<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
HOMESIDE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6162 [APPLIED FOR]
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
7301 BAYMEADOWS WAY
JACKSONVILLE, FL 32256
(904) 281-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT J. JACOBS, VICE PRESIDENT AND SECRETARY
HOMESIDE, INC.
7301 BAYMEADOWS WAY
JACKSONVILLE, FL 32256
(904) 281-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
MARY ELLEN O'MARA
HUTCHINS, WHEELER & DITTMAR
A PROFESSIONAL CORPORATION
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 951-6600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
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11 1/4% Series B Senior
Secured Second Priority
Notes due 2003............. $200,000,000 $1,000.00 $200,000,000 $68,966
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</TABLE>
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.
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<PAGE> 2
HOMESIDE, INC.
<TABLE>
CROSS REFERENCE SHEET
(PURSUANT TO ITEM 501(b) OF REGULATION S-K)
<CAPTION>
S-4 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
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<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Facing Page; Cross Reference Sheet;
Outside Front Cover Page of Prospectus.
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover Pages
of Prospectus.
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... "Prospectus Summary;" "Risk Factors;"
"Selected Consolidated Financial
Information", "Unaudited Pro Forma
Consolidated Financial Information".
4. Terms of the Transaction.................. "Prospectus Summary;" "Risk Factors;" "The
Exchange Offer;" "Description of the
Exchange Notes;" "Income Tax
Considerations".
5. Pro Forma Financial Information........... "Pro Forma Financial Information"
6. Material Contacts with the Company Being
Acquired................................ *
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters...................... *
8. Interests of Named Experts and Counsel.... "Legal Matters;" "Experts".
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. *
10. Information with Respect to S-3
Registrants............................. *
11. Incorporation of Certain Information by
Reference............................... *
12. Information with Respect to S-2 or S-3
Registrants............................. *
13. Incorporation of Certain Information by
Reference............................... *
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants....... Cover Page of Registration Statement;
"Prospectus Summary;" "Risk Factors;"
"Capitalization;" "Selected Consolidated
Financial Information;" "Unaudited Pro
Forma Consolidated Financial
Information;" "Management's Discussion
and Analysis of Financial Condition and
Results of Operations;" "Business;"
"Management;" "Executive Compensation".
15. Information with Respect to S-3
Companies............................... *
16. Information with Respect to S-2 or S-3
Companies............................... *
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies......... *
18. Information if Proxies, Consents or
Authorizations are to be Solicited...... *
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer................. *
<FN>
- ---------------
* Item is omitted because answer is negative or Item is inapplicable.
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 25, 1996
PROSPECTUS
$200,000,000
HOMESIDE, INC.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF
11 1/4% SERIES B SENIOR SECURED SECOND PRIORITY NOTES DUE 2003
FOR EACH $1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING
11 1/4% SENIOR SECURED SECOND PRIORITY NOTES DUE 2003
HomeSide, Inc. (the "Issuer") hereby offers to exchange (the "Exchange
Offer") up to $200,000,000 in aggregate principal amount of its 11 1/4% Series B
Senior Secured Second Priority Notes due 2003 (the "Exchange Notes") for
$200,000,000 in aggregate principal amount of its outstanding 11 1/4% Senior
Secured Second Priority Notes due 2003 (the "Initial Notes"; and together with
the Exchange Notes, the "Notes").
The terms of the Exchange Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Initial Notes for which they may be exchanged pursuant to this offer, except
that the Exchange Notes are freely transferable by holders thereof (except as
provided in the next paragraph below) and are issued without any covenant upon
the Issuer regarding registration. The Exchange Notes will be issued under the
same indenture governing the Initial Notes. For a complete description of the
terms of the Exchange Notes, see "Description of the Exchange Notes." There will
be no cash proceeds to the Issuer from this offer. The Initial Notes and the
Exchange Notes are secured by a second priority lien on the stock of the
Issuer's wholly owned direct and indirect subsidiaries, HomeSide Holdings, Inc.
("HHI") and HomeSide Lending, Inc. ("HLI").
The Initial Notes were originally issued and sold on May 14, 1996 (the
"Issue Date"), in a transaction (the "Offering") not registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the
exemption provided in Section 4(2) of the Securities Act. Accordingly, the
Initial Notes may not be reoffered, resold or otherwise pledged, hypothecated or
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
Based upon the interpretations by the Staff of the Securities and Exchange
Commission (the "Commission") issued to third parties, the Issuer believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial
Notes may be offered for resale, resold or otherwise transferred by holders
thereof (other than any holder which is an "affiliate" of the Issuer within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
the distribution of such Exchange Notes. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal (as defined herein) states that
by so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Initial Notes where such Exchange Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Issuer has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution".
The Initial Notes and the Exchange Notes constitute issues of securities
with no established trading market. Any Initial Notes not tendered and accepted
in the Exchange Offer will remain outstanding. To the extent that Initial Notes
are tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered and tendered but unaccepted Initial Notes could be adversely
affected. Following consummation of the Exchange Offer, the holders of the
Initial Notes will continue to be subject to the existing restrictions on
transfer thereof and the Issuer will have no further obligation to such holders
to provide for the registration under the Securities Act of the Initial Notes
held by them. No assurance can be given as to the liquidity of the trading
market for either the Initial Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1996, unless extended
(the "Expiration Date"). The date of acceptance for exchange for the Initial
Notes (the "Exchange Date") will be the first business day following the
Expiration Date. Initial Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date; otherwise such tenders are
irrevocable.
Interest on the Exchange Notes shall accrue from May 14, 1996 or from the
last May 15 or November 15 (an "Interest Payment Date") on which interest was
paid on the Initial Notes so surrendered.
SEE "RISK FACTORS" FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
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 DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 4
AVAILABLE INFORMATION
The Issuer has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall include all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the Exchange Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission and to which reference is
hereby made. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
For further information with respect to the Issuer and the Notes, reference
is made to such Registration Statement. A copy of the Registration Statement can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth St., N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at 7 World Trade Center,
13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained from the public reference facilities of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Issuer intends, and is required by the terms of the Indenture dated as
of May 14, 1996 (the "Indenture") between the Issuer and The Bank of New York,
as trustee, under which the Notes are issued, to furnish the holders of the
Notes with annual reports containing financial statements audited by its
independent certified public accountants and with quarterly reports containing
unaudited financial statements for each of the first three quarters of each
fiscal year.
------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE ISSUER SINCE THE DATE HEREOF.
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2
<PAGE> 5
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, risk factors and financial
statements, including the related notes, appearing elsewhere in this Prospectus.
Unless otherwise referred to herein or the context otherwise requires,
references to "HomeSide" shall mean HomeSide, Inc., a Delaware corporation, and
its consolidated subsidiaries, including HomeSide Lending, Inc. ("HLI") formerly
known as BancBoston Mortgage Corporation, and HomeSide Holdings, Inc. ("HHI"),
formerly known as Barnett Mortgage Company. Both BancBoston Mortgage Corporation
and Barnett Mortgage Company operated on a fiscal year end of December 31.
HomeSide was formed in December 1995, but had no operations prior to its
acquisition of BancBoston Mortgage Corporation on March 15, 1996, which was
accounted for as a purchase transaction. HomeSide intends to adopt a February 28
year end. Accordingly, unless otherwise stated, all 1996 interim financial
information for HLI is for the period ended March 15, 1996 and all interim
financial information for HHI is for the quarter ended March 31, 1996. All
combined or pro forma financial information for HomeSide as of or for the period
ended March 15, 1996 has been prepared using HLI information as of or for the
period ended March 15, 1996 and HHI information as of or for the quarter ended
March 31, 1996. However, all information for HomeSide presented as of or for the
period ended March 31, 1996 has been prepared by combining information for HLI
for the period ended March 15, 1996 with information for HomeSide for the period
from March 16, 1996 to March 31, 1996.
THE COMPANY
HomeSide is one of the largest full-service mortgage banking companies
in the United States, emphasizing wholesale mortgage originations and low cost
mortgage servicing. For the year ended December 31, 1995 and the three months
ended March 31, 1996, HLI originated approximately $8.9 billion and $4.2
billion of mortgage loans, respectively, including co-issue production, and
serviced a loan portfolio of $41.6 billion and $44.2 billion, respectively, at
the end of such periods. For 1995, HLI was ranked as the 9th largest originator
of residential mortgage loans (including co-issue volume) and as the 16th
largest servicer of residential mortgage loans, according to National Mortgage
News, and as the 5th largest wholesale originator of mortgage loans (including
co-issue volume) according to Wholesale Access. The Issuer acquired HHI, a
full-service mortgage banking company engaged in the origination, sale and
servicing of mortgage loans secured by residential properties, on May 31, 1996.
For 1995, HHI was ranked as the 15th largest originator of residential mortgage
loans and as the 19th largest servicer of residential mortgage loans, according
to National Mortgage News. In 1995, and the three months ended March 31, 1996,
HHI reported total mortgage production of approximately $5.8 billion and $1.5
billion, respectively, and had a servicing portfolio of $33.4 billion at
December 31, 1995 and $33.0 billion at March 31, 1996. HHI grew substantially
over the past two years primarily through the acquisition of two mortgage
banking companies.
HomeSide, Inc. was formed on December 11, 1995 to acquire HLI (the "HLI
Acquisition"), the mortgage banking subsidiary of The First National Bank of
Boston ("Bank of Boston" or "BKB"). On March 15, 1996, HomeSide completed the
HLI Acquisition. On May 31, 1996, HomeSide acquired HHI, the mortgage banking
subsidiary of Barnett Banks, Inc. ("Barnett") (the "HHI Acquisition"). Upon the
HHI Acquisition, the Issuer contributed all of the stock of HLI to HHI,
whereupon HLI became a wholly-owned subsidiary of HHI. All of HHI's servicing
portfolio was transferred to HLI, with the exception of HHI's GNMA loans, which
it retained. All of HHI's former subsidiaries, except Honolulu Mortgage Company,
Inc. ("Honolulu Mortgage"), were merged with and into HLI.
The combined originations and servicing of HLI and HHI would have been
$14.7 billion and $75.0 billion, respectively, for the year ended and at
December 31, 1995 and $5.7 billion and $77.2 billion, respectively, for the
three months ended and at March 31, 1996. HomeSide, pro forma for the HHI
Acquisition, would have ranked as the 5th largest mortgage loan originator and
the 7th largest mortgage loan servicer in the United States for 1995 based on
data published by National Mortgage News.
HomeSide expects that the acquisition and integration of HHI will allow it
to realize improved economies of scale in servicing costs, increase its
productivity by converting to HHI's proprietary servicing software system and
expand and diversify its variable cost origination channels. HomeSide is in the
process of
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3
<PAGE> 6
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consolidating servicing operations and converting to HHI's proprietary servicing
software system. Once this conversion is completed, this system is expected to
increase HomeSide's servicing capacity to accommodate approximately twice the
number of loans in the combined portfolio of HLI and HHI. HomeSide has exclusive
access through a correspondent relationship to Bank of Boston retail and Barnett
retail and broker origination channels for an initial term of five years,
subject to certain limitations. The combined origination and servicing
operations of HLI and HHI are expected to enhance HomeSide's national presence
and increase its visibility to consumers and mortgage market participants.
Homeside's business consists primarily of:
- Mortgage production: the origination and purchase of residential single
family mortgage loans through all major channels including correspondents
(including BKB and Barnett), mortgage brokers, co-issue partners,
telemarketing, affinity programs and retail branches;
- Secondary marketing: the sale of residential single family mortgage loans
as pools underlying mortgage-backed securities guaranteed or issued by
governmental or quasi-governmental agencies or as whole loans to
investors; and
- Servicing: the administration, collection and remittance of monthly
mortgage principal and interest payments, the collection and payment of
property taxes and insurance premiums and the management of certain loan
default activities.
HomeSide's business strategy is focused on building its origination and
servicing business to benefit from the economies of scale inherent in the
business through growth in its wholesale and retail origination channels, as
well as by selected acquisitions of servicing portfolios and mortgage banking
companies. Consistent with this growth strategy, HomeSide typically retains the
right to service the loans it originates and purchases servicing rights in bulk
from other mortgage lenders or on an individual (loan-by-loan) basis from
correspondents or mortgage brokers. HLI has been ranked by industry surveys as
one of the nation's most efficient mortgage servicers based on various factors
such as cost per loan and loans serviced per employee. HomeSide plans to
continue to pursue economies of scale and productivity improvements in both
origination and servicing, relying on, among other things, a high degree of
automation, outsourcing of selected labor intensive functions, which enables it
to maintain a low fixed cost base, and an emphasis on quality control.
As with HomeSide, HHI's servicing strategy has been to build its mortgage
servicing portfolio to benefit from economies of scale. Through an acquisition
strategy, HHI succeeded in building a production network and servicing portfolio
national in scope. Primarily an originator of FNMA/FHLMC loans, HHI's servicing
portfolio consisted predominantly of conventional servicing. In addition, HHI
maintained a highly efficient, cost-effective proprietary servicing software
system. HHI's portfolio was fully converted to the proprietary system by the end
of 1995.
Ownership. Thomas H. Lee Equity Fund III, L.P. (the "Fund") and certain
affiliates of Thomas H. Lee Company (collectively, "THL") and Madison Dearborn
Capital Partners, L.P. ("MDP") collectively own approximately 33% of HomeSide;
Bank of Boston and Siesta Holdings, Inc., an affiliate of Barnett ("Siesta"),
each own approximately 33% and management of HomeSide and other unaffiliated
investors own the remainder.
Recent Results of Risk Management Activities. The value of HomeSide's
servicing portfolio is subject to volatility in the event of unanticipated
changes in the speed of prepayments by mortgagors. As interest rates decrease,
prepayments by mortgagors increase as homeowners seek to refinance their
mortgages, reducing expected future cash flows from servicing revenues on those
prepaid mortgages. Conversely, as interest rates increase, prepayments by
mortgagors decrease as fewer homeowners refinance, increasing expected future
cash flows from servicing revenues. Since the value of servicing rights is based
on the net present value of future cash flows, the value of the portfolio
increases in a rising interest rate environment and decreases in a declining
interest rate environment. HomeSide employs a hedging program which uses risk
management contracts designed to offset changes in the value of the servicing
portfolio resulting from changes in interest rates and prepayments.
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4
<PAGE> 7
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HLI recognized a gain on risk management contracts of $108.7 million in
1995, of which $86.5 million was unrealized. During the first quarter of 1996,
long-term interest rates increased, reversing the declining trend which
prevailed during 1995. As a result, through the date of the HLI Acquisition in
March 1996, HLI recognized a loss on risk management contracts of $128.8
million, which included a reversal of such $86.5 million unrealized gain
recognized during 1995. In both 1995 and 1996, changes in the value of
HomeSide's mortgage servicing rights substantially offset the gain and loss on
the risk management contracts. However, such changes in value were not fully
recorded in the financial statements of HomeSide because servicing rights are
recorded at the lower of amortized cost or market value. Since March 15, 1996,
long-term interest rates have continued to increase and, accordingly, through
May 31, 1996, HomeSide has experienced further declines in the value of its risk
management contracts.
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5
<PAGE> 8
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THE EXCHANGE OFFER
THE EXCHANGE OFFER......... The Issuer is offering to exchange (the "Exchange
Offer") up to $200,000,000 aggregate principal
amount of 11 1/4% Series B Senior Secured Second
Priority Notes due 2003 (the "Exchange Notes") for
$200,000,000 aggregate principal amount of its
outstanding 11 1/4% Senior Secured Second Priority
Notes due 2003 (the "Initial Notes"; and together
with the Exchange Notes, the "Notes"). The terms of
the Exchange Notes are substantially identical in
all respects (including principal amount, interest
rate and maturity) to the terms of the Initial
Notes for which they may be exchanged pursuant to
the Exchange Offer, except that the Exchange Notes
are freely transferable by holders thereof (except
as provided herein -- see "The Exchange Offer --
Terms of the Exchange" and " -- Terms and
Conditions of the Letter of Transmittal"), and are
not subject to any covenant regarding registration
under the Securities Act. The Initial Notes and the
Exchange Notes are secured by a second priority
lien on the stock of the Issuer's wholly owned
direct and indirect subsidiaries, HHI and HLI.
INTEREST PAYMENTS.......... Interest on the Exchange Notes shall accrue from
May 14, 1996 or from the last Interest Payment Date
on which interest was paid on the Initial Notes so
surrendered.
MINIMUM CONDITION.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Initial Notes
being tendered for exchange.
EXPIRATION DATE............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1996, unless
extended.
EXCHANGE DATE.............. The date of acceptance for exchange of the Initial
Notes will be the first business day following the
Expiration Date.
CONDITIONS OF THE EXCHANGE
OFFER.................... The obligation of the Issuer to consummate the
Exchange Offer is subject to certain conditions.
See "The Exchange Offer -- Conditions to the
Exchange Offer". The Issuer reserves the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence of
any such condition.
WITHDRAWAL RIGHTS.......... Tenders may be withdrawn at any time prior to the
Expiration Date. Otherwise, all tenders are
irrevocable. Any Initial Notes not accepted for any
reason will be returned without expense to the
tendering holders thereof as promptly as
practicable after the expiration or termination of
the Exchange Offer.
PROCEDURES FOR TENDERING
INITIAL NOTES.............. See "The Exchange Offer -- How to Tender".
FEDERAL INCOME TAX
CONSEQUENCES............. The exchange of Initial Notes for Exchange Notes
should be treated as a "non-event" for Federal
income tax purposes. See "Income Tax
Considerations".
EFFECTS ON HOLDERS OF
INITIAL NOTES.............. As a result of the making of, and upon acceptance
for exchange of all validly tendered Initial Notes
pursuant to the terms of, this Exchange Offer, the
Issuer will have fulfilled a covenant contained in
the terms of the Initial Notes and the Registration
Rights Agreement as amended
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6
<PAGE> 9
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(the "Registration Rights Agreement") dated May 14,
1996 between the Issuer, HHI and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Smith Barney
Inc. and Friedman, Billings, Ramsey & Co., Inc.
(collectively, the "Initial Purchasers") and,
accordingly, there will be no increase in the
interest rate on the Initial Notes pursuant to the
terms of the Registration Rights Agreement, the
Initial Notes or the Indenture. The holders of the
Initial Notes will have no further registration
rights under the Registration Rights Agreement with
respect to the Initial Notes. Holders of the
Initial Notes who do not tender their Notes in the
Exchange Offer will continue to hold such Initial
Notes and will be entitled to all the rights and
limitations applicable thereto under the Indenture,
except for any such rights under the Registration
Rights Agreement, which by their terms terminate or
cease to have further effectiveness as a result of
the making of, and the acceptance for exchange of
all validly tendered Initial Notes pursuant to, the
Exchange Offer. All untendered and tendered but
unaccepted Initial Notes will continue to be
subject to the restrictions on transfer provided
for in the Initial Notes and in the Indenture. To
the extent that Initial Notes are tendered and
accepted in the Exchange Offer, the trading market
for untendered Initial Notes could be adversely
affected.
TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $200,000,000 aggregate principal amount of
the Initial Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Initial Notes except as noted above and except that the
Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof. The Exchange Notes will
evidence the same debt as the Initial Notes and will be entitled to the benefits
of the Indenture. See "Description of the Exchange Notes".
Terms capitalized below have the meanings ascribed to them in "Description
of the Exchange Notes".
NOTES OFFERED.............. $200,000,000 principal amount of 11 1/4% Series B
Senior Secured Second Priority Notes due 2003.
MATURITY DATE.............. May 15, 2003.
INTEREST PAYMENT DATES..... May 15 and November 15 of each year, commencing
November 15, 1996.
OPTIONAL REDEMPTION........ The Exchange Notes are redeemable at the option of
the Issuer, in whole or in part, at any time, on or
after May 15, 2001, at the redemption prices set
forth herein, together with accrued and unpaid
interest, if any, to the date of redemption. In
addition, at any time on or prior to May 15, 1999,
the Issuer may redeem up to 35% of the principal
amount of the Notes originally issued with the net
proceeds of one or more Equity Offerings at 111.25%
of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of
redemption; provided that at least $75 million in
aggregate principal amount of the Notes remain
outstanding after such redemption.
CHANGE OF CONTROL.......... Upon the occurrence of a Change of Control, each
holder of the Exchange Notes may require the Issuer
to purchase all or any portion of such holder's
Notes at a purchase price equal to 101% of the
principal amount thereof, together with accrued and
unpaid interest, if any, to the date of purchase.
See "Description of the Exchange Notes -- Certain
Covenants -- Purchase of Notes Upon a Change of
Control".
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7
<PAGE> 10
- ------------------------------------------------------------------------------
SECURITY................... The Exchange Notes will be secured by a second
priority lien on (i) the capital stock of HHI owned
by the Issuer and (ii) the capital stock of HLI
owned by HHI. HHI is a direct wholly-owned
subsidiary of the Issuer and HLI is a direct
wholly-owned subsidiary of HHI. See "Description of
the Exchange Notes -- Security" and "The
Acquisitions".
RANKING.................... The Exchange Notes will be senior secured
obligations of the Issuer, ranking pari passu in
right of payment with the Issuer's existing and
future unsubordinated indebtedness. As of March 15,
1996, after giving pro forma effect to the issuance
of the Initial Notes and the application of the net
proceeds therefrom and consummation of the HLI
Acquisition and the HHI Acquisition, the aggregate
outstanding principal amount of senior indebtedness
of the Issuer would have been approximately
$2,342.0 million, of which $2,142.0 million would
have represented the guarantee by the Issuer of the
indebtedness of its subsidiaries under the Bank
Credit Agreement (as defined).
In addition, the business operations of the Issuer
are conducted through its subsidiaries and,
accordingly, the Exchange Notes will be effectively
subordinated to the obligations of such
subsidiaries. As of March 15, 1996, after giving
pro forma effect to the issuance of the Initial
Notes and the application of the net proceeds
therefrom and consummation of the HLI Acquisition
and the HHI Acquisition, the Issuer's subsidiaries
would have had approximately $2,163.7 million of
indebtedness outstanding. Subject to certain
limitations, the Issuer and its subsidiaries may
incur additional indebtedness in the future. See
"Risk Factors -- Substantial Leverage and Ability
to Service Debt; Need to Refinance Notes" and "Debt
Restrictions; Compliance with Certain Covenants;
Asset Encumbrances" and "Description of the
Exchange Notes -- Certain Covenants -- Limitation
on Indebtedness".
CERTAIN COVENANTS.......... The Indenture contains certain covenants,
including, but not limited to, the following: (i)
limitation on indebtedness; (ii) limitation on
restricted payments; (iii) limitation on issuances
and sales of capital stock of subsidiaries; (iv)
limitation on transactions with affiliates; (v)
limitation on liens; (vi) limitation on guarantees
of indebtedness by subsidiaries; (vii) limitation
on dividend and other payment restrictions
affecting subsidiaries; and (viii) restrictions on
consolidations, mergers and transfers of all or
substantially all of the assets of the Issuer to
another person. See "Description of the Exchange
Notes -- Certain Covenants" and "Consolidation,
Merger and Sale of Assets".
USE OF PROCEEDS............ There will not be any proceeds from the Exchange
Offer. The net proceeds from the sale of the
Initial Notes were used as follows: (i) $90 million
to repay all principal on the Bridge Loan (as
defined), (ii) $87.5 million to finance a portion
of the cash consideration paid to Barnett in the
HHI Acquisition and to pay certain fees and
expenses related thereto and (iii) the remainder to
repay borrowings under HomeSide's former credit
facility.
ABSENCE OF MARKET
FOR THE EXCHANGE NOTES... The Exchange Notes will be new securities for which
there is currently no trading market. Although the
Issuer has been advised by the Initial Purchasers
that, following the completion of the Exchange
Offer, the Initial Purchasers presently intend to
make a market in the Exchange
------------------------------------------------------------------------------
8
<PAGE> 11
- ------------------------------------------------------------------------------
Notes, the Initial Purchasers are under no
obligation to do so and may discontinue any market
making activities at any time without notice.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the
Exchange Notes. The Issuer does not intend to apply
for listing of the Exchange Notes on any securities
exchange or through the National Association of
Securities Dealers Automated Quotation System.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors which should be
considered by prospective investors in evaluating an investment in the Exchange
Notes.
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9
<PAGE> 12
- -------------------------------------------------------------------------------
SUMMARY FINANCIAL INFORMATION
<TABLE>
HOMESIDE
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The summary unaudited pro forma consolidated financial information for
HomeSide set forth below has been derived from the unaudited pro forma
consolidated financial information included elsewhere in this Prospectus and
gives effect to the HHI Acquisition and the HLI Acquisition by the Issuer as
though such transactions occurred on January 1, 1995 for income statement data
and as of March 15, 1996 and March 31, 1996 for balance sheet data of HLI and
HHI, respectively. The summary pro forma consolidated income statement
information is presented for the period January 1, 1996 to March 15, 1996 for
HLI and for the quarter ended March 31, 1996 for HHI. The unaudited pro forma
consolidated financial information does not purport to represent what HomeSide's
financial position and results of operations would have been if the HLI
Acquisition and the HHI Acquisition had actually been completed as of the dates
indicated and is not intended to project HomeSide's financial position or
results of operations for any future period. The following summary financial
information should be read in conjunction with the historical financial
statements of HLI and HHI and the unaudited pro forma consolidated financial
information for HomeSide and the related notes thereto included elsewhere in
this Prospectus.
<CAPTION>
PRO FORMA HOMESIDE FOR THE HLI
ACQUISITION AND THE HHI ACQUISITION
-------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1995 MARCH 15, 1996
----------------- ---------------
<S> <C> <C>
(DOLLARS IN MILLIONS)
UNAUDITED STATEMENTS OF OPERATIONS DATA:
Revenues:
Mortgage servicing revenues........................................ $ 357.1 $ 83.0
Gain(loss) on risk management contracts(a)......................... 108.7 (154.9)
Amortization of mortgage servicing rights.......................... (227.8) 27.1
------- -------
Net servicing revenue............................................ 238.0 (44.8)
Warehouse interest income.......................................... 66.9 27.1
Warehouse interest expense......................................... (58.1) (21.3)
------- -------
Net warehouse interest income.................................... 8.8 5.8
Net mortgage origination revenue................................... 25.3 10.5
Other income....................................................... 0.7 0.2
------- -------
Total revenues............................................ 272.8 (28.3)
Total operating expenses.................................. 155.2 42.5
Servicing secured interest expense................................. 46.1 11.8
Other interest expense............................................. 23.9 6.3
------- -------
Total other interest expense.............................. 70.0 18.1
------- -------
Income (loss) before income taxes.................................. 47.6 (88.9)
Income tax expense (benefit)....................................... 19.5 (33.4)
------- -------
Net income (loss).................................................. $ 28.1 $ (55.5)
======= =======
</TABLE>
- -------------------------------------------------------------------------------
10
<PAGE> 13
<TABLE>
<CAPTION>
PRO FORMA HOMESIDE FOR THE HLI
ACQUISITION AND THE HHI ACQUISITION
-------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1995 MARCH 15, 1996
----------------- ---------------
<S> <C> <C>
(DOLLARS IN MILLIONS)
DATA:EBITDA(b)..................................................... $ 258.1 $ 46.8
Ratio of EBITDA to total other interest expense.................... 3.7x 2.6x
Volume of loans originated and acquired............................ $ 14,652 $ 5,743
Loan servicing portfolio (at period end)........................... 74,966 77,177
Loan servicing portfolio (average)................................. 69,953 76,423
Weighted average interest rate (at period end)..................... 8.01% 7.97%
Weighted average servicing fee (average for period)................ 0.351% 0.365%
SELECTED BALANCE SHEET DATA (AT PERIOD END):
Mortgage loans held for sale....................................... $ 1,673.2
Mortgage servicing rights.......................................... 1,101.5
Total assets....................................................... 2,995.1
Warehouse debt..................................................... 1,631.3
Total debt......................................................... 2,363.7
Total stockholders' equity......................................... 360.0
</TABLE>
- ---------------
(a) The non-cash portion of gain (loss) on risk management contracts was $86.5
million pro forma HomeSide for the HLI Acquisition and HHI Acquisition for
the year ended December 31, 1995. Of the $86.5 million non-cash gain
recorded during 1995, $68.5 million reversed in 1996. In addition, the
unrealized losses on risk management contracts purchased in 1996 totaled
$82.7 million. Accordingly, $151.2 million was included in EDITDA for the
period ended March 15, 1996.
(b) EBITDA represents earnings before total other interest expense, taxes,
depreciation, amortization, including amortization of mortgage servicing
rights, the value of originated mortgage servicing rights ("OMSR") recorded
in income and the non-cash gain (loss) on risk management contracts.
Depreciation and amortization, excluding amortization of mortgage servicing
rights, was $12.7 million and $3.1 million, including amortization of
goodwill and debt issuance expenses, and OMSR was $13.5 million and $9.6
million pro forma HomeSide for the HLI Acquisition and HHI Acquisition for
the year ended December 31, 1995 and the three months ended March 15, 1996,
respectively. EBITDA should not be considered as an alternative to net
income as an indicator of the Issuer's operating performance or to cash flow
as a measure of liquidity, but rather to provide additional information
related to the Issuer's ability to service debt.
11
<PAGE> 14
- ------------------------------------------------------------------------------
HLI
SUMMARY HISTORICAL FINANCIAL INFORMATION
<TABLE>
The following table sets forth summary historical financial information for
HLI (formerly BancBoston Mortgage Corporation). Such financial information
should be read in conjunction with the consolidated financial statements, pro
forma financial information and related notes included elsewhere in this
Prospectus.
<CAPTION>
FOR THE PERIOD
FOR THE THREE JANUARY 1,
YEARS ENDED DECEMBER 31, MONTHS ENDED 1996 TO MARCH
------------------------------------------------------------------- MARCH 31, 15,
1991 1992 1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- ----------- ------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues:
Mortgage servicing fees.... $ 92,362 $ 105,890 $ 111,822 $ 140,491 $ 173,038 $ 43,657 $ 38,977
Gain (loss) on risk
management contracts..... -- -- 6,688 (6,702) 108,702 3,612 (128,795)
Amortization of mortgage
servicing rights......... (37,213) (73,908) (112,492) (66,801) (108,013) (23,103) (7,245)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net servicing revenue.... 55,149 31,982 6,018 66,988 173,727 24,166 (97,063)
Interest income............ 41,252 46,865 50,156 31,585 24,324 4,122 8,423
Interest expense........... (27,686) (38,855) (44,199) (33,952) (27,128) (6,079) (10,089)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest revenue..... 13,566 8,010 5,957 (2,367) (2,804) (1,957) (1,666)
Net mortgage origination
revenue (expense)........ 6,508 1,123 6,173 4,983 3,417 (1,083) 7,638
Gain on sales of servicing
rights................... 12,034 14,769 651 10,862 10,230 4,285 --
Other income............... 52 17 50 147 511 13 253
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues..... 87,309 55,901 18,849 80,613 185,081 25,424 (90,838)
Expenses:
Salaries and employee
benefits............... 27,328 30,053 33,096 40,370 45,381 11,696 10,287
Occupancy and equipment.. 7,809 7,788 7,966 9,012 10,009 2,358 2,041
Servicing losses on
investor-owned loans... 2,880 8,138 2,770 7,177 9,981 733 5,560
Real estate acquired..... 1,195 1,124 1,600 253 1,054 218 291
Other expenses........... 17,552 20,461 22,058 19,326 21,896 4,713 7,377
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses..... 56,764 67,564 67,490 76,138 88,321 19,718 25,556
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes and cumulative
effects of changes in
accounting principles.... $ 30,545 $ (11,663) $ (48,641) $ 4,475 $ 96,760 $ 5,706 $ (116,394)
=========== =========== =========== =========== =========== =========== ===========
Net income (loss).......... $ 18,377 $ (7,834) $ (85,185) $ 5,405 $ 58,826 $ 3,429 $ (73,861)
=========== =========== =========== =========== =========== =========== ===========
SELECTED OPERATING DATA:
Volume of loans originated
and acquired............. $ 5,196,996 $ 9,705,875 $13,682,761 $14,473,000 $ 9,567,521 $ 1,181,642 $ 4,187,603(a)
Loan servicing portfolio
(at period end).......... 20,600,569 23,705,642 27,999,100 37,971,200 41,555,354 37,800,120 44,158,163(a)
Loan servicing portfolio
(average)................ 19,663,100 22,153,100 25,852,400 33,178,600 39,283,700 38,099,730 43,158,072(a)
Weighted average interest
rate (at period end)..... 9.65% 9.05% 8.07% 7.91% 7.97% 7.90% 7.92%(a)
Weighted average servicing
fee (average for
period).................. 0.400% 0.390% 0.372% 0.389% 0.383% 0.384% 0.380%(a)
SELECTED BALANCE SHEET
DATA (AT PERIOD END):
Mortgage loans held for
sale..................... $ 507,776 $ 495,455 $ 607,506 $ 271,215 $ 388,436 $ 70,978 $ 641,465
Mortgage servicing
rights................... 296,393 337,307 281,727 431,148 551,338 414,974 542,862
Total assets............... 1,034,269 1,073,686 1,193,583 1,006,887 1,254,303 858,001 1,512,902
Note payable to parent..... 748,827 799,992 1,019,011 779,021 966,000 648,499 1,256,000
Total liabilities.......... 818,890 866,141 1,071,223 879,122 1,067,712 726,807 1,400,172
Total stockholders'
equity................... 215,379 207,545 122,360 127,765 186,591 131,194 112,730
<FN>
- ---------------
(a) Period information is for the period January 1, 1996 to March 31, 1996 and
period end information is at March 31, 1996.
</TABLE>
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12
<PAGE> 15
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HHI
<TABLE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following table sets forth summary historical financial information for
HHI (formerly known as Barnett Mortgage Company). Such financial information
should be read in conjunction with the consolidated financial statements, pro
forma financial information and related notes included elsewhere in this
Prospectus.
<CAPTION>
FOR THE THREE FOR THE THREE
YEARS ENDED DECEMBER 31, MONTHS ENDED MONTHS ENDED
--------------------------------------------------- MARCH 31, MARCH 31,
1991 1992 1993 1994(a) 1995(b) 1995(b) 1996
------- -------- -------- -------- -------- ------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Mortgage origination revenue:
Mortgage origination fees............ $ -- $ -- $ 358 $ 3,276 $ 17,104 $ 2,535 $ 5,642
Gain (loss) on sales of loans, net... 3,184 8,187 5,688 692 (13,920) 519 3,865
------- -------- -------- -------- -------- -------- --------
Total mortgage origination
revenue...................... 3,184 8,187 6,046 3,968 3,184 3,054 9,507
Interest income (expense):
Interest income...................... 765 657 855 3,460 27,264 2,583 8,578
Interest expense..................... (568) (531) (1,415) (4,911) (20,427) (2,919) (6,094)
------- -------- -------- -------- -------- -------- --------
Net interest income
(expense).................... 197 126 (560) (1,451) 6,837 (336) 2,484
Mortgage servicing revenue:
Mortgage servicing income............ 17,129 29,570 38,886 47,147 108,559 19,380 31,288
Amortization of capitalized mortgage
servicing rights................... (2,453) (6,013) (11,547) (17,783) (48,282) (8,351) (17,011)
Gain on sales of servicing........... -- -- -- -- 9,096 -- --
------- -------- -------- -------- -------- -------- --------
Net mortgage servicing
revenue...................... 14,676 23,557 27,339 29,364 69,373 11,029 14,277
Other income........................... 2,860 7,750 6,296 4,492 2,592 851 62
------- -------- -------- -------- -------- -------- --------
Total revenues................. 20,917 39,620 39,121 36,373 81,986 14,598 26,330
Expenses:
Salaries and benefits................ 7,778 13,698 13,914 17,474 53,070 9,133 14,771
General and administrative........... 10,349 11,401 12,432 14,924 41,849 8,283 13,932
Occupancy and equipment.............. 1,091 1,167 1,810 2,702 5,960 1,517 2,151
Amortization of goodwill............. -- -- -- 259 4,840 553 1,395
------- -------- -------- -------- -------- -------- --------
Total expenses................. 19,218 26,266 28,156 35,359 105,719 19,486 32,249
Income (loss) before income taxes and
affiliate profit sharing............. 1,699 13,354 10,965 1,014 (23,733) (4,888) (5,919)
Affiliate profit sharing............... (1,699) (12,471) (10,774) (3,534) (6,242) -- --
------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes...... $ 0 $ 883 $ 191 $ (2,520) $(29,975) $ (4,888) $ (5,919)
======= ======== ======== ======== ======== ======== ========
Net income (loss)...................... $ (34) $ 17 $ 104 $ (2,058) $(20,386) $ (4,129) $ (4,358)
======= ======== ======== ======== ======== ======== ========
SELECTED OPERATING DATA (DOLLARS IN
MILLIONS):
Volume of loans originated and
acquired............................. $ 1,945 $ 3,507 $ 3,360 $ 3,410 $ 5,767 $ 920 $ 1,556
Loan servicing portfolio (at period
end)................................. 10,034 11,524 13,085 18,411 33,411 32,827 33,019
Loan servicing portfolio (average)..... 9,639 10,779 12,305 15,748 30,669 23,366 33,265
Weighted average interest rate (at
period end)(c)....................... -- -- 7.34% 7.44% 8.05% 7.91% 8.04%
Weighted average servicing fee (average
for period)(c)....................... -- -- 0.259% 0.261% 0.299% 0.297% 0.346%
SELECTED BALANCE SHEET DATA (AT PERIOD
END):
Mortgage loans held for sale........... $ -- $ -- $ -- $183,914 $465,880 $128,168 $386,380
Mortgage servicing rights.............. 12,959 25,458 48,941 92,461 250,788 314,237 245,617
Total assets........................... 42,082 61,166 96,186 359,472 994,630 663,331 920,322
Notes payable.......................... 16,107 20,325 63,329 248,214 653,056 115,093 604,000
Total liabilities...................... 22,676 38,541 69,930 274,570 762,802 414,031 692,852
Total stockholders' equity............. 19,406 22,625 26,257 84,902 231,828 249,300 227,470
<FN>
- ---------------
(a) Includes operations of Loan America since its acquisition in October 1994.
(b) Includes operations of BancPLUS since its acquisition in February 1995.
(c) Information not available for 1991 and 1992.
</TABLE>
- ------------------------------------------------------------------------------
13
<PAGE> 16
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be carefully considered before investing in the Exchange Notes
offered hereby.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT; NEED TO REFINANCE EXCHANGE
NOTES
HomeSide has significant debt service obligations. As of March 15, 1996, on
a pro forma basis after giving effect to the sale of the Initial Notes, the
application of the net proceeds therefrom, and consummation of the HLI
Acquisition and the HHI Acquisition, the Issuer would have had aggregate
outstanding indebtedness of approximately $2,342.0 million, of which $2,142.0
million would have represented the guarantee by the Issuer of the indebtedness
of its subsidiaries under the Bank Credit Agreement, and its subsidiaries would
have had aggregate outstanding indebtedness of approximately $2,163.7 million
and $358.0 million of additional availability under the Bank Credit Agreement.
See "Capitalization." HomeSide may incur additional indebtedness in the future,
subject to certain limitations contained in the instruments governing its
indebtedness.
The degree to which HomeSide is leveraged could have important consequences
to holders of the Exchange Notes, including the following: (i) HomeSide's
ability to grow will depend on its ability to obtain additional financing in the
future for originating loans, investment in servicing rights, working capital,
capital expenditures and general corporate purposes or other purposes, and that
ability may be impaired; (ii) a substantial portion of HomeSide's cash flow from
operations must be dedicated to the payment of the principal of and interest on
its indebtedness thereby reducing the funds available to finance operations;
(iii) HomeSide may be more highly leveraged than certain of its competitors,
which may place HomeSide at a competitive disadvantage and make it more
vulnerable to economic downturns; and (iv) the Issuer's ability to refinance the
Exchange Notes in order to pay the principal of the Exchange Notes at maturity
or upon a Change of Control may be adversely affected.
HomeSide's ability to satisfy its interest payment obligations under its
indebtedness will depend largely on its future performance, which, in turn, is
subject to prevailing economic conditions and to financial, business and other
factors beyond its control, including levels of interest rates. In addition, all
amounts owing under the Bank Credit Agreement will become due prior to the time
the principal payments on the Exchange Notes will become due and such amounts
will need to be refinanced. Furthermore, the Issuer does not expect to be able
to repay the principal amount of the Exchange Notes at maturity and accordingly
will need to refinance the Exchange Notes, or repay the Exchange Notes with the
proceeds of an equity offering, at or prior to their maturity. There can be no
assurance that HomeSide will be able to generate sufficient cash flow to service
its interest payment obligations under its indebtedness or that future
borrowings or equity financing will be available for the payment or refinancing
of HomeSide's indebtedness. To the extent that HomeSide is not successful in
negotiating renewals of its borrowings or in arranging new financing, it may
have to curtail its origination activities and/or sell significant portions of
its servicing portfolio, which would have a material adverse effect on
HomeSide's business and results of operations. Among the factors that will
affect the Issuer's ability to effect an offering of its capital stock or
refinance the Exchange Notes are financial market conditions and the value and
performance of the Issuer at the time of such offering or refinancing. There can
be no assurance that any such offering or refinancing can be successfully
completed. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- HLI -- Liquidity and Capital Resources" and
"Description of Bank Credit Agreement".
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION; LIMITATION ON THE PAYMENT OF
FUNDS TO ISSUER BY SUBSIDIARIES
The Issuer is a holding company and does not have any material assets other
than ownership of capital stock of its subsidiaries. Accordingly, the Notes will
be effectively subordinated to all existing and future liabilities of the
Issuer's subsidiaries, including indebtedness under the Bank Credit Agreement.
As of March 15, 1996, on a pro forma basis after giving effect to the sale of
the Initial Notes, the application of the net proceeds therefrom and
consummation of the HLI Acquisition and the HHI Acquisition, the Issuer's
subsidiaries would have had aggregate outstanding indebtedness of approximately
$2,163.7 million and
14
<PAGE> 17
$358.0 million of additional availability under the Bank Credit Agreement for
future borrowings. The Issuer and its subsidiaries may incur additional
indebtedness in the future, subject to certain limitations contained in the
instruments governing their indebtedness.
Any right of the Issuer to participate in any distribution of the assets of
its subsidiaries upon the liquidation, reorganization or insolvency of any such
subsidiary (and the consequent right of the holders of the Exchange Notes to
participate in the distribution of those assets) will be subject to the prior
claims of the respective subsidiary's creditors. The obligations of the Issuer's
subsidiaries under the Bank Credit Agreement are secured by substantially all of
their respective assets, including mortgage loans held for sale and loan
servicing rights, and are guaranteed by the Issuer. Additionally, the Bank
Credit Agreement is secured by a first priority pledge of all the capital stock
of HHI owned by the Issuer and all of the capital stock of HLI owned by HHI. See
"Description of Bank Credit Agreement".
The Issuer's cash flow, and consequently its ability to service debt,
including the Exchange Notes, is dependent upon the earnings of its subsidiaries
and the payment of funds by its subsidiaries to the Issuer in the form of loans,
dividends or otherwise. The Issuer's operating subsidiaries have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Exchange Notes
or to make any funds available therefor. In addition, the payment of funds by
the subsidiaries to the Issuer is subject to restrictions under such
subsidiaries' debt instruments. Under the Bank Credit Agreement, the Issuer's
subsidiaries will be permitted to pay dividends to the Issuer equal to the
semi-annual interest payments due on the Exchange Notes; provided that upon a
notice of a default or event of default under the Bank Credit Agreement, the
Issuer's subsidiaries will be prohibited from paying such dividends until the
earlier of the 180th day following such notice and the date such default or
event of default is cured or waived. Accordingly, repayment of the Exchange
Notes may depend upon the ability of the Issuer to effect an offering of capital
stock or to refinance the Exchange Notes prior to maturity.
DEBT RESTRICTIONS; COMPLIANCE WITH CERTAIN COVENANTS; ASSET ENCUMBRANCES
The Indenture and the Bank Credit Agreement will impose restrictions that
affect, among other things, the ability of the Issuer and its subsidiaries, as
the case may be, to incur debt, pay dividends, sell assets, create liens, make
capital expenditures and investments and otherwise enter into certain
transactions outside the ordinary course of business. The Bank Credit Agreement
also requires the Issuer's subsidiaries to maintain specified financial ratios
and meet certain financial tests. Although such subsidiaries are currently in
compliance with covenants and restrictions contained in the Bank Credit
Agreement, their ability to continue to comply may be affected by events beyond
their control. The breach of any of these covenants or restrictions could result
in a default under the Bank Credit Agreement. In the event of any such default,
the lenders under the Bank Credit Agreement could elect to declare all amounts
borrowed thereunder, together with accrued interest, to be due and payable, or
cease making additional revolving loans. In connection with the Bank Credit
Agreement, the Issuer's subsidiaries have granted the lenders thereunder a first
priority lien on substantially all of their respective assets. If such
subsidiaries were unable to repay such amounts in the event of a default under
the Bank Credit Agreement, the lenders thereunder could foreclose upon the
assets pledged to secure the Bank Credit Agreement and the holders of the
Exchange Notes might not be able to receive any payments until any payment
default was cured or waived, any acceleration was rescinded, or the indebtedness
under the Bank Credit Agreement was discharged or paid in full. Moreover, since
the security interest of the Exchange Notes in the stock of certain subsidiaries
of the Issuer is a second priority security interest, there may not be
sufficient funds available after payment to the lenders under the Bank Credit
Agreement holding the first priority security interest to pay all, or any, of
the principal amount of the Exchange Notes.
IMPACT OF CHANGES IN INTEREST RATES; RESULTS OF RISK MANAGEMENT ACTIVITIES
Changes in interest rates can have a variety of effects on HomeSide's
business. In particular, changes in interest rates affect the volume of loan
originations and acquisitions, the interest rate spread on loans held for sale,
the amount of gain or loss on the sale of loans and the value of HomeSide's
servicing portfolio.
15
<PAGE> 18
During periods of declining interest rates, HomeSide typically experiences
an increase in loan originations because of increased home purchases and,
particularly, increased refinancing activity. During 1990 to 1993, a period of
generally declining interest rates, refinancing activity as a percentage of
total originations increased from 13% in 1990 to 55% in 1993. In contrast,
refinancing activity decreased to 32% of total originations in 1994 and 25% in
1995 as the result of generally increasing interest rates. Increases in interest
rates may adversely affect refinancing activity, which could have an adverse
effect on HomeSide's origination revenues.
HomeSide's loans held for sale are generally funded by borrowings under its
revolving warehouse credit line. HomeSide's net warehouse interest income is the
difference between the interest income it earns on loans held for sale
(generally based on long-term interest rates) and the interest it pays on its
borrowings (generally based on short-term interest rates). To the extent this
spread narrows or if the yield curve inverts, HomeSide's results of operations
could be adversely affected.
Gain or loss on sales of mortgage loans may result from changes in interest
rates from the time the interest rate on the customer's loan application is
established to the time HomeSide sells the loan. To manage interest rate risk
HomeSide uses a hedging strategy that is designed to minimize the negative
effect of changes in interest rates on loans that have closed and loans for
which interest rate commitments have been given that are expected to close.
HomeSide then enters into forward sale commitments and option contracts with
FNMA, FHLMC and the private investors to whom HomeSide sells loans based on this
analysis. The actual number of loans that close may differ from the estimate, in
particular due to changes in interest rates. The resultant mismatching of
commitments to originate loans and commitments to deliver loans may have an
adverse effect on results of operations.
In addition, the value of HomeSide's servicing portfolio may be adversely
affected if mortgage interest rates decline and loan prepayments increase. In
periods of declining interest rates, the economic advantages to borrowers of
refinancing mortgage loans increase, and increases in the rate of mortgage loan
prepayments reduce the period during which HomeSide receives servicing income
from such loans. HomeSide capitalizes the cost of the acquisition of servicing
rights from third parties and began in 1996 to capitalize servicing rights on
loans that it originates. Since the value of servicing rights is based upon the
net present value of future cash flows, if the rate of prepayment of the related
loans exceeds the rate assumed by HomeSide, due to a significant reduction in
interest rates or otherwise, the value of the servicing portfolio will decrease
and accelerated amortization of servicing rights may become necessary. Interest
rate changes can also adversely affect the ability to sell or the proceeds of a
sale of servicing rights to a third party. While HomeSide has established a
hedging program designed to protect the value of its servicing portfolio from
declines in economic value, the results of such hedging depend on a variety of
factors, including the relationship between mortgage rates and Treasury
securities, the hedge instruments used and other factors.
HLI recognized a gain on risk management contracts of $108.7 million in
1995, of which $86.5 million was unrealized. During the first quarter of 1996,
long-term interest rates increased, reversing the declining trend which
prevailed during 1995. As a result, through the date of the acquisition of HLI
in March 1996, HLI recognized a loss on risk management contracts of $128.8
million, which included a reversal of such $86.5 million unrealized gain
recognized during 1995. In both 1995 and 1996, changes in the value of
HomeSide's mortgage servicing rights substantially offset the gain and loss on
the risk management contracts. However, such changes in value were not fully
recorded in the financial statements of HomeSide because servicing rights are
recorded at the lower of amortized cost or market value. Since March 15, 1996,
long-term interest rates have continued to increase and, accordingly, through
May 31, 1996, HomeSide has experienced further declines in the value of its risk
management contracts.
LOAN DELINQUENCIES, DEFAULTS ON LOANS AND OTHER RISKS
HomeSide's profitability may be negatively impacted by economic downturns
as the frequency of loan defaults tends to increase. From the time that HomeSide
funds the loans it originates to the time it sells the loans (generally 10 to 40
days), HomeSide is generally at risk for any loan defaults. Once HomeSide sells
the loans it originates, the risk of loss from loan defaults and foreclosure
generally passes to the purchaser or insurer of the loans. In connection
therewith, HomeSide typically makes certain representations and
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warranties to the purchasers and insurers of loans and to the purchasers of
servicing rights. Such representations and warranties generally relate to the
origination and servicing of loans in substantial conformance with state and
federal laws and applicable investor guidelines. If a loan defaults and there
has been a breach of these representations and warranties, HomeSide becomes
liable for the unpaid principal and interest on the defaulted mortgage loan. In
such a case, HomeSide may be required to repurchase the loan and bear the
subsequent loss, if any. Historically, the impact of loans repurchased by
HomeSide as the result of such breaches of representations and warranties has
not been material. However, the number and amount of loans repurchased in the
future could increase due to the high volume of loans which HomeSide originates
and sells. Accordingly, HomeSide believes that future provisions relating to
loan repurchases may be necessary as loan origination volume increases. See
"Business -- HLI -- Secondary Marketing".
HomeSide is also affected by loan delinquencies and defaults on loans that
it services. Under certain types of servicing contracts, particularly contracts
to service loans that have been pooled or securitized, the servicer must forward
all or part of the scheduled payments to the owner of the loan, even when loan
payments are delinquent. Also, to protect their liens on mortgaged properties,
owners of loans usually require the servicer to advance mortgage and hazard
insurance and tax payments on schedule even if sufficient escrow funds are not
available. The servicer will be reimbursed, subject to certain limitations with
respect to FHA/VA loans, by the mortgage owner or from liquidation proceeds for
payments advanced that the servicer is unable to recover from the mortgagor,
although the timing of such reimbursement is typically uncertain. In the
interim, the servicer must absorb the cost of funds advanced during the time the
advance is outstanding. Further, the servicer must bear the increased costs of
attempting to collect on delinquent and defaulted loans. HomeSide also foregoes
servicing income from the time such loan becomes delinquent until foreclosure
when, if any proceeds are available, such amounts may be recovered.
HomeSide periodically incurs losses attributable to servicing Federal
Housing Administration ("FHA") and Veterans Administration ("VA") loans for
investors, including actual losses for final disposition of loans that have been
foreclosed or assigned to the FHA or VA and accrued interest on such FHA or VA
loans for which payment has not been received. HLI's servicing losses on
investor-owned loans totaled $2.8 million, $7.2 million and $10.0 million for
the years ended 1993, 1994 and 1995, respectively, and $5.6 million for the
period January 1, 1996 to March 15, 1996, primarily representing losses on VA
loans. Because the total principal amount of FHA loans is guaranteed, losses on
such loans are generally limited to expenses of collection. HomeSide has
experienced minimal losses from FHA loans. In respect of VA loans, the VA
guarantees the initial losses on a loan. The guaranteed amount generally ranges
from 20% to 35% of the original principal balance. Before each foreclosure sale,
the VA determines whether to bid by comparing the estimated net sale proceeds to
the outstanding principal balance and the servicer's accumulated reimbursable
costs and fees. If this amount is a loss and exceeds the guaranteed amount, the
VA typically issues a no-bid and pays the servicer the guaranteed amount.
Whenever a no-bid is issued, the servicer absorbs the loss, if any, in excess of
the sum of the guaranteed principal and amounts recovered at the foreclosure
sale. HomeSide's historical delinquency and foreclosure rate experience on VA
loans has generally been consistent with that of the industry. There can be no
assurance that HomeSide's servicing losses on investor-owned loans will not be
greater in the future.
OPERATIONS AS AN INDEPENDENT COMPANY
Prior to the consummation of the HLI Acquisition, HLI had been a
wholly-owned subsidiary of BKB, and prior to the HHI Acquisition, HHI was a
wholly-owned subsidiary of Barnett. Each has engaged in various intercompany
transactions and arrangements with, and was provided certain administrative
services by, its parent. As a former subsidiary of a national bank and a bank
holding company, HLI and HHI, respectively, have benefitted from their ability
to finance certain acquisitions, their loan production funding and to a lesser
extent, their capital expenditure and working capital requirements, through
borrowings from their respective parents. Following the consummation of the HLI
Acquisition, certain arrangements, including all borrowing arrangements, with
BKB were terminated or modified and, following the consummation of the HHI
Acquisition, such arrangements with Barnett were similarly terminated or
modified. See "Certain Relationships and Related Transactions". Accordingly,
HomeSide can no longer rely on such entities and there can be no assurances that
it will be able to successfully operate as an independent company.
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CONCENTRATION OF OWNERSHIP
THL and MDP, collectively, currently own approximately 33% of HomeSide;
each of BKB and Siesta owns approximately 33%. In addition, THL, MDP, BKB and
Siesta (the "Investors") have entered into an Amended and Restated Shareholder
Agreement that provides for the designation of directors, requires super-
majority consent for certain actions by the Board of Directors of HomeSide and
other matters. As a result of their percentage ownership of HomeSide and such
agreement, the Investors as a group will be able to effectively control the
affairs and policies of HomeSide. Certain decisions concerning the operations or
financial structure of HomeSide may present conflicts of interest between the
owners of HomeSide's capital stock and the holders of the Exchange Notes. See
"Certain Relationships and Related Transactions".
GENERAL INTEGRATION/SYSTEMS CONVERSION RISK
The ability of HomeSide to realize significant benefits from the HHI
Acquisition, including improved economies of scale in servicing costs and
increased productivity, will depend on its ability to integrate HHI's operations
effectively and to convert to the HHI servicing software system. Difficulties or
delays in such integration and conversion could adversely affect HomeSide's
operating and financial results.
COMPETITION
The mortgage banking business is highly competitive. HomeSide competes with
other mortgage banking companies, commercial banks, savings associations, credit
unions and other financial institutions in every aspect of its business,
including funding and purchasing loans from mortgage brokers, purchasing loans
from correspondents and acquiring loan servicing rights and origination
capabilities. HomeSide competes with mortgage banking companies and other
financial institutions that have substantially greater financial resources,
greater operating efficiencies and longer operating histories than HomeSide. To
the extent that market pricing becomes more competitive, HomeSide may be unable
to achieve its planned level of originations or consummate acquisitions of
servicing rights at a satisfactory cost. Retail mortgage banking companies have
direct access to borrowers and generally are able to sell their loans to the
same entities that purchase HomeSide's loans. HomeSide depends primarily on
mortgage brokers and correspondents for originating new loans. Competitors also
seek to establish relationships with mortgage brokers and correspondents, who
are not obligated by contract or otherwise to continue to do business with
HomeSide.
REGULATION, POSSIBLE CHANGES AND RELATED MATTERS
HomeSide's mortgage banking business is subject to the rules and
regulations of the Department of Housing and Urban Development ("HUD"), FHA, VA,
FNMA, FHLMC, GNMA and other regulatory agencies with respect to originating,
processing, underwriting, selling, securitizing and servicing mortgage loans. In
addition, there are other federal and state statutes and regulations affecting
such activities. These rules and regulations, among other things, impose
licensing obligations on HomeSide, prohibit discrimination and establish
underwriting guidelines which include provisions for inspections and appraisals,
require credit reports on prospective borrowers and fix maximum loan amounts.
Moreover, lenders such as HomeSide are required annually to submit audited
financial statements to FNMA, FHLMC and GNMA and to comply with each regulatory
entity's own financial requirements. HomeSide's business is also subject to
examination by FNMA, FHLMC and GNMA and state regulatory agencies at all times
to assure compliance with applicable regulations, policies and procedures.
Mortgage origination activities are subject to the provisions of various
Federal and state statutes including, among others, the Equal Credit Opportunity
Act, the Federal Truth-in-Lending Act and the Real Estate Settlement Procedures
Act, and the regulations promulgated thereunder, which prohibit discrimination
and require the disclosure of certain basic information to mortgagors concerning
credit terms and settlement costs. Many of the aforementioned regulatory
requirements are designed to protect the interests of consumers, while others
protect the owners or insurers of mortgage loans. Failure to comply with these
requirements can lead to loss of approved status, termination of servicing
contracts without compensation to the servicers,
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demands for indemnification or loan repurchases, class action lawsuits and
administrative enforcement actions.
HomeSide's net income includes a credit against borrowings that HomeSide
receives for escrow deposits placed with depository institutions. Net income
could be adversely affected to the extent that proposed revisions of applicable
bank regulations cause certain escrow accounts to be recharacterized as demand
deposit accounts, thereby requiring reserves to be established with Federal
Reserve Banks. Other regulatory changes or interpretations if applied
retroactively to change the ability of HomeSide to receive credit for escrow
balances would adversely affect HomeSide.
In addition, certain states require that interest be paid to mortgagors on
funds deposited by them in escrow to cover mortgage-related payments such as
property taxes and insurance premiums. Federal legislation has in the past been
introduced that would, if ever enacted, revise current escrow regulations and
establish a uniform interest payment requirement in all states. If such federal
legislation were enacted or if other states enact legislation relating to
payment of, or increases in the rate of, interest on escrow balances, or if such
legislation were retroactively applied to loans in HomeSide's servicing
portfolio, HomeSide's earnings would be adversely affected.
Prior to the HLI Acquisition, HLI was a wholly-owned operating subsidiary
of a national bank, and subject to substantially all of the regulations and
restrictions applicable to a national bank. Prior to the HHI Acquisition, HHI
was a wholly-owned subsidiary of a bank holding company. During the period that
BKB or Barnett, or any of their subsidiaries, retains a material ownership
interest in HomeSide, HomeSide and its subsidiaries (i) will continue to be
under the jurisdiction, supervision, and examining authority of the Office of
the Comptroller of the Currency ("OCC"), and (ii) may only engage in activities
that are part of, or incidental to, the business of banking. The OCC has
specifically ruled that mortgage banking is a proper incident to the business of
banking.
In recent years, the mortgage banking industry has been subject to class
action lawsuits which allege violations of federal and state laws and
regulations, including the propriety of collecting various fees and charges and
the calculation of escrow amounts. Class action lawsuits may continue to be
filed in the future against the mortgage banking industry generally. See
"Business -- Litigation".
There are various other state and local laws and regulations affecting
HomeSide's operations. HomeSide is licensed in those states that require
licensing to originate, purchase and/or service mortgage loans. Conventional
mortgage operations may also be subject to state usury statutes. FHA and VA
loans are exempt from the effect of such statutes.
CONTINUATION OF FEDERAL PROGRAMS; AVAILABILITY OF ACTIVE SECONDARY MARKET
HomeSide's ability to sell mortgage loans and mortgage-backed securities is
largely dependent upon the continuation of programs of FNMA, FHLMC and private
investors. These entities facilitate the sale of mortgage loans and
mortgage-backed securities. HomeSide's continued eligibility to participate in
such programs is also a necessary element to the ability to sell mortgage loans.
Although HomeSide is not aware of any proposed discontinuation of, or
significant reduction in, the various programs of FNMA, FHLMC, or private
investors, any such discontinuation or reduction in the operation of such
programs could have a material adverse effect on HomeSide's operations. HomeSide
expects that it will continue to remain eligible to participate in such programs
but any significant impairment of such eligibility could also materially and
adversely affect its operations.
The requirements of loans accepted under such programs may be changed from
time to time by the sponsoring entity. The profitability of participating in
specific programs may vary depending on a number of factors, including the
administrative costs to HomeSide of originating and purchasing qualifying loans.
There can be no assurance that HomeSide will be successful in effecting the
sale of mortgage loans at the historic price or volume levels in any particular
future periods. Any significant change in the secondary market level of activity
or underwriting criteria of FNMA, FHLMC or private investors could have a
material adverse effect on the gain or loss on sales of mortgage loans recorded
by HomeSide and therefore on HomeSide's results of operations.
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FRAUDULENT CONVEYANCE
The net proceeds from the sale of the Initial Notes were used to repay
indebtedness under the short term promissory notes of the Issuer dated March 15,
1996, issued in favor of Merrill Lynch Capital Corporation (the "Bridge Loan"),
to finance a portion of the cash consideration paid to Barnett in the HHI
Acquisition and to repay borrowings under HomeSide's former credit facility.
Borrowings under the Bridge Loan were used to finance a portion of the cash
consideration paid to BKB in connection with the HLI Acquisition. The
obligations of the Issuer incurred under the Indenture and the Notes, including
the second priority security interest in the collateral created thereunder, may
be subject to review under relevant federal and state fraudulent conveyance
statutes (the "fraudulent conveyance statutes") in a bankruptcy, reorganization
or rehabilitation case or similar proceeding or a lawsuit by or on behalf of
unpaid creditors of the Issuer. The requirements for establishing a fraudulent
conveyance or revocatory transfer vary depending on the law of the jurisdiction
which is being applied. If under relevant fraudulent conveyance statutes a court
were to find that, at the time the Notes were issued, (i) the Issuer issued the
Notes or granted the security interest in the collateral with the intent of
hindering, delaying or defrauding current or future creditors of the Issuer, or
(ii) (a) the Issuer received less than reasonably equivalent value or fair
consideration for issuing the Notes or granting such security interest and (b)
the Issuer (A) was insolvent or was rendered insolvent by reason of the issuance
of the Notes, (B) was engaged or about to engage in a business or transaction
for which its assets constituted unreasonably small capital, (C) intended to
incur, or believed that it would incur, indebtedness beyond its ability to pay
as such indebtedness matured (as all of the foregoing terms are defined in or
interpreted under the applicable fraudulent conveyance statutes) or (D) was a
defendant in an action for money damages, or had a judgment for money damages
docketed against it (if, in either case, the judgment is unsatisfied after the
final judgment), such court could avoid or subordinate the Notes to presently
existing and future indebtedness of the Issuer, avoid the granting of the
security interest in the collateral and take other action detrimental to the
holders of the Notes, including, under certain circumstances, invalidating the
Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or local law that is being applied in any such
proceeding. Generally, however the Issuer would be considered insolvent if, at
the time it incurs the indebtedness constituting the Notes, either (i) the fair
market value (or fair saleable value) of its assets is less than the amount
required to pay the probable liability on its total existing debts and
liabilities (including contingent liabilities) as they become absolute and
matured or (ii) it is incurring indebtedness beyond its ability to pay as such
indebtedness matures.
The Issuer believes that at the time of issuance of the Notes it will have
received reasonably equivalent value or fair consideration for issuing the Notes
and granting the security interest in the Collateral and that it (i) will be (a)
neither insolvent nor rendered insolvent thereby for purposes of the foregoing
standards, (b) in possession of sufficient capital to meet its obligations as
such obligations mature or become due and to operate its businesses effectively
and (c) incurring obligations within its ability to pay such obligations as they
mature or become due and (ii) will have sufficient assets to satisfy any
probable money judgment against it in any pending action. No assurance can be
given, however, that a court passing on such issues would reach the same
conclusions.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON RESALE
There is no existing market for the Exchange Notes and there can be no
assurances as to the liquidity of any markets that may develop for the Exchange
Notes, the ability of holders of the Exchange Notes to sell their Exchange
Notes, or the price at which holders would be able to sell their Exchange Notes.
Future trading prices of the Exchange Notes will depend on many factors,
including, among other things, prevailing interest rates, HomeSide's operating
results and the market for similar securities. The Initial Purchasers have
advised the Issuer that they currently intend to make a market in the Exchange
Notes offered hereby. However, the Initial Purchasers are not obligated to do so
and any market making may be discontinued at any time without notice. The Issuer
does not intend to apply for listing of the Exchange Notes offered hereby on any
securities exchange or through the National Association of Securities Dealers
Automated Quotation System.
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CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Initial Notes who do not exchange their Initial Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of Initial Notes set forth in the legend thereon as a
consequence of the issuance of the Initial Notes pursuant to an exemption from
or in a transaction not subject to, the registration requirements of the
Securities Act. In general, the Initial Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Issuer does not currently anticipate registering the Initial Notes
under the Securities Act.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Initial Notes were originally issued and sold on May 14, 1996. Such
sales were not registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act. In connection with the
sale of the Initial Notes, the Issuer agreed to file with the Commission a
registration statement relating to an exchange offer (the "Exchange Offer
Registration Statement") pursuant to which the Exchange Notes would be offered
in exchange for Initial Notes tendered at the option of the holders thereof or,
if applicable interpretations of the staff of the Commission did not permit the
Issuer to effect such an exchange offer, the Issuer agreed, at its cost, to file
a shelf registration statement covering resales of the Initial Notes (the
"Resale Registration Statement") and to have such Resale Registration Statement
declared effective and kept effective for a period of three years from the
effective date thereof. In the event that (i) the Issuer fails to file the
Exchange Offer Registration Statement, (ii) the Exchange Offer Registration
Statement is not declared effective by the Commission, or (iii) the Exchange
Offer is not consummated or the Resale Registration Statement is not declared
effective by the Commission, in each case within specified time periods, the
interest rate borne by the Notes shall increase, which interest will accrue and
be payable in cash until completion of such filing, declaration of effectiveness
or completion of such exchange. See "Registration Rights Agreement".
The sole purpose of the Exchange Offer is to fulfill obligations of the
Issuer with respect to the foregoing agreement. Following the consummation of
the Exchange Offer, the Issuer does not currently anticipate registering any
untendered Initial Notes under the Securities Act and will not be obligated to
do so.
TERMS OF THE EXCHANGE
The Issuer hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Initial Notes. The terms of the Exchange Notes are identical in all respects to
the terms of the Initial Notes, for which they may be exchanged pursuant to this
Exchange Offer, except that the Exchange Notes will generally be freely
transferable by holders thereof and the holders of the Exchange Notes (as well
as remaining holders of any Initial Notes) will not be entitled to registration
rights under the Registration Rights Agreement. See "Registration Rights
Agreement". The Exchange Notes will evidence the same debt as the Initial Notes
and will be entitled to the benefits of the Indenture. See "Description of the
Exchange Notes".
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Issuer believes the Exchange
Notes issued pursuant to the Exchange Offer in exchange for Initial Notes may be
offered for sale, resold and otherwise transferred by any holder of such
Exchange Notes (other than any such holder which is an "affiliate" of the Issuer
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and such
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holder has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
cannot rely on such interpretations by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Initial Notes, where such Initial Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution".
Interest on the Exchange Notes shall accrue from May 14, 1996 or from the
last Interest Payment Date on which interest was paid on the Initial Notes so
surrendered.
Tendering holders of the Initial Notes will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Initial Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer shall expire on the Expiration Date. The term
"Expiration Date" means 5:00 p.m. New York City time, on , 1996, unless
the Issuer, in its sole discretion, extends the period during which the Exchange
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date on which the Exchange Offer, as so extended by the Issuer, shall
expire. The Issuer reserves the right to extend the Exchange Offer at any time
and from time to time by giving oral or written notice to The Bank of New York
(the "Exchange Agent") and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by making a release to the
Dow Jones News Service. During any extension of the Exchange Offer, all Initial
Notes previously tendered pursuant to the Exchange Offer will remain subject to
the Exchange Offer.
The Exchange Date will be the first business day following the Expiration
Date. The Issuer expressly reserves the right to (i) terminate the Exchange
Offer and not accept for exchange any Initial Notes if either of the events set
forth below under "Conditions to the Exchange Offer" shall have occurred and
shall not have been waived by the Issuer and (ii) amend the terms of the
Exchange Offer in any manner which, in its good faith judgment, is advantageous
to the holders of the Initial Notes, whether before or after any tender of the
Initial Notes. If any such termination or amendment occurs, the Issuer will
notify the Exchange Agent and will either issue a press release or give oral or
written notice to the holders of the Initial Notes as promptly as practicable.
Unless the Issuer terminates the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date, the Issuer will exchange the Exchange Notes
for the Initial Notes on the Exchange Date.
HOW TO TENDER
The tender to the Issuer of Initial Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Issuer in accordance with the terms and subject to the conditions
set forth herein and in the Letter of Transmittal.
A holder of an Initial Note may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Initial Notes being tendered and any required
signature guarantees, to the Exchange Agent at its address set forth on the back
cover of this Prospectus on or prior to the Expiration Date, (ii) complying with
the procedure for book entry transfer described below or (iii) complying with
the guaranteed delivery procedures described below.
If tendered Initial Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Initial Notes are to be reissued) in the
name of the registered holder (which term, for the purposes described herein,
shall include any participant in The Depository Trust Company ("DTC") (also
referred to as a book-entry transfer facility)
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whose name appears on a security listing as the owner of Initial Notes), the
signature of such signer need not be guaranteed. In any other case. the tendered
Initial Notes must be endorsed or accompanied by written instruments of transfer
in form satisfactory to the Issuer and duly executed by the registered holder
and the signature on the endorsement or instrument of transfer must be
guaranteed by a commercial bank or trust company located or having an office or
correspondent in the United States, or by a member firm of a national securities
exchange or of the National Association of Securities Dealers, Inc. (any of the
foregoing hereinafter referred to as an "Eligible Institution"). If the Exchange
Notes and/or Initial Notes not exchanged are to be delivered to an address other
than that of the registered holder appearing on the note register for the
Initial Notes, the signature in the Letter of Transmittal must be guaranteed by
an Eligible Institution.
The method of delivery of Initial Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance obtained,
and the mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent on or before the Expiration Date.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system (a "Participant") may utilize DTC's
Automated Tender Offer Program ("ATOP") to tender Initial Notes.
The Exchange Agent will request that DTC establish an account with respect
to the Initial Notes for purposes of the Exchange Offer within two business days
after the date of this Prospectus. Any Participant may make book-entry delivery
of Initial Notes by causing DTC to transfer such Initial Notes into the Exchange
Agent's account in accordance with DTC's ATOP procedures for transfer. However,
the exchange for the Initial Notes so tendered will only be made after timely
confirmation (a "Book-Entry Confirmation") of such book-entry transfer of
Initial Notes into the Exchange Agent's account, and timely receipt by the
Exchange Agent of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letter of Transmittal. The
term "Agent's Message" means a message, transmitted by DTC and received by the
Exchange Agent and forming part of a Book-Entry Confirmation, which states that
DTC has received an express acknowledgment from a Participant tendering Initial
Notes which are the subject of such Book-Entry Confirmation that such
Participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Issuer may enforce such agreement against such
Participant.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Initial Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its office listed on the back cover hereof on or prior to the Expiration Date a
letter, telegram or facsimile transmission from an Eligible Institution setting
forth the name and address of the tendering holder, the names in which the
Initial Notes are registered and, if possible, the certificate numbers of the
Initial Notes to be tendered, and stating that the tender is being made thereby
and guaranteeing that within five New York Stock Exchange trading days after the
date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, the Initial Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the book-entry transfer facility), will be delivered by such
Eligible Institution together with a properly completed and duly executed Letter
of Transmittal (and any other required documents). Unless Initial Notes being
tendered by the above-described method are deposited with the Exchange Agent
within the time period set forth above (accompanied or preceded by a properly
completed Letter of Transmittal and any other required documents), the Issuer
may, at its option, reject the tender. Copies of a Notice of Guaranteed Delivery
which may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Initial Notes is received by the Exchange Agent, (ii) a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the book-entry transfer facility is received by the Exchange
Agent, or (iii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) from an Eligible Institution
is received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Initial Notes
23
<PAGE> 26
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal (and
any other required documents) and the tendered Initial Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Initial Notes will be
determined by the Issuer, whose determination will be final and binding. The
Issuer reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of the counsel
of the Issuer, be unlawful. The Issuer also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularity in the
tender of any Initial Notes. None of the Issuer, the Exchange Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Initial Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Initial Notes to the Issuer and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Initial Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Initial Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Initial
Notes, and that, when the same are accepted for exchange, the Issuer will
acquire good and unencumbered title to the tendered Initial Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Issuer to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Initial Notes or transfer ownership of such Initial Notes on the
account books maintained by a book-entry transfer facility. The Transferor
further agrees that acceptance of any tendered Initial Notes by the Issuer and
the issuance of Exchange Notes in exchange therefor shall constitute performance
in full by the Issuer of its obligations under the Registration Rights Agreement
and that the Issuer shall have no further obligations or liabilities thereunder.
All authority conferred by the Transferor will survive the death or incapacity
of the Transferor and every obligation of the Transferor shall be binding upon
the heirs, legal representatives, successors, assigns, executors and
administrators of such Transferor.
By tendering Initial Notes, the Transferor certifies that it is not an
"affiliate" of the Issuer within the meaning of Rule 405 under the Securities
Act and that it is acquiring the Exchange Notes offered hereby in the ordinary
course of such Transferor's business and that such Transferor has no arrangement
with any person to participate in the distribution of such Exchange Notes.
WITHDRAWAL RIGHTS
Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent at its address set forth on the back cover of this Prospectus.
Any such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Initial Notes to be withdrawn, the certificate
numbers of Initial Notes to be withdrawn, the principal amount of Initial Notes
to be withdrawn, a statement that such holder is withdrawing his election to
have such Initial Notes exchanged, and the name of the registered holder of such
Initial Notes, and must be signed by the holder in the same manner as the
original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the Issuer
that the person withdrawing the tender has succeeded to the beneficial ownership
of the Initial Notes being withdrawn. The Exchange Agent will return the
properly withdrawn Initial Notes promptly following receipt of notice of
withdrawal. If Initial Notes have been tendered pursuant to the procedures for
book-entry transfer, any notice
24
<PAGE> 27
of withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Initial Notes or otherwise
comply with the book-entry transfer facility procedure. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Issuer, and such determination will be final and binding on
all parties.
ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance of Initial Notes validly tendered and not withdrawn and issuance of
the Exchange Notes will be made on the Exchange Date. For the purpose of the
Exchange Offer, the Issuer shall be deemed to have accepted for exchange validly
tendered Initial Notes when, as and if the Issuer has given oral or written
notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Initial
Notes for the purpose of receiving Exchange Notes from the Issuer and causing
the Initial Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of Exchange Notes to
be issued in exchange for accepted Initial Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Initial Notes. Initial Notes not
accepted for exchange by the Issuer will be returned without expense to the
tendering holders promptly following the Expiration Date or, if the Issuer
terminates the Exchange Offer prior to the Expiration Date, promptly after the
Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Issuer will not be required to issue Exchange Notes
in respect of any properly tendered Initial Notes not previously accepted and
may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service) or, at its option, modify or otherwise amend the Exchange Offer, if
there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any court
or governmental agency or other governmental regulatory or administrative agency
or commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
or assessing or seeking any damages as a result thereof, or (ii) resulting in a
material delay in the ability of the Issuer to accept for exchange or exchange
some or all of the Initial Notes pursuant to the Exchange Offer; or any statute,
rule, regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority, agency
or court, domestic or foreign, that in the sole judgment of the Issuer, might
directly or indirectly result in any of the consequences referred to in clauses
(i) or (ii) above or, in the sole judgment of the Issuer, might result in the
holders of Exchange Notes having obligations with respect to resales and
transfers of Exchange Notes which are greater than those described in the
interpretations of the Commission referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the Exchange
Offer.
In addition, the Issuer will not accept for exchange any Initial Notes
tendered and no Exchange Notes will be issued in exchange for any such Initial
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act").
The Issuer expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Initial Notes upon the occurrence of either of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Issuer of properly tendered Initial Notes). In addition, the
Issuer may amend the Exchange Offer at any time prior to the Expiration Date if
either of the conditions set forth above occur. Moreover, regardless of whether
either of such conditions has occurred, the Issuer may amend the
25
<PAGE> 28
Exchange Offer in any manner which, in its good faith judgment, is advantageous
to holders of the Initial Notes.
The foregoing conditions are for the sole benefit of the Issuer and may be
waived by the Issuer, in whole or in part, in its sole discretion. Any
determination made by the Issuer concerning an event, development or
circumstance described or referred to above will be final and binding on all
parties.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent
at its address set forth on the back cover of this Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Issuer has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Issuer
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Issuer will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of the Initial Notes and in handling or forwarding
tenders for their customers.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Issuer. Neither the delivery
of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Issuer since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Initial Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Issuer may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Initial
Notes in such jurisdiction. In any jurisdiction the securities laws or blue sky
laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Issuer by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Initial Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Initial Notes pursuant to the terms of, this Exchange Offer,
the Issuer will have fulfilled a covenant contained in the terms of the Initial
Notes, the Indenture and the Registration Rights Agreement. Holders of the
Initial Notes who do not tender their certificates in the Exchange Offer will
continue to hold such certificates and will be entitled to all the rights, and
limitations applicable thereto, under the Indenture, except for any such rights
under the Registration Rights Agreement, which by their terms terminate or cease
to have further effect as a result of the making of this Exchange Offer. See
"Description of the Initial Notes". All untendered Initial Notes will continue
to be subject to the restrictions on transfer set forth in the Indenture. To the
extent that Initial Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered Initial Notes could be adversely affected.
26
<PAGE> 29
The Issuer may in the future seek to acquire untendered Initial Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuer has no present plan to acquire any Initial Notes
which are not tendered in the Exchange Offer or to file a registration statement
to permit resales of any Initial Notes which are not tendered pursuant to the
Exchange Offer.
27
<PAGE> 30
<TABLE>
CAPITALIZATION
The following table sets forth the pro forma capitalization of HomeSide, as
adjusted for the HLI Acquisition and the HHI Acquisition. The information in
this table should be read in conjunction with the consolidated financial
statements, unaudited pro forma consolidated financial information and related
notes appearing elsewhere in this Prospectus. The March 15, 1996 information has
been prepared using March 15, 1996 information for HomeSide and HLI and March
31, 1996 information for HHI.
<CAPTION>
PRO FORMA HOMESIDE
FOR THE HLI
ACQUISITION AND THE
HHI ACQUISITION
--------------------
AT MARCH 15, 1996
--------------------
(DOLLARS IN
MILLIONS)
<S> <C>
Short-term debt:
Warehouse credit facility............................................. $1,631.3
========
Long-term debt:
Servicing secured credit facility..................................... $ 510.7
Notes................................................................. 200.0
Bridge Loan........................................................... --
Other................................................................. 21.7
--------
Total long-term debt.......................................... 732.4
Stockholders' equity
Class A voting common stock, par value $.01 per share, authorized
2,500,000 shares, issued and outstanding 2,045,717 shares.......... --
Class B non-voting common stock, par value $.01 per share, authorized
5,714 shares, issued and outstanding 5,714 shares.................. --
Class C non-voting common stock, par value $1.00 per share, authorized
5,714 shares, issued and outstanding 5,714 shares.................. --
Additional paid-in capital............................................ 360.0
--------
Total stockholders' equity.................................... 360.0
--------
Total capitalization..................................... $1,092.4
========
</TABLE>
28
<PAGE> 31
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION
The unaudited pro forma consolidated financial information set forth below
which is based upon management's assumptions and includes adjustments as
described in the notes which follow, should be read in conjunction with the
historical financial statements and notes thereto included elsewhere in this
Prospectus. The Unaudited Pro Forma Consolidated Income Statement set forth
below gives effect to the HLI Acquisition and the HHI Acquisition and the
issuance of $200.0 million principal amount of the Initial Notes as though such
transactions occurred on January 1, 1995. Results of operations are included for
the period January 1, 1996 to March 15, 1996 for HLI and the quarter ended March
31, 1996 for HHI. The Unaudited Pro Forma Consolidated Balance Sheet set forth
below gives effect to the HLI Acquisition and the HHI Acquisition and the
issuance of $200.0 million principal amount of the Initial Notes as though such
transactions occurred as of March 15, 1996 for HLI and March 31, 1996 for HHI.
The unaudited pro forma consolidated financial information does not purport to
represent the results that actually would have occurred if the acquisition of
HLI or the acquisition of HHI or the issuance of the Initial Notes had in fact
occurred on such date or to project the results that may be achieved in the
future.
29
<PAGE> 32
<TABLE>
UNAUDITED PRO FORMA
CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1995
<CAPTION>
PRO FORMA
HOMESIDE
PRO FORMA FOR THE
HOMESIDE HLI
FOR THE ACQUISITION,
HLI HLI HHI THE HHI
ACQUISITION ACQUISITION ACQUISITION ACQUISITION
HLI AND OFFERING AND THE HHI AND OFFERING AND THE
HISTORICAL(a) ADJUSTMENTS(b) OFFERING HISTORICAL(a) ADJUSTMENTS(c) OFFERING
------------- -------------- ------------ ------------- -------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Mortgage servicing
revenues................ $ 207.6 $ (2.6)(d) $ 205.0 $132.8 $ 19.3 (p) $ 357.1
Gain on risk management
contracts............... 108.7 -- 108.7 -- -- (q) 108.7
Amortization of mortgage
servicing rights........ (108.0) (52.7)(e) (160.7) (48.3) (18.8)(r) (227.8)
------- ------ ------- ------ ------ -------
Net servicing revenue... 208.3 (55.3) 153.0 84.5 0.5 238.0
Warehouse interest
income.................. 16.4 13.3 (f) 29.7 26.2 11.0 (s) 66.9
Warehouse interest
expense................. (14.5) (10.3)(f) (24.8) (29.1) (4.2)(s) (58.1)
------- ------ ------- ------ ------ -------
Warehouse spread........ 1.9 3.0 4.9 (2.9) 6.8 8.8
Net mortgage origination
revenue................. 14.5 7.8 (g) 22.3 3.2 (0.2)(t) 25.3
Gain on sales of servicing
rights.................. 10.3 (10.3)(h) -- 9.1 (9.1)(u) --
Other income.............. 8.4 (7.9)(i) 0.5 3.6 (3.4)(v) 0.7
------- ------ ------- ------ ------ -------
Total revenues...... 243.4 (62.7) 180.7 97.5 (5.4) 272.8
Expenses:
Salaries and employee
benefits................ 56.5 (5.8)(j) 50.7 53.1 (21.5)(w) 82.3
Occupancy and equipment... 10.0 (6.4)(k) 3.6 6.0 (4.2)(x) 5.4
Servicing losses on
investor-owned loans.... 10.0 -- 10.0 2.8 -- 12.8
Real estate owned......... 1.1 -- 1.1 (0.5) -- 0.6
Other expenses............ 21.8 3.3 (l) 25.1 50.6 (21.6)(y) 54.1
------- ------ ------- ------ ------ -------
Total operating
expenses.......... 99.4 (8.9) 90.5 112.0 (47.3) 155.2
Servicing secured interest
expense................. 45.9 (14.6)(m) 31.3 15.5 (.7)(z) 46.1
Other interest expense.... 1.4 12.7 (n) 14.1 -- 9.8 (aa) 23.9
------- ------ ------- ------ ------ -------
Total other interest
expense........... 47.3 (1.9) 45.4 15.5 9.1 70.0
------- ------ ------- ------ ------ -------
Income (loss) before
income taxes............ 96.7 (51.9) 44.8 (30.0) 32.8 47.6
Income tax expense
(benefit)............... 37.9 (20.9)(o) 17.0 (9.6) 12.1 (ab) 19.5
------- ------ ------- ------ ------ -------
Net income (loss)......... $ 58.8 $(31.0) $ 27.8 $(20.4) 20.7 $ 28.1
======= ====== ======= ====== ====== =======
</TABLE>
(footnotes on following pages)
30
<PAGE> 33
- ---------------
(a) Reflects HLI's and HHI's historical consolidated income statements for the
year ended December 31, 1995 subject to certain reclassifications to
conform with the pro forma income statement presentation. In order to
better reflect the pro forma results of the new financing structure, the
historical interest income and expense items have been separated into
warehouse interest income and expense and servicing secured interest
expense. Other items of interest income and interest expense, including
interest on real estate owned and earnings on escrow deposit accounts
balances, have been reclassified. The SFAS No. 91 reclassification of
mortgage origination expenses was also eliminated. Additionally, for HHI,
amortization of goodwill and affiliate profit sharing amounts have been
reclassified to conform with this pro forma presentation.
(b) Reflects pro forma adjustments related to HomeSide's initial capitalization
and the HLI Acquisition, including related financing and proceeds from
$112.5 million of the Notes. The remaining proceeds of the Offering were
held in escrow pending completion of the HHI Acquisition. The adjustments
reflect the application of purchase accounting to the HLI Acquisition and,
as a result, the assets and liabilities have been adjusted to reflect the
allocation of the purchase price.
(c) Reflects pro forma adjustments related to the HHI Acquisition, including
related financing and proceeds from the incremental $87.5 million of the
Notes. The adjustments reflect the application of purchase accounting to
the HHI Acquisition and, as a result, the assets and liabilities have been
adjusted to reflect the allocation of the purchase price.
(d) Income is earned on the escrow deposit accounts associated with the loan
servicing portfolio. Before the HLI Acquisition, these deposits were held
at Bank of Boston and earned a higher interest rate than would have been
earned had they been held by an independent party. Reduction of $2.6
million is based on the earnings that would have been received from an
independent party.
(e) Amortization of mortgage servicing rights was increased by $52.7 million to
reflect the allocation of the HLI purchase price to servicing rights and
the resultant amortization due to the interest rate environment during
1995.
(f) In 1995, HLI sold loans held for sale as participations to an affiliate of
Bank of Boston. This funding source was replaced with the Bank Credit
Agreement. Consequently, interest income has been increased by $13.3
million to adjust for interest income passed to the participations and
interest expense has been increased by $10.3 million to adjust for the cost
of funding under the Bank Credit Agreement.
(g) Mortgage origination revenue generated by the branches retained by Bank of
Boston was eliminated. In accordance with SFAS No. 122 (adopted as of
January 1, 1996 and reflected in these pro forma statements for comparative
analysis), the recognition of the value of OMSR was recorded in income.
<TABLE>
<S> <C>
Decrease in mortgage origination revenue generated by
branches retained by Bank of Boston........................ $(2.9)
OMSR......................................................... 10.7
-----
Net increase in mortgage origination revenue............ $ 7.8
=====
</TABLE>
(h) Mortgage servicing rights were adjusted to fair value and therefore no
gain on sales would have been recognized.
(i) Bank of Boston has retained mortgage loans held for investment. The
interest earned on these loans of $7.9 million has been eliminated.
(j) The salaries and employee benefits incurred at the retail branches and the
loan processing center retained by Bank of Boston of $5.8 million have
been eliminated.
(k) Occupancy expenses for the retail branches and the loan processing center
retained by Bank of Boston of $6.4 million have been eliminated.
(l) Reflects amortization of debt issuance and Offering costs of $3.6 million
and elimination of goodwill amortization of $0.3 million.
31
<PAGE> 34
(m) Servicing secured interest expense has been reduced by $14.6 million to
reflect the Bank Credit Agreement and new capital structure.
(n) Reflects interest expense of $12.7 million for $112.5 million of the Notes.
(o) Adjusts income tax expense for the HLI Acquisition and Offering Adjustments
and HomeSide's expected effective rate.
(p) BancPLUS was acquired by HHI on February 28, 1995. Income for the period
January 1, 1995 through February 28, 1995 was added to reflect the period
BancPLUS was not owned by HHI. Also, servicing fee income was increased to
reflect the new agreement on servicing fee rates paid on Barnett's mortgage
loan portfolio. Lastly, income is earned on the escrow deposit accounts
associated with the loan servicing portfolio. Before the HHI Acquisition,
these deposits were held at Barnett. The amount earned was reduced to
reflect the amount which would have been received from an independent
party.
<TABLE>
<S> <C>
Period BancPLUS not owned by HHI............................ $ 9.9
Servicing fee income........................................ 10.0
Decreased income on escrows................................. (0.6)
-----
Net increase in mortgage servicing revenues............ $19.3
=====
</TABLE>
(q) At HHI, risk management contracts were not in place throughout 1995 and no
gains were recognized in income to offset the decline in the value of the
mortgage servicing rights and accelerated amortization due to changes in
interest rates. No adjustments have been included to reflect the results of
a risk management program had once been in place at HHI. After the HHI
Acquisition, HomeSide extended its risk management practices to the
combined servicing portfolio.
(r) Amortization of mortgage servicing rights was increased to reflect the
period from January 1, 1995 through February 28, 1995 during which BancPLUS
was not owned by HHI. Amortization was also increased to reflect the
allocation of the HHI purchase price to mortgage servicing rights and the
resultant amortization due to the interest rate environment during 1995.
<TABLE>
<S> <C>
Amortization for BancPLUS during period not owned by HHI.... $ (2.9)
Increased amortization...................................... (15.9)
------
Net increase in amortization of mortgage servicing
rights............................................... $(18.8)
======
</TABLE>
(s) In 1995, HHI sold loans held for sale as participations to an affiliate of
Barnett. This funding source will be replaced with the Bank Credit
Agreement. Consequently, interest income was increased to adjust for
interest income passed to the participations. Income for the period January
1, 1995 through February 28, 1995 was added to reflect the period BancPLUS
was not owned by BMC.
<TABLE>
<S> <C>
Interest income on participations........................... $ 9.6
Period BancPLUS not owned by HHI............................ 1.4
-----
Net increase in warehouse interest income.............. $11.0
=====
</TABLE>
Warehouse interest expense was increased to reflect the Bank Credit
Agreement.
<TABLE>
<S> <C>
Interest expense on participations.......................... $(7.6)
Period BancPLUS not owned by HHI............................ (1.9)
Bank Credit Agreement....................................... 5.3
-----
Net increase in warehouse interest expense............. $(4.2)
=====
</TABLE>
32
<PAGE> 35
(t) In accordance with SFAS No. 122, the value of OMSR produced by Honolulu
Mortgage was included in income. Since the HHI Acquisition, HomeSide has
purchased the loans produced by the loan production units retained by
Barnett through its correspondent channel. As such, the fair market value
of the related servicing rights are paid to Barnett and capitalized as
purchased mortgage servicing rights (PMSR). Therefore, no adjustment is
made to OMSR to account for mortgages originated by Barnett as a
correspondent. Also, origination revenue generated by the loan production
units retained by Barnett was eliminated.
<TABLE>
<S> <C>
OMSR........................................................ $ 2.8
Decrease in net mortgage origination revenue related to loan
production units retained by Barnett...................... (3.0)
-----
Net decrease in mortgage origination revenue........... $(0.2)
=====
</TABLE>
(u) Mortgage servicing rights were adjusted to fair value and therefore no gain
on sales would have been recognized.
(v) Other income generated by the branches retained by Barnett was eliminated.
Barnett is retaining mortgage loans held for investment. The interest
earned on these loans has been eliminated.
<TABLE>
<S> <C>
Decrease in other income generated by loan production units
retained by Barnett....................................... $(2.3)
Elimination of interest income on mortgage loans held
for investment............................................ (1.1)
-----
Net decrease in other income........................... $(3.4)
=====
</TABLE>
(w) Salaries and employee benefits for the period January 1, 1995 through
February 28, 1995 were added to reflect the period BancPLUS was not owned
by HHI. Salaries and employee benefits for mortgage loan production units
retained by Barnett were eliminated.
<TABLE>
<S> <C>
Period BancPLUS not owned by HHI............................ $ 5.6
Decrease in salaries and employee benefits for loan
production units retained by Barnett...................... (27.1)
------
Net decrease in salaries and employee benefits......... $(21.5)
======
</TABLE>
(x) Occupancy and equipment expenses of $4.2 million for loan production units
retained by Barnett have been eliminated.
(y) Expenses have been reduced for mortgage loan production units retained by
Barnett. Other expenses for the period January 1, 1995 through February 28,
1995 were added to reflect the period BancPLUS was not owned by HHI. Other
expenses have been adjusted to reflect amortization of debt issuance costs
and amortization of goodwill.
<TABLE>
<S> <C>
Decrease in other expenses for loan production units
retained by Barnett....................................... $(25.8)
Period BancPLUS not owned by HHI -- other expenses.......... 3.9
Amortization of debt issuance costs......................... 2.0
Adjustment to amortization of goodwill...................... (1.7)
------
Net decrease in other expenses....................... $(21.6)
======
</TABLE>
(z) Other servicing secured interest expense has been decreased by $0.7 million
to reflect the Bank Credit Agreement and new capital structure.
(aa) Reflects interest expense of $9.8 million on the incremental $87.5 million
of Notes.
(ab) Adjusts income tax expense for the HHI Acquisition and Offering Adjustments
and HomeSide's expected effective rate.
Note: Numbers may not total or agree to financial statements due to rounding.
33
<PAGE> 36
UNAUDITED PRO FORMA
<TABLE>
CONSOLIDATED INCOME STATEMENT
QUARTER ENDED MARCH 15, 1996(A)
<CAPTION>
PRO FORMA
HOMESIDE PRO FORMA
FOR THE HOMESIDE
HLI HLI HHI FOR THE
ACQUISITION ACQUISITION ACQUISITION HLI ACQUISITION,
HLI AND OFFERING AND THE HHI AND OFFERING THE HHI ACQUISITION
HISTORICAL(A) ADJUSTMENTS(B) OFFERING HISTORICAL(A) ADJUSTMENTS(C) AND THE OFFERING(D)
------------- -------------- ------------ ------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
Revenues:
Mortgage servicing
revenues.............. $ 47.4 $(2.2)(e) $ 45.2 $ 37.8 $ -- $ 83.0
Gain/(loss) on risk
management
contracts............. (128.8) -- (128.8) -- (26.1)(q) (154.9)
Amortization of mortgage
servicing rights and
adjustment to
valuation allowance... (7.2) 42.0(f) 34.8 (17.0) 9.3(r) 27.1
------- ----- ------- ------ ------ -------
Net servicing
revenue............. (88.6) 39.8 (48.8) 20.8 (16.8) (44.8)
Warehouse interest
income................ 7.1 7.2(g) 14.3 8.3 4.5(s) 27.1
Warehouse interest
expense............... (5.6) (6.9)(g) (12.5) (8.0) (0.8)(s) (21.3)
------- ----- ------- ------ ------ -------
Warehouse spread...... 1.5 0.3 1.8 0.3 3.7 5.8
Net mortgage origination
revenue............... 11.0 (1.4)(h) 9.6 9.5 (8.6)(t) 10.5
Gain on sales of
servicing rights...... -- -- -- -- -- --
Other income............ 1.5 (1.3)(i) 0.2 0.3 (0.3)(u) 0.2
------- ----- ------- ------ ------ -------
Total revenues.... (74.6) 37.4 (37.2) 30.9 (22.0) (28.3)
Expenses:
Salaries and employee
benefits.............. 13.6 (2.3)(j) 11.3 14.8 (8.5)(v) 17.6
Occupancy and
equipment............. 2.0 (0.2)(k) 1.8 2.2 (1.0)(w) 3.0
Servicing losses on
investor-owned
loans................. 5.6 (0.8)(l) 4.8 -- -- 4.8
Real estate owned....... 0.3 -- 0.3 -- -- 0.3
Other expenses.......... 7.4 (0.5)(m) 6.9 15.3 (5.4)(x) 16.8
------- ----- ------- ------ ------ -------
Total operating
expenses........ 28.9 (3.8) 25.1 32.3 (14.9) 42.5
Servicing secured
interest expense...... 11.6 (3.9)(n) 7.7 4.6 (0.5)(y) 11.8
Other interest
expense............... 1.3 2.5(o) 3.8 -- 2.5(z) 6.3
------- ----- ------- ------ ------ -------
Total other
interest
expense......... 12.9 (1.4) 11.5 4.6 2.0 18.1
------- ----- ------- ------ ------ -------
Income (loss) before
income taxes.......... (116.4) 42.6 (73.8) (6.0) (9.1) (88.9)
Income tax expense
(benefit)............. (42.5) 14.5(p) (28.0) (1.6) (3.8)(aa) (33.4)
------- ----- ------- ------ ------ -------
Net income (loss)....... $ (73.9) $28.1 $ (45.8) $ (4.4) $ (5.3) $ (55.5)
======= ===== ======= ====== ====== =======
</TABLE>
(footnotes on following pages)
34
<PAGE> 37
- ---------------
(a) Reflects HLI's and HHI's historical consolidated income statements for the
period January 1, 1996 to March 15, 1996 for HLI and for the quarter ended
March 31, 1996 for HHI subject to certain reclassifications to conform with
the pro forma income statement presentation. In order to better reflect the
pro forma results of the new financing structure, the historical interest
income and expense items have been separated into warehouse interest income
and expense and servicing secured interest expense. Other items of interest
income and interest expense, including interest on real estate owned and
earnings on escrow deposit accounts balances, have been reclassified. The
SFAS No. 91 reclassification of mortgage origination expenses was also
eliminated. Additionally, for HHI, amortization of goodwill has been
reclassified to conform with this pro forma presentation. Pro forma
adjustments to the historical financial statements have been completed in a
manner consistent with the calendar periods of the related financial
statements of HLI and HHI, respectively.
(b) Reflects pro forma adjustments related to HomeSide's initial capitalization
and the HLI Acquisition, including related financing and proceeds from
$112.5 million of the Notes. The remaining proceeds of the Offering were
held in escrow pending completion of the HHI Acquisition. The adjustments
reflect the application of purchase accounting to the HLI Acquisition and,
as a result, the assets and liabilities have been adjusted to reflect the
allocation of the purchase price.
(c) Reflects pro forma adjustments related to the HHI Acquisition, including
related financing and proceeds from the incremental $87.5 million of the
Notes. The adjustments reflect the application of purchase accounting to
the HHI Acquisition and, as a result, the assets and liabilities have been
adjusted to reflect the allocation of the purchase price.
(d) On a pro forma basis which reflects the HLI Acquisition, the HHI
Acquisition and the offering of $200 million of senior secured second
priority notes, HomeSide had a net loss of $55.5 million for the first
quarter of 1996. The loss was primarily due to losses on risk management
contracts of $128.8 million by HLI and $26.1 million by HHI. The losses on
risk management contracts, which were purchased to protect the value of
HLI's and HHI's mortgage servicing rights portfolio, were the result of an
increase in long-term interest rates during the first quarter of 1996.
Changes in the value of HLI's and HHI's mortgage servicing rights
substantially offset the losses on the risk management contracts. However,
such changes in the value of mortgage servicing rights were not fully
recorded in the financial statements of HLI or HHI because servicing rights
are recorded at the lower of amortized cost or market value.
(e) Income is earned on the escrow deposit accounts associated with the loan
servicing portfolio. Before the HLI Acquisition, these deposits were held
at Bank of Boston and earned a higher interest rate than would have been
earned had they been held by an independent party. Reduction of $2.2
million is based on the earnings that would have been received from an
independent party.
(f) Amortization of mortgage servicing rights was increased by $3.0 million to
reflect the allocation of the HLI purchase price to servicing rights and
reduced by $45.0 million due to the change in the SFAS No. 122 impairment
reserve.
(g) In 1996, HLI sold loans held for sale as participations to an affiliate of
Bank of Boston. This funding source was replaced with the Bank Credit
Agreement. Consequently, interest income has been increased by $7.2 million
to adjust for interest income passed to the participations and interest
expense has been increased by $6.9 million to adjust for the cost of
funding under the Bank Credit Agreement.
(h) Mortgage origination revenue of $1.4 million generated by the branches
retained by Bank of Boston was eliminated.
(i) Bank of Boston has retained mortgage loans held for investment. The
interest earned on these loans of $1.3 million has been eliminated.
(j) The salaries and employee benefits incurred at the retail branches and the
loan processing center retained by Bank of Boston of $2.3 million have
been eliminated.
35
<PAGE> 38
(k) Occupancy expenses for the retail branches and the loan processing center
retained by Bank of Boston of $0.2 million have been eliminated.
(l) Servicing losses of $0.8 million on assets being retained by Bank of Boston
have been eliminated.
(m) Reflects amortization of debt issuance and Offering costs of $0.8 million
and elimination of goodwill amortization of $0.1 million. Other expenses of
$1.2 million for the retail branches and the loan processing center
retained by Bank of Boston have been eliminated.
(n) Servicing secured interest expense has been reduced by $3.9 million to
reflect the Bank Credit Agreement and new capital structure.
(o) Reflects interest expense of $2.6 million for $112.5 million of the Notes
and a reduction of $0.1 million for interest expense on the headquarters
mortgage to adjust the interest rate to a market rate.
(p) Adjusts income tax expense for the HLI Acquisition and Offering Adjustments
and HomeSide's expected effective rate.
(q) In connection with the HHI Acquisition, Barnett purchased risk management
contracts to protect the value of HHI's mortgage servicing rights. During
the first quarter of 1996, HHI experienced losses on risk management
contracts of $26.1 million due to an increase in long term interest rates.
In order to conform BMC's accounting policies to BBMC's, the change in
value of HHI's risk management contracts is included as a loss on risk
management contracts. Changes in the value of HHI's mortgage servicing
rights substantially offset the loss on the risk management contracts.
(r) Amortization was increased by $0.7 million to reflect the allocation of the
HHI purchase price to mortgage servicing rights and reduced by $10 million
due to the change in the FAS 122 impairment reserve.
(s) In 1996, HHI sold loans held for sale as participations to an affiliate of
Barnett. This funding source will be replaced with the Bank Credit
Agreement. Consequently, interest income was increased by $4.5 million to
adjust for interest income passed to the participations.
Warehouse interest expense was increased to reflect the Bank Credit
Agreement.
<TABLE>
<S> <C>
Interest expense on participations.......................... $(3.0)
Bank Credit Agreement....................................... 2.2
-----
Net increase in warehouse interest expense............. $(0.8)
=====
</TABLE>
(t) Origination revenue of $8.6 million generated by the loan production units
retained by Barnett was eliminated.
(u) Barnett is retaining mortgage loans held for investment. The interest
earned on these loans of $0.3 million has been eliminated.
(v) Salaries and employee benefits of $8.5 million for mortgage loan production
units retained by Barnett were eliminated.
(w) Occupancy and equipment expenses of $1.0 million for loan production units
retained by Barnett have been eliminated.
(x) Expenses have been reduced for mortgage loan production units retained by
Barnett. Other expenses have been adjusted to reflect amortization of debt
issuance costs and amortization of goodwill.
<TABLE>
<S> <C>
Decrease in other expenses for loan production units
retained by Barnett....................................... $(5.5)
Amortization of debt issuance costs......................... 0.5
Adjustment to amortization of goodwill...................... (0.4)
-----
Net decrease in other expenses....................... $(5.4)
=====
</TABLE>
(y) Other servicing secured interest expense has been decreased by $0.5 million
to reflect the Bank Credit Agreement and new capital structure.
36
<PAGE> 39
(z) Reflects interest expense of $2.5 million on the incremental $87.5 million
of Notes.
(aa) Adjusts income tax expense for the HHI Acquisition and Offering Adjustments
and HomeSide's expected effective rate.
Note: Numbers may not total or agree to financial statements due to rounding.
37
<PAGE> 40
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
AT MARCH 15, 1996(A)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HOMESIDE FOR HOMESIDE FOR THE
HLI THE HLI HHI HLI ACQUISITION,
ACQUISITION ACQUISITION ACQUISITION THE HHI
HLI AND OFFERING AND THE HHI AND OFFERING ACQUISITION
HISTORICAL(A) ADJUSTMENTS(B) OFFERING HISTORICAL(A) ADJUSTMENTS(C) AND THE OFFERING
------------- -------------- ------------ ------------- -------------- ----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash and cash
equivalents......... $ 23.2 $ (21.2)(d) $ 2.0 $ 44.0 $ (44.0)(o) $ 2.0
Mortgage loans
Held for sale....... 641.5 507.3(e) 1,148.8 386.4 138.0(p) 1,673.2
Held for
investment........ 65.1 (65.1)(f) -- 22.3 (22.3)(q) --
Mortgage servicing
rights, net......... 542.9 153.5(g) 696.4 245.6 159.5(r) 1,101.5
Accounts receivable... 45.1 (1.5)(h) 43.6 8.7 (8.4)(s) 43.9
Servicing advances.... 73.8 (56.3)(h) 17.5 39.6 -- 57.1
Goodwill.............. 4.6 (4.6)(i) -- 136.8 (81.8)(t) 55.0
Other assets.......... 116.7 (75.8)(j) 40.9 36.9 (15.4)(u) 62.4
-------- --------- -------- ------ ------- --------
Total assets...... $1,512.9 $ 436.3 $1,949.2 $920.3 $ 125.6 $2,995.1
======== ========= ======== ====== ======= ========
Liabilities and
stockholders'
equity:
Notes payable
Pre-acquisition
credit facility... $1,256.0 $(1,256.0)(k) $ -- $604.0 $(604.0)(v) $ --
Warehouse credit
facility.......... -- 1,117.4(k) 1,117.4 -- 513.9(v) 1,631.3
Servicing secured
credit facility... -- 361.7(k) 361.7 -- 149.0(v) 510.7
-------- --------- -------- ------ ------- --------
1,256.0 223.1 1,479.1 604.0 58.9 2,142.0
Accounts payable and
accrued
liabilities......... 130.4 5.5(l) 135.9 49.6 (3.3)(w) 182.2
Accrued and deferred
income taxes........ -- -- -- 39.2 50.0(x) 89.2
Other long-term
debt................ 13.8 120.4(m) 134.2 -- 87.5(y) 221.7
-------- --------- -------- ------ ------- --------
Total
liabilities..... 1,400.2 349.0 1,749.2 692.8 193.1 2,635.1
Stockholders'
equity.............. 112.7 87.3(n) 200.0 227.5 (67.5)(z) 360.0
-------- --------- -------- ------ ------- --------
Total liabilities
and
stockholders'
equity.......... $1,512.9 $ 436.3 $1,949.2 $920.3 $ 125.6 $2,995.1
======== ========= ======== ====== ======= ========
</TABLE>
(footnotes on following pages)
38
<PAGE> 41
- ---------------
<TABLE>
<S> <C> <C>
(a) Reflects HLI's and HHI's historical consolidated balance sheets as of March 15, 1996
and March 31, 1996, respectively. Certain amounts from the consolidated balance sheets
have been reclassified to conform with the pro forma balance sheet presentation. To
accurately reflect pro forma results of the new financing structure, notes payable
balances have been reclassified. Further, certain captions of the historical balance
sheet presentations have been summarized to conform with this pro forma presentation.
(b) Reflects pro forma adjustments related to HomeSide's initial capitalization and the HLI
Acquisition, including related financing and proceeds from $112.5 million of the Notes.
The remaining proceeds of the Offering were held in escrow pending completion of the
HHI Acquisition. The adjustments reflect the application of purchase accounting to the
HLI Acquisition, and as a result, the assets and liabilities have been adjusted to
reflect the allocation of the purchase price.
(c) Reflects pro forma adjustments related to the HHI Acquisition including financing and
proceeds from the incremental $87.5 million of the Notes. The adjustments reflect the
application of purchase accounting to the HHI Acquisition, and as a result, the assets
and liabilities have been adjusted to reflect the allocation of the purchase price.
(d) Factors affecting cash balances associated with the acquisition of HLI include the
following:
Issuance of common stock.................................................... $ 200.0
Notes Offering.............................................................. 112.5
Acquisition of HLI from Bank of Boston...................................... (225.9)
Borrowings under Bank Credit Agreement...................................... 1,479.1
Repayment of pre-acquisition facility....................................... (1,256.0)
Net purchase of certain Bank of Boston assets............................... (292.1)
Debt issuance costs for HLI Acquisition..................................... (15.3)
HLI Acquisition expenses.................................................... (15.5)
Expenses of Offering........................................................ (8.0)
---------
Net decrease in cash........................................................ $ (21.2)
=========
(e) Excluded from the historical balance of loans held for sale are participations with an
affiliate of Bank of Boston. These exclusions are eliminated from the balance sheet
and, consequently, have the effect of increasing loans held for sale of HLI by $507.3
million.
(f) As part of the HLI Acquisition, Bank of Boston retained all loans held for investment
in the amount of $65.1 million.
(g) The value of mortgage servicing rights have been adjusted as of March 15, 1996 as part
of the allocation of the HLI acquisition price to assets and liabilities acquired,
resulting in a net increase of mortgage servicing rights of $153.5 million.
(h) Bank of Boston retained certain accounts receivable as part of the HLI Acquisition
totaling $1.5 million and certain servicing advances totaling $56.3 million.
(i) Goodwill from previous transactions of $4.6 million has been eliminated.
</TABLE>
39
<PAGE> 42
<TABLE>
<S> <C> <C>
(j) Bank of Boston retained all HLI's real estate owned along with certain premises and
equipment and other assets. In addition, assets acquired by HomeSide have been revalued
to reflect the allocation of the HLI purchase price. Also, HomeSide capitalized certain
debt issuance and acquisition costs.
Assets retained by Bank of Boston:
Real estate owned........................................................... $ (2.8)
Premises and equipment...................................................... (0.1)
Accrued taxes receivable.................................................... (33.9)
Deferred tax asset.......................................................... (40.7)
Other assets................................................................ (8.6)
---------
Total other assets retained by Bank of Boston............................... (86.1)
Revaluation of other assets acquired by HomeSide............................ (13.0)
Debt issuance costs for HLI Acquisition..................................... 15.3
Expenses of Offering........................................................ 8.0
---------
Net decrease in other assets................................................ $ (75.8)
=========
(k) The Bank of Boston debt was replaced with the Bank Credit Agreement in conjunction with
the HLI Acquisition.
Repayment of note payable to Bank of Boston................................. $(1,256.0)
Drawings under Bank Credit Agreement -- Warehouse credit facility........... 1,117.4
-- Servicing secured credit facility........................................ 361.7
---------
Net increase in notes payable............................................... $ 223.1
=========
(l) HomeSide accrued the costs associated with the closure of certain retail branches and
other exit costs. Also, Bank of Boston retained certain liabilities of HLI.
Accrued costs related to HLI Acquisition.................................... $ 10.0
Liabilities retained by Bank of Boston...................................... (4.5)
---------
Net increase in accounts payable and accrued liabilities.................... $ 5.5
=========
(m) Reflects the Notes and marks to market HLI's mortgage debt payable.
Issuance of Notes........................................................... $ 112.5
Mark to market adjustment of long-term mortgage debt........................ 7.9
---------
Net increase in other long-term debt........................................ $ 120.4
=========
(n) HomeSide was capitalized with $200 million through the contribution of cash and
property.
Issuance of common stock.................................................... $ 200.0
Elimination of historical HLI stockholders' equity.......................... (112.7)
---------
Net increase in stockholders' equity........................................ $ 87.3
=========
</TABLE>
40
<PAGE> 43
<TABLE>
<S> <C> <C>
(o) Factors affecting cash balances associated with the HHI Acquisition.
Issuance of common stock.................................................... $ 160.0
Acquisition of HHI from Barnett............................................. (228.2)
Borrowings under Bank Credit Agreement...................................... 662.9
Repayment of pre-acquisition credit facility................................ (604.0)
Net purchase of HHI assets.................................................. (106.2)
Notes Offering.............................................................. 87.5
Contingent payment to Bank of Boston........................................ (5.0)
HHI Acquisition expenses.................................................... (5.0)
Debt issuance costs for HHI Acquisition..................................... (6.0)
---------
Net decrease in cash........................................................ $ (44.0)
=========
(p) Increase of $138.0 million in mortgage loans held for sale to reflect the new
correspondent relationship with Barnett.
(q) Mortgage loans held for investment of $22.3 million retained by Barnett.
(r) Mortgage servicing rights have been marked to market as of March 31, 1996 as part of
the allocation of fair value to assets and liabilities acquired, resulting in a net
increase of mortgage servicing rights of $159.5 million.
(s) Certain accounts receivable totaling $8.4 million will be retained by
Barnett.
(t) Goodwill of $136.8 million from prior transactions has been eliminated and $55.0
million has been recorded for the effects of this transaction.
(u) Barnett retained all real estate owned by HHI along with certain premises and equipment
and other assets. Also, HHI capitalized certain debt issuance costs.
Assets retained by Barnett:
Real estate owned........................................................... $ (1.5)
Premises and equipment...................................................... (16.6)
Other assets................................................................ (3.3)
---------
Total other assets retained by Barnett...................................... (21.4)
Debt issuance costs for HHI Acquisition..................................... 6.0
---------
Net decrease in other assets................................................ $ (15.4)
=========
(v) The Barnett debt was replaced with the Bank Credit Agreement in conjunction with the
HHI Acquisition.
Repayment of notes payable to Barnett....................................... $ (604.0)
Drawings under Bank Credit Agreement -- Warehouse credit facility........... 513.9
-- Servicing secured credit facility........................................ 149.0
---------
Net increase in notes payable............................................... $ 58.9
=========
(w) As part of the HHI Acquisition, a liability for exit costs and other incremental
transaction costs was accrued. Also, Barnett retained certain liabilities of HHI.
Accrued costs related to HHI Acquisition.................................... $ 12.0
Liabilities retained by Barnett............................................. (15.3)
---------
Net decrease in accounts payable and accrued liabilities.................... $ (3.3)
=========
(x) Reflects deferred tax liabilities of $5.0 million related to assets retained by Barnett
and the tax effect of a step up in basis of assets and liabilities of $55.0 million.
(y) Reflects issuance of $87.5 million of Notes upon completion of HHI
Acquisition.
</TABLE>
41
<PAGE> 44
<TABLE>
<S> <C> <C>
(z) Reflects the impact on capital of the HHI Acquisition and is comprised of the
following:
Issuance of common stock.................................................... $ 160.0
Elimination of historical HHI stockholders' equity.......................... (227.5)
---------
Net decrease in stockholders' equity........................................ $ (67.5)
=========
</TABLE>
Note: Numbers may not total or agree to financial statements due to rounding.
42
<PAGE> 45
SELECTED CONSOLIDATED FINANCIAL INFORMATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF HLI
The selected consolidated financial information of HLI (formerly BancBoston
Mortgage Corporation) set forth below has been derived from the audited
financial statements of HLI and the related notes thereto. The selected
consolidated financial information should be read in conjunction with HLI's
Consolidated Financial Statements and the Notes thereto and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- HLI"
included elsewhere in this Prospectus. See also "Unaudited Pro Forma
Consolidated Financial Information."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, FOR THE THREE FOR THE PERIOD
---------------------------------------------------------------- MONTHS ENDED JANUARY 1, 1996
1991 1992 1993 1994 1995 MARCH 31, 1995 TO MARCH 15, 1996
----------- ----------- ----------- ----------- ----------- -------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues:
Mortgage servicing fees.... $ 92,362 $ 105,890 $ 111,822 $ 140,491 $ 173,038 $ 43,657 $ 38,977
Gain (loss) on risk
management contracts..... -- -- 6,688 (6,702) 108,702 3,612 (128,795)
Amortization of mortgage
servicing rights......... (37,213) (73,908) (112,492) (66,801) (108,013) (23,103) (7,245)
----------- ----------- ----------- ----------- ----------- ------------ -----------
Net servicing revenue.... 55,149 31,982 6,018 66,988 173,727 24,166 (97,063)
Interest income............ 41,252 46,865 50,156 31,585 24,324 4,122 8,423
Interest expense........... (27,686) (38,855) (44,199) (33,952) (27,128) (6,079) (10,089)
----------- ----------- ----------- ----------- ----------- ------------ -----------
Net interest revenue..... 13,566 8,010 5,957 (2,367) (2,804) (1,957) (1,666)
Net mortgage origination
revenue (expense)........ 6,508 1,123 6,173 4,983 3,417 (1,083) 7,638
Gain on sales of servicing
rights................... 12,034 14,769 651 10,862 10,230 4,285 --
Other income............... 52 17 50 147 511 13 253
----------- ----------- ----------- ----------- ----------- ------------ -----------
Total revenues..... 87,309 55,901 18,849 80,613 185,081 25,424 (90,838)
Expenses:
Salaries and employee
benefits............... 27,328 30,053 33,096 40,370 45,381 11,696 10,287
Occupancy and
equipment.............. 7,809 7,788 7,966 9,012 10,009 2,358 2,041
Servicing losses on
investor-owned loans... 2,880 8,138 2,770 7,177 9,981 733 5,560
Real estate acquired..... 1,195 1,124 1,600 253 1,054 218 291
Other expenses........... 17,552 20,461 22,058 19,326 21,896 4,713 7,377
----------- ----------- ----------- ----------- ----------- ------------ -----------
Total expenses..... 56,764 67,564 67,490 76,138 88,321 19,718 25,556
----------- ----------- ----------- ----------- ----------- ------------ -----------
Income (loss) before income
taxes and cumulative
effects of changes in
accounting principles.... 30,545 (11,663) (48,641) 4,475 96,760 5,706 (116,394)
Income tax expense
(benefit) before
cumulative effects of
changes in accounting
principles............... 12,168 (3,829) (17,284) 2,525 37,934 2,277 (42,533)
----------- ----------- ----------- ----------- ----------- ------------ -----------
Income (loss) before
cumulative effects of
changes in accounting
principles............... 18,377 (7,834) (31,357) 1,950 58,826 3,429 (73,861)
Change in purchased
mortgage servicing
rights (PMSR) valuation
method, net of tax..... -- -- (59,921 (a) -- -- -- --
Change in accounting for
income taxes........... -- -- 6,093(b) -- -- -- --
Change in accounting for
mortgage servicing fee
income, net of tax..... -- -- -- 3,455(c) -- -- --
----------- ----------- ----------- ----------- ----------- ------------ -----------
Net income (loss).......... $ 18,377 $ (7,834) $ (85,185) $ 5,405 $ 58,826 $ 3,429 $ (73,861)
=========== =========== =========== =========== =========== ============ ===========
SELECTED OPERATING DATA:
Volume of loans originated
and acquired............. $ 5,196,996 $ 9,705,875 $13,682,761 $14,473,000 $ 9,567,521 1,181,642 $ 4,187,603(e)
Loan servicing portfolio
(at period end).......... 20,600,569 23,705,642 27,999,100 37,971,200 41,555,354 37,800,120 44,158,163(e)
Loan servicing portfolio
(average)................ 19,663,100 22,153,100 25,852,400 33,178,600 39,283,700 38,099,730 43,158,072(e)
Weighted average interest
rate (at period end)..... 9.65% 9.05% 8.07% 7.91% 7.97% 7.90% 7.92%(e)
Weighted average servicing
fee (average for
period).................. 0.400% 0.390% 0.372% 0.389% 0.383% 0.384% 0.380%(e)
Ratio of earnings to fixed
charges.................. 2.06x --(d) --(d) 1.13x 4.40x 1.88x --(d)
SELECTED BALANCE SHEET DATA
(AT PERIOD END):
Mortgage loans held for
sale..................... $ 507,776 $ 495,455 $ 607,506 $ 271,215 $ 388,436 $ 70,978 $ 641,465
Mortgage servicing
rights................... 296,393 337,307 281,727 431,148 551,338 414,974 542,862
Total assets............... 1,034,269 1,073,686 1,193,583 1,006,887 1,254,303 858,001 1,512,902
Note payable to parent..... 748,827 799,992 1,019,011 779,021 966,000 648,499 1,256,000
Long term debt............. 14,483 14,339 14,180 14,007 13,816 13,961 13,790
Total liabilities.......... 818,890 866,141 1,071,223 879,122 1,067,712 726,807 1,400,172
Total stockholders'
equity................... 215,379 207,545 122,360 127,765 186,591 131,194 112,730
</TABLE>
43
<PAGE> 46
- ---------------
(a) On January 1, 1993, HLI changed its method of accounting for PMSR to conform
to the accounting rules adopted in 1993 by the banking regulators. Under
these new rules, the carrying value of PMSR is recorded at the lesser of
amortized cost or the discounted cash flows from servicing the underlying
mortgages. Previously, this valuation was performed on an undiscounted
basis. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 2 of Notes to Consolidated Financial
Statements.
(b) On January 1, 1993, HLI adopted SFAS No. 109, "Accounting for Income Taxes,"
which principally affects accounting for deferred taxes. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 2 of Notes to Consolidated Financial Statements.
(c) On January 1, 1994, HLI changed its method of recognizing servicing fee
income to the accrual method. Previously, these fees were recorded as income
when the payments were received. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Note 2 of Notes to
Consolidated Financial Statements.
(d) Fixed charges exceeded income before income taxes, cumulative effects of
changes in accounting principles and fixed charges by $11.7 million and
$48.6 million in 1992 and 1993, respectively, and $116.4 million for the
period January 1, 1996 to March 15, 1996.
(e) Period information is for the period January 1, 1996 to March 31, 1996 and
period end information is at March 31, 1996.
44
<PAGE> 47
<TABLE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
OF HHI
The selected consolidated financial information of HHI (formerly Barnett
Mortgage Company) set forth below has been derived from the audited financial
statements of HHI and the related notes thereto. The selected consolidated
financial information should be read in conjunction with HHI's Consolidated
Financial Statements and the Notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- HHI" included
elsewhere in this Prospectus. See also "Unaudited Pro Forma Consolidated
Financial Information."
<CAPTION>
FOR THE THREE
FOR THE THREE MONTHS
YEARS ENDED DECEMBER 31, MONTHS ENDED ENDED
-------------------------------------------------- MARCH 31, MARCH 31,
1991 1992 1993 1994(A) 1995(B) 1995(B) 1996
------- ------- -------- -------- -------- ------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Mortgage Origination Revenue:
Mortgage origination fees........... $ -- $ -- $ 358 $ 3,276 $ 17,104 $ 2,535 $ 5,642
Gain (loss) on sales of loans,
net............................... 3,184 8,187 5,688 692 (13,920) 519 3,865
------- ------- -------- -------- -------- -------- --------
Total mortgage origination
revenue..................... 3,184 8,187 6,046 3,968 3,184 3,054 9,507
Interest Income (expense):
Interest income..................... 765 657 855 3,460 27,264 2,583 8,578
Interest expense.................... (568) (531) (1,415) (4,911) (20,427) (2,919) (6,094)
------- ------- -------- -------- -------- -------- --------
Net interest income
(expense)................... 197 126 (560) (1,451) 6,837 (336) 2,484
Mortgage Servicing Revenue:
Mortgage servicing income........... 17,129 29,570 38,886 47,147 108,559 19,380 31,288
Amortization of capitalized mortgage
servicing rights.................. (2,453) (6,013) (11,547) (17,783) (48,282) (8,351) (17,011)
Gain on sales of servicing.......... -- -- -- -- 9,096 -- --
------- ------- -------- -------- -------- -------- --------
Net mortgage servicing revenue.... 14,676 23,557 27,339 29,364 69,373 11,029 14,277
Other Income.......................... 2,860 7,750 6,296 4,492 2,592 851 62
------- ------- -------- -------- -------- -------- --------
Total revenues................ 20,917 39,620 39,121 36,373 81,986 14,598 26,330
Expenses:
Salaries and benefits............... 7,778 13,698 13,914 17,474 53,070 9,133 14,771
General and administrative.......... 10,349 11,401 12,432 14,924 41,849 8,283 13,932
Occupancy and equipment............. 1,091 1,167 1,810 2,702 5,960 1,517 2,151
Amortization of goodwill............ -- -- -- 259 4,840 553 1,395
------- ------- -------- -------- -------- -------- --------
Total expenses................ 19,218 26,266 28,156 35,359 105,719 19,486 32,249
------- ------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
affiliate profit sharing............ 1,699 13,354 10,965 1,014 (23,733) (4,888) (5,919)
Affiliate profit sharing.............. (1,699) (12,471) (10,774) (3,534) (6,242) -- --
------- ------- -------- -------- -------- -------- --------
Income (loss) before income taxes..... 0 883 191 (2,520) (29,975) (4,888) (5,919)
Income tax provision (benefit)........ 34 359 87 (462) (9,589) (759) (1,561)
------- ------- -------- -------- -------- -------- --------
Income (loss) before changes in
accounting principles............... (34) 524 104 (2,058) (20,386) (4,129) (4,358)
Cumulative effect of changes in
accounting principles............... -- (507)(c) -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Net income (loss)..................... $ (34) $ 17 $ 104 $ (2,058) $(20,386) $ (4,129) $ (4,358)
======= ======= ======== ======== ======== ======== ========
SELECTED OPERATING DATA (DOLLARS IN
MILLIONS):
Volume of loans originated and
acquired............................ $ 1,945 $ 3,507 $ 3,360 $ 3,410 $ 5,767 $ 920 $ 1,556
Loan servicing portfolio (at period
end)................................ 10,034 11,524 13,085 18,411 33,411 32,827 33,019
Loan servicing portfolio (average).... 9,639 10,779 12,305 15,748 30,669 23,366 33,265
Weighted average interest rate (at
period end)(d)...................... -- -- 7.34% 7.44% 8.05% 7.91% 8.04%
Weighted average servicing fee
(average for period)(d)............. -- -- 0.259% 0.261% 0.299% 0.297% 0.346%
SELECTED BALANCE SHEET DATA (AT PERIOD
END):
Mortgage loans held for sale.......... $ -- $ -- $ -- $183,914 $465,880 $128,168 $386,380
Mortgage servicing rights............. 12,959 25,458 48,941 92,461 250,788 314,237 245,617
Total assets.......................... 42,082 61,166 96,186 359,472 994,630 663,331 920,322
Notes payable......................... 16,107 20,325 63,329 248,214 653,056 115,093 604,000
Total liabilities..................... 22,676 38,541 69,930 274,570 762,802 414,031 692,852
Total stockholder's equity............ 19,406 22,625 26,257 84,902 231,828 249,300 227,470
</TABLE>
45
<PAGE> 48
- ---------------
(a) Includes Loan America since its acquisition in October 1994.
(b) Includes BancPLUS since its acquisition in February 1995.
(c) In 1992, HHI adopted two new accounting standards. Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
changed HHI's accounting for income taxes to the asset/liability method from
the deferred method previously required by Accounting Principles Board
Opinion No. 11. HHI also adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires that the
projected future cost of providing postretirement health care and other
benefits be recognized during the periods employees provide services to earn
those benefits. Prior to adopting SFAS No. 106, these costs were expensed as
incurred. HHI adopted both of these changes on a prospective basis effective
January 1, 1992. As permitted under SFAS No. 106, HHI chose to immediately
recognize the transition obligation for postretirement benefits other than
pensions in net income for 1992 rather than on a delayed basis over the
remaining average service period of active plan members.
(d) Information not available for 1991 and 1992.
46
<PAGE> 49
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- HLI
JANUARY 1, 1996 TO MARCH 15, 1996
AND
JANUARY 1, 1995 TO MARCH 31, 1995
GENERAL
On March 15, 1996, the HLI Acquisition was consummated. On May 31, 1996,
the HHI Acquisition was consummated. See "The Acquisitions".
The interim financial statements of HLI have been prepared for the period
January 1, 1996 to March 15, 1996 to coincide with the closing of the HLI
Acquisition. Results of operations for periods subsequent to March 15, 1996 will
be included in future financial statements of HomeSide. Results of operations
for the three months ended March 31, 1995 have been presented for comparative
purposes. Unless otherwise noted, for purposes of the Management's Discussion
and Analysis of Financial Condition and Results of Operations -- HLI, references
to the first quarter 1996 pertain to the period January 1, 1996 to March 15,
1996. The Management's Discussion and Analysis of Financial Condition and
Results of Operations for the first quarter of 1996 and 1995 should be read in
conjunction with the Management's Discussion and Analysis of Financial Condition
and Results of Operations for the three years ended December 31, 1995 appearing
elsewhere in this Prospectus.
RESULTS OF OPERATIONS
For purposes of this "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- HLI" the term "HomeSide" means HLI.
Summary
Long-term interest rates declined through mid-February 1996, the
continuation of a trend which began in 1995. This decline led to an increase in
loan production to $4.2 billion during the first quarter of 1996 from $1.2
billion during the first quarter of 1995, and resulted in growth in HomeSide's
servicing portfolio, which increased from $41.6 billion at December 31, 1995 to
$44.2 billion at March 31, 1996. Beginning in late February and continuing
through March 1996, long-term interest rates increased and negatively impacted
HomeSide's results of operations for the first quarter. HomeSide reported a net
loss of $73.9 million during the first quarter of 1996, compared to net income
of $3.4 million in the first quarter of 1995. The decrease in net income was
primarily due to losses on HomeSide's risk management contracts of $128.8
million during the first quarter of 1996 as a result of increasing interest
rates in late February and March 1996.
Net Servicing Revenue
During the first quarter of 1996, HomeSide had net servicing expense of
$97.1 million, as compared to net servicing revenue of $24.2 million in the
first quarter of 1995. The net servicing expense in 1996 was primarily due to
losses on HomeSide's risk management contracts. Excluding the effect of risk
management contracts, net servicing revenue increased from $20.6 million in the
first quarter 1995 to $31.7 million in the first quarter 1996. In the first
quarter of 1995, HomeSide recorded gains on risk management contracts of $3.6
million. Due to an increase in long-term interest rates in late February and
early March 1996, HomeSide experienced losses on risk management contracts of
$128.8 million during the quarter. Changes in the value of HomeSide's mortgage
servicing rights substantially offset the loss on risk management contracts.
However, such changes in value were not fully recorded in the financial
statements of HomeSide because servicing rights are recorded at the lower of
amortized cost or market value.
The decrease in net servicing revenue was partially offset by a reduction
in amortization of mortgage servicing rights from $23.1 million in the first
quarter of 1995 to $7.2 million in the first quarter of 1996. The reduction in
amortization was due to the increase in long-term interest rates noted above,
which had a
47
<PAGE> 50
favorable effect on prepayment estimates used in calculating HomeSide's periodic
amortization expense. Since mortgage servicing rights are amortized over the
expected period of service fee revenues, a reduction in prepayment activity
typically results in a longer amortization period and, accordingly, lower
amortization expense for each reporting period. Amortization charges are highly
dependent upon the level of prepayments during the period and the change in
prepayment expectations, which are significantly influenced by the direction and
level of long-term interest rate movements.
Net Interest Expense
Net interest expense decreased from $2.0 million in the first quarter of
1995 to $1.7 million in the first quarter of 1996, primarily due to an increase
in long-term interest rates during February and March 1996. An increase in
long-term interest rates has a positive impact on HomeSide's interest spread by
increasing the Company's yield on its loans held for sale. Interest expense is
incurred on HomeSide's credit facility with Bank of Boston, which is primarily
influenced by short-term interest rates. The decrease in net interest expense
was also due to an increase in the average balance of HomeSide's loans held for
sale from $124.6 million during the first quarter of 1995 to $535.6 million
during the first quarter of 1996.
Net Mortgage Origination Revenue (Expense)
<TABLE>
Net mortgage origination revenue (expense) increased from ($1.1) million in
the first quarter of 1995 to $7.6 million in the first quarter of 1996. The
following table sets forth HomeSide's origination activity for the three months
ended March 31, 1995 and 1996:
<CAPTION>
FIRST FIRST
QUARTER QUARTER
1995 1996
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Correspondent.......................................... $ 314 $2,031
Co-issue(a)............................................ 755 1,597
Broker................................................. 28 191
------ ------
Total wholesale........................................ 1,097 3,819
Retail................................................. 85 368
------ ------
Total production....................................... $1,182 $4,187
====== ======
<FN>
- ---------------
(a) Represents the acquisition of servicing rights, not the underlying loans.
Amounts represent UPB of mortgage debt to which the acquired servicing
rights relate.
</TABLE>
The increase in net origination revenue during the first quarter of 1996
was partially due to the adoption of Statement of Financial Accounting Standards
No. 122, "Accounting for Mortgage Servicing Rights" (SFAS 122) as of January 1,
1996, which had the effect of increasing net mortgage origination revenue by
$2.1 million. In previous periods, the cost of mortgage servicing rights on a
loan originated by HomeSide was included in the basis of the related loan. SFAS
122 requires that the cost of an originated loan that is sold with servicing
retained be allocated between the loan sold and the servicing rights retained.
Consequently, the cost basis of loans originated in 1996 by HomeSide was lower
than the basis that would have been recorded prior to the adoption of SFAS 122
and resulted in additional gain on the sale of loans. The remaining increase was
due to increases in origination income resulting from higher loan production
volumes.
Gain on Sales of Servicing Rights
Gain on sales of servicing rights during the first quarter of 1995 were
$4.3 million. The gain was due to the sale of servicing rights on loans with a
principal balance of $1.1 billion. There were no sales of servicing rights
during the first quarter of 1996.
Salaries and Employee Benefits
Salaries and employee benefits decreased $1.4 million, or 12.1%, in the
first quarter of 1996 as compared to the first quarter of 1995. Including
capitalized loan costs added to the cost basis of mortgage loans, salaries
48
<PAGE> 51
and employee benefits increased $0.7 million, or 5.8%, in the first quarter of
1996 as compared to the first quarter of 1995. The increase reflects general
salary and benefit increases as compared to the first quarter of 1995 and a
slight increase in the number of full-time equivalent employees from 1,117 as of
March 31, 1995 to approximately 1,120 as of March 15, 1996.
Occupancy and Equipment Expense
Occupancy and equipment expense decreased $0.4 million, from $2.4 million
for the first quarter of 1995 to $2.0 million for the first quarter of 1996. The
decrease is primarily due to a decline in equipment repair and maintenance
expenses in the first quarter of 1996 as compared to the first quarter of 1995.
Servicing Losses on Investor-Owned Loans
Servicing losses on investor-owned loans increased from $0.7 million in the
first quarter of 1995 to $5.6 million in the first quarter of 1996. The increase
is primarily due to a change in the VA's method of calculating the amount it
will guarantee on any loan, coupled with planned military base closings in
California that may have an impact on the performance of certain VA loans
serviced by HomeSide. The increase in the VA marketing rate effectively
represents a potential increase in HomeSide's exposure on properties conveyed to
the VA. HomeSide analyzed the effect of these factors on the level of its
reserve for estimated servicing losses and recorded a higher provision in the
first quarter of 1996 in order to bring the reserve to an acceptable level.
Real Estate Owned Expense
Real estate owned expense increased from $0.2 million in the first quarter
of 1995 to $0.3 million in the first quarter of 1996. The change was due to an
increase in the average balance of real estate owned from $1.2 million during
the first quarter of 1995 to $2.6 million during the first quarter of 1996.
Other Expense
Other expense increased $2.7 million, from $4.7 million during the first
quarter of 1995 to $7.4 million in the first quarter of 1996. The increase was
the result of a $0.5 million increase in communications expense and a $0.4
million increase in loan expense, coupled with a decrease in expense credits
resulting from a decline in early pool buyout activity in 1996. These increases
are reflective of the increase in HomeSide's servicing portfolio, $44.2 billion
at March 31, 1996 as compared to $37.8 billion at March 31, 1995, and higher
loan production levels in the first quarter of 1996 as compared to the first
quarter of 1995.
Provision for (benefit from) Income Taxes
HomeSide's benefit from income taxes was $42.5 million during the first
quarter of 1996 as compared to a provision for income taxes of $2.3 million in
the first quarter of 1995. The change in HomeSide's income tax provision is the
result of a decline in pre-tax income during the first quarter of 1996 as
compared to the first quarter of 1995, and a decrease in the effective tax rate
from 39.9% during the first quarter of 1995 to 36.5% during the first quarter of
1996.
LIQUIDITY AND CAPITAL RESOURCES
Operations
Net cash used in operations was $112.5 million for the first quarter of
1996 as compared to net cash provided by operations of $197.6 million for the
first quarter of 1995. The decrease in net cash provided by operating activities
was principally the result of a $453.3 million increase in net cash used in the
origination and purchase of loans held for sale. This is evidenced by the
increase in loan production from $1.2 billion during the first quarter of 1995
to $4.2 billion during the first quarter of 1996. The increase in cash used in
loan production activities was partially offset by a $62.6 million increase in
collection of accounts and mortgage claims receivable.
49
<PAGE> 52
Investing
Net cash used in investing activities increased $83.7 million to $155.1
million in the first quarter of 1996 from $71.4 million during the first quarter
of 1995. The increase in cash used in investing activities was due to a $53.2
million increase in cash used for the purchase and origination of mortgage
servicing rights and a $66.7 million increase in the purchase of risk management
contracts. These increases were the result of higher loan production levels and
an increasing loan servicing portfolio. The increases noted above were partially
offset by a $40.0 million decrease in net originations of loans held for
investment.
Financing
During the first quarter of 1996, HomeSide had $290.0 million of net cash
provided by financing activities as compared to net cash used in financing
activities of $130.6 million during the first quarter of 1995. During the first
quarter of 1995, HomeSide had net repayments on its line of credit with Bank of
Boston of $130.5 million, as opposed to net borrowings of $290.0 million during
the first quarter of 1996. The level of borrowings is highly dependent on loan
production and servicing activity. As loan production and servicing increases,
HomeSide draws more from its credit line, and conversely, as production and
servicing levels decrease, HomeSide is able to use excess cash to pay down the
credit line. The net borrowings for the first quarter of 1996, therefore, are
the result of increased loan production and held for sale balances as compared
to the first quarter of 1995.
Post Acquisition Financing
In connection with the HHI Acquisition, HomeSide, together with its
wholly-owned subsidiary, Honolulu Mortgage, entered into a $2.5 billion three
year senior secured revolving credit facility maturing on May 31, 1999 that
replaced the line of credit entered into by HomeSide on March 15, 1996 in
connection with the HLI Acquisition and HHI's former line of credit with
Barnett. The new facility is comprised of a $2.5 billion warehouse commitment
and a $950 million servicing commitment sublimit and is funded by independent
third party financial institutions. The Company's total borrowing capacity under
the new facility is $2.5 billion, with the servicing commitment portion capped
at $950 million. The new credit facility provides financing for HomeSide's and
Honolulu Mortgage's ongoing operations, including the origination and servicing
of residential mortgage loans, other working capital and general corporate
purposes. The facility is secured primarily by all of HomeSide's and Honolulu
Mortgage's assets. See "Description of Bank Credit Agreement".
On May 14, 1996, HomeSide issued $200 million of the Initial Notes. The
Notes mature May 15, 2003 and pay interest semiannually in arrears on May 15 and
November 15 of each year, commencing November 15, 1996. The Notes are redeemable
at the option of HomeSide, in whole or in part, at any time on or after May 15,
2001, at certain pre-set redemption prices. Upon issuance, $90.0 million of the
proceeds were used to pay-off bridge financing incurred in the acquisition of
HLI, $87.5 million was placed into escrow pending completion of the HHI
Acquisition, $6.5 million was used to pay underwriting expenses and the
remaining $16.0 million was used to repay borrowings under HomeSide's former
credit facility. The $87.5 million was released from escrow on May 31, 1996
concurrently with the completion of the HHI acquisition.
HomeSide also has a mortgage note payable with interest at 9.50% maturing
in 2017. HomeSide's main office building is pledged as collateral for such note,
and certain restrictions and/or penalties apply with respect to HomeSide's
ability to refinance this note.
HomeSide considers cash generated from operations and sources of post
acquisition financing to be adequate in meeting its liquidity needs. In addition
to its cash and loans held for sale balances. HomeSide's servicing rights
portfolio provides a source of funds to meet its liquidity requirements. Sales
of servicing rights are a significant potential source of funds, especially in
periods of rising interest rates when loan origination volume slows. Future cash
needs are highly dependent on future loan production and servicing results,
which are correlated to changes in long-term interest rates.
50
<PAGE> 53
THREE YEARS ENDED DECEMBER 31, 1995
GENERAL
Prior to March 15, 1996, HLI was a wholly-owned subsidiary of Bank of
Boston, a subsidiary of Bank of Boston Corporation ("BKBC"). In December 1995,
Bank of Boston signed an agreement to sell HLI to HomeSide, Inc. At the closing
of the HLI Acquisition, Bank of Boston received cash and approximately a 45%
equity interest in HomeSide, Inc. Also at the closing of the HLI Acquisition,
THL and MDP collectively acquired approximately a 55% interest in HomeSide, Inc.
On March 4, 1996, HomeSide, Inc. signed an agreement to acquire from
Barnett all of the outstanding stock of HHI. At the closing of the HHI
Acquisition, certain assets and liabilities of HHI were retained by Barnett,
including those assets of HHI and its subsidiaries (other than Honolulu
Mortgage) associated with the loan origination or production activities of such
entities. Upon closing of the HHI Acquisition, Barnett received cash and Siesta,
an affiliate of Barnett, acquired an ownership interest in HomeSide, Inc. such
that each of (i) Siesta, (ii) BKB, and (iii) THL and MDP collectively, own
approximately a 33% interest in HomeSide, Inc.
On June 1, 1995, HLI purchased certain assets and assumed certain
liabilities of Bell Mortgage Company ("Bell Mortgage"), a privately-held
mortgage origination company located in Minneapolis, Minnesota. The acquisition
of Bell Mortgage was accounted for under the purchase method of accounting.
Results of operations of Bell Mortgage are included in the 1995 consolidated
financial statements from the date of acquisition. See Note 16 of Notes to
Consolidated Financial Statements for further discussion.
HomeSide operates as a full-service mortgage banking firm emphasizing
wholesale mortgage originations and low cost mortgage servicing. Servicing
activities represent HomeSide's primary revenue source. HomeSide also generates
revenue, to a lesser extent, from mortgage loan origination fees. HomeSide
incurs expenses for amortization of mortgage servicing rights, interest on its
line of credit and general corporate activities.
RESULTS OF OPERATIONS
For purposes of this "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- HLI" the term "HomeSide" means HLI.
Summary
HomeSide reported net income of $58.8 million in 1995, $5.4 million in 1994
and a net loss of $85.2 million in 1993. Net income in 1994 included an after
tax positive effect of $3.5 million from a change in the accounting for mortgage
servicing fee income. The net loss in 1993 includes an after tax charge of $59.9
million for a change in HomeSide's method of valuing purchased mortgage
servicing rights, which was partially offset by an after tax benefit of $6.1
million resulting from the cumulative effect on prior years of adopting
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" as of January 1, 1993. Prior to the effect of the adjustments noted
above, HomeSide had income of $58.8 million in 1995, $2.0 million in 1994 and a
loss of $31.4 million in 1993. See Notes 2 and 10 of Notes to Consolidated
Financial Statements for further discussion of HomeSide's accounting changes.
The increase in net income in 1995 as compared to 1994 was primarily due to
factors that resulted from a decrease in interest rates coupled with growth in
HomeSide's servicing portfolio. The lower interest rate environment resulted in
a gain related to HomeSide's risk management activities in 1995 as compared to a
loss in 1994. See "-- Risk Management Activities." HomeSide also benefited from
a 9% increase in its residential servicing portfolio from $38.0 billion at
December 31, 1994 to $41.6 billion at December 31, 1995. The increases were
partially offset, however, by higher mortgage servicing rights amortization
charges as a result of increased servicing volumes and higher prepayment
activity in 1995. The loss before the cumulative effect of changes in accounting
principles in 1993 was primarily due to unscheduled mortgage servicing rights
amortization that resulted from a declining interest rate environment.
51
<PAGE> 54
Net Servicing Revenue
Servicing activities include collection of mortgage principal, interest and
escrow payments; remitting these payments to investors; and maintaining records
of loans and escrows. Servicing fees are typically expressed as a percentage of
unpaid principal balance ("UPB") and are collected from the monthly remittances
of the borrower before being paid to the investor. HomeSide is one of the
largest servicers of government insured and guaranteed loans. These loans
receive a higher servicing fee as compared to conventional loans to compensate
for the additional risks associated with FHA/VA loans (see "-- Servicing Losses
on Investor-Owned Loans").
<TABLE>
The following table sets forth the composition of HomeSide's servicing
portfolio by UPB:
<CAPTION>
AT DECEMBER 31,(A)
------------------------------------
1993 1994 1995
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
FHA/VA.................................... $ 12,524 $ 15,695 $ 19,880
Conventional.............................. 14,130 20,113 21,041
------- ------- -------
Total........................... $ 26,654 $ 35,808 $ 40,921
======= ======= =======
<FN>
- ---------------
(a) Excludes loans purchased not yet on servicing system.
</TABLE>
Net servicing revenue increased from $67.0 million to $173.7 million, an
increase of $106.7 million or 159.3%, from 1994 to 1995. This increase was
comprised of a $115.4 million rise in gain on risk management contracts and a
$32.5 million increase in mortgage servicing fees, offset by a $41.2 million
increase in amortization of mortgage servicing rights. The gain on risk
management contracts resulted primarily from a decline in interest rates in the
fourth quarter of 1995 and was substantially offset by a related decrease in the
economic value of the servicing portfolio, which was not reflected in earnings
for the period. The cost of acquiring the right to service mortgage loans
originated by others is capitalized and amortized as a reduction of servicing
fee revenue over the estimated servicing period. The increases in mortgage
servicing fees and amortization of mortgage servicing rights were primarily due
to growth in the HomeSide's average servicing portfolio during 1995. Average
servicing fees decreased slightly from 0.389% in 1994 to 0.383% in 1995.
At December 31, 1995, HomeSide serviced approximately 510,000 loans,
including loans purchased not yet on HomeSide's servicing system, with UPB of
$41.6 billion, compared to approximately 484,000 loans with UPB of $38.0 billion
at December 31, 1994, an increase of $3.6 billion, or 9.5%. The average
servicing volume increased from $33.2 billion in 1994 to $39.3 billion in 1995,
an increase of $6.1 billion or 18.4%. Growth in HomeSide's servicing portfolio
has been primarily generated by wholesale loan production, which includes
correspondent, co-issue and broker channels. HomeSide also purchases servicing
rights in bulk from other mortgage servicing entities. Bulk purchases totalled
$2.3 billion, $5.5 billion and $0.7 billion in 1993, 1994 and 1995,
respectively.
In addition to growth in the servicing portfolio, an increase in late fee
income contributed to the rise in mortgage servicing revenue during 1995. Late
fees are included in the consolidated statement of operations as a component of
mortgage servicing revenue. HomeSide instituted efforts to improve the
collection of ancillary fee income during the year which contributed to an
increase in late fee charges collected from $10.5 million in 1994 to $14.4
million in 1995. Late fee income also increased as a result of increases in
HomeSide's servicing portfolio and average loan balance. The higher average loan
balance translates into higher loan payments on which late fees are based. There
was little or no change in the rate on which late fees were computed during 1995
as compared to 1994.
Net servicing revenue increased from $6.0 million to $67.0 million from
1993 to 1994, an increase of $61 million. This increase was comprised of a $28.7
million growth in mortgage servicing revenue and a $45.7 million decrease in
amortization of mortgage servicing rights, offset by a $13.4 million reduction
in gain on risk management contracts. The growth in servicing revenue was due to
an increase in HomeSide's average servicing portfolio from 1993 to 1994, as a
result of loan production and an increase in the average servicing fee rate from
0.372% to 0.389%. At December 31, 1993, HomeSide serviced approximately 368,000
loans with
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<PAGE> 55
UPB of $28.0 billion, including loans purchased not yet on HomeSide's servicing
system, compared to approximately 484,000 loans with UPB of $38.0 billion at
December 31, 1994, an increase of $10.0 billion, or 35.7%. The average servicing
volume was $33.2 billion in 1994, as compared to $25.9 billion in 1993. The
decrease in amortization of $45.7 million was due to an increase in interest
rates during 1994 which reduced refinancing activities below the levels of 1993
and helped to reduce prepayments on HomeSide's servicing portfolio. High loan
prepayment activity shortens the estimated life of the associated mortgage
servicing right and, accordingly, accelerates the rate of mortgage servicing
amortization. The slower prepayment activity during 1994 increased the value of
HomeSide's servicing rights and reduced the amount of amortization required in
1994 as compared to 1993.
Risk Management Activities
HomeSide has a risk management program designed to protect the economic
value of its mortgage servicing portfolio from declines in value due to
increases in estimated prepayment speeds, which are primarily influenced by
declines in interest rates. When loans prepay faster than anticipated, the cash
flow HomeSide expects to receive from servicing such loans is reduced. Since the
value of the mortgage servicing rights is based on the present value of the cash
flows to be received over the life of the loan, the value of the servicing
portfolio declines as prepayments increase. Prior to 1994, risk management of
the mortgage servicing rights value was principally conducted by BKB as part of
a consolidated risk management program. Through the third quarter of 1995, BKB
continued to manage a portion of the risk associated with the servicing
portfolio.
To implement its risk management objectives, HomeSide purchases risk
management contracts that increase in value when long-term interest rates
decline, or when prepayment speeds increase above a specified level. During 1994
and 1995, HomeSide purchased options on long-term United States Treasury bond
futures to protect a significant portion of the market value of its mortgage
servicing portfolio from a decline in value. The value of HomeSide's risk
management position is designed to perform inversely with changes in value of
mortgage servicing rights due to the effects of the changes in interest rates.
The options were marked to market at each reporting date with changes in value
reported in revenues. HomeSide recognized a gain on risk management contracts of
$108.7 million in 1995. While the value of the servicing portfolio declined, the
full effect of such decline was not reflected in HomeSide's financial results
because its value exceeded its book value. Due to a rising interest rate
environment, HomeSide experienced a $6.7 million loss related to its risk
management contracts in 1994. In 1993, the decline in the value of mortgage
servicing rights substantially exceeded gains on risk management contracts
realized by HomeSide. The value of the servicing rights was included in BKB's
consolidated risk management program.
HomeSide recognized a gain on risk management contracts of $108.7 million
in 1995, of which $86.5 million was unrealized. During the first quarter of
1996, long-term interest rates increased, reversing the declining trend which
prevailed during 1995. As a result, through the date of the sale of HomeSide in
March 1996, HomeSide recognized a loss on risk management contracts of $128.8
million, which included a reversal of such $86.5 million unrealized gain
recognized during 1995. In 1995 and 1996, changes in the value of HomeSide's
mortgage servicing rights substantially offset the gain and loss on the risk
management contracts. However, such changes in value were not fully recorded in
the financial statements of HomeSide because servicing rights are recorded at
the lower of amortized cost or market value.
Net Interest Revenue/Expense
Net interest revenue represents interest earned on warehouse loans and on
mortgage loans held for investment purposes, less interest expense incurred to
fund such loans and certain other assets, including mortgage servicing rights.
HomeSide's net interest position was negatively impacted by a compression of its
net interest spread from 3.60% in 1993 to 2.57% in 1994 and 1.49% in 1995. In
addition, HomeSide's net interest revenue and expense position is affected by
the volume of loan originations, which have a direct effect on interest earned
on warehouse loans and interest paid on borrowings. During periods of reduced
production volume, HomeSide will have lower average balances of interest earning
loans and interest bearing warehouse
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<PAGE> 56
debt. The entire mortgage loan origination industry experienced a decline in
production from 1993 to 1995. As reported by FNMA, United States total
residential mortgage originations declined from $1,020 billion in 1993 to $769
billion in 1994 and $654 billion in 1995.
During 1995 and 1994, HomeSide incurred net interest expense of $2.8
million and $2.4 million, respectively. Interest revenue decreased $7.3 million
during 1995 primarily as a result of a decrease in the average rate earned on
warehouse loans from 9.52% in 1994 to 7.78% in 1995. The reduction in interest
revenue on warehouse loans was partially offset by a $2.1 million increase in
interest earned on mortgage loans held for investment and a decrease in interest
expense of $6.8 million resulting from a decline in the average rate paid on
HomeSide's borrowings from 7.14% in 1994 to 6.89% in 1995.
HomeSide earned $6.0 million of net interest revenue during 1993 as
compared to $2.4 million of net interest expense in 1994. The change from 1993
to 1994 was comprised of a decrease in interest revenue of $18.6 million
partially offset by a reduction in interest expense of $10.2 million. The
decrease in interest income was due to a decrease in the average balance of
warehouse loans from $529.7 million in 1993 to $272.0 million in 1994. The
impact of decreased average balances was partially mitigated by an increase in
the average rate earned on warehouse loans from 8.84% in 1993 to 9.52% in 1994
and a $2.2 million increase in interest revenue on mortgage loans held for
investment. The decrease in interest expense from 1993 to 1994 was due to a
reduction in borrowings on the warehouse line of credit as a result of weaker
loan production during 1994.
Net Mortgage Origination Revenue
HomeSide maintains various loan origination channels, including
correspondent flow and co-issue, brokered, telemarketing, affinity programs and
retail branches. Additionally, HomeSide purchases servicing rights in bulk from
time to time. HomeSide has continued to deemphasize its retail branch network in
favor of wholesale production. By primarily relying on wholesale originations,
HomeSide avoids high fixed costs in periods of lower market volumes as well as
the high start-up costs associated with entering new markets through retail
expansion. This shift to a more variable cost structure is expected to continue
as HomeSide actively reduces its retail production network. In connection with
the sale of HLI, Bank of Boston agreed to retain its retail production
facilities in New England, and HomeSide has sold or closed most of its remaining
retail branches.
<TABLE>
The following table sets forth HomeSide's origination activity:
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
-------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Wholesale:
Correspondent.................................. $ 4,955 $3,364 $3,778
Co-Issue(a).................................... 2,860 4,285 3,901
Broker......................................... 1,431 498 291
------- ------ ------
Total wholesale........................... 9,246 8,147 7,970
Retail.............................................. 2,125 788 915
------- ------ ------
Total production.......................... $11,371 $8,935 $8,885
======= ====== ======
<FN>
- ---------------
(a) Represents the acquisition of servicing rights, not the underlying loans.
Amounts represent the UPB of mortgage debt to which the acquired servicing
rights relate.
</TABLE>
Through its correspondent production channel, HomeSide buys loans from
approximately 500 financial intermediaries. Co-issue loan production is the
purchase of servicing rights from a correspondent subject to contracts to
deliver specified volumes on a monthly or quarterly basis. Under its broker
program, HomeSide funds loans at closing from a network of approximately 450
mortgage brokers nationwide.
Net mortgage origination revenue includes gains and losses from sales of
mortgage loans, deferred origination fees and expenses (see "- Salaries and
Employee Benefits") and the gains from excess servicing
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<PAGE> 57
rights. Net mortgage origination revenue decreased from $5.0 million in 1994 to
$3.4 million in 1995, or 31.4%, and from $6.2 million in 1993 to $5.0 million in
1994, or 19.0%.
During 1995 and 1994, HomeSide's loan production, excluding co-issue
volume, was $5.0 billion and $4.7 billion, respectively. The majority of these
loans were purchased through HomeSide's correspondent channel.
The decrease in net mortgage origination revenue from 1993 to 1994 was due
to a decrease in mortgage production during 1994. Loan production volume
decreased from $8.5 billion in 1993 to $4.7 billion in 1994, or 44.7%. The
declining interest rate environment in 1993 prompted a record number of
homeowners to refinance existing mortgages.
Gain on Sales of Servicing Rights
Gain on sales of servicing rights decreased $0.7 million from $10.9 million
in 1994 to $10.2 million in 1995 and increased $10.2 million from $0.7 million
in 1993. HomeSide sold servicing rights on loans of $1.9 billion, $0.8 billion
and $0.5 billion during 1995, 1994 and 1993, respectively. The sales of
servicing rights during 1994 consisted of primarily retail originated loans, for
which a servicing right asset was not recognized, and therefore there was little
or no basis in the servicing rights sold. The servicing rights sales in 1995
consisted of a higher percentage of servicing on purchased loans, which had a
higher basis because servicing rights on purchased loans are capitalized.
HomeSide's decision to sell mortgage servicing rights depends on a variety of
factors, including the available markets and current prices for such servicing
rights and the working capital requirements of HomeSide. The likelihood of
future sales of mortgage servicing rights, or the profitability on such sales,
cannot be predicted.
Salaries and Employee Benefits
Salaries and employee benefits increased from $40.4 million in 1994 to
$45.4 million in 1995, or 12.4%, and from $33.1 million in 1993 to $40.4 million
in 1994, or 22.1%. Direct loan origination costs, principally salary and
employee benefit costs, are included in the cost basis of the mortgage loans
and, therefore, they are not recognized until the sale of the loans. Including
these capitalized costs, salaries and employee benefits increased from $51.5
million to $56.5 million from 1994 to 1995, or 9.7% and decreased from $56.2
million to $51.5 million from 1993 to 1994, or 8.3%.
The $5.0 million increase, including capitalized costs, in 1995 over 1994
included a $3.9 million increase in salaries and a $1.1 million increase in
benefits. The salary and benefit increases were the result of a larger
production staff needed to support HomeSide's growing servicing portfolio. Loan
production headcount grew from 498 full time equivalent ("FTE") employees at
December 31, 1994 to 523 FTE employees at December 31, 1995. The increases to
salaries and benefits were partially offset by the outsourcing of certain
default administration and tax payment administration activities during 1995.
HomeSide determined that the performance of these services on a contracted basis
was more cost effective than maintaining the personnel and infrastructure
necessary to carry out these functions in-house.
The decrease in salaries and benefits from 1993 to 1994 was due to a
reduction of loan production during 1994 and lower incentive compensation
expenses. Loan production headcount fell from 806 at December 31, 1993 to 498 at
December 31, 1994. The decrease in salaries and employee benefits due to reduced
loan demand was partially offset by the assumption of certain risk management
functions formerly provided by BKB and an increased staff required to service a
larger portfolio.
Occupancy and Equipment Expense
Occupancy and equipment expense increased from $9.0 million in 1994 to
$10.0 million in 1995, or 11.1%, due primarily to the acquisition of Bell
Mortgage and the larger servicing operations.
Occupancy and equipment expense increased from $8.0 million in 1993 to $9.0
million in 1994, or 13.1%. This increase included a leasehold reserve of $0.3
million recorded in December 1994 for the planned closing of certain broker
branches that were subsequently closed during 1995.
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<PAGE> 58
Servicing Losses on Investor-Owned Loans
HomeSide periodically incurs losses attributable to servicing FHA and VA
loans for investors, including actual losses for final disposition of loans that
have been foreclosed or assigned to the FHA or VA and accrued interest on such
FHA or VA loans for which payment has not been received. Servicing losses on
investor-owned loans totaled $2.8 million, $7.2 million and $10.0 million for
the years ended 1993, 1994 and 1995, respectively, primarily representing losses
on VA loans. Because the total principal amount of FHA loans is guaranteed,
losses on such loans are generally limited to expenses of collection. HomeSide
has experienced minimal losses from FHA loans. In respect of VA loans, the VA
guarantees the initial losses on a loan. The guaranteed amount generally ranges
from 20% to 35% of the original principal balance. Before each foreclosure sale,
the VA determines whether to bid by comparing the estimated net sale proceeds to
the outstanding principal balance and the servicer's accumulated reimbursable
costs and fees. If this amount is a loss and exceeds the guaranteed amount, the
VA typically issues a no-bid and pays the servicer the guaranteed amount.
Whenever a no-bid is issued, the servicer absorbs the loss, if any, in excess of
the sum of the guaranteed principal and the amounts recovered at the foreclosure
sale. HomeSide's historical loss experience on VA loans has generally been
consistent with industry experience.
In 1995 and 1994, HomeSide recorded provisions in excess of actual
foreclosure losses. Management believes that HomeSide has an adequate level of
reserve based on its servicing volume, portfolio composition, credit quality and
historical loss rates, as well as estimated future losses. For an analysis of
changes in the reserve for estimated servicing losses on investor-owned loans
for each of the three years ended December 31, 1995, see Note 4 of Notes to
Consolidated Financial Statements of HLI.
Real Estate Owned Expense
Real estate owned expense increased from $0.3 million in 1994 to $1.1
million in 1995, and decreased from $1.6 million in 1993 to $0.3 million in
1994. Real estate owned expense is incurred from foreclosed properties on which
HomeSide has taken title and includes declines in the value of the property, as
well as the incurrence of property holding and maintenance costs. The change in
real estate owned expense in 1995 was due primarily to an increase in the
average balance of real estate owned from $1.4 million in 1994 to $1.6 million
in 1995. The decrease from 1993 to 1994 is due to a decline in the average
balance of real estate owned from $3.4 million in 1993 to $1.4 million in 1994.
As part of the HLI Acquisition, BKB retained all real estate owned.
Other Expense
Other expense increased from $19.3 million to $21.9 million, or 13.3%, from
1994 to 1995 and decreased from $22.1 million to $19.3 million, or 12.4%, from
1993 to 1994. The increase in other expense from 1994 to 1995 included increases
of $1.1 million in advertising and public relations, $1.0 million in contracted
services, $0.9 million in software costs and $0.6 million in communication
expenses. These increases were partially offset by a $0.7 million reduction in
loan related expenses. The increase in advertising and public relations expense
was due to a $1.0 million major advertising campaign carried out during 1995 in
addition to normal advertising activity. Contracted services increased due to an
increase in bank service charges for loan payment processing, which increased
with the rise in HomeSide's servicing volume. Software costs increased as
HomeSide continued to expand and redesign its computer platform in order to
deliver more efficient and reliable service. The increase in communications
expense was due to higher telephone postage and delivery expenses resulting from
higher loan production levels.
The decline in other expense from 1993 to 1994 was principally due to a
$2.0 million increase in gains from the disposition of foreclosed property.
Gains and losses on the sale of foreclosed property are netted and included as a
component of other expense. Gains and losses on the disposition of foreclosed
property result from the difference between the amount received in satisfaction
of the borrower's obligation upon sale of the property and the amount at which
the property was recorded on HomeSide's books at the time of the sale. Gains and
losses on the disposition of real estate fluctuate based on regional and
national market conditions at the time each property is being marketed.
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<PAGE> 59
Provision for Income Taxes
HomeSide recorded a provision for income taxes of $37.9 million and $2.5
million for 1995 and 1994, respectively, and an income tax benefit of $17.3
million in 1993. The effective income tax rate was 39.2%, 56.4% and 35.5% for
1995, 1994 and 1993, respectively. The difference between these rates and the
statutory federal tax rate is primarily due to state income taxes, net of
federal tax benefit, and the effect on deferred taxes of a change in the federal
statutory rate in 1993. The changes in the provisions for, and benefit from,
income taxes is the result of variances in HomeSide's pre-tax income and loss
for each of the years presented. For additional information regarding income
taxes, refer to Note 10 of Notes to Consolidated Financial Statements of HLI.
Accounting Changes
Effective January 1, 1993, HomeSide elected to change its method of valuing
mortgage servicing rights from an undiscounted basis to a discounted basis to
conform its financial reporting to the regulatory accounting rules adopted by
bank regulators in 1993. HomeSide also adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" on January 1, 1993. On January
1, 1994, HomeSide changed its method of accounting for mortgage servicing fees
from the cash basis to the accrual basis. See Notes 2 and 10 of Notes to
Consolidated Financial Statements for further discussion of HomeSide's
accounting changes. See "-- Liquidity and Capital Resources -- New Accounting
Standard" for a discussion of Statement of Financial Accounting Standards No.
122, -- "Accounting for Mortgage Servicing Rights," which was adopted by
HomeSide in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Overview
HomeSide's primary sources of cash are revenues earned from the servicing
of mortgage loans, sales of mortgage loans and servicing rights and borrowings
under HomeSide's warehouse line of credit. HomeSide has entered into a new
credit facility (see "-- Post Acquisition Financing"). HomeSide's primary uses
of cash are to fund loan originations and purchases, purchase bulk servicing
rights, repay its warehouse line of credit and pay general corporate expenses.
HomeSide had a net increase (decrease) in cash of ($4.8 million), $0.3 million
and ($0.8 million) in 1995, 1994 and 1993, respectively.
Operations
Net cash provided by (used in) operating activities was ($65.9 million) in
1995, $394.6 million in 1994, and ($110.2 million) in 1993. The decrease in cash
provided by operating activities from 1994 to 1995 was attributable to cash
needed to meet growth in loan origination volume coupled with a reduction in
proceeds on sales of mortgage loans. The increase in cash provided by operating
activities from 1993 to 1994 was due to a reduction in loan demand during 1994,
which diminished HomeSide's cash needs for funding loan production.
Investing
Cash used in investing activities was $125.7 million in 1995, $154.2
million in 1994 and $109.5 million in 1993. The decrease in cash used in
investing activities from 1994 to 1995 was comprised primarily of a $36.8
million increase in proceeds from risk management contracts and a $17.8 million
increase in proceeds from sales of mortgage servicing rights. These cash inflows
were partially offset by a $29.0 million increase in purchases of mortgage
servicing rights. The increase in proceeds from risk management contracts was a
result of a decline in interest rates during 1995 that increased the value of
HomeSide's risk management contracts and, accordingly, the proceeds received by
HomeSide upon settlement. The increase in proceeds from sales of mortgage
servicing rights was principally due to an increase in sales activity in 1995 as
compared to 1994. HomeSide sold servicing rights of $1.9 billion in 1995 as
compared to $0.8 billion in 1994. The increase in cash used to purchase mortgage
servicing rights during 1995 is related to an increase in mortgage loans
purchased through HomeSide's warehouse channels as a result of declining
interest rates that increased loan production across the industry.
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<PAGE> 60
The increase in cash used in investing activities in 1994 as compared to
1993 was comprised of a $39.4 million increase in purchases of mortgage
servicing rights and a $16.3 million decrease in proceeds from risk management
contracts. The decreases in cash flow were partially mitigated by a $10.2
million increase in proceeds from the sale of mortgage servicing rights. The
increase in cash used to purchase mortgage servicing rights was part of
HomeSide's overall strategy to increase its servicing portfolio and benefit from
economies of scale. The decrease in proceeds from risk management contracts was
a result of an increase in interest rates during 1994 which negatively impacted
the value of the contracts. The increase in proceeds from the sale of mortgage
servicing rights from 1993 to 1994 was due to an improvement in the market for
mortgage servicing rights during 1994. The low interest rate environment in 1993
depressed the value of the mortgage servicing right market since loans were
being prepaid with a higher frequency.
Financing
Cash provided by (used in) financing activities was $186.8 million in 1995,
($240.2 million) in 1994 and $218.9 million in 1993. Prior to the HLI
Acquisition, the primary source and use of cash related to financing activities
was attributable to the line of credit with Bank of Boston. This line of credit
was used to fund the origination and purchase of mortgage loans until the loans
were sold to investors. The proceeds of such sales were typically used to pay
down the related warehouse debt with any excess retained by HomeSide. Maximum
borrowings under the line of credit were $1.25 billion. The higher level of
borrowings in 1995 and 1993 were indicative of higher loan production and
purchase volumes during these years as compared to 1994.
Impact of Inflation
Inflation affects HomeSide primarily through its effect on interest rates
since interest rates normally increase during periods of high inflation and
decrease during periods of low inflation. See "Risk Factors -- Impact of Changes
in Interest Rates".
New Accounting Standard
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights." This Statement, among other provisions, requires that the value of
mortgage servicing rights associated with mortgage loans originated by an entity
be capitalized as assets, which results in an increase in mortgage origination
revenues. The value of originated mortgage servicing rights is determined by
allocating the total costs of the mortgage loans between the loans and the
mortgage servicing rights based on their relative fair values. Also, the
Statement requires that capitalized servicing rights be evaluated for impairment
based on the fair value of these rights. For the purposes of determining
impairment, mortgage servicing rights that are capitalized after the adoption of
this Statement are stratified based on one or more of the predominant risk
characteristics of the underlying loans. Impairment is recognized through a
valuation allowance for each impaired stratum. HomeSide adopted this statement
effective January 1, 1996.
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<PAGE> 61
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- HHI
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
GENERAL
Prior to May 31, 1996, HHI was a wholly-owned subsidiary of Barnett and
operated as a full service mortgage banking company, engaged in the origination,
sale and servicing of first mortgage loans secured by residential properties. On
March 4, 1996, Barnett entered into an agreement to sell HHI to the Issuer.
Under the terms of the sale, which closed on May 31, 1996, the Issuer acquired
HHI's and its subsidiaries' $33.0 billion servicing portfolio and servicing
platform, its proprietary mortgage servicing software and Honolulu Mortgage
Company, Inc. ("Honolulu Mortgage"), a full service mortgage banking company in
Honolulu, Hawaii. Barnett received cash and an ownership interest in HomeSide,
Inc. In addition, Barnett retained its retail branch network, the retail branch
network acquired from BancPLUS, the broker network acquired from Loan America,
and all of the related facilities. Also, as part of the HHI Acquisition, Barnett
agreed to sell, subject to limitations, to HomeSide all of its production on
market terms pursuant to an exclusive five-year correspondent contract.
In February 1995, HHI acquired BancPLUS Financial Corporation ("BPFC"), a
full service mortgage company with a $13.9 billion servicing portfolio.
Headquartered in San Antonio, Texas, BancPLUS Mortgage Company ("BancPLUS"), a
wholly-owned subsidiary of BPFC, was primarily a retail originator with thirty-
six branch offices in seventeen states. HHI's acquisition of BPFC also included
Honolulu Mortgage, with a $1.7 billion servicing portfolio at the time of such
acquisition.
RESULTS OF OPERATIONS
During the first quarter of 1995, HHI experienced significant growth
through the acquisition of BancPLUS. From December 31, 1994 to March 31, 1996,
the servicing portfolio increased by 79% from $18.4 billion to $33.0 billion and
production volume increased by 78% from $0.9 billion to $1.6 billion from the
first quarter of 1995 to the first quarter of 1996.
HHI reported a net loss of $4.4 million for the quarter ended March 31,
1996 and a net loss of $4.1 million for the quarter ended March 31, 1995. The
first quarter of 1996 loss was mainly attributable to amortization and other
costs associated with the mortgage servicing rights portfolio, while the first
quarter 1995 loss was primarily attributable to increased operating costs
associated with the BancPLUS and Loan America acquisitions.
Net Servicing Revenue
HHI's revenues are primarily earned from servicing mortgage loans for
investors. Servicing activities include the collection of mortgage principal,
interest and escrow payments; remitting these payments to investors; and
maintaining records of loans and escrows. Servicing fees are typically expressed
as a percentage of the unpaid principal balance (UPB) of the related loans and
are collected from the monthly remittance of the borrower before being paid to
the investor. Mortgage servicing income also includes late charges for
delinquent customer payments.
<TABLE>
The following table sets forth the composition of HHI's servicing portfolio
at March 31, 1996 (dollars in millions):
<CAPTION>
AT MARCH 31,
1996
------------
<S> <C>
FHA/VA.......................................................... $ 5,586
Conventional.................................................... 27,433
-------
Total................................................. $33,019
=======
</TABLE>
59
<PAGE> 62
Mortgage servicing revenues increased from $19.4 million to $31.3 million,
or 61% from first quarter 1995 to first quarter 1996. This increase was offset
by an increase in amortization of mortgage servicing rights of $8.7 million.
Mortgage servicing fees are earned for servicing mortgage loans owned by
investors. The cost of acquiring the right to service mortgage loans originated
by others is capitalized and amortized as a reduction of servicing fee revenue
over the estimated servicing period. The increases in mortgage servicing fees
and amortization of mortgage servicing rights were primarily due to growth in
the servicing portfolio related to the BancPLUS acquisition. In addition, the
average servicing fee increased from 0.297% in first quarter 1995 to 0.346% in
first quarter 1996. The increase in the average service fee is due to a change
in the service fee rate charged to Barnett bank affiliates from a sub-market
rate in 1995 to a market rate in 1996.
At March 31, 1996, HHI serviced approximately 441,000 loans with UPB of
$33.0 billion, compared to approximately 445,000 loans with UPB of $32.8 billion
at March 31, 1995 and approximately 243,000 loans with UPB of $18.4 billion at
December 31, 1994. Growth in HHI's servicing portfolio has been primarily
generated from the acquisition of BancPLUS.
Secondary Marketing Gain/Loss
Gains or losses on the sales of loans, which increased from $0.5 million of
gains in the first quarter of 1995 to $3.9 million during the first quarter of
1996, result primarily from two factors. First, HHI may make a loan to a
borrower at a price (i.e., interest rate and discount) which is higher or lower
than it would receive if it immediately sold the loan in the secondary market.
HHI adjusts the pricing on its loans depending on competitive market dynamics.
Generally, prior to the acquisition of Loan America at the end of 1994 and
BancPLUS in the beginning of 1995, HHI priced its loans based on interest rate
levels prevalent in the secondary market. After the acquisition of those
companies, HHI began aggressively competing in national markets where pricing
below the secondary market often occurred, especially for loans sourced through
wholesale brokers. Price competition due to the sharp decline in origination
volumes, and industry overcapacity and aggressive price pressure, which followed
the refinance boom of 1993, prevailed through 1995. To the extent that such
pricing pressure continues, HHI's ability to sell its loans at a gain will
continue to be negatively impacted.
Second, gains or losses may result from changes in interest rates which
result in changes in the market value of the loans, or commitments to purchase
loans, from the time the price commitment is given to the borrower until the
time that the loan is sold to investors. HHI uses sophisticated modelling tools
to provide information to hedge this latter interest rate risk. HHI uses forward
delivery contracts for mortgage-backed securities and whole loan sales as
hedging instruments. There is close correlation of risk as the borrower's loan
is used to satisfy the forward delivery contract. HHI's secondary marketing
activities are generally negatively impacted during periods of high interest
rate volatility and periods when there is a significant overall change in the
direction of interest rates, both of which occurred in 1995.
Net Interest Revenue/Expense
HHI recorded net interest expense of $0.3 million and net interest revenue
of $2.5 million for the quarters ended March 31, 1995 and 1996, respectively.
HHI's net interest results are derived from interest earned on warehouse loans
originated by the BancPLUS and Loan America branches, less interest expense
incurred to fund such loans. Interest revenue on warehouse loans is generally
influenced by long-term interest rates, which increased during the latter part
of the first quarter of 1996, and had a positive impact on HHI's net interest
revenue. In addition, interest expense, following the acquisition of BancPLUS on
February 28, 1995, was incurred at a rate reduced by the benefit for the escrow
balances maintained in the Barnett banks for the servicing portfolio.
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<PAGE> 63
Net Mortgage Origination Revenue
<TABLE>
HHI has built a multi-channel production network as part of its strategy to
become a national participant in the mortgage banking business. HHI maintains
several channels, including Barnett's retail bank franchise, a national retail
network acquired from BancPLUS, a national wholesale broker group acquired from
Loan America, traditional correspondent business and production from Honolulu
Mortgage. This diversified production base is designed to provide flexibility,
allowing HHI to shift production focus to the most attractive source given
specific market conditions. The following table sets forth HHI's origination
activity for the first quarters of 1995 and 1996:
<CAPTION>
FIRST FIRST
QUARTER QUARTER
1995 1996
------- -------
<S> <C> <C>
Barnett bank branch retail................................. $403 $ 537
BancPLUS retail(a)......................................... 86 192
Loan America broker........................................ 204 378
Honolulu Mortgage(a)....................................... 52 83
Correspondent.............................................. 175 366
---- ------
Total production................................. $920 $1,556
==== ======
<FN>
- ---------------
(a) Since date of acquisition by HHI.
</TABLE>
Net mortgage origination revenue includes origination fees received from
borrowers, gains and losses from mortgage sales, and capitalized originated
mortgage servicing rights ("OMSR"). OMSR income results from the January 1, 1996
implementation of SFAS 122. The requirements of SFAS 122 are discussed in Note 1
to the interim financial statements. Net mortgage origination revenue increased
from $3.1 million to $9.5 million from first quarter 1995 to first quarter 1996.
The increase was comprised of $7.5 million of OMSR income which was partially
offset by a $4.1 million decline in gains on sales of loans. The decline in
gains on sales of loans, except servicing gains and pricing subsidies was due to
an increase in loan originations and sales from first quarter 1995 to first
quarter 1996. This volume increase was due to the acquisition of BancPLUS on
February 28, 1995, which resulted in HHI collecting and recording the
origination fee income for loans originated through these channels.
Salaries and Employee Benefits
Salaries and employee benefits increased from $9.1 million during the first
quarter of 1995 to $14.8 million during the first quarter of 1996. The salary
and benefit increases were the result of additional employees assumed in the
February 1995 acquisition of BancPLUS as well as the origination activity
increase from the first quarter of 1995 compared to the first quarter of 1996.
Total employee headcount grew from 555 full-time equivalent (FTE) employees at
December 31, 1994 to 1,486 FTE employees at March 31, 1995 and declined to 1,317
FTE at March 31, 1996.
Occupancy and Equipment Expense
Occupancy and equipment expense increased from $1.5 million to $2.2 million
from the first quarter of 1995 to the first quarter of 1996 primarily due to the
full quarter impact of the rental and depreciation expense related to assets and
production offices acquired in the acquisition of BancPLUS in February 1995.
General and Administrative Expense
General and administrative expenses increased from $8.3 million to $13.9
million from the first quarter of 1995 to the first quarter of 1996 due
primarily to the full quarter impact of the acquisition of BancPLUS in February
1995.
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<PAGE> 64
Provision for Income Taxes
HHI's results of operations are included in Barnett's consolidated income
tax return. HHI's income tax provision and related asset or liability are
computed based on income tax rates as if HHI filed a separate income tax return.
Pursuant to a tax-sharing agreement with Barnett, HHI is reimbursed for the tax
effect of current operating losses utilized in the consolidated return.
During first quarter 1995, HHI recorded a benefit for income taxes of $0.8
million compared to a tax benefit of $1.6 million for the first quarter of 1996.
For further information regarding the reconciliation between statutory federal
tax rate and the effective tax rate, refer to Note 4 of Notes to Consolidated
Financial Statements of Barnett Mortgage Company for the year ended December 31,
1995.
LIQUIDITY AND CAPITAL RESOURCES
Overview
HHI's primary sources of cash are revenues earned from the servicing of
mortgage loans, sales of mortgage loans and servicing rights, which historically
have offered a high measure of liquidity, and borrowings under HHI's lines of
credit. HHI's primary uses of cash are to fund loan originations and purchases,
repay its lines of credit and pay general corporate expenses. HHI had a net
increase of cash of $10.5 million and $29.1 million for the quarters ended March
31, 1995 and 1996, respectively.
Operations
Net cash provided by operating activities was $130.8 million and $90.7
million for the quarters ended March 31, 1995 and 1996, respectively. The
decrease in cash provided by operating activities during first quarter 1996 as
compared to the first quarter of 1995 was primarily attributable to a decrease
in cash proceeds from loan sales net of originations.
Investing
Cash used in investing activities was $168.8 million for the first quarter
of 1995 and $12.6 million for the first quarter of 1996. Cash used in first
quarter 1995 investing activities was primarily used for the acquisition of
BancPLUS; while cash used in the first quarter 1996 investing activities was
impacted by an effort to increase HHI's servicing portfolio and nationwide loan
originations.
Financing
Cash provided by financing activities was $48.4 million during the first
quarter of 1995; the first quarter of 1996 reflected a reduction in financing
needs of $49.1 million. The primary source and use of cash related to financing
activities is the line of credit with Barnett and its affiliates, to which some
of HHI's assets are pledged as collateral. This line of credit is used to fund
the origination and purchase of mortgage loans until the loans are sold to
investors. The proceeds from such sales are typically used to pay down the
related warehouse debt with any excess retained by HHI. There was a net
repayment of the lines of credit for the quarters ended March 31, 1995 and 1996
of $118.9 million and $49.1 million, respectively. Additionally, cash provided
as capital contributions from Barnett was $167.3 million for the quarter ended
March 31, 1995. There were no capital contributions from Barnett during the
first quarter of 1996. The first quarter 1995 contribution was to fund the
acquisition of BancPLUS.
New Accounting Standard
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights." This Statement, among other provisions, requires that the value of
mortgage servicing rights associated with mortgage loans originated by an entity
be capitalized as assets, which results in an increase in mortgage origination
revenues. The value of originated mortgage servicing rights is determined by
allocating the total cost of the mortgage loans between the loans and the
mortgage servicing rights based on their relative fair values. Also, the
Statement requires that
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<PAGE> 65
capitalized servicing rights be evaluated for impairment based on the fair value
of these rights. For purposes of determining impairment, mortgage servicing
rights that are capitalized after the adoption of this Statement are stratified
based on one or more of the predominant risk characteristics of the underlying
loans. Impairment is recognized through a valuation allowance for each impaired
stratum. HHI adopted this Statement effective January 1, 1996. The actual effect
of implementing this Statement on HHI's financial position and results of
operations will depend on factors determined at the end of a reporting period,
including the amount and mix of originated and purchased production, the level
of interest rates and market estimates of future prepayment rates.
Additional information regarding SFAS 122 can be found in Note 3 of the
Notes accompanying the interim financial statements of HHI.
THREE YEARS ENDED DECEMBER 31, 1995
GENERAL
Prior to May 31, 1996, HHI was a wholly-owned mortgage banking subsidiary
of Barnett and a full service mortgage banking company, engaged in the
origination, sale and servicing of first mortgage loans secured by residential
properties. On March 4, 1996, Barnett entered into an agreement to sell HHI to
the Issuer. At the closing of the HHI Acquisition, the Issuer acquired HHI's and
its subsidiaries' $33.4 billion servicing portfolio and servicing platform, its
proprietary mortgage servicing software and Honolulu Mortgage Company ("Honolulu
Mortgage"), a full service mortgage banking company in Honolulu, Hawaii.
HHI acquired Loan America Financial Corporation ("Loan America" or "LAFC"),
a wholesale mortgage banking company with a $4.0 billion servicing portfolio in
October 1994. Headquartered in Miami, Florida, Loan America originated loans
through brokers in twelve states. The acquisition of Loan America represented
HHI's first entry into the wholesale origination business.
In February 1995, HHI acquired BancPLUS Financial Corporation ("BPFC"), a
full service mortgage company with a $13.9 billion servicing portfolio.
Headquartered in San Antonio, Texas, BancPLUS Mortgage Company ("BancPLUS"), a
wholly-owned subsidiary of BPFC, was primarily a retail originator with thirty-
six branch offices in seventeen states. HHI's acquisition of BPFC also included
Honolulu Mortgage, with its $1.7 billion servicing portfolio.
The BancPLUS and Loan America acquisitions were accounted for as purchases
and, accordingly, their results are only included in HHI's results since the
dates of their acquisitions. On May 31, 1996, BPFC was merged into BancPLUS,
which in turn was merged, together with Loan America, into HLI.
In connection with the HHI Acquisition, HHI transferred all of its
servicing rights to HLI, except for the servicing of GNMA loans, which it
retained. HomeSide currently believes that HHI will not in the future acquire
any additional servicing rights.
RESULTS OF OPERATIONS
For purposes of this "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- HHI" the term "HHI" means HHI and its
subsidiaries.
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<PAGE> 66
During 1993, 1994 and 1995, HHI experienced significant growth through its
acquisitions of BancPLUS and Loan America. From 1993 to 1995, the servicing
portfolio increased by 155% and production volumes increased by 72%.
HHI reported a net loss of $20.4 million in 1995, a net loss of $2.1
million in 1994 and net income of $0.1 million in 1993. The net loss in 1995 was
mainly attributable to costs associated with the BancPLUS acquisition and
secondary market losses, partially offset by a $9.1 million gain on the sales of
servicing rights.
Net Servicing Revenue
HHI's revenues were primarily earned from servicing mortgage loans for
investors. Servicing activities include collection of mortgage principal,
interest and escrow payments; remitting these payments to investors; and
maintaining records of loans and escrows. Servicing fees are typically expressed
as a percentage of UPB and are collected from the monthly remittances of the
borrower before being paid to the investor. Mortgage servicing income also
includes late charges assessed for delinquent customer payments.
<TABLE>
The following table sets forth the composition of HHI's servicing
portfolio:
<CAPTION>
AT DECEMBER 31,
-----------------------------
1993 1994 1995
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
FHA/VA....................................... $ 1,032 $ 1,082 $ 6,023
Conventional................................. 12,053 17,329 27,388
------- ------- -------
Total.............................. $13,085 $18,411 $33,411
======= ======= =======
</TABLE>
Net servicing revenue increased from $29.4 million to $69.4 million, or
136% from 1994 to 1995. This increase was comprised of a $9.1 million increase
in gain on the sales of servicing and a $61.4 million growth in mortgage
servicing fees, offset by a $30.5 million increase in amortization of mortgage
servicing rights. Mortgage servicing fees are earned for servicing mortgage
loans owned by investors. The cost of acquiring the right to service mortgage
loans originated by others is capitalized and amortized as a reduction of
servicing fee revenue over the estimated servicing period. The increases in
mortgage servicing fees and amortization of mortgage servicing rights were
primarily due to growth in HHI's servicing portfolio during 1995. The average
servicing fee increased from 0.259% in 1993 to 0.261% in 1994 and to 0.277% in
1995.
At December 31, 1995, HHI serviced approximately 446,000 loans with UPB of
$33.4 billion, compared to approximately 243,000 loans with UPB of $18.4 billion
at December 31, 1994. Growth in HHI's servicing portfolio was primarily
generated from the acquisition of BancPLUS.
The 1995 gain on the sales of servicing is a result of two servicing sales
totalling $1.2 billion of UPB. There were no servicing sale gains during 1994 or
1993. HHI's decision to sell mortgage servicing rights depended on a variety of
factors, including the available markets and current prices for such servicing
rights and the working capital requirements of HHI.
Net servicing revenue increased from $27.3 million in 1993 to $29.4 million
in 1994, or 8%. This increase was partially due to the acquisition of Loan
America and its $4.0 billion servicing portfolio in October 1994. At December
31, 1993, HHI serviced approximately 193,000 loans with UPB of $13.1 billion.
Risk Management Activities
HHI has actively monitored and managed risk of loss related to the value of
its mortgage servicing portfolio and its origination and subsequent sale of
loans into the secondary market.
Servicing Values
HHI's operating results have been affected by changes in the economic value
of its mortgage servicing portfolio due to increases in prepayment speeds, which
are primarily influenced by interest rates. When loans prepay faster than
anticipated, the estimated cash flow HHI expected to receive from servicing such
loans is
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<PAGE> 67
reduced. Since the value of the mortgage servicing rights is based on the
present value of the cash flows to be received over the life of the loan, the
value of the servicing portfolio declines as prepayments increase.
During 1993, 1994 and most of 1995, hedging of the mortgage servicing
rights value was handled by Barnett as part of its overall risk management
program. During this period, no hedges were specifically implemented for risk
management of mortgage servicing rights. During 1995, Barnett and HHI evaluated
the risks, benefits and costs related to servicing hedges and in December 1995
commenced a partial hedging program. While the market value of HHI's servicing
portfolio declined, such decline was not reflected in HHI's financial results
because its market value exceeded its book value.
Secondary Marketing Gain/Loss
Gains or losses on the sales of loans result primarily from two factors.
First, HHI may have made a loan to a borrower at a price (i.e., interest rate
and discount) which is higher or lower than it would have received if it
immediately sold the loan in the secondary market. HHI adjusted the pricing on
its loans depending on competitive pressure. Generally, prior to the acquisition
of Loan America at the end of 1994 and BancPLUS in the beginning of 1995, HHI
priced its loans based on interest rate levels prevalent in the secondary
market. After the acquisition of those companies, HHI began aggressively
competing in national markets where pricing below the secondary market often
occurred, especially for loans sourced through wholesale brokers. Price
competition intensified in 1994 due to the sharp decline in origination volumes
and industry overcapacity and aggressive price pressure continued through 1995.
Second, gains or losses may result from changes in interest rates which
result in changes in the market value of the loans, or commitments to purchase
loans, from the time the price commitment is given to the borrower until the
time that the loan is sold to investors. HHI has employed sophisticated
modelling tools to provide information to hedge this latter interest rate risk.
HHI has employed forward delivery contracts for mortgage-backed securities and
whole loan sales as hedging instruments. There is close correlation of risk as
the borrower's loan was used to satisfy the forward delivery contract. HHI's
secondary marketing activities have been generally negatively impacted during
periods of high interest rate volatility and periods when there is a significant
overall change in the direction of interest rates, both of which occurred in
1994 and 1995. Additionally, during the period following the integration of
BancPLUS' secondary marketing operations during 1995, the magnitude of the
conversion task caused a temporary operational delay in selling borrowers' loans
into the secondary market, reducing the normally close correlation of loans to
forward delivery contracts. This condition had an additional temporary negative
impact on results from sales of mortgages.
Net Interest Revenue/Expense
In 1995, HHI recorded net interest revenue of $6.8 million, an increase
from net interest expense of $1.5 million in 1994. The net interest revenue was
mainly derived from interest earned on warehouse loans originated by the
BancPLUS and Loan America branches, less interest expense incurred to fund such
loans. The interest expense for 1995 was incurred at a rate reduced by the
benefit for the escrow balances maintained in the Barnett banks for the
servicing portfolio. Prior to 1995, when the primary origination source was the
Barnett bank branches, HHI's net interest revenue was comprised of interest
income on a small portfolio of mortgage loans that HHI held for investment
purposes, offset by interest expense on a line of credit from Barnett to fund
servicing acquisitions and servicing advances since Barnett banks held loans
until they were sold by HHI.
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<PAGE> 68
Net Mortgage Origination Revenue
<TABLE>
HHI has built a multi-channel production network as part of its strategy to
become a national participant in the mortgage banking business. Until the HHI
Acquisition, HHI maintained several channels, including Barnett's retail bank
franchise, a national retail network obtained from BancPLUS, a national
wholesale broker group obtained from the Loan America, traditional correspondent
business and production from Honolulu Mortgage. This varied production base was
designed to provide flexibility, allowing HHI to shift production focus to the
most attractive source given specific market conditions. The following table
sets forth HHI's origination activity:
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1993 1994 1995
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Barnett bank branch retail...................... $3,360 $2,559 $1,932
BancPLUS retail(a).............................. -- -- 606
Loan America broker(a).......................... -- 401 1,386
Honolulu Mortgage(a)............................ -- -- 244
Correspondent................................... -- 450 1,599
------ ------ ------
Total production........................... $3,360 $3,410 $5,767
====== ====== ======
<FN>
- ---------------
(a) Since date of acquisition by HHI.
</TABLE>
Net mortgage origination revenue includes origination fees received from
borrowers and gains and losses from sales of mortgage loans. Net mortgage
origination revenue decreased from $4.0 million to $3.2 million, or 20% from
1994 to 1995. The decrease was comprised of a $14.6 million decrease in gains on
sales of loans, offset by a $13.8 million increase in loan origination fees. The
decline in gains on sales of loans, excess servicing gains and pricing subsidies
was due to an increase in loan originations and sales over 1994. This volume
increase was driven by the acquisitions of BancPLUS and Loan America. Prior to
October 1994, the primary source of loan originations was the Barnett bank
retail network, and related origination fees were recognized by such banks. The
BancPLUS acquisition in February 1995 resulted in HHI collecting and recording
the origination fee income for loans originated through these channels. Net
mortgage origination revenue decreased from $6.0 million to $4.0 million, or
33%, from 1993 to 1994. The acquisition of Loan America in late 1994 resulted in
a $3.0 million increase in origination fees from 1993; however, this was offset
by a $5.0 million decrease in gain on the sale of loans.
Salaries and Employee Benefits
Salaries and employee benefits increased from $17.5 million in 1994 to
$53.1 million in 1995 and increased from $13.9 million in 1993 to $17.5 million
in 1994. The salary and benefit increases were the result of additional
employees assumed in the 1994 Loan America and 1995 BancPLUS acquisitions. Total
employee headcount grew from 464 FTE employees at December 31, 1993 to 555 FTE
employees at December 31, 1994 to 1,341 FTE employees at December 31, 1995. The
increase in the 1995 headcount was net of approximately 200 job eliminations
resulting from the consolidation of the administrative and operational functions
of the three mortgage companies that occurred throughout the year.
Occupancy and Equipment Expense
Occupancy and equipment expense increased from $2.7 million in 1994 to $6.0
million in 1995 due to the increases in rental and depreciation expense related
to assets and production offices acquired in the acquisition of BancPLUS in
February 1995.
Occupancy and equipment expense increased from $1.8 million in 1993 to $2.7
million in 1994 due to the increases in rental and depreciation expense related
to assets and production offices acquired in the acquisition of Loan America in
October 1994.
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<PAGE> 69
General and Administrative Expense
General and administrative expenses increased from $14.9 million in 1994 to
$41.8 million in 1995, and increased from $12.4 million in 1993 to $14.9 million
in 1994. The increases in both 1995 and 1994 were largely a result of the
acquisition of Loan America and BancPLUS.
Provision for Income Taxes
HHI's results of operations are included in Barnett's consolidated income
tax return. HHI's income tax provision and related asset or liability are
computed based on income tax rates as if HHI filed a separate income tax return.
Pursuant to a tax-sharing agreement with Barnett, HHI is reimbursed for the tax
effect of current operating losses utilized in the consolidated return.
In 1995, HHI recorded a benefit for income taxes of $9.6 million compared
to a tax benefit of $0.5 million for 1994. The increased benefit was
attributable to the significantly higher operating loss reported in 1995.
Comparatively, a tax provision of $0.1 million was recorded in 1993 due to the
reported $0.2 million net income before income taxes. For additional information
regarding the reconciliation between the statutory federal tax rate and the
effective tax rate, refer to Note 4 of Notes to Consolidated Financial
Statements of HHI.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Prior to the HHI Acquisition, HHI's primary sources of cash were revenues
earned from the servicing of mortgage loans, sales of mortgage loans and
servicing rights, which historically have offered a high measure of liquidity,
and borrowings under HHI's lines of credit. Prior to the HHI Acquisition, HHI's
primary uses of cash are to fund loan originations and purchases, repay its
lines of credit and pay general corporate expenses. HHI had a net increase of
cash of $11.1 million and $2.4 million in 1995 and 1994, respectively.
Operations
Net cash used in operating activities was $185.5 million in 1995, $39.0
million in 1994 and $6.3 million in 1993. The increase in cash used in operating
activities from 1994 to 1995 was attributable to cash needed to meet growth in
loan origination volume which was related to the acquisition of BancPLUS, a full
year impact of the October 1994 acquisition of Loan America, and increased
correspondent business. The $32.7 million increase from 1993 to 1994 was
similarly attributable to increased loan origination volume from Loan America in
the fourth quarter of 1994 and the first time entry into the correspondent
business.
Investing
Cash used in investing activities was $182.3 million in 1995, $83.3 million
in 1994 and $36.3 million in 1993. The increase in cash used is primarily due to
the cost of the acquisitions of BancPLUS in 1995 and Loan America in 1994. The
increase in cash used to purchase BancPLUS and Loan America was part of HHI's
overall strategy to increase its servicing portfolio and nationwide loan
originations.
Financing
Cash provided by financing activities was $378.9 million in 1995, $124.8
million in 1994 and $43.0 million in 1993. Prior to the HHI Acquisition, the
primary source and use of cash related to financing activities was attributable
to the lines of credit with Barnett and its affiliates. The net increase in the
lines of credit with Barnett was $211.7 million in 1995, $65.0 million in 1994,
and $43.0 million in 1993. The higher level of borrowings in 1995 and 1994 are
indicative of increasingly higher loan production and purchase volumes during
these years.
Additionally, cash provided as capital contributions from Barnett increased
from $0 in 1993 to $59.8 million in 1994 and $167.2 in 1995. These contributions
were provided primarily for the acquisitions of BancPLUS in 1995 and Loan
America in 1994.
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<PAGE> 70
Impact of Inflation
Inflation has affected HHI primarily through its effect on interest rates
since interest rates normally increase during periods of high inflation and
decrease during periods of low inflation. See "Risk Factors -- Impact of Changes
in Interest Rates".
New Accounting Standard
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights." This Statement, among other provisions, requires that the value of
mortgage servicing rights associated with mortgage loans originated by an entity
be capitalized as assets, which results in an increase in mortgage origination
revenues. The value of originated mortgage servicing rights is determined by
allocating the total costs of the mortgage loans between the loans and the
mortgage servicing rights based on their relative fair values. Also, the
Statement requires that capitalized servicing rights be evaluated for impairment
based on the fair value of these rights. For purposes of determining impairment,
mortgage servicing rights that are capitalized after the adoption of this
Statement are stratified based on one or more of the predominant risk
characteristics of the underlying loans. Impairment is recognized through a
valuation allowance for each impaired stratum. HHI adopted this Statement
effective January 1, 1996. The actual effect of implementing this Statement on
HHI's financial position and results of operations will depend on factors
determined at the end of a reporting period, including the amount and mix of
originated and purchased production, the level of interest rates and market
estimates of future prepayment rates.
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<PAGE> 71
INDUSTRY OVERVIEW
INTRODUCTION
Mortgage banking is a specialized branch of the financial services industry
which primarily involves (1) originating and purchasing mortgage loans
("origination" and/or "production"); (2) selling the originated mortgages to
third parties either as mortgage-backed securities or as whole loans ("secondary
marketing"); (3) servicing of mortgage loans on behalf of the ultimate
purchasers, which includes the collection and disbursement of payments of
mortgage principal and interest and the collection of payments of taxes and
insurance premiums to pay property taxes and insurance premiums and the
performance of other attendant administrative functions (collectively,
"servicing"); and (4) the purchase and sale of the rights to service mortgage
loans.
Mortgage bankers originate loans generally through two channels: wholesale
and retail. Wholesale origination involves the origination of mortgage loans
from sources other than homeowners, including mortgage brokers and other
mortgage lenders. Retail origination typically includes (i) networks of retail
loan offices with sales staff that solicit business from homeowners, realtors,
builders, and other real estate professionals, (ii) centers that use
telemarketing, direct mail, and advertising to market loans directly to home
buyers or homeowners, (iii) affinity and co-branding partnerships, and (iv)
corporate relocations. Once originated, mortgage bankers hold the loans
temporarily ("warehousing") until they are sold, typically earning an interest
spread equal to the difference between the loan rate and the cost of financing.
Each loan is sold either excluding or including the associated right to service
the loan ("servicing retained" or "servicing released," respectively).
Mortgage bankers rely mainly on short-term borrowings, such as warehouse
lines, to finance the origination of mortgages that are then typically sold.
Mortgage bankers also borrow on a longer term basis to finance their servicing
assets and working capital requirements. Revenues consist primarily of those
related to servicing and, to a lesser extent, fees and interest spreads from
originations. The major expenses of a mortgage banker include costs of
financing, operating costs related to origination and servicing and the
amortization of mortgage servicing rights.
Mortgage bankers typically seek to retain the rights to service the loans
they originate and to acquire rights to service additional loans in order to
generate recurring fee income. The purchase and sale of servicing rights can
occur on a loan by loan basis ("flow") or on a portfolio (group of loans) basis
("bulk" or "mini-bulk"). Prices for servicing rights are typically stated as a
multiple of the servicing fee or as a percentage of the outstanding UPB for a
group of mortgage loans. Values of servicing portfolios are determined on the
basis of the present value of the servicing fee income stream (net of servicing
costs) expected to be received over the estimated life of the loans. The assets
of a mortgage banking company consist primarily of loans in warehouse and the
value of the servicing rights purchased ("purchased mortgage servicing rights"
or "PMSR") or originated ("originated mortgage servicing rights" or "OMSR").
MORTGAGE MARKET
Mortgage bankers operate in the second largest debt market in the world,
exceeded only by the United States national debt. Residential mortgage debt in
the United States grew to over $3.6 trillion in 1995 from $1.7 trillion in 1985,
approximately a 8% compounded annual growth rate.
Over the past five years mortgage bankers have emerged as the dominant
players in the United States' mortgage origination and servicing business.
Mortgage bankers held market shares of 55% and 41%, respectively, of the United
States' residential mortgage origination and servicing markets in 1995, up from
35% and 37% in 1990. The bulk of the remaining origination and servicing market
share is held by commercial banks and thrifts. The mortgage bankers' market
share improvement began in the late 1980s and early 1990s when the thrift
industry, historically the largest provider of residential mortgage loans,
experienced serious financial difficulties. Mortgage bankers expanded market
share not only by supplanting thrifts as the primary mortgage originators and
servicers in the marketplace but also by purchasing the mortgage banking
operations
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and assets of certain of these entities. Mortgage bankers gained additional
momentum and increased their market share during the decline in interest rates
in the early 1990s.
Although mortgage loan demand is affected by a number of factors, including
economic conditions, demographics and consumer confidence, it is most heavily
influenced by interest rates and correlates inversely with interest rate
movements. When mortgage rates dropped below 10% in 1990, mortgagors began to
seek mortgages at lower interest rates, resulting in a growing refinancing boom
that lasted through 1993.
<TABLE>
TOTAL RESIDENTIAL MORTGAGE ORIGINATIONS
<CAPTION>
PURPOSE OF MORTGAGE(B)
-----------------------------
PURCHASE REFINANCING FIXED ADJUSTABLE
(% OF TOTAL) (% OF TOTAL) RATE(B)(C)(E) RATE(B)(D)(E)
TOTAL ------------ -------------- ------------- --------------
ORIGINATIONS(A)
---------------------
(DOLLARS IN BILLIONS)
<S> <C> <C> <C> <C> <C>
1985...................... $ 290 82% 18% 12.42% 10.04%
1986...................... 499 68 32 10.18 8.42
1987...................... 507 71 29 10.20 7.82
1988...................... 446 82 18 10.33 7.90
1989...................... 453 81 19 10.32 8.80
1990...................... 458 87 13 10.13 8.36
1991...................... 562 70 30 9.25 7.10
1992...................... 893 52 48 8.40 5.63
1993...................... 1,020 45 55 7.33 4.59
1994...................... 769 68 32 8.36 5.33
1995...................... 636 75 25 N/A N/A
<FN>
- ---------------
(a) Source: FNMA
(b) Sources: Board of Governors of the Federal Reserve System; FHLMC; Federal
Home Loan Bank of San Francisco.
(c) 30-year conventional contract loan rate with 20% down payment.
(d) 1-year Treasury-indexed conventional contract loan rate with 20% down
payment.
(e) Figures are annual averages of monthly data.
</TABLE>
SECONDARY MORTGAGE MARKETS
The secondary mortgage market and its evolution have been significantly
influenced by two government-sponsored enterprises, the Federal National
Mortgage Association ("FNMA" or "Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("FHLMC" or "Freddie Mac"), and one government agency, the
Government National Mortgage Association ("GNMA" or "Ginnie Mae") (collectively,
the "Agencies"). Through these entities, the United States government provides
support and liquidity to the market for residential mortgage debt.
Mortgage originators sell their loans directly to FNMA and FHLMC either as
whole loans or, more typically, as pools of loans used to collateralize
mortgage-backed securities ("MBS") issued or guaranteed by these entities.
Similarly, the originators can issue MBS collateralized by pools of loans that
are guaranteed by GNMA. In order to effect these sales or obtain these
guarantees, the originator must underwrite its loans to conform ("conforming
loans") with standards established by FNMA or FHLMC or by the Federal Housing
Administration ("FHA") or Veterans Administration ("VA") in the case of GNMA.
All loans other than FHA and VA loans ("government loans") are considered
conventional loans. Loans with principal balances exceeding Agency guidelines
("jumbo loans"), currently in excess of $207,000, are sold to private investors
or aggregated into pools and sold as MBS.
The role of the Agencies has grown substantially over the past ten years.
In 1994, FNMA, FHLMC, and GNMA mortgage-backed securities accounted for, in the
aggregate, $1.4 trillion, or 39.6% of total residential
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<PAGE> 73
mortgage debt outstanding, approximately a fivefold increase from $287 billion
ten years earlier. The mortgage banking industry relies heavily on these
Agencies to provide liquidity.
There are a number of other participants in the market that primarily
purchase MBS. These participants include institutional investors such as life
insurance companies, pension funds and mutual funds. More recently, investors
that purchase pools of loans to collateralize MBS issued in their own name
("private investor securities") have entered the market. The development of the
private investor securities market has provided mortgage bankers the liquidity
essential to effect the sale of the loans the mortgage banker originates that do
not conform ("non-conforming") to Agency guidelines.
MORTGAGE BANKING MARKET CHARACTERISTICS
The mortgage banking market is highly fragmented. Despite the market share
growth of the industry as a whole, no single company controls or dominates the
market. In 1995 the largest originator represented 5.2% of the market and the
largest servicer represented 3.7%, while the top 25 originators and servicers
represented 38.1% and 39.1% of their markets, respectively.
<TABLE>
TOP 10 ORIGINATORS AND SERVICERS
(DOLLARS IN BILLIONS)
1995 ORIGINATIONS SERVICING PORTFOLIO AT DECEMBER 31, 1995
<S> <C> <C> <C> <C> <C>
1 Norwest Mortgage................. $34.2 1 Countrywide Funding.............. $134.0
2 Countrywide Funding.............. 31.5 2 General Electric Mortgage........ 109.5
3 Prudential Home Mortgage......... 15.7 3 Norwest Mortgage................. 107.4
4 Fleet Mortgage................... 14.9 4 Fleet Mortgage................... 105.5
5 Chase Manhattan Mortgage......... 13.9 5 Prudential Home Mortgage......... 81.8
6 Chemical Mortgage................ 13.3 6 NationsBank...................... 81.4
7 NationsBank...................... 11.0 7 Bank of America.................. 63.1
8 Bank of America.................. 10.3 8 Home Savings of America.......... 60.7
9 BancBoston Mortgage.............. 8.9 9 Chase Manhattan Mortgage......... 59.4
10 North American Mortgage.......... 7.6 10 Chemical Mortgage................ 57.2
<FN>
- ---------------
Source: National Mortgage News.
</TABLE>
Mortgage bankers operate in a highly competitive market. The underwriting
guidelines and servicing requirements set by the participants in the secondary
markets are standardized. As a result, mortgage banking products (i.e., mortgage
loans and the servicing of those loans) have become difficult to differentiate.
Therefore, mortgage bankers compete primarily on the basis of price or service,
making effective cost management essential.
Mortgage bankers generally seek to develop cost efficiencies in one of two
ways: economies of scale or specialization. Large full service national or
regional mortgage bankers have sought economies of scale through an emphasis on
wholesale originations, the introduction of automated processing systems and
expansion through acquisition. Smaller companies frequently identify and pursue
a particular expertise or customer base in an attempt to create a market niche.
RECENT TRENDS
The introduction of significant technological improvements to the mortgage
banking industry began in the mid 1980s. From the use of laptop computers for
originations to the electronic scanning of loan documents, technological
advances have allowed mortgage bankers to accommodate higher volumes of
business. This trend has continued, contributing to the consolidation in
mortgage banking. The automation of many functions in mortgage banking,
especially those related to servicing, has reduced costs significantly for
industry participants.
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<PAGE> 74
Just as declining interest rates contributed to the growth of the mortgage
bankers' role in the early 1990s, rising interest rates in 1994 caused a
reduction in overall demand for mortgage loans, particularly refinancings. Many
mortgage bankers had expanded their operations in response to the increased
refinancing activities of 1992 and 1993. The contraction of the refinancing
demand in 1994 created substantial excess capacity in the industry, resulting in
further industry consolidation.
Many mortgage bankers that were not low cost, high volume producers or did
not operate in a low cost specialized field experienced earnings declines during
this period, causing many to exit the business or to be acquired. Surviving cost
effective firms purchased servicing portfolios or other companies to expand
their servicing economies of scale, while others acquired market niche
operations. As evidence of this consolidation, the top 25 mortgage loan
servicers increased their market share from 21% in 1990 to 39% in 1995.
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<PAGE> 75
BUSINESS
OVERVIEW
The Issuer was formed on December 11, 1995 to acquire HLI, the mortgage
banking subsidiary of Bank of Boston. On March 15, 1996, the Issuer completed
the HLI Acquisition. On March 4, 1996, the Issuer entered into an agreement to
acquire HHI, the mortgage banking subsidiary of Barnett. On May 31, 1996, the
Issuer completed the HHI Acquisition. The Issuer's executive offices are located
at 7301 Baymeadows Way, Jacksonville, Florida 32256, telephone number (904)
281-3000.
The combined originations and servicing of HLI and HHI for the year ended
and at December 31, 1995 would have been $14.7 billion and $75.0 billion,
respectively. At its current size, HomeSide would have ranked as the 5th largest
mortgage loan originator and as the 7th largest mortgage loan servicer in the
United States for 1995 based on data published by National Mortgage News.
HomeSide expects that the acquisition and integration of HLI and HHI will
allow it to realize improved economies of scale in servicing costs, increase its
productivity by converting to HHI's proprietary servicing software system and
expand and diversify its variable cost origination channels. HomeSide is in the
process of consolidating servicing operations and converting to HHI's
proprietary servicing software system. Once this conversion is completed, this
system is expected to increase HomeSide's servicing capacity to accommodate
approximately twice the number of loans in the combined portfolio of HLI and
HHI. HomeSide will have exclusive access through a correspondent relationship to
BKB retail and Barnett retail and broker origination channels for an initial
term of five years, subject to certain limitations. The combined origination and
servicing operations of HLI and HHI are expected to enhance HomeSide's national
presence and increase its visibility to consumers and mortgage market
participants.
HomeSide's business consists primarily of:
- Mortgage production: the origination and purchase of residential single
family mortgage loans through all major channels including correspondents
(including BKB and Barnett), mortgage brokers, co-issue partners,
telemarketing, affinity programs and retail branches;
- Secondary marketing: the sale of residential single family mortgage loans
as pools underlying mortgage-backed securities guaranteed or issued by
governmental or quasi-governmental agencies or as whole loans to
investors; and
- Servicing: the administration, collection and remittance of monthly
mortgage principal and interest payments and the collection and payment
of property taxes and insurance premiums and the management of certain
loan default activities.
HomeSide's business strategy is focused on building its origination and
servicing business to benefit from the economies of scale inherent in the
business through growth in its wholesale and retail origination channels, as
well as by selected acquisitions of servicing portfolios and mortgage banking
companies. Consistent with this growth strategy, HomeSide typically retains the
right to service the loans it originates and purchases servicing rights in bulk
from other mortgage lenders or on an individual (loan-by-loan) basis from
correspondents or mortgage brokers. HomeSide has been ranked by industry surveys
as one of the nation's most efficient mortgage servicers based on various
factors such as cost per loan and loans serviced per employee. HomeSide plans to
continue to pursue economies of scale and productivity improvements in both
origination and servicing, relying on, among other things, a high degree of
automation, outsourcing of selected labor intensive functions, which enables it
to maintain a low fixed cost base, and an emphasis on quality control.
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<PAGE> 76
<TABLE>
The table below sets forth the historical production and servicing
portfolio volumes of HLI and HHI.
COMBINED PRODUCTION AND SERVICING SUMMARY
<CAPTION>
YEARS ENDED AND AT DECEMBER 31, THREE MONTHS
----------------------------------------------- ENDED AND AT
1991 1992 1993 1994 1995 MARCH 31, 1996
------- ------- ------- ------- ------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
PRODUCTION
HLI....................... $ 4,437 $ 8,660 $11,371 $ 8,935 $ 8,885 $ 4,187
HHI....................... 1,945 3,507 3,360 3,410 5,767 1,556
------- ------- ------- ------- ------- -------
Combined production..... $ 6,382 $12,167 $14,731 $12,345 $14,652 $ 5,743
======= ======= ======= ======= ======= =======
SERVICING PORTFOLIO
HLI....................... $20,601 $23,706 $27,999 $37,971 $41,555 $44,158
HHI....................... 10,034 11,524 13,085 18,411 33,411 33,019
------- ------- ------- ------- ------- -------
Combined servicing
portfolio............ $30,635 $35,230 $41,084 $56,382 $74,966 $77,177
======= ======= ======= ======= ======= =======
<FN>
- ---------------
(a) If Loan America and BancPLUS loan production had been included for years
prior to their acquisitions, then production would have been $4,742 million,
$8,480 million, $9,589 million, $6,401 million and $5,767 million for 1991,
1992, 1993, 1994 and 1995, respectively.
</TABLE>
<TABLE>
The table below sets forth the servicing statistics for HomeSide pro forma
for the HLI Acquisition and HHI Acquisition:
HOMESIDE PRO FORMA SERVICING STATISTICS
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
1995 1996
----------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
FHA/VA............................................... $25,903 $26,266
Conventional......................................... 48,429 49,069
------- -------
Total serviced (UPB)(a)............................ $74,332 75,335
ARM.................................................. 23% 22%
Fixed................................................ 77% 78%
Weighted average coupon.............................. 8.01% 7.97%
Weighted average servicing fee (% of UPB)............ 0.351%(b) 0.365%
Weighted average maturity (months)................... 278 280
<FN>
- ---------------
(a) Excludes loans purchased not yet on servicing system.
(b) HHI's weighted average servicing fees are adjusted to reflect market rates
under contractual arrangements between HomeSide and Barnett.
</TABLE>
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<PAGE> 77
HLI
For purposes of this Section "Business -- HLI" the term "HomeSide" means
"HLI".
HomeSide, headquartered in Jacksonville, Florida, is one of the largest
full-service mortgage banking companies in the United States, emphasizing
wholesale mortgage originations and low cost mortgage servicing. For the year
ended December 31, 1995 and the three months ended March 31, 1996, HomeSide
originated approximately $8.9 billion and $4.2 billion of mortgage loans,
respectively, including co-issue production, and serviced a loan portfolio of
$41.6 billion and $44.2 billion, respectively, at the end of such periods. For
1995, HomeSide was ranked as the 9th largest originator of residential mortgage
loans (including co-issue volume) and as the 16th largest servicer of
residential mortgage loans, according to National Mortgage News, and as the 5th
largest wholesale originator of mortgage loans (including co-issue volume)
according to Wholesale Access.
PRODUCTION
HomeSide participates in several origination channels, with a focus on
wholesale originations. In 1995, wholesale channels (correspondent, co-issue and
broker) represented approximately 90% of HomeSide's total production. No single
source within the correspondent or broker channels accounted for more than 2% of
total production in 1995. HomeSide's other origination channels include
telemarketing, affinity programs and retail branches. HomeSide also purchases
servicing rights in bulk from time to time. This multi-channel production base
provides access to and flexibility among production channels in a wide variety
of market and economic conditions. The table below details production by HLI's
origination channels:
<TABLE>
RESIDENTIAL LOAN PRODUCTION BY CHANNEL
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------- THREE MONTHS ENDED
1991 1992 1993 1994 1995 MARCH 31, 1996
------- ------ ------- ------- ------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Wholesale:
Correspondent............... $2,096 $2,947 $ 4,955 $ 3,364 $3,778 $2,031
Co-issue(a)................. 1,200 2,955 2,860 4,285 3,901 1,597
Broker...................... 231 934 1,431 498 291 191
------ ------ ------- ------- ------ ------
Total wholesale.......... 3,527 6,836 9,246 8,147 7,970 3,819
Retail........................ 910 1,824 2,125 788 915 368
------ ------ ------- ------- ------ ------
Total production......... 4,437 8,660 11,371 8,935 8,885 4,187
Bulk acquisitions(a).......... 760 1,046 2,311 5,538 683 --
------ ------ ------- ------- ------ ------
Total production and
acquisitions........... $5,197 $9,706 $13,682 $14,473 $9,568 $4,187
====== ====== ======= ======= ====== ======
<FN>
- ---------------
(a) Represents the acquisition of servicing rights, not the underlying loans.
Amounts represent the UPB of mortgage debt to which the acquired servicing
rights relate.
</TABLE>
HomeSide competes nationwide by offering a wide variety of mortgage
products designed to respond to consumer needs and tailored to address market
competition. HomeSide is primarily an originator of fixed rate 15- and 30-year
mortgage loans, which collectively represented 77% of total production in 1995
and 81% of the total production in the first three months of 1996. HomeSide also
offers other products, such as adjustable rate mortgages ("ARMs") and balloon
and jumbo mortgages.
HomeSide's national loan production operation has resulted in
geographically diverse originations, enabling HomeSide to diversify its risk
across many markets in the United States. HomeSide originates loans in 48 states
and the District of Columbia and its largest markets by state in 1995 were
California (18.4% of UPB of production), Texas (9.4%), Florida (7.1%), Georgia
(5.1%) and Massachusetts (4.5%). HomeSide's
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<PAGE> 78
largest markets by state in the three months ended March 31, 1996 were
California (19.5% of UPB of production), Maryland (7.5%), Texas (6.9%), Florida
(6.4%), and Georgia (5.1%).
HomeSide's production strategy is to maintain and improve its reputation as
one of the largest, most cost effective originators of mortgage loans
nationwide. HomeSide pursues this strategy through an emphasis on wholesale
production, the use of contract and delegated underwriters, a high degree of
automation in its processing and retail originations and quality control.
HomeSide plans to expand production through its low cost correspondent and
telemarketing channels and to continue to streamline its production operation.
HomeSide plans to continue to pursue bulk acquisitions in the secondary market
for mortgage servicing rights on an opportunistic basis.
WHOLESALE PRODUCTION
Correspondent Production
Through its correspondent program, HomeSide purchases loans from
approximately 500 commercial banks, savings and loan associations, licensed
mortgage lenders and other financial intermediaries. The correspondent takes the
mortgage application and processes the loan, which is either underwritten
through contract underwriters or, in some cases, the correspondent to whom
underwriting authority has been delegated. Closing documents are submitted to
HomeSide for legal review and funding. The participants in this program are
prequalified and monitored on an ongoing basis by HomeSide. If a correspondent
subsequently fails to meet HomeSide's requirements, HomeSide typically
terminates the relationship. Correspondents are also required to repurchase
loans in the event of fraud or misrepresentation in the origination process and
for certain other reasons. In 1995, HomeSide's top ten correspondents accounted
for approximately 20% of the total loans originated through this channel.
Co-Issue Production
Co-issue production, which represents the purchase of servicing rights from
a correspondent under contracts to deliver specified volumes on a monthly or
quarterly basis, is another main source of HomeSide's production. The co-issue
correspondent controls the entire loan process from application to closing. This
arrangement particularly suits large originators who have the ability to deliver
on an automated basis. Reflecting this delegated underwriting authority,
co-issue correspondents are subject to more extensive credit and quality control
reviews. Contractually, the co-issue correspondent is obligated to make certain
representations and warranties and is required to repurchase loans in the event
of fraud or misrepresentation in the origination process or for certain other
reasons.
Broker Production
Under its broker program, HomeSide funds loans at closing from a network of
approximately 450 mortgage brokers nationwide. The broker controls the process
of application and loan processing. A preclosing quality control review is
performed by HomeSide to verify the borrower's credit. All loans originated
through brokers are underwritten by HomeSide's approved contract underwriters.
Loans are funded by HomeSide and may be closed in either the broker's name or
HomeSide's name. Participants in this program prequalify on the basis of
creditworthiness, mortgage lending experience and reputation. Each broker is
subject to annual and ongoing reviews by HomeSide. In 1995, HomeSide's top ten
brokers accounted for approximately 24% of the total loans originated through
this channel.
RETAIL PRODUCTION
HomeSide's retail production includes the use of telemarketing to solicit
loans from several sources, including refinancings of mortgage loans in
HomeSide's existing servicing portfolio, leads generated from direct mail
campaigns and other advertising, and mortgages related to affinity group and
co-branding partnerships. HomeSide established a telemarketing system in May
1995. HomeSide believes that these efforts have been a significant factor in
increasing the percentage of loans captured by the retail division from
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<PAGE> 79
loan prepayments in HomeSide's servicing portfolio. Refinancing retention was
approximately 1% in June 1995, approximately 6% in January 1996 and
approximately 7% in May 1996.
In April 1996, pursuant to a two-year agreement, HomeSide began offering
mortgage loans through the American Airlines AAdvantage Program, which
encompasses approximately 14 million households. Under this program, a borrower
will receive one frequent flyer mile for every dollar of interest paid on time.
HomeSide will offer loans in four out of five geographic regions in the United
States, along with two other lenders in each region. Each lender will receive
one third of the referrals from the AAdvantage program, or prospective borrowers
may contact the lender directly. HomeSide plans to establish additional affinity
relationships.
Under the terms of the HLI Acquisition, BKB has retained all of its retail
production facilities in the New England area and entered into an exclusive
five-year agreement to sell, subject to certain limitations, all loans
originated from these branches to HomeSide on a broker or correspondent basis at
market rates. In 1996, HomeSide sold or closed most of HomeSide's remaining
retail branches.
BULK ACQUISITION
Bulk acquisition is the large scale purchase of mortgage servicing rights.
In connection with such acquisitions, HomeSide does not purchase the underlying
mortgage loans which were originated by other originators. HomeSide may purchase
servicing rights on an exclusive basis or through a competitive bidding process
and plans to continue this practice on an opportunistic basis in order to grow
its servicing portfolio and benefit from economies of scale.
UNDERWRITING AND QUALITY CONTROL
Underwriting
HomeSide's loans are underwritten in accordance with applicable FNMA,
FHLMC, VA, and FHA guidelines, as well as certain private investor requirements.
The underwriting process is organized by origination channel and by loan type.
HomeSide currently employs underwriters with an average of ten years of
underwriting experience.
HomeSide requires approximately 80% of its correspondent lenders to have
their loans underwritten by third party contract underwriters prior to purchase.
These contract underwriters are designated by HomeSide and include General
Electric Capital Corp., Mortgage Guaranty Insurance Corp., and Private Mortgage
Insurance Corp. HomeSide grants delegated underwriting status to the remaining
approximately 20% of correspondents which enables the correspondent to submit
conventional loans to HomeSide without prior underwriting approval. Generally,
HomeSide grants delegated underwriting status to its larger correspondents who
meet financial strength, delinquency, underwriting and quality control
standards, and which correspondents are monitored regularly. The FHA and VA
require that loans be underwritten by the originating lender on an
Agency-approved or delegated basis. If issuance of FHA guarantees or VA
insurance certificates is denied, the correspondent must repurchase the loan.
HomeSide implemented an automated underwriting process for its retail
production operation in 1994. The automated underwriting technology incorporates
credit scoring and appraisal evaluation systems. These systems employ
rules-based and statistical technologies to evaluate the borrower, the property
and salability of the loan to the secondary market. HomeSide believes that these
technologies have contributed to improved productivity and reduced underwriting
and processing turnaround time.
Quality Control
HomeSide maintains a compliance and quality assurance department that
operates independently of the production, underwriting, secondary marketing and
loan administration departments. For its production compliance process, HomeSide
randomly selects 10% of all closed loans monthly for review. This review
includes a credit scoring and reunderwriting of such loans; ordering second
appraisals on 10% of the sample; reverifying funds, employment and final
applications; and reordering credit reports on all loans selected. In
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<PAGE> 80
addition, a full underwriting review is conducted on (i) all jumbo loans that go
into default during the first thirty-six months from the date of origination and
(ii) all other loans that go into default during the first six months from the
date of origination. Document and file reviews are also undertaken to ensure
regulatory compliance. In addition, random reviews of the servicing portfolio,
covering selected aspects of the loan administration process, are conducted.
HomeSide monitors the performance of the underwriting department through
quality assurance reports, HUD/VA reports and audits, reviews and audits of
regulatory agencies, investor reports and mortgage insurance company audits.
According to HomeSide's quality control findings, less than 1% of its loans have
underwriting issues that affect salability to the secondary market. Flaws in
these loans are generally corrected; otherwise, the holder of the MBS is
indemnified against future losses resulting from such flaws by HLI or,
ultimately, the originating correspondent. Correspondents or co-issue partners
are required to repurchase any flawed loans originated by them, and as a result,
HomeSide has repurchased and had to retain fewer than three loans annually for
the last three years. See "Risk Factors -- Loan Delinquencies, Defaults on Loans
and Other Risks."
SECONDARY MARKETING
HomeSide customarily sells all loans that it originates while retaining the
servicing rights to such loans. HomeSide aggregates mortgage loans into pools
and sells these pools, as well as individual mortgage loans, to investors
principally at prices established under forward sales commitments. HomeSide's
FHA and VA loans are generally pooled and sold in the form of GNMA MBS.
Conforming conventional mortgage loans are generally pooled and exchanged under
the purchase and guarantee programs sponsored by FNMA and FHLMC for FNMA MBS or
FHLMC participation certificates, respectively. HomeSide pays certain guarantee
fees to the Agencies in connection with these programs and then sells the GNMA,
FNMA and FHLMC securities to securities dealers. A limited number of mortgage
loans (i.e. non-conforming loans) are sold to private investors. In 1995,
approximately 83% of the mortgage loans originated by HomeSide were sold to GNMA
(43%), FNMA (31%) or FHLMC (9%). The remaining approximately 17% were sold to
private investors. In the three months ended March 31, 1996, approximately 92%
of the mortgage loans originated by HomeSide were sold to GNMA (48%), FNMA (35%)
or FHLMC (9%). The remaining approximately 8% were sold to private investors.
The sale of mortgage loans may generate a gain or loss to HomeSide. Gains
or losses result primarily from two factors. First, HomeSide may purchase a loan
at a price (i.e., interest rate and discount) that may be higher or lower than
HomeSide would receive if it immediately sold the loan in the secondary market.
These pricing differences occur principally as a result of competitive pricing
conditions in the primary loan origination market. Second, gains or losses may
result from fluctuations in interest rates that create changes in the market
value of the loans or commitments to purchase loans, from the time the interest
rate commitment is given to the mortgagor until the loan is sold to an investor.
HomeSide assesses the interest rate risk associated with outstanding
commitments that it has extended to fund loans and hedges the interest rate risk
of these commitments based upon a number of factors, including the remaining
term of the commitment, the interest rate at which the commitment was provided,
current interest rates and interest rate volatility. HomeSide constantly
monitors these factors and adjusts its hedging on a daily basis as needed. In
1995, HomeSide converted to the Quantitative Risk Management ("QRM") system, a
sophisticated hedging, reporting and evaluation system, which has the ability to
perform analyses under various interest rate scenarios. HomeSide's interest rate
risk is currently hedged using a combination of forward sales of MBS and over
the counter ("OTC") options, including both puts and calls, on fixed income
securities. HomeSide generally commits to sell to investors for delivery at a
future time for a stated price all its closed loans and a percentage of the
mortgage loan commitments for which the interest rate has been established.
HomeSide aims to price loans competitively, hedge the interest rate risk of loan
origination and sell loans on a break-even basis. For each year since 1990,
HomeSide has not experienced secondary marketing losses.
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<PAGE> 81
HomeSide's policy is to sell mortgage loans on a non-recourse basis.
However, in the case of VA loans used to form GNMA pools, the VA's loan
guarantees do not cover the entire principal balance of the loan and HomeSide is
responsible for losses which exceed the VA's guaranteed limitations. See "--
Loan Servicing Credit Issues". In connection with HomeSide's loan exchanges and
sales, HomeSide makes representations and warranties customary in the industry
relating to, among other things, compliance with laws, regulations and program
standards, and to accuracy of information. In the event of a breach of these
representations and warranties, HomeSide typically corrects such flaws, but, if
the flaws cannot be corrected, may be required to repurchase such loans. In
cases where loans are originated by a correspondent, HomeSide may sell the
flawed loan back to the correspondent under a repurchase obligation.
LOAN SERVICING
HomeSide derives its revenues predominantly from its servicing operations.
Since 1991, HomeSide's servicing portfolio has grown as originations and bulk
servicing acquisitions have exceeded scheduled principal reductions,
prepayments, foreclosures and sales of servicing rights. HomeSide anticipates
that the sale of servicing rights will not be a significant component of its
business strategy in the future. Since 1994, HomeSide has also maintained a risk
management program designed to protect, within certain parameters, the economic
value of its servicing portfolio, which is subject to prepayment risk when
interest rate declines provide mortgagors with refinancing opportunities.
<TABLE>
CHANGES IN SERVICING PORTFOLIO
<CAPTION>
THREE MONTHS
1991 1992 1993 1994 1995 ENDED MARCH 31, 1996
------- ------- ------- ------- ------- --------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
January 1st
balance............ $18,726 $20,601 $23,706 $27,999 $37,971 $41,555
Total additions.... 5,375 9,733 13,669 14,970 9,389 4,243
Scheduled
amortization....... 337 434 501 523 869 241
Prepayments.......... 1,303 4,345 8,123 3,372 2,740 1,274
Foreclosures......... 174 157 223 258 334 113
Servicing sales...... 1,686 1,692 529 845 1,862 12
------- ------- ------- ------- ------- -------
Total reductions... 3,500 6,628 9,376 4,998 5,805 1,640
------- ------- ------- ------- ------- -------
December 31st balance
or at end of
period............. $20,601 $23,706 $27,999 $37,971 $41,555 $44,158
======= ======= ======= ======= ======= =======
</TABLE>
Loan servicing includes collecting payments of principal and interest from
borrowers, remitting aggregate loan payments to investors, accounting for
principal and interest payments, holding escrow funds for payment of mortgage
related expenses such as taxes and insurance, making advances to cover
delinquent payments, inspecting the mortgaged premises as required, contacting
delinquent mortgagors, supervising foreclosures and property dispositions in the
event of unremedied defaults, and other miscellaneous duties related to loan
administration. HomeSide collects servicing fees from monthly mortgage payments.
These fees generally range from 0.25% to 0.50% of the declining principal
balances of the loans per annum. HomeSide's weighted average servicing fee was
0.386% at December 31, 1995. HomeSide also maintains certain subservicing
relationships whereby servicing is performed by another servicer under an
agreement with HomeSide, which remains contractually responsible for servicing
the loans. Subservicing relationships are often entered into as part of a bulk
servicing acquisition where the selling institution continues to perform
servicing until the loans are transferred to the purchasing institution.
HomeSide's servicing strategy is to continue to build its mortgage
servicing portfolio and benefit from the economies of scale inherent in the
business. HomeSide services substantially all of the mortgage loans that it
originates. In addition, HomeSide purchases the rights to service mortgage loans
originated by other lenders. Over the past five years, HomeSide's servicing
portfolio has grown steadily, from $20.6 billion at December 31, 1991 to $41.6
billion at December 31, 1995, a 19% compounded annual growth rate.
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<PAGE> 82
HomeSide's servicing strategy is also to enhance the profitability of its
servicing revenue through low cost and efficient processes. This strategy is
pursued through highly automated, cost effective processing systems, strategic
outsourcing of selected servicing functions and effective control of
delinquencies and foreclosures. HomeSide outsources to third party vendors
functions related to insurance, taxes and default management, contributing to
HomeSide's ability to maintain a highly variable cost structure. HomeSide is
recognized in the industry as one of the most efficient servicers of mortgage
loans. Industry surveys on servicing efficiency have ranked HomeSide among the
top three mortgage bankers based on a variety of factors, including loans
serviced per employee and cost per loan. Management believes that its low cost
servicing provides it with a competitive advantage in the industry.
SERVICING PORTFOLIO COMPOSITION
HomeSide originates and purchases servicing rights for mortgage loans
nationwide. The broad geographic distribution of HomeSide's servicing portfolio
reflects the national scope of HomeSide's originations and bulk servicing
acquisitions. The nine largest states accounted for 63.6% and 63.4% of
outstanding UPB of the total servicing portfolio of HomeSide at December 31,
1995, and March 31, 1996, respectively, while the largest volume by state is
California with a 16.8% and 16.9% share of the total portfolio at December 31,
1995 and March 31, 1996, respectively. HomeSide actively monitors the geographic
distribution of its servicing portfolio to maintain a mix that it deems
appropriate and makes adjustments as it deems necessary.
<TABLE>
The following tables set forth certain information regarding HLI's
servicing portfolio:
SERVICING PORTFOLIO COMPOSITION(A)
<CAPTION>
AT DECEMBER 31, AT
----------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
FHA/VA....................... $ 9,898 $10,751 $12,524 $15,695 $19,880 $20,680
Conventional................. 10,703 12,955 14,130 20,113 21,041 21,636
------- ------- ------- ------- ------- -------
Total serviced (UPB)....... $20,601 $23,706 $26,654 $35,808 $40,921 $42,316
======= ======= ======= ======= ======= =======
<FN>
- ---------------
(a) Servicing statistics are based on loans serviced by HomeSide, and excludes
loans purchased not yet on servicing system.
</TABLE>
80
<PAGE> 83
<TABLE>
SERVICING PORTFOLIO BY STATE(a)
<CAPTION>
AT DECEMBER 31, 1995 AT MARCH 31, 1996
------------------------ ------------------------
STATE UPB % OF UPB UPB % OF UPB
----- --- -------- --- --------
(DOLLARS IN (DOLLARS IN
MILLIONS) MILLIONS)
<S> <C> <C> <C> <C>
California............................. $ 6,863 16.8% $ 7,168 16.9%
Massachusetts.......................... 3,784 9.2 3,759 8.9
Florida................................ 3,094 7.6 3,198 7.6
Maryland............................... 2,748 6.7 2,859 6.8
Texas.................................. 2,605 6.4 2,727 6.4
Virginia............................... 2,297 5.6 2,350 5.6
Georgia................................ 1,879 4.6 1,961 4.6
Connecticut............................ 1,430 3.5 1,449 3.4
Washington............................. 1,293 3.2 1,340 3.2
Other(b)............................... 14,928 36.4 15,505 36.6
------- ----- ------- -----
Total.................................. $40,921 100.0% $42,316 100.0%
======= ===== ======= =====
<FN>
- ---------------
(a) Excludes loans purchased not yet on servicing system.
(b) No other state represents more than 3.0% of HomeSide's servicing portfolio.
</TABLE>
<TABLE>
SERVICING PORTFOLIO BY COUPON(A)
<CAPTION>
AT DECEMBER 31, 1995 AT MARCH 31, 1996
---------------------------------------- -----------------------------------------
CUMULATIVE CUMULATIVE
INTEREST RATE UPB % OF UPB % OF UPB UPB % OF UPB % OF UPB
------------- ----------- -------- ---------- ----------- -------- ----------
(DOLLARS IN (DOLLARS IN
MILLIONS) MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Less than 6.0%........... $ 515 1.3% 1.3% $ 636 1.5% 1.5%
6.0% to 6.9%............. 4,636 11.3 12.6 4,633 11.0 12.5
7.0% to 7.9%............. 16,621 40.6 53.2 18,550 43.8 56.3
8.0% to 8.9%............. 11,752 28.7 81.9 11,648 27.5 83.8
9.0% to 9.9%............. 4,923 12.0 93.9 4,532 10.7 94.5
10.0% to 10.9%........... 2,024 5.0 98.9 1,893 4.5 99.0
Over 11.0%............... 450 1.1 100.0 424 1.0 100.0
------- ----- ------- -----
Total.......... $40,921 100.0% $42,316 100.0%
======= ===== ======= =====
<FN>
- ---------------
(a) Statistics based on loans serviced by HomeSide. Excludes loans purchased not
yet on servicing system.
</TABLE>
LOAN SERVICING CREDIT ISSUES
HomeSide is affected by loan delinquencies and defaults on loans that it
services. Under certain types of servicing contracts, particularly contracts to
service loans that have been pooled or securitized, HomeSide must forward all or
part of the scheduled payments to the owner of the loan, even when loan payments
are delinquent. Also, to protect their liens on mortgaged properties, owners of
loans usually require a servicer to advance scheduled mortgage and hazard
insurance and tax payments even if sufficient escrow funds are not available.
HomeSide is generally reimbursed, subject to certain limitations with respect to
FHA/VA loans as described below, by the mortgage owner or from liquidation
proceeds for payments advanced that the servicer is unable to recover from the
mortgagor, although the timing of such reimbursement is typically uncertain. In
the interim, HomeSide absorbs the cost of funds advanced during the time the
advance is outstanding. Further, HomeSide bears the increased costs of
collection activities on delinquent and defaulted loans.
81
<PAGE> 84
HomeSide also foregoes servicing income from the time such loan becomes
delinquent until foreclosure, when, if any proceeds are available, it may
recover such amounts.
HomeSide periodically incurs losses attributable to servicing FHA and VA
loans for investors, including actual losses for final disposition of loans that
have been foreclosed or assigned to the FHA or VA and accrued interest on such
FHA or VA loans for which payment has not been received. For HomeSide, servicing
losses on investor-owned loans totaled $2.8 million, $7.2 million, $10.0 million
and $5.6 million for the years ended 1993, 1994 and 1995 and the period January
1 to March 15, 1996, respectively, primarily representing losses on VA loans.
Because the total principal amount of FHA loans is guaranteed, losses on such
loans are generally limited to expenses of collection. HomeSide experiences
minimal losses from FHA loans. In respect of VA loans, the VA guarantees the
initial losses on a loan. The guaranteed amount generally ranges from 20% to 35%
of the original principal balance. Before each foreclosure sale, the VA
determines whether to bid by comparing the estimated net sale proceeds to the
outstanding principal balance and the servicer's accumulated reimbursable costs
and fees. If this amount is a loss and exceeds the guaranteed amount, the VA
typically issues a no-bid and pays the servicer the guaranteed amount. Whenever
a no-bid is issued, the servicer absorbs the loss, if any, in excess of the sum
of the guaranteed principal and amounts recovered at the foreclosure sale.
HomeSide's historical delinquency and foreclosure rate experience on VA loans
has generally been consistent with that of the industry.
In the period January 1 to March 15, 1996 and in 1995 and 1994, HomeSide
recorded provisions in excess of actual foreclosure losses. HomeSide's
management believes that it has an adequate level of reserve based on HomeSide's
servicing volume, portfolio composition, credit quality and historical loss
rates, as well as estimated future losses.
<TABLE>
Set forth below is a comparison of HomeSide's historical delinquency and
foreclosure experience to national industry statistics compiled by the Mortgage
Bankers Association:
SERVICING PORTFOLIO DELINQUENCIES
(PERCENT BY LOAN COUNT)
<CAPTION>
AT TOTAL FORECLOSURE
DECEMBER 31, 30 DAYS 60 DAYS 90+ DAYS PAST DUE INVENTORY
- ------------ ------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
1993 HomeSide ...................... 2.91% 0.70% 1.00% 4.61% 1.41%
Industry Average (adjusted for
servicing portfolio mix)..... 3.77 0.88 1.10 5.75 1.27
1994 HomeSide....................... 3.13 0.70 0.97 4.80 1.19
Industry Average (adjusted for
servicing portfolio mix)..... 3.62 0.87 1.01 5.50 1.08
1995 HomeSide....................... 3.51 0.73 1.04 5.28 1.16
Industry Average (adjusted for
servicing portfolio mix)..... 3.89 0.84 0.95 5.68 1.11
</TABLE>
<TABLE>
<CAPTION>
AT
MARCH 31,
- ------------
<S> <C> <C> <C> <C> <C> <C>
1996 HomeSide....................... 2.65 0.56 0.59 3.80 1.00
</TABLE>
SERVICING PORTFOLIO HEDGING PROGRAM
The value of HomeSide's servicing portfolio is subject to volatility in the
event of unanticipated changes in prepayments. As interest rates increase,
prepayments by mortgagors decrease as fewer owners refinance, increasing
expected future cash flows from servicing revenue. Conversely, as interest rates
decrease, prepayments by mortgagors increase as homeowners seek to refinance
their mortgages, reducing expected future cash flows from servicing revenues on
those prepaid mortgages. Since the value of servicing rights is based on the net
present value of future cash flows, the value of the portfolio decreases in a
declining interest rate environment and increases in a rising rate environment.
82
<PAGE> 85
HomeSide's risk management policy is designed to minimize exposure to loss
in the value of the servicing portfolio caused by prepayments due to declines in
interest rates. The servicing portfolio is valued using market discount rates
and market consensus prepayment speeds, among other variables. The value is then
analyzed under various interest rate scenarios that help HomeSide estimate the
exposure to loss. This potential loss exposure determines the hedge profile,
which profile is monitored daily and may be adjusted to reflect significant
moves in key variables such as interest rate and yield curve changes and revised
prepayment speed assumptions. Results of the risk management program depend on a
variety of factors, including the hedge instruments typically used by HomeSide,
the relationship between mortgage rates and Treasury securities and certain
other factors. See "Risk Factors -- Impact of Changes in Interest Rates; Results
of Risk Management Activities" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- HomeSide -- Risk Management
Activities".
The Financial Accounting Standards Board ("FASB") has been evaluating the
accounting for derivative financial instruments and hedging activities. The FASB
has not yet reached a consensus on the outcome of its deliberations, although an
exposure draft may be issued in 1996. Under current practice, derivative
financial instruments may be accounted for as hedges with changes in the value
deferred as a component of the asset or liability being hedged, provided the
instruments are designated as a hedge and reduce exposure to loss with a high
correlation. HomeSide is currently reviewing the potential use of hedge
accounting. Management is unable to predict what effect, if any, changes in
accounting principles would have on HomeSide's financial statements or
HomeSide's potential use of hedge accounting.
83
<PAGE> 86
ACQUISITION OF HHI
On March 4, 1996, the Issuer entered into an agreement to acquire HHI. On
May 31, 1996, the Issuer consummated the HHI Acquisition.
Prior to the HHI Acquisition, HHI operated as a full service mortgage
banking company, engaged in the origination, sale and servicing of mortgage
loans secured by residential properties. A significant portion of the loans
originated by HHI were underwritten to the standards and requirements of
secondary market investors and were sold as pools underlying mortgage backed
securities guaranteed by FNMA, FHLMC, GNMA and other institutional investors.
The balance was underwritten and retained by Barnett. In 1995 and the three
months ended March 31, 1996, HHI reported total production of $5.8 billion and
$1.6 billion, respectively and had a servicing portfolio of $33.4 billion at
December 31, 1995 and $33.0 billion at March 31, 1996. HHI was ranked as the
19th largest originator and as the 18th largest servicer of residential mortgage
loans for 1995, according to National Mortgage News.
Prior to 1994, HHI originated loans primarily on a retail basis through
bank branches in Florida and Georgia. In 1994, HHI grew its origination business
and servicing portfolio substantially, primarily through two acquisitions. HHI
acquired Loan America, a wholesale mortgage banking company with a $4.0 billion
servicing portfolio, in October 1994. Headquartered in Miami, Florida, Loan
America originated loans through brokers in twelve states. The acquisition of
Loan America represented HHI's first entry into the wholesale origination
business.
In February 1995, HHI acquired BancPLUS, a full service mortgage company
with a $13.9 billion servicing portfolio. Headquartered in San Antonio, Texas,
BancPLUS was primarily a retail originator with thirty-six branch offices in
seventeen states. HHI's acquisition of BancPLUS included the company's
proprietary mortgage banking software for retail origination, secondary
marketing and servicing. It also included BancPLUS' wholly-owned subsidiary
Honolulu Mortgage, a full-service mortgage banking company based in Honolulu,
Hawaii with a $1.7 billion servicing portfolio.
In connection with the HHI Acquisition, the Issuer acquired HHI's and its
subsidiaries' $33.0 billion servicing portfolio and servicing platform, its
proprietary mortgage servicing software, and Honolulu Mortgage (production and
servicing operations). Barnett retained its retail bank branch network, the
retail branch network acquired from BancPLUS, the broker network acquired from
Loan America, and all of the related facilities. Barnett also retained the
facility which housed HHI's Jacksonville servicing unit. In connection with the
HHI Acquisition, BPFC was merged into BancPLUS, which in turn was merged,
together with LoanAmerica, into HLI. Also concurrently with the HHI Acquisition,
all of HHI's servicing portfolio was transferred to HLI, except for HHI's GNMA
loans, which HHI retained. In the future, it is expected that HHI will neither
originate nor service any loans, except for the GNMA loans retained by it on May
31, 1996. As part of the HHI Acquisition, Barnett agreed to sell, subject to
certain limitations, to HomeSide all of its production on market terms pursuant
to an exclusive, five-year correspondent contract. See "Certain Relationships
and Related Transactions".
PRODUCTION
Prior to the HHI Acquisition, HHI expanded its production capabilities
primarily through recent acquisitions. Originations grew from $1.9 billion in
1991 to $5.8 billion in 1995. In 1995 and the three months ended March 31, 1996,
wholesale originations represented approximately 52% and 49%, respectively, of
HHI's total production and retail represented the balance.
Subsequent to the HHI Acquisition, Barnett has agreed to deliver to HLI all
of its mortgage loan production under an exclusive, five-year correspondent
relationship on market terms, with the exception of the loans held by Barnett.
However, Barnett will sell to HLI, on a co-issue basis, the servicing rights
related to those loans which it retains. Under the terms of its correspondent
agreement, loans originated through the Barnett network will be underwritten on
a delegated basis. HLI will perform the secondary marketing functions of pricing
and hedging related to the correspondent production.
84
<PAGE> 87
Like HLI, HHI has built a multi-channel production network as part of its
strategy to become a national mortgage banking business through several
channels, including Barnett's retail bank branch franchise; a national wholesale
broker group obtained through the Loan America acquisition; a national retail
network obtained through the BancPLUS acquisition; traditional correspondent
business; and production from the Honolulu Mortgage subsidiary. This
multi-channel production base provided HHI with the flexibility to shift its
production focus to the most appropriate channel given specific market
conditions.
<TABLE>
RESIDENTIAL LOAN PRODUCTION BY CHANNEL
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------ THREE MONTHS ENDED
1991 1992 1993 1994 1995 MARCH 31, 1996
------ ------ ------ ------ ------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Barnett banks branch retail.... $1,945 $3,507 $3,360 $2,559 $1,932 $ 537
BancPLUS retail (a)............ -- -- -- -- 606 192
Loan America broker (a)........ -- -- -- 401 1,386 378
Honolulu Mortgage (a).......... -- -- -- -- 244 83
Correspondent.................. -- -- -- 450 1,599 366
------ ------ ------ ------ ------ ------
Total production.......... $1,945 $3,507 $3,360 $3,410 $5,767 $1,556
====== ====== ====== ====== ====== ======
<FN>
- ---------------
(a) Since date of acquisitions by HHI.
</TABLE>
HHI's loan production operation, historically limited to the Florida and
Georgia markets, became national in scope over the last two years. This
expansion was achieved primarily through HHI's acquisitions of Loan America and
BancPLUS. Historically, the mortgage origination leader in Florida with a market
share in excess of 11%, HHI originated loans in 45 states and the District of
Columbia. Its largest markets by state in 1995 were Florida (34% of UPB of
production), California (8%), Ohio (7%), New York (6%) and Hawaii (6%) and its
largest markets by state in the three months ended March 31, 1996 were Florida
(33% of UPB of production), California (8%), New York (7%), Hawaii (7%) and Ohio
(6%).
Secondary Marketing
Prior to the acquisitions of LoanAmerica and BancPLUS, HHI sold
approximately 20% of the loans originated by the Barnett banks into the
secondary market, predominately to FNMA. The remaining 80% were retained in
Barnett's portfolio. Subsequent to its recent acquisitions, HHI began to deliver
some loans to FHLMC and issue GNMA securities. In 1995 and the first three
months of 1996, approximately 81% and 95%, respectively, of the mortgage loans
originated by HHI were eligible for inclusion in the programs of GNMA, FNMA, or
FHLMC. Those loans not sold under these programs were sold to approximately
seven private investors, including several state housing finance agency
programs. The integration of HHI's production profile into HLI is expected to
provide greater balance in originations overall and is expected to increase the
weighting toward conventional product.
Loan Servicing
As with HLI, HHI's strategy has been to build its mortgage servicing
portfolio to benefit from economies of scale and productivity improvements. The
HHI portfolio increased from $10.0 billion at the end of 1991 to $33.4 billion
at the end of 1995, primarily as a result of the Loan America and BancPLUS
acquisitions. As a result of the HHI Acquisition, HomeSide expects to benefit
from HHI's substantial growth over the past several years and will service over
950,000 loans with UPB of over $75 billion.
85
<PAGE> 88
<TABLE>
CHANGES IN SERVICING PORTFOLIO
<CAPTION>
PRO FORMA
HHI HOMESIDE
THREE MONTHS THREE MONTHS
HHI PRO FORMA ENDED ENDED
----------------------------------------------- HOMESIDE MARCH 31, MARCH 31,
1991 1992 1993 1994 1995 1995 1996 1996
------- ------- ------- ------- ------- ------------ ------------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 1st
balance............ $ 9,243 $10,034 $11,524 $13,085 $18,411 $56,382 $33,411 $74,966
Total
additions(a)..... 2,039 3,744 5,237 7,469 20,312 29,701 1,526 5,769
Reductions........... 1,248 2,254 3,016 2,143 4,241 8,184 1,911 3,539
Servicing sales...... 0 0 660 0 1,071 2,933 7 19
------- ------- ------- ------- ------- ------- ------- --------
Total reductions... 1,248 2,254 3,676 2,143 5,312 11,117 1,918 3,558
------- ------- ------- ------- ------- ------- ------- -------
December 31st balance
or end of period
balance............ $10,034 $11,524 $13,085 $18,411 $33,411 $74,966 $33,019 $77,177
======= ======= ======= ======= ======= ======= ======= =======
<FN>
- ---------------
(a) Includes $13.9 billion of servicing from BancPLUS which includes $1.7
billion of servicing from Honolulu Mortgage in 1995 and $4.0 billion of
servicing from LoanAmerica acquisition in 1994.
</TABLE>
SERVICING PORTFOLIO COMPOSITION
Historically, HHI had been primarily a servicer of conventional loans,
consisting of FNMA and FLHMC product. The acquisition of HHI's servicing
portfolio has reduced the percentage of HomeSide's government loans. Based on
the combined servicing portfolios of HLI and HHI, the percentage of conventional
loans and FHA/VA loans serviced was 65% and 35%, respectively, at December 31,
1995 and 65% and 35%, respectively, at March 31, 1996.
<TABLE>
SERVICING PORTFOLIO COMPOSITION
<CAPTION>
HHI(A)
------------------------------- PRO FORMA PRO FORMA
HOMESIDE HHI AT HOMESIDE
AT DECEMBER 31, AT MARCH AT
------------------------------- DECEMBER 31, 31, MARCH 31,
1993 1994 1995 1995(a) 1996 1996(a)
------- ------- ------- -------------- -------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
FHA/VA.......................... $ 1,032 $ 1,082 $ 6,023 $25,903 $ 5,586 $26,266
Conventional.................... 12,053 17,329 27,388 48,429 27,433 49,069
------- ------- ------- ------- ------- -------
Total serviced (UPB)........ $13,085 $18,411 $33,411 $74,332 $33,019 $75,335
======= ======= ======= ======= ======= =======
ARM............................. 48% 41% 28% 23% 27 % 22%
Fixed........................... 52% 59% 72% 77% 73 % 78%
Weighted average coupon......... 7.34% 7.44% 8.05% 8.01% 8.04 % 7.97%
Weighted average servicing fee
(% of UPB).................... 0.259% 0.261% 0.277% 0.351% 0.346 % 0.365%(b)
Weighted average maturity
(months)...................... 257 259 261 278 260 280
<FN>
- ---------------
(a) Servicing statistics are based on loans serviced. Excludes loans purchased
not yet on servicing system.
(b) HHI's weighted average servicing fees are adjusted to reflect market rates
under contractual arrangements between HomeSide and Barnett.
</TABLE>
86
<PAGE> 89
<TABLE>
The following table sets forth information regarding the geographic
distribution of HLI's, HHI's and HomeSide's pro forma combined servicing
portfolio. Because of Barnett's market presence in Florida, that state comprised
approximately 21.2% share of HomeSide's total portfolio on a pro forma basis as
of March 31, 1996:
SERVICING PORTFOLIO BY STATE
<CAPTION>
PRO FORMA(a)
HLI(a) HHI HOMESIDE
---------------- ---------------- ----------------
% OF % OF % OF
STATE UPB UPB UPB UPB UPB UPB
-------------------------------- ------- ----- ------- ----- ------- -----
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Florida......................... $ 3,198 7.6% $12,803 38.8% $16,001 21.2%
California...................... 7,168 16.9 4,689 14.2 11,857 15.7
Texas........................... 2,727 6.4 1,739 5.3 4,466 5.9
Massachusetts................... 3,759 8.9 236 0.7 3,995 5.3
Maryland........................ 2,859 6.8 536 1.6 3,395 4.5
Virginia........................ 2,350 5.6 491 1.5 2,841 3.8
Georgia......................... 1,961 4.6 870 2.6 2,831 3.8
Hawaii.......................... 388 0.9 2,015 6.1 2,403 3.2
Illinois........................ 1,194 2.8 1,060 3.2 2,254 3.0
Washington...................... 1,340 3.2 864 2.6 2,204 2.9
Other........................... 15,372 36.3 7,716 23.4 23,088 30.7
------- ----- ------- ----- ------- -----
Total................. $42,316 100.0% $33,019 100.0% $75,335 100.0%
======= ===== ======= ===== ======= =====
<FN>
- ---------------
(a) Excludes loans purchased not yet on servicing system.
</TABLE>
<TABLE>
The following table sets forth the coupon stratification of HLI's, HHI's
and HomeSide's pro forma combined servicing portfolio at March 31, 1996:
SERVICING PORTFOLIO BY COUPON
<CAPTION>
HLI(a) HHI PRO FORMA HOMESIDE(a)
---------------------------- ---------------------------- ----------------------------
% OF CUMULATIVE % OF CUMULATIVE % OF CUMULATIVE
INTEREST RATE UPB UPB % OF UPB UPB UPB % OF UPB UPB UPB % OF UPB
- -------------------- ------- ----- ---------- ------- ----- ---------- ------- ----- ----------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Less than 6.0%...... $ 636 1.5% 1.5% $ 195 0.6% 0.6% $ 831 1.1% 1.1%
6.0% to 6.9%........ 4,633 11.0 12.5 4,075 12.3 12.9 8,708 11.6 12.7
7.0% to 7.9%........ 18,550 43.8 56.3 12,236 37.1 50.0 30,786 40.9 53.6
8.0% to 8.9%........ 11,648 27.5 83.8 10,904 33.0 83.0 22,552 29.9 83.5
9.0% to 9.9%........ 4,532 10.7 94.5 3,390 10.3 93.3 7,922 10.5 94.0
10.0% to 10.9%...... 1,893 4.5 99.0 1,615 4.9 98.2 3,508 4.7 98.7
Over 11.0%.......... 424 1.0 100.0 604 1.8 100.0 1,028 1.3 100.0
------- ----- ------- ----- ------- -----
Total..... $42,316 100.0% $33,019 100.0% $75,335 100.0%
======= ===== ======= ===== ======= =====
<FN>
- ---------------
(a) Excludes loans purchased not yet on servicing system.
</TABLE>
87
<PAGE> 90
LOAN SERVICING CREDIT ISSUES
<TABLE>
The table below sets forth a comparison of HHI's historical delinquency and
foreclosure experience to national statistics compiled by the Mortgage Bankers
Association at December 31, 1995 and March 31, 1996:
SERVICING PORTFOLIO DELINQUENCIES
(PERCENT BY LOAN COUNT)
<CAPTION>
TOTAL FORECLOSURE
30 DAYS 60 DAYS 90+ DAYS PAST DUE INVENTORY
------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1995
HHI..................................... 3.47% 0.66% 0.49% 4.62% 0.55%
Industry Average (adjusted for servicing
portfolio mix)........................ 3.17 0.65 0.63 4.45 0.80
AT MARCH 31, 1996
HHI..................................... 2.95 0.59 0.39 3.93 0.66
</TABLE>
Under the terms of the HHI Acquisition, if HHI originated loans are
required to be repurchased out of the pool existing as May 31, 1996 by an
investor for the five year period following closing, Barnett is obligated to
purchase these loans from HomeSide. See "Certain Relationships and Related
Transactions".
SERVICING INTEGRATION
To facilitate administration and to effect the economies of scale targeted
by management, HomeSide's servicing operations are expected to be integrated
over the next year. HomeSide has one servicing site located in Jacksonville,
Florida, which at December 31, 1995 serviced approximately 510,000 loans with a
servicing staff of 408. HHI had three servicing operations, located in
Jacksonville, Florida; San Antonio, Texas; and Honolulu, Hawaii. Approximately
11,000 loans are serviced at the Honolulu Mortgage subsidiary. HomeSide plans to
integrate the existing HomeSide portfolio of approximately 510,000 loans with
the former HHI portfolio of approximately 446,000 loans in stages based on the
capacity and capabilities of each of the respective servicing sites. Initially,
HomeSide intends to transfer its approximately 145,000 existing loans at HHI's
Jacksonville facility to San Antonio for servicing while HomeSide's Jacksonville
servicing center is converted from the current outsourced system to the new
proprietary system. Both Jacksonville and San Antonio are expected to function
as full service operations for the next twelve to fifteen months while the
conversion takes place. Once conversion of all its servicing has been completed,
HomeSide intends to use the Jacksonville site to service conventional loans and
the San Antonio site to service all government loans.
In addition to the physical consolidation of servicing operations, HomeSide
is in the process of converting the entire servicing platform to HHI's
proprietary software. This proprietary servicing technology accommodates all
areas of loan servicing, including loan setup and maintenance, cashiering,
escrow administration, investor accounting, customer service and default
management. The platform is mainframe based, with on-line, real-time
architecture and is supported by an experienced staff of over 30 technology
providers.
HomeSide expects to achieve significant competitive advantages over time by
converting to the proprietary servicing software, which is expected to cost less
to operate than HomeSide's current system. Once the conversion has been
completed, this architecture is expected to support HomeSide's portfolio growth
to a size of up to approximately twice its size following the HHI Acquisition.
The system is also expected to permit continued development of workflow and
other client-server applications, contributing to increased productivity.
Several other measures are expected to be undertaken in conjunction with
the conversion of HomeSide's servicing to the proprietary system in order to
operate more efficiently. It is expected that HHI's hazard insurance, tax
payments and default functions will be subcontracted to specialized vendors, as
they currently are at HomeSide. This outsourcing process has begun and is
expected be completed by the fall of 1996, prior to moving additional servicing
to the San Antonio site. The consolidation of the two servicing operations in
Jacksonville is expected to result in a reduction in headcount of approximately
100 positions. In addition, the
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<PAGE> 91
plan to have dedicated centers for conventional and FHA/VA servicing in
Jacksonville and San Antonio, respectively, is expected to yield additional
economies through specialization.
EMPLOYEES
As of May 31, 1996, HLI had approximately 1,106 total employees,
substantially all of whom were full-time employees. Of these, approximately 805
were employed at HomeSide's Jacksonville, Florida headquarters, and
approximately 150 employees were employed in retail and wholesale offices.
HomeSide has no unionized employees and considers its relationship with its
employees generally to be satisfactory. Upon consummation of the HHI
Acquisition, HomeSide had approximately 2,300 total employees, substantially all
of whom were full-time employees.
PROPERTIES
HomeSide's corporate, administrative, and servicing headquarters are
located in Jacksonville, Florida, in facilities, which comprise approximately
145,000 square feet of owned space and approximately 135,000 square feet of
leased space. The servicing center lease expires on August 31, 1999 unless
HomeSide exercises its options to renew, which could extend the lease for an
additional six years. HomeSide also leases warehouse space and 20,000 square
feet of space in Hawaii and owns an additional 190,000 square feet of space in
San Antonio, Texas. HomeSide believes that its present facilities are adequate
for its operations.
REGULATIONS
HomeSide's mortgage banking business is subject to the rules and
regulations of HUD, FHA, VA, FNMA, FHLMC, GNMA and other regulatory agencies
with respect to originating, processing, underwriting, selling, securitizing and
servicing mortgage loans. In addition, there are other federal and state
statutes and regulations affecting such activities. These rules and regulations,
among other things, impose licensing obligations on HomeSide, prohibit
discrimination and establish underwriting guidelines which include provisions
for inspections and appraisals, require credit reports on prospective borrowers
and set maximum loan amounts. Moreover, lenders such as HomeSide are required
annually to submit audited financial statements to FNMA, FHLMC and GNMA and to
comply with each regulatory entity's own financial requirements. HomeSide's
business is also subject to examination by FNMA, FHLMC and GNMA and state
regulatory agencies at all times to assure compliance with applicable
regulations, policies and procedures.
Mortgage origination activities are subject to the provisions of various
Federal and state statutes including, among others, the Equal Credit Opportunity
Act, the Federal Truth-in-Lending Act and the Real Estate Settlement Procedures
Act, and the regulations promulgated thereunder, which prohibit discrimination
and require the disclosure of certain basic information to mortgagors concerning
credit terms and settlement costs. Many of the aforementioned regulatory
requirements are designed to protect the interests of consumers, while others
protect the owners or insurers of mortgage loans. Failure to comply with these
requirements can lead to loss of approved status, termination of servicing
contracts without compensation to the servicers, demands for indemnification or
loan repurchases, class action lawsuits and administrative enforcement actions.
Prior to the HLI Acquisition, HLI was a wholly-owned operating subsidiary
of a national bank, and subject to substantially all of the regulations and
restrictions applicable to a national bank. Prior to the HHI Acquisition, HHI
was a wholly-owned subsidiary of a bank holding company. During the period that
BKB or Barnett, or any of their subsidiaries, retains a material ownership
interest in HomeSide, HomeSide and its subsidiaries (i) will be under the
jurisdiction, supervision, and examining authority of the OCC, and (ii) may only
engage in activities that are part of, or incidental to, the business of
banking. The OCC has specifically ruled that mortgage banking is a proper
incident to the business of banking.
There are various other state and local laws and regulations affecting
HomeSide's operations. HomeSide is licensed in those states that require
licensing to originate, purchase and/or service mortgage loans. Conventional
mortgage operations may also be subject to state usury statutes. FHA and VA
loans are exempt from the effect of such statutes. See "Risk Factors --
Regulations, Possible Changes and Related Matters".
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<PAGE> 92
LITIGATION
HomeSide is a defendant in a number of legal proceedings arising in the
normal course of business. HomeSide, in management's estimation, has recorded
adequate reserves in the financial statements for pending litigation.
Management, after reviewing all actions and proceedings pending against or
involving HomeSide, considers that the aggregate liability or loss, if any,
resulting from the final outcome of these proceedings will not have a material
effect on the financial position of HomeSide.
During 1994, HLI settled a class action lawsuit pertaining to escrow
practices. HLI agreed to change its escrow calculations to the aggregate method.
As a result, HLI reduced escrow balances held by approximately $45.0 million and
paid interest relating to this reduction of approximately $1.3 million. The
change in escrow calculations did not have a material impact on HLI's financial
statements.
In recent years, the mortgage banking industry has been subject to class
action lawsuits which allege violations of federal and state laws and
regulations, including the propriety of collecting various fees and charges.
Class action lawsuits may be filed in the future against the mortgage banking
industry.
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<PAGE> 93
THE ACQUISITIONS
THE HLI ACQUISITION
On March 15, 1996 HomeSide acquired from Bank of Boston all of the
outstanding stock of HLI. Certain assets and liabilities of HLI were retained by
Bank of Boston, including HLI's mortgage retail production operations in New
England.
The Issuer paid approximately $138.2 million in cash and issued 495,715
shares of Class A Voting Common Stock of HomeSide ("Class A Common Stock"),
representing approximately 45% of the outstanding Class A Common Stock (having a
value of approximately $86.8 million), to Bank of Boston in consideration of all
the stock of HLI. Also in connection with the HLI Acquisition, Bank of Boston
paid approximately $1.0 million in cash for 5,714 shares of HomeSide's Class C
Non-Voting Common Stock ("Class C Common Stock"), representing 100% of the
outstanding Class C Common Stock. Additionally, HomeSide agreed that if it
acquired directly or indirectly all or any portion of the capital stock or all
or any substantial portion of the assets of another person during the six-month
period from the closing of the HLI Acquisition, HomeSide would pay to Bank of
Boston, on the effective date of such acquisition, cash in an additional amount
determined pursuant to a formula set forth in the Stock Purchase Agreement
between HomeSide and Bank of Boston dated December 11, 1995, as amended.
Accordingly, upon the consummation of the HHI Acquisition, HomeSide paid an
additional $5.0 million in cash to Bank of Boston.
Simultaneously with the closing of the HLI Acquisition, THL purchased
459,643 shares of Class A Common Stock for approximately $80.4 million in cash
and MDP purchased 153,214 shares of Class A Common Stock for approximately $26.8
million in cash. HomeSide also reserved shares of its Class A Common Stock for
issuance to members of management of HomeSide at a price of $175.00 per share
(the same price paid by the other Investors). Management of HomeSide has, since
May 15, 1996, purchased a total of 23,117 shares of Class A Stock for an
aggregate purchase price of approximately $4.0 million. Simultaneously with the
closing of the HLI Acquisition, HomeSide also issued 5,714 shares of its Class B
Non-Voting Common Stock ("Class B Common Stock"), representing 100% of the
outstanding Class B Common Stock, to Smith Barney Inc. in consideration of
services rendered to HomeSide in connection with the HLI Acquisition pursuant to
an agreement dated March 14, 1996. Immediately following consummation of the HLI
Acquisition, Bank of Boston sold its shares of Class C Common Stock to an
unaffiliated third party pursuant to an agreement dated March 13, 1996.
Upon consummation of the HLI Acquisition, HLI terminated its former line of
credit with Bank of Boston and entered into a new credit agreement with certain
other lenders. In connection with the HHI Acquisition, HLI terminated its credit
facility entered into on March 15, 1996 and entered into a new credit agreement.
See "Description of Bank Credit Agreement". Also in connection with the HLI
Acquisition, HomeSide entered into various contractual arrangements with Bank of
Boston and its affiliates regarding the provision of certain operational
services between the parties and the purchase by HomeSide from Bank of Boston of
certain mortgage production and servicing rights of Bank of Boston. See "Certain
Relationships and Related Transactions".
THE HHI ACQUISITION
On May 31, 1996, HomeSide acquired from Barnett all of the outstanding
stock of HHI. Certain assets and liabilities of HHI were retained by Barnett,
including those assets of HHI and its subsidiaries (other than Honolulu
Mortgage) associated with the loan origination or production activities of such
entities.
As consideration for all the stock of HHI, HomeSide paid Barnett
approximately $228.2 million in cash. Upon consummation of the HHI Acquisition,
Siesta, an affiliate of Barnett, paid HomeSide approximately $118.0 million and
BKB, THL and MDP paid to HomeSide approximately $31.2 million, $8.1 million and
$2.7 million, respectively, in cash in exchange for shares of Class A Common
Stock of HomeSide such that Siesta owns approximately 33% of HomeSide, and THL
and MDP, collectively, and BKB each own approximately 33% of HomeSide.
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<PAGE> 94
Upon consummation of the HHI Acquisition, HHI and its subsidiaries
terminated their former line of credit with Barnett. In connection with the HHI
Acquisition, HomeSide has entered into various contractual arrangements with
Barnett regarding the provision of certain operational services between the
parties and the purchase by HomeSide from Barnett of certain mortgage production
and servicing rights of Barnett. See "Certain Relationships and Related
Transactions".
Upon closing of the HHI Acquisition, the Issuer contributed all of the
stock of HLI to HHI, whereupon HLI became a wholly-owned subsidiary of HHI. All
of HHI's servicing portfolio was transferred to HLI, except for HHI's GNMA
loans, which HHI retained. All of HHI's former subsidiaries, except Honolulu
Mortgage, were merged with and into HLI.
<TABLE>
The following table sets forth the approximate sources and uses of cash and
equity related to (i) the HLI Acquisition and (ii) the HHI Acquisition as if
such transactions occurred at March 15, 1996:
<CAPTION>
HLI
ACQUISITION
HLI HHI AND HHI
ACQUISITION ACQUISITION ACQUISITION
----------- ----------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
SOURCES:
Issuance of common stock...................................... $ 200.0 $160.0 $ 360.0
Notes Offering................................................ 112.5 87.5 200.0
Borrowings under Bank Credit Agreement........................ 1,479.1 662.9 2,142.0
Cash acquired................................................. 23.2 44.0 67.2
-------- ------ --------
Total Sources............................................ $1,814.8 $954.4 $2,769.2
======== ====== ========
USES:
Acquisition of HLI............................................ $ 225.9 $ -- $ 225.9
Acquisition of HHI............................................ -- 228.2 228.2
Net purchase of certain Bank of Boston assets(a).............. 292.1 -- 292.1
Net purchase of certain Barnett assets(b)..................... -- 106.2 106.2
Repayment of pre-acquisition facility......................... 1,256.0 604.0 1,860.0
Payment of debt issuance, acquisition and Offering expenses... 38.8 11.0 49.8
Contingent payment to Bank of Boston.......................... -- 5.0 5.0
Pro forma cash balances....................................... 2.0 -- 2.0
-------- ------ --------
Total Uses............................................... $1,814.8 $954.4 $2,769.2
======== ====== ========
<FN>
- ---------------
(a) Represents the net effect of purchasing loans held for sale previously
attributable to participations of an affiliate of Bank of Boston of $507.3
million and excluding net assets retained by Bank of Boston of $215.2
million. See unaudited pro forma consolidated financial information and
notes thereto.
(b) Represents the net effect of including loans held for sale to reflect the
new correspondent relationship with Barnett of $138.0 million and excluding
net assets retained by Barnett of $31.8 million. See unaudited pro forma
consolidated financial information and notes thereto.
</TABLE>
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<PAGE> 95
MANAGEMENT
<TABLE>
The following table sets forth the name, age and position with the Issuer
and/or HLI of each person who is an executive officer or director of the Issuer
and HLI:
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- --------------------------------------------------------
<S> <C> <C>
Joe K. Pickett.............. 50 Chairman of the Board and Chief Executive Officer (HLI
and the Issuer); Director (HLI and the Issuer)
Hugh R. Harris.............. 45 President and Chief Operating Officer (HLI and the
Issuer); Director (HLI and the Issuer)
Robert J. Jacobs............ 43 Secretary and Vice President (the Issuer); Executive
Vice President, Secretary and General Counsel (HLI);
Director (HLI)
Betty L. Francis............ 49 Vice President (the Issuer); Chief Financial Officer and
Executive Vice President (HLI)
Mark. F. Johnson............ 41 Vice President (the Issuer); Executive Vice President --
Secondary Marketing and Production (HLI)
William Glasgow, Jr......... 46 Vice President (the Issuer); Executive Vice President
(HLI)
Daniel T. Scheuble.......... 37 Vice President (the Issuer); Executive Vice President --
Technology (HLI)
Thomas H. Fish.............. 63 Vice President and Assistant Secretary (the Issuer);
Executive Vice President and Assistant Secretary (HLI)
Charles D. Gilmer........... 48 Senior Vice President and Treasurer (HLI)
Ann R. Mackey............... 38 Senior Vice President and Finance Director (HLI)
Thomas M. Hagerty........... 33 Treasurer (the Issuer); Director (the Issuer); Risk
Management Committee (the Issuer)
David V. Harkins............ 55 Director (the Issuer)
Justin S. Huscher........... 42 Director (the Issuer); Risk Management Committee (the
Issuer)
Peter J. Manning............ 57 Director (the Issuer)
Edward A. O'Neal............ 51 Director (the Issuer)
Kathleen M. McGillycuddy.... 46 Director (the Issuer); Risk Management Committee (the
Issuer)
Hinton F. Nobles, Jr. ...... 51 Director (the Issuer)
Douglas K. Freeman.......... 45 Director (the Issuer)
Charles W. Newman........... 46 Director (the Issuer)
</TABLE>
The Board of Directors of the Issuer consists of eleven members, two
directors designated by the Fund, one director designated by MDP, three
directors designated by each of Siesta and BKB and two directors who are members
of management selected by at least five of the other directors in office. See
"Certain Relationships and Related Transactions -- Amended and Restated
Shareholder Agreement."
JOE K. PICKETT has served as Chairman of the Board and Chief Executive
Officer of HLI since April 1990 and as Chairman of the Board, Chief Executive
Officer and a Director of the Issuer since March 14, 1996. From October 1994
through October 1995, Mr. Pickett served concurrently as President of the
Mortgage Bankers Association of America. Mr. Pickett has also been nominated to
serve as a Director of FNMA.
HUGH R. HARRIS has served as President and Chief Operating Officer of HLI
since January 1993 and as President, Chief Operating Officer and a Director of
the Issuer since March 14, 1996. From January 1988 to January 1993, Mr. Harris
served as Vice Chairman of HLI in charge of production and secondary marketing.
ROBERT J. JACOBS has served as Executive Vice President and Secretary of
HLI since February 2, 1996. Mr. Jacobs has served as a Director of HLI since
March 14, 1996. Mr. Jacobs has also served as Secretary of the Issuer since
March 14, 1996 and as Vice President of the Issuer since April 10, 1996. From
1987 to 1996, Mr. Jacobs served as a Senior Vice President and Chief Legal
Officer of Chase Manhattan Mortgage
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<PAGE> 96
Corporation, and served as General Counsel for Citicorp Savings of Florida from
1984 to 1986. Mr. Jacobs currently serves as President-Elect and Legislative
Chairman of the Mortgage Bankers Association of Florida.
BETTY L. FRANCIS has served as Chief Financial Officer and as Executive
Vice President of HLI since March 1994 and as Vice President of the Issuer since
April 10, 1996. Ms. Francis served from April 1993 to March 1994 as the Senior
Finance Officer of the Personal Banking Group, and from April 1990 to April 1993
as the Comptroller of Bank of Boston and BKBC. Ms. Francis is a Trustee of
Commonwealth Energy Services, a gas and electric utility in Massachusetts.
MARK F. JOHNSON has served as Executive Vice President of Secondary
Marketing and Production of HLI since April 1, 1992. From 1988 to 1992, Mr.
Johnson served as Senior Vice President and Director of Wholesale Lending for
HLI. Mr. Johnson also has served as Vice President of the Issuer since April 10,
1996.
WILLIAM GLASGOW, JR. has served as Executive Vice President of HLI since
July 1991. From October 1989 to July 1991, Mr. Glasgow served as Senior Vice
President with Citicorp Mortgage Inc. in St. Louis, Missouri. Mr. Glasgow has
also served as Vice President of the Issuer since April 10, 1996.
DANIEL T. SCHEUBLE has served as Executive Vice President for Technology,
Loan Processing and Consumer Direct Lending of HLI since 1993. From 1990 to
1992, Mr. Scheuble served as a Senior Technology and Operational Manager at The
First National Bank of Boston. Mr. Scheuble has also served as Vice President of
the Issuer since April 10, 1996.
THOMAS H. FISH has served as Executive Vice President of HLI since 1988.
Mr. Fish has served as Assistant Secretary of HLI since March 14, 1996. Mr. Fish
served as Secretary and General Counsel of HLI from 1988 to March 14, 1996.
CHARLES D. GILMER has served as Senior Vice President and Treasurer of HLI
since October 1993. Mr. Gilmer previously served as the Director of Liability
Management for Citicorp from November 1989 to October 1993.
ANN R. MACKEY has served as Senior Vice President and Finance Director of
HLI since July 1993. From September 1992 to July 1993, Ms. Mackey served as a
manager in International Risk Management for Bank of Boston. Ms. Mackey
previously served as Senior Audit Manager at KPMG Peat Marwick from 1985 to
1992.
THOMAS M. HAGERTY has served as Treasurer of the Issuer since March 14,
1996. Mr. Hagerty served as President of the Issuer from its organization,
December 11, 1995 through March 14, 1996. Mr. Hagerty has served as a Director
of HomeSide since December 11, 1995. Mr. Hagerty has been employed by the Thomas
H. Lee Company since 1988, and currently serves as a Managing Director. Mr.
Hagerty is also a Vice President and Trustee of THL Equity Trust III, the
General Partner of THL Equity Advisors III Limited Partnership, which is the
General Partner of Thomas H. Lee Equity Fund III, L.P. Mr. Hagerty also serves
as a Director of Select Beverages, Inc., TAC Bancshares, Inc. and TAC GP
Corporation.
DAVID V. HARKINS has served as a Director of the Issuer since December 11,
1995. Mr. Harkins has been employed by the Thomas H. Lee Company since 1986 and
currently serves as a Senior Managing Director. Mr. Harkins has been Chairman
and Director of National Dentex Corporation, an operator of dental laboratories,
since 1983. Mr. Harkins also serves as Senior Vice President and Trustee of
Thomas H. Lee Advisors I, and T.H. Lee Mezzanine II, affiliates of ML-Lee
Acquisition Fund, L.P., and the ML-Lee Acquisition Funds, respectively,
President and Trustee of THL Equity Trust III, the General Partner of THL Equity
Advisors III Limited Partnership, which is the General Partner of Thomas H. Lee
Equity Fund III, L.P. and is a Director of Stanley Furniture Company, Inc.,
First Alert, Inc., and various private corporations.
JUSTIN S. HUSCHER has served as a Director of the Issuer since December 11,
1995. Mr. Huscher has been principally employed as a Vice President of Madison
Dearborn Partners, Inc. since January 1993. From April 1990 until January 1993,
Mr. Huscher served as Senior Investment Manager of First Chicago Venture
Capital. Mr. Huscher is a member of the operating committees of the general
partners of Huntway Partners,
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<PAGE> 97
L.P. and Golden Oak Mining Company, L.P., respectively, and a member of the
board of directors of Bay State Paper Holding Company and Buckeye Cellulose
Corporation.
PETER J. MANNING has served as a Director of the Issuer since December 11,
1995. Mr. Manning has been employed by Bank of Boston and BKBC as Executive
Director, Mergers & Acquisitions since 1993. From 1990 to 1993, Mr. Manning
served as Executive Vice President, Chief Financial Officer and Treasurer of
BKBC and Chief Financial Officer of Bank of Boston.
EDWARD A. O'NEAL has served as a Director of the Issuer since December 11,
1995. Mr. O'Neal has been employed by Bank of Boston and BKBC since 1992 as Vice
Chairman. Prior to that time, Mr. O'Neal was employed by Chemical Banking
Corporation as Senior Executive Vice President, Operating Services and
Nationwide Consumer in 1992 and Vice Chairman and Director from 1990 to 1991.
KATHLEEN M. MCGILLYCUDDY has served as a Director of the Issuer since March
14, 1996. Ms. McGillycuddy has been employed by Bank of Boston since 1992 and
currently serves as Group Managing Director, Global Asset Liability Management.
Previously, Ms. McGillycuddy was employed by Fleet/Norstar Bank as Executive
Vice President, Corporate Liquidity and Funds Management from 1991 to 1992 and
by Bank of New England as Executive Vice President, Corporate Liquidity and
Capital Markets Manager prior to 1991.
HINTON F. NOBLES JR. has served as a Director of Issuer since May 31, 1996.
Mr. Nobles has been employed by Barnett Banks, Inc. since 1974 and currently
serves as Executive Vice President and a member of the Management Executive
Committee. He was elected Vice President in 1981, Senior Vice President for
Special Services in 1983 and Executive Vice President in 1985. Mr. Nobles was
named to his current position in 1989.
DOUGLAS K. FREEMAN has served as a Director of Issuer since May 31, 1996.
Mr. Freeman joined Barnett Banks, Inc. in 1991 and currently serves as Chief
Consumer Credit Executive and a member of Barnett's Management Operating
Committee. From 1991 to 1995 Mr. Freeman served as Chief Corporate Banking
Executive. Previously, Mr. Freeman was employed by Wells Fargo Bank as Executive
Vice President of Business Banking and by Citizens & Southern Corporation as
Senior Vice President of Product and Sales Management. Mr. Freeman is past
chairman of the Consumer Bankers Association. He also chairs the Governor's
Capital Partnership Board of Florida and serves on the board of The Small
Business Foundation of America, Inc.
CHARLES W. NEWMAN has served as a Director of Issuer since May 31, 1996.
Mr. Newman has been employed by Barnett Banks, Inc. since 1983 and currently
serves as Chief Financial Officer and a member of the Management Executive
Committee. From 1983 to 1991, Mr. Newman served as Vice President and Deputy
Controller, Senior Vice President and Controller, and Executive Vice President
of Barnett Banks, Inc. Mr. Newman was elected to his current position in 1992.
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<PAGE> 98
EXECUTIVE COMPENSATION
Following the HLI Acquisition, the annual salaries of HomeSide's Chief
Executive Officer and HomeSide's four other most highly compensated executive
officers whose total annual salary will exceed $100,000 are as follows: Joe K.
Pickett, $312,500; Hugh R. Harris, $300,000; Mark F. Johnson, $200,000; William
Glasgow, $200,000 and Charles D. Gilmer, $175,000.
Each of the named executive officers will be entitled to severance benefits
if he is terminated, or constructively terminated through diminution in job
responsibilities or compensation following an acquisition. If such named
executive officer offers to remain in the employ of HomeSide for one year
following any such acquisition, and is either terminated during that first year
or has his job responsibilities or compensation diminished, he is entitled to a
severance benefit. The severance benefit will be a lump sum payment in cash
equal in the case of each of Messrs. Pickett and Harris to the sum of (i) twice
his annual salary in effect at the time of termination, (ii) his annual bonus
received for the preceding two years and (iii) a pro rata portion of the bonus
he would have received for the year in which termination occurs (paid at the
time the amount of such bonus would have been determined). The severance benefit
for the other named executive officers will be equal to the sum of (i) such
officer's annual salary in effect at the time of termination, (ii) his annual
bonus received for the preceding year, and (iii) a pro rata portion of the bonus
he would have received for the year in which termination occurs (paid at the
time the amount of such bonus would have been determined). The named executive
officers will also receive continued coverage under HomeSide's medical benefit
plans for one year following such termination, or two years following
termination in the case of Messrs. Pickett and Harris.
The named executive officers participate in the HomeSide 1996 Employee
Stock Option Plan under which 34,285 shares of Class A Common Stock are reserved
for issuance. Options issued under the plan may be either non-qualified or
incentive stock options and the options will be exercisable at such prices as
are set by the HomeSide Board of Directors. Under the plan, options will vest in
five equal installments in arrears, or 20% per year. Upon consummation of the
HHI Acquisition, non-qualified options to purchase 23,821 shares were granted at
an exercise price of $175 per share, including options to purchase the following
number of shares granted to the named executive officers: Joe K. Pickett, 4,762;
Hugh R. Harris, 4,762; Mark F. Johnson, 1,905; William Glasgow, 1,905; and
Charles D. Gilmer, 1,905.
HomeSide has also adopted a 1996 Time Accelerated Restricted Stock Option
Plan under which 68,576 shares of Class A Common Stock will initially be
reserved for issuance. Options granted under the plan will be non-qualified and
will be exercisable at such prices as are set by the Board of Directors. Options
granted under the plan will vest nine years from the date of grant, and may be
exercised at any time within six months thereafter. Vesting will accelerate upon
achievement of certain performance criteria. Upon consummation of the HHI
Acquisition, non-qualified options to purchase 47,642 shares were granted at an
exercise price of $175 per share, including options to purchase the following
number of shares granted to the named executive officers: Joe K. Pickett, 9,524;
Hugh R. Harris, 9,524; Mark F. Johnson, 3,810; William Glasgow, 3,810; and
Charles D. Gilmer, 3,810.
See "Certain Relationships and Related Transactions -- Management
Ownership" for information regarding shares of Class A Common Stock sold to
members of management.
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<PAGE> 99
HLI HISTORICAL EXECUTIVE COMPENSATION
<TABLE>
The following table sets forth all compensation awarded to, earned by or
paid to HomeSide's Chief Executive Officer and HomeSide's four most highly
compensated Executive Officers other than the Chief Executive Officer whose
total annual salary and bonus exceeded $100,000 for all services rendered in all
capacities to HLI and its subsidiaries for HLI's fiscal year ended December 31,
1995.
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION AWARDS(2) PAYOUTS
----------------------------
----------------------- LONG-TERM
ANNUAL COMPENSATION RESTRICTED SECURITIES INCENTIVE
NAME AND PRINCIPAL -------------------- STOCK UNDERLYING PLAN ALL OTHER
HLI POSITION YEAR SALARY(1) BONUS(1) AWARDS OPTIONS PAYOUTS(3) COMPENSATION(4)
- ------------------------------- ---- --------- -------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joe K. Pickett................. 1995 $287,000 $200,000 $68,700 9,600 $215,156 $11,480
Chairman & CEO
Hugh R. Harris................. 1995 275,000 225,000 42,938 6,000 0 11,000
President
Charles D. Gilmer.............. 1995 170,769 155,000 0 0 0 0
Director, Risk Management
Mark F. Johnson................ 1995 190,577 125,000 28,625 4,000 0 7,623
Director,
Wholesale/Securities
Marketing
William Glasgow, Jr............ 1995 189,230 125,000 28,625 4,000 0 7,569
Director Loan Administration
<FN>
- ---------------
(1) The salary and bonus amounts presented were earned in 1995. The payment of
certain of such amounts occurred in 1996. The amounts reflected in the table
do not include the following bonuses paid to the named executive officers in
1996 in connection with the closing of the HLI Acquisition: Mr. Pickett,
$50,000; Mr. Harris, $225,000; Mr. Gilmer, $175,000; Mr. Johnson, $200,000;
and Mr. Glasgow, $200,000.
(2) Involves Common Stock of BKBC. As of December 31, 1995, the named executive
officers held the following number of restricted shares of BKBC Common Stock
having the corresponding year-end market values:
</TABLE>
<TABLE>
AS OF DECEMBER 31, 1995
<CAPTION>
TOTAL NUMBER OF AGGREGATE
NAME RESTRICTED SHARES HELD MARKET VALUE
---------------------------------------------------------- ---------------------- ------------
<S> <C> <C>
Joe K. Pickett............................................ 5,600 $259,000
Hugh R. Harris............................................ 4,135 191,244
Charles D. Gilmer......................................... 0 0
Mark F. Johnson........................................... 1,784 82,510
William Glasgow, Jr....................................... 1,700 78,625
<FN>
In connection with the HLI Acquisition, vesting on all of the restricted
stock owned by HLI employees, including the restricted stock listed above,
was accelerated and all prior forfeiture and transferability restrictions
thereon were removed.
(3) Represents the dollar value of vested shares of performance restricted stock
calculated by multiplying the closing price of BKBC Common Stock on each
vesting date by the number of shares that vested on that date.
(4) Includes matching employer contributions and credits under the Bank of
Boston thrift-incentive plan and the Bank of Boston deferred compensation
plan for the named executive officers.
</TABLE>
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<PAGE> 100
OPTION GRANTS IN 1995
<TABLE>
The following table provides information on option grants with respect to
BKBC Common Stock in fiscal 1995 to the named executive officers. Pursuant to
applicable regulations of the Securities and Exchange Commission, the following
table also sets forth the hypothetical value which might have been realized with
respect to such options based on assumed rates of stock appreciation of 5% and
10% compounded annually from date of grant to March 15, 1996, the end of the
option terms:
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED
----------------------- ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE OPTION TERM
GRANTED EMPLOYEES PRICE EXPIRATION ------------------
NAME (#)(1) IN 1995 ($/SH) DATE 5% 10%
- ------------------------------------- ---------- ----------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Joe K. Pickett....................... 9,600 .90 $28.625 3/15/96 $15,631 $31,362
Hugh R. Harris....................... 6,000 .53 $28.625 3/15/96 $ 9,769 $19,601
Charles D. Gilmer.................... 0 0 0 -- --
Mark F. Johnson...................... 4,000 .40 $28.625 3/15/96 $ 6,513 $13,067
William Glasgow, Jr.................. 4,000 .40 $28.625 3/15/96 $ 6,513 $13,067
<FN>
- ---------------
(1) All options were exercised prior to March 15, 1996.
</TABLE>
AGGREGATED OPTION EXERCISES IN 1995
AND DECEMBER 31, 1995 OPTION VALUES
<TABLE>
The following table provides information on option exercises during 1995
with respect to BKBC Common Stock and on the values of the named executive
officers' unexercised options at December 31, 1995:
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT YEAR-END(#) OPTIONS AT YEAR-END
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ---------- --------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Joe K. Pickett.............. 0 $ 0 32,100 4,800 $687,575 $ 84,600
Hugh R. Harris.............. 0 0 10,200 3,000 202,275 52,875
Charles D. Gilmer........... 0 0 0 0 0 0
Mark F. Johnson............. 0 0 5,200 2,000 108,250 35,250
William Glasgow, Jr......... 4,000 32,750 0 2,000 0 35,250
</TABLE>
In connection with the HLI Acquisition, vesting of all stock options listed
in the preceding table was accelerated and all such options listed as being
unexercised at year end were exercised with values realized as follows: Mr.
Pickett, $753,725; Mr. Harris, $248,550; Mr. Johnson, $139,900; and Mr. Glasgow,
$26,000.
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<PAGE> 101
RETIREMENT BENEFITS
<TABLE>
The following table shows the years of service and the estimated annual
retirement benefits that are payable at age 65 from BKBC to each of the named
executive officers in the form of a single lifetime annuity with an assumed
future annual interest rate of 6.3% through 1996 and 5.5% thereafter on each
individual's cash balance account:
<CAPTION>
ESTIMATED ANNUAL
PRIOR YEARS OF SERVICE RETIREMENT
NAME AS OF 12/31/95 BENEFIT
- --------------------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
Joe K. Pickett................................................. 15 $73,883
Hugh R. Harris................................................. 12 50,676
Charles D. Gilmer.............................................. 2 2,386
Mark F. Johnson................................................ 13 48,616
William Glasgow, Jr............................................ 4 6,836
</TABLE>
The estimates shown above reflect Bank of Boston's current cash balance
formula (under which credits are made annually to an individual's account at a
rate based on the individual's age and years of service), plus any accrued
benefits under the prior plan formula. These benefits are provided under a
combination of Bank of Boston's tax-qualified retirement plan and certain
supplemental plans.
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<PAGE> 102
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table and the paragraphs that follow set forth information
with respect to the beneficial ownership of shares of the Issuer's voting
securities as of May 31, 1996 by (i) all shareholders of the Issuer who own more
than 5% of any class of such voting securities; (ii) each director who is a
stockholder; (iii) certain executive officers; and (iv) all directors and
executive officers as a group, as determined in accordance with Rule 13(d) under
the Securities Exchange Act of 1934.
<CAPTION>
NUMBER OF
SHARES OF
CLASS A PERCENTAGE
NAME OF BENEFICIAL OWNER COMMON STOCK OF CLASS
------------------------------------------------------- ------------ ----------
<S> <C> <C>
The First National Bank of Boston...................... 674,200 32.96%
100 Federal Street
Boston, MA
Siesta Holdings, Inc. ................................. 674,200 32.96%
3800 Howard Hughes Parkway
Suite 1560
Las Vegas, NV
THL.................................................... 505,650 24.72%
75 State Street
Boston, MA
Madison Dearborn Capital Partners, L.P................. 168,550 8.24%
Three First National Plaza
Chicago, IL
Joe K. Pickett......................................... 4,572 *
Hugh R. Harris......................................... 4,286 *
Charles D. Gilmer...................................... 2,000 *
Mark F. Johnson........................................ 2,860 *
William Glasgow, Jr.................................... 2,572 *
Thomas M. Hagerty...................................... 1,482(1) *
David V. Harkins....................................... 2,333(2) *
All Directors and Executive Officers as a Group (19 22,951(3) 1.12%
persons).............................................
<FN>
- ---------------
*Less than 1%.
(1) Does not include 504,168 shares owned by THL, as to which Mr. Hagerty
disclaims beneficial ownership.
(2) Does not include 503,317 shares owned by THL, as to which Mr. Harkins
disclaims beneficial ownership.
(3) Does not include the shares held by THL, Madison Dearborn Capital Partners,
L.P., The First National Bank of Boston and Siesta Holdings, Inc., with
which certain directors are affiliated.
</TABLE>
Each of the stockholders set forth above is party to a stockholder
agreement pursuant to which the parties have agreed to certain matters regarding
their ownership of shares of capital stock of the Issuer including, among other
things, election of directors, super majority voting requirements and preemptive
rights. See "Certain Relationships and Related Transactions -- Amended and
Restated Shareholder Agreement."
The Issuer has issued 23,117 shares of the Class A Common Stock to members
of management of HomeSide. HomeSide has also granted options to purchase shares
of the Class A Common Stock pursuant to employee stock option plans. See
"Management -- Executive Compensation," "The Acquisitions" and "Certain
Relationships and Related Transactions."
In addition to those shares of capital stock set forth in the preceding
table, 5,714 shares of Class B Common Stock (non-voting) of the Issuer are
beneficially owned by Smith Barney Inc. and 5,714 shares of Class C Common Stock
(non-voting) of the Issuer are beneficially owned by Robert Morrissey, each
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<PAGE> 103
constituting 100% of the respective class. Within 180 days of an initial public
offering of common stock of the Issuer, a holder of Class C Common Stock may
require the Issuer to purchase any portion of its shares of Class C Common Stock
at a price based upon the average bid prices for the preceding 20 days. In
addition, upon consummation of a merger or sale of substantially all the assets
of the Issuer, a holder of Class C Common Stock may require the Issuer to
purchase any portion of its shares of Class C Common Stock at an appraised fair
market value price.
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<PAGE> 104
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AMENDED AND RESTATED SHAREHOLDER AGREEMENT
Each of THL, MDP, Siesta Holdings, Inc. ("Siesta") and Bank of Boston
(collectively "Investors") and certain other stockholders named therein has
entered into an Amended and Restated Shareholder Agreement with HomeSide which
provides for, among other things, the following:
Election of Directors. The Board of Directors will consist of eleven
members, two directors designated by the Fund, one director designated by MDP,
three directors designated by Siesta, three directors designated by Bank of
Boston, and two directors who are members of management, one of whom will be the
Chairman and the other who will be the President (unless one person holds both
offices, in which case the other member shall be selected jointly by at least
five of the other directors in office). At such time as THL and MDP collectively
own less than one-third of the shares of Class A Common Stock owned by them on
the date of the closing of the HHI Acquisition, they collectively will be
entitled to designate only one director. Each of Siesta and the Bank of Boston
will also be entitled to designate only one director at such time as it owns
less than one-third of the Class A Common Stock owned by it on the closing of
the HHI Acquisition.
Super Majority Consent. A super-majority consent, consisting of a majority
of the directors designated by each of the Fund and MDP collectively, Barnett
and Bank of Boston will be required for: a merger or consolidation of HomeSide
or any of its subsidiaries or a sale of all or substantially all the assets or
stock of HomeSide or any of its subsidiaries where consideration received by the
stockholders of HomeSide is either (i) less than book value of HomeSide or the
relevant subsidiary or (ii) other than cash or securities which the Bank of
Boston or Barnett and their affiliates may lawfully hold; entering into
transactions with Barnett or its affiliates, the Bank of Boston or its
affiliates, THL or MDP or its affiliates; or the removal or election of
HomeSide's or HHI's Chairman, President, Chief Financial Officer or head of risk
management.
Risk Management Committee. The Board of Directors is required to establish
and maintain a Risk Management Committee to monitor execution of the interest
rate policies of HomeSide. Such Committee will at all times include two
representatives of each of Siesta and Bank of Boston and two representatives of
THL and MDP collectively.
Other Committees. Pursuant to the Registration Rights Agreement, described
below, THL has certain rights to demand the initial public offering of HomeSide
equity securities. The Amended and Restated Shareholder Agreement will also
provide THL and MDP "take-along" rights described below. During such time as THL
and MDP have such rights, the Board of Directors will establish an IPO committee
and a sale committee and delegate to them the authority, respectively to cause
HomeSide to undertake an initial public offering of HomeSide's capital stock
under the Securities Act and to cause HomeSide to undertake a merger or
consolidation of HomeSide or a sale of all or substantially all the stock or
assets of HomeSide in accordance with such take-along rights. The IPO and sale
committees will be comprised of members chosen by THL.
Preemptive Rights. Under certain circumstances, if HomeSide proposes to
issue any capital stock, each stockholder shall first have the opportunity to
purchase its pro rata portion of such capital stock, based upon a percentage of
the outstanding shares of Class A Common Stock held or deemed to be held by such
stockholder, upon the same terms as such securities are to be offered to the
proposed recipient.
Right of First Offer. In the event THL, MDP, Bank of Boston or Siesta
intend to transfer any capital stock of HomeSide to an unaffiliated third party,
the transferring stockholder must provide notice thereof to HomeSide and the
other stockholders party to the Amended and Restated Shareholder Agreement.
HomeSide (by action of a majority of the Board of Directors not designated by
the transferring stockholder) has the right, within 15 days of such notice, to
make an offer to buy the shares to be transferred, which offer may but need not
be accepted by the transferring stockholder. If HomeSide does not make such an
offer, or if HomeSide's Board of Directors intends to vote in favor of a sale or
merger of HomeSide or any of its subsidiaries, then the stockholders of HomeSide
shall have the right to offer to buy such stock or assets, which offer may but
need not be accepted by the transferring stockholder or Board of Directors, as
the case may be.
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<PAGE> 105
Co-Sale Rights. If a stockholder decides to sell shares of capital stock
of HomeSide owned by it, then the non-selling stockholders holding shares or
deemed to hold shares of the same class being sold shall have the right to sell
their pro rata percentage of the total number of shares of the class to be sold
to the proposed transferee on the same terms and conditions as the selling
stockholder.
Take-Along Rights. Subject to certain limitations, the stockholders will
be required to sell their shares of stock in the event THL and MDP desire to
sell their shares to an unaffiliated third party in an arm's-length transaction
but only while THL and MDP and their respective affiliates collectively own at
least 70% of the shares owned by them on the closing of the HLI Acquisition.
Prohibited Transfers. Transfers of capital stock to certain direct
competitors of Barnett or Bank of Boston will be prohibited without the consent
of Siesta or Bank of Boston, as the case may be.
Non-Competition. Subject to certain exceptions, including with respect to
certain acquisitions by any of the Investors, Barnett or certain of their
affiliates or an acquisition by another person of BKBC, Barnett or certain of
their affiliates, for a ten-year period, the Investors and Barnett will not
engage in certain acts in competition with HomeSide. Also, subject to certain
exceptions, HomeSide will agree that it will not market through retail branches,
for a ten-year period, any products or services which are competitive with
products or services then being marketed (i) by Barnett or its affiliates in
Florida (other than within a 50-mile radius of Jacksonville at the same level as
such products or services are being marketed on the date of the HHI Acquisition
Agreement) or (ii) by Bank of Boston or its affiliates in Massachusetts,
Connecticut, or Rhode Island.
Termination. Except for the provisions concerning certain related party
transactions, the Amended and Restated Shareholder Agreement shall terminate on
the first to occur of (i) consummation of one or more public offerings of equity
securities of HomeSide with aggregate offering price to the public of at least
$50,000,000 or (ii) the tenth anniversary of the Amended and Restated
Shareholder Agreement.
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
Subject to certain limitations, pursuant to the Amended and Restated
Registration Rights Agreement among HomeSide and the Investors dated May 31,
1996, upon the request of (i) holders of shares of Class A Common Stock
aggregating more than 50% of the number of shares of Class A Common Stock then
held by THL, (ii) the Bank of Boston, (iii) MDP, or (iv) Siesta (provided that
no request may be made for registration of securities with an expected aggregate
offering price to the public of less than $20,000,000), HomeSide will use its
best efforts to effect the registration of the Class A Common Stock requested by
such stockholder to be registered and the Class A Common Stock of all other
holders who have requested registration in connection therewith; provided that
(x) HomeSide is not required to effect more than two registrations pursuant to
any request made by any of the foregoing parties, and (y) prior to an initial
public offering of equity securities of HomeSide pursuant to the Securities Act
(so long as THL and MDP hold in the aggregate a greater percentage of Class A
Common Stock then outstanding than the Bank of Boston or Siesta), HomeSide need
not effect such registration unless the request is made by the holders of shares
of Class A Common Stock aggregating more than 50% of the Class A Common Stock
held by THL. Under certain circumstances, if HomeSide proposes to register
shares of its Class A Common Stock, it will, upon the written request of any
stockholder, register such requesting stockholder's Class A Common Stock,
subject to pro rata reduction in the event all securities requested to be
included in the registration statement cannot, in the opinion of the managing
underwriter, be so included.
In addition, following any transfer of 50% or more of the capital stock
collectively owned by THL, MDP and their affiliates on the HLI Acquisition
closing, THL's rights to a demand registration prior to an initial public
offering will terminate but will inure to the benefit its transferees.
EXCLUSIVE MARKETING AGREEMENTS
HomeSide has entered into a Marketing Agreement dated March 15, 1996 (the
"BKBC Marketing Agreement") with BKBC pursuant to which HomeSide and BKBC may
market services to HomeSide
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<PAGE> 106
customers who are also BKBC customers ("BKBC Customers") and other customers of
HomeSide. Under this agreement: (a) HomeSide has the exclusive right, subject to
certain limitations, to market to all customers any mortgage loan refinancings,
(b) HomeSide has the non-exclusive right to market first mortgage loans (other
than refinancings) to BKBC Customers and the exclusive right to market such
loans to other HomeSide customers, (c) HomeSide has the exclusive right to
market "other" mortgage loans to customers who are not BKBC Customers, and BKBC
has the exclusive right to market such mortgage loans to BKBC Customers, (d)
HomeSide has the non-exclusive right, subject to certain limitations, to offer
certain "Eligible Products" (mortgage credit insurance, relocation services,
title insurance, title search, appraisal services, private mortgage insurance,
escrow services, hazard insurance services and certain other products) to BKBC
Customers and the exclusive right to offer Eligible Products to other customers,
and (e) BKBC has the exclusive right to offer certain banking services to BKBC
Customers and the non-exclusive right to offer such services to other customers.
Under the Agreement BKBC may not engage in a formal program to solicit
HomeSide's customers for refinancings.
The term of the Marketing Agreement is the later of: (a) eight years, or
(b) the third anniversary of the termination of the Operating Agreement (which
has a term of five years). See "-- Other BKBC Agreements -- Operating
Agreement".
HomeSide has also entered into a Marketing Agreement dated May 31, 1996
(the "Barnett Marketing Agreement") with Barnett which is substantially similar
to the BKBC Marketing Agreement, except that it governs rights with respect to
"Barnett Customers" as defined therein rather than with respect to BKBC
Customers.
TRANSITIONAL SERVICES AGREEMENTS
Bank of Boston and its affiliate banks (the "BKB Banks") and HomeSide have
entered into a series of Transitional Services Agreements dated March 15, 1996,
pursuant to which the BKB Banks agreed to make available to HomeSide, at the BKB
Banks' cost, certain corporate services, including travel and relocation,
general ledger support, audit, payroll, retirement plans, computer services,
disbursement accounting, purchasing, telecommunications/workstation support and
human resources. HomeSide also agreed to make available to the BKB Banks, at
HomeSide's cost, certain administrative services, including mortgage loan
origination support, mortgage loan quality control services, affordable housing
loan support and pledged loan support services.
Barnett and HomeSide have entered into a Transitional Services Agreement
dated May 31, 1996, pursuant to which Barnett agreed to make available to
HomeSide office space and certain corporate services, including finance
services, accounting services, purchasing services, benefits and compensation
administration, human resources and staffing services and technology services.
HomeSide will reimburse Barnett for its cost of providing these items to
HomeSide.
The terms of the services provided under the Transitional Services
Agreements vary. As a general matter, the services will be provided to the
receiving party until the receiving party no longer requires the services, but
in no event later than December 31, 1996. The term may be extended for 90 days
for most services, upon 60 days' prior written notice.
OTHER BKBC AGREEMENTS
Operating Agreement
The BKB Banks and HomeSide have entered into an Operating Agreement, dated
March 15, 1996 (the "BKBC Operating Agreement"), which sets forth the parties'
roles with respect to new loan originations and servicing rights. With certain
exceptions, the BKB Banks are required to sell all mortgage loan production to
HomeSide during the term of the BKBC Operating Agreement. In particular, among
other things, the BKBC Operating Agreement: (a) describes the mortgage loan
products to be purchased by HomeSide from BKB Banks, (b) ensures that the BKB
Banks will receive the most favorable pricing and service released premiums
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<PAGE> 107
offered by HomeSide to mortgage brokers or, upon agreement of the parties,
correspondents, (c) describes HomeSide's customer service levels, (d) sets forth
warehouse and pipeline management rights and obligations, (e) describes the
technology support which the parties will provide to one another, (f) describes
the mortgage loan production and support functions to be provided by the
parties, (g) describes the reports and information to be provided periodically
by HomeSide to the BKB Banks, including, but not limited to, risk management,
internal performance and management reports, (h) sets forth the penalties to be
paid by the BKB Banks for failing to satisfy the buy price expiration dates, (i)
describes BKB Banks' mortgage loan repurchase obligations, and (j) restricts
HomeSide's ability to sell servicing rights relating to BKB Banks' portfolio
mortgage loans.
The fees to be paid by the BKB Banks to HomeSide for loan servicing are
"market" fees consistent with the fees charged by HomeSide to other mortgagees.
The term of the BKBC Operating Agreement is five years. The termination of
the BKBC Operating Agreement will not affect HomeSide's right to service
mortgage loans serviced prior to the termination date.
Brokered Loan Purchase and Sale Agreement
HomeSide and the BKB Banks have also entered into a Brokered Loan Purchase
and Sale Agreement, dated March 15, 1996, which describes the mortgage loans
which are eligible for sale to HomeSide by BKB, and related pricing and delivery
requirements for such loans. The BKB Banks will receive the most favorable
pricing offered by HomeSide to mortgage brokers or, upon agreement of the
parties, correspondents. Under certain conditions, the BKB Banks must indemnify
HomeSide or repurchase mortgage loans from HomeSide. The agreement provides
certain underwriting, appraisal, mortgage insurance and escrow requirements.
The term of the Brokered Loan Purchase Agreement is five years but will
automatically terminate upon the termination of the Operating Agreement.
PMSR Flow Agreement
HomeSide and the BKB Banks have entered into a PMSR Flow Agreement dated
March 15, 1996, which requires the BKB Banks, subject to certain exceptions, to
sell to HomeSide the servicing rights to the BKB Banks' portfolio mortgage
loans. The agreement also requires the BKB Banks to provide certain notices to
government agencies, flood service providers, insurance carriers and borrowers
upon the transfer of servicing rights to HomeSide. The agreement describes the
BKB Banks' obligation to prepare and record assignments of mortgage and pay tax,
service-related fees and flood service fees. Under certain conditions, the BKB
Banks must reimburse the servicing rights purchase price to HomeSide.
The term of the PMSR Flow Agreement is five years but will automatically
terminate upon the termination of the BKBC Operating Agreement.
Mortgage Loan Servicing Agreement
HomeSide and the BKB Banks have entered into a Mortgage Loan Servicing
Agreement dated March 15, 1996 (the "BKBC Servicing Agreement"), which requires
HomeSide, subject to certain exceptions, to service the BKB Banks' portfolio
mortgage loans. HomeSide is also required to use reasonable efforts to collect
mortgage loan payments, to remit principal and interest to the BKB Banks each
month and to perform general ledger reconciliations and other related tasks.
HomeSide is also required to perform certain default loan administration and
foreclosure activities. HomeSide will provide additional services for the BKB
Banks' private banking clients.
The servicing fees to be paid by the BKB Banks to HomeSide are market-based
fees consistent with the fees charged by HomeSide to other mortgagees.
The term of the BKBC Servicing Agreement is five years. The BKB Banks will
not be obligated to deliver portfolio mortgage loan servicing rights to HomeSide
upon the termination of the BKBC Operating Agreement. However, the termination
of the BKBC Operating Agreement will not affect HomeSide's right to
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<PAGE> 108
continue servicing the BKB Banks' portfolio loans that are being serviced by
HomeSide as of such termination date.
OTHER BARNETT AGREEMENTS
Operating Agreement
Barnett and HomeSide have entered into an Operating Agreement, dated May
31, 1996 (the "Barnett Operating Agreement"), which sets forth the parties'
roles with respect to new loan originations and servicing rights. With certain
exceptions, Barnett and its affiliate banks (the "Barnett Banks") are required
to sell all mortgage loan production to HomeSide during the term of the Barnett
Operating Agreement. In particular, among other things, the Barnett Operating
Agreement: (a) describes the mortgage loan products to be purchased by HomeSide
from Barnett Banks, (b) ensures that the Barnett Banks will receive the most
favorable pricing and servicing released premiums offered by HomeSide to
mortgage correspondents, (c) describes HomeSide's customer service levels, (d)
sets forth warehousing and pipeline management rights and obligations, (e)
describes the technology support which the parties will provide to one another,
(f) describes the mortgage loan production and support functions to be provided
by the parties, (g) describes the reports and information to be provided
periodically by HomeSide to the Barnett Banks, including, but not limited to,
risk management, internal performance and management reports, (h) sets forth
penalties to be paid by the Barnett Banks for failing to satisfy the buy price
expiration dates, (i) describes Barnett Banks' mortgage loan repurchase
obligations, and (j) restricts HomeSide's ability to sell servicing rights
relating to the Barnett Banks' portfolio mortgage loans. The fees to be paid by
the Barnett Banks to HomeSide for loan servicing are market-based fees
consistent with the fees charged by HomeSide to other mortgagees.
The term of the Barnett Operating Agreement is 5 years, subject to earlier
termination in certain specified instances. The termination of the Barnett
Operating Agreement will not affect HomeSide's rights to service mortgage loans
serviced prior to the termination date.
Correspondent Loan Purchase Agreement
HomeSide and Barnett Banks have entered into a Correspondent Loan Purchase
Agreement, dated May 16, 1996, which describes the mortgage loans which are
eligible for sale to HomeSide by the Barnett Banks and related pricing and
delivery requirements for such loans. The Barnett Banks will receive the most
favorable pricing offered by HomeSide to other correspondents. Under certain
conditions, the Barnett Banks must repurchase mortgage loans for HomeSide. The
Agreement provides certain underwriting, appraisal, mortgage insurance and
escrow requirements.
The term of the Correspondent Loan Purchase Agreement is 5 years but will
automatically terminate upon the termination of the Operating Agreement.
PMSR Flow Agreement
HomeSide and the Barnett Banks have entered into a PMSR Flow Agreement
dated May 31, 1996, which requires the Barnett Banks, subject to certain
exceptions, to sell to HomeSide the servicing rights to the Barnett Banks'
portfolio mortgage loans. The Agreement also requires the Barnett Banks to
provide certain notices to government agencies, flood service providers,
insurance carriers and borrowers upon the transfer of servicing rights to
HomeSide. The Agreement describes the Barnett Banks' obligation to prepare and
record assignments of mortgage and pay tax, service-related fees and flood
service fees. Under certain conditions, the Barnett Banks must reimburse the
servicing rights purchase price to HomeSide.
The term of the PMSR Flow Agreement is 5 years but will automatically
terminate upon the termination of the Barnett Operating Agreement.
Mortgage Loan Servicing Agreement
HomeSide and the Barnett Banks have entered into a Mortgage Loan Servicing
Agreement dated as of May 31, 1996 (the "Barnett Servicing Agreement") which
requires HomeSide, subject to certain exceptions,
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<PAGE> 109
to service the Barnett Banks' portfolio mortgage loans. HomeSide is also
required to use reasonable efforts to collect mortgage loan payments, to remit
principal and interest to the Barnett Banks each month and to perform general
ledger reconciliations and other related tasks. HomeSide is also required to
perform certain default loan administration and foreclosure activities. HomeSide
will provide additional services for the Barnett Banks' private banking clients.
The servicing fees to be paid by the Barnett Banks to HomeSide are
market-based fees consistent with those charged by HomeSide to other mortgagees.
The term of the Barnett Servicing Agreement is 5 years. The Barnett Banks
will not be obligated to deliver portfolio mortgage loan servicing rights to
HomeSide upon the termination of the Barnett Operating Agreement. However, the
termination of the Barnett Operating Agreement will not affect HomeSide's right
to continue servicing the Barnett Banks' portfolio loans that are being serviced
by HomeSide as of such termination date.
MANAGEMENT AGREEMENTS
HomeSide will pay the Thomas H. Lee Company (the "Lee Company"), Madison
Dearborn Partners, Inc., Bank of Boston and Barnett Banks, Inc. pursuant to
management agreements, an annual management fee of $250,000, $83,333, $333,333
and $333,333, respectively. Such management agreements will terminate upon an
initial public offering of equity securities of HomeSide.
MANAGEMENT OWNERSHIP
HomeSide has established option plans for employees of HomeSide pursuant to
which HomeSide will grant options to purchase shares of Class A Common Stock of
HomeSide equal to approximately 5% of the outstanding Class A Common Stock of
HomeSide.
In addition, certain members of management have purchased in the aggregate
23,117 shares of Class A Common Stock of HomeSide at a price of $175 per share,
the same price paid by the other Investors. In the case of certain purchasers,
the shares have been acquired with the proceeds of loans from HLI. Such loans
are evidenced by recourse notes secured by a pledge of the shares purchased,
having a term of approximately 5 years and bearing interest at 8.25% per annum.
In the case of the executive officers of HomeSide, the principal amount of such
indebtedness outstanding at June 17, 1996 was as follows: Mr. Pickett
($400,000); Mr. Harris ($350,000); Mr. Jacobs ($50,000); Ms. Francis ($100,000);
Mr. Johnson ($250,000); Mr. Glasgow ($225,000); Ms. Mackey ($10,000). The
management purchasers are party to a Management Stockholders' Agreement that
contains various restrictions on transfer. Management holders also have
piggyback registration rights. There is no right of repurchase by HomeSide upon
termination of employment. Upon death of a management shareholder, such
management shareholder's estate has a right to require HomeSide to acquire the
shares owned by such management shareholder and his or her permitted
transferees, subject to certain conditions and restrictions, for the lower of
$175 per share and fair market value.
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<PAGE> 110
DESCRIPTION OF BANK CREDIT AGREEMENT
Each of HLI and Honolulu Mortgage is a party to a credit agreement (the
"Bank Credit Agreement") that includes a warehouse credit facility (the
"Warehouse Credit Facility") and a servicing receivables credit facility
("Servicing Credit Facility") (collectively, the "Facilities"). The Bank Credit
Agreement provides for availability of up to $2.5 billion which may be used to
provide funds for HLI's and Honolulu Mortgage's business of making, originating,
acquiring and servicing mortgage loans.
WAREHOUSE CREDIT FACILITY
The Warehouse Credit Facility provides for availability up to $2.5 billion
of borrowings, less amounts borrowed under the Servicing Credit Facility,
governed by a borrowing base which includes pools of loans that are subject to
binding sale commitments or hedge contracts and certain mortgage-backed
securities. The Warehouse Credit Facility terminates on May 31, 1999 (the
"Warehouse Termination Date").
SERVICING CREDIT FACILITY
The Servicing Credit Facility provides for availability of up to $950.0
million of borrowings governed by a borrowing base which includes (i) eligible
receivables arising from HLI's or Honolulu Mortgage's, as the case may be,
required monthly principal and interest payments for FHLMC, FNMA and GNMA
mortgage-backed securities, (ii) eligible claims receivable related to
foreclosed loans serviced by BBMC, (iii) eligible receivables in respect of
payments of real estate taxes or receivables arising from insurance premiums in
respect of serviced loans, (iv) a portion of the value of the servicing
portfolio, (v) eligible receivables in respect of advances made by HLI or
Honolulu Mortgage, as the case may be, to repurchase certain loans which are to
be prepaid, and (vi) advances made by HLI or Honolulu Mortgage, as the case may
be, with respect to certain defaulted loans. The Servicing Credit Facility
terminates on the Warehouse Termination Date.
SECURITY
Borrowings under the Bank Credit Agreement are secured by (i) all mortgage
loans and mortgage-backed securities submitted for inclusion in the Warehouse
Credit Facility borrowing base and all take-out commitments and hedge contracts
related thereto, (ii) all servicing rights and hedge contracts and receivables
related thereto, and (iii) any other assets included in determining the
borrowing bases under the facilities. Borrowings under the facilities are
guaranteed by the Issuer. In addition, the Issuer has pledged to the Lenders (as
defined in the Bank Credit Agreement) all of the capital stock of HHI, HHI has
pledged all the capital stock of HLI and HLI has pledged all the capital stock
of its subsidiaries as security under the Bank Credit Agreement. Upon certain
events, including the achievement of unsecured long-term senior non-credit-
enhanced debt ("Rated Debt") ratings of at least A- by Standard & Poor's Rating
Services ("S&P") and at least A3 by Moody's Investor Services, Inc. ("Moody's"),
the Facilities become unsecured (except for the stock pledges). The Facilities
will again be required to be secured upon the occurrence of certain other
events.
OPTIONAL AND MANDATORY PREPAYMENTS
The entire unpaid principal balance under the Warehouse Credit Facility and
the Servicing Credit Facility will be due and payable on the Warehouse
Termination Date. HLI or Honolulu Mortgage, as the case may be, may prepay
(without premium) all or any part of the loans under the Bank Credit Agreement
or reduce the commitment (without penalty) under the Warehouse Credit Facility
at any time or from time to time in certain minimum increments following
specified notice periods. In addition, mandatory prepayments will be required
(i) in the amounts by which borrowings outstanding exceed the related borrowing
base at any time, (ii) with certain proceeds from debt issuances and (iii) with
proceeds of certain termination and similar fees under servicing agreements.
Amounts repaid under the Facilities may, absent any uncured or unwaived default
under the Bank Credit Agreement, be reborrowed during the term of the Warehouse
Credit Facility.
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INTEREST RATES AND FEES
<TABLE>
Loans under the Bank Credit Agreement will bear interest at rates per
annum, based on, at HLI's option, (A) the highest of (i) Chemical Bank's prime
rate, (ii) the secondary market rate for certificates of deposit plus 1%, and
(iii) the federal funds rate in effect from time to time plus 0.5%, or (B) a
eurodollar rate, in each case based upon the rating of the Rated Debt as
announced by S&P, Fitch Investors Service, Inc. ("Fitch") and Moody's as
applicable, and in accordance with the following:
<CAPTION>
APPLICABLE MARGIN APPLICABLE MARGIN APPLICABLE MARGIN
FOR WAREHOUSE FOR SERVICING FOR SERVICING
RATING LEVEL LOANS ADVANCE LOANS PORTFOLIO LOANS
----------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
A- or higher....................... 0.350% 0.350% 0.600%
BBB+............................... 0.400% 0.400% 0.675%
BBB or BBB-........................ 0.450% 0.450% 0.750%
BB+ or BB.......................... 0.625% 0.625% 1.000%
BB- or lower....................... 0.625% 0.625% 1.500%
</TABLE>
For purposes of determining the applicable interest rate under the Bank
Credit Agreement, the applicable rating is deemed to be two increments higher
than the rating announced by both S&P and Fitch (or if different ratings are
announced, the lower of the two), such that if the Rated Debt was BB+, the rate
for purposes of the Bank Credit Agreement would be BBB. In the event that
Moody's issues a comparable debt rating and such rating results in an implied
rating that differs from the rating level in effect pursuant to the above grid
by (i) two increments or more, the applicable pricing level will be deemed to be
one pricing level below (i.e. having a larger margin) the higher of such rating
levels or (ii) one increment, the applicable pricing level shall be deemed to be
the higher (i.e. having a smaller margin) of such rating levels. Until September
15, 1996, the "BBB or BBB-" rating level will apply to the Rated Debt unless the
actual rating level determined as set forth above is a lower rating level. The
margins set forth in the middle column above apply only to portions of the
Servicing Credit Facility borrowing base constituting advance receivables, while
the margins in last column above apply to all other portions of the Servicing
Credit Facility borrowing base.
The annual commitment fee on the Facilities ranges from 0.125% to 0.375% of
the commitments thereunder depending upon the rating of the Rated Debt.
RESTRICTIVE COVENANTS
The Bank Credit Agreement contains certain covenants that impose
limitations and requirements on HLI and the Issuer and their subsidiaries,
including limitations with respect to payments, dividends or distributions from
HLI to the Issuer, except that HLI may, so long as no event of default has
occurred and is continuing under the Bank Credit Agreement, (i) declare and pay
cash dividends to the Issuer in an amount equal to the actual taxes paid in cash
by the Issuer, (ii) declare and pay cash dividends to the Issuer to allow it to
redeem capital stock of the Issuer held by directors and employees pursuant to
employment arrangements of HLI, in an aggregate annual amount not to exceed
$2,000,000, (iii) declare and pay cash dividends to the Issuer to allow it to
redeem Class C Common Stock issued in connection with the HLI Acquisition in an
amount not to exceed $7,500,000 in the aggregate, (iv) subject to certain
conditions, declare and pay cash dividends to the Issuer, in an amount not to
exceed $75,000 in the aggregate in each fiscal year of HLI, (v) declare and pay
dividends to allow the Issuer to pay fees and expenses incurred in the
administration of its ordinary and normal activities and (vi) declare and pay
cash dividends to the Issuer in an amount equal to the actual interest payable
in cash by the Issuer on the Notes, provided, however, that no such payments or
distributions will be permitted when a payment default has occurred and is
continuing under the Bank Credit Agreement or during a "blocking period." A
"blocking period" occurs under the Bank Credit Agreement beginning upon the
delivery by the administrative agent thereunder to HLI and the Trustee under the
Indenture of a notice that a default or event of default exists under the Bank
Credit Agreement and continues until the earlier to occur of the 180th day
following delivery of such notice and the date such default or event of default
is cured or waived. Only one blocking period may be commenced within any 365
consecutive day period.
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<PAGE> 112
Other covenants in the Bank Credit Agreement will impose limitations on HLI
and its subsidiaries with respect to, among other things: (i) the incurrence of
certain additional indebtedness; (ii) the incurrence of liens; (iii) the making
of certain investments other than certain permitted investments; (iv)
fundamental changes in HLI's business activities or the sale or disposition of a
substantial part of HLI's business or the acquisition of substantially all of
the assets or stock of any other person other than the dissolution of inactive
subsidiaries of HLI or intercompany mergers, sales or consolidation; (v) capital
expenditures in excess of $10.0 million in any fiscal year; (vi) transactions
with affiliates; (vii) entering into new lines of business; (viii) making
optional prepayments or redeeming or purchasing any indebtedness evidenced by
the Notes or modifying any such indebtedness; or (ix) amending the material
terms of HomeSide's Stockholder Agreement; except that (a) the Special
Redemption Notes may be repaid in accordance with the terms of the Holdings
Guarantee (as defined in the Bank Credit Agreement), including any make-whole or
prepayment premium required by the terms thereof and (b) the Issuer may redeem
or repay, in an aggregate amount not to exceed $25,000,000, a portion of the
principal amount of the Notes with the proceeds of the issuance by the Issuer of
capital stock other than certain specifically enumerated issuances. These
covenants are subject to various other customary exceptions under the Bank
Credit Agreement.
HLI is also required to maintain compliance with certain financial
covenants, including:
(a) Maintaining a Minimum Consolidated Tangible Net Worth (as defined
in the Bank Credit Agreement) equal to the sum of (i) an amount equal to
80% of Adjusted Consolidated Tangible Net Worth (as defined in the Credit
Agreement) as of March 15, 1996 plus (ii) an amount equal to 50% of the
excess of (A) the aggregate amount of net proceeds received during the
period from March 15, 1996 through such date by the Issuer from the
issuance of capital stock other than to Investors over (B) the amount
thereof applied to prepay or redeem the Notes plus (iii) an amount equal to
80% of the sum of Consolidated Net Income (as defined in the Credit
Agreement) for each fiscal quarter for which Consolidated Net Income is
positive during the period from the March 15, 1996 through the last day of
the most recently ended fiscal quarter of HLI less (iv) the amount of
Restricted Payments (as defined in the Bank Credit Agreement) actually made
by HLI and permitted under the Bank Credit Agreement during the period
March 15, 1996 through such date (to the extent such Restricted Payments
were not deducted in determining such Adjusted Consolidated Tangible Net
Worth).
(b) Not permitting the ratio of Consolidated Total Liabilities (as
defined in the Bank Credit Agreement) to Adjusted Consolidated Tangible Net
Worth to exceed (i) 7.5:1.0 at any time during the period from March 15,
1996 through and including March 31, 1997 or (ii) 7.0:1.0 at any time
thereafter.
(c) Not permitting the ratio of Consolidated Servicing-Related Debt
(as defined in the Bank Credit Agreement) to Adjusted Consolidated Tangible
Net worth to exceed (i) 2.0:1.0 at any time during the period from March
15, 1996 through and including September 30, 1997, (ii) 1.75:1.0 at any
time during the period from and including October 1, 1997 through and
including September 30, 1998 or (iii) 1.5:1.0 thereafter.
(d) Not permitting (i) for any period beginning on March 15, 1996 and
ending on the earlier to occur of the last day of the fiscal year of HLI
first ending after March 15, 1996 or the last day of the fiscal quarter of
HLI ending on March 31, 1997, or (ii) for any period of four consecutive
fiscal quarters of HLI ending thereafter, the ratio of (A) the sum of (1)
Consolidated Cash Flow (as defined in the Bank Credit Agreement) for such
period plus (2) Consolidated Interest and Dividend Expense (as defined in
the Bank Credit Agreement) for such period to (B) Consolidated Interest and
Dividend Expense for such period to be less than 2.75:1.0.
EVENTS OF DEFAULT
The Bank Credit Agreement contains certain standard payment, covenant, and
bankruptcy-related events of default, as well as other events of default,
including, among other things, (i) the failure of HLI to pay any amount of
principal under the Bank Credit Agreement when due or any interest or fees under
the Bank Credit Agreement within five days after such amounts are due; (ii) the
failure of any party to a loan document (each, a "Loan Party") to comply with
any covenant, agreement, condition, provision, or term of any Loan
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<PAGE> 113
Document (as defined in the Bank Credit Agreement), provided that, in certain
cases, such Loan Party has a 30-day grace period in which to remedy such
failure; (iii) the default by the Issuer, HLI or any of its subsidiaries in
payment of indebtedness aggregating $15.0 million or more, or the default by the
Issuer, HLI or any of its subsidiaries in the observance of any agreement or
condition relating to indebtedness aggregating $15.0 million or more which
permits or causes the holder thereof to cause such indebtedness to become due
prior to its stated maturity; (iv) entry of unpaid judgments against HLI or any
subsidiary of HLI of $10.0 million or more other than judgments that have been
stayed pending appeal within 60 days of entry; (v) the occurrence of certain
events under the Employee Retirement Income Security Act of 1974, as amended
('ERISA"), that would have a material adverse effect on HLI and its
subsidiaries; (vi) except upon a Positive Security Event, the failure of any
Security Document (as defined in the Bank Credit Agreement) to remain in full
force and effect or any lien granted pursuant thereto to remain legal, valid and
enforceable; (vii) the failure of any Guarantee (as defined in the Bank Credit
Agreement) to remain in full force and effect, (viii) certain bankruptcy and
insolvency events; (ix) any execution or attachment whereby a substantial part
of HLI's property is taken or attempted to be taken and that is not vacated or
stayed within 60 days; and (x) certain changes of control relating to the Issuer
and HLI, including where (a) the Issuer ceases to own 100% of the capital stock
of HLI and/or the ownership of the Issuer by the Investors on March 15, 1995
falls below certain percentages or (b) a certain number of directors of the
Issuer as of March 15, 1995 fail to continue as directors of the Issuer.
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<PAGE> 114
DESCRIPTION OF THE EXCHANGE NOTES
The Notes (including the Exchange Notes offered hereby) will be issued
pursuant to the terms of an indenture dated as of May 14, 1996 (the "Indenture")
between Homeside, Inc., as issuer, and The Bank of New York, as trustee (the
"Trustee"). The Indenture will be subject to and governed by the provisions of
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
following summary of the material provisions of the Indenture does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
the provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
Trust Indenture Act. For definitions of certain capitalized terms used in the
following summary, see "-- Certain Definitions."
GENERAL
The Notes will mature on May 15, 2003, will be limited to $200 million
aggregate principal amount and will be secured as described below. Each Note
will bear interest at the rate set forth on the cover page hereof from May 14,
1996 or from the most recent interest payment date to which interest has been
paid or duly provided for, payable on November 15, 1996 and semiannually
thereafter on May 15 and November 15 in each year until the principal thereof is
paid or duly provided for to the Person in whose name the Note (or any
predecessor Note) is registered at the close of business on the May 1 or
November 1 next preceding such interest payment date. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months. (Sections 311
and 314) The circumstances under which the interest rate may increase from the
rate set forth on the front cover hereof are described below.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Issuer in The City of New York maintained for such purposes (which initially
will be the office of the Trustee); provided, however, that, at the option of
the Issuer, interest may be paid by check mailed to the address of the Person
entitled thereto as such address shall appear on the security register.
(Sections 305 and 311) The Notes will be issued only in fully registered form
without coupons and only in denominations of $1,000 principal amount and any
integral multiple thereof. (Section 302) No service charge will be made for any
registration of transfer or exchange or redemption of Notes, but the Issuer may
require payment in certain circumstances of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith. (Section
305)
SECURITY
The Notes will be secured by a second priority pledge, subject to a first
priority pledge in favor of the lenders under the Bank Credit Agreement, of all
of the capital stock of each of the Issuer's current and future Subsidiaries
held directly by the Issuer, including all of the capital stock of HLI held by
HHI (collectively, the "Pledged Stock"), together with profits and proceeds
therefrom and property received with respect to the Pledged Stock in addition
thereto, in exchange therefor or in substitution therefor (collectively, the
"Collateral").
So long as no Event of Default has occurred and is continuing, the Issuer
or HHI, as the case may be, will be entitled to receive and retain cash
dividends and other cash distributions on any of the Pledged Stock and will be
entitled to vote the Pledged Stock. The Bank Agent will, among other things,
have the right to direct and control any sale or other disposition of the
Collateral in foreclosure or other judicial proceedings or private sale, none of
which require the consent of holders of the Notes. Upon any such sale or
disposition of the Collateral, the lien securing the Notes will be automatically
extinguished, with the rights of the holders of the Notes in the event of such
sale being limited to the right to receive excess proceeds after payment in full
of all costs and expenses of sale or disposition and all indebtedness under the
Bank Credit Agreement. Any such excess proceeds will be applied, first to
amounts due to the Trustee, second to the payment of all amounts due and unpaid
on the Notes and, finally, any surplus to the Issuer or the applicable pledgor
or to whomever may be lawfully entitled to receive such surplus. The Notes are
not secured by any lien on, or other security interest in, any other properties
or assets of the Issuer or any other properties or assets of any Subsidiary. The
security
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interest in the Collateral will not alter the effective subordination of the
Notes to the creditors of Subsidiaries whose stock is included in the
Collateral.
RANKING
The Notes will be senior obligations of the Issuer and the Indebtedness
evidenced by the Notes will rank pari passu in right of payment with all other
existing and future senior indebtedness of the Issuer. At March 31, 1996, after
giving pro forma effect to the sale of the Notes and the application of the net
proceeds therefrom and consummation of the HLI Acquisition and the HHI
Acquisition, the aggregate outstanding principal amount of senior indebtedness
of the Issuer would have been approximately $2,342.0 million, of which $2,142.0
million would have represented the guarantee by the Issuer of the indebtedness
of its subsidiaries under the Bank Credit Agreement.
The business operations of the Issuer are conducted through its
subsidiaries, and the Issuer is therefore ultimately dependent on the cash flow
of such subsidiaries to meet its obligations, including its obligations under
the Notes. All indebtedness of the Issuer, including the Notes, will be
effectively subordinated to all obligations of its subsidiaries, including all
obligations under the Bank Credit Agreement. At March 31, 1996, after giving pro
forma effect to the Offering and the application of the estimated net proceeds
therefrom and consummation of the HLI Acquisition and the HHI Acquisition, the
Issuer's subsidiaries would have had approximately $2,163.7 million of
indebtedness outstanding. See "Risk Factors -- Holding Company Structure;
Effective Subordination; Limitation on the Payment of Funds to Issuer by
Subsidiaries."
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
REDEMPTION
The Notes will be redeemable at the option of the Issuer, as a whole or
from time to time in part, at any time on or after May 15, 2001, on not less
than 30 nor more than 60 days' prior notice at the redemption prices (expressed
as percentages of principal amount) set forth below, together with accrued
interest, if any, to the redemption date, if redeemed during the 12-month period
beginning on May 15 of the years indicated below (subject to the right of
holders of record on relevant record dates to receive interest due on an
interest payment date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
-------------------------------------------------- ----------
<S> <C>
2001.............................................. 105.625%
2002.............................................. 102.813%
</TABLE>
(Section 1201)
In addition, at any time or from time to time prior to May 15, 1999, the
Issuer may redeem up to 35% of the aggregate principal amount of the Notes
within 60 days of one or more Equity Offerings with the net proceeds of such
offering at a redemption price equal to 111.25% of the principal amount thereof,
together with accrued interest, if any, to the date of redemption (subject to
the right of holders of record on relevant record dates to receive interest due
on an interest payment date); provided that immediately after giving effect to
any such redemption at least $75 million of the original aggregate principal
amount of the Notes remains outstanding. (Section 1201)
If less than all the Notes are to be redeemed, the particular Notes or
portions thereof to be redeemed will be selected not more than 60 days prior to
the redemption date by the Trustee by such method as the Trustee deems fair and
appropriate; provided, however, that no such partial redemption will reduce the
principal amount of a Note not redeemed to less than $1,000. Notice of
redemption will be mailed, first-class postage prepaid, at least 30 but not more
than 60 days before the redemption date to each holder of Notes to be redeemed
at its registered address. On and after the redemption date, interest will cease
to accrue on Notes or portions thereof called for redemption and accepted for
payment. (Sections 1204 and 1205)
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CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Indebtedness. The Issuer will not, and will not permit any
Subsidiary to, create, issue, assume, guarantee or in any manner become directly
or indirectly liable for the payment of, or otherwise incur (collectively,
"incur"), any Indebtedness (including any Acquired Indebtedness), other than
Permitted Indebtedness, unless at the time of such incurrence the Consolidated
Fixed Charge Coverage Ratio for the four full fiscal quarters immediately
preceding the incurrence of such Indebtedness, taken as one period (after giving
pro forma effect to (i) the incurrence of such Indebtedness and (if applicable)
the application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred, and the application of such
proceeds occurred, on the first day of such four-quarter period, (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Issuer and
its Subsidiaries since the first day of such four-quarter period as if such
Indebtedness was incurred, repaid or retired on the first day of such
four-quarter period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average daily balance of such Indebtedness during such four-quarter period),
and (iii) the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business acquired or disposed of by the Issuer or its Subsidiaries (including
the operations thereof), as the case may be, since the first day of such
four-quarter period, as if such acquisition or disposition occurred on the first
day of such four-quarter period), would have been at least equal to 2.5 to 1.0
and, on and after the date of consummation of the HHI Acquisition, would have
been at least equal to 3.0 to 1.0; provided (a) that with respect to the
incurrence of Indebtedness by the Issuer (other than Permitted Indebtedness)
that is permitted to be incurred only after giving effect to the proviso in the
definition of Consolidated Adjusted Net Income, such Indebtedness will not have
any Stated Maturity of principal earlier than the Stated Maturity of principal
of the Notes; (b) that no Inactive Subsidiary will be permitted to incur
Indebtedness pursuant to this paragraph or otherwise have any Indebtedness
outstanding except, in the case of HHI, its guarantee of Indebtedness of the
Issuer and the Subsidiaries under the Bank Credit Agreement; and (c) that the
Issuer will not be permitted to incur Indebtedness that is senior in right of
payment to the Notes. (Section 1008)
Limitation on Restricted Payments. (a) The Issuer will not, and will not
permit any Subsidiary, directly or indirectly, to take any of the following
actions:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Issuer (other than
dividends or distributions payable solely in shares of its Qualified
Capital Stock or in options, warrants or other rights to acquire such
shares of Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock of the Issuer or any
shares of Capital Stock of any Affiliate of the Issuer (other than shares
of Capital Stock of any Wholly Owned Subsidiary) or any options, warrants
or other rights to acquire such shares of Capital Stock;
(iii) declare or pay any dividend or make any distribution on any
shares of Capital Stock of any Subsidiary to any Person (other than with
respect to any shares of Capital Stock held by the Issuer or any Wholly
Owned Subsidiary) or purchase, redeem or otherwise acquire or retire for
value any shares of Capital Stock of any Subsidiary held by any Person
(other than the Issuer or any Wholly Owned Subsidiary);
(iv) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Pari Passu Indebtedness or
Subordinated Indebtedness;
(v) make any Investment (other than any Permitted Investment) in any
Person; or
(vi) incur or suffer to exist any guarantee of Indebtedness of any
Affiliate of the Issuer (other than guarantees by the Issuer of
Indebtedness of any Wholly Owned Subsidiary);
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<PAGE> 117
(such payments or other actions described in (but not excluded from) clauses (i)
through (vi) are collectively referred to as "Restricted Payments"), unless at
the time of, and after giving effect to, the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors of the Issuer, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Issuer could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Indebtedness" covenant and (3) the aggregate amount of all
Restricted Payments declared or made after the date of the Indenture will not
exceed the sum of:
(A) 40% of the aggregate cumulative Consolidated Adjusted Net Income
accrued on a cumulative basis during the period beginning on April 1, 1995
and ending on the last day of the Issuer's last fiscal quarter ending prior
to the date of such proposed Restricted Payment (or, if such aggregate
cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of
such loss), plus
(B) the aggregate net cash proceeds received after the date of the
Indenture by the Issuer from the issuance or sale (other than to any
Subsidiary and other than in connection with the HHI Acquisition) of shares
of Qualified Capital Stock of the Issuer (including upon the exercise of
options, warrants or rights) or warrants, options or rights to purchase
shares of Qualified Capital Stock of the Issuer, plus
(C) the aggregate net cash proceeds received after the date of the
Indenture by the Issuer from the issuance or sale (other than to any
Subsidiary) of debt securities or Redeemable Capital Stock that have been
converted into or exchanged for shares of Qualified Capital Stock of the
Issuer, to the extent such securities were originally sold for cash,
together with the aggregate net cash proceeds received by the Issuer at the
time of such conversion or exchange.
(b) Notwithstanding paragraph (a) above, the Issuer and any Subsidiary may
take the following actions so long as (with respect to clauses (ii), (iii),
(iv), (v), (vi) and (vii)) no Default or Event of Default shall have occurred
and be continuing:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date such declaration complied with the
provisions of paragraph (a) above and such payment shall be deemed to have
been paid on such date of declaration for purposes of the calculation
required by the foregoing paragraph (a);
(ii) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Issuer in exchange for, or out
of the net cash proceeds of, a substantially concurrent issuance and sale
(other than to a Subsidiary and other than with respect to the proceeds of
the HHI Acquisition) of shares of Qualified Capital Stock of the Issuer;
(iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Subordinated Indebtedness in
exchange for, or out of the net cash proceeds of, a substantially
concurrent issuance and sale (other than to a Subsidiary) of shares of
Qualified Capital Stock of the Issuer;
(iv) the repurchase, retirement or other acquisition or retirement for
value of Common Stock of the Issuer held by any present or future employees
of the Issuer or any Subsidiary on the termination of their employment with
the Issuer or such Subsidiary, provided that the aggregate amount of such
Restricted Payments in any one fiscal year will not exceed $2.0 million;
(v) the redemption of the Class C non-voting Common Stock of the
Issuer, outstanding on the date of the Indenture, in accordance with the
terms thereof as in effect on such date, provided that the aggregate amount
of such Restricted Payment will not exceed $7.5 million;
(vi) loans to employees of the Issuer or any Subsidiary in an
aggregate amount not to exceed $2.5 million outstanding at any time; and
(vii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Subordinated Indebtedness in
exchange for, or out of the net cash proceeds of a substantially
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concurrent incurrence (other than to a Subsidiary) of, Subordinated
Indebtedness of the Issuer so long as (A) the principal amount of such new
Indebtedness does not exceed the principal amount (or, if such Subordinated
Indebtedness being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination)
of the Subordinated Indebtedness being so purchased, redeemed, defeased,
acquired or retired, plus the lesser of the amount of any stated premium
required to be paid in connection with such refinancing pursuant to the
terms of the Subordinated Indebtedness being refinanced or the amount of
any premium actually paid at such time to refinance the Subordinated
Indebtedness, plus, in either case, the amount of reasonable expenses of
the Issuer incurred in connection with such refinancing, (B) such new
Subordinated Indebtedness is subordinated to the Notes to the same extent
as such Subordinated Indebtedness so purchased, redeemed, defeased,
acquired or retired and (C) such new Subordinated Indebtedness has an
Average Life longer than the Average Life of the Subordinated Indebtedness
being purchased, redeemed, defeased, acquired or retired and a final Stated
Maturity of principal later than the final Stated Maturity of principal of
the Subordinated Indebtedness being purchased, redeemed, defeased, acquired
or retired.
The actions described in clauses (i), (ii), (iii), (iv) and (v) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph (a)
and that the actions described in clauses (vi) and (vii) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be taken in accordance
with this paragraph and shall not reduce the amount that would otherwise be
available for Restricted Payments under clause (3) of paragraph (a). (Section
1009)
Limitation on Issuances and Sales of Capital Stock of Subsidiaries. The
Issuer (a) will not permit any Subsidiary to issue or sell any shares of its
Capital Stock (other than to the Issuer or a Wholly Owned Subsidiary) and (b)
will not permit any Person (other than the Issuer or a Wholly Owned Subsidiary)
to own any shares of Capital Stock of any Subsidiary; provided, however, that
this covenant shall not prohibit (i) the issuance and sale of all, but not less
than all, of the issued and outstanding shares of Capital Stock of any
Subsidiary in compliance with the other provisions of the Indenture or (ii) the
issuance of director's qualifying shares in accordance with applicable law.
(Section 1012)
Limitation on Transactions with Affiliates. The Issuer will not, and will
not permit any Subsidiary to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions with, or for the benefit
of, any Affiliate of the Issuer or any Subsidiary unless (a) such transaction is
solely between the Issuer and a Wholly Owned Subsidiary or (b) (i) such
transaction is in writing and on terms that are no less favorable to the Issuer
or such Subsidiary, as the case may be, than those that could have been obtained
in an arm's length transaction with third parties who are not Affiliates and
(ii) with respect to any transaction or series of related transactions involving
aggregate payments in excess of $5 million, the Issuer shall have delivered an
officers' certificate to the Trustee certifying that such transaction or series
of related transactions complies with clause (i) above and such transaction or
series of related transactions has been approved by the Board of Directors
(including a majority of the Disinterested Directors); provided that any
transaction or series of related transactions otherwise permitted under this
paragraph pursuant to which the Issuer or any Subsidiary will receive or render
value exceeding $15 million will not be permitted unless, prior to the
consummation of any such transaction or series of related transactions, the
Issuer has obtained a written opinion from a nationally recognized investment
banking firm to the effect that such transaction is on fair and reasonable terms
to the Issuer or such Subsidiary, and no less favorable to the Issuer or such
Subsidiary, as the case may be, than those which might be obtained at the time
from a Person who is not an Affiliate; provided, further, that this covenant
will not restrict (x) the Issuer from paying reasonable and customary regular
compensation and fees to directors of the Issuer or any Subsidiary who are not
employees of the Issuer or any Subsidiary, (y) any transaction between BKB or
Barnett and the Issuer or any Subsidiary, pursuant to an agreement in effect on
the date of the Indenture or required to be entered into as part of the HHI
Acquisition, as such agreement may be amended, renewed, extended, supplemented
or otherwise modified from time to time, provided that such agreement as so
amended, renewed, extended, supplemented or otherwise modified is not materially
less favorable to the Issuer or such Subsidiary, as the case may be, or to the
holders of the
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Notes, than such agreement as in effect on the date of the Indenture, and (z)
the purchase of any Mortgage-Backed Securities, Mortgage Loans or servicing
rights for Mortgage Loans by the Issuer or any of its Subsidiaries in the
ordinary course of the Issuer's or such Subsidiary's business. (Section 1013)
Limitation on Liens. The Issuer will not, and will not, with respect to
any Indebtedness or other obligation of the Issuer permit any Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien (other
than Permitted Liens) of any kind on or with respect to any of its property or
assets including any shares of stock or indebtedness of any Subsidiary, whether
owned at the date of the Indenture or thereafter acquired, or any income,
profits or proceeds therefrom, or assign or otherwise convey any right to
receive income thereon, unless (x) in the case of any Lien securing Subordinated
Indebtedness, the Notes are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Lien and (y) in the case of any
other Lien, the Notes are equally and ratably secured with the obligation or
liability secured by such Lien. (Section 1011)
Purchase of Notes Upon a Change of Control. If a Change of Control shall
occur at any time, then each holder of Notes shall have the right to require
that the Issuer purchase such holder's Notes, in whole or in part in integral
multiples of $1,000, at a purchase price (the "Change of Control Purchase
Price") in cash in an amount equal to 101% of the principal amount thereof, plus
accrued interest, if any, to the date of purchase (the "Change of Control
Purchase Date"), pursuant to the offer described below (the "Change of Control
Offer") and the other procedures set forth in the Indenture.
Within 15 days following any Change of Control, the Issuer shall notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Notes by first-class mail, postage prepaid, at the address appearing in the
security register, stating, among other things, (i) the purchase price and the
purchase date, which shall be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed, or such later date as is
necessary to comply with requirements under the Exchange Act; (ii) that any Note
not tendered will continue to accrue interest; (iii) that, unless the Issuer
defaults in the payment of the purchase price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after the
Change of Control Purchase Date; and (iv) certain other procedures that a holder
of Notes must follow to accept a Change of Control Offer or to withdraw such
acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Issuer will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change of Control Offer. There can be no assurance
that in the event of a Change of Control the Issuer will be able to obtain the
consents necessary to consummate a Change of Control Offer from the lenders
under agreements governing outstanding Indebtedness which may prohibit such an
offer. The failure of the Issuer to make or consummate the Change of Control
Offer or pay the Change of Control Purchase Price when due would result in an
Event of Default and would give the Trustee and the holders of the Notes the
rights described under "Events of Default."
One of the events which constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Issuer's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event holders of the Notes elect to require the Issuer to purchase the Notes
and the Issuer elects to contest such election, there can be no assurance as to
how a court interpreting New York law would interpret the phrase.
The existence of a holder's right to require the Issuer to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Issuer in a transaction which constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Issuer to purchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Issuer's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Issuer (including, in certain circumstances, an
acquisition of the Issuer by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "-- Certain
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Definitions" for the definition of "Change of Control." A transaction involving
the Issuer's management or its affiliates, or a transaction involving a
recapitalization of the Issuer, would result in a Change of Control if it is the
type of transaction specified by such definition.
The Issuer will comply with the applicable tender offer rules including
Rule 14e-l under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer.
Limitation on Guarantees of Indebtedness by Subsidiaries. (a) The Issuer
will not permit any Subsidiary, directly or indirectly, to guarantee, assume or
in any other manner become liable for the payment of any Indebtedness of the
Issuer unless (i) (A) if such Subsidiary is not a Guarantor, such Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee of payment of the Notes by such Subsidiary and (B)
with respect to any guarantee of Subordinated Indebtedness by a Subsidiary, any
such guarantee shall be subordinated to such Subsidiary's Guarantee with respect
to the Notes at least to the same extent as such Subordinated Indebtedness is
subordinated to the Notes and (ii) such Subsidiary waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Issuer
or any other Subsidiary as a result of any payment by such Subsidiary under its
Guarantee.
(b) Notwithstanding the foregoing, any Guarantee of the Notes created
pursuant to the provisions described in the foregoing paragraph shall provide by
its terms that it shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any Person that is not an
Affiliate of the Issuer, of all of the Issuer's and each Subsidiary's shares of
Capital Stock in, or all or substantially all the assets of, such Subsidiary
(which sale, exchange or transfer is not prohibited by the Indenture) or (ii)
the release by the holders of the Indebtedness of the Issuer described in the
preceding paragraph of their guarantee by such Subsidiary (including any deemed
release upon payment in full of all obligations under such Indebtedness, except
by or as a result of payment under such guarantee), at a time when (A) no other
Indebtedness of the Issuer has been guaranteed by such Subsidiary or (B) the
holders of all such other Indebtedness which is guaranteed by such Subsidiary
also release their guarantee by such Subsidiary (including any deemed release
upon payment in full of all obligations under such Indebtedness, except by or as
a result of payment under such guarantee). (Section 1014)
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Issuer will not, and will not permit any Subsidiary, directly
or indirectly, to create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction of any kind on the ability of any
Subsidiary to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock, (b) pay any Indebtedness
owed to the Issuer or any other Subsidiary, (c) make loans or advances to the
Issuer or any other Subsidiary or (d) transfer any of its properties or assets
to the Issuer or any other Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (i) the Bank Credit Agreement,
provided that the Issuer will not permit any Subsidiary to, (A) amend, modify,
terminate or waive the Limitation on Restricted Payments or Limitation on
Investments, Loans and Advances covenants of the Bank Credit Agreement or the
definitions contained in the Bank Credit Agreement, in each case as in effect on
the date of the Indenture, or any similar covenants in any amendments, renewals,
extensions, substitutions, replacements, restatements, increases, refinancings,
restructurings, supplements or other modifications of the Bank Credit Agreement,
to provide for, in each case, greater restrictions than those in effect on the
date of the Indenture with respect to the right of any Subsidiary to make
distributions to, loans to or other investments in the Issuer or (B) add to the
Bank Credit Agreement any covenant directly addressing the matters covered by
the "Limitation on Restricted Payments" or "Limitation on Investments, Loans and
Advances" covenants thereunder, or any similar covenant in any amendment,
renewal, extension, substitution, replacement, restatement, increase,
refinancing, restructuring, supplement or other modification of the Bank Credit
Agreement, in any manner prohibited by clause (A) of this clause (d)(i), (ii)
applicable law, (iii) customary non-assignment provisions of any lease governing
a leasehold interest of the Issuer or any Subsidiary, (iv) any agreement or
other instrument of a Person acquired by the Issuer or any Subsidiary in
existence at the time of such acquisition (but not created in connection with,
or in contemplation thereof), which encumbrance or restriction is not applicable
to any Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, or (v) any agreement that
extends, renews, refinances or
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replaces the agreements containing the encumbrances or restrictions in the
foregoing clause (iv), provided that the terms and conditions of any such
encumbrances or restrictions are not materially less favorable to the holders of
the Notes than those under or pursuant to the agreement evidencing the
Indebtedness so extended, renewed, refinanced or replaced. (Section 1010)
Maintenance of Risk Management. The Issuer will establish and maintain a
risk management program with respect to its portfolio of Mortgage Loans and
servicing rights so as to reduce fluctuations in the value of its servicing
portfolio due to interest rate movements. (Section 1015)
Business Activities. (a) The Issuer will not, and will not permit any
Subsidiary to, engage in any business other than in the usual and ordinary
course of the mortgage banking business and other than which is consistent with
the industry standards in the mortgage banking industry.
(b) Notwithstanding paragraph (a) above, the Issuer will not permit HHI to
engage in any business other than the servicing of its mortgage portfolio, as in
existence on the date of the Indenture, in the usual and ordinary course of its
business and consistent with past practice. (Section 1016)
Reports. The Issuer will file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission and whether or not the
Issuer has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Issuer would be required
to file if it were subject to Section 13 or 15 of the Exchange Act. The Issuer
will also be required (a) to file with the Trustee, and provide to each holder
of Notes, without cost to such holder, copies of such reports and documents
within 15 days after the date on which the Issuer files such reports and
documents with the Commission or the date on which the Issuer would be required
to file such reports and documents if the Issuer were so required and (b) if
filing such reports and documents with the Commission is not accepted by the
Commission or is prohibited under the Exchange Act, to supply at the Issuer's
cost copies of such reports and documents to any prospective holder of Notes
promptly upon written request. (Section 1019)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Issuer will not, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets to any other Person or Persons, or permit any
Subsidiary to enter into any such transaction or series of transactions, if such
transaction or series of transactions, in the aggregate, would result in the
sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Issuer and its
Subsidiaries on a consolidated basis to any other Person or Persons, unless at
the time and after giving effect thereto (a) either (i) if the transaction is a
consolidation or merger, the Issuer will be the continuing corporation or (ii)
the Person (if other than the Issuer) formed by such consolidation or into which
the Issuer or such Subsidiary is merged or the Person that acquires by sale,
assignment, conveyance, transfer, lease or disposition all or substantially all
the properties and assets of the Issuer and its Subsidiaries on a consolidated
basis (the "Surviving Entity") (A) will be a corporation duly organized and
validly existing under the laws of the United States of America, any state
thereof or the District of Columbia and (B) will expressly assume, by a
supplemental indenture, in form and substance satisfactory to the Trustee, the
Issuer's obligation for the due and punctual payment of the principal of,
premium, if any, and interest on all the Notes and the performance and
observance of every covenant of the Indenture and the Pledge Agreement on the
part of the Issuer to be performed or observed; (b) immediately before and
immediately after giving effect to such transaction or series of transactions on
a pro forma basis (and treating any obligation of the Issuer or any Subsidiary
incurred in connection with or as a result of such transaction or series of
transactions as having been incurred at the time of such transaction), no
Default or Event of Default will have occurred and be continuing; (c)
immediately after giving effect to such transaction or series of transactions on
a pro forma basis (and treating any obligation of the Issuer or any Subsidiary
incurred in connection with or as a result of such transaction or series of
transactions as having been incurred at the time of such transaction), the
Consolidated Net Worth of the Issuer (or of the Surviving Entity if the Issuer
is not the continuing obligor under the Indenture) is equal to or greater than
95% of the Consolidated Net Worth of the Issuer immediately prior to such
transaction or series of transactions; (d) immediately after giving effect
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to such transaction or series of transactions on a pro forma basis (on the
assumption that the transaction or series of transactions occurred on the first
day of the four-quarter period immediately prior to the consummation of such
transaction or series of transactions with the appropriate adjustments with
respect to the transaction or series of transactions being included in such pro
forma calculation), the Issuer (or the Surviving Entity if the Issuer is not the
continuing obligor under the Indenture) could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the provisions of the
"Limitation on Indebtedness" covenant; (e) each Guarantor, if any, unless it is
the other party to the transactions described above, shall have by supplemental
indenture confirmed that its Guarantee will apply to such Person's obligations
under the Indenture and the Notes; and (f) if any of the property or assets of
the Issuer or any of its Subsidiaries would thereupon become subject to any
Lien, the provisions of the "Limitation on Liens" covenant are complied with.
(Section 801)
Notwithstanding the foregoing, the Indenture permitted the mergers and
other corporate transactions effected in connection with the HHI Acquisition.
In connection with any such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition, the Issuer or the Surviving
Entity shall have delivered to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an officers' certificate and an opinion of counsel,
each stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition, and if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with the requirements of the Indenture and that all conditions precedent
therein provided for relating to such transaction have been complied with.
(Section 801)
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Issuer in accordance with the immediately preceding paragraphs in
which the Issuer is not the continuing obligor under the Indenture, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Issuer under the Indenture with the same effect as
if such successor had been named as the Issuer therein. When a successor assumes
all the obligations of its predecessor under the Indenture, the Notes and the
Pledge Agreement, the predecessor shall be released from those obligations;
provided that in the case of a transfer by lease, the predecessor shall not be
released from the payment of principal, premium, if any, and interest on the
Notes. (Section 802)
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of any interest on any Note when it becomes
due and payable and continuance of such default for a period of 30 days;
(ii) default in the payment of the principal of, or premium, if any,
on any Note at its Maturity (upon acceleration, optional redemption,
required purchase or otherwise);
(iii) default in the performance, or breach, of the provisions
described in "Consolidation, Merger and Sale of Assets" or the failure to
make or consummate a Change of Control Offer in accordance with the
provisions of the "Purchase of Notes Upon a Change of Control" covenant;
(iv) default in the performance, or breach, of any covenant, warranty
or other agreement of the Issuer, any Guarantor or any Pledgor contained in
the Indenture, any Guarantee or any Pledge Agreement (other than a default
in the performance, or breach, of a covenant, warranty or agreement which
is specifically dealt with in clauses (i), (ii) or (iii) above) and
continuance of such default or breach for a period of 30 days after written
notice shall have been given to the Issuer, such Guarantor or such Pledgor
by the Trustee or to the Issuer, such Guarantor or such Pledgor and the
Trustee by the holders of at least 25% in aggregate principal amount of the
Notes then outstanding;
(v) (a) one or more defaults in the payment of principal, premium, if
any, or interest on any Indebtedness of the Issuer aggregating $15 million
or more, when the same becomes due and payable at the stated maturity
thereof, and such default or defaults shall have continued after any
applicable grace period and shall not have been cured or waived, (b) one or
more defaults in the payment of any Hedge
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Termination Obligation of the Issuer or any Subsidiary which is outstanding
in amount aggregating $15 million or more when the same becomes due and
payable, (c) one or more defaults in the payment of principal on any
Indebtedness of a Subsidiary aggregating $15 million or more, when the same
becomes due and payable at the final Stated Maturity thereof or (d)
Indebtedness or any Hedge Termination Obligation of the Issuer or any
Subsidiary aggregating $15 million or more shall have been accelerated or
otherwise declared due and payable, or required to be prepaid or
repurchased (other than by regularly scheduled required prepayment or a
mandatory prepayment required in order to cause Indebtedness under the Bank
Credit Agreement not to exceed available borrowing limits), prior to the
stated maturity thereof;
(vi) any holder of any Indebtedness in excess of $15 million in the
aggregate of the Issuer or any Subsidiary that owns directly or indirectly
any Capital Stock of HHI or its successors shall notify the Issuer or such
Subsidiary of the intended sale or disposition of any assets of the Issuer
or any Subsidiary that have been pledged to or for the benefit of such
Person to secure such Indebtedness or shall commence proceedings, or take
action (including by way of set-off) to retain in satisfaction of any such
Indebtedness, or to collect on, seize, dispose of or apply, any such assets
of the Issuer or any Subsidiary pursuant to the terms of any agreement or
instrument evidencing any such Indebtedness of the Issuer or such
Subsidiary or in accordance with applicable law;
(vii) one or more judgments or orders shall be rendered against the
Issuer or any Subsidiary or any of their respective properties for the
payment of money, either individually or in an aggregate amount, in excess
of $20 million and shall not be discharged and either (A) an enforcement
proceeding shall have been commenced by any creditor upon such judgment or
order or (B) there shall have been a period of 60 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, was not in effect;
(viii) any Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under any Guarantee, or gives notice to such effect (other than
by reason of the termination of the Indenture or the release of any such
Guarantee in accordance with the Indenture);
(ix) any Pledge Agreement ceases to be in full force and effect or any
Pledgor denies or disaffirms its obligations under any Pledge Agreement or
the obligations under any Pledge Agreement cease to be secured by a
perfected security interest in any portion of the Collateral purported to
be pledged under any Pledge Agreement with respect thereto (other than in
accordance with the terms thereof); or
(x) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Issuer or any Significant Subsidiary.
(Section 501)
If an Event of Default (other than as specified in clause (x) above) occurs
and is continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding, by written notice to the Issuer
(and to the Trustee if such notice is given by the holders), may, and the
Trustee, upon the written request of such holders, shall declare the principal
of, premium, if any, and accrued interest on all of the outstanding Notes
immediately due and payable, and upon any such declaration such principal amount
of the Notes shall become immediately due and payable. If an Event of Default
specified in clause (x) above occurs and is continuing, then the principal of,
premium, if any, and accrued interest on all of the outstanding Notes shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any holder of Notes. (Section 502)
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Issuer and the Trustee, may rescind
and annul such declaration and its consequences if (a) the Issuer has paid or
deposited with the Trustee a sum sufficient to pay (i) all overdue interest on
all Notes, (ii) all unpaid principal of and premium, if any, on any outstanding
Notes that has become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Notes, (iii) to the extent that
payment of such interest is lawful, interest upon overdue interest at
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the rate borne by the Notes, and (iv) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and (b) all Events of Default,
other than the non-payment of amounts of principal of, premium, if any, or
interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived. No such rescission shall affect any
subsequent default or impair any right consequent thereon.
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the holders of all the Notes, waive any
past defaults under the Indenture, any Guarantee or any Pledge Agreement, except
a default in the payment of the principal of, premium, if any, or interest on
any Note, or in respect of a covenant or provision which under the Indenture,
any Guarantee or any Pledge Agreement cannot be modified or amended without the
consent of the holder of each Note outstanding. (Section 513)
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each holder of the Notes notice of the
Default or Event of Default within 45 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of,
premium, if any, or interest on any Notes, the Trustee may withhold the notice
to the holders of such Notes if a committee of its trust officers in good faith
determines that withholding the notice is in the interests of the holders of the
Notes. (Section 601)
The Issuer is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Issuer, any Pledgor and any Guarantor of
their respective obligations under the Indenture and as to any default in such
performance. The Issuer is also required to notify the Trustee within five
Business Days of the occurrence of any Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Issuer may, at its option and at any time, elect to have the
obligations of the Issuer and any Guarantor upon the Notes discharged with
respect to the outstanding Notes ("defeasance"). Such defeasance means that the
Issuer and any such Guarantor will be deemed to have paid and discharged the
entire Indebtedness represented by the outstanding Notes and to have satisfied
all their other obligations under such Notes and the Indenture insofar as such
Notes are concerned except for (i) the rights of holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due, (ii) the Issuer's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes, maintain an office or agency for
payments in respect of the Notes and segregate and hold such payments in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee and (iv)
the defeasance provisions of the Indenture. In addition, the Issuer may, at its
option and at any time, elect to have the obligations of the Issuer and any
Guarantor released with respect to certain covenants set forth in the Indenture,
and any omission to comply with such obligations shall not constitute a Default
or an Event of Default with respect to the Notes ("covenant defeasance").
(Sections 1101, 1102 and 1103)
In order to exercise either defeasance or covenant defeasance, (i) the
Issuer must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Notes, cash in United States dollars, or
U.S. Government Obligations (as defined in the Indenture), or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay and discharge the
principal of, premium, if any, and interest on the outstanding Notes on the
Stated Maturity (or upon redemption, if applicable) of such principal, premium,
if any, or installment of interest; (ii) no Default or Event of Default with
respect to the Notes will have occurred and be continuing on the date of such
deposit or, insofar as an event of bankruptcy under clause (x) of "Events of
Default"above is concerned, at any time during the period ending on the 91st day
after the date of such deposit; (iii) such defeasance or covenant defeasance
will not result in a breach or violation of, or constitute a default under, the
Indenture or any material agreement or instrument to which the Issuer or any
Guarantor is a party or by which it is bound; (iv) in the case of defeasance,
the Issuer shall have delivered to the Trustee an opinion of counsel stating
that
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the Issuer has received from, or there has been published by, the Internal
Revenue Service a ruling, or since May 7, 1996, there has been a change in
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred; (v) in the case of covenant defeasance, the
Issuer shall have delivered to the Trustee an opinion of counsel to the effect
that the holders of the Notes outstanding will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant defeasance
had not occurred; (vi) the Issuer shall have delivered to the Trustee an opinion
of counsel to the effect that the trust funds will not be subject to any rights
of holders of Indebtedness, including, without limitation, any rights arising
under the Indenture (other than the rights of the holders of the Notes to be
paid out of the proceeds of such trust funds) and that after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar law affecting
creditors' rights generally; and (vii) the Issuer shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with. (Section 1104)
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes as expressly
provided for in the Indenture) and the Trustee, at the expense of the Issuer,
will execute proper instruments acknowledging satisfaction and discharge of the
Indenture when (a) either (i) all the Notes theretofore authenticated and
delivered (other than destroyed, lost or stolen Notes which have been replaced
or paid and Notes for whose payment money has been deposited in trust with the
Trustee or any Paying Agent or segregated and held in trust by the Issuer and
thereafter repaid to the Issuer or discharged from such trust as provided for in
the Indenture) have been delivered to the Trustee for cancellation or (ii) all
Notes not theretofore delivered to the Trustee for cancellation (x) have become
due and payable, (y) will become due and payable at Stated Maturity within one
year or (z) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Issuer, and the Issuer or any
Guarantor has irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust for such purpose an amount sufficient to pay and
discharge the entire Indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and interest on the
Notes to the date of such deposit (in the case of Notes which have become due
and payable) or to the Stated Maturity or redemption date, as the case may be;
(b) the Issuer or any Guarantor has paid or caused to be paid all sums payable
under the Indenture by the Issuer; and (c) the Issuer has delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent provided in the Indenture relating to the satisfaction
and discharge of the Indenture have been complied with, and that such
satisfaction and discharge will not result in a breach or violation of, or
constitute a default under, the Indenture or any other material agreement or
instrument to which the Issuer is a party or by which the Issuer is bound.
(Section 401)
AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture, any Guarantee and any Pledge
Agreement may be entered into by the Issuer, each Guarantor, if any, each
Pledgor and the Trustee with the consent of the holders of a majority in
aggregate principal amount of the Notes then outstanding; provided, however,
that no such modification or amendment may, without the consent of the holder of
each outstanding Note affected thereby: (i) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, or reduce the
principal amount thereof, premium, if any, or the rate of interest thereon or
waive a default in the payment of the principal of, premium, if any, or interest
on any such Note, or change the coin or currency in which the principal of any
Note or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the Stated Maturity
thereof (or, in the case of
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redemption, on or after the redemption date); (ii) amend, change or modify the
obligation of the Issuer to make and consummate a Change of Control Offer in the
event of a Change of Control in accordance with the "Purchase of Notes Upon a
Change of Control" covenant, including amending, changing or modifying any
definition relating thereto; (iii) reduce the percentage in principal amount of
outstanding Notes, the consent of whose holders is required for any supplemental
indenture or amendment or the consent of whose holders is required for any
waiver of compliance with certain provisions of the Indenture, any Guarantee, or
any Pledge Agreement; (iv) modify any of the provisions of the Indenture, any
Guarantee, or any Pledge Agreement relating to the consent of holders or
relating to the waiver of past defaults or relating to the waiver of certain
covenants, except to increase the percentage of outstanding Notes required for
such actions or to provide that certain other provisions of the Indenture, any
Guarantee or any Pledge Agreement cannot be modified or waived without the
consent of the holder of each Note affected thereby; (v) except as otherwise
permitted under "Consolidation, Merger and Sale of Assets," consent to the
assignment or transfer by the Issuer or any Guarantor or any Pledgor of any of
their rights or obligations under the Indenture, any Guarantee or any Pledge
Agreement; (vi) amend or modify any of the provisions of the Indenture in any
manner which subordinates the Notes in right of payment to other Indebtedness of
the Issuer or which subordinates any Guarantee in right of payment to other
Indebtedness of such Guarantor; or (vii) make any change in the provisions of
the Indenture or the Notes or any Guarantee or any Pledge Agreement relating to
the Collateral that adversely affects the interest of the holders of the Notes.
(Sections 902 and 903)
Notwithstanding the foregoing, without the consent of any holder of the
Notes, the Issuer, the Guarantors, if any, the Pledgors and the Trustee may
modify or amend the Indenture, any Guarantee or any Pledge Agreement: (a) to
evidence the succession of another Person to the Issuer, a Guarantor, a Pledgor
or any other obligor on the Notes, and the assumption by any such successor of
the covenants of the Issuer or such obligor or Guarantor or such Pledgor or in
the Indenture and in the Notes and in any Guarantee and in any Pledge Agreement
as permitted under "Consolidation, Merger and Sale of Assets"; (b) to add to the
covenants of the Issuer, any Guarantor, any Pledgor or any other obligor upon
the Notes for the benefit of the holders of the Notes or to surrender any right
or power conferred upon the Issuer or any Guarantor or any Pledgor or any other
obligor upon the Notes, as applicable, in the Indenture, in the Notes, in any
Guarantee or in any Pledge Agreement; (c) to cure any ambiguity, or to correct
or supplement any provision in the Indenture, the Notes, any Guarantee or any
Pledge Agreement which may be defective or inconsistent with any other provision
in the Indenture, the Notes, any Pledge Agreement or any Guarantee or make any
other provisions with respect to matters or questions arising under the
Indenture, the Notes, any Pledge Agreement or any Guarantee; provided that, in
each case, such provisions shall not adversely affect the interest of the
holders of the Notes; (d) to comply with the requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the Trust
Indenture Act; (e) to add a Guarantor or Pledgor under the Indenture; (f) to
evidence and provide for the acceptance of the appointment of a successor
Trustee under the Indenture; or (g) to mortgage, pledge, hypothecate or grant a
security interest in favor of the Trustee for the benefit of the holders of the
Notes as additional security for the payment and performance of the Issuer's and
any Guarantor's obligations under the Indenture, in any property, or assets,
including any of which are required to be mortgaged, pledged or hypothecated, or
in which a security interest is required to be granted to the Trustee pursuant
to the Indenture or otherwise. (Section 901)
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1020)
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. If an Event of Default has occurred and is continuing, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent Person
would exercise under the circumstances in the conduct of such Person's own
affairs.
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The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Issuer, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that if it acquires any conflicting
interest (as defined) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture, the Notes, any Guarantee and any Pledge Agreement will be
governed by, and construed in accordance with, the laws of the State of New
York.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person becomes a Subsidiary or (b) assumed in connection with the
acquisition of assets from such Person, in each case other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or the
date the acquired Person becomes a Subsidiary.
"Affiliate" means, with respect to any specified Person (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person that
owns, directly or indirectly, 10% or more of such specified Person's Capital
Stock or any executive officer or director of any such specified Person or other
Person. For the purposes of this definition, "control," when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Average Life" means, as of the date of determination with respect to any
Indebtedness, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years from the date of determination to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
"Bank Credit Agreement" means the Credit Agreement dated as of March 15,
1996 among HLI, the lenders parties thereto, Nationsbank of Texas, N.A., as
Syndication Agent, Bankers Trust Company, as Documentation Agent, The First
National Bank of Boston, as Collateral Agent, and Chemical Bank, as
administrative agent for said lenders, as such agreement may be amended,
renewed, extended, substituted, replaced, restated, increased, refinanced,
restructured, supplemented or otherwise modified from time to time (including,
without limitation, any successive amendments, renewals, extensions,
substitutions, replacements, restatements, increases, refinancings,
restructurings, supplements or other modifications of the foregoing).
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Capital Stock" means, with respect to any person, any and all shares,
interests, partnership interests, participations, rights in or other equivalents
(however designated) of such Person's equity, including any Preferred Stock, and
any rights (other than debt securities convertible into such equity), warrants
or options exchangeable for or convertible into such equity, whether now
outstanding or issued after the date of the Indenture.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under generally accepted accounting
principles, and, for purposes of the Indenture, the amount of such obligation at
any date shall be the capitalized amount thereof at such date, determined in
accordance with such principles.
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"Cash Equivalents" means (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof; (b) certificates of deposit and
Eurodollar time deposits with maturities of one year or less from the date of
acquisition and overnight bank deposits of any commercial bank having capital
and surplus in excess of $500,000,000; (c) commercial paper of a domestic issuer
rated at least A-1 by S&P or P-1 by Moody's, (d) securities with maturities of
one year or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or territory or
by any foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by S&P or A2 by Moody's, or (e) shares of
money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (d) of this definition.
"Change of Control" means the occurrence of any of the following events:
(a) the Issuer ceases to directly or indirectly own 100% of the Capital Stock
(other than directors' qualifying shares) of HLI; (b) any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other
than Permitted Holders, is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 40% of the total
outstanding Voting Stock of the Issuer; (c) the Issuer consolidates with, or
merges with or into, another Person or conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Issuer, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Issuer is
converted into or exchanged for cash, securities or other property, other than
any such transaction (i) where the outstanding Voting Stock of the Issuer is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Issuer) or is converted into
or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation or (B) cash, securities and other property
(other than Capital Stock of the entity surviving such transaction) in an amount
that could be paid by the Issuer as a Restricted Payment as described under the
"Limitation on Restricted Payments" covenant (and such amount shall be treated
as a Restricted Payment subject to the provisions of the Indenture as described
under the "Limitation on Restricted Payments" covenant) and (ii) immediately
after such transaction, no "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 50% or more of the total outstanding Voting Stock of the
surviving or transferee corporation; (d) Continuing Directors shall at any time
cease to constitute a majority of the Board of Directors of the Issuer; or (e)
the Issuer is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the provisions
described under "Consolidation, Merger and Sale of Assets."
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Issuer and all Subsidiaries for such period as
determined in accordance with GAAP, adjusted by excluding, without duplication,
(a) any net after-tax extraordinary gains or losses (less all fees and expenses
relating thereto), (b) any net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to asset dispositions other than in the
ordinary course of business (sales of servicing rights being deemed to be in the
ordinary course of business), (c) the portion of net income (or loss) of any
Person (other than the Issuer or a Subsidiary) in which the Issuer or any
Subsidiary has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Issuer or any Subsidiary
in cash dividends or distributions during such period, (d) the net income (or
loss) of any Person combined with the Issuer or any Subsidiary on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(e) cash paid during such period (to the extent deducted in determining
Consolidated Adjusted Net Income during such period), which cash was paid for
the purchase of Hedge Contracts related to Servicing Rights (i) during the
period beginning five business days prior to and ending five business days after
the date of the
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closing of the HLI Acquisition and (ii) so long as the closing date of the HHI
Acquisition occurs on or before August 15, 1996, through the end of the one
month period after such closing date in an aggregate amount not to exceed $25
million under this clause (ii) and (f) the net income of any Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such Subsidiary is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Subsidiary or its stockholders; provided, that, for the
purpose of determining whether an incurrence of Indebtedness (1) by the Issuer
will be permitted pursuant to the "Limitation on Indebtedness" covenant, the
entire net income of each Subsidiary that is subject to a restriction under the
Bank Credit Agreement and/or any other instrument or agreement governing any
Indebtedness of such Subsidiary of the type set forth in clause (f) above will
be included in determining Consolidated Adjusted Net Income so long as the Bank
Credit Agreement and such other agreement or instrument governing such
Indebtedness permits such Subsidiary to declare and pay cash dividends or make
similar distributions sufficient to pay interest on the Indebtedness being
incurred and any other Indebtedness of the Issuer in existence as of the date of
determination and (2) by a Subsidiary (the "Borrowing Subsidiary") will be
permitted pursuant to the "Limitation on Indebtedness" covenant, the entire net
income of the Borrowing Subsidiary will be included in determining Consolidated
Adjusted Net Income and the entire net income of each other Subsidiary that is
subject to a restriction under the Bank Credit Agreement and/or any other
instrument or agreement governing any Indebtedness of such Subsidiary of the
type set forth in clause (f) above will be included in determining Consolidated
Adjusted Net Income so long as the Bank Credit Agreement and such other
agreement or instrument governing such Indebtedness permits such other
Subsidiary to declare and pay cash dividends or make similar distributions
sufficient to pay interest on the Indebtedness being incurred and any other
Indebtedness of the Borrowing Subsidiary in existence as of the date of
determination.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the ratio
of (a) the sum of, without duplication, (i) Consolidated Adjusted Net Income,
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-cash Charges deducted in computing Consolidated Adjusted Net Income, minus
(ii) the aggregate amount of after tax unrealized gains (less all fees and
expenses relating thereto) attributable to Hedge Contracts related to Servicing
Rights included in computing Consolidated Adjusted Net Income, in each case, for
such period to (b) the sum of (i) Consolidated Interest Expense and (ii) cash
dividends due (whether or not declared) on Preferred Stock by the Issuer and any
Subsidiary (to any Person other than the Issuer and any Subsidiary), in each
case for such period. Gains or losses on Hedge Contracts related to Servicing
Rights are unrealized until the Hedge Contracts expire or the position is
closed.
"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes of the Issuer and all
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" means, for any period, without duplication,
the sum of (i) the interest expense of the Issuer and its Subsidiaries for such
period, including, without limitation, (A) amortization of debt discount, (B)
the amortization of the net cost of Interest Rate Agreements (including
discounts), (C) the interest portion of any deferred payment obligation and (D)
amortization of debt issuance costs (excluding from this clause (i) interest
expense of the Issuer and its Subsidiaries for such period on any Mortgage
Warehouse Debt, including, without limitation and with respect to such Mortgage
Warehouse Debt, (x) amortization of debt discount and (y) amortization of debt
issuance costs), plus (ii) the interest component of Capitalized Lease
Obligations of the Issuer and its Subsidiaries during such period, plus (iii)
any decrease in interest expense resulting from compensating balances held by
any lenders to the Issuer or its Subsidiaries, in each case as determined on a
consolidated basis in accordance with GAAP; provided that (x) the Consolidated
Interest Expense attributable to interest on any Indebtedness computed on a pro
forma basis and (A) bearing a floating interest rate shall be computed as if the
rate in effect on the date of computation had been the applicable rate for the
entire period and (B) which was not outstanding during the period for which the
computation is being made but which bears, at the option of the Issuer, a fixed
or floating rate of interest, shall be computed by applying at the option of the
Issuer, either the fixed or floating rate, and (y) in making such computation,
the Consolidated Interest Expense attributed to interest on any Indebtedness
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under a revolving credit facility computed on a pro forma basis shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period.
"Consolidated Net Worth" means, at any date, the stockholders' equity of
the Issuer less the amount of such stockholders' equity attributable to
Redeemable Capital Stock or treasury stock of the Issuer and any Subsidiary, as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash items (including unrealized losses
attributable to Hedge Contracts relating to Servicing Rights) of the Issuer and
any Subsidiary reducing Consolidated Adjusted Net Income for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
non-cash charge that requires an accrual of or reserve for cash charges for any
future period).
"Continuing Directors" shall mean, collectively, (i) all members of the
board of directors of the Company on the date of Indenture and (ii) all members
of the board of directors of the Company who assume office after the date of
Indenture and whose nomination for election by the Company's shareholders was
approved by a majority of the Continuing Directors or was otherwise approved
under the terms of the Stockholder Agreement, dated as of December 11, 1995, as
amended by Amendment No. 1, dated as of March 4, 1996, among the principal
stockholders of the Company.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Equity Offering" means an underwritten primary public offering by the
Issuer of its Common Stock pursuant to an effective registration under the
Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the date of the Indenture.
"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" means any guarantee of the obligations of the Issuer under the
Indenture and the Notes by any Subsidiary in accordance with the provisions of
the Indenture. When used as a verb, "Guarantee" shall have a corresponding
meaning.
"Guarantor" means any Subsidiary that incurs a Guarantee.
"Hedge Contract" means in respect of any Mortgage Loan, Mortgaged-Backed
Securities or servicing rights for Mortgage Loans, a contract to buy or sell an
instrument on the futures market, cash forward market, private investor whole
loan market or options market, or an option or financial future purchased over
the counter for future delivery of such instrument, in respect of interest rate
risks associated with such Mortgage Loans, Mortgage-Backed Securities and
servicing rights for Mortgage Loans.
"Hedge Termination Obligation" means any termination amount or other amount
payable by the Issuer or any of its Subsidiaries upon the early termination, by
reason of the occurrence of a default or other termination event thereunder of
any interest rate protection agreement, interest rate option, interest rate cap
or
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other interest rate hedge arrangement providing to the Issuer or any of its
Subsidiaries protection against changes in interest rates.
"Inactive Subsidiary" means (a) HHI and (b) any other Subsidiary that has
(i) no active operations or (ii) substantially no assets (other than Investments
in Capital Stock of other Subsidiaries).
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money (including overdrafts) or for
the deferred purchase price of property or services, excluding any trade
payables and other accrued current liabilities incurred in the ordinary course
of business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit and
acceptances issued under letter of credit facilities, acceptance facilities or
other similar facilities, (b) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, (c) all indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade payables arising in the ordinary course of business, (d) all Capitalized
Lease Obligations of such Person, (e) all obligations of such Person under or in
respect of Interest Rate Agreements, (f) all Indebtedness referred to in (but
not excluded from) the preceding clauses of other Persons and all dividends of
other Persons, the payment of which is secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (g) all guarantees by such
Person of Indebtedness referred to in this definition of any other Person, (h)
all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends and (i) any amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any Indebtedness of the types referred to
in clauses (a) through (h) above; provided that this definition of Indebtedness
shall not include obligations under any Hedge Contract. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by, the
fair market value of such Redeemable Capital Stock, such fair market value shall
be determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Interest Rate Agreements" means any interest rate protection agreements in
the form of a swap or similar agreement designed to protect against or manage
exposure to fluctuations in interest rates relating to any floating rate
Indebtedness of the Issuer or its Subsidiaries.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan or other extension of credit or capital contribution to (by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase, acquisition or
ownership by such Person of any Capital Stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued or owned by, any other Person and
all other items that would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any property
of any kind, real or personal, movable or immovable, owned on the date of the
Indenture or thereafter acquired. A Person shall be deemed to own subject to a
Lien any property which such Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Maturity" means, with respect to any Note, the date on which any principal
of such Note becomes due and payable as therein provided or as provided in the
Indenture, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, notice of redemption or purchase or otherwise.
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"Moody's" means Moody's Investors Service, Inc. and its successors.
"Mortgage" means a mortgage or deed of trust on real property which has
been improved by a completed single family (i.e., one to four family units)
dwelling unit (i.e., a detached house, townhouse or condominium).
"Mortgage-Backed Security" means any security (including a participation
certificate) owned by a Subsidiary issued by the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association or the Government
National Mortgage Association or any successor to any of the foregoing, that
represents an interest in a pool of Mortgage Loans.
"Mortgage Loan" means a Mortgage Note and the related Mortgage.
"Mortgage Note" means a promissory note which has a term not exceeding 30
years evidencing a loan or advance which is secured by a Mortgage.
"Mortgage Warehouse Debt" means Indebtedness of any Person under any
warehouse line of credit, mortgage loan repurchase agreement or similar facility
or under any commercial paper program that (a) is incurred for the purpose of
funding the origination or purchase of Mortgage Loans or Mortgage Notes that are
intended to be sold to investors and (b) in the case of any warehouse line of
credit or similar facility is, or, in the case of any commercial paper program,
the letters of credit or revolving credit facility providing credit enhancement
or liquidity backup for such commercial paper program are, secured by Mortgage
Loans, Mortgage Notes, Mortgage-Backed Securities or any combination thereof
owned by such Person.
"Pari Passu Indebtedness" means any Indebtedness of the Issuer that is pari
passu in right of payment with the Notes.
"Permitted Holders" means, as of the date of determination, The Bank of
Boston Corporation, Thomas H. Lee Company, Madison Dearborn Partners, Inc. and
the Affiliates of such Persons.
"Permitted Indebtedness" means one or more of the following:
(a) Servicing Secured Indebtedness, provided that the aggregate amount
of such Indebtedness outstanding pursuant to this clause (a), when added to
the aggregate amount of Indebtedness issued pursuant to clause (k) of this
definition of Permitted Indebtedness, may not exceed, prior to the
consummation of the HHI Acquisition, $700 million and thereafter $950
million; provided, further, that all Servicing Secured Indebtedness
outstanding under the Bank Credit Agreement as of the date of the Indenture
and as of the date of the consummation of the HHI Acquisition (and, in each
case, any refinancings of such outstanding Indebtedness) will be deemed to
have been incurred pursuant to this clause (a);
(b) Indebtedness of the Issuer pursuant to the Notes;
(c) Indebtedness of the Issuer or any Subsidiary outstanding on the
date of the Indenture (other than Indebtedness outstanding under the Bank
Credit Agreement and refinancings thereof) and listed on a schedule
thereto;
(d) Indebtedness of the Issuer owing to any Wholly Owned Subsidiary;
provided that any Indebtedness of the Issuer owing to any such Subsidiary
is made pursuant to an intercompany note and is subordinated in right of
payment from and after such time as the Notes shall become due and payable
(whether at Stated Maturity, upon acceleration or otherwise) to the payment
and performance of the Issuer's obligations under the Notes; provided,
further, that any disposition, pledge or transfer of any such Indebtedness
to a Person (other than a disposition, pledge or transfer to the Issuer or
another Wholly Owned Subsidiary) shall be deemed to be an incurrence of
such Indebtedness by the Issuer not permitted by this clause (d);
(e) Indebtedness of a Wholly Owned Subsidiary owing to the Issuer or
to another Wholly Owned Subsidiary of the Issuer; provided that any such
Indebtedness is made pursuant to an unsubordinated intercompany note;
provided, further, that (i) any disposition, pledge or transfer of any such
Indebtedness
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to a Person (other than a disposition, pledge or transfer to the Issuer or
another Wholly Owned Subsidiary) shall be deemed to be an incurrence of
such Indebtedness by such Wholly Owned Subsidiary not permitted by this
clause (e) and (ii) any transaction pursuant to which any Wholly Owned
Subsidiary, which is owed Indebtedness by any other Subsidiary, ceases to
be a Wholly Owned Subsidiary shall be deemed to be an incurrence of such
Indebtedness not permitted by this clause (e);
(f) guarantees of any Subsidiary of Indebtedness of the Issuer entered
into in accordance with the provisions of the "Limitation on Guarantees of
Indebtedness by Subsidiaries" covenant;
(g) the guarantee of the Issuer with respect to the Indebtedness of
any Subsidiary under the Bank Credit Agreement;
(h) the guarantees of the Issuer's Subsidiaries with respect to the
Indebtedness under the Bank Credit Agreement;
(i) secured Indebtedness of Subsidiaries, incurred in the ordinary
course of business, not to exceed $100 million in aggregate principal
amount outstanding at any time;
(j) unsecured Indebtedness of Subsidiaries, incurred in the ordinary
course of business, not to exceed $20 million in aggregate principal amount
outstanding at any time;
(k) Indebtedness of any Subsidiary related to the maintenance of
balances with the lender of such Indebtedness arising under a line of
credit (i) which has a term not in excess of one year, (ii) which is
secured by Cash Equivalents having an aggregate value not materially in
excess of the outstanding amount under such line of credit and (iii) with
respect to which the net interest expense thereon (after giving effect to
compensating balances) is not in excess of the interest income earned on
the collateral securing such line of credit; provided that the aggregate
amount of Indebtedness outstanding pursuant to this clause (k), when added
to the aggregate amount of Servicing Secured Indebtedness outstanding
pursuant to clause (a) of this definition of Permitted Indebtedness, may
not exceed, prior to the consummation of the HHI Acquisition, $700 million
and thereafter $950 million;
(l) intra-day overdrafts of any Subsidiary on dealer clearance
accounts arising in connection with trade settlements for Mortgage-Backed
Securities;
(m) letters of credit issued by the Issuer or any Subsidiary for the
benefit of the Governmental National Mortgage Association and any successor
thereto in connection with final pool certifications;
(n) repurchase agreements (including "gestation" repo transactions)
entered into in the ordinary course of a Subsidiaries' mortgage banking
business and relating to Mortgage Loans and Mortgage-Backed Securities;
(o) the endorsement of negotiable instruments by the Issuer or any
Subsidiary for deposit or collection or similar transactions in the
ordinary course of business;
(p) Mortgage Warehouse Debt of the Issuer or any Subsidiary;
(q) Indebtedness under Interest Rate Agreements, provided that such
agreements relate to Indebtedness permitted pursuant to the "Limitation on
Indebtedness" covenant; and
(r) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
Indebtedness described in clauses (b) and (c) of this definition, including
any successive refinancings, so long as (i) any such new Indebtedness shall
be in a principal amount that does not exceed the principal amount (or, if
such Indebtedness being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination)
so refinanced, plus the lesser of the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium actually paid at such
time to refinance the Indebtedness, plus, in either case, the amount of
reasonable expenses of incurred in connection with such refinancing, (ii)
such new Indebtedness has an Average Life longer than the remaining Average
Life of
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the Indebtedness so renewed, extended, substituted, refinanced or replaced
and a final Stated Maturity later than the final Stated Maturity of the
Indebtedness so renewed, extended, substituted, refinanced or replaced; and
(iii) in the case of any refinancing of Subordinated Indebtedness, such new
Indebtedness is made subordinate to the Notes at least to the same extent
as the Indebtedness being refinanced, provided that Indebtedness of the
Issuer may not be refinanced by Indebtedness of any Subsidiary of the
Issuer pursuant to this clause (r);
provided, however, that any Indebtedness of a Subsidiary permitted pursuant to
this definition of Permitted Indebtedness shall not be permitted with respect to
a Subsidiary that is an Inactive Subsidiary.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents, provided that at no time shall
any obligor (other than the United States Government) be the obligor under
more than 10%, if such obligor has a long term Indebtedness rating of A- or
better but less than AA by S&P (or, if unavailable, the equivalent rating
of Moody's), or 25%, if such obligor has a long term Indebtedness rating of
AA or better by S&P (or, if unavailable, the equivalent rating of Moody's),
of the Issuer's Cash Equivalents at such time;
(b) Investments in the Issuer or any Wholly Owned Subsidiary engaged
in the mortgage banking business;
(c) intercompany Indebtedness to the extent permitted under clauses
(d) and (e) of the definition of "Permitted Indebtedness";
(d) negotiable instruments held for deposit or collection in the
ordinary course of business, except to the extent that they would
constitute Investments in Affiliates;
(e) Investments in stock, obligations or securities received in
settlement of debts owing to the Issuer or a Subsidiary as a result of
foreclosure, perfection or enforcement of any Lien, in each case in the
ordinary course of business;
(f) travel, moving and other advances made to officers, employees and
consultants in the ordinary course of business;
(g) Investments by the Issuer or any Subsidiary in another Person, if
as a result of such Investment (i) such other Person becomes a Subsidiary
or (ii) such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the Issuer
or a Subsidiary; and
(h) Investments in Mortgage Loans, Mortgage-Backed Securities,
mortgage servicing rights and Hedge Contracts, in each case made in the
ordinary course of business.
"Permitted Liens" means the following types of Liens as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been consummated:
(a) The pledge of the Capital Stock of any Subsidiary as security for
Indebtedness permitted pursuant to the "Limitation on Indebtedness"
covenant;
(b) Liens (other than Liens securing Indebtedness under the Bank
Credit Agreement) existing as of the date of the Indenture;
(c) Liens on any property or assets of a Subsidiary granted in favor
of the Issuer;
(d) Liens securing the Notes;
(e) Liens arising by reason of (i) security for payment of workmen's
compensation or insurance consistent with past practice, (ii) good faith
deposits in connection with tenders, contracts (other than contracts for
the payment of money) or leases entered into in the ordinary course of
business or (iii) deposits to secure public or statutory obligations, or in
lieu of surety or appeal bonds;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation so long as such Indebtedness is permitted under the "Limitations
on Indebtedness" covenant;
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(g) Liens of mechanics, materialmen, laborers, employees or suppliers
or any similar Liens arising by operation of law incurred in the ordinary
course of business securing obligations that are not overdue by a period of
more than 30 days;
(h) Liens arising by reason of zoning restrictions, easements,
licenses, reservations, provisions, covenants, conditions, waivers,
restrictions on the use of property or minor irregularities of title (and
with respect to leasehold interests, mortgages, obligations, liens and
other encumbrances incurred, created, assumed or permitted to exist and
arising by, through or under a landlord or owner of the leased property,
with or without consent of the lessee), none of which materially impairs
the use of any parcel of property material to the operation of the business
of the Issuer and its Subsidiaries taken as a whole or the value of such
property for the purpose of such business;
(i) Liens arising by reason of surveys, exceptions, defects of title,
encumbrances, easements, reservations of, or rights of others for, rights
of way, sewers, electric lines, telegraph or telephone lines or other
similar purposes or zoning or other restrictions as to the use of real
property not materially interfering with the ordinary conduct of the
business of the Issuer and its Subsidiaries taken as a whole;
(j) Liens arising out of judgments or orders that have been adequately
bonded or with respect to which a stay of execution has been obtained
pending an appeal or proceeding for review; and
(k) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness
by the Issuer or any Subsidiary; provided that such Lien does not extend to
any property or assets of the Issuer or any Subsidiary other than the
assets acquired in connection with the incurrence of such Acquired
Indebtedness;
(l) Liens securing Interest Rate Agreements permitted to be incurred
pursuant to clause (q) of the definition of "Permitted Indebtedness";
(m) Liens arising from purchase money mortgages and purchase money
security interests incurred in the normal and ordinary course of the
business of the Issuer; provided that (i) the related Indebtedness shall
not be secured by any property or assets of the Issuer or any Subsidiary
other than the property and assets so acquired and (ii) the Lien securing
such Indebtedness shall be created within 60 days of such acquisition;
(n) any Lien securing any Mortgage Warehouse Debt of the Issuer or any
Subsidiary secured primarily by Mortgage Loans held for sale;
(o) any Lien arising under a binding agreement pursuant to which the
Issuer or any Subsidiary is obligated to sell identifiable Mortgage Loans,
which Lien encumbers such Mortgage Loans and secures the Issuer's or a
Subsidiary's obligation to sell and deliver such Mortgage Loans under such
agreement; provided, in each such case the Mortgage Loans are sold or
released from such Liens under such binding agreement within 90 days of the
entering into of such binding agreement; and
(p) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (a), (b) and (k); provided that (i)
the amount of security is not thereby increased, (ii) the aggregate amount
of Indebtedness or other obligations secured by the Lien after such
extension, renewal or replacement does not exceed the aggregate amount of
Indebtedness or other obligations secured by the existing Lien prior to
such extension, renewal or replacement plus an amount equal to the lesser
of (A) the stated premium required to be paid with such an extension,
renewal or replacement pursuant to the terms of the Indebtedness or (B) the
amount of any premium actually paid by the Issuer or the Subsidiary, as the
case may be, to accomplish such extension, renewal or replacement and (iii)
the Indebtedness secured by such Lien is permitted under the provisions of
the "Limitation on Indebtedness" covenant.
"Person" means any individual, corporation, partnership, business trust,
joint venture, association, joint stock company, trust, unincorporated
organization, limited liability company or other entity, or government or any
agency or political subdivision thereof.
"Pledge Agreement" means the Pledge Agreement, dated as of the date of the
Indenture, by the Issuer in favor of the Trustee and any future Pledge Agreement
entered into by the Issuer or any Subsidiary in favor of the Trustee, pursuant
to the Indenture, in each case, in the form attached to the Indenture.
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"Pledgor" means the Issuer and any Subsidiary that is a "Pledgor" under a
Pledge Agreement.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding, or issued after
the date of the Indenture, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Qualified Capital Stock" of any person means any and all Capital Stock of
such person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time prior to such final Stated Maturity, or is convertible into
or exchangeable for debt securities at any time prior to such final Stated
Maturity.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw- Hill,
Inc., and its successors.
"Servicing Rights" means, at any date of determination, the mortgage loan
servicing rights and related receivables owned by the Issuer and its
Subsidiaries.
"Servicing Secured Indebtedness" means Indebtedness of the Issuer and
Subsidiaries under the Bank Credit Agreement and/or other agreement or facility,
other than Mortgage Warehouse Debt, that is secured by, among other things, a
first priority security interest in Servicing Rights, and is advanced based only
on the value of such Servicing Rights.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Issuer that is
expressly subordinated in right of payment to the Notes.
"Subsidiary" of the Issuer means a corporation, partnership, joint venture,
limited liability company, trust, estate or other entity of which (or in which)
more than 50% of (a) the issued and outstanding Voting Stock, (b) the interest
in the capital or profits of such partnership or joint venture or (c) the
beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by the Issuer, by the Issuer and one or more of
its other Subsidiaries or by one or more of the Issuer's other Subsidiaries.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force on the date as of which this Indenture was executed, except as provided
with respect to the conformity of supplemental indentures with TIA.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers,
trustees or other voting members of the governing body of any Person
(irrespective of whether or not, at the time, stock of any other class or
classes shall have, or might have, voting power by reason of the happening of
any contingency).
"Wholly Owned Subsidiary" means any Subsidiary of the Issuer of which 100%
of the outstanding Capital Stock is owned by the Issuer or another Wholly Owned
Subsidiary of the Issuer.
BOOK-ENTRY DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form, without coupons. Except as described in the next paragraph, the Notes will
be deposited with, or on behalf of, The Depository Trust
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Company, New York, New York ("DTC"), and registered in the name of Cede & Co.,
as DTC's nominee in the form of a global Note certificate (the "Global
Certificate") or will remain in the custody of the Trustee pursuant to a FAST
Balance Certificate Agreement between DTC and the Trustee.
Initial Notes originally purchased by or transferred to (i) institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) who are not "qualified institutional buyers" (as defined in Rule
144A under the Securities Act ("QIBS")), (ii) except as described below, persons
outside the United States pursuant to sales in accordance with Regulation S
under the Securities Act or (iii) any other Persons who are not QIBs
(collectively, "Non-Global Purchasers") will be issued in registered form
without coupons (the "Certificated Notes"). Upon the transfer to a QIB of
Certificated Notes initially issued to a Non-Global Purchaser, such Certificated
Notes will be exchanged for an interest in the Global Certificate or in the
Notes in the custody of the Trustee representing the principal amount of notes
being transferred.
Notes originally purchased by persons outside the United States pursuant to
sales in accordance with Regulation S under the Securities Act will be
represented upon issuance by a temporary global Note certificate (the "Temporary
Certificate") which will not be exchangeable for Certificated Notes until the
expiration of the "40-day restricted period" within the meaning of Rule
903(c)(3) or Regulation S under the Securities Act. The Temporary Certificate
will be registered in the name of, and held by, a temporary certificate holder
until the expiration of such 40-day period, at which time the Temporary
Certificate will be delivered to the Trustee in exchange for Certificated Notes
registered in the names requested by such temporary certificate holder. In
addition, until the expiration of such 40-day period, transfers of interest in
the Temporary Certificate can only be effect through such temporary certificate
holder in accordance with the requirements set forth in "Notice to Investors."
DESCRIPTION OF THE INITIAL NOTES
The terms of the Initial Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Exchange Notes for which they may be exchanged pursuant to this Exchange Offer,
except that the Initial Notes are not freely transferable by holders thereof and
were issued subject to certain covenants regarding registration as provided
therein and in the Registration Rights Agreement (which covenants will terminate
and be of no further force or effect upon completion of this Exchange Offer).
See "Registration Rights Agreement."
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Exchange Notes will be issued in fully
registered form. The Exchange Notes initially will each be represented by a
single, permanent global certificate in definitive, fully registered form (the
"Global Note") and will be deposited with the Trustee as custodian for DTC and
registered in the name of a nominee of DTC.
The Global Note. Upon the issuance of the Global Note, DTC or its
custodian will credit, on its internal system, the respective principal amount
of Exchange Notes, of the individual beneficial interests represented by such
global securities to the respective accounts of persons who have accounts with
such depositary. Such accounts initially will be designated by or on behalf of
the Initial Purchasers. Ownership of beneficial interests in the Global Note
will be limited to persons who have accounts with DTC ("participants") or
persons who hold interests through participants. Ownership of beneficial
interests in the Global Note will be shown on, and the transfer of that
ownership will be effected only through records maintained by DTC or its nominee
(with respect to interests of participants) and the records of participants
(with respect to interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note. DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture and the Exchange Notes. No beneficial owner of
an interest in the Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture.
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Payments of the principal of, premium (if any) and interest on, the Global
Note, will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. Neither the Issuer, the Trustee nor any Paying Agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Issuer expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Issuer also expects that
payments by participants will be governed by standing instructions and customary
practice, as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a certificated note for any reason,
including to sell Exchange Notes to persons in states which require physical
delivery of such Exchange Notes, or to pledge such Exchange Notes, such holder
must transfer its interest in the Global Note, in accordance with the normal
procedures of DTC and the procedures set forth in the Indenture.
DTC has advised the Issuer that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the Global Note is credited
and only in respect of such portion of the aggregate principal amount of
Exchange Notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default under the Exchange
Notes, DTC will exchange the Global Note for certificated notes, which it will
distribute to its participants.
DTC has advised the Issuer as follows: DTC is a limited purpose trust
Issuer organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Issuer nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Notes. If DTC is at any time unwilling or unable to continue
as a depositary for the Global Note and a successor depositary is not appointed
by the Issuer within 90 days, Certificated Notes will be issued in exchange for
the Global Note.
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EXCHANGE OFFER; REGISTRATION RIGHTS
The Issuer entered into a registration rights agreement with the Initial
Purchasers (the "Registration Rights Agreement") pursuant to which the Issuer
agreed, for the benefit of the holders of the Initial Notes, at the Issuer's
cost, to use its best efforts (i) to file the Exchange Offer Registration
Statement within 45 days after the date of the original issue of the Initial
Notes with the Commission with respect to the Exchange Offer for the Exchange
Notes, which will have terms identical in all material respects to the Initial
Notes (except that the Exchange Notes will not contain terms with respect to
transfer restrictions or interest rate increases as described herein) and (ii)
to cause the Exchange Offer Registration Statement to be declared effective
under the Securities Act within 90 days after the date of the original issue of
the Notes. Promptly after the Exchange Offer Registration Statement has been
declared effective, the Issuer will offer the Exchange Notes in exchange for
surrender of the Initial Notes. The Issuer will keep the Exchange Offer open for
not less than 30 days (or longer if required by applicable law) after the date
notice of the Exchange Offer is mailed to the holders of the Initial Notes. For
each Initial Note validly tendered to the Issuer pursuant to the Exchange Offer
and not withdrawn by the holder thereof, the holder of such Initial Note will
receive an Exchange Note having a principal amount equal to that of the tendered
Initial Note. Interest on each Exchange Note will accrue from the last interest
payment date on which interest was paid on the tendered Initial Note in exchange
therefor or, if no interest has been paid on such Initial Note, from the date of
its original issue.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no action letters to third parties, and subject
to the immediately following sentence, the Issuer believes that the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof without further registration under
the Securities Act. However, any purchaser of Notes who is an "affiliate" of the
Issuer or who intends to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes (i) will not be able to rely on the
interpretation by the staff of the Commission set forth in the above referenced
no action letters, (ii) will not be able to tender Notes in the Exchange Offer
and (iii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or transfer of the Notes,
unless such sale or transfer is made pursuant to an exemption from such
requirements.
Each holder of the Initial Notes (other than certain specified holders) who
wishes to exchange Initial Notes for Exchange Notes in the Exchange Offer will
be required to make certain representations, including that (i) it is not an
affiliate of the Issuer, (ii) any Exchange Notes to be received by it were
acquired in the ordinary course of its business and (iii) at the time of
commencement of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes. In addition, in connection with any resales of Exchange
Notes, any broker-dealer (a "Participating Broker-Dealer") who acquired the
Notes for its own account as a result of market-making activities or other
trading activities must deliver a prospectus meeting the requirements of the
Securities Act. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from the
original sale of the Notes) with the prospectus contained in the Exchange Offer
Registration Statement. Under the Registration Rights Agreement, the Issuer is
required to allow Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements to use the prospectus
contained in the Exchange Offer Registration Statement in connection with the
resale of such Exchange Notes.
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit the Issuer to effect the Exchange
Offer or if for any other reason the Exchange Offer Registration Statement is
not declared effective within 90 days after the original issuance of the Notes,
the Exchange Offer is not consummated within 120 days after the original issue
of the Notes, any holder of the Notes (other than the Initial Purchasers) is not
eligible to participate in the Exchange Offer or upon the request of any Initial
Purchaser under certain circumstances, the Issuer will at its cost, (a) as
promptly as practicable, file with the Commission the Shelf Registration
Statement covering resales of the Notes, (b) use its best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
by the 120th day after the original issue of the Notes (or promptly in the event
of a request by any Initial Purchaser) and (c) use its best
137
<PAGE> 140
efforts to keep effective the Shelf Registration Statement for a period of three
years after its effective date (or for a period of one year after such effective
date if such Shelf Registration Statement is filed at the request of the Initial
Purchasers or, for such shorter period, when all of the Notes covered by the
Shelf Registration Statement have been sold pursuant thereto). The Issuer will,
in the event of the filing of a Shelf Registration Statement, provide to each
holder of the Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement for the Notes has become effective and take certain other actions as
are required to permit unrestricted resales of the Notes. A holder of Notes who
sells such Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver the prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of the Notes will be required to deliver information to be
used in connection with the Shelf Registration Statement and to provide comments
on the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Notes included in the Shelf
Registration Statement and to benefit from the provisions regarding liquidated
damages set forth in the following paragraph.
In the event that either (i) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 45th day after the date of
original issue of the Notes, (ii) the Exchange Offer Registration Statement is
not declared effective on or prior to the 90th day after the date of original
issue of the Notes or (iii) the Exchange Offer is not consummated on or prior to
the 120th day after the date of original issue of the Notes or a Shelf
Registration Statement is not declared effective on or prior to the 120th day
after the date of original issue of the Notes, the interest rate borne by the
Notes shall be increased by one-half of one percent per annum following such
45-day period in the case of (i) above, such 90-day period in the case of clause
(ii) above or such 120-day period in the case of (iii) above, which rate will be
increased by an additional one-half of one percent per annum for each 90-day
period that any such additional interest continues to accrue; provided that the
aggregate increase in such interest rate will in no event exceed one percent per
annum. Upon (x) the filing of the Exchange Offer Registration Statement after
the 45 day period described in clause (i) above, (y) the effectiveness of the
Exchange Offer Registration Statement after the 90-day period described in
clause (ii) above or (z) the day before the date of the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 120-day period described in clause (iii) above, the
interest rate borne by the Notes from the date of such filing, effectiveness or
the day before the date of the consummation, as the case may be, will be reduced
by the full amount of such increase from the original interest rate set forth on
the cover of this Offering Memorandum; provided, however, that, if after any
such reduction in interest rate, a different event specified in clause (i), (ii)
or (iii) above occurs, the interest rate may again be increased and thereafter
reduced pursuant to the foregoing provisions.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Issuer.
138
<PAGE> 141
INCOME TAX CONSIDERATIONS
Holders of the Notes should consult their own tax advisors with respect to
their particular circumstances and with respect to the effects of state, local
or foreign tax laws to which they may be subject.
The following discussion is a summary of the material federal income tax
consequences expected to apply to the exchange of Initial Notes for Exchange
Notes and the ownership and disposition of Exchange Notes under currently
applicable law. The discussion does not cover all aspects of federal taxation
that may be relevant to, or the actual tax effect that any of the matters
described herein will have on, particular holders, and does not address state,
local, foreign or other tax laws. Further, the federal income tax treatment of a
holder of the Initial Notes and the Exchange Notes may vary depending on the
holder's particular situation. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, taxpayers
subject to the alternative minimum tax and foreign persons) may be subject to
special rules not discussed below. The description assumes that holders of the
Initial Notes and the Exchange Notes will hold the Initial Notes and the
Exchange Notes as "capital assets" (generally, property held for investment
purposes) within the meaning of Section 1221 of the Code.
THE EXCHANGE
An exchange of Initial Notes for Exchange Notes should be treated as a
"non-event" for federal income tax purposes because the Exchange Notes should
not be considered to differ materially in kind or extent from the Initial Notes.
As a result, no federal income tax consequences would result to holders
exchanging Initial Notes for Exchange Notes.
THE EXCHANGE NOTES
Interest Payments on the Exchange Notes. The Initial Notes were not issued
with original issue discount. The stated interest on the Initial Notes and
Exchange Notes should be considered to be "qualified stated interest" and,
therefore, will be includible in a holder's gross income (except to the extent
attributable to accrued interest at the time of purchase) as ordinary income for
federal income tax purposes in accordance with a holder's tax method of
accounting.
Tax Basis. A holder's adjusted tax basis (determined by taking into
account accrued interest at the time of purchase) in an Exchange Note received
in exchange for an Initial Note will equal the cost of the Initial Note to such
holder, increased by the amounts of market discount previously included in
income by the holder and reduced by any principal payments received by such
holder with respect to the Exchange Notes and by amortized bond premium. A
holder's adjusted tax basis in an Exchange Note purchased by such holder will be
equal to the price paid for such an Exchange Note (determined by taking into
account accrued interest at the time of purchase), increased by market discount
previously included in income by the holder and reduced by any principal
payments received by such holder with respect to an Exchange Note and by
amortized bond premium. See "Market Discount and Bond Premium" below.
Sale, Exchange or Retirement. Upon the sale, exchange or retirement of an
Exchange Note, a holder will recognize taxable gain or loss, if any, equal to
the difference between the amount realized on the sale, exchange or retirement
and such holder's adjusted tax basis in such Exchange Note. Such gain or loss
will be a capital gain or loss (except to the extent of any accrued market
discount), and will be a long-term capital gain or loss if the Exchange Note has
been held for more than one year at the time of such sale, exchange or
retirement.
Market Discount and Bond Premium. Holders should be aware that the market
discount provisions of the Code may affect the Exchange Notes. These rules
generally provide that a holder who purchases Exchange Notes for an amount which
is less than their principal amount will be considered to have purchased the
Exchange Notes at a "market discount" equal to the amount of such difference.
Such holder will be required to treat any gain realized upon the disposition of
the Exchange Note as interest income to the extent of the market discount that
is treated as having accrued during the period that such holder held such
Exchange Note, unless an election is made to include such market discount in
income on a current basis. A
139
<PAGE> 142
holder of an Exchange Note who acquires the Exchange Note at a market discount
and who does not elect to include market discount in income on a current basis
may also be required to defer the deduction of a portion of the interest on any
indebtedness incurred or continued to purchase or carry the Exchange Note until
the holder disposes of such Exchange Note in a taxable transaction.
If a holder's tax basis in an Exchange Note immediately after acquisition
exceeds the stated redemption price at maturity of such Exchange Note, such
holder may be eligible to elect to deduct such excess as amortizable bond
premium pursuant to Section 171 of the Code.
Purchasers of the Exchange Notes should consult their own tax advisors as
to the application to such purchasers of the market discount and bond premium
rules.
HOLDERS OF THE INITIAL NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING OR
DISPOSING OF THE INITIAL NOTES AND THE EXCHANGE NOTES, INCLUDING THE APPLICATION
OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND POSSIBLE FUTURE CHANGES IN
SUCH FEDERAL TAX LAWS.
140
<PAGE> 143
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
issued by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Initial Notes where such Notes were acquired as a result of
market-making activities or other trading activities. The Issuer has agreed that
for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until 1996, all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Issuer will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such brokerdealer and/or the
purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account pursuant to the Exchange
Offer and any broker or dealer that participates in a distribution of such
Exchange Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Issuer will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Issuer has agreed to pay all expenses incident to the
Exchange Offer other than commissions or concessions of any brokers or dealers
and will indemnify the holders of the Notes (including any brokerdealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Issuer by Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston,
Massachusetts.
EXPERTS
The balance sheet of HomeSide, Inc. as of March 14, 1996, included in this
Prospectus and elsewhere in the registration statement, has been audited by
Arthur Andersen LLP, independent certified public accountants, as indicated in
their report with respect thereto, and is included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
The consolidated balance sheets of BancBoston Mortgage Corporation, as of
December 31, 1995 and 1994 and the related consolidated statements of operations
and retained earnings and cash flows for each of the three years in the period
ended December 31, 1995, included in this Prospectus and elsewhere in the
registration statement, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as indicated in their report with respect thereto, and
is included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
The consolidated balance sheets of Barnett Mortgage Company and
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of operations, stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1995, included in this registration
statement, have been audited by Arthur Andersen LLP, independent certified
public accountants, as indicated in their report with
141
<PAGE> 144
respect thereto, and is included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
The consolidated statements of financial condition of BancPLUS Financial
Corporation and subsidiary as of December 31, 1994 and 1993 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended, included in this Prospectus and elsewhere in the
registration statement, have been audited by KPMG Peat Marwick LLP, independent
auditors, as set forth in their report included herein. In that report, that
firm states that with respect to a certain subsidiary, Honolulu Mortgage
Company, Inc., its opinion is based on the report of other independent auditors,
namely Ernst & Young LLP. The financial statements referred to above have been
included herein in reliance upon the authority of those firms as experts in
accounting and auditing in giving said reports.
142
<PAGE> 145
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
HOMESIDE, INC.
Report of Independent Certified Public Accountants............................... F-2
Balance Sheet at March 14, 1996.................................................. F-3
Notes to Balance Sheet........................................................... F-4
BANCBOSTON MORTGAGE CORPORATION
Consolidated Balance Sheets at December 31, 1995 and March 15, 1996.............. F-6
Consolidated Statements of Income and Retained Earnings (Deficit) for the Quarter
Ended March 31, 1995 and the Period January 1, 1996 through March 15, 1996.... F-7
Consolidated Statements of Cash Flows for the Quarter Ended March 31, 1995 and
the Period January 1, 1996 through March 15, 1996............................. F-8
Notes to Consolidated Financial Statements....................................... F-9
BARNETT MORTGAGE COMPANY
Consolidated Balance Sheets at December 31, 1995 and March 31, 1996.............. F-11
Consolidated Statements of Operations for Quarters Ended March 31, 1995 and
1996.......................................................................... F-12
Consolidated Statements of Cash Flows for the Quarters Ended March 31, 1995 and
1996.......................................................................... F-13
Notes to Consolidated Financial Statements....................................... F-14
BANCBOSTON MORTGAGE CORPORATION
Report of Independent Accountants................................................ F-15
Consolidated Balance Sheets at December 31, 1994 and 1995........................ F-16
Consolidated Statements of Operations and Retained Earnings for the Years Ended
December 31, 1993, 1994 and 1995.............................................. F-17
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995.............................................. F-18
Notes to Consolidated Financial Statements....................................... F-20
BARNETT MORTGAGE COMPANY
Report of Independent Certified Public Accountants............................... F-34
Consolidated Balance Sheets at December 31, 1994 and 1995........................ F-35
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995.............................................. F-36
Consolidated Statements of Stockholder's Equity for the Years Ended
December 31, 1993, 1994 and 1995.............................................. F-37
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995.............................................. F-38
Notes to Consolidated Financial Statements....................................... F-39
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
Independent Auditors' Report..................................................... F-51
Consolidated Statements of Financial Condition at December 31, 1993 and 1994..... F-52
Consolidated Statements of Operations for the Years Ended December 31, 1993 and
1994.......................................................................... F-53
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1993 and 1994.................................................... F-54
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993 and
1994.......................................................................... F-55
Notes to Consolidated Financial Statements....................................... F-56
</TABLE>
F-1
<PAGE> 146
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and
the Board of Directors of
HomeSide, Inc.:
We have audited the accompanying balance sheet of HOMESIDE, INC. (a Delaware
corporation) as of March 14, 1996. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. 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
audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of HomeSide, Inc. as of March 14,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Jacksonville, Florida
April 10, 1996, except for Note 3, as to
which the date is May 31, 1996
F-2
<PAGE> 147
HOMESIDE, INC.
<TABLE>
BALANCE SHEET
MARCH 14, 1996
(NOTE 1)
<S> <C>
ASSETS
Total assets................................................................. $ 0
=============
STOCKHOLDERS' EQUITY
COMMON STOCK:
Class A voting, $.01 par value, 1,500,000 shares authorized and
1,131,429 shares subscribed............................................ $ 11,314
Class B non-voting, $.01 par value, 5,714 shares authorized and
subscribed............................................................. 57
Class C non-voting, $1.00 par value, 5,714 shares authorized and
subscribed............................................................. 5,714
-------------
17,085
ADDITIONAL PAID-IN CAPITAL................................................... 199,982,915
SUBSCRIPTION RECEIVABLE...................................................... (200,000,000)
-------------
Total stockholders' equity.............................................. $ 0
=============
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-3
<PAGE> 148
HOMESIDE, INC.
NOTES TO BALANCE SHEET
MARCH 14, 1996
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
On December 11, 1995, HomeSide, Inc. ("HomeSide") was formed for the
purpose of acquiring BancBoston Mortgage Corporation ("BBMC"), the mortgage
banking subsidiary of The First National Bank of Boston ("BKB"). HomeSide
expects to adopt a fiscal year ended February 28 and accordingly will report
quarterly results for the quarters ended May 31, August 31, November 30 and
February 28.
HomeSide will initially be capitalized by the issuance of 1,131,429 shares
of Class A voting common stock, 5,714 shares of Class B non-voting common stock,
and 5,714 shares of Class C non-voting common stock. Each of these shares will
be purchased for approximately $175 per share.
On March 15, 1996, HomeSide completed the acquisition of BBMC for a
purchase price of approximately $225.9 million, with an additional $5 million
due upon the consummation of the Barnett Mortgage Company ("BMC") acquisition.
On March 4, 1996, HomeSide entered into an agreement to acquire BMC, the
mortgage banking subsidiary of Barnett Banks, Inc. ("Barnett").
HomeSide's business consists primarily of:
- Mortgage production: the origination and purchase of residential single
family mortgage loans through all major channels including correspondents
(including BKB and after the BMC acquisition, Barnett), mortgage brokers,
co-issue partners, telemarketing, affinity programs and retail branches;
- Secondary marketing: the sale of residential single family mortgage loans
as pools underlying mortgage-backed securities guaranteed by governmental
or quasi-governmental agencies or as whole loans to investors; and
- Servicing: the administration, collection, and remittance of monthly
mortgage principal and interest payments, the collection and payment of
property taxes and insurance premiums and the management of certain loan
default activities.
The "Risk Factors" section in the accompanying offering memorandum should
be read in connection with these financial statements.
2. CONTINGENCIES
BBMC is a defendant in a number of legal proceedings arising in the normal
course of business. BBMC, in management's estimation, has recorded adequate
reserves in the financial statements for pending litigation. Management, after
reviewing all actions and proceedings pending against or involving BBMC,
considers that the aggregate liabilities or loss, if any, resulting form the
final outcome of these proceedings will not have a material effect on the
financial position of BBMC.
3. SUBSEQUENT EVENTS
On May 15, 1996, HomeSide issued $200 million of 11.25% senior secured
second priority notes ("Notes"). The Notes mature May 15, 2003 and pay interest
semiannually in arrears on May 15 and November 15 of each year, commencing
November 15, 1996. The Notes are redeemable at the option of HomeSide, in whole
or in part, at any time on or after May 15, 2001, at certain pre-set redemption
prices. Upon issuance, $90.0 million of the proceeds were used to repay bridge
financing incurred in the acquisition of BBMC, $87.5 million was placed into
escrow pending completion of the BMC acquisition, $6.5 million was used to pay
underwriting expenses and the remaining $16.0 million was retained by HomeSide.
The $87.5 million was released from escrow, and forwarded to HomeSide, on May
31, 1996 upon completion of the BMC acquisition as discussed below.
F-4
<PAGE> 149
On May 31, 1996, Barnett completed the sale of BMC (which owned certain of
Barnett's mortgage banking operations, primarily its servicing portfolio and
proprietary mortgage banking software systems) to HomeSide for a purchase price
of approximately $228.2 million. Barnett received cash and Siesta Holdings, Inc.
("Siesta"), an affiliate of Barnett, purchased an ownership interest in
HomeSide. As of May 31, 1996, (i) Bank of Boston, (ii) Thomas H. Lee Equity Fund
III, L.P. (the "Fund") and certain affiliates of Thomas H. Lee Company
(collectively, "'THL") and Madison Dearborn Capital Partners, L.P. ("MDP"),
collectively, and (iii) Siesta each owned one-third of HomeSide.
F-5
<PAGE> 150
BANCBOSTON MORTGAGE CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
DECEMBER 31, 1995 MARCH 15, 1996
----------------- --------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents..................................... $ 830 $ 23,216
Mortgage loans:
Held for sale............................................ 388,436 641,465
Held for investment...................................... 33,183 65,068
Accounts receivable........................................... 82,473 45,183
Accounts receivable from Bank of Boston and affiliates........ 343 --
Pool loan purchases........................................... 65,272 56,261
Mortgage claims receivable, net............................... 45,422 17,563
Mortgage servicing rights receivable, net..................... 533,891 522,469
Excess mortgage servicing rights receivable, net.............. 17,447 20,393
Accrued and deferred income taxes............................. 40,724 77,257
Real estate acquired.......................................... 2,627 2,797
Premises and equipment, net................................... 25,386 25,071
Other assets.................................................. 18,269 16,159
---------- ----------
Total assets.................................................. $1,254,303 $1,512,902
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Note payable to Bank of Boston................................ $ 966,000 $1,256,000
Accounts payable and accrued liabilities...................... 51,683 130,382
Accrued income taxes payable.................................. 36,213 --
Long term debt................................................ 13,816 13,790
---------- ----------
Total liabilities............................................. 1,067,712 1,400,172
---------- ----------
Common stock, $1 par value per share; 10,000 shares
authorized; 100 shares issued and outstanding............... -- --
Additional paid in capital.................................... 156,666 156,666
Retained earnings (accumulated deficit)....................... 29,925 (43,936)
---------- ----------
Total stockholder's equity.................................... 186,591 112,730
---------- ----------
Total liabilities and stockholder's equity.................... $1,254,303 $1,512,902
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 151
BANCBOSTON MORTGAGE CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (DEFICIT)
<CAPTION>
FOR THE PERIOD
FOR THE QUARTER JANUARY 1, 1996
ENDED THROUGH
MARCH 31, 1995 MARCH 15, 1996
--------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
(UNAUDITED)
Revenues:
Mortgage servicing fees..................................... $ 43,657 $ 38,977
Gain (loss) on hedge contracts.............................. 3,612 (128,795)
Amortization of mortgage servicing rights................... (23,103) (7,245)
-------- ---------
Net servicing revenue.................................. 24,166 (97,063)
Interest income............................................. 4,122 8,423
Interest expense............................................ (6,079) (10,089)
-------- ---------
Net interest revenue................................... (1,957) (1,666)
Net mortgage origination revenue............................ (1,083) 7,638
Gain on sale of servicing rights............................ 4,285 --
Other income................................................ 13 253
-------- ---------
Total revenue.......................................... 25,424 (90,838)
Expenses:
Salaries and employee benefits.............................. 11,696 10,287
Occupancy and equipment..................................... 2,358 2,041
Servicing losses on investor-owned loans.................... 733 5,560
Real estate acquired........................................ 218 291
Other expenses.............................................. 4,713 7,377
-------- ---------
19,718 25,556
Income (loss) before income taxes........................... 5,706 (116,394)
Income tax expense (benefit)................................ 2,277 (42,533)
-------- ---------
Net income (loss)........................................... 3,429 (73,861)
Retained (deficit) earnings at beginning of period.......... (28,901) 29,925
-------- ---------
Accumulated deficit at end of period........................ $(25,472) $ (43,936)
======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 152
BANCBOSTON MORTGAGE CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
FOR THE FOR THE PERIOD
QUARTER JANUARY 1, 1996
ENDED THROUGH
MARCH 31, 1995 MARCH 15, 1996
-------------- ---------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss).......................................... $ 3,429 $ (73,861)
Amortization............................................... 23,185 7,327
Depreciation............................................... 769 719
Servicing losses on investor-owned loans................... 733 5,560
Write down of real estate owned............................ 109 1,067
Gain (loss) on risk management contracts................... (3,612) 128,795
Loss on sale of mortgage servicing rights.................. (4,285) --
Capitalized excess mortgage servicing receivable........... 355 (3,967)
Mortgage loans originated and purchased for sale........... (426,918) (2,027,741)
Proceeds and principal repayments of mortgage loans held
for sale................................................. 627,155 1,774,712
Change in accounts receivable.............................. 394 37,633
Change in accrued and deferred income taxes................ (3,371) (72,746)
Change in pool loan purchases.............................. (2,269) 9,011
Change in mortgage claims receivable....................... 477 25,863
Change in other assets and accounts payable and accrued
liabilities.............................................. (18,578) 75,167
--------- -----------
Net cash provided by (used in) operating activities............. 197,573 (112,461)
--------- -----------
Cash flows used in investing activities:
Net origination of loans held for investment............... (71,908) (31,885)
Purchase of premises and equipment......................... (668) (404)
Purchase and origination of mortgage servicing rights...... (6,934) (60,171)
Proceeds from (purchase of) risk management contracts...... 3,262 (63,426)
Proceeds from sale of mortgage servicing rights............ 4,285 --
Proceeds from sale of real estate owned.................... 559 759
--------- -----------
Net cash used in investing activities........................... (71,404) (155,127)
--------- -----------
Cash flows (used in) provided by financing activities:
Net (repayments to) borrowings from Bank of Boston......... (130,522) 290,000
Repayment of long term debt................................ (46) (26)
--------- -----------
Net cash (used in) provided by financing activities........ (130,568) 289,974
--------- -----------
Net (decrease) increase in cash................................. (4,399) 22,386
Cash at beginning of period................................ 5,653 830
--------- -----------
Cash at end of period........................................... $ 1,254 $ 23,216
========= ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest................................................... $ 9,165 $ 9,211
========= ===========
Income taxes............................................... $ 5,648 $ 30,213
========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 153
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of BancBoston
Mortgage Corporation (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with the
audited consolidated financial statements of the Company for the year ended
December 31, 1995. In the opinion of management of the Company, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the period January 1,
1996 to March 15, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996.
The accompanying interim financial statements of the Company have been
prepared for the period January 1, 1996 to March 15, 1996, the date the Company
was sold, as discussed in "ORGANIZATION" below. Results of operations for
periods subsequent to March 15, 1996 will be included in future financial
statements of HomeSide, Inc. Results of operations for the three months ended
March 31, 1995 have been presented for comparative purposes.
2. ORGANIZATION
Prior to March 15, 1996, the Company was a wholly-owned subsidiary of the
First National Bank of Boston (Bank of Boston), which is a wholly-owned
subsidiary of Bank of Boston Corporation. Upon the close of business on March
15, 1996, Bank of Boston Corporation sold the Company to certain affiliates of
Thomas H. Lee Company and Madison Dearborn Capital Partner, L.P. (Investors),
creating an independent mortgage company, which was named HomeSide, Inc. Under
terms of the transaction, Bank of Boston received cash and an equity interest in
the new company. The investors retained a majority interest in the new company.
On May 31, 1996, Barnett Banks, Inc. (Barnett) sold Barnett Mortgage
Company (now HomeSide Holdings, Inc.), which owned certain of Barnett's mortgage
banking operations, primarily its servicing portfolio and proprietary mortgage
banking software systems, to HomeSide, Inc. Barnett received cash and an
affiliate of Barnett acquired an ownership interest in HomeSide, Inc. for cash.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies are discussed in Note 2 of the audited
consolidated financial statements of the Company for the year ended December 31,
1995. The accounting policies of the Company for the periods presented in the
accompanying interim financial statements conform to the policies presented in
the audited consolidated financial statements for the year ended December 31,
1995, except for the adoption of Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights" (SFAS 122).
On January 1, 1996, the Company adopted SFAS 122 which, among other
provisions, requires that the value of mortgage servicing rights associated with
mortgage loans originated by an entity be capitalized as assets. The value of
the Company's originated mortgage servicing rights (OMSR) is determined by
allocating the total costs of the mortgage loans between the loans and the
mortgage servicing rights based on their relative fair values. Previously, OMSR
were included with the cost of the related loans and considered in determining
the gain or loss on sale when the loans were sold. Through March 15, 1996, the
Company capitalized $2,067,000 of OMSR, which had the effect of increasing net
mortgage origination revenue by $2,067,000 for the period January 1, 1996 to
March 15, 1996 since a portion of the basis of loans originated for sale was
allocated to OMSR.
SFAS 122 also requires that capitalized mortgage servicing rights be
evaluated for impairment based on the fair value of these rights. For purposes
of determining impairment, the Company's mortgage servicing
F-9
<PAGE> 154
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
rights are stratified based on interest rate and type of loan
(conventional/government). Impairment, if any, is recognized through a valuation
allowance for each impaired stratum. The Company did not record any impairment
charges related to its mortgage servicing right portfolio for the period January
1, 1996 to March 15, 1996. Since SFAS 122 prohibits retroactive application,
historical accounting results have not been restated and, accordingly, the
accounting results for the quarter ended March 31, 1995 are not directly
comparable with the period January 1, 1996 to March 15, 1996.
4. RISK MANAGEMENT ACTIVITIES
As discussed in the Company's audited financial statements for the year
ended December 31, 1995, the Company has a risk management policy designed to
protect the economic value of its mortgage servicing portfolio from declines in
value due to increases in estimated prepayment speeds, which are primarily
influenced by declines in interest rates. During the first quarter of 1996,
long-term interest rates increased, reversing the declining trend which
prevailed during 1995. As a result, from January 1, 1996 to March 15, 1996, the
Company recognized a loss on risk management contracts of $128,795,000, which
included a reversal of $86,500,000 in unrealized gains recognized during 1995.
F-10
<PAGE> 155
BARNETT MORTGAGE COMPANY
<TABLE>
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
DECEMBER 31,
1995 MARCH 31, 1996
------------ -----------------
(AUDITED) (UNAUDITED)
<S> <C> <C>
Cash.......................................................... $ 14,987,783 $ 44,040,105
Mortgage Loans:
Held for sale, net....................................... 465,879,840 386,380,442
Held for investment, net................................. 19,225,181 22,314,481
Capitalized Mortgage Servicing Rights:
Purchased mortgage servicing rights, net................. 240,059,235 231,730,457
Excess mortgage servicing rights, net.................... 10,729,518 13,886,471
Accounts Receivable, net
Mortgage claims receivable............................... 40,810,317 39,641,519
Amounts due from affiliates.............................. 3,296,638 2,983,840
Other receivables........................................ 20,784,599 5,692,405
Property and Equipment, net................................... 25,263,834 24,862,286
Real Estate Owned, net........................................ 600,061 1,514,565
Goodwill, net................................................. 138,674,988 136,789,890
Other Assets.................................................. 14,318,185 10,485,138
------------ ------------
$994,630,179 $920,321,599
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Notes payable............................................ $653,055,514 $604,000,000
Drafts payable........................................... 11,573,446 17,417,755
Accounts payable and accrued liabilities................. 63,789,362 32,287,339
Deferred tax liability................................... 34,383,877 39,146,511
------------ ------------
Total liabilities................................... 762,802,199 692,851,605
------------ ------------
Stockholder's Equity:
Common stock, $100 par value; 10,000 shares authorized,
issued and outstanding................................. 1,000,000 1,000,000
Additional paid in capital............................... 248,453,974 248,453,974
Retained earnings........................................ (17,625,994) (21,983,980)
------------ ------------
Total stockholder's equity.......................... 231,827,980 227,469,994
------------ ------------
$994,630,179 $920,321,599
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 156
BARNETT MORTGAGE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 1995 AND MARCH 31, 1996
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
(UNAUDITED)
Mortgage Origination Revenue:
Mortgage origination fees.................................. $ 2,535,123 $ 5,642,082
Gain on sales of loans, net................................ 518,934 3,865,057
----------- ------------
Total mortgage origination revenue.................... 3,054,057 9,507,139
----------- ------------
Interest (Expense) Income:
Interest income............................................ 2,582,525 8,578,467
Interest expense........................................... (2,918,837) (6,094,265)
----------- ------------
Net interest (expense) income......................... (336,312) 2,484,202
----------- ------------
Mortgage Servicing Revenue:
Mortgage servicing income.................................. 19,380,299 31,288,417
Amortization of capitalized mortgage servicing rights...... (8,350,999) (17,011,378)
----------- ------------
Net mortgage servicing revenue........................ 11,029,300 14,277,039
----------- ------------
Other Income.................................................... 850,998 61,582
----------- ------------
Total revenues............................................. 14,598,043 26,329,962
----------- ------------
Expenses:
Salaries and benefits...................................... 9,132,475 14,770,678
General and administrative................................. 8,283,394 13,932,184
Occupancy and equipment.................................... 1,517,148 2,151,359
Amortization of goodwill................................... 552,775 1,395,098
----------- ------------
Total expenses........................................ 19,485,792 32,249,319
----------- ------------
Loss Before Income Taxes........................................ (4,887,749) (5,919,357)
Income Tax Benefit.............................................. (759,252) (1,561,371)
----------- ------------
Net Loss........................................................ $(4,128,497) $ (4,357,986)
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE> 157
BARNETT MORTGAGE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 31, 1995 AND MARCH 31, 1996
<CAPTION>
1995 1996
------------- ---------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (4,128,497) $ (4,357,986)
------------- ---------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Amortization of purchased mortgage servicing rights.... 8,350,999 17,011,378
Amortization of excess servicing fees.................. 569,239 589,245
Amortization of goodwill............................... 552,775 1,395,098
Depreciation and amortization of property and
equipment............................................ 597,188 802,376
Capitalization of excess servicing fees................ (37,633) (3,746,198)
Origination of loans held for sale..................... (516,811,802) (1,019,027,002)
Sales of mortgage loans held for sale.................. 644,607,527 1,098,526,400
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable, net............................. 7,110,040 16,573,790
Other assets......................................... 1,142,086 3,833,047
Accounts payable and accrued liabilities............. (11,179,656) (25,657,714)
Other, net........................................... -- 4,762,631
------------- ---------------
Total adjustments................................. 134,900,763 95,063,051
------------- ---------------
Net cash provided by operating activities......... 130,772,266 90,705,065
------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchased mortgage servicing rights....................... (3,152,172) (8,192,597)
Net increase in loans held for investment................. (6,453,881) (3,089,300)
Net decrease (increase) in real estate owned.............. 218,889 (914,504)
Purchase of property and equipment, net of retirements.... (617,133) (400,828)
Business acquisitions, net of cash acquired............... (158,747,064) --
------------- ---------------
Net cash used in investing activities............. (168,751,361) (12,597,229)
------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in notes payable............................. (118,891,132) (49,055,514)
Capital contributions..................................... 167,331,263 --
------------- ---------------
Net cash provided by (used in) financing
activities................................................ 48,440,131 (49,055,514)
------------- ---------------
NET INCREASE IN CASH........................................ 10,461,036 29,052,322
CASH AT BEGINNING OF YEAR................................... 3,900,572 14,987,783
============= ===============
CASH AT END OF YEAR......................................... $ 14,361,608 $ 44,040,105
============= ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 158
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Barnett
Mortgage Company ("BMC") and its wholly owned subsidiaries, BancPLUS Financial
Corporation ("BancPLUS") and Loan America Financial Corporation ("LAFC"). Wholly
owned subsidiaries of BancPLUS include BancPLUS Mortgage Corp. and Honolulu
Mortgage Company, Inc. ("HMC"). As discussed in Note 2, BancPLUS and LAFC were
acquired in 1995 and 1994, respectively. These acquisitions were accounted for
as purchases; therefore, BancPLUS and LAFC are included in the consolidated
financial statements from their respective dates of acquisition. BMC is a wholly
owned subsidiary of Barnett Banks, Inc. (the "Parent"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
2. ORGANIZATION
On February 28, 1995, BMC completed the acquisition of BancPLUS for
approximately $167 million in cash. BancPLUS and its wholly owned subsidiaries
are full service mortgage bankers based in San Antonio, Texas and Honolulu,
Hawaii, who had total assets of $244 million and a servicing portfolio of $13.9
billion at the date of acquisition. The purchase price in excess of net assets
acquired was $113 million.
On October 1, 1994, BMC completed the acquisition of LAFC for $60 million.
LAFC was a Miami based wholesale mortgage banking company which had assets of
$180 million and a servicing portfolio of approximately $4 billion at the date
of acquisition. The purchase price in excess of net assets acquired was $29
million.
On May 31, 1996, the parent sold BMC to HomeSide, Inc. Barnett received
cash and an affiliate of Barnett received an ownership interest in HomeSide,
Inc. for cash.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BMC's accounting policies are discussed in Note 1 of the audited
consolidated financial statements for the year ended December 31, 1995. The
accounting policies of BMC for the periods presented in the accompanying interim
financial statements conform to the policies presented in the audited
consolidated financial statements for the year ended December 31, 1995, except
for the adoption of Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights" ("SFAS 122").
On January 1, 1996, BMC adopted SFAS 122 which, among other provisions,
requires that the value of mortgage servicing rights associated with mortgage
loans originated by an entity be capitalized as assets. The adoption of SFAS 122
resulted in capitalized originated mortgage servicing rights ("OMSR") of
$7,461,000 for the quarter ended March 31, 1996.
SFAS 122 requires that capitalized mortgage servicing rights be evaluated
for impairment based on the fair value of these rights. For purposes of
determining impairment, BMC's mortgage servicing rights are stratified based on
interest rate, fixed rate versus adjustable rate, and type of loan (conventional
versus government). Impairment, if any, is recognized through a valuation
allowance for each stratum. BMC did not recognize any impairment charges related
to its mortgage servicing rights portfolio for the quarter ended March 31, 1996.
Since SFAS 122 prohibits retroactive application, historical accounting
results have not been restated and, accordingly, the accounting results for the
quarter ended March 31, 1996 are not directly comparable with the quarter ended
March 31, 1995.
F-14
<PAGE> 159
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
BancBoston Mortgage Corporation
We have audited the accompanying consolidated balance sheets of BancBoston
Mortgage Corporation as of December 31, 1994 and 1995, and the related
consolidated statements of operations and retained earnings and cash flows for
each of the three years in the period then ended. These financial statements are
the responsibility of the 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 BancBoston
Mortgage Corporation as of December 31, 1994 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period then ended, in conformity with generally accepted accounting
principles.
As discussed in Notes 2 and 10, BancBoston Mortgage Corporation adopted
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, and changed its method of accounting for purchased mortgage servicing
rights, effective January 1, 1993. BancBoston Mortgage Corporation also changed
its method of accounting for mortgage servicing fee income, effective January 1,
1994.
COOPERS & LYBRAND L.L.P.
Jacksonville, Florida
January 18, 1996, except for the
second paragraph of Note 1 and
the fifth paragraph of Note 2, as to
which the date is March 4, 1996
F-15
<PAGE> 160
BANCBOSTON MORTGAGE CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
AT DECEMBER 31,
-------------------------
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash................................................................ $ 5,653 $ 830
Mortgage loans
Held for sale..................................................... 271,215 388,436
Held for investment............................................... 28,589 33,183
Purchased mortgage servicing rights, net............................ 415,815 533,891
Excess mortgage servicing receivable, net........................... 15,333 17,447
Accounts receivable................................................. 66,390 82,473
Accounts receivable from Bank of Boston and affiliates.............. 373 343
Pool loan purchases................................................. 77,477 65,272
Mortgage claims receivable, net..................................... 48,835 45,422
Deferred tax asset.................................................. 31,012 40,724
Real estate acquired................................................ 924 2,627
Premises and equipment, net......................................... 25,279 25,386
Other assets........................................................ 19,992 18,269
---------- ----------
Total Assets.............................................. $1,006,887 $1,254,303
========== ==========
LIABILITIES & STOCKHOLDER'S EQUITY
Note payable to Bank of Boston...................................... $ 779,021 $ 966,000
Accounts payable and accrued liabilities............................ 81,269 51,683
Accrued income taxes................................................ 4,825 36,213
Long-term debt...................................................... 14,007 13,816
---------- ----------
Total Liabilities......................................... 879,122 1,067,712
---------- ----------
Commitments and Contingencies (Notes 1, 9, 11, 13 and 15)
Stockholder's Equity:
Common stock, $1 par value per share: 10,000 shares authorized;
100 shares issued and outstanding
Additional paid-in capital........................................ 156,666 156,666
Retained earnings (Accumulated deficit)........................... (28,901) 29,925
---------- ----------
Total Stockholder's Equity..................................... 127,765 186,591
---------- ----------
Total Liabilities & Stockholder's Equity.................. $1,006,887 $1,254,303
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE> 161
BANCBOSTON MORTGAGE CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1994 1995
--------- -------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Mortgage servicing fees................................ $ 111,822 $140,491 $ 173,038
Gain (loss) on risk management contracts............... 6,688 (6,702) 108,702
Amortization of mortgage servicing rights.............. (112,492) (66,801) (108,013)
--------- -------- ---------
Net servicing revenue............................... 6,018 66,988 173,727
--------- -------- ---------
Interest income........................................ 50,156 31,585 24,324
Interest expense....................................... (44,199) (33,952) (27,128)
--------- -------- ---------
Net interest revenue................................ 5,957 (2,367) (2,804)
--------- -------- ---------
Net mortgage origination revenue....................... 6,173 4,983 3,417
Gain on sales of servicing rights...................... 651 10,862 10,230
Other income........................................... 50 147 511
--------- -------- ---------
Total Revenue.................................. 18,849 80,613 185,081
--------- -------- ---------
Expenses:
Salaries and employee benefits......................... 33,096 40,370 45,381
Occupancy and equipment................................ 7,966 9,012 10,009
Servicing losses on investor-owned loans............... 2,770 7,177 9,981
Real estate acquired................................... 1,600 253 1,054
Other expenses......................................... 22,058 19,326 21,896
--------- -------- ---------
Total Expenses................................. 67,490 76,138 88,321
--------- -------- ---------
Income (loss) before income taxes and cumulative
effects of changes in accounting principles............ (48,641) 4,475 96,760
Income tax expense (benefit) before cumulative
effects of changes in accounting principles:
Current................................................ (1,425) 4,773 47,646
Deferred............................................... (15,859) (2,248) (9,712)
--------- -------- ---------
Total Income Tax Expense (Benefit)............. (17,284) 2,525 37,934
--------- -------- ---------
Income (loss) before cumulative effects of changes
in accounting principles............................... (31,357) 1,950 58,826
Cumulative effect on prior years of:
Change in purchased mortgage servicing rights (PMSR)
valuation method, net of tax........................... (59,921) -- --
Change in accounting for income taxes.................... 6,093 -- --
Change in accounting for mortgage servicing fee income,
net of tax............................................. -- 3,455 --
--------- -------- ---------
Net Income (Loss)................................... (85,185) 5,405 58,826
Retained Earnings (Accumulated Deficit), January 1....... 50,879 (34,306) (28,901)
--------- -------- ---------
Retained Earnings (Accumulated Deficit), December 31..... $ (34,306) $(28,901) $ 29,925
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE> 162
BANCBOSTON MORTGAGE CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows (used in) provided by operating
activities:
Net income (loss)................................. $ (85,185) $ 5,405 $ 58,826
Adjustments to reconcile net income (loss) to cash
(used in) provided by operations:
Cumulative effects of change in:
PMSR valuation, net of tax................... 59,921 -- --
Accounting for income taxes.................. (6,093) -- --
Accounting for mortgage servicing fees, net
of tax.................................... -- (3,455) --
Amortization................................... 117,177 67,207 108,404
Depreciation................................... 2,243 2,621 3,133
Servicing losses on investor-owned loans....... 2,770 7,177 9,981
Deferred tax benefit........................... (15,859) (2,248) (9,712)
Gain on sale of mortgage servicing rights...... (651) (10,862) (10,230)
(Gain) loss on risk management contracts....... (6,688) 6,702 (108,702)
Write down of real estate acquired............. 1,113 1,066 1,699
Capitalized excess mortgage servicing
receivable................................... (13,557) (3,653) (7,513)
Mortgage loans originated and purchased for
sale......................................... (8,525,347) (4,673,100) (4,816,964)
Proceeds and principal repayments of mortgage
loans held for sale.......................... 8,395,528 5,005,969 4,694,909
Change in accounts receivable.................. (13,827) (7,482) (16,053)
Change in pool loan purchases.................. (1,345) 9,002 12,205
Change in mortgage claims receivable........... (13,681) 4,574 (5,383)
Change in accrued income taxes................. (3,584) (1,231) 31,388
Change in other assets and accounts payable and
accrued liabilities.......................... (3,154) (13,051) (11,899)
----------- ----------- -----------
Net cash (used in) provided by operating
activities................................... (110,219) 394,641 (65,911)
----------- ----------- -----------
Cash flows used in investing activities:
Principal payments on mortgage loans
held for investment............................ 7,038 11,216 12,966
Purchase of premises and equipment................ (4,170) (5,355) (3,141)
Acquisition of Bell Mortgage...................... -- -- (891)
Purchase of mortgage servicing rights............. (124,693) (164,047) (193,013)
Proceeds from risk management contracts, net...... 6,688 (9,641) 27,120
Proceeds from real estate acquired................ 5,010 2,773 2,610
Proceeds from sales of mortgage servicing
rights......................................... 651 10,862 28,649
----------- ----------- -----------
Net cash used in investing activities.......... (109,476) (154,192) (125,700)
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE> 163
BANCBOSTON MORTGAGE CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<CAPTION>
YEARS ENDED DECEMBER 31,
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows provided by (used in) financing
activities:
Borrowings from Bank of Boston.................... 7,674,500 3,988,224 3,669,085
Repayments to Bank of Boston...................... (7,455,481) (4,228,214) (3,482,106)
Repayment of long-term debt....................... (159) (173) (191)
----------- ----------- -----------
Net cash provided by (used in) financing
activities................................... 218,860 (240,163) 186,788
----------- ----------- -----------
Net (decrease) increase in cash..................... (835) 286 (4,823)
Cash at January 1................................. 6,202 5,367 5,653
----------- ----------- -----------
Cash at December 31............................... $ 5,367 $ 5,653 $ 830
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest....................................... $ 44,809 $ 32,819 $ 27,498
=========== =========== ===========
Income taxes................................... $ 2,158 $ 7,864 $ 16,258
=========== =========== ===========
Supplemental schedule of non-cash investing
activities:
BBMC purchased bulk mortgage servicing rights
during the years 1993, 1994 and 1995. In
conjunction with purchases, liabilities were
assumed as follows:
Accounts payable.................................. $ 14,586 $ 60,188 $ 23,022
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 164
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
BancBoston Mortgage Corporation (BBMC) is a wholly-owned subsidiary of The
First National Bank of Boston (Bank of Boston), which is a wholly-owned
subsidiary of Bank of Boston Corporation. In December 1995, Bank of Boston
Corporation signed an agreement with Thomas H. Lee Company and Madison Dearborn
Partners (Investors) to sell BBMC, creating an independent mortgage company.
Under the terms of the agreement, Bank of Boston will receive cash and an equity
interest in the new company. The Investors will acquire a majority interest in
the new company. The transaction is expected to close in the first half of 1996.
On March 4, 1996, Barnett Banks, Inc. (Barnett) entered into an agreement
to sell certain of its mortgage banking operations, primarily its servicing
portfolio and proprietary mortgage banking software systems to the new company.
Barnett will receive cash and an ownership interest in the new company. The
transaction is expected to close in the second quarter of 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include BBMC and its wholly-owned
subsidiaries. All material intercompany transactions have been eliminated.
Certain reclassifications have been made to the 1993 and 1994 financial
statements to conform to the 1995 presentation.
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, the
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.
Interest rate products
BBMC enters into financial agreements and purchases financial instruments
as part of its interest rate risk management strategy. These agreements are not
considered trading instruments and are primarily entered into for purposes of
managing the prepayment risk associated with mortgage servicing rights and
interest rate risk relative to commitments to originate mortgage loans against
market value declines resulting from fluctuations in interest rates. These
instruments and agreements are designated as a part of BBMC's risk management
strategy and are linked to the related assets being managed.
BBMC acquires financial instruments, including derivative contracts (risk
management contracts), to partially protect the value of mortgage servicing
rights from the effects of prepayment activity caused by interest rate declines.
These financial instruments increase or decrease in value in an inverse
relationship to changes in market interest rates. Accordingly, as interest rates
decline, these financial instruments will increase in value, and as interest
rates increase, these financial instruments will decline in value. The value of
these financial instruments will fluctuate daily with interest rate changes, and
these fluctuations may be significant. However, the decline in the value of
these financial instruments is limited to the value recorded in the balance
sheet. These financial instruments primarily include options on U.S. treasury
futures, forward contracts, and interest rate floors.
As of March 4, 1996, due to rising interest rates, the risk management
contracts had declined in value by the carrying amount recorded on the balance
sheet at December 31, 1995 (see Note 14).
The cost of option contracts to manage BBMC's fixed and variable rate loan
origination commitments are capitalized and amortized as an adjustment of gain
or loss over the life of the underlying option contract. Unamortized premiums
are included in other assets on the balance sheet.
F-20
<PAGE> 165
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Short-term option contracts that are used to manage interest rate risk on
BBMC's mortgage servicing rights are marked-to-market with gains or losses
recognized in current income. The current market value of these option contracts
are included in the balance of capitalized mortgage servicing rights.
Mortgage loans
Mortgage loans held for sale are carried at the lower of aggregate cost or
fair value. Fair value is based on the contract prices at which the mortgage
loans will be sold or, if the loans are not committed for sale, the current
market price. Loan origination fees and certain direct costs are deferred until
the related mortgage loans are sold.
Mortgage loans held for investment are stated at the lower of cost or fair
value at the time the permanent investment decisions are made. Discounts, if
any, are amortized over the anticipated life of the investment.
Loans are placed on nonaccrual status when any portion of the principal or
interest is ninety days past due or earlier when concern exists as to the
ultimate collectibility of principal or interest. When loans are placed on
nonaccrual status, the related interest receivable is reversed against interest
income of the current period. Interest payments received on nonaccrual loans are
applied as a reduction of the principal balance when concern exists as to the
ultimate collection of principle; otherwise, such payments are recognized as
interest income. Loans are removed from nonaccrual status when principal and
interest become current and they are estimated to be fully collectible.
Purchased and originated mortgage servicing rights
Purchased mortgage servicing rights (PMSR) represent the cost of purchasing
the right to service mortgage loans originated by others. PMSR are amortized as
a reduction of servicing fee income over the estimated servicing period in
proportion to the estimated future net cash flows from the loans serviced.
Remaining PMSR asset balances are evaluated for impairment by determining their
estimated recoverable amount through applying the discount rate in effect at the
time the servicing was purchased to the estimated future aggregate net cash
flows from the underlying mortgages. The carrying value is written down for any
impairment; such write-downs are included in the amortization of mortgage
servicing rights. Prior to 1993, this valuation was performed on an undiscounted
basis.
In May 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 122, Accounting for
Mortgage Servicing Rights. This Statement, among other provisions, requires that
the value of mortgage servicing rights associated with mortgage loans originated
by an entity be capitalized as assets. The value of originated mortgage
servicing rights (OMSR) is determined by allocating the total costs of the
mortgage loans between the loans and the mortgage servicing rights based on
their relative fair values. Presently, OMSR are included with the cost of the
related loans and considered in determining the gain or loss on sale when the
loans are sold. Also, the new Statement requires that capitalized mortgage
servicing rights be evaluated for impairment based on the fair value of these
rights. For the purposes of determining impairment, mortgage servicing rights
that are capitalized after the adoption of this Statement are stratified based
on one or more of the predominate risk characteristics of the underlying loans.
Impairment is recognized through a valuation allowance for each impaired
stratum.
The Statement applies prospectively to fiscal years beginning after
December 15, 1995. BBMC plans to adopt the Statement beginning January 1, 1996.
The actual effect of implementing this new Statement on BBMC's financial
position and results of operations will depend on factors including the amount
and mix of originated and purchased production, the level of interest rates, and
market estimates of future prepayment rates.
F-21
<PAGE> 166
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accordingly, BBMC cannot determine at this time the ultimate impact on its
future earnings of applying the new methodologies of recording all mortgage
servicing rights as assets, of calculating impairment, and of applying the other
provisions of the Statement.
Excess mortgage servicing receivable
Excess mortgage servicing receivable (EMSR) represents the present value of
servicing fee income in excess of a normal servicing fee. When loans are sold,
the estimated excess servicing is recognized as income and amortized over the
estimated servicing period in proportion to the estimated future aggregate net
cash flows from the loans serviced. Remaining asset balances are evaluated for
impairment based on current estimates of future discounted cash flows. Such
write-downs are included in amortization of mortgage servicing rights.
Accounts receivable
Accounts receivable includes advances made in connection with loan
servicing activities. These advances consist primarily of payments for property
taxes and insurance premiums, as well as, principal and interest remitted to
investors before they are collected from mortgagors.
Pool loan purchases
Pool loan purchases are carried at cost and consist of FHA-insured,
VA-guaranteed, and conventional loans purchased from mortgage-backed securities
serviced by BBMC for others. At the purchase date, these loans were delinquent
or in the process of foreclosure or repayment. Losses associated with pool loan
purchases are largely reimbursed by the insurer.
Mortgage claims receivable
Mortgage claims receivable includes claims filed primarily with the FHA and
the VA. These receivables are carried at cost, less an allowance for estimated
amounts that are not collectible from the mortgage insuring agencies.
Real estate acquired
Real estate acquired includes properties on which BBMC has foreclosed and
taken title. It is initially reported at the lower of the carrying value of the
loan or the fair value of the real estate obtained, less estimated selling
costs. The excess, if any, of the loan balance over the fair value of the
property at the time of transfer to real estate acquired is charged to the
reserve for estimated servicing losses on investor-owned loans. Subsequent
declines in the value of the property and costs related to holding the property
are charged against income.
Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized over the lesser
of the estimated life of the improvement or the term of the lease.
Other assets
Other assets consist primarily of a prepaid pension asset of $10.1 million,
allocated from the Bank of Boston, and the excess of cost over fair value of net
assets acquired. The excess of cost over fair value of net assets acquired is
amortized using a straight-line basis over periods varying from seven to
twenty-five years.
F-22
<PAGE> 167
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Mortgage servicing fees
Mortgage servicing fees represent fees earned for servicing mortgage loans
owned by investors. The fees are generally calculated on the outstanding
principal balances of the loans serviced and are recognized as income on an
accrual basis. Prior to 1994, these fees were recorded as income when the
payments were received.
Servicing losses on investor-owned loans
BBMC records losses attributable to servicing FHA and VA loans for
investors. These amounts include actual losses for final disposition of loans,
accrued interest for which payment has been denied, and estimates for potential
losses based on BBMC's experience as a servicer of government loans.
A reserve for estimated servicing losses on investor-owned loans is
available for potential losses related to the mortgage servicing portfolio and
is included in the balance of accounts payable and accrued liabilities.
Net mortgage origination revenue
Net mortgage origination revenue includes gains and losses from sales of
mortgage loans, deferred origination fees and expenses, and the present value of
gains from the EMSR.
Income taxes
BBMC files its federal tax return through inclusion in Bank of Boston
Corporation's consolidated return. Accordingly, Bank of Boston's federal tax
provision is allocated to all member subsidiaries as if each member were a
separate taxpayer. However, the timing of utilization of certain of BBMC's tax
attributes may differ from a stand-alone tax-paying basis.
BBMC accounts for income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes, which was prospectively adopted effective January 1, 1993.
Note 10 includes additional information with respect to the adoption of this
Statement. Under the Statement, current tax liabilities or assets are recognized
through charges or credits to the current tax provision for the estimated taxes
payable or refundable for the current year.
Deferred tax liabilities are recognized for temporary differences that will
result in amounts taxable in the future and deferred tax assets are recognized
for temporary differences and tax benefit carryforwards that will result in
amounts deductible or creditable in the future. Net deferred tax liabilities or
assets are recognized through charges or credits to the deferred tax provision.
A deferred tax valuation reserve is established if it is more likely than not
that all or a portion of the deferred tax assets will not be realized. Changes
in the deferred tax valuation reserve are recognized through charges or credits
to the deferred tax provision.
The effect of enacted changes in tax law, including changes in tax rates,
on deferred tax assets and liabilities is recognized in income in the period
that includes the enactment date.
Accounting changes
Effective January 1, 1993, BBMC elected to change its method of valuing its
mortgage servicing rights from an undiscounted basis to a discounted basis to
conform its financial reporting to the regulatory accounting rules adopted by
the bank regulators in 1993.
The cumulative effect to January 1, 1993 of adopting this change in
accounting principle was an increase in net loss of approximately $59.9 million,
which is net of $30.9 million of income tax benefit. Effective January 1, 1994,
BBMC changed its method of accounting for mortgage servicing fees from the cash
basis to
F-23
<PAGE> 168
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the accrual basis. The cumulative effect to January 1, 1994 of this accounting
change was an increase in net income of approximately $3.5 million, which is net
of income taxes of $1.9 million.
<TABLE>
BBMC's income (loss) before income taxes and cumulative effects of changes
in accounting principles and net income (loss) for 1993 and 1994, as if the
changes for the valuing of mortgage servicing rights and the change in
accounting for mortgage servicing fees had been retroactively applied, would
have been as follows:
<CAPTION>
1993 1994
-------- ------
(IN THOUSANDS)
<S> <C> <C>
Income (loss) before income taxes and cumulative effects of
changes in accounting principles............................... $(48,013) $4,475
-------- ------
Net income (loss)................................................ $(24,850) $1,950
======== ======
</TABLE>
3. PURCHASED MORTGAGE SERVICING RIGHTS AND EXCESS MORTGAGE SERVICING RECEIVABLE
<TABLE>
PMSR consist of the following:
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
PMSR....................................................... $ 732,775 $ 954,931
Accumulated amortization................................... (316,960) (421,040)
--------- ---------
Balance at December 31..................................... $ 415,815 $ 533,891
========= =========
</TABLE>
<TABLE>
EMSR consists of the following:
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
(IN THOUSANDS)
EMSR......................................................... $ 60,419 $ 66,465
Accumulated amortization..................................... (45,086) (49,018)
-------- --------
Balance at December 31....................................... $ 15,333 $ 17,447
======== ========
</TABLE>
4. RESERVE FOR ESTIMATED SERVICING LOSSES ON INVESTOR-OWNED LOANS
<TABLE>
An analysis of the reserve for estimated servicing losses on investor-owned
loans is as follows:
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Balance at January 1.................................. $(5,000) $(4,700) $(6,650)
Servicing losses on investor-owned loans.............. (2,770) (7,177) (9,981)
Charge-offs........................................... 3,462 5,304 7,473
Recoveries............................................ (392) (77) (242)
------- ------- -------
Balance at December 31................................ $(4,700) $(6,650) $(9,400)
======= ======= =======
</TABLE>
5. MORTGAGE SERVICING PORTFOLIO
BBMC's residential mortgage servicing portfolio totaled $37.9 billion and
$41.5 billion at December 31, 1994 and 1995, respectively, and included
mortgage-backed securities of $24.0 billion and $28.5 billion in 1994 and 1995,
respectively. In addition, BBMC's commercial loan servicing portfolio totaled
$1.0 billion and $0.9 billion in 1994 and 1995, respectively. Related fiduciary
funds are segregated in trust accounts, principally deposited with Bank of
Boston, and are not included in the accompanying consolidated financial
statements.
F-24
<PAGE> 169
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
BBMC has in force an errors and omissions policy in the amount of $20
million. Fidelity coverage up to a limit of $75 million, subject to a $1 million
deductible, is provided under a Bank of Boston master program.
6. PREMISES AND EQUIPMENT
<TABLE>
Premises and equipment consist of the following:
<CAPTION>
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land......................................................... $ 4,086 $ 4,086
Building..................................................... 14,251 14,477
Furniture and equipment...................................... 24,300 26,870
Leasehold improvements....................................... 752 824
-------- --------
43,389 46,257
Accumulated depreciation and amortization.................... (18,110) (20,871)
-------- --------
Balance at December 31....................................... $ 25,279 $ 25,386
======== ========
</TABLE>
7. NOTE PAYABLE TO BANK OF BOSTON
BBMC borrows funds on a demand basis from Bank of Boston under a $1.25
billion line of credit, collateralized by substantially all of BBMC's assets. At
December 31, 1994 and 1995, the interest rate was 8.5% and 6.8%, respectively,
less the benefit received from balances held at Bank of Boston. Interest
expense, net of this benefit, was $25.0 million, $24.6 million, and $20.5
million in 1993, 1994, and 1995, respectively.
8. LONG-TERM DEBT
<TABLE>
Long-term debt consists of a 30-year mortgage note, payable monthly with
interest at 9 1/2%, maturing in 2017. BBMC's main office building is pledged as
collateral. Principal payments due on long-term debt are as follows:
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996........................................... $ 210
1997........................................... 231
1998........................................... 233
1999........................................... 279
2000........................................... 307
Thereafter..................................... 12,556
-------
Total Due............................ $13,816
=======
</TABLE>
9. EMPLOYEE BENEFITS
BBMC participates with Bank of Boston and its affiliates in a
non-contributory defined benefit pension plan (Plan) covering substantially all
full-time employees. Bank of Boston funds the Plan in compliance with the
requirements of the Employee Retirement Income Security Act.
The Plan is an account balance defined benefit plan in which each employee
has an account to which amounts are allocated based on level of pay and years of
service and which grows at a specific rate of interest. Benefits accrued prior
to 1989 are based on years of service, highest average compensation, and social
security benefits. Expense (income) associated with this Plan was ($0.9)
million, ($1.1) million and $0.5 million in 1993, 1994 and 1995, respectively.
F-25
<PAGE> 170
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
BBMC also maintains non-qualified deferred compensation and retirement
plans for certain officers. All benefits provided under these plans are unfunded
and any payments to plan participants are made by BBMC. As of December 31, 1994
and 1995, approximately $0.8 million and $0.7 million, respectively, were
included in accrued expenses and other liabilities for these plans. For the
years ended December 31, 1993, 1994, and 1995, expense related to these plans
was $0.1 million, $0.2 million and $0.2 million, respectively.
BBMC also participates with Bank of Boston and its affiliates in a thrift
incentive plan. Under this plan, employer contributions are generally based on
the amount of eligible employee contributions. The amounts charged to operating
expense under this plan were $0.5 million, $0.8 million, and $0.2 million in
1993, 1994, and 1995, respectively.
BBMC participates with Bank of Boston and its affiliates by providing
certain health and life insurance benefits for retired employees. Eligible
employees currently receive credits up to $10 thousand based on years of
service, which are used to purchase post-retirement health care coverage. Life
insurance coverage is dependent on years of service at retirement. Amounts
charged to employee benefits expense for these benefits were $0.6 million in
1993, $0.6 million in 1994, and $0.5 million in 1995.
<TABLE>
The components of post-retirement benefits expense for the three years
ended December 31 were as follows:
<CAPTION>
1993 1994 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost (benefits earned during the period).............. $ 44 $ 63 $ 53
Interest cost on projected benefit obligation................. 280 282 264
Amortization:
Unrecognized net asset...................................... 250 250 250
Unamortized gain............................................ (20) (11) (53)
---- ---- ----
Net post-retirement benefit cost.............................. $554 $584 $514
==== ==== ====
</TABLE>
<TABLE>
BBMC's unfunded accumulated post-retirement benefit obligation for the two
years ended December 31 was as follows:
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated post-retirement benefit obligation for retirees...... $ 3,711 $ 3,515
Unrecognized net gain............................................ 1,385 1,541
Unrecognized net obligation...................................... (4,500) (4,250)
------- -------
Post-retirement benefit liability................................ $ 596 $ 806
======= =======
</TABLE>
<TABLE>
Assumptions used in actuarial computations were:
<CAPTION>
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Rate of increase in future
compensation levels................. 4.50% 4.50% 4.50%
Weighted average discount rate........ 7.50% 8.25% 7.25%
Medical inflation rate................ 12% declining 11% declining 8% declining
to 5% in 2001 to 5% in 2001 to 5% in 1999
</TABLE>
An increase of 1% in the assumed health care cost trend rate would result
in an increase of 4.8%, 5.9%, and 5.8% in the accumulated post-retirement
benefit obligation and 4.1%, 4.9%, and 4.9% in annual post-retirement benefit
expense in 1993, 1994, and 1995, respectively.
F-26
<PAGE> 171
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES
<TABLE>
The components of the net deferred tax asset at December 31 are as follows:
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
(IN THOUSANDS)
PMSR............................................................. $27,223 $34,008
EMSR............................................................. 9,303 8,957
Reserve for estimated servicing losses on investor-owned loans... 2,529 3,657
Other............................................................ (2,385) (1,301)
Valuation reserve................................................ (5,658) (4,597)
------- -------
Net deferred tax assets, net of reserve.......................... $31,012 $40,724
======= =======
</TABLE>
The deferred tax assets, net of the valuation reserve, can be realized from
the reversal of existing deferred tax liabilities and by carryback to previous
years with taxable income. The valuation reserve has been primarily established
against state deferred tax assets where carryback is not permitted.
<TABLE>
The components of the provision for (benefit from) income taxes for the
years ending December 31 are as follows:
<CAPTION>
1993 1994 1995
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current tax provision (benefit)...................... $ (1,425) $ 4,773 $47,646
Deferred tax
Benefit on income.................................. (15,859) (2,587) (8,651)
Change in valuation reserve........................ -- 339 (1,061)
-------- ------- -------
Net deferred tax benefit............................. (15,859) (2,248) (9,712)
Income tax provision (benefit) before cumulative
effect of changes in accounting principles......... (17,284) 2,525 37,934
Change in accounting for:
PMSR............................................... (30,868) -- --
Income taxes....................................... (6,093) -- --
Mortgage servicing fee............................. -- 1,860 --
-------- ------- -------
Total income tax provision (benefit)................. $(54,245) $ 4,385 $37,394
======== ======= =======
</TABLE>
Effective January 1, 1993, BBMC adopted prospectively SFAS No. 109, which
principally affects accounting for deferred taxes. The cumulative effect to
January 1, 1993 of adopting this new Standard was a decrease in net loss of $6.1
million.
F-27
<PAGE> 172
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
The following table reconciles the expected federal tax provision (benefit)
on income (loss) before cumulative effect of changes in accounting principles,
based on the federal statutory tax rate of 35% in 1993, 1994, and 1995, to the
actual tax provision (benefit) before cumulative effect of changes in accounting
principles:
<CAPTION>
1993 1994 1995
-------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Expected tax provision (benefit) applicable to income (loss)
before cumulative effect of changes in accounting
principles.................................................. $(17,024) $1,567 $33,866
Effect of:
State income taxes, net of federal tax benefits............. -- 381 3,774
Federal tax rate change to 35% on deferred tax assets....... (408) -- --
Other....................................................... 148 577 294
-------- ------ -------
Actual tax provision (benefit) before cumulative effect of
changes in accounting principles............................ $(17,284) $2,525 $37,934
======== ====== =======
</TABLE>
11. LEASE COMMITMENTS
<TABLE>
BBMC leases office facilities and equipment under noncancelable leases that
include renewal options and escalation clauses which extend into 1999. Rental
expense for leases of office facilities and equipment was $3.6 million in both
1993 and 1994 and $3.9 million in 1995. BBMC's minimum future lease commitments
are as follows:
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996................................................... $1,996
1997................................................... 622
1998................................................... 280
1999................................................... 52
Thereafter............................................. --
------
Total........................................ $2,950
======
</TABLE>
12. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
BBMC purchases financial instruments and enters into financial agreements
with off-balance sheet risk in the normal course of business through the
origination and selling of mortgage loans and the management of the risk of
fluctuations in interest rates. These instruments involve, to varying degrees,
elements of credit and interest rate risk. Credit risk is the possibility that a
loss may occur if a counterparty to a transaction fails to perform according to
the terms of the contract. Interest rate risk is the possibility that a change
in interest rates will cause the value of a financial instrument to decrease or
become more costly to settle. Financial instruments primarily used by BBMC
include commitments to extend credit, mandatory and optional forward
commitments, commitments to purchase mortgage servicing rights, and other
instruments to minimize the interest rate risk of capitalized servicing assets,
primarily options on treasury bond futures.
Options and forward contracts
BBMC purchases options and forward contracts to protect the value of
mortgage servicing assets from exposure to increases in prepayment activity and
to reduce the impact of interest rate fluctuations on its lending commitments.
The notional amount of the options and forward contracts is the amount upon
which interest and other payments under the contract are based and is generally
not exchanged. Therefore, the notional amounts should not be taken as the
measure of credit risk or a reflection of future cash requirements.
F-28
<PAGE> 173
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The risk associated with options and forwards is the exposure to current and
expected market movements in the interest rates and the ability of the
counterparties to meet the terms of the contracts.
BBMC is exposed to credit loss in the event of nonperformance by the
counterparties to the various instruments. BBMC controls credit and market risk
associated with interest rate products by establishing and monitoring limits as
to the types and degree of risks that may be undertaken. BBMC's exposure to
credit risk in the event of default by the counterparties for the options is
$123.3 million which was due at December 31, 1995.
BBMC's exposure to credit risk in the event of default by the counterparty
for mandatory forward commitments to sell mortgage loans is the difference
between the contract price and the current market price, offset by any available
margins retained by BBMC or an independent clearing agent. The amount of credit
risk as of December 31, 1995, if all counterparties failed completely and if the
margins, if any, retained by BBMC or an independent clearing were to become
unavailable, was approximately $24.1 million for mandatory forward commitments
of mortgage-backed securities.
<TABLE>
The following is a summary of BBMC's notional amounts and fair values of
interest rate products as of December 31, 1994 and 1995.
<CAPTION>
1994 1995
---------------------- ------------------------
ESTIMATED ESTIMATED
NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE(1) AMOUNT VALUE(1)
-------- --------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Purchased commitments to sell mortgage loans:
Mandatory forward contracts.................... $286,430 $4,413 $1,169,559 $ (9,798)
Options on mortgage-backed securities.......... 87,000 172 315,000 --
Risk management contracts:
Purchased...................................... 371,000 2,157 3,107,500 118,753
Sold........................................... -- -- 295,000 (33,833)
<FN>
- ---------------
(1) Fair value represents the amount at which a given instrument could be
exchanged in an arms length transaction with a third party as of the balance
sheet date.
(2) See Note 14 for additional disclosures on fair value of financial
instruments.
</TABLE>
Commitments to originate mortgage loans
BBMC regularly enters into commitments to originate mortgage loans at a
future date subject to compliance with stated conditions. Commitments to
originate mortgage loans have off-balance sheet risk to the extent BBMC does not
have matching commitments to sell loans, which exposes BBMC to lower of cost or
market valuation adjustments in a rising interest rate environment.
Additionally, the extension of a commitment, which is subject to BBMC's credit
review and approval policies, gives rise to credit exposure when certain
borrowing conditions are met and the loan is made. Until such time, it
represents only potential exposure. The obligation to lend may be voided if the
customer's financial condition deteriorates or if the customer fails to meet
certain conditions. Commitments to originate mortgage loans do not necessarily
reflect future cash requirements since some of the commitments are expected to
expire without being drawn upon. Commitments to originate mortgage loans totaled
$194.5 million at December 31, 1994 and $885.6 million at December 31, 1995.
F-29
<PAGE> 174
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Mortgage loans sold with recourse
BBMC sells mortgage loans with recourse to various investors and retains
the servicing rights on these loans. The total outstanding balance of loans sold
with recourse does not necessarily represent future cash outflows. The total
outstanding principal balance of loans sold with recourse was $9.0 million at
December 31, 1994 and $6.8 million at December 31, 1995.
Servicing commitments to investors
BBMC is required to submit to certain investors, primarily GNMA, guaranteed
principal and interest payments from the underlying mortgage loans regardless of
actual collections.
Purchase mortgage servicing rights commitments
BBMC routinely enters into commitments to purchase mortgage servicing
rights associated with mortgages originated by third parties, subject to
compliance with stated conditions. These commitments to purchase mortgage
servicing rights, expiring during 1996, correspond to mortgage loans having an
aggregate loan principal balance of approximately $2.7 billion at December 31,
1995.
Geographical concentration of credit risk
BBMC is engaged in business nationwide and has no material concentration of
credit risk in any geographic region.
13. OTHER RELATED PARTY TRANSACTIONS
BBMC services mortgage loans for Bank of Boston and its affiliates. The
balances of those portfolios totaled $3.3 billion and $2.0 billion at December
31, 1994 and 1995, respectively. Related servicing fees are included in mortgage
servicing fees and were $5.4 million, $8.4 million and $7.6 million in 1993,
1994, and 1995, respectively.
BBMC reimburses Bank of Boston and its affiliates for certain occupancy and
supplies costs. Total costs reimbursed were $.0.7 million in 1993, 1994, and
1995.
BBMC services real estate acquired by the Bank of Boston and its
affiliates. Related expenses are reimbursed and were $0.3 million in 1993, $2.1
million in 1994, and $1.7 million in 1995.
An affiliate of Bank of Boston purchases a 99.25% participation in
mortgages in the process of being sold to permanent investors. The principal
balances sold under this agreement aggregated approximately $3.6 billion and
$6.5 billion in 1994 and 1995, respectively.
BBMC purchased mortgage servicing rights from Bank of Boston during 1995
and capitalized $4.8 million in mortgage servicing rights associated with this
transaction.
BBMC sold mortgage loans to Bank of Boston and its affiliates in its normal
course of business. These sales totaled $1.3 billion, $0.4 billion, and $0.5
billion in 1993, 1994, and 1995, respectively. Included in mortgage loans held
for sale at December 31 are loans which will be sold to Bank of Boston and its
affiliates totaling $94.5 million and $18.1 million for 1994 and 1995,
respectively.
Miscellaneous administrative services are provided by related companies.
These services did not have a material impact on the consolidated financial
statements.
F-30
<PAGE> 175
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value.
Financial instruments include such items as mortgage loans held for sale,
mortgage loans held for investment, interest rate contracts, notes payable, and
other instruments.
Fair value estimates are made as of a specific point in time based on the
characteristics of the financial instruments and the relevant market
information. Where available, quoted market prices are used. In other cases,
fair values are based on estimates using other valuation techniques, such as
discounting estimated future cash flows using a rate commensurate with the risks
involved or other acceptable methods. These techniques involve uncertainties and
are significantly affected by the assumptions used and the judgments made
regarding risk characteristics of various financial instruments, prepayments,
discount rates, estimates of future cash flows, future expected loss experience,
and other factors. Changes in assumptions could significantly affect these
estimates. Derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in an immediate
sale of the instrument. Also, because of differences in methodologies and
assumptions used to estimate fair value, BBMC's fair values should not be
compared to those of other companies.
Under the Statement, fair value estimates are based on existing financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of BBMC. For certain assets and
liabilities, the information required under the Statement is supplemented with
additional information relevant to an understanding of the fair value.
The methods and assumptions used to estimate the fair values of each class
of financial instruments are as follows:
Cash
The carrying amount reported in the balance sheet approximates fair value.
Mortgages held for sale
Fair values are based on the estimated value at which the loans could be
sold in the secondary market. These loans are priced to be sold with servicing
rights retained, as is BBMC's normal business practice.
Mortgages held for investment
Fair value is estimated using market quotes for securities backed by
similar loans or by discounting contractual cash flows, adjusted for credit risk
and prepayment estimates. These loans are priced with servicing rights retained.
Discount rates are obtained from secondary market sources.
Accounts receivable, pool loan purchases, and mortgage claims receivable, net
Carrying amounts are considered to approximate fair value. All amounts that
are assumed to be uncollectible within a reasonable time are written off.
Excess mortgage servicing receivable
Fair value is based on the present value of expected future net cash flows
and the current estimated servicing life.
F-31
<PAGE> 176
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Risk management contracts
Fair values are estimated based on actual market quotes or option models.
Note payable to Bank of Boston
The carrying amount of the note payable to Bank of Boston reported in the
balance sheet approximates its fair value.
Long-term debt
Fair value of long-term debt is estimated by discounting estimated future
cash flows using a rate commensurate with the risks involved.
Commitments to originate mortgage loans
Fair value is estimated using quoted market prices for securities backed by
similar loans adjusted for differences in loan characteristics.
Forward contracts to sell mortgages
Forward contracts to sell mortgages, which represent legally binding
agreements to sell loans to permanent investors at a specified price or yield,
are valued using market prices for securities backed by similar loans and are
reflected in the fair values of the mortgages held for sale, to the extent that
these commitments relate to mortgage loans already originated, or of the related
commitments to extend credit.
Options on mortgage-backed securities
The fair values of options are estimated based on actual market quotes. In
some instances, quoted prices for the underlying loans or option models are
used.
<TABLE>
The estimated fair values of BBMC's financial instruments are as follows:
<CAPTION>
1994 1995
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash.................................... $ 5,653 $ 5,653 $ 830 $ 830
Mortgages held for sale................. 271,215 272,535 388,436 395,984
Mortgages held for investment........... 28,589 26,988 33,183 35,003
Accounts receivable..................... 66,763 66,763 82,816 82,816
Pool loan purchases..................... 77,477 77,477 65,272 65,272
Mortgage claims receivable.............. 48,835 48,835 45,422 45,422
Excess mortgage servicing receivable.... 15,333 20,700 17,447 19,117
Risk management contracts, classified
as PMSR, and other assets(2).......... 3,727 2,157 84,520 84,920
LIABILITIES
Note payable to Bank of Boston.......... 779,021 779,021 966,000 966,000
Long-term debt.......................... 14,007 13,853 13,816 16,211
OFF-BALANCE SHEET(1)
Commitments to originate mortgage
loans................................. (1,455) 1,094
Mandatory forward contracts to sell
mortgages(2).......................... 4,413 (9,798)
Options on mortgage-backed
securities(2)......................... 172 --
Risk management contracts............... (6,998) --
</TABLE>
F-32
<PAGE> 177
BANCBOSTON MORTGAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- ---------------
(1) Parentheses denote a liability
(2) See Note 12 for additional disclosures on notional amounts
Fair value estimates are made as of a specific point in time, based on
relevant market data and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale BBMC's entire holding of a particular financial instrument. Because no
active market exists for some portion of BBMC's financial instruments, fair
value estimates are based on judgments regarding future expected loss
experience, current economic conditions, current interest rates and repayment
trends, risk characteristics of various financial instruments, and other
factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in any of these assumptions used in calculating fair value
would also significantly affect the estimates. Further, the fair value estimates
were calculated as of December 31, 1994 and 1995. Changes in market interest
rates and prepayment assumption could significantly change the fair value.
15. CONTINGENCIES
BBMC is a defendant in a number of legal proceedings arising in the normal
course of business. BBMC, in management's estimation, has recorded adequate
reserves in the financial statements for pending litigation. Management, after
reviewing all actions and proceedings pending against or involving BBMC,
considers that the aggregate liability or loss, if any, resulting from the final
outcome of these proceedings will not have a material effect on the financial
position of BBMC.
During 1994, BBMC settled a class action lawsuit pertaining to escrow
practices. BBMC agreed to change its escrow calculations to the aggregate method
and, as a result, refunded approximately $45.0 million in excess escrow balance
to mortgagors. In addition, BBMC paid interest on these excess funds in the
amount of approximately $1.3 million. The change in escrow calculations did not
have a material impact on the consolidated financial statements.
16. ACQUISITION OF BELL MORTGAGE
On June 1, 1995, BBMC purchased the assets and liabilities of Bell Mortgage
Company (Bell Mortgage), a privately-held mortgage origination company located
in Minneapolis, Minnesota, for $0.9 million in cash. The acquisition of Bell
Mortgage was accounted for as a purchase. Accordingly, the purchase price was
allocated to net assets acquired based upon their estimated fair market value.
As of a result of the acquisition, goodwill of $0.4 million was recorded and is
being amortized over a 7-year period using the straight-line method.
Also, under the terms of the agreement, the shareholders of Bell Mortgage
will receive additional contingent cash payments based on Bell Mortgage reaching
specific performance goals over the next 3 years. These additional cash payments
will be recorded as additions to goodwill and will be amortized over the
remainder of the original 7-year period using the straight-line method.
Results of operations after the acquisition date are included in the 1995
consolidated financial statements. Proforma financial results would not have
been materially different as a result of this acquisition.
F-33
<PAGE> 178
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of
Barnett Mortgage Company:
We have audited the accompanying consolidated balance sheets of BARNETT
MORTGAGE COMPANY (a Florida corporation and a wholly owned subsidiary of Barnett
Banks, Inc.) and subsidiaries as of December 31, 1994 and 1995 and the related
consolidated statements of operations, stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the 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 financial position of Barnett Mortgage Company and
subsidiaries as of December 31, 1994 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Jacksonville, Florida
March 8, 1996
F-34
<PAGE> 179
BARNETT MORTGAGE COMPANY
<TABLE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
CASH............................................................ $ 3,900,572 $ 14,987,783
MORTGAGE LOANS:
Held for sale, net............................................ 183,913,568 465,879,840
Held for investment, net...................................... 14,699,097 19,225,181
CAPITALIZED MORTGAGE SERVICING RIGHTS:
Purchased mortgage servicing rights, net...................... 85,574,002 240,059,235
Excess mortgage servicing rights, net......................... 6,887,431 10,729,518
ACCOUNTS RECEIVABLE, Net:
Mortgage claims receivable.................................... 14,667,507 40,810,317
Amounts due from affiliates................................... 170,894 3,296,638
Other receivables............................................. 3,704,721 20,784,599
PROPERTY AND EQUIPMENT, net..................................... 18,565,631 25,263,834
REAL ESTATE OWNED, net.......................................... 731,091 600,061
GOODWILL, net................................................... 25,690,047 138,674,988
OTHER ASSETS.................................................... 967,476 14,318,185
------------ ------------
$359,472,037 $994,630,179
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Notes payable................................................. $248,214,485 $653,055,514
Drafts payable................................................ 9,208,104 11,573,446
Accounts payable and accrued liabilities...................... 9,791,502 63,789,362
Deferred tax liability........................................ 7,355,676 34,383,877
------------ ------------
Total liabilities..................................... 274,569,767 762,802,199
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $100 par value; 10,000 shares authorized,
issued, and outstanding.................................... 1,000,000 1,000,000
Additional paid-in capital.................................... 81,141,958 248,453,974
Retained earnings (accumulated deficit)....................... 2,760,312 (17,625,994)
------------ ------------
Total stockholder's equity............................ 84,902,270 231,827,980
------------ ------------
$359,472,037 $994,630,179
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-35
<PAGE> 180
BARNETT MORTGAGE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
MORTGAGE ORIGINATION REVENUE:
Mortgage origination fees...................... $ 357,900 $ 3,276,304 $ 17,103,976
Gain (loss) on sales of loans, net............. 5,687,882 691,969 (13,920,382)
------------ ------------ ------------
Total mortgage origination revenue..... 6,045,782 3,968,273 3,183,594
------------ ------------ ------------
INTEREST INCOME (EXPENSE):
Interest income................................ 855,053 3,459,860 27,264,470
Interest expense............................... (1,415,372) (4,911,433) (20,427,661)
------------ ------------ ------------
Net interest income (expense).......... (560,319) (1,451,573) 6,836,809
------------ ------------ ------------
MORTGAGE SERVICING REVENUE:
Mortgage servicing income...................... 38,885,803 47,147,335 108,559,485
Amortization of capitalized mortgage servicing
rights...................................... (11,547,048) (17,783,184) (48,282,193)
Gain on sales of servicing..................... 0 0 9,096,134
------------ ------------ ------------
Net mortgage servicing revenue......... 27,338,755 29,364,151 69,373,426
------------ ------------ ------------
OTHER INCOME..................................... 6,296,519 4,491,999 2,592,125
------------ ------------ ------------
Total revenues......................... 39,120,737 36,372,850 81,985,954
------------ ------------ ------------
EXPENSES:
Salaries and benefits.......................... 13,913,978 17,473,917 53,070,150
General and administrative..................... 12,432,134 14,923,734 41,849,355
Occupancy and equipment........................ 1,809,949 2,702,169 5,959,537
Amortization of goodwill....................... 0 259,275 4,839,536
------------ ------------ ------------
Total expenses......................... 28,156,061 35,359,095 105,718,578
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES AND AFFILIATE
PROFIT SHARING................................. 10,964,676 1,013,755 (23,732,624)
AFFILIATE PROFIT SHARING......................... (10,773,786) (3,533,551) (6,242,191)
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES................ 190,890 (2,519,796) (29,974,815)
INCOME TAX PROVISION (BENEFIT)................... 87,040 (461,411) (9,588,509)
------------ ------------ ------------
NET INCOME (LOSS)................................ $ 103,850 $ (2,058,385) $(20,386,306)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-36
<PAGE> 181
BARNETT MORTGAGE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<CAPTION>
RETAINED
ADDITIONAL EARNINGS
COMMON PAID-IN (ACCUMULATED
STOCK CAPITAL DEFICIT) TOTAL
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1992.......... $1,000,000 $ 16,910,146 $ 4,714,847 $ 22,624,993
Capital contributions............. 0 3,527,674 0 3,527,674
Net income........................ 0 0 103,850 103,850
---------- ------------ ------------ ------------
BALANCE, December 31, 1993.......... 1,000,000 20,437,820 4,818,697 26,256,517
Capital contributions............. 0 60,704,138 0 60,704,138
Net loss.......................... 0 0 (2,058,385) (2,058,385)
---------- ------------ ------------ ------------
BALANCE, December 31, 1994.......... 1,000,000 81,141,958 2,760,312 84,902,270
Capital contributions............. 0 167,312,016 0 167,312,016
Net loss.......................... 0 0 (20,386,306) (20,386,306)
---------- ------------ ------------ ------------
BALANCE, December 31, 1995.......... $1,000,000 $248,453,974 $(17,625,994) $231,827,980
========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-37
<PAGE> 182
BARNETT MORTGAGE COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(NOTE 7)
<CAPTION>
1993 1994 1995
------------ ------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $ 103,850 $ (2,058,385) $ (20,386,306)
------------ ------------- ---------------
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Amortization of purchased mortgage servicing
rights.................................... 9,321,064 15,288,479 45,816,361
Amortization of excess servicing fees....... 2,225,984 2,494,705 2,465,832
Amortization of goodwill.................... 0 259,275 4,839,536
Depreciation and amortization of property
and equipment............................. 1,430,339 1,776,267 3,191,009
Capitalization of excess servicing fees..... (3,657,824) (1,258,180) (7,081,112)
Origination of loans held for sale.......... 0 (508,150,116) (3,318,208,729)
Sales of mortgage loans held for sale....... 0 456,864,511 3,106,918,971
Proceeds from sales of mortgage servicing
rights.................................... 0 0 10,437,502
Gain on sales of servicing rights........... 0 0 (9,096,134)
Deferred income tax provision (benefit)..... (309,391) 91,933 (1,250,725)
Changes in assets and liabilities:
Accounts receivable, net.................. (3,931,488) 2,067,746 (8,164,924)
Other assets.............................. (292,732) 1,254,075 (11,285,808)
Accounts payable and accrued
liabilities............................ (11,438,834) (7,700,318) 9,488,879
Other, net................................ 209,676 45,104 6,807,216
------------ ------------- ---------------
Total adjustments...................... (6,443,206) (36,966,519) (165,122,126)
------------ ------------- ---------------
Net cash used in operating
activities........................... (6,339,356) (39,024,904) (185,508,432)
------------ ------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchased mortgage servicing rights............ (31,569,835) (22,487,973) (21,563,279)
Net increase in loans held for investment...... (457,402) (1,593,575) (3,152,365)
Net increase (decrease) in real estate owned... (421) (166,405) 1,751,036
Purchases of property and equipment, net of
retirements................................. (4,232,868) (220,543) (556,054)
Business acquisitions, net of cash acquired.... 0 (58,824,244) (158,747,064)
------------ ------------- ---------------
Net cash used in investing
activities........................... (36,260,526) (83,292,740) (182,267,726)
------------ ------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in notes payable.................. 43,004,351 64,990,122 211,666,829
Capital contributions.......................... 0 59,765,851 167,196,540
------------ ------------- ---------------
Net cash provided by financing
activities........................... 43,004,351 124,755,973 378,863,369
------------ ------------- ---------------
NET INCREASE IN CASH............................. 404,469 2,438,329 11,087,211
CASH AT BEGINNING OF YEAR........................ 1,057,774 1,462,243 3,900,572
------------ ------------- ---------------
CASH AT END OF YEAR.............................. $ 1,462,243 $ 3,900,572 $ 14,987,783
============ ============= ===============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-38
<PAGE> 183
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
1. SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
Barnett Mortgage Company and its wholly owned subsidiaries (the "Company")
originate, purchase, and service residential mortgage loans. The Company
operates nationally with offices in 25 states.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and prevailing practices within the mortgage
banking industry.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Barnett
Mortgage Company ("BMC") and its wholly owned subsidiaries, BancPLUS Financial
Corporation ("BancPLUS") and Loan America Financial Corporation ("LAC").
Wholly-owned subsidiaries of BancPLUS include BancPLUS Mortgage Corp. and
Honolulu Mortgage Company ("HMC"). As discussed in Note 2, BancPLUS and LAC were
acquired in 1994 and 1995, respectively. These acquisitions were accounted for
as purchases; therefore, BancPLUS and LAC are included in the consolidated
financial statements from their respective dates of acquisition. BMC is a wholly
owned subsidiary of Barnett Banks, Inc. (the "Parent"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain previously reported amounts have been reclassified to conform to
current presentation.
Use of Estimates in the Preparation of Financial Statements
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
disclosed amount 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.
Mortgage Loans
Mortgage loans held for sale are carried at the lower of aggregate cost or
market. Cost is defined as the unpaid principal balance of the mortgage loans,
adjusted for discounts and premiums, including deferred costs and fees.
Differences between the net carrying amount of mortgage loans held for sale and
the amount received from the sale, net of the recognition of any commitment fees
paid, are recognized as gains or losses from the sale of mortgage loans. At
December 31, 1994 and 1995, mortgage loans held for sale were carried at cost,
which was less than their market values. Mortgage loans held for sale originated
by the Parent's banking subsidiaries (the "Affiliate Banks") are not included in
the Company's mortgage loans held for sale. These loans are funded and owned by
the Affiliate Banks until they are sold by the Company. At December 31, 1995,
the Affiliate Banks owned approximately $135,323,000 in mortgage loans held for
sale.
Mortgage loans held for investment are carried at cost and primarily
consist of (i) mortgage loans originated on behalf of employees of the Parent
and the Affiliate Banks who are relocating, (ii) seasoned loans obtained in
acquisitions by the Affiliate Banks which management has chosen to retain rather
than sell, and (iii) loans in the final stages of foreclosure which were
repurchased by the Company.
Interest income on mortgage loans is recorded on the accrual basis. Loans
are placed on nonaccrual status and accrued interest is reversed when the
collectibility of interest and principal is uncertain, generally after the loans
become 120 days past due.
F-39
<PAGE> 184
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capitalized Mortgage Servicing Rights
Capitalized mortgage servicing rights include purchased mortgage servicing
rights ("PMSRs") and excess servicing fees. The Company capitalizes the cost of
purchased mortgage servicing rights ("bulk"), servicing rights acquired through
the purchase of mortgage loans originated by others ("flow") and servicing
rights acquired in connection with acquisitions ("acquired") (Note 2). These
amounts are capitalized and amortized in proportion to and over the life of the
net servicing income, primarily using a discounted cash flow method for flow and
acquired purchases and to a maximum of seven years using the
sum-of-the-years-digits method for bulk purchases. PMSRs, net, represent PMSRs
of $116,326,941 and $308,722,024 at December 31, 1994 and 1995, respectively,
net of accumulated amortization of $30,752,939 and $68,662,789, respectively.
Excess servicing fees are stated net of accumulated amortization and
represent the present value of servicing yields in excess of industry standards.
These amounts are capitalized and amortized over the estimated life of the
underlying loans, primarily to a maximum of eight years using the
sum-of-the-years-digits method, to provide for the recognition of a normal
servicing fee in each year. Excess servicing fees, net, represent excess
servicing fees at December 31, 1994 and 1995 of $14,876,068 and $20,640,470,
respectively, net of accumulated amortization of $7,988,637 and $9,910,952,
respectively.
The Company evaluates the effect of prepayments on the net realizable value
of purchased mortgage servicing rights and excess servicing fees on a
disaggregated undiscounted basis. If needed, the Company records additional
amortization or write-downs based on this evaluation.
Accounts Receivable
Mortgage claims receivable includes loan servicing advances made in
connection with loan servicing activities and claims receivable. Loan servicing
advances consist primarily of payments for property taxes and insurance
premiums, as well as principal and interest remitted to investors before they
are collected from mortgagors. Claims receivable includes claims filed on
foreclosed mortgages, primarily with the FHA and the VA.
Reserves for estimated losses on loan servicing advances are based on
management's continuing evaluation of potential losses. The allowance for losses
included in accounts receivable was $320,654 and $1,542,989 at December 31, 1994
and 1995, respectively.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation is provided on a straight-line basis using estimated useful lives
of 12 to 50 years for buildings and improvements and 3 to 20 years for furniture
and equipment. Leasehold improvements are amortized over their estimated useful
lives or the terms of the related leases, whichever is shorter.
Real Estate Owned
Real estate owned represents real estate acquired by foreclosure and is
carried at the lower of cost or appraised value minus estimated costs to sell.
Any additional declines are charged to other expense and are recorded in a
valuation reserve on an asset-by-asset basis. Net costs of maintaining and
operating foreclosed properties are charged to expense as incurred.
Deferred Commitment Fees
Deferred commitment fees, which are included in other assets, primarily
consist of fees paid to permanent investors to ensure the ultimate sale of loans
and put option fees paid for the option of selling mortgage-backed securities.
Fees paid to permanent investors are recognized as an adjustment to the sales
F-40
<PAGE> 185
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
price when loans are sold. Any gain or loss resulting from either the exercise
or expiration of put option fees is included in gain (loss) on sales of loans.
Goodwill
Net assets acquired in purchase transactions (Note 2) are recorded at fair
value at the date of acquisition. Goodwill, representing the excess of the
purchase price over the fair value of the net assets purchased, is being
amortized on a straight-line basis over 25 years.
Reserve for Losses
A reserve for losses is maintained for estimated foreclosure losses. The
required level of reserves is determined on an undiscounted basis by analysis of
such factors such as the prevailing stages of delinquencies, anticipated
reinstatement rates from the various stages of delinquency, and loss experience
on similar loans serviced. This reserve represents that portion of the estimated
foreclosure losses for which the Company does not have an outstanding receivable
as of the date of the financial statements, but for which an expected loss is
estimated based on loan delinquencies and other characteristics of the loans
serviced. This reserve is included in accounts payable and accrued liabilities
in the accompanying financial statements.
Mortgage Origination Fees
Mortgage origination fees consist primarily of (i) fees received from
borrowers on loans originated for sale, (ii) fees received from certain
correspondents, and (iii) fees received from an affiliate (Note 5).
Mortgage Servicing Revenue
Mortgage servicing fees consist primarily of servicing fees and late
charges received for servicing loans owned by investors and affiliates.
Servicing fees are calculated on the basis of the outstanding principal balance
of loans serviced and are recorded as income when received. Loan servicing costs
are charged to expense as incurred.
Late charges are recognized when assessed and are recorded in mortgage
claims receivable net of an allowance for estimated waived or otherwise
uncollectible amounts. Accrued late fees, net of allowance, totaled $1,998,380
and $1,554,393 at December 31, 1994 and 1995, respectively. In addition, amounts
greater than 120 days past due are written off.
Statement of Financial Accounting Standards No. 122
In May 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 122, "Accounting for
Mortgage Servicing Rights". This statement, among other provisions, requires
that the value of mortgage servicing rights associated with mortgage loans
originated by an entity be capitalized as assets. The value of originated
mortgage servicing rights ("OMSRs") is determined by allocating the total cost
of the mortgage loans between the loans and the mortgage servicing rights based
on their relative fair values. Presently, OMSRs are included with the cost of
the related loans and considered in determining the gain or loss on sale when
the loans are sold. Also, the statement requires that capitalized mortgage
servicing rights be evaluated for impairment based on the fair value of these
rights. For the purposes of determining impairment, mortgage servicing rights
that are capitalized after the adoption of this statement are stratified based
on one or more of the predominate risk characteristics of the underlying loans.
Impairment is recognized through a valuation allowance for each impaired
stratum.
The statement applies prospectively to fiscal years beginning after
December 15, 1995. The Company plans to adopt the statement beginning January 1,
1996. The actual effect of implementing this statement on the Company's
financial position and results of operations will depend on factors determined
at the end of a
F-41
<PAGE> 186
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reporting period, including the amount and mix of originated and purchased
production, the level of interest rates, and market estimates of future
prepayment rates. Accordingly, the Company cannot determine at this time the
ultimate impact on its future earnings of applying the new methodologies of
recording all mortgage servicing rights as assets, of calculating impairment,
and of applying the other provisions of the statement; however, the adoption of
the statement will accelerate the timing of income recognition from origination
activities.
Consolidated Statements of Cash Flows
The Company defines cash as cash in banks.
2. ACQUISITIONS
On February 28, 1995, the Company completed the acquisition of BancPLUS for
approximately $167 million in cash. BancPLUS and its wholly owned subsidiaries,
BancPLUS Mortgage Corp. and HMC, are full-service mortgage bankers based in San
Antonio, Texas, and Honolulu, Hawaii, who had total assets of $244 million and a
servicing portfolio of $13.9 billion at the date of acquisition. The purchase
price in excess of net assets acquired was $113 million.
On October 1, 1994, the Company completed the acquisition of LAC for $60
million. LAC was a Miami-based wholesale mortgage banking company which had
assets of $180 million and a servicing portfolio of approximately $4 billion at
the date of acquisition. The purchase price in excess of net assets acquired, as
adjusted for changes in estimates in 1995, was $29 million.
<TABLE>
These acquisitions are included in the consolidated financial statements
from their respective dates of acquisition. Unaudited pro forma statements of
operations for 1994 and 1995, assuming BancPLUS and LAC had been acquired as of
January 1, 1994, are as follows (in thousands):
<CAPTION>
1994 1995
--------- --------
<S> <C> <C>
Mortgage origination revenue.................................. $ 26,149 $ 4,631
Interest income (expense), net................................ (148) 6,137
Mortgage servicing revenue.................................... 87,437 74,646
Other income.................................................. 5,830 2,744
--------- --------
Total revenues...................................... 119,268 88,158
Expenses...................................................... (136,439) (115,997)
--------- --------
Loss before income taxes and affiliate profit sharing......... (17,171) (27,839)
Affiliate profit sharing...................................... (3,534) (6,242)
Income tax benefit............................................ 4,741 10,780
--------- --------
Net loss............................................ $ (15,964) $(23,301)
========= ========
</TABLE>
The above pro forma statements of operations assume that the Parent contributed
capital equal to the purchase price as of January 1, 1994. The purchase
accounting adjustments are reflected based on the actual purchase price and the
amount of assets actually acquired. In addition, gains on sales of mortgage
servicing rights are included in mortgage servicing revenue in these pro forma
results. No adjustments have been made for restructuring costs that might have
been incurred during the periods presented or for cost efficiencies that might
have been realized. Accordingly, these pro forma results are not indicative of
future results.
F-42
<PAGE> 187
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment at December 31, 1994 and 1995 consisted of the
following:
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Building and improvements......................... $ 14,720,814 $ 23,494,585
Furniture and equipment........................... 11,584,787 12,881,277
------------ ------------
26,305,601 36,375,862
Less accumulated depreciation..................... 7,739,970 11,112,028
------------ ------------
$ 18,565,631 $ 25,263,834
============ ============
</TABLE>
4. INCOME TAXES
The Company's results of operations are included in the Parent's
consolidated income tax return. The Company's income tax provision and related
asset or liability are computed based on income tax rates as if the Company
filed a separate income tax return. Pursuant to a tax-sharing agreement with the
Parent, the Company is reimbursed for the tax effect of current operating losses
utilized in the consolidated return.
<TABLE>
The components of the provision (benefit) for income taxes for the years
ended December 31, 1993, 1994, and 1995 are as follows:
<CAPTION>
1993 1994 1995
--------- --------- -----------
<S> <C> <C> <C>
Current:
Federal.............................. $ 377,258 $(514,431) $(7,504,840)
State................................ 19,173 (38,913) (832,944)
--------- --------- -----------
396,431 (553,344) (8,337,784)
--------- --------- -----------
Deferred:
Federal.............................. (296,983) 87,016 (1,080,141)
State................................ (12,408) 4,917 (170,584)
--------- --------- -----------
(309,391) 91,933 (1,250,725)
--------- --------- -----------
Provision (benefit) for income taxes... $ 87,040 $(461,411) $(9,588,509)
========= ========= ===========
</TABLE>
<TABLE>
The differences between federal income tax computed at the statutory rate
of 35 percent and the actual tax provision are shown below:
<CAPTION>
1993 1994 1995
-------- ----------- ------------
<S> <C> <C> <C>
Income (loss) before taxes................... $190,890 $(2,519,796) $(29,974,815)
======== =========== ============
Tax provision (benefit) at the statutory
rate....................................... $ 66,812 $ (881,929) $(10,491,185)
Increase (decrease) in taxes:
State income tax, net of federal benefit... 4,590 (22,098) (539,470)
Goodwill................................... 0 90,746 1,693,838
Other...................................... 15,638 351,870 (251,692)
-------- ----------- ------------
Total income tax provision
(benefit)........................ $ 87,040 $ (461,411) $ (9,588,509)
======== =========== ============
Effective tax rate........................... 46% (18)% (32)%
======== =========== ============
</TABLE>
Deferred income taxes reflect the impact of temporary differences between
the financial statement carrying amounts and the tax bases of assets and
liabilities due to differences in the timing of recognition of
F-43
<PAGE> 188
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
revenues and expenses and differences related to acquisitions. The tax effects
of temporary differences which create deferred tax assets and liabilities at
December 31, 1994 and 1995 are detailed below:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Reserves................................................ $ 0 $ 5,109,268
Net operating loss carryforwards........................ 4,044,430 3,146,010
Late charges............................................ 629,351 954,969
Property and equipment.................................. 651,825 321,215
Other................................................... 930,060 1,571,175
----------- -----------
Gross deferred tax assets....................... 6,255,666 11,102,637
Valuation allowance............................. 0 (3,146,010)
----------- -----------
Deferred tax asset.............................. 6,255,666 7,956,627
----------- -----------
Deferred tax liabilities:
Capitalized servicing rights............................ 13,310,651 41,520,994
Other................................................... 300,691 819,510
----------- -----------
Deferred tax liability.......................... 13,611,342 42,340,504
----------- -----------
Net deferred tax liability................................ $ 7,355,676 $34,383,877
=========== ===========
</TABLE>
The Company's $34,383,877 net deferred tax liability includes a valuation
allowance of $3,146,010, representing LAC's preaffiliation federal and state net
operating loss carryforwards for which realization is uncertain.
5. RELATED-PARTY TRANSACTIONS
The Company services loans (Note 8) for the Affiliate Banks. Total loan
servicing income relating to loans owned by the Affiliate Banks was
approximately $18,326,000, $20,017,000, and $25,057,000 in 1993, 1994, and 1995,
respectively.
Through March 1995, the Company received earnings credits from the Parent
or its subsidiaries in exchange for maintaining fiduciary deposit accounts.
Revenue recognized as a result of this arrangement was $2,456,000, $2,365,000,
and $523,000 in 1993, 1994, and 1995, respectively, and has been included in
other income. Subsequent to March 1995, the Company received earnings credits in
the form of reduced interest expense.
Notes payable at December 31, 1995, includes advances from lines of credit
with the Parent and the Affiliate Banks which bear interest at a rate of LIBOR
plus 1%, reduced in proportion to compensating balances maintained with
Affiliate Banks.
Amounts payable to the Parent and Affiliate Banks which are included in
accounts payable and accrued liabilities at December 31, 1994 and 1995 were
$2,170,000 and $7,680,000, respectively.
The Company performs certain centralized processing functions for certain
Affiliate Banks. Included in other income was approximately $2,559,000,
$2,171,000, and $1,972,000 in fees for these services for the years ended
December 31, 1993, 1994, and 1995, respectively.
F-44
<PAGE> 189
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
The Company recorded certain expenses related to transactions with the
Parent and the Affiliate Banks as follows:
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Management fees............................. $ 465,729 $ 721,141 $ 2,914,794
Affiliate revenue sharing................... 10,773,786 3,533,551 6,242,191
Rent expense................................ 1,267,130 1,292,498 1,316,448
Interest expense............................ 1,415,372 3,281,503 17,588,548
Information processing support.............. 328,556 1,953,244 3,505,484
Internal audit fees......................... 91,933 358,800 421,392
----------- ----------- -----------
$14,342,506 $11,140,737 $31,988,857
=========== =========== ===========
</TABLE>
The Company pays its Parent a management fee for traditional corporate
support functions, such as accounting operations, financial reporting and
analysis, human resources, marketing, and strategic planning. Affiliate revenue
sharing is a distribution to the Affiliate Banks and is based on each
affiliate's annual loan production.
The Parent funds certain additions to building and improvements through
capital contributions. The Parent made noncash capital contributions of
$3,527,674, $938,287, and $115,476 to the Company for the net cost of building
facilities in 1993, 1994, and 1995, respectively. In addition, the Parent has
made additional capital contributions to fund acquisitions. During 1994 and
1995, the Parent contributed $59,800,000 and $167,100,000, respectively to the
Company to fund the acquisitions of LAC and BancPLUS, respectively.
LAC and BancPLUS Mortgage Corp. sell a certain amount of their loan
production to an Affiliate Bank. Total loans sold to the Affiliate Bank, at
cost, during 1994 and 1995 were $204 million and $324 million, respectively.
Additionally, BMC charges the Affiliate Bank a fee, which totaled $509,000 and
$809,000 during 1994 and 1995, respectively, for arranging these transactions
and providing certain support services.
6. NOTES PAYABLE
<TABLE>
At December 31, 1994, LAC had available mortgage warehouse credit
facilities which permitted the Company to borrow a maximum amount of $275
million, collateralized by the mortgage loans held for sale by LAC. The
following table summarizes information regarding these facilities as of December
31, 1994:
<S> <C>
Balance at end of year....................................... $ 174,015,589
Weighted average interest rate at end of year................ 7.23%
Maximum amount outstanding................................... $ 174,015,589
Average amount outstanding................................... 150,825,062
Contractual interest rate at end of year..................... 1.25% to 8.5%
Weighted average interest rate during the year............... 5.58%
</TABLE>
These facilities expired on May 27, 1995. The Company replaced these
facilities with a borrowing arrangement from the Parent and the Affiliate Banks
(Note 5). Also, during 1995, the Company entered into a credit facility for $200
million, of which $0 was outstanding at December 31, 1995.
7. SUPPLEMENTAL CASH FLOW INFORMATION
The Company transferred $890,203, $235,000, and $1,669,000 from mortgage
loans to real estate acquired by foreclosure in 1993, 1994, and 1995,
respectively. These transactions have been excluded from the accompanying
consolidated statements of cash flows.
F-45
<PAGE> 190
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For the years ended December 31, 1993, 1994, and 1995, income taxes of
$255,605, $396,431 and $2,852,641, respectively, were paid to the Parent.
Interest paid during the same years was $1,259,372, $4,578,611 and $18,529,118,
respectively.
8. LOAN SERVICING
The Company was servicing 243,116 and 445,665 loans at December 31, 1994
and 1995, respectively. The remaining principal balances on serviced loans
totaled approximately $18.4 billion and $33.4 billion at December 31, 1994 and
1995, respectively. At December 31, 1995, the geographic distribution of loans
serviced was 38% in Florida, 14% in California, and 48% in other states. Loans
serviced for others are not included in the accompanying consolidated balance
sheets. The accompanying balance sheets also do not include funds held in
fiduciary deposit accounts, as these funds are not assets of the Company. These
amounts averaged $262,000,000 and $407,000,000 during 1994 and 1995,
respectively.
In connection with its loan servicing activities, the Company makes certain
payments of property taxes and insurance premiums in advance of collecting them
from specific mortgagors and makes certain payments of attorneys' fees and other
costs related to loans in foreclosure. Also, in connection with servicing
mortgage-backed securities guaranteed by Government National Mortgage
Association ("GNMA") or Federal National Mortgage Association ("FNMA"), the
Company advances certain principal and interest payments to security holders
prior to their collection from specific mortgagors. These advances are presented
as receivables in the accompanying consolidated balance sheets.
Conforming conventional loans serviced by the Company are securitized
through FNMA or Federal Home Loan Mortgage Corporation ("FHLMC") programs on a
nonrecourse basis, whereby foreclosure losses are generally the responsibility
of FNMA and FHLMC and not the Company. Similarly, the government loans serviced
by the Company are securitized through GNMA programs, whereby the Company is
insured against loss by the FHA or partially guaranteed against loss by the VA.
The Company is exposed to potential losses on loans partially guaranteed by
the VA in the event the VA elects to pay its guarantee amount instead of
repurchasing the loans. The Company incurred losses of $809,000, in 1995, but
did not incur any significant losses in 1993 or 1994 related to these loans. The
Company has also fulfilled certain pool commitments with loans that were sold
with recourse. Total principal outstanding of loans sold with recourse was
$64,415,000 and $144,490,000 at December 31, 1994 and 1995, respectively.
Management believes that its reserves for losses are adequate for any
contingencies that may arise from these loans.
9. COMMITMENTS AND CONTINGENCIES
The Company's fidelity bond requirements are satisfied through a policy
with underwriters at Lloyd's of London ("Lloyd's"). Maximum coverage is
$75,000,000 per occurrence, with a self-insurance program covering losses under
the deductible of $5,000,000 for the Parent as a whole. The Company is only
liable for losses up to its $250,000 deductible. At December 31, 1995, the
Company had errors and omissions insurance coverage through a policy with
Lloyd's in the amount of $35,000,000. Premiums on both policies have been paid
through August 1996.
The Company leases office space and equipment under various operating
leases expiring through 1998. Substantially all lease agreements for office
space contain renewal options and provide for increases in rental payments based
on the lessor's operating costs or the consumer price index.
F-46
<PAGE> 191
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
The following is a schedule of future minimum rental payments, exclusive of
any contingent operating charges under certain leasing arrangements that have
initial or remaining noncancelable lease terms in excess of one year at December
31, 1995:
<S> <C>
Year ending December 31:
1996................................................... $2,274,796
1997................................................... 1,200,805
1998................................................... 681,885
1999................................................... 395,047
----------
Total.......................................... $4,552,533
==========
</TABLE>
The Company is a party to certain pending legal proceedings arising from
matters incidental to its business. In the opinion of management and counsel,
the aggregate unreserved liability or loss, if any, of legal proceedings will
not have a significant effect on the consolidated financial condition, results
of operations or liquidity of the Company.
10. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
The following disclosure of the estimated fair value of financial
instruments as of December 31, 1995 is made in accordance with the requirements
of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. However,
considerable judgment is necessary to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts:
<CAPTION>
1994
-------------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
------------ ------------
<S> <C> <C>
Assets:
Cash................................................ $ 3,900,572 $ 3,900,572
Accounts receivable, net............................ 18,543,122 18,543,122
Mortgage loans held for sale, net................... 183,913,568 185,101,884
Mortgage loans held for investment, net............. 14,699,097 14,365,427
Liabilities:
Notes payable....................................... 248,214,485 248,214,485
Accounts payable and accrued liabilities............ 9,791,502 9,791,502
Off-balance sheet financial instruments:
Commitments to extend credit and sell loans......... 0 605,854
</TABLE>
F-47
<PAGE> 192
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995
-------------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
------------ ------------
<S> <C> <C>
Assets:
Cash................................................ $ 14,987,783 $ 14,987,783
Accounts receivable, net............................ 64,891,554 64,891,554
Mortgage loans held for sale, net................... 465,879,840 471,241,851
Mortgage loans held for investment, net............. 19,225,181 19,225,181
Liabilities:
Notes payable....................................... 653,055,514 653,055,514
Accounts payable and accrued liabilities............ 63,789,362 63,789,362
Off-balance sheet financial instruments:
Commitments to extend credit and sell loans......... 0 (4,084,450)
</TABLE>
The fair value estimates as of December 31, 1994 and 1995 are based on
pertinent information available to management as of the respective dates.
Although management is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since those dates, and
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
The following describes the methods and assumptions used by the Company in
estimating fair value amounts:
Cash, Accounts Receivable, Notes Payable, and Accounts Payable and Accrued
Liabilities
The carrying amount approximates fair value.
Mortgage Loans Held for Sale
Fair value is estimated using the quoted market prices for securities
backed by similar types of loans and dealer commitments to purchase loans on a
servicing retained basis.
Mortgage Loans Held for Investment
Fair value is estimated using quoted market prices for sales of whole loans
with similar characteristics, such as repricing dates, product type, and size.
In 1995, management's estimates of fair value of these loans does not materially
differ from cost.
Off-Balance Sheet Financial Instruments
Fair value represents the gain or loss on the Company's unclosed
commitments to originate or purchase loans and the Company's commitments to sell
loans. Both types of commitments take into consideration the remaining terms of
the agreements and the present creditworthiness of the counterparties.
11. DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK
During December, 1995, the Company purchased options to buy $500 million of
U.S. Treasury securities in order to reduce its exposure to the impact of
falling interest rates on the value of its capitalized mortgage servicing
assets. The cost of the options of $6,600,000, net of accumulated amortization
of $41,000, is included in other assets.
F-48
<PAGE> 193
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business through the production and sale of mortgage
loans and the management of interest rate risk. These instruments include
short-term commitments (interest rate and points) to extend credit,
mortgage-backed securities mandatory forward commitments, put options to sell
mortgage-backed securities, and loans sold with recourse. These instruments
involve, to varying degrees, elements of credit and interest rate risk.
The Company's exposure to credit loss in the event of nonperformance by the
other party for commitments to extend credit, mortgage-backed securities
mandatory forward commitments, put options to sell mortgage-backed securities,
and loans sold with recourse is represented by the contractual or notional
amounts of these instruments. As these off-balance sheet financial instruments
have essentially the same credit risk involved in extending loans, the Company
generally uses the same credit and collateral policies in making these
commitments and conditional obligations as it does for on-balance sheet
instruments.
<TABLE>
At December 31, 1994 and 1995, financial instruments having potential
credit risk in excess of those reported in the consolidated balance sheets are
as follows:
<CAPTION>
CONTRACTUAL OR NOTIONAL AMOUNTS 1994 1995
---------------------------------------------------------- ------------ ------------
<S> <C> <C>
Commitments to extend credit.............................. $133,000,000 $418,000,000
Commitments to sell mortgage loans and mortgage-backed
securities.............................................. 288,000,000 863,000,000
Loans sold with recourse.................................. 64,415,000 144,490,000
</TABLE>
12. CONCENTRATION OF CREDIT RISK
The Company has identified certain credit risk concentrations in relation
to its on- and off-balance sheet financial instruments. A credit risk
concentration results when the Company has a significant credit exposure to an
individual or a group engaged in similar activities or is affected similarly by
economic conditions.
A significant portion of the Company's financial instruments is transacted
with other financial institutions, various government agencies, and individual
investors. The Company does not have a credit risk concentration with any one
financial institution, agency, or individual. However, of the loans held by the
Company and sold with recourse, a majority are secured by residential real
estate in Florida.
13. RETIREMENT PLAN
<TABLE>
The Company participates in the Parent's retirement, management and
incentive compensation, and health and welfare plans. The Company's share of
pension and 401(k) plans' costs and expenses allocated annually by the Parent
are as follows:
<CAPTION>
PENSION 401(K)
PLANS PLAN
-------- --------
<S> <C> <C>
Year ended December 31:
1993......................................................... $ 96,192 $240,367
1994......................................................... 143,148 245,739
1995......................................................... 268,938 837,956
</TABLE>
The Company remits amounts expensed to the Parent for retirement plans and
for health and welfare plans. Amounts for the management and incentive
compensation plans are remitted directly to employees or to plans maintained on
their behalf.
Information from the Parent's retirement plans' administrator is not
available to permit the Company to determine its share of the vested and
nonvested retirement plan benefit obligations and plan assets. The weighted
average discount rate and rate of increase in future compensation levels used in
determining the actual present value of the projected benefit obligations were
8.90% and 4.50%, respectively, in 1994 and
F-49
<PAGE> 194
BARNETT MORTGAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7.30% and 4.00% in 1995. The expected long-term rate of return on assets was
9.00% and 9.50% in 1994 and 1995, respectively.
The Parent has estimated the accumulated postretirement benefit obligation
on a consolidated basis only and allocates costs to each subsidiary. No specific
estimate has been made for each subsidiary.
14. SUBSEQUENT EVENT
On March 4, 1996, the Parent entered into a transaction in which the stock
of Barnett Mortgage Company would be acquired by a newly formed entity in
exchange for one-third ownership of the new entity and cash. Under the terms of
the transaction, the Parent would retain its mortgage production units, continue
to originate mortgages and retain certain other assets.
F-50
<PAGE> 195
INDEPENDENT AUDITORS' REPORT
Board of Directors
BancPLUS Financial Corporation:
We have audited the accompanying consolidated statements of financial
condition of BancPLUS Financial Corporation and subsidiary as of December 31,
1993 and 1994, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of Honolulu Mortgage Company, Inc., a wholly-owned subsidiary of
BancPLUS Mortgage Corp., which statements reflect total assets constituting 16%
and 20% and total revenues constituting 17% and 14% of the related 1993 and 1994
consolidated totals, respectively. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Honolulu Mortgage Company, Inc., is based
solely on the report of the other auditors.
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, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of BancPLUS Financial Corporation and
subsidiary as of December 31, 1993 and 1994, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
As discussed in note 2(j) to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
KPMG PEAT MARWICK LLP
San Antonio, Texas
March 17, 1995
F-51
<PAGE> 196
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1993 AND 1994
(IN THOUSANDS OF DOLLARS, EXCEPT FOR SHARE DATA)
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents.............................................. $ 4,096 $ 7,901
Mortgage loans held for sale, at lower of cost or market (note 6)...... 417,695 120,871
Accounts receivable and accrued interest, net of allowance for
uncollectible amounts of $3,031 in 1993 and $2,621 in 1994........... 33,941 29,836
Mortgage loan administration contracts, net of accumulated amortization
of $91,079 in 1993 and $116,167 in 1994 (note 3)..................... 118,265 117,716
Real estate acquired through foreclosure............................... 599 1,694
Properties and equipment, net (note 4)................................. 10,595 10,435
Prepaid expenses and other assets...................................... 8,100 5,640
-------- --------
Total assets................................................. $593,291 $294,093
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable (note 5)............................................... 508,342 237,586
Accounts payable and accrued expenses................................ 54,073 23,490
Reserves for losses.................................................. 13,300 11,400
-------- --------
Total liabilities............................................ 575,715 272,476
-------- --------
Commitments and contingencies (notes 3, 5, 6, 8, 10 and 11)
Stockholders' equity (note 5):
Common stock, par value $.01 per share -- 200,000 shares authorized;
100,000 shares issued and outstanding............................. 1 1
Preferred stock, par value $.01 per share ($10,000 liquidation
preference) -- 100,000,000 shares authorized; 1,284,783 and
1,460,125 shares issued and outstanding in 1993 and 1994,
respectively...................................................... 13 15
Additional paid-in capital........................................... 20,174 20,173
Retained earnings (accumulated deficit).............................. (2,612) 1,428
-------- --------
Total stockholders' equity................................... 17,576 21,617
-------- --------
Total liabilities and stockholders' equity................... $593,291 $294,093
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-52
<PAGE> 197
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993 AND 1994
(IN THOUSANDS OF DOLLARS)
<CAPTION>
1993 1994
-------- -------
<S> <C> <C>
INCOME
Loan administration..................................................... $ 69,471 $ 62,253
Loan origination........................................................ 42,053 16,184
Gain on sale of mortgage loan administration contracts.................. 11,334 24,348
Interest income, net of interest expense of $23,732 in 1993 and $15,959
in 1994.............................................................. (1,004) (2,019)
Other................................................................... 1,199 1,190
-------- --------
Total income.................................................... 123,053 101,956
-------- --------
EXPENSES
Personnel............................................................... 48,977 42,798
Occupancy and equipment................................................. 5,803 6,924
Provision for foreclosure costs......................................... 4,528 3,050
Amortization of mortgage loan administration contracts.................. 58,808 25,175
Other general and administrative........................................ 17,198 15,797
-------- --------
Total expenses.................................................. 135,314 93,744
-------- --------
Income (loss) before income taxes, extraordinary item, and
cumulative effect of a change in accounting principle............. (12,261) 8,212
Income taxes (note 9)..................................................... (4,228) 3,107
-------- --------
Income (loss) before extraordinary item and cumulative effect of
a change in accounting principle.................................. (8,033) 5,105
Extraordinary loss resulting from extinguishment of debt, net of income
tax benefit of $548 (note 5)............................................ -- (1,064)
Cumulative effect on prior years of a change in accounting for income
taxes................................................................... (264) --
-------- --------
Net income (loss)............................................... $ (8,297) $ 4,041
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-53
<PAGE> 198
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993 AND 1994
(IN THOUSANDS OF DOLLARS)
<CAPTION>
RETAINED
ADDITIONAL EARNINGS TOTAL
COMMON PREFERRED PAID-IN (ACCUMULATED STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT) EQUITY
------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992....... $1 $12 $20,175 $ 5,685 $25,873
Net loss......................... -- -- -- (8,297) (8,297)
Preferred stock
dividends-in-kind............. -- 1 (1) -- --
--
--- ------- ------- -------
Balance at December 31, 1993....... 1 13 20,174 (2,612) 17,576
Net income....................... -- -- -- 4,041 4,041
Preferred stock
dividends-in-kind............. -- 2 (1) (1) --
--
--- ------- ------- -------
Balance at December 31, 1994....... $1 $15 $20,173 $ 1,428 $21,617
== === ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-54
<PAGE> 199
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1994
(IN THOUSANDS OF DOLLARS)
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................................. $ (8,297) $ 4,041
----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation............................................... 1,559 1,958
Amortization............................................... 58,832 25,199
Provision for foreclosure costs............................ 4,528 3,050
Capitalized excess servicing fees.......................... (1,161) (330)
Non-cash interest expense.................................. 1,168 1,497
Gain on sales of servicing................................. (11,334) (24,348)
Proceeds from sales of servicing........................... 8,924 32,065
Extraordinary loss resulting from extinguishment of debt... -- 1,064
Cumulative effect of a change in accounting principle...... 264 --
Deferred tax benefit....................................... (4,583) (270)
Changes in operating assets and liabilities:
Increase in accounts receivable and other assets......... (9,040) (4,713)
Loans originated or acquired for sale.................... (3,240,339) (1,703,896)
Proceeds from sales of loans............................. 3,127,539 1,991,424
Net increase (decrease) in warehouse debt................ 110,735 (269,085)
Increase (decrease) in accounts payable and accrued
expenses.............................................. 9,823 (9,647)
----------- -----------
Total adjustments to net income (loss)................ 56,915 43,968
----------- -----------
Net cash provided by operating activities............. 48,618 48,009
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of mortgage loan administration contracts........... (33,455) (38,198)
Real estate acquired through foreclosure...................... (1,421) (1,648)
Proceeds from sales of foreclosed real estate................. 816 1,259
Purchases of properties and equipment......................... (4,117) (1,796)
----------- -----------
Net cash used in investing activities................. (38,177) (40,383)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable................................... 725,150 400,936
Principal payments on notes payable........................... (739,084) (402,630)
Loan fees paid................................................ -- (2,127)
----------- -----------
Net cash used in financing activities................. (13,934) (3,821)
----------- -----------
Net increase (decrease) in cash and cash
equivalents......................................... (3,493) 3,805
CASH AND CASH EQUIVALENTS
Beginning of year............................................. 7,589 4,096
----------- -----------
End of year................................................... $ 4,096 $ 7,901
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-55
<PAGE> 200
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1994
(1) REPORTING ENTITY
BancPLUS Financial Corporation (the Company) was incorporated in 1991 for
the purpose of acquiring all of the capital stock of BancPLUS Mortgage Corp.
(BancPLUS Mortgage), and its only substantive operations to date have involved
such activities. The purchase of the stock of BancPLUS Mortgage was effective as
of September 1, 1991.
The accompanying consolidated financial statements include the operations
of the Company and BancPLUS Mortgage. All significant intercompany balances and
transactions have been eliminated in consolidation.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Mortgage Loans Held for Sale
Mortgage loans held for sale are stated at the lower of cost or market
value as determined in the aggregate. The cost basis of mortgage loans includes
loan principal outstanding, adjusted for discounts or premiums. Loan fees and
direct costs associated with the origination of mortgage loans, which are
deferred and recognized when the loans are sold, are reflected as deferred
revenue in the financial statements. Commitment fees paid to permanent investors
are recognized as expense when the related loans are sold or when it becomes
evident that the commitment will not be used. The market value of mortgage loans
covered by investor commitments is based on commitment prices. The market value
of uncommitted mortgage loans is determined by current investor yield
requirements. Differences between the carrying amounts of mortgage loans and
sales proceeds are recognized at the time of sale.
When mortgage loans are sold with servicing rights retained and the actual
servicing fees to be received differ from normal servicing fees for similar
loans, an additional gain or loss is recognized. This gain or loss represents
the present value of the difference between the actual and the normal servicing
fees over the remaining lives of the loans, adjusted for anticipated
prepayments. The excess servicing fees receivable resulting from the recognition
of these gains are included in mortgage loan administration contracts.
(b) Allowance for Uncollectible Receivables
An allowance is maintained for estimated uncollectible advances made
primarily in connection with BancPLUS Mortgage's responsibilities as servicer
for loans in Government National Mortgage Association (GNMA) pools. The
allowance represents that portion of the advances made as of the date of the
financial statements that are not expected to be reimbursed. The allowance is
increased by provisions charged to earnings and reduced by receivable
charge-offs, net of recoveries.
(c) Mortgage Loan Administration Contracts
Mortgage loan administration contracts are recorded at cost, which does not
exceed the present value of future net servicing income, net of amortization.
Mortgage loan administration contracts are amortized in the current period on an
accelerated method that approximates the proportion that current net servicing
income bears to anticipated total net servicing income from the related loans.
In connection with the periodic evaluation of the amortization of mortgage loan
administration contracts, the Company compares the recorded investment in
mortgage loan administration contracts to the value of the expected future net
servicing income determined on a disaggregated, undiscounted basis. Differences
representing an excess of recorded investment over expected future net servicing
income are charged to earnings through an additional current period charge to
amortization.
F-56
<PAGE> 201
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Included in mortgage loan administration contracts at December 31, 1994 was
$2,428,000 of excess servicing fees receivable. This amount represents the
present value of future servicing fees in excess of the normal fee. These
receivables are amortized in the current period on an accelerated method that
approximates the proportion that the current servicing fees bear to anticipated
total servicing fees to be received from the related loans. The receivable
balance is revalued periodically using current prepayment estimates and original
discount rates and, if so indicated, is written down to the present value of the
estimated remaining future excess service fee revenue through an additional
charge to amortization. If the receivable balance is less than the present value
of the estimated remaining future excess service fee revenue due to favorable
prepayment experience, amortization is adjusted prospectively.
(d) Reserve for Losses
A reserve for losses is maintained for estimated foreclosure losses
associated primarily with BancPLUS Mortgage's responsibilities as servicer for
loans in GNMA pools. The required level of reserves is determined on an
undiscounted basis by analysis of such factors as the prevailing level of loan
delinquencies, anticipated reinstatement rates from the various stages of
delinquency, and loss experience on similar loans serviced. This reserve
represents that portion of the estimated foreclosure losses for which BancPLUS
Mortgage does not have an outstanding receivable as of the date of the financial
statements, but for which an expected loss is estimable based on loan
delinquencies and other characteristics of the loans serviced. The reserve is
increased by provisions charged to earnings and by purchase price adjustments on
certain acquisitions of mortgage loan administration contracts. The reserve is
reduced by charge-offs, net of recoveries.
(e) Real Estate Acquired Through Foreclosure
Real estate properties acquired through foreclosure are recorded at the
lower of cost or fair value on their acquisition dates and at the lower of such
initial amount or current fair value thereafter.
(f) Properties and Equipment
Properties and equipment are stated at cost less accumulated depreciation
and are depreciated using the straight-line method over their estimated useful
lives.
Maintenance, repairs, and minor renewals are charged to expense.
Betterments and major renewals are capitalized. Upon retirement or disposition,
both the asset cost and the related accumulated depreciation are written off and
gains or losses are included in operations.
(g) Loan Administration
Loan administration fees represent a participation in interest collections
on loans serviced for investors, normally based on a stipulated percentage of
the outstanding monthly principal balance of the loans. Loan administration fees
are recognized as income when received. Loan administration costs are charged to
expense as incurred.
(h) Loan Origination
Fees and direct loan costs associated with the origination of single-family
residential loans are recognized when the related loans are sold. Direct loan
costs have not been reclassified against loan origination income.
(i) Cash Equivalents
Cash equivalents include all highly liquid investments with a maturity of
three months or less at the date of acquisition.
F-57
<PAGE> 202
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(j) Federal Income Taxes
BancPLUS Financial Corporation files a consolidated federal income tax
return which includes the operations of BancPLUS Mortgage.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" and has reported the
cumulative effect of this change in accounting for income taxes in the
consolidated statement of operations for the year ended December 31, 1993.
Statement 109 required a change from the deferred method of accounting for
income taxes required under APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method specified in
Statement 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recoverable or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date.
(3) SERVICING INFORMATION
BancPLUS Mortgage acts as a correspondent for investors in securing and
servicing loans. BancPLUS Mortgage was servicing approximately 197,000 loans
with an aggregate unpaid principal balance of approximately $14,013,000,000 at
December 31, 1994. Amounts capitalized in connection with acquiring the right to
service mortgage loans were approximately $35,970,000 and $25,980,000 for the
years ended December 31, 1993 and 1994, respectively.
As of December 31, 1994, 24% of the servicing portfolio balance was secured
by properties in California, 13% in Texas, and 13% in Hawaii. There were no
other state concentrations in excess of 10% and there were loans in all 50
states. The portfolio included approximately 26% Federal Housing Administration
(FHA) loans in Government National Mortgage Association (GNMA) pools and 11%
Department of Veterans Affairs (VA) loans in GNMA pools. Federal National
Mortgage Association (FNMA) loans comprised approximately 37% of the portfolio
and Federal Home Loan Mortgage Corporation (FHLMC) loans comprised approximately
19% of the portfolio. The remaining 7% of the portfolio was spread among various
other investors.
BancPLUS Mortgage is generally required to advance, from corporate funds,
escrow and foreclosure costs for loans which it services. A portion of these
advances is not recoverable for the loans in GNMA pools. Upon foreclosure, an
FHA or VA property is typically conveyed to the Department of Housing and Urban
Development (HUD) or VA. However, VA has the authority to deny conveyance of the
foreclosed property and to reimburse BancPLUS Mortgage based on a percentage of
the loan's outstanding principal balance. BancPLUS Mortgage assumes
responsibility for the disposition of properties on which VA has denied
conveyance.
Included in the servicing portfolio at December 31, 1994 were approximately
$79,656,000 of loans serviced for FNMA or private investors and $1,166,000 of
uninsured conventional loans for which there is recourse to BancPLUS Mortgage in
the event of foreclosure.
Anticipated losses associated with these activities are provided for in the
consolidated financial statements. Actual losses have been within management's
expectations.
Custodial funds for the payment of insurance and taxes and unremitted
principal and interest are segregated in separate bank accounts excluded from
BancPLUS Mortgage's assets and liabilities. Such custodial funds approximated
$212,754,000 at December 31, 1994.
F-58
<PAGE> 203
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company carries blanket fidelity bond coverage in the aggregate amount
of $15,700,000 and errors and omissions coverage in the aggregate amount of
$16,000,000 at December 31, 1994.
(4) PROPERTIES AND EQUIPMENT
<TABLE>
The following is a detail of properties and equipment at December 31, 1993
and 1994 (in thousands):
<CAPTION>
ESTIMATED
USEFUL LIFE
IN YEARS 1993 1994
----------- ------- -------
<S> <C> <C> <C>
Building and improvements............................ 5 - 30 $ 6,660 $ 7,186
Data processing equipment............................ 3 - 7 3,439 4,109
Furniture, fixtures, and equipment................... 5 - 7 3,573 4,042
------- -------
13,672 15,337
Less accumulated depreciation........................ (3,077) (4,902)
------- -------
Properties and equipment, net.............. $10,595 $10,435
======= =======
</TABLE>
(5) NOTES PAYABLE
<TABLE>
Notes payable consisted of the following at December 31, 1993 and 1994 (in
thousands):
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
Committed operating lines of credit:
Mortgage loans credit facility............................... $258,645 $ 88,239
Receivables credit facility.................................. 12,183 3,800
Working capital credit facility.............................. 2,600 --
Pool advance credit facility................................. -- 198
-------- --------
Total committed operating lines of credit................. 273,428 92,237
Uncommitted operating lines of credit:
Mortgage loans and mortgage backed securities credit
facility.................................................. 123,444 24,764
Term debt.................................................... 62,500 76,368
Subordinated notes........................................... 40,857 40,880
Mortgage on corporate headquarters........................... 3,613 3,337
Notes payable to related party............................... 4,500 --
-------- --------
Total notes payable.................................. $508,342 $237,586
======== ========
</TABLE>
The committed operating lines permitted BancPLUS Mortgage to borrow an
aggregate maximum amount of $282,000,000 at December 31, 1994. These agreements
expire during 1995. The uncommitted operating lines permitted BancPLUS Mortgage
to borrow an additional aggregate maximum amount of $275,000,000 at December 31,
1994. These agreements also expire during 1995. Borrowings under these
agreements bear interest at rates ranging from the federal funds rate plus 1% to
a range of prime minus .75% to prime plus 1.25%, reduced in proportion to
compensating balances maintained at the banks. Commitment fees paid relating to
committed operating lines of credit outstanding at December 31, 1994 totaled
$901,000 and ranged from .31% to .57%. These amounts are amortized over the term
of the commitments and are included as a component of interest expense.
Non-usage fees for the committed operating lines range from .125% to .25%.
F-59
<PAGE> 204
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
These operating lines of credit are secured by mortgage loans and mortgage
backed securities and all rights relating to or to be reimbursed for principal
and interest advances and foreclosure advances. All of these operating lines of
credit are cross-collateralized and cross-defaulted.
The agreements provide for various financial covenants, the most
restrictive of which place limitations on debt, other investments, transactions
with affiliates, and the payment of dividends. The agreements also require the
maintenance of certain financial ratios, including minimums for net worth,
portfolio size, and funds from operations. As of December 31, 1994, BancPLUS
Mortgage was in compliance with all requirements of the creditor banks.
BancPLUS Mortgage had notes payable outstanding to a group of banks which
provided $76,368,000 of acquisition term financing at December 31, 1994. The
notes mature in 2000 and bear interest at prime plus 1.25%, reduced in
proportion to the amount of compensating balances maintained at the banks.
Quarterly installments of principal in the amount of $3,632,000 plus interest
are due through the year 1999. A final principal payment of $3,728,000 plus
interest is due February 7, 2000. The notes are secured by the servicing
portfolios of both BancPLUS Mortgage and Honolulu Mortgage Company, Inc., a
wholly-owned subsidiary of BancPLUS Mortgage (subject to the restrictions
required by GNMA, FNMA, and FHLMC), and all of the issued and outstanding shares
of capital stock of certain BancPLUS Mortgage subsidiaries. These notes contain
financial covenants similar to those contained in the operating lines of credit
agreements. BancPLUS Mortgage met all of the requirements of the creditor banks
at December 31, 1994.
As of December 31, 1993 and 1994, BancPLUS Financial Corporation had
$41,000,000 of 11.5% subordinated notes outstanding. The notes become due
February 26, 2001 with annual redemptions of one-third of the original principal
to begin February 26, 1999. In connection with the issuance of those notes, the
note holders also acquired warrants to purchase 9,170 Stock Units (see note 10).
BancPLUS Mortgage has executed as co-maker with its subsidiary, Fiesta
Investments, Inc., a mortgage in the face amount of $4,150,000 to provide
financing for the purchase and improvement of its corporate headquarters. As of
December 31, 1994, $3,337,000 was outstanding on the note, which bears interest
at prime plus 1% (prime plus 2% beginning in 1995). The note requires monthly
principal installments of approximately $23,000 and matures on December 31,
1996.
Substantially all of the BancPLUS Mortgage debt is guaranteed by BancPLUS
Financial Corporation.
Aggregate cash payments for interest were $22,779,000 and $14,733,000
during the years ended December 31, 1993 and 1994, respectively.
During the first quarter of 1994, BancPLUS Mortgage refinanced all of its
operating lines of credit and term debt through a group of banks. As a result of
this refinancing, the Company recognized an extraordinary loss of $1,064,000
resulting from the write-off of certain unamortized commitment fees relating to
the refinanced debt.
(6) COMMITMENTS AND CONTINGENCIES
BancPLUS Mortgage had commitments at set prices and rates, which generally
were less than a year in duration, to make and purchase loans of approximately
$61,259,000 and to sell loans of approximately $107,344,000 at December 31,
1994. BancPLUS Mortgage also had commitments to make and purchase loans of
approximately $55,200,000 at December 31, 1994 for which prices and rates had
not been set. Market risk exists on the commitments to make and purchase loans
for which prices and rates are set as a result of potential future fluctuations
in mortgage interest rates. To mitigate this risk, BancPLUS Mortgage has entered
into sales agreements which, viewed independent of the related commitments to
make or purchase loans, are subject to offsetting market risk should there be
fluctuations in mortgage interest rates. All loans in the warehouse are covered
by these forward sales agreements. BancPLUS Mortgage conducts forward sales on a
F-60
<PAGE> 205
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
percentage of the loans in process and may use options to hedge all or a portion
of any remaining loans in process. Gains or losses on options are deferred and
recognized at the time the related mortgage loans are sold or upon expiration of
the option term.
All loans are collateralized by the underlying real estate. The gross
amount of the commitments to make and purchase loans represents BancPLUS
Mortgage's maximum exposure to credit risk. To mitigate credit risk, BancPLUS
Mortgage securitizes and sells conventional loans on a non-recourse basis, and
securitizes and sells government loans through programs under which VA partially
guarantees or FHA insures BancPLUS Mortgage against credit risk.
BancPLUS Mortgage has been named as a defendant in various lawsuits arising
in the normal course of business. Management intends to vigorously defend the
lawsuits and is of the opinion that their resolution will not have a material
adverse effect on the accompanying financial statements.
<TABLE>
BancPLUS Mortgage has obligations under various operating leases. Lease
expense was $3,670,000 and $4,628,000 for the years ended December 31, 1993 and
1994, respectively. Additionally, BancPLUS Mortgage leases a portion of its
corporate headquarters facility to outside tenants. The future minimum rent
payments and receipts as of December 31, 1994 relating to these leasing
activities were as follows (in thousands):
<CAPTION>
LEASE LEASE
PAYMENTS INCOME
-------- ------
<S> <C> <C>
1995...................................................... $2,272 $601
1996...................................................... 1,713 449
1997...................................................... 978 247
1998...................................................... 532 95
1999 and thereafter....................................... 399 13
</TABLE>
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires that the Company disclose
estimated fair values for its financial instruments. Fair value estimates along
with the methods and assumptions used in developing such estimates are set forth
below for the Company's financial instruments.
Cash, Receivables and Payables -- The carrying amount approximates fair
value because these instruments are of short duration and do not present
significant credit concerns.
Mortgage Loans Held for Sale -- The fair value of mortgage loans held for
sale and covered by investor commitments is based on commitment prices. The fair
value of uncommitted mortgage loans is determined using current investor yield
requirements.
Excess Servicing Fees Receivable -- The fair value of excess servicing fees
receivable is determined by discounting the expected future cash flows using
current prepayment estimates.
Notes Payable -- The carrying amount approximates fair value due to the
variable interest rates associated with this debt. The fair value of the
subordinated notes is determined in accordance with the redemption requirements
of the notes.
F-61
<PAGE> 206
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
The estimated fair values of the Company's financial instruments are
summarized as follows (in thousands):
<CAPTION>
AT DECEMBER 31, 1994
-----------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents.................................... $ 7,901 $ 7,901
Mortgage loans held for sale................................. 120,871 120,895
Receivables, net of allowance................................ 29,836 29,836
Excess servicing fees receivable............................. 2,428 4,230
-------- --------
Total financial assets............................... $161,036 $162,862
======== ========
FINANCIAL LIABILITIES:
Notes payable................................................ 237,586 237,706
Payables..................................................... 23,490 23,490
-------- --------
Total financial liabilities.......................... $261,076 $261,196
======== ========
UNRECOGNIZED FINANCIAL INSTRUMENTS:
Fixed commitments to make and purchase loans................. 61,259 61,294
Floating commitments to make and purchase loans.............. 51,359 51,359
-------- --------
Total commitments to make and purchase loans......... $112,618 $112,653
======== ========
Commitments to sell loans, into which specific loans have not
been allocated............................................ $ 14,830 $ 14,877
======== ========
</TABLE>
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no ready market exists for a portion of the
Company's financial instruments, fair value estimates are based on judgments
regarding future expected losses, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Other significant assets that are not considered
financial instruments include mortgage loan administration contracts, net of
excess servicing fees receivable and properties and equipment. In addition, the
tax ramifications related to the realization of unrealized gains and losses can
have a significant effect on fair value estimates and have not been considered
in the estimates.
(8) EMPLOYEE BENEFIT PLANS
BancPLUS Mortgage sponsors a savings and investment plan in which employees
may contribute a portion of their compensation. BancPLUS Mortgage matches a
portion of employee contributions, subject to the plan's defined vesting
schedule.
Honolulu Mortgage Company, Inc. sponsors a retirement plan which covers
substantially all of its employees. This retirement plan includes an employee
savings option with partial matching by Honolulu Mortgage Company, Inc. Annual
contributions are discretionary as defined in the plan agreement and such
contributions are funded on a current basis.
F-62
<PAGE> 207
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total expense relating to these plans was $468,000 and $680,000 for the
years ended December 31, 1993 and 1994, respectively.
(9) INCOME TAXES
<TABLE>
The components of income taxes for the years ended December 31, 1993 and
1994 were as follows (in thousands):
<CAPTION>
1993 1994
------- ------
<S> <C> <C>
Current expense........................................... $ 355 $3,377
Deferred benefit.......................................... (4,583) (270)
------- ------
Total................................................ $(4,228) $3,107
======= ======
</TABLE>
<TABLE>
The expected income taxes for the years ended December 31, 1993 and 1994
differ from the recorded amounts as follows (in thousands):
<CAPTION>
1993 1994
-------- ------
<S> <C> <C>
Income (loss) before income taxes, extraordinary item, and
cumulative effect of a change in accounting principle........ $(12,261) $8,212
======== ======
Income tax at 34% statutory rate............................... (4,169) 2,792
Increase (decrease) in tax resulting from:
State and local income taxes................................. 28 248
Other, net................................................... (87) 67
-------- ------
Income tax expense (benefit)......................... $ (4,228) $3,107
======== ======
</TABLE>
<TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1993 and 1994 are presented below (in thousands):
<CAPTION>
1993 1994
------ ------
<S> <C> <C>
Deferred tax assets:
Accruals not currently deductible for income tax purposes...... $ 673 $1,005
Valuation allowances........................................... 5,475 4,771
Excess of tax over book basis for organization costs........... 896 700
Properties and equipment, principally due to differences in
depreciation................................................ 130 88
Deferred installment sale income............................... -- 304
Other.......................................................... 103 150
------ ------
Total deferred tax assets.............................. 7,277 7,018
------ ------
Deferred tax liabilities:
Excess of book over tax basis for mortgage loan administration
contracts................................................... 5,972 5,136
Accounts receivable, principally due to allowance for
uncollectible accounts...................................... 412 533
Other.......................................................... -- 186
------ ------
Total deferred tax liabilities......................... 6,384 5,855
------ ------
Net deferred tax asset................................. $ 893 $1,163
====== ======
</TABLE>
Management believes that realization of the deferred tax assets is more
likely than not based on the expectation that such benefits will be utilized in
future consolidated tax returns.
F-63
<PAGE> 208
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1993, the net deferred tax asset of $893,000 was comprised
of $1,377,000 of deferred income tax benefit (included in prepaid expenses and
other assets) and $484,000 of deferred state income taxes payable (included in
accounts payable and accrued expenses). Prepaid expenses and other assets also
included $983,000 of current income taxes recoverable at December 31, 1993. At
December 31, 1994, the net deferred tax asset of $1,163,000 was comprised of
$1,473,000 of deferred income tax benefit (included in prepaid expenses and
other assets) and $310,000 of deferred state income taxes payable (included in
accounts payable and accrued expenses). Accounts payable and accrued expenses
also included $1,411,000 of current income taxes payable at December 31, 1994.
Aggregate cash payments for income taxes were $1,907,000 and $1,470,000
during the years ended December 31, 1993 and 1994, respectively.
(10) STOCKHOLDERS' EQUITY AND RELATED PARTY TRANSACTIONS
Under a Management Shareholders Agreement between the Company and its
shareholders, certain restrictions exist with respect to the transfer of shares
between shareholders which provide that the Company has a right of first refusal
on any transfer of shares to third parties. The terms of this Management
Shareholders Agreement include provisions whereby the Company may be required to
acquire the outstanding shares of specified "management shareholders" at "fair
value" in the event of termination of employment of such individuals in certain
cases. The agreement provides that any requirement of the Company to purchase
shares of terminated management shareholders expires on the day the common stock
of the Company is listed or admitted to trading on a national securities
exchange or quoted by NASDAQ.
The Company's preferred stock outstanding has a stated $1.30 per share
annual dividend which is payable quarterly and is cumulative. The Company
declared preferred stock dividends-in-kind, recorded at par value, of 159,300
and 181,041 shares during 1993 and 1994, respectively of which 41,755 and 47,454
were issued January 1, 1994 and 1995, respectively. The preferred shares have a
liquidation preference of $10 per share (exclusive of accrued dividends) and are
redeemable at the Company's option on or after October 31, 1996 for $10 per
share.
In connection with the issuance of the 11.5% subordinated notes, the note
holders acquired warrants to purchase 9,170 Stock Units at a price of $202.71
per Unit. The warrants expire February 26, 2001. Each Stock Unit entitles the
holder to acquire 1 share of common stock and 10.271 shares of preferred stock
as of the warrant issuance date, adjusted proportionately for subsequent
issuances of stock.
Effective October 18, 1991, the Company granted options to the Chairman and
Chief Executive Officer of BancPLUS Mortgage to purchase up to 5,263 shares of
common stock at $95 per share and 52,632 shares of preferred stock at $9.50 per
share. The options are exercisable immediately and expire in ten years. Any
exercise must be made to acquire a proportionate number of common and preferred
shares. As of December 31, 1994, none of the options had been exercised.
From time to time, the Company's mortgage banking subsidiaries may make
mortgage loans to its officers and employees in the normal course of business.
The terms of such mortgage loans will be substantially similar to those provided
to the public, but may, in certain circumstances, be more favorable to such
officers or employees. It is the Company's policy to waive the origination fee
on officer and employee residential mortgage loans. Such mortgage loans are sold
to investors in the secondary market in the ordinary course of business.
Substantially all of the Company's net assets are attributable to BancPLUS
Mortgage's net assets, which are restricted. (See Note 5).
F-64
<PAGE> 209
BANCPLUS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) BANCPLUS GROUP PERFORMANCE SHARE PLAN
Effective April 28, 1993, the Company adopted the BancPLUS Group
Performance Share Plan, pursuant to which designated employees of BancPLUS
Mortgage may be awarded "Performance Shares" entitling them to cash bonus
payments in the event of (1) distributions to common shareholders (after
outstanding preferred stock has been effectively redeemed and specified
distributions have been made to existing common shareholders), (2) termination
of employment in certain cases or (3) a change of control of the Company. These
Performance Shares vest ratably over a five-year period subsequent to the date
of grant unless the Company determines a different vesting schedule at the time
of grant.
A maximum of 3,627 Performance Shares are currently authorized under the
BancPLUS Group Performance Share Plan. As of December 31, 1994, a total of 3,500
Performance Shares have been issued under the Plan.
(12) SUBSEQUENT EVENTS
On February 28, 1995, all of the outstanding stock of BancPLUS Financial
Corporation was acquired by Barnett Mortgage Company. Barnett Mortgage Company
is a wholly-owned subsidiary of Barnett Banks, Inc., a registered bank holding
company headquartered in Jacksonville, Florida. The acquisition will be
accounted for as a purchase.
On February 28, 1995, the Company also repaid all its subordinated notes
outstanding and redeemed all of its outstanding preferred stock, stock warrants,
stock options, and Performance Shares. Additionally, BancPLUS Mortgage repaid
the mortgage on its corporate headquarters.
F-65
<PAGE> 210
===============================================================================
NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY HOMESIDE. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE
NOTES 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 ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF HOMESIDE SINCE THE DATE HEREOF.
------------------------
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 14
Capitalization........................ 28
Unaudited Pro Forma Consolidated
Financial Information............... 29
Selected Consolidated Financial
Information......................... 43
Management's Discussion and Analysis
of Financial Condition and Results
of Operations -- HLI................ 47
Management's Discussion and Analysis
of Financial Condition and Results
of Operations -- HHI................ 59
Industry Overview..................... 69
Business.............................. 73
Overview............................ 73
HLI................................. 75
Acquisition of HHI.................. 84
The Acquisitions...................... 91
Management............................ 93
Security Ownership of Certain
Beneficial Owners and Management.... 100
Certain Relationships and Related
Transactions........................ 102
Description of Bank Credit
Agreement........................... 108
Description of the Exchange Notes..... 112
Description of the Initial Notes...... 135
Book Entry; Delivery and Form......... 135
Exchange Offer; Registration Rights... 137
Income Tax Considerations............. 139
Plan of Distribution.................. 141
Legal Matters......................... 141
Experts............................... 141
Index to Financial Statements......... F-1
</TABLE>
===============================================================================
===============================================================================
$200,000,000
LOGO
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF 11 1/4% SERIES B SENIOR SECURED
SECOND PRIORITY NOTES DUE 2003 FOR EACH OF $1,000 IN PRINCIPAL AMOUNT OF
OUTSTANDING 11 1/4% SENIOR SECURED SECOND PRIORITY NOTES DUE 2003
---------------------------
PROSPECTUS
---------------------------
, 1996
================================================================================
<PAGE> 211
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
provides as follows:
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he 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, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he 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 reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he 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, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect to any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the board of directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) if
there are no such directors, or, if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the shareholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including
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<PAGE> 212
attorneys' fees) incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of shareholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who 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, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to the corporation shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to other enterprises
shall include employee benefit plans; references to fines shall include any
excise taxes assessed on a person with respect to any employee benefit
plan; and references to serving at the request of the corporation shall
include any service as a director, officer, employee, or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner not opposed to the best interests of the
corporation as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Article 10 of the By-laws of the Issuer provides as follows:
ARTICLE 10
INDEMNIFICATION
Section 10.1 Third Party Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he 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, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
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 conduct was unlawful. The termination of any
action, suit or proceeding by judgment,
II-2
<PAGE> 213
order, settlement, conviction, or upon plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he 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 reasonable cause to believe that his conduct
was unlawful.
Section 10.2 Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he 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, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 10.3 Expenses. To the extent that a Director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
Section 10.4 Authorization. Any indemnification under Sections 10.1 and
10.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 10.1 and 10.2.
Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
Section 10.5 Advance Payment of Expenses. Expenses incurred by an officer
or Director in defending a civil or criminal action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of such officer or Director to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article 10. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
Section 10.6 Non-Exclusiveness. The indemnification provided by this
Article 10 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 10.7 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who 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,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article 10.
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<PAGE> 214
Section 10.8 Constituent Corporations. The Corporation shall have power to
indemnify any person who is or was a director, officer, employee or agent of a
constituent corporation absorbed in a consolidation or merger with this
Corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in the same manner as hereinabove
provided for any person who 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, partnership, joint
venture, trust or other enterprise.
Section 10.9 Additional Indemnification. In addition to the foregoing
provisions of this Article 10, the Corporation shall have the power, to the full
extent provided by law, to indemnify any person for any act or omission of such
person against all loss, cost, damage and expense (including attorney's fees) if
such person is determined (in the manner prescribed in Section 10.4 hereof) to
have acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation.
Article X of the Certificate of Incorporation of the Issuer provides in
relevant part as follows:
No director shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
notwithstanding any provision of law imposing such liability; provided, however,
that, to the extent provided by applicable law, this provision shall not
eliminate the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of Delaware, or
(iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<S> <C>
3.1 Certificate of Incorporation of HomeSide, Inc.
3.2 By-Laws of HomeSide, Inc.
4.1 Form of Indenture dated as of May 14, 1996 between HomeSide, Inc. and The Bank of
New York, as Trustee.
5.1* Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding
legality of the securities being registered.
10.1 Stock Purchase Agreement dated December 11, 1995 between HomeSide, Inc. and The
First National Bank of Boston (the "BBMC Purchase Agreement").
10.2 Amendment No. 1, dated as of March 15, 1996, to the BBMC Purchase Agreement.
10.3 Marketing Agreement dated as of March 15, 1996 between HomeSide, Inc. and The
First National Bank of Boston.
10.4* Repurchase of Mortgage Loan Servicing Rights Letter Agreement between The First
National Bank of Boston and HomeSide Lending, Inc.
10.5 Operating Agreement effective as of March 15, 1996 between The First National Bank
of Boston and HomeSide Lending, Inc.
10.6 Brokered Loan Purchase and Sale Agreement dated as of March 15, 1996 between
HomeSide Lending, Inc. and each of The First National Bank of Boston, Bank of
Boston Connecticut, Rhode Island Hospital Trust National Bank and Bank of Boston
Florida, N.A.
10.7 Master Take-Out Commitment dated as of March 15, 1996 between HomeSide Lending,
Inc. and each of The First National Bank of Boston, Bank of Boston Connecticut,
Rhode Island Hospital Trust National Bank and Bank of Boston Florida, N.A.
10.8 Neighborhood Assistance Corporation of America Mortgage Loan Take-Out Commitment
dated as of March 15, 1996 between HomeSide Lending, Inc. and The First National
Bank of Boston.
</TABLE>
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<PAGE> 215
<TABLE>
<S> <C>
10.9+ PMSR Flow Agreement dated as of March 15, 1996 between HomeSide Lending, Inc. and
each of The First National Bank of Boston, Bank of Boston Connecticut, Rhode
Island Hospital Trust National Bank and Bank of Boston Florida, N.A.
10.10+ Mortgage Loan Servicing Agreement dated as of March 15, 1996 between HomeSide
Lending, Inc. and each of The First National Bank of Boston, Bank of Boston
Connecticut, Rhode Island Hospital Trust National Bank and Bank of Boston Florida,
N.A.
10.11 Stock Purchase Agreement dated as of March 4, 1996 between HomeSide, Inc. and
Barnett Banks, Inc. (the "BMC Purchase Agreement").
10.12* Amendment No. 1, dated as of May 31, 1996, to the BMC Purchase Agreement.
10.13 Tax Indemnity Letter Agreement dated as of May 31, 1996 between HomeSide Holdings,
Inc. and Barnett Banks, Inc.
10.14 Amended and Restated Shareholder Agreement dated as of May 31, 1996 among
HomeSide, Inc. and the shareholders thereof.
10.15 Amended and Restated Registration Rights Agreement dated as of May 31, 1996
between HomeSide, Inc. and certain shareholders thereof.
10.16 Marketing Agreement dated as of May 31, 1996 between HomeSide, Inc. and Barnett
Banks, Inc.
10.17 Transitional Services Agreement dated as of May 31, 1996 between the HomeSide
Holdings, Inc. and Barnett Banks, Inc.
10.18 Operating Agreement dated as of May 31, 1996 between HomeSide Lending, Inc. and
Barnett Banks, Inc.
10.19+ Mortgage Loan Servicing Agreement dated as of May 31, 1996 between HomeSide
Lending, Inc. and Barnett Banks, Inc.
10.20+ PMSR Flow Agreement dated as of May 31, 1996 between HomeSide Lending, Inc. and
Barnett Banks, Inc.
10.21 Correspondent Agreement dated May 31, 1996 between HomeSide Lending, Inc. and
Barnett Banks, Inc.
10.22 Delegated Underwriting Agreement dated as of May 31, 1996 between HomeSide
Lending, Inc. and HomeSide Holdings, Inc.
10.23 Credit Agreement dated as of May 31, 1996 among HomeSide Lending, Inc., Honolulu
Mortgage Company, Inc., the Lenders parties thereto, the Balance Lenders thereto,
NationsBank of Texas, N.A., as Syndication Agent, Bankers Trust Company, as
Documentation Agent, The First National Bank of Boston, as Collateral Agent, and
Chemical Bank, as Administrative Agent (the "Credit Agreement").
10.24 Holdings Pledge Agreement dated as of May 31, 1996 between HomeSide, Inc. and
Chemical Bank, as Administrative Agent for the Lenders parties to the Credit
Agreement.
10.25 HomeSide Pledge Agreement dated as of May 31, 1996 between HomeSide Lending, Inc.
and Chemical Bank, as Administrative Agent for the Lenders parties to the Credit
Agreement.
10.26 BMC Pledge Agreement dated as of May 31, 1996 between HomeSide Holdings, Inc. and
Chemical Bank, as Administrative Agent for the Lenders parties to the Credit
Agreement.
10.27* Amended Registration Rights Agreement dated as of May 31, 1996 between HomeSide,
Inc. and HomeSide Holdings, Inc.
10.28 Holdings Guaranty dated as of May 31, 1996 by HomeSide, Inc. in favor of Chemical
Bank, as Administrative Agent for the Lenders parties to the Credit Agreement.
10.29 HomeSide Guaranty dated as of May 31, 1996 by HomeSide Lending, Inc. in favor of
Chemical Bank, as Administrative Agent for the Lenders parties to the Credit
Agreement.
</TABLE>
II-5
<PAGE> 216
<TABLE>
<S> <C>
10.30 Subsidiaries Guaranty dated as of May 31, 1996 by each of SWD Properties, Inc.,
Stockton Plaza, Inc., HomeSide Mortgage Securities, Inc. and Honolulu Mortgage
Company, Inc. in favor of Chemical Bank, as Administrative Agent for the Lenders
parties to the Credit Agreement.
10.31 BMC Guaranty dated as of May 31, 1996 by HomeSide Holdings, Inc. in favor of
Chemical Bank, as Administrative Agent for the Lenders parties to the Credit
Agreement.
10.32 Security and Collateral Agency Agreement dated as of May 31, 1996 between HomeSide
Lending, Inc. and Chemical Bank, as Administrative Agent for the Lenders parties
to the Credit Agreement.
10.33 Security and Collateral Agency Agreement dated as of May 31, 1996 between Honolulu
Mortgage Company, Inc. and Chemical Bank, as Administrative Agent for the Lenders
parties to the Credit Agreement.
10.34 Security and Collateral Agency Agreement dated as of May 31, 1996 between HomeSide
Holdings, Inc. and Chemical Bank, as Administrative Agent for the Lenders parties
to the Credit Agreement.
10.35 Intercreditor Agreement dated as of May 31, 1996 between HomeSide, Inc., HomeSide
Holdings, The Bank of New York, as Trustee, and Chemical Bank, as Administrative
Agent under the Credit Agreement.
10.36 HomeSide, Inc. Time Accelerated Restricted Stock Option Plan.
10.37 HomeSide, Inc. Non-Qualified Stock Option Plan.
12.1 Statement re Computation of Ratios
21.1 List of subsidiaries of HomeSide, Inc.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in
Exhibit 5.1)
25.1 Statement on Form T-1 of the eligibility of the Trustee
99.1 Letter of Transmittal
99.2 Notice of Guaranteed Delivery
99.3* Exchange Agent Agreement between HomeSide, Inc. and The Bank of New York
<FN>
- ---------------
+ Portions of this Exhibit have been omitted pursuant to an application for an
order declaring confidential treatment filed with the Securities and Exchange
Commission.
* This Exhibit shall be supplied in a future amendment to this Registration
Statement.
</TABLE>
(b) Financial Statement Schedules.
NONE.
Schedules other than those listed above have been omitted since the
information is not applicable, not required or is included in the financial
statemens or notes thereto.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above 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
II-6
<PAGE> 217
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.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 218
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 JACKSONVILLE, STATE OF
FLORIDA, ON THE 21ST DAY OF JUNE, 1996.
HOMESIDE, INC.
By: /s/ JOE K. PICKETT
------------------------------------
Joe K. Pickett
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Joe K. Pickett and Hugh R. Harris and each of
them, with the power to act without the other, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her or in his or her name, place and stead, in any and all capacities
to sign any and all amendments or post-effective amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
<TABLE>
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.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOE K. PICKETT Chairman of the Board, Chief June 21, 1996
- ---------------------------------------- Executive Officer and Director
Joe K. Pickett (Principal Executive Officer)
/s/ HUGH R. HARRIS President, Chief Operating Officer June 21, 1996
- ---------------------------------------- and Director
Hugh R. Harris
/s/ BETTY L. FRANCIS Vice President (Principal Financial June 21, 1996
- ---------------------------------------- and Accounting Officer)
Betty L. Francis
/s/ THOMAS M. HAGERTY Treasurer and Director June 21, 1996
- ----------------------------------------
Thomas M. Hagerty
/s/ DAVID V. HARKINS Director June 21, 1996
- ----------------------------------------
David V. Harkins
/s/ JUSTIN S. HUSCHER Director June 21, 1996
- ----------------------------------------
Justin S. Huscher
</TABLE>
II-8
<PAGE> 219
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PETER J. MANNING Director June 21, 1996
- ----------------------------------------
Peter J. Manning
/s/ EDWARD A. O'NEAL Director June 19, 1996
- ----------------------------------------
Edward A. O'Neal
/s/ KATHLEEN M. MCGILLYCUDDY Director June 20, 1996
- ----------------------------------------
Kathleen M. McGillycuddy
/s/ HINTON NOBLES Director June 21, 1996
- ----------------------------------------
Hinton Nobles
/s/ DOUGLAS FREEMAN Director June 21, 1996
- ----------------------------------------
Douglas Freeman
</TABLE>
II-9
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
HOMEAMERICA CAPITAL, INC.
---------------------------
FIRST: The name of this corporation shall be:
HomeAmerica Capital, Inc.
SECOND: Its registered office in the State of Delaware is to be
located at 1209 Orange Street, in the City of Wilmington, County of New Castle,
19801, and its registered agent at such address is: THE CORPORATION TRUST
COMPANY.
THIRD: The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware:
FOURTH: The total number of shares of stock which this corporation is
authorized to issue is:
1,000 shares of $.01 par value common stock.
FIFTH: The name and mailing address of the sole incorporator is as
follows:
NAME MAILING ADDRESS
---- ---------------
Marilyn French, Esq. c/o Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
The name and mailing address of each person who is to serve as a
director until the first annual meeting of the stockholders or until a successor
is elected and qualified is as follows:
NAME MAILING ADDRESS
---- ---------------
C. Hunter Boll c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
<PAGE> 2
David V. Harkins c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
Thomas M. Hagerty c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
Justin S. Huscher c/o Madison Dearborn Partners, Inc.
Suite 1330
Three First National Plaza
Chicago, IL 60602
Peter J. Manning c/o The First National Bank of Boston
100 Federal Street
Boston, MA 02110
Edward A. O'Neal c/o The First National Bank of Boston
100 Federal Street
Boston, MA 02110
Bradford H. Warner c/o The First National Bank of Boston
100 Federal Street
Boston, MA 02110
SIXTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware:
A. The board of directors of the corporation is
expressly authorized to adopt, amend, or repeal the
by-laws of the corporation.
B. Elections of directors need not be by written ballot
unless the by-laws of the corporation shall so
provide.
C. The books of the corporation may be kept at such
place within or without the State of Delaware as the
by-laws of the corporation may provide or as may be
designated from time to time by the board of
directors of the corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or
- 2 -
<PAGE> 3
stockholder thereof or on the application of any receiver or receivers appointed
for this corporation under the provisions of section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this corporation under the provisions of
section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
EIGHTH: The Corporation hereby elects in this original certificate of
incorporation not to be governed by Section 203 of the General Corporation Law
of Delaware.
NINTH: Except as stated in Article Tenth of this certificate of
incorporation, the corporation reserves the right to amend or repeal any
provision contained in this certificate of incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
TENTH: No director shall be personally liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
notwithstanding any provision of law imposing such liability; provided, however,
that, to the extent provided by applicable law, this provision shall not
eliminate the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of Delaware, or
(iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
ELEVENTH: The Corporation is to have perpetual existence.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed, and acknowledged this certificate of
incorporation this 11th day of December, 1995.
/s/ Marilyn French
--------------------
Marilyn French, Esq.
Sole Incorporator
- 3 -
<PAGE> 4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HOMEAMERICA CAPITAL, INC.
Pursuant to Section 241
of the General Corporation Law of the
State of Delaware
--------------------------------
HomeAmerica Capital, Inc. (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify:
FIRST: That the Board of Directors of the Corporation, by the
unanimous written consent of its members, filed with the minutes of the Board,
adopted a resolution proposing and declaring advisable the following amendment
to the Certificate of Incorporation of the Corporation:
RESOLVED: That the Certificate of Incorporation of this Corporation be
amended by changing ARTICLE ONE thereof so that, as amended
said Article shall be and read as follows:
"The name of the Corporation shall be GrantAmerica,
Inc."
FURTHER
RESOLVED: That the Certificate of Incorporation of this Corporation be
amended by changing ARTICLE FOURTH thereof so that, as
amended said Article shall be and read as follows:
"The total number of shares of stock which this
Corporation is authorized to issue is: 1,000,000
shares of $.01 par value common stock.
SECOND: The Corporation has not received any payment for any of its
stock and this amendment is being duly adopted in accordance with the provisons
of Section 241.
<PAGE> 5
THIRD: That the aforesaid amendments were duly adopted in accordance
with the applicable provisions of Sections 141 and 241 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by ___________________________ , its _________ this
______ day of ___________________ , 1996.
By: /s/ Thomas M. Hagerty
---------------------
<PAGE> 6
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
GRANTAMERICA, INC.
- --------------------------------------------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
- --------------------------------------------------------------------------------
GrantAmerica, Inc., a Delaware corporation (the "Corporation") does
hereby certify as follows:
FIRST: Article ONE of the Corporation's Certificate of Incorporation
is hereby amended to read in its entirety as follows:
ONE: The name of the Corporation shall be "HomeSide,
Inc.".
SECOND: Article FOURTH of the Corporation's Certificate of
Incorporation is hereby amended to read in its entirety as follows:
FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is:
1,511,428 shares consisting of 1,500,000 shares of
Class A Voting Common Stock, $0.01 par value per
share ("Class A Voting Common Stock") and 5,714
shares of Class B Non-Voting Common Stock, $0.01 par
value per share ("Class B Non-Voting Common Stock");
and 5,714 shares of Class C Non-Voting Common Stock
with $1.00 par value per share (herein called the
"Class C Non-Voting Common Stock"). The Class A
Voting Common Stock, Class B Non-Voting Common Stock
and Class C Non-Voting Common Stock shall
collectively be referred to herein as the "Common
Stock".
A description of the respective classes of stock and a statement of the
designations, preferences, voting powers (or special, preferential or no voting
powers), relative, participating, optional or other special rights and
privileges and the qualifications, limitations and restrictions of each of the
classes of the Common Stock are as follows:
1. Voting Rights.
(a) The holders of Class A Voting Common Stock shall be
entitled to vote on each matter on which the stockholders of the Corporation
shall be entitled to vote, and each
<PAGE> 7
holder of Class A Voting Common Stock shall be entitled to one vote for each
share of such stock held by such holder.
(b) The holders of Class B Non-Voting Common Stock shall
not have any voting rights, except as otherwise required by applicable law, in
which case holders of Class B Non-Voting Common Stock shall vote (at the rate of
one vote per share of Class B Non-Voting Common Stock held) with all other
holders of Common Stock as a single class on such matter unless otherwise
required by applicable law.
(c) The holders of Class C Non-Voting Common Stock shall
not have any voting rights, except as otherwise required by applicable law, in
which case holders of Class C Non-Voting Common Stock shall vote (at the rate of
one vote per share of Class C Non-Voting Common Stock held) with all other
holders of Common Stock as a single class on such matter unless otherwise
required by applicable law.
2. Dividends. The Board of Directors of the Corporation may cause
dividends to be paid to the holders of shares of Common Stock out of funds
legally available for the payment of dividends by declaring an amount per share
as a dividend. When and as dividends or other distributions are declared,
whether payable in cash, in property or in shares of stock of the Corporation,
other than in shares of Common Stock, the holders of Common Stock shall be
entitled to share equally, share for share, in such dividends or other
distributions as if all such shares were of a single class. No dividends or
other distributions shall be declared or paid in shares of Common Stock or
options, warrants or rights to acquire such stock or securities convertible into
or exchangeable for shares of such stock, except dividends or other
distributions payable to all of the holders of Common Stock together as one
class ratably according to the number of shares of Common Stock held by them, in
shares of Class A Voting Common Stock to holders of that class of stock and in
shares of Class B Non-Voting Common Stock to holders of that class of stock, and
in shares of Class C Non-Voting Common Stock to holders of that class of stock.
3. Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation (a "Liquidation Event"), holders of Common Stock shall be entitled
to share ratably, according to the number of shares of Common Stock held by
them, in all assets of the Corporation available for distribution to its
stockholders.
4. Mandatory Conversion.
(a) Each share of Class B Non-Voting Common Stock shall
be converted into shares of Class A Voting Common Stock automatically, without
any action on the part of the holder thereof, upon the closing of a sale of
shares of Class A Voting Common Stock by the Corporation in a public offering
("Public Offering") pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"). The number of shares
of Class A Voting Common Stock to which a holder of Class B Non-Voting Common
-2-
<PAGE> 8
Stock shall be entitled to receive upon conversion shall be determined by
dividing $175.00 by the Conversion Price in effect at the time of conversion.
The initial "Conversion Price" shall be $175.00, and shall be subject to
adjustment as set forth below.
(b) Mechanics of Mandatory Conversion. All holders of
record of shares of Class B Non-Voting Common Stock will be given at least ten
(10) days' prior written notice of any Public Offering and the place designated
for mandatory conversion of all shares of Class B Non-Voting Common Stock
pursuant to this Section 4. Such notice will be sent by facsimile transmission,
prepaid overnight courier or first class or registered mail, postage prepaid, to
each record holder of Class B Non-Voting Common Stock at such holder's address
last shown on the records of the Corporation. On or before the closing date of
any Public Offering each holder of shares of Class B Non-Voting Common Stock
shall surrender his or its certificate or certificates for all such shares to
the Corporation at the place designated in such notice, and shall thereafter
receive certificates for the number of shares of Class A Voting Common Stock to
which such holder is entitled pursuant to this Section 4. On the date fixed for
conversion, all rights with respect to the Class B Non-Voting Common Stock,
including the rights, if any, to receive notices and vote, will terminate,
except only the rights of the holders thereof, upon surrender of their
certificate or certificates therefor, to receive certificates for the number of
shares of Class A Voting Common Stock into which such Class B Non-Voting Common
Stock has been converted, and payment of any accrued but unpaid dividends
thereon. If so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
of transfer, in form satisfactory to the Corporation, duly executed by the
registered holder or by his or its attorney duly authorized in writing. As soon
as practicable after the date of such mandatory conversion and the surrender of
the certificate or certificates for Class B Non-Voting Common Stock, the
Corporation shall cause to be issued and delivered to such holder, or on his or
its written order, a certificate or certificates for the number of full shares
of Class A Voting Common Stock issuable on such conversion in accordance with
the provisions hereof.
(c) All certificates evidencing shares of Class B
Non-Voting Common Stock surrendered for conversion in accordance with the
provisions hereof shall, from and after the closing date of the Public Offering,
be deemed to have been retired and cancelled and the shares of Class B
Non-Voting Common Stock represented thereby converted into Class A Voting Common
Stock for all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The Corporation
may thereafter take such appropriate action as may be necessary to reduce the
authorized Class B Non-Voting Common Stock accordingly.
(d) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Conversion Price
-3-
<PAGE> 9
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(e) Adjustment for Reclassification, Exchange, or
Substitution. If the Class A Voting Common Stock issuable upon the conversion of
the Class B Non-Voting Common Stock shall be changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a subdivision or
combination of shares provided for above), then and in each such event the
holder of each such share of Class B Non-Voting Common Stock shall have the
right thereafter to convert such share into the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the number of shares of Class A
Voting Common Stock into which such shares of Class B NonVoting Common Stock
might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
(f) No Impairment. The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Class B Non-Voting Common Stock against impairment.
(g) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant to this Section
4, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Class B Non-Voting Common Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Class B Non-Voting Common Stock furnish or cause to be
furnished to such holder a similar certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price then in effect, and
(iii) the number of shares of Class A Voting Common Stock and the amount, if
any, of other property which then would be received upon the conversion of Class
B Non-Voting Common Stock.
(h) Notice of Record Date. In the event:
(i) that the Corporation subdivides or combines
its outstanding shares of Common Stock; or
-4-
<PAGE> 10
(ii) of any reclassification of the Common Stock
of the Corporation (other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution thereon);
then the Corporation shall cause to be filed at its principal office, and shall
cause to be mailed to the holders of the Class B Non-Voting Common Stock at
their last addresses as shown on the records of the Corporation, at least ten
(10) days prior to the record date specified in (A) below or twenty (20) days
before the date specified in (B) below, a notice stating
(A) the record date of such subdivision
or combination, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such subdivision or
combination are to be determined, or
(B) the date on which such
reclassification is expected to become effective, and the date as of which it is
expected that holders of Class B Non-Voting Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification.
5. Subdivisions and Combinations. If shares of either the Class A
Voting Common Stock, Class B Non-Voting Common Stock or Class C Non-Voting
Common Stock are subdivided or combined, then shares of all the Class A Voting
Common Stock, Class B NonVoting Common Stock or Class C Non-Voting Common Stock
shall be so subdivided or combined.
6. Put Rights. Upon the earlier to occur of (a) public offerings
of the Common Stock of the Corporation under the Securities Act with gross
proceeds to the Corporation aggregating $50,000,000 or more; (b) any sale of all
or substantially all of the assets of the Corporation; (c) any merger or
consolidation of the Corporation into another corporation if the Class C
Non-Voting Common Stock is not treated on a pari passu basis with the Class A
Voting Common Stock; or (d) a Liquidation Event (the first to occur of the
events described in 6(a), (b), (c) and (d) being referred to herein as the "Put
Event"), each holder of Class C Non-Voting Common Stock shall have the right, by
delivery of a written notice to the Corporation no later than thirty (30) days
after the Put Event (the "Put Notice"), to compel the Corporation to purchase,
and the Corporation shall purchase, all or any portion of the shares of Class C
Non-Voting Common Stock held by such holder (the "Put Securities"), at a price
equal to the Put Price (as hereafter defined). For purposes hereof, the Put
Price shall equal (i) if an event under (a) above has occurred, a price per
share equal to the average of the bid prices for the Common Stock on the NASDAQ
National Market System for the twenty (20) days preceding the Put Closing (as
hereinafter defined) (ii) if an event under (b), (c) or (d) above has occurred,
then a price per share equal to an amount determined pursuant to an appraisal of
the Common Stock on the date of the event by an independent,
nationally-recognized investment banking firm. The Put Price shall be adjusted
under the same circumstances under which the Conversion Price is subject to
adjustment pursuant to Section 4(e) and (f) hereof and the holders of Class C
Non-Voting Common Stock shall be entitled to the same rights set forth in
Section 4(g), (h), and (i) with respect to such adjustment. The closing of the
purchase of any Put Securities by the Corporation shall take place at the
principal office of the Corporation not later than fifteen (15) days after
delivery of the Put Notice (the "Put Closing"). At such closing, the Corporation
shall deliver to the holder exercising his put rights hereunder, against
delivery of certificates duly endorsed and
-5-
<PAGE> 11
stock powers representing the Put Securities, an amount equal to the aggregate
Put Price payable in respect of such Put Securities, and such deliveries shall
be deemed to be made simultaneously and none shall be deemed completed until all
have been completed.
THIRD: That Article SEVENTH of the Corporation's Certificate of
Incorporation is hereby deleted in its entirety.
FOURTH: The foregoing amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, GrantAmerica, Inc. has caused this Certificate of
Amendment to be executed by its President this ___ day of March, 1996.
GrantAmerica, Inc.
By: /s/ Thomas M. Hagerty
------------------------
Name: Thomas M. Hagerty
Title: President
-6-
<PAGE> 12
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HOMESIDE, INC.
Pursuant to Section 242
of the General Corporation Law of the
State of Delaware
--------------------------
HomeSide, Inc. (hereinafter called the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: That the Board of Directors of the Corporation, at a meeting
duly held on April 10, 1996, filed with the minutes of the Board, adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of the Corporation:
RESOLVED: That the first paragraph of ARTICLE FOURTH of the
Certificate of Incorporation be amended to read as
follows:
The total number of shares of all classes of capital
stock which the Corporation shall have authority to
issue is: 2,511,428 shares consisting of 2,500,000
shares of Class A Voting Common Stock, $0.01 par
value per share ("Class A Voting Common Stock");
5,714 shares of Class B Non-Voting Common Stock,
$.01 par value per share ("Class B Non-Voting Common
Stock"); and 5,714 shares of Class C Non-Voting
Common Stock with $1.00 par value per share (herein
called the "Class C Non-Voting Common Stock"). The
Class A Voting Common Stock, Class B Non-Voting
Common Stock and Class C Non-Voting Common Stock
shall collectively be referred to herein as the
"Common Stock".
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware.
<PAGE> 13
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by its President this day of May, 1996.
HOMESIDE, INC.
By: /s/ Hugh R. Harris
---------------------
Name: Hugh R. Harris
Title: President
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<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
HOMESIDE, INC.
(A Delaware Corporation)
<PAGE> 2
BY-LAWS
OF
HOMESIDE, INC.
(A Delaware Corporation)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 1. Certificate of Incorporation 1
Section 1.1 Contents 1
Section 1.2 Certificate in Effect 1
Article 2. Meetings of Stockholders 1
Section 2.1 Place 1
Section 2.2 Annual Meeting 2
Section 2.3 Special Meetings 2
Section 2.4 Notice of Meetings 2
Section 2.5 Affidavit of Notice 3
Section 2.6 Quorum 3
Section 2.7 Voting Requirements 3
Section 2.8 Proxies and Voting 4
Section 2.9 Action Without Meeting 4
Section 2.10 Stockholder List 5
Section 2.11 Record Date 5
Article 3. Directors 6
Section 3.1 Number; Election and Term of Office 6
Section 3.2 Duties 7
Section 3.3 Compensation 7
Section 3.4 Reliance on Books 7
Article 4. Meetings of the Board of Directors 8
Section 4.1 Place 8
Section 4.2 Annual Meeting 8
Section 4.3 Regular Meetings 8
Section 4.4 Special Meetings 8
Section 4.5 Quorum 9
Section 4.6 Action Without Meeting 9
Section 4.7 Telephone Meetings 9
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Article 5. Committees of Directors 10
Section 5.1 Designation 10
Section 5.2 Records of Meetings 10
Article 6. Notices 11
Section 6.1 Method of Giving Notice 11
Section 6.2 Waiver 11
Article 7. Officers 12
Section 7.1 In General 12
Section 7.2 Election of President, Secretary and Treasurer 12
Section 7.3 Election of Other Officers 12
Section 7.4 Salaries 12
Section 7.5 Term of Office 12
Section 7.6 Duties of Chairman of the Board 12
Section 7.7 Duties of President 13
Section 7.8 Duties of Vice President 13
Section 7.9 Duties of Secretary 14
Section 7.10 Duties of Assistant Secretary 14
Section 7.11 Duties of Treasurer 14
Section 7.12 Duties of Assistant Treasurer 15
Article 8. Resignations, Removals and Vacancies 15
Section 8.1 Directors 15
Section 8.2 Officers 16
Article 9. Certificate of Stock 17
Section 9.1 Issuance of Stock 17
Section 9.2 Right to Certificate; Form 17
Section 9.3 Facsimile Signature 18
Section 9.4 Lost Certificates 18
Section 9.5 Transfer of Stock 18
Section 9.6 Registered Stockholders 18
Article 10. Indemnification 19
Section 10.1 Third Party Actions 19
Section 10.2 Derivative Actions 20
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
Section 10.3 Expenses 20
Section 10.4 Authorization 20
Section 10.5 Advance Payment of Expenses 21
Section 10.6 Non-Exclusiveness 21
Section 10.7 Insurance 22
Section 10.8 Constituent Corporations 22
Section 10.9 Additional Indemnification 22
Article 11. Execution of Papers 23
Article 12. Fiscal Year 23
Article 13. Seal 23
Article 14. Offices 23
Article 15. Amendments 24
</TABLE>
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<PAGE> 5
HOMESIDE, INC.
BY-LAWS
ARTICLE 1
CERTIFICATE OF INCORPORATION
Section 1.1 Contents. The name, registered agent and purposes of the
Corporation shall be as set forth in its Certificate of Incorporation. These
By-Laws, the powers of the Corporation and of its Directors and stockholders,
and all matters concerning the conduct and regulation of the business of the
Corporation shall be subject to such provisions in regard thereto, if any, as
are set forth in said Certificate of Incorporation. The Certificate of
Incorporation is hereby made a part of these By-Laws. These By-Laws shall be
subject to the provisions of any stockholder agreement among the stockholders of
the Corporation in effect from time to time and, in the event the provisions of
such stockholder agreement conflicts with the provisions hereof, the provisions
of such stockholder agreement shall control.
Section 1.2 Certificate in Effect. All references in these By-Laws to
the Certificate of Incorporation shall be construed to mean the Certificate of
Incorporation of the Corporation as from time to time amended, including (unless
the context shall otherwise require) all certificates and any agreement of
consolidation or merger filed pursuant to the Delaware General Corporation Law,
as amended.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.1 Place. All meetings of the stockholders may be held at such
place either within or without the State of Delaware as shall be designated from
time to time by the Board of
<PAGE> 6
Directors, the Chairman of the Board of Directors or the President and stated in
the notice of the meeting or in any duly executed waiver of notice thereof.
Section 2.2 Annual Meeting. Annual meetings of stockholders, shall be
held on the second Tuesday of April in each year, if not a legal holiday, and,
if a legal holiday, then on the next secular day following, at 10:00 A.M., or at
such other date and time as shall be designated from time to time by the Board
of Directors, the Chairman of the Board of Directors or the President and stated
in the notice of the meeting. If such annual meeting has not been held on the
day herein provided therefor, a special meeting of the stockholders in lieu of
the annual meeting may be held, and any business transacted or elections held at
such special meeting shall have the same effect as if transacted or held at the
annual meeting, and in such case all references in these By-Laws, except in this
Section 2.2, to the annual meeting of the stockholders shall be deemed to refer
to such special meeting.
Section 2.3 Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President, the Chairman of
the Board, or by the Board of Directors and shall be called by the President or
Secretary at the request in writing of a majority of the Directors then in
office, or at the request in writing of stockholders owning a majority in amount
of the entire stock of any class or series of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting, which need not be the exclusive purposes for
which the meeting is called.
1. Section 2.4 Notice of Meetings. A written notice of all
meetings of stockholders stating the place, date and hour of the
meeting and, in the case of a special meeting, the
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<PAGE> 7
purpose or purposes for which the special meeting is called, shall be
given to each stockholder entitled to vote at such meeting. Except as
otherwise provided by law, such notice shall be given not less than ten
nor more than sixty days before the date of the meeting. Business
transacted at any special meeting of stockholders shall be limited to
the purposes stated in the notice.
Section 2.5 Affidavit of Notice. An affidavit of the Secretary or an
Assistant Secretary or the transfer agent of the Corporation that notice of a
stockholders meeting has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
Section 2.6 Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute, by an agreement
among the stockholders or by the Certificate of Incorporation. If, however, such
quorum shall not be present or represented by proxy at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, except as hereinafter
provided, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
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<PAGE> 8
Section 2.7 Voting Requirements. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of any applicable statute, of an agreement among the stockholders or of the
Certificate of Incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Section 2.8 Proxies and Voting. Unless otherwise provided in the
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date, unless the proxy provides for a
longer period. Persons holding stock in a fiduciary capacity shall be entitled
to vote the shares so held, and persons whose stock is pledged shall be entitled
to vote the pledged shares, unless in the transfer by the pledgor on the books
of the Corporation he shall have expressly empowered the pledgee to vote said
shares, in which case only the pledgee, or his proxy, may represent and vote
such shares. Shares of the capital stock of the Corporation owned by the
Corporation shall not be voted, directly or indirectly.
Section 2.9 Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or
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<PAGE> 9
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 2.10 Stockholder List. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The original or duplicate stock ledger shall be the only evidence as to
who are the stockholders entitled to examine such list, the stock ledger or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 2.11 Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than
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<PAGE> 10
sixty nor less than ten days before the date of such meeting, nor more than
sixty days prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
If no record date is fixed by the Board of Directors:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed.
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
ARTICLE 3
DIRECTORS
Section 3.1 Number; Election and Term of Office. There shall be a Board
of Directors of the Corporation consisting of not less than one member, the
number of members to be determined by resolution of the Board of Directors or by
the stockholders at the annual or any special meeting, unless the Certificate of
Incorporation fixed the number of Directors, in which case a change in the
number of Directors shall be made only by amendment of the Certificate.
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<PAGE> 11
Subject to any limitation which may be contained within the Certificate of
Incorporation, the number of the Board of Directors may be increased at any time
by vote of a majority of the Directors then in office. The Directors shall be
elected at the annual meeting of the stockholders, except as provided in
paragraph (c) of Section 8.1, and each Director elected shall hold office until
his successor is elected and qualified or until his earlier resignation or
removal. Directors need not be stockholders.
Section 3.2 Duties. The business of the Corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the Corporation and do all such lawful acts and things, including the
power and responsibility to select, and evaluate the performance of, the
management of the Corporation and to establish and monitor capital and operating
budgets so long as such acts are not, by statute or by the Certificate of
Incorporation or by these By-Laws, directed or required to be exercised or done
by the stockholders.
Section 3.3 Compensation. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, the Board of Directors shall have
the authority to fix the compensation of Directors. The Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as Directors. No such payment shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
Section 3.4 Reliance on Books. A member of the Board of Directors or a
member of any committee designated by the Board of Directors shall, in the
performance of his duties, be fully
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<PAGE> 12
protected in relying in good faith upon the books of account or reports made to
the Corporation by any of its officers, or by an independent certified public
accountant, or by an appraiser selected with reasonable care by the Board of
Directors or by any committee, or in relying in good faith upon other records of
the Corporation.
ARTICLE 4
MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Place. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 4.2 Annual Meeting. The first meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders or any special meeting held in lieu thereof, and no notice of such
meeting shall be necessary to the newly elected Directors in order legally to
constitute the meeting.
Section 4.3 Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 4.4 Special Meetings. Special meetings of the Board may be
called by the President on two days' notice to each Director either personally
or by mail or by telegram; special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of two
Directors unless the Board consists of only one Director, in which case special
meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of the sole Director, or on the written
request of holders of at least one-third of the outstanding stock of the
Company.
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<PAGE> 13
Section 4.5 Quorum. At all meetings of the Board a majority of the
Directors then in office shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except that
the President of the Corporation, if also a Director, may not vote on matters
relating to his or her powers, compensation or performance, or except as may be
otherwise specifically provided by statute, by contractual arrangement or by the
Certificate of Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the Directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 4.6 Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 4.7 Telephone Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
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<PAGE> 14
ARTICLE 5
COMMITTEES OF DIRECTORS
Section 5.1 Designation.
(a) The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
(b) In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(c) Any such committee, to the extent provided in the resolution
of the Board of Directors designating the committee, shall have and may exercise
all the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-Laws of the Corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or
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<PAGE> 15
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 5.2 Records of Meetings. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.
ARTICLE 6
NOTICES
Section 6.1 Method of Giving Notice. Whenever, under any provision of
the law or of the Certificate of Incorporation or of these By-Laws, notice is
required to be given to any Director or stockholder, such notice shall be given
in writing by the Secretary or the person or persons calling the meeting by
leaving such notice with such Director or stockholder at his residence or usual
place of business or by mailing it addressed to such Director or stockholder, at
his address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Notice to Directors may
also be given by telegram.
Section 6.2 Waiver. Whenever any notice is required to be given under
any provision of law or of the Certificate of Incorporation or of these By-Laws,
a waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
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<PAGE> 16
ARTICLE 7
OFFICERS
Section 7.1 In General. The officers of the Corporation shall be chosen
by the Board of Directors and shall include a President, a Secretary and a
Treasurer. The Board of Directors may also choose a Chairman of the Board, one
or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-Laws otherwise provide.
Section 7.2 Election of President, Secretary and Treasurer. The Board
of Directors at its first meeting after each annual meeting of stockholders
shall choose a President, a Secretary and a Treasurer.
Section 7.3 Election of Other Officers. The Board of Directors may
appoint such other officers and agents as it shall deem appropriate who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board.
Section 7.4 Salaries. The salaries of all officers and agents of the
Corporation may be fixed by the Board of Directors.
Section 7.5 Term of Office. The officers of the Corporation shall hold
office until their successors are chosen and qualify or until their earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time in the manner specified in Section 8.2.
Section 7.6 Duties of Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the stockholders and shall have general and
active management of the business of
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<PAGE> 17
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The Chairman of the Board shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. The Chairman of the Board, if any, shall make his counsel
available to the other officers of the Corporation, shall be authorized to sign
stock certificates on behalf of the Corporation, shall preside at all meetings
of the Directors at which he is present, and shall have such other duties and
powers as may from time to time be conferred upon him by the Directors. The
Chairman of the Board shall advise the Board of the status of the business of
the Corporation as requested by the Board.
Section 7.7 Duties of President. In the absence of a Chairman of the
Board or in the event of his refusal or inability to act, the President shall
perform the duties of the Chairman of the Board not otherwise conferred upon the
Chairman of the Board, if any, when so acting, shall have all the powers and be
subject to all the restrictions upon the Chairman of the Board. The President
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
Section 7.8 Duties of Vice President. In the absence of the President
or in the event of his inability or refusal to act, the Vice-President (or in
the event there be more than one Vice-President, the Vice-Presidents in the
order designated by the Directors, or in the absence of any designation, then in
the order of their election) shall perform the duties of the President not
otherwise conferred upon the President, if any, and when so acting, shall have
all the powers of
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<PAGE> 18
and be subject to all the restrictions upon the President. The Vice-Presidents
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
Section 7.9 Duties of Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board of
Directors, except as otherwise provided in these By-Laws, and shall perform such
other duties as may be prescribed by the Board of Directors or President, under
whose supervision he shall be. He shall have charge of the stock ledger (which
may, however, be kept by any transfer agent or agents of the Corporation under
his direction) and of the corporate seal of the Corporation.
Section 7.10 Duties of Assistant Secretary. The Assistant Secretary, or
if there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors (or if there be no such determination, then in the order
of their election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 7.11 Duties of Treasurer. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board
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<PAGE> 19
of Directors. The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all of his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, he shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of this office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 7.12 Duties of Assistant Treasurer. The Assistant Treasurer, or
if there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors (or if there be no such determination, then
in the order of their election), shall, in the absence of the Treasurer or in
the event of his inability or refusal to act, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE 8
RESIGNATIONS, REMOVALS AND VACANCIES
Section 8.1 Directors.
(a) Resignations. Any Director may resign at any time by giving
written notice to the Board of Directors or the President or the Secretary. Such
resignation shall take effect at
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<PAGE> 20
the time specified therein; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
(b) Removals. Subject to any provisions of the Certificate of
Incorporation or contractual arrangement, the holders of stock entitled to vote
for the election of Directors may, at any meeting called for the purpose, by
vote of a majority of the shares of such stock outstanding, remove any Director
or the entire Board of Directors with or without cause and fill any vacancies
thereby created. This Section 8.1(b) may not be altered, amended or repealed
except by the holders of a majority of the shares of stock issued and
outstanding and entitled to vote for the election of the Directors.
(c) Vacancies. Vacancies occurring in the office of Director and
newly created Directorships resulting from any increase in the authorized number
of Directors shall be filled by a majority of the Directors then in office,
though less than a quorum, unless previously filled by the stockholders entitled
to vote for the election of Directors, and the Directors so chosen shall hold
office subject to the By-Laws until the next annual election and until their
successors are duly elected and qualify or until their earlier resignation or
removal. If there are no Directors in office, then an election of Directors may
be held in the manner provided by statute.
Section 8.2 Officers.
Any officer may resign at any time by giving written notice to the
Board of Directors or the President or the Secretary. Such resignation shall
take effect at the time specified therein; and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. The Board of Directors may, at any meeting called for the purpose, by
vote of a majority of their entire number, remove from office any officer of the
Corporation or any
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<PAGE> 21
member of a committee, with or without cause. Any vacancy occurring in the
office of President, Secretary or Treasurer shall be filled by the Board of
Directors and the officers so chosen shall hold office subject to the By-Laws
for the unexpired term in respect of which the vacancy occurred and until their
successors shall be elected and qualify or until their earlier resignation or
removal.
ARTICLE 9
CERTIFICATE OF STOCK
Section 9.1 Issuance of Stock. The Directors may, at any time and from
time to time, if all of the shares of capital stock which the Corporation is
authorized by its Certificate of Incorporation to issue have not been issued,
subscribed for, or otherwise committed to be issued, issue or take subscriptions
for additional shares of its capital stock up to the amount authorized in its
Certificate of Incorporation. Such stock shall be issued and the consideration
paid therefor in the manner prescribed by law.
Section 9.2 Right to Certificate; Form. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President or a
Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation; provided that the Directors may provide by one or
more resolutions that some or all of any or all classes or series of the
Corporation's stock shall be uncertified shares. Certificates may be issued for
partly paid shares and in such case upon the face or back of the certificates
issued to represent any such partly paid shares, the total amount of the
consideration to be paid therefor, and the amount paid thereon shall be
specified.
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<PAGE> 22
Section 9.3 Facsimile Signature. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 9.4 Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 9.5 Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 9.6 Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends,
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<PAGE> 23
and to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE 10
INDEMNIFICATION
Section 10.1 Third Party Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he 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, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
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 conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
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
reasonable cause to believe that his conduct was unlawful.
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<PAGE> 24
Section 10.2 Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he 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, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 10.3 Expenses. To the extent that a Director, officer, employee
or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
Section 10.4 Authorization. Any indemnification under Sections 10.1 and
10.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon
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<PAGE> 25
a determination that indemnification of the Director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 10.1 and 10.2. Such determination shall be made
(a) by the Board of Directors by a majority vote of a quorum consisting of
Directors who were not parties to such action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested Directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
Section 10.5 Advance Payment of Expenses. Expenses incurred by an
officer or Director in defending a civil or criminal action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of such officer or
Director to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified by the Corporation as authorized in this Article
10. Such expenses incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the Board of Directors deems appropriate.
Section 10.6 Non-Exclusiveness. The indemnification provided by this
Article 10 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
- 21 -
<PAGE> 26
Section 10.7 Insurance. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who 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, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article 10.
Section 10.8 Constituent Corporations. The Corporation shall have power
to indemnify any person who is or was a director, officer, employee or agent of
a constituent corporation absorbed in a consolidation or merger with this
Corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in the same manner as hereinabove
provided for any person who 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, partnership, joint
venture, trust or other enterprise.
Section 10.9 Additional Indemnification. In addition to the foregoing
provisions of this Article 10, the Corporation shall have the power, to the full
extent provided by law, to indemnify any person for any act or omission of such
person against all loss, cost, damage and expense (including attorney's fees) if
such person is determined (in the manner prescribed in Section 10.4 hereof) to
have acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation.
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<PAGE> 27
ARTICLE 11
EXECUTION OF PAPERS
Except as otherwise provided in these By-Laws or as the Board of
Directors may generally or in particular cases otherwise determine, all deeds,
leases, transfers, contracts, bonds, notes, checks, drafts and other instruments
authorized to be executed on behalf of the Corporation shall be executed by the
President or the Treasurer.
ARTICLE 12
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
ARTICLE 13
SEAL
The Corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE 14
OFFICES
In addition to its principal office, the Corporation may have offices
at such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
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<PAGE> 28
ARTICLE 15
AMENDMENTS
Except as otherwise provided herein, these By-Laws may be altered,
amended or repealed or new By-Laws may be adopted by the stockholders or by the
Board of Directors, when such power is conferred upon the Board of Directors by
the Certificate of Incorporation, at any regular meeting of the stockholders or
of the Board of Directors, or at any special meeting of the stockholders or of
the Board of Directors if notice of such alteration, amendment, repeal or
adoption of new By-Laws is contained in the notice of such special meeting, or
by the written consent of a majority in interest of the outstanding voting stock
of the Corporation or by the unanimous written consent of the Directors. If the
power to adopt, amend or repeal by-laws is conferred upon the Board of Directors
by the Certificate of Incorporation, it shall not divest or limit the power of
the stockholders to adopt, amend or repeal by-laws.
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<PAGE> 1
EXHIBIT 4.1
===============================================================================
HOMESIDE, INC.,
Issuer
and
The Bank of New York,
Trustee
--------------------
INDENTURE
Dated as of May 14, 1996
---------------------
$200,000,000
11 1/4% Senior Secured Second Priority Notes due 2003
11 1/4% Series B Senior Secured Second Priority Notes due 2003
===============================================================================
<PAGE> 2
<TABLE>
<CAPTION>
HOMESIDE, INC.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT
OF 1939 AND INDENTURE, DATED AS OF MAY 14, 1996
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C> <C>
Section 310(a)(1) .............................................................. 607
(a)(2) .............................................................. 607
(b) .............................................................. 608
Section 312(c) .............................................................. 701
Section 314(a) .............................................................. 703
(a)(4) .............................................................. 1008(a)
(c)(1) .............................................................. 102
(c)(2) ............................................................. 102
(e) .............................................................. 102
Section 315(b) .............................................................. 601
Section 316(a)(last
sentence) .............................................................. 101 ("Outstanding")
(a)(1)(A) .............................................................. 502, 512
(a)(1)(B) .............................................................. 513
(b) .............................................................. 508
(c) .............................................................. 104(d)
Section 317(a)(1) .............................................................. 503
(a)(2) .............................................................. 504
(b) .............................................................. 1003
Section 318(a) .............................................................. 111
- ------------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C> <C>
PARTIES.............................................................................. 1
RECITALS OF THE COMPANY.............................................................. 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions....................................................... 2
Acquired Indebtedness..................................................... 2
Act .......................................................... 2
Affiliate .......................................................... 2
Average Life .......................................................... 3
Bank Credit Agreement..................................................... 3
Bankruptcy Law .......................................................... 3
Barnett Acquisition....................................................... 3
Barnett Mortgage.......................................................... 3
Barnett Purchase Agreement................................................ 3
Board of Directors........................................................ 3
Board Resolution.......................................................... 3
Business Day .......................................................... 4
Capital Stock .......................................................... 4
Capitalized Lease Obligation.............................................. 4
Cash Equivalents.......................................................... 4
Change of Control......................................................... 4
Collateral .......................................................... 5
Commission .......................................................... 5
Company .......................................................... 5
Company Request or Company Order.......................................... 5
Consolidated Adjusted Net Income.......................................... 6
Consolidated Fixed Charge Coverage Ratio.................................. 7
Consolidated Income Tax Expense........................................... 7
Consolidated Interest Expense............................................. 7
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 4
ii
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Net Worth.................................................... 7
Consolidated Non-cash Charges............................................. 8
Continuing Directors...................................................... 8
Corporate Trust Office.................................................... 8
Default .......................................................... 8
Defaulted Interest........................................................ 8
Depositary .......................................................... 8
Disinterested Director.................................................... 8
Equity Offering .......................................................... 8
Event of Default.......................................................... 8
Exchange Act .......................................................... 9
Exchange Notes .......................................................... 9
Exchange Offer .......................................................... 9
Exchange Offer Registration Statement..................................... 9
Generally Accepted Accounting Principles.................................. 9
guarantee .......................................................... 9
Guarantee .......................................................... 9
Guarantor .......................................................... 9
Hedge Contract .......................................................... 9
Hedge Termination Obligation.............................................. 10
Holder .......................................................... 10
Inactive Subsidiary....................................................... 10
Indebtedness .......................................................... 10
Indenture .......................................................... 11
Indenture Obligations..................................................... 11
Interest Payment Date..................................................... 11
Interest Rate Agreements.................................................. 11
Initial Notes .......................................................... 11
Investment .......................................................... 11
Lien .......................................................... 11
Maturity .......................................................... 12
Moody's .......................................................... 12
Mortgage .......................................................... 12
Mortgage-Backed Security.................................................. 12
Mortgage Loan .......................................................... 12
Mortgage Note .......................................................... 12
Mortgage Warehouse Debt................................................... 12
Notes .......................................................... 12
</TABLE>
<PAGE> 5
iii
<TABLE>
<CAPTION>
PAGE
<S> <C>
Note Register .......................................................... 13
Officers' Certificate..................................................... 13
Opinion of Counsel........................................................ 13
Outstanding .......................................................... 13
Pari Passu Indebtedness................................................... 14
Paying Agent .......................................................... 14
Permitted Holders......................................................... 14
Permitted Indebtedness.................................................... 14
Permitted Investments..................................................... 17
Permitted Liens .......................................................... 17
Person .......................................................... 19
Pledge Agreement.......................................................... 20
Pledged Stock .......................................................... 20
Pledgor .......................................................... 20
Predecessor Note.......................................................... 20
Preferred Stock ......................................................... 20
QIB ......................................................... 20
Qualified Capital Stock.................................................. 20
Redeemable Capital Stock................................................. 20
Redemption Date ......................................................... 20
Redemption Price......................................................... 20
Registration Rights Agreement............................................ 21
Regular Record Date...................................................... 21
Regulation S ......................................................... 21
Responsible Officer...................................................... 21
Rule 144A ......................................................... 21
S&P ......................................................... 21
Securities Act ......................................................... 21
Significant Subsidiary................................................... 21
Special Record Date...................................................... 21
Stated Maturity ......................................................... 22
Subordinated Indebtedness................................................ 22
Subsidiary ......................................................... 22
Trust Indenture Act................................................. ..... 22
Trustee ......................................................... 22
Vice President ......................................................... 22
Voting Stock ......................................................... 22
Wholly Owned Subsidiary.................................................. 22
SECTION 102. Compliance Certificates and Opinions............................. 23
SECTION 103. Form of Documents Delivered to Trustee........................... 23
</TABLE>
<PAGE> 6
iv
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 104. Acts of Holders.................................................. 24
SECTION 105. Notices, Etc., to Trustee and the Company........................ 25
SECTION 106. Notice to Holders; Waiver........................................ 26
SECTION 107. Effect of Headings and Table of Contents......................... 26
SECTION 108. Successors and Assigns........................................... 26
SECTION 109. Separability Clause.............................................. 26
SECTION 110. Benefits of Indenture............................................ 27
SECTION 111. Governing Law.................................................... 27
SECTION 112. Legal Holidays................................................... 27
SECTION 113. Execution of Ancillary Documents................................. 27
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.................................................. 27
SECTION 202. Restrictive Legends.............................................. 29
SECTION 203. Form of Certificate to Be Delivered upon Termination of Restricted
Period................................................................... 31
SECTION 204. Form of Face of Note............................................. 32
SECTION 205. Form of Reverse of Note.......................................... 34
SECTION 206. Form of Trustee's Certificate of Authentication.................. 39
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.................................................. 40
SECTION 302. Denominations.................................................... 41
SECTION 303. Execution, Authentication, Delivery and Dating................... 41
SECTION 304. Temporary Notes.................................................. 42
SECTION 305. Registration, Registration of Transfer and Exchange.............. 43
SECTION 306. Book-Entry Provisions for U.S. Global Note....................... 44
SECTION 307. Special Transfer Provisions...................................... 45
SECTION 308. Form of Certificate to Be Delivered in Connection with Transfers to
Non-QIB Institutional Accredited Investors............................... 49
SECTION 309. Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S................................................. 52
SECTION 310. Mutilated, Destroyed, Lost and Stolen Notes...................... 53
</TABLE>
<PAGE> 7
v
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 311. Payment of Interest; Interest Rights Preserved................... 54
SECTION 312. Persons Deemed Owners............................................ 55
SECTION 313. Cancellation..................................................... 55
SECTION 314. Computation of Interest.......................................... 56
......................................................................... 56
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.......................... 56
SECTION 402. Application of Trust Money....................................... 57
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default................................................ 58
SECTION 502. Acceleration of Maturity; Rescission and Annulment............... 60
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.. 61
SECTION 504. Trustee May File Proofs of Claim................................. 62
SECTION 505. Trustee May Enforce Claims Without Possession of Notes........... 63
SECTION 506. Application of Money Collected................................... 63
SECTION 507. Limitation on Suits.............................................. 63
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest................................................................. 64
SECTION 509. Restoration of Rights and Remedies............................... 64
SECTION 510. Rights and Remedies Cumulative................................... 65
SECTION 511. Delay or Omission Not Waiver..................................... 65
SECTION 512. Control by Holders............................................... 65
SECTION 513. Waiver of Past Defaults.......................................... 66
SECTION 514. Waiver of Stay or Extension Laws................................. 66
SECTION 515. Undertaking for Costs............................................ 67
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults................................................ 67
</TABLE>
<PAGE> 8
vi
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 602. Certain Rights of Trustee......................................... 67
SECTION 603. Trustee Not Responsible for Recitals or Issuance of Notes......... 69
SECTION 604. May Hold Notes.................................................... 69
SECTION 605. Money Held in Trust............................................... 69
SECTION 606. Compensation and Reimbursement.................................... 70
SECTION 607. Corporate Trustee Required; Eligibility........................... 71
SECTION 608. Resignation and Removal; Appointment of Successor................. 71
SECTION 609. Acceptance of Appointment by Successor............................ 72
SECTION 610. Merger, Conversion, Consolidation or Succession to Business....... 73
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders...................... 73
SECTION 702. Reports by Trustee................................................ 74
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.............. 74
SECTION 802. Successor Substituted............................................. 76
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE, PLEDGE AGREEMENT
SECTION 901. Without Consent of Holders........................................ 76
SECTION 902. With Consent of Holders........................................... 77
SECTION 903. Effect of Supplemental Indentures................................. 79
SECTION 904. Conformity with Trust Indenture Act............................... 79
SECTION 905. Revocation and Effect of Consents................................. 80
SECTION 906. Notation on or Exchange of Notes.................................. 80
SECTION 907. Trustee to Sign Amendments, Etc................................... 80
</TABLE>
ARTICLE TEN
COVENANTS
<PAGE> 9
vii
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1001. Payment of Principal, Premium, if any, and Interest.............. 81
SECTION 1002. Maintenance of Office or Agency.................................. 81
SECTION 1003. Money for Note Payments to Be Held in Trust...................... 81
SECTION 1004. Corporate Existence.............................................. 83
SECTION 1005. Payment of Taxes and Other Claims................................ 83
SECTION 1006. Maintenance of Properties........................................ 83
SECTION 1007. Insurance........................................................ 84
SECTION 1008. Limitation on Indebtedness....................................... 84
SECTION 1009. Limitation on Restricted Payments................................ 85
SECTION 1010. Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries.............................................................. 88
SECTION 1011. Limitation on Liens.............................................. 89
SECTION 1012. Limitation on Issuances and Sales of Capital Stock of
Subsidiaries.............................................................. 89
SECTION 1013. Limitation on Transactions with Affiliates....................... 89
SECTION 1014. Limitation on Guarantees of Indebtedness by Subsidiaries......... 90
SECTION 1015. Maintenance of Risk Management................................... 91
SECTION 1016. Business Activities.............................................. 91
SECTION 1017. Reserved......................................................... 91
SECTION 1018. Statement by Officers as to Default.............................. 91
SECTION 1019. Commission Reports and Reports to Holders........................ 92
SECTION 1020. Waiver of Certain Covenants...................................... 93
SECTION 1021. Purchase of Notes upon a Change of Control....................... 93
ARTICLE ELEVEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1101. Company's Option to Effect Defeasance or Covenant Defeasance..... 95
SECTION 1102. Defeasance and Discharge......................................... 95
SECTION 1103. Covenant Defeasance.............................................. 95
SECTION 1104. Conditions to Defeasance or Covenant Defeasance.................. 96
SECTION 1105. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions..................................... 98
SECTION 1106. Reinstatement.................................................... 98
</TABLE>
ARTICLE TWELVE
REDEMPTION OF NOTES
<PAGE> 10
viii
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1201. Redemption....................................................... 99
SECTION 1202. Applicability of Article......................................... 99
SECTION 1203. Election to Redeem; Notice to Trustee............................ 99
SECTION 1204. Selection by Trustee of Notes to Be Redeemed..................... 99
SECTION 1205. Notice of Redemption.............................................100
SECTION 1206. Deposit of Redemption Price......................................101
SECTION 1207. Notes Payable on Redemption Date.................................101
SECTION 1208. Notes Redeemed in Part...........................................101
ARTICLE THIRTEEN
SECURITY
SECTION 1301. Pledge Agreement.................................................102
SECTION 1302. Recording, etc...................................................102
SECTION 1303. Suits to Protect the Collateral..................................103
SECTION 1304. Authorization of Receipt of Funds by the Trustee Under the Pledge
Agreement.................................................................103
SECTION 1305. Additional Pledges...............................................103
TESTIMONIUM..........................................................................104
SIGNATURES...........................................................................105
SCHEDULE I Outstanding Indebtedness
EXHIBIT A Form of Pledge Agreement
</TABLE>
<PAGE> 11
INDENTURE, dated as of May 14, 1996, between HOMESIDE, INC.,
a corporation duly organized and existing under the laws of the State of
Delaware (the "Company"), having its principal office at 7301 Baymeadows Way,
Jacksonville, Florida 32256, and The Bank of New York, a New York banking
corporation, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issuance
of its 11 1/4% Senior Secured Second Priority Notes due 2003 (the "Initial
Notes"), and 11 1/4% Series B Senior Secured Second Priority Notes due 2003 (the
"Exchange Notes", and together with the Initial Notes, the "Notes"), of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
The obligations under this Indenture and the Notes are
secured by a second priority pledge of the capital stock of (i) Homeside
Lending, Inc., a wholly owned subsidiary of the Company, and (ii) upon
consummation of the Barnett Acquisition (as defined herein), Barnett Mortgage
(as defined herein), subject in the case of this clause (ii) to certain other
conditions, in each case as provided in this Indenture and the applicable Pledge
Agreement (as defined herein).
Upon the issuance of the Exchange Notes, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to, and shall be governed by, the provisions of the
Trust Indenture Act of 1939, as amended, that are required or deemed to be part
of and to govern indentures qualified thereunder.
All things necessary have been done to make the Notes, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in each case in accordance with the
terms thereof, and to secure the Notes as contemplated in the Pledge Agreement
dated as of the date hereof.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Notes, as follows:
<PAGE> 12
2
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and "self-liquidating
paper", as used in TIA Section 311, shall have the meanings assigned to them in
the rules of the Commission adopted under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted accounting
principles; and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Articles Two and Ten, are
defined in those Articles.
"Acquired Indebtedness" means Indebtedness of a Person (a)
existing at the time such Person becomes a Subsidiary or (b) assumed in
connection with the acquisition of assets from such Person, in each case other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary or such acquisition. Acquired Indebtedness shall be
deemed to be incurred on the date of the related acquisition of assets from any
Person or the date the acquired Person becomes a Subsidiary.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" means, with respect to any specified Person (a)
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control
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with such specified Person or (b) any other Person that owns, directly or
indirectly, 10% or more of such specified Person's Capital Stock or any
executive officer or director of any such specified Person or other Person. For
the purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Average Life" means, as of the date of determination with
respect to any Indebtedness, the quotient obtained by dividing (a) the sum of
the products of (i) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such Indebtedness multiplied by
(ii) the amount of each such principal payment by (b) the sum of all such
principal payments.
"Bank Credit Agreement" means the Credit Agreement dated as
of March 15, 1996 among HomeSide Lending, Inc. (formerly BancBoston Mortgage
Corporation), the lenders parties thereto, Nationsbank of Texas, N.A., as
Syndication Agent, Bankers Trust Company, as Documentation Agent, The First
National Bank of Boston, as Collateral Agent, and Chemical Bank, as
administrative agent for said lenders, as such agreement may be amended,
renewed, extended, substituted, replaced, restated, increased, refinanced,
restructured, supplemented or otherwise modified from time to time (including,
without limitation, any successive amendments, renewals, extensions,
substitutions, replacements, restatements, increases, refinancings,
restructurings, supplements or other modifications of the foregoing).
"Bankruptcy Law" means Title 11, United States Bankruptcy
Code of 1978, as amended, or any similar United States federal or state law
relating to bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization or relief of debtors or any amendment to, succession to or change
in any such law.
"Barnett Acquisition" means the acquisition by the Company of
Barnett Mortgage pursuant to the Barnett Purchase Agreement.
"Barnett Mortgage" means Barnett Mortgage Company, a Florida
corporation.
"Barnett Purchase Agreement" means the Stock Purchase
Agreement dated as of March 4, 1996 between the Company and Barnett Banks, Inc.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
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"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in The City
of New York are authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any person, any and
all shares, interests, partnership interests, participations, rights in or other
equivalents (however designated) of such Person's equity, including any
Preferred Stock, and any rights (other than debt securities convertible into
such equity), warrants or options exchangeable for or convertible into such
equity, whether now outstanding or issued after the date of this Indenture.
"Capitalized Lease Obligation" means any obligation to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under generally
accepted accounting principles, and, for the purposes of this Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with such principles.
"Cash Equivalents" means (a) securities with maturities of
one year or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b) certificates
of deposit and Eurodollar time deposits with maturities of one year or less from
the date of acquisition and overnight bank deposits of any commercial bank
having capital and surplus in excess of $500,000,000, (c) commercial paper of a
domestic issuer rated at least A-1 by S&P or P-1 by Moody's, (d) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A2 by Moody's, or
(e) shares of money market mutual or similar funds which invest exclusively in
assets satisfying the requirements of clauses (a) through (d) of this
definition.
"Change of Control" means the occurrence of any of the
following events: (a) the Company ceases to directly or indirectly own 100% of
the Capital Stock (other than directors' qualifying shares) of HomeSide Lending,
Inc.; (b) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and l3d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
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securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total outstanding Voting Stock of the
Company; (c) the Company consolidates with, or merges with or into, another
Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction (i) where the outstanding Voting Stock of the Company is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company) or is converted into
or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation or (B) cash, securities and other property
(other than Capital Stock of the entity surviving such transaction) in an amount
that could be paid by the Company as a Restricted Payment as described under
Section 1009 (and such amount shall be treated as a Restricted Payment subject
to the provisions of this Indenture as described under Section 1009) and (ii)
immediately after such transaction, no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), other than Permitted
Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of 50% or more of the total outstanding Voting Stock of
the surviving or transferee corporation; (d) Continuing Directors shall at any
time cease to constitute a majority of the Board of Directors of the Company; or
(e) the Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the provisions
described under Article Eight.
"Collateral" means (i) the Pledged Stock and (ii) any other
current or future assets of the Company or its Subsidiaries defined as "Pledged
Collateral" in the Pledge Agreement.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this Indenture such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the
first paragraph of this Indenture, until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
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"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman, its President, any
Vice President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated Adjusted Net Income" means, for any period, the
consolidated net income (or loss) of the Company and all Subsidiaries for such
period as determined in accordance with GAAP, adjusted by excluding, without
duplication, (a) any net after-tax extraordinary gains or losses (less all fees
and expenses relating thereto), (b) any net after-tax gains or losses (less all
fees and expenses relating thereto) attributable to asset dispositions other
than in the ordinary course of business (sales of servicing rights being deemed
to be in the ordinary course of business), (c) the portion of net income (or
loss) of any Person (other than the Company or a Subsidiary) in which the
Company or any Subsidiary has an ownership interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or any
Subsidiary in cash dividends or distributions during such period, (d) the net
income (or loss) of any Person combined with the Company or any Subsidiary on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (e) cash paid during such period (to the extent deducted in
determining Consolidated Adjusted Net Income during such period), which cash was
paid for the purchase of Hedge Contracts related to Servicing Rights (i) during
the period beginning five business days prior to and ending five business days
after March 15, 1996 and (ii) so long as the closing date of the Barnett
Acquisition occurs on or before August 15, 1996, through the end of the one
month period after such closing date in an aggregate amount not to exceed $25
million under this clause (ii) and (f) the net income of any Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such Subsidiary is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Subsidiary or its stockholders; provided that, for the
purpose of determining whether an incurrence of Indebtedness (1) by the Company
will be permitted pursuant to Section 1008 the entire net income of each
Subsidiary that is subject to a restriction under the Bank Credit Agreement
and/or any other instrument or agreement governing any Indebtedness of such
Subsidiary of the type set forth in clause (f) above will be included in
determining Consolidated Adjusted Net Income so long as the Bank Credit
Agreement and such other agreement or instrument governing such Indebtedness
permits such Subsidiary to declare and pay cash dividends or make similar
distributions sufficient to pay interest on the Indebtedness being incurred and
any other Indebtedness of the Company in existence as of the date of
determination and (2) by a Subsidiary (the "Borrowing Subsidiary") will be
permitted pursuant to the Section 1008 the entire net income of the Borrowing
Subsidiary will be included in determining Consolidated Adjusted Net Income and
the entire net income of each other Subsidiary that is subject to a restriction
under the Bank Credit Agreement and/or any other instrument or agreement
governing any Indebtedness of such Subsidiary of the type set forth in clause
(f) above will be included in determining Consolidated Adjusted Net Income so
long as
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the Bank Credit Agreement and such other agreement or instrument governing such
Indebtedness permits such other Subsidiary to declare and pay cash dividends or
make similar distributions sufficient to pay interest on the Indebtedness being
incurred and any other Indebtedness of the Borrowing Subsidiary in existence as
of the date of determination.
"Consolidated Fixed Charge Coverage Ratio" means, for any
period, the ratio of (a) the sum of, without duplication, (i) Consolidated
Adjusted Net Income, Consolidated Interest Expense, Consolidated Income Tax
Expense and Consolidated Non-cash Charges deducted in computing Consolidated
Adjusted Net Income, minus (ii) the aggregate amount of after tax unrealized
gains (less all fees and expenses relating thereto) attributable to Hedge
Contracts related to Servicing Rights included in computing Consolidated
Adjusted Net Income, in each case, for such period to (b) the sum of (i)
Consolidated Interest Expense and (ii) cash dividends due (whether or not
declared) on Preferred Stock by the Company and any Subsidiary (to any Person
other than the Company and any Subsidiary), in each case for such period. Gains
or losses on Hedge Contracts related to Servicing Rights are unrealized until
the Hedge Contracts expire or the position is closed.
"Consolidated Income Tax Expense" means, for any period, the
provision for federal, state, local and foreign income taxes of the Company and
all Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" means, for any period,
without duplication, the sum of (i) the interest expense of the Company and its
Subsidiaries for such period, including, without limitation, (A) amortization of
debt discount, (B) the amortization of the net cost of Interest Rate Agreements
(including discounts), (C) the interest portion of any deferred payment
obligation and (D) amortization of debt issuance costs (excluding in the case of
this clause (i) interest expense of the Company and its Subsidiaries for such
period on any Mortgage Warehouse Debt, including, without limitation and with
respect to such Mortgage Warehouse Debt, (x) amortization of debt discount and
(y) amortization of debt issuance costs), plus (ii) the interest component of
Capitalized Lease Obligations of the Company and its Subsidiaries during such
period, plus (iii) any decrease in interest expense resulting from compensating
balances held by any lenders to the Company or its Subsidiaries, in each case as
determined on a consolidated basis in accordance with GAAP; provided that (x)
the Consolidated Interest Expense attributable to interest on any Indebtedness
computed on a pro forma basis and (A) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, shall be computed
by applying at the option of the Company, either the fixed or floating rate, and
(y) in making such computation, the Consolidated Interest Expense attributed to
interest on any Indebtedness
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under a revolving credit facility computed on a pro forma basis shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period.
"Consolidated Net Worth" means, at any date, the
stockholders' equity of the Company less the amount of such stockholders' equity
attributable to Redeemable Capital Stock or treasury stock of the Company and
any Subsidiary, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the
aggregate depreciation, amortization and other non-cash items (including
unrealized losses attributable to Hedge Contracts relating to Servicing Rights)
of the Company and any Subsidiary reducing Consolidated Adjusted Net Income for
such period, determined on a consolidated basis in accordance with GAAP
(excluding any such non-cash charge that requires an accrual of or reserve for
cash charges for any future period).
"Continuing Directors" shall mean, collectively, (i) all
members of the board of directors of the Company on the date of Indenture and
(ii) all members of the board of directors of the Company who assume office
after the date of Indenture and whose nomination for election by the Company's
shareholders was approved by a majority of the Continuing Directors or was
otherwise approved under the terms of the Stockholder Agreement, dated as of
December 11, 1995, as amended by Amendment No. 1, dated as of March 4, 1996,
among the principal stockholders of the Company.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of this
Indenture is located at 101 Barclay Street, Floor 21 West, New York, New York
10286.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section
311.
"Depositary" means The Depository Trust Company, its nominees
and successors.
"Disinterested Director" means, with respect to any
transaction or series of transactions in respect of which the Board of Directors
is required to deliver a resolution of the Board of Directors under this
Indenture, a member of the Board of Directors who does not have any material
direct or indirect financial interest in or with respect to such transaction or
series of transactions.
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"Equity Offering" means an underwritten primary public
offering by the Company of its Common Stock pursuant to an effective
registration statement under the Securities Act.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" has the meaning stated in the first recital
of this Indenture and refers to any Exchange Notes containing terms
substantially identical to the Initial Notes (except that (i) such Exchange
Notes shall not contain terms with respect to transfer restrictions and shall be
registered under the Securities Act, and (ii) certain provisions relating to an
increase in the stated rate of interest thereon shall be eliminated) that are
issued and exchanged for the Initial Notes in accordance with the Exchange
Offer, as provided for in the Registration Rights Agreement and this Indenture.
"Exchange Offer" means the offer by the Company to the
Holders of the Initial Notes to exchange all of the Initial Notes for Exchange
Notes, as provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange
Offer Registration Statement as defined in the Registration Rights Agreement.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title
II of the United States Code, as amended from time to time.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in the United States consistently
applied, that are in effect on the date of this Indenture.
"guarantee" means, as applied to any obligation, (a) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (b) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" means any guarantee of the obligations of the
Company under this Indenture and the Notes by any Subsidiary in accordance with
the provisions of this Indenture. When used as a verb, "Guarantee" shall have a
corresponding meaning.
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"Guarantor" means any Subsidiary that incurs a Guarantee.
"Hedge Contract" means, in respect of any Mortgage Loan,
Mortgage-Backed Securities or servicing rights for Mortgage Loans, a contract to
buy or sell an instrument on the futures market, cash forward market, private
investor whole loan market or options market, or an option or financial future
purchased over the counter for future delivery of such instrument, in respect of
interest rate risks associated with such Mortgage Loans, Mortgage-Backed
Securities and servicing rights for Mortgage Loans.
"Hedge Termination Obligation" means any termination amount
or other amount payable by the Company or any of its Subsidiaries upon the early
termination, by reason of the occurrence of a default or other termination event
thereunder of any interest rate protection agreement, interest rate option,
interest rate cap or other interest rate hedge arrangement providing to the
Company or any of its Subsidiaries protection against changes in interest rates.
"Holder" means a Person in whose name a Note is registered in
the Note Register.
"Inactive Subsidiary" means (a) Barnett Mortgage and (b) any
other Subsidiary that has (i) no active operations or (ii) substantially no
assets (other than Investments in Capital Stock of other Subsidiaries).
"Indebtedness" means, with respect to any Person, without
duplication, (a) all liabilities of such Person for borrowed money (including
overdrafts) or for the deferred purchase price of property or services,
excluding any trade payables and other accrued current liabilities incurred in
the ordinary course of business, but including, without limitation, all
obligations, contingent or otherwise, of such Person in connection with any
letters of credit and acceptances issued under letter of credit facilities,
acceptance facilities or other similar facilities, (b) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments, (c)
all indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even if the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), but
excluding trade payables arising in the ordinary course of business, (d) all
Capitalized Lease Obligations of such Person, (e) all obligations of such Person
under or in respect of Interest Rate Agreements, (f) all Indebtedness referred
to in (but not excluded from) the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon or with respect to property (including, without
limitation, accounts
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and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness (the amount of
suchobligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (g) all guarantees by such
Person of Indebtedness referred to in this definition of any other Person, (h)
all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends and (i) any amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any Indebtedness of the types referred to
in clauses (a) through (h) above; provided that this definition of Indebtedness
shall not include obligations under any Hedge Contract. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to this Indenture, and if such price is based upon, or measured by, the
fair market value of such Redeemable Capital Stock, such fair market value shall
be determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company
and any other obligor hereunder or under the Notes, to pay principal of (and
premium, if any) and interest on the Notes when due and payable at Maturity, and
all other amounts due or to become due under or in connection with this
Indenture, the Notes and the performance of all other obligations to the Trustee
(including all amounts due to the Trustee under Section 606 hereof) and the
Holders under this Indenture and the Notes, according to the terms hereof and
thereof.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Smith Barney Inc. and Friedman, Billings, Ramsey & Co.,
Inc., as purchasers of the Initial Notes.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Interest Rate Agreements" means any interest rate protection
agreements in the form of a swap or similar agreement designed to protect
against or manage exposure to fluctuations in interest rates relating to any
floating rate Indebtedness of the Company or its Subsidiaries.
"Initial Notes" has the meaning specified in the recitals to
this Agreement.
"Investment" means, with respect to any Person, any direct or
indirect advance, loan or other extension of credit or capital contribution to
(by means of any transfer of cash or
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other property to others or any payment for property or services for the account
or use of others), or any purchase, acquisition or ownership by such Person of
any Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued or owned by, any other Person and all other items that would
be classified as investments on a balance sheet prepared in accordance with
GAAP.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
owned on the date of this Indenture or thereafter acquired. A Person shall be
deemed to own subject to a Lien any property which such Person has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
"Maturity" means, with respect to any Note, the date on which
any principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, notice of redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Mortgage" means a mortgage or deed of trust on real property
which has been improved by a completed single family (i.e., one to four family
units) dwelling unit (i.e., a detached house, townhouse or condominium).
"Mortgage-Backed Security" means any security (including a
participation certificate) owned by a Subsidiary issued by the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association or the
Government National Mortgage Association or any successor to any of the
foregoing, that represents an interest in a pool of Mortgage Loans.
"Mortgage Loan" means a Mortgage Note and the related
Mortgage.
"Mortgage Note" means a promissory note which has a term not
exceeding 30 years evidencing a loan or advance which is secured by a Mortgage.
"Mortgage Warehouse Debt" means Indebtedness of any Person
under any warehouse line of credit, mortgage loan repurchase agreement or
similar facility or under any commercial paper program that (a) is incurred for
the purpose of funding the origination or purchase of Mortgage Loans or Mortgage
Notes that are intended to be sold to investors and (b) in the case of any
warehouse line of credit or similar facility is, or, in the case of any
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commercial paper program, the letters of credit or revolving credit facility
providing credit enhancement or liquidity backup for such commercial paper
program are, secured by Mortgage Loans, Mortgage Notes, Mortgage-Backed
Securities or any combination thereof owned by such Person.
"Notes" has the meaning stated in the first recital of this
Indenture and more particularly means any Notes authenticated and delivered
under this Indenture.
"Note Register" and "Note Registrar" have the respective
meanings specified in Section 305.
"Officers' Certificate" means a certificate signed by the
Chairman, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered
to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, including an employee of the Company, and who
shall be acceptable to the Trustee.
"Outstanding", when used with respect to Notes, means, as of
the date of determination, all Notes theretofore authenticated and delivered
under this Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the
Holders of such Notes; provided that, if such Notes are to be
redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor satisfactory to the
Trustee has been made;
(iii) Notes, except to the extent provided in Sections 1102
and 1103, with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article
Eleven; and
(iv) Notes which have been paid pursuant to Section 310 or in
exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture, other than
any such Notes in respect of which there shall have been
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presented to the Trustee proof satisfactory to it that such Notes
are held by a bona fide purchaser in whose hands the Notes are
valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in making
such calculation or in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which the Trustee actually
knows to be so owned shall be so disregarded. Notes so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Company or any other obligor upon the
Notes or any Affiliate of the Company or such other obligor.
"Pari Passu Indebtedness" means any Indebtedness of the
Company that is pari passu in right of payment with the Notes.
"Paying Agent" means any Person (including the Company acting
as Paying Agent) authorized by the Company to pay the principal of (and premium,
if any) or interest on any Notes on behalf of the Company.
"Permitted Holders" means, as of the date of determination,
the Bank of Boston Corporation, Thomas H. Lee Company, Madison Dearborn
Partners, Inc. and the Affiliates of such Persons.
"Permitted Indebtedness" means any of the following:
(a) Servicing Secured Indebtedness; provided that the
aggregate amount of such Indebtedness outstanding pursuant to this
clause (a), when added to the aggregate amount of Indebtedness
issued pursuant to clause (k) of this definition of Permitted
Indebtedness, may not exceed, prior to the consummation of the
Barnett Acquisition, $700 million and thereafter $950 million;
provided further that all Servicing Secured Indebtedness
outstanding under the Bank Credit Agreement as of the date of this
Indenture and as of the date of the consummation of the Barnett
Acquisition (and, in each case, any refinancings of such
outstanding Indebtedness) will be deemed to have been incurred
pursuant to this clause (a);
(b) Indebtedness of the Company pursuant to the Notes;
<PAGE> 25
15
(c) Indebtedness of the Company or any Subsidiary outstanding
on the date of this Indenture (other than Indebtedness under the
Bank Credit Agreement and refinancings thereof) and listed on
Schedule I hereto;
(d) Indebtedness of the Company owing to any Wholly Owned
Subsidiary; provided that any Indebtedness of the Company owing to
any such Subsidiary is made pursuant to an intercompany note and
is subordinated in right of payment from and after such time as
the Notes shall become due and payable (whether at Stated
Maturity, upon acceleration or otherwise) to the payment and
performance of the Company's obligations under the Notes; provided
further that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or
transfer to the Company or another Wholly Owned Subsidiary) shall
be deemed to be an incurrence of such Indebtedness by the Company
not permitted by this clause (d);
(e) Indebtedness of a Wholly Owned Subsidiary owing to the
Company or to another Wholly Owned Subsidiary of the Company;
provided that any such Indebtedness is made pursuant to an
unsubordinated intercompany note; provided further that (i) any
disposition, pledge or transfer of any such Indebtedness to a
Person (other than a disposition, pledge or transfer to the
Company or another Wholly Owned Subsidiary) shall be deemed to be
an incurrence of such Indebtedness by such Subsidiary not
permitted by this clause (e) and (ii) any transaction pursuant to
which any Wholly Owned Subsidiary, which is owed Indebtedness by
any other Subsidiary, ceases to be a wholly owned Subsidiary shall
be deemed to be an incurrence of such Indebtedness not permitted
by this clause (e);
(f) guarantees of any Subsidiary of Indebtedness of the
Company entered into in accordance with the provisions of Section
1014;
(g) the guarantee of the Company with respect to the
Indebtedness of any Subsidiary under the Bank Credit Agreement;
(h) the guarantees of the Company's Subsidiaries with respect
to the Indebtedness under the Bank Credit Agreement;
(i) secured Indebtedness of Subsidiaries, incurred in the
ordinary course of business, not to exceed $100 million in
aggregate principal amount outstanding at any time;
(j) unsecured Indebtedness of Subsidiaries, incurred in the
ordinary course of business, not to exceed $20 million in
aggregate principal amount outstanding at any time;
<PAGE> 26
16
(k) Indebtedness of any Subsidiary related to the maintenance
of balances with the lender of such Indebtedness arising under a
line of credit (i) which has a term not in excess of one year,
(ii) which is secured by Cash Equivalents having an aggregate
value not materially in excess of the outstanding amount under
such line of credit and (iii) with respect to which the net
interest expense thereon (after giving effect to compensating
balances) is not in excess of the interest income earned on the
collateral securing such line of credit; provided that the
aggregate amount of Indebtedness outstanding pursuant to this
clause (k), when added to the aggregate amount of Servicing
Secured Indebtedness outstanding pursuant to clause (a) of this
definition of Permitted Indebtedness, may not exceed, prior to the
consummation of the Barnett Acquisition, $700 million and
thereafter $950 million;
(l) intra-day overdrafts of any Subsidiary on dealer
clearance accounts arising in connection with trade settlements
for Mortgage-Backed Securities;
(m) letters of credit issued by the Company or any Subsidiary
for the benefit of the Governmental National Mortgage Association
and any successor thereto in connection with final pool
certifications;
(n) repurchase agreements (including "gestation" repo
transactions) entered into in the ordinary course of a
Subsidiary's mortgage banking business and relating to Mortgage
Loans and Mortgage-Backed Securities;
(o) the endorsement of negotiable instruments by the Company
or any Subsidiary for deposit or collection or similar
transactions in the ordinary course of business;
(p) Mortgage Warehouse Debt of the Company or any Subsidiary;
(q) Indebtedness under Interest Rate Agreements; provided
that such agreements relate to Indebtedness permitted pursuant to
Section 1008; and
(r) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing")
of any Indebtedness described in clauses (b) and (c) of this
definition, including any successive refinancings, so long as (i)
any such new Indebtedness shall be in a principal amount that does
not exceed the principal amount (or, if such Indebtedness being
refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) so
refinanced, plus the lesser of the amount of any premium required
to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of
<PAGE> 27
17
any premium actually paid at such time to refinance the
Indebtedness, plus, in either case, the amount of reasonable
expenses of incurred in connection with such refinancing, (ii)
such new Indebtedness has an Average Life longer than the
remaining Average Life of the Indebtedness so renewed, extended,
substituted, refinanced or replaced, and (iii) in the case of any
refinancing of Subordinated Indebtedness, such new Indebtedness is
made subordinate to the Notes at least to the same extent as the
Indebtedness being refinanced; provided that Indebtedness of the
Company may not be refinanced by Indebtedness of any Subsidiary of
the Company pursuant to this clause (r);
provided, however, that any Indebtedness of a Subsidiary permitted
pursuant to this definition of Permitted Indebtedness shall not be
permitted with respect to a Subsidiary that is an Inactive
Subsidiary.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents, provided that at no time
shall any obligor (other than the United States Government) be the
obligor under more than 10%, if such obligor has a long term
Indebtedness rating of A- or better but less than AA by S&P (or,
if unavailable, the equivalent rating of Moody's), or 25%, if such
obligor has a long term Indebtedness rating of AA or better by S&P
(or, if unavailable, the equivalent rating of Moody's), of the
Company's Cash Equivalents at such time;
(b) Investments in the Company or any Wholly Owned Subsidiary
engaged in the mortgage banking business;
(c) intercompany Indebtedness to the extent permitted under
clauses (d) and (e) of the definition of "Permitted Indebtedness";
(d) negotiable instruments held for deposit or collection in
the ordinary course of business, except to the extent that they
would constitute Investments in Affiliates;
(e) Investments in stock, obligations or securities received
in settlement of debts owing to the Company or a Subsidiary as a
result of foreclosure, perfection or enforcement of any Lien, in
each case in the ordinary course of business;
(f) travel, moving and other advances made to officers,
employees and consultants in the ordinary course of business;
<PAGE> 28
18
(g) Investments by the Company or any Subsidiary in another
Person, if as a result of such Investment (i) such other Person
becomes a Subsidiary or (ii) such other Person is merged or
consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a Subsidiary;
and
(h) Investments in Mortgage Loans, Mortgage-Backed
Securities, mortgage servicing rights and Hedge Contracts, in each
case made in the ordinary course of business.
"Permitted Liens" means the following types of Liens as to
which no enforcement, collection, execution, levy or foreclosure proceeding
shall have been consummated:
(a) The pledge of the Capital Stock any Subsidiary as
security for Indebtedness permitted pursuant to Section 1008;
(b) Liens (other than Liens securing Indebtedness under the
Bank Credit Agreement) existing as of the date of this Indenture;
(c) Liens on any property or assets of a Subsidiary granted
in favor of the Company;
(d) Liens securing the Notes;
(e) Liens arising by reason of (i) security for payment of
workmen's compensation or insurance consistent with past practice,
(ii) good faith deposits in connection with tenders, contracts
(other than contracts for the payment of money) or leases entered
into in the ordinary course of business or (iii) deposits to
secure public or statutory obligations, or in lieu of surety or
appeal bonds;
(f) any interest or title of a lessor under any Capitalized
Lease Obligation so long as such Indebtedness is permitted under
Section 1008;
(g) Liens of mechanics, materialmen, laborers, employees or
suppliers or any similar Liens arising by operation of law
incurred in the ordinary course of business securing obligations
that are not overdue by a period of more than 30 days;
(h) Liens arising by reason of zoning restrictions,
easements, licenses, reservations, provisions, covenants,
conditions, waivers, restrictions on the use of property or minor
irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred,
created, assumed or
<PAGE> 29
19
permitted to exist and arising by, through or under a landlord or
owner of the leased property, with or without consent of the
lessee), none of which materially impairs the use of any parcel of
property material to the operation of the business of the Company
and its Subsidiaries taken as a whole or the value of such
property for the purpose of such business;
(i) Liens arising by reason of surveys, exceptions, defects
of title, encumbrances, easements, reservations of, or rights of
others for, rights of way, sewers, electric lines, telegraph or
telephone lines or other similar purposes or zoning or other
restrictions as to the use of real property not materially
interfering with the ordinary conduct of the business of the
Company and its Subsidiaries taken as a whole;
(j) Liens arising out of judgments or orders that have been
adequately bonded or with respect to which a stay of execution has
been obtained pending an appeal or proceeding for review;
(k) Liens securing Acquired Indebtedness created prior to
(and not in connection with or in contemplation of) the incurrence
of such Indebtedness by the Company or any Subsidiary; provided
that such Lien does not extend to any property or assets of the
Company or any Subsidiary other than the assets acquired in
connection with the incurrence of such Acquired Indebtedness;
(l) Liens securing Interest Rate Agreements permitted to be
incurred pursuant to clause (q) of the definition of "Permitted
Indebtedness";
(m) Liens arising from purchase money mortgages and purchase
money security interests incurred in the normal and ordinary
course of the business of the Company; provided that (i) the
related Indebtedness shall not be secured by any property or
assets of the Company or any Subsidiary other than the property
and assets so acquired and (ii) the Lien securing such
Indebtedness shall be created within 60 days of such acquisition;
(n) any Lien securing any Mortgage Warehouse Debt of the
Company or any Subsidiary secured primarily by Mortgage Loans held
for sale;
(o) any Lien arising under a binding agreement pursuant to
which the Company or any Subsidiary is obligated to sell
identifiable Mortgage Loans, which Lien encumbers such Mortgage
Loans and secures the Company's or a Subsidiary's obligation to
sell and deliver such Mortgage Loans under such agreement;
provided, in each such case the Mortgage Loans are sold or
released from such Liens under such binding agreement within 90
days of the entering into of such binding agreement; and
<PAGE> 30
20
(p) any extension, renewal or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a), (b) and
(k); provided that (i) the amount of security is not thereby
increased, (ii) the aggregate amount of Indebtedness or other
obligations secured by the Lien after such extension, renewal or
replacement does not exceed the aggregate amount of Indebtedness
or other obligations secured by the existing Lien prior to such
extension, renewal or replacement plus an amount equal to the
lesser of (A) the stated premium required to be paid with such an
extension, renewal or replacement pursuant to the terms of the
Indebtedness or (B) the amount of any premium actually paid by the
Company or the Subsidiary, as the case may be, to accomplish such
extension, renewal or replacement and (iii) the Indebtedness
secured by such Lien is permitted under the provisions of Section
1008.
"Person" means any individual, corporation, partnership,
business trust, joint venture, association, joint stock company, trust,
unincorporated organization, limited liability company or other entity, or
government or any agency or political subdivision thereof.
"Pledge Agreement" means the Pledge Agreement dated as of the
date hereof by the Company in favor of the Trustee and any future Pledge
Agreement entered into by the Company or any Subsidiary in favor of the Trustee,
pursuant to this Indenture, in each case, in the form attached hereto as Exhibit
A, as amended from time to time.
"Pledged Stock" means the Capital Stock of a Subsidiary of
the Company that is pledged from time to time to the Trustee pursuant to the
Pledge Agreement.
"Pledgor" means the Company and any Subsidiary that is a
"Pledgor" under a Pledge Agreement.
"Predecessor Note" of any particular Note means every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 310 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participation or other equivalents (however designated)
of such Person's preferred or preference stock whether now outstanding, or
issued after the date of this Indenture, and including, without limitation, all
classes and series of preferred or preference stock of such Person.
"QIB" means a "Qualified Institutional Buyer" under Rule
144A.
<PAGE> 31
21
"Qualified Capital Stock" of any person means any and all
Capital Stock of such person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of
Capital Stock that, either by its terms, by the terms of any security into which
it is convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Notes or is redeemable at the option of the
holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity.
"Redemption Date", when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of May 14, 1996, among the Company and the holders of
Initial Notes.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the May 1 or November 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice chairman of the board of directors, the chairman
or any vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any trust officer or assistant trust officer, the controller or any
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above-designated officers,
and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc. and its successors.
<PAGE> 32
22
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations thereunder.
"Servicing Rights" means, at any date of determination, the
mortgage loan servicing rights and related receivables owned by the Company and
its Subsidiaries.
"Servicing Secured Indebtedness" means Indebtedness of the
Company and Subsidiaries under the Bank Credit Agreement and/or other agreement
or facility, other than Mortgage Warehouse Debt, that is secured by, among other
things, a first priority security interest in Servicing Rights, and is advanced
based only on the value of such Servicing Rights.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 311.
"Stated Maturity" means, when used with respect to any Note or
any installment of interest thereon, the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable, and, when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company
that is expressly subordinated in right of payment to the Notes.
"Subsidiary" of the Company means a corporation, partnership,
joint venture, limited liability company, trust, estate or other entity of which
(or in which) more than 50% of (a) the issued and outstanding Voting Stock, (b)
the interest in the capital or profits of such partnership or joint venture or
(c) the beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by the Company, by the Company and one or more of
its other Subsidiaries or by one or more of the Company's other Subsidiaries.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939 as in force on the date as of which this Indenture was executed, except
as provided in Section 904.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
<PAGE> 33
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"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers, trustees or other voting members of the governing body of any Person
(irrespective of whether or not, at the time, stock of any other class or
classes shall have, or might have, voting power by reason of the happening of
any contingency).
"Wholly Owned Subsidiary" means any Subsidiary of the Company
of which 100% of the outstanding Capital Stock is owned by the Company or
another Wholly Owned Subsidiary of the Company.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture or the Pledge
Agreement, the Company shall furnish to the Trustee an Officer's Certificate
stating that all conditions precedent, if any, provided for in this Indenture or
the Pledge Agreement (including any covenant compliance with which constitutes a
condition precedent) relating to the proposed action have been complied with and
an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture or the Pledge
Agreement relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1018(a)) shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
<PAGE> 34
24
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
<PAGE> 35
25
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by
any Person, and the date of holding the same, shall be proved by the Note
Register.
(d) If the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Notes shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Note.
<PAGE> 36
26
SECTION 105. Notices, Etc., to Trustee and the Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this Indenture, or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to
Holders by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders. Any
notice mailed to a Holder in the manner herein prescribed shall be conclusively
deemed to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
<PAGE> 37
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SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, (other than the parties hereto, any Paying Agent, any
Notes Registrar and their successors hereunder and each of the Holders) any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
This Indenture, the Notes and any Guarantee shall be governed
by and construed in accordance with the law of the State of New York excluding
(to the greatest extent permissible by law) any rule of law that would cause the
application of the laws of any jurisdiction other than the State of New York.
Upon the issuance of the Exchange Notes or the effectiveness of the Shelf
Registration Statement, this Indenture shall be subject to the provisions of the
Trust Indenture Act that are required to be part of this Indenture and shall, to
the extent applicable, be governed by such provisions.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity or Maturity of any Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Notes) payment
of principal (or premium, if any) or interest need not be made on such date, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the Interest Payment Date, Redemption Date, or at the Stated
Maturity or Maturity; provided that no interest shall accrue for the period from
<PAGE> 38
28
and after such Interest Payment Date, Redemption Date, Stated Maturity or
Maturity, as the case may be.
SECTION 113. Execution of Ancillary Documents.
The Trustee is hereby authorized and directed to execute and
deliver the Pledge Agreement and to perform the duties and obligations of the
Trustee thereunder.
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.
The Initial Notes shall be known as the "11 1/4% Senior
Secured Second Priority Notes due 2003" and the Exchange Notes shall be known as
the "11 1/4% Series B Senior Secured Second Priority Notes due 2003", in each
case, of the Company. The Notes and the Trustee's certificate of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.
The definitive Notes shall be printed, lithographed or
engraved on steel-engraved borders or may be produced in any other manner, all
as determined by the officers of the Company executing such Notes, as evidenced
by their execution of such Notes.
Initial Notes offered and sold in reliance on Rule 144A may be
issued in the form of one or more permanent global Notes substantially in the
form set forth in Sections 204 and 205 (the "U.S. Global Note") deposited with
the Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the U.S. Global Note may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for the
Depositary or its nominee, as hereinafter provided.
Initial Notes offered and sold in reliance on Regulation S
shall be issued initially in the form of temporary certificated Notes in
registered form substantially in the form set
<PAGE> 39
29
forth in Sections 204 and 205 (the "Temporary Offshore Physical Notes"). The
Temporary Offshore Physical Notes will be registered in the name of, and held
by, a temporary certificate holder designated by Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated until the later of the completion of
the distribution of the Initial Notes and the termination of the "restricted
period" (as defined in Regulation S) with respect to the offer and sale of the
Initial Notes (the "Offshore Notes Exchange Date"). At any time following the
Offshore Notes Exchange Date, upon receipt by the Trustee and the Company of a
certificate substantially in the form set forth in Section 203, the Company
shall execute, and the Trustee shall execute and deliver, one or more permanent
certificated Notes in registered form substantially in the form set forth in
Sections 204 and 205 (the "Permanent Offshore Physical Notes") in exchange for
the Temporary Offshore Physical Notes of like tenor and amount.
Initial Notes offered and sold other than as described in the
preceding two paragraphs shall be issued in the form of permanent certificated
Notes in registered form in substantially the form set forth in Sections 204 and
205 (the "U.S. Physical Notes").
The Temporary Offshore Physical Notes, Permanent Offshore
Physical Notes and U.S. Physical Notes are sometimes collectively herein
referred to as the "Physical Notes".
SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Note is sold under an
effective Registration Statement or (ii) an Initial Note is exchanged for an
Exchange Note in connection with an effective Registration Statement, in each
case pursuant to the Registration Rights Agreement, each such U.S. Global Note,
Temporary Offshore Physical Note, Permanent Offshore Physical Note and U.S.
Physical Note shall bear the following legend (the "Private Placement Legend")
on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
<PAGE> 40
30
OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2),
(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR", FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH
OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
Each U.S. Global Note, whether or not an Initial Note, shall
also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
REPRESENTATIVE OF DTC AS IS REQUESTED BY AN
<PAGE> 41
31
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
SECTION 203. Form of Certificate to Be Delivered upon
Termination of Restricted Period.
On or after June 24, 1996
The Bank of New York, as Trustee
101 Barclay Street, Floor 21 West
New York, New York 10286
Re: HOMESIDE, INC.
(the "Company") 11 1/4% Senior Secured Second
Priority Notes due 2003 (the "Notes")
Ladies and Gentlemen:
This letter relates to $200 million principal amount of Notes
represented by the temporary global note certificate (the "Temporary
Certificate"). Pursuant to Section 201 of the Indenture dated as of May 14, 1996
relating to the Notes (the "Indenture"), we hereby certify that (1) we are the
beneficial owner of such principal amount of Notes represented by the Temporary
Certificate and (2) we are a person outside the United States to whom the Notes
could be transferred in accordance with Rule 904 of Regulation S promulgated
under the Securities Act of 1933, as amended. Accordingly, you are hereby
requested to issue a
<PAGE> 42
32
Certificated Note representing the undersigned's interest in the principal
amount of Notes represented by the Temporary Certificate, all in the manner
provided by the Indenture.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:___________________________________________________________
Authorized Signature
SECTION 204. Form of Face of Note.
HOMESIDE, INC.
11 1/4% [Series B]* Senior Secured Second Priority Note due 2003
CUSIP No. _____
No. __________ $________
HOMESIDE, INC., a Delaware corporation (the "Company", which
term includes any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to ____________________ or registered
assigns, the principal sum of ____________________ Dollars on May 15, 2003, at
the office or agency of the Company referred to below, and to pay interest
thereon on November 15, 1996 and semi-annually thereafter, on May 15 and
November 15 in each year, from May 14, 1996, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, at the rate
of 11 1/4% per annum, until the principal hereof is paid or duly provided for,
and (to the extent lawful) to pay on demand interest on any overdue interest at
the rate borne by the Notes from the date on which such overdue interest becomes
payable to the date payment of such interest has been made or duly provided for.
The interest so payable, and punctually paid or duly
- --------
* Include only for Exchange Notes.
<PAGE> 43
33
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Note (or one or more Predecessor Notes)
is registered at the close of business on the Regular Record Date for such
interest, which shall be the May 1 or November 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date, and such defaulted interest,
and (to the extent lawful) interest on such defaulted interest at the rate borne
by the Notes, may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Notes not less than 10 days prior to
such Special Record Date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
Notes may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.
[The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated as of May 14, 1996 (the "Registration
Rights Agreement"), between the Company and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Smith Barney Inc. and Friedman, Billings, Ramsey & Co.,
Inc., as initial purchasers. In the event that either (a) an Exchange Offer
Registration Statement (as such term is defined in the Registration Rights
Agreement) is not filed with the Securities and Exchange Commission on or prior
to the 45th day following the date of original issue of the Notes, (b) such
Exchange Offer Registration Statement has not been declared effective on or
prior to the 90th day following the date of original issue of the Notes or (c)
the Exchange Offer (as such term is defined in the Registration Rights
Agreement) is not consummated or a Shelf Registration Statement (as such term is
defined in the Registration Rights Agreement) is not declared effective on or
prior to the 120th day following the date of original issue of the Notes, the
interest rate borne by this Note shall be increased by 0.5% per annum following
such 45-day period in the case of clause (a) above, such 90-day period in the
case of clause (b) above or 120-day period in the case of clause (c) above,
which rate will be increased by an additional one-half of one percent per annum
for each 90-day period that any such additional interest continues to accrue;
provided that the aggregate increase in such interest rate will in no event
exceed 1.00%. Upon (x) the filing of the Exchange Offer Registration Statement
after the 45-day period described in clause (a) above, (y) the effectiveness of
the Exchange Offer Registration Statement after the 90-day period described in
clause (b) above or (z) the day before the date of the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 120-day period described in clause (c) above, the
interest rate borne by the Note from the date of such filing, effectiveness or
the day before the date of consummation or effectiveness, as the case may be,
will be reduced to the original interest rate set forth above; provided,
however, that, if after such reduction in interest rate, a different event
specified in
<PAGE> 44
34
clause (a), (b) or (c) above occurs, the interest rate may again be increased
pursuant to the foregoing provisions.]*
Payment of the principal of (and premium, if any, on) and
interest on this Note will be made at the office or agency of the Company
maintained for that purpose in The City of New York, or at such other office or
agency of the Company as may be maintained for such purpose, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company (i) by check mailed to the
address of the Person entitled thereto as such address shall appear on the Note
Register or (ii) by wire transfer to an account maintained by the payee located
in the United States.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
HOMESIDE, INC.
By __________________________
SECTION 205. Form of Reverse of Note.
This Note is one of a duly authorized issue of securities of
the Company designated as its 11 1/4% [Series B]** Senior Secured Second
Priority Notes due 2003 (the "Notes"), limited (except as otherwise provided in
the Indenture referred to below) in aggregate principal amount to $200,000,000,
which may be issued under an indenture (the "Indenture") dated as of May 14,
1996 between the Company and The Bank of New York, as
- --------
* Include only for Initial Notes.
** Include only for the Exchange Notes
<PAGE> 45
35
trustee (the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties, obligations and immunities thereunder of the Company, the Trustee and
the Holders of the Notes, and of the terms upon which the Notes are, and are to
be, authenticated and delivered.
As provided in the Indenture, the Notes are secured by the
pledge to the Trustee pursuant to the Pledge Agreement. Each Holder by accepting
a Note shall be bound by and be entitled to the benefits of the Pledge
Agreement, as the same may be amended from time to time pursuant to the
respective provisions thereof and of the Indenture.
On or before each payment date, the Company shall deliver or
cause to be delivered to the Trustee or the Paying Agent an amount in dollars
sufficient to pay the amount due on such payment date.
The Notes are subject to redemption upon not less than 30 nor
more than 60 days notice, at any time after May 15, 2001, as a whole or in part,
at the election of the Company, at a Redemption Price equal to the percentage of
the principal amount set forth below if redeemed during the 12-month period
beginning May 15, of the years indicated:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2001 ................................................................... 105.625%
2002 ................................................................... 102.813%
</TABLE>
In addition, at any time or from time to time prior to May 15,
1999, the Company may redeem up to 35% of the aggregate principal amount of the
Notes originally issued within 60 days of one or more Equity Offerings, upon not
less than 30 nor more than 60 days notice, with the net proceeds of such
offering at a redemption price equal to 111.25% of the principal amount thereof,
together with accrued interest, if any, to the date of redemption; provided that
immediately after giving effect to any such redemption at least $75 million in
aggregate principal amount of the Notes remain outstanding.
Notes aggregating $87,500,000 million in principal amount will
be subject to a mandatory redemption at 101% of the principal amount thereof
plus accrued interest to the Redemption Date in the event that the Escrow Agent
(as defined in the Escrow Agreement, dated as of May 14, 1996 (the "Escrow
Agreement"), between The Bank of New York, as escrow agent (the "Escrow Agent"),
and the Company) has not received the Officers' Certificate and Opinion of
Counsel (each as defined in the Escrow Agreement) provided for in
<PAGE> 46
36
the Escrow Agreement on or prior to August 15, 1996 (the "Termination Date").
The Redemption Date for such redemption will be five Business Days after the
Termination Date.
If, on or prior to the Termination Date, the Escrow Agent
receives such Officers' Certificate and Opinion of Counsel from the Company, the
Escrow Agreement provides that the Escrow Agent will release the Escrowed
Property (as defined in the Escrow Agreement) and take such other action as
required by the Escrow Agreement, all in accordance with the provisions of the
Escrow Agreement.
In the case of any redemption of Notes, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable to
the Holders of such Notes, or one or more Predecessor Notes, of record at the
close of business on the relevant Record Date referred to on the face hereof.
Notes (or portions thereof) for whose redemption and payment provision is made
in accordance with the Indenture shall cease to bear interest from and after the
Redemption Date.
In the event of redemption of this Note in part only, a new
Note or Notes for the unredeemed portion hereof shall be issued in the name of
the Holder hereof upon the cancellation hereof.
Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to purchase such Holder's
Notes, in whole or in part, at a purchase price in cash equal to 101% of the
principal amount thereof, plus accrued interest, if any, to the date of
purchase, in accordance with the Indenture.
If an Event of Default shall occur and be continuing, the
principal of all the Notes may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of (a) the entire indebtedness of the Company on this Note and (b) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Note.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all the Notes, to waive compliance by the Company
with certain provisions of
<PAGE> 47
37
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by or on behalf of the Holder of this
Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of (and premium, if
any) and interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registerable on the
Note Register of the Company, upon surrender of this Note for registration of
transfer at the office or agency of the Company maintained for such purpose in
The City of New York, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Note Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Notes, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Notes are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to pay all documentary, stamp or similar issue or transfer taxes or
other governmental charge payable in connection therewith.
Prior to the time of due presentment of this Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, whether or not this Note be overdue, and neither
the Company, the Trustee nor any agent shall be affected by notice to the
contrary.
Interest on this Note shall be computed on the basis of a
360-day year of twelve 30-day months.
<PAGE> 48
38
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
________________________________________________________________________________
________________________________________________________________________________
please print or typewrite name and address including zip code of assignee
________________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
________________________________________________________________________________
attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
NOTES]
In connection with any transfer of this Note occurring prior
to the date that is the earlier of the date of an effective Registration
Statement or May 14, 1999, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
or
<PAGE> 49
39
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished that comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
Date: ____________________ ________________________________________________
NOTICE: The signature must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee: ______________________________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date: ____________________ ________________________________________________
NOTICE: To be executed by an executive officer.
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 1021 of the Indenture, check the Box: [ ].
<PAGE> 50
40
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1021 of the Indenture, state the amount (in original
principal amount) below:
$_____________________.
Date: ________________________________________
Your Signature: __________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: _____________________________________________
SECTION 206. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in
substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Dated: ____________________
This is one of the Notes referred to in the within-mentioned
Indenture.
The Bank of New York
as Trustee
By __________________
Authorized Signatory
<PAGE> 51
41
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $200,000,000,
except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes pursuant to Section 303, 304,
305, 306, 307, 310, 906, 1021 or 1208 or pursuant to an Exchange Offer.
The Initial Notes shall be known and designated as the
"11 1/4% Senior Secured Second Priority Notes due 2003" and the Exchange Notes
shall be known and designated as the "11 1/4% Series B Senior Secured Second
Priority Notes due 2003", in each case, of the Company. The Stated Maturity of
the Notes shall be May 15, 2003, and they shall bear interest at the rate of
11 1/4% per annum from May 14, 1996, or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, payable on
November 15, 1996 and semi-annually thereafter on May 15 and November 15 in
each year and at said Stated Maturity, until the principal thereof is paid or
duly provided for.
The Notes shall be redeemable as provided in Article Twelve.
The Notes shall be entitled to the benefits of the Pledge
Agreement as provided in Article Thirteen.
The principal of (and premium, if any) and interest on the
Notes shall be payable at the office or agency of the Company maintained for
such purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose; provided, however, that, at the
option of the Company, interest may be paid by check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Note Register.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
<PAGE> 52
42
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
Chairman, its President or a Vice President, under its corporate seal reproduced
thereon. The signature of any of these officers on the Notes may be manual or
facsimile signatures of the present or any future such authorized officer and
may be imprinted or otherwise reproduced on the Notes.
Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Initial Notes executed by
the Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Notes, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Initial Notes
directing the Trustee to authenticate the Notes and certifying that all
conditions precedent to the issuance of Notes contained herein have been fully
complied with, and the Trustee in accordance with such Company Order shall
authenticate and deliver such Initial Notes. On Company Order, the Trustee shall
authenticate for original issue Exchange Notes in an aggregate principal amount
not to exceed $200,000,000; provided that such Exchange Notes shall be issuable
only upon the valid surrender for cancellation of Initial Notes of a like
aggregate principal amount in accordance with an Exchange Offer pursuant to the
Registration Rights Agreement. In each case, the Trustee shall be entitled to
receive an Officers' Certificate and an Opinion of Counsel of the Company that
it may reasonably request in connection with such authentication of Notes. Such
order shall specify the amount of Notes to be authenticated and the date on
which the original issue of Initial Notes or Exchange Notes is to be
authenticated.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder and is
entitled to the benefits of this Indenture.
<PAGE> 53
43
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the Notes
authenticated or delivered prior to such consolidation, merger, conveyance,
transfer, lease or other disposition may, from time to time, at the request of
the successor Person, be exchanged for other Notes executed in the name of the
successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Notes surrendered
for such exchange and of like principal amount; and the Trustee, upon Company
Request of the successor Person, shall authenticate and deliver Notes as
specified in such request for the purpose of such exchange. If Notes shall at
any time be authenticated and delivered in any new name of a successor Person
pursuant to this Section in exchange or substitution for or upon registration of
transfer of any Notes, such successor Person, at the option of the Holders but
without expense to them, shall provide for the exchange of all Notes at the time
Outstanding for Notes authenticated and delivered in such new name.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Notes may determine, as conclusively evidenced by their
execution of such Notes.
If temporary Notes are issued, the Company will cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Company designated for such purpose pursuant to Section 1002, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes, the Company shall execute and the Trustee shall authenticate
and deliver in exchange therefor a like principal amount of definitive Notes of
authorized denominations. Until so exchanged, the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as definitive
Notes.
<PAGE> 54
44
SECTION 305. Registration, Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Note Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Notes and of transfers of Notes. The Note Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Note Register shall be
open to inspection by the Trustee. The Trustee is hereby initially appointed as
security registrar (the "Note Registrar") for the purpose of registering Notes
and transfers of Notes as herein provided.
Upon surrender for registration of transfer of any Note at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Notes of any
authorized denomination or denominations of a like aggregate principal amount.
Furthermore, any Holder of the U.S. Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interest in
such Global Note may be effected only through a book-entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denomination and of a like aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange (including an exchange of Initial
Notes for Exchange Notes), the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Holder making the exchange is
entitled to receive; provided that no exchange of Initial Notes for Exchange
Notes shall occur until an Exchange Offer Registration Statement shall have been
declared effective by the Commission and the Initial Notes to be exchanged for
the Exchange Notes shall be cancelled by the Trustee.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Note
Registrar) be duly endorsed, or be
<PAGE> 55
45
accompanied by a written instrument of transfer, in form satisfactory to the
Company and the Note Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Notes, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 304, 906, 1021 or 1208, not involving
any transfer.
SECTION 306. Book-Entry Provisions for U.S. Global Note.
(a) The U.S. Global Note initially shall (i) be registered in
the name of the Depositary for such global Note or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 202.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any U.S.
Global Note held on their behalf by the Depositary, or the Trustee as its
custodian, or under the U.S. Global Note, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such U.S. Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or shall impair, as between the Depositary and its Agent Members, the operation
of customary practices governing the exercise of the rights of a Holder of any
Note.
(b) Transfers of the U.S. Global Note shall be limited to
transfers of such U.S. Global Note in whole, but not in part, to the Depositary,
its successors or their respective nominees. Interests of beneficial owners in
the U.S. Global Note may be transferred in accordance with the rules and
procedures of the Depositary and the provisions of Section 307. Beneficial
owners may obtain U.S. Physical Notes in exchange for their beneficial interests
in the U.S. Global Note upon request in accordance with the Depositary's and the
Registrar's procedures. In addition, U.S. Physical Notes shall be transferred to
all beneficial owners in exchange for their beneficial interests in the U.S.
Global Note if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for the U.S. Global Note and a successor
depositary is not appointed by the Company within 90 days of such notice or (ii)
an Event of Default has occurred and is continuing and the Note Registrar has
received a request from the Depositary.
(c) In connection with any transfer of a portion of the
beneficial interest in the U.S. Global Note pursuant to subsection (b) of this
Section to beneficial owners who are
<PAGE> 56
46
required to hold U.S. Physical Notes, the Note Registrar shall reflect on its
books and records the date and a decrease in the principal amount of the U.S.
Global Note in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Note to be transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more U.S.
Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire U.S. Global
Note to beneficial owners pursuant to subsection (b) of this Section, the U.S.
Global Note shall be deemed to be surrendered to the Trustee for cancellation,
and the Company shall execute, and the Trustee shall authenticate and deliver,
to each beneficial owner identified by the Depositary in exchange for its
beneficial interest in the U.S. Global Note, an equal aggregate principal amount
of U.S. Physical Notes of authorized denominations.
(e) Any U.S. Physical Note delivered in exchange for an
interest in the U.S. Global Note pursuant to subsection (c) or subsection (d) of
this Section shall, except as otherwise provided by paragraph (a)(i)(x) and
paragraph (f) of Section 307, bear the applicable legend regarding transfer
restrictions applicable to the U.S. Physical Note set forth in Section 202.
(f) The registered holder of the U.S. Global Note may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Notes.
SECTION 307. Special Transfer Provisions.
Unless and until (i) an Initial Note is sold under an
effective Registration Statement, or (ii) an Initial Note is exchanged for an
Exchange Note in connection with an effective Registration Statement, in each
case pursuant to the Registration Rights Agreement, the following provisions
shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Note to any institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) which is not a QIB (excluding Non-U.S. Persons):
(i) The Note Registrar shall register the transfer of any
Initial Note, whether or not such Initial Note bears the Private
Placement Legend, if (x) the requested transfer is at least three years
after the original issue date of the Initial Note or (y) the proposed
transferee has delivered to the Registrar a certificate substantially
in the form set forth in Section 308.
<PAGE> 57
47
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the Note Registrar
of (x) the documents, if any, required by paragraph (i) and (y) instructions
given in accordance with the Depositary's and the Note Registrar's procedures
therefor, the Note Registrar shall reflect on its books and records the date and
a decrease in the principal amount of the U.S. Global Note in an amount equal to
the principal amount of the beneficial interest in the U.S. Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more U.S. Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of an Initial Note to
a QIB (excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of U.S. Physical
Notes, Temporary Offshore Physical Notes or Permanent Offshore Physical Notes,
the Registrar shall register the transfer if such transfer is being made by a
proposed transferor who has checked the box provided for on the form of Initial
Note stating, or has otherwise advised the Company and the Note Registrar in
writing, that the sale has been made in compliance with the provisions of Rule
144A to a transferee who has signed the certification provided for on the form
of Initial Note stating, or has otherwise advised the Company and the Note
Registrar in writing, that it is purchasing the Initial Note for its own account
or an account with respect to which it exercises sole investment discretion and
that it, or the person on whose behalf it is acting with respect to any such
account, is a QIB within the meaning of Rule 144A, and is aware that the sale to
it is being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the
Initial Note to be transferred consists of U.S. Physical Notes, Temporary
Offshore Physical Notes or Permanent Offshore Physical Notes, upon receipt by
the Note Registrar of instructions given in accordance with the Depositary's and
the Note Registrar's procedures therefor, the Note Registrar shall reflect on
its books and records the date and an increase in the principal amount of the
U.S. Global Note in an amount equal to the principal amount of the U.S. Physical
Notes, Temporary Offshore Physical Notes or Permanent Offshore Physical Notes,
as the case may be, to be transferred, and the Trustee shall cancel the Physical
Note so transferred.
<PAGE> 58
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(c) Transfers by Non-U.S. Persons Prior to June 24, 1996. The
following provisions shall apply with respect to registration of any proposed
transfer of an Initial Note by a Non-U.S. Person prior to June 24, 1996:
(i) The Note Registrar shall register the transfer of any
Initial Note (x) if the proposed transferee is a Non-U.S. Person and the
proposed transferor has delivered to the Note Registrar a certificate
substantially in the form set forth in Section 309 or (y) if the proposed
transferee is a QIB and the proposed transferor has checked the box provided for
on the form of Initial Note stating, or has otherwise advised the Company and
the Note Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Initial Note stating, or has otherwise advised the
Company and the Note Registrar in writing, that it is purchasing the Initial
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it, or the person on whose behalf it is acting
with respect to any such account, is a QIB within the meaning of Rule 144A, and
is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as it
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A. Unless clause (ii) below is applicable, the Company shall
execute, and the Trustee shall authenticate and deliver, one or more Temporary
Offshore Physical Notes of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon
receipt by the Note Registrar of instructions given in accordance with the
Depositary's and the Note Registrar's procedures therefor, the Note Registrar
shall reflect on its books and records the date and an increase in the principal
amount of the U.S. Global Note in an amount equal to the principal amount of the
Temporary Offshore Physical Note to be transferred, and the Note Registrar shall
cancel the Temporary Offshore Physical Notes so transferred.
(d) Transfers by Non-U.S. Persons on or After June 24, 1996.
The following provisions shall apply with respect to any transfer of an Initial
Note by a Non-U.S. Person on or after June 24, 1996:
(i) (x) If the Initial Note to be transferred is a Permanent
Offshore Physical Note, the Note Registrar shall register such transfer, (y) if
the Initial Note to be transferred is a Temporary Offshore Physical Note, upon
receipt of a certificate substantially in the form set forth in Section 309 from
the proposed transferor, the Note Registrar shall register such transfer and (z)
in the case of either clause (x) or (y),
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unless clause (ii) below is applicable, the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Permanent Offshore Physical
Notes of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon
receipt by the Note Registrar of instructions given in accordance with the
Depositary's and the Note Registrar's procedures therefor, the Note Registrar
shall reflect on its books and records the date and an increase in the principal
amount of the U.S. Global Note in an amount equal to the principal amount of the
Temporary Offshore Physical Note or of the Permanent Offshore Physical Note to
be transferred, and the Trustee shall cancel the Physical Note so transferred.
(e) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an Initial Note to a
Non-U.S. Person:
(i) Prior to June 24, 1996, the Note Registrar shall register
any proposed transfer of an Initial Note to a Non-U.S. Person upon receipt of a
certificate substantially in the form set forth in Section 309 from the proposed
transferor and the Company shall execute, and the Trustee shall authenticate and
make available for delivery, one or more Temporary Offshore Physical Notes.
(ii) On and after June 24, 1996, the Note Registrar shall
register any proposed transfer to any Non-U.S. Person (w) if the Initial Note to
be transferred is a Permanent Offshore Physical Note, (x) if the Initial Note to
be transferred is a Temporary Offshore Physical Note, upon receipt of a
certificate substantially in the form set forth in Section 309 from the proposed
transferor, (y) if the Initial Note to be transferred is a U.S. Physical Note or
an interest in the U.S. Global Note, upon receipt of a certificate substantially
in the form set forth in Section 309 from the proposed transferor and (z) in the
case of either clause (w), (x) or (y), the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Permanent Offshore Physical
Notes of like tenor and amount.
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the Note Registrar
of (x) the document, if any, required by paragraph (i), and (y) instructions in
accordance with the Depositary's and the Note Registrar's procedures therefor,
the Note Registrar shall reflect on its books and records the date and a
decrease in the principal amount of the U.S. Global Note in an amount equal to
the principal amount of the beneficial interest in the U.S. Global Note to be
transferred and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Permanent Offshore Physical Notes of like tenor and
amount.
<PAGE> 60
50
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Note Registrar shall deliver only Notes that bear the
Private Placement Legend unless either (i) the circumstances contemplated by the
fourth paragraph of Section 201 or paragraph (a)(i)(x), (d)(i) or (e)(ii) of
this Section 307 exist or (ii) there is delivered to the Note Registrar an
Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(g) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Note Registrar shall retain copies of all letters, notices
and other written communications received pursuant to Section 306 or this
Section 307. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Note Registrar.
SECTION 308. Form of Certificate to Be Delivered in Connection
with Transfers to Non-QIB Institutional Accredited Investors.
[date]
HOMESIDE, INC.
c/o The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Dear Sirs:
In connection with our proposed purchase of $____________
aggregate principal amount of the 11 1/4% Senior Secured Second Priority Notes
due 2003 (the "Notes") of HOMESIDE, INC., a Delaware corporation (the
"Company"), we confirm that:
<PAGE> 61
51
1. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable securities law and may not be offered sold or otherwise transferred
except in compliance with the registration requirements of the Securities Act or
any other applicable securities law, or pursuant to an exemption therefrom, and
in each case in compliance with the conditions for transfer set forth below. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing the Notes to offer, sell or otherwise transfer such Notes prior to
the date that is three years after the later of the date of original issue and
the last date on which the Company or any affiliate of the Company was the owner
of such Notes (or any predecessor thereto) (the "Resale Restriction Termination
Date") only (a) to the Company, (b) pursuant to a registration statement that
has been declared effective under the Securities Act, (c) for so long as the
Notes are eligible for resale pursuant to Rule 144A under the Securities Act, to
a Person we reasonably believe is a "Qualified Institutional Buyer" under Rule
144A (a "QIB") that purchases for its own account or for the account of a QIB to
whom notice is given that the transfer is being made in reliance on Rule 144A,
(d) pursuant to offers and sales to non-U.S. persons that occur outside the
United States within the meaning of Regulations S under the Securities Act, (e)
to an institutional "accredited investor" within the meaning of subparagraph
(a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 under the Securities Act that is
acquiring the Notes for its own account or for the account of such an
institutional "accredited investor" for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution thereof in
violation of the Securities Act or (f) pursuant to any other available exemption
from the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
and the property of such investor account or accounts be at all times within our
or their control and to compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes is
proposed to be made pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver to The Bank of New York, as
trustee (the "Trustee"), a letter from the transferee substantially in the form
of this letter, which shall provide, among other things, that the transferee is
a person or entity as defined in paragraph 1 of this letter that is acquiring
such Notes for investment purposes and not for distribution in violation of the
Securities Act. We acknowledge that the Company and the Trustee reserve the
right prior to any offer, sale or other transfer of the Notes pursuant to
clauses (d), (e) and (f) above prior to the Resale Restriction Termination Sale
to require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Company and the Trustee.
<PAGE> 62
52
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor", and we are acquiring the Notes for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in violation
of the Securities Act or any other applicable securities laws and we have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Notes, and we and any
accounts for which we are acting are each able to bear the economic risk of our
or its investment.
3. We are acquiring the Notes purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
4. You and the Trustee are entitled to rely upon this letter and you
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
Date: __________________
By: _____________________
(NAME OF PURCHASER)
Upon registration of transfer, the Notes should be registered in the
name of the transferee as follows:
Name: _______________________________________________________________
Address:_____________________________________________________________
Taxpayer ID Number: _________________________________________________
<PAGE> 63
53
SECTION 309. Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S.
[date]
The Bank of New York, as Trustee
101 Barclay Street, Floor 21 West
New York, New York 10286
Re: HOMESIDE, INC.
(the "Company") 11 1/4% Senior Secured Second Priority
Notes due 2003 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States or (b) the
transaction was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting on our behalf
knows that the transaction has been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such
<PAGE> 64
54
sale has been made in accordance with the applicable provisions of Rule
903(c)(3) or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:_______________________
Authorized Signature
SECTION 310. Mutilated, Destroyed, Lost and Stolen Notes.
If (i) any mutilated Note is surrendered to the Trustee, or (ii) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and there is delivered to the Company
and the Trustee such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide purchaser, the Company
shall execute and upon Company Order the Trustee shall authenticate and deliver,
in exchange for any such mutilated Note or in lieu of any such destroyed, lost
or stolen Note, a new Note of like tenor and principal amount, bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time
<PAGE> 65
55
enforceable by anyone, and shall be entitled to all benefits of this Indenture
equally and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 311. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest at the office or agency of
the Company maintained for such purpose pursuant to Section 1002; provided,
however, that each installment of interest may at the Company's option be paid
by (i) mailing a check for such interest, payable to or upon the written order
of the Person entitled thereto pursuant to Section 312, to the address of such
Person as it appears in the Note Register or (ii) wire transfer to an account
located in the United States maintained by the payee.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the Holder on the Regular Record Date by virtue of having been such
Holder, and such defaulted interest and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Notes (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") shall be paid
by the Company, at its election in each case, as provided in clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed
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payment. The Trustee shall promptly notify the Company of such Special
Record Date, and in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be given in the manner provided for in Section 106,
not less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so given, such Defaulted Interest shall be paid to the
Persons in whose names the Notes (or their respective Predecessor Notes)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
SECTION 312. Persons Deemed Owners.
Prior to the due presentment of a Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Note is registered as the owner of such Note for
the purpose of receiving payment of principal of (and premium, if any) and
(subject to Sections 305 and 311) interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 313. Cancellation.
All Notes surrendered for payment, redemption, registration of transfer
or exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Company may
at any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and may deliver to the Trustee (or to any other Person for
delivery to the Trustee) for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold, and all Notes so
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delivered shall be promptly cancelled by the Trustee. If the Company shall so
acquire any of the Notes, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Notes unless
and until the same are surrendered to the Trustee for cancellation. No Notes
shall be authenticated in lieu of or in exchange for any Notes cancelled as
provided in this Section, except as expressly permitted by this Indenture. All
cancelled Notes held by the Trustee shall be disposed of by the Trustee in
accordance with its customary procedures unless by Company Order the Company
shall direct that cancelled Notes be returned to it.
SECTION 314. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of Notes
expressly provided for herein or pursuant hereto) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when
(1) either
(a) all Notes theretofore authenticated and delivered
(other than (i) Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 310 and (ii) Notes for whose payment money has
theretofore been deposited in trust with the Trustee or any
Paying Agent or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(b) all such Notes not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
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(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company or any Guarantor, in the case of (i), (ii) or
(iii) above, has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust for such
purpose an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation, for principal of (and premium, if
any) and interest to the date of such deposit (in the case of
Notes which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company or any Guarantor has paid or caused to be paid
all other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with, and that such
satisfaction and discharge will not result in a breach or violation of,
or constitute a default under, this Indenture or any other material
agreement or instrument to which the Company is a part or by which the
Company is bound.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 606 and,
if money shall have been deposited with the Trustee pursuant to subclause (B) of
clause (1) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be held
in trust and applied by it, in accordance with the provisions of the Notes and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
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ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Events of Default," wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when it
becomes due and payable and continuance of such default for a period of
30 days; or
(ii) default in the payment of the principal of, or premium,
if any, on any Note at its Maturity (upon acceleration, optional
redemption, required purchase or otherwise); or
(iii) default in the performance, or breach, of the provisions
described in Article Eight or the failure to make or consummate a
Change of Control Offer in accordance with the provisions of Section
1021; or
(iv) default in the performance, or breach, of any covenant,
warranty or other agreement of the Company, any Guarantor or any
Pledgor contained in this Indenture, any Guarantee or any Pledge
Agreement (other than a default in the performance, or breach, of a
covenant, warranty or agreement which is specifically dealt with in
clauses (i), (ii) or (iii) above) and continuance of such default or
breach for a period of 30 days after written notice shall have been
given to the Company, such Guarantor or such Pledgor by the Trustee or
to the Company, such Guarantor or such Pledgor and the Trustee by the
holders of at least 25% in aggregate principal amount of the Notes then
Outstanding; or
(v) (a) one or more defaults in the payment of principal,
premium, if any, or interest on any Indebtedness of the Company
aggregating $15 million or more, when the same becomes due and payable
at the stated maturity thereof, and such default or defaults shall have
continued after any applicable grace period and shall not have been
cured or waived, (b) one or more defaults in the payment of any Hedge
Termination Obligation of the Company or any Subsidiary which is
outstanding in an amount aggregating $15 million or more, when the same
becomes due and payable, (c) one or more defaults in the payment of
principal on any Indebtedness of a Subsidiary aggregating $15 million
or more, when the same becomes due and payable at the final
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Stated Maturity thereof or (d) Indebtedness or any Hedge Termination
Obligation of the Company or any Subsidiary aggregating $15 million or
more shall have been accelerated or otherwise declared due and payable,
or required to be prepaid or repurchased (other than by regularly
scheduled required prepayment or a mandatory prepayment required in
order to cause Indebtedness under the Bank Credit Agreement not to
exceed available borrowing limits), prior to the stated maturity
thereof; or
(vi) any holder of any Indebtedness in excess of $15 million
in the aggregate of the Company or any Subsidiary that owns directly or
indirectly any Capital Stock of HomeSide Lending, Inc. (formerly known
as BancBoston Mortgage Corporation) or its successors shall notify the
Company or such Subsidiary of the intended sale or disposition of any
assets of the Company or any Subsidiary that have been pledged to or
for the benefit of such Person to secure such Indebtedness or shall
commence proceedings, or take action (including by way of set-off) to
retain in satisfaction of any such Indebtedness, or to collect on,
seize, dispose of or apply, any such assets of the Company or any
Subsidiary pursuant to the terms of any agreement or instrument
evidencing any such Indebtedness of the Company or such Subsidiary or
in accordance with applicable law; or
(vii) one or more judgments or orders shall be rendered
against the Company or any Subsidiary or any of their respective
properties for the payment of money, either individually or in an
aggregate amount, in excess of $20 million and shall not be discharged
and either (A) an enforcement proceeding shall have been commenced by
any creditor upon such judgment or order or (B) there shall have been a
period of 60 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, was
not in effect; or
(viii) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company or any Significant
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company or any Significant Subsidiary under the
Federal Bankruptcy Code or any other applicable federal or state law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or any Significant
Subsidiary or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the continuance of any
such decree or order unstayed and in effect for a period of 60
consecutive days;
(ix) the institution by the Company or any Significant
Subsidiary of proceedings to be adjudicated a bankrupt or insolvent, or
the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a
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petition or answer or consent seeking reorganization or relief under
the Federal Bankruptcy Code or any other applicable federal or state
law, or the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or any Significant
Subsidiary or of any substantial part of its property, or the making by
it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they
become due; or
(x) any Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under any Guarantee, or gives notice to such effect (other
than by reason of the termination of this Indenture or the release of
any such Guarantee in accordance with this Indenture); or
(xi) any Pledge Agreement ceases to be in full force and
effect or any Pledgor denies or disaffirms its obligations under any
Pledge Agreement or the obligations under any Pledge Agreement cease to
be secured by a perfected security interest in any portion of the
Collateral purported to be pledged under any Pledge Agreement with
respect thereto (other than in accordance with the terms thereof).
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(viii) or 501(ix)) occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in principal
amount of the Notes Outstanding may declare the principal amount of all the
Notes to be due and payable immediately, by a notice in writing to the Company
(and to the Trustee if given by Holders), and upon any such declaration such
principal amount shall become immediately due and payable. If an Event of
Default specified in Section 501(viii) or 501(ix) occurs and is continuing, then
the principal amount of all the Notes shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder.
At any time after a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter provided in this Article, the Holders of a
majority in principal amount of the Notes Outstanding, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
(A) all overdue interest on all Outstanding Notes,
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(B) all unpaid principal of (and premium, if any, on) any
Outstanding Notes which has become due otherwise than by such
declaration of acceleration, and interest on such unpaid principal and
premium at the rate borne by the Notes,
(C) to the extent that payment of such interest is lawful,
interest on overdue interest at the rate borne by the Notes, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on Notes which have become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of interest on
any Note when such interest becomes due and payable and such default continues
for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium, if
any, on) any Note at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Notes, the whole amount then due and payable on such
Notes for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate borne by the Notes, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
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If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes,
wherever situated, including Collateral under the Pledge Agreement.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Notes or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Notes shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal, premium, if any, or interest) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Notes and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation,
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expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Notes.
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name and as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Notes and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Notes in respect
of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Notes for principal (and premium, if
any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
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SECTION 507. Limitation on Suits.
No Holder of any Notes shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or the Pledge
Agreement, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or the Pledge Agreement to affect, disturb or prejudice the
rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture
or the Pledge Agreement, except in the manner herein provided and for the equal
and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture or the
Pledge Agreement, the Holder of any Note shall have the right, which is absolute
and unconditional, to receive payment, as provided herein (including, if
applicable, Article Eleven) and in such Note of the principal of (and premium,
if any) and (subject to Section 311) interest on such Note on the respective
Stated Maturities expressed in such Note (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
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SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 310, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in principal amount of
the Outstanding Notes shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, including, without
limitation, powers conferred on it by the Pledge Agreement, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
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(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve
it in personal liability or be unjustly prejudicial to the Holders not
consenting.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of
the Outstanding Notes may on behalf of the Holders of all the Notes waive any
past default hereunder or under any Guarantee or any Pledge Agreement and its
consequences, except a default
(1) in respect of the payment of the principal of (or premium,
if any) or interest on any Note, or
(2) in respect of a covenant or provision hereof which under
Article Nine or under any Pledge Agreement, as the case may be, cannot
be modified or amended without the consent of the Holder of each
Outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
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SECTION 515. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Security on or after the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on or after the Redemption Date);
provided that neither this Section 515 nor the Trust Indenture Act shall be
deemed to authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Company.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
Within 45 days after the occurrence of any Default hereunder,
the Trustee shall transmit in the manner and to the extent provided in TIA
Section 313(c), notice of such Default hereunder known to the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
the case of a Default in the payment of the principal of (or premium, if any) or
interest on any Note, the Trustee shall be protected in withholding such notice
if and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interest of the Holders;
and provided further that in the case of any Default of the character specified
in Section 501(iv) no such notice to Holders shall be given until at least 30
days after the occurrence thereof.
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SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through
315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(4) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
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(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
SECTION 603. Trustee Not Responsible for Recitals or Issuance
of Notes.
The recitals contained herein and in the Notes, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture, the Notes, the Pledge Agreement or any Collateral, except that the
Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Notes and perform its obligations hereunder and that
the statements made by it in a Statement of Eligibility on Form T-1 supplied to
the Company are true and accurate, subject to the qualifications set forth
therein. The Trustee shall not be accountable for the use or application by the
Company of Notes or the proceeds thereof.
SECTION 604. May Hold Notes.
The Trustee, any Paying Agent, any Note Registrar or any other
agent of the Company or of the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Notes and, subject to TIA Sections 310(b) and
311, may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Paying Agent, Note Registrar or such other agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
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SECTION 606. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation
as shall be agreed to in writing between the Company and the Trustee
for all services rendered by it pursuant to the Pledge Agreement or
hereunder (which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided in the Pledge
Agreement, and herein, to reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by
the Trustee in accordance with any provision of this Indenture or the
Pledge Agreement (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify each of the Trustee or any predecessor
Trustee for, and to hold it harmless against, any and all loss, damage,
claim, liability or expense, including taxes (other than taxes based on
the income of the Trustee) incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of this trust or the Pledge Agreement, including the
costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or
duties hereunder or under the Pledge Agreement.
The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the Notes
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the payment of principal of (and premium, if any) or
interest on particular Notes.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(viii) or (ix), the
expenses (including the reasonable charges and expenses of its counsel) of and
the compensation for such services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
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The provisions of this Section shall survive the termination
of this Indenture.
SECTION 607. Corporate Trustee Required; Eligibility
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of not less than a majority in principal amount of the Outstanding
Notes, delivered to the Trustee and to the Company. If an instrument of
acceptance by a successor Trustee shall not have been delivered to the Trustee
within 30 days after notice of such Act is given to the Trustee, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Note for at least six
months, or
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(2) the Trustee shall cease to be eligible under Section 607
and shall fail to resign after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Note for at least
six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Note for at least six
months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Notes in the manner provided for in Section 106. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and
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deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or
Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes. In case at
that time any of the Notes shall not have been authenticated, any successor
Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor Trustee. In all such cases such
certificates shall have the full force and effect which this Indenture provides
for the certificate of authentication of the Trustee shall have; provided,
however, that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of
Holders.
Every Holder of Notes, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with TIA Section 312, regardless of the
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source from which such information was derived, and that the Trustee shall not
be held accountable by reason of mailing any material pursuant to a request made
under TIA Section 312(b).
SECTION 702. Reports by Trustee.
Within 60 days after April 15 of each year commencing with the
first April 15 after the first issuance of Notes, the Trustee shall transmit to
the Holders, in the manner and to the extent provided in TIA Section 313(c), a
brief report dated as of such April 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms.
(A) The Company will not, in a single transaction or through a
series of related transactions, consolidate with or merge with or into any other
Person or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any other Person or Persons,
or permit any Subsidiary to enter into any such transaction or series of
transactions, if such transaction or series of transactions, in the aggregate,
would result in the sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company and its Subsidiaries on a consolidated basis to any other Person or
Persons, unless at the time and after giving effect thereto:
(a) either (i) if the transaction is a consolidation or
merger, the Company will be the continuing corporation or (ii) the
Person (if other than the Company) formed by such consolidation or into
which the Company or such Subsidiary is merged or the Person that
acquires by sale, assignment, conveyance, transfer, lease or
disposition all or substantially all the properties and assets of the
Company and its Subsidiaries on a consolidated basis (the "Surviving
Entity") (A) will be a corporation duly organized and validly existing
under the laws of the United States of America, any state thereof or
the District of Columbia and (B) will expressly assume, by a
supplemental indenture, in form and substance satisfactory to the
Trustee, the Company's obligation for the due and punctual payment of
the principal of, premium, if any, and interest on all the Notes and
the performance and observance of every covenant of this Indenture and
the Pledge Agreement on the part of the Company to be performed or
observed;
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(b) immediately before and immediately after giving effect to
such transaction or series of transactions on a pro forma basis (and
treating any obligation of the Company or any Subsidiary incurred in
connection with or as a result of such transaction or series of
transactions as having been incurred at the time of such transaction),
no Default or Event of Default will have occurred and be continuing;
(c) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (and treating any
obligation of the Company or any Subsidiary incurred in connection with
or as a result of such transaction or series of transactions as having
been incurred at the time of such transaction), the Consolidated Net
Worth of the Company (or of the Surviving Entity if the Company is not
the continuing obligor under this Indenture) is equal to or greater
than 95% of the Consolidated Net Worth of the Company immediately prior
to such transaction or series of transactions;
(d) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (on the assumption that the
transaction or series of transactions occurred on the first day of the
four-quarter period immediately prior to the consummation of such
transaction or series of transactions with the appropriate adjustments
with respect to the transaction or series of transactions being
included in such pro forma calculation), the Company (or the Surviving
Entity if the Company is not the continuing obligor under this
Indenture) could incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the provisions of Section 1008;
(e) if any of the property or assets of the Company or
any of its Subsidiaries would thereupon become subject to
any Lien, the provisions of Section 1011 are complied with;
(f) each Guarantor, if any, unless it is the other party to
the transactions described above, shall have by supplemental indenture
confirmed that its Guarantee will apply to such Person's obligations
under this Indenture and the Notes; and
(g) the Company or the Surviving Entity shall have delivered
to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition, and if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture, comply with the requirements of this Indenture and that all
conditions precedent therein provided for relating to such transaction
have been complied with.
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(B) Notwithstanding clause (A), (a) immediately after the
consummation of the Barnett Acquisition the Company will contribute all the
stock of HomeSide Lending, Inc. owned by it to Barnett Mortgage, whereby
HomeSide Lending, Inc. will become a Wholly Owned Subsidiary of Barnett
Mortgage; thereafter HomeSide Lending, Inc. will be permitted to merge with
BancPLUS Financial Corporation and Loan America, provided that following
consummation of the Barnett Acquisition, Barnett Mortgage is a direct Wholly
Owned Subsidiary of the Company and HomeSide Lending, Inc. is a direct Wholly
Owned Subsidiary of Barnett Mortgage, and (b) HomeSide Lending, Inc. will be
permitted to merge with any other direct Wholly Owned Subsidiary of the Company
or direct Wholly Owned Subsidiary of Barnett Mortgage with a positive net worth,
so long as the Notes are secured by a second priority security interest in the
stock of the entity surviving such merger.
SECTION 802. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company in accordance with Section 801 in which the
Company is not the continuing obligor under this Indenture, the Surviving Entity
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
had been named as the Company therein. When a successor assumes all the
obligations of its predecessor under this Indenture, the Notes and the Pledge
Agreement, the predecessor shall be released from those obligations; provided
that in the case of a transfer by lease, the predecessor shall not be released
from the payment of principal, premium, if any, and interest on the Notes.
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE, PLEDGE AGREEMENT
SECTION 901. Without Consent of Holders.
Notwithstanding Section 902 of this Indenture, the Company and
the Trustee may amend or supplement this Indenture, the Notes any Guarantee or
any Pledge Agreement without the consent of any Holder of a Note:
(1) to evidence the succession of another Person to the
Company, a Guarantor, a Pledgor or any other obligor on the Notes, and
the assumption by any such successor of the covenants of the Company or
such obligor or Guarantor or such Pledgor contained herein and in the
Notes and in any Guarantee and in any Pledge Agreement as permitted
under the Article Eight; or
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(2) to add to the covenants of the Company, any Guarantor, any
Pledgor or any other obligor upon the Notes for the benefit of the
Holders or to surrender any right or power conferred upon the Company
or any Guarantor or any Pledgor or any other obligor upon the Notes, as
applicable, in this Indenture, in the Notes, in any Guarantee or in any
Pledge Agreement; or
(3) to cure any ambiguity, or to correct or supplement any
provision herein or in the Notes , any Guarantee or any Pledge
Agreement which may be defective or inconsistent with any other
provision herein, in the Notes, any Pledge Agreement or any Guarantee,
as the case may be, or make any other provisions with respect to
matters or questions arising under this Indenture, the Notes, any
Pledge Agreement or any Guarantee; provided that, in each case, such
provisions shall not adversely affect the interests of the Holders;
(4) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act;
(5) to add a Guarantor or Pledgor under this Indenture;
(6) to evidence and provide for the acceptance of the
appointment hereunder of a successor Trustee pursuant to the
requirements of Section 609; or
(7) to mortgage, pledge, hypothecate or grant a security
interest in favor of the Trustee for the benefit of the holders of the
Notes as additional security for the payment and performance of the
Company's and any Guarantor's obligations under this Indenture, in any
property, or assets, including any of which are required to be
mortgaged, pledged or hypothecated, or in which a security interest is
required to be granted to the Trustee pursuant to this Indenture or
otherwise.
Upon the request of the Company accompanied by a Board
Resolution authorizing the execution of any such amended or supplemental
Indenture, Note or Pledge Agreement, and upon receipt by the Trustee of the
documents described in Section 907 hereof, the Trustee shall join with the
Company in the execution of any amended or supplemental Indenture or Pledge
Agreement authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture or Pledge Agreement that affects its own rights, duties
or immunities under this Indenture or otherwise.
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SECTION 902. With Consent of Holders.
Except as provided below in this Section 902, the Company and
the Trustee may amend or supplement this Indenture, the Notes and the Pledge
Agreement with the consent of the Holders of at least a majority in principal
amount of the Notes then Outstanding (including consents obtained in connection
with a tender offer or exchange offer for the Notes).
However, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(1) change the Stated Maturity of the principal of or any
installment of interest on any Note, or reduce the principal amount
thereof (or premium, if any) or the rate of interest thereon or waive a
default in the payment of the principal of (or premium, if any) or
interest on any such Note, or change the coin or currency in which any
Note or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment after
the Stated Maturity thereof (or, in the case of redemption, on or after
the Redemption Date), or
(2) amend, change or modify the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change
of Control in accordance with Section 1021, including amending,
changing or modifying any definition relating thereto;
(3) reduce the percentage in principal amount of the
Outstanding Notes, the consent of whose Holders is required for any
such supplemental indenture or amendment, or the consent of whose
Holders is required for any waiver of compliance with certain
provisions of this Indenture, or certain defaults hereunder and their
consequences provided for in this Indenture, or any Guarantee, or any
Pledge Agreement, or
(4) modify any of the provisions of this Section or Sections
513 and 1020, and any similar provisions of any Guarantee or any Pledge
Agreement relating to the consent of Holders or relating to the consent
of past defaults, except to increase any such percentage or to provide
that certain other provisions of this Indenture, any Guarantee or any
Pledge Agreement cannot be modified or waived without the consent of
the Holder of each Outstanding Note affected thereby, or
(5) except as otherwise permitted under Article Eight, consent
to the assignment or transfer by the Company or any Guarantor or any
Pledgor of any of their rights or obligations under this Indenture, any
Guarantee or any Pledge Agreement; or
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(6) amend or modify any of the provisions of this Indenture in
any manner which subordinates the Notes in right of payment to other
Indebtedness of the Company or which subordinates any guarantee in
right of payment to other Indebtedness of such Guarantor; or
(7) make any change in Article Thirteen or in any other
provision herein or in the Notes or any Guarantee or any Pledge
Agreement relating to the Collateral that adversely affects the
interest of the Holders.
Upon the request of the Company accompanied by a Board
Resolution authorizing the execution of any such amended or supplemental
Indenture, Note or Pledge Agreement, and upon the filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in Section
907 hereof, the Trustee shall join with the Company in the execution of such
amended or supplemental Indenture, Note or Pledge Agreement, unless such amended
or supplemental Indenture, Note or Pledge Agreement affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture, Note or Pledge Agreement.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
After an amendment, supplement or waiver under this Section
902 becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture, Note or Pledge Agreement or waiver. Subject to Sections
508 and 513 hereof, the Holders of a majority in aggregate principal amount of
the Notes then outstanding may waive compliance in a particular instance by the
Company with any provision of this Indenture, the Notes or the Pledge Agreement.
SECTION 903. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
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SECTION 904. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 905. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 906. Notation on or Exchange of Notes.
The Trustee may require the Holders to deliver the Notes to
the Trustee and the Trustee may place an appropriate notation about an
amendment, supplement or waiver on such Notes. The Trustee may also place such a
notation on any Note thereafter authenticated. The Company in exchange for all
Notes may issue and the Trustee shall authenticate new Notes that reflect the
amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 907. Trustee to Sign Amendments, Etc.
The Trustee shall sign any amended or supplemental Indenture
or Pledge Agreement authorized pursuant to this Article Nine allowed by the
terms thereof, in each case if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture or Pledge Agreement until
the Board of Directors approves it. In executing any amended or supplemental
Indenture or amendment or supplement to the Pledge Agreement, the Trustee shall
be entitled to receive and (subject to Section 601) shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental Indenture or Pledge Agreement, as
the case may be, is authorized or permitted by this Indenture.
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ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any,
and Interest.
The Company covenants and agrees for the benefit of the
Holders that it will duly and punctually pay the principal of (and premium, if
any) and interest on the Notes in accordance with the terms of the Notes and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York, an office
or agency where Notes may be presented or surrendered for payment, where Notes
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Notes and this Indenture
may be served. The Corporate Trust Office of the Trustee shall be such office or
agency of the Company, unless the Company shall designate and maintain some
other office or agency for one or more of such purposes. The Company will give
prompt written notice to the Trustee of any change in the location of any such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Note Payments to Be Held in
Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of (or premium, if any) or
interest on any of the Notes, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal of (or premium,
if any) or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act.
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Whenever the Company shall have one or more Paying Agents for
the Notes, it will, on or before each due date of the principal of (or premium,
if any) or interest on any Notes, deposit with a Paying Agent a sum sufficient
to pay the principal (and premium, if any) or interest so becoming due, such sum
to be held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of such action or any failure so to act.
The Company will cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any) or interest on Notes in trust for the benefit
of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Notes) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (or
premium, if any) or interest on any Note and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Note shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the
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expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Subsidiary; provided, however, that the Company shall not be
required to preserve any such right or franchise, or the existence of any such
Subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries as a whole and that the loss thereof is not disadvantageous in
any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties owned by the Company or
any Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the maintenance of any of such properties
if such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
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SECTION 1007. Insurance.
The Company will at all times keep all of its and its
Subsidiaries, properties which are of an insurable nature insured with insurers,
believed by the Company to be responsible, against loss or damage to the extent
that property of similar character is usually so insured by corporations
similarly situated and owning like properties.
SECTION 1008. Limitation on Indebtedness.
(a) The Company will not, and will not permit any Subsidiary
to, create, issue, assume, guarantee or in any manner become directly or
indirectly liable for the payment of, or otherwise incur (collectively,
"incur"), any Indebtedness (including any Acquired Indebtedness), other than
Permitted Indebtedness, unless at the time of such incurrence the Consolidated
Fixed Charge Coverage Ratio for the four full fiscal quarters immediately
preceding the incurrence of such Indebtedness, taken as one period (after giving
pro forma effect to (i) the incurrence of such Indebtedness and (if applicable)
the application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred, and the application of such
proceeds occurred, on the first day of such four-quarter period, (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company and
its Subsidiaries since the first day of such four-quarter period as if such
Indebtedness was incurred, repaid or retired on the first day of such
four-quarter period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average daily balance of such Indebtedness during such four-quarter period),
and (iii) the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business acquired or disposed of by the Company or its Subsidiaries (including
the operations thereof), as the case may be, since the first day of such
four-quarter period, as if such acquisition or disposition occurred on the first
day of such four-quarter period), would have been at least equal to 2.5 to 1.0
and, on and after the date of consummation of the Barnett Acquisition, would
have been at least equal to 3.0 to 1.0; provided (a) that with respect to the
incurrence of Indebtedness by the Company (other than Permitted Indebtedness)
that is permitted to be incurred only after giving effect to the proviso in the
definition of Consolidated Adjusted Net Income, such Indebtedness will not have
any Stated Maturity of principal earlier than the Stated Maturity of principal
of the Notes; (b) that no Inactive Subsidiary will be permitted to incur
Indebtedness pursuant to this paragraph or otherwise have any Indebtedness
outstanding except, in the case of Barnett Mortgage, its guarantee of
Indebtedness of the Company and the Subsidiaries under the Bank Credit
Agreement; and (c) that the Company will not be permitted to incur Indebtedness
that is senior in right of payment to the Notes.
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(b) If, with respect to the incurrence of any Indebtedness
(other than Permitted Indebtedness) by the Issuer or any Subsidiary pursuant to
the preceding paragraph, the net income of any Subsidiary is included in the
calculation of the Consolidated Fixed Charge Coverage Ratio in reliance on the
proviso contained in the definition of Consolidated Adjusted Net Income, the
Company will deliver or cause to be delivered to the Trustee, prior to such
incurrence, an Officers' Certificate, signed by the Chief Financial Officer of
the Company, attesting that the conditions included in such proviso have been
satisfied and attaching the relevant provisions of the Bank Credit Agreement or
such other agreement or instrument, or other writing, sufficient to form a basis
for such attestation. Such provisions of the Bank Credit Agreement, other
agreement or instrument or other writing will be permanent and will, other than
during the continuance of an event of default under the instrument governing
such Indebtedness, permit such Subsidiary to declare and pay cash dividends or
make similar distributions, and in order to include such Subsidiary's net income
in the calculation of the Consolidated Fixed Charge Coverage Ratio such
dividends or similar distributions will otherwise be available to pay interest
on the Indebtedness being incurred and any other existing indebtedness of the
Issuer or Borrowing Subsidiary (as defined in the definition of Consolidated
Adjusted Net Income), as the case may be.
SECTION 1009. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Subsidiary,
directly or indirectly, to take any of the following actions:
(i) declare or pay any dividend on, or make any distribution
to holders of, any shares of the Capital Stock of the Company (other
than dividends or distributions payable solely in shares of its
Qualified Capital Stock or in options, warrants or other rights to
acquire such shares of Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for
value, directly or indirectly, any shares of Capital Stock of the
Company or any shares of Capital Stock of any Affiliate of the Company
(other than shares of Capital Stock of any Wholly Owned Subsidiary) or
any options, warrants or other rights to acquire such shares of Capital
Stock;
(iii) declare or pay any dividend or make any distribution on
any shares of Capital Stock of any Subsidiary to any Person (other than
with respect to any shares of Capital Stock held by the Company or any
Wholly Owned Subsidiary) or purchase, redeem or otherwise acquire or
retire for value any shares of Capital Stock of any Subsidiary held by
any Person (other than the Company or any Wholly Owned Subsidiary);
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(iv) make any principal payment on, or repurchase, redeem,
defease or otherwise acquire or retire for value, prior to any
scheduled principal payment, sinking fund payment or maturity, any Pari
Passu Indebtedness or Subordinated Indebtedness;
(v) make any Investment (other than any Permitted Investment)
in any Person; or
(vi) incur or suffer to exist any guarantee of Indebtedness of
any Affiliate of the Company (other than guarantees by the Company of
Indebtedness of any Wholly Owned Subsidiary);
(such payments or other actions described in (but not excluded from) clauses (i)
through (vi) are collectively referred to as "Restricted Payments"), unless at
the time of, and after giving effect to, the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Company could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
1008 and (3) the aggregate amount of all Restricted Payments declared or made
after the date of this Indenture will not exceed the sum of:
(A) 40% of the aggregate cumulative Consolidated Adjusted Net
Income accrued on a cumulative basis during the period beginning on
April 1, 1995 and ending on the last day of the Company's last fiscal
quarter ending prior to the date of such proposed Restricted Payment
(or, if such aggregate cumulative Consolidated Adjusted Net Income
shall be a loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds received after the date of
this Indenture by the Company from the issuance or sale (other than to
any Subsidiary and other than in connection with the Barnett
Acquisition) of shares of Qualified Capital Stock of the Company
(including upon the exercise of options, warrants or rights) or
warrants, options or rights to purchase shares of Qualified Capital
Stock of the Company, plus
(C) the aggregate net cash proceeds received after the date of
this Indenture by the Company from the issuance or sale (other than to
any Subsidiary) of debt securities or Redeemable Capital Stock that
have been converted into or exchanged for shares of Qualified Capital
Stock of the Company, to the extent such securities were originally
sold for cash, together with the aggregate net cash proceeds received
by the Company at the time of such conversion or exchange.
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(b) Notwithstanding paragraph (a) above, the Company and any
Subsidiary may take the following actions so long as (with respect to clauses
(ii), (iii), (iv), (v), (vi) and (vii)) no Default or Event of Default shall
have occurred and be continuing:
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at such date such declaration complied with
the provisions of paragraph (a) above and such payment shall be deemed
to have been paid on such date of declaration for purposes of the
calculation required by the foregoing paragraph (a);
(ii) the purchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of the Company in
exchange for, or out of the net cash proceeds of, a substantially
concurrent issuance and sale (other than to a Subsidiary and other than
with respect to the proceeds of the Barnett Acquisition) of shares of
Qualified Capital Stock of the Company;
(iii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Subordinated
Indebtedness in exchange for, or out of the net cash proceeds of, a
substantially concurrent issuance and sale (other than to a Subsidiary)
of shares of Qualified Capital Stock of the Company;
(iv) the repurchase, retirement or other acquisition or
retirement for value of Common Stock of the Company held by any present
or future employees of the Company or any Subsidiary on the termination
of their employment with the Company or such Subsidiary, provided that
the aggregate amount of such Restricted Payments in any one fiscal year
will not exceed $2.0 million;
(v) the redemption of the Class C non-voting Common Stock of
the Company, outstanding on the date of this Indenture, in accordance
with the terms thereof as in effect on such date, provided that the
aggregate amount of such Restricted Payment will not exceed $7.5
million;
(vi) loans to employees of the Company or any Subsidiary in an
aggregate amount not to exceed $2.5 million outstanding at any time;
and
(vii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Subordinated
Indebtedness in exchange for, or out of the net cash proceeds of a
substantially concurrent incurrence (other than to a Subsidiary) of,
Subordinated Indebtedness of the Company so long as (A) the principal
amount of such new Indebtedness does not exceed the principal amount
(or, if such Subordinated Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration
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thereof, such lesser amount as of the date of determination) of the
Subordinated Indebtedness being so purchased, redeemed, defeased,
acquired or retired, plus the lesser of the amount of any stated
premium required to be paid in connection with such refinancing
pursuant to the terms of the Subordinated Indebtedness being refinanced
or the amount of any premium actually paid at such time to refinance
the Subordinated Indebtedness, plus, in either case, the amount of
reasonable expenses of the Company incurred in connection with such
refinancing, (B) such new Subordinated Indebtedness is subordinated to
the Notes to the same extent as such Subordinated Indebtedness so
purchased, redeemed, defeased, acquired or retired and (C) such new
Subordinated Indebtedness has an Average Life longer than the Average
Life of the Subordinated Indebtedness being purchased, redeemed,
defeased, acquired or retired and a final Stated Maturity of principal
later than the final Stated Maturity of principal of the Subordinated
Indebtedness being purchased, redeemed, defeased, acquired or retired.
The actions described in clauses (i), (ii), (iii), (iv) and (v) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph (a)
and that the actions described in clauses (vi) and (vii) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be taken in accordance
with this paragraph and shall not reduce the amount that would otherwise be
available for Restricted Payments under clause (3) of paragraph (a).
SECTION 1010. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any Subsidiary,
directly or indirectly, to create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction of any kind on the ability of
any Subsidiary to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock, (b) pay any Indebtedness
owed to the Company or any other Subsidiary, (c) make loans or advances to the
Company or any other Subsidiary or (d) transfer any of its properties or assets
to the Company or any other Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (i) the Bank Credit Agreement,
provided that the Company will not permit any Subsidiary to, (A) amend, modify,
terminate or waive the "Limitation on Restricted Payments" or "Limitation on
Investments, Loans and Advances" covenants of the Bank Credit Agreement or the
definitions contained in the Bank Credit Agreement, in each case as in effect on
the date of this Indenture, or any similar covenants in any amendments,
renewals, extensions, substitutions, replacements, restatements, increases,
refinancings, restructurings, supplements or other modifications of the Bank
Credit Agreement, to provide for, in each case, greater restrictions than those
in effect on the date of this Indenture with respect to the right of any
Subsidiary to make distributions to, loans to or other investments in the
Company or any
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Subsidiary owning capital stock of such Subsidiary or (B) add to the Bank Credit
Agreement any covenant directly addressing the matters covered by the
"Limitation on Restricted Payments" or "Limitation on Investments, Loans and
Advances" covenants thereunder, or any similar covenant in any amendment,
renewal, extension, substitution, replacement, restatement, increase,
refinancing, restructuring, supplement or other modification of the Bank Credit
Agreement, in any manner prohibited by clause (A) of this clause (d)(i), (ii)
applicable law, (iii) customary non-assignment provisions of any lease governing
a leasehold interest of the Company or any Subsidiary, (iv) any agreement or
other instrument of a Person acquired by the Company or any Subsidiary in
existence at the time of such acquisition (but not created in connection with,
or in contemplation thereof), which encumbrance or restriction is not applicable
to any Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, or (v) any agreement that
extends, renews, refinances or replaces the agreements containing the
encumbrances or restrictions in the foregoing clause (iv), provided that the
terms and conditions of any such encumbrances or restrictions are not materially
less favorable to the Holders of the Notes than those under or pursuant to the
agreement evidencing the Indebtedness so extended, renewed, refinanced or
replaced.
SECTION 1011. Limitation on Liens.
The Company will not, and will not, with respect to any
Indebtedness or other obligation of the Company permit any Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien (other
than Permitted Liens) of any kind on or with respect to any of its property or
assets including any shares of stock or indebtedness of any Subsidiary, whether
owned at the date of this Indenture or thereafter acquired, or any income,
profits or proceeds therefrom, or assign or otherwise convey any right to
receive income thereon, unless (x) in the case of any Lien securing Subordinated
Indebtedness, the Notes are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Lien and (y) in the case of any
other Lien, the Notes are equally and ratably secured with the obligation or
liability secured by such Lien.
SECTION 1012. Limitation on Issuances and Sales of
Capital Stock of Subsidiaries.
The Company (a) will not permit any Subsidiary to issue or
sell any shares of its Capital Stock (other than to the Company or a Wholly
Owned Subsidiary) and (b) will not permit any Person (other than the Company or
a Wholly Owned Subsidiary) to own any shares of Capital Stock of any Subsidiary;
provided, however, that this covenant shall not prohibit (i) the issuance and
sale of all, but not less than all, of the issued and outstanding shares of
Capital Stock of any Subsidiary in compliance with the other provisions of this
Indenture or (ii) the issuance of director's qualifying shares in accordance
with applicable law.
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SECTION 1013. Limitation on Transactions with
Affiliates.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions with, or for the benefit of, any Affiliate of the
Company or any Subsidiary unless (a) such transaction is solely between the
Company and a Wholly Owned Subsidiary or (b) (i) such transaction is in writing
and on terms that are no less favorable to the Company or such Subsidiary, as
the case may be, than those that could have been obtained in an arm's length
transaction with third parties who are not Affiliates and (ii) with respect to
any transaction or series of related transactions involving aggregate payments
in excess of $5 million, the Company shall have delivered an Officers'
Certificate to the Trustee certifying that such transaction or series of related
transactions complies with clause (i) above and such transaction or series of
related transactions has been approved by the Board of Directors (including a
majority of the Disinterested Directors); provided that any transaction or
series of related transactions otherwise permitted under this paragraph pursuant
to which the Company or any Subsidiary will receive or render value exceeding
$15 million will not be permitted unless, prior to the consummation of any such
transaction or series of related transactions, the Company has obtained a
written opinion from a nationally recognized investment banking firm to the
effect that such transaction is on fair and reasonable terms to the Company or
such Subsidiary, and no less favorable to the Company or such Subsidiary, as the
case may be, than those which might be obtained at the time from a Person who is
not an Affiliate; provided, further, that this covenant will not restrict (x)
the Company from paying reasonable and customary regular compensation and fees
to directors of the Company or any Subsidiary who are not employees of the
Company or any Subsidiary, (y) any transaction between The First National Bank
of Boston or Barnett Banks, Inc. and the Company or any Subsidiary, pursuant to
an agreement in effect on the date of this Indenture, or required to be entered
into as part of the BMC Acquisition (such agreements to be entered into as part
of the BMC Acquisition to be substantially in the form of the draft agreements
delivered to the Initial Purchasers on the date hereof as exhibits to a
certificate of the Chief Financial Officer of the Company which makes reference
to this Section 1013), in each case as such agreement may be amended, renewed,
extended, supplemented or otherwise modified from time to time, provided that
such agreement as so amended, renewed, extended, supplemented or otherwise
modified is not materially less favorable to the Company or such Subsidiary, as
the case may be, or to the Holders of the Notes, than such agreement as in
effect on the date of this Indenture or such draft agreement delivered to the
Initial Purchasers on the date hereof as above provided, and (z) the purchase of
any Mortgage-Backed Securities, Mortgage Loans or servicing rights for Mortgage
Loans by the Company or any of its Subsidiaries in the ordinary course of the
Company's or such Subsidiary's business.
SECTION 1014. Limitation on Guarantees of Indebtedness
by Subsidiaries.
(a) The Company will not permit any Subsidiary,
directly or indirectly, to guarantee, assume or in any other
manner become liable for the payment of any Indebtedness
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of the Company unless (i) (A) if such Subsidiary is not a Guarantor, such
Subsidiary simultaneously executes and delivers a supplemental indenture to this
Indenture providing for a Guarantee of payment of the Notes by such Subsidiary
and (B) with respect to any guarantee of Subordinated Indebtedness by a
Subsidiary, any such guarantee shall be subordinated to such Subsidiary's
Guarantee with respect to the Notes at least to the same extent as such
Subordinated Indebtedness is subordinated to the Notes and (ii) such Subsidiary
waives and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Company or any other Subsidiary as a result of any payment by
such Subsidiary under its Guarantee.
(b) Notwithstanding the foregoing, any Guarantee of the Notes
created pursuant to the provisions described in the foregoing paragraph shall
provide by its terms that it shall be automatically and unconditionally released
and discharged upon (i) any sale, exchange or transfer, to any Person that is
not an Affiliate of the Company, of all of the Company's and each Subsidiary's
shares of Capital Stock in, or all or substantially all the assets of, such
Subsidiary (which sale, exchange or transfer is not prohibited by this
Indenture) or (ii) the release by the holders of the Indebtedness of the Company
described in the preceding paragraph of their guarantee by such Subsidiary
(including any deemed release upon payment in full of all obligations under such
Indebtedness, except by or as a result of payment under such guarantee), at a
time when (A) no other Indebtedness of the Company has been guaranteed by such
Subsidiary or (B) the holders of all such other Indebtedness which is guaranteed
by such Subsidiary also release their guarantee by such Subsidiary (including
any deemed release upon payment in full of all obligations under such
Indebtedness, except by or as a result of payment under such guarantee).
SECTION 1015. Maintenance of Risk Management. The Company will
establish and maintain a risk management program with respect to its portfolio
of Mortgage Loans and servicing rights so as to reduce fluctuations in the value
of its servicing portfolio due to interest rate movements.
SECTION 1016. Business Activities.
(a) The Company will not, and will not permit any Subsidiary
to, engage in any business other than in the usual and ordinary course of the
mortgage banking business and other than which is consistent with the industry
standards in the mortgage banking industry.
(b) Notwithstanding paragraph (a) above, the Company will not
permit Barnett Mortgage to engage in any business other than the servicing of
its mortgage portfolio, as in existence on the date of this Indenture, in the
usual and ordinary course of its business and consistent with past practice.
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SECTION 1017. Reserved
SECTION 1018. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, within 45 days
after the end of each quarter (within 90 days after the end of the last fiscal
quarter of each year), an Officer's Certificate, one of the signers of which
shall be the principal executive officer, principal financial officer or
principal accounting officer of the Company as to his or her knowledge of the
Company's compliance with all conditions and covenants under this Indenture and
the Pledge Agreement. For purposes of this Section 1018(a), such compliance
shall be determined without regard to any period of grace or requirement of
notice under this Indenture or the Pledge Agreement.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $5 million), the Company shall
deliver to the Trustee by registered or certified mail or facsimile transmission
an Officers' Certificate specifying such event, notice or other action within
five Business Days of its occurrence.
SECTION 1019. Commission Reports and Reports to
Holders.
The Company will file on a timely basis with the Commission,
to the extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company will also be required (a) to file with the Trustee, and provide to each
Holder of Notes, without cost to such Holder, copies of such reports and
documents within 15 days after the date on which the Company files such reports
and documents with the Commission or the date on which the Company would be
required to file such reports and documents if the Company were so required and
(b) if filing such reports and documents with the Commission is not accepted by
the Commission or is prohibited under the Exchange Act, to supply at the
Company's cost copies of such reports and documents to any prospective Holder of
Notes promptly upon written request.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not consitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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At any time when the Company is not subject to Section 13 or
15(d) of the Exchange Act, upon the request of a Holder, the Company will
promptly furnish or cause to be furnished Rule 144A Information (as defined
below) to such Holder, to a prospective purchaser who is a QIB, of such Note
designated by such Holder in order to permit compliance by such Holder with Rule
144A in connection with the resale of such Note by such Note by such Holder,
provided; however, that the Company shall not be required to furnish such
information in connection with any request made on or after the date which is
three years from the later of (i) the date such Note (or any predecessor Note)
was acquired from the Company or (ii) the date such Note (or any predecessor
Note) was last acquired from an "affiliate" of the Company within the meaning of
Rule 144 under the Securities Act. "Rule 144A Information" shall be such
information as is specified pursuant to Rule 144A(d)(4) under the Securities Act
as in effect on the date hereof.
SECTION 1020. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Sections 1007 through 1018,
inclusive, or any covenant or condition set forth in the Pledge Agreement, if
before or after the time for such compliance the Holders of at least a majority
in principal amount of the Outstanding Notes, by Act of such Holders, waive such
compliance in such instance with such term, provision or condition, but no such
waiver shall extend to or affect such term, provision or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
term, provision or condition shall remain in full force and effect.
SECTION 1021. Purchase of Notes upon a Change of
Control.
(a) If a Change of Control shall occur at any time, then each
Holder of Notes shall have the right to require that the Company purchase such
Holder's Notes, in whole or in part, at a purchase price (the "Change of Control
Purchase Price") in cash in an amount equal to 101% of the principal amount
thereof, plus accrued interest, if any, to the date of purchase (the "Change of
Control Purchase Date"), in accordance with the procedures set forth in
paragraphs (b) and (c) of this Section (the "Change of Control Offer").
(b) Within 15 days following any Change of Control, the
Company shall notify the Trustee thereof and give written notice of such Change
of Control to each Holder of Notes in the manner provided in Section 106,
stating (i) that a Change in Control has occurred and that such Holder has the
right to require the Company to repurchase such Holder's Securities at the
Change of Control Purchase Price; (ii) the circumstances and relevant facts
regarding such Change in Control (including but not limited to information with
respect to pro forma historical income, cash flow and capitalization after
giving effect to such Change in
<PAGE> 105
95
Control); (iii) the Change of Control Purchase Price and the Change of Control
Purchase Date, which shall be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed, or such later date as is
necessary to comply with requirements under the Exchange Act or any applicable
securities laws or regulations; (iv) that all Notes validly tendered will be
accepted for payment and that any Note not tendered will continue to accrue
interest pursuant to its terms; (v) that, unless the Company defaults in the
payment of the Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after the
Change of Control Purchase Date; (vi) that Holders electing to have any Note
purchased pursuant to the Change of Control Offer will be required to surrender
such Note, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of such Note completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the Business
Day immediately preceding the Change of Control Payment Date; (vii) that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the third Business Day immediately preceding
the Change of Control Purchase Date, a facsimile transmission or letter setting
forth the name of such Holder, the principal amount of Notes delivered for
purchase and a statement that such Holder is withdrawing his election to have
such Notes purchased; and (viii) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered; provided that each Note purchased
and each new Note issued shall be in a principal amount at maturity of $1,000 or
integral multiples thereof.
(c) On the Change of Control Purchase Date, the Company shall:
(i) accept for payment Notes or portions thereof tendered pursuant to the Change
of Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the
Change or Control Purchase Price of all Notes or portions thereof so accepted;
and (iii) deliver, or cause to be delivered, to the Trustee all Notes or
portions thereof so accepted together with an Officer's Certificate specifying
the Notes or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail to the Holders of Notes so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and mail to such Holders a new Note equal in principal amount to any unpurchased
portion of the Note surrendered; provided that each Note purchased and each new
Note issued shall be in a principal amount at maturity of $1,000 or integral
multiples thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Purchase Date.
(d) The Company will comply with the applicable tender offer
rules, including Rule l4e-l under the Exchange Act, and any other applicable
securities laws and regulations in connection with a Change of Control Offer.
<PAGE> 106
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ARTICLE ELEVEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1101. Company's Option to Effect Defeasance or
Covenant Defeasance.
The Company may, at its option by Board Resolution, at any
time, with respect to the Notes, elect to have either Section 1102 or Section
1103 be applied to all Outstanding Notes upon compliance with the conditions set
forth below in this Article Twelve.
SECTION 1102. Defeasance and Discharge.
Upon the Company's exercise under Section 1101 of the option
applicable to this Section 1102, the Company and any Guarantor shall be deemed
to have been discharged from its obligations with respect to all Outstanding
Notes on the date the conditions set forth in Section 1104 are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that the
Company and any such Guarantor shall be deemed to have paid and discharged the
entire Indebtedness represented by the Outstanding Notes, which shall thereafter
be deemed to be "Outstanding" only for the purposes of Section 1105 and the
other Sections of this Indenture referred to in (A) and (B) below, and to have
satisfied all its other obligations under such Notes and this Indenture insofar
as such Notes are concerned (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of Outstanding Notes to receive, solely
from the trust fund described in Section 1104 and as more fully set forth in
such Section, payments in respect of the principal of (and premium, if any, on)
and interest on such Notes when such payments are due, (B) the Company's
obligations with respect to such Notes under Sections 304, 305, 306, 307, 310,
1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Eleven. Subject to compliance with this
Article Eleven, the Company may exercise its option under this Section 1102
notwithstanding the prior exercise of its option under Section 1103 with respect
to the Notes.
SECTION 1103. Covenant Defeasance.
Upon the Company's exercise under Section 1101 of the option
applicable to this Section 1103, the Company shall be released from its
obligations under any covenant contained in Sections 1007 through 1019 with
respect to the Outstanding Notes on and after the date the conditions set forth
below are satisfied (hereinafter, "covenant defeasance"), and the Notes shall
thereafter be deemed not to be "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in
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connection with such covenants, but shall continue to be deemed "Outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the Outstanding Notes, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 501(iv), but, except as specified above, the remainder
of this Indenture and such Notes shall be unaffected thereby.
SECTION 1104. Conditions to Defeasance or Covenant
Defeasance.
The following shall be the conditions to application of either
Section 1102 or Section 1103 to the Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Eleven applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Notes, (A) cash in United States dollars, or (B) U.S.
Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the
principal of (and premium, if any) and interest on the Outstanding
Notes on the Stated Maturity (or Redemption Date, if applicable) of
such principal (and premium, if any) or installment of interest;
provided that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such U.S. Government Obligations to
said payments with respect to the Notes. For this purpose, "U.S.
Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (y) obligations of a
Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of
which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Notes Act of 1933, as amended), as custodian
with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government
<PAGE> 108
98
Obligation held by such custodian for the account of the holder of such
depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation
or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(2) No Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit or,
insofar as paragraphs (viii) and (ix) of Section 501 hereof are
concerned, at any time during the period ending on the 91st day after
the date of such deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture
or any other material agreement or instrument to which the Company or
any Guarantor is a party or by which it is bound.
(4) In the case of an election under Section 1102, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since May 7, 1996, there has
been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such opinion shall confirm that,
the Holders of the Outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance had not occurred.
(5) In the case of an election under Section 1103, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that the trust funds will not be subject to
any rights of holders of Indebtedness, including, without limitation,
any rights arising under this Indenture (other than the rights of the
Holders to be paid out of the proceeds of such trust funds) and that
after the 91st day following the deposit, the trust funds will not be
subject to
<PAGE> 109
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the effect of any applicable bankruptcy, insolvency, reorganization or
similar law affecting creditors rights generally.
(7) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 1202 or the covenant defeasance under Section 1103 (as
the case may be) have been complied with.
SECTION 1105. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1105, the "Trustee") pursuant to Section 1104 in
respect of the Outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Notes of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1104 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Notes.
Anything in this Article Eleven to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it as
provided in Section 1104 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1106. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1105 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture, the Notes
and the Pledge Agreement shall be revived and
<PAGE> 110
100
reinstated as though no deposit had occurred pursuant to Section 1102 or 1103,
as the case may be, until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 1105; provided, however, that
if the Company makes any payment of principal of (or premium, if any) or
interest on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE TWELVE
REDEMPTION OF NOTES
SECTION 1201. Redemption.
The Notes may or shall, as the case may be, be redeemed, as a
whole or from time to time in part, subject to the conditions and at the
Redemption Prices specified in the form of Note, together with accrued interest
to the Redemption Date.
SECTION 1202. Applicability of Article.
Redemption of Notes at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
SECTION 1203. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to
Section 1201 shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Notes to be redeemed and shall deliver to the Trustee
such documentation and records as shall enable the Trustee to select the Notes
to be redeemed pursuant to Section 1204.
SECTION 1204. Selection by Trustee of Notes to Be
Redeemed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date (provided that, in the case of a partial redemption (the
"Special Redemption") as contemplated by the Escrow Agreement, dated as of May
14, 1996, between the Company and The Bank of New York, as escrow agent, such
Notes shall be selected on August 15, 1996) by the Trustee, from the Outstanding
Notes not previously called for redemption, by such method as the Trustee shall
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deem fair and appropriate and which may provide for the selection for redemption
of portions of the principal of Notes; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Note not
redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Notes shall relate,
in the case of any Note redeemed or to be redeemed only in part, to the portion
of the principal amount of such Note which has been or is to be redeemed.
SECTION 1205. Notice of Redemption.
Notice of redemption shall be given in the manner provided for
in Section 106 not less than 30 nor more than 60 days prior to the Redemption
Date (provided that, in the case of the Special Redemption, such notice shall be
given on August 15, 1996), to each Holder of Notes to be redeemed.
All notices of redemption shall identify the Notes to be redeemed (including
CUSIP number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Notes are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Notes to be redeemed,
(4) in case any Note is to be redeemed in part only, the
notice which relates to such Note shall state that on and after the
Redemption Date, upon surrender of such Note, the holder will receive,
without charge, a new Note or Notes of authorized denominations for the
principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and
accrued interest, if any, to the Redemption Date payable as provided in
Section 1207) will become due and payable upon each such Note, or the
portion thereof, to be redeemed, and that interest thereon will cease
to accrue on and after said date, and
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(6) the place or places where such Notes are to be surrendered
for payment of the Redemption Price and accrued interest, if any.
Notice of redemption of Notes to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company.
SECTION 1206. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an amount
of money sufficient to pay the Redemption Price of, and accrued interest on, all
the Notes which are to be redeemed on that date.
SECTION 1207. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such Notes
shall cease to bear interest. Upon surrender of any such Note for redemption in
accordance with said notice, such Note shall be paid by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Notes, or one or more Predecessor Notes, registered as such at the close of
business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Notes.
SECTION 1208. Notes Redeemed in Part.
Any Note which is to be redeemed only in part (pursuant to the
provisions of this Article) shall be surrendered at the office or agency of the
Company maintained for such purpose pursuant to Section 1002 (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holders attorney duly authorized in writing), and
the Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Note without service charge, a new Note or Notes, of any
authorized
<PAGE> 113
103
denomination as requested by such Holder, in aggregate principal amount equal to
and in exchange for the unredeemed portion of the principal of the Note so
surrendered.
<PAGE> 114
104
ARTICLE THIRTEEN
SECURITY
SECTION 1301. Pledge Agreement.
In order to secure the due and punctual payment of the
principal of (premium, if any) and interest on the Notes when and as the same
shall be due and payable, whether on an interest payment date, at maturity, by
acceleration, call for redemption, or otherwise, and interest on the overdue
principal, premium and interest, if any, of the Notes and performance of all
other obligations of the Company to the Holders or the Trustee under this
Indenture and the Notes, according to the terms hereunder or thereunder, the
Company will, on the date hereof, make an assignment of its right, title and
interest in and to the Collateral to the Trustee pursuant to the Pledge
Agreement and to the extent therein provided. Each Holder, by its acceptance of
a Note, consents and agrees to the terms of the Pledge Agreement (including,
without limitation, the provisions providing for foreclosure and release of
Collateral) as the same may be in effect or may be amended from time to time in
accordance with the terms thereof and hereof. Subject to the rights of the
lenders party to the Bank Credit Agreement, the Company (a) will forever warrant
and defend the title to the Collateral against the claims of all persons
whatsoever, (b) will execute, acknowledge and deliver to the Trustee such
further assignments, transfers, assurances or other instruments, and (c) will do
or cause to be done all such acts and things as may be necessary or proper, in
each case to assure and confirm to the Trustee the security interest in the
Collateral contemplated hereby and by the Pledge Agreement or any part thereof,
as from time to time constituted, so as to render the same available for the
security and benefit of this Indenture and of the Notes secured hereby,
according to the intent and purposes herein expressed. The Company shall take,
or cause its Subsidiaries to take any and all actions reasonably required to
cause the Pledge Agreement to create and maintain, as security for the Indenture
Obligations of the Company, a valid and enforceable second priority Lien in and
on the Collateral, in favor of the Trustee, subject to no other Liens (other
than Liens securing the guarantee of the obligations under the Bank Credit
Agreement).
SECTION 1302. Recording, etc.
(a) The Company will cause, at its own expense, the Pledge
Agreement and this Indenture and all amendments or supplements thereto to be
registered, recorded and filed or re-recorded, re-filed and renewed in such
manner and in such place or places, if any, as may be required by law in order
fully to preserve and protect the security interests created under the Pledge
Agreement and to effectuate and preserve the security therein of the Holders and
all rights of the Trustee.
<PAGE> 115
105
(b) The Company shall furnish to the Trustee, within 30 days
after May 1 in each year beginning with May 1, 1997, an Opinion of Counsel,
dated as of such date, either (i) stating that, in the opinion of such counsel,
such action has been taken with respect to the recording, registering, filing,
re-recording, re-registering and refiling of all supplemental indentures,
financing statements, continuation statements or other instruments of further
assurance as is necessary to maintain the Lien of the Pledge Agreement and
reciting with respect to the security interests in the Collateral the details of
such action or referring to prior Opinions of Counsel in which such details are
given, and stating that all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and protect
the rights of the Holders and the Trustee hereunder and under the Pledge
Agreement with respect to the security interests in the Collateral or (ii)
stating that, in the opinion of such counsel, no such action is necessary to
maintain such Lien and assignment.
SECTION 1303. Suits to Protect the Collateral.
The Trustee shall have power to institute and to maintain such
suits and proceedings as it may deem expedient to prevent any impairment of the
Collateral by any acts which may be unlawful or in violation of the Pledge
Agreement or this Indenture, and such suits and proceedings as the Trustee may
deem expedient to preserve or protect its interests and the interests of the
Holders in the Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security hereunder or be prejudicial to the
interests of the Holders or the Trustee).
SECTION 1304. Authorization of Receipt of Funds by the Trustee
Under the Pledge Agreement.
The Trustee is authorized to receive any funds for the benefit
of the Holders distributed under the Pledge Agreement, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture.
SECTION 1305. Additional Pledges.
(a) Upon the consummation of the Barnett Acquisition, the
Company will, on the date thereof, pursuant to a Pledge Agreement in the form
set forth as Exhibit A to this Indenture, grant a second priority security
interest in the Capital Stock of Barnett owned by the Company to the Trustee for
the benefit of the Holders.
(b) Within five Business Days of the acquisition of any
Capital Stock of any other direct Subsidiary of the Company, the Company will,
pursuant to a Pledge Agreement in
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the form set forth as Exhibit A to this Indenture, grant a second priority
security interest in such Capital Stock to the Trustee for the benefit of the
Holders.
This Indenture may be signed in any number of counterparts
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
<PAGE> 117
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
HOMESIDE, INC.,
a Delaware corporation
By /s/ Joe K. Pickett
------------------------------------
Title: Chairman and Chief
Executive Officer
THE BANK OF NEW YORK,
as Trustee
By /s/ Paul J. Schmalzel
------------------------------------
Title: Assistant Treasurer
<PAGE> 1
EXHIBIT 10.1
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
December 11, 1995
BETWEEN
THE FIRST NATIONAL BANK OF BOSTON
AND
HOMEAMERICA CAPITAL, INC.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS ................................................... 1
ARTICLE II PURCHASE AND SALE ............................................. 11
2.1 Purchase and Sale.................................... 11
2.2 Purchase Price....................................... 11
2.3 Actions to be taken at Closing....................... 12
ARTICLE III CLOSING ..................................................... 13
ARTICLE IV GENERAL REPRESENTATIONS AND
WARRANTIES OF SELLER........................................... 13
4.1 Organization......................................... 13
4.2 Authority............................................ 13
4.3 Non-Contravention.................................... 14
4.4 Consents, Approvals and Notices...................... 14
4.5 Title to BBMC Stock.................................. 15
4.6 Capitalization of BBMC; Existing Options............. 15
4.7 Financial Statements................................. 15
4.8 Litigation........................................... 16
4.9 Compliance with Laws; Permits and Licenses........... 16
4.10 Absence of Certain Changes or Events................. 17
4.11 Employee Benefits Matters............................ 18
4.12 Taxes................................................ 19
4.13 Ownership and Leases of Real Property................ 20
4.14 Insurance............................................ 20
4.15 Intellectual Property................................ 20
4.16 Transactions with Affiliates......................... 21
4.17 Certain Labor Matters................................ 21
4.18 Brokers.............................................. 22
4.19 No Undisclosed Liabilities........................... 22
4.20 Certain Contracts.................................... 22
ARTICLE V MORTGAGE BANKING REPRESENTATIONS
OF SELLER...................................................... 23
5.1 Portfolios and Listed Agreements..................... 23
5.2 Portfolio Information................................ 23
<PAGE> 3
-ii-
5.3 Enforceability of Listed Agreements.................. 24
5.4 Compliance with Listed Agreements ................... 24
5.5 Advances............................................. 24
5.6 No Recourse.......................................... 25
5.7 Warehouse Loan Representations and Warranties........ 25
5.8 Mortgage Banking Licenses and Qualification.......... 30
5.9 Mortgage Banking Compliance.......................... 31
5.10 Inquiries............................................ 32
5.11 Correspondent Agreements............................. 32
5.12 Custodial Accounts................................... 32
5.13 Environmental Matters................................ 32
5.14 Pool Certification................................... 33
5.15 Absence of Other Warranties.......................... 34
ARTICLE VI REPRESENTATIONS AND WARRANTIES
OF PURCHASER................................................... 34
6.1 Organization......................................... 34
6.2 Capitalization of Purchaser; Existing Options........ 34
6.3 Authority............................................ 35
6.4 Non-Contravention.................................... 35
6.5 Consents, Approvals and Notices...................... 36
6.6 Litigation........................................... 36
6.7 Compliance with Laws; Permits and Licenses........... 36
6.8 Brokers.............................................. 36
6.9 No Regulatory Impediment............................. 36
6.10 No Undisclosed Liabilities........................... 37
6.11 Absence of Other Warranties.......................... 37
ARTICLE VII COVENANTS ..................................................... 37
7.1 Conduct of Business.................................. 37
7.2 Access; Confidentiality.............................. 40
7.3 Reasonable Efforts; Taking of Necessary Action....... 40
7.4 Insurance; Risk of Loss.............................. 41
7.5 Assumption of Proceedings............................ 42
7.6 Name and Marks....................................... 42
7.7 Employment and Benefit Matters....................... 42
7.8 Public Announcements................................. 44
7.9 Post-Closing Access to Business Records and
Accounting Cooperation............................. 45
7.10 Further Assurances................................... 45
7.11 Transitional Services Agreements..................... 45
7.12 Delivery of Tapes.................................... 46
7.13 Assignment of Hedge Positions........................ 46
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ARTICLE VIII CONDITIONS TO THE CLOSING ..................................... 46
8.1 Conditions to Obligation of Each Party............... 46
8.2 Additional Conditions to the Obligations
of Purchaser....................................... 47
8.3 Additional Conditions to the Obligations
of Seller............................................ 48
ARTICLE IX TERMINATION ................................................... 49
9.1 Grounds For Termination.............................. 49
9.2 Effects of Termination............................... 50
ARTICLE X TAX MATTERS ................................................... 50
10.1 Returns.............................................. 50
10.2 Contests............................................. 51
10.3 Payment of Taxes..................................... 51
10.4 Tax Benefits and Credits............................. 53
10.5 Notices.............................................. 54
10.6 Cooperation.......................................... 54
10.7 Certain Tax Elections................................ 55
10.8 Valuation and Allocation............................. 55
10.9 Transfer Taxes....................................... 56
10.10 Purchase Price Adjustment............................ 56
10.11 Statute of Limitations............................... 56
10.12 Scope of Indemnity................................... 56
ARTICLE XI INDEMNIFICATION BY SELLER ..................................... 57
11.1 Indemnification...................................... 57
11.2 Indemnification Procedure............................ 57
11.3 Limitation on Liability.............................. 58
11.4 General.............................................. 60
ARTICLE XII INDEMNIFICATION BY PURCHASER .................................. 61
12.1 Indemnification...................................... 61
12.2 Indemnification Procedure............................ 61
12.3 Limitation on Liability.............................. 62
12.4 General.............................................. 63
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ARTICLE XIII GENERAL PROVISIONS ............................................ 64
13.1 Notices.............................................. 64
13.2 Interpretation....................................... 65
13.3 Amendment and Modification; Waiver................... 65
13.4 Entire Agreement..................................... 66
13.5 Fees and Expenses.................................... 66
13.6 Third Party Beneficiaries............................ 66
13.7 Assignment; Binding Effect........................... 66
13.8 Governing Law........................................ 66
13.9 Counterparts......................................... 67
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Seller Disclosure Schedule
Section 4.4(a) Governmental Consents, Approvals, Filings, Etc.
Section 4.4(b) Third Party Consents
Section 4.6(c) Existing Options
Section 4.6(d) Existing Subsidiaries
Section 4.7 Financial Statements; Exceptions
Section 4.8(a)(i) Pending Litigation
Section 4.8(a)(ii) Orders, Judgments, Injunctions or Decrees
Section 4.8(b) Threatened Litigation
Section 4.9(a) Noncompliance with Applicable Laws
Section 4.9(b) Requisite Permits, Licenses, Etc.
Section 4.10 Absence of Certain Changes or Events
Section 4.11(a) Employee Benefit Plans
Section 4.11(b) Employee Benefit Plan Noncompliance
Section 4.13 Real Property
Section 4.14 Insurance
Section 4.15 Intellectual Property
Section 4.16 Transactions with Affiliates
Section 4.19 Undisclosed Liabilities
Section 4.20 Certain Contracts
Section 5.1(a) Servicing Agreements
Section 5.1(b) Master Servicing Agreements
Section 5.1(c) Certificate Administration Agreements
Section 5.1(d) Mortgage Sale Agreements
Section 5.1(e) Collateral Certificate Sale Agreements
Section 5.1(f) Investment Commitments
Section 5.3(c) Liens on Listed Agreements
Section 5.4(a) Defaults by BBMC under Listed Agreements
Section 5.4(b) Breach of Representations or Warranties by BBMC under Listed
Agreements
Section 5.5 Advances
Section 5.6 Recourse
Section 5.7(iii) Senior Liens on Loans in Warehouse Portfolio
Section 5.7(xi) Warehouse Portfolio Delinquencies
Section 5.8(a) Mortgage Banking Licenses
Section 5.8(b) Mortgage Banking Licenses Affected by the Transaction
Section 5.9(a) Mortgage Banking Compliance
Section 5.9(c) BBMC Defaults
Section 5.10 Audits, Investigations and
Section 5.11 Correspondent Agreements
Section 5.13 Environmental Matters
Section 5.14 Pool Certification
Section 5.15 List of Employees for Knowledge
Section 7.4 Termination of Insurance Coverage
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Purchaser Disclosure Schedule
Section 6.4(a) Governmental Consents, Approvals,
Section 6.4(b) Third Party Consents
Section 6.8 Brokers
Section 6.10 No Undisclosed Liabilities
Section 6.12 List of Employees for Knowledge
Schedule 2.2 Purchase Price Adjustment
Schedule 7.1(f) Material Contracts
Schedule 7.1(m) Excluded BBMC Assets and Excluded
Schedule 7.13 Hedge Contracts
Schedule 8.1(a) Terms of Loans
Exhibits
Exhibit A Stockholder Agreement
Exhibit B Registration Rights Agreement
<PAGE> 8
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 11, 1995 (this "Agreement"),
by and between THE FIRST NATIONAL BANK OF BOSTON, a national banking association
("Seller"), and HOMEAMERICA CAPITAL, INC., a Delaware corporation ("Purchaser").
ARTICLE I
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
terms when used in this Agreement shall have the following meanings:
"Advances" means unreimbursed amounts that have been advanced by BBMC with
respect to Mortgage Loans (including, without limitation, payments of principal,
interest, taxes and insurance, ground rents, assessments, attorneys' fees,
property preservation fees and similar charges) pursuant to any Servicing
Agreement, Master Servicing Agreement or Certificate Administration Agreement.
"Affiliate" of a Person means a Person that, directly or indirectly,
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with, the first Person.
"Agency" means FHA, VA, GNMA, FNMA, FHLMC, HUD, or a State Agency, as
applicable.
"Agreement" has the meaning set forth in the introductory paragraph hereof.
"ALTA" means the American Land Title Association or any successor.
"Applicable Law" has the meaning set forth in Section 4.3.
"Available Remedies" has the meaning set forth in Section 11.4(b).
"Balance Sheet" has the meaning set forth in Section 4.7.
"BBMC" means BancBoston Mortgage Company, a Florida corporation.
"BBMC Business" means the business heretofore conducted by BBMC.
"BBMC Stock" has the meaning set forth in Section 4.6(a).
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"Business Day" means any day which is not a Saturday, Sunday or a day on
which banks in the City of Boston are authorized or obligated by law or
executive order to be closed.
"Cash Purchase Price" has the meaning set forth in Section 2.2.
"Certificate Administration" means certificate administration services in
respect of Collateral Certificate Pools or Mortgage Loans, including, without
limitation, one or more of the following functions (or a portion thereof): (i)
the calculation of payments due to owners of mortgage-backed securities,
asset-backed securities, participation certificates or Mortgage Loans; (ii) the
transmittal of payments related to Mortgage Loans or Collateral Certificates;
(iii) the transmittal or payment of Advances; (iv) the preparation of reports to
Investors, tax authorities and the Securities and Exchange Commission; (v) the
compliance with REMIC or other relevant requirements; and (vi) the performance
of certain other administrative functions.
"Certificate Administration Agreement" means an agreement, other than a
Master Servicing Agreement or a Servicing Agreement, pursuant to which a Related
Company provides Certificate Administration (including, without limitation, any
rights to certificate administration fees).
"Certificate Administration Portfolio" means those Mortgage Loans or
Collateral Certificates subject to Certificate Administration Agreements.
"Certificate Insurer" means a provider of an insurance policy insuring
against certain specified losses or shortfalls with respect to certain
mortgage-backed securities.
"Claim Notice" has the meaning set forth in Section 11.2(a).
"Closing" has the meaning set forth in Article III.
"Closing Date" has the meaning set forth in Article III.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Collateral Certificate" means a security based on and backed by a Mortgage
Pool, which security has been pledged, granted or sold to secure or support
payments on specific asset-backed securities which are administered pursuant to
a Certificate Administration Agreement.
"Collateral Certificate Pool" means a group of Collateral Certificates that
have been pledged, granted or sold to secure or support payments on specific
<PAGE> 10
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asset-backed securities which are administered pursuant to a specific
Certificate Administration Agreement.
"Collateral Certificate Sale Agreement" means an agreement pursuant to
which BBMC has sold or otherwise conveyed Collateral Certificates and with
respect to which BBMC has a repurchase obligation in the event of a breach by it
of a representation, warranty, covenant or undertaking made or given therein.
"Company Contract" has the meaning set forth in Section 4.20(a).
"Confidentiality Agreement" means that certain letter agreement dated June
9, 1995 between Seller and Lee relating to, among other things, the
confidentiality of certain information provided by or on behalf of Seller and
BBMC.
"Contract" has the meaning set forth in Section 4.3.
"Contract Party" means any Person, other than an Investor, who is a party
to a Servicing Agreement, Master Servicing Agreement, Certificate Administration
Agreement, Mortgage Sale Agreement or Collateral Certificate Sale Agreement.
"Control" (including the terms "Controlled by" and "under common Control
with") means the direct or indirect possession of ordinary voting power to elect
a majority of the board of directors (or comparable body) of a Person.
"Correspondent Agreement" means any agreement between BBMC, on the one
hand, and a broker, correspondent or other originator or purchaser of mortgage
loans, on the other hand, pursuant to which such broker, correspondent or
mortgage loan originator or purchaser may sell mortgage loans to BBMC.
"Damages" has the meaning set forth in Section 11.1.
"Deductible" has the meaning set forth in Section 11.3(a)(i).
"Disclosure Schedules" means, collectively, the Purchaser Disclosure
Schedule and the Seller Disclosure Schedule.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means certain assets of BBMC of the types set forth on
Schedule 7.1(m) hereto which are to be transferred to Seller at or prior to
Closing in accordance with Section 7.1(m).
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"Excluded Liabilities" means certain liabilities of BBMC of the types set
forth on Schedule 7.1(m) hereto which are to be assumed by Seller at or prior to
Closing in accordance with Section 7.1(m).
"Exclusive Marketing Agreement" means the Exclusive Marketing Agreement, to
be dated as of the Closing Date, between Seller and Purchaser, pursuant to which
Seller and its Affiliates shall have been granted the exclusive right to market
certain banking products and services to customers of Purchaser and its
Affiliates, which agreement may contain reasonable restrictions on the volume
and frequency of communications of Seller and its Affiliates to customers of
Purchaser, and pursuant to which Seller has agreed to grant to Purchaser an
exclusive arrangement in which Purchaser will be afforded the opportunity, for a
period of three years from date hereof, on arm's length terms, including without
limitation fees, to service mortgages originated or acquired by Seller and its
Affiliates and to manage the securitization on behalf of Seller of mortgages
sold by Seller and its Affiliates, as in effect from time to time. The right of
Seller and its Affiliates to market such products and services to customers of
Purchaser and its Affiliates other than customers whose mortgages were
originated by Seller shall become non-exclusive if a financial institution other
than Seller or its Affiliates acquires after the Closing an equity interest in
the Purchaser of at least twenty percent (20%) of the Purchaser's voting
securities.
"Extended Warehouse Loans" means those Mortgage Loans in the Warehouse Loan
Portfolio that are not readily salable under existing Investment Commitments due
to one or more failures to conform to all of the terms and conditions of such
Investment Commitments.
"FHA" means Federal Housing Administration or any successor thereto.
"FHA Loans" means Mortgage Loans which are insured or are eligible to be
insured by FHA.
"FHLMC" means Federal Home Loan Mortgage Corporation or any successor
thereto.
"FNMA" means Federal National Mortgage Association or any successor
thereto.
"Financial Statements" has the meaning set forth in Section 4.7.
"Foreclosure" means the acquisition of title to a Mortgaged Property in a
foreclosure sale or by a deed in lieu of foreclosure or pursuant to any other
comparable procedure allowed under applicable Regulation.
<PAGE> 12
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"GAAP" means generally accepted accounting principles in the United States
which, unless otherwise indicated, are to be applied on a basis consistent with
the Financial Statements referred to in Section 4.7(a).
"GNMA" means Government National Mortgage Association or any successor
thereto.
"Governmental Authority" has the meaning set forth in Section 4.3.
"HUD" means United States Department of Housing and Urban Development or
any successor thereto.
"Indemnified Purchaser Entities" has the meaning set forth in Section 11.1.
"Indemnified Seller Entities" has the meaning set forth in Section 12.1.
"Insurer" means a Person who (i) insures or guarantees all or any portion
of the risk of loss on any Mortgage Loan, including, without limitation, FHA,
VA, FNMA, GNMA, FHLMC and any private mortgage insurer, pool insurer and
provider of standard hazard insurance, flood insurance, earthquake insurance or
title insurance with respect to any Mortgage Loan or related Mortgaged Property,
(ii) provides, with respect to a Listed Agreement or an applicable Regulation,
any fidelity bond, direct surety bond or errors and omissions policy or (iii) is
a Certificate Insurer.
"Intellectual Property" has the meaning set forth in Section 4.15.
"Investment Commitment" means the optional or mandatory commitment of a
Person to purchase a Mortgage Loan, a Pipeline Loan or a portion of a Mortgage
Loan or Pipeline Loan owned or to be acquired by BBMC.
"Investor" means any Person, other than BBMC which (i) owns or has a
beneficial interest in a Mortgage Loan or Collateral Certificate or (ii) is a
party to an Investment Commitment.
"IRS" means the Internal Revenue Service of the United States of America or
any successor agency or authority.
"Lee" means Thomas H. Lee Company, a sole proprietorship.
"Lee Fund" means Thomas H. Lee Equity Fund III, L.P., a Delaware limited
partnership.
"Licenses" has the meaning set forth in Section 5.8(a).
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"Lien" means any mortgage, pledge, lien, charge or other encumbrance.
"Listed Agreement" means any Servicing Agreement, Master Servicing
Agreement, Certificate Administration Agreement, Mortgage Sale Agreement,
Collateral Certificate Sale Agreement or Investment Commitment.
"Litigation" has the meaning set forth in Section 4.8(a).
"LIBOR Rate" means, with respect to the applicable period, the rate of
interest equal to the rate at which U.S. dollar deposits for a six (6) month
period are offered based on information presented on Telerate Page 3750 as of
11:00 a.m. London time on the day prior to the first day of such period.
"Madison Dearborn" means Madison Dearborn Capital Partners, L.P., an
Illinois limited partnership.
"Management Subscription Agreement" means the Subscription Agreement, dated
as of the Closing Date, among the Purchaser and certain officers and employees
of BBMC, pursuant to which such officers and employees shall purchase shares of
Purchaser Class A Common Stock, on the same terms and at the same price per
share as the purchase of shares of Purchaser Class A Common Stock by the Lee
Fund and Madison Dearborn pursuant to the Subscription Agreement, and otherwise
in form and substance satisfactory to Seller, Lee and Madison Dearborn, as in
effect from time to time.
"Master Servicing" means master servicing services in respect of Mortgage
Loans, including, without limitation, one or more of the following functions (or
a portion thereof): (i) to supervise and oversee the performance of services of
their obligations under servicing agreements, and (ii) to cause Mortgage Loans
to be serviced in the event a service is terminated.
"Master Servicing Agreement" means an agreement pursuant to which BBMC
provides Master Servicing and, where applicable, Certificate Administration
(including, without limitation, any rights to master servicing fees).
"Master Servicing Portfolio" means those Mortgage Loans subject to Master
Servicing Agreements.
"Material Adverse Effect" means, with respect to any Person, considered on
a consolidated basis, any effect on such Person that is, individually or in the
aggregate, materially adverse to the business, operations or financial condition
of such Person.
"Mortgage" means with respect to a Mortgage Loan, a mortgage, deed of trust
or other security instrument creating a lien upon real property and any
<PAGE> 14
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other property described therein which secures a Mortgage Note, together with
any assignment, reinstatement, extension, endorsement or modification thereof.
"Mortgage Loan" means a residential mortgage loan evidenced by a Mortgage
Note and secured by a Mortgage that is (i) owned by BBMC or (ii) owned by an
Investor and subject to a Servicing Agreement, Master Servicing Agreement or
Certificate Administration Agreement.
"Mortgage Loan Documents" means the credit and closing packages, custodial
documents and escrow documents (including, without limitation, the Mortgage
Note, the Mortgage, any assignment or endorsement of any such Mortgage Note or
Mortgage, the title insurance policy, and any private mortgage insurance
policy), and all other documents (i) in the possession of BBMC specifically
pertaining to a Mortgage Loan or a Pipeline Loan, (ii) reasonably necessary for
prudent servicing of a Mortgage Loan or a Pipeline Loan or (iii) reasonably
necessary to establish the eligibility of the Mortgage Loan or a Pipeline Loan
for insurance by an Insurer or sale to an Investor; in each case as required by
applicable Regulations.
"Mortgage Loan Payment" means a payment of interest or principal with
respect to a Mortgage Loan.
"Mortgage Note" means, with respect to a Mortgage Loan, a promissory note
or notes, or other evidence of indebtedness, with respect to such Mortgage Loan
secured by a Mortgage or Mortgages, together with any assignment, reinstatement,
extension, endorsement or modification thereof.
"Mortgage Pool" means a group of Mortgage Loans that have been pledged,
granted or sold to secure or support payments on specific mortgage-backed
securities or specific participation certificates.
"Mortgage Sale Agreement" means an agreement pursuant to which BBMC has
sold or otherwise conveyed Mortgage Loans and BBMC has a repurchase or indemnity
obligation in the event of breach by BBMC of a representation, warranty or
undertaking contained therein.
"Mortgaged Property" means the improved real property that secures a
Mortgage Note and that is subject to a Mortgage, which is related to a Mortgage
Loan.
"Mortgagor" means the obligor(s) on a Mortgage Note.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Overlap Period" has the meaning set forth in Section 10.1.
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"Parent" has the meaning set forth in Section 7.6.
"Person" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or other entity.
"Pipeline Loan" means each of those pending mortgage loans to be secured by
a first priority mortgage lien on a one to four family residential property with
respect to which BBMC has issued a commitment or otherwise agreed with an
applicant to fund or determined to fund or has issued a commitment or otherwise
agreed with a correspondent originator to purchase (including those mortgage
loans which are pending with a correspondent originator and which otherwise meet
BBMC's acquisition criteria for such mortgage loans), and which have not yet
closed or been purchased from the correspondent originator.
"Plans" has the meaning set forth in Section 4.11(a).
"Pre-Closing Periods" has the meaning set forth in Section 10.1.
"Purchase Agreements" means, collectively, the BBMC Purchase Agreement, the
Subscription Agreement, the Management Subscription Agreement, the Purchaser
Class B Nonvoting Common Stock Issuance Agreement and the Purchaser Class C
Nonvoting Common Stock Purchase Agreement.
"Purchaser" has the meaning set forth in the introductory paragraph hereof.
"Purchaser Class A Common Stock" has the meaning set forth in Section
6.2(a).
"Purchaser Class B Nonvoting Common Stock" has the meaning set forth in
Section 6.2(a).
"Purchaser Class B Nonvoting Common Stock Issuance Agreement" means the
Issuance Agreement, to be entered into on or prior to the Closing Date, between
the Purchaser and a third party, pursuant to which such third party shall be
issued 5,714 shares of Purchaser Class B Nonvoting Common Stock solely in
exchange for services, as in effect from time to time.
"Purchaser Class C Nonvoting Common Stock" has the meaning set forth in
Section 6.2(a).
"Purchaser Class C Nonvoting Common Stock Purchase Agreement" means the
Purchase Agreement, to be entered into on or prior to the Closing Date, pursuant
to which the Seller shall sell 5,714 shares of Purchaser Class C Nonvoting
Common Stock to a third party, as in effect from time to time.
<PAGE> 16
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"Purchaser Disclosure Schedule" means the disclosure schedule delivered by
Purchaser to Seller at the time of execution hereof.
"Purchaser Stock Option Plan" means the Purchaser's Stock Option Plan,
dated as of the Closing Date, providing for the issuance by the Purchaser to
certain officers and employees of BBMC of options to purchase shares of
Purchaser Class A Common Stock, and otherwise in form and substance satisfactory
to the Seller, Lee and Madison Dearborn, as in effect from time to time.
Rating Agency" means any nationally recognized statistical credit agency
that at the time of any determination thereof has outstanding a rating on one or
more classes of mortgage-backed securities or asset-b acked securities at the
request of (i) BBMC or (ii) any other issuer of mortgage-backed securities or
asset-backe d securities for which BBMC acts as master service or certificate
administrator.
"Real Property Lease" has the meaning set forth in Section 4.13(b).
"REMIC" has the meaning set forth in Section 4.12(ix).
"REO" means any residential real property owned by BBMC or an Investor as a
result of a Foreclosure.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date hereof, among Purchaser and certain shareholders of
Purchaser, in substantially the form attached hereto as Exhibit B, as in effect
from time to time.
"Regulation" means any (i) federal, state or local law, rule or regulation,
(ii) requirement of an Insurer or (iii) requirement of an Agency, in each case
with respect to the origination, insuring, purchase, sale or servicing of a
Mortgage Loan or Collateral Certificate or the filing of a claim in respect
thereof.
"Related Agreements" means, collectively, the Certificate of Incorporation
and by-laws of Purchaser, this Agreement, the Stockholder Agreement, the
Registration Rights Agreement, the Purchase Agreements, the Exclusive Marketing
Agreement, the Transitional Services Agreements, the Purchaser Stock Option Plan
and any other agreement between any of Purchaser, Seller, BBMC, Lee, Lee Fund,
Madison Dearborn, or any shareholder of Purchaser relating to the Corporation or
BBMC which specifies that it is a Related Agreement for purposes of this
Agreement.
"Section 7.12 Tapes" has the meaning set forth in Section 7.12.
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"Seller" has the meaning set forth in the preamble.
"Seller Disclosure Schedule" means the disclosure schedule delivered by
Seller to Purchaser at the time of execution hereof.
"Servicing" means Mortgage Loan servicing services including, without
limitation, one or more of the following functions (or a portion thereof): (i)
the administration and collection of payments for the reduction of principal
and/or the application of interest on a Mortgage Loan; (ii) the collection of
payments on account of taxes and insurance; (iii) the remittance of appropriate
portions of collected payments; (iv) the provision of full escrow
administration; (v) the pursuit of foreclosure and alternate remedies against a
related Mortgaged Property; and (vi) the administration and liquidation of REO.
"Servicing Agreement" means an agreement pursuant to which BBMC provides
Servicing and, where applicable, Certificate Administration (including, without
limitation, any rights to servicing fees and excess servicing compensation).
"Servicing Compensation" means any servicing fees and any excess servicing
compensation which BBMC is entitled to receive pursuant to any Servicing
Agreement.
"Servicing Portfolio" means those Mortgage Loans subject to Servicing
Agreements.
"State Agency" means any state agency or other entity with authority to
regulate the mortgage-related activities of BBMC or to determine the investment
or servicing requirements with regard to mortgage loan origination, purchasing,
servicing, master servicing or certificate administration performed by BBMC.
"Stockholder Agreement" means the Stockholder Agreement, dated as of the
date hereof, among Purchaser, Seller, Lee Fund, Madison Dearborn and the other
shareholders of Purchaser, in substantially the form attached hereto as Exhibit
A, as in effect from time to time.
"Subscription Agreement" means the Subscription Agreement, dated as of the
date hereof, among Purchaser, Seller, Lee, Lee Fund and Madison Dearborn, as in
effect from time to time.
"Subsidiary" means, with respect to any entity, a corporation or other
entity of which the outstanding shares of stock or other equity interests are
Controlled by such entity, either directly or indirectly through one or more
intermediaries.
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"Tape Date" has the meaning set forth in Section 7.12(a).
"Tax" or "Taxes" has the meaning set forth in Section 4.12.
"Tax Returns" has the meaning set forth in Section 4.12.
"Third Party Consents" has the meaning set forth in Section 4.4.
"Transfer Taxes" has the meaning set forth in Section 10.7.
"Transitional Services Agreements" means, collectively, the Exclusive
Marketing Agreement and any other agreements pursuant to which Seller provides
at Seller's cost services to BBMC or Purchaser, as in effect from time to time.
"VA" means the United States Department of Veterans Affairs and any
successor thereto.
"VA Loans" means Mortgage Loans which are guaranteed or are eligible to be
guaranteed by VA.
"Warehouse Loan Portfolio" means those Mortgage Loans owned by BBMC and
held for sale.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, the Seller shall sell, transfer, assign and deliver to
the Purchaser, and the Purchaser shall purchase from the Seller, all of the BBMC
Stock.
2.2 Purchase Price. (a) In consideration for the sale of the BBMC Stock by
the Seller to the Purchaser hereunder, the Purchaser shall (a) pay to the Seller
cash in an amount equal to $146,250,000 (the "Cash Purchase Price") and (b)
issue to the Seller 444,286 shares of Purchaser Class A Common Stock and 5,714
shares of Purchaser Class C Nonvoting Common Stock; provided, however, that in
the event that, during the six (6) month period immediately following the
Closing Date, the Purchaser acquires, directly or indirectly, all or any portion
of the capital stock or all or any substantial portion of the assets of another
Person, the Purchaser shall pay to Seller, on the effective date of such
acquisition, cash in an additional amount determined by reference to Schedule
2.2 hereto.
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(b) As additional consideration for the sale of the BBMC Stock by the
Seller to the Purchaser hereunder, in the event that the Closing shall not have
occurred on or prior to the later to occur of (i) January 10, 1996 and (ii) the
date that Seller and BBMC shall have obtained all governmental and third party
consents, licenses, permits and approvals required to be obtained by Seller to
perform its obligations hereunder or required to be obtained by BBMC in order to
conduct its business after the Closing on substantially the same basis as such
business was conducted prior to the Closing, then Purchaser shall pay to Seller,
for the period commencing on such date and ending on the Closing Date, cash in
an amount equal to the product of (1) $225,000,000 multiplied by (2) a rate per
annum equal to the LIBOR Rate. Such amount shall be paid by Purchaser to Seller
on the Closing Date and shall be calculated on a year of 365 days for the number
of days elapsed.
(c) As additional consideration for the sale of the BBMC Stock by the
Seller to the Purchaser hereunder, the Purchaser shall pay to Seller on the
Closing Date forty-five percent (45%) of the aggregate consideration received by
Purchaser from the sale of shares of Purchaser Class A Common Stock pursuant to
the Management Subscription Agreement.
2.3 Actions to be taken at Closing. At the Closing and subject to the terms
and conditions of this Agreement:
(a) The Purchaser shall pay the Cash Purchase Price to the Seller by wire
transfer of immediately available funds to such bank account in the United
States of America as the Seller shall have designated in writing at least two
(2) Business Days prior to the Closing Date.
(b) The Purchaser shall deliver to the Seller one or more stock
certificates evidencing the 444,286 shares of Purchaser Class A Common Stock and
5,714 shares of Purchaser Class C Nonvoting Common Stock issued to the Seller.
(c) The Seller shall deliver to the Purchaser one or more stock
certificates evidencing the BBMC Stock, duly endorsed in blank or with stock
powers therefor duly executed in blank.
(d) Each party shall take such other actions, and shall execute and deliver
such other instruments and documents, as shall be required under Article VIII
hereof.
<PAGE> 20
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ARTICLE III
CLOSING
Subject to the provisions of Articles VIII and IX hereof, the consummation
of the transactions contemplated by this Agreement shall take place at a closing
(the "Closing") to be held at 10:00 a.m. at the Boston, Massachusetts office of
Bingham, Dana & Gould, on or prior to the fifth business day after the date on
which all of the conditions contained in Article VIII hereof shall have been
satisfied or waived or at such other place, day and time as the parties hereto
may mutually agree in writing. The date on which the Closing occurs is referred
to herein as the "Closing Date". Notwithstanding the first sentence of this
Article III, for all purposes of this Agreement, including, without limitation,
the provisions of Article II above, the effective time of the Closing shall be
the close of business on the Closing Date.
ARTICLE IV
GENERAL REPRESENTATIONS AND
WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that:
4.1 Organization.
(a) Seller is a duly organized and validly existing national banking
association.
(b) BBMC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and has full corporate power and
authority to own all of its properties and assets and to carry on its business
as it is now being conducted. True and complete copies of BBMC's charter and
by-laws have been delivered to Purchaser. BBMC is duly qualified or licensed to
do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business or properties makes such
qualification or license necessary, except where failure to be so qualified,
licensed or in good standing would not reasonably be expected to have a Material
Adverse Effect on BBMC.
4.2 Authority. Seller has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The execution
and delivery by Seller of this Agreement and the consummation by Seller of the
transactions contemplated hereby have been duly authorized by all
<PAGE> 21
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necessary corporate action on the part of Seller. This Agreement constitutes a
valid and legally binding agreement of Seller, enforceable against Seller in
accordance with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law).
4.3 Non-Contravention. The execution and delivery of this Agreement by
Seller does not, and the consummation by Seller of the transactions contemplated
hereby and the performance by Seller of the obligations which it is obligated to
perform hereunder will not, (a) violate any provision of the certificate of
incorporation or by-laws or other organizational documents of Seller or BBMC,
(b) assuming that all material consents, authorizations, orders and approvals
of, material filings or registrations with, and material notices to, each Agency
or other United States federal, state or local governmental commission, board or
other regulatory authority or agency (each a "Governmental Authority") listed in
Sections 4.4(a) and 5.8(b) of the Seller Disclosure Schedule and all Third Party
Consents listed in Sections 4.4(b) and 5.8(b) of the Seller Disclosure Schedule
have been obtained or made, (i) violate in any material respect any material
law, regulation, rule, order, judgment or decree (each an "Applicable Law") to
which Seller or BBMC is subject or (ii) violate in any material respect, result
in the termination or the acceleration (except as set forth in Section 5.3(c) of
the Seller Disclosure Schedule with respect to the effect of a change in control
on certain Listed Agreements) of, or conflict with in any material respect or
constitute a material default under, any material mortgage, indenture, lease,
franchise, license, permit, agreement or instrument (each a "Contract") to which
Seller or BBMC is a party or by which any of their respective assets or
properties are bound or (c) result in the creation of any Lien on any of the
material assets or properties of Seller or BBMC or the loss of any material
license or other material contractual right with respect thereto.
4.4 Consents, Approvals and Notices. (a) Except as described in Section
4.4(a) or 5.8(b) of the Seller Disclosure Schedule, no material consent,
authorization, order or approval of, filing or registration with, or notice to,
any Governmental Authority and (b) except as described in Section 4.4(b) or
5.8(b) of the Seller Disclosure Schedule, no material consent, authorization,
approval, waiver, order, license, certificate or permit or act of or from, or
notice to, any Rating Agency or party to any Contract (collectively, "Third
Party Consents") to which Seller or BBMC is a party or by which any of their
respective assets or properties are bound, is required for the execution and
delivery of this Agreement by Seller, the consummation by Seller of the
transactions contemplated hereby, and the conduct by BBMC following the Closing
of its business on substantially the same basis as such business was conducted
prior
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to the Closing, except for such consents, authorizations, orders, approvals,
filings, registrations, notices or Third Party Consents which are required
solely by reason of the specific ownership or regulatory status of Purchaser or
its Affiliates.
4.5 Title to BBMC Stock. The transfer from Seller to Purchaser of the BBMC
Stock pursuant to the provisions of this Agreement will transfer to Purchaser
good and marketable title thereto, free and clear of any adverse claims or Liens
(other than Liens created or incurred by Purchaser or any of its Affiliates).
4.6 Capitalization of BBMC; Existing Options.
(a) The authorized capital stock of BBMC consists of 10,000 shares of
common stock, par value $1.00 per share, of which 1,000 shares are issued and
outstanding (the "BBMC Stock"). All of the issued and outstanding shares of
capital stock of BBMC are owned beneficially and of record by Seller, free and
clear of any Liens. All issued and outstanding shares of capital stock of BBMC
are validly issued, fully paid and non-assessable.
(b) There are no outstanding obligations, warrants, options or other rights
to subscribe for or purchase from BBMC, Seller or any Affiliate of Seller, or
any other contracts or commitments providing for the issuance of, or the
granting of rights to acquire, shares of any class of stock of or any equity
interest in BBMC, or any securities or other instruments convertible into or
exchangeable for shares of any class of stock of or any equity interest in BBMC
other than (i) the rights of Purchaser created by this Agreement or (ii) created
by Purchaser or any of its Affiliates.
(c) As of the date hereof, BBMC neither owns nor has the option to acquire,
directly or indirectly, any equity interest in any Person, except as set forth
in Section 4.6(c) of the Seller Disclosure Schedule. As of the Closing, BBMC
will neither own nor have the option to acquire, directly or indirectly, any
equity interest in any Person, except (i) as set forth in Section 4.6(c) of the
Seller Disclosure Schedule and (ii) equity interests acquired since the date
hereof in satisfaction of debts previously contracted in good faith.
(d) Except as set forth in Section 4.6(d) of the Seller Disclosure
Schedule, BBMC has no Subsidiaries and is not a party to any partnership or
joint venture.
4.7 Financial Statements. Set forth in Section 4.7 of the Seller Disclosure
Schedule are the following financial statements (collectively, the "Financial
Statements"): (a) BBMC's audited balance sheets as of December 31,
<PAGE> 23
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1993 and December 31, 1994 and the related audited statements of operations,
changes in shareholder's equity and cash flows for the years then ended; and (b)
BBMC's unaudited balance sheet as of September 30, 1995 (the "Balance Sheet")
and the related unaudited statements of operations, changes in shareholder's
equity and cash flows for the nine months then ended. Except as otherwise
indicated in Section 4.7 of the Seller Disclosure Schedule, the Financial
Statements were prepared in accordance with GAAP applied on a consistent basis
during the periods involved and fairly present the financial position of BBMC as
of the dates thereof and the results of BBMC's operations for the periods then
ended. The books and records of the Seller have been, and are being, maintained
in all material respects in accordance with GAAP and any other applicable legal
and accounting requirements.
4.8 Litigation. (a) Except as set forth in Section 4.8(a)(i) of the Seller
Disclosure Schedule, as of the date of this Agreement, there is no regulatory
investigation of which Seller has knowledge or administrative proceeding pending
before any court, arbitrator or Governmental Authority (each, a "Litigation")
against BBMC. Except as set forth in Section 4.8(a)(i) of the Seller Disclosure
Schedule, there is no other action, suit or proceeding pending before any court
against BBMC or Seller which (i) if adversely determined, would have a Material
Adverse Effect on BBMC or (ii) challenges the validity or the propriety of the
transactions contemplated by this Agreement. Section 4.8(a)(ii) of the Seller
Disclosure Schedule lists, as of the date of this Agreement, all material
orders, judgments, injunctions and decrees applicable to BBMC, and BBMC is not
in material violation of any such order, judgment, injunction or decree.
(b) Except as set forth in Section 4.8(b) of the Seller Disclosure
Schedule, as of the date of this Agreement, there is no Litigation, to the
knowledge of Seller, threatened against BBMC before any court, arbitrator or
Governmental Authority which if adversely determined would have a Material
Adverse Effect on BBMC.
4.9 Compliance with Laws: Permits and Licenses. (a) Except as set forth in
Section 4.9(a) of the Seller Disclosure Schedule, the operations of BBMC are
being conducted in compliance with all Applicable Laws, except where the failure
to so comply would not reasonably be expected to have a Material Adverse Effect
on BBMC.
(b) Except as set forth in Section 4.9(b) or 5.8(a) of the Seller
Disclosure Schedule, BBMC holds all permits, certificates, licenses, approvals
and other authorizations (or, where legally permissible, has waivers thereof or
is entitled to exemptions therefrom) of each Governmental Authority necessary
for the operation of its business as presently conducted, except where the
failure to so
<PAGE> 24
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hold would not reasonably be expected to have a Material Adverse Effect on BBMC.
4.10 Absence of certain Changes or Events. Since December 31, 1994, except
as set forth in Section 4.10 of the Seller Disclosure Schedule or as expressly
permitted by this Agreement, BBMC has carried on its business in all material
respects in the ordinary course consistent with past practices and there has not
been:
(a) any material change by BBMC in accounting methods, principles or
practices, except as required by law or by changes in GAAP and, with respect to
the representation and warranty made as of the Closing Date, the potential
implementation by BBMC of the accounting change described in FASB 122;
(b) other than in the ordinary course of business consistent with past
practice, any entry by BBMC into any material contract, transaction or
commitment, including any loan, lease, purchase or sale of assets, borrowing or
capital expenditure, or any commitment therefor;
(c) any change or development in or affecting the business, operations or
financial condition of BBMC that has had or could reasonably be expected to have
a Material Adverse Effect on BBMC;
(d) any write-off by or in respect of BBMC as uncollectible of any note or
account receivable, except write-offs in the ordinary course of business
consistent with past practice;
(e) any agreement by BBMC or any of its Affiliates to do any of the
foregoing;
(f) except for normal increases in the ordinary course of business
consistent with past practice or as required under employment agreements in
effect on December 31, 1994, any increase by BBMC in the wages, salaries,
compensation, pension, or other fringe benefits or perquisites payable to any
executive officer, employee, or director from the amount thereof in effect as of
December 31, 1994 (which amounts have been previously disclosed to Purchaser),
any grant by BBMC of any severance or termination pay, the entry by BBMC into
any contract to make or grant any severance or termination pay, or the payment
by BBMC of any bonus other than year-end bonuses for fiscal 1995; or
(g) any strike, work stoppage, slow-down, or other labor disturbance with
respect to BBMC.
<PAGE> 25
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4.11 Employee Benefits Matters. (a) Section 4.11(a) of the Seller
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" within the meaning of Section 3(3) of ERISA, and each stock, deferred
compensation, incentive, vacation, sick pay, leave, severance pay, or fringe
benefit plan, policy, or arrangement, which BBMC maintains, contributes to or is
a party to, or for which BBMC has any liability or contingent liability
(collectively, the "Plans"). Complete and accurate copies of all Plan documents
have been delivered to Purchaser.
(b) Except as otherwise provided in Section 4.11(b) of the Seller
Disclosure Schedule, and except to the extent that any breach of the
representation and warranty made in this sentence would not have a Material
Adverse Effect on BBMC, (i) each Plan is and has been maintained in compliance
with ERISA and the Code and has been administered and operated in accordance
with its terms; (ii) each Plan which is intended to be "qualified" within the
meaning of Section 401 (a) of the Code has received a favorable determination
letter from the IRS and, to the knowledge of Seller, no event has occurred and
no condition exists which could reasonably be expected to result in the
revocation of any such determination; (iii) no Plan subject to Title IV of ERISA
has been terminated or is or has been the subject of termination proceedings
pursuant to Title IV of ERISA; (iv) BBMC has not engaged in any transaction in
connection with any Plan that could reasonably be expected to result in the
imposition of a penalty pursuant to Section 502(i) of ERISA, damages pursuant to
Section 409 of ERISA or a tax pursuant to Section 4975(a) of the Code; (v) no
liability, claim, action or litigation has been incurred, made, commenced or, to
the knowledge of Seller, threatened against BBMC or any Plan (other than for
benefits and administrative expenses payable in the ordinary course and
insurance premiums payable to the Pension Benefit Guaranty Corporation); (vi)
with respect to any Plan which is subject to Title IV of ERISA, as of the most
recent actuarial valuation prepared for such Plan, the aggregate present value
of the accrued liabilities thereof did not exceed the aggregate fair market
value of the assets allocable thereto; and (vii) no Plan is a Multiemployer
Plan.
(c) No Plan provides benefits, including, without limitation, death,
medical or severance benefits, with respect to current or former employees,
officers, or directors of BBMC (or their beneficiaries) beyond their retirement
or other termination of service, other than (i) coverage for benefits mandated
by applicable law, (ii) death benefits or retirement benefits under an "employee
pension benefit plan" (as such term is defined in Section 3(2) of ERISA), (iii)
deferred compensation benefits properly accrued as liabilities on the Financial
Statements, or (iv) benefits the full cost of which is borne by the current or
former employee, officer, or director, or his or her beneficiaries.
<PAGE> 26
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(d) All required contributions to, and all payments with respect to, the
Plans have been timely made.
4.12 Taxes. (a) The Parent has timely filed or caused to be filed, or will
timely file or cause to be filed on or prior to the Closing Date, all material
federal, state, local and foreign income tax returns and reports (collectively,
the "Tax Returns") which are required to be filed by or with respect to BBMC on
or prior to the Closing Date (taking into account any properly granted
extensions of time to file any Tax Return). Except as set forth in Section 4.12
of the Seller Disclosure Schedule, all material federal, state, local and
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, backup withholding, withholding, social
security, unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, and other tax of any kind whatsoever, including any interest, penalty
(including penalties for failure to file information returns or other returns),
or addition thereto or with respect thereto, whether disputed or not
(collectively, "Taxes"), due and payable solely by BBMC with respect to taxable
years or other taxable periods ending on or prior to the Closing Date have been,
or on or prior to the Closing Date will be, paid or adequately disclosed and
fully provided for as a liability accrual set forth on Schedule 7.1(m) and taken
into account for purposes of determining the parties' obligations under Section
7.1(m) hereof. Except as set forth in Section 4.12 of the Seller Disclosure
Schedule, to the knowledge of Seller, (a) there are no waivers in effect of the
applicable statutory period of limitation for Taxes of BBMC (other than Taxes of
BBMC relating to a BKBC Group Tax return) for any taxable period and (b) no
deficiency assessment or proposed adjustment with respect to any Tax liability
of BBMC (other than Tax liabilities relating to a BKBC Group Tax return) for any
taxable period is pending or has been threatened in writing.
(b) The Parent is the "common parent" of an "affiliated group" of
corporations (as those terms are used in Section 1504(a) of the Code and
Treasury Regulations promulgated under Section 1502 of the Code) which includes
Seller and BBMC (the "BKBC Group"). The Parent, Seller, and BBMC are eligible to
file a consolidated federal income Tax Return for the taxable period of the
Parent including the Closing Date, and BBMC will be included in such
consolidated federal income Tax Return for its taxable period ending on the
Closing Date.
(c) Each of Seller and BBMC is a "U.S. person" within the meaning of
Section 7701(a)(30) of the Code.
(d) For purposes of this Section 4.12 the term "BBMC" shall include BBMC
(as otherwise defined in Article I) and each of its subsidiaries.
<PAGE> 27
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4.13 Ownership and Leases of Real Property. (a) As of the date of this
Agreement, except as set forth in Section 4.13 of the Seller Disclosure
Schedule, BBMC does not own, beneficially or of record, any real property (other
than REOs).
(b) Section 4.13 of the Seller Disclosure Schedule lists all real estate
leased as of the date of this Agreement by BBMC as lessee. Each lease with
respect to such real estate (collectively, the "Real Property Leases") is a
valid and binding obligation of BBMC and is in full force and effect in all
material respects; all rents and additional rents due to date on each Real
Property Lease have been paid; in each case, BBMC is in peaceable possession and
no waiver, indulgence or postponement of BBMC's material obligations thereunder
has been granted by the lessor; and there exists no material default or event,
occurrence, condition or act which, with the giving of notice or the lapse of
time, would become a material default by BBMC under any such Real Property
Lease.
4.14 Insurance. Section 4.14 of the Seller Disclosure Schedule lists all
policies of insurance relating to the business or operations of BBMC in effect
as of the date of this Agreement (other than title insurance policies or
insurance policies relating exclusively to mortgage or other loans originated or
serviced by BBMC which name BBMC as an insured party thereunder), whether
maintained by BBMC or Parent. As of the date of this Agreement, all such
policies are in full force and effect, all premiums due thereon have been paid
and BBMC has complied in all material respects with the provisions thereof and
none of such policies is subject to any retroactive premium adjustment.
4.15 Intellectual Property. (a) Section 4.15 of the Seller Disclosure
Schedule lists, as of the date of this Agreement (i) all foreign and domestic
patents and patent applications which are owned (A) by BBMC or (B) by an
Affiliate of BBMC specifically for use by BBMC; and (ii) all copyright
registrations, trademark registrations, trademark registration applications,
service mark registrations, service mark registration applications and trade
names (exclusive of any such registration, application or name using the name
"BancBoston Mortgage Company", "BancBoston" or any derivative thereof or the
Eagle or 1784 symbol in any form) which are (A) owned by BBMC or (B) owned by an
Affiliate of BBMC and used primarily or exclusively by BBMC (collectively, the
"Intellectual Property"). Section 4.15 of the Seller Disclosure Schedule also
lists (1) all material license agreements of patent, trademark or service mark
rights entered into by or primarily for use by BBMC and (2) all material
computer programs and databases utilized on a regular basis by BBMC (excluding
computer programs marketed to the general public).
(b) Unless otherwise indicated in Section 4.15 of the Seller Disclosure
Schedule, as of the date of this Agreement (i) there are no existing or, to the
knowledge of Seller, threatened claims by any third party based on the use by,
<PAGE> 28
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or challenging the ownership of, BBMC or any Affiliate of BBMC of any
Intellectual Property, or any claims challenging any material rights of BBMC or
any Affiliate of BBMC under the license agreements or to the use of the computer
programs and databases listed in Section 4.15 of the Seller Disclosure Schedule;
(ii) to the knowledge of Seller, (A) none of the methods or services which BBMC
offers, sells or provides materially infringes upon any Intellectual Property of
others, (B) none of the Intellectual Property is being infringed by others in
any material respect and (C) none of the material rights of BBMC or any
Affiliate of BBMC under the license agreements or to the use of the computer
programs and databases listed under Section 4.15 of the Seller Disclosure
Schedule is being violated in any material respect; (iii) BBMC and/or Affiliates
of BBMC own all right, title and interest in the Intellectual Property; and (iv)
to the knowledge of Seller, neither BBMC nor any Affiliate of BBMC has received
any oral or written claim or demand from any Person pertaining to or challenging
the right of BBMC or any Affiliate of BBMC to use any Intellectual Property, or
any such claim or demand challenging the rights of BBMC or any Affiliate of BBMC
under the license agreements or to the use of the computer programs and
databases listed under Section 4.15 of the Seller Disclosure Schedule and no
proceedings have been instituted, are pending or are threatened which challenge
such rights. Within the 12-month period immediately prior to the date of this
Agreement, BBMC has not made use of any intellectual property material to the
operation of its business other than rights under Intellectual Property or the
license agreements, computer programs and databases listed in Section 4.15 of
the Seller Disclosure Schedule.
4.16 Transactions with Affiliates. Section 4.16 of the Seller Disclosure
Schedule lists all material agreements in effect as of the Closing Date (such
schedule to be delivered to the Purchaser not less than five (5) Business Days
prior to the Closing Date, with respect to services provided by or to BBMC with
respect to any Affiliate of BBMC. Except as set forth in Section 4.16 of the
Seller Disclosure Schedule, such agreements were entered into on commercially
reasonable terms and conditions.
4.17 Certain Labor Matters. (a) BBMC is in substantial compliance with all
federal, state and other applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and has not
and is not engaged in any unfair labor practice, except where the failure to so
comply or such unfair labor practice could not reasonably be expected to have a
Material Adverse Effect on BBMC; (b) no unfair labor practice complaint against
BBMC is pending before the National Labor Relations Board; (c) there is no labor
strike, dispute, slowdown or stoppage actually pending or, to the knowledge of
Seller, threatened against or involving BBMC; (d) no representation question
exists respecting the employees of BBMC; (e) no grievance which is likely to
have a Material Adverse Effect on BBMC
<PAGE> 29
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exists, no arbitration proceeding arising out of or under any collective
bargaining agreement is pending and no claim therefor has been asserted; (f) no
collective bargaining agreement is currently being negotiated by BBMC; and (g)
BBMC has not experienced any material labor difficulty during the last three
years.
4.18 Brokers. No broker, investment banker, financial advisor or other
Person, other than Schroder Wertheim & Co. Incorporated, the fees and expenses
of which will be paid by Seller or an Affiliate (other than BBMC) thereof, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Seller or any of its Affiliates.
4.19 No Undisclosed Liabilities. Except as disclosed in Section 4.8(a)(i),
4.8(a)(ii), 4.8(b) or 4.19 of the Seller Disclosure Schedule and except for (a)
liabilities disclosed, reserved for or otherwise reflected in the Balance Sheet
and (b) liabilities incurred in the ordinary course of business by BBMC after
September 30, 1995, BBMC has not incurred any liabilities (contingent or
otherwise) that have had, or would reasonably be expected to have, a Material
Adverse Effect on BBMC.
4.20. Certain Contracts. (a) Except as set forth in Section 4.20 of the
Seller Disclosure Schedule, BBMC is not a party to or bound by any contract,
arrangement, commitment or understanding (whether written or oral) (i) with
respect to the employment of any directors, officers, employees or consultants,
(ii) which, due to the consummation of the transactions contemplated by this
Agreement, will (either alone or upon the occurrence of any additional acts or
events) result in any payment (whether of severance pay or otherwise) becoming
due from Purchaser or BBMC to any officer or employee of BBMC, (iii) which is a
material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC)
to be performed after the date of this Agreement, (iv) which is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on notice of 60 days or less involving the payment of
more than $100,000 per annum, (v) which materially restricts the conduct of any
line of business by BBMC or (vi) with or to a labor union or guild (including
any collective bargaining agreement). Each contract, arrangement, commitment or
understanding of the type described in this Section 4.20(a), whether or not set
forth in Section 4.20 of the Seller Disclosure Schedule, is referred to herein
as a "Company Contract".
(b) Seller has previously delivered or made available to Purchaser true and
correct copies of each Company Contract listed on Section 4.20 of the Seller
Disclosure Schedule.
<PAGE> 30
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(c) Except as set forth in Section 4.20 of the Seller Disclosure Schedule,
(i) each Company Contract is valid and binding and in full force and effect in
all material respects, (ii) BBMC has in all material respects performed all
obligations required to be performed by it to date under each Company Contract,
(iii) no event or condition exists which constitutes or, after notice or lapse
of time or both, would constitute, a material default on the part of BBMC under
any such Company Contract, and (iv) to the knowledge of the Seller, no other
party to such Company Contract is in default in any material respect thereunder.
ARTICLE V
MORTGAGE BANKING REPRESENTATIONS
OF SELLER
Seller represents and warrants to Purchaser that:
5.1 Portfolios and Listed Agreements. (a) Section 5.1(a) of the Seller
Disclosure Schedule contains a list of all Servicing Agreements to which BBMC is
a party as of the date hereof.
(b) Section 5.1(b) of the Seller Disclosure Schedule contains a list of all
Master Servicing Agreements to which BBMC is a party as of the date hereof.
(c) Section 5.1(c) of the Seller Disclosure Schedule contains a list of all
Certificate Administration Agreements to which BBMC is a party as of the date
hereof.
(d) Section 5.1(d) of the Seller Disclosure Schedule contains a list of all
Mortgage Sale Agreements entered into by BBMC after January 1, 1993 and to which
BBMC is a party as of the date hereof.
(e) Section 5.1(e) of the Seller Disclosure Schedule contains a list of all
Collateral Certificate Sale Agreements entered into by BBMC after January 1,
1993 and to which BBMC is a party as of the date hereof.
(f) Section 5.1(f) of the Seller Disclosure Schedule contains a list of all
Investment Commitments to which BBMC is party as of the date hereof, except for
Pipeline Loans to be funded or acquired by BBMC, which Pipeline Loans shall be
disclosed as of the Tape Date on the tape referred to in Section 7.12(b).
5.2 Portfolio Information. The information furnished by Seller to Purchaser
pursuant to Section 7.12(a) and (b) was true and correct in all material
respects as of the date furnished.
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5.3 Enforceability of Listed Agreements. (a) Seller has previously made
available to Purchaser true and complete copies of all Listed Agreements. Each
Listed Agreement and the Regulations applicable thereto set forth all the
material terms and conditions of BBMC's rights against and obligations to the
Agencies, Contract Parties, Investors and Insurers and there are no written or
oral agreements that modify, supplement or amend any such Listed Agreement other
than such modifications, supplements or amendments which would not have a
material adverse effect on the rights of BBMC under the related Listed
Agreement. Each of the Listed Agreements is a valid and binding obligation of
BBMC, is in full force and effect in all material respects, and is enforceable
against BBMC in accordance with its terms, except as such enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization and
other similar laws relating to or affecting creditors' rights generally and
general principles of equity (whether considered in a proceeding in equity or at
law).
(b) There is no pending or, to the knowledge of Seller, threatened
cancellation or partial termination of any Listed Agreement.
(c) Except as set forth in Section 5.3(c) of the Seller Disclosure
Schedule, the rights of BBMC under each of the Listed Agreements are owned by or
for the account of BBMC, free and clear of any Liens, including, without
limitation, the right to receive servicing fees, excess servicing fees, master
servicing fees, certificate administration fees or other compensation, if any.
5.4 Compliance with Listed Agreements. (a) Except as set forth in
Section 5.4(a) of the Seller Disclosure Schedule, there is no material default
or breach by BBMC under any Listed Agreement, and no event has occurred which
with the passage of time or the giving of notice or both would constitute a
material default or breach by BBMC under any such Listed Agreement or would
permit termination or modification of any such Listed Agreement by a third party
without the consent of BBMC.
(b) Except as set forth in Section 5.4(b) of the Seller Disclosure
Schedule, there exists no material breach of a representation and warranty by
BBMC set forth in a Listed Agreement (each of which was made as of the date
specified in such Listed Agreement) which gives rise to a remedy against BBMC
under such Listed Agreement.
5.5 Advances. Except as set forth in Section 5.5 of the Seller
Disclosure Schedule, there are no pooling, participation, Servicing or other
agreements to which BBMC is a party which obligate it to make Advances with
respect to defaulted or delinquent Mortgage Loans, other than as provided in
GNMA, FNMA or FHLMC pooling and Servicing agreements. Each Advance is a valid
and subsisting amount owing to BBMC, is carried on the books of BBMC at
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values determined in accordance with GAAP and is not subject to any setoff or
claim of the account debtor arising from acts or omissions of BBMC.
5.6 No Recourse. Except as provided in Section 5.6 of the Seller
Disclosure Schedule or in the applicable Regulations, and except with respect to
GNMA so-called "VA no bid" loans, BBMC is not a party to (a) any agreement,
arrangement or obligation with or to any Person, including any Agency, Contract
Party or Investor, to repurchase from any such Person any Mortgage Loan,
Collateral Certificate or Mortgaged Property serviced for others or (b) any
agreement, arrangement or understanding to reimburse, indemnify or hold any such
Person harmless or otherwise assume liability with respect to any loss, cost or
expense suffered or incurred as a result of the Foreclosure or sale of any such
Mortgage Loan, Collateral Certificate or Mortgaged Property, except insofar as
(i) such recourse is based upon (A) a breach (or condition equivalent to a
breach) by BBMC of a representation, warranty, covenant or undertaking or (B)
BBMC's act or omission in respect of such Mortgage Loan, Collateral Certificate
or Mortgaged Property or in connection with such Foreclosure or sale or (ii)
BBMC incurs expenses in excess of the reimbursement limits, if any, set forth in
a Listed Agreement or applicable Regulation.
5.7 Warehouse Loan Representations and Warranties. With respect to each
Mortgage Loan which, as of any date of determination, is a part of the Warehouse
Loan Portfolio and is not an Extended Warehouse Loan:
(i) the information with respect to such Mortgage Loan set forth
in the Section 5.2(a) Tape is correct in all material respects as at
the date or dates with respect to which such information is furnished
as specified herein;
(ii) immediately prior to the transfer and assignment contemplated
by this Agreement, BBMC is the sole owner and holder of such Mortgage
Loan, free and clear of any and all Liens (other than Liens securing
indebtedness reflected on the Balance Sheet);
(iii) (A) the related Mortgage is a valid, subsisting and
enforceable first lien on the related Mortgaged Property, and (B)
except as set forth in Section 5.7(iii) of the Seller Disclosure
Schedule, the related Mortgaged Property is free and clear of all
encumbrances and liens having priority over the first lien of the
related Mortgage (except for liens for real estate taxes and
assessments not yet due and payable) and, if the related Mortgaged
Property is a condominium unit, any lien for common charges permitted
by statute;
(iv) neither BBMC nor, to Seller's knowledge, any prior holder of
the related Mortgage or the related Mortgage Note has (A) modified the
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related Mortgage or the related Mortgage Note that would cause the
information set forth in the Section 5.2(a) Tape to be incorrect in any
material respect, (B) satisfied, canceled or subordinated the related
Mortgage or the related Mortgage Note in whole or in part, (C) released
the related Mortgaged Property in whole or in part from the lien of the
related Mortgage, or (D) executed any instrument of release,
cancellation, modification or satisfaction of the related Mortgage or
the related Mortgage Note that would cause the information set forth in
the Section 5.2(a) Tape to be incorrect in any material respect;
(v) all taxes, governmental assessments, insurance premiums, and
water, sewer and municipal charges previously due and owing relating to
the related Mortgaged Property for which an escrow is required, have
been paid, or an escrow of funds in an amount sufficient to pay for
every such item which remains unpaid has been established, to the
extent permitted by law;
(vi) to Seller's knowledge, there is no proceeding pending or
threatened for the total or partial condemnation of the related
Mortgaged Property and the related Mortgaged Property is undamaged by
water, fire, earthquake or earth movement, windstorm, flood, tornado or
similar casualty, so as to affect materially adversely the value of the
related Mortgaged Property as security for such Mortgage Loan or the
use for which the premises were intended;
(vii) to Seller's knowledge, the related Mortgaged Property is
free and clear of all mechanics' and materialmen's liens or liens in
the nature thereof that have rights coordinate with or prior to the
related Mortgage;
(viii) except for such Mortgage Loans secured by cooperative unit
shares or leasehold interests, the related Mortgaged Property consists
of a fee simple estate in real property and, to Seller's knowledge, all
of the improvements which are included for the purpose of determining
the appraised value of the related Mortgaged Property lie wholly within
the boundaries and building restriction lines of such property and no
improvements on adjoining properties encroach upon the Mortgaged
Property (unless insured against under the applicable title insurance
policy);
(ix) such Mortgage Loan meets, or is exempt from, applicable state
or federal laws, regulations and other requirements pertaining to
usury, and such Mortgage Loan is not usurious;
(x) to Seller's knowledge, all inspections, licenses and
certificates required to be made or issued with respect to all occupied
portions of the
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related Mortgaged Property and, with respect to the use and occupancy
of the same, including, but not limited to, certificates of occupancy,
have been made or obtained from the appropriate authorities;
(xi) except for any Mortgage Loans set forth in Section 5.7(xi) of
the Seller Disclosure Schedule, no payment required under such Mortgage
Loan is more than 30 days past due and such Mortgage Loan had no more
than one such delinquency in the preceding 13 months;
(xii) (A) the related Mortgage Note, the related Mortgage and the
other agreements executed in connection therewith are genuine, and each
is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms except as such enforcement may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law), and (B) to Seller's
knowledge, all parties to the related Mortgage Note and the related
Mortgage had legal capacity to execute such Mortgage Note and such
Mortgage and the related Mortgage Note and the related Mortgage has
been duly and properly executed by the related mortgagor;
(xiii) any and all requirements of any federal, state or local law
with respect to the origination of such Mortgage Loan, including,
without limitation, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity or
disclosure laws applicable to such Mortgage Loan, have been complied
with in all material respects;
(xiv) (A) the proceeds of such Mortgage Loan have been fully
disbursed, there is no requirement for future advances thereunder, and
(B) all costs, fees and expenses incurred in making, closing or
recording such Mortgage Loan have been paid except recording fees with
respect to a related Mortgage not recorded but which are in the process
of being recorded or fees which are not BBMC's responsibility;
(xv) such Mortgage Loan (except any such Mortgage Loan secured by
related Mortgaged Property located in any state as to which an opinion
of counsel of the type customarily rendered in such state in lieu of
title insurance is instead received) is covered by an ALTA mortgagee
title insurance policy or other generally acceptable form of policy or
insurance acceptable to FNMA or FHLMC, issued by a title insurer
acceptable to FNMA or FHLMC, insuring the originator, its successors
and assigns, as to the first priority lien of the related Mortgage in
the original principal amount of such Mortgage Loan and subject only to
(A) the lien of current real property taxes and assessments not yet due
and payable, (B)
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covenants, conditions and restrictions, rights-of-way, easements and
other matters of public record as of the date of recording of the
related Mortgage generally acceptable to mortgage lending institutions
in the area in which the related Mortgaged Property is located or
specifically referred to in the appraisal performed in connection with
the origination of such Mortgage Loan, (C) liens created pursuant to
any federal, state or local law, regulation or ordinance affording
liens for the costs of clean up of hazardous substances or hazardous
wastes or for other environmental protection purposes and (D) such
other matters to which like properties are commonly subject which do
not individually, or in the aggregate, materially interfere with the
benefits of the security intended to be provided by the related
Mortgage; BBMC and its successors and assigns are the sole insureds of
such mortgagee title insurance policy, any assignment of BBMC's
interest in such mortgagee title insurance policy does not require any
consent of or notification to the insurer which has not been obtained
or made, such mortgagee title insurance policy is in full force and
effect, and such mortgage title insurance policy has an environmental
protections lien endorsement in effect, which is generally equivalent
to ALTA 8.1, and, in the case of such Mortgage Loan which bears an
adjustable interest rate, an adjustable rate mortgage loan endorsement
in effect, which is generally equivalent to ALTA 6.1;
(xvi) the related Mortgaged Property securing such Mortgage Loan
is insured by an insurer acceptable to FHLMC or FNMA against loss by
fire and such hazards as are covered under a standard extended coverage
endorsement, in an amount which is not less than the lesser of 100% of
the insurable value of the related Mortgaged Property and the
outstanding principal balance of such Mortgage Loan; if the related
Mortgaged Property is a condominium unit, it is included under the
coverage afforded by a blanket policy for the project; the insurance
policy contains a standard clause naming the originator of such
Mortgage Loan, its successor and assigns, as insured mortgagee; if upon
origination of such Mortgage Loan, the improvements on the related
Mortgaged Property were in an area identified in the Federal Register
by the Federal Emergency Management Agency as having special flood
hazards, a flood insurance policy meeting the requirements of the
current guidelines of the Federal Insurance Administration is in effect
with a generally acceptable insurance carrier, in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of such Mortgage Loan, (B) the full insurable value
and (C) the maximum amount of insurance which was available under the
Flood Disaster Protection Act of 1973, as amended; and the related
Mortgage obligates the related mortgagor thereunder to maintain all
such insurance at such mortgagor's cost and expense;
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(xvii) to Seller's knowledge, there is no material default,
breach, violation or event of acceleration existing under the related
Mortgage or the related Mortgage Note and no event which, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a material default, breach, violation or event
of acceleration; and no foreclosure action is threatened or has been
commenced with respect to such Mortgage Loan;
(xviii) to the knowledge of Seller, neither the related Mortgage
Note nor the related Mortgage is subject to any right of rescission,
set-off, counterclaim or defense, 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 the related Mortgage Note or
the related Mortgage unenforceable, in whole or in part, or subject it
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, except,
in the case of the exercise of rights under a Mortgage Note or a
Mortgage, as a result of limitations imposed by so-called single-
action laws or similar laws in effect in any state;
(xix) (A) with respect to Mortgage Loans which are not balloon
loans, the related Mortgage Note is payable in monthly payments
resulting in complete amortization of the Mortgage Loan over a term of
not more than 360 months, and (B) with respect to Mortgage Loans which
are balloon loans, the related Mortgage Note has an original term to
stated maturity of no more than 84 months, is payable in level monthly
installments of principal and interest based on a 30-year amortization
schedule up to the stated maturity date thereof, bears a fixed mortgage
interest rate and provides that the full outstanding principal balance
of such Mortgage Note is due and payable, together with accrued
interest thereon, on its stated maturity date;
(xx) the related Mortgage contains customary and enforceable
provisions such as to 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 realization by
judicial or nonjudicial foreclosure (subject to any limitation arising
from any bankruptcy, insolvency or other law for the relief of
debtors), and there is no homestead or other exemption available to the
related mortgagor which would interfere with such right of foreclosure;
(xxi) to Seller's knowledge, the related mortgagor with respect to
such Mortgage Loan is not a debtor in any state or federal bankruptcy
or insolvency proceeding;
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(xxii) the related Mortgaged Property is located in the United
States and consists of a single parcel of real property upon which is
built a one to four family residential property which may include a
detached home, townhouse, condominium unit, a unit in a planned unit
development or, in the case such Mortgage Loan is secured by
cooperative unit shares, leases or occupancy agreements;
(xxiii) such Mortgage Loan was originated by either: (A) a savings
and loan association, savings bank, commercial bank, credit union,
insurance company, or similar institution which is supervised and
examined by a federal or state authority; (B) a mortgagee approved by
the secretary of HUD pursuant to Sections 203 and 211 of the National
Housing Act (an "Approved Mortgagee") or (C) a mortgage broker
sponsored by an Approved Mortgagee; and
(xxiv) such Mortgage Loan is a "qualified mortgage" within the
meaning of Section 8600 of the code.
5.8 Mortgage Banking Licenses and Qualification. (a) Except as set
forth in Section 5.8(a) of the Seller Disclosure Schedule, BBMC (i) to the
extent required for the conduct of its current business, is approved (A) by FHA
as an approved mortgagee and servicer for FHA Loans, (B) by VA as an approved
lender and service for VA Loans, (C) by FNMA and FHLMC as an approved
seller/servicer of first lien residential mortgages, and (D) by GNMA as an
authorized issuer and approved servicer of GNMA-guaranteed mortgage-backed
securities and (ii) has all other material certifications, authorizations,
licenses, permits and other approvals (together with the approvals and
qualifications set forth in clause (i), the "Licenses") necessary to conduct its
current business.
(b) Except as set forth in Section 5.8(b) of the Seller Disclosure
Schedule, to the knowledge of Seller, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
affect the validity of any License currently possessed by BBMC, and all such
Licenses will be in full force and effect immediately after the Closing Date;
provided, however, that no representation is made with respect to the impact or
effect of any business, conduct, activities or regulatory status of Purchaser or
any Affiliate thereof on any such License.
(c) BBMC is in compliance with all requirements relating to all of its
Licenses, and Seller knows of no threatened suspension, cancellation or
invalidation of any such License except where such failure, non-compliance or
threatened suspension, cancellation or invalidation would not reasonably be
expected to have a Material Adverse Effect on BBMC.
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5.9 Mortgage Banking Compliance. (a) Except as set forth in Section
5.9(a) of the Seller Disclosure Schedule, BBMC is in compliance in all material
respects with (i) all applicable Regulations, (ii) all orders, writs, decrees,
injunctions and other requirements of any court or governmental authorities
applicable to it, its properties and assets and the conduct of its business and
(iii) all Mortgage Loan Documents relating to each Mortgage Loan. Any and all
Regulations and requirements of any federal, state or local law with respect to
the documentation, underwriting, origination, modification and sale of each
Mortgage Loan in the Servicing Portfolio, including, without limitation,
truth-in-lending, real estate settlement procedures, consumer credit protection,
equal credit opportunity or disclosure laws applicable to such Mortgage Loan,
have been complied with in all material respects except where such
non-compliance would not reasonably be expected to have a Material Adverse
Effect on BBMC.
(b) BBMC has timely filed all reports required by any Agency, Investor
or Insurer or by any federal, state or municipal law, Regulation or ordinance to
be filed by BBMC except where the failure to file such reports would not
reasonably be expected to have a Material Adverse Effect on BBMC. BBMC has not
done or failed to do, and has not caused to be done or omitted to be done, any
act required of BBMC, the effect of which would operate to invalidate or
materially impair (i) any approval of any Agency or Investor, (ii) any FHA
insurance or commitment of the FHA to insure, (iii) any VA Guarantee or
commitment of the VA to guarantee, (iv) any private mortgage insurance or
commitment of any private mortgage insurer to insure, (v) any title insurance
policy, (vi) any hazard insurance policy, (vii) any flood insurance policy,
(viii) any fidelity bond, direct surety bond, or errors and omissions insurance
policy required by HUD, GNMA, FNMA, FHA, FHLMC, VA or a private mortgage insurer
or (ix) any surety or guaranty agreement, except where such act or failure to
act would not reasonably be expected to have a Material Adverse Effect on BBMC.
(c) Except as disclosed in Section 5.9(c) of the Seller Disclosure
Schedule, to the Seller's knowledge, no Agency, Investor or Insurer has (i)
claimed that BBMC has violated or not complied in any material respect with the
applicable underwriting standards with respect to Mortgage Loans sold by BBMC to
an Investor or (ii) imposed any restrictions on the activities (including
commitment authority) of BBMC. Except as disclosed in Section 5.9(c) of the
Seller Disclosure Schedule, to the knowledge of the Seller, there exist no facts
or circumstances which would entitle an Investor to demand repurchase of a
Mortgage Loan or which would entitle an Insurer (A) to demand indemnification
from BBMC, (B) to cancel (or deny with respect to any pending Mortgage Loan) any
mortgage insurance held for BBMC's benefit or (C) to reduce any mortgage
insurance benefits payable to BBMC.
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5.10 Inquiries. Section 5.10 of the Seller Disclosure Schedule contains
a true and correct list of each audit, investigation and complaint against BBMC
by any Agency, Investor or Insurer commenced since January 1, 1992 which
resulted in a determination of a material failure to comply with applicable
Regulations or otherwise resulted in (a) a repurchase by BBMC of ten or more
Mortgage Loans and/or REOs from such Agency, Investor or Insurer in any period
equal to or less than one year, (b) indemnification by BBMC in connection with
ten or more Mortgage Loans in any period equal to or less than one year, (c)
rescission of an insurance or guaranty contract or agreement applicable to ten
or more Mortgage Loans or (d) payment of a penalty to an Agency, Investor or
Insurer. Except as set forth in Section 5.10 of the Seller Disclosure Schedule
and except for customary ongoing quality control reviews, no such audit,
investigation or complaint is, to the knowledge of Seller, pending or
threatened. Seller has made available to Purchaser copies of all written reports
and other material documents received in connection with such audits,
investigations, complaints and inquiries.
5.11 Correspondent Agreements. Each Correspondent Agreement is a valid
and binding contract in full force and effect in all material respects. Except
as set forth in Section 5.11 of the Seller Disclosure Schedule, BBMC is not in
material default under any Correspondent Agreement.
5.12. Custodial Accounts. BBMC has full power and authority to
establish and, to the extent applicable, maintain escrow accounts ("Custodial
Accounts") for the Mortgage Loans, and is the lawful fiduciary of all Custodial
Accounts related to the Mortgage Loans. Such Custodial Accounts comply in all
material respects with (a) all applicable Regulations and (b) all terms of the
Mortgage Loans relating thereto, and all such Custodial Accounts have been
maintained in all material respects in accordance with usual and customary
industry practice during any period during which BBMC has been responsible for
maintaining such Custodial Accounts. Except as required by applicable
Regulations, BBMC is not required to pay interest on the Custodial Accounts
during any period during which BBMC is responsible for maintaining such
Custodial Accounts.
5.13. Environmental Matters. Except as set forth in Section 5.13 of the
Seller Disclosure Schedule:
(a) BBMC is, and has been, in compliance in all material respects with
all applicable federal, state and local laws, including common law, Regulations
and ordinances and with all applicable decrees, orders and contractual
obligations relating to pollution, or discharge of, or exposure to, Hazardous
Materials (as defined in Section 5.13(f) hereof) in the environment or workplace
("Environmental Laws").
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(b) There is no suit, action or proceeding pending or, to the knowledge
of the Seller, threatened before any governmental entity or other forum in which
BBMC has been or, with respect to threatened proceedings, could reasonably be
expected to be, named as a defendant (i) for alleged noncompliance with
Environmental Laws, or (ii) relating to the release into the environment of any
Hazardous Material or oil, whether or not occurring at or on a site owned,
leased or operated by BBMC.
(c) To the knowledge of Seller, there is no reasonable basis for any
suit, claim, action or proceeding as described in subsection (b) of this Section
5.13, except as would not be reasonably expected, individually or in the
aggregate, to have Material Adverse Effect on BBMC.
(d) During the period of the ownership or operation by BBMC of any
properties currently owned, leased or operated by BBMC, there has been no
material release of any Hazardous Material or oil in, on, under or affecting
such properties.
(e) The Seller shall promptly notify Purchaser if it receives any
notices, or learns of any facts, that would cause the representation set forth
in this Section 5.13 to be false in any material respect.
(f) The following definition applies for purposes of this Section 5.13:
"Hazardous Material" mean any pollutant, contaminant, or hazardous
substance under the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C., Section 9601, et. seq. or any similar state law.
5.14. Pool Certification. Each Mortgage Loan included in a Mortgage
Pool meets all eligibility requirements for inclusion in such Mortgage Pool, in
accordance with all applicable standards of eligibility for loan pooling. Except
as disclosed in Section 5.14 of the Seller Disclosure Schedule, the Loan
Documents for each Mortgage Loan contain or will contain, within the period
required by applicable Investor Regulations, all items required by applicable
Investor Regulations for the certification of Mortgage Pools by the appropriate
Investor and such Mortgage Pools will be in compliance with all applicable
Investor requirements and guidelines, within the period required by applicable
Investor Regulations. Except as disclosed in Section 5.14 of the Seller
Disclosure Schedule, all Mortgage Pools relating to the Mortgage Loans have been
or will be, within the period required by applicable Investor Regulations,
certified in accordance with applicable Investor Regulations, and the securities
backed by such Mortgage Pools have been issued on uniform documents, promulgated
in the applicable Investor guide without any material deviations therefrom.
Except as disclosed in Section 5.14 of the Seller Disclosure Schedule,
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all Mortgage Pools relating to the Mortgage Loans are or will be, within the
period required by applicable Investor Regulations, eligible for recertification
by the appropriate custodian. Except as disclosed in Section 5.14 of the Seller
Disclosure Schedule, the principal balance outstanding and owing on the Mortgage
Loans in each Mortgage Pool equals or exceeds the amount owing to the
corresponding security holder of such Mortgage Pool. No Mortgage Loan has been
bought out of a Mortgage Pool without approval of the appropriate Investor.
5.15 Absence of Other Warranties. Except as and to the extent expressly
set forth in this Agreement, Seller makes no representations or warranties
whatsoever.
For purposes of this Agreement, the term "knowledge of Seller" or
similar qualifiers shall be limited to the actual knowledge of any of the
officers and employees of Seller listed in Section 5.15 of the Seller Disclosure
Schedule.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that:
6.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Purchaser
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of its business or
properties makes such qualification or license necessary, except where failure
to be so qualified, licensed or in good standing would not reasonably be
expected to have a Material Adverse Effect on Purchaser.
6.2 Capitalization of Purchaser; Existing Options.
(a) At the Closing the authorized capital stock of Purchaser will
consist of 1,500,000 shares of Class A voting common stock, par value $.01 per
share (the "Purchaser Class A Common Stock"), 5,714 shares of Class B nonvoting
convertible common stock, par value $.01 per share (the "Purchaser Class B
Nonvoting Common Stock"), and 5,714 shares of Class C nonvoting common stock,
par value $1.00 per share (the "Purchaser Class C Nonvoting Common Stock"). All
shares of capital stock of Purchaser to be issued on the Closing Date shall be
validly issued, fully paid and non-assessable and shall be free and clear of all
Liens and adverse claims.
(b) Except as contemplated by the Purchaser Stock Option Plan, there
are no outstanding obligations, warrants, options or other rights to subscribe
for
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or purchase from Purchaser or other contracts or commitments providing for
the issuance of, or the granting of rights to acquire, shares of any class of
stock of or any equity interest in Purchaser, or any securities or other
instruments convertible into or exchangeable for shares of any class of stock of
or any equity interest in Purchaser other than the rights of Seller created by
this Agreement and the rights created by the other Purchase Agreements and the
Stockholder Agreement.
(c) Other than as contemplated by this Agreement with respect to the
BBMC Stock, (i) as of the date hereof, Purchaser neither owns nor has the option
to acquire, directly or indirectly, any equity interest in any Person, and (ii)
as of the Closing, Purchaser will neither own nor have the option to acquire,
directly or indirectly, any equity interest in any Person.
(d) Other than as contemplated by this Agreement with respect to BBMC,
Purchaser has no Subsidiaries and is not party to any partnership or joint
venture.
6.3 Authority. Purchaser has the corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by Purchaser of this Agreement and the consummation by it
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Purchaser. This Agreement constitutes
a valid and legally binding agreement of Purchaser, enforceable against
Purchaser in accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
6.4 Non-Contravention. The execution and delivery of this Agreement by
Purchaser does not, and the consummation by Purchaser of the transactions
contemplated hereby and the performance by each of Purchaser of the obligations
which it is obligated to perform hereunder will not, (a) violate any provision
of the constituent documents of Purchaser, (b) assuming that all material
consents, authorizations, orders and approvals of, filings or registrations
with, and notices to, each Governmental Authority listed in Section 6.4(a) of
the Purchaser Disclosure Schedule and all Third Party Consents listed in Section
6.4(b) of the Purchaser Disclosure Schedule have been obtained or made, (i)
violate in any material respect any Applicable Law to which Purchaser is subject
or (ii) violate in any material respect, result in the termination or the
acceleration of, or conflict with in any material respect or constitute a
material default under, any Contract to which Purchaser is a party or by which
any of its assets or property is bound or (c) result in the creation of any Lien
on any of the material assets or properties of Purchaser or the loss of any
material license or other contractual right with respect thereto.
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6.5 Consents, Approvals and Notices. (a) Except as described in Section
6.4(a) of the Purchaser Disclosure Schedule, no material consent, authorization,
order or approval of, filing or registration with, or notice to, any
Governmental Authority and (b) except as described in Section 6.4(b) of the
Purchaser Disclosure Schedule, no material Third Party Consent under any
Contract to which Purchaser is a party or by which any of its assets or
properties is bound is required for the execution and delivery of this Agreement
by Purchaser and the consummation by Purchaser of the transactions contemplated
hereby, except for such consents, authorizations, orders, approvals, filings,
registrations, notices or Third Party Consents which Seller or its Affiliates
are required to obtain or make.
6.6 Litigation. (a) As of the date of this Agreement, there is no
Litigation against Purchaser which if adversely determined would have a Material
Adverse Effect on Purchaser. As of the date of this Agreement, there are no
material orders, judgments, injunctions or decrees applicable to Purchaser.
(b) As of the date of this Agreement, there is no Litigation, to the
knowledge of Purchaser, threatened against Purchaser before any court,
arbitrator or Governmental Authority which if adversely determined would have a
Material Adverse Effect on Purchaser.
6.7 Compliance with Laws; Permits and Licenses. (a) The operations of
Purchaser are being conducted in compliance with all Applicable Laws, except
where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect on Purchaser.
(b) Purchaser holds all permits, certificates, licenses, approvals and
other authorizations (or, where legally permissible, has waivers thereof or is
entitled to exemptions therefrom) of each Governmental Authority necessary for
the operation of its business as presently conducted, except where the failure
to so hold would not reasonably be expected to have a Material Adverse Effect on
Purchaser.
6.8 Brokers. Except as otherwise set forth in Section 6.8 of the
Purchaser Disclosure Schedule, no broker, investment banker, financial advisor
or other Person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Purchaser or
any of its Affiliates.
6.9 No Regulatory Impediment. Purchaser is not aware of any fact
relating to its or any Affiliate's business, operations, financial condition or
legal status that could reasonably be expected to impair its ability to obtain,
on a
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timely basis, all consents, approvals, licenses and permits from Governmental
Authorities necessary for the consummation of the transactions contemplated
hereby.
6.10 No Undisclosed Liabilities. Except as disclosed in Section 6.10 of
the Purchaser Disclosure Schedule or as otherwise specifically contemplated by
this Agreement, since the date of its organization, Purchaser has not conducted
any business or otherwise engaged in any material activities or incurred any
material liabilities.
6.11 Absence of Other Warranties. Except as and to the extent expressly
set forth in this Agreement, Purchaser makes no representations or warranties
whatsoever.
For purposes of this Agreement, the term "knowledge of Purchaser" or
similar qualifiers shall be limited to the actual knowledge of any of the
officers and employees of Purchaser listed in Section 6.12 of the Purchaser
Disclosure Schedule.
ARTICLE VII
COVENANTS
7.1 Conduct of Business. During the period from the date hereof to the
Closing Date, without the prior written consent of Purchaser or except as
expressly permitted or required by this Agreement, Seller agrees that:
(a) Seller will operate the BBMC Business only in the ordinary
course consistent with past practice, and Seller shall use commercially
reasonable efforts, consistent with past practice, to preserve for
Purchaser BBMC's business organization and operations and to maintain
satisfactory relationships with customers, licensors and others having
business relationships with BBMC, and Seller shall cause BBMC to engage
in hedging activities consistent with BBMC's hedging policies as in
effect on the date hereof; provided, that Purchaser shall have the
right to review BBMC's hedging activities to confirm that such
activities are consistent with such policies;
(b) no change shall be made in the certificate of incorporation or
by-laws or other organizational documents of BBMC;
(c) no dividend or other distribution shall be declared, paid or
otherwise made (including by way of redemption or otherwise) in respect
of the BBMC Stock;
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(d) BBMC shall not issue or agree to issue any shares of its
capital stock or other equity interests or securities convertible into
or exchangeable for or other rights with respect to such capital stock
or other equity interests;
(e) no material change shall be made by BBMC in accounting
methods, principles or practices, unless required by law or by changes
in GAAP, except that BBMC may elect to implement the accounting change
described in FASB 122;
(f) Except as set forth on Section 7.1(f) of the Seller Disclosure
Schedule, BBMC shall not enter into any material contract, transaction
or commitment otherwise than in the ordinary course of business
consistent with past practice;
(g) BBMC shall not (i) transfer or otherwise dispose of or
encumber any of its properties or assets, other than in the ordinary
course of business or as contemplated by Section 7.1(m) or other than
Liens incurred in connection with (a) any revolving credit facility or
gestation repo facility entered into by BBMC to fund its Warehouse Loan
Portfolio or (b) any indebtedness permitted by clause (iv) below;
provided, however, that nothing in this Agreement shall in any way
restrict the ability of BBMC to transfer or otherwise dispose of any
Extended Warehouse Loan or REO; (ii) cancel any debt or waive or
compromise any claim or right, except in the ordinary course of
business; (iii) make any capital expenditure or commitment, other than
in the ordinary course of business; (iv) except with respect to
endorsements of negotiable instruments in the ordinary course of its
business or with respect to its mortgage banking business in accordance
with past practice, incur, assume or guarantee any indebtedness for
borrowed money which will constitute a liability of BBMC as of the
Closing Date other than (A) purchase money indebtedness, (B)
indebtedness for borrowed money pursuant to credit agreements, credit
lines and other borrowing facilities and arrangements in effect on the
date of this Agreement, (C) refunding of existing indebtedness, (D)
intercompany indebtedness between and among BBMC and any Affiliate
thereof, (E) indebtedness incurred by BBMC pursuant to any revolving
credit facility or gestation repo facility utilized to fund its
Warehouse Loan Portfolio, or (F) guaranties of letter of credit
reimbursement obligations, purchaser orders and similar obligations
issued for the benefit of customers in the ordinary course of business;
or (v) agree to do any of the foregoing;
(h) unless required by applicable law or Investor or Insurer
requirements, BBMC shall not materially alter or vary its methods or
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policies of underwriting, originating, warehousing, selling or
servicing, or buying or selling rights to service mortgage loans;
(i) BBMC shall not initiate the termination of any Servicing
Agreement, Master Servicing Agreement or Certificate Administration
Agreement;
(j) BBMC shall not enter into any Servicing Agreement, Master
Servicing Agreement or Certificate Administration Agreement with
recourse against it, except insofar as (i) such recourse is based upon
(A) a breach (or condition equivalent to a breach) by BBMC of a
representation, warranty, covenant or undertaking or (B) BBMC's act or
omission in connection with a foreclosure sale or (ii) BBMC incurs
expenses in excess of the reimbursement limits, if any, set forth in
the relevant agreement or any applicable Regulation;
(k) BBMC shall not enter into or amend any employment, bonus,
severance, or retirement contract or arrangement (including any Plan as
described in Section 4.11), or increase any salary or other form of
compensation payable or to become payable to any current or former
employee, officer, or director (including any beneficiary thereof),
except as may be required in order to obtain any favorable
determination letter with respect to any Plan intended to be qualified
under Section 401(a) of the Code and except for merit increases to
employees (including directors and executive officers) in accordance
with past practices and general increases to employees (excluding
directors and executive officers) as a class in accordance with past
practice or as required by law and except for payments pursuant to
agreements referred to in Section 4.10 of the Seller Disclosure
Schedule; provided that no such payment shall be made to discharge a
Retained Liability as defined in Section 7.7(e);
(l) BBMC shall not enter into any agreement, understanding or
transaction with any Affiliate, other than on arms-length terms, in the
ordinary course of business and consistent with past practices, or as
expressly contemplated hereby or by the other Related Agreements;
(m) On or prior to the Closing Date, BBMC shall transfer to the
Seller the Excluded Assets and the Seller shall assume from BBMC the
Excluded Liabilities, in each case at their respective book values on
the date of such transfer, and the Seller shall pay to the Purchaser in
cash on the Closing Date (or there shall be deducted from the
indebtedness of BBMC owed to the Seller) the excess of the aggregate
book value of the Excluded Assets over the aggregate book value of the
Excluded Liabilities; provided, however, that, with respect to Excluded
Assets and Excluded Liabilities which existed as of the date of the
Balance Sheet, such book
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values shall not be modified other than to reflect amortization or
depreciation consistent with past practices and not inconsistent with
GAAP and, with respect to Excluded Assets and Excluded Liabilities
arising after the date of the Balance Sheet, such book values shall not
be modified other than consistent with past practices not inconsistent
with GAAP; and provided, further, that certain of the Excluded Assets
as set forth on such Schedule may be retained by BBMC and pledged to
the Seller as security for financing provided by the Seller to BBMC on
terms and conditions satisfactory to the Seller, Lee and Madison
Dearborn; and
(n) Seller shall not permit or cause BBMC to make any material
increase in its reserve for Taxes from the amounts of such reserves
reflected in the Balance Sheet other than increases consistent with
past practices and not inconsistent with GAAP.
Notwithstanding anything herein to the contrary, BBMC may use any gains from its
hedging activities to add Mortgage Loans to its Servicing Portfolio. During the
period from the date of this Agreement to the Closing Date, Seller, shall confer
on a regular basis with Purchaser as to the BBMC Business, and report
periodically on the general status of ongoing operations of BBMC.
7.2 Access; Confidentiality. Seller agrees to cause BBMC to permit
Purchaser and its accountants, counsel and other authorized representatives to
have, during the period from the date of this Agreement to the Closing Date,
reasonable access to the premises, books and records of BBMC at all reasonable
times upon reasonable notice. Seller agrees to cause BBMC to make available to
Purchaser, upon reasonable advance notice and at all reasonable times, the
officers of BBMC, as Purchaser may reasonably request, provided that such
availability shall not interfere with the normal operations of BBMC. Seller
shall cause BBMC to furnish Purchaser with such financial and operational data
and other information with respect to the business and properties of BBMC as
Purchaser shall from time to time reasonably request. Any information regarding
BBMC heretofore or hereafter obtained from Seller or BBMC by Purchaser or its
representatives shall be subject to the terms of the Confidentiality Agreement,
and such information shall be held by Purchaser and its representatives in
accordance with the terms of the Confidentiality Agreement.
7.3 Reasonable Efforts; Taking of Necessary Action. (a) Each of the
parties hereto agrees to use its all reasonable efforts to take or cause to be
taken all actions and promptly to do or cause to be done all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
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(b) Purchaser shall (i) as soon as practicable after the date hereof,
file such applications, notices, registrations and requests as may be required
or advisable to be filed by it with any Governmental Authority in connection
with the transactions contemplated hereby, (ii) furnish Seller with copies of
all documents (except documents or portions thereof for which confidential
treatment has been requested or given) and correspondence (A) prepared by or on
behalf of Purchaser for submission to any Governmental Authority and (B)
received by or on behalf of Purchaser from any Governmental Authority, in each
case in connection with the transactions contemplated hereby, and (iii) use all
reasonable efforts to consult with and keep Seller informed as to the status of
such matters. To the extent that any application, notice, registration or
request so filed contains any significant information relating to Seller or
BBMC, prior to Purchaser submitting such application, notice, registration or
request to any Governmental Authority, Seller shall have the right to approve
any such information that relates to Seller or BBMC (which approval shall not be
unreasonably withheld).
(c) Seller shall use all reasonable efforts to cooperate with Purchaser
in the preparation and filing of all applications, notices, registrations and
responses to requests for additional information from Governmental Authorities
made by Purchaser with any Governmental Authority in connection with the
transactions contemplated by this Agreement, including providing such
information as Purchaser may reasonably request for inclusion in such
applications, notices, registrations and responses.
7.4 Insurance; Risk of Loss. (a) Effective as of the Closing Date: (i)
Seller may terminate or cause its Affiliates to terminate all coverage relating
to BBMC and its business, assets and current or former employees under any
general corporate policies of insurance, cancelable surety bonds and hold
harmless agreements of Seller for the benefit of BBMC as listed in Section 7.4
of the Seller Disclosure Schedule (provided that no such termination of
occurrence liability policies shall be effected so as to prevent BBMC from
recovering under such policies for losses from events occurring prior to the
Closing Date); and (ii) Purchaser shall become solely responsible for all
insurance coverage and related risk of loss based on events occurring on and
after the Closing Date with respect to BBMC and its business, assets and current
or former employees or employees terminated after the Closing Date.
(b) Notwithstanding the provisions of Section 7.4(a), to the extent
that (i) any insurance policies controlled by Seller and its Affiliates
("Seller's Insurance Policies") cover any loss, liability, claim, damage or
expense relating to BBMC or its business, assets and current or former employees
("BBMC Liabilities") and relating to or arising out of occurrences prior to the
Closing Date and (ii) Seller's Insurance Policies continue after the Closing
Date to
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permit claims to be made thereunder with respect to BBMC Liabilities relating to
or arising out of occurrences prior to the Closing Date ("BBMC Claims"), Seller
shall cooperate and cause its Affiliates to cooperate with Purchaser in
submitting BBMC Claims (or pursuing BBMC Claims previously made) on behalf of
Purchaser under Seller's Insurance Policies.
(c) To the extent that, after the Closing Date, Purchaser or Seller
requires any information regarding claim data, payroll or other information in
order to make filings with insurance carriers, Seller shall promptly supply such
information to Purchaser and Purchaser shall promptly supply such information to
Seller.
7.5 Assumption of Proceedings. From and after the Closing Date,
Purchaser shall, or shall cause BBMC to, assume the defense of, and Purchaser
shall indemnify and hold each Indemnified Seller Entity harmless from and
against, any and all Litigations involving, or related to, BBMC; provided,
however, that neither the Purchaser nor BBMC shall have any responsibility or
liability under this Section 7.5 with respect to a Litigation which constitutes
a breach of the representations and warranties contained in Section 4.8, and to
which the Purchaser is entitled to indemnification under Article XII.
7.6 Name and Marks. On the Closing Date, BBMC will change its name to
"HomeAmerica Real Estate Funding, Inc.". As of the Closing Date, Purchaser will
cease the use of the designation "BancBoston Mortgage Corporation" or any
derivative thereof in connection with Purchaser's operation of the business of
BBMC and will eliminate the use of any other designation or symbol indicating
affiliation after the Closing Date with Bank of Boston Corporation ("Parent") or
any Affiliate of Parent. Insofar as promotional materials are concerned,
placement on the covers thereof a prominent legend negating affiliation with
Parent or any Affiliate of Parent shall be deemed compliance with the
requirements of this Section with respect to materials on hand as of the Closing
Date which are used or distributed by Purchaser for a period of no more than
three months following the Closing Date.
7.7. Employment and Benefit Matters.
(a) Employment.
(i) At the Closing Date, the Purchaser will cause BBMC to offer to
continue the employment of substantially all of the employees then
employed by BBMC other than the New England-based retail and operations
employees ("Continuing Employees").
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(ii) For a period of six months after the Closing Date, the
Purchaser will cause BBMC to provide any Continuing Employee whose
position is eliminated with severance payments and benefits
substantially equivalent to those maintained by BBMC immediately prior
to the Closing Date.
(b) Bonus. The Seller shall provide all funds necessary to implement
BBMC's bonus program for 1995, but not 1996 or following years, and the
Purchaser shall cause BBMC to adopt and announce to Continuing Employees a bonus
program for 1996 and following years appropriate for its industry, business
plans, and operating performance, and taking into account other benefit plans
(including option plans) maintained from time to time by Purchaser.
(c) Employee Benefits.
(i) For a period of six months after the Closing Date, except as
otherwise provided in this clause (i), the Purchaser will cause BBMC to
provide Continuing Employees with the types of employee benefits
maintained by BBMC immediately prior to the Closing Date and with
employee benefits (other than retire medical and life insurance
benefits) that are substantially equivalent to those maintained by BBMC
immediately prior to the Closing Date. Whenever the Purchaser causes
BBMC to adopt new employee benefit plans or to join employee plans
maintained for its employees and/or the employees of other subsidiaries
or Affiliates, the Purchaser shall cause each such plan to recognize
for all purposes (other than the accrual of benefits attributable to
periods before the Closing Date) all service by Continuing Employees
with BBMC, the Seller and any other subsidiary or Affiliate of the
Seller. The Seller and the Purchaser contemplate that BBMC will at the
Closing Date terminate its participation in the Retirement Plan
theretofore maintained by BBMC and will replace it with a
profit-sharing plan providing contributions for the accounts of the
Continuing Employees for 1996 not less than the allocations they would
have received under such Retirement Plan and thereafter providing
contributions appropriate for BBMC's industry, business plans, and
operating performance, and taking into account other benefit plans
(including option plans) maintained from time to time by Purchaser.
After the Closing Date and after appropriate approvals within the
Seller, Continuing Employees will no longer be able to direct
investment of amounts standing to their respective accounts under the
Thrift Incentive Plan into funds invested in securities issued by the
Seller and its Affiliates.
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(ii) If BBMC shall have continued to be an employer contributing
to the Seller's Thrift Incentive Plan after the Closing Date, the
Purchaser will cause BBMC to withdraw from that Plan effective June 30,
1996, and the Seller will retain responsibility for distributions under
both its Retirement Plan and its Thrift Incentive Plan in accordance
with applicable provisions of those plans.
(d) Stock Plans.
(i) If the Seller receives appropriate approval from its internal
boards and committees, the Seller will, prior to the Closing Date,
accelerate vesting in all outstanding stock options granted to
Continuing Employees, and Continuing Employees will have to exercise
all options prior to the Closing Date. Otherwise, the options will
terminate.
(ii) If the Seller receives appropriate approval from its internal
boards and committees, the Seller will cause all outstanding restricted
stock awarded to Continuing Employees to become free of all
restrictions, effective as of the Closing Date.
(e) Seller shall retain all liabilities and obligations ("Retained
Liabilities") for (i) providing postretirement medical and life insurance
benefits to all current and former employees and officers of BBMC and
subsidiaries of BBMC (and any eligible dependents thereof) who terminate
employment on or before the Closing Date; (ii) payment of amounts deferred by
Continuing Employees under Seller's Voluntary Deferred Compensation Plan through
the Closing Date (plus interest thereon in accordance with the terms of said
plan); and (iii) providing all benefits and paying all amounts due now or in the
future under all change of control agreements and stay put bonuses entered into
prior to the Closing Date between BBMC or Seller and any of their respective
current or former employees and officers; provided, however, that Seller shall
be liable to provide such benefits and/or to make such payments under such
change of control agreements only to the extent such benefits are provided or
such payments are payable as a result of the transactions contemplated hereby.
7.8 Public Announcements. Unless otherwise required by law, prior to
the Closing Date, no news release or other public announcement pertaining to the
transactions contemplated by this Agreement shall be made by or on behalf of any
party hereto without the prior approval of the other parties hereto; provided,
that Seller may make such a release or announcement after notice to Purchaser,
Lee and Madison Dearborn and after giving Lee and Madison Dearborn a reasonable
opportunity to review such release or announcement. Unless otherwise required by
law, no news release or other public announcement shall be made by or on behalf
of a party hereto regarding the
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financial terms of this Agreement without the prior approval of the other
parties hereto.
7.9 Post-Closing Access to Business Records and Accounting Cooperation.
Purchaser agrees that, following the Closing Date, Seller and its Affiliates,
and their respective attorneys, accountants, officers and other representatives,
shall have reasonable access, at all reasonable times upon reasonable notice, to
the books and records of Purchaser to the extent they relate to a period prior
to the Closing Date (and shall permit such Persons to examine and copy such
books and records to the extent requested by such party), and shall cause the
directors, officers and employees of the Purchaser to furnish all information
reasonably requested by Seller or any Affiliate thereof in connection with
financial reporting and tax matters (including financial and tax audits and tax
contests) and other similar business purposes. Purchaser shall not destroy or
dispose of any such books and records without the prior written consent of
Seller prior to the fifth anniversary of the Closing Date. On and after the
fifth anniversary of the Closing Date, Purchaser shall not destroy or dispose or
allow the destruction or disposition of such books and records without first
having offered in writing to deliver such books and records to Seller. Purchaser
may dispose of the books and records described in such notice if Seller shall
fail to request copies of such books and records within 90 days after receipt of
the notice described in the preceding sentence.
7.10 Further Assurances. Each party hereto shall cooperate with the
others, and execute and deliver, or use all reasonable efforts to cause to be
executed and delivered, all such other instruments, including instruments of
conveyance, assignment and transfer, and to make all filings with and to obtain
all consents, approvals or authorizations of any governmental or regulatory
authority or any other Person under any permit, license, agreement, indenture or
other instrument, and take all such other actions as such party may reasonably
be requested to take by the other parties hereto from time to time, consistent
with the terms of this Agreement, in order to effectuate the provisions and
purposes of this Agreement and the transactions contemplated hereby.
7.11 Transitional Services Agreements. Prior to the Closing Date,
Seller and Purchaser shall negotiate in good faith the terms of appropriate
Transitional Services Agreements pursuant to which Seller will agree that for a
reasonable period of time it will make available to BBMC at Seller's cost such
corporate services as are necessary to enable BBMC to conduct its operations
after the Closing Date on substantially the same basis as they were conducted
prior to the Closing Date.
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7.12 Delivery of Tapes.
(a) Seller shall deliver to Purchaser at least five (5) Business Days
prior to the Closing Date a tape (magnetic media) which sets forth certain
information, as of the end of the month most recently ended at least fifteen
(15) days prior to the Closing Date (the "Tape Date"), with respect to each
Mortgage Loan that is a part of the Servicing Portfolio, the Master Servicing
Portfolio, the Certificate Administration Portfolio or the Warehouse Loan
Portfolio (the "Section 7.12(a) Tape").
(b) Seller shall deliver to Purchaser at least five (5) Business Days
prior to the Closing Date a tape (magnetic media) which sets forth certain
information as of the Tape Date with respect to each Pipeline Loan.
7.13. Assignment of Hedge Positions. At the Closing Seller shall assign
to BBMC, for no additional consideration, or enter into other arrangements
reasonably acceptable to Purchaser with respect to, the hedge contracts listed
on Schedule 7.13 hereto.
ARTICLE VIII
CONDITIONS TO THE CLOSING
8.1 Conditions to Obligation of Each Party. The respective obligations
of each of the parties hereunder are subject to the satisfaction, on or prior to
the Closing Date, of the following conditions:
(a) No Injunction. At the Closing Date,
there shall be no (i) injunction, restraining order or decree
of any nature of any court or Governmental Authority of
competent jurisdiction in effect that restrains or prohibits
the consummation of the transactions contemplated under this
Agreement or (ii) pending action, suit or proceeding brought
by any Governmental Authority which seeks to restrain or
prohibit consummation of such transactions.
(b) Regulatory Authorizations. Each consent,
authorization, order, approval or License listed in Section
4.4(a), 4.4(b) or 5.8(a) of the Seller Disclosure Schedule or
Section 6.4(a) or 6.4(b) of the Purchaser Disclosure Schedule
shall have been obtained and any applicable waiting period in
respect thereof shall have expired or been terminated. No such
consent, authorization, order, approval or License shall have
been granted subject to the imposition of any term, condition
or restriction that so materially adversely affects the
economic or business benefits of the transaction contemplated
by this Agreement to the recipient thereof as to render
inadvisable the consummation of such transaction.
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Notwithstanding the foregoing, the parties agree that
satisfaction of the condition set forth in this Section 8.1(b)
shall be determined without regard to whether Seller is able
to deconsolidate from BBMC for financial statement, regulatory
and reporting purposes.
(c) Financings. BBMC shall have received
financing satisfactory to Seller, Lee and Madison Dearborn. In
addition, the Purchaser shall have entered into financing
arrangements satisfactory to each of the Seller, Lee and
Madison Dearborn; provided that subject to the provisions set
forth on Schedule 8.1(c), if such financing of Purchaser shall
not have been consummated on or prior to June 30, 1996, Seller
shall permit to remain outstanding on the Closing Date
indebtedness of BBMC to Seller and/or commitments of Seller to
fund additional indebtedness of BBMC, in an aggregate amount
not in excess of $100,000,000, such indebtedness and/or
commitments to be upon the terms and conditions set forth on
such Schedule 8.1(c).
(d) Other Transactions. Each of the Related
Agreements shall have been duly executed and delivered by each
party thereto and shall be in full force and effect; the
transactions contemplated by Purchase Agreements shall have
been consummated and have become effective in accordance with
their respective terms.
(e) Section 338(h)(10) Election. No
acquisition of equity interests in Parent, Seller, Lee or
Madison Dearborn shall have occurred, and be continuing and
shall have the effect of precluding the election under Section
338(h)(10) of the Code contemplated by Section 10.7 of this
Agreement.
8.2 Additional Conditions to the Obligations of Purchaser. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement is subject to the satisfaction at or prior to the Closing Date of each
of the following additional conditions;
(a) Representations and Warranties. The
representations and warranties of Seller contained in Articles
IV and V of this Agreement shall be true and correct in all
material respects as of the Closing Date as though made at and
as of the Closing Date, except to the extent that (i) any
representation and warranty is made as of a specified date
other than the Closing Date, in which case such representation
and warranty shall be true and correct as of such date and
(ii) the representations and warranties set forth in Sections
5.4 and 5.10 of this Agreement may be modified by the delivery
to Purchaser prior to the Closing Date of amendments to
Sections 5.4 and 5.10 of the Seller Disclosure Schedules
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reflecting activity in the period from the date of this
Agreement to the Closing Date.
(b) Performance of Covenants. Seller shall
have performed in all material respects all obligations and
agreements, and complied in all material respects with all
covenants and conditions, contained in this Agreement to be
performed or complied with by it prior to or at the Closing
Date.
(c) Servicing Portfolio. The aggregate
principal amount of the Mortgage Loans in BBMC's Servicing
Portfolio shall not be less than $38,000,000,000 as of the
Closing Date.
(d) Certificates. Purchaser shall have
received a certificate of Seller, dated the Closing Date,
executed on behalf of Seller to the effect that the conditions
specified in Sections 8.2(a) and 8.2(b) with respect to it
have been fulfilled.
8.3 Additional Conditions to the Obligations of Seller. The obligation
of Seller to consummate the transactions contemplated by this Agreement is
subject to the satisfaction at or prior to the Closing Date of each of the
following additional conditions:
(a) Representations and Warranties. The
representations and warranties of Purchaser contained in
Article VI of this Agreement shall be true and correct in all
material respects as of the Closing Date as though made at and
as of the Closing Date, except to the extent that any
representation and warranty is made as of a specified date
other than the Closing Date, in which case such representation
and warranty shall be true and correct as of such date.
(b) Performance of Covenants. Purchaser
shall have performed in all material respects all obligations
and agreements, and complied in all material respects with all
covenants and conditions, contained in this Agreement to be
performed or complied with by it prior to or at the Closing
Date.
(c) Repayment of Indebtedness of BBMC to
Seller. Except as otherwise contemplated by Section 8.1(c),
BBMC shall have repaid or prepaid all indebtedness owing from
it to Seller and shall have terminated all commitments of
Seller to fund additional indebtedness of BBMC.
(d) Certificate. Seller shall have received
a certificate of Purchaser, dated the Closing Date, executed
on behalf of Purchaser, to the
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effect that the conditions specified in Sections 8.3(a) and
8.3(b) have been fulfilled.
ARTICLE IX
TERMINATION
9.1. Grounds For Termination. This Agreement may be terminated at any
time prior to the Effective Time:
(a) by mutual written consent of all of the parties
hereto;
(b) by any party hereto (i) thirty (30) days after
the date on which any request or application for a required regulatory
approval, authorization, consent or order from any federal or state
banking or other regulatory authority or agency necessary for the
consummation of the transactions contemplated hereby shall have been
denied, unless within the thirty (30) day period following such denial
a petition for rehearing or an amended application has been filed with
such governmental regulatory authority or agency; provided, however,
that no party shall have the right to terminate this Agreement pursuant
to this Section 11.1(b) if such denial shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe in
any material respect the covenants and agreements of such party set
forth herein, or (ii) if any federal or state banking or other
regulatory authority or agency, or court of competent jurisdiction,
shall have issued a final permanent order, injunction or other legal
restraint or prohibition preventing the consummation of the
transactions contemplated hereby and the time for appeal or petition
for reconsideration of such order, injunction, restraint or prohibition
shall have expired without such appeal or petition being granted or
such order, injunction, restraint or prohibition shall otherwise have
become final and non-appealable;
(c) by any party hereto (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein), in the event
of a material breach by the other party of any representation,
warranty, covenant or other agreement contained herein, which breach is
not cured after forty-five (45) days written notice thereof is given to
the party committing such breach; or
(d) by any party hereto if the Closing shall not have
occurred on or prior to June 30, 1996, unless the failure of the
Closing to occur by such date shall be due to the failure of the party
seeking to terminate this
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Agreement hereunder to perform or observe in any material respect the
covenants and agreements of such party set forth in this Agreement.
9.2. Effects of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become null
and void (other than this Section 9.2, the last sentence of Section 7.2 and
Section 13.5, which shall remain in full force and effect) and there shall be no
further liability on the part of any party or their respective officers,
directors or stockholders (or those who have subscribed for shares of stock) to
any other party, except in the event of a willful breach by a party of any
representation, warranty, covenant or agreement contained in this Agreement, in
which case, the breaching party shall remain liable for any and all Damages
sustained or incurred by the non-breaching parties as a result thereof or in
connection therewith or with the enforcement of its rights hereunder.
ARTICLE X
TAX MATTERS
10.1 Returns. Seller shall have the exclusive obligation and authority
to file or cause to be filed all Tax Returns that are required to be filed by or
with respect to the income, assets or operations of BBMC for all taxable years
or other taxable periods ending on or prior to the Closing Date (the
"Pre-Closing Periods"), except for information Tax Returns prepared on Internal
Revenue Service Forms 1098 and 1099 (and any variants of each), and summary Tax
Returns relating thereto ("Information Tax Returns"). Except as provided in the
preceding sentence, Purchaser shall have the exclusive obligation and authority
to file or cause to be filed all Tax Returns that are required to be filed by or
with respect to the income, assets or operations of BBMC or any successor
thereto for any taxable year or other taxable period. No later than 30 days
prior to the due date for the filing of (i) any Tax Return with respect to any
taxable year or other taxable period of BBMC beginning on or before the Closing
Date and ending after the Closing Date (the "Overlap Period"), or (ii) any
Information Tax Return, Purchaser shall (a) provide Seller with written notice,
which notice shall set forth Purchaser's calculations regarding the amount of
Taxes for which Purchaser determines Seller is obligated to reimburse Purchaser
pursuant to Section 10.3(a) in sufficient detail and particularity to enable
Seller to verify the amount of such Taxes for which Seller is obligated to
reimburse Purchaser, (b) provide Seller with a draft of such Tax Return (or
appropriate summaries thereof in the case of Information Tax Returns) and (c)
provide Seller access to all records reasonably necessary to enable Seller and
its representatives to evaluate the draft Tax Returns (or such summaries)
provided with such notice. No later than 15 days prior to the due date for the
filing of such Tax Return, Seller shall notify Purchaser of any reasonable
objections Seller may have to Purchaser's calculations regarding the amount of
such Taxes and to any items
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set forth in such draft Tax Return (or such summaries). Purchaser and Seller
agree to consult and resolve in good faith any such objection, it being
understood and agreed that in the absence of any such resolution, any and all
such objections shall be resolved in accordance with procedures comparable to
those described in Section 10.8.
10.2 Contests. Seller and its duly appointed representatives shall have
the exclusive authority to control any audit or examination by any taxing
authority, initiate any claim for refund, amend any Tax Return and contest,
resolve and defend against any assessment for additional Taxes, notice of Tax
deficiency or other adjustment of Taxes of or relating to any liability of BBMC
reflected on any Tax Returns described in the first sentence of Section 10.1;
provided, however, that neither Seller nor any of its appointed representatives
shall, without the prior written consent of Purchaser, which consent shall not
be unreasonably withheld, enter into any settlement of any contest or otherwise
compromise any issue that affects or may affect the Tax liability of Purchaser
or BBMC for any taxable year or other taxable period or portion thereof ending
after the Closing Date. Purchaser and its duly appointed representatives shall
have the exclusive authority to control any audit or examination by any taxing
authority, initiate any claim for a refund, amend any Tax Return and contest,
resolve and defend against any assessment for additional Taxes, notice of Tax
deficiency or other adjustment of Taxes of or relating to any liability BBMC or
any successor thereto for Taxes for any taxable year or other taxable period
ending after the Closing Date; provided, however, that (a) neither Purchaser,
nor any of its duly appointed representatives shall, without the prior written
consent of Seller, which consent shall not be unreasonably withheld, enter into
any settlement of any contest or otherwise compromise any issue that affects or
may affect the liability of Seller under Sections 10.3(b) or 10.3(e), or the Tax
liability of Seller or any of its Affiliates for any taxable year or other
taxable period or portion thereof ending on or prior to the Closing Date and (b)
neither Purchaser, nor any of its duly appointed representatives shall, without
the prior consent of Seller, which consent shall not unreasonably be withheld,
enter into any settlement of any contest or otherwise compromise any issue that
would require payment by Seller of any amount under Section 10.3 unless
Purchaser shall have waived any right to indemnification for Taxes from Seller.
Seller shall be entitled to any Tax refund relating to BBMC to the extent such
Tax refund relates to any taxable year or other taxable period or portion
thereof ending on or prior to the Closing Date except to the extent such refund
is the result of the carryback of losses or credits relating to taxable years or
other periods or portions thereof ending after the Closing Date. BBMC shall be
entitled to all other Tax refunds relating to BBMC.
10.3 Payment of Taxes. (a) Taxes of BBMC that relate to the Overlap
Period shall be apportioned between the portion of such period ending on the
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Closing Date and the portion of such period beginning after the Closing Date on
the basis of (i) an interim closing of the books as to Taxes based upon or
measured with reference to income, sales, receipts, or the like, or (ii) a per
diem allocation reflecting the number of days in the applicable Tax period (A)
through and including the Closing Date and (B) after the Closing Date in all
other cases, and based on accounting methods, elections and conventions that do
not have the effect of distorting income or expenses. Seller shall pay to
Purchaser or the appropriate taxing authority the Taxes calculated with respect
to the portion of the Overlap Period ending on the Closing Date (as determined
by Seller and Purchaser using the procedure set forth under Section 10.1), but
any such payment required by Seller shall be reduced by the amount of such Taxes
already paid by Seller or any Affiliate of Seller (including, without
limitation, BBMC) on or prior to the Closing Date.
(b) Except as otherwise provided in this Section 10.3(b), Seller agrees
to pay, indemnify and hold harmless Purchaser and BBMC against all Taxes of or
with respect to BBMC for all Pre- Closing Periods and, with respect to the
Overlap Period, the portion of such taxable year or taxable period ending on the
Closing Date.
(c) Except as otherwise provided in this Section 10.3, Purchaser agrees
to pay, indemnify and hold harmless Seller and its Affiliates from and against
all Taxes of or with respect to BBMC for all taxable years or other taxable
periods beginning after the Closing Date and, with respect to the Overlap
Period, the portion of such taxable year or taxable period commencing after the
Closing Date.
(d) On and after the Closing Date, the participation of BBMC in all Tax
sharing agreements and other Tax sharing arrangements with respect to taxable
years ending on or prior to the Closing Date to which Seller or any Affiliate of
Seller, on the one hand, and BBMC, on the other, are parties shall be terminated
and BBMC shall have no continuing obligation to make any payment thereunder.
(e) Seller agrees to pay to the applicable Governmental Authority and
to indemnify and hold harmless the Purchaser and BBMC from and against any and
all Taxes, whether determined on a separate, consolidated, combined, unitary or
other basis, including any penalties and interest in respect thereof, (i)
pursuant to Treasury Regulations Section 1.15026 or any comparable provision of
state, local or foreign law by reason of BBMC having been a member of
consolidated, combined, or unitary group for a PreClosing Period, or, with
respect to the Overlap Period, for the portion of such taxable year or taxable
period ending on the Closing Date; (ii) pursuant to any guaranty,
indemnification, tax sharing or similar agreement entered into by BBMC on or
before the Closing Date relating to the sharing of liability for, or payment of,
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Taxes; (iii) arising out of, resulting from or attributable to the Section 338
Elections; and (iv) arising out of, resulting from or attributable to the
transactions described in Section 7.1(m) of this Agreement.
10.4 Tax Benefits and Credits. If Seller makes any payment under
Section 10.3(b) with respect to a Tax liability of or with respect to BBMC for
any Pre-Closing Period or the portion of an Overlap Period ending on or prior to
the Closing Date and the payment of such Tax liability gives rise to a United
States federal, state, local or foreign Tax benefit or credit to Purchaser or
any of its Affiliates, then Purchaser shall pay to Seller the amount of such Tax
benefit or credit. The amount of a Tax benefit or credit shall be equal to: (a)
for taxable years and taxable periods of Purchaser and its Affiliates ending
after the Closing Date but on or prior to the date on which a Tax adjustment is
made, the positive difference, if any, of (i) the amount of Tax that Purchaser
and its Affiliates would have to pay for each such taxable period had it not
received any benefit or credit resulting, directly or indirectly, from the Tax
adjustment, minus (ii) the amount of Tax that Purchaser and its Affiliates
actually pay to the IRS or other Tax authority for such taxable period taking
such benefit or credit into account, plus, (b) for taxable years and taxable
periods ending after the date on which a Tax adjustment is made, an amount equal
to the present value (as determined in accordance with the immediately following
sentence) of the sum of (i) in the case of a benefit (resulting directly or
indirectly from the Tax adjustment) that is not a Tax credit, the amount of such
benefit multiplied by the relevant maximum corporate Tax rate in effect in the
year in which the Tax adjustment is made and (ii) in the case of a Tax credit
(resulting directly or indirectly from the Tax adjustment), the amount of such
Tax credit. In calculating the present value of the sum of (b) (i) and (b) (ii)
in the immediately preceding sentence, where it can be reasonably determined at
the time the Tax adjustment is made in which taxable years or other taxable
periods any resulting benefits and credits may be utilized, such resulting
benefits and credits shall be deemed to be utilized in such taxable years or
other taxable periods, and, with respect to all other resulting benefits and
credits, such benefits and credits shall be deemed to be utilized in the taxable
year in which the Tax adjustment is made and, further, the discount rate for
purposes of determining the net present value shall be six percent.
The determination of any such Tax benefit or credit shall be made in
good faith by Purchaser and, if requested by Seller, shall be verified in
writing by an independent certified public accounting firm selected by Seller.
Seller and Purchaser shall bear equally the fees charged by such accounting
firm.
If an adjustment by the IRS or such other Tax authority subsequently
reverses, disallows or reduces any Tax benefit received by Purchaser or any of
its Affiliates in respect of which any payment has been made to Seller pursuant
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to this Section 10.4, then within 10 days of Seller's receipt of notification of
such event, Seller shall pay to Purchaser such disallowed or reduced amount or
the amount of the payment received, if less. Purchaser and Seller agree to
consult and resolve in good faith any dispute with respect to any actual Tax
benefit as determined under this Section 10.4, it being understood and agreed
that in the absence of any such resolution, any and all such objections shall be
resolved in accordance with procedures comparable to those described in Section
10.8.
If as the result of a final determination the Tax liability of BBMC for
a period after the Closing Date (including the portion of an Overlap Period
after the Closing Date) is increased (a "Post Closing Increase") because of a
change in the timing of an item of income, deduction, or credit, which, when
changed, produces a Tax benefit actually available to the Seller, the Seller
shall pay to the Purchaser upon its receipt (or application to other Tax
liabilities) of all or any portion of such Tax benefit an amount equal to the
amount of such Tax benefit or portion thereof; provided that the cumulative
aggregate amount paid to the Purchaser under this paragraph shall not exceed the
amount of the Post-Closing Increase.
10.5 Notices. If any party to this Agreement receives any written
notice or other communication from any taxing authority relating to any Tax
audit or other proceeding relating to any Tax for which any other party thereto
may be obligated to indemnify or pay under this Agreement, such party shall
promptly forward such notice or communication to the other party. The failure to
forward such written notice or other communication promptly pursuant to this
Section 10.5 shall excuse the indemnity or payment obligations of such other
party except to the extent (and only to the extent) that the party that so
failed to forward can show that such failure did not materially prejudice the
rights of the other party to contest such Tax. In addition, Purchaser shall
promptly forward to Seller all written notifications and other communications
from any taxing authority received by Purchaser relating to any tax audit or
other proceeding relating to the tax liability of Seller or any Affiliate of
Seller.
10.6 Cooperation. Purchaser and Seller shall cooperate (and Purchaser
shall cause BBMC to cooperate) fully, as and to the extent reasonably requested
by the other party, in connection with the calculation of any Taxes and with the
preparation and filing of Tax Returns pursuant to this Agreement, and in
connection with any tax proceeding with respect to Taxes affecting or relating
to BBMC. Such cooperation shall include the retention and (upon the other
party's written request) the provision of records and information that are
reasonably relevant to such preparation and filing and to any tax proceeding
relating thereto and making employees available on a mutually convenient basis
to provide additional information and explanation of any material so provided.
Purchaser and Seller agree to retain (and Purchaser agrees to cause BBMC to
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retain) all books and records with respect to Tax matters pertinent to BBMC
relating to any Tax period beginning prior to the Closing Date until the
expiration of the statute of limitations for assessment of the applicable Taxes
(and, to the extent notified by Purchaser or Seller, any extensions thereof),
and shall not destroy or otherwise dispose of any such books and records without
first providing the other party or parties with a reasonable opportunity to
review and copy the same. Purchaser and Seller acknowledge that any and all
information obtained in connection with the preparation of any Tax Return, audit
or judicial or administrative proceeding or determination pursuant to this
Section 10.6 is of a confidential nature and that all such information shall be
used only for the purposes set forth in the immediately preceding sentence.
10.7 Certain Tax Elections.
(a) Purchaser and Parent, in its capacity as "common parent" of the
group of commonly controlled corporations filing a consolidated federal income
Tax Return which includes Seller, agree to make an election under Section
338(h)(10) of the Code with respect to the sale of the BBMC Stock as to BBMC and
its Subsidiaries, and shall file their consolidated federal income Tax Returns
for the period including the Closing Date on a basis consistent therewith.
Purchaser, Seller and Parent further agree to make such other similar elections
as may be available under applicable law and necessary to achieve substantially
the same results to the parties for state and local Tax purposes as the Section
338 Elections achieve for federal income Tax purposes and shall file their state
and local Tax Returns for the periods including the Closing Date on a basis
consistent with any such elections and such applicable law. For purposes of this
Agreement, the term "Section 338 Elections" shall include any such state or
local elections. Purchaser, Seller and their respective Affiliates shall prepare
and timely file all necessary forms and elections necessary to be prepared or
filed by such entity to effect valid Section 338 Elections.
(b) Seller and Parent further agree that in the event they otherwise
qualify for the election described in Section 197(f)(9) of the Code they will
make such election, in generally for the purpose of assuring that BBMC will not
be precluded from amortizing any of its "amortizable section 197 intangibles" as
that term is defined in Section 197 of the Code solely by reason of the
antichurning rules of Section 197(f) of the Code.
10.8 Valuation and Allocation. Seller and Purchaser agree to act
reasonably and in good faith in preparing a mutually agreed upon valuation of
assets and allocation of purchase price and assumed obligations for purposes of
Section 338 of the Code. If Seller and Purchaser are unable to reach a mutually
acceptable valuation of assets and allocation of the purchase price and assumed
obligations
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within 120 days after the Closing Date, such disagreement shall be referred for
resolution to such other nationally recognized independent certified public
accounting firm as is mutually agreed upon by the Seller and Purchaser (a "Tax
Referee"). If the parties cannot agree on such a Tax Referee, the Tax Referee
shall be picked by two nationally recognized accounting firms, one picked by the
Purchaser and one picked by the Seller; provided, however, that the Tax Referee
so picked may not then be the accountant regularly employed by Purchaser or
Seller. The decision of the Tax Referee shall be final and binding on the
parties. The fees of the Tax Referee shall be shared equally by the Seller and
the Purchaser. The valuations and allocations determined pursuant to this
Section 10.8 shall be used for purposes of all relevant Tax Returns.
10.9 Transfer Taxes. All stamp, transfer, documentary, sales, use,
registration and other such taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the transactions
contemplated hereby (collectively, the "Transfer Taxes") shall be paid by
Purchaser, and Purchaser shall, at its own expense, procure any stock transfer
stamps required by, and properly file on a timely basis all necessary tax
returns and other documentation with respect to any Transfer Tax and provide to
the Seller evidence of payment of all Transfer Taxes.
10.10 Purchase Price Adjustment. The Seller and the Purchaser agree to
treat all payments made by either of them to or for the benefit of the other
(including any payments to or from BBMC under this Article X, under other
indemnity provisions of this Agreement and for any misrepresentations or
breaches of warranties or covenants as adjustments to the Purchase Price for Tax
purposes and that such treatment shall govern for purposes hereof.
10.11 Statute of Limitations. Notwithstanding any provision of this
Agreement to the contrary, the respective obligations of Seller and Purchaser to
indemnify and hold harmless the Purchaser and BBMC or Purchaser, as applicable,
pursuant to this Article X shall terminate no earlier than at the close of
business on the 30th day following the expiration of the applicable statute of
limitations with respect to the Tax liabilities in question (giving effect to
any waiver, suspension, mitigation or extension thereof).
10.12 Scope of Indemnity. For purposes of this Article X, the term
"BBMC" shall include BBMC (as otherwise defined in Article I) and all of its
Subsidiaries.
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ARTICLE XI
INDEMNIFICATION BY SELLER
11.1 Indemnification. In addition to and not in limitation of the
indemnities provided in Article X (which Article sets forth the exclusive remedy
of Seller and Purchaser in respect of the matters covered thereby), from and
after the Closing, subject to the other provisions of this Article X, Seller
agrees to indemnify Purchaser and its officers, directors and employees
(collectively, the "Indemnified Purchaser Entities") and to hold each of them
harmless from and against, and agrees to assume liability for, any and all
actions, suits, proceedings, demands, assessments, judgments, claims,
liabilities, losses, costs, damages or expenses (including interest, penalties
and reasonable attorneys' fees, expenses and disbursements in connection with
any action, suit or proceeding against such Person) net of any pertinent
reserves therefor and excluding loss of profits or other consequential damages
(collectively, "Damages") suffered, paid or incurred by such Indemnified
Purchaser Entity resulting from, caused by or arising out of (a) any breach of
any of the representations and warranties made by Seller to Purchaser in this
Agreement (other than the representations and warranties set forth in Section
4.12(a), (c) and (d), liability for the breach of which shall be as set forth in
Article X); and (b) any breach by Seller of any covenant or agreement of Seller
contained in this Agreement. Damages arising out of a breach of any
representations, warranties or covenants made by Seller in this Agreement shall
be determined without giving effect to any exception or qualification of such
representations, warranties or covenants as to the knowledge of Seller,
materiality of the breach of such representation or warranty or Material Adverse
Effect on BBMC of such breach. With respect to any breach of a representation
set forth in Article V which results in an obligation of an Indemnified
Purchaser Entity to repurchase a Mortgage Loan or Collateral Certificate under
any Listed Agreement, Damages shall mean (i) the difference between (A) the
repurchase price for such Mortgage Loan (or the related Mortgaged Property, if
REO) or Collateral Certificate, as determined by the terms of the applicable
Listed Agreement, and (B) the fair market value of the Mortgage Loan (or the
fair market value of the related Mortgaged Property, if REO) or Collateral
Certificate, reduced by (ii) any amounts actually recovered pursuant to
Available Remedies with respect to such Mortgage Loan or Collateral Certificate.
11.2 Indemnification Procedure. (a) If an Indemnified Purchaser Entity
believes that a claim, demand or other circumstance exists that has given or may
reasonably be expected to give rise to a right of indemnification under this
Article XI (whether or not the amount of Damages relating thereto is then
quantifiable), such Indemnified Purchaser Entity shall promptly assert its claim
for indemnification by giving written notice thereof (a "Claim Notice") to
Seller.
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Each Claim Notice shall describe the claim in reasonable detail. The failure to
so notify Seller shall not relieve Seller of any obligation to indemnify any
Indemnified Purchaser Entity unless such failure materially prejudices the
rights or increases the liability of Seller with respect to the claim to which
the Claim Notice relates.
(b) If any claim or demand by an Indemnified Purchaser Entity under
this Article XI relates to an action or claim filed or made against an
Indemnified Purchaser Entity by a third party, Seller may elect at any time to
negotiate a settlement or a compromise of such action or claim (with the written
consent of Purchaser which shall not be unreasonably withheld) or to defend such
action or claim, in each case at its sole cost and expense (subject to the last
sentence of this Section 11.2(b)) and with its own counsel. If, within 30 days
of receipt from an Indemnified Purchaser Entity of any Claim Notice with respect
to a third party action or claim, Seller (i) advises such Indemnified Purchaser
Entity in writing that Seller will not elect to defend, settle or compromise
such action or claim or (ii) fails to make such an election in writing, such
Indemnified Purchaser Entity may (subject to Seller's continuing right of
election in the preceding sentence), at its option, defend, settle or otherwise
compromise or pay such action or claim; provided that any such settlement or
compromise shall be permitted hereunder only with the written consent of Seller,
which consent shall not be unreasonably withheld. Unless and until Seller makes
an election in accordance with this Section 11.2(b), all of the Indemnified
Purchaser Entity's reasonable costs and expenses arising out of the defense,
settlement or compromise of any such action or claim shall be Damages subject to
indemnification hereunder to the extent provided herein. Each Indemnified
Purchaser Entity shall make available to Seller all information reasonably
available to such Indemnified Purchaser Entity relating to such action or claim.
In addition, the parties hereto shall render to each other such assistance as
may reasonably be requested in order to ensure the proper and adequate defense
of any such action or claim. The party in charge of the defense shall keep the
other party fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If Seller elects to defend any
such action or claim, then the Indemnified Purchaser Entity shall be entitled to
participate in such defense with the counsel of its choice at such Indemnified
Purchaser Entity's sole cost and expense.
11.3 Limitation on Liability. (a) Notwithstanding anything to the
contrary contained in this Article XI, the Indemnified Purchaser Entities shall
not be entitled to indemnification pursuant to this Article XI with respect to
any claim for indemnification pursuant to Section 11.1:
(i) unless, and only to the extent that, the
aggregate Damages to all Indemnified Purchaser Entities
(without duplication) with respect to
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all such claims exceed $4,000,000 (the "Deductible"),
whereupon (subject to the provisions of clause (iii) below)
Seller shall be obligated to pay in full all such amounts, but
only to the extent such aggregate Damages are in excess of the
Deductible; provided, however, that no claim against Seller
with respect to a breach by Seller of its covenants in
Sections 7.7(e) or 7.13 shall be subject to the Deductible;
(ii) with respect to any claim for
indemnification based upon (A) a breach of any representation
or warranty made by Seller in this Agreement and relating to
Mortgage Loans or the Servicing Portfolio, the Claim Notice
with respect to which is not received on or before the date
that is 180 days after the Closing Date, (B) a breach of any
representation and warranty made by Seller in this Agreement
(other than those described in clause (A) above or contained
in Sections 4.5, 4.6(a) or 4.12), the Claim Notice with
respect to which is not received on or before the earlier to
occur of (1) April 10, 1997 or (2) ten (10) days after receipt
by Purchaser of audited financial statements of BBMC for the
year ending December 31, 1996, or (C) a breach of any
representation and warranty made by Seller to Purchaser in
Section 4.12 of this Agreement, the Claim Notice with respect
to which is not received on or before the date that is 30 days
following (1) the date of expiration of the applicable statute
of limitations with respect to the Taxes to which such claim
relates (assuming no waiver or extension thereof effected in
accordance with clause (2) below) or (2) if Purchaser waives
or extends the applicable statute of limitations with the
prior consent of Seller, which consent shall not be
unreasonably withheld, the date of final settlement of such
open tax period or the end of such extension, as the case may
be; or
(iii) for aggregate Damages in excess of
$50,000,000.
(b) Notwithstanding anything contained in any other provision of this
Agreement to the contrary, Purchaser understands and agrees that Seller is not
making any representation or warranty whatsoever, express or implied, other than
those representations and warranties of Seller expressly set forth in Articles
IV and V, respectively. In particular, Seller is not making any representation
or warranty with respect to any of information set forth in the any financial
projection or forecast relating to BBMC. With respect to any such projection or
forecast delivered to Purchaser, Purchaser acknowledges that (i) there are
uncertainties inherent in attempting to make such projections and forecasts,
(ii) it is familiar with such uncertainties, (iii) it is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
such projections and forecasts so furnished to it and (iv) it shall have no
claim against Seller with respect thereto.
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(c) Purchaser has been given such access to the premises, books,
records and officers of BBMC and has had the opportunity to review such other
data and other information with respect to the business and properties of BBMC
as Purchaser has deemed necessary in its sole judgment to evaluate the
transactions contemplated by this Agreement. Purchaser acknowledges that neither
Seller nor BBMC nor any of their respective officers, directors, Affiliates or
agents assumes any responsibility for the accuracy or adequacy of any
information heretofore or hereafter furnished to Purchaser by or on behalf of
Seller or BBMC except as otherwise expressly provided in this Agreement. Nothing
in this Section 11.3(c) shall in any way vitiate or limit the representations or
warranties made by Seller or the Purchaser's rights under this Article XI.
11.4 General. (a) Each Indemnified Purchaser Entity shall be obligated
in connection with any claim for indemnification under this Article XI to use
all commercially reasonable efforts to obtain any insurance proceeds available
to such Indemnified Purchaser Entity with regard to the applicable claims. The
amount which Seller is or may be required to pay to any Indemnified Purchaser
Entity pursuant to this Article XI shall be reduced (retroactively, if
necessary) by any insurance proceeds or other amounts actually recovered (net of
any direct relevant collection costs) by or on behalf of such Indemnified
Purchaser Entity in reduction of the related Damages. If an Indemnified
Purchaser Entity shall have received the payment required by this Agreement from
Seller or any Affiliate of Seller in respect of Damages and shall subsequently
receive insurance proceeds or other amounts in respect of such Damages, then
such Indemnified Purchaser Entity shall promptly repay to Seller a sum equal to
the amount of such insurance proceeds or other amounts actually received (net of
any direct relevant collection costs).
(b) In addition to the requirements of Section 11.4(a), (i) each
Indemnified Purchaser Entity shall be obligated in connection with any claim for
indemnification under this Article XI to use all commercially reasonable efforts
to mitigate Damages upon and after becoming aware of any event which could
reasonably be expected to give rise to such Damages and (ii) in connection with
any claim under this Article XI in respect of a breach of any representation set
forth in Article V, such Indemnified Purchaser Entity shall diligently pursue
any and all contractual rights and remedies under agreements with third parties
pursuant to which such Indemnified Purchaser Entity has remedies, including,
without limitation; Listed Agreements, Correspondent Agreements and agreements
with and policies of Insurers, and any and all rights and remedies available at
law or equity (such contractual, legal and equitable rights and remedies,
collectively, the "Available Remedies").
<PAGE> 68
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(c) Subject to the rights of existing insurers of an Indemnified
Purchaser Entity, Seller shall be surrogated to any right of action which the
Indemnified Purchaser Entity may have against any other Person with respect to
any matter giving rise to a claim for indemnification hereunder.
(d) The indemnification provided in this Article XI shall be the
exclusive post-Closing Date remedy available to Purchaser or any other
Indemnified Purchaser Entity with respect to any breach of any representation,
warranty, covenant or agreement made by Seller to Purchaser in this Agreement.
Anything contained in this Agreement to the contrary notwithstanding, no remedy
under this Agreement shall give rise to any obligation on the part of Seller to
repurchase any Mortgage Loan, REO or Collateral Certificate.
ARTICLE XII
INDEMNIFICATION BY PURCHASER
12.1 Indemnification. In addition to and not in limitation of the
indemnities provided in Article X (which Article sets forth the exclusive remedy
of Purchaser and Seller in respect of the matters covered thereby), from and
after the Closing, subject to the other provisions of this Article XII,
Purchaser agrees to indemnify Seller and its Affiliates and their respective
officers, directors and employees (collectively, the "Indemnified Seller
Entities") and to hold each of them harmless from and against, and agrees to
assume liability for, any and all Damages suffered, paid or incurred by such
Indemnified Seller Entity resulting from, caused by or arising out of: (a) any
claims, liabilities or obligations of such Indemnified Seller Entity arising on
or after the Closing Date as a result of any act or omission of Purchaser; (b)
any breach of any of the representations and warranties made by Purchaser to
Seller in this Agreement; and (c) any breach by Purchaser of any covenant or
agreement of Purchaser contained in this Agreement.
12.2 Indemnification Procedure. (a) If an Indemnified Seller Entity
believes that a claim, demand or other circumstance exists that has given or may
reasonably be expected to give rise to a right of indemnification under this
Article XII (whether or not the amount of Damages relating thereto is then
quantifiable), such Indemnified Seller Entity shall promptly assert its claim
for indemnification by giving a Claim Notice to Purchaser. Each Claim Notice
shall describe the claim in reasonable detail. The failure to so notify
Purchaser shall not relieve Purchaser of any obligation to indemnify any
Indemnified Seller Entity unless such failure materially prejudices the rights
or increases the liability of Purchaser with respect to the claim to which the
Claim Notice relates.
<PAGE> 69
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(b) If any claim or demand by an Indemnified Seller Entity under this
Article XII relates to an action or claim filed or made against such Indemnified
Seller Entity by a third party, Purchaser may elect at any time to negotiate a
settlement or compromise of any such action or claim (with the written consent
of Seller which shall not be unreasonably withheld) or to defend any such action
or claim, in each case at its sole cost and expense (subject to the last
sentence of this Section 12.2(b)) and with its own counsel. If, within 30 days
of receipt from an Indemnified Seller Entity of any Claim Notice with respect to
a third party action or claim, Purchaser (i) advises such Indemnified Seller
Entity that Purchaser will not elect to defend, settle or compromise such action
or claim, or (ii) fails to make such an election in writing, such Indemnified
Seller Entity may (subject to Purchaser's continuing right of election in the
preceding sentence), at its option, defend, settle or otherwise compromise or
pay such action or claim; provided that any such settlement or compromise shall
be permitted hereunder only with the written consent of Purchaser, which consent
shall not be unreasonably withheld. Unless and until Purchaser makes an election
in accordance with this Section 12.2(b), all of such Indemnified Seller Entity's
reasonable costs and expenses arising out of the defense, settlement or
compromise of any such action or claim shall be Damages subject to
indemnification hereunder to the extent provided herein. Each Indemnified Seller
Entity shall make available to Purchaser all information reasonably available to
it relating to such action or claim. In addition, the parties shall render to
each other such assistance as may reasonably be requested in order to ensure the
proper and adequate defense of any such action or claim. The party in charge of
the defense shall keep the other party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
Purchaser elects to defend any such action or claim, then the Indemnified Seller
Entity shall be entitled to participate in such defense with counsel of its
choice at such Indemnified Seller Entity's sole cost and expense.
12.3 Limitation on Liability. Notwithstanding anything to the contrary
contained in this Article XII, the Indemnified Seller Entities shall not be
entitled to indemnification pursuant to this Article XII with respect to any
claim for indemnification pursuant to Section 12.1(b):
(i) unless, and only to the extent that, the
aggregate Damages to all Indemnified Seller Entities (without
duplication) with respect to such claims exceed the
Deductible, whereupon (subject to the provisions of clause
(iii) below) Purchaser shall be obligated to pay in full all
such amounts, but only to the extent such aggregate Damages
are in excess of the Deductible; or
(ii) with respect to any claim for
indemnification based upon a breach of any representation and
warranty made by Purchaser in this
<PAGE> 70
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Agreement, the Claim Notice with respect to which is not
received on or before the date that is one year after the
Closing Date.
12.4 General. (a) Each Indemnified Seller Entity shall be obligated in
connection with any claim for indemnification under this Article XII to use all
commercially reasonable efforts to obtain any insurance proceeds available to
such Indemnified Seller Entity with regard to the applicable claims. The amount
which Purchaser is or may be required to pay to any Indemnified Seller Entity
pursuant to this Article XII shall be reduced (retroactively, if necessary) by
any insurance proceeds or other amounts actually recovered (net of any direct
relevant collection costs) by or on behalf of such Indemnified Seller Entity in
reduction of the related Damages. If an Indemnified Seller Entity shall have
received the payment required by this Agreement from Purchaser in respect of
Damages and shall subsequently receive insurance proceeds or other amounts in
respect of such Damages, then such Indemnified Seller Entity shall promptly
repay to Purchaser a sum equal to the amount of such insurance proceeds or other
amounts actually received (net of any direct relevant collection costs).
(b) In addition to the requirements of Section 12.4(a), each
Indemnified Seller Entity shall be obligated in connection with any claim for
indemnification under this Article XII to use all commercially reasonable
efforts to mitigate Damages upon and after becoming aware of any event which
could reasonably be expected to give rise to such Damages.
(c) Subject to the rights of existing insurers of an Indemnified Seller
Entity, Purchaser shall be subjugated to any right of action which the
Indemnified Seller Entity may have against any other Person with respect to any
matter giving rise to a claim for indemnification hereunder.
(d) The indemnification provided in this Article XII shall be the
exclusive post-Closing Date remedy available to Seller or any other Indemnified
Seller Entity with respect to any breach of any representation, warranty,
covenant or agreement made by Purchaser to Seller in this Agreement.
(e) Notwithstanding anything contained in any provision of this
Agreement to the contrary, Seller understands and agrees that Purchaser is not
making any representation or warranty whatsoever, express or implied, other than
those representations and warranties of Purchaser expressly set forth in Article
VI.
<PAGE> 71
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ARTICLE XIII
GENERAL PROVISIONS
13.1 Notices. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed given if
delivered personally, transmitted by facsimile (and telephonically confirmed),
mailed by registered or certified mail with postage prepaid and return receipt
requested, or sent by commercial overnight courier, courier fees prepaid, to the
parties at the following addresses:
(a) if to Purchaser, to it at:
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Attn: David V. Harkins
Telecopy: (617) 227-3514
Confirmation: (617) 227-1050
with copies to:
Madison Dearborn Partners, Inc.
Three First National Plaza, Suite 1330
Chicago, Illinois 60602
Attn: Justin S. Huscher
Telecopy: (312) 722-4098
Confirmation: (312) 732-8063
and
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attn: Charles W. Robins, Esq.
Telecopy: (617) 951-1295
Confirmation: (617) 951-6602
<PAGE> 72
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and
HomeAmerica Capital, Inc.
7301 Bay Meadows Way
Jacksonville, Florida 32256
Attn: Joe K. Pickett
Telecopy: (904) 281-3745
Confirmation: (904) 281-3233
(b) if to Seller, to it at:
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Peter J. Manning
Telecopy: (617) 434-7825
Confirmation: (617) 434-8592
with a copy to:
Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
Attn: Norman J. Shachoy, Esq.
Telecopy: (617) 951-8736
Confirmation: (617) 951-8235
or to such other person or address as either party shall specify by notice in
writing to the other party in accordance with this Section 13.1. All such
notices or other communications shall be deemed to have been received on the
date of the personal delivery or facsimile transmission (with telephone
confirmation) or on the third Business Day after the mailing or dispatch
thereof; provided that notice of change of address shall be effective only upon
receipt.
13.2 Interpretation. The table of contents of and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
13.3 Amendment and Modification; Waiver. (a) This Agreement and the
Disclosure Schedules hereto may not be amended except by an instrument or
instruments in writing signed and delivered on behalf of each of the parties
hereto.
(b) At any time prior to the Closing Date, any party hereto which is
entitled to the benefits hereof may (i) extend the time for the performance of
any of the obligations or other acts of the other party, (ii) waive any
inaccuracy in
<PAGE> 73
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the representations and warranties of the other party contained herein or in any
schedule hereto or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements of the other party or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed and
delivered on behalf of such party.
13.4 Entire Agreement. This Agreement (including the Disclosure
Schedules and Exhibits), the Related Agreement and the Confidentiality
Agreement, together with a separate letter of even date regarding financing of
BBMC, constitute the entire agreement and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
13.5 Fees and Expenses. Except as otherwise expressly provided for in
this Agreement, (a) in the event the transactions contemplated hereby are
consummated, all fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby by Seller, Purchaser, Lee, Lee Fund,
Lee Affiliates and co-investors and Madison Dearborn shall be paid by the
Purchaser; provided that $750,000 of fees of Schroder Wertheim & Co.
Incorporated shall be borne by Purchaser and the balance of any fees and all
expenses of such party shall be borne by Seller, and that neither Purchaser nor
BBMC shall pay, nor shall have paid, any fees or expenses associated with the
previously contemplated acquisition of The Prudential Home Mortgage Company,
Inc., and (b) in the event the transactions contemplated hereby are not
consummated, all fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses.
13.6 Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement. The parties acknowledge and
agree that Seller may enforce directly the provisions of Section 7.7 for the
benefit of BBMC employees.
13.7 Assignment; Binding Effect. This Agreement shall not be assigned
by any party hereto without the prior written consent of the other party. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns.
13.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts without regard
to conflicts of laws principles thereof.
<PAGE> 74
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13.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
<PAGE> 75
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by their respective officers hereunto duly authorized
all on the date first written above.
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Peter J. Manning
------------------------------
Name: Peter J. Manning
Title: Executive Director
HOMEAMERICA CAPITAL, INC.
By:
------------------------------
Name:
Title:
Solely for purposes of and to the extent of
the undertakings set forth in Section 10.7
of this Agreement:
BANK OF BOSTON CORPORATION
By: /s/ Peter J. Manning
------------------------------
Name:
Title:
<PAGE> 76
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by their respective officers hereunto duly authorized
all on the date first written above.
THE FIRST NATIONAL BANK OF BOSTON
By:
-----------------------------
Name:
Title:
HOMEAMERICA CAPITAL, INC.
By: /s/ Thomas Hagerty
------------------------------
Name: Thomas Hagerty
Title: President
Solely for purposes of and to the extent of
the undertakings set forth in Section 10.7
of this Agreement:
BANK OF BOSTON CORPORATION
By:
------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.2
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
AMENDMENT NO. 1, DATED AS OF MARCH 15, 1996 (THIS "AMENDMENT"), TO STOCK
PURCHASE AGREEMENT, dated as of December 11, 1995 (the "Stock Purchase
Agreement"), by and between HomeSide, Inc. (formerly known as HomeAmerica
Capital, Inc.), a Delaware corporation (the "Purchaser"), and The First National
Bank of Boston, a national banking association (the "Seller").
WHEREAS, the parties hereto desire to modify certain terms and conditions
of the Stock Purchase Agreement as specifically set forth in this Amendment;
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used hereiN AND not otherwise
defined herein have the meanings given to such terms in the Stock Purchase
Agreement.
SECTION 2. REFERENCES TO HOMEAMERICA CAPITAL, INC. THE parties hereto
hereby agree that from and after the effective date hereof, each and every
reference in the Stock Purchase Agreement to the term "HomeAmerica Capital,
Inc." shall be deemed to refer to HomeSide, Inc.
SECTION 3. AMENDMENTS TO ARTICLE 1 OF THE STOCK PURCHASE AGREEMENT. Article
1 of the Stock Purchase Agreement is hereby amended by:
(a) deleting the definitions of the terms "Certificate Administration
Agreement", "Exclusive Marketing Agreement" and "Material Adverse Effect" in
their entireties.
(b) inserting the following new definitions in the appropriate places
designated by alphabetical order:
"Barnett Mortgage" means Barnett Mortgage Company, a Florida corporation.
"Barnett Mortgage Purchase Agreement" means the Stock Purchase Agreement,
dated as of March 4, 1996, relating to the acquisition of the capital stock of
Barnett Mortgage from Barnett Banks, Inc., a Florida corporation, by Purchaser.
<PAGE> 2
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"Certificate Administration Agreement" means an agreement, other than a
Master Servicing Agreement or a Servicing Agreement, pursuant to which a Company
affiliated with the BKBC Group provides Certificate Administration (including,
without limitation, any rights to certificate administration fees).
"Marketing Agreement" the Marketing Agreement, to be dated as of the
Closing Date, between the Seller and the Purchaser, substantially in the form
attached hereto as Exhibit C.
"Material Adverse Effect" means, with respect to any Person, considered on
a consolidated basis, any effect on such Person that is, individually or in the
aggregate, materially adverse to the business, operations or financial condition
of such Person (other than any effect from general economic or industry-wide
conditions).
SECTION 4. AMENDMENTS TO SECTION 2.2 OF THE STOCK PURCHASE AGREEMENT.
Section 2.2 of the Stock Purchase Agreement is hereby amended by:
(a) deleting the number "444,286" in paragraph (a) thereof and substituting
in place thereof the number "501,429".
(b) deleting paragraph (b) thereof in its entirety and substituting in
place thereof the following new paragraph (b):
(b) As additional consideration for the sale of the BBMC Stock by the
Seller to the Purchaser hereunder, in the event that the Closing shall not
have occurred on or prior to February 15, 1996, then Purchaser shall pay to
Seller, for the period commencing on such date and ending on the Closing
Date, cash in an amount equal to the product of (i) $225,000,000 multiplied
by (ii) a rate per annum equal to the LIBOR Rate. Such amount shall be paid
by Purchaser to Seller on the Closing Date and shall be calculated on a
year of 365 days for the number of days elapsed.
(c) deleting paragraph (c) thereof in its entirety and substituting in
place thereof the following new paragraph (c):
(c) As further additional consideration for the sale of the BBMC Stock
by the Seller to the Purchaser hereunder, at the time of the Closing under
and as defined in the Barnett Mortgage Purchase Agreement, the Purchaser
shall pay to the Seller cash in an amount equal to $5,000,000.
<PAGE> 3
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SECTION 5. AMENDMENT TO SECTION 2.3 OF THE STOCK PURCHASE AGREEMENT.
Section 2.3 of the Stock Purchase Agreement is hereby amended by deleting the
number "444,286" in paragraph (b) thereof and substituting in place thereof the
number "501,429".
SECTION 6. AMENDMENT TO SECTION 4.6 OF THE STOCK PURCHASE AGREEMENT.
Section 4.6 of the Stock Purchase Agreement is hereby amended by deleting the
number "1,000" in the second line of paragraph (a) thereof and substituting the
number "100" in place thereof.
SECTION 7. AMENDMENT TO SECTION 4.12 OF THE STOCK PURCHASE AGREEMENT.
Section 4.12 of the Stock Purchase Agreement is hereby amended by deleting the
phrase "Except as set forth in Section 4.12 of the Seller Disclosure Schedule,"
from the beginning of each of the second and third sentences of paragraph (a)
thereof and capitalizing the new first word of each such sentence.
SECTION 8. AMENDMENT TO SECTION 5.3 OF THE STOCK PURCHASE AGREEMENT.
Section 5.3 of the Stock Purchase Agreement is hereby amended by deleting the
phrase "which would not have a material adverse effect on the rights of BBMC
under the related Listed Agreement" at the end of the second sentence of
paragraph (a) thereof and substituting in place thereof the phrase "which are of
a type customary in the industry and were made in the ordinary course of
business".
SECTION 9. AMENDMENT TO SECTION 5.9 OF THE STOCK PURCHASE AGREEMENT.
Section 5.9 of the Stock Purchase Agreement is hereby amended by inserting, at
the end of the first sentence of paragraph (a) thereof, a comma and the phrase
"except where the failure to so comply would not reasonably be expected to have
a Material Adverse Effect on BBMC".
SECTION 10. AMENDMENT TO SECTION 5.13 OF THE STOCK PURCHASE AGREEMENT.
Section 5.13 of the Stock Purchase Agreement is hereby amended by inserting, at
the end of paragraph (a) thereof, a comma and the phrase "except where the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect on BBMC".
SECTION 11. ADDITION OF NEW SECTION 6.12 TO THE STOCK PURCHASE AGREEMENT.
The Stock Purchase Agreement is hereby amended by inserting the following new
Section 6.12 immediately following Section 6.11 thereof:
Section 6.12. Barnett Mortgage Purchase Agreement. There has been
furnished to the Seller a true, correct and complete copy of the Barnett
Mortgage Purchase Agreement and there have been no amendments or
modifications thereto.
<PAGE> 4
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SECTION 12. AMENDMENT TO SECTION 7.6 OF THE STOCK PURCHASE AGREEMENT.
Section 7.6 of the Stock Purchase Agreement is hereby deleted in its entirety
and the following new Section 7.6 is hereby substituted in place thereof:
7.6. Name and Marks. The Seller hereby grants to BBMC the right and
license (the "License") to use the name "BancBoston Mortgage Corporation"
as its name in connection with the operation of its business in a manner
consistent with the conduct of such business prior to the Closing Date,
subject to the terms and conditions of this Section 7.6. The License shall
be non-exclusive, applicable throughout North America, and royalty-free.
The License shall be and remain in effect from the Closing Date until the
ninetieth (90th) calendar day after the Closing Date. All use of the name
"BancBoston Mortgage Corporation" by BBMC shall inure to the exclusive
benefit of the Seller. On or prior to the ninetieth (90th) calendar day
after the Closing Date, the Purchaser will cease, and will cause BBMC to
cease, the use of the name "BancBoston Mortgage Corporation" or any
derivative thereof. On or prior to the ninetieth (90th) calendar day after
the Closing Date, the Purchaser will cease, and will cause BBMC to cease,
the use of any other name, designation or symbol indicating affiliation
with Bank of Boston Corporation ("Parent") or any Affiliate of Parent.
SECTION 13. AMENDMENT TO SECTION 7.7 OF THE STOCK PURCHASE AGREEMENT.
Section 7.7 of the Stock Purchase Agreement is hereby amended by inserting, at
the end of paragraph (e) thereof, the following new clause:
; and (iv) any employee benefit plan, program, or arrangement maintained or
contributed to by the Parent or any entity which is or has been aggregated
with the Parent for purposes of section 414 of the Code or section 4001 of
ERISA, other than liabilities or obligations relating to (xx) the employee
benefit plans, programs, and arrangements which are maintained or
contributed to solely by BBMC or its subsidiaries and which are disclosed
on Schedule 4.11(a) and (yy) BBMC's obligation to make contributions to and
pay related administration expenses of Seller's Thrift Incentive Plan for
any period after the Closing Date during which BBMC remains a participating
employer;
SECTION 14. AMENDMENT TO SECTION 11.3 OF THE STOCK PURCHASE AGREEMENT.
Section 11.3 of the Stock Purchase Agreement is hereby amended by deleting the
phrase "made by Seller" in the last sentence of paragraph (c) thereof and
substituting in place thereof the phrase "expressly made by Seller in Articles
IV and V of this Agreement" followed by a comma.
SECTION 15. REFERENCES TO EXCLUSIVE MARKETING AGREEMENT. The Stock Purchase
Agreement is hereby amended by substituting for each reference therein to the
term "Exclusive Marketing Agreement" a reference to the term "Marketing
Agreement".
<PAGE> 5
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SECTION 16. SUBSTITUTION OF NEW SECTIONS TO SELLER DISCLOSURE SCHEDULE. The
Stock Purchase Agreement is hereby amended by deleting Sections 4.6(c),
4.8(a)(i), 4.20, 5.14 and 7.1(m) to the Seller Disclosure Schedule in their
entirety and substituting in place thereof the form of Sections 4.6(c),
4.8(a)(i), 4.20, 5.14 and 7.1(m) to the Seller Disclosure Schedule attached
hereto.
SECTION 17. SUBSTITUTION OF NEW SECTION 6.8 TO PURCHASER DISCLOSURE
SCHEDULE. The Stock Purchase Agreement is hereby amended by deleting Section 6.8
to the Purchaser Disclosure Schedule in its entirety and substituting in place
thereof the form of Section 6.8 to the Purchaser Disclosure Schedule attached
hereto.
SECTION 18. RETENTION OF ASSETS RELATED TO RETAINED LIABILITIES. The Stock
Purchase Agreement is hereby amended by adding the following sentence to the end
of Section 7.7(e): "Seller shall retain all assets related to any such Retained
Liabilities."
SECTION 19. ADDITIONAL AGREEMENTS WITH RESPECT TO FINANCING ARRANGEMENTS.
Section 8.1(c) of the BBMC Stock Purchase Agreement provides that it is a
condition precedent to the obligations of both Seller and Purchaser to complete
the Closing that the Purchaser and BBMC enter into financing arrangements
satisfactory to the Seller, Lee and Madison Dearborn. Under certain
circumstances, the Seller is required pursuant to Section 8.1(c) to provide
bridge financing for a contemplated placement of fixed income securities of the
Purchaser (the "BKBC Bridge"). At the request of the Seller, the Purchaser and
the Seller have agreed to use reasonable efforts to complete the Closing on or
before March 15, 1996. In order to attempt to complete the Closing by such date,
the Purchaser and the Seller are attempting to arrange to accelerate the closing
of the contemplated bank financing of BBMC and to cause an unaffiliated third
party to provide bridge financing to the Purchaser in lieu of the bridge
financing by the Seller referred to above. In consideration of such efforts and
agreement, the Seller hereby agrees to reimburse the Purchaser for all costs
including but not limited to interest, fees and expenses (collectively, "Costs")
incurred by the Purchaser or BBMC, as applicable, in connection with financing
approved by the Seller that are caused by accelerating the closing of the bank
financing of BBMC to March 15, 1996 or earlier and bridging with an unaffiliated
third party the placement of fixed income securities of the Purchaser to the
extent that such Costs exceed the Costs that would have been incurred by the
Purchaser or BBMC, as applicable, in connection with the BKBC Bridge (such
excess being referred to herein as "Incremental Costs"). Seller and Purchaser
intend that any portion of such Incremental Costs that are paid by the Purchaser
or BBMC at or about the Closing Date will be capitalized and subsequently
amortized by the Purchaser or BBMC, as applicable. The Seller will reimburse the
Purchaser or BBMC, as applicable, for such capitalized Incremental Costs at such
time as the amortization of such Incremental Costs becomes a charge against the
income of the Purchaser or BBMC, as applicable. The Seller will reimburse the
Purchaser or BBMC, as applicable, for Incremental Costs not so capitalized
promptly upon being notified by the Purchaser or BBMC, as applicable, that such
Incremental Costs have been incurred. In addition, the Seller will pay interest
to the Purchaser or BBMC, as applicable, on such capitalized costs at BBMC's
Bank borrowing rate. In the event that the Purchaser or BBMC, as applicable,
notifies the Seller that it has determined
<PAGE> 6
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in its sole discretion that it is unable to finance the cash payment of any
Incremental Costs, then the Seller will pay such Incremental Costs within 20
days of receipt of such notice. In addition, Seller will bear the burden of any
incremental equity requirement incurred by Purchaser in connection with the
Bridge and any long term debt into which such Bridge is converted to the extent
such equity requirement is in excess of the equity requirement reflected on
Schedule 8.1(a). The foregoing sentence shall not require Seller to bear the
burden of any equity requirement in connection with the placement of the
contemplated senior high yield notes which is approved by Purchaser's Board of
Directors.
SECTION 20. BARNETT MORTGAGE PURCHASE AGREEMENT. The Purchaser hereby
agrees not to amend, waive or otherwise modify the Barnett Mortgage Purchase
Agreement without the prior written consent of the Seller other than such
amendment, waiver or modification as do not significantly affect the business of
the Purchaser or the benefits afforded the Purchaser thereunder. The Purchaser
also covenants and agrees with the Seller that Purchaser will enter into with
Seller a Marketing Agreement, a Transitional Services Agreement and other
Related Agreements the terms of each of which taken as a whole will be at least
as favorable to the Seller and its Affiliates as the terms offered to Barnett
Mortgage and its Affiliates. The agreements and covenants set forth in the
previous two sentences shall be in effect and survive the Closing. In reliance
upon the foregoing representations, warranties and agreements of the Purchaser,
the Seller hereby consents to the execution and delivery of the Barnett Mortgage
Purchase Agreement and the Related Agreements (as defined in the Barnett
Mortgage Purchase Agreement) by the Purchaser and the performance by the
Purchaser of its obligations thereunder.
SECTION 21. EXCLUDED ASSETS AND EXCLUDED LIABILITIES. Section 7.1(m) of the
Stock Purchase Agreement provides that, on or prior to the Closing Date, BBMC
shall transfer to the Seller the Excluded Assets and the Seller shall assume
from BBMC the Excluded Liabilities, in each case at their respective book values
at the date of such transfer. Section 7.1(m) also provides that the Seller shall
pay to the Purchaser in cash on the Closing Date (or there shall be deducted
from the indebtedness of BBMC owed to the Seller) the excess of the aggregate
book value of the Excluded Assets over the aggregate book value of the Excluded
Liabilities. The Seller and the Purchaser recognize that Closing Date balances
of certain Excluded Assets and Excluded Liabilities cannot be accurately
determined until the books and records closing process has been completed.
Therefore, the Seller and the Purchaser desire to, and hereby agree to,
consummate the Closing, and to make the payment (or deductions from
indebtedness) required to be made on or prior to the Closing Date (the "Closing
Date Payment") pursuant to Section 7.1(m), based upon the balance sheet attached
hereto as Exhibit A which balance sheet includes Excluded Assets and Excluded
Liabilities that are determined as of a date prior to the Closing Date. The
Seller and the Purchaser further agree to cooperate in good faith to mutually
agree, as soon as practicable after the Closing Date, on a final Closing Date
balance sheet for all Excluded Assets and Excluded Liabilities. Promptly after
agreement upon such final Closing Date balance sheet, but in no event more than
45 days after the Closing Date, the Seller shall pay to the Purchaser in cash,
or the Purchaser shall pay to the Seller in cash, as applicable, such amount as
shall be necessary (taking into account the Closing Date Payment) to give effect
to the payment
<PAGE> 7
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of an amount equal to the excess of the aggregate book value of the Excluded
Assets over the aggregate book value of the Excluded Liabilities. To the extent
that the amount payable by either party pursuant to the immediately preceding
sentence exceeds $50,000, the party obligated to make such payment shall also
pay interest on such payment during the period commencing on the Closing Date
and ending on the date that such payment is received by the other at a rate
equal to the Federal Funds Rate.
SECTION 22. LIMITED WAIVER OF SECTION 8.1(b) OF THE STOCK PURCHASE
AGREEMENT. Section 8.1(b) of the Stock Purchase Agreement provides that it is a
condition precedent to the obligations of each of the Seller and the Purchaser
to consummate the Closing that each License referred to in Section 5.8(b) of the
Seller Disclosure Schedule shall have been obtained. Each of the Purchaser and
the Seller hereby waives such condition precedent with respect to obtaining the
Licenses referred to in Section 5.8(b) of the Seller Disclosure Schedule for the
States of Arizona, New Jersey, New York and Pennsylvania.
SECTION 23. RATIFICATION, ETC. Except as otherwise expressly set forth
herein, all terms and conditions of the Stock Purchase Agreement and the other
Related Agreements are hereby ratified and confirmed and shall remain in full
force and effect. Except as expressly set forth herein, nothing herein shall be
construed to be an amendment or a waiver of any requirements of the Stock
Purchase Agreement or of any of the other Related Agreements. This Amendment
shall constitute a "Related Agreement" for all purposes of the Stock Purchase
Agreement.
SECTION 24. COUNTERPARTS. This Amendment may be executed In two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
SECTION 25. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
without regard to conflicts of laws principles thereof.
<PAGE> 8
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as an
instrument under seal to be effective as of the date first above written.
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter J. Manning
-------------------------------
Title:
HOMESIDE, INC.
By: /s/ Joe K. Pickett
-------------------------------
Title:
<PAGE> 1
EXHIBIT 10.3
MARKETING AGREEMENT
MARKETING AGREEMENT (the "Agreement"), dated as of March 15, 1996, by
and among Bank of Boston Corporation, a Massachusetts corporation (together with
its subsidiaries, "BKBC"), HomeSide, Inc., a Delaware corporation (together with
its subsidiaries, the "Company").
WHEREAS, BKBC and the Company have entered into a Stock Purchase
Agreement, dated as of December 11, 1995, as amended from time to time (the
"Purchase Agreement"), pursuant to which the Company is purchasing from BKBC all
of the issued and outstanding capital stock of BancBoston Mortgage Corporation,
a Florida corporation ("BBMC"); and
WHEREAS, it is a condition to the obligations of BKBC under the
Purchase Agreement that the parties hereto execute this Agreement.
NOW, THEREFORE, the parties hereto agrees as follows:
SECTION 1. Definitions. Capitalized terms used herein and not
otherwise defined in this Agreement shall have the meanings assigned to such
terms in the Purchase Agreement. In addition, the following terms shall have the
following meanings:
"BKB Customer" means any Person who becomes a customer of the Company
(a) in connection with the acquisition of a loan or servicing rights to a loan
originated through BKBC's or a BKBC Affiliate's normal retail origination
channels, including, without limitation, so called consumer direct mortgages, by
virtue of the sale to the Company of the capital stock of BBMC pursuant to the
Purchase Agreement or (b) as a result of a sale, after the date hereof, by BKBC
or a BKBC Affiliate to the Company of a loan and/or servicing rights relating to
(i) loans originated through BKBC's or such Affiliate's normal retail
origination channels, including, without limitation, so called consumer direct
mortgages and (ii) loans originated by banks and other Persons acquired by BKBC,
in each case for so long as such Person remains obligated to make any payment in
respect of such a loan (or any refinancing thereof by BKBC or its Affiliates).
Such Person shall continue to be a "BKBC Customer" notwithstanding any products
or services (including, without limitation, refinancings) provided to such
Person by the Company.
"Barnett" means Barnett Banks, Inc. and its Affiliates.
<PAGE> 2
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"Barnett Customer" shall have the meaning set forth in the Barnett
Marketing Agreement.
"Barnett Marketing Agreement" means the marketing agreement to be
entered into between Barnett and the Company substantially in the form attached
as Annex A hereto, as in effect from time to time, which Agreement shall not be
modified in any way (nor shall any waiver be granted thereunder) which (i) shall
impinge upon or otherwise limit the rights of BKBC and its Affiliates under this
Agreement or (ii) shall provide to Barnett any material rights or benefits
which, taken as a whole, are more favorable than the rights or benefits provided
to BKBC under this Agreement.
"Company Customers" means any Person who is a customer of the Company
(including Barnett Customers, BKBC Customers and Other Customers).
"Other Customer" means any Person who is a customer of the Company and
is not a Barnett Customer or a BKBC Customer.
SECTION 2. Exclusive Marketing Rights. Subject to Sections 7 and 8
hereof, the Company hereby grants to BKBC and its Affiliates the exclusive right
to market directly to BKBC Customers, or to solicit directly BKBC Customers with
respect to, any and all products and services. In connection with the grant of
such exclusive right, subject to Sections 7 and 8 hereof, the Company agrees
that it and its Subsidiaries will not, (a) market to BKBC Customers, or solicit
directly BKBC Customers with respect to, any products or services or (b) take
any action to facilitate any other Person's ability to so market or solicit BKBC
Customers.
SECTION 3. Non-Exclusive Marketing Rights. Subject to Sections 7 and 8
hereof, the Company hereby grants to BKBC and its Affiliates the non-exclusive
right to market directly to Other Customers, and to solicit directly Other
Customers with respect to, any and all products and services which BKBC markets
to its customers generally, other than products and services which are offered
by the Company.
SECTION 4. Customer Lists. (a) The Company shall not sell, alienate,
assign, grant, or otherwise convey (each of the foregoing referred to herein as
a "Transfer") to any Person any list of names of or information regarding any
BKBC Customers or any right to market to BKBC Customers, or to solicit
BKBC Customers with respect to, any products or services. The Company
shall at all times keep the names of and all information regarding BKBC
Customers confidential. Subject to
<PAGE> 3
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Sections 7 and 8 hereof, the Company shall use such names and information solely
for the purpose of servicing loans to BKBC Customers. Nothing in this agreement
shall be deemed to limit the Company's ability to pledge its assets to secure
repayment of indebtedness for money borrowed (in connection with which the
Company will seek appropriate confidentiality agreements).
(b) The Company may Transfer to any Person any list of names of or
information regarding Other Customers.
(c) To the extent permitted pursuant to the Barnett Marketing
Agreement, the Company may Transfer to any Person any list of names of or
information regarding Barnett Customers, provided, however, that in the event
that the Company proposes to Transfer any list containing names or other
information regarding Barnett Customers, the Company shall notify BKBC in
writing of such proposal and shall provide to BKBC an equal opportunity to
acquire such list or information.
(d) The Company shall not use any names of or information regarding
Persons who have ceased to be BKBC Customers for any purpose (including, without
limitation, marketing or solicitation purposes), other than for internal
analytical purposes, and shall not Transfer any such names or information to any
Person other than BKBC.
SECTION 5. Customer Information. At the Company's expense, the Company
shall furnish to BKBC, at BKBC's request, a list of all BKBC Customers and Other
Customers, in each case designating each such customer as a BKBC Customer or an
Other Customer and including each such customer's name and all such other
information reasonably available to the Company concerning such customer as
shall be requested by BKBC; provided; however, that if such a list is requested
by BKBC in excess of once per calendar year, BKBC shall reimburse the Company
for the Company's reasonable costs and expenses of producing such additional
lists.
SECTION 6. Customer Access. Subject to the rights granted to Barnett
under the Barnett Marketing Agreement, the Company shall allow BKBC, subject to
reasonable restrictions relating to frequency, timing and other matters to be
determined by the Company in good faith, to include marketing materials (other
than with respect to Eligible Products) in all mortgage account statements and
other materials sent by the Company to any BKBC Customers and/or Other
Customers. BKBC shall reimburse the Company for the Company's reasonable costs
and expenses of including such marketing materials in such statements.
<PAGE> 4
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SECTION 7. Refinancing Restrictions.
The Company may take such action as it desires with respect to the
refinancing of its customer loans subject to the following:
(a) Notwithstanding Section 2 hereof, the Company shall have the right
to solicit any BKBC Customer for the refinancing of a mortgage loan, but only so
long as (i) in connection with such marketing or solicitation the Company
complies with such standards and restrictions with respect to solicitation as
are set forth in the applicable guides, regulations and practices of the Federal
National Mortgage Association, the Federal Home Loan Mortgage Corporation and
the Government National Mortgage Association and such additional standards and
restrictions as are typically contained in agency servicing agreements and (ii)
such marketing or solicitation does not separately target BKBC Customers. In
addition, in no event will the Company market to or solicit any BKBC Customer
whose loan is carried on BKBC's balance sheet to refinance a mortgage loan,
unless such marketing or solicitation is conducted solely through materials
included in mortgage account statements.
(b) BKBC will not engage in any formal program (e.g., mailings or
telemarketing efforts) soliciting the refinancing of mortgage loans if such
program includes Company Customers or any subset thereof. BKBC may engage in
such a program using a customer list rented or purchased from a third party,
and, if such list includes Company Customers, BKBC will submit to the Company a
list of leads generated from such effort and the Company shall promptly pay to
BKBC commercially reasonable compensation as agreed between the Company and BKBC
for refinancings arising out of such leads.
SECTION 8. Eligible Products Marketing. The Company shall have the
nonexclusive right to market to BKBC Customers, and the exclusive right to
market to Other Customers, any Eligible Products. "Eligible Products" shall mean
mortgage loans on one-to-four family residential real estate (which, in the case
of BKBC Customers, shall be restricted to first mortgages), mortgage credit
insurance, relocation services, title insurance and title search services,
appraisal services, private mortgage insurance, escrow services, hazard
insurance (provided, however, that if BKBC offers such insurance, the Company
will not solicit BKBC Customers for such insurance), accelerated mortgage
payment products, speed pay services, and a customer retention program
comparable to the Country Wide Perks Program. "Eligible Products" shall also
include such additional products and services which are ancillary to
<PAGE> 5
-5-
the Company's core business and which the Company may wish to market from time
to time, subject to BKBC's prior written approval which shall not be
unreasonably withheld. The parties agree that BKBC's approval shall be deemed to
be reasonably withheld if such ancillary product or service is competitive with
a significant product or service then marketed or under development by BKBC.
SECTION 9. Term. The term of this Agreement shall be the later of (i)
the eighth anniversary of the date hereof or (ii) the third anniversary of
termination of the Operating Agreement. Notwithstanding the foregoing, BKBC's
right pursuant to Section 5 hereof to obtain a list of all BKBC's Customers
(including such information as provided for in Section 5) shall survive
termination of this Agreement.
SECTION 10. Compliance. Upon request of either party hereto, the other
party shall provide to the requesting party such access to the other party's
books, records and personnel, subject to a reasonable advance notice and at
mutually agreeable times, as is necessary for the requesting party to confirm
compliance by the other party with its obligations hereunder.
SECTION 11. No Other Restrictions. Except as specifically set forth
herein, and notwithstanding any provision of the Purchase Agreement or any
Related Agreement, (i) BKBC shall not be subject to any restrictions with
respect to the marketing to or the solicitation of BKBC Customers and (ii) the
Company shall not be subject to any restrictions with respect to the marketing
to or the solicitation of Other Customers.
SECTION 12. Successors and Assigns. Each of BKBC and the Company may
assign its rights (subject to its obligations) hereunder, in whole or in part;
provided, however, that no rights or obligations hereunder may be assigned, in
whole or in part, to one or more of the Persons listed on Schedule 5.2B of the
Amended and Restated Stockholder Agreement. This Agreement shall be binding on
and insure to the benefit of the parties hereto and their respective successors
and permitted assigns.
SECTION 13. Notice. Any notice, request, instruction or other document
to be given hereunder by any party hereto to any other party shall be in writing
and shall be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by electronic facsimile transmission, cable, telegram, telex
or other standard form of telecommunications, by overnight courier or by
registered or certified mail, postage prepaid, addressed as follows:
<PAGE> 6
-6-
if to BKBC:
The First National Bank of Boston
100 Federal Street, 01-25-08
Boston, Massachusetts 02110
Attention: Peter J. Manning
Telecopy: (617) 434-7825
with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Norman J. Shachoy, Esq.
Telecopy: (617) 951-8736
if to the Company:
HomeSide, Inc.
7301 Bay Meadows Way
Jacksonville, FL 32256
Attention: Joe K. Pickett
Telecopy: (904) 281-3745
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: James Westra, Esq.
Telecopy: (617) 951-1295
or at such other address for a party as shall be specified by written notice.
SECTION 14. Modification and Waiver. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by BKB and the Company. No waiver
of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision of this Agreement, whether or not
similar. No waiver by any party of any breach or violation of this Agreement
shall be deemed or construed as a waiver of any subsequent breach or violation
thereof, whether or not similar. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
<PAGE> 7
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SECTION 15. Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties relating to the subject matter
hereof and supercedes all prior proposals, commitments, negotiations and
understandings, whether written or oral, and all other communications between
the parties relating to the subject matter hereof.
SECTION 16. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Delaware, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the laws of any other jurisdiction.
SECTION 17. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, the remainder of this Agreement and
the application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
SECTION 18. Third Party Beneficiaries. Nothing in this Agreement shall
entitle any Person other than the parties or their respective successors and
assigns permitted hereby to any claim, cause of action, remedy or right of any
kind.
SECTION 19. 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 together shall be deemed to be one and the same document.
<PAGE> 8
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
BANK OF BOSTON CORPORATION
By: /s/ Peter J. Manning
--------------------
Name: Peter J. Manning
Title: Executive Director
HOMESIDE, INC.
By: /s/ Joe K. Pickett
--------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.5
OPERATING AGREEMENT
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BANK NAME: THE FIRST NATIONAL BANK OF BOSTON, 100 FEDERAL STREET, BOSTON,
MASSACHUSETTS 02110
BANK CONTACT PERSON: PHONE NO:
FAX NO:
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BANK NAME: BANK OF BOSTON CONNECTICUT, 31 PRATT STREET, HARTFORD,
CONNECTICUT, 06103
BANK CONTACT PERSON: PHONE NO:
FAX NO:
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BANK NAME: RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, ONE HOSPITAL TRUST
PLAZA, PROVIDENCE, RI 02903
BANK CONTACT PERSON: PHONE NO:
FAX NO:
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BANK NAME: BANK OF BOSTON FLORIDA, N.A. 450 ROYAL PALM WAY, PALM BEACH,
FL 33480
BANK CONTACT PERSON: PHONE NO:
FAX NO:
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This Operating Agreement (the "Operating Agreement") is entered into and
effective as of MARCH 15, 1996, by and between the Bank and Newco Mortgage
Corporation.
RECITALS.
1. BKB and Newco Holdings have entered into the Stock Purchase Agreement.
2. The Stock Purchase Agreement contemplated origination and servicing
arrangements between the Bank and Newco Holdings after the Closing Date.
3. The Bank and Newco Holdings and Newco Mortgage Corporation desire to set
forth the specific terms and conditions of such arrangements.
IN CONSIDERATION of the mutual promises made in this Operating Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Bank and Newco Mortgage Corporation agree as follows:
ARTICLE 1.
DEFINITIONS.
As used in this Operating Agreement, the following capitalized terms shall have
the meanings given to them below:
1.1. "AFFILIATE" means an entity that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, another entity. For purposes of this definition, "control", "controlled
by", and "under common control with" means the direct or indirect possession of
ordinary voting power to elect a majority of the board of directors or
comparable body of an entity.
1.2. "ANCILLARY AGREEMENTS" means this Operating Agreement and the attached
Broker Agreement, the PMSR Flow Agreement, the Newco Servicing Agreement and the
Master Take-Out Commitment.
1.3. "BANK" means each and/or all of the entities identified above as a Bank, as
the context may indicate.
1.4. "BBMC SERVICING AGREEMENT" means the agreement(s) entered into by and among
Newco Mortgage Corporation and each Bank before the Closing Date and which
govern the terms under which Newco Mortgage Corporation serviced the Existing
Portfolio Mortgage Loans prior to the Closing Date.
1.5. "BKB" means The First National Bank of Boston.
1.6. "BROKER AGREEMENT" means the Brokered Loan Purchase and Sale Agreement to
be entered into by and among Newco Mortgage Corporation and each Bank on or
before the Closing Date and which will govern the terms under which the Bank
will originate
<PAGE> 2
and Newco will fund and acquire the: (a) New Portfolio Mortgage
Loans, and (b) New Secondary Market Mortgage Loans and the related servicing
rights. The Broker Agreement may be amended from time to time, including, but
not limited to, the amendment contemplated by SECTION 3.4 below. The Broker
Agreement is attached to this Operating Agreement as EXHIBIT A.
1.7. "CLOSING DATE" means March 15, 1996.
1.8. "EXISTING MORTGAGE LOANS" means all residential mortgage loans serviced by
Newco Mortgage Corporation on or before the Closing Date.
1.9. "EXISTING PORTFOLIO MORTGAGE LOANS" means residential mortgage loans owned
by a Bank and serviced by Newco Mortgage Corporation immediately prior to the
Closing Date.
1.10. "EXISTING SERVICING RIGHTS" means Newco Mortgage Corporation's rights to
service the Existing Mortgage Loans.
1.11. "MARKETING AGREEMENT" means the Marketing Agreement to be entered into by
and between Newco Holdings and Bank of Boston Corporation on or before the
Closing Date and which will govern the terms under which Newco Mortgage
Corporation's mortgagors may be solicited for certain products and services.
1.12. "MASTER TAKE-OUT COMMITMENT" means the Master Take-Out Commitment to be
entered into by and among Newco Mortgage Corporation and each Bank on or before
the Closing Date and which will govern the terms under which each Bank will
repurchase New Portfolio Mortgage Loans from Newco Mortgage Corporation. The
Take-Out Commitment is attached to this Operating Agreement as EXHIBIT B.
1.13. "NEWCO HOLDINGS" means HomeSide, Inc., formerly known as HomeAmerica
Capital, Inc., a business corporation organized under the laws of the state of
Delaware. It is contemplated that GrantAmerica intends to change its name after
the Closing Date.
1.14. "NEWCO MORTGAGE CORPORATION" means BancBoston Mortgage Corporation, a
business corporation organized under the laws of the state of Florida and with
its principal place of business at 7301 Baymeadows Way, Jacksonville, Florida
32256. It is contemplated that BancBoston Mortgage Corporation intends to change
its name after the Closing Date.
1.15. "NEWCO SERVICING AGREEMENT" means the agreement to be entered into by and
among Newco Mortgage Corporation and each Bank on or before the Closing Date and
which will govern the terms under which Newco Mortgage Corporation will service
the Portfolio Mortgage Loans. The Newco Servicing Agreement is attached to this
Operating Agreement as EXHIBIT C.
1.16. "NEW MORTGAGE LOAN" means a New Portfolio Mortgage Loan and/or New
Secondary Market Mortgage Loan.
1.17. "NEW PORTFOLIO MORTGAGE LOAN" means each residential mortgage loan which a
Bank: (a) will originate on or after the Closing Date and retain the ownership
subject to the New Servicing Rights, and (b) has originated prior to the Closing
Date, has not repurchased from Newco as of the Closing Date and will retain the
ownership subject to the New Servicing Rights.
1.18. "NEW SECONDARY MARKET MORTGAGE LOAN" means each residential mortgage loan
which the Bank will originate on or after the Closing Date other than a New
Portfolio Mortgage Loan.
1.19. "NEW SERVICING RIGHTS" means Newco Mortgage Corporation's right to service
the New Portfolio Mortgage Loans.
1.20. "OPERATING AGREEMENT" has the meaning set forth in the recitals above. The
Exhibits to this Operating Agreement, except for EXHIBIT E, shall not be
considered to be part of this Operating Agreement.
1.21. "PMSR FLOW AGREEMENT" means the agreement to be entered into by and among
Newco Mortgage Corporation and each Bank on or before the Closing Date and which
will govern the terms under which the Bank will sell the New Servicing Rights to
Newco Mortgage Corporation. The PMSR Flow Agreement is attached to this
Operating Agreement as EXHIBIT D.
1.22. "PORTFOLIO MORTGAGE LOANS" means the Existing Portfolio Mortgage Loans and
the New Portfolio Mortgage Loans.
1.23. "RELATED AGREEMENTS" has the meaning described in ARTICLE 1 of the Stock
Purchase Agreement.
1.24. "SECONDARY MARKET MORTGAGE LOAN" means a Mortgage Loan other than a
Portfolio Mortgage Loan.
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<PAGE> 3
1.25. "SERVICING RIGHTS" means a the New Servicing Rights and the Existing
Servicing Rights.
1.26. "STOCKHOLDER AGREEMENT" has the meaning defined in ARTICLE 1 of the Stock
Purchase Agreement, and as such Stockholder Agreement may be amended from time.
1.27. "STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement entered into
by and between BKB and Newco Holding as of December 11, 1995, as may be amended
from time to time.
ARTICLE 2.
EXISTING SERVICING ARRANGEMENTS.
2.1. TERMINATION OF EXISTING SERVICING ARRANGEMENT.
The BBMC Servicing Agreement will terminate as of the Closing Date, and the
Existing Servicing Rights shall be administered in accordance with the terms of
the Newco Servicing Agreement.
2.2. NEWCO MORTGAGE CORPORATION OWNS THE EXISTING SERVICING RIGHTS.
The Bank acknowledges that Newco Mortgage Corporation owns all right, title and
interest in the Existing Servicing Rights, subject to the terms of the Newco
Servicing Agreement.
ARTICLE 3.
ORIGINATION AND SERVICING OF NEW MORTGAGE LOANS.
3.1. THE BANK'S ROLE IN NEW LOAN ORIGINATIONS.
The Bank shall sell to Newco Mortgage Corporation on an exclusive basis any: (a)
New Servicing Rights, and (b) New Secondary Market Mortgage Loan and related
servicing rights, subject to the provisions of this Operating Agreement.
Any New Portfolio Mortgage Loan or New Secondary Market Mortgage Loan originated
by a Bank shall be in accordance with the terms of the Related Agreements, and
in particular with the terms of the Broker Agreement and the non-competition
article of the Stockholder Agreement.
3.2. NEWCO MORTGAGE CORPORATION'S ROLE IN NEW PORTFOLIO MORTGAGE LOAN
ORIGINATIONS.
Each Bank and Newco Mortgage Corporation acknowledge that the Broker Agreement
contemplates that the Master Take-Out Commitment will operate in conjunction
with the Broker Agreement to ensure that the New Portfolio Loans will be
purchased by a Bank from Newco Mortgage Corporation and thereby reside on such
Bank's balance sheet, subject to the New Servicing Rights.
3.3. NEWCO MORTGAGE CORPORATION'S INTEREST IN THE NEW SERVICING RIGHTS.
The Bank shall sell and grant all right, title and interest in the New Servicing
Rights to Newco Mortgage Corporation in accordance with the terms of the PMSR
Flow Agreement. The New Servicing Rights will be administered in accordance with
the terms of the Newco Servicing Agreement.
3.4. NEWCO MORTGAGE CORPORATION'S ROLE IN NEW PORTFOLIO AND SECONDARY MARKET
MORTGAGE LOAN ORIGINATIONS AFTER THE BAYBANKS MERGER.
Newco Mortgage Corporation will continue to fund the New Portfolio Mortgage
Loans and New Secondary Market Mortgage Loans under the terms of the Broker
Agreement until the respective Bank establishes a mortgage loan origination
system sufficient to enable such Bank to fund its own mortgage loan originations
which could take place (a) when BKB completes its merger with BayBanks, or (b)
at such other time as the respective Bank may elect.
At that time, such Bank and Newco Mortgage Corporation will amend the Broker
Agreement into a correspondent lender purchase and sale agreement substantially
similar to the correspondent lending agreement entered into by and between
Barnett Banks, Inc. and the Buyer. Such amended agreement will reflect the fact
that: (a) the Bank will originate and fund all New Portfolio Mortgage Loans and
New Secondary Market Mortgage Loans, and (b) Newco Mortgage Corporation will
purchase the New Secondary Market Mortgage Loans and their related servicing
rights. Newco Mortgage Corporation will
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<PAGE> 4
continue to purchase the New Servicing Rights under the PMSR Flow Agreement.
3.5. MARKETING AGREEMENT AND STOCKHOLDER AGREEMENT CONTROLS THE OPERATING
AGREEMENT.
Except with respect to SECTION 3.1 of this Operating Agreement, to the extent
that the terms of the Marketing Agreement or the Stockholder Agreement, on the
one hand, are inconsistent with the terms of this Operating Agreement on the
other hand, the terms of the Marketing Agreement or the Stockholder Agreement,
as the case may be, shall control.
3.6. OPERATING AGREEMENT CONTROLS THE OTHER ANCILLARY AGREEMENTS.
To the extent that the terms of this Operating Agreement are inconsistent with
the terms of the other Ancillary Agreements, the terms of this Operating
Agreement shall control.
ARTICLE 4.
PORTFOLIO LOAN SALES SUPPORT.
4.1. NEWCO MORTGAGE CORPORATION WILL ASSIST THE BANK.
From time to time, a Bank may desire to sell any or all of its ownership
interest in its Portfolio Mortgage Loans to a third party. At the Bank's
request, Newco Mortgage Corporation will assist the Bank with any such sale in
accordance with the terms set forth in EXHIBIT E attached to this Operating
Agreement.
4.2. NEWCO MORTGAGE CORPORATION RETAINS SERVICING RIGHTS.
Any such sale of the Portfolio Mortgage Loans shall be subject to Newco Mortgage
Corporation's Servicing Rights, and shall be conducted in accordance with the
terms set forth in SECTION 17.4 of the Newco Servicing Agreement.
ARTICLE 5.
PRODUCTS, PRICING, CUSTOMER SERVICE AND RELATED ISSUES.
5.1. PRODUCTS.
Newco Mortgage Corporation covenants as follows:
(a) Newco Mortgage Corporation will continue to offer all secondary market and
portfolio products currently offered by Newco Mortgage Corporation on the
Closing Date, subject to investor availability.
(b) Subject to investor availability, Newco Mortgage Corporation will add new
products which a Bank can demonstrate are being offered by a significant
competitor. This would include major competitors in Massachusetts, Connecticut
and Rhode Island.
(c) Newco Mortgage Corporation shall work with a Bank to create mortgage loan
products: (i) which may be new to such Bank's mortgage loan production market
and offer significant competitive advantage to such Bank, or (ii) for which such
Bank believes there may be significant demand.
(d) Newco Mortgage Corporation shall formalize a Product Development
Committee/Process. A Bank representative may participate in the activities of
such Committee.
(e) Newco Mortgage Corporation will not discontinue mortgage loan products
without proper notice to the affected Bank. The Product Development Committee
will determine the appropriate mortgage loan product menu, subject again to
investor availability.
(f) If Newco Mortgage Corporation does not offer a mortgage loan product which a
Bank wishes to sell, the Bank may sell such mortgage loan product to another
lender. If Newco Mortgage Corporation requires a minimum amount of production in
order to offer a new mortgage loan product and a Bank cannot meet such minimum
amount, such Bank may sell to another lender.
(g) Newco Mortgage Corporation shall not require a Bank to sell any mortgage
loans or related servicing rights which fail to satisfy the A Paper credit
quality standards of the Federal National Mortgage Association, the Federal Home
Loan Mortgage Corporation, Government National Mortgage Association, or any A
Paper conforming or jumbo private investor.
5.2. PRICING
(a) A Bank will receive the lower of either the most favorable Newco Mortgage
Corporation pricing offered to brokers or Newco Mortgage Corporation's pricing
as determined by the screen price/dealer price
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<PAGE> 5
determined each morning, based on the delivery month for the appropriate lock
term. For example, a loan which is locked on March 1 for 70 days closed and back
will be priced for June delivery. If a mortgage loan is delivered to Newco
Mortgage Corporation on the 70th day, this would be May 10. The cutoff for May
pools is approximately May 1, therefore requiring this mortgage loan to be
delivered in a June pool. The cutoff on June pools is approximately June 1. On
average, Newco Mortgage Corporation's 70-day locks are rolled on the 20th of
each month.
(b) Daily pricing from Newco Mortgage Corporation will be administered as
defined in Newco Mortgage Corporation's Secondary Marketing Buy Price Policy I
dated March 1, 1996, subject to SECTION 3.1 of the Broker Agreement. The Bank
will have a two (2)-hour window for New Secondary Market Mortgage Loans from the
time Newco Mortgage Corporation notifies the person designated by the Bank of a
price change. Such 2-hour window shall apply only to new mortgage loan
applications. Floating rate mortgage loan applications will remain at market
rate risk, and will be subject to immediate rate/price changes.
5.3. SERVICING RELEASED PREMIUMS.
5.3.1. BANK RECEIVES MOST FAVORABLE BROKER PRICING. A Bank will receive the most
favorable Newco Mortgage Corporation broker servicing released premiums.
Servicing Released premiums for New Portfolio Mortgage Loans will be established
by the Buyer for each New portfolio Mortgage Loan product, based upon certain
Mortgage Loan and servicing criteria, including, but not limited to, credit,
cash flow, product characteristics and other such criteria.
5.3.2. NON-PRIVATE BANK MORTGAGE LOANS. Newco Mortgage Corporation will pay to
the Bank the applicable broker servicing released premium for each New Mortgage
Loan, other than a mortgage loan made to a private banking client of the Bank,
in the manner described below:
(A) APPLICATIONS RECEIVED AND MORTGAGE LOAN CLOSED AFTER CLOSING DATE. Newco
Mortgage Corporation will pay to the Bank 100% of the applicable broker
servicing released premium, for each New Mortgage Loan: (a) with an application
which is received by the Bank after the Closing Date, and (b) which was closed
after the Closing Date.
(B) APPLICATIONS RECEIVED 2 WEEKS OR LESS BEFORE CLOSING DATE. Newco Mortgage
Corporation will pay to the Bank 50% of the applicable broker servicing released
premium, net of any difference in the Newco Mortgage Corporation subsidy for
retail Mortgage Loans and tablefunded Mortgage Loans, for each Mortgage Loan
application which was received by the Bank or Newco Mortgage Corporation 2 weeks
or less before the Closing Date.
(C) APPLICATIONS RECEIVED MORE THAN 2 WEEKS BEFORE CLOSING DATE. Newco Mortgage
Corporation will not pay a servicing released premium to a Bank for any New
Mortgage Loan application which is received by the Bank more than 2 weeks before
the Closing Date.
(D) APPLICATION WHERE NEWCO PAID LOAN OFFICER COMPENSATION. Newco Mortgage
Corporation will not pay a servicing released premium to a Bank for any New
Mortgage Loan application which is received by the Bank at any time if Newco
Mortgage Corporation paid compensation to the originating loan officer.
5.3.3. PRIVATE BANK MORTGAGE LOANS. Newco Mortgage Corporation will pay to the
Bank 100% of the applicable broker servicing released premium for each New
Mortgage Loan made to a private banking client of the Bank.
5.4. CUSTOMER SERVICE LEVELS.
(a) Newco Mortgage Corporation shall establish an Advisory/Monitoring Committee
which shall include a BKB representative to meet regularly to address
operational issues, customer service issues for both servicing and secondary
marketing, and other internal and external customer concerns. The
Advisory/Monitoring Committee shall establish service level benchmarks at least
equivalent to normal industry standards of large mortgage companies.
(b) A Bank will receive necessary Newco Mortgage Corporation internal service
level reports to enable such Bank to monitor key service levels. The service
level benchmarks established by the Advisory/Monitoring Committee will be
monitored and addressed, as appropriate.
5.5. BANK FUNCTIONS.
1. Origination.
2. Processing.
3. All underwriting with respect to which Newco Mortgage Corporation has
delegated authority will be delegated to a Bank, subject to the Delegated
Underwriting Agreement.
- 5 -
<PAGE> 6
4. Prepare closing documents and mortgage loan funding requests per Newco
Mortgage Corporation's requirements.
5. Completion Control (Follow-up documents relating to closing conditions).
6. Compliance review on all loans, and all upfront Quality Control for all loans
required by the investor -- e.g. alternative doc loans).
7. Rate distribution to Bank loan officers.
8. Lock-in reconciliation.
9. Secondary Marketing Liaison Group to interface with Production and Newco
Mortgage Corporation.
10. Funding reconciliation.
5.6. NEWCO MORTGAGE CORPORATION FUNCTIONS.
1. Secondary Marketing (secondary market loans only).
2. Pipeline Management and Hedging (secondary market loans only).
3. Funding.
4. Shipping.
5. Post closing quality control.
6. Record Retention and Retrieval.
7. Legal review and document follow-up.
8. FHA/VA insuring and guaranteeing.
5.7. FEES.
1. Addressed in Newco Servicing Agreement.
2. The Bank will receive the most favorable Newco document review fee charged
for best efforts flow program loans.
5.8. REPORTING.
(a) Newco Mortgage Corporation to furnish all agreed upon risk management
reports outside of the formal Directors' Risk Management Committee. (Note: this
is especially important concerning the servicing asset and its hedge.) This
information should go to the Bank's Treasury, Finance and Accounting
departments. Book versus market servicing portfolio valuation and rate shock -
Monthly Change in economic servicing value and rate shock - Monthly Hedge
position results - Daily Formal hedge position review and strategy review -
Monthly Minutes of Newco Mortgage Corporation's internal risk management
meetings.
(b) The Bank will be provided internal performance analysis information, which
allows the Bank to run it's operation effectively.
(c) Newco Mortgage Corporation agrees to furnish the Bank each month with the
following management reports along with other reports usual and customary for
Newco Mortgage Corporation brokers.
PIPELINE REPORT. All loans registered, at float or locked-in with all required
information including lock expiration dates, price, etc.
EXCEPTION REPORT: All loans received by Newco Mortgage Corporation indicating
exceptions which are tracked by legal review system.
DOCUMENT TRACKING REPORT. Follow-up documents received or not received (Recorded
mortgage, title policy etc.)
QUALITY CONTROL REPORT. Monthly/Quarterly QC reports on a sample of secondary
market and private loans for production by Bank/branch with overall summary
indicating trends, fraud, etc.
HUD QUARTERLY QC REPORTS on servicing including summary reports of QC reviews,
delinquency trends, early payment defaults/early foreclosure analysis, etc.
STATUS REPORT. When available, a report identifying where a loan is in the Newco
Mortgage Corporation process (i.e.,reviewed, set up on servicing system, etc.)
5.9. OPERATIONS.
Newco Mortgage Corporation and the Bank to develop procedures and processes
which will minimize redundancies.
5.10. PENALTIES.
1. On or before the buyprice expiration date, the Bank will be responsible for
notifying Newco Mortgage Corporation regarding any loans which will not meet
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<PAGE> 7
its buyprice expiration date. Upon notification, either telephonically or
through delivery and notation in the closed loan file, Newco Mortgage
Corporation will grant the Bank a 15-day extension from the buyprice expiration
date for the cost of the roll as indicated on Knight-Ridder, rounded to the
nearest one-eighth of one percent (0.125%). An additional 15 day extension will
be granted for one-half of one percent (0.50%). After 30 days, the loans will be
marked-to-market at the time they are eligible for funding. Failure to notify
Newco Mortgage Corporation regarding loans which will not meet their buyprice
expiration date as described above will result in said loans being
marked-to-market.
5.11. MORTGAGE INSURANCE AND REPURCHASE REQUESTS.
Newco Mortgage Corporation shall promptly notify the Bank (within 72 hours) of
any repurchase request or notification of mortgage insurance reduction or
cancellation so that the Bank may participate in the repurchase decision
process. Newco Mortgage Corporation shall begin to work on
repurchases/cancellation defense as soon as possible. The Bank must remedy
deficiencies within the applicable investor's deadline. Failure to provide the
Bank adequate notice to participate in the repurchase decision process, relieves
the Bank from liability or recourse to the Newco Mortgage Corporation, but only
if the failure to timely notify has a material adverse impact on the Bank's
interests. The Bank shall provide Newco Mortgage Corporation with primary
contact person/persons to facilitate such processing.
5.12. SALE OF SERVICING RIGHTS.
Newco Mortgage Corporation may not sell servicing relating to the Existing and
New Portfolio Mortgage Loans except in compliance with provisions of this
section.
(a) Newco Mortgage Corporation will not sell servicing relating to Existing and
New Portfolio Mortgage Loans to Citizens Bank or Fleet National Bank or to the
successors or affiliates of such parties without the consent of the Bank.
(b) Newco Mortgage Corporation will not sell servicing relating to Existing and
New Portfolio Mortgage Loans to any party unless each of the following
conditions shall have been complied with:
(i) The sale of such servicing shall be necessary to meet Newco Mortgage
Corporation's liquidity needs.
(ii) Newco Mortgage Corporation shall have used all reasonable efforts to
satisfy its liquidity needs through the sale of servicing assets relating to
Secondary Market Mortgage Loans.
(iii) Newco Mortgage Corporation shall have first offered to sell such servicing
rights to the Bank at fair market value and in connection with such offer shall
have offered to subservice on commercially reasonable terms.
(c) No lender which takes a security interest in the assets of Newco Mortgage
Corporation and no transferees of such a lender shall be bound by the provisions
of SECTION 5.12(B) above.
5.13. NATURE OF RELATIONSHIP.
Both parties recognize the importance of maintaining their competitive
advantages in their businesses and understand that the success of each is
inextricably bound in the other. Beyond the responsibilities explicitly outlined
in this Operating Agreement, both parties agree to work together to create
synergies and develop innovations that can result in sustainable competitive
advantages for both. Newco Mortgage Corporation will cooperate in good faith
with the Bank to respond promptly to any reasonable request made by the Bank
with respect to the enhancement of the services, products and systems offered by
Newco Mortgage Corporation consistent with Newco Mortgage Corporation's access
to capital.
ARTICLE 6.
MISCELLANEOUS.
6.1. AFFILIATES WILL ENTER INTO AGREEMENTS WITH NEWCO MORTGAGE CORPORATION.
BKB will cause any of its current or future Affiliates to execute agreements
substantially similar to the Ancillary Agreements, which shall be reasonably
acceptable to such Affiliate and Newco Mortgage Corporation, in the event such
Affiliate desires to engage in any mortgage banking activity of a type which is
the subject matter of such Ancillary Agreements.
6.2. AFFILIATES WILL COMPLY WITH
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<PAGE> 8
RELATED AGREEMENTS.
To the extent applicable, an Affiliate of BKB shall at all times comply with all
other Related Agreements, including, but not limited to, the Stockholder
Agreement and the non-competition provisions of the Stockholder Agreement.
6.3. SUCCESSORS.
This Operating Agreement will inure to the benefit of and be binding upon the
parties to this Operating Agreement. Nothing in this Operating Agreement
expressed or implied is intended to confer on any person other that the parties
to this Operating Agreement and their successors and assigns, any rights,
obligations, remedies or liabilities.
6.4. ASSIGNMENT AND DELEGATION.
No party may assign this Operating Agreement or delegate any of its functions
hereunder to any other party without the prior written consent of Newco Mortgage
Corporation or the respective Bank; provided, however, that either party may
assign and/or delegate, in whole or in part, any of its rights under this
Operating Agreement to any of its Affiliates without the prior written consent
of Newco Mortgage Corporation or the respective Bank.
6.5. FORCE MAJEURE.
No party shall be liable for delays or errors occurring by reason of
circumstances beyond such party's control, including, without limitation, acts
of civil, military, or banking authorities, national emergencies, labor
difficulties, fire, flood or other catastrophes, acts of God, insurrection, war,
riots, failure of transportation or equipment, or failure of vendors,
communication or power supply.
6.6. TERM.
The term of this Operating Agreement will be five (5) years from the effective
date of this Operating Agreement.
This Operating Agreement may be extended for two (2) years if the extension
negotiations are completed at least six (6) months prior to the original
expiration date. After any such two (2) year extension, this Operating Agreement
is cancelable upon 180 days' written notice which may be given as early as 180
days before the extended expiration date.
The expiration of this Operating Agreement will not cause the Servicing
Agreement or Newco Mortgage Corporation's right to service the Existing Mortgage
Loans or the New Mortgage Loans serviced at the date of such expiration under
the Servicing Agreement to terminate or otherwise expire.
6.7. TERMINATION.
This Operating Agreement may be terminated for any one of the following reasons:
6.7.1. NEWCO'S FINANCIAL IMPAIRMENT. The Bank may terminate this Operating
Agreement immediately if:
(a) Newco Mortgage Corporation becomes bankrupt or has its status as an approved
seller/servicer/mortgagee rescinded by FNMA, FHLMC or GNMA. However, this
Operating Agreement will reactivate if Newco Mortgage Corporation is reinstated
by the applicable agency within six (6) months of any such rescission. Newco
Mortgage Corporation will reimburse the Bank for its reasonable costs associated
with such termination and reactivation.
(b) Newco Mortgage Corporation's liquidity needs cause Newco Mortgage
Corporation to sell servicing rights for the Existing Portfolio Mortgage Loans
or the New Portfolio Mortgage Loans.
6.7.2. NEWCO'S FAILURE TO PERFORM. The Bank may terminate this Operating
Agreement immediately if:
(a) Newco Mortgage Corporation fails to satisfy specific written standards
established by a Advisory/Monitoring Committee, as agreed upon by the executive
management of BKB and Newco Mortgage Corporation, and
(b) Newco Mortgage Corporation fails to cure such failure within a reasonable
cure period after receiving formal written notice of such failure.
6.7.3. TERMINATION OF NEWCO SERVICING AGREEMENT. Notwithstanding the foregoing,
the Bank may terminate Newco Mortgage Corporation's rights to service the
Existing Mortgage Loans or the New Mortgage Loans under the Newco Servicing
Agreement ONLY if:
(a) an event described in SECTION 6.7.1(A) above occurs, or
(b) Newco Mortgage Corporation: (i) fails to satisfy specific written standards
established by the Advisory/Monitoring Committee, as described in SECTION
6.7.2(A) above, (ii) such written standards relate expressly to Newco Mortgage
Corporation's servicing of the Existing Mortgage Loans or the New Mortgage Loans
under the Newco Servicing Agreement, and (iii) Newco Mortgage Corporation fails
to cure such failure within a reasonable cure period after receiving formal
written notice of such failure.
Subject to the rights of the Secured Party contained in the Investors
Acknowledgment Agreement to be
- 8 -
<PAGE> 9
entered into by and among Newco Mortgage Corporation, The First National Bank of
Boston as "Secured Party" and each of the Banks as Investors, dated as of March
15, 1996, which rights Newco Mortgage Corporation and the Bank acknowledge,
Newco Mortgage Corporation will, upon receipt of notice that the Newco Servicing
Agreement has been terminated: (a) sell to the Bank the servicing rights to the
Existing Mortgage Loans and New Mortgage Loans for the then current fair market
value of such servicing rights, or (b) if the Bank declines to purchase such
servicing rights, then Newco Mortgage Corporation shall negotiate the sale and
transfer of such servicing rights to a third party servicer selected by Newco
Mortgage Corporation and approved by the Bank which approval shall not be
unreasonably withheld. The "fair market value" of the servicing rights will be
determined by an independent appraiser mutually acceptable to Newco Mortgage
Corporation and the Bank with respect to the servicing rights sold pursuant to
this SECTION 6.7.3. Newco Mortgage Corporation shall be entitled to the related
purchase price, less any costs or expenses incurred by the Bank in relating to
such transfer.
6.8. REPURCHASE AND INDEMNIFICATION.
Liability for New Portfolio Mortgage Loans and New Secondary Market Mortgage
Loans which are the subject of the Broker Agreement and Delegated Underwriting
Agreement are the responsibility of the Bank. The Broker Agreement states that
the Broker will repurchase, upon demand from Newco Mortgage Corporation, any New
Secondary Market Mortgage Loan that Newco Mortgage Corporation is required to
repurchase from the investor due to underwriting or processing deficiencies. If
Newco Mortgage Corporation's quality control review discovers any processing or
underwriting deficiencies, Newco Mortgage Corporation may require the bank to
repurchase the related New Secondary Market Mortgage Loan.
6.9. NOTICES.
All notices, requests, demands and other all notices and other communications
required or permitted to be given under this Operating Agreement shall be in
writing and shall be deemed given if delivered personally, transmitted by
facsimile (and telephonically confirmed), mailed by registered or certified mail
with postage prepaid and return receipt requested, or sent by commercial
overnight courier, courier fees prepaid, to the parties at the following
addresses:
If to Newco Mortgage Corporation to:
Hugh R. Harris
President
BancBoston Mortgage Corporation
7301 Baymeadows Way
Jacksonville, FL 32256
With a copy to:
Robert J. Jacobs
General Counsel
BancBoston Mortgage Corporation
7301 Baymeadows Way
Jacksonville, FL 32256
Parks Avery
Rhode Island Hospital Trust National Bank
15 Westminster Street
Providence, Rhode Island 02903
Cathy Elder
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
With a copy to:
Ryan S. Stinneford
Senior Counsel
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
or to such other address as Newco Mortgage Corporation or the Bank will have
specified in writing to the other.
6.10. AMENDMENT.
No amendment or modification to this Operating Agreement will be valid unless
executed in writing by Newco Mortgage Corporation and the Bank.
6.11. WAIVER.
No waiver of any right or obligation under this Operating Agreement by any party
on any occasion will be deemed to operate as a waiver on any subsequent
occasion.
6.12. PROVISIONS SEVERABLE.
If any provision of this Operating Agreement will be held to be void or
unenforceable by any court of competent jurisdiction or any governmental
regulatory agency, such provision will be considered by all parties to be
severed from this Operating Agreement. All remaining provisions of this
Operating Agreement will be considered by the parties to remain in full force
and effect.
6.13. GOVERNING LAW.
This Operating Agreement is entered into in the state of Florida. Its
construction and rights, remedies and obligations arising by, under, through, or
on account
- 9 -
<PAGE> 10
of it will be governed by the laws of the State of Florida excluding its
conflict of laws rules and will be deemed performable in the State of Florida.
6.14. NO AGENCY OR JOINT VENTURE CREATED.
This Operating Agreement will not be deemed to constitute Newco Mortgage
Corporation and the Bank as partners or joint venturers, nor will Newco Mortgage
Corporation or the Bank be deemed to constitute the other as its agent.
6.15. SECTION HEADINGS.
Section headings are intended only to assist in the organization of this
Operating Agreement and do not in any way limit or otherwise define the rights
and liabilities of the parties.
6.16. ENTIRE AGREEMENT.
This Operating Agreement constitutes the entire agreement among the parties and
supersede all other prior communications and understandings, written or oral,
among the parties with respect to the subject matter of this Operating
Agreement. There are no contemporaneous oral agreements.
6.17. COUNTERPARTS.
This Operating Agreement may be executed in multiple
6.18. PLURALS AND GENDER.
In construing the words of this Operating Agreement, plural constructions will
include the singular, and singular constructions will include plural. No
significance will be attached to whether a pronoun is masculine, feminine, or
neuter.
- 10 -
<PAGE> 11
IN WITNESS WHEREOF, Newco Mortgage Corporation and the Bank, as of the day first
set forth above, have caused this instrument to be signed on their behalf by
their duly authorized officers.
BANCBOSTON MORTGAGE CORPORATION
By: /s/ Joseph K. Pickett
-------------------------------
Joseph K. Pickett
- -----------------------------------
(Print Name)
Title: Chairman
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter J. Manning
-------------------------------
Peter J. Manning
- -----------------------------------
(Print Name)
Title: Creative Director
BANK OF BOSTON CONNECTICUT
By: /s/ William J. Shea
-------------------------------
William J. Shea
- -----------------------------------
(Print Name)
Title: Vice Chairman
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK
By: /s/ William J. Shea
-------------------------------
William J. Shea
- -----------------------------------
(Print Name)
Title: Vice Chairman
BANK OF BOSTON-FLORIDA, N.A.
By: /s/ Susan P. Haney
-------------------------------
Susan P. Haney
- -----------------------------------
(Print Name)
Title: Chairman
- 11 -
<PAGE> 12
EXHIBIT E
TO THE OPERATING AGREEMENT BETWEEN NEWCO MORTGAGE CORPORATION AND THE BANK
EXISTING AND NEW PORTFOLIO MORTGAGE LOAN SUPPORT
This EXHIBIT E is attached to and made a part of the Operating Agreement between
Newco Mortgage Corporation and the Bank dated March 15, 1996.
DESCRIPTION OF SERVICE TO BE PERFORMED BY NEWCO MORTGAGE CORPORATION.
Provide the Bank with mortgage loan sales support, including:
(a) Mortgage loan portfolio valuation
(b) Negotiations with investors regarding special programs
(c) Sale pooling and delivery coordination of mortgage loan assets
(d) Securitization of mortgage loans
(e) Analysis of mortgage loan assets and portfolio analysis, liquidity
evaluation
(f) Advice and ongoing consultation on any of the above services in instances
where a Bank performs basic activity
(g) Agency discussions and/or negotiations where required
(h) New product consultation (i.e., marketability, underwriting, etc.)
TERM OF THIS SCHEDULE.
For each transaction, a Bank's request for Newco Mortgage Corporation's services
should be described in writing and give Newco Mortgage Corporation sufficient
time to provide such services.
FEES FOR SERVICES PERFORMED.
To be negotiated for each transaction.
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<PAGE> 13
EXHIBIT 10.7
MASTER TAKE-OUT COMMITMENT
Ms. Debra F. Watkins
Senior Vice President
BancBoston Mortgage Corporation
7301 Baymeadows Way
Jacksonville, Florida 32256
RE: MASTER TAKE-OUT COMMITMENT BETWEEN THE FIRST NATIONAL BANK OF BOSTON AND ITS
AFFILIATE BANKS,AND BANCBOSTON MORTGAGE CORPORATION.
Dear Ms. Watkins:
Each of The First National Bank of Boston, Bank of Boston Connecticut, Rhode
Island Hospital Trust National Bank, and Bank of Boston Florida, N.A. (each
severally, but not jointly, a "Buyer") confirms its agreement to buy, and
BancBoston Mortgage Corporation (the "Seller") confirms its agreement to sell,
residential mortgage loans on a flow basis and under the terms and conditions
described below.
The Buyer and the Seller acknowledge that, from time to time, the Buyer desires
the Seller to fund certain residential mortgage loans on behalf of the Buyer.
The Seller is willing to accommodate such desire, on the condition that the
Buyer agree to purchase such mortgage loans from the Seller under the terms of
this Master Take-Out Commitment.
MASTER COMMITMENT Such amount as may be agreed from time to time by the
AMOUNT Buyer and the Seller.
FORM OF SALE Whole loan servicing retained.
MANDATORY COMMITMENT This is a mandatory commitment. The Buyer will purchase
each residential mortgage loan which is the subject of
this Master Take-Out Commitment (the "Mortgage Loan").
TERM OF COMMITMENT The term of this Master Take-Out Commitment shall be the
same as the term of the Brokered Loan Purchase and Sale
Agreement to be entered into by and between the Buyer
and the Seller (the "Broker Agreement"). The term of
this Master Take-Out Commitment will end when: (a) the
Buyer ceases to broker Mortgage Loans to the Seller, (b)
the Buyer, in its capacity as a mortgage loan
correspondent, begins to sell closed and funded
residential mortgage loans to the Seller, (c) the Broker
Agreement is amended to become a correspondent mortgage
loan purchase and sale agreement, and (d) each Mortgage
Loan tablefunded by the Seller under the Brokered Loan
Agreement has been purchased by the Buyer.
MORTGAGE LOAN PRODUCTS The Mortgage Loans, as defined in Section 1 of the
Mortgage Loan Servicing Agreement to be entered into by
and between the Buyer and the Seller (the "Servicing
Agreement"), and described more particularly in Exhibit
B to the Servicing Agreement.
FEES. None.
<PAGE> 14
PRICING The price for each Mortgage Loan will be the same price
at which the Buyer instructed the Seller to tablefund
such Mortgage Loan under the terms of the Broker
Agreement, less the amount of the Purchase Price
Percentage as defined in Section 1 of the PMSR Flow
Agreement entered into by and between the Buyer and the
Seller, and described more particularly in Exhibit A to
the PMSR Flow Agreement.
UNDERWRITING To be performed entirely by the Buyer.
FUNDING The Mortgage Loans will be funded by the Buyer on the
10th and 25th day of each month, or the business day
immediately before any such date if such 10th or 25th
date is not a business day.
SERVICING FEE The Seller will retain a servicing fee over the life
of each Mortgage Loan in an amount and in the manner
described in the Servicing Agreement.
TIME PERIOD TO The Seller shall be prepared to sell each Mortgage Loan
SELL LOANS TO to the Buyer no later than thirty (30) days after the
THE BUYER date the Seller funds each such Mortgage Loan.
This commitment may not be assigned to any other entity by either the Buyer or
the Seller without the prior written consent of the other party.
Please acknowledge your acceptance and agreement to the terms of this Master
Take-Out Commitment by signing and returning the enclosed duplicate letter to
the Seller at the address shown above.
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter J. Manning
-------------------------------
Peter J. Manning
- -----------------------------------
Print Name
Title: Creative Director
BANK OF BOSTON CONNECTICUT
By: /s/ William J. Shea
-------------------------------
William J. Shea
- -----------------------------------
Print Name
Title: Vice Chairman
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK
By: /s/ William J. Shea
-------------------------------
William J. Shea
- -----------------------------------
Print Name
Title: Vice Chairman
BANK OF BOSTON-FLORIDA, N.A.
By: /s/ Susan P. Haney
-------------------------------
Susan P. Haney
- -----------------------------------
Print Name
Title: Chairman
- 2 -
<PAGE> 15
BANCBOSTON MORTGAGE CORPORATION
By: /s/ Joseph K. Pickett
-------------------------------
___________________________________
Print Name
Title:_____________________________
- 3 -
<PAGE> 1
EXHIBIT 10.6
BROKERED LOAN AGREEMENT
BROKERED LOAN PURCHASE AND SALE AGREEMENT
- --------------------------------------------------------------------------------
SELLER NAME: THE FIRST NATIONAL BANK OF BOSTON, 100 FEDERAL STREET, BOSTON,
MASSACHUSETTS 02110
SELLER CONTACT PERSON: PHONE NO:
FAX NO:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELLER NAME: BANK OF BOSTON CONNECTICUT 31 PRATT STREET, HARTFORD,
CONNECTICUT 06103
SELLER CONTACT PERSON: PHONE NO:
FAX NO:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELLER NAME: RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, ONE HOSPITAL TRUST
PLAZA, PROV., RI 02903
SELLER CONTACT PERSON: PHONE NO:
FAX NO:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELLER NAME: BANK OF BOSTON FLORIDA, N.A. 450 ROYAL PALM WAY, PALM BEACH,
FL 33480
SELLER CONTACT PERSON: PHONE NO:
FAX NO:
- --------------------------------------------------------------------------------
This Brokered Loan Purchase and Sale Agreement (the "Broker Agreement") is
entered into as of the date shown above by and between the Buyer and the Seller,
both as defined below, and applies to any of the transactions described below.
RECITALS.
1. The Buyer desires to fund and purchase certain Mortgage Loans, as defined
below, which are originated by the Seller and subject to the terms and
conditions described below.
2. The Seller desires to have the Buyer fund and
purchase such Mortgage Loans.
IN CONSIDERATION of the mutual promises made in this Broker Agreement and other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Buyer and the Seller agree as follows:
1. DEFINITIONS.
1.1. "AGENCY" means FNMA, FHLMC, FHA, HUD, VA, GNMA, and/or a private investor,
as applicable.
1.2. "AGENCY GUIDE" means: (a) the Handbook GNMA 5500.1, Government National
Mortgage Association GNMA I Mortgage-Backed Securities Guide, Handbook GNMA
5500.2, Government National Mortgage Association GNMA II Mortgage-Backed
Securities Guide, in each case as such Guide may be amended from time to time,
(b) the HUD 4155.1 REV-4, Mortgage Credit Analysis for Mortgage Insurance on
1-to-4 Family Properties, HUD 4000.2 REV-2, Mortgagee Handbook Application
Through Insurance (Single Family), HUD 4000.4 REV-1, Single Family Direct
Endorsement Program, HUD 4145.1 REV-2, Architectural Processing and Inspections
For Home Mortgage Insurance, 4150.1 REV-1 Valuation Analysis for Home Mortgage
Insurance, HUD 4060.1 REV-1, Mortgagee Approval Handbook, (c) the FNMA Selling
and Servicing Guides, (d) the FHLMC Sellers' and Servicers' Guides, and/or (e)
any guide or instructions provided from time to time by a private investor,
including, but not limited to, the Seller, in each case as such Agency Guide may
be amended from time to time. The Seller is the applicable Agency for each
Portfolio Mortgage Loan.
1.3. "BORROWER" means each obligor under a Mortgage Note.
1.4. "BROKER AGREEMENT" has the meaning set forth in the recitals above.
1.5. "BUYER" means BancBoston Mortgage Corporation, a business corporation
organized under
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the laws of the state of Florida and with its principal place of business at
7301 Baymeadows Way, Jacksonville, Florida 32256.
1.6. "DELEGATED UNDERWRITING AGREEMENT" means the agreement between the Buyer
and the Seller under which the Seller will underwrite Mortgage Loans without the
Buyer's prior written approval, a copy of which is attached to and made a part
of this Broker Agreement.
1.7. "FHA" means the Federal Housing Administration or any successor to the FHA.
1.8. "FNMA" means the Federal National Mortgage Association or any successor to
FNMA.
1.9. "FHLMC" means the Federal Home Loan Mortgage Corporation or any successor
to FHLMC.
1.10. "GNMA" means the Government National Mortgage Association or any successor
to GNMA.
1.11. "HUD" means the United States Department of Housing and Urban Development,
or any successor to HUD.
1.12. "MANUAL" means the BBMC Correspondent and Broker Operations Manuals, the
Buyprice Policy, the Product Description Manual provided to the Seller and made
a part of this Broker Agreement, as amended from time to time. The Seller
acknowledges that the Buyer is customizing a manual for the Seller which will
combine the applicable provisions of the Buyer's Broker Operations Manual and
Correspondent Operations Manuals. After such customized manual had been provided
to the Seller, such customized manual will replace the BBMC Correspondent and
Broker Operations Manuals previously provided to the Seller, and will become a
part of this Broker Agreement.
1.13. "MARKETING AGREEMENT" means the Marketing Agreement to be entered into by
and between GrantAmerica, Inc., which may later change its name, and Bank of
Boston Corporation on or before the Closing Date and which will govern the terms
under which Newco Mortgage Corporation's mortgagors may be solicited for certain
products and services.
1.14. "MORTGAGE" means a first lien mortgage, deed of trust, or other such
security instrument which is executed by a Mortgagor pledging the Mortgaged
Property as security for repayment of a Mortgage Note.
1.15. "MORTGAGE DOCUMENTS" means all documents required by applicable law, an
Agency, a private investor, and/or a private mortgage insurer to originate and
service a Mortgage Loan and issue a related security.
1.16. "MORTGAGE LOAN" means a residential mortgage loan which is: (a) secured by
a Mortgage, (b) originated by the Seller, (c) funded by the Buyer, and (d)
assigned by the Seller to the Buyer under the terms of this Broker Agreement.
1.17. "MORTGAGE NOTE" means the written promise of a Borrower to pay a sum of
money in United States' dollars at a stated interest rate over a specified term,
and which is secured by a Mortgage.
1.18. "MORTGAGED PROPERTY" means the real property, together with the
one-to-four family dwelling and any other improvements situated on such real
property, which have been pledged by a Mortgagor under a Mortgage as collateral
to secure the obligation under a related Mortgage Note.
1.19. "MORTGAGOR" means each person who executes a Mortgage.
1.20. "POOL" means the Mortgage Loans and related Mortgage Documents which are
assembled to back the issuance of a security and/or a participation certificate.
1.21. "PORTFOLIO MORTGAGE LOAN" means the Mortgage Loans to be ultimately
retained and owned by the Seller for its own Mortgage Loan portfolio, including,
but not limited to, private bank and certain low-to-moderate income Mortgage
Loans. Without limiting the above, any Mortgage Loan which the Seller does not
lock-in with the Buyer will be a Portfolio Mortgage Loan.
1.22. "PRIVATE INVESTOR" means the entity other than FNMA, FHLMC or GNMA which
purchases a Mortgage Loan from the Buyer.
1.23. "SELLER" means each entity identified at the top of the first page of this
Broker Agreement as the Seller.
1.24. "VA" means the Department of Veterans Affairs, or any successor to the VA.
2. MORTGAGE LOAN PROGRAMS.
2.1. CLOSE IN SELLER'S NAME. All Mortgage Loans will be approved and closed by
the Seller, in each case in accordance with the requirements, regulations,
and/or specific conditions imposed by an Agency and/or private mortgage
insurance issuer. Prior to the change in the Buyer's name, all Mortgage Loans
will be closed in the name of BancBoston Mortgage Corporation. After the change
in the Buyer's name, all Mortgage Loans will be closed in the name of "The First
National Bank of Boston doing business as BancBoston Mortgage Corporation."
2.2. FUNDING. Subject to the terms and conditions of
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this Broker Agreement, the Buyer will fund each residential mortgage loan
originated by the Seller.
2.3. NON PORTFOLIO MORTGAGE LOANS. The Buyer will provide to the Seller
descriptions of certain Mortgage Loans, other than Portfolio Mortgage Loans,
which the Buyer will fund and purchase, including the related servicing rights,
under the terms and conditions set forth under this Broker Agreement, including
the Buyer's general information and closing requirements provided to the Seller.
Such Mortgage Loans will include conventional, FHA, and VA Mortgage Loans.
2.4. PORTFOLIO MORTGAGE LOANS. From time to time, the Seller will originate, and
the Buyer will fund, Portfolio Mortgage Loans under the terms of this Broker
Agreement. The Seller will repurchase each Portfolio Loan from the Buyer
promptly after the Buyer delivers such Portfolio Mortgage Loan to the Seller
under the terms described in the Master Take-Out Commitment entered into by and
between the Buyer and the Seller. The Buyer will retain all right, title and
interest in each Portfolio Mortgage Loan until such Portfolio Mortgage Loan has
been repurchased by the Seller under the terms of the Master Take-Out
Commitment.
3. PRICING.
3.1. NON PORTFOLIO MORTGAGE LOANS. The Seller will close Mortgage Loans (other
than Portfolio Mortgage Loans) through the Buyer's "price protected best efforts
program" described in and governed by the Manual. Any price quoted by the Buyer
as of 10:30 a.m. on a business day will remain valid until 8:30 a.m. on the next
business day, subject to emergency price changes as described in the Manual,
provided that the Seller will have the benefit of any improvement in such
pricing during such period.
3.2. PORTFOLIO MORTGAGE LOANS. The Seller will close Portfolio Mortgage Loans at
such price as may be determined by the Seller from time to time.
4. DELIVERING MORTGAGE LOANS.
4.1. DELIVERY OF NON PORTFOLIO MORTGAGE LOANS. Each Mortgage Loan package, as
described in the Manual, must be delivered to the Buyer at the earlier of: (a)
five (5) calendar days after the Buyer has disbursed the monies to fund the
Mortgage Loan, or (b) the lock-in expiration date designated by the Buyer.
The Seller will pay a twenty five basis point (0.25%) late delivery fee to the
Buyer if: (a) the Seller fails to deliver a Mortgage Loan package to the Buyer
within five (5) calendar days after disbursement but prior to the lock-in
expiration date, and (b) the Buyer incurs a penalty or additional charge from
its warehouse lender as a result thereof.
The Seller will be subject to the Buyer's buy price policy if the Seller fails
to deliver a Mortgage Loan package to the Buyer before the lock-in expiration
date. The Buyer may refuse to fund or may reprice any Mortgage Loan which is not
originated, registered, locked in, processed, closed, funded, and delivered in
compliance in all material respects with the terms of this Broker Agreement, the
Manual, or the informational and closing requirements timely provided by the
Buyer to the Seller. The Seller will repurchase a Mortgage Loan from the Buyer
if the Seller fails to satisfy the requirements of the Buyer's collateral agent
within ten (10) calendar days after such collateral agent provides notice of any
defect in such collateral documents.
4.2. DELIVERY OF PORTFOLIO MORTGAGE LOANS. Each Portfolio Mortgage Loan package,
as described in the Manual, must be delivered to the Buyer no later than five
(5) calendar days after the Buyer has disbursed the monies to fund the
applicable Mortgage Loan.
4.3. RESPONSIBILITY FOR DOCUMENTS.
4.3.1. PRIVATE BANK MORTGAGE LOANS. With respect to Mortgage Loans made by the
Seller to any of its private banking clients, the Buyer will obtain all
follow-up Mortgage Documents, other than those Mortgage Documents required to
originate a Mortgage Loan, including, but not limited to, those documents which
are necessary to: (a) perfect title to the related security instrument, (b)
satisfy the requirements of an Agency and/or a private mortgage insurer for the
servicing of a Mortgage Loan and the issuance of a related security, (c) satisfy
the insurance and/or guarantee requirements of the applicable Agency and/or
private mortgage insurer, and (d) ensure that each Mortgage Loan has in full
force and effect a flood certificate and a "life of loan" tracking service
contract, which contract is either with a flood service provider acceptable to
the Buyer, or is fully transferable to the Buyer's flood service provider,
without the payment of any fee by the Buyer. The Seller will use all reasonable
efforts to help the Buyer obtain such follow-up Mortgage Documents.
4.3.2. OTHER MORTGAGE LOANS. With respect to all other Mortgage Loans, the Buyer
will perform all post-closing reviews of the Mortgage Documents and advise the
Seller of any deficiencies in such Mortgage Documents. The Seller will obtain
all follow-up Mortgage Documents, including, but not limited to, those documents
which are necessary to: (a) perfect title to the related security instrument,
(b) satisfy the requirements of an Agency and/or a private mortgage insurer for
the servicing of a Mortgage Loan and the
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issuance of a related security, (c) satisfy the insurance and/or guarantee
requirements of the applicable Agency and/or private mortgage insurer, and (d)
ensure that each Mortgage Loan has in full force and effect a "life of loan"
transferable tax service contracts, which contracts are either with TRETS or are
fully transferable to TRETS, without the payment of any fee by the Buyer.
4.4. TAX AND FLOOD SERVICES. The Seller will ensure that each Mortgage Loan has
in full force and effect at closing a transferable flood certification and a
"life of loan" tracking service from a flood service provider acceptable to the
Buyer, and also pay any and all costs and expenses associated with the TRETS
contracts and flood insurance certification and tracking services described
above.
5. UNDERWRITING.
5.1. NON-PORTFOLIO LOAN UNDERWRITING. Each non- Portfolio Mortgage Loan will be
underwritten by the Seller in accordance with the terms and conditions set forth
in the Delegated Underwriting Agreement.
5.2. PORTFOLIO LOAN UNDERWRITING. Each Portfolio Mortgage Loan will be
underwritten in accordance with the Seller's underwriting guidelines in effect
from time to time.
5.3. PRIVATE MORTGAGE INSURERS. The Seller will obtain private mortgage
insurance for each Mortgage Loan which requires such insurance from a private
mortgage insurer reasonably acceptable to the Buyer.
5.4. APPRAISALS. The Seller will ensure that each Mortgage Loan is evidenced by
an appraisal which satisfies the requirements of the applicable Agency and/or
the applicable provisions of the Financial Institution Reform, Recovery and
Enforcement Act and the regulations promulgated under such act.
5.5. QUALITY CONTROL. The Buyer shall perform credit and compliance quality
control functions for a percentage of Mortgage Loans mutually and reasonably
acceptable to the Buyer and the Seller.
6. COMPLETION ESCROWS. Each Mortgage Loan with a completion escrow for exterior,
weather-related repairs will only be purchased under the terms of the Manual.
The Seller shall repurchase each Mortgage Loan with respect to which the Seller
fails to satisfy all escrow completion items within sixty (60) days after the
closing. BBMC may, in its sole discretion, grant extensions to the Seller.
7. WAIVER OF ESCROWS. Mortgage Loans which do not have escrows for taxes and
insurance will be paid a reduced servicing released premium per the Buyer's
premium schedule. The Seller will refund to the Buyer the escrow premium
discount for each Mortgage Loan purchased by the Buyer with an escrow account
that is later released upon the Borrower's request or demand within six (6)
months after the date the Buyer purchased such Mortgage Loan.
8. SELLER'S REPRESENTATIONS AND WARRANTIES AS TO MORTGAGE LOANS.
The Seller represents and warrants to the Buyer with respect to each Mortgage
Loan that, as of the time such Mortgage Loan is closed and delivered to the
Buyer that:
8.1. NOTE AND MORTGAGE ARE VALID OBLIGATION OF OBLIGORS.
The Mortgage Note and the related Mortgage are genuine and each is the legal,
valid, and binding obligation of the related Borrower and Mortgagor, enforceable
in accordance with their terms, except as such enforceability may be limited by
(a) applicable bankruptcy, reorganization, insolvency, moratorium and other laws
affecting creditors' rights or debtors' obligations from time to time in effect,
and (b) the availability of the remedy of specific performance or injunctive
relief or any other equitable remedy.
All parties to the Mortgage Note and the Mortgage had legal capacity to execute
the Mortgage Note and the Mortgage, and each Mortgage Note and Mortgage have
been duly and properly executed by such parties.
8.2. FIRST LIENS FREE OF ENCUMBRANCE.
The Mortgage is a valid and existing first lien on the Mortgaged Property
described in the Mortgage, and the Mortgaged Property is free and clear of all
encumbrances and liens, including but not limited to mechanics' liens and
materialmen's liens, having priority over the first lien of the Mortgage except
for liens for real estate taxes and special assessments not yet due and payable,
and no rights are outstanding that under the law could give rise to such lien.
8.3. LOANS SATISFY THE GUIDE.
Each Mortgage Loan satisfies the requirements and terms set forth in the
applicable Agency's Guide in effect at the time of delivery to the applicable
Agency, and the inclusion of each such Mortgage Loan in a Pool satisfies the
requirements and terms set forth in the applicable Agency's Guide. There is no
circumstance or condition relating to a Mortgage Loan, the Mortgaged Property,
the Mortgage Documents, the Borrower or the Borrower's credit standing that can
reasonably be expected to cause an Agency to regard a Mortgage Loan as not
eligible for insurance coverage or guaranty, as applicable, or applicable Agency
to regard a Mortgage Loan as not
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eligible for a Pool.
8.4. NO PERSON OR MORTGAGE RELEASED.
No party to the Mortgage Note or Mortgage has been released in whole or in part
from the Mortgage Note or the Mortgage, and no part of the Mortgaged Property
has been released from the Mortgage.
8.5. NO TAX LIENS.
There was no delinquent tax or delinquent assessment lien against the Mortgaged
Property at the time the related Mortgage Loan was closed. If the Seller
receives knowledge of any such delinquency, the Seller must notify the Buyer
within two (2) business days after obtaining such knowledge and cure such event
within thirty (30) days after such notice. In any event, the Seller will
indemnify and hold Buyer harmless from and against any and all costs, losses,
and expenses relating to or arising out of such delinquency.
8.6. NO DEFENSE TO PAYMENT.
The Mortgage Loan 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 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, or subject it 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.
8.7. LOANS COMPLY WITH LAW.
Each Mortgage Loan application was taken and processed, and each Mortgage Loan
was made in compliance in all material respects with all applicable local, state
and federal laws, regulations, rules and orders, including without limitation:
usury, the Equal Credit Opportunity Act and its implementing Regulation B, the
Real Estate Settlement Procedures Act and its implementing Regulation X, the
Financial Institutions Reform Recovery And Enforcement Act and its implementing
regulations, Federal Deposit Insurance Corporation Improvement Act, the Truth-
In-Lending Act and its implementing Regulation Z, the Fair Credit Reporting Act
and any applicable state credit reporting laws, the Fair Debt Collection
Practices Act, the Fair Housing Act, and Fair Lending Laws in all material
respects, and consummation of the transactions contemplated hereby by the Seller
will not involve the violation in any material respect of any such laws.
8.8. ADEQUATE REMEDIES OF HOLDER.
Each Mortgage contains customary and enforceable provisions which give the
holder of the Mortgage adequate rights and remedies to realize against the
Mortgaged Property and to benefit from its security, including, but not limited
to: (a) in the case of a Mortgage designated as a Deed of Trust, by trustee's
sale; and (b) otherwise by foreclosure, subject, in each case, to any
limitations arising from any bankruptcy, insolvency or other similar laws for
the benefit of debtors..
8.9. TITLE INSURANCE.
A title insurance policy has been issued for each Mortgage Loan insuring the
Seller, its successors and assigns, in an amount no less than the outstanding
Mortgage Loan principal balance, that the related Mortgage is a valid first lien
on the Mortgaged Property and that the Mortgaged Property is free and clear of
all encumbrances and liens having priority over the first lien of the Mortgage,
except (a) liens for real estate taxes and special assessments not yet due and
payable, (b) covenants, restrictions, rights of way, easements and other matters
customarily acceptable to institutional lenders and title insurance companies in
the jurisdictions in which such Mortgaged Property is located, and (c) easements
and restrictions of record being acceptable to the Agencies and to the Buyer,
and specifically identified in the title insurance policy. Unless the Mortgaged
Property is within a jurisdiction where title insurance was unavailable, or the
form of title evidence is not the general form, a mortgage title insurance
policy on current prescribed ALTA form, or such other form of title insurance
policy with a carrier acceptable to the Agencies and reasonably acceptable to
the Agencies and the Buyer, is in effect as to the Mortgaged Property.
8.10. NO CONDEMNATION PROCEEDINGS.
There is no proceeding pending for the total or partial condemnation of the
Mortgaged Property and such 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.
8.11. SURVEYS AND FLOOD INSURANCE.
A survey, where required, has been made of the Mortgaged Property, and if in a
flood zone A or V in a FEMA flood map area in a participating community, flood
insurance has been provided. All of the improvements which were included for the
purpose of determining the appraised value of the Mortgaged Property lie wholly
within the boundaries and building restriction lines of such property, and no
improvements on adjoining properties encroach upon the Mortgaged Property unless
covered by title
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insurance and/or waivers.
8.12. NO VIOLATION OF ZONING LAWS.
No improvements located on or being part of the Mortgaged Property are 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 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.
8.13. PROCEEDS FULLY DISBURSED.
Except for Escrow Account funds retained for completion of Mortgaged Property
improvements, the proceeds of the Mortgage Loan have been fully disbursed, there
is no requirement for future advances thereunder and any and all requirements as
to completion of any on-site or off-site improvements and as to disbursements of
any Escrow Account funds therefore have been complied with. All costs, fees and
expenses incurred in making, closing or recording the Mortgage Loans will be
paid by the Seller.
8.14. DUE ON SALE.
Each Mortgage contains an enforceable 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 or transferred without the prior consent of
the mortgagee thereunder, unless prohibited by state law, and subject to any
limitations arising from any bankruptcy, insolvency or other similar law for the
benefit of debtors.
8.15. ORIGINATION PRACTICES.
The origination practices used by the Seller for each Mortgage Loan have been in
all respects legal, proper, prudent, customary in the mortgage origination
business, and in accordance with the applicable Agency's Guide.
8.16. HAZARD AND FLOOD INSURANCE.
There is in force for each Mortgaged Property a hazard insurance policy which:
(a) is acceptable to the applicable Agency and reasonably acceptable the Buyer,
(b) contains a standard mortgagee clause, (c) insures against loss or damage by
fire, all other hazards set forth in the standard extended coverage form of
endorsement, and any other insurable risks against hazards required by the
applicable Agency, (d) has been issued in an amount equal to at least the lesser
of the outstanding principal balance of the Mortgage Loan or the full insurable
value of the improvements to the Mortgaged Property, and (e) if required by the
Flood Disaster Protection Act of 1973, the National Flood Insurance Reform Act
of 1994, and regulations promulgated under such acts, all as amended from time
to time, a flood insurance policy in an amount representing coverage at least
equal to the lesser of the outstanding principal balance of the Mortgage Loan or
the maximum amount of insurance which is available under the Flood Disaster
Protection Act of 1973, the National Flood Insurance Reform Act of 1994, and
regulations promulgated under such acts, all as amended from time to time. None
of the improvements to the Mortgaged Property have been affected in any
substantial manner or suffered any material loss as a result of any fire,
explosion, accident, strike, riot, war or act of God or the public enemy as of
the closing date. All such insurance policies remain in full force and effect.
8.17. APPRAISALS.
An appraisal has been made of each Mortgaged Property which conforms with: (a)
the applicable Guide, (b) the applicable Agency's requirements, (c) the Buyer's
requirements, and (d) applicable laws, rules, regulations and orders, including,
but not limited to, the Financial Institutions Reform Recovery And Enforcement
Act and its implementing regulations.
8.18. MORTGAGED PROPERTY.
The Mortgaged Property consists of a single parcel of real property with a
detached one-to-four family dwelling, a townhouse, an individual condominium
unit in a development, or an individual unit in a planned unit development.
8.19. NO SUPERFUND SITE.
The Mortgaged Property is not located on a superfund site.
8.20. DOCUMENTS COMPLY WITH GUIDE.
The Mortgage Documents satisfy each of the requirements of the applicable Guide,
and/or the Buyer, and the Mortgage Documents have been duly executed and are in
a form acceptable to the applicable Agency and the Buyer.
Each Mortgage Note, Mortgage and appraisal are on forms acceptable to the
applicable Agency, applicable investor, and/or the Buyer, and the Mortgage Loan
was originated, serviced, and delivered, as applicable, in accordance with the
requirements of the applicable Guide, and/or the Buyer.
8.21. ASSIGN MORTGAGE LOANS TO THE BUYER.
Each Mortgage Loan will be transferred and assigned,
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as applicable, to the Buyer by the Seller pursuant to appropriate endorsement
and assignment of the Mortgage Loan and will be subject to the representations,
warranties and covenants of the Seller as provided in this Broker Agreement.
8.22. TAX PAYMENTS.
The Seller will: (a) Provide evidence in the Mortgage Loan package delivered to
the Buyer that all taxes relating to the Mortgaged Property which are due as of
the date such package is delivered to the Buyer and for thirty (30) days
afterwards are paid, or (b) For taxes due within thirty (30) days after
disbursing the Mortgage Loan proceeds to each Borrower, the Seller request that
the Buyer obtain the tax bill and to disburse the tax payment, including any
penalties and interest, if applicable. For such service, the Buyer will charge
the Seller a fee equal to a percentage set forth in the Manual multiplied by the
estimated tax, as such tax appears on the Buyer form G245.
8.23. SELLER'S STATEMENTS ARE TRUE AND ACCURATE.
No representation, warranty or written statement made by the Seller in this
Broker Agreement, or in any schedule, written statement or certificate given to
the Buyer by the Seller in connection with the transactions contemplated by this
Broker Agreement contains or will contain any untrue statement of a material
fact or omits or will omit a material fact necessary to make the statements in
this Broker Agreement or in any of such statements and certificates not
misleading.
8.24. SELLER'S BOOKS AND RECORDS.
The Seller's books, records and accounts relating to the Mortgage Loans will be
in accordance with all requirements of the applicable Agency and the Guides.
8.25. FRAUD.
No Mortgage has been originated through any type of fraud or deceit.
8.26. PMI.
All Mortgage Loans which are the subject of private mortgage insurance will be
evidenced by a private mortgage insurance policy. With respect to each such
policy: (a) all provisions of such private mortgage insurance policy have been
and are being complied with, (b) such policy is in full force and effect, and
(c) all premiums due under such policy through the date of disbursement of the
Mortgage Loan will be paid by the Seller. Any Mortgage Loan subject to any such
private mortgage insurance policy obligates the Borrower to maintain such
private mortgage insurance policy and pay all such premiums and charges in
connection therewith. Each private mortgage insurance company will be reasonably
acceptable to the Buyer.
8.27. FHA INSURANCE AND VA GUARANTY.
Each Mortgage Loan to be insured by the FHA is eligible for FHA insurance, and
the FHA insurance premiums which are due and payable for each such Mortgage Loan
have been paid by the Seller. Each Mortgage Loan to be guaranteed by the VA is
eligible for a VA guaranty.
8.28. MORTGAGED PROPERTY LOCATED IN THE U.S.
The Mortgaged Property is located in the continental United States or the State
of Hawaii.
8.29. FLOOD CERTIFICATION AND TRACKING SERVICES.
Each Mortgage Loan has in full force and effect a transferable flood
certification and a "life of loan" tracking service contract, which contract is
either with a flood service provider acceptable to the Buyer, or is fully
transferable to the Buyer's flood service provider, without the payment of any
fee by the Buyer.
8.30. WARRANTIES SURVIVE.
The Seller agrees that all warranties and obligations under this Broker
Agreement are perpetual and will survive the termination of this Broker
Agreement.
9. GENERAL REPRESENTATIONS AND WARRANTIES.
The Seller represents and warrants to the Buyer with respect to the following
statements relating to the Seller, and the Buyer represents and warrants to the
Seller with respect to the following statements relating to the Buyer, that as
of the date of this Broker Agreement and as of the time each Mortgage Loan is
closed and delivered to the Buyer that:
9.1. DULY ORGANIZED.
The First National Bank of Boston, Rhode Island Hospital Trust National Bank and
Bank of Boston- Florida, N.A. are each duly organized and validly existing
national banking associations, Bank of Boston Connecticut is a duly organized
and validly existing state-chartered savings bank and the Buyer is a duly
organized and validly existing corporation. Each is in good standing under the
laws of its jurisdiction of organization, and has the requisite power and
authority to enter into this Broker Agreement and any other agreements to which
is a party and that are contemplated by this Broker Agreement.
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9.2. AGREEMENT IS DULY AUTHORIZED.
It has all requisite power, authority and capacity to enter into this Broker
Agreement and to perform the obligations required of it under this Broker
Agreement. The execution and delivery of this Broker Agreement by it and the
consummation of the transactions contemplated by this Broker Agreement by it,
have been duly and validly authorized by all necessary action. This Broker
Agreement constitutes its valid and legally binding agreement, enforceable in
accordance with its terms, except as it may be limited by bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights and by general equity principles, and no offset, counterclaim or defense
exists to the full performance of this Broker Agreement by such party.
9.3. AGREEMENT DOES NOT VIOLATE OTHER OBLIGATIONS.
Insofar as its capacity to carry out any obligation under this Broker Agreement
is concerned, it is not in violation in any material respect of any provision of
any charter, certificate of incorporation, by-law, mortgage, indenture,
indebtedness, agreement, instrument, judgment, decree, order, statute, rule or
regulation, and there is no such provision that materially and adversely affects
its capacity to carry out such obligations. Its execution of, and performance
pursuant to, this Broker Agreement will not result in such violation.
9.4. COMPLIANCE.
Unless exempt under applicable law, the Seller has obtained all licenses,
consents, approvals, authorizations or orders of applicable regulatory or other
government authorities necessary for, and is in compliance in all material
respects with all state and federal laws and regulations governing, the
origination of Mortgage Loans sold to the Buyer under this Broker Agreement. The
Seller is in compliance with all state and federal laws governing the brokering,
origination, and transfer of Mortgage Loans sold to the Buyer under this Broker
Agreement.
The Buyer has obtained all licenses, consents, approvals, authorizations or
orders of applicable regulatory or other government authorities necessary for,
and is in compliance in all material respects with all state and federal laws
and regulations governing, the funding and purchase of the Mortgage Loans
purchased from the Seller pursuant to this Broker Agreement.
9.5. WARRANTIES SURVIVE.
All warranties and obligations under this Broker Agreement are perpetual and
will survive the termination of this Broker Agreement.
10. INDEMNIFICATION.
The Seller shall indemnify the Buyer and shall hold the Buyer harmless from and
against any and all losses, liabilities, penalties, damages, expenses or other
harm or injury which the Buyer may incur or suffer or which may be asserted by
any person or entity, including reasonable attorneys' fees and court costs,
arising out of any action at any time taken or omitted to be taken (a) by the
Seller under or in connection with this Broker Agreement and/or any applicable
Exhibit to the Agreement, including, without limitation, any failure by the
Seller to observe and perform properly each and every covenant of this Broker
Agreement and/or any applicable Exhibit to the Agreement, or (b) by the Buyer in
reliance upon information provided to the Buyer by the Seller. Without limiting
the above, the Seller shall indemnify the Buyer and shall hold the Buyer
harmless from and against any and all losses, liabilities, penalties, damages,
expenses or other harm or injury which the Buyer may incur or suffer or which
may be asserted by any person or entity, including reasonable attorneys' fees
and court costs, arising out of any Mortgage Loan which result from:
- 8 -
<PAGE> 9
(a) Any misrepresentation made by the Seller in this Broker Agreement or any
information provided to the Buyer,
(b) Any breach by the Seller of any of the Seller's representations or
warranties under this Broker Agreement,
(c) Any act, or failure to act or perform any term, covenant, condition or
obligation of the Seller under this Broker Agreement,
The Buyer shall indemnify the Seller and shall hold the Seller harmless from and
against any and all losses, liabilities, penalties, damages, expenses or other
harm or injury which the Seller may incur or suffer or which may be asserted by
any person or entity, including reasonable attorneys' fees and court costs,
arising out of any action at any time taken or omitted to be taken (a) by the
Buyer under or in connection with this Broker Agreement and/or any applicable
Exhibit to the Agreement, including, without limitation, any failure by the
Buyer to observe and perform properly each and every covenant of this Broker
Agreement and/or any applicable Exhibit to the Agreement, or (b) by the Seller
in reliance upon information provided to the Seller by the Buyer. Without
limiting the above, the Buyer shall indemnify the Seller and shall hold the
Seller harmless from and against any and all losses, liabilities, penalties,
damages, expenses or other harm or injury which the Seller may incur or suffer
or which may be asserted by any person or entity, including reasonable
attorneys' fees and court costs, arising out of any Mortgage Loan which result
from:
(a) Any misrepresentation made by the Buyer in this Broker Agreement or any
information provided to the Seller,
(b) Any breach by the Buyer of any of the Buyer's representations or warranties
under this Broker Agreement,
(c) Any act, or failure to act or perform any term, covenant, condition or
obligation of the Buyer under this Broker Agreement.
11. REPURCHASING LOANS FROM THE BUYER.
11.1 REASONS WHY.
11.1.1. AGENCY REQUIRES BUYER TO REPURCHASE. The Seller will repurchase a
Mortgage Loan from the Buyer if an Agency requires the Buyer to repurchase the
Mortgage Loan from the Agency for any reason other than the Buyer's failure to
service the Mortgage Loan under the terms of the applicable Agency Guide.
11.1.2. FRAUD. There is any fraud, misrepresentation, or deceit in connection
with the Mortgage Loan on the part of the Seller, Borrower, Mortgagor, or any
other third party in connection with the application or origination of such
Mortgage Loan, regardless of whether the Seller has any knowledge of such fraud
or misrepresentation.
11.1.3. UNABLE TO OBTAIN INSURANCE OR GUARANTEE. the Buyer is unable to obtain
FHA insurance, VA guarantee, or private mortgage insurance, as applicable, or
such guarantee or insurance lapses for any reason other than the Buyer's act or
failure to act under this Broker Agreement.
11.2. APPEAL AND CURE PERIOD.
11.2.1. THE BUYER WILL NOTIFY THE SELLER. If an Agency requires the Buyer to
repurchase any Mortgage Loan from the Agency for any reason other than the
Buyer's failure to service the Mortgage Loan under the terms of the Guide, the
Buyer will notify the Seller in writing of such repurchase requirement within
ten (10) business days after receiving such repurchase requirement.
11.2.2. COLLECTION AND PAYMENT HISTORY. the Buyer will give the Seller a
collection and payment history for each such Mortgage Loan.
11.2.3. SELLER'S APPEAL. The Seller may appeal to the Agency at its own expense
within a reasonable time, but not in excess of the time provided by the Agency
to the Buyer. Any such appeal shall be made through the Buyer, which shall
promptly submit such appeal to the Agency. If the Agency denies such appeal, the
party which receives notice of such denial will give the other party written
notice of such denial within three (3) business days of such denial.
11.2.4. WITHDRAWAL OF REPURCHASE REQUIREMENT. If the repurchase requirement is
withdrawn by the Agency and the Buyer has no obligation to repurchase the
Mortgage Loan, the Seller will have no obligation to repurchase the Mortgage
Loan.
11.3. REPURCHASE PRICE.
11.3.1. REPURCHASE PRICE. The Buyer will tender to the Seller any Mortgage Loan
required to be repurchased by the Seller under this Broker Agreement, endorsed
to the Seller without recourse, together with all of the Mortgage Loan documents
that have been received by the Buyer from the Seller.
No later than ten (10) business days after the Seller has received any such
Mortgage Loan, the Seller will pay to the Buyer, in immediately available funds,
an amount equal to the following:
(a) If the Seller repurchases such Mortgage Loan before it has been sold to a
secondary market investor, the amount will be the:
(i) purchase price percentage paid by the Buyer to the Seller for the Mortgage
Loan, including the servicing released premium,
(ii) multiplied by the then unpaid principal balance,
(iii) plus accrued interest to the date of the repurchase.
(b) If the Seller repurchases such Mortgage Loan after it has been sold to a
secondary market investor, the amount will be the:
(i) amount paid by the Buyer to repurchase the Mortgage Loan from the secondary
market investor,
(ii) plus the original servicing released premium percentage, multiplied by the
then unpaid principal balance
If the facts giving rise to the Buyer's repurchase demand for a Mortgage Loan
are not discovered until after the related Mortgaged Property has been sold at
foreclosure and purchased by the Buyer under a credit bid, then the required
repurchase price shall be equal to:
(a) the outstanding principal balance and accrued interest on the Mortgage Loan
as of the date of such foreclosure, plus
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<PAGE> 10
(b) any costs and attorneys' fees associated with the foreclosure, plus interest
on these amounts at the rate set forth in the Mortgage Note from the date of
such transfer until the date of repurchase. Upon payment of this repurchase
price, the Buyer shall transfer title to the Mortgaged Property to the Seller.
If a foreclosure sale is made to a third party, the repurchase price shall be
equal to:
(a) the outstanding principal balance and accrued interest on the Mortgage Loan
as of the date of foreclosure, less the net proceeds of the foreclosure sale,
plus
(b) interest on this amount at the rate set forth in the Mortgage Note from date
of foreclosure until date of repurchase.
The Buyer's right to require Seller to repurchase any Mortgage Loan is in
addition to, and not in lieu of, its rights to be indemnified by the Seller
under SECTION 10 above.
12. TERM OF THIS BROKER AGREEMENT.
This Broker Agreement will have the same term as set forth in SECTION 6.6 of the
Operating Agreement, which SECTION 6.6 is incorporated
herein by reference.
13. TERMINATION OF THIS BROKER AGREEMENT.
This Broker Agreement may be terminated in accordance with the provisions set
forth in SECTION 6.7 of the Operating Agreement.
14. SOLICITATION FOR REFINANCES.
The Seller's ability to solicit a Borrower for a mortgage loan refinancing is
described in the Marketing Agreement.
15. FURTHER ASSURANCES.
The Buyer and the Seller will from time to time execute and promptly deliver to
each other such documents, assignments, endorsements, applications or other
instruments necessary or reasonably proper or convenient to effectuate the
assignments, transfers and other transactions contemplated by this Broker
Agreement.
16. POWER OF ATTORNEY.
The Seller irrevocably constitutes and appoints the Buyer and its duly
authorized officers as the Seller's agent and attorney-in-fact coupled with an
interest, to endorse checks and other instruments of payment with respect to the
Mortgage Loans.
17. NOTICES.
All notices, requests, demands and other All notices and other communications
required or permitted to be given under this Broker Agreement shall be in
writing and shall be deemed given if delivered personally, transmitted by
facsimile (and telephonically confirmed), mailed by registered or certified mail
with postage prepaid and return receipt requested, or sent by commercial
overnight courier, courier fees prepaid, to the parties at the following
addresses:
If to the Buyer to:
Hugh Harris
President
BancBoston Mortgage Corporation
7301 Baymeadows Way
Jacksonville, FL 32256
With a copy to:
Robert J. Jacobs
Deputy General Counsel
the Buyer Mortgage Corporation
7301 Baymeadows Way
Jacksonville, FL 32256
If to Seller to:
Parks Avery
Rhode Island Hospital Trust National Bank
15 Westminster Street
Providence, Rhode Island 02903
With a copy to:
Ryan Stinneford
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
or to such other address as the Buyer or the Seller will have specified in
writing to the other.
18. ASSIGNMENT AND DELEGATION.
No party may assign this Broker Agreement or delegate any of its functions
hereunder to any other party without the prior written consent of Buyer or the
respective Seller; provided, however, that either party may assign and/or
delegate, in whole or in part, any of its rights under this Broker Agreement to
any of its affiliates or subsidiaries without the prior written consent of the
Buyer or the respective Seller.
19. AMENDMENT.
No amendment or modification to this Broker Agreement will be valid unless
executed in writing by the Buyer and the Seller.
20. WAIVER.
No waiver of any right or obligation under this
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<PAGE> 11
Broker Agreement by any party on any occasion will be deemed to operate as a
waiver on any subsequent occasion.
21. PROVISIONS SEVERABLE.
If any provision of this Broker Agreement will be held to be void or
unenforceable by any court of competent jurisdiction or any governmental
regulatory agency, such provision will be considered by all parties to be
severed from this Broker Agreement. All remaining provisions of this Broker
Agreement will be considered by the parties to remain in full force and effect.
22. GOVERNING LAW.
This Broker Agreement is entered into in the state of Florida. Its construction
and rights, remedies and obligations arising by, under, through, or on account
of it will be governed by the laws of the State of Florida excluding its
conflict of laws rules and will be deemed performable in the State of Florida.
23. NO AGENCY OR JOINT VENTURE CREATED.
This Broker Agreement will not be deemed to constitute the Buyer and the Seller
as partners or joint venturers, nor will the Buyer or the Seller be deemed to
constitute the other as its agent.
24. SUCCESSORS.
This Broker Agreement will inure to the benefit of and be binding upon the
parties hereto and their successors and assigns. Nothing in this Broker
Agreement expressed or implied is intended to confer on any person other that
the parties hereto and their successors and assigns, any rights, obligations,
remedies or liabilities.
25. FORCE MAJEURE.
No party shall be liable for delays or errors occurring by reason of
circumstances beyond such party's control, including, without limitation, acts
of civil, military, or banking authorities, national emergencies, labor
difficulties, fire, flood or other catastrophes, acts of God, insurrection, war,
riots, failure of transportation or equipment, or failure of vendors,
communication or power supply.
26. SECTION HEADINGS.
Section headings are intended only to assist in the organization of this Broker
Agreement and do not in any way limit or otherwise define the rights and
liabilities of the parties.
27. ENTIRE AGREEMENT.
This Broker Agreement and the Exhibits to this Broker Agreement constitute the
entire agreement among the parties and supersede all other prior communications
and understandings, written or oral, among the parties with respect to the
subject matter of this Broker Agreement. There are no contemporaneous oral
agreements.
28. COUNTERPARTS.
This Broker Agreement may be executed in multiple
29. PLURALS AND GENDER.
In construing the words of this Broker Agreement, plural constructions will
include the singular, and singular constructions will include plural. No
significance will be attached to whether a pronoun is masculine, feminine, or
neuter.
30. ATTORNEYS' FEES AND COSTS.
If it is determined in a judicial proceeding that either party has failed under
any provision of this Broker Agreement, and if either party will employ
attorneys or incur other expenses for the enforcement, performance, or
observance of the terms of this Broker Agreement, then said party, to the extent
permitted by law, will be reimbursed by the losing party, for reasonable
attorneys' fees and other out-of-pocket expenses.
- 11 -
<PAGE> 12
IN WITNESS WHEREOF, the Buyer and the Seller, as of the day first set forth
above, have caused this instrument to be signed on their behalf by their duly
authorized officers.
BANCBOSTON MORTGAGE CORPORATION
By: /s/ Joseph K. Pickett
------------------------------
Joseph K. Pickett
- ----------------------------------
(Print Name)
Title: Chairman
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter J. Manning
------------------------------
Peter J. Manning
- ----------------------------------
(Print Name)
Title: Creative Director
BANK OF BOSTON CONNECTICUT
By: /s/ William J. Shea
------------------------------
William J. Shea
- ----------------------------------
(Print Name)
Title: Vice Chairman
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK
By: /s/ William J. Shea
------------------------------
William J. Shea
- ----------------------------------
(Print Name)
Title: Vice Chairman
BANK OF BOSTON-FLORIDA, N.A.
By: /s/ Susan P. Haney
------------------------------
Susan P. Haney
- ----------------------------------
(Print Name)
Title: Chairman
- 12 -
<PAGE> 1
EXHIBIT 10.7
MASTER TAKE-OUT COMMITMENT
Ms. Debra F. Watkins
Senior Vice President
BancBoston Mortgage Corporation
7301 Baymeadows Way
Jacksonville, Florida 32256
RE: MASTER TAKE-OUT COMMITMENT BETWEEN THE FIRST NATIONAL BANK OF BOSTON AND ITS
AFFILIATE BANKS,AND BANCBOSTON MORTGAGE CORPORATION.
Dear Ms. Watkins:
Each of The First National Bank of Boston, Bank of Boston Connecticut, Rhode
Island Hospital Trust National Bank, and Bank of Boston Florida, N.A. (each
severally, but not jointly, a "Buyer") confirms its agreement to buy, and
BancBoston Mortgage Corporation (the "Seller") confirms its agreement to sell,
residential mortgage loans on a flow basis and under the terms and conditions
described below.
The Buyer and the Seller acknowledge that, from time to time, the Buyer desires
the Seller to fund certain residential mortgage loans on behalf of the Buyer.
The Seller is willing to accommodate such desire, on the condition that the
Buyer agree to purchase such mortgage loans from the Seller under the terms of
this Master Take-Out Commitment.
MASTER COMMITMENT Such amount as may be agreed from time to time by the
AMOUNT Buyer and the Seller.
FORM OF SALE Whole loan servicing retained.
MANDATORY COMMITMENT This is a mandatory commitment. The Buyer will purchase
each residential mortgage loan which is the subject of
this Master Take-Out Commitment (the "Mortgage Loan").
TERM OF COMMITMENT The term of this Master Take-Out Commitment shall be the
same as the term of the Brokered Loan Purchase and Sale
Agreement to be entered into by and between the Buyer
and the Seller (the "Broker Agreement"). The term of
this Master Take-Out Commitment will end when: (a) the
Buyer ceases to broker Mortgage Loans to the Seller, (b)
the Buyer, in its capacity as a mortgage loan
correspondent, begins to sell closed and funded
residential mortgage loans to the Seller, (c) the Broker
Agreement is amended to become a correspondent mortgage
loan purchase and sale agreement, and (d) each Mortgage
Loan tablefunded by the Seller under the Brokered Loan
Agreement has been purchased by the Buyer.
MORTGAGE LOAN PRODUCTS The Mortgage Loans, as defined in Section 1 of the
Mortgage Loan Servicing Agreement to be entered into by
and between the Buyer and the Seller (the "Servicing
Agreement"), and described more particularly in Exhibit
B to the Servicing Agreement.
FEES. None.
<PAGE> 2
PRICING The price for each Mortgage Loan will be the same price
at which the Buyer instructed the Seller to tablefund
such Mortgage Loan under the terms of the Broker
Agreement, less the amount of the Purchase Price
Percentage as defined in Section 1 of the PMSR Flow
Agreement entered into by and between the Buyer and the
Seller, and described more particularly in Exhibit A to
the PMSR Flow Agreement.
UNDERWRITING To be performed entirely by the Buyer.
FUNDING The Mortgage Loans will be funded by the Buyer on the
10th and 25th day of each month, or the business day
immediately before any such date if such 10th or 25th
date is not a business day.
SERVICING FEE The Seller will retain a servicing fee over the life
of each Mortgage Loan in an amount and in the manner
described in the Servicing Agreement.
TIME PERIOD TO The Seller shall be prepared to sell each Mortgage Loan
SELL LOANS TO to the Buyer no later than thirty (30) days after the
THE BUYER date the Seller funds each such Mortgage Loan.
This commitment may not be assigned to any other entity by either the Buyer or
the Seller without the prior written consent of the other party.
Please acknowledge your acceptance and agreement to the terms of this Master
Take-Out Commitment by signing and returning the enclosed duplicate letter to
the Seller at the address shown above.
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter J. Manning
-------------------------------
Peter J. Manning
- -----------------------------------
Print Name
Title: Creative Director
BANK OF BOSTON CONNECTICUT
By: /s/ William J. Shea
-------------------------------
William J. Shea
- -----------------------------------
Print Name
Title: Vice Chairman
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK
By: /s/ William J. Shea
-------------------------------
William J. Shea
- -----------------------------------
Print Name
Title: Vice Chairman
BANK OF BOSTON-FLORIDA, N.A.
By: /s/ Susan P. Haney
-------------------------------
Susan P. Haney
- -----------------------------------
Print Name
Title: Chairman
- 2 -
<PAGE> 3
BANCBOSTON MORTGAGE CORPORATION
By: /s/ Joseph K. Pickett
-------------------------------
___________________________________
Print Name
Title:_____________________________
- 3 -
<PAGE> 1
EXHIBIT 10.8
NEIGHBORHOOD ASSISTANCE CORPORATION OF AMERICA
MORTGAGE LOAN TAKE-OUT COMMITMENT
Glenda Edgy
Senior Vice President
BancBoston Mortgage Corporation
7301 Baymeadows Way
Jacksonville, Florida 32256
RE: NEIGHBORHOOD ASSISTANCE CORPORATION OF AMERICA TAKE-OUT COMMITMENT BETWEEN
THE FIRST NATIONAL BANK OF BOSTON AND BANCBOSTON MORTGAGE CORPORATION.
Dear Ms. Edgy:
The First National Bank of Boston (the "Buyer") confirms its agreement to buy,
and BancBoston Mortgage Corporation (the "Seller") confirms its agreement to
sell, residential mortgage loans on a flow basis and under the terms and
conditions described below.
The Buyer and the Seller acknowledge that, from time to time, the Buyer desires
the Seller to originate certain low-to-moderate income residential mortgage
loans on behalf of the Buyer. The Seller is willing to accommodate such desire,
on the condition that the Buyer agree to purchase such mortgage loans from the
Seller under the terms of this Neighborhood Assistance Corporation of America
Take-Out Commitment.
MASTER COMMITMENT Such amount as may be agreed from time to time by the
AMOUNT Buyer and the Seller.
FORM OF SALE Whole loan servicing retained.
MANDATORY COMMITMENT This is a mandatory commitment. The Buyer will purchase
each residential mortgage loan (the "Mortgage
Agreement") which Buyer instructs the Seller to
originate under the Neighborhood Assistance Corporation
of America Agreement entered into by and between the
Buyer and the Neighborhood Assistance Corporation of
America as of July 28, 1994 (the "NACA Agreement").
TERM OF COMMITMENT The term of this Neighborhood Assistance Corporation of
America Take-Out Commitment shall be the same as the
term of the NACA Agreement.
The term of this Neighborhood Assistance Corporation of
America Take-Out Commitment will end when the NACA
Agreement is terminated or otherwise expires.
<PAGE> 2
MORTGAGE LOAN PRODUCTS The low-to-moderate income Mortgage Loans described in
the NACA Agreement, including the underwriting criteria
set forth in EXHIBIT A to the NACA Agreement.
FEES. None.
PRICING The price for each Mortgage Loan will be the same price
at which the Buyer instructed the Seller to make such
Mortgage Loan available to the mortgagor under the terms
of SECTION 3 of the NACA Agreement, plus the closing
costs incurred by the Buyer on behalf of such mortgagor.
UNDERWRITING To be performed in the manner set forth in EXHIBIT A to
the NACA Agreement.
FUNDING The Mortgage Loans will be funded by the Buyer on the
10th and 25th day of each month, or the business day
immediately before any such date if such 10th or 25th
date is not a business day.
SERVICING FEE The Seller will retain a servicing fee over the life
of each Mortgage Loan in an amount and in the manner
described in the Mortgage Loan Servicing Agreement to be
entered into by and between the Buyer and the Seller as
of March 15, 1996.
TIME PERIOD TO SELL The Seller shall be prepared to sell each Mortgage Loan
LOANS TO THE BUYER to the Buyer no later than thirty (30) days after the
date the Seller funds each such Mortgage Loan.
This commitment may not be assigned to any other entity by either the Buyer or
the Seller without the prior written consent of the other party.
Please acknowledge your acceptance and agreement to the terms of this
Neighborhood Assistance Corporation of America Take-Out Commitment by signing
and returning the enclosed duplicate letter to the Seller at the address shown
above.
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter J. Manning
--------------------------------
Peter J. Manning
- ------------------------------------
Print Name
Title: Creative Director
BANCBOSTON MORTGAGE CORPORATION
By: /s/ Joseph K. Pickett
--------------------------------
____________________________________
Print Name
Title: _____________________________
- 2 -
<PAGE> 1
EXHIBIT 10.9
PMSR FLOW AGREEMENT
- --------------------------------------------------------------------------------
SELLER NAME: THE FIRST NATIONAL BANK OF BOSTON, 100 FEDERAL STREET, BOSTON,
MASSACHUSETTS 02110
SELLER CONTACT PERSON: PARKS AVERY PHONE NO: (401) 278-8275
FAX NO: (401)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELLER NAME: BANK OF BOSTON CONNECTICUT, 31 PRATT STREET, HARTFORD,
CONNECTICUT 06103
SELLER CONTACT PERSON: _____________________ PHONE NO: ____________________
FAX NO: ______________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELLER NAME: RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, ONE HOSPITAL TRUST
PLAZA, PROVIDENCE, RI
SELLER CONTACT PERSON: _____________________ PHONE NO: ____________________
FAX NO: ______________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELLER NAME: BANK OF BOSTON FLORIDA, N.A., 450 ROYAL PALM WAY, PALM BEACH,
FL 33480
SELLER CONTACT PERSON: _____________________ PHONE NO: ____________________
FAX NO: ______________________
- --------------------------------------------------------------------------------
This PMSR Flow Agreement (the "PMSR Flow Agreement") is entered into as of the
date shown above by and between the Buyer and the Seller and applies to any of
the transactions described below.
RECITALS.
1. The Seller originates Mortgage Loans from time to time.
2. The Seller desires to sell to the Buyer the right, title, and interest in and
to the Servicing Rights to certain Mortgage Loans on the terms and conditions
set forth below in this PMSR Flow Agreement.
3. The Buyer desires to buy from the Seller the right, title, and interest in
and to the Servicing Rights on the terms and conditions set forth below in this
PMSR Flow Agreement.
IN CONSIDERATION of the mutual promises made in this PMSR Flow Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Buyer and the Seller agree as follows:
ARTICLE 1.
DEFINITIONS.
As used in this PMSR Flow Agreement, the following capitalized terms shall have
the meanings given to them below:
1.1. "ADJUSTMENT DATE" The third Business Day after the Transfer Date.
1.2. "AGENCY" means FHA, HUD, VA, and/or a private mortgage insurance company,
as applicable.
1.3. "BORROWER" means each obligor under a Mortgage Note.
1.4. "BUSINESS DAY" means any day other than a Saturday, Sunday, federal
holiday, or any other day on which the Buyer or the Seller is not open for
business.
1.5. "BUYDOWN" means any reduction in a Borrower's monthly Mortgage Loan payment
required under a Mortgage Note or otherwise provided for in a related document.
The funds for each Buydown must
<PAGE> 2
be deposited into an Escrow Account and used to supplement the Borrower's
monthly Mortgage Loan payment.
1.6. "BUYER" means BancBoston Mortgage Corporation, a business corporation
organized under the laws of the state of Florida and with its principal place of
business at 7301 Baymeadows Way, Jacksonville, Florida 32256. The Seller
understands that the Buyer intends to change its name after the date of this
PMSR Flow Agreement.
1.7. "CUSTODIAL ACCOUNT" means each deposit account maintained by the Seller
which: (a) complies with Agency requirements and the Servicing PMSR Flow
Agreement, and (b) contains P&I or T&I.
1.8. "CUSTODIAL FILE" means a file to be delivered to the Custodian which
contains documents required by the Seller, including, but not limited to,
original Mortgage Notes endorsed in blank by the Buyer, original recorded
assignments from the Seller to the Buyer, any original recorded interim
assignments relating to the Mortgage Loans, original recorded Mortgage, original
title policies and any endorsements to such policies or other forms of evidence
of title, and appraisals.
1.9. "CUSTODIAN" means the financial institution designated by the Buyer to hold
in trust the Custodial Files. Unless otherwise (i) required by a secured party
having a security interest in the Servicing Rights, or (ii) selected by the
Buyer in accordance with the Servicing Agreement, the Custodian shall be The
First National Bank of Boston.
1.10. "CUTOFF DATE" means the Business Day immediately preceding each Transfer
Date.
1.11. "ESCROW ACCOUNTS" means Mortgage Loan escrow/impound accounts for taxes,
insurance, assessments, ground rents, Buydowns, loss drafts, suspense balances,
and any other such amounts which are maintained by the Seller as a fiduciary for
the Borrowers and relate to the Servicing Rights.
1.12. "EXCLUDED MORTGAGE LOAN" A Mortgage Loan which is: (a) delinquent by three
(3) or more monthly payments as of the Transfer Date, (b) in litigation as of
the Transfer Date, (c) in bankruptcy as of the Transfer Date, (d) in foreclosure
or subject to an assignment of deed in lieu of foreclosure as of the Transfer
Date, (e) repurchased prior to the Transfer Date, (f) paid in full within sixty
(60) days after the Sale Date, (g) subject to an interest rate subsidy under the
Soldiers' and Sailors' Relief Act as of the Transfer Date, or (h) a HUD Repo or
VA Vendee Mortgage Loan .
1.13. "FHA" means the Federal Housing Administration or any successor to the
FHA.
1.14. "FLOOD SERVICE FEE" means a flood service fee paid by the Seller to the
Flood Service Provider or the Buyer to obtain certain flood certification and
"life of loan" tracking services for the Mortgage Loans.
1.15. "FLOOD SERVICE PROVIDER" means the company which provides a transferable
flood certification and "life of loan" tracking service for the Mortgage Loans.
The list of Flood Service Providers acceptable to the Buyer is set forth in
EXHIBIT E to this PMSR Flow Agreement. The Flood Servicer Provider must guaranty
the accuracy of the flood status determination and any future flood zone
changes.
1.16. "GUIDE" means: (a) the HUD 4155.1 REV-4, Mortgage Credit Analysis for
Mortgage Insurance on 1-to-4 Family Properties, HUD 4000.2 REV-2, Mortgagee
Handbook Application Through Insurance (Single Family), HUD 4000.4 REV-1, Single
Family Direct Endorsement Program, HUD 4145.1 REV-2, Architectural Processing
and Inspections For Home Mortgage Insurance, 4150.1 REV-1 Valuation Analysis for
Home Mortgage Insurance, HUD 4060.1 REV-1, Mortgagee Approval Handbook, (b) the
VA Lender's Handbook, and/or (c) the provisions of the Servicing Agreement
relating to the servicing procedures to be followed by the Buyer.
1.19. "HUD" means the United States Department of Housing and Urban Development,
or any successor to HUD.
1.20. "MANDATORY DELIVERY" means the required delivery of Servicing Rights by
the Seller to the Buyer under the terms of this PMSR Flow Agreement. The
delivery of Servicing Rights by the Seller and the acceptance of Servicing
Rights by the Buyer are not optional unless this PMSR Flow Agreement is
terminated in the manner set forth below. The Seller's failure to sell and
deliver the Servicing Rights to the Buyer will be a breach of this PMSR Flow
Agreement.
1.21. "MARKETING AGREEMENT" means the Marketing Agreement to be entered into by
and between GrantAmerica, Inc., which may later change its name, and Bank of
Boston Corporation on or
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before the Closing Date and which will govern the terms under which Newco
Mortgage Corporation's mortgagors may be solicited for certain products and
services.
1.22. "MASTER TAKE-OUT COMMITMENT" means the take-out commitment entered or to
be entered into by and between the Buyer and the Seller and pursuant to which
the Seller will repurchase Mortgage Loans from the Buyer.
1.23. "MORTGAGE" means a mortgage, deed of trust, or other such security
instrument which is executed by a Mortgagor pledging the Mortgaged Property as
security for repayment of a Mortgage Note.
1.24. "MORTGAGE DOCUMENTS" means all documents required by an Agency and/or the
Seller to service a Mortgage Loan.
1.25. "MORTGAGE LOAN" means a residential mortgage loan originated by the Seller
which is: (a) secured by a Mortgage, and (b) the subject of the Servicing Rights
purchased by the Buyer.
1.26. "MORTGAGE NOTE" means the written promise of a Borrower to pay a sum of
money in United States' dollars at a stated interest rate over a specified term,
and which is secured by a Mortgage.
1.27. "MORTGAGED PROPERTY" means the real property, together with the
one-to-four family dwelling and any other improvements situated on such real
property, which have been pledged by a Mortgagor under a Mortgage as collateral
to secure the obligation under a related Mortgage Note.
1.28. "MORTGAGOR" means each person who executes a Mortgage.
1.29. "OPERATING AGREEMENT" means the Operating Agreement entered into by and
between the Buyer and the Seller pursuant to which this PMSR Flow Agreement is
attached as EXHIBIT E.
1.30. "P & I" means principal and interest.
1.31. "PMSR FLOW AGREEMENT" has the meaning set forth in the recitals.
1.32. "PRIOR ORIGINATOR" means each entity which originated a Mortgage Loan,
other than the Seller.
1.33. "PURCHASE PRICE" means the purchase price for the Servicing Rights, as
described in SECTION 4.1 below.
1.34. "PURCHASE PRICE PERCENTAGE" means the percentage set forth in EXHIBIT A to
this PMSR Flow Agreement.
1.35. "SALE DATE" means (a) each date on which the Seller repurchases a Mortgage
Loan from the Buyer under the Master Take-Out Commitment, or (b) upon expiration
of the Master Take-Out Commitment, when the Buyer and the Seller mutually agree
but in no event later than the date necessary to properly commence Servicing
after the Mortgage Loan closing.
1.36. "SELLER" means the entity identified at the top of the first page of this
PMSR Flow Agreement as the Seller.
1.37. "SERVICER" means the entity which is responsible for Servicing the
Mortgage Loans.
1.38. "SERVICING" means the performance of Mortgage Loan servicing functions,
including, but not limited to, (a) collecting and disbursing of funds held in
trust to pay taxes, hazard insurance, mortgage insurance and other items as they
become due, (b) collecting and remitting principal and interest payments to
investors, and (c) resolving defaulted Mortgage Loans, in each case as set forth
in the Servicing Agreement.
1.39. "SERVICING AGREEMENT" means the Mortgage Loan Servicing Agreement entered
into by and between the Buyer and the Seller pursuant to which the Buyer agrees
to service certain mortgage loans.
1.40. "SERVICING FEE" means the fee collected by the Servicer for Servicing the
Mortgage Loans. The servicing fee shall be equal to the amount set forth in the
Servicing Agreement.
1.41. "SERVICING FILE" means a file containing any and all documents required by
an Agency and the Buyer to service Mortgage Loans on behalf of such Agency or
the Seller.
1.42. "SERVICING RIGHTS" means the right to receive the Servicing Fee and any
other income relating to or arising out of the Servicing Rights purchased by the
Buyer under this PMSR Flow Agreement, including, but not limited to, the right
to hold the Escrow Accounts.
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1.43. "T & I" means the taxes, insurance and any additional amount other than
P&I which is contained in an Escrow Account.
1.44. "TRANSFER DATE" means the Sale Date.
1.45. "TRETS" means Transamerica Real Estate Tax Service.
1.46. "TRETS FEE" means a tax service fee paid by the Seller to TRETS to obtain
tax services from TRETS.
1.47. "VA" means the Department of Veterans Affairs or any successor to VA.
ARTICLE 2.
THE BUYER'S AND SELLER'S OBLIGATIONS BEFORE EACH TRANSFER DATE.
The Buyer and the Seller shall comply with the following terms and conditions
before each Transfer Date.
2.1. CONSISTENT WITH THE SERVICING AGREEMENT. All Mortgage Loans delivered to
the Buyer will be consistent with the criteria set forth in the Servicing
Agreement and the Operating Agreement.
2.2. AGENCY NOTIFICATION OF TRANSFER.
The Seller will, at its sole cost, notify the applicable Agency of the transfer
of the Servicing Rights to the Buyer within the time period required by the
applicable Agency. The Seller shall pay any and all transfer fees charged by
such Agency.
2.3. BORROWER COMMUNICATIONS.
The Seller will give written notice to each Borrower of the transfer of the
Servicing Rights to the Buyer in compliance with applicable law, including, but
not limited to, the Real Estate Settlement Procedures Act and its implementing
Regulation X. Such notice will include, but not be limited to, instructions
about when and where the Borrower should make the Borrower's next Mortgage Loan
payment. The notice will instruct Borrowers to forward future Mortgage Loan
payments to an address to be provided to the Borrower in the Seller's mortgage
servicing transfer letter (the "good-bye letter").
2.4. FLOOD SERVICE COMMUNICATIONS WITH FLOOD SERVICE PROVIDER.
The Seller will give written notice to each Flood Service Provider of the
transfer of Servicing Rights to the Buyer. The Seller will provide any
information required by such Flood Service Provider to effect the creation
and/or transfer of "life of loan" tracking service to the Buyer.
2.5. INSURANCE COMMUNICATIONS.
2.5.1. COMMERCIAL INSURANCE CARRIERS. The Seller will give written notice to
each insurance carrier of the transfer of Servicing Rights to the Buyer. Such
notice will include the following requests:
(a) Name the Buyer and its successors and assigns as an insured in the lender's
policy of title insurance for the Mortgage Loan (unless the lender's policy of
title insurance for the Mortgage Loan defines "insured" to include any owner of
indebtedness secured by the insured Mortgage),
(b) Name the Buyer and its successors and assigns as an insured, and include a
lender's loss payable endorsement, in the fire and extended coverage policy for
the Mortgaged Property,
(c) Name the Buyer and its successors and assigns as an insured, and include a
lender's loss payable endorsement, in the flood insurance policy and in the
catastrophe insurance policy, if any, for the Mortgaged Property, and
(d) Name the Buyer and its successors and assigns as an insured, and include a
lender's loss payable endorsement, in the private mortgage insurance policy for
the Mortgage Loan.
The Buyer's Mortgage Loan numbers must be included as part of the information
provided by the Seller to the insurance carrier under this SECTION 2.5.1.
2.5.2. FHA INSURANCE. The Seller will give notice to FHA of the transfer of the
Servicing Rights to the Buyer in accordance with FHA guidelines.
2.6. NO OBLIGATION TO BUY.
Nothing in this PMSR Flow Agreement will be
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construed as obligating the Buyer to purchase any Servicing Rights from the
Seller unless the related Mortgage Loan conforms in all respects to the terms,
conditions, representations, warranties, and covenants contained in this PMSR
Flow Agreement.
2.7. SOLICITATION FOR REFINANCES.
The Seller's ability to solicit a Borrower for a refinancing is described in the
Marketing Agreement.
2.8. ACCESS TO INFORMATION.
The Seller will give to the Buyer and its counsel, accountants, and other
representatives reasonable access, upon reasonable prior notice, during normal
business hours throughout the period before each Transfer Date, to all of
Seller's files, books and records relating to the Mortgage Loans, Servicing
Rights and/or Escrow Accounts.
ARTICLE 3.
THE BUYER'S AND SELLER'S OBLIGATIONS ON AND AFTER THE TRANSFER DATE.
3.1. SELLER TRANSFERS SERVICING RIGHTS.
The Seller will transfer the applicable Servicing Rights to the Buyer on each
Transfer Date.
3.2. SELLER ASSIGNS SERVICING RIGHTS.
The Seller will prepare and record the assignments of lien required to service
the Mortgage Loans at its sole cost and expense. The Seller will not use: (a)
blanket assignments, or (b) facsimile signatures on any assignment.
3.3. TRETS FEES.
TRETS will provide all tax related services for the Mortgage Loans. For each
Mortgage Loan, the Seller will pay any and all TRETS fees as negotiated with
TRETS for the "life of loan" transferable contracts.
3.4. FLOOD CERTIFICATION FEES
For each Mortgage Loan, the Seller will: (a) transfer and assign a "life of
loan" transferable flood tracking service contract to the Buyer, and (b) pay any
and all Flood Service Provider fees as negotiated with the applicable Flood
Service Provider for the "life of loan" transferable tracking services.
3.5. MORTGAGE PAYMENTS RECEIVED AFTER TRANSFER DATE.
The Seller will deliver to the Buyer by overnight courier each Mortgage Loan
payment received by the Seller each day during the sixty (60)-day period
following each Transfer Date. The Seller will deliver to the Buyer by first
class mail each Mortgage Loan payment received by the Seller each day after such
sixty (60)-day period has ended. Each Mortgage Loan payment will be accompanied
by: (a) an endorsement assigning such payment to the Buyer, and (b) information
sufficient to permit the Buyer to process each such payment.
3.6. SUPPLEMENTARY INFORMATION.
The Seller will give the Buyer any and all information which is reasonably
necessary for the Buyer to Service the Mortgage Loans no later than ten (10)
Business Days after the Seller receives the Buyer's request for such
information.
ARTICLE 4.
THE PURCHASE PRICE.
4.1. CALCULATING THE PURCHASE PRICE.
With respect to Servicing Rights purchased by the Buyer under a flow
arrangement, the Buyer will pay the Purchase Price to the Seller in an amount
equal to:
(a) the Purchase Price Percentage shown in EXHIBIT A to this PMSR Flow
Agreement, as amended from time to time by the Buyer,
(b) multiplied by the outstanding principal balance of the applicable Mortgage
Loans as of the Sales Date, less the amount of the outstanding principal balance
of the Excluded Mortgage Loans.
(c) adjusted in the manner set forth in EXHIBIT A to this PMSR Flow Agreement,
as amended from time to time by the Buyer.
4.2. WHEN THE PURCHASE PRICE WILL BE PAID TO THE SELLER.
The Buyer will pay the Purchase Price to the Seller on the applicable Sale Date.
4.3. ADJUSTMENTS FOR MORTGAGE LOAN PAYOFFS.
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If a Mortgage Loan, with the exception of an Excluded Mortgage Loan, is paid off
within sixty (60) days after the Sale Date, the Purchase Price shall be reduced
in an amount equal to: (a) the outstanding principal balance of the Mortgage
Loan as of the Sale Date, and (b) multiplied by the Purchase Price Percentage
applicable to the Servicing Rights at the time the Buyer purchased such
Servicing Rights.
4.4. CORRECTIONS.
If, within one hundred and eighty (180) days after the Transfer Date: (i) the
principal balance of any Mortgage Loan used in computing the amount of the
Purchase Price were found to be incorrect, or (ii) any other item which affects
the Purchase Price is found to be incorrect, the Purchase Price will be adjusted
promptly, and adjustments will be made to the appropriate party.
ARTICLE 5.
REIMBURSEMENT FOR DELINQUENT MORTGAGE LOANS.
5.1 REASONS WHY.
The Seller will reimburse the Purchase Price to the Buyer if a Mortgage Loan
becomes sixty (60) days or more delinquent during the first twelve (12) months
following the first payment due to the Buyer and the Mortgage Loan subsequently
becomes ninety (90) days or more delinquent.
5.2. REIMBURSEMENT AMOUNT.
If the Seller reimburses the Purchase Price to the Buyer, the Seller will pay to
the Buyer an amount equal to:
(a) the then current unpaid principal balance of the Mortgage Loan,
(b) multiplied by the Purchase Price Percentage applicable to the Servicing
Rights at the time the Buyer purchased such Servicing Rights..
5.3. TIMING FOR REIMBURSEMENT.
The Seller will complete each such reimbursement transaction no later than ten
(10) Business Days after the Seller has received notice of such reimbursement
requirement from the Buyer.
ARTICLE 6.
SELLER'S REPRESENTATIONS AND WARRANTIES RELATING TO THE MORTGAGE LOANS.
The Seller represents and warrants to the Buyer with respect to each Mortgage
Loan that, as of the Sale Date, to and including each Transfer Date:
6.1. NOTE AND MORTGAGE ARE VALID OBLIGATIONS OF THE OBLIGORS.
The Mortgage Note and the related Mortgage are genuine and each is the legal,
valid, and binding obligation of the related Borrower and Mortgagor, enforceable
in accordance with their terms, except as such enforceability may be limited by
(a) applicable bankruptcy, reorganization, insolvency, moratorium and other laws
affecting creditors' rights or debtors' obligations from time to time in effect,
and (b) the availability of the remedy of specific performance or injunctive
relief or any other equitable remedy.
All parties to the Mortgage Note and the Mortgage had legal capacity to execute
the Mortgage Note and the Mortgage, and each Mortgage Note and Mortgage have
been duly and properly executed by such parties.
6.2. LIENS FREE OF ENCUMBRANCE.
The Mortgage is a valid and existing lien on the Mortgaged Property described in
the Mortgage, and the Mortgaged Property is free and clear of all encumbrances
and liens, including but not limited to mechanics' liens and materialmen's
liens, having priority over the first lien of the Mortgage except for liens for
real estate taxes and special assessments not yet due and payable, and no rights
are outstanding that under the law could give rise to such lien.
6.3. LOANS SATISFY THE GUIDE.
Each Mortgage Loan satisfies the requirements and terms set forth in the
applicable Guide in effect at the time of delivery to the applicable Agency.
There is no circumstance or condition relating to a Mortgage Loan, the Mortgaged
Property, the Mortgage Documents, the Borrower or the Borrower's credit standing
that can reasonably be expected to cause an Agency to regard a Mortgage Loan as
not eligible for insurance coverage or guaranty, as applicable.
6.4. NO PERSON OR MORTGAGE RELEASED.
No party to the Mortgage Note or Mortgage has been released in whole or in part
from the Mortgage Note
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or the Mortgage, and no part of the Mortgaged Property has been released from
the Mortgage.
6.5. NO TAX LIENS.
There was no delinquent tax or delinquent assessment lien against the Mortgaged
Property at the time the related Mortgage Loan was closed or on the Transfer
Date. If the Seller receives knowledge of any such delinquency, the Seller must
notify the Buyer within two (2) Business Days after obtaining such knowledge and
cure such event within thirty (30) days after such notice. In any event, the
Seller will indemnify and hold Buyer harmless from and against any and all
costs, losses, and expenses relating to or arising out of such delinquency.
6.6. SELLER HAS PAID ALL TAXES AND ASSESSMENTS.
All taxes, governmental assessments, all hazard insurance premiums, flood
insurance premiums, mortgage insurance premiums, leasehold payments or ground
rents which previously became due have been paid by the Seller or, if not
escrowed, by the applicable Borrower.
6.7. NO DEFENSE TO PAYMENT.
The Mortgage Loan 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 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, or subject it 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.
6.8. LOANS COMPLY WITH LAW.
Each Mortgage Loan application was taken and processed, and each Mortgage Loan
was made in compliance in all material respects with all applicable local, state
and federal laws, regulations, rules and orders, including without limitation;
usury, the Equal Credit Opportunity Act and its implementing Regulation B, the
Real Estate Settlement Procedures Act and its implementing Regulation X, the
Financial Institutions Reform Recovery And Enforcement Act and its implementing
regulations, Federal Deposit Insurance Corporation Improvement Act, the
Truth-In-Lending Act and its implementing Regulation Z, the Fair Credit
Reporting Act and any applicable state credit reporting laws, the Fair Debt
Collection Practices Act, the Fair Housing Act, and Fair Lending Laws in all
material respects, and consummation of the transactions contemplated hereby, by
the Seller will not involve the violation in any material respect of any such
laws.
6.9. ADEQUATE REMEDIES OF HOLDER.
Each Mortgage contains customary and enforceable provisions which give the
holder of the Mortgage adequate rights and remedies to realize against the
Mortgaged Property and to benefit from its security, including, but not limited
to: (a) in the case of a Mortgage designated as a Deed of Trust, by trustee's
sale; and (b) otherwise by foreclosure subject, in each case, to any limitations
arising from any bankruptcy, insolvency or other similar laws for the benefit of
debtors.
6.10. TITLE INSURANCE.
A title insurance policy has been issued for each Mortgage Loan insuring the
Seller, its successors and assigns, in an amount no less than the outstanding
Mortgage Loan principal balance, that the related Mortgage is a valid lien on
the Mortgaged Property and that the Mortgaged Property is free and clear of all
encumbrances and liens having priority over the lien of the Mortgage, except
for: (a) liens for real estate taxes and special assessments not yet due and
payable, (b) covenants, restrictions, rights of way, easements, and other
matters customary and acceptable to institutional lenders and title insurance
companies in the jurisdictions in which such Mortgaged Property is located, and
(c) easements and restrictions of record being acceptable to the Agencies and to
the Buyer, and specifically identified in the title insurance policy. Unless the
Mortgaged Property is within a jurisdiction where title insurance was
unavailable, or the form of title evidence is not the general form, a mortgage
title insurance policy on current prescribed ALTA form, or such other form of
title insurance policy with a carrier acceptable to the Agencies and reasonably
acceptable to the Buyer, is in effect as to the Mortgaged Property.
6.11. NO CONDEMNATION PROCEEDINGS.
There is no proceeding pending for the total or partial condemnation of the
Mortgaged Property and such 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
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Mortgaged Property as security for the Mortgage Loan or the use for which the
premises were intended.
6.12. NO VIOLATION OF ZONING LAWS.
No improvements located on or being part of the Mortgaged Property are 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 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.
6.13. PROCEEDS FULLY DISBURSED.
Except for Escrows Account funds retained for completion of Mortgaged Property
improvements, the proceeds of the Mortgage Loan have been fully disbursed, there
is no requirement for future advances thereunder and any and all requirements as
to completion of any on-site or off-site improvements and as to disbursements of
any Escrow Account funds therefore have been complied with. All costs, fees and
expenses incurred in making, closing or recording the Mortgage Loans has been
paid by the Seller.
6.14. DUE ON SALE.
Each Mortgage contains an enforceable 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 or transferred without the prior consent of
the mortgagee thereunder, unless prohibited by state law, and subject to any
limitations arising from any bankruptcy, insolvency or other similar laws for
the benefit of debtors.
6.15. ORIGINATION AND COLLECTION PRACTICES.
The origination and collection practices used by the Seller for each Mortgage
Loan have been in all respects legal, proper, prudent, customary in the mortgage
servicing business, and in accordance with the applicable Agency's Guide. There
are no deficiencies in any Escrow Account deposit or payment, and no Escrow
Account deposits or payments or other charges or prepayments due to the Seller
have been capitalized under any Mortgage or the related Mortgage Note.
6.16. HAZARD INSURANCE.
There is in force for each Mortgaged Property a hazard insurance policy which:
(a) is acceptable to the applicable Agency and reasonably acceptable to the
Buyer, (b) contains a standard mortgagee clause, (c) insures against loss or
damage by fire, all other hazards set forth in the standard extended coverage
form of endorsement, and any other insurable risks against hazards required by
the applicable Agency, (d) has been issued in an amount equal to at least the
lesser of the outstanding principal balance of the Mortgage Loan or the full
insurable value of the improvements to the Mortgaged Property, and (e) if
required by the Flood Disaster Protection Act of 1973 and the National Flood
Insurance Reform Act of 1994, a flood insurance policy in an amount representing
coverage at least equal to the lesser of the outstanding principal balance of
the Mortgage Loan or the maximum amount of insurance which is available under
the Flood Disaster Protection Act of 1973 and the National Flood Insurance
Reform Act of 1994. The improvements to the Mortgaged Property have not been
affected in any substantial manner or suffered any material loss as a result of
any fire, explosion, accident, strike, riot, war or act of God or the public
enemy as of the Transfer Date, except as disclosed by the Seller to the Buyer in
accordance with EXHIBIT B to this PMSR Flow Agreement. All such insurance
policies remain in full force and effect.
6.17. SURVEYS AND FLOOD INSURANCE.
A survey, where required, has been made of the Mortgaged Property, and if in a
flood zone A or V in a FEMA flood map area in a participating community, flood
insurance has been provided. All of the improvements which were included for the
purpose of determining the appraised value of the Mortgaged Property lie wholly
within the boundaries and building restriction lines of such property, and no
improvements on adjoining properties encroach upon the Mortgaged Property unless
covered by title insurance and/or waivers.
6.18. PMI.
All Mortgage Loans which are the subject of private mortgage insurance are
evidenced by a private mortgage insurance policy. With respect to each such
policy: (a) all provisions of such private mortgage insurance policy have been
and are being complied with, (b) such policy is in full force and effect, and
(c) all premiums due under such policy have been paid by
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the Seller. Any Mortgage Loan subject to any such private mortgage insurance
policy obligates the Borrower to maintain such private mortgage insurance policy
and pay all such premiums and charges in connection therewith. Each private
mortgage insurance company will be reasonably acceptable to the Buyer.
6.19. FHA INSURANCE AND VA GUARANTY.
Each Mortgage Loan to be insured by the FHA is eligible for FHA insurance, and
the FHA insurance premiums which are due and payable for each such Mortgage Loan
have been paid by the Seller. Each Mortgage Loan to be guaranteed by the VA is
eligible for a VA guaranty.
6.20. APPRAISALS.
An appraisal has been made of each Mortgaged Property which conforms with: (a)
the applicable Guide, (b) the applicable Agency's requirements, (c) the Buyer's
requirements, and (d) applicable laws, rules, regulations and orders, including,
but not limited to, the Financial Institutions Reform Recovery And Enforcement
Act and its implementing regulations.
6.21. MORTGAGED PROPERTY LOCATED IN THE U.S.
The Mortgaged Property is located in the continental United States or the State
of Hawaii, and all such Mortgage Loans consist of a single parcel of real
property with a detached one-to-four family dwelling, a townhouse, or an
individual condominium unit in a development or an individual unit in a planned
unit development.
6.22. NO SUPERFUND SITE.
The Mortgaged Property is not located on a superfund site.
6.23. DOCUMENTS COMPLY WITH GUIDE.
The Mortgage Documents satisfy each of the requirements of the applicable Guide
and the Buyer, and the Mortgage Documents have been duly executed and are in a
form acceptable to the applicable Agency and the Buyer.
Each Mortgage Note, Mortgage and appraisal are on forms acceptable to the
applicable Agency and the Buyer, and the Mortgage Loan was originated, serviced,
and delivered, as applicable, in accordance with the applicable Guide and the
Buyer's requirements.
6.24. SERVICING FILES.
All documents which are required to be in the Servicing File have been provided
to the Buyer by the Seller in accordance with the applicable Agency's Guide.
6.25. ASSIGN MORTGAGE TO BUYER.
Each Mortgage, has been properly assigned to the Buyer by the Seller.
6.26. MORTGAGED PROPERTY TAX IDENTIFICATION.
Each Mortgaged Property tax identifications and Mortgaged Property description
is, in all material respects, accurate, complete and legally sufficient. Tax
segregation, where required, has been completed.
6.27. INTEREST ON ESCROW ACCOUNTS.
The Seller has credited to each Borrower's account all interest required to be
paid on any Escrow Account through each Transfer Date. The Seller will provide
to the Buyer evidence of each such payment upon the Buyer's request. If required
by applicable law, rules, regulations or orders, the Seller has implemented
backup withholding of interest accrual on each such Escrow Account, and the
Seller will provide to the Buyer evidence of each such backup withholding on or
before each Transfer Date.
6.28. PAYOFF STATEMENTS.
Each Mortgage Loan payoff and assumption statement provided by the Seller to a
Mortgagor, Borrower, or his/her agent is complete and accurate.
6.29. ESCROW ACCOUNTS.
There is an Escrow Account for each Mortgage Loan which is required by an
applicable Agency to have an Escrow Account. Each Escrow Account (whether
voluntary or required by an Agency or the Seller, has been created, maintained,
serviced, and disbursed in compliance, in all material respects, with: (a) the
applicable Guide, (b) the applicable Agency's requirements, (c) the Mortgage
Documents, and (d) applicable laws, rules, regulations and orders. All payments
for taxes, assessments, ground rents, hazard insurance, mortgage insurance,
flood insurance, optional insurance and any other such items constituting an
expenditures from each Escrow Account have been made before such amounts became
delinquent or lost any possible discount. Each item in an Escrow Account
contains funds in the proper amount.
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6.30. ESCROW ANALYSIS.
The Seller has: (a) analyzed the payments into each Escrow Account, (b) analyzed
disbursements from each Escrow Account, (c) made the appropriate adjustments to
each Escrow Account which has a deficiency or surplus, (d) performed any
additional analysis and made any additional adjustments as may be required by
the applicable Guide, the applicable Agency's requirements, and applicable laws,
rules, regulations and orders, including, but not limited to, the Real Estate
Settlement Procedures Act and its implementing Regulation X.
6.31. PLEDGED ACCOUNTS.
There are no pledged accounts relating to a Mortgage Loan which are used in lieu
of Escrow Account deposits or because a Borrower is a resident alien.
6.32. TAX SERVICE CONTRACTS.
Each Mortgage Loan has in full force and effect a "life of loan" transferable
tax service contracts, which contracts are either with TRETS or are fully
transferable to TRETS, without the payment of any fee by the Buyer.
6.33. FLOOD CERTIFICATION AND TRACKING SERVICES.
Each Mortgage Loan has in full force and effect a transferable flood insurance
certification and a "life of loan" tracking service contract, which contract is
either with a Flood Service Provider or is fully transferable to the Buyer's
Flood Service Provider, without the payment of any fee by the Buyer.
6.34. SELLER'S STATEMENTS ARE TRUE AND ACCURATE.
No representation, warranty or written statement made by the Seller in this PMSR
Flow Agreement, or in any schedule, written statement or certificate given to
the Buyer in connection with the transactions contemplated by this PMSR Flow
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements in
this PMSR Flow Agreement or in any of such statements and certificates not
misleading.
6.35. DISCLOSURE OF MORTGAGE LOAN ACCOUNT INFORMATION.
Except as otherwise indicated in writing to the Buyer prior to the date of this
PMSR Flow Agreement, the Seller has not disclosed Mortgage Loan information,
including, but not limited to, the names and addresses of the Mortgagors or the
Borrowers, to any person or entity unless such disclosure was necessary to
comply with an Agency Agreement or with applicable state or federal law, rule,
regulation, or order. Notwithstanding the above, any disclosure of Mortgage Loan
information to credit bureaus is governed by contracts that prohibit any person
from directly or indirectly using such information for solicitation of the
Mortgagors or Borrowers for financial, insurance and/or related services or
products.
6.36. SELLER'S BOOKS AND RECORDS.
The Seller's books, records and accounts relating to the Mortgage Loans comply
in all material respects with all applicable Agency requirements and the Guides.
6.37. SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940.
Each Mortgage Loan which is the subject of a Borrower's request for an
adjustment under the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, is separately identified by the Seller in writing.
6.38. FRAUD.
No Mortgage Loan has been originated through any type of fraud or deceit. The
Seller shall retain the risk of bankruptcy, foreclosure, delinquency, fraud and
other such matters relating to the Mortgage Loans.
6.39. SOCIAL SECURITY NUMBERS.
The Seller has complied with all Internal Revenue Service requirements relating
to or arising out of the procurement of a Social Security number.
6.40. WARRANTIES SURVIVE.
The Seller agrees that all warranties and obligations under this PMSR Flow
Agreement are perpetual and will survive the termination of this PMSR Flow
Agreement.
ARTICLE 7.
SELLER'S REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO SERVICING RIGHTS.
- 10 -
<PAGE> 11
The Seller represents and warrants to the Buyer with respect to the Servicing
Rights that, as of each Transfer Date:
7.1. GOOD AND MARKETABLE TITLE.
The Seller has good and marketable title to the Servicing Rights, and has the
complete right and power to transfer the Servicing Rights to the Buyer, free and
clear of all liens, claims, charges, defenses, offsets, and encumbrances,
including, but not limited to, those of the Seller arising by, through, or under
the Seller. The Seller is not obligated either contractually or otherwise to
sell the Servicing Rights to any other person or entity.
7.2. NO ENCUMBRANCES.
Each transfer of the Servicing Rights by the Seller to the Buyer is free and
clear of any and all adverse claims and encumbrances, and there is no existing
assignment, sale or hypothecation thereof, except as contemplated by this PMSR
Flow Agreement.
7.3. ALL REPORTS FILED.
The Seller has filed all reports required by all government agencies with
jurisdiction over the Servicing Rights.
7.4. COMPLIANCE WITH CONTRACTS AND AGENCY AGREEMENTS.
The Seller has complied in all material respects with all of the terms and
obligations of all contracts to which the Seller is a party, and with all
applicable federal, state and local laws, regulations, rules and orders, in each
case, which might materially and adversely affect any of the Servicing Rights
and/or the Mortgage Loans. No event has occurred and is continuing which under
the provisions of any Guide or any other document or agreement, but for the
passage of time or the giving of notice, or both, would constitute an event of
default by the Seller thereunder. The laws and regulations with which the Seller
has complied in all material respects include, but are not limited to, all
applicable Guides and Agency requirements. The Seller has not done or failed to
do any act or thing which could reasonably be expected to materially and
adversely affect the Servicing Rights.
7.5. LITIGATION.
There is no litigation, proceeding or governmental investigation pending or
threatened, and the Seller does not know of any facts which could reasonably be
expected to result in any such litigation, proceeding or governmental
investigation, or any order, injunction or decree outstanding which does or
could reasonably be expected to materially and adversely affect any of the
Mortgage Loans or the Servicing Rights.
7.6. COMPLIANCE WITH LAW AND AGENCY REQUIREMENTS.
The Seller has not violated any: (a) applicable law, regulation, rule or order,
(b) Guide, (c) Agency requirement, or (c) any other requirement of any
governmental body which may materially affect any of the Servicing Rights.
7.7. WARRANTIES SURVIVE.
The Seller agrees that all warranties and obligations under this PMSR Flow
Agreement are perpetual and will survive the termination of this PMSR Flow
Agreement.
ARTICLE 8.
MUTUAL REPRESENTATIONS AND WARRANTIES.
The Seller represents and warrants to the Buyer with respect to the following
statements relating to the Seller, and the Buyer represents and warrants to the
Seller with respect to the following statements relating to the Buyer, that as
of the date of this PMSR Flow Agreement:
8.1. PARTY IS DULY ORGANIZED.
The First National Bank of Boston, Rhode Island Hospital Trust National Bank and
Bank of Boston-Florida, N.A. are each duly organized and validly existing
national banking associations; Bank of Boston Connecticut is a duly organized
and validly existing state-chartered savings bank and the Buyer is a duly
organized and validly existing corporation. Each is in good standing under the
laws of its jurisdiction of organization, and has the requisite power and
authority to enter into this PMSR Flow Agreement and any other agreements to
which it is a party and that are contemplated by this PMSR Flow Agreement.
8.2. AGREEMENT IS DULY AUTHORIZED.
- 11 -
<PAGE> 12
It has all requisite power, authority and capacity to enter into this PMSR Flow
Agreement and to perform the obligations required of it under this PMSR Flow
Agreement. The execution and delivery of this PMSR Flow Agreement by it and the
consummation of the transactions contemplated by this PMSR Flow Agreement by it,
have been duly and validly authorized by all necessary action. This PMSR Flow
Agreement constitutes its valid and legally binding agreement, enforceable in
accordance with its terms, except as it may be limited by bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights and by general equity principles, and no offset, counterclaim or defense
exists to the full performance of this PMSR Flow Agreement by such party.
8.3. AGREEMENT DOES NOT VIOLATE ANY OTHER OBLIGATION.
Insofar as its capacity to carry out any obligation under this PMSR Flow
Agreement is concerned, it is not in violation in any material respect of any
provision of any charter, certificate of incorporation, by-law, mortgage,
indenture, indebtedness, agreement, instrument, judgment, decree, order,
statute, rule or regulation, and there is no such provision that materially and
adversely affects its capacity to carry out such obligations. Its execution of,
and performance pursuant to, this PMSR Flow Agreement will not result in such
violation.
8.4. PARTY IS DULY LICENSED.
It holds the required licenses and is in compliance with all applicable state
and federal laws governing the transfer and Servicing of Mortgage Loans
transferred under this PMSR Flow Agreement.
8.5. WARRANTIES SURVIVE.
It agrees that all warranties and obligations under this PMSR Flow Agreement are
perpetual and will survive the termination of this PMSR Flow Agreement.
ARTICLE 9.
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS.
The Buyer's obligations under this PMSR Flow Agreement are subject to the
satisfaction of each of the following conditions:
9.1. INSPECTION AND VERIFICATION.
The Buyer may from time to time upon reasonable prior notice during normal
business hours inspect and review the Seller's books, records, accounts, quality
control policies and procedures, and underwriting policies and procedures
relating to the Mortgage Loans, but in no event more than two (2) such reviews
each year. Such books, records, accounts, quality control policies and
procedures and underwriting policies will be reasonably satisfactory to the
Buyer.
9.2. CORRECT REPRESENTATIONS AND WARRANTIES .
Each of the Seller's representations and warranties under this PMSR Flow
Agreement are true and correct in all material respects and remain true and
correct in all material respects as of each Sale Date and each Transfer Date.
9.3. SELLER COMPLIES WITH EACH OBLIGATION.
As of each Transfer Date, the Seller has complied in all material respects with
each term, covenant, condition of this PMSR Flow Agreement applicable to the
Seller as of such date.
9.4. REGULATORY APPROVALS.
The Seller will, at its sole expense, obtain the approval of each Agency to
transfer the Servicing Rights from the Seller to the Buyer under this PMSR Flow
Agreement.
9.5. NO ACTIONS.
Through and including the Sale Date, there will not have been commenced or
threatened any action, suit, or proceeding against the Seller, which could
reasonably be expected to materially and adversely affect the Servicing Rights,
the Mortgage Loans, the Escrow Accounts, and/or the consummation of the
transactions contemplated hereby.
ARTICLE 10.
- 12 -
<PAGE> 13
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS.
The Seller's obligations under this PMSR Flow Agreement are subject to the
satisfaction of each of the following conditions:
10.1. CORRECT REPRESENTATIONS AND WARRANTIES.
Each of the Buyer's representations and warranties under this PMSR Flow
Agreement are true and correct in all material respects and remain true and
correct in all material respects as of each Sale Date and each Transfer Date.
10.2. BUYER COMPLIES WITH EACH OBLIGATION.
As of each Transfer Date, the Buyer has complied in all material respects with
each term, covenant, condition of this PMSR Flow Agreement applicable to the
Buyer as of such date.
10.3. NO MATERIAL ADVERSE CHANGE.
There will not have been any material adverse change in the Buyer's relationship
with, or authority from, an Agency.
10.4. NO ACTIONS.
Through and including the Sale Date, there will not have been commenced or
threatened any action, suit, or proceeding against the Buyer, which could
reasonably be expected to materially and adversely affect the Buyer's ability to
consummate the transactions contemplated hereby.
10.5. SERVICING AGREEMENT.
The Servicing Agreement shall remain in full force and effect and the
representations and warranties of the Buyer in the Servicing Agreement shall be
true and correct in all material respects.
ARTICLE 11.
MISCELLANEOUS.
11.1. TERM OF THIS PMSR FLOW AGREEMENT.
This PMSR Flow Agreement will have the same term as set forth in SECTION 6.6 of
the Operating Agreement, which SECTION 6.6 is incorporated herein by reference.
11.2. TERMINATION OF THIS PMSR FLOW AGREEMENT.
This Agreement shall be terminated only in accordance with the provisions of
SECTION 6.7 of the Operating Agreement.
11.3. FURTHER ASSURANCES.
The Buyer and the Seller will from time to time execute and promptly deliver to
each other such documents, assignments, endorsements, applications or other
instruments necessary or reasonably proper or convenient to effectuate the
assignments, transfers and other transactions contemplated by this PMSR Flow
Agreement.
11.4. INDEMNIFICATION.
The Seller shall indemnify the Buyer and shall hold the Buyer harmless from and
against any and all losses, liabilities, penalties, damages, expenses or other
harm or injury which the Buyer may incur or suffer or which may be asserted by
any person or entity, including reasonable attorneys' fees and court costs,
arising out of any action at any time taken or omitted to be taken (a) by the
Seller under or in connection with this PMSR Flow Agreement and/or any
applicable Exhibit to the Agreement, including, without limitation, any failure
by the Seller to observe and perform properly each and every covenant of this
PMSR Flow Agreement and/or any applicable Exhibit to the Agreement, or (b) by
the Buyer in reliance upon information provided to the Buyer by the Seller.
Without limiting the above, the Seller shall indemnify the Buyer and shall hold
the Buyer harmless from and against any and all losses, liabilities, penalties,
damages, expenses or other harm or injury which the Buyer may incur or suffer or
which may be asserted by any person or entity, including reasonable attorneys'
fees and court costs, arising out of any Mortgage Loan or the Servicing Rights
relating to such Mortgage Loan which result from:
(a) Any misrepresentation made by the Seller in this PMSR Flow Agreement or any
initial offering information provided to the Buyer,
(b) Any breach by the Seller or Prior Originator of any of the Seller's
representations or warranties under this PMSR Flow Agreement,
- 13 -
<PAGE> 14
(c) Any act, or failure to act or perform any term, covenant, condition or
obligation of the Seller under this PMSR Flow Agreement, or any act or failure
to act by any Prior Originator of a Mortgage Loan,
(d) Any defect in any Mortgage Loan existing as of the Transfer Date,
(e) Errors in originating, closing, pooling, or Servicing any Mortgage Loan
prior to the Transfer Date, including any improper act or failure to act when
required to do so,
(f) The Seller's failure to: (i) allow the Buyer to inspect the Seller's
records, (ii) comply with the terms and conditions of this PMSR Flow Agreement,
(iii) comply with the Buyer's instructions relating to the transfer of the
Servicing Rights for the Mortgage Loans, (iv) give the Buyer accurate
information relating to the Mortgage Loans when requested by the Buyer,
(g) Any Agency demand for indemnification or repurchase relating to an error or
omission of the Seller or Prior Originator,
(h) Any and all losses incurred as a result of the forfeiture of any Mortgaged
Property to the United States under 21 U.S.C. Section 881 or to any other
governmental entity, including, but not limited to, any state or municipality
under any comparable state or local law by reason that: (i) the Mortgaged
Property is proceeds traceable to an exchange for a controlled substance, (ii)
the Mortgage Property was purchased with proceeds traceable to an exchange for a
controlled substance, (iii) the Mortgaged Property was used and was intended to
be used to facilitate the commission of a violation of 21 U.S.C. Section 841,
and/or (iv) the Mortgaged Property was used in a manner violating a comparable
state or local law, such that the Buyer cannot prevail in asserting an "innocent
owner" defense due to the acts or omissions of the Seller or any Prior
Originator of a Mortgage Loan,
(i) Any representation or promise by the Seller or any Prior Originator of a
Mortgage Loan to a Mortgagor or Borrower that a Mortgage Loan could be
refinanced at any time after the closing with any term or condition which is
more favorable than the terms and conditions offered by the Buyer to members of
the general public, and/or
(j) Any and all losses incurred as a result of a VA no bid or buydown in lieu of
such no-bid for Mortgage Loans on which foreclosure action is commenced within
three (3) years after the Transfer Date.
The Buyer shall indemnify the Seller and shall hold the Seller harmless from and
against any and all losses, liabilities, penalties, damages, expenses or other
harm or injury which the Seller may incur or suffer or which may be asserted by
any person or entity, including reasonable attorneys' fees and court costs,
arising out of any action at any time taken or omitted to be taken (a) by the
Buyer under or in connection with this PMSR Flow Agreement and/or any applicable
Exhibit to the Agreement, including, without limitation, any failure by the
Buyer to observe and perform properly each and every covenant of this PMSR Flow
Agreement and/or any applicable Exhibit to the Agreement, or (b) by the Seller
in reliance upon information provided to the Seller by the Buyer. Without
limiting the above, the Buyer shall indemnify the Seller and shall hold the
Seller harmless from and against any and all losses, liabilities, penalties,
damages, expenses or other harm or injury which the Seller may incur or suffer
or which may be asserted by any person or entity, including reasonable
attorneys' fees and court costs, arising out of any Mortgage Loan or the
Servicing Rights relating to such Mortgage Loan which result from:
(a) Any misrepresentation made by the Buyer in this PMSR Flow Agreement or any
initial offering information provided to the Seller,
(b) Any breach by the Buyer of any of the Buyer's representations or warranties
under this PMSR Flow Agreement,
(c) Any act, or failure to act or perform any term, covenant, condition or
obligation of the Buyer under this PMSR Flow Agreement,
11.5. POWER OF ATTORNEY.
The Seller irrevocably constitutes and appoints the Buyer and its duly
authorized officers as the Seller's agent and attorney-in-fact coupled with an
interest, to endorse checks and other instruments of payment with respect to the
Mortgage Loans.
11.6. NOTICES.
All notices and other communications required or permitted to be given under
this Agreement shall be in writing and shall be deemed given if delivered
personally, transmitted by facsimile (and telephonically confirmed), mailed by
registered or certified mail with postage prepaid and return receipt requested,
or sent by commercial overnight courier, courier fees prepaid, to the parties at
the following addresses:
- 14 -
<PAGE> 15
If to Buyer, to:
Debra F. Watkins
Senior Vice President
BancBoston Mortgage Corporation
7301 Baymeadows Way
Jacksonville, FL 32256
With a copy to:
Robert J. Jacobs
General Counsel
BancBoston Mortgage Corporation
7301 Baymeadows Way
Jacksonville, FL 32256
If to Seller to:
Parks Avery
Rhode Island Hospital Trust National Bank
15 Westminster Street
Providence, Rhode Island 02903
Cathy Elder
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
With a copy to:
Ryan S. Stinneford
Senior Counsel
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
or to such other address as the Buyer or the Seller will have specified in
writing to the other.
11.7. EXHIBITS PART OF THIS PMSR FLOW AGREEMENT.
The Exhibits are incorporated by reference into this PMSR Flow Agreement, are
made a part of this PMSR Flow Agreement, and will be binding on the Buyer and
the Seller. The Exhibits to this PMSR Flow Agreement may not be amended or
supplemented by the Buyer or the Seller without the prior written agreement of
the other party.
11.8. ATTORNEYS' FEES AND COSTS.
If it is determined in a judicial proceeding that either party has failed under
any provision of this PMSR Flow Agreement, and if either party will employ
attorneys or incur other expenses for the enforcement, performance, or
observance of the terms of this PMSR Flow Agreement, then said party, to the
extent permitted by law, will be reimbursed by the losing party, for reasonable
attorneys' fees and other out-of-pocket expenses.
11.10. BROKER'S FEE.
Each of the Buyer and the Seller represents and warrants to each other that it :
(a) has made no agreement to pay any agent, finder, or broker or any other
representative, any fee or commission in the nature of a finder's or
originator's fee arising out of or in connection with the subject matter of this
PMSR Flow Agreement, except as they have otherwise disclosed in writing, and (b)
is liable for any and all such fees and commissions.
11.11. ASSIGNMENT AND DELEGATION.
No party may assign this PMSR Flow Agreement or delegate any of its functions
hereunder to any other party without the prior written consent of Buyer or the
respective Seller; provided, however, that either party may assign and/or
delegate, in whole or in part, any of its rights under this PMSR Flow
Agreement to any of its affiliates or subsidiaries without the prior written
consent of the Buyer or the respective Seller.
11.12. AMENDMENT.
No amendment or modification to this PMSR Flow Agreement will be valid unless
executed in writing by the Buyer and the Seller.
11.13. WAIVER.
No waiver of any right or obligation under this PMSR Flow Agreement by any party
on any occasion will be deemed to operate as a waiver on any subsequent
occasion.
11.14. PROVISIONS SEVERABLE.
If any provision of this PMSR Flow Agreement will be held to be void or
unenforceable by any court of competent jurisdiction or any governmental
regulatory agency, such provision will be considered by all parties to be
severed from this PMSR Flow Agreement. All remaining provisions of this PMSR
Flow Agreement will be considered by the parties to remain in full force and
effect.
11.15. GOVERNING LAW.
This PMSR Flow Agreement is entered into in the state of Florida. Its
construction and rights, remedies and obligations arising by, under, through, or
on account of it will be governed by the laws of the State of Florida excluding
its conflict of laws rules and will be deemed performable in the State of
Florida.
- 15 -
<PAGE> 16
11.16. NO AGENCY OR JOINT VENTURE CREATED.
This PMSR Flow Agreement will not be deemed to constitute the Buyer and the
Seller as partners or joint venturers, nor will the Buyer or the Seller be
deemed to constitute the other as its agent.
11.17. SUCCESSORS.
This PMSR Flow Agreement will inure to the benefit of and be binding upon the
parties hereto and their successors and assigns. Nothing in this PMSR Flow
Agreement expressed or implied is intended to confer on any person other that
the parties hereto and their successors and assigns, any rights, obligations,
remedies or liabilities.
11.18. FORCE MAJEURE.
No party shall be liable for delays or errors occurring by reason of
circumstances beyond such party's control, including, without limitation, acts
of civil, military, or banking authorities, national emergencies, labor
difficulties, fire, flood or other catastrophes, acts of God, insurrection, war,
riots, failure of transportation or equipment, or failure of vendors,
communication or power supply.
11.19. SECTION HEADINGS.
Section headings are intended only to assist in the organization of this PMSR
Flow Agreement and do not in any way limit or otherwise define the rights and
liabilities of the parties.
11.20. ENTIRE AGREEMENT.
This PMSR Flow Agreement and the Exhibits to this PMSR Flow Agreement constitute
the entire agreement among the parties and supersede all other prior
communications and understandings, written or oral, among the parties with
respect to the subject matter of this PMSR Flow Agreement. There are no
contemporaneous oral agreements.
11.21. COUNTERPARTS.
This PMSR Flow Agreement may be executed in multiple counterparts each of which
will be deemed an original. Regardless of the number of counterparts, the total
will constitute only one agreement.
11.22. PLURALS AND GENDER.
In construing the words of this PMSR Flow Agreement, plural constructions will
include the singular, and singular constructions will include plural. No
significance will be attached to whether a pronoun is masculine, feminine, or
neuter.
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<PAGE> 17
IN WITNESS WHEREOF, the Buyer and the Seller, as of the day first set forth
above, have caused their seals to be affixed on this instrument to be signed on
their behalf by their duly authorized officers.
BANCBOSTON MORTGAGE CORPORATION
By /s/ Joseph K. Pickett
----------------------------
Joseph K. Pickett
- --------------------------------
(Print Name)
Title: Chairman
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter J. Manning
----------------------------
Peter J. Manning
- --------------------------------
(Print Name)
Title: Creative Director
BANK OF BOSTON CONNECTICUT
By: /s/ William J. Shea
----------------------------
William J. Shea
- --------------------------------
(Print Name)
Title: Vice Chairman
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK
By: /s/ William J. Shea
----------------------------
William J. Shea
- --------------------------------
(Print Name)
Title: Vice Chairman
BANK OF BOSTON-FLORIDA, N.A.
By: /s/ Susan P. Hancy
----------------------------
Susan P. Hancy
- --------------------------------
(Print Name)
Title: Chairman
- 17 -
<PAGE> 18
LIST OF EXHIBITS
EXHIBIT A Purchase Price Percentage Schedule
EXHIBIT B Transfer Instructions
EXHIBIT C List of Flood Service Providers Acceptable to the Buyer
- 18 -
<PAGE> 19
EXHIBIT A
PURCHASE PRICE PERCENTAGE SCHEDULE
<TABLE>
<CAPTION>
I. PURCHASE PRICE PERCENTAGE TABLE FOR PORTFOLIO MORTGAGE LOANS PURCHASED ON A FLOW BASIS.
- ------------------------------------------------------------------------------------------------------------------------
PRODUCT TYPE ANNUAL BASE RATE BASE RATE BASE RATE
SERVICING [ * ]%
TO
FEE RATE [ * ]% [ * ]% BASE RATE
AND UNDER TO BASE [ * ]%
RATE
========================================================================================================================
<S> <C> <C> <C> <C>
A and A- 30-year conforming fixed rate [* ]% [* ]% [* ]% [* ]%
A and A- 15-year conforming fixed rate [* ]% [* ]% [* ]% [* ]%
A and A- conforming conventional ARM [* ]% [* ]% [* ]% [* ]%
FHA 30-year fixed rate [* ]% [* ]% [* ]% [* ]%
FHA 15-year fixed rate [* ]% [* ]% [* ]% [* ]%
FHA ARM [* ]% [* ]% [* ]% [* ]%
CRA low-to-moderate conventional 30-year fixed rate [* ]% [* ]% [* ]% [* ]%
CRA low-to-moderate conventional 15-year fixed rate [* ]% [* ]% [* ]% [* ]%
CRA low-to-moderate conventional ARM [* ]% [* ]% [* ]% [* ]%
A and A- non-conforming conventional 30-year fixed rate [* ]% [* ]% [* ]% [* ]%
A and A- non-conforming conventional 15-year fixed rate [* ]% [* ]% [* ]% [* ]%
A and A- non-conforming conventional ARM [* ]% [* ]% [* ]% [* ]%
A quality conforming 2nd mortgage loans with Escrow
Accounts [* ]% [* ]% [* ]% [* ]%
A quality conforming 2nd mortgage loans w/o Escrow
Accounts [* ]% [* ]% [* ]% [* ]%
A- quality conforming 2nd mortgage loans with Escrow
Accounts [* ]% [* ]% [* ]% [* ]%
A- quality conforming 2nd mortgage loans w/o Escrow
Accounts [* ]% [* ]% [* ]% [* ]%
A quality non-conforming 2nd mortgage loans with escrow [* ]% [* ]% [* ]% [* ]%
A quality non-conforming 2nd mortgage loans w/o Escrow
Accounts [* ]% [* ]% [* ]% [* ]%
A- quality non-conforming 2nd mortgage loans with Escrow
Accounts [* ]% [* ]% [* ]% [* ]%
A- quality non-conforming 2nd mortgage loans w/o Escrow
Accounts [* ]% [* ]% [* ]% [* ]%
Less than A- quality mortgage loans TBD TBD TBD TBD
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* At the 3-year anniversary of the original Servicing Agreement dated 3/1/95,
and every 3 years afterwards, the servicing fee will be adjusted by the change
in the consumer price index over the prior 3 years. Such change will be based
upon the most recently published consumer price index.
Unless otherwise specifically indicated, all Mortgage Loans described above are
first Mortgage Loans.
- ------------------------
* Confidential treatment requested.
- 19 -
<PAGE> 20
EXHIBIT A
CONTINUED
II. ADJUSTMENTS TO THE PURCHASE PRICE.
- - Deduct [ * ] basis points [ * ]% for VA Mortgage Loans.
- - Deduct [ * ] basis points [ * ]% for First-Lien Mortgage Loans w/o Escrow
Accounts for taxes and hazard insurance.
- - Deduct [ * ] basis points [ * ]% for Buydown Mortgage Loans.
- - Deduct [ * ] dollar [ * ] TRETS fee for each Mortgage Loan (post BayBank
merger).
- - Deduct [ * ] basis points [ * ]% for A, A- and CRA 30 and 15-year conforming
fixed rate Mortgage Loans with original principal balances less than $100,000
and greater than or equal to $80,000.
- - Deduct [ * ] basis points [ * ]% for A, A- and CRA 30 and 15-year conforming
fixed rate MortgagE Loans with original principal balances less than $80,000
and greater than or equal to $60,000.
- - Deduct [ * ] basis points [ * ]% for FHA or VA fixed rate Mortgage Loans with
original principal balances less than $100,000 and greater than or equal to
$80,000.
- - Deduct [ * ] basis points [ * ]% for FHA or VA fixed rate Mortgage Loans with
original principal balances less than $80,000 and greater than or equal to
$60,000.
- - Deduct [ * ] basis points [ * ]% for FHA or VA adjustable rate Mortgage Loans
with original principal balances less than $100,000 and greater than or equal
to $80,000.
- - Deduct [ * ] basis points [ * ]% for FHA or VA adjustable rate Mortgage Loans
with original principal balances less than $80,000 and greater than or equal
to $60,000.
- - The servicing released premium to be paid for Mortgage Loans with original
principal balances of $60,000 or less will be negotiated on a case-by-case
basis.
III. PRICING ASSUMPTIONS.
- - Assumes Mortgage Loan balance is $100,000.
Note: The annual servicing fee rates shown above apply to all Servicing Rights
acquired by the Buyer after March 15, 1996. All annual servicing fee rates
remain the same on the Mortgage Loan portfolio existing on March 15, 1996.
- ------------------------
* Confidential treatment requested.
- 20 -
<PAGE> 1
EXHIBIT 10.10
MORTGAGE LOAN SERVICING AGREEMENT
MORTGAGEE NAME: THE FIRST NATIONAL BANK OF BOSTON, 100 FEDERAL STREET, BOSTON,
MASSACHUSETTS 02110
MORTGAGEE CONTACT PERSON: PHONE NO:
FAX NO:
MORTGAGEE NAME: BANK OF BOSTON CONNECTICUT, 31 PRATT STREET, HARTFORD,
CONNECTICUT 06103
MORTGAGEE CONTACT PERSON: PHONE NO:
FAX NO:
MORTGAGEE NAME: RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, ONE HOSPITAL TRUST
PLAZA, PROV, RI 02903
MORTGAGEE CONTACT PERSON: PHONE NO:
FAX NO:
MORTGAGEE NAME: BANK OF BOSTON FLORIDA, N.A., 450 ROYAL PALM WAY, PALM BEACH,
FL 33480
MORTGAGEE CONTACT PERSON: PHONE NO:
FAX NO:
This Servicing Agreement (the "Servicing Agreement") is entered into as of the
date shown above by and between the Servicer and the Mortgagee, both as defined
below, and applies to any of the transactions described below.
RECITALS.
1. The Servicer is in the business of servicing residential mortgage loans,
including, but not limited to, conventional, FHA, VA and certain other Mortgage
Loans, including, but not limited to, first and second lien Mortgage Loans.
2. The Mortgagee is now or will be the owner of certain Notes secured by
Mortgages.
3. The Mortgagee desires the Servicer to service the Mortgage Loans under the
terms set forth in this Servicing Agreement.
4. The Servicer desires to service the Mortgage Loans under the terms set forth
in this Servicing Agreement.
IN CONSIDERATION of the mutual promises made in this Servicing Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Servicer and the Mortgagee agree as follows:
1. DEFINITIONS.
1.1. "AGENCY" means FNMA, FHLMC, FHA, HUD, VA, GNMA.
1.2. "BORROWER" means each obligor under a Mortgage Note.
1.3. "DELINQUENT MORTGAGE LOAN" means a Mortgage Loan with respect to which: (a)
one or more Mortgage Loan payments have not been received by the holder of the
Mortgage Note before the end of the month during which any such Mortgage Loan
payment was due, (b) Mortgage Loans in bankruptcy with one or more Mortgage Loan
payments which have not been received by the holder of the Mortgage Note on or
before the due date in the Mortgage Note, (c) Mortgage Loans in foreclosure, (d)
Mortgage Loan subject to an assignment of deed in lieu of foreclosure, or (e)
Mortgage Loan subject to the HUD assignment program.
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1.4. "ESCROW ACCOUNTS" means Mortgage Loan escrow/impound accounts for taxes,
insurance, assessments, ground rents, buydowns, loss drafts, and any other such
amounts which are maintained by the Servicer as a fiduciary for the Borrowers
and investors, and relate to the Servicing Rights.
1.5. "FHA" means the Federal Housing Administration or any successor to the FHA.
1.6. "FNMA" means the Federal National Mortgage Association or any successor to
FNMA.
1.7. "FHLMC" means the Federal Home Loan Mortgage Corporation or any successor
to FHLMC.
1.8. "GNMA" means the Government National Mortgage Association or any successor
to GNMA.
1.9. GUIDE" means: (a) the Handbook GNMA 5500.1, Government National Mortgage
Association GNMA I Mortgage-Backed Securities Guide, Handbook GNMA 5500.2, in
each case as such Guide may be amended from time to time, (b) the HUD 4155.1
REV-4, Single Family Direct Endorsement Program, HUD 4060.1 REV-1, Mortgagee
Approval Handbook, (c) the FNMA Selling and Servicing Guides, (d) the FHLMC
Mortgagees' and Servicers' Guides, and/or (e) any guide or instructions provided
from time to time by a private investor, in each case as such Agency Guide may
be amended from time to time.
1.10. "HUD" means the United States Department of Housing and Urban Development,
or any successor to HUD.
1.11. "MORTGAGE" means a mortgage, deed of trust, or other such security
instrument which is executed by a Mortgagor pledging the Mortgaged Property as
security for repayment of a Mortgage Note.
1.12. "MORTGAGE DOCUMENTS" means all documents required by applicable law, an
Agency, the Servicer, and/or a private mortgage insurer to service a Mortgage
Loan.
1.13. "MORTGAGEE" means each entity identified at the top of the first page of
this Servicing Agreement as the Mortgagee.
1.14. "MORTGAGE LOAN" means a residential mortgage loan which is: (a) secured by
a Mortgage, (b) owned by the Mortgagee, and (c) currently serviced by the
Servicer or the subject of the Broker Agreement or the PMSR Flow Agreement.
1.15. "MORTGAGE NOTE" means the written promise of a Borrower to pay a sum of
money in United States' dollars at a stated interest rate over a specified term,
and which is secured by a Mortgage.
1.16. "MORTGAGED PROPERTY" means the real property, together with the
one-to-four family dwelling and any other improvements situated on such real
property, which have been pledged by a Mortgagor under a Mortgage as collateral
to secure the obligation under a related Mortgage Note.
1.17. "MORTGAGOR" means each person who executes a Mortgage.
1.18. "OPERATING AGREEMENT" means the Operating Agreement entered into by and
among the Servicer and each Mortgagee and to which this Servicing Agreement is
attached as EXHIBIT C.
1.19. "OREO PROPERTY:" means a Mortgaged Property acquired by the Mortgagee or
its designee through foreclosure or by deed in lieu of foreclosure.
1.20 "SERVICER" means BancBoston Mortgage Corporation, a business corporation
organized under the laws of the state of Florida and with its principal place of
business at 7301 Baymeadows Way, Jacksonville, Florida 32256.
1.21. "SERVICING RIGHTS" means the rights to service the Mortgage Loans and
collect the servicing fees, late fees and certain other ancillary amounts
relating to the Mortgage Loans, including, but not limited to, amounts under an
Escrow Account.
1.22 "SBO LOAN" means a Mortgage Loan which is "serviced by others". The terms
and conditions of the servicing of such Mortgage Loans by third party
subservicers are set forth in EXHIBIT D to this Servicing Agreement.
1.23.. "SERVICING AGREEMENT has the meaning set forth in the recitals above.
1.24.. "TRETS" means TransAmerica Real Estate Tax Service, Inc.
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1.25 "VA" means the Department of Veterans Affairs, or any successor to the VA.
2. STANDARD OF CARE.
2.1. IN GENERAL. The Servicer will perform its duties and obligations under this
Servicing Agreement for all Mortgage Loans in accordance with: (a) applicable
laws, rules, regulations, and orders, and (b) prudent mortgage banking
practices.
2.2. GOVERNMENT MORTGAGE LOANS. Without limiting the scope of the foregoing, the
Servicer will perform its duties and obligations under this Servicing Agreement
for FHA and VA Mortgage Loans in accordance with the Guides, regulations and
practices of the applicable Agency.
2.3. MORTGAGE LOANS OTHER THAN GOVERNMENT MORTGAGE LOANS. Without limiting the
scope of the foregoing, the Servicer will perform its duties and obligations
under this Servicing Agreement for Mortgage Loans other than FHA and VA Mortgage
Loans in accordance with the Guides, regulations and practices of: (a) FNMA, (b)
FHLMC, and (b) the applicable private mortgage insurance, if a Mortgage Loan is
required to have private mortgage insurance. If any provision of a FNMA Guide,
regulation, or practice is inconsistent with a provision in a FHLMC Guide,
regulation, or practice, the FNMA provision will control.
2.4. PRIVATE BANK MORTGAGE LOANS. Without limiting the scope of the foregoing,
the Servicer will provide to Mortgagors who are private banking clients of the
Mortgagee the additional tasks and services requested by the Mortgagee and
described in EXHIBIT A to this Servicing Agreement. The Mortgage Loans which are
provided by the Mortgagee's private banking department to certain borrowers
under the Mortgagee's Community Reinvestment Act efforts will be serviced under
the provisions of EXHIBIT A to this Servicing Agreement. Each Mortgage Loan with
such a Mortgagor who is a private banking client of the Mortgagee will be
subject to the special private banking fees and charges described in EXHIBIT B
to this Servicing Agreement in addition to the standard servicing fees and
charges described in such exhibit.
3. COLLECTING PAYMENTS AND ENFORCING OBLIGATIONS.
The Servicer will use reasonable efforts to collect each Mortgage Loan payment
when such payments become due until all amounts due and owing under or in
connection with each such Mortgage Loan has been paid in full.
4. SERVICING TASKS.
4.1. REMITTING PRINCIPAL AND INTEREST. The Servicer will pay to the Mortgagee
each month all Mortgage Loan principal and interest payments received by the
Servicer from each Mortgagor, less the amount of the servicing fee set forth in
EXHIBIT B to this Servicing Agreement. Such remittance will be made in
accordance with the FNMA actual/actual remittance method. The Servicer will
deliver to the Mortgagee a remittance advice and a full accounting report
containing information relating to the servicing fee on such dates as shall be
requested by the Mortgagee.
4.2. GENERAL LEDGER RECONCILIATIONS. The Servicer will reconcile the principal,
interest, and interest receivable accounts which are interfaced with the
Servicer's Mortgage Servicing Package System for a period equal to the lesser
of: (a) six (6) months from the date of this Servicing Agreement, or (b) the
period ending on the date when the Servicer no longer has direct on-line
computer access to the Mortgagee's general ledger.
4.3. OTHER RELATED TASKS. If requested by Mortgagee the Servicer will perform
certain reporting, investor service, custodial liaison and other credit-related
services described in EXHIBITS B and D to this Servicing Agreement.
5. COMPENSATION.
5.1. GENERAL FEE SCHEDULE. The Mortgagee will pay to the Servicer the fees and
charges set forth in EXHIBITS B and D TO this Servicing Agreement.
5.2. SERVICER MAY RETAIN CERTAIN OTHER CHARGES AND FEES. The Servicer will
charge and retain the full amount of any late charges, returned check charges,
partial release and assumption processing fees, and other administrative fees
and charges allowed by: (a) FNMA and/or FHLMC in their Guides or other rules or
regulations with respect to Mortgage Loans other than FHA and VA Mortgage Loans,
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and (b) the applicable Agency in its Guide or other rules or regulations with
respect to FHA and VA Mortgage Loans.
5.3. MORTGAGEE WILL PAY ALL CUSTODIAL FEES AND EXPENSES. The Mortgagee will pay
any and all costs, expenses and fees relating to the Mortgagee's custodian and
the custodial services provided by such custodian for the Mortgage Loans.
5.4. MORTGAGEE WILL PAY ALL TRETS AND FLOOD CERTIFICATION AND TRACKING FEES. The
Mortgagee will collect from the Mortgagor and pay over to the Servicer any and
all fees relating to or arising out of each: (a) "life of loan" transferable tax
service contract, which contract is either with TRETS or are fully transferable
to TRETS, and (b) transferable flood insurance certification and "life of loan"
tracking service from a flood service provider acceptable to the Servicer.
5.5. MORTGAGEE WILL PAY ALL FEES RELATING TO CERTAIN ADDITIONAL SERVICES. The
Mortgagee will pay to the Servicer any fees relating to any additional service
which the Servicer: (a) is required to perform by applicable law, rule,
regulation or order, and (b) reasonably believes the Servicer is unable to
collect directly from a Mortgagor or Borrower.
6. CUSTODIAL ACCOUNT.
6.1. INSURED DEPOSIT ACCOUNTS. The Servicer will hold all funds relating to the
Mortgage Loans in a custodial bank account or accounts at a depository financial
institution(s) with deposits insured by the Federal Deposit Insurance
Corporation, and will maintain all records necessary to secure and obtain the
maximum Federal Deposit Insurance Corporation insurance for each beneficiary of
the account(s).
6.2. MORTGAGE LOANS WITH AN ESCROW ACCOUNT. The Servicer will pay promptly all
hazard insurance premiums, mortgage insurance premiums, real estate taxes, and
other obligations which have funds in an Escrow Account during the term of this
Servicing Agreement promptly after receiving a bill for any such amount. If an
Escrow Account does not contain funds sufficient to pay such amounts, the
Servicer will advance funds for the payment of such amounts in the manner and to
the extent required by applicable law. The Servicer may elect to terminate any
Escrow Account without the express permission of the Mortgagee, consistent with
the Servicer's past servicing practices with respect to the existing Mortgage
Loans.
6.3. MORTGAGE LOANS WITH NO ESCROW ACCOUNTS. The Servicer will advance funds on
behalf of a Mortgagor who does not maintain an Escrow Account for the payment of
taxes and certain other amounts. The Servicer will use its best efforts to
collect any such funds from each such Mortgagor. If the Servicer is unable to
recover any such funds from a Mortgagor, the Mortgagee will pay such funds to
the Servicer immediately.
6.4. ANNUAL CERTIFICATION. The Servicer will certify once each year that all
general property taxes, special assessments, and hazard insurance premiums and,
if applicable, flood insurance premiums have been paid on the Mortgaged
Properties securing the Mortgaged Loans.
7. DELINQUENT MORTGAGE LOANS.
The Servicer's Delinquent Mortgage Loan collection efforts will be made in
accordance with the standard of care described in SECTION 2 above. The Servicer
will provide Computer Power, Inc.'s standard Mortgage Servicing Package
delinquency reports to the Mortgagee once each month during the term of this
Servicing Agreement.
Except as otherwise set forth in EXHIBIT A, the Servicer will deliver an initial
late payment notice to each Borrower who has a Delinquent Mortgage Loan if the
Servicer does not receive the full amount of a periodic payment by the end of
any grace period following the due date set forth in the Mortgage Note. Such
notice will set forth the amount of the periodic payment, together with any late
or other charges required or allowed under the Mortgage Note. The Servicer will
also use reasonable efforts to contact each such Borrower by telephone in
accordance with the Servicer's standard operating policies in effect from time
to time.
8. INSURANCE.
The Servicer will use reasonable efforts to ensure that there is in force for
each Mortgaged Property a hazard insurance policy which: (a) is acceptable to
the applicable Agency, (b) contains the mortgagee clause: "BancBoston Mortgage
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Corporation, its successors and/or assigns" or such other clause which is
acceptable to the Servicer, (c) insures against loss or damage by fire, all
other hazards set forth in the standard extended coverage form of endorsement,
and any other insurable risks against hazards required by the applicable Agency,
(d) has been issued in an amount equal to the lesser of the outstanding
principal balance of the Mortgage Loan or the full insurable value of the
improvements to the Mortgaged Property, and (e) if required by the Flood
Disaster Protection Act of 1973 and/or the National Flood Insurance Reform Act
of 1994, a flood insurance policy in an amount representing coverage equal to
the lesser of the outstanding principal balance of the Mortgage Loan or the
maximum amount of insurance which is available under the Flood Disaster
Protection Act of 1973 and/or the National Flood Insurance Reform Act of 1994,
as may be amended from time to time. If a Mortgagor fails to maintain such
insurance coverage, the Servicer will obtain such coverage on behalf of such
Mortgagor, and the Servicer will collect the insurance premiums from the
Mortgagor under the terms of the Mortgage. The Servicer will retain, service,
and continually maintain evidence of such insurance coverage, as required by the
Mortgagee. The Mortgagee will reimburse the Servicer for the cost of maintaining
and administering insurance coverage in the event of default by the Mortgagor.
The Servicer is authorized to sign on behalf of the Mortgagee for all loss
drafts relating to such insurance coverage in the manner and to the extent set
forth in the FNMA Servicing Guide, as amended from time to time.
9. INSPECTIONS.
The Servicer will inspect a Mortgaged Property to determine its physical
condition and occupancy status: (a) each month following the Mortgagor's default
until such Mortgaged Property has been foreclosed or the Mortgage Loan has been
reinstated, and (b) in accordance with the applicable Agency's Guide and/or the
Servicer's standard operating procedures with respect to damaged Mortgaged
Properties. The Servicer will use its best efforts to recover from each
Mortgagor all costs and expenses relating to or arising out of such inspections.
If the Servicer is unable to recover such costs and expenses from the Mortgagor,
the Mortgagee will reimburse the Servicer for all such costs and expenses at the
time of any foreclosure sale, presale, or acceptance of a deed in lieu of
foreclosure.
10. SPECIAL NOTICE TO MORTGAGEE.
The Servicer will notify the Mortgagee in writing promptly after the Servicer
discovers that: (a) there is a material default under the terms of a Mortgage or
Mortgage Note, and (b) a Mortgaged Property has been sold or transferred (if
required by the Mortgagee).
11. PREPAYMENT.
The Servicer will not accept any full or partial principal prepayment of a
Mortgage Loan unless: (a) the Mortgage and/or Mortgage Note allows such
prepayment, (b) the Mortgagee authorizes such prepayment in writing, and/or (c)
applicable law, rule, regulation or order requires the Servicer to accept such
prepayment.
12. FORECLOSURE.
12.1. COMPLIANCE WITH APPLICABLE RULES. The Servicer or its designated agent
will begin foreclosure proceedings or otherwise begin to acquire a Mortgaged
Property promptly after a Mortgagor has defaulted on a Mortgage Loan. These
proceedings will be conducted in the manner described in SECTION 2 above. If the
Mortgaged Property is conveyed to the Federal Housing Administration or the
Veterans Administration, the Servicer will facilitate any settlement with
applicable Agency or private mortgage insurance company. The Mortgagee will be
responsible for any deficiency in any claim settled by the Servicer with such an
Agency or private mortgage insurance company.
12.2. MANNER OF CONDUCTING FORECLOSURES. The Servicer or its designated agent
will conduct all such proceedings in the manner described in SECTION 2 above,
and will take title to the Mortgaged Property in the name designated by the
Mortgagee. The Mortgagee under this Servicing Agreement provides the Servicer
with full delegated authority to mitigate all foreclosures, if applicable, on
behalf of the Mortgagee. The Mortgagee will pay to the Servicer the mitigation
fees set forth in EXHIBIT B to this Servicing Agreement. The Servicer will
perform only those foreclosure or related procedures which are normal and
customary for foreclosures in each jurisdiction where the Mortgaged Property is
situated.
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12.3. MANAGING AND PROTECTING THE MORTGAGED PROPERTY. Unless otherwise directed
by the Mortgagee, the Servicer will manage and protect the Mortgaged Property
from the date the Servicer commences foreclosure until the date when such
proceedings have been terminated and title to the property has been conveyed to
the appropriate person or entity. The manner of such services will be consistent
with the management of real estate in the jurisdiction in which the Mortgaged
Property is situated including, but not limited to, the: (a) placement and
payment of certain insurance relating to the Mortgaged Property, (b) management
and supervision of repairs to and maintenance of the Mortgaged Property, and (c)
preparation of such reports as may be reasonably required by the Mortgagee. The
Servicer will obtain any authorization from any Agency or such other authority
required to manage and protect the Mortgage Property. The Servicer will
administer and sell OREO owned by the Mortgagee following the procedures
outlined in EXHIBIT F.
12.4. DEFICIENCY BALANCE AFTER DISPOSING OF MORTGAGED PROPERTY. The Servicer
will pursue any deficiency owed by any Mortgagor to the Mortgagee after the
Servicer has disposed of the Mortgaged Property if the Mortgagee: (a) requests
such services in writing, and (b) pays the Servicer the applicable fees
described in EXHIBIT B to this Servicing Agreement. Such deficiency services
will include, but not be limited to, initiating legal proceedings against a
Mortgagor. The Servicer's collection of any such deficiency will: (a) be
reasonable and customary for the collection of such deficiencies relating to
real estate in the jurisdiction in which the Mortgaged Property is situated, and
(b) comply with applicable laws, rules, regulations, and orders.
12.5. MORTGAGEE WILL APPOINT CONTACT PERSON. The Mortgagee will designate an
employee of the Mortgagee who will be responsible for: (a) approving
extraordinary foreclosure matters and loss mitigation-related expenses,
including, but not limited to, litigation expenses, (b) Mortgage Loan
charge-offs in an amount greater than the Servicer's delegated signing
authority, (c) Mortgaged Property donations, and (d) other credit-related
matters requiring the prior approval of the Mortgagee. Such designated employee
shall respond promptly to all of the Servicer's inquiries and requests.
12.6. MORTGAGEE WILL REIMBURSE SERVICER FOR COSTS. The Servicer will bill the
Mortgagee for any and all expenses relating to or arising out of a foreclosure,
deed in lieu of foreclosure, deficiency proceeding, and other disposition of the
Mortgaged Property and actions relating thereto, including, but not limited to,
reasonable attorneys' fees, court costs, appraisals, filing costs, process fees,
and all other actual out-of-pocket expenses paid to third parties. The Mortgagee
will reimburse the Servicer for such costs and expenses no later than thirty
(30) calendar days after the Mortgagee receives the Servicer's consolidated
invoice for such costs and expenses. The Servicer may collect any such cost or
expense or any fee set forth in EXHIBIT B from the proceeds of any disposition
of any Mortgaged Property.
12.7. MORTGAGEE WILL GIVE SIGNING AUTHORITY TO SERVICER. From time to time, the
Mortgagee will delegate in writing to the Servicer certain authority to charge
off certain foreclosure-related expenses.
13. FIDELITY COVERAGE.
The Servicer will maintain a fidelity bond with a responsible surety company on
all of the Servicer's employees who may have access to the Mortgagee's funds,
monies, and documents. The bond will protect the Servicer against losses,
including theft, embezzlement, fraud, and misplacement. The Servicer will
maintain Fire and Extended Coverage Errors and Omissions Insurance, which will
reimburse the Servicer for any losses relating to the Servicer's failure to
require, procure, maintain or provide Fire and Extended Coverage Insurance on
the Mortgaged Properties.
14. MUTUAL REPRESENTATIONS AND WARRANTIES.
The Mortgagee represents and warrants to the Servicer with respect to the
following statements relating to the Mortgagee, and the Servicer represents and
warrants to the Mortgagee with respect to the following statements relating to
the Servicer, that as of the date of this Servicing Agreement:
14.1. PARTY IS DULY ORGANIZED.
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The First National Bank of Boston, Rhode Island Hospital Trust National Bank and
Bank of Boston-Florida, N.A. are each duly organized and validly existing
national banking associations, Bank of Boston Connecticut is a duly organized
and validly existing state-chartered savings bank and the Buyer is a duly
organized and validly existing corporation. Each is in good standing under the
laws of its jurisdiction of organization, and has the requisite power and
authority to enter into this Servicing Agreement and any other agreements to
which it is a party and that are contemplated by this Servicing Agreement.
14.2. AGREEMENT IS DULY AUTHORIZED.
It has all requisite power, authority and capacity to enter into this Servicing
Agreement and to perform the obligations required of it under this Servicing
Agreement. The execution and delivery of this Servicing Agreement by it and the
consummation of the transactions contemplated by this Servicing Agreement by it,
have been duly and validly authorized by all necessary action. This Servicing
Agreement constitutes its valid and legally binding agreement, enforceable in
accordance with its terms, except as it may be limited by bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights and by general equity principles, and no offset, counterclaim or defense
exists to the full performance of this Servicing Agreement by such party.
14.3. AGREEMENT DOES NOT VIOLATE ANY OTHER OBLIGATION.
Insofar as its capacity to carry out any obligation under this Servicing
Agreement is concerned, it is not in violation of any provision of any charter,
certificate of incorporation, by-law, mortgage, indenture, indebtedness,
agreement, instrument, judgment, decree, order, statute, rule or regulation, and
there is no such provision that adversely affects its capacity to carry out such
obligations. Its execution of, and performance pursuant to, this Servicing
Agreement will not result in such violation.
14.4. PARTY IS DULY LICENSED.
It holds the required licenses is in compliance with all state and federal laws
governing the transfer and Servicing of Mortgage Loans transferred under this
Servicing Agreement.
14.5. WARRANTIES SURVIVE.
It agrees that all warranties and obligations under this Servicing Agreement are
perpetual and will survive the termination of this Servicing Agreement.
15. INDEMNIFICATION.
15.1. MORTGAGEE WILL INDEMNIFY SERVICER. The Mortgagee shall indemnify the
Servicer and shall hold the Servicer harmless from and against any and all
losses, liabilities, penalties, damages, expenses or other harm or injury which
the Servicer may incur or suffer or which may be asserted by any person or
entity, including reasonable attorneys' fees and court costs, arising out of any
action at any time taken or omitted to be taken (a) by the Mortgagee under or in
connection with this Servicing Agreement and/or any applicable Exhibit to the
Agreement, including, without limitation, any failure by the Mortgagee to
observe and perform properly each and every covenant of this Servicing Agreement
and/or any applicable Exhibit to the Agreement, or (b) by the Servicer in
reliance upon information provided to the Servicer by the Mortgagee. Without
limiting the above, the Mortgagee shall indemnify the Servicer and shall hold
the Servicer harmless from and against any and all losses, liabilities,
penalties, damages, expenses or other harm or injury which the Servicer may
incur or suffer or which may be asserted by any person or entity, including
reasonable attorneys' fees and court costs, arising out of any Mortgage Loan or
the Servicing Rights relating to such Mortgage Loan which result from
(a) The failure of any prior servicer of a Mortgage Loan to perform servicing
obligations in accordance with the standards set forth in this Servicing
Agreement for any Mortgage Loan transferred from a prior servicer to the
Servicer.
(b) Any claim asserted by any person or entity which was not the result of any
negligence, willful misconduct, violation of law, or breach of this Servicing
Agreement by the Servicer.
(c) Any act or failure to act in connection with the origination, processing, or
closing of a Mortgage Loan, including but not limited to, the failure to provide
and/or complete the Mortgage Documents, which results in a tax penalty, tax
sale, lost Mortgage Documents and other such adverse consequences.
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15.2. SERVICER WILL INDEMNIFY MORTGAGEE. The Servicer shall indemnify the
Mortgagee and shall hold the Mortgagee harmless from and against any and all
losses, liabilities, penalties, damages, expenses or other harm or injury which
the Mortgagee may incur or suffer or which may be asserted by any person or
entity, including reasonable attorneys' fees and court costs, arising out of any
action at any time taken or omitted to be taken (a) by the Servicer under or in
connection with this Servicing Agreement and/or any applicable Exhibit to the
Agreement, including, without limitation, any failure by the Servicer to observe
and perform properly each and every covenant of this Servicing Agreement and/or
any applicable Exhibit to the Agreement, or (b) by the Mortgagee in reliance
upon information provided to the Mortgagee by the Servicer.
16. TERM OF THIS SERVICING AGREEMENT.
This Servicing Agreement will remain in full force and effect until terminated
by either party under the terms of SECTION 17 below.
17. TERMINATION.
This Agreement may be terminated for any reason set forth in SECTION 6.7 of the
Operating Agreement.
SECTIONS 17.1 THROUGH 17.3 INTENTIONALLY LEFT BLANK
17.4. MORTGAGEE'S SALE OF MORTGAGE LOAN ASSETS. The Mortgagee may sell its
interest in any or all of the Mortgage Loans, other than the Servicing Rights.
The Servicer consents to the sale of all or any part of such Mortgage Loan
(other than the related Servicing Rights) as long as:
(a) the sale of the Mortgage Loans remains subject to the terms of this
Servicing Agreement and the Servicer's rights under this Servicing Agreement,
including, but not limited to, the Servicer's continuing right to service the
Mortgage Loans and to receive the servicing fees set forth in this Servicing
Agreement, and
(b) the method of servicing the Mortgage Loans for such purchaser is
substantially the same as the servicing under this Servicing Agreement, and
(c) the Servicer may terminate its servicing responsibilities for any such
Mortgage Loans designated by the Servicer upon thirty (30) days' prior written
notice to the Mortgagee. Nothing in this Servicing Agreement will be considered
by either party to require the Servicer to terminate any such servicing
responsibilities for any such Mortgage Loans.
Notwithstanding the above, the Mortgagee may sell Mortgage Loans with Mortgagors
who are private banking clients of the Mortgagee to an investor with which the
Servicer has an existing servicing agreement. The Servicer will service such
Mortgage Loans under the terms of such existing servicing agreements with such
investors.
The Mortgagee will reimburse the Servicer for any costs or expenses incurred by
the Servicer relating to or arising out of any such sale of Mortgage Loans,
including, but not limited to, the costs of any additional reports created by
the Servicer for the Mortgagee in connection with any such sale.
17.5. SERVICER'S SALE OF SERVICING RIGHTS. Except as provided in SECTION 5.12 of
the Operating Agreement during the term of such Operating Agreement, the
Servicer may not sell or otherwise transfer the Servicing Rights (other than as
a result of the Servicer's pledge of the Servicing Rights as collateral for
certain extensions of credit to the Servicer) to any other person or entity
without the prior written consent of the Mortgagee. The Mortgagee understands
and acknowledges that the Servicer has pledged all or part of the Servicing
Rights to a third party creditor to secure certain amounts owing by the Servicer
under a credit agreement entered into by and between the Servicer and such
creditor.
17.6. SERVICER'S RESPONSIBILITIES UPON TERMINATION. The Servicer will perform
the following tasks for any Mortgage loans affected by any termination of part
or all of this Servicing Agreement:
(a) Make a full accounting of such Mortgage Loans to the Mortgagee.
(b) Pay all amounts due and owing to the Mortgagee and/or other persons or
entities.
(c) Deliver to the Mortgagee: (i) all Mortgage Documents held by the Servicer
which are the
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<PAGE> 9
property of the Mortgagee, (ii) a written summary of all taxes and fire
insurance premiums which have been paid by the Servicer on behalf of Mortgagors,
and (iii) such other information reasonably necessary for a subsequent servicer
to service the Mortgage Loans.
18. POWER OF ATTORNEY.
The Mortgagee irrevocably constitutes and appoints the Servicer and its duly
authorized officers as the Mortgagee's agent and attorney-in-fact coupled with
an interest, to endorse checks and other instruments of payment with respect to
the Mortgage Loans.
19. NOTICES.
All notices and other communications required or permitted to be given under
this Agreement shall be in writing and shall be deemed given if delivered
personally, transmitted by facsimile (and telephonically confirmed), mailed by
registered or certified mail with postage prepaid and return receipt requested,
or sent by commercial overnight courier, courier fees prepaid, to the parties at
the following addresses:
If to Servicer, to:
William Glasgow, Jr.
Executive Vice President
BancBoston Mortgage Corporation
7301 Baymeadows Way
Jacksonville, FL 32256
With a copy to:
Robert J. Jacobs
General Counsel
BancBoston Mortgage Corporation
7301 Baymeadows Way
Jacksonville, FL 32256
If to Mortgagee to:
Parks Avery
Rhode Island Hospital Trust National Bank
15 Westminster Street
Providence, Rhode Island 02903
Cathy Elder
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
With a copy to:
Ryan S. Stinneford
Senior Counsel
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
or to such other address as the Servicer or the Mortgagee will have specified in
writing to the other.
20. EXHIBITS PART OF THIS SERVICING AGREEMENT.
The Exhibits are incorporated by reference into this Servicing Agreement, are
made a part of this Servicing Agreement, and will be binding on the Servicer and
the Mortgagee. The Exhibits to this Servicing Agreement may not be amended or
supplemented by the Servicer or the Mortgagee without the prior written
agreement of the other party.
21. ATTORNEYS' FEES AND COSTS.
If it is determined in a judicial proceeding that either party has failed under
any provision of this Servicing Agreement, and if either party will employ
attorneys or incur other expenses for the enforcement, performance, or
observance of the terms of this Servicing Agreement, then said party, to the
extent permitted by law, will be reimbursed by the losing party, for reasonable
attorneys' fees and other out-of-pocket expenses.
22. ASSIGNMENT AND DELEGATION.
No party may assign this Servicing Agreement, in whole or part, to any other
party without the prior written consent of the other party; except that (i)
either party may assign, in whole or in part, any of its rights under this
Servicing Agreement to any of its affiliates or subsidiaries, (ii) Servicer may
assign, in whole or in part, any of its rights under this Servicing Agreement to
secure payment of money borrowed and such assignee shall have the rights and
remedies of a secured party, (iii) Servicer may sell, transfer or assign, in
whole or in part, any of its rights, pursuant to a Sale of Servicing Rights, in
accordance with the provisions set forth in SECTION 17.5 of this Servicing
Agreement, and (iv) any Mortgagee may sell, transfer or assign, all or a portion
of its ownership interest in the
- 9 -
<PAGE> 10
Mortgage Loans which are serviced under this Servicing Agreement in accordance
with the provisions set forth in SECTION 17.4 of this Servicing Agreement.
The Mortgagee understands and acknowledges that the Servicer has delegated:
(a) foreclosure, bankruptcy, claims and conveyance, and other default-related
services to the Law Offices of Gerald Shapiro,
(b) tax bill procurement and tax payment services to TransAmerica Real Estate
Tax Service, Inc., and
(c) hazard insurance tracking, forced place, and other related insurance
services to American Sterling Corporation.
The Servicer may delegate additional servicing responsibilities and duties under
this Servicing Agreement from time to time without the prior consent of the
Mortgagee.
The Servicer may not delegate any additional material customer service
responsibilities or duties under this Servicing Agreement without the written
consent of the Mortgagee.
Neither party may assign this Servicing Agreement to any other party without the
prior written consent of the other party; provided, however, that either party
may assign and/or delegate, in whole or in part, any of its rights under this
Servicing Agreement to any of its affiliates or subsidiaries without the prior
written consent of the other party.
23. AMENDMENT.
No amendment or modification to this Servicing Agreement will be valid unless
executed in writing by the Servicer and the Mortgagee.
24. WAIVER.
No waiver of any right or obligation under this Servicing Agreement by any party
on any occasion will be deemed to operate as a waiver on any subsequent
occasion.
25. PROVISIONS SEVERABLE.
If any provision of this Servicing Agreement will be held to be void or
unenforceable by any court of competent jurisdiction or any governmental
regulatory agency, such provision will be considered by all parties to be
severed from this Servicing Agreement. All remaining provisions of this
Servicing Agreement will be considered by the parties to remain in full force
and effect.
26. GOVERNING LAW.
This Servicing Agreement is entered into in the state of Florida. Its
construction and rights, remedies and obligations arising by, under, through, or
on account of it will be governed by the laws of the State of Florida excluding
its conflict of laws rules and will be deemed performable in the State of
Florida.
27. FORCE MAJEURE.
No party shall be liable for delays or errors occurring by reason of
circumstances beyond such party's control, including, without limitation, acts
of civil, military, or banking authorities, national emergencies, labor
difficulties, fire, flood or other catastrophes, acts of God, insurrection, war,
riots, failure of transportation or equipment, or failure of vendors,
communication or power supply.
28. FURTHER ASSURANCES.
Each party to this Servicing Agreement will, from time to time, execute and
promptly deliver to the other party to this Servicing Agreement such documents,
assignments, endorsements, applications or other instruments, and provide such
other party with such information, and take all such other actions, consistent
with the terms of this Servicing Agreement, as the other party may reasonably
request in order to effectuate the provisions and purposes of this Servicing
Agreement and the transactions contemplated by this Servicing Agreement.
29. NO AGENCY OR JOINT VENTURE CREATED.
This Servicing Agreement will not be deemed to constitute the Servicer and the
Mortgagee as partners or joint venturers, nor will the Servicer or the Mortgagee
be deemed to constitute the other as its agent.
30. SUCCESSORS.
This Servicing Agreement will inure to the benefit of and be binding upon the
parties hereto and their successors and assigns. Nothing in this Servicing
Agreement expressed or implied is intended to confer on any person other than
the
- 10 -
<PAGE> 11
parties hereto and their successors and assigns, any rights, obligations,
remedies or liabilities.
31. SECTION HEADINGS.
Section headings are intended only to assist in the organization of this
Servicing Agreement and do not in any way limit or otherwise define the rights
and liabilities of the parties.
32. ENTIRE AGREEMENT.
This Servicing Agreement and the Exhibits to this Servicing Agreement constitute
the entire agreement among the parties and supersede all other prior
communications and understandings, written or oral, among the parties with
respect to the subject matter of this Servicing Agreement. There are no
contemporaneous oral agreements.
33. COUNTERPARTS.
This Servicing Agreement may be executed in multiple counterparts each of which
will be deemed an original. Regardless of the number of counterparts, the total
will constitute only one agreement.
34. PLURALS AND GENDER.
In construing the words of this Servicing Agreement, plural constructions will
include the singular, and singular constructions will include plural. No
significance will be attached to whether a pronoun is masculine, feminine, or
neuter.
- 11 -
<PAGE> 12
IN WITNESS WHEREOF, the Servicer and the Mortgagee, as of the day first set
forth above, have caused their seals to be affixed on this instrument to be
signed on their behalf by their duly authorized officers.
BANCBOSTON MORTGAGE CORPORATION
By: /s/ Joseph K. Pickett
-----------------------------
Joseph K. Pickett
- ---------------------------------
(Print Name)
Title: Chairman
--------------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter J. Manning
-----------------------------
Peter J. Manning
- ---------------------------------
(Print Name)
Title: Executive Director
--------------------------
BANK OF BOSTON CONNECTICUT
By: /s/ William J. Shea
-----------------------------
William J. Shea
- ---------------------------------
(Print Name)
Title: Vice Chairman
--------------------------
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK
By: /s/ William J. Shea
-----------------------------
William J. Shea
- ---------------------------------
(Print Name)
Title: Vice Chairman
--------------------------
BANK OF BOSTON-FLORIDA, N.A.
By: /s/ Susan P. Hancy
-----------------------------
Susan P. Hancy
- ---------------------------------
(Print Name)
Title: Chairman
--------------------------
- 12 -
<PAGE> 13
EXHIBIT B
BASE SERVICING FEES - PORTFOLIO LOANS (INCLUDING THE PRIVATE BANK)
<TABLE>
<CAPTION>
AMOUNT / % BILLING
DESCRIPTION OF FEE OF FEE FREQUENCY NOTES
- ------------------ ------ --------- -----
<S> <C> <C>
All Base Servicing Fee Rates for All [ * ] Monthly
Mortgage Loans Which Were Serviced by
the Servicer Prior to the Date of this
Agreement
Servicing Fee for Each A and A- [ * ]% Per Annum Monthly
Conventional Fixed Rate 1st Mortgage
Loan
Servicing Fee for Each A and A- Fixed [ * ]% Per Annum Monthly
Rate CRA/1st Mortgage Loan (including
FHA / VA Loans)
Servicing Fee for Each A and A- Paper [ * ]% Per Annum Monthly
Conventional ARM First Mortgage Loan
Servicing Fee for Conforming A Quality $[ * ] Per Month (2) Monthly
Non-Escrowed 2nd Mortgage Loan
Servicing Fee for Conforming A Quality $[ * ] Per Month (2) Monthly
Escrowed 2nd Mortgage Loan
Servicing Fee for Non-Conforming A- $[ * ] Per Month (2) Monthly
Quality 2nd Mortgage Loan
Servicing Fee for Non-Conforming Less Subject to Negotiation (not to exceed To Be Determined
Than A- Quality Mortgage Loans and Other [ * ]% per annum)
Non-Conforming Mortgage Loans
</TABLE>
(2) At the three year anniversary of the original Servicing Agreement dated
3/1/95 and every three years thereafter, the servicing fee will be adjusted by
the change in the Consumer Price Index over the prior three years. The change
will be based upon the most recently published CPI.
INCREMENTAL SERVICES FEE SCHEDULE - PORTFOLIO LOANS (INCLUDING THE PRIVATE BANK)
<TABLE>
<CAPTION>
AMOUNT / % BILLING
DESCRIPTION OF FEE OF FEE FREQUENCY NOTES
<S> <C> <C>
REO Servicing: Fee for Managing, [ * ]% of the Sales Price of the Mortgaged Upon the Sale
Protecting, Renting and Disposing of Property Date of the
Mortgaged Property Which Has Been Mortgaged Property
Foreclosed, Abandoned or Received By
Deed in Lieu of Foreclosure or Otherwise
Placed Into the Possession of the
Servicer.
Fee for Initiating and Conducting [ * ]% of the Amount of any Deficiency Upon Collection
Proceedings to Obtain a Deficiency Balances Collected From the Mortgagor.
Judgment Against Mortgagor in Default.
</TABLE>
- ------------------------
* Confidential treatment requested.
Page B-1
<PAGE> 14
EXHIBIT - B
INCREMENTAL SERVICES FEE SCHEDULE - PORTFOLIO LOANS (INCLUDING THE PRIVATE BANK)
<TABLE>
<CAPTION>
BILLING BKB BILLING
DEPARTMENT DESCRIPTION OF SERVICE UNIT COST FREQUENCY CONTACT & RC NO. NOTES
- ---------- ---------------------- --------- --------- ---------------- -----
<S> <C> <C> <C> <C> <C>
Document Services Paper retrieval requests - per Document $[*]/Request (1) Monthly
Document Services Film retrieval requests $[*]/Request (1) Monthly
Document Services Whole file copy $[*]/loan file (1) Monthly
Default Management* Presale $[*]/loan Monthly Will change as FNMA
standard fee changes
A financial analysis is made to
determine if the mortgagor has
experienced a financial hardship beyond
their control. An appraisal is made to
determine the value of the property. If
the property value is less than the
amount of the debt, a presale may be
appropriate. A BBMC representative will
work with the mortgagor's Realtor to
obtain the best possible sales price and
will request investor approval of the
sale. The entire process is closely
monitored through receipt of the payoff
funds. If the mortgagor is in the
presale program for a minimum of 3
months and a reasonable purchase offer
has not been obtained, a deed in lieu
may be recommended as an alternative to
foreclosure.
Default Management* Deed In Lieu $[*]/loan Monthly Will change as FNMA
standard fee changes
A financial analysis is made to
determine if the mortgagor has
experienced a financial hardship beyond
their control. If foreclosure is deemed
inevitable, and there is no equity in
the property, it may be in the best
interest of BBMC and the investor to
accept a Deed in Lieu, rather than incur
the additional cost of pursuing a
foreclosure. A BBMC representative will
request our foreclosure attorney to
prepare a deed for the mortgagor's
signature and an estoppel letter. After
the deed is executed and recorded, the
loan is referred to the OREO for
disposition of the property.
Default Management* Modification $[*]/loan Monthly Will change as FNMA
standard fee changes
A financial analysis is made to
determine if the mortgagor has
experienced a financial hardship beyond
their control. Next, a title update is
obtained to determine if there are other
liens. A BBMC representative will
thoroughly review the terms of the loan
to decide if a change in the interest
rate, maturity date, principal and
interest payment or capitalization of
arrearages will be most beneficial to
the mortgagor and the investor. If
modification is not a viable solution,
the mortgagor may be referred to the
presale program.
Default Management* CRA (O.N.E.) Support Hourly (1) Monthly Currently $[ * ]/
month - plus travel
Investor Services* Master Servicing - SBO Agreement [ ] bps/loan Monthly Refer to Exhibit D
- plus $[*] / hr
Investor Services* G/L Reconciliations $[*]/hour (1) Monthly Currently 110 hrs/mo.
Custodial Liaison* Bond loan follow up $[*]/loan (1) Monthly Does not include cost
of Post Closing
function
Custodial Liaison* Pledge loans $[*] / new Quarterly Additional Doc pull
asset loan (1) fees apply
Special Loans Special "Prime"/ARM loans $[*] / loan (1) Annual BKB to provide
permission to modify
</TABLE>
* These services and fees will not apply to private bank loans
(1) At the three year anniversary of this agreement and every three years
thereafter, the unit costs will be adjusted by the change in the Consumer Price
Index over the prior three years. the change will be based upon the most
recently published CPI.
- ------------------------
* Confidential treatment requested.
PAGE B-2
<PAGE> 15
EXHIBIT - B
INCREMENTAL SERVICES FEE SCHEDULE - PORTFOLIO LOANS (INCLUDING THE PRIVATE BANK)
<TABLE>
<CAPTION>
BILLING BKB BILLING
DEPARTMENT DESCRIPTION OF SERVICE UNIT COST FREQUENCY CONTACT & RC NO. NOTES
- ---------- ---------------------- --------- --------- ---------------- -----
REPORTING: - SEE EXHIBIT G - SOME REPORTS LISTED IN EXHIBIT G MARKED WITH AN "S" ARE CONSIDERED STANDARD REPORTS
AND NO ADDITIONAL FEE APPLIES. CUSTOM REPORTS ARE BILLED AT AN HOURLY RATE.
<S> <C> <C> <C> <C> <C>
Default Management Loan level delinquency reporting $[*]/hour (1) Monthly 26 hours/month for
current rpts
Financial/Credit Financial/Credit Reporting - $[*]/hour (1) Monthly 30 hours/month for
Reporting custom & Ad hoc current rpts
ACQUISITIONS, SALES
AND O/ SPECIAL
PROJECTS* (3) Senior Manager $[*]/hour (1) Monthly Plus out of pocket
expenses
Middle Manager $[*]/hour (1) Monthly Plus out of pocket
expenses
Support Exempt Personnel $[*]/hour (1) Monthly Plus out of pocket
expenses
Support Non-Exempt Personnel $[*]/hour (1) Monthly Plus out of pocket
expenses
External conversion expense At cost Alltel currently
charges $[*]
ARM Note Review $[*] / loan (1) Per bulk acq.
All key data pertaining to the current status of the ARM loan as well as the original loan
information is placed on a worksheet. The key loan documents are obtained and the
information in the note is compared to the data from the worksheet to verify that the loan
setup is accurate.
Audit historical adjustments $[*] / loan (1) Per bulk acq. Financial losses
if errors covered by FNBB
The index used to determine the rate changes for every ARM loan is reviewed to determine
if the loan has been serviced in accordance with the terms of the note or any subsequent
modifications. The mortgagor will be provided with a letter of the findings of the audit,
and is advised of any effects the audit will have on their payment amount, loan balance,
etc.
Incomplete loan documentation $[*] / loan (1) Quarterly Covers title
search /
Doc re-creation
When key loan documents are missing from the loan file, an impasse is created for various
servicing areas; Customer Service is unable to resolve mortgagor disputes concerning loan
amortization, origination or maturity dates, verify specific servicing requirements
specified in the individual documents, etc.; Special Loans is unable to complete the audit
of the ARM loan accounts because vital information cannot be verified; Paid In Full is
unable to discharge liens when recording information is unavailable or when documents are
missing that create a clear chain of title. A title search or other necessary documentation
will be ordered to recreate a loan file.
Document Services Rush request for documents-same $[*] next day / Monthly
day/next day $[*] same day (1)
Escrow Escrow Waiver Fee [*]% of principal Monthly Collected from cust. Based on customer
balance and Mortgagee
requests
Loan Modifications P&I adjustment based on principal $[*]/adjustment(1) Collected from cust.
curtailment
Loan Modifications* Partial Release Based on FNMA Collected from cust.
guidelines
</TABLE>
* These services and fees will not apply to Private Bank Loans
This is not an exhaustive list of fees and services provided. Refer to the
servicing agreement, master agreement and standard industry fees supported by
FNMA and/or HUD.
(1) At the three year anniversary of this Agreement and every three years
thereafter, the unit costs will be adjusted by the change in the Consumer Price
Index over the prior three years. The change will be based upon the most
recently published CPI.
(3) Servicer will be reimbursed its direct expenses on due diligence projects
supporting Mortgagee Bank Acquisitions if the servicing rights are sold to a
third party. Otherwise the Servicer will pay its own expenses when the Servicer
acquires the servicing rights.
- ------------------------
* Confidential treatment requested.
PAGE B-3
<PAGE> 16
EXHIBIT - B
INCREMENTAL SERVICES FEE SCHEDULE - PRIVATE BANK PORTFOLIO LOANS
(PRIORITY SERVICE)
<TABLE>
<CAPTION>
BILLING BKB CONTACT
DEPARTMENT DESCRIPTION OF SERVICE UNIT COST FREQUENCY & RC NO. NOTES
- ---------- ---------------------- --------- --------- -------- -----
<S> <C> <C> <C> <C> <C>
Customer Service / Esc. Direct 800# access to $[*]/loan/year + Quarterly Ellen Rosenblatt See Loan Servicing Policies and
dedicated CSR's normal Svc Fee (1) Procedures Addendum for the
Private Bank
The Private Bank and
their mortgagors
will be provided
with a dedicated 800
number staffed by
representatives
trained to handle
the special needs of
Private Bank
customers. This
number provides
direct access,
bypassing the voice
response unit that
answers all incoming
calls on the main
800 line. Target
response time for
research items is 48
hours.
Exception processing Included in $[*] /
of tax & hazard ln charge
If a renewal policy
is not received by
the expiration date
of the policy, a
representative will
contact the
insurance
agent/carrier to
obtain coverage
information. If the
representative is
unable to obtain the
needed information,
the Operations
Manager will be
contacted to obtain
permission to send
notification to the
mortgagor. A BBMC
representative will
request permission
from the Operations
Manager, before
contacting a
mortgagor regarding
a tax delinquency.
An open items report
of open hazard items
will be sent
monthly.
Exception processing Included in $[*] /
of special lns ln charge
A monthly loan level
detail report is
provided to the
Senior Mortgage
Lender for all
maturing balloon
notes beginning 6
months prior to the
maturity date.
Approval from the
Private Bank is
obtained prior to
contacting the
mortgagor regarding
loan maturity,
accepting payments
past maturity, or
extending the
maturity date. A
representative will
work with the
Private Bank to
modify or refinance
the loan. In
addition, special
monthly or quarterly
statements are
prepared for those
loans that require
such service.
Exception collection Included in $[*] /
process ln charge
A dedicated
representative
personally works
with the Private
Bank to resolve
delinquent accounts,
or obtains
permission to
contact the
mortgagor directly.
All calls to
mortgagors must be
made manually vs.
using an
auto-dialer. Demand
letters are manually
sent when the
delinquency is >
than 90 days. Demand
letters to the
remainder of the
portfolio are sent
at day 50 via an
Easytrieve program.
Financial / Credit Rptg Financial / Credit $[*] / hour (1) Annual Aprox. 5 hours / month currently
- see Exhibit G Reporting
</TABLE>
All other fees described in Exhibit 'B' apply to the Private Bank Portfolio
Loans as applicable - see * on pages B-1 to B-3 for exceptions
(1) At the three year anniversary of this agreement and every three years
thereafter, the unit costs will be adjusted by the change in the Consumer Price
Index over the prior three years. The change will be based upon the most
recently published CPI.
- ------------------------
* Confidential treatment requested.
PAGE B-4
<PAGE> 17
EXHIBIT C
SERVICE LEVELS
I. CUSTOMER SERVICE TIME FRAMES.
<TABLE>
<CAPTION>
SERVICE TRANSITION GOAL
INDICATORS (12-15 MONTHS) POST-TRANSITION GOALS*
---------- --------------- ----------------------
<S> <C> <C>
Average Speed of Answer TBD 30-60 seconds**
Abandonment Rate TBD 3% - 5%
Blockage Rate TBD 3% - 5%
Call Per Mortgage Loan Per Year TBD 2
VRU Usage TBD 40%
</TABLE>
*Post-transition goals will be assessed from time to time, based upon analysis
of Mortgagor expectations and return on investment.
**Range of ASA used to adjust for seasonality of activities.
All Customer Service Indicators will be measured on a monthly basis.
II. Investor Accounting Time Frames.
<TABLE>
<CAPTION>
FUNCTION TIME FRAME
-------- ----------
<S> <C>
System Balancing Daily
Bank Reconciliation 30 days from receipt of bank statement
Resolve items within the bank reconciliation 90 days from date of bank deposit account reconciliation
Reconcile investor shortages/surplus 21 days from receipt of investor reports
Resolve items within investor shortage/surplus 120 days after shortage/surplus reconciliation
</TABLE>
III. Other Time Frames.
<TABLE>
<CAPTION>
FUNCTION TIME FRAME
-------- ----------
<S> <C>
Mail payment coupons and welcome letters 5 business days after loan set-up
Refund Escrow Account balances after pay-off 16 days after pay-off Simple
Mortgage Loan assumptions 8 business days after receipt of all required documents
Qualifying assumptions Best efforts to complete within 45 days
Maturing balloon Mortgage Loan notice to Mortgagor First notice 180 days before maturity
Second notice 120 days before maturity
Third notice 30 days before maturity
Deliver Mortgage Loan documents to Mortgagee 3 business days
</TABLE>
<PAGE> 18
EXHIBIT E
ADDITIONAL SERVICING PRACTICES AND PROCEDURES
1.1. DOCUMENT REQUESTS. The Servicer will accept telefaxed orders for individual
Mortgage Loan documents and files or for groups of these items. The Servicer
will deliver Mortgage Loan files or Mortgage Loan documents stored by the
Servicer to a central location designated by the Mortgagee within three (3)
business days after receiving the Mortgagee's request for such documents. The
Servicer will deliver Mortgage Loan files and Mortgage Loan documents which are
not stored with the Servicer to a central location designated by the Mortgagee
within two (2) business days after the Servicer receives such documents and
files from its offsite vendor. The Mortgagee will distribute all Mortgage Loan
documents from its central location to the applicable branch location through
the Mortgagee's interoffice mail.
The Servicer will classify as "projects" all Mortgage Loan documents and
Mortgage Loan files requested in groups of twenty (20) to five hundred (500).
The Servicer will deliver all "project" Mortgage Loan documents and Mortgage
Loan files which are stored by the Servicer to the Mortgagee no later than ten
(10) business days after the Servicer receives the Mortgagee's request. The
Servicer will deliver all "project" Mortgage Loan documents and Mortgage Loan
files which are not stored by Servicer to a centralized location designated by
the Mortgagee no later than two (2) business days after receiving such documents
from the Servicer's offsite vendor. The Mortgagee will distribute all Mortgage
Loan documents from its central location to the applicable branch bank location
through the Mortgagee's interoffice mail.
The Servicer will classify as "special projects" all Mortgage Loan documents and
Mortgage Loan files requested in groups of more than five hundred (500). The
Servicer will deliver all special project Mortgage Loan documents and Mortgage
Loan files to the Mortgagee within a reasonable time, which may vary depending
upon the size of the special project.
The Mortgagee will provide Mortgage Loan files and Mortgage Loan documents to
the Servicer upon request according to the above schedule to allow the Servicer
to execute certain tasks and duties contemplated by this Agreement.
The Mortgagee's requests for same-day or next-day delivery will be available for
the fees and charges described in EXHIBIT B to this Agreement.
1.2. SERVICE LEVEL INTERRUPTIONS. The Servicer will give written notice to an
individual designated by the Mortgagee of any servicing interruption or error
which has a material adverse effect upon the Mortgage Loans or the related
Servicing Rights no later than twenty-four (24) hours after the Servicer becomes
aware of such interruption or error. Such notice shall contain a description of
the Servicer's plan to correct such servicing interruption or error.
1.3. NOTICE OF MASS MAILINGS. The Servicer will give written notice to an
individual designated by the Mortgagee of any category of mass mailings to
Mortgagors which the Servicer and the Mortgagor mutually agree is "non-routine".
2.1. PROCESSING BRANCH PAYMENTS. The Mortgagee will process each Mortgage Loan
payments in accordance with the terms of the Lockbox Agreement.
2.2. ACCEPTING PAYMENTS FOR MORTGAGE LOANS IN DEFAULT. The Mortgagee will
indemnify and hold the Servicer harmless from any costs, expenses, penalties,
losses or other harm relating to the Mortgagee's acceptance of a payment
relating to a portfolio Mortgage Loan or secondary market mortgage loan which is
in default.
2.3. PAYMENT CLEARING AND NSF ACCOUNT. The Servicer will establish and maintain
at the First National Bank of Boston a single Payment Clearing Account at The
First National Bank of Boston into which the Mortgagee will deposit all of the
Mortgagee's bank teller Mortgage Loan
1
<PAGE> 19
payments along with the lock box payments. The Servicer will also establish and
maintain at The First National Bank of Boston a single NSF Account at The First
National Bank of Boston which will be used to process all returned Mortgagee's
bank teller Mortgage Loan payments. The Servicer will redeposit all Mortgage
Loan payment checks which are returned unpaid by the payor bank unless the
payor bank is also the depository bank. These procedures will apply as long as
the Servicer utilizes The First National Bank of Boston as a lock-box service.
2.4. MORTGAGE LOAN PAYMENT ACCEPTED AT SERVICER LOCATION ONLY. The Mortgagee
acknowledges that the Servicer accepts Mortgage Loan "payment in full
transactions" only at locations designated by the Servicer. If the Mortgagee
accepts a Mortgage Loan payment in full transaction from a Borrower or any other
person which is short, fraudulent, or otherwise fails to satisfy all amounts due
and owing under the Mortgage Note and Mortgage, the Mortgagee will indemnify and
hold the Servicer harmless for all costs, expenses, loss and other harm incurred
by the Servicer relating to such payment in full transaction, including, but not
limited to, lost interest and other outstanding charges due and owing.
2.5. ESCROWS NOT APPLIED TO PAYOFF. When quoting a payoff amount to a Mortgagor,
the Servicer will not subtract any Escrow Account balances from such payoff
amount. The Servicer will refund Escrow Account balances to each Borrower not
later than 16 days after the Servicer has received all funds necessary to pay a
Mortgage Loan in full.
3.1. ACCOUNTING CUT-OFF. The Servicer will provide the Mortgagee with a complete
accounting of all financial transactions relating to its Mortgage Loan portfolio
once each month. Each financial accounting report will contain information
relating to activity from the date of the immediately preceding report through
the 23rd day of each month.
3.2. Magnetic Tape. The Servicer will transmit a magnetic tape monthly to
Mortgagee or overnight the magnetic tape to Mortgagee if the transmission is
unsuccessful. The magnetic tape shall be in a format acceptable to the Servicer
and the Mortgagee.
3.3. CHANGE IN REPORT CONFIGURATION. The Servicer will give the Mortgagee
written notice that the Servicer's software vendor will change its current
configuration of report sets no later than ten (10) business days after the
Servicer receives notice of such change from its software vendor.
4.1. ESCROW WAIVER POLICY. Except as provided below, the Servicer will not waive
an Escrow Account requirement for a Mortgage Loan. The Servicer may, but will
not be required to, consider an Escrow Account waiver request if each of the
following criteria has been satisfied:
(a) The Mortgage Loan must have been serviced by the Servicer for at least six
(6) months.
(b) No Mortgage Loan payment has been more than thirty (30) days past due during
the six (6) months immediately preceding such waiver request.
(c) The Mortgage Loan is current at the time the waiver request is completed.
(d) All Escrow Account advances have been repaid.
(e) The Mortgagor pays the escrow waiver fee described in EXHIBIT B to this
Agreement, to the extent permitted by applicable law.
The Servicer may, in its sole discretion and with the Mortgagee's prior written
consent, waive Escrow Account requirements for a Mortgage Loan if the Servicer
has committed a servicing error relating to Escrow Account disbursements and
such error has caused the Mortgagor to request such a waiver.
The Servicer will also waive escrow Account requirements for a Mortgage loan
upon the written request of the Mortgagee and receipt of the Escrow Account
waiver fee described in EXHIBIT B to this Agreement.
4.2. FLOOD DETERMINATIONS. Life of loan flood determinations shall be performed
by a flood insurance provider acceptable to Buyer for all
2
<PAGE> 20
Mortgage Loans, or the Mortgagee will pay to the Servicer the life of loan
contract conversion fee of $10.
4.3. INSURANCE DEDUCTIBLES. The deductible amount of any homeowner's/hazard
insurance or flood insurance may not exceed the greater of: (a) one thousand
dollars ($1,000), or (b) one percent (1%) of the outstanding principal balance
of the Mortgage Loan.
4.4. INSURANCE LOSS CLAIMS. The Servicer will endorse over to a Mortgagor any
insurance loss claim check or draft in the amount of five thousand dollars
($5,000) or less if the related Mortgage Loan is current. The Servicer will
require the Mortgagor to endorse over to the Servicer any insurance loss claim
check or draft if:
(a) the insurance loss claim check or draft is in an amount greater than five
thousand dollars ($5,000), or
(b) the Mortgage Loan is delinquent,
If an insurance loss claim check or draft is endorsed over to the Servicer, the
Servicer will deposit the funds in a restricted Escrow Account and disburse such
funds as satisfactory repairs are made to the Mortgaged Property. The Servicer
may require property inspection from time to time to ensure that such repairs
are made in a satisfactory manner.
5.1. ARM RATE CHANGES. The Servicer will service and maintain each adjustable
rate Mortgage Loan in accordance with the provisions contained in each such
Mortgage Note and related Mortgage.
The Servicer will deliver periodic interest rate and payment changes to
Mortgagors thirty (30) days prior to the payment change date, unless otherwise
specified in the Mortgage Note. The Servicer's mass escrow analysis for Mortgage
Loans undergoing payment changes will be performed as of the payment adjustment
date. Coupon books and escrow analysis statements for Mortgagors not on
automatic drafting will be mailed no later than twenty (20) days prior to the
new Mortgage Loan payment due date.
5.2. PAYMENT ADJUSTMENTS UPON PRINCIPAL CURTAILMENT. The principal and interest
portion of a Mortgage Loan payment for a conventional fixed rate or adjustable
rate portfolio Mortgage Loan may be adjusted when an additional principal
payment of five thousand dollars ($5,000) or more is made and the following
requirements are met:
(a) The Servicer receives such a request from the Mortgagor.
(b) All Mortgage Loan payments are current at the time the Servicer receives
such a request.
(c) The Mortgagor executes a recast Agreement for Modification prepared by the
Servicer.
(d) The Mortgagor pays the payment adjustment processing fee described in
EXHIBIT B to this Agreement.
Principal and interest adjustments will not be made on FHA and VA Mortgage Loans
and non-portfolio conventional Mortgage Loans.
6.1. ASSUMPTION REQUESTS. The Servicer will process a request for assumption
information, as long as such request is made by the Mortgagor or an authorized
third party.
Simple changes of ownership in the Mortgaged Property will be initiated within
eight (8) business days following the Servicer's receipt of documentation
reasonably requested by the Servicer which identifies and confirms such change
in ownership. The data system will be updated with the new information and new
payment coupons will be provided to the Mortgagor.
If the assumption transaction requires the new Mortgagor's credit to be
approved, the credit will be approved, denied or pended within 45 days following
the Servicer's receipt of a completed credit package. The Mortgagee authorizes
the Servicer to process the credit request in accordance with standard FNMA
underwriting guidelines.
The Servicer will charge the Mortgagor, and retain as compensation for it's
services hereunder, a fee for the assumption in
3
<PAGE> 21
accordance with FNMA guidelines and as described in EXHIBIT B.
7.1. WAIVER OF LATE CHARGES. The Servicer may, in its sole discretion, waive a
late charge if the Mortgagor provides information satisfactory to the Servicer
that the Mortgage Loan payment was lost in the mail or was paid at a Mortgagee
bank branch location prior to the end of the business day on which the late
charge was assessed.
The Servicer will always waive a late charge if: (a) the charge was imposed in
error, (b) the charge was caused by the Servicer's misposting or misapplication,
or (c) the Mortgagee has a business relationship with the Mortgagor and the
Mortgagee requests the Servicer to waive such charge and agrees to reimburse the
late charge to the Servicer.
7.2. FORECLOSURES. The Servicer will refer a delinquent Mortgage Loan file to
the Servicer's Foreclosure Review Committee after the servicer has completed its
collection efforts, including any forbearance or special payment plans. The
Mortgagee will advise the Servicer in writing of any mitigating circumstances of
which the Mortgagee is aware and which the Mortgagee believes should prevent a
delinquent portfolio Mortgage Loan from being referred to foreclosure. The
Servicer will delay foreclosure action relating to any such delinquent portfolio
Mortgage Loan until the Mortgagee asks the Servicer to resume foreclosure
activities. The Mortgagee will indemnify and hold the Servicer harmless from any
costs, expenses, damages and loss relating to the Servicer's deferral of such
foreclosure activities.
7.3. FORECLOSURE REVIEW COMMITTEE. The Servicer's Foreclosure Review Committee
will review each potential foreclosure. The Servicer, or its designated agent,
will be responsible for all foreclosure activity and will ensure compliance with
all Investor and Insurer regulations and procedures. The Service will use its
best efforts to complete foreclosure activity within the timeframes established
by FNMA.
7.4. PROPERTY PRESERVATION EXPENSES. The Mortgagee will reimburse the Servicer
for all of the Servicer's out-of-pocket expenses incurred for property
inspections, property preservation and maintenance costs, attorney fees and
other reasonable expenses. The Mortgagee acknowledges that the Servicer does not
routinely obtain transactional environmental screenings on properties to be
acquired through foreclosure, unless Servicer is made aware of potential
environmental issues. The Mortgagee will reimburse the Servicer for expenses
incurred in obtaining a transactional environmental screening, if, in the
opinion of the Servicer, a screening is warranted, or if the Mortgagee requests
the Servicer to obtain the screening.
7.5. MANAGEMENT AND DISPOSITION OF OREO PROPERTY.
(a) The Servicer shall manage, conserve, protect, and operate each OREO
property on behalf of the Mortgagee in the same manner that it manages,
conserves, protects and operates other foreclosed property for its own account.
(b) The Servicer shall maintain on each OREO Property fire and hazard insurance
with extended coverage in an amount which is at least equal to the maximum
insurable value of the improvements which are a party of such property,
liability insurance and, to the extent required and available under the
National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of
1973, each as amended, flood insurance in the amount required above.
(c) With respect to each OREO Property, the Servicer shall hold all funds
collected and received in connection with the operation of such OREO Property
separate and apart from its own funds or general assets in the Mortgagor T&I
custodial account.
(d) The Servicer shall deposit, or cause to be redeposited, on a daily basis in
each OREO Account all revenues received with respect to the conservation and
disposition of the related OREO Property and shall withdraw therefrom funds
necessary for the proper operation, management and maintenance of the OREO
Property, including the cost of maintaining any hazard insurance and the fees
of any managing agent acting on behalf of the Servicer. Any disbursement in
excess of ($5,000) shall be
4
<PAGE> 22
made only with the written approval of the Mortgagee. Such approval or Denial
to be given within 48 hours of receipt. The Servicer shall not be entitled to
retain interest paid or other earnings, if any, on funds deposited in such OREO
Account. The Servicer shall pay to the Mortgagee monthly the net cash flow from
the OREO Property (which shall equal the revenues from such OREO Property net
of the expenses described above and of any reserves reasonably required from
time to time to be maintained to satisfy anticipated liabilities).
(e) The disposition of OREO Property shall be carried out by the Servicer only
with the prior written consent given within 48 hours of our recommendation of
the Mortgagee and shall be made at such price, and upon such terms and
conditions, as the Servicer reasonably deems to be in the best interests of the
Mortgagee. The proceeds of sale of the OREO Property shall be promptly
deposited in the OREO Account and, as soon as practical thereafter, the expenses
of such sale shall be paid and the net cash proceeds of such sale remaining in
the OREO Account shall be paid to the Mortgagee.
(f) Upon request, with respect to any OREO Property, the Servicer shall furnish
to the Mortgagee a statement covering the Servicer's efforts in connection with
the sale of such OREO Property and any rental of the OREO Property incidental
to the sale thereof for the previous month (together with an operating
statement). Such statement shall be accompanied by such other information as
the Mortgagee shall reasonably request.
(g) OREO fees will be paid to Servicer in accordance with Exhibit B.
8.1. PARTIAL RELEASE. The Servicer will process all requests for a partial
release of mortgage in accordance with FNMA guidelines. If such partial release
conforms with FNMA guidelines, the Servicer shall have full authority to make
the decision to approve or deny the request without further discussion or
approvals from the Mortgagee.
The Servicer will execute partial releases on behalf of the Mortgagee. The
Mortgagee will provide, from time to time, whatever consents, board approvals,
ratifications or other documentation necessary to execute such a release.
As compensation for its services hereunder, Servicer shall retain any and all
fees charged to the Mortgagors in connection with the partial release process,
to the extent such fees conform with standard FNMA guidelines.
9.1. MODIFICATIONS. The Mortgagee will process and approve all portfolio
Mortgage Loan modifications. The Mortgagee will notify the Servicer upon
completion of such modifications.
10.1. MATURING BALLOON LOANS. The Servicer will process the renewal of maturing
balloon Mortgage Loans and will track delinquent matured Mortgage Loans in
accordance with the timelines described in EXHIBIT C to this Servicing
Agreement.
11.1. The First National Bank of Boston will reimburse Servicer for expenses
which may be incurred by Servicer after the date hereof related to prior
affiliate bank mergers wherein Servicer paid FNBB for the servicing rights.
5
<PAGE> 23
MASTER REPORT LISTING - EXHIBIT G
BKB & PRIVATE BANK - STANDARD (S) VS CUSTOM REPORTS (X)
================================================================================
<TABLE>
<CAPTION>
PRICING
S = STANDARD SOURCE RESPONSIBLE
REPORT X = CUSTOM OF DATA PARTY RECIPIENT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investor Delinquency Report S CPI P-195 Wendy Woodcock/ Investors
Default Reporting
Monthly Statement of Mortgage S CPI P-139 Gerald Perkinson/ Investors
Accounts S-53W Investor Accounting
Report of Mortgage Accruals S CPI P-185 Gerald Perkinson/ Investors
S-28W Investor Accounting
Single Debit Reconciliation S CPI T-303 Gerald Perkinson/ Investors
T-30J Investor Accounting
Consolidation of Remittance Reports S CPI S-215 Gerald Perkinson/ Investors
S-21F Investor Accounting
Loans Added / Deleted Report S CPI S-263, S26K Gerald Perkinson/ Investors
and Paid in Full Reports S-264, 26L Investor Accounting
S-214, S-21J
Affiliate Delinquency Report X FOCUS, MSP Sharen Silvers Affiliate Credit
Default Administration Officers
Affiliate REO Report S REO System, Lotus Sharen Silvers Affiliate Credit
- part of 2% fee Default Administration Officers, Bob
Hartmann
Affiliate Portfolio Tracking X Easytrieve, Focus Patrice Dickman/ Jeff Mouhalis, Bill
MIS Glasgow, Megan
Fannin, Affiliate
Credit Officers.
<CAPTION>
REPORT BRIEF DESCRIPTION OF REPORT FREQUENCY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investor Delinquency Report Lists loans 30 or more days delinquent within the Monthly
Investor's portfolio. Gives units and dollar volume.
Monthly Statement of Mortgage Loan level detail by investor of the status of loans (UPB, P & I Monthly
Accounts Constant, Due Date, etc.)
Report of Mortgage Accruals Loan level detail by investor that shows accrual status of loan Monthly
(Accruing or non-accruing) Also includes loan type, IR, Due Date.
Single Debit Reconciliation Aggregate forecast report for for next months payments. Monthly
Consolidation of Remittance Reports Loan level detail of payments received from cut-off to cut-off. Monthly
(Application of P & I, service fees, etc.)
Loans Added / Deleted Report Monthly
and Paid in Full Reports
Affiliate Delinquency Report Details collection information on affiliate loans over 60 days delq. Monthly
with principal balance greater than $150,000 and loans 90 or more
days delinquent with principal balance greater than $100,000.
Report lists loan number, prin. balance, loan type, address and due
datas of loans 30 or more days past due. An easytrieve gives the same data
for private banking loans only. Also includes details on loans in F/C process.
Affiliate REO Report Details loans in Affiliate REO portfolio (Investor 019) by loan Monthly
- part of 2% fee number, borrower, address, date acquired, principal balance,
charge-offs, book value, list price, date listed, comments and
functional owner.
Affiliate Portfolio Tracking Details affiliate portfolios based on dollar volume, Monthly
loan count, function, LTV, Loan size, Property type,
Occupancy type, Payment type, year of origination.
Report gives delinquency figures for each of the
sorts. Report also gives same data for private
banking loans only.
</TABLE>
<PAGE> 24
MASTER REPORT LISTING - EXHIBIT G
BKB & PRIVATE BANK - STANDARD (S) VS CUSTOM REPORTS (X)
================================================================================
<TABLE>
<CAPTION>
PRICING
S = STANDARD SOURCE RESPONSIBLE
REPORT X = CUSTOM OF DATA PARTY RECIPIENT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Early Charge-Off YTD Report X Patrice Dickman/
MIS
Charge-Off by Affiliate X Patrice Dickman/
MIS
FASB Reporting X P46T Gerald Perkinson/
P56W Investor Accounting
Affiliate Portfolio by State Summary X Easytrieve, Focus Patrice Dickman/
and Pay Type Summary MIS
Master Servicing Delinquency Rpt X Master Servicing Kari Sherman
(part of Master Serv. Fee)
Affiliate Residential Mtg Report for X Easytrieve Albert Keaton/ Mark Henderson, Linda
Treasury EZM6B251 Data Services Boucher (Bank of Vermont)
Affiliate FDIC RC Reports X Easytrieve Albert Keaton/ Kari Sherman
VTMTHEND Data Services Accounting
Interest Income for MA and other X Easytrieve Gerald Perkinson/ Rosemary Gall
States Investor Accounting FNBB
<CAPTION>
REPORT BRIEF DESCRIPTION OF REPORT FREQUENCY
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Early Charge-Off YTD Report Database with detailed reports are considered custom reporting. Monthly
Individual charge-off sheets sent to BKB for rollup is standard rptg.
Charge-Off by Affiliate Database with detailed reports are considered custom reporting. Monthly
Individual charge-off sheets sent to BKB for rollup is standard rptg.
FASB Reporting Net origination fees amortization
Monthly fee amortization
Affiliate Portfolio by State Summary Summary of dollar volume, loan count and non-accrual dollars by Monthly
and Pay Type Summary affiliate, by state for 1st mortgages, 2nd mortgages and total
Master Servicing Delinquency Rpt Detail of delinquency for Master Servicing accounts Monthly
(part of Master Serv. Fee)
Affiliate Residential Mtg Report for Fixed rate and adjustable rate mortgage reports for affiliates Monthly
Treasury CT, RIHT, BKB and BKB CLN. Reports include
Average Years to Interest Rate Change, Average Years
to Maturity, Average Coupon Rate, Maturity Loan Term
Affiliate FDIC RC Reports FNBB, RIHT & BKB-CT FDIC Schedule reports RC-J, RC-C, RC-J Monthly
non-accruals listing data by weighted average/yield, loan type
and property code.
Interest Income for MA and other FNBB - Tax reporting for MA Monthly/
States Annual
</TABLE>
Note: See Systems Term Sheet for information re. FFR Data Set transmissions
<PAGE> 25
MASTER REPORT LISTING - EXHIBIT G
BKB & PRIVATE BANK - STANDARD (S) VS CUSTOM REPORTS (X)
================================================================================
<TABLE>
<CAPTION>
PRICING
S = STANDARD SOURCE RESPONSIBLE
REPORT X = CUSTOM OF DATA PARTY RECIPIENT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Step Delinquency Report X Focus Sharen Silvers Jeff Mouhalis, Linda
Default Administration Bullard, Judy Garfinkel,
Warren Bacon,
Gail Snowden,
Carolyn Hart, Glenda
Edgy, Jeff Graham, Bill
Glasgow
Affiliate Risk Rating X Easytrieve, Focus Patrice Dickman/ BBMC Senior Mmgmt
MIS Affiliate Credit officers
Affiliate Loan Type Delinquency X Easytrieve, Focus Patrice Dickman/ Bob Hartmann/
Report MIS BKB Domestic Acctg
Affiliate Loan Type Report X Easytrieve, Focus Patrice Dickman/ Pam Mattson/
MIS BKB Domestic Acctg
Affiliate Full Accrual Report X Easytrieve, Focus Patrice Dickman/ Bob Hartmann/
MIS BKB Domestic Acctg
Monthly Charge-Off Summary Rpt X Focus Report Run Patrice Dickman/ Warren Bacon
Against In-House Data MIS
Time on Books Delinquency Rpt X Cindy Lucas/ Warren Bacon
Default Reporting
Correlation of Delinquencies with X Warren Bacon
Credit Scores
Fidicia Reports X Greg Neitling/ Warren Bacon
Quality Control
Detail Report of Charge-Offs X Patrice Dickman/
MIS
<CAPTION>
REPORT BRIEF DESCRIPTION OF REPORT FREQUENCY
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First Step Delinquency Report Gives delinquency statistics (30, 60, 90, FC) loans in First Step Monthly
program.
Affiliate Risk Rating Breaks down Affiliate exposure loans by dollar volume based on Monthly
Risk Rating table.
Affiliate Loan Type Delinquency Breaks down affiliate portfolio by affiliate, by loan type, by dollar Quarterly
Report volume and loan count for loans 30 days past due through
non-accrual
Affiliate Loan Type Report Breaks down affiliate portfolio by affiliate, by loan type, by dollar Quarterly
volume and loan count for loans current through non-accrual
Affiliate Full Accrual Report Gives total affiliate portfolios by principal balance and units which Quarterly
owe two or three payments.
Monthly Charge-Off Summary Rpt Loan level listing of approved charge-offs for delinquent affiliate Monthly
loans.
Time on Books Delinquency Rpt Monthly
Correlation of Delinquencies with
Credit Scores
Fidicia Reports Quarterly
Detail Report of Charge-Offs Database with detailed reports are considered custom reporting. Monthly
Individual charge off-sheets sent to BKB for rollup is standard rptg.
</TABLE>
<PAGE> 1
EXHIBIT 10.11
EXECUTION COPY
--------------
STOCK PURCHASE AGREEMENT
March 4, 1996
BETWEEN
GRANTAMERICA, INC.
AND
BARNETT BANKS, INC.
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I DEFINITIONS.......................................................1
-----------
ARTICLE II PURCHASE AND SALE................................................10
-----------------
2.1 Purchase and Sale.......................................10
-----------------
2.2 Purchase Price..........................................10
--------------
2.3 Investment by Seller....................................10
--------------------
2.4 Actions to be taken at Closing..........................10
------------------------------
ARTICLE III CLOSING..........................................................11
-------
ARTICLE IV GENERAL REPRESENTATIONS AND - WARRANTIES OF SELLER...............11
--------------------------------------------------
4.1 Organization - .........................................11
------------
4.2 Authority - ............................................11
---------
4.3 Non-Contravention.......................................12
-----------------
4.4 Consents, Approvals and Notices - ......................12
-------------------------------
4.5 Title to BMC Stock......................................12
------------------
4.6 Capitalization of BMC; Existing Options.................12
---------------------------------------
4.7 Financial Statements - .................................13
--------------------
4.8 Litigation - ...........................................13
----------
4.9 Compliance with Laws: Permits and Licenses - ...........14
------------------------------------------
4.10 Absence of Certain Changes or Events....................14
-------------------------------------
4.11 Employee Benefits Matters...............................15
-------------------------
4.12 Taxes...................................................16
-----
4.13 Ownership and Leases of Real Property - ................17
-------------------------------------
4.14 Insurance - ............................................17
---------
4.15 Intellectual Property - ................................17
---------------------
4.16 Transactions with Affiliates - .........................18
----------------------------
4.17 Certain Labor Matters...................................18
---------------------
4.18 Brokers.................................................19
-------
4.19 No Undisclosed Liabilities - ...........................19
--------------------------
4.20. Certain Contracts - ....................................19
-----------------
ARTICLE V MORTGAGE BANKING REPRESENTATIONS - OF SELLER.....................20
--------------------------------------------
5.1 Portfolios and Listed Agreements - .....................20
--------------------------------
5.2 Portfolio Information - ................................20
---------------------
5.3 Enforceability of Listed Agreements - ..................20
-----------------------------------
5.4 Compliance with Listed Agreements - ....................21
---------------------------------
</TABLE>
-i-
<PAGE> 3
<TABLE>
<C> <S> <C>
5.5 Advances - .............................................21
--------
5.6 No Recourse - ..........................................21
-----------
5.7 Warehouse Loan Representations and Warranties - ........22
---------------------------------- ----------
5.8 Mortgage Banking Licenses and Qualification - ..........26
----------------------------- -------------
5.9 Mortgage Banking Compliance - ..........................26
---------------------------
5.10 Inquiries - ............................................27
---------
5.11 Correspondent Agreements - .............................28
------------------------
5.12. Custodial Accounts - ...................................28
------------------
5.13. Environmental Matters - ................................28
---------------------
5.14. Pool Certification - ...................................29
------------------
5.15 Absence of Other Warranties - ..........................29
---------------------------
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER......................29
-------------------------------------------
6.1 Organization - .........................................29
------------
6.2 Capitalization of Purchaser: Existing Options...........30
----------------- ---------------------------
6.3 Authority - ............................................30
---------
6.4 Non-Contravention - ....................................31
-----------------
6.5 Consents, Approvals and Notices - ......................31
----------------------- -------
6.6 Litigation..............................................31
----------
6.7 Compliance with Laws; Permits and Licenses - ...........31
--------------------------------- --------
6.8 Brokers.................................................31
-------
6.9 No Regulatory Impediment - .............................32
------------------------
6.10 No Undisclosed Liabilities; Affiliate Transactions - ...32
--------------------------------------------------
6.11 BancBoston Mortgage Purchase Agreement - ...............32
--------------------------------------
6.12 Absence of Other Warranties - ..........................32
---------------------------
ARTICLE VII COVENANTS........................................................32
---------
7.1 Conduct of Business - ..................................32
-------------------
7.2 Access; Confidentiality.................................35
-----------------------
7.3 Reasonable Efforts: Taking of Necessary Action..........35
----------------------------------------------
7.4 Insurance; Risk of Loss - ..............................36
-----------------------
7.5 Assumption of Proceedings - ............................36
-------------------------
7.6 Name and Marks..........................................37
--------------
7.7 Employment and Benefit Matters..........................37
-------------- ---------------
7.8 Public Announcements....................................39
--------------------
7.9 Post-Closing Access to Business Records and
Accounting Cooperation. - ..............................39
----------------------
7.10 Further Assurances - ...................................40
------------------
7.11 Other Agreements - .....................................40
----------------
7.12 Delivery of Tapes.......................................40
-----------------
7.13. Assignment of Hedge Positions - ........................40
-----------------------------
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<C> <S> <C>
7.14. Adjustment of Servicing Fees............................40
----------------------------
7.15. Escrow Accounts - ......................................41
---------------
7.16 Financial Statement Delivery - .........................41
----------------------------
7.17 Prohibition of Certain Affiliate Transactions - ........41
---------------------------------------------
7.18 338(h)(10) Transaction - ...............................41
----------------------
7.19 Material Consents - ....................................41
-----------------
7.20 Repurchase Obligations of Seller - .....................42
--------------------------------
ARTICLE VIII CONDITIONS TO THE CLOSING........................................42
-------------------------
8.1 Conditions to Obligation of Each Party - ...............42
--------------------------------------
8.2 Additional Conditions to the Obligations of Purchaser - 43
-----------------------------------------------------
8.3 Additional Conditions to the Obligations of Seller......44
--------------------------------------------------
ARTICLE IX TERMINATION......................................................44
-----------
9.1. Grounds For Termination - ..............................44
-----------------------
9.2. Effects of Termination - ...............................45
----------------------
ARTICLE X TAX MATTERS......................................................45
-----------
10.1 Returns.................................................45
-------
10.2 Contests - .............................................46
--------
10.3 Payment of Taxes........................................47
----------------
10.4 Tax Benefits and Credits - .............................48
------------------------
10.5 Notices.................................................49
-------
10.6 Cooperation - ..........................................49
-----------
10.7 Certain Tax Elections and Other Matters.................49
---------------------------------------
10.8 Valuation and Allocation................................51
------------------------
10.9 Transfer Taxes..........................................52
--------------
10.10 Purchase Price Adjustment - ............................52
-------------------------
10.11 Statute of Limitations - ...............................52
----------------------
ARTICLE XI INDEMNIFICATION BY SELLER........................................52
-------------------------
11.1 Indemnification.........................................52
---------------
11.2 Indemnification Procedure - ............................53
-------------------------
11.3 Limitation on Liability - ..............................54
-----------------------
11.4 General.................................................55
-------
11.5 Indemnification for Seller Assumed Liabilities - .......56
----------------------------------------------
ARTICLE XII INDEMNIFICATION BY PURCHASER.....................................56
----------------------------
12.1 Indemnification.........................................56
---------------
12.2 Indemnification Procedure - ............................56
-------------------------
12.3 Limitation on Liability - ..............................57
-----------------------
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<C> <S> <C>
12.4 General.................................................57
-------
12.5 Purchaser Indemnification for Seller Liabilities - .....58
------------------------------------------------
ARTICLE XIII GENERAL PROVISIONS...............................................59
------------------
13.1 Notices.................................................59
-------
13.2 Interpretation - .......................................61
--------------
13.3 Amendment and Modification; Waiver......................61
----------------------------------
13.4 Entire Agreement - .....................................61
----------------
13.5 Fees and Expenses - ....................................61
-----------------
13.6 Third Party Beneficiaries - ............................62
-------------------------
13.7 Assignment; Binding Effect..............................62
--------------------------
13.8 Governing Law...........................................62
-------------
13.9 Counterparts - .........................................62
------------
</TABLE>
-iv-
<PAGE> 6
<TABLE>
Seller Disclosure Schedule
- --------------------------
<S> <C>
Section 4.4(a) Governmental Consents, Approvals, Filings, Etc.
Section 4.4(b) Third Party Consents
Section 4.6(c) Existing Options
Section 4.6(d) Existing Subsidiaries
Section 4.7 Financial Statements; Exceptions
Section 4.8(a)(i) Pending Litigation
Section 4.8(a)(ii) Orders, Judgments, Injunctions or Decrees
Section 4.8(b) Threatened Litigation
Section 4.9(a) Noncompliance with Applicable Laws
Section 4.9(b) Requisite Permits, Licenses, Etc.
Section 4.10 Absence of Certain Changes or Events
Section 4.11(a) Employee Benefit Plans
Section 4.11(b) Employee Benefit Plan Noncompliance
Section 4.12 Taxes
Section 4.13 Real Property
Section 4.14 Insurance
Section 4.15 Intellectual Property
Section 4.16 Transactions with Affiliates
Section 4.19 Undisclosed Liabilities
Section 4.20 Certain Contracts
Section 5.1(a) Servicing Agreements
Section 5.1(b) Master Servicing Agreements
Section 5.1(c) Certificate Administration Agreements
Section 5.1(d) Mortgage Sale Agreements
Section 5.1(e) Collateral Certificate Sale Agreements
Section 5.1(f) Investment Commitments
Section 5.3(c) Liens on Listed Agreements
Section 5.4(a) Defaults by BMC under Listed Agreements
Section 5.4(b) Breach of Representations or Warranties by BMC under
Listed Agreements
Section 5.5 Advances
Section 5.6 Recourse
Section 5.7(iii) Senior Liens on Loans in Warehouse Portfolio
Section 5.7(xi) Warehouse Portfolio Delinquencies
Section 5.8(a) Mortgage Banking Licenses
Section 5.8(b) Mortgage Banking Licenses Affected by the Transaction
Section 5.9(a)(c) Mortgage Banking Compliance
Section 5.10 Audits, Investigations and Complaints
Section 5.11 Correspondent Agreements
Section 5.13 Environmental Matters
Section 5.14 Pool Certification
Section 5.15 List of Employees for Knowledge Qualifiers
Section 7.4 Termination of Insurance Coverage
</TABLE>
-v-
<PAGE> 7
<TABLE>
Purchaser Disclosure Schedule
- -----------------------------
<S> <C>
Schedule 6.2 (a) Capitalization of Purchaser
Schedule 6.2(b) Options; Warrants and Stock Purchase Rights of
Purchaser Stock
Schedule 6.2(c) Options; Warrants; and Stock Purchase Rights Held
By Purchaser
Schedule 6.2(d) Subsidiaries
Section 6.4(a) Non-Contravention
Section 6.4(b) Third Party Consents
Section 6.8 Brokers
Section 6.10 Undisclosed Liabilities; Affiliate Transactions
Section 6.12 List of Employees for Knowledge Qualifiers
Schedule 7.1(f) Material Contracts
Schedule 7.7(a)(i) Lists of Employees
Schedule 7.7(e)(iv) Assumed Employment Agreements
Schedule 7.17 Affiliate Transactions
Schedule 7.1(m) Excluded BMC Assets and Excluded BMC Liabilities
Schedule 7.1(m)(ii) Seller Assumed Liabilities
Schedule 7.13 Hedge Contracts
Schedule 8.1(c) Terms of Loans
Exhibits
- --------
Exhibit A Amended and Restated Stockholder Agreement
Exhibit B Amended and Restated Registration Rights Agreement
Exhibit C Marketing Agreement
Exhibit D Transitional Services Agreements
Exhibit E Mortgage Loan Servicing Agreement
Exhibit F Operating Agreement Term Sheet
</TABLE>
-vi-
<PAGE> 8
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of March 4, 1996 (this "Agreement"), by
and between GRANTAMERICA, INC., a Delaware corporation ("PURCHASER"), and
BARNETT BANKS, INC. a Florida corporation ("SELLER" or "PARENT").
ARTICLE I
DEFINITIONS
-----------
In addition to terms defined elsewhere in this Agreement. the following
terms when used in this Agreement shall have the following meanings:
"ADVANCES" means unreimbursed amounts that have been advanced by BMC with
respect to Mortgage Loans (including, without limitation, payments of principal,
interest, taxes and insurance, ground rents, assessments, attorneys' fees,
property preservation fees and similar charges) pursuant to any Servicing
Agreement, Master Servicing Agreement or Certificate Administration Agreement.
"AFFILIATE" of a Person means a Person that, directly or indirectly,
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with, the first Person.
"AGENCY" means FHA, VA, GNMA, FNMA, FHLMC, HUD, or a State agency, as
applicable.
"AGREEMENT" has the meaning set forth in the introductory paragraph hereof.
"ALTA" means the American Land Title Association or any successor.
"AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT" means the Amended
Registration Rights Agreement, dated as of the date hereof, among Purchaser and
certain shareholders of Purchaser, in substantially the form attached hereto as
Exhibit B, as in effect from time to time.
"AMENDED AND RESTATED STOCKHOLDER AGREEMENT" means the Amended and Restated
Stockholder Agreement, dated as of the, date hereof, among Purchaser, Seller,
FNB, Lee Fund, Madison Dearborn and the other shareholders of Purchaser, in
substantially the form attached hereto as Exhibit A, as in effect from time to
time.
"APPLICABLE LAW" has the meaning set forth in Section 4.3.
"AVAILABLE REMEDIES" has the meaning set forth in Section 11.4(b).
"BALANCE SHEET" has the meaning set forth in Section 4.7.
<PAGE> 9
"BANCBOSTON MORTGAGE" means BancBoston Mortgage Company, a Florida
corporation.
"BANCBOSTON MORTGAGE PURCHASE AGREEMENT" means the Stock Purchase Agreement
dated as of December 11, 1995 relating to the acquisition of the capital stock
of BancBoston Mortgage from FNB by Purchaser, as in effect from time to time.
"BARNETT GROUP" shall have the meaning set forth in Section 4.12(b).
"BMC" means Barnett Mortgage Company, a Florida corporation.
"BMC BUSINESS" means the business heretofore conducted by BMC and its
Subsidiaries.
"BMC STOCK" has the meaning set forth in Section 4.6(a).
"BUSINESS DAY" means any day which is not a Saturday, Sunday or a day on
which banks in the City of Boston are authorized or obligated by law or
executive order to be closed.
"CASH PURCHASE PRICE" has the meaning set forth in Section 2.2.
"CERTIFICATE ADMINISTRATION" means certificate administration services in
respect of Collateral Certificate Pools or Mortgage Loans, including, without
limitation, one or more of the following functions (or a portion thereof): (i)
the calculation of payments due to owners of mortgage-backed securities, asset
backed securities. participation certificates or Mortgage Loans; (ii) the
transmittal of payments related to Mortgage Loans or Collateral Certificates;
(iii) the transmittal or payment of Advances; (iv) the preparation of reports to
Investors, tax authorities and the Securities and Exchange Commission: (v) the
compliance with REMIC or other relevant requirements; and (vi) the performance
of certain other administrative functions.
"CERTIFICATE ADMINISTRATION AGREEMENT" means an agreement, other than a
Master Servicing Agreement or a Servicing Agreement, pursuant to which a company
affiliated with the Barnett Group provides Certificate Administration
(including, without limitation, any rights to certificate administration fees).
"CERTIFICATE ADMINISTRATION PORTFOLIO" means those Mortgage Loans or
Collateral Certificates subject to Certificate Administration Agreements.
"CERTIFICATE INSURER" means a provider of an insurance policy insuring
against certain specified losses or shortfalls with respect to certain
mortgage-backed securities.
"CLAIM NOTICE" has the meaning set forth in Section 11.2(a).
"CLOSING" has the meaning set forth in Article III.
"CLOSING DATE" has the meaning set forth in Article III.
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<PAGE> 10
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"COLLATERAL CERTIFICATE" means a security based on and backed by a Mortgage
Pool, which security has been pledged, granted or sold to secure or support
payments on specific asset-backed securities which are administered pursuant to
a Certificate Administration Agreement.
"COLLATERAL CERTIFICATE POOL" means a group of Collateral Certificates that
have been pledged, granted or sold to secure or support payments on specific
asset-backed securities which are administered pursuant to a specific
Certificate Administration Agreement.
"COLLATERAL CERTIFICATE SALE AGREEMENT" means an agreement pursuant to
which BMC or any of its Subsidiaries has sold or otherwise conveyed Collateral
Certificates and with respect to which BMC or any of its Subsidiaries has a
repurchase obligation in the event of a breach by it of a representation,
warranty, covenant or undertaking made or given therein.
"COMPANY CONTRACT" has the meaning set forth in Section 4.20(a).
"CONFIDENTIALITY AGREEMENT" means that certain letter agreement between
Seller and Purchaser relating to, among other things, the confidentiality of
certain information provided by or on behalf of Seller and BMC.
"CONTRACT" has the meaning set forth in Section 4.3.
"CONTRACT PARTY" means any Person, other than an Investor, who is a party
to a Servicing Agreement, Master Servicing Agreement, Certificate Administration
Agreement, Mortgage Sale Agreement or Collateral Certificate Sale Agreement.
"CONTROL" (including the terms "Controlled by" and "under common Control
with") means the direct or indirect possession of ordinary voting power to
elect a majority of the board of directors (or comparable body) of a Person.
"CORRESPONDENT AGREEMENT" means any agreement between BMC or any of its
Subsidiaries, on the one hand, and a broker, correspondent or other originator
or purchaser of mortgage loans, on the other hand, pursuant to which such
broker, correspondent or mortgage loan originator or purchaser may sell mortgage
loans to BMC or any of its Subsidiaries.
"DAMAGES" has the meaning set forth in Section 11.1.
"DEDUCTIBLE" has the meaning set forth in Section 11.3(a)(i).
"DISCLOSURE SCHEDULES" means, collectively, the Purchaser Disclosure
Schedule and the Seller Disclosure Schedule.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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<PAGE> 11
"EXCLUDED ASSETS" means certain assets of BMC or any of its Subsidiaries of
the types set forth on Schedule 7.1(m) hereto which are to be transferred to
Seller at or prior to Closing in accordance with Section 7.1(m).
"EXCLUDED LIABILITIES" means certain liabilities of BMC or any of its
Subsidiaries of the types set forth on Schedule 7.1(m) hereto which are to be
assumed by Seller at or prior to Closing in accordance with Section 7.1(m).
"EXTENDED WAREHOUSE LOANS" means those Mortgage Loans in the Warehouse
Loan Portfolio that are not readily salable under existing Investment
Commitments due to one or more failures to conform to all of the terms and
conditions of such Investment Commitments.
"FHA" means Federal Housing Administration or any successor thereto.
"FHA LOANS" means Mortgage Loans which are insured or are eligible to be
insured by FHA.
"FHLMC" means Federal Home Loan Mortgage Corporation or any successor
thereto.
"FNB" means The First National Bank of Boston, a national banking
association.
"FNMA" means Federal National Mortgage Association or any successor
thereto.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.7.
"FORECLOSURE" means the acquisition of title to a Mortgaged Property in a
foreclosure sale or by a deed in lieu of foreclosure or pursuant to any other
comparable procedure allowed under applicable Regulation.
"GAAP" means generally accepted accounting principles in the United States
which, unless otherwise indicated, are to be applied on a basis consistent with
the Financial Statements referred to in Section 4.7(a).
"GNMA" means Government National Mortgage Association or any successor
thereto.
"GOVERNMENTAL AUTHORITY" has the meaning set forth in Section 4.3.
"HUD" means United States Department of Housing and Urban Development or
any successor thereto.
"INDEMNIFIED PURCHASER ENTITIES" has the meaning set forth in Section 11.1.
"INDEMNIFIED SELLER ENTITIES" has the meaning set forth in Section 12.1.
4
<PAGE> 12
"INSURER" means a Person who (i) insures or guarantees all or any portion
of the risk of loss on any Mortgage Loan, including, without limitation, FHA,
VA, FNMA, GNMA, FHLMC and any private mortgage insurer, pool insurer and
provider of standard hazard insurance, flood insurance, earthquake insurance or
title insurance with respect to any Mortgage Loan or related Mortgaged Property,
(ii) provides, with respect to a Listed Agreement or an applicable Regulation,
any fidelity bond, direct surety bond or errors and omissions policy or (iii) is
a Certificate Insurer.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 4.15.
"INVESTMENT COMMITMENT" means the optional or mandatory commitment of a
Person to purchase a Mortgage Loan, a Pipeline Loan or a portion of a Mortgage
Loan or Pipeline Loan owned or to be acquired by BMC or any of its Subsidiaries.
"INVESTOR" means any Person, other than BMC or any of its Subsidiaries
which (i) owns or has a beneficial interest in a Mortgage Loan or Collateral
Certificate or (ii) is a party to an Investment Commitment.
"IRS" means the Internal Revenue Service of the United States of America or
any successor agency or authority.
"LEE" means Thomas H. Lee Company, a sole proprietorship.
"LEE FUND" means Thomas H. Lee Equity Fund III, L.P., a Delaware limited
partnership.
"LICENSES" has the meaning set forth in Section 5.8(a).
"LIEN" means any mortgage, pledge, lien, charge or other encumbrance.
"LISTED AGREEMENT" means any Servicing Agreement, Master Servicing
Agreement, Certificate Administration Agreement, Mortgage Sale Agreement,
Collateral Certificate Sale Agreement or Investment Commitment.
"LITIGATION" has the meaning set forth in Section 4.8(a).
"MADISON DEARBORN" means Madison Dearborn Capital Partners, L.P., an
Illinois limited partnership.
"MANAGEMENT SUBSCRIPTION AGREEMENT" means the Subscription Agreement, dated
as of the Closing Date, among the Purchaser and certain officers and employees
of BMC or any of its Subsidiaries, pursuant to which such officers and employees
shall purchase shares of Purchaser Class A Common Stock.
"MARKETING AGREEMENT" means the Marketing Agreement, to be dated as of the
Closing Date, between Seller and Purchaser, in the form attached hereto as
Exhibit C.
5
<PAGE> 13
"MASTER SERVICING" means master servicing services in respect of Mortgage
Loans, including, without limitation, one or more of the following functions (or
a portion thereof): (i) to supervise and oversee the performance of services of
their obligations under servicing agreements, and (ii) to cause Mortgage Loans
to be serviced in the event a service is terminated.
"MASTER SERVICING AGREEMENT" means an agreement pursuant to which BMC or
any of its Subsidiaries provides Master Servicing and, where applicable,
Certificate Administration (including, without limitation, any rights to master
servicing fees).
"MASTER SERVICING PORTFOLIO" means those Mortgage Loans subject to Master
Servicing Agreements.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, considered on
a consolidated basis with its Subsidiaries, any effect on such Person that is,
individually or in the aggregate, materially adverse to the business, operations
or financial condition of such Person (other than any effect from general
economic or industry-wide conditions).
"MORTGAGE" means with respect to a Mortgage Loan, a mortgage, deed of trust
or other security instrument creating a lien upon real property and any other
property described therein which secures a Mortgage Note, together with any
assignment, reinstatement, extension, endorsement or modification thereof .
"MORTGAGE LOAN" means a residential mortgage loan evidenced by a Mortgage
Note and secured by a Mortgage that is (i) owned by BMC or any of its
Subsidiaries or (ii) owned by an Investor and subject to a Servicing Agreement,
Master Servicing Agreement or Certificate Administration Agreement.
"MORTGAGE LOAN DOCUMENTS" means the credit and closing packages, custodial
documents and escrow documents (including, without limitation, the Mortgage
Note, the Mortgage, any assignment or endorsement of any such Mortgage Note or
Mortgage, the title insurance policy, and any private mortgage insurance
policy), and all other documents (i) in the possession of BMC or any of its
Subsidiaries pertaining to a Mortgage Loan or a Pipeline Loan, (ii) reasonably
necessary for prudent servicing of a Mortgage Loan or a Pipeline Loan or (iii)
reasonably necessary to establish the eligibility of the Mortgage Loan or a
Pipeline Loan for insurance by an Insurer or sale to an Investor; in each case
as required by applicable Regulations.
"MORTGAGE LOAN PAYMENT" means a payment of interest or principal with
respect to a Mortgage Loan.
"MORTGAGE NOTE" means, with respect to a Mortgage Loan, a promissory note
or notes, or other evidence of indebtedness, with respect to such Mortgage Loan
secured by a Mortgage or Mortgages, together with any assignment, reinstatement,
extension, endorsement or modification thereof.
6
<PAGE> 14
"MORTGAGE POOL" means a group of Mortgage Loans that have been pledged,
granted or sold to secure or support payments on specific mortgage backed
securities or specific participation certificates.
"MORTGAGE SALE AGREEMENT" means an agreement pursuant to which BMC or any
of its Subsidiaries has sold or otherwise conveyed Mortgage Loans and BMC or any
of its Subsidiaries has a repurchase or indemnity obligation in the event of
breach by BMC or any of its Subsidiaries of a representation, warranty or
undertaking contained therein.
"MORTGAGE LOAN SERVICING AGREEMENT" means the Mortgage Loan Servicing
Agreement, to be dated as of the Closing Date, in the form attached hereto as
Exhibit E.
"MORTGAGED PROPERTY" means the improved real property that secures a
Mortgage Note and that is subject to a Mortgage, which is related to a Mortgage
Loan.
"MORTGAGOR" means the obligor(s) on a Mortgage Note.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"OPERATING COMPANY" means BMC and its successors.
"OPERATING AGREEMENT" means the Operating Agreement, to be dated as of the
Closing Date, reflecting the terms set forth on Exhibit F.
"OVERLAP PERIOD" has the meaning set forth in Section 10.1.
"PARENT" has the meaning set forth in Section 7.6.
"PERSON" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or other entity.
"PIPELINE LOAN" means each of those pending mortgage loans to be secured by
a first priority mortgage lien on a one to four family residential property with
respect to which BMC or any of its Subsidiaries has issued a commitment or
otherwise agreed with an applicant to fund or determined to fund or has issued a
commitment or otherwise agreed with a correspondent originator to purchase
(including those mortgage loans which are pending with a correspondent
originator and which otherwise meet the acquisition criteria of BMC or any of
its Subsidiaries for such mortgage loans), and which have not yet closed or been
purchased from the correspondent originator.
"PLANS" has the meaning set forth in Section 4.11(a).
"PRE-CLOSING PERIODS" has the meaning set forth in Section 10.1.
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<PAGE> 15
"PURCHASER" has the meaning set forth in the introductory paragraph hereof.
"PURCHASER CLASS A COMMON STOCK" has the meaning set forth in Section
6.2(a).
"PURCHASER DISCLOSURE SCHEDULE" means the disclosure schedule delivered by
Purchaser to Seller at the time of execution hereof.
"PURCHASER STOCK OPTION PLAN" means the Purchaser's Stock Option Plan,
dated as of the Closing Date, providing for the issuance by the Purchaser to
certain officers and employees of Purchaser of options to purchase shares of
Purchaser Class A Common Stock as in effect from time to time.
"RATING AGENCY" means any nationally recognized statistical credit agency
that at the time of any determination thereof has outstanding a rating on one or
more classes of mortgage-backed securities or asset-backed securities at the
request of (i) BMC or (ii) any other issuer of mortgage-backed securities or
asset-backed securities for which BMC or any of its Subsidiaries acts as master
service or certificate administrator.
"REAL PROPERTY LEASE" has the meaning set forth in Section 4.13(b).
"REMIC" has the meaning set forth in Section 4.12(ix).
"REO" means any residential real property owned by BMC or any of its
Subsidiaries or an Investor as a result of a Foreclosure.
"REGULATION" means any (i) federal, state or local law, rule or regulation,
(ii) requirement of an Insurer or (iii) requirement of an Agency, in each case
with respect to the origination, insuring, purchase, sale or servicing of a
Mortgage Loan or Collateral Certificate or the filing of a claim in respect
thereof.
"RELATED AGREEMENTS" means, collectively, the Certificate of Incorporation
and by-laws of Purchaser, this Agreement, the Subscription Agreement, the
Management Subscription Agreement, the Amended and Restated Stockholder
Agreement, the Amended and Restated Registration Rights Agreement, the Marketing
Agreement, the Transitional Services Agreement, the Mortgage Loan Servicing
Agreement, the Operating/Correspondent Agreement, the Purchaser Stock Option
Plan and any other agreement between any of Purchaser, Seller, BMC or any
shareholder of Purchaser relating to the Purchaser or BMC which specifies that
it is a Related Agreement for purposes of this Agreement.
"SECTION 7.12 TAPES" has the meaning set forth in Section 7.12.
"SELLER" has the meaning set forth in the preamble.
"SELLER DISCLOSURE SCHEDULE" means the disclosure schedule delivered by
Seller to Purchaser at the time of execution hereof.
8
<PAGE> 16
"SERVICING" means Mortgage Loan servicing services including, without
limitation, one or more of the following functions (or a portion thereof): (1)
the administration and collection of payments for the reduction of principal
and/or the application of interest on a Mortgage Loan; (ii) the collection of
payments on account of taxes and insurance; (iii) the remittance of appropriate
portions of collected payments; (lv) the provision of full escrow
administration; (v) the pursuit of foreclosure and alternate remedies against a
related Mortgaged Property; and (vi) the administration and liquidation of REO.
"SERVICING AGREEMENT" means an agreement pursuant to which BMC or any of
its Subsidiaries provides Servicing and, where applicable, Certificate
Administration (including, without limitation, any rights to servicing fees and
excess servicing compensation).
"SERVICING COMPENSATION" means any servicing fees and any excess servicing
compensation which BMC or any of its Subsidiaries is entitled to receive
pursuant to any Servicing Agreement.
"SERVICING PORTFOLIO" means those Mortgage Loans subject to Servicing
Agreements.
"STATE AGENCY" means any state agency or other entity with authority to
regulate the mortgage-related activities of BMC or any of its Subsidiaries or to
determine the investment or servicing requirements with regard to mortgage loan
origination, purchasing, servicing, master servicing or certificate
administration performed by BMC or any of its Subsidiaries.
"SUBSCRIPTION AGREEMENT" means the Subscription Agreement, dated as of the
date hereof, among Purchaser and Seller, as in effect from time to time.
"SUBSIDIARY" means, with respect to any entity, a corporation or other
entity of which the outstanding shares of stock or other equity interests are
Controlled by such entity, either directly or indirectly through one or more
intermediaries.
"TAPE DATE" has the meaning set forth in Section 7.12(a).
"TAX or "TAXES" has the meaning set forth Section 4.12.
"TAX RETURNS" has the meaning set forth in Section 4.12.
"THIRD PARTY CONSENTS" has the meaning set forth in Section 4.4.
"TRANSFER TAXES" has the meaning set forth in Section 10.7.
"TRANSITIONAL SERVICES AGREEMENT" means the Transitional Services
Agreement, to be dated as of the Closing Date, in the form attached hereto as
Exhibit D.
"VA" means the United States Department of Veterans Affairs and any
successor thereto.
9
<PAGE> 17
"VA LOANS" means Mortgage Loans which are guaranteed or are eligible to be
guaranteed by VA.
"WAREHOUSE LOAN PORTFOLIO" means those Mortgage Loans owned by BMC or any
of its Subsidiaries and held for sale.
ARTICLE II
PURCHASE AND SALE
-----------------
2.1 PURCHASE AND SALE. Upon the terms and subject to the conditions set
forth in this Agreement, the Seller shall sell, transfer, assign and deliver to
the Purchaser, and the Purchaser shall purchase from the Seller, all of the BMC
Stock.
2.2 PURCHASE PRICE. In consideration for the sale of the BMC Stock by the
Seller to the Purchaser hereunder, the Purchaser shall pay to the Seller cash in
an amount equal to $226,100,000 (the "Cash Purchase Price").
2.3 INVESTMENT BY SELLER. Upon the terms and subject to the conditions set
forth in this Agreement and the Subscription Agreement, the Purchaser shall
issue to Barnett Bank, N.A. or one of its wholly-owned Subsidiaries designated
by Seller, the same number of shares of Purchaser Class A Common Stock as is
owned by each of (i) FNB and (ii) Lee and Madison Dearborn collectively, in
consideration for which the Seller shall pay to the Purchaser cash in an amount
equal to $120,000,000.
2.4 ACTIONS TO BE TAKEN AT CLOSING. At the Closing and subject to the terms
and conditions of this Agreement:
(a) The Purchaser shall pay the Cash Purchase Price to the Seller by wire
transfer of immediately available funds to such bank account in the United
States of America as the Seller shall have designated in writing at least two
(2) Business Days prior to the Closing Date.
(b) The Purchaser shall deliver to Barnett Bank, N.A. or one of its
wholly-owned Subsidiaries designated by Seller one or more stock certificates
evidencing the number of shares of Purchaser Class A Common Stock set forth in
Section 2.3 hereof.
(c) The Seller shall deliver to the Purchaser one or more stock
certificates evidencing the BMC Stock, duly endorsed in blank or with stock
powers therefor duly executed in blank.
(d) Each party shall take such other actions, and shall execute and deliver
such other instruments and documents, as shall be required under Article VIII
hereof.
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<PAGE> 18
ARTICLE III
CLOSING
-------
Subject to the provisions of Articles VIII and IX hereof, the consummation
of the transactions contemplated by this Agreement shall take place at a closing
(the "Closing") to be held at 10:00 a.m. at Hutchins, Wheeler & Dittmar, A
Professional Corporation, Boston, Massachusetts on or prior to the fifth
business day after the date on which all of the conditions contained in Article
VIII hereof shall have been satisfied or waived or at such other place, day and
time as the parties hereto may mutually agree in writing. The date on which the
Closing occurs is referred to herein as the "Closing Date". Notwithstanding the
first sentence of this Article III, for all purposes of this Agreement,
including, without limitation, the provisions of Article II above, the effective
time of the Closing shall be the close of business on the Closing Date.
ARTICLE IV
GENERAL REPRESENTATIONS AND
---------------------------
WARRANTIES OF SELLER
--------------------
Seller represents and warrants to Purchaser that:
4.1 Organization.
------------
(a) Seller is a duly organized and validly existing national banking
association.
(b) Each of BMC and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has full corporate power and authority to own all of its
properties and assets and to carry on its business as it is now being conducted.
True and complete copies of the charter and by-laws of each of BMC and each of
its Subsidiaries have been delivered to Purchaser. Each of BMC and each of its
Subsidiaries is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
its business or properties makes such qualification or license necessary, except
where failure to be so qualified, licensed or in good standing would not
reasonably be expected to have a Material Adverse Effect on BMC.
4.2 AUTHORITY. Seller has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The execution
and delivery by Seller of this Agreement and the consummation by Seller of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement constitutes a valid and
legally binding agreement of Seller, enforceable against Seller in accordance
with its terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law).
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<PAGE> 19
4.3 NON-CONTRAVENTION. The execution and delivery of this Agreement by
Seller does not, and the consummation by Seller of the transactions contemplated
hereby and the performance by Seller of the obligations which it is obligated to
perform hereunder will not, (a) violate any provision of the certificate of
incorporation or by-laws or other organizational documents of Seller, BMC or any
of BMC's Subsidiaries, nor assuming that all material consents, authorizations,
orders and approvals of, material filings or registrations with, and material
notices to, each Agency or other United States federal, state or local
governmental commission, board or other regulatory authority or agency (each a
"Governmental Authority") listed in Sections 4.4(a) and 5.8(b) of the Seller
Disclosure Schedule and all Third Party Consents listed in Sections 4.4(b) and
5.8(b) of the Seller Disclosure Schedule have been obtained or made, (i) violate
in any material respect any material law, regulation, rule, order, judgment or
decree (each an "Applicable Law") to which Seller, BMC or any of BMC's
Subsidiaries is subject or (ii) violate in any material respect, result in the
termination or the acceleration (except as set forth in Section 5.3(c) of the
Seller Disclosure Schedule with respect to the effect of a change in control on
certain Listed Agreements) of, or conflict with in any material respect or
constitute a material default under, any material mortgage, indenture, lease,
franchise, license, permit, agreement or instrument (each a "Contract") to which
Seller, BMC or any of BMC's Subsidiaries is a party or by which any of their
respective assets or properties are bound or (c) result in the creation of any
Lien on any of the material assets or properties of Seller or BMC or its
Subsidiaries or the loss of any material license or other material contractual
right with respect thereto.
4.4 CONSENTS, APPROVALS AND NOTICES. Except as described in Section 4.4(a)
or 5.8(b) of the Seller Disclosure Schedule, no material consent, authorization,
order or approval of, filing or registration with, or notice to, any
Governmental Authority is required for the execution and delivery of this
Agreement by Seller, the consummation by Seller of the transactions contemplated
hereby, and the conduct by BMC and its Subsidiaries following the Closing of its
business on substantially the same basis as such business was conducted prior to
the Closing, except for such consents, authorizations, orders, approvals,
filings, registrations, notices which are required solely by reason of the
specific ownership or regulatory status of Purchaser or its Affiliates.
4.5 TITLE TO BMC STOCK. The transfer from Seller to Purchaser of the BMC
Stock pursuant to the provisions of this Agreement, will transfer to Purchaser
good and marketable title thereto, free and clear of any adverse claims or Liens
(other than Liens created or incurred by Purchaser or any of its Affiliates).
4.6 Capitalization of BMC; Existing Options.
---------------------------------------
(a) The authorized capital stock of BMC consists of 10,000 shares of common
stock, par value $100.00 per share, of which 10,000 shares are issued and
outstanding (the "BMC Stock"). All of the issued and outstanding shares of
capital stock of BMC are owned beneficially and of record by Seller, free and
clear of any Liens. All issued and outstanding shares of capital stock of BMC
are validly issued, fully paid and non-assessable.
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(b) There are no outstanding obligations, warrants, options or other
rights to subscribe for or purchase from BMC, Seller or any Affiliate of Seller,
or any other contracts or commitments providing for the issuance of, or the
granting of rights to acquire, shares of any class of stock of or any equity
interest in BMC, or any securities or other instruments convertible into or
exchangeable for shares of any class of stock of or any equity interest in BMC
other than (i) the rights of Purchaser created by this Agreement or (ii) created
by Purchaser or any of its Affiliates.
(c) As of the date hereof, BMC neither owns nor has the option to acquire,
directly or indirectly, any equity interest in any Person, except as set forth
in Section 4.6(c) of the Seller Disclosure Schedule. As of the Closing, BMC will
neither own nor have the option to acquire, directly or indirectly, any equity
interest in any Person, except (i) as set forth in Section 4.6(c) of the Seller
Disclosure Schedule and (ii) equity interests acquired since the date hereof in
satisfaction of debts previously contracted in good faith.
(d) Except as set forth in Section 4.6(d) of the Seller Disclosure
Schedule, BMC has no Subsidiaries and is not a party to any partnership or joint
venture. Section 4.6(d) of the Seller Disclosure Schedule sets forth the
authorized and outstanding capital stock of each subsidiary of BMC, and except
as otherwise set forth on such schedule, there are outstanding no warrants,
options or other rights to subscribe for the capital stock of such subsidiaries,
nor any securities or other instruments convertible into or exchangeable for any
class of stock of or any equity interest in such Subsidiaries. Each of the
shares of Subsidiaries listed as owned by BMC is owned free and clear of any
lien, charge or encumbrance of any third party.
4.7 FINANCIAL STATEMENTS. Set forth in Section 4.7 of the Seller Disclosure
Schedule are the following financial statements (collectively, the "FINANCIAL
STATEMENTS"): (a) BMC's unaudited consolidated balance sheet as of December 31,
1995 (the "Balance Sheet") and the related unaudited consolidated statements of
operations, changes in shareholder's equity and cash flows for the year then
ended and (b) the pro forma consolidated balance sheet (the "Pro Forma Balance
Sheet") of BMC as of December 31, 1995, adjusted to reflect the exclusion from
the historic Balance Sheet of the Excluded Assets and Excluded Liabilities.
Except as otherwise indicated in Section 4.7 of the Seller Disclosure Schedule,
the Financial Statements described in clause (a) were prepared in accordance
with GAAP applied on a consistent basis during the periods involved and fairly
present the financial position of BMC and its Subsidiaries as of the dates
thereof and the results of operations of BMC and its Subsidiaries for the
periods then ended; and the Pro Forma Balance Sheet fairly presents the
financial position of BMC and its Subsidiaries, after giving effect to the
exclusion of the Excluded Assets and Excluded Liabilities. The books and records
of the Seller have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting requirements.
4.8 LITIGATION. (a) Except as set forth in Section 4.8(a)(1) of the Seller
Disclosure Schedule, as of the date of this Agreement, there is no regulatory
investigation of which Seller has knowledge or administrative proceeding pending
before any court, arbitrator or Governmental Authority (each, a "Litigation")
against BMC or any of its Subsidiaries. Except as set forth in Section 4.8(a)(1)
of the Seller Disclosure Schedule, there is no other action, suit or proceeding
pending before any court against BMC or any of its Subsidiaries or Seller which
(i) if adversely
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determined, would have a Material Adverse Effect on BMC or (ii) challenges the
validity or the propriety of the transactions contemplated by this Agreement.
Section 4.8(a)(11) of the Seller Disclosure Schedule lists, as of the date of
this Agreement, all material orders, judgments, injunctions and decrees
applicable to BMC and its Subsidiaries, and BMC and its Subsidiaries are not in
material violation of any such order, judgment, injunction or decree.
(b) Except as set forth in Section 4.8(b) of the Seller Disclosure
Schedule, as of the date of this Agreement, there is no Litigation, to the
knowledge of Seller, threatened against BMC or any of its Subsidiaries before
any court, arbitrator or Governmental Authority which if adversely determined
would have a Material Adverse Effect on BMC.
4.9 COMPLIANCE WITH LAWS: Permits and Licenses. (a) Except as set forth in
Section 4.9(a) of the Seller Disclosure Schedule, the operations of BMC and its
Subsidiaries are being conducted in compliance with all Applicable Laws, except
where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect on BMC.
(b) Except as set forth in Section 4.9(b) or 5.8(a) of the Seller
Disclosure Schedule, BMC and its Subsidiaries hold all permits, certificates,
licenses, approvals and other authorizations (or, where legally permissible, has
waivers thereof or is entitled to exemptions therefrom) of each Governmental
Authority necessary for the operation of their businesses as presently
conducted, except where the failure to so hold would not reasonably be expected
to have a Material Adverse Effect on BMC.
4.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995, except
as set forth in Section 4.10 of the Seller Disclosure Schedule or as expressly
permitted by this Agreement, BMC and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary course consistent
with past practices and there has not been:
(a) any material change by BMC in accounting methods, principles or
practices, except as required by law or by changes in GAAP;
(b) other than in the ordinary course of business consistent with past
practice, any entry by BMC or any of its Subsidiaries into any material
contract, transaction or commitment, including any loan, lease, purchase or sale
of assets, borrowing or capital expenditure, or any commitment therefor;
(c) to the knowledge of Seller, any change or development in or affecting
the business, operations or financial condition of BMC or any of its
Subsidiaries that has had or could reasonably be expected to have a Material
Adverse Effect on BMC;
(d) any write-off by or in respect of BMC or any of its Subsidiaries as
uncollectible of any note or account receivable, except write-offs in the
ordinary course of business consistent with past practice;
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(e) any agreement by BMC or any of its Subsidiaries or any of their
respective Affiliates to do any of the foregoing;
(f) except for normal increases in the ordinary course of business
consistent with past practice or as required under employment agreements in
effect on December 31, 1995, any increase by BMC or any of its Subsidiaries in
the wages, salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer, employee, or director from the
amount thereof in effect as of December 31, 1995 (which amounts have been
previously disclosed to Purchaser), any grant by BMC or any of its Subsidiaries
of any severance or termination pay, the entry by BMC or any of its Subsidiaries
into any contract to make or grant any severance or termination pay, or the
payment by BMC or any of its Subsidiaries of any bonus;
(g) any strike, work stoppage, slow-down, or other labor disturbance with
respect to BMC or any of its Subsidiaries; or
(h) any dividend or other distribution declared, paid or otherwise made
(including by way of redemption or otherwise) in respect of the BMC Stock.
4.11 EMPLOYEE BENEFITS MATTERS. (a) Section 4.11(a) of the Seller
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" within the meaning of Section 3(3) of ERISA, and each stock, deferred
compensation, incentive, vacation, sick pay, leave, severance pay, or fringe
benefit plan. policy, or arrangement, which BMC or any of its Subsidiaries
maintains, contributes to or is a party to, or for which BMC or any of its
Subsidiaries has any liability or contingent liability (collectively, the
"Plans"). Complete and accurate copies of all Plan documents have been delivered
to Purchaser.
(b) Except as otherwise provided in Section 4.11(b) of the Seller
Disclosure Schedule, and except to the extent that any breach of the
representation and warranty made in this sentence would not have a Material
Adverse Effect on BMC, (1) each Plan is and has been maintained in compliance
with ERISA and the Code and has been administered and operated in accordance
with its terms; (ii) each Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code has received a favorable determination
letter from the IRS and, to the knowledge of Seller, no event has occurred and
no condition exists which could reasonably be expected to result in the
revocation of any such determination; (iii) no Plan subject to Title IV of ERISA
has been terminated or is or has been the subject of termination proceedings
pursuant to Title IV of ERISA; (iv) BMC and its Subsidiaries have not engaged in
any transaction in connection with any Plan that could reasonably be expected to
result in the imposition of a penalty pursuant to Section 502(i) of ERISA,
damages pursuant to Section 409 of ERISA or a tax pursuant to Section 4975(a) of
the Code; (v) no liability, claim, action or litigation has been incurred, made,
commenced or, to the knowledge of Seller, threatened against BMC and its
Subsidiaries or any Plan (other than for benefits and administrative expenses
payable in the ordinary course and insurance premiums payable to the Pension
Benefit Guaranty Corporation); (vi) with respect to any Plan which is subject to
Title IV of ERISA, as of the most recent actuarial valuation prepared for such
Plan, the aggregate present value of the accrued liabilities thereof did not
exceed the aggregate fair market value of the assets allocable thereto; and
(vii) no Plan is a Multiemployer Plan.
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(c) No Plan provides benefits, including, without limitation, death,
medical or severance benefits, with respect to current or former employees,
officers, or directors of BMC or any of its Subsidiaries (or their
beneficiaries) beyond their retirement or other termination of service, other
than (i) coverage for benefits mandated by applicable law, (ii) death benefits
or retirement benefits under an "employee pension benefit plan" (as such term is
defined in Section 3(2) of ERISA), (iii) deferred compensation benefits properly
accrued as liabilities on the Financial Statements, or (iv) benefits the full
cost of which is borne by the current or former employee, officer, or director,
or his or her beneficiaries.
(d) All required contributions to, and all payments with respect to, the
Plans have been timely made.
4.12 TAXES. (a) The Parent has timely filed or caused to be filed, or will
timely file or cause to be filed on or prior to the Closing Date, all material
federal, state, local and foreign income tax returns and reports (collectively,
the "Tax Returns") which are required to be filed by or with respect to BMC or
any of its Subsidiaries on or prior to the Closing Date (taking into account any
properly granted extensions of time to file any Tax Return). Except as set forth
in Section 4.12 of the Seller Disclosure Schedule, all material federal, state,
local and foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, backup withholding, withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
estimated, and other tax of any kind whatsoever, including any interest, penalty
(including penalties for failure to file information returns or other returns),
or addition thereto or with respect thereto, whether disputed or not
(collectively, "Taxes"), due and payable solely by BMC or any of its
Subsidiaries with respect to taxable years or other taxable periods ending on or
prior to the Closing Date have been, or on or prior to the Closing Date will be,
paid or adequately disclosed and fully provided for as a liability accrual set
forth on Schedule 7.1(m) and taken into account for purposes of determining the
parties' obligations under Section 7.1(m) hereof. Except as set forth in Section
4.12 of the Seller Disclosure Schedule, to the knowledge of Seller, (i) there
are no waivers in effect of the applicable statutory period of limitation for
Taxes of BMC or any of its Subsidiaries (other than Taxes of BMC or any of its
Subsidiaries relating to a Barnett Group Tax return) for any taxable period and
(ii) no deficiency assessment or proposed adjustment with respect to any Tax
liability of BMC or any of its Subsidiaries (other than Tax liabilities relating
to a Barnett Group Tax return) for any taxable period is pending or has been
threatened in writing. None of BMC or its Subsidiaries have filed a consent
under Section 341(f) of the Code.
(b) The Parent is the "common parent" of an "affiliated group" of
corporations (as those terms are used in Section 1504(a) of the Code and
Treasury Regulations promulgated under Section 1502 of the Code) which includes
BMC and the BMC Subsidiaries (the "Barnett Group"). The Parent, BMC, and the BMC
Subsidiaries are eligible to file a consolidated federal income Tax Return for
the taxable period of the Parent including the Closing Date, and BMC and each of
BMC's Subsidiaries will be included in such consolidated federal income Tax
Return for its taxable period ending on the Closing Date.
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(c) Each of Seller, BMC and each of BMC's Subsidiaries is a "U.S. person"
within the meaning of Section 7701(a)(30) of the Code.
4.13 OWNERSHIP AND LEASES OF REAL PROPERTY. (a) As of the date of this
Agreement, except as set forth in Section 4.13 of the Seller Disclosure
Schedule, neither BMC nor any of its Subsidiaries owns, beneficially or of
record, any real property (other than REOs).
(b) Section 4.13 of the Seller Disclosure Schedule lists all real estate
leased as - of the date of this Agreement by BMC or any of its Subsidiaries as
lessee. Each lease with respect to such real estate (collectively, the "Real
Property Leases") is a valid and binding obligation of BMC or such Subsidiary
and is in full force and effect in all material respects; in each case, BMC or
such Subsidiary is in peaceable possession and no material waiver, indulgence or
postponement of material obligations of BMC or such Subsidiary thereunder has
been granted by the lessor; and there exists no material default or event,
occurrence, condition or act which, with the giving of notice or the lapse of
time, would become a material default by BMC or such Subsidiary under any such
Real Property Lease.
4.14 INSURANCE. Section 4.14 of the Seller Disclosure Schedule lists all
policies of insurance relating to the business or operations of BMC and its
Subsidiaries in effect as of the date of this Agreement (other than title
insurance policies or insurance policies relating exclusively to mortgage or
other loans originated or serviced by BMC and its Subsidiaries which name BMC or
any of its Subsidiaries as an insured party thereunder), whether maintained by
BMC or one of its Subsidiaries or Parent. As of the date of this Agreement, all
such policies are in full force and effect, all premiums due thereon have been
paid and BMC and its Subsidiaries have complied in all material respects with
the provisions thereof and none of such policies is subject to any retroactive
premium adjustment.
4.15 INTELLECTUAL PROPERTY. (a) Section 4.15 of the Seller Disclosure
Schedule lists, as of the date of this Agreement (1) all foreign and domestic
patents and patent applications which are owned (A) by BMC or any of its
Subsidiaries or (B) by an Affiliate of BMC or any of its Subsidiaries
specifically for use by BMC or any of its Subsidiaries; and (ii) all copyright
registrations, trademark registrations, trademark registration applications,
service mark registrations, service mark registration applications and trade
names (exclusive of any such registration, application or name using the name
"Barnett Mortgage Company", "BancPLUS" or "Loan America" or any derivative
thereof in any form) which are (A) owned by BMC or any of its Subsidiaries or
(B) owned by an Affiliate of BMC or any of its Subsidiaries and used primarily
or exclusively by BMC or any of its Subsidiaries (collectively, the
"Intellectual Property"). Section 4.15 of the Seller Disclosure Schedule also
lists (1) all material license agreements of patent, trademark or service mark
rights entered into by or primarily for use by BMC or any of its Subsidiaries
and (2) all material computer programs and databases utilized on a regular basis
by BMC or any of its Subsidiaries (excluding computer programs marketed to the
general public).
(b) Unless otherwise indicated in Section 4.15 of the Seller Disclosure
Schedule, as of the date of this Agreement (i) there are no existing or, to the
knowledge of Seller, threatened claims by any third party based on the use by,
or challenging the ownership of, BMC or any of its
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Subsidiaries, or any Affiliate of BMC or any of its Subsidiaries of any
Intellectual Property, or any claims challenging any material rights of BMC or
any of its Subsidiaries or any Affiliate of BMC or any of its Subsidiaries under
the license agreements or to the use of the computer programs and databases
listed in Section 4.15 of the Seller Disclosure Schedule: (ii) to the knowledge
of Seller, (A) none of the methods or services which BMC or any of its
Subsidiaries offers, sells or provides materially infringes upon any
Intellectual Property of others, (B) none of the Intellectual Property is being
infringed by others in any material respect and (C) none of the material rights
of BMC or any of its Subsidiaries or any Affiliate of BMC or any of its
Subsidiaries under the license agreements or to the use of the computer programs
and databases listed under Section 4.15 of the Seller Disclosure Schedule is
being violated in any material respect; (iii) BMC and its Subsidiaries and/or
Affiliates of BMC and its Subsidiaries own all right, title and interest in the
Intellectual Property; and (iv) to the knowledge of Seller, neither BMC or any
of its Subsidiaries nor any Affiliate of BMC or any of its Subsidiaries have
received any oral or written claim or demand from any Person pertaining to or
challenging the right of BMC or any of its Subsidiaries or any Affiliate of BMC
or any of its Subsidiaries to use any Intellectual Property, or any such claim
or demand challenging the rights of BMC or any of its Subsidiaries or any
Affiliate of BMC or any of its Subsidiaries under the license agreements or to
the use of the computer programs and databases listed under Section 4.15 of the
Seller Disclosure Schedule and no proceedings have been instituted, are pending
or are threatened which challenge such rights. Within the 12-month period
immediately prior to the date of this Agreement, neither BMC nor its
Subsidiaries have made use of any intellectual property material to the
operation of its business other than rights under Intellectual Property or the
license agreements, computer programs and databases listed in Section 4.15 of
the Seller Disclosure Schedule.
4.16 TRANSACTIONS WITH AFFILIATES. Section 4.16 of the Seller Disclosure
Schedule lists all material agreements in effect as of the Closing Date (such
schedule to be delivered to the Purchaser not less than five (5) Business Days
prior to the Closing Date), with respect to services provided by or to BMC or
any of its Subsidiaries with respect to any Affiliate of BMC or any of its
Subsidiaries. Except as set forth in Section 4.16 of the Seller Disclosure
Schedule, such agreements were entered into on commercially reasonable terms and
conditions.
4.17 CERTAIN LABOR MATTERS. (a) BMC and its Subsidiaries are in substantial
compliance with all federal, state and other applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and have not and are not engaged in any unfair labor practice,
except where the failure to so comply or such unfair labor practice could not
reasonably be expected to have a Material Adverse Effect on BMC; (b) no unfair
labor practice complaint against BMC or any of its Subsidiaries is pending
before the National Labor Relations Board; (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the knowledge of Seller,
threatened against or involving BMC or any of its Subsidiaries; (d) no
representation question exists respecting the employees of BMC or any of its
Subsidiaries; (e) no grievance which is likely to have a Material Adverse Effect
on BMC exists, no arbitration proceeding arising out of or under any collective
bargaining agreement is pending and no claim therefor has been asserted; (f) no
collective bargaining agreement is currently being negotiated by BMC or any of
its Subsidiaries; and (g) neither BMC nor any of its Subsidiaries have
experienced any material labor difficulty during the last three years.
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4.18 BROKERS. No broker, investment banker, financial advisor or other
Person, other than UBS Securities Corporation, the fees and expenses of which
will be paid by Seller or an Affiliate (other than BMC or any of its
Subsidiaries) thereof (other than as provided in Section 13.5 hereof), is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Seller or any of its Affiliates.
4.19 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section 4.8(a)(i),
4.8(a)(ii), 4.8(b) or 4.19 of the Seller Disclosure Schedule and except for (a)
liabilities disclosed, reserved for or otherwise reflected in the Balance Sheet
and (b) liabilities incurred in the ordinary course of business by BMC after
December 31, 1995, BMC and its Subsidiaries have not incurred any liabilities
(contingent or otherwise) that have had, or would reasonably be expected to
have, a Material Adverse Effect on BMC.
4.20. CERTAIN CONTRACTS. (a) Except as set forth in Section 4.20 of the
Seller Disclosure Schedule, neither BMC nor any of its Subsidiaries is a party
to or bound by any contract, arrangement, commitment or understanding (whether
written or oral) (i) with respect to the employment of any directors, officers,
employees or consultants, (ii) which, due to the consummation of the
transactions contemplated by this Agreement, will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from Purchaser or BMC or any of its
Subsidiaries to any officer or employee of BMC or any of its Subsidiaries, (iii)
which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of
the SEC) to be performed after the date of this Agreement, (iv) which is a
consulting agreement (including data processing, software programming and
licensing contracts) not terminable on notice of 60 days or less involving the
payment of more than $100,000 per annum, (v) which materially restricts the
conduct of any line of business by BMC or any of its Subsidiaries or (vi) with
or to a labor union or guild (including any collective bargaining agreement).
Each contract, arrangement, commitment or understanding of the type described in
this Section 4.20(a), whether or not set forth in Section 4.20 of the Seller
Disclosure Schedule, is referred to herein as a "COMPANY CONTRACT".
(b) Seller has previously delivered or made available to Purchaser true and
correct - copies of each Company Contract listed on Section 4.20 of the Seller
Disclosure Schedule.
(c) Except as set forth in Section 4.20 of the Seller Disclosure Schedule,
(i) each Company Contract is valid and binding and in full force and effect in
all material respects, (ii) BMC and its Subsidiaries have in all material
respects performed all obligations required to be performed by them to date
under each Company Contract, (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, would constitute, a
material default on the part of BMC or any of its Subsidiaries under any such
Company Contract, and (iv) to the knowledge of the Seller, no other party to
such Company Contract is in default in any material respect thereunder.
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ARTICLE V
MORTGAGE BANKING REPRESENTATIONS
--------------------------------
OF SELLER
---------
Seller represents and warrants to Purchaser that:
5.1 PORTFOLIOS AND LISTED AGREEMENTS. (a) Section 5.1(a) of the Seller
Disclosure Schedule contains a list of all Servicing Agreements to which BMC or
any of its Subsidiaries is a party as of the date hereof.
(b) Section 5.1(b) of the Seller Disclosure Schedule contains a list of all
Master Servicing Agreements to which BMC or any of its Subsidiaries is a party
as of the date hereof.
(c) Section 5.1(c) of the Seller Disclosure Schedule contains a list of all
Certificate Administration Agreements to which BMC or any of its Subsidiaries is
a party as of the date hereof.
(d) Section 5.1(d) of the Seller Disclosure Schedule contains a list of all
Mortgage Sale Agreements entered into by BMC or any of its Subsidiaries after
February 28, 1995 to which BMC or any of its Subsidiaries is a party as of the
date hereof. Such Schedule shall be amended within 5 days of the date hereof to
include the 10 largest Mortgage Sale Agreements entered into by BMC and its
Subsidiaries during each of calendar years 1994 and 1993 to which BMC or any of
its Subsidiaries is a party as of the date hereof.
(e) Section 5.1(e) of the Seller Disclosure Schedule contains a list of all
Collateral Certificate Sale Agreements entered into by BMC or any of its
Subsidiaries after February 28, 1995 to which BMC or any of its Subsidiaries is
a party as of the date hereof. Such Schedule shall be amended within 5 days of
the date hereof to include the 10 largest Collateral Certificate Sale Agreements
entered into by BMC and its Subsidiaries during each of calendar years 1994 and
1993, to which BMC or any of its Subsidiaries is a party as of the date hereof.
(f) Section 5.1(f) of the Seller Disclosure Schedule contains a list of all
Investment Commitments to which BMC or any of its Subsidiaries is party as of
the date hereof, except for Pipeline Loans to be funded or acquired by BMC or
any of its Subsidiaries, which Pipeline Loans shall be disclosed as of the Tape
Date on the tape referred to in Section 7.12(b).
5.2 PORTFOLIO INFORMATION. The information to be furnished by Seller to
Purchaser pursuant to Section 7.12(a) and (b) will be true and correct in all
material respects as of the date furnished.
5.3 ENFORCEABILITY OF LISTED AGREEMENTS. (a) Seller has previously made
available to Purchaser true and complete copies of all Listed Agreements. Each
Listed Agreement and the Regulations applicable thereto set forth all the
material terms and conditions of the rights of
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BMC and its Subsidiaries against and obligations to the Agencies, Contract
Parties, Investors and Insurers and there are no written or oral agreements that
modify, supplement or amend any such Listed Agreement other than such
modifications, supplements or amendments which are of a type customary in the
industry and were made in the ordinary course of business. Each of the Listed
Agreements is a valid and binding obligation of BMC and its Subsidiaries, is in
full force and effect in all material respects, and is enforceable against BMC
and its Subsidiaries in accordance with its terms, except as such enforceability
may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization
and other similar laws relating to or affecting creditors' rights generally and
general principles of equity (whether considered in a proceeding in equity or at
law).
(b) There is no pending or, to the knowledge of Seller, threatened
cancellation or partial termination of any Listed Agreement.
(c) Except as set forth in Section 5.3(c) of the Seller Disclosure
Schedule, the rights of BMC and its Subsidiaries under each of the Listed
Agreements are owned by or for the account of BMC and its Subsidiaries, free and
clear of any Liens, including, without limitation, the right to receive
servicing fees, excess servicing fees, master servicing fees, certificate
administration fees or other compensation, if any.
5.4 COMPLIANCE WITH LISTED AGREEMENTS. (a) Except as set forth in Section
5.4(a) of the Seller Disclosure Schedule, there is no material default or breach
by BMC or any of its Subsidiaries under any Listed Agreement, and no event has
occurred which with the passage of time or the giving of notice or both would
constitute a material default or breach by BMC or any of its Subsidiaries under
any such Listed Agreement or would permit termination or modification of any
such Listed Agreement by a third party without the consent of BMC or any of its
Subsidiaries.
(b) Except as set forth in Section 5.4(b) of the Seller Disclosure
Schedule, there exists no material breach of a representation and warranty by
BMC or any of its Subsidiaries set forth in a Listed Agreement (each of which
was made as of the date specified in such Listed Agreement) which gives rise to
a remedy against BMC or any of its Subsidiaries under such Listed Agreement.
5.5 ADVANCES. Except as set forth in Section 5.5 of the Seller Disclosure
Schedule, there are no pooling, participation, Servicing or other agreements to
which BMC or any of its Subsidiaries is a party which obligate it to make
Advances with respect to defaulted or delinquent Mortgage Loans, other than as
provided in GNMA, FNMA or FHLMC pooling and Servicing agreements. Each Advance
is a valid and subsisting amount owing to BMC or any of its Subsidiaries, is
carried on the books of BMC or one of its Subsidiaries at values determined in
accordance with GAAP and is not subject to any setoff or claim of the account
debtor arising from acts or omissions of BMC or one of its Subsidiaries.
5.6 NO RECOURSE. Except as provided in Section 5.6 of the Seller Disclosure
Schedule or in the applicable Regulations, and except with respect to GNMA
so-called "VA no bid" loans,
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neither BMC nor any of its Subsidiaries is a party to (a) any agreement,
arrangement or obligation with or to any Person, including any Agency, Contract
Party or Investor, to repurchase from any such Person any Mortgage Loan,
Collateral Certificate or Mortgaged Property serviced for others or (b) any
agreement, arrangement or understanding to reimburse, indemnify or hold any such
Person harmless or otherwise assume liability with respect to any loss, cost or
expense suffered or incurred as a result of the Foreclosure or sale of any such
Mortgage Loan, Collateral Certificate or Mortgaged Property, except insofar as
(i) such recourse is based upon (A) a breach (or condition equivalent to a
breach) by BMC or any of its Subsidiaries of a representation, warranty,
covenant or undertaking or (B) the act or omission of BMC or one of its
Subsidiaries in respect of such Mortgage Loan, Collateral Certificate or
Mortgaged Property or in connection with such Foreclosure or sale or (ii) BMC or
any of its Subsidiaries incurs expenses in excess of the reimbursement limits,
if any, set forth in a Listed Agreement or applicable Regulation.
5.7 WAREHOUSE LOAN REPRESENTATIONS AND WARRANTIES. With respect to each
Mortgage Loan which, as of any date of determination, is a part of the Warehouse
Loan Portfolio and is not an Extended Warehouse Loan:
(i) the information with respect to such Mortgage Loan set forth in
the Section 5.2(a) Tape is correct in all material respects as at the date or
dates with respect to which such information is furnished as specified herein;
(ii) immediately prior to the transfer and assignment contemplated by
this Agreement, BMC or one of its Subsidiaries is the sole owner and holder of
such Mortgage Loan, free and clear of any and all Liens (other than Liens
securing indebtedness reflected on the Balance Sheet);
(iii) (A) the related Mortgage is a valid, subsisting and enforceable
first lien on the related Mortgaged Property, and (B) except as set forth in
Section 5.7(iii) of the Seller Disclosure Schedule, the related Mortgaged
Property is free and clear of all encumbrances and liens having priority over
the first lien of the related Mortgage (except for liens for real estate taxes
and assessments not yet due and payable) and, if the related Mortgaged Property
is a condominium unit, any lien for common charges permitted by statute;
(iv) neither BMC nor any of its Subsidiaries nor, to Seller's
knowledge, any prior holder of the related Mortgage or the related Mortgage Note
has (A) modified the related Mortgage or the related Mortgage Note that would
cause the information set forth in the Section 5.2(a) Tape to be incorrect in
any material respect, (B) satisfied, canceled or subordinated the related
Mortgage or the related Mortgage Note in whole or in part, (C) released the
related Mortgaged Property in whole or in part from the lien of the related
Mortgage, or (D) executed any instrument of release, cancellation, modification
or satisfaction of the related Mortgage or the related Mortgage Note that would
cause the information set forth in the Section 5.2(a) Tape to be incorrect in
any material respect;
(v) all taxes, governmental assessments, insurance premiums, and
water, sewer and municipal charges previously due and owing relating to the
related Mortgaged Property for
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which an escrow is required, have been paid, or an escrow of funds in an amount
sufficient to pay for every such item which remains unpaid has been established,
to the extent permitted by law;
(vi) to Seller's knowledge, there is no proceeding pending or threatened
for the total or partial condemnation of the related Mortgaged Property and the
related Mortgaged Property is undamaged by water, fire, earthquake or earth
movement, windstorm, flood, tornado or similar casualty, so as to affect
materially adversely the value of the related Mortgaged Property as security for
such Mortgage Loan or the use for which the premises were intended;
(vii) to Seller's knowledge, the related Mortgaged Property is free and
clear of all mechanics' and materialmen's liens or liens in the nature thereof
that have rights coordinate with or prior to the related Mortgage;
(viii) except for such Mortgage Loans secured by cooperative unit shares or
leasehold interests, the related Mortgaged Property consists of a fee simple
estate in real property and, to Seller's knowledge, all of the improvements
which are included for the purpose of determining the appraised value of the
related Mortgaged Property lie wholly within the boundaries and building
restriction lines of such property and no improvements on adjoining properties
encroach upon the Mortgaged Property (unless insured against under the
applicable title insurance policy);
(ix) such Mortgage Loan meets, or is exempt from, applicable state or
federal laws, regulations and other requirements pertaining to usury, and such
Mortgage Loan is not usurious;
(x) to Seller's knowledge, all inspections, licenses and certificates
required to be made or issued with respect to all occupied portions of the
related Mortgaged Property and, with respect to the use and occupancy of the
same, including, but not limited to, certificates of occupancy, have been made
or obtained from the appropriate authorities;
(xi) except for any Mortgage Loans set forth in Section 5.7(xi) of the
Seller Disclosure Schedule, no payment required under such Mortgage Loan is more
than 30 days past due and such Mortgage Loan had no more than one such
delinquency in the preceding 13 months;
(xii) (A) the related Mortgage Note, the related Mortgage and the other
agreements executed in connection therewith are genuine, and each is the legal,
valid and binding obligation of the maker thereof, enforceable in accordance
with its terms except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law), and
(B) to Seller's knowledge, all parties to the related Mortgage Note and the
related Mortgage had legal capacity to execute such Mortgage Note and such
Mortgage and the related Mortgage Note and the related Mortgage has been duly
and properly executed by the related mortgagor;
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(xiii) any and all requirements of any federal, state or local law
with respect to the origination of such Mortgage Loan, including, without
limitation, truth-in-lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity or disclosure laws applicable to such
Mortgage Loan, have been complied with in all material respects;
(xiv) (A) the proceeds of such Mortgage Loan have been fully
disbursed, there is no requirement for future advances thereunder, and (B) all
costs, fees and expenses incurred in making, closing or recording such Mortgage
Loan have been paid except recording fees with respect to a related Mortgage not
recorded but which are in the process of being recorded or fees which are not
the responsibility of BMC or one of its Subsidiaries;
(xv) such Mortgage Loan (except any such Mortgage Loan secured by
related Mortgaged Property located in any state as to which an opinion of
counsel of the type customarily rendered in such state in lieu of title
insurance is instead received) is covered by an ALTA mortgagee title insurance
policy or other generally acceptable form of policy or insurance acceptable to
FNMA or FHLMC, issued by a title insurer acceptable to FNMA or FHLMC, insuring
the originator, its successors and assigns, as to the first priority lien of the
related Mortgage in the original principal amount of such Mortgage Loan and
subject only to (A) the lien of current real property taxes and assessments not
yet due and payable, (B) covenants. conditions and restrictions, rights-of-way,
easements and other matters of public record as of the date of recording of the
related Mortgage generally acceptable to mortgage lending institutions in the
area in which the related Mortgaged Property is located or specifically referred
to in the appraisal performed in connection with the origination of such
Mortgage Loan, (C) liens created pursuant to any federal, state or local law,
regulation or ordinance affording liens for the costs of clean up of hazardous
substances or hazardous wastes or for other environmental protection purposes
and (D) such other matters to which like properties are commonly subject which
do not individually, or in the aggregate materially interfere with the benefits
of the security intended to be provided by the related Mortgage; BMC or one of
its Affiliates and their respective successors and assigns are the sole insureds
of such mortgagee title insurance policy, any assignment of BMC's or such
Affiliate's interest in such mortgagee title insurance policy does not require
any consent of or notification to the insurer which has not been obtained or
made, such mortgagee title insurance policy is in full force and effect, and
such mortgage title insurance policy has an environmental protections lien
endorsement in effect, which is generally equivalent to ALTA 8.1, and, in the
case of such Mortgage Loan which bears an adjustable interest rate, an
adjustable rate mortgage loan endorsement in effect, which is generally
equivalent to ALTA 6.1;
(xvi) the related Mortgaged Property securing such Mortgage Loan is
insured by an insurer acceptable to FHLMC or FNMA against loss by fire and such
hazards as are covered under a standard extended coverage endorsement, in an
amount which is not less than the lesser of 100% of the insurable value of the
related Mortgaged Property and the outstanding principal balance of such
Mortgage Loan; if the related Mortgaged Property is a condominium unit, it is
included under the coverage afforded by a blanket policy for the project; the
insurance policy contains a standard clause naming the originator of such
Mortgage Loan, its successor and assigns, as insured mortgagee; if upon
origination of such Mortgage Loan, the improvements on the related Mortgaged
Property were in an area identified in the Federal Register by the Federal
Emergency Management
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Agency as having special flood hazards, a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect with a generally acceptable insurance carrier, in an amount
representing coverage not less than the least of (A) the outstanding principal
balance of such Mortgage Loan, (B) the full insurable value and (C) the maximum
amount of insurance which was available under the Flood Disaster Protection Act
of 1973, as amended; and the related Mortgage obligates the related mortgagor
thereunder to maintain all such insurance at such mortgagor's cost and expense;
(xvii) to Seller's knowledge, there is no material default, breach,
violation or event of acceleration existing under the related Mortgage or the
related Mortgage Note and no event which, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute a
material default, breach, violation or event of acceleration; and no foreclosure
action is threatened or has been commenced with respect to such Mortgage Loan;
(xviii) to the knowledge of Seller, neither the related Mortgage Note
nor the related Mortgage is subject to any right of rescission, set-off,
counterclaim or defense, 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 the related Mortgage Note or the related Mortgage
unenforceable, in whole or in part, or subject it 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, except, in the case of the exercise of rights under a Mortgage
Note or a Mortgage, as a result of limitations imposed by so-called
single-action laws or similar laws in effect in any state;
(xix) (A) with respect to Mortgage Loans which are not balloon loans,
the related Mortgage Note is payable in monthly payments resulting in complete
amortization of the Mortgage Loan over a term of not more than 360 months, and
(B) with respect to Mortgage Loans which are balloon loans, the related Mortgage
Note has an original term to stated maturity of no more than 84 months, is
payable in level monthly installments of principal and interest based on a
30-year amortization schedule up to the stated maturity date thereof, bears a
fixed mortgage interest rate and provides that the full outstanding principal
balance of such Mortgage Note is due and payable, together with accrued interest
thereon, on its stated maturity date;
(xx) the related Mortgage contains customary and enforceable
provisions such as to 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 realization by judicial or nonjudicial
foreclosure (subject to any limitation arising from any bankruptcy, insolvency
or other law for the relief of debtors), and there is no homestead or other
exemption available to the related mortgagor which would interfere with such
right of foreclosure;
(xxi) to Seller's knowledge, the related mortgagor with respect to
such Mortgage Loan is not a debtor in any state or federal bankruptcy or
insolvency proceeding;
(xxii) the related Mortgaged Property is located in the United States
and consists of a single parcel of real property upon which is built a one to
four family residential property which
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may include a detached home, townhouse, condominium unit, a unit in a planned
unit development or, in the case such Mortgage Loan is secured by cooperative
unit shares, leases or occupancy agreements;
(xxiii) such Mortgage Loan was originated by either: (A) a savings and
loan association, savings bank, commercial bank, credit union, insurance
company, or similar institution which is supervised and examined by a federal or
state authority; (B) a mortgagee approved by the secretary of HUD pursuant to
Sections 203 and 211 of the National Housing Act (an "Approved Mortgagee") or
(C) a mortgage broker sponsored by an Approved Mortgagee; and
(xxiv) such Mortgage Loan is a "qualified mortgage" within the meaning
of Section 8600 of the code.
5.8 MORTGAGE BANKING LICENSES AND QUALIFICATION. (a) Except as set
forth in Section 5.8(a) of the Seller Disclosure Schedule, BMC or one of its
Subsidiaries (i) to the extent required for the conduct of its current business,
is approved (A) by FHA as an approved mortgagee and servicer for FHA Loans, (B)
by VA as an approved lender and service for VA Loans, (C) by FNMA and FHLMC as
an approved seller/servicer of first lien residential mortgages, and (D) by GNMA
as an authorized issuer and approved servicer of GNMA-guaranteed mortgage-backed
securities and (ii) has all other material certifications, authorizations,
licenses, permits and other approvals (together with the approvals and
qualifications set forth in clause (i), the "Licenses") necessary to conduct its
current business.
(b) Except as set forth in Section 5.8(b) of the Seller Disclosure
Schedule, to the knowledge of Seller, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
affect the validity of any License currently possessed by BMC or any of its
Subsidiaries, and all such Licenses will be in full force and effect immediately
after the Closing Date; provided, however, that no representation is made with
respect to the impact or effect of any business, conduct, activities or
regulatory status of Purchaser or any Affiliate thereof on any such License.
(c) BMC and each of its Subsidiaries is in compliance with all requirements
relating to all of its Licenses, and Seller knows of no threatened suspension,
cancellation or invalidation of any such License except where such failure,
non-compliance or threatened suspension, cancellation or invalidation would not
reasonably be expected to have a Material Adverse Effect on BMC.
5.9 MORTGAGE BANKING COMPLIANCE. (a) Except as set forth in Section 5.9(a)
of the Seller Disclosure Schedule, BMC and each of its Subsidiaries is in
compliance in all material respects with (i) all applicable Regulations, (ii)
all orders, writs, decrees, injunctions and other requirements of any court or
governmental authorities applicable to it, its properties and assets and the
conduct of its business and (iii) all Mortgage Loan Documents relating to each
Mortgage Loan, except where the failure to so comply would not reasonably be
expected to have a Material Adverse Effect on BMC. Any and all Regulations and
requirements of any federal, state or local law with respect to the
documentation, underwriting, origination, modification and sale of each Mortgage
Loan in the Servicing Portfolio, including, without limitation, truth
in-lending, real estate settlement procedures,
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consumer credit protection, equal credit opportunity or disclosure laws
applicable to such Mortgage Loan, have been complied with in all material
respects except where such non-compliance would not reasonably be expected to
have a Material Adverse Effect on BMC.
(b) BMC and each of its Subsidiaries have timely filed all reports required
by any Agency, Investor or Insurer or by any federal, state or municipal law,
Regulation or ordinance to be filed by BMC and each of its Subsidiaries except
where the failure to file such reports would not reasonably be expected to have
a Material Adverse Effect on BMC. Neither BMC nor any of its Subsidiaries have
done or failed to do, and have not caused to be done or omitted to be done, any
act required of BMC and its Subsidiaries, the effect of which would operate to
invalidate or materially impair (i) any approval of any Agency or Investor, (ii)
any FHA insurance or commitment of the FHA to insure, (iii) any VA Guarantee or
commitment of the VA to guarantee, (iv) any private mortgage insurance or
commitment of any private mortgage insurer to insure, (v) any title insurance
policy, (vi) any hazard insurance policy, (vii) any flood insurance policy,
(viii) any fidelity bond, direct surety bond, or errors and omissions insurance
policy required by HUD, GNMA, FNMA, FHA, FHLMC, VA or a private mortgage insurer
or (ix) any surety or guaranty agreement, except where such act or failure to
act would not reasonably be expected to have a Material Adverse Effect on BMC.
(c) Except as disclosed in Section 5.9(c) of the Seller Disclosure
Schedule, to the Seller's knowledge, no Agency, Investor or Insurer has (i)
claimed that BMC or any of its Subsidiaries has violated or not complied in any
material respect with the applicable underwriting standards with respect to
Mortgage Loans sold by BMC or such Subsidiary to an Investor or (ii) imposed any
restrictions on the activities (including commitment authority) of BMC or any of
its Subsidiaries. Except as disclosed in Section 5.9(c) of the Seller Disclosure
Schedule, to the knowledge of the Seller, there exist no facts or circumstances
which would entitle an Investor to demand repurchase of a Mortgage Loan or which
would entitle an Insurer (A) to demand indemnification from BMC or any of its
Subsidiaries, (B) to cancel (or deny with respect to any pending Mortgage Loan)
any mortgage insurance held for the benefit of BMC or any of its Subsidiaries or
(C) to reduce any mortgage insurance benefits payable to BMC or any of its
Subsidiaries.
5.10 INQUIRIES. Section 5.10 of the Seller Disclosure Schedule contains a
true and correct list of each audit, investigation and complaint against BMC or
any of its Subsidiaries by any Agency, Investor or Insurer commenced since
February 28, 1995 (and shall be amended within five (5) days hereof to include a
true and correct list of each such audit, investigation and complaint commenced
since January 1, 1992) which resulted in a determination of a material failure
to comply with applicable Regulations or otherwise resulted in (a) in the case
of any one audit, investigation or complaint, a repurchase by BMC or any of its
Subsidiaries of ten or more Mortgage Loans and/or REOs from such Agency,
Investor or Insurer in any period equal to or less than one year, (b)
indemnification by BMC or any of its Subsidiaries in connection with ten or more
Mortgage Loans in any period equal to or less than one year, (c) rescission of
an insurance or guaranty contract or agreement applicable to ten or more
Mortgage Loans or (d) payment of a penalty to an Agency, Investor or Insurer.
Except as set forth in Section 5.10 of the Seller Disclosure Schedule and except
for customary ongoing quality control reviews, no such audit, investigation or
complaint is, to the knowledge of Seller, pending or threatened. Seller has made
available to Purchaser copies of all
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written reports and other material documents received in connection with such
audits, investigations, complaints and inquiries.
5.11 CORRESPONDENT AGREEMENTS. Each Correspondent Agreement is a valid and
binding contract in full force and effect in all material respects. Except as
set forth in Section 5.11 of the Seller Disclosure Schedule, neither BMC nor any
of its Subsidiaries is in material default under any Correspondent Agreement.
5.12. CUSTODIAL ACCOUNTS. BMC and its Subsidiaries have full power and
authority to establish and, to the extent applicable, maintain escrow accounts
("Custodial Accounts") for the Mortgage Loans, and is the lawful fiduciary of
all Custodial Accounts related to the Mortgage Loans. Such Custodial Accounts
comply in all material respects with (a) all applicable Regulations and (b) all
terms of the Mortgage Loans relating thereto, and all such Custodial Accounts
have been maintained in all material respects in accordance with usual and
customary industry practice during any period during which BMC or any of its
Subsidiaries has been responsible for maintaining such Custodial Accounts.
Except as required by applicable Regulations, neither BMC nor any of its
Subsidiaries is required to pay interest on the Custodial Accounts during any
period during which BMC or such Subsidiary is responsible for maintaining such
Custodial Accounts.
5.13. ENVIRONMENTAL MATTERS. Except as set forth in Section 5.13 of the
Seller Disclosure Schedule:
(a) BMC and each of its Subsidiaries are and have been, in compliance in
all material respects with all applicable federal, state and local laws,
including common law, Regulations and ordinances and with all applicable
decrees, orders and contractual obligations relating to pollution, or discharge
of, or exposure to, Hazardous Materials (as defined in Section 5.13(f) hereof)
in the environment or workplace ("Environmental Laws"), except where the failure
to so comply would not reasonably be expected to have a Material Adverse Effect
on BMC.
(b) There is no suit, action or proceeding pending or, to the knowledge of
the Seller, threatened before any governmental entity or other forum in which
BMC or any of its Subsidiaries has been or, with respect to threatened
proceedings, could reasonably be expected to be, named as a defendant (1) for
alleged noncompliance with Environmental Laws, or (ii) relating to the release
into the environment of any Hazardous Material or oil, whether or not occurring
at or on a site owned, leased or operated by BMC or such Subsidiary.
(c) To the knowledge of Seller, there is no reasonable basis for any suit,
claim, action or proceeding as described in subsection (b) of this Section 5.13,
except as would not be reasonably expected, individually or in the aggregate, to
have Material Adverse Effect on BMC.
(d) During the period of the ownership or operation by BMC or any of its
Subsidiaries of any properties currently owned, leased or operated by BMC or any
of its Subsidiaries, there has been no material release of any Hazardous
Material or oil in, on, under or affecting such properties.
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(e) The Seller shall promptly notify Purchaser if it receives any notices,
or learns of any facts, that would cause the representation set forth in this
Section 5.13 to be false in any material respect.
(f) The following definition applies for purposes of this Section 5.13:
"Hazardous Material" mean any pollutant, contaminant, or hazardous substance
under the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C., Section 9601, et. seq. or any similar state law.
5.14. POOL CERTIFICATION. Each Mortgage Loan included in a Mortgage Pool
meets all eligibility requirements for inclusion in such Mortgage Pool, in
accordance with all applicable standards of eligibility for loan pooling. Except
as disclosed in Section 5.14 of the Seller Disclosure Schedule, the Loan
Documents for each Mortgage Loan contain or will contain, within the period
required by applicable Investor Regulations, all items required by applicable
Investor Regulations for the certification of Mortgage Pools by the appropriate
Investor and such Mortgage Pools will be in compliance with all applicable
Investor requirements and guidelines, within the period required by applicable
Investor Regulations. Except as disclosed in Section 5.14 of the Seller
Disclosure Schedule, all Mortgage Pools relating to the Mortgage Loans have been
or will be, within the period required by applicable Investor Regulations,
certified in accordance with applicable Investor Regulations, and the securities
backed by such Mortgage Pools have been issued on uniform documents, promulgated
in the applicable Investor guide without any material deviations therefrom.
Except as disclosed in Section 5.14 of the Seller Disclosure Schedule, all
Mortgage Pools relating to the Mortgage Loans are or will be, within the period
required by applicable Investor Regulations, eligible for recertification by the
appropriate custodian. Except as disclosed in Section 5.14 of the Seller
Disclosure Schedule, the principal balance outstanding and owing on the Mortgage
Loans in each Mortgage Pool equals or exceeds the amount owing to the
corresponding security holder of such Mortgage Pool. No Mortgage Loan has been
bought out of a Mortgage Pool without approval of the appropriate Investor.
5.15 ABSENCE OF OTHER WARRANTIES. Except as and to the extent expressly set
forth in this Agreement, Seller makes no representations or warranties
whatsoever.
For purposes of this Agreement, the term "knowledge of Seller" or similar
qualifiers shall be limited to the actual knowledge of any of the officers and
employees of Seller listed in Section 5.15 of the Seller Disclosure Schedule.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to Seller that:
6.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Purchaser
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the
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nature of its business or properties makes such qualification or license
necessary, except where failure to be so qualified, licensed or in good standing
would not reasonably be expected to have a Material Adverse Effect on Purchaser.
6.2 Capitalization of Purchaser: Existing Options.
----------------------------------------------
(a) Immediately prior to the Closing the authorized capital stock of
Purchaser will consist of 1,500,000 shares of Class A voting common stock, par
value $.01 per share (the "Purchaser Class A Common Stock"), of which 994,286
shares will be outstanding and held of record as set forth in Section 6.2(a) of
the Purchaser Disclosure Schedule, 5,714 shares of Class B nonvoting convertible
common stock, par value $.01 per share (the "Purchaser Class B Nonvoting Common
Stock"), of which 5,714 shares will be outstanding and held of record as set
forth in Section 6.2(a) of the Purchaser Disclosure Schedule, and 5,714 shares
of Class C nonvoting common stock, par value $1.00 per share (the "Purchaser
Class C Nonvoting Common Stock") of which 5,714 shares will be outstanding and
held of record as set forth in Section 6.2(a) of the Purchaser Disclosure
Schedule. All shares of capital stock of Purchaser to be issued on the Closing
Date shall be validly issued, fully paid and non-assessable and shall be free
and clear of all Liens and adverse claims.
(b) Except as set forth on Section 6.2(b) of the Purchaser Disclosure
Schedule, and except as contemplated by the Purchaser Stock Option Plan, there
are no outstanding obligations, warrants, options or other rights to subscribe
for or purchase from Purchaser or other contracts or commitments providing for
the issuance of, or the granting of rights to acquire, shares of any class of
stock of or any equity interest in Purchaser, or any securities or other
instruments convertible into or exchangeable for shares of any class of stock of
or any equity interest in Purchaser other than the rights of Seller created by
this Agreement and the rights created by the other Related Agreements.
(c) Except as set forth on Section 6.2(c) of the Purchaser Disclosure
Schedule, and other than as contemplated by this Agreement with respect to the
BMC Stock, (i) as of the date hereof, Purchaser neither owns nor has the option
to acquire, directly or indirectly, any equity interest in any Person, and (ii)
as of the Closing, Purchaser will neither own nor have the option to acquire,
directly or indirectly, any equity interest in any Person.
(d) Except as set forth on Section 6.2(d) of the Purchaser Disclosure
Schedule, other than as contemplated by this Agreement with respect to BMC,
Purchaser has no Subsidiaries and is not party to any partnership or joint
venture.
6.3 AUTHORITY. Purchaser has the corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by Purchaser of this Agreement and the consummation by it
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Purchaser. This Agreement constitutes
a valid and legally binding agreement of Purchaser, enforceable against
Purchaser in accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
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6.4 NON-CONTRAVENTION. The execution and delivery of this Agreement by
Purchaser does not, and the consummation by Purchaser of the transactions
contemplated hereby and the performance by each of Purchaser of the obligations
which it is obligated to perform hereunder will not, (a) violate any provision
of the constituent documents of Purchaser, (b) assuming that all material
consents, authorizations, orders and approvals of, filings or registrations
with, and notices to, each Governmental Authority listed in Section 6.4(a) of
the Purchaser Disclosure Schedule and all Third Party Consents listed in Section
6.4(b) of the Purchaser Disclosure Schedule have been obtained or made, (i)
violate in any material respect any Applicable Law to which Purchaser is subject
or (ii) violate in any material respect, result in the termination or the
acceleration of, or conflict with in any material respect or constitute a
material default under, any Contract to which Purchaser is a party or by which
any of its assets or property is bound or (c) result in the creation of any Lien
on any of the material assets or properties of Purchaser or the loss of any
material license or other contractual right with respect thereto.
6.5 CONSENTS, APPROVALS AND NOTICES. (a) Except as described in Section
6.4(a) of the Purchaser Disclosure Schedule, no material consent, authorization,
order or approval of, filing or registration with, or notice to, any
Governmental Authority and (b) except as described in Section 6.4(b) of the
Purchaser Disclosure Schedule, no material Third Party Consent under any
Contract to which Purchaser is a party or by which any of its assets or
properties is bound is required for the execution and delivery of this Agreement
by Purchaser and the consummation by Purchaser of the transactions contemplated
hereby, except for such consents., authorizations, orders, approvals, filings,
registrations, notices or Third Party Consents which Seller or its Affiliates
are required to obtain or make.
6.6 LITIGATION. (a) As of the date of this Agreement, there is no
Litigation against Purchaser which if adversely determined would have a Material
Adverse Effect on Purchaser. As of the date of this Agreement, there are no
material orders, judgments, injunctions or decrees applicable to Purchaser.
(b) As of the date of this Agreement, there is no Litigation, to the
knowledge of Purchaser, threatened against Purchaser before any court,
arbitrator or Governmental Authority which if adversely determined would have a
Material Adverse Effect on Purchaser.
6.7 Compliance with Laws; Permits and Licenses. (a) The operations of
Purchaser are being conducted in compliance with all Applicable Laws, except
where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect on Purchaser.
(b) Purchaser holds all permits, certificates, licenses, approvals and
other authorizations (or, where legally permissible, has waivers thereof or is
entitled to exemptions therefrom) of each Governmental Authority necessary for
the operation of its business as presently conducted, except where the failure
to so hold would not reasonably be expected to have a Material Adverse Effect on
Purchaser.
6.8 BROKERS. Except as otherwise set forth in Section 6.8 of the Purchaser
Disclosure Schedule, no broker, investment banker, financial advisor or other
Person is entitled to any broker's,
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finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Purchaser or any of its Affiliates.
6.9 NO REGULATORY IMPEDIMENT. Purchaser is not aware of any fact relating
to its or any Affiliate's business, operations, financial condition or legal
status that could reasonably be expected to impair its ability to obtain, on a
timely basis, all consents, approvals, licenses and permits from Governmental
Authorities necessary for the consummation of the transactions contemplated
hereby.
6.10 NO UNDISCLOSED LIABILITIES; Affiliate Transactions. Except as
disclosed in Section 6.10 of the Purchaser Disclosure Schedule or as otherwise
specifically contemplated by this Agreement, from the date of its organization
to the closing date of the BBMC Mortgage Purchase Agreement (the "BBMC Closing
Date"), (a) Purchaser has not conducted any business or otherwise engaged in any
material activities or incurred any material liabilities (b) Purchaser has
neither declared, paid or otherwise made any dividend or other distribution in
respect of its capital stock, and (c) except as specifically contemplated by the
BancBoston Mortgage Purchase Agreement and the Letter Agreement referenced in
Section 6.11, neither Lee, Purchaser, BancBoston Mortgage or any of their
Affiliates has entered into any agreement, commitment or transaction (including
any waiver under the BancBoston Mortgage Purchase Agreement) with FNB or any of
its Affiliates.
6.11 BANCBOSTON MORTGAGE PURCHASE AGREEMENT. There has been furnished to
the Seller a true and correct copy of the BancBoston Mortgage Purchase
Agreement, and there have been no further amendments or modifications of that
Agreement other than the letter of even date herewith (the "Amendment Letter")
furnished to the Seller setting forth certain proposed amendments thereto.
6.12 ABSENCE OF OTHER WARRANTIES. Except as and to the extent expressly set
forth in this Agreement, Purchaser makes no representations or warranties
whatsoever.
For purposes of this Agreement, the term "knowledge of Purchaser" or
similar qualifiers shall be limited to the actual knowledge of any of the
officers and employees of Purchaser listed in Section 6.12 of the Purchaser
Disclosure Schedule.
ARTICLE VII
COVENANTS
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7.1 CONDUCT OF BUSINESS. During the period from the date hereof to the
Closing Date, without the prior written consent of Purchaser or except as set
forth in Section 7.1 of the Seller Disclosure Schedule or as expressly permitted
or required by this Agreement, Seller agrees that:
(a) Seller will operate the BMC Business only in the ordinary course
consistent with past practice, and Seller shall use commercially reasonable
efforts, consistent with past practice, to preserve for Purchaser BMC's business
organization and operations and to maintain satisfactory relationships with
customers, licensors and others having business relationships with BMC and its
Subsidiaries;
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(b) No change shall be made in the certificate of incorporation or by-laws
or other organizational documents of BMC or any of its Subsidiaries;
(c) No dividend or other distribution shall be declared, paid or otherwise
made (including by way of redemption or otherwise) in respect of the BMC Stock;
(d) Neither BMC nor any of its Subsidiaries shall issue or agree to issue
any shares of its capital stock or other equity interests or securities
convertible into or exchangeable for or other rights with respect to such
capital stock or other equity interests;
(e) No material change shall be made by BMC or any of its Subsidiaries in
accounting methods, principles or practices, unless required by law or by
changes in GAAP;
(f) Except as set forth on Section 7.1(f) of the Seller Disclosure
Schedule, neither BMC nor any of its Subsidiaries shall enter into any material
contract, transaction or commitment otherwise than in the ordinary course of
business consistent with past practice;
(g) Neither BMC nor any of its Subsidiaries shall (i) transfer or otherwise
dispose of or encumber any of its properties or assets, other than in the
ordinary course of business or as contemplated by Section 7.1(m) or other than
Liens incurred in connection with (a) any revolving credit facility or gestation
repo facility entered into by BMC or its Subsidiaries to fund its Warehouse Loan
Portfolio or (b) any indebtedness permitted by clause (iv) below; provided,
however, that nothing in this Agreement shall in any way restrict the ability of
BMC or its Subsidiaries to transfer or otherwise dispose of any Extended
Warehouse Loan or REO; (ii) cancel any debt or waive or compromise any claim or
right, except in the ordinary course of business; (iii) make any capital
expenditure or commitment, other than in the ordinary course of business; (iv)
except with respect to endorsements of negotiable instruments in the ordinary
course of its business or with respect to its mortgage banking business in
accordance with past practice, incur, assume or guarantee any indebtedness for
borrowed money which will constitute a liability of BMC or its Subsidiaries as
of the Closing Date other than (A) purchase money indebtedness, (B) indebtedness
for borrowed money pursuant to credit agreements, credit lines and other
borrowing facilities and arrangements in effect on the date of this Agreement,
(C) refunding of existing indebtedness, (D) intercompany indebtedness between
and among BMC or its Subsidiaries and any Affiliate thereof, (E) indebtedness
incurred by BMC or its Subsidiaries pursuant to any revolving credit facility or
gestation repo facility utilized to fund its Warehouse Loan Portfolio, or (F)
guaranties of letter of credit reimbursement obligations, purchaser orders and
similar obligations issued for the benefit of customers in the ordinary course
of business; or (v) agree to do any of the foregoing;
(h) unless required by applicable law or Investor or Insurer requirements,
neither BMC nor any of its Subsidiaries shall materially alter or vary its
methods or policies of underwriting, originating, warehousing, selling or
servicing, or buying or selling rights to service mortgage loans;
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(i) Neither BMC nor any of its Subsidiaries shall initiate the termination
of any Servicing Agreement, Master Servicing Agreement or Certificate
Administration Agreement,
(j) Neither BMC nor any of its Subsidiaries shall enter into any Servicing
Agreement, Master Servicing Agreement or Certificate Administration Agreement
with recourse against it, except insofar as (i) such recourse is based upon (A)
a breach (or condition equivalent to a breach) by BMC or one of its Subsidiaries
of a representation, warrant, covenant or undertaking or (B) the act or omission
in connection with a foreclosure sale or (ii) BMC or one of its Subsidiaries
incurs expenses in excess of the reimbursement limits, if any, set forth in the
relevant agreement or any applicable Regulation;
(k) Neither BMC nor any of its Subsidiaries shall enter into or amend any
employment, bonus, severance, or retirement contract or arrangement (including
any Plan as described in Section 4.11), or increase any salary or other form of
compensation payable or to become payable to any current or former employee,
officer, or director (including any beneficiary thereof), except as may be
required in order to obtain any favorable determination letter with respect to
any Plan intended to be qualified under Section 401(a) of the Code and except
for merit increases to employees (including directors and executive officers) in
accordance with past practices and general increases to employees (excluding
directors and executive officers) as a class in accordance with past practice or
as required by law and except for payments pursuant to agreements referred to in
Section 4.10 of the Seller Disclosure Schedule; PROVIDED that no such payment
shall be made to discharge a Retained Liability as defined in Section 7.7(e);
(l) Neither BMC nor any of its Subsidiaries shall enter into any agreement,
understanding or transaction with any Affiliate, other than on arms-length
terms, in the ordinary course of business and consistent with past practices, or
as expressly contemplated hereby or by the other Related Agreements;
(m) On or prior to the Closing Date, BMC and its Subsidiaries shall
transfer to the Seller the Excluded Assets identified on Section 7.1(m) of the
Disclosure Schedule and the Seller shall assume from BMC and its Subsidiaries
the Excluded Liabilities identified on Section 7.1(m) of the Disclosure
Schedule, in each case at their respective book values on the date of such
transfer, and the Seller shall pay to the Purchaser in cash on the Closing Date
(or there shall be deducted from the indebtedness of BMC and its Subsidiaries
owed to the Seller) the excess of the aggregate book value of the Excluded
Assets over the aggregate book value of the Excluded Liabilities; PROVIDED,
HOWEVER, that, with respect to Excluded Assets and Excluded Liabilities which
existed as of the date of the Balance Sheet, such book values shall not be
modified other than to reflect amortization or depreciation consistent with past
practices and not inconsistent with GAAP and, with respect to Excluded Assets
and Excluded Liabilities arising after the date of the Balance Sheet, such book
values shall not be modified other than consistent with past practices not
inconsistent with GAAP; and provided, further, that certain of the Excluded
Assets as set forth on such Schedule may be retained by BMC and pledged to the
Seller as security for financing provided by the Seller to BMC on terms and
conditions satisfactory to the Seller and the Purchaser. Those Excluded Assets
which consist of assets formerly held in BMC, or its
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Subsidiaries consist only of assets associated with loan origination or
production activities conducted by such entities (hereinafter referred to as the
"Excluded Production Assets"). In addition, on or prior to the Closing Date, BMC
and its Subsidiaries shall transfer to the Seller and the Seller shall execute
an instrument of assumption in form reasonably acceptable to Purchaser (the
"Instrument of Assumption") by which Seller shall assume and discharge all
liabilities arising out of or relating to the Excluded Production Assets and the
liabilities set forth on Schedule 7.1(m)(ii) (the "Seller Assumed Liabilities");
and
(n) Seller shall not permit or cause BMC or any of its Subsidiaries to make
any material increase in its reserve for Taxes from the amounts of such reserves
reflected in the Balance Sheet other than increases consistent with past
practices and not inconsistent with GAAP.
During the period from the date of this Agreement to the Closing Date, at
Purchaser's request, Seller shall confer on a regular basis with Purchaser as to
the BMC Business, and report periodically on the general status of ongoing
operations of BMC and its Subsidiaries.
7.2 ACCESS; CONFIDENTIALITY. Seller agrees to cause BMC and its
Subsidiaries to permit Purchaser and its accountants, counsel and other
authorized representatives to have, during the period from the date of this
Agreement to the Closing Date, reasonable access to the premises, books and
records of BMC and its Subsidiaries at all reasonable times upon reasonable
notice. Seller agrees to cause BMC and its Subsidiaries to make available to
Purchaser, upon reasonable advance notice and at all reasonable times, the
officers of BMC and its Subsidiaries, as Purchaser may reasonably request,
provided that such availability shall not interfere with the normal operations
of BMC and its Subsidiaries. Seller shall cause BMC and its Subsidiaries to
furnish Purchaser with such financial and operational data and other information
with respect to the business and properties of BMC and its Subsidiaries as
Purchaser shall from time to time reasonably request. Any information regarding
BMC and its Subsidiaries heretofore or hereafter obtained from Seller or BMC and
its Subsidiaries by Purchaser or its representatives shall be subject to the
terms of the Confidentiality Agreement, and such information shall be held by
Purchaser and its representatives in accordance with the terms of the
Confidentiality Agreement.
7.3 REASONABLE EFFORTS: TAKING OF NECESSARY ACTION. (a) Each of the parties
hereto agrees to use its all reasonable efforts to take or cause to be taken all
actions and promptly to do or cause to be done all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement.
(b) Purchaser shall (i) as soon as practicable after the date hereof, file
such applications, notices, registrations and requests as may be required or
advisable to be filed by it with any Governmental Authority in connection with
the transactions contemplated hereby, (ii) furnish Seller with copies of all
documents (except documents or portions thereof for which confidential treatment
has been requested or given) and correspondence (A) prepared by or on behalf of
Purchaser for submission to any Governmental Authority and (B) received by or on
behalf of Purchaser from any Governmental Authority, in each case in connection
with the transactions contemplated hereby, and (iii) use all reasonable efforts
to consult with and keep
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Seller informed as to the status of such matters. To the extent that any
application, notice, registration or request so filed contains any significant
information relating to Seller or BMC or its Subsidiaries, prior to Purchaser
submitting such application, notice, registration or request to any Governmental
Authority, Seller shall have the right to approve any such information that
relates to Seller or BMC or its Subsidiaries (which approval shall not be
unreasonably withheld).
(c) Seller shall use all reasonable efforts to cooperate with Purchaser in
the preparation and filing of all applications, notices, registrations and
responses to requests for additional information from Governmental Authorities
made by Purchaser with any Governmental Authority in connection with the
transactions contemplated by this Agreement, including providing such
information as Purchaser may reasonably request for inclusion in such
applications, notices, registrations and responses.
7.4 INSURANCE; RISK OF LOSS. (a) Effective as of the Closing Date: (i)
Seller may terminate or cause its Affiliates to terminate all coverage relating
to BMC and its Subsidiaries and their respective businesses, assets and current
or former employees under any general corporate policies of insurance,
cancelable surety bonds and hold harmless agreements of Seller for the benefit
of BMC and its Subsidiaries as listed in Section 7.4 of the Seller Disclosure
Schedule (provided that no such termination of occurrence liability policies
shall be effected so as to prevent BMC and its Subsidiaries from recovering
under such policies for losses from events occurring prior to the Closing Date);
and (ii) Purchaser shall become solely responsible for all insurance coverage
and related risk of loss based on events occurring on and after the Closing Date
with respect to BMC and its Subsidiaries and their respective businesses, assets
and current or former employees or employees terminated after the Closing Date.
(b) Notwithstanding the provisions of Section 7.4(a), to the extent that
(i) any insurance Policies controlled by Seller and its Affiliates ("SELLER'S
INSURANCE POLICIES") cover any loss, liability, claim, damage or expense
relating to BMC or its Subsidiaries or their respective businesses, assets and
current or former employees ("BMC LIABILITIES") and relating to or arising out
of occurrences prior to the Closing Date and (ii) Seller's Insurance Policies
continue after the Closing Date to permit claims to be made thereunder with
respect to BMC Liabilities relating to or arising out of occurrences prior to
the Closing Date ("BMC Claims"), Seller shall cooperate and cause its Affiliates
to cooperate with Purchaser in submitting BMC Claims (or pursuing BMC Claims
previously made) on behalf of Purchaser under Seller's Insurance Policies.
(c) To the extent that, after the Closing Date, Purchaser or Seller
requires any information regarding claim data, payroll or other information in
order to make filings with insurance carriers, Seller shall promptly supply such
information to Purchaser and Purchaser shall promptly supply such information to
Seller.
7.5 ASSUMPTION OF PROCEEDINGS. From and after the Closing Date, Purchaser
shall. or shall cause BMC and its Subsidiaries to, assume the defense of, and
Purchaser shall indemnify and hold each Indemnified Seller Entity harmless from
and against, any and all Litigations involving, or related to, BMC and its
Subsidiaries; provided, however, that neither the Purchaser nor BMC or its
Subsidiaries shall have any responsibility or liability under this Section 7.5
with
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respect to a Litigation which constitutes a breach of the representations and
warranties contained in Section 4.8, and to which the Purchaser is entitled to
indemnification under Article XII.
7.6 NAME AND MARKS. On the Closing Date, BMC will change its name to a name
which does not include the name "Barnett," "BancPLUS" or "Loan America", or any
derivative thereof. As of the Closing Date, Purchaser will cease the use of the
designation "Barnett Mortgage Company", "BancPLUS" or "Loan America", or any
derivative thereof, in connection with Purchaser's operation of the business of
BMC and will eliminate the use of any other designation or symbol indicating
affiliation after the Closing Date with Barnett Banks, Inc. ("Parent") or any
Affiliate of Parent. Insofar as promotional materials are concerned, placement
on the covers thereof a prominent legend negating affiliation with Parent or any
Affiliate of Parent shall be deemed compliance with the requirements of this
Section with respect to materials on hand as of the Closing Date, which
materials may be used or distributed by Purchaser for a period of no more than
forty-five (45) days following the Closing Date but in all events such use or
distribution shall cease as soon after the Closing Date as is reasonably
practicable.
7.7 Employment and Benefit Matters.
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(a) Employment.
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(i) At the Closing Date, the Purchaser will cause the Operating
Company to offer to continue the employment of employees fulfilling the job
functions listed on Schedule 7.7(a) (such employees who will be referred to
herein as the "CONTINUING EMPLOYEES").
(ii) The Purchaser will cause the Operating Company to provide any
Continuing Employee whose position is eliminated within six (6) months after the
Closing Date severance payments and benefits substantially equivalent to those
maintained by BMC immediately prior to the Closing Date.
(b) BONUS. The Seller shall provide all funds necessary to implement BMC's
bonus program for 1995, but not for following years, and the Purchaser shall
cause the Operating Company to adopt and announce to Continuing Employees a
bonus program for 1996 and following years appropriate for its industry,
business plans, and operating performance, and taking into account other benefit
plans (including option plans) maintained from time to time by Purchaser.
(c) EMPLOYEE BENEFITS. For a period of six months after the Closing Date,
except as otherwise provided in this paragraph (c), the Purchaser will cause the
Operating Company to provide Continuing Employees with the types of employee
benefits maintained by BMC and its Subsidiaries immediately prior to the Closing
Date and with employee benefits (other than retiree medical and life insurance
benefits and defined benefit pension plans) that are substantially equivalent to
those maintained by BMC and its Subsidiaries immediately prior to the Closing
Date. Thereafter, the Purchaser will cause the Operating Company to provide
Continuing Employees with the same employee benefits maintained by the Operating
Company for its
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employees generally. Whenever the Purchaser causes the Operating Company to
adopt new employee benefit plans or to join employee plans maintained for its
employees and/or the employees of other subsidiaries or Affiliates, the
Purchaser shall cause each such plan to recognize for all purposes (other than
the accrual of benefits attributable to periods before the Closing Date) all
service by Continuing Employees with BMC, the Seller and any other subsidiary or
Affiliate of the Seller. The Seller and the Purchaser contemplate that the
Operating Company will at the Closing Date terminate participation in the
Retirement Plan theretofore maintained by BMC and will replace it with a
profit-sharing plan providing contributions for the accounts of the Continuing
Employees for 1996 not less than the allocations they would have received under
such Retirement Plan and thereafter providing contributions appropriate for the
Operating Company's industry, business plans, and operating performance, and
taking into account other benefit plans (including option plans) maintained from
time to time by Purchaser. Seller agrees, for a period of six (6) months
following the Closing Date, (i) to allow the Operating Company to purchase (on
terms reasonably mutually satisfactory, including advanced funding by the
Operating Company of benefit amounts) coverage and benefits for the Continuing
Employees (and their beneficiaries) and any other employees (and their
beneficiaries) of the Operating Company hired on or after the Closing Date
through Seller's present welfare and fringe benefit plans, and (ii) to continue
to provide (pursuant to the Transition Services Agreement) administrative
services associated with such coverages and benefits. If coverages or benefits
for Seller's similarly situated employees is modified, the coverages or benefits
provided to the employees of the Operating Company (and their beneficiaries)
shall also be modified in the same manner. For such coverages and benefits, the
Operating Company shall pay to Seller or its designated Affiliate, the cost to
Seller's welfare or fringe benefit plans of providing such coverages and
benefits for such period, together with the Operating Company's share of the
administrative expenses of such plans during such period (pursuant to the
Transition Services Agreement).
(d) Stock Plans.
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(i) If the Seller receives appropriate approval from its internal
boards and committees, the Seller will, prior to the Closing Date, accelerate
vesting in all outstanding stock options granted to Continuing Employees, and
Continuing Employees will have to exercise all options prior to the Closing
Date. Otherwise, the options will terminate.
(ii) If the Seller receives appropriate approval from its internal
boards and committees, the Seller will cause all outstanding restricted stock
awarded to Continuing Employees to become free of all restrictions, effective as
of the Closing Date.
(e) Seller shall retain all liabilities and obligations ("ERISA RETAINED
LIABILITIES") for (i) providing post-retirement medical and life insurance
benefits to all current and former employees and officers of BMC and its
Subsidiaries (and any eligible dependents thereof) who terminate employment on
or before the Closing Date; (ii) payment of amounts deferred by Continuing
Employees under Seller's Management Excess Savings and Deferral Plans through
the Closing Date (plus interest thereon in accordance with the terms of said
plans); (iii) all liabilities and obligations arising out of, resulting from, or
relating to any employee benefit plan,
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program, or arrangement maintained or contributed to by the Parent or any entity
which is or has been aggregated with the Parent for purposes of section 414 of
the Code or section 4001 of ERISA, other than liabilities or obligations arising
out of, resulting from, or relating to the employee benefit plans, programs, and
arrangements which are maintained or contributed to solely by Honolulu Mortgage
Company, Inc. and which are disclosed on SCHEDULE 4.11(a); and (iv) providing
all benefits and paying all amounts due now or in the future under all
employment, severance and change of control agreements and stay put bonuses
entered into prior to the Closing Date between BMC or its Subsidiaries or Seller
and any of their respective current or former employees and officers, other than
such agreements and bonuses as set forth on Schedule 7.7(e)(iv).
(f) If a Continuing Employee who performed services as of the Closing Date
at the BMC Jacksonville facility is offered reemployment by Seller or one of its
Affiliates within ninety (90) days of such cessation of employment (each, a
"Rehired Employee"), then (x) the Rehired Employee shall be credited for all
purposes under the employee benefit plans, programs, and arrangements maintained
or contributed to by the Seller or its Affiliates with all service with the
Operating Company, and (y) neither Purchaser nor its Subsidiaries shall have any
further obligation to pay severance commencing as of the date of the offer of
reemployment by the Seller or its Affiliates. Seller agrees that neither Seller
nor any of its Affiliates will offer employment to any Continuing Employee for a
period of ninety (90) days following the Closing Date unless (i) such Continuing
Employee has been terminated by BMC or its Subsidiaries without cause or (ii)
the Purchaser consents thereto in writing.
7.8 PUBLIC ANNOUNCEMENTS. Unless otherwise required by law, prior to the
Closing Date, no news release or other public announcement pertaining to the
transactions contemplated by this Agreement shall be made by or on behalf of any
party hereto without the prior approval of the other parties hereto; provided,
that Seller may make such a release or announcement after notice to Purchaser
and after giving Purchaser a reasonable opportunity to review such release or
announcement. Unless otherwise required by law, no news release or other public
announcement shall be made by or on behalf of a party hereto regarding the
financial terms of this Agreement without the prior approval of the other
parties hereto.
7.9 POST-CLOSING ACCESS TO BUSINESS RECORDS AND ACCOUNTING COOPERATION.
Purchaser agrees that, following the Closing Date, Seller and its Affiliates,
and their respective attorneys, accountants, officers and other representatives,
shall have reasonable access, at all reasonable times upon reasonable notice, to
the books and records of Purchaser to the extent they relate to a period prior
to the Closing Date (and shall permit such Persons to examine and copy such
books and records to the extent requested by such party), and shall cause the
directors, officers and employees of the Purchaser to furnish all information
reasonably requested by Seller or any Affiliate thereof in connection with
financial reporting and tax matters (including financial and tax audits and tax
contests) and other similar business purposes. Purchaser shall not destroy or
dispose of any such books and records without the prior written consent of
Seller prior to the fifth anniversary of the Closing Date. On and after the
fifth anniversary of the Closing Date, Purchaser shall not destroy or dispose or
allow the destruction or disposition of such books and records without first
having offered in writing to deliver such books and records
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to Seller. Purchaser may dispose of the books and records described in such
notice if Seller shall fall to request copies of such books and records within
90 days after receipt of the notice described in the preceding sentence.
7.10 FURTHER ASSURANCES. Each party hereto shall cooperate with the others,
and execute and deliver, or use all reasonable efforts to cause to be executed
and delivered, all such other instruments, including instruments of conveyance,
assignment and transfer, and to make all filings with and to obtain all
consents, approvals or authorizations of any governmental or regulatory
authority or any other Person under any permit, license, agreement, indenture or
other instrument, and take all such other actions as such party may reasonably
be requested to take by the other parties hereto from time to time, consistent
with the terms of this Agreement, in order to effectuate the provisions and
purposes of this Agreement and the transactions contemplated hereby.
7.11 OTHER AGREEMENTS. At the Closing, Seller and Purchaser shall enter
into the Subscription Agreement, the Amended and Restated Shareholder Agreement,
the Amended and Restated Registration Rights Agreement, the Transitional
Services Agreements, the Marketing Agreement, the Mortgage Loan Servicing
Agreement, and the Operating Agreement.
7.12 Delivery of Tapes.
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(a) Seller shall deliver to Purchaser at least five (5) Business Days prior
to the Closing Date a tape (magnetic media) which sets forth certain
information, as of the end of the month most recently ended at least fifteen
(15) days prior to the Closing Date (the "TAPE DATE"), with respect to each
Mortgage Loan that is a part of the Servicing Portfolio, the Master Servicing
Portfolio, the Certificate Administration Portfolio or the Warehouse Loan
Portfolio (the "SECTION 7.12(a) TAPE").
(b) Seller shall deliver to Purchaser at least five (5) Business Days prior
to the Closing Date a tape (magnetic media) which sets forth certain information
as of the Tape Date with respect to each Pipeline Loan.
7.13. ASSIGNMENT OF HEDGE POSITIONS. Seller shall cause BMC to maintain
through the Closing the hedge position which it has in place on the date of
execution of this Agreement with respect to its Servicing Portfolio; provided,
however, that Seller or BMC shall make such changes thereto as Purchaser may
from time to time reasonably recommend in order to protect the economic value of
the Servicing Portfolio, so long as no such change shall require Seller to make
any further investment in such hedge position. All hedge positions relating to
the assets of BMC maintained by the Seller and its Affiliates are held by BMC.
7.14. ADJUSTMENT OF SERVICING FEES. Prior to the Closing, Seller shall
cause the Servicing Agreements with respect to the Servicing Portfolio to be
amended so that servicing fees payable thereunder with respect to such of the
Servicing Portfolio as is comprised of adjustable rate mortgages or balloon
payment mortgages shall be the greater of (i) the fee in effect on the date
hereof and (ii) three eighths of one percent, and so that such fees payable with
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respect to such of the loans reflected on the consolidated Balance Sheet of
Seller as is comprised of fixed rate mortgages shall be the greater of (i) the
fee in effect on the date hereof and (ii) one quarter of one percent.
7.15. ESCROW ACCOUNTS. Prior to the Closing Seller shall take such action
as is necessary to ensure that Purchaser has the benefit of all escrow accounts
currently maintained by Seller, BMC or any of its Subsidiaries with respect to
loans included in the Servicing Portfolio.
7.16 FINANCIAL STATEMENT DELIVERY. Seller shall use its reasonable efforts
to deliver to Purchaser as soon as practicable following the date hereof, and in
any event prior to March 25, 1996, all historical and selected financial
information and statements concerning BMC and its subsidiaries as would be
required for filings made by Purchaser under the Act in connection with the
public offering of its securities as if the transactions contemplated by this
Agreement and the BancBoston Mortgage Purchase Agreement were consummated (the
"Historical and Selected Financial Statements") and shall cooperate, and cause
its certified public accountants to cooperate, with Purchaser in the preparation
of pro forma financial information giving effect to the transactions
contemplated hereby and by the BancBoston Mortgage Purchase Agreement.
7.17 PROHIBITION OF CERTAIN AFFILIATE TRANSACTIONS. From and after the date
hereof through the Closing Date, except as specifically contemplated by the
BancBoston Mortgage Purchase Agreement or the Amendment Letter or as set forth
on Schedule 7.17(i) Purchaser and its Subsidiaries shall not, declare, pay or
otherwise make any dividend or other distribution in respect of its capital
stock and, (ii) none of Lee, the Purchaser, the Operating Company or any of
their Affiliates shall enter into any agreement, commitment or transaction
(including any waiver other than a waiver which would not significantly affect
the business of Purchaser or BancBoston Mortgage or the benefits afforded
Purchaser or BancBoston Mortgage under the BancBoston Mortgage Purchase
Agreement) with FNB or any of its Affiliates.
7.18 338(h)(10) TRANSACTION. Seller and Purchaser intend and agree that the
acquisitions of stock of BMC and BancBoston Mortgage by Purchaser pursuant to
the terms of this Agreement and the BancBoston Mortgage Agreement, respectively
(the "Stock Acquisitions"), shall not be treated as transactions under Code
Section 351. Neither Purchaser nor Seller will take any action that will cause
the Stock Acquisitions to be treated as transactions under Code Section 351 and
neither Purchaser nor Seller have knowledge of any facts that would cause the
Stock Acquisitions to be so taxable. Seller and Purchaser shall be deemed to
have knowledge of the terms of this Agreement, the BancBoston Mortgage
Agreement, the Amended and Restated Shareholder Agreement, the appendices and
exhibits of any of them, the related agreements described in any of the
foregoing, and execution by Purchaser of such agreements and performance by
Purchaser substantially in accordance with the terms thereof shall not be deemed
to be actions of the Purchaser that will cause the Stock Acquisition to be
treated as a transaction under Code Section 351.
7.19 MATERIAL CONSENTS. The Seller shall have obtained each material
consent, authorization, approval, waiver, order, license, certificate or permit
or act of or from, or notice to, any Rating Agency or party to any Contract
(collectively, "Third Party Consents") to which
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Seller, BMC or any of BMC's Subsidiaries is a party or by which any of their
respective assets or properties are bound, is required for the execution and
delivery of this Agreement by Seller, the consummation by Seller of the
transactions contemplated hereby, and the conduct by BMC and its Subsidiaries
following the Closing of its business on substantially the same basis as such
business was conducted prior to the Closing, except for such Third Party
Consents which are required solely by reason of the specific ownership or
regulatory status of Purchaser of its Affiliates.
7.20 REPURCHASE OBLIGATIONS OF SELLER. Seller and Purchaser agree that the
responsibility for any repurchase or indemnification requests received by
Purchaser or its Subsidiaries related to the sale of loans prior to the Closing
by BMC or its Subsidiaries shall be governed by the terms of Article VIII and
XIV of the Operating Agreement.
ARTICLE VIII
CONDITIONS TO THE CLOSING
-------------------------
8.1 CONDITIONS TO OBLIGATION OF EACH PARTY. The respective obligations of
each of the parties hereunder are subject to the satisfaction, on or prior to
the Closing Date, of the following conditions:
(a) NO INJUNCTION. At the Closing Date, there shall be no (i) injunction,
restraining order or decree of any nature of any court or Governmental Authority
of competent jurisdiction in effect that restrains or prohibits the consummation
of the transactions contemplated under this Agreement or (ii) pending action,
suit or proceeding brought by any Governmental Authority which seeks to restrain
or prohibit consummation of such transactions.
(b) REGULATORY AUTHORIZATIONS. Each consent, authorization, order, approval
or License listed in Section 4.4(a), 4.4(b) or 5.8(a) of the Seller Disclosure
Schedule or Section 6.4(a) or 6.4(b) of the Purchaser Disclosure Schedule shall
have been obtained and any applicable waiting period in respect thereof shall
have expired or been terminated. No such consent, authorization, order, approval
or License shall have been granted subject to the imposition of any term,
condition or restriction that so materially adversely affects the economic or
business benefits of the transaction contemplated by this Agreement to the
recipient thereof as to render inadvisable the consummation of such transaction.
Notwithstanding the foregoing, the parties agree that satisfaction of the
condition set forth in this Section 8.1(b) shall be determined without regard to
whether Seller is able to deconsolidate from BMC for financial statement,
regulatory and reporting purposes.
(c) FINANCINGS. Purchaser shall have received financing on terms acceptable
to Purchaser and Seller in an amount sufficient to consummate the transaction
herein contemplated; provided, however, that at the request of Purchaser, Seller
shall provide up to $75,000,000 of financing on the terms set forth on SCHEDULE
8.1(c); provided further, however, that Seller's obligations to provide such
financing shall be conditioned on Purchaser having received not less
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than $85,000,000 of financing on terms which, after giving effect to the
agreements contemplated by Schedule 7.17, are substantially similar to those set
forth on Schedule 8.1(c). Seller acknowledges receipt of the commitment letter,
dated February 28, 1996, from Chemical Bank, N.A. relating to its commitment to
lend up to $1,500,000,000 to Purchaser and BancBoston Mortgage on the terms set
forth therein and that such terms are acceptable to Seller.
(d) ACQUISITION OF BANCBOSTON MORTGAGE. The Acquisition of BancBoston
Mortgage in accordance with the terms of the BancBoston Mortgage Purchase
Agreement shall be consummated prior to or concurrently with the consummation of
the Acquisition of BMC hereunder. Purchaser hereby agrees that it will not waive
satisfaction of any condition to Closing under the BancBoston Mortgage Purchase
Agreement without the prior written consent of Seller hereunder, unless the
waiver thereof would not significantly affect the business of Purchaser or
BancBoston Mortgage or the benefits afforded Purchaser or BancBoston Mortgage
under the BancBoston Mortgage Purchase Agreement.
8.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PURCHASER. The obligation
of Purchaser to consummate the transactions contemplated by this Agreement is
subject to the satisfaction at or prior to the Closing Date of each of the
following additional conditions;
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Seller contained in Articles IV and V of this Agreement shall have been true and
correct in all material respects as of the BBMC Closing Date as though made at
and as of the BBMC Closing Date, except to the extent that any representation
and warranty is made as of a specified date other than the BBMC Closing Date, in
which case such representation and warranty shall be true and correct as of such
date.
(b) PERFORMANCE OF COVENANTS. Seller shall have performed in all material
respects all obligations and agreements, and complied in all material respects
with all covenants and conditions, contained in this Agreement to be performed
or complied with by it prior to or at the Closing Date.
(c) SERVICING PORTFOLIO. The aggregate principal amount of the Mortgage
Loans in the Servicing Portfolio shall not be less than $30,500,000,000 as of
the Closing Date.
(d) CERTIFICATES. Purchaser shall have received a certificate of Seller,
dated the Closing Date, executed on behalf of Seller to the effect that the
conditions specified in Sections 8.2(a) and 8.2(b) with respect to it have been
fulfilled.
(e) AUDITED FINANCIAL STATEMENTS. There shall have been delivered to
Purchaser (i) audited financial statements of BMC and its Subsidiaries as of
December 31, 1995 and for the year then ended, accompanied by an unqualified
report of independent accountants of national recognition confirming the
substantial accuracy of the unaudited Financial Statements as of December 31,
1995 and for the year then ended referenced in Section 4.7 and (ii) the
Historical and Selected Financial Statements.
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(f) OTHER TRANSACTIONS. Each of the Related Agreements shall have been duly
executed and delivered by Seller and shall be in full force and effect and the
transactions contemplated by Related Agreements to occur at the Closing shall
have been consummated and become effective in accordance with their respective
terms.
8.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF SELLER. The obligation of
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction at or prior to the Closing Date of each of the following
additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Purchaser contained in Article VI of this Agreement shall be true and correct in
all material respects as of the Closing Date as though made at and as of the
Closing Date, except to the extent that any representation and warranty is made
as of a specified date other than the Closing Date, in which case such
representation and warranty shall be true and correct as of such date.
(b) PERFORMANCE OF COVENANTS. Purchaser shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions, contained in this Agreement to be
performed or complied with by it prior to or at the Closing Date.
(c) REPAYMENT OF INDEBTEDNESS OF BMC TO SELLER. Except as otherwise
contemplated by Section 8.1(c), BMC and its Subsidiaries shall have repaid or
prepaid all indebtedness owing from it to Seller and shall have terminated all
commitments of Seller to fund additional indebtedness of BMC and its
Subsidiaries.
(d) CERTIFICATE. Seller shall have received a certificate of Purchaser,
dated the Closing Date, executed on behalf of Purchaser, to the effect that the
conditions specified in Sections 8.3(a) and 8.3(b) have been fulfilled.
(e) OTHER TRANSACTIONS. Each of the Related Agreements shall have been duly
executed and delivered by Purchaser and shall be in full force and effect and
the transactions contemplated by Related Agreements to occur at the Closing
shall have been consummated and become effective in accordance with their
respective terms.
ARTICLE IX
TERMINATION
-----------
9.1. GROUNDS FOR TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of all of the parties hereto;
(b) by any party hereto (i) thirty (30) days after the date on which any
request or application for a required regulatory approval, authorization,
consent or order from any federal or
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state banking or other regulatory authority or agency necessary for the
consummation of the transactions contemplated hereby shall have been denied,
unless within the thirty (30) day period following such denial a petition for
rehearing or an amended application has been filed with such governmental
regulatory authority or agency; PROVIDED, HOWEVER, that no party shall have the
right to terminate this Agreement pursuant to this Section 11.1(b) if such
denial shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe in any material respect the covenants and
agreements of such party set forth herein, or (ii) if any federal or state
banking or other regulatory authority or agency, or court of competent
jurisdiction, shall have issued a final permanent order, injunction or other
legal restraint or prohibition preventing the consummation of the transactions
contemplated hereby and the time for appeal or petition for reconsideration of
such order, injunction, restraint or prohibition shall have expired without such
appeal or petition being granted or such order, injunction, restraint or
prohibition shall otherwise have become final and non-appealable;
(c) by any party hereto (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein), in the event of a material breach by the other party of any
representation, warranty, covenant or other agreement contained herein, which
breach is not cured after forty-five (45) days written notice thereof is given
to the party committing such breach; or
(d) by any party hereto if the Closing shall not have occurred on or prior
to September 30, 1996, unless the failure of the Closing to occur by such date
shall be due to the failure of the party seeking to terminate this Agreement
hereunder to perform or observe in any material respect the covenants and
agreements of such party set forth in this Agreement.
9.2. EFFECTS OF TERMINATION. In the event of termination of this Agreement
as provided in Section 9.1, this Agreement shall forthwith become null and void
(other than this Section 9.2, the last sentence of Section 7.2 and Section 13.5,
which shall remain in full force and effect) and there shall be no further
liability on the part of any party or their respective officers, directors or
stockholders (or those who have subscribed for shares of stock) to any other
party, except in the event of a willful breach by a party of any representation.
warranty, covenant or agreement contained in this Agreement, in which case, the
breaching party shall remain liable for any and all Damages sustained or
incurred by the non-breaching parties as a result thereof or in connection
therewith or with the enforcement of its rights hereunder.
ARTICLE X
TAX MATTERS
-----------
10.1 RETURNS. Seller shall have the exclusive obligation and authority to
file or cause to be filed all Tax Returns that are required to be filed by or
with respect to the income, assets or operations of BMC and its Subsidiaries for
all taxable years or other taxable periods ending on or prior to the Closing
Date (the "PRE-CLOSING PERIODS"), except for information Tax Returns prepared on
Internal Revenue Service Forms 1098 and 1099 (and any variants of each), and
summary Tax Returns relating thereto ("INFORMATION TAX RETURNS"). Except as
provided in the preceding sentence,
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Purchaser shall have the exclusive obligation and authority to file or cause to
be filed all Tax Returns that are required to be filed by or with respect to the
income, assets or operations of BMC and its Subsidiaries or any successor
thereto for any taxable year or other taxable period. No later than 30 days
prior to the due date for the filing of (i) any Tax Return with respect to any
taxable year or other taxable period of BMC and its Subsidiaries beginning on or
before the Closing Date and ending after the Closing Date (the "OVERLAP
PERIOD"), or (ii) any Information Tax Return, Purchaser shall (a) provide Seller
with written notice, which notice shall set forth Purchaser's calculations
regarding the amount of Taxes for which Purchaser determines Seller is obligated
to reimburse Purchaser or purchaser is obligated to reimburse Seller, as the
case may be, pursuant to Section 10.3(a), or for which BMC and its Subsidiaries
are obligated to reimburse Seller or Seller is obligated to reimburse BMC and
its Subsidiaries, as the case may be, under Section 10.3(d), in sufficient
detail and particularity to enable Seller to verify the amount of such Taxes for
which Seller is obligated to reimburse Purchaser or Purchaser is obligated to
reimburse Seller, as the case may be, under Section 10.3(a) or for which BMC and
its Subsidiaries are obligated to reimburse Seller or Seller is obligated to
reimburse BMC and its Subsidiaries, as the case may be, under Section 10.3(d),
(b) provide Seller with a draft of such Tax Return (or appropriate summaries
thereof in the case of Information Tax Returns) and (c) provide Seller access to
all records reasonably necessary to enable Seller and its representatives to
evaluate the draft Tax Returns (or such summaries) provided with such notice. No
later than 15 days prior to the due date for the filing of such Tax Return,
Seller shall notify Purchaser of any reasonable objections Seller may have to
Purchaser's calculations regarding the amount of such Taxes and to any items set
forth in such draft Tax Return (or such summaries). Purchaser and Seller agree
to consult and resolve in good faith any such objection, it being understood and
agreed that in the absence of any such resolution, any and all such objections
shall be resolved in accordance with the procedure described in Section 10.8.
10.2 CONTESTS. Seller and its duly appointed representatives shall have the
exclusive authority to control any audit or examination by any taxing authority,
initiate any claim for refund, amend any Tax Return and contest, resolve and
defend against any assessment for additional Taxes, notice of Tax deficiency or
other adjustment of Taxes of or relating to any liability of BMC and its
Subsidiaries reflected on any Tax Returns described in the first sentence of
Section 10.1; PROVIDED, HOWEVER, that neither Seller nor any of its appointed
representatives shall, without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld, enter into any settlement of any
contest or otherwise compromise any issue that affects or may affect materially
the Tax liability of Purchaser BMC and its Subsidiaries for any taxable year or
other taxable period or portion thereof ending after the Closing Date. Except as
provided in the preceding sentence, Purchaser and its duly appointed
representatives shall have the exclusive authority to control any audit or
examination by any taxing authority, initiate any claim for a refund, amend any
Tax Return and contest, resolve and defend against any assessment for additional
Taxes, notice of Tax deficiency or other adjustment of Taxes of or relating to
any liability BMC and its Subsidiaries or any successor thereto for Taxes for
any taxable year or other taxable period ending after the Closing Date;
PROVIDED, HOWEVER, that neither Purchaser, nor any of its duly appointed
representatives shall, without the prior consent of Seller, which consent shall
not unreasonably be withheld, enter into any settlement of any contest or
otherwise compromise any issue that would require payment by Seller of any
amount under Section 10.3 unless Purchaser shall have waived any right to
indemnification for Taxes from Seller. Seller shall be entitled to any Tax
refund relating to BMC and its Subsidiaries
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to the extent such Tax refund relates to any taxable year or other taxable
period or portion thereof ending on or prior to the Closing Date except to the
extent such refund is the result of the carryback of losses or credits relating
to taxable years or other periods or portions thereof ending after the Closing
Date. BMC shall be entitled to all other Tax refunds relating to BMC and its
Subsidiaries.
10.3 Payment of Taxes.
----------------
(a) Taxes of BMC and its Subsidiaries that relate to the Overlap Period
shall be apportioned between the portion of such period ending on the Closing
Date and the portion of such period beginning after the Closing Date on the
basis of (i) an interim closing of the books as to Taxes based upon or measured
with reference to income, sales, receipts, or the like, or (ii) a per diem
allocation reflecting the number of days in the applicable Tax period (A)
through and including the Closing Date and (B) after the Closing Date in all
other cases, and based on accounting methods, elections and conventions that do
not have the effect of distorting income or expenses. Seller shall pay to
Purchaser or the appropriate taxing authority the Taxes calculated with respect
to the portion of the Overlap Period ending on the Closing Date (as determined
by Seller and Purchaser using the procedure set forth under Section 10.1), but
any such payment required by Seller shall be reduced by the amount of such Taxes
already paid by Seller or any Affiliate of Seller (including, without
limitation, BMC and its Subsidiaries) on or prior to the Closing Date. If the
amount of Taxes previously paid by Seller or any Affiliate of Seller (including,
without limitation, BMC and its Subsidiaries) on or prior to the Closing Date
with respect to the portion of the Overlap Period ending on the Closing Date
exceeds the actual amount of Taxes due with respect to such period, then
Purchaser shall promptly pay any such excess to Seller.
(b) Except as otherwise provided in this Section 10.3, Seller agrees to
pay, indemnify and hold harmless Purchaser and BMC and its Subsidiaries against
all Taxes of or with respect to BMC and its Subsidiaries for all Pre-Closing
Periods and, with respect to the Overlap Period, the portion of such taxable
year or taxable period ending on the Closing Date.
(c) Except as otherwise provided in this Section 10.3, Purchaser agrees to
pay, indemnify and hold harmless Seller and its Affiliates from and against all
Taxes of or with respect to BMC and its Subsidiaries for all taxable years or
other taxable periods beginning after the Closing Date and, with respect to the
Overlap Period, the portion of such taxable year or taxable period commencing
after the Closing Date.
(d) On and after the Closing Date, the participation of BMC and its
Subsidiaries in all Tax sharing agreements and other Tax sharing arrangements
with respect to taxable years ending on or prior to the Closing Date to which
Seller or any Affiliate of Seller, on the one hand, and BMC and its
Subsidiaries, on the other, are parties shall be terminated and BMC and its
Subsidiaries shall have no continuing obligation to make any payment thereunder.
On or prior to the Closing Date, BMC and its Subsidiaries and Seller shall make
a (i) good faith determination of the aggregate liability of BMC and its
Subsidiaries to the Seller Group or the aggregate liability of the Seller Group,
as defined in Section 10.7(b) hereof, to BMC and its Subsidiaries, as the case
may be, under the Seller Group's Tax sharing agreement or arrangement with
respect to the year ended December 31, 1995 and the period ending on the Closing
Date, and (ii) BMC and its Subsidiaries shall make payment
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to Seller or Seller shall make payment to BMC and its Subsidiaries of the amount
of liability so determined, as the case may be. The Seller Group shall not amend
or change its Tax sharing agreement or arrangement in effect with BMC and its
Subsidiaries and shall follow such agreement or arrangement in accordance with
past custom and practice. Upon filing of the Seller Group's consolidated federal
income tax returns for 1995 and 1996, a final determination shall be made of the
amount of payment required to be made to Seller or BMC and its Subsidiaries, as
the case may be, under the Tax sharing agreement or arrangement with respect to
such periods, and BMC and its Subsidiaries shall make a payment to Seller, or
Seller shall make a payment to Purchaser, as the case may be. In no event shall
BMC and its Subsidiaries be obligated to make any payments to Seller Group
hereunder for, or have their payments from the Seller Group hereunder be reduced
by, any Taxes described in Section 10.3(e) hereof.
(e) Seller agrees to pay to the applicable Governmental Authority and to
indemnify and hold harmless the Purchaser, BMC and its Subsidiaries from and
against any and all Taxes, whether determined on a separate, consolidated,
combined, unitary or other basis, including any penalties and interest in
respect thereof, (i) pursuant to Treasury Regulations Section 1.1502-6 or any
comparable provision of state, local or foreign law by reason of BMC or its
Subsidiaries having been a member of consolidated, combined, or unitary group
for a Pre-Closing Period, or, with respect to the Overlap Period, for the
portion of such taxable year or taxable period ending on the Closing Date; (ii)
pursuant to any guaranty, indemnification, tax sharing or similar agreement
entered into by BMC or its Subsidiaries on or before the Closing Date relating
to the sharing of liability for, or payment of, Taxes: (iii) subject to Section
10.7(d), arising out of, resulting from or attributable to the Section
338(h)(10) Elections; (iv) arising out of, resulting from or attributable to the
transactions described in Section 7.1(m) of this Agreement; and (v) Taxes
resulting from BMC and its Subsidiaries ceasing to be members of Seller's
affiliated group, as defined in Code Section 1504(a).
10.4 TAX BENEFITS AND CREDITS. If Seller makes any payment (other than a
payment funded by BMC or its Subsidiaries under Section 10.3(d) hereof) under
Section 10.3(b) with respect to a Tax liability of or with respect to BMC and
its Subsidiaries for any Pre-Closing Period or the portion of an Overlap Period
ending on or prior to the Closing Date and the Tax adjustment or item by a
governmental authority which gave rise to the payment of such Tax liability
directly or indirectly gives rise to a United States federal, state, local or
foreign Tax benefit or credit to Purchaser or any of its Affiliates, then
Purchaser shall pay to Seller the amounts of such Tax benefit or credit in the
year in which the Tax benefit is realized. A Tax benefit shall be realized for
this purpose when the Purchaser or its Affiliates obtain an actual reduction in
Tax liability; increases in Tax attributes, such as loss carryovers and basis,
shall not be deemed a Tax benefit until the Purchaser or its Affiliates obtains
a reduction in Tax liability from the use of such attribute.
The determination of any such Tax benefit or credit shall be made in good
faith by Purchaser and Seller and any disagreement shall be resolved in
accordance with the procedure described in Section 10.8.
If an adjustment by the IRS or such other Tax authority subsequently
reverses, disallows or reduces any Tax benefit received by Purchaser or any of
its Affiliates in respect of which any payment has been made to Seller pursuant
to this Section 10.4, then within 10 days of Seller's
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receipt of notification of such event, Seller shall pay to Purchaser such
disallowed or reduced amount or the amount of the payment received, if less.
Purchaser and Seller agree to consult and resolve in good faith any dispute with
respect to any actual Tax benefit as determined under this Section 10.4, it
being understood and agreed that in the absence of any such resolution, any and
all such objections shall be resolved in accordance with the procedures
described in Section 10.8.
If as the result of a final determination the Tax liability of BMC and its
Subsidiaries for a period after the Closing Date (including the portion of an
Overlap after the Closing Date) is increased (a "POST CLOSING INCREASE") because
of a change in the timing of an item of income, deduction, or credit, which,
when changed, produces a Tax benefit actually received by the Seller, the Seller
shall pay to the Purchaser in the year in which the Tax benefit is actually
realized an amount equal to the amount of such Tax benefit actually realized,
determined under a calculation comparable to that described in the first
paragraph of this Section 10.4.
10.5 NOTICES. If any party to this Agreement receives any written
notice or other communication from any taxing authority relating to any Tax
audit or other proceeding relating to any Tax for which any other party thereto
may be obligated to indemnify or pay under this Agreement, such party shall
promptly forward such notice or communication to the other party. The failure to
forward such written notice or other communication promptly pursuant to this
Section 10.5 shall excuse the indemnity or payment obligations of such other
party except to the extent (and only to the extent) that the party that so
failed to forward can show that such failure did not materially prejudice the
rights of the other party to contest such Tax. In addition, Purchaser shall
promptly forward to Seller all written notifications and other communications
from any taxing authority received by Purchaser relating to any tax audit or
other proceeding relating to the tax liability of Seller or any Affiliate of
Seller.
10.6 COOPERATION. Purchaser and Seller shall cooperate (and Purchaser
shall cause BMC and its Subsidiaries to cooperate) fully, as and to the extent
reasonably requested by the other party, in connection with the calculation of
any Taxes and with the preparation and filing of Tax Returns pursuant to this
Agreement, and in connection with any tax proceeding with respect to Taxes
affecting or relating to BMC and its Subsidiaries. Such cooperation shall
include the retention and (upon the other party's written request) the provision
of records and information that are reasonably relevant to such preparation and
filing and to any tax proceeding relating thereto and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material so provided. Purchaser and Seller agree to retain (and Purchaser
agrees to cause BMC and its Subsidiaries to retain) all books and records with
respect to Tax matters pertinent to BMC and its Subsidiaries relating to any Tax
period beginning prior to the Closing Date until the expiration of the statute
of limitations for assessment of the applicable Taxes (and, to the extent
notified by Purchaser or Seller, any extensions thereof), and shall not destroy
or otherwise dispose of any such books and records without first providing the
other party or parties with a reasonable opportunity to review and copy the
same. Purchaser and Seller acknowledge that any and all information obtained in
connection with the preparation of any Tax Return, audit or judicial or
administrative proceeding or determination pursuant to this Section 10.6 is of a
confidential nature and that all such information shall be used only for the
purposes set forth in this Section 10.6.
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10.7 Certain Tax Elections and Other Matters.
---------------------------------------
(a) PRIVATE LETTER RULING. Upon Purchaser's request, Seller shall promptly
seek a private letter ruling from the Internal Revenue Service covering the
following matters (the "Private Letter Ruling"):
(i) The mortgage servicing rights held by BMC are capital assets under
Code Section 1221 or, if the Service refuses to rule that they are Code Section
1221 assets, that the mortgage servicing rights are assets used in a trade or
business under Code Section 1231 ("Section 1231 Assets"), in either case thereby
allowing BMC's loss from the deemed sale of its shares of stock in Loan America
and BancPLUS to offset the gain BMC will recognize from the deemed sale of its
mortgage servicing rights, other than Code Section 1231(c) recapture.
(ii) The mortgage servicing rights are not goodwill or going concern
value under Code Sections 197(d)(1)(A) and (B), respectively, and would be
depreciable or amortizable under the law existing prior to the enactment of Code
Section 197; accordingly, the acquisition of the mortgage servicing rights by
new BMC from old BMC in the deemed asset sale under the Section 338(h)(10)
Elections will not be subject to the anti-churning rules under Code Section
197(f)(9).
(b) As soon as practicable after the Closing Date, but not later than
ninety (90) days after the Closing Date, Seller shall submit to Purchaser a
detailed calculation of (i) the combined Federal and State income Tax liability
of the Seller affiliated group, as that term is defined in Code Section 1504
(the "Seller Group"), assuming the Section 338(h)(10) Elections were made, and
(ii) the combined Federal and state income Tax liability of the Seller Group,
assuming the Section 338(h)(10) Elections were not made, in both cases taking
into account and assuming the receipt of any Tax benefits realized from capital
loss and net operating loss carryovers from the Taxable years in which the
Closing Date occurs other than capital loss and net operating loss carryforwards
to Taxable years beginning after December 31, 1996 (the "Preliminary
Calculations"). For purposes of this Section 10.7(b), any Tax benefit received
by the Seller Group from its use of a Tax attribute, such as a capital or net
operating loss carryover, to offset income or gain shall be treated as a payment
of Tax. Within thirty (30) days after the filing of Seller's 1996 federal
consolidated income Tax Return, Seller shall submit to Purchaser a detailed
calculation of the amounts described above based upon relevant items in that
return and prior year returns (relating to the availability of loss carrybacks)
and on actual items on state Tax Returns filed and to be filed for the relevant
periods (the "Second Calculations"). Purchasers shall have the opportunity to
review and comment on both the Preliminary Calculations and the Second
Calculations and may request any appropriate supporting materials, schedules,
and Tax Returns. If the Seller and Purchaser are unable to agree on the amount
of any of the above calculations within sixty (60) days after submission of such
calculations to Purchaser, the calculations shall be determined promptly under
the procedures set forth in Section 10.8 hereof within sixty (60) days after the
end of such sixty (60) day period.
(c) Upon receipt of the Private Letter Ruling in form satisfactory to
Purchaser and Seller and at the joint request of Purchaser and Seller, Purchaser
and Seller agree to make an election under Section 338(h)(10) of the Code with
respect to the sale of the BMC Stock as to BMC, and shall file
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their consolidated federal income Tax Returns for the period including the
Closing Date on a basis consistent therewith. Purchaser and Seller and their
Affiliates further agree to make such other similar elections as may be
available under applicable law and necessary to achieve substantially the same
results to the parties for state and local Tax purposes as the Section
338(h)(10) election achieves for federal income Tax purposes and shall file
their state and local Tax Returns for the periods including the Closing Date on
a basis consistent with any such elections and such applicable law. For purposes
of this Agreement, the term "Section 338(h)(10) Elections" shall include any
such state and local elections. Purchaser, Seller and their respective
Affiliates shall prepare and timely file all necessary forms and elections
necessary to be prepared or filed by such entity to effect valid Section
338(h)(10) Elections. No Section 338(h)(10) Election shall be made with respect
to the deemed sale of stock of the Subsidiaries of BMC.
(d) If the Section 338(h)(10) Elections are made, Purchaser shall pay to
Seller an amount equal to the sum of (i) the excess of the amount of Tax
liability described in Section 10.7(b)(i) over the amount described in Section
10.7(b)(ii), plus (ii) a gross-up payment equal to the additional Taxes incurred
by the Seller Group by virtue of receiving the payment described in Section
10.7(d)(i) and this clause (ii). The payments under this Section 10.7(d)(i) and
(ii) shall be made after the amounts in Section 10.7 are finally determined,
including any application of Section 10.8. Seller shall pay Purchaser (iii) an
amount equal to the Tax benefit actually received by the Seller Group in Taxable
years ending after December 31, 1996, to the extent such Tax benefit was created
as a result of the Section 338(h)(10 Elections and would not have been available
to the Seller Group in the absence of such Section 338(h)(10) Elections,
including any Tax benefit resulting to the Seller Group from the payment by the
Seller under Section 10.7(d)(iii); provided, however, that the amount paid under
this third sentence shall not exceed the amount paid to Seller under the first
sentence of this Section 10.7(d). Such payments shall be made within thirty (30)
days of the filing of the Tax Return for the applicable Taxable year. Seller
shall submit a schedule detailing the calculations of the Tax benefits.
Purchaser shall have the opportunity to review and comment on such calculations
and may request any appropriate supporting materials, schedules, and Tax
Returns. If the Seller and Purchaser are unable to agree on the amount of any of
the above calculations within sixty (60) days after submission of such
calculations to Purchaser, the calculations shall be determined promptly under
the procedures set forth in Section 10.8 hereof within sixty (60) days after the
end of such sixty (60) day period.
(e) The Seller acknowledges that time is of the essence in respect of the
matters described in Sections 10.7(a) through 10.7(d) and it agrees to use its
best efforts to pursue the matters described therein on a timely basis.
(f) RETENTION OF CARRYOVERS. Seller will not elect to retain any net
operating loss carryovers or capital loss carryovers of BMC and its Subsidiaries
under Reg. [Sections] 1.1502-20(g).
(g) CARRYBACKS. Seller will immediately pay to the Purchaser any Tax refund
(or reduction in Tax liability) resulting from a carryback of a postacquisition
Tax attribute of BMC and its Subsidiaries into the Seller consolidated, combined
and unitary Tax Returns, when such refund or reduction is realized by the Seller
group. Seller will cooperate with BMC and its Subsidiaries in obtaining such
refunds (or reduction in Tax liability), including through the filing of amended
Tax
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Returns or refund claims. The Purchaser agrees to indemnify Seller for any Taxes
resulting from the disallowance of such postacquisition Tax attribute on audit
or otherwise.
10.8 VALUATION AND ALLOCATION. Seller and Purchaser agree to act reasonably
and in good faith in preparing all valuations, allocations, Tax Returns, and
calculations of indemnity amounts under this Article X. In the case of the
valuation needed for allocation under the Section 338(h)(10) Election, Purchaser
shall obtain a valuation from an independent third party appraiser and submit
such valuation to Seller within ninety (90) days of the Closing Date. Seller and
Purchaser agree to act reasonably and in good faith to use such valuation for
purposes of mutually agreeing on allocations under Section 338(h)(10) of the
Code. If Seller and Purchaser are unable to reach mutual agreement on any such
item within 120 days from the arising of the need for agreement on any such
item, and in the case of the valuation and allocation needed for the Section
338(h)(10) Election, within 120 days of the Closing Date, such disagreement
shall be referred for resolution to such other nationally recognized independent
certified public accounting firm as is mutually agreed upon by the Seller and
Purchaser (a "Tax Referee"). If the parties cannot agree on such a Tax Referee,
the Tax Referee shall be picked by two nationally recognized accounting firms,
one picked by the Purchaser and one picked by the Seller; PROVIDED, HOWEVER,
that the Tax Referee so picked may not then be the accountant regularly employed
by Purchaser or Seller. The decision of the Tax Referee shall be final and
binding on the parties. The fees of the Tax Referee shall be shared equally by
the Seller and the Purchaser. The valuations and allocations determined pursuant
to this Section 10.8 shall be used for purposes of all relevant Tax Returns.
10.9 TRANSFER TAXES. All stamp, transfer, documentary, sales, use,
registration and other such taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the transactions
contemplated hereby (collectively, the "TRANSFER TAXES") shall be paid by
Purchaser, and Purchaser shall, at its own expense, procure any stock transfer
stamps required by, and properly file on a timely basis all necessary tax
returns and other documentation with respect to any Transfer Tax and provide to
the Seller evidence of payment of all Transfer Taxes.
10.10 PURCHASE PRICE ADJUSTMENT. The Seller and the Purchaser agree to
treat all payments made by either of them to or for the benefit of the other
(including any payments to or from BMC and its Subsidiaries under this Article
X, under other indemnity provisions of this Agreement and for any
misrepresentations or breaches of warranties or covenants as adjustments to the
Purchase Price for Tax purposes and that such treatment shall govern for
purposes hereof.
10.11 STATUTE OF LIMITATIONS. Notwithstanding any provision of this
Agreement to the contrary, the respective obligations of Seller and Purchaser to
indemnify and hold harmless the Purchaser, BMC and its Subsidiaries or Seller,
as applicable, pursuant to this Article X shall terminate no earlier than at the
close of business on the, 30th day following the expiration of the applicable
statute of limitations with respect to the Tax liabilities in question (giving
effect to any waiver, suspension, mitigation or extension thereof).
ARTICLE XI
INDEMNIFICATION BY SELLER
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11.1 INDEMNIFICATION. In addition to and not in limitation of the
indemnities provided in Article X (which Article sets forth the exclusive remedy
of Seller and Purchaser in respect of the matters covered thereby), from and
after the Closing, subject to the other provisions of this Article XI, Seller
agrees to indemnify Purchaser and its officers, directors and employees
(collectively, the "INDEMNIFIED PURCHASER ENTITIES") and to hold each of them
harmless from and against, and agrees to assume liability for, any and all
actions, suits, proceedings, demands, assessments, judgments, claims,
liabilities, losses, costs, damages or expenses (including interest, penalties
and reasonable attorneys' fees, expenses and disbursements in connection with
any action, suit or proceeding against such Person) net of any pertinent
reserves therefor and excluding loss of profits or other consequential damages
(collectively. "DAMAGES") suffered, paid or incurred by such Indemnified
Purchaser Entity resulting from, caused by or arising out of (a) any breach
(subject to the last sentence of this Section 11.1) of any of the
representations and warranties made by Seller to Purchaser in this Agreement
(other than the representations and warranties set forth in Section 4.12(a) and
(c), liability for the breach of which shall be as set forth in Article X); and
(b) any breach by Seller of any covenant or agreement of Seller contained in
this Agreement. The amount of damages arising out of a breach of any
representations, warranties or covenants made by Seller in this Agreement shall
be determined and calculated without giving effect to any exception or
qualification of such representations, warranties or covenants as to the
knowledge of Seller, materiality of the breach of such representation or
warranty or Material Adverse Effect on BMC of such breach. For purposes of this
Article XI (and for purposes of Article X with respect to Sections 4.12(a) and
(c)) the representations and warranties made by Seller to Purchaser in this
Agreement shall be deemed to have been made on and as of the date hereof and
made again on and as of the time of the Closing.
11.2 INDEMNIFICATION PROCEDURE. (a) If an Indemnified Purchaser Entity
believes that a claim, demand or other circumstance exists that has given or may
reasonably be expected to give rise to a right of indemnification under this
Article XI (whether or not the amount of Damages relating thereto is then
quantifiable), such Indemnified Purchaser Entity shall promptly assert its claim
for indemnification by giving written notice thereof (a "Claim Notice") to
Seller. Each Claim Notice shall describe the claim in reasonable detail. The
failure to so notify Seller shall not relieve Seller of any obligation to
indemnify any Indemnified Purchaser Entity unless such failure materially
prejudices the rights or increases the liability of Seller with respect to the
claim to which the Claim Notice relates.
(b) If any claim or demand by an Indemnified Purchaser Entity under this
Article XI relates to an action or claim filed or made against an Indemnified
Purchaser Entity by a third party, Seller may elect at any time to negotiate a
settlement or a compromise of such action or claim (with the written consent of
Purchaser which shall not be unreasonably withheld) or to defend such action or
claim, in each case at its sole cost and expense (subject to the last sentence
of this Section 11.2(b)) and with its own counsel. If, within 30 days of receipt
from an Indemnified Purchaser Entity of any Claim Notice with respect to a third
party action or claim, Seller (1) advises such Indemnified Purchaser Entity in
writing that Seller will not elect to defend, settle or compromise such action
or claim or (ii) falls to make such an election in writing, such Indemnified
Purchaser Entity may (subject to Seller's continuing right of election in the
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preceding sentence), at its option, defend, settle or otherwise compromise or
pay such action or claim; provided that any such settlement or compromise shall
be permitted hereunder only with the written consent of Seller, which consent
shall not be unreasonably withheld. Unless and until Seller makes an election in
accordance with this Section 11.2(b), all of the Indemnified Purchaser Entity's
reasonable costs and expenses arising out of the defense, settlement or
compromise of any such action or claim shall be Damages subject to
indemnification hereunder to the extent provided herein. Each Indemnified
Purchaser Entity shall make available to Seller all information reasonably
available to such Indemnified Purchaser Entity relating to such action or claim.
In addition, the parties hereto shall render to each other such assistance as
may reasonably be requested in order to ensure the proper and adequate defense
of any such action or claim. The party in charge of the defense shall keep the
other party fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If Seller elects to defend any
such action or claim, then the Indemnified Purchaser Entity shall be entitled to
participate in such defense with the counsel of its choice at such Indemnified
Purchaser Entity's sole cost and expense.
11.3 LIMITATION ON LIABILITY. (a) Notwithstanding anything to the contrary
contained in Sections 11.1 through 11.4, the Indemnified Purchaser Entities
shall not be entitled to indemnification pursuant to this Article XI with
respect to any claim for indemnification pursuant to Section 11.1(a):
(i) unless, and only to the extent that, the aggregate Damages to all
Indemnified Purchaser Entities (without duplication) with respect to all
such claims exceed $3,500,000 (the "DEDUCTIBLE"), whereupon (subject to the
provisions of clause (iii) below) Seller shall be obligated to pay in full
all such amounts, but only to the extent such aggregate Damages are in
excess of the Deductible;
(ii) with respect to any claim for indemnification based upon (A) a
breach of any representation or warranty made by Seller in this Agreement
and relating to Mortgage Loans or the Servicing Portfolio, the Claim Notice
with respect to which is not received on or before the date that is 180
days after the Closing Date, (B) a breach of any representation and
warranty made by Seller in this Agreement (other than those described in
clause (A) above or contained in Sections 4.5, 4.6(a) or 4.12), the Claim
Notice with respect to which is not received on or before the earlier to
occur of (1) April 30, 1997, or (2) ten (10) days after receipt by
Purchaser of audited financial statements of BMC for the year ending
December 31, 1996 or (C) a breach of any representation and warranty made
by Seller to Purchaser in Section 4.12 of this Agreement, the Claim Notice
with respect to which is not received on or before the date that is 30 days
following (1) the date of expiration of the applicable statute of
limitations with respect to the Taxes to which such claim relates (assuming
no waiver or extension thereof effected in accordance with clause (2)
below) or (2) if Purchaser waives or extends the applicable statute of
limitations with the prior consent of Seller, which consent shall not be
unreasonably withheld, the date of final settlement of such open tax period
or the end of such extension, as the case may be; or
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(iii) for aggregate Damages in excess of $43,500,000.
(b) Notwithstanding anything contained in any other provision of this
Agreement to the contrary, Purchaser understands and agrees that Seller is not
making any representation or warranty whatsoever, express or implied, other than
those representations and warranties of Seller expressly set forth in Articles
IV and V, respectively. In particular, Seller is not making any representation
or warranty with respect to any of information set forth in any financial
projection or forecast relating to BMC. With respect to any such projection or
forecast delivered to Purchaser, Purchaser acknowledges that (i) there are
uncertainties inherent in attempting to make such projections and forecasts,
(ii) it is familiar with such uncertainties, (iii) it is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
such projections and forecasts so furnished to it and (iv) it shall have no
claim against Seller with respect thereto.
(c) Purchaser has been given such access to the premises, books, records
and officers of BMC and has had the opportunity to review such other data and
other information with respect to the business and properties of BMC as
Purchaser has deemed necessary in its sole judgment to evaluate the transactions
contemplated by this Agreement. Purchaser acknowledges that neither Seller nor
BMC nor any of their respective officers, directors, Affiliates or agents
assumes any responsibility for the accuracy or adequacy of any information
heretofore or hereafter furnished to Purchaser by or on behalf of Seller or BMC
except as otherwise expressly provided in this Agreement. Nothing in this
Section 11.3(c) shall in any way vitiate or limit the representations or
warranties expressly made by Seller in Articles IV and V of this Agreement, or
the Purchaser's rights under this Article XI.
11.4 General.
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(a) Each Indemnified Purchaser Entity shall be obligated in connection with
any claim for indemnification under this Article XI to use all commercially
reasonable efforts to obtain any insurance proceeds available to such
Indemnified Purchaser Entity with regard to the applicable claims. The amount
which Seller is or may be required to pay to any Indemnified Purchaser Entity
pursuant to this Article XI shall be reduced (retroactively, if necessary) by
any insurance proceeds or other amounts actually recovered (net of any direct
relevant collection costs) by or on behalf of such Indemnified Purchaser Entity
in reduction of the related Damages. If an Indemnified Purchaser Entity shall
have received the payment required by this Agreement from Seller or any
Affiliate of Seller in respect of Damages and shall subsequently receive
insurance proceeds or other amounts in respect of such Damages, then such
Indemnified Purchaser Entity shall promptly repay to Seller a sum equal to the
amount of such insurance proceeds or other amounts actually received (net of any
direct relevant collection costs).
(b) In addition to the requirements of Section 11.4(a), (i) each
Indemnified Purchaser Entity shall be obligated in connection with any claim for
indemnification under this Article XI to use all commercially reasonable efforts
to mitigate Damages upon and after becoming aware of any event which could
reasonably be expected to give rise to such Damages and (ii) in connection with
any claim under this Article XI in respect of a breach of any representation set
forth in Article V, such Indemnified Purchaser Entity shall diligently pursue
any and all
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contractual rights and remedies under agreements with third parties pursuant to
which such Indemnified Purchaser Entity has remedies, including, without
limitation, Listed Agreements, Correspondent Agreements and agreements with and
policies of Insurers, and any and all rights and remedies available at law or
equity (such contractual, legal and equitable rights and remedies, collectively,
the "AVAILABLE REMEDIES").
(c) Subject to the rights of existing insurers of an Indemnified Purchaser
Entity, Seller shall be subrogated to any right of action which the Indemnified
Purchaser Entity may have against any other Person with respect to any matter
giving rise to a claim for indemnification hereunder.
(d) The indemnification provided in this Article XI shall be the exclusive
post-Closing Date remedy available to Purchaser or any other Indemnified
Purchaser Entity with respect to any breach of any representation, warranty,
covenant or agreement made by Seller to Purchaser in this Agreement. Anything
contained in this Agreement to the contrary notwithstanding, no remedy under
this Agreement shall give rise to any obligation on the part of Seller to
repurchase any Mortgage Loan, REO or Collateral Certificate.
11.5 INDEMNIFICATION FOR SELLER ASSUMED LIABILITIES. In addition to and not
in limitation of the indemnities provided in Article X and Section 11.1, from
and after the Closing, subject to the other provisions of this Article XI,
Seller agrees to indemnify each Indemnified Purchaser Entity and to hold each of
them harmless from and against, and agrees to assume liability for, any and all
Damages suffered, paid or incurred by such Indemnified Purchaser Entity
resulting from, caused by or arising out of the Excluded Liabilities, the Seller
Assumed Liabilities and/or the ERISA Retained Liabilities.
ARTICLE XII
INDEMNIFICATION BY PURCHASER
----------------------------
12.1 INDEMNIFICATION. In addition to and not in limitation of the
indemnities provided in Article X (which Article sets forth the exclusive remedy
of Purchaser and Seller in respect of the matters covered thereby), from and
after the Closing, subject to the other provisions of this Article XII,
Purchaser agrees to indemnify Seller and its Affiliates and their respective
officers, directors and employees (collectively, the "Indemnified Seller
Entities") and to hold each of them harmless from and against, and agrees to
assume liability for, any and all Damages suffered, paid or incurred by such
Indemnified Seller Entity resulting from, caused by or arising out of (a) any
claims, liabilities or obligations of such Indemnified Seller Entity arising on
or after the Closing Date as a result of any act or omission of Purchaser; (b)
any breach of any of the representations and warranties made by Purchaser to
Seller in this Agreement; and (c) any breach by Purchaser of any covenant or
agreement of Purchaser contained in this Agreement.
12.2 Indemnification Procedure.
-------------------------
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(a) If an Indemnified Seller Entity believes that a claim, demand or other
circumstance exists that has given or may reasonably be expected to give rise to
a right of indemnification under this Article XII (whether or not the amount of
Damages relating thereto is then quantifiable), such Indemnified Seller Entity
shall promptly assert its claim for indemnification by giving a Claim Notice to
Purchaser. Each Claim Notice shall describe the claim in reasonable detail. The
failure to so notify Purchaser shall not relieve Purchaser of any obligation to
indemnify any Indemnified-Seller Entity unless such failure materially
prejudices the rights or increases the liability of Purchaser with respect to
the claim to which the Claim Notice relates.
(b) If any claim or demand by an Indemnified Seller Entity under this
Article XII relates to an action or claim filed or made against such Indemnified
Seller Entity by a third party, Purchaser may elect at any time to negotiate a
settlement or compromise of any such action or claim (with the written consent
of Seller which shall not be unreasonably withheld) or to defend any such action
or claim, in each case at its sole cost and expense (subject to the last
sentence of this Section 12.2(b)) and with its own counsel. If, within 30 days
of receipt from an Indemnified Seller Entity of any Claim Notice with respect to
a third party action or claim, Purchaser (i) advises such Indemnified Seller
Entity that Purchaser will not elect to defend, settle or compromise such action
or claim, or (ii) falls to make such an election in writing, such Indemnified
Seller Entity may (subject to Purchaser's continuing right of election in the
preceding sentence), at its option defend, settle or otherwise compromise or
pay such action or claim; PROVIDED that any such settlement or compromise shall
be permitted hereunder only with the written consent of Purchaser, which consent
shall not be unreasonably withheld. Unless and until Purchaser makes an election
in accordance with this Section 12.2(b), all of such Indemnified Seller Entity's
reasonable costs and expenses arising out of the defense, settlement or
compromise of any such action or claim shall be Damages subject to
indemnification hereunder to the extent provided herein. Each Indemnified Seller
Entity shall make available to Purchaser all information reasonably available to
it relating to such action or claim. In addition, the parties shall render to
each other such assistance as may reasonably be requested in order to ensure the
proper and adequate defense of any such action or claim. The party in charge of
the defense shall keep the other party fully apprised at all times as to the
status of -the defense or any settlement negotiations with respect thereto. If
Purchaser elects to defend any such action or claim, then the Indemnified Seller
Entity shall be entitled to participate in such defense with counsel of its
choice at such Indemnified Seller Entity's sole cost and expense.
12.3 LIMITATION ON LIABILITY. Notwithstanding anything to the contrary
contained in this Article XII, the Indemnified Seller Entities shall not be
entitled to indemnification pursuant to this Article XII with respect to any
claim for indemnification pursuant to Section 12.1(b):
(i) unless, and only to the extent that, the aggregate Damages to all
Indemnified Seller Entities (without duplication) with respect to such
claims exceed the Deductible, whereupon (subject to the provisions of
clause (iii) below) Purchaser shall be obligated to pay in full all such
amounts, but only to the extent such aggregate Damages are in excess of the
Deductible; or
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(ii) with respect to any claim for indemnification based upon a breach
of any representation and warranty made by Purchaser in this Agreement, the
Claim Notice with respect to which is not received on or before the date
that is one year after the Closing Date.
12.4 General.
-------
(a) Each Indemnified Seller Entity shall be obligated in connection with
any claim for indemnification under this Article XII to use all commercially
reasonable efforts to obtain any insurance proceeds available to such
Indemnified Seller Entity with regard to the applicable claims. The amount which
Purchaser is or may be required to pay to any Indemnified Seller Entity pursuant
to this Article XII shall be reduced (retroactively, if necessary) by any
insurance proceeds or other amounts actually recovered (net of any direct
relevant collection costs) by or on behalf of such Indemnified Seller Entity in
reduction of the related Damages. If an Indemnified Seller Entity shall have
received the payment required by this Agreement from Purchaser in respect o f
Damages and shall subsequently receive insurance proceeds or other amounts in
respect of such Damages, then such Indemnified Seller Entity shall promptly
repay to Purchaser a sum equal to the amount of such insurance proceeds or other
amounts actually received (net of any direct relevant collection costs).
(b) In addition to the requirements of Section 12.4(a), each Indemnified
Seller Entity shall be obligated in connection with any claim for
indemnification under this Article XII to use all commercially reasonable
efforts to mitigate Damages upon and after becoming aware of any event which
could reasonably be expected to give rise to such Damages.
(c) Subject to the rights of existing insurers of an Indemnified Seller
Entity, Purchaser shall be subjugated to any right of action which the
Indemnified Seller Entity may have against any other Person with respect to any
matter giving rise to a claim for indemnification hereunder.
(d) The indemnification provided in this Article XII shall be the exclusive
post-Closing Date remedy available to Seller or any other Indemnified Seller
Entity with respect to any breach of any representation, warranty, covenant or
agreement made by Purchaser to Seller in this Agreement.
(e) Notwithstanding anything contained in any provision of this Agreement
to the contrary, Seller understands and agrees that Purchaser is not making any
representation or warranty whatsoever, express or implied, other than those
representations and warranties of Purchaser expressly set forth in Article VI.
12.5 PURCHASER INDEMNIFICATION FOR SELLER LIABILITIES. In addition to and
not in limitation of the indemnities provided in Article X and Section 12.1,
from and after the Closing subject to the other provisions of this Article XII,
Purchaser agrees to indemnify each Indemnified Seller Entity and to hold each of
them harmless from and against, and agrees to assume liability for, any and all
Damages suffered, paid or incurred by such Indemnified Seller
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Entity resulting from, caused by or arising out of the conduct by BMC (and its
successors) and its Subsidiaries of their respective businesses other than those
constituting (i) the Seller Assumed Liabilities, or (ii) the Excluded
Liabilities and (iii) caused by or arising out of breaches by Seller of
representations, warranties, covenants or agreements contained in this Agreement
and the Related Agreements.
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ARTICLE XIII
GENERAL PROVISIONS
------------------
13.1 NOTICES. All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be deemed given if delivered
personally, transmitted by facsimile (and telephonically confirmed), mailed by
registered or certified mail with postage prepaid and return receipt requested,
or sent by commercial overnight courier, courier fees prepaid, to the parties at
the following addresses:
(a) if to Purchaser, to it at:
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Attn: David V. Harkins
Telecopy: (617) 227-3514
Confirmation: (617) 227-1050
with copies to:
Madison Dearborn Partners, Inc.
Three First National Plaza, Suite 1330
Chicago, Illinois 60602
Attn: Justin S. Huscher
Telecopy: (312) 722-4098
Confirmation: (312) 732-8063
and
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Peter J. Manning
Telecopy: (617) 434-7825
Confirmation: (617) 434-8592
and
GrantAmerica, Inc.
7301 Bay Meadows Way
Jacksonville, Florida 32256
Attn: Joe K. Pickett
Telecopy: (904) 281-3745
Confirmation: (904) 281-3233
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and
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attn: James Westra, Esq.
Telecopy: (617) 951-1295
Confirmation: (617) 951-6602
and
Bingham, Dana & Gold
150 Federal Street
Boston, Massachusetts 02110
Attn: Norman J. Shachoy, Esq.
Telecopy: (617) 951-8736
Confirmation: (617) 951-8235
and
Kirkland & Ellis
200 East Randall Street
Chicago, Illinois 60601
Attn: William S. Kirsch, Esq.
Telecopy: (312) 861-2200
Confirmation: (312) 861-2000
(b) if to Seller, to it at:
Barnett Banks, Inc.
50 N. Laura Street
Jacksonville, FL 32202-3638
Attn: Hinton Nobles
Telecopy: (904) 791-5448
Confirmation: (904) 791-7741
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with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attn: Gail Weinstein, Esq.
Telecopy: (212) 859-4000
Confirmation: (212) 859-8000
or to such other person or address as either party shall specify by notice in
writing to the other party in accordance with this Section 13.1. All such
notices or other communications shall be deemed to have been received on the
date of the personal delivery or facsimile transmission (with telephone
confirmation) or on the third Business Day after the mailing or dispatch
thereof; PROVIDED that notice of change of address shall be effective only upon
receipt.
13.2 INTERPRETATION. The table of contents of and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
13.3 Amendment and Modification; Waiver.
----------------------------------
(a) This Agreement and the Disclosure Schedules hereto may not be amended
except by an instrument or instruments in writing signed and delivered on behalf
of each of the parties hereto.
(b) At any time prior to the Closing Date, any party hereto which is
entitled to the benefits hereof may (i) extend the time for the performance of
any of the obligations or other acts of the other party, (ii) waive any
inaccuracy in the representations and warranties of the other party contained
herein or in any schedule hereto or in any document delivered pursuant hereto
and (iii) waive compliance with any of the agreements of the other party or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed and delivered on behalf of such party.
13.4 ENTIRE AGREEMENT. This Agreement (including the Disclosure Schedules
and Exhibits), the Related Agreement and the Confidentiality Agreement,
constitute the entire agreement and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof
13.5 FEES AND EXPENSES. Except as otherwise expressly provided for in this
Agreement, (a) in the event the transactions contemplated hereby are
consummated, $750,000 of fees of UBS Securities Corporation, the fees and
disbursements of outside legal counsel and accountants of Barnett incurred in
connection with the transactions contemplated hereby and the Seller's filing fee
relating to its filing of notice under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, if any, shall be borne by Purchaser and
all other fees and expenses of Seller and its subsidiaries incurred in
connection with the transactions
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contemplated hereby shall be borne by Seller, and (b) in the event the
transactions contemplated hereby are not consummated, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses. All fees and expenses
incurred by Lee or Madison Dearborn (as defined in the Amended and Restated
Shareholder Agreement) in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Purchaser.
13.6 THIRD PARTY BENEFICIARIES. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement. The parties acknowledge and
agree that Seller may enforce directly the provisions of Section 7.7 for the
benefit of Continuing Employees.
13.7 ASSIGNMENT; BINDING EFFECT. This Agreement shall not be assigned by
any party hereto without the prior written consent of the other party. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns.
13.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without regard to
conflicts of laws principles thereof.
13.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by their respective officers hereunto duly authorized
all on the date first written above.
GRANTAMERICA, INC.
By: /s/ Thomas M. Hagerty
------------------------------
Name: Thomas M. Hagerty
Title: President
63
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BARNETT BANKS, INC.
By: /s/ Hinton D. Nobles, Jr.
------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 10.13
Dated as of March 4, 1996
Barnett Banks, Inc.
50 N. Laura Street
Jacksonville, FL 32202-3638
Attn: Hinton Nobles
Ladies and Gentlemen:
Reference is hereby made to (i) that certain Stock Purchase Agreement dated
as of March 4, 1996 (the "Barnett Purchase Agreement") between GrantAmerica,
Inc. ("Purchaser") and Barnett Banks, Inc. ("Barnett"), and (ii) that certain
Stock Purchase Agreement dated as of December 11, 1995 (the "BKB Purchase
Agreement") between Purchaser and The First National Bank of Boston ("BKB"). Any
capitalized terms used herein but not defined herein shall have the meanings
ascribed to such terms in the Barnett Purchase Agreement.
1. INDEMNIFICATION. The Purchaser hereby agrees that in the event of a
final determination, whether by means of a settlement entered into in accordance
with the terms hereof, or an order of a court of competent jurisdiction which is
nonappealable, or which the parties hereto have agreed not to appeal (in any
such case the "Final Determination"), that for purposes of Section 1(a) hereof
the acquisition of stock by Purchaser under the BKB Purchase Agreement is to be
treated as an exchange under Section 351 of the Internal Revenue Code of 1986,
as amended (the "Code"), and that for purposes of Section 1(b) hereof the
acquisitions of stock by Purchaser under the Barnett Purchase Agreement and the
BKB Purchase Agreement, (collectively the "Stock Acquisition") are to be treated
as an exchange under Section 351 of the Code, then Purchaser shall, subject to
the terms and limitations described herein, indemnify Barnett and hold it
harmless for the following losses (including without limitation interest,
penalties, reasonable attorney's fees and other costs and disbursements incurred
in connection with the issue as to which indemnification is sought or pursuant
to exercise by Barnett of its rights and obligations under Section 4 hereof.
(a) if the Final Determination is made with respect to an income tax
return filed by Purchaser, the product of (A) that amount equal to the excess of
(i) the present value of the income tax benefits from the amortization (for
income tax purposes) of the mortgage servicing portfolio of BancBoston Mortgage
assuming an income tax basis equal to the value of the mortgage servicing
portfolio of BancBoston Mortgage on December 31, 1995 over (ii) the present
value of the income tax benefits from the amortization (for income tax purposes)
of the
<PAGE> 2
Barnett Banks, Inc.
March 4, 1996
Page 2
mortgage servicing portfolio of BancBoston Mortgage with its actual historic
income tax basis on December 31, 1995, in both cases using an 8% discount rate
and a 37.5% effective tax rate, MULTIPLIED BY (B) the percentage of common stock
of Purchaser owned by Barnett (determined as a percentage of the total issued
and outstanding Class A Common Stock of Purchaser); and
(b) if the Final Determination is made with respect to an income tax
return filed by Barnett, the "net tax detriment" (as such term is hereafter
defined) to Barnett. For purposes of this subparagraph (b), the "net tax
detriment" to Barnett shall mean that amount equal to the excess of (A) the
increased income tax liability of Barnett resulting from the nonrecognition,
solely pursuant to the Final Determination, of capital loss on the sale of stock
to Purchaser under the BMC Purchase Agreement, which loss would otherwise be
allowable under the relevant income tax laws (e.g., not otherwise disallowed
under the loss disallowance provisions of the federal consolidated tax return
regulations), and which capital loss was actually recognized and reported by
Barnett in its federal, state and local income tax returns as finally determined
(other than solely pursuant to the Final Determination) on the sale of stock to
Purchaser under the Barnett Purchase Agreement, over (B) the income tax benefits
realized by Barnett resulting from the Final Determination that the sale of
stock to Purchaser under the Barnett Purchase Agreement is an exchange under
Code Section 351, other than income tax benefits for which payment is made to
Purchaser by Barnett through the repayment, pursuant to this subparagraph, of
any net amount paid to Barnett under Section 10.7(d) of the Barnett Purchase
Agreement. To the extent Barnett has not realized all of its income tax benefit
resulting from the Final Determination at the time of the payment under this
Section 1(b), Barnett shall pay Purchaser the amount of any remaining such
income tax benefit realized after the payment under this Section 1(b) to the
extent such benefit was not taken in the account in calculating the payment
under this Section 1(b) at the time so realized, but, except as provided in the
immediately following sentence, in no event an amount greater than the net
amount paid to Barnett by Purchaser under this letter agreement. As a result of
the Final Determination, Barnett shall repay to the Purchaser any net payment
which Purchaser has made to Barnett under Section 10.7(d) of the Barnett
Purchase Agreement, even if this repayment exceeds the amount which would be due
Barnett from the Purchaser under this letter agreement, subject to a right of
offset for net amounts due Barnett under this Agreement. For purposes of
determining income tax liabilities and income tax benefits, Barnett shall
include the Barnett affiliated group, as defined in Code Section 1504(a), and
any successors thereto.
2. LIMITATION ON LOSSES. Notwithstanding any provision contained herein to
the contrary:
(a) Barnett shall not be entitled to indemnification hereunder unless,
and only to the extent that, the aggregate amount of such aggregate Losses to
Barnett exceed $3,500,000 (the "Deductible"), whereupon (subject to the
provisions of clause 2(b) below) Purchaser shall be obligated to pay in full all
such amounts, but only to the extent such aggregate Losses are in excess of the
Deductible; and
<PAGE> 3
Barnett Banks, Inc.
March 4, 1996
Page 3
(b) Barnett shall not be entitled to indemnification hereunder for
aggregate Losses in excess of $20,000,000.
3. CONDITIONS. Barnett will not take any action that will cause the Stock
Acquisition to be treated as a transaction under Code Section 351 and shall
report the Stock Acquisition for all tax reporting purposes as a taxable stock
transaction (and not as a Code Section 351 transaction); provided that Barnett
may report the stock acquisition of Barnett stock by Purchaser consistent with
the Section 338(h)(10) Election if, in fact, the Section 338(h)(10) Election is
made with respect to such purchase. In the event Barnett fails to comply with
its covenants in this Paragraph 3, then Purchaser shall have no obligation to
indemnify Barnett hereunder.
4. CONTESTS. Barnett and its duly appointed representatives shall have the
exclusive authority to control any audit or examination by any taxing authority,
initiate any claim for refund, amend any tax return and contest, resolve and
defend against any assessment for additional taxes, notice of tax deficiency or
other adjustment of taxes of or relating to any liability of Barnett Mortgage
Company and its Subsidiaries' tax returns relating to taxable years or periods
ending on or prior to the Closing Date (provided that Barnett in all events
shall comply with its covenants contained in Paragraph 3 hereof); PROVIDED,
HOWEVER, that:
(a) Barnett agrees to vigorously contest any claim or determination by
any taxing authority or other administrative body or court that the Stock
Acquisition is to be treated as a transaction under Code Section 351 and to
exhaust all administrative and judicial remedies available to it relating to any
such determination;
(b) Purchaser and its duly appointed representatives shall have the
right to participate at its expense in any audit, administrative or judicial
appeal referenced in subparagraph (a) above;
(c) neither Barnett nor any of its appointed representatives shall,
without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld, enter into any settlement of any contest or otherwise
compromise any issue that relates to the treatment of the Stock Acquisitions as
transactions under Section 351 of the Code or that may trigger Purchaser's
indemnification obligations hereunder; and
(d) Purchaser and its duly appointed representatives shall have the
opportunity to review and comment upon any of Barnett's calculations of the
amount of tax liability of Barnett arising from or relating to the treatment of
the Stock Acquisition as a transaction under Section 351 of the Code, and the
amount of any tax benefits realized by Barnett as a result of the treatment of
the Stock Acquisition as a transaction under Section 351 of the Code, and
Barnett, at Purchaser's request, shall submit to Purchaser copies of all
supporting materials, schedules and tax returns related to all of such
calculations.
<PAGE> 4
Barnett Banks, Inc.
March 4, 1996
Page 4
5. EXCLUSIVE REMEDY. Notwithstanding any provision contained in the Barnett
Purchase Agreement to the contrary, the indemnification provided in this letter
agreement shall be the sole and exclusive remedy available to Barnett with
respect to any loss incurred by Barnett relating to, arising out of or resulting
from the treatment of the Stock Acquisition as a transaction under Section 351
of the Code; provided, however, that nothing herein shall limit Barnett's rights
under the Barnett Purchase Agreement with respect to a breach by the Purchaser
of the provisions of Section 7.18 thereof, although Barnett shall not be
entitled to recover twice for the same loss.
6. Miscellaneous.
-------------
(a) NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be deemed duly given if given in accordance with
Section 13.1 of the Barnett Purchase Agreement.
(b) AMENDMENT. This letter agreement may not be amended except by an
instrument or instruments in writing signed and delivered on behalf of each of
the parties hereto.
(c) GOVERNING LAW. This letter agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts
without regard to conflicts of laws principles thereof.
(d) COUNTERPARTS. This letter agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
(e) TERM. This letter agreement shall terminate upon expiration of the
last day upon which any taxing authority could successfully dispute the
characterization of the Stock Acquisition as a taxable stock transaction and
recharacterize it as a transaction under Code Section 351 under applicable laws.
<PAGE> 5
Barnett Banks, Inc.
March 4, 1996
Page 5
Please sign where indicated below to acknowledge your agreement with the
foregoing.
Sincerely,
GrantAmerica, Inc.
By:
------------------------
Thomas M. Hagerty,
President
Acknowledged and agreed to as of
this 4th day of March, 1996.
Barnett Banks, Inc.
By:
------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.14
AMENDED AND RESTATED
SHAREHOLDER AGREEMENT
This Amended and Restated Shareholder Agreement is executed as of May
31, 1996 (as in effect from time to time, this "Agreement"), among (a) HomeSide,
Inc., a Delaware corporation formerly known as HomeAmerica Capital, Inc. (the
"Corporation"), (b) The First National Bank of Boston, a national banking
association ("BKB"), (c) Siesta Holdings, Inc. ("Siesta"), (d) Thomas H. Lee
Company, a sole proprietorship ("Lee"), (e) Thomas H. Lee Equity Fund III, L.P.,
and Thomas H. Lee Foreign Fund III, L.P., each a limited partnership organized
under the laws of the State of Delaware (collectively, "Lee Fund"), (f) each of
the persons listed as Lee Managers on the signature pages hereto ("Lee
Managers"), (g) Madison Dearborn Capital Partners, L.P., a limited partnership
organized under the laws of the State of Delaware ("Madison Dearborn"), (h)
Smith Barney Inc., (i) Robert Morrissey and (j) each other Person who becomes a
party to this Agreement by executing an Instrument of Accession in the form of
Exhibit A hereto ("Instrument of Accession").
The Corporation, BKB, Lee, Lee Fund and Madison Dearborn executed a
Stockholder Agreement dated as of December 11, 1995 (as amended from time to
time, the "Original Agreement") in connection with the acquisition of BancBoston
Mortgage Company ("BBMC"). The parties hereto are hereby amending and restating
the Original Agreement in connection with the acquisition by the Corporation of
HomeSide Holdings, Inc., formerly known as Barnett Mortgage Company ("Barnett
Mortgage").
Article 1
Defined Terms
In addition to the defined terms found elsewhere in this Agreement, as
used in this Agreement the following terms shall have the following meanings:
"Act" means the Securities Act of 1933, as amended.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with. such Person. As used in
this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") means the possession, directly
or indirectly, of power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" has the meaning set forth in the preamble.
"Barnett Closing Date" means the date on which the transaction
contemplated in the Barnett Purchase Agreement is consummated.
<PAGE> 2
"Barnett Management Subscription Agreements" means the Subscription
Agreements dated as of the Barnett Closing Date, among the Corporation and
certain officers and employees of Barnett Mortgage, pursuant to which such
officers and employees shall purchase shares of Class A Common Stock at the same
price per share as a purchase of shares of Class A Common Stock by BKB, the Lee
Fund and Madison Dearborn.
"Barnett Managers" means the officers and employees of Barnett Mortgage
who purchase Class A Common Stock pursuant to the Barnett Management
Subscription Agreements.
"Barnett Marketing Agreement" means the Marketing Agreement, to be
dated as of the Barnett Closing Date, between Barnett Bank and the Corporation,
set forth as Exhibit C to the Barnett Purchase Agreement, as in effect from time
to time.
"Barnett Mortgage" has the meaning set forth in the preamble.
"Barnett Mortgage Banking Business" means the business heretofore
conducted by Barnett Mortgage.
"Barnett Purchase Agreement" means the Stock Purchase Agreement, dated
March 4, 1996, between Barnett Banks, Inc., and the Corporation, and as amended
by Amendment No. 1 dated May 31, 1996.
"BBMC" has the meaning set forth in the preamble.
"BBMC Closing Date" means the Closing Date as defined in the BBMC
Purchase Agreement.
"BBMC Management Subscription Agreements" means the Subscription
Agreements, dated as of May 15, 1996, among the Corporation and certain officers
and employees of BBMC, pursuant to which such officers and employees purchased
shares of Class A Common Stock at the same price per share as the purchase of
shares of Class A Common Stock by Siesta, the Lee Fund and Madison Dearborn.
"BBMC Managers" means the officers and employees of BBMC who purchase
Class A Common Stock pursuant to the BBMC Management Subscription Agreements.
"BBMC Mortgage Banking Business" means the business heretofore
conducted by BBMC.
"BBMC Purchase Agreement" means the Stock Purchase Agreement, dated as
of December 11, 1995, between BKB and the Corporation, as in effect from time to
time.
"BKB" has the meaning set forth in the preamble.
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<PAGE> 3
"BKBC" means Bank of Boston Corporation, a Massachusetts corporation.
"BKB Marketing Agreement" means the Marketing Agreement, dated as of
the BBMC Closing Date, between BKB and the Corporation, as in effect from time
to time.
"By-laws" means the by-laws of the Corporation, which by-laws shall on
the BBMC Closing Date be substantially in the form of Exhibit B to be attached
hereto, as in effect from time to time.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Corporation. which Certificate of Incorporation shall on the Barnett
Closing Date be substantially in the form of Exhibit A to be attached hereto, as
in effect from time to time.
"Class A Common Stock" means shares of Class A voting common stock, par
value $.01 per share, of the Corporation.
"Class B Non-Voting Common Stock" means shares of Class B non-voting
convertible common stock, par value $.01 per share, of the Corporation.
"Class B Non-Voting Common Stock Issuance Agreement" means the
Subscription Agreement, dated prior to the BBMC Closing Date, pursuant to which
the Corporation issued 5,714 shares of Class B Non-Voting Common Stock to Smith
Barney, Inc. solely in exchange for services, as in effect from time to time.
"Class C Non-Voting Common Stock" means shares of Class C non-voting
common stock, par value $1.00 per share, of the Corporation.
"Class C Non-Voting Common Stock Purchase Agreement" means the Purchase
Agreement, dated prior to the BBMC Closing Date, pursuant to which BKB sold
5,714 shares of Class C Non-Voting Common Stock to a third party, as in effect
from time to time.
"Corporation" has the meaning set forth in the preamble.
"Disclosing Party" has the meaning set forth in Article 7.
"Information" has the meaning set forth in Article 7.
"Institutional Shareholders" means, collectively, Siesta, BKB, Lee
Fund, Lee Holders and Madison Dearborn.
"Instrument of Accession" has the meaning set forth in the preamble.
"Lee" has the meaning set forth in the preamble.
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<PAGE> 4
"Lee Fund has the meaning set forth in the preamble.
"Lee Managers" has the meaning set forth in the preamble.
"Madison Dearborn" has the meaning set forth in the preamble.
"Mortgage Banking Business" means the BBMC Mortgage Banking Business
and the Barnett Mortgage Banking Business, collectively.
"Non-Selling Shareholder" has the meaning set forth in Section 5.1(b).
"Person" means any individual, partnership, corporation, association,
trust, limited liability company, joint venture, unincorporated organization and
any government, governmental department or agency or political subdivision
thereof.
"Purchase Agreements" means, collectively, the BBMC Purchase Agreement,
Barnett Purchase Agreement, the Subscription Agreements, the Barnett and BBMC
Management Subscription Agreements, the Class B Non-Voting Common Stock Issuance
Agreement and the Class C Non-Voting Common Stock Purchase Agreement, as in
effect on the date hereof and without amendment thereto.
"Registration Rights Agreement" means the Amended and Restated
Registration Rights Agreement, dated as of the date hereof, among the
Corporation and each of the Shareholders, as in effect from time to time.
"Related Agreements" means, collectively, the Related Agreements as
defined in the Barnett Purchase Agreement and the Related Agreements as defined
in the BBMC Purchase Agreement.
"Risk Management Committee" has the meaning set forth in Section 3.4.
"Sale Notice" has the meaning set forth in Section 5.3.
"Selling Shareholder" has the meaning set forth in Section 5.3.
"Shareholders" means, collectively, Siesta, BKB, Lee Fund, Madison
Dearborn, the Lee Managers, Smith Barney, Inc., Robert Morrissey and any other
Person who becomes the holder of any Stock transferred from any Shareholder in
accordance with the terms hereof.
"Siesta" has the meaning set forth in the preamble.
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<PAGE> 5
"Stock" means, collectively, the Class A Common Stock, the Class B
Non-Voting Common Stock, the Class C Non-Voting Common Stock and any other
shares of capital stock of the Corporation.
"Stock Option Plan" means the Corporation's Stock Option Plans, dated
as of May 31, 1996, providing for the issuance by the Corporation to certain
officers and employees of the Corporation and its Subsidiaries of shares of
Class A Common Stock, as in effect from time to time.
"Subscription Agreements" means the Subscription Agreements, dated as
of May 31, 1996, between the Corporation, Siesta, BKB, the Lee Fund, Madison
Dearborn and the Lee Managers, and the Subscription Agreement, dated as of
December 11, 1996 between the Corporation, BKB, Lee, Lee Fund and Madison
Dearborn, each as in effect from time to time.
"Subsidiary" means any corporation, association, trust, or other
business entity, of which the designated parent shall at any time own or control
directly or indirectly through a Subsidiary or Subsidiaries at least a majority
(by number of votes) of the outstanding shares of capital stock (or other shares
of beneficial interest) entitled ordinarily to vote for the election of such
business entity's directors (or in the case of a business entity that is not a
corporation, for those Persons exercising functions similar to directors of a
corporation).
"Transfer" means to sell, alienate, assign, participate, encumber or
otherwise convey.
Article 2.
Certain Regulatory Considerations
Each of the Shareholders agrees that for so long as BKB or any of BKB's
Affiliates or Siesta or any of Siesta's Affiliates shall own, directly or
indirectly, any Stock, the Corporation and its Subsidiaries shall not undertake
any new activities which are not legally permissible activities for a
corporation having a national bank as a holder of that portion of its Stock as
is held by BKB or Siesta at that time, and the Corporation and its Subsidiaries
shall submit themselves to the extent legally required to the jurisdiction,
supervision and examining authority of the Comptroller of the Currency and any
and all other appropriate agencies.
Article 3
Governance
3.1. Directors.
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<PAGE> 6
(a) Each of the Shareholders agrees to vote all shares of Class A
Common Stock owned by such Shareholder or over which such Shareholder has voting
control so as to cause the Board of Directors of the Corporation (the "Board")
to consist of a total of eleven (11) Directors, who shall be designated as
follows:
(1) two (2) members shall be designated by Lee Fund;
(2) one (1) member shall be designated by Madison
Dearborn;
(3) three (3) members shall be designated by BKB;
(4) three (3) members shall be designated by Siesta; and
(5) two (2) members shall be members of management of the
Corporation or its operating subsidiaries, which
members shall be the Chairman and the President of
the Corporation (unless one person shall be both
Chairman and President, in which case the Chairman
and President of the Corporation shall be one
management member and the other management member
shall be another management employee of the
Corporation or its operating subsidiaries selected
jointly by at least five of the members designated
pursuant to clauses (1), (2), (3) and (4)).
(b) Each Director shall serve at the pleasure of the party or
parties which designated such Director and may from time to time be replaced by
such party or parties. Each party shall notify the other parties in writing of
any person designated by it to serve as a Director and any replacement for such
person promptly following such designation or replacement.
(c) Lee Fund and Madison Dearborn collectively shall be entitled
to designate a total of three (3) members as set forth above until they and
their respective Affiliates shall own collectively less than one-third of the
shares of Class A Common Stock owned by them on the date hereof, at which time
they collectively shall be entitled to designate one (1) member. Each of BKB and
Siesta shall be entitled to designate the number of members set forth above
until such entity and its Affiliates shall own collectively less than one-third
of the shares of Class A Common Stock owned by them on the date hereof, at which
time the entity whose ownership has been so reduced shall be entitled to
designate one (1) member. At such time as (i) Lee Fund, Lee Managers and Madison
Dearborn collectively, (ii) BKB or (iii) Siesta, in each case together with
their respective Affiliates, shall own less than ten percent (10%) of the number
of shares of Class A Common Stock owned by them on the date hereof, they shall
lose the right to designate any member. In the event any party loses the right
to designate one or more members, the total number of Directors comprising the
Board shall be reduced accordingly.
3.2. Authority and Meetings.
(a) Authority. The Board shall have the specific authority
delegated to it pursuant to this Agreement and the other Related Agreements,
including, without limitation, the Certificate of Incorporation and the By-laws.
Except as otherwise set forth in Section 3.4, all action permitted to
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<PAGE> 7
be taken by the Directors shall be duly authorized if approved by a majority in
number of all of the Directors.
(b) Meetings. The Board will meet as often as the members deem
necessary, presently contemplated to be at least four times per year. Meetings
of the Board may be attended by other representatives of Siesta, BKB, Lee Fund
or Madison Dearborn and other persons related to the Corporation as agreed to
from time to time by the Board. Actions of the Board may also be taken without a
meeting by unanimous written consent of the Board. Any one of Siesta, BKB or Lee
Fund may call a meeting of the Board upon reasonable prior notice.
3.3. Risk Management Committee; Other Committees.
(a) The Board shall establish a committee (the "Risk Management
Committee") which will monitor execution of the interest rate policies of the
Corporation by management of the Corporation, subject to oversight by the Board.
The Committee shall be staffed by individuals, who may or may not be Directors,
selected by the Board and shall at all times include at least two
representatives of Siesta, two representatives of BKB, and two representatives
of Lee Fund and Madison Dearborn collectively (including at least one designee
of Madison Dearborn so long as it is entitled to designate at least one (1)
director pursuant to Section 3.1 hereof), in each case so long as such Person
has the right to designate a member of the Board of Directors pursuant to
Section 3.1(a). Subject to the foregoing, each person shall serve as a member of
the Risk Management Committee at the pleasure of the Board.
(b) The Risk Management Committee will meet as often as the
members deem necessary. Unless otherwise agreed to by Siesta, BKB and Lee Fund,
the Risk Management Committee shall meet at least monthly. Meetings of the Risk
Management Committee may be held in person or telephonically. The attendance of
a majority of the members of the Risk Management Committee shall constitute a
quorum for purposes of any meeting of the Risk Management Committee. Actions of
the Risk Management Committee may also be taken without a meeting by unanimous
written consent of all the members thereof.
(c) The Board will establish a policy, the implementation of which
will be monitored by the Risk Management Committee, by which the Corporation
will seek to protect the value of the Corporation's assets and to dampen as
nearly as may be practicable the cyclicality of quarterly earnings utilizing
such techniques as entering into hedging transactions and selling mortgage
servicing to offset in part losses that may be incurred on hedging instruments
in any quarter, with the underlying goal of such policy being to enhance the
long term value of the business of the Corporation.
(d) Except as otherwise provided in Section 3.6, at least one
director designated pursuant to each of (i) clauses (1) or (2), (ii) clause (3),
and (iii) clause (4) of Section 3.1(a) shall have the right to serve on any
committee of the Board which is established.
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3.4. Super Majority Consent.
(a) Notwithstanding the provisions of the By-laws regarding voting
requirements, no Major Action (as defined in sub-paragraph (b) below), shall be
effective unless approved by consent of at least (i) a majority of the total
number of Directors designated pursuant to clauses (1) and (2) of Section
3.1(a), (ii) a majority of the Directors designated pursuant to clause (3) of
Section 3.1(a), and (iii) a majority of the Directors designated pursuant to
clause (4) of Section 3.1(a).
(b) For purposes of this Agreement, "Major Action" means each of
the following:
(i) the merger or consolidation of the Corporation or any
of its Subsidiaries with, or the sale of all or
substantially all of the stock or assets of the
Corporation or any of its Subsidiaries to, any other
Person in a transaction as a result of which the
consideration received by the shareholders of the
Corporation (A) is cash or securities issued by a
Person other than the Corporation or a Subsidiary of
the Corporation having an aggregate value less than
the book value of the Corporation or such Subsidiary,
or (B) consists of consideration other than cash or
securities which Barnett Banks, Inc., BKB and their
Affiliates may lawfully hold; or
(ii) except as expressly contemplated by this Agreement
and the Related Agreements, the Corporation or any of
its Subsidiaries entering into any agreement,
commitment, or transaction (including, without
limitation, any amendment of or waiver (other than an
amendment or waiver which would not adversely affect
the business of the Corporation, BBMC or Barnett
Mortgage or the benefits afforded the Corporation,
BBMC or Barnett Mortgage) under the Barnett Purchase
Agreement or the BBMC Purchase Agreement) with
Siesta, BKB, Lee Fund or Madison Dearborn or any of
their respective Affiliates (each a "Related Party
Transaction"); or
(iii) the removal or election of the Corporation's or any
of its direct subsidiaries' Chairman, President,
Chief Financial Officer or head of risk management.
(c) Notwithstanding any provisions of this Agreement or any
Related Agreement, express or implied to the contrary, no issuance of capital
stock of the Corporation (other than an underwritten public offering made under
the Act or in connection with a transaction pursuant to the exercise of Lee's
rights contained in Sections 3.6 or 5.5 hereof) may be effected (i) without the
consent of Siesta if such issuance is the first issuance which would cause the
greater of (A) the number of shares of Stock owned by Siesta, as of the date
hereof (adjusted for any stock splits, stock dividends and the like) and (B) the
number of shares of Stock owned by Siesta following such transaction to
represent below 20% of the outstanding capital stock of the Corporation for
equity accounting purposes and (ii) without the consent of BKB if such issuance
is the first issuance which would cause the greater of (A) the number of shares
of Stock owned by BKB, as of the date hereof (adjusted for any stock
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splits, stock dividends and the like) and (B) the number of shares of Stock
owned by BKB following such transaction to represent below 20% of the
outstanding capital stock of the Corporation for equity accounting purposes.
3.5 Certain Prohibited Transfers. The Shareholders acknowledge and
agree that it is in their mutual best interests to prohibit the Transfer of the
Corporation's business to a limited number of direct competitors of one or more
of the Shareholders. Accordingly, notwithstanding the provisions of the by-laws
regarding voting requirements or any other provisions of this Agreement, the
Corporation may not issue Stock or Transfer assets of the Corporation (other
than Transfers of assets in the ordinary course of business consistent with past
practice) to any one or more of the Persons listed on Schedules 5.2A or B
attached hereto, or to any successor or one or more affiliates of such Persons,
unless otherwise consented to by Siesta (in the case of the Persons listed on
Schedule 5.2A attached hereto) or BKB (in the case of the Persons listed on
Schedule 5.2B attached hereto). In addition, notwithstanding the provisions of
the by-laws regarding voting requirements or any other provisions of this
Agreement, the Corporation may not Transfer servicing rights of the Corporation
to any one or more of the Persons listed on Schedule 5.2A or B attached hereto,
or to any successor or one or more affiliates of such Persons, unless otherwise
consented to by Siesta (in the case of the Persons listed on Schedule 5.2A
attached hereto) or BKB (in the case of the Persons listed on Schedule 5.2B
hereto). In addition, the Corporation may not specifically target for sale by
the Corporation the servicing rights of mortgage loans originated by Barnett
Banks, Inc. or its Affiliates (other than the Corporation) in determining
servicing rights to be sold by the Corporation.
3.6. IPO and Sale Committees.
(a) The Board shall establish, and subject to the provisions of
Section 5.7 the Board shall maintain, a committee (the "IPO Committee") which
shall be delegated the authority to cause the Corporation to undertake an
initial public offering of the Corporation's common stock under the Act and,
subject to the terms of this Agreement and the Related Agreements, to take all
actions necessary in connection with the initial public offering of the common
stock of the Corporation. The IPO Committee shall be staffed by directors
designated pursuant to clause (1) of Section 3.1(a) and such other individuals
as such designees may determine from time to time. The IPO Committee will meet
as often as the members deem necessary. Meetings of the IPO Committee may be
held in person or telephonically. The attendance of a majority of the members of
the IPO Committee shall constitute a quorum for purposes of any meeting of the
IPO Committee. Actions of the IPO Committee may also be taken without a meeting
by unanimous written consent of all the members thereof. Each Shareholder agrees
to take such action in its capacity as a Shareholder of the Corporation,
including without limitation voting its shares of Stock and instructing its
designees on the Board of Directors to take action, as may be reasonably
requested by the IPO Committee in connection with any such initial public
offering; provided that nothing herein shall circumvent any Shareholder's rights
under this Agreement or any Related Agreement (including, without limitation,
affecting any Shareholder's rights with respect to such offering contained in
any Related Agreement).
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(b) The Board shall establish, and so long as Lee, Lee Fund, Lee
Managers, Madison Dearborn and their respective Affiliates collectively hold at
least seventy percent (70%) of the number of shares of Stock collectively owned
by them on the Barnett Closing Date the Board shall maintain, a committee (the
"Sale Committee") which shall be delegated the authority to cause the
Corporation to undertake any merger or consolidation of the Corporation with or
the sale of all or substantially all of the stock or assets of the Corporation
to, any Person in a transaction which is not a Major Action (a "Permitted
Sale"). The Sale Committee shall be staffed by directors designated pursuant to
clause (1) of Section 3.1(a) and such other individuals as such designees may
determine from time to time. The Sale Committee will meet as often as the
members deem necessary. Meetings of the Sale Committee may be held in person or
telephonically. The attendance of a majority of the members of the Sale
Committee shall constitute a quorum for purposes of any meeting of the IPO
Committee. Actions of the Sale Committee may also be taken without a meeting by
unanimous written consent of all the members thereof. The Sale Committee shall
be granted authority to take all actions necessary in connection with a
Permitted Sale, subject to the terms of this Agreement and the Related
Agreements. Each Shareholder agrees to take such action in its capacity as a
Shareholder of the Corporation, including without limitation voting its shares
of Stock and instructing its designees on the Board of Directors to take action,
as may be reasonably requested by the Sale Committee in connection with any such
Permitted Sale; provided, that nothing herein shall circumvent any Shareholder's
rights under this Agreement or any Related Agreement.
3.7 Action by Shareholders. Each Shareholder agrees that such
Shareholder will not vote any Class A Common Stock owned by such Shareholder or
over which such Shareholder has voting control, or take any action by written
consent, or take any other action as a shareholder of the Corporation, to
circumvent the arrangements set forth in this Article 3. Without limiting the
generality of the foregoing, each Shareholder agrees not to (a) vote any Stock
owned by such Shareholder or over which such Shareholder has voting control, or
take any other action as a shareholder of the Corporation to approve any
corporate action or transaction by the Corporation not previously approved by
the Board of Directors elected and acting in accordance with this Article 3 or
(b) commence or maintain any shareholder's derivative suit challenging any
action or transaction approved by the Board so elected and so acting. Each
Shareholder further agrees to take such action in its capacity as a shareholder
of the Corporation as may be reasonably requested by the Board of Directors of
the Corporation in connection with the proposed merger or consolidation of the
Corporation or its Subsidiaries or the sale of all or substantially all of the
assets of the Corporation or its subsidiaries, if such transaction has been
approved by the Board of Directors of the Corporation pursuant to this
Agreement, including without limitation voting its shares of stock in favor of
such transaction.
3.8 Related Party Transactions. Following the consummation of its
initial public offering of equity securities, the Corporation covenants that it
shall not, and will not permit any of its Subsidiaries, to enter into any
transaction (including without limitation the purchase, sale, rental or exchange
of any property or services, or any loans, advances or guarantees) with any
stockholder, director, officer, agent, partner, employee or Affiliate of the
Corporation, other than
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upon fair and reasonable terms no less favorable to the Corporation and its
Subsidiaries than would be obtained in a comparable arms-length transaction with
any other Person not so affiliated, except for transactions contemplated by
agreements entered into on or prior to the date hereof. The provisions of this
Section 3.8 shall survive termination of this Agreement and expire on the tenth
anniversary of the date hereof.
Article 4
Preemptive Rights
4.1. Preemptive Rights. Except for the issuance of shares of Class
A Common Stock (or securities convertible into or containing options or rights
to acquire shares of Class A Common Stock) (a) pursuant to an underwritten
public offering made under the Act, (b) as consideration for an acquisition
approved by the Board of Directors of assets or the capital stock of any Person,
(c) upon conversion of another series or class of capital stock, (d) pursuant to
a stock split, stock dividend or other similar form of recapitalization, (e)
pursuant to an incentive compensation plan approved by the Board of Directors,
or (f) pursuant to the Purchase Agreements, if the Corporation authorizes the
issuance and sale of any shares of any class of capital stock or any securities
convertible into or containing options or rights to acquire any shares of any
class of capital stock, the Corporation will first offer to sell to each
Shareholder a pro rata portion of such securities based upon the percentage of
the outstanding shares of Class A Common Stock (on a fully-diluted basis, giving
effect to any options or warrants then exercisable) held by such Shareholder.
Each Shareholder will be entitled to purchase all or part of such stock or
securities at the same price and on the same terms as such stock or securities
are to be offered to any other Persons.
4.2. Shareholders' Exercise Of Right. Each Shareholder entitled to
purchase securities under this Article 4 who wishes to exercise its purchase
rights hereunder must do so within 20 days after receipt of written notice from
the Corporation describing in reasonable detail the stock or securities being
offered, the purchase price thereof, the payment terms, the identity of the
proposed purchaser, if known, and such Shareholder's percentage allotment. Each
Shareholder shall have a right of over-allotment so that if and to the extent
any Shareholder does not exercise its right to purchase securities pursuant to
this Article 4, the other Shareholders shall have the right to purchase such
unsubscribed shares, such right of over-allotment to be exercised pro rata in
proportion to the number of shares of Class A Common Stock owned (on a
fully-diluted basis) by each Shareholder who exercises such over-allotment
right. Such over-allotment right may be exercised at any time within ten (10)
days after expiration of the twenty (20) day period described in the first
sentence of this Section 4.2.
4.3. Corporation's Exercise Of Right. Upon the expiration of the
offering period described above, the Corporation will be free to sell such stock
or securities which the Shareholders entitled to purchase such stock or
securities have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers
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<PAGE> 12
thereof. in the aggregate, than those offered to such Shareholders. Any stock or
securities offered or sold by the Corporation after such 90-day period must be
reoffered to the Shareholders entitled to purchase such stock or securities
pursuant to the terms of this Article 4.
Article 5
Transferability of Shares
5.1. Restrictions on Transfer. Except for (i) transfers among
Shareholders, (ii) transfers by Madison Dearborn, Lee Fund or Lee Managers to
investors reasonably acceptable to Siesta and BKB, (iii) transfers by any
Shareholder to its respective Affiliates, (iv) transfers by pledge or
hypothecation to a financial institution which agrees that no Stock so pledged
or hypothecated may be transferred to it or to any other Person except in
accordance with the terms of this Agreement, (v) transfers pursuant to public
offerings made in accordance with the terms of the Registration Rights
Agreement, (vi) the transfer of shares of Class C Non-Voting Common Stock by BKB
pursuant to the Class C Non-Voting Common Stock Purchase Agreement and (vii)
transfers of Class B Non-Voting Common Stock by Smith Barney Inc. to its
Affiliates, no Shareholder may Transfer all or any part of any Stock without
complying with the provisions of this Article V.
5.2 Prohibited Transfers. The Shareholders acknowledge and agree
that it is in their mutual best interest to prohibit the Transfer of Stock to a
limited number of direct competitors of one or more of the Shareholders.
Accordingly, the Shareholders agree that unless otherwise consented to by Siesta
(in the case of the Persons listed on Schedule 5.2A attached hereto) or BKB (in
the case of the Persons listed on Schedule 5.2B attached hereto), no Shareholder
may Transfer any share of Stock to any one or more of the Persons listed on
Schedules 5.2A and B attached hereto, or to any successor or one or more
Affiliates of such Persons.
5.3 Right of First Offer. In the event that (i) the Board of
Directors intends to vote in accordance with the terms of Article 3 to merge or
consolidate the Corporation or any of its Subsidiaries, or to sell all or
substantially all of the stock or assets of the Corporation or any of its
Subsidiaries, or (ii) Lee Fund, Lee Managers, Madison Dearborn or their
respective Affiliates, BKB or its Affiliates, or Siesta or its Affiliates (in
any such case, the "Transfer Shareholder") intend to transfer any Stock, in each
case to an unaffiliated third party, the Board of Directors or the Transfer
Shareholder, as the case may be, shall first give notice (the "Transfer Notice")
of such proposed action to the Shareholders not participating in such Transfer
(the "Non-Transfer Shareholders"), specifying in reasonable detail such proposed
action. Within 15 days after delivery of the Transfer Notice (in the event of
clause (ii) of the first sentence of this paragraph), the Board of Directors, by
majority vote of all of the Directors designated by the Non-Transfer
Shareholders, shall determine whether the Corporation shall make an offer (a
"Company Offer") to acquire the stock of the Corporation which is the subject of
the Transfer Notice (the "Subject Property") and, if so, the terms thereof. If,
in connection with an event described in clause (ii) of the first sentence of
this paragraph, the Corporation does not make a Company Offer, or, in
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connection with an event described in clause (i) of the first sentence of this
paragraph, any Non-Transfer Shareholder may, by the earlier of (x) 5 days after
the determination by the Board of Directors not to make a Company Offer, if
applicable, or (y) 20 days after delivery of the Transfer Notice, make an offer
(a "Shareholder Offer") to acquire the Subject Property. Any Company Offer and
any Shareholder Offer may not include consideration other than cash and/or
securities which BKB and its Affiliates and Siesta and its Affiliates may
lawfully hold (and any securities so included will be valued at the fair market
value thereof), may not be subject to any closing conditions (other than
regulatory or other legally required approvals, lack of material adverse change,
material accuracy of representations and warranties and lack of injunction or
illegality prohibiting the transaction from taking place) and must remain open
for a period of at least 21 days from the date of delivery thereof. The Board of
Directors or the Transfer Shareholder, as the case may be, may, but shall not be
obligated to, accept any Company Offer or Shareholder Offer. The Board of
Directors or the Transfer Shareholder, as the case may be, shall have 180 days
following delivery of the Transfer Notice within which to Transfer the Stock or
assets subject to the Transfer Notice; provided, however, that such Transfer
shall be on terms and conditions, including price, which are more favorable to
the Corporation and its shareholders than the terms most favorable to the
Corporation and its Subsidiaries specified in the Company Offer or the
Shareholder Offer, as the case may be. If within such 180 day period the
Corporation or the Transfer Shareholder, as the case may be, do not enter into
such an agreement then the Corporation or the Transfer Shareholder, as the case
may be, may not thereafter enter into any such agreement without again complying
with the provisions of this Section 5.3.
5.4 Co-Sale Right. Subject to the provisions of Section 5.3, if a
Selling Shareholder enters into an agreement to Transfer any or all of the
Shares of Stock owned by such Selling Shareholder or its Affiliates, such
Selling Shareholder shall deliver a written notice (the "Sale Notice") to the
Non-Selling Shareholders and the Corporation specifying in reasonable detail the
price, terms and conditions of such purchase and the identity of the purchaser.
The Non-Selling Shareholders shall be entitled, by notice to the Selling
Shareholder and the Corporation within 15 days after receipt of the Sale Notice,
to elect to sell shares of Stock of the class or classes being sold which are
owned by the Non-Selling Shareholders and their Affiliates at the price and on
the terms and conditions specified in the Sale Notice. If any Non-Selling
Shareholder(s) elects to sell, then the Selling Shareholder and such Non-Selling
Shareholders who elect to sell shall be entitled to sell Stock of the class or
classes being sold on a pro-rata basis based upon the relative percentages of
such Shareholders' respective ownership of Stock of the class or classes being
sold. Such sale shall be completed within 90 days after delivery of the Sale
Notice, except that the closing of such sale may be delayed for up to 90
additional days pending completion of all regulatory filings, expiration of all
waiting periods and receipt of all required regulatory approvals. In the event
the Selling Shareholder does not complete such sale within such period, or all
of such Stock shall not have been sold, then any subsequent proposed sale of any
such Stock shall be once again subject to the provisions of this paragraph (b).
For purposes of this Section all shares of Class A Common Stock of the
Corporation and Class B Non-Voting Common Stock of the Corporation shall be
considered to be a single class on an as converted basis.
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5.5. Take-Along Right. Subject to the provisions of Section 5.3, so
long as Lee Fund, Lee Managers and Madison Dearborn and their respective
Affiliates collectively hold at least seventy percent (70%) of the number shares
of Stock owned by them on the Barnett Closing Date, and they wish to sell all of
their shares of Stock to an unaffiliated third party in an arm's length
transaction, and the consideration to be received (a) has a value which is not
less than the book value of the Corporation, and (b) consists of cash and/or
securities which Barnett Banks, Inc., BKB and their respective Affiliates (if
then shareholders of the Corporation) may lawfully hold, then all of the
Shareholders shall sell all of their shares of Stock of the Corporation to such
third party on the same terms and conditions, including price, as the other
Shareholders.
5.6. Additional Restrictions. Anything contained in the foregoing
provisions of this Article 5 expressed or implied to the contrary
notwithstanding:
(a) The Board may, in addition to any other requirement
that they may impose, require as a condition of any Transfer of any Stock that
the transferor furnish to the Corporation an opinion of counsel satisfactory
(both as to such opinion and as to such counsel) to counsel to the Corporation
that such sale, transfer, assignment, exchange, or other disposition complies
with applicable federal and state securities laws.
(b) Each transferee of Stock shall execute and deliver an
Instrument of Accession whereby such transferee becomes a party to this
Agreement.
(c) Any sale, transfer, assignment, exchange, or other
disposition of Stock in contravention of any of the provisions of this Article 5
shall be void and ineffectual and shall not bind or be recognized by the
Corporation.
5.7 Lee/Madison Dearborn Transfers. Anything contained in the
foregoing provisions of this Article 5 or in any Related Agreement expressed or
implied to the contrary notwithstanding, following the Transfer of 50% or more
of the shares of Stock collectively owned on the Barnett Closing Date by Lee
Fund, Lee Managers, Madison Dearborn and their respective Affiliates to Persons
who are not Affiliates of Lee or Madison Dearborn, the rights of Lee Fund and
Lee Managers under the Registration Rights Agreement to a demand registration
prior to a Public Offering (as defined therein) and under the provisions of
Section 3.6(a) hereof shall terminate; provided, however, that following such a
Transfer such rights shall inure to the benefit of their Transferees.
Article 6
Non-Competition
(a) Subject to paragraph (iii) below, during the period commencing
on the date hereof and ending on the date of termination of this Agreement (the
"Restricted Period"), (i) none of the Shareholders shall, nor shall they permit
any of their Affiliates to, engage (other than as a
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shareholder in the Corporation) directly or indirectly, alone or as a
shareholder (other than as a holder of less than five percent (5%) of the common
stock of any publicly traded corporation), partner or holder of any other
ownership interest, in the Mortgage Banking Business anywhere within North
America, and (ii) none of the Shareholders shall direct to any competitor of the
Corporation any customer or prospective customer of the Corporation for services
of a kind provided by the Corporation (except as permitted under any Related
Agreement); provided, however, that this Article 6 shall not prohibit BKB from
originating mortgages through its normal retail origination channels, including
so-called consumer direct mortgage origination targeted to New England,
purchasing non-conforming mortgages or from conducting any activities permitted
under any Related Agreement, nor shall it prohibit Barnett from transacting any
business other than a mortgage correspondent business or from conducting any
activities permitted under any Related Agreement; and provided further that this
Article 6 shall not prohibit the ownership and operation by Shareholder of a
competing Mortgage Banking Business as a result of Changed Circumstances so long
as the following conditions are satisfied:
(i) Either (1) such Shareholder shall offer by written
notice to the Corporation (the "Offer") to sell such competing
Mortgage Banking Business within two months after the
occurrence of such Changed Circumstances to the Corporation at
fair market value, as specified in such written notice and
determined within such two month period by an independent
appraiser selected jointly by such Shareholder and by the
Corporation's Board of Directors (without involvement of any
director designated by such Shareholder) or (2) such
Shareholder shall, by written notice to the Corporation within
two months after the occurrence of such Changed Circumstances,
elect to terminate its rights under Sections 3.1 and 3.4 of
this Agreement.
(ii) The Corporation shall have two months after receipt
of an Offer to accept such Offer, which decision shall be made
without involvement of any director designated by such
Shareholder and shall be made by a majority of the remaining
directors, which majority shall include a majority of the
directors designated pursuant to Section 3.1(a) by each of (i)
Lee Fund and Madison Dearborn collectively, (ii) BKB and (iii)
Siesta, in each case to the extent such Shareholder is not
delivering the Offer contemplated hereby. If the Corporation
does not accept such Offer within such two month period, such
Shareholder shall have four months, commencing upon the first
to occur of the Corporation's rejection of the Offer or the
passage of two months after the Offer is made, to sell such
competing Mortgage Banking Business to any other party;
provided, however, that in the case of Changed Circumstances
described in (i), (iii) or (v) of paragraph (b) below, if the
applicable Shareholder has entered into a binding agreement to
sell such competing Mortgage Banking Business and such
Shareholder is prepared to consummate such sale within such
four month period but for the receipt of all necessary
regulatory approvals, completion of all necessary regulatory
filings, or the expiration of all regulatory waiting periods,
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such four month time period shall be extended for up to an
additional four months pending receipt of such regulatory
approvals, completion of such regulatory filings and
expiration of such regulatory waiting periods. If such
Shareholder fails to complete such sale within such four month
period (as such period may be extended in accordance with the
immediately preceding sentence), such Shareholder shall be
obligated again to offer such competing Mortgage Banking
Business to the Corporation before entering into an agreement
to sell the same to any other person, in which case the time
periods specified above shall commence anew.
(iii) If such Shareholder sells such competing Mortgage
Banking Business within such four month period (as such period
may be extended in accordance with paragraph (ii) above), or
in the event such competing Mortgage Banking Business's
mortgage servicing portfolio was $5 billion or less when
acquired by such Shareholder or any of its Affiliates and the
aggregate mortgage servicing portfolio then owned by such
Shareholder and its Affiliates (other than through ownership
of the Corporation) is not greater than $10 billion, then such
Shareholder shall be free of the provisions of this Article 6
with respect to such competing Mortgage Banking Business and
its rights under Sections 3.1 and 3.4 hereof shall continue
unaffected by such Changed Circumstances.
(iv) For so long as such Shareholder or its Affiliates
retain any mortgage servicing portfolio greater than $5
billion acquired in any single Changed Circumstance or greater
than $10 billion acquired in any series of Changed
Circumstances, then immediately after expiration of the four
month period specified above (as such period may be extended
in accordance with paragraph (ii) above) within which the
Shareholder may sell such Mortgage Banking Business, such
Shareholder shall have no rights under Sections 3.1 and 3.4
hereof and such rights shall automatically terminate.
(b) Changed Circumstances for purposes of this Article 6 shall
mean, (i) an acquisition by a Shareholder of a previously unaffiliated Person,
(ii) an acquisition of BKBC or an Affiliate of BKBC by a previously unaffiliated
Person, (iii) an acquisition of Barnett Banks, Inc. or an Affiliate of Barnett
Banks, Inc. by an unaffiliated Person, (iv) a merger, consolidation or other
business combination by and between BKBC or an Affiliate of BKBC and a
previously unaffiliated Person, or (v) a merger, consolidation or other business
combination by and between Barnett or an Affiliate of Barnett and a previously
unaffiliated Person. Nothing in this Article 6 shall be deemed to affect or
apply to the acquisition by Lee Fund , Lee Managers or Madison Dearborn or their
respective Affiliates of an equity interest of less than 20% in a bank or other
financial institution which has an Affiliate engaged in the Mortgage Banking
Business.
(c) Notwithstanding anything to the contrary in the Related
Agreements, during the Restricted Period the Corporation may not, within the
states of Massachusetts, Connecticut or
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Rhode Island, offer or market through retail branches in those states any
products or services which are competitive with products or services which are
then being marketed in those states by BKB or its Affiliates, or within the
State of Florida (other than within a 50-mile radius of Jacksonville at the same
level as such products or services are being offered or marketed on the date
hereof) offer or market through retail branches in that State any products or
services which are competitive with products or services which are then being
marketed in that State by Barnett Banks, Inc. or its Affiliates.
Article 7
Confidentiality
Each Shareholder shall hold, and shall cause its respective Affiliates
and their directors, officers, employees, agents, consultants and advisors to
hold, in strict confidence, unless disclosure to a banking or other regulatory
authority is necessary in connection with any necessary regulatory approval or
unless compelled to disclose by judicial or administrative process or, in the
written opinion of its counsel, by other requirement of law or the applicable
requirements of any regulatory agency or relevant stock exchange, all non-public
records, books, contracts, reports, instruments, computer data and other data
and information (collectively, "Information") concerning the other parties (or,
if required under a contract with a third party, such third party) furnished it
by such other party or its representatives pursuant to this Agreement or any
other Related Agreement, except to the extent that such Information can be shown
to have been (a) previously known by such party on a non-confidential basis, (b)
available to such party on a non-confidential basis from a source other than the
disclosing party, (c) in the public domain through no fault of such party or (d)
later lawfully acquired from other sources by the party to which it was
furnished, and no party shall release or disclose such Information to any other
person, except its auditors, attorneys, financial advisors, bankers, other
consultants and advisors and, to the extent permitted above, to bank regulatory
authorities. In the event that a party to this Agreement becomes compelled to
disclose any Information in connection with any necessary regulatory approval or
by judicial or administrative process, such party shall provide the party who
provided such Information (the "Disclosing Party") with prompt prior written
notice of such requirement so that the Disclosing Party may seek a protective
order or other appropriate remedy and/or waive the terms of the Confidentiality
Agreement between BKB and Lee, Barnett Banks, Inc. and Lee or BKB and Barnett
Banks, Inc., as the case may be. In the event that such protective order, other
remedy or waiver is not obtained, only that portion of the Information which is
legally required to be disclosed shall be so disclosed. Notwithstanding the
foregoing, (i) each of Lee Fund and Madison Dearborn can include summary
information concerning the financial condition, business and results of
operation of the Corporation to its partners and (ii) each of Siesta and BKB can
provide information concerning the Corporation to analysts or others in
connection with routine types of corporate communications relating to Siesta or
BKB, as the case may be.
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Article 8
Additional Legend
So long as any Stock is subject to the provisions hereof, all
certificates or instruments representing Stock will have imprinted on them the
following legend:
The shares represented by this certificate are subject to the terms of
a certain Amended and Restated Shareholder Agreement, dated as of May
31, 1996, among the issuer of this certificate and certain stockholders
(the "Stockholder Agreement"). The Stockholder Agreement contains
certain restrictive provisions relating to the voting and transfer of
shares of the stock represented hereby. A copy of the Stockholder
Agreement is on file at the Corporation's principal offices. Upon
written request to the Corporation's Secretary, a copy of the
Stockholder Agreement will be provided without charge to appropriately
interested persons.
Article 9
General
9.1. Notices. All notices, demands and other communications
hereunder shall be in writing or by written telecommunication, and shall be
deemed to have been duly given if delivered personally or if mailed by certified
mail, return receipt requested, postage prepaid or if sent by overnight courier
or sent by written telecommunication, as follows:
If to BKB:
The First National Bank of Boston
100 Federal Street, 01-25-08
Boston, Massachusetts 02110
Attention: Mr. Peter J. Manning
with a copy sent contemporaneously to:
Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
Attention: Norman J. Shachoy, Esq.
18
<PAGE> 19
If to Lee, Lee Managers or the Lee Fund:
Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Attention: David V. Harkins
with a copy sent contemporaneously to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attention: James Westra, Esq.
If to Madison Dearborn:
Madison Dearborn Capital Partners, L.P.
3 First National Plaza, Suite 1330
Chicago, Illinois 60602
Attention: Justin S. Huscher
with a copy sent contemporaneously to:
Kirkland & Ellis
200 East Randall Street
Chicago, Illinois 60601
Attention: William S. Kirsch, Esq.
If to Siesta:
3800 Howard Hughes Parkway
Suite 1560
Las Vegas, Nevada 89109
Attention: Bryan E. Buchholz
Phone: (702) 735-1832
Fax: (702) 735-1723
19
<PAGE> 20
with a copy sent contemporaneously to:
Barnett Banks, Inc.
50 North Laura Street
Jacksonville, Florida 32202-3638
Attention: Hinton Nobles
and to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Attention: Gail Weinstein, Esq.
9.2. Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) together with the Related Agreements contains the entire
understanding of the parties hereto and thereto, supersedes all prior agreements
and understandings relating to the subject matter hereof and thereof and this
Agreement may not be amended except by a written instrument hereafter signed by
holders of not less than eighty percent (80%) of the outstanding shares of Class
A Common Stock; provided, however, that no amendment, restatement or
modification which adversely affects the rights of any party hereto shall be
effective without the consent of such party. No waiver of any provision of this
Agreement shall be effective unless evidenced by a written instrument signed by
the waiving party. Each of the parties hereto further acknowledge and agree
that, in entering into this Agreement and entering into the Related Agreements,
they have not in any way relied upon any oral or written agreements, statements.
promises, information, arrangements, understandings, representations or
warranties, express or implied, not specifically set forth in this Agreement or
the Related Agreements.
9.3. Remedies. The Shareholders will be entitled to enforce their
rights under this Agreement specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights existing in their favor. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any Shareholder may
in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce or prevent any violation of the provisions of this Agreement. In the
event of any dispute involving the terms of this Agreement. the prevailing party
shall be entitled to collect reasonable fees and expenses incurred by the
prevailing party in connection with such dispute from the other parties to such
dispute.
9.4. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
without regard to its conflict of laws rules.
20
<PAGE> 21
9.5. Waiver of Certain Damages. EACH OF THE PARTIES HERETO TO THE
FULLEST EXTENT PERMITTED BY LAW IRREVOCABLY WAIVES ANY RIGHTS THAT THEY MAY HAVE
TO PUNITIVE, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY
LITIGATION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT OR ANY RELATED
AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS OR ACTIONS OF
ANY OF THEM RELATING THERETO.
9.6. Sections and Section Headings. The headings of sections and
subsections are for reference only and shall not limit or control the meaning
thereof.
9.7. Assigns. This Agreement and the Related Agreements shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors and permitted assigns. Neither this Agreement and the Related
Agreements nor the obligations of any party hereunder or thereunder shall be
assignable or transferable by such party without the prior written consent of
the other parties hereto or thereto.
9.8. No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any Person, except the parties hereto, any
rights or remedies under or by reason of this Agreement.
9.9. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original. but all of which
together shall constitute one and the same instrument.
9.10. Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party.
9.11. Severability. The invalidity or unenforceability of any
particular provision of this Agreement or any Related Agreement shall not affect
the other provisions hereof or thereof, and this Agreement shall be construed in
all respects as if such invalid or unenforceable provision was omitted.
9.12. Term. Except as otherwise expressly set forth herein, this
Agreement shall terminate on the first to occur of (i) consummation of one or
more public offerings of equity securities of the Corporation with aggregate
offering price to the public of at least $50,000,000, or (ii) the tenth
anniversary of the date of execution of the Agreement.
21
<PAGE> 22
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed and delivered as a
sealed instrument as of the date and year first above written.
HOMESIDE, INC.
By: /s/ Joe K. Pickett
---------------------------------------
Name: Joe K. Pickett
President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter J. Manning
---------------------------------------
Name: Peter J. Manning
Title: Executive Director
THOMAS H. LEE COMPANY
By: /s/ Thomas M. Hagerty
---------------------------------------
Name: Thomas M. Hagerty
Title: Managing Director
THOMAS H. LEE EQUITY FUND III, L.P.
By: Equity Advisors III Limited Partnership, its
general partner
By: THL Equity Trust III, its general partner
By: /s/ Thomas M. Hagerty
---------------------------------------
Name: Thomas M. Hagerty
Title: Vice President
<PAGE> 23
THOMAS H. LEE FOREIGN FUND III, L.P.
By: Equity Advisors III Limited Partnership, its
general partner
By: THL Equity Trust III, its general partner
By: /s/ Thomas M. Hagerty
---------------------------------------
Name: Thomas M. Hagerty
Title: Vice President
MADISON DEARBORN CAPITAL PARTNERS,
L.P.
By: Madison Dearborn Partners, Inc.,
its General Partner
By: /s/ Justin S. Huscher
---------------------------------------
Name: Justin S. Huscher
Title: Vice President
SIESTA HOLDINGS, INC.
By: /s/ Bryan E. Buchholz
---------------------------------------
Name: Bryan E. Buchholz
Title:
SMITH BARNEY, INC.
By:
---------------------------------------
Name:
Title:
/s/ Robert Morrissey
----------------------------
Robert Morrissey
<PAGE> 24
Lee Managers
/s/ David V. Harkins /s/ Soren L. Oberg
- ------------------------- -----------------------------
David V. Harkins Soren L. Oberg
/s/ Thomas R. Shepherd /s/ Scott L. Jaeckel
- ------------------------- -----------------------------
Thomas R. Shepherd Scott L. Jaeckel
/s/ Scott A. Schoen /s/ Simon E. Brown
- ------------------------- -----------------------------
Scott A. Schoen Simon E. Brown
/s/ C. Hunter Boll /s/ Darius C. Brooks
- ------------------------- -----------------------------
C. Hunter Boll Darius C. Brooks
/s/ Anthony J. DiNovi /s/ Charles W. Robins
- ------------------------- -----------------------------
Anthony J. DiNovi Charles W. Robins
/s/ Thomas M. Hagerty /s/ James Westra
- ------------------------- -----------------------------
Thomas M. Hagerty James Westra
/s/ Joseph J. Incandela /s/ Barbara F. Lee
- ------------------------- -----------------------------
Joseph J. Incandela Barbara F. Lee
/s/ Warren C. Smith, Jr.
- -------------------------
Warren C. Smith, Jr. Robert Schiff Lee 1988 Irrevocable
Trust
/s/ Seth W. Lawry By: /s/ Charles W. Robins
- ------------------------- -------------------------
Seth W. Lawry Trustee aforesaid and not
individually
Stephen Zachary Lee 1988 Irrevocable
/s/ Kent R. Weldon Trust
- -------------------------
Kent R. Weldon
/s/ Wendy L. Masler By: /s/ Charles W. Robins
- ------------------------- --------------------------
Wendy L. Masler Trustee aforesaid and not
individually
/s/ Andrew D. Flaster /s/ Warren C. Smith, Jr.
- ------------------------- -----------------------------
Andrew D. Flaster Warren C. Smith as trustee of
Martha Marks Irrevocable Family Trust
/s/ Kristina A. Weinberg
- -------------------------
Kristina A. Weinberg
<PAGE> 25
/s/ Sheryll J. Harkins
---------------------------------
Thomas H. Lee Company Sheryll J. Harkins as trustee of
Jessica Ashley Harkins Gift Trust
By: /s/ Wendy L. Masler /s/ Sheryll J. Harkins
---------------------- ---------------------------------
Name: Sheryll J. Harkins as trustee of Jason
Title: Edward Harkins Gift Trust
/s/ Scott M. Sperling
- -------------------------
Scott M. Sperling
<PAGE> 1
EXHIBIT 10.15
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (the "Agreement")
is made and entered into as of the 31st day of May, 1996, by and among HomeSide,
Inc. a Delaware corporation (the "Company") and those shareholders of the
Company who have accepted and agreed to the terms hereof by executing a
signature page of this Agreement (collectively, the "Shareholders").
The parties hereby agree as follows:
1. Definitions
-----------
"Bank of Boston" means The First National Bank of Boston, in its
capacity as a Shareholder hereunder.
"Best efforts" with respect to the Company shall mean the reasonable
good faith efforts of the Company.
"Business Day" means any day except a Saturday, a Sunday or other day
on which commercial banks in Boston, Massachusetts are required or authorized by
law to be closed.
"Commission" means the Securities and Exchange Commission and any
successor agency of the United States federal government administering the
Securities Act or the Exchange Act.
"Common Stock" means the Class A voting common stock of the
Corporation, $.01 par value.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules, regulations and interpretations thereunder.
"Holder" means any Shareholder owning or having the right to acquire
Registrable Shares as of the date hereof, or any rightful assignee thereof.
"Lee" means collectively, Thomas H. Lee Equity Fund III, L.P. ("Fund
III") and the affiliates of and co-investors with Fund III, in their capacities
as Shareholders hereunder.
"Madison Dearborn" means Madison Dearborn Capital Partners, L.P., in
its capacity as a Shareholder hereunder.
"Person" means a corporation, an association, a partnership, a trust,
an organization, a business, an individual, or a government or political agency
or other entity.
<PAGE> 2
A "Public Offering" shall mean the completion of a sale of Common
Stock pursuant to a registration statement which has become effective under the
Securities Act, excluding registration statements on Form S-4, S-8 or similar
limited purpose forms.
"Registrable Securities" means the shares of Common Stock now or
hereafter held by the Shareholders or issuable to the Shareholders upon
conversion of convertible securities now or hereafter held by the Shareholders
or upon exercise of options or warrants to purchase the same. Securities will
cease to be Registrable Securities when (a) they have been registered under the
Securities Act, the registration statement in connection therewith has been
declared effective, and they have been disposed of pursuant to such effective
registration statement, (b) they are distributed to the public pursuant to Rule
144 (or any similar provision then in force) under the Securities Act or (c)
they have been otherwise transferred and new certificates or other evidences of
ownership for them (not bearing a legend to the effect that such securities have
not been registered under the Securities Act and may not be sold or transferred
in the absence of registration or an exemption therefrom under the Securities
Act, and not subject to any stop transfer order or other restriction on
transfer) have been delivered by or on behalf of the Company, and they may be
resold without subsequent registration under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules, regulations and interpretations thereunder.
"Siesta" means Siesta Holdings, Inc., a Nevada corporation, in its
capacity as a Shareholder hereunder.
2. Demand Registrations
--------------------
(a) REQUEST FOR REGISTRATION. At any time (i) Holders of more than
fifty percent (50%) of the Registrable Securities then outstanding or issuable
to Lee, (ii) Bank of Boston, (iii) Madison Dearborn, or (iv) Siesta , may make a
written request to the Company for registration with the Commission under and in
accordance with the provisions of the Securities Act of all or part of their or
their affiliates' Registrable Securities (a "Demand Registration"); PROVIDED,
HOWEVER, that (a) no such request may be made with respect to Registrable
Securities with an expected aggregate offering price to the public of less than
$20,000,000; (b) the Company need effect only two (2) Demand Registrations (per
requesting party) pursuant to any request made by any of Lee, Bank of Boston,
Siesta or Madison Dearborn; and (c) prior to the initial public offering of
securities of the Company pursuant to the Securities Act, no request for a
Demand Registration shall be effective unless such request shall be made by the
Holders of more than fifty percent (50%) of the Registrable Securities then
outstanding or issuable to Lee, subject to any further restrictions contained in
the Amended and Restated Shareholder Agreement dated as of May 31, 1996, as
amended from time to time. Such request shall specify the aggregate number of
Registrable Securities
2
<PAGE> 3
proposed to be sold. Within ten (10) days after receipt of such request, the
Company shall give written notice (the "Notice") of such registration request to
all other Holders of Registrable Securities, specifying those Holders who
requested registration and the number of Registrable Securities as to which
registration was requested, and stating that the Company will include in such
registration all Registrable Securities as to which the Company has received
written requests for inclusion therein within twenty (20) days after the giving
of the Notice. Within five (5) days after the expiration of such twenty (20)
days, the Company will notify all the Holders to be included in such
registration of the other Holders and the number of Registrable Securities
requested to be included therein.
(b) PARTICIPATION BY OTHER PARTIES. No Person other than a Holder of
Registrable Securities shall be permitted to offer any securities under any
Demand Registration unless (i) such Person is the Company or is entitled to
exercise Piggyback Registration rights pursuant to contractual commitments with
the Company and (ii) the Holders of Registrable Securities participating in such
Demand Registration and their underwriters, if any, in their sole discretion,
determine that such Demand Registration can accommodate such additional
participation.
(c) EFFECTIVE REGISTRATION AND EXPENSES. A registration will not count
as a Demand Registration until it has become effective and until all of the
Registrable Securities included in such registration have actually been sold
thereunder. No Demand Registration may be requested at a time when a
registration is effective with respect to the class of securities proposed to be
included in such Demand Registration (except with respect to a registration on
Form S-4 or S-8, or any other form not available for registering the Registrable
Securities for sale to the public). The Company shall pay all Registration
Expenses (as defined in Section 8 below) in connection with a registration made
pursuant to this Section 2, whether or not such registration becomes effective
or Registrable Securities are sold thereunder.
(d) PRIORITY ON DEMAND REGISTRATIONS. If in the opinion of the
managing underwriter or underwriters of a proposed offering the number of
Registrable Securities requested to be included in such offering exceeds the
number which can be sold in such offering or is reasonably likely materially and
adversely to affect the success or offering price of such offering (an
"Undersubscribed Offering"), there shall be excluded, to the extent necessary,
shares requested for inclusion in such Undersubscribed Offering in the following
order: (i) first, shares of those shareholders of the Company other than Holders
shall be excluded, PRO RATA on the basis of the shares requested to be included
by each; (ii) next, shares requested to be included by the Company shall be
excluded; and (iii) next, shares of Registrable Securities requested to be
included by Holders shall be excluded, PRO RATA on the basis of the shares
requested to be included by each such Holder. Notwithstanding the foregoing, in
the event an Undersubscribed Offering is also an initial public offering of the
securities of the Company, the shares requested for inclusion in such offering
shall be excluded in the following order: (x) first, shares of those
shareholders of the Company other
3
<PAGE> 4
than Holders shall be excluded, PRO rata on the basis of the shares requested to
be included by each; (y) next, shares of Registrable Securities requested to be
included by Holders shall be excluded, PRO RATA on the basis of the shares
requested to be included by each such Holder; and (z) next, shares requested to
be included by the Company shall be excluded; PROVIDED, HOWEVER, that if the
shares to be sold by the Company in such offering constitute more than twenty
percent (20%) of the total number of shares to be sold in the offering, then
such offering shall be deemed to be a Company initiated offering and the Holders
of Registrable Securities shall be deemed to have exercised only Piggyback
Registration rights under Section 3 hereof and not any Demand Registration
rights under this Section 2.
(e) SELECTION OF UNDERWRITERS. The Person making the request for
Demand Registration will select the investment banker or bankers and managing
underwriter or underwriters for each Demand Registration.
3. Piggyback Registration
----------------------
(a) RIGHT TO PIGGYBACK. If at any time the Company proposes to file a
registration statement under the Securities Act for any shares of Common Stock
or any options, warrants, units, convertibles, rights or other securities
related or linked to any shares of such Common Stock (except with respect to
registration statements on Form S-4 or S-8, or any other form not available for
registering the Registrable Securities for sale to the public), with respect to
an offering for its own account or for the account of another Person (other than
the Holders of Registrable Securities in their capacity as such) of any class of
security (a "Proposed Registration"), then the Company shall in each case give
written notice of such proposed filing to the Holders of Registrable Securities
at least twenty (20) days before the anticipated filing date, and shall, subject
to Section 4(b), include in such registration statement such amount of
Registrable Securities as each such Holder may request (a "Piggyback
Registration") within ten (10) days of the receipt of such notice. The Company
shall register such Registrable Securities on the same terms and subject to the
same conditions applicable to the registration in the Proposed Registration of
equity securities to be sold by the Company or the Person selling under such
Proposed Registration; provided that the Company shall in all events pay
Registration Expenses associated with the inclusion of Registrable Securities as
provided in Section 8.
(b) PRIORITY ON PIGGYBACK REGISTRATIONS. If in the opinion of the
managing underwriter or underwriters of such offering the number of Registrable
Securities which the Holders intend to include in such offering exceeds the
number which can be sold in such offering or is reasonably likely materially and
adversely to affect the success or offering price of such offering, then the
amount of securities to be offered for the accounts of Holders of Registrable
Securities shall be reduced, pro rata in accordance with the number of such
securities held by such Holders requested to be included in such registration.
(c) SELECTION OF UNDERWRITERS. The Company will select a managing
4
<PAGE> 5
underwriter or underwriters to administer each Piggyback Registration.
4. Registration on Form S-3
------------------------
The Company shall use its best efforts to qualify for registration
under Form S- 3 or any comparable or successor form; and to that end the Company
shall register (whether or not required by law to do so) the Common Stock under
the Exchange Act following the effective date of the first registration of any
securities of the Company on Form S-1 or any comparable or successor form. After
the Company is qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Agreement, the Holders of at least
10% of the Registrable Securities shall have the right to request registrations
on Form S-3 (such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended methods of
disposition of such shares by such Holders); provided, that the Company shall
not be obligated to effect any such registration pursuant to this Section 4 more
than once in any 12 month period, and in no event shall the Company be required
to register shares with any aggregate market value of less than $1 million.
5. Restrictions on Public Sale by Holders of Registrable Securities
----------------------------------------------------------------
To the extent not inconsistent with applicable law, each Holder of
Registrable Securities agrees not to effect any public sale or distribution of
securities of the Company including a sale pursuant to Rule 144 under the
Securities Act, during the seven (7) days prior to, and during the one hundred
eighty (180)-day period beginning on, the effective date of a registration
statement filed by the Company, if and to the extent requested (i) by the
Company or (ii) by the managing underwriter or underwriters in the case of an
underwritten public offering.
6. Restriction on Public Sale by the Company
-----------------------------------------
The Company agrees (i) not to effect any public sale or distribution
of its equity securities other than (A) a sale or distribution of such
securities in connection with a merger or consolidation by the Company or any of
its Subsidiaries or the acquisition by the Company or any of its Subsidiaries of
the capital stock or substantially all of the assets of any other Person, or (B)
in connection with an employee stock option or other benefit plan, during the
seven days prior to, and during the 180-day period beginning on the effective
date of any registration statement relating to a Demand Registration (the
"Holdback Period"), except where Holders of a majority of the Registrable
Securities to be included in such registration statement consent; and (ii) that
any agreement entered into after the date of this Agreement pursuant to which
the Company issues or agrees to issue any privately placed securities shall
contain a provision under which Holders of such securities agree not to effect
any public sale or distribution of any such securities during such Holdback
Period, including a sale pursuant to Rule 144 under the Securities Act (except
as part of such registration, if permitted); provided, however, that
5
<PAGE> 6
the provisions of this Section 6 shall not prevent the conversion or exchange of
any securities pursuant to their terms into or for other securities.
7. Registration Procedures
-----------------------
Whenever the Holders of Registrable Securities request that any such
securities be registered pursuant to Section 2, 3 or 4 of this Agreement and, in
addition, at any other time pursuant to Section 7(d) below, the Company shall
use its best efforts to effect the registration and to further the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof as quickly as practicable, and in connection with any such request the
Company shall, as expeditiously as possible:
(a) in connection with a request pursuant to Section 2, prepare and
file with the Commission within 60 days, and use its best efforts to prepare and
so file within 45 days after receipt of a request to file a registration
statement, on any form for which the Company then qualifies or which counsel for
the Company shall deem appropriate and which form shall be available for the
sale of the Registrable Securities in accordance with the intended method of
distribution thereof, and in connection with any registration statement filed
for Registrable Securities hereunder, use its best efforts to cause such
registration statement to become effective; PROVIDED that if such registration
statement does not become effective, then any Demand Registration prompting such
undertaking by the Company shall be deemed to be rescinded and retracted and
shall not be counted as, or deemed or considered to be or to have been, a Demand
Registration for any purpose. In connection with the preparation and filing of
each registration statement registering Registrable Securities under this
Agreement, the Company will give the Holders of Registrable Securities on whose
behalf such Registrable Securities are to be so registered and their
underwriter, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such access
to its books and records and such opportunities to discuss the business of the
Company with its officers, its counsel and the independent public accountants
who have certified its financial statements, as shall be necessary, in the
opinion of such Holders or such underwriters or their respective counsel, in
order to conduct a reasonable and diligent investigation within the meaning of
the Securities Act. Without limiting the foregoing, each registration statement,
prospectus, amendment, supplement or any other document filed with respect to a
registration under this Agreement shall be subject to review and reasonable
approval by the Holders registering Registrable Securities in such registration
and by their counsel;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than 120 days or such shorter period which will terminate
when all Registrable Securities covered by such registration statement have been
sold (but not before the expiration of the 90-day period
6
<PAGE> 7
referred to in Section 4(3) of the Securities Act and Rule 174 or other
comparable provisions thereunder, if applicable), and comply with the provisions
of the Securities Act applicable to it with respect to the disposition of all
securities covered by such registration statement during the applicable period
in accordance with the intended methods of disposition by the sellers thereof
set forth in such registration statement or supplement to the prospectus;
(c) furnish to such Holder selected by a majority in interest of such
Holders and the managing underwriter or underwriters without charge, at least
one signed copy of the registration statement and any post-effective amendment
thereto and such number of conformed copies thereof and such number of copies of
the prospectus (including any preliminary prospectus) and any amendments or
supplements thereto, and any documents incorporated by reference therein, as
such Holder of Registrable Securities or managing underwriter may request in
order to facilitate the disposition of the Registrable Securities being sold by
such Holder (it being understood that the Company consents to the use of the
prospectus and any amendment or supplement thereto by each Holder of Registrable
Securities covered by the registration statement and the managing underwriter or
underwriters (or any other underwriter or dealer who is required to deliver the
prospectus), if any, in connection with the offering and sale of the Registrable
Securities covered by the prospectus or any amendment or supplement thereto);
(d) notify any Holder on whose behalf Registrable Securities are being
registered under this Agreement of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered and make every reasonable effort to obtain
the withdrawal of any order suspending the effectiveness of the registration
statement at the earliest possible moment;
(e) enter into a written agreement with the managing underwriter or
underwriters selected in the manner herein provided in such form and containing
such representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, provisions relating
to indemnification and contribution. The Holders on whose behalf Registrable
Securities are to be distributed by such underwriters shall be parties to any
such underwriting agreement, and the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holders of
Registrable Securities. Such indemnity agreement shall comply with the
provisions of Section 8;
(f) if requested by the managing underwriter or underwriters or any
Holder of Registrable Securities covered by the registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters or such Holder
reasonably requests to be included therein, including, without limitation, with
respect to the number of Registrable Securities being sold by such Holder to
such underwriter or underwriters, the purchase price being paid therefor by
7
<PAGE> 8
such underwriter or underwriters and with respect to any other terms of the
underwritten offering of the Registrable Securities to be sold in such offering;
and make all required filings of such prospectus supplement or post-effective
amendment as soon as reasonably possible after being notified of the matters to
be incorporated in such prospectus supplement or post-effective amendment;
(g) on or prior to the date on which the registration statement is
declared effective, use its best efforts to register or qualify, and cooperate
with the Holders of Registrable Securities included in such registration
statement, the underwriter or underwriters, if any, and their counsel in
connection with the registration or qualification of, the Registrable Securities
covered by the registration statement for offer and sale under the securities or
blue sky laws of each state and other jurisdiction of the United States as any
such Holder or underwriter reasonably requests in writing, to use its best
efforts to keep each such registration or qualification effective, including
through new filings, or amendments or renewals, during the period such
registration statement is required to be kept effective and to do any and all
acts or things necessary or advisable to enable the disposition in all such
jurisdictions of the Registrable Securities covered by the applicable
registration statement, provided, however, that the Company will not be required
(i) to qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subsection (g), (ii) to subject
itself to taxation in any such jurisdiction or (iii) to consent to general
service of process in any such jurisdiction;
(h) use its best efforts to cause the Registrable Securities included
in such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers or the underwriter or underwriters, if any, thereof to consummate the
disposition of such Registrable Securities;
(i) cooperate with the Holders of Registrable Securities covered by
the registration statement and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing securities to be sold under the
registration statement, and enable such securities to be in such denominations
and registered in such names as the managing underwriter or underwriters, if
any, or such Holders may request;
(j) immediately notify each Holder on whose behalf Registrable
Securities have been registered pursuant to this Agreement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement (as then in effect) contains 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 not misleading and, as
promptly as practicable thereafter, prepare and file with the Commission and
furnish a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain any untrue statement of a material fact
8
<PAGE> 9
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(k) use its best efforts to cause all such Registrable Securities
included in such registration statement to be listed by the date of the first
sale of Registrable Securities pursuant to such registration statement on each
securities exchange on which securities issued by the Company are then listed or
proposed to be listed, if any;
(l) make available for inspection, during normal business hours, by
any Holder on whose behalf Registrable Securities are being registered under
this Agreement, any underwriter participating in any disposition pursuant to
such registration statement, and any attorney, accountant, or other agent
retained by any such Holder or underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents, and properties of
the Company and its Subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors, and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement. Records which the Company determines, in good
faith, to be confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a material
misstatement or omission in the registration statement or (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or is otherwise required by law or regulation. The Holder
on whose behalf Registrable Securities are being registered under this Agreement
agrees that it will, upon learning that disclosure of such Records is sought in
a court of competent jurisdiction, give notice, to the extent practicable, to
the Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential;
(m) furnish, at the request of any Holder of Registrable Securities
sold in such offering, on any date that any Registrable Security is delivered to
the underwriters for sale pursuant to such registration: (i) an opinion dated
such date from counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such Holder, stating that
such registration statement has become effective under the Securities Act and
that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act, (B) the
registration statement, the related prospectus, and each amendment or supplement
thereto, comply as to form in all material respects with the requirements of the
Securities Act and the applicable rules and regulations of the Commission
thereunder (except that such counsel need express no opinion as to financial
statements contained therein) and (C) the opinion covers such other effects with
respect to the registration as are customarily covered in opinions of issuers'
counsel delivered to underwriters in connection with underwritten public
offerings of securities (including with respect to such registration statement
and the prospectus included therein), and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed
9
<PAGE> 10
to such seller, stating that they are independent public accountants within the
meaning of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment thereof or supplement thereto, comply as to
form in all material respects with the applicable accounting requirements of the
Securities Act, and such letter shall additionally cover such other financial
matters (including information with respect to events subsequent to the date of
such financial statements) with respect to the registration (including with
respect to such registration statement and the prospectus included therein) in
respect of which such letter is being given as are customarily covered in
accountant's letters delivered to underwriters in connection with underwritten
public offerings of securities;
(n) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, to make available to the Holders of
Registrable Securities an earnings statement covering a period of twelve months,
beginning within three months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or other comparable
provisions), and to take all such other actions as the Holders of a majority of
the Registrable Securities being sold or the underwriters retained by such
Holders, if any, may reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities;
(o) keep all Holders of Registrable Securities advised in writing as
to the initiating of proceedings for such registration and qualification and as
to the completion hereof, and will advise any such Holder, upon request, of the
progress of such proceedings; and
(p) in connection with any registration of Registrable Securities
under this Agreement, the Company will provide a transfer agent and registrar
for the Registrable Securities not later than the effective date of such
registration statement.
Each Holder of Registrable Securities as to which registration is
being effected pursuant hereto shall use its best efforts to cooperate with the
Company, and the Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such securities as the Company may
from time to time reasonably request in writing. Each Holder of Registrable
Securities agrees by acquisition of such Registrable Securities that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 7(j) hereof, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 7(j) hereof,
and, if so directed by the Company, such Holder will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the period mentioned in Section 7(b)
10
<PAGE> 11
hereof shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 7(j) hereof
to and including the date when each seller of Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 7(j) hereof.
8. Registration Expenses
---------------------
All costs and expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration,
qualification and filing fees, transfer taxes, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), rating agency fees, printing expenses, messenger and delivery
expenses, fees of transfer agents and registrars, internal expenses of the
Company (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities to be
registered in accordance with Section 7(k), fees of the National Association of
Securities Dealers, Inc., costs of insurance, including securities acts
liability insurance (if the Company elects to obtain such insurance), the fees
and disbursements of counsel for the Company and all independent certified
public accountants (including the expenses of any annual audit, special audit,
or "cold comfort" letters required by or incident to such performance), the fees
and expenses of any special experts retained by the Company in connection with
such registration and fees and expenses of other Persons retained by the
Company, the fees and expenses of any underwriter (but not including any
underwriting discounts or commissions attributable to the sale of Registrable
Securities by the Holders of such Registrable Securities), the reasonable fees
and disbursements of counsel retained by the underwriter, but excluding all fees
and disbursements of counsel retained by the Holders of the Registrable
Securities being registered, and any out-of-pocket expenses of the Holders of
Registrable Securities (or the agents who manage their accounts), will be borne
by the Company. Such expenses to be borne by the Company are referred to herein
as "Registration Expenses".
9. Indemnification
---------------
(a) INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and to
save and hold harmless each Holder of Registrable Securities and any underwriter
for such Holder, the officers, directors and partners and partners of partners,
and each person who controls such Holder or any such underwriter (within the
meaning of the Securities Act or the Exchange Act) from and against any and all
losses, claims, damages, liabilities, and expenses (including reasonable
attorneys fees and expenses and reasonable costs of investigation) to which the
Holder or underwriter or any such other person may be subject, under the
Securities Act or otherwise, arising out of or based on any untrue or alleged
untrue statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities or in any amendment or
supplement thereto or in any preliminary prospectus or any
11
<PAGE> 12
other document incident to the registration of Registrable Securities under the
Securities Act or the qualification of the Registrable Securities under any
state securities laws, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out of or
based upon any violation or alleged violation by the Company of the Securities
Act, the Exchange Act or any other federal or state securities laws, rules or
regulations applicable to the Company and relating to action or inaction by the
Company in connection with any such registration or qualification, except
insofar as the same arise out of reliance upon any untrue statement or omission
furnished in writing to the Company by such Holder (or, if it is an underwritten
offering, an underwriter selected by such Holders), expressly for use therein;
provided that the Company shall not be required to indemnify any Holder of
Registrable Securities for damages caused by such Holder's continuing to use a
prospectus with respect to which such Holder has received a notice pursuant to
Section 7(j) hereof and has not received a notice of the amendment or
supplementation of such prospectus, as contemplated in Section 7(j). In
connection with an underwritten offering, the Company will, pursuant to a
separate agreement, agree to indemnify the underwriters thereof, their officers,
directors and partners and partners of partners, and each person who controls
(within the meaning of the Securities Act) such underwriters (collectively,
"Securities Professionals") to the same extent as provided above.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. In connection
with any registration statement in which a Holder of Registrable Securities is
participating, each such Holder will furnish to the Company in writing such
information and affidavits with respect to such Holder as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and agrees to indemnify, to the extent permitted by law, each of the
Company's directors and officers, and each Person who controls the Company
(within the meaning of the Securities Act) and, if it is an underwritten
offering, the underwriters, against any losses, claims, damages, liabilities,
and expenses arising out of or based on any untrue statement of a material fact
or any omission of a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue statement or omission is made in reliance upon
and in conformity with information with respect to such Holder furnished in
writing to the Company by such Holder specifically for use in such registration
statement or prospectus or amendment thereof or supplement thereto; provided,
however, that the liability of any such Holder under this Section 9 (including,
without limitation, Section 9(d) below) shall be limited to the proportion of
any such losses, claims, damages, liabilities and expenses which is equal to the
proportion that the public offering price of securities sold by such Holder
under such registration statement bears to the total public offering price of
all securities sold thereunder, and shall in no event exceed the net proceeds of
the sale of Registrable Securities being sold pursuant to said registration
statement or prospectus by such Holder; and provided further that no such Holder
shall be required to indemnify the Company for damages caused by any Person,
including the Company, continuing to use a prospectus (prior to its amendment or
12
<PAGE> 13
supplementation) more than three days after the Company has received a notice by
such Holder of any such untrue statement or omission contained in such
prospectus.
(c) CONDUCT OF INDEMNIFICATION PROCEEDING. If any action, suit,
investigation or proceeding (including any governmental investigation) is
brought or asserted against any selling Holder of Registrable Securities (or its
officers, directors, partners, partners of partners or agents) or any person
controlling any such Holder in respect of which indemnity may be sought from the
Company, the Company shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to such Holder, to represent such Holder and
its officers, directors, partners, partners of partners, agents and controlling
persons in connection with investigating, defending or preparing to defend any
such action, suit, investigation or proceeding, and shall pay all reasonable
expenses in connection therewith. Such Holder or such other person shall have
the right to employ separate counsel in any such action and either direct its
own defense or participate in the Company's defense thereof, but the reasonable
fees and expenses of such counsel shall be at the expense of such Holder or such
other person, unless (i) the Company has agreed to pay such fees and expenses or
(ii) the named parties to any such action, suit, investigation or proceeding
(including any impleaded parties) include both such Holder or such other person,
and such Holder or such other person shall have reasonably concluded that there
may be one or more legal defenses available to such Holder or such other person
which are different from or additional to those available to the Company or
(iii) the Company shall not have provided its counsel to take charge of such
defense, then in any of such events referred to in clauses (i), (ii) or (iii),
if such Holder or such other person notifies the Company in writing that it
elects to employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense of such action or proceeding on
behalf of such Holder or such other person, it being understood, however, that
the Company shall not, in connection with any one such action, suit,
investigation or proceeding or separate but substantially similar or related
actions, suits, investigations or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for the Holders and such other persons, which firm
shall be designated in writing by a majority of such Holders. The Company shall
not be liable for any settlement of any such action, suit, investigation or
proceeding effected without the Company's written consent (but such consent
shall not be unreasonably withheld), but if any action, suit, investigation or
proceeding is settled with the Company's consent, or if there be a final
judgment for the plaintiff in any such action, suit, investigation or
proceeding, the Company agrees to indemnify and hold harmless such Holder and
such other person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. The Company will not consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such action,
claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in this Section
9 is
13
<PAGE> 14
unavailable to an indemnified party under this Section 8 in respect of any
losses, claims, damages, liabilities, expenses or judgments referred to herein,
then each such indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities, expenses and judgments
(i) as between the Company and such Holders on the one hand and the Securities
Professionals on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company and such Holders on the one hand and
the Securities Professionals on the other from the offering of the Registrable
Securities, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only such relative benefits, but
also the relative fault of the Company and such Holders on the one hand and of
the Securities Professionals on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities, expenses
or judgments as well as any other relevant equitable considerations and (ii) as
between the Company on the one hand and each such Holder on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
each such Holder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and such Holders on the one hand and the Securities Professionals on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and such Holders bear to the total
underwriting discounts and commissions received by the Securities Professionals,
in each case as set forth in the table on the cover page of the prospectus. The
relative fault of the Company, of each such Holder and of the Securities
Professionals 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
such party, and the party's relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and such Holders agree that it would not be just and equitable if contribution
pursuant to this Section 9(d) were determined by pro rata allocation (even if
such Holders 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 in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities,
expenses or judgments referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9(d), no Securities Professional shall be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of such Holder were offered to the public exceeds the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
14
<PAGE> 15
10. Miscellaneous
-------------
(a) RULE 144. The Company covenants that, at all times after it has
filed a registration statement pursuant to the requirements of the Securities
Act relating to any class of securities of the Company, it will file any reports
required to be filed by it under the Securities Act and the Exchange Act and
that it will take such further action as any Holder of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
such Holders to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144 that
has become effective under the Securities Act, as such Rule may be amended from
time to time, or any similar rules or regulations hereafter adopted by the
Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Shareholder as follows: the execution, delivery
and performance of this Agreement by the Company have been duly authorized by
all requisite corporate action and will not violate any provision of law, any
order of any court or other agency of government, the charter or by-laws of the
Company, or any provision of any indenture, agreement or other instrument to
which it or any of its properties or assets is bound, or conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company. This Agreement
has been duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms.
(c) SPECIFIC PERFORMANCE. The parties agree that irreparable damage
will result in the event that this Agreement is not specifically enforced, and
the parties agree that any damage available at law for a breach of this
Agreement would not be an adequate remedy. Therefore, the provisions hereof and
the obligations of the parties hereunder shall be enforceable in a court of
equity, or other tribunal with jurisdiction, by a decree of specific
performance, and appropriate injunctive relief may be applied for and granted in
connection therewith. Such remedies and all other remedies provided for in this
Agreement shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which a party may have under this Agreement or
otherwise.
(d) REMEDIES. The rights and remedies of each Holder of Registrable
Securities hereunder shall be independent of the rights and remedies of any
other Holder except as otherwise expressly provided herein. Without limiting the
foregoing, if the Company or any other person has any rights, claims or defenses
against any Holder of Registrable Securities, such rights, claims or defenses
shall not apply with respect to any other Holder, except as otherwise expressly
provided herein. The taking of any action or the failure
15
<PAGE> 16
to take any action by any Holder of this Agreement shall not, and shall not be
deemed to, constitute the taking of any action or the failure to take any action
by any other Holder, except as expressly set forth in this Agreement.
(e) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, restated, modified, or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Holders of 70% of the Registrable Securities then entitled to the benefits of
this Agreement; PROVIDED, HOWEVER, that no amendment, restatement or
modification which adversely affects the rights of any party hereto shall be
made, restated or modified without the written consent of such party.
(f) NOTICES. Any notice, request, instruction, or other document to be
given hereunder by any party to another shall be in writing, shall be delivered
personally or by overnight courier service or sent by certified mail, postage
prepaid and return receipt requested, or by facsimile transmission (receipt
confirmed) to the Company, 7301 Baymeadows Way, Jacksonville, FL 32256,
Attention: Robert Jacobs (facsimile transmission number: (904) 281-3062, and to
each Shareholder at the address set forth on SCHEDULE 1 to this Agreement (or to
such other address as any subsequent Holder of Registrable Securities or any
other party to whom notice is to be given may provide in a written notice to the
other parties), and (except when delivered personally) shall be deemed received
three days after such notice is sent.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties
permitted by the next two sentences of this Section 10(g). The Company may not
assign any of its obligations, duties or rights under this Agreement except with
the written consent of a majority in interest of the Holders of Registrable
Securities. In addition to any assignment by operation of law, each Holder of
Registrable Securities may assign, in whole or in part, any or all of its rights
(and/or obligations) under this Agreement to any Person.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or any application of any provision contained herein, shall be
held invalid, illegal, or unenforceable in any jurisdiction, the validity,
legality, and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall
16
<PAGE> 17
not be affected or impaired thereby and any such invalidity, illegality or
unenforceability in any jurisdiction shall not invalidate or render such
provision unenforceable in any other jurisdiction.
(k) ENTIRE AGREEMENT; SUPERSESSION OF PRIOR AGREEMENTS. This Agreement
supersedes and replaces the Registration Rights Agreement, dated as of December
11, 1995, by and among the Company and the Shareholders party thereto and is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement supersedes all prior
agreements and understandings among the parties with respect to such subject
matter.
(l) ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees and expenses in addition to any other available
remedy.
(m) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the Commonwealth of Massachusetts,
applicable to contracts made and to be performed wholly within that Commonwealth
without regard to principles of conflicts of law.
17
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Amended an
Restated Registration Rights Agreement as an instrument under seal to be
effective as of the date first above written.
HOMESIDE, INC.
By: /s/ Joe K. Pickett
------------------------------
Name: Joe K. Pickett
Title: Chairman and CEO
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Peter J. Manning
------------------------------
Name: Peter J. Manning
Title: Executive Director
THOMAS H. LEE COMPANY
By: /s/ Thomas M. Hagerty
------------------------------
Name: Thomas M. Hagerty
Title: Vice President
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, its general partner
By: THL Equity Trust III, its general
partner
By: /s/ Thomas M. Hagerty
------------------------------
Name: Thomas M. Hagerty
Title: Vice President
18
<PAGE> 19
` THOMAS H. LEE FOREIGN FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, its general partner
By: THL Equity Trust III, its general
partner
By: /s/ Thomas M. Hagerty
------------------------------
Name: Thomas M. Hagerty
Title: Vice President
MADISON DEARBORN CAPITAL PARTNERS,
L.P.
By: Madison Dearborn Partners, Inc., its
general partner
By: /s/ Justin S. Huscher
------------------------------
Name: Justin S. Huscher
Title: Vice President
SIESTA HOLDINGS, INC.
By:
------------------------------
Name:
Title:
SMITH BARNEY INC.
By:
------------------------------
Name:
Title:
19
<PAGE> 20
Lee Holders
-----------
/s/ David V. Harkins /s/ Soren L. Oberg
- ------------------------ -------------------------------------
David V. Harkins Soren L. Oberg
/s/ Thomas R. Shepherd /s/ Scott L. Jaeckel
- ------------------------ -------------------------------------
Thomas R. Shepherd Scott L. Jaeckel
/s/ Scott A. Schoen /s/ Simon E. Brown
- ------------------------ -------------------------------------
Scott A. Schoen Simon E. Brown
/s/ C. Hunter Boll /s/ Darius C. Brooks
- ------------------------ -------------------------------------
C. Hunter Boll Darius C. Brooks
/s/ Anthony J. DiNovi /s/ Charles W. Robins
- ------------------------ -------------------------------------
Anthony J. DiNovi Charles W. Robins
/s/ Thomas M. Hagerty /s/ James Westra
- ------------------------ -------------------------------------
Thomas M. Hagerty James Westra
/s/ Joseph J. Incandela /s/ Barbara F. Lee
- ------------------------ -------------------------------------
Joseph J. Incandela Barbara F. Lee
/s/ Warren C. Smith, Jr.
- ------------------------ Robert Schiff Lee 1988 Irrevocable
Warren C. Smith, Jr. Trust
/s/ Seth W. Lawry
- ------------------------ By: /s/ Charles W. Robins
Seth W. Lawry ---------------------------------
Trustee as aforesaid and not
individually
/s/ Kent R. Weldon
- ------------------------
Kent R. Weldon Stephen Zachary Lee 1988 Irrevocable
Trust
/s/ Wendy L. Masler
- ------------------------
Wendy L. Masler By: /s/ Charles W. Robins
---------------------------------
Trustee as aforesaid and not
individually
/s/ Andrew D. Flaster
- ------------------------ /s/ Warren C. Smith, Jr.
Andrew D. Flaster -------------------------------------
Warren C. Smith as trustee of
/s/ Kristina A. Weinberg Martha Marks Irrevocable Family Trust
- ------------------------
Kristina A. Weinberg
20
<PAGE> 21
/s/ Sheryll J. Harkins
--------------------------------------
Thomas H. Lee Company Sheryll J. Harkins as trustee of
Jessica Ashley Harkins Gift Trust
By: /s/ Wendy L Masler /s/ Sheryll J. Harkins
--------------------- --------------------------------------
Name: Wendy L. Masler Sheryll J. Harkins as trustee of Jason
Title: Edward Harkins Gift Trust
/s/ Scott M. Sperling
- --------------------------
Scott M. Sperling
21
<PAGE> 22
<TABLE>
<CAPTION>
SCHEDULE 1
----------
Party Address/Fax Copy To
- ----- ----------- -------
<S> <C> <C>
The First National Bank of 100 Federal Street Bingham, Dana & Gould
Boston Boston, MA 02110 150 Federal Street
(617) 434-7825 Boston, MA 02110
(617) 951-8736
Attn: Norman J. Shachoy, Esq.
Thomas H. Lee Company; c/o Thomas H. Lee Company Hutchins, Wheeler & Dittmar
Thomas H. Lee Equity 75 Federal Street 101Federal Street
Fund III, L.P.; Boston, MA 02109 Boston, MA 02110
Thomas H. Lee Foreign (617) 227-2514 (617) 951-1295
Fund III, L.P.; or Attn: James Westra, Esq
Any of the Lee Holders
Siesta Holdings, Inc. c/o Barnett Banks, Inc. Fried, Frank, Harris, Shriver
50 North Laura Street & Jacobson
Jacksonville, FL 32202-3638 One New York Plaza
(904) 987-0975 New York, NY 10004-1980
Attn: Karen Lugar,Esq. (212) 859-4000
Attn: Gail Weinstein, Esq.
Madison Dearborn Capital c/o Madison Dearborn Kirkland & Ellis
Partners, L.P. Partners, Inc. 200 East Randolph Drive
Suite 1330 Chicago, IL 60601
Three First National Plaza (312) 861-2200
Chicago, IL 60602 Attn: James Stempel, Esq.
(312) 732-4098
Attn: Justin Huscher
Smith Barney, Inc. 388 Greenwich Street
New York, NY 10013
(212) 816-7763
Attn: Hans Morris
</TABLE>
22
<PAGE> 1
EXHIBIT 10.16
FINAL VERSION
MARKETING AGREEMENT
MARKETING AGREEMENT (the "AGREEMENT"), dated as of May 31, 1996, by and
among Barnett Banks, Inc., a Florida corporation (together with its
subsidiaries, "Barnett"), and Homeside, Inc. (formerly known as GrantAmerica,
Inc.), a Delaware corporation (together with its subsidiaries, the "COMPANY").
WHEREAS, Barnett and the Company have entered into a Stock Purchase
Agreement, dated as of March 4, 1996 (the "PURCHASE AGREEMENT"), pursuant to
which the Company is purchasing from Barnett all of the issued and outstanding
capital stock of Barnett Mortgage Company, a Florida corporation ("BMC"); and
WHEREAS, it is a condition to the obligations of Barnett under the Purchase
Agreement that the parties hereto execute this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein and not otherwise
defined in the Agreement shall have the meanings assigned to such terms in the
Purchase Agreement. In addition, the following terms shall have the following
meanings:
"BARNETT CUSTOMER" means any Person who becomes a customer of the Company
(a) in connection with the acquisition of a loan or servicing rights to a loan
to such Person by virtue of the sale to the Company of the capital stock of BMC
pursuant to the Purchase Agreement or (b) as a result of a sale, after the date
hereof, by Barnett or its Affiliates to the Company of a loan and/or servicing
rights relating to a loan, in each case for so long as such Person remains
obligated to make any payment in respect of such a loan (or any refinancing
thereof by the Company or Barnett or its Affiliates). Such Person shall continue
to be a "Barnett Customer" notwithstanding any products or services (including,
without limitation, refinancings) provided to such Person by the Company.
"BKB" means The First National Bank of Boston and its Affiliates.
"BKB CUSTOMER" shall have the meaning set forth in the BKB Marketing
Agreement.
"BKB MARKETING AGREEMENT" means the marketing agreement to be entered into
between BKB and the Company substantially in the form attached as Annex A
hereto, as in effect from time to time, which Agreement shall not be modified in
any way (nor shall any waiver be granted thereunder) which (i) shall impinge
upon or otherwise limit the rights of Barnett and its Affiliates under this
Agreement or (ii) shall provide to
<PAGE> 2
BKB any material rights or benefits which, taken as a whole, are more favorable
than the rights or benefits provided to Barnett under this Agreement.
"COMPANY CUSTOMERS" means any Person who is a customer of the Company
(including Barnett Customers, BKB Customers and Other Customers).
"OTHER CUSTOMER" means any Person who is a customer of the Company and is
not a Barnett Customer or a BKB Customer.
SECTION 2. EXCLUSIVE MARKETING RIGHTS. Subject to Sections 7 and 8 hereof,
the Company hereby grants to Barnett and its Affiliates the exclusive right to
market directly to Barnett Customers, or to solicit directly Barnett Customers
with respect to, any and all products and services. In connection with the grant
of such exclusive right, subject to Sections 7 and 8 hereof, the Company agrees
that it and its Subsidiaries will not, (a) market to Barnett Customers, or
solicit directly Barnett Customers with respect to, any products or services or
(b) take any action to facilitate any other Person's ability to so market or
solicit Barnett Customers.
SECTION 3. NON-EXCLUSIVE MARKETING RIGHTS. Subject to Sections 7 and 8
hereof, the Company hereby grants to Barnett and its Affiliates the
non-exclusive right to market directly to Other Customers, and to solicit
directly Other Customers with respect to, any and all products and services
which Barnett markets to its customers generally, other than products and
services which are offered by the Company.
SECTION 4. CUSTOMER LISTS. (a) The Company shall not sell, alienate,
assign, grant, or otherwise convey (each of the foregoing referred to herein as
a "TRANSFER") to any Person any list of names of or information regarding any
Barnett Customers or any right to market to Barnett Customers, or to solicit
Barnett Customers with respect to, any products or services. The Company shall
at all times keep the names of and all information regarding Barnett Customers
confidential. Subject to Sections 7 and 8 hereof, the Company shall use such
names and information solely for the purpose of servicing loans to Barnett
Customers. Nothing in this Agreement shall be deemed to limit the Company's
ability to pledge its assets to secure repayment of indebtedness for money
borrowed (in connection with which the Company will seek appropriate
confidentiality agreements).
(b) The Company may Transfer to any Person any list of names of or
information regarding Other Customers.
(c) To the extent permitted pursuant to the BKB Marketing Agreement, the
Company may Transfer to any Person any list of names of or information regarding
BKB Customers, provided, however, that in the event that the Company proposes to
Transfer any list containing names or other information regarding BKB Customers,
the
2
<PAGE> 3
Company shall notify Barnett in writing of such proposal and shall provide
to Barnett an equal opportunity to acquire such list or information.
(d) The Company shall not use any names of or information regarding Persons
who have ceased to be Barnett Customers, for any purpose (including without
limitation, marketing or solicitation purposes), other than for internal
analytical purposes, and shall not Transfer any such names or information to any
Person other than Barnett.
SECTION 5. CUSTOMER INFORMATION. At the Company's expense, the Company
shall furnish to Barnett, at Barnett's request, a list of all Barnett Customers
and Other Customers, in each case designating each such customer as a Barnett
Customer or an Other Customer and including each such customer's name and all
such other information reasonably available to the Company concerning such
customer as shall be requested by Barnett; PROVIDED, HOWEVER, that if such a
list is requested by Barnett in excess of once per calendar year, Barnett shall
reimburse the Company for the Company's reasonable costs and expenses of
producing such additional lists.
SECTION 6. CUSTOMER ACCESS. Subject to the rights granted to BKB under the
BKB Marketing Agreement, the Company shall allow Barnett, subject to reasonable
restrictions relating to frequency, timing and other matters to be determined by
the Company in good faith, to include marketing materials (other than with
respect to Eligible Products) in all mortgage account statements and other
materials sent by the Company to any Barnett Customers and/or Other Customers.
Barnett shall reimburse the Company for the Company's reasonable costs and
expenses of including such marketing materials in such statements.
SECTION 7. REFINANCING RESTRICTIONS.
(a) Notwithstanding Section 2 hereof, the Company shall have the right to
solicit any Barnett Customer for the refinancing of a mortgage loan, but only so
long as (i) in connection with such marketing or solicitation the Company
complies with such standards and restrictions with respect to solicitation as
are set forth in the applicable guides, regulations and practices of the Federal
National Mortgage Association, the Federal Home Loan Mortgage Corporation and
the Government National Mortgage Association and such additional standards and
restrictions as are typically contained in agency servicing agreements and (ii)
such marketing or solicitation does not specifically target Barnett Customers.
In addition, in no event will the Company market to or solicit any Barnett
Customer whose loan is carried on Barnett's balance sheet to refinance a
mortgage loan, unless such marketing or solicitation is conducted solely through
materials included in mortgage account statements sent to all Company Customers
holding a mortgage.
3
<PAGE> 4
(b) Barnett will not engage in any formal program (E.G., mailings or
telemarketing efforts) directly soliciting the refinancing of mortgage loans if
such program includes Company Customers or any subset thereof; PROVIDED,
HOWEVER, that Barnett may engage in such a program using a customer list rented
or purchased from a third party, and, if such list includes Company Customers,
Barnett will submit to the Company a list of leads generated from such effort
and the Company shall promptly pay to Barnett commercially reasonable
compensation as agreed between the Company and Barnett for refinancings arising
out of such leads. Nothing herein shall prohibit or limit Barnett's right to
refinance loans of Company Customers arising out of efforts other than formal
programs initiated by Barnett to solicit directly refinancings (E.G.,
solicitations by individual brokers or solicitors).
SECTION 8. ELIGIBLE PRODUCTS MARKETING. The Company shall have the
nonexclusive right to market to Barnett Customers, and the exclusive right to
market to Other Customers, any Eligible Products. "Eligible Products" shall mean
mortgage loans on one-to-four family residential real estate (which, in the case
of Barnett Customers, shall be restricted to first mortgages), mortgage credit
insurance, relocation services, title insurance and title search services,
appraisal services, private mortgage insurance, escrow services, hazard
insurance (provided, however, that if Barnett offers such insurance, the Company
will not solicit Barnett Customers for such insurance), accelerated mortgage
payment products, speed pay services, and a customer retention program
comparable to the CountryWide Perks program. "Eligible Products" shall also
include such additional products and services which are ancillary to the
Company's core business and which the Company may wish to market from time to
time, subject to Barnett's prior written approval which shall not be
unreasonably withheld. The parties agree that Barnett's approval shall be deemed
to be reasonably withheld if such ancillary product or service is competitive
with a significant product or service then marketed or under development by
Barnett.
SECTION 9. TERM. The term of this Agreement shall be the later of (i) the
eighth anniversary of the date hereof or (ii) the third anniversary of
termination of the Operating/Correspondent Agreement. Notwithstanding the
foregoing, Barnett's right pursuant to Section 5 hereof to obtain a list of all
Barnett's Customers (including such information as provided for in Section 5)
shall survive termination of this Agreement.
SECTION 10. COMPLIANCE. Upon request of either party hereto, the other
party shall provide to the requesting party such access to the other party's
books, records and personnel, subject to reasonable advance notice and at
mutually agreeable times, as is necessary for the requesting party to confirm
compliance by the other party with its obligations hereunder.
4
<PAGE> 5
SECTION 11. NO OTHER RESTRICTIONS. Except as specifically set forth herein,
and notwithstanding any provision of the Purchase Agreement or any Related
Agreement, (i) Barnett shall not be subject to any restrictions with respect to
the marketing to or the solicitation of Barnett Customers and (ii) the Company
shall not be subject to any restrictions with respect to the marketing to or the
solicitation of Other Customers.
SECTION 12. SUCCESSORS AND ASSIGNS. Each of Barnett and the Company may
assign its rights (subject to its obligations) hereunder, in whole or in part;
PROVIDED, HOWEVER, that no rights or obligations hereunder may be assigned, in
whole or in part, to one or more of the Persons listed on Schedule 5.2A of the
Amended and Restated Stockholder Agreement. This Agreement shall be binding on
and insure to the benefit of the parties hereto and their respective successors
and permitted assigns.
SECTION 13. NOTICE. Any notice, request, instruction or other document to
be given hereunder by any party hereto to any other party shall be in writing
and shall be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by electronic facsimile transmission, cable, telegram, telex
or other standard form of telecommunications, by overnight courier or by
registered or certified mail, postage prepaid, addressed as follows:
if to Barnett:
Barnett Banks, Inc.
50 N. Laura Street
Jacksonville, FL 32202
Attention: Hinton Nobles
Telecopy: (904) 791-5448
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Gail Weinstein, Esq.
Telecopy: (212) 859-4000
5
<PAGE> 6
if to the Company:
Homeside, Inc.
7301 Bay Meadows Way
Jacksonville, FL 32256
Attention: Joe K. Pickett
Telecopy: (904) 281-3745
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: James Westra, Esq.
Telecopy: (617) 951-1295
or at such other address for a party as shall be specified by written notice.
SECTION 14. MODIFICATION AND WAIVER. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by Barnett and the Company. No
waiver of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision of this Agreement, whether or not
similar. No waiver by any party of any breach or violation of this Agreement
shall be deemed or construed as a waiver of any subsequent breach or violation
thereof, whether or not similar. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
SECTION 15. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding between the parties relating to the subject matter
hereof and supersedes all prior proposals, commitments, negotiations and
understandings, whether written or oral, and all other communications between
the parties relating to the subject matter hereof.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Delaware, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the laws of any other jurisdiction.
SECTION 17. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or
6
<PAGE> 7
unenforceable, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
SECTION 18. THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall
entitle any Person other than the parties or their respective successors and
assigns permitted hereby to any claim, cause of action, remedy or right of any
kind.
SECTION 19. 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
together shall be deemed to be one and the same document.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
BARNETT BANKS, INC.
By: /s/ Hinton F. Nobles, Jr.
-----------------------------
Name: Hinton F. Nobles
Title: Executive Vice President
HOMESIDE, INC.
By: /s/ Joe K. Pickett
------------------------------
Name: Joe K. Pickett
Title: Chief Executive Officer
8
<PAGE> 1
EXHIBIT 10.17
FINAL VERSION
-------------
TRANSITIONAL SERVICES AGREEMENT5
TRANSITIONAL SERVICES AGREEMENT (the "Agreement"), dated as of May 31,
1996, by and among Barnett Banks, Inc., a Florida corporation, (together with
its subsidiaries, "Barnett"), Barnett Mortgage Company, a Florida corporation
(together with its subsidiaries as of the date hereof, "BMC"), and Homeside,
Inc. (formerly known as Grant America, Inc.), a Delaware corporation (together
with its subsidiaries, the "Company").
WHEREAS, Barnett and the Company have entered into a Stock Purchase
Agreement, dated as of March 4, 1996 (the "Purchase Agreement"), pursuant to
which the Company is purchasing from Barnett all of the outstanding capital
stock of BMC; and
WHEREAS, Barnett currently provides certain services to BMC, and the
Company and BMC wish that Barnett continue to provide, for a transitional
period, certain of such services to BMC relating to the business conducted by
BMC as of the date hereof (the "Business") after the closing of the transactions
contemplated by the Purchase Agreement (the "Closing"), and Barnett wishes to
provide such services.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein and not otherwise
defined in this Agreement (including the schedules to this Agreement (each, a
"Schedule" and, collectively, the "Schedules")) shall have the meanings assigned
to such terms in the Purchase Agreement.
SECTION 2. EFFECTIVE DATE. This Agreement shall become effective and
binding on the parties hereto from and after the date hereof.
SECTION 3. BARNETT SERVICES. (a) From and after the date hereof, Barnett
agrees to provide to BMC each of the services listed on Schedule A with respect
to the Business (the "Services"). Except as expressly set forth herein and on
Schedule A, and subject to the terms and conditions set forth in this Agreement,
Barnett shall use reasonable efforts to provide each of the Services to BMC in
substantially the same manner, in, and with substantially the same quality with,
which such Services are provided by Barnett to BMC as of the date hereof.
Barnett shall have the sole discretion to determine the individuals by which,
and the facilities from which, the Services shall be rendered.
(b) Barnett shall provide the Services to BMC using the same systems
and procedures used by, and subject to the policies of, Barnett. To the extent
Barnett modifies or changes such systems, procedures or policies, Barnett
expressly reserves the right to similarly modify or change the systems,
procedures and policies used
<PAGE> 2
1in connection with, or applicable to, the support of the Services provided
pursuant to this Agreement. In the event Barnett shall cease to perform for
itself functions of the type required to perform the Services, Barnett shall
have the right to cease performing such functions (and the related Services) for
BMC after providing at least 60 days' notice thereof to BMC.
(c) Notwithstanding anything in this Agreement to the contrary,
Barnett shall not be required to provide services to BMC in quantities or in a
manner greater than or different from the quantities and manner provided or
employed by Barnett as of the date hereof for the production of such Services,
or to make any change or addition which would require Barnett to make any
capital expenditure.
(d) The Company acknowledges that the Services shall be provided only
for BMC. Barnett will not be required to perform any of the Services for the
benefit of any other operations of the Company or any other entity. The Company
shall not use the Services for any purpose other than in connection with the
Business.
SECTION 4. TERM. Subject to Section 3, Barnett agrees to provide each of
the Services for the period commencing on the Closing Date and continuing
through December 31, 1996; PROVIDED, HOWEVER, that (i) subject to a written
request from the Company received at least 60 days prior to December 31, 1996,
Barnett will provide any one or more of the Services for up to 90 days after
December 31, 1996 (or, in the case of the Service listed as item 3 on Schedule A
hereto, up to 180 days past December 31, 1996), and (ii) subject to at least 60
days prior written request from the Company to Barnett at any time, Barnett will
cease to provide any one or more of the Services (the "Service Term").
SECTION 5. FEES. (a) The Company agrees to compensate Barnett for the
Services provided during the Service Term at the rates specified with respect to
each such Service on Schedule B (with respect to each Service, the "Service Term
Rate"); provided, however, that the Service Term Rates shall be increased to the
extent of any increase in the costs to Barnett in connection with providing the
Services, including, but not limited to, (i) an increase in the cost of
supplies, services or equipment expenses or Barnett's overhead costs allocable
to the Services, (ii) Barnett determining (after consultation with the Company)
a need to pay a "stay bonus" to any employee involved with the providing of the
Services in order to induce such employee to remain employed by Barnett during
the Service Term, (iii) the incurrence of costs by Barnett in connection with
the hiring of temporary employees in connection with the providing of the
Services (including, without limitation, any search or finder's costs and salary
costs) (iv) the incurrence of travel costs by employees of Barnett in connection
with providing the Services and (iv) the incurrence of severance costs and
outpayment expenses in connection with the termination of Barnett employees
involved with the providing of the Services (unless the Company is otherwise
2
<PAGE> 3
responsible for paying severance costs for such employee). Notwithstanding the
foregoing, (i) the Service Term Rate applicable to any Service shall not be
increased by more than 10% without the prior written consent of the Company, and
(ii) if such consent is not provided, Barnett may elect to cease to provide such
Service.
(b) All charges payable by the Company hereunder shall be invoiced by
Barnett. All payments from the Company in respect of the Services shall be made
no later than thirty (30) days from the date of the invoice. The parties agree
that the Company's failure to pay in full any fee or expense contemplated by
this Agreement within thirty (30) days after the date of invoice will constitute
a material breach of the terms of this Agreement and Barnett may, as a result
thereof, cease providing the Services with 60 days notice.
SECTION 6. LIMITATION OF LIABILITY. Barnett shall not be liable to the
Company or its Affiliates for direct, consequential or incidental damages,
including, without limitation, loss of profits or damage to or loss of use of
any property arising out of or relating to the provision of the Services in
accordance with the terms of this Agreement, except to the extent of willful
misconduct.
SECTION 7. ACCESS TO INFORMATION; NOTIFICATION. The Company agrees to
provide to Barnett, when requested, all information reasonably requested by
Barnett in connection with its providing of the Services pursuant to this
Agreement.
SECTION 8. SUCCESSORS AND ASSIGNS. This Agreement shall not be assigned by
the parties hereto, except that Barnett may assign its rights and obligations
hereunder to any of its Affiliates. Subject to the foregoing, this Agreement
shall be binding on and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
SECTION 9. INDEMNITY. The Company agrees to indemnify and hold Barnett and
its Affiliates (and their respective directors, officers, employees and
representatives) harmless from and against any and all claims, losses, damages,
costs, expenses, cause of action or judgments of any kind or character
(including those arising from, related to or caused, directly or indirectly, by
the sole, joint, concurrent or comparative negligence of such indemnified
parties), including any interest, penalty, reasonable attorney's fees,
investigation expenses with respect to asserted claims (whether or not resulting
in any liability) and other costs and expenses incurred in connection therewith
or the defense thereof, attributable to or arising out of any claims by, or
liabilities or obligations to, any third party arising out of, in connection
with or resulting from the Services or other activities of Barnett hereunder,
except to the extent arising out of, in connection with or resulting from
Barnett's willful misconduct. Notwithstanding
3
<PAGE> 4
anything contained herein to the contrary, Section 6 and Section 9 of this
Agreement shall survive the termination of this Agreement.
SECTION 10. NOTICE. Any notice, request, instruction or other document to
be given hereunder by any party hereto to any other party (other than the
written documentation which is part of the Services, which shall be furnished to
BMC at its address as requested by it) shall be in writing and shall be given
(and will be deemed to have been duly given upon receipt) by delivery in person,
by electronic facsimile transmission, cable, telegram, telex or other standard
form of telecommunications, by overnight courier or by registered or certified
mail, postage prepaid, addressed as follows:
if to Barnett:
Barnett Banks, Inc.
50 N. Laura Street
Jacksonville, FL 32202
Attention: Hinton Nobles
Telecopy: (904) 791-5448
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Gail Weinstein, Esq.
Telecopy: (212) 859-4000
if to the Company:
Homeside, Inc.
7301 Bay Meadows Way
Jacksonville, FL 32256
Attention: Joe K. Pickett
Telecopy: (904) 281-3745
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: James Westra, Esq.
Telecopy: (617) 951-1295
4
<PAGE> 5
or at such other address for a party as shall be specified by written notice.
SECTION 11. MODIFICATION AND WAIVER. No amendment, modification or
alteration of the terms or provisions of this Agreement or any Schedule shall be
binding unless the same shall be in writing and duly executed by the parties
hereto, except that any of the terms or provisions of this Agreement or any
Schedule may be waived in writing at any time by the party which is entitled to
the benefits of such waived terms or provisions. No waiver of any of the
provisions of this Agreement or any Schedule shall be deemed to or shall
constitute a waiver of any other provision of this Agreement or any Schedule,
whether or not similar. No waiver by any party of any breach or violation of
this Agreement or any Schedule shall be deemed or construed as a waiver of any
subsequent breach or violation thereof, whether or not similar. No delay on the
part of any party in exercising any right, power or privilege hereunder or under
any Schedule shall operate as a waiver thereof.
SECTION 12. ENTIRE AGREEMENT. This Agreement and the Schedules constitute
the entire agreement and understanding between the parties relating to the
subject matter hereof and supersede all prior proposals, commitments,
negotiations and understandings, whether written or oral, and all other
communications between the parties relating to the subject matter hereof.
SECTION 13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Delaware, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the laws of any other jurisdiction.
SECTION 14. SEVERABILITY. The provisions of this Agreement and the
Schedules shall be deemed severable and the invalidity or unenforceability of
any provision shall not affect the validity or enforceability of the other
provisions hereof or of any Schedule. If any provision of this Agreement or any
Schedule, or the application thereof to any Person or any circumstance, is
invalid or unenforceable, the remainder of this Agreement and the Schedules and
the application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
SECTION 15. THIRD PARTY BENEFICIARIES. Nothing in this Agreement or in any
Schedule shall entitle any Person other than the parties or their respective
successors and assigns permitted hereby to any claim, cause of action, remedy or
right of any kind.
SECTION 16. FORCE MAJEURE. Barnett shall be excused for failure to provide
the Services hereunder to the extent that such failure is directly or indirectly
5
<PAGE> 6
caused by or results from an occurrence commonly known as FORCE MAJEURE,
including, without limitation, any act of God, governmental action, natural
disaster, armed hostilities, floods, power or technological failure or failure
of essential equipment, strikes or labor disturbances, or any other
circumstances beyond the reasonable control of Barnett. In the event that
Barnett's performance hereunder is affected by an event of FORCE MAJEURE,
Barnett shall promptly notify the Company of the same, giving reasonably full
particulars thereof, and insofar as known, the probable extent to which it will
be unable to perform, or will be delayed in performing, its obligations
hereunder and shall use its reasonable efforts to remove such FORCE MAJEURE as
quickly as possible.
SECTION 17. 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
together shall be deemed to be one and the same document.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
BARNETT BANKS, INC.
By: /s/ Hinton F. Nobles, Jr.
-------------------------------
Name: Hinton F. Nobles, Jr.
Title: Executive Vice President
HOMESIDE, INC.
By: /s/ Joe K. Pickett
-------------------------------
Name: Joe K. Pickett
Title: Chief Executive Officer
BARNETT MORTGAGE COMPANY
By: /s/ Francis G. Seabrook
-------------------------------
Name: Francis G. Seabrook
Title: Chairman, President and Chief
Executive Officer
7
<PAGE> 8
SCHEDULE A
SERVICES TO BE PROVIDED
-----------------------
1. OFFICE SPACE. The office space occupied by the Continuing Employees as of
the date hereof in 9000 South Side Boulevard, Jacksonville, Florida (the
"Office Campus"), Building 700 (consisting of such number of square feet of
space as the Company requests at least 30 days prior to the Closing Date),
including utilities, telephone servicing, access to the YMCA in Building
500 of the Office Campus and daycare center services for any employee of
BMC enrolled for such services as of the date hereof. Daycare center
services shall be available to such employees so long as the Office Campus
remains such employee's place of employment, this Service is provided
pursuant to the terms of this Agreement and such employee complies with
Barnett's guidelines relating to daycare center service (including payment
of fees).
2. FINANCE SERVICES. Coordination of FOCUS files and downloads; providing
supporting documentation to the Company; providing cash management services
relating to the Company's servicing portfolio; generation of standard
monthly management and analysis reports; assistance in preparing new
budgets/targets; providing of spectrum reports and impairment analysis
reports; Peer Group analysis; working with the Company to align account and
cost center hierarchy.
3. ACCOUNTING SERVICES.* Recording and reviewing servicing fees and mortgage
service rights; providing of servicing related accounting; preparing,
reviewing and filing reconcilement forms for servicing related accounts by
the twenty-fifth of each month; providing of financial analysis and
variations on a monthly basis; general ledger reporting; processing of
vendor invoices for payment of such invoices by check including employee
expense reimbursement; fixed asset processing; G/L processing;
reconcilements of all due from bank accounts; funds management; work with
the Company to align account and cost center hierarchy; provide support in
conversion of financial systems to the Company applications (excluding
systems support); and provide FOCUS extracts for financial systems on a
monthly basis.
4. PURCHASING SERVICES.* Purchasing of office equipment, office furniture and
office supplies; arranging for office equipment maintenance; providing
internal service support.
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* The disbursement of checks and other funds in connection with the providing of
Services will be made only from BMC's or the Company's bank accounts and, under
no circumstances, will loans or advances, be made by Barnett to BMC or the
Company for any disbursements.
<PAGE> 9
5. BENEFITS ADMINISTRATION. Administration of flexible benefits plan, 401(k)
incentive savings plan, retirement plan, medical leaves and a benefits
service center.
6. COMPENSATION/SALARY ADMINISTRATION.* Processing of payroll according to
Barnett policy and procedures; mailing all payroll related notifications;
coordinating payment of employment taxes; maintaining of personnel records;
providing quarterly management reports, including an attendance report;
providing employee "customer services."
7. HUMAN RESOURCE ADMINISTRATION; STAFFING SERVICES. Administration of
employee related matters; employee counseling, including
displacement/outplacement; manage staffing and hiring matters.
8. TECHNOLOGY SERVICES. Data communications network management and support;
voice network management and support; supporting and maintaining the
payroll human resources, fixed asset, and general ledger and accounts
payable systems; providing of mail services.
* The disbursement of checks and other funds in connection with the providing of
Services will be made only from BMC's or the Company's bank accounts and, under
no circumstances, will loans or advances, be made by Barnett to BMC or the
Company for any disbursements.
ii
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SCHEDULE B
FEE SCHEDULE
------------
Service Monthly Fee
- ------- -----------
1. Office Space. $1.57 per square
------------ foot requested
pursuant to Item 1
on Schedule A,
plus sales tax
2. Finance Services. $18,000
----------------
3. Accounting Services. $42,000
-------------------
4. Purchasing Services. $8,500
-------------------
5. Benefits Administration. $4,500
-----------------------
6. Compensation/Salary Administration. $16,500
----------------------------------
7. Human Resource Administration; $14,000
------------------------------
Staffing Services.
-----------------
8. Technology Services. $17,500
-------------------
<PAGE> 1
EXHIBIT 10.18
OPERATING AGREEMENT
OPERATING AGREEMENT PARTNER NAME: BARNETT BANKS, INC.
ADDRESS: 50 N. LAURA STREET, JACKSONVILLE, FLORIDA 32202-3638
TYPE OF BUSINESS ENTITY: BANK HOLDING COMPANY
DATE OF AGREEMENT: MAY 31, 1996 CONTACT PERSON: HINTON NOBLES
PHONE NO: (904) 791-7741
FAX NO: (904) 791-5448
This Operating Agreement (the "Operating Agreement") is entered into and
effective as of the date shown above by and between Barnett Banks, Inc.
("Barnett") and HomeSide Lending, Inc. ("HomeSide Lending")
RECITALS.
1. Barnett and HomeSide, Inc. (formerly known as GrantAmerica, Inc.) have
entered into the Stock Purchase Agreement.
2. The Stock Purchase Agreement contemplated origination and servicing
arrangements between Barnett and HomeSide Lending after the Closing Date.
3. Barnett and HomeSide Lending desire to set forth the specific terms and
conditions of such arrangements.
IN CONSIDERATION of the mutual promises made in this Operating Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, Barnett and HomeSide Lending agree as follows:
ARTICLE 1.
DEFINITIONS.
As used in this Operating Agreement, the following capitalized terms shall have
the meanings given to them below:
1.1. "AFFILIATE" means an entity that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, another entity. For purposes of this definition, "control", "controlled
by", and "under common control with" means the direct or indirect possession of
ordinary voting power to elect a majority of the board of directors or
comparable body of an entity.
1.2. "ANCILLARY AGREEMENTS" means this Operating Agreement and the attached
Correspondent Agreement, Delegated Underwriting Agreement, the PMSR Flow
Agreement and the Servicing Agreement.
1.3. "BARNETT" means: (a) the entity defined as "Barnett" above, (b) any of its
Affiliate banks, and (c) its Affiliate mortgage company, as applicable within
the context used.
1.4. "CORRESPONDENT AGREEMENT" means the Correspondent Loan Purchase Agreement
entered into by and among HomeSide, each Barnett Affiliate bank and the Barnett
Affiliate mortgage company as of May 16, 1996 and which will govern the terms
under which Barnett will originate and fund, and HomeSide will acquire the New
Secondary Market Mortgage Loans and related servicing rights. The Correspondent
Agreement is attached to this Operating Agreement as EXHIBIT A.
1.5. "CLOSING DATE" means the date on which Barnett sells to HomeSide, Inc. all
of the outstanding shares of Barnett Mortgage Company, to be known as HomeSide
Holdings, Inc.
1.6. "EXISTING MORTGAGE LOANS" means all residential mortgage loans serviced by
Barnett on or before the Closing Date.
1.7. "EXISTING PORTFOLIO MORTGAGE LOANS" means residential mortgage loans owned
by Barnett and serviced by Barnett (with or without
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HomeSide Lending's management and direction under the Interim Management
Agreement) on or before the Closing Date.
1.8. "EXISTING SERVICING RIGHTS" means HomeSide Lending's Mortgage rights to
service the Existing Mortgage Loans.
1.9. "HOMESIDE, INC." means HomeSide, Inc., formerly known as GrantAmerica
Capital, Inc., a business corporation organized under the laws of the state of
Delaware.
1.10. "HOMESIDE LENDING" means HomeSide Lending, Inc., formerly known as
BancBoston Mortgage Corporation, a business corporation organized under the laws
of the state of Florida and with its principal place of business at 7301
Baymeadows Way, Jacksonville, Florida 32256.
1.11. "MARKETING AGREEMENT" means the Marketing Agreement to be entered into by
and between HomeSide, Inc. and Barnett on or before the Closing Date and which
will govern the terms under which HomeSide Lending's mortgagors may be solicited
for certain products and services.
1.12. "NEW MORTGAGE LOAN" means a New Portfolio Mortgage Loan and/or New
Secondary Market Mortgage Loan.
1.13. "NEW PORTFOLIO MORTGAGE LOAN" means each residential mortgage loan which
Barnett: (a) will originate on or after the Closing Date and retain the
ownership subject to the New Servicing Rights, or (b) has originated prior to
the Closing Date but not closed or funded, and intends to retain the ownership
subject to the New Servicing Rights.
1.14. "NEW SECONDARY MARKET MORTGAGE LOAN" means each residential mortgage loan,
other than a New Portfolio Mortgage Loan, which Barnett: (a) will originate on
or after the Closing Date, or (b) has originated prior to the Closing Date but
not closed or funded.
1.15. "NEW SERVICING RIGHTS" means HomeSide Lending's right to service the New
Portfolio Mortgage Loans.
1.16. "OPERATING AGREEMENT" has the meaning set forth in the recitals above. The
Exhibits to this Operating Agreement shall not be considered to be part of this
Operating Agreement.
1.17. "PMSR FLOW AGREEMENT" means the agreement to be entered into by and among
HomeSide Lending and Barnett on or before the Closing Date and which will govern
the terms under which Barnett will sell the New Servicing Rights to HomeSide.
The PMSR Flow Agreement is attached to this Operating Agreement as EXHIBIT B.
1.18. "PORTFOLIO MORTGAGE LOANS" means the Existing Portfolio Mortgage Loans and
the New Portfolio Mortgage Loans.
1.19. "RELATED AGREEMENTS" has the meaning described in ARTICLE 1 of the Stock
Purchase Agreement.
1.20. "SECONDARY MARKET MORTGAGE LOAN" means a mortgage loan, other than a
Portfolio Mortgage Loan, originated by Barnett or Barnett's mortgage broker or
correspondent lender.
1.21. "SERVICING AGREEMENT" means the agreement to be entered into by and
between HomeSide Lending and Barnett on or before the Closing Date and which
will govern the terms under which HomeSide will service the Portfolio Mortgage
Loans. The Servicing Agreement is attached to this Operating Agreement as
EXHIBIT C.
1.22. "SERVICING RIGHTS" means the New Servicing Rights and the Existing
Servicing Rights.
1.23. "SHAREHOLDER AGREEMENT" means the Amended and Restated Shareholder
Agreement to be entered into by and among HomeSide, Inc., The First National
Bank of Boston, Barnett, Thomas H. Lee Equity Fund III, L.P., Madison Dearborn
Capital Partners, L.P., and certain other persons.
1.24. "STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement entered into
by and between Barnett and HomeSide, Inc. as of March 4, 1996, as may be amended
from time to time.
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<PAGE> 3
ARTICLE 2.
EXISTING SERVICING ARRANGEMENTS.
2.1 TERMINATION OF EXISTING SERVICING AGREEMENTS AMONG BARNETT MORTGAGE COMPANY
AND BARNETT BANKS.
Barnett shall cause any servicing agreements relating to the Existing Mortgage
Loans among any of Barnett's Affiliate mortgage companies and any of Barnett's
Affiliate banks to terminate as of the Closing Date, and the servicing of the
Existing Mortgage Loans shall subsequently be administered in accordance with
the terms of the Servicing Agreement.
2.2. BARNETT OWNS THE EXISTING SERVICING RIGHTS. 2.2. BARNETT OWNS THE EXISTING
SERVICING RIGHTS.
Barnett acknowledges that, as of the Closing Date, HomeSide Lending will own all
right, title and interest in the Existing Servicing Rights, subject to the terms
of the Servicing Agreement.
ARTICLE 3.
ORIGINATION AND SERVICING OF NEW MORTGAGE LOANS.
3.1. BARNETT'S ROLE IN NEW LOAN ORIGINATIONS.
Barnett shall sell to HomeSide Lending on an exclusive basis any: (a) New
Servicing Rights, and (b) New Secondary Market Mortgage Loans and related
servicing rights, subject to the provisions of this Operating Agreement.
Any New Secondary Market Mortgage Loan originated by Barnett shall be in
accordance with the terms of the Related Agreements, and in particular with the
terms of the Correspondent Agreement, and the non-competition article of the
Shareholder Agreement.
New Portfolio Loans will remain on Barnett's balance sheet, subject to the New
Servicing Rights.
3.2. HOMESIDE LENDING'S INTEREST IN THE NEW SERVICING RIGHTS.
Barnett shall sell and grant all right, title and interest in the New Servicing
Rights to HomeSide Lending in accordance with the terms of the PMSR Flow
Agreement. The New Servicing Rights will be administered in accordance with the
terms of the Servicing Agreement.
3.3. MARKETING AGREEMENT AND SHAREHOLDER AGREEMENT CONTROL THE OPERATING
AGREEMENT.
To the extent that the terms of the Marketing Agreement or the Shareholder
Agreement, on the one hand, are inconsistent with the terms of this Operating
Agreement on the other hand, the terms of the Marketing Agreement or the
Shareholder Agreement, as the case may be, shall control.
3.4. OPERATING AGREEMENT CONTROLS THE OTHER ANCILLARY AGREEMENTS.
To the extent that the terms of this Operating Agreement are inconsistent with
the terms of the other Ancillary Agreements, the terms of this Operating
Agreement shall control.
ARTICLE 4.
PRODUCTS, PRICING, CUSTOMER SERVICE AND RELATED ISSUES.
4.1. PRODUCTS.
HomeSide Lending covenants as follows:
(a) Subject to investor availability, HomeSide Lending will continue to offer
all secondary market and portfolio products currently offered by HomeSide
Lending and Barnett immediately prior to the Closing Date.
(b) Subject to investor availability, HomeSide Lending will add new products
which Barnett can
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<PAGE> 4
demonstrate are being offered by a significant competitor, including major
national competitors and competitors in Florida.
(c) HomeSide Lending shall work with Barnett's mortgage company Affiliate to
create mortgage loan products: (i) which may be new to Barnett's mortgage loan
production market and which Barnett believes offers significant opportunity to
Barnett or HomeSide Lending, or (ii) for which Barnett believes there may be
significant demand.
(d) HomeSide Lending shall formalize a Product Development Committee/Process.
Barnett's Affiliate mortgage company production and operations representatives
shall participate in the activities of such Product Development
Committee/Process.
(e) HomeSide Lending will not discontinue mortgage loan products without giving
proper reasonable advance notice to Barnett's Affiliate mortgage company. The
Product Development Committee will determine the appropriate mortgage loan
product menu, subject to investor availability.
(f) If HomeSide Lending does not offer a mortgage loan product which Barnett
wishes to sell, Barnett may sell such mortgage loan product to another lender
servicing released. If HomeSide Lending requires a minimum amount of production
in order to offer a new mortgage loan product and Barnett cannot meet such
minimum amount, Barnett may sell to another lender servicing released.
(g) Barnett will sell all "EquiCredit Products" to EquiCredit. "EquiCredit
Products" shall mean all mortgage loan products with a total yield which differs
materially from traditional secondary market eligible mortgage loan products
offered by HomeSide Lending.
4.2. PRICING
(a) Barnett will receive the higher of either: (i) the most favorable HomeSide
Lending pricing offered to correspondents, or (ii) HomeSide Lending's pricing as
determined by the screen price/dealer price determined each morning on a
business day, based on the delivery month for the appropriate mortgage loan
interest rate lock term. For example, a mortgage loan which has an interest rate
locked on March 1 for 70 days closed and back will be priced for June delivery.
If such mortgage loan is delivered to HomeSide Lending on the 70th day of the
lock-in period, the applicable date would be May 10. HomeSide Lending's cutoff
date for May pools is approximately May 1, therefore requiring such mortgage
loan to be delivered in a June pool. The cutoff date for June pools is
approximately June 1. On average, HomeSide Lending's 70-day locks are rolled on
the 20th day of each month.
(b) HomeSide Lending will delegate to Barnett's Affiliate mortgage company
renegotiation and repricing grids to avoid departmental duplication and to
maintain the highest customer service levels. HomeSide Lending may change such
repricing grids from time to time upon reasonable notice to Barnett's Affiliate
mortgage company.
(c) HomeSide Lending shall not apply its daily volume cap policy to Barnett.
However, there will be intra-day pricing on all of Barnett's non-retail
originated production, per HomeSide Lending's Buy Price Policy I and II, dated
May 1, 1996. A copy of the Buy Price Policy I and II is set forth in EXHIBIT D,
as amended by the Addendum to Newco Buy Price Policies I & II, which Addendum is
included within EXHIBIT D. In addition, the last sentence of the Addendum shall
be deleted and replaced with the following language: "HomeSide Lending agreed to
allow Barnett to have delegated underwriting authority on all agency loans
including jumbo loans up to $1,000,000. The only exception to the above policy
occurs when a particular investor will not allow HomeSide Lending to underwrite
loans on a delegated basis."
(d) HomeSide Lending will administer its daily pricing in the manner set forth
in HomeSide Lending's Secondary Marketing Buy Price Policy I and II dated May 1,
1996, as amended in the manner described in subparagraph (c) above.
(e) HomeSide Lending shall administer its intraday and emergency price changes
in the manner set forth in HomeSide Lending's Secondary Marketing Buy Price
Policy I and II dated May 1, 1996, as amended in the manner described in
subparagraph (c) above.
4.3. SERVICING RELEASED PREMIUMS.
4.3.1. BARNETT RECEIVES MOST FAVORABLE CORRESPONDENT SERVICING RELEASED
PREMIUMS. Barnett will receive the most favorable HomeSide Lending correspondent
servicing released premiums. In addition, such
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<PAGE> 5
servicing released premiums will be no more than 10 (ten) basis points below the
average of a wholesaler peer group, calculated as follows: HomeSide Lending will
calculate an average core products price bi-monthly, using the top ten (10)
wholesalers, as measured semi-annually by SMR Research, as the peer group. In
calculating such average, HomeSide Lending's servicing released premiums across
core product groups will be combined into an average core products price after
the highest and lowest prices for each product have been eliminated.
Servicing released premiums shall be measured on a comparable basis taking into
consideration such factors as mortgage loan product types, mortgage loan
amounts, fees, volume incentives and other data necessary and appropriate to
accurately compare competitor pricing.
4.4. CUSTOMER SERVICE LEVELS.
(a) HomeSide Lending shall maintain a dedicated Customer Service Liaison
Department within its Correspondent Lending Division to respond specifically and
exclusively to Barnett issues and concerns.
(b) HomeSide Lending shall establish an Advisory/Monitoring Committee, including
Barnett representatives, which shall meet regularly to address operational
issues, customer service issues for both servicing and secondary marketing, and
other internal and external customer concerns. The Advisory/Monitoring Committee
shall establish service level benchmarks to be reported.
(c) Barnett will receive HomeSide Lending internal service level reports
necessary to enable Barnett to monitor key service levels. The service level
benchmarks established by the Advisory/Monitoring Committee will be monitored
and addressed, as appropriate.
4.5. BARNETT FUNCTIONS.
(a) Origination.
(b) Processing.
(c) All underwriting with respect to which HomeSide Lending has delegated
authority will be delegated to Barnett, subject to the Delegated Underwriting
Agreement.
(d) Conduct mortgage loan closings and fund all mortgage loans.
(e) Such post closing functions to be performed by Barnett and HomeSide Lending
as such entities shall mutually agree
(f) FHA/VA Insuring and Guaranteeing.
(g) Completion control (follow-up mortgage loan documents and problem mortgage
loans.)
(h) Compliance review for all mortgage loans.
(i) Quality Control for all New Portfolio Mortgage Loans, FHA Mortgage Loans and
VA mortgage loans.
(j) Up-front quality control for all New Secondary Market Mortgage Loans
required by the applicable secondary market investor (e.g., alternative document
mortgage loans).
(k) Distribute mortgage loan rate information to Barnett's mortgage loan
origination channels.
(l) Lock-in reconciliation.
(m) Secondary Marketing Liaison Group shall interface with Production and
HomeSide Lending.
(n) Funding reconciliation.
(o) Document follow-up, as required by HomeSide's Preferred Seller Manual.
4.6. HOMESIDE LENDING FUNCTIONS.
(a) Secondary marketing functions for New Secondary Market Mortgage Loans.
(b) Pipeline Management and Hedging for New Secondary Market Mortgage Loans.
(c) Shipping.
(d) Post closing quality control in the manner described in the Correspondent
Agreement, except for the mortgage loans described in SECTION 4.5 above
(e) Record retention and retrieval.
(f) Legal review and payment for mortgage loans and servicing rights under the
terms of the Correspondent Agreement and related documents.
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<PAGE> 6
4.7. FEES.
(a) Barnett shall pay to HomeSide Lending the fees set forth in the Servicing
Agreement and the Exhibits thereto.
(b) Barnett shall receive the most favorable HomeSide Lending document review
fee charged for best efforts flow program mortgage loans.
4.8. WAREHOUSE MANAGEMENT.
4.8.1. MORTGAGE LOANS LOCKED WITH OTHER ENTITIES. Barnett shall assign to
HomeSide Lending commitments for mortgage loans with rate locks issued by a
third party, and shall deliver such mortgage loans to HomeSide Lending. HomeSide
Lending shall deliver and settle with each entity issuing such a commitment. The
parties acknowledge that the purchase price to be paid by HomeSide, Inc. under
the Stock Purchase Agreement includes the price for such mortgage loans to be
acquired by HomeSide Lending, in bulk, on the Closing Date. HomeSide Lending
shall not pay any additional monies for such mortgage loans. Moreover, any
difference between the lock-in (commitment) price and the cost for such mortgage
loans on Barnett's balance sheet shall be a put-back to Barnett.
4.8.2. MORTGAGE LOANS LOCKED WITH HOMESIDE LENDING. Barnett shall, in the
ordinary course of Barnett's business, deliver to HomeSide Lending all mortgage
loans locked in with HomeSide Lending. The parties acknowledge that the purchase
price to be paid by HomeSide, Inc. under the Stock Purchase Agreement includes
the price for such mortgage loans to be acquired by HomeSide Lending, in bulk,
on the Closing Date. HomeSide Lending shall not pay any additional monies for
such mortgage loans. Moreover, any difference between the lock-in (commitment)
price and the cost for such mortgage loans on Barnett's balance sheet shall be a
put-back to Barnett.
4.8.3. ELIGIBLE SECONDARY MARKET MORTGAGE LOANS NOT LOCKED WITH ANY ENTITY.
Barnett shall deliver to HomeSide Lending all secondary market eligible mortgage
loans without a rate lock commitment. The parties acknowledge that the purchase
price to be paid by HomeSide, Inc. under the Stock Purchase Agreement includes
the price for such mortgage loans to be acquired by HomeSide Lending, in bulk,
on the Closing Date. HomeSide Lending shall not pay any additional monies for
such mortgage loans. Barnett shall bear the risk of loss or gain for any
difference between a mortgage loan's closing price and the market price, based
on a mark-to-market.
4.8.4. MORTGAGE LOANS INELIGIBLE FOR SECONDARY MARKET SALE. HomeSide Lending
shall not purchase from Barnett any mortgage loan which:
(a) As of the Closing Date, is not eligible for sale to the secondary market for
any reason, including, but not limited to, documentation deficiencies,
underwriting deficiencies, poor credit quality, delinquency status and fraud, or
(b) Closed one hundred and twenty (120) or more days prior to the Closing Date.
Notwithstanding the above, HomeSide Lending will purchase a Hula Mae mortgage
loan which has: (i) closed one hundred and twenty (120) or more days prior to
the Closing Date, and (ii) been delivered to Hula Mae prior to the Closing Date.
However, Barnett shall repurchase any such Hula Mae mortgage loan if Hula Mae,
at any time, fails to purchase such mortgage loan or fails to accept such
mortgage loan for inclusion in a security.
Barnett shall keep each such mortgage loan as a retained asset. No additional
servicing released premium shall be paid to Barnett by HomeSide, because the
payment for such servicing rights will be included as part of the purchase price
under the Stock Purchase Agreement.
4.8.5. REPURCHASE OF MORTGAGE LOANS INELIGIBLE FOR SECONDARY MARKET SALE.
Barnett shall repurchase from HomeSide Lending any mortgage loan which was on
Barnett's balance sheet as of the Closing Date and, no later than sixty (60)
days after the Closing Date, is discovered to be ineligible for sale to the
secondary market for any reason, including, but not limited to, documentation
deficiencies, underwriting deficiencies, poor credit quality, delinquency status
and fraud.
4.9. PIPELINE MANAGEMENT.
4.9.1. NEW SERVICING RIGHTS. Barnett shall sell and deliver the New Servicing
Rights to HomeSide Lending under the terms of the PMSR
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Flow Agreement.
4.9.2. NEW SECONDARY MARKET MORTGAGE LOANS. New Secondary Market Mortgage Loans
rate locked with HomeSide Lending shall be delivered to HomeSide Lending under
the terms of the Correspondent Agreement.
4.9.3. MORTGAGE LOANS LOCKED IN WITH ANOTHER ENTITY. Mortgage loans which are
rate locked with an entity other than HomeSide Lending shall be delivered to
such entity by HomeSide Lending upon the closing of such rate locked loans in
accordance with the terms of the related purchase agreement between Barnett and
such entity. Prior to such delivery, HomeSide Lending will purchase such
mortgage loans from Barnett on a servicing released basis and deliver such
mortgage loans to such entity, with HomeSide Lending retaining such servicing
after such delivery, if permitted under the terms of the agreement between
Barnett and such entity.
4.9.4. MORTGAGE LOANS WHICH ARE NOT RATE LOCKED. HomeSide Lending shall not be
obligated to purchase any mortgage loan which is not rate locked with any entity
until such mortgage loan is rate locked with HomeSide Lending and marked-to
market.
4.10. REPURCHASE AND INDEMNIFICATION REQUESTS.
4.10.1. REQUESTS RECEIVED PRIOR TO THE CLOSING DATE. For five years following
the Closing Date, Barnett shall be liable for any repurchase or indemnification
request from any person or entity relating to an Existing Mortgage Loan which is
received by Barnett prior to the Closing Date and remains outstanding as of the
Closing Date. Barnett may satisfy any such indemnification request for any such
item by repurchasing the related mortgage loan.
4.10.2. REQUESTS RECEIVED AFTER THE CLOSING DATE. For five years following the
Closing Date, Barnett shall be liable for any repurchase or indemnification
request from any person or entity relating to an Existing Mortgage Loan which is
received by Barnett or HomeSide Lending after the Closing Date. Barnett may
satisfy any such indemnification request for any such item by repurchasing the
related mortgage loan.
4.10.3. LIABILITY UNDER THE CORRESPONDENT AGREEMENT. Barnett shall be liable for
the New Secondary Market Mortgage Loans it sells to HomeSide Lending in
accordance with the terms of the Correspondent Agreement and Delegated
Underwriting Agreement, including, but not limited to, the statement in the
Correspondent Agreement that Barnett shall repurchase, upon demand from HomeSide
Lending, any mortgage loan purchased by HomeSide Lending thereunder which
HomeSide Lending shall be required to repurchase from an investor due to
underwriting or processing deficiencies under the terms of SECTION 4.16. Should
any processing or underwriting deficiencies be discovered by HomeSide Lending's
quality control reviews, HomeSide Lending at its sole option, may also require
repurchase from Barnett. The Correspondent Agreement contains certain other
repurchase provisions, which are also incorporated into this Operating Agreement
by reference.
4.11. REPORTING.
4.11.1. RISK MANAGEMENT REPORTS. HomeSide Lending shall furnish all agreed-upon
risk management reports outside of the formal Directors' Risk Management
Committee. The parties acknowledge that this report is critical with respect to
the servicing asset and its hedge. The information in such report shall be
provided to Barnett's treasury, finance and accounting departments. The report
shall contain the following information: (a) monthly book versus market
servicing portfolio valuation and rate shock, (b) monthly change in economic
servicing value and rate shock, (c) daily hedge position results, (d) daily
formal hedge position review and strategy review, and (e) minutes of HomeSide
Lending's internal risk management meetings.
4.11.2. INTERNAL PERFORMANCE ANALYSIS REPORTS. HomeSide Lending will provide
Barnett with internal performance analysis information to assist Barnett in
operating its mortgage lending business effectively. HomeSide Lending will
provide Barnett with access to the existing executive information system ("EIS")
to obtain such New Secondary Market Mortgage Loan origination and pipeline
information until Barnett Technologies assumes support for the ALPS system.
4.11.3. MANAGEMENT AND OTHER REPORTS.
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HomeSide Lending will furnish Barnett each month with the following management
reports, together with other reports usual and customary for HomeSide Lending
correspondents.
(a) PIPELINE REPORT. All registered mortgage loans, whether floating rate or
locked-in rate, together with all required information, including, but not
limited to, the rate lock expiration dates and prices.
(b) EXCEPTION REPORT: All mortgage loans received by HomeSide Lending with
exceptions which are tracked by HomeSide Lending's legal review system.
(c) DOCUMENT TRACKING REPORT. Information whether a follow-up mortgage document
has been received by HomeSide Lending, including, but not limited to, recorded
security instruments and title policies.
(d) QUALITY CONTROL REPORT. Monthly/Quarterly quality control reports on a
sample of Secondary Market Mortgage Loans and Portfolio Mortgage Loans for
production by bank/branch with an overall summary indicating trends, fraud and
certain other matters mutually agreed upon by the parties.
(e) HUD QUARTERLY QC REPORTS. HUD quarterly quality control reports relating to
mortgage loan servicing, including summary reports of quality control reviews,
delinquency trends, early payment defaults, early foreclosure analysis and
certain other matters mutually agreed upon by the parties.
(f) STATUS REPORT. When available, a report identifying at what stage in
HomeSide Lending's process a mortgage loan may be identified (e.g. identifying
whether a mortgage loan has been reviewed or set-up on HomeSide Lending's
servicing system).
(g) SERVICE LEVEL REPORT. Upon completion, the average turn-around time for
funding and the number of mortgage loans which: (a) Barnett has delivered to
HomeSide Lending, (b) HomeSide Lending has purchased and funded, and (c)
HomeSide Lending has delivered to its problem mortgage loan area. Upon
completion, a report comparing the Barnett mortgage loan information described
above with information relating to other HomeSide Lending correspondent lenders.
4.12. TECHNOLOGY.
4.12.1. COMPUTER FEEDS. HomeSide Lending and Barnett will use their best efforts
to develop computer feeds (both ways) as quickly as possible to prevent
degradation of service relating to Barnett's pricing and HomeSide Lending's
funding time.
4.12.2. APPLICATION SUPPORT FOR ALPS SYSTEM. HomeSide Lending will provide
Barnett with application support for the ALPS systems in support of mortgage
loan processing, closing and underwriting functions for a limited time to be
agreed upon by Barnett and HomeSide Lending. Barnett Technologies shall use best
efforts to assume such support sometime between 9 and 15 months after the
Closing Date. Such services shall be provided at an internal rate of
seventy-five dollars ($75.00) per hour. HomeSide Lending will work with Barnett
to develop a mutually-agreed upon project list of enhancements based on the
planned enhancements to ALPS based upon the enhancements described in EXHIBIT E
to this Operating Agreement. Prior to Barnett Technologies assuming support,
HomeSide Lending will commit to ensuring programming resources are dedicated to
the completion of the mutually agreed-upon projects by the agreed-upon dates,
assuming no changes are made by Barnett to the project specifications. Barnett
shall be granted a perpetual non-exclusive source code license to the ALPS
(originations) and ASMS (secondary marketing) software; provided however, that
Barnett shall have no right to sell or otherwise transfer such license to a
third party.
4.12.3. TECHNOLOGY SUPPORT FOR ALPS SYSTEM. Barnett Technologies will provide
all technology support necessary to operate ALPS in the Barnett organization,
including, but not limited to, networks, hardware, printers, printer PC
stations, terminals, PCs and laptops.
4.12.4. ADOPT BARNETT SERVICING PLATFORM. HomeSide Lending will use all
reasonable efforts to adopt Barnett's secondary marketing and servicing
platform.
4.12.5. DAILY INTERFACES. HomeSide Lending will provide daily interfaces with
Barnett and overall support consistent with the service levels
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currently provided, including, but not limited to, the items described in
EXHIBIT F to this Operating Agreement. The parties will mutually agree upon
reasonable fees to be paid by Barnett to HomeSide for developing the capacity
for daily interface, based upon the actual hours worked by HomeSide.
4.12.6. BARNETT RETAINS JACKSONVILLE APPLICATIONS SUPPORT GROUP. Barnett
Technologies will retain the Jacksonville applications support group and
supported applications, including, but not limited to, BOLT, MortgageWare and
MortgageFlex.
4.12.7. LEVERAGE EXISTING TECHNOLOGIES. Barnett and HomeSide Lending will work
together to leverage existing technology relating to mortgage loan production
functions.
4.13. OPERATIONS.
4.13.1. OPERATING PLAN TO HANDLE ADDITIONAL VOLUME. At a time mutually
acceptable to the parties, HomeSide Lending shall provide Barnett with an
operating plan designed to give HomeSide Lending the ability to handle
additional mortgage loan volume without a material degradation of the service
quality provided by HomeSide Lending.
4.13.2. MINIMIZE REDUNDANCIES. HomeSide Lending and Barnett shall develop
procedures and processes which will minimize redundancies.
4.13.3. ADDITIONAL OPERATING PLAN. Subject to Barnett's review and approval of
EXHIBIT E, at a time mutually acceptable to the parties, HomeSide Lending shall
provide Barnett with an operating plan reflecting the terms described in EXHIBIT
G to this Operating Agreement. In addition, HomeSide Lending shall perform an
extensive legal review prior to funding each mortgage loan. The daily sequential
operating activities and events described in EXHIBIT G shall be amended as set
forth in the Daily Sequential Operating Activities Addendum, which is included
within EXHIBIT G. In addition, Exhibits A and B to the Correspondent Operations
manual are replaced by the Shipping Submission Checklist, which is included
within EXHIBIT G.
4.13.4. CORRESPONDENT OPERATIONS MANUAL. HomeSide Lending has provided Barnett
with a copy of HomeSide Lending's Correspondent Operations Manual, as amended by
EXHIBIT H, which will govern the operational issues between HomeSide Lending and
Barnett contained in the Correspondent Operations Manual.
4.14. STAFFING.
HomeSide Lending and Barnett shall work together to place employees of Barnett
who are targeted to become HomeSide Lending employees on the Closing Date in new
positions at HomeSide Lending and Barnett.
4.15. PENALTIES.
On or before HomeSide Lending's buyprice expiration date, Barnett shall notify
HomeSide Lending of any mortgage loans which will not meet such expiration date.
Upon receipt of such notification, either telephonically or through delivery and
notation in the closed loan file, HomeSide Lending will grant Barnett a fifteen
(15)-day extension from the buyprice expiration date for the cost of the roll,
as indicated on Knight-Ridder, rounded to the nearest one-eighth of one percent
(0.125%). HomeSide Lending will grant Barnett an additional fifteen (15)-day
extension for a fee equal to one-half of one percent (0.50%) of the loan amount.
After thirty (30) days, the mortgage loans will be marked-to-market at the time
they are eligible for funding. Failure to notify HomeSide Lending regarding
mortgage loans which will not meet their buyprice expiration date as described
above will result in HomeSide Lending's right to refuse to purchase such
mortgage loans in the event such mortgage loans cannot be promptly
marked-to-market and sold to an available investor by HomeSide Lending.
4.16. MORTGAGE INSURANCE AND REPURCHASE REQUESTS.
HomeSide Lending shall promptly notify Barnett (within 72 hours) of any
repurchase request or notification of mortgage insurance reduction or
cancellation so that Barnett may participate in the repurchase decision process.
HomeSide Lending shall begin to work on repurchases/cancellation defense as soon
as possible. Barnett must remedy deficiencies within the applicable investor's
deadline, subject to any agreed upon extensions; provided, however, that Barnett
shall remedy such deficiencies within a period not to exceed sixty (60) days.
Barnett shall be relieved from liability or recourse to HomeSide Lending if
HomeSide
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Lending fails to provide Barnett with adequate notice to participate in the
repurchase decision process, but only if such failure to timely notify has a
material adverse impact on Barnett's interests. Barnett shall provide HomeSide
Lending with the name of the primary contact person/persons to facilitate such
processing.
4.17. SALE OF SERVICING RIGHTS.
HomeSide Lending may not sell servicing rights to the Portfolio Mortgage Loans
except in compliance with the provisions of this SECTION 4.17.
(a) HomeSide Lending will not sell servicing rights to the Portfolio Mortgage
Loans to SunTrust, NationsBank, First Union Bank or to any of their successors
or Affiliates without the prior written consent of Barnett.
(b) Without limiting the scope of the above, HomeSide Lending will not sell
servicing relating to the Portfolio Mortgage Loans to any party unless each of
the following conditions shall have been complied with:
(i) The sale of such servicing shall be necessary to meet HomeSide Lending's
liquidity needs.
(ii) HomeSide Lending shall have used all reasonable efforts to satisfy its
liquidity needs through the sale of other assets.
(iii) HomeSide Lending shall have first offered to sell such servicing rights to
Barnett at fair market value and in connection with such offer shall have
offered to subservice on commercially reasonable terms.
(c) No lender which takes a security interest in the assets of HomeSide Lending
and no transferees of such a lender shall be bound by the provisions of this
SECTION 4.17.
4.18. NATURE OF RELATIONSHIP.
Both parties recognize the importance of maintaining their competitive
advantages in their businesses and understand that the success of each is
inextricably bound in the other. Beyond the responsibilities explicitly outlined
in this Operating Agreement, both parties agree to work together to create
synergies and develop innovations that can result in sustainable competitive
advantages for both. HomeSide Lending will cooperate in good faith with Barnett
to respond promptly to any reasonable request made by Barnett with respect to
the enhancement of the services, products and systems offered by HomeSide
Lending consistent with HomeSide Lending's access to capital.
ARTICLE 5.
MISCELLANEOUS.
5.1. AFFILIATES EXECUTE AGREEMENTS .
Barnett will cause any of its current or future Affiliates to execute agreements
substantially similar to the Ancillary Agreements, which shall be reasonably
acceptable to such Affiliate and HomeSide Lending, in the event such Affiliate
desires to engage in any mortgage banking activity of a type which is the
subject matter of such Ancillary Agreements.
5.2. AFFILIATES WILL COMPLY WITH RELATED AGREEMENTS.
To the extent applicable, an Affiliate of Barnett shall at all times comply with
all other Related Agreements, including, but not limited to, the Shareholder
Agreement and the non-competition provisions of the Shareholder Agreement.
5.3. SUCCESSORS.
This Operating Agreement will inure to the benefit of and be binding upon the
parties to this Operating Agreement. Nothing in this Operating Agreement
expressed or implied is intended to confer on any person other that the parties
to this Operating Agreement and their successors and assigns, any rights,
obligations, remedies or liabilities.
5.4. ASSIGNMENT AND DELEGATION.
No party may assign this Operating Agreement or delegate any of its functions
hereunder to any other party without the prior written consent of HomeSide
Lending or the applicable Barnett Affiliate; provided, however, that either
party may assign and/or delegate, in whole or in part, any of its rights under
this Operating Agreement to any of its Affiliates without the prior written
consent of HomeSide Lending or Barnett.
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5.5. FORCE MAJEURE.
No party shall be liable for delays or errors occurring by reason of
circumstances beyond such party's control, including, without limitation, acts
of civil, military, or banking authorities, national emergencies, labor
difficulties, fire, flood or other catastrophes, acts of God, insurrection, war,
riots, failure of transportation or equipment, or failure of vendors,
communication or power supply.
5.6. TERM.
The term of this Operating Agreement will be five (5) years from the effective
date of this Operating Agreement.
This Operating Agreement may be extended for two (2) years if the extension
negotiations are completed at least six (6) months prior to the original
expiration date. After any such two (2) year extension, this Operating Agreement
is cancelable upon one hundred eighty (180) days' prior written notice which may
be given as early as one hundred eighty (180) days before the extended
expiration date.
The expiration of this Operating Agreement will not cause the Servicing
Agreement or HomeSide Lending's right to service the Existing Mortgage Loans or
the New Mortgage Loans serviced at the date of such expiration under the
Servicing Agreement to terminate or otherwise expire.
5.7. TERMINATION.
This Operating Agreement may be terminated for any one of the following reasons:
5.7.1. HOMESIDE LENDING'S FINANCIAL IMPAIRMENT. Barnett may terminate this
Operating Agreement immediately if:
(a) HomeSide Lending becomes bankrupt or has its status as an approved
seller/servicer/mortgagee rescinded by the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation or the Government
national Mortgage Association. However, this Operating Agreement will reactivate
if HomeSide Lending is reinstated by the applicable agency within six (6) months
of any such rescission. HomeSide Lending will reimburse Barnett for its
reasonable costs associated with such termination and reactivation, including,
but not limited to, any applicable termination or cancellation fees or costs
associated with terminating arrangements with any third party.
(b) HomeSide Lending's liquidity needs cause HomeSide Lending to sell servicing
rights for the Existing Portfolio Mortgage Loans or the New Portfolio Mortgage
Loans.
5.7.2. HOMESIDE LENDING'S FAILURE TO PERFORM. Barnett may terminate this
Operating Agreement immediately if:
(a) HomeSide Lending fails to satisfy specific written standards established by
an Advisory/Monitoring Committee, as agreed upon by the executive management of
Barnett and HomeSide Lending, and
(b) HomeSide Lending fails to cure such failure within an appropriate cure
period after receiving formal written notice of such failure.
5.7.3. BARNETT'S FAILURE TO PERFORM. HomeSide Lending may, but shall not be
required to, terminate this Operating Agreement immediately if Barnett fails to
deliver at least one billion dollars ($1,000,000,000) of mortgage servicing
rights during each year of the Operating Agreement and interest rates on average
are less than twelve percent (12%) during such year, unless origination levels
increase to one billion dollars ($1,000,000,000) on an annualized basis after a
ninety (90)-day cure period.
5.7.4. TERMINATION OF SERVICING AGREEMENT. Notwithstanding the foregoing,
Barnett may terminate HomeSide Lending's right to service the Existing Mortgage
Loans or the New Mortgage Loans under the HomeSide Lending Servicing Agreement
ONLY if:
(a) HomeSide Lending files for protection under any bankruptcy or similar law.
(b) The Federal Housing Administration (the "FHA") suspends any of HomeSide
Lending's approvals as an FHA approved mortgagee; provided, however, that
HomeSide Lending may cure any such suspension within ninety (90) days after the
Business Day on which HomeSide Lending receives written notice of any such
suspension.
(c) HomeSide Lending commits a material breach of its obligations under the
Servicing Agreement; provided, however, that Barnett must first give HomeSide
Lending written notice that Barnett has discovered such a material breach.
HomeSide Lending may cure any such breach within ninety (90) days after the
Business Day on which HomeSide Lending receives such written notice.
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HomeSide Lending may terminate the Servicing Agreement for any reason upon one
hundred eighty (180) days' prior written notice, but only after termination of
this Operating Agreement.
Subject to the rights of any secured party relating to HomeSide Lending's
warehouse line of credit, which rights HomeSide Lending and Barnett acknowledge,
HomeSide Lending will, upon receipt of notice that the HomeSide Lending
Servicing Agreement has been terminated: (a) sell to Barnett the servicing
rights to the Existing Mortgage Loans and New Mortgage Loans for the then
current fair market value of such servicing rights as determined by an
independent appraiser mutually acceptable to the HomeSide Lending and Barnett,
or (b) if Barnett declines to purchase such servicing rights, then HomeSide
Lending shall negotiate the sale and transfer of such servicing rights to a
third party servicer selected by HomeSide Lending and approved by Barnett which
approval shall not be unreasonably withheld. The "fair market value" of the
servicing rights will be determined by an independent appraiser mutually
acceptable to HomeSide Lending and Barnett with respect to the servicing rights
sold pursuant to this SECTION 6.7.4. HomeSide Lending shall be entitled to the
related purchase price, less any costs or expenses incurred by Barnett in
relating to such transfer.
5.8. NOTICES.
All notices, requests, demands and other all notices and other communications
required or permitted to be given under this Operating Agreement shall be in
writing and shall be deemed given if delivered personally, transmitted by
facsimile (and telephonically confirmed), mailed by registered or certified mail
with postage prepaid and return receipt requested, or sent by commercial
overnight courier, courier fees prepaid, to the parties at the following
addresses:
If to HomeSide Lending to:
Hugh R. Harris
President
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
With a copy to:
Robert J. Jacobs
General Counsel
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
If to Barnett, to:
Hinton Nobles
Barnett Banks, Inc.
50 N. Laura Street
Jacksonville, Florida 32202-3638
With a copy to:
Karen Lugar
Senior Counsel
Barnett Banks, Inc.
9000 Southside Boulevard, Building 700
Jacksonville, Florida 32256
or to such other address as HomeSide Lending or Barnett will have specified in
writing to the other.
5.9. AMENDMENT.
No amendment or modification to this Operating Agreement will be valid unless
executed in writing by HomeSide Lending and Barnett.
5.10. WAIVER.
No waiver of any right or obligation under this Operating Agreement by any party
on any occasion will be deemed to operate as a waiver on any subsequent
occasion.
5.11. PROVISIONS SEVERABLE.
If any provision of this Operating Agreement will be held to be void or
unenforceable by any court of competent jurisdiction or any governmental
regulatory agency, such provision will be considered by all parties to be
severed from this Operating Agreement. All remaining provisions of this
Operating Agreement will be considered by the parties to remain in full force
and effect.
5.12. GOVERNING LAW.
This Operating Agreement is entered into in the state of Florida. Its
construction and rights, remedies and obligations arising by, under, through, or
on account of it will be governed by the laws of the State of Florida excluding
its conflict of laws rules and will be deemed performable in the State of
Florida.
5.13. NO AGENCY OR JOINT VENTURE CREATED.
This Operating Agreement will not be deemed to constitute HomeSide Lending and
Barnett as partners or joint venturers, nor will HomeSide Lending or Barnett be
deemed to constitute the
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other as its agent.
5.14. SECTION HEADINGS.
Section headings are intended only to assist in the organization of this
Operating Agreement and do not in any way limit or otherwise define the rights
and liabilities of the parties.
5.15. ENTIRE AGREEMENT.
This Operating Agreement constitutes the entire agreement among the parties and
supersede all other prior communications and understandings, written or oral,
among the parties with respect to the subject matter of this Operating
Agreement. There are no contemporaneous oral agreements.
5.16. COUNTERPARTS.
This Operating Agreement may be executed in multiple counterparts each of which
will be deemed an original. Regardless of the number of counterparts, the total
will constitute only one agreement.
5.17. PLURALS AND GENDER.
In construing the words of this Operating Agreement, plural constructions will
include the singular, and singular constructions will include plural. No
significance will be attached to whether a pronoun is masculine, feminine, or
neuter.
IN WITNESS WHEREOF, HomeSide Lending and Barnett, as of the day first set forth
above, have caused this instrument to be signed on their behalf by their duly
authorized officers.
HOMESIDE LENDING, INC.
By: /s/ Joe K. Pickett
--------------------------
Joe K. Pickett
--------------------------
(Print Name)
Title: Chief Executive Officer
------------------------
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BARNETT BANKS. INC.
By: /s/ Hinton F. Nobles, Jr.
-------------------------
Hinton F. Nobels, Jr.
-------------------------
(Print Name)
Title: Executive Vice President
-------------------------
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EXHIBIT 10.19
MORTGAGE LOAN SERVICING AGREEMENT
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MORTGAGEE NAME: BARNETT BANKS, INC.
MORTGAGEE ADDRESS: 50 N. LAURA STREET, JACKSONVILLE, FLORIDA 32202-3638
TYPE OF BUSINESS ENTITY: BANK HOLDING COMPANY
DATE OF AGREEMENT: APRIL ___, 1996 MORTGAGEE CONTACT PERSON: HINTON NOBLES
PHONE NO: (904) 791-7741
FAX NO: (904) 791-5448
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This Mortgage Loan Servicing Agreement (the "Servicing Agreement") is entered
into as of the date shown above by and between the Servicer and the Mortgagee,
and applies to any of the transactions described below.
RECITALS.
1. The Servicer is in the business of servicing residential mortgage loans,
including, but not limited to, conventional, FHA, VA and certain other Mortgage
Loans, including, but not limited to, first and second lien Mortgage Loans.
2. The Mortgagee is now or will be the owner of certain Notes secured by
Mortgages.
3. The Mortgagee desires the Servicer to service the Mortgage Loans under the
terms set forth in this Servicing Agreement.
4. The Servicer desires to service the Mortgage Loans under the terms set forth
in this Servicing Agreement.
IN CONSIDERATION of the mutual promises made in this Servicing Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Servicer and the Mortgagee agree as follows:
1. DEFINITIONS.
1.1. "AFFILIATE" means an entity that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, another entity. For purposes of this definition, "control", "controlled
by", and "under common control with" means the direct or indirect possession of
ordinary voting power to elect a majority of the board of directors or
comparable body of an entity.
1.2. "AGENCY" means FNMA, FHLMC, FHA, HUD, VA, GNMA.
1.3. "BORROWER" means each obligor under a Mortgage Note.
1.4. "DELINQUENT MORTGAGE LOAN" means a Mortgage Loan with respect to which: (a)
one or more Mortgage Loan payments have not been received by the holder of the
Mortgage Note before the end of the month during which any such Mortgage Loan
payment was due, (b) Mortgage Loans in bankruptcy with one or more Mortgage Loan
payments which have not been received by the holder of the Mortgage Note on or
before the due date in the Mortgage Note, (c) Mortgage Loans in foreclosure, (d)
Mortgage Loan subject to an assignment of deed in lieu of foreclosure, or (e)
Mortgage Loan subject to the HUD assignment program.
1.5. "ESCROW ACCOUNTS" means Mortgage Loan escrow/impound accounts for taxes,
insurance, assessments, ground rents, buydowns, loss drafts, and any other such
amounts which are maintained by the Servicer as a fiduciary for the Borrowers
and investors, and relate to the Servicing Rights.
1.6. "FHA" means the Federal Housing Administration or any successor to the FHA.
1.7. "FNMA" means the Federal National Mortgage Association or any successor to
FNMA.
1.8. "FHLMC" means the Federal Home Loan Mortgage Corporation or any successor
to FHLMC.
<PAGE> 2
SERVICING AGREEMENT
1.9. "GNMA" means the Government National Mortgage Association or any successor
to GNMA.
1.10. GUIDE" means: (a) the Handbook GNMA 5500.1, Government National Mortgage
Association GNMA I Mortgage-Backed Securities Guide, Handbook GNMA 5500.2, in
each case as such Guide may be amended from time to time, (b) the HUD 4155.1
REV-4, Single Family Direct Endorsement Program, HUD 4060.1 REV-1, Mortgagee
Approval Handbook, (c) the FNMA Selling and Servicing Guides, (d) the FHLMC
Mortgagees' and Servicers' Guides, and/or (e) any guide or instructions provided
from time to time by a private investor, in each case as such Agency Guide may
be amended from time to time.
1.11. "HUD" means the United States Department of Housing and Urban Development,
or any successor to HUD.
1.12. "MORTGAGE" means a mortgage, deed of trust, or other such security
instrument which is executed by a Mortgagor pledging the Mortgaged Property as
security for repayment of a Mortgage Note.
1.13. "MORTGAGE DOCUMENTS" means all documents required by applicable law, an
Agency, the Servicer, and/or a private mortgage insurer to service a Mortgage
Loan.
1.14. "MORTGAGEE" means: (a) the entity defined as "Mortgagee" above, (b) any of
its Affiliate banks, and (c) its Affiliate mortgage company, as applicable
within the context used.
1.15. "MORTGAGE LOAN" means a residential mortgage loan which is: (a) secured by
a Mortgage, (b) owned by the Mortgagee, and (c) serviced by the Servicer under
the terms of this Servicing Agreement.
1.16. "MORTGAGE NOTE" means the written promise of a Borrower to pay a sum of
money in United States' dollars at a stated interest rate over a specified term,
and which is secured by a Mortgage.
1.17. "MORTGAGED PROPERTY" means the real property, together with the
one-to-four family dwelling and any other improvements situated on such real
property, which have been pledged by a Mortgagor under a Mortgage as collateral
to secure the obligation under a related Mortgage Note.
1.18. "MORTGAGOR" means each person who executes a Mortgage.
1.19. "OPERATING AGREEMENT" means the Operating Agreement entered into by and
between the Servicer and the Mortgagee pursuant to which this Servicing
Agreement is attached as EXHIBIT C.
1.20. "SERVICER" means HomeSide Lending, Inc., a business corporation organized
under the laws of the state of Florida and with its principal place of business
at 7301 Baymeadows Way, Jacksonville, Florida 32256.
1.21. "SERVICING AGREEMENT" means this Servicing Agreement and all Exhibits
attached hereto.
1.22. "SERVICING RIGHTS" means the rights to service the Mortgage Loans and
collect the servicing fees, late fees and certain other ancillary amounts
relating to the Mortgage Loans, including, but not limited to, amounts under an
Escrow Account.
1.23. "TRETS" means TransAmerica Real Estate Tax Service, Inc.
1.24. "VA" means the Department of Veterans Affairs, or any successor to the VA.
2. STANDARD OF CARE.
2.1. IN GENERAL. The Servicer will perform its duties and obligations under this
Servicing Agreement for all Mortgage Loans in accordance with: (a) applicable
Federal, State and local laws, rules, regulations, and orders, and (b) prudent
mortgage banking practices.
2.2. GOVERNMENT MORTGAGE LOANS. In addition to 2.1 above, the Servicer will
perform its duties and obligations under this Servicing Agreement for FHA and VA
Mortgage Loans in accordance with the Guides, regulations and practices of the
applicable Agency.
2.3. MORTGAGE LOANS OTHER THAN GOVERNMENT MORTGAGE LOANS. In addition to 2.1
above the Servicer will perform its duties and obligations under this Servicing
Agreement for Mortgage Loans other than FHA and VA Mortgage Loans in accordance
with the Guides, regulations and practices of: (a) FNMA, (b) FHLMC, and (c) the
applicable private mortgage insurance if a Mortgage Loan is required to have
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<PAGE> 3
SERVICING AGREEMENT
private mortgage insurance and (d) this Servicing Agreement. If any provision of
a FNMA Guide, regulation, or practice is inconsistent with a provision in a
FHLMC Guide, regulation, or practice, the FNMA provision will control.
2.4. PRIVATE BANK MORTGAGE LOANS. Without limiting the scope of the foregoing,
the Servicer will provide to Mortgagors who are private banking clients of the
Mortgagee the additional tasks and services listed on EXHIBIT A of this
Servicing Agreement and requested by the Mortgagee, the fees for which are
described in EXHIBIT A to this Servicing Agreement. The Mortgage Loans which are
provided by the Mortgagee's private banking department to certain borrowers
under the Mortgagee's Community Reinvestment Act efforts will be serviced under
the general provisions of this Servicing Agreement rather than under the special
provisions of EXHIBIT A to this Servicing Agreement. Each Mortgage Loan with
such a Mortgagor will be subject to the special private banking fees and charges
described in EXHIBIT A TO this Servicing Agreement in addition to the standard
servicing fees and charges described in such EXHIBIT B.
3. COLLECTING PAYMENTS.
The Servicer will use reasonable efforts to collect each Mortgage Loan payment
when such payments become due until all amounts due and owing under or in
connection with each such Mortgage Loan has been paid in full.
4. SERVICING TASKS.
4.1. REMITTING PRINCIPAL AND INTEREST. The Servicer will pay to the Mortgagee
each month all Mortgage Loan principal and interest payments received by the
Servicer from each Mortgagor, less the amount of the servicing fees set forth in
EXHIBIT A AND EXHIBIT B to this Servicing Agreement. Such remittance will be
made in accordance with the actual/actual remittance method. The Servicer will
deliver to the Mortgagee a remittance advice and a full accounting report
containing information relating to the servicing fee on such dates as shall be
mutually acceptable to the Servicer and the Mortgagee.
4.2. INCREMENTAL SERVICES AS REQUESTED. If requested by the Mortgagee, the
Servicer will perform certain reporting, investor service, custodial liaison and
other credit-related services described in EXHIBITS A, B AND D to this Servicing
Agreement.
5. COMPENSATION.
5.1. GENERAL FEE SCHEDULE. The Mortgagee will pay to the Servicer the fees and
charges set forth in EXHIBITS A AND B to this Servicing Agreement.
5.2. SERVICER MAY RETAIN CERTAIN OTHER CHARGES AND FEES. The Servicer will
charge and retain the full amount of any late charges, returned check charges,
partial release and assumption processing fees, and other administrative fees
and charges described in EXHIBIT A AND EXHIBIT B to this Servicing Agreement and
allowed by: (a) FNMA and/or FHLMC in their Guides or other rules or regulations
with respect to Mortgage Loans other than FHA and VA Mortgage Loans, and (b) the
applicable Agency in its Guide or other rules or regulations with respect to FHA
and VA Mortgage Loans.
5.3. MORTGAGEE WILL PAY ALL CUSTODIAL FEES AND EXPENSES. The Mortgagee will pay
any and all costs, expenses and fees relating to the Mortgagee's custodian and
the custodial services provided by such custodian for the Mortgage Loans.
5.4. MORTGAGEE WILL PAY ALL TRETS AND FLOOD CERTIFICATION AND TRACKING FEES. The
Mortgagee will collect from the Mortgagor and pay over to the Servicer any and
all fees relating to or arising out of each: (a) "life of loan" transferable tax
service contract, which contract is either with TRETS or are fully transferable
to TRETS, and (b) transferable flood insurance certification and "life of loan"
tracking service from a flood service provider acceptable to the Servicer.
5.5. MORTGAGEE WILL PAY ALL FEES RELATING TO CERTAIN ADDITIONAL SERVICES. The
Mortgagee will pay to the Servicer any fees relating to any additional service
which the Servicer: (a) is required to perform by applicable law, rule,
regulation or order, and (b) reasonably believes the Servicer is unable to
collect directly from a Mortgagor or Borrower.
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SERVICING AGREEMENT
6. CUSTODIAL ACCOUNT.
6.1. INSURED DEPOSIT ACCOUNTS. The Servicer will hold all funds relating to the
Mortgage Loans in a custodial bank account at a depository financial institution
with deposits insured by the Federal Deposit Insurance Corporation, and will
maintain all records necessary to secure and obtain the maximum Federal Deposit
Insurance Corporation insurance for each beneficiary of the account.
6.2. MORTGAGE LOANS WITH AN ESCROW ACCOUNT. The Servicer will pay promptly all
hazard insurance premiums, mortgage insurance premiums, real estate taxes, and
other obligations which have funds in an Escrow Account during the term of this
Servicing Agreement promptly after receiving a bill for any such amount. If an
Escrow Account does not contain funds sufficient to pay such amounts, the
Servicer will advance funds for the payment of such amounts in the manner and to
the extent required by applicable law. The Servicer may elect to waive the
collection of such escrow charges without the express permission of the
Mortgagee in accordance with this Servicing Agreement.
6.3. MORTGAGE LOANS WITH NO ESCROW ACCOUNTS. The Servicer will advance funds on
behalf of a Mortgagor who does not maintain an Escrow Account for the payment of
taxes and certain other amounts. The Servicer will use its best efforts to
collect any such funds from each such Mortgagor. If the Servicer is unable to
recover any such funds from a Mortgagor, the Mortgagee will pay such funds to
the Servicer monthly.
6.4. ANNUAL CERTIFICATION. At the request of the Mortgagee, the Servicer will
certify once each year that all general property taxes, special assessments, and
hazard insurance premiums have been paid on the Mortgaged Properties securing
the Mortgaged Loans.
7. DELINQUENT MORTGAGE LOANS.
The Servicer's Delinquent Mortgage Loan collection efforts will be made in
accordance with the standard of care described in SECTION 2 above. The Servicer
will provide standard mortgage servicing package delinquency reports to the
Mortgagee once each month during the term of this Servicing Agreement.
8. INSURANCE.
The Servicer will use reasonable efforts to ensure that there is in force for
each Mortgaged Property a hazard insurance policy which: (a) is acceptable to
the applicable Agency, (b) contains the mortgagee clause: " HomeSide Lending,
Inc., its successors and/or assigns" or such other clause which is acceptable to
the Servicer, (c) insures against loss or damage by fire, all other hazards set
forth in the standard extended coverage form of endorsement, and any other
insurable risks against hazards required by the applicable Agency, (d) has been
issued in an amount equal to the lesser of the outstanding principal balance of
the Mortgage Loan or the full insurable value of the improvements to the
Mortgaged Property, and (e) if required by the Flood Disaster Protection Act of
1973 and/or the National Flood Insurance Reform Act of 1994, a flood insurance
policy in an amount representing coverage equal to the lesser of the outstanding
principal balance of the Mortgage Loan or the maximum amount of insurance which
is available under the Flood Disaster Protection Act of 1973 and/or the National
Flood Insurance Reform Act of 1994, as may be amended from time to time. If a
Mortgagor fails to maintain such insurance coverage, the Servicer may obtain
such coverage on behalf of such Mortgagor, and the Servicer may collect the
insurance premiums from the Mortgagor under the terms of the Mortgage. The
Servicer will retain, service, and continually maintain evidence of such
insurance coverage, as required by the Mortgagee. The Mortgagee will reimburse
the Servicer for the cost of maintaining insurance coverage in the event the
loan completes foreclosure.
The Servicer is authorized to sign on behalf of the Mortgagee for all loss
drafts relating to such insurance coverage in the manner and to the extent set
forth in EXHIBIT E And the FNMA Servicing Guide, as amended from time to time.
9. INSPECTIONS.
The Servicer will inspect a Mortgaged Property to determine its physical
condition and occupancy status: (a) each month following the Mortgagor's default
until such Mortgaged Property has been foreclosed or the Mortgage Loan has been
reinstated, and (b) in accordance with the applicable Agency's Guide and/or the
Servicer's standard operating procedures with respect to
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SERVICING AGREEMENT
damaged Mortgaged Properties. The Servicer will use its best efforts to recover
from each Mortgagor all costs and expenses relating to or arising out of such
inspections. If the Servicer is unable to recover such costs and expenses from
the Mortgagor, the Mortgagee will reimburse the Servicer for all such costs and
expenses at the time of any foreclosure sale, presale, or acceptance of a deed
in lieu of foreclosure.
10. SPECIAL NOTICE TO MORTGAGEE.
The Servicer will notify the Mortgagee in writing promptly after the Servicer
discovers that: (a) there is a material default under the terms of a Mortgage or
Mortgage Note, or (b) a Mortgaged Property has been sold or transferred.
11. PREPAYMENT.
The Servicer will not accept any full or partial principal prepayment of a
Mortgage Loan unless: (a) the Mortgage and/or Mortgage Note allows such
prepayment, (b) the Mortgagee authorizes such prepayment in writing, and/or (c)
applicable law, rule, regulation or order requires the Servicer to accept such
prepayment.
12. FORECLOSURES
12.1. COMPLIANCE WITH APPLICABLE RULES. The Servicer or its designated agent
will begin foreclosure proceedings or otherwise begin to acquire a Mortgaged
Property promptly after a Mortgagor has defaulted on a Mortgage Loan. These
proceedings will be conducted in the manner described in SECTION 2 above. If the
Mortgaged Property is conveyed to the FHA or the VA, the Servicer will
facilitate any settlement with applicable Agency. The Mortgagee will be
responsible for any deficiency in any claim settled by the Servicer with such an
Agency or private mortgage insurance company.
12.2. MANNER OF CONDUCTING FORECLOSURES. The Servicer or its designated agent
will conduct all such proceedings in the manner described in SECTION 2 above,
and will take title to the Mortgaged Property in the name designated by the
Mortgagee. The Mortgagee will pay to the Servicer the mitigation fees set forth
in EXHIBIT B to this Servicing Agreement for services requested by the
Mortgagee. The Servicer will perform only those foreclosure or related
procedures which are normal and customary for foreclosures in each jurisdiction
where the Mortgaged Property is situated.
12.3. MANAGING AND PROTECTING THE MORTGAGED PROPERTY. Unless otherwise directed
by the Mortgagee, the Servicer will manage and protect the Mortgaged Property
from the date the Servicer commences foreclosure until the date when such
proceedings have been terminated and title to the property has been conveyed to
the appropriate person or entity. The manner of such services will be consistent
with the management of real estate in the jurisdiction in which the Mortgaged
Property is situated including, but not limited to, the: (a) placement and
payment of certain insurance relating to the Mortgaged Property, (b) management
and supervision of repairs to and maintenance of the Mortgaged Property, and (c)
preparation of such reports as may be reasonably required by the Mortgagee. The
Servicer will obtain any authorization from any Agency or such other authority
required to manage and protect the Mortgaged Property.
12.4. MORTGAGEE WILL APPOINT CONTACT PERSON. The Mortgagee will designate an
employee of the Mortgagee who will be responsible for: (a) approving
extraordinary foreclosure matters and loss mitigation-related expenses,
including, but not limited to, litigation expenses, (b) Mortgaged Property
donations, and (c) other credit-related matters requiring the prior approval of
the Mortgagee. Such designated employee shall be authorized by Mortgagee to
instruct Servicer with respect to each of said matters and shall respond
promptly to all of the Servicer's inquiries and requests.
12.5. MORTGAGEE WILL REIMBURSE SERVICER FOR COSTS. The Servicer will bill the
Mortgagee for any and all expenses relating to or arising out of a foreclosure,
deed in lieu of foreclosure, deficiency proceeding, and other disposition of the
Mortgaged Property and actions relating thereto, including, but not limited to,
reasonable attorneys' fees, court costs, appraisals, filing costs, process fees,
and all other actual out-of-pocket expenses paid to third parties. The Mortgagee
will reimburse the Servicer for such costs and expenses no later than thirty
(30) calendar days after the Mortgagee receives the Servicer's consolidated
invoice for such costs and expenses. The Servicer may collect any such cost or
expense or any fee set forth in EXHIBIT B from
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SERVICING AGREEMENT
the proceeds of any disposition of any Mortgaged Property.
13. FIDELITY AND E & O COVERAGE.
The Servicer will maintain a fidelity bond with a responsible surety company on
all of the Servicer's employees who may have access to the Mortgagee's funds,
monies, and documents. The bond will protect the Servicer against losses,
including theft, embezzlement, fraud, and misplacement. The Servicer will
maintain Fire and Extended Coverage Errors and Omissions Insurance, which will
reimburse the Servicer for any losses relating to the Servicer's failure to
require, procure, maintain or provide Fire and Extended Coverage Insurance on
the Mortgaged Properties.
14. MORTGAGEE REPRESENTATIONS AND WARRANTIES.
The Mortgagee represents, warrants and agrees that, as of the date of this
Servicing Agreement:
14.1. PARTY IS DULY ORGANIZED.
The Mortgagee is a duly organized and validly existing bank holding company. The
Seller's Affiliate banks are each duly organized and validly existing national
banking associations organized under the laws of the United States. The Seller's
Affiliate mortgage company is a duly organized and validly existing business
corporation. Each is in good standing under the laws of the jurisdiction of
organization, and has the requisite power and authority to enter into this
Servicing Agreement and any other agreements to which Mortgagee is party and
that are contemplated by this Servicing Agreement.
14.2. AGREEMENT IS DULY AUTHORIZED.
Mortgagee has all requisite corporate power, authority and capacity to enter
into this Servicing Agreement and to perform the obligations required of it
under this Servicing Agreement. The execution and delivery of this Servicing
Agreement, and the consummation of the transactions contemplated by this
Servicing Agreement, have each been duly and validly authorized by all necessary
corporate action. This Servicing Agreement constitutes the valid and legally
binding agreement of each party, enforceable in accordance with its terms,
except as they may be limited by bankruptcy, insolvency, reorganization or other
laws affecting the enforcement of creditors' rights and by general equity
principles, and no offset, counterclaim or defense exists to the full
performance of this Servicing Agreement.
14.3. AGREEMENT DOES NOT VIOLATE ANY OTHER OBLIGATION.
Insofar as Mortgagee's capacity to carry out any obligation under this Servicing
Agreement is concerned, Mortgagee is not in violation of any provision of any
charter, certificate of incorporation, by-law, mortgage, indenture,
indebtedness, agreement, instrument, judgment, decree, order, statute, rule or
regulation, and there is no such provision that adversely affects its capacity
to carry out such obligations. Mortgagee's execution of, and performance
pursuant to, this Servicing Agreement will not result in such violation.
14.4. PARTY IS DULY LICENSED.
Mortgagee holds the required licenses and, to the extent required, is in
compliance with all state and federal laws governing the transfer and Servicing
of Mortgage Loans transferred under this Servicing Agreement.
14.5. WARRANTIES SURVIVE.
Mortgagee agrees that all warranties and obligations under this Servicing
Agreement are perpetual and will survive the termination of this Servicing
Agreement.
15. SERVICER REPRESENTATIONS AND WARRANTIES.
The Servicer represents, warrants and agrees that, as of the date of this
Servicing Agreement:
15.1. PARTY IS DULY ORGANIZED.
The Servicer is a duly organized and validly existing corporation and is in good
standing under the laws of the jurisdiction of organization, and has the
requisite power and authority to enter into this Servicing Agreement and any
other agreements to which Servicer is party and that are contemplated by this
Servicing Agreement.
15.2. AGREEMENT IS DULY AUTHORIZED.
Servicer has all requisite corporate power, authority and capacity to enter into
this Servicing Agreement and to perform the obligations required
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SERVICING AGREEMENT
of it under this Servicing Agreement. The execution and delivery of this
Servicing Agreement, and the consummation of the transactions contemplated by
this Servicing Agreement, have each been duly and validly authorized by all
necessary corporate action. This Servicing Agreement constitutes the valid and
legally binding agreement of each party, enforceable in accordance with its
terms, except as they may be limited by bankruptcy, insolvency, reorganization
or other laws affecting the enforcement of creditors' rights and by general
equity principles, and no offset, counterclaim or defense exists to the full
performance of this Servicing Agreement.
15.3. AGREEMENT DOES NOT VIOLATE ANY OTHER OBLIGATION.
Insofar as Servicer's capacity to carry out any obligation under this Servicing
Agreement is concerned, Servicer is not in violation of any provision of any
charter, certificate of incorporation, by-law, mortgage, indenture,
indebtedness, agreement, instrument, judgment, decree, order, statute, rule or
regulation, and there is no such provision that adversely affects its capacity
to carry out such obligations. Servicer's execution of, and performance pursuant
to, this Servicing Agreement will not result in such violation.
15.4. PARTY IS DULY LICENSED.
Servicer holds the required licenses and is in compliance with all state and
federal laws governing the transfer and Servicing of Mortgage Loans transferred
under this Servicing Agreement.
15.5. WARRANTIES SURVIVE.
Servicer agrees that all warranties and obligations under this Servicing
Agreement are perpetual and will survive the termination of this Servicing
Agreement.
16. INDEMNIFICATION.
16.1. MORTGAGEE WILL INDEMNIFY SERVICER. The Mortgagee shall indemnify the
Servicer and shall hold the Servicer harmless from and against any and all
losses, liabilities, penalties, damages, expenses or other harm or injury which
the Servicer may incur or suffer or which may be asserted by any person or
entity, including reasonable attorneys' fees and court costs, arising out of any
action at any time taken or omitted to be taken (a) by the Mortgagee under or in
connection with this Servicing Agreement and/or any applicable Exhibit to the
Agreement, including, without limitation, any failure by the Mortgagee to
observe and perform properly each and every covenant of this Servicing Agreement
and/or any applicable Exhibit to the Agreement, or (b) by the Servicer in
reliance upon information provided to the Servicer by the Mortgagee, or (c) by
Servicer in accordance with the terms hereof. Without limiting the above, the
Mortgagee shall indemnify the Servicer and shall hold the Servicer harmless from
and against any and all losses, liabilities, penalties, damages, expenses or
other harm or injury which the Servicer may incur or suffer or which may be
asserted by any person or entity, including reasonable attorneys' fees and court
costs, arising out of any Mortgage Loan or the Servicing Rights relating to such
Mortgage Loan which result from
(a) The failure of any prior servicer of a Mortgage Loan to perform servicing
obligations in accordance with the standards set forth in this Servicing
Agreement for any Mortgage Loan transferred from a prior servicer to the
Servicer.
(b) Any claim asserted by any person or entity which was not the result of any
negligence, willful misconduct, violation of law, or breach of this Servicing
Agreement by the Servicer.
(c) Any act or failure to act in connection with the origination, processing, or
closing of a Mortgage Loan, including but not limited to, the failure to provide
and/or complete the Mortgage Documents, which results in a tax penalty, tax
sale, lost Mortgage Documents and other such adverse consequences.
16.2. OTHER. Indemnification provisions of SECTION 16.1 shall apply only to
Mortgage Loans made subject to this Servicing Agreement subsequent to the
Closing Date as such term is defined in the Stock Purchase Agreement between
Grant America, Inc. (now known as HomeSide, Inc.) and Barnett Bank, Inc. dated
March 4, 1996.
16.3. SERVICER WILL INDEMNIFY MORTGAGEE. The Servicer shall indemnify the
Mortgagee and shall hold the Mortgagee harmless from and against any and all
losses, liabilities, penalties, damages, expenses or other harm or injury which
the Mortgagee may incur or suffer or which may be asserted by any person or
entity, including reasonable attorneys' fees and court costs, arising
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SERVICING AGREEMENT
out of any action at any time taken or omitted to be taken (a) by the Servicer
under or in connection with this Servicing Agreement and/or any applicable
Exhibit to the Agreement, including, without limitation, any failure by the
Servicer to observe and perform properly each and every covenant of this
Servicing Agreement and/or any applicable Exhibit to the Agreement, or (b) by
the Mortgagee in reliance upon information provided to the Mortgagee by the
Servicer, or (c) by Mortgagee in accordance with the terms hereof.
17. TERM OF THIS SERVICING AGREEMENT.
This Servicing Agreement will remain in full force and effect until terminated
by either party under the terms of SECTION 18 below.
18. TERMINATION.
This Servicing Agreement may be terminated for any reason set forth in SECTION
5.7 of the Operating Agreement.
18.1. MORTGAGEE'S SALE OF MORTGAGE LOAN ASSETS. The Mortgagee may sell its
interest in any or all of the Mortgage Loans, other than the servicing rights
relating to such Mortgage Loans. The Servicer consents to the sale of all or any
part of such Mortgage Loan assets (other than the related servicing rights), as
long as:
(a) the sale of the Mortgage Loans remains subject to the terms of this
Servicing Agreement and the Servicer's rights under this Servicing Agreement,
including, but not limited to, the Servicer's continuing right to service the
Mortgage Loans and to receive the servicing fees set forth in this Servicing
Agreement, and
(b) the method of servicing the Mortgage Loans for such purchaser is
substantially the same as the servicing under this Servicing Agreement.
The Mortgagee will reimburse the Servicer for any costs or expenses incurred by
the Servicer relating to or arising out of any such sale of Mortgage Loans,
including, but not limited to, the costs of any additional reports created by
the Servicer for the Mortgagee in connection with any such sale.
18.2. SERVICER'S RESPONSIBILITIES UPON TERMINATION. The Servicer will perform
the following tasks for any Mortgage Loans affected by any termination of part
or all of this Servicing Agreement:
(a) Make a full accounting of such Mortgage Loans to the Mortgagee.
(b) Pay all amounts due and owing to the Mortgagee and/or other persons or
entities.
(c) Deliver to the Mortgagee: (i) all Mortgage Documents held by the Servicer
which are the property of the Mortgagee, (ii) a written summary of all taxes and
fire insurance premiums which have been paid by the Servicer on behalf of
Mortgagors, and (iii) such other information reasonably necessary for and
otherwise cooperate with a subsequent servicer to service the Mortgage Loans.
19. POWER OF ATTORNEY.
The Mortgagee irrevocably constitutes and appoints the Servicer and its duly
authorized officers and agents as the Mortgagee's agent and attorney-in-fact
coupled with an interest, to endorse checks and other instruments of payment and
documents with respect to the Mortgage Loans.
20. CONFIDENTIALITY.
The Mortgagee and the Servicer and their affiliates and subsidiaries will cause
their respective directors, officers, employees, agents and other authorized
representatives to hold in strict confidence, and not use or disclose to any
other party without the prior written consent of the other party, the
proprietary business procedures of the other party, the servicing fees or
prices, the policies or plans of the other party or any of its affiliates. The
Mortgagee and the Servicer agree that the terms of this Servicing Agreement,
including, but not limited to, the financial terms relating to any transaction
under this Servicing Agreement, are confidential and, except as required by law,
regulation, administrative or court order, neither party shall disclose, and
shall prevent any other person not authorized in writing by the other party from
disclosing, any such confidential information without the prior written consent
of the other party. Neither party is required to give such consent to the other
party.
21. NOTICES.
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SERVICING AGREEMENT
All notices, requests, demands and other communications which are required or
permitted to be given under this Servicing Agreement will be in writing and will
be deemed to have been duly given upon the delivery of mailing thereof, sent by
registered or certified mail, return receipt requested, postage paid or fax:
If to Servicer, to:
William Glasgow, Jr.
Executive Vice President
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
With a copy to:
Robert J, Jacobs
General Counsel
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
If to Mortgagee to:
Fran Seabrook
Chairman, President and CEO
Barnett Mortgage Company
9000 Southside Boulevard
Building 700
Jacksonville, Florida 32256
With a copy to:
Karen Lugar
Senior Counsel
Barnett Banks, Inc.
9000 Southside Boulevard, Building 700
Jacksonville, Florida 32256
or to such other address as the Servicer or the Mortgagee will have specified in
writing to the other.
22. EXHIBITS PART OF THIS SERVICING AGREEMENT.
The Exhibits are incorporated by reference into this Servicing Agreement, are
made a part of this Servicing Agreement, and will be binding on the Servicer and
the Mortgagee. The Exhibits to this Servicing Agreement may not be amended or
supplemented by the Servicer or the Mortgagee without the prior written
agreement of the other party.
23. ATTORNEYS' FEES AND COSTS.
If it is determined in a judicial proceeding that either party has failed under
any provision of this Servicing Agreement, and if either party will employ
attorneys or incur other expenses for the enforcement, performance, or
observance of the terms of this Servicing Agreement, then said party, to the
extent permitted by law, will be reimbursed by the losing party, for reasonable
attorneys' fees and other out-of-pocket expenses.
24. ASSIGNMENT AND DELEGATION.
Neither party may assign this Servicing Agreement, in whole or part, to any
other party without the prior written consent of the other party; except that
(i) either party may assign, in whole or in part, any of its rights under this
Servicing Agreement to any of its affiliates or subsidiaries, (ii) Servicer may
assign, in whole or in part, any of its rights under this Servicing Agreement to
secure payment of money borrowed and such assignee shall have the rights and
remedies of a secured party, and (iii) the Servicer may assign, in whole or in
part, any of its rights, pursuant to a sale of Servicing in accordance with the
provisions of SECTION 4.17 of the Operating Agreement.
The Mortgagee understands and acknowledges that the Servicer has delegated:
(a) foreclosure, bankruptcy, claims and conveyance, and other default-related
services to the Law Offices of Gerald Shapiro,
(b) tax bill procurement and tax payment services to TransAmerica Real Estate
Tax Service, Inc., and
(c) hazard insurance tracking, forced place, and other related insurance
services to American Sterling Corporation.
The Servicer shall not delegate any additional material customer service
responsibilities or duties under this Servicing Agreement without the prior
written consent of the Mortgagee. The Servicer may delegate other additional
servicing responsibilities without the approval of the Mortgagee.
25. AMENDMENT.
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SERVICING AGREEMENT
No amendment or modification to this Servicing Agreement will be valid unless
executed in writing by the Servicer and the Mortgagee.
26. WAIVER.
No waiver of any right or obligation under this Servicing Agreement by any party
on any occasion will be deemed to operate as a waiver on any subsequent
occasion.
27. PROVISIONS SEVERABLE.
If any provision of this Servicing Agreement will be held to be void or
unenforceable by any court of competent jurisdiction or any governmental
regulatory agency, such provision will be considered by all parties to be
severed from this Servicing Agreement. All remaining provisions of this
Servicing Agreement will be considered by the parties to remain in full force
and effect.
28. GOVERNING LAW.
This Servicing Agreement is entered into in the state of Florida. Its
construction and rights, remedies and obligations arising by, under, through, or
on account of it will be governed by the laws of the State of Florida excluding
its conflict of laws rules and will be deemed performable in the State of
Florida.
29. FORCE MAJEURE
Notwithstanding any language in this Servicing Agreement to the contrary,
Servicer shall not be held responsible nor subject to indemnification for any
loss suffered by Mortgagee stemming from acts or events beyond its reasonable
control, including (i) lightning, earthquakes, hurricanes or other acts of God,
as well as (ii) civil unrest, riots or war.
30. NO AGENCY OR JOINT VENTURE CREATED.
This Servicing Agreement will not be deemed to constitute the Servicer and the
Mortgagee as partners or joint venturers, nor will the Servicer or the Mortgagee
be deemed to constitute the other as its agent.
31. SUCCESSORS.
This Servicing Agreement will inure to the benefit of and be binding upon the
parties hereto and their successors and assigns. Nothing in this Servicing
Agreement expressed or implied is intended to confer on any person other than
the parties hereto and their successors and assigns, any rights, obligations,
remedies or liabilities.
32. SECTION HEADINGS.
Section headings are intended only to assist in the organization of this
Servicing Agreement and do not in any way limit or otherwise define the rights
and liabilities of the parties.
33. ENTIRE AGREEMENT.
This Servicing Agreement and the Exhibits to this Servicing Agreement constitute
the entire agreement among the parties and supersede all other prior
communications and understandings, written or oral, among the parties with
respect to the subject matter of this Servicing Agreement. There are no
contemporaneous oral agreements. Notwithstanding the above, this Servicing
Agreement is subject to the provisions of the Operating Agreement, including,
but not limited to, SECTIONS 3.3 and 3.4 thereof.
34. COUNTERPARTS.
This Servicing Agreement may be executed in multiple counterparts each of which
will be deemed an original. Regardless of the number of counterparts, the total
will constitute only one agreement.
35. PLURALS AND GENDER.
In construing the words of this Servicing Agreement, plural constructions will
include the singular, and singular constructions will include plural. No
significance will be attached to whether a pronoun is masculine, feminine, or
neuter.
IN WITNESS WHEREOF, the Servicer and the Mortgagee, as of the day first set
forth above, have caused their seals to be affixed on this instrument to be
signed on their behalf by their duly authorized officers.
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SERVICING AGREEMENT
HOMESIDE LENDING, INC.
/s/ Joe K. Pickett
By:__________________________
_____________________________
(Print Name)
Title:_______________________
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<TABLE>
<CAPTION>
EXHIBIT A TO SERVICING AGREEMENT
INCREMENTAL SERVICES AVAILABLE -- FEE SCHEDULE FOR PRIVATE BANK LOANS (PRIORITY SERVICES)
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DEPARTMENT DESCRIPTION OF SERVICES UNIT COST(1) BILLING PRIVATE BANK
FREQUENCY CONTACT
====================================================================================================================================
<S> <C> <C>
Customer Service/Esc. DIRECT 800 NUMBER ACCESS TO DEDICATED CSRS. Servicer will $[*]/loan/yr +
provide the Mortgagee's private banking Mortgagors with a normal servicing
dedicated 800 number staffed by representatives trained to Fee
handle the special needs of such Mortgagors. The 800 number
will by-pass the voice response unit for all incoming calls.
48 hour target response time for research items.
EXCEPTION PROCESSING FOR TAXES AND HAZARD INSURANCE. If a Included in $[*]/
renewal policy is not received by the expiration date of the loan charge
policy, a representative will contact the insurance
agent/carrier to obtain coverage information. If the
representative is unable to obtain the needed information,
the Operations Manager will be contacted to obtain
permission to send notification to the Mortgagor. A
servicing representative will request permission from the
Operations Manager, before contacting a Mortgagor, regarding
a tax delinquency. The Servicer will send the Mortgagor an
open hazard insurance items report each month.
EXCEPTION PROCESSING OF SPECIAL LOANS. The Servicer will Included in $[*]/
provide a monthly loan level detail report to the loan charge
Mortgagee's private banking department for all maturing
balloon loans beginning 6 months prior to the maturity date
of each such loan. The Servicer will obtain the Mortgagee's
approval prior to contacting the Mortgagor about the loan
maturity, accepting payments past the maturity date, or
extending the maturity date. The Servicer's representative
will work with the Mortgagee's private banking department to
modify or refinance the loan. In addition, the Servicer will
prepare special monthly or quarterly statements for those
loans requiring such statements.
EXCEPTION COLLECTION PROCESSING. A dedicated representative Included in $[*]/
will work with the Mortgagee's private banking department to loan charge
resolve delinquent accounts, or to obtain the Mortgagee's
permission to contact the Mortgagor directly. The Servicer
will mail demand letters manually when the delinquency is
greater than 90 days. The Servicer will mail demand letters
to the remainder of the portfolio on the 50th day using a
custom program. The Servicer and the Mortgagee will mutually
agree to the timing of Mortgagor notices and contacts.
Financial/Credit ADHOC FINANCIAL/CREDIT REPORTING(2) $[*]/hour Monthly
Reporting
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</TABLE>
All other fees described in EXHIBIT B to the Servicing Agreement will be charged
to private banking Mortgage Loans, as applicable.
(1) At the 3-year anniversary of this Servicing Agreement and every 3 years
afterwards, the Servicer will adjust the unit costs according to changes in the
Consumer Price Index over the prior 3 years. Such change will be based upon the
most recently published Consumer Price Index.
(2) The list of standard reports is set forth in EXHIBIT D to this Servicing
Agreement.
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* Confidential treatment requested.
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT B TO THE SERVICING AGREEMENT
I. BASE SERVICING FEES -- PORTFOLIO LOANS (INCLUDING THE PRIVATE BANK)
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FEE DESCRIPTION AMOUNT OR PERCENTAGE OF FEE BILLING
FREQUENCY
====================================================================================================================================
<S> <C> <C>
All base servicing fee rates for all Mortgage
Loans which were serviced by the Mortgagee Monthly
prior to the effective date of this Servicing
Agreement.
Servicing Fee for each fixed rate A and A- [*]% per annum Monthly
conventional fixed rate 1st Mortgage Loans
(including, but not limited to, FHA and VA
Mortgage Loans).
Servicing Fee for each fixed rate A and A- [*]% per annum Monthly
CRA/low-to-moderate income 1st Mortgage Loans
(including, but not limited to, FHA and VA
Mortgage Loans).
Servicing fee for each A and A- paper [*]% per annum Monthly
conventional ARM 1st Mortgage Loans
(including, but not limited to, FHA and VA
Mortgage Loans).
Servicing Fee for non-conforming less than A- To be determined. To be determined
quality Mortgage Loans and other (Not to exceed [*]% per annum.)
non-conforming Mortgage Loans.
</TABLE>
<TABLE>
<CAPTION>
II. INCREMENTAL SERVICES FEE SCHEDULE -- PORTFOLIO LOANS (INCLUDING THE PRIVATE BANK)
- ------------------------------------------------------------------------------------------------------------------------------------
DEPARTMENT DESCRIPTION OF SERVICES Unit Cost(1) or BILLING MORTGAGE
Amount/ FREQUENCY CONTACT
Percentage of
Fee
====================================================================================================================================
<S> <C> <C> <C>
REO SERVICING: Fee for managing, protecting, [*]% of On the sale date
renting and disposing of Mortgaged Property Mortgaged of the Mortgaged
which has been foreclosed, abandoned or Property Sales Property
received by deed in lieu of foreclosure or Price
otherwise placed into the possession of the
Servicer.
Fee for initiating and conducting proceedings [*]% of any Upon Servicer's
to obtain a deficiency judgment against a deficiency collection.
Mortgagor in default. balances
collected from
the Mortgagor.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) At the 3-year anniversary of this Servicing Agreement and every 3 years
afterwards, the Servicer will adjust the unit costs according to changes in the
Consumer Price
- ------------------------
* Confidential treatment requested.
<PAGE> 14
Index over the prior 3 years. Such change will be based upon the
most recently published Consumer Price Index.
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT B TO THE SERVICING AGREEMENT (CONTINUED)
II. INCREMENTAL SERVICES FEE SCHEDULE -- PORTFOLIO LOANS (INCLUDING THE PRIVATE BANK)
- ------------------------------------------------------------------------------------------------------------------------------------
DEPARTMENT DESCRIPTION OF SERVICES UNIT COST(1) OR AMT/ BILLING MORTGAGE
% OF FEE FREQUENCY CONTACT
====================================================================================================================================
<S> <C> <C>
Default Management PRESALE - LOSS MITIGATION: The Servicer will cause an $[*]/loan(2) Monthly
appraisal of the Mortgaged Property to be made if the
Servicer determines that the Mortgagor has experienced a
financial hardship beyond his/her control. If the Mortgaged
Property's value is less than the amount of the debt, a
presale may be appropriate. A servicing representative will
work with the Mortgagor's real estate agent to obtain the
best possible sales price and will request the investor's
approval of the sale. The entire process will be closely
monitored through receipt of the payoff funds. If a
reasonable purchase offer has not been made after the
Mortgagor has been in the presale program for a minimum of 3
months, the Servicer mat recommend a deed in lieu of
foreclosure.
Default Management DEED IN LIEU - LOSS MITIGATION. The Servicer may determine $[*]/loan(2) Monthly
that it is in the Mortgagee's best interests to accept a
deed in lieu of foreclosure if: (a) the Mortgagor has
experienced financial hardships beyond his/her control, and
(b) foreclosure appears inevitable, and (c) there is
little/no equity on the Mortgaged Property. A servicing
representative will ask the Servicer's foreclosure attorney
to prepare an estopple letter and a deed for the Mortgagor's
signature. The Servicer will refer the Mortgaged Property to
OREO for disposition after the deed has been executed and
recorded.
Default Management MODIFICATION-LOSS MITIGATION: The Servicer will obtain a $[*]/loan(2) Monthly
title update to locate any additional liens on the Mortgaged
Property if the Servicer determines that the Mortgagor has
experienced financial hardships beyond his/her control. The
Servicer will thoroughly review the Mortgage Loan terms to
determine if a change in the interest rate, maturity date,
principal and interest payment, or capitalization of
arrearages will be most beneficial to the Mortgagor and the
Mortgagee. The Servicer may refer the Mortgagor to the
presale program if modification is inappropriate.
Custodial Liaison Bond loan follow-up $[*]/loan(1) Monthly
Custom Report: Ad hoc reports $[*]/hour Monthly
Financial/Credit Report DEVELOPMENT(1),(3)
Acquisitions, Sales or Senior manager $[*]/hour(1) + Monthly
Special Projects out-of-pocket
expenses
Middle manager $[*]/hour(1) + Monthly
out-of-pocket
expenses
</TABLE>
(1) At the 3-year anniversary of this Servicing Agreement and every 3 years
afterwards, the Servicer will adjust the unit costs according to changes in the
Consumer Price Index over the prior 3 years. Such change will be based upon the
most recently published Consumer Price Index.
(2) Will change as standard FNMA fee changes.
(3) See EXHIBIT D for a list of standard reports.
- ------------------------
* Confidential treatment requested.
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT B TO THE SERVICING AGREEMENT (CONTINUED)
II. INCREMENTAL SERVICES FEE SCHEDULE -- PORTFOLIO LOANS (INCLUDING THE PRIVATE BANK)
- ------------------------------------------------------------------------------------------------------------------------------------
DEPARTMENT DESCRIPTION OF SERVICES UNIT COST(1) OR BILLING MORTGAGE
AMOUNT/ PERCENTAGE FREQUENCY CONTACT
OF FEE
====================================================================================================================================
<S> <C> <C> <C>
Acquisitions, Sales and/or Support exempt personnel $[*]/hour(1) + Monthly
Special Projects (continued) out-of-pocket
expenses
Support non-exempt personnel $[*]/hour(1) + Monthly
out-of-pocket
expenses
ARM note review(4) $[*]/loan(1) + Per bulk
out-of-pocket acquisition
expenses
Audit historical adjustments if errors(4) $[*]/loan(1) Per bulk
acquisition
INCOMPLETE LOAN DOCUMENTATION(5): Covers title $[*]/loan(1) Quarterly
search, document recreation on Portfolio
Mortgage Loans with missing documents and/or
missing recording information.
Document Services Paper retrieval requests-per document $[*]/ request(1) Monthly
Document Services Film retrieval request - on paper $[*]/ request(1) Monthly
Document Services Whole File Copy $[*]/loan file(1) Monthly
Document Services Rush document request - same day/next day $[*] next day(1) Monthly
$[*] same day(1)
</TABLE>
(1) At the 3-year anniversary of this Servicing Agreement and every 3 years
afterwards, the Servicer will adjust the unit costs according to changes in the
Consumer Price Index over the prior 3 years. Such change will be based upon the
most recently published Consumer Price Index.
(4) The Servicer will place all key data relating to the current status of the
ARM loan, together with the original loan information, into a worksheet. The
Servicer will obtain the key Mortgage Loan documents and compare the information
in the Mortgage Note with the information in the worksheet to verify the
accuracy of the Mortgage Loan set-up.
(5) An impasse occurs in various servicing areas when key Mortgage Loan
documents are missing from the Mortgage loan file. The Servicer's customer
service department is then unable to resolve Mortgagor disputes concerning
Mortgage Loan amortization, origination, or maturity dates, verify specific
servicing requirements set forth in the individual documents, etc. The
Servicer's special loan department is unable to complete the audit of the ARM
loan accounts because vital information cannot be verified. The Servicer's
paid-in-full department is unable to discharge liens when recording information
is unavailable or when Mortgage Loan documents are missing that create a clear
chain of title. A title search or other necessary documentation will be ordered
to recreate a loan file.
- ------------------------
* Confidential treatment requested.
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT B TO THE SERVICING AGREEMENT (CONTINUED)
II. INCREMENTAL SERVICES FEE SCHEDULE -- PORTFOLIO LOANS (INCLUDING THE PRIVATE BANK)
- ------------------------------------------------------------------------------------------------------------------------------------
DEPARTMENT DESCRIPTION OF SERVICES UNIT COST(1) BILLING MORTGAGE
OR AMOUNT/ FREQUENCY CONTACT
PERCENTAGE OF
FEE
====================================================================================================================================
<S> <C> <C> <C>
Escrow Escrow waiver fee. (Based on Mortgagor and [*]% of Monthly Collected from
Mortgagee requests.) principal Mortgagor
balance
Escrow Life of loan flood contract conversion fee. $[*]/contract(1)
(Convert flood certification to
life of loan coverage.)
Loan Modifications Principal and interest adjustment based on $[*]/adjustment(1) Collected from
principal curtailment Mortgagor
Loan Modifications Partial release Based on FNMA Collected from
guidelines/fees Mortgagor
Special Loans Track and convert maturing balloon loans (Fee Based on loan
retained by the Servicer) documentation
</TABLE>
(1) At the 3-year anniversary of this Servicing Agreement and every 3 years
afterwards, the Servicer will adjust the unit costs according to changes in the
Consumer Price Index over the prior 3 years. Such change will be based upon the
most recently published Consumer Price Index.
- ------------------------
* Confidential treatment requested.
<PAGE> 1
EXHIBIT 10.20
PMSR FLOW AGREEMENT
SELLER NAME: BARNETT BANKS, INC.
SELLER ADDRESS: 50 N. LAURA STREET, JACKSONVILLE, FLORIDA
32202-3638
TYPE OF BUSINESS ENTITY: BANK HOLDING COMPANY
DATE OF AGREEMENT: MAY 31, 1996 SELLER CONTACT PERSON: HINTON NOBLES
PHONE NO: (904) 791-7741
FAX NO: (904) 791-5448
This PMSR Flow Agreement (the "PMSR Flow Agreement") is entered into as of the
date shown above by and between the Buyer and the Seller and applies to any of
the transactions described below.
RECITALS.
1. The Seller, through its Affiliate Banks and/or other Affiliates, originates
Mortgage Loans from time to time.
2. The Seller desires to sell to the Buyer the right, title, and interest in and
to the Servicing Rights to certain Mortgage Loans on the terms and conditions
set forth below in this PMSR Flow Agreement.
3. The Buyer desires to buy from the Seller the right, title, and interest in
and to the Servicing Rights on the terms and conditions set forth below in this
PMSR Flow Agreement.
IN CONSIDERATION of the mutual promises made in this PMSR Flow Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Buyer and the Seller agree as follows:
ARTICLE 1.
DEFINITIONS.
As used in this PMSR Flow Agreement, the following capitalized terms shall have
the meanings given to them below:
1.1. "AFFILIATE" means an entity that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, another entity. For purposes of this definition, "control", "controlled
by", and "under common control with" means the direct or indirect possession of
ordinary voting power to elect a majority of the board of directors or
comparable body of an entity.
1.2. "AGENCY" means FHA, HUD, VA, a private mortgage insurance company, and/or
the Seller, as applicable.
1.3. "BORROWER" means each obligor under a Mortgage Note.
1.4. "BUSINESS DAY" means any day other than a Saturday, Sunday, federal
holiday, or any other day on which the Buyer or the Seller is not open for
business.
1.5. "BUYDOWN" means any reduction in a Borrower's monthly Mortgage Loan payment
required under a Mortgage Note or otherwise provided for in a related document.
The funds for each Buydown must be deposited into Escrow Funds and used to
supplement the Borrower's monthly Mortgage Loan payment.
1.6. "BUYER" means HomeSide Lending, Inc., a business corporation organized
under the laws of the state of Florida and with its principal place of business
at 7301 Baymeadows Way, Jacksonville, Florida 32256.
1.7. "ESCROW FUNDS" means those Mortgage Loan escrow/impound funds for taxes,
insurance, assessments, ground rents, Buydowns and any other such amounts which
were established at the Mortgage Loan closing and held by the Seller until such
funds are transferred to the Buyer on the Sale Date.
1.8. "EXCLUDED MORTGAGE LOAN" A Mortgage Loan which is: (a) delinquent by three
(3) or more monthly payments as of the Sale Date, (b) in litigation as of the
Sale Date which has a material adverse affect upon the value of the Servicing
Rights, (c) in bankruptcy as of the Sale Date, (d) in foreclosure or subject to
an assignment of deed in lieu of foreclosure as of the
<PAGE> 2
Sale Date, (e) paid in full within sixty (60) days after the Sale Date, or (f)
on a case-by-case basis, a HUD Repo or VA Vendee Mortgage Loan .
1.9. "FHA" means the Federal Housing Administration or any successor to the FHA.
1.10. "FLOOD SERVICE FEE" means a flood service fee paid by the Seller to the
Flood Service Provider or the Buyer to obtain certain flood certification and
"life of loan" tracking services for the Mortgage Loans.
1.14. "FLOOD SERVICE PROVIDER" means the company which provides a transferable
flood certification and "life of loan" tracking service for the Mortgage Loans.
The list of Flood Service Providers acceptable to the Buyer is set forth in
EXHIBIT C to this PMSR Flow Agreement. The Flood Service Provider must guaranty
the accuracy of the flood status determination and any future flood zone
changes.
1.11. "GUIDE" means: (a) the HUD 4155.1 REV-4, Mortgage Credit Analysis for
Mortgage Insurance on 1-to-4 Family Properties, HUD 4000.2 REV-2, Seller
Handbook Application Through Insurance (Single Family), HUD 4000.4 REV-1, Single
Family Direct Endorsement Program, HUD 4145.1 REV-2, Architectural Processing
and Inspections For Home Mortgage Insurance, 4150.1 REV-1 Valuation Analysis for
Home Mortgage Insurance, HUD 4060.1 REV-1, Seller Approval Handbook, (b) the VA
Lender's Handbook, (c) the requirements of any private mortgage insurer, and/or
(d) the provisions of the Servicing Agreement relating to the servicing
procedures to be followed by the Buyer.
1.12. "HUD" means the United States Department of Housing and Urban Development,
or any successor to HUD.
1.13. "MANDATORY DELIVERY" means the required delivery of Servicing Rights by
the Seller to the Buyer under the terms of this PMSR Flow Agreement. The
delivery of Servicing Rights by the Seller and the acceptance of Servicing
Rights by the Buyer are not optional unless this PMSR Flow Agreement is
terminated in the manner set forth below. The Seller's failure to sell and
deliver the Servicing Rights to the Buyer will be a breach of this PMSR Flow
Agreement. Notwithstanding the above, nothing in this PMSR Agreement shall be
deemed to limit any right which the Seller may have under the Operating
Agreement to sell Servicing Rights to third parties.
1.14. "MARKETING AGREEMENT" means the Marketing Agreement to be entered into by
and between HomeSide, Inc. and Barnett Banks, Inc. on or before the Closing Date
and which will govern the terms under which the Buyer's mortgagors may be
solicited for certain products and services.
1.15. "MORTGAGE" means a mortgage, deed of trust, or other such security
instrument which is executed by a Mortgagor pledging the Mortgaged Property as
security for repayment of a Mortgage Note.
1.16. "MORTGAGE DOCUMENTS" means all documents required by an Agency and/or the
Seller to service a Mortgage Loan.
1.17. "MORTGAGE LOAN" means a residential mortgage loan originated by the Seller
which is: (a) secured by a Mortgage, and (b) the subject of the Servicing Rights
purchased by the Buyer.
1.18. "MORTGAGE NOTE" means the written promise of a Borrower to pay a sum of
money in United States' dollars at a stated interest rate over a specified term,
and which is secured by a Mortgage.
1.19. "MORTGAGED PROPERTY" means the real property, together with the
one-to-four family dwelling and any other improvements situated on such real
property, which have been pledged by a Mortgagor under a Mortgage as collateral
to secure the obligation under a related Mortgage Note.
1.20. "MORTGAGOR" means each person who executes a Mortgage.
1.21. "OPERATING AGREEMENT" means the Operating Agreement entered into by and
between the Buyer and the Seller pursuant to which this PMSR Flow Agreement is
attached as EXHIBIT B.
1.22. "P & I" means principal and interest.
1.23. "PMSR FLOW AGREEMENT" has the meaning set forth in the recitals.
1.24. "PRIOR ORIGINATOR" means each entity which originated a Mortgage Loan
relating to SECTION 4.5 below, other than the Seller.
1.25. "PURCHASE PRICE" means the purchase price for the Servicing Rights, as
described in SECTION 4.1 and 4.5 below.
1.26. "PURCHASE PRICE PERCENTAGE" means the percentage set forth in EXHIBIT A to
this PMSR Flow Agreement.
1.27. "SALE DATE" means the date on which the Buyer pays the Purchase Price to
the Seller.
-2-
<PAGE> 3
1.28. "SELLER" means: (a) the entity defined as "Seller" above, and/or (b) any
of its Affiliate banks.
1.29. "SERVICER" means the entity which is responsible for Servicing the
Mortgage Loans.
1.30. "SERVICING" means the performance of Mortgage Loan servicing functions,
including, but not limited to, (a) collecting and disbursing of funds held in
trust to pay taxes, hazard insurance, mortgage insurance and other items as they
become due, (b) collecting and remitting principal and interest payments to
investors, and (c) resolving defaulted Mortgage Loans, in each case as set forth
in the Servicing Agreement.
1.31. "SERVICING AGREEMENT" means the Mortgage Loan Servicing Agreement entered
into by and between the Buyer and the Seller pursuant to which the Buyer agrees
to service certain mortgage loans.
1.32. "SERVICING FEE" means the fee collected by the Servicer for Servicing the
Mortgage Loans. The Servicing Fee shall be equal to the amount set forth in the
Servicing Agreement.
1.33. "SERVICING FILE" means a file containing any and all documents required by
an Agency and the Buyer to service Mortgage Loans on behalf of such Agency or
the Seller.
1.34. "SERVICING RIGHTS" means the rights to service the Mortgage Loans and
collect the Servicing Fees, late fees and certain other ancillary amounts
relating to the Mortgage Loans, including, but not limited to, amounts contained
in escrow accounts.
1.35. "T & I" means the taxes, insurance and any additional amount other than
P&I which is held in Escrow Funds.
1.36. "TRETS" means Transamerica Real Estate Tax Service.
1.37. "TRETS FEE" means a tax service fee paid by the Seller to TRETS to obtain
tax services from TRETS.
1.38. "VA" means the Department of Veterans Affairs or any successor to VA.
ARTICLE 2.
THE BUYER'S AND SELLER'S OBLIGATIONS BEFORE EACH SALE DATE.
The Buyer and the Seller shall comply with the following terms and conditions
before each Sale Date.
2.1. CONSISTENT WITH THE SERVICING AGREEMENT.
All Mortgage Loans delivered to the Buyer will be consistent with the criteria
set forth in the Servicing Agreement and the Operating Agreement.
2.2. AGENCY NOTIFICATION OF TRANSFER.
The Seller will, at its sole cost, notify the applicable Agency of the transfer
of the Servicing Rights to the Buyer within the time period required by the
applicable Agency.
2.3. BORROWER COMMUNICATIONS.
The Seller will give written notice to each Borrower of the transfer of the
Servicing Rights to the Buyer in compliance with applicable law, including, but
not limited to, the Real Estate Settlement Procedures Act and its implementing
Regulation X.
2.4. FLOOD SERVICE COMMUNICATIONS WITH FLOOD SERVICE PROVIDER.
The Seller will give written notice to each Flood Service Provider of the
transfer of Servicing Rights to the Buyer. Such notice may be satisfied by a
"blanket" notification to each such Flood Service Provider. The Seller will
provide any information required by such Flood Service Provider to effect the
creation and/or transfer of "life of loan" tracking service to the Buyer.
2.5. TAX SERVICE COMMUNICATIONS WITH TRETS.
TRETS will provide all tax related services for the Mortgage Loans.
2.6. INSURANCE COMMUNICATIONS.
2.6.1. COMMERCIAL INSURANCE CARRIERS. The Seller will give written notice to
each insurance carrier of the transfer of Servicing Rights to the Buyer. Such
notice will include the following requests:
(a) Name the Buyer and its successors and assigns as an insured in the lender's
policy of title insurance for the Mortgage Loan (unless the lender's policy of
title
-3-
<PAGE> 4
insurance for the Mortgage Loan defines "insured" to include any owner of
indebtedness secured by the insured Mortgage),
(b) Name the Buyer and its successors and assigns as an insured, and include a
lender's loss payable endorsement, in the fire and extended coverage policy for
the Mortgaged Property,
(c) Name the Buyer and its successors and assigns as an insured, and include a
lender's loss payable endorsement, in the flood insurance policy and in the
catastrophe insurance policy, if any, for the Mortgaged Property, and
(d) Name the Buyer and its successors and assigns as an insured, and include a
lender's loss payable endorsement, in the private mortgage insurance policy for
the Mortgage Loan.
The Buyer's Mortgage Loan numbers must be included as part of the information
provided by the Seller to the insurance carrier under this SECTION 2.6.1.
2.6.2. FHA INSURANCE. The Seller will give notice to FHA of the transfer of the
Servicing Rights to the Buyer in accordance with FHA guidelines.
2.7. NO OBLIGATION TO BUY.
Nothing in this PMSR Flow Agreement will be construed as obligating the Buyer to
purchase any Servicing Rights if the Buyer, in good faith, determines that it
is unable to service the related Mortgage Loan under the Servicing Agreement.
The Seller shall consult with the Buyer before offering new Mortgage loan
products to ensure that the Seller is able to service such Mortgage Loans. In
such event, the Seller may sell such Servicing Rights to a Third Party.
2.8. SOLICITATION FOR REFINANCES.
The Seller's ability to solicit a Borrower for a refinancing is described in the
Marketing Agreement.
2.9. ACCESS TO INFORMATION.
The Seller will give to the Buyer and its counsel, accountants, and other
representatives reasonable access, upon reasonable prior notice, during normal
business hours throughout the period before each Sale Date, to all of Seller's
files, books and records relating to the Mortgage Loans, Servicing Rights and/or
Escrow Funds.
ARTICLE 3.
THE BUYER'S AND SELLER'S OBLIGATIONS ON AND AFTER THE SALE DATE.
3.1. SELLER TRANSFERS SERVICING RIGHTS.
The Seller will transfer the applicable Servicing Rights to the Buyer on each
Sale Date.
3.2. NO ASSIGNMENT OF SERVICING RIGHTS.
The Seller shall not be required to prepare and record assignments of lien.
However, the Seller shall implement policies and procedures, and provide the
Buyer with powers of attorney necessary to assist the Buyer in properly
servicing the Mortgage Loans.
3.3. TRETS FEES.
For each Mortgage Loan, the Seller will pay any and all TRETS Fees, as
negotiated by the Buyer with TRETS, for the "life of loan" transferable
contracts. The Buyer will give the Seller written notice of any change to such
TRETS Fees no later than sixty (60) days prior to the effective date of such
change.
3.4. FLOOD CERTIFICATION FEES
For each Mortgage Loan, the Seller will transfer and assign a "life of loan"
transferable flood tracking service contract to the Buyer.
3.5. MORTGAGE PAYMENTS RECEIVED AFTER SALE DATE.
With respect to Mortgage Loan payments accepted by the Seller at an Affiliate
branch bank, the Seller shall ensure that each such payment is promptly
delivered to the Buyer. If any such Affiliate branch bank misdirects such a
payment, the Seller shall make the Buyer whole in the amount of any such
misdirected payment. If the Buyer receives such misdirected payment, the Buyer
will return such amount to the Seller.
3.6. SUPPLEMENTARY INFORMATION.
The Seller will give the Buyer any and all information which is reasonably
necessary for the Buyer to Service the Mortgage Loans, and which is reasonably
available to the Seller. The Seller shall provide such information to the Buyer
no later than ten (10) Business Days after the Seller receives the Buyer's
request for such information.
-4-
<PAGE> 5
ARTICLE 4.
THE PURCHASE PRICE.
4.1. CALCULATING THE PURCHASE PRICE.
Except as described in SECTION 4.5 below, the Buyer will pay the Purchase Price
to the Seller for the Servicing Rights in an amount equal to:
(a) the Purchase Price Percentage shown in EXHIBIT A to this PMSR Flow
Agreement, as amended from time to time by the Buyer upon receipt of a
revaluation by a third party mutually acceptable to the Buyer and the Seller,
(b) multiplied by the outstanding principal balance of the applicable Mortgage
Loans as of the Sale Date, and
(c) adjusted in the manner set forth in EXHIBIT A to this PMSR Flow Agreement,
as amended from time to time by the Buyer upon receipt of a revaluation by a
third party mutually acceptable to the Buyer and the Seller.
If the Buyer uses the services of a third party other than BayView Financial
Services for such revaluation, the Seller and the Buyer shall share the costs
of such revaluation equally.
4.2. WHEN THE PURCHASE PRICE WILL BE PAID TO THE SELLER.
The Buyer will pay the Purchase Price to the Seller on the applicable Sale Date,
which shall occur monthly. The Buyer shall work with the Seller to change the
payment process and increase the frequency of Sale Dates. Upon completion of
such change to the payment process, it is the parties' intent that a Sale Date
shall occur no less frequently than once each week.
4.3. ADJUSTMENTS FOR MORTGAGE LOAN PAYOFFS.
If a Mortgage Loan, with the exception of an Excluded Mortgage Loan, is paid off
within sixty (60) days after the Sale Date, the seller will reimburse the
Purchase Price to the Seller.
4.4. CORRECTIONS.
If, within one hundred and eighty (180) days after the Sale Date: (i) the
principal balance of any Mortgage Loan used in computing the amount of the
Purchase Price were found to be incorrect, or (ii) any item described in EXHIBIT
A or any other item which has a material affect upon the Purchase Price is found
to be incorrect, the Purchase Price will be adjusted promptly, and adjustments
will be made to the appropriate party.
4.5. MORTGAGE LOANS REPURCHASED FROM INVESTORS.
The parties acknowledge that, from time to time, the Seller may repurchase
certain mortgage loans from investors and hold such mortgage loans in the
Seller's portfolio. The Seller may sell the related Servicing Rights to the
Buyer for a Purchase Price to be determined on a case-by-case basis
ARTICLE 5.
REIMBURSEMENT FOR DELINQUENT MORTGAGE LOANS.
5.1 REASONS WHY.
The Seller will reimburse the Purchase Price to the Buyer if a Mortgage Loan
becomes sixty (60) days or more delinquent during the first six (6) months
following the first payment due to the Buyer after the related Sale Date and the
Mortgage Loan subsequently goes into foreclosure within twelve (12) months
following the first payment due to the Buyer.
5.2. REIMBURSEMENT AMOUNT.
If the Seller reimburses the Purchase Price to the Buyer, the Seller will pay to
the Buyer an amount equal to:
(a) the then current unpaid principal balance of the Mortgage Loan,
(b) multiplied by the Purchase Price Percentage applicable to the Servicing
Rights at the time the Buyer purchased such Servicing Rights.
5.3. TIMING FOR REIMBURSEMENT.
The Seller will complete each such reimbursement transaction no later than ten
(10) Business Days after the Seller has received notice of such reimbursement
requirement from the Buyer.
-5-
<PAGE> 6
PSMR Agreement
ARTICLE 6.
SELLER'S REPRESENTATIONS AND WARRANTIES RELATING TO THE MORTGAGE LOANS.
The Seller represents and warrants to the Buyer with respect to each Mortgage
Loan that, as of the Sale Date:
6.1. NOTE AND MORTGAGE ARE VALID OBLIGATIONS OF THE OBLIGORS.
The Mortgage Note and the related Mortgage are genuine and each is the legal,
valid, and binding obligation of the related Borrower and Mortgagor, enforceable
in accordance with their terms, except as such enforceability may be limited by
(a) applicable bankruptcy, reorganization, insolvency, moratorium and other laws
affecting creditors' rights or debtors' obligations from time to time in effect,
and (b) the availability of the remedy of specific performance or injunctive
relief or any other equitable remedy.
All parties to the Mortgage Note and the Mortgage had legal capacity to execute
the Mortgage Note and the Mortgage, and each Mortgage Note and Mortgage have
been duly and properly executed by such parties.
6.2. LIENS FREE OF ENCUMBRANCE.
The Mortgage is a valid and existing lien on the Mortgaged Property described in
the Mortgage, and the Mortgaged Property is free and clear of all encumbrances
and liens which have or will have a material adverse affect on the value of the
Servicing Rights.
6.3. LOANS SATISFY THE GUIDE.
Each Mortgage Loan satisfies the requirements and terms set forth in the
applicable Guide in effect at the time the Servicing Rights are delivered to the
Buyer. There is no circumstance or condition relating to a Mortgage Loan, the
Mortgaged Property, the Mortgage Documents, the Borrower or the Borrower's
credit standing that can reasonably be expected to cause an Agency to regard a
Mortgage Loan as not eligible for insurance coverage or guaranty, as applicable.
6.4. NO PERSON OR MORTGAGE RELEASED.
No party to the Mortgage Note or Mortgage has been released in whole or in part
from the Mortgage Note or the Mortgage, and no part of the Mortgaged Property
has been released from the Mortgage.
6.5. NO TAX LIENS.
There was no delinquent tax or delinquent assessment lien against the Mortgaged
Property at the time the related Mortgage Loan was closed or on the Sale Date.
If the Seller receives knowledge of any such delinquency, the Seller must notify
the Buyer within two (2) Business Days after obtaining such knowledge and cure
such event within thirty (30) days after such notice.
6.6. SELLER HAS PAID ALL TAXES AND ASSESSMENTS.
The Seller has caused the settlement agent to pay all taxes, governmental
assessments, all hazard insurance premiums, flood insurance premiums, mortgage
insurance premiums, leasehold payments or ground rents which are due and payable
as of the closing date.
6.7. NO DEFENSE TO PAYMENT.
The Mortgage Loan 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 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, or subject it 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.
6.8. LOANS COMPLY WITH LAW.
Each Mortgage Loan application was taken and processed, and each Mortgage Loan
was made in compliance in all material respects with all applicable local, state
and federal laws, regulations, rules and orders, including without limitation;
usury, the Equal Credit Opportunity Act and its implementing Regulation B, the
Real Estate Settlement Procedures Act and its implementing Regulation X, the
Financial Institutions Reform Recovery And Enforcement Act and its implementing
regulations, Federal Deposit Insurance Corporation Improvement Act, the
Truth-In-Lending Act and its implementing Regulation Z, the Fair Credit
Reporting Act and any applicable state credit reporting laws, the Fair Debt
Collection Practices Act, the Fair Housing Act, and Fair Lending Laws in all
material respects, and consummation of the transactions contemplated
QUARTERLY BULK PURCHASE
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PMSR Agreements
hereby, by the Seller will not involve the violation in any material respect of
any such laws.
6.9. ADEQUATE REMEDIES OF HOLDER.
Each Mortgage contains customary and enforceable provisions which give the
holder of the Mortgage adequate rights and remedies to realize against the
Mortgaged Property and to benefit from its security, including, but not limited
to: (a) in the case of a Mortgage designated as a Deed of Trust, by trustee's
sale; and (b) otherwise by foreclosure subject, in each case, to any limitations
arising from any bankruptcy, insolvency or other similar laws for the benefit of
debtors.
6.10. NO CONDEMNATION PROCEEDINGS.
There is no proceeding pending for the total or partial condemnation of the
Mortgaged Property and such 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.
6.11. PROCEEDS FULLY DISBURSED.
Except for Escrow Funds retained for completion of Mortgaged Property
improvements, the proceeds of the Mortgage Loan have been fully disbursed, there
is no requirement for future advances thereunder and any and all requirements as
to completion of any on-site or off-site improvements and as to disbursements of
any funds therefore have been complied with. All costs, fees and expenses
incurred in making, closing or recording the Mortgage Loans has been paid by the
Seller or a Prior Originator.
6.12. ORIGINATION PRACTICES.
The origination practices used by the Seller or a Prior Originator for each
Mortgage Loan have been in all respects legal, proper, prudent, customary in the
mortgage servicing business, and in accordance with the applicable Agency's
Guide. There are no deficiencies in any Escrow Funds and none of the Escrow
Funds have been capitalized under any Mortgage or the related Mortgage Note.
6.13. HAZARD INSURANCE.
There is in force for each Mortgaged Property a hazard insurance policy which:
(a) is acceptable to the applicable Agency and reasonably acceptable to the
Buyer, (b) contains a standard mortgagee clause, (c) insures against loss or
damage by fire, all other hazards set forth in the standard extended coverage
form of endorsement, and any other insurable risks against hazards required by
the applicable Agency, (d) has been issued in an amount equal to at least the
lesser of the outstanding principal balance of the Mortgage Loan or the full
insurable value of the improvements to the Mortgaged Property, and (e) if
required by the Flood Disaster Protection Act of 1973 and the National Flood
Insurance Reform Act of 1994, a flood insurance policy in an amount representing
coverage at least equal to the lesser of the outstanding principal balance of
the Mortgage Loan or the maximum amount of insurance which is available under
the Flood Disaster Protection Act of 1973 and the National Flood Insurance
Reform Act of 1994. The improvements to the Mortgaged Property have not been
affected in any substantial manner or suffered any material loss as a result of
any fire, explosion, accident, strike, riot, war or act of God or the public
enemy as of the Transfer Date, except as disclosed by the Seller to the Buyer in
accordance with EXHIBIT B to this PMSR Flow Agreement. All such insurance
policies remain in full force and effect.
6.14. SURVEYS AND FLOOD INSURANCE.
A survey, where required, has been made of the Mortgaged Property, and if in a
flood zone A or V in a FEMA flood map area in a participating community, flood
insurance has been provided. All of the improvements which were included for the
purpose of determining the appraised value of the Mortgaged Property lie wholly
within the boundaries and building restriction lines of such property, and no
improvements on adjoining properties encroach upon the Mortgaged Property unless
covered by title insurance and/or waivers.
6.15. PMI.
All Mortgage Loans with Escrow Funds relating to private mortgage insurance are
evidenced by a private mortgage insurance policy. With respect to each such
policy: (a) all provisions of such private mortgage insurance policy have been
and are being complied with, (b) such policy is in full force and effect, and
(c) all premiums due under such policy have been paid by the Seller. Any
Mortgage Loan subject to any such private mortgage insurance policy obligates
the Borrower to maintain such private mortgage insurance policy and pay all such
premiums and charges in
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PMSR Agreements
connection therewith. Each private mortgage insurance company will be reasonably
acceptable to the Buyer.
6.16. FHA INSURANCE AND VA GUARANTY.
Each Mortgage Loan to be insured by the FHA is eligible for FHA insurance, and
the FHA insurance premiums which are due and payable for each such Mortgage Loan
have been paid by the Seller. Each Mortgage Loan to be guaranteed by the VA is
eligible for a VA guaranty.
6.17. MORTGAGED PROPERTY LOCATED IN THE U.S.
The Mortgaged Property is located in the continental United States or the State
of Hawaii, and all such Mortgage Loans consist of a detached one-to-four family
dwelling, a townhouse, or an individual condominium unit in a development or an
individual unit in a planned unit development.
6.18. NO SUPERFUND SITE.
The Mortgaged Property is not located on a superfund site.
6.19. DOCUMENTS COMPLY WITH GUIDE.
The Mortgage Documents satisfy each of the requirements of the applicable Guide,
and the Mortgage Documents have been duly executed and are in a form acceptable
to the applicable Agency.
Each Mortgage Note, Mortgage and appraisal are on forms acceptable to the
applicable Agency, and the Mortgage Loan was originated, serviced, and
delivered, as applicable, in accordance with the applicable Guide.
6.20. SERVICING FILES.
All documents which are required to be in the Servicing File have been provided
to the Buyer by the Seller in accordance with the applicable Agency's Guide.
6.21. MORTGAGED PROPERTY TAX IDENTIFICATION.
Each Mortgaged Property tax identifications and Mortgaged Property description
is, in all material respects, accurate, complete and legally sufficient. Tax
segregation, where required, has been completed.
6.22. ESCROW FUNDS.
There are Escrow Funds for each Mortgage Loan which is required by an applicable
Agency to have Escrow Funds. All Escrow Funds (whether voluntary or required by
an Agency or the Seller, have been created and maintained in compliance, in all
material respects, with: (a) the applicable Guide, (b) the applicable Agency's
requirements, (c) the Mortgage Documents, and (d) applicable laws, rules,
regulations and orders. Each item contained within the Escrow Funds contains
funds in the proper amount.
6.23. ESCROW ANALYSIS.
The Seller has complied with applicable laws, rules, regulations and orders,
including, but not limited to, the Real Estate Settlement Procedures Act and its
implementing Regulation X with respect to the establishment of Escrow Funds.
6.24. PLEDGED ACCOUNTS.
There are no pledged accounts relating to a Mortgage Loan which must be
maintained or administered by the Buyer.
6.25. FLOOD CERTIFICATION AND TRACKING SERVICES.
Each Mortgage Loan has in full force and effect a transferable flood insurance
certification and a "life of loan" tracking service contract, which contract is
with a Flood Servicer Provider.
6.26. SELLER'S STATEMENTS ARE TRUE AND ACCURATE.
No representation, warranty or written statement made by the Seller in this PMSR
Flow Agreement, or in any schedule, written statement or certificate given to
the Buyer in connection with the transactions contemplated by this PMSR Flow
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements in
this PMSR Flow Agreement or in any of such statements and certificates not
misleading.
6.27. DISCLOSURE OF MORTGAGE LOAN ACCOUNT INFORMATION.
Except as otherwise indicated in writing to the Buyer prior to the date of this
PMSR Flow Agreement, the Seller has not disclosed Mortgage Loan information,
including, but not limited to, the names and addresses of the Mortgagors or the
Borrowers, to any person or entity other than an Affiliate unless such
disclosure was necessary to comply with an Agency Agreement
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PMSR Agreement
or with applicable state or federal law, rule, regulation, or order.
Notwithstanding the above, any disclosure of Mortgage Loan information to credit
bureaus is governed by contracts that prohibit any person from directly or
indirectly using such information for solicitation of the Mortgagors or
Borrowers for financial, insurance and/or related services or products. To the
extent that there are any inconsistencies between the provisions of this SECTION
6.26 and the provisions of the Marketing Agreement, the provisions of the
Marketing Agreement shall control during the term of the Marketing Agreement.
After the term of the Marketing Agreement, the Seller will not directly or
indirectly solicit a refinance of any Mortgage Loan, nor will the Seller
directly or indirectly assist or be employed by or participate with any other
party in soliciting a refinance of a Mortgage Loan.
6.28. SELLER'S BOOKS AND RECORDS.
The Seller's books, records and accounts relating to the Mortgage Loans comply
in all material respects with all applicable Agency requirements and the Guides.
6.29. SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940.
Each Mortgage Loan which is the subject of a Borrower's request for an
adjustment under the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, is separately identified by the Seller in writing.
6.30. FRAUD.
No Mortgage Loan has been originated through any type of fraud or deceit.
6.31. SOCIAL SECURITY NUMBERS.
The Seller has complied with all Internal Revenue Service requirements relating
to or arising out of the procurement of a Social Security number.
6.32. WARRANTIES SURVIVE.
The Seller agrees that all warranties and obligations under this PMSR Flow
Agreement are perpetual and will survive the termination of this PMSR Flow
Agreement.
ARTICLE 7.
SELLER'S REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO SERVICING RIGHTS.
The Seller represents and warrants to the Buyer with respect to the Servicing
Rights that, as of each Sale Date:
7.1. GOOD AND MARKETABLE TITLE.
The Seller has good and marketable title to the Servicing Rights, and has the
complete right and power to transfer the Servicing Rights to the Buyer, free and
clear of all liens, claims, charges, defenses, offsets, and encumbrances,
including, but not limited to, those of the Seller arising by, through, or under
the Seller. The Seller is not obligated either contractually or otherwise to
sell the Servicing Rights to any other person or entity.
7.2. NO ENCUMBRANCES.
Each transfer of the Servicing Rights by the Seller to the Buyer is free and
clear of any and all adverse claims and encumbrances, and there is no existing
assignment, sale or hypothecation thereof, except as contemplated by this PMSR
Flow Agreement.
7.3. ALL REPORTS FILED.
The Seller has filed all reports required by all government agencies with
jurisdiction over the Servicing Rights.
7.4. COMPLIANCE WITH CONTRACTS AND AGENCY AGREEMENTS.
The Seller has complied in all material respects with all of the terms and
obligations of all contracts to which the Seller is a party, and with all
applicable federal, state and local laws, regulations, rules and orders, in each
case, which might materially and adversely affect any of the Servicing Rights
and/or the Mortgage Loans. No event has occurred and is continuing which under
the provisions of any Guide or any other document or agreement, but for the
passage of time or the giving of notice, or both, would constitute an event of
default by the Seller thereunder. The laws and regulations with which the Seller
has complied in all material respects include, but are not limited to, all
applicable Guides and Agency requirements. The Seller has not done or failed to
do any act or thing which could reasonably be expected to materially and
adversely affect the Servicing Rights.
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PMSR Agreement
7.5. LITIGATION.
There is no litigation, proceeding or governmental investigation pending or
threatened, and the Seller does not know of any facts which could reasonably be
expected to result in any such litigation, proceeding or governmental
investigation, or any order, injunction or decree outstanding which does or
could reasonably be expected to materially and adversely affect any of the
Servicing Rights.
7.6. COMPLIANCE WITH LAW AND AGENCY REQUIREMENTS.
The Seller has not violated any: (a) applicable law, regulation, rule or order,
(b) Guide, (c) Agency requirement, or (c) any other requirement of any
governmental body which may materially affect any of the Servicing Rights.
7.7. WARRANTIES SURVIVE.
The Seller agrees that all warranties and obligations under this PMSR Flow
Agreement are perpetual and will survive the termination of this PMSR Flow
Agreement.
ARTICLE 8.
MUTUAL REPRESENTATIONS AND WARRANTIES.
The Seller represents and warrants to the Buyer with respect to the following
statements relating to the Seller, and the Buyer represents and warrants to the
Seller with respect to the following statements relating to the Buyer, that as
of the date of this PMSR Flow Agreement:
8.1. PARTY IS DULY ORGANIZED.
The Seller is a duly organized and validly existing bank holding company. The
Seller's Affiliate banks are each duly organized and validly existing national
banking associations organized under the laws of the United States. The Buyer is
a duly organized and validly existing business corporation. Each is in good
standing under the laws of its jurisdiction of organization, and has the
requisite power and authority to enter into this PMSR Flow Agreement and any
other agreements to which is a party and that are contemplated by this PMSR Flow
Agreement.
8.2. AGREEMENT IS DULY AUTHORIZED.
It has all requisite power, authority and capacity to enter into this PMSR Flow
Agreement and to perform the obligations required of it under this PMSR Flow
Agreement. The execution and delivery of this PMSR Flow Agreement by it and the
consummation of the transactions contemplated by this PMSR Flow Agreement by it,
have been duly and validly authorized by all necessary action. This PMSR Flow
Agreement constitutes its valid and legally binding agreement, enforceable in
accordance with its terms, except as it may be limited by bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights and by general equity principles, and no offset, counterclaim or defense
exists to the full performance of this PMSR Flow Agreement by such party.
8.3. AGREEMENT DOES NOT VIOLATE ANY OTHER OBLIGATION.
Insofar as its capacity to carry out any obligation under this PMSR Flow
Agreement is concerned, it is not in violation in any material respect of any
provision of any charter, certificate of incorporation, by-law, mortgage,
indenture, indebtedness, agreement, instrument, judgment, decree, order,
statute, rule or regulation, and there is no such provision that materially and
adversely affects its capacity to carry out such obligations. Its execution of,
and performance pursuant to, this PMSR Flow Agreement will not result in such
violation.
8.4. PARTY IS DULY LICENSED.
It holds the required licenses, is in good standing with applicable states and
Agencies and is in compliance with all applicable state and federal laws
governing the transfer and Servicing of Mortgage Loans transferred under this
PMSR Flow Agreement.
8.5. WARRANTIES SURVIVE.
It agrees that all warranties and obligations under this PMSR Flow Agreement are
perpetual and will survive the termination of this PMSR Flow Agreement.
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PMSR Agreement
ARTICLE 9.
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS.
The Buyer's obligations under this PMSR Flow Agreement are subject to the
satisfaction of each of the following conditions:
9.1. INSPECTION AND VERIFICATION.
Once each year, or twice each year "for cause", the Buyer may, upon reasonable
prior notice during normal business hours inspect and review the Seller's books,
records, accounts, quality control policies and procedures, and underwriting
policies and procedures relating to the Mortgage Loans, but in no event more
than two (2) such reviews each year. Such books, records, accounts, quality
control policies and procedures and underwriting policies will be reasonably
satisfactory to the Buyer.
9.2. CORRECT REPRESENTATIONS AND WARRANTIES .
Each of the Seller's representations and warranties under this PMSR Flow
Agreement are true and correct in all material respects and remain true and
correct in all material respects as of each Sale Date.
9.3. SELLER COMPLIES WITH EACH OBLIGATION.
As of each Sale Date, the Seller has complied in all material respects with each
term, covenant, condition of this PMSR Flow Agreement applicable to the Seller
as of such date.
9.4. REGULATORY APPROVALS.
The Seller will, at its sole expense, obtain any required approval of each
Agency to transfer the Servicing Rights from the Seller to the Buyer under this
PMSR Flow Agreement.
9.5. NO ACTIONS.
Through and including the Sale Date, there will not have been commenced or
threatened any action, suit, or proceeding against the Seller, which could
reasonably be expected to materially and adversely affect the Servicing Rights,
the Mortgage Loans, the Escrow Funds, and/or the consummation of the
transactions contemplated hereby.
ARTICLE 10.
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS.
The Seller's obligations under this PMSR Flow Agreement are subject to the
satisfaction of each of the following conditions:
10.1. CORRECT REPRESENTATIONS AND WARRANTIES.
Each of the Buyer's representations and warranties under this PMSR Flow
Agreement are true and correct in all material respects and remain true and
correct in all material respects as of each Sale Date and each Sale Date.
10.2. BUYER COMPLIES WITH EACH OBLIGATION.
As of each Sale Date, the Buyer has complied in all material respects with each
term, covenant, condition of this PMSR Flow Agreement applicable to the Buyer as
of such date.
10.3. NO MATERIAL ADVERSE CHANGE.
There will not have been any material adverse change in the Buyer's relationship
with, or authority from, an Agency.
10.4. NO ACTIONS.
Through and including the Sale Date, there will not have been commenced or
threatened any action, suit, or proceeding against the Buyer, which could
reasonably be expected to materially and adversely affect the Buyer's ability to
consummate the transactions contemplated hereby.
10.5. SERVICING AGREEMENT.
The Servicing Agreement be in full force and effect and the representations and
warranties of the Buyer in the Servicing Agreement shall be true and correct in
all material respects.
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PMSR Agreement
ARTICLE 11.
MISCELLANEOUS.
11.1. TERM OF THIS PMSR FLOW AGREEMENT.
This PMSR Flow Agreement will have the same term as set forth in SECTION 5.6 of
the Operating Agreement, which SECTION 5.6 is incorporated herein by reference.
11.2. TERMINATION OF THIS PMSR FLOW AGREEMENT.
This Agreement shall be terminated only in accordance with the provisions of
SECTION 5.7 of the Operating Agreement.
11.3. FURTHER ASSURANCES.
The Buyer and the Seller will from time to time execute and promptly deliver to
each other such documents, assignments, applications or other instruments
necessary or reasonably proper or convenient to effectuate the assignments,
transfers and other transactions contemplated by this PMSR Flow Agreement.
11.4. INDEMNIFICATION.
The Seller shall indemnify the Buyer and shall hold the Buyer harmless from and
against any and all losses, liabilities, penalties, damages, expenses or other
harm or injury which the Buyer may incur or suffer or which may be asserted by
any person or entity, including reasonable attorneys' fees and court costs,
arising out of any action at any time taken or omitted to be taken (a) by the
Seller under or in connection with this PMSR Flow Agreement and/or any
applicable Exhibit to the Agreement, including, without limitation, any failure
by the Seller to observe and perform properly each and every covenant of this
PMSR Flow Agreement and/or any applicable Exhibit to the Agreement, or (b) by
the Buyer in reliance upon information provided to the Buyer by the Seller.
Without limiting the above, the Seller shall indemnify the Buyer and shall hold
the Buyer harmless from and against any and all losses, liabilities, penalties,
damages, expenses or other harm or injury which the Buyer may incur or suffer or
which may be asserted by any person or entity, including reasonable attorneys'
fees and court costs, arising out of any Mortgage Loan or the Servicing Rights
relating to such Mortgage Loan which result from:
(a) Any misrepresentation made by the Seller in this PMSR Flow Agreement
(b) Any breach by the Seller or Prior Originator of any of the Seller's
representations or warranties under this PMSR Flow Agreement,
(c) Any act, or failure to act or perform any term, covenant, condition or
obligation of the Seller under this PMSR Flow Agreement,
(d) Any defect in any Mortgage Loan existing as of the Sale Date,
(e) Errors in originating, closing, any Mortgage Loan prior to the Sale Date,
including any improper act or failure to act when required to do so,
(f) The Seller's failure to: (i) allow the Buyer to inspect the Seller's
records, (ii) comply with the terms and conditions of this PMSR Flow Agreement,
(iii) comply with the Buyer's reasonable instructions relating to the transfer
of the Servicing Rights for the Mortgage Loans, (iv) give the Buyer accurate
information relating to the Mortgage Loans when reasonably requested by the
Buyer,
(g) Any Agency demand for indemnification relating to an error or omission of
the Seller or Prior Originator,
(h) Any and all losses incurred as a result of the forfeiture of any Mortgaged
Property to the United States under 21 U.S.C. Section 881 or to any other
governmental entity, including, but not limited to, any state or municipality
under any comparable state or local law by reason that: (i) the Mortgaged
Property is proceeds traceable to an exchange for a controlled substance, (ii)
the Mortgage Property was purchased with proceeds traceable to an exchange for a
controlled substance, (iii) the Mortgaged Property was used and was intended to
be used to facilitate the commission of a violation of 21 U.S.C. Section 841,
and/or (iv) the Mortgaged Property was used in a manner violating a comparable
state or local law, such that the Buyer cannot prevail in asserting an "innocent
owner" defense due to the acts or omissions of the Seller or any Prior
Originator of a Mortgage Loan,
(i) Any pattern or practice under which the Seller makes representations or
promises to Mortgagors or Borrowers that Mortgage Loans could be refinanced at
any time after the closing with any term or condition which is more favorable
than the terms and conditions
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PMSR Agreement
offered by the Buyer to members of the general public, and/or
(j) Any and all losses incurred as a result of a VA no bid or buydown in lieu of
such no-bid for Mortgage Loans on which foreclosure action is commenced.
The Buyer shall indemnify the Seller and shall hold the Seller harmless from and
against any and all losses, liabilities, penalties, damages, expenses or other
harm or injury which the Seller may incur or suffer or which may be asserted by
any person or entity, including reasonable attorneys' fees and court costs,
arising out of any action at any time taken or omitted to be taken (a) by the
Buyer under or in connection with this PMSR Flow Agreement and/or any applicable
Exhibit to the Agreement, including, without limitation, any failure by the
Buyer to observe and perform properly each and every covenant of this PMSR Flow
Agreement and/or any applicable Exhibit to the Agreement, or (b) by the Seller
in reliance upon information provided to the Seller by the Buyer. Without
limiting the above, the Buyer shall indemnify the Seller and shall hold the
Seller harmless from and against any and all losses, liabilities, penalties,
damages, expenses or other harm or injury which the Seller may incur or suffer
or which may be asserted by any person or entity, including reasonable
attorneys' fees and court costs, arising out of any Mortgage Loan or the
Servicing Rights relating to such Mortgage Loan which result from:
(a) Any misrepresentation made by the Buyer in this PMSR Flow Agreement,
(b) Any breach by the Buyer of any of the Buyer's representations or warranties
under this PMSR Flow Agreement,
(c) Any act, or failure to act or perform any term, covenant, condition or
obligation of the Buyer under this PMSR Flow Agreement,
11.5. POWER OF ATTORNEY.
The Seller irrevocably constitutes and appoints the Buyer and its duly
authorized officers as the Seller's agent and attorney-in-fact coupled with an
interest, to endorse checks and other instruments of payment with respect to the
Mortgage Loans.
11.6. NOTICES.
All notices and other communications required or permitted to be given under
this Agreement shall be in writing and shall be deemed given if delivered
personally, transmitted by facsimile (and telephonically confirmed), mailed by
registered or certified mail with postage prepaid and return receipt requested,
or sent by commercial overnight courier, courier fees prepaid, to the parties at
the following addresses:
If to Buyer, to:
Debra F. Watkins
Senior Vice President
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
With a copy to:
Robert J. Jacobs
General Counsel
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
If to Seller to:
Hinton Nobles
Barnett Banks, Inc.
50 N. Laura Street
Jacksonville, Florida 32202-3638
With a copy to:
Karen Lugar
Senior Counsel
Barnett Banks, Inc.
9000 Southside Boulevard, Building 700
Jacksonville, Florida 32256
or to such other address as the Buyer or the Seller will have specified in
writing to the other.
11.7. EXHIBITS PART OF THIS PMSR FLOW AGREEMENT.
The Exhibits are incorporated by reference into this PMSR Flow Agreement, are
made a part of this PMSR Flow Agreement, and will be binding on the Buyer and
the Seller. The Exhibits to this PMSR Flow Agreement may not be amended or
supplemented by the Buyer or the Seller without the prior written agreement of
the other party.
11.8. ATTORNEYS' FEES AND COSTS.
If it is determined in a judicial proceeding that either party has failed under
any provision of this PMSR Flow Agreement, and if either party will employ
attorneys or incur other expenses for the enforcement, performance, or
observance of the terms of this PMSR Flow Agreement, then said party, to the
extent permitted by law, will be reimbursed by the
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PMSR Agreement
losing party, for reasonable attorneys' fees and other out-of-pocket expenses.
11.10. BROKER'S FEE.
Each of the Buyer and the Seller represents and warrants to each other that it :
(a) has made no agreement to pay any agent, finder, or broker or any other
representative, any fee or commission in the nature of a finder's or
originator's fee arising out of or in connection with the subject matter of this
PMSR Flow Agreement, except as they have otherwise disclosed in writing, and (b)
is liable for any and all such fees and commissions.
11.11. ASSIGNMENT AND DELEGATION.
No party may assign this PMSR Flow Agreement or delegate any of its functions
hereunder to any other party without the prior written consent of Buyer or the
respective Seller; provided, however, that either party may assign and/or
delegate, in whole or in part, any of its rights under this PMSR Flow Agreement
to any of its affiliates or subsidiaries without the prior written consent of
the Buyer or the respective Seller.
11.12. AMENDMENT.
No amendment or modification to this PMSR Flow Agreement will be valid unless
executed in writing by the Buyer and the Seller.
11.13. WAIVER.
No waiver of any right or obligation under this PMSR Flow Agreement by any party
on any occasion will be deemed to operate as a waiver on any subsequent
occasion.
11.14. PROVISIONS SEVERABLE.
If any provision of this PMSR Flow Agreement will be held to be void or
unenforceable by any court of competent jurisdiction or any governmental
regulatory agency, such provision will be considered by all parties to be
severed from this PMSR Flow Agreement. All remaining provisions of this PMSR
Flow Agreement will be considered by the parties to remain in full force and
effect.
11.15. GOVERNING LAW.
This PMSR Flow Agreement is entered into in the state of Florida. Its
construction and rights, remedies and obligations arising by, under, through, or
on account of it will be governed by the laws of the State of Florida excluding
its conflict of laws rules and will be deemed performable in the State of
Florida.
11.16. NO AGENCY OR JOINT VENTURE CREATED.
This PMSR Flow Agreement will not be deemed to constitute the Buyer and the
Seller as partners or joint venturers, nor will the Buyer or the Seller be
deemed to constitute the other as its agent.
11.17. SUCCESSORS.
This PMSR Flow Agreement will inure to the benefit of and be binding upon the
parties hereto and their successors and permitted assigns. Nothing in this PMSR
Flow Agreement expressed or implied is intended to confer on any person other
that the parties hereto and their successors and assigns, any rights,
obligations, remedies or liabilities.
11.18. FORCE MAJEURE.
No party shall be liable for delays or errors occurring by reason of
circumstances beyond such party's control, including, without limitation, acts
of civil, military, or banking authorities, national emergencies, labor
difficulties, fire, flood or other catastrophes, acts of God, insurrection, war,
riots, failure of transportation or equipment, or failure of vendors,
communication or power supply.
11.19. SECTION HEADINGS.
Section headings are intended only to assist in the organization of this PMSR
Flow Agreement and do not in any way limit or otherwise define the rights and
liabilities of the parties.
11.20. ENTIRE AGREEMENT.
This PMSR Flow Agreement and the Exhibits to this PMSR Flow Agreement constitute
the entire agreement among the parties and supersede all other prior
communications and understandings, written or oral, among the parties with
respect to the subject matter of this PMSR Flow Agreement. There are no
contemporaneous oral agreements.
11.21. COUNTERPARTS.
This PMSR Flow Agreement may be executed in multiple counterparts each of which
will be deemed an original. Regardless of the number of counterparts, the total
will constitute only one agreement.
-14-
<PAGE> 15
PMSR Agreement
11.22. PLURALS AND GENDER.
In construing the words of this PMSR Flow Agreement, plural constructions will
include the singular, and singular constructions will include plural. No
significance will be attached to whether a pronoun is masculine, feminine, or
neuter.
IN WITNESS WHEREOF, the Buyer and the Seller, as of the day first set forth
above, have caused their seals to be affixed on this instrument to be signed on
their behalf by their duly authorized officers.
-15-
<PAGE> 16
PMSR Agreement
HOMESIDE LENDING, INC.
By: /s/ Joe K. Pickett
---------------------------------
Joe K. Pickett
- -------------------------------------
(Print Name)
Title: Chief Executive Officer
------------------------------
<PAGE> 17
PMSR Agreement
BARNETT BANKS, INC.
By: /s/ Hinton F. Nobles, Jr.
---------------------------------
Hinton F. Nobles, Jr.
- -------------------------------------
(Print Name)
Title: Executive Vice President
------------------------------
-16-
<PAGE> 18
PMSR Agreement
LIST OF EXHIBITS
EXHIBIT A Purchase Price Percentage Schedule
EXHIBIT B Transfer Instructions
EXHIBIT C List of Flood Service Providers Acceptable to the Buyer
-18-
<PAGE> 19
PMSR Agreement
EXHIBIT A
PURCHASE PRICE PERCENTAGE SCHEDULE
I. PURCHASE PRICE PERCENTAGE TABLE FOR PORTFOLIO MORTGAGE LOANS PURCHASED ON A
FLOW BASIS.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PRODUCT TYPE ANNUAL BASE RATE BASE RATE BASE RATE
SERVICING [* ]%
TO
FEE RATE [* ]% [* ]% TO BASE RATE
AND BASE RATE [* ]%
UNDER
============================================================================================================================
<S> <C> <C> <C> <C>
A and A- 30-year conforming fixed rate [* ]% [* ]% [* ]% [* ]%
A and A- 15-year conforming fixed rate [* ]% [* ]% [* ]% [* ]%
A and A- conforming conventional ARM [* ]% [* ]% [* ]% [* ]%
FHA 30-year fixed rate [* ]% [* ]% [* ]% [* ]%
FHA 15-year fixed rate [* ]% [* ]% [* ]% [* ]%
FHA ARM [* ]% [* ]% [* ]% [* ]%
CRA low-to-moderate conventional 30-year fixed rate [* ]% [* ]% [* ]% [* ]%
CRA low-to-moderate conventional 15-year fixed rate [* ]% [* ]% [* ]% [* ]%
CRA low-to-moderate conventional ARM [* ]% [* ]% [* ]% [* ]%
A and A- non-conforming conventional 30-year fixed rate [* ]% [* ]% [* ]% [* ]%
A and A- non-conforming conventional 15-year fixed rate [* ]% [* ]% [* ]% [* ]%
A and A- non-conforming conventional ARM [* ]% [* ]% [* ]% [* ]%
A and A 7-year Balloons [* ]% [* ]% [* ]% [* ]%
A and A 5-year Balloons [* ]% [* ]% [* ]% [* ]%
Less than A- quality mortgage loans TBD TBD TBD TBD
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Unless otherwise specifically indicated, all Mortgage Loans described above are
first Mortgage Loans.
- ------------------------
* Confidential treatment requested.
-19-
<PAGE> 20
PMSR AGREEMENT
EXHIBIT A
CONTINUED
II. ADJUSTMENTS TO THE PURCHASE PRICE.
- - Deduct [* ] basis points ([* ]%) for VA Mortgage Loans.
- - Deduct [* ] basis points ([* ]%) for First-Lien Mortgage Loans w/o Escrow
Funds for taxes and hazard insurance.
- - Deduct [* ] basis points ([* ]%) for Buydown Mortgage Loans.
- - Deduct [* ] dollar ($[* ]) TRETS fee for each Mortgage Loan.
- - Add [* ] basis points ([* ]%) for 30 and 15-year fixed rate Mortgage Loans
with original principal balances less than or equal to the applicable FNMA
maximum loan amount and greater than or equal to $140,000.
- - Add [* ] basis points ([* ]%) for 30 and 15-year fixed rate Mortgage Loans
with original principal balances less than $140,000 and greater than or equal
to $120,000.
- - Deduct [* ] basis points ([* ]%) for 30 and 15-year fixed rate Mortgage
Loans with original principal balances less than $100,000 and greater than or
equal to $80,000.
- - Deduct [* ] basis points ([* ]%) for 30 and 15-year fixed rate Mortgage
Loans with original principal balances less than $80,000 and greater than or
equal to $60,000.
- - Deduct [* ] basis points ([* ]%) for 30 and 15-year fixed rate Mortgage
Loans with original principal balances less than $60,000 and greater than or
equal to $50,000.
- - Deduct [* ] basis points ([* ]%) for 30 and 15-year fixed rate Mortgage
Loans with original principal balances less than $50,000 and greater than or
equal to $40,000.
- - Deduct [* ] basis points ([* ]%) for 30 and 15-year fixed rate Mortgage
Loans with original principal balances less than $40,000 and greater than or
equal to $30,000.
- - No servicing released premium to be paid for Mortgage Loans with original
principal balance of $30,000 or less.
III. PRICING ASSUMPTIONS.
- - Assumes fixed rate and ARM Mortgage Loan balance is $100,000 or greater.
- - Assumes balloon Mortgage Loan balance is $60,000 or greater.
- - Conforming Mortgage Loans are Mortgage Loans with a balance less than or equal
to the then current applicable FNMA maximum loan amount.
- - Non-conforming Mortgage Loans are Mortgage Loans with a balance greater than
the then current applicable FNMA maximum loan amount.
- ------------------------
* Confidential treatment requested.
-20-
<PAGE> 1
EXHIBIT 10.21
[HOMESIDE LENDING, INC. LOGO]
CORRESPONDENT LOAN PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into this 16th day of May, 1996 by and between
HOMESIDE LENDING, INC., a corporation organized and existing under the laws of
the State of Florida, having its principal office and place of business at 7301
Baymeadows Way, Jacksonville, Florida 32256 (herein after referred to as
"Purchaser") and the subsidiaries of Barnett Banks, Inc. which have signed below
(hereinafter referred to as "Seller").
WITNESSETH:
WHEREAS, Purchaser in the conduct of its business as a mortgage
company, desires to have Seller perform, and Seller desires to perform, the
service of loan origination for the purpose of sale to Purchaser;
WHEREAS, Seller is not an agent of Purchaser, but desires to sell
residential mortgage loans to Purchaser;
WHEREAS, the parties agree that all future purchases of loans by
Purchaser from Seller shall be governed by the terms of this Agreement and the
Amendment attached hereto as Exhibit A, which is incorporated herein by
reference, unless agreed by the parties in writing before or at the time such
purchases are made;
NOW, THEREFORE, in consideration of the mutual covenants and
stipulations set forth herein, the parties agree as follows:
1. Loans Eligible for Purchase
Seller can offer for sale to Purchaser closed VA, FHA or conventional
loans which are current and have experienced no delinquencies as to the
payments of principal, interest, taxes and insurance escrows. All loans
are to be approved and closed in Seller's or Seller's approved
correspondent name according to standard agency regulations, private
investor requirements and/or any particular conditions pertaining
case-by-case to loan commitments issued by Purchaser, private mortgage
insurance issuers, FHA or VA.
2. Pricing
Seller may close loans through the price protected best efforts flow
program offered through Purchaser, or may offer closed loans for sale
to Purchaser. Should Seller choose to originate loans through the flow
program offered by Purchaser, then Seller shall be bound by the
guidelines for those loans as put forth in the Correspondent Operations
Manual and incorporated and made a part of this Agreement.
Should Seller choose to sell closed loans other than through the flow
program, then Seller shall be bound by the Modification Agreements and
applicable Assignment of Trade or Mandatory Commitment Agreements.
<PAGE> 2
CORRESPONDENT LOAN PURCHASE AGREEMENT
Page 2
- --------------------------------------------------------------------------------
3. Payment for Loans
Upon the receipt and approval by Purchaser of the initial documents
specified in the Correspondent Operations Manual, or Purchase
Commitment Letter, and upon approval of same by Purchaser, Purchaser
will transfer funds to the Seller, or Sellers designated Warehouse
Bank. Interest accruing on loans purchased by Purchaser shall inure to
the benefit of Purchaser beginning on the date of purchase.
4. Delivery of Documents
Seller shall deliver the closed loan package (as described in the
Correspondent Operations Manual) in correct and fundable fashion on or
before the fifteenth day from disbursement, or buyprice commitment
expiration date, whichever comes first or the loan shall be subject to
repricing at Purchaser's option as outlined in Purchasers Buyprice
Policy. Purchaser reserves the right to refuse purchase should any
loans be delivered beyond the buyprice commitment expiration.
From the date of the closing of the loan(s) by Seller, Seller shall
have one hundred twenty (120) days in which to do all acts necessary to
perfect title to the mortgage in Purchaser's name, and shall sell,
assign and deliver on a flow basis to Purchaser the required supporting
original documentation and photocopies as set forth in the
Correspondent Operations Manual or Purchase Commitment Letter, all
subject to the approval of Purchaser as to the proper form and
execution.
Should Seller fail to satisfy the requirements for document delivery
within the allowed one hundred twenty (120) days from the loan closing,
on any given loan purchased, Seller shall be required to repurchase
said loan as set forth in Paragraph 10 provided, however, it is agreed
between the parties that no repurchase will be required for failure of
document delivery unless GNMA, FNMA, FHLMC or private investor requires
Purchaser to repurchase said loan. In such event, Seller shall obtain
outstanding document(s) or repurchase said loan(s) within the time
frame allowed for repurchase by GNMA, FNMA, FHLMC or private investor.
Notwithstanding the foregoing, in the event any documents remain
outstanding in excess of one hundred twenty (120) days from loan
closing by Seller, the Purchaser at its sole option shall have the
right to extend the delivery deadline for 60 days by assessing a
penalty for the outstanding document(s) of $100 per month per loan, in
addition to any costs incurred by Purchaser to obtain such documents.
On government loans which are not cured and require Purchaser to issue
a Letter of Credit due to agency/investor requirements, Seller will be
responsible for all costs incurred by the Purchaser to obtain said
Letter of Credit until the pool is finally certified.
Purchaser also reserves the right to withhold servicing released
premiums on loans not yet funded should documents within Seller's
control, as determined by Purchaser, remain
<PAGE> 3
CORRESPONDENT LOAN PURCHASE AGREEMENT
Page 3
- --------------------------------------------------------------------------------
outstanding in excess of 270 days from loan closing. These premiums
will be refunded upon compliance with delivery requirements outlined in
Section 4, above.
5. Warranties as to Loan Documentation
Seller represents and warrants as to each mortgage offered for sale
under this Agreement that:
5.1 In the event the mortgage was serviced by Seller prior to
purchase by Purchaser, Seller warrants the loan was serviced
in accordance to all applicable federal, state and local
regulatory requirements.
5.2 The mortgage has been duly executed by the mortgagor,
acknowledged and has been/will be recorded, is valid, and is a
first lien on the real property held in fee simple.
5.3 Seller is the sole owner of the mortgage and has authority to
sell, transfer and assign the same on the terms herein set
forth; and there has been no assignment, sale or hypothecation
thereof by Seller and that the sale is free and clear of
claims or encumbrances of any type.
5.4 The full principal amount of the mortgage has been advanced to
the mortgagor, either by payment direct to him or by payment
made on his request or approval; the unpaid principal balance
is as stated; all costs, fees and expenses incurred in making,
closing and recording the mortgage have been paid; no part of
the mortgaged property has been released from the lien of the
mortgage; the terms of the mortgage have in no way been
changed or modified, and the mortgage is current and not in
default.
5.5 Each mortgage which Seller represents is so insured or
guaranteed or will be insured or guaranteed within the time
provisions as set forth in Paragraph 4.
5.6 All conditions as to the validity of the insurance or guaranty
as required by the National Housing Act of 1934, as amended,
and the rules and regulations thereunder, or as required by
the Servicemen's Readjustment Act of 1944, as amended, and the
rules and regulations thereunder, or by the Purchasers
approved mortgage insurance companies, have been properly
satisfied, and said insurance or guaranty is valid and
enforceable.
5.7 All applicable Federal, State and Local Laws, rules and
regulations have been complied with, including but not limited
to the Real Estate Settlement and Procedures Act, Usury Laws,
the Equal Credit Opportunity Act, the Home Mortgage Disclosure
Act, the Privacy Act of 1974, the Financial Institution
Reform, Recovery and Enforcement Act, the Federal Emergency
Management Act, and the Federal Truth in Lending Act. Seller
fully indemnifies Purchaser
<PAGE> 4
CORRESPONDENT LOAN PURCHASE AGREEMENT
Page 4
against any and all claims, demands and/or actions relating to
any alleged violation of such laws, rules and regulations.
5.8 There is in force a paid-up ALTA title insurance policy (or
acceptable substitute where ALTA policies are not available)
on the mortgage issued by an accredited title company approved
by Purchaser in an amount at least equal to the outstanding
principal balance of the mortgage. Such policy shall be
assignable to Purchaser.
5.9 With regard to tax payments, Seller shall have two (2)
options:
1) Provide evidence in the loan package (as described in
the Correspondent Operations Manual) that all taxes
due as of date of delivery to Purchaser and for
thirty (30) days thereafter are paid.
2) For taxes due within thirty (30) days following
delivery, Seller may choose to leave the
responsibility to Purchaser to obtain the tax bill
and to disburse the tax payment including any
penalties and interest, if applicable. For this
service, Seller agrees to have Purchaser net from the
loan sale proceeds a percentage of the estimated tax
as it appears on the Tax Information Sheet (Purchaser
Form G245) and specific to the location of the tax
payee as identified in Purchaser's Correspondent
Operations Manual. Such fee shall cover the risk of
incurring penalties and/or interest and
administrative effort on behalf of the Purchaser to
ensure taxes are paid. Indication that the Seller
exercises this option shall be evident in the loan
package by the absence of a tax receipt or other
certification of tax payment.
"Due" shall mean, for purposes of this section, the
first date a tax penalty is incurred or identifiable
discount is lost.
5.10 There is in force for such loan a hazard insurance policy and
flood insurance coverage, in conformance with the Federal
Emergency Management Act, if necessary or required by survey,
in an amount at least equal to the outstanding principal
balance of the mortgage or to the full insurable replacement
value of the improvements, whichever is less, such policy
containing a mortgagee clause, and containing suitable
provisions for payment on all present and future mortgages on
such premises in order of precedence.
5.11 The assignment of the mortgage from Seller to Purchaser is
valid and sufficient.
5.12 All documents submitted are genuine, and all documents
presented by Seller to Purchaser requiring Mortgagor(s)
signatures do, in fact, bear genuine signatures of the
Mortgagor(s). There are no defects in the loans offered to
Purchaser and all loans presented for purchase are in all
respects what they purport to be.
<PAGE> 5
CORRESPONDENT LOAN PURCHASE AGREEMENT
Page 5
- --------------------------------------------------------------------------------
5.13 All loans have been originated in an ethical manner in
accordance with Purchaser's published Code of Ethics as
outlined in the Correspondent Loan Purchase Agreement.
6. Underwriting; Private Mortgage Insurance; Appraisals
Private mortgage insurance issuers shall be selected by Purchaser and
shall be at its sole discretion. All conventional loans originated by
Seller shall be submitted for underwriting review by Purchaser or
Purchaser's Designee before closing and/or prior to purchase. All
appraisers shall be FHA or VA approved, in the case of government
loans, or in the case of conventional loans must conform to guidelines
as established pursuant to Financial Institution Reform, Recovery and
Enforcement Act and Regulators promulgated thereunder which apply to
the Seller and/or Purchaser.
7. Completion Escrows
Loans with Completion Escrows for exterior, weather related repairs
will only be purchased subject to the requirements as outlined in the
Correspondent Operations Manual. Failure to satisfy all escrow
completion items within 60 days of closing shall require Seller to
repurchase said loan(s) as set forth in paragraph 10. Weather related
extensions may be granted upon prior approval by Purchaser.
8. Waiver of Escrows
Loans which do not have escrows for taxes and insurance will be paid a
reduced servicing released premium per the Purchaser premium schedule.
Seller will refund to Purchaser the escrow premium discount on loans
purchased with escrows that are subsequently released upon request or
demand by the borrower within six months of date of purchase by
Purchaser.
9. Quality Control
All loans originated by Seller and purchased by Purchaser shall be
subject to Purchaser's quality control and audit procedures which will
include, but will not be limited to, independent verifications of loan,
property and credit information. Seller grants to Purchaser the right
for an on-site review and audit of Seller's loan policies, procedures
and records to be performed by Purchaser's quality control staff or
similarly assigned personnel. Seller will provide Internal Quality
Control reports to Purchaser upon Purchaser's request.
<PAGE> 6
CORRESPONDENT LOAN PURCHASE AGREEMENT
Page 6
- --------------------------------------------------------------------------------
10. Repurchase of Loans
Seller agrees to repurchase any loan sold to Purchaser which becomes 60
days or more delinquent in the first six months, beginning with the
first payment due Purchaser, and/or becomes eligible for repurchase
from GNMA, FNMA, FHLMC or private investor.
Purchaser shall have the sole option to repurchase a loan from GNMA,
FNMA, FHLMC or private investor in accordance with said investor
guidelines; and in such event of repurchase Seller shall be required to
repurchase the loan from Purchaser.
Seller agrees to repurchase any loan sold to Purchaser at any time
during the life of the loan upon the occurrence of any of the following
events:
(a) Seller makes any misstatement of material fact relating to or
arising out of any loan or other transaction under this
agreement;
(b) Seller fails to obtain the FHA insurance, VA guaranty, or if
applicable, Private Mortgage Insurance; or such insurance or
guaranty lapses as a result of any act or failure to act by
Seller or Mortgagor;
(c) Seller fails to satisfy the document delivery requirements
under Paragraph 4 of this Agreement;
(d) Purchaser is required to repurchase any loan sold to GNMA,
FNMA, FHLMC or any other investor;
(e) Seller breaches any warranties or fails to satisfy any of its
obligations under this Agreement;
(f) Any material third party fraud or misrepresentation which is
determined to exist. This includes, but is not limited to, any
misrepresentation of income, funds on deposit, or employment.
Loans shall be repurchased at par or Purchaser's buyprice, whichever is
higher, plus any additional accrued interest and cost incurred by
Purchaser for action taken, including any servicing release fee that
has been paid by Purchaser. Seller agrees to repurchase any loan sold
to Purchaser by the expiration date shown in the repurchase request.
Without limiting any of the Seller's other rights hereunder, failure to
comply will result in Seller being suspended from future sales until
resolved.
11. Solicitation for Refinance
Seller agrees that neither Seller nor any employee, agent, or
contractor of Seller, shall solicit for mortgage refinance any mortgage
loan which is or could be construed to be subject to a Commitment or to
this Agreement. Loans sold to Purchaser cannot be
<PAGE> 7
CORRESPONDENT LOAN PURCHASE AGREEMENT
Page 7
solicited by Seller, Sellers employee, agent or contractor for
refinance for a period of 12 months from the date the loan is purchased
by Purchaser. Borrowers requesting a refinance from Seller within 12
month period must be referred to Purchaser. In the event Seller
breaches this covenant, Seller shall pay to Purchaser within two days
of Seller's receipt of notice from Purchaser an amount equal to 2% of
the then outstanding principal balance of the loan.
12. Mandatory Delivery
Seller agrees that delivery of loans committed to Purchaser is
mandatory on each loan that closes and has been committed for sale to
the Purchaser. Excessive fallout may result in Seller's suspension from
Purchaser's best efforts flow program.
13. Financial Statements
Seller shall provide audited financial statements to Purchaser as of
the date of this Agreement and annually thereafter based on Seller's
fiscal year-end. In it's sole discretion, Purchaser may require Seller
to provide interim financial statements on a more frequent basis.
Purchaser shall provide financial statements to Seller upon request.
14. Duration
This Agreement will become effective on the date executed and shall
continue in full force and effect and shall govern all transactions
between the parties hereto, until termination in accordance with the
terms set forth in Section 15.
15. Termination
Either party shall have the privilege, without cause, to cancel and
annul this Agreement (including all addendum's and modifications) at
any time upon thirty (30) days written notice by registered mail, or
personal delivery of notice, to the other party.
Termination of this Agreement, shall not affect the Seller's
obligations with respect to loans sold, commitments issued, or
indemnification agreements signed before the date of such termination.
Should this Agreement be terminated with cause, Purchaser shall also
have the right to terminate any commitments issued before the date of
such termination. Termination without cause will not affect the parties
responsibilities with respect to loans already sold under this
Agreement.
16. Seller's Qualification to do Business
Seller warrants and certifies that it is in good standing, licensed and
qualified to do business by all appropriate agencies (i.e., HUD, VA,
FNMA, etc.) and in each jurisdiction
<PAGE> 8
CORRESPONDENT LOAN PURCHASE AGREEMENT
Page 8
- --------------------------------------------------------------------------------
in which it operates and in which the mortgages sold under this
Agreement have been originated.
17. Receipt of Information by Seller
Seller agrees that any information provided by Purchaser to Seller
after the loan is purchased is for the internal use of Seller only.
Seller agrees to indemnify Purchaser and hold Purchaser harmless from
any misuse by Seller of the information provided, and/or any
action taken by Seller after receipt of such information, which results
in a violation of any federal, state, or local laws or regulations.
This includes, but is not limited to, violation of the Fair Credit
Reporting Act and the Fair Debt Collection Practices Act.
18. Survival of Warranties
Seller agrees that all warranties and obligations under this Agreement
are perpetual and shall survive the termination of the Agreement.
19. Assignment
It is hereby agreed by the parties that there will be no assignment or
transfer of this Agreement, nor of any interest in this Agreement, as
delegated of any duties under this Agreement.
20. Law Governing
It is mutually understood and agreed that this Agreement shall be
governed by the laws of the state of Florida, both as to interpretation
and performance.
21. Entirety of Agreement
This instrument embodies the entire agreement between the parties, and
there are no promises, terms, conditions, or obligations other than
those contained herein. This contract supersedes all previous
communications, representations or agreements, either verbal or written
between the parties hereto.
22. Waiver
Purchaser may, from time to time, at its option, waive any part of this
Agreement. It is understood, however, that a waiver of any part of this
Agreement as to any loan sold to Purchaser does not constitute a waiver
of any other condition, or a waiver as to any other loan sold to
Purchaser.
<PAGE> 9
CORRESPONDENT LOAN PURCHASE AGREEMENT
Page 9
- --------------------------------------------------------------------------------
23. Incorporation of Correspondent Manual
It is mutually understood and agreed that the Purchaser's Correspondent
Operations Manual and all its terms and provisions are hereby included
and incorporated into this Agreement. Purchaser reserves the right to
modify and amend its manual from time to time, and all such amendments
and modifications will become a part of this Agreement.
24. Additional Guaranty of Performance
Seller is a wholly-owned subsidiary of
and said parent corporation does hereby guaranty the performance and
undertakings of Seller. Said parent corporation specifically agrees to
the jurisdictions of Florida courts if litigation is commenced and
further specifically waives any objections based on jurisdictional
matters and constitutional matters. The parent also agrees to service
of process under the Florida long arm jurisdiction.
25. Representation as to Agency
It is hereby agreed that Seller is not an agent of Purchaser and
Purchaser is not an agent of Seller.
26. Modification
There may be no modification of this Agreement, except in writing,
executed with the same formalities as this instrument. However, the
Correspondent Operations Manual may, from time to time, be revised,
amended, or supplemented by Purchaser, and any such amendments will be
binding upon the parties hereto and will be effective as of the
effective date of such amendment. Purchaser will work with Seller to
accommodate any pipeline loans which fall under Manual guidelines which
were in effect prior to the revision or amendment.
27. Litigation
In the event litigation is commenced any part of this Agreement by
either party, the prevailing party shall be entitled to recover all
reasonable attorney fees plus costs and including cost and attorney
fees if an appeal is taken.
<PAGE> 10
IN WITNESS WHEREOF, the Purchaser and the Seller, as of the day first set forth
above, have caused this instrument to be signed on their behalf by their duly
authorized officers.
HOMESIDE LENDING, INC.
By: /s/ Hugh R. Harris
------------------------------------
Hugh R. Harris
President and Chief Operating
Officer
<PAGE> 11
Correspondent Agreement
Barnett Mortgage Company
By: /s/ Francis G. Seabrook
-------------------------------
Francis G. Seabrook
- ----------------------------------
(Print Name)
Title: Chairman, President and CEO
----------------------------
<PAGE> 12
Correspondent Agreement
Barnett Residential Lending Corporation,
to be known as Barnett Mortgage Company
By: /s/ Francis G. Seabrook
-------------------------------
Francis G. Seabrook
- ----------------------------------
(Print Name)
Title: Chairman, President and CEO
----------------------------
<PAGE> 13
Correspondent Agreement
Barnett Bank of Alachua County, N.A.
By: /s/ Denise J. Freedman
------------------------
Denise J. Freedman
- ---------------------------
(Print Name)
Title: Vice President
---------------------
<PAGE> 14
Correspondent Agreement
Barnett Bank of Broward County, N.A.
By: A. Blair Glenn
------------------------
A. Blair Glenn
- ---------------------------
(Print Name)
Title: Senior Vice President
---------------------
<PAGE> 15
Correspondent Agreement
Barnett Bank of Central Florida, N.A.
By: /s/ Glen K. Spears
------------------------
Glen K. Spears
- ---------------------------
(Print Name)
Title: SVP
---------------------
Real Estate Manager
<PAGE> 16
Correspondent Agreement
Barnett Bank of Highlands County
By: /s/ Mary Brown
------------------------------------------
Mary Brown
- ---------------------------------------------
(Print Name)
Title: S.V.P./Residential Real Estate Manager
---------------------------------------
<PAGE> 17
Correspondent Agreement
Barnett Bank of Jacksonville, N.A.
By: /s/ H. Wade Griffin
----------------------------
H. Wade Griffin
- -------------------------------
(Print Name)
Title: SVP & Manager
-------------------------
<PAGE> 18
Correspondent Agreement
Barnett Bank of the Keys
By: /s/ Ruben Concepcion
------------------------------
Ruben Concepcion
- ---------------------------------
(Print Name)
Title: VP/Retail Loan Sales Mgr.
---------------------------
<PAGE> 19
Correspondent Agreement
Barnett Bank of Lake County, N.A.
By: /s/ Eldon R. Irminger
---------------------------------------
Eldon R. Irminger S.V.P.
- ------------------------------------------
(Print Name)
Title: RRE Mgr - Lake County
------------------------------------
<PAGE> 20
Correspondent Agreement
Barnett Bank of Lake Okeechobee
By: /s/ Tabitha Wildes
----------------------------
Tabitha Wildes
- -------------------------------
(Print Name)
Title: Vice President
-------------------------
<PAGE> 21
Correspondent Agreement
Barnett Bank of Lee County, N.A.
By: /s/ Don A. Schnell
--------------------------------------
Don A. Schnell
- -----------------------------------------
(Print Name)
Title: Vice President Residential Lending
-----------------------------------
Residential Lending Manager
<PAGE> 22
Correspondent Agreement
Barnett Bank of (illegible) County, N.A.
By: /s/ Timothy J. Bazell
-----------------------------
Timothy J. Bazell
- --------------------------------
(Print Name)
Title: V.P. Residential Lending
--------------------------
<PAGE> 23
Correspondent Agreement
Barnett Bank of Marion County, N.A.
By: /s/ Cynthia C. Jones
-------------------------------
Cynthia C. Jones
- ----------------------------------
(Print Name)
Title: Senior Vice President
----------------------------
Residential Lending Manager
<PAGE> 24
Correspondent Agreement
Barnett Bank of Martin County, N.A.
By: /s/ Nancy T. Harmon
-------------------------
Nancy T. Harmon
- ----------------------------
(Print Name)
Title: Senior Vice President
----------------------
<PAGE> 25
Correspondent Agreement
Barnett Bank of Naples
By: /s/ John Clark
------------------------------------
John Clark
- ---------------------------------------
(Print Name)
Title: EVP, Director of Retail Banking
---------------------------------
<PAGE> 26
Correspondent Agreement
Barnett Bank of Nassau County
By: /s/ Elaine C. Bowen
----------------------------
Elaine C. Bowen
- -------------------------------
(Print Name)
Title: V-P Residential Lending
-------------------------
<PAGE> 27
Correspondent Agreement
Barnett Bank of North Central Florida
By: /s/ Denise J. Freedman
------------------------
Denise J. Freedman
- ---------------------------
(Print Name)
Title: Vice President
---------------------
<PAGE> 28
Correspondent Agreement
Barnett Bank of Northwest Florida
By: /s/ Don O. Collins
------------------------------
Don O. Collins
- ---------------------------------
(Print Name)
Title: Director of Retail Banking
---------------------------
<PAGE> 29
Correspondent Agreement
Barnett Bank of Palm Beach County
By: /s/ Raymond E. Weeks
--------------------------
Raymond E. Weeks
- -----------------------------
(Print Name)
Title: Senior Vice President
-----------------------
<PAGE> 30
Correspondent Agreement
Barnett Bank of (illegible) County
By: /s/ Roberto Cabrera
---------------------------
Roberto Cabrera
- ------------------------------
(Print Name)
Title: EVP/Residential Manager
------------------------
<PAGE> 31
Correspondent Agreement
Barnett Bank of (illegible) County
By: /s/ Roberto Cabrera
---------------------------
Roberto Cabrera
- ------------------------------
(Print Name)
Title: EVP/Residential Manager
------------------------
<PAGE> 32
Correspondent Agreement
Barnett Bank of Polk County
By: /s/ Shirley A. McClintock
-------------------------------
Shirley A. McClintock
- ----------------------------------
(Print Name)
Title: AVP - Sales Support Manager
----------------------------
<PAGE> 33
Correspondent Agreement
Barnett Bank of South Florida, N.A.
By: /s/ E. Charles Rogers
---------------------------
E. Charles Rogers
- ------------------------------
(Print Name)
Title: Executive Vice President
-------------------------
<PAGE> 34
Correspondent Agreement
Barnett Bank of Southwest Florida
By: /s/ John M. Smithman
-----------------------------
John M. Smithman
- --------------------------------
(Print Name)
Title: Executive Vice President
--------------------------
<PAGE> 35
Correspondent Agreement
Barnett Bank of the St. James
By: /s/ Mandee D. McAloon
--------------------------
Mandee D. McAloon
- -----------------------------
(Print Name)
Title: Senior Vice President
-----------------------
<PAGE> 36
Correspondent Agreement
Barnett Bank of the Suncoast, N.A.
By: /s/ James R. Stalvey
-------------------------
James R. Stalvey
- ----------------------------
(Print Name)
Title: Senior Vice President
----------------------
<PAGE> 37
Correspondent Agreement
Barnett Bank of Tallahassee
By: /s/ John M. Harrison
--------------------------
John M. Harrison
- -----------------------------
(Print Name)
Title: Senior Vice President
-----------------------
<PAGE> 38
Correspondent Agreement
Barnett Bank of Tampa
By: /s/ Stephan E. Krieger
------------------------
Stephan E. Krieger
- ---------------------------
(Print Name)
Title: SVP - Res. Mgr.
---------------------
<PAGE> 39
Correspondent Agreement
Barnett Bank of the Treasure Coast
By: /s/ Robert Fleischmann
------------------------
Robert Fleischmann
- ---------------------------
(Print Name)
Title: Vice President
---------------------
<PAGE> 40
Correspondent Agreement
Barnett Bank of Volusia County
By: /s/ Cynthia C. Jones
--------------------------------
Cynthia C. Jones
- -----------------------------------
(Print Name)
Title: Executive Vice President
-----------------------------
Residential Lending Manager
<PAGE> 41
Correspondent Agreement
Barnett Bank of West Florida
By: /s/ Yolanda M. Smithee
--------------------------
Yolanda M. Smithee
- -----------------------------
(Print Name)
Title: Senior Vice President
-----------------------
<PAGE> 42
Correspondent Agreement
Barnett Bank of Southeast Georgia, N.A.
By: /s/ Brian Sheesley
--------------------------
Brian Sheesley
- -----------------------------
(Print Name)
Title: V.P. Regional Manager
-----------------------
<PAGE> 43
Correspondent Agreement
Barnett Bank of Southwest Georgia
By: /s/ Gary Peacock, Jr.
------------------------
Gary Peacock, Jr.
- ---------------------------
(Print Name)
Title: President/CEO
---------------------
<PAGE> 44
Correspondent Agreement
Community Bank of the Islands
By: /s/ Lyman Frank
------------------------
Lyman Frank
- ---------------------------
(Print Name)
Title: President
---------------------
<PAGE> 45
AMENDMENT TO CORRESPONDENT AGREEMENT
[HOMESIDE LENDING, INC. LOGO]
EXHIBIT A TO THE CORRESPONDENT LOAN PURCHASE AGREEMENTI
AMENDMENT TO
CORRESPONDENT LOAN PURCHASE AGREEMENT
This Amendment to the Correspondent Loan Purchase Agreement (the "Amendment") is
dated as of the 16th day of May, 1996 by and between HomeSide lending, Inc. (the
"Purchaser") and the Seller, as defined in the Correspondent Loan Purchase
Agreement.
RECITALS.
1. Barnett Banks, Inc. ("BBI") and HomeSide, Inc., formerly known as
GrantAmerica, Inc., became parties (the "Parties") to a Stock Purchase Agreement
on March 4, 1996. Capitalized terms not defined herein are as defined in the
Stock Purchase Agreement.
2. Pursuant to the terms of the Stock Purchase Agreement, the Parties agreed to
the Operating Agreement Significant Terms (the "Term Sheet"), which contemplates
that BBI will enter into an Operating Agreement (the "Operating Agreement") with
HomeSide Lending, Inc. on the Closing Date, now scheduled for May 31, 1996.
3. The Stock Purchase Agreement and the Term Sheet also provide that the
Purchaser and the Seller shall enter into a Correspondent Loan Purchase
Agreement (the "Correspondent Agreement") on the Closing Date, in the form to
which this Amendment is attached, except as modified by the Term Sheet.
4. The Purchaser and the Seller have now agreed that it would be mutually
beneficial if the Seller began to lock-in mortgage loan rates with the Purchaser
prior to the Closing Date, thereby establishing a correspondent relationship at
an earlier date.
6. Therefore, the Purchaser and the Seller desire to enter into the
Correspondent Agreement, as amended below, on the date of this Amendment and
prior to the Closing Date.
IN CONSIDERATION of the mutual promises made in this Amendment and other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Purchaser and the Seller agree as follows:
1. TERM SHEET.
From the date of this Amendment to the Closing Date, the following shall apply:
To the extent that the applicable terms of the Term Sheet are inconsistent with
the terms of the Correspondent Agreement, the terms of the Term Sheet shall
control.
- -1-
<PAGE> 46
AMENDMENT TO CORRESPONDENT AGREEMENT
2. CHANGES TO THE TERM SHEET AND OTHER RELATED CHANGES.
2.1. CHANGES TO THE TERM SHEET. In connection with the Correspondent Agreement,
the Seller and the Purchaser agree that the Term Sheet shall be amended as
follows:
(a) PRICING: The first sentence of paragraph 1 of Section II of the Term
Sheet shall be replaced by the following language: "New BMC will receive
the higher of either the most favorable Newco pricing offered to
correspondents or Newco's pricing as determined by the screen price/dealer
price determined each morning, based on the delivery month for the
appropriate lock term."
(b) ANNEX F. The Purchaser and the Seller have agreed that Annex F to the
Term Sheet shall be changed as follows:
- SHIPPING SUBMISSION CHECKLIST. The Shipping Submission Checklist
attached as SCHEDULE 1 replaces Exhibits A and B to the Correspondent
Operations Manual.
- SECONDARY MARKETING. The daily sequential operating activities and
events shall be as described in the attached SCHEDULE 2.
- LEGAL REVIEW. The Purchaser shall perform an extensive legal review
prior to funding a mortgage loan.
(c) WAREHOUSE MANAGEMENT. The last sentence to paragraph 3 to Section VI of
the Term Sheet shall be deleted and replaced with the following language:
"New BMC shall bear the risk of loss for any difference between the loan
closing price and the market price, based on a mark to market."
(d) PIPELINE MANAGEMENT. Paragraph 3 to Section VII of the Term Sheet shall
be deleted and replaced with the following language: "Loans rate locked
with an entity other than Newco will be delivered to such entity by Newco
upon the closing of such rate locked loans in accordance with the terms of
the related purchase agreement between New BMC and such entity. Prior to
such delivery, Newco will purchase the loans from New BMC on a servicing
released basis and deliver such loans to such entity, with Newco retaining
such servicing after such delivery, if permitted under the terms of the
agreement between New BMC and such entity."
(e) PENALTIES. The final sentence of Section XIII of the Term Sheet should
be revised as follows: "Failure to notify Newco regarding loans which will
not meet their buyprice expiration date as described above will result in
Newco's right to refuse to purchase such loans in the event such loans
cannot be promptly marked to market and sold to an available investor by
Newco."
2.2. OTHER CHANGES. In connection with the Correspondent Agreement, the Seller
and the Purchaser agree to the following additional terms:
(a) ADDENDUM TO NEWCO (HOMESIDE) BUYPRICE POLICIES I & II. The Buyprice
Policies I and II attached hereto as SCHEDULE 3 shall govern buyprice
policies. Furthermore, the Seller and the Purchaser acknowledge that the
Buyprice Policies I and II must be amended as of the effective date of this
Amendment in order to facilitate the correspondent arrangement. Therefore,
the Purchaser and the Seller agree that the Buyprice Policies I and II are
hereby modified as provided in the "Addendum to Newco Buy Price Policies I
& II", which Addendum is included
- -2-
<PAGE> 47
AMENDMENT TO CORRESPONDENT AGREEMENT
within SCHEDULE 3. The Seller and the Purchaser also agree that the last
sentence in the Addendum shall be deleted and replaced with the following
language: "Newco agreed to allow Green to have delegated underwriting
authority on all agency loans including jumbo loans up to $1,000,000. The
only exception to the above policy occurs when a particular investor will
not allow Newco to underwrite loans on a delegated basis."
(b) ADDENDUM TO NEWCO (HOMESIDE) CORRESPONDENT OPERATIONS MANUAL. The
Seller and the Purchaser acknowledge that the Correspondent Operations
Manual must be amended as of the effective date of this Amendment in order
to facilitate the correspondent arrangement. Therefore, the Purchaser and
the Seller agree that the Correspondent Operations Manual is hereby
modified as provided in the attached SCHEDULE 4.
3. CHANGES TO CORRESPONDENT AGREEMENT.
The Seller and the Purchaser agree that the Correspondent Agreement shall be
amended as follows:
(a) DELIVERY OF DOCUMENTS. The words "one hundred and twenty (120) days"
shall be changed to "one hundred and eighty (180) days" in the second,
third and fourth paragraphs of Section 4 of the Correspondent Agreement.
(b) CONSTRUCTION LOANS. The following language shall be added to the end of
the second, third and fourth paragraphs of Section 4 of the Correspondent
Agreement: "Regarding construction-permanent loans, Seller shall have the
lesser of one hundred and eighty (180) days from the funding of the
permanent loan or such time period as may be designated by HomeSide's
investor in which to do all acts necessary to perfect title to the mortgage
in Purchaser's name, and shall sell, assign and deliver on a flow basis to
Purchaser the required supporting documentation and photocopies as set
forth in the Correspondent Operations Manual or Purchase Commitment Letter,
all subject to the approval of Purchaser as to the proper form and
substance."
(c) LATE DOCUMENTS CAUSED BY AGENCY OR RECORDING OFFICE. The following
language shall be added to the end of the second, third and fourth
paragraphs of Section 4 of the Correspondent Agreement (immediately
following the construction loan language described above): "The Seller
shall not be in breach of the one hundred and eighty (180) day requirement
described above if the Seller's failure to comply with such time period is
caused by an Agency or recording office and the Seller promptly furnishes
written documentation to the Purchaser that the Seller has performed, in a
timely manner, all of its duties relating thereto; provided, however, in
any event, a breach shall be deemed to have occurred if the required
documentation has not been delivered to the Purchaser within three hundred
sixty (360) days. Notwithstanding the foregoing, the Purchaser may, in its
reasonable discretion and on a case by case basis, review New York and
Hawaii loans which exceed the three hundred sixty (360) day requirement and
grant an extension to such requirement. "
(d) WITHHOLDING SRPS. The following new paragraph shall be added to the end
of the last paragraph of Section 4 of this Agreement: "The Seller shall not
be in breach of the two hundred and seventy (270) day requirement described
above if the Seller's failure to comply with such time period is caused by
an Agency or recording office and the Seller promptly furnishes written
documentation to the Purchaser that the Seller has performed, in a timely
manner, all of its duties relating thereto; provided, however, in any
event, a breach shall be deemed to have occurred if the required
documentation has not been delivered to the Purchaser within three
- -3-
<PAGE> 48
AMENDMENT TO CORRESPONDENT AGREEMENT
hundred sixty (360) days. Notwithstanding the foregoing, the Purchaser may,
in its reasonable discretion and on a case by case basis, review New York
and Hawaii loans which exceed the three hundred sixty (360) day requirement
and grant an extension to such requirement. "
(e) REIMBURSING PURCHASER'S LETTER OF CREDIT COSTS. The following language
shall be added to the end of the fifth paragraph of Section 4 of the
Correspondent Agreement: "The Seller shall reimburse a portion of the
Purchaser's costs for each letter of credit, based on the amount of the
Seller's deficient loans. The calculation of such Seller reimbursement
shall be reasonably agreed to by the Seller and the Purchaser and shall
reflect applicable agency letter of credit requirements in effect from time
to time."
4. OPERATING AGREEMENT.
From the Closing Date to the date on which the Operating Agreement terminates or
expires, the following shall apply:
To the extent that the applicable terms of the Operating Agreement are
inconsistent with the terms of the Correspondent Agreement, the terms of the
Operating Agreement shall control.
5. TERMINATION IF CLOSING DOES NOT OCCUR.
Notwithstanding anything to the contrary in this Amendment or the Term Sheet, if
the Closing does not occur, the termination provisions in the Correspondent
Agreement shall control.
6. ALL OTHER TERMS REMAIN THE SAME.
Except as provided above, all terms of the Correspondent Agreement remain the
same.
7. MISCELLANEOUS.
This Amendment shall be construed under and governed by the laws of the State of
Florida. Section headings are intended only to assist in the organization of
this Amendment and do not in any way limit or otherwise define the rights and
liabilities of the parties.
- -4-
<PAGE> 49
SCHEDULE 1
BARNETT MORTGAGE CORPORATION
SHIPPING SUBMISSION CHECKLIST
Loan #____________________________ Mortgagor:_______________________________
THESE DOCUMENTS ARE REQUIRED FOR FUNDING AND SET-UP
================================================================================
___ORIGINAL NOTE +1 Copy (properly endorsed and any applicable addendums).
___SECURITY DEED w/Legal Description - True and certified copy with (conforming
signatures acceptable) all applicable riders + 1 Copy.
___INTERVENING ASSIGNMENT(S) True and certified + 1 Copy.
___HAZARD INSURANCE POLICY OR BINDER and request for endorsement changing
mortgagee.*
___FLOOD APPLICATION and request for endorsement changing mortgagee.*
___ORIGINAL HUD-I Settlement Statement.
___FIRST PAYMENT LETTER indicating payment breakdown.**
___TAX INFORMATION SHEET
___TITLE BINDER/COMMITMENT OR POLICY.
___LIFE OF LOAN FLOOD CERTIFICATE.
___PMI CERTIFICATE (Conventional Only).
___BUYDOWN AGREEMENT (if applicable).
___MORTGAGE RECORD CHANGE (FHA only).
___POWER OF ATTORNEY + 2 Copies (must be specific for transaction). (If
applicable).
___TYPED APPLICATION (Conventional 1003/FHA 92900/VA 26-1802).
___FNMA 1008 w/Underwriting Approval Sheet including conditions (Conventional
Only). Original + 1 Copy.
___6100 A (Conventional Only) Original + 1 Copy.
___HMDA Form (Government Only) Original + 1 Copy.
___APPRAISAL with photos.
___PROJECT APPROVAL (FNMA Form 1028 or Condo/PUD Warranty Letter-if applicable).
* Loan will not be pended if document is omitted if all data needed for set up
is provided.
** Loan will not be pended if document is omitted.
IN ADDITION TO THE DOCUMENTS LISTED ABOVE, ALL CREDIT DOCUMENTS USED TO PROCESS,
CLOSE, AND UNDERWRITE MUST BE INCLUDED IN THE LOAN FILE.
(Replaces Exhibit A and B of HomeSide Lending, Inc. Correspondent
Operations Manual)
<PAGE> 50
SCHEDULE 2
Listed below is the recommended approach to be taken by both HomeSide Lending
and Barnett Mortgage to facilitate the pipeline and the AOT process.
- - All loans which are not currently price committed to BMC as of 5/15
(floaters and new applications) will be manually locked in with HLI
between 5/16 and 5/31. After 5/31, the "high speed lock" will be used
if available.
Update:
Effective 5/16, the BMC long and short position for loans
locked in with HLI will be considered frozen. This position
will be managed on a go forward basis by HomeSide Lending.
Loans locked, closed and delivered by BMC to HLI from
5/16-5/24, will be funded via Legal Review. In order to avoid
duplicate funding, between 5/25-6/2, HLI will cease funding
UNTIL 5/31 AT WHICH TIME THESE LOANS WILL BE FUNDED AT CLOSING
THRU THE ACQUISITION OF THE BALANCE SHEET. For all loans
funded thru Legal Review between 5/16-5/24, HLI will fax the
Purchase Advice form to Bob Ventrone. After 5/28, HLI will use
the automated Funding Spreadsheet to facilitate this process.
Please see the attached memos regarding procedures for the
manual lock-in process, warehouse transfer and assignment of
trades.
- - BMC will cease the allocation process on 5/20.
- - BMC will cease all loan deliveries on 5/24.
- - All unfilled trades will be assigned from BMC to HLI on or before 5/31.
Update
BMC will deactivate their lock-in system at 12 noon on
5/31/96,' in order to facilitate the transfer process. The BMC
pipeline will be manually keyed into HLI's system the night of
5/31 and up to 1 pm on 6/1.
<PAGE> 51
HLI and BMC will develop a warehouse transfer mechanism
(manual vs. automated). (M. Garces, D. Watkins, C. Jones, B.
Brendle). The BMC pipeline will automatically receive 10 extra
days price protection upon transfer to HLI.
HLI must research the Wall Street requirements regarding BMC
assigning their trades to HLI (T. Laidlaw).
- - HLI has committed to provide personnel support to:
1. Manage the allocation process on trade assignments to
HLI (Kyle Lawler) (Deleted)
2. Facilitate the manual lock in process. (Kim Callahan
and Marketing Liaison staff).
Update
BMC agreed to provide HLI's Secondary Marketing Department a
daily QRM file.
BMC will continue to use its Relock/Renegotiation policy until
5/31/96. After this date, BMC will comply with HomeSide's Buy
Price Policy 1&2.
- - As of 5/16, all loans in BMC pipeline will be assigned HLI loan
numbers.
- - Current BMC price committed loans that require a re-lock will be
handled by BMC.
Update
BMC will handle price committed relocks until 5/31/96.
- - HLI will develop a combined "Hello" - "Good-bye" letter for only those
loans locked with HLI and closed with BMC between 5/16 and 5/31. (Tony
Ebers). During this transition period, BMC will be responsible for all
compliance issues as it relates to the proper transfer of servicing
disclosures.
Update
All loans funded via Legal Review from 5/16-5/24 will receive
a joint - BMC/HLI "Welcome Letter". (HLI-Post Closing
Department)
<PAGE> 52
- - HLI and BMC will develop a manual lock-in process. (Mark Kramer, Andre
Brooks and Brenda Brendle).
- - BMC and HLI will research and develop the most efficient HMDA/GSE data
transmission to HLI. (Mark Garces, Loren Stivers, Charlotte Jones).
NOTE: The resolution of this issue is critical to the success
of the transition plan.
- - BMC will be evaluating their trading and hedging model for segregation
of loans on the Banc Plus system. (Mark Garces, Loren Stivers).
- - BMC will need to provide HLI with sufficient space for the transition
support team during this manual process.
- - BMC portfolio loan process will continue under existing procedures at
BMC until the 6/3 transfer to HLI.
Update
HLI will determine if the individual Barnett Banks need to
sign separate agreements governing portfolio loans. (addressed
in the Servicing Agreement),
- - BMC employees being transferred to HLI will report to HLI on 6/3,
excluding select shipping staff that will need to remain at BMC to
deliver off of the Banc Plus system.
- - HLI will be responsible for developing the working document outlining
the specific procedures for each company as it relates to the
successful execution of the transition plan. (Debbie Watkins).
NOTE: BMC will be given an opportunity to review this document
for comment prior to implementation.
We will be providing a copy of these minutes to Linda Henley and the above
referenced BMC-HLI attendees to insure that all pertinent issues have been
covered.
<PAGE> 53
SCHEDULE 3
HomeSide Lending, Inc.
[LOGO]
"Preferred Seller"
Secondary Marketing
Buy Price Policy - 1
Branch Lending
Retail
May 1, 1996
<PAGE> 54
TABLE OF CONTENTS
INTRODUCTION
POLICY AND PROCEDURE
100 GENERAL 4
200 CLOSED AND BACK POLICY 5
201. Late Deliveries .............................................. 5
300 PRICING AND LOCK-INS 5
301. Pricing ...................................................... 6
1. Price/Rate Posting.
2. Price/Rate Distribution.
3. Premium Pricing.
4. Price Changes.
302. Lock Procedures .............................................. 6
1. New Registrations.
2. New Applications.
3. Floating Locks.
303. Lock Terms and Programs ...................................... 8
1. Standard Locks
2. Extended Locks.
3. Rate Cap Float Program.
4. Shoppers Lock-In.
5. Buyers Choice Float-Down Protection.)
2
<PAGE> 55
400 RELOCKS 10
401. Relock Options .............................................. 11
402. Refinance Relock Options .................................... 11
403. Calculating the New Rate Discount ........................... 11
1. Improving Market.
2. Declining Market.
3. Extended Locks.
4. Relocks on Rates No Longer Offered.
5. Change in Rate, Term or Program.
404. Expired or Canceled Locks ................................... 12
405. Change in Property .......................................... 12
406. Renegotiation Requests ...................................... 12
500 SPECIAL CONVENTIONAL PRODUCTS 12
600 LOCK-IN FEES 13
3
<PAGE> 56
OBJECTIVE
It is HomeSide Lending's policy to offer competitive prices, price lock
periods, and loan programs. This policy will ensure that all products
originated will be secondary marketable at prices which minimize market
risk and loss to the company while maintaining a competitive market
presence.
It is the responsibility of HomeSide Lending's Secondary Marketing
Department in Jacksonville to post prices and lock terms each business
day. It is the responsibility of the Preferred Seller to provide
HomeSide Lending's Secondary Marketing with the information necessary
to make hedging decisions.
The Residential Loan Inventory Control System (RLIC) was designed to
provide HomeSide Lending with up-to-date pipeline information. All loan
data keyed into RLIC throughout the day is extracted and fed into
HomeSide Lending's hedging model. All pricing information including
loan amounts, loan types, price lock periods, rate and buy price
combinations, and etc. is used by HomeSide Lending to determine the
best delivery to the secondary market.
POLICY
100 General
The lock-in policy of HomeSide Lending is designed under a "dual
pricing" concept. Under this concept there are two basic prices for
every loan application (and subsequent loan closing).
The first price is the "buy price". This is the price at which HomeSide
Lending will buy a loan from the Preferred Seller. The buy price is
established by HomeSide Lending Marketing based upon current market
conditions and available commitments and is subject to change at any
time. Once locked-in, the buy price is guaranteed for the lock-in term.
The second price is the "closing price". This is the price the
Preferred Seller quotes (commits) to their customer, and this is the
price at which the loan will close.
Rates and discounts for all loan programs are quoted daily. No rates
other than those quoted may be given without the express consent of the
HomeSide
4
<PAGE> 57
Lending's Secondary Marketing Department. Requests must be placed
through HomeSide Lending's Marketing Liaison Staff.
HomeSide Lending's Secondary Marketing will honor lock ins on all loans
which conform to program guidelines. Loans which are outside of
published guidelines require an exception per published policy prior to
lock in. The Preferred Seller should contact Secondary Marketing to
obtain a waiver for individual loans which do not conform to program
guidelines. HomeSide Lending's program manual, with periodic updates,
should be used to determine if a loan conforms to HomeSide Lending
product parameters.
200 Closed and Back Policy
HomeSide Lending offers a variety of lock-in periods for price
committed applications. All the price protected applications must be
closed and the closing package returned to HomeSide Lending by the
expiration date of the buy price. In addition, the loan must be in
complete, correct and fundable form per HomeSide Lending guidelines. In
the event a loan is delivered and not in fundable form per HomeSide
Lending guidelines the following actions will be taken to cover
HomeSide Lending's costs:
201. Late Deliveries
Complete loans (including the original note, and completed
HMDA/GSE documentation) must be delivered on or before
HomeSide Lending's buyprice expiration date. "Preferred
Seller" shall notify HomeSide Lending of any mortgage loans
which will not meet such expiration date. Upon such
notification, either telephonically or through delivery and
notation in the closed loan file, HomeSide Lending will grant
"Preferred Seller" a fifteen (15)-day extension from the
buyprice expiration date for the cost of the roll, as
indicated on Knight-Ridder, rounded to the nearest one-eighth
of one percent (0.125%). An additional fifteen (15)-day
extension will be granted for one-half of one percent (0.50%).
After thirty (30) days, the mortgage loans will be
marked-to-market at the time they are eligible for funding.
Failure to notify HomeSide Lending regarding mortgage loans
which will not meet their buyprice expiration date as
described above will result in such mortgage loans being
marked-to-market. A late delivery will require a renegotiation
per standard policy. (See page 9, Section V.C Relock,
Calculating the New Rate and Discount.)
NOTE: It is "Preferred Seller's" responsibility to relock the
loan prior to buyprice expiration date.
5
<PAGE> 58
300 Pricing and Lock-Ins
All loans will have four options available for lock in: (1) at time of
application for 15, 30, 45, or 70 days (or as specified on the daily
rate sheet), (2) at the time of application for extended rate
protection, (3) at the time of application rate cap protection, or
float-down protection may be purchased, or (4) register as a float and
lock in at a later date under any currently available program. The loan
may be locked in at any time during the processing of the loan;
however, the loan must be locked in prior to closing.
301 Pricing
1. Price/Rate Posting.
HomeSide Lending Secondary Marketing posts rates NOT LATER
THAN 10:30 AM Eastern Time (ET) each business day. Rates will
be good from 10:30 AM (ET) each business day until 8:30 AM
(ET) the next business day, unless an Emergency Price Change
occurs. New applications not locked by 8:30 AM (ET), the next
business day, are subject to rates in effect at 10:30 AM (ET).
2. Price/Rate Distribution.
Rates will be distributed via fax as soon as they are
available.
3. Premium Pricing.
HomeSide Lending Marketing Liaison may offer par plus pricing
(negative fee pricing), wherein marketing fees are exchanged
for a higher interest rate. Normally, the highest price posted
will be 103.00. The premium may be used to cover any charges
normally absorbed by the seller or borrower subject to
individual product guidelines. The premium may not be paid as
cash out or cash back to the borrower.
4. Price Changes.
HomeSide Lending, in its sole discretion, may institute
Emergency Price Changes or other Intraday Price Changes when
the market and prudent practices so require.
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302 Lock Procedures
It is the Preferred Seller and HomeSide Lending's intent to
receive lock-in information via an interface with the
Preferred Seller's Lock-in system to our system once
programming has been completed.
1. Registering or Price Committing Loans.
Fax
If the Preferred Seller desires to lock in loans via fax they
must use the Lock in form provided by HomeSide Lending
(attached) and fax to the following number:
800-571-5861
This form must be completed in order for the "Preferred
Seller" to receive the correct rate and price. HomeSide
Lending will notify the Preferred Seller regarding incomplete
forms.
Telephone
If the Preferred Seller desires to lock in loans via telephone
they must call HomeSide Lending's Marketing Liaison Call
Center:
904-281-7899
Please include the following information when using the
telephone:
- Borrowers name,
- Loan amount,
- interest rate,
- Number of days to be locked,
- Loan program,
- Loan type,
- Property type,
- Purchase or refinance,
- Property address,
- Application date, and
- The "Preferred Seller's" code.
Confirmations
HomeSide Lending Marketing will forward all confirmations to
the "Preferred Seller" via fax within 24 hours of receiving
Lockins to allow the "Preferred Seller" to review the loan
number and buy price information for accuracy.
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NOTE: Please make sure you provide complete Lockin information
whether using the fax machine or telephone.
2. New Applications.
New Applications are defined as those taken by Preferred
Seller since the last regular 10:30 a.m. price posting or any
immediately preceding an Emergency Price Change. Any other
applications are considered floating, regardless of whether or
not they had been previously registered as floating. New
Applications may be locked in at any time between the hours of
10:30 AM (ET) and 8:30 AM (ET), the next business day.
a. HomeSide encourages that loans be locked in at the
time of application. However, "Preferred Seller" will
have until 8:30 AM (ET) on the next business day from
the date of application to lock in the loan. Prices
posted by HomeSide each day will remain in effect
until 8:30 AM (ET) the next Business Day unless an
Emergency or Intraday Price Change occurs.
b. In the event of an Emergency Price Change, "Preferred
Seller's" retail origination channel will have a one
(1)-hour window to lock in mortgage loans with the
"Preferred Seller" under the previously existing rate
bulletin. The one (1)-hour window begins from the
time HomeSide Lending notifies the person designated
by "Preferred Seller" of a price change. The one
(1)-hour window shall apply only to new mortgage
loans. The "Preferred Seller" will have an additional
one (1)-hour window to lock in mortgage loans with
HomeSide Lending.
c. These new applications may be registered with
HomeSide Lending under the previously posted price
from the time "Preferred Seller" is notified. The two
(2)-hour window (one (1)-hour for loans to be locked
with the "Preferred Seller" and an additional one
(1)-hour to lock loans with HomeSide Lending) begins
from the time the first attempt is made at
notification. HomeSide Lending, Inc. may require that
a copy of any new application locked-in during the
two hour period be transmitted to Jacksonville for
verification. The copy, if required, will be sent by
facsimile if available, or overnight mail. Floating
rate mortgage loan applications will remain subject
to market rate risk and immediate rate/price changes.
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NOTE: The two (2)-hour window is provided by HomeSide
Lending to allow the "Preferred Seller" to lock in
rates and prices on new mortgage loans which have
been committed to it's customers.
d. In the event of an intraday price change which is not
an "Emergency Price Change", registrations will not
be processed during the "blackout" period which
normally lasts approximately 15 minutes in order to
update rates and/or prices. New registrations will
receive the new rate in effect after the price
change.
e. In the event of a Intraday Price Change which is not
an "Emergency Price Change" by HomeSide Lending,
"Preferred Seller's" Retail origination channel will
be able to either lock in New Applications at the
original posted price per the above policy. If the
Intraday Price Change results in an improvement in
pricing, "Preferred Seller" may take advantage of the
improvement. For the purpose of overnight price
protection, the better of the original price or the
last price posted by HomeSide Lending each Business
Day may be used to lock in loans until 8:30 AM (ET)
the next Business Day, per the above policy.
3. Floating Locks.
Floating Rate Applications must be registered without a buy
price expiration date.
a. Floating rate application may choose to lock at a
later date, in which case the borrower is subject to
the rate and buy price in effect at that time.
b. Rates on loans which have previously been registered
as float to lock will be good from 10:30 AM (ET) each
business day until 10:00 PM (local time), unless an
emergency price change occurs.
c. In the event of an emergency price change, the new
price shall be effective immediately with respect to
all floating rate applications and any new
applications not already taken.
d. Prior to receiving a fixed price commitment, floating
rate applications have no protection as to rate or
price.
NOTE: Once a floating loan has been registered with HomeSide
Lending, the loan number provided by HomeSide Lending must be
used when the loan is eventually committed with a specific
rate and price.
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303 Lock Terms and Programs
1. Standard Locks.
The lock-in periods for all loan programs are 15, 30, 45 or 70
calendar days without the payment of a fee. These time periods
include the delivery of a complete, correct and HomeSide
Lending fundable form closing package.
NOTE: A 70 day lock will be accepted on a new refinance
application without an up front fee, however HomeSide Lending
reserves the option to assess a .50% non-refundable,
applicable commitment fee during heavy refinance periods.
HomeSide Lending will notify the Preferred Seller regarding
implementation of this policy.
2. Extended Locks.
90 and 120 day rate lock protection is available for purchase
transactions on all programs. A non-refundable up front fee of
1% is required to guarantee the commitment terms and will be
credited toward the purchase price at the time of loan
funding. The up front fee must be received by HomeSide Lending
within seven (7) calendar days from the loan registration
date. If the fee is not received within the seven (7) days,
the loan will be canceled from the system. Fees on declined
loans will be refunded to the borrower.
3. Rate Cap Float Program.
This program is designed to protect a borrower's interest rate
risk and qualifications during new construction. Loan officers
should contact HomeSide Lending's Marketing Liaison to
determine which programs are eligible for Rate Cap Protection.
a. The lock-in period is 180 days (closed and back) and
the rate cap will be .50% in rate above the then
current 70 day rate and price for the selected
program on the day of application. This rate and
price becomes the "Index Rate" for the program and is
restricted to rates with buy prices of 99.00 and
higher. The expiration date will be 180 days.
b. Anytime between 180 days and 5 days prior to the
original Buy Price Expiration Date, the borrower may
exercise the lock option by locking the loan under
any of HomeSide Lending's standard or extended lock
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terms using any currently quoted rate and price. If
the option is exercised, the expiration date will
either remain at the original 180 day expiration
date, or the expiration date of the newly elected
lock term, whichever is sooner. Additional fees for
extended rate protection will be waived if the
borrower locks the loan under a new program without
exercising the option.
c. A non-refundable up front fee of 1.00% is required to
guarantee the commitment terms .50% of the up front
fee is fully applicable toward the borrowers closing
costs. The cost for the option is .50% discount point
up front, which is due and payable to the HomeSide
Lending's Secondary Marketing Department to help
cover the cost of providing this program. The up
front fee must be received by HomeSide Lending within
seven (7) calendar days from the loan registration
date. HomeSide Lending Marketing Liaison Staff will
monitor the receipt of the funds. If the fee is not
received within the seven (7) days, the loan will be
canceled from the system. Fees on declined loans will
be refunded to the borrower.
4. Shoppers Lock-In.
This program allows the borrower to lock-in an interest rate
for 70 days closed and back without a property. From the time
of the original lock-in, the Preferred Seller has 30 days to
contact HomeSide Lending Marketing with a property address
(the remainder of the lock period will be used for processing,
closing and delivery to HomeSide Lending). If a property
address is not obtained within 30 days, the rate lock expires.
5. Buyers Choice (Float-Down Protection).
This program allows the borrower to lock-in an interest rate
and purchase a one time option to float down to a better rate
prior to closing.
a. The borrower may chose either a 45, or 70 day lock
term to set the initial interest rate and buy price
of the option.
b. The Buyers Choice conversion from the original terms
to a new price and rate may be exercised within 30 or
45 days of buyprice expiration. Once the conversion
is exercised, the buy price expiration will remain at
the initial expiration date or 30 days from date of
conversion, whichever is sooner.
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c. The Preferred Seller will be quoted the rate for the
desired lock term (30 or 45 days). If the new rate at
that time is lower than the buyer's initial locked-in
rate at the same buy price, the buyer may elect the
lower rate.
d. This option can only be exercised one time to take
advantage of the lower rate. The cost for the option
is .50% discount point up front. The up front fee is
non-applicable and non-refundable if the borrower
exercises his option to float down. The up front fee
must be received by HLI within seven (7) calendar
days from the loan registration date. If the fee is
not received within the seven (7) days, HLI retains
the right to cancel the loan from the system. By
accepting the terms of the lock, the Preferred Seller
agrees to remit the fee to HLI. HLI retains the right
to deduct uncollected fees from a future loan funding
and/or inactivate the Preferred Seller. Fees on
declined loans will be refunded if proper
underwriting documentation is provided to HLI.
e. If the borrower does not exercise the option and
closes under the original lock terms, the .50% fee
will be refunded by separate check after loan
funding.
f. The Buyers Choice can be combined with Standard lock,
or the Shoppers lock programs.
g. The HLI interest Rate Float Down Agreement
(disclosure) is a required document in all Buyers
Choice loan files.
h. If the Preferred Seller wishes to extend the date of
the original lock term, the right to float down is
forfeit. The loan will be subject to relock policy.
An additional float down protection may be purchased.
400 RELOCKS
A loan has been relocked when the Lock Expiration Date field on RLIC
has been changed to reflect the new Lock Expiration Date. Only loans
locked under the Standard and Extended Rate Lock programs are eligible
to be relocked under this policy.
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401 Relock Options - Prior to Expiration
When a purchase application lock-in is within 10 days of its
closed and back buy price expiration date, it may be relocked
for additional days. The cumulative number of consecutive
locks cannot exceed 125 days. If a loan has received 125 days
of cumulative lock ins, the loan will not be given another
lock in until it is ready to close. HomeSide Lending's
Marketing Liaison Officer must be contacted to obtain a price
and the term of the lock will allow only sufficient time for
preparation of the closing package, closing, and return of the
closed loan package to HLI. Relocks may be locked only between
10:30 AM (ET) and 4:45 PM (ET), subject to existing prices at
the time of lock-in.
402 Refinance Relock Options - Prior to Expiration
When a refinance lock-in is within 10 days of its closed and
back expiration date, it can be relocked for a maximum
additional 15 days. All lock periods include time for the
recission period on refinance loans. If additional days are
required to meet recission, the loan must be relocked
according to policy.
403 Calculating the New Rate and Discount - Prior to Expiration
1. Improving Market.
At the time of relock request, if the market has improved for
the same lock period, the relock rate and buy price will
remain the same as the immediately preceding lock-in.
2. Declining Market.
The new rate and buy price will be the rate and buy price that
was in effect on the date of the previous lock-in or the
currently offered rate and buy price for the original lock
term, whichever is worse.
3. Extended Locks.
Loans originally locked under an extended rate lock program
will use the above policy and extend to a maximum of 30 days.
4. Relocking a Rate No Longer Offered.
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<PAGE> 66
When the market has changed such that the previously locked-in
rate is no longer currently offered, relocks at the old rate
with a new buy price will be considered by the HomeSide
Lending Marketing Liaison Officer on a case-by-case basis.
HomeSide Lending, however, is under no obligation to extend a
lock expiration date if a rate or program is no longer
offered.
5. Requests for Change in Program, Amortization or
Interest Rate
If at the time of relock, the applicant chooses to change
rate, amortization period, or program, the "Preferred Seller"
must notify HomeSide Lending's Marketing Liaison Officer to
receive the pricing for the new rate, amortization period or
program desired. Provided that there is no change in program,
requests for changes in amortization period or interest rate
will be accepted at the rate and buy price as of the date of
the previous lock-in. Changes in program will require a
renegotiation per the above policy.
404 Expired or Canceled Locks
Locks which have expired will be treated as a relock and
priced at the highest price. Loans which have been previously
canceled and reactivated within 60 days will be treated as a
relock. The loan should be priced at the highest price, using
the initial lock, relock, and reinstatement dates in the
calculation.
405 Change in Property
The loan number belongs to the property and not the borrower.
Therefore, if a borrower changes property, the old number
should be canceled off the system. The new property will be
treated as a new lock.
406 Renegotiation request
It is HomeSide Lending's policy to have the "Preferred Seller"
relock per the above policy. A customer may propose pulling
the loan if HomeSide Lending does not allow him/her to
renegotiate to a price more beneficial to the borrower.
Occasionally it may be in the HomeSide Lending's interest to
do so. Request for renegotiations will be received only
between
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the hours of 10:30 AM and 4:45 PM ET and will be considered on
a case by case basis.
500 SPECIAL CONVENTIONAL PRODUCTS
Certain conventional loan programs (other than standard FNMA/FHLMC
conforming fixed rate programs) may have differing lock-in periods and
relock policies due to varying investor or HomeSide Lending
requirements. These programs are normally limited in total commitment
duration and volume. Due to these requirements, general policies
regarding locks, relocks, repricing and floating loans may not apply.
Specific guidelines may be addressed in the individual product
descriptions; therefore, Sections 111 and IV will be superseded by the
individual product descriptions where they differ. Under investor
limited programs, floating loans have no commitment protection as to
rate, discount or product availability. Additionally, due to commitment
expiration dates, lock-in periods may be reduced, and/or relocks may
not be granted.
600 LOCK-IN FEES
For programs that require lock in fees please remit all payments to:
HomeSide Lending, Inc.
7301 BAYMEADOWS WAY
JACKSONVILLE, FL 32256
ATTN.: FL JAX 3B-ML
The following criteria is required when remitting the fees:
- loan number
- borrower name
- applicable program (90/120, buyers choice, extended
rate cap)
This commitment fee must reach the HomeSide Marketing Liaison
Department within seven (7) calendar days from the loan registration
date. If the fee is not received within the seven (7) days, the loan
will be canceled from the system. Fees on declined loans may be waived
if proper underwriting documentation is provided to HomeSide Lending.
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SCHEDULE 3
HOMESIDE LENDING, INC.
[LOGO]
"Preferred Seller"
Secondary Marketing
Buy Price Policy 2
Wholesale Lending
Correspondent/Broker
May 1, 1996
<PAGE> 69
TABLE OF CONTENTS
INTRODUCTION
POLICY AND PROCEDURE
100 GENERAL 4
200 CLOSED AND BACK POLICY 4
201. Late Deliveries ......................................... 4
202. Incorrect Delivery ...................................... 4
300 PRICING AND LOCK-INS 6
301. Pricing ................................................. 6
1. Price/Rate Posting.
2. Price/Rate Distribution.
3. Premium Pricing.
302. Lock Procedures ......................................... 7
1. New Registrations.
303. Lock Terms and Programs ................................. 10
1. Standard Locks.
2. Extended Locks.
3. Rate Cap Float Program.
4. Shoppers Lock-In.
5. Buyers Choice (Float-Down Protection.)
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400 RELOCKS 13
401. ReLock Options .......................................... 13
402. Refinance Relock Options ................................ 13
403. Calculating the New Rate Discount ....................... 14
1. Improving Market.
2. Declining Market.
3. Extended Locks.
4. Relocks on Rates No Longer Offered.
5. Change in Rate, Term or Program.
404. Expired or Canceled Locks ............................... 14
405. Change in Property.. .................................... 15
406. Renegotiation Requests .................................. 15
500 SPECIAL CONVENTIONAL PRODUCTS 15
600 FEES 16
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INTRODUCTION
It is HomeSide Lending's objective to offer competitive prices, price
lock periods, and loan programs. This policy will ensure that all
products originated or purchased will be secondary marketable at prices
which minimize market risk and loss to the company.
It is the responsibility of the HomeSide Lending's Secondary Marketing
Department in Jacksonville to post prices and lock terms each business
day. It is the responsibility of the Preferred Seller to provide
HomeSide Lending's Secondary Marketing with the information necessary
to make hedging decisions.
The Residential Loan Inventory Control System (RLIC) was designed to
provide HomeSide Lending with up-to-date pipeline information. All loan
data keyed into RLIC throughout the day is extracted and fed into
HomeSide Lending's hedging model. All pricing information including
loan amounts, loan types, price lock periods, rate and buy price
combinations, and etc. is used by HomeSide Lending's Marketing to
determine the best delivery to the secondary market.
POLICY
100 General
The lock-in policy of HomeSide Lending is designed under a "dual
pricing" concept. Under this concept there are two basic prices for
every loan application (and subsequent loan closing).
The first price is the "buy price." This is the price at which HomeSide
Lending will buy a loan from the Preferred Seller. The buy price is
established by HomeSide Lending marketing based upon current market
conditions and available commitments and is subject to change at any
time. Once locked-in, the buy price is guaranteed for the lock-in term.
The second price is the "closing price." This is the price the
Preferred Seller quotes (commits) to their customer, and this is the
price at which the loan will close.
Rates and discounts for all loan programs are quoted daily. No rates
other than those quoted may be given without the express consent of the
HomeSide Lending Secondary Marketing Department. Requests must be
placed through HomeSide Lending Marketing Liaison Staff.
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HomeSide Lending Secondary Marketing will honor lock ins on all loans
which conform to program guidelines. Loans which are outside of
published guidelines require an exception per published policy prior to
lock in. The Preferred Seller should contact HomeSide Lending Marketing
to obtain a waiver for individual loans which do not conform to program
guidelines. The HomeSide Lending program manual, with periodic updates,
should be used to determine if a loan conforms to HomeSide Lending
product parameters.
200 Closed and Back Policy
HomeSide Lending offers a variety of lock-in periods for price
committed applications. All the price protected applications must be
closed and the closing package, with original note and HMDA/GSE
documentation, delivered to HomeSide Lending before the HomeSide
Lending Buy Price Expiration Date. All loans must be in complete,
correct and fundable form per HomeSide Lending guidelines. If these
guidelines are not met, the policies below will be followed:
201. Late Deliveries
Complete loans (including the original note, and completed HMDA/GSE
documentation) must be delivered on or before HomeSide Lending's
buyprice expiration date, "Preferred Seller" shall notify HomeSide
Lending of any mortgage loans which will not meet such expiration date.
Upon such notification, either telephonically or through delivery and
notation in the closed loan file, HomeSide Lending will grant
"Preferred Seller" a fifteen (15)-day extension from the buyprice
expiration date for the cost of the roll, as indicated on
Knight-Ridder, rounded to the nearest one-eighth of one percent
(0.125%). An additional fifteen (15)-day extension will be granted for
one-half of one percent (0.50%). After thirty (30) days, the mortgage
loans will be marked-to-market at the time they are eligible for
funding. Failure to notify HomeSide Lending regarding mortgage loans
which will not meet their buyprice expiration date as described above
will result in such mortgage loans being marked-to-market. A late
delivery will require a renegotiation per standard policy. (See page 9,
Section V.C Relock, Calculating the New Rate and Discount.)
NOTE: It is "Preferred Seller's" responsibility to relock the loan
prior to buyprice expiration date.
202 Incorrect Delivery (problem reject loans:)
<PAGE> 73
Loans must be delivered in HomeSide Lending fundable form before the
buy price expiration date. If a loan is deemed to have documentation or
information deficiencies, the procedures listed below are followed:
1. If loan file problems are corrected within the HomeSide
Lending buy price expiration period (prior to expiring), no penalty is
assessed.
2. If loan file problems are not resolved within the buy price
expiration period, the loan is penalized .50 and extended 15 days. This
15 day roll should be used by the Preferred Seller to resolve any
outstanding problems.
3. If loan file problems are not resolved by the NEW buy price
expiration, it is penalized again .50 and extended another 15 days. In
all instances of penalty, the Preferred Seller is notified immediately.
Loans cannot be held longer than 30 days by HomeSide Lending. Once a
loan is at HomeSide Lending for 30 days without resolution, it is
returned to the Preferred Seller for correction, and a pair-off fee may
be applicable.
300 Pricing and Lock-Ins
All loans will have four options available for lock in: (1) at
time of registration for 15, 30, 45, or 70 days (or as specified on the
daily rate sheet), (2) at the time of registration for extended rate
protection, (3) at the time of registration, rate cap protection, or
float-down protection may be purchased, or (4) register as a float and
lock in at a later date under any currently available program. The loan
may be locked in at any time during the processing of the loan;
however, the loan must be locked in prior to closing.
301 Pricing
1. Price/Rate Posting.
HomeSide Lending Secondary Marketing posts rates NOT LATER THAN 10:30
AM Eastern Time (ET) each business day. Rates will be good from 10:30
AM (ET) each business day until 10:00 PM local time, unless a price
change occurs.
a. On occasion, the secondary mortgage market will fluctuate such
that HomeSide Lending Secondary Marketing will change prices
during the day. If the secondary market has worsened, HomeSide
Lending Marketing must limit the cost incurred by
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<PAGE> 74
loans being locked at prices lower than the secondary market. If
the secondary market has improved, HomeSide Lending Marketing can
pass the improvement on to the Preferred Seller's customers.
NOTE: HomeSide Lending, in its sole discretion, may institute Emergency
Price Changes or other Intraday Price Changes when the market and
prudent practices so require.
2. Price/Rate Distribution.
Rates will be distributed by the Preferred Seller as they are available
via fax machine. The Preferred Seller will be responsible for
distributing their daily rate bulletin to their production channels.
3. Premium Pricing.
HomeSide Lending Marketing Liaison may offer par plus pricing (negative
fee pricing), wherein marketing fees are exchanged for a higher introit
rate. Normally, the highest price posted will be 103.00. The premium
may be used to cover any charges normally absorbed by the seller or
borrower subject to individual product guidelines. The premium may not
be paid as cash out or cash back to the borrower.
302 Lock Procedures
1. Registering or price committing loans.
Fax
If the Preferred Seller desires to lock in loans via fax they must use
the Lock-in form provided by HomeSide Lending and fax to the following
number:
800-571-5861
This form must be complete in order for the Preferred Seller to receive
the correct rate and price. HomeSide Lending will notify the Preferred
Seller regarding incomplete forms.
Telephone
If the Preferred Seller desires to lock in loans via phone they must
call HomeSide Lending's Marketing Liaison Call Center at:
904-281-7899
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<PAGE> 75
Operations:
904-281-3713
Please include the following information when using the phone.:
- Borrowers name,
- Loan amount,
- Interest rate,
- Number of days to be locked,
- Loan program,
- Loan type,
- Property type,
- Purchase or refinance,
- Property address,
- Application date, and
- Company ID code (Example: 5XYZ, 7XYZ).
Confirmation
HomeSide Lending Marketing will forward all confirmations to the
Preferred Seller via fax within 24 hours of receiving Lock-ins to allow
the Preferred Seller to review the loan number and buyprice information
for accuracy.
Note: Please make sure you provide complete Lock-In information whether
using the fax machine or telephone.
2. New Applications.
New Applications are defined as those taken by Preferred Seller since
the last regular 10:30 a.m. price posting or any immediately preceding
an Emergency Price Change. Any other applications are considered
floating, regardless of whether or not they had been previously
registered as floating. New Applications may be locked in at any time
between the hours of 10:30 AM (ET) and 10:00 PM local time.
a. HomeSide Lending encourages that loans be locked in at the time
of application. However, "Preferred Seller" will have until 10:00
PM Local Time. Prices posted by HomeSide each day will remain in
effect until 10:00 PM Local Time unless an Emergency or Intraday
Price Change occurs.
b. In the event of an Emergency Price Change by HomeSide Lending,
"Preferred Seller's" Non-Retail origination channel will be
subject to the new rates and prices immediately upon notification
by HomeSide Lending to the person designated by
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<PAGE> 76
"Preferred Seller". "Preferred Seller" will have a one (1)-hour
window to lock in mortgage loans originated through it's
non-retail operations under the previously existing rate bulletin
with HomeSide Lending. The one (1)-hour window begins from the
time HomeSide Lending notifies the person designated by
"Preferred Seller".
NOTE: The one (1)-hour window is provided by HomeSide Lending to
allow the "Preferred Seller" to lock in rates and prices on new
mortgage loans which have been committed to it's customers.
c. These new applications may be registered with HomeSide Lending
under the previously posted price from the time "Preferred
Seller" is notified by HomeSide Lending, Inc. (The one (1)-hour
window begins from the time the first attempt is made at
notification.) HomeSide Lending, Inc. may require that a copy of
any new application locked-in during the grace period be
transmitted to Jacksonville for verification. The copy, if
required, will be sent by facsimile if available, or overnight
mail. Floating rate mortgage loan applications will remain
subject to market rate risk and immediate rate/price changes.
d. In the event of an Intraday Price Change by HomeSide Lending,
"Preferred Seller's" Non-Retail origination channel will be
subject to the new rates and prices immediately upon
notification. "Preferred Seller" will have a one (1)-hour window
to lock in mortgage loans originated through it's non-retail
operations under the previously existing rate bulletin with
HomeSide Lending. The one (1)-hour window begins from the time
HomeSide Lending notifies the person designated by "Preferred
Seller" of a price change. If the Intraday Price Change results
in an improvement in pricing, "Preferred Seller" may take
advantage of the improvement.
NOTE: The one (1)-hour window is provided by HomeSide Lending to
allow the "Preferred Seller" to lock in rates and prices on new
mortgage loans which have been committed to it's customers.
3. Floating Locks.
Floating Rate Applications must be registered without a buy price
expiration date.
a. Floating rate application may choose to lock at a later date, in
which case the borrower is subject to the rate and buy price in
effect at that time.
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<PAGE> 77
b. Rates on loans which have previously been registered as float to
lock will be good from 10:30 AM (ET) each business day until
10:00 PM (local time), unless an Emergency or Intraday Price
change occurs.
c. In the event of an Emergency or Intraday Price Change by HomeSide
Lending, "Preferred Seller's" Non-Retail origination channel will
be subject to the new rates and prices immediately upon
notification by HomeSide Lending to the person designated by
"Preferred Seller". "Preferred Seller" will have a one (1)-hour
window to lock in mortgage loans originated through it's
non-retail operations under the previously existing rate bulletin
with HomeSide Lending. The one (1)-hour window begins from the
time HomeSide Lending notifies the person designated by
"Preferred Seller".
NOTE: The one (1/-hour window is provided by HomeSide Lending to
allow the "Preferred Seller" to lock in rates and prices on new
mortgage loans which have been committed to it's customers.
d. In the event of an emergency price change, the new price shall be
effective immediately with respect to all floating rate
applications and not already lock in on "Preferred Seller's"
automated system.
e. Prior to receiving a fixed price commitment, floating rate
applications have no protection as to rate or price.
NOTE: Once a floating loan has been registered with HomeSide
Lending, the loan number provided by HomeSide Lending must be
used when the loan is eventually committed with a specific rate
and price.
303 Lock Terms and Programs
1. Standard Locks.
The lock-in periods for all loan programs are 15, 30, 45 or 70 calendar
days without the payment of a fee. These time periods include the
delivery of a complete, correct and HomeSide Lending fundable form
closing package.
NOTE: A 70 day lock will be accepted on a new refinance application
without an up front fee, however HomeSide Lending reserves the option
to assess a .50% non-refundable, applicable commitment fee
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<PAGE> 78
during heavy refinance periods. HomeSide Lending will notify the
Preferred Seller regarding implementation of this policy.
The fee becomes due and payable at the time the loan is registered
under this program. This fee will be refunded by separate check after
loan funding. The up front fee must be received by HomeSide Lending
within seven (7) calendar days from the loan registration date. If the
fee is not received within the seven (7) days, HomeSide Lending retains
the right to cancel the loan from the system. By accepting the terms of
the lock, the Preferred Seller agrees to remit the fee to HomeSide
Lending. Fees on declined loans may be waived if proper underwriting
documentation is provided to HomeSide Lending.
2. Extended Locks.
90 and 120 day rate lock protection is available for purchase
transactions on all programs. A non-refundable up front fee of 1% is
required to guarantee the commitment terms. The fee becomes due and
payable at the time the loan is registered under this program. This fee
will be refunded by separate check after loan funding. The up front fee
must be received by HomeSide Lending within seven (7) calendar days
from the loan registration date. If the fee is not received within the
seven (7) days, HomeSide Lending retains the right to cancel the loan
from the system. By accepting the terms of the lock, the Preferred
Seller agrees to remit the fee to HomeSide Lending. Fees on declined
loans may be waived if proper underwriting documentation is provided to
HomeSide Lending.
3. Rate Cap Float Program.
This program is designed to protect a borrower's interest rate risk and
qualifications during new construction. The Preferred Seller should
contact HomeSide Lending Marketing to determine which programs are
eligible for Rate Cap Float Protection.
a. The lock-in period is 180 days (closed and back) and the rate cap
will be .50% in rate above the then current 70 day rate and price
for the selected program on the day of registration. This rate
and price becomes the "Index Rate" for the program and is
restricted to rates with buy prices of 99.00 and higher. The
expiration date will be 180 days.
b. Anytime between 120 days and 5 days prior to the original Buy
Price Expiration date, the Preferred Seller may exercise the lock
option on behalf of the borrower by locking the loan under any of
HomeSide Lending's standard or extended lock terms using any
currently quoted rate and price. If the option is exercised, the
expiration date will either remain at the original
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180 day expiration date, or the expiration date of the newly
elected lock term, whichever is sooner. Additional fees for
extended rate protection will be waived if the Preferred Seller
locks the loan under a new program without exercising the option.
c. A non-refundable up front fee of 1.00% is required to guarantee
the commitment terms. The cost for the option is .50% discount
point up front, non-applicable and non-refundable. The remaining
.50% will be refunded by separate check after loan funding. The
up front fee must be received by HomeSide Lending within seven
(7) calendar days from the loan registration date. If the fee is
not received within the seven (7) days, HomeSide Lending retains
the right to cancel the loan from the system. By accepting the
terms of the lock, the Preferred Seller agrees to remit the fee
to HomeSide Lending. Fees on declined loans may be waived if
proper underwriting documentation is provided to HomeSide
Lending.
4. Shoppers Lock-In.
This program allows the Preferred Seller to lock-in an interest rate
for 70 days closed and back without a property. From the time of the
original lock-in, the Preferred Seller has 30 days to contact HomeSide
Lending Marketing with a property address (the remainder of the lock
period will be used for processing, closing and delivery to HomeSide
Lending). If a property address is not obtained within 30 days, the
rate lock expires.
5. Buyers Choice (Float-Down Protection).
This program allows the Preferred Seller to lock-in an interest rate
and purchase a one time option to float down to a better rate prior to
closing.
a. The Buyers Choice conversion from the original terms to a new
price and rate may be exercised anytime after underwriting
approval and within 30 days of closing. Once the conversion is
exercised, the buy price expiration will remain at the initial 70
day expiration or 30 days from date of lock, whichever is sooner.
b. This option can only be exercised one time to take advantage of
the lower rate. The cost for the option is .50% discount point up
front, non-applicable and non-refundable. The up front fee must
be received by HomeSide Lending within seven (7) calendar days
from the loan registration date. If the fee is not received
within the seven (7) days, HomeSide Lending retains
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<PAGE> 80
the right to cancel the loan from the system. By accepting the
terms of the lock, the correspondent agrees to remit the fee to
HomeSide Lending. Fees on declined loans may be waived if proper
underwriting documentation is provided to HomeSide Lending.
c. If the Preferred Seller does not exercise the option and closes
under the originai lock terms, the .50% fee will be refunded by
separate check after loan funding.
d. The Preferred Seller will be quoted the 30 day rate. If our 30
day rate at that time is lower than the Preferred Seller's
initial locked-in rate at the same buy price, the Preferred
Seller may elect the lower rate.
e. The Buyers Choice. can be combined with Standard lock, or the
Shoppers lock programs.
f. The HomeSide Lending Interest Rate Float Down Agreement
(disclosure) is a required document in all Buyers Choice loan
files.
400 Relocks
A loan has been relocked when the Lock Expiration Date field on RLIC
has been changed to reflect the new Lock Expiration Date. Only loans
locked under the Standard and Extended Rate Lock programs are eligible
to be relocked under this policy.
401 Relock Options - Prior to Expiration
When a purchase application lock-in is within 10 days of its closed and
back Buy Price Expiration Date, it may be relocked for additional days.
The cumulative number of consecutive locks cannot exceed 125 days. If a
loan has received 125 days of cumulative lock ins, the loan will not be
given another lock in until it is ready to close. The Marketing Liaison
Staff must be contacted to obtain a price and the term of the lock will
allow only sufficient time for preparation of the closing package,
closing, and return of the closed loan package to HomeSide Lending.
Relocks may be locked only between 10:30 AM (EST) and 4:45 PM (EST),
subject to existing prices at the time of lock-in.
402 Refinancie Relock Options - Prior to Expiration
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<PAGE> 81
When a refinance lock-in is within 10 days of its closed and back
expiration date, it can be relocked for a maximum additional 15 days.
All lock periods include time for the rescission period on refinance
loans. If additional days are required to meet rescission, the loan
must be relocked according to policy.
403 Calculating the New Rate and Discount - Prior to Expiration
1. Improving Market.
At the time of relock request, if the market has improved for the same
lock period, the relock rate and buy price will remain the same as the
immediately preceding lock-in.
2. Declining Market.
The new rate and buy price will be the rate and buy price that was in
effect on the date of the previous lock-in or currently offered rate
and buy price for the original lock term, whichever is worse.
3. Extended Locks.
Loans originally locked under an extended rate lock program will use
the above policy and extend to a maximum of 30 days.
4. Relocking a Rate No Longer Offered.
When the market has changed such that the previously locked-in rate is
no longer currently offered, relocks at the old rate with a new buy
price will be considered by the HomeSide Lending Marketing on a
case-by-case basis. HomeSide Lending Marketing, however, is under no
obligation to extend a lock expiration date if a rate or program is no
longer offered.
5. Requests for Change in Program, Amortization or Interest Rate
If at the time of relock, the applicant chooses to change rate,
amortization period, or program, the "Preferred Seller" must notify
HomeSide Lending's Marketing Liaison Officer to receive the pricing for
the new rate, amortization period or program desired. Provided that
there is no change in program, requests for changes in amortization
period or interest rate will be accepted at the rate and buy price as
of the date of the previous lock-in. Changes in program will require a
renegotiation per the above policy.
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<PAGE> 82
404 Expired or Canceled Locks
Locks which have expired will be treated as a relock and priced at
according to the policy in Section C above. Loans which have been
previously canceled and reactivated within 60 days will be treated as a
relock. The loan should be priced at the according to policy in Section
C above, using the initial lock, relock, and reinstatement dates in the
calculation.
405 Change in Property
The loan number belongs to the property and not the borrower.
Therefore, if a borrower changes property, the old number should be
canceled off the system. The new property will be treated as a new
lock.
406 Renegotiation Requests
It is HomeSide Lending policy to have the Preferred Seller relock per
the above policy. May propose pulling the loan if Marketing does not
allow him/her to re negotiate to a price more beneficial to the
borrower. Occasionally it may be in the Company's interest to do so.
Requests for renegotiations will be received only between the hours of
10:30 AM and 4:45 PM EST and will be considered on a case by case
basis.
500 Special Conventional Products
Certain conventional loan programs (other than standard FNMA/FHLMC
conforming fixed rate programs) may have differing lock-in periods and
relock policies due to varying investor or HomeSide Lending's
requirements. These programs are normally limited in total commitment
duration and volume. Due to these requirements, general policies
regarding locks, relocks, repricing and floating loans may not apply.
Specific guidelines may be addressed in the individual product
descriptions; therefore, Sections IV and V will be superseded by the
individual product descriptions where they differ. Under investor
limited programs, floating loans have no commitment protection as to
rate, discount or product availability. Additionally, due to commitment
expiration dates, lock-in periods may be reduced, and/or relocks may
not be granted.
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600 Fees
For programs that require lock-in fees please remit all payments to:
HomeSide Lending, Inc.
7301 BAYMEADOWS WAY
JACKSONVILLE, FL 32256
ATTN.: FL JAX 3B-ML
The following criteria is required when remitting the fees:
- loan number
- borrower name
- applicable program (90/120, buyers choice, extended rate cap)
This commitment fee must reach HomeSide Lending's Marketing Liaison
staff within seven (7) calendar days from the loan registration date.
If the fee is not received within the seven (7) days, the loan will be
canceled from the system. Fees on declined loans may be waived if
proper underwriting documentation is provided to HomeSide Lending.
16
<PAGE> 1
EXHIBIT 10.22
[HOMESIDE LETTERHEAD]
CORRESPONDENT LENDER DELEGATED UNDERWRITING AGREEMENT
- -------------------------------------------------------------------------------
SELLER NAME: BARNETT MORTGAGE COMPANY
SELLER ADDRESS: 9000 SOUTHSIDE BOULEVARD, BUILDING 700,
JACKSONVILLE, FLORIDA 32256
TYPE OF BUSINESS ENTITY: MORTGAGE CORPORATION
DATE OF AGREEMENT: MAY 15, 1996 SELLER CONTACT PERSON: DOUG FORKER
PHONE NO: (904) 464-4383
FAX NO: (904) 987-0932
- -------------------------------------------------------------------------------
This Correspondent Lender Delegated Underwriting Agreement (the "Delegated
Underwriting Agreement") is entered into as of the date shown above by and
between the Buyer and the Seller, both as defined below, and applies to any of
the transactions described below.
RECITALS.
1. The Buyer and the Seller have entered into a Correspondent Agreement.
2. The Buyer and the Seller desire to have the Seller underwrite the Mortgage
Loans under the terms and conditions set forth below.
IN CONSIDERATION of the mutual promises made in this Correspondent Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Buyer and the Seller agree as follows:
1. DEFINITIONS.
1.1. "AFFILIATE" means an entity that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, another entity. For purposes of this definition, "control", "controlled
by", and "under common control with" means the direct or indirect possession of
ordinary voting power to elect a majority of the board of directors or
comparable body of an entity.
1.2. "AGENCY" means FNMA, FHLMC, FHA, HUD, VA, GNMA, and/or a Private Investor,
as applicable.
1.3. "AGENCY GUIDE" means: (a) the Handbook Ginnie Mae 5500.1, Government
National Mortgage Association Ginnie Mae I Mortgage-Backed Securities Guide,
Handbook Ginnie Mae 5500.2, Government National Mortgage Association Ginnie Mae
II Mortgage-Backed Securities Guide, in each case as such Guide may be amended
from time to time, (b) the HUD 4155.1 REV-4, Mortgage Credit Analysis for
Mortgage Insurance on 1-to-4 Family Properties, HUD 4000.2 REV-2, Mortgagee
Handbook Application Through Insurance (Single Family), HUD 4000.4 REV-1, Single
Family Direct Endorsement Program, HUD 4145.1 REV-2, Architectural Processing
and Inspections For Home Mortgage Insurance, 4150.1 REV-1 Valuation Analysis for
Home Mortgage Insurance, HUD 4060.1 REV-1, Mortgagee Approval Handbook, (c) the
Fannie Mae Selling and Servicing Guides, (d) the Freddie Mac Sellers' and
Servicers' Guides, and/or (e) any guide or instructions provided from time to
time by a Private Investor, in each case as such Agency Guide may be amended
from time to time.
1.4. "BUYER" means HomeSide Lending, Inc., a business corporation organized
under the laws of the state of Florida and with its principal place of business
at 7301 Baymeadows Way, Jacksonville, Florida 32256.
1.5. "CORRESPONDENT AGREEMENT" means the Correspondent Loan Purchase Agreement
entered into by and between the Buyer and the Seller as of May 15, 1996 under
which the Buyer has agreed to buy, and the Seller has agreed to sell, the
Mortgage
<PAGE> 2
Loans under the terms and conditions set forth in the Correspondent Agreement.
1.6. "DELEGATED UNDERWRITING AGREEMENT" has the meaning set forth in the
recitals above.
1.7. "FANNIE MAE" means the Federal National Mortgage Association or any
successor to Fannie Mae.
1.8. "FHA" means the Federal Housing Administration or any successor to the FHA.
1.9. "FREDDIE MAC" means the Federal Home Loan Mortgage Corporation or any
successor to Freddie Mac.
1.10. "GINNIE MAE" means the Government National Mortgage Association or any
successor to GNMA.
1.12. "HUD" means the United States Department of Housing and Urban Development,
or any successor to HUD.
1.13. "MANUAL" means the HomeSide Lending, Inc. Correspondent Operations Manual
as modified by the Addendum attached to this Delegated Underwriting Agreement,
the Buyprice Policy I and II, the Product Description Manual provided to the
Seller as part of the Correspondent Agreement, each as may be amended from time
to time.
1.14. "MORTGAGE" means a mortgage, deed of trust, or other such security
instrument which is executed by a Mortgagor pledging the Mortgaged Property as
security for repayment of a Mortgage Note.
1.15. "MORTGAGE LOAN" means a residential mortgage loan which is: (a) secured by
a Mortgage, (b) originated by the Seller, and (c) intended to be assigned by the
Seller to the Buyer under the terms of the Correspondent Agreement.
1.16. "MORTGAGED PROPERTY" means the real property, together with the
one-to-four family dwelling and any other improvements situated on such real
property, which have been pledged by a Mortgagor under a Mortgage as collateral
to secure the obligation under a related Mortgage Note.
1.17. "MORTGAGOR" means each person who executes a Mortgage.
1.18. "OPERATING AGREEMENT" means the Operating Agreement to be entered into by
and between the Buyer and the Seller as of May 31, 1996.
1.19. "SELLER" means: the entity defined as "Seller" above.
2. LOANS ELIGIBLE FOR DELEGATED
UNDERWRITING.
The Seller may underwrite the conforming and nonconforming Mortgage Loans set
forth in the Manual for which the Buyer has delegated underwriting authority
from the investor.
3. WHICH ENTITY MUST PROCESS AND UNDERWRITE MORTGAGE LOANS.
The Seller or the Seller's approved third party originator shall process each
Mortgage Loan. Only the Seller or the Seller's contract underwriter may
underwrite a Mortgage Loan.
4. COMPLY WITH THE AGENCY GUIDE.
The Seller must underwrite a Mortgage Loan in accordance with the requirements
of the applicable Agency Guide in effect at the time such Mortgage Loan is
underwritten. If an Agency changes its underwriting requirements during the
processing of a Mortgage Loan, the Seller shall amend its underwriting
procedures for such Mortgage Loan to the extent required by such Agency. The
Buyer shall provide the Seller with the benefits of any special underwriting
guideline waivers negotiated and obtained by the Buyer from an Agency on behalf
of the Seller.
5. APPRAISERS.
The Seller shall ensure that each person who appraises a Mortgage Property
satisfies the: (a) requirements of the Financial Institutions Reform Recovery
and Enforcement Act and its implementing regulations, (b) applicable Agency
Guide, and/or (c) other requirements, rules or instructions of the applicable
Agency. Without limiting the Seller's obligation above, the Seller shall not
allow a person to appraise a Mortgaged Property if the Buyer has advised the
Seller that the Buyer believes such person fails to satisfy the requirements
described above.
6. CONDITIONS WHICH MUST BE SATISFIED PRIOR TO CLOSING.
The Seller shall describe in a written "approval conditions sheet" all
requirements which a Mortgage Loan applicant must satisfy as a
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<PAGE> 3
condition to the Seller closing the related Mortgage Loan. The Seller shall
include the following items in the closed Mortgage Loan package: (a) evidence
acceptable to the Buyer that each such requirement has been satisfied, and (b)
the Buyer's Prior Approval Request Form 6100 or a Fannie Mae Form 1008 signed
and dated by the Seller's underwriter.
7. PRIVATE MORTGAGE INSURANCE
If required by the applicable Agency, the Seller shall ensure that private
mortgage insurance is obtained in such amounts as may be required by such
Agency. The Seller shall obtain private mortgage insurance only from the
following list of insurers: (a) PMI, (b) GEMICO, (c) UGIC, (d) RMIC, (e) MGIC,
(f) CMAC, (g) and TRIAD.
8. CONDOMINIUM PROJECTS.
The Seller shall provide to the Buyer a letter relating to the warrantability of
a condominium project in which the Mortgage Property is situated. Such letter
shall warrant the condominium project is a: (a) Type A, B or C project for
Fannie Mae Mortgage Loans, or (b) Class I, II or III project for Freddie Mac
Mortgage Loans.
9. REPURCHASE MORTGAGE LOANS.
9.1. IN GENERAL. The Seller shall repurchase a Mortgage Loan from the Buyer
under the terms set forth in the Correspondent Agreement and the
Operating Agreement.
9.2. UNDERWRITING OR PROCESSING DEFICIENCIES. Without limiting the above, the
Buyer shall notify the Seller in writing of any processing or underwriting
deficiency discovered by the Buyer, whether through its quality control review
or otherwise. The Seller shall cure each such deficiency within the applicable
investor's deadline, subject to any agreed upon extensions; provided, however,
that the Seller shall remedy such deficiencies within a period not to exceed
sixty (60) days. If the Seller fails to cure any such deficiency within such
period, the Seller shall immediately repurchase the related Mortgage Loan from
the Buyer.
10. QUALITY CONTROL PROGRAM.
The Seller's underwriting policies and procedures, including, but not limited
to, the Seller's quality control plan, shall comply with the applicable Agency
Guide. From time to time, the Buyer may review the Seller's underwriting
policies and procedures, including, but not limited to, the Seller's quality
control plan. The Seller shall give the Buyer access to its underwriting files,
manuals, quality control plans, closing documents, and underwriters during
normal business hours upon reasonable advance notice. The Buyer shall notify the
Seller in writing of any failure by the Seller to comply with an Agency Guide's
underwriting requirements. The Seller shall immediately cure such failure. The
Advisory Monitoring Committee identified in SECTION 4.4(B) of the Operating
Agreement shall resolve any dispute between the Buyer and the Seller.
11. ARTIFICIAL INTELLIGENCE.
The Buyer acknowledges that the Seller desires to utilize an artificial
intelligence system to help the Seller underwrite Mortgage Loans. The Seller
shall provide the Buyer with any and all information relating to such artificial
intelligence system reasonably requested by the Buyer. Any such artificial
intelligence system shall be subject to the Buyer's reasonable approval.
12. TERMINATION.
21.1. IN GENERAL. This Agreement shall terminate immediately upon the
termination of the Operating Agreement.
12.2. EFFECT OF TERMINATION. If this Delegated Underwriting Agreement is
terminated, the Buyer shall purchase all Mortgaged Loans which are processed by
the Seller and locked in with the Buyer at the time of such termination if such
Mortgage Loans satisfy the terms of this Delegated Underwriting Agreement and
the Correspondent Agreement.
13. NOTICES.
All notices, requests, demands and other All notices and other communications
required or permitted to be given under this Delegated Underwriting Agreement
shall be in writing and shall be deemed given if delivered personally,
transmitted by facsimile (and telephonically confirmed), mailed by registered or
certified mail with postage prepaid and return receipt requested, or sent by
commercial overnight courier, courier fees prepaid, to the parties at the
following addresses:
If to the Buyer to:
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<PAGE> 4
Glenda S. Edgy
Senior Vice President
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
If to Seller to:
Doug Forker
Senior Vice President
Barnett Mortgage Company
9000 Southside Boulevard
Building 700
Jacksonville, Florida 32256
with a copy to:
Karen S. Lugar, Esq.
Senior Counsel
Barnett Banks, Inc.
9000 Southside Boulevard
Building 700
Jacksonville, Florida 32256
or to such other address as the Buyer or the Seller will have specified in
writing to the other.
14. ASSIGNMENT AND DELEGATION.
No party may assign this Delegated Underwriting Agreement or delegate any of its
functions hereunder to any other party without the prior written consent of
Buyer or the Seller.
15. AMENDMENT.
No amendment or modification to this Delegated Underwriting Agreement will be
valid unless executed in writing by the Buyer and the Seller.
16. WAIVER.
No waiver of any right or obligation under this Delegated Underwriting Agreement
by any party on any occasion will be deemed to operate as a waiver on any
subsequent occasion.
17. PROVISIONS SEVERABLE.
If any provision of this Delegated Underwriting Agreement will be held to be
void or unenforceable by any court of competent jurisdiction or any governmental
regulatory agency, such provision will be considered by all parties to be
severed from this Delegated Underwriting Agreement. All remaining provisions of
this Delegated Underwriting Agreement will be considered by the parties to
remain in full force and effect.
18. GOVERNING LAW.
This Delegated Underwriting Agreement is entered into in the state of Florida.
Its construction and rights, remedies and obligations arising by, under,
through, or on account of it will be governed by the laws of the State of
Florida excluding its conflict of laws rules and will be deemed performable in
the State of Florida.
19. NO AGENCY OR JOINT VENTURE
CREATED.
This Delegated Underwriting Agreement will not be deemed to constitute the Buyer
and the Seller as partners or joint venturers, nor will the Buyer or the Seller
be deemed to constitute the other as its agent.
20. SUCCESSORS.
This Delegated Underwriting Agreement will inure to the benefit of and be
binding upon the parties hereto and their successors and assigns. Nothing in
this Delegated Underwriting Agreement expressed or implied is intended to confer
on any person other that the parties hereto and their successors and assigns,
any rights, obligations, remedies or liabilities.
21. FORCE MAJEURE.
No party shall be liable for delays or errors occurring by reason of
circumstances beyond such party's control, including, without limitation, acts
of civil, military, or banking authorities, national emergencies, labor
difficulties, fire, flood or other catastrophes, acts of God, insurrection, war,
riots, failure of transportation or equipment, or failure of vendors,
communication or power supply.
22. SECTION HEADINGS.
Section headings are intended only to assist in the organization of this
Delegated Underwriting Agreement and do not in any way limit or otherwise define
the rights and liabilities of the parties.
23. ENTIRE AGREEMENT.
This Delegated Underwriting Agreement constitutes the entire agreement among the
parties and supersede all other prior communications and understandings, written
or oral, among the parties
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<PAGE> 5
with respect to the subject matter of this Delegated Underwriting Agreement.
This Delegated Underwriting Agreement shall be deemed to supplement and amend
the Correspondent Agreement. To the extent that there are any inconsistencies
between the terms of this Delegated Underwriting Agreement and the terms of the
Correspondent Agreement, the terms of this Delegated Underwriting Agreement
shall control.
24. COUNTERPARTS.
This Delegated Underwriting Agreement may be executed in multiple
25. PLURALS AND GENDER.
In construing the words of this Delegated Underwriting Agreement, plural
constructions will include the singular, and singular constructions will include
plural. No significance will be attached to whether a pronoun is masculine,
feminine, or neuter.
26. ATTORNEYS' FEES AND COSTS.
If it is determined in a judicial proceeding that either party has failed under
any provision of this Delegated Underwriting Agreement, and if either party will
employ attorneys or incur other expenses for the enforcement, performance, or
observance of the terms of this Delegated Underwriting Agreement, then said
party, to the extent permitted by law, will be reimbursed by the losing party,
for reasonable attorneys' fees and other out-of-pocket expenses.
IN WITNESS WHEREOF, the Buyer and the Seller, as of the day first set forth
above, have caused this instrument to be signed on their behalf by their duly
authorized officers.
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<PAGE> 6
HOMESIDE LENDING, INC.
By:/s/ Mark F. Johnson
-------------------------------
Mark F. Johnson
Executive Vice President
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<PAGE> 7
BARNETT MORTGAGE COMPANY
By:/s/ Francis G. Seabrook
-------------------------------
Francis G. Seabrook
-------------------------------
(Print Name)
Title:Chairman, President and CEO
----------------------------
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<PAGE> 1
EXHIBIT 10.23
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
AMONG
HOMESIDE LENDING, INC.,
HONOLULU MORTGAGE COMPANY, INC.,
THE LENDERS PARTIES HERETO,
THE BALANCE LENDERS
PARTIES HERETO,
NATIONSBANK OF TEXAS, N.A.,
AS SYNDICATION AGENT,
BANKERS TRUST COMPANY,
AS DOCUMENTATION AGENT,
THE FIRST NATIONAL BANK OF BOSTON,
AS COLLATERAL AGENT,
AND
CHEMICAL BANK,
AS ADMINISTRATIVE AGENT
Dated as of May 31, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS..................................................... 2
1.1 Defined Terms................................................. 2
1.2 Other Definitional Provisions................................. 26
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS................................. 27
2.1 Tranche A Loans............................................... 27
2.2 Tranche B Loans............................................... 28
2.3 Making, Assignment and Purchase of Balance-Based Loans........ 29
2.4 Funding of Balance-Based Loans; Repayment..................... 30
2.5 Procedure for Balance-Based Loan Borrowings................... 30
2.6 Types of Rate-Based Loans..................................... 31
2.7 Procedure for Rate-Based Borrowings........................... 31
2.8 Conversion and Continuation Options........................... 32
2.9 Swing Line Commitments........................................ 33
2.10 Minimum Amounts and Maximum Number of Eurodollar Tranches.... 35
2.11 Interest Rates and Payment Dates for Rate-Based Loans........ 35
SECTION 3. ADDITIONAL PROVISIONS APPLICABLE TO THE LOANS................... 36
3.1 Repayment of Loans; Interest; Evidence of Debt................ 36
3.2 Fees ........................................................ 37
3.3 Optional Reductions of Commitments............................ 37
3.4 Optional and Mandatory Prepayments; Net Repayments............ 38
3.5 Computation of Discounts, Interest and Fees................... 40
3.6 Pro Rata Treatment and Payments............................... 40
3.7 Inability to Determine Interest Rate.......................... 42
3.8 Illegality.................................................... 43
3.9 Requirements of Law........................................... 43
3.10 Taxes........................................................ 44
3.11 Indemnity.................................................... 46
SECTION 4. BORROWING BASE AND ELIGIBLE COLLATERAL.......................... 46
4.1 Tranche A Borrowing Base...................................... 46
4.2 Tranche B Borrowing Base...................................... 48
4.3 Borrowing Base Definitions.................................... 50
4.4 Waiver of Requirements; Mark-to-Market........................ 66
SECTION 5. REPRESENTATIONS AND WARRANTIES.................................. 66
5.1 Financial Condition........................................... 66
5.2 No Change..................................................... 68
5.3 Corporate Existence; Compliance with Law...................... 68
5.4 Corporate Power; Authorization; Enforceable Obligations....... 68
<PAGE> 3
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5.5 No Legal Bar.................................................. 69
5.6 No Material Litigation........................................ 69
5.7 No Default.................................................... 69
5.8 Ownership of Property; Liens.................................. 69
5.9 Intellectual Property......................................... 69
5.10 Taxes........................................................ 70
5.11 Federal Regulations.......................................... 70
5.12 ERISA........................................................ 70
5.13 Investment Company Act; Other Regulations.................... 70
5.14 Subsidiaries................................................. 71
5.15 Purpose of Loans............................................. 71
5.16 Environmental Matters........................................ 71
5.17 Consummation of the Acquisitions; Stock Purchase Agreement... 72
5.18 Capitalization............................................... 72
5.19 Disclosure................................................... 72
SECTION 6. CONDITIONS PRECEDENT............................................ 73
6.1 Conditions to Initial Loans................................... 73
6.2 Conditions to Each Loan....................................... 75
SECTION 7. AFFIRMATIVE COVENANTS........................................... 76
7.1 Financial Statements.......................................... 77
7.2 Certificates; Other Information............................... 77
7.3 Payment of Obligations........................................ 79
7.4 Conduct of Business and Maintenance of Existence.............. 79
7.5 Maintenance of Property; Insurance; Risk Management........... 79
7.6 Inspection of Property; Books and Records; Discussions........ 80
7.7 Notices....................................................... 80
7.8 Environmental Laws............................................ 81
7.9 Further Assurances............................................ 81
7.10 Security Events.............................................. 81
7.11 Additional Collateral........................................ 82
7.12 Compliance With Other Loan Documents......................... 82
7.13 Maintenance of Agency Status................................. 83
7.14 GNMA Acknowledgement Agreements.............................. 83
SECTION 8. NEGATIVE COVENANTS.............................................. 83
8.1 Financial Condition Covenants................................. 83
8.2 Limitation on Indebtedness.................................... 84
8.3 Limitation on Liens........................................... 85
8.4 Limitation on Fundamental Changes............................. 86
8.5 Limitation on Sale of Assets.................................. 87
8.6 Limitation on Leases.......................................... 87
-ii-
<PAGE> 4
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8.7 Limitation on Sales and Leasebacks............................ 87
8.8 Limitation on Recourse Servicing.............................. 87
8.9 Limitation on Restricted Payments............................. 87
8.10 Limitation on Capital Expenditures........................... 88
8.11 Limitation on Investments, Loans and Advances................ 89
8.12 Limitation on Optional Payments and Modifications of Certain
Instruments and Agreements................................. 89
8.13 Limitation on Transactions with Affiliates................... 89
8.14 Limitation on Negative Pledge Clauses........................ 89
8.15 Limitation on Lines of Business.............................. 90
8.16 Limitation on Changes in Fiscal Year......................... 90
SECTION 9. EVENTS OF DEFAULT............................................... 90
SECTION 10. THE ADMINISTRATIVE AGENT; THE COLLATERAL AGENT;
THE DOCUMENTATION AGENT; THE SYNDICATION AGENT..................... 93
10.1 Appointment.................................................. 93
10.2 Delegation of Duties......................................... 94
10.3 Exculpatory Provisions....................................... 94
10.4 Reliance by Administrative Agent............................. 94
10.5 Notice of Default............................................ 95
10.6 Non-Reliance on Administrative Agent, Collateral Agent and
Other Lenders.............................................. 95
10.7 Indemnification.............................................. 96
10.8 Administrative Agent and Collateral Agent in Its Individual
Capacity................................................... 96
10.9 Successor Administrative Agent............................... 96
10.10 Successor Collateral Agent.................................. 97
10.11 Concerning the Collateral Agent and the Security
Agreements................................................ 97
SECTION 11. MISCELLANEOUS.................................................. 97
11.1 Amendments and Waivers....................................... 97
11.2 Notices...................................................... 98
11.3 No Waiver; Cumulative Remedies............................... 99
11.4 Survival of Representations and Warranties................... 99
11.5 Payment of Expenses and Taxes................................ 99
11.6 Successors and Assigns; Participations and Assignments....... 100
11.7 Adjustments; Set-off......................................... 102
11.8 Balance Lenders.............................................. 103
11.9 Release of Collateral Upon Occurrence of Positive Security
Event...................................................... 103
11.10 Authority of HomeSide on Behalf of HonoMo................... 103
11.11 Termination of HonoMo as Borrower........................... 104
11.12 Counterparts................................................ 104
11.13 Severability................................................ 104
- iii -
<PAGE> 5
11.14 Integration................................................. 104
11.15 GOVERNING LAW............................................... 104
11.16 Submission To Jurisdiction; Waivers......................... 104
11.17 Acknowledgements............................................ 105
11.18 WAIVERS OF JURY TRIAL....................................... 105
SCHEDULES
Schedule I Names, Addresses and Commitments of Lenders
Schedule II Approved Investors
Schedule 5.1 Certain Contingent Liabilities
Schedule 5.4 Consents, Etc.
Schedule 5.6 Litigation
Schedule 5.14 Subsidiaries
Schedule 5.18 Capitalization
Schedule 8.2 Certain Existing Indebtedness
Schedule 8.3 Certain Existing Liens
Schedule 8.13 Certain Affiliate Transactions
EXHIBITS
Exhibit A-1 Form of Balance-Based Note
Exhibit A-2 Form of Rate-Based Note
Exhibit A-3 Form of Swing Line Note
Exhibit B Form of Balance Lender Agreement
Exhibit C-1 Form of Holdings Guarantee
Exhibit C-2 Form of Subsidiaries Guarantee
Exhibit C-3 Form of BMC Guarantee
Exhibit C-4 Form of HomeSide Guarantee
Exhibit D-1 Form of HomeSide Security Agreement
Exhibit D-2 Form of BMC Security Agreement
Exhibit D-3 Form of HonoMo Security Agreement
Exhibit E-1 Form of Holdings Pledge Agreement
Exhibit E-2 Form of HomeSide Pledge Agreement
Exhibit E-3 Form of BMC Pledge Agreement
Exhibit F-1 Form of Borrowing Notice (ABR/Swing Line)
Exhibit F-2 Form of Borrowing Notice (Eurodollar/Balance-Based)/
Conversion Notice
Exhibit F-3 Form of Payment Notice
Exhibit G Form of Closing Certificate
Exhibit H-1 Form of Legal Opinion of Bingham, Dana & Gould, LLP
Exhibit H-2 Form of Legal Opinion of Hutchins, Wheeler & Dittmar,
a Professional Corporation
Exhibit H-3 Form of Legal Opinion of General Counsel of HomeSide
Exhibit H-4 Form of Legal Opinion of Holland & Knight
Exhibit H-5 Form of Legal Opinion of Hawaii Counsel
Exhibit I Form of Assignment and Acceptance
Exhibit J Form of Intercreditor Agreement
Exhibit K-1 Form of Holdings Second Lien Pledge Agreement
Exhibit K-2 Form of BMC Second Lien Pledge Agreement
- iv -
<PAGE> 6
CREDIT AGREEMENT, dated as of May 31, 1996, among (i) HOMESIDE LENDING,
INC., a Florida corporation ("HOMESIDE"), (ii) HONOLULU MORTGAGE COMPANY, INC.,
a Hawaii corporation ("HONOMO"; each of HomeSide and HonoMo, a "BORROWER", and,
collectively, the "BORROWERS"), (iii) the several banks and other financial
institutions from time to time parties to this Agreement (collectively, the
"LENDERS"), (iv) the Lenders from time to time designated as Balance Lenders
pursuant to subsection 11.8 (in such capacity, collectively, the "BALANCE
LENDERS"), (v) NATIONSBANK OF TEXAS, N.A., as Syndication Agent (in such
capacity, the "SYNDICATION AGENT"), (vi) BANKERS TRUST COMPANY, as Documentation
Agent (in such capacity, the "DOCUMENTATION AGENT"), (vii) THE FIRST NATIONAL
BANK OF BOSTON, as Collateral Agent (in such capacity, the "COLLATERAL AGENT")
and (viii) CHEMICAL BANK, as Administrative Agent (in such capacity, the
"ADMINISTRATIVE AGENT").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, HomeSide, certain of the Lenders parties hereto, the Syndication
Agent, the Documentation Agent, the Collateral Agent and the Administrative
Agent are parties to the Credit Agreement, dated as of March 15, 1996 (the
"EXISTING CREDIT AGREEMENT");
WHEREAS, pursuant to the Stock Purchase Agreement, dated as of December 11,
1995, as amended by Amendment No. 1, dated as of March 15, 1996 (as amended from
time to time, the "BBMC STOCK PURCHASE AGREEMENT"), between The First National
Bank of Boston ("BANK OF BOSTON") and HomeSide, Inc., a Delaware corporation
("HOLDINGS"), Holdings acquired (as hereinafter defined, the "BBMC ACQUISITION")
100% of the issued and outstanding capital stock of HomeSide on March 15, 1996
(the "BBMC CLOSING DATE");
WHEREAS, pursuant to the Stock Purchase Agreement, dated as of March 4,
1996, as amended by Amendment No. 1, dated as of May 31, 1996 (as amended from
time to time, the "BMC STOCK PURCHASE AGREEMENT"), between Holdings and Barnett
Banks, Inc. ("Barnett"), Holdings is acquiring (as hereinafter defined, the "BMC
ACQUISITION") on the Closing Date 100% of the issued and outstanding capital
stock of Barnett Mortgage Company, a Florida corporation to be renamed HomeSide
Holdings, Inc. on the Closing Date ("BMC");
WHEREAS, on the Closing Date, immediately after the BMC Acquisition, (i)
BancPLUS Financial Corp. ("BANCPLUS FINANCIAL"), a Texas corporation and a
wholly owned subsidiary of BMC, will merge with and into its wholly owned
subsidiary, BancPLUS Mortgage Company ("BANCPLUS"), a Texas corporation and the
corporate parent of HonoMo, with BancPLUS being the surviving corporation, (ii)
BancPLUS will thereupon merge with and into HomeSide, with HomeSide being the
surviving corporation and HonoMo becoming a wholly owned subsidiary of HomeSide,
and (iii) Holdings will thereupon contribute all of the capital stock of
HomeSide to BMC, resulting in HomeSide becoming a wholly owned subsidiary of BMC
on the Closing Date;
<PAGE> 7
2
WHEREAS, in connection with the BMC Acquisition, on the Closing Date
HomeSide will be required to repay certain existing indebtedness of BMC owing by
it to Barnett and repay existing indebtedness under the Existing Credit
Agreement, and from and after the Closing Date, the Borrowers will require a
credit facility in order to finance their origination and acquisition of
residential mortgage loans and mortgage servicing rights and to provide for
their ongoing working capital and general corporate needs; and
WHEREAS, the Lenders are making such credit facilities available on and
subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, the parties hereto hereby
agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes of this definition: "BASE CD RATE" shall mean the sum of (a)
the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction,
the numerator of which is one and the denominator of which is one minus the
C/D Reserve Percentage and (b) the C/D Assessment Rate; and "THREE-MONTH
SECONDARY CD RATE" shall mean, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect on such day
(or, if such day shall not be a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not
be so reported on such day or such next preceding Business Day, the average
of the secondary market quotations for three-month certificates of deposit
of major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the Administrative
Agent from three New York City negotiable certificate of deposit dealers of
recognized standing selected by it. Any change in the ABR due to a change
in the Prime Rate, the Base C/D Rate or the Federal Funds Effective Rate
shall be effective as of the opening of business on the effective day of
such change in the Prime Rate, the Base C/D Rate or the Federal Funds
Effective Rate, respectively.
"ABR Loans": Rate-Based Loans bearing interest based upon the ABR.
<PAGE> 8
3
"ACQUISITIONS": the collective reference to the BBMC Acquisition and
the BMC Acquisition.
"ADJUSTED CONSOLIDATED TANGIBLE NET WORTH": at any time, the sum of
(i) Consolidated Tangible Net Worth, plus (ii) the amount of carryover
basis in connection with the Acquisitions, plus (iii) the Appraised Value
of the Eligible Servicing Portfolio as set forth in the Appraisal thereof
delivered pursuant to subsection 7.2(h) setting forth such Appraised Value
as at such time.
"ADMINISTRATIVE AGENT": as defined in the Preamble to this Agreement.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether by
contract or otherwise.
"AGENCY": FHLMC, FNMA or GNMA.
"AGGREGATE AVAILABLE TRANCHE A COMMITMENTS": at any time, an amount
equal to the excess, if any, of (a) the aggregate Commitments then in
effect over (b) the aggregate principal amount of Loans then outstanding.
"AGGREGATE AVAILABLE TRANCHE B COMMITMENTS": at any time, an amount
equal to the excess, if any, of (a) the aggregate Tranche B Commitments
then in effect over (b) the aggregate principal amount of all Tranche B
Loans and Tranche B Swing Line Loans then outstanding.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
<PAGE> 9
4
<TABLE>
"APPLICABLE MARGIN": (a) with respect to each day during each Interest
Period relating to Balance-Based Loans, a rate per annum based on the
Rating Level in effect on the date which is two Business Days prior to the
first day of such Interest Period and (b) with respect to each day during
each Interest Period relating to Rate-Based Loans, a rate per annum based
on the Rating Level in effect on such day, in each case as set forth below:
<CAPTION>
- ------------------------------------------------------------------------------------------
Applicable Margin Applicable Margin Applicable Margin
for Tranche A for Tranche B for Tranche B
Rating Level Loans Advance Loans Portfolio Loans
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rating I .35% .35% .60%
Rating II .40% .40% .675%
Rating III .45% .45% .75%
Rating IV .625% .625% 1.00%
Rating V .625% .625% 1.50%
- ------------------------------------------------------------------------------------------
</TABLE>
"APPRAISAL": an appraisal report with respect to the Eligible
Servicing Portfolio by an independent appraiser acceptable to the
Administrative Agent.
"ASSIGNEE": as defined in subsection 11.6(c).
"AVAILABLE COMMITMENT": at any time for any Lender, an amount equal to
the excess, if any, of (a) such Lender's Commitment then in effect over (b)
the aggregate outstanding principal amount of all Loans then owing to such
Lender.
"BALANCE-BASED LOANS": the collective reference to Balance-Based
Tranche A Loans and Balance-Based Tranche B Loans.
"BALANCE-BASED TRANCHE A LOANS": as defined in subsection 2.1(a).
"BALANCE-BASED TRANCHE B LOANS": as defined in subsection 2.2(a).
"BALANCE LENDERS": as defined in the Preamble to this Agreement.
"BALANCE LENDER AGREEMENT": each Balance Lender Agreement,
substantially in the form of Exhibit B, entered into by HomeSide and a
Balance Lender pursuant to subsection 11.8.
"BALANCE LENDER DISCOUNT": with respect to each Balance-Based Loan, an
amount determined by the Administrative Agent with respect to such
Balance-Based Loan such that, when the Principal Amount of such
Balance-Based Loan is repaid by the applicable Borrower on the last day of
the Interest Period with respect thereto, such Principal Amount will be
equivalent to the proceeds of such Balance-Based Loan (net
<PAGE> 10
5
of the Balance Lender Discount) plus interest on such net proceeds
calculated at a rate per annum equal to the Applicable Margin.
"BANCPLUS": as defined in the Preamble to this Agreement.
"BANCPLUS FINANCIAL": as defined in the Preamble to this Agreement.
"BARNETT": as defined in the Preamble to this Agreement.
"BBMC ACQUISITION": the acquisition on March 15, 1996 of the capital
stock of HomeSide by Holdings pursuant to the BBMC Stock Purchase
Agreement, and the transactions related thereto.
"BBMC CLOSING DATE": as defined in the Preamble to this Agreement.
"BBMC STOCK PURCHASE AGREEMENT": as defined in the Preamble to this
Agreement.
"BMC": as defined in the Preamble to this Agreement.
"BMC ACQUISITION": the acquisition of the capital stock of BMC by
Holdings pursuant to the BMC Stock Purchase Agreement, and the related
transactions contemplated thereunder.
"BMC GUARANTEE": the BMC Guarantee to be executed and delivered by
BMC, substantially in the form of Exhibit C-3, as the same may be amended,
supplemented or otherwise modified from time to time.
"BMC PLEDGE AGREEMENT": the BMC Pledge Agreement to be executed and
delivered by BMC, substantially in the form of Exhibit E-3, as the same may
be amended, supplemented or otherwise modified from time to time.
"BMC SECURITY AGREEMENT": the Security and Collateral Agency Agreement
to be executed and delivered by BMC, substantially in the form of Exhibit
D-2, as the same may be amended, supplemented or otherwise modified from
time to time.
"BMC STOCK PURCHASE AGREEMENT": as defined in the Preamble to this
Agreement.
"BOARD": the Board of Governors of the Federal Reserve System.
"BORROWER": as defined in the Preamble to this Agreement.
<PAGE> 11
6
"BORROWER SECURITY AGREEMENT": either of the HomeSide Security
Agreement and the HonoMo Security Agreement, as the context may require.
"BORROWING BASE CERTIFICATE: either of (a) a Tranche A Borrowing Base
Certificate or (b) a Tranche B Borrowing Base Certificate.
"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.5, 2.7 or 2.9 as a date on which a Borrower requests the
Lenders to make Loans hereunder.
"BUSINESS": as defined in subsection 5.16.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"CASH EQUIVALENTS": (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the
date of acquisition and overnight bank deposits of any Lender or of any
commercial bank having capital and surplus in excess of $500,000,000, (c)
commercial paper of a domestic issuer rated at least A-1 by S&P or P-1 by
Moody's, (d) securities with maturities of one year or less from the date
of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing
authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory,
political subdivision, taxing authority or foreign government (as the case
may be) are rated at least A by S&P or A2 by Moody's, or (e) shares of
money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (d) of this definition.
"CHANGE OF CONTROL": the occurrence of any of the events or
circumstances described in Section 9(k).
"C/D ASSESSMENT RATE": for any day as applied to any ABR Loan, the
annual assessment rate in effect on such day which is payable by a member
of the Bank Insurance Fund maintained by the Federal Deposit Insurance
Corporation (the "FDIC") classified as well-capitalized and within
supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. [Section]327.4 (or
<PAGE> 12
7
any successor provision) to the FDIC (or any successor) for the FDIC's (or
such successor's) insuring time deposits at offices of such institution in
the United States.
"C/D RESERVE PERCENTAGE": for any day as applied to any ABR Loan, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board for determining the maximum reserve requirement for
a Depositary Institution (as defined in Regulation D of the Board) in
respect of new non-personal time deposits in Dollars having a maturity of
30 days or more.
"CHEMICAL": Chemical Bank, a New York banking corporation.
"CLOSING DATE": the date, on or before May 31, 1996, on which the
conditions precedent set forth in subsection 6.1 shall be satisfied.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL": all assets of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security
Document.
"COLLATERAL AGENT": as defined in the Preamble to this Agreement.
"COMMITMENT": as to any Lender, the collective reference to such
Lender's Tranche A Commitment and Tranche B Commitment.
"COMMITMENT FEE RATE": for each day during each quarterly calculation
period, a rate per annum based on the Rating Level in effect on such day,
as set forth below:
Commitment Fee
Rating Level Rate
------------ --------------
- --------------------------------------------------------------------
Rating I .125%
Rating II .150%
Rating III .175%
Rating IV .250%
Rating V .375%
"COMMITMENT PERCENTAGE": as to any Lender at any time, the percentage
which such Lender's Commitment then constitutes of the aggregate
Commitments, or, at any
<PAGE> 13
8
time after the Commitments shall have expired or terminated, the percentage
which the aggregate Principal Amount of such Lender's Loans then
outstanding constitutes of the aggregate Principal Amount of the Loans then
outstanding (including, with respect to each Lender other than a Swing Line
Lender, such Lender's participating interest in outstanding Swing Line
Loans and excluding, with respect to each Swing Line Lender, the aggregate
amount of participating interests held by other Lenders in such Swing Line
Lender's Swing Line Loans).
"COMMITMENT PERIOD": the period from and including the date hereof to
but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"COMMITTED LENDER DISCOUNT": with respect to each Balance-Based Loan,
an amount determined by the Administrative Agent with respect to such
Balance-Based Loan such that, when the Principal Amount of such
Balance-Based Loan is repaid by the applicable Borrower on the last day of
the Interest Period with respect thereto, such Principal Amount will be
equivalent to the proceeds of such Balance-Based Loan (net of the Committed
Lender Discount) plus interest accrued during such Interest Period on such
net proceeds calculated at a rate per annum equal to (a) in the case of
each Balance-Based Loan other than any Balance-Based Loan made while a
Substitute Basis Notice is outstanding, the Eurodollar Rate plus the
Applicable Margin in respect of such Balance-Based Loan and the applicable
Interest Period, and (b) in the case of each Balance-Based Loan made while
a Substitute Basis Notice is outstanding, the Substitute Basis plus the
Applicable Margin.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with HomeSide within the meaning of Section
4001 of ERISA or is part of a group which includes HomeSide and which is
treated as a single employer under Section 414 of the Code.
"CONSOLIDATED CASH FLOW": for any period, Consolidated Net Income for
such period, PLUS (a) the sum of
(i) amortization for such period, including, without limitation,
amortization of mortgage servicing rights (including Purchased
Mortgage Servicing Rights, Excess Servicing and Originated Mortgage
Servicing Rights and impairments thereto) and amortization of
intangibles and goodwill (to the extent deducted in determining such
Consolidated Net Income),
(ii) depreciation for such period,
(iii) any provision for income taxes or any refunds during such
period,
<PAGE> 14
9
(iv) non-cash expense attributable to the recordation of fees as
a result of the application of SFAS No. 91 for such period,
(v) any increase in loan loss reserves, including reserves for
servicing losses on investor-owned loans, for such period,
(vi) cash proceeds of the sale of mortgage servicing rights for
such period (to the extent not included in determining such
Consolidated Net Income),
(vii) the amount of increase in reserves for such period in
respect of the value of mortgage servicing rights,
(viii) the loss recorded for such period in respect of Hedge
Contracts,
(ix) cash realized during such period in respect of Hedge
Contracts (to the extent not included in determining such Consolidated
Net Income),
(x) charges attributable to restructuring and transaction costs
incurred (i) on the BBMC Closing Date and within six months thereafter
as a result of the BBMC Acquisition and (ii) on the Closing Date and
within six months thereafter as a result of the BMC Acquisition, to
the extent of the amount thereof expensed for such period, and
(xi) non-cash charges attributable to loss on the sale of
Mortgage Loans (including any decrease in Excess Servicing) for such
period,
MINUS (b) the sum of
(i) the amount of Restricted Payments paid during such period as
cash dividends to Holdings to service interest on the Holdings Notes
payable during such period and applied by Holdings thereto during such
period (less the amount of tax benefit resulting therefrom to the
extent applied to reduce cash taxes payable during such period),
(ii) non-cash revenue recorded in respect of Originated Mortgage
Servicing Rights for such period,
(iii) any taxes actually paid in cash during such period,
(iv) any decrease in loan loss reserves, including reserves for
servicing losses on investor-owned loans for such period,
<PAGE> 15
10
(v) non-cash income attributable to the recordation of fees as a
result of the application of SFAS No. 91 for such period,
(vi) non-cash income attributable to gain on the sale of Mortgage
Loans (including any increase in Excess Servicing) for such period,
(vii) amortization of negative goodwill for such period (to the
extent added in determining such Consolidated Net Income),
(viii) the amount of decrease in reserves for such period in
respect of the value of mortgage servicing rights,
(ix) the gain recorded for such period in respect of Hedge
Contracts
and
(x) cash paid during such period in respect of Hedge Contracts
other than the investment made (i) within one month after the BBMC
Closing Date in Hedge Contracts in connection with the BBMC
Acquisition (to the extent not deducted in determining such
Consolidated Net Income) and (ii) prior to and within one month after
the Closing Date in Hedge Contracts in connection with the BMC
Acquisition (to the extent not deducted in determining such
Consolidated Net Income),
in each case without duplication and to the extent included in determining
such Consolidated Net Income, and giving effect to the application of SFAS
No. 122.
"CONSOLIDATED INTANGIBLES": at any time, all amounts included in
Consolidated Net Worth of HomeSide at such time which, in accordance with
GAAP, would be classified as intangible assets on a consolidated balance
sheet of HomeSide and its Subsidiaries, including, without limitation, (a)
goodwill (other than negative goodwill), including any amounts (however
designated on the balance sheet) representing the cost of acquisitions in
excess of underlying net tangible assets, and (b) patents, trademarks,
copyrights and other intangibles, but excluding Purchased Mortgage
Servicing Rights, Originated Mortgage Servicing Rights and Excess
Servicing.
"CONSOLIDATED INTEREST AND DIVIDEND EXPENSE": for any period, the sum
of Consolidated Interest Expense for such period plus the amount of
Restricted Payments paid during such period as cash dividends to Holdings
(other than to pay any makewhole or prepayment premium payable on the
Holdings Notes as described in clause (ii) to the proviso to subsection
8.12 and other than to pay taxes payable by Holdings as permitted under
subsection 8.12) payable during such period and applied by Holdings in
respect of the Holdings Notes during such period.
<PAGE> 16
11
"CONSOLIDATED INTEREST EXPENSE": for any period, interest expense of
HomeSide and its Subsidiaries for such period (including, without
limitation, commitment fees payable on the unused portion of credit
facilities and letter of credit fees, but excluding (i) interest expense
attributable to the Tranche A Loans and any other financing of Mortgage
Loan inventory, (ii) interest expense on escrow accounts and (iii) interest
expense in respect of paid-in-full Mortgage Loans), on a consolidated basis
in accordance with GAAP, net of any amount received by HomeSide from Bank
of Boston Corporation or its Affiliates pursuant to its or their agreement
to reimburse certain costs as set forth in Amendment No. 1 to the BBMC
Stock Purchase Agreement.
"CONSOLIDATED LEASE EXPENSE": for any period, the aggregate rental
expenses of HomeSide and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP, payable in respect of such period under
leases (other than Financing Leases).
"CONSOLIDATED NET INCOME": for any period, the consolidated net income
(or deficit) of HomeSide and its Subsidiaries for such period, determined
in accordance with GAAP.
"CONSOLIDATED NET WORTH": at any time, all amounts which would, in
conformity with GAAP, be included under shareholder's equity on a
consolidated balance sheet of HomeSide and its Subsidiaries as at such
time.
"CONSOLIDATED SERVICING-RELATED DEBT": at any time, the sum of (i) the
aggregate principal amount of the Tranche B Portfolio Loans outstanding at
such time and (ii) the aggregate principal amount outstanding at such time
of any other Indebtedness secured by servicing rights to the extent
permitted under subsections 8.2(j) and 8.3(k) and the provisions of the
Security Agreements.
"CONSOLIDATED TANGIBLE NET WORTH": at any date, the amount (which may
be a negative number) equal to (a) Consolidated Net Worth at such date LESS
(b) the sum of (i) Consolidated Intangibles at such date, (ii) Purchased
Mortgage Servicing Rights at such date, (iii) Originated Mortgage Servicing
Rights at such date and (iv) Excess Servicing at such date.
"CONSOLIDATED TOTAL LIABILITIES": all liabilities of HomeSide and its
Subsidiaries on a consolidated basis, determined in accordance with GAAP.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CONTINUING DIRECTORS": as defined in Section 9(k).
<PAGE> 17
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"DAILY FEDERAL FUNDS RATE": for any day, a fluctuating interest rate
per annum (rounded upward to the nearest 0.01%) determined (which
determination shall be conclusive and binding, absent manifest error) by
the Administrative Agent to be equal to the overnight federal funds rate
(based on the offered side of the market) as reported on Telerate page 5
(funds source Garvin Guy Butler) at 10:00 a.m. (New York City time) on such
date (or, if such date is not a Business Day, on the preceding Business
Day), or, if such rates are not reported for any day, the average of the
quotations at approximately 10:00 a.m. (New York City time) received by the
Administrative Agent from three Federal funds brokers of recognized
standing selected by the Administrative Agent in its sole discretion.
"DEFAULT": any of the events specified in Section 9, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"DOCUMENTATION AGENT": as defined in the Preamble to this Agreement.
"DOLLARS" and "$": dollars in lawful currency of the United States of
America.
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing liability
or standards of conduct concerning protection of human health or the
environment, as are now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or other Governmental
Authority having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board) maintained by a
member bank of the Federal Reserve System.
"EURODOLLAR BASE RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the average (rounded to the nearest
whole multiple of 1/16 of 1%) of the respective rates notified to the
Administrative Agent by each of the Reference Lenders as the rate at which
such Reference Lender is offered Dollar deposits at or about 10:00 A.M.,
New York City time, two Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the
<PAGE> 18
13
eurodollar and foreign currency and exchange operations in respect of its
Eurodollar Loans are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.
"EURODOLLAR LOANS": Rate-Based Loans bearing interest based upon the
Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan (other than any Eurodollar Loan made
while a Substitute Basis Notice is outstanding), a rate per annum
determined for such day in accordance with the following formula (rounded
upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EURODOLLAR TRANCHE": the collective reference to Eurodollar Loans and
Balance-Based Loans as to which all of the then current Interest Periods
begin on the same date and end on the same later date (whether or not such
Loans shall originally have been made on the same day).
"EVENT OF DEFAULT": any of the events specified in Section 9, PROVIDED
that any requirement for the giving of notice, the lapse of time, or both,
or any other condition, has been satisfied.
"EXCESS SERVICING": at any date, the amount that would, in conformity
with GAAP, be classified as deferred excess servicing rights on a
consolidated balance sheet of HomeSide and its Subsidiaries at such date.
"EXISTING CREDIT AGREEMENT": the Credit Agreement, dated as of March
15, 1996, among HomeSide, the Lenders and agents parties thereto and
Chemical Bank, as administrative agent, as amended.
"FEDERAL FUNDS EFFECTIVE RATE": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by
the Administrative Agent from three federal funds brokers of recognized
standing selected by it.
"FHLMC": the Federal Home Loan Mortgage Corporation and any successor
thereto.
<PAGE> 19
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"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of such lessee.
"FITCH": Fitch Investors Service LLP.
"FNMA": the Federal National Mortgage Association and any successor
thereto.
"FUNDING ACCOUNT": (i) with respect to HomeSide, the account of
HomeSide described in Section 6 of the HomeSide Security Agreement, which
will be maintained at the Payment Office as "Warehouse Funding Account" -
Account No. 230-204910, and into which all proceeds of Loans to HomeSide
will be deposited, all amounts made available to HomeSide from the
Settlement Accounts (as defined in the HomeSide Security Agreement) will be
deposited, and from which all Mortgage Loans purchased or originated by
HomeSide will be funded, and (ii) with respect to HonoMo, the account of
HonoMo described in Section 6 of the HonoMo Security Agreement, which will
be maintained at the Payment Office as "Warehouse Funding Account" -
Account No. 304-207306, and into which all proceeds of Loans to HonoMo will
be deposited, all amounts made available to HonoMo from the Settlement
Accounts (as defined in the HonoMo Security Agreement) will be deposited,
and from which all Mortgage Loans purchased or originated by HonoMo will be
funded.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time (subject to the provisions of
subsection 1.2(b)).
"GNMA": the Government National Mortgage Association and any successor
thereto.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
without duplication, any obligation of (a) the guaranteeing person or (b)
another Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued
a reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "PRIMARY OBLIGATIONS") of any other third Person
(the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain
<PAGE> 20
15
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (iv)
otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; PROVIDED, HOWEVER, that the
term Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be the
lower of (a) an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Guarantee Obligation is made
and (b) the maximum amount for which such guaranteeing person may be liable
pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which
such guaranteeing person may be liable are not stated or determinable, in
which case the amount of such Guarantee Obligation shall be such
guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by HomeSide in good faith.
"GUARANTEES": the collective reference to the Subsidiaries Guarantee,
the BMC Guarantee, the Holdings Guarantee and the HomeSide Guarantee.
"GUARANTOR": each of Holdings, BMC, HomeSide and the Subsidiary
Guarantors.
"HEDGE TERMINATION OBLIGATION": any termination amount or other amount
payable by HomeSide or any of its Subsidiaries upon the early termination,
by reason of the occurrence of a default or other termination event
thereunder, of any interest rate protection agreement, interest rate
option, interest rate cap or other interest rate hedge arrangement
providing to HomeSide or any of its Subsidiaries protection against changes
in interest rates.
"HOLDINGS": as defined in the Preamble to this Agreement.
"HOLDINGS GUARANTEE": the Holdings Guarantee to be executed and
delivered by Holdings, substantially in the form of Exhibit C-1, as the
same may be amended, supplemented or otherwise modified from time to time.
"HOLDINGS NOTES": the Senior Secured Second Priority Notes Due 2003
issued by Holdings under the Indenture in the aggregate principal amount of
$200,000,000.
"HOLDINGS PLEDGE AGREEMENT": the Holdings Pledge Agreement to be
executed and delivered by Holdings, substantially in the form of Exhibit
E-1, as the same may be amended, supplemented or otherwise modified from
time to time.
<PAGE> 21
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"HOMESIDE GUARANTEE": the HomeSide Guarantee to be executed and
delivered by HomeSide, substantially in the form of Exhibit C-4, as the
same may be amended, supplemented or otherwise modified from time to time.
"HOMESIDE PLEDGE AGREEMENT": the HomeSide Pledge Agreement to be
executed and delivered by HomeSide, substantially in the form of Exhibit
E-2, as the same may be amended, supplemented or otherwise modified from
time to time.
"HOMESIDE SECURITY AGREEMENT": the Security and Collateral Agency
Agreement to be executed and delivered by HomeSide, substantially in the
form of Exhibit D-1, as the same may be amended, supplemented or otherwise
modified from time to time.
"HOMESIDE TRANCHE A BORROWING BASE": as defined in subsection 4.1.
"HOMESIDE TRANCHE B BORROWING BASE": as defined in subsection 4.2.
"HONOMO SECURITY AGREEMENT": the Security and Collateral Agency
Agreement to be executed and delivered by HonoMo, substantially in the form
of Exhibit D-3, as the same may be amended, supplemented or otherwise
modified from time to time.
"HONOMO TRANCHE A BORROWING BASE": as defined in subsection 4.1.
"HONOMO TRANCHE B BORROWING BASE": as defined in subsection 4.2.
"HONOMO TRANCHE A SUBLIMIT": an amount equal to $100,000,000; PROVIDED
that, subject to compliance with the other provisions of this Agreement,
HomeSide may, by notice to the Administrative Agent, reduce the amount of
the HonoMo Tranche A Sublimit from time to time and, if so reduced,
increase such amount from time to time, so long as such amount does not at
any time exceed $100,000,000.
"HONOMO TRANCHE B SUBLIMIT": an amount equal to $50,000,000; PROVIDED
that, subject to compliance with the other provisions of this Agreement,
HomeSide may, by notice to the Administrative Agent, reduce the amount of
the HonoMo Tranche B Sublimit from time to time and, if so reduced,
increase such amount from time to time, so long as such amount does not at
any time exceed $50,000,000.
"INDENTURE": the Indenture, dated as of May 14, 1996, among Holdings
and The Bank of New York, as Trustee thereunder, pursuant to which the
Holdings Notes are issued.
"INDEBTEDNESS": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in
<PAGE> 22
17
accordance with customary practices), (b) any other indebtedness of such
Person which is evidenced by a note, bond, debenture or similar instrument,
(c) all obligations of such Person under Financing Leases, (d) all
obligations of such Person in respect of acceptances issued or created for
the account of such Person, (e) all liabilities secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof and (f) without
duplication, all Guarantee Obligations; PROVIDED that obligations under
Hedge Contracts shall be excluded from this definition of Indebtedness to
the extent that they would otherwise be included.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTERCREDITOR AGREEMENT": the Intercreditor Agreement to be executed
and delivered by Holdings, BMC, the Administrative Agent and The Bank of
New York, as trustee under the Indenture, substantially in the form of
Exhibit J, as the same may be amended, supplemented or otherwise modified
from time to time.
"INTEREST PAYMENT DATE": with respect to (a) any Eurodollar Loan
having an Interest Period of one, two or three months' duration, the last
day of such Interest Period, (b) any Eurodollar Loan having an Interest
Period of six months' duration, the first Business Day to occur at least
three months after the first day of such Interest Period and the last day
of such Interest Period, (c) any ABR Loan, the tenth day following the last
day of each calendar month (or, if such tenth day is not a Business Day,
the Business Day first preceding such tenth day) while such ABR Loan is
outstanding and the date of payment in full of such ABR Loan and (d) any
Swing Line Loan, the tenth day following the last day of each calendar
month (or, if such tenth day is not a Business Day, the Business Day first
preceding such tenth day) while such Swing Line Loan is outstanding and the
date of payment in full of such Swing Line Loan.
"INTEREST PERIOD": (a) with respect to each Balance-Based Loan, the
period commencing on the Borrowing Date with respect to such Balance-Based
Loan and ending one month thereafter; PROVIDED, that the foregoing
provisions of this paragraph (a) are subject to the following:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the immediately preceding
Business Day; and
<PAGE> 23
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(ii) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date; and
(b) with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Loan and
ending one, two, three or six months thereafter, as selected by the
applicable Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Loan and ending one,
two, three or six months thereafter, as selected by the applicable
Borrower by irrevocable notice to the Administrative Agent not less
than three Business Days prior to the last day of the then current
Interest Period with respect thereto;
PROVIDED, that the foregoing provisions of this paragraph (b) are subject
to the following:
(A) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(B) any Interest Period in respect of any such Loans that would
otherwise extend beyond the Termination Date shall end on the
Termination Date; and
(C) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month.
"LENDER": as defined in the Preamble to this Agreement.
"LETTER AGREEMENT": the Fee Letter, dated March 9, 1996, among
HomeSide, Chemical, NationsBank of Texas, N.A., and Bankers Trust Company
relating to the credit facility made available pursuant to this Agreement.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
of any kind or nature
<PAGE> 24
19
whatsoever (including, without limitation, any conditional sale or other
title retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"LOAN": any loan made by any Lender pursuant to this Agreement.
"LOAN DOCUMENTS": this Agreement, any Notes, the Guarantees, the
Security Documents and the Intercreditor Agreement.
"LOAN PARTIES": HomeSide, HonoMo, BMC, Holdings and each Subsidiary of
HomeSide which is a party to a Loan Document.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of
Holdings, BMC, HomeSide and its Subsidiaries taken as a whole or (b) the
validity or enforceability of this Agreement or any of the other Loan
Documents or the rights or remedies of the Administrative Agent, the
Collateral Agent or the Lenders hereunder or thereunder.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"MATURITY DATE": (a) with respect to each Balance-Based Loan, the last
day of the Interest Period applicable thereto and (b) with respect to each
Rate-Based Loan and Swing Line Loan, the Termination Date.
"MERGER": the merger of (i) BancPLUS Financial with BancPLUS and (ii)
the merger of BancPLUS with HomeSide pursuant to the Plan of Merger between
BancPLUS Financial and BancPLUS, dated as of May 31, 1996, and the Plan of
Merger between BancPLUS and HomeSide, dated as of May 31, 1996, as further
described in the Preamble hereto.
"MOODY'S": Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NEGATIVE SECURITY EVENT": the occurrence of any of the following
events after the occurrence and during the effectiveness of a Positive
Security Event, and the giving of notice to HomeSide by the Administrative
Agent that such event has occurred and, in the case of clause (c), has been
determined by the Required Banks to constitute a Negative Security Event:
(a) HomeSide's unsecured long-term senior non credit-
<PAGE> 25
20
enhanced debt is rated below A- by S&P or below A3 by Moody's, (b)
HomeSide's long-term senior unsecured non-credit-enhanced debt shall be
unrated by both S&P and Moody's or (c) an Event of Default shall occur and
be continuing; for purposes of this Agreement, the effectiveness of a
Negative Security Event shall continue from the occurrence thereof pursuant
to this definition until the occurrence thereafter of a Positive Security
Event.
"NET CASH PROCEEDS": (a) in connection with any sale or disposition,
the cash proceeds (including any payments received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise) of such sale or
disposition net of all reasonable legal fees, accountants' fees, investment
banking fees, brokerage commissions, survey costs, title insurance
premiums, required debt payments (other than pursuant hereto), amounts
required to be paid to any Person (other than either Borrower) owning a
legal or beneficial interest in the assets subject to such sale or
disposition, reasonable amounts to be provided by HomeSide as a reserve, in
accordance with GAAP, against any liabilities associated with such sale or
disposition and retained by HomeSide (provided, that, if any amount of such
reserve shall be released or reversed, the amount of such release or
reversal shall be "Net Cash Proceeds"), and other customary fees and
expenses in connection therewith and net of taxes paid or payable as a
result thereof and net of purchase price adjustments which are in amounts
ascertainable on the date of such sale or disposition and which are
reasonably expected to be payable in connection therewith within 6 months
of such date and (b) in connection with any issuance of any equity or debt
securities or instruments or the incurrence of loans, the cash proceeds
(including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise) received from such issuance or
incurrence, net of all reasonable investment banking fees, legal fees,
accountants fees, underwriting discounts and commissions and other
customary fees and expenses in connection therewith, provided that
notwithstanding the foregoing, fees described in clauses (a) or (b) above
and payable to an Affiliate of HomeSide shall be deducted in determining
such Net Cash Proceeds only to the extent such fees satisfy the provisions
of subsection 8.13.
"NON-EXCLUDED TAXES": as defined in subsection 3.10.
"NOTE": as defined in subsection 3.1(e).
"ORIGINATED MORTGAGE SERVICING RIGHTS: at any date, all amounts which
would, in conformity with GAAP, be capitalized as the cost of acquiring
mortgage servicing rights via loan origination activities on a consolidated
balance sheet of HomeSide and its Subsidiaries at such date.
"PARTICIPANT": as defined in subsection 11.6(b).
<PAGE> 26
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"PAYMENT OFFICE": the office of the Administrative Agent located at
270 Park Avenue, New York, New York 10017.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA, or any successor thereto.
"PERSON": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
limited liability company, Governmental Authority or other entity of
whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which HomeSide or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section
3(5) of ERISA.
"PLEDGE AGREEMENTS": the collective reference to the Holdings Pledge
Agreement, the BMC Pledge Agreement and the HomeSide Pledge Agreement.
"POSITIVE SECURITY EVENT": the occurrence of either of the following
events, and the giving of notice to HomeSide by the Administrative Agent
that such event has occurred and, in the case of clause (b), has been
determined by the Required Banks to constitute a Positive Security Event:
(a) HomeSide's unsecured long-term senior non credit-enhanced debt is rated
at least A- by S&P and at least A3 by Moody's or (b) an Event of Default
that gave rise to a Negative Security Event shall no longer be continuing;
for purposes of this Agreement, the effectiveness of a Positive Security
Event shall continue from the occurrence thereof pursuant to this
definition until the occurrence thereafter of a Negative Security Event.
"POST-DEFAULT RATE": with respect to any Loan, a rate per annum equal
to 2% above the rate otherwise applicable thereto (which, in the case of a
Balance-Based Loan, shall be the rate with respect thereto set forth in
clause (a) or (b), as applicable, of the definition of "Committed Lender
Discount"), and with respect to any other amount payable hereunder, a rate
per annum equal to 2% above the ABR (plus the Applicable Margin for ABR
Loans, if any, then in effect).
"PREMISES": as defined in subsection 5.16.
"PRIME RATE": the rate of interest per annum publicly announced from
time to time by Chemical as its prime rate in effect at its principal
office in New York City (the Prime Rate not being intended to be the lowest
rate of interest charged by Chemical in connection with extensions of
credit to debtors).
"PRINCIPAL AMOUNT": (a) with respect to each Balance-Based Loan, the
principal amount thereof required to be repaid on the last day of the
Interest Period applicable
<PAGE> 27
22
thereto to the Lenders holding such Balance-Based Loan, such principal
amount being composed of the actual amount of such Balance-Based Loan
funded (or deemed funded pursuant to subsection 3.4(f)) to the Borrowers on
the Borrowing Date with respect thereto, plus the Balance Lender Discount
applicable thereto, and (b) with respect to each Loan other than a
Balance-Based Loan, the actual amount of such Loan funded to the Borrowers
on the Borrowing Date with respect thereto. References herein to the
"principal amount" of any Loan shall refer to such Principal Amount in
respect thereof.
"PURCHASE COMMITMENT": (a) a mandatory delivery commitment which
obligates a Borrower to deliver a mortgage loan or a pool of mortgage loans
to a purchaser thereof for the amount and yield specified therein, (b) an
optional delivery commitment which grants a Borrower an option to deliver a
mortgage loan or a pool of mortgage loans to a purchaser thereof, but upon
delivery thereof by the applicable Borrower to such purchaser, such
purchaser is obligated to acquire the delivered mortgage loans for the
amount and yield specified therein or (c) to the extent not included in the
foregoing, any commitment pursuant to which a Borrower may deliver
mortgage-backed securities for sale.
"PURCHASED MORTGAGE SERVICING RIGHTS: at any date, all amounts which
would, in conformity with GAAP, be capitalized as the cost of acquiring
mortgage servicing rights via purchase transactions on a consolidated
balance sheet of HomeSide and its Subsidiaries at such date.
"RATE-BASED LOANS": the collective reference to Rate-Based Tranche A
Loans and Rate-Based Tranche B Loans.
"RATE-BASED TRANCHE A LOANS": as defined in subsection 2.1(b).
"RATE-BASED TRANCHE B LOANS": as defined in subsection 2.2(b).
"RATING AGENCIES": collectively, S&P, Fitch and Moody's.
"RATINGS": the rating that is two increments higher than the rating in
effect for HomeSide's long-term senior unsecured, non credit-enhanced debt
as announced by the applicable Rating Agency (e.g., the Rating for the
purposes hereof would be BBB if the rating by a Rating Agency of such debt
were BB+). Ratings of the Rating Agencies are sometimes referred to herein
as the "S&P Rating", the "Moody's Rating" and the "Fitch Rating",
respectively.
"RATING LEVEL": the respective Ratings set forth below opposite each
of "Rating I", "Rating II", "Rating III", "Rating IV" and "Rating V" below:
Rating I greater than or equal to A- by S&P AND Fitch
<PAGE> 28
23
Rating II equal to BBB+ by S&P AND Fitch
Rating III equal to or greater than BBB- by S&P AND equal to
or greater than BBB- by Fitch, and Rating I or II
does not apply
Rating IV equal to or greater than BB by S&P AND equal to or
greater than BB by Fitch, and Rating I, II or III
does not apply
Rating V equal to or less than BB-, or unrated, by S&P or
Fitch
PROVIDED that in the event that at any time the Moody's Rating differs from
the lower of the S&P Rating and the Fitch Rating then in effect (such lower
rating, the "S&P/FITCH RATING") (i) by two increments or more, the
applicable Rating Level shall be that which would apply to a Rating one
increment lower than the higher of the Moody's Rating and the S&P/Fitch
Rating or (ii) by one increment, the applicable Rating Level shall be that
which would apply to the higher of the Moody's Rating and the S&P/Fitch
Rating; PROVIDED, FURTHER, that during the period from the Closing Date to
and including September 15, 1996, the Rating Level in effect shall be the
lower Rating Level (i.e. having a higher numeric designation) of (i) Rating
III and (ii) the Rating Level that would otherwise be in effect pursuant to
the definition of Rating Level.
"REFERENCE LENDERS": Chemical, NationsBank of Texas, N.A., and Bankers
Trust Company.
"REFUNDING BORROWING": a borrowing of Loans which, after application
of the proceeds thereof and, with respect to Balance-Based Loans, the
assignment transactions contemplated by subsection 2.3, results in no net
increase in the Principal Amount of Loans owing to any Lender.
"REGISTER": as defined in subsection 11.6(d).
"REGULATION U": Regulation U of the Board as in effect from time to
time.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
[Section]2615.
<PAGE> 29
24
"REQUIRED LENDERS": at any time, Lenders the Commitment Percentages of
which aggregate at least 51%.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer or the president of
the applicable Borrower or, with respect to financial matters, the chief
financial officer of the applicable Borrower.
"RESTRICTED PAYMENTS": as defined in subsection 8.9.
"S&P": Standard & Poor's Ratings Services.
"SECOND LIEN PLEDGE AGREEMENTS": the collective reference to (i) the
Pledge Agreement, dated as of May 14, 1996, made by Holdings in favor of
The Bank of New York, as trustee under the Indenture, substantially in the
form of Exhibit K-1, and (ii) the Pledge Agreement, dated as of May 31,
1996, made by BMC in favor of The Bank of New York, as trustee under the
Indenture, substantially in the form of Exhibit K-2.
"SECURITY AGREEMENTS": the collective reference to the HomeSide
Security Agreement, the HonoMo Security Agreement and the BMC Security
Agreement.
"SECURITY DOCUMENTS": the collective reference to the Security
Agreements, the Pledge Agreements and all other security documents
hereafter delivered to the Administrative Agent or the Collateral Agent
granting a Lien on any asset or assets of any Person to secure the
obligations and liabilities of the Borrowers hereunder and under any of the
other Loan Documents or to secure any Guarantee.
"SECURITY PERFECTION DATE": the date that the Administrative Agent
gives notice of the occurrence of a Negative Security Event or, if HomeSide
shall wish to cause the Security Perfection Date to occur earlier, such
earlier date.
"SERVICING ADVANCE PORTION": as defined in subsection 4.3.
"SERVICING PORTFOLIO PORTION": as defined in subsection 4.3.
"SFAS": Statements of Financial Accounting Standards as adopted by the
Financial Accounting Standards Board.
<PAGE> 30
25
"SHORT TERM LOAN AGREEMENT": the Short Term Loan Agreement, dated as
of March 15, 1996, between Holdings and Merrill Lynch Capital Corporation.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"SPONSOR": as defined in Section 9(k).
"STOCKHOLDER AGREEMENT": the Amended and Restated Stockholder
Agreement, dated as of May 31, 1996, among the principal stockholders of
Holdings and entered into pursuant to the BMC Stock Purchase Agreement.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of HomeSide.
"SUBSIDIARIES GUARANTEE": the Subsidiaries Guarantee to be executed
and delivered by the Subsidiary Guarantors, substantially in the form of
Exhibit C-2, as the same may be amended, supplemented or otherwise modified
from time to time.
"SUBSIDIARY GUARANTORS": the Subsidiaries listed on Schedule 5.14 and
all Subsidiaries that are required to become parties to the Subsidiaries
Guarantee from time to time pursuant to subsection 7.11(b).
"SUBSTITUTE BASIS": an alternative basis for determining the
Eurodollar Rate because of the circumstances referred to in subsection 3.7,
as determined as provided in subsection 3.7.
"SUBSTITUTE BASIS NOTICE": as defined in subsection 3.7.
"SWING LINE COMMITMENT": initially, the amount set forth on Schedule I
opposite each initial Swing Line Lender's name, and, in the event that any
additional Swing Line Lender is designated as described in the definition
of "Swing Line Lenders", the amount agreed upon by HomeSide, the
Administrative Agent and such Swing Line Lender.
"SWING LINE LENDERS": initially, Chemical, NationsBank of Texas, N.A.,
and Bankers Trust Company, and any other Lender that the Administrative
Agent,
<PAGE> 31
26
HomeSide and such Lender may from time to time agree to designate as a
Swing Line Lender.
"SWING LINE LOANS": the collective reference to the Tranche A Swing
Line Loans and the Tranche B Swing Line Loans.
"SYNDICATION AGENT": as defined in the Preamble to this Agreement.
"TERMINATION DATE": May 31, 1999.
"TRANCHE A BORROWING BASE": either or both of the HomeSide Tranche A
Borrowing Base and the HonoMo Tranche A Borrowing Base, as the context may
require.
"TRANCHE A BORROWING BASE CERTIFICATE": a certificate, substantially
in the form of Attachment 4-A to the Borrower Security Agreements, duly
executed by the Collateral Agent and delivered to the Administrative Agent
pursuant to this Agreement.
"TRANCHE A COMMITMENT": as to any Lender, the amount set forth
opposite such Lender's name on Schedule I under the heading "Tranche A
Commitments", as such amount may be reduced from time to time in accordance
with the provisions of this Agreement.
"TRANCHE A COMMITMENT AMOUNT": at any time, the sum of the aggregate
Tranche A Commitments in effect at such time.
"TRANCHE A COMMITMENT PERCENTAGE": as to any Lender at any time, the
percentage which such Lender's Tranche A Commitment then constitutes of the
aggregate Tranche A Commitments (or, at any time after the Tranche A
Commitments shall have expired or terminated, the percentage which the
aggregate principal amount of such Lender's Tranche A Loans then
outstanding constitutes of the aggregate principal amount of the Tranche A
Loans then outstanding).
"TRANCHE A LOANS": the collective reference to the Rate-Based Tranche
A Loans and Balance-Based Tranche A Loans.
"TRANCHE A SWING LINE LOANS": as defined in subsection 2.9(a).
"TRANCHE A SWING LINE RATE": for any day, a per annum rate equal to
the Daily Federal Funds Rate for such day, PLUS a margin of .60%.
"TRANCHE B ADVANCE LOANS": as defined in subsection 2.2(c).
<PAGE> 32
27
"TRANCHE B BORROWING BASE": either or both of the HomeSide Tranche B
Borrowing Base and the HonoMo Tranche B Borrowing Base, as the context may
require.
"TRANCHE B BORROWING BASE CERTIFICATE": a certificate, substantially
in the form of Attachment 4-B to the Borrower Security Agreements, duly
executed by the Collateral Agent and delivered to the Administrative Agent
pursuant to this Agreement.
"TRANCHE B COMMITMENT": as to any Lender, the obligation of such
Lender to make Tranche B Loans to the Borrowers hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount set
forth opposite such Lender's name on Schedule I under the heading "Tranche
B Commitments", as such amount may be reduced from time to time in
accordance with the provisions of this Agreement.
"TRANCHE B COMMITMENT AMOUNT": at any time, the sum of the aggregate
Tranche B Commitments in effect at such time.
"TRANCHE B COMMITMENT PERCENTAGE": as to any Lender at any time, the
percentage which such Lender's Tranche B Commitment then constitutes of the
aggregate Tranche B Commitments (or, at any time after the Tranche B
Commitments shall have expired or terminated, the percentage which the
aggregate principal amount of such Lender's Tranche B Loans then
outstanding constitutes of the aggregate principal amount of the Tranche B
Loans then outstanding).
"TRANCHE B LOANS": the collective reference to the Rate-Based Tranche
B Loans and Balance-Based Tranche B Loans.
"TRANCHE B PORTFOLIO LOANS": as defined in subsection 2.2(c).
"TRANCHE B SWING LINE ADVANCE LOANS": as defined in subsection 2.9(a).
"TRANCHE B SWING LINE LOANS": as defined in subsection 2.9(a).
"TRANCHE B SWING LINE PORTFOLIO LOANS": as defined in subsection
2.9(a).
"TRANCHE B SWING LINE RATE": for any day, a per annum rate equal to
(i) in the case of Tranche B Swing Line Advance Loans, a per annum rate
equal to the Daily Federal Funds Rate for such day, PLUS a margin of .60%,
and (ii) in the case of Tranche B Swing Line Portfolio Loans, a per annum
rate equal to the Daily Federal Funds Rate for such day, PLUS a margin of
.90%.
"TRANSFEREE": as defined in subsection 11.6(f).
<PAGE> 33
28
"TYPE": as to any Rate-Based Loan, its nature as an ABR Loan or a
Eurodollar Loan.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified therein,
all terms defined in this Agreement shall have the defined meanings when used in
any Notes or any certificate or other document made or delivered pursuant
hereto.
(b) As used herein and in any Notes, and any certificate or other document
made or delivered pursuant hereto, accounting terms relating to HomeSide and its
Subsidiaries not defined in subsection 1.1 and accounting terms partly defined
in subsection 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP, as defined in subsection 1.1; PROVIDED, that in the
event that there shall occur after the Closing Date any change in the generally
accepted accounting principles in the United States of America and such change
affects the method of calculating any of the factors that go into any component
of the financial covenants set forth in subsection 8.1, GAAP (as in effect prior
to such change) shall continue to be used in the determination thereof (and
HomeSide shall prepare and deliver a reconciliation satisfactory to the
Administrative Agent in respect thereof) until the Administrative Agent, the
Required Lenders and HomeSide agree upon adjustments to such covenants as
reasonably required so that they are consistent with such financial covenants
made as of the date hereof, notwithstanding such change, and the Administrative
Agent, the Lenders and HomeSide hereby agree to make reasonable efforts to reach
agreement thereon in such event.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(e) In addition to the terms defined in subsection 1.1, other
terms used herein are defined in Section 4.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 TRANCHE A LOANS. (a) During the Commitment Period, subject to the terms
and conditions hereof, each Balance Lender severally agrees to make revolving
credit loans (the "BALANCE-BASED TRANCHE A LOANS") to each Borrower in the
Principal Amount requested by such Borrower in accordance with subsection 2.5,
PROVIDED, that (i) a Balance Lender shall not be obligated to make, and shall
not make, a Balance-Based Tranche A Loan to the extent that after giving effect
to such Balance-Based Tranche A Loan and the purchase thereof by the other
Balance Lenders and Lenders pursuant to subsection 2.3, (A) the aggregate
outstanding Principal Amount of Tranche A Loans and Tranche B Loans of any
<PAGE> 34
29
Lender would exceed the aggregate amount of such Lender's Tranche A Commitment
and Tranche B Commitment, (B) the aggregate outstanding Principal Amount of all
Loans would exceed the Tranche A Commitment Amount plus the Tranche B Commitment
Amount, (C) the aggregate outstanding Principal Amount of all Tranche A Loans
and Tranche A Swing Line Loans made to HomeSide would exceed the HomeSide
Tranche A Borrowing Base, (D) the aggregate outstanding Principal Amount of all
Tranche A Loans and Tranche A Swing Line Loans made to HonoMo would exceed the
HonoMo Tranche A Borrowing Base or (E) the aggregate amount of all Tranche A
Loans and Tranche A Swing Line Loans made to HonoMo would exceed the HonoMo
Tranche A Sublimit, and (ii) a Balance Lender shall not be obligated to make a
Balance-Based Tranche A Loan to the extent of the amount of the shortfall in
funding by any other Lender resulting from such Lender's failure to comply with
its obligation pursuant to subsection 2.3 to purchase its Tranche A Commitment
Percentage of such Balance-Based Tranche A Loan.
(b) During the Commitment Period, subject to the terms and conditions
hereof, each Lender severally agrees to make revolving credit loans (the
"RATE-BASED TRANCHE A LOANS") to each Borrower in the Principal Amount requested
by such Borrower in accordance with subsection 2.7; PROVIDED, that a Lender
shall not be obligated to make, and shall not make, a Rate-Based Tranche A Loan
to the extent that after giving effect to such Tranche A Loan, (i) the aggregate
outstanding Principal Amount of Tranche A Loans and Tranche B Loans of any
Lender would exceed the aggregate amount of such Lender's Tranche A Commitment
and Tranche B Commitment, (ii) the aggregate outstanding Principal Amount of all
Loans would exceed the Tranche A Commitment Amount plus the Tranche B Commitment
Amount, (iii) the aggregate outstanding Principal Amount of all Tranche A Loans
and Tranche A Swing Line Loans made to HomeSide would exceed the HomeSide
Tranche A Borrowing Base, (iv) the aggregate outstanding Principal Amount of all
Tranche A Loans and Tranche A Swing Line Loans made to HonoMo would exceed the
HonoMo Tranche A Borrowing Base or (vi) the aggregate amount of all Tranche A
Loans and Tranche A Swing Line Loans made to HonoMo would exceed the HonoMo
Tranche A Sublimit.
2.2 TRANCHE B LOANS. (a) During the Commitment Period, subject to the terms
and conditions hereof, each Balance Lender severally agrees to make revolving
credit loans (the "BALANCE-BASED TRANCHE B LOANS") to each Borrower in the
Principal Amount requested by such Borrower in accordance with subsection 2.5,
PROVIDED, that (i) a Balance Lender shall not be obligated to make, and shall
not make, a Balance-Based Tranche B Loan to the extent that after giving effect
to such Balance-Based Tranche B Loan and the purchase thereof by the other
Balance Lenders and Lenders pursuant to subsection 2.3, (A) the aggregate
outstanding Principal Amount of Tranche B Loans of any Lender would exceed such
Lender's Tranche B Commitment, (B) the aggregate outstanding principal amount of
all Tranche B Loans and Tranche B Swing Line Loans would exceed the Tranche B
Commitment Amount, (C) the aggregate outstanding Principal Amount of all Loans
would exceed the Tranche A Commitment Amount plus the Tranche B Commitment
Amount, (D) the aggregate outstanding Principal Amount of all Tranche B Advance
Loans and Tranche B Swing Line Advance Loans made to HomeSide would exceed the
Servicing Advance Portion of the
<PAGE> 35
30
HomeSide Tranche B Borrowing Base, (E) the aggregate outstanding Principal
Amount of all Tranche B Advance Loans and Tranche B Swing Line Advance Loans
made to HonoMo would exceed the Servicing Advance Portion of the HonoMo Tranche
B Borrowing Base, (F) the aggregate outstanding Principal Amount of all Tranche
B Portfolio Loans and Tranche B Swing Line Portfolio Loans made to HomeSide
would exceed the Servicing Portfolio Portion of the HomeSide Tranche B Borrowing
Base, (G) the aggregate outstanding Principal Amount of all Tranche B Portfolio
Loans and Tranche B Swing Line Portfolio Loans made to HonoMo would exceed the
Servicing Portfolio Portion of the HonoMo Tranche B Borrowing Base or (H) the
aggregate amount of all Tranche B Loans and Tranche B Swing Line Loans made to
HonoMo would exceed the HonoMo Tranche B Sublimit, and (ii) a Balance Lender
shall not be obligated to make a Balance-Based Tranche B Loan to the extent of
the amount of the shortfall in funding by any other Lender resulting from such
Lender's failure to comply with its obligation pursuant to subsection 2.3 to
purchase its Tranche B Commitment Percentage of such Balance-Based Tranche B
Loan.
(b) During the Commitment Period, subject to the terms and conditions
hereof, each Lender severally agrees to make revolving credit loans (the
"RATE-BASED TRANCHE B LOANS") to each Borrower in the Principal Amount requested
by HomeSide in accordance with subsection 2.7; PROVIDED, that a Lender shall not
be obligated to make, and shall not make, a Rate-Based Tranche B Loan to the
extent that after giving effect to such Rate-Based Tranche B Loan, (i) the
aggregate outstanding Principal Amount of Tranche B Loans of any Lender would
exceed such Lender's Tranche B Commitment, (ii) the aggregate outstanding
principal amount of all Tranche B Loans and Tranche B Swing Line Loans would
exceed the Tranche B Commitment Amount, (iii) the aggregate outstanding
Principal Amount of all Loans would exceed the Tranche A Commitment Amount plus
the Tranche B Commitment Amount, (iv) the aggregate outstanding Principal Amount
of all Tranche B Advance Loans and Tranche B Swing Line Advance Loans made to
HomeSide would exceed the Servicing Advance Portion of the HomeSide Tranche B
Borrowing Base, (v) the aggregate outstanding Principal Amount of all Tranche B
Advance Loans and Tranche B Swing Line Advance Loans made to HonoMo would exceed
the Servicing Advance Portion of the HonoMo Tranche B Borrowing Base, (vi) the
aggregate outstanding Principal Amount of all Tranche B Portfolio Loans and
Tranche B Swing Line Portfolio Loans made to HomeSide would exceed the Servicing
Portfolio Portion of the HomeSide Tranche B Borrowing Base, (vii) the aggregate
outstanding Principal Amount of all Tranche B Portfolio Loans and Tranche B
Swing Line Portfolio Loans made to HonoMo would exceed the Servicing Portfolio
Portion of the HonoMo Tranche B Borrowing Base, or (viii) the aggregate amount
of all Tranche B Loans and Tranche B Swing Line Loans made to HonoMo would
exceed the HonoMo Tranche B Sublimit.
(c) Tranche B Loans may be made as either (i) Tranche B Loans based upon
the Servicing Advance Portion of the applicable Borrower's Tranche B Borrowing
Base ("TRANCHE B ADVANCE LOANS") or (ii) Tranche B Loans based upon the
Servicing Portfolio Portion of the applicable Borrower's Tranche B Borrowing
Base ("TRANCHE B PORTFOLIO LOANS").
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2.3 MAKING, ASSIGNMENT AND PURCHASE OF BALANCE-BASED LOANS. (a)
Simultaneously with the making of a Balance-Based Loan by a Balance Lender on a
Borrowing Date, such Balance Lender agrees to sell and assign, and does hereby
sell and assign, without recourse, to each other Lender (including each other
Balance Lender, if any, that is a Lender having a Tranche A Commitment, in the
case of Balance-Based Tranche A Loans, or a Tranche B Commitment, in the case of
Balance-Based Tranche B Loans), and each such other Lender hereby irrevocably
agrees that it will purchase and acquire, such Lender's Tranche A Commitment
Percentage, in the case of Balance-Based Tranche A Loans, or Tranche B
Commitment Percentage, in the case of Balance-Based Tranche B Loans, of such
Balance-Based Loan, whereupon such amount so acquired by such Lender shall
constitute a Balance-Based Tranche A Loan or Balance-Based Tranche B Loan, as
the case may be, owing to such Lender. The purchase price to be paid by each
such Lender for the portion of each Balance-Based Loan assigned to it shall be
such Lender's Tranche A Commitment Percentage, in the case of Balance-Based
Tranche A Loans, or Tranche B Commitment Percentage, in the case of
Balance-Based Tranche B Loans, of the Principal Amount of such Balance-Based
Loan less the Committed Lender Discount applicable thereto.
(b) Each Borrower hereby acknowledges and consents to the assignment of
Balance-Based Loans by each Balance Lender to the other Lenders as contemplated
by this subsection 2.3. Each Borrower and the Administrative Agent shall deem
and treat each Lender as the creditor in respect of the portion of each
Balance-Based Loan assigned to it and as the payee of its Notes, if any, to the
same extent as if such Balance-Based Loan had originally been made by such
Lender directly to such Borrower.
2.4 FUNDING OF BALANCE-BASED LOANS; REPAYMENT. Each Balance-Based Loan will
be funded by the Balance Lenders to the applicable Borrower net of the
applicable Balance Lender Discount; accordingly, each Balance-Based Loan shall
bear no interest prior to the Maturity Date thereof. Subject to subsection
3.4(f), each Borrower will pay, for the account of the Lenders, at the Payment
Office, the unpaid Principal Amount of each Balance-Based Loan made to such
Borrower on the Maturity Date applicable thereto.
2.5 PROCEDURE FOR BALANCE-BASED LOAN BORROWINGS. (a) The Borrowing Date in
respect of each Balance-Based Loan shall be (i) with respect to the initial
Balance-Based Loans, the Closing Date (or such Business Day thereafter as shall
be selected by HomeSide and notice of which is received by the Administrative
Agent at least three Business Days prior thereto), and (ii) thereafter, the last
day of the Interest Period with respect to the then outstanding Balance-Based
Tranche A Loans, in the case of Balance-Based Tranche A Loans, or the then
outstanding Balance-Based Tranche B Loans, in the case of Balance-Based Tranche
B Loans. To request that Balance-Based Loans be made on any Borrowing Date,
HomeSide, for itself or on behalf of HonoMo, shall give irrevocable notice of
such borrowing, which notice must be received by the Administrative Agent prior
to 12:00 noon, New York City time, three Business Days prior to such Borrowing
Date. Each such notice of borrowing shall be given by delivery in writing or by
fax of a Borrowing Notice in the form set forth as Exhibit F-2, including the
information to be provided by the Collateral Agent as set forth
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32
therein and including the respective Principal Amounts of Balance-Based Loans to
be made by each of the Balance Lenders on such Borrowing Date and whether such
Balance-Based Loans are requested to be made as Tranche A Loans, Tranche B
Advance Loans, Tranche B Portfolio Loans or a combination thereof. Upon the
receipt of any such Borrowing Notice, the Administrative Agent shall promptly
notify each Lender thereof. Each borrowing of Balance-Based Tranche A Loans, or,
in the event that HomeSide and HonoMo each make a borrowing of Balance-Based
Tranche A Loans on the same date, the combined amount of both such borrowings,
shall be in an amount equal to $25,000,000 or a whole multiple of $5,000,000 in
excess thereof (or if the Aggregate Available Tranche A Commitments are less
than $25,000,000 such lesser amount). Each borrowing of Balance-Based Tranche B
Loans, or, in the event that HomeSide and HonoMo each make a borrowing of
Balance-Based Tranche B Loans on the same date, the combined amount of both such
borrowings, shall be in an amount equal to $25,000,000 or a whole multiple of
$5,000,000 in excess thereof (or if the Aggregate Available Tranche B
Commitments are less than $25,000,000, such lesser amount). Subject to
subsection 3.4(f), and upon, and to the extent of, receipt by each Balance
Lender from the other Lenders of the amount required to be made available by
such Lenders pursuant to subsection 2.3(a), the Balance Lenders will make the
Principal Amount of Balance-Based Loans so made available by such Lenders, less
the Balance Lender Discount applicable thereto, available to the Administrative
Agent, for the account of such Borrower, at the Payment Office at 1:00 p.m., New
York City time, on the Borrowing Date requested by HomeSide in funds immediately
available to the Administrative Agent; and such proceeds will then be made
available to such Borrower by the Administrative Agent at the Payment Office by
crediting the applicable Funding Account, as directed by HomeSide, with the
amount made available to the Administrative Agent by the Balance Lenders in like
funds as received by the Administrative Agent.
(b) Subject to subsection 3.4(f), at or before 1:00 P.M., New York City
time, on each Borrowing Date in respect of Balance-Based Loans, each Lender will
make available to the Administrative Agent, for the respective accounts of the
Balance Lenders, at the Payment Office in immediately available funds, an amount
equal to the Principal Amount of the Balance-Based Loans being purchased by such
Lender from the Balance Lenders on such Borrowing Date, less the applicable
Committed Lender Discount.
2.6 TYPES OF RATE-BASED LOANS. The Rate-Based Loans may from time to time
be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as
determined by the applicable Borrower and notified to the Administrative Agent
in accordance with subsections 2.7 and 2.8; PROVIDED, that no Rate-Based Loan
shall be made as a Eurodollar Loan after the day that is one month prior to the
Termination Date.
2.7 PROCEDURE FOR RATE-BASED BORROWINGS. Each Borrower may borrow
Rate-Based Loans during the Commitment Period on any Business Day, PROVIDED,
that HomeSide, for itself or on behalf of HonoMo, shall give irrevocable notice
thereof (which notice must be received by the Administrative Agent prior to
12:00 noon, New York City time, (a) three Business Days prior to the requested
Borrowing Date, if all or any part of the requested Rate-
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33
Based Loans are to be initially Eurodollar Loans, or (b) on the Business Day
prior to the requested Borrowing Date, otherwise). Each such notice of borrowing
shall be given in writing or by fax in the form of the Borrowing Notice set
forth as Exhibit F-1, including the information to be provided by the Collateral
Agent as set forth therein and including the requested Type, amount and Interest
Period, if any, thereof and whether such Rate-Based Loans are requested to be
made as Tranche A Loans, Tranche B Advance Loans, Tranche B Portfolio Loans or a
combination thereof. Each borrowing of Rate-Based Loans under the Tranche A
Commitment, or, in the event that HomeSide and HonoMo each make a borrowing of
Rate-Based Tranche A Loans on the same date with the same Interest Periods, the
combined amount of both such borrowings, shall be in an amount equal to (i) in
the case of ABR Loans, $15,000,000 or a whole multiple of $5,000,000 in excess
thereof (or, if the then undrawn amount of the Tranche A Commitments is less
than $15,000,000, such lesser amount) and (ii) in the case of Eurodollar Loans,
$25,000,000 or a whole multiple of $5,000,000 in excess thereof. Each borrowing
of Rate-Based Loans under the Tranche B Commitment, or, in the event that
HomeSide and HonoMo each make a borrowing of Rate-Based Tranche B Loans on the
same date with the same Interest Period, the combined amount of both such
borrowings, shall be in an amount equal to (i) in the case of ABR Loans,
$15,000,000 or a whole multiple of $5,000,000 in excess thereof (or, if the then
undrawn amount of the Tranche B Commitments is less than $15,000,000, such
lesser amount) and (ii) in the case of Eurodollar Loans, $25,000,000 or a whole
multiple of $5,000,000 in excess thereof. Upon receipt of any such notice from
HomeSide, the Administrative Agent shall promptly notify each Lender thereof.
Subject to subsection 3.4(f), each Lender will make the amount of its pro rata
share of each such borrowing available to the Administrative Agent for the
account of the applicable Borrower at the Payment Office prior to 1:00 P.M., New
York City time, on the Borrowing Date requested by HomeSide in funds immediately
available to the Administrative Agent, and such proceeds will then be made
available to such Borrower by the Administrative Agent at the Payment Office by
crediting the applicable Funding Account as directed by HomeSide, with the
aggregate of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative Agent.
2.8 CONVERSION AND CONTINUATION OPTIONS FOR RATE-BASED LOANS. (a) HomeSide
may elect from time to time to convert Eurodollar Loans made to it or to HonoMo
to ABR Loans by giving the Administrative Agent at least two Business Days'
prior irrevocable notice of such election, PROVIDED, that any such conversion
may only be made on the last day of an Interest Period with respect to the
Eurodollar Loans being converted. HomeSide may elect from time to time to
convert ABR Loans made to it or to HonoMo to Eurodollar Loans by giving the
Administrative Agent at least three Business Days' prior irrevocable notice of
such election. Each such notice shall be in writing or by fax in the form of
Exhibit F-2 and shall include the applicable information required as set forth
therein. Any such notice of conversion to Eurodollar Loans shall specify the
length of the initial Interest Period or Interest Periods therefor. Upon receipt
of any such notice the Administrative Agent shall promptly notify each Lender
thereof. All or any part of outstanding Eurodollar Loans or ABR Loans may be
converted as provided herein, PROVIDED, that (i) no ABR Loan may be converted
into a Eurodollar Loan when any Event of Default has occurred and is continuing
<PAGE> 39
34
and the Administrative Agent or the Required Lenders have determined that such a
conversion is not appropriate, (ii) any such conversion may only be made if,
after giving effect thereto, subsection 2.10 shall not have been contravened and
(iii) no ABR Loan may be converted into a Eurodollar Loan after the date which
is one month prior to the Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration of
the then current Interest Period with respect thereto by HomeSide's giving three
Business Days' notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1.1,
of the length of the next Interest Period to be applicable to such Eurodollar
Loans, PROVIDED, that no Eurodollar Loan may be continued as such (i) when any
Event of Default has occurred and is continuing and the Administrative Agent or
the Required Lenders have determined that such a continuation is not
appropriate, (ii) if, after giving effect thereto, subsection 2.10 would be
contravened or (iii) after the date that is one month prior to the Termination
Date; and PROVIDED, FURTHER, that if HomeSide shall fail to give any required
notice as described above in this paragraph or if such continuation is not
permitted pursuant to the preceding proviso such Eurodollar Loans shall be
automatically converted to ABR Loans on the last day of such then expiring
Interest Period. Each such notice shall be in writing or by fax in the form of
Exhibit F-2 and shall include the applicable information required as set forth
therein. Upon receipt of any such notice the Administrative Agent shall promptly
notify each Lender thereof.
2.9 SWING LINE COMMITMENTS. (a) Subject to the terms and conditions hereof,
each Swing Line Lender severally agrees to make short-term funding loans, which
may be designated in the Borrowing Notice in the form of Exhibit F-1 in respect
thereof as (i) based on the Tranche A Borrowing Base of the applicable Borrower
("TRANCHE A SWING LINE LOANS"), (ii) based on the Servicing Advance Portion of
the applicable Borrower's Tranche B Borrowing Base ("TRANCHE B SWING LINE
ADVANCE LOANS"), and/or (iii) based on the Servicing Portfolio Portion of the
applicable Borrower's Tranche B Borrowing Base ("TRANCHE B SWING LINE PORTFOLIO
LOANS"; together with the Tranche B Swing Line Advance Loans, the "TRANCHE B
SWING LINE LOANS"), to each Borrower from time to time during the Commitment
Period in an aggregate principal amount at any one time outstanding not to
exceed such Swing Line Lender's Swing Line Commitment; PROVIDED, that no Swing
Line Loans may be made if, after giving effect thereto, (A) the aggregate
outstanding Principal Amount of all Loans would exceed the Tranche A Commitment
Amount plus the Tranche B Commitment Amount, (B) the aggregate outstanding
Principal Amount of Swing Line Loans of any Swing Line Lender would exceed such
Swing Line Lender's Swing Line Commitment, (C) the aggregate outstanding
principal amount of all Tranche B Loans and Tranche B Swing Line Loans would
exceed the Tranche B Commitment Amount, (D) the aggregate outstanding Principal
Amount of all Tranche A Loans and Tranche A Swing Line Loans made to HomeSide
would exceed the HomeSide Tranche A Borrowing Base, (E) the aggregate
outstanding Principal Amount of all Tranche A Loans and Tranche A Swing Line
Loans made to HonoMo would exceed the HonoMo Tranche A Borrowing Base, (F) the
aggregate outstanding Principal Amount of all Tranche B Advance Loans and
Tranche B Swing Line Advance Loans made to HomeSide would exceed the Servicing
Advance Portion of the HomeSide Tranche B Borrowing Base, (G)
<PAGE> 40
35
the aggregate outstanding Principal Amount of all Tranche B Advance Loans and
Tranche B Swing Line Advance Loans made to HonoMo would exceed the Servicing
Advance Portion of the HonoMo Tranche B Borrowing Base, (H) the aggregate
outstanding Principal Amount of all Tranche B Portfolio Loans and Tranche B
Swing Line Portfolio Loans made to HomeSide would exceed the Servicing Portfolio
Portion of the HomeSide Tranche B Borrowing Base, (I) the aggregate outstanding
Principal Amount of all Tranche B Portfolio Loans and Tranche B Swing Line
Portfolio Loans made to HonoMo would exceed the Servicing Portfolio Portion of
the HonoMo Tranche B Borrowing Base, (J) the aggregate outstanding Principal
Amount of all Tranche A Loans and Tranche A Swing Line Loans made to HonoMo
would exceed the HonoMo Tranche A Sublimit or (K) the aggregate outstanding
Principal Amount of all Tranche B Loans and Tranche B Swing Line Loans made to
HonoMo would exceed the HonoMo Tranche B Sublimit.
(b) Each Borrower may borrow under the Swing Line Commitments during the
Commitment Period on any Business Day, PROVIDED that HomeSide, for itself or on
behalf of HonoMo, shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 2:00 P.M., New York
City time, on the requested Borrowing Date, specifying the amount to be
borrowed. Each borrowing under the Swing Line Commitments, or in the event
HomeSide and HonoMo make a borrowing of Swing Line Loans on the same day, the
combined amount of such Swing Line Loans, shall be in an amount equal to
$2,500,000 or a whole multiple of $1,000,000 in excess thereof. Each such notice
shall be in writing or by fax in the form of Exhibit F-1 and shall include the
information required as set forth therein, including the information to be
provided by the Collateral Agent as set forth therein. During the Commitment
Period each Borrower may use the Swing Line Commitments by borrowing, prepaying
the Swing Line Loans in whole or in part, and reborrowing, all in accordance
with the terms and conditions hereof. Upon receipt of any such notice from
HomeSide, the Administrative Agent shall promptly notify each Swing Line Lender
thereof. Each Swing Line Lender will make the amount of its pro rata share of
each borrowing available to the Administrative Agent for the account of the
applicable Borrower at the Payment Office prior to 3:00 p.m., New York City
time, on the Borrowing Date requested by HomeSide in funds immediately available
to the Administrative Agent. Such borrowing will then be made available to the
applicable Borrower by the Administrative Agent at the Payment Office by
crediting the applicable Funding Account with the aggregate of the amounts made
available to the Administrative Agent by the Swing Line Lenders and in like
funds as received by the Administrative Agent.
(c) The Administrative Agent may at any time in its sole and absolute
discretion, and, with respect to each Swing Line Loan which has not been repaid
by the applicable Borrower in immediately available funds prior to 10:30 A.M.,
New York City time, on the Thursday (or if such day is not a Business Day, the
Business Day first preceding such day) first occurring after the Borrowing Date
with respect to such Swing Line Loan shall, on behalf of such Borrower (which
hereby irrevocably directs the Swing Line Lender to act on its behalf) request
prior to 12:00 Noon, New York City time, each Lender on such Thursday (or such
next preceding Business Day) after the Borrowing Date with respect to such Swing
<PAGE> 41
36
Line Loan (i) to make a Tranche A Loan in an amount equal to such Lender's
Tranche A Commitment Percentage of the amount of each such Swing Line Loan that
is a Tranche A Swing Line Loan and (ii) to make a Tranche B Loan in an amount
equal to such Lender's Tranche B Commitment Percentage of the amount of each
such Swing Line Loan that is a Tranche B Swing Line Loan (collectively, the
"MATURING SWING LINE LOANS"). Unless any of the events described in paragraph
(f) of Section 9 shall have occurred (in which event the procedures of paragraph
(d) of this subsection 2.9 shall apply) each Lender shall make the proceeds of
its Tranche A Loan or Tranche B Loan, as the case may be, available to the
Administrative Agent for the account of the Swing Line Lenders at the Payment
Office prior to 2:00 P.M., New York City time, in funds immediately available on
the date such notice is given. The proceeds of such Tranche A Loans or Tranche B
Loans, as the case may be, shall be immediately applied to repay the Maturing
Swing Line Loan. Each Tranche A Loan or Tranche B Loan made pursuant to this
subsection 2.9(c) shall be an ABR Loan. Such Tranche B Loans shall be Tranche B
Advance Loans or Tranche B Portfolio Loans, as the case may be, as determined by
such type of the applicable Swing Line Loans refunded thereby.
(d) If prior to the making of a Tranche A Loan or a Tranche B Loan pursuant
to paragraph (c) of this subsection 2.9 one of the events described in paragraph
(f) of Section 9 shall have occurred, each Lender will, on the date such Tranche
A Loan or Tranche B Loan was to have been made, purchase an undivided
participating interest in the Maturing Swing Line Loan that was to have been
refunded with the proceeds of such Tranche A Loan or such Tranche B Loan, as the
case may be, in an amount equal to its Tranche A Commitment Percentage of such
Maturing Swing Line Loan, in the case of such Tranche A Loan, or in an amount
equal to its Tranche B Commitment Percentage of such Maturing Swing Line Loan,
in the case of such Tranche B Loan. Each Lender will immediately transfer to the
Administrative Agent, in immediately available funds, the amount of its
participation and upon receipt thereof (i) the Administrative Agent will make
such funds available to each Swing Line Lender based pro rata on their
respective portion of such Swing Line Loan and (ii) each such Swing Line Lender
will deliver to the Administrative Agent, and the Administrative Agent will in
turn promptly deliver to each such Lender, a Swing Line Loan participation
certificate dated the date of receipt of such funds and in such amount.
(e) Whenever, at any time after the Administrative Agent has received from
any Lender such Lender's participating interest in a Maturing Swing Line Loan,
the Administrative Agent receives any payment on account thereof, the
Administrative Agent will distribute to such Lender its participating interest
in such amount (appropriately adjusted in the case of interest payments, to
reflect the period of time during which such Lender's participating interest was
outstanding and funded); PROVIDED, HOWEVER, that in the event that such payment
received by the Administrative Agent is required to be returned, such Lender
will return to the Administrative Agent any portion thereof previously
distributed by the Administrative Agent to it.
(f) Each Lender's obligation to purchase participating interests pursuant
to this subsection 2.9 shall be absolute and unconditional and shall not be
affected by any
<PAGE> 42
37
circumstance, including, without limitation, (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender or either Borrower may have
against the Administrative Agent or any Swing Line Lender, either Borrower or
anyone else for any reason whatsoever; (ii) the occurrence or continuance of an
Event of Default; (iii) any adverse change in the financial condition of either
Borrower; (iv) any breach of this Agreement by any Loan Party or any other
Lender; or (v) any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing.
2.10 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF EURODOLLAR TRANCHES. All
borrowings, conversions and continuations of Eurodollar Loans hereunder and all
selections of Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, there shall be
no more than 20 Eurodollar Tranches outstanding at any time.
2.11 INTEREST RATES AND PAYMENT DATES FOR RATE-BASED LOANS. (a) Each
Eurodollar Loan shall bear interest for each day during each Interest Period
with respect thereto at a rate per annum equal to the Eurodollar Rate determined
for such Interest Period plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR
plus, with respect to any Tranche B Portfolio Loan that is an ABR Loan
outstanding when Rating V is in effect, a margin of .50%.
(c) Each Tranche A Swing Line Loan shall bear interest at a rate per annum
equal to the Tranche A Swing Line Rate, and each Tranche B Swing Line Loan shall
bear interest at a rate per annum equal to the applicable Tranche B Swing Line
Rate.
(d) If all or a portion of the Principal Amount of any Loan or any interest
payable thereon shall not be paid when due (whether at the stated Maturity Date,
by acceleration or otherwise), the outstanding Principal Amount of the Loans
shall bear interest at a rate per annum equal to the Post-Default Rate, in each
case from the date of such non-payment until such amount is paid in full (as
well after as before judgment). If any amount payable hereunder other than the
amounts set forth above shall not be paid when due, such amount shall bear
interest at a rate per annum equal to the Post-Default Rate until paid in full.
(e) Interest shall be payable in arrears on each Interest Payment Date,
PROVIDED, that interest accruing pursuant to paragraph (d) of this subsection
shall be payable on demand and PROVIDED, FURTHER, that interest accrued on ABR
Loans for each day during each calendar month shall be payable on the Interest
Payment Date first following such calendar month.
<PAGE> 43
38
SECTION 3. ADDITIONAL PROVISIONS APPLICABLE TO THE LOANS
3.1 REPAYMENT OF LOANS; INTEREST; EVIDENCE OF DEBT. (a) Each Borrower
hereby unconditionally promises to pay at the Payment Office for the account of
each Lender the then unpaid Principal Amount of each Loan of such Lender made to
such Borrower on the Maturity Date with respect thereto, or on such earlier date
on which the Loans become due and payable pursuant to Section 9. Each Borrower
hereby further agrees to pay at the Payment Office interest on the unpaid
principal amount of the Loans made to it and from time to time outstanding from
the date hereof until payment in full thereof at the rates per annum, and on the
dates, set forth in subsection 2.11.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of each Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
subsection 11.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the Principal Amount of each Loan made hereunder and each Interest
Period applicable thereto and, in the case of Rate-Based Loans, the Type
thereof, (ii) the amount of any principal or interest due and payable or to
become due and payable from the Borrowers to each Lender hereunder and (iii)
both the amount of any sum received by the Administrative Agent hereunder from
the Borrowers and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 3.1(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrowers therein recorded; PROVIDED, HOWEVER, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of either Borrower to repay (with applicable interest) the Loans in
accordance with the terms of this Agreement.
(e) Each Borrower agrees that, upon the request to the Administrative Agent
by any Lender, such Borrower will execute and deliver to such Lender a
promissory note of such Borrower evidencing the Loans of such Lender,
substantially in the form of Exhibit A-1, in the case of Balance-Based Loans,
Exhibit A-2, in the case of Rate-Based Loans, and Exhibit A-3, in the case of
Swing Line Loans, with appropriate insertions as to date and principal amount
(each, a "NOTE").
3.2 FEES. (a) HomeSide shall pay to the Administrative Agent, for the
account of each Lender, quarterly in arrears, a commitment fee equal to the
product of (i) the Commitment Fee Rate multiplied by (ii) such Lender's average
daily Available Commitment, in each case for the quarterly period ended on the
last day of such quarterly payment date, payable on the last day of each March,
June, September and December and on the Termination
<PAGE> 44
39
Date or such earlier date on which the Commitments shall terminate as provided
herein. Payment of commitment fees payable pursuant to this subsection 3.2(a)
shall commence on June 30, 1996.
(b) HomeSide shall pay to the Administrative Agent, for the account of
Chemical, NationsBank of Texas, N.A., and Bankers Trust Company, the fees in the
amounts and on the dates previously set forth in the Letter Agreement.
(c) HomeSide shall pay to the Collateral Agent the fees in the amounts and
on the dates agreed between HomeSide and the Collateral Agent from time to time.
(d) HomeSide shall pay to the Administrative Agent fees for its services
hereunder in the amounts and on the dates agreed between HomeSide and the
Administrative Agent from time to time.
3.3 OPTIONAL REDUCTIONS OF COMMITMENTS. (a) HomeSide shall have the right
to terminate or reduce the unused portion of the Tranche A Commitments, the
Tranche B Commitments or the Swing Line Commitments at any time or from time to
time upon not less than three Business Days' prior notice to the Administrative
Agent (which shall notify the Lenders thereof as soon as practicable), which
notice shall specify the effective date thereof and the amount of any such
reduction (which shall not be less than $10,000,000 or a whole multiple of
$5,000,000 in excess thereof) and shall be irrevocable; PROVIDED, that no such
termination or reduction shall be permitted if, after giving effect thereto and
to any prepayments of the Loans made on the effective date thereof, (i) the
aggregate Principal Amount of the outstanding Tranche A Loans and Tranche B
Loans, plus the aggregate amount of the outstanding Swing Line Loans and the
unused portion of the Swing Line Commitments, would exceed the Tranche A
Commitment Amount plus the Tranche B Commitment Amount or (ii) the aggregate
Principal Amount of the outstanding Tranche B Loans and Tranche B Swing Line
Loans would exceed the Tranche B Commitments; and PROVIDED, FURTHER, that after
giving effect to any such reduction in the Tranche A Commitments or the Tranche
B Commitments, the proportion of the aggregate Tranche A Commitments in relation
to the aggregate Commitments shall not be less than the proportion of the
aggregate Tranche A Commitments on the Closing Date in relation to the aggregate
Commitments on the Closing Date.
(b) The Commitments once terminated or reduced may not be reinstated.
Termination of the Commitments shall terminate the obligation of (i) the Balance
Lenders to make Balance-Based Loans, (ii) the Lenders to purchase Balanced-Based
Loans, (iii) the Lenders to make Rate-Based Loans and (iv) the Swing Line
Lenders to make Swing Line Loans.
3.4 OPTIONAL AND MANDATORY PREPAYMENTS; Net Repayments. (a) Subject to
subsection 3.11, each Borrower shall have the right to prepay a Loan prior to
the Maturity Date applicable thereto, without premium or penalty, upon at least
three Business Days'
<PAGE> 45
40
irrevocable notice to the Administrative Agent with respect to Eurodollar Loans
or Balance-Based Loans, and one Business Day's notice in the case of ABR Loans,
specifying the date and amount of prepayment and whether the prepayment is of
Tranche A Loans, Tranche B Advance Loans, Tranche B Portfolio Loans,
Balance-Based Loans, Rate-Based Loans or, if of a combination thereof, the
amount allocable to each, and, with respect to Rate-Based Loans, whether the
prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if
of a combination thereof, the amount allocable to each; PROVIDED, that any
optional prepayment shall be in an amount not less than $10,000,000 or a whole
multiple of $5,000,000 in excess thereof (or, if the outstanding principal
amount of any Loan being so prepaid is less than $10,000,000, such lesser
amount). Swing Line Loans may be prepaid without notice.
(b) Each Borrower shall immediately prepay (i) Tranche A Loans and/or
Tranche A Swing Line Loans made to it to the extent that the aggregate
outstanding Principal Amount of the Tranche A Loans and Tranche A Swing Line
Loans made to it exceeds the amount of the HomeSide Tranche A Borrowing Base, in
the case of such Loans made to HomeSide, or the amount of the HonoMo Tranche A
Borrowing Base, in the case of such Loans made to HonoMo, (ii) Tranche B Advance
Loans and/or Tranche B Swing Line Advance Loans made to it to the extent that
the aggregate outstanding Principal Amount of the Tranche B Advance Loans and
the Tranche B Swing Line Advance Loans made to it exceeds the amount of the
Servicing Advance Portion of the HomeSide Tranche B Borrowing Base, in the case
of such Loans made to HomeSide, or the amount of the Servicing Advance Portion
of the HonoMo Tranche B Borrowing Base, in the case of such Loans made to
HonoMo, and (iii) Tranche B Portfolio Loans and/or Tranche B Swing Line
Portfolio Loans made to it, to the extent that the aggregate outstanding
Principal Amount of the Tranche B Portfolio Loans and the Tranche B Swing Line
Portfolio Loans made to it exceeds the amount of the Servicing Portfolio Portion
of the HomeSide Tranche B Borrowing Base, in the case of such Loans made to
HomeSide, or the amount of the Servicing Portfolio Portion of the HonoMo Tranche
B Borrowing Base, in the case of such Loans made to HonoMo, in each case as set
forth in any Borrowing Base Certificate delivered by such Borrower hereunder,
PROVIDED that in the case of clause (iii) above, if such Borrower delivers to
the Administrative Agent on the date of such required prepayment of Tranche B
Portfolio Loans a certificate setting forth, in reasonable detail, the value and
description of Hedge Contracts from which such Borrower is then undertaking to
realize cash proceeds, and the Administrative Agent determines that the amount
of such value to be so realized is equal to or greater than the amount of such
required prepayment, such required prepayment shall be made as soon as
practicable thereafter and in any event no later than five Business Days after
the date that such prepayment would be required but for this proviso. Such
prepayments shall be applied to the Loans in respect of which such excess over
the Borrowing Base component applicable thereto exists as described in the
preceding sentence (and ratably thereto, if applicable), FIRST, to any
outstanding ABR Loans, SECOND, to any outstanding Eurodollar Loans and THIRD, to
any outstanding Balance-Based Loans.
(c) If, subsequent to the Closing Date, HomeSide or Holdings shall issue or
incur any Indebtedness (other than Indebtedness permitted by subsection 8.2),
HomeSide shall
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41
apply an amount equal to the Net Cash Proceeds thereof, on the date of the
receipt of such Net Cash Proceeds, to the prepayment of the Tranche B Loans,
FIRST, to any outstanding ABR Loans, SECOND, to any outstanding Eurodollar Loans
and THIRD, to any outstanding Balance-Based Loans. This paragraph (c) does not
constitute permission for HomeSide or Holdings to incur any Indebtedness not
otherwise permitted by this Agreement and the Holdings Guarantee.
(d) If, subsequent to the Closing Date, Holdings or any Subsidiary of
Holdings shall receive any payment in respect of termination or equivalent fees
under its servicing agreements related to the Eligible Servicing Portfolio,
HonoMo, in the case of any such payment received by HonoMo, or HomeSide, in the
case of any such payment received by Holdings or any Subsidiary of Holdings
other than HonoMo, shall immediately apply an amount equal to the Net Cash
Proceeds thereof to the prepayment of the Loans made to it, FIRST, to any
outstanding Swing Line Loans, SECOND, to any outstanding Tranche B Loans that
are ABR Loans, THIRD, to any outstanding Tranche B Loans that are Eurodollar
Loans and FOURTH, to any outstanding Tranche B Loans that are Balance-Based
Loans.
(e) If any Lender makes or purchases a Loan on a day on which a Borrower is
to repay all or any part of any outstanding Loan made or purchased by such
Lender, such Lender shall apply the proceeds of the requested Loan to make such
repayment and only an amount equal to the difference (if any) between the amount
such Lender would have otherwise advanced pursuant to subsections 2.3 and 2.7 in
the absence of any such repayment and the principal amount of the Loan being
repaid shall be made available by such Lender to the Administrative Agent as
provided in subsections 2.3 and 2.7 or remitted by such Borrower to the
Administrative Agent for the account of such Lender as provided in subsection
3.6.
(f) If any Balance-Based Loan shall be prepaid pursuant to subsections
3.4(a) through (e), the amount required to prepay such Balance-Based Loan shall
be the net funded amount of such Balance-Based Loan actually advanced by the
Balance Lenders to the applicable Borrower on the relevant Borrowing Date,
together with accreted discount thereon calculated at the Applicable Margin
(based on a 360-day year) for the period commencing on the relevant Borrowing
Date and extending through the date immediately preceding the date of the
prepayment, plus all amounts payable pursuant to subsection 3.11 in connection
therewith. If any Rate-Based Loan or Swing Line Loan shall be prepaid pursuant
to subsection 3.4(a) through (e), the amount required to prepay such Rate-Based
Loans shall be the Principal Amount of such Rate-Based Loan, together with
accrued interest to such date and all amounts payable pursuant to subsection
3.11 in connection therewith, PROVIDED that so long as no Default or Event of
Default has occurred and is continuing, interest accrued on any ABR Loan prepaid
pursuant to this subsection 3.4 shall be paid on the Interest Payment Date in
respect thereof first following such prepayment rather than on the date of such
prepayment.
3.5 COMPUTATION OF DISCOUNTS, INTEREST AND FEES. (a) Each Balance Lender
Discount and Committed Lender Discount shall be calculated on the basis of a 360
day year for the actual days elapsed. Interest on ABR Loans accruing at a rate
per annum based upon
<PAGE> 47
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the Prime Rate shall be calculated on the basis of a 365 day year for the actual
days elapsed; otherwise, all interest on the Loans shall be calculated on the
basis of a 360-day year for the actual days elapsed. Commitment fees and any
other amounts hereunder that are calculated on a per annum basis shall be
calculated on the basis of a 360 day year for the actual days elapsed. The
Administrative Agent shall notify the Borrowers and the Lenders of each
determination of a Eurodollar Rate on the date of the determination thereof. Any
change in the interest rate on a Loan resulting from a change in the ABR or the
Eurocurrency Reserve Requirements shall become effective as of the opening of
business on the day on which such change in the ABR or the Eurocurrency Reserve
Requirements, as the case may be, is announced.
(b) Each determination by the Administrative Agent of a Balance Lender
Discount, Committed Lender Discount, ABR, Eurodollar Rate, Applicable Margin or
Commitment Fee Rate pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrowers and the Lenders, in the absence of
manifest error. The Administrative Agent shall, at the request of HomeSide or
any Lender, deliver to the Borrowers or such Lender a statement showing the
computations used by the Administrative Agent in determining any discount,
interest rate or fee rate.
3.6 PRO RATA TREATMENT AND PAYMENTS. (a) Each purchase by the Lenders
pursuant to subsection 2.3 of Balance-Based Loans under the Tranche A
Commitments or the Tranche B Commitments, as the case may be, each borrowing by
the Borrowers of Rate-Based Loans under the Tranche A Commitments or the Tranche
B Commitments, as the case may be, and any reduction of the Tranche A
Commitments or the Tranche B Commitments, as the case may be, shall be made pro
rata according to the respective Tranche A Commitment Percentages or the Tranche
B Commitment Percentages of the Lenders. Each payment by a Borrower on account
of any commitment fee under the Tranche A Commitments or the Tranche B
Commitments, as the case may be, shall be made pro rata according to the
respective Tranche A Commitment Percentages or the Tranche B Commitment
Percentages of the Lenders. Each payment (including each prepayment) by a
Borrower on account of principal of and interest on the Loans shall be made pro
rata according to the respective outstanding Principal Amounts of the Loans or
amounts of interest, as the case may be, then due and owing to the Lenders.
(b) All payments (including prepayments) to be made by a Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without set off or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof at the Payment Office, for the
account of the Lenders, in Dollars and in immediately available funds. Each
payment or prepayment of Loans shall be accompanied by (i) a payment notice in
writing or by fax in the form of Exhibit F-3 and shall include the information
required as set forth therein, including the information to be provided by the
Collateral Agent as set forth therein and (ii) a Tranche A Borrowing Base
Certificate, in the case of repayments of Tranche A Loans or Tranche A Swing
Line Loans or a Tranche B Borrowing Base Certificate, in the case of repayments
of Tranche B Loans or Tranche B
<PAGE> 48
43
Swing Line Loans, in each case dated as of the close of business on the Business
Day immediately preceding such Borrowing Date or as of such Borrowing Date, duly
completed by HomeSide, the applicable Borrower and the Collateral Agent in the
manner required by the Borrower Security Agreements. The Administrative Agent
shall distribute such payments to the Lenders promptly upon receipt in like
funds as received. If any payment hereunder becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next succeeding
Business Day, and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension. For the purposes
of determining the obligations of the Borrowers hereunder with respect thereto,
any payment by either Borrower received by the Administrative Agent after 12:00
noon on the due date thereof shall be deemed to be received on the next
succeeding Business Day.
(c) Unless the Administrative Agent shall have been notified in writing by
any Lender prior to a Borrowing Date that such Lender will not make its share of
such borrowing available to the Administrative Agent on such Borrowing Date, the
Administrative Agent may, in its sole discretion, assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the applicable
Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on such Borrowing Date, such Lender
shall pay to the Administrative Agent, on demand, such amount with interest
thereon at a rate equal to the Federal Funds Effective Rate for the period until
such Lender makes such amount immediately available to the Administrative Agent.
A certificate of the Administrative Agent submitted to any Lender with respect
to any amounts owing under this subsection shall be conclusive in the absence of
manifest error. If such Lender's share of such borrowing is not made available
to the Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall also be entitled, upon five
Business Days' notice, to recover such amount (less any amounts theretofore made
available to the Administrative Agent by such Lender in respect of such
borrowing) with interest thereon at the rate per annum applicable to ABR Loans
hereunder, on demand, from the applicable Borrower to which such amount was
advanced.
(d) Unless the Administrative Agent shall have been notified in writing by
HomeSide prior to a date on which a payment of principal, interest or fees is
due from either Borrower hereunder that such Borrower will not make such amount
available to the Administrative Agent on such due date, the Administrative Agent
may, in its sole discretion, assume that such Borrower is making such amount
available to the Administrative Agent, and the Administrative Agent may, in
reliance upon such assumption, make available a corresponding amount to the
Lenders entitled thereto. If such amount is not made available to the
Administrative Agent by the required time on the due date therefor, the
Administrative Agent shall notify each Lender of such failure, and each Lender
shall pay to the Administrative Agent, on demand, the portion of such amount
received by such Lender with interest thereon at a rate equal to the Federal
Funds Effective Rate for the period from the date of receipt of such amount by
such Lender until such Lender makes such amount immediately available to the
Administrative Agent. A certificate of the Administrative Agent submitted to
<PAGE> 49
44
any Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error.
3.7 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day of any
Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrowers) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost to
such Lenders (as conclusively certified by such Lenders) of making or
maintaining their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof (a
"SUBSTITUTE BASIS NOTICE") confirmed in writing, as soon as practicable, to
HomeSide and the Lenders at least one Business Day prior to the requested
Borrowing Date for such Loans. If such Substitute Basis Notice has been given,
HomeSide and the Administrative Agent (in consultation with the Balance Lenders
and the Lenders) shall promptly enter into good faith negotiations with a view
to agreeing upon a Substitute Basis to be used in lieu of the Eurodollar Rate,
including for the purpose of calculating the Committed Lender Discount in
connection with the making of Balance-Based Loans. If on or before the twentieth
day after the date of such Substitute Basis Notice HomeSide and the Balance
Lenders and the Lenders shall agree upon a Substitute Basis, such Substitute
Basis shall, until such Substitute Basis Notice is withdrawn, be applicable to
Eurodollar Loans and Committed Lender Discounts determined after the date of
such Substitute Basis Notice. If a Substitute Basis has not been agreed upon
within such twenty-day period, the Balance Lenders, with the concurrence of the
Required Lenders, shall determine and shall notify the Lenders and HomeSide
(through the Administrative Agent) of the rate basis upon which Eurodollar Loans
and the Committed Lender Discounts will be calculated (which rate basis shall
reflect the rate at which the Lenders are able to fund Eurodollar Loans and the
Balance-Based Loans) and such rate basis shall, until such Substitute Basis
Notice is withdrawn, be applicable to Eurodollar Loans and Committed Lender
Discounts determined after the date of such Substitute Basis Notice. In the
event that any Interest Period commences after the date of a Substitute Basis
Notice and before the date of determination of the Substitute Basis applicable
to such Interest Period as provided in the two preceding sentences, the
Administrative Agent shall preliminarily determine the Substitute Basis
applicable to such Interest Period in its discretion, with payments made at the
end of such Interest Period being appropriately adjusted to give effect to the
Substitute Basis finally determined as provided in the two preceding sentences.
<PAGE> 50
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(c) If a Substitute Basis Notice is issued and until it has been withdrawn
(x) any Rate-Based Loans thereafter requested to be made shall be made as ABR
Loans or as Loans the interest rate of which is based on the Substitute Basis
agreed to as set forth above, (y) any ABR Loans that were to have been converted
to Eurodollar Loans shall be continued as ABR Loans or converted to Loans based
on such Substitute Basis and (z) any outstanding Eurodollar Loans to be
continued as Eurodollar Loans shall be converted, on the last day of the then
current Interest Period, to ABR Loans or to Loans based on such Substitute
Basis.
(d) Each Substitute Basis Notice shall be withdrawn by the Administrative
Agent upon the determination by the Required Lenders that the state of facts
which was the basis for such notice no longer exists.
3.8 ILLEGALITY. Notwithstanding any other provision herein, if the adoption
of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such
Lender's Loans then outstanding as Eurodollar Loans or Balance-Based Loans, if
any, shall be converted automatically to ABR Loans on the respective last days
of the then current Interest Periods with respect to such Loans or within such
earlier period as required by law. If any such conversion of a Eurodollar Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, each Borrower shall pay to such Lender such amounts, if
any, as may be required pursuant to subsection 3.11. To the extent that any
Lender whose Commitment is terminated pursuant to this subsection 3.8 would
otherwise be obligated to purchase Balance-Based Loans from the Balance Lenders,
the Balance Lenders' obligation to make such Balance-Based Loans shall be
reduced.
3.9 REQUIREMENTS OF LAW. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note, any Eurodollar Loan or any
Balance-Based Loan made or purchased by it, or change the basis of taxation
of payments to such Lender in respect thereof (except for Non-Excluded
Taxes covered by subsection 3.10 and changes in the rate of tax on the
overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise
<PAGE> 51
46
included in the determination of the Eurodollar Rate or the Committed
Lender Discount hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, purchasing,
converting into, continuing or maintaining Eurodollar Loans or Balance-Based
Loans or to reduce any amount receivable hereunder in respect thereof, then, in
any such case, the Borrower to which such Loans were made shall promptly pay
such Lender such additional amount or amounts as will compensate such Lender for
such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any change
in any Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any corporation controlling
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority made subsequent to
the date hereof shall have the effect of reducing the rate of return on such
Lender's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time,
HomeSide shall promptly pay to such Lender such additional amount or amounts as
will compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts pursuant
to this subsection, it shall promptly notify HomeSide (with a copy to the
Administrative Agent) of the event by reason of which it has become so entitled.
A certificate as to any additional amounts payable pursuant to this subsection
submitted by such Lender to HomeSide (with a copy to the Administrative Agent)
shall be conclusive in the absence of manifest error. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.
3.10 TAXES. (a) All payments made by the Borrowers under this Agreement and
any Notes shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Administrative Agent or any Lender as a result
of a present or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any Note). If any such non-excluded taxes,
levies, imposts, duties, charges, fees deductions or
<PAGE> 52
47
withholdings ("NON-EXCLUDED TAXES") are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any Note,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, PROVIDED, HOWEVER, that the Borrowers shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this subsection. Whenever any
Non-Excluded Taxes are payable by either Borrower, as promptly as possible
thereafter HomeSide shall send to the Administrative Agent for its own account
or for the account of such Lender, as the case may be, a certified copy of an
original official receipt received by such Borrower showing payment thereof. If
such Borrower fails to pay any Non-Excluded Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent the required
receipts or other required documentary evidence, HomeSide shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to HomeSide and the Administrative Agent (A) two duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be, and (B) an Internal
Revenue Service Form W-8 or W-9, or successor applicable form, as the case
may be;
(ii) deliver to HomeSide and the Administrative Agent two further
copies of any such form or certification on or before the date that any
such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to HomeSide; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by HomeSide or the
Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises HomeSide and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (ii) in
the case of a Form W-8 or
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W-9, that it is entitled to an exemption from United States backup withholding
tax. Each Person that shall become a Lender or a Participant pursuant to
subsection 11.6 shall, upon the effectiveness of the related transfer, be
required to provide all of the forms and statements required pursuant to this
subsection, provided that in the case of a Participant such Participant shall
furnish all such required forms and statements to the Lender from which the
related participation shall have been purchased.
3.11 INDEMNITY. Each Borrower agrees to indemnify each Lender and to hold
each Lender harmless from any loss or expense which such Lender may sustain or
incur as a consequence of (a) default by such Borrower in making a borrowing of,
conversion into or continuation of Eurodollar Loans or Balance-Based Loans after
notice has been given requesting the same in accordance with the provisions of
this Agreement, (b) default by such Borrower in making any prepayment after
notice thereof has been given in accordance with the provisions of this
Agreement or (c) the making by such Borrower of a prepayment or conversion of
Eurodollar Loans or Balance-Based Loans on a day which is not the last day of an
Interest Period with respect thereto. Such indemnification may include an amount
equal to the excess, if any, of (i) the amount of interest which would have
accrued (or, in the case of Balance-Based Loans, the amount of the Committed
Lender Discount) on the amount so prepaid or converted, or not so borrowed,
converted or continued, for the period from the date of such prepayment or
conversion or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest (or, in the case of
Balance-Based Loans, the applicable Committed Lender Discount) for such Loans
provided for herein (excluding, however, the Applicable Margin included therein,
if any) over (ii) the amount of interest (as reasonably determined by such
Lender) which would have accrued to such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
eurodollar market. This covenant shall survive the termination of this Agreement
and the payment of on demand.
SECTION 4. BORROWING BASE AND ELIGIBLE COLLATERAL
4.1 TRANCHE A BORROWING BASE. The "HOMESIDE TRANCHE A BORROWING BASE" shall
be, as of any date, the sum of the amounts determined by applying the
percentages set forth below to the respective values of assets of HomeSide, and
the "HONOMO TRANCHE A BORROWING BASE" shall be, as of any date, the sum of the
amounts determined by applying the percentages set forth below to the respective
values of assets of HonoMo, in each case described in subparagraphs (a) through
(d) below which are deemed Delivered hereunder as of such date (without
duplication in the event that any such asset is converted from one category to
another) subject to the sublimits set forth below and to the other provisions
hereof (terms used in this subsection 4.1 and not defined in subsection 1.1
being defined in subsection 4.3):
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49
(a) for Eligible First Mortgage Loans, 98% of the least of (i) the
current unpaid principal balance thereof, (ii) the acquisition cost thereof
(minus discount points and fees associated with yield), and (iii) the
Applicable Take-Out Price thereof multiplied by the current unpaid
principal balance thereof;
(b) for Eligible Second Mortgage Loans, 95% of the least of (i) the
current unpaid principal balance thereof, (ii) the acquisition cost thereof
(minus discount points and fees associated with yield), and (iii) the
Applicable Take-Out Price thereof multiplied by the current unpaid
principal amount thereof;
(c) for Eligible Mortgage-Backed Securities, 99% of the lesser of (i)
the face amount thereof, and (ii) the Applicable Take-Out Price multiplied
by the face amount thereof; and
(d) cash or Cash Equivalents pledged as Collateral in accordance with
the applicable Borrower Security Agreement and held in the Settlement
Accounts referred to in such Borrower Security Agreement;
PROVIDED that, at any time, the maximum portion of either the HomeSide Tranche A
Borrowing Base or the HonoMo Tranche A Borrowing Base attributable to the value
of assets determined under subparagraphs (a) and (b) above at such time shall be
subject to the following sublimits:
(i) the portion of such Tranche A Borrowing Base attributable to
Eligible Wet Loans shall not exceed 30% of the Tranche A Commitment Amount
less the HonoMo Tranche A Sublimit at such time, in the case of the
HomeSide Tranche A Borrowing Base, or 30% of the HonoMo Tranche A Sublimit
at such time, in the case of the HonoMo Tranche A Borrowing Base;
(ii) the portion of such Tranche A Borrowing Base attributable to
Eligible Mortgage Loans with respect to which the related promissory notes
(or related note modification agreements if such note modification
agreements provide for conversion of the interest rate on such Mortgage
Loans from an adjustable rate to a fixed rate) are dated earlier than 180
days prior to inclusion of such Eligible Mortgage Loans in such Tranche A
Borrowing Base shall not exceed 3% of the Tranche A Commitment Amount less
the HonoMo Tranche A Sublimit at such time, in the case of the HomeSide
Tranche A Borrowing Base, or 3% of the HonoMo Tranche A Sublimit at such
time, in the case of the HonoMo Tranche A Borrowing Base, and no such
Eligible Mortgage Loans may be so included in such Tranche A Borrowing Base
unless (A) they are covered by and allocated to one or more specific
Eligible Take-Out Commitments and (B) the related promissory notes (or
related note modification agreements if such note modification agreements
provide for conversion of the interest rate on such Mortgage Loan from an
adjustable rate to a fixed rate) are dated not
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earlier than 25 months prior to inclusion of such Eligible Mortgage Loans
in such Tranche A Borrowing Base;
(iii) the portion of such Tranche A Borrowing Base attributable to
Eligible First Mortgage Loans having an original principal balance in
excess of $1,000,000 shall not exceed 3% of the Tranche A Commitment Amount
less the HonoMo Tranche A Sublimit at such time, in the case of the
HomeSide Tranche A Borrowing Base, or 3% of the HonoMo Tranche A Sublimit
at such time, in the case of the HonoMo Tranche A Borrowing Base;
(iv) the portion of the Tranche A Borrowing Base attributable to
Eligible Second Mortgage Loans shall not exceed 6% of the Tranche A
Commitment Amount less the HonoMo Tranche A Sublimit at such time, in the
case of the HomeSide Tranche A Borrowing Base, or 6% of the HonoMo Tranche
A Sublimit at such time, in the case of the HonoMo Tranche A Borrowing
Base; and
(v) the portion of the Tranche A Borrowing Base attributable to
Nonconforming Mortgage Loans constituting Eligible First Mortgage Loans
shall not exceed 30% of the Tranche A Commitment Amount less the HonoMo
Tranche A Sublimit at such time, in the case of the HomeSide Tranche A
Borrowing Base, or 30% of the HonoMo Tranche A Sublimit at such time, in
the case of the HonoMo Tranche A Borrowing Base;
and FURTHER PROVIDED that no Mortgage Loan purchased by a Borrower with the
proceeds of an Eligible Early Buyout Advance or Eligible Paid-in-Full Buyout
Advance shall be included in such Borrower's Tranche A Borrowing Base.
Each Tranche A Borrowing Base shall be determined by reference to the most
recent Tranche A Borrowing Base Certificate delivered by the Collateral Agent to
the Administrative Agent absent any error in such Tranche A Borrowing Base
Certificate as of the date delivered.
4.2 TRANCHE B BORROWING BASE. The "HOMESIDE TRANCHE B BORROWING BASE" shall
be, as of any date, the sum of the amounts determined by applying the
percentages set forth below to the respective values of assets of HomeSide, and
the "HONOMO TRANCHE B BORROWING BASE" shall be, as of any date, the sum of the
amounts determined by applying the percentages set forth below to the respective
values of assets of HonoMo, in each case described in subparagraphs (a) through
(g) below which are deemed Delivered hereunder as of such date (without
duplication in the event any such asset is converted from one category to
another) subject to the sublimits set forth below and to the other provisions
hereof (terms used in this subsection 4.2 and not defined in subsection 1.1
being defined in subsection 4.3):
(a) 85% of Eligible P&I Advance Receivables, PROVIDED that no value
shall be included in such Tranche B Borrowing Base for individual Approved
Investor remittance types commencing on the 18th day after the related
Eligible P&I Advances
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51
for each such individual Approved Investor remittance type are made to but
not including the 29th day after such related Eligible P&I Advances are
made (or the prior Business Day, if such 29th day is not a Business Day);
(b) 70% of Eligible T&I Advance Receivables;
(c) 85% of Eligible Early Buyout Advance Receivables;
(d) 85% of Eligible Foreclosure Advance Receivables;
(e) 85% of Eligible Default-Related Advance Receivables;
(f) 85% of Eligible Paid-in-Full Buyout Advance Receivables; and
(g) the lesser of (i) 70% of the Appraised Value of the Eligible
Servicing Portfolio and (ii) 1.25% of the aggregate unpaid principal
balance of the underlying Mortgage Loans in respect of the Eligible
Servicing Portfolio;
PROVIDED that, at any time, the maximum portion of either the HomeSide Tranche B
Borrowing Base or the HonoMo Tranche B Borrowing Base attributable to the value
of assets determined under subparagraphs (a), (b), (c), (d), (e) and (f) above
at such time shall be subject to the following sublimits:
(i) the portion of the Tranche B Borrowing Base attributable to
Eligible P&I Advance Receivables shall not exceed 8% of the Tranche B
Commitment Amount less the HonoMo Tranche B Sublimit at such time, in the
case of the HomeSide Tranche B Borrowing Base, or 8% of the HonoMo Tranche
B Sublimit at such time, in the case of the HonoMo Tranche B Borrowing
Base;
(ii) the portion of the Tranche B Borrowing Base attributable to
Eligible T&I Advance Receivables shall not exceed 6% of the Tranche B
Commitment Amount less the HonoMo Tranche B Sublimit at such time, in the
case of the HomeSide Tranche B Borrowing Base, or 6% of the HonoMo Tranche
B Sublimit at such time, in the case of the HonoMo Tranche B Borrowing
Base;
(iii) the portion of the Tranche B Borrowing Base attributable to
Eligible Early Buyout Advance Receivables shall not exceed 18.5% of the
Tranche B Commitment Amount less the HonoMo Tranche B Sublimit at such
time, in the case of the HomeSide Tranche B Borrowing Base, or 18.5% of the
HonoMo Tranche B Sublimit at such time, in the case of the HonoMo Tranche B
Borrowing Base;
(iv) the portion of the Tranche B Borrowing Base attributable to
Eligible Foreclosure Advance Receivables shall not exceed 15.5% of the
Tranche B Commitment Amount less the HonoMo Tranche B Sublimit at such
time, in the case of
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the HomeSide Tranche B Borrowing Base, or 15.5% of the HonoMo Tranche B
Sublimit at such time, in the case of the HonoMo Tranche B Borrowing Base;
(v) the portion of the Tranche B Borrowing Base attributable to
Eligible Default-Related Advance Receivables shall not exceed 3% of the
Tranche B Commitment Amount less the HonoMo Tranche B Sublimit at such
time, in the case of the HomeSide Tranche B Borrowing Base, or 3% of the
HonoMo Tranche B Sublimit at such time, in the case of the HonoMo Tranche B
Borrowing Base; and
(vi) the portion of the Tranche B Borrowing Base attributable to
Eligible Paid in-Full Buyout Advance Receivables shall not exceed 6% of the
Tranche B Commitment Amount less the HonoMo Tranche B Sublimit at such
time, in the case of the HomeSide Tranche B Borrowing Base, or 6% of the
HonoMo Tranche B Sublimit at such time, in the case of the HonoMo Tranche B
Borrowing Base;
PROVIDED FURTHER, that upon receipt by Holdings of Net Cash Proceeds of the
issuance of Capital Stock of Holdings, other than to Sponsors, in an amount
greater than $25,000,000, the advance rate in clause (g)(i) of this subsection
4.2 shall be reduced by 0.10% for each whole multiple of $1,000,000 of such Net
Cash Proceeds received by Holdings in excess of $25,000,000; and PROVIDED
FURTHER that such advance rate shall not be reduced below 65% as a result of
receipt by Holdings of such Net Cash Proceeds.
Each Tranche B Borrowing Base shall be determined by reference to the most
recent Tranche B Borrowing Base Certificate delivered by the Collateral Agent to
the Administrative Agent absent any error in such Tranche B Borrowing Base
Certificate as of the date delivered.
4.3 BORROWING BASE DEFINITIONS. As used in this Section 4 and in the other
provisions of this Agreement and the other Loan Documents, the following terms
shall have the following meanings, PROVIDED that (a) for the purpose of the use
of each such term in determining the HomeSide Tranche A Borrowing Base or the
HomeSide Tranche B Borrowing Base, (i) each reference to the Borrower therein
shall be deemed to refer to HomeSide, (ii) each reference therein to the
Borrower Security Agreement shall be deemed to refer to the HomeSide Security
Agreement, and (iii) each reference to the Tranche A Borrowing Base or the
Tranche B Borrowing Base therein shall refer to the HomeSide Tranche A Borrowing
Base or the HomeSide Tranche B Borrowing Base, respectively, and (b) for the
purpose of the use of each such term in determining the HonoMo Tranche A
Borrowing Base or the HonoMo Tranche B Borrowing Base, (i) each reference to the
Borrower therein shall be deemed to refer to HonoMo, (ii) each reference therein
to the Borrower Security Agreement shall be deemed to refer to the HonoMo
Security Agreement, and (iii) each reference to the Tranche A Borrowing Base or
the Tranche B Borrowing Base therein shall refer to the HonoMo Tranche A
Borrowing Base or the HonoMo Tranche B Borrowing Base, respectively:
"ACKNOWLEDGMENT AGREEMENTS": collectively, the FHLMC Acknowledgment
Agreement, the FNMA Acknowledgment Agreement, each Approved Investor
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Acknowledgment Agreement and, in the event that the Administrative Agent
has determined that any such form is acceptable as set forth in the
definition of GNMA Acknowledgement Agreement, the GNMA Acknowledgement
Agreement.
"AGENCY GUIDES": collectively, the FHLMC Guide, the FNMA Guide and the
GNMA Guide.
"APPLICABLE TAKE-OUT PRICE": as of any date, (a) for each Eligible
Mortgage Loan included in the Tranche A Borrowing Base, the weighted
average net purchase price (expressed as a percentage) of the Eligible
Take-Out Commitments under which such Eligible Mortgage Loan could be sold,
and (b) for each Eligible Mortgage-Backed Security included in the Tranche
A Borrowing Base, the weighted average net purchase price (expressed as a
percentage) of the Eligible Take-Out Commitments under which such Eligible
Mortgage-Backed Security could be sold (assuming the simultaneous shipment
and sale by the Borrower of all other Eligible Mortgage-Backed Securities).
The weighted average net purchase price of all Eligible Take-Out
Commitments covering Eligible Mortgage Loans or Eligible Mortgage-Backed
Securities in the Tranche A Borrowing Base shall be determined initially
pursuant to the commitment status report delivered to the Administrative
Agent pursuant to subsection 6.1(h), and thereafter weekly pursuant to the
commitment status report delivered to the Administrative Agent pursuant to
subsection 7.2(j) absent any error therein (or if such report has not been
delivered to the Administrative Agent as required by such subsection
7.2(j), such other weighted average net purchase price as the
Administrative Agent shall determine until such report has been delivered
to the Administrative Agent). For purposes of determining the Applicable
Take-Out Price, each commitment status report other than the initial
commitment status report delivered to the Administrative Agent pursuant to
subsection 6.1(h) shall become effective on the first Business Day of the
week immediately following the week in which such commitment status report
is delivered to the Administrative Agent.
"APPRAISED VALUE": with respect to the Eligible Servicing Portfolio at
any time, the amount determined by an independent appraiser acceptable to
the Administrative Agent as set forth initially in the Appraisal delivered
to the Administrative Agent pursuant to subsection 6.1(h)(v), and
thereafter (i) the most recent Appraisal delivered to the Administrative
Agent pursuant to subsection 7.2(h), until the next monthly determination
described in clause (ii) below or, if earlier, the delivery of the next
succeeding Appraisal, or (ii) in the case of any determination of Appraised
Value for the purposes hereof made on or after the first calendar month-end
succeeding delivery of an Appraisal pursuant to subsection 7.2(h) and prior
to the next such delivery pursuant to subsection 7.2(h), such value,
determined as at the same day of each calendar month occurring during such
period (such day to be the first day of such determination after the
Closing Date) and ending most recently prior to such determination, by
applying the percentage value shown in the most recent Appraisal thereof
for each type of investor to the then unpaid principal balance of the
Eligible
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Servicing Portfolio attributable to each such type of investor as
determined in such recent Appraisal, all as certified, in the case of
determinations in connection with any Borrowing Date, in the applicable
worksheet accompanying the related Borrowing Notice, and subject to the
discretion of the Administrative Agent to request an Appraisal pursuant to
subsection 7.2(h) to determine such Appraised Value, or (iii) in the event
that any Appraisal has not been delivered to the Administrative Agent as
required by such subsection 7.2(h), such other amount as the Administrative
Agent shall reasonably determine until such Appraisal has been delivered in
form and substance satisfactory to the Administrative Agent, PROVIDED that
in the event that at any time the Borrower purchases any additional
portfolio of servicing rights, the Borrower may submit a certificate
setting forth the adjustment to the Appraised Value in respect thereof,
determined as set forth in clause (ii) above, and the Administrative Agent
may either accept such adjustment as set forth in such certificate,
effective upon such acceptance, or request an Appraisal to determine the
adjustment to Appraised Value in respect thereof. For purposes of
determining the Appraised Value of the Eligible Servicing Portfolio, (i)
each Appraisal other than the initial Appraisal delivered to the
Administrative Agent pursuant to subsection 6.1(h)(v) shall become
effective on the first Business Day upon which such Appraisal has been both
delivered to and accepted by the Administrative Agent and shall continue to
be effective until such delivery and acceptance of a new Appraisal, and
(ii) each adjustment to Appraised Value pursuant clause (ii) above shall
become effective upon the first Business Day upon which the certificate
described therein has been both delivered to and accepted by the
Administrative Agent and shall continue to be effective until the earlier
of such delivery and acceptance of the next such monthly adjustment or such
delivery and acceptance of a new Appraisal, PROVIDED that, in the event
that, after delivery and before acceptance of any certificate with respect
to any such adjustment to Appraised Value pursuant to clause (ii), the
Administrative Agent requests a new Appraisal, the Appraised Value in
effect immediately prior to delivery of such certificate shall continue in
effect until the delivery and acceptance of such new Appraisal.
"APPROVED INVESTOR": FNMA, FHLMC, or an investor acceptable to the
Administrative Agent, which acceptable investors are listed (i) on Schedule
II, under the heading "Loan Sales", in the case of Approved Investors for
eligible Collateral under the Tranche A Borrowing Base, or (ii) on Schedule
II, under the heading "Servicing", in the case of Approved Investors for
eligible Collateral under the Tranche B Borrowing Base, as such Schedule II
is supplemented with additional Persons which, at the request of the
Borrower, the Administrative Agent may, in its discretion, from time to
time agree in writing to add thereto, PROVIDED that by notice to the
Borrower, the Administrative Agent may in its discretion, based on its
evaluation of the creditworthiness or funding ability of any investor
listed on Schedule II, determine that such investor is no longer an
Approved Investor, effective as of the time of such notice to the Borrower
(or such other effective time as the Borrower and the Administrative Agent
may agree upon) and PROVIDED FURTHER, that no such determination by the
Administrative Agent that an investor is no longer an Approved Investor
shall affect the
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value of any assets then included in the Tranche A Borrowing Base or the
Tranche B Borrowing Base as determined in accordance with this Section 4.
"APPROVED INVESTOR ACKNOWLEDGMENT AGREEMENT": an agreement pursuant to
which an investor (other than FNMA, FHLMC or GNMA) acknowledges the Lien of
the Collateral Agent, for the benefit of the Secured Parties, on
Non-Recourse Servicing Rights relating to Mortgage Loans sold to or
securitized through such investor, in form and substance satisfactory to
the Administrative Agent.
"BMC SERVICING RIGHTS": Direct Servicing Rights owned by BMC and
retained by BMC after the Closing Date (i) with respect to which all
representations and warranties contained in the BMC Security Agreement
applicable thereto are true and correct, (ii) subject to the Barnett
Subservicing Agreement, dated as of May 31, 1996, between HomeSide and BMC,
as in effect on the Closing Date and (iii) the aggregate unpaid principal
balance of the related mortgage loans in respect thereof does not exceed
$1,105,000,000.
"BOOK-ENTRY MORTGAGE-BACKED SECURITY": a Mortgage-Backed Security (a)
that is not represented by a certificate (other than the physical security
issued to GNMA's nominee, MBSCC & Co., or any successor thereto,
representing a GNMA Mortgage-Backed Security) and (b) the ownership and
transfer of which are entered upon books maintained for that purpose by a
depositary.
"CONVENTIONAL MORTGAGE LOAN": a Mortgage Loan that is not insured or
guaranteed by the United States federal government or any agency or
instrumentality thereof.
"DELIVERED": (a) at any time from the date on which a Positive
Security Event has occurred until the occurrence of a Negative Security
Event, an asset to be included in the Tranche A Borrowing Base or Tranche B
Borrowing Base, as the case may be, shall be deemed "DELIVERED" hereunder
if (i) the representations and warranties applicable thereto contained in
the applicable Security Agreement (other than those set forth in Section
8(a)(v) thereof) are true and correct, and (ii) such asset has been
described in a Borrowing Base Certificate delivered to the Administrative
Agent, and (b) at any other time, an asset to be included in the Tranche A
Borrowing Base or Tranche B Borrowing Base, as the case may be, shall be
deemed "DELIVERED" hereunder if (i) the representations and warranties
applicable thereto contained in the applicable Security Agreement
(including, without limitation, those set forth in Section 8(a)(v) thereof)
are true and correct and (ii) such asset has been described in a Borrowing
Base Certificate delivered to the Administrative Agent.
"DIRECT SERVICING RIGHTS": the rights of the Borrower or, in the case
of the BMC Servicing Rights, BMC to service Mortgage Loans for or on behalf
of the owner or holder of such Mortgage Loans (including investors in
mortgage-backed securities
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backed by Mortgage Loans) pursuant to a direct agreement between the
Borrower or BMC, as the case may be, and an Agency or such owner or holder.
In furtherance and not in limitation of the foregoing, subservicing rights
(other than BMC Servicing Rights to the extent set forth herein) shall not
constitute Direct Servicing Rights.
"ELIGIBLE DEFAULT-RELATED ADVANCE": an advance made by the Borrower
(which advance has not been repaid or reimbursed to the Borrower) to
inspect, protect, preserve or repair a Property subject to a Mortgage Loan
that is in default and which is serviced or, in the case of the BMC
Servicing Rights, subserviced, by the Borrower, or for similar or related
purposes, as required by the FNMA Guide, the FHLMC Guide or other Approved
Investor guidelines or as a prudent servicer would reasonably deem
appropriate, including, but not limited to, necessary legal fees and costs
expended for foreclosure, bankruptcy, eviction or litigation actions as
well as costs to obtain clear title.
"ELIGIBLE DEFAULT-RELATED ADVANCE RECEIVABLES": on any date, the
aggregate amount reasonably expected to be recovered by the Borrower from
the applicable mortgagors in respect of Eligible Default-Related Advances
outstanding as of such date if such mortgagors reinstate, pay off or redeem
the related Mortgage Loans or from the FHA, the VA or the applicable
Approved Investor, as the case may be, upon liquidation of such Mortgage
Loans (such amount not to exceed the amount advanced by the Borrower under
the related Eligible Default-Related Advances), other than such receivables
that have been included in the Tranche B Borrowing Base for a period of
more than 18 months (which period shall be extended to 3 years for
receivables relating to Mortgage Loans with respect to which the related
mortgagor is the subject of a bankruptcy proceeding).
"ELIGIBLE EARLY BUYOUT ADVANCE": an advance made by the Borrower
(which advance has not been repaid or reimbursed to the Borrower) which
does not yet qualify as an Eligible Foreclosure Advance: to repurchase an
FHA-insured or VA-guaranteed first priority Mortgage Loan or a first
priority Conventional Mortgage Loan which is an Eligible Mortgage Loan
(except for its failure to satisfy the requirements of subsections (d) and
(e) of the definition of the term "Eligible Mortgage Loan", as a result of
the default thereunder), in each case (i) which has (A) a mortgagor who has
voluntarily surrendered to the Borrower possession of the Property securing
such Mortgage Loan, or (B) any payment 90 days or more past due and the
Borrower has reasonably determined that the reinstatement of such Mortgage
Loan to a current status is unlikely, (ii) which has been repurchased by
the Borrower out of a pool of Mortgage Loans underlying GNMA, FNMA or FHLMC
Mortgage-Backed Securities or issued by an Approved Investor, and (iii)
with respect to which the Required Documentation described in clauses 1 and
3 of ATTACHMENT 2 to the Borrower Security Agreement has been delivered to
the Collateral Agent on or prior to the funding of a Tranche B Loan, the
proceeds of which are used to reimburse the Borrower for such advance.
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"ELIGIBLE EARLY BUYOUT ADVANCE RECEIVABLES": on any date, the
aggregate amount receivable by the Borrower from the FHA, the VA or the
applicable Approved Investor, as the case may be, as of such date as
reimbursement of Eligible Early Buyout Advances (such amount not to exceed
the aggregate amount of principal and accrued interest due under the
related Mortgage Loans repurchased with the proceeds of such Eligible Early
Buyout Advances as of the date of repurchase of such Mortgage Loans by the
Borrower), other than such receivables (a) that have been included in the
Tranche B Borrowing Base for a period of more than 18 months (which period
shall be extended to 3 years for receivables relating to Mortgage Loans
with respect to which the related mortgagor is the subject of a bankruptcy
proceeding), (b) created in connection with an Eligible Early Buyout
Advance with respect to a Mortgage Loan as to which Mortgage Loan notice or
other indication has been given by the FHA, the VA or the applicable
Approved Investor, as the case may be, challenging its obligation to pay
the full amount due in connection therewith, including such amount due on
any insurance or guaranty certificate issued or made in connection
therewith, or (c) created in connection with an Eligible Early Buyout
Advance with respect to a Mortgage Loan that has been reinstated, redeemed
or classified a "No-Bid" by the VA, provided that such receivables
described in this clause (c) shall not cease to be Eligible Early Buyout
Advance Receivables until the earlier to occur of (i) the Borrower's
obtaining knowledge of such reinstatement, redemption or classification,
and (ii) the 10th day following such reinstatement, redemption or
classification.
"ELIGIBLE FIRST MORTGAGE LOAN": an Eligible Mortgage Loan that (a)(i)
is either FHA-insured or VA-guaranteed or (ii) fully conforms to all
underwriting and other requirements of an Approved Investor and has an
original principal balance not exceeding $1,500,000 (provided that Eligible
Mortgage Loans that are covered by an Eligible Take-Out Commitment from The
First National Bank of Boston may have an original principal balance of up
to $5,000,000), (b) is covered by one or more Eligible Take-Out Commitments
or by a Hedge Contract, PROVIDED that if such Mortgage Loan has an original
principal balance in excess of $1,000,000, such Mortgage Loan must be
covered by and allocated to one or more specific Eligible Take-Out
Commitments, (c) has not been included in the Tranche A Borrowing Base for
a period of more than 180 days, and (d) satisfies the requirements of
clause (i) of paragraph (b) of the definition of Eligible Mortgage Loan.
"ELIGIBLE FORECLOSURE ADVANCE": an advance made by the Borrower (which
advance has not been repaid or reimbursed to the Borrower): to repurchase
an FHA-insured or VA-guaranteed first priority Mortgage Loan or a first
priority Conventional Mortgage Loan out of a pool of Mortgage Loans
underlying GNMA, FNMA or FHLMC Mortgage-Backed Securities or
mortgage-backed securities issued by an Approved Investor, in each case for
which a foreclosure sale has been completed or a deed in lieu of
foreclosure has been executed and for which a claim against the FHA, the VA
or the applicable Approved Investor has been filed or is in process.
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"ELIGIBLE FORECLOSURE ADVANCE RECEIVABLES": on any date, the aggregate
amount receivable by the Borrower from the FHA, the VA, or the applicable
Approved Investor, as the case may be, as of such date as reimbursement of
Eligible Foreclosure Advances (such amount not to exceed the aggregate
amount of principal and accrued interest due with respect to the related
Mortgage Loans as of the date of repurchase of such Mortgage Loans by the
Borrower), other than such receivables (a) that have been included in the
Tranche B Borrowing Base for a period of more than 18 months (which period
shall be extended to 3 years for receivables relating to Mortgage Loans
with respect to which the related mortgagor is the subject of a bankruptcy
proceeding) or (b) created in connection with an Eligible Foreclosure
Advance with respect to a Mortgage Loan as to which Mortgage Loan notice or
other indication has been given by the FHA, the VA or the applicable
Approved Investor, as the case may be, challenging its obligation to pay
the full amount due in connection therewith, including such amount due on
any insurance or guaranty certificate issued or made in connection
therewith.
"ELIGIBLE MORTGAGE-BACKED SECURITY": a Mortgage-Backed Security owned
by the Borrower with respect to which each of the following statements is
true and correct:
(a) such Mortgage-Backed Security is a valid and binding
obligation of the Obligor thereon, is in full force and effect and is
enforceable in accordance with its terms;
(b) such Mortgage-Backed Security is free of any default and from
any rescission, cancellation or avoidance, and all rights thereof,
whether by operation of law or otherwise;
(c) such Mortgage-Backed Security has either been deposited with
and is held by the Collateral Agent or an agent, bailee and custodian
of the Collateral Agent under the Borrower Security Agreement (or by a
Person who has executed a custodial agreement acceptable to the
Administrative Agent and the Collateral Agent), properly endorsed in
blank for transfer or, if such Mortgage-Backed Security is a
Book-Entry Mortgage-Backed Security, such Mortgage-Backed Security is
the subject of a Perfected Assignment;
(d) such Mortgage-Backed Security is free and clear of all liens,
encumbrances, charges, rights and interests of any kind (other than
Eligible Take-Out Commitments), except in favor of the Collateral
Agent, for the benefit of the Secured Parties; and
(e) such Mortgage-Backed Security is covered by and allocated to
one or more specific Eligible Take-Out Commitments.
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"ELIGIBLE MORTGAGE LOAN": a Mortgage Loan owned by the Borrower with
respect to which each of the following statements is true and correct:
(a) such Mortgage Loan is a binding and valid obligation of the
Obligor thereon, is in full force and effect and is enforceable in
accordance with its terms;
(b) such Mortgage Loan is secured by (i) a first priority
mortgage (or deed of trust) on the Property encumbered thereby, or
(ii) a second priority mortgage (or deed of trust) on the Property
encumbered thereby;
(c) such Mortgage Loan is genuine in all respects as appearing on
its face or as represented in the books and records of the Borrower,
and all information set forth therein is true and correct;
(d) such Mortgage Loan is free of any material default (other
than as permitted in subsection (e) below) of any party thereto
(including the Borrower), counterclaims, offsets and defenses and from
any rescission, cancellation or avoidance, and all rights thereof,
whether by operation of law or otherwise;
(e) no payment under such Mortgage Loan is more than thirty (30)
days past due the payment due date set forth in the underlying
promissory note and mortgage (or deed of trust);
(f) the underlying mortgage (or deed of trust) for such Mortgage
Loan and promissory note, together with any related note modification
agreement, contain the entire agreement of the parties thereto with
respect to the subject matter thereof, have not been modified or
amended in any respect and such Mortgage Loan is free of concessions
or understandings with the Obligor thereon of any kind not expressed
in writing therein;
(g) such Mortgage Loan is in all respects in accordance with all
applicable laws and regulations governing the same, including the
federal Consumer Credit Protection Act and the regulations promulgated
thereunder and all applicable usury laws and restrictions; and all
notices, disclosures and other statements or information required by
law or regulation to be given, and any other act required by law or
regulation to be performed, in connection with such Mortgage Loan have
been given and performed as required;
(h) all advance payments and other deposits on such Mortgage Loan
have been paid in cash, and no part of such sums has been loaned,
directly or indirectly, by the Borrower to the Obligor thereon;
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(i) such Mortgage Loan is free and clear of all liens,
encumbrances, charges, rights and interests of any kind (other than
Take-Out Commitments), except in favor of the Collateral Agent, for
the benefit of the Secured Parties, under the Borrower Security
Agreement;
(j) the Property encumbered by such Mortgage Loan is insured
against loss or damage by fire and all other hazards normally included
within standard extended insurance coverage (including flood plain
insurance if such Property is located in a federally designated flood
plain) in accordance with the provisions of such Mortgage Loan with
the Borrower and its assigns named as a loss payee thereon;
(k) the Property encumbered by such Mortgage Loan is free and
clear of all Liens other than Liens in favor of the Borrower which
have been assigned by the Borrower to the Collateral Agent, for the
benefit of the Secured Parties, under the Borrower Security Agreement,
except (A) in the case of first priority Mortgage Loans, junior Liens
permitted by the Agency Guides or the underwriting criteria of other
Approved Investors for Mortgage Loans conforming to the requirements
of the applicable Agency Guide or Approved Investor guidelines, (B) in
the case of second priority Mortgage Loans, a first priority Lien or
junior Liens permitted by the Agency Guides or the underwriting
criteria of other Approved Investors for Mortgage Loans conforming to
the requirements of the applicable Agency Guide or Approved Investor
guidelines, and (C) in the case of all Mortgage Loans:
(i) Liens in respect of real property taxes and assessments
not yet due and payable;
(ii) covenants, conditions and restrictions, rights of way,
easements and other matters of public record, as of the date of
recording, being acceptable to mortgage lending institutions
generally and specifically referred to in a lender's title
insurance policy delivered to the originator of such Mortgage
Loan and (A) referred to or otherwise considered in the appraisal
(if any) made for the originator of such Mortgage Loan or (B)
that do not materially adversely affect the appraised value of
such Property as set forth in such appraisal (if any);
(iii) other matters to which like properties are commonly
subject that do not materially interfere with the benefits of the
security intended to be provided by such Mortgage Loan or the
use, enjoyment, value or marketability of the related Property;
and
(iv) subordinate financing and liens that would be permitted
title exceptions pursuant to the applicable Agency Guide or the
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underwriting criteria of other Approved Investors for Mortgage
Loans conforming to the requirements of the applicable Agency
Guide or Approved Investor guidelines;
(l) if the promissory note for such Mortgage Loan (or any other
documentation relating thereto) has been withdrawn from the possession
of the Collateral Agent on the terms and subject to the conditions set
forth in Section 6 of the Borrower Security Agreement, (i) such note
or other documentation has been released to the Borrower in accordance
with Section 6(a) of the Borrower Security Agreement and such release
has occurred within the immediately preceding fourteen (14) days,
PROVIDED that if the aggregate value (determined in accordance with
subsection 4.1) of Mortgage Loans for which such notes or other
documentation have been released as provided above exceeds 1% of the
Tranche A Commitment Amount less the HonoMo Tranche A Sublimit at such
time, in the case of the HomeSide Tranche A Borrowing Base, or of the
HonoMo Tranche A Sublimit, in the case of the HonoMo Tranche A
Borrowing Base, such excess shall be deducted from the Tranche A
Borrowing Base, (ii) the promissory note and any related documentation
for such Mortgage Loan has been shipped by the Collateral Agent
directly to an Approved Investor for purchase in accordance with
Section 6(b) of the Borrower Security Agreement and such shipment has
occurred within the immediately preceding forty-five (45) days, or
(iii) the promissory note and any related documentation for such
Mortgage Loan has been shipped by the Collateral Agent to a
Certificating Custodian in accordance with Section 6(e) of the
Borrower Security Agreement and such shipment has occurred within the
immediately preceding ten (10) days if Section 6(e)(i) of the Borrower
Security Agreement is applicable or within the immediately preceding
forty-five (45) days if Section 6(e)(ii) of the Borrower Security
Agreement is applicable;
(m) with respect to first priority Conventional Mortgage Loans,
if the Loan-to-Value Ratio of such Mortgage Loan exceeds eighty
percent (80%), such Mortgage Loan is the subject of a private mortgage
insurance policy issued in favor of the Borrower by an insurer
approved by an Agency or by the applicable Approved Investor;
(n) except as provided in clause (ii) of the first proviso to
subsection 4.1, the date of the promissory note (or related note
modification agreement if such note modification agreement provides
for conversion of the interest rate on such Mortgage Loan from an
adjustable rate to a fixed rate) related to such Mortgage Loan is no
earlier than one hundred and eighty (180) days prior to the date such
Mortgage Loan was first included in the Tranche A Borrowing Base;
(o) if such Mortgage Loan is FHA-insured or VA-guaranteed, such
insurance or guaranty is in full force and effect (or there exists a
binding
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commitment to issue such insurance or guaranty subject to the
satisfaction of customary conditions);
(p) (i) the Collateral Agent shall have received for such
Mortgage Loan, prior to or simultaneously with its inclusion in the
Tranche A Borrowing Base, the Required Documentation for such Mortgage
Loan described on ATTACHMENT 2 to the Borrower Security Agreement
(PROVIDED that if the Collateral Agent fails to receive such Required
Documentation for such Mortgage Loan prior to or simultaneously with
its inclusion in the Tranche A Borrowing Base, then (A) the Collateral
Agent shall have received a Tranche A Borrowing Base Addition Report
in the form attached to the Borrower Security Agreement as ATTACHMENT
1 relating to such Mortgage Loan prior to or simultaneously with such
Mortgage Loan's inclusion therein; and (B) the Collateral Agent shall
receive such Required Documentation within 10 days after such Mortgage
Loan's inclusion in the Tranche A Borrowing Base), (ii) the Borrower
holds in trust for the Secured Parties those items described on
ATTACHMENT 2 to the Borrower Security Agreement, and (iii) there has
been delivered to the Collateral Agent, if the Collateral Agent has so
requested in writing, the additional items described on ATTACHMENT 8
to the Borrower Security Agreement;
(q) except for the existence of a commitment to sell such
Mortgage Loan on a servicing-released basis, such Mortgage Loan is not
subject to any servicing arrangement with any Person other than
HomeSide nor are any servicing rights relating to such Mortgage Loan
subject to any lien, claim, interest or negative pledge in favor of
any Person other than as permitted hereunder;
(r) if an appraisal is required by the applicable Approved
Investor, the appraisal obtained by the Borrower in connection with
the origination of such Mortgage Loan satisfies all appraisal
requirements of such Approved Investor; and
(s) the improvements on the Property encumbered by such Mortgage
Loan consist of a completed one- to four-family residence (other than
a mobile home or other temporary housing facility).
"ELIGIBLE P&I ADVANCE": an advance of principal and interest made by
the Borrower (which advance has not been repaid or reimbursed to the
Borrower) pursuant to the Borrower's obligation to do so under a servicing
agreement or, in the case of the BMC Servicing Rights, subservicing
agreement, as the case may be, in respect of Non-Recourse Servicing Rights
with respect to the servicing of first priority Mortgage Loans, which
advance is reimbursable by the FHA, the VA or the applicable Approved
Investor, and which advance was made not more than thirty (30) days prior
to the date
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on which the determination of whether such advance is an Eligible P&I
Advance is made.
"ELIGIBLE P&I ADVANCE RECEIVABLES": on any date, the aggregate amount
receivable by the Borrower from the FHA, the VA or the applicable Approved
Investor, as the case may be, as of such date as reimbursement of Eligible
P&I Advances (such amount not to exceed the amount advanced by the Borrower
under the related Eligible P&I Advances), other than such receivables (a)
created in connection with an Eligible P&I Advance with respect to a
Mortgage Loan as to which Mortgage Loan notice or other indication has been
given by the FHA or the VA challenging its obligation to pay the full
amount due on any insurance or guaranty certificate, or (b) created in
connection with an Eligible P&I Advance with respect to a Mortgage Loan,
which Eligible P&I Advance is reimbursable by an Approved Investor and
notice or other indication has been given by such Approved Investor
challenging its obligation to pay the full amount due in connection with
such Mortgage Loan.
"ELIGIBLE PAID-IN-FULL BUYOUT ADVANCE": an advance made by the
Borrower (which advance has not been repaid or reimbursed to the Borrower):
(a) to repurchase an FHA-insured or VA-guaranteed first priority Mortgage
Loan or first priority Conventional Mortgage Loan constituting an Eligible
Mortgage Loan which has (i) a mortgagor who has indicated intent to
liquidate the Mortgage Loan through a payoff, (ii) no delinquent payments
over 30 days in the past 12 months and (iii) a confirmed closing date
through an authorized closing agent, (b) in respect of which the Required
Documentation described on ATTACHMENT 2 to the Borrower Security Agreement
has been delivered to the Collateral Agent as required thereunder, and (c)
which is fully reimbursable by the applicable mortgagor or authorized
closing agent.
"ELIGIBLE PAID-IN-FULL BUYOUT ADVANCE RECEIVABLES": on any date, the
aggregate amount receivable by the Borrower from the applicable mortgagors
or authorized closing agents as of such date as reimbursement of Eligible
Paid-in-Full Buyout Advances (such amount not to exceed the aggregate
amount of principal due as of such date under the Mortgage Loans
repurchased with the proceeds of such Eligible Paid-in-Full Buyout Advances
together with interest accruing to but not including the confirmed closing
date for the payoff of each such Mortgage Loan), other than such
receivables (a) that have been included in the Tranche B Borrowing Base for
a period of more than 60 days, or (b) created in connection with an
Eligible Paid-in-Full Buyout Advance with respect to a Mortgage Loan as to
which Mortgage Loan notice or other indication has been given by the
mortgagor thereof or closing agent challenging its intent to pay the full
amount due in connection with such Mortgage Loan.
"ELIGIBLE SECOND MORTGAGE LOAN": an Eligible Mortgage Loan that (a)(i)
is either FHA-insured or VA-guaranteed, or (ii) fully conforms to all
underwriting and other requirements of an Approved Investor and has an
original principal balance not exceeding $300,000, (b) is covered by one or
more Eligible Take-Out Commitments or
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covered by a Hedge Contract, PROVIDED that if such Mortgage Loan is a
Nonconforming Mortgage Loan, such Mortgage Loan must be covered by and
allocated to one or more specific Eligible Take-Out Commitments, (c) has
not been included in the Tranche A Borrowing Base for a period of more than
60 days, (d) has a Loan-to-Value Ratio not greater than 95%, and (e)
satisfies the requirements of clause (ii) of paragraph (b) of the
definition of Eligible Mortgage Loan.
"ELIGIBLE SERVICING PORTFOLIO": Non-Recourse Servicing Rights (a) for
Mortgage Loans which are no more than 90 days delinquent, whether
underlying Mortgage-Backed Securities or held as whole loans, (b) in
respect of which Acknowledgment Agreements (as applicable thereto pursuant
to the definition of Acknowledgment Agreements) are in full force and
effect and have been delivered to the Collateral Agent and the
Administrative Agent, and (c) in respect of which true and correct copies
of the contracts or agreements relating to or from which such Non-Recourse
Servicing Rights arise, together with all amendments, modifications and
supplements thereto, have been delivered to the Administrative Agent and
are in form and substance satisfactory to the Administrative Agent, if such
Non-Recourse Servicing rights are for Mortgage Loans other than those
serviced for or on behalf of an Agency.
"ELIGIBLE SERVICING RECEIVABLES": collectively, Eligible
Default-Related Advance Receivables, Eligible Early Buyout Advance
Receivables, Eligible Foreclosure Advance Receivables, Eligible P&I Advance
Receivables, Eligible Paid-in-Full Buyout Advance Receivables, and Eligible
T&I Advance Receivables.
"ELIGIBLE TAKE-OUT COMMITMENT": a Take-Out Commitment with respect to
which each of the following statements is true and correct:
(a) the Borrower and the Eligible Mortgage Loans or Eligible
Mortgage-Backed Securities that are the subject of such Take-Out
Commitment are in full compliance therewith; and
(b) such Take-Out Commitment is in full force and effect and
pledged to the Collateral Agent, for the benefit of the Secured
Parties, under the Borrower Security Agreement.
"ELIGIBLE T&I ADVANCE": an advance made by the Borrower (which advance
has not been repaid or reimbursed to the Borrower) of tax and insurance
escrow amounts (a) required to be paid by the Borrower, as servicer, or, in
the case of the BMC Servicing Rights, subservicer, under a first priority
Mortgage Loan as a result of an increase in the related taxes and/or
insurance premiums owing by the mortgagor, which increased amounts are to
be recovered subsequently from the mortgagor in accordance with the Real
Estate Settlement Procedures Act of 1974, as amended, or (b) required to
be, but not, paid by the mortgagor under a first priority Mortgage Loan
serviced by the Borrower, which advance is made by the Borrower pursuant to
the
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Borrower's obligation to do so under a servicing agreement or, in the
case of the BMC Servicing Rights, subservicing agreement, as the case
may be, in respect of Non-Recourse Servicing Rights and, in the case
of each of clauses (a) and (b) above, eligible for reimbursement by
the FHA, the VA, or the applicable Approved Investor.
"ELIGIBLE T&I ADVANCE RECEIVABLES": on any date, the aggregate amount
receivable by the Borrower from the applicable mortgagor, the FHA, the VA
or the applicable Approved Investor, as the case may be, as of such date as
reimbursement of Eligible T&I Advances (such amount not to exceed the
amount advanced by the Borrower under the related Eligible T&I Advances),
other than such receivables (a) that have been included in the Tranche B
Borrowing Base for a period of more than 18 months (which period shall be
extended to 3 years for receivables relating to Mortgage Loans with respect
to which the related mortgagor is the subject of a bankruptcy proceeding),
(b) created in connection with an Eligible T&I Advance with respect to a
Mortgage Loan as to which Mortgage Loan notice or other indication has been
given by the FHA or the VA challenging its obligation to pay the full
amount due on any insurance or guaranty certificate, or (c) created in
connection with an Eligible T&I Advance with respect to a Mortgage Loan,
which Eligible T&I Advance is reimbursable by an Approved Investor and
notice or other indication has been given by such Approved Investor
challenging its obligation to pay the full amount due in connection with
such Mortgage Loan.
"ELIGIBLE WET LOANS": the collective reference to Eligible Wet First
Loans and Eligible Wet Second Loans.
"ELIGIBLE WET FIRST LOAN": an Eligible First Mortgage Loan of the type
described in the proviso to clause (i) of paragraph (p) of the definition
of Eligible Mortgage Loan.
"ELIGIBLE WET SECOND LOAN": an Eligible Second Mortgage Loan of the
type described in the proviso to clause (i) of paragraph (p) of the
definition of Eligible Mortgage Loan.
"FHA": the United States Federal Housing Administration and any
successor thereto.
"FHLMC ACKNOWLEDGMENT AGREEMENT": an agreement pursuant to which FHLMC
acknowledges the Lien of the Collateral Agent, on behalf of the Secured
Parties, on Non-Recourse Servicing Rights relating to Mortgage Loans sold
to or securitized through FHLMC, in form and substance as is customarily
provided by FHLMC in agreements of its kind on its date of execution (or
any successor agreement thereto) and acceptable to the Administrative
Agent.
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"FHLMC GUIDE": the "Sellers' & Servicers' Guide" published by FHLMC,
as amended, modified or supplemented from time to time.
"FHLMC MORTGAGE-BACKED SECURITIES": any security (including a
participation certificate) issued by FHLMC that represents an interest in a
pool of Mortgage Loans.
"FNMA ACKNOWLEDGMENT AGREEMENT": an agreement pursuant to which FNMA
acknowledges the Lien of the Collateral Agent, on behalf of the Secured
Parties, on Non-Recourse Servicing Rights relating to Mortgage Loans sold
to or securitized through FNMA, in form and substance as is customarily
provided by FNMA in agreements of its kind on its date of execution (or any
successor agreement thereto) and acceptable to the Administrative Agent.
"FNMA GUIDE": collectively, the "Selling Guide" and the "Servicing
Guide" published by FNMA, as amended, modified or supplemented from time to
time.
"FNMA MORTGAGE-BACKED SECURITIES": any security (including a
participation certificate) issued by FNMA that represents an interest in a
pool of Mortgage Loans.
"GNMA ACKNOWLEDGMENT AGREEMENT": at all times subsequent to the date
hereof that GNMA enters into such agreements and such agreement is
available to the Borrower and in a form acceptable to the Administrative
Agent, an agreement pursuant to which GNMA acknowledges the Lien of the
Collateral Agent, on behalf of the Secured Parties, on Non-Recourse
Servicing Rights relating to Mortgage Loans securitized through GNMA.
"GNMA GUIDE": collectively, the "GNMA I Mortgage-Backed Securities
Guide" and the "GNMA II Mortgage-Backed Securities Guide" published by the
Department of Housing and Urban Development, as amended, modified or
supplemented from time to time.
"GNMA MORTGAGE-BACKED SECURITIES": any security (including a
participation certificate) guaranteed by GNMA that represents an interest
in a pool of Mortgage Loans.
"HEDGE CONTRACT": in respect of any Mortgage Loans, Mortgage-Backed
Securities or servicing rights for Mortgage Loans, a contract to buy or
sell an instrument on the futures market, cash forward market, private
investor whole-loan market or options market, or an option or financial
future purchased over the counter for future delivery of such instrument,
in respect of interest rate risks associated with such Mortgage Loans,
Mortgage-Backed Securities and servicing rights.
"LOAN-TO-VALUE RATIO": for any Mortgage Loan, the percentage
represented by the sum of the initial principal amount of the first and, if
applicable, second priority
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Mortgage Loans outstanding in respect of the Property encumbered thereby at
the origination thereof in relation to the lesser of (a) the appraised
value of the Property encumbered thereby (as set forth in the appraisal, if
any, delivered in connection with the origination of such Mortgage Loan)
and (b) the most recent value assigned to such Property pursuant to the
requirements of the applicable Approved Investor.
"MORTGAGE LOAN": a one- to four-family residential real estate-secured
loan.
"MORTGAGE-BACKED SECURITIES": the collective reference to FHLMC
Mortgage-Backed Securities, FNMA Mortgage-Backed Securities and GNMA
Mortgage-Backed Securities.
"NONCONFORMING MORTGAGE LOAN": an Eligible First Mortgage Loan or an
Eligible Second Mortgage Loan that fully conforms to all underwriting and
other requirements of an Approved Investor other than FNMA, FHLMC or GNMA.
"NON-RECOURSE SERVICING RIGHTS": Direct Servicing Rights owned by the
Borrower or, in respect of the BMC Servicing Rights, BMC, relating to
Mortgage Loans in respect of which the Borrower, as servicer or, in the
case of the BMC Servicing Rights, subservicer, bears no general risk of
payment default by the mortgagor thereunder, PROVIDED that (i) servicing
rights owned by the Borrower or, in the case of the BMC Servicing Rights,
BMC relating to Mortgage Loans guaranteed by the VA shall constitute
Non-Recourse Servicing Rights notwithstanding the classification of such
Mortgage Loans as "No Bids" by the VA, and (ii) servicing rights owned by
the Borrower or, in the case of the BMC Servicing Rights, BMC, which would
otherwise not constitute Non-Recourse Servicing Rights shall constitute
Non-Recourse Servicing Rights to the extent that the Borrower, as servicer
or subservicer, in the case of the BMC Servicing Rights, is fully
indemnified by The First National Bank of Boston or Barnett against the
risk of payment default by the mortgagors under the related Mortgage Loans
in accordance with indemnification agreements in form and substance
satisfactory to the Administrative Agent.
"OBLIGOR": the Person or Persons obligated to pay the indebtedness
that is the subject of a Mortgage Loan or Mortgage-Backed Security,
including any guarantor of such indebtedness.
"PERFECTED ASSIGNMENT": with respect to any Book-Entry Mortgage-Backed
Security, such Book-Entry Mortgage-Backed Security has been transferred to
the Collateral Agent or any entity designated by the Collateral Agent so
that the Collateral Agent or such entity may maintain such Book-Entry
Mortgage-Backed Security as depositary in one of its book-entry accounts
with a Federal Reserve Bank or the Participants Trust Company and a pledge
to the Collateral Agent for the benefit of the Secured Parties has been
registered with the Collateral Agent or such entity, or the Borrower has
taken such other actions as the Administrative Agent or the Collateral
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Agent may reasonably request to perfect, protect and maintain the valid,
perfected and first priority security interest of the Collateral Agent, for
the benefit of the Secured Parties, in such Book-Entry Mortgage-Backed
Security.
"PROPERTY": the real property, including the improvements thereon, and
the personal property (tangible and intangible) that are encumbered
pursuant to a Mortgage Loan.
"REQUIRED DOCUMENTATION": in respect of any Mortgage Loan,
Mortgage-Backed Security or Eligible Servicing Receivable, the set of
instruments and documents applicable thereto described in the applicable
Security Agreement that is required to be delivered to the Collateral Agent
thereunder in connection with such Mortgage Loan, Mortgage-Backed Security
or Eligible Servicing Receivable, and such other documents related thereto
as the Collateral Agent or the Administrative Agent may from time to time
reasonably require.
"SECURED PARTIES": as defined in Section 1 of the each of the Security
Agreements.
"SERVICING ADVANCE PORTION": that portion of the Tranche B Borrowing
Base, determined under subsection 4.2, attributable to clauses (a) through
(f) of subsection 4.2.
"SERVICING PORTFOLIO PORTION": that portion of the Tranche B Borrowing
Base, determined under subsection 4.2, attributable to clause (g) of
subsection 4.2.
"TAKE-OUT COMMITMENT": with respect to any Eligible Mortgage Loan or
Eligible Mortgage-Backed Security included in the Tranche A Borrowing Base,
one or more BONA FIDE current, unfilled and unexpired commitments of an
Approved Investor, issued in favor of and owned by the Borrower, under
which such Approved Investor agrees to purchase, at a specified price, an
aggregate amount and type of (i) Mortgage Loans which includes such
Eligible Mortgage Loan or (ii) Mortgage-Backed Securities which includes
such Eligible Mortgage-Backed Securities.
"VA": the United States Veteran's Administration and any successor
thereto.
4.4 WAIVER OF REQUIREMENTS; MARK-TO-MARKET. Notwithstanding the provisions
of subsections 4.1, 4.2 and 4.3, (a) the Administrative Agent is hereby
authorized by the Lenders to grant waivers, in its sole discretion, of any of
the requirements for eligibility regarding qualification of Mortgage Loans,
Mortgage-Backed Securities, Eligible Servicing Receivables and/or Non-Recourse
Servicing Rights for inclusion in either Tranche A Borrowing Base or either
Tranche B Borrowing Base, as applicable, PROVIDED that, at any time, the
aggregate value (as determined in accordance with this Section 4) of all such
Mortgage Loans, Mortgage-Backed Securities, Eligible Servicing Receivables
and/or
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Non-Recourse Servicing Rights accepted by the Administrative Agent as eligible
for inclusion in such Tranche A Borrowing Base or such Tranche B Borrowing Base,
as applicable, pursuant to such waivers shall not exceed $50,000,000 in the
aggregate, and (b) if a Default or Event of Default has occurred and is
continuing, the value of each Eligible Mortgage Loan or Eligible Mortgage-Backed
Security shall be equal to the applicable advance rate as set forth in the
applicable provision of subsection 4.1 multiplied by the product of (i) the
market price for 30-day mandatory future delivery of such Eligible Mortgage Loan
or Eligible Mortgage-Backed Security quoted by Telerate or, if not so quoted,
the average bid price quoted in writing to the Administrative Agent as of the
computation date in respect thereof by any two nationally recognized dealers
reasonably selected by the Administrative Agent who, at such time, are making a
market in similar Mortgage Loans or Mortgage-Backed Securities, as the case may
be, multiplied by (ii) the unpaid principal amount or face amount, respectively,
thereof.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans, each Borrower hereby represents and warrants to
the Administrative Agent and each Lender that:
5.1 FINANCIAL CONDITION. (a) The consolidated balance sheet of HomeSide and
its consolidated Subsidiaries as at December 31, 1995, and the related
consolidated statements of income and of cash flows for the fiscal year ended on
such date, reported on by Coopers & Lybrand, LLP, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the consolidated financial condition of HomeSide and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the fiscal year then ended. The
consolidated balance sheet of HomeSide and its consolidated Subsidiaries as at
March 15, 1996, and the related consolidated statements of income and of cash
flows for the period ended on such date, certified by Responsible Officer,
copies of which have heretofore been furnished to each Lender, are complete and
correct and present fairly the consolidated financial condition of HomeSide and
its consolidated Subsidiaries as at such date, and the consolidated results of
their operations and their consolidated cash flows for the period then ended
(subject to normal year-end adjustments). All such financial statements,
including the related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods involved
(except as approved by such accountants or Responsible Officer, as the case may
be, and as disclosed therein). Except for those items set forth on Schedule 5.1,
neither HomeSide nor any of its consolidated Subsidiaries had, at the date of
the most recent balance sheet referred to above, any material Guarantee
Obligation, material contingent liability or material liability for taxes, or
any material long-term lease or material unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction, which is not reflected in the foregoing statements
or in the notes thereto. During the period from December 31, 1995 to and
including the date hereof there has been no
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sale, transfer or other disposition by HomeSide or any of its consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the consolidated financial condition
of HomeSide and its consolidated Subsidiaries at December 31, 1995, other than
pursuant to and in accordance with the BBMC Stock Purchase Agreement as in
effect on the BBMC Closing Date and the BMC Stock Purchase Agreement as in
effect on the Closing Date.
(b) The consolidated balance sheet of BMC and its consolidated Subsidiaries
as at December 31, 1995, and the related consolidated statements of income and
of cash flows for the fiscal year ended on such date, reported on by Arthur
Andersen LLP, copies of which have heretofore been furnished to each Lender, are
complete and correct and present fairly the consolidated financial condition of
BMC and its consolidated Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for the fiscal
year then ended. The consolidated balance sheet of BMC and its consolidated
Subsidiaries as at March 31, 1996, and the related consolidated statements of
income and of cash flows for the three-month period ended on such date,
certified by Responsible Officer, copies of which have heretofore been furnished
to each Lender, are complete and correct and present fairly the consolidated
financial condition of BMC and its consolidated Subsidiaries as at such date,
and the consolidated results of their operations and their consolidated cash
flows for the three-month period then ended (subject to normal year-end
adjustments). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein). Except for
those items set forth on Schedule 5.1, neither BMC nor any of its consolidated
Subsidiaries had, at the date of the most recent balance sheet referred to
above, any material Guarantee Obligation, material contingent liability or
material liability for taxes, or any material long-term lease or material
unusual forward or material long-term commitment, including, without limitation,
any interest rate or foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto. During the period
from December 31, 1995 to and including the date hereof there has been no sale,
transfer or other disposition by BMC or any of its consolidated Subsidiaries of
any material part of its business or property and no purchase or other
acquisition of any business or property (including any capital stock of any
other Person) material in relation to the consolidated financial condition of
BMC and its consolidated Subsidiaries at December 31, 1995, other than pursuant
to and in accordance with the BBMC Stock Purchase Agreement as in effect on the
BBMC Closing Date and the BMC Stock Purchase Agreement as in effect on the
Closing Date.
(c) The unaudited PRO FORMA consolidated balance sheet delivered pursuant
to subsection 6.1(i) has been prepared in good faith based on reasonable
assumptions and fairly presents the PRO FORMA financial condition of Holdings
and its Subsidiaries as at March 31, 1996, after giving effect to the BBMC
Acquisition and the BMC Acquisition and the transactions contemplated thereby,
and the making of Loans hereunder on the Closing Date
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and the issuance of the Holdings Notes, assuming such transactions had occurred
on March 31, 1996.
5.2 NO CHANGE. (a) Since December 31, 1995 there has been no development or
event which has had or could reasonably be expected to have a Material Adverse
Effect, and (b) except for the transactions effected pursuant to the BBMC Stock
Purchase Agreement and the BMC Stock Purchase Agreement, during the period from
December 31, 1995 to and including the date of this Agreement no dividends or
other distributions have been declared, paid or made upon the Capital Stock of
HomeSide nor has any of the Capital Stock of HomeSide been redeemed, retired,
purchased or otherwise acquired for value by HomeSide or any of its
Subsidiaries, it being agreed that the amount of the charge to earnings of
HomeSide in respect of Hedge Contracts relating to the Eligible Servicing
Portfolio has not constituted a Material Adverse Effect, to the extent of the
projected amount thereof to be recorded for such period disclosed to the Lenders
prior to the date of this Agreement.
5.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of Holdings and its
Subsidiaries (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) has the corporate power
and authority, and the legal right, to own and operate its property, to lease
the property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except to the extent that the failure to be so qualified or in
good standing could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect, (d) in the case of BMC, such Borrower and, to the
extent necessary or desirable in the normal conduct of its business, each
Subsidiary, has valid current status and eligibility in good standing under the
regulations of the Agencies as an approved seller/servicer, issuer/servicer or
lender, as the case may be (including as a FNMA and FHLMC approved
Seller/Servicer, a GNMA approved Issuer/Servicer, a HUD Direct Endorsement
Lender, a VA approved lender and an FHA approved lender), (e) has any other
valid and current classification under the regulations of each of the Agencies
necessary or desirable in the normal conduct of its business and (f) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
5.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each Loan
Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of such Borrower, to borrow hereunder and has taken all necessary corporate
action to authorize the borrowings on the terms and conditions of this Agreement
and any Notes and to authorize the execution, delivery and performance of the
Loan Documents to which it is a party. No consent or authorization of, filing
with, notice to or other act by or in respect of any Governmental Authority or
any other Person is required in connection with the borrowings hereunder or with
the execution, delivery, performance, validity or enforceability of the Loan
Documents to which such Loan Party is a party, except as set forth on Schedule
5.4, all of which have been duly accomplished
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and are valid and in full force and effect. Each Loan Document has been, and
each other Loan Document will be, duly executed and delivered on behalf of each
Loan Party that is a party thereto. This Agreement constitutes, and each other
Loan Document when executed and delivered by each Loan Party that is a party
thereto will constitute, a legal, valid and binding obligation of such Loan
Party enforceable against such Loan Party in accordance with its terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
5.5 NO LEGAL BAR. The execution, delivery and performance of the Loan
Documents, the borrowings hereunder and the use of the proceeds thereof will not
violate any Requirement of Law or Contractual Obligation (subject to the receipt
of any required consents under certain servicing contracts) of Holdings or of
any of its Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation.
5.6 NO MATERIAL LITIGATION. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of such Borrower, threatened by or against Holdings or any of its
Subsidiaries or against any of its or their respective properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated hereby or thereby, or (b) except as set forth on Schedule 5.6,
which could reasonably be expected to have a Material Adverse Effect.
5.7 NO DEFAULT. Neither Holdings nor any of its Subsidiaries is in default
under or with respect to any of its Contractual Obligations in any respect which
could reasonably be expected to have a Material Adverse Effect. No Default or
Event of Default has occurred and is continuing.
5.8 OWNERSHIP OF PROPERTY; LIENS. Each of Holdings and its Subsidiaries has
good record and marketable title in fee simple to, or a valid leasehold interest
in, all its real property, and good title to, or a valid leasehold interest in,
all its other property, and none of such property is subject to any Lien except
as permitted by subsection 8.3.
5.9 INTELLECTUAL PROPERTY. Holdings and each of its Subsidiaries owns, or
is licensed to use, all trademarks, tradenames, copyrights, technology, know-how
and processes necessary for the conduct of its business as currently conducted
except for those the failure to own or license which could not reasonably be
expected to have a Material Adverse Effect (the "INTELLECTUAL PROPERTY"). No
claim has been asserted and is pending by any Person challenging or questioning
the use of any such Intellectual Property or the validity or effectiveness of
any such Intellectual Property, nor does such Borrower know of any valid basis
for any such claim. The use of such Intellectual Property by Holdings and its
Subsidiaries does not infringe
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on the rights of any Person, except for such claims and infringements that, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
5.10 TAXES. Each of Holdings and its Subsidiaries has filed or caused to be
filed all tax returns which, to the knowledge of such Borrower, are required to
be filed and has paid all taxes shown to be due and payable on said returns or
on any assessments made against it or any of its property and all other taxes,
fees or other charges imposed on it or any of its property by any Governmental
Authority (other than any the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of Holdings or
its Subsidiaries, as the case may be); and no tax Lien has been filed, and, to
the knowledge of such Borrower, no claim is being asserted, with respect to any
such tax, fee or other charge.
5.11 FEDERAL REGULATIONS. No part of the proceeds of any Loans will be used
for "purchasing" or "carrying" any "margin stock" within the respective meanings
of each of the quoted terms under Regulation G or Regulation U of the Board as
now and from time to time hereafter in effect. If requested by any Lender or the
Administrative Agent, HomeSide will furnish to the Administrative Agent and each
Lender a statement to the foregoing effect in conformity with the requirements
of FR Form G-1 or FR Form U-1 referred to in said Regulation G or Regulation U,
as the case may be.
5.12 ERISA. Neither a Reportable Event that reasonably could result in the
termination of a Plan (other than a standard termination) or which could have a
Material Adverse Effect nor an "accumulated funding deficiency" (within the
meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during
the five-year period prior to the date on which this representation is made or
deemed made with respect to any Single Employer Plan, and each Plan has complied
in all material respects with the applicable provisions of ERISA and the Code.
No termination of a Single Employer Plan has occurred, (other than a standard
termination) and no Lien in favor of the PBGC or a Plan has arisen, during such
five-year period. The present value of all accrued benefits under each Single
Employer Plan (based on those assumptions used to fund such Plans) did not, as
of the last annual valuation date prior to the date on which this representation
is made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits. Neither such Borrower nor any Commonly Controlled Entity
has had a complete or partial withdrawal from any Multiemployer Plan, and
neither such Borrower nor any Commonly Controlled Entity would become subject to
any liability under ERISA if such Borrower or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent.
5.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS. Such 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. Such
Borrower is not subject
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to regulation under any Federal or State statute or regulation (other than
Regulation X of the Board) which limits its ability to incur the Loans.
5.14 SUBSIDIARIES. The Subsidiaries listed on Schedule 5.14 constitute all
the Subsidiaries of Holdings at the date hereof.
5.15 PURPOSE OF LOANS. The proceeds of the Loans shall be used by such
Borrower (i) in the case of HomeSide, to finance the repayment of existing
indebtedness of HomeSide on the Closing Date (including indebtedness under the
Existing Credit Agreement), (ii) in the case of HomeSide, to finance a portion
of the consideration for the BMC Acquisition and the transactions related
thereto and to pay costs, fees and expenses in relation thereto and to the
financing thereof, and (iii) in the case of each Borrower, following the
consummation of the BMC Acquisition, to finance the ongoing operations of such
Borrower, including the origination, acquisition and servicing of residential
mortgage loans, and other working capital and general corporate needs of such
Borrower, including making Restricted Payments permitted by subsection 8.9.
5.16 ENVIRONMENTAL MATTERS. Except to the extent that all of the following,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect:
(a) The facilities and properties owned, leased or operated by
Holdings or any of its Subsidiaries (the "PREMISES") do not contain, and
have not previously contained, any Materials of Environmental Concern in
amounts or concentrations which (i) constitute or constituted a violation
of, or (ii) could reasonably be expected to give rise to liability under,
any Environmental Law.
(b) The Premises and all operations at the Premises are in compliance,
and have in the last five years been in compliance, in all material
respects with all applicable Environmental Laws, and there is no
contamination at, under or about the Premises or violation of any
Environmental Law with respect to the Premises or the business operated by
Holdings or any of its Subsidiaries (the "BUSINESS") which could interfere
with the continued operation of the Premises.
(c) Neither Holdings nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Premises or the Business, nor
does such Borrower have knowledge or reason to believe that any such notice
will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Premises in violation of, or in a manner or to a
location which could reasonably be expected to give rise to liability
under, any Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at, on or under any
of the Premises in violation of, or in a manner that
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could reasonably be expected to give rise to liability under, any
applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of such Borrower, threatened, under any
Environmental Law to which Holdings or any Subsidiary is or will be named
as a party with respect to the Premises or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or
other orders, or other administrative or judicial requirements outstanding
under any Environmental Law with respect to the Premises or the Business.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Premises, or arising from or related
to the operations of Holdings or any Subsidiary in connection with the
Premises or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could reasonably give rise to liability
under Environmental Laws.
5.17 CONSUMMATION OF THE ACQUISITIONS; STOCK PURCHASE AGREEMENTS. On the
BBMC Closing Date, the BBMC Acquisition was duly consummated in accordance with
the BBMC Stock Purchase Agreement. Each representation and warranty made by each
of the Seller and the Purchaser (as such terms are defined in the BBMC Stock
Purchase Agreement) in the BBMC Stock Purchase Agreement is true and correct in
all material respects on and as of the Closing Date, except to the extent that
any such representation or warranty relates expressly to an earlier date, in
which case such representation or warranty is true and correct on and as of such
earlier date. On the Closing Date, the BMC Acquisition was duly consummated in
accordance with the BMC Stock Purchase Agreement, without any material waiver or
other material modification of the terms or conditions thereof not consented to
by Required Lenders. Each representation and warranty made by each of the Seller
and the Purchaser in the BMC Stock Purchase Agreement is true and correct in all
material respects on and as of the Closing Date, except to the extent that any
such representation or warranty relates expressly to an earlier date, in which
case such representation or warranty is true and correct on and as of such
earlier date.
5.18 CAPITALIZATION. Schedule 5.18 sets forth, as of the date hereof, the
number of authorized, issued and outstanding shares of each class of Capital
Stock of Holdings, the names and record owners of such shares (other than
management shareholders, whose shares are set forth therein in aggregate
opposite "Management"), the number of shares owned of record by each of such
owners, and the amount of the equity investment evidenced thereby on the Closing
Date. All of such shares are fully paid and duly and validly issued and
outstanding. Except as described on Schedule 5.18, there are no outstanding
subscriptions, options, warrants, calls, rights (including preemptive rights) or
any other agreements or commitments of any nature with respect to the Capital
Stock of Holdings or any of its Subsidiaries.
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5.19 DISCLOSURE. The statements and information contained herein, in any
other Loan Document and in any of the information provided to the Administrative
Agent or the Lenders in writing (other than financial projections) in connection
with this Agreement, taken as a whole, do not contain any untrue statement of
any material fact, or omit to state a fact necessary in order to make such
statements or information not misleading in any material respect, in each case
in light of the circumstances under which such statements were made or
information provided as of the date so provided and subject to any information
subsequently provided in writing which amends, modifies or corrects the
information previously furnished. The financial projections dated May 21, 1996,
furnished to the Administrative Agent or the Lenders in writing in connection
with this Agreement have been prepared in good faith based upon assumptions
which were reasonable when such projections were made, it being acknowledged
that such projections are subject to the uncertainty inherent in all projections
of future results and that there can be no assurance that the results set forth
in such projections will in fact be realized. There is no fact known to such
Borrower, other than economic conditions generally, including interest rate
risk, that could reasonably be expected to have a Material Adverse Effect that
has not been expressly disclosed herein, in the other Loan Documents or in such
other documents, certificates and written statements furnished to the
Administrative Agent and the Lenders for use in connection with the transactions
contemplated hereby and by the other Loan Documents.
SECTION 6. CONDITIONS PRECEDENT
6.1 CONDITIONS TO INITIAL LOANS. The agreement of each Lender to make or
purchase the initial Loan requested to be made or purchased by it is subject to
the satisfaction, immediately prior to or concurrently with the making of such
Loan on the Closing Date, of the following conditions precedent:
(a) LOAN DOCUMENTS. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of each
Borrower, with a counterpart for each Lender, (ii) each Security Agreement,
executed and delivered by a duly authorized officer of each party thereto,
with a counterpart or a conformed copy for each Lender, (iii) each Pledge
Agreement, executed and delivered by a duly authorized officer of each
party thereto, with a counterpart or a conformed copy for each Lender,
accompanied by all stock certificates and related undated stock powers,
executed in blank, in respect of all Pledged Stock thereunder, (iv) each
Guarantee, executed and delivered by a duly authorized officer of each
Guarantor party thereto, with a counterpart or a conformed copy for each
Lender and (v) the Intercreditor Agreement, executed and delivered by a
duly authorized officer of each party thereto, with a counterpart or a
conformed copy for each Lender.
(b) BMC ACQUISITION; FINANCING. (i) All conditions to the consummation
of the BMC Acquisition under the BMC Stock Purchase Agreement shall have
been satisfied, (ii) the Administrative Agent shall have received evidence
satisfactory to it that
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Holdings and HomeSide shall have received the proceeds of the equity
issuances described on Schedule 5.18 in the amounts set forth therein (in
each case, including the amounts of existing equity in Holdings immediately
prior to the Closing Date) and the proceeds of the issuance of $200,000,000
in aggregate principal amount of Holdings Notes, and (iii) the
Administrative Agent shall have received evidence satisfactory to it that
the BMC Acquisition shall be consummated and effective in accordance with
the terms of the BMC Stock Purchase Agreement immediately upon the making
of the initial Loans on the Closing Date.
(c) RELATED AGREEMENTS. The Administrative Agent shall have received,
with a copy for each Lender, true and correct copies, certified as to
authenticity by HomeSide, of (i) the BMC Stock Purchase Agreement, along
with related schedules and exhibits, (ii) the Holdings Notes and related
documents and (iii) the Second Lien Pledge Agreements, executed and
delivered by Holdings and BMC, respectively, and such other documents or
instruments as may be reasonably requested by the Administrative Agent.
(d) REPAYMENT OF EXISTING INDEBTEDNESS. The Administrative Agent shall
have received evidence satisfactory to it that, simultaneously with the
making of the initial Loans on the Closing Date, HomeSide will have repaid
in full its existing Indebtedness (i) to Barnett, (ii) under the Short Term
Loan Agreement and (iii) under the Existing Credit Agreement.
(e) CLOSING CERTIFICATE. The Administrative Agent shall have received,
with a counterpart for each Lender, a certificate of each Borrower, dated
the Closing Date, substantially in the form of Exhibit G, with appropriate
insertions and attachments, satisfactory in form and substance to the
Administrative Agent, executed by the President or any Vice President and
the Secretary or any Assistant Secretary of such Borrower.
(f) FEES. The Administrative Agent shall have received the fees to be
received on the Closing Date referred to in subsection 3.2.
(g) LEGAL OPINIONS. The Administrative Agent shall have received, with
a counterpart for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Bingham, Dana & Gould, LLP,
counsel to HomeSide and the other Loan Parties, substantially in the
form of Exhibit H-1;
(ii) the executed legal opinion of Hutchins, Wheeler & Dittmar, a
Professional Corporation, counsel to Holdings, substantially in the
form of Exhibit H-2;
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(iii) the executed legal opinion of Robert Jacobs, Esq., general
counsel of HomeSide, substantially in the form of Exhibit H-3;
(iv) the executed legal opinion of Holland & Knight, special
Florida counsel to the Borrowers, substantially in the form of Exhibit
H-4; and
(v) the executed legal opinion of special Hawaii counsel to the
Administrative Agent, substantially in the form of Exhibit H-5.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(h) ACTIONS IN RESPECT OF COLLATERAL. The Administrative Agent shall
have received:
(i) evidence in form and substance satisfactory to the
Administrative Agent that all filings, recordings, registrations and
other actions, including, without limitation, the filing of duly
executed UCC financing statements, necessary or, in the opinion of the
Administrative Agent, desirable to perfect the Liens created by the
Security Documents shall have been completed;
(ii) the results of a recent search by a Person satisfactory to
the Administrative Agent, of the Uniform Commercial Code, judgment and
tax lien filings which may have been filed with respect to personal
property of the Borrowers and BMC, and the results of such search
shall be satisfactory to the Administrative Agent; and
(iii) evidence satisfactory to the Administrative Agent that all
collateral accounts, settlement accounts and custody accounts required
to be established pursuant to each of the Security Agreements have
been established;
(iv) a duly executed copy of an Acknowledgment Agreement with
each relevant Agency (other than GNMA) or Approved Investors covering
all servicing rights included in the Eligible Servicing Portfolio; and
(v) an Appraisal reporting the value of the Eligible Servicing
Portfolio as of May 24, 1996, in the case of the portion thereof
reflecting assets acquired in the BMC Acquisition, and as of April 1,
1996, in the case of assets owned prior to the Closing by the
Borrower, in form and substance satisfactory to the Administrative
Agent.
(i) PRO FORMA BALANCE SHEET. The Administrative Agent shall have
received the unaudited PRO FORMA consolidated balance sheet of Holdings and
its Subsidiaries presenting the PRO FORMA financial condition of Holdings
and its Subsidiaries as at
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March 31, 1996, after giving effect to the BMC Acquisition and the
transactions contemplated thereby and the making of Loans hereunder on the
Closing Date and the issuance of the Holdings Notes, assuming such
transactions had occurred on March 31, 1996.
6.2 CONDITIONS TO EACH LOAN. The agreement of each Lender to make or
purchase any Loan requested to be made or purchased by it on any Borrowing Date
(including, without limitation, its initial Loan) is subject to the satisfaction
of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. (i) In the case of any Loans other
than Loans constituting a Refunding Borrowing, each of the representations
and warranties made by either Borrower herein or in the Borrowing Base
Certificate relating to such Loans shall be true and correct in all
material respects on and as of such Borrowing Date as if made on and as of
such date and (ii) in the case of any Loans constituting a Refunding
Borrowing, each of the representations and warranties made by either
Borrower in subsections 5.3, 5.4, 5.5, 5.11, 5.13 and 5.15 and in the
Borrowing Base Certificate relating to such Loans shall be true and correct
in all material respects on and as of such Borrowing Date as if made on and
as of such date.
(b) NO DEFAULT. (i) In the case of Loans constituting a Refunding
Borrowing, no Event of Default shall have occurred and be continuing on
such Borrowing Date or after giving effect to the Loans to be made on such
Borrowing Date and the application of the proceeds thereof and (ii) in the
case of any other Loans, no Default or Event of Default shall have occurred
and be continuing on such Borrowing Date or after giving effect to the
Loans requested to be made on such Borrowing Date and the application of
the proceeds thereof.
(c) BORROWING BASE CERTIFICATE; BORROWING BASE AND OTHER LIMITATIONS.
In the case of a borrowing of Tranche A Loans or Tranche A Swing Line
Loans, the Administrative Agent shall have received a Tranche A Borrowing
Base Certificate for the applicable Borrower, dated as of the close of
business on the Business Day immediately preceding such Borrowing Date or
as of such Borrowing Date, duly completed by the Collateral Agent in the
manner required by the Security Agreements. In the case of a borrowing of
Tranche B Loans or Tranche B Swing Line Loans, the Administrative Agent
shall have received a Tranche B Borrowing Base Certificate for the
applicable Borrower, dated as of the close of business on the Business Day
immediately preceding such Borrowing Date or as of such Borrowing Date,
duly completed by the Collateral Agent in the manner required by the
Security Agreements. In the case of each Loan, the Administrative Agent
shall have determined, based upon the Tranche A Borrowing Base Certificate
and/or Tranche B Borrowing Base Certificate delivered in respect thereof
that, after giving effect to such Loan and the simultaneous application by
the Administrative Agent of the proceeds thereof, the limitations of
subsections 2.1 and 2.2, as applicable, will not be contravened.
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(d) ADDITIONAL MATTERS. All corporate and other proceedings and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be satisfactory in form and substance to the Administrative Agent,
and the Administrative Agent shall have received such other documents and
legal opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
Each borrowing by each Borrower hereunder shall constitute a representation and
warranty by both Borrowers as of the date thereof that the conditions contained
in this subsection have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
HomeSide hereby agrees that, so long as the Commitments remain in effect or
any amount is owing to any Lender or the Administrative Agent hereunder or under
any other Loan Document, HomeSide shall and (except in the case of delivery of
financial information, reports and notices) shall cause each of its Subsidiaries
to:
7.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of HomeSide or Holdings, as the case may be, a copy
of the consolidated balance sheet of HomeSide and its consolidated
Subsidiaries, and of Holdings and its consolidated Subsidiaries, as at the
end of such year and the related consolidated statements of income and
retained earnings and of cash flows for such year, setting forth in each
case in comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Arthur Andersen LLP
or other independent certified public accountants of nationally recognized
standing; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of HomeSide or Holdings, as the case may be, the unaudited
consolidated balance sheet of HomeSide and its consolidated Subsidiaries,
and of Holdings and its consolidated Subsidiaries, as at the end of such
quarter and the related unaudited consolidated statements of income and
retained earnings and of cash flows of HomeSide and its consolidated
Subsidiaries, and of Holdings and its consolidated Subsidiaries, for such
quarter and the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures for the previous
year, certified by a Responsible Officer as being fairly stated in all
material respects (subject to normal year-end audit adjustments);
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all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or Responsible Officer, as the
case may be, and disclosed therein).
7.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a Responsible
Officer stating that, to the best of such Responsible Officer's knowledge,
during such period (i) no Subsidiary has been formed or acquired (or, if
any such Subsidiary has been formed or acquired, HomeSide has complied with
the requirements of subsection 7.11 with respect thereto), (ii) neither BMC
nor any of its Subsidiaries has changed its name, its principal place of
business, its chief executive office or the location of any material item
of tangible Collateral without complying with the requirements of this
Agreement and the Security Documents with respect thereto and (iii) each
Borrower and each other Loan Party has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in
this Agreement and the other Loan Documents to be observed, performed or
satisfied by it, and that such Responsible Officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate, and containing calculations in reasonable detail demonstrating
compliance with the provisions of subsections 8.1, 8.2, 8.6, 8.8, 8.9, 8.10
and 8.11;
(c) not later than the end of each fiscal year of HomeSide, a copy of
the projections by HomeSide of the operating budget and cash flow budget of
HomeSide and its Subsidiaries for the succeeding fiscal year, such
projections to be accompanied by a certificate of a Responsible Officer to
the effect that such projections have been prepared on the basis of sound
financial planning practice and that such Responsible Officer has no reason
to believe they are incorrect or misleading in any material respect;
(d) within five days after the same are sent, copies of all financial
statements and reports which Holdings or HomeSide may make to, or file
with, the Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(e) within three Business Days after the end of each calendar month
(in addition to the other dates required by the provisions of this
Agreement), the Tranche A Borrowing Base Certificate and Tranche B
Borrowing Base Certificate for each of
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HomeSide and HonoMo, delivered by the Collateral Agent in respect of the
last day of such month, accompanied by a certificate of a Responsible
Officer of each Borrower certifying to the effect that the same are true
and correct;
(f) concurrently with the delivery of any audits or similar report by
any Agency, copies of the same;
(g) not later than 30 days after the end of each fiscal quarter of
HomeSide, an origination report, in form and substance satisfactory to the
Administrative Agent;
(h) (i) not later than 30 days after the end of each calendar quarter,
or, upon the request of the Administrative Agent, as soon as practicable
after such request, an Appraisal of the total servicing portfolio of BMC
and its Subsidiaries, including an Appraisal of the Eligible Servicing
Portfolio, together with a report by HomeSide, in form and substance
satisfactory to the Administrative Agent, containing a break-down by
investor and interest rate, and containing a break-down of delinquencies by
state and product, and (ii) not later than 15 days after the end of each
calendar month, a certificate showing adjusted Appraised Value as at the
end of such month as described in clause (ii) of the definition thereof,
certified by a Responsible Officer of each Borrower and including, in
detail satisfactory to the Administrative Agent, the calculation and basis
for such determination;
(i) not later than 30 days after the end of each fiscal quarter of
HomeSide, a report by HomeSide, in form and substance satisfactory to the
Administrative Agent, specifying nonaccrual loans and other real estate
owned; and
(j) on the last Business Day of each calendar week, a report, in form
and substance satisfactory to the Administrative Agent, setting forth the
weighted average net purchase price of all Take-Out Commitments covering
Eligible Mortgage Loans or Eligible Mortgage-Backed Securities; and
(k) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
7.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
HomeSide or its Subsidiaries, as the case may be.
7.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. (a) Continue to
engage in businesses in which HomeSide and its Subsidiaries are engaged on the
date of this Agreement and such other businesses generally related to
residential mortgage banking as HomeSide and its Subsidiaries may enter into in
accordance with subsection 8.15, and, except
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as permitted under subsection 8.4, preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of its business; (b) preserve and maintain its and BMC's and such Subsidiary's
status and eligibility as an approved seller and servicer, as applicable; (c)
preserve and maintain any other classification under the regulations of each of
the Agencies necessary or desirable in the normal conduct of BMC's, HomeSide's
or such Subsidiary's businesses; and (d) comply with all Contractual Obligations
and Requirements of Law except to the extent that failure to comply therewith
could not, in the aggregate, be reasonably expected to have a Material Adverse
Effect.
7.5 MAINTENANCE OF PROPERTY; INSURANCE; RISK MANAGEMENt. Keep all property
useful and necessary in its business in good working order and condition;
maintain with financially sound and reputable insurance companies insurance on
all its property in at least such amounts and against at least such risks (but
including in any event public liability, product liability and business
interruption) as are usually insured against in the same general area by
companies engaged in the same or a similar business; furnish to each Lender,
upon written request, full information as to the insurance carried; and maintain
a risk management policy with respect to its portfolio of mortgage loans and
servicing rights designed to reduce fluctuations in the value of its servicing
portfolio due to interest rate movements.
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of HomeSide and its
Subsidiaries with officers and employees of HomeSide and its Subsidiaries and
with its independent certified public accountants, PROVIDED that such visits by
Lenders shall be coordinated through the Administrative Agent and, when no Event
of Default has occurred and is continuing, shall be arranged upon reasonable
prior notice during normal working hours and with reasonable efforts to minimize
disruption of the normal conduct of business of HomeSide and its Subsidiaries.
7.7 NOTICES. Promptly give notice to the Administrative Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of BMC or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between BMC or any
of its Subsidiaries and any Governmental Authority, which in either case,
if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
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(c) any litigation or proceeding affecting BMC or any of its
Subsidiaries in which the amount involved is $1,000,000 or more and not
covered by insurance or in which injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event within
30 days after HomeSide knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any Multiemployer Plan
or (ii) the institution of proceedings or the taking of any other action by
the PBGC or HomeSide or any Commonly Controlled Entity or any Multiemployer
Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan (other than a standard
termination); and
(e) any change in the business, operations, property, condition
(financial or otherwise) of BMC and its Subsidiaries taken as a whole that
has had or has a reasonable likelihood of having a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action HomeSide proposes to take with respect thereto.
7.8 ENVIRONMENTAL LAWS. (a) Comply with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply in all material respects with and maintain, and ensure that
all tenants and subtenants obtain and comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except to the extent that
failure to do so could not be reasonably expected to have a Material Adverse
Effect.
(b) Conduct and complete all investigations, studies, sampling and testing,
and all remedial, removal and other actions required under Environmental Laws
and promptly comply in all material respects with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws except
to the extent that the same are being contested in good faith by appropriate
proceedings and the pendency of such proceedings could not be reasonably
expected to have a Material Adverse Effect.
(c) Defend, indemnify and hold harmless the Administrative Agent and the
Lenders, and their respective employees, agents, officers and directors, from
and against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the violation
of, noncompliance with or liability under any Environmental Laws applicable to
the operations of HomeSide or the Premises, or any orders, requirements or
demands of Governmental Authorities related thereto, including, without
limitation,
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attorney's and consultant's fees, investigation and laboratory fees, response
costs, court costs and litigation expenses, except to the extent that any of the
foregoing arise out of the gross negligence or willful misconduct of the party
seeking indemnification therefor. Notwithstanding anything in this Agreement to
the contrary, this indemnity shall continue in full force and effect regardless
of the termination of this Agreement.
7.9 FURTHER ASSURANCES. Upon the request of the Administrative Agent,
promptly perform or cause to be performed any and all acts and execute or cause
to be executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other Requirement of Law which are necessary or
advisable to maintain in favor of the Administrative Agent or Collateral Agent,
as applicable, for the benefit of the Lenders, Liens on the Collateral that are
duly perfected in accordance with all applicable Requirements of Law.
7.10 SECURITY EVENTS. (a) If a Negative Security Event occurs during the
effectiveness of a Positive Security Event, as promptly as practicable after the
occurrence of such Negative Security Event, and in any event on or before the
Security Perfection Date in respect thereof, take or cause to be taken the
following actions:
(i) take all actions required (including, where required, physical
delivery to the Collateral Agent of Mortgage-Backed Securities and Required
Documentation in respect of Eligible Mortgage Loans, filing of UCC
financing statements and execution and delivery of Acknowledgment
Agreements, to the extent such actions have not already been taken) to
cause Collateral to be Delivered under the Security Agreements;
(ii) deliver to the Administrative Agent, with a counterpart for each
Lender, executed legal opinions of such counsel to HomeSide and its
Subsidiaries as shall be reasonably acceptable to the Administrative Agent
confirming, as of a date not more than thirty days prior to such Security
Perfection Date, the opinions rendered on the Closing Date by such
respective counsel in respect of the creation, perfection and priority of
the Collateral Agent's security interest in the Collateral, with such
changes therein as the Administrative Agent shall approve or reasonably
request;
and thereafter from time to time promptly take or cause to be taken all such
further actions as shall be requested by the Collateral Agent in order to ensure
that the provisions of the Security Agreements are satisfied and the
representations and warranties therein with respect to the Collateral are true
and correct.
7.11 ADDITIONAL COLLATERAL. (a) With respect to any assets acquired after
the Closing Date by BMC or any of its Subsidiaries that are intended to be
subject to the Lien created by any of the Security Documents but which are not
so subject, at any time other than during the effectiveness of a Positive
Security Event, promptly (and in any event within 30 days after the acquisition
thereof): (i) execute and deliver to the Administrative Agent such
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amendments to the relevant Security Documents or such other documents as the
Administrative Agent shall deem necessary or advisable to grant to the
Administrative Agent, for the benefit of the Secured Parties, a Lien on such
assets, (ii) take all actions necessary or advisable to cause such Lien to be
duly perfected in accordance with all applicable Requirements of Law, including,
without limitation, the filing of financing statements in such jurisdictions as
may be requested by the Administrative Agent, and (iii) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (i) and (ii) immediately preceding,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a Subsidiary, promptly upon the request of the Administrative Agent: (i)
cause such new Subsidiary to become a party to the Subsidiary Guarantee pursuant
to documentation which is in form and substance satisfactory to the
Administrative Agent, (ii) cause the capital stock of such Subsidiary to be
pledged under the HomeSide Pledge Agreement pursuant to documentation
satisfactory to the Administrative Agent (including acknowledgment thereof by
such Subsidiary) and (iii) if requested by the Administrative Agent, deliver to
the Administrative Agent legal opinions relating to the matters described in
clause (i) immediately preceding, which opinions shall be in form and substance,
and from counsel, reasonably satisfactory to the Administrative Agent.
7.12 COMPLIANCE WITH OTHER LOAN DOCUMENTS. Cause each other Loan Party to
comply with all its obligations under each Loan Document to which such Loan
Party is a party.
7.13 MAINTENANCE OF AGENCY STATUS. In the case of each Borrower and, to the
extent necessary or desirable in the normal conduct of its business, BMC and
each Subsidiary, maintain at all times its status as a FNMA and FHMLC approved
Seller/Servicer, a GNMA approved Issuer/Servicer, a HUD Direct Endorsement
Lender, a VA-approved Lender and an FHA approved lender in good standing.
7.14 GNMA ACKNOWLEDGEMENT AGREEMENTS. If an Acknowledgement Agreement from
GNMA becomes generally available in a form that the Administrative Agent
determines is acceptable, use its best efforts to obtain and deliver such
applicable Acknowledgement Agreements from GNMA relating to the Mortgage Loans
serviced on behalf of GNMA included in the Eligible Servicing Portfolio as the
Administrative Agent may from time to time request.
SECTION 8. NEGATIVE COVENANTS
HomeSide hereby agrees that, so long as the Commitments remain in effect or
any amount is owing to any Lender or the Administrative Agent hereunder or under
any other
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Loan Document, HomeSide shall not, and (except with respect to subsection 8.1)
shall not permit any of its Subsidiaries to, directly or indirectly:
8.1 FINANCIAL CONDITION COVENANTS.
(a) MAINTENANCE OF ADJUSTED CONSOLIDATED TANGIBLE NET WORTH. Permit
Adjusted Consolidated Tangible Net Worth at any date to be less than an
amount equal to the sum of (i) an amount equal to 80% of Adjusted
Consolidated Tangible Net Worth as at the Closing Date PLUS (ii) an amount
equal to 50% of the excess of (A) the aggregate amount of net proceeds
received during the period from the Closing Date through such date by
Holdings from the issuance of Capital Stock other than to Sponsors over (B)
the amount thereof applied to prepay or redeem the Holdings Notes PLUS
(iii) an amount equal to 80% of the sum of Consolidated Net Income for each
fiscal quarter for which Consolidated Net Income is positive during the
period from the Closing Date through the last day of the most recently
ended fiscal quarter of HomeSide LESS (iv) the amount of Restricted
Payments actually made by HomeSide as permitted under subsection 8.9 during
the period from the Closing Date through such date (to the extent such
Restricted Payments were not deducted in determining such Adjusted
Consolidated Tangible Net Worth).
(b) LEVERAGE RATIO. Permit the ratio of Consolidated Total Liabilities
to Adjusted Consolidated Tangible Net Worth to exceed (i) 7.75:1.0 at any
time during the period from the Closing Date through and including
September 30, 1997, (ii) 7.5:1.0 at any time during the period from October
1, 1997 through and including December 31, 1998 or (iii) 7.0:1.0 at any
time thereafter.
(c) SERVICING-RELATED DEBT RATIO. Permit the ratio of Consolidated
Servicing-Related Debt to Adjusted Consolidated Tangible Net Worth to
exceed (i) 2.0:1.0 at any time during the period from the Closing Date
through and including September 30, 1997, (ii) 1.75:1.0 at any time during
the period from and including October 1, 1997 through and including
September 30, 1998 or (iii) 1.5:1.0 at any time thereafter.
(d) CASH FLOW COVERAGE RATIO. Permit (i) for any period beginning on
the Closing Date and ending on the earlier to occur of the last day of the
fiscal year of HomeSide first ending after the Closing Date or the last day
of the fiscal quarter of HomeSide ending on March 31, 1997, and (ii) for
any period of four consecutive fiscal quarters of HomeSide ending
thereafter, the ratio of (A) the sum of (1) Consolidated Cash Flow for such
period plus (2) Consolidated Interest and Dividend Expense for such period
to (B) Consolidated Interest and Dividend Expense for such period to be
less than 3.0:1.0.
8.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to exist
any Indebtedness, except:
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(a) Indebtedness of the Borrowers under this Agreement;
(b) Indebtedness of HomeSide to any Subsidiary Guarantor and of any
Subsidiary to HomeSide or any other Subsidiary Guarantor;
(c) Indebtedness outstanding on the date hereof and listed on Schedule
8.2 and any refinancings, refundings, renewals or extensions thereof,
PROVIDED that the principal amount of any such Indebtedness so refinanced,
refunded, renewed or extended shall not exceed the principal amount of such
Indebtedness immediately prior to the time of such refinancing, refunding,
renewal or extension;
(d) Indebtedness related to the maintenance of balances with the
holder of such Indebtedness arising under a line of credit (i) which has a
term not in excess of one year, (ii) which is secured by Cash Equivalents
having an aggregate value not materially in excess of the outstanding
amount under such line of credit and (iii) with respect to which the net
interest expense thereon (after giving effect to compensating balances) is
not in excess of the interest income earned on the collateral securing such
line of credit;
(e) repurchase agreements (including "gestation" repo transactions)
entered into in the ordinary course of HomeSide's or HonoMo's mortgage
banking business and relating to mortgage loans and Mortgage-Backed
Securities;
(f) obligations under Take-Out Commitments;
(g) intra-day overdrafts on dealer clearance accounts arising in
connection with trade settlements for Mortgage-Backed Securities;
(h) obligations of HomeSide or its Subsidiaries under Hedge Contracts;
(i) obligations of HomeSide under the BBMC Stock Purchase Agreement as
in effect on the BBMC Closing Date and the BMC Stock Purchase Agreement as
in effect on the Closing Date;
(j) Indebtedness of HomeSide or HonoMo secured by servicing rights,
related receivables or Mortgage Loans that do not meet the requirements for
inclusion in the Eligible Servicing Portfolio and do not constitute
Collateral under the Security Agreements;
(k) letters of credit issued for the benefit of GNMA in connection
with final pool certifications; and
(l) additional Indebtedness of HomeSide, including in respect of
performance bonds and letters of credit (other than letters of credit
issued pursuant to the foregoing
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clause (k) of this subsection 8.2), not exceeding $35,000,000 in aggregate
principal amount at any one time outstanding.
8.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens for taxes, assessments and other governmental impositions
not yet due or which are being contested in good faith by appropriate
proceedings; PROVIDED, that adequate reserves with respect thereto are
maintained on the books of HomeSide or its Subsidiaries, as the case may
be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business and securing
obligations which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
PROVIDED that adequate reserves with respect thereto are maintained on the
books of HomeSide or its Subsidiaries, as the case may be, in accordance
with GAAP;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of HomeSide or such
Subsidiary;
(f) Liens of landlords, arising solely by operation of law and which
are not avoidable as a matter of law, on fixtures and moveable property
located on premises leased in the ordinary course of business; PROVIDED,
that the rental payments secured thereby are not yet due;
(g) Liens (not otherwise permitted hereunder) which secure obligations
incidental to repurchase contracts ordinary in the mortgage banking
businesses of HomeSide and its Subsidiaries;
(h) Liens (not otherwise permitted hereunder) which secure obligations
(as to HomeSide and all Subsidiaries) incidental to forward delivery
contracts ordinary in the mortgage banking businesses of HomeSide and its
Subsidiaries;
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(i) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in
the foregoing clauses; PROVIDED, that the principal amount of Indebtedness
secured thereby shall not exceed the principal amount of Indebtedness so
secured immediately prior to the time of such extension, renewal or
replacement, and that such extension, renewal, or replacement Lien shall be
limited to all or a part of the property which secured the Lien so
extended, renewed or replaced (plus improvements on such property);
(j) Liens created by the Security Documents;
(k) Liens securing Indebtedness permitted under subsection 8.2(j) as
described therein;
(l) Liens in existence on the Closing Date described on Schedule 8.3;
and
(m) Liens on Cash Equivalents securing lines of credit permitted under
subsection 8.2(d) to the extent described therein;
PROVIDED, that none of the foregoing permitted Liens shall encumber assets
Delivered as Collateral or otherwise included in the Tranche A Borrowing Base or
the Tranche B Borrowing Base other than Liens permitted by the foregoing clause
(j).
8.4 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger, consolidation
or amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of HomeSide may be merged or consolidated with or
into HomeSide (PROVIDED that HomeSide shall be the continuing or surviving
corporation) or with or into any one or more wholly owned Subsidiary
Guarantor (PROVIDED that the wholly owned Subsidiary or Subsidiaries shall
be the continuing or surviving corporation);
(b) any wholly owned Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to HomeSide or any other wholly owned Subsidiary Guarantor; and
(c) HomeSide may dissolve any Subsidiary that is inactive and holds
minimal assets and the continued existence of which is of no value to
HomeSide, any other Loan Party or the interests of the Lenders.
8.5 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets (including, without
limitation,
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receivables and leasehold interests), whether now owned or hereafter acquired,
other than in the ordinary course of business, or, in the case of any
Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any
Person other than HomeSide or any wholly owned Subsidiary, except as permitted
by subsection 8.4(b).
8.6 LIMITATION ON LEASES. Permit Consolidated Lease Expense for any fiscal
year of HomeSide to exceed $7,500,000, plus, if HomeSide consummates a sale and
leaseback transaction in respect of its principal place of business, an
additional $3,000,000.
8.7 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement with any
Person providing for the leasing by HomeSide or any Subsidiary of real or
personal property which has been or is to be sold or transferred by HomeSide or
such Subsidiary to such Person or to any other Person to whom funds have been or
are to be advanced by such Person on the security of such property or rental
obligations of HomeSide or such Subsidiary, other than any such arrangement with
respect to the real property described on Schedule 8.3.
8.8 LIMITATION ON RECOURSE SERVICING. Permit the aggregate outstanding face
amount of mortgage loans in respect of which BMC, HomeSide or any of its
Subsidiaries holds servicing rights other than Non-Recourse Servicing Rights to
exceed $50,000,000, PROVIDED that servicing rights other than Non-Recourse
Servicing Rights included in the bulk purchase of Non-Recourse Servicing Rights
shall not be included in determining compliance herewith at any time to the
extent such servicing rights were so acquired less than 90 days prior to such
time.
8.9 LIMITATION ON RESTRICTED PAYMENTS. Declare or pay any dividend (other
than dividends payable solely in common stock of HomeSide) on, or make any
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any shares of any class of Capital Stock of HomeSide or any warrants or options
to purchase any such Capital Stock, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of BMC, HomeSide or any Subsidiary
(such declarations, payments, setting apart, purchases, redemptions,
defeasances, retirements, acquisitions and distributions being herein called
"RESTRICTED PAYMENTS"), except that, (a) so long as no Event of Default has
occurred and is continuing, (i) HomeSide may declare and pay cash dividends to
BMC (which BMC may, in accordance with the BMC Guarantee, declare and pay as
cash dividends to Holdings) in an amount equal to the actual taxes paid in cash
by Holdings, such dividends to be paid substantially concurrently with the
payment of such taxes by Holdings and to be returned to HomeSide to the extent
not applied by Holdings thereto (PROVIDED that notwithstanding the existence of
an Event of Default, HomeSide shall not be prohibited by the terms of this
subsection from paying taxes due and payable in respect of HomeSide and its
consolidated Subsidiaries), (ii) HomeSide may declare and pay cash dividends to
BMC (which BMC may, in accordance with the BMC Guarantee, declare and pay as
cash dividends to Holdings) to allow Holdings to redeem Capital Stock of
Holdings held by directors and employees pursuant to employment arrangements of
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HomeSide, in an aggregate annual amount not to exceed $2,000,000, (iii) HomeSide
may declare and pay cash dividends to BMC (which BMC may, in accordance with the
BMC Guarantee, declare and pay as cash dividends to Holdings) to allow Holdings
to redeem redeemable Capital Stock issued in connection with the BBMC
Acquisition and listed on Schedule 5.18 in an amount not to exceed $7,500,000 in
the aggregate after the Closing Date, and (iv) HomeSide may declare and pay cash
dividends to BMC (which BMC may, in accordance with the BMC Guarantee, declare
and pay as cash dividends to Holdings) in an amount not to exceed $75,000 in the
aggregate in each fiscal year of HomeSide, to allow Holdings to pay fees and
expenses incurred in the administration of its ordinary and normal activities
and (b) so long as no Blockage Notice (as defined below) is in effect, HomeSide
may declare and pay cash dividends to BMC (which BMC may, in accordance with the
BMC Guarantee, declare and pay as cash dividends to Holdings) in an amount equal
to the actual interest payable in cash by Holdings on the Holdings Notes, such
dividends to be paid concurrently with the payment of such interest by Holdings
and to be returned to HomeSide to the extent not applied by Holdings thereto.
For the purposes hereof a "BLOCKAGE NOTICE" shall be a notice designated as such
by the Administrative Agent to the agent or trustee of the Holdings Notes
stating that a Default or Event of Default has occurred and is continuing; each
Blockage Notice shall continue to be in effect for the period from the date of
such notice to the earlier to occur of the cure or waiver of the Default or
Event of Default that was the basis for such Blockage Notice or the date which
is 180 days after the date of such notice; PROVIDED that only one Blockage
Notice may be delivered hereunder during each period of 365 days.
8.10 LIMITATION ON CAPITAL EXPENDITURES. Make or commit to make (by way of
the acquisition of securities of a Person or otherwise) any expenditure in
respect of the purchase or other acquisition of fixed or capital assets
(excluding (i) any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations, (ii) purchases of
Mortgage Loans, mortgage servicing rights, Hedge Contracts and Mortgage-Backed
Securities and (iii) expenditures made with insurance proceeds received in
respect of losses of plant, property and equipment to the extent applied to the
purchase of replacement or similar assets within one year after receipt thereof)
except for expenditures in the ordinary course of business not exceeding, in the
aggregate for HomeSide and its Subsidiaries, $15,000,000 during any fiscal year
of HomeSide, PROVIDED, that the amount of such capital expenditures permitted to
be made in any fiscal year of HomeSide shall be increased by the excess of
$15,000,000 over the amount of capital expenditures actually made in such
immediately preceding fiscal year.
8.11 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance, loan,
extension of credit or capital contribution to, or purchase any stock, bonds,
notes, debentures or other securities of or any assets constituting a business
unit of, or make any other investment in, any Person, except:
(a) investments made in the ordinary course of HomeSide's business,
including investments in Mortgage Loans, Mortgage-Backed Securities,
mortgage servicing rights and Hedge Contracts;
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(b) investments in Cash Equivalents;
(c) loans and advances to employees of HomeSide and its Subsidiaries
in an aggregate amount not to exceed $2,500,000 at any time outstanding;
(d) loans permitted under subsection 8.2(b); and
(e) additional investments in Persons other than Holdings or any
Subsidiary of Holdings which is not a Subsidiary of HomeSide, in an
aggregate amount not to exceed $30,000,000 at any time outstanding.
8.12 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF CERTAIN
INSTRUMENTS AND AGREEMENTS. (a) Make or permit any optional payment or
prepayment on or redemption or purchase of any Indebtedness under the Holdings
Notes or (b) amend, modify or change, or consent or agree to any amendment,
modification or change to any of the terms of (i) any such Indebtedness (other
than any such amendment, modification or change which would extend the maturity
or reduce the amount of any payment of principal thereof or which would reduce
the rate or extend the date for payment of interest thereon) or (ii) any of the
material terms of the BBMC Stock Purchase Agreement, the Stockholder Agreement
or the BMC Stock Purchase Agreement, in each case as in effect on the Closing
Date; PROVIDED that notwithstanding the provisions of clause (a) above, so long
as no Event of Default exists or is continuing, Holdings may redeem or repay a
portion of the principal amount of the Holdings Notes, and pay any make-whole or
prepayment premium required under the Holdings Notes to be paid in respect of
such redemption or prepayment, with the proceeds of the issuance by Holdings of
Capital Stock, in an aggregate principal amount of such Holdings Notes not to
exceed $70,000,000.
8.13 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Except for the agreements
listed on Schedule 8.13, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate unless such transaction is (a) otherwise
permitted under this Agreement, (b) in the ordinary course of HomeSide's or such
Subsidiary's business and (c) upon fair and reasonable terms no less favorable
to HomeSide or such Subsidiary, as the case may be, than it would obtain in a
comparable arm's length transaction with a Person which is not an Affiliate.
8.14 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any Person any
agreement, other than the Loan Documents, which prohibits or limits the ability
of HomeSide or any of its Subsidiaries to create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired.
8.15 LIMITATION ON LINES OF BUSINESS. Enter into any business, either
directly or through any Subsidiary, except for those businesses in which
HomeSide and its Subsidiaries are engaged on the date of this Agreement and
businesses generally related to residential mortgage banking.
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8.16 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
HomeSide to end on a day other than December 31, PROVIDED that during the first
year after the Closing Date, HomeSide may elect to change its fiscal year end to
February 28, March 31, June 30 or September 30, if and only if, in the case of
any such change to February 28, the Borrowers enter into such amendments to this
Agreement as the Administrative Agent shall request to reflect such change,
including modifications to Section 8, such that the financial covenants and
other covenants affected by such change shall have the same effect (or, in any
case, be substantively no less favorable to the Lenders, in the determination of
the Administrative Agent) after giving effect thereto as if such change were not
made. The Lenders hereby authorize the Administrative Agent to enter into such
amendments to effect such modifications, if any, in accordance with the
provisions of this subsection.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Either Borrower shall fail to pay any principal of any Loan when
due in accordance with the terms thereof or hereof; or either Borrower
shall fail to pay any interest on any Loan, or any other amount payable
hereunder, within five days after any such interest, any fees or other
amount becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by either
Borrower or any other Loan Party herein or in any other Loan Document or
which is contained in any certificate, document or financial or other
statement furnished by it at any time under or in connection with this
Agreement or any such other Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed made,
and the facts or circumstances in respect of which such representation or
warranty was incorrect have not changed to make such representation or
warranty correct within 30 days after it was made or deemed made; or
(c) HomeSide or any other Loan Party shall default in the observance
or performance of any agreement contained in subsection 7.10 or Section 8
(other than subsection 8.3), in subsection 8.3 (other than as provided in
clause (i) of paragraph (d) of this Section), in Section 14 of either
Borrower Security Agreement or in Section 7 of the BMC Security Agreement;
or
(d) HomeSide or any other Loan Party shall default in the observance
or performance of (i) any agreement contained in subsection 8.3 to the
extent that the Lien giving rise to such default is not a Lien on
Collateral and does not secure Indebtedness in an aggregate amount in
excess of $5,000,000 or (ii) any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
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(a) through (c) of this Section), and any such default described in clause
(i) or (ii) of this paragraph (d) shall continue unremedied for a period of
30 days; or
(e) Holdings or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Loans) or in the payment of any Guarantee Obligation or Hedge Termination
Obligation, beyond the period of grace (not to exceed 30 days), if any,
provided in the instrument or agreement under which such Indebtedness,
Guarantee Obligation or Hedge Termination Obligation was created; or (ii)
default in the observance or performance of any other agreement or
condition relating to any such Indebtedness, Guarantee Obligation or Hedge
Termination Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is
to cause, or to permit the holder or holders of such Indebtedness or Hedge
Termination Obligation or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or
such Guarantee Obligation or Hedge Termination Obligation to become
payable; PROVIDED, HOWEVER, that no Default or Event of Default shall exist
under this paragraph unless the aggregate amount of Indebtedness, Guarantee
Obligations and/or Hedge Termination Obligations in respect of which any
default or other event or condition referred to in this paragraph shall
have occurred shall be equal to at least $15,000,000; or
(f) (i) Holdings or any of its Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or Holdings or any of its Subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against Holdings or any of its Subsidiaries any case, proceeding
or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a
period of 60 days; or (iii) there shall be commenced against Holdings or
any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or (iv) Holdings or any of its Subsidiaries shall take
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
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above; or (v) Holdings or any of its Subsidiaries shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of
HomeSide or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) HomeSide or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required
Lenders is likely to, incur any liability in connection with a withdrawal
from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi)
any other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could
reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against BMC,
HomeSide or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance) of $12,000,000 or more, and such
judgments or decrees, to the extent in excess of such amount, shall not
have been vacated, discharged, stayed or bonded pending appeal within 60
days from the entry thereof; or
(i) Except to the extent that during the existence of a Positive
Security Event the Liens thereunder may be released in accordance with the
terms thereof, (i) any of the Security Documents shall cease, for any
reason, to be in full force and effect, or HomeSide or any other Loan Party
which is a party to any of the Security Documents shall so assert or (ii)
the Lien created by any of the Security Documents shall cease to be
enforceable and of the same effect and priority purported to be created
thereby; or
(j) Any Guarantee shall cease, for any reason, to be in full force and
effect or any Guarantor shall so assert; or
(k) (i) Holdings shall cease to own 100% of the Capital Stock of BMC,
or (ii) BMC shall cease to own 100% of the Capital Stock of HomeSide, or
(iii) the ownership interest of any of (A) Thomas H. Lee Company and/or
Madison Dearborn Capital Partners, L.P., and their respective Affiliates,
(B) Bank of Boston Corporation and/or its Affiliates and (C) Barnett and/or
its Affiliates (individually, a "SPONSOR" and collectively, the "SPONSORS")
in Holdings shall be reduced by more than 25% prior to March 15, 1997 as a
result of a sale by such Sponsor of the outstanding capital stock of
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Holdings held by such Sponsor, or (iv) the Sponsors shall cease to own
shares representing at least 51% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of Holdings on a
fully diluted basis, or (v) any Person or group of Persons acquires,
directly or indirectly, beneficially or of record, shares representing at
least 20% of the aggregate ordinary voting power represented by the issued
and outstanding Capital Stock of Holdings on a fully diluted basis (other
than the Sponsors and an additional partner designated by the Sponsors and
approved by the board of directors of Holdings), or (vi) Continuing
Directors shall cease at any time to constitute a majority of the board of
directors of Holdings (as used herein, "Continuing Directors" shall mean,
collectively, (A) all members of the board of directors of Holdings on the
Closing Date and (B) all members of the board of directors of Holdings who
assume office after the Closing Date and whose nomination for election by
Holdings' shareholders was approved by a majority of the Continuing
Directors (or as approved pursuant to the applicable terms of the
Stockholder Agreement);
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to either
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement shall immediately become due and payable, and (B) if such
event is any other Event of Default, either or both of the following actions may
be taken: (i) with the consent of the Required Lenders, the Administrative Agent
may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to HomeSide declare the Commitments to be terminated forthwith,
whereupon the Commitments shall immediately terminate; and (ii) with the consent
of the Required Lenders, the Administrative Agent may, or upon the request of
the Required Lenders, the Administrative Agent shall, by notice to HomeSide,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement to be due and payable forthwith, whereupon
the same shall immediately become due and payable. Except as expressly provided
above in this Section, presentment, demand, protest and all other notices of any
kind are hereby expressly waived.
SECTION 10. THE ADMINISTRATIVE AGENT; THE COLLATERAL AGENT;
THE DOCUMENTATION AGENT; THE SYNDICATION AGENT
10.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints
the Administrative Agent as the agent of such Lender under this Agreement and
the other Loan Documents and the Collateral Agent as the agent of such Lender
under the Loan Documents to which it is a party, and each such Lender
irrevocably authorizes the Administrative Agent and the Collateral Agent, in
such capacities, to execute and deliver the Loan Documents to which it is a
party and to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Administrative Agent or the
Collateral Agent, as the case may be,
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by the terms of this Agreement and the other Loan Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary elsewhere in this Agreement, neither the Administrative Agent
nor the Collateral Agent shall have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent or the Collateral Agent. None
of the Syndication Agent or Documentation Agent shall have any duties or
responsibilities under any Loan Document, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against any of them.
10.2 DELEGATION OF DUTIES. Each of the Administrative Agent and the
Collateral Agent may execute any of its duties under this Agreement and the
other Loan Documents to which it is a party by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Neither the Administrative Agent nor the
Collateral Agent shall be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS. None of the Administrative Agent, the
Collateral Agent or any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Loan Document to which it is a party
(except for its or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by either Borrower or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of either Borrower to perform its obligations
hereunder or thereunder. Neither the Administrative Agent nor the Collateral
Agent shall be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of either Borrower.
10.4 RELIANCE BY ADMINISTRATIVE AGENT AND COLLATERAL AGENT. Each of the
Administrative Agent and the Collateral Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to HomeSide), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent may deem and
treat the payee of any Note
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as the owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Administrative
Agent. Each of the Administrative Agent and the Collateral Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders (or, to the extent required by this Agreement, all of the
Lenders) as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
Each of the Administrative Agent and the Collateral Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the other Loan Documents in accordance with a request of the Required
Lenders (or, to the extent required by this Agreement, all of the Lenders), and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.
10.5 NOTICE OF DEFAULT. Neither the Administrative Agent nor the Collateral
Agent shall be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default hereunder unless it has received notice from a
Lender or HomeSide referring to this Agreement, describing such Default or Event
of Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, the Administrative Agent
shall give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, to the extent required by this
Agreement, all of the Lenders); PROVIDED that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
10.6 NON-RELIANCE ON ADMINISTRATIVE AGENT, COLLATERAL AGENT AND OTHER
LENDERS. Each Lender expressly acknowledges that neither the Administrative
Agent nor the Collateral Agent nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Administrative Agent or the
Collateral Agent hereafter taken, including any review of the affairs of either
Borrower, shall be deemed to constitute any representation or warranty by the
Administrative Agent or the Collateral Agent to any Lender. Each Lender
represents to the Administrative Agent that it has, independently and without
reliance upon the Administrative Agent or the Collateral Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of
either Borrower and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or the Collateral Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it
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deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of either Borrower. Except
for notices, reports and other documents expressly required to be furnished to
the Lenders by the Administrative Agent or the Collateral Agent hereunder, the
Administrative Agent and the Collateral Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of either Borrower which may come into
the possession of the Administrative Agent or the Collateral Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
10.7 INDEMNIFICATION. The Lenders agree to indemnify each of the
Administrative Agent and the Collateral Agent in its capacity as such (to the
extent not reimbursed by the Borrowers and without limiting the obligation of
the Borrowers to do so), ratably according to their respective Commitment
Percentages in effect on the date on which indemnification is sought, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent or the Collateral Agent in any way relating to
or arising out of the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Administrative Agent or the Collateral Agent under or in connection with
any of the foregoing; PROVIDED that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the gross negligence or willful misconduct of the Administrative Agent or
the Collateral Agent, as the case may be. The agreements in this subsection
shall survive the payment of the Loans and all other amounts payable hereunder.
10.8 ADMINISTRATIVE AGENT AND COLLATERAL AGENT IN ITS INDIVIDUAL CAPACITY.
The Administrative Agent and the Collateral Agent and their respective
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrowers as though such Person were not the
Collateral Agent or the Administrative Agent hereunder, as the case may be, and
under the other Loan Documents. With respect to the Loans made by it, the
Administrative Agent and the Collateral Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not the Administrative Agent or the
Collateral Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent and the Collateral Agent in their individual capacity.
10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as
Administrative Agent upon 10 days' notice to the Lenders. If the Administrative
Agent shall resign as Administrative Agent under this Agreement and the other
Loan Documents, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent shall succeed to the
rights, powers and duties of the Administrative
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Agent hereunder. Effective upon such appointment and approval, the term
"Administrative Agent" shall mean such successor agent, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
10.10 SUCCESSOR COLLATERAL AGENT. The Collateral Agent may resign or be
removed as Collateral Agent, and a successor Collateral Agent may be appointed,
in accordance with Section 12 of the Borrower Security Agreements and Section 5
of the BMC Security Agreement. After any retiring Collateral Agent's resignation
or removal as Collateral Agent, the provisions of this Section 10 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Collateral Agent under this Agreement and the other Loan Documents.
10.11 CONCERNING THE COLLATERAL AGENT AND THE SECURITY AGREEMENTS. The
Collateral Agent shall perform the functions specifically set forth for it in
the Security Agreements, and, in performing such functions, shall follow the
directions of the Administrative Agent (given at the direction of, or with the
consent of, the Required Lenders or all the Lenders, as the case may be, as
prescribed by subsection 11.1). The Lenders hereby instruct the Collateral Agent
and Administrative Agent to execute and deliver the Security Agreements on
behalf of the Lenders. HomeSide shall compensate the Collateral Agent for its
services as such as from time to time agreed by HomeSide and the Collateral
Agent.
SECTION 11. MISCELLANEOUS
11.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with HomeSide and
HonoMo written amendments, supplements or modifications hereto and to the other
Loan Documents for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or of
the Borrowers hereunder or thereunder or (b) waive, on such terms and conditions
as the Required Lenders or the Administrative Agent, as the case may be, may
specify in such instrument, any of the requirements of this Agreement or the
other Loan Documents or any Default or Event of Default and its consequences;
PROVIDED, HOWEVER, that no such waiver and no such amendment, supplement or
modification shall (i) reduce the amount or extend the scheduled date of
maturity of any Loan or of any installment thereof, or reduce the stated rate of
any interest or fee payable hereunder or extend the scheduled date of any
payment thereof or increase the aggregate amount or extend the expiration date
of any Lender's Commitments,
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in each case without the consent of each Lender affected thereby, or (ii) amend,
modify or waive any provision of this subsection or reduce the percentage
specified in the definition of Required Lenders, or consent to the assignment or
transfer by either Borrower of any of its rights and obligations under this
Agreement and the other Loan Documents, or release any of the Guarantees or
(except as contemplated by the Security Agreements) any portion of the
Collateral, or increase the percentage figures representing the advance rates
set forth in clauses (a) through (d) of subsection 4.1 or clauses (a) through
(g) of subsection 4.2, or amend the definition of "Negative Security Event" or
"Positive Security Event" to change the language set forth in such definition
that expressly specifies the events that constitute a Negative Security Event or
a Positive Security Event, as the case may be, in each case without the written
consent of all the Lenders, or (iii) amend, modify or waive any provision of
Section 10 relating to the Administrative Agent or the Collateral Agent without
the written consent of the then Administrative Agent or Collateral Agent, as the
case may be; PROVIDED, FURTHER that, notwithstanding the foregoing, (x) this
Agreement may be amended as provided in subsection 8.16 and (y) in the event of
any sale of HonoMo and the satisfaction of the conditions set forth in
subsection 11.11, the Administrative Agent will release HonoMo from its
obligations under the Subsidiaries Guarantee and will release the stock of
HonoMo from the lien of the HomeSide Pledge Agreement. Any such waiver and any
such amendment, supplement or modification shall apply equally to each of the
Lenders and shall be binding upon the Borrowers, the Lenders, the Administrative
Agent, the Collateral Agent and all future holders of the Loans. In the case of
any waiver, the Borrowers, the Lenders, the Administrative Agent and the
Collateral Agent shall be restored to their former positions and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereon.
11.2 NOTICES. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by facsimile
transmission) and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made (a) in the case of delivery by hand, when
delivered, (b) in the case of delivery by mail, three days after being deposited
in the mails, postage prepaid, or (c) in the case of delivery by facsimile
transmission, when sent and receipt has been confirmed, addressed as follows in
the case of the Borrowers, the Administrative Agent and the Collateral Agent and
as set forth in Schedule I in the case of the other parties hereto, or to such
other address as may be hereafter notified by the respective parties hereto:
The Borrowers: HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
Attention: Joe K. Pickett
Fax: 904-281-3745
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with a copy to: James Westra, Esq.
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Fax: 617-951-1295
The Administrative Agent: Chemical Bank
270 Park Avenue
New York, NY 10017
Attention: Roger Parker
Fax: 212-972-0009
with a copy to: Chemical Bank - Agent Bank Services Group
140 East 45th Street, 29th Floor
New York, NY 10017
Attention: Janet Belden
Fax: 212-622-0002
The Collateral Agent: The First National Bank of Boston
100 Federal Street
Mail Stop: 01-1B-06
Boston, MA 02110
Attention: David L. Hall, Senior Manager
Fax: 617-434-8295
PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Lenders shall not be effective until received, and any notices to or upon
the Collateral Agent pursuant to the Security Agreements shall be given as
provided therein.
11.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
11.5 PAYMENT OF EXPENSES AND TAXES. HomeSide agrees (a) to pay or reimburse
each of the Administrative Agent and the Collateral Agent for all its reasonable
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out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Agreement and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, (b) to
pay or reimburse each Lender, the Administrative Agent and the Collateral Agent
for all its reasonable costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other Loan
Documents and any such other documents, including, without limitation, the fees
and disbursements of counsel to each Lender and of counsel to the Administrative
Agent and the Collateral Agent (c) to pay, and indemnify and hold harmless each
Lender, the Administrative Agent and the Collateral Agent from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, and indemnify and hold harmless each
Lender and each of the Administrative Agent, the Collateral Agent, the
Syndication Agent and the Documentation Agent (each, an "indemnified person")
from and against, any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement or the other Loan Documents or
the use of the proceeds of the Loans (including, without limitation, in
connection with the Acquisitions) and any such other documents, including,
without limitation, any of the foregoing relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of HomeSide, any of its Subsidiaries or any of the Premises (all the
foregoing in this clause (d), collectively, the "indemnified liabilities"),
PROVIDED that HomeSide shall have no obligation hereunder to any indemnified
person with respect to indemnified liabilities arising from the gross negligence
or willful misconduct of such indemnified person. The agreements in this
subsection shall survive repayment of the Loans and all other amounts payable
hereunder.
11.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrowers, the
Lenders, the Administrative Agent, the Collateral Agent and their respective
successors and assigns, except that neither Borrower may assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial lending
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("PARTICIPANTS") participating interests in any Loan
owing to such Lender, any Commitment of such Lender or any other interest of
such Lender hereunder and under the other Loan Documents. In the event of any
such sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this
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105
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrowers and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender shall
be entitled to create in favor of any Participant, in the participation
agreement pursuant to which such Participant's participating interest shall be
created or otherwise, any right to vote on, consent to or approve any matter
relating to this Agreement or any other Loan Document except for those specified
in clause (i) of the proviso to subsection 11.1. Each Borrower agrees that if
amounts outstanding under this Agreement are due or unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall, to the maximum extent permitted by applicable
law, be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement, PROVIDED that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in subsection 11.7(a) as fully as if it were a
Lender hereunder. Each Borrower also agrees that each Participant shall be
entitled to the benefits of subsections 3.9, 3.10 and 3.11 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if it were a Lender; PROVIDED that, in the case of subsection 3.10, such
Participant shall have complied with the requirements of said subsection and
PROVIDED, FURTHER, that no Participant shall be entitled to receive any greater
amount pursuant to any such subsection than the transferor Lender would have
been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.
(c) Any Lender may, in the ordinary course of its commercial lending
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any affiliate thereof or, with the consent of
HomeSide and the Administrative Agent (which in each case shall not be
unreasonably withheld), to an additional bank or financial institution (an
"ASSIGNEE") all or any part of its rights and obligations under this Agreement
and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit I, executed by such Assignee, such
assigning Lender (and, in the case of an Assignee that is not then a Lender or
an affiliate thereof, by HomeSide and the Administrative Agent) and delivered to
the Administrative Agent for its acceptance and recording in the Register,
PROVIDED that, in the case of any such assignment to an additional bank or
financial institution, the sum of the aggregate principal amount of the Loans
and the aggregate amount of the unused Commitments being assigned and, if such
assignment is of less than all of the rights and obligations of the assigning
Lender, the sum of the aggregate principal amount of the Loans and the aggregate
amount of the unused Commitments remaining with the assigning Lender are each
not less than $10,000,000 (or such lesser amount as may be agreed to by
HomeSide, the Administrative Agent and the Required Lenders), and PROVIDED,
FURTHER, that no assignment may be made by any Lender that does not include
pro-rata Tranche A Commitments, Tranche B Commitments, Tranche A Loans and
Tranche B Loans in the same
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relative proportions as those of the amounts of such Commitments and Loans held
by such Lender immediately prior to giving effect to such assignment and
PROVIDED, FURTHER, that any such assignment that would otherwise include an
interest in a Balance-Based Loan may only become effective on the last day of
the Interest Period applicable thereto. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with a Commitment as set forth
therein, and (y) the assigning Lender thereunder shall, to the extent provided
in such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto; it being
understood that any indemnification in this Agreement in favor of such Lender
that by its terms survives termination of this Agreement shall continue to inure
to the benefit of such Lender). Notwithstanding any provision of this paragraph
(c) and paragraph (e) of this subsection, the consent of HomeSide shall not be
required for any assignment which occurs at any time when any of the events
described in Section 9(f) shall have occurred and be continuing.
(d) The Administrative Agent, on behalf of each of the Borrowers, shall
maintain at the address of the Administrative Agent referred to in subsection
11.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "REGISTER") for the recordation of the names and addresses of the Lenders
and the Commitments of, and principal amounts of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrowers, the Administrative Agent and the
Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder not evidenced by a Note shall be effective only upon
appropriate entries with respect thereto being made in the Register. The
Register shall be available for inspection by HomeSide or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by HomeSide and the Administrative Agent)
together with payment to the Administrative Agent of a registration and
processing fee of $3,500, the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and HomeSide.
(f) Each Borrower authorizes each Lender to disclose to any Participant or
Assignee (each, a "TRANSFEREE") and any prospective Transferee any and all
financial
<PAGE> 112
107
information in such Lender's possession concerning such Borrower and its
Affiliates which has been delivered to such Lender by or on behalf of such
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of such Borrower in connection with such Lender's credit
evaluation of such Borrower and its Affiliates prior to becoming a party to this
Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge that
the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
11.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED LENDER") shall
at any time receive any payment of all or part of its Tranche A Loans or Tranche
B Loans, as the case may be, or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in subsection 9(f), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's Tranche
A Loans or Tranche B Loans, as the case may be, or interest thereon, such
benefitted Lender shall purchase for cash from the other Lenders a participating
interest in such portion of each such other Lender's Tranche A Loans or Tranche
B Loans, as the case may be, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.
(b) In addition to any rights and remedies of the Lenders provided by law,
each Lender shall have the right, without prior notice to either Borrower, any
such notice being expressly waived by each Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by either Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to set
off and appropriate and apply against such amount any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of either Borrower. Each Lender agrees promptly to notify
HomeSide and the Administrative Agent after any such set-off and application
made by such Lender, PROVIDED that the failure to give such notice shall not
affect the validity of such set-off and application.
11.8 BALANCE LENDERS. Prior to the date of this Agreement, HomeSide has
designated the Lenders that will be the Balance Lenders initially, and will
cause each such
<PAGE> 113
108
Balance Lender to enter into a Balance Lender Agreement with HomeSide on or
before the Closing Date. From time to time after the Closing Date, any Lender
may, upon the request of HomeSide, agree to become a Balance Lender. In order to
become a Balance Lender, a Lender shall enter into a Balance Lender Agreement
with HomeSide, and HomeSide and such Lender shall give the Administrative Agent
notice thereof; such Lender shall be permitted to make Balance-Based Loans as a
Balance Lender on any Borrowing Date that is at least ten days after receipt by
the Administrative Agent of such notice.
11.9 RELEASE OF COLLATERAL UPON OCCURRENCE OF POSITIVE SECURITY EVENT. Upon
the occurrence of a Positive Security Event, the Administrative Agent will, at
the request of HomeSide, direct the Collateral Agent to take, and the Collateral
Agent will take, at the expense of the Borrowers, all necessary actions to
release its security interest in all Collateral in accordance with the Security
Agreements (other than stock pledged pursuant to the Pledge Agreements).
11.10 AUTHORITY OF HOMESIDE ON BEHALF OF HONOMO. HonoMo hereby authorizes
HomeSide to take any action hereunder and under each Loan Document to which
HonoMo is a party on its behalf, including delivery of Borrowing Notices,
Payment Notices and Conversion Notices under Section 2 and execution and
delivery of amendments and waivers to any Loan Document, appoints HomeSide its
attorney-in-fact for all purposes hereunder, and hereby ratifies all actions
taken by HomeSide in such capacity. HonoMo and HomeSide agree that the
Administrative Agent, the Collateral Agent and the Lenders shall be entitled to
rely on any instruction, notice or other action by HomeSide on behalf of HonoMo
as if such instruction, notice or other action were given or taken by HonoMo.
HonoMo agrees that any notice affecting it or applicable to it or its Loans
hereunder given to HomeSide shall be deemed to be notice effective for the
purposes thereof to HonoMo.
11.11 TERMINATION OF HONOMO AS BORROWER. With 10 days prior written notice
by HomeSide to the Administrative Agent, the rights and obligations of HonoMo as
a Borrower hereunder may be terminated, after the effectiveness of which no
Loans will be made to HonoMo, no assets of HonoMo will be included in any
Borrowing Base, and the HonoMo Tranche A Sublimit and the HonoMo Tranche B
Sublimit will each be deemed to be zero, PROVIDED that (i) in order for such
termination to be effective, no Loans, interest, fees, expenses or other
obligations owing or payable by HonoMo may be outstanding or payable, and no
Default or Event of Default shall have occurred and be continuing or result from
giving effect thereto, (ii) HonoMo will execute and deliver such instruments and
documents requested by the Administrative Agent in connection therewith, and
(iii) all obligations and liabilities of HonoMo under subsection 11.6 shall
survive such termination and remain in full force and effect. Upon such
effectiveness in connection with any sale by HomeSide of HonoMo, the Collateral
Agent and the Administrative Agent, respectively, will take, at the request of
HomeSide and at the expense of HomeSide and HonoMo, all necessary actions to
release its security interest in all Collateral under the HonoMo Security
Agreement and the Collateral under the HomeSide Pledge Agreement representing
stock issued by HonoMo, and HonoMo will automatically be released from its
obligations under the Subsidiary Guarantee, PROVIDED
<PAGE> 114
109
that at the time of such effectiveness and release, the consolidated total
assets of HonoMo and its Subsidiaries represent less than 5% of the consolidated
total assets of HomeSide and its Subsidiaries, in each case determined in
accordance with GAAP.
11.12 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with HomeSide and the
Administrative Agent.
11.13 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.
11.14 INTEGRATION. This Agreement and the other Loan Documents represent
the entire agreement of the Borrowers, the Administrative Agent and the Lenders
with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof or thereof not expressly
set forth or referred to herein or in the other Loan Documents.
11.15 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.16 SUBMISSION TO JURISDICTION; WAIVERS. Each Borrower hereby irrevocably
and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
<PAGE> 115
110
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to HomeSide
at its address set forth in subsection 11.2 or at such other address of
which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
11.17 ACKNOWLEDGEMENTS. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent, the Collateral Agent nor any
Lender has any fiduciary relationship with or duty to either Borrower
arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between Administrative Agent, the
Collateral Agent and the Lenders, on the one hand, and the Borrowers, on
the other hand, in connection herewith or therewith is solely that of
debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Borrowers and the Lenders.
11.18 WAIVERS OF JURY TRIAL. THE BORROWERS, THE ADMINISTRATIVE AGENT, THE
COLLATERAL AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE> 116
111
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
HOMESIDE LENDING, INC.
By: /s/ Joe K. Pickett
--------------------------------------
Title: Chairman and CEO
HONOLULU MORTGAGE COMPANY, INC.
By: /s/ Joe K. Pickett
--------------------------------------
Title: Chairman and CEO
CHEMICAL BANK, as Administrative Agent and
as a Lender
By: /s/ Jeanette F. Brummell
--------------------------------------
Title: Managing Director
NATIONSBANK OF TEXAS, N.A., as
Syndication Agent and as a Lender
By: /s/ Elizabeth Kurilecz
--------------------------------------
Title: Senior Vice President
BANKERS TRUST COMPANY, as
Documentation Agent and as a Lender
By: /s/ John O'Rourke
--------------------------------------
Title: Vice President
<PAGE> 117
112
THE FIRST NATIONAL BANK OF BOSTON,
as Collateral Agent
By: /s/ David L. Hall
--------------------------------------
Title: Senior Manager
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Robert J. McCollom
--------------------------------------
Title: Vice President
THE BANK OF NEW YORK
By: /s/ William H. Cunningham
--------------------------------------
Title: Vice President
BANK NATIONALE DE PARIS
By: /s/ Riva L. Howard /s/ William Shaheen
--------------------------------------
Title: Vice Presidents
CIBC INC.
By: /s/ Su Ann Bowers
--------------------------------------
Title: Authorized Signatory
CREDIT LYONNAIS
By: /s/ Renaud D. Herbes
--------------------------------------
Title: SRP
<PAGE> 118
113
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/
--------------------------------------
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK
BRANCH
By: /s/ Gina M. Kearns
--------------------------------------
Title: Vice President and Manager
BANK OF TOKYO - MITSUBISHI TRUST
COMPANY
By: /s/ David A. Kelson
--------------------------------------
Title: Vice President
PEARL STREET L.P., as a Lender
By: /s/ Edward C. Forst
--------------------------------------
Title: Authorized Signatory
SOCIETE GENERALE, NEW YORK BRANCH
By: /s/ Emilio Martinez
--------------------------------------
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By: /s/ Lisa Allison
--------------------------------------
Title: Vice President
<PAGE> 119
114
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
By: /s/
--------------------------------------
Title: Vice President
By: /s/
--------------------------------------
Title: Vice President
COMMERZBANK AG, ATLANTA AGENCY
By: /s/
--------------------------------------
Title: Vice President and Manager
By: /s/
--------------------------------------
Title: Assistant Vice President
MELLON BANK, N.A.
By: /s/ Dean C. Pace
--------------------------------------
Title: Vice President
FLEET BANK, N.A. (formerly NatWest Bank,
N.A.)
By: /s/ Robert L. Klein
--------------------------------------
Title: Assistant Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, ATLANTA AGENCY
By: /s/ Junoya Fujiwara
--------------------------------------
Title: Senior Vice President and
Deputy General Manager
PNC BANK KENTUCKY, INC.
By: /s/ Charles Ezell
--------------------------------------
Title: Vice President
<PAGE> 120
115
Title
THE SAKURA BANK, LIMITED
ATLANTA AGENCY
By: /s/ Hiroyasu Imanishi
--------------------------------------
Title: V.P. & Senior Manager
UNION BANK OF SWITZERLAND, NEW
YORK BRANCH
By: /s/ Robert Mendeles
--------------------------------------
Title: Vice President
By: /s/ Richard W. Fortney
--------------------------------------
Title: Managing Director
AMSOUTH BANK OF ALABAMA
By: /s/ Ronny Hudspeth
--------------------------------------
Title: Vice President
BANQUE PARIBAS
By: /s/ Victor S. Brown
--------------------------------------
Title: Assistant Vice President
By: /s/ Mathew J. Colleen
--------------------------------------
Title: Vice President
COMERICA BANK
By: /s/ N. Donald Heath
--------------------------------------
Title: Vice President
<PAGE> 121
116
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ Dean Blaice
--------------------------------------
Title: Senior Vice President
DAI-ICHI KANGYO
By: /s/
--------------------------------------
Title: Joint General Manager
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK, CAYMAN
ISLAND BRANCH
By: /s/ Karen A. Brinkman
--------------------------------------
Title: Vice President
By: /s/ Norah McCarr
--------------------------------------
Title: Senior Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Ann H. Chudacoff
--------------------------------------
Title: Vice President
LTCB TRUST COMPANY
By: /s/ John Sullivan
--------------------------------------
Title: Executive Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ Patricia Loret de Mola
--------------------------------------
Title: Senior Vice President
<PAGE> 122
117
NATIONAL CITY BANK OF KENTUCKY
/s/ Michael W. Nicholson
By:_______________________________________
Title: Vice Presient
THE ROYAL BANK OF SCOTLAND PLC
/s/ Derek Bonnar
By:_______________________________________
Title: Vice President
THE SANWA BANK, LIMITED, ATLANTA
AGENCY
/s/ Peter J. Pawlak
By:_______________________________________
Title: V.P. & Senior Manager
THE TOKAI BANK, LIMITED
ATLANTA AGENCY
/s/
By:_______________________________________
Title: General Manager
THE YASUDA TRUST AND BANKING
COMPANY, LIMITED, NEW YORK BRANCH
/s/
By:_______________________________________
Title: Deputy General Manager
<PAGE> 123
<TABLE>
SCHEDULE I
----------
BANK NAMES, ADDRESSES AND COMMITMENTS
<CAPTION>
TRANCHE A TRANCHE B SWING LINE
NAMES/ADDRESS COMMITMENT COMMITMENT COMMITMENT
- -------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C> <C>
Chemical Bank
270 Park Avenue
4th Floor
New York, NY 10017
Attention: Roger Parker
Fax: 213-270-1063 $93,000,000.00 $57,000,000.00 $100,000,000.00
NationsBank
901 Main Street
Dallas, TX 75202
Attention: Beth Sorenson
Fax: 214-508-0604 93,000,000.00 57,000,000.00 100,000,000.00
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Attention: John O'Rourke
Fax: 212-250-7200 83,700,000.00 51,300,000.00 100,000,000.00
Bank of America National Trust and Savings Association
GRESG Mortgage Warehousing #5149
24022 Calle de la Plata, Suite 405
Laguna Hills, CA 92653
Attention: Robert J. McCollom
Fax: 714-951-4046 66,650,000.00 40,850,000.00
</TABLE>
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B SWING LINE
NAMES/ADDRESS COMMITMENT COMMITMENT COMMITMENT
- -------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C>
The Bank of New York
One Wall Street, 17th Floor
New York, NY 10286
Attention: William H. Cunningham
Fax: 212-635-6468 66,650,000.00 40,850,000.00
Banque Nationale de Paris
499 Park Avenue, 3rd Floor
New York, NY 10022
Attention: Bill Shaheen
Fax: 212-415-9698 66,650,000.00 40,850,000.00
CIBC Inc.
2727 Paces Ferry Rd., Suite 1200
Atlanta, GA 30339
Attention: Stephen Reynolds
425 Lexington Avenue
New York, NY 10017
Fax: 212-856-3613 66,650,000.00 40,850,000.00
Credit Lyonnais
1301 Avenue of the Americas
New York, NY 10019
Attention: Greg Raue
Fax: 212-261-3401 66,650,000.00 40,850,000.00
First Union National Bank of North Carolina
301 S. College Street TW8
Charlotte, NC 28288
Attention: Carolyn Eskridge
Fax: 704-374-7102 66,650,000.00 40,850,000.00
</TABLE>
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B SWING LINE
NAMES/ADDRESS COMMITMENT COMMITMENT COMMITMENT
- -------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C>
The Fuji Bank, Limited, New York Branch
2 World Trade Center
New York, NY 10048
Attention: Michael Gebauer
Fax: 212-912-0516 66,650,000.00 40,850,000.00
Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas, 12th Floor
New York, NY 10020-1104
Attention: Dave Kelson
Fax: 212-782-6440 66,650,000.00 40,850,000.00
Pearl Street L.P.
85 Broad Street
New York, NY 10022
Attention: Justin Vorwerk
Fax: 212-622-0122 66,650,000.00 40,850,000.00
Societe Generale, New York Branch
1221 Avenue of the Americas
New York, NY 10020
Attention: Emilio Martinez
Fax: 212-278-7614 66,650,000.00 40,850,000.00
The Toronto-Dominion Bank
909 Fannin Street, 17th Floor
Houston, TX 77010
Attention: Lisa Allison
Fax: 713-951-9921 66,650,000.00 40,850,000.00
</TABLE>
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B SWING LINE
NAMES/ADDRESS COMMITMENT COMMITMENT COMMITMENT
- -------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C>
Westdeutsche Landesbank Girozentrale
1211 Sixth Avenue, 24th Floor
New York, NY 10036
Attention: Kenneth R. Crespo
Fax: 212-852-6300 66,650,000.00 40,850,000.00
Commerzbank AG, Atlanta Agency
1230 Preachtree Street, NE, Suite 3500
Atlanta, GA 30309
Attention: Mark Wortmann
Fax: 404-888-6539 46,500,000.00 28,500,000.00
Mellon Bank, N.A.
One Mellon Bank Center, Room 0400
Pittsburgh, PA 15258-0001
Attention: Dean G. Pace
Fax: 412-234-9047 46,500,000.00 28,500,000.00
Fleet Bank, N.A. (formerly NatWest Bank, N.A.)
175 Water Street, 28th Floor
New York, NY 10038
Attention: Bob Klein
Fax: 212-602-3704 66,650,000.00 40,850,000.00
The Industrial Bank of Japan, Limited, Atlanta
Agency
One Ninety One Peachtree Tower
Suite 3600
191 Preachtree Street, N.E.
Atlanta, GA 30303-1757
Attention: Chip McCollum
Fax: 404-524-8509 31,000,000.00 19,000,000.00
</TABLE>
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B SWING LINE
NAMES/ADDRESS COMMITMENT COMMITMENT COMMITMENT
- -------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C>
PNC Bank Kentucky, Inc.
500 W. Jefferson Street
Suite 1200
Louisville, KY 40202
Attention: Charles Ezell
Fax: 502-581-3844 31,000,000.00 19,000,000.00
The Sakura Bank, Limited, Atlanta Agency
245 Peachtree Center Avenue, NE
Suite 2703
Atlanta, GA 30303
Attention: Christy Joel
Fax: 404-521-1133 31,000,000.00 19,000,000.00
Union Bank of Switzerland, New York Branch
299 Park Avenue
41st Floor
New York, NY 10171
Attention: Robert Mendeles
Fax: 212-821-4541 31,000,000.00 19,000,000.00
Amsouth Bank of Alabama
Commercial Real Estate AST - 9th Floor
1900 5th Ave. No.
Birmingham, AL 36203
Attention: Ronny Hudspeth
Fax: 205-326-4075 15,500,000.00 9,500,000.00
</TABLE>
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B SWING LINE
NAMES/ADDRESS COMMITMENT COMMITMENT COMMITMENT
- -------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C>
Banque Paribas
787 Seventh Avenue
New York, NY 10019
Attention: Victor Brown
Fax: 212-841-2689 15,500,000.00 9,500,000.00
Comerica Bank
500 Woodward Avenue MC: 3256
Detroit, MI 48226
Attention: N. Donald Heath
Fax: 313-222-9295 15,500,000.00 9,500,000.00
Credit Agricole
55 East Monroe
Suite 4700
Chicago, IL 60603
Attention: Brian Knezeak
600 Travis, Suite 2340
Houston, Texas 77002
Fax: 713-223-7029 15,500,000.00 9,500,000.00
Dai-Ichi Kangyo Limited, Atlanta Agency
Marquis Two Tower
Suite 2400
285 Peachtree Avenue, N.E.
Atlanta, GA 30303
Attention: David Smith
Fax: 404-581-9657 15,500,000.00 9,500,000.00
</TABLE>
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B SWING LINE
NAMES/ADDRESS COMMITMENT COMMITMENT COMMITMENT
- -------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C>
DG Bank
609 Fifth Avenue
New York, NY 10017
Attention: Linda O'Connell
Fax: 212-745-1556/1550 15,500,000.00 9,500,000.00
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670-0098
Attention: Ann H. Chudacoff
Fax: 312-732-6222 15,500,000.00 9,500,000.00
LTCB
165 Broadway
New York, NY 10006
Attention: Tom Meyer
245 Peachtree Center Avenue, N.E.,
Suite 2801, Marquis One Tower
Atlanta, GA 30303
Fax: 404-658-9751 15,500,000.00 9,500,000.00
Mitsubishi Trust and Banking
520 Madison Avenue
26th Floor
New York, NY 10022
Attention: Pat Loret De Mola
Fax: 212-755-2349 15,500,000.00 9,500,000.00
</TABLE>
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B SWING LINE
NAMES/ADDRESS COMMITMENT COMMITMENT COMMITMENT
- -------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C>
National City Bank of Kentucky
101 South Fifth Street
Louisville, KY 40202
Attention: Michael W. Nicholson
Fax: 502-581-4154 15,500,000.00 9,500,000.00
The Royal Bank of Scotland PLC
Wall Street Plaza
88 Pine St., 26th Floor
New York, NY 10005
Attention: Derek I. Bonnar
Fax: 212-480-0791 15,500,000.00 9,500,000.00
The Sanwa Bank, Limited, Atlanta Agency
285 Peachtree St., Suite 4950
Atlanta, GA 30303
Attention: Peter J. Pawlak
Fax: 404-589-1629 15,500,000.00 9,500,000.00
The Tokai Bank, Limited Atlanta Agency
285 Peachtree Center Avenue N.E.
Marquis II Tower, Suite 2802
Atlanta, GA 30303
Attention: Ted Steinkanp, Jr.
Fax: 404-653-0737 15,500,000.00 9,500,000.00
</TABLE>
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B SWING LINE
NAMES/ADDRESS COMMITMENT COMMITMENT COMMITMENT
- -------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C>
The Yasuda Trust and Banking Co., Ltd., New York Branch
666 Fifth Avenue, Suite 801
New York, NY 10103
Attention: Price Chenault
285 Peachtree Center Avenue, N.E.
Suite 2104
Atlanta, GA 30303
Fax: 404-584-7816 15,500,000.00 9,500,000.00
-9-
</TABLE>
<PAGE> 124
EXHIBIT A-1
-----------
FORM OF BALANCED-BASED NOTE
$________ New York, New York
________ __, 199_
FOR VALUE RECEIVED, the undersigned, [HomeSide Lending, Inc.,
a Florida corporation] [Honolulu Mortgage Company, Inc., a Hawaii corporation]
(the "BORROWER") hereby unconditionally promises to pay to the order of [Name of
Lender] (the "LENDER") on the maturity date relating to each Balance-Based Loan
at the office of the Administrative Agent specified in the Credit Agreement
hereinafter referred to, in lawful money of the United States of America and in
immediately available funds, the Principal Amount of the lesser of (a) [Lender's
Aggregate Commitment Amount] and (b) the aggregate unpaid Principal Amount of
each Balance-Based Tranche A Loan and Balance-Based Tranche B Loan (i) made by
the Lender pursuant to subsection 2.1(a) or 2.2(a) of the Credit Agreement and
not assigned to the other Lenders, or (ii) assigned to the Lender pursuant to
subsection 2.3 of the Credit Agreement.
Each Balance-Based Loan evidenced by this Note was funded to
the Borrower at a discount as provided in the Credit Agreement; accordingly, the
Principal Amount of each Balance-Based Loan evidenced by this Note will bear no
interest hereunder until the last day of the Interest Period applicable thereto,
and if such Principal Amount is not paid in full on such day, such Principal
Amount and, to the extent permitted by law, interest thereon, shall from and
after such day bear interest at the Post-Default Rate determined in accordance
with the Credit Agreement.
The holder of this Note is authorized to endorse the date,
Principal Amount and Maturity Date of each Balance-Based Tranche A Loan and each
Balance-Based Tranche B Loan (i) made by such Lender pursuant to subsection
2.1(a) or 2.2(a) of the Credit Agreement and not assigned to the other Lenders,
or (ii) assigned to such Lender pursuant to subsection 2.3 of the Credit
Agreement, and each payment or prepayment of the Principal Amount with respect
thereto on the applicable schedule annexed hereto and made a part hereof, or on
a continuation thereof which shall be attached hereto and made a part hereof,
which endorsement shall constitute PRIMA FACIE evidence of the accuracy of the
information endorsed; PROVIDED, that the failure to make any such endorsement
shall not affect the obligations of the Borrower under this Note.
This Note is one of the Notes referred to in the Credit
Agreement, dated as of May 31, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"; terms defined therein being
used herein as therein defined), among HomeSide Lending, Inc., Honolulu Mortgage
Company, Inc. and the Lenders, Nationsbank of Texas, N.A., as Syndication Agent,
Bankers Trust Company, as Documentation Agent, The
<PAGE> 125
2
First National Bank of Boston, as Collateral Agent, and Chemical Bank, as
Administrative Agent, and is entitled to the benefits thereof and of the other
Loan Documents.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts then remaining unpaid on
this Note shall become, or may be declared to be, immediately due and payable,
all as provided therein.
All parties now and hereafter liable with respect to this
Note, whether as maker, principal, surety, guarantor, endorser or otherwise,
hereby waive presentment, demand, protest and all other notices of any kind.
This Note shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.
[HOMESIDE LENDING, INC.]
[HONOLULU MORTGAGE COMPANY,
INC.]
By:_______________________
Title:
<PAGE> 126
Schedule 1 to Note
------------------
<TABLE>
BALANCED-BASED TRANCHE A LOANS AND PAYMENTS OF PRINCIPAL
--------------------------------------------------------
<CAPTION>
Principal Amount Unpaid
Amount Maturity of Principal Notation
Date of Loan Date Principal Paid Balance made by
- ---- ------- ---- -------------- ------- -------
<S> <C> <C> <C> <C> <C>
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
</TABLE>
<PAGE> 127
2
<PAGE> 128
Schedule 2 to Note
------------------
<TABLE>
BALANCED-BASED TRANCHE A LOANS AND PAYMENTS OF PRINCIPAL
--------------------------------------------------------
<CAPTION>
Principal Amount Unpaid
Amount Maturity of Principal Notation
Date of Loan Date Principal Paid Balance made by
- ---- ------- ---- -------------- ------- -------
<S> <C> <C> <C> <C> <C>
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
- ---- ------- ---- ------- ------- -------
</TABLE>
<PAGE> 129
2
<PAGE> 130
EXHIBIT A-2
-----------
FORM OF RATE-BASED NOTE
$ __________ New York, New York
_________ __, 199_
FOR VALUE RECEIVED, the undersigned, [HomeSide Lending, Inc.,
a Florida corporation] [Honolulu Mortgage Company, Inc., a Hawaii corporation]
(the "BORROWER"), hereby unconditionally promises to pay to the order of [Name
of Lender] (the "LENDER") on the Termination Date, as defined in the Credit
Agreement hereinafter referred to, at the office of the Administrative Agent
specified in such Credit Agreement, in lawful money of the United States of
America and in immediately available funds, the Principal Amount of (a)
[Lender's Aggregate Commitment Amount] or, if less, (b) the aggregate unpaid
Principal Amount of all Rate-Based Tranche A Loans and Rate-Based Tranche B
Loans made by the Lender pursuant to subsection 2.1(b) or 2.2(b) of the Credit
Agreement. The Borrower further agrees to pay interest in like money at such
office on the unpaid Principal Amount hereof from time to time (whether at the
stated maturity, by acceleration or otherwise) on the dates and at the
applicable rates per annum specified in subsection 2.11 of the Credit Agreement
until paid in full (both before and after judgment).
The holder of this Note is authorized to endorse the date,
Type and Principal Amount of each Rate-Based Tranche A Loan and each Rate-Based
Tranche B Loan made by the Lender pursuant to subsection 2.1(b) or 2.2(b) of the
Credit Agreement, each continuation thereof, each conversion of all or a portion
thereof to another Type, the date and amount of each payment or repayment hereof
and, in the case of Eurodollar Loans, the length of Interest Periods with
respect thereto, on the applicable schedule annexed hereto and made a part
hereof, or on a continuation thereof which shall be attached hereto and made a
part hereof, which endorsement shall constitute PRIMA FACIE evidence of the
accuracy of the information endorsed; PROVIDED, that the failure to make any
such endorsement shall not affect the obligations of the Borrower under this
Note.
This Note is one of the Notes referred to in the Credit
Agreement, dated as of May 31, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"; terms defined therein being
used herein as therein defined), among HomeSide Lending, Inc., Honolulu Mortgage
Company, Inc. and the Lenders, Nationsbank of Texas, N.A., as Syndication Agent,
Bankers Trust Company, as Documentation Agent, The First National Bank of
Boston, as Collateral Agent, and Chemical Bank, as Administrative Agent, and is
entitled to the benefits thereof and of the other Loan Documents and is subject
to prepayment in whole or in part as provided therein.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts then remaining unpaid on
this Note shall become, or may be declared to be, immediately due and payable,
all as provided therein.
<PAGE> 131
2
All parties now and hereafter liable with respect to this
Note, whether as maker, principal, surety, guarantor, endorser or otherwise,
hereby waive presentment, demand, protest and all other notices of any kind.
This Note shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.
[HOMESIDE LENDING, INC.]
[HONOLULU MORTGAGE COMPANY,
INC.]
By:________________________
Title:
<PAGE> 132
Schedule to 1 Note
------------------
<TABLE>
RATE-BASED TRANCHE A LOANS AND PAYMENTS OF PRINCIPAL
----------------------------------------------------
<CAPTION>
Principal Amount
Amount of Unpaid
of Interest Principal Principal Notation
Date Loans Type Period Repaid Balance Made By
- ---- ----- ---- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
</TABLE>
<PAGE> 133
2
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
</TABLE>
<PAGE> 134
Schedule to 2 Note
------------------
<TABLE>
RATE-BASED TRANCHE A LOANS AND PAYMENTS OF PRINCIPAL
----------------------------------------------------
<CAPTION>
Principal Amount
Amount of Unpaid
of Interest Principal Principal Notation
Date Loans Type Period Repaid Balance Made By
- ---- ----- ---- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
</TABLE>
<PAGE> 135
2
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
</TABLE>
<PAGE> 136
EXHIBIT A-3
-----------
FORM OF SWING LINE NOTE
$ __________ New York, New York
_________ __, 199_
FOR VALUE RECEIVED, the undersigned, [HomeSide Lending, Inc., a Florida
corporation] [Honolulu Mortgage Company, Inc.] (the "BORROWER"), hereby
unconditionally promises to pay to the order of [Name of Swing Line Lender] (the
"SWING LINE LENDER") on the Maturity Date relating to each Swing Line Loan at
the office of the Administrative Agent specified in the Credit Agreement
hereinafter referred to, in lawful money of the United States of America and in
immediately available funds, the Principal Amount of the lesser of (a) [Swing
Line Commitment Amount] and (b) the aggregate unpaid Principal Amount of all
Swing Line Loans made by the Swing Line Lender pursuant to subsection 2.9 of the
Credit Agreement. The Borrower further agrees to pay interest in like money at
such office on the unpaid Principal Amount hereof from time to time (whether at
the stated maturity, by acceleration or otherwise) on the dates and at the
applicable rates per annum specified in subsection 2.11 of the Credit Agreement
until paid in full (both before and after judgment).
The holder of this Note is authorized to endorse the date and Principal
Amount of each Swing Line Loan made by the Swing Line Lender pursuant to
subsection 2.9 of the Credit Agreement, the date and amount of each payment or
prepayment hereof, and the date and amount of any assignment of a portion of the
Principal Amount hereof pursuant to subsection 2.9(d) of the Credit Agreement,
on the schedule annexed hereto and made a part hereof, or on a continuation
thereof which shall be attached hereto and made a part hereof, which endorsement
shall constitute PRIMA FACIE evidence of the accuracy of the information
endorsed; PROVIDED, that the failure to make any such endorsement shall not
affect the obligations of the Borrower under this Note.
This Note is one of the Notes referred to in the Credit Agreement, dated as
of May 31, 1996 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"; terms defined therein being used herein as therein
defined), among HomeSide Lending, Inc., Honolulu Mortgage Company, Inc. and the
Lenders, Nationsbank of Texas, N.A., as Syndication Agent, Bankers Trust
Company, as Documentation Agent, The First National Bank of Boston, as
Collateral Agent, and Chemical Bank, as Administrative Agent, and is entitled to
the benefits thereof and of the other Loan Documents and is subject to
prepayment in whole or in part as provided therein.
Upon the occurrence of any one or more of the Events of Default specified
in the Credit Agreement, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable, all as provided
therein.
<PAGE> 137
2
All parties now and hereafter liable with respect to this Note, whether as
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of New York.
[HOMESIDE LENDING, INC.]
[HONOLULU MORTGAGE COMPANY,
INC.]
By:________________________
Title:
<PAGE> 138
Schedule to 1 Note
------------------
<TABLE>
SWING LINE LOANS AND PAYMENTS OF PRINCIPAL
------------------------------------------
<CAPTION>
Principal Amount
Amount of Unpaid
of Interest Principal Principal Notation
Date Loans Type Period Repaid Balance Made By
- ---- ----- ---- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
</TABLE>
<PAGE> 139
2
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
- ---- ----- ---- ----- ----- ------ ------
</TABLE>
<PAGE> 140
EXHIBIT B
---------
FORM OF BALANCE LENDER AGREEMENT
BALANCE LENDER AGREEMENT, dated as of __________, 199_,
between the Balance Lender named on the signature pages hereof, as a Balance
Lender under the Credit Agreement referred to below (the "BALANCE LENDER"),
HOMESIDE LENDING, INC., a Florida corporation ("HOMESIDE"), and CHEMICAL BANK,
in its capacity as the Administrative Agent under the Credit Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, HomeSide and the Balance Lender are parties to the
Credit Agreement;
WHEREAS, the Balance Lender has agreed to make and assign
Balance- Based Loans under the Credit Agreement, on the terms and conditions set
forth therein; and
WHEREAS, HomeSide has agreed to compensate the Balance Lender
as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement. As used in this Agreement, the following terms shall have
the following meanings:
"BALANCE DEFICIENCY FEE" shall have the meaning set forth in
Section 3 of this Agreement.
"BALANCE DEFICIENCY FEE RATE" shall mean, in respect of the
Balance Lender, the rate per annum agreed to by HomeSide and the Balance Lender
from time to time in writing.
"CREDIT AGREEMENT" shall mean the Credit Agreement, dated as
of May 31, 1996, among HomeSide and Honolulu Mortgage Company, Inc., as
Borrowers, the Lenders parties thereto, Nationsbank of Texas, N.A., as
Syndication Agent, Bankers Trust Company, as Documentation Agent, The First
National Bank of Boston, as Collateral Agent, and Chemical Bank, as
Administrative Agent, as amended, supplemented or otherwise modified from time
to time.
<PAGE> 141
2
"ESCROW FUNDS" shall mean funds received by HomeSide and its
Subsidiaries in connection with their mortgage servicing businesses,
constituting payments or prepayments of principal or interest in respect of
mortgages serviced by HomeSide and its Subsidiaries or of insurance, taxes or
other amounts in respect of such mortgages or the property encumbered thereby,
including such funds received in connection with master servicing arrangements.
"QUALIFYING BALANCES" shall mean, with respect to the Balance
Lender, the collected non-interest bearing deposits of Escrow Funds made by
HomeSide and its Subsidiaries with the Balance Lender, exclusive of the amount
of Escrow Funds necessary to compensate the Balance Lender for (i) direct
processing or transaction costs, (ii) amounts charged from time to time by the
Federal Deposit Insurance Corporation (or any successor thereto), including
risk-based premiums, (iii) the reserve requirements imposed from time to time by
the Board of Governors of the Federal Reserve System (or any successor thereto)
(such reserve requirements being determined by the Balance Lender on the amount
of collected deposits actually held by HomeSide or a Subsidiary in each type of
deposit at the rate imposed by such Board of Governors or successor on such
type) and (iv) any other costs, expenses, charges, taxes (other than general
corporate income or franchise taxes of the Balance Lender), duties, reserves,
special deposits or similar impositions now or hereafter imposed by any
Governmental Authority upon deposits maintained with the Balance Lender, all as
determined by the Balance Lender to be associated with such deposits maintained
by HomeSide or a Subsidiary with the Balance Lender.
"SUPPLEMENTAL BORROWING FEE" shall have the meaning set forth
in Section 2 of this Agreement.
"SUPPLEMENTAL BORROWING FEE RATE" shall mean, in respect of
the Balance Lender, the rate per annum agreed to by HomeSide and the Balance
Lender from time to time in writing.
2. SUPPLEMENTAL BORROWING FEE. HomeSide shall pay to the
Balance Lender on each Borrowing Date a supplemental borrowing fee calculated at
the Supplemental Borrowing Fee Rate on the Principal Amount of each
Balance-Based Loan made by the Balance Lender on such Borrowing Date (the
"SUPPLEMENTAL BORROWING FEE"). The aggregate amount of the Supplemental
Borrowing Fee payable to the Balance Lender on each Borrowing Date shall be
payable by HomeSide directly to the Balance Lender on such Borrowing Date.
3. BALANCE DEFICIENCY FEE. If, during any Interest Period, the
average daily outstanding Principal Amount of Balance-Based Loans made by the
Balance Lender during such Interest Period (without giving effect to any
prepayment of Balance-Based Loans during such Interest Period) exceeds the
average daily outstanding amount of Qualifying Balances held at the Balance
Lender during such Interest Period, HomeSide shall, within five
<PAGE> 142
3
Business Days after the billing of such amount by the Balance Lender, pay to the
Balance Lender a balance deficiency fee (the "BALANCE DEFICIENCY FEE")
calculated on the amount of such excess at a rate per annum equal to the Balance
Deficiency Fee Rate.
4. TREATMENT OF QUALIFYING BALANCES; INDEMNITY. The Balance
Lender and HomeSide will consult from time to time with a view toward allowing
HomeSide to maintain its deposit balances at the Balance Lender in types of
deposit accounts bearing the lowest reserve requirements practicable consistent
with the flexibility required by HomeSide to make withdrawals and deposits. In
the event that it shall be determined at any time that (i) (A) the Balance
Lender has incorrectly characterized deposit accounts maintained by HomeSide or
its Subsidiaries with the Balance Lender for purposes of determining required
reserves, (B) the Balance Lender has maintained inadequate reserves in respect
of such deposit accounts, (C) the costs of reserves used in the calculation of
the amount of Qualifying Balances at any time was the cost of the inadequate
reserves so maintained and (D) the Balance Lender is required to maintain
retroactive reserves, or to pay other costs, penalties or charges, as a result
thereof, or (ii) any costs, penalties or charges shall be imposed upon the
Balance Lender by any Governmental Authority specifically as a result of the
transactions contemplated hereby provided that the Balance Lender has followed
the procedures and kept such records as may be required under applicable laws
consistent with the type of accounts maintained hereunder, or any costs or
expenses shall be incurred by the Balance Lender in connection with any such
imposition or threatened imposition, then, in such event, HomeSide shall pay to
the Balance Lender on demand the additional amounts necessary to compensate the
Balance Lender for, as the case may be, the cost of maintaining such retroactive
reserves referred to in the foregoing clause (i) and for any other costs,
penalties or charges related thereto, including any amounts arising from a
recalculation of the Balance Deficiency Fee, and any such costs, penalties,
charges or expenses referred to in the foregoing clause (ii). A certificate as
to any additional amounts payable pursuant to this subsection submitted by the
Balance Lender, through the Administrative Agent, to HomeSide shall be
conclusive in the absence of manifest error. The agreements in this subsection
shall survive termination of this Agreement, and the Credit Agreement and
payment of the Loans and all other amounts payable hereunder or thereunder.
5. COMPUTATION OF FEES. The Balance Deficiency Fee and the
Supplemental Borrowing Fee shall be calculated on the basis of a 360 day year
for the number of days elapsed or to elapse, as the case may be, in the relevant
Interest Period.
6. REPRESENTATIONS AND WARRANTIES. HomeSide hereby represents
and warrants to the Balance Lender that:
(a) HomeSide is duly organized, validly existing and in good
standing under the laws of the State of Florida.
<PAGE> 143
4
(b) HomeSide has the corporate power and authority, and the
legal right, to make, deliver and perform this Agreement and has taken all
necessary corporate action to authorize the transactions contemplated by this
Agreement on the terms and conditions hereof and to authorize the execution,
delivery and performance of this Agreement. No consent or authorization of,
filing with or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement. This Agreement has
been duly executed and delivered on behalf of HomeSide. This Agreement
constitutes a legal, valid and binding obligation of HomeSide enforceable
against HomeSide in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
(c) The execution, delivery and performance of this Agreement
will not violate any Requirement of Law or Contractual Obligation of HomeSide
and will not result in, or require, the creation or imposition of any Lien on
any of its properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
7. COUNTERPARTS. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with HomeSide and the Administrative Agent. Neither party to
this Agreement may assign its rights or obligations hereunder without the
written consent of the other party.
8. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or enforceability 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.
9. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 144
5
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in New York, New York by their
proper and duly authorized officers as of the day and year first above written.
[BALANCE LENDER], as a Balance Lender
By:_____________________________________
Title:
HOMESIDE LENDING, INC.
By:_____________________________________
Title:
<PAGE> 1
EXHIBIT 10.24
HOLDINGS PLEDGE AGREEMENT
HOLDINGS PLEDGE AGREEMENT, dated as of May 31, 1996 (this
"AGREEMENT"), made by HOMESIDE, INC., a Delaware corporation (the "PLEDGOR"), in
favor of CHEMICAL BANK, as Administrative Agent (in such capacity, the
"ADMINISTRATIVE AGENT") for the Lenders parties to the Credit Agreement, dated
as of May 31, 1996 (as amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT"), among (i) HOMESIDE LENDING, INC. ("HOMESIDE") and
HONOLULU MORTGAGE COMPANY, INC. ("HONOMO"), as Borrowers (collectively, the
"BORROWERS"), (ii) the several banks and other financial institutions from time
to time parties to the Credit Agreement (collectively, the "LENDERS"), (iii) the
Lenders from time to time designated as Balance Lenders pursuant to subsection
11.8 of the Credit Agreement (in such capacity, collectively, the "BALANCE
LENDERS"), (iv) NATIONSBANK OF TEXAS, N.A., as Syndication Agent, (v) BANKERS
TRUST COMPANY, as Documentation Agent, (vi) THE FIRST NATIONAL BANK OF BOSTON,
as Collateral Agent, and (vii) the Administrative Agent.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrowers upon the terms and subject to
the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrowers that the Pledgor
guarantee payment and performance of the Borrowers' obligations under the Credit
Agreement and the other Loan Documents;
WHEREAS, in satisfaction of such condition, the Pledgor has
entered into a Holdings Guarantee of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "GUARANTEE") for the
benefit of the Administrative Agent and the Lenders; and
WHEREAS, it is a further condition precedent to the obligation
of the Lenders to make their respective Loans to the Borrowers under the Credit
Agreement that the Pledgor shall have executed and delivered this Agreement to
secure payment and performance of the Pledgor's obligations under the Guarantee;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective Loans to the Borrowers, the
Pledgor hereby agrees with the Administrative Agent, for the ratable benefit of
the Lenders, as follows:
<PAGE> 2
2
1. DEFINED TERMS. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Holdings Pledge Agreement, as the same may
be amended, modified or otherwise supplemented from time to time.
"CODE": the Uniform Commercial Code from time to time in
effect in the State of New York.
"Collateral": the Pledged Stock and all Proceeds.
----------
"COLLATERAL ACCOUNT": any account established to hold money
Proceeds, maintained under the sole dominion and control of the Administrative
Agent, subject to withdrawal by the Administrative Agent for the account of the
Lenders only as provided in paragraph 8(a).
"ISSUER": the company identified on SCHEDULE 1 attached hereto
as the issuer of the Pledged Stock.
"Obligations": as defined in the Guarantee.
-----------
"PLEDGED STOCK": the shares of capital stock listed on
SCHEDULE 1 hereto, together with all stock certificates, options or rights of
any nature whatsoever that may be issued or granted by the Issuer to the Pledgor
while this Agreement is in effect.
"PROCEEDS": all "proceeds" as such term is defined in Section
9-306(1) of the Code on the date hereof and, in any event, shall include,
without limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
"SECURED OBLIGATIONS": the collective reference to (a) the
Obligations and (b) all obligations and liabilities of the Pledgor which may
arise under or in connection with this Agreement or any other Loan Document to
which the Pledgor is a party, whether on account of reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Administrative Agent or to the
Lenders that are required to be paid by the Pledgor pursuant to the terms of
this Agreement or any other Loan Document to which the Pledgor is a party).
"Securities Act": the Securities Act of 1933, as amended.
--------------
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular
<PAGE> 3
3
provision of this Agreement, and section and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Pledgor hereby
delivers to the Administrative Agent, for the ratable benefit of the Lenders,
all the Pledged Stock and hereby grants to the Administrative Agent, for the
ratable benefit of the Lenders, a first priority security interest in the
Collateral, as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Secured Obligations.
3. STOCK POWERS. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power covering such
certificate, duly executed in blank by the Pledgor with, if the Administrative
Agent so requests, signature guaranteed.
4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants that:
(a) The Pledgor has the corporate power and authority and the
legal right to execute and deliver, to perform its obligations under, and to
grant the security interest in the Collateral pursuant to, this Agreement and
has taken all necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the Collateral
pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms, and upon
delivery to the Administrative Agent of the stock certificates evidencing the
Pledged Stock, the security interest created pursuant to this Agreement will
constitute a valid, perfected first priority security interest in the
Collateral, enforceable in accordance with its terms against all creditors of
the Pledgor and any Persons purporting to purchase any Collateral from the
Pledgor, except in each case as enforceability may be affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this Agreement
will not violate any provision of any Requirement of Law or Contractual
Obligation of the Pledgor and will not result in the creation or imposition of
any Lien on any of the properties or revenues of the Pledgor pursuant to any
Requirement of Law or Contractual Obligation of the Pledgor, except the security
interest created by this Agreement.
<PAGE> 4
4
(d) No consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or creditor of
the Pledgor), is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of the
Pledgor, threatened by or against the Pledgor or against any of its properties
or revenues with respect to this Agreement or any of the transactions
contemplated hereby.
(f) The shares of Pledged Stock constitute all the issued and
outstanding shares of all classes of the capital stock of the Issuer.
(g) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(h) The Pledgor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock, free of any and all Liens or
options in favor of, or claims of, any other Person, except the security
interest created by this Agreement, other than the Liens under the Second Lien
Pledge Agreements to which the Pledgor is a party as in effect on the Closing
Date.
5. COVENANTS. The Pledgor covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement is terminated and the security interests created
hereby are released:
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights, whether in addition to, in substitution of, as a conversion of, or in
exchange for, any shares of the Pledged Stock, or otherwise in respect thereof,
the Pledgor shall accept the same as the agent of the Administrative Agent and
the Lenders, hold the same in trust for the Administrative Agent and the Lenders
and deliver the same forthwith to the Administrative Agent in the exact form
received, duly indorsed by the Pledgor to the Administrative Agent, if required,
together with an undated stock power covering such certificate duly executed in
blank by the Pledgor and with, if the Administrative Agent so requests,
signature guaranteed, to be held by the Administrative Agent, subject to the
terms hereof, as additional collateral security for the Secured Obligations. Any
sums paid upon or in respect of the Pledged Stock upon the liquidation or
dissolution of the Issuer shall be paid over to the Administrative Agent to be
held by it hereunder as additional collateral security for the Secured
Obligations, and in case any distribution of capital shall be made on or in
respect of the Pledged Stock or any property shall be distributed upon or with
respect to the Pledged Stock pursuant to the recapitalization or
reclassification of the capital of the Issuer or pursuant
<PAGE> 5
5
to the reorganization thereof, the property so distributed shall be delivered to
the Administrative Agent to be held by it hereunder as additional collateral
security for the Secured Obligations. If any sums of money or property so paid
or distributed in respect of the Pledged Stock shall be received by the Pledgor,
the Pledgor shall, until such money or property is paid or delivered to the
Administrative Agent, hold such money or property in trust for the Lenders,
segregated from other funds of the Pledgor, as additional collateral security
for the Secured Obligations.
(b) Without the prior written consent of the Administrative
Agent, the Pledgor will not (1) vote to enable, or take any other action to
permit, the Issuer to issue any stock or other equity securities of any nature
or to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any nature of
the Issuer, (2) sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Collateral, (3) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Collateral, or any interest therein, except for the security
interests created by this Agreement and the other Security Documents or (4)
enter into any agreement or undertaking restricting the right or ability of the
Pledgor or the Administrative Agent to sell, assign or transfer any of the
Collateral.
(c) The Pledgor shall maintain the security interest created
by this Agreement as a first priority, perfected security interest and shall
defend such security interest against claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Administrative Agent may reasonably request for
the purposes of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note, other instrument or chattel paper, such note, instrument or
chattel paper shall be immediately delivered to the Administrative Agent, duly
endorsed in a manner satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Agreement.
(d) The Pledgor shall pay, and save the Administrative Agent
and the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
6. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default
shall have occurred and be continuing and the Administrative Agent shall have
given notice to the Pledgor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 7, the Pledgor shall be permitted to
receive all cash dividends paid in the normal course of business of the Issuer
and consistent with past practice in respect of the Pledged Stock and to
exercise all voting and corporate rights with respect to the Pledged Stock;
<PAGE> 6
6
PROVIDED, HOWEVER, that no vote shall be cast or corporate right exercised or
other action taken which, in the Administrative Agent's reasonable judgment,
would impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, the Notes, this Agreement or
any other Loan Document.
7. RIGHTS OF THE LENDERS AND THE ADMINISTRATIVE AGENT. (a) All
money Proceeds received by the Administrative Agent hereunder shall be held by
the Administrative Agent for the benefit of the Administrative Agent and the
Lenders in a Collateral Account. All Proceeds while held by the Administrative
Agent in a Collateral Account (or by the Pledgor in trust for the Administrative
Agent and the Lenders) shall continue to be held as collateral security for all
the Secured Obligations and shall not constitute payment thereof until applied
as provided in paragraph 8(a).
(b) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise such rights
to the Pledgor, (1) the Administrative Agent shall have the right to receive any
and all cash dividends paid in respect of the Pledged Stock and make application
thereof to the Secured Obligations in such order as the Administrative Agent may
determine, and (2) all shares of the Pledged Stock shall be registered in the
name of the Administrative Agent or its nominee, and the Administrative Agent or
its nominee may thereafter exercise (A) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock at any meeting of shareholders of
the Issuer or otherwise and (B) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
shares of the Pledged Stock as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any and all of the
Pledged Stock upon the merger, consolidation, reorganization, recapitalization
or other fundamental change in the corporate structure of the Issuer or upon the
exercise by the Pledgor or the Administrative Agent of any right, privilege or
option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Administrative Agent may
determine), all without liability except to account for property actually
received by it, but the Administrative Agent shall have no duty to the Pledgor
to exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
8. REMEDIES. (a) If an Event of Default shall have occurred
and be continuing, at any time at the Administrative Agent's election, the
Administrative Agent may apply all or any part of Proceeds held in any
Collateral Account in payment of the Secured Obligations in such order as the
Administrative Agent may elect.
(b) If an Event of Default shall occur and be continuing, the
Administrative Agent, on behalf of the Lenders, may exercise, in addition to all
other rights and remedies granted in this Agreement and in any other instrument
or agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Code.
<PAGE> 7
7
Without limiting the generality of the foregoing, the Administrative Agent,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option
or options to purchase or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Collateral so sold, free of any right or equity of redemption in the
Pledgor, which right or equity is hereby waived and released. The Administrative
Agent shall apply any Proceeds from time to time held by it and the net proceeds
of any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred in
respect thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the exercise of the
rights of the Administrative Agent and the Lenders hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of counsel to the
Administrative Agent, to the payment in whole or in part of the Secured
Obligations, in such order as the Administrative Agent may elect, and only after
such application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor
waives all claims, damages and demands it may acquire against the Administrative
Agent or any Lender arising out of the exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
(c) The Pledgor waives and agrees not to assert any rights or
privileges which it may acquire under Section 9-112 of the Code. The Pledgor
shall remain liable for any deficiency if the proceeds of any sale or other
disposition of Collateral are insufficient to pay the Secured Obligations and
the fees and disbursements of any attorneys employed by the Administrative Agent
or any Lender to collect such deficiency.
9. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the
Administrative Agent shall determine to exercise its right to sell any or all of
the Pledged Stock pursuant to paragraph 8(b), and if in the sole determination
of the Administrative Agent it is necessary or advisable to have the Pledged
Stock, or that portion thereof to be sold, registered under the provisions of
the Securities Act, the Pledgor will cause the Issuer to (1) execute and
deliver, and cause the directors and officers of the Issuer to execute and
deliver, all such instruments and documents,
<PAGE> 8
8
and do or cause to be done all such other acts as may be, in the opinion of the
Administrative Agent, necessary or advisable to register the Pledged Stock, or
that portion thereof to be sold, under the provisions of the Securities Act, (2)
to use its best efforts to cause the registration statement relating thereto to
become effective and to remain effective for a period of one year from the date
of the first public offering of the Pledged Stock, or that portion thereof to be
sold, and (3) to make all amendments thereto and/or to the related prospectus
that are permitted by law which, in the opinion of the Administrative Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. The Pledgor agrees to cause the Issuer to comply
with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) The Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if the Issuer would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this Section valid
and binding and in compliance with any and all other applicable Requirements of
Law. The Pledgor further agrees that a breach of any of the covenants contained
in this Section will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section shall be specifically enforceable
against the Pledgor, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred under the Credit Agreement.
10. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. The
Pledgor hereby authorizes and instructs the Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and (b) is otherwise in accordance
with the terms of this Agreement, without any other or further
<PAGE> 9
9
instructions from the Pledgor, and the Pledgor agrees that the Issuer shall be
fully protected in so complying.
11. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) The Pledgor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent of the Administrative Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Pledgor and in the name of the
Pledgor or in the Administrative Agent's own name, from time to time in the
Administrative Agent's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all necessary and appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, including, without
limitation, any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
paragraph 11(a). All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are released.
12. DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar securities and property for its own account, except that the
Administrative Agent shall have no obligation to invest funds held in any
Collateral Account and may hold the same as demand deposits. Neither the
Administrative Agent, any Lender nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Administrative Agent to file
financing statements with respect to the Collateral without the signature of the
Pledgor in such form and in such filing offices as the Administrative Agent
reasonably determines appropriate to perfect the security interests of the
Administrative Agent for the benefit of the Lenders under this Agreement. A
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement for filing in any jurisdiction.
14. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy
<PAGE> 10
10
provided for herein or resulting or arising out of this Agreement shall, as
between the Administrative Agent and the Lenders, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Administrative Agent and the
Pledgor, the Administrative Agent shall be conclusively presumed to be acting as
agent for the Lenders with full and valid authority so to act or refrain from
acting, and neither the Pledgor nor the Issuer shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
15. NOTICES. All notices, requests and demands to or upon the
Administrative Agent or the Pledgor to be effective shall be in writing (or by
telex, fax or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (a) when delivered by hand or (b) if
given by mail, when deposited in the mails by certified mail, return receipt
requested, or (c) if by telex, fax or similar electronic transfer, when sent and
receipt has been confirmed, addressed as follows:
(1) if to the Administrative Agent, at its address or
transmission number for notices provided in subsection 11.2 of the Credit
Agreement; and
(2) if to the Pledgor, at its address or transmission number
for notices set forth under its signature below and to:
James Westra, Esq.
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Fax: 617-951-1295.
The Administrative Agent and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided in this
Section.
16. 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.
17. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a)
None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and the Administrative Agent, PROVIDED that any provision of this
Agreement may be waived by the Administrative Agent and the Lenders in a letter
or agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent.
<PAGE> 11
11
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph 17(a)), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default 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 Administrative Agent or any 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 Administrative Agent or any 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 Administrative Agent or such Lender would
otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
18. SECTION HEADINGS. The section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
19. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns of the Pledgor and shall inure to the benefit of
the Administrative Agent and the Lenders and their successors and assigns.
20. GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
HOMESIDE, INC.
By: /s/ Joe K. Pickett
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Title:
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<PAGE> 12
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Holdings Pledge Agreement dated May 31, 1996, made by HomeSide, Inc. for the
benefit of the Administrative Agent and the Lenders (the "HOLDINGS PLEDGE
AGREEMENT"). The undersigned agrees for the benefit of the Administrative Agent
and the Lenders as follows:
1. The undersigned will be bound by the terms of the Holdings
Pledge Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.
2. The undersigned will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in
paragraph 5(a) of the Holdings Pledge Agreement.
3. The terms of paragraph 9(c) of the Holdings Pledge
Agreement shall apply to it, MUTATIS MUTANDIS, with respect to all actions that
may be required of it under or pursuant to or arising out of Section 9 of the
Holdings Pledge Agreement.
HOMESIDE HOLDINGS, INC.
By: /s/ Joe K. Pickett
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Title:
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Address for Notices:
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Telex:
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Fax:
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<PAGE> 13
SCHEDULE 1
TO HOLDINGS
PLEDGE AGREEMENT
<TABLE>
DESCRIPTION OF PLEDGED STOCK
<CAPTION>
Issuer Class of Stock Stock Certificate No. Number of Shares
------ -------------- --------------------- ----------------
<S> <C> <C> <C>
HomeSide Holdings, Common 002 10,000
Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.25
HOMESIDE PLEDGE AGREEMENT
HOMESIDE PLEDGE AGREEMENT, dated as of May 31, 1996 (this
"AGREEMENT"), made by HOMESIDE LENDING, INC., a Florida corporation (the
"PLEDGOR"), in favor of CHEMICAL BANK, as Administrative Agent (in such
capacity, the "ADMINISTRATIVE AGENT") for the Lenders parties to the Credit
Agreement, dated as of May 31, 1996 (as amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"), among (i) the Pledgor and
Honolulu Mortgage Company, Inc., as Borrowers (collectively, the "BORROWERS"),
(ii) the several banks and other financial institutions from time to time
parties to the Credit Agreement (collectively, the "LENDERS"), (iii) the Lenders
from time to time designated as Balance Lenders pursuant to subsection 11.8 of
the Credit Agreement (in such capacity, collectively, the "BALANCE LENDERS"),
(iv) NATIONSBANK OF TEXAS, N.A., as Syndication Agent, (v) BANKERS TRUST
COMPANY, as Documentation Agent, (vi) THE FIRST NATIONAL BANK OF BOSTON, as
Collateral Agent, and (vii) the Administrative Agent.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrowers upon the terms and subject to
the conditions set forth therein;
WHEREAS, the Pledgor is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) issued by the Issuers (as
hereinafter defined); and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrowers under the Credit
Agreement that the Pledgor shall have executed and delivered this Agreement to
the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective Loans to the Borrowers under the
Credit Agreement, the Pledgor hereby agrees with the Administrative Agent, for
the ratable benefit of the Lenders, as follows:
1. DEFINED TERMS. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.
(b) The following terms shall have the following meanings:
<PAGE> 2
2
"AGREEMENT": this HomeSide Pledge Agreement, as the same may
be amended, modified or otherwise supplemented from time to time.
"CODE": the Uniform Commercial Code from time to time in
effect in the State of New York.
"COLLATERAL": the Pledged Stock and all Proceeds.
"COLLATERAL ACCOUNT": any account established to hold money
Proceeds, maintained under the sole dominion and control of the Administrative
Agent, subject to withdrawal by the Administrative Agent for the account of the
Lenders only as provided in paragraph 8(a).
"ISSUERS": the collective reference to the companies
identified on SCHEDULE 1 attached hereto as the issuers of the Pledged Stock;
individually, each an "ISSUER."
"OBLIGATIONS": the collective reference to the unpaid
principal of and interest on the Loans and any Notes and all other obligations
and liabilities of the Borrowers to the Administrative Agent, the Collateral
Agent and the Lenders (including, without limitation, interest accruing at the
then applicable rate provided in the Credit Agreement after the maturity of the
Loans and interest accruing at the then applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to either Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement, the Loans, any Notes, this
Agreement, the other Loan Documents or any other document made, delivered or
given in connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of counsel
to the Administrative Agent or to the Lenders that are required to be paid by
the Borrowers pursuant to the terms of the Credit Agreement or this Agreement or
any other Loan Document).
"PLEDGED STOCK": the shares of capital stock listed on
SCHEDULE 1 hereto, together with all stock certificates, options or rights of
any nature whatsoever that may be issued or granted by each Issuer to the
Pledgor while this Agreement is in effect.
"PROCEEDS": all "proceeds" as such term is defined in Section
9-306(1) of the Code in effect in the State of New York on the date hereof and,
in any event, shall include, without limitation, all dividends or other income
from the Pledged Stock, collections thereon or distributions with respect
thereto.
"SECURITIES ACT": the Securities Act of 1933, as amended.
<PAGE> 3
3
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Pledgor hereby
delivers to the Administrative Agent, for the ratable benefit of the Lenders,
all the Pledged Stock and hereby grants to the Administrative Agent, for the
ratable benefit of the Lenders, a first priority security interest in the
Collateral, as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations.
3. STOCK POWERS. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power covering such
certificate, duly executed in blank by the Pledgor with, if the Administrative
Agent so requests, signature guaranteed.
4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants that:
(a) The shares of Pledged Stock constitute all the issued and
outstanding shares of all classes of the capital stock of each Issuer.
(b) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(c) The Pledgor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock, free of any and all Liens or
options in favor of, or claims of, any other Person, except the security
interest created by this Agreement.
(d) Upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock, the security interest created by this
Agreement will constitute a valid, perfected first priority security interest in
the Collateral, enforceable in accordance with its terms against all creditors
of the Pledgor and any Persons purporting to purchase any Collateral from the
Pledgor, except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
5. COVENANTS. The Pledgor covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement is terminated and the security interests created
hereby are released:
<PAGE> 4
4
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights, whether in addition to, in substitution of, as a conversion of, or in
exchange for, any shares of the Pledged Stock, or otherwise in respect thereof,
the Pledgor shall accept the same as the agent of the Administrative Agent and
the Lenders, hold the same in trust for the Administrative Agent and the Lenders
and deliver the same forthwith to the Administrative Agent in the exact form
received, duly indorsed by the Pledgor to the Administrative Agent, if required,
together with an undated stock power covering such certificate duly executed in
blank by the Pledgor and with, if the Administrative Agent so requests,
signature guaranteed, to be held by the Administrative Agent, subject to the
terms hereof, as additional collateral security for the Obligations. Any sums
paid upon or in respect of the Pledged Stock upon the liquidation or dissolution
of any Issuer shall be paid over to the Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged Stock or
any property shall be distributed upon or with respect to the Pledged Stock
pursuant to the recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property so distributed
shall be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Stock shall be
received by the Pledgor, the Pledgor shall, until such money or property is paid
or delivered to the Administrative Agent, hold such money or property in trust
for the Lenders, segregated from other funds of the Pledgor, as additional
collateral security for the Obligations.
(b) Without the prior written consent of the Administrative
Agent, the Pledgor will not (1) vote to enable, or take any other action to
permit, any Issuer to issue any stock or other equity securities of any nature
or to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any nature of
any Issuer, (2) sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Collateral, (3) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Collateral, or any interest therein, except for the security
interests created by this Agreement and the other Security Documents or (4)
enter into any agreement or undertaking restricting the right or ability of the
Pledgor or the Administrative Agent to sell, assign or transfer any of the
Collateral.
(c) The Pledgor shall maintain the security interest created
by this Agreement as a first priority, perfected security interest and shall
defend such security interest against claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Administrative Agent may reasonably request for
the purposes of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted. If any amount payable under or in
connection with any of the
<PAGE> 5
5
Collateral shall be or become evidenced by any promissory note, other instrument
or chattel paper, such note, instrument or chattel paper shall be immediately
delivered to the Administrative Agent, duly endorsed in a manner satisfactory to
the Administrative Agent, to be held as Collateral pursuant to this Agreement.
(d) The Pledgor shall pay, and save the Administrative Agent
and the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
6. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default
shall have occurred and be continuing and the Administrative Agent shall have
given notice to the Pledgor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 7, the Pledgor shall be permitted to
receive all cash dividends paid in the normal course of business of the Issuers
and consistent with past practice, to the extent permitted in the Credit
Agreement, in respect of the Pledged Stock and to exercise all voting and
corporate rights with respect to the Pledged Stock; PROVIDED, HOWEVER, that no
vote shall be cast or corporate right exercised or other action taken which, in
the Administrative Agent's reasonable judgment, would impair the Collateral or
which would be inconsistent with or result in any violation of any provision of
the Credit Agreement, the Notes, this Agreement or any other Loan Document.
7. RIGHTS OF THE LENDERS AND THE ADMINISTRATIVE AGENT. (a) All
money Proceeds received by the Administrative Agent hereunder shall be held by
the Administrative Agent for the benefit of the Administrative Agent and the
Lenders in a Collateral Account. All Proceeds while held by the Administrative
Agent in a Collateral Account (or by the Pledgor in trust for the Administrative
Agent and the Lenders) shall continue to be held as collateral security for all
the Obligations and shall not constitute payment thereof until applied as
provided in paragraph 8(a).
(b) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise such rights
to the Pledgor, (1) the Administrative Agent shall have the right to receive any
and all cash dividends paid in respect of the Pledged Stock and make application
thereof to the Obligations in such order as the Administrative Agent may
determine, and (2) all shares of the Pledged Stock shall be registered in the
name of the Administrative Agent or its nominee, and the Administrative Agent or
its nominee may thereafter exercise (A) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock at any meeting of shareholders of
any Issuer or otherwise and (B) any and all rights of conversion, exchange, and
subscription and any other rights, privileges or options pertaining to such
shares of the Pledged Stock as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any and all of the
Pledged Stock upon the merger, consolidation, reorganization, recapitalization
or other fundamental change in the corporate structure of any Issuer, or upon
<PAGE> 6
6
the exercise by the Pledgor or the Administrative Agent of any right, privilege
or option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Administrative Agent may
determine), all without liability except to account for property actually
received by it, but the Administrative Agent shall have no duty to the Pledgor
to exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
8. REMEDIES. (a) If an Event of Default shall have occurred
and be continuing, at any time at the Administrative Agent's election, the
Administrative Agent may apply all or any part of Proceeds held in any
Collateral Account in payment of the Obligations in such order as the
Administrative Agent may elect.
(b) If an Event of Default shall have occurred and be
continuing, the Administrative Agent, on behalf of the Lenders, may exercise, in
addition to all other rights and remedies granted in this Agreement and in any
other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon the Pledgor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give option or options to
purchase or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any exchange, broker's
board or office of the Administrative Agent or any Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Administrative Agent or any Lender shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in the Pledgor, which right
or equity is hereby waived and released. The Administrative Agent shall apply
any Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the exercise of the rights of the
Administrative Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel to the Administrative
Agent, to the payment in whole or in part of the Obligations, in such order as
the Administrative Agent may elect, and only after such application and after
the payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to the
Pledgor. To the extent permitted by applicable law, the Pledgor
<PAGE> 7
7
waives all claims, damages and demands it may acquire against the
Administrative Agent, the Collateral Agent or any Lender arising out of the
exercise by them of any rights hereunder. If any notice of a proposed sale or
other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale or
other disposition. The Pledgor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of Collateral are insufficient to pay
the Obligations and the fees and disbursements of any attorneys employed by the
Collateral Agent or any Lender to collect such deficiency.
9. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the
Administrative Agent shall determine to exercise its right to sell any or all of
the Pledged Stock pursuant to paragraph 8(b), and if in the sole determination
of the Administrative Agent it is necessary or advisable to have the Pledged
Stock, or that portion thereof to be sold, registered under the provisions of
the Securities Act, the Pledgor will cause each Issuer thereof to (1) execute
and deliver, and cause the directors and officers of such Issuer to execute and
deliver, all such instruments and documents, and do or cause to be done all such
other acts as may be, in the opinion of the Administrative Agent, necessary or
advisable to register the Pledged Stock, or that portion thereof to be sold,
under the provisions of the Securities Act, (2) to use its best efforts to cause
the registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (3) to make all
amendments thereto and/or to the related prospectus that are permitted by law
which, in the opinion of the Administrative Agent, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. The
Pledgor agrees to cause such Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of the Securities
Act.
(b) The Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
<PAGE> 8
8
(c) The Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this Section valid
and binding and in compliance with any and all other applicable Requirements of
Law. The Pledgor further agrees that a breach of any of the covenants contained
in this Section will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section shall be specifically enforceable
against the Pledgor, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred under the Credit Agreement.
10. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. The
Pledgor hereby authorizes and instructs each Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and (b) is otherwise in accordance
with the terms of this Agreement, without any other or further instructions from
the Pledgor, and the Pledgor agrees that each Issuer shall be fully protected in
so complying.
11. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) The Pledgor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent of the Administrative Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Pledgor and in the name of the
Pledgor or in the Administrative Agent's own name, from time to time in the
Administrative Agent's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all necessary and appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, including, without
limitation, any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
paragraph 11(a). All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are released.
12. DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar securities and property for its own account, except that the
Administrative Agent shall have no obligation to invest funds held in any
Collateral Account and may hold the same as demand deposits. Neither the
Administrative Agent, any Lender nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for
<PAGE> 9
9
any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor or any other Person or
to take any other action whatsoever with regard to the Collateral or any part
thereof.
13. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Administrative Agent to file
financing statements with respect to the Collateral without the signature of the
Pledgor in such form and in such filing offices as the Administrative Agent
reasonably determines appropriate to perfect the security interests of the
Administrative Agent for the benefit of the Lenders under this Agreement. A
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement for filing in any jurisdiction.
14. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Pledgor, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and neither the Pledgor
nor any Issuer shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
15. NOTICES. All notices, requests and demands to or upon the
Administrative Agent or the Pledgor to be effective shall be in writing (or by
telex, fax or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (1) when delivered by hand or (2) if
given by mail, when deposited in the mails by certified mail, return receipt
requested, or (3) if by telex, fax or similar electronic transfer, when sent and
receipt has been confirmed, addressed to the Administrative Agent or the Pledgor
at its address or transmission number for notices provided in subsection 11.2 of
the Credit Agreement. The Administrative Agent and the Pledgor may change their
addresses and transmission numbers for notices by notice in the manner provided
in this Section.
16. 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.
17. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a)
None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and the Administrative Agent, PROVIDED that any provision of this
Agreement may be waived by the
<PAGE> 10
10
Administrative Agent and the Lenders in a letter or agreement executed by the
Administrative Agent or by telex or facsimile transmission from the
Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph 17(a)), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default 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 Administrative Agent or any 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 Administrative Agent or any 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 Administrative Agent or such Lender would
otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
18. SECTION HEADINGS. The section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
19. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns of the Pledgor and shall inure to the benefit of
the Administrative Agent and the Lenders and their successors and assigns.
20. GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
HOMESIDE LENDING, INC.
By: /s/ Joe K. Pickett
------------------------------------
Title:
----------------------------------
<PAGE> 11
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Borrower Pledge Agreement dated May 31, 1996, made by HomeSide Lending, Inc. for
the benefit of the Administrative Agent and the Lenders (the "BORROWER PLEDGE
AGREEMENT"). The undersigned agrees for the benefit of the Administrative Agent
and the Lenders as follows:
1. The undersigned will be bound by the terms of the Borrower
Pledge Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.
2. The undersigned will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in
paragraph 5(a) of the Borrower Pledge Agreement.
3. The terms of paragraph 9(c) of the Borrower Pledge
Agreement shall apply to it, MUTATIS MUTANDIS, with respect to all actions that
may be required of it under or pursuant to or arising out of Section 9 of the
Borrower Pledge Agreement.
SWD PROPERTIES, INC.
By: /s/ Joe K. Pickett
------------------------------------
Title:
----------------------------------
Address for Notices:
----------------------------------------
----------------------------------------
Telex:
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Fax:
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<PAGE> 12
12
HOMESIDE MORTGAGE SECURITIES, INC.
By: /s/ Joe K. Pickett
------------------------------------
Title:
----------------------------------
Address for Notices:
----------------------------------------
----------------------------------------
Telex:
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Fax:
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STOCKTON PLAZA, INC.
By: /s/ Joe K. Pickett
------------------------------------
Title:
----------------------------------
Address for Notices:
----------------------------------------
----------------------------------------
Telex:
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Fax:
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HONOLULU MORTGAGE COMPANY, INC.
By: /s/ Joe k. Pickett
------------------------------------
Title:
----------------------------------
Address for Notices:
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Telex:
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<PAGE> 13
13
Fax:
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<PAGE> 14
SCHEDULE 1
TO HOMESIDE
PLEDGE AGREEMENT
<TABLE>
DESCRIPTION OF PLEDGED STOCK
<CAPTION>
Issuer Class of Stock Stock Certificate No. Number of Shares
------ -------------- --------------------- ----------------
<S> <C> <C> <C>
Honolulu Mortgage Common 011 100
Company, Inc.
Stockton Plaza, Inc. Common 003 100
SWD Properties, Inc. Common 004 500
HomeSide Mortgage Common 002 100
Securities, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.26
BMC PLEDGE AGREEMENT
BMC PLEDGE AGREEMENT, dated as of May 31, 1996 (this "BMC
PLEDGE AGREEMENT"), made by HOMESIDE HOLDINGS, INC., a Florida corporation
(formerly named "Barnett Mortgage Company" and renamed "HomeSide Holdings, Inc."
on the Closing Date, the "PLEDGOR"), in favor of CHEMICAL BANK, as
Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT") for the
Lenders parties to the Credit Agreement, dated as of May 31, 1996 (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among (i) HOMESIDE LENDING, INC., a Florida corporation, and HONOLULU MORTGAGE
COMPANY, INC., a Hawaii corporation, as Borrowers (collectively, the
"BORROWERS"), (ii) the several banks and other financial institutions from time
to time parties thereto (collectively, the "LENDERS"), (iii) the Lenders from
time to time designated as Balance Lenders pursuant to subsection 11.8 of the
Credit Agreement (in such capacity, collectively, the "BALANCE LENDERS"), (iv)
NATIONSBANK OF TEXAS, N.A., as Syndication Agent, (v) BANKERS TRUST COMPANY, as
Documentation Agent, (vi) THE FIRST NATIONAL BANK OF BOSTON, as Collateral
Agent, and (vii) the Administrative Agent.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrowers upon the terms and subject to
the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrowers that the Pledgor
guarantee payment and performance of the Borrowers' obligations under the Credit
Agreement and the other Loan Documents;
WHEREAS, in satisfaction of such condition, the Pledgor has
entered into a BMC Guarantee of even date herewith (as amended, supplemented or
otherwise modified from time to time, the "BMC GUARANTEE") for the benefit of
the Administrative Agent and the Lenders; and
WHEREAS, it is a further condition precedent to the obligation
of the Lenders to make their respective Loans to the Borrowers under the Credit
Agreement that the Pledgor shall have executed and delivered this BMC Pledge
Agreement to secure payment and performance of the Pledgor's obligations under
the BMC Guarantee;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the
<PAGE> 2
2
Lenders to make their respective Loans to the Borrowers, the Pledgor hereby
agrees with the Administrative Agent, for the ratable benefit of the Lenders, as
follows:
1. DEFINED TERMS. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
(b) The following terms shall have the following meanings:
"AGREEMENT": this BMC Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"CODE": the Uniform Commercial Code from time to time in
effect in the State of New York.
"COLLATERAL": the Pledged Stock and all Proceeds.
"COLLATERAL ACCOUNT": any account established to hold money
Proceeds, maintained under the sole dominion and control of the Administrative
Agent, subject to withdrawal by the Administrative Agent for the account of the
Lenders only as provided in paragraph .
"ISSUER": the company identified on SCHEDULE 1 attached hereto
as the issuer of the Pledged Stock.
"OBLIGATIONS": as defined in the BMC Guarantee.
"PLEDGED STOCK": the shares of capital stock listed on
SCHEDULE 1 hereto, together with all stock certificates, options or rights of
any nature whatsoever that may be issued or granted by the Issuer to the Pledgor
while this Agreement is in effect.
"PROCEEDS": all "proceeds" as such term is defined in Section
9-306(1) of the Code in effect in the State of New York on the date hereof and,
in any event, shall include, without limitation, all dividends or other income
from the Pledged Stock, collections thereon or distributions with respect
thereto.
"SECURED OBLIGATIONS": the collective reference to (a) the
Obligations and (b) all obligations and liabilities of the Pledgor which may
arise under or in connection with this Agreement or any other Loan Document to
which the Pledgor is a party, whether on account of reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Administrative Agent or to the
<PAGE> 3
3
Lenders that are required to be paid by the Pledgor pursuant to the terms of
this Agreement or any other Loan Document to which the Pledgor is a party).
"Securities Act": the Securities Act of 1933, as amended.
--------------
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Pledgor hereby
delivers to the Administrative Agent, for the ratable benefit of the Lenders,
all the Pledged Stock and hereby grants to the Administrative Agent, for the
ratable benefit of the Lenders, a first priority security interest in the
Collateral, as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Secured Obligations.
3. STOCK POWERS. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power covering such
certificate, duly executed in blank by the Pledgor with, if the Administrative
Agent so requests, signature guaranteed.
4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants that:
(a) The Pledgor has the corporate power and authority and the
legal right to execute and deliver, to perform its obligations under, and to
grant the security interest in the Collateral pursuant to, this Agreement and
has taken all necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the Collateral
pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms, and upon
delivery to the Administrative Agent of the stock certificates evidencing the
Pledged Stock, the security interest created pursuant to this Agreement will
constitute a valid, perfected first priority security interest in the
Collateral, enforceable in accordance with its terms against all creditors of
the Pledgor and any Persons purporting to purchase any Collateral from the
Pledgor, except in each case as enforceability may be affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights
<PAGE> 4
4
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this Agreement
will not violate any provision of any Requirement of Law or Contractual
Obligation of the Pledgor and will not result in the creation or imposition of
any Lien on any of the properties or revenues of the Pledgor pursuant to any
Requirement of Law or Contractual Obligation of the Pledgor, except the security
interest created by this Agreement.
(d) No consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or creditor of
the Pledgor), is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of the
Pledgor, threatened by or against the Pledgor or against any of its properties
or revenues with respect to this Agreement or any of the transactions
contemplated hereby.
(f) The shares of Pledged Stock constitute all the issued and
outstanding shares of all classes of the capital stock of the Issuer.
(g) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(h) The Pledgor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock, free of any and all Liens or
options in favor of, or claims of, any other Person, except the security
interest created by this Agreement, other than the Liens under the Second Lien
Pledge Agreements to which the Pledgor is a party as in effect on the Closing
Date.
5. COVENANTS. The Pledgor covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement is terminated and the security interests created
hereby are released:
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights, whether in addition to, in substitution of, as a conversion of, or in
exchange for, any shares of the Pledged Stock, or otherwise in respect thereof,
the Pledgor shall accept the same as the agent of the Administrative Agent and
the Lenders, hold
<PAGE> 5
5
the same in trust for the Administrative Agent and the Lenders and deliver the
same forthwith to the Administrative Agent in the exact form received, duly
indorsed by the Pledgor to the Administrative Agent, if required, together with
an undated stock power covering such certificate duly executed in blank by the
Pledgor and with, if the Administrative Agent so requests, signature guaranteed,
to be held by the Administrative Agent, subject to the terms hereof, as
additional collateral security for the Secured Obligations. Any sums paid upon
or in respect of the Pledged Stock upon the liquidation or dissolution of the
Issuer shall be paid over to the Administrative Agent to be held by it hereunder
as additional collateral security for the Secured Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged Stock or
any property shall be distributed upon or with respect to the Pledged Stock
pursuant to the recapitalization or reclassification of the capital of the
Issuer or pursuant to the reorganization thereof, the property so distributed
shall be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Secured Obligations. If any sums of money
or property so paid or distributed in respect of the Pledged Stock shall be
received by the Pledgor, the Pledgor shall, until such money or property is paid
or delivered to the Administrative Agent, hold such money or property in trust
for the Lenders, segregated from other funds of the Pledgor, as additional
collateral security for the Secured Obligations.
(b) Without the prior written consent of the Administrative
Agent, the Pledgor will not (1) vote to enable, or take any other action to
permit, the Issuer to issue any stock or other equity securities of any nature
or to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any nature of
the Issuer, (2) sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Collateral, (3) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Collateral, or any interest therein, except for the security
interests created by this Agreement and the other Security Documents or (4)
enter into any agreement or undertaking restricting the right or ability of the
Pledgor or the Administrative Agent to sell, assign or transfer any of the
Collateral.
(c) The Pledgor shall maintain the security interest created
by this Agreement as a first priority, perfected security interest and shall
defend such security interest against claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Administrative Agent may reasonably request for
the purposes of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note, other instrument or chattel paper, such note, instrument or
chattel paper shall be immediately delivered to the Administrative Agent, duly
endorsed in a manner satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Agreement.
<PAGE> 6
6
(d) The Pledgor shall pay, and save the Administrative Agent
and the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
6. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default
shall have occurred and be continuing and the Administrative Agent shall have
given notice to the Pledgor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 7, the Pledgor shall be permitted to
receive all cash dividends paid in the normal course of business of the Issuer
and consistent with past practice in respect of the Pledged Stock and to
exercise all voting and corporate rights with respect to the Pledged Stock;
PROVIDED, HOWEVER, that no vote shall be cast or corporate right exercised or
other action taken which, in the Administrative Agent's reasonable judgment,
would impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Credit Agreement, the Notes, this Agreement or
any other Loan Document.
7. RIGHTS OF THE LENDERS AND THE ADMINISTRATIVE AGENT. (a) All
money Proceeds received by the Administrative Agent hereunder shall be held by
the Administrative Agent for the benefit of the Administrative Agent and the
Lenders in a Collateral Account. All Proceeds while held by the Administrative
Agent in a Collateral Account (or by the Pledgor in trust for the Administrative
Agent and the Lenders) shall continue to be held as collateral security for all
the Secured Obligations and shall not constitute payment thereof until applied
as provided in paragraph 8(a).
(b) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise such rights
to the Pledgor, (1) the Administrative Agent shall have the right to receive any
and all cash dividends paid in respect of the Pledged Stock and make application
thereof to the Secured Obligations in such order as the Administrative Agent may
determine, and (2) all shares of the Pledged Stock shall be registered in the
name of the Administrative Agent or its nominee, and the Administrative Agent or
its nominee may thereafter exercise (A) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock at any meeting of shareholders of
the Issuer or otherwise and (B) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
shares of the Pledged Stock as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any and all of the
Pledged Stock upon the merger, consolidation, reorganization, recapitalization
or other fundamental change in the corporate structure of the Issuer or upon the
exercise by the Pledgor or the Administrative Agent of any right, privilege or
option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the
<PAGE> 7
7
Administrative Agent may determine), all without liability except to account for
property actually received by it, but the Administrative Agent shall have no
duty to the Pledgor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.
8. REMEDIES. (a) If an Event of Default shall have occurred
and be continuing, at any time at the Administrative Agent's election, the
Administrative Agent may apply all or any part of Proceeds held in any
Collateral Account in payment of the Secured Obligations in such order as the
Administrative Agent may elect.
(b) If an Event of Default shall occur and be continuing, the
Administrative Agent, on behalf of the Lenders, may exercise, in addition to all
other rights and remedies granted in this Agreement and in any other instrument
or agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Code. Without limiting the
generality of the foregoing, the Administrative Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Pledgor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give option or options to
purchase or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any exchange, broker's
board or office of the Administrative Agent or any Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Administrative Agent or any Lender shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in the Pledgor, which right
or equity is hereby waived and released. The Administrative Agent shall apply
any Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the exercise of the rights of the
Administrative Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel to the Administrative
Agent, to the payment in whole or in part of the Secured Obligations, in such
order as the Administrative Agent may elect, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to the
Pledgor. To the extent permitted by applicable law, the Pledgor waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder. If any
notice
<PAGE> 8
8
of a proposed sale or other disposition of Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition.
(c) The Pledgor waives and agrees not to assert any rights or
privileges which it may acquire under Section 9-112 of the Code. The Pledgor
shall remain liable for any deficiency if the proceeds of any sale or other
disposition of Collateral are insufficient to pay the Secured Obligations and
the fees and disbursements of any attorneys employed by the Administrative Agent
or any Lender to collect such deficiency.
9. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the
Administrative Agent shall determine to exercise its right to sell any or all of
the Pledged Stock pursuant to paragraph 8(b), and if in the sole determination
of the Administrative Agent it is necessary or advisable to have the Pledged
Stock, or that portion thereof to be sold, registered under the provisions of
the Securities Act, the Pledgor will cause the Issuer to (1) execute and
deliver, and cause the directors and officers of the Issuer to execute and
deliver, all such instruments and documents, and do or cause to be done all such
other acts as may be, in the opinion of the Administrative Agent, necessary or
advisable to register the Pledged Stock, or that portion thereof to be sold,
under the provisions of the Securities Act, (2) to use its best efforts to cause
the registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (3) to make all
amendments thereto and/or to the related prospectus that are permitted by law
which, in the opinion of the Administrative Agent, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. The
Pledgor agrees to cause the Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of the Securities
Act.
(b) The Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer to register such
securities
<PAGE> 9
9
for public sale under the Securities Act, or under applicable state securities
laws, even if the Issuer would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this Section valid
and binding and in compliance with any and all other applicable Requirements of
Law. The Pledgor further agrees that a breach of any of the covenants contained
in this Section will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section shall be specifically enforceable
against the Pledgor, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred under the Credit Agreement.
10. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. The
Pledgor hereby authorizes and instructs the Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and (b) is otherwise in accordance
with the terms of this Agreement, without any other or further instructions from
the Pledgor, and the Pledgor agrees that the Issuer shall be fully protected in
so complying.
11. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) The Pledgor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent of the Administrative Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Pledgor and in the name of the
Pledgor or in the Administrative Agent's own name, from time to time in the
Administrative Agent's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all necessary and appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, including, without
limitation, any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
paragraph 11(a). All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are released.
12. DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same
<PAGE> 10
10
manner as the Administrative Agent deals with similar securities and property
for its own account, except that the Administrative Agent shall have no
obligation to invest funds held in any Collateral Account and may hold the same
as demand deposits. Neither the Administrative Agent, any Lender nor any of
their respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.
13. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Administrative Agent to file
financing statements with respect to the Collateral without the signature of the
Pledgor in such form and in such filing offices as the Administrative Agent
reasonably determines appropriate to perfect the security interests of the
Administrative Agent for the benefit of the Lenders under this Agreement. A
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement for filing in any jurisdiction.
14. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Pledgor, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and neither the Pledgor
nor the Issuer shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
15. NOTICES. All notices, requests and demands to or upon the
Administrative Agent or the Pledgor to be effective shall be in writing (or by
telex, fax or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (a) when delivered by hand or (b) if
given by mail, when deposited in the mails by certified mail, return receipt
requested, or (c) if by telex, fax or similar electronic transfer, when sent and
receipt has been confirmed, addressed as follows:
(1) if to the Administrative Agent, at its address or
transmission number for notices provided in subsection 11.2 of the Credit
Agreement; and
(2) if to the Pledgor, at its address or transmission number
for notices set forth under its signature below and to:
<PAGE> 11
11
James Westra, Esq.
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Fax: 617-951-1295.
The Administrative Agent and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided in this
Section.
16. 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.
17. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a)
None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and the Administrative Agent, PROVIDED that any provision of this
Agreement may be waived by the Administrative Agent and the Lenders in a letter
or agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph 17(a)), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default 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 Administrative Agent or any 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 Administrative Agent or any 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 Administrative Agent or such Lender would
otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
18. SECTION HEADINGS. The section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
<PAGE> 12
12
19. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns of the Pledgor and shall inure to the benefit of
the Administrative Agent and the Lenders and their successors and assigns.
20. GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
<PAGE> 13
13
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
HOMESIDE HOLDINGS, INC.
By:
-------------------------------------
Title:
----------------------------------
<PAGE> 14
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
BMC Pledge Agreement, dated May 31, 1996, made by HomeSide Holdings, Inc. for
the benefit of the Administrative Agent and the Lenders (the "BMC PLEDGE
AGREEMENT"). The undersigned agrees for the benefit of the Administrative Agent
and the Lenders as follows:
1. The undersigned will be bound by the terms of the BMC
Pledge Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.
2. The undersigned will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in
paragraph 5(a) of the BMC Pledge Agreement.
3. The terms of paragraph 9(c) of the BMC Pledge Agreement
shall apply to it, MUTATIS MUTANDIS, with respect to all actions that may be
required of it under or pursuant to or arising out of Section 9 of the BMC
Pledge Agreement.
HOMESIDE LENDING, INC.
By /s/ Joe K. Pickett
-------------------------------------
Title
-----------------------------------
Address for Notices:
----------------------------------------
----------------------------------------
Telex:
----------------------------------
Fax:
------------------------------------
<PAGE> 15
SCHEDULE 1
TO BMC PLEDGE AGREEMENT
<TABLE>
DESCRIPTION OF PLEDGED STOCK
<CAPTION>
Issuer Class of Stock Stock Certificate No. Number of Shares
------ -------------- --------------------- ----------------
<S> <C> <C> <C>
HomeSide Lending, Common 002 100
Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.28
HOLDINGS GUARANTEE
HOLDINGS GUARANTEE, dated as of May 31, 1996 (this
"GUARANTEE"), made by HOMESIDE, INC., a Delaware corporation (the "GUARANTOR"),
in favor of CHEMICAL BANK, as Administrative Agent (in such capacity, the
"ADMINISTRATIVE AGENT") for the lenders (the "LENDERS") parties to the Credit
Agreement, dated as of May 31, 1996 (as amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"), among HOMESIDE LENDING,
INC. ("HOMESIDE") and HONOLULU MORTGAGE COMPANY, INC. ("HONOMO"), as Borrowers
(collectively, the "BORROWERS"), the Lenders, NATIONSBANK OF TEXAS, N.A., as
Syndication Agent, BANKERS TRUST COMPANY, as Documentation Agent, THE FIRST
NATIONAL BANK OF BOSTON, as Collateral Agent, and the Administrative Agent.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrowers upon the terms and subject to
the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrowers under the Credit
Agreement that the Guarantor shall have executed and delivered this Guarantee to
the Administrative Agent for the ratable benefit of the Lenders; and
WHEREAS, HonoMo is a wholly owned subsidiary of HomeSide;
HomeSide is the wholly owned subsidiary of HomeSide Holdings, Inc., which in
turn is a wholly owned subsidiary of the Guarantor; and it is to the advantage
of the Guarantor that the Lenders make the Loans to the Borrower;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective Loans to the Borrowers under the
Credit Agreement, the Guarantor hereby agrees with the Administrative Agent, for
the ratable benefit of the Lenders, as follows:
1. DEFINED TERMS. (a) Unless otherwise defined herein, capitalized terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
(b) As used herein, "OBLIGATIONS" means, collectively, the
unpaid principal of and interest on the Loans and all other obligations and
liabilities of the Borrowers to the
<PAGE> 2
2
Administrative Agent, the Collateral Agent and the Lenders (including, without
limitation, interest accruing at the then applicable rate provided in the Credit
Agreement after the maturity of the Loans and interest accruing at the then
applicable rate provided in the Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to either Borrower whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, the Notes, the other Loan Documents or any other
document made, delivered or given in connection therewith, in each case whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by the Borrowers or the Guarantor pursuant to the terms of
the Credit Agreement or this Guarantee or any other Loan Document).
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this Guarantee as a
whole and not to any particular provision of this Guarantee, and section and
paragraph references are to this Guarantee unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. GUARANTEE. (a) The Guarantor hereby unconditionally and
irrevocably guarantees to the Administrative Agent, for the ratable benefit of
the Lenders and their respective successors, indorsees, transferees and assigns,
the prompt and complete payment and performance by the Borrowers when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations.
(b) The Guarantor further agrees to pay any and all reasonable
expenses (including, without limitation, all fees and disbursements of counsel)
which may be paid or incurred by the Administrative Agent or any Lender in
enforcing, or obtaining advice of counsel in respect of, any rights with respect
to, or collecting, any or all of the Obligations and/or enforcing any rights
with respect to, or collecting against, the Guarantor under this Guarantee. This
Guarantee shall remain in full force and effect until the Obligations are paid
in full and the Commitments are terminated, notwithstanding that from time to
time prior thereto the Borrowers may be free from any Obligations.
3. RIGHT OF SET-OFF. The Administrative Agent, the Collateral
Agent and each Lender is hereby irrevocably authorized at any time and from time
to time without notice to the Guarantor, any such notice being expressly waived
by the Guarantor, upon any amount of the Obligations becoming due and payable
(whether at stated maturity, by acceleration or
<PAGE> 3
3
otherwise), to set off and appropriate and apply any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by the Administrative Agent, the Collateral Agent or such Lender
to or for the credit or the account of the Guarantor, or any part thereof in
such amounts as the Administrative Agent, the Collateral Agent or such Lender
may elect, against or on account of the obligations and liabilities of the
Guarantor to the Administrative Agent, the Collateral Agent or such Lender
hereunder and claims of every nature and description of the Administrative Agent
or such Lender against the Guarantor, in any currency, whether arising
hereunder, under the Credit Agreement, any Note, any other Loan Document or
otherwise, as the Administrative Agent, the Collateral Agent or such Lender may
elect, whether or not the Administrative Agent, the Collateral Agent or such
Lender has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Administrative Agent,
the Collateral Agent and each Lender shall notify the Guarantor promptly of any
such set-off and the application made by the Administrative Agent, the
Collateral Agent or such Lender, as the case may be, of the proceeds thereof;
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Administrative Agent, the
Collateral Agent and each Lender under this paragraph are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Administrative Agent or such Lender may have.
4. NO SUBROGATION. Notwithstanding any payment or payments
made by the Guarantor hereunder, or any set-off or application of funds of the
Guarantor by the Administrative Agent or any Lender, the Guarantor shall not be
entitled to exercise any rights to be subrogated to any of the rights of the
Administrative Agent or any Lender against the Borrowers or any other Guarantor
or against any collateral security or guarantee or right of offset held by the
Administrative Agent or any Lender for the payment of the Obligations, nor shall
the Guarantor seek or be entitled to seek any contribution or reimbursement from
the Borrowers or any other Loan Party in respect of payments made by the
Guarantor hereunder, until all amounts owing to the Administrative Agent and the
Lenders by the Borrowers on account of the Obligations are paid in full and the
Commitments are terminated. If any amount shall be paid to the Guarantor on
account of such subrogation rights at any time when all of the Obligations shall
not have been paid in full, such amount shall be held by the Guarantor in trust
for the Administrative Agent and the Lenders, segregated from other funds of the
Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to
the Administrative Agent in the exact form received by the Guarantor (duly
indorsed by the Guarantor to the Administrative Agent, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as
the Administrative Agent may determine.
5. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF
RIGHTS. The Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of
<PAGE> 4
4
rights against the Guarantor, and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made by the
Administrative Agent or any Lender may be rescinded by the Administrative Agent
or such Lender, and any of the Obligations continued, and the Obligations, or
the liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and the Credit Agreement, any Notes, and the other Loan
Documents and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the Administrative Agent (or the Required Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any Lender for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Obligations or for this Guarantee or any property subject
thereto. When making any demand hereunder against the Guarantor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on the Borrowers or any other guarantor, and any failure
by the Administrative Agent or any Lender to make any such demand or to collect
any payments from the Borrowers or any such other guarantor or any release of
the Borrowers or such other guarantor shall not relieve the Guarantor of its
obligations or liabilities hereunder, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of the Administrative
Agent or any Lender against the Guarantor. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
6. GUARANTEE ABSOLUTE AND UNCONDITIONAL. The Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon this Guarantee or acceptance of this Guarantee; the Obligations,
and any of them, shall conclusively be deemed to have been created, contracted
or incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee; and all dealings between the Borrowers or the Guarantor, on the one
hand, and the Administrative Agent and the Lenders, on the other, shall likewise
be conclusively presumed to have been had or consummated in reliance upon this
Guarantee. The Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Borrowers or the
Guarantor with respect to the Obligations. This Guarantee shall be construed as
a continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Credit Agreement, any
Note, or any other Loan Document, any of the Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Administrative Agent or any Lender, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrowers or any other Loan Party against the Administrative Agent or any
<PAGE> 5
5
Lender, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of the Borrowers or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrowers for
the Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in
any other instance. When pursuing its rights and remedies hereunder against the
Guarantor, the Administrative Agent and any Lender may, but shall be under no
obligation to, pursue such rights and remedies as it may have against the
Borrowers or any other Person or against any collateral security or guarantee
for the Obligations or any right of offset with respect thereto, and any failure
by the Administrative Agent or any Lender to pursue such other rights or
remedies or to collect any payments from the Borrowers or any such other Person
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Borrowers or any such other Person
or of any such collateral security, guarantee or right of offset, shall not
relieve the Guarantor of any liability hereunder, and shall not impair or affect
the rights and remedies, whether express, implied or available as a matter of
law, of the Administrative Agent or any Lender against the Guarantor. This
Guarantee shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Guarantor and its successors and
assigns, and shall inure to the benefit of the Administrative Agent and the
Lenders, and their respective successors, indorsees, transferees and assigns,
until all the Obligations and the obligations of the Guarantor under this
Guarantee shall have been satisfied by payment in full and the Commitments shall
be terminated, notwithstanding that from time to time during the term of the
Credit Agreement the Borrowers may be free from any Obligations.
7. REINSTATEMENT. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of either
Borrower or any other Loan Party or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for,
either Borrower, any other Loan Party or any substantial part of its property,
or otherwise, all as though such payments had not been made.
8. PAYMENTS. The Guarantor hereby agrees that the Obligations
will be paid to the Administrative Agent without set-off or counterclaim in U.S.
Dollars at the office of the Administrative Agent located at 270 Park Avenue,
New York, New York 10017.
9. REPRESENTATIONS AND WARRANTIES. The Guarantor represents
and warrants to the Administrative Agent and the Lenders that:
(a) the Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority and the legal right to
own and operate its property, to lease the property it operates and to conduct
the business in which it is currently engaged;
<PAGE> 6
6
(b) the Guarantor has the corporate power and authority and
the legal right to execute and deliver, and to perform its obligations under,
this Guarantee, and has taken all necessary corporate action to authorize its
execution, delivery and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the enforcement of
creditors' rights generally, general equitable principles and an implied
covenant of good faith and fair dealing;
(d) the execution, delivery and performance of this Guarantee
will not violate any provision of any Requirement of Law or Contractual
Obligation of the Guarantor and will not result in or require the creation or
imposition of any Lien on any of the properties or revenues of the Guarantor
pursuant to any Requirement of Law or Contractual Obligation of the Guarantor;
(e) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or creditor of
the Guarantor) is required in connection with the execution, delivery,
performance, validity or enforceability of this Guarantee; and
(f) no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of its
properties or revenues (i) with respect to this Guarantee or any of the
transactions contemplated hereby or (ii) which has any reasonable likelihood of
having a material adverse effect on the business, operations, property or
financial or other condition of the Guarantor.
The Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by the Guarantor on the date of
each borrowing by a Borrower under the Credit Agreement on and as of such date
of borrowing as though made hereunder on and as of such date.
10. COVENANTS. The Guarantor hereby covenants and agrees with
the Administrative Agent and the Lenders that, from and after the date of this
Guarantee until the Obligations are paid in full and the Commitments are
terminated:
(a) The Guarantor shall take, or shall refrain from taking, as
the case may be, all actions that are necessary to be taken or not taken so that
no violation of any provision, covenant or agreement contained in Section 7 or 8
of the Credit Agreement, and so that no Default or Event of Default, is caused
by any act or failure to act of the Guarantor.
<PAGE> 7
7
(b) The Guarantor shall not incur any Indebtedness or
Guarantee Obligations, or make any investments, loans or advances to any Person,
or conduct, transact or otherwise engage, or commit to transact, conduct or
otherwise engage, in any business or operations other than (i) the ownership of
the capital stock of HomeSide Holdings, Inc. and the exercise of rights and
performance of obligations in connection therewith, (ii) Indebtedness under the
Holdings Notes (including the obligations thereunder to pay make-whole or
prepayment premiums), (iii) the entry into, and exercise of rights and
performance of obligations in respect of this Guarantee, the Holdings Pledge
Agreement, the Second Lien Pledge Agreement to which it is a party, equity
subscription agreements, registration rights agreements, voting and other
stockholder agreements, engagement letters, underwriting agreements and other
agreements in respect of its equity securities or any offering, issuance or sale
thereof, (iv) the offering, issuance and sale of its equity securities to the
extent such offering, issuance or sale does not constitute a Change of Control
or would be otherwise inconsistent with the provisions of the Credit Agreement,
(v) the entry into, and exercise of rights and performance of obligations in
respect of indentures, engagement letters, underwriting agreements and other
agreements in respect of Indebtedness permitted under clause (ii) above or any
offering, issuance or sale thereof, and the offering, issuance and sale of its
debt securities representing such Indebtedness, (vi) the filing of registration
statements, and compliance with applicable reporting and other obligations,
under federal, state or other securities laws, (vii) the listing of its equity
securities and compliance with applicable reporting and other obligations in
connection therewith, (viii) the retention of transfer agents, private placement
agents, underwriters, counsel, accountants and other advisors and consultants,
(ix) the performance of obligations under in and compliance with its certificate
of incorporation and by-laws, or any applicable law, ordinance, regulation,
rule, order, judgment, decree or permit, including, without limitation, as a
result of or in connection with the activities of the Borrowers, (x) the
incurrence and payment of any taxes for which it may be liable and (xi) other
activities directly related to the foregoing.
(c) The Guarantor shall not amend, modify or change, or
consent or agree to any amendment, modification or change to any of the terms of
(i) the Holdings Notes or the Indenture related thereto (other than any such
amendment, modification or change which would extend the maturity or reduce the
amount of any payment of principal thereof or which would reduce the rate or
extend the date for payment of interest thereon or which would result in terms
and conditions thereof that are no less favorable to Holdings or the Borrower or
to the interests of the Lenders than the terms and conditions thereof in effect
immediately prior to giving effect to such amendment, modification or change) or
(ii) any of the material terms of the BBMC Stock Purchase Agreement, the BMC
Stock Purchase Agreement or the Stockholder Agreement, in each case as in effect
on the Closing Date.
11. AUTHORITY OF ADMINISTRATIVE AGENT. The Guarantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Guarantee with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the
<PAGE> 8
8
Administrative Agent of any option, right, request, judgment or other right or
remedy provided for herein or resulting or arising out of this Guarantee shall,
as between the Administrative Agent and the Lenders, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Administrative Agent and the
Guarantor, the Administrative Agent shall be conclusively presumed to be acting
as agent for the Lenders with full and valid authority so to act or refrain from
acting, and the Guarantor shall not be under any obligation, or entitlement, to
make any inquiry respecting such authority.
12. NOTICES. All notices, requests and demands to or upon the
Administrative Agent, any Lender or the Guarantor to be effective shall be in
writing (or by telex, fax or similar electronic transfer confirmed in writing)
and shall be deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by certified mail, return
receipt requested, or (iii) if by telex, fax or similar electronic transfer,
when sent and receipt has been confirmed, addressed as follows:
(a) if to the Administrative Agent or any Lender, at its
address or transmission number for notices provided in subsection 11.2 of the
Credit Agreement; and
(b) if to the Guarantor, at its address or transmission number
for notices set forth under its signature below.
The Administrative Agent, each Lender and the Guarantor may
change its address and transmission numbers for notices by notice in the manner
provided in this Section.
13. SEVERABILITY. Any provision of this Guarantee 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.
14. INTEGRATION. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter hereof and there
are no promises or representations by the Administrative Agent or any Lender
relative to the subject matter hereof not reflected herein.
15. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a)
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Guarantor and the Administrative Agent, PROVIDED that any provision of this
Guarantee may be waived by the Administrative Agent and the Lenders in a letter
or agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent.
<PAGE> 9
9
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph 15(a)), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default 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 Administrative Agent or any 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 Administrative Agent or any 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 Administrative Agent or such Lender would
otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
16. SECTION HEADINGS. The section headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
17. SUCCESSORS AND ASSIGNS. This Guarantee shall be binding
upon the successors and assigns of the Guarantor and shall inure to the benefit
of the Administrative Agent and the Lenders and their successors and assigns.
18. GOVERNING LAW. THIS GUARANTEE AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
19. SUBMISSION TO JURISDICTION; WAIVERS. The Guarantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guarantee and any other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
<PAGE> 10
10
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Guarantor at its address set forth under its signature
below or at such other address of which the Administrative Agent shall
have been notified pursuant hereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
20. WAIVERS OF JURY TRIAL. THE GUARANTOR AND, BY ACCEPTANCE
HEREOF, THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT AND THE LENDERS, HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTEE OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
<PAGE> 11
11
IN WITNESS WHEREOF, the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
HOMESIDE, INC.
By: /s/ Joe K. Pickett
------------------------------------
Title:
----------------------------------
Address for Notices:
HomeSide, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
Attention: Robert J. Jacobs, Esq.
Fax: 904-281-3513
<PAGE> 1
EXHIBIT 10.29
HOMESIDE GUARANTEE
HOMESIDE GUARANTEE, dated as of May 31, 1996 (this "HOMESIDE
GUARANTEE"), made by HOMESIDE LENDING, INC., a Florida corporation (the
"GUARANTOR"), in favor of CHEMICAL BANK, as Administrative Agent (in such
capacity, the "ADMINISTRATIVE AGENT") for the lenders (the "LENDERS") parties to
the Credit Agreement, dated as of May 31, 1996 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among the
Guarantor and HONOLULU MORTGAGE COMPANY, INC. ("HONOMO") as Borrowers
(collectively, the "BORROWERS"), the Lenders, NATIONSBANK OF TEXAS, N.A., as
Syndication Agent, BANKERS TRUST COMPANY, as Documentation Agent, THE FIRST
NATIONAL BANK OF BOSTON, as Collateral Agent, and the Administrative Agent.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrowers upon the terms and subject to
the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrowers under the Credit
Agreement that the Guarantor shall have executed and delivered this HomeSide
Guarantee to the Administrative Agent for the ratable benefit of the Lenders,
pursuant to which the Guarantor will guarantee all obligations and liabilities
of HonoMo under the Loan Documents; and
WHEREAS, HonoMo is a wholly-owned subsidiary of the Guarantor,
and it is to the advantage of the Guarantor that the Lenders make the Loans to
HonoMo;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective Loans to HonoMo under the Credit
Agreement, the Guarantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:
1. DEFINED TERMS. (a) Unless otherwise defined herein, capitalized terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
(b) As used herein, "OBLIGATIONS" means, collectively, the
unpaid principal of and interest on the Loans and all other obligations and
liabilities of HonoMo to the
<PAGE> 2
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Administrative Agent, the Collateral Agent and the Lenders (including, without
limitation, interest accruing at the then applicable rate provided in the Credit
Agreement after the maturity of the Loans and interest accruing at the then
applicable rate provided in the Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to either Borrower whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, the Notes, the other Loan Documents or any other
document made, delivered or given in connection therewith, in each case whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by HonoMo or the Guarantor pursuant to the terms of the
Credit Agreement or this HomeSide Guarantee or any other Loan Document).
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this HomeSide Guarantee shall refer to this HomeSide
Guarantee as a whole and not to any particular provision of this HomeSide
Guarantee, and section and paragraph references are to this HomeSide Guarantee
unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. GUARANTEE. (a) The Guarantor hereby unconditionally and
irrevocably guarantees to the Administrative Agent, for the ratable benefit of
the Lenders and their respective successors, indorsees, transferees and assigns,
the prompt and complete payment and performance by HonoMo when due (whether at
the stated maturity, by acceleration or otherwise) of the Obligations.
(b) The Guarantor further agrees to pay any and all reasonable
expenses (including, without limitation, all fees and disbursements of counsel)
which may be paid or incurred by the Administrative Agent or any Lender in
enforcing, or obtaining advice of counsel in respect of, any rights with respect
to, or collecting, any or all of the Obligations and/or enforcing any rights
with respect to, or collecting against, the Guarantor under this HomeSide
Guarantee. This HomeSide Guarantee shall remain in full force and effect until
the Obligations are paid in full and the Commitments are terminated,
notwithstanding that from time to time prior thereto HonoMo may be free from any
Obligations.
3. RIGHT OF SET-OFF. The Administrative Agent, the Collateral
Agent and each Lender is hereby irrevocably authorized at any time and from time
to time without notice to the Guarantor, any such notice being expressly waived
by the Guarantor, upon any amount of the Obligations becoming due and payable
(whether at stated maturity, by acceleration or
<PAGE> 3
3
otherwise), to set off and appropriate and apply any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by the Administrative Agent, the Collateral Agent or such Lender
to or for the credit or the account of the Guarantor, or any part thereof in
such amounts as the Administrative Agent, the Collateral Agent or such Lender
may elect, against or on account of the obligations and liabilities of the
Guarantor to the Administrative Agent, the Collateral Agent or such Lender
hereunder and claims of every nature and description of the Administrative Agent
or such Lender against the Guarantor, in any currency, whether arising
hereunder, under the Credit Agreement, any Note, any other Loan Document or
otherwise, as the Administrative Agent, the Collateral Agent or such Lender may
elect, whether or not the Administrative Agent, the Collateral Agent or such
Lender has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Administrative Agent,
the Collateral Agent and each Lender shall notify the Guarantor promptly of any
such set-off and the application made by the Administrative Agent, the
Collateral Agent or such Lender, as the case may be, of the proceeds thereof;
PROVIDED that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Administrative Agent, the
Collateral Agent and each Lender under this paragraph are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Administrative Agent or such Lender may have.
4. NO SUBROGATION. Notwithstanding any payment or payments
made by the Guarantor hereunder, or any set-off or application of funds of the
Guarantor by the Administrative Agent or any Lender, the Guarantor shall not be
entitled to exercise any rights to be subrogated to any of the rights of the
Administrative Agent or any Lender against HonoMo or any other Guarantor or
against any collateral security or guarantee or right of offset held by the
Administrative Agent or any Lender for the payment of the Obligations, nor shall
the Guarantor seek or be entitled to seek any contribution or reimbursement from
HonoMo or any other Loan Party in respect of payments made by the Guarantor
hereunder, until all amounts owing to the Administrative Agent and the Lenders
by HonoMo on account of the Obligations are paid in full and the Commitments are
terminated. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by the Guarantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of the
Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to
the Administrative Agent in the exact form received by the Guarantor (duly
indorsed by the Guarantor to the Administrative Agent, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as
the Administrative Agent may determine.
5. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF
RIGHTS. The Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of
<PAGE> 4
4
rights against the Guarantor, and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made by the
Administrative Agent or any Lender may be rescinded by the Administrative Agent
or such Lender, and any of the Obligations continued, and the Obligations, or
the liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and the Credit Agreement, any Notes, and the other Loan
Documents and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the Administrative Agent (or the Required Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any Lender for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Obligations or for this HomeSide Guarantee or any property
subject thereto. When making any demand hereunder against the Guarantor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on HonoMo or any other guarantor, and any failure by the
Administrative Agent or any Lender to make any such demand or to collect any
payments from HonoMo or any such other guarantor or any release of HonoMo or
such other guarantor shall not relieve the Guarantor of its obligations or
liabilities hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Administrative Agent or any
Lender against the Guarantor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
6. GUARANTEE ABSOLUTE AND UNCONDITIONAL. The Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon this HomeSide Guarantee or acceptance of this HomeSide
Guarantee; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this HomeSide Guarantee; and all dealings between
HonoMo or the Guarantor, on the one hand, and the Administrative Agent and the
Lenders, on the other, shall likewise be conclusively presumed to have been had
or consummated in reliance upon this HomeSide Guarantee. The Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon HonoMo or the Guarantor with respect to the Obligations.
This HomeSide Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Credit Agreement, any Note, or any other
Loan Document, any of the Obligations or any other collateral security therefor
or guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent or any Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by HonoMo or any other Loan Party against
the
<PAGE> 5
5
Administrative Agent or any Lender, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of HonoMo or the Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of HonoMo for the Obligations, or of the Guarantor under this HomeSide
Guarantee, in bankruptcy or in any other instance. When pursuing its rights and
remedies hereunder against the Guarantor, the Administrative Agent and any
Lender may, but shall be under no obligation to, pursue such rights and remedies
as it may have against HonoMo or any other Person or against any collateral
security or guarantee for the Obligations or any right of offset with respect
thereto, and any failure by the Administrative Agent or any Lender to pursue
such other rights or remedies or to collect any payments from HonoMo or any such
other Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of HonoMo or any such other
Person or of any such collateral security, guarantee or right of offset, shall
not relieve the Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against the Guarantor.
This HomeSide Guarantee shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon the Guarantor and its
successors and assigns thereof, and shall inure to the benefit of the
Administrative Agent and the Lenders, and their respective successors,
indorsees, transferees and assigns, until all the Obligations and the
obligations of the Guarantor under this HomeSide Guarantee shall have been
satisfied by payment in full and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement
HonoMo may be free from any Obligations.
7. REINSTATEMENT. This HomeSide Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of either
Borrower or any other Loan Party or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for,
either Borrower or any other Loan Party or any substantial part of its property,
or otherwise, all as though such payments had not been made.
8. PAYMENTS. The Guarantor hereby agrees that the Obligations
will be paid to the Administrative Agent without set-off or counterclaim in U.S.
Dollars at the office of the Administrative Agent located at 270 Park Avenue,
New York, New York 10017.
9. REPRESENTATIONS AND WARRANTIES. The Guarantor represents
and warrants to the Administrative Agent and the Lenders that:
(a) the Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and
<PAGE> 6
6
authority and the legal right to own and operate its property, to lease the
property it operates and to conduct the business in which it is currently
engaged;
(b) the Guarantor has the corporate power and authority and
the legal right to execute and deliver, and to perform its obligations under,
this HomeSide Guarantee, and has taken all necessary corporate action to
authorize its execution, delivery and performance of this HomeSide Guarantee;
(c) this HomeSide Guarantee constitutes a legal, valid and
binding obligation of the Guarantor enforceable in accordance with its terms,
except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting the
enforcement of creditors' rights generally, general equitable principles and an
implied covenant of good faith and fair dealing;
(d) the execution, delivery and performance of this HomeSide
Guarantee will not violate any provision of any Requirement of Law or
Contractual Obligation of the Guarantor and will not result in or require the
creation or imposition of any Lien on any of the properties or revenues of the
Guarantor pursuant to any Requirement of Law or Contractual Obligation of the
Guarantor;
(e) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or creditor of
the Guarantor) is required in connection with the execution, delivery,
performance, validity or enforceability of this HomeSide Guarantee; and
(f) no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of its
properties or revenues (i) with respect to this HomeSide Guarantee or any of the
transactions contemplated hereby or (ii) which has any reasonable likelihood of
having a material adverse effect on the business, operations, property or
financial or other condition of the Guarantor.
The Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by the Guarantor on the date of
each borrowing by a Borrower under the Credit Agreement on and as of such date
of borrowing as though made hereunder on and as of such date.
10. AUTHORITY OF ADMINISTRATIVE AGENT. The Guarantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this HomeSide Guarantee with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the Administrative Agent
of any option, right, request, judgment or other right or remedy
<PAGE> 7
7
provided for herein or resulting or arising out of this HomeSide Guarantee
shall, as between the Administrative Agent and the Lenders, be governed by the
Credit Agreement and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Administrative Agent and the
Guarantor, the Administrative Agent shall be conclusively presumed to be acting
as agent for the Lenders with full and valid authority so to act or refrain from
acting, and the Guarantor shall not be under any obligation, or entitlement, to
make any inquiry respecting such authority.
11. NOTICES. All notices, requests and demands to or upon the
Administrative Agent, any Lender or the Guarantor to be effective shall be in
writing (or by telex, fax or similar electronic transfer confirmed in writing)
and shall be deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by certified mail, return
receipt requested, or (iii) if by telex, fax or similar electronic transfer,
when sent and receipt has been confirmed, addressed to such Person at its
address or transmission number for notices provided in subsection 11.2 of the
Credit Agreement.
The Administrative Agent, each Lender and the Guarantor may
change its address and transmission numbers for notices by notice in the manner
provided in this Section.
12. SEVERABILITY. Any provision of this HomeSide Guarantee
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.
13. INTEGRATION. This HomeSide Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter hereof and there
are no promises or representations by the Administrative Agent or any Lender
relative to the subject matter hereof not reflected herein.
14. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a)
None of the terms or provisions of this HomeSide Guarantee may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Guarantor and the Administrative Agent, PROVIDED that any
provision of this HomeSide Guarantee may be waived by the Administrative Agent
and the Lenders in a letter or agreement executed by the Administrative Agent or
by telex or facsimile transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph 14(a)), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default 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 Administrative Agent or any Lender,
<PAGE> 8
8
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 Administrative Agent or any 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 Administrative Agent or such Lender would
otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
15. SECTION HEADINGS. The section headings used in this
HomeSide Guarantee are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
16. SUCCESSORS AND ASSIGNS. This HomeSide Guarantee shall be
binding upon the successors and assigns of the Guarantor and shall inure to the
benefit of the Administrative Agent and the Lenders and their successors and
assigns.
17. GOVERNING LAW. THIS HOMESIDE GUARANTEE AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE> 9
9
IN WITNESS WHEREOF, the undersigned has caused this HomeSide
Guarantee to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
HOMESIDE LENDING, INC.
By: /s/ Joe K. Pickett
------------------------------------
Title:
----------------------------------
Address for Notices:
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
Attention: Joe K. Pickett
Fax: 904-281-3745
<PAGE> 1
EXHIBIT 10.30
SUBSIDIARIES GUARANTEE
SUBSIDIARIES GUARANTEE, dated as of May 31, 1996 (this
"GUARANTEE"), made by each of the corporations that are signatories hereto (the
"GUARANTORS"), in favor of CHEMICAL BANK, as Administrative Agent (in such
capacity, the "ADMINISTRATIVE AGENT") for the lenders (the "LENDERS") parties to
the Credit Agreement, dated as of May 31, 1996 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among HOMESIDE
LENDING, INC. ("HOMESIDE") and HONOLULU MORTGAGE COMPANY, INC. ("HONOMO"), as
Borrowers (collectively, the "BORROWERS"), the Lenders, NATIONSBANK OF TEXAS,
N.A., as Syndication Agent, BANKERS TRUST COMPANY, as Documentation Agent, THE
FIRST NATIONAL BANK OF BOSTON, as Collateral Agent, and the Administrative
Agent.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrowers upon the terms and subject to
the conditions set forth therein;
WHEREAS, HomeSide owns directly or indirectly all of the
issued and outstanding stock of each Guarantor;
WHEREAS, the Borrowers and the Guarantors are engaged in
related businesses, and each Guarantor will derive substantial direct and
indirect benefit from the making of the Loans; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrowers under the Credit
Agreement that the Guarantors shall have executed and delivered this Guarantee
to the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective Loans to the Borrowers under the
Credit Agreement, the Guarantors hereby agree with the Administrative Agent, for
the ratable benefit of the Lenders, as follows:
1. DEFINED TERMS. (a) Unless otherwise defined herein, capitalized terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
<PAGE> 2
2
(b) As used herein, "OBLIGATIONS" means, collectively, the
unpaid principal of and interest on the Loans and all other obligations and
liabilities of the Borrowers to the Administrative Agent, the Collateral Agent
and the Lenders (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the Loans
and interest accruing at the then applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to either Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, which may arise under, out of,
or in connection with, the Credit Agreement, any Notes, the other Loan Documents
or any other document made, delivered or given in connection therewith, whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by the Borrowers or the Guarantors pursuant to the terms of
the Credit Agreement or this Guarantee or any other Loan Document).
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this Guarantee as a
whole and not to any particular provision of this Guarantee, and section and
paragraph references are to this Guarantee unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. GUARANTEE (a) Subject to the provisions of paragraph , each
of the Guarantors hereby, jointly and severally, unconditionally and
irrevocably, guarantees to the Administrative Agent, for the ratable benefit of
the Lenders and their respective successors, indorsees, transferees and assigns,
the prompt and complete payment and performance by the Borrowers when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations.
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating to
the insolvency of debtors.
(c) Each Guarantor further agrees to pay any and all
reasonable expenses (including, without limitation, all fees and disbursements
of counsel) which may be paid or incurred by the Administrative Agent or any
Lender in enforcing, or obtaining advice of counsel in respect of, any rights
with respect to, or collecting, any or all of the Obligations and/or enforcing
any rights with respect to, or collecting against, such Guarantor under this
<PAGE> 3
3
Guarantee. This Guarantee shall remain in full force and effect until the
Obligations are paid in full and the Commitments are terminated, notwithstanding
that from time to time prior thereto the Borrowers may be free from any
Obligations.
(d) Each Guarantor agrees that the Obligations may at any time
and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing this Guarantee or affecting the rights and remedies
of the Administrative Agent or any Lender hereunder.
(e) No payment or payments made by either Borrower, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Administrative Agent or any Lender from either Borrower, any of the
Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment or payments other than
payments made by such Guarantor in respect of the Obligations or payments
received or collected from such Guarantor in respect of the Obligations, remain
liable for the Obligations up to the maximum liability of such Guarantor
hereunder until the Obligations are paid in full and the Commitments are
terminated.
(f) Each Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Administrative Agent or any
Lender on account of its liability hereunder, it will notify the Administrative
Agent in writing that such payment is made under this Guarantee for such
purpose.
3. RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to
the extent that a Guarantor shall have paid more than its proportionate share of
any payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section . The provisions of this
Section shall in no respect limit the obligations and liabilities of any
Guarantor to the Administrative Agent and the Lenders, and each Guarantor shall
remain liable to the Administrative Agent and the Lenders for the full amount
guaranteed by such Guarantor hereunder.
4. RIGHT OF SET-OFF. Each Guarantor hereby irrevocably
authorizes the Administrative Agent, the Collateral Agent and each Lender at any
time and from time to time without notice to such Guarantor or any other
Guarantor, any such notice being expressly waived by each Guarantor, upon any
amount of the Obligations becoming due and payable (whether at stated maturity,
by acceleration or otherwise), to set off and appropriate and apply any and all
deposits (general or special, time or demand, provisional or final), in any
<PAGE> 4
4
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Administrative Agent, the Collateral
Agent or such Lender to or for the credit or the account of such Guarantor, or
any part thereof in such amounts as the Administrative Agent, the Collateral
Agent or such Lender may elect, against or on account of the obligations and
liabilities of such Guarantor to the Administrative Agent, the Collateral Agent
or such Lender hereunder and claims of every nature and description of such
Lender against such Guarantor, in any currency, whether arising hereunder, under
the Credit Agreement, any Note, any other Loan Document or otherwise, as the
Administrative Agent, the Collateral Agent such Lender may elect, whether or not
the Administrative Agent, the Collateral Agent or such Lender has made any
demand for payment and although such obligations, liabilities and claims may be
contingent or unmatured. The Administrative Agent, the Collateral Agent and each
Lender shall notify such Guarantor promptly of any such set-off and the
application made by the Administrative Agent, the Collateral Agent or such
Lender,as the case maybe, of the proceeds thereof provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Administrative Agent, the Collateral Agent and each Lender
under this paragraph are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Administrative Agent, or
such Lender may have.
5. NO SUBROGATION. Notwithstanding any payment or payments
made by any of the Guarantors hereunder, or any set-off or application of funds
of any of the Guarantors by the Administrative Agent or any Lender, no Guarantor
shall be entitled to exercise any rights to be subrogated to any of the rights
of the Administrative Agent or any Lender against the Borrowers or any other
Guarantor or against any collateral security or guarantee or right of offset
held by the Administrative Agent or any Lender for the payment of the
Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Borrowers or any other Loan Party in
respect of payments made by such Guarantor hereunder, until all amounts owing to
the Administrative Agent and the Lenders by the Borrowers on account of the
Obligations are paid in full and the Commitments are terminated. If any amount
shall be paid to any Guarantor on account of such subrogation rights at any time
when all of the Obligations shall not have been paid in full, such amount shall
be held by such Guarantor in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Administrative Agent may
determine.
6. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF
RIGHTS. Each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to or
further assent by any Guarantor, any demand for payment of any of the
<PAGE> 5
5
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender, and any of the Obligations continued,
and the Obligations, or the liability of any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Administrative Agent or any Lender, and the Credit Agreement,
any Notes and the other Loan Documents and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required
Lenders, as the case may be) may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the Administrative
Agent nor any Lender shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Obligations or for
this Guarantee or any property subject thereto. When making any demand hereunder
against any of the Guarantors, the Administrative Agent or any Lender may, but
shall be under no obligation to, make a similar demand on the Borrowers or any
other Guarantor or guarantor, and any failure by the Administrative Agent or any
Lender to make any such demand or to collect any payments from the Borrowers or
any such other Guarantor or guarantor or any release of the Borrowers or such
other Guarantor or guarantor shall not relieve any of the Guarantors in respect
of which a demand or collection is not made or any of the Guarantors not so
released of their several obligations or liabilities hereunder, and shall not
impair or affect the rights and remedies, express or implied, or as a matter of
law, of the Administrative Agent or any Lender against any of the Guarantors.
For the purposes hereof "demand" shall include the commencement and continuance
of any legal proceedings.
7. GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon this Guarantee or acceptance of this Guarantee; the Obligations,
and any of them, shall conclusively be deemed to have been created, contracted
or incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee; and all dealings between the Borrowers or any of the Guarantors, on
the one hand, and the Administrative Agent and the Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrowers or any of the Guarantors with respect to the Obligations. Each
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Credit Agreement, any Note
or any other Loan Document, any of the Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Administrative Agent or any Lender, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrowers or any other Loan Party against the Administrative Agent or any
<PAGE> 6
6
Lender, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of the Borrowers or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrowers for
the Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in
any other instance. When pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent and any Lender may, but shall be under no
obligation to, pursue such rights and remedies as it may have against the
Borrowers or any other Person or against any collateral security or guarantee
for the Obligations or any right of offset with respect thereto, and any failure
by the Administrative Agent or any Lender to pursue such other rights or
remedies or to collect any payments from the Borrowers or any such other Person
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Borrowers or any such other Person
or any such collateral security, guarantee or right of offset, shall not relieve
such Guarantor of any liability hereunder, and shall not impair or affect the
rights and remedies, whether express, implied or available as a matter of law,
of the Administrative Agent or any Lenders against such Guarantor. This
Guarantee shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon each Guarantor and the successors and
assigns thereof, and shall inure to the benefit of the Administrative Agent and
the Lenders, and their respective successors, indorsees, transferees and
assigns, until all the Obligations and the obligations of each Guarantor under
this Guarantee shall have been satisfied by payment in full and the Commitments
shall be terminated, notwithstanding that from time to time during the term of
the Credit Agreement the Borrowers may be free from any Obligations.
8. REINSTATEMENT. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of either
Borrower or any other Loan Party, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for,
either Borrower or any other Loan Party or any substantial part of its property,
or otherwise, all as though such payments had not been made.
9. PAYMENTS. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in U.S. Dollars at the office of the Administrative Agent located
at 270 Park Avenue, New York, New York 10017.
10. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby
represents and warrants to the Administrative Agent and the Lenders that:
(a) it is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
the corporate power and authority and the legal right to own and operate its
property, to lease the property it operates and to conduct the business in which
it is currently engaged;
<PAGE> 7
7
(b) it has the corporate power and authority and the legal
right to execute and deliver, and to perform its obligations under, this
Guarantee, and has taken all necessary corporate action to authorize its
execution, delivery and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding
obligation of such Guarantor enforceable in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the enforcement of
creditors' rights generally, general equitable principles and an implied
covenant of good faith and fair dealing;
(d) the execution, delivery and performance of this Guarantee
will not violate any provision of any Requirement of Law or Contractual
Obligation of such Guarantor and will not result in or require the creation or
imposition of any Lien on any of the properties or revenues of such Guarantor
pursuant to any Requirement of Law or Contractual Obligation of the Guarantor;
(e) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or creditor of
such Guarantor) is required in connection with the execution, delivery,
performance, validity or enforceability of this Guarantee; and
(f) no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of such
Guarantor, threatened by or against such Guarantor or against any of its
properties or revenues (1) with respect to this Guarantee or any of the
transactions contemplated hereby or (2) which has any reasonable likelihood of
having a material adverse effect on the business, operations, property or
financial or other condition of such Guarantor.
Each Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by such Guarantor on the date of
each borrowing by the Borrowers under the Credit Agreement on and as of such
date of borrowing as though made hereunder on and as of such date.
11. AUTHORITY OF ADMINISTRATIVE AGENT. Each Guarantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Guarantee with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Guarantee shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and such Guarantor, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to
<PAGE> 8
8
act or refrain from acting, and no Guarantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
12. NOTICES. All notices, requests and demands to or upon the
Administrative Agent, any Lender or any Guarantor to be effective shall be in
writing (or by telex, fax or similar electronic transfer confirmed in writing)
and shall be deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by certified mail, return
receipt requested, or (iii) if by telex, fax or similar electronic transfer,
when sent and receipt has been confirmed, addressed as follows:
(a) if to the Administrative Agent or any Lender, at its
address or transmission number for notices provided in subsection 11.2 of the
Credit Agreement; and
(b) if to any Guarantor, at its address or transmission number
for notices set forth under its signature below.
The Administrative Agent, each Lender and each Guarantor may
change its address and transmission numbers for notices by notice in the manner
provided in this Section.
13. COUNTERPARTS. This Guarantee may be executed by one or
more of the Guarantors on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the counterparts of this Guarantee signed by all the
Guarantors shall be lodged with the Administrative Agent.
14. Severability. Any provision of this Guarantee 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.
15. INTEGRATION. This Guarantee represents the entire
agreement of each Guarantor with respect to the subject matter hereof and there
are no promises or representations by the Administrative Agent or any Lender
relative to the subject matter hereof not reflected herein.
16. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a)
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
each Guarantor and the Administrative Agent, PROVIDED that any provision of this
Guarantee may be waived by the Administrative Agent and the Lenders in a letter
or agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent.
<PAGE> 9
9
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph 16(a)), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default 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 Administrative Agent or any 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 Administrative Agent or any 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 Administrative Agent or such Lender would
otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
17. SECTION HEADINGS. The section headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
18. SUCCESSORS AND ASSIGNS. This Guarantee shall be binding
upon the successors and assigns of each Guarantor and shall inure to the benefit
of the Administrative Agent and the Lenders and their successors and assigns.
19. GOVERNING LAW. THIS GUARANTEE AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
20. SUBMISSION TO JURISDICTION; WAIVERS. Each Guarantor hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Guarantee and any other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
<PAGE> 10
10
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Guarantor at its address set forth under its signature
below or at such other address of which the Administrative Agent shall
have been notified pursuant hereto;
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
21. WAIVERS OF JURY TRIAL. EACH GUARANTOR AND, BY ACCEPTANCE
HEREOF, THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT AND THE LENDERS, HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTEE OR ANY OTHER LOAN DOCUMENTS AND FOR ANY
COUNTERCLAIM THEREIN.
<PAGE> 11
11
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
HOMESIDE MORTGAGE STOCKTON PLAZA, INC.
SECURITIES, INC.
By: /s/ Joe K. Pickett By: /s/ Joe K. Pickett
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Title: Title:
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Address for Notices: Address for Notices:
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
Telex: Telex:
---------------------------- ----------------------------
Fax: Fax:
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SWD PROPERTIES, INC. HONOLULU MORTGAGE
COMPANY, INC.
By: /s/ Joe K. Pickett By: /s/ Joe K. Pickett
------------------------------ ------------------------------
Title: Title:
---------------------------- ----------------------------
Address for Notices: Address for Notices:
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
Telex: Telex:
---------------------------- ----------------------------
Fax: Fax:
------------------------------ ------------------------------
<PAGE> 1
EXHIBIT 10.31
BMC GUARANTEE
BMC GUARANTEE, dated as of May 31, 1996 (this "BMC
GUARANTEE"), made by HOMESIDE HOLDINGS, INC., a Florida corporation (formerly
named Barnett Mortgage Company and renamed "HomeSide Holdings, Inc." on the
Closing Date; the "GUARANTOR"), in favor of CHEMICAL BANK, as Administrative
Agent (in such capacity, the "ADMINISTRATIVE AGENT") for the lenders (the
"LENDERS") parties to the Credit Agreement, dated as of May 31, 1996 (as
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among HOMESIDE LENDING, INC. ("HOMESIDE") and HONOLULU MORTGAGE
COMPANY, INC. ("HONOMO") as Borrowers (collectively, the "BORROWERS"), the
Lenders, NATIONSBANK OF TEXAS, N.A., as Syndication Agent, BANKERS TRUST
COMPANY, as Documentation Agent, THE FIRST NATIONAL BANK OF BOSTON, as
Collateral Agent, and the Administrative Agent.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrowers upon the terms and subject to
the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrowers under the Credit
Agreement that the Guarantor shall have executed and delivered this BMC
Guarantee to the Administrative Agent for the ratable benefit of the Lenders;
and
WHEREAS, HomeSide is a wholly-owned subsidiary of the
Guarantor; HonoMo is a wholly owned subsidiary of HomeSide; and it is to the
advantage of the Guarantor that the Lenders make the Loans to the Borrowers;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective Loans to the Borrowers under the
Credit Agreement, the Guarantor hereby agrees with the Administrative Agent, for
the ratable benefit of the Lenders, as follows:
1. DEFINED TERMS. (a) Unless otherwise defined herein, capitalized terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
<PAGE> 2
2
(b) As used herein, "OBLIGATIONS" means, collectively, the
unpaid principal of and interest on the Loans and all other obligations and
liabilities of the Borrowers to the Administrative Agent, the Collateral Agent
and the Lenders (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the Loans
and interest accruing at the then applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to either Borrower
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement, the Notes, the other Loan
Documents or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative Agent or
to the Lenders that are required to be paid by the Borrowers or the Guarantor
pursuant to the terms of the Credit Agreement or this BMC Guarantee or any other
Loan Document).
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this BMC Guarantee shall refer to this BMC Guarantee
as a whole and not to any particular provision of this BMC Guarantee, and
section and paragraph references are to this BMC Guarantee unless otherwise
specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. GUARANTEE. (a) The Guarantor hereby unconditionally and
irrevocably guarantees to the Administrative Agent, for the ratable benefit of
the Lenders and their respective successors, indorsees, transferees and assigns,
the prompt and complete payment and performance by the Borrowers when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations.
(b) The Guarantor further agrees to pay any and all reasonable
expenses (including, without limitation, all fees and disbursements of counsel)
which may be paid or incurred by the Administrative Agent or any Lender in
enforcing, or obtaining advice of counsel in respect of, any rights with respect
to, or collecting, any or all of the Obligations and/or enforcing any rights
with respect to, or collecting against, the Guarantor under this BMC Guarantee.
This BMC Guarantee shall remain in full force and effect until the Obligations
are paid in full and the Commitments are terminated, notwithstanding that from
time to time prior thereto the Borrowers may be free from any Obligations.
3. RIGHT OF SET-OFF. The Administrative Agent, the Collateral
Agent and each Lender is hereby irrevocably authorized at any time and from time
to time without notice to
<PAGE> 3
3
the Guarantor, any such notice being expressly waived by the Guarantor, upon any
amount of the Obligations becoming due and payable (whether at stated maturity,
by acceleration or otherwise), to set off and appropriate and apply any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Administrative Agent, the Collateral
Agent or such Lender to or for the credit or the account of the Guarantor, or
any part thereof in such amounts as the Administrative Agent, the Collateral
Agent or such Lender may elect, against or on account of the obligations and
liabilities of the Guarantor to the Administrative Agent, the Collateral Agent
or such Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against the Guarantor, in any currency,
whether arising hereunder, under the Credit Agreement, any Note, any other Loan
Document or otherwise, as the Administrative Agent, the Collateral Agent or such
Lender may elect, whether or not the Administrative Agent, the Collateral Agent
or such Lender has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Administrative Agent,
the Collateral Agent and each Lender shall notify the Guarantor promptly of any
such set-off and the application made by the Administrative Agent, the
Collateral Agent or such Lender, as the case may be, of the proceeds thereof;
PROVIDED that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Administrative Agent, the
Collateral Agent and each Lender under this paragraph are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Administrative Agent or such Lender may have.
4. NO SUBROGATION. Notwithstanding any payment or payments
made by the Guarantor hereunder, or any set-off or application of funds of the
Guarantor by the Administrative Agent or any Lender, the Guarantor shall not be
entitled to exercise any rights to be subrogated to any of the rights of the
Administrative Agent or any Lender against the Borrowers or any other Guarantor
or against any collateral security or guarantee or right of offset held by the
Administrative Agent or any Lender for the payment of the Obligations, nor shall
the Guarantor seek or be entitled to seek any contribution or reimbursement from
the Borrowers or any other Loan Party in respect of payments made by the
Guarantor hereunder, until all amounts owing to the Administrative Agent and the
Lenders by the Borrowers on account of the Obligations are paid in full and the
Commitments are terminated. If any amount shall be paid to the Guarantor on
account of such subrogation rights at any time when all of the Obligations shall
not have been paid in full, such amount shall be held by the Guarantor in trust
for the Administrative Agent and the Lenders, segregated from other funds of the
Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to
the Administrative Agent in the exact form received by the Guarantor (duly
indorsed by the Guarantor to the Administrative Agent, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as
the Administrative Agent may determine.
<PAGE> 4
4
5. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF
RIGHTS. The Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against the Guarantor, and without notice to
or further assent by the Guarantor, any demand for payment of any of the
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender, and any of the Obligations continued,
and the Obligations, or the liability of any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Administrative Agent or any Lender, and the Credit Agreement,
any Notes, and the other Loan Documents and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required
Lenders, as the case may be) may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the Administrative
Agent nor any Lender shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Obligations or for
this BMC Guarantee or any property subject thereto. When making any demand
hereunder against the Guarantor, the Administrative Agent or any Lender may, but
shall be under no obligation to, make a similar demand on the Borrowers or any
other guarantor, and any failure by the Administrative Agent or any Lender to
make any such demand or to collect any payments from the Borrowers or any such
other guarantor or any release of the Borrowers or such other guarantor shall
not relieve the Guarantor of its obligations or liabilities hereunder, and shall
not impair or affect the rights and remedies, express or implied, or as a matter
of law, of the Administrative Agent or any Lender against the Guarantor. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
6. GUARANTEE ABSOLUTE AND UNCONDITIONAL. The Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon this BMC Guarantee or acceptance of this BMC Guarantee; the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this BMC Guarantee; and all dealings between the Borrowers or the
Guarantor, on the one hand, and the Administrative Agent and the Lenders, on the
other, shall likewise be conclusively presumed to have been had or consummated
in reliance upon this BMC Guarantee. The Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Borrowers or the Guarantor with respect to the Obligations. This BMC
Guarantee shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity, regularity or
enforceability of the Credit Agreement, any Note, or any other Loan Document,
any of the Obligations or any other collateral security therefor or guarantee or
right of offset with respect
<PAGE> 5
5
thereto at any time or from time to time held by the Administrative Agent or any
Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
the Borrowers or any other Loan Party against the Administrative Agent or any
Lender, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of the Borrowers or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrowers for
the Obligations, or of the Guarantor under this BMC Guarantee, in bankruptcy or
in any other instance. When pursuing its rights and remedies hereunder against
the Guarantor, the Administrative Agent and any Lender may, but shall be under
no obligation to, pursue such rights and remedies as it may have against the
Borrowers or any other Person or against any collateral security or guarantee
for the Obligations or any right of offset with respect thereto, and any failure
by the Administrative Agent or any Lender to pursue such other rights or
remedies or to collect any payments from the Borrowers or any such other Person
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Borrowers or any such other Person
or of any such collateral security, guarantee or right of offset, shall not
relieve the Guarantor of any liability hereunder, and shall not impair or affect
the rights and remedies, whether express, implied or available as a matter of
law, of the Administrative Agent or any Lender against the Guarantor. This BMC
Guarantee shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Guarantor and its successors and
assigns, and shall inure to the benefit of the Administrative Agent and the
Lenders, and their respective successors, indorsees, transferees and assigns,
until all the Obligations and the obligations of the Guarantor under this BMC
Guarantee shall have been satisfied by payment in full and the Commitments shall
be terminated, notwithstanding that from time to time during the term of the
Credit Agreement the Borrowers may be free from any Obligations.
7. REINSTATEMENT. This BMC Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of either
Borrower or any other Loan Party, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for,
either Borrower, or any other Loan Party, or any substantial part of its
property, or otherwise, all as though such payments had not been made.
8. PAYMENTS. The Guarantor hereby agrees that the Obligations
will be paid to the Administrative Agent without set-off or counterclaim in U.S.
Dollars at the office of the Administrative Agent located at 270 Park Avenue,
New York, New York 10017.
9. REPRESENTATIONS AND WARRANTIES. The Guarantor represents
and warrants to the Administrative Agent and the Lenders that:
<PAGE> 6
6
(a) the Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority and the legal right to
own and operate its property, to lease the property it operates and to conduct
the business in which it is currently engaged;
(b) the Guarantor has the corporate power and authority and
the legal right to execute and deliver, and to perform its obligations under,
this BMC Guarantee, and has taken all necessary corporate action to authorize
its execution, delivery and performance of this BMC Guarantee;
(c) this BMC Guarantee constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the enforcement of
creditors' rights generally, general equitable principles and an implied
covenant of good faith and fair dealing;
(d) the execution, delivery and performance of this BMC
Guarantee will not violate any provision of any Requirement of Law or
Contractual Obligation of the Guarantor and will not result in or require the
creation or imposition of any Lien on any of the properties or revenues of the
Guarantor pursuant to any Requirement of Law or Contractual Obligation of the
Guarantor;
(e) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or creditor of
the Guarantor) is required in connection with the execution, delivery,
performance, validity or enforceability of this BMC Guarantee; and
(f) no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of its
properties or revenues (i) with respect to this BMC Guarantee or any of the
transactions contemplated hereby or (ii) which has any reasonable likelihood of
having a material adverse effect on the business, operations, property or
financial or other condition of the Guarantor.
The Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by the Guarantor on the date of
each borrowing by a Borrower under the Credit Agreement on and as of such date
of borrowing as though made hereunder on and as of such date.
10. COVENANTS. The Guarantor hereby covenants and agrees with
the Administrative Agent and the Lenders that, from and after the date of this
BMC Guarantee until the Obligations are paid in full and the commitments are
terminated:
<PAGE> 7
7
(a) The terms of each of subsections 7.3, 7.4, 7.5, 7.6, 7.7,
7.8, 7.9, 7.10, 7.11, 7.12, 7.13 and 7.14 of the Credit Agreement shall apply to
the Guarantor, MUTATIS MUTANDIS, to the same extent as if the references to a
Borrower therein were references to the Guarantor, and the Guarantor will
perform and satisfy all such covenants as so applied to it;
(b) The Guarantor shall take, or shall refrain from taking, as
the case may be, all actions that are necessary to be taken or not taken so that
no violation of any provision, covenant or agreement contained in Section 7 or 8
of the Credit Agreement, and so that no Default or Event of Default, is caused
by any act or failure to act of the Guarantor, and, in particular, the Guarantor
shall not declare or pay any dividend on, or make any payment on account of, or
set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of Capital Stock of the Guarantor or any warrants or options to purchase
any such Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Guarantor, the Borrowers or any Subsidiary
(such declarations, payments, setting apart, purchases, redemptions,
defeasances, retirements, acquisitions and distributions being herein called
"RESTRICTED PAYMENTS"), except that, (a) so long as no Event of Default has
occurred and is continuing, (i) from cash dividends declared and paid to the
Guarantor by HomeSide, the Guarantor may declare and pay cash dividends to
Holdings in an amount equal to the actual taxes paid in cash by Holdings, such
dividends to be paid substantially concurrently with the payment of such taxes
by Holdings and to be returned to the Guarantor, who shall return it to
HomeSide, to the extent not applied by Holdings thereto (PROVIDED that
notwithstanding the existence of an Event of Default, the Guarantor shall not be
prohibited by the terms of this subsection from paying taxes due and payable in
respect of the Guarantor and its consolidated Subsidiaries), (ii) from cash
dividends declared and paid to the Guarantor by HomeSide, the Guarantor may
declare and pay cash dividends to Holdings to allow Holdings to redeem Capital
Stock of Holdings held by directors and employees pursuant to employment
arrangements of the Borrowers, in an aggregate annual amount not to exceed
$2,000,000, (iii) from cash dividends declared and paid to the Guarantor by
HomeSide, the Guarantor may declare and pay cash dividends to Holdings to allow
Holdings to redeem redeemable Capital Stock issued in connection with the BBMC
Acquisition and listed on Schedule 8.9 of the Credit Agreement in an amount not
to exceed $7,500,000 in the aggregate after the Closing Date, and (iv) from cash
dividends declared and paid to the Guarantor by HomeSide, the Guarantor may
declare and pay cash dividends to Holdings in an amount not to exceed $75,000 in
the aggregate in each fiscal year of HomeSide, to allow Holdings to pay fees and
expenses incurred in the administration of its ordinary and normal activities
and (b) so long as no Blockage Notice (as defined in the Credit Agreement) is in
effect, from cash dividends declared and paid to the Guarantor by HomeSide, the
Guarantor may declare and pay cash dividends to Holdings in an amount equal to
the actual interest payable in cash by Holdings on the Holdings Notes, such
dividends to be paid concurrently with the payment of such interest by Holdings
and to be returned to the Guarantor, who shall return it to HomeSide, to the
extent not applied by Holdings thereto.
<PAGE> 8
8
(c) The Guarantor shall not incur any Indebtedness or
Guarantee Obligations, or make any investments, loans or advances to any Person,
or conduct, transact or otherwise engage, or commit to transact, conduct or
otherwise engage, in any business or operations other than (i) the ownership of
the capital stock of HomeSide and the exercise of rights and performance of
obligations in connection therewith, (ii) the ownership of the BMC Servicing
Rights (as defined the Credit Agreement) and activities related or incidental
thereto, (iii) the entry into, and exercise of rights and performance of
obligations in respect of, this BMC Guarantee, the BMC Pledge Agreement, the
Holdings Pledge Agreement, the Second Lien Pledge Agreement to which it is a
party, equity subscription agreements, registration rights agreements, voting
and other stockholder agreements, engagement letters, underwriting agreements
and other agreements in respect of its equity securities or any offering,
issuance or sale thereof, (iv) the offering, issuance and sale of its equity
securities to the extent such offering, issuance or sale does not constitute a
Change of Control or would be otherwise inconsistent with the provisions of the
Credit Agreement, (v) the entry into, and exercise of rights and performance of
obligations in respect of, indentures, engagement letters, underwriting
agreements and other agreements in respect of Indebtedness permitted under
clause (iv) above or any offering, issuance or sale thereof, and the offering,
issuance and sale of its debt securities representing such Indebtedness, (vi)
the filing of registration statements, and compliance with applicable reporting
and other obligations, under federal, state or other securities laws, (vii) the
listing of its equity securities and compliance with applicable reporting and
other obligations in connection therewith, (viii) the retention of transfer
agents, private placement agents, underwriters, counsel, accountants and other
advisors and consultants, (ix) the performance of obligations under and in
compliance with its certificate of incorporation and by-laws, or any applicable
law, ordinance, regulation, rule, order, judgment, decree or permit, including,
without limitation, as a result of or in connection with the activities of
HomeSide, (x) the incurrence and payment of any taxes for which it may be liable
and (xi) other activities directly related to the foregoing.
11. AUTHORITY OF ADMINISTRATIVE AGENT. The Guarantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this BMC Guarantee with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this BMC Guarantee shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Guarantor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting, and
the Guarantor shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
12. NOTICES. All notices, requests and demands to or upon the
Administrative Agent, any Lender or the Guarantor to be effective shall be in
writing (or by telex, fax or
<PAGE> 9
9
similar electronic transfer confirmed in writing) and shall be deemed to have
been duly given or made (i) when delivered by hand or (ii) if given by mail,
when deposited in the mails by certified mail, return receipt requested, or
(iii) if by telex, fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
(a) if to the Administrative Agent or any Lender, at its
address or transmission number for notices provided in subsection 11.2 of the
Credit Agreement; and
(b) if to the Guarantor, at its address or transmission number
for notices set forth under its signature below.
The Administrative Agent, each Lender and the Guarantor may
change its address and transmission numbers for notices by notice in the manner
provided in this Section.
13. SEVERABILITY. Any provision of this BMC Guarantee 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.
14. INTEGRATION. This BMC Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter hereof and there
are no promises or representations by the Administrative Agent or any Lender
relative to the subject matter hereof not reflected herein.
15. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a)
None of the terms or provisions of this BMC Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Guarantor and the Administrative Agent, PROVIDED that any provision of this
BMC Guarantee may be waived by the Administrative Agent and the Lenders in a
letter or agreement executed by the Administrative Agent or by telex or
facsimile transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph 15(a)), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default 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 Administrative Agent or any 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 Administrative Agent or any Lender of
any right or remedy hereunder on any one occasion shall not be
<PAGE> 10
10
construed as a bar to any right or remedy which the Administrative Agent or such
Lender would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
16. SECTION HEADINGS. The section headings used in this BMC
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
17. SUCCESSORS AND ASSIGNS. This BMC Guarantee shall be
binding upon the successors and assigns of the Guarantor and shall inure to the
benefit of the Administrative Agent and the Lenders and their successors and
assigns.
18. GOVERNING LAW. THIS BMC GUARANTEE AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
19. SUBMISSION TO JURISDICTION; WAIVERS. The Guarantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this BMC Guarantee and any other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Guarantor at its address set forth under its signature
below or at such other address of which the Administrative Agent shall
have been notified pursuant hereto;
<PAGE> 11
11
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
20. WAIVERS OF JURY TRIAL. THE GUARANTOR AND, BY ACCEPTANCE
HEREOF, THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT AND THE LENDERS, HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS BMC GUARANTEE, OR ANY OTHER LOAN DOCUMENT AND FOR
ANY COUNTERCLAIM THEREIN.
<PAGE> 12
12
IN WITNESS WHEREOF, the undersigned has caused this BMC
Guarantee to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
HOMESIDE HOLDINGS, INC.
By: /s/ Joe K. Pickett
------------------------------------
Title:
----------------------------------
Address for Notices:
HomeSide Holdings, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
Attention: Robert J. Jacobs, Esq.
Fax: 904-281-3513
<PAGE> 1
EXHIBIT 10.32
1
SECURITY AND COLLATERAL AGENCY AGREEMENT
SECURITY AND COLLATERAL AGENCY AGREEMENT, dated as of May 31, 1996,
made by HOMESIDE LENDING, INC., a Florida corporation (the "Grantor"), CHEMICAL
BANK, in its capacity as Administrative Agent under the Credit Agreement
referred to below (in such capacity, the "Administrative Agent"), and THE FIRST
NATIONAL BANK OF BOSTON, as Collateral Agent for the financial institutions
party to the Credit Agreement referred to below (in such capacity, the
"Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Grantor has entered into a Credit Agreement, dated as of
May 31, 1996, with Honolulu Mortgage Company, Inc., the financial institutions
from time to time party thereto, as Lenders (the "Lenders"), the lenders from
time to time designated therein as Balance Lenders (the "Balance Lenders"),
NationsBank of Texas, N.A., as Syndication Agent (the "Syndication Agent"),
Bankers Trust Company, as Documentation Agent (the "Documentation Agent"), the
Collateral Agent and the Administrative Agent (said Agreement, as it may be
amended, supplemented or otherwise modified from time to time, being the "Credit
Agreement"); and
WHEREAS, it is a condition precedent to the making of the Loans that
the Grantor shall have entered into this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make the Loans, the Grantor hereby agrees with the Administrative
Agent and the Collateral Agent on behalf and for the ratable benefit of the
Secured Parties (as hereinafter defined) as follows:
1. Defined Terms.
Terms defined in the UCC (as hereinafter defined) are used herein as
therein defined. As used in this Agreement, capitalized terms defined in the
Credit Agreement and not otherwise defined herein have the meanings given in the
Credit Agreement, and the following terms have the meanings specified below
(such meanings being equally applicable to both the singular and plural forms of
the terms defined):
"Additional Required Documents" has the meaning set forth in Section
4(a) of this Agreement.
"Agency Custodial Agreements" shall mean, collectively, the FHLMC
Custodial Agreement, the FNMA Custodial Agreement and the GNMA Custodial
Agreement.
<PAGE> 2
2
"Approved Non-Agency Mortgage Loan" shall mean a Mortgage Loan in respect
of which the Grantor has Servicing Rights covered by a duly executed and
delivered Approved Investor Acknowledgment Agreement.
"Certificating Custodian" shall mean any Person acting as the Grantor's
"document custodian," "custodian" or "certificating custodian," as such terms
are used in the Agency Guides, for purposes of (a) certifying that the
documentation relating to Mortgage Loans received by such Person from the
Grantor (or the Collateral Agent) is complete and acceptable under the
applicable Agency Guide for purposes of including such Mortgage Loan in a pool
of Mortgage Loans in which Mortgage-Backed Securities will represent interests
and (b) holding such documentation following formation of such pools and
issuance of such Mortgage-Backed Securities. The Certificating Custodian shall
at all times be a party to the Agency Custodial Agreements.
"Collateral" has the meaning set forth in Section 3 of this Agreement.
"FHLMC Custodial Agreement" shall mean the agreement, as amended,
supplemented or otherwise modified from time to time, between FHLMC, the Grantor
and any Person meeting the eligibility requirements set forth in the FHLMC Guide
to serve as a "custodian," as such term is used in the FHLMC Guide, pursuant to
which such Person is authorized to act as Certificating Custodian for the
Grantor.
"FNMA Custodial Agreement" shall mean the agreement, as amended,
supplemented or otherwise modified from time to time, between FNMA, the Grantor
and any Person meeting the eligibility requirements set forth in the FNMA Guide
to serve as a "document custodian," as such term is used in the FNMA Guide,
pursuant to which such Person is authorized to act as Certificating Custodian
for the Grantor.
"Funding Account" shall mean account number 230-204910 maintained by the
Grantor with the Administrative Agent.
"GNMA Custodial Agreement" shall mean the agreement, as amended, modified
or supplemented from time to time, between GNMA, the Grantor and any Person
meeting the eligibility requirements set forth in the GNMA Guide to serve as a
"certificating custodian," as such term is used in the GNMA Guide, pursuant to
which such Person is authorized to act as Certificating Custodian.
"MBS Custody Account" has the meaning set forth in Section 6(h) of this
Agreement.
"Mortgage Loan Settlement Account" has the meaning set forth in Section
6(c) of this Agreement.
"Negative Security Period" shall mean each period commencing upon the
occurrence of a Negative Security Event and ending upon the occurrence of a
Positive Security Event.
<PAGE> 3
3
"Positive Security Period" shall mean each period commencing upon the
occurrence of a Positive Security Event and ending upon the occurrence of a
Negative Security Event.
"Proceeds" shall mean "proceeds," as such term is defined in Section
9-306(1) of the UCC, and, in any event, includes, without limitation, (a) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Grantor from time to time with respect to any of the Collateral, (b) any and
all payments (in any form whatsoever) made or due and payable to the Grantor
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting under color of Governmental
Authority), and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Required Documents" has the meaning set forth in Section 4(a) of this
Agreement.
"Secured Obligations" shall mean, collectively, the unpaid principal of
and interest on the Loans and any Notes and all other obligations and
liabilities of the Grantor and each of the other Loan Parties to the Secured
Parties (including, without limitation, interest accruing at the then applicable
rate provided in the Credit Agreement after the maturity of the Loans and
interest accruing at the then applicable rate provided in the Credit Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Grantor or any
other Loan Party, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, the Loans,
any Notes, the HomeSide Guaranty, the HomeSide Pledge Agreement, this Agreement,
the other Loan Documents or any other document made, delivered or given in
connection therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to any of
the Secured Parties that are required to be paid by the Grantor or any other
Loan Party pursuant to the terms of the Credit Agreement, this Agreement or any
other Loan Document).
"Secured Parties" shall mean, collectively, the Lenders, the Balance
Lenders, the Syndication Agent, the Documentation Agent, the Collateral Agent
and the Administrative Agent.
"Securities Settlement Account" has the meaning set forth in Section
6(j) of this Agreement.
"Servicing Contract" shall mean each of the contracts or other
agreements to which the Grantor is a party pursuant to which the Grantor holds
Servicing Rights, in
<PAGE> 4
4
each case as amended, supplemented or otherwise modified from time to time,
including, without limitation, (a) all rights of the Grantor to receive moneys
due and to become due to it thereunder or in connection therewith, other than
any portion of principal and interest payable under the related Mortgage Loans
to the extent not attributable to servicing fees payable to the Grantor under
such Servicing Contracts, (b) all rights of the Grantor to damages arising out
of, or for, breach or default in respect thereof, and (c) all rights of the
Grantor to perform and to exercise all remedies thereunder.
"Servicing Receivables" shall mean the accounts, receivables and other
amounts owing to the Grantor for its own account in respect of Servicing Rights
or under a Servicing Contract, including, without limitation, all Eligible
Servicing Receivables.
"Servicing Rights" shall mean the rights of the Grantor to (a) service
Mortgage Loans for or on behalf of the owner or holder of such Mortgage Loans
(including investors in Mortgage-Backed Securities supported by Mortgage Loans)
pursuant to a direct agreement between the Grantor and an Agency, Approved
Investor or such owner or holder, together with the legal titles, mortgagor
files, escrows and records relating to such Mortgage Loans and the right to
receive servicing fee income and any other income arising from or in connection
with such Mortgage Loans, including late charges, termination fees and charges
and all other incidental fees and charges, and (b) subservice Mortgage Loans for
or on behalf of the legal title holder of the direct servicing rights in respect
of, or the owner or holder of, such Mortgage Loans (including, without
limitation, the BMC Servicing Rights), together with the legal titles, mortgagor
files, escrows and records relating to such Mortgage Loans and the right to
receive servicing or subservicing fee income and any other income arising from
or in connection with such Mortgage Loans, including late charges, termination
fees and charges and all other incidental fees and charges.
"Servicing Settlement Account" has the meaning set forth in Section
6.1(m) of this Agreement.
"Settlement Accounts" shall mean, collectively, the Mortgage Loan
Settlement Account, the Securities Settlement Account and the Servicing
Settlement Account.
"UCC" shall mean the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of New York; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Collateral Agent's and the other Secured Parties'
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, the term "UCC"
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
<PAGE> 5
5
2. Appointment of Collateral Agent.
Pursuant to the Credit Agreement the Collateral Agent has been
appointed to act as secured party, agent, bailee and custodian for the exclusive
benefit of the Secured Parties with respect to the Collateral. The Collateral
Agent hereby acknowledges that it has accepted such appointment and agrees to
maintain and hold all Collateral at any time delivered to it as secured party,
agent, bailee and custodian for the exclusive benefit of the Secured Parties.
The Collateral Agent acknowledges and agrees that it is acting and will act with
respect to the Collateral for the exclusive benefit of the Secured Parties and
is not, and shall not at any time in the future be, subject, with respect to the
Collateral, in any manner or to any extent, to the direction or control of the
Grantor or any of the other Loan Parties, except as expressly permitted
hereunder and under the other Loan Documents. The Collateral Agent agrees to act
in accordance with this Agreement and in accordance with any written
instructions from the Administrative Agent delivered pursuant to the Credit
Agreement. Under no circumstances shall the Collateral Agent deliver possession
of Collateral to the Grantor or any other Person (other than the Administrative
Agent) or otherwise release any Collateral from the Lien created hereby, except
in accordance with the express terms of this Agreement or otherwise upon the
written instructions of the Administrative Agent.
3. Grant of Security Interest.
As collateral security for the full and prompt payment when due
(whether at stated maturity, by acceleration or otherwise) of, and the
performance of, all the Secured Obligations and to induce the Lenders to make
the Loans pursuant to the Credit Agreement, the Grantor hereby assigns, conveys,
mortgages, pledges, hypothecates and transfers to the Collateral Agent, on
behalf and for the ratable benefit of the Secured Parties, and hereby grants to
the Collateral Agent, on behalf and for the ratable benefit of the Secured
Parties, a security interest in, all of the Grantor's right, title and interest
in, to and under the following, whether now owned or hereafter acquired, whether
now in existence or hereafter arising (all of which being herein collectively
called the "Collateral"):
(a) all Mortgage Loans submitted by the Grantor for inclusion in the
HomeSide Tranche A Borrowing Base and all Mortgage Loans purchased by the
Grantor with the proceeds of an Eligible Early Buyout Advance or an Eligible
Paid-in-Full Buyout Advance, including, without limitation, all notes,
mortgages, deeds to secure debt, trust deeds and security agreements, financing
statements and fixture filings related thereto, all rights to payment
thereunder, all rights in the Property securing payment of the indebtedness of
the Obligors thereunder or that are the subject of such Mortgage Loans, all
rights under documents related thereto, such as guaranties and insurance
policies (issued by an Agency or otherwise), including, without limitation,
mortgage and title insurance policies, fire and extended coverage insurance
policies (including the right to any return premiums) and FHA insurance and VA
guaranties and all rights, if any, in cash deposits consisting of impounds,
insurance premiums or other funds held on account
<PAGE> 6
6
thereof, and all commitments and other approvals issued by or on behalf of the
FHA or the VA to insure or guaranty any of the Mortgage Loans;
(b) all Mortgage-Backed Securities, all right to the payment of moneys
and non-cash distributions on account thereof and all new, substituted and
additional securities at any time issued with respect thereto;
(c) all Take-Out Commitments covering any part of the Collateral, all
rights to deliver Mortgage Loans and Mortgage-Backed Securities to investors and
other purchasers pursuant to such Take-Out Commitments, and all proceeds
resulting from the disposition of such Collateral pursuant thereto;
(d) all commitments and other agreements or approvals issued by or on
behalf of any Agency to issue, insure or guaranty any Mortgage-Backed Security
(other than any such commitments or approvals the creation of a security
interest in which would be prohibited thereby or by applicable law);
(e) all Servicing Rights, Servicing Contracts and rights to receive
payments in connection with Servicing Rights and Servicing Contracts, whether on
account of the performance of services, upon the termination of Servicing
Rights, Servicing Contracts or otherwise (including, without limitation, all
Eligible Servicing Receivables (and all deeds, contracts, agreements,
instruments of title and other documents received or receivable in respect
thereof)), and rights with respect to the placement of escrow deposits
associated with such Servicing Rights and Servicing Contracts and rights to the
payment of money or provision of concessions or services with respect thereto;
(f) the Mortgage Loan Settlement Account, the Securities Settlement
Account, the Servicing Settlement Account, the MBS Custody Account, the Funding
Account, each other account of the type described in Section 6(m) hereof and any
other custodial account of the Grantor held by or in the name of the Collateral
Agent or its bailee or designee (including, without limitation, the
Administrative Agent), and any and all funds, securities, Cash Equivalents and
other items at any time held in such accounts and any and all rights of the
Grantor to insurance payments made in respect of such accounts;
(g) all files, documents, agreements, instruments, deeds, chattel
paper, inventory consisting of Mortgage Loans, Mortgage-Backed Securities or
Servicing Rights held for sale, insurance policies, personal property, contract
rights, accounts, general intangibles, records, surveys, certificates,
correspondence, appraisals, computer records, tapes, discs, cards, accounting
records and other books, records, information and data of the Grantor relating
to the Collateral (including all such items necessary or helpful in the
administration or servicing of the Collateral) of whatever kind or nature
whatsoever relating to the Mortgage Loans described in subsection (a) above or
the servicing of Mortgage Loans, the Mortgage-Backed Securities, the Take-Out
Commitments, the Servicing Rights or any other Collateral, and all other
documents or instruments delivered to the Collateral Agent in respect of the
Collateral, including, without limitation, the right
<PAGE> 7
7
to receive all insurance proceeds and condemnation awards which may be payable
in respect of any of the Property;
(h) all Hedge Contracts covering, relating to, or entered into in
respect of, any of the Collateral, and all rights to the payment of money or
provision of concessions or services with respect thereto, and all accounts
relating thereto and moneys and other items held therein; and
(i) to the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of, each of the foregoing.
4. Delivery of Collateral Documentation; Submission of Collateral for
Inclusion in Borrowing Bases.
(a) Delivery of Mortgage Loans. From time to time, the Grantor shall
deliver or cause to be delivered to the Collateral Agent Eligible Mortgage Loans
to be included in the HomeSide Tranche A Borrowing Base as permitted pursuant to
the Credit Agreement, by delivery to the Collateral Agent of a HomeSide Tranche
A Borrowing Base Addition Report in the form of Attachment 1-A hereto, with all
blanks completed in conformity therewith, together with those documents,
instruments and agreements described on Attachment 2 hereto (the "Required
Documents"), except to the extent such Eligible Mortgage Loan constitutes an
Eligible Wet Loan, in which case the Required Documents shall be delivered to
the Collateral Agent within 10 days after the date such Eligible Wet Loan is
included in the HomeSide Tranche A Borrowing Base. Additionally, if requested by
the Administrative Agent, the Grantor shall use diligent efforts to promptly
deliver to the Collateral Agent the items described on Attachment 8 hereto (the
"Additional Required Documents"). Whenever the Grantor shall deliver Eligible
Mortgage Loans for inclusion in the HomeSide Tranche A Borrowing Base, the
Grantor shall be deemed to have represented and warranted that (i) has delivered
to the Collateral Agent (or, in the case of an Eligible Wet Loan, will deliver
to the Collateral Agent within 10 days after the date such Eligible Wet Loan is
included in the HomeSide Tranche A Borrowing Base) the Required Documents, and
(ii) it holds in its possession or is using diligent efforts to obtain
possession of the Additional Required Documents and to deliver the Additional
Required Documents to the Collateral Agent. The Grantor shall hold the
Additional Required Documents in its possession in trust for the benefit of the
Secured Parties until delivery thereof to the Collateral Agent as provided
herein.
(b) Delivery of Mortgage-Backed Securities. From time to time, the
Grantor shall deliver or caused to be delivered to the Collateral Agent or its
bailee (including, without limitation, the Administrative Agent) Eligible
Mortgage-Backed Securities to be included in the HomeSide Tranche A Borrowing
Base and shall confirm the issuance of Mortgage- Backed Securities, by delivery
to the Collateral Agent of a HomeSide Tranche A Borrowing Base Addition Report,
in the form of Attachment 1-B hereto, with all
<PAGE> 8
8
blanks completed in conformity therewith, together with the Required Documents
for such Mortgage-Backed Securities.
(c) Delivery of Servicing Receivables; Delivery of Receivables
Certificate. From time to time, the Grantor may designate Eligible Early Buyout
Advance Receivables, Eligible Paid-In-Full Buyout Advance Receivables and
Eligible Foreclosure Advance Receivables for inclusion in the HomeSide Tranche B
Borrowing Base by delivering, or causing to be delivered, to the Collateral
Agent a HomeSide Tranche B Borrowing Base Addition Report, in the form of
Attachment 1-C hereto, with all blanks completed in conformity therewith,
together with all Required Documents in respect of such Eligible Servicing
Receivables. Simultaneously with its delivery to the Administrative Agent of a
notice of borrowing and/or notice of payment in respect of each HomeSide Tranche
B Advance Loan and HomeSide Tranche B Swing Line Loan as required under the
Credit Agreement, the Grantor shall designate P&I Advance Receivables, T&I
Advance Receivables and Default-Related Advance Receivables to be included in
the HomeSide Tranche B Borrowing Base by its delivery to the Collateral Agent of
a Receivables Certificate in the form of Attachment 1-D hereto, with all blanks
completed in conformity therewith.
(d) Designation of Mortgage Loans and Mortgage-Backed Securities. By
designating a Mortgage Loan or Mortgage-Backed Security for inclusion in the
HomeSide Tranche A Borrowing Base in accordance with this Section 4, the Grantor
shall be deemed to represent and warrant to each of the Secured Parties at and
as of the date of such addition that such Mortgage Loan or Mortgage-Backed
Security constitutes an Eligible Mortgage Loan or Eligible Mortgage-Backed
Security, as the case may be. If any such Mortgage Loan or Mortgage-Backed
Security fails to constitute an Eligible Mortgage Loan or Eligible
Mortgage-Backed Security, at any time, then the Grantor shall promptly so notify
the Administrative Agent and the Collateral Agent by telefacsimile, and such
Mortgage Loan or Mortgage-Backed Security shall be deemed to have no value for
purposes of determining the HomeSide Tranche A Borrowing Base (whether or not
the Grantor has given such notice).
(e) Designation of Servicing Receivables. By designating Eligible
Servicing Receivables for inclusion in the HomeSide Tranche B Borrowing Base in
accordance with this Section 4, the Grantor shall be deemed to represent and
warrant to each of the Secured Parties at and as of the date of such inclusion
that such Eligible Servicing Receivables constitute Eligible Default-Related
Advance Receivables, Eligible Early Buyout Advance Receivables, Eligible
Foreclosure Advance Receivables, Eligible P&I Advance Receivables, Eligible
Paid-in-Full Buyout Advance Receivables or Eligible T&I Advance Receivables, as
the case may be. If any such servicing receivables fail to constitute Eligible
Default-Related Advance Receivables, Eligible Early Buyout Advance Receivables,
Eligible Foreclosure Advance Receivables, Eligible P&I Advance Receivables,
Eligible Paid-in-Full Buyout Advance Receivables or Eligible T&I Advance
Receivables, at any time, then the Grantor shall promptly so notify the
Administrative Agent and the Collateral Agent by telefacsimile, and such
Servicing Receivables shall be
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9
deemed to have no collateral value for purposes of determining the HomeSide
Tranche B Borrowing Base (whether or not the Grantor has given such notice).
(f) Collateral Agent Office. The Collateral Agent shall hold all
documentation relating to or constituting Collateral delivered to it from time
to time under this Agreement or any other Loan Document in accordance with the
provisions hereof and of the other Loan Documents in a fire resistant vault,
drawer or other suitable depository in an office maintained by the Collateral
Agent on premises owned or leased or subleased by it and occupied and controlled
solely by the Collateral Agent (the "Collateral Agent Office"), which
documentation shall (x) be conspicuously marked to show the Collateral Agent's
and the other Secured Parties' interests therein and (y) not be commingled with
any other assets or property of, or held by, the Collateral Agent. The
Collateral Agent Office may, in the discretion of the Collateral Agent, be
located on premises leased or subleased to the Collateral Agent by the Grantor
or an Affiliate of the Grantor, and may be adjacent to or in the same office
building as offices maintained and occupied by the Grantor or its Affiliates;
provided, however, that (i) any such lease or sublease shall be in a form
customary in the location of such premises for arms'-length leases or subleases
of office premises between unrelated parties, and shall provide that the
Collateral Agent shall enjoy exclusive occupancy of such premises with no right
of access being granted to or retained by the Grantor or its other Affiliates
pursuant to such lease or sublease (other than any such right which is customary
for unaffiliated, third-party landlords to be granted in order to respond to
emergencies, or in order to conduct inspection of the premises upon reasonable
notice to the Collateral Agent and in the presence of the Collateral Agent),
(ii) there shall be no doorway or other physical access to the Collateral Agent
Office directly from premises occupied exclusively by the Grantor or any of its
other Affiliates, (iii) the public entrance to the Collateral Agent Office shall
be accessible from the street, a public lobby or other public space, and
entrance by the public into the Collateral Agent Office shall not require access
to space occupied exclusively by the Grantor or any of its other Affiliates,
(iv) the public entrance to the Collateral Agent Office shall be conspicuously
marked with the name of the Collateral Agent to identify such premises as being
premises of the Collateral Agent, and there shall be no reference in such
markings to the Grantor or any of its other Affiliates, (v) the Collateral Agent
Office shall be staffed solely by employees, officers or agents of the
Collateral Agent and not of the Grantor or any of its other Affiliates, which
employees, officers and agents will be under the sole supervision and direction
of the Collateral Agent, and (vi) the Grantor shall have access to the
Collateral Agent Office, under the supervision of the Collateral Agent, during
normal business hours, which access shall be not greater than that afforded to
similar Persons in an arm's-length custodial transaction.
5. Collateral Agent's Review of Collateral; Borrowing Base
Certificates.
(a) Review of Collateral. Upon receipt of Required Documents specified
on Attachment 2 hereto for any Collateral, the Collateral Agent shall review the
same and verify that:
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(i) all Required Documents appear regular on their face and
remain in the Collateral Agent's possession; and
(ii) the statements set forth on Attachment 3 hereto are
accurate and complete in all respects in respect of such Collateral.
Such verification of Collateral delivered during any period covered by a Basic
Status Report referred to in Section 5(d) hereof shall be set forth in such
report. If the Collateral Agent (x) notes any exception in the review described
in subsection (i) or (ii) above, (y) determines that any item of Collateral does
not satisfy the requirements of the Loan Documents for inclusion in the HomeSide
Tranche A Borrowing Base or the HomeSide Tranche B Borrowing Base, or (z)
questions, in its reasonable discretion, the genuineness, regularity, propriety,
or accuracy of any item of Collateral, the Collateral Agent shall note the same
as ineligible Collateral in its next HomeSide Tranche A Borrowing Base
Certificate or HomeSide Tranche B Borrowing Base Certificate, as the case may
be, delivered to the Administrative Agent.
(b) Borrowing Base Determination: Determination Assumptions. On each
Business Day, the Collateral Agent shall compute the value of the HomeSide
Tranche A Borrowing Base and the HomeSide Tranche B Borrowing Base (a "Borrowing
Base Determination"). At the close of the last Business Day of each week, the
Collateral Agent shall reconcile the Borrowing Base Determination against the
written determination thereof made by the Grantor (which determination shall be
in form and substance satisfactory to the Administrative Agent). In the event
either the Collateral Agent or Grantor determines that a discrepancy exists, the
Grantor shall cooperate with the Collateral Agent to reconcile such discrepancy
promptly but in any event not later than the following Business Day and prior to
any delivery of a HomeSide Tranche A Borrowing Base Certificate or HomeSide
Tranche B Borrowing Base Certificate to the Administrative Agent. Upon receipt
of a copy of any notice of borrowing and/or notice of payment submitted by the
Grantor to the Collateral Agent, deletion of any Collateral from the HomeSide
Tranche A Borrowing Base or the HomeSide Tranche B Borrowing Base or at such
other times as the Administrative Agent or the Grantor shall reasonably request,
the Collateral Agent shall promptly notify the Administrative Agent, or the
Grantor, as the case may be, of its Borrowing Base Determination by delivering a
HomeSide Tranche A Borrowing Base Certificate in the form of Attachment 4-A
hereto and a HomeSide Tranche B Borrowing Base Certificate in the form of
Attachment 4-B hereto. In making its Borrowing Base Determination, the
Collateral Agent shall also verify that (i) the aggregate outstanding Principal
Amount of all HomeSide Tranche A Loans and Tranche A Swing Line Loans does not
and, after giving effect to any borrowings or payments contemplated in any such
notice of borrowing or notice of payment or any such deletion, will not, exceed
the HomeSide Tranche A Borrowing Base, (ii) the HomeSide Tranche A Borrowing
Base complies in all respects to the limitations and other terms set forth in
Section 4.1 of the Credit Agreement, (iii) the aggregate outstanding Principal
Amount of all Tranche B Loans and Tranche B Swing Line Loans does not and, after
giving effect to any borrowings or payments contemplated
<PAGE> 11
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in any such notice of borrowing or notice of payment or any such deletion, will
not, exceed the HomeSide Tranche B Borrowing Base, and (iv) the HomeSide Tranche
B Borrowing Base complies in all respects to the limitations and other terms set
forth in Section 4.2 of the Credit Agreement.
(c) In making any Borrowing Base Determination or other calculation
involving a determination of the value of the HomeSide Tranche A Borrowing Base
or the HomeSide Tranche B Borrowing Base, the Collateral Agent shall be
permitted to rely, without independent investigation of the correctness thereof,
on:
(i) the information supplied by the Grantor to the Collateral
Agent on the related HomeSide Tranche A Borrowing Base Addition Report
with respect to the unpaid principal balance, the acquisition cost
(minus discount points and fees associated with yield), and the
Applicable Take-Out Price relating to any Mortgage Loan;
(ii) the information supplied by the Grantor to the Collateral
Agent on the related HomeSide Tranche A Borrowing Base Addition Report
with respect to the Applicable Take-Out Price relating to any
Mortgage-Backed Security;
(iii) the information supplied by the Grantor to the
Collateral Agent on the related HomeSide Tranche B Borrowing Base
Addition Report or Receivables Certificate with respect to the amount
of any Servicing Receivable;
(iv) the information supplied by the Grantor to the Collateral
Agent, whether written or in any other form acceptable to the
Collateral Agent, with respect to a determination as to whether amounts
received in the Mortgage Loan Settlement Account or Securities
Settlement Account represent the purchase price paid for a specific
Mortgage Loan or Mortgage-Backed Security and, consequently, whether
the value of such Mortgage Loan or of such Mortgage-Backed Security
should be removed from such calculation; and
(v) the information supplied by the Grantor to the Collateral
Agent, whether written or in any other form acceptable to the
Collateral Agent, with respect to a determination as to whether amounts
received in the Servicing Settlement Account represent collections of
Servicing Receivables or other Servicing Rights or the purchase price
paid for Servicing Receivables or other Servicing Rights sold and,
consequently, whether the value of such Servicing Receivables or
Servicing Rights should be removed from such calculation.
(d) Reports. The Collateral Agent shall deliver to: (i) the
Administrative Agent and the Grantor, (A) within three Business Days after the
end of each month, a basic status report in form and substance acceptable to the
Administrative Agent with respect to the status of the HomeSide Tranche A
Borrowing Base and the HomeSide Tranche B Borrowing Base ("Basic Status Report")
as of the end of the preceding month and
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(B) within one Business Day after the end of each week, a report in form and
substance acceptable to the Administrative Agent with respect to exceptions
noted by the Collateral Agent in accordance with Section 5(a) hereof outstanding
as of the end of the preceding week (an "Outstanding Exceptions Report"), and
(ii) to the Administrative Agent and the Lenders, from time to time, such other
reports and information as the Administrative Agent or the Required Lenders may
from time to time reasonably request. In preparing any such reports, the
Collateral Agent shall be entitled to rely, without independent investigation
(other than the review steps described on Attachment 3 hereto), on information
supplied to the Collateral Agent by the Grantor.
6. Release of Collateral; Pool Formation; Pledging of Mortgage-Backed
Securities and Transfer of Funds from Settlement Accounts.
(a) Release of Mortgage Loans for Correction Under Trust Receipt.
Unless and until notified by the Administrative Agent (by telephone,
telefacsimile or otherwise) that a Default or an Event of Default has occurred
and is continuing, the Collateral Agent is hereby authorized upon written
request of the Grantor to release from time to time to the Grantor,
documentation constituting or relating to Mortgage Loans pledged hereunder
against a trust receipt executed by the Grantor in the form of Attachment 5-A
hereto (during a Negative Security Period) or Attachment 5-B hereto (during a
Positive Security Period), with all blanks completed in conformity therewith. In
any such release, the Grantor and the Collateral Agent will comply with the
relevant trust receipt procedures specified on Attachment 6 hereto. The Grantor
hereby represents and warrants that (i) any request by the Grantor for release
of documentation constituting or relating to Mortgage Loans shall be solely for
the purposes of correcting clerical or other non- substantial documentation
problems in preparation for returning such documentation to the Collateral Agent
for ultimate sale or exchange, and (ii) the Grantor shall request such release
in compliance with all of the terms and conditions of such release herein set
forth. The Grantor agrees to hold any documentation so released in trust for the
Collateral Agent and the other Secured Parties, and agrees to return such
documentation to the Collateral Agent no later than the close of business on the
fourteenth (14th) day following the date of such release or, if such day is not
a Business Day, on the immediately preceding Business Day.
(b) Release of Mortgage Loans for Whole-Loan Purchases. Unless and
until otherwise notified by the Administrative Agent (by telephone,
telefacsimile or otherwise) that a Default or an Event of Default has occurred
and is continuing, upon delivery from time to time by the Grantor to the
Collateral Agent of a shipping request and authorization to ship in the form of
Attachment 7-A hereto, with all blanks completed in conformity therewith, the
Collateral Agent shall release documentation constituting or relating to
Mortgage Loans pledged hereunder to Approved Investors for purchase as whole,
non- pooled Mortgage Loans. Any transmittal of documentation for Mortgage Loans
in the possession of the Collateral Agent in connection with the sale thereof to
an Approved Investor (other than an Agency) shall be under cover of a
transmittal letter substantially in the form of Attachment 7-B hereto (during a
Negative Security Period) or
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Attachment 7-C hereto (during a Positive Security Period), with all blanks
completed in conformity therewith and duly executed by the Collateral Agent. Any
transmittal of documentation for Mortgage Loans in connection with the sale
thereof to either FHLMC or FNMA for inclusion as whole, non-pooled Mortgage
Loans in their respective loan portfolios shall be (x) under cover of a
transmittal letter substantially in the form of Attachment 7-B hereto (during a
Negative Security Period) or Attachment 7-C hereto (during a Positive Security
Period), with all blanks completed in conformity therewith and duly executed by
the Collateral Agent. Any transmittal of documentation for Mortgage Loans in
connection with the sale thereof to either FHLMC or FNMA for inclusion as whole,
non-pooled Mortgage Loans in their respective loan portfolios shall be (x) under
cover of a transmittal letter substantially in the form of Attachment 7-B hereto
(during a Negative Security Period) or Attachment 7-C hereto (during a Positive
Security Period), with all blanks completed in conformity therewith and duly
executed by the Collateral Agent, (y) under cover of such other forms in lieu of
the foregoing that FHLMC or FNMA require pursuant to their respective Agency
Guides, duly executed by the Collateral Agent and, if necessary, the Grantor, or
(z) with appropriate entries into any applicable electronic telecommunications
network utilized by FHLMC or FNMA. In each case of transmittal of documentation
constituting or relating to Mortgage Loans pursuant to this subsection (b), the
Collateral Agent and the Grantor shall instruct the recipient thereof that such
documentation shall be returned to the Collateral Agent if such Mortgage Loans
are not purchased and the proceeds thereof paid in accordance with subsection
(c) below within forty-five (45) days after such recipient's receipt of such
documentation or, if such forty-fifth day is not a Business Day, on the
immediately preceding Business Day. With respect to transmittal of documentation
constituting or relating to Mortgage Loans, before the Collateral Agent delivers
documentation pursuant to this subsection (b), the Grantor shall have delivered
to the Collateral Agent (or any other applicable Person) such forms, duly
executed by the Grantor, or written notification that the Grantor has made such
appropriate entries into any applicable electronic telecommunications network
utilized by FHLMC or FNMA, as required under the applicable Agency Guides or
Take-Out Commitments to effect delivery to FHLMC, FNMA or any other Approved
Investor of such Mortgage Loans and payment therefor in accordance with the
instructions of the Collateral Agent.
(c) Mortgage Loan Settlement Account. With respect to any purchases of
Mortgage Loans described in subsection (b) hereof, the Collateral Agent and the
Grantor shall instruct each Approved Investor purchasing Mortgage Loans that all
amounts payable on account of the sale of such Mortgage Loans are to be paid
directly by such party to a "no access" account of the Grantor (account no.
230-204929) maintained in the Administrative Agent's name alone at the office of
the Administrative Agent for the benefit of the Grantor (the "Mortgage Loan
Settlement Account"). For all such purchases of Mortgage Loans, the Grantor
shall, upon demand of the Collateral Agent or the Administrative Agent, provide
the Collateral Agent and the Administrative Agent with evidence that the Grantor
has directed such Approved Investors to pay such amounts directly into the
Mortgage Loan Settlement Account. Upon the Administrative Agent's receipt of the
full amount of the purchase price for each Mortgage Loan from an Approved
Investor in accordance with this subsection (c), the security interest created
by this Agreement on the affected Mortgage Loan (but not the Proceeds thereof)
shall be automatically released. Unless a Default or an Event of Default shall
be continuing, amounts held from time to time in the Mortgage Loan Settlement
Account may, upon the written instructions of the Grantor, be invested and
reinvested in Cash Equivalents. To the extent funds are not otherwise available
in the Mortgage Loan Settlement Account,
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the Collateral Agent shall have the right to redeem any such investments prior
to the maturity thereof for purposes of applying any funds in accordance with
the terms of any of the Loan Documents, and, in the event of any such
redemption, the Collateral Agent shall not be liable for any loss or penalties
relating thereto. Any profit realized from such investments shall be deposited
in, and any loss shall be charged to, the Mortgage Loan Settlement Account.
Neither the Collateral Agent nor any of the other Secured Parties shall be
liable for any such loss.
(d) Security Interest in Mortgage Loan Settlement Account. Pursuant to
Section 3 hereof, the Grantor has granted to the Collateral Agent, for the
benefit of the Secured Parties, a security interest in the Mortgage Loan
Settlement Account and in any and all funds, securities, Cash Equivalents and
other items at any time held therein as collateral security for the Secured
Obligations. This subsection (d) shall constitute irrevocable notice to the
Collateral Agent that the Mortgage Loan Settlement Account is a "no access"
account to the Grantor. The Collateral Agent shall hold its security interest in
the Mortgage Loan Settlement Account and all funds at any time held therein for
the benefit of the Secured Parties and with all rights of a secured party under
the UCC and other applicable New York law. In no circumstances shall the Grantor
have access to, control of or dominion over the Mortgage Loan Settlement
Account. The Collateral Agent hereby appoints the Administrative Agent to hold
the Mortgage Loan Settlement Account pursuant to the terms hereof for the
benefit of the Secured Parties with all rights of a secured party under the UCC
and other applicable New York law, and the Administrative Agent hereby accepts
such appointment.
(e) Release of Mortgage Loans for Pooling. Unless and until otherwise
notified by the Administrative Agent (by telephone, telefacsimile or otherwise)
that a Default or an Event of Default has occurred and is continuing, upon
delivery from time to time by the Grantor to the Collateral Agent of a shipping
request and authorization to ship in the form of Attachment 7-A hereto, with all
blanks completed in conformity therewith, the Collateral Agent shall release
documentation constituting or relating to Mortgage Loans in connection with the
formation of a pool of Mortgage Loans supporting Mortgage-Backed Securities. Any
transmittal of documentation for such Mortgage Loans in the possession of the
Collateral Agent shall be to the Certificating Custodian and shall be (x) under
cover of a transmittal letter substantially in the form of Attachment 7-D hereto
(during a Negative Security Period) or Attachment 7-E hereto (during a Positive
Security Period), as applicable, with all blanks completed in conformity
therewith and duly executed by the Collateral Agent; (y) under cover of such
other forms in lieu of the foregoing that FHLMC, FNMA or GNMA require pursuant
to their respective Agency Guides, duly executed by the Collateral Agent and, if
necessary, the Grantor; or (z) with entries into any applicable electronic
telecommunications network utilized by FHLMC, FNMA or GNMA. The Collateral Agent
and the Grantor shall, with respect to each Mortgage Loan for which
documentation is transmitted pursuant to this subsection (e), instruct the
Certificating Custodian to (i) return to the Collateral Agent, within ten (10)
days after receiving such documentation, either (A) evidence of such Mortgage
Loan's initial certification for inclusion in a Mortgage Loan pool if the
Certificating Custodian so
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certifies such Mortgage Loan or (B) all documentation relating to such Mortgage
Loan if the Certificating Custodian does not so certify such Mortgage Loan, (ii)
immediately return all documentation relating thereto to the Collateral Agent if
(A) the Certificating Custodian initially certifies such Mortgage Loan but
subsequently determines that such Mortgage Loan is not suitable for inclusion in
a Mortgage Loan pool supporting a Mortgage-Backed Security prior to the issuance
of such Mortgage-Backed Security or (B) no Mortgage-Backed Security supported by
a pool including such Mortgage Loan has been issued within forty-five (45) days
after the Certificating Custodian's receipt of such documentation, and (iii)
segregate and, during each Negative Security Period, properly identify all such
documentation as collateral of the Secured Parties that secures the Secured
Obligations. Before the Collateral Agent delivers documentation pursuant to this
subsection (e), the Grantor shall have delivered to the Collateral Agent or any
other applicable Person such forms, duly executed by the Grantor, or written
notification that the Grantor has made the appropriate entries into any
applicable electronic telecommunications network utilized by FHLMC, FNMA or
GNMA, as required under the applicable Agency Guides or Take-Out Commitments to
effect delivery to the Certificating Custodian of such Mortgage Loans and
payment therefor in accordance with the instructions of the Collateral Agent.
The Grantor further agrees to (x) enter into such arrangements and agreements
with the Collateral Agent, the Certificating Custodian and each of the Agencies
as may be necessary to facilitate the issuance of Mortgage-Backed Securities
under the respective Mortgage-Backed Securities programs of such Agencies and
(y) conform its procedures relating to the formation of such pools and the
delivery of such forms and certifications required by FHLMC, FNMA and GNMA, as
the case may be, to the established procedures of the Collateral Agent with
respect thereto.
(f) Return of Mortgage Loans by Certificating Custodian. If the
Certificating Custodian returns to the Collateral Agent documentation relating
to any Mortgage Loan following the Certificating Custodian's determination that
such Mortgage Loan is not suitable for pooling, the Collateral Agent shall hold
such documentation in accordance with the terms hereof, and, following the
Grantor's request that such Mortgage Loan be included in the HomeSide Tranche A
Borrowing Base for purposes of determining the value thereof pursuant to a
HomeSide Tranche A Borrowing Base Addition Report, shall also include such
Mortgage Loan in the HomeSide Tranche A Borrowing Base if (but only if) such
Mortgage Loan constitutes an Eligible Mortgage Loan.
(g) PTC and Seg Accounts. The Collateral Agent shall (i) maintain at
all times in its name with the Participants Trust Company (the "PTC"), or with a
participant of the PTC if the Collateral Agent is not a participant of the PTC,
a "Seg Account" (or an account that shall not at any time be subject to a
security interest in favor of the PTC or anyone benefiting through the PTC),
into which each GNMA Mortgage-Backed Security shall be initially deposited or
credited when issued, and (ii) maintain at all times in its name with a bank
that is a member of the Federal Reserve Bank of New York a securities account
into which each FHLMC Mortgage-Backed Security or FNMA Mortgage- Backed Security
shall be entered when issued. In all circumstances, possession, maintenance and
transfer of Mortgage-Backed Securities in, to and from such accounts
<PAGE> 16
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shall be under the sole and exclusive control of the Collateral Agent, and the
Grantor shall have no access to, control of or dominion over such accounts.
(h) MBS Custody Account. The Grantor has established and shall at all
times maintain a pledged securities custodial account (Account No. MR7635586)
with the Administrative Agent (the "MBS Custody Account") for the purpose of
holding all Mortgage-Backed Securities. The MBS Custody Account shall be a "no
access" account to the Grantor maintained in the Collateral Agent's name for the
benefit of the Grantor. The Collateral Agent shall have exclusive control over
the disposition of all Mortgage- Backed Securities held in the MBS Custody
Account, and the Grantor shall have no right to transfer, trade or otherwise
direct the disposition of such Mortgage-Backed Securities. Pursuant to Section 3
hereof, the Grantor has granted to the Collateral Agent, for the benefit of the
Secured Parties, a security interest in the MBS Custody Account and in any and
all Mortgage-Backed Securities at any time held therein or credited thereto as
collateral security for the Secured Obligations. This subsection (h) shall
constitute irrevocable notice to the Collateral Agent that the MBS Custody
Account is a "no access" account to the Grantor. The Collateral Agent shall hold
its security interest in the MBS Custody Account and all Mortgage-Backed
Securities at any time held therein or credited thereto, for the benefit of the
Secured Parties, with all rights of a secured party under the UCC and other
applicable New York or federal law. In no circumstances shall the Grantor have
access to, control of or dominion over the MBS Custody Account.
(i) Issuance of Mortgage-Backed Securities. The Grantor shall promptly
confirm to the Collateral Agent the issuance of each Mortgage-Backed Security
supported by a pool of Mortgage Loans constituting Collateral prior to such
issuance. Upon the issuance of Mortgage-Backed Securities, (A) the security
interest of the Collateral Agent, for the benefit of the Secured Parties, in the
pooled Mortgage Loans supporting such Mortgage- Backed Securities (but not in
the Proceeds thereof) shall cease, (B) for purposes of determining the HomeSide
Tranche A Borrowing Base, such Mortgage Loans shall be removed from the HomeSide
Tranche A Borrowing Base and, upon receipt by the Collateral Agent of a HomeSide
Tranche A Borrowing Base Addition Report in respect thereof, such
Mortgage-Backed Securities shall be deemed submitted for inclusion in the
HomeSide Tranche A Borrowing Base and (C) such Mortgage-Backed Securities and
the Proceeds thereof shall be subject to a security interest in favor of the
Collateral Agent for the benefit of the Secured Parties. The Collateral Agent
and the Grantor shall comply with all rules and regulations, if any, of the
applicable Agency, the PTC, the applicable Federal Reserve Bank and any
applicable Governmental Authority for recognizing, creating and perfecting
security interests in such Mortgage-Backed Securities and shall, to the extent
consistent with such rules and regulations, comply with the procedures set forth
on Attachment 3 hereto. For Book-Entry Mortgage-Backed Securities, the
Collateral Agent and the Grantor shall cause the applicable security to be
issued in the name of or pledged or transferred to the Collateral Agent (or a
financial intermediary for the Collateral Agent), as bailee for the Secured
Parties, as collateral security for the Secured Obligations, and the Grantor
shall identify the Collateral Agent (or its financial intermediary), for the
benefit of the Secured Parties, as the Person to whom such
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Mortgage-Backed Security shall be issued on the forms required by FHLMC, FNMA or
GNMA under their respective Agency Guides or in entries into any electronic
telecommunications network utilized by FHLMC, FNMA or GNMA. The Collateral Agent
shall make such entries with respect to such Mortgage-Backed Securities on its
books and records as necessary to reflect the transfer and pledge of such
securities for the benefit of the Secured Parties. The Collateral Agent shall
also ensure that each of the Administrative Agent, the Grantor, itself and any
other applicable Person receive such confirmation, if any, of the pledge as is
necessary to effect a Perfected Assignment with respect to the pledged security.
All such Mortgage-Backed Securities shall be credited "free" when issued to the
Collateral Agent or a financial intermediary of the Collateral Agent. For
certificated Mortgage-Backed Securities, the Collateral Agent or its bailee
(including, without limitation, the Administrative Agent) shall have received
and be holding in its possession for the benefit of the Secured Parties the
original Mortgage- Backed Security certificate, which shall be registered in the
name of the Collateral Agent or accompanied by a duly executed (in blank),
undated, transfer power or other instrument of assignment sufficient to transfer
the security to the Collateral Agent for the benefit of the Secured Parties.
Immediately upon demand of the Collateral Agent, the Grantor shall provide the
Collateral Agent and the Administrative Agent with evidence that the Grantor has
taken all steps and performed all actions necessary to ensure that the
Collateral Agent holds, for the benefit of the Secured Parties, a valid,
perfected and first priority security interest in all Mortgage-Backed
Securities.
(j) Securities Settlement Account. Unless the Administrative Agent has
notified the Collateral Agent that a Default or an Event of Default has occurred
and is continuing or until otherwise notified by the Administrative Agent (by
telephone, telefacsimile or otherwise), from time to time the Collateral Agent
shall arrange for the timely transfer of any Mortgage-Backed Securities to an
Approved Investor (including any of the Agencies), or the nominee thereof, in
accordance with the terms of any applicable Take-Out Commitment. The Grantor
agrees to provide the Collateral Agent with written or electronic designation of
such Approved Investors, together with the appropriate instructions for
crediting such Approved Investors' respective accounts. All deliveries of
Mortgage-Backed Securities to such Approved Investors shall be made only
"against payment" by such Approved Investors to the Securities Settlement
Account (as hereinafter defined), in immediately available funds, of the full
purchase price of such Mortgage- Backed Securities, in accordance with the terms
of such Take-Out Commitments. The Grantor shall provide the Collateral Agent and
the Administrative Agent with evidence that it has directed all Approved
Investors or other purchasers to pay the proceeds of Mortgage-Backed Securities
purchases directly to a "no access" account to the Grantor (account no.
230-204937) maintained in the Administrative Agent's name alone for the benefit
of the Grantor (the "Securities Settlement Account"). The Collateral Agent shall
hold its security interest in the Securities Settlement Account and all funds at
any time held therein for the benefit of the Secured Parties and with all rights
of a secured party under the UCC and other applicable New York law. In no
circumstances shall the Grantor have access to, control of or dominion over the
Securities Settlement Account. The Collateral Agent hereby appoints the
Administrative Agent to hold the Securities
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Settlement Account pursuant to the terms hereof for the benefit of the Secured
Parties with all rights of a secured party under the UCC and other applicable
New York law, and the Administrative Agent hereby accepts such appointment. Upon
the Collateral Agent's full receipt of the purchase price of any Mortgage-Backed
Security in accordance with this subsection (j) the security interest created by
this Agreement in the affected Mortgage- Backed Security (but not in the
Proceeds thereof) shall be automatically released. Unless a Default or an Event
of Default shall be continuing, amounts held from time to time in the Securities
Settlement Account may, upon the written instructions of the Grantor, be
invested in Cash Equivalents. To the extent funds are not otherwise available in
the Securities Settlement Account, the Collateral Agent shall have the right to
redeem any such investments prior to the maturity thereof for purposes of
applying any funds in accordance with the terms of any of the Loan Documents,
and, in the event of any such redemption, the Collateral Agent shall not be
liable for any loss or penalties relating thereto. Any profit realized from such
investments shall be deposited in, and any loss shall be charged to, the
Securities Settlement Account. Neither the Collateral Agent nor any of the other
Secured Parties shall be liable for any such loss.
(k) Release of Certain Mortgage Loans Relating to Eligible Early Buyout
Advance Receivables in Connection with Foreclosure Proceedings. Unless and until
otherwise notified by the Administrative Agent (by telephone, telefacsimile or
otherwise) that a Default or an Event of Default has occurred and is continuing,
upon delivery from time to time by the Grantor to the Collateral Agent of a
shipping request and authorization to ship in the form of Attachment 7-A hereto,
with all blanks completed in conformity therewith, the Collateral Agent shall
release documentation constituting or relating to Mortgage Loans obtained by the
Grantor in connection with an Eligible Early Buyout Advance Receivable and
pledged hereunder to the attorney or title insurance company that has been
requested by the Grantor to commence foreclosure proceedings in respect of such
Mortgage Loans. Any transmittal of documentation for Mortgage Loans in the
possession of the Collateral Agent to such attorney or title company in
connection with such foreclosure proceedings shall be under cover of a
transmittal letter substantially in the form of Attachment 7-F hereto (during a
Negative Security Period) or Attachment 7-G hereto (during a Positive Security
Period), with all blanks completed in conformity therewith and duly executed by
the Collateral Agent. In each case of transmittal of documentation constituting
or relating to Mortgage Loans pursuant to this subsection (k), the Collateral
Agent shall instruct the recipient thereof that it shall return to the
Collateral Agent, within 45 days of receipt of such documentation, either (i)
evidence of the completion of the foreclosure proceedings in respect of such
Mortgage Loans or (ii) all documentation relating to such Mortgage Loans if such
foreclosure proceedings have not been completed.
(l) No Collateral Release During Default or Event of Default. If the
Collateral Agent has been notified in writing by the Administrative Agent that a
Default or an Event of Default has occurred and is continuing, the Collateral
Agent shall not, and shall incur no liability to the Grantor or any other Person
for refusing to, release any item of
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Collateral to the Grantor or any other Person without the express prior written
consent and at the direction of the Administrative Agent.
(m) Servicing Settlement Account. With respect to any amounts owed to
the Grantor (other than from a mortgagor in respect of the applicable Mortgage
Loan) in respect of Servicing Receivables or other Servicing Rights (including,
without limitation, all Eligible Default-Related Advance Receivables, Eligible
Early Buyout Advance Receivables, Eligible Foreclosure Advance Receivables,
Eligible P&I Advance Receivables, Eligible Paid-in-Full Buyout Advance
Receivables, Eligible T&I Advance Receivables, proceeds of the sale of Servicing
Rights and all termination and other fees payable in respect of Servicing
Rights), if requested by the Administrative Agent, the Collateral Agent and the
Grantor shall instruct each obligor in respect of such Servicing Receivable or
other Servicing Rights that all amounts payable on account of such Servicing
Receivable or other Servicing Rights are to be paid directly by such party to a
"no access" account of the Grantor (account no. 230-205038) maintained in the
Administrative Agent's name alone at the office of the Administrative Agent for
the benefit of the Grantor (the "Servicing Settlement Account"). The Grantor
shall, upon demand of the Collateral Agent or the Administrative Agent, provide
the Collateral Agent and the Administrative Agent with evidence that the Grantor
has directed such obligors to pay such amounts directly into the Servicing
Settlement Account. Unless a Default or an Event of Default shall be continuing,
amounts held from time to time in the Servicing Settlement Account may, upon the
written instructions of the Grantor, be invested in Cash Equivalents. To the
extent funds are not otherwise available in the Servicing Settlement Account,
the Collateral Agent shall have the right to redeem any such investments prior
to the maturity thereof for purposes of applying any funds in accordance with
the terms of any of the Loan Documents, and, in the event of any such
redemption, the Collateral Agent shall not be liable for any loss or penalties
relating thereto. Any profit realized from such investments shall be deposited
in, and any loss shall be charged to, the Servicing Settlement Account. Neither
the Collateral Agent nor any of the other Secured Parties shall be liable for
any such loss. With respect to any amounts owed to the Grantor in respect of
Servicing Receivables or other Servicing Rights as to which the Administrative
Agent has not requested that such instructions be given to such obligors or
which are received by the Grantor contrary to such instructions, the Grantor
shall, on the date of its receipt thereof, deposit any and all such amounts in a
blocked account or other "no access" account in the name of the Administrative
Agent, which account shall be designated by, and subject to terms and conditions
satisfactory to, the Collateral Agent and the Administrative Agent. All funds so
deposited by the Grantor in such blocked or other account shall be promptly
transferred to the Servicing Settlement Account.
(n) Security Interest in Servicing Settlement Account. Pursuant to
Section 3 hereof, the Grantor has granted to the Collateral Agent, for the
benefit of the Secured Parties, a security interest in the Servicing Settlement
Account and each other blocked or other account of the type contemplated in
subsection (m) above, and in any and all funds, securities, Cash Equivalents and
other items at any time held therein as collateral security
<PAGE> 20
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for the Obligations. This subsection (n) shall constitute irrevocable
notice to the Collateral Agent that the Servicing Settlement Account is a "no
access" account to the Grantor. The Collateral Agent shall hold its security
interest in the Servicing Settlement Account and all funds at any time held
therein for the benefit of the Secured Parties and with all rights of a secured
party under the UCC and other applicable New York law. In no circumstances shall
the Grantor have access to, control of or dominion over the Servicing Settlement
Account. The Collateral Agent hereby appoints the Administrative Agent to hold
the Servicing Settlement Account pursuant to the terms hereof for the benefit of
the Secured Parties with all rights of a secured party under the UCC and other
applicable New York law, and the Administrative Agent hereby accepts such
appointment.
(o) Transfer of Funds from Settlement Accounts. The Administrative
Agent shall transfer by 3:00 P.M. of each Business Day from one or more
Settlement Accounts to an account of the Administrative Agent or to the accounts
of the Lenders, the lesser of (i) all amounts owing to each of the Secured
Parties pursuant to the terms of the Credit Agreement and each of the other Loan
Documents, and (ii) all immediately available funds on deposit in the Settlement
Accounts. The Administrative Agent shall determine the order of transfers from
the Settlement Accounts, and will apply the funds so transferred in payment of
all such amounts so owing in conformity with the provisions of the Credit
Agreement (notwithstanding any contrary instructions or lack of instructions
from the Collateral Agent or otherwise). Except during the continuance of a
Default or an Event of Default, after the transfer of funds described in the
first sentence of this subclause (o), on each Business Day, the Administrative
Agent shall (unless otherwise instructed by the Borrower) transfer all remaining
available funds on deposit in the Settlement Accounts (if any) to the Funding
Account.
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7. Rights of the Secured Parties; Limitations on Secured Parties'
Obligations.
(a) It is expressly agreed by the Grantor that, anything herein to the
contrary notwithstanding, the Grantor shall remain liable to observe and perform
all the conditions, duties and obligations to be observed and performed by it
relating to the Collateral, and the Grantor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the terms and
provisions relating thereto. Neither the Collateral Agent nor any other Secured
Party shall have any obligation or liability under any instrument, agreement,
contract or other document by reason of or arising out of this Agreement or the
granting of a security interest in any instrument, agreement, contract or other
document to the Collateral Agent on behalf and for the ratable benefit of the
Secured Parties or the receipt by the Collateral Agent or any other Secured
Party of any payment relating to any of the foregoing pursuant hereto, nor shall
the Collateral Agent or any other Secured Party be required or obligated in any
manner to perform or fulfill any of the obligations of the Grantor thereunder,
or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party thereunder, or to present or file any claim, or to take any action
to collect or enforce any performance or 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) Subject to the terms of this Agreement, the Collateral Agent
authorizes the Grantor to collect all sums due or to become due (including,
without limitation, Proceeds) in respect of any Collateral ("Collateral
Payments"), provided that such collection is performed in a prudent and
businesslike manner, and the Collateral Agent may, upon the occurrence and
during the continuance of any Default or Event of Default and without notice,
limit or terminate said authority at any time. If required by the Collateral
Agent at any time during the continuance of any Default or Event of Default, any
Collateral Payments, when first collected by the Grantor shall be promptly
delivered by the Grantor to the Collateral Agent in precisely the form received
(with all necessary indorsements), and until so turned over shall be deemed to
be held in trust by the Grantor for and as the Collateral Agent's property, for
the benefit of the Secured Parties, and shall not be commingled with the
Grantor's other funds or properties. Such Collateral Payments, when so delivered
to the Collateral Agent, shall continue to be collateral security for all of the
Secured Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Collateral Agent shall upon the request of the
Required Lenders apply all or a part of the funds so delivered to the principal
of and/or interest on any of the Secured Obligations in accordance with the
provisions of Section 17(h) hereof.
(c) The Collateral Agent may at any time, upon the occurrence and
during the continuance of any Default or Event of Default, notify any party that
is or might become obligated to make any Collateral Payment that the Collateral
and the right, title and interest of the Grantor in and under the Collateral
have been assigned to the Collateral Agent, for the benefit of the Secured
Parties, and that any or all of such Collateral Payments shall be made directly
to the Collateral Agent or its designee. Upon the request of the Collateral
Agent, the Grantor will so notify such parties. Upon the occurrence and
<PAGE> 22
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during the continuance of a Default or an Event of Default, the Collateral Agent
may in its own name or in the name of others communicate with all such parties
to verify with such parties to the Collateral Agent's satisfaction the
existence, amount and terms of any such obligation in respect of any Collateral
Payment.
8. Representations and Warranties.
(a) The Grantor hereby represents and warrants to the Secured Parties
as follows:
(i) The Grantor is the sole owner of each item of the
Collateral in which it purports to grant a security interest hereunder,
having good title thereto, free and clear of any and all Liens or any
other right, title, claim or interest, except for the security interest
granted pursuant to this Agreement.
(ii) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by the Grantor in
favor of the Collateral Agent, for the benefit of the Secured Parties,
pursuant to this Agreement.
(iii) Each Mortgage Loan (A) serviced by or on behalf of FHLMC
or FNMA included in the Eligible Servicing Portfolio is covered by a
FHLMC Acknowledgment Agreement or FNMA Acknowledgment Agreement,
respectively, that is in full force and effect, and (B) serviced by or
on behalf of GNMA included in the Eligible Servicing Portfolio will be,
after the execution and delivery thereof by GNMA, the Grantor and the
Collateral Agent, covered by a GNMA Acknowledgment Agreement that is in
full force and effect.
(iv) Each Approved Non-Agency Mortgage Loan that is included
in the Eligible Servicing Portfolio is covered by an Approved Investor
Acknowledgment Agreement that is in full force and effect.
(v) Except as otherwise provided in Section 28 hereof, all
action necessary to protect and perfect the valid and perfected first
priority security interest in each item of the Collateral has been duly
taken (except to the extent that subsequent delivery of documents or
instruments is permitted herein or in the Credit Agreement in
connection with Eligible Wet Loans).
(vi) The Grantor's principal place of business and the place
where its records concerning the Collateral are kept are set forth on
Schedule I hereto.
(vii) All information heretofore, herein, or hereafter
supplied to the Collateral Agent or any other Secured Party by or on
behalf of the Grantor with respect to the Collateral is accurate and
complete in all material respects.
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(viii) No consent of any other Person is required for the
grant of the security interest provided herein by the Grantor in any of
the Collateral, other than consents that have been obtained (subject to
any consents that may relate to Servicing Rights not covered by an
Acknowledgment Agreement), nor will any consent need to be obtained
upon the occurrence of an Event of Default for the Secured Parties to
exercise their rights with respect to any of such Collateral.
(ix) To the best of the Grantor's knowledge, no Obligor or
other Person responsible or liable for any Collateral Payment has any
defense, set off, claim or counterclaim against the Grantor that can be
asserted against the Collateral Agent or any other Secured Party.
(b) The Collateral Agent hereby represents and warrants to the Grantor
and each of the other Secured Parties as follows:
(i) The Collateral Agent is a national banking association
duly incorporated, validly existing and in good standing under the laws
of the United States of America.
(ii) The execution, delivery and performance by the Collateral
Agent of this Agreement are within the Collateral Agent's corporate
powers, have been duly authorized by all necessary corporate action and
do not contravene the Collateral Agent's certificate of incorporation
or bylaws, any Requirement of Law or any order or decree of any court,
or any contractual obligation of the Collateral Agent.
(iii) No consent, authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority or any
other Person is required for the due execution, delivery and
performance by the Collateral Agent of this Agreement.
(iv) This Agreement has been duly executed and delivered by
the Collateral Agent and is the legal, valid and binding obligation of
the Collateral Agent, enforceable against the Collateral Agent in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally and by general principles of equity.
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9. Additional Representations and Warranties Concerning Mortgage Loans,
Mortgage-Backed Securities and Servicing Receivables, Etc..
By adding any Mortgage Loan or Mortgage-Backed Security to the HomeSide
Tranche A Borrowing Base or any Servicing Receivable to the HomeSide Tranche B
Borrowing Base in accordance with Section 4 of this Agreement, the Grantor shall
be deemed to represent and warrant to the Secured Parties at and as of the date
of such addition that each of the statements set forth with respect to such
Mortgage Loan, Mortgage-Backed Security or Servicing Receivable in the
definition of Eligible First Mortgage Loan, Eligible Second Mortgage Loan,
Eligible Mortgage-Backed Security, Eligible Early Buyout Advance Receivable,
Eligible Default-Related Advance Receivable, Eligible Foreclosure Advance
Receivable, Eligible Paid-in-Full Buyout Advance Receivable, Eligible P&I
Advance Receivable or Eligible T&I Advance Receivable, as the case may be, is
true and correct. If any such statement may be untrue or incorrect in any
respect at any time, then the Grantor shall promptly so notify the
Administrative Agent and the Collateral Agent by telefacsimile, and such
Mortgage Loan, Mortgage-Backed Security or Servicing Receivable shall be deemed
to have no value for purposes of determining the HomeSide Tranche A Borrowing
Base or the HomeSide Tranche B Borrowing Base, as the case may be (whether or
not the Grantor has given such notice).
10. Standard of Care of Collateral Agent; Duties; Indemnification.
The Collateral Agent is a bailee for hire and shall hold the Collateral
in accordance with customary standards for those engaged as custodians of
commercial documents in similar capacities. Nothing contained herein or in the
Credit Agreement shall be construed to make the Collateral Agent a trustee or
other fiduciary for the Administrative Agent or any other Secured Party.
Notwithstanding anything to the contrary contained herein:
(a) The provisions of the Credit Agreement, this Agreement and the
annexes, schedules, exhibits and attachments hereto set forth the exclusive
duties of the Collateral Agent and no implied duties or obligations shall be
read into this Agreement against the Collateral Agent. The Collateral Agent
shall not be bound in any way by any agreement or contract other than this
Agreement and the annexes, the exhibits and the attachments hereto and any other
agreement to which it is a party. The Collateral Agent shall not be required to
ascertain or inquire as to the performance or observance of any of the
conditions or agreements to be performed or observed by any other party, except
as specifically provided in this Agreement and the annexes, schedules, exhibits
and attachments hereto. The Collateral Agent disclaims any responsibility for
the validity or accuracy of the recitals to this Agreement and any
representations and warranties contained herein, unless specifically identified
as recitals, representations or warranties of the Collateral Agent.
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(b) Throughout the term of this Agreement, the Collateral Agent shall
have no responsibility for ascertaining the value, collectability, insurability,
enforceability, effectiveness or suitability (except as otherwise provided by
the Collateral Review Procedures set forth on Attachment 3 hereto) of any
Collateral, the title of any party therein, the validity or adequacy of the
security afforded thereby or the validity of this Agreement (except as to
Collateral Agent's authority to enter into this Agreement and to perform its
obligations hereunder).
(c) The Collateral Agent shall not be under any duty to examine or pass
upon the genuineness, validity, or legal sufficiency of any of the documents
constituting part of any Mortgage Loan file, including, without limitation,
whether any document purporting to be an assignment is in recordable form or
whether any Evidence of Notice to Customer and Rescission is in compliance with
Regulation Z or other applicable law, and shall be entitled to assume that all
documents constituting part of such files are genuine and valid and that they
are what they purport to be and that any endorsements or assignments thereof are
genuine and valid. The Collateral Agent may rely upon and shall be protected in
acting in good faith upon any notice, resolution, request, consent, order,
certificate, report, statement or other paper or document appearing on its face
to be genuine and to have been signed or presented by the proper party or
parties or by a person or persons authorized to act on behalf of the proper
party or parties. The Collateral Agent shall not be liable for any action or
omission to act as bailee, except for its own gross negligence or willful
misconduct.
(d) No provision of this Agreement shall require the Collateral Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if, in its judgment, it shall believe that repayment of such
funds or adequate indemnity against such risk or liability is not assured to it.
(e) The Collateral Agent is not responsible for preparing or filing any
reports or returns relating to federal, state or local income taxes with respect
to this Agreement, other than for the Collateral Agent's compensation or for
reimbursement of expenses.
(f) The Grantor agrees to reimburse, indemnify and hold harmless the
Collateral Agent and its directors, officers, employees, Affiliates and agents
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, reasonable attorneys' fees and disbursements and allocated costs of
internal counsel) or disbursements of any kind or nature that may be imposed on,
incurred by or asserted against the Collateral Agent and its directors,
officers, employees, Affiliates and agents arising from or connected with the
Collateral Agent's execution and performance of this Agreement, including, but
not limited to, the claims of any third parties, including any assignee. The
foregoing shall apply regardless of whether such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements are in any way or to any extent caused, in whole or in part, by
any negligent act or omission of any kind by the Collateral Agent; provided
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that the Grantor shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from gross negligence or willful misconduct
on the part of the Collateral Agent. This provision shall survive the
termination of this Agreement.
(g) At its sole cost and expense, the Collateral Agent shall have the
power to employ such agents as it may deem necessary or appropriate in the
performance of its duties and the exercise of its powers under this Agreement.
11. Fees and Expenses of Collateral Agent.
The Collateral Agent shall notify the Grantor of all reasonable fees,
expenses, and charges of the Collateral Agent arising out of the Collateral
Agent's entering into this Agreement and performing its duties and obligations
under this Agreement (including in connection with the enforcement of remedies
hereunder and realization upon the Collateral), and (except as set forth in
Section 10(g) hereof) such fees, expenses and charges shall be paid promptly by
the Grantor or, if already paid by the Collateral Agent, the Grantor shall
reimburse the Collateral Agent promptly therefor. The Collateral Agent shall
receive reasonable additional compensation from the Grantor for services
rendered beyond those specifically enumerated in this Agreement, provided that
the Collateral Agent shall, to the extent possible, provide reasonable advance
notice to the Grantor of such services and its estimate of fees, expenses and
charges in connection therewith. The Collateral Agent may employ, at the
Grantor's expense, such legal counsel and other experts as it reasonably deems
necessary in connection with entering into this Agreement and performing its
duties and obligations under this Agreement. The Collateral Agent may rely upon
and shall be protected if acting in good faith upon the advice of such legal
counsel or experts.
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12. Removal or Resignation of Collateral Agent.
The Administrative Agent, upon the direction of the Required Lenders,
may, at any time, remove and discharge the Collateral Agent from the performance
of its duties under this Agreement, effective (a) immediately if such
termination is for cause or (b) upon not less than thirty (30) days' prior
written notice to the Collateral Agent and the Grantor if such termination is
without cause. In addition, the Collateral Agent may, at any time, terminate its
agreement to act as the Collateral Agent hereunder, effective upon sixty (60)
days' prior written notice to the Grantor, the Administrative Agent and the
Lenders. Upon the effective date of any such termination, the Collateral Agent
shall promptly deliver the Collateral then held by it and any and all books and
records (or copies thereof) relating thereto, to the Administrative Agent or to
such other person or entity as the Administrative Agent may direct in writing,
and shall cooperate with the Administrative Agent and any successor Collateral
Agent in order to effect the orderly transfer of the Collateral and the rights
and obligations of the Collateral Agent hereunder to any successor Collateral
Agent. Upon resignation or removal of the Collateral Agent hereunder, the
Administrative Agent and the Required Lenders shall appoint a successor
Collateral Agent. If no successor Collateral Agent shall have been so appointed,
and shall have accepted such appointment, before the end of the thirty (30) or
sixty (60) day period referred to above, as the case may be, then the
Administrative Agent (or, at the discretion of the Administrative Agent, an
Affiliate of the Administrative Agent) shall succeed as Collateral Agent.
13. Availability of Documents.
The Administrative Agent and each other Secured Party and its agents,
accountants, attorneys and auditors will be permitted during normal business
hours at any time and from time to time upon reasonable notice to the Collateral
Agent to examine and inspect (to the extent permitted by applicable law) the
files, documents, records and other papers in the possession or under the
control of the Collateral Agent relating to any or all of the Collateral and to
make copies thereof. As long as no Default or Event of Default has occurred and
is continuing, any such activity will be at no cost or expense to the Grantor;
if a Default or Event of Default has occurred and is continuing, all costs and
expenses associated with the exercise by the Administrative Agent or any other
Secured Party of its rights under this Section 13 shall be paid by the Grantor
within fifteen (15) days of receipt by the Grantor from the Administrative Agent
or such other Secured Party of a statement setting forth in reasonable detail
the amount thereof.
14. Covenants.
The Grantor covenants and agrees with the Collateral Agent and the
other Secured Parties that from and after the date of this Agreement and until
the Secured Obligations are fully satisfied:
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(a) Further Documentation; Pledge of Instruments and Chattel Paper. At
any time and from time to time, upon the written request of the Collateral
Agent, and at the sole expense of the Grantor, the Grantor will promptly and
duly execute and deliver any and all such further instruments and documents and
take such further action as the Collateral Agent may reasonably deem necessary
or desirable to obtain the full benefits of this Agreement and of the rights and
powers herein granted, including, without limitation, using its best efforts to
secure all consents and approvals necessary or appropriate for the assignment to
the Collateral Agent of any Collateral held by the Grantor or in which the
Grantor has any rights not heretofore assigned, the filing of any financing or
continuation statements under the UCC with respect to the Liens and security
interests granted hereby and transferring Collateral to the Collateral Agent's
(or its bailee's) possession (if a security interest in such Collateral can be
perfected by possession). The Grantor also hereby authorizes the Collateral
Agent to file any such financing or continuation statement without the signature
of the Grantor to the extent permitted by applicable law. If any of the
Collateral shall be or become evidenced by any instrument, the Grantor agrees to
pledge such instrument to the Collateral Agent and shall duly endorse such
instrument in a manner satisfactory to the Collateral Agent and deliver the same
to the Collateral Agent. The Grantor shall hold any such instrument in its
possession in trust for the benefit of the Secured Parties until the delivery
thereof to the Collateral Agent as provided herein.
(b) Maintenance of Records. The Grantor will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. The Grantor will mark its books and records pertaining to the
Collateral to evidence this Agreement and the Lien and security interests
granted hereby. For the Collateral Agent's and the other Secured Parties'
further security, the Grantor agrees that the Collateral Agent and the other
Secured Parties shall have a special property interest in all of the Grantor's
books and records pertaining to the Collateral and, upon the occurrence and
during the continuance of any Default or Event of Default, the Grantor shall
deliver and turn over any such books and records to the Collateral Agent or to
its representatives at any time on demand of the Collateral Agent.
(c) Indemnification. In any suit, proceeding or action brought by the
Collateral Agent or any other Secured Party relating to all or any portion of
the Collateral or any Collateral Payment for any sum owing thereunder, or to
enforce any right in respect of the Collateral or any Collateral Payment, the
Grantor will indemnify and save and keep harmless the Collateral Agent and each
of the other Secured Parties from and against all expense, loss or damage
suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out of a
breach by the Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor of, such
obligor or its successors from the Grantor, and all such obligations of the
Grantor shall be and remain enforceable against and only against the Grantor and
shall not be enforceable against the Collateral Agent or any other Secured
Party.
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(d) Compliance with Laws, Etc. The Grantor will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any Governmental Authority, applicable to the Collateral or any part thereof or
to the operation of the Grantor's business; provided, however, that the Grantor
may contest any act, regulation, order, decree or direction in any reasonable
manner which shall not, in the sole opinion of the Collateral Agent, adversely
affect the Collateral Agent's rights hereunder or adversely affect the first
priority of its Lien on and security interest in the Collateral for the benefit
of the Secured Parties.
(e) Payment of Obligations. The Grantor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom and all claims of
any kind (including, without limitation, claims for labor, materials and
supplies), except that no such charge need be paid if (i) such non-payment does
not involve any danger of the sale, forfeiture or loss of any of the Collateral
or any interest therein, and (ii) such charge is adequately reserved against in
accordance with and to the extent required by GAAP.
(f) Compliance with Terms of Agreements, Etc. In all material respects,
the Grantor will comply with and perform with all obligations, covenants,
conditions and other agreements with respect to any of the Collateral and all
other agreements related thereto to which it is a party or by which it is bound.
(g) Limitation on Liens on Collateral. The Grantor will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral except the
Liens created under this Agreement and the other Loan Documents, and will defend
the right, title and interest of the Collateral Agent and the other Secured
Parties in and to any of the Grantor's rights in and under the Collateral and in
and to the Proceeds thereof against the claims and demands of all Persons
whomsoever.
(h) Limitations on Disposition. The Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so, except as permitted by the Credit Agreement, this Agreement or the
other Loan Documents.
(i) Further Identification of Collateral. The Grantor will, if so
requested by the Collateral Agent, furnish to the Collateral Agent, as often as
the Collateral Agent reasonably requests, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
(j) Notices. The Grantor will advise the Collateral Agent promptly, in
reasonable detail, (i) of any Lien or claim made or asserted against any of the
Collateral, (ii) of any material change in the composition of the Collateral,
and (iii) of the occurrence of any
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other event which would have a material adverse effect on the aggregate value of
the Collateral or on the security interests created hereunder.
(k) Right of Inspection. Upon reasonable notice to the Grantor (unless
a Default or an Event of Default has occurred and is continuing, in which case
no notice is necessary), the Collateral Agent, each of the other Secured
Parties, and their respective agents, accountants, attorneys and auditors shall
at all times have full and free access during normal business hours to all the
files, documents, records and other papers of the Grantor, and the Collateral
Agent, each of the other Secured Parties and their respective agents,
accountants, attorneys and auditors may examine the same, take extracts
therefrom and make photocopies thereof, and the Grantor agrees to render to the
Collateral Agent, at the Grantor's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto.
(l) Continuous Perfection. The Grantor will not change its name,
identity or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless the Grantor shall have given the Collateral Agent
at least 30 days' prior written notice thereof and shall have taken all action
(or made arrangements to take such action substantially simultaneously with such
change if it is impossible to take such action in advance) necessary or
reasonably requested by the Collateral Agent to amend such financing statement
or continuation statement so that it is not seriously misleading. The Grantor
will not change its principal place of business or remove its records, each as
set forth on Schedule I hereto, unless it gives the Collateral Agent at least 30
days' prior written notice thereof and has taken such action as is necessary to
cause the security interest of the Collateral Agent in the Collateral to
continue to be perfected.
(m) Insurance. The Grantor will keep the Collateral insured against
loss, damage, theft and other risks customarily covered by insurance and such
other risks as the Collateral Agent may reasonably request.
(n) Other Acts. The Grantor will do all acts that a prudent investor
would deem necessary or desirable to maintain, preserve and protect the
Collateral.
(o) Defense of Actions. The Grantor will appear in and defend, at the
Grantor's sole cost and expense (unless such action or proceeding arises solely
from an act or failure to act by a Secured Party which act or failure to act is
determined to be gross negligence or willful misconduct), any action or
proceeding that may affect its title to or the Secured Parties' interest in the
Collateral.
(p) Reports. Within five Business Days after the end of each calendar
month, the Grantor will provide to the Administrative Agent and the Collateral
Agent a report in respect of each type of Eligible Servicing Receivable, which
report shall be set forth (a) except for Eligible P&I Advance Receivables, in
loan-level detail (including, without
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limitation, loan number and receivable amount), and (b) with respect to
Eligible P&I Advance Receivables, by investor remittance type, in each case, in
form and substance satisfactory to the Administrative Agent.
15. The Collateral Agent's Appointment as Attorney-in-Fact.
(a) The Grantor hereby irrevocably constitutes and appoints the
Collateral Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Grantor and in the name of the
Grantor or in its own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute and deliver any and all documents
and instruments which the Collateral Agent may deem necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives the Collateral Agent the power and right, on
behalf of the Grantor, without notice to or assent by the Grantor to do the
following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any
Collateral and, in the name of the Grantor or in its own name or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Collateral and to file any claim or to take any
other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the
Collateral Agent for the purpose of collecting any and all such moneys
due under any Collateral whenever payable;
(ii) to pay or discharge taxes, Liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral, to effect any insurance called for by the terms of this
Agreement and to pay all or any part of the premiums therefor and the
costs thereof; and
(iii) (A) to direct any party liable for any Collateral
Payment under any of the Collateral to make any and all Collateral
Payments due and to become due thereunder, directly to the Collateral
Agent or as the Collateral Agent shall direct; (B) to receive payment
of and receipt for any and all moneys, claims and other amounts due and
to become due at any time, in respect of or arising out of any
Collateral; (C) to sign and indorse any invoices, freight or express
bills, bills of lading, storage, trust or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection
with accounts and other documents constituting or relating to the
Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction
to collect the Collateral or any part thereof and to enforce any other
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right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against the Grantor with respect to any Collateral;
(F) to settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, to give such discharges
or releases as the Collateral Agent may deem appropriate; (G) to
license or, to the extent permitted by an applicable license,
sublicense, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any patent or trademark constituting
Collateral, throughout the world for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its
sole discretion determine; and (H) generally to sell, transfer, pledge,
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Collateral Agent were
the absolute owner thereof for all purposes, and to do, at the
Collateral Agent's option and the Grantor's expense, at any time, or
from time to time, all acts and things which the Collateral Agent
reasonably deems necessary to protect, preserve or realize upon the
Collateral and the Collateral Agent's and the other Secured Parties'
Lien therein, in order to effect the intent of this Agreement, all as
fully and effectively as the Grantor might do.
(b) The Collateral Agent agrees that, except upon the occurrence and
during the continuance of any Default or Event of Default, it will forbear from
exercising the power of attorney or any rights granted to the Collateral Agent
pursuant to this Section 15. The Grantor hereby ratifies, to the extent
permitted by law, all that any said attorney shall lawfully do or cause to be
done by virtue hereof. The power of attorney granted pursuant to this Section
15, being coupled with an interest, shall be irrevocable until the Secured
Obligations are indefeasibly paid in full.
(c) The powers conferred on the Collateral Agent hereunder are solely
to protect the Collateral Agent's and the other Secured Parties' interests in
the Collateral and shall not impose any duty upon it to exercise any such
powers. The Collateral Agent 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
Grantor for any act or failure to act, except for its own gross negligence or
willful misconduct.
(d) The Grantor also authorizes the Collateral Agent, at any time and
from time to time upon the occurrence and during the continuance of a Default or
Event of Default, (i) to communicate in its own name with any party to any
contract, instrument, agreement or document constituting Collateral with regard
to the assignment of the right, title and interest of the Grantor therein and
thereunder and other matters relating thereto and (ii) to execute, in connection
with the sale provided for in Section 17 hereof, any indorsements, assignments
or other instruments of conveyance or transfer with respect to the Collateral.
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16. Performance by the Collateral Agent of the Grantor's Obligations.
If the Grantor fails to perform or comply with any of its agreements
contained herein and the Collateral Agent, as provided for by the terms of this
Agreement, shall itself perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses of the Collateral Agent
incurred in connection with such performance or compliance, together with
interest thereon at the highest rate then in effect in respect of the Loans,
shall be payable by the Grantor to the Collateral Agent on demand and shall
constitute Secured Obligations secured hereby.
17. Remedies, Rights Upon an Event of Default.
(a) If any Event of Default shall occur and be continuing, the
Collateral Agent shall, at the request of the Administrative Agent (acting upon
the direction of the Required Lenders), or may with the consent of the
Administrative Agent (acting upon the direction of the Required Lenders),
exercise in addition to all other rights and remedies granted to it in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a secured party
under the UCC or as otherwise provided by applicable law or in equity. Without
limiting the generality of the foregoing, the Grantor expressly agrees that in
any such event the Collateral Agent, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon the Grantor or any other
Person (all and each of which demands, advertisements and/or notices are hereby
expressly waived to the maximum extent permitted by the UCC and other applicable
law), may forthwith (i) enter onto property where any Collateral or books and
records relating thereto are located and take possession thereof with or without
judicial process, (ii) prior to the disposition of any Collateral, prepare such
Collateral for disposition in any manner and to the extent the Administrative
Agent or Collateral Agent deems appropriate, (iii) collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or sell, lease,
assign, give an option or options to purchase, or sell or otherwise dispose of
and deliver said Collateral (or contract to do so), or any part thereof, in one
or more parcels at public or private sale or sales, at any exchange or broker's
board or any of the Collateral Agent's offices or elsewhere at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. The Collateral Agent or any other Secured Party shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
said Collateral so sold. Each purchaser at any such sale or other disposition
shall hold the Collateral free from any claim or right of whatever kind,
including, without limitation, any equity or right of redemption of the Grantor,
and the Grantor specifically waives and releases (to the extent permitted by
law) all rights of redemption, stay, or appraisal that it has or may have under
any rule of law or statute now existing or hereafter adopted. The Grantor
further agrees, at the Collateral Agent's request, to assemble the Collateral
and make it available to the Collateral Agent at places which the Collateral
Agent shall reasonably select, whether at the Grantor's premises or elsewhere.
The
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Collateral Agent shall apply the net proceeds of any such collection, recovery
receipt, appropriation, realization or sale, as provided in Section 17(h)
hereof, the Grantor remaining liable for any deficiency remaining unpaid after
such application, and only after so paying over such net proceeds and after the
payment by the Collateral Agent of any other amount required by any provision of
law, including Section 9-504(1)(c) of the UCC, need the Collateral Agent account
for the surplus, if any, to the Grantor. To the maximum extent permitted by
applicable law, the Grantor waives all claims, damages, and demands against the
Secured Parties arising out of the repossession, retention or sale of the
Collateral. The Grantor agrees that the Collateral Agent need not give more than
ten days' notice of the time and place of any public sale or of the time after
which a private sale may take place and that such notice is reasonable
notification of such matters. The Grantor shall remain liable for any deficiency
if the proceeds of any sale or disposition of the Collateral are insufficient to
pay all amounts to which the Secured Parties are entitled, the Grantor also
being liable for the fees and expenses of any attorneys employed by the
Collateral Agent and the other Secured Parties to collect such deficiency. Upon
the exercise by the Collateral Agent of any remedy hereunder, the Grantor shall
(x) upon request of the Collateral Agent, deliver to the Collateral Agent all
computer software, tapes, records, documents, escrow deposits and other deposits
in its possession or under its control relating to the Collateral, and (y)
cooperate with the Collateral Agent in every respect in effecting such delivery.
(b) In furtherance and not in limitation of the rights of the
Collateral Agent set forth in this Section 17, upon the acceleration of the
maturity of the Loans or other Secured Obligations as provided in the Credit
Agreement, at the request and direction of the Administrative Agent, the
Collateral Agent may, in addition to any other rights it may have, do one or
more of the following, subject to the terms of the relevant Servicing Contract,
Acknowledgment Agreement, Agency Guide or applicable law (it being understood
that if there is any conflict between any such relevant Servicing Contract,
Acknowledgment Agreement, Agency Acknowledgment Agreement, Agency Guide or
applicable law and this Agreement, then the terms of such Servicing Contracts,
Acknowledgment Agreement, Agency Acknowledgment Agreement, Agency Guide or
applicable law shall prevail):
(i) succeed the Grantor as servicer under any or all of the
Servicing Contracts as absolute assignee thereof and not merely as
security;
(ii) appoint a third party as successor servicer under any or
all of the Servicing Contracts;
(iii) sell to a third party or itself or otherwise transfer
any of the Grantor's right, title, interest or obligations with respect
to the Servicing Contracts, including without limitation the right to
hold and/or place the escrow deposits associated therewith; or
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(iv) require the Grantor, notwithstanding any action taken by
the Collateral Agent under clause (iii), to remain as servicer under
any Servicing Contract for a reasonable period of time, such period not
to exceed 180 days.
Notwithstanding anything herein to the contrary, the Collateral Agent shall have
no obligations as servicer under any Servicing Contracts unless and until the
Collateral Agent has succeeded the Grantor as servicer of the related Mortgage
Loans pursuant to this subsection (b).
(c) The Collateral Agent's rights under clauses (i), (ii) and (iii) of
subsection (b) above shall respectively include, without limitation, the right
to succeed the Grantor as servicer, appoint a successor servicer or transfer any
or all of its rights with respect to the Servicing Rights and/or the Servicing
Contracts if the Grantor, or any successor to the Grantor in bankruptcy or
similar proceedings, rejects any Servicing Contracts. As successor servicer
under such clause (i), the Collateral Agent shall notify all interested
Persons thereof and take such further action as it shall deem necessary or
appropriate. Upon the Collateral Agent's (x) succeeding the Grantor as servicer
under such clause (i), (y) appointing a third party as a successor servicer
under any Servicing Contract under such clause (ii), or (z) transferring any of
the Grantor's right, title, interest and obligations under such clause (iii),
the Grantor shall have no further rights under or with respect to the Servicing
Rights (or to such rights, title, interest or obligations in the case of a
transfer under clause (iii)), to any other documents pertaining thereto or to
the related escrow deposits.
(d) Upon the exercise by the Collateral Agent of any remedy set forth
in subsection (b) or (c) above, the Grantor shall:
(i) upon request of the Collateral Agent, deliver to the
Collateral Agent all computer software, tapes, records, documents,
escrow deposits and other deposits in its possession or under its
control relating to the Collateral, and
(ii) cooperate with the Collateral Agent in every reasonable
respect in effecting the succession of a successor servicer.
(e) If the Collateral Agent or any appointee of the Collateral Agent
succeeds the Grantor as successor servicer under any Servicing Contract, the
Collateral Agent or such appointee, as the case may be, shall only assume those
obligations that a successor servicer under such Servicing Contract is obligated
to assume; provided that neither the Collateral Agent or its appointee nor any
other Secured Party shall be liable for any failure of the Grantor to perform
its obligations under any Servicing Contract or for any other breach thereof.
Nothing herein contained shall be construed as an assumption by the Collateral
Agent or its appointee or any other Secured Party of any liability of the
Grantor with respect to any of the Collateral, and the Grantor shall be and
remain responsible for all such liabilities.
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(f) The Grantor also agrees to pay all reasonable costs and expenses of
the Collateral Agent and each of the other Secured Parties, including, without
limitation, attorneys' fees, incurred in connection with the enforcement of any
of their rights and remedies hereunder.
(g) The Grantor hereby waives presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(h) The Proceeds of any sale, disposition or other realization upon all
or any part of the Collateral shall be distributed by the Collateral Agent in
the following order of priorities:
First, to the payment of the costs and expenses of such sale,
disposition or other realization, including, without limitation, all
expenses of the Collateral Agent and its agents including the fees and
expenses of its counsel, and all expenses, liabilities and advances
made or incurred by the Collateral Agent and the other Secured Parties
in connection therewith or pursuant to Section 7 hereof;
Next, to the Administrative Agent, for distribution by it in
accordance with the terms of the Credit Agreement; and
Finally, after payment in full of all the Secured Obligations,
to the payment to the Grantor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same as a court of
competent jurisdiction may direct.
18. Limitation on the Secured Parties' Duty in Respect of Collateral.
No Secured Party shall have any duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
it or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto, except that each Secured Party
shall use reasonable care with respect to the Collateral in its possession or
under its control. Upon request of the Grantor, the Collateral Agent shall
account for any moneys received by it in respect of any foreclosure on or
disposition of the Collateral.
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19. Rights with Respect to GNMA; Acknowledgment Agreements.
(a) Notwithstanding anything contained herein or in any of the other
Loan Documents to the contrary, the Collateral Agent, by executing this
Agreement, and each of the other Secured Parties, by executing the Credit
Agreement, acknowledge that (a) the Grantor is entitled to servicing income with
respect to any GNMA pool of Mortgage Loans only so long as the Grantor is a GNMA
Issuer/Servicer in good standing; (b) upon the Grantor's loss of such good
standing status, the Secured Parties' rights to any such servicing income also
terminate; and (c) the pledge of rights to servicing income with respect to any
GNMA pool of Mortgage Loans hereunder conveys no rights (such as the right to
become a substitute servicer or issuer) that are not otherwise specifically
provided for in the applicable GNMA Guide. Notwithstanding anything contained
herein or in the other Loan Documents to the contrary, to the extent that any
Acknowledgment Agreement is executed and delivered by FNMA and such agreement or
the FNMA Guide relating thereto provides that the Grantor may not pledge
security interests in rights relating to servicing income to secure Loans, the
proceeds of which Loans are used for purposes prohibited by such agreement or
FNMA Guide, then the Collateral Agent and the other Secured Parties shall not be
deemed to have such a security interest to the extent such security interest
serves as collateral for such prohibited use; provided that nothing contained
herein shall affect the validity or enforceability of (x) security interests in
such rights pledged to secure Loans whose purposes are not prohibited and (y)
the assignment of the proceeds of such rights to the Secured Parties, and
provided further that if at any time the use of the proceeds of such Loans is no
longer prohibited, then such security interest shall be valid, binding,
perfected, enforceable and in full force and effect.
(b) The security interest created by this Agreement is subject and
subordinate to all rights, powers, and prerogatives of FNMA under and in
connection with (i) the terms and conditions of that certain Acknowledgment
Agreement, with respect to the security interest created hereunder, by and
between FNMA, the Grantor and the Collateral Agent, (ii) the Mortgage Selling
and Servicing Contract and all applicable Pool Purchase Contracts between FNMA
and the Grantor, and (iii) the FNMA Guide, as such Guide is amended from time to
time ((ii) and (iii) collectively, the "FNMA Contract"), which rights, powers,
and prerogatives include, without limitation, the right of FNMA to terminate the
FNMA Contract with or without cause and the right to sell, or have transferred,
the Servicing Rights as therein provided.
(c) The security interest referred to in this Agreement is subject and
subordinate in each and every respect (a) to all rights, powers and prerogatives
of one or more of the following: FHLMC, FNMA, GNMA, or such other investors that
own mortgage loans, or which guaranty payments on securities based on and backed
by pools of mortgage loans, identified herein (the "Investors"); and (b) to all
claims of an Investor arising out of any and all defaults and outstanding
obligations of the debtor to the Investor. Such rights, powers and prerogatives
of the Investors may include, without limitation, one or more of the following:
the right of an Investor to disqualify the Grantor from participating in a
mortgage selling or servicing program or a securities guaranty program with such
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Investor; the right to terminate contract rights of the Grantor relating to such
a mortgage selling or servicing program or securities guaranty program; and the
right to transfer and sell all or any portion of such contract rights following
the termination of those rights.
20. Notices.
All notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, telecopy, or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered by hand, addressed
to any party hereto at the address of such party specified in the Credit
Agreement, or, as to each party, at such other address as shall be designated by
such party in a written notice to each other party complying as to delivery with
the terms of this Section. All such notices and other communications shall, when
mailed, telegraphed, telexed, telecopied, cabled or delivered, be effective when
deposited in the mails, delivered to the telegraph company, confirmed by telex
answerback, telecopied with confirmation of receipt, delivered to the cable
company, or delivered by hand to the addressee or its Collateral Agent,
respectively.
21. Amendments, Etc.
No amendment or waiver of any provision of this Agreement or consent to
any departure by the Grantor therefrom shall in any event be effective unless
the same shall be in writing, signed by the Grantor, the Administrative Agent
(upon the direction of the Required Lenders or all of the Lenders, as required
by the Credit Agreement) and the Collateral Agent, and then any such waiver or
consent shall only be effective in the specific instance and for the specific
purpose for which given.
22. No Waiver; Remedies.
(a) No failure on the part of any Secured Party 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, may be exercised singly or concurrently, and are
not exclusive of any remedies provided by law or any of the other Loan
Documents.
(b) Failure by any of the Secured Parties at any time or times
hereafter to require strict performance by the Grantor or any other Person of
any of the provisions, warranties, terms or conditions contained in any of the
Loan Documents now or at any time or times hereafter executed by the Grantor or
any such other Person and delivered to any of the Secured Parties shall not
waive, affect or diminish any right of any of the Secured Parties at any time or
times hereafter to demand strict performance thereof, and such right shall not
be deemed to have been modified or waived by any course of conduct or knowledge
of any of the Secured Parties, or any agent, officer or employee of any Secured
Party.
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23. Successors and Assigns.
This Agreement and all obligations of the Grantor hereunder shall be
binding upon the successors and assigns of the Grantor, and shall, together with
the rights and remedies of the Collateral Agent hereunder, inure to the benefit
of the Collateral Agent, each of the other Secured Parties, and their respective
successors and assigns. Notwithstanding the foregoing, the Grantor may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of each Lender, the Administrative Agent and the
Collateral Agent.
24. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND BE CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
25. Entire Agreement; Severability.
This Agreement and the other Loan Documents constitute the entire
agreement and understanding between the parties hereto and supersede any and all
prior or contemporaneous agreements and understandings of such Persons, oral or
written, relating to the subject matter hereof and thereof. In addition, there
are no promises, undertakings, representations or warranties by the Collateral
Agent or any other Secured Party relating to the subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents. All
waivers by the Grantor provided for in this Agreement have been specifically
negotiated by the parties with full cognizance and understanding of their
respective rights. If any of the provisions of this Agreement shall be held
invalid or unenforceable, this Agreement shall be construed as if not containing
such provisions, and the rights and obligations of the parties hereto shall be
construed and enforced accordingly.
26. Waiver of Jury Trial.
EACH OF THE GRANTOR, THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES HEREUNDER, UNDER THE CREDIT AGREEMENT
OR UNDER ANY OF THE OTHER LOAN DOCUMENTS OR ANY OTHER DOCUMENT RELATING TO ANY
OF THE FOREGOING.
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27. Further Indemnification.
The Grantor agrees to pay, and to save the Collateral Agent and each
other Secured Party harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all excise, sales or other similar
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
28. Release and Reinstatement.
(a) During any Positive Security Period, upon the written request of
the Grantor and subject to the conditions precedent set forth below, the
Collateral Agent shall release the Collateral from the Lien in favor of the
Collateral Agent for the benefit of the Secured Parties hereunder and, as
evidence of such release of Lien, shall execute and deliver to the Grantor (i) a
confirmation of such release in the form of that attached hereto as Attachment
9, (ii) such UCC termination statements as are necessary to terminate all
existing UCC-1 financing statements covering the Collateral filed by the
Collateral Agent on behalf of the Secured Parties and (iii) such notices and
instructions to all appropriate Persons to release such Lien on any
Mortgage-Backed Security, it being expressly acknowledged and agreed by the
Collateral Agent, the Agent and the Grantor that during any Positive Security
Period the Secured Obligations are intended to be and become unsecured
obligations. Following the effective date of the release of Lien contemplated
hereby, the Collateral Agent will continue to maintain possession of the
Collateral as set forth herein as if such Lien had not been so released, and
shall utilize a trust receipt in the form of that attached hereto as Attachment
5-B and letters in the forms of those attached hereto as Attachment 7-C,
Attachment 7-E and Attachment 7-G in releasing Collateral to the Grantor and
shipping Collateral pursuant hereto in lieu of the trust receipt form attached
hereto as Attachment 5-A and the letters attached hereto as Attachment 7-B,
Attachment 7-D and Attachment 7-F, respectively. As conditions precedent to the
release of Lien contemplated hereby:
(i) Immediately prior to and immediately following the release
of Lien contemplated hereby, there shall not exist any Default or Event
of Default;
(ii) There shall exist a Positive Security Period both
immediately prior to and immediately following the release of Lien
contemplated hereby; and
(iii) The Grantor shall have executed and conditionally
delivered to the Collateral Agent new UCC-1 financing statements in
form and substance acceptable to the Collateral Agent accompanied by
the Grantor's irrevocable written authorization for the Collateral
Agent to file such UCC-1 financing statements upon the occurrence of a
Negative Security Event.
(b) Nothing contained in this Section 28 shall in any manner or to any
extent affect the obligations of the Grantor hereunder and under the other Loan
Documents to
<PAGE> 41
41
maintain with the Collateral Agent items constituting Collateral required under
the Loan Documents, it being expressly acknowledged and agreed by the Grantor
that the release of the Lien contemplated hereby shall not affect the terms and
provisions of the Loan Documents except to the extent that during any Positive
Security Period, the Secured Obligations shall not be secured by the Collateral.
(c) If following the release of the Lien contemplated by subparagraph
(a) above there shall occur a Negative Security Event:
(i) The Grantor shall automatically be deemed to assign,
convey, mortgage, pledge, hypothecate and transfer to the Collateral
Agent, on behalf and for the ratable benefit of the Secured Parties,
and automatically be deemed to grant to the Collateral Agent, on behalf
and for the ratable benefit of the Secured Parties, a security interest
in, and effective upon the occurrence of such Negative Security Event
hereby does so assign, convey, mortgage, pledge, hypothecate and
transfer to the Collateral Agent, for the ratable benefit of the
Secured Parties, and hereby does so grant a security interest in, the
Collateral, including, without limitation, all Collateral then in the
possession of the Collateral Agent, as collateral security for the
Secured Obligations;
(ii) The Collateral Agent shall no later than five Business
Days following receipt of notification from the Administrative Agent of
such Negative Security Event (A) record the UCC-1 financing statements
previously delivered to it pursuant to subparagraph (a)(iii) above and
(B) commence to utilize the trust receipt in the form of that attached
hereto as Attachment 5-A and the letters in the forms of those attached
hereto as Attachment 7-B , Attachment 7-D and Attachment 7-F in
releasing Collateral to the Grantor and shipping Collateral pursuant to
this Agreement; and
(iii) The Grantor shall take such other actions and execute
and deliver such additional documents, instruments and agreements as
the Administrative Agent, the Collateral Agent and the Required Lenders
shall reasonably request to obtain for the Secured Parties the benefit
of the Collateral.
(d) The reinstatement of the Lien of the Collateral Agent for the
benefit of the Secured Parties on the Collateral following a Negative Security
Event shall in no manner affect the rights, powers and remedies of the
Collateral Agent or the other Secured Parties otherwise available under the Loan
Documents, including, without limitation, the right to accelerate the Secured
Obligations and to refuse to make further Loans under the Credit Agreement in
the event there exists a Default or an Event of Default.
(e) Upon the written request of the Grantor, so long as no Default or
Event of Default has occurred and is continuing or would result therefrom, from
time to time (but in no event more frequently than once per calendar quarter)
the Collateral Agent shall, at the sole cost and expense of the Grantor, release
Servicing Receivables and any other
<PAGE> 42
42
Servicing Rights arising in connection with Servicing Contracts with Approved
Investors (other than an Agency) which do not constitute Eligible Servicing
Receivables or otherwise constitute part of the Eligible Servicing Portfolio and
which are not included in the HomeSide Tranche B Borrowing Base from the Lien in
favor of the Collateral Agent for the benefit of the Secured Parties hereunder
and, as evidence of such release of Lien, shall execute and deliver to the
Grantor (i) a confirmation of such release in a form reasonably satisfactory to
the Grantor, the Collateral Agent and the Administrative Agent, and (ii) such
UCC amendments as are necessary to amend all existing UCC-1 financing statements
covering the Servicing Receivables so released.
(f) Upon the written request of the Grantor, so long as no Default or
Event of Default has occurred and is continuing or would result therefrom, from
time to time (but in no event more frequently than once per calendar quarter)
the Collateral Agent shall, at the sole cost and expense of the Grantor, release
Mortgage Loans constituting Collateral which are not included in the HomeSide
Tranche A Borrowing Base from the Lien in favor of the Collateral Agent for the
benefit of the Secured Parties hereunder and, as evidence of such release of
Lien, shall execute and deliver to the Grantor (i) a confirmation of such
release in a form reasonably satisfactory to the Grantor, the Collateral Agent
and the Administrative Agent, and (ii) such further documents as are necessary
to effect and evidence the release of such Lien on such Mortgage Loans.
29. Survival of Representations.
All covenants, agreements, representations and warranties made herein
shall survive the making by the Lenders of the Loans and the execution and
delivery to the Administrative Agent for the account of the Lenders of the Notes
regardless of any investigation made by the Collateral Agent or any of the other
Secured Parties and of the Collateral Agent's and the other Secured Parties'
access to any information and shall continue in full force and effect so long as
any Secured Obligation is unpaid or unperformed.
30. Section Titles.
The Section titles contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of this
Agreement.
31. Execution in Counterparts.
This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer on the
date first above written.
HOMESIDE LENDING, INC.
By: /s/ Joe K. Pickett
-------------------------------------
/s/ Hugh R. Harris
-------------------------------------
Name:
Title:
CHEMICAL BANK,
as Administrative Agent
By: /s/ Jeanette F. Brummell
-------------------------------------
Name: Jeanette F. Brummell
Title: Managing Director
THE FIRST NATIONAL BANK
OF BOSTON, as Collateral Agent
By: /s/ David L. Hall
-------------------------------------
Name: David L. Hall
Title: Senior Manager
<PAGE> 1
EXHIBIT 10.33
1
SECURITY AND COLLATERAL AGENCY AGREEMENT
SECURITY AND COLLATERAL AGENCY AGREEMENT, dated as of May 31, 1996,
made by HONOLULU MORTGAGE COMPANY, INC., a Florida corporation (the "Grantor"),
CHEMICAL BANK, in its capacity as Administrative Agent under the Credit
Agreement referred to below (in such capacity, the "Administrative Agent"), and
THE FIRST NATIONAL BANK OF BOSTON, as Collateral Agent for the financial
institutions party to the Credit Agreement referred to below (in such capacity,
the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Grantor has entered into a Credit Agreement, dated as of
May 31, 1996, with Honolulu Mortgage Company, Inc., the financial institutions
from time to time party thereto, as Lenders (the "Lenders"), the lenders from
time to time designated therein as Balance Lenders (the "Balance Lenders"),
NationsBank of Texas, N.A., as Syndication Agent (the "Syndication Agent"),
Bankers Trust Company, as Documentation Agent (the "Documentation Agent"), the
Collateral Agent and the Administrative Agent (said Agreement, as it may be
amended, supplemented or otherwise modified from time to time, being the "Credit
Agreement"); and
WHEREAS, it is a condition precedent to the making of the Loans that
the Grantor shall have entered into this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make the Loans, the Grantor hereby agrees with the Administrative
Agent and the Collateral Agent on behalf and for the ratable benefit of the
Secured Parties (as hereinafter defined) as follows:
1. Defined Terms.
Terms defined in the UCC (as hereinafter defined) are used herein as
therein defined. As used in this Agreement, capitalized terms defined in the
Credit Agreement and not otherwise defined herein have the meanings given in the
Credit Agreement, and the following terms have the meanings specified below
(such meanings being equally applicable to both the singular and plural forms of
the terms defined):
"Additional Required Documents" has the meaning set forth in Section
4(a) of this Agreement.
"Agency Custodial Agreements" shall mean, collectively, the FHLMC
Custodial Agreement, the FNMA Custodial Agreement and the GNMA Custodial
Agreement.
<PAGE> 2
2
"Approved Non-Agency Mortgage Loan" shall mean a Mortgage Loan in
respect of which the Grantor has Servicing Rights covered by a duly executed and
delivered Approved Investor Acknowledgment Agreement.
"Certificating Custodian" shall mean any Person acting as the Grantor's
"document custodian," "custodian" or "certificating custodian," as such terms
are used in the Agency Guides, for purposes of (a) certifying that the
documentation relating to Mortgage Loans received by such Person from the
Grantor (or the Collateral Agent) is complete and acceptable under the
applicable Agency Guide for purposes of including such Mortgage Loan in a pool
of Mortgage Loans in which Mortgage-Backed Securities will represent interests
and (b) holding such documentation following formation of such pools and
issuance of such Mortgage-Backed Securities. The Certificating Custodian shall
at all times be a party to the Agency Custodial Agreements.
"Collateral" has the meaning set forth in Section 3 of this Agreement.
"FHLMC Custodial Agreement" shall mean the agreement, as amended,
supplemented or otherwise modified from time to time, between FHLMC, the Grantor
and any Person meeting the eligibility requirements set forth in the FHLMC Guide
to serve as a "custodian," as such term is used in the FHLMC Guide, pursuant to
which such Person is authorized to act as Certificating Custodian for the
Grantor.
"FNMA Custodial Agreement" shall mean the agreement, as amended,
supplemented or otherwise modified from time to time, between FNMA, the Grantor
and any Person meeting the eligibility requirements set forth in the FNMA Guide
to serve as a "document custodian," as such term is used in the FNMA Guide,
pursuant to which such Person is authorized to act as Certificating Custodian
for the Grantor.
"Funding Account" shall mean account number 230-204910 maintained by
the Grantor with the Administrative Agent.
"GNMA Custodial Agreement" shall mean the agreement, as amended,
modified or supplemented from time to time, between GNMA, the Grantor and any
Person meeting the eligibility requirements set forth in the GNMA Guide to serve
as a "certificating custodian," as such term is used in the GNMA Guide, pursuant
to which such Person is authorized to act as Certificating Custodian.
"MBS Custody Account" has the meaning set forth in Section 6(h) of this
Agreement.
"Mortgage Loan Settlement Account" has the meaning set forth in Section
6(c) of this Agreement.
"Negative Security Period" shall mean each period commencing upon the
occurrence of a Negative Security Event and ending upon the occurrence of a
Positive Security Event.
<PAGE> 3
3
"Positive Security Period" shall mean each period commencing upon the
occurrence of a Positive Security Event and ending upon the occurrence of a
Negative Security Event.
"Proceeds" shall mean "proceeds," as such term is defined in Section
9-306(1) of the UCC, and, in any event, includes, without limitation, (a) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Grantor from time to time with respect to any of the Collateral, (b) any and
all payments (in any form whatsoever) made or due and payable to the Grantor
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting under color of Governmental
Authority), and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Required Documents" has the meaning set forth in Section 4(a) of this
Agreement.
"Secured Obligations" shall mean, collectively, the unpaid principal of
and interest on the Loans and any Notes and all other obligations and
liabilities of the Grantor and each of the other Loan Parties to the Secured
Parties (including, without limitation, interest accruing at the then applicable
rate provided in the Credit Agreement after the maturity of the Loans and
interest accruing at the then applicable rate provided in the Credit Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Grantor or any
other Loan Party, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, the Loans,
any Notes, the HomeSide Guaranty, the HomeSide Pledge Agreement, this Agreement,
the other Loan Documents or any other document made, delivered or given in
connection therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to any of
the Secured Parties that are required to be paid by the Grantor or any other
Loan Party pursuant to the terms of the Credit Agreement, this Agreement or any
other Loan Document).
"Secured Parties" shall mean, collectively, the Lenders, the Balance
Lenders, the Syndication Agent, the Documentation Agent, the Collateral Agent
and the Administrative Agent.
"Securities Settlement Account" has the meaning set forth in Section
6(j) of this Agreement.
"Servicing Contract" shall mean each of the contracts or other
agreements to which the Grantor is a party pursuant to which the Grantor holds
Servicing Rights, in each case as amended, supplemented or otherwise modified
from time to time, including,
<PAGE> 4
4
without limitation, (a) all rights of the Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, other than any portion
of principal and interest payable under the related Mortgage Loans to the extent
not attributable to servicing fees payable to the Grantor under such Servicing
Contracts, (b) all rights of the Grantor to damages arising out of, or for,
breach or default in respect thereof, and (c) all rights of the Grantor to
perform and to exercise all remedies thereunder.
"Servicing Receivables" shall mean the accounts, receivables and other
amounts owing to the Grantor for its own account in respect of Servicing Rights
or under a Servicing Contract, including, without limitation, all Eligible
Servicing Receivables.
"Servicing Rights" shall mean the rights of the Grantor to (a) service
Mortgage Loans for or on behalf of the owner or holder of such Mortgage Loans
(including investors in Mortgage-Backed Securities supported by Mortgage Loans)
pursuant to a direct agreement between the Grantor and an Agency, Approved
Investor or such owner or holder, together with the legal titles, mortgagor
files, escrows and records relating to such Mortgage Loans and the right to
receive servicing fee income and any other income arising from or in connection
with such Mortgage Loans, including late charges, termination fees and charges
and all other incidental fees and charges, and (b) subservice Mortgage Loans for
or on behalf of the legal title holder of the direct servicing rights in respect
of, or the owner or holder of, such Mortgage Loans (including, without
limitation, the BMC Servicing Rights), together with the legal titles, mortgagor
files, escrows and records relating to such Mortgage Loans and the right to
receive servicing or subservicing fee income and any other income arising from
or in connection with such Mortgage Loans, including late charges, termination
fees and charges and all other incidental fees and charges.
"Servicing Settlement Account" has the meaning set forth in Section
6.1(m) of this Agreement.
"Settlement Accounts" shall mean, collectively, the Mortgage Loan
Settlement Account, the Securities Settlement Account and the Servicing
Settlement Account.
"UCC" shall mean the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of New York; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Collateral Agent's and the other Secured Parties'
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, the term "UCC"
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
2. Appointment of Collateral Agent.
<PAGE> 5
5
Pursuant to the Credit Agreement the Collateral Agent has been
appointed to act as secured party, agent, bailee and custodian for the exclusive
benefit of the Secured Parties with respect to the Collateral. The Collateral
Agent hereby acknowledges that it has accepted such appointment and agrees to
maintain and hold all Collateral at any time delivered to it as secured party,
agent, bailee and custodian for the exclusive benefit of the Secured Parties.
The Collateral Agent acknowledges and agrees that it is acting and will act with
respect to the Collateral for the exclusive benefit of the Secured Parties and
is not, and shall not at any time in the future be, subject, with respect to the
Collateral, in any manner or to any extent, to the direction or control of the
Grantor or any of the other Loan Parties, except as expressly permitted
hereunder and under the other Loan Documents. The Collateral Agent agrees to act
in accordance with this Agreement and in accordance with any written
instructions from the Administrative Agent delivered pursuant to the Credit
Agreement. Under no circumstances shall the Collateral Agent deliver possession
of Collateral to the Grantor or any other Person (other than the Administrative
Agent) or otherwise release any Collateral from the Lien created hereby, except
in accordance with the express terms of this Agreement or otherwise upon the
written instructions of the Administrative Agent.
3. Grant of Security Interest.
As collateral security for the full and prompt payment when due
(whether at stated maturity, by acceleration or otherwise) of, and the
performance of, all the Secured Obligations and to induce the Lenders to make
the Loans pursuant to the Credit Agreement, the Grantor hereby assigns, conveys,
mortgages, pledges, hypothecates and transfers to the Collateral Agent, on
behalf and for the ratable benefit of the Secured Parties, and hereby grants to
the Collateral Agent, on behalf and for the ratable benefit of the Secured
Parties, a security interest in, all of the Grantor's right, title and interest
in, to and under the following, whether now owned or hereafter acquired, whether
now in existence or hereafter arising (all of which being herein collectively
called the "Collateral"):
(a) all Mortgage Loans submitted by the Grantor for inclusion in the
HomeSide Tranche A Borrowing Base and all Mortgage Loans purchased by the
Grantor with the proceeds of an Eligible Early Buyout Advance or an Eligible
Paid-in-Full Buyout Advance, including, without limitation, all notes,
mortgages, deeds to secure debt, trust deeds and security agreements, financing
statements and fixture filings related thereto, all rights to payment
thereunder, all rights in the Property securing payment of the indebtedness of
the Obligors thereunder or that are the subject of such Mortgage Loans, all
rights under documents related thereto, such as guaranties and insurance
policies (issued by an Agency or otherwise), including, without limitation,
mortgage and title insurance policies, fire and extended coverage insurance
policies (including the right to any return premiums) and FHA insurance and VA
guaranties and all rights, if any, in cash deposits consisting of impounds,
insurance premiums or other funds held on account thereof, and all commitments
and other approvals issued by or on behalf of the FHA or the VA to insure or
guaranty any of the Mortgage Loans;
<PAGE> 6
6
(b) all Mortgage-Backed Securities, all right to the payment of moneys
and non-cash distributions on account thereof and all new, substituted and
additional securities at any time issued with respect thereto;
(c) all Take-Out Commitments covering any part of the Collateral, all
rights to deliver Mortgage Loans and Mortgage-Backed Securities to investors and
other purchasers pursuant to such Take-Out Commitments, and all proceeds
resulting from the disposition of such Collateral pursuant thereto;
(d) all commitments and other agreements or approvals issued by or on
behalf of any Agency to issue, insure or guaranty any Mortgage-Backed Security
(other than any such commitments or approvals the creation of a security
interest in which would be prohibited thereby or by applicable law);
(e) all Servicing Rights, Servicing Contracts and rights to receive
payments in connection with Servicing Rights and Servicing Contracts, whether on
account of the performance of services, upon the termination of Servicing
Rights, Servicing Contracts or otherwise (including, without limitation, all
Eligible Servicing Receivables (and all deeds, contracts, agreements,
instruments of title and other documents received or receivable in respect
thereof)), and rights with respect to the placement of escrow deposits
associated with such Servicing Rights and Servicing Contracts and rights to the
payment of money or provision of concessions or services with respect thereto;
(f) the Mortgage Loan Settlement Account, the Securities Settlement
Account, the Servicing Settlement Account, the MBS Custody Account, the Funding
Account, each other account of the type described in Section 6(m) hereof and any
other custodial account of the Grantor held by or in the name of the Collateral
Agent or its bailee or designee (including, without limitation, the
Administrative Agent), and any and all funds, securities, Cash Equivalents and
other items at any time held in such accounts and any and all rights of the
Grantor to insurance payments made in respect of such accounts;
(g) all files, documents, agreements, instruments, deeds, chattel
paper, inventory consisting of Mortgage Loans, Mortgage-Backed Securities or
Servicing Rights held for sale, insurance policies, personal property, contract
rights, accounts, general intangibles, records, surveys, certificates,
correspondence, appraisals, computer records, tapes, discs, cards, accounting
records and other books, records, information and data of the Grantor relating
to the Collateral (including all such items necessary or helpful in the
administration or servicing of the Collateral) of whatever kind or nature
whatsoever relating to the Mortgage Loans described in subsection (a) above or
the servicing of Mortgage Loans, the Mortgage-Backed Securities, the Take-Out
Commitments, the Servicing Rights or any other Collateral, and all other
documents or instruments delivered to the Collateral Agent in respect of the
Collateral, including, without limitation, the right to receive all insurance
proceeds and condemnation awards which may be payable in respect of any of the
Property;
<PAGE> 7
7
(h) all Hedge Contracts covering, relating to, or entered into in
respect of, any of the Collateral, and all rights to the payment of money or
provision of concessions or services with respect thereto, and all accounts
relating thereto and moneys and other items held therein; and
(i) to the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of, each of the foregoing.
4. Delivery of Collateral Documentation; Submission of Collateral for
Inclusion in Borrowing Bases.
(a) Delivery of Mortgage Loans. From time to time, the Grantor shall
deliver or cause to be delivered to the Collateral Agent Eligible Mortgage Loans
to be included in the HomeSide Tranche A Borrowing Base as permitted pursuant to
the Credit Agreement, by delivery to the Collateral Agent of a HomeSide Tranche
A Borrowing Base Addition Report in the form of Attachment 1-A hereto, with all
blanks completed in conformity therewith, together with those documents,
instruments and agreements described on Attachment 2 hereto (the "Required
Documents"), except to the extent such Eligible Mortgage Loan constitutes an
Eligible Wet Loan, in which case the Required Documents shall be delivered to
the Collateral Agent within 10 days after the date such Eligible Wet Loan is
included in the HomeSide Tranche A Borrowing Base. Additionally, if requested by
the Administrative Agent, the Grantor shall use diligent efforts to promptly
deliver to the Collateral Agent the items described on Attachment 8 hereto (the
"Additional Required Documents"). Whenever the Grantor shall deliver Eligible
Mortgage Loans for inclusion in the HomeSide Tranche A Borrowing Base, the
Grantor shall be deemed to have represented and warranted that (i) has delivered
to the Collateral Agent (or, in the case of an Eligible Wet Loan, will deliver
to the Collateral Agent within 10 days after the date such Eligible Wet Loan is
included in the HomeSide Tranche A Borrowing Base) the Required Documents, and
(ii) it holds in its possession or is using diligent efforts to obtain
possession of the Additional Required Documents and to deliver the Additional
Required Documents to the Collateral Agent. The Grantor shall hold the
Additional Required Documents in its possession in trust for the benefit of the
Secured Parties until delivery thereof to the Collateral Agent as provided
herein.
(b) Delivery of Mortgage-Backed Securities. From time to time, the
Grantor shall deliver or caused to be delivered to the Collateral Agent or its
bailee (including, without limitation, the Administrative Agent) Eligible
Mortgage-Backed Securities to be included in the HomeSide Tranche A Borrowing
Base and shall confirm the issuance of Mortgage-Backed Securities, by delivery
to the Collateral Agent of a HomeSide Tranche A Borrowing Base Addition Report,
in the form of Attachment 1-B hereto, with all blanks completed in conformity
therewith, together with the Required Documents for such Mortgage-Backed
Securities.
<PAGE> 8
8
(c) Delivery of Servicing Receivables; Delivery of Receivables
Certificate. From time to time, the Grantor may designate Eligible Early Buyout
Advance Receivables, Eligible Paid-In-Full Buyout Advance Receivables and
Eligible Foreclosure Advance Receivables for inclusion in the HomeSide Tranche B
Borrowing Base by delivering, or causing to be delivered, to the Collateral
Agent a HomeSide Tranche B Borrowing Base Addition Report, in the form of
Attachment 1-C hereto, with all blanks completed in conformity therewith,
together with all Required Documents in respect of such Eligible Servicing
Receivables. Simultaneously with its delivery to the Administrative Agent of a
notice of borrowing and/or notice of payment in respect of each HomeSide Tranche
B Advance Loan and HomeSide Tranche B Swing Line Loan as required under the
Credit Agreement, the Grantor shall designate P&I Advance Receivables, T&I
Advance Receivables and Default-Related Advance Receivables to be included in
the HomeSide Tranche B Borrowing Base by its delivery to the Collateral Agent of
a Receivables Certificate in the form of Attachment 1-D hereto, with all blanks
completed in conformity therewith.
(d) Designation of Mortgage Loans and Mortgage-Backed Securities. By
designating a Mortgage Loan or Mortgage-Backed Security for inclusion in the
HomeSide Tranche A Borrowing Base in accordance with this Section 4, the Grantor
shall be deemed to represent and warrant to each of the Secured Parties at and
as of the date of such addition that such Mortgage Loan or Mortgage-Backed
Security constitutes an Eligible Mortgage Loan or Eligible Mortgage-Backed
Security, as the case may be. If any such Mortgage Loan or Mortgage-Backed
Security fails to constitute an Eligible Mortgage Loan or Eligible
Mortgage-Backed Security, at any time, then the Grantor shall promptly so notify
the Administrative Agent and the Collateral Agent by telefacsimile, and such
Mortgage Loan or Mortgage-Backed Security shall be deemed to have no value for
purposes of determining the HomeSide Tranche A Borrowing Base (whether or not
the Grantor has given such notice).
(e) Designation of Servicing Receivables. By designating Eligible
Servicing Receivables for inclusion in the HomeSide Tranche B Borrowing Base in
accordance with this Section 4, the Grantor shall be deemed to represent and
warrant to each of the Secured Parties at and as of the date of such inclusion
that such Eligible Servicing Receivables constitute Eligible Default-Related
Advance Receivables, Eligible Early Buyout Advance Receivables, Eligible
Foreclosure Advance Receivables, Eligible P&I Advance Receivables, Eligible
Paid-in-Full Buyout Advance Receivables or Eligible T&I Advance Receivables, as
the case may be. If any such servicing receivables fail to constitute Eligible
Default-Related Advance Receivables, Eligible Early Buyout Advance Receivables,
Eligible Foreclosure Advance Receivables, Eligible P&I Advance Receivables,
Eligible Paid-in-Full Buyout Advance Receivables or Eligible T&I Advance
Receivables, at any time, then the Grantor shall promptly so notify the
Administrative Agent and the Collateral Agent by telefacsimile, and such
Servicing Receivables shall be deemed to have no collateral value for purposes
of determining the HomeSide Tranche B Borrowing Base (whether or not the Grantor
has given such notice).
<PAGE> 9
9
(f) Collateral Agent Office. The Collateral Agent shall hold all
documentation relating to or constituting Collateral delivered to it from time
to time under this Agreement or any other Loan Document in accordance with the
provisions hereof and of the other Loan Documents in a fire resistant vault,
drawer or other suitable depository in an office maintained by the Collateral
Agent on premises owned or leased or subleased by it and occupied and controlled
solely by the Collateral Agent (the "Collateral Agent Office"), which
documentation shall (x) be conspicuously marked to show the Collateral Agent's
and the other Secured Parties' interests therein and (y) not be commingled with
any other assets or property of, or held by, the Collateral Agent. The
Collateral Agent Office may, in the discretion of the Collateral Agent, be
located on premises leased or subleased to the Collateral Agent by the Grantor
or an Affiliate of the Grantor, and may be adjacent to or in the same office
building as offices maintained and occupied by the Grantor or its Affiliates;
provided, however, that (i) any such lease or sublease shall be in a form
customary in the location of such premises for arms'-length leases or subleases
of office premises between unrelated parties, and shall provide that the
Collateral Agent shall enjoy exclusive occupancy of such premises with no right
of access being granted to or retained by the Grantor or its other Affiliates
pursuant to such lease or sublease (other than any such right which is customary
for unaffiliated, third-party landlords to be granted in order to respond to
emergencies, or in order to conduct inspection of the premises upon reasonable
notice to the Collateral Agent and in the presence of the Collateral Agent),
(ii) there shall be no doorway or other physical access to the Collateral Agent
Office directly from premises occupied exclusively by the Grantor or any of its
other Affiliates, (iii) the public entrance to the Collateral Agent Office shall
be accessible from the street, a public lobby or other public space, and
entrance by the public into the Collateral Agent Office shall not require access
to space occupied exclusively by the Grantor or any of its other Affiliates,
(iv) the public entrance to the Collateral Agent Office shall be conspicuously
marked with the name of the Collateral Agent to identify such premises as being
premises of the Collateral Agent, and there shall be no reference in such
markings to the Grantor or any of its other Affiliates, (v) the Collateral Agent
Office shall be staffed solely by employees, officers or agents of the
Collateral Agent and not of the Grantor or any of its other Affiliates, which
employees, officers and agents will be under the sole supervision and direction
of the Collateral Agent, and (vi) the Grantor shall have access to the
Collateral Agent Office, under the supervision of the Collateral Agent, during
normal business hours, which access shall be not greater than that afforded to
similar Persons in an arm's-length custodial transaction.
5. Collateral Agent's Review of Collateral; Borrowing Base
Certificates.
(a) Review of Collateral. Upon receipt of Required Documents specified
on Attachment 2 hereto for any Collateral, the Collateral Agent shall review the
same and verify that:
(i) all Required Documents appear regular on their face and
remain in the Collateral Agent's possession; and
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(ii) the statements set forth on Attachment 3 hereto are
accurate and complete in all respects in respect of such Collateral.
Such verification of Collateral delivered during any period covered by a Basic
Status Report referred to in Section 5(d) hereof shall be set forth in such
report. If the Collateral Agent (x) notes any exception in the review described
in subsection (i) or (ii) above, (y) determines that any item of Collateral does
not satisfy the requirements of the Loan Documents for inclusion in the HomeSide
Tranche A Borrowing Base or the HomeSide Tranche B Borrowing Base, or (z)
questions, in its reasonable discretion, the genuineness, regularity, propriety,
or accuracy of any item of Collateral, the Collateral Agent shall note the same
as ineligible Collateral in its next HomeSide Tranche A Borrowing Base
Certificate or HomeSide Tranche B Borrowing Base Certificate, as the case may
be, delivered to the Administrative Agent.
(b) Borrowing Base Determination: Determination Assumptions. On each
Business Day, the Collateral Agent shall compute the value of the HomeSide
Tranche A Borrowing Base and the HomeSide Tranche B Borrowing Base (a "Borrowing
Base Determination"). At the close of the last Business Day of each week, the
Collateral Agent shall reconcile the Borrowing Base Determination against the
written determination thereof made by the Grantor (which determination shall be
in form and substance satisfactory to the Administrative Agent). In the event
either the Collateral Agent or Grantor determines that a discrepancy exists, the
Grantor shall cooperate with the Collateral Agent to reconcile such discrepancy
promptly but in any event not later than the following Business Day and prior to
any delivery of a HomeSide Tranche A Borrowing Base Certificate or HomeSide
Tranche B Borrowing Base Certificate to the Administrative Agent. Upon receipt
of a copy of any notice of borrowing and/or notice of payment submitted by the
Grantor to the Collateral Agent, deletion of any Collateral from the HomeSide
Tranche A Borrowing Base or the HomeSide Tranche B Borrowing Base or at such
other times as the Administrative Agent or the Grantor shall reasonably request,
the Collateral Agent shall promptly notify the Administrative Agent, or the
Grantor, as the case may be, of its Borrowing Base Determination by delivering a
HomeSide Tranche A Borrowing Base Certificate in the form of Attachment 4-A
hereto and a HomeSide Tranche B Borrowing Base Certificate in the form of
Attachment 4-B hereto. In making its Borrowing Base Determination, the
Collateral Agent shall also verify that (i) the aggregate outstanding Principal
Amount of all HomeSide Tranche A Loans and Tranche A Swing Line Loans does not
and, after giving effect to any borrowings or payments contemplated in any such
notice of borrowing or notice of payment or any such deletion, will not, exceed
the HomeSide Tranche A Borrowing Base, (ii) the HomeSide Tranche A Borrowing
Base complies in all respects to the limitations and other terms set forth in
Section 4.1 of the Credit Agreement, (iii) the aggregate outstanding Principal
Amount of all Tranche B Loans and Tranche B Swing Line Loans does not and, after
giving effect to any borrowings or payments contemplated in any such notice of
borrowing or notice of payment or any such deletion, will not, exceed the
HomeSide Tranche B Borrowing Base, and (iv) the HomeSide Tranche B Borrowing
Base complies in all
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respects to the limitations and other terms set forth in Section 4.2 of the
Credit Agreement.
(c) In making any Borrowing Base Determination or other calculation
involving a determination of the value of the HomeSide Tranche A Borrowing Base
or the HomeSide Tranche B Borrowing Base, the Collateral Agent shall be
permitted to rely, without independent investigation of the correctness thereof,
on:
(i) the information supplied by the Grantor to the Collateral
Agent on the related HomeSide Tranche A Borrowing Base Addition Report
with respect to the unpaid principal balance, the acquisition cost
(minus discount points and fees associated with yield), and the
Applicable Take-Out Price relating to any Mortgage Loan;
(ii) the information supplied by the Grantor to the Collateral
Agent on the related HomeSide Tranche A Borrowing Base Addition Report
with respect to the Applicable Take-Out Price relating to any
Mortgage-Backed Security;
(iii) the information supplied by the Grantor to the
Collateral Agent on the related HomeSide Tranche B Borrowing Base
Addition Report or Receivables Certificate with respect to the amount
of any Servicing Receivable;
(iv) the information supplied by the Grantor to the Collateral
Agent, whether written or in any other form acceptable to the
Collateral Agent, with respect to a determination as to whether amounts
received in the Mortgage Loan Settlement Account or Securities
Settlement Account represent the purchase price paid for a specific
Mortgage Loan or Mortgage-Backed Security and, consequently, whether
the value of such Mortgage Loan or of such Mortgage-Backed Security
should be removed from such calculation; and
(v) the information supplied by the Grantor to the Collateral
Agent, whether written or in any other form acceptable to the
Collateral Agent, with respect to a determination as to whether amounts
received in the Servicing Settlement Account represent collections of
Servicing Receivables or other Servicing Rights or the purchase price
paid for Servicing Receivables or other Servicing Rights sold and,
consequently, whether the value of such Servicing Receivables or
Servicing Rights should be removed from such calculation.
(d) Reports. The Collateral Agent shall deliver to: (i) the
Administrative Agent and the Grantor, (A) within three Business Days after the
end of each month, a basic status report in form and substance acceptable to the
Administrative Agent with respect to the status of the HomeSide Tranche A
Borrowing Base and the HomeSide Tranche B Borrowing Base ("Basic Status Report")
as of the end of the preceding month and (B) within one Business Day after the
end of each week, a report in form and substance acceptable to the
Administrative Agent with respect to exceptions noted by the Collateral
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Agent in accordance with Section 5(a) hereof outstanding as of the end of the
preceding week (an "Outstanding Exceptions Report"), and (ii) to the
Administrative Agent and the Lenders, from time to time, such other reports and
information as the Administrative Agent or the Required Lenders may from time to
time reasonably request. In preparing any such reports, the Collateral Agent
shall be entitled to rely, without independent investigation (other than the
review steps described on Attachment 3 hereto), on information supplied to the
Collateral Agent by the Grantor.
6. Release of Collateral; Pool Formation; Pledging of Mortgage-Backed
Securities and Transfer of Funds from Settlement Accounts.
(a) Release of Mortgage Loans for Correction Under Trust Receipt.
Unless and until notified by the Administrative Agent (by telephone,
telefacsimile or otherwise) that a Default or an Event of Default has occurred
and is continuing, the Collateral Agent is hereby authorized upon written
request of the Grantor to release from time to time to the Grantor,
documentation constituting or relating to Mortgage Loans pledged hereunder
against a trust receipt executed by the Grantor in the form of Attachment 5-A
hereto (during a Negative Security Period) or Attachment 5-B hereto (during a
Positive Security Period), with all blanks completed in conformity therewith. In
any such release, the Grantor and the Collateral Agent will comply with the
relevant trust receipt procedures specified on Attachment 6 hereto. The Grantor
hereby represents and warrants that (i) any request by the Grantor for release
of documentation constituting or relating to Mortgage Loans shall be solely for
the purposes of correcting clerical or other non-substantial documentation
problems in preparation for returning such documentation to the Collateral Agent
for ultimate sale or exchange, and (ii) the Grantor shall request such release
in compliance with all of the terms and conditions of such release herein set
forth. The Grantor agrees to hold any documentation so released in trust for the
Collateral Agent and the other Secured Parties, and agrees to return such
documentation to the Collateral Agent no later than the close of business on the
fourteenth (14th) day following the date of such release or, if such day is not
a Business Day, on the immediately preceding Business Day.
(b) Release of Mortgage Loans for Whole-Loan Purchases. Unless and
until otherwise notified by the Administrative Agent (by telephone,
telefacsimile or otherwise) that a Default or an Event of Default has occurred
and is continuing, upon delivery from time to time by the Grantor to the
Collateral Agent of a shipping request and authorization to ship in the form of
Attachment 7-A hereto, with all blanks completed in conformity therewith, the
Collateral Agent shall release documentation constituting or relating to
Mortgage Loans pledged hereunder to Approved Investors for purchase as whole,
non-pooled Mortgage Loans. Any transmittal of documentation for Mortgage Loans
in the possession of the Collateral Agent in connection with the sale thereof to
an Approved Investor (other than an Agency) shall be under cover of a
transmittal letter substantially in the form of Attachment 7-B hereto (during a
Negative Security Period) or Attachment 7-C hereto (during a Positive Security
Period), with all blanks completed in conformity therewith and duly executed by
the Collateral Agent. Any transmittal of
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documentation for Mortgage Loans in connection with the sale thereof to either
FHLMC or FNMA for inclusion as whole, non-pooled Mortgage Loans in their
respective loan portfolios shall be (x) under cover of a transmittal letter
substantially in the form of Attachment 7-B hereto (during a Negative Security
Period) or Attachment 7-C hereto (during a Positive Security Period), with all
blanks completed in conformity therewith and duly executed by the Collateral
Agent, (y) under cover of such other forms in lieu of the foregoing that FHLMC
or FNMA require pursuant to their respective Agency Guides, duly executed by the
Collateral Agent and, if necessary, the Grantor, or (z) with appropriate entries
into any applicable electronic telecommunications network utilized by FHLMC or
FNMA. In each case of transmittal of documentation constituting or relating to
Mortgage Loans pursuant to this subsection (b), the Collateral Agent and the
Grantor shall instruct the recipient thereof that such documentation shall be
returned to the Collateral Agent if such Mortgage Loans are not purchased and
the proceeds thereof paid in accordance with subsection (c) below within
forty-five (45) days after such recipient's receipt of such documentation or, if
such forty-fifth day is not a Business Day, on the immediately preceding
Business Day. With respect to transmittal of documentation constituting or
relating to Mortgage Loans, before the Collateral Agent delivers documentation
pursuant to this subsection (b), the Grantor shall have delivered to the
Collateral Agent (or any other applicable Person) such forms, duly executed by
the Grantor, or written notification that the Grantor has made such appropriate
entries into any applicable electronic telecommunications network utilized by
FHLMC or FNMA, as required under the applicable Agency Guides or Take-Out
Commitments to effect delivery to FHLMC, FNMA or any other Approved Investor of
such Mortgage Loans and payment therefor in accordance with the instructions of
the Collateral Agent.
(c) Mortgage Loan Settlement Account. With respect to any purchases of
Mortgage Loans described in subsection (b) hereof, the Collateral Agent and the
Grantor shall instruct each Approved Investor purchasing Mortgage Loans that all
amounts payable on account of the sale of such Mortgage Loans are to be paid
directly by such party to a "no access" account of the Grantor (account no.
230-204929) maintained in the Administrative Agent's name alone at the office of
the Administrative Agent for the benefit of the Grantor (the "Mortgage Loan
Settlement Account"). For all such purchases of Mortgage Loans, the Grantor
shall, upon demand of the Collateral Agent or the Administrative Agent, provide
the Collateral Agent and the Administrative Agent with evidence that the Grantor
has directed such Approved Investors to pay such amounts directly into the
Mortgage Loan Settlement Account. Upon the Administrative Agent's receipt of the
full amount of the purchase price for each Mortgage Loan from an Approved
Investor in accordance with this subsection (c), the security interest created
by this Agreement on the affected Mortgage Loan (but not the Proceeds thereof)
shall be automatically released. Unless a Default or an Event of Default shall
be continuing, amounts held from time to time in the Mortgage Loan Settlement
Account may, upon the written instructions of the Grantor, be invested and
reinvested in Cash Equivalents. To the extent funds are not otherwise available
in the Mortgage Loan Settlement Account, the Collateral Agent shall have the
right to redeem any such investments prior to the maturity thereof for purposes
of applying any funds in accordance with the terms of any
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of the Loan Documents, and, in the event of any such redemption, the Collateral
Agent shall not be liable for any loss or penalties relating thereto. Any profit
realized from such investments shall be deposited in, and any loss shall be
charged to, the Mortgage Loan Settlement Account. Neither the Collateral Agent
nor any of the other Secured Parties shall be liable for any such loss.
(d) Security Interest in Mortgage Loan Settlement Account. Pursuant to
Section 3 hereof, the Grantor has granted to the Collateral Agent, for the
benefit of the Secured Parties, a security interest in the Mortgage Loan
Settlement Account and in any and all funds, securities, Cash Equivalents and
other items at any time held therein as collateral security for the Secured
Obligations. This subsection (d) shall constitute irrevocable notice to the
Collateral Agent that the Mortgage Loan Settlement Account is a "no access"
account to the Grantor. The Collateral Agent shall hold its security interest in
the Mortgage Loan Settlement Account and all funds at any time held therein for
the benefit of the Secured Parties and with all rights of a secured party under
the UCC and other applicable New York law. In no circumstances shall the Grantor
have access to, control of or dominion over the Mortgage Loan Settlement
Account. The Collateral Agent hereby appoints the Administrative Agent to hold
the Mortgage Loan Settlement Account pursuant to the terms hereof for the
benefit of the Secured Parties with all rights of a secured party under the UCC
and other applicable New York law, and the Administrative Agent hereby accepts
such appointment.
(e) Release of Mortgage Loans for Pooling. Unless and until otherwise
notified by the Administrative Agent (by telephone, telefacsimile or otherwise)
that a Default or an Event of Default has occurred and is continuing, upon
delivery from time to time by the Grantor to the Collateral Agent of a shipping
request and authorization to ship in the form of Attachment 7-A hereto, with all
blanks completed in conformity therewith, the Collateral Agent shall release
documentation constituting or relating to Mortgage Loans in connection with the
formation of a pool of Mortgage Loans supporting Mortgage-Backed Securities. Any
transmittal of documentation for such Mortgage Loans in the possession of the
Collateral Agent shall be to the Certificating Custodian and shall be (x) under
cover of a transmittal letter substantially in the form of Attachment 7-D hereto
(during a Negative Security Period) or Attachment 7-E hereto (during a Positive
Security Period), as applicable, with all blanks completed in conformity
therewith and duly executed by the Collateral Agent; (y) under cover of such
other forms in lieu of the foregoing that FHLMC, FNMA or GNMA require pursuant
to their respective Agency Guides, duly executed by the Collateral Agent and, if
necessary, the Grantor; or (z) with entries into any applicable electronic
telecommunications network utilized by FHLMC, FNMA or GNMA. The Collateral Agent
and the Grantor shall, with respect to each Mortgage Loan for which
documentation is transmitted pursuant to this subsection (e), instruct the
Certificating Custodian to (i) return to the Collateral Agent, within ten (10)
days after receiving such documentation, either (A) evidence of such Mortgage
Loan's initial certification for inclusion in a Mortgage Loan pool if the
Certificating Custodian so certifies such Mortgage Loan or (B) all documentation
relating to such Mortgage Loan if the Certificating Custodian does not so
certify such Mortgage Loan, (ii) immediately
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return all documentation relating thereto to the Collateral Agent if (A) the
Certificating Custodian initially certifies such Mortgage Loan but subsequently
determines that such Mortgage Loan is not suitable for inclusion in a Mortgage
Loan pool supporting a Mortgage-Backed Security prior to the issuance of such
Mortgage-Backed Security or (B) no Mortgage-Backed Security supported by a pool
including such Mortgage Loan has been issued within forty-five (45) days after
the Certificating Custodian's receipt of such documentation, and (iii) segregate
and, during each Negative Security Period, properly identify all such
documentation as collateral of the Secured Parties that secures the Secured
Obligations. Before the Collateral Agent delivers documentation pursuant to this
subsection (e), the Grantor shall have delivered to the Collateral Agent or any
other applicable Person such forms, duly executed by the Grantor, or written
notification that the Grantor has made the appropriate entries into any
applicable electronic telecommunications network utilized by FHLMC, FNMA or
GNMA, as required under the applicable Agency Guides or Take-Out Commitments to
effect delivery to the Certificating Custodian of such Mortgage Loans and
payment therefor in accordance with the instructions of the Collateral Agent.
The Grantor further agrees to (x) enter into such arrangements and agreements
with the Collateral Agent, the Certificating Custodian and each of the Agencies
as may be necessary to facilitate the issuance of Mortgage-Backed Securities
under the respective Mortgage-Backed Securities programs of such Agencies and
(y) conform its procedures relating to the formation of such pools and the
delivery of such forms and certifications required by FHLMC, FNMA and GNMA, as
the case may be, to the established procedures of the Collateral Agent with
respect thereto.
(f) Return of Mortgage Loans by Certificating Custodian. If the
Certificating Custodian returns to the Collateral Agent documentation relating
to any Mortgage Loan following the Certificating Custodian's determination that
such Mortgage Loan is not suitable for pooling, the Collateral Agent shall hold
such documentation in accordance with the terms hereof, and, following the
Grantor's request that such Mortgage Loan be included in the HomeSide Tranche A
Borrowing Base for purposes of determining the value thereof pursuant to a
HomeSide Tranche A Borrowing Base Addition Report, shall also include such
Mortgage Loan in the HomeSide Tranche A Borrowing Base if (but only if) such
Mortgage Loan constitutes an Eligible Mortgage Loan.
(g) PTC and Seg Accounts. The Collateral Agent shall (i) maintain at
all times in its name with the Participants Trust Company (the "PTC"), or with a
participant of the PTC if the Collateral Agent is not a participant of the PTC,
a "Seg Account" (or an account that shall not at any time be subject to a
security interest in favor of the PTC or anyone benefiting through the PTC),
into which each GNMA Mortgage-Backed Security shall be initially deposited or
credited when issued, and (ii) maintain at all times in its name with a bank
that is a member of the Federal Reserve Bank of New York a securities account
into which each FHLMC Mortgage-Backed Security or FNMA Mortgage-Backed Security
shall be entered when issued. In all circumstances, possession, maintenance and
transfer of Mortgage-Backed Securities in, to and from such accounts shall be
under the sole and exclusive control of the Collateral Agent, and the Grantor
shall have no access to, control of or dominion over such accounts.
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(h) MBS Custody Account. The Grantor has established and shall at all
times maintain a pledged securities custodial account (Account No. MR7635586)
with the Administrative Agent (the "MBS Custody Account") for the purpose of
holding all Mortgage-Backed Securities. The MBS Custody Account shall be a "no
access" account to the Grantor maintained in the Collateral Agent's name for the
benefit of the Grantor. The Collateral Agent shall have exclusive control over
the disposition of all Mortgage-Backed Securities held in the MBS Custody
Account, and the Grantor shall have no right to transfer, trade or otherwise
direct the disposition of such Mortgage-Backed Securities. Pursuant to Section 3
hereof, the Grantor has granted to the Collateral Agent, for the benefit of the
Secured Parties, a security interest in the MBS Custody Account and in any and
all Mortgage-Backed Securities at any time held therein or credited thereto as
collateral security for the Secured Obligations. This subsection (h) shall
constitute irrevocable notice to the Collateral Agent that the MBS Custody
Account is a "no access" account to the Grantor. The Collateral Agent shall hold
its security interest in the MBS Custody Account and all Mortgage-Backed
Securities at any time held therein or credited thereto, for the benefit of the
Secured Parties, with all rights of a secured party under the UCC and other
applicable New York or federal law. In no circumstances shall the Grantor have
access to, control of or dominion over the MBS Custody Account.
(i) Issuance of Mortgage-Backed Securities. The Grantor shall promptly
confirm to the Collateral Agent the issuance of each Mortgage-Backed Security
supported by a pool of Mortgage Loans constituting Collateral prior to such
issuance. Upon the issuance of Mortgage-Backed Securities, (A) the security
interest of the Collateral Agent, for the benefit of the Secured Parties, in the
pooled Mortgage Loans supporting such Mortgage-Backed Securities (but not in the
Proceeds thereof) shall cease, (B) for purposes of determining the HomeSide
Tranche A Borrowing Base, such Mortgage Loans shall be removed from the HomeSide
Tranche A Borrowing Base and, upon receipt by the Collateral Agent of a HomeSide
Tranche A Borrowing Base Addition Report in respect thereof, such
Mortgage-Backed Securities shall be deemed submitted for inclusion in the
HomeSide Tranche A Borrowing Base and (C) such Mortgage-Backed Securities and
the Proceeds thereof shall be subject to a security interest in favor of the
Collateral Agent for the benefit of the Secured Parties. The Collateral Agent
and the Grantor shall comply with all rules and regulations, if any, of the
applicable Agency, the PTC, the applicable Federal Reserve Bank and any
applicable Governmental Authority for recognizing, creating and perfecting
security interests in such Mortgage-Backed Securities and shall, to the extent
consistent with such rules and regulations, comply with the procedures set forth
on Attachment 3 hereto. For Book-Entry Mortgage-Backed Securities, the
Collateral Agent and the Grantor shall cause the applicable security to be
issued in the name of or pledged or transferred to the Collateral Agent (or a
financial intermediary for the Collateral Agent), as bailee for the Secured
Parties, as collateral security for the Secured Obligations, and the Grantor
shall identify the Collateral Agent (or its financial intermediary), for the
benefit of the Secured Parties, as the Person to whom such Mortgage-Backed
Security shall be issued on the forms required by FHLMC, FNMA or GNMA under
their respective Agency Guides or in entries into any electronic
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telecommunications network utilized by FHLMC, FNMA or GNMA. The Collateral Agent
shall make such entries with respect to such Mortgage-Backed Securities on its
books and records as necessary to reflect the transfer and pledge of such
securities for the benefit of the Secured Parties. The Collateral Agent shall
also ensure that each of the Administrative Agent, the Grantor, itself and any
other applicable Person receive such confirmation, if any, of the pledge as is
necessary to effect a Perfected Assignment with respect to the pledged security.
All such Mortgage-Backed Securities shall be credited "free" when issued to the
Collateral Agent or a financial intermediary of the Collateral Agent. For
certificated Mortgage-Backed Securities, the Collateral Agent or its bailee
(including, without limitation, the Administrative Agent) shall have received
and be holding in its possession for the benefit of the Secured Parties the
original Mortgage-Backed Security certificate, which shall be registered in the
name of the Collateral Agent or accompanied by a duly executed (in blank),
undated, transfer power or other instrument of assignment sufficient to transfer
the security to the Collateral Agent for the benefit of the Secured Parties.
Immediately upon demand of the Collateral Agent, the Grantor shall provide the
Collateral Agent and the Administrative Agent with evidence that the Grantor has
taken all steps and performed all actions necessary to ensure that the
Collateral Agent holds, for the benefit of the Secured Parties, a valid,
perfected and first priority security interest in all Mortgage-Backed
Securities.
(j) Securities Settlement Account. Unless the Administrative Agent has
notified the Collateral Agent that a Default or an Event of Default has occurred
and is continuing or until otherwise notified by the Administrative Agent (by
telephone, telefacsimile or otherwise), from time to time the Collateral Agent
shall arrange for the timely transfer of any Mortgage-Backed Securities to an
Approved Investor (including any of the Agencies), or the nominee thereof, in
accordance with the terms of any applicable Take-Out Commitment. The Grantor
agrees to provide the Collateral Agent with written or electronic designation of
such Approved Investors, together with the appropriate instructions for
crediting such Approved Investors' respective accounts. All deliveries of
Mortgage-Backed Securities to such Approved Investors shall be made only
"against payment" by such Approved Investors to the Securities Settlement
Account (as hereinafter defined), in immediately available funds, of the full
purchase price of such Mortgage-Backed Securities, in accordance with the terms
of such Take-Out Commitments. The Grantor shall provide the Collateral Agent and
the Administrative Agent with evidence that it has directed all Approved
Investors or other purchasers to pay the proceeds of Mortgage-Backed Securities
purchases directly to a "no access" account to the Grantor (account no.
230-204937) maintained in the Administrative Agent's name alone for the benefit
of the Grantor (the "Securities Settlement Account"). The Collateral Agent shall
hold its security interest in the Securities Settlement Account and all funds at
any time held therein for the benefit of the Secured Parties and with all rights
of a secured party under the UCC and other applicable New York law. In no
circumstances shall the Grantor have access to, control of or dominion over the
Securities Settlement Account. The Collateral Agent hereby appoints the
Administrative Agent to hold the Securities Settlement Account pursuant to the
terms hereof for the benefit of the Secured Parties with all rights of a secured
party under the UCC and other applicable New York law, and
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the Administrative Agent hereby accepts such appointment. Upon the Collateral
Agent's full receipt of the purchase price of any Mortgage-Backed Security in
accordance with this subsection (j) the security interest created by this
Agreement in the affected Mortgage-Backed Security (but not in the Proceeds
thereof) shall be automatically released. Unless a Default or an Event of
Default shall be continuing, amounts held from time to time in the Securities
Settlement Account may, upon the written instructions of the Grantor, be
invested in Cash Equivalents. To the extent funds are not otherwise available in
the Securities Settlement Account, the Collateral Agent shall have the right to
redeem any such investments prior to the maturity thereof for purposes of
applying any funds in accordance with the terms of any of the Loan Documents,
and, in the event of any such redemption, the Collateral Agent shall not be
liable for any loss or penalties relating thereto. Any profit realized from such
investments shall be deposited in, and any loss shall be charged to, the
Securities Settlement Account. Neither the Collateral Agent nor any of the other
Secured Parties shall be liable for any such loss.
(k) Release of Certain Mortgage Loans Relating to Eligible Early Buyout
Advance Receivables in Connection with Foreclosure Proceedings. Unless and until
otherwise notified by the Administrative Agent (by telephone, telefacsimile or
otherwise) that a Default or an Event of Default has occurred and is continuing,
upon delivery from time to time by the Grantor to the Collateral Agent of a
shipping request and authorization to ship in the form of Attachment 7-A hereto,
with all blanks completed in conformity therewith, the Collateral Agent shall
release documentation constituting or relating to Mortgage Loans obtained by the
Grantor in connection with an Eligible Early Buyout Advance Receivable and
pledged hereunder to the attorney or title insurance company that has been
requested by the Grantor to commence foreclosure proceedings in respect of such
Mortgage Loans. Any transmittal of documentation for Mortgage Loans in the
possession of the Collateral Agent to such attorney or title company in
connection with such foreclosure proceedings shall be under cover of a
transmittal letter substantially in the form of Attachment 7-F hereto (during a
Negative Security Period) or Attachment 7-G hereto (during a Positive Security
Period), with all blanks completed in conformity therewith and duly executed by
the Collateral Agent. In each case of transmittal of documentation constituting
or relating to Mortgage Loans pursuant to this subsection (k), the Collateral
Agent shall instruct the recipient thereof that it shall return to the
Collateral Agent, within 45 days of receipt of such documentation, either (i)
evidence of the completion of the foreclosure proceedings in respect of such
Mortgage Loans or (ii) all documentation relating to such Mortgage Loans if such
foreclosure proceedings have not been completed.
(l) No Collateral Release During Default or Event of Default. If the
Collateral Agent has been notified in writing by the Administrative Agent that a
Default or an Event of Default has occurred and is continuing, the Collateral
Agent shall not, and shall incur no liability to the Grantor or any other Person
for refusing to, release any item of Collateral to the Grantor or any other
Person without the express prior written consent and at the direction of the
Administrative Agent.
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(m) Servicing Settlement Account. With respect to any amounts owed to
the Grantor (other than from a mortgagor in respect of the applicable Mortgage
Loan) in respect of Servicing Receivables or other Servicing Rights (including,
without limitation, all Eligible Default-Related Advance Receivables, Eligible
Early Buyout Advance Receivables, Eligible Foreclosure Advance Receivables,
Eligible P&I Advance Receivables, Eligible Paid-in-Full Buyout Advance
Receivables, Eligible T&I Advance Receivables, proceeds of the sale of Servicing
Rights and all termination and other fees payable in respect of Servicing
Rights), if requested by the Administrative Agent, the Collateral Agent and the
Grantor shall instruct each obligor in respect of such Servicing Receivable or
other Servicing Rights that all amounts payable on account of such Servicing
Receivable or other Servicing Rights are to be paid directly by such party to a
"no access" account of the Grantor (account no. 230-205038) maintained in the
Administrative Agent's name alone at the office of the Administrative Agent for
the benefit of the Grantor (the "Servicing Settlement Account"). The Grantor
shall, upon demand of the Collateral Agent or the Administrative Agent, provide
the Collateral Agent and the Administrative Agent with evidence that the Grantor
has directed such obligors to pay such amounts directly into the Servicing
Settlement Account. Unless a Default or an Event of Default shall be continuing,
amounts held from time to time in the Servicing Settlement Account may, upon the
written instructions of the Grantor, be invested in Cash Equivalents. To the
extent funds are not otherwise available in the Servicing Settlement Account,
the Collateral Agent shall have the right to redeem any such investments prior
to the maturity thereof for purposes of applying any funds in accordance with
the terms of any of the Loan Documents, and, in the event of any such
redemption, the Collateral Agent shall not be liable for any loss or penalties
relating thereto. Any profit realized from such investments shall be deposited
in, and any loss shall be charged to, the Servicing Settlement Account. Neither
the Collateral Agent nor any of the other Secured Parties shall be liable for
any such loss. With respect to any amounts owed to the Grantor in respect of
Servicing Receivables or other Servicing Rights as to which the Administrative
Agent has not requested that such instructions be given to such obligors or
which are received by the Grantor contrary to such instructions, the Grantor
shall, on the date of its receipt thereof, deposit any and all such amounts in a
blocked account or other "no access" account in the name of the Administrative
Agent, which account shall be designated by, and subject to terms and conditions
satisfactory to, the Collateral Agent and the Administrative Agent. All funds so
deposited by the Grantor in such blocked or other account shall be promptly
transferred to the Servicing Settlement Account.
(n) Security Interest in Servicing Settlement Account. Pursuant to
Section 3 hereof, the Grantor has granted to the Collateral Agent, for the
benefit of the Secured Parties, a security interest in the Servicing Settlement
Account and each other blocked or other account of the type contemplated in
subsection (m) above, and in any and all funds, securities, Cash Equivalents and
other items at any time held therein as collateral security for the Obligations.
This subsection (n) shall constitute irrevocable notice to the Collateral Agent
that the Servicing Settlement Account is a "no access" account to the Grantor.
The Collateral Agent shall hold its security interest in the Servicing
Settlement
<PAGE> 20
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Account and all funds at any time held therein for the benefit of the Secured
Parties and with all rights of a secured party under the UCC and other
applicable New York law. In no circumstances shall the Grantor have access to,
control of or dominion over the Servicing Settlement Account. The Collateral
Agent hereby appoints the Administrative Agent to hold the Servicing Settlement
Account pursuant to the terms hereof for the benefit of the Secured Parties with
all rights of a secured party under the UCC and other applicable New York law,
and the Administrative Agent hereby accepts such appointment.
(o) Transfer of Funds from Settlement Accounts. The Administrative
Agent shall transfer by 3:00 P.M. of each Business Day from one or more
Settlement Accounts to an account of the Administrative Agent or to the accounts
of the Lenders, the lesser of (i) all amounts owing to each of the Secured
Parties pursuant to the terms of the Credit Agreement and each of the other Loan
Documents, and (ii) all immediately available funds on deposit in the Settlement
Accounts. The Administrative Agent shall determine the order of transfers from
the Settlement Accounts, and will apply the funds so transferred in payment of
all such amounts so owing in conformity with the provisions of the Credit
Agreement (notwithstanding any contrary instructions or lack of instructions
from the Collateral Agent or otherwise). Except during the continuance of a
Default or an Event of Default, after the transfer of funds described in the
first sentence of this subclause (o), on each Business Day, the Administrative
Agent shall (unless otherwise instructed by the Borrower) transfer all remaining
available funds on deposit in the Settlement Accounts (if any) to the Funding
Account.
7. Rights of the Secured Parties; Limitations on Secured Parties'
Obligations.
(a) It is expressly agreed by the Grantor that, anything herein to the
contrary notwithstanding, the Grantor shall remain liable to observe and perform
all the conditions, duties and obligations to be observed and performed by it
relating to the Collateral, and the Grantor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the terms and
provisions relating thereto. Neither the Collateral Agent nor any other Secured
Party shall have any obligation or liability under any instrument, agreement,
contract or other document by reason of or arising out of this Agreement or the
granting of a security interest in any instrument, agreement, contract or other
document to the Collateral Agent on behalf and for the ratable benefit of the
Secured Parties or the receipt by the Collateral Agent or any other Secured
Party of any payment relating to any of the foregoing pursuant hereto, nor shall
the Collateral Agent or any other Secured Party be required or obligated in any
manner to perform or fulfill any of the obligations of the Grantor thereunder,
or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party thereunder, or to present or file any claim, or to take any action
to collect or enforce any performance or the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
<PAGE> 21
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(b) Subject to the terms of this Agreement, the Collateral Agent
authorizes the Grantor to collect all sums due or to become due (including,
without limitation, Proceeds) in respect of any Collateral ("Collateral
Payments"), provided that such collection is performed in a prudent and
businesslike manner, and the Collateral Agent may, upon the occurrence and
during the continuance of any Default or Event of Default and without notice,
limit or terminate said authority at any time. If required by the Collateral
Agent at any time during the continuance of any Default or Event of Default, any
Collateral Payments, when first collected by the Grantor shall be promptly
delivered by the Grantor to the Collateral Agent in precisely the form received
(with all necessary indorsements), and until so turned over shall be deemed to
be held in trust by the Grantor for and as the Collateral Agent's property, for
the benefit of the Secured Parties, and shall not be commingled with the
Grantor's other funds or properties. Such Collateral Payments, when so delivered
to the Collateral Agent, shall continue to be collateral security for all of the
Secured Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Collateral Agent shall upon the request of the
Required Lenders apply all or a part of the funds so delivered to the principal
of and/or interest on any of the Secured Obligations in accordance with the
provisions of Section 17(h) hereof.
(c) The Collateral Agent may at any time, upon the occurrence and
during the continuance of any Default or Event of Default, notify any party that
is or might become obligated to make any Collateral Payment that the Collateral
and the right, title and interest of the Grantor in and under the Collateral
have been assigned to the Collateral Agent, for the benefit of the Secured
Parties, and that any or all of such Collateral Payments shall be made directly
to the Collateral Agent or its designee. Upon the request of the Collateral
Agent, the Grantor will so notify such parties. Upon the occurrence and during
the continuance of a Default or an Event of Default, the Collateral Agent may in
its own name or in the name of others communicate with all such parties to
verify with such parties to the Collateral Agent's satisfaction the existence,
amount and terms of any such obligation in respect of any Collateral Payment.
8. Representations and Warranties.
(a) The Grantor hereby represents and warrants to the Secured Parties
as follows:
(i) The Grantor is the sole owner of each item of the
Collateral in which it purports to grant a security interest hereunder,
having good title thereto, free and clear of any and all Liens or any
other right, title, claim or interest, except for the security interest
granted pursuant to this Agreement.
(ii) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by the Grantor in
favor of the Collateral Agent, for the benefit of the Secured Parties,
pursuant to this Agreement.
<PAGE> 22
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(iii) Each Mortgage Loan (A) serviced by or on behalf of FHLMC
or FNMA included in the Eligible Servicing Portfolio is covered by a
FHLMC Acknowledgment Agreement or FNMA Acknowledgment Agreement,
respectively, that is in full force and effect, and (B) serviced by or
on behalf of GNMA included in the Eligible Servicing Portfolio will be,
after the execution and delivery thereof by GNMA, the Grantor and the
Collateral Agent, covered by a GNMA Acknowledgment Agreement that is in
full force and effect.
(iv) Each Approved Non-Agency Mortgage Loan that is included
in the Eligible Servicing Portfolio is covered by an Approved Investor
Acknowledgment Agreement that is in full force and effect.
(v) Except as otherwise provided in Section 28 hereof, all
action necessary to protect and perfect the valid and perfected first
priority security interest in each item of the Collateral has been duly
taken (except to the extent that subsequent delivery of documents or
instruments is permitted herein or in the Credit Agreement in
connection with Eligible Wet Loans).
(vi) The Grantor's principal place of business and the place
where its records concerning the Collateral are kept are set forth on
Schedule I hereto.
(vii) All information heretofore, herein, or hereafter
supplied to the Collateral Agent or any other Secured Party by or on
behalf of the Grantor with respect to the Collateral is accurate and
complete in all material respects.
(viii) No consent of any other Person is required for the
grant of the security interest provided herein by the Grantor in any of
the Collateral, other than consents that have been obtained (subject to
any consents that may relate to Servicing Rights not covered by an
Acknowledgment Agreement), nor will any consent need to be obtained
upon the occurrence of an Event of Default for the Secured Parties to
exercise their rights with respect to any of such Collateral.
(ix) To the best of the Grantor's knowledge, no Obligor or
other Person responsible or liable for any Collateral Payment has any
defense, set off, claim or counterclaim against the Grantor that can be
asserted against the Collateral Agent or any other Secured Party.
(b) The Collateral Agent hereby represents and warrants to the Grantor
and each of the other Secured Parties as follows:
(i) The Collateral Agent is a national banking association
duly incorporated, validly existing and in good standing under the laws
of the United States of America.
<PAGE> 23
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(ii) The execution, delivery and performance by the Collateral
Agent of this Agreement are within the Collateral Agent's corporate
powers, have been duly authorized by all necessary corporate action and
do not contravene the Collateral Agent's certificate of incorporation
or bylaws, any Requirement of Law or any order or decree of any court,
or any contractual obligation of the Collateral Agent.
(iii) No consent, authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority or any
other Person is required for the due execution, delivery and
performance by the Collateral Agent of this Agreement.
(iv) This Agreement has been duly executed and delivered by
the Collateral Agent and is the legal, valid and binding obligation of
the Collateral Agent, enforceable against the Collateral Agent in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally and by general principles of equity.
9. Additional Representations and Warranties Concerning Mortgage Loans,
Mortgage-Backed Securities and Servicing Receivables, Etc..
By adding any Mortgage Loan or Mortgage-Backed Security to the HomeSide
Tranche A Borrowing Base or any Servicing Receivable to the HomeSide Tranche B
Borrowing Base in accordance with Section 4 of this Agreement, the Grantor shall
be deemed to represent and warrant to the Secured Parties at and as of the date
of such addition that each of the statements set forth with respect to such
Mortgage Loan, Mortgage-Backed Security or Servicing Receivable in the
definition of Eligible First Mortgage Loan, Eligible Second Mortgage Loan,
Eligible Mortgage-Backed Security, Eligible Early Buyout Advance Receivable,
Eligible Default-Related Advance Receivable, Eligible Foreclosure Advance
Receivable, Eligible Paid-in-Full Buyout Advance Receivable, Eligible P&I
Advance Receivable or Eligible T&I Advance Receivable, as the case may be, is
true and correct. If any such statement may be untrue or incorrect in any
respect at any time, then the Grantor shall promptly so notify the
Administrative Agent and the Collateral Agent by telefacsimile, and such
Mortgage Loan, Mortgage-Backed Security or Servicing Receivable shall be deemed
to have no value for purposes of determining the HomeSide Tranche A Borrowing
Base or the HomeSide Tranche B Borrowing Base, as the case may be (whether or
not the Grantor has given such notice).
10. Standard of Care of Collateral Agent; Duties; Indemnification.
The Collateral Agent is a bailee for hire and shall hold the Collateral
in accordance with customary standards for those engaged as custodians of
commercial documents in similar capacities. Nothing contained herein or in the
Credit Agreement shall be construed to make the Collateral Agent a trustee or
other fiduciary for the
<PAGE> 24
24
Administrative Agent or any other Secured Party. Notwithstanding anything to the
contrary contained herein:
(a) The provisions of the Credit Agreement, this Agreement and the
annexes, schedules, exhibits and attachments hereto set forth the exclusive
duties of the Collateral Agent and no implied duties or obligations shall be
read into this Agreement against the Collateral Agent. The Collateral Agent
shall not be bound in any way by any agreement or contract other than this
Agreement and the annexes, the exhibits and the attachments hereto and any other
agreement to which it is a party. The Collateral Agent shall not be required to
ascertain or inquire as to the performance or observance of any of the
conditions or agreements to be performed or observed by any other party, except
as specifically provided in this Agreement and the annexes, schedules, exhibits
and attachments hereto. The Collateral Agent disclaims any responsibility for
the validity or accuracy of the recitals to this Agreement and any
representations and warranties contained herein, unless specifically identified
as recitals, representations or warranties of the Collateral Agent.
(b) Throughout the term of this Agreement, the Collateral Agent shall
have no responsibility for ascertaining the value, collectability, insurability,
enforceability, effectiveness or suitability (except as otherwise provided by
the Collateral Review Procedures set forth on Attachment 3 hereto) of any
Collateral, the title of any party therein, the validity or adequacy of the
security afforded thereby or the validity of this Agreement (except as to
Collateral Agent's authority to enter into this Agreement and to perform its
obligations hereunder).
(c) The Collateral Agent shall not be under any duty to examine or pass
upon the genuineness, validity, or legal sufficiency of any of the documents
constituting part of any Mortgage Loan file, including, without limitation,
whether any document purporting to be an assignment is in recordable form or
whether any Evidence of Notice to Customer and Rescission is in compliance with
Regulation Z or other applicable law, and shall be entitled to assume that all
documents constituting part of such files are genuine and valid and that they
are what they purport to be and that any endorsements or assignments thereof are
genuine and valid. The Collateral Agent may rely upon and shall be protected in
acting in good faith upon any notice, resolution, request, consent, order,
certificate, report, statement or other paper or document appearing on its face
to be genuine and to have been signed or presented by the proper party or
parties or by a person or persons authorized to act on behalf of the proper
party or parties. The Collateral Agent shall not be liable for any action or
omission to act as bailee, except for its own gross negligence or willful
misconduct.
(d) No provision of this Agreement shall require the Collateral Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if, in its judgment, it shall believe that repayment of such
funds or adequate indemnity against such risk or liability is not assured to it.
<PAGE> 25
25
(e) The Collateral Agent is not responsible for preparing or filing any
reports or returns relating to federal, state or local income taxes with respect
to this Agreement, other than for the Collateral Agent's compensation or for
reimbursement of expenses.
(f) The Grantor agrees to reimburse, indemnify and hold harmless the
Collateral Agent and its directors, officers, employees, Affiliates and agents
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, reasonable attorneys' fees and disbursements and allocated costs of
internal counsel) or disbursements of any kind or nature that may be imposed on,
incurred by or asserted against the Collateral Agent and its directors,
officers, employees, Affiliates and agents arising from or connected with the
Collateral Agent's execution and performance of this Agreement, including, but
not limited to, the claims of any third parties, including any assignee. The
foregoing shall apply regardless of whether such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements are in any way or to any extent caused, in whole or in part, by
any negligent act or omission of any kind by the Collateral Agent; provided that
the Grantor shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from gross negligence or willful misconduct
on the part of the Collateral Agent. This provision shall survive the
termination of this Agreement.
(g) At its sole cost and expense, the Collateral Agent shall have the
power to employ such agents as it may deem necessary or appropriate in the
performance of its duties and the exercise of its powers under this Agreement.
11. Fees and Expenses of Collateral Agent.
The Collateral Agent shall notify the Grantor of all reasonable fees,
expenses, and charges of the Collateral Agent arising out of the Collateral
Agent's entering into this Agreement and performing its duties and obligations
under this Agreement (including in connection with the enforcement of remedies
hereunder and realization upon the Collateral), and (except as set forth in
Section 10(g) hereof) such fees, expenses and charges shall be paid promptly by
the Grantor or, if already paid by the Collateral Agent, the Grantor shall
reimburse the Collateral Agent promptly therefor. The Collateral Agent shall
receive reasonable additional compensation from the Grantor for services
rendered beyond those specifically enumerated in this Agreement, provided that
the Collateral Agent shall, to the extent possible, provide reasonable advance
notice to the Grantor of such services and its estimate of fees, expenses and
charges in connection therewith. The Collateral Agent may employ, at the
Grantor's expense, such legal counsel and other experts as it reasonably deems
necessary in connection with entering into this Agreement and performing its
duties and obligations under this Agreement. The Collateral Agent may rely upon
and shall be protected if acting in good faith upon the advice of such legal
counsel or experts.
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12. Removal or Resignation of Collateral Agent.
The Administrative Agent, upon the direction of the Required Lenders,
may, at any time, remove and discharge the Collateral Agent from the performance
of its duties under this Agreement, effective (a) immediately if such
termination is for cause or (b) upon not less than thirty (30) days' prior
written notice to the Collateral Agent and the Grantor if such termination is
without cause. In addition, the Collateral Agent may, at any time, terminate its
agreement to act as the Collateral Agent hereunder, effective upon sixty (60)
days' prior written notice to the Grantor, the Administrative Agent and the
Lenders. Upon the effective date of any such termination, the Collateral Agent
shall promptly deliver the Collateral then held by it and any and all books and
records (or copies thereof) relating thereto, to the Administrative Agent or to
such other person or entity as the Administrative Agent may direct in writing,
and shall cooperate with the Administrative Agent and any successor Collateral
Agent in order to effect the orderly transfer of the Collateral and the rights
and obligations of the Collateral Agent hereunder to any successor Collateral
Agent. Upon resignation or removal of the Collateral Agent hereunder, the
Administrative Agent and the Required Lenders shall appoint a successor
Collateral Agent. If no successor Collateral Agent shall have been so appointed,
and shall have accepted such appointment, before the end of the thirty (30) or
sixty (60) day period referred to above, as the case may be, then the
Administrative Agent (or, at the discretion of the Administrative Agent, an
Affiliate of the Administrative Agent) shall succeed as Collateral Agent.
13. Availability of Documents.
The Administrative Agent and each other Secured Party and its agents,
accountants, attorneys and auditors will be permitted during normal business
hours at any time and from time to time upon reasonable notice to the Collateral
Agent to examine and inspect (to the extent permitted by applicable law) the
files, documents, records and other papers in the possession or under the
control of the Collateral Agent relating to any or all of the Collateral and to
make copies thereof. As long as no Default or Event of Default has occurred and
is continuing, any such activity will be at no cost or expense to the Grantor;
if a Default or Event of Default has occurred and is continuing, all costs and
expenses associated with the exercise by the Administrative Agent or any other
Secured Party of its rights under this Section 13 shall be paid by the Grantor
within fifteen (15) days of receipt by the Grantor from the Administrative Agent
or such other Secured Party of a statement setting forth in reasonable detail
the amount thereof.
14. Covenants.
The Grantor covenants and agrees with the Collateral Agent and the
other Secured Parties that from and after the date of this Agreement and until
the Secured Obligations are fully satisfied:
<PAGE> 27
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(a) Further Documentation; Pledge of Instruments and Chattel Paper. At
any time and from time to time, upon the written request of the Collateral
Agent, and at the sole expense of the Grantor, the Grantor will promptly and
duly execute and deliver any and all such further instruments and documents and
take such further action as the Collateral Agent may reasonably deem necessary
or desirable to obtain the full benefits of this Agreement and of the rights and
powers herein granted, including, without limitation, using its best efforts to
secure all consents and approvals necessary or appropriate for the assignment to
the Collateral Agent of any Collateral held by the Grantor or in which the
Grantor has any rights not heretofore assigned, the filing of any financing or
continuation statements under the UCC with respect to the Liens and security
interests granted hereby and transferring Collateral to the Collateral Agent's
(or its bailee's) possession (if a security interest in such Collateral can be
perfected by possession). The Grantor also hereby authorizes the Collateral
Agent to file any such financing or continuation statement without the signature
of the Grantor to the extent permitted by applicable law. If any of the
Collateral shall be or become evidenced by any instrument, the Grantor agrees to
pledge such instrument to the Collateral Agent and shall duly endorse such
instrument in a manner satisfactory to the Collateral Agent and deliver the same
to the Collateral Agent. The Grantor shall hold any such instrument in its
possession in trust for the benefit of the Secured Parties until the delivery
thereof to the Collateral Agent as provided herein.
(b) Maintenance of Records. The Grantor will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. The Grantor will mark its books and records pertaining to the
Collateral to evidence this Agreement and the Lien and security interests
granted hereby. For the Collateral Agent's and the other Secured Parties'
further security, the Grantor agrees that the Collateral Agent and the other
Secured Parties shall have a special property interest in all of the Grantor's
books and records pertaining to the Collateral and, upon the occurrence and
during the continuance of any Default or Event of Default, the Grantor shall
deliver and turn over any such books and records to the Collateral Agent or to
its representatives at any time on demand of the Collateral Agent.
(c) Indemnification. In any suit, proceeding or action brought by the
Collateral Agent or any other Secured Party relating to all or any portion of
the Collateral or any Collateral Payment for any sum owing thereunder, or to
enforce any right in respect of the Collateral or any Collateral Payment, the
Grantor will indemnify and save and keep harmless the Collateral Agent and each
of the other Secured Parties from and against all expense, loss or damage
suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out of a
breach by the Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor of, such
obligor or its successors from the Grantor, and all such obligations of the
Grantor shall be and remain enforceable against and only against the Grantor and
shall not be enforceable against the Collateral Agent or any other Secured
Party.
<PAGE> 28
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(d) Compliance with Laws, Etc. The Grantor will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any Governmental Authority, applicable to the Collateral or any part thereof or
to the operation of the Grantor's business; provided, however, that the Grantor
may contest any act, regulation, order, decree or direction in any reasonable
manner which shall not, in the sole opinion of the Collateral Agent, adversely
affect the Collateral Agent's rights hereunder or adversely affect the first
priority of its Lien on and security interest in the Collateral for the benefit
of the Secured Parties.
(e) Payment of Obligations. The Grantor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom and all claims of
any kind (including, without limitation, claims for labor, materials and
supplies), except that no such charge need be paid if (i) such non-payment does
not involve any danger of the sale, forfeiture or loss of any of the Collateral
or any interest therein, and (ii) such charge is adequately reserved against in
accordance with and to the extent required by GAAP.
(f) Compliance with Terms of Agreements, Etc. In all material respects,
the Grantor will comply with and perform with all obligations, covenants,
conditions and other agreements with respect to any of the Collateral and all
other agreements related thereto to which it is a party or by which it is bound.
(g) Limitation on Liens on Collateral. The Grantor will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral except the
Liens created under this Agreement and the other Loan Documents, and will defend
the right, title and interest of the Collateral Agent and the other Secured
Parties in and to any of the Grantor's rights in and under the Collateral and in
and to the Proceeds thereof against the claims and demands of all Persons
whomsoever.
(h) Limitations on Disposition. The Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so, except as permitted by the Credit Agreement, this Agreement or the
other Loan Documents.
(i) Further Identification of Collateral. The Grantor will, if so
requested by the Collateral Agent, furnish to the Collateral Agent, as often as
the Collateral Agent reasonably requests, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
(j) Notices. The Grantor will advise the Collateral Agent promptly, in
reasonable detail, (i) of any Lien or claim made or asserted against any of the
Collateral, (ii) of any material change in the composition of the Collateral,
and (iii) of the occurrence of any
<PAGE> 29
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other event which would have a material adverse effect on the aggregate value of
the Collateral or on the security interests created hereunder.
(k) Right of Inspection. Upon reasonable notice to the Grantor (unless
a Default or an Event of Default has occurred and is continuing, in which case
no notice is necessary), the Collateral Agent, each of the other Secured
Parties, and their respective agents, accountants, attorneys and auditors shall
at all times have full and free access during normal business hours to all the
files, documents, records and other papers of the Grantor, and the Collateral
Agent, each of the other Secured Parties and their respective agents,
accountants, attorneys and auditors may examine the same, take extracts
therefrom and make photocopies thereof, and the Grantor agrees to render to the
Collateral Agent, at the Grantor's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto.
(l) Continuous Perfection. The Grantor will not change its name,
identity or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless the Grantor shall have given the Collateral Agent
at least 30 days' prior written notice thereof and shall have taken all action
(or made arrangements to take such action substantially simultaneously with such
change if it is impossible to take such action in advance) necessary or
reasonably requested by the Collateral Agent to amend such financing statement
or continuation statement so that it is not seriously misleading. The Grantor
will not change its principal place of business or remove its records, each as
set forth on Schedule I hereto, unless it gives the Collateral Agent at least 30
days' prior written notice thereof and has taken such action as is necessary to
cause the security interest of the Collateral Agent in the Collateral to
continue to be perfected.
(m) Insurance. The Grantor will keep the Collateral insured against
loss, damage, theft and other risks customarily covered by insurance and such
other risks as the Collateral Agent may reasonably request.
(n) Other Acts. The Grantor will do all acts that a prudent investor
would deem necessary or desirable to maintain, preserve and protect the
Collateral.
(o) Defense of Actions. The Grantor will appear in and defend, at the
Grantor's sole cost and expense (unless such action or proceeding arises solely
from an act or failure to act by a Secured Party which act or failure to act is
determined to be gross negligence or willful misconduct), any action or
proceeding that may affect its title to or the Secured Parties' interest in the
Collateral.
(p) Reports. Within five Business Days after the end of each calendar
month, the Grantor will provide to the Administrative Agent and the Collateral
Agent a report in respect of each type of Eligible Servicing Receivable, which
report shall be set forth (a) except for Eligible P&I Advance Receivables, in
loan-level detail (including, without
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limitation, loan number and receivable amount), and (b) with respect to Eligible
P&I Advance Receivables, by investor remittance type, in each case, in form and
substance satisfactory to the Administrative Agent.
15. The Collateral Agent's Appointment as Attorney-in-Fact.
(a) The Grantor hereby irrevocably constitutes and appoints the
Collateral Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Grantor and in the name of the
Grantor or in its own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute and deliver any and all documents
and instruments which the Collateral Agent may deem necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives the Collateral Agent the power and right, on
behalf of the Grantor, without notice to or assent by the Grantor to do the
following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any
Collateral and, in the name of the Grantor or in its own name or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Collateral and to file any claim or to take any
other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the
Collateral Agent for the purpose of collecting any and all such moneys
due under any Collateral whenever payable;
(ii) to pay or discharge taxes, Liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral, to effect any insurance called for by the terms of this
Agreement and to pay all or any part of the premiums therefor and the
costs thereof; and
(iii) (A) to direct any party liable for any Collateral
Payment under any of the Collateral to make any and all Collateral
Payments due and to become due thereunder, directly to the Collateral
Agent or as the Collateral Agent shall direct; (B) to receive payment
of and receipt for any and all moneys, claims and other amounts due and
to become due at any time, in respect of or arising out of any
Collateral; (C) to sign and indorse any invoices, freight or express
bills, bills of lading, storage, trust or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection
with accounts and other documents constituting or relating to the
Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction
to collect the Collateral or any part thereof and to enforce any other
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right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against the Grantor with respect to any Collateral;
(F) to settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, to give such discharges
or releases as the Collateral Agent may deem appropriate; (G) to
license or, to the extent permitted by an applicable license,
sublicense, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any patent or trademark constituting
Collateral, throughout the world for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its
sole discretion determine; and (H) generally to sell, transfer, pledge,
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Collateral Agent were
the absolute owner thereof for all purposes, and to do, at the
Collateral Agent's option and the Grantor's expense, at any time, or
from time to time, all acts and things which the Collateral Agent
reasonably deems necessary to protect, preserve or realize upon the
Collateral and the Collateral Agent's and the other Secured Parties'
Lien therein, in order to effect the intent of this Agreement, all as
fully and effectively as the Grantor might do.
(b) The Collateral Agent agrees that, except upon the occurrence and
during the continuance of any Default or Event of Default, it will forbear from
exercising the power of attorney or any rights granted to the Collateral Agent
pursuant to this Section 15. The Grantor hereby ratifies, to the extent
permitted by law, all that any said attorney shall lawfully do or cause to be
done by virtue hereof. The power of attorney granted pursuant to this Section
15, being coupled with an interest, shall be irrevocable until the Secured
Obligations are indefeasibly paid in full.
(c) The powers conferred on the Collateral Agent hereunder are solely
to protect the Collateral Agent's and the other Secured Parties' interests in
the Collateral and shall not impose any duty upon it to exercise any such
powers. The Collateral Agent 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
Grantor for any act or failure to act, except for its own gross negligence or
willful misconduct.
(d) The Grantor also authorizes the Collateral Agent, at any time and
from time to time upon the occurrence and during the continuance of a Default or
Event of Default, (i) to communicate in its own name with any party to any
contract, instrument, agreement or document constituting Collateral with regard
to the assignment of the right, title and interest of the Grantor therein and
thereunder and other matters relating thereto and (ii) to execute, in connection
with the sale provided for in Section 17 hereof, any indorsements, assignments
or other instruments of conveyance or transfer with respect to the Collateral.
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16. Performance by the Collateral Agent of the Grantor's Obligations.
If the Grantor fails to perform or comply with any of its agreements
contained herein and the Collateral Agent, as provided for by the terms of this
Agreement, shall itself perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses of the Collateral Agent
incurred in connection with such performance or compliance, together with
interest thereon at the highest rate then in effect in respect of the Loans,
shall be payable by the Grantor to the Collateral Agent on demand and shall
constitute Secured Obligations secured hereby.
17. Remedies, Rights Upon an Event of Default.
(a) If any Event of Default shall occur and be continuing, the
Collateral Agent shall, at the request of the Administrative Agent (acting upon
the direction of the Required Lenders), or may with the consent of the
Administrative Agent (acting upon the direction of the Required Lenders),
exercise in addition to all other rights and remedies granted to it in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a secured party
under the UCC or as otherwise provided by applicable law or in equity. Without
limiting the generality of the foregoing, the Grantor expressly agrees that in
any such event the Collateral Agent, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon the Grantor or any other
Person (all and each of which demands, advertisements and/or notices are hereby
expressly waived to the maximum extent permitted by the UCC and other applicable
law), may forthwith (i) enter onto property where any Collateral or books and
records relating thereto are located and take possession thereof with or without
judicial process, (ii) prior to the disposition of any Collateral, prepare such
Collateral for disposition in any manner and to the extent the Administrative
Agent or Collateral Agent deems appropriate, (iii) collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or sell, lease,
assign, give an option or options to purchase, or sell or otherwise dispose of
and deliver said Collateral (or contract to do so), or any part thereof, in one
or more parcels at public or private sale or sales, at any exchange or broker's
board or any of the Collateral Agent's offices or elsewhere at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. The Collateral Agent or any other Secured Party shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
said Collateral so sold. Each purchaser at any such sale or other disposition
shall hold the Collateral free from any claim or right of whatever kind,
including, without limitation, any equity or right of redemption of the Grantor,
and the Grantor specifically waives and releases (to the extent permitted by
law) all rights of redemption, stay, or appraisal that it has or may have under
any rule of law or statute now existing or hereafter adopted. The Grantor
further agrees, at the Collateral Agent's request, to assemble the Collateral
and make it available to the Collateral Agent at places which the Collateral
Agent shall reasonably select, whether at the Grantor's premises or elsewhere.
The
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Collateral Agent shall apply the net proceeds of any such collection, recovery
receipt, appropriation, realization or sale, as provided in Section 17(h)
hereof, the Grantor remaining liable for any deficiency remaining unpaid after
such application, and only after so paying over such net proceeds and after the
payment by the Collateral Agent of any other amount required by any provision of
law, including Section 9-504(1)(c) of the UCC, need the Collateral Agent account
for the surplus, if any, to the Grantor. To the maximum extent permitted by
applicable law, the Grantor waives all claims, damages, and demands against the
Secured Parties arising out of the repossession, retention or sale of the
Collateral. The Grantor agrees that the Collateral Agent need not give more than
ten days' notice of the time and place of any public sale or of the time after
which a private sale may take place and that such notice is reasonable
notification of such matters. The Grantor shall remain liable for any deficiency
if the proceeds of any sale or disposition of the Collateral are insufficient to
pay all amounts to which the Secured Parties are entitled, the Grantor also
being liable for the fees and expenses of any attorneys employed by the
Collateral Agent and the other Secured Parties to collect such deficiency. Upon
the exercise by the Collateral Agent of any remedy hereunder, the Grantor shall
(x) upon request of the Collateral Agent, deliver to the Collateral Agent all
computer software, tapes, records, documents, escrow deposits and other deposits
in its possession or under its control relating to the Collateral, and (y)
cooperate with the Collateral Agent in every respect in effecting such delivery.
(b) In furtherance and not in limitation of the rights of the
Collateral Agent set forth in this Section 17, upon the acceleration of the
maturity of the Loans or other Secured Obligations as provided in the Credit
Agreement, at the request and direction of the Administrative Agent, the
Collateral Agent may, in addition to any other rights it may have, do one or
more of the following, subject to the terms of the relevant Servicing Contract,
Acknowledgment Agreement, Agency Guide or applicable law (it being understood
that if there is any conflict between any such relevant Servicing Contract,
Acknowledgment Agreement, Agency Acknowledgment Agreement, Agency Guide or
applicable law and this Agreement, then the terms of such Servicing Contracts,
Acknowledgment Agreement, Agency Acknowledgment Agreement, Agency Guide or
applicable law shall prevail):
(i) succeed the Grantor as servicer under any or all of the
Servicing Contracts as absolute assignee thereof and not merely as
security;
(ii) appoint a third party as successor servicer under any or
all of the Servicing Contracts;
(iii) sell to a third party or itself or otherwise transfer
any of the Grantor's right, title, interest or obligations with respect
to the Servicing Contracts, including without limitation the right to
hold and/or place the escrow deposits associated therewith; or
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(iv) require the Grantor, notwithstanding any action taken by
the Collateral Agent under clause (iii), to remain as servicer under
any Servicing Contract for a reasonable period of time, such period not
to exceed 180 days.
Notwithstanding anything herein to the contrary, the Collateral Agent shall have
no obligations as servicer under any Servicing Contracts unless and until the
Collateral Agent has succeeded the Grantor as servicer of the related Mortgage
Loans pursuant to this subsection (b).
(c) The Collateral Agent's rights under clauses (i), (ii) and (iii) of
subsection (b) above shall respectively include, without limitation, the right
to succeed the Grantor as servicer, appoint a successor servicer or transfer any
or all of its rights with respect to the Servicing Rights and/or the Servicing
Contracts if the Grantor, or any successor to the Grantor in bankruptcy or
similar proceedings, rejects any Servicing Contracts. As successor servicer
under such clause (i), the Collateral Agent shall notify all interested Persons
thereof and take such further action as it shall deem necessary or appropriate.
Upon the Collateral Agent's (x) succeeding the Grantor as servicer under such
clause (i), (y) appointing a third party as a successor servicer under any
Servicing Contract under such clause (ii), or (z) transferring any of the
Grantor's right, title, interest and obligations under such clause (iii), the
Grantor shall have no further rights under or with respect to the Servicing
Rights (or to such rights, title, interest or obligations in the case of a
transfer under clause (iii)), to any other documents pertaining thereto or to
the related escrow deposits.
(d) Upon the exercise by the Collateral Agent of any remedy set forth
in subsection (b) or (c) above, the Grantor shall:
(i) upon request of the Collateral Agent, deliver to the
Collateral Agent all computer software, tapes, records, documents,
escrow deposits and other deposits in its possession or under its
control relating to the Collateral, and
(ii) cooperate with the Collateral Agent in every reasonable
respect in effecting the succession of a successor servicer.
(e) If the Collateral Agent or any appointee of the Collateral Agent
succeeds the Grantor as successor servicer under any Servicing Contract, the
Collateral Agent or such appointee, as the case may be, shall only assume those
obligations that a successor servicer under such Servicing Contract is obligated
to assume; provided that neither the Collateral Agent or its appointee nor any
other Secured Party shall be liable for any failure of the Grantor to perform
its obligations under any Servicing Contract or for any other breach thereof.
Nothing herein contained shall be construed as an assumption by the Collateral
Agent or its appointee or any other Secured Party of any liability of the
Grantor with respect to any of the Collateral, and the Grantor shall be and
remain responsible for all such liabilities.
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(f) The Grantor also agrees to pay all reasonable costs and expenses of
the Collateral Agent and each of the other Secured Parties, including, without
limitation, attorneys' fees, incurred in connection with the enforcement of any
of their rights and remedies hereunder.
(g) The Grantor hereby waives presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(h) The Proceeds of any sale, disposition or other realization upon all
or any part of the Collateral shall be distributed by the Collateral Agent in
the following order of priorities:
First, to the payment of the costs and expenses of such sale,
disposition or other realization, including, without limitation, all
expenses of the Collateral Agent and its agents including the fees and
expenses of its counsel, and all expenses, liabilities and advances
made or incurred by the Collateral Agent and the other Secured Parties
in connection therewith or pursuant to Section 7 hereof;
Next, to the Administrative Agent, for distribution by it in
accordance with the terms of the Credit Agreement; and
Finally, after payment in full of all the Secured Obligations,
to the payment to the Grantor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same as a court of
competent jurisdiction may direct.
18. Limitation on the Secured Parties' Duty in Respect of Collateral.
No Secured Party shall have any duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
it or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto, except that each Secured Party
shall use reasonable care with respect to the Collateral in its possession or
under its control. Upon request of the Grantor, the Collateral Agent shall
account for any moneys received by it in respect of any foreclosure on or
disposition of the Collateral.
19. Rights with Respect to GNMA; Acknowledgment Agreements.
(a) Notwithstanding anything contained herein or in any of the other
Loan Documents to the contrary, the Collateral Agent, by executing this
Agreement, and each of the other Secured Parties, by executing the Credit
Agreement, acknowledge that (a) the Grantor is entitled to servicing income with
respect to any GNMA pool of Mortgage Loans only so long as the Grantor is a GNMA
Issuer/Servicer in good standing; (b) upon the Grantor's loss of such good
standing status, the Secured Parties' rights to any such
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36
servicing income also terminate; and (c) the pledge of rights to servicing
income with respect to any GNMA pool of Mortgage Loans hereunder conveys no
rights (such as the right to become a substitute servicer or issuer) that are
not otherwise specifically provided for in the applicable GNMA Guide.
Notwithstanding anything contained herein or in the other Loan Documents to the
contrary, to the extent that any Acknowledgment Agreement is executed and
delivered by FNMA and such agreement or the FNMA Guide relating thereto provides
that the Grantor may not pledge security interests in rights relating to
servicing income to secure Loans, the proceeds of which Loans are used for
purposes prohibited by such agreement or FNMA Guide, then the Collateral Agent
and the other Secured Parties shall not be deemed to have such a security
interest to the extent such security interest serves as collateral for such
prohibited use; provided that nothing contained herein shall affect the validity
or enforceability of (x) security interests in such rights pledged to secure
Loans whose purposes are not prohibited and (y) the assignment of the proceeds
of such rights to the Secured Parties, and provided further that if at any time
the use of the proceeds of such Loans is no longer prohibited, then such
security interest shall be valid, binding, perfected, enforceable and in full
force and effect.
(b) The security interest created by this Agreement is subject and
subordinate to all rights, powers, and prerogatives of FNMA under and in
connection with (i) the terms and conditions of that certain Acknowledgment
Agreement, with respect to the security interest created hereunder, by and
between FNMA, the Grantor and the Collateral Agent, (ii) the Mortgage Selling
and Servicing Contract and all applicable Pool Purchase Contracts between FNMA
and the Grantor, and (iii) the FNMA Guide, as such Guide is amended from time to
time ((ii) and (iii) collectively, the "FNMA Contract"), which rights, powers,
and prerogatives include, without limitation, the right of FNMA to terminate the
FNMA Contract with or without cause and the right to sell, or have transferred,
the Servicing Rights as therein provided.
(c) The security interest referred to in this Agreement is subject and
subordinate in each and every respect (a) to all rights, powers and prerogatives
of one or more of the following: FHLMC, FNMA, GNMA, or such other investors that
own mortgage loans, or which guaranty payments on securities based on and backed
by pools of mortgage loans, identified herein (the "Investors"); and (b) to all
claims of an Investor arising out of any and all defaults and outstanding
obligations of the debtor to the Investor. Such rights, powers and prerogatives
of the Investors may include, without limitation, one or more of the following:
the right of an Investor to disqualify the Grantor from participating in a
mortgage selling or servicing program or a securities guaranty program with such
Investor; the right to terminate contract rights of the Grantor relating to such
a mortgage selling or servicing program or securities guaranty program; and the
right to transfer and sell all or any portion of such contract rights following
the termination of those rights.
20. Notices.
All notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, telecopy, or cable communication) and
mailed, telegraphed,
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telexed, telecopied, cabled or delivered by hand, addressed to any party hereto
at the address of such party specified in the Credit Agreement, or, as to each
party, at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section. All such notices and other communications shall, when mailed,
telegraphed, telexed, telecopied, cabled or delivered, be effective when
deposited in the mails, delivered to the telegraph company, confirmed by telex
answerback, telecopied with confirmation of receipt, delivered to the cable
company, or delivered by hand to the addressee or its Collateral Agent,
respectively.
21. Amendments, Etc.
No amendment or waiver of any provision of this Agreement or consent to
any departure by the Grantor therefrom shall in any event be effective unless
the same shall be in writing, signed by the Grantor, the Administrative Agent
(upon the direction of the Required Lenders or all of the Lenders, as required
by the Credit Agreement) and the Collateral Agent, and then any such waiver or
consent shall only be effective in the specific instance and for the specific
purpose for which given.
22. No Waiver; Remedies.
(a) No failure on the part of any Secured Party 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, may be exercised singly or concurrently, and are
not exclusive of any remedies provided by law or any of the other Loan
Documents.
(b) Failure by any of the Secured Parties at any time or times
hereafter to require strict performance by the Grantor or any other Person of
any of the provisions, warranties, terms or conditions contained in any of the
Loan Documents now or at any time or times hereafter executed by the Grantor or
any such other Person and delivered to any of the Secured Parties shall not
waive, affect or diminish any right of any of the Secured Parties at any time or
times hereafter to demand strict performance thereof, and such right shall not
be deemed to have been modified or waived by any course of conduct or knowledge
of any of the Secured Parties, or any agent, officer or employee of any Secured
Party.
23. Successors and Assigns.
This Agreement and all obligations of the Grantor hereunder shall be
binding upon the successors and assigns of the Grantor, and shall, together with
the rights and remedies of the Collateral Agent hereunder, inure to the benefit
of the Collateral Agent, each of the other Secured Parties, and their respective
successors and assigns. Notwithstanding the foregoing, the Grantor may not
assign or transfer any of its rights or
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obligations under this Agreement without the prior written consent of each
Lender, the Administrative Agent and the Collateral Agent.
24. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND BE CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
25. Entire Agreement; Severability.
This Agreement and the other Loan Documents constitute the entire
agreement and understanding between the parties hereto and supersede any and all
prior or contemporaneous agreements and understandings of such Persons, oral or
written, relating to the subject matter hereof and thereof. In addition, there
are no promises, undertakings, representations or warranties by the Collateral
Agent or any other Secured Party relating to the subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents. All
waivers by the Grantor provided for in this Agreement have been specifically
negotiated by the parties with full cognizance and understanding of their
respective rights. If any of the provisions of this Agreement shall be held
invalid or unenforceable, this Agreement shall be construed as if not containing
such provisions, and the rights and obligations of the parties hereto shall be
construed and enforced accordingly.
26. Waiver of Jury Trial.
EACH OF THE GRANTOR, THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES HEREUNDER, UNDER THE CREDIT AGREEMENT
OR UNDER ANY OF THE OTHER LOAN DOCUMENTS OR ANY OTHER DOCUMENT RELATING TO ANY
OF THE FOREGOING.
27. Further Indemnification.
The Grantor agrees to pay, and to save the Collateral Agent and each
other Secured Party harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all excise, sales or other similar
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
28. Release and Reinstatement.
(a) During any Positive Security Period, upon the written request of
the Grantor and subject to the conditions precedent set forth below, the
Collateral Agent shall release
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the Collateral from the Lien in favor of the Collateral Agent for the benefit of
the Secured Parties hereunder and, as evidence of such release of Lien, shall
execute and deliver to the Grantor (i) a confirmation of such release in the
form of that attached hereto as Attachment 9, (ii) such UCC termination
statements as are necessary to terminate all existing UCC-1 financing statements
covering the Collateral filed by the Collateral Agent on behalf of the Secured
Parties and (iii) such notices and instructions to all appropriate Persons to
release such Lien on any Mortgage-Backed Security, it being expressly
acknowledged and agreed by the Collateral Agent, the Agent and the Grantor that
during any Positive Security Period the Secured Obligations are intended to be
and become unsecured obligations. Following the effective date of the release of
Lien contemplated hereby, the Collateral Agent will continue to maintain
possession of the Collateral as set forth herein as if such Lien had not been so
released, and shall utilize a trust receipt in the form of that attached hereto
as Attachment 5-B and letters in the forms of those attached hereto as
Attachment 7-C, Attachment 7-E and Attachment 7-G in releasing Collateral to the
Grantor and shipping Collateral pursuant hereto in lieu of the trust receipt
form attached hereto as Attachment 5-A and the letters attached hereto as
Attachment 7-B, Attachment 7-D and Attachment 7-F, respectively.
As conditions precedent to the release of Lien contemplated hereby:
(i) Immediately prior to and immediately following the release
of Lien contemplated hereby, there shall not exist any Default or Event
of Default;
(ii) There shall exist a Positive Security Period both
immediately prior to and immediately following the release of Lien
contemplated hereby; and
(iii) The Grantor shall have executed and conditionally
delivered to the Collateral Agent new UCC-1 financing statements in
form and substance acceptable to the Collateral Agent accompanied by
the Grantor's irrevocable written authorization for the Collateral
Agent to file such UCC-1 financing statements upon the occurrence of a
Negative Security Event.
(b) Nothing contained in this Section 28 shall in any manner or to any
extent affect the obligations of the Grantor hereunder and under the other Loan
Documents to maintain with the Collateral Agent items constituting Collateral
required under the Loan Documents, it being expressly acknowledged and agreed by
the Grantor that the release of the Lien contemplated hereby shall not affect
the terms and provisions of the Loan Documents except to the extent that during
any Positive Security Period, the Secured Obligations shall not be secured by
the Collateral.
(c) If following the release of the Lien contemplated by subparagraph
(a) above there shall occur a Negative Security Event:
(i) The Grantor shall automatically be deemed to assign,
convey, mortgage, pledge, hypothecate and transfer to the Collateral
Agent, on behalf and for the ratable benefit of the Secured Parties,
and automatically be deemed to
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grant to the Collateral Agent, on behalf and for the ratable benefit of
the Secured Parties, a security interest in, and effective upon the
occurrence of such Negative Security Event hereby does so assign,
convey, mortgage, pledge, hypothecate and transfer to the Collateral
Agent, for the ratable benefit of the Secured Parties, and hereby does
so grant a security interest in, the Collateral, including, without
limitation, all Collateral then in the possession of the Collateral
Agent, as collateral security for the Secured Obligations;
(ii) The Collateral Agent shall no later than five Business
Days following receipt of notification from the Administrative Agent of
such Negative Security Event (A) record the UCC-1 financing statements
previously delivered to it pursuant to subparagraph (a)(iii) above and
(B) commence to utilize the trust receipt in the form of that attached
hereto as Attachment 5-A and the letters in the forms of those attached
hereto as Attachment 7-B , Attachment 7-D and Attachment 7-F in
releasing Collateral to the Grantor and shipping Collateral pursuant to
this Agreement; and
(iii) The Grantor shall take such other actions and execute
and deliver such additional documents, instruments and agreements as
the Administrative Agent, the Collateral Agent and the Required Lenders
shall reasonably request to obtain for the Secured Parties the benefit
of the Collateral.
(d) The reinstatement of the Lien of the Collateral Agent for the
benefit of the Secured Parties on the Collateral following a Negative Security
Event shall in no manner affect the rights, powers and remedies of the
Collateral Agent or the other Secured Parties otherwise available under the Loan
Documents, including, without limitation, the right to accelerate the Secured
Obligations and to refuse to make further Loans under the Credit Agreement in
the event there exists a Default or an Event of Default.
(e) Upon the written request of the Grantor, so long as no Default or
Event of Default has occurred and is continuing or would result therefrom, from
time to time (but in no event more frequently than once per calendar quarter)
the Collateral Agent shall, at the sole cost and expense of the Grantor, release
Servicing Receivables and any other Servicing Rights arising in connection with
Servicing Contracts with Approved Investors (other than an Agency) which do not
constitute Eligible Servicing Receivables or otherwise constitute part of the
Eligible Servicing Portfolio and which are not included in the HomeSide Tranche
B Borrowing Base from the Lien in favor of the Collateral Agent for the benefit
of the Secured Parties hereunder and, as evidence of such release of Lien, shall
execute and deliver to the Grantor (i) a confirmation of such release in a form
reasonably satisfactory to the Grantor, the Collateral Agent and the
Administrative Agent, and (ii) such UCC amendments as are necessary to amend all
existing UCC-1 financing statements covering the Servicing Receivables so
released.
(f) Upon the written request of the Grantor, so long as no Default or
Event of Default has occurred and is continuing or would result therefrom, from
time to time (but
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in no event more frequently than once per calendar quarter) the Collateral Agent
shall, at the sole cost and expense of the Grantor, release Mortgage Loans
constituting Collateral which are not included in the HomeSide Tranche A
Borrowing Base from the Lien in favor of the Collateral Agent for the benefit of
the Secured Parties hereunder and, as evidence of such release of Lien, shall
execute and deliver to the Grantor (i) a confirmation of such release in a form
reasonably satisfactory to the Grantor, the Collateral Agent and the
Administrative Agent, and (ii) such further documents as are necessary to effect
and evidence the release of such Lien on such Mortgage Loans.
29. Survival of Representations.
All covenants, agreements, representations and warranties made herein
shall survive the making by the Lenders of the Loans and the execution and
delivery to the Administrative Agent for the account of the Lenders of the Notes
regardless of any investigation made by the Collateral Agent or any of the other
Secured Parties and of the Collateral Agent's and the other Secured Parties'
access to any information and shall continue in full force and effect so long as
any Secured Obligation is unpaid or unperformed.
30. Section Titles.
The Section titles contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of this
Agreement.
31. Execution in Counterparts.
This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement.
<PAGE> 42
42
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer on the
date first above written.
HONOLULU MORTGAGE COMPANY, INC.
By: /s/ Joe K. Pickett
---------------------------------
/s/ Hugh R. Harris
---------------------------------
Name:
Title:
CHEMICAL BANK,
as Administrative Agent
By: /s/ Jeanette F. Brummell
---------------------------------
Name: Jeanette F. Brummell
Title: Managing Director
THE FIRST NATIONAL BANK
OF BOSTON, as Collateral Agent
By: /s/ David L. Hall
---------------------------------
Name: David L. Hall
Title: Senior Manager
<PAGE> 1
EXHIBIT 10.34
1
SECURITY AND COLLATERAL AGENCY AGREEMENT
SECURITY AND COLLATERAL AGENCY AGREEMENT (this "Agreement"), dated as
of May 31, 1996, made by HOMESIDE HOLDINGS, INC., a Florida corporation
(formerly known as Barnett Mortgage Company) (the "Grantor"), CHEMICAL BANK, in
its capacity as Administrative Agent under the Credit Agreement referred to
below (in such capacity, the "Administrative Agent"), and THE FIRST NATIONAL
BANK OF BOSTON, as Collateral Agent for the financial institutions party to the
Credit Agreement referred to below (in such capacity, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, HomeSide Lending, Inc., a Florida corporation ("HomeSide"),
and Honolulu Mortgage Company, Inc., a Hawaii corporation ("HonoMo"), have
entered into a Credit Agreement, dated as of May 31, 1996, with the financial
institutions from time to time party thereto, as Lenders (the "Lenders"), the
lenders from time to time designated therein as Balance Lenders (the "Balance
Lenders"), NationsBank of Texas, N.A., as Syndication Agent (the "Syndication
Agent"), Bankers Trust Company, as Documentation Agent (the "Documentation
Agent"), the Collateral Agent and the Administrative Agent (said Agreement, as
it may be amended, supplemented or otherwise modified from time to time, being
the "Credit Agreement");
WHEREAS, (i) the Grantor is the beneficial and record owner of 100% of
the issued and outstanding capital stock of HomeSide, and (ii) HomeSide is the
beneficial and record owner of 100% of the issued and outstanding capital stock
of HonoMo;
WHEREAS, in connection with the Credit Agreement, the Grantor has
entered into the BMC Guarantee; and
WHEREAS, it is a condition precedent to the making of the Loans that
the Grantor shall have entered into this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make the Loans, the Grantor hereby agrees with the Administrative
Agent and the Collateral Agent on behalf and for the ratable benefit of the
Secured Parties (as hereinafter defined) as follows:
1. Defined Terms.
Terms defined in the UCC (as hereinafter defined) are used herein as
therein defined. As used in this Agreement, capitalized terms defined in the
Credit Agreement and not otherwise defined herein have the meanings given in the
Credit Agreement; provided, however, that with respect to use of terms defined
in the Credit Agreement for purposes of the definition of the term "Collateral"
and the various components thereof,
<PAGE> 2
2
any reference in such defined terms contained in the Credit Agreement to the
"Borrower," "HomeSide" or "HonoMo" shall be deemed, and shall be for all
purposes hereunder, a reference to the Grantor. Additionally, the following
terms have the meanings specified below (such meanings being equally applicable
to both the singular and plural forms of the terms defined):
"Agency Custodial Agreement" shall mean the GNMA Custodial Agreement.
"Certificating Custodian" shall mean any Person acting as the Grantor's
"certificating custodian," as such term is used in the GNMA Guide, for purposes
of (a) certifying that the documentation relating to Mortgage Loans received by
such Person from the Grantor (or the Collateral Agent) is complete and
acceptable under the GNMA Guide for purposes of including such Mortgage Loan in
a pool of Mortgage Loans in which Mortgage-Backed Securities will represent
interests and (b) holding such documentation following formation of such pools
and issuance of such Mortgage-Backed Securities. The Certificating Custodian
shall at all times be a party to the Agency Custodial Agreement.
"Collateral" has the meaning set forth in Section 3 of this Agreement.
"GNMA Custodial Agreement" shall mean the agreement, as amended,
modified or supplemented from time to time, between GNMA, the Grantor and any
Person meeting the eligibility requirements set forth in the GNMA Guide to serve
as a "certificating custodian," as such term is used in the GNMA Guide, pursuant
to which such Person is authorized to act as Certificating Custodian.
"Proceeds" shall mean "proceeds," as such term is defined in Section
9-306(1) of the UCC, and, in any event, includes, without limitation, (a) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Grantor from time to time with respect to any of the Collateral, (b) any and
all payments (in any form whatsoever) made or due and payable to the Grantor
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting under color of Governmental
Authority), and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Secured Obligations" shall mean the "Obligations," as such term is
defined in the BMC Guarantee.
"Secured Parties" shall mean, collectively, the Lenders, the Balance
Lenders, the Syndication Agent, the Documentation Agent, the Collateral Agent
and the Administrative Agent.
"Servicing Contract" shall mean each of the contracts or other
agreements to which the Grantor is a party pursuant to which the Grantor holds
Servicing Rights, in each case as amended, supplemented or otherwise modified
from time to time, including, without limitation, (a) all rights of the Grantor
to receive moneys due and to become due
<PAGE> 3
3
to it thereunder or in connection therewith, other than any portion of principal
and interest payable under the related Mortgage Loans to the extent not
attributable to servicing fees payable to the Grantor under such Servicing
Contracts, (b) all rights of the Grantor to damages arising out of, or for,
breach or default in respect thereof, and (c) all rights of the Grantor to
perform and to exercise all remedies thereunder.
"Servicing Receivables" shall mean the accounts, receivables and other
amounts owing to the Grantor for its own account in respect of Servicing Rights
or under a Servicing Contract, including, without limitation, all Eligible
Servicing Receivables.
"Servicing Rights" shall mean the rights of the Grantor to service
Mortgage Loans for or on behalf of the owner or holder of such Mortgage Loans
(including investors in Mortgage-Backed Securities supported by Mortgage Loans)
pursuant to any direct agreement between the Grantor and GNMA (including,
without limitation, all such rights covered by the Barnett Subservicing
Agreement, dated as of May 31, 1996, between the Grantor and HomeSide), together
with the legal titles, mortgagor files, escrows and records relating to such
Mortgage Loans and the right to receive servicing fee income and any other
income arising from or in connection with such Mortgage Loans, including late
charges, termination fees and charges and all other incidental fees and charges.
"Servicing Settlement Account" shall have the meaning given such term
in the HomeSide Security Agreement.
"UCC" shall mean the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of New York; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Collateral Agent's and the other Secured Parties'
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, the term "UCC"
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
2. Appointment of Collateral Agent.
Pursuant to the Credit Agreement the Collateral Agent has been
appointed to act as secured party, agent, bailee and custodian for the exclusive
benefit of the Secured Parties with respect to the Collateral. The Collateral
Agent hereby acknowledges that it has accepted such appointment and agrees to
maintain and hold all Collateral at any time delivered to it as secured party,
agent, bailee and custodian for the exclusive benefit of the Secured Parties.
The Collateral Agent acknowledges and agrees that it is acting and will act with
respect to the Collateral for the exclusive benefit of the Secured Parties and
is not, and shall not at any time in the future be, subject, with respect to the
Collateral, in any manner or to any extent, to the direction or control of the
Grantor or any of the other Loan Parties, except as expressly permitted
hereunder and under the other Loan
<PAGE> 4
4
Documents. The Collateral Agent agrees to act in accordance with this Agreement
and in accordance with any written instructions from the Administrative Agent
delivered pursuant to the Credit Agreement. Under no circumstances shall the
Collateral Agent deliver possession of Collateral to the Grantor or any other
Person (other than the Administrative Agent) or otherwise release any Collateral
from the Lien created hereby, except in accordance with the express terms of
this Agreement or otherwise upon the written instructions of the Administrative
Agent.
3. Grant of Security Interest.
As collateral security for the full and prompt payment when due
(whether at stated maturity, by acceleration or otherwise) of, and the
performance of, all the Secured Obligations and to induce the Lenders to make
the Loans pursuant to the Credit Agreement, the Grantor hereby assigns, conveys,
mortgages, pledges, hypothecates and transfers to the Collateral Agent, on
behalf and for the ratable benefit of the Secured Parties, and hereby grants to
the Collateral Agent, on behalf and for the ratable benefit of the Secured
Parties, a security interest in, all of the Grantor's right, title and interest
in, to and under the following, whether now owned or hereafter acquired, whether
now in existence or hereafter arising (all of which being herein collectively
called the "Collateral"):
(a) all Servicing Rights, Servicing Contracts and rights to receive
payments in connection with Servicing Contracts and Servicing Rights, whether on
account of the performance of services, upon the termination of Servicing
Rights, Servicing Contracts or otherwise (including, without limitation, all
Eligible Servicing Receivables (and all deeds, contracts, agreements,
instruments of title and other documents received or receivable in respect
thereof)), and rights with respect to the placement of escrow deposits
associated with such Servicing Rights and Servicing Contracts and rights to the
payment of money or provision of concessions or services with respect thereto;
(b) the Servicing Settlement Account and any other custodial account of
the Grantor held by or in the name of the Collateral Agent or its bailee or
designee (including, without limitation, the Administrative Agent), and any and
all funds, securities, Cash Equivalents and other items at any time held in such
accounts and any and all rights of the Grantor to insurance payments made in
respect of such accounts;
(c) all files, documents, agreements, instruments, deeds, chattel
paper, inventory consisting of Servicing Rights held for sale, insurance
policies, personal property, contract rights, accounts, general intangibles,
records, surveys, certificates, correspondence, appraisals, computer records,
tapes, discs, cards, accounting records and other books, records, information
and data of the Grantor relating to the Collateral (including all such items
necessary or helpful in the administration or servicing of the Collateral) of
whatever kind or nature whatsoever relating to the Servicing Rights or any other
Collateral, and all other documents or instruments delivered to the Collateral
Agent in respect of the Collateral;
<PAGE> 5
5
(d) all Hedge Contracts covering, relating to, or entered into in
respect of, any of the Collateral, and all rights to the payment of money or
provision of concessions or services with respect thereto, and all accounts
relating thereto and moneys and other items held therein; and
(e) to the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of, each of the foregoing.
4. Servicing Settlement Account.
(a) Servicing Settlement Account. With respect to any amounts owed to
the Grantor in respect of Servicing Receivables or other Servicing Rights
(including, without limitation, all Eligible Servicing Receivables, proceeds of
the sale of Servicing Rights and all termination and other fees payable in
respect of Servicing Rights) other than from a mortgagor in respect of the
applicable Mortgage Loan, if requested by the Administrative Agent, the
Collateral Agent and the Grantor shall instruct any obligor in respect of such
Servicing Receivable or other Servicing Rights that all amounts payable on
account of such Servicing Receivable or other Servicing Rights are to be paid
directly by such party to the Servicing Settlement Account. The Grantor shall,
upon demand of the Collateral Agent or the Administrative Agent, provide the
Collateral Agent and the Administrative Agent with evidence that the Grantor has
directed such obligors to pay such amounts directly into the Servicing
Settlement Account. The Grantor hereby consents to the investment and
reinvestment of any funds held in the Servicing Settlement Account in accordance
with, and consents to each of the terms and conditions set forth in, Section
6(m) of the HomeSide Security Agreement.
(b) Security Interest in Servicing Settlement Account. Pursuant to
Section 3 hereof, the Grantor has granted to the Collateral Agent, for the
benefit of the Secured Parties, a security interest in the Servicing Settlement
Account and in any and all funds at any time held therein as collateral security
for the Secured Obligations. This subsection (b) shall constitute irrevocable
notice to the Collateral Agent that the Servicing Settlement Account is a "no
access" account to the Grantor. The Collateral Agent shall hold its security
interest in the Servicing Settlement Account and all funds at any time held
therein for the benefit of the Secured Parties and with all rights of a secured
party under the UCC and other applicable New York law. In no circumstances shall
the Grantor have access to, control of or dominion over the Servicing Settlement
Account. The Collateral Agent hereby appoints the Administrative Agent to hold
the Servicing Settlement Account pursuant to the terms hereof for the benefit of
the Secured Parties with all rights of a secured party under the UCC and other
applicable New York law, and the Administrative Agent hereby accepts such
appointment.
<PAGE> 6
6
(c) Transfer of Funds from the Servicing Settlement Account. The
Administrative Agent shall transfer funds from the Servicing Settlement Account
in accordance with Section 6(m) of the HomeSide Security Agreement.
5. Rights of the Secured Parties; Limitations on Secured Parties'
Obligations.
(a) It is expressly agreed by the Grantor that, anything herein to the
contrary notwithstanding, the Grantor shall remain liable to observe and perform
all the conditions, duties and obligations to be observed and performed by it
relating to the Collateral, and the Grantor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the terms and
provisions relating thereto. Neither the Collateral Agent nor any other Secured
Party shall have any obligation or liability under any instrument, agreement,
contract or other document by reason of or arising out of this Agreement or the
granting of a security interest in any instrument, agreement, contract or other
document to the Collateral Agent on behalf and for the ratable benefit of the
Secured Parties or the receipt by the Collateral Agent or any other Secured
Party of any payment relating to any of the foregoing pursuant hereto, nor shall
the Collateral Agent or any other Secured Party be required or obligated in any
manner to perform or fulfill any of the obligations of the Grantor thereunder,
or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party thereunder, or to present or file any claim, or to take any action
to collect or enforce any performance or 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) Subject to the terms of this Agreement, the Collateral Agent
authorizes the Grantor to collect all sums due or to become due (including,
without limitation, Proceeds) in respect of any Collateral ("Collateral
Payments"), provided that such collection is performed in a prudent and
businesslike manner, and the Collateral Agent may, upon the occurrence and
during the continuance of any Default or Event of Default and without notice,
limit or terminate said authority at any time. If required by the Collateral
Agent at any time during the continuance of any Default or Event of Default, any
Collateral Payments, when first collected by the Grantor shall be promptly
delivered by the Grantor to the Collateral Agent in precisely the form received
(with all necessary indorsements), and until so turned over shall be deemed to
be held in trust by the Grantor for and as the Collateral Agent's property, for
the benefit of the Secured Parties, and shall not be commingled with the
Grantor's other funds or properties. Such Collateral Payments, when so delivered
to the Collateral Agent, shall continue to be collateral security for all of the
Secured Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Collateral Agent shall upon the request of the
Required Lenders apply all or a part of the funds so delivered in accordance
with the provisions of Section 14(h) hereof.
(c) The Collateral Agent may at any time, upon the occurrence and
during the continuance of any Default or Event of Default, notify any party that
is or might become obligated to make any Collateral Payment that the Collateral
and the right, title and
<PAGE> 7
7
interest of the Grantor in and under the Collateral have been assigned to the
Collateral Agent, for the benefit of the Secured Parties, and that any or all of
such Collateral Payments shall be made directly to the Collateral Agent or its
designee. Upon the request of the Collateral Agent, the Grantor will so notify
such parties. Upon the occurrence and during the continuance of a Default or an
Event of Default, the Collateral Agent may in its own name or in the name of
others communicate with all such parties to verify with such parties to the
Collateral Agent's satisfaction the existence, amount and terms of any such
obligation in respect of any Collateral Payment.
6. Representations and Warranties.
(a) The Grantor hereby represents and warrants to the Secured Parties
as follows:
(i) The Grantor is the sole owner of each item of the
Collateral in which it purports to grant a security interest hereunder,
having good title thereto, free and clear of any and all Liens or any
other right, title, claim or interest, except for (A) the security
interest granted pursuant to this Agreement and (B) subservicing rights
in favor of HomeSide arising under the Barnett Subservicing Agreement,
dated as of May 31, 1996, between the Grantor and HomeSide.
(ii) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by the Grantor in
favor of the Collateral Agent, for the benefit of the Secured Parties,
pursuant to this Agreement.
(iii) Except as otherwise provided in Section 25 hereof, all
action necessary to protect and perfect the valid and perfected first
priority security interest in each item of the Collateral has been duly
taken.
(iv) The Grantor's principal place of business and the place
where its records concerning the Collateral are kept are set forth on
Schedule I hereto.
(v) All information heretofore, herein, or hereafter supplied
to the Collateral Agent or any other Secured Party by or on behalf of
the Grantor with respect to the Collateral is accurate and complete in
all material respects.
(vi) No consent of any other Person is required for the grant
of the security interest provided herein by the Grantor in any of the
Collateral, other than consents that have been obtained, nor will any
consent need to be obtained upon the occurrence of an Event of Default
for the Secured Parties to exercise their rights with respect to any of
such Collateral.
(vii) To the best of the Grantor's knowledge, no obligor or
other Person responsible or liable for any Collateral Payment has any
defense, set off, claim or
<PAGE> 8
8
counterclaim against the Grantor that can be asserted against the
Collateral Agent or any other Secured Party.
(b) The Collateral Agent hereby represents and warrants to the Grantor
and each of the other Secured Parties as follows:
(i) The Collateral Agent is a national banking association
duly incorporated, validly existing and in good standing under the laws
of the United States of America.
(ii) The execution, delivery and performance by the Collateral
Agent of this Agreement are within the Collateral Agent's corporate
powers, have been duly authorized by all necessary corporate action and
do not contravene the Collateral Agent's certificate of incorporation
or bylaws, any Requirement of Law or any order or decree of any court,
or any contractual obligation of the Collateral Agent.
(iii) No consent, authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority or any
other Person is required for the due execution, delivery and
performance by the Collateral Agent of this Agreement.
(iv) This Agreement has been duly executed and delivered by
the Collateral Agent and is the legal, valid and binding obligation of
the Collateral Agent, enforceable against the Collateral Agent in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally and by general principles of equity.
7. Standard of Care of Collateral Agent; Duties; Indemnification.
The Collateral Agent is a bailee for hire and shall hold the Collateral
in accordance with customary standards for those engaged as custodians of
commercial documents in similar capacities. Nothing contained herein or in the
Credit Agreement shall be construed to make the Collateral Agent a trustee or
other fiduciary for the Administrative Agent or any other Secured Party.
Notwithstanding anything to the contrary contained herein:
(a) The provisions of the Credit Agreement, this Agreement and the
annexes, schedules, exhibits and attachments hereto set forth the exclusive
duties of the Collateral Agent and no implied duties or obligations shall be
read into this Agreement against the Collateral Agent. The Collateral Agent
shall not be bound in any way by any agreement or contract other than this
Agreement and the annexes, the exhibits and the attachments hereto and any other
agreement to which it is a party. The Collateral Agent shall not be required to
ascertain or inquire as to the performance or observance of any of the
conditions or agreements to be performed or observed by any other party, except
as
<PAGE> 9
9
specifically provided in this Agreement and the annexes, schedules, exhibits and
attachments hereto. The Collateral Agent disclaims any responsibility for the
validity or accuracy of the recitals to this Agreement and any representations
and warranties contained herein, unless specifically identified as recitals,
representations or warranties of the Collateral Agent.
(b) Throughout the term of this Agreement, the Collateral Agent shall
have no responsibility for ascertaining the value, collectability, insurability,
enforceability, effectiveness or suitability of any Collateral, the title of any
party therein, the validity or adequacy of the security afforded thereby or the
validity of this Agreement (except as to Collateral Agent's authority to enter
into this Agreement and to perform its obligations hereunder).
(c) The Collateral Agent may rely upon and shall be protected in acting
in good faith upon any notice, resolution, request, consent, order, certificate,
report, statement or other paper or document appearing on its face to be genuine
and to have been signed or presented by the proper party or parties or by a
person or persons authorized to act on behalf of the proper party or parties.
The Collateral Agent shall not be liable for any action or omission to act as
bailee, except for its own gross negligence or willful misconduct.
(d) No provision of this Agreement shall require the Collateral Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if, in its judgment, it shall believe that repayment of such
funds or adequate indemnity against such risk or liability is not assured to it.
(e) The Collateral Agent is not responsible for preparing or filing any
reports or returns relating to federal, state or local income taxes with respect
to this Agreement, other than for the Collateral Agent's compensation or for
reimbursement of expenses.
(f) The Grantor agrees to reimburse, indemnify and hold harmless the
Collateral Agent and its directors, officers, employees, Affiliates and agents
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, reasonable attorneys' fees and disbursements and allocated costs of
internal counsel) or disbursements of any kind or nature that may be imposed on,
incurred by or asserted against the Collateral Agent and its directors,
officers, employees, Affiliates and agents arising from or connected with the
Collateral Agent's execution and performance of this Agreement, including, but
not limited to, the claims of any third parties, including any assignee. The
foregoing shall apply regardless of whether such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements are in any way or to any extent caused, in whole or in part, by
any negligent act or omission of any kind by the Collateral Agent; provided that
the Grantor shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting
<PAGE> 10
10
from gross negligence or willful misconduct on the part of the Collateral Agent.
This provision shall survive the termination of this Agreement.
(g) At its sole cost and expense, the Collateral Agent shall have the
power to employ such agents as it may deem necessary or appropriate in the
performance of its duties and the exercise of its powers under this Agreement.
8. Fees and Expenses of Collateral Agent.
The Collateral Agent shall notify the Grantor of all reasonable fees,
expenses, and charges of the Collateral Agent arising out of the Collateral
Agent's entering into this Agreement and performing its duties and obligations
under this Agreement (including in connection with the enforcement of remedies
hereunder and realization upon the Collateral), and (except as set forth in
Section 7(g) hereof) such fees, expenses and charges shall be paid promptly by
the Grantor or, if already paid by the Collateral Agent, the Grantor shall
reimburse the Collateral Agent promptly therefor. The Collateral Agent shall
receive reasonable additional compensation from the Grantor for services
rendered beyond those specifically enumerated in this Agreement, provided that
the Collateral Agent shall, to the extent possible, provide reasonable advance
notice to the Grantor of such services and its estimate of fees, expenses and
charges in connection therewith. The Collateral Agent may employ, at the
Grantor's expense, such legal counsel and other experts as it reasonably deems
necessary in connection with entering into this Agreement and performing its
duties and obligations under this Agreement. The Collateral Agent may rely upon
and shall be protected if acting in good faith upon the advice of such legal
counsel or experts.
9. Removal or Resignation of Collateral Agent.
The Administrative Agent, upon the direction of the Required Lenders,
may, at any time, remove and discharge the Collateral Agent from the performance
of its duties under this Agreement, effective (a) immediately if such
termination is for cause or (b) upon not less than thirty (30) days' prior
written notice to the Collateral Agent and the Grantor if such termination is
without cause. In addition, the Collateral Agent may, at any time, terminate its
agreement to act as the Collateral Agent hereunder, effective upon sixty (60)
days' prior written notice to the Grantor, the Administrative Agent and the
Lenders. Upon the effective date of any such termination, the Collateral Agent
shall promptly deliver the Collateral then held by it and any and all books and
records (or copies thereof) relating thereto, to the Administrative Agent or to
such other person or entity as the Administrative Agent may direct in writing,
and shall cooperate with the Administrative Agent and any successor Collateral
Agent in order to effect the orderly transfer of the Collateral and the rights
and obligations of the Collateral Agent hereunder to any successor Collateral
Agent. Upon resignation or removal of the Collateral Agent hereunder, the
Administrative Agent and the Required Lenders shall appoint a successor
Collateral Agent. If no successor Collateral Agent shall have been so appointed,
and shall have accepted such appointment, before the end of the thirty (30) or
sixty (60) day
<PAGE> 11
11
period referred to above, as the case may be, then the Administrative Agent (or,
at the discretion of the Administrative Agent, an Affiliate of the
Administrative Agent) shall succeed as Collateral Agent.
10. Availability of Documents.
The Administrative Agent and each other Secured Party and its agents,
accountants, attorneys and auditors will be permitted during normal business
hours at any time and from time to time upon reasonable notice to the Collateral
Agent to examine and inspect (to the extent permitted by applicable law) the
files, documents, records and other papers in the possession or under the
control of the Collateral Agent relating to any or all of the Collateral and to
make copies thereof. As long as no Default or Event of Default has occurred and
is continuing, any such activity will be at no cost or expense to the Grantor;
if a Default or Event of Default has occurred and is continuing, all costs and
expenses associated with the exercise by the Administrative Agent or any other
Secured Party of its rights under this Section 10 shall be paid by the Grantor
within fifteen (15) days of receipt by the Grantor from the Administrative Agent
or such other Secured Party of a statement setting forth in reasonable detail
the amount thereof.
11. Covenants.
The Grantor covenants and agrees with the Collateral Agent and the
other Secured Parties that from and after the date of this Agreement and until
the Secured Obligations are fully satisfied:
(a) Further Documentation; Pledge of Instruments and Chattel Paper. At
any time and from time to time, upon the written request of the Collateral
Agent, and at the sole expense of the Grantor, the Grantor will promptly and
duly execute and deliver any and all such further instruments and documents and
take such further action as the Collateral Agent may reasonably deem necessary
or desirable to obtain the full benefits of this Agreement and of the rights and
powers herein granted, including, without limitation, using its best efforts to
secure all consents and approvals necessary or appropriate for the assignment to
the Collateral Agent of any Collateral held by the Grantor or in which the
Grantor has any rights not heretofore assigned, the filing of any financing or
continuation statements under the UCC with respect to the Liens and security
interests granted hereby and transferring Collateral to the Collateral Agent's
(or its bailee's) possession (if a security interest in such Collateral can be
perfected by possession). The Grantor also hereby authorizes the Collateral
Agent to file any such financing or continuation statement without the signature
of the Grantor to the extent permitted by applicable law. If any of the
Collateral shall be or become evidenced by any instrument, the Grantor agrees to
pledge such instrument to the Collateral Agent and shall duly endorse such
instrument in a manner satisfactory to the Collateral Agent and deliver the same
to the Collateral Agent. The Grantor shall hold any such instrument in its
possession in trust for the benefit of the Secured Parties until the delivery
thereof to the Collateral Agent as provided herein.
<PAGE> 12
12
(b) Maintenance of Records. The Grantor will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. The Grantor will mark its books and records pertaining to the
Collateral to evidence this Agreement and the Lien and security interests
granted hereby. For the Collateral Agent's and the other Secured Parties'
further security, the Grantor agrees that the Collateral Agent and the other
Secured Parties shall have a special property interest in all of the Grantor's
books and records pertaining to the Collateral and, upon the occurrence and
during the continuance of any Default or Event of Default, the Grantor shall
deliver and turn over any such books and records to the Collateral Agent or to
its representatives at any time on demand of the Collateral Agent.
(c) Indemnification. In any suit, proceeding or action brought by the
Collateral Agent or any other Secured Party relating to all or any portion of
the Collateral or any Collateral Payment for any sum owing thereunder, or to
enforce any right in respect of the Collateral or any Collateral Payment, the
Grantor will indemnify and save and keep harmless the Collateral Agent and each
of the other Secured Parties from and against all expense, loss or damage
suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising out of a
breach by the Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor of, such
obligor or its successors from the Grantor, and all such obligations of the
Grantor shall be and remain enforceable against and only against the Grantor and
shall not be enforceable against the Collateral Agent or any other Secured
Party.
(d) Compliance with Laws, Etc. The Grantor will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any Governmental Authority, applicable to the Collateral or any part thereof or
to the operation of the Grantor's business; provided, however, that the Grantor
may contest any act, regulation, order, decree or direction in any reasonable
manner which shall not, in the sole opinion of the Collateral Agent, adversely
affect the Collateral Agent's rights hereunder or adversely affect the first
priority of its Lien on and security interest in the Collateral for the benefit
of the Secured Parties.
(e) Payment of Obligations. The Grantor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom and all claims of
any kind (including, without limitation, claims for labor, materials and
supplies), except that no such charge need be paid if (i) such non-payment does
not involve any danger of the sale, forfeiture or loss of any of the Collateral
or any interest therein, and (ii) such charge is adequately reserved against in
accordance with and to the extent required by GAAP.
(f) Compliance with Terms of Agreements, Etc. In all material respects,
the Grantor will comply with and perform with all obligations, covenants,
conditions and
<PAGE> 13
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other agreements with respect to any of the Collateral and all other agreements
related thereto to which it is a party or by which it is bound.
(g) Limitation on Liens on Collateral. The Grantor will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral except the
Liens created under this Agreement and the other Loan Documents, and will defend
the right, title and interest of the Collateral Agent and the other Secured
Parties in and to any of the Grantor's rights in and under the Collateral and in
and to the Proceeds thereof against the claims and demands of all Persons
whomsoever.
(h) Limitations on Disposition. The Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so, except as permitted by the Credit Agreement, this Agreement or the
other Loan Documents.
(i) Further Identification of Collateral. The Grantor will, if so
requested by the Collateral Agent, furnish to the Collateral Agent, as often as
the Collateral Agent reasonably requests, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
(j) Notices. The Grantor will advise the Collateral Agent promptly, in
reasonable detail, (i) of any Lien or claim made or asserted against any of the
Collateral, (ii) of any material change in the composition of the Collateral,
and (iii) of the occurrence of any other event which would have a material
adverse effect on the aggregate value of the Collateral or on the security
interests created hereunder.
(k) Right of Inspection. Upon reasonable notice to the Grantor (unless
a Default or an Event of Default has occurred and is continuing, in which case
no notice is necessary), the Collateral Agent, each of the other Secured
Parties, and their respective agents, accountants, attorneys and auditors shall
at all times have full and free access during normal business hours to all the
files, documents, records and other papers of the Grantor, and the Collateral
Agent, each of the other Secured Parties and their respective agents,
accountants, attorneys and auditors may examine the same, take extracts
therefrom and make photocopies thereof, and the Grantor agrees to render to the
Collateral Agent, at the Grantor's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto.
(l) Continuous Perfection. The Grantor will not change its name,
identity or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless the Grantor shall have given the Collateral Agent
at least 30 days' prior written notice thereof and shall have taken all action
(or made arrangements to take such action substantially simultaneously with such
change if it is impossible to take such action in
<PAGE> 14
14
advance) necessary or reasonably requested by the Collateral Agent to amend such
financing statement or continuation statement so that it is not seriously
misleading. The Grantor will not change its principal place of business or
remove its records, each as set forth on Schedule I hereto, unless it gives the
Collateral Agent at least 30 days' prior written notice thereof and has taken
such action as is necessary to cause the security interest of the Collateral
Agent in the Collateral to continue to be perfected.
(m) Insurance. The Grantor will keep the Collateral insured against
loss, damage, theft and other risks customarily covered by insurance and such
other risks as the Collateral Agent may reasonably request.
(n) Other Acts. The Grantor will do all acts that a prudent investor
would deem necessary or desirable to maintain, preserve and protect the
Collateral.
(o) Defense of Actions. The Grantor will appear in and defend, at the
Grantor's sole cost and expense (unless such action or proceeding arises solely
from an act or failure to act by a Secured Party which act or failure to act is
determined to be gross negligence or willful misconduct), any action or
proceeding that may affect its title to or the Secured Parties' interest in the
Collateral.
12. The Collateral Agent's Appointment as Attorney-in-Fact.
(a) The Grantor hereby irrevocably constitutes and appoints the
Collateral Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Grantor and in the name of the
Grantor or in its own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute and deliver any and all documents
and instruments which the Collateral Agent may deem necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives the Collateral Agent the power and right, on
behalf of the Grantor, without notice to or assent by the Grantor to do the
following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any
Collateral and, in the name of the Grantor or in its own name or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Collateral and to file any claim or to take any
other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the
Collateral Agent for the purpose of collecting any and all such moneys
due under any Collateral whenever payable;
<PAGE> 15
15
(ii) to pay or discharge taxes, Liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral, to effect any insurance called for by the terms of this
Agreement and to pay all or any part of the premiums therefor and the
costs thereof; and
(iii) (A) to direct any party liable for any Collateral
Payment under any of the Collateral to make any and all Collateral
Payments due and to become due thereunder, directly to the Collateral
Agent or as the Collateral Agent shall direct; (B) to receive payment
of and receipt for any and all moneys, claims and other amounts due and
to become due at any time, in respect of or arising out of any
Collateral; (C) to sign and indorse any invoices, freight or express
bills, bills of lading, storage, trust or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection
with accounts and other documents constituting or relating to the
Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction
to collect the Collateral or any part thereof and to enforce any other
right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against the Grantor with respect to any Collateral;
(F) to settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, to give such discharges
or releases as the Collateral Agent may deem appropriate; (G) to
license or, to the extent permitted by an applicable license,
sublicense, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any patent or trademark constituting
Collateral, throughout the world for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its
sole discretion determine; and (H) generally to sell, transfer, pledge,
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Collateral Agent were
the absolute owner thereof for all purposes, and to do, at the
Collateral Agent's option and the Grantor's expense, at any time, or
from time to time, all acts and things which the Collateral Agent
reasonably deems necessary to protect, preserve or realize upon the
Collateral and the Collateral Agent's and the other Secured Parties'
Lien therein, in order to effect the intent of this Agreement, all as
fully and effectively as the Grantor might do.
(b) The Collateral Agent agrees that, except upon the occurrence and
during the continuance of any Default or Event of Default, it will forbear from
exercising the power of attorney or any rights granted to the Collateral Agent
pursuant to this Section 12. The Grantor hereby ratifies, to the extent
permitted by law, all that any said attorney shall lawfully do or cause to be
done by virtue hereof. The power of attorney granted pursuant to this Section
12, being coupled with an interest, shall be irrevocable until the Secured
Obligations are indefeasibly paid in full.
(c) The powers conferred on the Collateral Agent hereunder are solely
to protect the Collateral Agent's and the other Secured Parties' interests in
the Collateral and shall not impose any duty upon it to exercise any such
powers. The Collateral Agent shall be
<PAGE> 16
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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 Grantor for any act or failure
to act, except for its own gross negligence or willful misconduct.
(d) The Grantor also authorizes the Collateral Agent, at any time and
from time to time upon the occurrence and during the continuance of a Default or
Event of Default, (i) to communicate in its own name with any party to any
contract, instrument, agreement or document constituting Collateral with regard
to the assignment of the right, title and interest of the Grantor therein and
thereunder and other matters relating thereto and (ii) to execute, in connection
with the sale provided for in Section 14 hereof, any indorsements, assignments
or other instruments of conveyance or transfer with respect to the Collateral.
13. Performance by the Collateral Agent of the Grantor's Obligations.
If the Grantor fails to perform or comply with any of its agreements
contained herein and the Collateral Agent, as provided for by the terms of this
Agreement, shall itself perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses of the Collateral Agent
incurred in connection with such performance or compliance, together with
interest thereon at the highest rate then in effect in respect of the Loans,
shall be payable by the Grantor to the Collateral Agent on demand and shall
constitute Secured Obligations secured hereby.
14. Remedies, Rights Upon an Event of Default.
(a) If any Event of Default shall occur and be continuing, the
Collateral Agent shall, at the request of the Administrative Agent (acting upon
the direction of the Required Lenders), or may with the consent of the
Administrative Agent (acting upon the direction of the Required Lenders),
exercise in addition to all other rights and remedies granted to it in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a secured party
under the UCC or as otherwise provided by applicable law or in equity. Without
limiting the generality of the foregoing, the Grantor expressly agrees that in
any such event the Collateral Agent, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon the Grantor or any other
Person (all and each of which demands, advertisements and/or notices are hereby
expressly waived to the maximum extent permitted by the UCC and other applicable
law), may forthwith (i) enter onto property where any Collateral or books and
records relating thereto are located and take possession thereof with or without
judicial process, (ii) prior to the disposition of any Collateral, prepare such
Collateral for disposition in any manner and to the extent the Administrative
Agent or Collateral Agent deems appropriate, (iii) collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or sell, lease,
assign, give an option or options to purchase, or sell or otherwise dispose of
and deliver said Collateral (or contract to do so), or any part thereof, in one
or more parcels at public or
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private sale or sales, at any exchange or broker's board or any of the
Collateral Agent's offices or elsewhere at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Collateral Agent or any other Secured Party shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of said Collateral so
sold. Each purchaser at any such sale or other disposition shall hold the
Collateral free from any claim or right of whatever kind, including, without
limitation, any equity or right of redemption of the Grantor, and the Grantor
specifically waives and releases (to the extent permitted by law) all rights of
redemption, stay, or appraisal that it has or may have under any rule of law or
statute now existing or hereafter adopted. The Grantor further agrees, at the
Collateral Agent's request, to assemble the Collateral and make it available to
the Collateral Agent at places which the Collateral Agent shall reasonably
select, whether at the Grantor's premises or elsewhere. The Collateral Agent
shall apply the net proceeds of any such collection, recovery receipt,
appropriation, realization or sale, as provided in Section 14(h) hereof, the
Grantor remaining liable for any deficiency remaining unpaid after such
application, and only after so paying over such net proceeds and after the
payment by the Collateral Agent of any other amount required by any provision of
law, including Section 9-504(1)(c) of the UCC, need the Collateral Agent account
for the surplus, if any, to the Grantor. To the maximum extent permitted by
applicable law, the Grantor waives all claims, damages, and demands against the
Secured Parties arising out of the repossession, retention or sale of the
Collateral. The Grantor agrees that the Collateral Agent need not give more than
ten days' notice of the time and place of any public sale or of the time after
which a private sale may take place and that such notice is reasonable
notification of such matters. The Grantor shall remain liable for any deficiency
if the proceeds of any sale or disposition of the Collateral are insufficient to
pay all amounts to which the Secured Parties are entitled, the Grantor also
being liable for the fees and expenses of any attorneys employed by the
Collateral Agent and the other Secured Parties to collect such deficiency. Upon
the exercise by the Collateral Agent of any remedy hereunder, the Grantor shall
(x) upon request of the Collateral Agent, deliver to the Collateral Agent all
computer software, tapes, records, documents, escrow deposits and other deposits
in its possession or under its control relating to the Collateral, and (y)
cooperate with the Collateral Agent in every respect in effecting such delivery.
(b) In furtherance and not in limitation of the rights of the
Collateral Agent set forth in this Section 14, upon the acceleration of the
maturity of the Loans or other Secured Obligations as provided in the Credit
Agreement, at the request and direction of the Administrative Agent, the
Collateral Agent may, in addition to any other rights it may have, do one or
more of the following, subject to the terms of the Servicing Contracts, GNMA
Acknowledgment Agreement (if applicable), GNMA Guide or applicable law (it being
understood that if there is any conflict between any such Servicing Contracts,
GNMA Acknowledgment Agreement (if applicable), GNMA Guide or applicable law and
this Agreement, then the terms of such Servicing Contracts, GNMA Acknowledgment
Agreement (if applicable), GNMA Guide or applicable law shall prevail):
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(i) succeed the Grantor as servicer under any or all of the
Servicing Contracts as absolute assignee thereof and not merely as
security;
(ii) appoint a third party as successor servicer under the
Servicing Contracts;
(iii) sell to a third party or itself or otherwise transfer
any of the Grantor's right, title, interest or obligations with respect
to the Servicing Contracts, including without limitation the right to
hold and/or place the escrow deposits associated therewith; or
(iv) require the Grantor, notwithstanding any action taken by
the Collateral Agent under clause (iii), to remain as servicer under
any Servicing Contract for a reasonable period of time, such period not
to exceed 180 days.
Notwithstanding anything herein to the contrary, the Collateral Agent shall have
no obligations as servicer under any Servicing Contracts unless and until the
Collateral Agent has succeeded the Grantor as servicer of the related Mortgage
Loans pursuant to this subsection (b).
(c) The Collateral Agent's rights under clauses (i), (ii) and (iii) of
subsection (b) above shall respectively include, without limitation, the right
to succeed the Grantor as servicer, appoint a successor servicer or transfer any
or all of its rights with respect to the Servicing Rights and/or the Servicing
Contracts if the Grantor, or any successor to the Grantor in bankruptcy or
similar proceedings, rejects any Servicing Contracts. As successor servicer
under such clause (i), the Collateral Agent shall notify all interested Persons
thereof and take such further action as it shall deem necessary or appropriate.
Upon the Collateral Agent's (x) succeeding the Grantor as servicer under such
clause (i), (y) appointing a third party as a successor servicer under any
Servicing Contract under such clause (ii), or (z) transferring any of the
Grantor's right, title, interest and obligations under such clause (iii), the
Grantor shall have no further rights under or with respect to the Servicing
Rights (or to such rights, title, interest or obligations in the case of a
transfer under clause (iii)), to any other documents pertaining thereto or to
the related escrow deposits.
(d) Upon the exercise by the Collateral Agent of any remedy set forth
in subsection (b) or (c) above, the Grantor shall:
(i) upon request of the Collateral Agent, deliver to the
Collateral Agent or its designee all computer software, tapes, records,
documents, escrow deposits and other deposits in its possession or
under its control relating to the Collateral, and
(ii) cooperate with the Collateral Agent in every reasonable
respect in effecting the succession of a successor servicer.
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(e) If the Collateral Agent or any appointee of the Collateral Agent
succeeds the Grantor as successor servicer under any Servicing Contract, the
Collateral Agent or such appointee, as the case may be, shall only assume those
obligations that a successor servicer under such Servicing Contract is obligated
to assume; provided that neither the Collateral Agent or its appointee nor any
other Secured Party shall be liable for any failure of the Grantor to perform
its obligations under any Servicing Contract or for any other breach thereof.
Nothing herein contained shall be construed as an assumption by the Collateral
Agent or its appointee or any other Secured Party of any liability of the
Grantor with respect to any of the Collateral, and the Grantor shall be and
remain responsible for all such liabilities.
(f) The Grantor also agrees to pay all reasonable costs and expenses of
the Collateral Agent and each of the other Secured Parties, including, without
limitation, attorneys' fees, incurred in connection with the enforcement of any
of their rights and remedies hereunder.
(g) The Grantor hereby waives presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(h) The Proceeds of any sale, disposition or other realization upon all
or any part of the Collateral shall be distributed by the Collateral Agent in
the following order of priorities:
First, to the payment of the costs and expenses of such sale,
disposition or other realization, including, without limitation, all
expenses of the Collateral Agent and its agents including the fees and
expenses of its counsel, and all expenses, liabilities and advances
made or incurred by the Collateral Agent and the other Secured Parties
in connection therewith or pursuant to Section 5 hereof;
Next, to the Administrative Agent, for distribution by it in
accordance with the terms of the BMC Guarantee; and
Finally, after payment in full of all the Secured Obligations,
to the payment to the Grantor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same as a court of
competent jurisdiction may direct.
15. Limitation on the Secured Parties' Duty in Respect of Collateral.
No Secured Party shall have any duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
it or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto, except that each Secured Party
shall use reasonable care with respect to the Collateral in its possession or
under its control. Upon request of the Grantor, the
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Collateral Agent shall account for any moneys received by it in respect of any
foreclosure on or disposition of the Collateral.
16. Rights with Respect to GNMA.
Notwithstanding anything contained herein or in any of the other Loan
Documents to the contrary, the Collateral Agent, by executing this Agreement,
and each of the other Secured Parties, by executing the Credit Agreement,
acknowledge that (a) the Grantor is entitled to servicing income with respect to
any GNMA pool of Mortgage Loans only so long as the Grantor is a GNMA
Issuer/Servicer in good standing; (b) upon the Grantor's loss of such good
standing status, the Secured Parties' rights to any such servicing income also
terminate; and (c) the pledge of rights to servicing income with respect to any
GNMA pool of Mortgage Loans hereunder conveys no rights (such as the right to
become a substitute servicer or issuer) that are not otherwise specifically
provided for in the applicable GNMA Guide.
17. Notices.
All notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, telecopy, or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered by hand, addressed
to any party hereto as set forth on the signature page hereto, or, as to each
party, at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section. All such notices and other communications shall, when mailed,
telegraphed, telexed, telecopied, cabled or delivered, be effective when
deposited in the mails, delivered to the telegraph company, confirmed by telex
answerback, telecopied with confirmation of receipt, delivered to the cable
company, or delivered by hand to the addressee or its agent, respectively.
18. Amendments, Etc.
No amendment or waiver of any provision of this Agreement or consent to
any departure by the Grantor therefrom shall in any event be effective unless
the same shall be in writing, signed by the Grantor, the Administrative Agent
(upon the direction of the Required Lenders or all of the Lenders, as required
by the Credit Agreement) and the Collateral Agent, and then any such waiver or
consent shall only be effective in the specific instance and for the specific
purpose for which given.
19. No Waiver; Remedies.
(a) No failure on the part of any Secured Party 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, may be
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exercised singly or concurrently, and are not exclusive of any remedies provided
by law or any of the other Loan Documents.
(b) Failure by any of the Secured Parties at any time or times
hereafter to require strict performance by the Grantor or any other Person of
any of the provisions, warranties, terms or conditions contained in any of the
Loan Documents now or at any time or times hereafter executed by the Grantor or
any such other Person and delivered to any of the Secured Parties shall not
waive, affect or diminish any right of any of the Secured Parties at any time or
times hereafter to demand strict performance thereof, and such right shall not
be deemed to have been modified or waived by any course of conduct or knowledge
of any of the Secured Parties, or any agent, officer or employee of any Secured
Party.
20. Successors and Assigns.
This Agreement and all obligations of the Grantor hereunder shall be
binding upon the successors and assigns of the Grantor, and shall, together with
the rights and remedies of the Collateral Agent hereunder, inure to the benefit
of the Collateral Agent, each of the other Secured Parties, and their respective
successors and assigns. Notwithstanding the foregoing, the Grantor may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of each Lender, the Administrative Agent and the
Collateral Agent.
21. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND BE CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
22. Entire Agreement; Severability.
This Agreement and the other Loan Documents constitute the entire
agreement and understanding between the parties hereto and supersede any and all
prior or contemporaneous agreements and understandings of such Persons, oral or
written, relating to the subject matter hereof and thereof. In addition, there
are no promises, undertakings, representations or warranties by the Collateral
Agent or any other Secured Party relating to the subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents. All
waivers by the Grantor provided for in this Agreement have been specifically
negotiated by the parties with full cognizance and understanding of their
respective rights. If any of the provisions of this Agreement shall be held
invalid or unenforceable, this Agreement shall be construed as if not containing
such provisions, and the rights and obligations of the parties hereto shall be
construed and enforced accordingly.
23. Waiver of Jury Trial.
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EACH OF THE GRANTOR, THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES HEREUNDER, UNDER THE CREDIT AGREEMENT
OR UNDER ANY OF THE OTHER LOAN DOCUMENTS OR ANY OTHER DOCUMENT RELATING TO ANY
OF THE FOREGOING.
24. Further Indemnification.
The Grantor agrees to pay, and to save the Collateral Agent and each
other Secured Party harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all excise, sales or other similar
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
25. Release and Reinstatement.
(a) In the event a Positive Security Event shall occur, upon the
written request of the Grantor and subject to the conditions precedent set forth
below, the Collateral Agent shall release the Collateral from the Lien in favor
of the Collateral Agent for the benefit of the Secured Parties hereunder and, as
evidence of such release of Lien, shall execute and deliver to the Grantor (i) a
confirmation of such release in the form of that attached hereto as Attachment
1, and (ii) such UCC termination statements as are necessary to terminate all
existing UCC-1 financing statements covering the Collateral filed by the
Collateral Agent on behalf of the Secured Parties, it being expressly
acknowledged and agreed by the Collateral Agent, the Agent and the Grantor that
upon the occurrence of a Positive Security Event the Secured Obligations are
intended to be and become unsecured obligations. As conditions precedent to the
release of Lien contemplated hereby:
(i) Immediately prior to and immediately following the release
of Lien contemplated hereby, there shall not exist any Default or Event
of Default;
(ii) Immediately prior to and immediately following the
release of Lien contemplated hereby, there shall not exist a Negative
Security Event; and
(iii) The Grantor shall have executed and conditionally
delivered to the Collateral Agent new UCC-1 financing statements in
form and substance acceptable to the Collateral Agent accompanied by
the Grantor's irrevocable written authorization for the Collateral
Agent to file such UCC-1 financing statements upon the occurrence of a
Negative Security Event.
(b) If following the release of the Lien contemplated by subparagraph
(a) above there shall occur a Negative Security Event:
<PAGE> 23
23
(i) The Grantor shall automatically be deemed to assign,
convey, mortgage, pledge, hypothecate and transfer to the Collateral
Agent, on behalf and for the ratable benefit of the Secured Parties,
and automatically be deemed to grant to the Collateral Agent, on behalf
and for the ratable benefit of the Secured Parties, a security interest
in, and effective upon the occurrence of such Negative Security Event
hereby does so assign, convey, mortgage, pledge, hypothecate and
transfer to the Collateral Agent, for the ratable benefit of the
Secured Parties, and hereby does so grant a security interest in, the
Collateral, including, without limitation, all Collateral then in the
possession of the Collateral Agent, as collateral security for the
Secured Obligations;
(ii) The Collateral Agent shall no later than five Business
Days following receipt of notification from the Administrative Agent of
such Negative Security Event record the UCC-1 financing statements
previously delivered to it pursuant to subparagraph (a)(iii) above; and
(iii) The Grantor shall take such other actions and execute
and deliver such additional documents, instruments and agreements as
the Administrative Agent, the Collateral Agent and the Required Lenders
shall reasonably request to obtain for the Secured Parties the benefit
of the Collateral.
(c) The reinstatement of the Lien of the Collateral Agent for the
benefit of the Secured Parties on the Collateral following a Negative Security
Event shall in no manner affect the rights, powers and remedies of the
Collateral Agent or the other Secured Parties otherwise available under the Loan
Documents, including, without limitation, the right to accelerate the Secured
Obligations and to refuse to make further Loans under the Credit Agreement in
the event there exists a Default or an Event of Default.
26. Survival of Representations.
All covenants, agreements, representations and warranties made herein
shall survive the making by the Lenders of the Loans and the execution and
delivery to the Administrative Agent for the account of the Lenders of the Notes
regardless of any investigation made by the Collateral Agent or any of the other
Secured Parties and of the Collateral Agent's and the other Secured Parties'
access to any information and shall continue in full force and effect so long as
any Secured Obligation is unpaid or unperformed.
27. Section Titles.
The Section titles contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of this
Agreement.
<PAGE> 24
24
28. Execution in Counterparts.
This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement.
<PAGE> 25
25
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer on the
date first above written.
HOMESIDE HOLDINGS, INC.
By: /s/ Joe K. Pickett
---------------------------------
/s/ Hugh R. Harris
---------------------------------
Name:
Title:
7301 Baymeadows Way
Jacksonville, Florida 32256
Attention: Joe K. Pickett
Telecopy: 904-281-3745
CHEMICAL BANK,
as Administrative Agent
By: /s/ Jeanette F. Brummell
---------------------------------
Name: Jeanette F. Brummell
Title: Managing Director
270 Park Avenue
10th Floor
New York, New York 10017
Attention: Roger A. Parker
Telecopy: 212-270-1789
THE FIRST NATIONAL BANK
OF BOSTON, as Collateral Agent
By: /s/ David L. Hall
---------------------------------
Name: David L. Hall
Title: Senior Manager
100 Federal Street
Mail Stop: 01-1B-06
Boston, Massachusetts 02110
Attention: David L. Hall
Telecopy:617-434-8295
<PAGE> 1
EXHIBIT 10.35
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT, dated as of May 31, 1996, among The
Bank of New York, as trustee (together with its successors and assigns in such
capacity, the "TRUSTEE") under the Indenture (such term and other capitalized
terms used herein being used as defined in Section 1 below), HOMESIDE, INC., a
Delaware corporation (together with its successors and assigns, "HOLDINGS"),
HOMESIDE HOLDINGS, INC., a Florida corporation (formerly named "Barnett Mortgage
Company" and renamed "HomeSide Holdings, Inc." on the Closing Date; together
with its successors and assigns, "BMC"), and CHEMICAL BANK, a New York banking
corporation, as agent (together with its successors and assigns in such
capacity, the "ADMINISTRATIVE AGENT") for the Lenders parties to the Credit
Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Homeside Lending, Inc., a Florida corporation
("HOMESIDE"), and Honolulu Mortgage Company, Inc., a Hawaii corporation
("HONOMO"), as Borrowers (collectively, the "BORROWERS"), are parties to the
Credit Agreement pursuant to which the Lenders party thereto have agreed to make
Loans and other extensions of credit to the Borrowers;
WHEREAS, HomeSide is a wholly owned subsidiary of BMC, which,
in turn, is a wholly owned subsidiary of Holdings;
WHEREAS, as a condition precedent to the obligations of the
Lenders to extend credit to the Borrowers under the Credit Agreement, Holdings
has executed and delivered to the Administrative Agent for the benefit of the
Lenders the Holdings Guarantee, and BMC has executed and delivered to the Agent
for the benefit of the Lenders the BMC Guarantee;
WHEREAS, to secure the obligations of the Borrowers under the
Loan Documents and Holdings' obligations under the Holdings Guarantee, Holdings
has executed and delivered to the Administrative Agent for the benefit of the
Lenders the Holdings Bank Pledge Agreement, and to secure the obligations of the
Borrowers under the Loan Documents and BMC's obligations under the BMC
Guarantee, BMC has executed and delivered to the Agent for the benefit of the
Lenders the BMC Bank Pledge Agreement;
WHEREAS, Holdings is issuing the Holdings Notes pursuant to
the Indenture;
WHEREAS, to secure its obligations under the Holdings Notes,
Holdings is executing and delivering to the Trustee the Holdings Noteholder
Pledge Agreement, and is causing BMC to execute and deliver to the Trustee the
BMC Noteholder Pledge Agreement;
WHEREAS, if Holdings acquires or forms any subsidiary
(directly owned by Holdings) after the date hereof, it may be required to grant
a first priority security interest in
<PAGE> 2
2
the stock of such subsidiary to the Administrative Agent for the benefit of the
Lenders pursuant to the Holdings Bank Pledge Agreement and to grant a security
interest (which, pursuant to the terms of the Indenture may be a second priority
security interest) in such stock to the Trustee pursuant to the Holdings
Noteholder Pledge Agreement;
WHEREAS, it is a condition precedent to the obligations of the
Lenders to extend credit to the Borrowers under the Credit Agreement that the
Administrative Agent and the Trustee shall have entered into this Agreement to
define the relative priority and rights of the Lenders and the Administrative
Agent, on the one hand, and the Noteholders and the Trustee, on the other hand,
with respect to the Collateral; and
WHEREAS, the Administrative Agent has been authorized and
directed by the Lenders to enter into this Agreement pursuant to subsection 10.1
of the Credit Agreement, and the Trustee has been authorized and directed to
enter into this Agreement pursuant to the Indenture;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree as follows:
1. Definitions. (a) Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Intercreditor Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"BANK LOAN DOCUMENTS": the collective reference to the Credit
Agreement, the Bank Pledge Agreements, each other Loan Document and all
other documents that from time to time evidence the Bank Obligations or
secure or support payment or performance thereof or of any guarantee
thereof.
"BANK LOAN PARTIES": Holdings, BMC, the Borrowers and each of
the other Loan Parties, and each successor and assign of the foregoing.
"BANK LOANS": the Loans made by the Lenders to the Borrowers
pursuant to the Credit Agreement.
"BANK PLEDGE AGREEMENTS": the collective reference to the
Holdings Bank Pledge Agreement and the BMC Bank Pledge Agreement.
"BANK OBLIGATIONS": the collective reference to the unpaid
principal of and interest on the Bank Loans and all other obligations
and liabilities of Holdings and each other Loan Party to the
Administrative Agent, each other agent under the Credit
<PAGE> 3
3
Agreement and the Lenders (including, without limitation, interest
accruing at the then applicable rate provided in the Credit Agreement
after the maturity of the Bank Loans and interest accruing at the then
applicable rate provided in the Credit Agreement after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to either Borrower or
Holdings, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, any notes issued thereunder, this
Agreement, the other Bank Loan Documents or any other document made,
delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel that are required to
be paid by any Bank Loan Party pursuant to the terms of the Credit
Agreement or any other Bank Loan Document).
"BANK SECURITY DOCUMENTS": the collective reference to the
Bank Pledge Agreements and all documents and instruments, now existing
or hereafter arising, which create or purport to create a security
interest in property to secure payment or performance of the Bank
Obligations.
"BMC BANK PLEDGE AGREEMENT": the BMC Pledge Agreement, dated
as of May 31, 1996, made by BMC in favor of the Administrative Agent
for the benefit of the Lenders, as the same may be amended,
supplemented or otherwise modified from time to time.
"BMC NOTEHOLDER PLEDGE AGREEMENT": the Pledge Agreement, dated
as of May 31, 1996, made by BMC in favor of the Trustee for the benefit
of the Noteholders, as the same may be amended, supplemented or
otherwise modified from time to time.
"COLLATERAL": the collective reference to the collateral from
time to time pledged purusant to the Bank Pledge Agreements and the
Noteholder Pledge Agreements, whether such collateral is in existence
on the date hereof or is hereafter acquired or created.
"CREDIT AGREEMENT": the Credit Agreement, dated as of May 31,
1996, among the Borrowers, the Lenders parties thereto from time to
time, the Syndication Agent, Documentation Agent and Collateral Agent
parties thereto and Chemical Bank, as Administrative Agent, as such
Credit Agreement may be amended, modified or supplemented from time to
time, including, without limitation, amendments, modifications,
supplements and restatements thereof giving effect to increases,
renewals, extensions, refundings, deferrals, restructurings,
replacements or refinancings of, or additions to, the arrangements
provided in such Credit Agreement
<PAGE> 4
4
(whether provided by the original agents and Lenders under such Credit
Agreement or successor agents or other Lenders).
"HOLDINGS BANK PLEDGE AGREEMENT": the Holdings Pledge
Agreement, dated as of May 31, 1996, made by Holdings in favor of the
Administrative Agent for the benefit of the Lenders, as the same may be
amended, supplemented or otherwise modified from time to time.
"HOLDINGS GUARANTEE": the Guarantee, dated as of May 31, 1996,
made by Holdings in favor of the Administrative Agent for the benefit
of the Lenders, as the same may be amended, modified or otherwise
supplemented from time to time.
"HOLDINGS NOTEHOLDER PLEDGE AGREEMENT": the Pledge Agreement,
dated as of May 14, 1996, made by Holdings in favor of the Trustee for
the benefit of the Noteholders, as the same may be amended,
supplemented or otherwise modified from time to time.
"HOLDINGS NOTES": the 11-1/4% Senior Secured Second Priority
Notes due 2003 of Holdings outstanding from time to time pursuant to
the Indenture.
"INDENTURE": the Indenture, dated May 14, 1996, between
Holdings and the Trustee, under which the Holdings Notes were issued,
as such Indenture may be amended, modified or otherwise supplemented
from time to time.
"LENDERS": the holders from time to time of Bank Obligations.
"NOTEHOLDERS": the holders from time to time of the Noteholder
Obligations.
"NOTEHOLDER DOCUMENTS": the collective reference to the
Indenture, the Holdings Notes, the Noteholder Pledge Agreements and any
other documents or instruments that from time to time evidence the
Noteholder Obligations or secure or support payment or performance
thereof.
"NOTEHOLDER OBLIGATIONS": the collective reference to the
unpaid principal of and interest on the Holdings Notes and all other
obligations and liabilities of Holdings to the Noteholders (including,
without limitation, interest accruing at the then applicable rate
provided in the Indenture and the Notes after the maturity of the Notes
and interest accruing at the then applicable rate provided in the
Indenture and the Notes after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like
proceeding, relating to Holdings, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Indenture, the Holdings Notes, this
Agreement, or any other Noteholder Document, in each case
<PAGE> 5
5
whether on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel that are required to
be paid by Holdings pursuant to the terms of the Indenture or this
Agreement or any other Noteholder Document).
"NOTEHOLDER PLEDGE AGREEMENTS": the collective reference to
the Holdings Noteholder Pledge Agreement and the BMC Noteholder Pledge
Agreement.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section and paragraph
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. ACKNOWLEDGEMENTS. The Trustee (a) acknowledges that Holdings has
granted a security interest in the Collateral owned by Holdings on the date
hereof under the Holdings Bank Pledge Agreement to the Administrative Agent for
the benefit of the Lenders to secure the Bank Obligations and the Holdings
Guarantee and that such security interest is prior in all respects to the second
priority security interest in the Collateral granted to the Trustee under the
Holdings Noteholder Pledge Agreement, (b) acknowledges that BMC has granted a
security interest in the Collateral owned by BMC on the date hereof under the
BMC Bank Pledge Agreement to the Administrative Agent for the benefit of the
Lenders to secure the Bank Obligations and the BMC Guarantee and that such
security interest is prior in all respects to the second priority security
interest in the Collateral granted to the Trustee under the BMC Noteholder
Pledge Agreement, (b) agrees that the Trustee shall not have any claim to or in
respect of the Collateral, or any proceeds of or realization on such Collateral,
on a parity with or prior to the claim of the Bank Obligations or the
obligations of Holdings under the Holdings Guarantee or of BMC under the BMC
Guarantee, as the case may be, and (c) agrees that notwithstanding such second
priority security interest and any rights of the Trustee and the Noteholders in
respect thereof under the Noteholder Pledge Agreements or otherwise, so long as
the Bank Obligations have not been paid in full or the Commitments under the
Credit Agreement have not been terminated, the Trustee shall not have any right
or claim in respect of the exercise of rights and remedies of the Administrative
Agent and the Lenders, whether under the Bank Pledge Agreements or otherwise, in
respect of the Collateral, nor shall the Administrative Agent or any Lender have
any obligation regarding any such exercise or any other obligation or duty in
respect of the interests of the Trustee or the Noteholders except as set forth
in paragraph 3(e) hereof. The Trustee further acknowledges that the Trustee
shall not have any right to or claim upon any assets of any subsidiary of
Holdings (including, without limitation, the Borrowers and BMC) in a bankruptcy
proceeding relating to the Borrower or BMC or otherwise (other than, in the case
of a bankruptcy proceeding relating to BMC, its claim with respect to the
Collateral under the BMC Noteholder Pledge Agreement as set forth
<PAGE> 6
6
therein); and that the Trustee will not assert any such claim or right in any
such proceeding or otherwise.
3. RIGHTS IN COLLATERAL. (a) Notwithstanding anything to the contrary
contained in any Bank Loan Document or any Noteholder Document and irrespective
of the time, order or method of attachment or perfection of the security
interests created by the Bank Pledge Agreements or the Noteholder Pledge
Agreements, anything contained in any filing or agreement to which the
Administrative Agent, any Lender or the Trustee now or hereafter may be a party
and the rules for determining priority under the Uniform Commercial Code or any
other law governing the relative priorities of secured creditors, any security
interest in any Collateral pursuant to the Bank Pledge Agreements has and shall
have priority, to the extent of any unpaid Bank Obligations, over any security
interest in such Collateral pursuant to the Noteholder Pledge Agreements.
(b) So long as the Bank Obligations have not been paid in full and the
Commitments under the Credit Agreement have not been terminated, whether or not
any bankruptcy proceeding or similar event or proceeding has been commenced by
or against Holdings or any other Bank Loan Party, (i) the Trustee will not (A)
exercise or seek to exercise any rights or exercise any remedies with respect to
any Collateral, (B) institute any action or proceeding with respect to such
rights or remedies, including without limitation, any action of foreclosure, (C)
contest, protest or object to any foreclosure proceeding or action brought by
the Administrative Agent or any Lender or any other exercise by the
Administrative Agent or any Lender of any rights and remedies relating to the
Collateral under any Bank Loan Documents or (D) object to the forbearance by the
Administrative Agent from bringing or pursuing any foreclosure proceeding or
action or any other exercise of any rights or remedies relating to the
Collateral, and (ii) the Administrative Agent and the Lenders shall have the
exclusive right to enforce rights and exercise remedies with respect to the
Collateral.
(c) In exercising rights and remedies with respect to the Collateral,
the Administrative Agent and the Lenders may enforce the provisions of the Bank
Pledge Agreements and exercise remedies thereunder and under any other Bank Loan
Documents, all in such order and in such manner as they may determine in the
exercise of their sole business judgment. Such exercise and enforcement shall
include, without limitation, the rights to sell or otherwise dispose of
Collateral, to incur expenses in connection with such sale or disposition, to
exercise rights and powers as a holder of the shares of stock included in the
Collateral under the Bank Pledge Agreements or otherwise and to exercise all the
rights and remedies of a secured lender under the Uniform Commercial Code of any
applicable jurisdiction.
(d) Any money, property or securities realized upon the sale,
disposition or other realization by the Administrative Agent upon all or any
part of the Collateral, shall be applied by the Administrative Agent in the
following order:
(i) FIRST, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and disbursements) paid
or incurred by the Administrative
<PAGE> 7
7
Agent or the Lenders in connection with such realization on the
Collateral or the protection of their rights and interests therein;
(ii) SECOND, to the payment in full of all Bank Obligations in
such order as the Administrative Agent may elect in its sole
discretion;
(iii) THIRD, to the Trustee, for application in its discretion
to the payment in full of all costs and expenses (including, without
limitation, attorneys' fees and disbursements) paid or incurred by the
Trustee in connection with realization on the Collateral or the
protection of its rights and interests therein;
(iv) FOURTH, to the Trustee for application in its discretion
to the Noteholder Obligations; and
(v) FIFTH, to pay to Holdings or BMC, as the case may be, or
their respective representatives or as a court of competent
jurisdiction may direct, any surplus then remaining.
(e) The Administrative Agent's and the Lenders' rights with respect to
the Collateral include the right to release any or all of the Collateral from
the lien under the Bank Pledge Agreements and the Noteholder Pledge Agreements
in connection with the sale of such Collateral, it being agreed that the net
proceeds of any such sale shall be permanently applied in accordance with clause
(d) above. Upon any sale by the Administrative Agent of Collateral, the lien and
security interest created pursuant to the Noteholder Pledge Agreements in such
Collateral shall be automatically released, and upon any such sale the Trustee
shall execute or cause to be executed such release documents and instruments and
shall take such further actions as the Administrative Agent or the Lenders shall
request. The Trustee, for itself and on behalf of each Noteholder, hereby
irrevocably constitutes and appoints the Administrative Agent and any officer or
agent of the Administrative Agent, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Trustee or such Noteholder and in the name of the Trustee
or such Noteholder or in the Administrative Agent's own name, from time to time
in the Administrative Agent's discretion, for the purpose of carrying out the
terms of this paragraph, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this paragraph, including, without limitation, any
financing statements, endorsements, assignments or other instruments of transfer
or release.
(f) In the event that all of the Bank Obligations have been paid in
full and the Commitments under the Credit Agreement have been terminated, and at
such time the Noteholder Obligations are still outstanding and the Noteholder
Pledge Agreements are in effect, (i) the Trustee and the Noteholders shall have
the right to enforce the provisions of the Noteholder Pledge Agreements and
exercise remedies thereunder; (ii) if at such time the Collateral has been sold
or otherwise disposed of and the Administrative Agent holds cash
<PAGE> 8
8
proceeds remaining after application as set forth in clauses (d)(i) and (ii)
above, the Administrative Agent shall turn over such remaining proceeds to the
Trustee for application as set forth in clauses (d)(iii), (iv) and (v) above;
and (iii) if at such time the Administrative Agent continues to hold any
certificates representing shares of stock included in the Collateral, the
Administrative Agent shall turn over such certificates to the Trustee to be held
by it under the Noteholder Pledge Agreements, PROVIDED, that Holdings or BMC, as
the case may be, and the Administrative Agent may elect in lieu of such delivery
to the Trustee, in connection with any refinancing, extension, renewal or
replacement of the Credit Agreement, to deliver any such certificates and any
remaining Collateral to or for the benefit of the lenders under such
refinancing, extension, renewal or replacement facility under an amended or
replacement pledge agreement in respect thereof, and upon such delivery the
security interest thereunder, and the lenders under such facility, shall have
the same priority in respect of the Noteholder Obligations and the rights of the
Trustee and the Noteholders in respect of the Collateral as the security
interest under the Bank Pledge Agreements and the Administrative Agent and the
Lenders have as set forth herein.
4. EFFECT OF COVENANTS IN NOTEHOLDER DOCUMENTS. The Trustee hereby
acknowledges and agrees that no covenant, agreement or restriction contained in
any Noteholder Document shall be deemed to restrict in any way the rights and
remedies of the Administrative Agent with respect to the Collateral as set forth
in this Agreement and the Bank Pledge Agreements.
5. OBLIGATIONS UNCONDITIONAL. All rights, interests, agreements and
obligations of the Administrative Agent, the Lenders and the Trustee,
respectively, hereunder shall remain in full force and effect irrespective of:
(a) any lack of validity or enforceability of the Bank Pledge
Agreements, any other Bank Loan Documents, the Noteholder Pledge Agreements or
any other Noteholder Documents;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Bank Obligations or Noteholder Obligations, or
any amendment or waiver or other modification, whether by course of conduct or
otherwise, of the terms of the Credit Agreement or any other Bank Loan Document
or of the terms of the Indenture or any other Noteholder Document;
(c) any exchange, release or nonperfection of any security interest in
any Collateral, or any release, amendment, waiver or other modification, whether
in writing or by course of conduct or otherwise, of all or any of the Bank
Obligations or Noteholder Obligations or any guarantee thereof;
(d) the commencement of any bankruptcy or similar proceeding in respect
of Holdings, either Borrower or any other Bank Loan Party; or
<PAGE> 9
9
(e) any other circumstances which otherwise might constitute a defense
available to, or a discharge of, any Loan Party in respect of the Bank
Obligations, of Holdings in respect of the Noteholder Obligations or of the
Trustee in respect of this Agreement.
6. WAIVER OF CLAIMS. To the maximum extent permitted by law, the
Trustee, for itself and each Noteholder, waives any claim it might have against
the Administrative Agent or the Lenders with respect to, or arising out of, any
action or failure to act or any error of judgment or negligence on the part of
the Administrative Agent, the Lenders or their respective directors, officers,
employees or agents with respect to any exercise of rights or remedies under the
Bank Pledge Agreements or any transaction relating to the Collateral. Neither
the Administrative Agent, any Lender nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Loan Party, the Trustee or any Noteholder or any other Person or
to take any other action whatsoever with regard to the Collateral or any part
thereof.
7. PROVISIONS DEFINE RELATIVE RIGHTS. This Agreement is intended solely
for the purpose of defining the relative rights of the Administrative Agent and
the Lenders on the one hand and the Trustee and the Noteholders on the other,
and no other Person shall have any right, benefit or other interest under this
Agreement. Notwithstanding anything to the contrary contained herein, this
Agreement shall not modify or amend the rights and obligations of Holdings under
the Indenture or under any Bank Loan Document.
8. POWERS COUPLED WITH AN INTEREST. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until the Bank Obligations are paid in full and the Commitments are
terminated.
9. NOTICES. All notices, requests and demands to or upon the
Administrative Agent or the Trustee to be effective shall be in writing (or by
telex, fax or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand or (ii) if
given by mail, when deposited in the mails by certified mail, return receipt
requested, or (iii) if by telex, fax or similar electronic transfer, when sent
and receipt has been confirmed, addressed as follows:
If to the Administrative Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Roger Parker
Telex:
Fax: 212-972-0009
If to the Trustee: The Bank of New York
101 Barclay Street, Fl. 21W
<PAGE> 10
10
New York, NY 10286
Attention: Corporate Trust
Trustee Administration
Facsimile: 212-815-5915
The Administrative Agent and the Trustee may change their addresses and
transmission numbers for notices by notice in the manner provided in this
Section.
10. COUNTERPARTS. This Agreement may be executed by one or more of the
parties on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the counterparts of this Agreement signed by all the parties shall be lodged
with the Administrative Agent.
11. 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.
12. INTEGRATION. This Agreement represents the entire agreement of the
Administrative Agent, the Lenders, the Trustee and the Noteholders with respect
to the subject matter hereof and there are no promises or representations by any
of them relative to the subject matter hereof not reflected herein. This
Agreement replaces and supercedes the Intercreditor Agreement, dated as of May
14, 1996, among Chemical Bank, as Administrative Agent, The Bank of New York, as
Trustee, and HomeSide, Inc.
13. AMENDMENTS IN WRITING. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Administrative Agent, Holdings and the
Trustee.
14. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding upon
the successors and assigns of the Administrative Agent, the Lenders, the Trustee
and the Noteholders and shall inure to the benefit of the Administrative Agent,
the Lenders, the Trustee and their successors and assigns.
(b) Upon a successor Administrative Agent becoming the Administrative
Agent under the Credit Agreement, such successor Administrative Agent
automatically shall become the Administrative Agent hereunder with all the
rights and powers of the Administrative Agent hereunder, and bound by the
provisions hereof, without the need for any further action on the part of any
party hereto. Upon a successor Trustee becoming the Trustee under the Indenture,
such successor Trustee automatically shall become the Trustee hereunder, and be
bound by the provisions hereof in its capacity as Trustee and on behalf of the
Noteholders, without the need for any further action on the part of any party
hereto.
<PAGE> 11
11
15. GOVERNING LAW. This Agreement shall be governed by, and construed
and interpreted in accordance with, the law of the State of New York, excluding
(to the greatest extent permissible by law) any rule of law that would cause the
application of the laws of any jurisdiction other than the State of New York.
<PAGE> 12
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
CHEMICAL BANK, as Administrative Agent
By: /s/ Jeanette F. Brummell
----------------------------
Title:
THE BANK OF NEW YORK, as Trustee
By: /s/
----------------------------
Title:
HOMESIDE, INC.
By: /s/ Joe K. Pickett
----------------------------
Title:
HOMESIDE HOLDINGS, INC.
By: /s/ Joe K. Pickett
----------------------------
Title:
<PAGE> 1
EXHIBIT 10.36
HOMESIDE, INC.
1996 TIME ACCELERATED RESTRICTED STOCK OPTION PLAN
1. Purpose of the Plan.
-------------------
This time accelerated restricted stock option plan (the "Plan") is intended
to encourage ownership of the stock of HomeSide, Inc. (the "Company") by members
of senior management of the Company and its subsidiaries, to induce qualified
management personnel to enter and remain in the employ of the Company or its
subsidiaries and otherwise to provide additional incentive for optionees to
promote the success of its business.
2. Stock Subject to the Plan.
-------------------------
(a) The total number of shares of the authorized but unissued or treasury
shares of the Class A Common Stock, $.01 par value per share, of the Company
("Common Stock") for which options may be granted under the Plan shall not
exceed 68,576 shares, subject to adjustment as provided in Section 12 hereof.
(b) If an option granted hereunder shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject thereto
shall not thereafter be available for subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the Plan may be
subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee and set forth in the option
agreement.
3. Administration of the Plan.
--------------------------
Following the initial grant of options hereunder, the Plan shall be
administered by a committee (the "Committee") consisting of two or more members
of the Company's Board of Directors, each of whom is a disinterested person as
defined from time to time in Rule 16b-3 promulgated under the Securities
Exchange Act of 1934. The selection of persons for participation in the Plan and
all decisions concerning the timing, pricing and amount of any grant or award
under the Plan shall be made solely by the Committee. The Board of Directors may
from time to time appoint a member or members of the Committee in substitution
for or in addition to the member or members then in office and may fill
vacancies on the Committee however caused. The Committee shall choose one of its
members as Chairman and shall hold meetings at such times and places as it shall
deem advisable. A majority of the members of the Committee shall constitute a
quorum and any action may be taken by a majority of those present and voting at
any meeting. Any action may also be taken without the necessity of a meeting by
a written instrument signed by a majority of the Committee. The decision of the
Committee as to all questions of interpretation and application of the Plan
shall be final, binding and conclusive on all persons. The Committee shall have
the authority to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the
<PAGE> 2
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option agreement
granted hereunder in the manner and to the extent it shall deem expedient to
carry the Plan into effect and shall be the sole and final judge of such
expediency. No Committee member shall be liable for any action or determination
made in good faith.
4. Type of Options.
---------------
Options granted pursuant to the Plan shall be authorized by action of the
Committee and shall be designated as non-qualified options which are not
intended to meet the requirements of Section 422 of the Internal Revenue Code of
1986, as amended, (the "Code").
5. Eligibility.
-----------
Non-qualified options may be granted to the officers and key employees of
the Company or of any of its subsidiaries.
In determining the eligibility of an individual to be granted an option, as
well as in determining the number of shares to be optioned to any individual,
the Committee has taken into account the position and responsibilities of the
individual being considered, the nature and value to the Company or its
subsidiaries of his or her service and accomplishments, his or her present and
potential contribution to the success of the Company or its subsidiaries, and
such other factors as the Committee deemed relevant.
6. Option Agreement.
----------------
Each option shall be evidenced by an option agreement (the "Agreement")
duly executed on behalf of the Company and by the optionee to whom such option
is granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Committee. No option shall be granted within the meaning of the Plan and no
purported grant of any option shall be effective until the Agreement shall have
been duly executed on behalf of the Company and the optionee. The date of grant
of an Option shall be as determined by the Committee.
7. Option Price.
------------
The option price of shares of the Company's Common Stock for non-qualified
stock options granted hereunder shall be as determined by the Committee.
- 2 -
<PAGE> 3
8. Manner of Payment; Manner of Exercise.
-------------------------------------
(a) Options granted under the Plan may provide for the payment of the
exercise price by delivery of cash or a check payable to the order of the
Company in an amount equal to the exercise price of such options.
(b) To the extent that the right to purchase shares under an option has
accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the option
at such time, during ordinary business hours, within thirty (30) days from the
date of receipt of the notice by the Company, as shall be designated in such
notice, or at such time, place and manner as may be agreed upon by the Company
and the person or persons exercising the option.
9. Exercise of Options.
-------------------
Each option granted under the Plan shall, subject to Section 10(b) and
Section 12 hereof, not be exercisable prior to nine (9) years from the date of
issuance unless exercisability is otherwise accelerated based upon a time
accelerated vesting schedule which is dependent upon performance criteria all as
set forth in the Agreement; provided, however, that no option granted under the
Plan shall have a term in excess of nine (9) years and six (6) months from the
date of grant.
10. Term of Options; Exercisability.
-------------------------------
(a) Term.
----
(1) Each option shall expire not more than nine (9) years and six (6)
months from the date of the granting thereof, but shall be subject to earlier
termination as provided in subsections (2), (3) and (4) below.
(2) If an employee optionee is terminated for Cause (as defined
herein) or voluntarily terminates his employment with the Company or one of its
subsidiaries, at any time, for any reason or for no reason, in either such case,
the option granted to such employee shall terminate, with respect to any shares
subject to options exercisable on the date of such termination, on the fifth day
following such termination and, with respect to any shares subject to options
not exercisable on the date of such termination, on the date of such
termination, or in both cases on the date on which the option expires by its
terms, whichever occurs earlier. The term "Cause" shall mean any one or more of
the following: (i) the employee optionee shall be convicted of, or plead NOLO
CONTENDERE to, a felony; (ii) the employee optionee shall commit an
- 3 -
<PAGE> 4
act of dishonesty against the Company; or (iii) the employee optionee shall be
negligent in the performance of his or her duties, shall wilfully fail to follow
a lawful directive of his or her superior, or shall fail to devote substantially
all of his or her business time to the Company or shall fail to exert his or her
reasonable best efforts on behalf of the Company, and in the case of any action
or omission described in this clause (iii), such act or omission shall continue
for ten days after receipt of notice thereof by the employee optionee from the
Company.
(3) If an employee optionee is terminated by the Company without
Cause, at any time, the option granted to such employee shall terminate, with
respect to any shares subject to options exercisable on the date of such
termination, on the 180th day following such termination and, with respect to
any shares subject to options not exercisable on the date of such termination,
on the date of such termination, or in both cases on the date on which the
option expires by its terms, whichever occurs earlier.
(4) In the event of the termination of an employee optionee's
employment with the Company or one of its subsidiaries due to the death of the
employee optionee, the option granted to such employee shall terminate, with
respect to any shares subject to options exercisable on the date of such
termination, on the 365th day following such termination and, with respect to
any shares subject to options not exercisable on the date of such termination,
on the date of such termination, or in both cases on the date on which the
option expires by its terms, whichever occurs earlier.
(b) Exercisability.
--------------
An option granted to an employee optionee who ceases to be an employee
of the Company or one of its subsidiaries, at any time, for any reason or for no
reason, shall be exercisable only to the extent that the right to purchase
shares under such option has accrued and is in effect on the date such optionee
ceases to be an employee of the Company or one of its subsidiaries.
11. Options Not Transferrable.
-------------------------
The right of any optionee to exercise any option granted to him or her
shall not be assignable or transferrable by such optionee other than by will or
the laws of descent and distribution, and any such option shall be exercisable
during the lifetime of such optionee only by him. Any option granted under the
Plan shall be null and void and without effect upon the bankruptcy of the
optionee to whom the option is granted, or upon any attempted assignment or
transfer, except as herein provided, including without limitation any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or
other disposition contrary to the provisions hereof or levy of execution,
attachment, divorce, trustee process or similar process, whether legal or
equitable, upon such option.
- 4 -
<PAGE> 5
12. Recapitalizations, Reorganizations and the Like.
-----------------------------------------------
(a) In the event that the outstanding shares of the Common Stock of the
Company are changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which options may be granted under the Plan and as to which outstanding options
or portions thereof then unexercised shall be exercisable, to the end that the
proportionate interest of the optionee shall be maintained as before the
occurrence of such event; such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised portion of such
options and with a corresponding adjustment in the option price per share.
(b) In addition, in the case of any (i) sale or conveyance to another
entity of all or substantially all of the property and assets of the Company,
including without limitation by way of merger or consolidation, or (ii) Change
in Control (as hereinafter defined) of the Company, the purchaser(s) of the
Company's assets or stock may, in its discretion, deliver to the optionee the
same kind of consideration that is delivered to the shareholders of the Company
as a result of such sale, conveyance or Change in Control, or the Committee may
cancel all outstanding options in exchange for consideration in cash or in kind
which consideration in both cases shall be equal in value to the value of those
shares of stock or other securities the optionee would have received had the
option been exercised (to the extent then exercisable) and no disposition of the
shares acquired upon such exercise been made prior to such sale, conveyance or
Change in Control, less the option price therefor. Upon receipt of such
consideration by the optionee, his or her option shall immediately terminate and
be of no further force and effect. The value of the stock or other securities
the optionee would have received if the option had been exercised shall be
determined in good faith by the Committee of the Company, and in the case of
shares of the Common Stock of the Company, in accordance with the provisions of
Section 7 hereof. In addition, the Committee shall have the power and right to
accelerate the exercisability of any options upon such a sale, conveyance or
Change in Control. Upon such acceleration, any options or portion thereof
originally designated as incentive stock options that no longer qualify as
incentive stock options under Section 422 of the Code as a result of such
acceleration shall be redesignated as non-qualified stock options. A "Change in
Control" shall be deemed to have occurred if any person, or any two or more
persons acting as a group, and all affiliates of such person or persons, who
prior to such time owned less than fifty percent (50%) of the then outstanding
Common Stock of the Company, shall acquire, whether by purchase, exchange,
tender offer, merger, consolidation or otherwise, such additional shares of the
Company's Common Stock in one or more transactions, or series of transactions,
such that following such transaction or transactions, such person or group and
affiliates beneficially own fifty percent (50%) or more of the Company's Common
Stock outstanding.
- 5 -
<PAGE> 6
(c) Upon dissolution or liquidation of the Company, all options granted
under this Plan shall terminate, but each optionee (if at such time in the
employ of or otherwise associated with the Company or any of its subsidiaries)
shall have the right, immediately prior to such dissolution or liquidation, to
exercise his or her option to the extent then exercisable.
(d) If by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation, the Board of
Directors shall authorize the issuance or assumption of a stock option or stock
options in a transaction to which Section 425(a) of the Code applies, then,
notwithstanding any other provision of the Plan, the Board of Directors may
grant an option or options upon such terms and conditions as it may deem
appropriate for the purpose of assumption of the old option, or substitution of
a new option for the old option; in conformity with the provisions of such
Section 425(a) of the Code and the Regulations thereunder, and any such option
shall not reduce the number of shares otherwise available for issuance under the
Plan.
(e) No fraction of a share shall be purchasable or deliverable upon the
exercise of any option, but in the event any adjustment hereunder of the number
of shares covered by the option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest whole number of shares.
13. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option granted under the Plan shall
confer upon any option holder any right with respect to the continuation of his
or her employment by the Company (or any subsidiary) or interfere in any way
with the right of the Company (or any subsidiary), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the rate in existence at the time of the grant of an option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Committee at the
time.
14. Withholding.
-----------
The Company's obligation to deliver shares upon the exercise of the
non-qualified option granted under the Plan shall be subject to the option
holder's satisfaction of all applicable Federal, state and local income,
employment and other tax withholding requirements. The Company and employee may
agree to withhold shares of Common Stock purchased upon exercise of an option to
satisfy the above-mentioned withholding requirements.
- 6 -
<PAGE> 7
15. Restrictions on Issue of Shares.
-------------------------------
(a) Notwithstanding the provisions of Section 8, the Company may delay the
issuance of shares covered by the exercise of an option and the delivery of a
certificate for such shares until one of the following conditions shall be
satisfied:
(i) The shares with respect to which such option has been exercised
are at the time of the issue of such shares effectively registered or qualified
under applicable Federal and state securities acts now in force or as hereafter
amended; or
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that such shares are
exempt from registration and qualification under applicable Federal and state
securities acts now in force or as hereafter amended.
(b) It is intended that all exercises of options shall be effective, and
the Company shall use its best efforts to bring about compliance with the above
conditions within a reasonable time, except that the Company shall be under no
obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.
16. Purchase for Investment.
-----------------------
Unless the shares to be issued upon exercise of an option granted under the
Plan have been effectively registered under the Securities Act of 1933, as now
in force or hereafter amended, the Company shall be under no obligation to issue
any shares covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel for the Company and
upon which, in the opinion of such counsel, the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he or
she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the Securities Act of
1933, or any other applicable law, and that if shares are issued without such
registration, a legend to this effect may be endorsed upon the securities so
issued.
17. Loans.
-----
The Company may make recourse loans to optionees to permit them to exercise
options. If loans are made, the requirements of all applicable Federal and state
laws and regulations regarding such loans must be met.
- 7 -
<PAGE> 8
18. Modification of Outstanding Options.
-----------------------------------
The Committee may authorize the amendment of any outstanding option with
the consent of the optionee when and subject to such conditions as are deemed to
be in the best interests of the Company and in accordance with the purposes of
the Plan and so long as such amendment does not violate any contractual
obligations of the Company.
19. Approval of Stockholders.
------------------------
The Plan shall be subject to approval by the vote of stockholders holding
at least a majority of the voting stock of the Company present, or represented,
and entitled to vote at a duly held stockholders' meeting, or by written consent
of a majority of the stockholders, within twelve (12) months after the adoption
of the Plan by the Committee and shall take effect as of the date of adoption by
the Committee upon such approval. The Committee may not grant options under the
Plan prior to such approval, but any such option shall become effective as of
the date of grant only upon such approval and, accordingly, no such option may
be exercisable prior to such approval.
20. Termination and Amendment of Plan.
---------------------------------
Unless sooner terminated as herein provided, the Plan shall terminate ten
(10) years from the date upon which the Plan was duly adopted by the Board of
Directors of the Company. The Committee may at any time terminate the Plan or
make such modification or amendment thereof as it deems advisable so long as
such modification or amendment does not conflict with contractual obligations of
the Company; provided, however, that except as provided in Section 12, the
Committee may not, without the approval of the stockholders of the Company
obtained in the manner stated in Section 19, increase the maximum number of
shares for which options may be granted or change the designation of the class
of persons eligible to receive options under the Plan, or make any change in the
Plan which requires stockholder approval under applicable laws or regulations,
including any approval requirement which is a prerequisite for exemptive relief
under Section 16 of the Securities Exchange Act of 1934. Termination or any
modification or amendment of the Plan shall not, without the consent of an
optionee, adversely affect his or her rights under an option theretofore granted
to him or her.
21. Compliance with Rule 16b-3.
--------------------------
It is intended that the provisions of the Plan and any option granted
thereunder to a person subject to the reporting requirements of Section 16(a) of
the Act shall comply in all respects with the terms and conditions of Rule 16b-3
under the Securities Exchange Act of 1934 (the "Act"), or any successor
provisions. Any agreement granting options shall contain such provisions as are
necessary or appropriate to assure such compliance. To the extent that any
provision hereof is found not to be in compliance with such Rule, such provision
shall be deemed to be modified so as to be in compliance with such Rule, or if
such modification is not
- 8 -
<PAGE> 9
possible, shall be deemed to be null and void, as it relates to a recipient
subject to Section 16(a) of the Act.
22. Reservation of Stock.
--------------------
The Company shall at all times during the term of the Plan reserve and keep
available such number of shares of stock as will be sufficient to satisfy the
requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
23. Limitation of Rights in the Option Shares.
-----------------------------------------
An optionee shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the options except to the extent that the option
shall have been exercised with respect thereto and, in addition, a certificate
shall have been issued theretofore and delivered to the optionee.
24. Notices.
-------
Any communication or notice required or permitted to be given under the
Plan shall be in writing and shall be deemed duly given if hand-delivered or
mailed by registered or certified mail, postage prepaid, return receipt
requested, as follows:
(a) If to the Company:
HomeSide, Inc.
7301 Baymeadows Way
Jacksonville, Florida 32256
Attn: Secretary
(b) If to an Optionee:
To the most recent address furnished in writing to the
Company by the Optionee,
unless and until notice of another or different address shall be given as
provided herein.
Adopted by the Board of Directors: May 31, 1996
Approved by the Stockholders: May 31, 1996
- 9 -
<PAGE> 1
EXHIBIT 10.37
HOMESIDE, INC.
1996 STOCK OPTION PLAN
1. Purpose of the Plan.
This stock option plan (the "Plan") is intended to encourage ownership
of the stock of HomeSide, Inc., a Delaware corporation (the "Company"), by
employees of the Company and/or its subsidiaries, to induce qualified personnel
to enter and remain in the employ of the Company and/or its subsidiaries and
otherwise to provide additional incentive for optionees to promote the success
of its business.
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued or
Treasury shares of the Class A voting common stock, par value $.01 per share, of
the Company ("Common Stock") for which options may be granted under the Plan
shall not exceed 34,285 shares; subject to adjustment as provided in Section 11
hereof.
(b) If an option granted hereunder shall expire or terminate for
any reason without having vested fully or having been exercised in full, the
unvested and/or unpurchased shares subject thereto shall again be available for
subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the
Plan may be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee.
3. Administration of the Plan. Following the initial grant of options
hereunder, the Plan shall be administered by a committee (the "Committee")
consisting of two or more members of the Company's Board of Directors (the
"Board"), each of whom shall be, at any time during which the Company has a
class of equity securities registered under the Securities Exchange Act of 1934,
as amended (the "Act"), a "disinterested person" as defined from time to time in
Rule 16b-3 promulgated under the Act. At any time during which the Company has a
class of equity securities registered under the Act, as to all persons who are
members of the Board or officers of the Company within the meaning of Section
16(b) of the Act, the Committee shall from time to time determine to whom
options or other rights shall be granted under the Plan, whether options granted
shall be incentive stock options or non-qualified stock options, the terms of
the options or other rights, and the number of shares which may be granted under
options. The Committee shall report to the Board the names of individuals to
whom stock or options or other rights are to be granted, the number of shares
covered and the terms and conditions of each grant. During any time that the
Company does not have a class of equity securities registered under the Act as
to all persons, and at any time during which the Company has a class of equity
securities registered under the Act as to persons other than members of the
Board or officers, the determinations described in this paragraph may be made
<PAGE> 2
by the Committee or by the Board, as the Board shall direct in its discretion,
and references in the Plan to the Committee shall be understood to refer to the
Board in any such case.
The grant of options and other rights shall be made by action of the
Board at a meeting at which a quorum of its members is present, or by unanimous
written consent of all its members.
The Board of Directors may from time to time appoint a member or members
of the Committee in substitution for or in addition to the member or members
then in office and may fill vacancies on the Committee however caused. The
Committee shall choose one of its members as Chairman and shall hold meetings at
such times and places as it shall deem advisable. A majority of the members of
the Committee shall constitute a quorum and any action may be taken by a
majority of those present and voting at any meeting. Any action may also be
taken without the necessity of a meeting by a written instrument signed by a
majority of the Committee. The decision of the Committee as to all questions of
interpretation and application of the Plan shall be final, binding and
conclusive on all persons. The Committee shall have the authority to adopt,
amend and rescind such rules and regulations as, in its opinion, may be
advisable in the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option agreement granted hereunder in the manner and to the extent it shall
deem expedient to carry the Plan into effect and shall be the sole and final
judge of such expediency. No Committee member shall be liable for any action or
determination made in good faith.
4. Type of Options.
Options granted pursuant to the Plan shall be authorized by action of
the Committee and may be designated as either incentive stock options meeting
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or non-qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Committee.
The optionee must notify the Company promptly in the event that he
sells, transfers, exchanges or otherwise disposes of any shares of Common Stock
issued upon exercise of an incentive stock option before the later of (i) the
second anniversary of the date of grant of the incentive stock option, and (ii)
the first anniversary of the date the shares were issued upon his exercise of
the incentive stock option.
5. Eligibility.
Options designated as incentive stock options may be granted only to
officers and key employees of the Company or of any subsidiary corporation
(herein called "subsidiary" or "subsidiaries"), as defined in Section 424 of the
Code and the Treasury Regulations promulgated thereunder (the "Regulations").
Options designated as non-qualified options may
- 2 -
<PAGE> 3
be granted to directors, consultants, officers or key employees of the Company
or of any of its subsidiaries.
In determining the eligibility of an individual to be granted an option,
as well as in determining the number of shares to be optioned to any individual,
the Committee shall take into account the position and responsibilities of the
individual being considered, the nature and value to the Company or its
subsidiaries of his or her service and accomplishments, his or her present and
potential contribution to the success of the Company or its subsidiaries, and
such other factors as the Committee may deem relevant.
No option designated as an incentive stock option shall be granted to
any employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an option, stock representing more than ten (10%) of the
voting power or more than ten (10%) of the value of all classes of stock of the
Company or a parent or a subsidiary, unless the purchase price for the stock
under such option shall be at least 110% of its fair market value at the time
such option is granted and the option, by its terms, shall not be exercisable
more than five years from the date it is granted. In determining the stock
ownership under this paragraph, the provisions of Section 424(d) of the Code
shall be controlling. In determining the fair market value under this paragraph,
the provisions of Section 7 hereof shall apply.
6. Option Agreement.
Each option shall be evidenced by an option agreement (the "Agreement")
in such form as the Committee shall approve from time to time, specifying the
number of shares of Common Stock that may be purchased pursuant to the option,
the time or times at which the option shall become exercisable, the term of the
option and whether such option is intended to be an incentive stock option or a
non-qualified stock option, which Agreement shall be duly executed on behalf of
the Company and by the optionee to whom such option is granted. Such Agreement
shall comply with and be subject to the terms and conditions of the Plan. The
Agreement may contain such other terms, provisions and conditions which are not
inconsistent with the Plan as may be determined by the Committee, provided that
options designated as incentive stock options shall meet all of the conditions
for incentive stock options as defined in Section 422 of the Code. The date of
grant of an option shall be as determined by the Committee. More than one option
may be granted to an individual.
7. Option Price.
The option price or prices of shares of the Company's Common Stock for
options designated as non-qualified stock options shall be the fair market value
of such Common Stock as determined by the Committee. The option price or prices
of shares of the Company's Common Stock for incentive stock options shall be at
least 100% of the fair market value of such Common Stock at the time the option
is granted as determined by the Committee in accordance with the Regulations
promulgated under Section 422 of the Code. If such shares
- 3 -
<PAGE> 4
are then listed on any national securities exchange, the fair market value shall
be the mean between the high and low sales prices, if any, on the largest such
exchange on the business day immediately preceding the date of the grant of the
option or, if none, shall be determined by taking a weighted average of the
means between the highest and lowest sales prices on the nearest date before and
the nearest date after the date of grant in accordance with Treasury Regulations
Section 25.2512-2. If the shares are not then listed on any such exchange, the
fair market value of such shares shall be the mean between the high and low
sales prices, if any, as reported in the Nasdaq National Market ("Nasdaq") for
the business day immediately preceding the date of the grant of the option, or,
if none, shall be determined by taking a weighted average of the means between
the highest and lowest sales on the nearest date before and the nearest date
after the date of grant in accordance with Treasury Regulations Section
25.2512-2. If the shares are not then either listed on any such exchange or
quoted in Nasdaq, the fair market value shall be the mean between the average of
the "Bid" and the average of the "Ask" prices, if any, as reported in the
National Daily Quotation Service for the business day immediately preceding the
date of the grant of the option, or, if none, shall be determined by taking a
weighted average of the means between the highest and lowest sales prices on the
nearest date before and the nearest date after the date of grant in accordance
with Treasury Regulations Section 25.2512-2. If the fair market value cannot be
determined under the preceding three sentences, it shall be determined in good
faith by the Committee.
8. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may be exercised by notice to
the Company as specified in sub-paragraph (b) below, and payment therefor may be
made by (i) delivery of cash or a check payable to the order of the Company in
an amount equal to the exercise price of such options, (ii) delivery of
certificates registered in the name of the optionee or his personal
representative for shares of Common Stock legally and beneficially owned by the
optionee, fully vested and free of all liens, claims and encumbrances of every
kind and having a fair market value on the date of delivery equal in amount to
the exercise price of the options being exercised, such certificates to be duly
endorsed, or accompanied by stock powers duly endorsed, by the record holder of
the shares represented by such certificates, or (iii) any combination of (i) and
(ii), provided, however, that (x) payment of the exercise price pursuant to (ii)
above may be made only to the extent such payment does not result in a charge to
earnings for financial accounting purposes as determined by the Committee and
(y) the optionee may not make payment in shares of Common Stock that he acquired
upon the exercise of any incentive stock option, unless he has held the shares
until at least two (2) years after the date the incentive stock option was
granted and at least one (1) year after the date the incentive stock option was
exercised. The fair market value of any shares of the Company's Common Stock
which may be delivered upon exercise of an option shall be determined by the
Committee in accordance with Section 7 hereof. After the Company has a class of
equity securities registered under the Act, payment may also be made by delivery
of a properly executed exercise notice to the Company, together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or
- 4 -
<PAGE> 5
loan proceeds to pay the exercise price. To facilitate the foregoing, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms.
(b) To the extent that the right to purchase shares under an
option has accrued and is in effect, options may be exercised in full at one
time or in part from time to time, by giving written notice, signed by the
person or persons exercising the option, to the Secretary or Treasurer of the
Company, stating the number of shares with respect to which the option is being
exercised, accompanied by payment in full for such shares as provided in
subparagraph (a) above. Upon such exercise, delivery of a certificate for
paid-up non-assessable shares shall be made at the principal office of the
Company to the person or persons exercising the option at such time, during
ordinary business hours, as soon as possible and in no event more than twenty
(20) business days from the date of receipt of the notice by the Company, or at
such time, place and manner as may be agreed upon by the Company and the person
or persons exercising the option.
9. Term of Options; Exercisability.
(a) Term.
(1) Each option shall expire not more than ten (10)
years from the date of the granting thereof, but shall be subject to earlier
termination as herein provided.
(2) Except as otherwise provided in the Agreement or
set forth below, an option granted to any employee optionee who ceases to be an
employee of the Company or one of its subsidiaries shall terminate immediately
on the date such optionee ceases to be an employee of the Company or one of its
subsidiaries, or on the date on which the option expires by its terms, whichever
occurs first.
(3) If such termination of employment is because the
optionee has become permanently disabled (within the meaning of Section 22(e)(3)
of the Code), such option shall terminate on the last day of the twelfth month
from the date such optionee ceases to be an employee, or on the date on which
the option expires by its terms, whichever occurs first.
(4) In the event of the death of any optionee, any
option granted to such optionee shall terminate on the last day of the twelfth
month from the date of death, or on the date on which the option expires by its
terms, whichever occurs first.
(5) Notwithstanding subparagraphs (2), (3) and (4), the
Committee shall have the authority to extend the expiration date of any
outstanding option in circumstances in which it deems such action to be
appropriate, provided that no such extension shall extend the term of an option
beyond the date on which the option would have expired if no termination of the
optionee's employment had occurred.
- 5 -
<PAGE> 6
(b) Exercisability.
(1) Except as otherwise determined from time to time by
the Committee, non-qualified options granted under the Plan shall, subject to
the other provisions of Section 9(b) hereof and Section 11 hereof, shall not be
exercisable during the first twelve (12) months after the date of grant.
Thereafter, non-qualified options shall become exercisable as to twenty percent
(20%) of the shares covered thereby upon the expiration of twelve (12) months
after the date of grant and as to an additional twenty percent (20%) upon the
expiration of each of the next four (4) succeeding twelve (12) month periods.
(2) To the extent that an option to purchase shares is
not exercised by an optionee when it becomes initially exercisable, it shall not
expire but shall be carried forward and shall be exercisable, on a cumulative
basis, until the expiration of the exercise period.
(3) Notwithstanding the foregoing, the Committee may in
its discretion (i) specifically provide for another time or times of exercise or
(ii) accelerate the exercisability of any option subject to such terms and
conditions as the Committee deems necessary and appropriate.
(4) Except as provided in the Agreement, an option
granted to an employee optionee who ceases to be an employee of the Company or
one of its subsidiaries shall be exercisable only to the extent that the right
to purchase shares under such option has accrued and is in effect on the date
such optionee ceases to be an employee of the Company or one of its
subsidiaries.
(5) An option granted to an employee optionee who
ceases to be an employee of the Company or one of its subsidiaries because he or
she has become permanently disabled, as defined in Section 22(e)(3) of the Code,
shall be exercisable by such person or his or her legal representative to the
full number of vested shares covered by such option.
(6) In the event of the death of any optionee, the
option granted to such optionee may be exercised to the full number of vested
shares covered thereby, by the estate of such optionee, or by any person or
persons who acquired the right to exercise such option by bequest or inheritance
or by reason of the death of such optionee.
(7) Notwithstanding the foregoing and subject to the
provisions of Section 11, the Committee shall have the authority to extend,
accelerate or change, but not in a manner adverse to the optionee, the vesting
of any outstanding option in circumstances in which it deems such action to be
appropriate.
- 6 -
<PAGE> 7
10. Transferability.
The right of any optionee to exercise any option granted to him or her
shall not be assignable or transferable by such optionee other than by will or
the laws of descent and distribution, and any such option shall be exercisable
during the lifetime of such optionee only by him, her or it. Any option granted
under the Plan shall be null and void and without effect upon the bankruptcy of
the optionee to whom the option is granted, or upon any attempted assignment or
transfer, except as herein provided, including without limitation any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or
other disposition contrary to the provisions hereof or levy of execution,
attachment, divorce, trustee process or similar process, whether legal or
equitable, upon such option.
11. Recapitalizations, Reorganizations and the Like.
(a) In the event that the outstanding shares of the Common Stock
of the Company are changed into or exchanged for a different number or kind of
shares or other securities of the Company or of another corporation by reason of
any reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which options may be granted under the Plan and as to which outstanding options
or portions thereof then unexercised shall be exercisable, to the end that the
proportionate interest of the optionee shall be maintained as before the
occurrence of such event; such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised portion of such
options and with a corresponding adjustment in the option price per share.
(b) In addition, in the case of any (i) sale or conveyance to
another entity of all or substantially all of the property and assets of the
Company, including without limitation by way of merger or consolidation, or (ii)
Change in Control (as hereinafter defined) of the Company, the purchaser(s) of
the Company's assets or stock may, in its discretion, deliver to the optionee
the same kind of consideration that is delivered to the shareholders of the
Company as a result of such sale, conveyance or Change in Control, or the
Committee may cancel all outstanding options in exchange for consideration in
cash or in kind which consideration in both cases shall be equal in value to the
value of those shares of stock or other securities the optionee would have
received had the option been exercised (to the extent then exercisable) and no
disposition of the shares acquired upon such exercise been made prior to such
sale, conveyance or Change in Control, less the option price therefor. Upon
receipt of such consideration by the optionee, his or her option shall
immediately terminate and be of no further force and effect. The value of the
stock or other securities the optionee would have received if the option had
been exercised shall be determined in good faith by the Committee of the
Company, and in the case of shares of the Common Stock of the Company, in
accordance with the provisions of Section 7 hereof. In addition, the Committee
shall have the power and right to accelerate the exercisability of any options
upon such a sale, conveyance or
- 7 -
<PAGE> 8
Change in Control. Upon such acceleration, any options or portion thereof
originally designated as incentive stock options that no longer qualify as
incentive stock options under Section 422 of the Code as a result of such
acceleration shall be redesignated as non-qualified stock options. A "Change in
Control" shall be deemed to have occurred if any person, or any two or more
persons acting as a group, and all affiliates of such person or persons, who
prior to such time owned less than fifty percent (50%) of the then outstanding
Common Stock of the Company, shall acquire, whether by purchase, exchange,
tender offer, merger, consolidation or otherwise, such additional shares of the
Company's Common Stock in one or more transactions, or series of transactions,
such that following such transaction or transactions, such person or group and
affiliates beneficially own fifty percent (50%) or more of the Company's Common
Stock outstanding.
(c) Upon dissolution or liquidation of the Company, all options
granted under this Plan shall terminate, but each optionee (if at such time in
the employ of or otherwise associated with the Company or any of its
subsidiaries) shall have the right, immediately prior to such dissolution or
liquidation, to exercise his or her option to the extent then exercisable.
(d) No fraction of a share shall be purchasable or deliverable
upon the exercise of any option, but in the event any adjustment hereunder of
the number of shares covered by the option shall cause such number to include a
fraction of a share, such fraction shall be adjusted to the nearest whole number
of shares.
(e) If by reason of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization, or liquidation,
the Committee shall authorize the issuance or assumption of a stock option or
stock options in a transaction to which Section 425(a) of the Code applies,
then, notwithstanding any other provision of the Plan, the Committee may grant
an option or options upon such terms and conditions as it may deem appropriate
for the purpose of assumption of the old option, or substitution of a new option
for the old option, in conformity with the provisions of such Section 425(a) of
the Code and the Regulations thereunder, and any such option shall not reduce
the number of shares otherwise available for issuance under the Plan.
12. No Special Employment Rights.
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any option holder any right with respect to the continuation
of his or her employment by the Company (or any subsidiary) or interfere in any
way with the right of the Company (or any subsidiary), subject to the terms of
any separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the rate in existence at the time of the grant of an option. An authorized leave
of absence, or absence in military or government service, shall not constitute
termination of employment for purposes of the Plan.
- 8 -
<PAGE> 9
13. Tax Withholding.
To the extent required by law, the Company shall withhold or cause to be
withheld income and other taxes with respect to any income recognized by an
optionee by reason of the exercise or vesting of an option, and as a condition
to the receipt of any option the optionee shall agree that if the amount payable
to him by the Company in the ordinary course is insufficient to pay such taxes,
then he shall upon the request of the Company pay to the Company an amount
sufficient to satisfy its tax withholding obligations.
Without limiting the foregoing, the Committee may in its discretion
permit any optionee's withholding from the shares to be issued under the option
or by accepting delivery from the optionee of shares already owned by him. The
fair market value of the shares for such purposes shall be determined as set
forth in Section 7. An optionee may not make any such payment in the form of
shares of Common Stock acquired upon the exercise of an incentive stock option
until the shares have been held by him for at least two (2) years after the date
the incentive stock option was granted and at least one (1) year after the date
the incentive stock option was exercised. If payment of withholding taxes is
made in whole or in part in shares of Common Stock, the optionee shall deliver
to the Company certificates registered in his name representing shares of Common
Stock legally and beneficially owned by him, fully vested and free of all liens,
claims and encumbrances of every kind, duly endorsed or accompanied by stock
powers duly endorsed by the record holder of the shares represented by such
certificates.
14. Restrictions on Issue of Shares.
(a) Notwithstanding the provisions of Section 8, the Company may
delay the issuance of shares covered by the exercise of an option and the
delivery of a certificate for such shares until one of the following conditions
shall be satisfied:
(i) The shares with respect to which such option has
been exercised are at the time of the issue of such shares effectively
registered or qualified as required under applicable Federal and state
securities acts now in force or as hereafter amended; or
(ii) Counsel for the Company shall have given an
opinion, which opinion shall not be unreasonably delayed, conditioned or
withheld, that such shares are exempt from registration and qualification under
applicable Federal and state securities acts now in force or as hereafter
amended.
(b) It is intended that all exercises of options shall be
effective, and the Company shall use its best efforts to bring about compliance
with the above conditions within a reasonable time, except that the Company
shall be under no obligation to qualify shares or to cause a registration
statement or a post-effective amendment to any registration statement to be
- 9 -
<PAGE> 10
prepared for the purpose of covering the issue of shares in respect of which any
option may be exercised, except as otherwise agreed to by the Company in
writing.
15. Purchase for Investment; Rights of Holder on Subsequent
Registration.
Unless the shares to be issued upon exercise of an option granted under
the Plan have been effectively registered under the Securities Act of 1933 (as
now in force or hereafter amended, the "Securities Act") the Company shall be
under no obligation to issue any shares covered by any option unless the person
who exercises such option, in whole or in part, shall give a written
representation and undertaking to the Company which is reasonably satisfactory
in form and scope to counsel for the Company and upon which, in the opinion of
such counsel, the Company may reasonably rely, that he or she is acquiring the
shares issued pursuant to such exercise of the option for his or her own account
as an investment and not with a view to, or for sale in connection with, the
distribution of any such shares, and that he or she will make no transfer of the
same except in compliance with any rules and regulations in force at the time of
such transfer under the Securities Act, or any other applicable law, and that if
shares are issued without such registration, a legend to this effect may be
endorsed upon the securities so issued. In the event that the Company shall,
nevertheless, deem it necessary or desirable to register under the Securities
Act or other applicable statutes any shares with respect to which an option
shall have been exercised, or to qualify any such shares for exemption from the
Securities Act or other applicable statutes, then the Company may take such
action and may require from each optionee such information in writing for use in
any registration statement, supplementary registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably necessary for such
purpose and may require reasonable indemnity to the Company and its officers and
directors and controlling persons from such holder against all losses, claims,
damages and liabilities arising from such use of the information so furnished
and caused by any untrue statement of any material fact therein or caused by the
omission 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
under which they were made.
16. Modification of Outstanding Options.
The Committee may authorize the amendment of any outstanding option with
the consent of the optionee when and subject to such conditions as are deemed to
be in the best interests of the Company and in accordance with the purposes of
this Plan.
17. Approval of Stockholders.
The Plan shall be subject to approval by the vote of stockholders
holding at least a majority of the voting stock of the Company present, or
represented, and entitled to vote at a duly held stockholders' meeting, or by
written consent of the stockholders as provided for under applicable state law,
within twelve (12) months after the adoption of the Plan by the
- 10 -
<PAGE> 11
Board of Directors and shall take effect as of the date of adoption by the Board
of Directors upon such approval.
18. Prior Grant of Options.
The Committee may grant options under the Plan prior to such approval,
but any such option shall become effective as of the date of grant only upon
such approval and, accordingly, no such option may be exercisable prior to such
approval.
19. Termination and Amendment.
Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board.
The Board may at any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, that except as
provided in this Section 19, the Board may not, without the approval of the
stockholders of the Company obtained in the manner stated in Section 17,
increase the maximum number of shares for which options may be granted or change
the designation of the class of persons eligible to receive options under the
Plan, or make any other change in the Plan which requires stockholder approval
under applicable law or regulations, including any approval requirement which is
a prerequisite for exemptive relief under Section 16 of the Act. The Committee
may grant options to persons subject to Section 16(b) of the Act after an
amendment to the Plan by the Board of Directors requiring stockholder approval
under Section 17, but any such option shall become effective as of the date of
grant only upon such approval and, accordingly, no such option may be
exerciseable prior to such approval.
20. Compliance with Rule 16b-3.
It is intended that the provisions of the Plan and any option granted
thereunder to a person subject to the reporting requirements of Section 16(a) of
the Act shall comply in all respects with the terms and conditions of Rule 16b-3
under the Act or any successor provisions. Any agreement granting options to a
person so subject shall contain such provisions as are necessary or appropriate
to assure such compliance. To the extent that any provision hereof is found not
to be in compliance with such Rule, such provision shall be deemed to be
modified so as to be in compliance with such Rule, or if such modification is
not possible, shall be deemed to be null and void, as it relates to a recipient
subject to Section 16(a) of the Act.
21. Reservation of Stock.
The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
- 11 -
<PAGE> 12
22. Limitation of Rights in the Option Shares.
An optionee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the options except to the extent that the
option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.
23. Notices.
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: Secretary, and, if to an optionee, to the address as appearing on the
records of the Company.
Adopted by the Board of Directors: May 31, 1996
Adopted by the Stockholders: May 31, 1996
- 12 -
<PAGE> 1
BANCBOSTON MORTGAGE CORPORATION
EXHIBIT 12-2(A) -- COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
The following table sets forth the ratio of earnings to fixed charges of
BancBoston Mortgage Corporation for the five fiscal years ended December 31,
1995, the quarter ended March 31, 1995 and the period January 1, 1996 to March
15, 1996. The ratio of earnings to fixed charges is computed by dividing net
fixed charges (interest expense on all debt plus the interest portion of rent
expense) into earnings before income taxes and fixed charges.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, FOR THE FOR THE PERIOD
-------------------------------------------------- QUARTER ENDED JANUARY 1, 1996
1991 1992 1993 1994 1995 MARCH 31, 1995 TO MARCH 15, 1996
------- -------- -------- ------- ------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings before income taxes....... $30,545 $(11,663) $(48,641) $ 4,475 $96,760 $5,706 $(116,394)
------- -------- -------- ------- ------- ------ -----------------
Interest expense................... 27,686 38,855 44,199 33,952 27,128 6,079 10,089
Interest portion of rental
expense.......................... 1,207 1,081 1,204 1,203 1,296 388 310
------- -------- -------- ------- ------- ------ -----------------
Fixed charges...................... 28,893 39,936 45,403 35,155 28,424 6,467 10,399
------- -------- -------- ------- ------- ------ -----------------
Earnings before fixed charges...... 59,438 28,273 (3,238) 39,630 125,184 12,173 (105,995)
------- -------- -------- ------- ------- ------ -----------------
FIXED CHARGES:
Interest expense................... 27,686 38,855 44,199 33,952 27,128 6,079 10,089
Interest portion of rental
expense.......................... 1,207 1,081 1,204 1,203 1,296 388 310
------- -------- -------- ------- ------- ------ -----------------
Fixed charges...................... $28,893 $ 39,936 $ 45,403 $35,155 $28,424 $6,467 $ 10,399
------- -------- -------- ------- ------- ------ -----------------
Ratio of earnings to fixed
charges.......................... 2.06 0.71(a) (a) 1.13 4.40 1.88 (a)
======= ======== ======== ======= ======= ============== ================
</TABLE>
- ---------------
(a) As a result of the loss incurred in this period, the Company was unable to
fully cover the indicated fixed charges.
<PAGE> 1
EXHIBIT 21.1
List of Subsidiaries
HomeSide Holdings, Inc.
HomeSide Lending, Inc.
HomeSide Mortgage Securities, Inc.
SWD Properties, Inc.
Stockton Plaza, Inc.
Honolulu Mortgage Company, Inc.
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants we hereby consent to the use of
our report, dated April 10, 1996, on our audit of the balance sheet of HomeSide,
Inc. (and to all references to our firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Jacksonville, Florida
June 21, 1996
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-4 of
our report dated January 18, 1996, except for the second paragraph on Note 1 and
the fifth paragraph of Note 2, as to which the date is March 4, 1996, on our
audits of the financial statements of BancBoston Mortgage Corporation.
COOPERS & LYBRAND, L.L.P.
Jacksonville, Florida
June 21, 1996
<PAGE> 1
The Board of Directors
HomeSide, Inc.:
We consent to the inclusion of our report dated March 17, 1995 in this
Registration Statement on Form S-4. Our report refers to a change to the asset
and liability method of accounting for income taxes. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
KPMG Peat Marwick LLP
San Antonio, Texas
June 21, 1996
<PAGE> 1
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
HomeSide, Inc.
(Exact name of obligor as specified in its charter)
Delaware
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
7301 Baymeadows Way
Jacksonville, Fl 32256
(Address of principal executive offices) (Zip code)
----------------------
11 % Series B Senior Secured Second Priority Notes due 2003
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 3 -
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 11th day of June, 1996.
THE BANK OF NEW YORK
By: /S/ WALTER N. GITLIN
-----------------------
Name: WALTER N. GITLIN
Title: VICE PRESIDENT
-4-
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ....................................... $ 4,500,312
Interest-bearing balances ............................... 643,938
Securities:
Held-to-maturity securities ............................. 806,221
Available-for-sale securities ........................... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ........................................ 4,166,720
Securities purchased under agreements
to resell ............................................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ................................................ 27,068,535
LESS: Allowance for loan and
lease losses .......................................... 520,024
LESS: Allocated transfer risk
reserve ............................................... 1,000
Loans and leases, net of unearned
income and allowance, and reserve ..................... 26,547,511
Assets held in trading accounts ........................... 758,462
Premises and fixed assets (including
capitalized leases) ..................................... 615,330
Other real estate owned ................................... 63,769
Investments in unconsolidated
subsidiaries and associated
companies ............................................... 223,174
Customers' liability to this bank on
acceptances outstanding ................................. 900,795
Intangible assets ......................................... 212,220
Other assets .............................................. 1,186,274
Total assets .............................................. $42,711,907
LIABILITIES
Deposits:
In domestic offices ..................................... $21,248,127
Noninterest-bearing ..................................... 9,172,079
Interest-bearing ........................................ 12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ........................ 9,535,088
Noninterest-bearing ..................................... 64,417
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Interest-bearing ....................................... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ................................ 2,095,668
Securities sold under agreements
to repurchase ........................................ 69,212
Demand notes issued to the U.S.
Treasury ............................................... 107,340
Trading liabilities ...................................... 615,718
Other borrowed money:
With original maturity of one year
or less .............................................. 1,638,744
With original maturity of more than
one year ............................................. 120,863
Bank's liability on acceptances exe-
cuted and outstanding .................................. 909,527
Subordinated notes and debentures ........................ 1,047,860
Other liabilities ........................................ 1,836,573
Total liabilities ........................................ 39,224,720
EQUITY CAPITAL
Common stock ............................................. 942,284
Surplus .................................................. 525,666
Undivided profits and capital
reserves ............................................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ............................................. 29,668
Cumulative foreign currency transla-
tion adjustments ....................................... (5,747)
Total equity capital ..................................... 3,487,187
Total liabilities and equity
capital ................................................ $42,711,907
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
OFFER FOR ALL OUTSTANDING
11 1/4% SENIOR SECURED SECOND PRIORITY NOTES DUE 2003
IN EXCHANGE FOR
11 1/4% SERIES B SENIOR SECURED SECOND PRIORITY NOTES DUE
2003
HOMESIDE, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON __________, 1996 (THE "EXPIRATION DATE")
UNLESS EXTENDED BY HOMESIDE, INC.
The Exchange Agent
for the Exchange Offer
THE BANK OF NEW YORK
By Registered or Certified Mail: By Overnight Courier:
The Bank of New York The Bank of New York
Reorganization Section Reorganization Section
101 Barclay Street - 7E 101 Barcleay Street - 7E
New York, New York 10286 New York, New York 10286
Attention: Enrique Lopez Attention: Enriqie Lopez
By Hand: By Facsimile:
The Bank of New York The Bank of New York
Reorganization Section (212) 571-3080
101 Barclay Street - 7E Enrique Lopez
New York, New York Confirm by telephone:
Attention: Enrique Lopez (212) 815-2742
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of instructions via a facsimile transmission to a
number other than set forth above will not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus dated July 21,
1995 (the "Prospectus") of HomeSide, Inc. (the "Company"), and this Letter of
Transmittal (the "Letter of Transmittal"), which together describe the Company's
offer (the "Exchange Offer") to exchange $1,000 in principal amount of 11 1/4%
Series B Senior Secured Second Priority Notes due 2003 (the "Exchange Notes")
for each $1,000 in principal amount of outstanding 11 1/4% Senior Secured Second
Priority Notes due 2003 (the "Initial Notes"). The terms of the Exchange
<PAGE> 2
Notes are substantially identical in all respects (including principal amount,
interest rate and maturity) to the terms of the Initial Notes for which they may
be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are
freely transferable by holders thereof (except as provided herein or in the
Prospectus) and are issued without any covenant upon the Company regarding
registration.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
A holder that is a participant in The Depository Trust Company's system
may utilize The Depository Trust Company's Automated Tender Offer Program to
tender Initial Notes.
List below the Initial Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the Certificate Numbers and
Principal Amounts should be listed on a separate signed schedule affixed hereto.
2
<PAGE> 3
DESCRIPTION OF INITIAL NOTES TENDERED HEREWITH
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Certificate Aggregate Principal Principal Amount
Holder(s) (Please fill in) Number(s)* Amount Represented by Tendered*
Initial Notes
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have
tendered the full aggregate amount represented by such Initial
Notes. See Instruction 2.
This Letter of Transmittal is to be used either if certificates of
Initial Notes are to be forwarded herewith or if delivery of Initial Notes is to
be made by book-entry transfer to an account maintained by the Exchange Agent at
The Depository Trust Company, pursuant to the procedures set forth in "The
Exchange Offer -- How To Tender" in the Prospectus. Delivery of documents to a
book-entry transfer facility does not constitute delivery to the Exchange Agent.
Holders whose Initial Notes are not immediately available or who cannot
deliver their Initial Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date may tender their Initial Notes
according to the guaranteed procedure set forth in the Prospectus under the
caption "The Exchange Offer How To Tender."
/ / CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution__________________________________________
/ / The Depository Trust Company
Account Number_________________________________________________________
Transaction Code Number________________________________________________
3
<PAGE> 4
/ / CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)___________________________________________
Name of Institution that Guaranteed Delivery___________________________
If Delivered by Book-Entry Transfer:
Account Number_________________________________________________________
Transaction Code Number________________________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name___________________________________________________________________
Address:_______________________________________________________________
_______________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of the Initial Notes. Subject to, and effective upon, the acceptance for
exchange of the Initial Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Initial Notes. The undersigned hereby
irrevocably constitutes (with full knowledge that said Exchange Agent acts as
the Agent of the Company in connection with the Exchange Offer) to cause the
Initial Notes to be assigned, transferred and exchanged. The undersigned
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Initial Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Initial Notes, and that, when the
same are accepted for exchange, the Company will acquire good and unencumbered
title to the tendered Initial Notes, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The undersigned
also warrants that it will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Initial
Notes or transfer ownership of such Notes on the account books maintained by a
book-entry transfer facility. The undersigned further agrees that acceptance of
any and all validly tendered Initial Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Registration Rights Agreement (as defined
in the Prospectus) and that the Company shall have no further obligations or
liabilities thereunder.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Company), as more particularly set
forth in the Prospectus, the Company may not be required to exchange any of the
Initial Notes tendered hereby and, in such event, the Initial Notes not
exchanged will be returned to the undersigned at the address above.
4
<PAGE> 5
By tendering, each holder of Initial Notes represents that Exchange
Notes acquired in the exchange will be obtained in the ordinary course of such
holder's business, that such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that such
holder is not an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act of 1933, as amended (the "Act"). If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of Exchange Notes. If the undersigned is
a broker-dealer that will receive Exchange Notes for its own account in exchange
for Initial Notes it represents that the Initial Notes to be exchanged for
Exchange Notes were acquired as a result of market-making activities or other
trading activities and it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Any holder of
Initial Notes using the Exchange Offer to participate in a distribution of the
Exchange Notes (i) cannot rely on the position of the staff of the Commission
enunciated in its interpretive letter with respect to Exxon Capital Holdings
Corporation (available May 13, 1988) or similar letters issued to third parties
and (ii) must comply with the registration and prospectus requirements of the
Act in connection with a secondary resale transaction.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Tendered Initial Notes may be
withdrawn at any time prior to the Expiration Date.
Certificates for all Exchange Notes delivered in exchange for tendered
Initial Notes and any Initial Notes delivered herewith but not exchanged, and
registered in the name of the undersigned, shall be delivered to the undersigned
at the address shown below the signature of the undersigned.
5
<PAGE> 6
TENDERING HOLDER(S) SIGN HERE
________________________________________________________________________________
________________________________________________________________________________
Signature of Holder(s)
Dated:_____________________________, 1996
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Initial Notes. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person.) See Instruction 3.
Name(s):________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT)
Capacity (full title): ________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone No._____________________________________________________
Taxpayer Identification No._____________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED - SEE INSTRUCTION 3)
Authorized Signature____________________________________________________________
Name____________________________________________________________________________
Title___________________________________________________________________________
Address_________________________________________________________________________
Name of Firm____________________________________________________________________
Area Code and Telephone No._____________________________________________________
Dated:__________________________________, 1996
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITION OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
Certificates for all physically delivered Initial Notes or confirmation
of any book-entry transfer to the Exchange Agent's account at a book-entry
transfer facility of Initial Notes tendered by book-entry transfer, as well as a
properly completed and duly executed copy of this Letter of Transmittal or
facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at any of its addresses set
forth herein on or prior to the Expiration Date (as defined in the Prospectus).
THE METHOD OF DELIVER OF THIS LETTER OF TRANSMITTAL, THE INITIAL NOTES
AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND
EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
BE USED.
Holders whose Initial Notes are not immediately available or who cannot
deliver their Initial Notes and all other required documents to the Exchange
Agent on or prior to the Expiration Date or comply with book-entry transfer
procedures on a timely basis may tender their Initial Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer -- How to Tender." Pursuant to such procedure: (i) such tender must be
made by or through an Eligible Institution (as defined in the prospectus); (ii)
on or prior to the Expiration Date the Exchange Agent must have received from
such Eligible Institution a letter or facsimile transmission setting forth the
name and address of the tendering holder, the names in which such Initial Notes
are registered, and, if possible, the certificate numbers of the Initial Notes
to be tendered and a guarantee that within five New York Stock Exchange Trading
days after the date of execution of such letter or facsimile transmission by the
Eligible Institution, the Initial Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the book-entry transfer facility), will be delivered by such
Eligible Institution, the Initial Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Initial Notes, in proper form for
transfer (or a confirmation of book-entry transfer of such Initial Notes into
the Exchange Agent's account at the book-entry transfer of such Initial Notes
into the Exchange Agent's account at a book-entry transfer facility) as well as
this Letter of Transmittal and all other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of such letter or facsimile
transmission, as all provided in the Prospectus under the caption "The Exchange
Offer -- How to Tender."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Initial Notes of exchange.
2. PARTIAL TENDERS: WITHDRAWALS.
If less than the entire principal amount of Initial Notes evidenced by
a submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Initial Notes submitted but
not tendered will be sent to such holder as soon as practicable after the
Expiration Date. All Initial Notes to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
Initial Notes tendered pursuant to the Exchange Offer may be withdrawn
at anytime prior to the Expiration Date. For a withdrawal to be effective, a
written or facsimile transmission notice of withdrawal must be timely received
by the Exchange Agent. Any such notice of withdrawal must specify the person
named in the Letter of
7
<PAGE> 8
Transmittal as having tendered Initial Notes to be withdrawn, the certificate
numbers of the Initial Notes to be withdrawn, the principal amount of Initial
Notes delivered for exchange, a statement that such holder is withdrawing his or
her election to have such Initial Notes exchanged, and the name of the
registered holder of such Initial Notes, and must be signed by the holder in the
same manner as the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accepted by evidence satisfactory to
the Company that the person withdrawing the tender has succeeded to the
beneficial ownership of the Initial Notes being withdrawn. The Exchange Agent
will return the properly withdrawn Initial Notes promptly following receipt of
notice of withdrawal. If Initial Notes have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Initial Notes or otherwise comply with the
book-entry transfer facility's procedures.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of
the Initial Notes tendered hereby, the signature must correspond with the
name(s) as written on the face of the certificates without alteration or any
change whatsoever.
If any of the Initial Notes tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Initial Notes tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Initial Notes registered in different names are
tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Initial Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include a
book-entry transfer facility whose name appears on a security listing as the
owner of the Initial Notes) of Initial Notes listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Initial Notes listed, such Initial Notes
must be endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the registered
holder, in either case signed exactly as the name or names of the registered
holder or holders appear(s) on the Initial Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Initial Notes are tendered: (i) by a
registered holder of such Initial Notes; or (ii) for the account of an Eligible
Institution.
8
<PAGE> 9
4. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
transfers and exchange of Initial Notes to it or its order pursuant to the
Exchange Offer. If a transfer tax is imposed for any reason other than the
transfer and exchange of Initial Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exception therefrom
is not submitted herewith the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Initial Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part,
any of the conditions to the Exchange Offer set forth in the Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED INITIAL NOTES.
Any holder whose Initial Notes have been mutilated, lost, stolen or
destroyed, should contact the Exchange Agent at the address indicated below for
further instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth on
the first page of this Letter of Transmittal. In addition, all questions
relating to the Exchange Offer, as well as requests for assistance or additional
copies of the Prospectus and this Letter of Transmittal, may be directed to the
Company at 7301 Baymeadows Way, Jacksonville, Florida 32256. Attention: Robert
J. Jacobs (telephone: (904) (281-3000).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER
WITH CERTIFICATES OF INITIAL NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
9
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
OFFER FOR ALL OUTSTANDING
11 1/4% SENIOR SECURED SECOND PRIORITY NOTES DUE 2003
IN EXCHANGE FOR
11 1/4% SERIES B SENIOR SECURED SECOND PRIORITY NOTES DUE 2003
OF
HOMESIDE, INC.
Registered holders of outstanding 11 1/4% Senior Secured Second
Priority Notes due 2003 (the "Initial Notes") who wish to tender their Initial
Notes in exchange for a like principal amount of 11 1/4% Series B Senior Secured
Second Priority Notes due 2003 (the "Exchange Notes") and whose Initial Notes
are not immediately available or who cannot deliver their Initial Notes and
Letter of Transmittal (and any other documents required by the Letter of
Transmittal) to The Bank of New York (the "Exchange Agent") prior to the
Expiration Date, may use this Notice of Guaranteed Delivery. This Notice of
Guaranteed Delivery may be delivered by hand or sent by facsimile transmission
or mail to the Exchange Agent, See "The Exchange Offer -- How to Tender" in the
Prospectus.
The Exchange Agent
for the Exchange Offer is:
THE BANK OF NEW YORK
By Registered or Certified Mail: By Overnight Courier:
The Bank of New York The Bank of New York
Reorganization Section Reorganization Section
101 Barclay Street - 7E 101 Barclay Street -7E
New York, New York 10286 New York, New York 10286
Attention: Reorganization Section Attention: Enrique Lopez
By Hand: By Facsimile:
The Bank of New York The Bank of New York
Reorganization Section (212) 571-3080
101 Barclay Street - 7E Confirm by telephone:
New York, New York 10286 (212) 815-2742
Attention: Enrique Lopez
Delivery of this Notice of Guaranteed Delivery to an address other than
as set forth above or transmission of instructions via a facsimile transmission
to a number other than as set forth above will not constitute a valid delivery.
<PAGE> 2
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
Ladies and Gentlemen:
The undersigned hereby tenders the principal amounts of Initial Notes
indicated below, upon the terms and subject to the conditions contained in the
Prospectus dated __________, 1996 of HomeSide, Inc. (the "Prospectus"), receipt
of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
Name and address of registered holder as it appears on Certificate number(s) of Initial Principal Amount of Initial
the privately placed 11 1/4 Senior Secured Second Priority Notes transmitted Notes Transmitted
Notes due 2003, ("Initial Notes")
<S> <C> <C>
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE> 3
THE FOLLOWING MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution within the meaning of Rule
17(A)(d)-15 under the Securities Exchange Act of 1934, as amended, hereby
guarantees to deliver to the Exchange Agent at one of its addresses set forth
above, the Initial Notes, together with a properly completed and duly executed
Letter of Transmittal within five New York Stock Exchange, Inc. trading days
after the date of execution of this Notice of Guaranteed Delivery.
Name of Firm:______________________ _________________________________
(Authorized Signature)
Address:___________________________ Title:___________________________
___________________________________ Name:____________________________
(Zip Code)
Area Code and Telephone Number:
Date:__________________________________
___________________________________
NOTE: DO NOT SEND INITIAL NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY, INITIAL NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED BALANCE SHEET OF HOMESIDE, INC. AS OF MARCH 14, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REGISTRATION STATEMENT ON
FORM S-4.
</LEGEND>
<NAME> HOMESIDE, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> MAR-14-1996
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 17,085
0
0
<OTHER-SE> (17,085)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
