UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1997
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to __________________
Commission file number: 0-22271
CFI MORTGAGE INC.
(Exact Name of Small Business Issuer as specified in its charter)
DELAWARE 52-2023491
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
580 VILLAGE BOULEVARD, SUITE 120, WEST PALM BEACH, FLORIDA 33409
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 561-687-1595
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.01
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. Yes X No __
As of March 31, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the closing price, was approximately
$20,749,203.
As of March 31, 1998, the registrant had 2,305,467 shares of Common Stock
outstanding.
Registrant's revenues for the fiscal year ended December 31, 1997 were
$8,267,264.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [x]
Transitional Small Business Disclosure Format: Yes ___ No X
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive Proxy Statement issued in connection with
the 1998 Annual Meeting of Stockholders are incorporated by reference into Part
III hereof, which the Company intends to file with the Securities and Exchange
Commission no later than 120 days after the end of the fiscal year covered by
this report.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
CFI Mortgage Inc. (the "Company") is a diversified financial services
company headquartered in West Palm Beach, Florida. The Company provides
mortgages and mortgage related services to individuals directly and indirectly
through mortgage brokers and mortgage lenders. The Company originates,
processes, underwrites and funds residential mortgage loans which are sold on
either an individual or bulk basis to institutional and private investors for
investment or securitization purposes. Through its subsidiaries, the Company
originates and purchases both mortgage loans originated to standard government
agency guidelines (conforming loans) and mortgage loans originated to standards
that do not conform to agency guidelines (non-conforming loans). Non-conforming
loans typically fail to meet agency guidelines due to credit impairment, higher
loan-to-value ratios and debt-to-income ratios, and are priced to compensate for
the additional credit risk. In 1997, the breakdown of conforming versus
non-conforming was 70% conforming and 30% non-conforming. The Company produced
$75.2 million in non-conforming closed loans in 1997 compared to less than $5
million in non-conforming loans in 1996. Since its inception, the Company has
experienced average annual growth of 75.76% in the volume of loans closed with
an annual growth rate of 11.5% in 1997.
All mortgage loans are sold on a non-recourse servicing released basis
with customary representations and warranties. Loans are serviced until sold by
one of two subservicers, depending on the type of loan. The subservicers provide
for servicing transfer and satisfaction functions which allow for compliance
with regulatory guidelines during this interim period.
The Company has used the proceeds of the initial public offering which
closed on May 30, 1997 to increase its production network, diversify production
geographically, improve technology and create an infrastructure capable of
handling the increased production that is expected in the future. Through
December 31, 1997, the Company opened two (2) retail production offices, seven
(7) non-conforming wholesale offices and one (1) consumer direct office which
sources customers through direct mailings. The new offices were located in five
(5) non-Florida states with licensing capability to transact business in
nineteen (19) states. The production offices source mortgage loan applications
through fifty-nine (59) commissioned loan officers and twenty-one (21) wholesale
account executives who call on mortgage brokers, mortgage bankers, and lenders.
During 1997, the Company upgraded computer hardware and established a wide area
network for communication and data flow. The production support divisions of the
Company expanded both in size and scope in an effort to achieve the Company's
goal of providing superior support to production units. The total employees of
the Company expanded from 118 at December 31, 1996 to 236 on December 31, 1997,
including the staffing required for the new production units and the staffing
required by the production support divisions.
All of the Company's operations are conducted through its wholly-owned
subsidiaries, Bankers Direct Mortgage Corporation ("BDMC") and Direct Mortgage
Partners, Inc. ("DMP"). BDMC was incorporated in Florida as Creative Industries,
Inc. in April 1989. In October 1990, Creative Industries, Inc.'s name was
changed to Creative Financing, Inc. In May 1995, Creative Financing, Inc.'s name
was changed to CFI Mortgage Corporation ("CFI Mortgage"). DMP was incorporated
in Florida in August 1997. In March 1997, CFI Mortgage Inc. was incorporated in
Delaware, and immediately prior to the initial public offering in May 1997,
Vincent J. Castoro and Christopher C. Castoro, who owned all of the issued and
outstanding common stock of CFI Mortgage (the "Existing Stockholders"),
contributed their shares of common stock of CFI Mortgage to the Company in
exchange for all of the outstanding shares of Common Stock of the Company (the
"Exchange"). From April 1989 until December 31, 1996, CFI Mortgage was treated
as an S corporation under Subchapter S (an "S corporation") of the Internal
Revenue Code of 1986, as amended (the "Code"). See "Reorganization and
Termination of S Corporation Status." The Company also owns a nominal 10%
interest in a Florida corporation which provides survey and appraisal services
to the Company's production offices located in the State of Florida. To date,
the capital required for this venture has been limited, and the "related entity"
has not required capital to fund operations nor has it provided revenue to the
Company.
GENERAL BACKGROUND
The Company currently has two wholly-owned subsidiaries, BDMC, the
Company's retail production arm originating both conforming and non-conforming
products, and DMP, the non-conforming production platform for the Company. DMP
produces non-conforming loans on a wholesale basis through mortgage brokers,
mortgage bankers and lenders.
Loans are funded through the use of good funds checks provided through
Bank One Capital Corporation. Once funding checks clear, the Company borrows
under its warehouse agreement with Bank One, Texas, N.A. ("Bank One") to cover
the checks. Once a week warehoused loans are moved to secure funds advanced
under a revolving warehouse line of credit provided by Nikko Financial Services,
Inc. ("Nikko"), which carries a preferential rate and a higher advance rate
compared to the Company's warehouse agreement. The Company's document custodian
also acts as custodian for all funding facilities. Loan level tracking of the
Company's borrowings, interest expense and interest accrual is accomplished
through the use of customized software provided by a national vendor
specializing in warehouse management software.
DESCRIPTION OF OPERATIONS
BANKERS DIRECT MORTGAGE CORPORATION PRODUCTION OPERATIONS
The Company's retail production subsidiary, BDMC, operates through
standalone branches located in Florida and Colorado. Commissioned loan officers
source the business through realtors and builders or other contacts.
Applications are taken primarily in face-to-face interviews either by hand or on
laptop computers. The loan officer submits the application to the branch office
for processing either in hard copy or through electronic transfer via modem. For
conforming loans, application information is transmitted through the Federal
National Mortgage Association's ("FNMA") automated underwriting system. The
application is then processed in accordance with the required conditions. For
all other loan types, applications are processed in the branch with
verifications collected for key financial information with a complete credit
file submitted to the centralized underwriting area. Certain loan types require
the investor to underwrite the loan. In these situations, the centralized
underwriting area submits the application package to the Investor for approval.
Once a loan is underwritten the branch collects the conditions required by
underwriting for approval. When all conditions have been satisfied, the branch
submits a request to close to the centralized closing area. Closing documents
are generated through the Company's closing department preparation software and
the loans are then closed by approved closing agents who have executed closing
agreements and provided insured closing letters from title insurers.
The loan programs offered reflect guidelines and terms which match
those published by approved investors. The pricing offered the Loan Officers is
generated from a pricing model which prices to generate a specific dollar profit
on each loan regardless of loan size. This philosophy has allowed the Company to
price larger, more efficient loans aggressively, which has increased its average
loan size. When rates and prices are committed to applicants, the interest rate
risk is transferred to the ultimate investor by locking the rate and price with
the Investor based upon an agreed to closed loan delivery date.
Conforming closed loans are shipped to institutional and private
investors in accordance with commitments made at the time that the rate and
price are guaranteed. Investors then review the loan files and upon clearing any
funding conditions, the investor wires the proceeds to the Company's account at
the warehouse bank for distribution to pay off the loan with the excess
deposited in the Company's operating account to use to fund operations.
Conforming loans are serviced on behalf of the Company under
subservicing arrangements with Cenlar, F.S.B. Borrowers are notified at closing
of the subservicer. For a fee, the subservicer handles all normal servicing
functions until the loan is sold to the permanent investor including the loan
satisfaction and transfer processes. The Company intends to sell its conforming
loans in agency securities with the servicing transfer via a magnetic tape
transfer in 1998 making the subservicing arrangement a necessity.
DIRECT MORTGAGE PARTNERS PRODUCTION OPERATIONS
The Company's wholesale production subsidiary, Direct Mortgage
Partners, operates through its regional operations hubs located in five states
utilizing twenty-one (21) account executives to obtain non-conforming
applications and closed loans from mortgage brokers, and mortgage lenders
located in nineteen (19) states. Direct Mortgage Partners also has a consumer
direct office which obtains application inquiries in response to direct mail
campaigns targeting specific market segments. Each regional center has the
capability to process, underwrite, close, and post-close the loans produced in
the region.
The subsidiary's regional operations hubs follow strict procedural and
policy guidelines. Credit information is submitted to the hub where the
application is credit graded. The grade is communicated to the broker/lender who
completes the processing and submits the processed application for underwriting,
credit grading and pricing. Prior to approval, the operations hubs re-verifies
credit and depending upon the characteristics of the application, re-verifies
the property value. Applications with characteristics outside of the published
matrices require a second signoff from the centralized credit and compliance
area of DMP.
When loans are approved the closing documents are generated by the
operational hub through the closing document preparation software and the loans
are then closed by approved closing agents who have executed closing agreements
and provided the Company with insured closing letters from title insurers.
Non-conforming loans are sold on either a flow or bulk basis with the
Company distributing listings of closed loans and their characteristics to
institutional and private investors who bid on loan(s) on an auction basis. This
process improves the Company's execution. The bids are subject to the review of
the complete closed loan file which normally takes place on site. Once funding
conditions are cleared, the investor's funding occurs as with conforming loans.
The loan programs and guidelines offered to the brokers and lenders
reflect conservative standards offered by a variety of investors who purchase
non-conforming loans routinely from mid-size aggregators such as the Company.
The pricing offered the brokers and lenders reflects differences based upon
credit grade and loan characteristics within the grade. These differences
reflect the adjustments received from the investors for which the Company
aggregates product. The ultimate price offered the broker or lender allows for a
specific profit percentage to be earned on each loan. The Company also charges
certain fees on each loan at closing to increase revenue and offset operational
costs.
To date the interest rate risk created by guaranteeing a rate and
price has been managed by regularly selling bulk packages of closed loans
reducing the period where interest rate risk exists. Hedging of the interest
rate risk has been considered and will continue to be considered but to date the
profit margins generated on the loans and the lack of volatility in Investor
pricing have negated the need to incur the expense of hedges utilizing financial
instruments.
CORPORATE SUPPORT FOR PRODUCTION SUBSIDIARIES
The Company also provides the services listed below to each
subsidiary:
* Human Resource and Personnel Management
* Primary Marketing Support
* Post-Closing Support
* Legal Support
* Administrative Services Support
* Information Systems Support
* Finance and Accounting Support
* Funding Support/Warehouse Management
In addition, the Company monitors the areas of Quality Control and
Regulatory Compliance and Interest Rate Risk Management for both subsidiaries
providing compliance direction, document approval, fair lending self testing,
documentation authenticity validation and the policies and procedures utilized
for broker approval and Interest Rate Risk Management.
The Company has contracted with Vincam, a national professional
employer organization, to handle payroll and benefits administration while
providing legal guidance in personnel matters. By utilizing Vincam, the Company
is able to provide a competitive benefits package throughout the United States.
The Company provides technical support in the creation and design of
professional marketing materials. Each subsidiary handles post-closing
functions, except servicing transfer government loan insuring and follow-up
documentation delivery to investors. These critical functions along with file
storage and retrieval have been centralized to control risk and decrease costs
and are handled for each subsidiary by the Company. Real Estate Settlement
Procedures Act ("RESPA"), compliance and licensing related issues are referred
to outside counsel due to the critical nature of these issues. The Company
provides administrative services support for each subsidiary. Purchasing, vendor
management, and physical plant management have been centralized to reduce costs
and duplication.
The Company provides hardware and software support for all
subsidiaries and employees. The Company operates a wide area network utilizing
Novel servers and ISDN lines to allow for efficient communication and data
management. A variety of software packages are installed on the network with
customized vendor provided software packages providing the means for loan
processing, underwriting, closing, secondary marketing, accounting and
post-closing functions. Customized interfaces between the software and a central
database improve the efficiency of the data input function and reporting. The
central database will provide the Company with data mining capability in the
future. The Company's help desk reduces downtime providing users with immediate
support for hardware and software issues.
The Company, through its customized accounting software, provides
branch level profitability analysis, which is used as the basis for compensation
for branch managers.
YEAR 2000 ISSUES
The "Year 2000" problem is the result of computer programs being
written using two digits rather than four digits to define the applicable year.
Systems that do not properly recognize such information could generate erroneous
data or cause a system to miscalculate or fail. This "Year 2000" problem creates
risk for the Company from problems in its own computer systems and from third
parties with whom the Company deals on transactions nationwide.
The Company has conducted a preliminary review of its computer systems
to identify the systems that could be affected by the "Year 2000" issue and is
developing an implementation plan to avoid any potential problems. The Company
has few internally developed applications that it utilizes for its operations,
and has been communicating with associated third parties to ensure that they are
addressing the issue. The potential impact of the "Year 2000" issue will depend
not only on the corrective measures the Company undertakes, but also on the way
in which the issue is addressed by businesses and other entities who they
provide or exchange data with.
It is certain that the Company's operations could be negatively
impacted if not adequately resolved, but at this time it is difficult to
quantify the potential financial impact of such situations.
BUSINESS STRATEGY
The Company's objective is to be a diversified financial services
provider specializing in mortgage related services. The key elements of the
Company's business strategy are as follows:
* Provide its stockholders with superior returns based on profitability.
* Continue controlled growth in stable and improving geographic areas
with teams of experienced professionals.
* Build customer loyalty by providing superior service in all of its
production channels, including a diversified product menu, consistent
underwriting utilizing automated underwriting whenever possible, and
timely closings.
* Manage all aspects of loan quality in a manner which allows the loans
produced through its subsidiaries to command superior pricing from
investors.
* Increase the capacity of each regional hub by obtaining licensing and
employing executives in states not currently penetrated.
* Sell additional mortgage related products and services to its mortgage
clients.
* Provide additional services linked to the loan process.
* Develop alternative delivery channels which allow for reduced cost
through direct contact with the ultimate customer.
* Grow its retail production channel by offering a full spectrum of
products emphasizing the production of more profitable non-conforming
and alternative products.
* Monitor execution alternatives for the sale of mortgage loans and
servicing rights to improve profitability.
<PAGE>
REORGANIZATION AND TERMINATION OF S CORPORATION STATUS
From April 17, 1989 (inception) through December 31, 1996, CFI
Mortgage was treated for federal income tax purposes as an S corporation, and
was treated as an S corporation for certain state corporate income tax purposes
under certain comparable state laws. As a result, CFI Mortgage's historical
earnings had been taxed directly to CFI Mortgage's stockholders at their
individual federal and state income tax rates, rather than to CFI Mortgage.
Pursuant to the terms of a contribution agreement (the "Contribution
Agreement"), the Existing Stockholders contributed their stock of CFI Mortgage
to the Company, in exchange for 1,200,000 shares of Common Stock. The Existing
Stockholders were Vincent J. Castoro and Christopher C. Castoro, who received a
portion of their Common Stock as gifts from their father, Vincent C. Castoro
(collectively with the Existing Stockholders, the "Prior Stockholders"), the
Company's Chairman of the Board and former Chief Executive Officer, in 1993.
From April 17, 1989 through December 31, 1996, CFI Mortgage had not
paid any of its earnings to the Prior Stockholders in the form of S corporation
distributions. On March 26, 1997, CFI Mortgage distributed as a dividend (the
"Distribution") to the Existing Stockholders CFI Mortgage's 40% interest (the
"Interest") in Carroll Street, a New York corporation whose principal asset is a
building located in Brooklyn, New York. The remaining 60% of Carroll Street is
owned by Vincent C. Castoro. The distribution of the Interest, which was
recorded on CFI Mortgage's balance sheet at December 31, 1996 as having a value
of $175,224, was intended to offset taxes payable at the applicable statutory
rate by the Existing Stockholders on the estimated net earnings of CFI Mortgage
for the period from January 1, 1996 to December 31, 1996 and to distribute to
the Existing Stockholders previously earned and undistributed S corporation
earnings.
As an S corporation, the Company's income, whether or not distributed,
was taxed at the stockholder level for federal and state tax purposes. As a
result of the Exchange, the Company and CFI Mortgage, which became a
wholly-owned subsidiary of the Company, became fully subject to federal and
state income taxes. The pro forma provision for income taxes in the accompanying
statements of income shows results as if the Company had always been fully
subject to federal taxes at an assumed tax rate of 34%.
SEASONALITY
The mortgage banking industry is subject to seasonal trends. These
trends reflect the general pattern of resales of homes, which sales typically
peak during the spring and summer seasons and decline from January through
March. In addition, the primary home market in Florida tends to increase during
the fourth quarter, while the second home market increases from October through
April. Refinancings tend to be less seasonal and more closely related to changes
in interest rates. The mortgage servicing business is generally not subject to
seasonal trends, except to the extent that growth of a mortgage servicing
portfolio is generally higher in periods of greater mortgage loan originations.
COMPETITION
The mortgage banking industry is highly competitive. The Company
competes with financial institutions, mainly mortgage companies, commercial
banks and savings and loan associations and, to a certain extent, credit unions
and insurance companies, depending upon the type of mortgage loan product
offered. The Company competes principally by purchasing or originating a variety
of types of mortgage loans, emphasizing the quality of its service and pricing
the loans at competitive rates. Many of the Company's competitors have financial
resources substantially greater than those of the Company. Many of the nation's
largest mortgage companies and commercial banks have a significant number of
branch offices in areas in which the Company's correspondents and wholesale and
retail branches operate. Increased competition for mortgage loans from larger
lenders may result in a decrease in the volume of loans originated and purchased
by the Company, thereby possibly reducing the Company's revenues.
REGULATION
The operations of the Company are subject to extensive regulation by
federal and state governmental authorities and are subject to various laws and
judicial and administrative decisions that, among other things, regulate credit
activities, require disclosures to customers, govern secured transactions and
establish collection, repossession and claims handling procedures and other
trade practices. The Company is subject to the rules and regulations of the
Federal Housing Administration ("FHA"), FNMA and the Department of Veteran
Affairs (the "VA") and state regulatory authorities with respect to originating,
processing, underwriting, selling, securitizing and servicing mortgage loans.
In addition, there are other federal and state statutes and
regulations, as well as judicial decisions, affecting the Company's operations.
Those rules and regulations, among other things, impose licensing obligations on
the Company, establish eligibility criteria for mortgage loans, prohibit
discrimination and establish underwriting guidelines which include provisions
for inspections and appraisals, require credit reports on prospective borrowers
and fix maximum loan amounts, and with respect to the VA loans, fix maximum
interest rates. Moreover, lenders such as the Company are required to submit
annually to the FHA, FNMA and VA audited financial statements, and each
regulatory entity has its own financial requirements. The Company's affairs also
are subject to examination by the FHA, FNMA and VA at all times to assure
compliance with all applicable regulations, policies and procedures. Mortgage
origination activities are subject to, among other regulatory requirements, the
Equal Credit Opportunity Act, the Federal Truth-in-Lending Act, the Home
Mortgage Disclosure Act and RESPA 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 servicer, demands
for indemnification or loan repurchases, class action lawsuits and
administrative enforcement actions.
There are various state and local laws and regulations affecting the
Company's operations. The Company is in possession of all licenses required by
the State of Florida to conduct its business operations and for the states where
it transacts business. Conventional mortgage operations also may be subject to
state usury statutes. FHA and VA mortgage loans are exempt from the effect of
such statutes.
ENVIRONMENTAL MATTERS
To date, the Company has not been required to perform any
investigation or remediation activities, nor has it been subject to any
environmental claims. There can be no assurance, however, that this will remain
the case in the future. In the ordinary course of its business, the Company from
time to time forecloses on the properties securing loans. Although the Company
primarily lends to owners of residential properties, there is a risk that the
Company could be required to investigate and clean up hazardous or toxic
substances or chemical releases at such properties after acquisition by the
Company, and may be held liable to a governmental entity or to third parties for
property damage, personal injury and investigation and clean up costs incurred
by such parties in connection with the contamination. In addition, the owner or
former owners of a contaminated site may be subject to common law claims by
third parties based on damages and costs resulting from environmental
contamination emanating from such property.
EMPLOYEES
As of December 31, 1997, the Company has 236 employees, 156 of whom
were salaried employees and 80 of whom were compensated on a commission basis.
Substantially all of the Company's employees work on a full time basis. None of
the Company's employees are represented by a union. The Company considers its
relations with its employees to be satisfactory.
ITEM 2. PROPERTIES
The Company's executive and administrative offices are located at 580
Village Boulevard, Suite 120, West Palm Beach, Florida 33409, where the Company
leases approximately 21,161 square feet of office space at an aggregate annual
rent of approximately $222,132. The lease provides for certain scheduled rent
increases and expires in May 31, 2001.
The Company maintains 15 other offices in the States of California,
Colorado, Florida, Georgia, Illinois and Tennessee pursuant to leases with
various expiration dates through 2002, at monthly rental rates ranging from $586
to $7,463. The Company considers its facilities to be satisfactory for its
current needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various routine legal proceedings arising
out of the ordinary course of its business. Management believes that none of
these actions, individually or in the aggregate, will have a material adverse
effect on the results of operations or financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. PRICE RANGE OF COMMON STOCK
Effective May 27, 1997 the Company's Common Stock was included for
quotation on the Nasdaq SmallCap Market under the symbol "CFIM." The following
table sets forth the time periods indicated the range of the high and low bid
prices for the Company's Common Stock on the Nasdaq SmallCap Market.
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1997 High Low
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Second Quarter (from May 27, 1997) $10.75 $5.75
Third Quarter $15.25 $7.38
Fourth Quarter $12.44 $7.00
There are approximately 50 stockholders of record of Common Stock as
of March 31, 1998. This number does not include beneficial owners holding shares
through or "street" names. The Company believes that it has more than 200
beneficial holders of Common Stock.
On December 3, 1997, the Company issued 2,060 shares of 8% Series A
Convertible Preferred Stock, $.01 par value (the "Preferred Stock"), in a
private placement to certain institutional investors. The net proceeds from the
issuance and sale, after deducting selling and other related expenses,
aggregated $1,821,753. The foregoing shares were sold without registration in a
transaction qualifying for exemption from registration afforded by Section 4(2)
of the Securities Act of 1933, as amended.
DIVIDEND POLICY
The Company has not paid any cash dividends (except for S corporation
distributions to the Existing Stockholders) on its Common Stock since its
inception and does not currently anticipate paying dividends on its Common Stock
in the foreseeable future. The Company conducts substantially all of its
operations through its subsidiaries. Accordingly, the Company's ability to pay
dividends is also dependent upon the ability of its subsidiaries to make cash
distributions to the Company. The payment of dividends to the Company by its
subsidiaries is and will continue to be restricted by or subject to, among other
limitations, applicable provisions of state and federal laws, contractual
provisions in the Company's financing agreements, the earnings of such
subsidiary and various business considerations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS OF THE COMPANY AND ACCOMPANYING NOTES SET FORTH THEREIN.
GENERAL
The Company, through its wholly-owned subsidiaries, BDMC and DMP, is a
rapidly growing mortgage banker engaged in originating, purchasing and selling
conforming and non-conforming loans on one-to-four family residential units
through its retail, wholesale and consumer finance divisions.
The Company's objective is to diversify its production channels while
expanding nationally to avoid geographic risk. The Company has purchased,
subject to execution of the final documentation, an economic interest in
California Pacific Mortgage Corporation ("California Pacific") and opened three
regional wholesale offices, which included the hiring of experienced established
account representatives. The California Pacific purchase provided the Company
with a direct mail non-conforming platform currently licensed to do business in
nine (9) Western states. The three regional wholesale offices provided the
Company with an established non-conforming regional wholesale operations doing
business in four (4) Southeastern states. The development of the wholesale
division continued with the opening of three regional wholesale offices
producing non-conforming first and second mortgage loans through full service
hubs located in Orange, California, Atlanta, Georgia and Oakbrook, Illinois.
Through these offices, the Company has developed a template for future growth
and expansion. In all cases, the Company has been able to secure seasoned
professionals to staff these offices, which is expected to reduce the time
before the offices become profitable.
The start-up costs associated with the national expansion coupled with
the increased corporate overhead put in place to support the production network
created a loss for the year. The loss is viewed as an investment in the future
with the newly added offices already yielding increased non-conforming
production. The Company continued its efforts to improve technology and
operating efficiency during the year. Progress was made in networking all
offices for communication and data flow with the installation of a wide area
network.
Progress toward the goal of improving the Company's Secondary Market
execution was made during the year as the Company received Fannie Mae
Seller/Servicer approval for BDMC. In addition subservicing relationships have
been established with Advanta Mortgage Corp. USA for non-conforming loans and
Cenlar, F.S.B. for all other loan products. These relationships improve the
Company's collection efforts until the loans are sold as well as outsourcing
certain of these operational functions associated with loan sales.
In the third and fourth quarters of 1997, operational changes were
made to utilize the Company's warehouse facilities with Bank One and Nikko. The
Company believes that the use of these facilities will allow for improved
earnings due to interest rate spreads with this fact contributing to an increase
in interest income, and also changes the balance sheet as the loans held for
sale are now reflected in the balance sheet as an asset with the outstanding
balance in the warehouse facilities reflected as a liability. As production
increases these facilities are expected to contribute positively to earnings.
During the fourth quarter of 1997, the Company recorded an adjustment
of $2,400,000 reversing revenues recognized in the third quarter of 1997.
RESULTS OF OPERATIONS
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1997 AND 1996
For 1997, revenues increased $409,000 (5.2%) to $8,267,000 in 1997
from $7,858,000 in 1996. Commissions and fees decreased by $852,000 (11.3%) to
$6,715,000 from $7,567,000 in 1996. The decrease in commissions and fees was
attributable to an increase in wholesale production volume and a larger balance
of "Loans Held for Sale" at year-end December 31, 1997 compared to December 31,
1996, resulting in unrealized gains at December 31, 1997.
Interest income increased $1,261,000 (433.3%) to $1,552,000 in 1997
from $291,000 in 1996. The increase in interest income was primarily due to the
Company holding mortgage loans for sale longer and thus earning additional
interest income over this time period. Total loan volume in 1997 was
$257,313,000 compared to $230,814,000 in 1996, an increase of $26,499,000
representing a 11.5% increase.
Total expenses increased $6,672,000 (88.4%) to $14,218,000 in 1997
from $7,546,000 in 1996. The expenses increased at a much faster rate than total
revenues primarily due to not realizing during 1997 economies of scale and the
efficiencies associated with the Company's implementation and investment in
technology, and due to the addition of experienced staff. Management believes
these efficiencies will be realized in 1998.
Selling expenses increased $1,937,000 (59.1%) to $5,214,000 in 1997
from $3,277,000 in 1996. Commissions and benefits accounted for approximately
two-thirds of this increase, which was directly related to the increased volume.
The remainder was the result of the national expansion and the upfront costs
associated with establishing the support functions required for this expansion
to be successful.
General and administrative expenses increased $4,249,000 (119.0%) to
$7,819,000 in 1997 from $3,570,000 in 1996. Salaries and benefits accounted for
over half of this increase. The Company added senior management personnel
experienced in the mortgage industry. Additional expenses were incurred in 1997
as part of the national expansion and the upfront costs associated with
establishing the production support functions required for this expansion to be
successful. During the year ended December 31, 1997, the Company opened two (2)
retail production offices, seven (7) non-conforming wholesale offices and one
(1) consumer direct office which sources customers through direct mailings. In
addition, the provision for loan losses in 1997 was $432,000, which represented
1.2% of loans held for sale at December 31, 1997.
Interest expense increased $636,000 (115.6%) to $1,186,000 in 1997
from $550,000 in 1996. This was primarily due to the increase in loan volume of
11.5% in 1997 as compared to 1996. In addition, the average cost of borrowings
increased due to the introduction of non-conforming loans, and loans were
aggregated for a longer period of time by the Company to take advantage of bulk
sale premiums.
The Company experienced a loss before taxes of $5,951,000 in 1997
compared to income before taxes of $311,000 in 1996 as a result of the national
expansion and the up front costs associated with establishing the support
functions required for this expansion to be successful. The second, third and
fourth quarter losses were significantly attributable to the increases in
selling, general and administrative and interest expenses associated with the
above activities. The first quarter loss was primarily the result of the
seasonality of home sales in Florida. Home sales typically decline in the first
quarter of the year due in part to Florida's homestead laws, which reduce a
purchaser's taxes resulting in many home purchasers buying before year end. The
increased demand at year end tends to drive up administrative costs in the first
quarter.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1996 AND 1995
For 1996, revenues increased $2,649,000 (50.9%) to $7,858,000 from
1995 revenues of $5,209,000. The increased revenue was the result of opening
three loan offices in Florida and adding 43 persons to the Company's selling
staff in 1996. The new offices and additional personnel, together with an
increase in the bank lines of credit, enabled the Company to originate more
conventional mortgage loans which historically have higher fees and have
generated a higher gain on sale of the mortgage loans.
Selling expenses increased $709,000 (27.6%) in 1996 to $3,277,000.
This increase is attributable to the increased personnel and selling costs
associated with the new offices as well as an increase in selling costs at all
locations arising from the Company's higher loan volume. As a percentage of
revenues, selling expenses decreased from 49.3% in 1995 to 41.7% in 1996. This
decrease resulted from allocating the Company's fixed costs over a larger
revenue base.
General and administrative expenses totaled $3,570,000 in 1996
compared to $1,804,000 in 1995, an increase of $1,766,000 (97.9%). As a
percentage of revenues, these expenses increased to 45.4% in 1996 from 34.6% in
1995. General expenses increased in 1996 primarily because of increased
administrative personnel costs required to service the increased loan volume in
the loan offices and in corporate headquarters. The increased loan volume in
1996 also resulted in increased operating and administrative costs.
Although actual interest expense increased $124,000 (29.1%) in 1996 to
$550,000 compared to $426,000 in 1995, as a percentage of revenues interest
expense remained relatively constant, 7.0% in 1996 compared to 8.2% in 1995.
Interest expense increased in 1996 because of the Company's increased borrowing
levels under Purchase Agreements. As the Company was a Subchapter S corporation
for federal income tax purposes, no provision for taxes was required.
The Company previously acquired a parcel of land in Florida for
development. In 1996, management decided to sell the land and accordingly
reclassified the land as a current asset at December 31, 1996. In conjunction
with this decision, management also decided to terminate its investment in
Carroll Street. As the cost of the land exceeded its fair market value of
$207,500 by $45,735 and the basis of the investment in Carroll Street exceeded
its fair market value of $175,224 by $104,776, the statement of operations for
1996 reflects a charge of $150,511 to reflect the assets at their fair market
value on December 31, 1996.
Net income decreased $100,000 to $311,000 in 1996 from $411,000 in
1995 due to the items discussed above.
Prior to December 31, 1996, CFI Mortgage was treated as an S
corporation for federal and state income tax purposes. As a result, the
Company's historical earnings prior to such date had been taxed directly to the
stockholders and not to the Company. On December 31, 1996, CFI Mortgage's status
as an S corporation was terminated and the Company became a C corporation for
federal and state income tax purposes.
FINANCIAL CONDITION
DECEMBER 31, 1997 COMPARED TO DECEMBER 31, 1996:
Cash in banks, net of overdrafts, increased $1,182,000 to $1,441,000
at December 31, 1997 from $259,000 at December 31, 1996. The increase was due to
the preferred stock offering in December 1997 and the increase in accrued
expenses.
Loans held for sale total $36,047,000 at December 31, 1997 and relate
directly to the warehouse finance facilities debt of $35,463,000. These items
correspond to the use of the $50,000,000 credit agreement entered into by BDMC
with Bank One on June 30, 1997, and the $50,000,000 revolving warehouse line of
credit entered into by DMP with Nikko in November 1997. The credit facilities
are being used to finance mortgage originations and purchases and are
collateralized by the mortgage loans held for sale by BDMC and DMP.
LIQUIDITY AND CAPITAL RESOURCES
The Company has operated on a negative cash flow basis, but expects to
reverse this trend based on the increases in the volume of loan originations and
purchases. Currently, the Company's cash requirements include the funding of (i)
mortgage originations and purchases pending their sale, (ii) the points and
expenses paid in connection with acquisition of correspondent loans, (iii)
ongoing administrative and other operating expenses, and (iv) new retail and
wholesale locations.
On May 30, 1997, the Company completed the initial public offering of
1,000,000 shares of its Common Stock at $5 per share. The net proceeds from the
offering, after deducting underwriting discounts and commissions and offering
expenses, aggregated $3,800,525. In connection with the offering, the Company
granted the underwriter warrants to purchase 100,000 shares of Common Stock at
an exercise price of $6 per share. The warrants are exercisable for a period of
four years commencing May 1998.
On December 3, 1997, the Company issued and sold 2,000 shares of
Preferred Stock at $1,000 per share in a private placement. The net proceeds
from the sale, after deducting selling and other related expenses, aggregated
$1,821,753. The Preferred Stock is convertible for two years into shares of
Common Stock at a price equal to 85% of the five-day average bid prices
immediately prior to the conversion date. The discount on the conversion price
is accounted for as a charge against retained earnings and is amortized over the
nonconvertible period. On March 3, 1998, 500 shares of the Preferred Stock, plus
accrued interest of approximately $10,000, were converted into 105,467 shares
of Common Stock. Furthermore, the Company is obligated to register for resale
the shares of Common Stock issuable upon conversion of the Preferred Stock and,
if the resale registration statement has not been declared effective by April 3,
1998, the Company is subject to cash penalty payments to the holders of the
Preferred Stock. In connection with the Preferred Stock transaction, the Company
granted warrants to purchase 240,000 shares of Common Stock at an exercise price
of $8.50 per share. The warrants are exercisable until September 17, 2001.
In addition, the Company issued 60 shares of Preferred Stock with identical
terms as payment for fees for the private placement. The cost will be included
in the net proceeds from the transaction and will be amortized over the
nonconversion term.
The Company has relied upon a few lenders to provide the primary
credit facilities for its loan originations and purchases. As noted above, BDMC
entered into a $50,000,000 credit agreement with Bank One on June 30, 1997 and
DMP entered into a $50,000,000 warehouse line with Nikko in November 1997. As of
December 31, 1997, $9,429,000 had been utilized and was outstanding on the Bank
One facility and $26,034,000 had been utilized and was outstanding on the Nikko
facility.
At December 31, 1997, the Company also had aggregate purchase
facilities of $34,500,000 from three financial institutions ranging from
$2,000,000 to $25,000,000. The utilized and outstanding portions of the
facilities at December 31, 1997 were $19,264,000. The unused purchase facilities
aggregated $15,236,000. Interest rates range from 9.5% to the rate on the
purchased loan.
At December 31, 1997, the Company was in default of several of the
financial covenants contained in its agreements with Bank One and Nikko. The
Company has negotiated waivers of such defaults through April 30, 1998 and has
begun negotiating amendments to such agreements. The Company believes its
failure to meet such covenants was due to the net loss incurred by the Company
for the year ending December 31, 1997. The financial institutions expect to
renew these lines under terms which the Company can reasonably meet over the
next year. In addition, the Company has in place available unused financing
sources which management believes are adequate to operate the business at
current levels of operations for the next year.
For the year ended December 31, 1997, net cash used in operating
activities was $39,498,000. The major uses were $36,479,000 for the funding of
loans and $5,393,000 for the net loss for the year. The loss was financed by the
proceeds from the Company's common and preferred stock offerings, the use of the
credit facilities and the increase in accrued expenses. The cash proceeds from
the offerings of $5,622,000 were used (i) to fund mortgage loans, (ii) to expand
the Company's retail and wholesale divisions and consumer finance offices, (iii)
for primary marketing and brand recognition and (iv) to purchase new technology
and infrastructure. The Company anticipates that cash from operating activities,
together with funds available under its current purchase agreements and other
available credit facilities, will be sufficient to fund its operations for the
next twelve months if the Company's future operations are consistent with
management's expectations. The Company may need additional financing thereafter.
There can be no assurance that the Company will be able to obtain financing on a
favorable or timely basis. The type, timing and terms of financing selected by
the Company will depend on its cash needs, the availability of other financing
sources and the prevailing conditions in the financial markets.
For the year ended December 31, 1996, cash provided by operating
activities was $120,000. The net income for the year was $311,000.
HEDGING, INFLATION AND INTEREST RATES
The Company actively manages the interest rate risk associated with
conforming loans by committing applications to permanent investors at the time
that the rate and price are guaranteed to the applicant, with the investor
agreeing to honor the rate and price committed provided that the resulting loan
is closed and presented for purchase within a specific time frame. The time
frame is set with ample time for delivery based on the rate and price expiration
date given the applicant.
To date, the Company has not elected to hedge against the interest
rate risk associated with nonconforming loans. This decision is subject to
review on an ongoing basis but given the current profit margins and the lack of
volatility associated with pricing for nonconforming loans sold on a whole loan
basis, the Company has decided against employing hedging techniques utilizing
costly financial instruments. The period where risk exists is limited since the
rate and price are only guaranteed once the application has been approved with
whole loan sales of closed loans occurring on a bi-monthly basis.
CERTAIN ACCOUNTING PRONOUNCEMENTS
SFAS 128
In March 1997, the Financial Accounting Standards Board issued
Statement No. 128 ("SFAS 128"), "Earnings Per Share," which supersedes
Accounting Principles Board No. 15, Earnings per Share ("APB 15"), and is
effective for the Company for the year ended December 31, 1997. SFAS 128
establishes standards by simplifying the computation and presentation of
earnings (loss) per share, and applies to public entities with publicly held
common stock. It replaces the presentation of primary earnings (loss) per share
with a presentation of basic earnings (loss) per share. SFAS 128 also requires
dual presentation of basic and diluted earnings (loss) per share on the face of
the statements of operations. Basic earnings (loss) per share excludes dilution
and are computed by dividing income available to common stockholders by the
weighted-average common shares outstanding for the period. Diluted earnings
(loss) per share reflect the potential dilution that could occur if preferred
stock contracts, options and warrants were to be exercised or converted or
otherwise resulted in the issuance of common stock that then shared in the
earnings of the entity. Diluted earnings (loss) per share is computed similarly
to fully diluted earnings (loss) per share pursuant to APB 15. The Company
adopted SFAS 128 for the year ended December 31, 1997.
SFAS 125
In June 1996, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"), which provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. SFAS No. 125
distinguishes transfers of financial assets that are sales from transfers that
are secured borrowings. Implementation of SFAS No. 125, effective as of January
1, 1997, did not have a significant effect on the financial condition or results
of operations or the Company.
SFAS 123
In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 establishes financial accounting
and reporting standards for stock-based employee compensation plans. Those plans
include all arrangements by which employees receive shares of stock or other
equity instruments of the employer or the employer incurs liabilities to
employees in amounts based on the price of the employer's stock. Examples are
stock purchase plans, stock options, restricted stock awards, and stock
appreciation rights. This statement also applies to transactions in which an
entity issues its equity instruments to acquire goods or services from
non-employees. Those transactions must be accounted for, or at least disclosed
in the case of stock options, based on the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measurable. The accounting requirements of SFAS No. 123 are effective
for financial statements for fiscal years beginning after December 31, 1995, or
for an earlier fiscal year for which SFAS No. 123 is initially adopted for
recognizing compensation cost. The statement permits a company to choose either
a new fair value-based method or the current APB Opinion 25 intrinsic
value-based method of accounting for its stock-based compensation arrangements.
The statement requires pro forma disclosures of net earnings and earnings per
share computed as if the fair value-based method had been applied in financial
statements of companies that continue to follow current practice in accounting
for such arrangements under APB Opinion 25.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, certain matters
discussed in this Form 10-KSB are "forward- looking statements" as defined in
the Private Securities Litigation Reform Act (PSLRA) of 1995, which involve risk
and uncertainties that exist in the Company's operations and business
environment, and are subject to changes based on various important factors. The
Company wishes to take advantage of the "safe harbor" provisions of the PSLRA by
cautioning readers that numerous important factors discussed below, among
others, in some cases have caused, and in the future could cause the Company's
actual results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. The following include some,
but not all, of the factors or uncertainties that could cause actual results to
differ from projections:
* Lending to "sub-prime" borrowers who have higher incidents of default
could adversely affect the Company's projections.
* Loss of funding sources necessary to originate mortgage loans at
profitable margins.
* Diminished ability to sell loans could cause the Company to require
additional funding sources.
* Profitability may be directly affected by the level and fluctuation in
interest rates which affect the Company's ability to earn a spread
between interest received on its loans and the costs of its
borrowings. The profitability of the Company is likely to be adversely
affected during any period of unexpected or rapid changes in interest
rates.
* A general economic slowdown.
* The unanticipated expenses of assimilating newly-acquired business
into the Company's business structure, as well as, the impact of
unusual expenses from ongoing evaluations of business strategies,
asset valuations, acquisitions, divestitures and organizational
structures.
* Unpredictable delays or difficulties in the development of new product
programs.
* Rapid or unforeseen escalation of the cost of regulatory compliance
and/or litigation, including but not limited to, environmental
compliance, licenses, adoptions of new, or changes in accounting
policies and practices and the application of such policies and
practices.
* The effects of changes in monetary and fiscal policies, laws and
regulations, other activities of governments, agencies and similar
organizations, and social and economic conditions, unforeseen
inflationary pressures and monetary fluctuation, the ability or
inability of the Company to hedge against fluctuations in interest
rates.
* The ability or inability of the Company to continue its current
practices relating to mortgage loans held for sale.
* Increased competition within the Company's markets.
The Company believes that it has the product offerings, facilities,
personnel and competitive and financial resources for continued business
success. However, future revenue, costs, margins and profits are all influenced
by a number of factors, as discussed above.
ITEM 7. FINANCIAL STATEMENTS
Reference is made to the financial statements, the reports thereon and
notes thereto, commencing on page F-1 to this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective February 6, 1998, the Company engaged Grant Thornton LLP
("Grant Thornton") as its independent public accountants to audit its financial
statements in place of Weinick Sanders Leventhal & Co., LLP (successor to the
practice of Martin Leventhal & Company LLP) (the "Former Accountants").
The report of the Former Accountants on the Company's financial
statements for the years ended December 31, 1991 through December 31, 1996 did
not contain an adverse opinion or a disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principles. For the
years ended December 31, 1991 through December 31, 1996 there were no
disagreements between the Company and the Former Accountants with respect to any
matters of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
The decision of the Company to replace the Former Accountants with
Grant Thornton as the independent public accountants was unanimously approved by
the Board of Directors.
The Company has not consulted with Grant Thornton regarding the
application of accounting principles or practices to any specific transaction,
or the type of audit opinion that might be rendered on the Company's financial
statements. Since there was no disagreement between the Company and the Former
Accountants on any matter of accounting principles or practices or any
reportable events, the Company has not consulted with Grant Thornton regarding
any matter that was the subject of a disagreement or a reportable event.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information required by Item 9 as to directors and executive
officers of the Company is incorporated herein by reference to the definitive
Proxy Statement to be filed pursuant to Regulation 14A under the headings
"Election of Directors" and "Management of the Company."
ITEM 10. EXECUTIVE COMPENSATION.
The information required by Item 10 is incorporated herein by
reference to the definitive Proxy Statement to be filed pursuant to Regulation
14A under the heading "Executive Compensation."
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 11 is incorporated herein by
reference to the definitive Proxy Statement to be filed pursuant to Regulation
14A under the heading "Security Ownership of Certain Beneficial Owners and
Management."
ITEM 12. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS.
The information required by Item 12 is incorporated herein by
reference to the definitive Proxy Statement to be filed pursuant to Regulation
14A under the heading "Certain Relationships and Related Transactions."
<PAGE>
PART IV
ITEM 13. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements. The following consolidated financial
statements of CFI Mortgage Inc. and Subsidiaries, required by Part II,
Item 7, are included in Part IV of this report:
Report of Independent Certified Public Accountants
Report of Independent Auditors
Consolidated Financial Statements
Consolidated Balance Sheet as of December 31, 1997
Consolidated Statements of Operations for the Years Ended
December 31, 1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996
Notes to Consolidated Financial Statements
(a) (3). Exhibits: "See Exhibit Index."
(b) Reports on Form 8-K
* Current Report on Form 8-K filed on December 4, 1997 reporting
under Item 7 on an event which occurred on December 3, 1997
* Current Report on Form 8-K filed on February 9, 1998 reporting
under Item 8 on an event which occurred on February 6, 1998.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Certified Public Accountants F-2
Report of Independent Auditors F-3
Consolidated Financial Statements
Consolidated Balance Sheet as of December 31, 1997 F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1997 and 1996 F-6
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 1997 and 1996 F-7
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997 and 1996 F-8
Notes to Consolidated Financial Statements F-9
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
CFI MORTGAGE INC. AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheet of CFI Mortgage Inc.
and Subsidiaries as of December 31, 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year 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 audit. The consolidated financial statements of CFI
Mortgage Inc. and Subsidiaries for the year ended December 31, 1996 were audited
by other auditors whose report dated February 7, 1997, except for Note 1a and
12, as to which the date is March 18, 1997, expressed an unqualified opinion on
those statements.
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 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CFI Mortgage
Inc. and Subsidiaries as of December 31, 1997 and the consolidated results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
New York, New York
March 20, 1998, except for Note 9, as to
which the date is April 9, 1998
<PAGE>
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying statements of operations, stockholders' equity
and cash flows of CFI Mortgage Corporation for the year ended December 31, 1996.
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 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 statements of operations, stockholders' equity and
cash flows are free from material misstatement. An audit includes examining on a
test basis, evidencing supporting the amounts and disclosures in the statements
of operations, stockholders' equity and cash flows. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the results of
operations and cash flows. We believe that our audit of the statements of
operations, stockholders' equity and cash flows provides a reasonable basis for
our opinion.
In our opinion, the statements of operations, stockholders' equity and cash
flows referred to above present fairly, in all material respects, the results of
operations and cash flows of CFI Mortgage Corporation for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
/S/ WEINICK SANDERS LEVENTHAL & CO., LLP
Weinick Sanders Leventhal & Co., LLP
(Successor to the Practice of
Martin Leventhal & Company LLP)
New York, New York
February 7, 1997, except for portions of notes 1a and 12 as to which the date is
March 18, 1997
<PAGE>
CFI Mortgage Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS
<S> <C>
Cash and cash equivalents (Note 1) $ 1,705,216
Interest receivable (Note 2) 621,751
Mortgage loans held for sale (net of allowance of
$450,000) (Notes 1, 3 and 9) 36,046,571
Miscellaneous receivables 155,843
Prepaid expenses 274,211
Due from related parties (Note 6) 105,564
Other current assets 568,666
Total current assets 39,477,822
PROPERTY AND EQUIPMENT (Notes 1 and 7)
Furniture and equipment 1,352,212
Automobile 99,047
1,451,259
Less accumulated depreciation and amortization 272,137
1,179,122
OTHER ASSETS
Property held for sale (Note 4) 207,500
Deposits 167,229
Deferred tax asset (Notes 1 and 11) 558,000
932,729
$41,589,673
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
</TABLE>
<PAGE>
CFI Mortgage Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET (CONTINUED)
December 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C>
Warehouse finance facilities (Notes 3 and 9) $35,463,034
Cash overdraft 264,409
Current maturities of long-term debt (Notes 3 and 7) 366,495
Accounts payable, accrued expenses and other
current liabilities (Note 8) 3,477,063
Total current liabilities 39,571,001
LONG-TERM LIABILITIES
Long-term debt, less current maturities (Notes 3 and 7) 554,745
------------
40,125,746
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY (Notes 1 and 12)
Common Stock, $.01 par value; authorized,
20,000,000; issued and outstanding,
2,200,000 shares 22,000
Preferred Stock, $.01 par value; authorized,
10,000,000; issued and outstanding,
2,060 shares 21
Additional paid-in capital 6,992,430
Retained earnings (deficit) (5,550,524)
1,463,927
$41,589,673
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
</TABLE>
<PAGE>
CFI Mortgage Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------------- -------------
Revenues
<S> <C> <C>
Commissions and fees $ 6,715,241 $7,566,764
Interest 1,552,023 290,904
----------- -----------
8,267,264 7,857,668
-----------
Expenses
Selling 5,213,625 3,276,575
General and administrative 7,818,532 3,569,708
Interest 1,185,608 549,648
Write-down of land and investment to fair
market value (Notes 1, 4 and 5) 150,511
----------- ----------
14,217,765 7,546,442
----------- ----------
Net (loss) income before income tax credit (5,950,501) 311,226
Deferred income tax credit 558,000
----------- ----------
NET (LOSS) INCOME $ (5,392,501) $ 311,226
============ ==========
Per share data, net loss per common share $(3.11)
=====
Pro forma information (unaudited) (Note 10)
Pro forma net income (unaudited)
Historical net income $ 311,226
Pro forma provision for income taxes 109,989
Pro forma net income $ 201,237
==========
Pro forma per share data (unaudited)
Pro forma net income per share $.17
===
Weighted average shares outstanding 1,783,250 1,200,000
========= ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
<PAGE>
CFI Mortgage Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Additional Retained
COMMON STOCK PREFERRED STOCK paid-in earnings
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
-------- -------- ------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 7,500 $ 7,500 $1,234,673 $ (144,025) $1,098,148
Net income for the year ended December 31, 1996 311,226 311,226
------ -------- ---------- ----------- ----------
Balance at December 31, 1996 7,500 7,500 1,234,673 167,201 1,409,374
Distribution of investment in 430 Carroll
Street, Inc. to stockholders at March 26,
1997 (Note 5) (175,224) (175,224)
Exchange of shares of CFI Mortgage Corp.
for shares of CFI Mortgage Inc. 1,192,500 4,500 (4,500)
Issuance of common stock on May 27,
1997 as a result of a public offering less
expenses of the offering of $1,199,475 1,000,000 10,000 3,790,525 3,800,525
Issuance of preferred stock on December 3,
1997 as a result of a private placement
less expenses of the offering of $178,247 2,060 $21 1,821,732 1,821,753
Accretion of preferred stock discount 150,000 (150,000)
Net loss for the year ended December 31, 1997 (5,392,501) (5,392,501)
------ -------- ---------- ----------- ----------
Balance at December 31, 1997 2,200,000 $22,000 2,060 $21 $6,992,430 $(5,550,524) $1,463,927
========= ======= ===== === ========== =========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
</TABLE>
<PAGE>
CFI Mortgage Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---------- --------
Cash flows from operating activities
<S> <C> <C>
Net (loss) income $ (5,392,501) $ 311,226
------------ --------
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities
Depreciation and amortization 181,681 34,444
Provision for doubtful accounts 432,000 72,957
Provision for deferred tax credit (558,000)
Write-down of land and investment to fair market value 150,511
(Increase) decrease in assets and liabilities
Interest receivable (621,751)
Mortgage loans held for sale (36,478,571)
Other current assets 313,921 (341,969)
Miscellaneous receivables (54,375) (103,638)
Prepaid expenses (222,918) 16,486
Deposits (118,980) (10,155)
Accounts payable, accrued expenses and other current liabilities 3,021,061 (10,335)
----------- -----------
(34,105,932) (191,699)
----------- -----------
Net cash (used in) provided by operating activities (39,498,433) 119,527
----------- -----------
Cash flows from investing activities
Expenditures for property and equipment (594,893) (121,693)
Payments for related party receivable (92,615)
----------- -----------
Net cash used in investing activities (687,508) (121,693)
----------- -----------
Cash flows from financing activities
Warehouse borrowings 35,463,034
Proceeds from issuance of common stock 3,920,525
Proceeds from issuance of preferred stock 1,821,753
Cash overdraft (121,449) 385,858
Proceeds from long-term debt 377,839 179,584
Payments for long-term debt (215,230)
Decrease in due to officers (361,918)
Payments for deferred offering costs (120,000)
----------- -----------
Net cash provided by financing activities 41,246,472 83,524
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,060,531 81,358
Cash and cash equivalents at beginning of year 644,685 563,327
------------- ----------
Cash and cash equivalents at end of year $ 1,705,216 $ 644,685
============= ========
Supplemental disclosures of cash flow information:
Cash paid during the year for
Income taxes $ - 0 - $ - 0 -
Interest $ 1,555,502 $ 910,975
============ ========
Supplemental schedules of noncash investing and financing activities:
Dividend paid by transfer of investment in 430 Carroll Street, Inc. $ 175,224
=============
Capital asset and lease obligation additions $ 579,047
=============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
<PAGE>
CFI Mortgage Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
Creative Industries, Inc. was incorporated in the State of Florida in
April 1989, and operates as a licensed mortgage lender. In October
1990, the Corporation's name was changed to Creative Financing, Inc.
and on May 24, 1995 the Corporation's name was changed to CFI Mortgage,
Corporation ("CFI Mortgage"). CFI Mortgage Inc. ("CFI") was
incorporated in Delaware on March 18, 1997. Immediately prior to the
initial public offering (see Note 12), the existing stockholders of CFI
Mortgage contributed all of their shares of CFI Mortgage common stock
to CFI in exchange for 1,200,000 shares of common stock of CFI. Through
its two wholly-owned subsidiaries, Bankers Direct Mortgage Corporation
("BDMC") and Direct Mortgage Partners Inc. ("DMP"), CFI is engaged in
originating, purchasing and selling loans secured primarily by first
mortgages on one- to four- residential properties and purchasing and
selling servicing rights associated with such loans. The loans are both
conventional conforming loans (originated and sold through BDMC) and
nonconforming loans (originated and sold through DMP). Significant
intercompany accounts and transactions have been eliminated in
consolidation.
B. GEOGRAPHIC CONCENTRATION
BDMC is approved by the U.S. Department of Housing and Urban
Development/Federal Housing Administration ("FHA") as a nonsupervised
mortgagee. Both BDMC and DMP are licensed and registered in
approximately 19 states, primarily in the southern United States, as
mortgage lenders with approximately 16 branch offices. Approximately
91%, or $234,747,000, of loans were originated and/or sold in the State
of Florida. Consequently, CFI's results of operations and financial
condition are affected by general trends in the Florida economy and its
residential real estate market.
C. REVENUE RECOGNITION
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale in the course of business are stated at
the lower of cost or market which approximates fair value (see Note 3).
Management has established a reserve allowance of $450,000 at December
31, 1997 for potential losses on a loan-by-loan basis.
GAIN ON SALE
The gain or loss on sales of mortgage loans to investors is recognized
upon purchase of the loan by the investor. In June 1996, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" ("SFAS No. 125"), which was
effective for transactions occurring after December 31, 1996. SFAS No.
125 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. This
statement also provides standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings. The adoption of SFAS No. 125 on January 1, 1997, did not
have a material effect on the Company's financial statements.
<PAGE>
CFI Mortgage, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 and 1996
NOTE 1 (CONTINUED)
ORIGINATION FEES
CFI accounts for origination fee income on mortgages held for sale in
conformity with Statement of Financial Accounting Standards No. 91.
This statement requires that origination fees be offset by their direct
loan costs and the net deferred income be recognized over the life of
the loan.
D. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits and highly liquid
investments with original maturities of three months or less.
CFI invests its cash in high-quality financial institutions, which at
times may be in excess of Federal Deposit Insurance Corporation
insurance limits. CFI has not incurred any losses in such accounts and
believes it is not exposed to any significant credit risk on cash.
E. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation
and amortization. CFI's policy is to provide for depreciation and
amortization over their estimated useful lives ranging between three to
seven years as a charge to operations at accelerated rates.
Expenditures for maintenance, repairs and minor renewals are charged to
operations; expenditures for betterments are charged to the property
accounts. Upon retirement or other disposition of property and
equipment, the carrying value and related accumulated depreciation and
amortization are removed from the accounts.
F. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions in determining the reported amounts of assets and
liabilities and disclosures 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.
G. INCOME TAXES
The Company complies with Statement of Financial Accounting Standards
No. 109 ("SFAS 109"), "Accounting for Income Taxes," which requires an
asset and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are computed
for differences between financial statement and tax basis of assets and
liabilities that will result in future taxable or deductible amounts,
based on the enacted tax laws and rates to the periods in which the
differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the
amount to be realized.
H. EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share are based on the weighted average
number of common shares outstanding. In March 1997, the Financial
Accounting Standards Board issued Statement No. 128 ("SFAS 128"),
"Earnings Per Share," which requires dual presentation of basic and
diluted earnings per share on the face of the statements of operations.
Basic earnings (loss) per share excludes dilution and is computed by
dividing income available to
<PAGE>
CFI Mortgage, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 and 1996
NOTE 1 (CONTINUED)
common stockholders less $150,000 for discount accretion (see Note 12)
by the weighted-average common shares outstanding for the period.
Diluted earnings (loss) per share reflect the potential dilution that
could occur if preferred stock contracts, options and warrants were to
be exercised or converted or otherwise resulted in the issuance of
common stock that then shared in the earnings of the entity. The
Company adopted SFAS 128 for the year ended December 31, 1997.
Since the effect of outstanding options, warrant and preferred stock
conversions is antidilutive, it has been excluded from the computation
of earnings (loss) per common share.
I. RECLASSIFICATION
Certain revenues and expenses for 1996 have been reclassified to
conform to the 1997 presentation.
NOTE 2 - INTEREST RECEIVABLE
Interest earned on mortgages held for sale from origination to date of sale
is recognized as earned. Interest receivable of $621,751 at December 31,
1997 represents interest earned on mortgages held for sale.
NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments as of December 31, 1997 is made by the Company using available
market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimated 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 methodologies may have a material effect on the
estimated fair value amounts. The amounts listed below as of December 31,
1997 are in thousands.
Carrying Estimated
AMOUNT FAIR VALUE
Assets
Mortgage loans held for sale $ 36,047 $ 37,998
Liabilities
Warehouse finance facilities $ 35,463 $ 35,463
Long-term debt $ 921 $ 921
The fair value estimates as of December 31, 1997 are based on pertinent
information available to management as of December 31, 1997. 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 values.
<PAGE>
CFI Mortgage, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 and 1996
MORTGAGE LOANS HELD FOR SALE - Fair value is estimated using the quoted
market prices from investors and commitments to purchase loans on a
non-servicing basis.
WAREHOUSE FINANCE FACILITIES AND LONG TERM-DEBT - Rates currently available
to the Company for debt with similar terms and remaining maturities are
used to estimate the fair value of existing debt.
NOTE 4 - PROPERTY HELD FOR SALE
CFI acquired a parcel of land in Florida which it intended to develop. As
the cost of the land exceeded its fair value of $207,500 by $45,735, the
statement of operations for 1996 reflects a charge of $45,735 to reflect
the asset's fair value at December 31, 1996.
NOTE 5 - INVESTMENT IN 430 CARROLL STREET, INC.
In 1992, CFI Mortgage issued 5,000 shares of its common stock in exchange
for 40% of the capital stock of 430 Carroll Street, Inc., a land holding
corporation which was owned by the CEO of CFI Mortgage. The basis of the
40% interest is $280,000. In December 1996, management determined to divest
itself of this investment. In February 1997, an appraisal of the
corporation's land revealed that CFI's investment had been impaired and the
investment's fair market value was $175,224. The accompanying financial
statements reflect a charge to operations of $104,776 in 1996 to record the
investment at its appraised fair market value at December 31, 1996.
On February 1, 1997, the Board of Directors approved a dividend of CFI's
undistributed Subchapter S earnings in the amount of $175,224, which was
paid through the transfer of title of this 40% stock interest to certain
stockholders.
NOTE 6 - RELATED PARTY TRANSACTIONS
In February 1996, the Company acquired a 49% interest for $5,000 in a
corporation which performed title searches for the Company. An officer of
the Company effectively owns 25% of this affiliate. The Company paid fees
of $20,000 in 1996 to this entity. The Company's $5,000 investment was
charged to operations in 1996. Such fees were regulated by the State of
Florida Office of Insurance Commission. Another officer of the Company
acquired a 49% interest in a corporation in 1996 which performed $82,500 of
appraisal services for the Company in 1996. In January 1997, both of these
entities ceased operations.
The Company has made advances to three officers aggregating approximately
$83,000 as of December 31, 1997. The advances are noninterest-bearing and
are due on demand and included in due from related parties.
NOTE 7 - LONG-TERM DEBT
In 1997, CFI acquired certain property and equipment assets partially
financed through various bank notes. The notes are collateralized by the
equipment purchased. The Company also leases certain office equipment under
various capital leases. The economic substance of the leases is that the
Company is financing the acquisition of the assets through the leases. At
December 31, 1997, the balances payable under the notes and leases are as
follows:
<PAGE>
CFI Mortgage, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 and 1996
Bank notes payable in equal monthly installments
of $4,310; interest rates ranging from 6.875% to 11%. $175,526
Various capitalized lease obligations 545,714
-------
721,240
Less portion payable in one year 166,495
-------
Long-term debt payable $554,745
Annual maturities of long-term debt are as follows:
1998 $166,495
1999 184,201
2000 164,901
2001 81,631
2002 83,088
Thereafter 40,924
--------
$721,240
In addition, included in current maturities of long-term debt is a bank
note payable of $200,000 bearing interest at the bank's prime rate plus 1%
and is due on demand. The note is collateralized by certain mortgages held
for sale, aggregating $252,000.
NOTE 8 - ACCOUNTS PAYABLE, ACCRUED EXPENSES AND
OTHER CURRENT LIABILITIES
Accounts payable, accrued expenses and other current liabilities at
December 31, 1997 are comprised of the following:
Accrued expenses $ 803,531
Accounts payable 572,645
Accrued interest 800,190
Accrued commissions and payroll 708,375
Other 592,322
----------
$3,477,063
NOTE 9 - COMMITMENTS, CONTINGENCIES AND REVENUE FROM
MAJOR CUSTOMER
A. WAREHOUSE LINES OF CREDIT
CFI has warehouse lines of credit from two financial institutions
aggregating $100,000,000 which were entered into in June and November
1997 and expire one year from their inception. The warehouse lines of
credit are used for short-term financing of mortgages held for sale
and are collateralized by the underlying mortgages held for sale. At
December 31, 1997, CFI had outstanding borrowings of $9,428,971 and
$26,034,063 under these agreements. Interest on the outstanding
borrowings is based upon the Federal funds rate and LIBOR rate,
respectively, plus .5 % to 3 %, (approximately 7.5 % at December 31,
1997) and interest expense was $565,798 and $171,426, respectively,
pursuant to these agreements for the year ended December 31, 1997. CFI
has violated certain covenants in these agreements including net
equity, cash
<PAGE>
CFI Mortgage, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 and 1996
flows and certain ratios. CFI has obtained waivers for these violations
from the two financial institutions through April 30, 1998.
The financial institutions expect to renew these lines under terms
which the Company can reasonably meet over the next year. In addition,
the Company has in place available unused financing sources which
management believes are adequate to operate the business at current
levels of operations for the next year.
B. MORTGAGE PURCHASE AGREEMENTS AND REVOLVING PURCHASE FACILITIES
In its normal course of business, CFI has entered into various mortgage
purchase agreements and two revolving purchase agreements with various
banks and investors. Under these mortgage purchase agreements, the
banks and investors purchase mortgages held for sale from CFI without
recourse.
Under the revolving repurchase agreements, CFI sells mortgage loans,
subject to certain warranties as defined, to two financial institutions
that have a takeout commitment from an investor. The mortgage loans
that CFI has sold to these financial institutions which have yet to be
closed with the investor by December 31, 1997 were $14,407,489 and
$4,463,625, respectively, at December 31, 1997. In addition, CFI earns
an additional 150 basis points when the loans close with the investor.
This broker fee is recorded as revenue upon closing with the investor.
Included in commissions and fees revenue is approximately $2,239,000
(27% total revenue) earned from one of the financial institutions with
a revolving purchase agreement with the Company.
C. LEASES
CFI leases its corporate headquarters, loan office facilities and
certain office equipment under various operating leases. The office
leases generally require CFI to pay certain escalation costs for real
estate taxes, operating expenses, usage and common area charges. Rent
expense for real property leases charged to operations in 1997 and 1996
was $651,374 and $403,786, respectively, and $220,032 and $162,894,
respectively, for equipment leases.
Minimum future rental payments under noncancellable operating leases
having remaining terms in excess of one year as of December 31, 1997
are as follows:
Capitalized
Operating lease
LEASES OBLIGATIONS
Years ending December 31,
1998 $1,331,201 $221,642
1999 1,094,477 221,642
2000 894,263 183,612
2001 287,283 77,441
2002 48,808 42,949
Total minimum future payments $3,656,032 747,286
=========
Less amount representing interest 201,572
-------
$545,714
========
<PAGE>
CFI Mortgage, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 and 1996
D. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising out of the
ordinary course of its business. Management believes that none of these
actions, individually or in the aggregate, will have a material adverse
effect on the results of operations or financial condition of the
Company.
E. EMPLOYMENT CONTRACTS
The Company has entered into several employment contracts with certain
officers and employees which expire between 1998 and 2002.
NOTE 10 - SUPPLEMENTAL PRO FORMA INFORMATION (UNAUDITED)
CFI Mortgage and its stockholders had elected S Corporation status for
Federal income tax reporting purposes. Under this election, the individual
stockholders reported all of the corporation's income and expenses on their
personal income tax returns and were liable for all taxes thereon for the
year ended December 31, 1996. Simultaneously with the exchange, CFI
terminated its S Corporation status. The following gives pro forma effect
to CFI's statements of operations for 1996 as if CFI and its stockholders
had not elected S Corporation status for the year ended December 31, 1996.
Historical net income, as reported $311,226
Provision for income taxes 109,989
Pro forma net income $201,237
The provision for income taxes is comprised of
Current payable $167,283
Deferred (57,294)
$109,989
In 1996, the deferred tax credit arises from the timing differences of the
allowance for doubtful accounts and the write-downs in carrying values of
the investment in 430 Carroll Street, Inc. and property held for sale.
A reconciliation of the statutory income tax to pro forma effective rate at
December 31, 1996 is as follows:
Federal statutory rate 34.0%
Nondeductible items 1.3
Effective tax rate 35.3%
Pro forma net income per share (unaudited) was computed by using the
weighted average number of shares outstanding during each period
retroactively reflecting the exchange.
NOTE 11 - INCOME TAXES
The Company and all of its subsidiaries file a consolidated Federal income
tax return. Income tax expense is allocated pursuant to the separate tax
return attributes of each subsidiary. The Company's deferred Federal and
state income tax asset is comprised of a benefit of a net operating loss
carryforward of approximately $6,000,000 which expires in 2018 and is based
on the 37.5% net federal and state income tax rate currently in effect:
<PAGE>
CFI Mortgage, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 and 1996
1997
Net operating loss carryforward $2,231,000
Valuation allowance $1,673,000
Deferred tax asset $ 558,000
==========
For the year ended December 31, 1997, the Federal statutory tax rate and
the Company's effective rate differ due to the valuation allowance on the
deferred tax asset. Although the Company has incurred a tax loss in 1997,
management believes that it is more likely than not that it will generate
taxable income sufficient to realize a portion of the tax benefit
associated with net operating loss carryforwards prior to their expiration.
If the Company is unable to generate sufficient taxable income in the
future through operating results, increases in the valuation allowance will
be required through a charge to expense. However, if the Company achieves
sufficient profitability to utilize a greater portion of the deferred tax
asset, the valuation allowance will be reduced through a credit to income.
NOTE 12 - STOCKHOLDERS' EQUITY
On May 30, 1997, CFI completed the initial public offering of 1,000,000
shares of its Common Stock at $5 per share. The net proceeds from the
offering, after deducting underwriting discounts and commissions and
offering expenses, aggregated $3,800,525. In connection with the offering,
CFI granted the underwriter warrants to purchase 100,000 shares of Common
Stock at an exercise price of $6 per share. The warrants are exercisable
for a period of four years commencing May 1998.
On December 3, 1997, CFI issued and sold 2,000 shares of 8% Convertible
Preferred Stock, $.01 par value, at $1,000 per share in a private
placement. The net proceeds from the sale, after deducting selling and
other related expenses, aggregated $1,821,753. The Preferred Stock is
convertible for two years into Common Shares at a price equal to 85% of the
five-day average bid prices immediately prior to the conversion date. The
discount on the conversion price is accounted for as a charge against
retained earnings and is amortized over the nonconvertible period. Included
in the statement of changes in stockholders' equity for the year ended
December 31, 1997 is a charge of $150,000 pursuant to the conversion
discount. On March 3, 1998, 500 shares of the Preferred Stock, plus accrued
interest of approximately $10,000 were converted into 105,467 of Common
Shares.
In connection with the preferred stock transaction, the Company granted
warrants to purchase 240,000 shares of common stock at an exercise price of
$8.50 per share. The warrants are exercisable until September 17, 2001. In
addition, the Company issued 60 shares of Preferred Stock with identical
terms as payment for fees for the private placement. The cost will be
included in the net proceeds from the transaction and will be amortized
over the nonconversion term.
NOTE 13 - STOCK OPTIONS
The Company adopted a 1997 Stock Option Plan, effective May 27, 1997
whereby the Company may grant incentive and nonqualified options to
eligible participants that vest in accordance with a vesting schedule,
determined in the sole discretion of the Compensation Committee of the
Company's Board of Directors. The 1997 Stock Option Plan provides for the
issuance of options with a term of 10 years. All of the options have an
exercise price equal to or greater than the fair market value of the stock
at grant date. The options granted in fiscal 1997 vest 100% at the grant
date or ratably over a period of two years beginning on the first
anniversary of the date of grant. A summary of the Company's 1997 Stock
Option Plan as of December 31, 1997, and changes during the year then ended
are as follows:
<PAGE>
CFI Mortgage, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 and 1996
Option Option price
SHARES RANGE
Outstanding at beginning of year
Granted 80,000 $5.00 - 9.81
Exercised -
Forfeited -
------ -------------
Outstanding at end of year 80,000 $5.00 - 9.81
====== ===========
The number of options exercisable at December 31, 1997 was 70,000. The
weighted-average fair value of options granted during 1997 was $7.39.
The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions for grants in fiscal 1997: a dividend yield of 0%; a risk-free
interest rate range of 6.57% to 6.96%; an expected life of ten years for
all grants; and a volatility range from 66% to 70%.
Options outstanding as of December 31, 1997 are summarized below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
Weighted
average Weighted Weighted
remaining average average
Ranges of Number contractual exercise Number exercise
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C>
$5.00 to $ 7.50 40,000 9.41 $5.00 40,000 $5.00
$7.75 TO $10.00 40,000 9.42 9.78 30,000 9.81
-------------- ------ ---- ---- ------ ----
$5.00 to $10.00 80,000 9.80 $7.39 70,000 $7.06
============== ====== ==== ==== ====== ====
</TABLE>
The Company applies APB Opinion 25 and related interpretations in
accounting for the Plan.
Had the compensation cost for the Company's stock-based compensation plans
been determined consistent with SFAS 123, the Company's pro forma net
income and pro forma net loss per common share for the year ended December
31, 1997 would approximate the amounts below:
AS REPORTED PRO FORMA
Net loss plus discount accretion of $150,000 $(5,542,501) $(5,961,135)
Net loss per common share $(3.11) $(3.34)
In February 1998, the Board of Directors approved a recommendation from the
Company's Compensation Committee to amend the 1997 Stock Option Plan to
allow for the issuance of up to 450,000 options. In addition, the Company
has granted an additional 283,250 options during 1997 subject to the
approval of the amendment to the 1997 Stock Option Plan by the Company's
stockholders.
NOTE 14 - FOURTH QUARTER ADJUSTMENT (UNAUDITED)
During the fourth quarter of 1997, the Company recorded an adjustment of
$2,400,000 reversing revenues recognized in the third quarter of 1997.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CFI MORTGAGE INC.
April 9, 1998 By: /S/CHRISTOPHER C. CASTORO
Christopher C. Castoro
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/VINCENT C. CASTORO
Vincent C. Castoro Chairman of the Board April 9, 1998
of Directors
/S/CHRISTOPHER C. CASTORO
Christopher C. Castoro Chief Executive Officer April 9, 1998
and Director
/S/ROBERT A. SIMM
Robert A. Simm Principal Accounting Officer April 9, 1998
/S/VINCENT J. CASTORO
Vincent J. Castoro Vice-President and Director April 9, 1998
/S/THOMAS J. HEALY
Thomas J. Healy Director April 9, 1998
/S/ROBERT J. THOMPSON
Robert J. Thompson Director April 9, 1998
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
+3.1 Certificate of Incorporation of the Company
+3.2 Bylaws of the Company
+3.3 Specimen Common Stock certificate
++3.4 Certificate of Designation of the Series A Convertible Preferred Stock
of the Company
+10.1 Loan Purchase Agreement dated April 21, 1994 between Creative
Financing, Inc. and Crown Bank
+10.2 Loan Purchase Agreement dated March 16, 1995 between Creative
Financing, Inc. and Equitable Trust Savings Bank
+10.3 Letter Agreement dated August 26, 1996 between First State
Bank-Calvert Branch and Creative Financing, Inc.
+10.4 Mortgage Purchase Agreement dated April 3, 1996 between Lott State
Bank-Marlin Branch and CFI Mortgage Corporation
+10.5 Mortgage Purchase Agreement dated September 29, 1994 between Southern
Financial and CFI Mortgage Corporation
+10.6 Lease Modification Agreement dated October 4, 1995 between Brandywine
Centre I Premium Partnership Ltd. ("Lessor") and CFI Mortgage
Corporation ("Lessee") for the premises known as Suite 370, Brandywine
Centre I, 580 Village Boulevard, West Palm Beach, Florida
+10.7 Lease Agreement dated October 31, 1995 between Paul A. Zinter or Robin
A. Zinter ("Lessor") and CFI Mortgage Corporation ("Lessee") for the
premises known as Bay A, 2014 SE Port St. Lucie Boulevard, St. Lucie,
Florida 34952
+10.8 Lease Agreement dated March 9, 1994 between Hernat, Inc. ("Lessor")
and Creative Financing, Inc. ("Lessor") for the premises known as 2200
South Front Street, Melbourne, Florida 32901
+10.9 Lease Agreement dated on or about January 31, 1995 between Brandywine
Centre I Premium Partnership, Ltd. ("Lessor") and Creative Finance,
Inc. ("Lessee") for the premises known as Suite 120, Brandywine Centre
I, 580 Village Boulevard, West Palm Beach, Florida
+10.10 Office Lease effective March 15, 1996 between Massachusetts Mutual
Life Insurance Company ("Lessor") and CFI Mortgage Corporation
("Lessee") for the premises known as Trafalgar Plaza, Suite 210, 5310
N.W. 33rd Avenue, Fort Lauderdale, Florida 33309
+10.11 Lease Agreement dated December 29, 1995 between Nancy Green d/b/a
Dadeland West Office Park ("Lessor") and CFI Mortgage Corporation
("Lessee") for the premises known as Suite 200, 10661 North Kendall
Drive, Suite 200, Miami, Florida
+10.12 Lease Agreement dated July 31, 1996 between Cynwyd Investments
("Lessor") and CFI Mortgage Corporation ("Lessee") for the premises
known as Space No. 450, 933 Building, 933 Lee Road, Orlando, Florida
32810
+10.13 Office Lease (Second Amendment) dated May 3, 1996 between Ted Glasrud
Associates, Inc. ("Lessor") and Creative Financing, Inc. ("Lessee")
for the premises known as 759 S. Federal Highway, #201m, Stuart,
Florida 34994-2972
+10.14 Office Lease dated November 8, 1995 between RGI-Fairway Executive
Center, Ltd. ("Lessor") and CFI Mortgage Corporation ("Lessee") for
the premises known as Fairway Executive Center Building, 455 Fairway
Drive, Suite 101, Deerfield Beach, Florida 33441
+10.15 Lease effective February 1, 1996 between Wellcorp I, Inc. ("Lessor")
and CFI Mortgage Corporation ("Lessee") for the premises known as
Suite 103, 1300 Corporate Center Way, Wellington, Florida
+10.16 Sublease Agreement dated November 30, 1995 between Paulette Koch Real
Estate, Inc. ("Overtenant") and CFI Mortgage Corporation
("Undertenant") for the premises known as a portion of Unite 328,
Royal Poinciana Plaza, Palm Beach, Florida 33480
+10.17 Form of Tax Indemnification Agreement by and among CFI Mortgage
Corporation and each of Vincent C. Castoro, Vincent J. Castoro,
Christopher C. Castoro, as revised.
+10.18 Form of Contribution Agreement by and among CFI Mortgage Inc., Vincent
J. Castoro, Christopher C. Castoro and CFI Mortgage Corporation, as
revised
+10.19 CFI Mortgage Inc. 1997 Stock Option Plan, as revised
+10.21 Form of Employment Agreement between the Registrant and Vincent C.
Castoro
+10.22 Form of Employment Agreement between the Registrant and Vincent J.
Castoro
+10.23 Form of Employment Agreement between the Registrant and Christopher C.
Castoro
+10.24 Promissory Note dated March 24, 1997 between First National Bank and
Trust Company of the Treasure Coast and CFI Mortgage Corporation in
the principal amount of $155,000
*10.25 Credit Agreement dated as of June 30, 1997, between CFI MORTGAGE
CORPORATION (to be known as Bankers Direct Mortgage Corporation as
of July 1, 1997), as Borrower, BANK ONE, TEXAS, N.A., as
Administrative Agent, and CERTAIN LENDERS, as Lenders.
*10.26 Master Repurchase Agreement, dated as of November 17, 1997, between
Nikko Financial Services, Inc., on behalf of itself and holders from
time to time of interests in the Purchased Securities, as buyer, and
Direct Mortgage Partners, as seller.
*10.27 Software License Agreement, dated the 30th day of October, 1997,
between MBMS Incorporated, a New York corporation having a place of
business at 95 John Muir Drive, Suite 106, Amherst, New York 14228,
("MBMS") and Bankers Direct Mortgage Corporation, a company having a
place of business at, 580 Village Blvd., Suite 120, West Palm
Beach, FL 33409.
*10.28 Form of Master Lease Agreement between Banc One Leasing Corporation,
as Lessor, and Bankers Direct Mortgage Corporation, as Lessee.
*10.29 Form of Lease Agreement dated as of June 1994 by and between EASTPARK,
a general partnership, as Landlord, and MARYLAND NATIONAL MORTGAGE
CORPORATION, as Tenant [assumed by Bankers Direct Mortgage
Corporation.]
*10.30 Lease Agreement dated as of October 20, 1997, between Laing Palisades,
LLC, a Georgia limited liability company, as Landlord, and Direct
Mortgage Partners, Inc., d/b/a Bankers Direct Mortgage Corporation,
a corporation of the State of Delaware.
*10.31 Lease Agreement dated this 11th day of August, 1997, by and between
PEARL PROPERTIES, LTD., a Florida Limited Partnership, of 1000
North Dixie Highway, Suite A, West Palm Beach, Florida 33401,
and BANKERS DIRECT MORTGAGE CORPORATION, 580 Village Blvd., Suite 120,
West Palm beach, FL., 33409.
*21 Subsidiaries of the Company
*27 Financial Data Schedule
- --------------
* Filed herewith.
+ Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File No. 333-6660) dated May 27, 1997.
++ Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File No. 333-44691) dated January 22, 1998.
EXHIBIT 10.25
CREDIT AGREEMENT
between
CFI MORTGAGE CORPORATION
(to be known as Bankers Direct Mortgage Corporation as of July 1, 1997),
as BORROWER
BANK ONE, TEXAS, N.A.,
as ADMINISTRATIVE AGENT,
and
CERTAIN LENDERS,
as LENDERS
$50,000,000
June 30, 1997
BANK ONE.
PREPARED BY HAYNES AND BOONE, L.L.P.
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND REFERENCES ......................................1
1.1 Definitions ............................................................1
1.2 Time References .......................................................15
1.3 Other References ......................................................15
1.4 Accounting Principles .................................................15
SECTION 2. BORROWING PROVISIONS ...........................................16
2.1 Commitments ...............................................16
2.2 Borrowing Request .........................................16
2.3 Funding ...................................................16
2.4 Wet Borrowings ............................................17
2.5 Terminations ..............................................18
SECTION 3. PAYMENT TERMS ..................................................18
3.1 Notes .....................................................18
3.2 Payment Procedures ........................................18
3.3 Scheduled Payments ........................................19
3.4 Prepayments ...............................................t9
3.5 Order of Application ......................................20
3.6 Sharing ...................................................21
3.7 Interest Rates ............................................21
3.8 Interest Periods ..........................................23
3.9 Basis Unavailable or Inadequate for LIBOR .................23
3.10 Additional Costs ..........................................23
3.11 Change in Governmental Requirements .......................24
3.12 Funding Loss ..............................................24
3.13 Foreign Lenders, Participants, and Purchasers .............25
3.14 Fees ......................................................25
SECTION 4. COLLATERAL PROCEDURES ..........................................25
4.1 Eligible Collateral .......................................25
4.2 Borrowing Base ............................................25
4.3 Collateral Delivery .......................................26
4.4 Bailee and Administrative Agent. ..........................26
4.5 Shipment for Sale .........................................26
4.6 Shipment for Correction ...................................27
4.7 Release of Collateral .....................................27
SECTION 5. CONDITIONS PRECENDENT..........................................27
SECTION 6. REPRESENTATIONS AND WARRANTIES..................................28
6.1 Purpose of Credit .........................................28
6.2 About the Companies .......................................28
6.3 Authorization and Contravention ...........................29
6.4 Binding Effect ............................................29
6.5 Fiscal Year ...............................................29
6.6 Current Financials ........................................29
6.7 Debt ......................................................29
6.8 Solvency ..................................................29
6.9 Litigation ................................................29
6.10 Transactions with Affiliates ..............................30
6.11 Taxes .....................................................30
6.12 Employee Plans ............................................30
6.13 Property and Liens ........................................30
6.14 Intellectual Property .....................................30
6.15 Environmental Matters .....................................30
6.16 Government Regulations ....................................31
6.17 Insurance .................................................31
6.18 Appraisals ................................................31
6.19 Full Disclosure ...........................................31
SECTION 7. AFFIRMATIVE COVENANTS ...........................................31
7.1 Reporting Requirements ....................................32
7.2 Use of Proceeds ...........................................33
7.3 Books and Records .........................................33
7.4 Inspections ...............................................33
7.5 Taxes .....................................................33
7.6 Expenses ..................................................33
7.7 Maintenance of Existence, Assets, and Business ............34
7.8 Insurance .................................................34
7.9 Appraisals ................................................34
7.10 INDEMNIFICATION ...........................................34
SECTION 8. NEGATIVE COVENANTS .............................................35
8.1 Debt ......................................................35
8.2 Liens .....................................................35
8.3 Loans, Advances, and Investments ..........................36
8.4 Distributions .............................................37
8.5 Merger or Consolidation ...................................37
8.6 Liquidations and Dispositions of Assets ...................38
8.7 Use of Proceeds ...........................................38
8.8 Transactions with Affiliates . ............................38
8.9 Employee Plans ............................................38
8.10 Compliance with Governmental Requirements and Documents....38
8.11 Government Regulations ....................................38
8.12 Fiscal Year Accounting ....................................38
8.13 New Businesses ............................................38
8.14 Assignment ................................................38
8.15 Strict Compliance .........................................38
SCHEDULES AND EXHIBITS
Schedule 2 - Lenders and Commitments
Schedule 4.1 - Eligibility Conditions
Schedule 4.2 - Borrowing--Base Calculations
Schedule 4.3 - Collateral Procedures
Schedule 5 - Closing Conditions
Schedule 6.2 - Companies
Schedule 6.9 - Litigation and Judgments
Schedule 6.10 - Affiliate Transactions
Exhibit A - Warehouse Note
Exhibit B - Guaranty
Exhibit C-I - Security Agreement
Exhibit C-2 - Financing Statement
Exhibit C-3 - Shipping Request
Exhibit C-4 - Bailee Letter for Investors
Exhibit C-5 - Bailee Letter for Pool Custodian
Exhibit C-6 - Trust Receipt and Agreement
Exhibit C-7 - Release Request
Exhibit D- I - Borrowing Request
Exhibit D-2 - Collateral-Delivery Notice
Exhibit D-3 - Borrowing-Base Report
Exhibit D-4 - Take-Out Report
Exhibit D-5 - Management Report
Exhibit D-6 - Compliance Certificate
Exhibit D-7 - Collateral-Conversion Notice
Exhibit E - Opinion of Counsel
Exhibit F - Assignment and Assumption Agreement
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of June 30, 1997, between CFI
MORTGAGE CORPORATION, a Florida corporation (to be known as Banker's Direct
Mortgage Corporation as of July 1, 1997) ("BORROWER"), the Lenders described
below, and BANK ONE, TEXAS, N.A., as Administrative Agent for Lenders.
(see SECTION 1.1 for defined terms)
Borrower originates, acquires, markets, and sells Mortgage Loans and
has requested Lenders to commit to provide Borrowings to finance Borrower's
Mortgage Loan origination and acquisition until those Mortgage Loans are sold in
the secondary market. Borrower proposes to grant to Administrative Agent for
Lenders first-priority Liens upon, among other things, the Mortgage Collateral
delivered to Administrative Agent under this agreement. Lenders have agreed upon
the terms of this agreement to provide those Borrowings up to the lesser of
EITHER the total Commitments OR the Borrowing Base.
ACCORDINGLY, for adequate and sufficient consideration, Borrower,
Lenders, and Administrative Agent agree as follows:
SECTION 1. DEFINITIONS AND REFERENCES. Unless stated otherwise, the following
provisions apply to each Credit Document and annexes, exhibits, and schedules to
- -- and certificates, reports, and other writings delivered under -- the Credit
Documents.
1.1 Definitions.
ADMINISTRATIVE AGENT means, at any time, Bank One, Texas, N.A. (or its
successor appointed under SECTION 11.6), acting as administrative, collateral,
managing, and syndication agent for Lenders under the Credit Documents.
AFFILIATE of a Person means any other individual or entity who
directly or indirectly controls, is controlled by, or is under common control
with that Person. For purposes of this definition (a) "CONTROL, " 11 CONTROLLED
BY," and "UNDER COMMON CONTROL WITH" mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of voting securities or other interests, by contract, or
otherwise), and (b) the Companies are "Affiliates" of each other.
AGENT'S REQUEST IS defined in SECTION 2.3(F).
APPLICABLE MARGIN means, for each Borrowing-Purpose Category and
relevant Borrowing-Price Category in the table below, the positive or negative
interest margin beside those categories:
BORROWING-PURPOSE CATEGORY Borrowing-Price Category Applicable Margin
Repurchase Borrowings Base Rate +.50%
Fed-Funds Rate or LIBOR +2.00%
Second-Lien Borrowing Base Rate +.50%
Fed-Funds Rate or LIBOR +2.00
B/C Borrowing Base Rate +.50%
Fed-Funds Rate or LIBOR +2.00
Other Borrowings Base Rate +0%
Fed-Funds Rate or LIBOR +1.75%
Appraisal means, for any Mortgage Loan, a written statement of the
market value of the real property securing it, if any.
APPRAISAL REQUIREMENT means any Governmental Requirement that is
applicable to appraisals of mortgaged-residential property in connection with
transactions involving that property, including, without limitation, TITLE XI OF
the FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989, the
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991, 12 C.F.R. CHAPTER
1, PART 34, SUBPART C, 12 C.F.R. CHAPTER 11, SUBCHAPTER A, PART 225, SUBPART G,
and 12 C.F.R. CHAPTER III, SUBCHAPTER B, PART 323.
APPROVED INVESTOR means (a) FHLMC, FNMA, and GNMA and (b) any other
Person from time to time named on lists (separate lists will be maintained for
B/C Borrowings, Second-Lien Borrowings, and for all other Borrowings) agreed to
by Administrative Agent and Borrower, which list Administrative Agent shall
furnish to any Lender upon request, as that list may be amended from time to
time (i) by Borrower and Administrative Agent to remove or add other names as
Administrative Agent and Borrower may agree, (ii) by either Administrative Agent
or Required Lenders to remove any such other Person after Administrative Agent
has or Required Lenders have given to Borrower notice of, and art opportunity to
discuss, the proposed removal of that Person, or (iii) automatically, without
signing by any party, to remove any such Person who then (A) is not Solvent, (B)
fails to pay its debts generally as they become due, (C) voluntarily seeks,
consents to, or acquiesces in the benefit of any Debtor Law, or (D) becomes a
party to or is made the subject of any proceeding provided for by any Debtor
Law, OTHER THAN as a creditor or claimant, that could suspend or otherwise
adversely affect the Rights OF any Company, Administrative Agent, or any Lender
in connection with the transactions contemplated in the Credit Documents. With
respect to Jumbo Loans, the term "APPROVED INVESTOR" WILL be deemed to refer to
an Approved-Jumbo Investor. Administrative Agent will designate, in its sole
discretion, Tier I Approved Investors and Tier 2 Approved Investors.
APPROVED-JUMBO INVESTOR means (a) FHLMC, FNMA, and GNMA and (b) any
other Person from time to time named on a list agreed to by Administrative Agent
and Borrower, which Administrative Agent shall furnish to any Lender upon
request, as that list may be amended from time to time (i) by Borrower and
Administrative Agent to remove or add other names as Administrative Agent and
Borrower may agree, (ii) by either Administrative Agent or Required Lenders to
remove any such other Person after Administrative Agent has or Required Lenders
have given to Borrower notice of, and an opportunity to discuss, the proposed
removal OF that Person, or (iii) automatically, without signing by any party, to
remove any such Person who then (A) is not Solvent, (B) fails to pay its debts
generally as they become due, (C) voluntarily seeks, consents to, or acquiesces
in the benefit of any Debtor Law, or (D) becomes a party to or is made the
subject of any proceeding provided for by any Debtor Law, OTHER THAN as a
creditor or claimant, that could suspend or otherwise adversely affect the
Rights of either Borrower, Administrative Agent, or any Lender in connection
with the transactions contemplated in the Credit Documents.
ASSIGNMENT means an Assignment and Assumption Agreement executed by a
selling Lender and a Purchaser under SECTION 12.12 and SECTION 12.14 and
delivered to Administrative Agent in substantially the form of EXHIBIT F.
AVERAGE-ADJUSTED-BASE RATE means, for any period, an annual interest
rate equal to the QUOTIENT of (a) the sum of the Base Rate plus the Applicable
Margin for each calendar day during that period DIVIDED BY (b) the number of
days during that period.
AVERAGE-ADJUSTED-FED-FUNDS RATE means, for any period, an annual
interest rate equal to the QUOTIENT of (a) the sum of the Fed-Funds Rate plus
the Applicable Margin for each calendar day during that period DIVIDED BY (b)
the number of days during that period.
AVERAGE-ADJUSTED-LIBOR RATE means, for any period, an annual interest
rate equal to the QUOTIENT of (a) the sum of LIBOR plus the Applicable Margin
for each calendar day during that period DIVIDED BY (b) the number of days
during that period.
AVERAGE COMMITMENT means, for any period and any Lender, the QUOTIENT
of the (a) the sum of that Lender's Commitment as of the close of business for
each calendar day during that period DIVIDED BY (b) the number of days during
that period.
AVERAGE-PRINCIPAL DEBT means, for any period and any Lender, the
QUOTIENT of (a) the sum of the Principal Debt owed to that Lender as of the
close of business for each calendar day (which for any day that is not a
Business Day is deemed for this definition to be the Principal Debt as of the
close of business for the preceding Business Day) during that period DIVIDED BY
(b) the number of days during that period.
BAILEE LETTER means, as applicable under the circumstances, one of the
letters executed and delivered by Administrative Agent in substantially the form
of EXHIBIT C-4 or EXHIBIT C-5.
BASE RATE means an annual interest rate equal from day to day to the
floating annual interest rate established by Administrative Agent from time to
time as its base-rate of interest, which may not be the lowest interest rate
charged by Administrative Agent on loans similar to the Borrowings.
BASE-RATE BORROWING means any Borrowing bearing interest at the
Average-Adjusted-Base Rate.
BIC BORROWING means a Borrowing that is (a) a Ratable Borrowing, (b)
advanced against either a B-Mortgage Loan or a C-Mortgage Loan, and (c) subject
to the Non-Agency Sublimit.
B-MORTGAGE LOAN means a Mortgage Loan that (a) is not eligible for
purchase in a traditional prime program (but may be available for inclusion in
FHLMC's or FNMA's B/C program) or FHLMC for reasons other than that the amount
of the Mortgage Loan exceeds the maximum eligible loan amount, (b) satisfies
the Companies' own underwriting standards for classification a "B" credit grade
Mortgage Loan, and (c) currently complies will all applicable requirements for
purchase under a valid and binding Take-Out Commitment.
BORROWER IS defined in the preamble to this agreement.
BORROWING means any amount disbursed by Lenders to Borrower under the
Credit Documents as an original disbursement of funds or as a renewal,
extension, or continuation of an amount outstanding in accordance with their
Commitment Percentages, or (b) by Administrative Agent in accordance with, and
to satisfy a Company's obligations under, any Credit Document.
BORROWING BASE means, at any time, the amount described on SCHEDULE
4.2 and calculated under SECTION 4.2.
BORROWING-BASE REPORT means a report executed by Administrative Agent
and delivered to Borrower and Lenders in substantially the form OF EXHIBIT D-3.
BORROWING DATE means, for any Borrowing, the date it is disbursed.
BORROWING EXCESS means, at any time, the amount by w1iich any OF the
limitations of SECTION 2.1 is exceeded.
BORROWING-PRICE CATEGORY means any category of Borrowing determined
with respect to the applicable interest option, E.G., a Base-Rate Borrowing,
Fed-Funds Borrowing, or LIBOR Borrowing.
BORROWING-PURPOSE CATEGORY means any category of Borrowing determined
with respect to its purpose, E.G., a Borrowing, which may be a Dry Borrowing,
Wet Borrowing, Repurchase Borrowing, B/C Borrowing, or Second-Lien Borrowing.
BORROWING REQUEST means a request executed by a Responsible Officer of
Borrower requesting a Borrowing and delivered to Administrative Agent in
substantially the form of EXHIBIT D-1.
BUSINESS DAY means (a) for purposes OF any LIBOR BORROWING, a day when
commercial banks ARE OPEN FOR INTERNATIONAL business in London, England, and (b)
for all other purposes, any day OTHER THAN Saturday, Sunday, and any other day
that commercial banks are authorized by applicable Governmental Requirements to
be closed in Texas.
CALENDAR MONTH means that portion of a calendar month that occurs at
any time from the date of this agreement to the Termination Date.
CALENDAR QUARTER means that portion OF a calendar quarter that occurs
at any time from the date OF this agreement to the Termination Date.
CASH FLOW means, for any month on a consolidated basis for Borrower
and in accordance with GAAP, consistently applied, the sum of (a) net income
plus (b) to the extent actually deducted in calculating net income,
depreciation, amortization, and any other non-cash charges, minus (c) to the
extent actually included in calculating net income, any non-cash revenue.
CERCLA means the Comprehensive Environmental Response, Compensation
and Liability Act OF 1980, 42 U.S.C. SS.SS.9601 ET SEQ.
CLOSING DATE means June 30, 1997.
CMLTD means current maturities OF long-term debt (inclusive of the
term debt extended under this agreement), plus current maturities of capital
leases.
C-MORTGAGE LOAN means a Mortgage Loan that (a) is not eligible for
purchase in a traditional prime program (but may be available for inclusion in
FHLMC's and FNMA's B/C program) for reasons other than that the amount of the
Mortgage Loan exceeds the maximum eligible loan amount, (b) satisfies the
Companies' own underwriting standards for classification a "C" credit grade
Mortgage Loan, and (c) currently complies will all applicable requirements for
purchase under a valid and binding Take-Out Commitment.
COLLATERAL means all COLLATERAL as defined in the Security Agreement
or as otherwise delivered by any Person as security for the Obligation.
COLLATERAL- CONVERSION NOTICE means a notice executed by Borrower and
delivered to Administrative Agent in substantially the form of EXHIBIT D-7.
COLLATERAL-DELIVERY NOTICE means a notice executed by Borrower and
delivered to Administrative Agent in substantially the form of EXHIBIT D-2.
COLLATERAL DOCUMENTS means the documents and other items described on
SCHEDULE 4.3 and required to be delivered to Administrative Agent under SECTION
4.3.
COMMITMENT means, at any time and for any Lender, the amounts stated
beside that Lender's name on the most-recently amended SCHEDULE 2 (which amount
is subject to reduction and cancellation as provided in this agreement).
COMMITMENT PERCENTAGE means, for any Lender, the proportion (stated as
a percentage) that its Commitment bears to the total Commitments OF all Lenders.
COMPANIES means (a) at any time, Borrower and each of its
Subsidiaries, and (b) where appropriate in respect of any period unless
otherwise provided, includes all of their operations during that period whether
discontinued or not.
COMPLIANCE CERTIFICATE means a certificate substantially in the form
of EXHIBIT D-5 and signed by a Responsible Officer of Borrower.
CONVENTIONAL LOAN means a Mortgage Loan that (a) is not a FHA Loan or
VA Loan, but (b) complies with all applicable requirements for purchase under
the FNMA or FHLMC standard form of conventional -mortgage-purchase contract.
CORRECTION PERIOD means 14 calendar days for any Collateral Documents
shipped under SECTION 4.6 for correction.
CURRENT FINANCIALS means EITHER (a) the Companies' Financials for the
year ended December 3 1, 1996, and for the six months ended June 30, 1997, OR
(b) at any time after the Companies' annual Financials are first delivered under
SECTION 7.1(A), the Companies' annual Financials then most recently delivered to
Administrative Agent and subsequent monthly Financials then most recently
delivered to Administrative Agent.
CREDIT DOCUMENTS means (a) this agreement, certificates and reports
delivered under this agreement, and exhibits and schedules to this agreement,
(b) all agreements, documents, and instruments in favor of Administrative Agent
or Lenders (or Administrative Agent on behalf of Lenders) ever delivered under
this agreement or otherwise delivered in connection with any of the Obligation
(other than assignments), and (c) all renewals, extensions, and restatements of,
and amendments and supplements to, any of the foregoing.
DEBT, for any Person and without duplication, means (a) all
obligations required by GAAP to be classified upon that Person's balance sheet
as liabilities, (b) liabilities secured (or for which the holder of the
liabilities has an existing Right, contingent or otherwise, to be so secured) by
any Lien existing on property owned or acquired by that Person, (c) obligations
that under GAAP should be capitalized for financial reporting purposes, and (d)
all guaranties, endorsements, and other contingent obligations with respect to
Debt of others or in respect of any Employee Plan.
DEBTOR LAWS means the BANKRUPTCY CODE OF THE UNITED STATES OF AMERICA
and all other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension of payments,
or similar Governmental Requirements affecting creditors' Rights.
DEFAULT RATE means, for any day, an annual interest rate equal to the
lesser of EITHER (a) the Fed Funds Rate plus 5%, OR (b) the Maximum Rate.
DISTRIBUTION means, at any time and with respect to any shares of any
capital stock or other equity securities issued by a Person -- means (a) the
retirement, redemption, purchase, or other acquisition for value of those
securities, (b) the declaration or payment of any dividend on or with respect to
those securities, (c) any loan or advance by that Person to, or other investment
by that Person in, the holder of any of those securities, and (d) any other
payment by that Person with respect to those securities.
DRY BORROWING means a Borrowing for which all of the Collateral
Documents have been delivered to Administrative Agent in accordance with SECTION
4.3.
ELIGIBLE-MORTGAGE COLLATERAL means, at any time, all Eligible-Mortgage
Loans and all Eligible-Mortgage Securities.
ELIGIBLE-MORTGAGE LOAN means, at any time, a Mortgage Loan, including
Repurchase Loans qualifying as Eligible Repurchase Loans, for which the
applicable conditions for eligibility described in SCHEDULE 4.1 are satisfied
and which may under SECTION 4.1 be included in the Borrowing Base.
ELIGIBLE-MORTGAGE SECURITY means, at any time, a Mortgage Security for
which the applicable conditions for eligibility described in SCHEDULE 4.1 are
satisfied and which may under SECTION 4.1 be included in the Borrowing Base.
ELIGIBLE-REPURCHASED LOANS means, at any time, a Mortgage Loan for
which the applicable conditions for eligibility described on SCHEDULE 4.1 are
satisfied and which may, under SECTION 4.1, be included in the Borrowing Base.
EMPLOYEE PLAN means any employee-pension-benefit plan (a) covered by
TITLE IV of ERISA and established or maintained by Borrower or any ERISA
Affiliate (OTHER THAN a Multiemployer Plan) or (b) established or maintained by
Borrower or any ERISA Affiliate, or to which Borrower or any ERISA Affiliate
contributes, under the Governmental Requirements of any foreign country.
ENVIRONMENTAL GOVERNMENTAL REQUIREMENT means any applicable
Governmental Requirement that relates to protection of the environment or to the
regulation of any Hazardous Substances, including, without limitation, CERCLA,
the Hazardous Materials Transportation Act (49 U.S.C SS. 1801 ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C ss. 6901 ET SEQ.), the Clean
Water Act (33 U.S.C. ss.1251 ET SEQ.), the Clean Air Act (42 U.S.C. SS. 7401 ET
SEQ.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 ET SEQ.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 ET SEQ.),
the Emergency Planning and Community Right to Know Act (42 U.S.C SS. 11001 ET
SEQ.), the Safe Drinking Water Act (42 U.S.C. ss. 201 AND SS. 300f ET SEQ.), the
Rivers and Harbors Act (33 U.S.C. ss. 401 ET SEQ.), the Oil Pollution Act (33
U.S.C. ss. 2701 ET SEQ.), analogous state and local Governmental Requirements,
and any analogous future enacted or adopted Governmental Requirement. =1
ERISA means the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.
ERISA AFFILIATE means any Person that, for purposes of TITLE IV of
ERISA, is a member of Borrower's controlled group or is under common control
with Borrower within the meaning of SECTION 414 of the IRC.
EVENT OF DEFAULT IS defined in SECTION 10.1.
FED-FUNDS BORROWING means any Borrowing bearing interest at the
Average-Adjusted-Fed-Funds Rate.
FED-FUNDS RATE means, for any day, the annual interest rate, rounded
upwards, if necessary, to the nearest 0.01%, determined by Administrative Agent
to be EITHER (a) the weighted average of the rates on overnight-federal-funds
transactions with member banks of the Federal Reserve System arranged by
federal-funds brokers for that day (or, if not a Business Day on the preceding
Business Day) as published by the Federal Reserve Bank of New York (as published
by Knight-Ridder, page 73, utilizing the Fed Effective Rate), OR (b) if not so
published for any day, the average of the quotations for that day on those
transactions received by Administrative Agent from three federal-funds brokers
of recognized standing it may select.
FHA means the Federal Housing Administration within the United States
Department of Housing and Urban Development.
FHA LOAN means a Mortgage Loan which is EITHER (a) fully or partially
insured by FHA under the NATIONAL HOUSING ACT or TITLE V OF the HOUSING ACT OF
1949, (b) subject to a current, binding, and enforceable commitment issued by
FHA for that insurance, OR (C) eligible for direct endorsement under the FHA
DIRECT ENDORSEMENT PROGRAM.
FHLMC means the Federal Home Loan Mortgage Corporation.
FINANCIALS OF a Person means balance sheets, profit and loss
statements, reconciliation of capital and surplus, and statements of cash flow
prepared (a) according to GAAP (subject to year end audit adjustments with
respect to interim Financials) and (b) except as stated in SECTION 1.4, in
comparative form to prior year-end figures or corresponding periods of the
preceding fiscal year or other relevant period, as applicable.
FNMA means the Federal National Mortgage Association.
FUNDING LOSS means any reasonable, out-of-pocket loss or expense that
any Lender incurs because BORROWER (A) FAILS or refuses, for any reason OTHER
THAN a default by the Lender claiming that loss or expense, to take any LIBOR
Borrowing that it has requested under this agreement, or (b) prepays or pays any
LIBOR Borrowing at any time other than the last day of the applicable Interest
Period.
FUNDING ACCOUNT means a non-interest bearing deposit account
established by Borrower with Administrative Agent, styled and numbered "CFI
MORTGAGE CORPORATION FUNDING ACCOUNT," Account No. 1825167602, for the deposit
of Borrowings.
GAAP means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board that are applicable from time to time.
GNMA means the Government National Mortgage ASSOCIATION.
GOVERNMENTAL AUTHORITY means any (a) local, state, territorial,
federal, or FOREIGN JUDICIAL, executive, regulatory, administrative,
legislative, or governmental agency, board, bureau, commission, department, or
other instrumentality, (b) private arbitration board or panel, or (c) central
bank.
GOVERNMENTAL REQUIREMENTS means all applicable statutes, laws,
treaties, ordinances, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, and interpretations of any Governmental Authority.
GUARANTOR means CF1 Mortgage, Inc.
GUARANTY means a Guaranty in substantially the form of EXHIBIT B.
GUIDE means the following, as applicable under the circumstances, for
(a) FHLMC, the FREDDIE MAC SELLERS' & SERVICERS' GUIDE, (B) FNMA, the FANNIE MAE
SERVICING GUIDE, and (c) GNMA, as applicable, EITHER (I) the GNMA I MORTGAGE
SECURITIES GUIDE, HANDBOOK GNMA 5500. ]REV-6, OR (II) the GNMA 11 MORTGAGE
SECURITIES GUIDE, HANDBOOK GNMA 5500.2.
HAZARDOUS SUBSTANCE means any substance that is designated, defined,
classified, or regulated as a hazardous waste, hazardous material, pollutant,
contaminant, explosive, corrosive, flammable, infectious, CARCINOGENIC,
MUTAGENIC, radioactive, or toxic or hazardous substance under any Environmental
Governmental Requirement, including, without limitation, any hazardous substance
within the meaning of ss. 10](14) of CERCLA.
HEDGE CONTRACT means, for any Person, any present or future, whether
master or single, agreement, document or instrument providing for, or
constituting an agreement to enter into (a) commodity hedges in the normal
course of business in accordance with prior practices of that Person before the
date of this agreement for purposes of hedging material purchases, (b)
foreign-currency purchases and swaps, (c) interest-rate swaps, and (d)
interest-rate-hedging products.
HUD means the Department of Housing and Urban Development.
INTEREST PERIOD IS determined in accordance with SECTION 3.8.
IRC means the INTERNAL REVENUE CODE OF 1986.
JUMBO LOAN means a Mortgage Loan (OTHER THAN a FHA Loan or VA Loan)
that complies with all applicable requirements for purchase under the FNMA or
FHLMC standard form of conventional mortgage purchase contract then in effect
EXCEPT that the amount of it exceeds the maximum loan amount under those
requirements. Except with the prior written consent of Administrative Agent, the
maximum loan amount of a Mortgage Loan may not exceed $650,000.
JUMBO SUB-LIMIT, at any time, means (a) for all Jumbo Loans, 25% of
the total Commitments.
LENDER LIEN means any present or future first-priority (except as
otherwise specifically permitted under the Credit Documents) Lien securing the
Obligation and assigned, conveyed, and granted to, or created in favor of,
Administrative Agent for the benefit of Lenders under the Credit Documents.
LENDERS means the financial institutions -- including, without
limitation, Administrative Agent in respect of its share of Borrowings -- named
on SCHEDULE 2 or on the most-recently-amended SCHEDULE 2, if any, delivered by
Administrative Agent under this agreement, and, subject to this agreement, their
respective successors and permitted assigns (but not any Participant who is not
otherwise a party to this agreement).
LIBOR MEANS, FOR A LIBOR BORROWING, the annual interest rate (rounded
upwards, if necessary, to the nearest 0.01%) equal to the annual interest rate
(rounded upwards, if necessary to the nearest 0.01%) that is (a) the rate
determined by Administrative Agent (at approximately 10:00 a.m. on the second
Business Day before the applicable Interest Period) as the rate reported by
Telerate Mortgage Services or Knight-Ridder for deposits in United States
dollars in the London interbank market that are comparable in amount and
maturity of that Borrowing, or (b) if Administrative Agent cannot determine that
rate, then the rate that deposits in United States dollars are offered to
Administrative Agent in the amount of that LIBOR Borrowing in the London
interbank market (at approximately 11:00 a.m., London, England, time on the
third Business Day before the applicable Interest Period) for deposits
comparable in amount and maturity of that Borrowing'
LIBOR BORROWING means any Borrowing that bears interest at the
Average-Adjusted-LIBOR Rate.
LIEN means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind and any other
arrangement for a creditor's claim to be satisfied from assets or proceeds prior
to the claims of other creditors or the owners (OTHER THAN title of the lessor
under an operating lease).
LITIGATION means any action by or before any Governmental Authority.
MANAGEMENT REPORT means a report delivered by a Responsible Officer of
Borrower to Administrative Agent in substantially the form of EXHIBIT D-5.
MARKET VALUE means, at any time (a) for Mortgage Loans, EXCEPT as
provided in CLAUSE (B) below, a market value based upon the then-most recent
posted net yield for 30-day mandatory future delivery furnished by FNMA and
published and distributed by Telerate Mortgage Services or Knight-Ridder or (if
that posted net yield is not available from these services) obtained by
Administrative Agent from FNMA, (b) for Jumbo Loans or any other Mortgage Loan
when the posted rate is not available from FNMA, the value determined in good
faith by Administrative Agent, and (c) for Mortgage Securities, the applicable
Take-Out Prices, as detailed in the then most-recent Take-Out Report delivered
by Borrower under this agreement of all Take-Out Commitments relating to
Mortgage Securities.
MATERIAL-ADVERSE EVENT means any circumstance or event that,
individually or collectively, is reasonably expected to result (at any time
before the Commitments are fully canceled or terminated and the Obligation is
fully paid and performed) in any (a) material impairment of (i) the ability of
Borrower or any Guarantor to perform any of its payment or other material
obligations under any Credit Document or (H) the ability of Administrative Agent
or any Lender to enforce any of those obligations or any of their respective
Rights under the Credit Documents, (b) material and adverse effect on the
financial condition of the Companies as a whole as represented to Lenders in the
Current Financials most recently delivered before the date of this agreement,
(c) material and adverse impact on any Collateral, or (d) Event of Default or
Potential Default.
MATERIAL AGREEMENT means ' for any Person, any agreement to which that
Person is a party, by which that Person is bound, or to which any assets of that
Person may be subject, and that is not cancelable by that Person upon less than
30-days notice without liability for further payment OTHER THAN nominal penalty,
and the default under which or cancellation or forfeiture of which would be a
Material Adverse Event.
MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for any day and for
any Lender, the maximum non-usurious amount and the maximum non-usurious rate of
interest that, under applicable Governmental Requirement, the Lender is
permitted to contract for, charge, take, reserve, or receive on its portion of
the Obligation.
MORTGAGE COLLATERAL means all Mortgage Loans, Mortgage Securities, and
related Collateral Documents offered as Collateral under the Credit Documents.
MORTGAGE- COLLATERAL GROUP IS defined on SCHEDULE 4.2.
MORTGAGE LOAN means a loan that is not a construction or
non-residential commercial loan, is evidenced by a valid promissory note, and is
secured by a mortgage, deed of trust, or trust deed that grants a perfected
first-priority Lien (or second-priority Lien with respect to Second-Lien
Borrowings) on residential-real property.
MORTGAGE POOL means a (a) "GROUP" or "GROUPING" OF Mortgage Loans
assembled in accordance with, and as that term is used in, the FHLMC Guide, (b)
"pool" of Mortgage Loans assembled in accordance with, and as that term is used
in, the FNMA Guide or the GNMA I Guide, (c) "pool" of Mortgage Loans or a "LOAN
PACKAGE" consisting of Mortgage Loans assembled in accordance with, and as those
terms are used in, the GNMA 11 Guide, or (d) any other pool of Mortgage Loans
assembled by an Approved Investor securing, and providing for pass-through
payments of principal and interest on, its Mortgage Securities.
MORTGAGE SECURITY means a security, in respect of an underlying pool
of related Mortgage Loans, that provides for payment by the issuer to the holder
of specified principal installments and a fixed-interest rate on the unpaid
balance, with all prepayments being passed through to the holder, and is issued
in certificate or book-entry form.
MULTIEMPLOYER PLAN means a multiemployer plan as defined in SECTIONS
3(37) OR 4001(A)(3) OF ERISA or SECTION 414(J) OF the IRC (or any similar type
OF plan established or regulated under the Governmental Requirements of any
foreign country) to which Borrower or any ERISA Affiliate is making, or has
made, or is accruing, or has accrued, an obligation to make contributions.
NET INCOME means, for any period and any Person, the amount that
should, in accordance with GAAP, be reflected on that Person's income statement
as net income (reflecting that Person's profit or loss after deducting its Tax
expense) for that period after deduction of any minority interests.
NET WORTH means, for any Person, the sum of its stockholder's equity
as determined under GAAP.
NON-AGENCY BORROWING means any B/C Borrowing or Second-Lien Borrowing.
NON-AGENCY SUBLIMIT means, at any time, $20,000,000.
NOTES means promissory notes executed and delivered by Borrower,
payable to a Lender's order, in the stated principal amount of its Commitment
and substantially in the form OF EXHIBIT A.
OBLIGATION means all (a) present and future indebtedness, obligations,
and liabilities of Borrower to Administrative Agent or any Lender and related to
any Credit Document, whether principal, interest, fees, costs, attorneys' fees,
or otherwise, (b) all present and future indebtedness, obligations, and
liabilities of Borrower to Administrative Agent or any Lender in respect of any
Hedge Contract, (c) amounts that would become due but for operation of 11 U.S.C
ss.ss. 502 and 503 or any other provision of TITLE 11 of the United States
Code, and all renewals, extensions, and modifications of any of the foregoing,
and (d) pre- and post-maturity interest on any of the foregoing, including,
without limitation, all post-petition interest if any Company voluntarily or
involuntarily files for protection under any Debtor Law.
ORGANIZATIONAL DOCUMENTS means, for any Person, the documents for its
formation and organization, which, for example, for a (a) corporation are its
corporate charter and bylaws, (b) for a partnership is its partnership
agreement, (c) for a limited-liability company are its certificate of
organization and regulations, and (d) for a trust is the trust agreement or
indenture under which it is created.
PARTICIPANT IS defined in SECTION 12.13.
PBGC means the Pension Benefit Guaranty Corporation.
PERMITTED DEBT IS defined in SECTION 8.1.
PERMITTED LIENS IS defined in SECTION 8.2.
PERMITTED LOANS INVESTMENTS IS defined in SECTION 8.3.
PERSON means any individual, entity, or Governmental Authority.
POTENTIAL DEFAULT means any event's occurrence or any circumstance's
existence that would, upon any required notice, time lapse, or both, become an
Event of Default.
PRINCIPAL DEBT means, at any time, the outstanding principal balance
of all Borrowings.
PURCHASER IS defined in SECTION 12.14.
REGULATION Q means REGULATION Q promulgated by the Board of Governors
of the Federal Reserve System, 12 C.F.R. PART 17.
REGULATION U means REGULATION U promulgated by the Board of Governors
of the Federal RESERVE SYSTEM, 12 CF.R. PART 221.
REGULATION X means REGULATION X promulgated by the Board of Governors
of the Federal Reserve System, 12 CF.R. PART 224.
RELEASE REQUEST means a Release Request executed and delivered by a
Responsible Officer of Borrower to Administrative Agent in substantially the
form OF EXHIBIT C-6.
REPRESENTATIVES means representatives, officers, directors, employees,
attorneys, and agents.
REPURCHASE BORROWING means a Borrowing that is (a) subject to the
Repurchase Sublimit and (b) supported by the Borrowing Base for Eligible-
Repurchased Loans.
REPURCHASE SUBLIMIT means, at any time, $1,500,000.
REQUIRED LENDERS means, at any time, any combination of Lenders whose
(a) Termination Percentages total at least 662/3% at any time on or after the
Termination Date, or (b) Commitment Percentages total at least 662/3% at all
other times.
RESPONSIBLE OFFICER means (a) the chairman, president, chief executive
officer, any vice president, -or chief financial officer of Borrower to the
extent that such officer's name, title, and signature have been certified to
Administrative Agent by the secretary or an assistant secretary of Borrower or
(b) any other officer designated as a "RESPONSIBLE OFFICER" in writing to
Administrative Agent by any officer in CLAUSE (A) preceding.
RIGHTS means rights, remedies, powers, privileges, and benefits.
SECOND-LIEN BORROWING means a Borrowing that is subject to the
Non-Agency Sublimit and is A SECOND-LIEN LOAN.
SECOND-LIEN LOAN means a Mortgage Loan that grants a second-priority
Lien on the underlying residential real property securing that Mortgage Loan.
SECURITY AGREEMENT means the Security Agreement in substantially the
form of EXHIBIT C-1.
SETTLEMENT ACCOUNT means a non-interest bearing deposit account
established by Borrower with Administrative Agent -- styled and numbered "CFI
MORTGAGE CORPORATION SETTLEMENT ACCOUNT", Account No. 1825167644 for the deposit
of payments from investors in or the settlement of Mortgage Collateral, and for
the deposit of payments on the Obligation,
SHIPPING PERIOD means 45 calendar days (or, in the case of shipping to
investors in a state housing authority bond program approved by Administrative
Agent, 60 calendar days) for the Collateral Documents for any Mortgage Loan
shipped to or for an investor under SECTION 4.5. If the review and approval of
an individual state housing authority bond program commonly exceed 60 calendar
days, this time frame may be extended with Administrative Agent's approval in
its sole discretion.
SHIPPING REQUEST means a Shipping Request executed and delivered by a
Responsible Officer of Borrower to Administrative Agent in substantially the
form of EXHIBIT C-3.
SOLVENT means, as to any Person, that (a) the aggregate fair market
value of its assets exceeds its liabilities, (b) it has sufficient cash flow to
enable it to pay its Debts as they mature, and (c) it does not have unreasonably
small capital to conduct its businesses.
STATED- TERMINATION DATE means June 30, 1998, In the event
Administrative Agent fails to provide Borrower with written notice of Lenders
intention to not renew this credit facility on or before 60 days PRIOR TO JUNE
30, 1998, such Stated Termination Date means July 31, 1998.
SUBSIDIARY of any Person means any entity of which more than 50% (in
number of votes) of the stock (or equivalent interests) is owned of record or
beneficially, directly or indirectly, by that Person. Unless otherwise specified
or the context otherwise requires, "SUBSIDIARY" refers to a Subsidiary of
Borrower.
SUBORDINATED DEBT means any Debt (which must be Permitted Debt) in
which any Company is the DEBTOR that is expressly subordinated, in form and
substance acceptable to Administrative Agent in its sole discretion, to the
Obligation.
TAKE-OUT COMMITMENT means a binding commitment from an Approved
Investor to purchase Mortgage Collateral, acceptable in form and substance to
Administrative Agent, in favor of Borrower with respect to which there is be no
condition which cannot be reasonably anticipated to be satisfied or complied
with before its expiration.
TAKE-OUT PRICE means, at any time, the amount described and calculated
as provided on SCHEDULE 4.2.
TAKE-OUT REPORT means a report delivered by Borrower to Administrative
Agent substantially in the form of EXHIBIT D-4.
TAXES means, for any Person, taxes, assessments, or other governmental
charges or levies imposed upon it, its income, or any of its properties,
franchises, or assets.
TERMINATION DATE means the earlier of EITHER (a) the
Stated-Termination Date, OR (b) the date that Lenders' commitments under this
agreement are fully canceled or terminated.
TERMINATION PERCENTAGE means, at any time for any Lender, the
proportion (stated as a percentage) that its Principal Debt bears to the total
Principal Debt.
TIER I APPROVED INVESTOR means an Approved Investor designated as such
by Administrative Agent in its sole discretion.
TIER 2 APPROVED INVESTOR means an Approved Investor designated as such
by Administrative Agent in its sole discretion.
TRUST RECEIPT means a Trust Receipt and Agreement executed and
delivered by BORROWER TO Administrative Agent in substantially the form of
EXHIBIT C-6.
UCC means the UNIFORM COMMERCIAL CODE as enacted in Texas or other
applicable jurisdictions.
VA means the Department of Veteran's Affairs.
VA LOAN means a Mortgage Loan (a) the full or partial payment of
w1iich is guaranteed by the VA under the SERVICEMEN'S READJUSTMENT ACT OF 1944
or CHAPTER 37 of TITLE 38 of the UNITED STATES CODE, (b) for which the VA has
issued a current binding and enforceable commitment for such a guaranty, OR (c)
that is subject to an automatic guarantee by the VA. In each case, the
applicable guaranty, commitment to guarantee, or automatic guaranty is for the
maximum amount permitted by Governmental Requirements.
WAREHOUSE NOTE means a promissory note executed and delivered by
Borrower, payable to a Lender's order, in the stated principal amount of its
Commitment, and substantially in the form of EXHIBIT A, as renewed, extended,
amended, or replaced.
WET BORROWING means a Borrowing for which all of the Collateral
Documents have not been delivered to Lender in accordance with SECTION 4.3.
WET PERIOD means 5 Business Days for the Collateral Documents for any
Mortgage Loan that supports a Wet Borrowing.
WET SUBLIMIT means (a) 30% of the total Commitments for the first five
and last five Business Days of each Calendar Month, and (b) 20% at all other
times.
WIRE INSTRUCTIONS mean, for any Person, the information for wire
transfers of funds to that Person, which (until changed by written notice to all
other parties to this agreement) are stated for (a) Borrower and Administrative
Agent, either beside their names on the signature pages below or as otherwise
disclosed by Administrative Agent, and (b) each Lender, beside its name on
SCHEDULE 2.
1.2 Time References. Unless otherwise specified, in the Credit
Documents (a) time references (E.G., 10:00 a.m.) are to time in Dallas, Texas,
and (b) in calculating a period from one date to another, the word "from" means
"from AND INCLUDING" and the word "TO" or "UNTIL" means "TO BUT EXCLUDING."
1.3 Other References. Unless otherwise specified, in the Credit
Documents (a) where appropriate, the singular includes the plural and VICE
VERSA, and words of any gender include each other gender, (b) heading and
caption references may not be construed in interpreting provisions, (c) monetary
references are to currency of the United States of America, (d) section,
paragraph, annex, schedule, exhibit, and similar references are to the
particular Credit Document in which they are used, (e) references to 11TELEFAX,"
"TELECOPY," "FACSIMILE," "fax," or similar terms are to facsimile or telecopy
transmissions, (f) references to "INCLUDING" mean including without limiting the
generality of any description preceding that word, (g) the rule of construction
that references to general items that follow references to specific items as
being limited to the same type or character of those specific items is not
applicable in the Credit Documents, (h) references to any Person include that
Person's heirs, personal representatives, successors, trustees, receivers, and
permitted assigns, (i) references to any Governmental Requirement include every
amendment or supplement to it, rule and regulation adopted under it, and
successor or replacement for it, and 0) references to any Credit Document or
other document include every renewal and extension of it, amendment and
supplement to it, and replacement or substitution for it.
1.4 ACCOUNTING PRINCIPLES. Unless otherwise specified, in the Credit
Documents (a) GAAP in effect on the date of this agreement determines all
accounting and financial terms and compliance with financial covenants, (b)
otherwise, all accounting principles applied in a Current period must be
comparable in all material respects to those applied during the preceding
comparable period, and (c) while Borrower has any consolidated Subsidiaries (i)
all accounting and financial terms and compliance with reporting covenants must
be on a consolidating and consolidated basis, as applicable, and (ii) compliance
with financial covenants must be on a consolidated basis.
SECTION 2. BORROWING PROVISIONS.
2.1 Commitments. Subject to the limitations below and other provisions
of the Credit Documents and on Business Days before the Termination Date, each
Lender severally agrees to provide its Commitment Percentage of Borrowings so
long as, in each case, no Borrowing may be disbursed that CD would cause any of
the following applicable limitations to be exceeded, which limitations must be
read together and are not mutually exclusive:
The total Principal Debt may never exceed the lesser of EITHER (a) the
total Commitments OR (b) the Borrowing Base.
The total Principal Debt of all Repurchase Borrowings may never exceed
the Repurchase Sublimit.
The total Principal Debt of all Wet Borrowings may never exceed the
Wet Sublimit.
The total Principal Debt of all B/C Borrowings may never exceed the
LESSER OF either (a) the Non-Agency Sublimit as reduced by Second-Lien
Borrowings or (b) the portion of the C, Borrowing Base attributable to
Collateral consisting of B-Mortgage Loans and C-Mortgage Loans.
The total Principal Debt of all Second-Lien Borrowings may never
exceed the LESSER OF either (a) the Non-Agency Sublimit as reduced by B/C
Borrowings or (b) the portion of the Borrowing Base attributable to Collateral
consisting of Second-Lien Loans.
No Lender's direct or indirect portion of the Principal Debt under
this SECTION 2.1 may ever exceed either its Commitment or its Commitment
Percentage of the Principal Debt.
2.2 Borrowing Request. Borrower may only request a Borrowing by timely
delivering to Administrative Agent a Collateral-Delivery Notice and required
Collateral Documents under SECTION 4.3 and by delivering to Administrative Agent
a Borrowing Request for the Borrowing before 12:00 p.m. (noon) on the Borrowing
Date for it for a Base-Rate Borrowing or a Fed-Funds Borrowing OR the third
Business Day before the Borrowing Date for a LIBOR Borrowing. A Borrowing
Request is irrevocable and binding on Borrower when delivered. Administrative
Agent shall use its best efforts to promptly, but at least by 1:00 p.m. on the
day it timely receives a Borrowing Request for a Borrowing, send a copy of it to
each Lender by fax and confirm it by telephone.
2.3 Fundings.
(a) Remittance by Lenders. Each Lender shall remit its
Commitment Percentage of any Borrowing requested in a Borrowing Request
to Administrative Agent's principal office in Dallas, Texas, by wire
transfer according to Administrative Agent's Wire Instructions, in
funds that are available for immediate use by Administrative Agent by,
2:00 p.m. on the Borrowing Date.
(B) FUNDING BY ADMINISTRATIVE AGENT. Subject to receipt of
those funds, Administrative Agent shall, unless to its actual knowledge
any of the applicable conditions precedent have not been satisfied by
Borrower or waived by the requisite Lenders, EITHER (A) deposit those
funds into the Funding Account for a Dry Borrowing, OR (B) wire transfer
those funds in accordance with the Borrowing Request for a Wet
Borrowing.
(c) NON-REMITTANCE UNDER BORROWING REQUEST. Absent contrary
written notice from a Lender received by Administrative Agent by 2:00
p.m. on the Borrowing Date, Administrative Agent may assume that each
Lender has made its Commitment Percentage of a Borrowing under a
Borrowing Request available to Administrative Agent on the Borrowing
Date and may, but is not obligated to, make available
to Borrower a corresponding amount. If a Lender fails to make its
Commitment Percentage of that Borrowing available to Administrative
Agent on the Borrowing Date, whether because of that Lender's default,
because that Lender is not open for business on that Business Day, or
otherwise, then Administrative Agent may recover that amount on demand
(i) from that Lender, TOGETHER WITH interest at the Fed-Funds Rate,
during the period from the Borrowing Date to the date Administrative
Agent recovers that amount from that Lender, which payment is then
deemed to be that Lender's Commitment Percentage of that Borrowing, or
(H) if that Lender fails to pay that amount upon demand, then from
Borrower, if applicable, TOGETHER WITH interest at an annual interest
rate equal to the rate applicable to the requested Borrowing during the
period from the Borrowing Date to the date Administrative Agent recovers
that amount from Borrower. Notwithstanding these provisions, each Lender
remains obligated to lend its Commitment Percentage of that Borrowing,
assumes the credit risk for that amount when the Borrowing is made
available to or for Borrower, and, after Administrative Agent has
recovered the amount of interest provided for in CAUSE (I) above, is
entitled to interest on that amount from the Borrowing Date.
(D) OTHER LENDERS. Although no Lender is responsible for the
failure of any other Lender to make its Commitment Percentage of any
Borrowing, that failure does not excuse any other Lender from making
its Commitment Percentage of that Borrowing.
2.4 Wet Borrowings. 'Me conditions and procedures of SECTION 2.2 and
SECTION 2.3 apply to Wet Borrowings, EXCEPT as follows:
(A) COLLATERAL DOCUMENTS. a Wet Borrowing may be funded before delivery to
Administrative Agent of all of the required Collateral Documents for the
Mortgage Loans supporting that Wet Borrowing. The Collateral-Delivery Notice
delivered to Administrative Agent for a Wet Borrowing may be sent to
Administrative Agent by fax but must identify and describe each Mortgage Loan
that supports that Wet Borrowing and the amount of the Borrowing Base applicable
to it. By delivering the Collateral-Delivery Notice, Borrower confirms its grant
under this agreement of Lender Liens, from the Borrowing Date for each Wet
Borrowing, on each Collateral Document offered as Collateral in that
Collateral-Delivery Notice that is perfected subject to the delivery of the
related promissory notes for those Mortgage Loans to Administrative Agent or its
bailee.
(b) Funding by ADMINISTRATIVE AGENT. Administrative Agent shall
make the funds available to Borrower by 4:00 p.m. on the Borrowing Date
by wire transferring these funds in accordance with the Borrowing
Request or by depositing these funds into the Funding Account.
2.5 Terminations.
(a) Termination of a Lender. If no Event of Default or
Potential Default exists and if a Lender declines to execute or consent
to any waiver or amendment (other than any amendment that would
increase that Lender's Commitment) requested by Borrower in respect of
any Credit Document, then, after giving written and irrevocable notice
to Administrative Agent, that Lender, and each other Lender at least
three Business Days before the effective date of the termination,
Borrower may fully terminate that Lender's Commitment by executing an
amendment under SECTION 12.10. A termination under this clause (a)
requires (i) no full or partial termination of any other Lender's
Commitment, (ii) a mandatory prepayment under SECTION 3.4 on the
effective date of the termination, and (iii) no other premium or
penalty.
(B) TERMINATIONS OF ALL LENDERS. After giving written and
irrevocable notice to Administrative Agent and each Lender at least
three Business Days before the effective date of any termination,
Borrower may fully or partially terminate the Commitments. A
termination under this CLAUSE (B) (I) IF partial, (A) must be at least
$10,000,000 and an integral of $5,000,000, (B) must be ratable for each
Lender according to its Commitment Percentage, (C) requires a mandatory
prepayment under SECTION 3.4 on the effective date of termination, and
(D) requires no other premium or penalty, or (ii) if full, requires (A)
a mandatory prepayment under SECTION 3.4 on the effective date of the
termination, and (B) no other premium or penalty.
(c) TERMINATION DATE. The total Commitments automatically terminate on
the Termination Date.
(d) Reinstatement. Once terminated, no part of any commitment
or agreement to extend credit under this agreement may be reinstated
except by an amendment to this agreement under SECTION 12.10.
SECTION 3. PAYMENT TERMS.
3.1 NOTES. The Principal Debt and interest on it are evidenced by the
Notes. Notwithstanding any sale of participating interests under SECTION 12.13
or any contrary notice, Borrower and Administrative Agent may deem and treat
each Lender as the absolute owner of its respective Note for all purposes.
3.2 PAYMENT PROCEDURES.
(a) Payments. Borrower shall make each payment and prepayment
on the Obligation to Administrative Agent, on behalf of Lenders, in
accordance with Administrative Agent's Wire Instructions in funds that
are available for immediate use by Administrative Agent. Payments that
are received by 12:00 p.m. (noon) on a Business Day are deemed received
on that Business Day. Payments that are received after 12:00 p.m. (noon)
on a Business Day are deemed received on the next Business Day. Subject
to SECTION 3.7(F), applicable interest continues to accrue through the
calendar day immediately before the Business Day on which the payment is
deemed received. No Lender directly invoices Borrower for, and only
Administrative Agent invoices Borrower for, interest under the Credit
Documents.
(B) DISTRIBUTIONS. When received under CLAUSE (A) above,
Administrative Agent shall distribute each payment to each Lender, in
accordance with SECTION 3.5 and each Lender's Wire Instructions,
reasonably promptly after receipt but by no later than 5:00 p.m. on the
Business Day the payment is deemed to be received by Administrative
Agent under CLAUSE (A) above. If Administrative Agent fails to
distribute any payment to any Lender as required by this clause, then
Administrative Agent shall pay to that Lender on demand interest on
that payment, from the date due under this clause until paid, at an
annual interest rate equal from day to day to the Fed-Funds Rate.
3.3 SCHEDULED PAYMENTS. Unless otherwise provided in this agreement,
Borrower shall pay the Obligation in accordance with the following table:
OBLIGATION PAYABLE
- ------------------------------------------------------------------------------
Insert each LIBOR Borrowing except As it accrues on (a) the last day
at the Default Rate of that Borrowing's Interset Period
and (b) the Termination Date
Interest on each other Borrowing except On (a) the 15th day of each Calendar
at the Default Rate Month as it accrued on the last day
of the preceding Calender Month and
(b) the Termination date
Interest at the Default Rate regardless On demand as it accrues
of Borrowing-Price Category
Principal Debt of Swing borrowings On demand
Other principal Debt of, and other On the termination date
obligation related to, Borrowings
3.4 PREPAYMENTS.
(A) COMMITMENT TERMINATION. On the effective date of any (i)
termination of a Lender's Commitment under SECTION 2.5(A), Borrower shall
pay to Administrative Agent for that Lender the Obligation owed to that
Lender, (ii) partial termination of the Commitments under SECTION 2.6(B),
Borrower shall pay to Administrative Agent for Lenders the amount that the
Principal Debt exceeds the reduced total, and (iii) full termination of the
Commitments under SECTION 2.6(B) or SECTION 2.6(C), Borrower shall prepay
the full Obligation.
(b) Borrowing Excess. Borrower shall, on demand when any Borrowing
Excess exists, take the following applicable actions that eliminate that
Borrowing Excess:
(i) For a Borrowing Excess that is not capable of elimination by
delivery of additional Collateral or an increase in the total or any
applicable Borrowing Base (E.G., if the total Principal Debt were to
exceed the total Commitments) or when an Event of Default exists,
prepay to Administrative Agent for distribution to the appropriate one
or more Lenders Principal Debt of the appropriate one or more B
borrowing -Purpose Categories (TOGETHER WITH any related Funding
Loss);
(ii) For any other Borrowing Excess and only when no Event of
Default exists, EITHER (A) deliver to Administrative Agent, in
accordance with this agreement, additional Collateral that causes the
total or the applicable Borrowing Base, as the case may be, to
increase, (B) prepay to Administrative Agent for distribution to the
appropriate one or more Lenders Principal Debt of the appropriate one
or more Borrowing- Purpose Categories (TOGETHER WITH any related
Funding Loss), OR (C) any combination of the actions under causes (A)
or (B) above.
M VOLUNTARY PREPAYMENTS. Borrower may otherwise voluntarily prepay any
of the Obligation at any time without PREMIUM OR PENALTY.
3.5 ORDER OF APPLICATION. All payments and proceeds (whether
voluntary, involuntary, through the exercise of any Right of set-off or other
Right, realization against any Collateral, or otherwise) shall be applied in the
following order:
(A) NO EVENT OF DEFAULT. While no Event of Default exists, (i) all
payments of regularly scheduled interest shall be applied to accrued and
unpaid interest on the Obligation, payable ratably to Lenders in the
proportion that the amount of interest owed to each Lender bears to the
total of all interest owed to all Lenders, and (ii) all principal payments
and proceeds from the sale or disposition of Collateral must be applied to
the Principal Debt of all Borrowings in the order below, payable ratably to
each Lender in accordance with its Commitment Percentage, EXCEPT as the
order may be rearranged by Administrative Agent to the extent possible to
avoid the application of any Funding Loss for LIBOR Borrowings. Principal
Debt shall be applied (A) to the Borrowing-Purpose Category to the extent
the collections or proceeds are from or arose in respect of the Collateral
in its Borrowing Base and (B) then in the following order:
B/C Borrowings (Wet Borrowings first)
Second-Lien Borrowings (Wet Borrowings first)
Repurchase Borrowings (Wet Borrowings first)
Other Wet Borrowings
Other Dry Borrowings
(b) EVENT OF DEFAULT. While an Event of Default exists, to:
(i) all costs and expenses incurred by Administrative Agent in
connection with its duties under the Credit Documents -- including,
without limitation, fees and expenses paid by Administrative Agent to
any servicing companies retained by Administrative Agent to assist it
in servicing any Collateral required to be serviced, to any attorneys,
or to Administrative Agent -- that have not been reimbursed by
Lenders, TOGETHER WITH interest at the Default Rate, payable solely to
Administrative Agent;
(ii) all costs and expenses incurred by any Lender in connection
with the Credit Documents that are reimbursable to it under the Credit
Documents, and all amounts paid by that Lender to Administrative Agent
as a reimbursement to it of costs and expenses incurred by
Administrative Agent in connection with its duties under the Credit
Documents, TOGETHER WITH interest at the Default Rate -- payable
ratably to Lenders in the proportion that each Lender's share of those
costs and expenses bears to the total of those costs and expenses for
all Lenders;
(iii) accrued and unpaid interest on the Obligation, payable
ratably to Lenders in the proportion that the amount of interest owed
to each Lender bears to the total of all interest owed to all Lenders;
(iv) Principal Debt, payable ratably to each Lender in accordance
with its Termination Percentage;
(v) all other portions of the Obligation, payable ratably to
Lenders in the proportion that each Lender's share of those amounts
bears to the total of those amounts for all Lenders; and
(vi) either (i) to Borrower or to its successors or assigns on
their behalf, to be divided between them as they may agree, or (ii) as
a court of competent jurisdiction may direct.
3.6 SHARING. If any Lender obtains any amount, whether voluntary,
involuntary, or otherwise, including, without limitation, as a result of
exercising its Rights under SECTION 10.3, that exceeds the portion of that
amount to w1iich it is otherwise entitled under the Credit Documents, then that
Lender shall purchase from the other Lenders participations that result in the
purchasing Lender's sharing the excess amount ratably with each Lender in
accordance with the portion it is entitled to receive under the Credit
Documents. If all or any of that excess amount is subsequently recovered from
that purchasing Lender, then the purchase of participations in it is
automatically rescinded and the purchase price is restored to that purchasing
Lender to the extent of the recovery. Any Lender purchasing a participation from
another Lender under this section may, to the extent lawful, exercise all of its
Rights of payment (including the Right of offset) with respect to that
participation as fully as if that Lender was the direct creditor of Borrower in
the amount of that participation.
3.7 INTEREST RATES.
(A) NON-DEFAULT RATE. Subject to clause (b) below, all Principal Debt
bears an annual interest rate equal to the lesser of EITHER
(i) the Maximum Rate OR
(ii) for each Calendar Month (A) the Average-Adjusted-Base Rate for the
Base- Z, Rate Borrowings for that Calendar Month, (B) the Average- Adjusted-
Fed-Funds Rate for the Fed-Funds Borrowings for that Calendar Month, and (C) the
Average-Adjusted-LIBOR Rate for the LIBOR Borrowings for that Calendar Month.
(B) DEFAULT RATE. All past-due Principal Debt and past-due interest on
it bears interest at the Default Rate from the date due (stated or by
acceleration) until paid, whether or not payment is before or after entry
of a judgment.
(c) RATE CHANGES. Each change in the Base Rate, FED-FUNDS RATE, LIBOR,
AND the Maximum Rate is effective upon the effective date of change without
notice to Borrower or any other Person.
(D) CALCULATIONS. Interest is calculated on the basis of actual days
(including the first but excluding the last) over a 360-day year -- unless
the calculation would result in an interest rate greater than the Maximum
Rate, in which event interest is calculated on the basis of the actual days
in that year. All interest rate determinations and calculations by
Administrative Agent are conclusive and binding absent manifest error.
(E) RECAPTURE. If the designated interest rate applicable to any
Borrowing exceeds the Maximum Rate, the interest rate on that Borrowing is
limited to the Maximum Rate. However, any subsequent reductions in the
designated rate shall not become effective until the total amount of
accrued interest equals the amount of interest that would have accrued if
that designated rate had always been in effect. If at maturity (stated or
by acceleration), OR AT FINAL payment of the Notes, the total interest paid
or accrued is less than the interest that would have accrued if the
designated rates had always been in effect, then, at that time and to the
extent permitted by Governmental Requirement, Borrower shall pay an amount
equal to the DIFFERENCE of (i) the lesser of EITHER the amount of interest
that would have accrued if the designated rates had always been in effect
OR the amount of interest that would have accrued if the Maximum Rate had
always been in effect, MINUS (II) the amount of interest actually paid or
accrued on the Notes.
(F) MAXIMUM RATE. Regardless of any Loan Document provision, no Lender
is entitled to contract for, charge, take, reserve, receive, or apply, as
interest on all or any of the Obligation any amount in excess of the
Maximum Rate. If a Lender ever does so, then any excess is treated as a
partial prepayment of principal, and any remaining excess shall be refunded
to Borrower, as the case may be. In determining if the interest paid or
payable exceeds the Maximum Rate, Borrower and Lenders shall, to the extent
lawful (i) treat all Borrowings as but a single extension of credit, (ii)
characterize any nonprincipal payment as an expense, fee, or premium rather
than as interest, (iii) exclude voluntary prepayments and their effects,
and (iv) amortize, prorate, allocate, and spread the total amount of
interest throughout the full contemplated term of the Obligation. However,
if the Obligation is paid in full before the end of that full-contemplated
term and the interest received for the Obligation's actual period of
existence exceeds the Maximum Amount, then Lenders shall refund any excess
without being subject to any penalties provided by any Governmental
Requirements. If Texas Laws are applicable for purposes of determining the
"MAXIMUM RATE" or the "MAXIMUM AMOUNT, " THEN those terms mean the
"INDICATED RATE CEILING" from time to time in effect under ARTICLE 1.04,
TITLE 79, TEXAS REVISED CIVIL STATUTES, as amended. CHAPTER 15, SUBTITLE
79, TEXAS REVISED CIVIL STATUTES, 1925 (which regulates certain revolving,
credit loan accounts and revolving triparty accounts), does not apply to
the Obligation.
3.8 Interest Periods. When Borrower requests any LIBOR Borrowing, it
may elect the applicable interest period (each an "INTEREST PERIOD"), which may
be either one, two or three months at its option or such other period as it and
Agent may agree (after first obtaining Required Lender approval if for more than
three months), subject to the following conditions: (a) an initial Interest
Period commences on the applicable Borrowing Date and each subsequent applicable
Interest Period commences on the day when the next preceding applicable Interest
Period expires; (b) if any Interest Period begins on a day for which no
numerically corresponding Business Day in the Calendar Month at the end of the
Interest Period exists, then the Interest Period ends on the last Business Day
of that Calendar Month; (c) if an Interest Period would otherwise not end on a
Business Day, it shall end on the immediately preceding Business Day; (d) no
Interest Period for any portion of the Obligation may extend beyond the
scheduled repayment date for that portion of the Obligation; and (e) no more
than three Interest Periods may be in effect at any time.
3.9 BASIS UNAVAILABLE OR INADEQUATE FOR LIBOR. If, on or before any
date when LIBOR is to be determined for a Borrowing, Administrative Agent or any
Lender (upon notice to Administrative Agent) determines that the basis for
determining the applicable rate is not available or that the resulting rate does
not accurately reflect the cost to Lenders of making or converting Borrowings at
that rate, then Administrative Agent shall promptly notify Borrower of that
determination (which is conclusive and binding on Borrower, absent manifest
error) and that Borrowing, shall be a Base-Rate Borrowing. Until Administrative
Agent notifies Borrower that it or the notifying Lender (upon notice to
Administrative Agent) has determined that those circumstances no longer exist
(which it shall promptly do), then Lenders' commitments under this agreement to
make LIBOR Borrowings are suspended.
3.10 ADDITIONAL COSTS. This section survives the full satisfaction of
the Obligation, termination of the Credit Documents, and release of Lender
Liens.
(a) For any LIBOR Borrowing, if (i) (a) any change after the date of
this agreement in any present Governmental Requirement (and, for purposes
of this SECTION 3.9, Governmental Requirement includes interpretations and
guidelines of any Governmental Authority, whether or not having the force
of law) or any future Governmental Requirement imposes, modifies, or deems
applicable (or if compliance by any Lender with any requirement of any
Governmental Authority results in) any requirement that any reserves
(including, without limitation, any marginal, emergency, supplemental, or
special reserves) be maintained, (B) those reserves reduce any sums
receivable by that Lender under this agreement or increase the costs
incurred by that Lender in advancing or maintaining any portion of any
LIBOR Borrowing, and (C) that Lender determines that the reduction or
increase is material (and it may, in determining the material nature of the
reduction or increase, utilize reasonable assumptions and allocations of
costs and expenses and use any reasonable averaging or attribution method),
then (ii) that Lender (through Administrative Agent) shall deliver to
Borrower a certificate stating in reasonable detail the calculation of the
amount necessary to compensate it for its reduction or increase (which
certificate is conclusive and binding absent manifest error), and Borrower
shall pay that amount to that Lender within ten days after demand.
(b) For any Borrowing, if (i) (a) any change after the date of this
agreement in any present or future Governmental Requirement regarding
capital adequacy or compliance by any Lender with any request, directive,
or requirement now or in the future imposed by any Governmental Authority
regarding capital adequacy or any change in the risk category of this
transaction reduces the rate of return on its capital as a consequence of
its obligations under this agreement to a level below that which it
otherwise could have achieved (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by it to be material (and
it may, in determining the material nature of the reduction, utilize
reasonable assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method), then (ii) that Lender (through
Administrative Agent) shall deliver to Borrower a certificate stating in
reasonable detail the calculation of the amount necessary to compensate it
for its reduction (which certificate is conclusive and binding absent
manifest error), and Borrower shall pay that amount to Lender within ten
days after demand.
(c) Any Taxes payable by Administrative Agent or any Lender OR RULED
(BY a Governmental Authority) payable by Administrative Agent or any Lender
in respect of any Credit Document shall -- if permitted by Governmental
Requirement and if deemed material by Administrative Agent or that Lender
(who may, in determining the material nature of the amount payable, utilize
reasonable assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method) -- be paid by Borrower,
together with interest and penalties, if any (except for Taxes payable on
the overall Net Income of Administrative Agent or that Lender and except
for interest and penalties incurred as a result of the gross negligence or
willful misconduct of Administrative Agent or any Lender). Administrative
Agent or that Lender (through Administrative Agent) SHALL notify Borrower
and deliver to Borrower a certificate stating in reasonable detail the
calculation of the amount of payable Taxes, which certificate is conclusive
and binding (absent manifest error), and Borrower shall pay that amount to
Administrative Agent for the account of Administrative Agent or that
Lender, as the case may be, within ten days after demand. If Administrative
Agent or that Lender subsequently receives a refund of the Taxes paid to it
by Borrower, then the recipient shall promptly pay the refund to Borrower.
3.11 CHANGE IN GOVERNMENTAL REQUIREMENTS. If any change, after the
date of this agreement, in any present or future Governmental Requirement makes
it unlawful for any Lender to make or maintain LIBOR BORROWINGS, then that
Lender shall promptly notify Administrative Agent, who shall promptly notify
Borrower and (a) as to undisbursed funds, any requested Borrowing shall be made
as a Base-Rate Borrowing, (b) as to any outstanding Borrowing (i) if maintaining
the Borrowing as a LIBOR BORROWING is unlawful, the Borrowing shall be converted
to a Base-Rate Borrowing as of the date of notice, or (ii) if MAINTAINING THE
BORROWING AS A LIBOR Borrowing is not unlawful, the Borrowing shall be converted
to a Base-Rate Borrowing only at the option of Borrower, or (iii) if any
conversion will not resolve the unlawfulness, Borrower shall promptly prepay the
Borrowing.
3.12 FUNDING LOSS. Subject to SECTION 3.11, BORROWER AGREES To
INDEMNIFY EACH LENDER AGAINST, AND PAY TO IT UPON DEMAND, ANY FUNDING LOSS OF
THAT LENDER. When any Lender demands that Borrower pay any Funding Loss, that
Lender shall deliver to Administrative Agent who shall promptly deliver to
Borrower a certificate stating in reasonable detail the basis for imposing
Funding Loss and the calculation of the amount, which calculation shall be
presumed correct. This
SECTION 3.12 survives the satisfaction and payment of the Obligation
and termination of the Credit Documents.
3.13 FOREIGN LENDERS, PARTICIPANTS, AND PURCHASERS. Each Lender,
Participant (by accepting a participation interest under this agreement), and
Purchaser (by executing an assignment and assumption agreement) that is not
organized under the Governmental Requirements of the United States of America or
one of its states (a) represents to Administrative Agent and Borrower that (i)
no Taxes are required to be withheld by Administrative Agent or Borrower with
respect to any payments to be made to it in respect of the Obligation, and (ii)
it has furnished to Administrative Agent and Borrower, two duly completed copies
of either U.S. Internal Revenue Service FORM 4224, FORM 1001, FORM W-8, or any
other form acceptable to Administrative Agent that entitles it to exemption from
U.S. federal withholding Tax on all interest payments under the Credit
Documents, and (b) covenants to (i) provide Administrative Agent and Borrower a
new FORM 4224, FORM 1001, FORM W-8, or other form acceptable to Administrative
Agent upon the expiration or obsolescence of any previously delivered form
according to applicable Governmental Requirements, duly executed and completed
by it, and (ii) comply from time to time with all Governmental Requirements with
regard to the withholding Tax exemption. If any of the foregoing is not true or
the applicable forms are not provided, then Borrower and Administrative Agent
(without duplication) may deduct and withhold any United States federal income
Tax (at the full rate applicable under the IRC) from interest payments under the
Credit Documents.
3.14 Fees.
(a) Fees Generally. The following fees are not compensation
for the use, detention, or forbearance of money, are in addition to,
and not in lieu of, interest and expenses otherwise described in the
Credit Documents, are non-refundable, bear interest if not paid when
due at the Default Rate, and are calculated on the basis of actual days
(including the first but excluding the last) elapsed over a year of
three hundred sixty (360) days (or actual days during that year, if the
calculation would otherwise result in exceeding the Maximum Amount and
the payment were deemed to be interest, notwithstanding the above
provisions to the contrary).
(B) FACILITY FEE. Borrower shall pay to Administrative Agent
for the account of each Lender a facility fee equal one-quarter of one
percent per annum, multiplied by each Lender's Commitment, paid
quarterly on the first day of each Calendar Quarter after the Closing
Date. When received, Administrative Agent shall pay to each Lender that
Lender's Commitment Percentage of Us fee.
SECTION 4. COLLATERAL PROCEDURES.
4.1 ELIGIBLE COLLATERAL. 'Me eligibility requirements for Mortgage
Collateral to be included in the Borrowing Base are listed on SCHEDULE 4.1. IF
at any time any item of Mortgage Collateral ceases to meet those requirements,
then that item is automatically excluded from all calculations of the Borrowing
Base.
4.2 Borrowing Base. By 1:00 p.m. on the date of any Borrowing, any
payment OF Principal Debt, or removal of any Collateral, Administrative Agent
shall deliver to Borrower and Lenders a Borrowing-Base Report prepared on the
basis of the information provided by Borrower in the most recent
Take-Out Report and other information then available to Administrative Agent as
provided in this agreement.
4.3 COLLATERAL DELIVERY. Borrower must comply with all the required
procedures in SCHEDULE 4.3 for Mortgage Collateral offered in connection with
this agreement by no later than 11:00 a.m. on (i) the Borrowing Date for
Collateral supporting any new Borrowing (OTHER THAN a Wet Borrowing) and (ii)
the 5th calendar day after the Borrowing Date of any Wet Borrowing for
Collateral supporting that Borrowing. By 11:00 a.m. on the Business Day that
Borrower is converting any Dry Borrowing to a Gestation Borrowing, Borrower
shall execute and deliver to Administrative Agent a Collateral -Conversion
Notice.
4.4 BAILEE AND ADMINISTRATIVE AGENT. Administrative Agent and Lenders
appoint Borrower, and Borrower shall act, as their (a) special agent, for-the
sole and limited purpose of obtaining and maintaining Appraisals for Mortgage
Loans as required by the Credit Documents, and (b) bailee, to (i) hold in trust
for Administrative Agent (A) the original recorded copy of the mortgage, deed of
trust, or trust deed securing each Mortgage Loan, (B) a mortgagee policy of
title insurance (or binding unexpired and unconditional commitment to issue such
insurance if the policy has not yet been delivered to Borrower) insuring
Borrower's perfected, first priority Lien (or second-priority Lien with respect
to Second-Lien Borrowings) created by that mortgage, deed of trust, or trust
deed, (C) the original insurance policies referred to on SCHEDULE 4.1, (D)
original copies of all Take-Out Commitments, and (E) all other original
documents, including promissory notes, (ii) specifically identify those items in
the appropriate Collateral-Delivery Notice, and (iii) deliver to Administrative
Agent any of the foregoing items as soon as reasonably practicable upon
Administrative Agent's request.
4.5 SHIPMENT FOR SALE.
(A) SHIPMENT OF COLLATERAL. If no Event of Default, Potential Default,
or Borrowing Excess exists, and if shipment would not result in any Tier 2
Approved Investor (OTHER THAN FNMA, FHLMC, and GNMA, or any other investor
that Administrative Agent has approved in WRITING), OR its servicers and
custodians, holding Collateral Documents for Mortgage Loans with more than
a total $2,500,000 face amount (other than, as approved in writing by
Administrative agent on a case by case basis, FNMA, FHLMC, GNMA, and
non-agency bulk sales), then Borrower may, by a Shipping Request delivered
to Administrative Agent by 11:00 a.m. on the Business Day immediately
preceding the requested shipping date, request Administrative Agent to ship
Collateral Documents to an Approved Investor, or its servicer or custodian,
for purchase of the related Mortgage Loans. If Administrative Agent has no
actual knowledge that any of the above conditions have not been satisfied,
then Administrative Agent shall use its best efforts to ship the Collateral
Documents it holds for those Mortgage Loans to that Approved Investor, or
its servicer or custodian, under an appropriate Bailee Letter by the end of
the Business Day following the date of receipt of the applicable Shipping
Request.
(B) INELIGIBLE COLLATERAL. Collateral shipped under CLAUSE (A) above,
unless returned to Administrative Agent, ceases to be an Eligible-Mortgage
Loan (i) to the extent that Collateral Documents for Mortgage Loans with
more than a total face amount of $2,500,000 are held by or for any Tier 2
Approved Investor (OTHER THAN FNMA, FHLMC, and GNMA, or any other investor
that Administrative Agent has approved in writing), and (ii) upon the
earlier of EITHER the release of the Lender Liens in that Collateral under
CAUSE (C) below, OR the expiration of the Shipping Period for that
Collateral.
(C) Release of Liens. The Lender Liens on any Collateral shipped under
CLAUSE (A) above continues on that Collateral until EITHER (i)
Administrative Agent receives payment in the Note Payment Account in an
amount at least equal to the GREATER OF (1) the price paid by the purchaser
for each Eligible-Mortgage Loan or Eligible -Repurchased Loan sold OR (2)
the full amount of the Borrowings made with respect to those
Eligible-Mortgage Loans or Eligible Repurchased Loan.
(D) CERTAIN CREDITS. Neither Administrative Agent nor any Lender is
obligated at any time to credit Borrower for any amounts due from any
purchase of any Mortgage Collateral contemplated under Us agreement until
Administrative Agent has actually received immediately available funds for
that Mortgage Collateral in the amount required under Us agreement. Neither
Administrative Agent nor any Lender is obligated at any time to collect any
amounts or otherwise enforce any obligations due from any purchaser in
respect of any such purchase.
4.6 SHIPMENT FOR CORRECTION. If no Event of Default, Potential
Default, or Borrowing Excess exists or occurs as a result of the shipment, and
if shipment would not result in any Collateral Documents for Mortgage Loans with
more than a total face amount of $1,500,000 being outstanding for correction,
then Borrower may, by a Trust Receipt delivered to Administrative Agent, request
that Administrative Agent ship to Borrower the entire mortgage loan file of
Collateral Documents for any Mortgage Loan so that certain of those Collateral
Documents may be corrected or replaced for clerical or other non-substantive
mistakes. If Administrative Agent has no actual knowledge that any of the above
conditions have not been satisfied, then, and subject to the limitations below,
Administrative Agent shall use its best efforts to ship to Borrower the entire
mortgage loan file of Collateral Documents to be corrected or replaced by the
end of the Business Day following the date of receipt of the applicable Trust
Receipt. Borrower shall re-deliver to Administrative Agent the corrected
Collateral Documents (meeting the requirements of SCHEDULE 4.3) before the
expiration of the Correction Period for that Collateral. Collateral shipped
under Us section, unless returned to Administrative Agent, ceases to be an
Eligible-Mortgage Loan or Eligible-Repurchased Loan (a) to the extent that
Collateral Documents for Mortgage Loans with more than a total face amount of
$1,500,000 are outstanding for correction at any time, and (b) upon the
expiration of the Correction Period for that Collateral. The Lender Liens on any
Collateral shipped under this section continue in full force and. effect.
4.7 RELEASE OF COLLATERAL.
(a) EXCESS COLLATERAL. If no Event of Default or Potential Default
exists, and no Borrowing Excess exists or would occur (after taking into
account any corresponding payment on the Obligation) as a result of the
release, Borrower may, by a Release Request delivered to Administrative
Agent by 11:00 a.m. on the Business Day of the release, request that
Administrative Agent release the Lender Liens on any Collateral.
(B) SATISFACTION OF OBLIGATION. If the Obligation is fully paid and
performed, and all commitments by each Lender to extend credit under the
Credit Documents are terminated or canceled, Borrower may, by written
request to Administrative Agent, request that Administrative Agent release
the Lender Liens on all of the Collateral, return to Borrower or its
designee all Collateral Documents then held by Administrative Agent, and
execute a release of any financing statements or other documents filed or
recorded to perfect the Lender Liens.
M Releases. if Administrative Agent has no actual knowledge that any
of the above conditions for a release have not been satisfied, then
Administrative Agent shall effect those releases.
SECTION 5. CONDITIONS PRECEDENT.
(A) INITIAL BORROWING. No Lender is obligated to fund its part of any
Borrowing unless Administrative Agent has received all of the documents and
items described on SCHEDULE 5.
(B) EACH BORROWING. In addition, no Lender is obligated to fund its
part of any Borrowing unless on the applicable Borrowing Date (and after
giving effect to the requested Borrowing): (i) Administrative Agent has
timely received a Borrowing Request; (ii) all of the representations and
warranties of Borrower in the Credit Documents are true and correct in all
material respects (unless they speak to a specific date or are based on
facts which have changed by transactions contemplated or permitted by this
agreement); (iii) no Event of Default or Potential Default exists; (iv) the
funding of the Borrowing is permitted by all Governmental Requirements and
does not cause a Borrowing Excess; and (v) if reasonably requested by
Administrative Agent, it has received evidence substantiating any of the
matters in the Credit Documents that are necessary to enable Borrower, as
the case may be, to qualify for the Borrowing.
(C) GENERAL. Each condition precedent in this agreement (including,
without limitation, those on SCHEDULE 5) IS material to the transactions
contemplated by this agreement, and time is of the essence with respect to
each. Subject to first obtaining the approval of all Lenders,
Administrative Agent or any Lenders may fund any Borrowing without all
conditions being satisfied. However, to the extent lawful, that funding is
not a waiver of the requirement that each condition precedent be satisfied
as a prerequisite for any subsequent funding, unless all Lenders
specifically waive an item in writing.
SECTION 6. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Administrative Agent and Lenders as follows:
6.1 Purpose of Credit. Borrowings are to be used as stated in the
recitals of this agreement. No Company is engaged principally (or as one of its
important activities) in the business of extending credit for the purpose of
purchasing or carrying any "MARGIN STOCK" within the meaning of Regulation U. No
part of the proceeds of any Borrowing is to be used, directly or indirectly, for
a purpose that violates any Governmental Requirement, including, without
limitation, the provisions of Regulation U.
6.2 About the Companies.
(A) SUBSIDIARIES AND TRADE Names. Except as described on SCHEDULE 6.2
(i) no Company has any Subsidiaries, and (ii) no Company has used or
transacted business under any other corporate or trade name in the six (6)
month period preceding the date of this agreement, but Borrower will change
its name to Bankers Direct Mortgage Corporation as of July 1, 1997.
(B) EXISTENCE, QUALIFICATION, AND COMPLIANCE. Each Company is duly
organized, validly existing, and in good standing under the Governmental
Requirements of the jurisdiction in which it is incorporated as stated on
SCHEDULE 6.2. Except where failure is not a Material Adverse Event, each
Company (i) is duly qualified to transact business and is in good
standing as a foreign corporation or other entity in each jurisdiction
where the nature and extent of its business and properties require due
qualification and good standing (as described on SCHEDULE 6.2), (II)
possesses all requisite authority, permits, and power to conduct its
business as is now being, or is contemplated by this agreement to be,
conducted, and (iii) is in compliance with all applicable Governmental
Requirements.
(C) Offices. Each Company's chief executive office and other principal
offices are described on SCHEDULE 6.2. The present and foreseeable location
of each Company's books and records concerning accounts and accounts
receivable is at its chief executive office, and all of its books and
records are in its possession.
6.3 AUTHORIZATION AND CONTRAVENTION. The execution and delivery by
each Company of each Credit Document to which it is a party, and the performance
by it of its related obligations (a) are within its corporate power or
partnership authority, as applicable, (b) have been duly authorized by all
necessary corporate or partnership action, as applicable, (c) except for any
action or filing that has been taken or made on or before the date of this
agreement, require no action by, or filing with, any Governmental Authority, (d)
do not violate any provision of its charter, articles of incorporation, bylaws,
or partnership agreement, as applicable, (e) except where not a Material-Adverse
Event, do not violate any provision of Governmental Requirement applicable to
it, or to any material agreements to which it is a party, and (f) except for
Lender Liens, do not result in the creation or imposition of any Lien on any
asset of any Company.
6.4 BINDING EFFECT. Upon execution and delivery by all parties to it,
each Credit Document will constitute a legal and binding obligation of each
Company party to it, and is enforceable against it in accordance with its terms,
except as enforceability may be limited by applicable Debtor Laws and general
principles of equity.
6.5 FISCAL YEAR. The Companies' fiscal year ends each December 31.
6.6 CURRENT FINANCIALS. The Current Financials were prepared in
accordance with GAAP and present fairly, in all material respects, the financial
condition, results of operations, and cash flows of the Companies as of, and for
the portion of the fiscal year ending on their date or dates (subject only to
normal year-end adjustments). All material liabilities of the Companies as of
the date or dates of the Current Financials are reflected in them or notes to
them. Except for transactions directly related to, or specifically contemplated
by, the Credit Documents, no subsequent material adverse changes have occurred
in the financial condition of the Companies from that shown in the Current
Financials, nor has any Company incurred any subsequent material liability.
6.7 Debt. No Company has any Debt EXCEPT Permitted Debt.
6.8 Solvency. On the date of each Borrowing, each Company is, and
after giving effect to the requested Borrowing will be, Solvent.
6.9 LITIGATION. Except as disclosed on SCHEDULE 6.9 (a) no Company is
subject to, or aware of the threat of, any Litigation that is reasonably likely
to be determined adversely to it, or, if so adversely determined, would be a
Material-Adverse Event, and (b) no outstanding or unpaid judgments against any
Company exists.
6.10 TRANSACTIONS WITH AFFILIATES. No Company is a party to a material
transaction with any of its Affiliates, EXCEPT (a) in transactions in the
ordinary course of business and upon fair and reasonable terms not materially
less favorable than it could obtain or could become entitled to in an
arm's-length transaction with a Person that was not its Affiliate, and (b) the
transactions described on SCHEDULE 6.10.
6.11 Taxes. All Tax returns of each Company required to be filed have
been filed (or extensions have been granted) before delinquency, except for
returns for which the failure to file is not a Material-Adverse Event, and all
Taxes imposed upon each Company that are due and payable have been paid before
delinquency.
6.12 EMPLOYEE PLANS. Except where occurrence or existence is not a
Material-Adverse Event, (a) no Employee Plan has incurred an "ACCUMULATED
FUNDING DEFICIENCY" (as defined in ss. 302 of ERISA or ss. 412 of the IRC), (b)
no Company has incurred liability under ERISA to the PBGC in connection with any
Employee Plan, (c) no Company has withdrawn in whole or in part from
participation in a Multiemployer Plan, (d) no Company has engaged in any
"PROHIBITED TRANSACTION" (as defined in ss. 406 of ERISA or ss. 4975 of the
IRC), and (e) no "REPORTABLE EVENT" (as defined in ss. 4043 of ERISA) has
occurred in respect of any Employee Plan, excluding events for which the notice
requirement is waived under applicable PBGC regulations.
6.13 PROPERTY AND LIENS. Each Company has good and marketable title to
all its property reflected on the Current Financials, EXCEPT for property that
is obsolete or that has been disposed of either in the ordinary course of
business, or, after the daze of this agreement, as otherwise permitted by this
agreement. All Collateral is free and clear of any Liens and adverse claims of
any nature EXCEPT Permitted Liens.
6.14 INTELLECTUAL PROPERTY. Each Company owns all material licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, and trade names necessary to continue to conduct its businesses as
presently conducted by it and proposed to be conducted by it immediately after
the date of this agreement. Each Company is conducting its business without
infringement or claim of infringement of any license, patent, copyright, service
mark, trademark, trade name, trade secret, or other intellectual property right
of others, OTHER THAN any infringements or claims that, if successfully asserted
against or determined adversely to that Company, are not a Material-Adverse
Event. To each Company's knowledge, no infringement or claim of infringement by
others of any material license, patent, copyright, service mark, trademark,
trade name, trade secret, or other intellectual property of that Company exists.
6.15 ENVIRONMENTAL MATTERS. Except where not a Material-Adverse Event,
no Company (a) knows of any environmental condition or circumstance adversely
affecting any Company's properties or operations, or any material portion of the
properties subject to Mortgage Loans, (b) has received any report of any
Company's violation of any Environmental Governmental Requirement, or (c) knows
that any Company is under any obligation to remedy any violation of any
Environmental Governmental Requirement. Each Company has taken prudent steps to
determine that its properties and operations, and substantially all of the
properties subject to Mortgage Loans, do not violate any Environmental
Governmental Requirement, EXCEPT those that are not a Material-Adverse Event.
6.16 GOVERNMENT REGULATIONS.
(a) INAPPLICABLE REGULATIONS. No Company is subject to REGULATION
UNDER THE INVESTMENT COMPANY ACT OF 1940, as amended, or the Public UTILITY
HOLDING COMPANY ACT OF 1935, as amended.
(B) BORROWER'S ELIGIBILITY. Borrower is approved, qualified, and in
good standing as a VA approved mortgagee, eligible to originate, purchase,
hold, sell and service VA Loans. At all such times following Borrower's
initial approval as such (if ever), Borrower will be approved, qualified,
and in good standing as an issuer, mortgagee, or seller/servicer, as
described below, and meets all requirements applicable to its status as
such: (i) GNMA approved issuer of mortgage securities guaranteed by GNMA;
(ii) FNMA approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to be sold to
FNMA; (iii) FHLMC approved seller/servicer of Mortgage Loans, eligible to
originate purchase, hold, sell, and service Mortgage Loans to be sold to
FHLMC; (iv) FHA approved mortgagee, eligible to originate, purchase, hold,
sell, and service FHA Loans; (v) VA approved mortgagee, eligible to
originate, purchase, hold, sell and service VA Loans.
6.17 Insurance. Each Company maintains with financially sound,
responsible, and reputable insurance companies or associations (or, as to
workers' compensation or similar insurance, with an insurance fund or by
self-insurance authorized by the jurisdictions in which it operates) insurance
concerning its properties and businesses against casualties and contingencies,
and of types and in amounts (and with co-insurance and deductibles) as is
customary in the case of similar businesses.
6.18 Appraisals. With respect to the property the subject of any
Mortgage Loan, each Company has obtained Appraisals in material compliance with
all Appraisal Requirements.
6.19 Full Disclosure. Each material fact or condition relating to the
Credit Documents or the financial condition, business, or property of the
Companies that is a Material-Adverse Event has been disclosed in writing to
Administrative Agent and Lenders. All information previously furnished by any
Company to Administrative Agent or any Lender in connection with the Credit
Documents was -- and all information furnished in the future by any Company to
Administrative Agent or any Lender will be -- true and accurate in all material
respects or based on reasonable estimates on the date the information is stated
or certified.
SECTION 7. AFFIRMATIVE COVENANTS. Until all commitments by Lenders to extend
credit under this agreement have been canceled or terminated, and the Obligation
is fully paid and performed, Borrower covenants and agrees with Administrative
Agent and Lenders as follows:
7.1 Reporting Requirements. Borrower shall cause to be furnished to
Administrative Agent the following, all in form and detail reasonably
satisfactory to Administrative Agent:
(A) ANNUAL FINANCIALS FOR THE COMPANIES. Promptly when available, but
at least within 120 days after the last day of each fiscal-year of
Borrower, audited Financials of the Companies as of that year end, each
reflecting the corresponding figures for the preceding fiscal year in
comparative form, accompanied by (i) an unqualified opinion of a firm OF
independent certified public accountants acceptable to Administrative Agent
stating that those Financials were prepared in accordance with GAAP applied
on a basis consistent with prior periods, EXCEPT for such changes in GAAP
concurred in by Borrower's independent public accountants and the
Financials present fairly the consolidated and consolidating financial
condition and results of operations of the Companies as of (and for the
fiscal year ending on) that last day, and (ii) a Compliance Certificate.
(B) GUARANTOR FINANCIAL STATEMENTS. Promptly when available but at
least within 120 days after each fiscal year end of each Guarantor, audited
financial statements and statements of cash flow for each Guarantor
prepared as of the end of the previous calendar year in form and detail
reasonably acceptable to Administrative Agent, accompanied by an
unqualified opinion of a firm of independent certified public accountants
acceptable to Administrative Agent stating that those Financials were
prepared in accordance with GAAP applied on a basis consistent with prior
periods, EXCEPT for such changes in GAAP concurred in by Guarantor's
independent public accountants and the Financials present fairly the
consolidated and consolidating financial condition and results of
operations of the Companies as of (and for the fiscal year ending on) that
last day.
(c) MONTHLY FINANCIALS FOR THE COMPANIES. Promptly when available, but
at least within 45 days after the end of each Calendar Month, monthly
unaudited Financials of the Companies, prepared as of the last day of that
Calendar Month, accompanied by a Compliance Certificate.
(d) Management Report. Promptly when available, but at least within 45
days after the last day of each Calendar Month, a Management Report.
(e) TAKE-OUT REPORT. By 5:00 p.m. on each Monday (or, if any Monday is
not a Business Day, then by that time on the next Business Day) but only to
the extent that Borrower has elected not to deliver specifically-designated
Take-Out Commitments to Administrative Agent under SCHEDULES 4.2 and 4.3, a
Take-Out Report that is prepared as of the close of business on the
preceding Business Day and reports the Take-Out Prices of the
Mortgage-Collateral Groups comprising the Mortgage Collateral for which
specifically-designated Take-Out Commitments have not been delivered.
(f) INVESTOR INFORMATION. Promptly after the request by Administrative
Agent or Required Lenders, financial information about any investor (OTHER
THAN FNMA, FHLMC, and GNMA) for purposes of determining whether that
investor should become or remain an Approved Investor.
(g) Notices. Notice, promptly after any Company knows or has reason to
know of (i) the existence and status of any Litigation that, if determined
adversely to any Company, would be a Material-Adverse Event, (ii) any
change in any material fact or circumstance represented or warranted by any
Company in any Credit Document that constitutes a Material- Adverse Event,
(iii) the receipt by any Company of notice of any violation or alleged
violation of ERISA, any Environmental Governmental Requirement, or other
Governmental Requirement, if that violation is a Material-Adverse Event, or
(iv) an Event of Default or Potential Default specifying the nature thereof
and what action the Companies have taken, are taking, or propose to take
with respect to it.
(h) OTHER INFORMATION. Promptly upon reasonable request by
Administrative Agent or Required Lenders (through Administrative Agent),
information (not otherwise required to be furnished under the Credit
Documents) respecting the business affairs, assets, and liabilities of any
Company, and opinions, certifications, and documents in addition to those
mentioned in this agreement.
7.2 USE OF PROCEEDS. The Companies shall use the proceeds of
Borrowings only for the purposes represented in this agreement.
7.3 BOOKS AND RECORDS. Each Company shall maintain books, records, and
accounts necessary to prepare Financials in accordance with GAAP.
7.4 INSPECTIONS. Upon reasonable request, each Company shall allow
Administrative Agent, any Lender, or their respective Representatives to inspect
any of its properties, to review reports, files, and other records, to make and
take away copies, to conduct tests or investigations, and to discuss any of its
affairs, conditions, and finances with its directors, officers, employees, or
representatives from time to time during reasonable business hours.
7.5 TAXES. Each Company shall promptly pay when due any and all Taxes,
OTHER TITAN Taxes of which the failure to pay is not a Material-Adverse Event or
which are being contested in good faith by lawful proceedings diligently
conducted, against which reserve or other provision required by GAAP has C, been
made, and in respect of which levy and execution of any Lien have been and
continue to be stayed.
7.6 EXPENSES. Each Company shall pay (a) all reasonable legal fees and
expenses incurred by Administrative Agent in connection with the preparation,
negotiation, and execution of the Credit Documents, (b) all reasonable legal
fees and expenses incurred by Administrative Agent in connection with each
separate future amendment, consent, waiver, or approval executed in connection
with any Credit Document, (c) all other reasonable legal fees and expenses by
Administrative Agent in connection with the exercise of any right under any
Credit Document after the Closing Date, (d) all fees, charges, or Taxes for the
recording or filing of any Credit Document to create or perfect Lender Liens,
(e) all other reasonable out-of-pocket expenses of Administrative Agent or any
Lender in connection with the preparation, negotiation, execution, or
administration of the Credit Documents -- including, without limitation, courier
expenses incurred in connection with the Mortgage Collateral, (f) all amounts
expended, advanced, or incurred by Administrative Agent or any Lender to satisfy
any obligation of any Company under any Credit Document, to collect the
Obligation, or to enforce the Rights of Administrative Agent or any Lender under
any Credit Document -- including, without limitation, all court costs,
attorneys' fees (whether for trial, appeal, other proceedings, or otherwise),
fees of auditors and accountants, and investigation expenses reasonably incurred
by Administrative Agent or any Lender in connection with any such matters, (g)
interest at an annual interest rate equal to the Default Rate on each item
specified in CLAUSE (f) above from 30 days after the date of written demand or
request for reimbursement to the date of reimbursement, and (h) any and all
stamp and other Taxes payable or determined to be payable in connection with the
execution, delivery, or recordation of any Credit Document -- IN CONNECTION WITH
WHICH THE COMPANIES SHALL INDEMNIFY AND SAVE ADMINISTRATIVE AGE, NT AND EACH
LENDER HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES WITH RESPECT To OR
RESULTING FROM ANY DELAY IN PAYING OR OMISSION To PAY THOSE TAXES To THE EXTENT
THOSE LIABILITIES ARISE SOLELY BECAUSE THE COMPANIES FAILED To PAY THE TAXES
UPON DEMAND By ADMINISTRATIVE AGENT OR ANY LENDER, WHICH INDEMNITY SURVIVES THE
PAYMENT AND PERFORMANCE OF THE OBLIGATION AND TERMINATION OF THE CREDIT
DOCUMENTS.
7.7 MAINTENANCE OF EXISTENCE, ASSETS, AND BUSINESS. Each Company shall
(a) except as permitted by SECTION 8.5, maintain its corporate existence and
good standing in its state of incorporation and its authority to transact
business in all other states where failure to maintain its authority to transact
business is a Material-Adverse Event, and (b) maintain all licenses, permits,
and franchises necessary for its business where failure to do so is a
Material-Adverse Event, including, without limitation, each Company's
eligibility as a lender, seller/servicer, and issuer as described in SECTION
6.16(B).
7.8 INSURANCE. Each Company shall (a) maintain with financially sound
and reputable insurers, insurance with respect to its assets and business
against such liabilities, casualties, risks, and contingencies and in such types
and amounts -- including, without limitation, a fidelity bond or bonds in form
and with coverage, with a company, and with respect to such individuals or
groups of individuals -as satisfy prevailing FHA, VA, and other requirements
applicable to a qualified mortgage institution and otherwise as is customary in
the case of Persons engaged in the same or similar businesses and similarly
situated, and (b) upon Administrative Agent's request, furnish to Administrative
Agent from time to time (i) a summary of its insurance coverage, in form and
substance satisfactory to Administrative Agent, and (ii) originals or copies of
the applicable policies.
7.9 APPRAISALS. Each Company shall promptly (a) permit Administrative
Agent's and any Lender's authorized Representatives to discuss with that
Company's officers or with the appraisers furnishing Appraisals the procedures
for preparation, review, and retention of -- and to review and obtain copies of
- -- all Appraisals pertaining to any Mortgage Collateral, and (b) upon
Administrative Agent's or any Lender's request, cooperate with it to ascertain
that the Appraisals comply with all Appraisal Requirements.
7.10 INDEMNIFICATION. IN CONSIDERATION OF THE COMMITMENTS By
ADMINISTRATIVE AGENT AND LENDERS UNDER THE CREDIT DOCUMENTS, EACH COMPANY SHALL
INDEMNIFY AND DEFEND ADMINISTRATIVE AGENT, EACH LENDER, AND THEIR RESPECTIVE
AFFILIATES AND REPRESENTATIVES (COLLECTIVELY, THE "INDEMNIFIED PARTIES") -- AND
DEFEND THEM AND HOLD EACH OF THEM HARMLESS -- AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, DEFICIENCIES, INTEREST, JUDGMENTS, COSTS, OR
EXPENSES -- INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES --
INCURRED By ANY OF THEM ARISING FROM OR BECAUSE OF (A) ANY INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING BROUGHT OR THREATENED IN CONNECTION WITH ANY
CREDIT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED By THE CREDIT DOCUMENTS,
INCLUDING, WITHOUT LIMITATION, ANY USE By ANY COMPANY OF THE PROCEEDS OF
BORROWINGS, (B) ANY IMPOUNDMENT, ATTACHMENT, OR RETENTION OF ANY MORTGAGE
COLLATERAL, (C) ANY ALLEGED VIOLATION OF ANY FEDERAL OR STATE GOVERNMENTAL
REQUIREMENT RELATING To USURY IN CONNECTION WITH ANY MORTGAGE COLLATERAL, AND
(D) ANY REPRESENTATION MADE By ANY COMPANY UNDER ANY CREDIT DOCUMENT. ALTHOUGH
EACH INDEMNIFIED PARTY Is ENTITLED To INDEMNIFICATION FOR ANY INDEMNIFIED
PARTY's ORDINARY NEGLIGENCE, No INDEMNIFIED PARTY Is ENTITLED To INDEMNIFICATION
FOR ITS OWN GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR FRAUD. THIS INDEMNITY
SURVIVES THE PAYMENT AND PERFORMANCE OF THE OBLIGATION AND TERMINATION OF THE
CREDIT DOCUMENTS.
SECTION 8. NEGATIVE COVENANTS. Until all commitments by Lenders to extend credit
under this agreement have been canceled or terminated and the Obligation is
fully paid and performed, Borrower covenants and agrees with Administrative
Agent and Lenders as follows:
8.1 Debt. No Company may create, incur, permit to exist, or commit to
create or incur any Debt in the nature of Wet Borrowings except under this
agreement or any Debt except the following (collectively, the "PERMITTED DEBT"):
(a) The Obligation;
(b) Obligations to pay Taxes;
(c) Liabilities for accounts payable, non-capitalized equipment or
operating leases, and similar liabilities if in each case incurred in the
ordinary course of business;
(d) Accrued expenses, deferred credits, and loss contingencies that
are properly classified as liabilities under GAAP;
(e) Debt incurred by Borrower under any swap, collar, floor, cap, or
other contract entered into by Borrower with any Lender or an Affiliate of
any Lender or another Person reasonably acceptable to Administrative Agent
under the Governmental Requirements of a jurisdiction in which such
contracts are legal and enforceable (except as enforceability may be
limited by applicable Debtor Laws and general principles of equity), which
is intended to reduce or eliminate the risk of fluctuations in interest
rates applicable to Borrowings under this or any other agreement entered
into by Borrower;
(f) Repurchase agreements and reverse-repurchase agreements; and
(g) Liabilities for capital leases and similar liabilities of up to
$500,000, in each case incurred in the ordinary course of business.
8.2 Liens. No Company may (a) enter into, permit to exist, or commit
to enter into any arrangement or agreement (except the Credit Documents) that
directly or indirectly prohibits any Company from creating or incurring any Lien
on any of its assets, or (b) create, incur, permit to exist, or commit to create
or incur any Lien on any of its assets except the following (collectively, the
"PERMITTED LIENS"):
(a) Any interest or title of a lessor in assets being leased under any
non-capitalized equipment or operating lease;
(b) Pledges or deposits that (i) do not encumber any Collateral and
(ii) are made to secure payment of workers' compensation, unemployment
insurance, or other forms of governmental insurance or benefits or to
participate in any fund in connection with workers' compensation,
unemployment insurance, pensions, or other social security programs;
(c) Good-faith pledges or deposits that (i) do not cover any Collateral
and (ii) are EITHER (A) not in excess of 10% of the amounts due under, and
made to secure, either Company's performance of bids, tenders, contracts
(except for the repayment of borrowed money), or leases, OR (B) made to
secure statutory obligations, surety or appeal bonds, or indemnity,
performance, or other similar bonds benefiting any Company in the ordinary
course of its business;
(d) Zoning and similar restrictions on the use of real property that
do not materially impair the use of the real property and that are not
violated by existing or proposed structures or land use;
(e) The following if no Lien has been filed in any jurisdiction or
agreed to: (i) Liens for Taxes not yet due and payable and (ii) if, to the
extent they cover any Collateral, they are subordinate to the Lender Liens
in form and substance reasonably acceptable to Administrative Agent (iii)
mechanic's Liens and materialman's Liens for services or materials for
which payment is not yet due and payable and (iv) landlord's Liens for rent
not yet due and payable;
(f) the following if the validity or amount thereof is being
contested in good faith and by appropriate and lawful proceedings
diligently conducted, reserve or other appropriate provision (if any)
required by GAAP has been made, levy and execution continue to be stayed,
any of which covering any Collateral must be subordinate to the Lender
Liens in form and substance reasonably acceptable to Administrative Agent,
and any of which do not in the aggregate materially detract from the value
of the property of the Company in question, or materially impair the use of
that property in the operation of its business: (i) Claims and Liens for
Taxes due and payable; (ii) claims and Liens upon, and defects of title to,
real or personal property (OTHER THAN any Collateral), including any
attachment of personal or real property or other legal process before
adjudication of a dispute on the merits; (iii) claims and Liens of
mechanics, materialmen, warehousemen, carriers, landlords, or other like
Liens; and (iv) adverse judgments or orders on appeal for the payment of
money;
(g) Lender Liens; and
(h) Liens disclosed in the UCC Search Reports as described on SCHEDULE
5 that are not by the terms of SCHEDULE 5 to be terminated, partially
released, or amended.
8.3 LOANS, ADVANCES, AND INVESTMENTS. No Company may make or commit to make any
loan, advance, extension of credit, or capital contribution to, make or commit
to make any investment in, or purchase or commit to purchase any stock or other
securities or evidences of Debt of, or interests in, any other Person except the
following (collectively, the "PERMITTED LOANS INVESTMENTS"):
(a) Extensions of trade credit and other payables in the ordinary
course of business;
(b) Mortgage Loans originated or acquired by Borrower in the ordinary
course of its business;
(c) Acquisition of securities or evidences of Debt of others when
acquired by any Company in settlement of accounts receivable or other Debts
arising in the ordinary course of business so LONG as the total of all of
those securities or evidences of Debt is not material to Borrower's
financial condition;
(d) Investments in obligations, with maturities of one year or less,
issued or unconditionally guaranteed by -- or issued by any of its agencies
and backed by the full faith and 0 credit of -- the United States of
America;
(e) Demand deposit accounts maintained in the ordinary course of
business;
(f) Certificates of deposit, bankers acceptances, and repurchase
agreements issued by (i) any Lender or (ii) any other commercial bank
organized under the Governmental Requirements of the United States of
America or one of its states that has combined capital, surplus, and
undivided profits of at least $250,000,000 and a rating of C or better by
Thompson Bank Watch, Inc.;
(g) Eurodollar investments with (i) any Lender or (ii) any other
financial institution that has (a) combined capital, surplus, and undivided
profits of at least $100,000,000 and (B) a commercial-paper rating of at
least P-1 or a-] or (if it does not have a commercial-paper rating) a bond
rating of at least A-1 or A- by Moody's Investors Service, Inc., or
Standard & Poor's Corporation, respectively;
(h) Investments in commercial paper (i) having a maturity of one year
or less and (ii) given the highest rating by a nationally recognized credit
rating agency;
(i) Other loans, advances, or investments, so LONG AS the aggregate
amount outstanding (defined as the amount of any such loans or advances
plus the cost of any such investments) is never more than $200,000 at any
one time.
8.4 DISTRIBUTIONS. Borrower may not directly or indirectly pay or
declare any Distribution EXCEPT (A) dividends payable solely in the form of
capital stock, and (b) if no Event of Default or Potential Default has occurred
or would occur as a result of such dividend, dividends of up to 50% of
Borrower's net income, and (c) distributions otherwise approved in writing by
Administrative Agent.
8.5 MERGER OR CONSOLIDATION. No Company may directly or indirectly
merge or consolidate with or into any other Person, EXCEPT that any Company may
merge into or be consolidated with any other Company, so LONG as Borrower is the
surviving corporation, if it is involved.
8.6 Liquidations and Dispositions of Assets. No Company may directly
or indirectly dissolve or liquidate or sell, transfer, lease, or otherwise
dispose of any material portion of its assets of business, EXCEPT FOR sales or
other dispositions by any Company, in the ordinary course of business, of (a)
subject to SECTION 4, Mortgage Loans or Mortgage Securities that are Collateral,
or (b) Mortgage Loans or Mortgage Securities that are not Collateral.
8.7 Use of Proceeds. No Company may directly or indirectly use the
proceeds of Borrowings (a) for any purpose other than as represented in this
agreement, (b) for the funding or acquisition of construction or commercial
loans, (c) for wages of employees, or (d) in violation of Regulation U or ss. 7
of the SECURITIES EXCHANGE ACT OF 1934.
8.8 Transactions with Affiliates. No Company may directly or
indirectly enter into any transaction with any of its Affiliates, OTHER TITAN
transactions in the ordinary course of business or upon fair and reasonable
terms not materially less favorable than it could obtain or could become
entitled to in an arm's-length transaction with a Person that was not its
Affiliate.
8.9 EMPLOYEE PLANS. Except where a Material-Adverse Event would not
result, no Company may directly or indirectly permit any of the events or
circumstances described in SECTION ~.12 to exist or occur.
8.10 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS AND DOCUMENTS. No
Company may directly or indirectly (a) violate the provisions of any
Governmental Requirements applicable to it or of any Material Agreement to which
it is a party if that violation alone or with all other violations is a
Material-Adverse Event, or (b) violate the provisions of its charter, articles
of incorporation, bylaws, or partnership agreement, as applicable, or repeal,
replace or amend any provision of its charter, articles of incorporation,
bylaws, or partnership agreement, as applicable, if any such action is a
Material-Adverse Event.
8.11 Government Regulations. No Company may directly or indirectly
conduct its business in a way that it becomes regulated under the INVESTMENT
COMPANY ACT OF 1940.
8.12 FISCAL YEAR ACCOUNTING. No Company may directly or indirectly
change its fiscal year or use any accounting method other than GAAP.
8.13 New Businesses. No Company may directly or indirectly engage in
any business, EXCEPT the businesses in which it or any of its Affiliates is
presently engaged, and any other reasonably-related business.
8.14 Assignment. Except as allowed in SECTION 12.12(A), no Company may
directly or indirectly assign or transfer any of its Rights, duties, or
obligations under any of the Credit Documents.
8.15 STRICT COMPLIANCE. No Company may indirectly do anything that it
may not directly do under any covenant in any Credit Document.
SECTION 9. FINANCIAL COVENANTS. Until all commitments by Lenders to extend
credit under this agreement have been canceled or terminated and the Obligation
is fully paid and performed, Borrower covenants and agrees with Administrative
Agent and Lenders as follows:
9.1 NET WORTH. The Companies' Net Worth may not be less than the sum
of (i) $4,500,000 plus (ii) 100% of all contributions to any Company's
stockholders' equity made on or after June 30, 1997, plus (iii) 50% of the
Companies' Net Income for each fiscal quarter ending after June 30, 1997, and
added to the Companies' required Net Worth on the last day of each successive
fiscal quarter (provided that if the Companies' Net Income for any fiscal
quarter is less than $0, then the incremental amount added to the Companies'
required Net Worth for that fiscal quarter shall be $0).
9.2 Leverage Ratio. The ratio of (a) Borrower's total Debt to (b)
Borrower's total Net Worth may never EXCEED 10.0 to 1.0, PROVIDED THAT the
Principal Debt may never exceed the total Commitments.
9.3 CASH FLOW. 'Me ratio of the Companies' historical Cash Flow to
historical CMLTD, may never be less than 1.3 to 1.0 at the end of any 4-quarter
period, calculated as of the last day of each Calendar Quarter.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
10.1 EVENT OF DEFAULT. 'Me term "EVENT OF DEFAULT" means the existence
or occurrence of any one or more of the following:
(a) OBLIGATION. Any Company fails to pay any part of the Obligation
when due under the Credit Documents.
(b) Covenants. Any Company fails to punctually and properly perform,
observe, and comply with (i) any covenant, agreement, or condition under
this agreement, or (ii) any covenant, agreement, or condition contained in
any other Credit Document, and such failure continues for a period of 10
days after any Company has, or, with the exercise of reasonable
investigation, should have, notice of it.
(c) Misrepresentation. Any material statement, warranty, or
representation by or on behalf of any Company or any Guarantor in any
Credit Document or other writing authorized by any Company or any Guarantor
and furnished in connection with the Credit Documents proves to have been
incorrect or misleading in any material respect as of the date made or
deemed made.
(d) Debtor Law. Any Company or any Guarantor (i) is not Solvent, (ii)
admits in writing its inability to pay its Debts generally as they become
due, (iii) voluntarily seeks, consents to, or acquiesces in the benefit of
any Debtor Law, or (iv) becomes a party to, or is made the subject of, any
proceeding provided for by any Debtor Law -- OTHER THAN as a creditor of
claimant -- that could suspend or otherwise adversely affect the Rights of
Administrative Agent or any Lender granted in the Credit Documents, UNLESS,
if the proceeding is involuntary, the applicable petition is dismissed
within 60 days after its filing.
(e) Other Debt. Any Company or any Guarantor fails to make any payment
due on any material Debt or security (with respect to which any Company or
any Guarantor has redemption, sinking fund, or other purchase obligations)
or any event occurs or any condition exists in respect of any material Debt
or security of any Company or any Guarantor, the effect of which is (i) to
cause or to permit any holder of that Debt or security or a trustee to
cause (whether or not it elects to cause) any of that Debt or security to
become due before its stated maturity or its regularly scheduled payment
dates, or (ii) to permit a trustee or the holder of any security (OTHER
THAN common stock of any Company or Guarantor) to elect (whether or not it
does elect) a majority of the directors on the board of directors of that
Company or Guarantor.
(f) JUDGMENTS. Any Company or any Guarantor fails to pay any money
judgment against it at least ten 10 days prior to the date on which any of
the assets of that Company or that Guarantor may be lawfully sold to
satisfy that judgment.
(g) ATTACHMENTS. The failure to have discharged within a period of 30
days after the commencement of any attachment, sequestration, or similar
proceeding against any material amount of the assets of any Company or any
Guarantor.
(h) UNENFORCEABILITY. Any material provision of any Credit Document
for any reason ceases to be in full force and effect or is fully or
partially declared null and void or unenforceable or the validity or
enforceability of any Credit Document is challenged or denied by any
Company.
(i) CHANGE OF MANAGEMENT. Except as otherwise approved by Administrative
Agent in writing prior to any such change, any change in the senior
management of Borrower or Parent from the senior management of Borrower or
Parent as it exists on the date of this agreement.
(j) Change of Control. Except as otherwise approved by Administrative
Agent prior to such change, the individuals who, as of the date of this
agreement, constitute the members of C, Borrower's board of directors (for
purposes of this section, the "INCUMBENT BOARD") do not constitute or cease
for any reason to constitute at least 662/3% of Borrower's board of
directors.
(k) AGENCY QUALIFICATIONS. Borrower ceases to be approved and in good
standing under any qualification listed in SECTION 6.16(B).
10.2 Remedies.
(a) DEBTOR LAW. Upon the occurrence of an Event of Default under
SECTION 10.1(D), the commitments of Lenders to extend credit under this
agreement automatically terminate and the full Obligation is automatically due
and payable, without presentment, demand, notice of default, notice of the
intent to accelerate, notice of acceleration, or other requirements of any kind,
all of which are expressly waived by Borrower.
(b) Other Defaults. While an Event of Default exists -- other than
those described in CLAUSE (A) above -- Administrative Agent may (and, upon the
direction of Required Lenders, shall) declare the Obligation to be immediately
due and payable, whereupon it shall be due and payable, and the commitments of
Lenders to extend credit under this agreement are then automatically terminated.
(c) OTHER REMEDIES. Following the termination of the commitments of
Lenders to extend credit under this agreement and the acceleration of the
Obligation, Administrative Agent may (and, at the direction of Required Lenders,
shall) do any one or more of the following: reduce any claim to judgment;
foreclose upon, or otherwise enforce, any Lender Liens; and exercise any other
Rights in the Credit Documents, at law, in equity, or otherwise that Required
Lenders may direct. Should any Event of Default continue that, in Administrative
Agent's opinion, materially and adversely affects the Collateral or the
interests of the Lenders under this agreement, Administrative Agent may, in a
notice to the Lenders of that Event of Default, set forth one or more actions
that Administrative Agent, in its opinion, believes should be taken. Unless
otherwise directed by Required Lenders (excluding the Lender serving as
Administrative Agent) within 10 days following the date of the notice setting
forth the proposed action or actions, Administrative Agent may, but shall not be
obligated to, take the action or actions set forth in that notice.
10.3 RIGHT OF OFFSET. Each Company hereby grants to Administrative
Agent and to each Lender a right of offset, to secure the repayment of the
Obligation, upon any and all modes, securities, or other property of each
Company, and the proceeds therefrom now or hereafter held or received by or in
transit to Administrative Agent or such Lender from or for the account of each
Company, whether for safekeeping, custody, pledge, transmission, collection, or
OTHERWISE, AND ALSO upon any and all deposits (general or special, time or
demand, provisional or final) and credits of each Company, and any and all
claims of any Company against Administrative Agent or such Lender, at any time
existing. Upon the occurrence of any Event of Default, Administrative Agent and
each Lender are authorized at any time and from time to time, without notice to
any Company, to offset, appropriate, and apply any and all of those items
against the Obligation, subject to SECTION 3.6. Notwithstanding anything in this
section or elsewhere in this agreement to the contrary, neither Administrative
Agent nor any other Lender shall have any right to offset, appropriate, or apply
any accounts of any Company which consist of escrowed funds (except and to the
extent of any beneficial interest which any Company has in such escrowed funds,)
which have been so identified by any Company in writing at the fine of deposit
thereof.
10.4 WAIVERS. Each Company waives any right to require Administrative
Agent to (a) proceed against any Person, (b) proceed against or exhaust any of
the Collateral, or pursue its Rights and remedies as against the Collateral in
any particular order, or (c) pursue any other remedy in its power.
Administrative Agent shall not be required to take any steps necessary to
preserve any Rights of any COMPANY AGAINST ANY PERSON from which any Company
purchased any Mortgage Loans or to preserve Rights against prior parties. Each
Company and each surety, endorser, guarantor, pledgor, and other party ever
liable or whose property is ever liable for payment of any of the Obligation
jointly and severally waive presentment and demand for payment, protest, notice
of intention to accelerate, notice of acceleration, and notice of protest and
nonpayment, and agree that their or their property's liability with respect to
the Obligation, or any part thereof, shall not be affected by any renewal or
extension in the time of payment of the Obligation, by any indulgence, or by any
release or change in any security for the payment of the Obligation, and hereby
consent to any and all renewals, extensions, indulgences, releases, or changes,
regardless of the number thereof.
10.5 PERFORMANCE BY ADMINISTRATIVE AGENT. Should any covenant, duty,
or agreement of any Company fail to be performed in accordance with the terms of
this agreement or of any document delivered under this agreement (and any
applicable grace period shall have expired), Administrative Agent may, at its
option, after notice to Borrower, perform, or attempt to perform such covenant,
duty, or agreement on behalf of that Company and shall notify each Lender that
it has done so. In such event, any Company shall jointly and severally, at the
request of Administrative Agent, promptly pay any amount expended by
Administrative Agent in such performance or attempted performance to
Administrative Agent at its principal place of business, TOGETHER WITH interest
thereon at the Maximum Rate from the date of such expenditure by Administrative
Agent until paid. Notwithstanding the foregoing, it is expressly understood that
Administrative Agent does not assume and shall never have, except by express
written consent of Administrative Agent, any liability or responsibility for the
performance of any duties of any Company under this agreement or under any other
document delivered under this agreement.
10.6 NO RESPONSIBILITY. Except in the case of fraud, gross negligence,
or willful misconduct, neither Administrative Agent nor any of its officers,
directors, employees, or attorneys shall assume -- or ever have any liability or
responsibility for -any diminution in the value of the Collateral or any part of
the Collateral.
10.7 NO WAIVER. The acceptance by Administrative Agent or any Lender
at any time and from time to time of partial payment or performance by any
Company of any of their respective obligations UNDER this agreement or under any
Credit Document shall not be deemed to be a waiver of any Event of Default then
existing. No waiver by Administrative Agent or any Lender shall be deemed to be
a waiver of any other then existing or subsequent Event of Default. No delay or
omission by Administrative Agent or any Lender in exercising any right under
this agreement or under any other document required to be executed under or in
connection with this agreement shall impair such right or be construed as a
waiver thereof or any acquiescence therein, nor shall any single or partial
exercise of any such right preclude other or further exercise thereof, or the
exercise of any other right under this agreement or otherwise.
10.8 CUMULATIVE RIGHTS. All Rights available to Administrative Agent
and the Lenders under this agreement or under any other document delivered under
this agreement shall be cumulative of and in addition to all other Rights
granted to Administrative Agent and the Lenders at law or in equity, whether or
not the Notes are due and payable and whether or not Administrative Agent has
instituted any suit for collection, foreclosure, or other action in connection
with this agreement or any other document delivered under this agreement.
10.9 RIGHTS OF INDIVIDUAL LENDERS. No Lender shall have any right by
virtue of, or by availing itself of, any provision of this agreement to
institute any actions or proceedings at law, in equity, or otherwise (excluding
any actions in bankruptcy), upon or under or with respect to this agreement, or
for the appointment of a receiver, or for any other remedy under this agreement,
unless (a) the Required Lenders previously shall have given to Administrative
Agent written notice of an Event of Default and the continuance thereof,
including a written request upon Administrative Agent to institute such action
or proceedings in its own name and offering to indemnify Administrative Agent
against the costs, expenses and liabilities to be incurred therein or thereby,
(b) Administrative Agent, for 10 Business Days after its receipt of such notice,
shall have failed to institute any such action or proceeding, and (c) no
direction inconsistent with such written request shall have been given to
Administrative Agent by Required Lenders. It is understood and intended, and
expressly covenanted by the taker and holder of every Note with every other
taker and holder and Administrative Agent, that no one or more holders of Notes
shall have any right in any manner whatever by virtue, or by availing itself, of
any provision of this agreement to affect, disturb or prejudice the Rights of
any other Lenders, or to obtain or seek to obtain priority over or preference to
any other such Lender, or to enforce any right under this agreement, except in
the manner herein provided and for the equal, ratable and common benefit of all
Lenders. For the protection and enforcement of the provisions of this SECTION
10.9, each and every Lender and Administrative Agent shall be entitled to such
relief as can be given either at law or in equity.
10.10 NOTICE TO ADMINISTRATIVE AGENT. Should any Event of Default or
Potential Default occur and be continuing, any Lender having actual knowledge
thereof shall notify Administrative Agent and Borrower of the existence thereof,
but the failure of any Lender to provide that notice shall not prejudice that
Lender's Rights under this agreement.
10.11 COSTS. All court costs, reasonable attorneys' fees, other costs
of collection, and other sums spent by Administrative Agent or any Lender in the
exercise of any Right provided in any Credit Document is payable to
Administrative Agent or that Lender, as the case may be, on demand, is part of
the Obligation, and bears interest at the Default Rate from the date paid by
Administrative Agent or any Lender to the date repaid by any Company.
SECTION 11. ADMINISTRATIVE AGENT.
11.1 AUTHORIZATION AND ACTION. Each Lender hereby appoints
Administrative Agent as Administrative Agent under the Credit Documents and
authorizes Administrative Agent to take such action on its behalf and to
exercise such powers and perform such duties as are expressly delegated to
Administrative Agent by the terms of the Credit Documents, TOGETHER WITH such
powers as are reasonably incidental thereto. As to any matter not expressly
provided for by this agreement (including, without LIMITATION, ENFORCEMENT OR
collection of the Notes), Administrative Agent shall not be required to exercise
any discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of Lenders, and those instructions shall be
binding upon all Lenders and all holders of the Notes. However, that
Administrative Agent shall not be required to take any action that exposes
Administrative Agent to personal liability or that is contrary to this agreement
or applicable Governmental Requirements. Administrative Agent agrees to give to
each Lender prompt notice of each notice given to it by Borrower pursuant to the
terms of the Credit Documents.
11.2 Agent's Reliance, Etc. Notwithstanding anything to the contrary
in any Credit Document, neither Administrative Agent nor any of its
Representatives shall be liable for any action taken or omitted to be taken by
it or them under or in connection with the Credit Documents, except for its or
their own gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, Administrative Agent: (a) May treat the payee of
any Note as the holder thereof; (b) may consult with legal counsel (including
counsel for Borrower), independent public accountants and other experts selected
by it or Borrower and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties, or
representations made in or in connection with the Credit Documents; (d) shall
not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions OF this agreement on the part of
Borrower or to inspect the property (including the BOOKS and records) of
Borrower, except receipt OF delivery OF the items required under SECTIONS 3.2,
4.1, 4.3, and 7.1; (e) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this agreement or any other instrument or document furnished pursuant hereto;
and (F) shall incur no liability under or in respect OF this agreement BY acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telecopy) believed by it to be genuine and signed or sent by the proper
party or parties.
11.3 Administrative Agent and Affiliates. With respect to Borrowings
made by it, and the one or more Notes issued to it, Administrative Agent shall
have the same rights and powers under this agreement and the other Credit
Documents as any other Lender and may exercise the same as though it were not
the Administrative Agent; and the term "LENDER" or "LENDERS" shall, unless
otherwise expressly indicated, include Administrative Agent in its individual
capacity. Administrative Agent and the Affiliates OF Administrative Agent may
accept deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of business with, Borrower, any OF its Affiliates
and any Person who may do business with or own securities OF Borrower or any OF
its Affiliates, all as IF Administrative Agent was not Administrative Agent and
without any duty to account therefor to Lenders.
11.4 Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Administrative Agent or any other
Lender, and based on the financial statements referred to in SECTIONS 6.6 and
7.1 OF this agreement and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter this agreement.
Each Lender also acknowledges that it will, independently and without reliance
upon Administrative Agent or any Lender, and based on such documents and
information as it shall deem appropriate at the time, make its own credit
decisions in taking or not taking action under this agreement.
11.5 INDEMNIFICATION. LENDERS SHALL INDEMNIFY ADMINISTRATIVE AGENT (TO
THE EXTENT NOT REIMBURSED By BORROWER), RATABLY ACCORDING TO THEIR RESPECTIVE
COMMITMENT PERCENTAGES, FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS
OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF
THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED By ADMINISTRATIVE AGENT UNDER THIS
AGREEMENT (INCLUDING ANY OF SAME WHICH MAY RESULT FROM THE NEGLIGENCE, BUT NOT
GROSS NEGLIGENCE, OF ADMINISTRATIVE AGENT). HOWEVER, No LENDER SHALL BE LIABLE
FOR ANY PORTION OF THOSE LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM
Administrative AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT
LIMITATION OF THE FOREGOING, EACH LENDER SHALL REIMBURSE ADMINISTRATIVE AGENT
PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF ANY OUT-OF-POCKET EXPENSES
(INCLUDING COUNSEL FEES) INCURRED By ADMINISTRATIVE AGENT IN CONNECTION WITH THE
PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR
ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF,
OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT,
TO THE EXTENT THAT ADMINISTRATIVE AGENT IS NOT REIMBURSED FOR SUCH EXPENSES By
BORROWER.
11.6 Successor Administrative Agent. Administrative Agent may resign
at any time by giving written notice thereof to Lenders and Borrower and may be
removed at any time with or without cause by 100% of Lenders. Upon any such
resignation or removal, 100% of Lenders shall have the right to appoint a
successor Administrative Agent in the capacity of Administrative Agent. If no
successor Administrative Agent shall have been so appointed by 100% of Lenders,
and shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Lenders' removal
of the retiring Administrative Agent, then the retiring Administrative Agent
may, on behalf of Lenders, appoint a successor Administrative Agent, which shall
be a commercial bank or savings bank organized under the laws of the United
States of America or of any state thereof which has a combined capital and
surplus of at least $200,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges, and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from any
further duties, and obligations under this agreement. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this article 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. The appointment of a successor Administrative Agent shall not release
the retiring Administrative Agent from any liability it may have for any actions
taken or omitted to be taken by it while it was Administrative Agent under this
agreement.
11.7 INSPECTION. Administrative Agent shall permit any officer,
employee, agent of Borrower OR ANY LENDER WHICH may so request to visit and
inspect the premises on which the custodial duties of Administrative Agent
hereunder are performed, examine the books and records of Administrative Agent
which pertain to such custodial duties, take copies and extracts therefrom, and
discuss the performance of such custodial duties with the officers, accountants
and auditors of Administrative Agent that are responsible therefor, all at such
reasonable times and as often as Borrower or any Lender may desire.
SECTION 12. MISCELLANEOUS.
12.1 NON BUSINESS DAYS. Any action that is due under any Credit
Document on a non-Business Day may be delayed until the next Business Day.
However, interest accrues on any payment until it is made.
12.2 COMMUNICATIONS. Unless otherwise stated, a communication under
any Credit Document to a party to this agreement must be written to be effective
and is deemed given:
For Borrowing REQUESTS, Collateral Delivery, Notices, Shipping
Requests, and Release Requests, only when actually received by
Administrative Agent.
Otherwise, if by fax, when transmitted to the appropriate fax number
-- but, without affecting the date deemed given, the fax must be
promptly confirmed by telephone.
Otherwise, if by mail, on the third Business Day after enclosed in a
properly addressed, stamped, and sealed envelope deposited in the
appropriate official postal service.
Otherwise, when actually delivered.
Until changed by written notice to each other party to this agreement, the
address and fax number are stated for (a) Borrower and Administrative Agent,
beside their names on the signature pages below, and (b) each Lender, beside its
name on SCHEDULE 2.
12.3 Form and Number of Documents. The form, substance, and number of
counterparts of each writing to be furnished under the Credit Documents must be
satisfactory to Administrative Agent and its counsel.
12.4 Exceptions to Covenants. An exception to any Credit Document
covenant does not permit violation of any other Credit Document covenant.
12.5 Survival. All Credit Document provisions survive all closings and
are not affected by any investigation made by any party.
12.6 Governing Law. UNLESS otherwise stated, each Credit Document must
be construed -and its performance enforced -- under the Governmental
Requirements of the State of Texas and the United States of America.
12.7 INVALID PROVISIONS. If any provision of a Credit Document is
judicially determined to be unenforceable, all other provisions of it remain
enforceable. If the provision determined to be unenforceable is a material part
of that Credit Document, then, to the extent lawful, it shall be replaced by a
judicially-construed provision that is enforceable but otherwise as similar in
substance and content to the original provision as the context of it reasonably
allows.
12.8 Conflicts Between Credit Documents. The provisions of this
agreement control if in conflict (i.e., the provisions contradict each other as
opposed to a Credit Document containing additional provisions not in conflict)
with the provisions of any other Credit Document.
12.9 DISCHARGE AND CERTAIN REINSTATEMENT. The Companies' obligations
under the Credit Documents remain in full force and effect until no Lender has
any commitment to extend credit under the Credit Documents and the Obligation is
fully paid (EXCEPT for provisions under the Credit Documents which by their
terms expressly survive payment of the Obligation and termination of the Credit
Documents). If any payment under any Credit Document is ever rescinded or must
be restored or returned for any reason, then all Rights and obligations under
the Credit Documents in respect of that payment are automatically reinstated as
though the payment had not been made when due.
12.10 AMENDMENTS, CONSENTS, CONFLICTS, AND WAIVERS. An amendment of --
or an approval, consent, or waiver by Administrative Agent or by one or more
Lenders under -- any Credit Document must be in writing and must be:
(a) Executed by Borrower and Administrative Agent if it purports to
reduce or increase any fees payable to Administrative Agent by Borrower.
(b) Executed by Borrower and Administrative Agent and executed or
approved in writing by all Lenders if action of all Lenders is specifically
provided in any Credit Document or if it purports to (i) EXCEPT as
otherwise stated in this SECTION 12.10, extend the due date or of which are
for the account of the assigning, pledging, or transferring Lender and its
assignee, pledgee, or transferee as they may agree, and (D) if the
Participant or Purchaser is organized under the Governmental Requirements
of any jurisdiction other than the United States of America or any of its
states, it complies with SECTION 3.13.
(c) Otherwise Void. Any purported assignment, pledge, or other transfer
in violation of this section is void from the beginning and not effective.
12.13 PARTICIPATIONS. Subject to SECTION 12.12(B) and this section,
and only if no Event of Default exists, a Lender may at any time sell to one or
more Persons (each a "PARTICIPANT") participating interests in its Commitment
and its share of the Obligation.
(a) ADDITIONAL CONDITIONS. For each participation (i) the selling
Lender must remain -- and the Participant may not become -- a "LENDER"
under this agreement, (ii) the selling Lender's obligations under the
Credit Documents must remain unchanged, (iii) the selling Lender must
remain solely responsible for the performance of those obligations, (iv)
the selling Lender must remain the holder of its one or more Notes and its
share of the Obligation for all purposes under the Credit Documents, and
(v) Borrower and Administrative Agent may continue to deal solely and
directly with the selling Lender in connection with those Rights and
obligations.
(b) PARTICIPANT RIGHTS. The selling Lender may obtain for each of its
Participants the benefits of the Credit Documents related to participations
in its share of the Obligation, but Borrower is never obligated to pay any
greater amount than would be due to the selling Lender under the Credit
Documents calculated as though no participation had been made. Otherwise,
Participants have no Rights under the Credit Documents, EXCEPT certain
permitted voting Rights described below.
(c) PARTICIPATION AGREEMENTS. An agreement for a participating
interest (i) may only provide to a Participant voting Rights in respect of
any amendment of or approval, consent, or waiver under any Credit Document
related to the matters in SECTION 12.10(B) if it also provides for a voting
mechanism that a majority of that selling Lender's Commitment Percentage or
Termination Percentage, as the case may be (whether directly held by that
selling Lender or participated), controls the vote for that selling Lender,
and (ii) may not permit a Participant to assign, pledge, or otherwise
transfer its participating interest in the Obligation to any Person, EXCEPT
any Lender or its Affiliates.
12.14 TRANSFERS. Subject to SECTION 12.12(B) and this section, and
only if no Event of Default exists, a Lender may at any time sell to one or more
financial institutions (each a "PURCHASER") all or part of its Rights and
obligations under the Credit Documents.
(a) ADDITIONAL CONDITIONS. The sale (i) must be accomplished by the
selling Lender and Purchaser executing and delivering to Administrative
Agent and Borrower an assignment and assumption agreement and (ii) may not
occur until the selling Lender pays to Administrative Agent an
administrative-transfer fee of $2,500.
12.16 LIMITATION OF LIABILITY. Neither Administrative Agent nor any
Lender shall be liable to any Company for any amounts representing indirect,
special, or consequential damages suffered by any Company, EXCEPT where such
amounts are based substantially on willful misconduct by Administrative Agent or
any Lender, but then only to the extent any damages resulting from such willful
misconduct are covered by Administrative Agent's and the other Lenders' fidelity
bond or other insurance.
12.17 ENTIRE AGREEMENT. THE CREDIT DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED By EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE No
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY
BLANK.
SIGNATURE PAGES TO FOLLOW]
EXECUTED as of the date first stated in this agreement.
(ADDRESS)
CFI MORTGAGE CORPORATION, as
CFI Mortgage Corporation BORROWER
580 Village Blvd., Suite 360
West Palm Beach, FL 33409
Attn.: Don M. Lashbrook By: /s/ Christopher C. Castoro
561/687-1595 (phone) Christopher C. Castoro
561/687-9801 (fax) Title:
(ADDRESS) BANK ONE, TEXAS, N.A., as
ADMINISTRATIVE
AGENT and a LENDER
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Dallas, Texas 75201 By: /s/ Paul J. Lazusky
Attn.: Paul J. Lazusky Name: Paul J. Lazusky
214/290-2153 (phone) Title: VP
214/290-2054 (fax)
(WIRE TRANSFER)
Account # 1887239620
Bank: Bank One, Dallas
ABA # 111000614
Attn.: Gloria Sadler, (214) 290-6069
Ref: CFI MORTGAGE CORPORATION
Settlement Account
Page One of One Signature Page Credit Agreement
SCHEDULE 2
LENDERS AND COMMITMENTS
Name of Lender Commitment
Bank One, Texas, N.A.
1717 Main Sue" 4th Floor
Dallas, TX 75201 $50,000,000
Attn.: Paul J. Lazusky
214/290-2153 (phone)
214/290-2054 (fax)
10:11
<PAGE>
SCHEDULE, 4.1
ELIGIBILITY CONDITIONS
A. ELIGIBLE-MORTGAGE LOAN. A Mortgage Loan:
1. Which supports either (a) a Dry Borrowing or (b) a Wet Borrowing and
for which the applicable
Wet Period has not expired.
2. Which is a Conventional Loan, FHA Loan, VA Loan, or Jumbo Loan.
3. THE PROMISSORY NOTE evidencing which (a) is the standard form approved
by VA, FHA, FNMA, or FHLMC or a form otherwise acceptable to
Administrative Agent, (b) has a maturity within 30 years of its
origination, (c) is payable or endorsed (without restriction or
limitation) to Borrower's order, (d) is endorsed in blank by Borrower,
(e) is fully funded, and (f) is valid and enforceable without offset,
counterclaim, defense, or right of recision or avoidance of any kind
OTHER THAN for valid payments made on it and any exceptions to
enforceability under Debtor Laws.
4. For which no default in the payment of principal or interest or any
other default has continued uncured for 60 days, no foreclosure or
other similar proceedings have commenced, and no claim for any credi4
allowance, or adjustment exists.
5. Which is secured by a mortgage, deed of trust, or trust deed that (a)
is the standard form approved by VA, FHA, FNMA, or FHLMC or a form
otherwise acceptable to Administrative Agent mid (b) grants a
first-priority Lien (or second-priority Lien with respect to
Second-Line Borrowings) on residential-real property described below
that will be perfected upon recording.
6.For which the underlying residential-real property (it) consists of land
and (i) it one- to four-family dwelling, or (ii) a condominium unit
that is ready for occupancy, (iii) a manufactured home unit that is
permanently attached to the underlying residential -real property, but
not (iv) a mobile home, it co-op, or a multi-family dwelling for more
than four families, (b) is, if required by Appraisal Requirements,
covered by an Appraisal, and (c) is insured against loss or damage by
fire and all other hazards normally included in
standard-extended-coverage insurance (including, without limitation,
flood insurance if the property is in a federally-designated-flood
plain) in accordance with the Collateral Documents for it and Borrower
is named as a loss-payee for that insurance.
7. Which conforms in all material respects with all of the requirements
of a valid and enforceable Take-Out Commitment held by Borrower.
8. The Collateral Documents for which (a) are delivered to Administrative
Agent within 90 days after the date of the related promissory note,
(b) are in compliance with all Governmental Requirements, (c) are
otherwise in compliance with the requirements of the Credit Documents
and other-wise in form and substance acceptable to Administrative
Agent, and (d) are subject to no Liens other than Lender Liens and
other Permitted Liens.
9. Which has been held by Administrative Agent for Lenders as an
Eligible-Mortgage Loan for either (a) 120 calendar days or less, or
(b) for B/C Loans and Second-Lien Loans committed to bulk delivery
programs approved in writing by Administrative Agent, 180 calendar
days or less.
10. Which has not -- and no Collateral Document for which has -- been (a)
sold to an investor and repurchased by Borrower, (b) rejected by an
investor, (c) delivered to an investor or any Person for it for more
than the Shipping Period, or (d) delivered to Borrower for correction
for more than the CORRECTION PERIOD.
11. Except in the case of B-Mortgage Loans, C-Mortgage Loans, and Jumbo
Loans, the Mortgage Loan complies with all applicable requirements for
purchase by GNMA, FNMA, and FHLMC. In the case of Jumbo Loans that are
not also B-Mortgage Loans or C-Mortgage Loans, such Mortgage Loans
comply with all applicable requirements for purchase by GNMA, FNMA,
and FHLMC except that the amount of such Mortgage Loan exceeds the
maximum loan amount under those requirements.
B. ELIGIBLE-REPURCHASED LOAN. An otherwise Eligible-Mortgage Loan, except that:
1. Which is valid and enforceable without offset, counterclaim, defense,
or right of recision or avoidance of any kind.
2. Which is guaranteed or issued by EITHER (a) FNMA, FHLMC or GNMA OR (b)
any other Person if (i) Borrower first obtains Determining Lenders'
written approval in their sole discretion and (ii) that other Person
has not been rejected as an issuer or guarantor by notice to Borrower
from Agent or Determining Lenders in their sole discretion.
3. Under which no default exists.
4. The mortgage pool in which it was included consists of Mortgage Loans
that were -- before the issuance of the relevant Mortgage Security
Eligible Mortgage Loans constituting part of the Collateral.
5. The Collateral Documents for which (a) have been delivered to or for
Agent, (b) are in compliance with all Laws, (c) are otherwise in form
and substance acceptable to Agent, and (d) are subject to no Liens
other than Lender Liens and other Permitted Liens.
6. Which has been held by Agent for Lenders as an Eligible-Mortgage
Security for a tune period that is 90 calendar days or less.
C. ELIGIBLE-MORTGAGE SECURITY. A Mortgage Security:
1. Which is valid and enforceable without offset, counterclaim, defense,
or right of recision or avoidance of any kind.
2. Which is guaranteed of issued by EITHER (a) FNMA, FHLMC, or GNMA OR
(b) any other Person if (i) Borrower first obtains Required Lenders'
written approval in their sole discretion and (ii) that other Person
has not been rejected as an issuer or guarantor by notice to Borrower
from Administrative Agent or Required Lenders IN THEIR SOLE
DISCRETION.
3. Under which no default exists.
4. Which conforms in all respects with all of the requirements of a valid
and enforceable Take-Out Commitment held by Borrower.
5. The Mortgage Pool for which consists of Mortgage Loans that were --
before the issuance of that Mortgage Security -- Eligible-Mortgage
Loans constituting part of the Collateral.
6. The Collateral Documents for which (a) have been delivered to or for
Administrative Agent, (b) are in compliance with all Governmental
Requirements, (c) are otherwise in form and substance acceptable to
Administrative Agent, and (d) are subject to no Liens other than
Lender Liens and other Permitted Liens.
7. Which has been held by Administrative Agent for Lenders as an
Eligible-Mortgage Security for a time period that -- when added to the
longest-time period any Mortgage Loan to which it relates was included
in the Collateral as an Eligible-Mortgage Loan -- is 180 days or less.
SCHEDULE 4.2
BORROWING-BASE CALCULATIONS
A. BORROWING BASE. The amount equal to:
1. For each item of Eligible-Mortgage Collateral, 98% (except for B/C
Loans and Second-Lien Loans, which is 97%), of the LEAST of its:
(a) unpaid principal balance;
(b) Face amount less discounts; or
(c) Take-Out Price. plus,
2. For each Eligible-Repurchased Loan, 98%, of the LEAST of its:
(a) unpaid principal balance;
(b) face amount less discounts;
(c) Take-Out Price due from a conveyance to FHA or VA; or
(d) At the election of Administrative Agent or Required Lenders' at
any time, Market Value as follows:
90% for FHA insured Mortgage Loans
80% for VA Mortgage Loans and all other
Mortgage Loans as reduced by the following
matters:
3. No more than the Wet Sublimit may be included for Mortgage Loans
supporting Wet Borrowings, and nothing may be included for any
Mortgage Loan supporting a Wet Borrowing upon the expiration of its
applicable Wet Period; and
4. No more than the applicable Jumbo Sublimit may be included for any
Jumbo Loan or for all Jumbo Loans.
5. Any B/C Loan or Second-Lien Loan which is more than 30 days past due
unless expressly covered by specific takeout.
B. TAKE-OUT PRICE. For the Mortgage Collateral for which Borrower elects:
1. DESSIGNATED. To deliver to Administrative Agent a Take-Out Commitment
designating a specific Eligible-Mortgage Loan or Eligible-Mortgage
Security for purchase, the amount which the Approved Investor has
committed to pay for that Eligible-Mortgage Loan or Eligible-Mortgage
Security.
2. Not desalinated. Not to deliver to Administrative Agent a Take-Out
Commitment designating a specific Eligible-Mortgage Loan or
Eligible-Mortgage Security for purchase, an amount determined by
Mortgage-Collateral Group as follows:
(a) As used in this SCHEDULE 4.2, the term "MORTGAGE- COLLATERAL
GROUP" means all Mortgage Collateral bearing the same interest
rate without regard to whether that Mortgage Collateral consists
of Mortgage Loans or Mortgage Securities. In determining any such
grouping, Mortgage Securities are grouped with other Mortgage
Collateral in accordance with the interest rates of the
underlying and related pools of eligible Mortgage Loans and not
by the interest rates appearing on the face of any the Mortgage
Securities.
(b) The Take-Out Price for each Mortgage-Collateral Group is the
corresponding weighted average Take-Out Commitment price,
expressed as a percentage, determined from all of' the respective
Take-Out Commitments for the sale of the items comprising that
Mortgage Collateral Group held by Borrower at that time -- and
not designated for specific Mortgage Collateral under PART B.I.
above -- calculated as follows:
All Take-Out Commitments are first grouped to correspond to each
related Mortgage-Collateral Group, with the result that for each
Mortgage-Collateral Group there will be a corresponding 'group of
Take-Out Commitments;
The aggregate principal balance of Take-Out Commitments in each
group is then determined; and
The principal balance of each Take-Out Commitment in each group
is then multiplied by the related commitment price and the sum of
the products thereof is divided by the aggregate principal
balance of Take-Out Commitments in each group to determine the
weighted average Take-Out Commitment price.
(c) For all Mortgage Collateral, the corresponding weighted average
Take-Out Commitment price, expressed as a percentage, determined
by DIVIDING (i) the total Take-Out Price for all Mortgage
-Collateral Groups determined above by (ii) the total principal
amount of all Take-Out Commitments determined above.
If the price in a Take-Out Commitment is stated as a yield and not as a
percentage of par, a yield so stated is converted to a percentage price
by the use of the "NET YIELD TABLES FOR GNMA MORTGAGE SECURITIES"
published by Financial Publishing Company or the "MORTGAGE YIELD
CONVERSION TABLES" published by FNMA, as applicable and acceptable to
Administrative Agent.
SCHEDULE 4.3
COLLATERAL PROCEDURES
A. MORTGAGE LOAN FOR DRY BORROWING. Delivery of a Mortgage Loan to support it
Dry Borrowing requires delivery to Administrative Agent of the following
Collateral Documents -- each of which must be in form and substance satisfactory
to Administrative Agent -- in the following manner:
1.A Collateral -Delivery Notice that, among other things, identifies
the documents being delivered to Lender for that Dry Borrowing.
2. The original promissory note evidencing the Mortgage Loan, properly
payable or endorsed to Borrower, and endorsed in blank by Borrower.
3.An assignment from Borrower of the mortgage, deed of trust, or trust
deed securing the Mortgage Loan, executed in blank by Borrower, and in
recordable form.
4.A certified copy of each intervening assignment to Borrower of that
mortgage, deed of trust, or trust deed sent for recording and copies
of all previous-intervening assignments.
5. A certified copy of that original mortgage, deed of trust, or trust
deed sent for recording in the jurisdiction where the property is
located.
6. EITHER (a) a Take-Out Commitment specifically designating that
Mortgage Loan for purchase or (b) Take-Out Commitments with the
take-out prices indicated (unless a master Take-Out Commitment has
already been delivered to, and is on file with, Administrative Agent).
7. Unless Administrative Agent has initiated the wire transfer for
originating the Mortgage Loan, a copy of the check evidencing that
origination or confirmation of a Bank One-One Check funding.
8. A data-processing print-out reflecting that Mortgage Loan's loan
number, mortgagor, origination date, original amount, outs
standing-principal balance., interest rate, type of loan, requested
advance amount, and indicating what sublimit under this agreement (if
any) applies to that Mortgage Loan.
9.Any and all other files, documents, instruments, certificates,
correspondence, or other records that are (a) requested b,
Administrative Agent and (b) deemed by Administrative Agent in its
sole and reasonable judgment to be necessary, appropriate, or
desirable.
MORTGAGE LOAN FOR WET BORROWING. Delivery of' a Mortgage Loan to
support a Wet Borrowing requires delivery to Administrative Agent of
the following Collateral Commitments -- each of which must be in form
and substance, satisfactory to Administrative Agent -- in the
following manner:
1. A Collate ",-Delivery Notice that, among other things, identifies
the documents that must be delivered to Administrative Agent before
the expiration of the Wet Period for that Wet Borrowing.
2. Unless Administrative Agent has approved a wire transfer initiated
by Borrower for originating the age Loan, EITHER (a) a copy of the
check evidencing that origination, (b) evidence that the Mortgage,
check or that origination is held by a tide company pending
disbursement, OR (C) confirmation of a Bank One-One Check funding.
3. A data-processing print-out reflecting that Mortgage Loan's loan
number, mortgagor, origination 4ite, original amount, out standing
principal balance, interest rate, type of loan, requested advance
amount, and indicating what sublimit under this agreement (if any)
applies to ____ Mortgage Loan.
4. A Take-Out Commitment specifically designating that Mortgage Loan
or a Take-Out Commitment specifying a bulk delivery program.
C. MORTGAGE SECURITY. Delivery of a Mortgage Security to support a Dry
Borrowing requires delivery to Administrative Agent of the following
Collateral Documents -- each of which must be in form and substance
satisfactory to Administrative Agent -- in the following manner:
1. A Collateral-Delivery Notice that, among other things, identifies
all documents being delivered to Lender for that Dry Borrowing.
2. For a Mortgage Security that is not in book-entry form:
(a) The original Mortgage Security.
(b) A bond power endorsed -- or another appropriate instrument or
assignment executed -- by Borrower in blank.
3. For a Mortgage. Security that is in book-entry form, confirmation
of EITHER:
(a) The appropriate entry (i) in records of a Federal Reserve Bank
of the nominal ownership by Administrative Agent (oil behalf of
Lenders) of any FNMA Mortgage Security that constitutes a FNMA
BOOKENTRY SECURITY," as defined in the BOOK-ENTRY PROCEDURES FOR
FNMA SECURITIES, 24 C.F.R SS.SS. 81.41-81.49 (the "FNMA
BOOK-ENTRY 1ROCEDURES"), or a FHLMC Mortgage Security that
constitutes a "FHLMC BOOK-ENTRY SECURITY," as defined in the
FEDERAL HOME LOAN MORTGAGE CORPORATION BOOK-ENTRY REGULATIONS, I
C.F.R. SS.SS. 462.1-462.8 (the "FHLMC BOOK-ENTRY REGULATIONS"),
and (ii) by Administrative Agent in its records of Borrower's
ownership of that book-entry Mortgage Security subject to a
Lender Lien; OR
(b) The (i) appropriate entry by Chemical Bank -- in its capacity as
custodian for Participants Trust Company ("PTC"), GNMA's central
depository -- in its records of the nominal ownership by
Administrative Agent (on behalf of Lenders) of any
GNMA-guaranteed Mortgage Security, (ii) the appropriate entry by
Administrative Agent in its records of
Borrower's ownership of that book-entry Mortgage Security subject to a
Lender Lien, and (iii) receipt by Administrative Agent of a
confirmation of transaction in the form of a written advice specifying
the amount and description of that book-entry Mortgage Security
subject to that Lien.
4. EITHER (a) a Take-Out Commitment specifically designating that Mortgage
Security for purchase
OR (b) Take-Out Commitments with the take-out prices indicated (unless
a master Take-Out Commitment has already been delivered to, and is on
file with, Administrative Agent).
SCHEDULE 5
CLOSING CONDITIONS
Unless otherwise specified, all dated as of the Closing Date or a date (a
"CURRENT DATE") within 30 days before the Closing Date.
H&B [1.] CREDIT AGREEMENT (the "CREDIT AGREEMENT") dated as of the
Closing Date, between CFI MORTGAGE CORPORATION, a Florida
corporation ("BORROWER"), certain lenders ("LENDERS"), and BANK
ONE, TEXAS, N.A., as Administrative Agent for Lenders
("ADMINISTRATIVE AGENT") all the terms in which have the same
meanings when used in this schedule accompanied by:
Schedule 2 Lenders and Commitments
Schedule 4.1 Eligibility Conditions
Schedule 4.2 Borrowing-Base Calculations
Schedule 4.3 Collateral Procedures
Schedule 5 Closing Conditions
Schedule 6.2 Companies
Schedule 6.9 Litigation and Judgments
Schedule 6.10 Affiliate Transactions
Exhibit A Warehouse Note
Exhibit B Guaranty
Exhibit C- I Security Agreement
Exhibit C-2 Financing Statement
Exhibit C-3 Shipping Request
Exhibit C-4 Bailee Letter for Investors
Exhibit C-5 Mlee Letter for Pool Custodian
Exhibit C-6 Trust Receipt and Agreement
Exhibit C-7 Release Request
Exhibit D- I Borrowing Request
Exhibit D-2 Collateral- Delivery Notice
Exhibit D-3 Borrowing-Base Report
Exhibit D-4 Brake-Out Report
Exhibit D-5 Management Report
Exhibit D-6 Compliance Certificate
Exhibit D-7 Collateral- Conversion Notice
Exhibit E Opinion of Counsel
Exhibit F Assignment and Assumption Agreement
H&B [2.] WAREHOUSE NOTE dated the Closing Date, in the original
principal amount of $50,000,000,executed by Borrower, payable to
the order of Bank One, Texas, N.A., as the sole initial Lender,
and in substantially the form of EXHIBIT A to the Credit
Agreement.
H&B [3.] GUARANTY dated the Closing Date, executed by CFI Mortgage,
Inc. as Guarantor, accepted by Administrative Agent, and in
substantially the form of EXHIBIT B to the Credit Agreement.
indicates items not complete at time of this draft of Ns
schedule, together with names of parties or counsel with
responsibility for each.
H&B [4.] SECURITY AGREEMENT dated the Closing Date, executed by
Borrower as DEBTOR and Administrative Agent as SECURED PARTY, and
in substantially the form of EXHIBIT C-1 to the Credit Agreement.
H&B [5.] FINANCING STATEMENTS executed by Borrower as DEBTOR and
Administrative Agent as SECURED PARTY, for filing with the
following UCC filing offices, and in substantially the form of
EXHIBIT C-2 to the Credit Agreement:
H&B [6.] UCC SEARCHREPORTS for financing statements filed against
Borrower as DEBTOR with the following UCC filing offices as of
Current Dates:
H&B [7.] TERMINATIONS OR AMENDMENTS OF FINANCING STATEMENTS reflected
in the UCC Search Reports described above that, in the judgment
of Administrative Agent and its special counsel, conflict with
the priority of the Lender Liens contemplated by the Credit
Documents, each executed by the appropriate secured party and (if
necessary) debtor, mid in form acceptable to Administrative Agent
for filing with the applicable UCC filing offices. AA AA
[8]CONFIRMATION of the establishment of the Funding and
Settlement Accounts.
AA [9] LIST agreed to by Borrower and Administrative Agent
identifying the non-FNMA, FHLMC, and GNMA Approved Investors and
guarantors or issuers of Eligible-Mortgage Securities, if any.
AA [10] CUSTODIAL FEES AGREEMENT dated as of a Current Date,
executed by Borrower and Administrative Agent.
BWR [11] ARTICLES OF INCORPORATION for Borrower, certified as of a
Current Date by the Florida Secretary of State.
BWR [12] OFFICERS' CERTIFICATE for Borrower, dated as of the Closing
Date, executed by the President and Secretary of Borrower as to
(a) the resolutions duly adopted by its directors approving and
authorizing the execution of the Credit Documents, (b) its
bylaws, (c) its articles of incorporation, (d) the due incumbency
of its officers authorized to execute or attest to the Credit
Documents, accompanied by:
EXHIBIT A - Resolutions
EXHIBIT B - Bylaws
EXHIBIT C - ARTICLES of Incorporation
BWR [13] ARTICLES OF INCORPORATION for CFI Mortgage, Inc., certified
its of a Current Date by the Delaware Secretary of State.
BWR [14.] OFFICERS' CERTIFICATE for CFI Mortgage, Inc., dated as of
the Closing Date, executed by the President and Secretary of CFI
Mortgage, Inc. as to (a) the resolutions duly adopted by its
directors approving and authorizing the execution of the Credit
Documents, (b) its bylaws, (c) its articles of incorporation, (d)
the due incumbency of its officers authorized to execute or
attest to the Credit Documents, accompanied by:
EXHIBIT A - Resolutions
EXHIBIT B - Bylaws
EXHIBIT C - ARTICLES of Incorporation
H&B [15.] CERTIFICATES OF QUALIFICATION, GOOD STANDING, AND AUTHORITY
for the following Persons, issued as of Current Dates by the
appropriate Governmental Authorities for the following
jurisdictions:
BWR [16.] OPINION OF COUNSEL dated as of the Closing Date, of as
counsel to Borrower, addressed to Administrative Agent, Lenders,
and Haynes and Bootie, L.L.P.,addressing the matters described on
EXHIBIT E.
17. Any other documents and items as Administrative Agent or any
Lender may reasonably request.
SCHEDULE 6.2
[TO BE COMPLETED BY BORROWER]
COMPANIES
Schedule 6.2
SCHEDULE 6.9
LITIGATION AND JUDGMENTS
[TO BE COMPLETED BY BORROWER
SCHEDULE 6.9
SCHEDULE 6.10
AFFILIATE TRANSACTIONS
[TO BE COMPLETED BY BORROWER
SCHEDULE 6.10
<PAGE>
WAREHOUSE NOTE,
S50A0,(()() June 30,
1997
FOR VALUE RECEIVED, CFI MORTGAGE CORPORATION, a Florida corporation
(to be known as Bankers Direct Mortgage Corporation as of July 1, 1997)
("MAKER"), promises to pay to the order of BANK ONE, TEXAS, NA. ("PAYEE")
that portion of the principal amount of $50,000,000 that may from Lime to
Lime be disbursed and outstanding under this note TOGETHER WITH interest.
This note is a "WAREHOUSE NOTE" under the Credit Agreement (as
renewed, exceeded, amended, or restated, the "CREDIT AGREEMENT') dated as
of June 30, 1997, between Maker, Payee, possibly other Lenders, and Bank
One, Texas, N.A., as Administrative Agent for Lenders. All of the defined
terms in the Credit Agreement have the same meanings when used -- unless
otherwise defined in this note.
This note incorporates by reference the principal and interest payment
terms in the Credit Agreement for this note, including, without limitation,
the final maturity, which is the Termination Date. Principal and interest
are payable to the holder of this note through Administrative Agent at
EITHER (a) its offices at 1717 Main Street, 4th Floor, Dallas, Texas 75201,
OR (b) at any other address so designated by Administrative Agent in
written notice to Maker.
This note incorporates by reference all other provisions in the Credit
Agreement applicable to this note such as provisions for disbursements of
principal, applicable-interest laws before and after an event of Default,
voluntary and mandatory prepayments, acceleration of maturity, exercise of
Rights, payment of attorneys' fees, court costs, and other costs of
collection, certain waivers by Maker and other obligors, assurances and
security, choice of Texas and United States federal Governmental
Requirements, usury, savings, and other matters applicable to Credit
Documents under the Credit Agreement.
CFI MORTGAGE CORPORATION, as MAKER
By
Title:
EXHIBIT 11
GUARANTY
THIS GUARANTY is executed as of June 30, 1997, by CFI Mortgage, Inc.
("GUARANTOR") for the benefit of BANK ONE, TEXAS, N.A. (in its capacity as
Administrative Agent for the Lenders now or in the future party to the Credit
Agreement described below, 'ADMINISTRATIVE AGENT").
CF1 MORTGAGE CORPORATION, a Florida corporation (to be known as Bankers
Direct Mortgage Corporation as of July 1, 1997) ("BORROWER"), Administrative
Agent, and Lenders have executed the Credit Agreement (as renewed, extended,
amended, or restated, the "CREDIT AGREEMENT") dated as of June 30, 1997. The
execution and delivery of this guaranty are requirements to Administrative
Agent's and Lenders' execution of the Credit Agreement, are integral to the
transactions contemplated by the Credit Documents, and are conditions precedent
to Lenders' obligations to extend credit under the Credit Agreement.
ACCORDINGLY, for adequate and sufficient consideration, Guarantor agrees
with Administrative Agent AND LENDERS AS follows:
1. DEFINITIONS. Terms defined in the Credit Agreement have the same
meanings when used -- unless otherwise defined -- in this guaranty. As used in
this guaranty:
ADMINISTRATIVE AGENT is defined in the preamble to this guaranty and
includes its successor appointed under the Credit Documents and acting as
ADMINISTRATIVE AGENT for Lenders under the Credit Documents.
BORROWER is defined in the recitals to this guaranty and includes, without
limitation, Borrower, Borrower as a debtor in possess ion, and any receiver,
trustee, liquidator, conservator, custodian, or similar party appointed for
Borrower or for all or substantially all of Borrower's assets under any Debtor
Law.
CREDIT AGREEMENT is defined in the recitals to this guaranty.
GUARANTEED DEBT means the Obligation, as defined in the Credit Agreement,
and all present and future costs, attorneys' fees, and expenses incurred by
Administrative Agent or any Lender to enforce Borrower's, Guarantor's, or any
other obligor's payment of any of the Obligation, including, without limitation,
all present and future amounts that would become due but for the operation of
ss.ss. 502 or 506 or any other provision of TITLE 11 of the UNITED STATES CODE
and all present and future accrued and unpaid interest (including, without
limitation, all post-petition interest if Borrower voluntarily or involuntarily
becomes subject to any Debtor Law).
GUARANTOR is defined in the preamble to this guaranty.
SUBORDINATED DEBT means all present and future obligations of Borrower to
Guarantor, whether those obligations are (a) direct, indirect, fixed,
contingent, liquidated, unliquidated, joint, several, or joint and several, (b)
due or to become due to Guarantor, (c) held by or are to be held by Guarantor,
(d) created directly or acquired by assignment or otherwise, or (e) evidenced in
writing.
2. GUARANTY. Guarantor guarantees to Administrative Agent and Lenders the
prompt payment of the Guaranteed Debt at -- and at all times after -- maturity
(by acceleration or otherwise). This is an absolute, irrevocable, and continuing
guaranty, and the circumstance that at any time or from time to Lime the
Guaranteed Debt may be paid in full does not affect the obligation of Guarantor
with respect to the Guaranteed Debt incurred after that time. This guaranty
remains in effect until the Guaranteed Debt is fully paid and performed and all
commitments to extend any credit under the Credit Agreement have terminated.
Guarantor may not rescind or revoke its obligations with respect to the
Guaranteed Debt.
3. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Administrative Agent that (a) Guarantor has the power and authority to execute,
deliver, and perform this guaranty, which execution, delivery, and performance
does not violate any Governmental Requirements or agreements by which Guarantor
or any of Guarantor's assets is bound, (b) the value of the consideration
received and to be received by Guarantor is reasonably worth at least as much as
Guarantor's liability under this guaranty, and that liability may reasonably be
expected to directly or indirectly benefit Guarantor, (c) this guaranty
constitutes a legal and binding obligation of Guarantor, enforceable against
Guarantor in accordance with its terms, except as enforceability may be limited
by applicable Debtor Laws and general principles of equity, (d) all financial
statements and other information about Guarantor's financial condition and cash
flow are true and correct in all material respects and fairly present
Guarantor's financial condition, cash flows, material liabilities, and (e)
Guarantor is Solvent.
4. CUMULATIVE RIGHTS. If Guarantor becomes liable for any indebtedness
owing by Borrower to Administrative Agent or any Lender, OTHER THAN under this
guaranty, that liability may not be in any manner impaired or affected by this
guaranty. The Rights of Administrative Agent or Lenders under this guaranty are
cumulative of any and all other Rights that Administrative Agent or Lenders may
ever have against Guarantor. The exercise by Administrative Agent or Lenders of
any Right under this guaranty or otherwise does not preclude the concurrent or
subsequent exercise of any other Right.
5. PAYMENT UPON DEMAND. If an Event of Default exists, Guarantor shall --
on demand and without further notice of dishonor and without any notice having
been given to Guarantor previous to that demand of either the acceptance by
Administrative Agent or Lenders of this guaranty or the creation or incurrence
of any Guaranteed Debt -- pay the amount of the Guaranteed Debt then due and
payable to Administrative Agent and Lenders. It is not necessary for
Administrative Agent or Lenders, in order to enforce that payment by Guarantor,
first or contemporaneously to institute suit or exhaust remedies against
Borrower or others liable on that indebtedness or to enforce Rights against any
collateral securing that indebtedness.
6. SUBORDINATION. The Subordinated Debt is expressly subordinated to the
full and final payment of the Guaranteed Debt. Guarantor agrees not to accept
any payment of any Subordinated Debt from Borrower if an Event of Default
exists. If Guarantor receives any payment of any Subordinated Debt in violation
of the foregoing, Guarantor shall hold that payment in trust for Administrative
Agent and Lenders and promptly turn it over to Administrative Agent, in the form
received (with any necessary endorsements), to be applied to the Guaranteed
Debt.
7. SUBROGATION AND CONTRIBUTION. Guarantor may not assert, enforce, or
otherwise exercise any Right of subrogation to any of the Rights or Liens of
Administrative Agent or Lenders or any other beneficiary against Borrower or any
other obligor on the Guaranteed Debt or any collateral or other security or any
Right of recourse, reimbursement, subrogation, contribution, indemnification, or
similar Right against Borrower or any other obligor on any Guaranteed Debt or
any guarantor of it. Guarantor irrevocably waives all of the foregoing Rights
(whether they arise in equity, under contract, by statute, under common law, or
otherwise). Guarantor irrevocably waives the benefit of, and any Right to
participate in, any collateral or other security given to Administrative Agent
or Lenders or any other beneficiary to secure payment of any Guaranteed Debt.
8. No Release. Guarantor's obligations under this guaranty may not be
released, diminished, or affected by the occurrence of any one or more of the
following events: (a) any taking or accepting of any other security or assurance
for any Guaranteed Debt; (b) any release, surrender, exchange, subordination,
impairment, or loss of any collateral securing any Guaranteed Debt; (c) any full
or partial release of the liability of any other obligor on the Obligation; (d)
the modification of, or waiver of compliance with, any terms of any other Credit
Document; (e) the insolvency, bankruptcy, or lack of corporate or partnership
power of any party or any line liable for any Guaranteed Debt, whether now
existing or occurring in the future; (f) any renewal, extension, or
rearrangement of any Guaranteed Debt or any adjustment, indulgence, forbearance,
or compromise that may be granted or given by Administrative Agent or any Lender
to any other obligor on the Obligation; (g) any neglect, delay, omission,
failure, or refusal of Administrative Agent or any Lender to take or prosecute
any action in connection with the Guaranteed Debt; (h) any failure of
Administrative Agent or any Lender to notify Guarantor of any renewal,
extension, or assignment of any Guaranteed Debt, or the release of any security
or of any other action taken or refrained from being taken by Administrative
Agent or any Lender against Borrower or any new agreement between Administrative
Agent, any Lender, and Borrower, it being understood that neither Administrative
Agent nor any Lender is required to give Guarantor any notice of any kind under
any circumstances whatsoever with respect to or in connection with any
Guaranteed Debt, OTHER THAN any notice required to be given to Guarantor
elsewhere in this guaranty; (i) the unenforceability of any Guaranteed Debt
against any party because it exceeds the amount permitted by applicable
Governmental Requirements, the act of creating it is ULTRA VIRES the officers
creation it exceeded their authority or violated their fiduciary duties in
connection with it, or otherwise; or 0) any payment of the Obligation to
Administrative Agent or Lenders is held to constitute a preference under any
Debtor Law or for any other reason Administrative Agent or any Lender is
required to refund that payment or make payment to someone else (and in each
such instance this guaranty will be reinstated in an amount equal to that
payment).
9. WAIVERS. Guarantor waives all Rights by which it might be entitled to
require suit on an accrued Right of action in respect of any Guaranteed Debt or
require suit against Borrower or others, whether arising under ss. 34.02 of the
TEXAS BUSINESS AND COMMERCE CODE, as amended (regarding its Right to require
Administrative Agent or Lenders to sue Borrower on accrued Right of action
following its written notice to Administrative Agent or Lenders), ss. I ZOO] of
the TEXAS CIVIL PRACTICE AND REMEDIES CODE, as amended (allowing suit against it
without suit against Borrower, but precluding entry of judgment against it
before entry of judgment against Borrower), RULE 31 of the TEXAS RULES OF CIVIL
PROCEDURE, as amended (requiring Administrative Agent or Lenders to join
Borrower in any suit against it unless judgment has been previously entered
against Borrower), or otherwise.
10. CREDIT AGREEMENT PROVISIONS. Guarantor acknowledges that certain (a)
representations and warranties in the Credit Agreement are applicable to
Guarantor and confirms that each such representation and warranty is true and
correct, and (b) covenants and other provisions in the Credit Agreement are
applicable to Guarantor or are imposed upon Guarantor and agrees to promptly and
properly comply with or be bound by each of them.
11. RELIANCE AND DUTY TO REMAIN INFORMED. Guarantor confirms that it has
executed and delivered this guaranty after reviewing the terms and conditions of
the Credit Documents and such other information as it has deemed appropriate in
order to make its own credit analysis and decision to execute and deliver this
guaranty. GUARANTOR CONFIRMS that it has made its own independent investigation
with respect to Borrower's creditworthiness and is not executing and delivering
this guaranty in reliance on any representation or warranty by Administrative
Agent or any Lender as to that creditworthiness. Guarantor expressly assumes all
responsibilities to remain informed of the financial condition of Borrower and
any circumstances affecting Borrower's ability to perform under the Credit
Documents to which it is a party or any collateral securing any Guaranteed Debt.
12. NO REDUCTION. The Guaranteed Debt may not be reduced, discharged, or
released because or by reason of any existing or future offset, claim, or
defense (except for the defense of complete and final payment of the Guaranteed
Debt) of Borrower or any other party against Administrative Agent or Lenders or
against payment of the Guaranteed Debt, whether that offset, claim, or defense
arises in connection with the Guaranteed Debt or otherwise. Those claims and
defenses include, without limitation, failure of consideration, breach of
warranty, fraud, bankruptcy, incapacity/infancy, statute of limitations, lender
liability, accord and satisfaction, usury, forged signatures, mistake,
impossibility, frustration of purpose, and unconscionability.
13. BANKRUPTCY OR Death. If Guarantor becomes insolvent, fails to pay
Guarantor's debts 1'~,erierally as they become due, voluntarily seeks (or
consents to or acquiesces in) any benefits of any Debtor Law, or becomes a party
to (or is made the subject of) any proceeding under any Debtor Law (other than
as a creditor or claimant) that could suspend or otherwise adversely affect the
Rights of Administrative Agent or my Lender under this guaranty, then, in any
such event, the Guaranteed Debt is automatically (as between that Guarantor,
Administrative Agent, and Lenders), a fully matured, due, and payable obligation
of Guarantor to Administrative Agent and Lenders (without regard to whether
Borrower is then in default under the Credit Agreement or whether any of the
Obligation is then due and owing by Borrower), payable in full -- I.E., the
estimated amount owing in respect of the contingent claim created under this
guaranty -- by Guarantor to Administrative Agent and Lenders upon demand.
14. CREDIT DOCUMENT. This guaranty is a Credit Document and is subject to
the applicable provisions of SECTIONS I and 12 of the Credit Agreement, all of
which are incorporated into this guaranty by reference the same as if set forth
in this guaranty verbatim.
15. COMMUNICATIONS. For purposes of SECTION 12.2 of the Credit Agreement,
Guarantor's address and telecopy number are set forth on the signature page to
this guaranty.
16. Amendments, Etc. No amendment, waiver, or discharge to or under this
guaranty is valid unless it is in writing and is signed by the party against
whom it is sought to be enforced and is otherwise in conformity with the
requirements of SECTION 12.10 of the Credit Agreement.
17. ENTIRETY. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTISAN MAY NOT BE CONTRADICTED By evidence OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE No UNWRI17EN ORAL
AGREEMENTS BETWEEN THE PARTIES.
18. ADMINISTRATIVE AGENT AND LENDERS. Administrative Agent is the agent for
each Lender under the Credit Agreement. All Rights granted to Administrative
Agent under or in connection with this guaranty are for each Lender's ratable
benefit. Administrative Agent may, without the Consent of any Lender, exercise
any Rights in Administrative Agent's or Lenders' favor under or in connection
with this guaranty. Administrative Agent's and each Lender's Rights and
obligations vis-a-vis each other may be subject to one or more separate
agreements between those parties. However, Guarantor is not required to inquire
about any such agreement and is not subject to any terms of it unless Guarantor
specifically joins it. Therefore, neither Guarantor nor its successors or
assigns is entitled to any benefits or provisions of any such separate agreement
or is entitled to rely upon or raise as a defense any party's failure or refusal
to comply with the provisions of it.
19. Parties. This guaranty benefits Administrative Agent, Lenders, and
their respective successors and assigns and binds Guarantor and Guarantor's
successors and assigns. Upon appointment of any successor Administrative Agent
under the Credit Agreement, all of the Rights of Administrative Agent under this
guaranty automatically vest in that new Administrative Agent as successor
Administrative Agent on behalf of Lenders without any further act, deed,
conveyance, or other formality OTHER THAN that appointment. The Rights of
Administrative Agent and Lenders under this guaranty may be transferred with any
assignment of the Guaranteed Debt. The Credit Agreement contains provisions
governing assignments of the Guaranteed Debt and of Rights and obligations under
this guaranty.
REMAINDER OF PAGE INTENTIONALLY BLANK
SIGNATURE PAGE FOLLOWS
EXECUTED as of the date first stated above.
CFI MORTGAGE, INC., as Guarantor
By Chris Castoro:
Administrative Agent executes this guaranty in acknowledgment of Paragraph 17
above.
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT
By
Paul J. Lazusky
Signature Page to Guaranty
EXHIBIT C-1
SECURITY AGREEMENT
THIS AGREEMENT is entered into as of June 30,1997, between CFI MORTGAGE
CORPORATION, a Florida corporation (to be known as Bankers Direct Mortgage
Corporation as of July 1, 1997) ("DEBTOR"), certain Lenders, and BANK ONE,
TEXAS, N.A., as Administrative Agent (in that capacity, "SECURED PARTY' for
Lenders.
<PAGE>
Debtor, Lenders, and Administrative Agent have entered into the Credit
Agreement (as renewed, extended, amended, or restated, the "CREDIT AGREEMENT"
dated as of June 30, 1997. As a continuing inducement to the Lenders to extend
credit to Debtor under the Credit Agreement -- and as a condition precedent to
that credit -- Debtor is executing and delivering this agreement for the benefit
of Lenders and Secured Party.
ACCORDINGLY, for adequate and sufficient consideration, Debtor and Secured
Party agree as follows:
SECTION 1. DEFINITIONS AND REFERENCES. Unless stated otherwise, (a) terms
defined in the Credit Agreement or the UCC have the same meanings when used in
this agreement, and (b) to the extent permitted by Governmental Requirements, if
in conflict (i) the definition of a term in the Credit Agreement controls over
the definition of that term in the UCC, and the definition of a term in
ARTICLE 9 of the UCC controls over the definition of that term elsewhere in the
UCC.
COLLATERAL is defined in SECTION 2.2 of this agreement.
DEBTOR is defined in the preamble to this agreement and includes, without
limitation, Debtor, Debtor as a debtor-in-possession, and any receiver, trustee,
liquidator, conservator, custodian, or similar party appointed for Debtor or for
substantially all of Debtor's assets under any Debtor Law.
OBLIGOR means any Person obligated with respect to any Collateral (whether
as an account debtor, obligor on an instrument, issuer of securities, or
otherwise).
SECURED PARTY is defined in the preamble to THIS agreement and includes its
successor appointed and acting as ADMINISTRATIVE AGENT for Lenders under the
Credit Documents.
SECURITY INTEREST means the security interest granted and the pledge and
assignment made under SECTION 2.1 of this agreement, which is a Lender Lien
under the Credit Agreement.
SECTION 2. SECURITY INTEREST AND COLLATERAL.
2.1 SECURITY INTEREST. To secure the full payment and performance of the
Obligation, Debtor grants to Secured Party for Lenders a security interest in
the Collateral and pledges and assigns the Collateral to the Secured Party, all
upon and subject to the terms and conditions of this agreement. The grant of the
Security Interest does not subject the Secured Party or any Lender to the terms
of any Collateral Document or in any way transfer, modify, or otherwise affect
(a) any of Debtor's obligations with respect to any Collateral or (b) the Lender
Liens under the Credit Agreement.
2.2 Collateral. As used in this agreement, the term "COLLATERAL" means
the present and future items and types of property described below, whether now
owned or acquired in the future by Debtor. This description of Collateral does
not permit any action prohibited by any Credit Document.
Mortgage Loans from time to time identified to Secured Party as
Collateral.
All Collateral Documents in any way related to any Mortgage Loans
identified as Collateral -including, without limitation, all
promissory notes evidencing and all mortgages, deeds of trust, or
trust deeds securing those Mortgage Loans -- whether deposited with or
held by or for Secured Party under this agreement, identified by
Debtor as Collateral for a Wet Borrowing, or otherwise.
Private-mortgage insurance (including, without limitation, all
commitments to issue any such insurance) covering -- and all
commitments issued by FHA to insure or issued by VA to guarantee --
any Mortgage Loans identified as Collateral.
SECURITY of any KIND PLEDGED BY A MORTGAGOR FOR any Mortgage Loan
identified as Collateral.
Casualty insurance assigned to Debtor in connection with any Mortgage
Loan identified as Collateral.
Mortgage Securities deposited with or held by or for Secured Party
under the Credit Document's or registered by book-entry in Secured
Party's name under the Credit Documents.
Guaranties related to Mortgage Securities identified as Collateral.
Take-Out Commitments held by Debtor for any Mortgage Loans or Mortgage
Securities identified as Collateral, Rights to deliver those Mortgage
Loans or Mortgage Securities, as the case may be, to the investors or
other purchasers under those Take-Out Commitments, and all proceeds
resulting from the sale of any of those Mortgage Loans or Mortgage
securities under those Take-Out Commitments.
Any Collateral otherwise described in this agreement that may from
time to time be delivered (a) to an investor under SECTION 4.5 of the
Credit Agreement until purchased and paid for by that investor or (b)
for correction under SECTION 4.6 of the Credit Agreement.
The Funding and Settlement Accounts and all amounts deposited in them
or represented by them.
Personal property, contract rights, accounts, and general intangibles
of any kind whatsoever relating to any Collateral.
All files, surveys, certificates, correspondence, appraisals, tapes,
discs, cards, accounting records, and other information and data of
Debtor relating to any other Collateral -- including, without
limitation, all information, data, tapes, discs, and cards necessary
to administer and service any Mortgage Loan identified as Collateral.
Cash and non-cash proceeds of any Collateral.
SECTION 3. REPRESENTATIONS AND WARRANTIES. By entering into this agreement, and
by each subsequent delivery of additional Collateral under this agreement,
Debtor reaffirms the representations and warranties contained in the Credit
Agreement. Debtor further represents and warrants to Secured Party for Lenders
as follows:
3.1 CONCERNING THE COLLATERAL. All Collateral (a) is genuine and in all
respects what it purports to be, (b) is the legal, valid, and binding obligation
of each Obligor (EXCEPT as enforceability may be limited by Debtor Laws), (c) is
free from any claim for credit, deduction, or allowance of any Obligor and free
from any defense, dispute, setoff, or counterclaim (other for payments made in
respect of it), (c) if a Mortgage Loan, was originated and is in compliance with
all Governmental Requirements (including, without limitation, all usury
Governmental Requirements, the REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974,
the EQUAL CREDIT OPPORTUNITY ACT, the FEDERAL TRUTH IN LENDING ACT, REGULATION Z
promulgated by the Board of Governors of the Federal Reserve System, and all
applicable federal and state consumer protection Governmental Requirements, (d)
if a Mortgage Security, is duly authorized and validly issued, the transfer of
which is not subject to any restrictions other than under the Credit Documents,
(e) if a Take-Out Commitment or other contract, is in full force and effect
without any material default having occurred by any party to it, and (f)
conforms to the applicable requirements of eligibility under SCHEDULE 4.1 to the
Credit Agreement.
3.2 OWNERSHIP AND PRIORITY. Debtor has full legal and beneficial ownership
of all Collateral, free and clear of all Liens EXCEPT Permitted Liens.
3.3 CREATION AND PERFECTION. The Security Interest is created and perfected
on (a) each promissory note that evidences a Mortgage Loan identified its
Collateral and that is delivered to Secured Party, (b) each promissory note that
evidences a Mortgage Loan identified by Debtor to Secured Party as supporting a
Wet Borrowing for 21 days after the Borrowing Date for that Borrowing, (c) each
Mortgage Security in certificated form that is delivered to Secured Party, (d)
each Mortgage Security in book-entry form when notice of the Security Interest
is given to the financial institution in whose favor that security has been
issued and that institution confirms that notice, (e) all Mortgage Collateral
shipped to any Approved Investor under SECTION 4.5 of the Credit Agreement (and
the Security Interest continues to be perfected until Secured Party receives
either payment or Mortgage Securities under that section), (f) all Mortgage
Collateral shipped to Debtor for correction under SECTION 4.6 of the Credit
Agreement (and the Security Interest continues to be perfected for 21 days after
that shipment), and (g) all other COLLATERAL UPON THE FILING of the Financing
Statements.
SECTION 4. COVENANTS. Until all commitments by Secured Party and Lenders to
extend credit under the Credit Agreement have been canceled or terminated and
the Obligation is fully paid and performed, Debtor covenants and agrees with
Secured Party for Lenders as follows:
4.1 CONCERNING THE COLLATERAL. Debtor (a) shall fully perform all of its
duties under and in connection with each transaction to which any Collateral
relates, (b) shall promptly notify Secured Party about any change in any fact or
circumstances represented or warranted by Debtor about any Collateral, (c) shall
promptly notify Secured Party of any claim, action, or proceeding affecting
title to my Collateral or the Security Interest and, at Secured Party's request
and Debtor's expense, appear in and defend that action or proceeding, (d) shall
hold in trust for Secured Party all Collateral not delivered to Secured Party
(without excusing any failure to deliver Collateral Documents to Secured Party
as required by this agreement) and mark that Collateral on Debtor's records that
it is subject to the Security Interest (but the failure to do so does not unpair
the Security Interest or its priority), (e) other than collections under SECTION
4.3 below, Debtor shall pay and deliver to Secured Party all items and types of
property into which any Collateral may be converted (all of which is subject to
the Security Interest) and properly endorse, assign, or take such other action
as Secured Party may request in order to maintain and continue the Security
Interest in that property, (f) may not compromise, extend, release, or adjust
payments on any Mortgage Collateral, accept a conveyance of mortgaged property
in full or partial satisfaction of any Mortgage Loan, or release any mortgage,
deed of trust, or trust deed securing or underlying any Mortgage Collateral, and
(g) may not agree to the amendment, termination, or substitution of any Take-Out
Commitment covered by the Security Interest if that amendment, termination, or
substitution would be a Material- Adverse Event.
4.2 Insurance. Debtor shall keep the Collateral fully insured in the
amounts, against the risks, and with insurers as may be approved by Secured
Party, with loss payable to Secured Party as its interest (on behalf of Lenders)
may appear.
4.3 Collections. Debtor shall, at its sole cost and expense, whether
requested to by Secured Party or in the absence of such a request, take all
actions reasonably necessary, to obtain payment, when due and payable, of all
amounts due or to become due from Obligors with respect to any Collateral.
Debtor may not agree to any rebate, refund, compromise, or extension with
respect to any Collateral or accept any prepayment on account of any Collateral
OTHER THAN in a manner and to the extent consistent with or as may otherwise be
provided in various servicing agreements to which it is a party or subject.
(A) NO EVENT OF DEFAULT. While no Event of Default exists, Debtor
shall make all of those collections, shall maintain such escrow accounts
and otherwise comply with the servicing agreements to which it is a party
or subject, and may otherwise retain and use the proceeds of those
collections in the ordinary course of its business.
(B) EVENT OF DEFAULT. While an Event of Default exists, and upon the
request of Secured Party, Debtor shall (i) notify and direct each Obligor
to make payments on the Collateral to Secured Party for deposit into such
accounts as it may designate so as to be held as Collateral under this
agreement and (ii) otherwise turn over to Secured Party, in the form
received and with any necessary endorsements, all payments it receives in
respect of any Collateral for deposit into such accounts as Secured Party
may designate to be held as Collateral under this agreement. Secured Party
may at any time apply any amounts in those accounts as a payment of the
Obligation, OTHER TITAN mortgage escrow payments that are deposited into
escrow accounts in accordance with the applicable Guide or servicing
contract.
4.4 CONCERNING DEBTOR. Without first giving Secured Party 30 days notice
(or fewer if agreed to in writing by Secured Party) of the intention to do any
of the following and performing such acts and executing and delivering to
Secured Party such additional documents as Secured Party requests in order to
continue or maintain the existence and priority of the Security Interest, Debtor
may not (a) use or transact business under any corporate, assumed, or trade
name, EXCEPT as represented in the Credit Agreement, (b) relocate its chief
executive offices or principal place of business, or (c) move or surrender
possession of its books and records regarding the Collateral.
SECTION 5. EVENT OF DEFAULT AND REMEDIES. If an Event of Default exists, then
Secured Party may, at its election (but subject to the terms and conditions of
the Credit Agreement), exercise any and all Rights available to a secured party
under the UCC, in addition to any and all other Rights afforded by the Credit
Documents, at law, in equity, or otherwise, including, without limitation (a)
requiring Debtor to assemble all or part of the Collateral and make it available
to Secured Party at a place to be designated by Secured Party which is
reasonably convenient to Debtor and Secured Party, (b) surrendering any policies
of insurance on all or part of the Collateral AND RECEIVING AND applying the
unearned premiums as a credit on the Obligation, (c) applying by appropriate
judicial proceedings for appointment of a receiver for all or part of the
Collateral (and Debtor hereby consents to any such appointment), and (d)
applying to the Obligation any cash held by Secured Party or any Lender under
the Credit Documents.
5.1 Notice. Reasonable notification of the time and place of any public
sale of the Collateral, or reasonable notification of the Lime after which any
private sale or other intended disposition of the Collateral is to be made,
shall be sent to Debtor and to any other Person entitled to notice under the
UCC. If any Collateral threatens to decline speedily in value or is of the type
customarily sold on a recognized market, Secured Party may sell or otherwise
dispose of the Collateral without notification, advertisement, or other notice
of any kind. Notice sent or given not less than five calendar days before the
taking Of the action to which the notice relates is reasonable notification and
notice for the purposes of this section.
5.2 APPLICATION OF Proceeds. Secured Party shall apply the proceeds of any
sale or other disposition of the Collateral under this SECTION 5 in the order
and manner specified in SECTION 3.5 of the Credit Agreement. Any surplus
remaining shall be delivered to Debtor or as a court Of Competent jurisdiction
may direct. If the proceeds are insufficient to pay the Obligation in full,
Debtor remains liable for any deficiency.
SECTION 6. OTHER RIGHTS.
6.1 PERFORMANCE. If Debtor fails to pay when due all Taxes on any of the
Collateral, or to preserve the priority of the Security Interest in any of the
Collateral, or to keep the Collateral insured as required by this agreement, or
otherwise fail to perform any of its obligations under any Credit Documents or
Collateral Documents with respect to the Collateral, then Secured Party may, at
its option, but without being required to do so, pay such Taxes, prosecute of
defend any suits in relation to the Collateral, or insure and keep insured the
Collateral in any amount deemed appropriate by Secured Party, or take all other
action which Debtor is required, but has failed or refused, to take under the
Credit Documents or Collateral Documents. Any sum which may be expended or paid
by SECURED PARTY UNDER THIS SECTION (including, without limitation, court costs
and attorneys' fees) shall bear interest from the dates of expenditure or
payment at the Default Rate until paid and, together with such interest, shall
be payable by Debtor to Secured Party upon demand and is part of the Obligation.
6.2 Collection.
(a) Actions. When Secured Party is entitled under SECTION 4.3 above to
make collection on any Collateral, it may in its own name or in the name of
Debtor (i) compromise or extend the time of payment with respect to any
Collateral for such amounts and upon such terms as Secured Party may
determine, (ii) demand, collect, receive, receipt for, sue for, compound,
and give acquittance for any and all amounts due or to become due with
respect to Collateral, (iii) take control of cash and other proceeds of any
Collateral, (iv) endorse Debtor's name on any notes, acceptances, checks,
drafts, money orders, or other evidences of payment on Collateral that may
come into Secured Party's possession, (v) sign Debtor's name on any invoice
or bill of lading relating to any Collateral, on any drafts against
Obligors or other Persons making payment with respect to Collateral, on
assignments and verifications of accounts or other Collateral and on
notices to Obligors making payment with respect to Collateral, (vi) send
requests for verification of obligations to any Obligor, (vii) do all other
acts and things necessary to carry out the intent of this agreement, and
(viii) authorize any servicer in respect of any Collateral to any one or
more of the foregoing on Secured Party's behalf.
(b) Other Matters. If any Obligor fails or refuses to make payment on
any Collateral when due, Secured Party is authorized, in its sole
discretion, either in its name or in Debtor's name, to take such action as
Secured Party deems appropriate for the collection of any amounts owed with
respect to Collateral or upon which a delinquency exists. Regardless of any
other provision, however, Secured Party is never liable for its failure to
collect, or for its failure to exercise diligence in the collection of, any
amounts owed with respect to Collateral and is not under any duty whatever
to anyone except Debtor to account for funds that it actually receives.
Without limiting the generality of the foregoing, Secured Party has no
responsibility for ascertaining any maturities, calls, conversions,
exchanges, offers, tenders, or similar matters relating to any Collateral,
or for informing Debtor with respect to any of such matters (irrespective
of whether Secured Party actually has, or may be deemed to have, knowledge
thereof). Secured Party's receipt to any Obligor is a full and complete
release, discharge, and acquittance to that Obligor, to the extent of any
amount so paid to Secured Party.
6.3 POWER OF ATTORNEY. Debtor irrevocably appoints Secured Party -- acting
on behalf of Lenders -as its attorney-in-fact (with full power of substitution)
for, on behalf, and in the name of Debtor to (a) endorse and deliver to any
Person any check, instrument, or other document, received by Secured Party or
any Lender that represents payment in respect of any Collateral, (b) prepare,
complete, execute, deliver, and record any assignment of any mortgage, deed of
trust, or trust deed securing any Mortgage Loan or Mortgage Security, (C)
endorse and deliver or otherwise transfer any promissory note evidencing any
Mortgage Loan or Mortgage Security and do every other thing necessary or
desirable to effect transfer of all or any Collateral, (d) take all necessary
and appropriate action with respect to any Obligation or any Collateral, (e)
commence, prosecute, settle, discontinue, defend, or otherwise dispose of any
claim relating to any Collateral, and (f) sign that Debtor's name wherever
appropriate to effect the performance of this agreement and the Credit
Agreement. This section shall be liberally, not restrictively, construed to give
the greatest latitude to Secured Party's power as the Debtor's attorney-in-fact
to collect, sell, and deliver any Collateral and all other documents relating to
it. The powers and authorities conferred on Secured Party in this section (w)
are discretionary and not obligatory on the part of Secured Party, (x) may be
exercised by Secured Party through any Person who, at the time of the execution
of a particular document, is an officer of Secured Party, (y) may not be
exercised by Secured Party unless an Event of Default exists, and (z) is granted
for a valuable CONSIDERATION, COUPLED WITH AN INTEREST, and irrevocable until --
and all Persons dealing with Secured Party, any of its officers acting under
this section, or any substitute are fully protected in treating the powers and
authorities conferred by this section as existing and continuing in full force
and effect until advised by Secured Party that -- all commitments under the
Credit Agreement to extend credit under this agreement have been terminated or
canceled and the Obligation is fully paid and performed.
SECTION 7. MISCELLANEOUS.
7.1 MISCELLANEOUS. Because this agreement is a "CREDIT DOCUMENT" referred
to in the Credit Agreement, the provisions relating to Credit Documents in
Sections I and 12 of the Credit Agreement are incorporated into this agreement
by reference the same as if included in this agreement verbatim.
7.2 TERM. This agreement terminates upon full payment and performance of
the Obligation. No Obligor is ever obligated to make inquiry of the termination
of this agreement but is fully protected in making any payments on the
Collateral directly to Secured Party.
7.3 Matters Not Relevant. The Security Interest, Debtor's obligations, and
Secured Party's and Lenders' Rights under this agreement are not released,
diminished, impaired, or adversely affected by any one or more of the following:
(a) Secured Party's or any Lender taking or accepting any additional -- or any
release, surrender, exchange, subordination, or loss of any other -- guaranty,
assurance, or security for any of the Obligation; (b) any full or partial
release of any other Person obligated on any of the Obligation; (c) the
modification or assignment of -- or waiver of compliance with -- any other
Credit Document; (d) any present or future insolvency, bankruptcy, or lack of
corporate, partnership, or trust power of any other Person obligated on any of
the Obligation; (e) any renewal, extension, or rearrangement of any of the
Obligation, or any adjustment, indulgence, forbearance, or compromise granted to
any Person obligated on any of the Obligation; (f) any Person's neglect, delay,
omission, failure, or refusal to take or prosecute any action in connection with
any of the Obligation; (g) any existing or future affect, claim, or defense
(OTHER THAN the defense of full and final payment of the Obligation) of Debtor
or any other Person against Secured Party or any Lender; (h) the
unenforceability of any of the Obligation against any Person obligated or any of
the Obligation because it exceeds the amount permitted by Governmental
Requirement, the act of creating it is ULTRA VIRES, or the officers, partners,
or trustees creating it exceeded their authority or violated their fiduciary
duties, or otherwise; (i) any payment of the Obligation is held to constitute a
preference under any Debtor LAW OR FOR ANY OTHER REASON SECURED Party or any
Lender is required to refund any payment or make payment to another Person; or
0) any Person's failure to notify Debtor, Secured Party, or any Lender of their
acceptance of this agreement or any Person's failure to notify Debtor about the
foregoing events or occurrences, and Debtor waives my notice of any kind under
any circumstances whatsoever with respect to this agreement or any offer
Obligation OTHER THAN as specifically provided in this agreement.
7.4 Waivers. Except to the extent expressly otherwise provided in the
Credit Documents, Debtor waives (a) any Right to require Secured Party or any
Lender to proceed against any other Person, to exhaust its Rights in the
Collateral, or to pursue any other Right which Secured Party or any Lender may
have, and (b) all Rights of marshaling in respect of the Collateral.
7.5 Financing Statement. Secured Party may, at any Lime, file this
agreement or a carbon, photographic, or other reproduction of this agreement as
a financing statement, but Secured Party's failure to do so does not impair the
validity or enforceability of this agreement.
7.6 Parties. This agreement binds and inures to Debtor, Secured Party, and
each Lender, with their respective successors and permitted assigns. Only those
Persons may rely or raise any defense about this agreement.
(a) Assignments. Debtor may not assign any Rights or obligations under
this agreement without first obtaining the written consent of Secured Party
and all Lenders. Secured Party's Rights under this agreement may be
assigned to any successor agent appointed under the Credit Agreement. Any
Lender may assign, pledge, and otherwise transfer all or any of its Rights
under this agreement to any participant or transferee permitted by the
Credit Agreement.
(b) Secured Party. Secured Party is the agent for each Lender. Secured
Party may, without the joinder of any Lender, exercise any Rights in favor
of any of them under this agreement. The Rights of Secured Party and
Lenders VIS-A-VIS each other may be subject to other agreements between
them. Neither Debtor nor its successors or permitted assigns need to
inquire about any such agreement or be subject to the terms of it unless
they join in it and, therefore, are not entitled to the benefits of any
such agreement or entitled to rely upon or raise as a defense the failure
of any party to comply with it.
7.7 Entire Agreement. THIS AGREEMENT THE OTHER CREDIT DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED By evidence
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE No UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE INTENTIONALLY BLANK
<PAGE>
SIGNATURE PAGE FOLLOWS
EXECUTED as of the date first stated above.
CFI MORTGAGE CORPORATION, as DEBTOR BANK ONE, TEXAS, N.A., Administrative
Agent, as Secured Party
By By /s/ Paul J. Lazusky
Name Chris Castoro: /s/ Vice President
Title:
Signature Page to Security Agreement
I
THIS DOCUMENT Haynes and Boone, L.L.P.
PREPARED BY AND WHEN 901 Main Street, Suite 3 100
FILED RETURN TO: Dallas, Texas 75202
Attention: Kelly Roberts
EXHIBIT C-2
FINANCING STATEMENT
THIS FINANCING STATEMENT IS PRESENTED TO A FILING
OFFICER FOR FILING UNDER T14E UNIFORM
COMMERCIAL CODE.
DEBTOR'S NAME AND MAILING ADDRESS: CFI Mortgage Corporation
580 Village Blvd., Suite 360
West Palm Beach, FL 33409
SECURED PARTY'S NAME AND MAILING ADDRESS: Bank One, Texas, N.A.
1717 Main Street 4th Floor
Dallas, TX 75201
FOR FILING OFFICER:
THIS FINANCING STATEMENT COVERS THE FOLLOWING PRESENT AND FUTURE TYPES AND
ITEMS OF PROPERTY AND INTERESTS, WHETHER NOW OWNED OR ACQUIRED IN THE
FUTURE BY DEBTOR
(THE "COLLATERAL"):
Terms defined on SCHEDULE I attached to this financing statement have the same
meanings when used below:
Mortgage Loans identified from time to time to Secured Party as
Collateral.
All Collateral Documents in any way related to any Mortgage Loans
identified as Collateral -including, without limitation, all
promissory notes evidencing and all mortgages, deeds of trust, of
trust deeds securing those Mortgage Loans -- whether deposited with or
held by or for Secured Party under the Credit Documents, identified by
Debtor as Collateral for a Wet Borrowing, or otherwise.
Private-mortgage insurance (including, without limitation, all
commitments to issue any such insurance) covering -- and all
commitments issued by FHA to insure or issued by VA to guarantee --
any Mortgage Loans identified as Collateral. Security of any kind
pledged by a mortgagor for any Mortgage Loan iden6fied as Collateral.
Casualty insurance assigned to Debtor in connection with any Mortgage
Loan identified as Collateral.
Mortgage Securities deposited with or held by or for Secured Party
under the Credit Documents or registered by book-entry in Secured
Party's name under the Credit Documents.
Guaranties related to Mortgage Securities identified as Collateral.
Take-Out Commitments held by Debtor for any Mortgage Loans or Mortgage
Securities identified as Collateral, Rights to deliver those Mortgage Loans or
Mortgage Securities, as the case may be, to the investors or other purchasers
under those Take-Out Commitments, and all proceeds resulting from the sale of
any of those Mortgage Loans or Mortgage Securities under those Take-Out
Commitments.
Any Collateral otherwise described in this financing statement that may from
time to Lime be shipped (a) to all investor under SECTION 4.5 of the Credit
Agreement until purchased and paid for by that investor or (b) to Debtor for
correction under SECTION 4.6 of the Credit Agreement.
The Funding and Settlement Warehouse Accounts and all amounts deposited ill them
or represented by them.
Personal property, contract rights, accounts, and general intangibles of any
kind whatsoever relating to any Collateral.
All files, surveys, certificates, correspondence, appraisals, tapes, discs,
cards, accounting records, and other information and data of Debtor relating to
any other Collateral -- including, without limitation, all information, data,
tapes, discs, and cards necessary to administer and service any Mortgage Loan
identified as Collateral.
Cash and noncash proceeds of any Collateral.
DEBTOR: SECURED PARTY:
CFI MORTGAGE CORPORATION BANK ONE, TEXAS, N.A., as Administrative
Agent for Lenders
By By
Name: Paul J. Lazusky, Vice President
Title:
SCHEDULE I
DEFINITIONS ATTACHED TO FINANCING STATEMENT
FROM CFI MORTGAGE CORPORATION, as DEBTOR, to
Bank One, Texas, N.A., ADMINISTRATIVE AGENT, as SECURED PARTY
COLLATERAL DOCUMENTS means the documents and other items described on
SCHEDULE 4.3 to the Credit Agreement and required to be delivered to Secured
Party under SECTION 4.3 of the Credit Agreement.
FHA means the Federal Housing Administration within the United States
Department of Housing and Urban Development or its successor.
FHLMC means the Federal Home Loan Mortgage Corporation or its
successor.
FNMA means the Federal National Mortgage Association or its successor.
FUNDING ACCOUNT means a non-interest bearing deposit account
established by Debtor with Secured Party -styled and numbered "CFI MORTGAGE
CORPORATION FUNDING ACCOUNT," Account No. 1825167602 for deposit of Borrowings
under the Credit Agreement.
GNMA means the Government National Mortgage Association or its
successor.
LENDERS means, at any time, the lenders that are now or in the future
party to the Credit Agreement.
CREDIT AGREEMENT means the Credit Agreement dated as of June 30, 1997,
between Debtor, Lenders, and Secured Party as Administrative Agent for Lenders,
as renewed, extended, amended, or restated.
MORTGAGE LOAN means a loan that is not a construction or
non-residential commercial loan, is evidenced by a valid promissory note, and is
secured by a mortgage, deed of trust, or trust deed that grants a perfected
first-priority lien on the residential-real property.
MORTGAGE SECURITY means a security -- in respect of an underlying pool
of related Mortgage Loans -- that provides for payment by the issuer to the
holder of specified principal installments and a fixed-interest rate on the
unpaid balance, with all prepayments being passed through to the holder, whether
issued in certificate or book-entry form.
SETTLEMENT ACCOUNT means a non-interest bearing deposit account
established by Debtor with Secured Party -styled and numbered "CFI MORTGAGE
CORPORATION SETTLEMENT ACCOUNT," Account No. 1825167644 for the deposit of
payments from investors in or the settlement of mortgage collateral, and for the
deposit of payments on the obligation under the Credit Agreement.
TAKE-OUT COMMITMENT means a written and binding commitment or master
purchase agreement from an investor or other purchaser to purchase Mortgage
Securities or Mortgage Loans.
VA means the Veteran's Administration or its successor.
WET BORROWING means a borrowing under the Credit Agreement for which
all of the Collateral Documents have not been delivered to Lender in accordance
with SECTION 4.3 OF the Credit Agreement.
Title:
I Must be a Responsible Officer of Borrower.
EXHIBIT C-4
BANK ONE
BAILEE LETTER FOR INVESTORS
BANK ONE, TEXAS, N.A.
1717 Main Street
Dallas, Texas 75201
Telephone (214) 290-6082
Telecopy (214) 290-6069
The enclosed mortgage notes and other documents ("COLLATERAL, as more
particularly described on the attached schedule, have been assigned and pledged
to Bank One, Texas, N.A., as Administrative Agent ("ADMINISTRATIVE AGENT") for
itself and certain other Lenders ("LENDERS"), as collateral under the Credit
Agreement (as renewed, extended, amended, or restated, the "CREDIT AGREEMENT")
dated as of June 30, 1997, between CFI MORTGAGE CORPORATION (to be known as
Bankers Direct Mortgage Corporation as of July 1, 1997) ("BORROWER"),
Administrative Agent, and Lenders.
The Collateral is being delivered to you for purchase under an existing Take-Out
Commitment (as defined in The Credit Agreement). Either payment in full for the
Collateral or the Collateral itself must be received by administrative Agent
within 45 calendar days (or 60 days if under a bond program approved by
Administrative Agent) after the date of this letter. Until that time, you are
deemed to be holding the Collateral in trust, subject to The security interest
granted to Administrative Agent for Lenders and as Administrative Agent's bailee
in accordance with the applicable provisions of the UNIFORM COMMERCIAL CODE. NO
property interest in the Collateral is transferred to you until Administrative
Agent receives the greater of either (a) the agreed purchase price of the
Collate" or (b) $__, which is the full amount of the advances under the Credit
Agreement in respect of the Collateral. If you receive conflicting instructions
regarding the Collateral from Borrower or Administrative Agent, you agree to act
in accordance with Administrative Agent's instructions. ADMINISTRATIVE AGENT
RESERVES THE RIGHT, AT ANY TIME BEFORE IT RECEIVES FULL PAYMENT, TO NOTIFY YOU
AND REQUIRE THAT YOU RETURN THE COLLATERAL To ADMINISTRATIVE AGENT. Payment for
the Collateral must be made by wire transfer of immediately available funds to:
Bank One, Texas, N.A., Administrative- Agent Account Number
ABA Number 111000614 Attn.: Gloria Sadler
Further Credit - CFI Mortgage Corporation TEL (214) 290-6082
Settlement Account FAX (2140 290-6069
BY ACCEPTING THE COLLATERAL DELIVERED TO YOU WITH THIS LETTER, YOU CONSENT TO BE
ADMINISTRATIVE AGENT'S BAILEE ON THE TERMS DESCRIBED IN THIS LETTER.
ADMINISTRATIVE AGENT REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED
COLLATERAL AND THIS LETTER BY SIGNING AND RETURNING TO ADMINISTRATIVE AGENT THE
ENCLOSED COPY OF THIS LETTER, BUT YOUR FAILURE TO DO SO DOES NOT NULLIFY YOUR
CONSENT. If YOU FAIL TO MAKE FULL PAYMENT to Administrative Agent for it within
45 days (or 60 days, if applicable) after the date of this letter, you are
instructed to return all of the Collateral to Administrative Agent. The
preceding provision in no way affects or impairs any claim or cause of action
against you in respect of your Take-Out Commitment.
This letter binds you and your successors, assigns, trustees, Conservators, and
receivers and inures to Administrative Agent, Lenders, and their respective
successors and assigns.
Member FDIC Exhibit C-4
yours,
BANK ONE, TEXAS, N.A., as ADMINISTRATIVE AGENT
By: Name: Title:
ACKNOWLEDGED AND AGREED as of '199-.
[NAME OF INVESTOR]
By: Name: Title:
Member FDIC Exhibit C-4
<PAGE>
EXHIBIT C-5
BANK ONE
LETTER FOR 11001, CUSTODIAN BANK ONE, TEXAS, N.A.
1717 Main Street
Dallas, Texas 75201
Telephone (214) 290-6082
Telecopy (214) 290-6069
The enclosed mortgage notes and other documents ("COLLATERAL, as more
particularly described the attached schedule, have been assigned and pledged to
Bank One, Texas, N.A., as Administrative Agent ("ADMINISTRATIVE AGENT") for
itself and certain other lenders ("LENDERS"), as Collateral under the Credit
Agreement (as renewed, extended, amended, or restated, the "CREDIT AGREEMENT")
dated as of June 30, 1997, between CFI MORTGAGE CORPORATION (to be known as
Bankers Direct Mortgage Corporation as of July 1, 1997) ("BORROWER"),
Administrative Agent, and Lenders.
The Collateral is being delivered to you for pooling in connection with the
issuance of Mortgage Securities (as defined in the Credit Agreement). Within 21
days after the date of THIS letter (a) payment ill full for the Collateral must
be paid to Administrative Agent, (b) the Mortgage Securities must be received by
Administrative Agent if ill certificated form or on its behalf in respect of
Mortgage Securities in book-entry form, or (c) the Collateral must be returned
to and received by Administrative Agent. Until that Lime, you are deemed to be
holding the Collateral in trust subject to the security interest granted to
Administrative Agent for Lenders as Administrative Agent's bailee in accordance
with the applicable provisions of the applicable UNIFORM COMMERCIAL CODE. No
property interest in the Collateral is transferred to you until either (a)
Administrative Agent receives the greater of either (i) the agreed purchase
price of the Collateral or (ii) $__, which is the full amount of the advances
under the Credit Agreement in respect of the Collateral, or (b) Administrative
Agent receives Mortgage Securities in certificated form or receives Mortgage
Securities on its behalf in respect of Mortgage Securities in book-Entry form.
If you receive conflicting instructions regarding the Collateral from Borrower
or Administrative Agent, you agree to act in accordance with Administrative
Agent's instructions. If you deliver any of the enclosures to another party,
this letter must accompany those items. ADMINISTRATIVE AGENT RESERVES THE RIGHT,
AT ANY TIrv1E BEFORE THE MORTGAGE SECURITIES HAVE BEEN ISSUED, TO NOTIFY YOU AND
REQUIRE THAT YOU RETURN THE COLLATERAL To ADMINISTRATIVE AGENT.
If applicable above, payment for the Collateral must be made by the purchaser's
wire transfer of immediately available funds to:
Bank One, Texas, N.A., Administrative Agent Account Number
ABA Number 111000614 Attn.: Gloria Sadler
Further Credit - CFI Mortgage Corporation TEL (214) 290-6082
Settlement Account FAX (2140 290-6069
If applicable above, Mortgage Securities in certificated form must be sent to:
Bank One, Texas, N.A., Administrative Agent
1900 Pacific Street, 6th Floor
Dallas, Texas 75201
Attn.: Gloria Sadler, Vice President
Member FDIC Exhibit C-5
<PAGE>
BY ACCEPTING THE COLLATERAL DELIVERED TO YOU WITH THIS LETTER, YOU CONSENT TO BE
ADMINISTRATIVE AGENT'S BAILEE ON THE TERMS DESCRIBED IN THIS LETTER.
ADMINISTRATIVE AGENT REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED
COLLATERAL AND THIS LETTER BY SIGNING AND RETURNING TO ADMINISTRATIVE AGENT THE
ENCLOSED COPY OF THIS LETTER, BUT YOUR FAILURE TO DO SO DOES NOT NULLIFY YOUR
CONSENT.
This letter binds you and your successors, assigns, trustees, conservators, and
receivers and inures to Administrative Agent, Lenders, and their respective.
successors and assigns.
Very truly yours,
BANK ONE, TEXAS, N.A., as ADMINISTRATIVE AGENT
By: Name: Title:
ACKNOWLEDGED AND AGREED as of , 199
[NAME OF POOL CUSTODIAN]
By: Name: Title:
Member FDIC Exhibit C-5
EXHIBIT C-6
TRUST RECEIPT AND AGREEMENT.
ADMINISTRATIVE AGENT. BANK ONE, TEXAS, N.A. DATE: 199
BORROWER: CFI MORTGAGE CORPORATION (to be known as Bankers Direct Mortgage
Corporation as of July 1, 1997)
This trust receipt and agreement is delivered under the Credit Agreement
(as renewed, extended, or amended the "CREDIT AGREEMENT") dated as of June 30,
1997, between Borrower, Administrative Agent, and certain other Lenders. Terms
defined in the Credit Agreement have the same meanings when used -- unless
otherwise defined -in this trust receipt and agreement.
In accordance with SECTION 4.6 of the Credit Agreement, Borrower
requests delivery by Administrative Agent
to Borrower of the entire mortgage file of Collateral Documents for the Mortgage
Loan and for the corrections described as follows:
MORTGAGE LOAN NUMBER:
ORIGINAL AMOUNT:
CORRECTIONS:
Borrower agrees that (a) these Collateral Documents are delivered to
Borrower solely for the purpose of making these corrections, (b) these
Collateral Documents are and continue to be subject to Lender Liens under the
Credit Documents, (c) Borrower shall hold these Collateral Documents as bailee
and trustee for Administrative Agent, and Lenders, and (d) Borrower may not
deliver any of these Collateral Documents to it third party unless (i) it is
necessary in order to complete the corrections, and (ii) Borrower notifies that
third party that the Collateral Documents are and continue to be subject to
Lender Liens under the Credit Documents, and obtains from that third party its
agreement to hold those Collateral Documents as bailee and trustee for
Administrative Agent and Lenders UNTIL THEY HAVE BEEN RETURNED TO Administrative
Agent or the amount of the Borrowing Base attributable to the related Mortgage
Loan has been fully paid to Administrative Agent for Lenders to be applied to
the Obligation.
On and as of the date of this receipt and agreement, Borrower certifies,
represents, and warrants to Administrative Agent for Lenders that (a) Borrower's
representations and warranties in the Credit Documents are true and correct in
all material respects EXCEPT to the extent that (i) a representation or warranty
speaks to a specific date or (ii) the facts on which a representation or
warranty is based have changed by transactions or conditions contemplated or
permitted by the Credit Documents, (b) no Event of Default, Potential Default,
or Borrowing Excess exists, and (c) this shipment will not result in Collateral
Documents for Mortgage Loans with more than a LOW face amount of $1,500,000
being outstanding for correction.
Borrower acknowledges receipt of the Collateral Documents referred to above.
CFI MORTGAGE CORPORATION, Borrower
By: Name: Title:
I MUST BE A RESPONSIBLE OFFICER OF Borrower.
EXHIBIT C-7
RELEASE REQUEST
ADMINISTRATIVE AGENT.- BANK ONE, TEXAS, N.A. Date: , 199
BORROWER: CFI MORTGAGE CORPORATION (to be known as Bankers Direct
Mortgage Corporation as of July 1, 1997)
This request is delivered under the Credit Agreement (as renewed, extended,
or amended the "CREDIT -AGREEMENT") dated as of June 30, 1997, between Borrower,
Administrative Agent, and certain Lenders. Terms defined in the Credit Agreement
have the same meanings when used -- unless otherwise defined -- in this request.
Borrower requests Administrative Agent to release the Lender Liens under
the Credit Documents in the Collateral described oil the attached SCHEDULE 1.
On and as of the date of this request, Borrower certifies, represents, and
warrants to Administrative Agent for Lenders that (a) Borrower's representations
and warranties in the Credit Documents are true and correct in all material
respects EXCEPT to the extent that (i) a representation or warranty speaks to a
specific date or (ii) the facts on which a representation or warranty is based
have changed by transactions or conditions contemplated or permitted by the
Credit Documents, and (b) no Event of Default, Potential Default, or Borrowing
Excess exists or occurs as a result of the requested release OTHER THAN any
Borrowing Excess that has been eliminated by payment which has been made to
Administrative Agent.
CFI MORTGAGE CORPORATION, BORROWER
By: Name: Title:
<PAGE>
BORROWING REQUEST.
ADMINISTRATIVE AGENT: BANK ONE, TEXAS, N.A. DATE: 199
BORROWER: CFI MORTGAGE CORPORATION
THIS REQUEST IS DELIVERED UNDER the Credit Agreement (as renewed,
extended, and amended, the "CREDIT AGREEMENT") dated as of June 30,
1997, between Borrower, Administrative Agent, and certain Lenders.
Terms
defined in the Credit Agreement have the same meanings when used -- unless
otherwise defined -- in this request.
Borrower requests $ in Borrowings (collectively, the "REQUESTED
BORROWING") to be funded on __, 199_ (as REQUESTED BORROWING DATE")
in the one or more Borrowing -Purpose
Categories indicated on the attached schedule, which has been completed as to
all other relevant information.
Borrower certifies that as of the Requested Borrowing Date -- after giving
effect to the Requested Borrowing -- (a) the representations and warranties of
Borrower in the Credit Documents are true and correct in all material respects
EXCEPT to the extent that (i) a representation or warranty speaks to a specific
date or (ii) the facts on which a representation or warranty is based have
changed by transactions or conditions contemplated or permitted by the Credit
Documents, (b) no Event of Default or Potential Default exists, (c) the
extension of the Requested Borrowing does not cause any Borrowing Excess to
exist, (d) Borrower has timely delivered a Collateral-Delivery Notice, if
applicable, (e) all Collateral Documents required by the Credit Agreement to be
delivered to Administrative Agent in connection with the Requested Borrowing
have been delivered to Administrative Agent, and (f) Borrower has otherwise
complied with all conditions of the Credit Documents to permit the Requested
Borrowing to be extended.
CFI MORTGAGE CORPORATION
By: Name: 'Title:
Must be no later than (a) the third business Day after request if the Requested
Borrowings involves any LIBOR Borrowing or (b) the business Day of request
otherwise. Must be a Responsible Officer of Borrower.
EXHIBIT D-1
SCHEDULE TO BORROWING REQUEST
Dated _, 199-; for $
[COMPLETE EACH APPLICABLE BOX OR MARK N.A.]
Borrowing-Purpose Amount Borrowing-Price Category Interest Period
Category I I Ending
Borrowing (Dry) $ o Base Rate 19
11 Fed-Funds Rate
0 (check and indicate ii LIBOR
amount if B/C Borrowing -
0 (check and indicate
amount if Second-Lien
Borrowing -
0 (check and indicate
amount if Repurchase
Borrowing -S-)
Borrowing (Wet) 0 Base Rate 19
C3 Fed-Funds Rate
0 (check and indicate o LIBOR
amount if B/C Borrowing
0 (CHECK AND INDICATE
AMOUNT if Second-Lien
Borrowing
0 (check and indicate
amount if Repurchase
Borrowing -
1 Must be 1, 2, or 3 months or other period acceptable to Administrative Agent.
EXHIBITD-2
COLLATERAL-DELIVERY NOTICE
ADMINISTRATIVE AGENT: BANK ONE, TEXAS, N.A. DATE: __, 199
BORROWER: CFI MORTGAGE CORPORATION (to be known as Bankers Direct
Mortgage Corporation as of July 1, 1997)
This notice is delivered under the Credit Agreement (as renewed, extended,
and amended the "CREDIT AGREEMENT") dated as of June 30, 1997, between Borrower,
Administrative Agent, and certain Lenders. Terms defined in the Credit Agreement
have the same meanings when used -- unless otherwise defined -- in this notice.
Under SECTION 4.3 and other applicable provisions of the Credit Agreement,
Borrower submits the following Collateral under -- and subject to the Lender
Liens created by -- the Credit Documents [CHECK APPLICABLE BOX(ES)]:
O MORTGAGE LOANS FOR DRY BORROWING. Borrower (a) is delivering to
Administrative Agent the Collateral Documents required by PART A of
SCHEDULE 4.3 to the Credit Agreement for the Mortgage Loans described on
the attached ANNEX I which is a data-processing print-out meeting the
requirements of PART A.8 on that SCHEDULE 4.3 and (b) confirms that those
Mortgage Loans and all related Collateral Documents are subject to the
Lender Liens created by the Credit Agreement.
O MORTGAGE LOANS FOR WET BORROWING. Borrower (a) is delivering to
ADMINISTRATIVE AGENT THE COLLATERAL Documents required by PART B of
SCHEDULE 4.3 to the Credit Agreement for the Mortgage Loans described on
the attached ANNEX 2 -- which is a data-processing print-out meeting the
requirements of PART B.3 on that SCHEDULE 4.3, (b) shall deliver to
Administrative Agent the Collateral Documents required by PART A of that
SCHEDULE 4.3 for -- before the expiration of the Wet Period for the
Borrowings made on the basis of -- those Mortgage Loans, and (c) cont-trins
that those Mortgage Loans and all related Collateral Documents are subject
to the Lender Liens created by the Credit Agreement.
O MORTGAGE SECURITIES FOR DRY BORROWING. Borrower (a) is delivering to
Administrative Agent the Collateral Documents required by PART C of SCHEDULE
4.3 to the Credit Agreement for the Mortgage Securities described on the
attached ANNEX 3 (the Mortgage Pools for which consist of Mortgage Loans
that were -- before issuance of those Mortgage Securities --
Eligible-Mortgage Loans constituting part of the Collateral) and (b)
confirms that those Mortgage Securities and all related Collateral
Documents are subject to the Lender Liens created by the Credit Agreement.
<PAGE>
On and as of the date of this notice, Borrower certifies, represents,
warrants, and covenants to or with
ADMINISTRATIVE AGENT FOR LENDERS THAT:
(a) For each Mortgage Loan described on either ANNEX I or 2 to this
notice, Borrower (i) holds each of the items required by SECTION 4.3 of
the Credit Agreement, (ii) holds those items in trust for
Administrative Agent on behalf of Lenders, (iii) upon request or
instructions from Administrative Agent from time to time and at any
time, shall deliver those items to Administrative Agent any other
Person designated by Administrative Agent, and (iv) may not deliver
those items -- or grant, transfer, or assign any interest in any of
them -- to any Person EXCEPT Administrative Agent without first
obtaining Administrative Agent's written consent.
(b) All of the items that Borrower is required to furnish to
Administrative Agent under the Credit Agreement in connection with this
notice accompany it, all of those items are accurate and what they
purport to be, and all of the Collateral described in this notice or
its schedules conform in all respects to the requirements of the Credit
Agreement, including, without limitation, the requirements of
eligibility applicable to that Collateral on SCHEDULE 4.1 to the Credit
Agreement.
(c) The representations and warrantees of Borrower in the Credit
Documents are true and correct in all material respects EXCEPT to the
extent that (i) a representation or warranty speaks to a specific date
or (ii) the facts on which a representation or warranty is based have
changed by transactions or conditions contemplated or permitted by the
Credit Documents.
(d) No Event of Default or Potential Default exists.
CFI MORTGAGE CORPORATION
By: Name: Title:
I Must be a Responsible Officer of Borrower.
EXHIBIT D-3
BORROWING-BASE REPORT
ADMINISTRATIVE AGENT- BANK ONE, TEXAS, N.A. DA7E:_, 199
BORROWER: CFI MORTGAGE CORPORATION (to be known as Bankers Direct
Mortgage Corporation as of July 1, 1997)
This report is delivered under the Credit Agreement (as renewed, extended,
and amended, the "CREDIT AGREEMENT") dated as of June 30, 1997, between
Borrower, Administrative Agent, and certain Lenders. Terms defined in the Credit
Agreement have the same meanings when used -- unless otherwise defined -- in
this report. Administrative Agent has calculated the Borrowing Base and its
various components as of the date of this report.
face warehouse
1. Reconciliation for Dry Borrowings
(a) Ending Collateral balance last report) $
(b) Collateral removed (since last report)
(c) Beginning Collateral balance -- LINE L(A) MINUS LINE 1(B)
(d) Collateral received (since last report)
(e) New Collateral balance (today) -- LINE L(C) plus Line I (d) $ $
(f) Ineligibles expired 60, 120-, or 180-day line
(g) Ineligibles expired shipping Period
(h) Ineligibles expired Correction Period $
(i) Jumbo Sublimit-~t exclusions
(j) Other ineligibles
(k) Total Ineligibles -- TOTAL OF LINES 1(J) THROUGH 1(J) $
Total Collateral amount- LINE L(E) MINUS LINE- 1(K)
(m) If Administrative Agent or Required Lenders elect -- Market
Value of items in LINE L(K)
(n) Lesser OF EITHER LINES 1(l) or -- if applicable -- ](in)
2. Reconciliation for Wet Borrowings
(a) Ending Collateral balance (last report)
(b) Collateral removed (since last report)
(c) Beginning Collateral balance -- LINE 2(A) MINUS LINE 2(B)
(d) Collateral received (since Wt report)
(e) New Collateral Balance
(f) Ineligibles -- expired Wet Period
(g) Jumbo Sublimit exclusions
(h) Other ineligibles
(i) Total Ineligibles -- TOTAL of Lines 20 through 2(H)
(j) Total Wet Collateral
(k) IF Administrative Agent or Required Lender's elect -- Market
Value OF items in LINE 2(J)
Lesser OF EITHER LINES 2(J) OR -- IF APPLICABLE 2(K)
3. Borrowing Base FOR MORTGAGE COLLATERAL
(a) 98% OF Dry and Wet Collateral Value (other than as set forth in Line
(b) below)
(b) 97% OF Collateral Value for B/C Loans and Second-lien Loans
(C) TOTAL OF LINES 3(A) AND 3(B)
4. Principal Debt
(a) Dry Borrowings
(b) Wet BORROWINGS TOTAL OF LINES 4(A) AND 4(B)
5. COMMITMENTS $50,000,000
6. Availability
(a) Lesser OF EITHER LINE 3(C) OR LINE 5
(b) Maximum Total IF positive OR Borrowing Excess IF negative
LINE,6(A) MINUS LINE 4(C)
BANK ONE, TEXAS, N.A., ADMINISTRATIVE AGENT
By: Name: Title:
EXHIBIT D-4
TAKE-OUT REPORT
(ONLY USED IF TAKE-OUT COMMITMENTS ARE NOT DESIGNATED)
ADMINISTRATIVE AGENT: BANK ONE, TEXAS, N.A. DATE: 199
BORROWER: CFI MORTGAGE CORPORATION (to be known as Bankers Direct Mortgage
Corporation as of July 1, 1997)
This report is delivered under the Credit Agreement (as renewed, extended,
or amended the "CREDIT AGREEMENT-) dated as of June 30, 1997, between Borrower,
Administrative Agent, and certain Lenders. Terms defined in the Credit Agreement
have the same meanings when used -- unless otherwise defined -- in this report.
The following is accurate and complete as of the date of this report in
respect of Take-Out Prices -determined in accordance with the attached SCHEDULE
1 -- and the total weighted-average-Take-Out Price is % of par:
FOR MORTGAGE LOANS
Mortgage-Collateral Group I Interest Rate Take-Out Price T Interest
(a) % %
(b) % %
(c) % %
(d) % %
(e) % %
[SCHEDULE]
TAKE-OUT PRICE DETERMINATION
Complete the following table for each Mortgage-Collateral Group for Mortgage
Loans and each Mortgage- Collateral Group for Mortgage Securities, in each case
indicating the group letter designation from the report to which this schedule
is attached:
<PAGE>
<TABLE>
<CAPTION>
(b) PRINCIPAL-BALANCE (D) COMMITMENT PRICE'
(A) INVESTOR of Take-Out (c) Percentage of Par COLUMN (B) THNES
Commitments Column (C)
<S> <C> <C> <C>
% $
Totals
</TABLE>
The total weighted-average Take-Out- Price (determined by dividing the total in
column (d) above by the total in column (b) above) is _% of par.
For each commitment price stated as a yield rather than as a percentage of par,
convert the yield to a percentage price by the use of the "NET YIELD Tables for
GNMA MORTGAGE-BACKED SECURITIES" PUBLISHED by Financial Publishing Company or
the "Mortgage Yield Conversion Tables" published by FNMA, as applicable.
EXHIBIT D-5
MANAGEMENT REPORT
ADMINISTRATIVE AGENT, BANK ONE, TEXAS, N.A. DATE: 1199
BORROWER: CFI MORTGAGE CORPORATION (to be known as Bankers Direct Mortgage
Corporation as of July 1, 1997)
This report is delivered under the Credit Agreement (as renewed, extended,
or amended the "CREDIT AGREEMENTS" dated as of June 30, 1997, between Borrower,
Administrative Agent, and certain Lenders. Terms defined in the Credit Agreement
have the same meaning when used -- unless otherwise defined -- in this report.
I certify to Administrative Agent for Lenders that on the date of this
report:
3. 1 am the undersigned officer of Borrower and deliver this certificate on
its behalf.
2. The attached SCHEDULE 1 is an accurate list of Borrower's Mortgage Loan
production (in such form as Borrower customarily prepares as its secondary
market report as same is reasonably acceptable to Administrative Agent) for the
Calendar Month before the date of this report -- describing in reasonable detail
the GEOGRAPHIC MIX OF ALL RETAIL AND CORRESPONDENT production for both the
Calendar Month before the date of this certificate and for the year to date, and
such other matters as Administrative Agent may have reasonably requested.
3. The attached SCHEDULE 2 is an accurate and complete schedule of
Borrower's "OPEN CONTENTMENT AND PIPELINE POSITIONS" (as commonly understood in
the industry) for Mortgage Loans -- describing in reasonable detail (i) with
regard to "OPEN COMMITMENT" positions, the names of investors, type, original
principal amount, rate, price/yield, and expiration date, and (ii) with regard
to "OPEN PIPELINE" positions, the amount of the pipeline, the tow locked amount
and rate of price committed Mortgage Loans in the pipeline, the percentage of
the locked amount that is covered, the types of coverage (mandatory or
optional), future contracts, hedged positions, repurchase agreements, the profit
or loss, and such other matters as Administrative Agent may have reasonably
requested.
By: Name: 'Tide:
1 Must be a Responsible Officer of Borrower.
EXHIBIT D-6
COMPLIANCE CERTIFICATE
ADMINISTRATIVE, AGENT: BANK ONE, TEXAS, N.A. DATE: 119
BORROWER: CFI MORTGAGE CORPORATION (to be known as Bankers Direct Mortgage
Corporation as of July 1, 1997)
SUBJECT PERIOD: ended 199
This certificate is delivered under the Credit Agreement (as renewed,
extended, and amended, the "CREDIT AGREEMENT") dated as of June 30, 1997,
between Borrower, Administrative Agent, and certain Lenders. Terms defined in
the Credit Agreement have the same meanings when used -- unless otherwise
defined -- in this certificate.
The undersigned officer certifies to Administrative Agent and Lenders, that
on the date of this certificate:
1. The undersigned officer is the officer of Borrower designated below.
2. Borrower's financial statements that are attached to this certificate
were prepared in accordance with GAAP and present fairly the Companies'
consolidated (if applicable) financial condition and results of operations as of
- -- and for the fiscal year or portion of the fiscal year ending on -- the last
day of the Subject Period.
3. The undersigned officer supervised a review of the Companies' activities
DURING THE SUBJECT PERIOD IN RESPECT of the following matters and has determined
the following: (a) The representations and warranties in the Credit Agreement
are true and correct in all material respects, EXCEPT (i) to the extent that a
representation or warranty speaks to a specific date or the facts on which it is
based have changed by transactions or conditions contemplated or permitted by
the Credit Documents and (ii) for the changes, if any, described on the attached
SCHEDULE 1; (b) each Company has complied with all of its obligations under the
Credit Documents, OTHER THAN for the deviations, if any, described on the
attached SCHEDULE 1; (c) no Event of Default or Potential Default exists or is
imminent, OTHER THAN those, if any, described on the attached SCHEDULE 1; and
(d) the Companies' compliance with the financial covenants in SECTION 8 and
SECTION 9 of the Credit Agreement is accurately calculated on the attached
SCHEDULE 1.
By: Name: 'Title:
I MUST BE A RESPONSIBLE OFFICER OF BORROWER.
SCHEDULE, 1
A. Describe any deviations from compliance with CLAUSE 3(A) OR clause 3(B)
of the attached Compliance Certificate -- if none, so state:
B. As required by CLAUSE 3(C) of the attached Compliance Certificate,
describe any Potential Defaults .or Events of Default, if any -- if none, so
state:
C. As required by CLAUSE 3(D) of the attached Compliance Certificate,
calculate compliance with the covenants in Section 8 and Section 9 of the Credit
Agreement at the end of the Subject Period (on a consolidated basis, if
applicable):
Covenant At End of Subject Period
1. Net Worth ss.9.1
(a) Net Worth
(b) NI _______
2. Leverage Ratio ss.9. 2. . . . . .
(a Total Debt $
(b) RATIO OF LINE 2 (a) to the SUM OF LINE . . . . . .
T0 . . . . . . . . . . . . . . . . . . . .
I (a) pt us t MA I SUBORDINATED DEBT. . . . . .
(C) MAXIMUM ......... 10.0 TO 10
-------------------------------------------------------------
3. Cash Flow - - 9. 3
Cash Row
(b) N1i uillutill. . . . . . . . . . . . .
13 T O 1.0
.2
EXHIBIT E
OPINION OF COUNSEL
The opinion delivered by counsel to the Companies must be in form and
substance acceptable to Administrative Agent and its special counsel and cover
the following matters:
1. To the best of that counsel's knowledge, except as described on SCHEDULE
6.2 to the Credit Agreement (a) Borrower has no Subsidiaries and (b) no Company
has used or transacted business under any other corporate or trade name in the
six-month period preceding the date of this agreement.
2. Each Company is duly organized, validly existing, and in good standing
under the Governmental Requirements of the jurisdiction in which it is
incorporated as stated on SCHEDULE 6.2 to the Credit Agreement.
3. Each Company is duly qualified to transact business and is in good
standing as a foreign corporation or other entity in each jurisdiction so
indicated on SCHEDULE 6.2 to the Credit Agreement and in each other jurisdiction
where, to the best of that counsel's knowledge, the nature and extent of that
Company's business and properties require due qualification and good standing
4. EACH COMPANY POSSESSES all requisite corporate power and authority to
conduct its business as is now being -- or is contemplated by the Credit
Agreement to be -- conducted.
5. The execution and delivery by each Company and each Guarantor of each
Credit Document to which it is a party and the performance by it of its related
obligations (a) are within its corporate power, (b) have been duly authorized by
all necessary corporate action on its behalf, (c) except for my action or filing
that has been taken or made on or before the date of this opinion, require no
action by or filing with any Governmental Authority, (d) do not violate any
provision of its charter of bylaws, (e) do not violate any provision of
Governmental Requirement applicable to it or any material agreements to which it
is a party and of which that counsel is aware, and (f) except for Lender Liens,
do not result in the creation or imposition of any Lien on any asset of any
Company.
6. Upon execution and delivery by all parties to it, each Credit Document
will constitute a legal and binding obligation of each Company party to it,
enforceable against it in accordance with its terms, except as enforceability
may be limited by applicable Debtor Laws and general principles of equity.
7. Except m disclosed on SCHEDULE 6.9 to the Credit Agreement (a) no
Company is subject to, or aware of the threat of, any Litigation that is
reasonably likely to be determined adversely to it or, if so adversely
determined, would be a Material-Adverse Event, and (b) no outstanding or unpaid
judgments against any Company exist.
8. No Company is subject to regulation under the INVESTMENT COMPANY ACT OF
1940, as amended, or the PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, as amended.
9. Borrower is approved and qualified and in good standing as an issuer,
mortgagee, of seller/servicer, and meets all requirements applicable to its
status as such, as described in SECTION 6.16(B) of the Credit Agreement.
EXHIBIT F
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is entered into effective as of
199, between ("ASSIGNOR"), and ("ASSIGNEE"),
CF1 MORTGAGE CORPORATION, a Florida corporation (to be known as Bankers
Direct Mortgage Corporation as of July 1, 1997) ("BORROWER"), certain lenders
("LENDERS"), and Bank One, Texas, N.A. (in its capacity as Administrative Agent
for Lenders, 'ADMINISTRATIVE AGENT'), are party to the Amended and Restated
Credit Agreement (as renewed, extended, amended, or restated, the "CREDIT
AGREEMENT") dated as of January 31, 1997, all of the defined terms in which have
the same meanings when used -- unless otherwise defined -- in this agreement.
This agreement is entered into as required by SECTION 12.14 of the Credit
Agreement and is not effective until consented to by -Borrower and
Administrative Agent, which consents may not under the Credit Agreement be
unreasonably withheld.
ACCORDINGLY, for adequate and sufficient consideration, Assignor and
Assignee agree as follows:
ASSIGNMENT AND ASSUMPTION. By this agreement, and effective as of , 199_,
(the "EFFECTIVE DATE"), Assignor sells and assigns to Assignee (without recourse
to Assignor) and Assignee purchases and assumes from Assignor an interest in and
to all of Assignor's Rights and obligations under the Credit Agreement (except
any Rights and obligations pertaining to Assignor's role as Administrative
Agent, Lender of Swing Borrowings, and custodian) as of the Effective Date,
including, without limitation, (a) a _% interest in Assignor's Commitment, (b) a
corresponding amount of the Principal Debt outstanding under Assignor's existing
Warehouse Note, (c) all interest accruing in respect of the interests assigned
above (collectively, the "ASSIGNED INTERESTS") after the Effective Date, and (d)
all commitment fees accruing in respect of the Assigned Interest after the
Effective Date.
2. Assignor Provisions. Assignor (a) represents and warrants to Assignee
that as of the Effective Date
(i) $ - is outstanding (without reduction for any assignments that have not
yet become effective) under the Assignor's Warehouse Note, (ii) Assignor is the
legal and beneficial owner of the Assigned Interest, which is free and clear of
any adverse claim, and (iii) Assignor has not been notified of an existing Event
of Default or Potential Default, and (b) makes no representation or warranty to
Assignee and assumes no responsibility to Assignee with respect to (i) any
statements, warranties, or representations made in or in connection with any
Credit Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency, or value of any Credit Document, or (iii) the
financial condition of any Company or the performance or observance by any
Company of any of its obligations under any Credit Document.
3. ASSIGNEE PROVISIONS. Assignee (a) represents and warrants to Assignor,
Borrower, and Administrative Agent that Assignee is legally authorized to enter
into this agreement and each other Credit Document to which it will become a
party, (b) confirms that it has received a copy of the Credit Agreement, copies
of the Current Financials, and such other documents and information as it deems
appropriate to make its own credit analysis and decision to enter into this
agreement, (c) agrees with Assignor, Borrower, and Administrative Agent that
Assignee shall -- independently and without reliance upon Administrative Agent,
Assignor, of any other Lender and based on such documents and information as
Assignee deems appropriate at the Lime -- continue to make its own credit
decisions in taking or not taking action under the Credit Documents, (d)
appoints and authorizes Administrative Agent to take such action as agent on its
behalf and to exercise such powers under the Credit Documents as are delegated
to Administrative Agent by the terms of the Credit Documents and all other
reasonably -incidental powers, (e) agrees with Assignor, Borrower, and
Administrative Agent that Assignee shall perform and comply with all provisions
of the Credit Documents applicable to Lenders in accordance with their
respective terms, and (f) if Assignee is not organized under the Governmental
Requirements of the United States of America or one of its states, it (i)
represents and warrants to Assignor, Administrative Agent and Borrower that no
Taxes are required to be withheld by Assignor, Administrative Agent, or Borrower
with respect to any payments to be made to it in respect of the Obligation, and
it has furnished to Administrative Agent and Borrower two duly completed copies
of either U.S. Internal Revenue Service FORM 4224, FORM 1001, FORM W-8, or any
other form acceptable to Administrative Agent that entitles Assignee to
exemption from U.S. federal withholding Tax on all interest payments under tile
Credit Documents, (ii) covenants to provide Administrative Agent and Borrower a
new FORM 4224, FORM 1001, FORM W-8, or other form acceptable to Administrative
Agent upon the expiration or obsolescence of any previously delivered form
according to applicable Governmental Requirements, duly executed and completed
by it and to comply from time to time with all Governmental Requirements with
regard to the withholding Tax exemption, and (iii) agrees with Administrative
Agent and Borrower tha4 if any of the foregoing is not true or the applicable
forms are not provided, then Administrative Agent and Borrower (without
duplication) may deduct and withhold from interest payments under the Credit
Documents any United States federal-income Tax at the full rate applicable under
the IRC.
4. CREDIT AGREEMENT AND COMMITMENTS. From and after the Effective Date (a)
Assignee shall be a party to the Credit Agreement Line (to the extent provided
in this agreement) have the Rights and obligations of a Lender under the Credit
Documents and (b) Assignor shall (to the extent provided in this agreement)
relinquish its Rights and be released from its obligations under the Credit
Documents. Oil the Effective Date, after giving effect to this and certain other
assignment and assumption agreements that become effective on the Effective
Date, but without giving effect to any other assignments that have not yet
become effective, Assignor's and Assignee's COMMITMENTS WILL be as follows:
Lender Commitments
ASSIGNOR $
ASSIGNEE $
5. Notes. Assignor and Assignee request Borrower to issue new Notes to
Assignor and Assignee in the amounts of their respective commitments under
PARAGRAPH 4 above and otherwise issue these Notes in accordance with the Credit
Agreement. Upon delivery of those Notes, Assignor shall return to Borrower all
Notes previously delivered to Assignor under the Credit Agreement.
6. PAYMENTS AND ADJUSTMENTS. From and after tile Effective Date,
Administrative Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees, and other amounts) to
Assignee. Assignor and Assignee shall make all appropriate adjustments in
payments for periods before the Effective Date by Administrative Agent or with
respect to the making of this assignment directly between themselves. Assignor
agrees to apply any payments and proceeds with respect to the Obligation ratably
with Assignee.
7. CONDITIONS PRECEDENT. PARAGRAPHS I through 6 above are not effective
until (a) counterparts of this agreement are executed by Assignor, Assignee,
Administrative Agent, and Borrower, and are delivered to Administrative Agent
and Borrower and (b) pursuant to SECTION 12.14(a)(ii), Assignor pays to
Administrative Agent an administrative transfer fee of $2,500. If Administrative
Agent is the Assignor, the requirement of SECTION 12.14(A)(II) is waived with
regard to this agreement.
8. INCORPORATED PROVISIONS. Although this agreement is not a Credit
Document, the provisions of the Credit Agreement applicable to Credit Documents
are incorporated into this instrument by reference the same as if this agreement
were a Credit Document and those provisions were set forth in this agreement
verbatim.
9. COMMUNICATIONS. FOR purposes of Section 12.2 of the Credit Agreement,
Assignee's address and telecopy number -until changed under that section -- are
beside its signature below.
10. AMENDMENTS, ETC. No amendment, waiver, or discharge to or under this
agreement is valid unless in writing that is signed by the party against whom it
is sought to be enforced and is otherwise in conformity with the requirements of
the Credit Agreement.
11. ENTIRETY. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
ASSIGNOR AND ASSIGNEE ABOUT ITS SUBJECT MATTER AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR COMMITMENTS, OR SUBSEQUENT ORAL AGREEMENTS OF ASSIGNOR AND
ASSIGNEE. THERE ARE No UNWRITTEN ORAL AGREEMENTS BETWEEN ASSIGNOR AND ASSIGNEE.
12. PARTIES. This agreement binds and benefits Assignor, Assignee, and
their respective successors and assigns as permitted under the documents.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
EXECUTED as of the date first stated above.
BANK ONE, TEXAS, N.A., as ASSIGNOR and
ADMINISTRATIVE AGENT as ASSIGNEE
By By
Name: Name
Title: Title
(Address)
Attn.:
(Tel. No.)(-) (Fax No.)(-)
<PAGE>
As of the Effective Date, Administrative Agent (per the above signature)
and Borrower consent to this agreement and the transactions contemplated in it.
CF1 MORTGAGE CORPORATION, as BORROWER
By: Name: Title:
Gloria Sadler Bank One, Texas, NA
i PH 1 655 115
5 115
June 25, 1997
Mr. Dusty Lashbrook
President and Chief operating officer
CFI Mortgage Corporation
580 Village Blvd., Suite 360
West Palm Beach, Florida 33409
Dear Dusty:
In anticipation of beginning a new relationship, I thought it would be
beneficial to give you a BRIEF OVERVIEW OF OUR WAREHOUSING procedures.
WAREHOUSE PACKAGES
The warehouse packages will be forwarded overnight to Bank One, Texas Mortgage
Warehouse, 1900 Pacific Building, 6th floor. The warehouse packages will
include: the original note endorsed in blank; the original executed assignment
(in blank) in recordable form and, if a purchased loan, a certified copy of the
interim assignment; title company certified true copy of the Deed/mortgage; a
copy of the take-out commitment and the warehouse transmittal.
Bank One staff will immediately review all documentation in the warehouse
package for errors in the loan amount, interest rate, closing date, names,
signatures, endorsements, and legal description. If there are errors or
discrepancies in the documentation, Bank one will contact the Borrower via
telephone. The collateral package(s) will be returned in overnight mail to the
Borrower to be corrected, therefore no advance will be allowed for that
particular loan.
SERVICES
Shipping
The Borrower will send via overnight delivery to Bank One, an original letter
signed by an authorized representative, requesting the shipment of notes to
permanent investors. The request letter will have a list attached specifying the
notes and/or documents to be shipped (loan number, name, note amount) , and the
exact wording for endorsements. Bank One will endorse the note(s) and forward as
instructed in the letter. A bailee letter will accompany all notes shipped out
of the Bank.
POOLING
Borrower will send pool packages to Bank One at least one day prior to Initial
Certification. After initial certification is completed by Bank One, the Bank
will overnight the pool packages to the appropriate government agency. All
settlements pertaining to
GNMA, FNMA and FHLMC pool transactions must be handle by Bank One's Safekeeping
Department. ALL SHIPPING AND COURIER CHARGES WILL BE PAID BY THE BORROWER.
INVESTOR PURCHASES
When loans are purchased, funds will be wired to Bank One according to funding
instructions provided to the investors by Bank One and the Borrower (the "Bailee
Letter") . Bank One will notify the Borrower when wires are received. The
borrower will fax a payment direction letter instructing Bank One to pay down
the warehouse line. Immediately after a loan is purchased by an investor and
removed from Bank One's collateral inventory, the residue will be returned to
the Borrower.
WET FUNDING/SPECIAL BORROWING
The Borrower will submit a borrowing request to Bank One listing loans not yet
closed with complete wiring instructions or check information identifying
closing agents. Bank One will advance against the warehouse line of credit,
deposit the proceeds of the advance into the Borrower's funding account, and add
the loans to warehouse inventory as "wet". For wires, the Borrower will Que in
(type) the wiring instructions via in-house computer against the funding account
and submit the sequence number of the wire to Bank One for secondary
authorization. Bank One will verify and release the wire to the title company by
providing secondary authorization approval. Please note that the Borrower must
assign personnel of Bank one secondary authorization for all wires related to
wet fundings. For checks, the Borrower will submit a list of checks
written/issued on the DAY OF CLOSING.
REPORTING
Bank One will provide the following collateral reports weekly to the Borrower
for reconciliation purposes:
a. Basic Status Report
b. Notes Shipped to Investors
If you have any questions or need additional information, please do not hesitate
to give me a call at 214/290-6082.
We look forward to a good working relationship!!!!
Alloria Sadler, Manager
Mortgage Finance Operations
cc: Paul Lazusky
EXHIBIT 10.26
MASTER REPURCHASE AGREEMENT
This Master Repurchase Agreement, dated as of November 17, 1997, between Nikko
Financial Services, Inc., on behalf of itself and holders from time to time of
interests in the Purchased Securities, as buyer ("Nikko" or "Buyer"), and Direct
Mortgage Partners, as seller ("Seller").
Nikko may, from time to time, agree, in its sole discretion, to enter into
transactions in which Seller transfers to Nikko Purchased Securities against the
transfer of funds by Nikko, with a simultaneous agreement by Nikko to transfer
to Seller such Purchased Securities at a date certain not more than one year
later, against the transfer of funds by Seller. Each such transaction shall be
referred to herein as a "Transaction", and, unless otherwise agreed in writing,
shall be governed by this Agreement.
SECTION 1. DEFINITIONS. Capitalized terms not otherwise defined but used herein
shall have the following meanings:
"AGENCY" means any of the Government National Mortgage Association ("GNMA"), the
Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC").
"ADDITIONAL PURCHASED SECURITIES" shall have the meaning assigned thereto in
Section 5 hereof.
"AFFILIATE" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting equity, by contract or otherwise.
"AGREEMENT" means this Master Repurchase Agreement, as may be amended,
supplemented or otherwise modified from time to time.
"AUTHORIZED PURCHASER" means any bona fide purchaser acceptable to Nikko in its
sole discretion.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday or (ii) a
public or bank holiday in New York City.
"BUYER'S MARGIN AMOUNT" means, with respect to any Transaction as of any date of
determination, the amount obtained by application of the Buyer's Margin
Percentage to the Repurchase Price for such Transaction as of such date.
"BUYER'S MARGIN PERCENTAGE" means, with respect to any Transaction as of any
date of determination, a percentage agreed to by Nikko and Seller as set forth
in the related Confirmation, or, in the absence of any such agreement, the
percentage obtained by dividing the Market Value of the Purchased Securities on
the Purchase Date by the Purchase Price on the Purchase Date for such
Transaction.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" shall have the meaning assigned thereto in Section 7 hereof.
"COLLATERAL RECEIPT" means a document duly executed by Seller with respect to
each delivery of documents relating to the Purchased Securities to Custodian in
the form attached to the Custody Agreement.
"COMPUTER TAPE" means a computer tape or other electronic medium generated by
Seller and delivered to Nikko and Custodian which provides information relating
to the Purchased Securities, including the information set forth in the Loan
Schedule, in a format acceptable to Nikko.
"CONFIRMATION" shall have the meaning assigned thereto in Section 3(b) hereof.
"CUSTODIAN" means each entity acting as bailee of and agent for Nikko with
respect to any item of the Purchased Securities.
"CUSTODY AGREEMENT" means each Tri-Party Custody Agreement, as amended,
supplemented or otherwise modified from time to time, among Seller, Nikko and a
Custodian, with respect to any Purchased Securities.
"CUSTODIAN'S LOAN FILE" shall have the meaning assigned thereto or to
"Custodian's Mortgage File" in the Custody Agreement.
"DEFAULT" means any event, that, with the giving of notice or the lapse of time
or both, would constitute an Event of Default.
"DEFAULT RATE" means the Prime Rate as quoted in the WALL STREET JOURNAL plus
5%.
"FICO SCORE" means the credit evaluation score as developed by Fair, Isaac and
Company, or its equivalent as developed by a company of comparable industry
standing.
"GAAP" means generally accepted accounting principles in the United States of
America in effect from time to time.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions over Seller.
"GUARANTEE" means, as to any Person, any obligation of such Person directly or
indirectly guaranteeing any Indebtedness of any other Person or in any manner
providing for the payment of any Indebtedness of any other Person.
"INCOME" means, with respect to any Purchased Security at any time, any
principal thereof then payable and all interest, dividends or other
distributions thereon.
"INDEBTEDNESS" means, for any Person: (a) all obligations for borrowed money;
(b) obligations of such Person to pay the deferred purchase or acquisition price
of Property or services, other than trade accounts payable (other than for
borrowed money) arising, and accrued expenses incurred, in the ordinary course
of business so long as such trade accounts payable are payable within ninety
(90) days of the date the respective goods are delivered or the respective
services are rendered; (c) Indebtedness of others secured by a lien on the
Property of such Person, whether or not the respective Indebtedness so secured
has been assumed by such Person; (d) obligations (contingent or otherwise) of
such Person in respect of letters of credit or similar instruments issued for
account of such Person; (e) capital lease obligations of such Person; (f)
obligations of such Person under repurchase agreements or like arrangements; (g)
Indebtedness of others Guaranteed by such Person; (h) all obligations of such
Person incurred in connection with the acquisition or carrying of fixed assets
by such Person; and (i) Indebtedness of general partnerships of which such
Person is a general partner.
"LIBOR" means the London Inter-Bank Offered Rate for United States dollars as
determined by Nikko from time to time.
"LOAN" means either (i) a 1-to-4 family residential first or second lien
mortgage loan or (ii) such other type of loan, lease or other receivable as
shall be agreed upon by the parties as evidenced by Appendix A, as amended or
supplemented, or (iii) any interest in, or secured by, any such loan, lease or
other receivables.
"LOAN NOTE" means, with respect to any Loan, the note together with all riders
thereto and amendments thereof or other evidence of indebtedness.
"LOAN SCHEDULE" means a list of Loans by Loan Type attached to the Trust Receipt
and setting forth as to each Loan the information specified by Nikko.
"LOAN TYPE" means the categorization of a Loan, based on information on a
Computer Tape, under one or more of the headings set forth on Appendix A, B, C
and D.
"LTV" means the ratio of the outstanding principal balance of a Loan to the
appraised value of the related secured property or collateral, if applicable, on
the date of determination.
"MARGIN DEFICIT" shall have the meaning assigned thereto in Section 5(a) hereof.
"MARKET VALUE" means, with respect to any Purchased Security, as of any date of
determination, the market price as determined by Nikko in good faith without
credit for any interest accrued and unpaid thereon. Nikko's determination of
Market Value shall be conclusive upon the parties, absent manifest error.
"MORTGAGE" means a mortgage, deed of trust, or other instrument which creates a
lien on a fee simple or leasehold interest in real property and secures a Loan
Note.
"NOTICE DATE" shall have the meaning assigned thereto in Section 3 hereof.
"OBLIGATIONS" means (a) all of Seller's indebtedness, obligation to pay the
Repurchase Price on the Repurchase Date, and other obligations and liabilities,
to Nikko, its affiliates or Custodian arising under, or in connection with, the
Program Documents or otherwise, whether now existing or hereafter arising; (b)
any and all sums paid by Nikko or on behalf of Nikko in order to preserve any
Purchased Security or its interest therein; (c) in the event of any proceeding
for the collection or enforcement of any of Seller's indebtedness, obligations
or liabilities referred to in clause (a) the reasonable expenses of retaking,
holding, collecting, preparing for sale, selling or otherwise disposing of or
realizing on any Purchased Security, or of any exercise by Nikko of its rights
under the Program Documents, including without limitation, attorneys' fees and
disbursements and court costs; and (d) all of Seller's indemnity obligations to
Nikko or Custodian or both pursuant to the Program Documents.
"OBLIGOR" means the obligor on a Loan.
"PERSON" means any legal person, including any individual, corporation,
partnership, association, joint-stock company, trust, limited liability company,
unincorporated organization, governmental entity, or other entity of similar
nature.
"P&I REMITTANCE DATE" shall mean the date (as specified in the Transaction
Notice) of each calendar month during the term of a Transaction or if no date is
specified in the Transaction Notice, as determined by Nikko and on which date
Seller and/or servicer of the Loans remits to Nikko certain sums of money in
accordance with Section 13 hereof.
"P&S REPORT" means the report defined as such in the related Custody Agreement.
"PRICE DIFFERENTIAL" means, with respect to each Transaction as of any date, the
aggregate amount obtained by daily application of the Pricing Rate to the
Purchase Price on a 360-day-per-year basis for the actual number of days during
the period commencing on (and including) the Purchase Date and ending on (but
excluding) the date of determination (reduced by any amount of such Price
Differential previously paid by Seller to Nikko).
"PRICING RATE" means the per annum percentage rate for determination of the
Price Differential.
"PRIME RATE" means the daily prime loan rate as reported in THE WALL STREET
JOURNAL.
"PROGRAM DOCUMENTS" means this Agreement, each Custody Agreement and any
Servicing Agreement.
"PROPERTY" means any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible.
"PURCHASE DATE" means the date on which Purchased Securities are to be
transferred by Seller to Nikko.
"PURCHASE PRICE" means the price at which Purchased Securities are transferred
by Seller to Nikko in a Transaction.
"PURCHASED SECURITIES" means, with respect to a Transaction, the related Loans,
together with related Records, Servicing Rights, Take-Out Commitments, if any,
and other Collateral, and such other property, rights, titles or interests as
are specified on a related Transaction Notice or P&S Report. The term "Purchased
Securities" with respect to any Transaction at any time also shall include
Additional Purchased Securities delivered pursuant to Section 5(a) hereof.
"RECORDS" means all instruments, agreements and other books, records, and other
media for the storage of information maintained by Seller or any other person or
entity with respect to a Purchased Security. Records shall include the Loan
Notes, any Mortgages and any other instruments necessary to document or service
a Loan.
"REPURCHASE DATE" means the date on which Seller is to repurchase the Purchased
Securities from Nikko, as specified in the related Confirmation, including any
date determined by application of Section 17 hereof. Any Repurchase Price
received by Nikko after 12:00 p.m. New York City time shall be applied on the
next succeeding Business Day, but such funds (absent a Default) shall earn
overnight interest at rate established by Nikko.
"REPURCHASE PRICE" means the price at which Purchased Securities are to be
transferred from Nikko to Seller upon termination of a Transaction, which will
be determined in each case (including Transactions terminable upon demand) as
the sum of the Purchase Price and the Price Differential as of the date of such
determination.
"SERVICING AGREEMENT" means any agreement giving rise or relating to Servicing
Rights with respect to a Purchased Security, including any assignment or other
agreement relating to such agreement.
"SERVICING RIGHTS" means the contractual right of Seller or any other Person to
administer or service a Purchased Security.
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership or
other entity of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.
"TRANSACTION NOTICE" shall have the meaning assigned thereto in Section 3
hereof.
"TRUST RECEIPT" means a Trust Receipt as defined in the related Custody
Agreement.
"UNDERWRITING GUIDELINES" means the standards, procedures and guidelines of
Seller for underwriting or originating Loans of the applicable previously
submitted by Seller to, and approved by, Nikko.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in effect on the
date hereof in the State of New York or the Uniform Commercial Code as in effect
in the applicable jurisdiction.
SECTION 2. THE TRANSACTIONS. Nikko agrees to consider from time to time Seller's
requests that Nikko enter into Transactions with Seller. Unless otherwise agreed
in writing by Nikko, this Agreement is not a commitment to enter into
Transactions with Seller, but rather this Agreement sets forth the procedures to
be used in connection with a Transaction. Seller hereby acknowledges that Nikko
is under no obligation to agree to enter into any Transaction or to modify any
terms of a Transaction.
SECTION 3. ENTERING INTO TRANSACTIONS; TRANSACTION NOTICE, CONFIRMATIONS.
(a) Unless otherwise agreed, Seller shall give Nikko at least one (1) Business
Day prior notice of any proposed Purchase Date (the date on which such notice is
given, the "Notice Date"). On the Notice Date, Seller shall (i) request that
Nikko enter into a Transaction by furnishing to Nikko (either orally or in
writing) the information specified in the form of EXHIBIT A hereto (each, a
"Transaction Notice"), or by delivering a P&S Report as such, (ii) deliver to
Nikko and Custodian a Loan Schedule and Computer Tape, and (iii) deliver to
Custodian (a) the Custodian's Loan File and (b) the related Collateral Receipt
for each Loan subject to such Transaction.
(b) Unless otherwise agreed, upon receipt of the Transaction Notice, Nikko may
make an offer to Seller specifying the terms for such Transaction, including the
Purchase Price, the Pricing Rate and the Repurchase Date in respect of such
Transaction. Upon Seller agreeing to enter into a Transaction hereunder, Nikko
shall promptly deliver to Seller a confirmation of such Transaction (a
"Confirmation"). The terms of any Transaction Notice, if any, signed by Seller
shall be deemed incorporated by reference into the Confirmation and if the terms
of the Transaction Notice conflicts with the Confirmation, the terms of the
Confirmation shall prevail.
(c) Each Confirmation and Transaction Notice, together with this Agreement,
shall constitute conclusive evidence of the terms agreed between Nikko and
Seller with respect to the Transaction to which the Confirmation relates, and
Seller's acceptance of the related proceeds shall constitute Seller's agreement
to the terms of such Confirmation. It is the intention of the parties that each
Confirmation and Transaction Notice shall not be separate from this Agreement
but shall be made a part of this Agreement.
SECTION 4. PAYMENT AND TRANSFER. Unless otherwise agreed, all transfers of funds
hereunder shall be immediately available funds and all Purchased Securities
transferred shall be transferred to the Custodian pursuant to the Custody
Agreement.
SECTION 5. MARGIN MAINTENANCE.
(a) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions is less than the aggregate Buyer's Margin Amount for
all such Transactions (a "Margin Deficit"), then Nikko may by notice to Seller
require Seller in such Transactions, at Seller's option, to transfer to Nikko
cash or additional Purchased Securities acceptable to Nikko and which conform in
all respects to the applicable representations and warranties set forth in
APPENDICES A, B, C AND D ("Additional Purchased Securities"), so that the cash
and aggregate Market Value of the Purchased Securities, including any such
Additional Purchased Securities, will thereupon equal or exceed such aggregate
Buyer's Margin Amount.
(b) Notice required pursuant to subsection (a) of this Section 5 may be given by
any means. A notice for the payment or delivery in respect of the Margin Deficit
received before 10:00 a.m. New York City time on a Business Day, must be met no
later than 5:00 p.m. Any notice given on a Business Day after 10:00 a.m., New
York City time, shall be met no later than 5:00 p.m., on the following Business
Day. The failure of Nikko, on any one or more occasions, to exercise its rights
hereunder, shall not change or alter the terms and conditions to which this
Agreement is subject or limit the right of Nikko to do so at a later date.
Seller and Nikko each agree that a failure or delay by Nikko to exercise its
rights hereunder shall not limit or waive Nikko's rights under this Agreement or
otherwise existing by law or in any way create additional rights for Seller.
SECTION 6. INCOME PAYMENTS.
(a) Where a particular term of a Transaction extends over an Income payment date
on the Purchased Securities subject to that Transaction, such Income shall be
the property of Nikko. Notwithstanding the foregoing, and provided no Event of
Default has occurred, Nikko agrees that Seller shall be entitled to receive an
amount equal to all Income paid on the Purchased Securities that is not
otherwise received by Seller, to the full extent it would be so entitled if the
Purchased Securities had not been sold to Nikko. Provided no Default has
occurred, Nikko shall, as the parties may agree with respect to any Transaction
(or, in the absence of any such agreement, as Nikko shall reasonably determine
in its sole discretion), on the date such Income is paid either (i) transfer to
Seller such Income with respect to any Purchased Securities subject to such
Transaction or (ii) apply the Income payment to reduce the amount, if any, to be
transferred to Nikko by Seller upon termination of such Transaction. Nikko shall
not be obligated to take any action pursuant to the preceding sentences to the
extent that such action would result in the creation of a Margin Deficit, unless
prior thereto or simultaneously therewith Seller transfers to Nikko cash or
Additional Purchased Securities sufficient to eliminate such Margin Deficit.
SECTION 7. SECURITY INTEREST. Seller and Nikko intend that the Transactions
hereunder be sales to Nikko of the Purchased Securities and not loans from Nikko
to Seller secured by the Purchased Securities. However, in order to preserve
Nikko's rights under this Agreement in the event that a court or other forum
recharacterizes the Transactions hereunder as other than sales, and as security
for Seller's performance of all of its Obligations, Seller hereby grants Nikko a
fully perfected first priority security interest in the Purchased Securities,
the Records, and all related Servicing Rights, insurance, Income, accounts
(including escrow accounts) and any other contract rights, payments, rights to
payment (including payments of interest or finance charges) general intangibles
and other assets relating to the Purchased Securities or any interest in the
Purchased Securities, the servicing of the Purchased Securities, and any
proceeds and distributions with respect to any of the foregoing and any other
property, rights, titles or interests as are specified on a Transaction Notice
or P&S Report (collectively, the "Collateral").
SECTION 8. CONDITIONS PRECEDENT.
(a) INITIAL TRANSACTION. As conditions precedent to the initial Transaction,
Nikko shall have received on or before the day of such initial Transaction
the following, in form and substance satisfactory to Nikko and duly
executed by Seller:
(i) The Program Documents, duly executed and delivered by the parties
hereto;
(ii) Evidence that all other actions necessary or, in the opinion of Nikko,
desirable to perfect and protect Nikko's interest in the Purchased
Securities and other Collateral have been taken, including, without
limitation, duly executed and filed Uniform Commercial Code financing
statements on Form UCC-1;
(iii) A certified copy of Seller's corporate resolutions approving the
Program Documents and Transactions thereunder (either specifically or
by general resolution), and all documents evidencing other necessary
corporate action or governmental approvals as may be required in
connection with the Program Documents;
(iv) An incumbency certificate of Seller's corporate secretary certifying
the names, true signatures and titles of Seller's officers and
employees duly authorized to request Transactions hereunder and sign
the Program Documents and the other documents to be delivered
thereunder, and a certificate of an officer of Seller, both of which
shall be in form and substance acceptable to Nikko;
(v) An opinion of Seller's counsel as to such matters as Nikko may
reasonably request and in form and substance acceptable to Nikko; and
(vi) Any other documents reasonably requested by Nikko.
(b) EACH TRANSACTION. The obligation of Nikko to enter into each Transaction
pursuant to this Agreement is subject to the following conditions
precedent:
(i) Nikko or its designee shall have received on or before the day of such
Transaction (unless otherwise specified in this Agreement) the
following, in form and substance satisfactory to Nikko and (if
applicable) duly executed:
(a) A Transaction Notice;
(b) The related Custodian's Loan File with respect to each Purchased
Security subject to a Transaction and the related Trust Receipt; and
(c) Such other documents as Nikko may reasonably request.
(ii) No Default or Event of Default shall have occurred and be continuing,
and
(iii) All representations and warranties in Section 10 hereof shall be true
and correct on the date of such Transaction.
SECTION 9. RELEASE OF COLLATERAL. Upon payment in full of the Repurchase Price
and all other Obligations owing with respect to any Purchased Security, if no
Default or Event of Default has occurred and is continuing, Nikko shall, and
shall direct Custodian to, release such Purchased Security.
SECTION 10. RELIANCE. With respect to any Transaction, Nikko may conclusively
rely upon, and shall incur no liability to Seller in acting upon, any request or
other communication that Nikko believes to have been given or made by a person
authorized to enter into a Transaction on Seller's behalf, whether or not such
person is listed on the certificate delivered pursuant to Subsection 8.1(d)
hereof. In each such case, Seller hereby waives the right to dispute Nikko's
record of the terms of the Confirmation, request or other communication.
SECTION 11. REPRESENTATIONS AND WARRANTIES. Seller hereby represents and
warrants, and shall on and as of the Purchase Date for any Transaction and on
and as of each date thereafter through and including the related Repurchase Date
be deemed to represent and warrant, that:
a) DUE ORGANIZATION AND QUALIFICATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
Seller's incorporation. Seller is duly qualified to do business, is in good
standing and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "APPROVALS") necessary for the
conduct of its business as currently conducted and the performance of its
obligations under the Program Documents.
b) POWERAND AUTHORITY. Seller has all necessary power and authority to conduct
its business as currently conducted, to execute, deliver and perform its
obligations under the Program Documents and to consummate the Transactions.
c) DUE AUTHORIZATION. The execution, delivery and performance of the Program
Documents by Seller have been duly authorized by all necessary corporate
action and do not require any additional approvals or consents or other
action by or any notice to or filing with any Person;
d) NONCONTRAVENTION. None of the execution and delivery of the Program
Documents by Seller or the consummation of the Transactions and
transactions thereunder:
(i) conflicts with, breaches or violates any provision of the articles
or certificate of incorporation or by-laws of Seller or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award currently in effect having applicability to Seller, or its
properties;
(ii) constitutes a material default by Seller under any loan or
repurchase agreement, mortgage, indenture or other agreement or
instrument to which Seller is a party or by which it or any of its
properties is or may be bound or affected; or
(iii) results in or requires the creation of any lien upon or in
respect of any of the assets of Seller except the lien relating to the
Program Documents.
e) LEGALPROCEEDINGS. There is no action, proceeding or investigation by or
before any court, governmental or administrative agency or arbitrator
affecting any of the Purchased Securities, Seller or any of its Affiliates,
pending or threatened, which, if decided adversely, would have a material
adverse effect with respect to Seller or any Purchased Security.
f) VALID AND BINDING OBLIGATIONS. Each of the Program Documents to which
Seller is a party when executed and delivered by Seller will constitute the
legal, valid and binding obligations of Seller, enforceable in accordance
with their respective terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles.
g) FINANCIAL STATEMENTS. The financial statements of Seller, copies of which
have been furnished to Nikko, (i) are, as of the dates and for the periods
referred to therein, complete and correct in all material respects, (ii)
present fairly the financial condition and results of operations of Seller
as of the dates and for the periods indicated and (iii) have been prepared
in accordance with GAAP consistently applied, except as noted therein
(subject as to interim statements to normal year-end adjustments). Since
the date of the most recent financial statements, there has been no
material adverse change in such financial condition or results of
operations. Except as disclosed in such financial statements, Seller is not
subject to any contingent liabilities or commitments that, individually or
in the aggregate, have a material possibility of causing a material adverse
change in the business or operations of Seller.
h) ACCURACY OF INFORMATION. None of the documents or information prepared by
or on behalf of Seller and provided by Seller to Nikko relating to Seller
or its financial condition contain any statement of a material fact with
respect to Seller or the Transactions that was untrue or misleading in any
material respect when made. Since the furnishing of such documents or
information, there has been no change, nor any development or event
involving a prospective change known to Seller, that would render any of
such documents or information untrue or misleading in any material respect.
i) NO CONSENTS. No consent, license, approval or authorization from, or
registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any
consent, approval, waiver or notification of any creditor, lessor or other
nongovernmental person, is required in connection with the execution,
delivery and performance by Seller of this Agreement or the consummation of
any other Program Document.
j) COMPLIANCE WITH LAW. ETC. No practice, procedure or policy employed or
proposed to be employed by Seller in the conduct of its businesses violates
any law, regulation, judgment, agreement, order or decree applicable to it
which, if enforced, would result in a material adverse effect upon Seller.
k) SOLVENCY: FRAUDULENT CONVEYANCE. Seller is solvent and will not be rendered
insolvent by the Transaction and, after giving effect to such Transaction,
Seller will not be left with an unreasonably small amount of capital with
which to engage in its business. Seller does not intend to incur, or
believe that it has incurred, debts beyond its ability to pay such debts as
they mature. Seller is not contemplating the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the appointment of
a receiver, liquidator, conservator, trustee or similar official in respect
of Seller or any of its assets. The amount of consideration being received
by Seller upon the sale of the Loans to Nikko and thereafter upon the sale
of any Purchased Securities by Seller to Nikko constitutes reasonably
equivalent value and fair consideration for such Purchased Securities.
Seller is not transferring any Purchased Securities with any intent to
hinder, delay or defraud any of its creditors.
l) INVESTMENT COMPANY ACT COMPLIANCE. Seller is neither required to be
registered as an "investment company" as defined under the Investment
Company Act nor under the control of an "investment company" as defined
under the Investment Company Act.
m) TAXES. Seller has filed all federal and state tax returns which are
required to be filed and paid all taxes, including any assessments received
by it, to the extent that such taxes have become due. Any taxes, fees and
other governmental charges payable by Seller in connection with a
Transaction and the execution and delivery of the Program Documents have
been paid (other than for taxes that are being contested in good faith or
for which it has established adequate reserves).
n) With respect to each Loan, Seller makes all of the applicable
representations and warranties set forth on APPENDICES A, B, C AND D for
the related Loan Type, as of the date the documents related to such Loan
are delivered to the Custodian and continuously while such Loan is part of
the Collateral and is subject to a Transaction.
In the event Nikko engages in a repurchase transaction with any of the Purchased
Securities or otherwise pledges or hypothecates any of the Purchased Securities,
Nikko shall have the right to assign to Nikko's counterparty any of the
applicable representations or warranties in APPENDICES A, B, C AND D as they
relate to the Purchased Securities that are subject to such repurchase
transaction.
The representations and warranties set forth in this Agreement shall survive
transfer of the Purchased Securities to Nikko and shall continue for so long as
the Purchased Securities are subject to this Agreement.
SECTION 12. COVENANTS OF SELLER. Seller hereby covenants with Nikko as follows:
(a) DEFENSE OF TITLE. Seller warrants and will defend the right, title and
interest of Nikko in and to all Collateral against all adverse claims and
demands.
(b) NO AMENDMENT OR COMPROMISE. Without Nikko's prior consent, Seller and those
acting on Seller's behalf shall not amend or modify, or waive any term or
condition of, or settle or compromise any claim in respect of, any item of
the Purchased Securities or any related rights.
(c) NO ASSIGNMENT. Seller shall not sell, assign, transfer or otherwise dispose
of, or grant any option with respect to, or pledge, hypothecate or grant a
security interest in or lien on or otherwise encumber (except pursuant to
the Program Documents), any of the Purchased Securities or any interest
therein, provided that this paragraph shall not prevent any transfer of
Purchased Securities in accordance with the Program Documents.
(d) SERVICING OF LOANS. Seller shall service, or cause to be serviced, all
Loans that are part of the Purchased Securities in accordance with the
standard industry practices, employing at least the same procedures and
exercising the same care that Seller customarily employs in servicing Loans
for its own account, and in accordance with all applicable requirements of
the relevant Agency or Authorized Purchaser. Seller shall notify servicers
of Nikko's interest hereunder. Seller shall notify Nikko of the name and
address of all servicers. Nikko shall have the right to approve each
servicer and the form of all servicing agreements. Seller shall hold or
cause to be held all escrow funds collected with respect to such Loans in
trust accounts and shall apply the same for the purposes for which such
funds were collected. Upon Nikko's request, Seller shall provide to Nikko a
letter addressed to and agreed to by each servicer of Loans, in form and
substance reasonably satisfactory to Nikko, advising such servicer of such
matters as Nikko may reasonably request. If Seller should discover that,
for any reason whatsoever, Seller or any entity responsible to Seller by
contract for managing or servicing any such Loan has failed to perform
fully Seller's obligations under the Program Documents or any of the
obligations of such entities with respect to the Purchased Securities,
Seller shall promptly notify Nikko.
(e) PRESERVATION OF COLLATERAL; COLLATERAL VALUE. Seller shall do all things
necessary to preserve the Collateral so that it remains effective security
hereunder. Without limiting the foregoing, Seller will comply with all
rules, regulations and other laws of any governmental authority and cause
the Collateral to comply with all applicable rules, regulations and other
laws. Seller will not allow any default for which Seller are responsible to
occur under any Collateral, and Seller shall fully perform or cause to be
performed when due all of its obligations under any Collateral or the
Program Documents.
(f) MAINTENANCE OF PAPERS, RECORDS AND FILES. Seller shall acquire and Seller
or servicer of the Purchased Securities shall build, maintain and have
available a complete file in accordance with industry custom and practice
for each Purchased Security. Seller or the servicer of the Purchased
Securities will maintain all Records not in the possession of Custodian in
good and complete condition in accordance with industry practices and
preserve them against loss.
(i) Seller shall collect and maintain or cause to be collected and
maintained all Records in accordance with industry custom and
practice, including those maintained pursuant to the preceding
subparagraph, and all such Records shall be in Custodian's or Seller's
possession unless Nikko otherwise approves. Seller will not allow any
such papers, records or files that are an original or an only copy to
leave Seller's or Custodian's possession, except for individual items
removed in connection with servicing a specific Purchased Security, in
which event Seller will obtain or cause to be obtained a receipt from
a financially responsible person for any such paper, record or file.
(ii) For so long as Nikko has an interest in or lien on any Purchased
Security, Seller will hold or cause to be held all Records in trust
for Nikko. Seller shall notify every other party holding any such
Records of the interests and liens granted hereby.
(iii) Uponreasonable advance notice from Custodian or Nikko, Seller shall
(x) make all Records available to Custodian or Nikko to examine any
such Records either by its own officers or employees, or by agents or
contractors, or both, and make copies of all or any portion thereof,
(y) permit Nikko or its authorized agents to discuss the affairs,
finances and accounts of Seller with its respective chief operating
officer and chief financial officer and to discuss the affairs,
finances and accounts of Seller with its independent accountants.
(g) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION. Seller shall
keep or cause to be kept in reasonable detail books and records of account
of its assets and business and shall clearly reflect therein the transfer
of Loans to Nikko. Seller shall furnish or cause to be furnished to Nikko
promptly upon Nikko's request the following:
(i) FINANCIAL STATEMENTS. (x) The consolidated, audited balance sheets of
Seller as of the end of each fiscal year of Seller and the audited
financial statements of income and changes in equity of Seller for
such fiscal year; (y) the consolidated, unaudited balance sheets of
Seller as of the end of each quarter and the audited financial
statements of income and changes in equity of Seller for the portion
of the fiscal year then ended; and (z) the consolidated, unaudited
balance sheets of Seller as of the end of such calendar month and the
unaudited financial statements of income and changes in equity of
Seller for the portion of the fiscal year then ended, all of which
were prepared in accordance with GAAP.
(ii) PERFORMANCE DATA. Monthly reports in form and scope satisfactory to
Nikko, setting forth data regarding the performance of the Purchased
Securities, and such other information as Nikko may reasonably
request.
(iii) MONTHLY SERVICING DISKETTES. A computer tape and a diskette (or any
other electronic transmission acceptable to Nikko) in a format
acceptable to Nikko containing such information with respect to the
Purchased Securities as Nikko may reasonably request.
(iv) ANNUAL BUDGETS; BUSINESS PLANS. Such annual budgets, monthly and
annual comparisons of conformity of operations with annual budgets,
annual projections of financial and operations results, strategic
business plans and other internal reports prepared or reviewed by
executive management as Nikko may reasonably request from time to
time.
(h) NOTICE OF MATERIAL EVENTS. Seller shall promptly inform Nikko in writing of
any event, circumstance or condition that has resulted, or has a
possibility of resulting, in a material adverse effect upon Seller.
(i) MAINTENANCE OF LICENSES. Seller shall maintain all licenses, permits or
other approvals necessary for Seller to conduct its business and to perform
its obligations under the Program Documents.
SECTION 13. P&I REMITTANCE DATE PAYMENTS. On each P&I Remittance Date, Seller
shall remit or shall cause to be remitted to Nikko:
(a) all principal under the Purchased Securities received in the calendar month
in which such P&I Remittance Date occurs;
(b) all principal prepayments received on the Purchased Securities in the
calendar month in which such P&I Remittance Date occurs (provided that the
date of receipt is prior to the Repurchase Date); and
(c) that portion of the Pricing Differential that has accrued as of such date.
SECTION 14. REPURCHASE OF PURCHASED SECURITIES. Upon discovery by Seller of a
breach of any of the representations and warranties set forth in APPENDICES A,
B, C AND D hereto, Seller shall give prompt written notice thereof to Nikko.
Upon any such discovery by Nikko, Nikko will notify Seller. If Seller does not
cure such breach on or before the 15th day following receipt of notice of such
breach, then Seller shall repurchase the affected Purchased Securities (with the
consent of Nikko) on the next succeeding Business Day.
SECTION 15. REPURCHASE TRANSACTIONS. Nikko may, in its sole election, engage in
repurchase transactions with the Purchased Securities or otherwise pledge,
hypothecate, assign, transfer or otherwise convey the Purchased Securities with
a counterparty of Nikko's choice.
SECTION 16. EVENTS OF DEFAULT. With respect to any Transactions covered by or
related to this Agreement, the occurrence of any of the following events shall
constitute an "EVENT OF DEFAULT":
(a) Seller fails to transfer the Purchased Securities to Nikko on the
applicable Purchase Date;
(b) Seller fails to repurchase the Purchased Securities on the applicable
Repurchase Date;
(c) Seller shall fail to perform, observe or comply with any other term,
covenant or agreement contained in the Program Documents;
(d) Any representation or warranty made by Seller (or any of Seller's officers)
in the Program Documents or in any other document (other than the
representations or warranties in Appendix A) shall have been incorrect or
untrue in any material respect when made or repeated or deemed to have been
made or repeated;
(e) Seller or any of Seller's Subsidiaries shall fail to pay any of Seller's or
Seller's Subsidiaries Indebtedness for borrowed money (including
non-recourse Indebtedness), or any interest or premium thereon when due
(whether by scheduled maturity, requirement prepayment, acceleration,
demand or otherwise), or shall fail to make any payment when due under
Seller's or Seller's Subsidiaries' Guarantee of another person's
Indebtedness for borrowed money, and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness or Guarantee; or any other default under any
agreement or instrument relating to any such Indebtedness or Guarantee, or
any other event, shall occur and shall continue after the applicable grace
period, if any, specified in such agreement, instrument or Guarantee, if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness or Guarantee; or if any
such Indebtedness or Guarantee shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
(f) a custodian, receiver, conservator, liquidator, trustee, sequestrator or
similar official for Seller or any of Seller's Subsidiaries, or of any of
Seller's or their Property, is appointed or takes possession of such
property; or Seller or any of Seller's Subsidiaries generally fails to pay
Seller's or Seller's Subsidiaries' debts as they become due; or Seller or
any of Seller's Subsidiaries is adjudicated bankrupt or insolvent; or an
order for relief is entered under the Federal Bankruptcy Code, any
successor or similar applicable statute, or any administrative insolvency
scheme, against Seller or any of Sellers Subsidiaries; or any of Seller's
or Seller's Subsidiaries' Property is sequestered by court or
administrative order; or a petition is filed against Seller or any of
Seller's Subsidiaries under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, moratorium, delinquency or
liquidation law of any jurisdiction, whether now or subsequently in effect;
(g) Seller or any of Seller's Subsidiaries files a voluntary petition in
bankruptcy or seeks relief under any provision of any bankruptcy,
reorganization, moratorium, delinquency, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction
whether now or subsequently in effect; or consents to the filing of any
petition against it under any such law; or consents to the appointment of
or taking possession by a custodian, receiver, conservator, trustee,
liquidator, sequestrator or similar official for Seller or any of Seller's
Subsidiaries, or of all or any part of Seller's or Seller's Subsidiaries'
Property; or makes an assignment for the benefit of Seller's or Seller's
Subsidiaries' creditors;
(h) any judgment or order for the payment of money in excess of $100,000 is
rendered against Seller or any of Seller's Subsidiaries;
(i) any Governmental Authority or any person, agency or entity acting or
purporting to act under governmental authority shall have taken any action
to condemn, seize or appropriate, or to assume custody or control of, all
or any substantial part of the Property of Seller or of any of Seller's
Subsidiaries, or shall have taken any action to displace the management of
Seller or of any of Seller's Subsidiaries or to curtail its authority in
the conduct of the business of Seller or of any of Seller's Subsidiaries,
or Governmental Authority takes any action to remove, limit or restrict the
approval of Seller as an issuer, lender or a seller/servicer of Loans;
(j) Seller or any of Seller's Subsidiaries shall default under, or fail to
perform as requested under, or shall otherwise breach the terms of any
instrument, agreement or contract between Seller and Nikko or any of
Nikko's Affiliates;
(k) in the good faith judgment of Nikko any material adverse change shall have
occurred in the financial condition, operations, business prospects or
corporate structure of Seller or any of Seller's Subsidiaries;
(l) Seller shall admit its inability to, or Seller's intention not to, perform
any of Seller's Obligations hereunder;
(m) Seller dissolves, merges or consolidates with another entity unless Seller
is the surviving party, or sells, transfers, or otherwise disposes of a
material portion of Seller's business or assets;
(n) this Agreement shall for any reason cease to create a valid, first priority
security interest in any of the Purchased Securities purported to be
covered hereby;
(o) Seller's audited annual financial statements or the notes thereto or other
opinions or conclusions stated therein shall be qualified or limited by
reference to the status of Seller, as a "going concern" or a reference of
similar import;
(p) any material amendment to the Underwriting Guidelines which was not
previously approved in writing by Nikko; or
(q) either (i) a change in Control (as such term is defined in Rule 12b-2 of
the Securities Exchange Act of 1934, as amended) of Seller shall have
occurred other than in connection with and as a result of the issuance and
sale by Seller of common stock or (ii) any two members of the management
team of Seller shall cease to be an officer of Seller and to function in
substantially the same capacity as such member functions as of the date
hereof.
SECTION 17. REMEDIES. Upon the occurrence of an Event of Default, Nikko, at its
option (which option shall be deemed to have been exercised immediately upon the
occurrence of an Event of Default pursuant to Section 16 (viii) or (ix) hereof),
shall have any or all of the following rights and remedies, which may be
exercised by Nikko:
(a) The Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
(b) Seller's obligations hereunder to repurchase all Purchased Securities at
the Repurchase Price therefor on the Repurchase Date in such Transactions
shall thereupon become immediately due and payable; all Income paid after
such exercise or deemed exercise shall be retained by Nikko and applied to
the aggregate Repurchase Prices and any other amounts owing by Seller
hereunder; Seller shall immediately deliver to Nikko or its designee any
and all original papers, records and files relating to the Purchased
Securities subject to such Transaction then in Seller's possession and/or
control; and all right, title and interest in and entitlement to such
Purchased Securities and Servicing Rights thereon shall be deemed
transferred to Nikko.
Nikko may (A) immediately sell, without notice or demand of any kind, at a
public or private sale and at such price or prices as Nikko may reasonably deem
satisfactory any or all Purchased Securities or (B) in its sole discretion
elect, in lieu of selling all or a portion of such Purchased Securities, to give
Seller credit for such Purchased Securities in an amount equal to the Market
Value of the Purchased Securities against the aggregate unpaid Repurchase Price
and any other amounts owing by Seller hereunder. The proceeds of any disposition
of Purchased Securities shall be applied FIRST to the costs and expenses
incurred by Nikko in connection with or as a result of an Event of Default;
SECOND to consequential damages, including, but not limited to, costs of cover
and/or related hedging transactions; THIRD to the aggregate Repurchase Prices;
and FOURTH to all other Obligations.
The parties recognize that it may not be possible to purchase or sell all of the
Purchased Securities on a particular Business Day, or in a transaction with the
same purchaser, or in the same manner because the market for such Purchased
Securities may not be liquid. In view of the nature of the Purchased Securities,
the parties agree that liquidation of a Transaction or the underlying Purchased
Securities does not require a public purchase or sale and that a good faith
private purchase or sale shall be deemed to have been made in a commercially
reasonable manner. Accordingly, Nikko may elect, the time and manner of
liquidating any Purchased Security and nothing contained herein shall obligate
Nikko to liquidate any Purchased Security on the occurrence of an Event of
Default or to liquidate all Purchased Securities in the same manner or on the
same Business Day or constitute a waiver of any right or remedy of Nikko.
In addition to its rights hereunder, Nikko shall have the right to proceed
against any of Seller's assets which may be in the possession of Nikko or its
designee (including the Custodian), including the right to liquidate such assets
and to set-off the proceeds against monies owed by Seller to Nikko pursuant to
this Agreement. Nikko may set off cash, the proceeds of the liquidation of the
Purchased Securities and Additional Purchased Securities, any other Collateral
or its proceeds and all other sums or obligations owed by Seller to Nikko
hereunder against all of Seller's Obligations to Nikko, whether under this
Agreement, under a Transaction, or under any other agreement between the
parties, or otherwise, whether or not such Obligations are then due, without
prejudice to Nikko's right to recover any deficiency.
Nikko may direct all Persons servicing the Purchased Securities to take such
action with respect to the Purchased Securities as Nikko determines appropriate.
Seller shall be liable to Nikko for the amount of all expenses (plus interest
thereon at a rate equal to the Default Rate), and consequential damages,
including, without limitation, all costs and expenses incurred in connection
with hedging or covering transactions.
Seller shall cause all sums received by it with respect to the Purchased
Securities to be deposited with Custodian (or such other Person as Nikko may
direct) after receipt thereof.
Nikko shall without regard to the adequacy of the security for the Obligations,
be entitled to the appointment of a receiver by any court having jurisdiction,
without notice, to take possession of and protect, collect, manage, liquidate,
and sell the Purchased Securities and any other Collateral or any portion
thereof, collect the payments due with respect to the Purchased Securities and
any other Collateral or any portion thereof, and do anything that Nikko is
authorized hereunder to do. Seller shall pay all costs and expenses incurred by
Nikko in connection with the appointment and activities of such receiver.
Nikko may enforce its rights and remedies hereunder without prior judicial
process or hearing, and Seller hereby expressly waives to the extent permitted
by law, any right Seller might otherwise have to require Nikko to enforce its
rights by judicial process. Seller also waives, to the extent permitted by law,
any defense Seller might otherwise have to the Obligations, arising from use of
nonjudicial process, enforcement and sale of all or any portion of the or
Purchased Securities and any other Collateral or from any other election of
remedies. Seller recognizes that nonjudicial remedies are consistent with the
usages of the trade, are responsive to commercial necessity and are the result
of a bargain at arm's length.
Nikko shall have all the rights and remedies provided herein, provided by
applicable federal, state, foreign, and local laws in equity, and under any
other agreement between Seller and Nikko.
Upon the occurrence of an Event of Default, Nikko shall have the right to
exercise any of its rights and/or remedies without presentment, demand, protest
or further notice of any kind, all of which are hereby expressly waived by
Seller.
SECTION 18. DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE. No failure on the part of
Nikko to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by Nikko of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All rights remedies of Nikko provided for herein are cumulative and in addition
to any and all other rights and remedies provided by law, the Program Documents
and the other instruments and agreements contemplated hereby and thereby. Nikko
may exercise at any time after the occurrence of an Event of Default one or more
remedies, as it so desires, and may thereafter at any time and from time to time
exercise any other remedy or remedies.
SECTION 19. USE OF EMPLOYEE PLAN ASSETS. If assets of an employee benefit plan
subject to any provision of the Employee Retirement Income Security Act of 1974
("ERISA") are intended to be used by either party hereto (the "Plan Party") in a
Transaction, the Plan Party shall so notify the other party prior to the
Transaction. The Plan Party shall represent in writing to the other party that
the Transaction does not constitute a prohibited transaction under ERISA or is
otherwise exempt therefrom, and the other party may proceed in reliance thereon
but shall not be required so to proceed.
SECTION 20. INDEMNITY. The powers conferred on Nikko hereunder are solely for
its protection and do not impose any duty on it to exercise any such powers.
Following the occurrence of an Event of Default, Nikko shall have no duty of
care to Seller as to any Purchased Security or any other Collateral or with
respect to the taking of any necessary steps to preserve rights against other
parties, or any other obligation pertaining to the Collateral. Seller, and
Seller's successors and assigns, waive all rights whatsoever against Nikko for
any loss, expense, liability or damage Seller may suffer as a result of actions
taken pursuant to the Program Documents, including those arising under any
"mortgage in possession" or similar doctrine.
Seller agrees to, and shall, indemnify Nikko and its Affiliates and their
respective officers, directors, partners, employees, representatives and agents
(collectively, the "Indemnified Parties", each an "Indemnified Party") from, and
hold each of them harmless against, any and all losses, liabilities, claims,
damages, judgments, penalties, suits, actions, costs, disbursements or expenses
(including, but not limited to, attorneys' fees, legal expenses and the
allocated cost of internal counsel) whether or not suit is brought and
settlement costs imposed on, asserted against or incurred by any of them as a
result of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not such Indemnified
Party is a party thereto) relating to, resulting from or arising out of any of
the Program Documents and all other documents related thereto, any breach of a
representation or warranty of Seller or Seller's officer in this Agreement, and
all actions taken pursuant thereto (but excluding any such costs to the extent
incurred by reason of gross negligence or willful misconduct on the part of the
Indemnified Party to be indemnified). In addition, Seller shall compensate and
indemnify Nikko for all reasonable costs, expenses, loss and other liabilities
that Nikko may sustain in connection with the protection of Nikko's rights under
or the enforcement of the Program Documents or any other documents received by
Nikko or Custodian in connection therewith.
Seller agrees to pay, or reimburse Nikko and Custodian for all fees and taxes in
connection with the recording or filing of instruments and documents in public
offices, payment or discharge of any taxes or liens upon or in respect of the
Purchased Securities and all other fees, costs and other expenses in connection
with protecting, maintaining or preserving the Purchased Securities and Nikko's
interest therein, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings arising out of or
relating to the Purchased Securities.
Seller's indemnity obligations contained in this Section 20 shall continue in
full force and effect notwithstanding the full payment of all Obligations and
notwithstanding the discharge thereof or termination of this Agreement.
SECTION 21. WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS. Seller hereby expressly
waives, to the fullest extent permitted by law, every statute of limitation on a
deficiency judgment, any reduction in the proceeds of any Purchased Securities
as a result of restrictions upon Nikko or Custodian contained in the Program
Documents or any other instrument delivered in connection therewith, and any
right that it may have to direct the order in which any of the Purchased
Securities shall be disposed of in the event of any disposition pursuant hereto.
SECTION 22. REIMBURSEMENT. All sums expended by Nikko in connection with the
exercise of any right or remedy provided for herein shall be and remain Seller's
obligation. Seller agrees to pay, with interest at the Default Rate, the
reasonable out-of-pocket expenses and reasonable attorneys' fees incurred by
Nikko and/or Custodian in connection with the preparation, negotiation,
administration and enforcement of the Program Documents, the taking of any
action, including legal action, required or permitted to be taken by Nikko
and/or Custodian pursuant thereto, or in connection with any refinancing or
restructuring in the nature of a "workout".
SECTION 23. FURTHER ASSURANCES. Seller agrees to do such further acts and things
and to execute and deliver to Nikko such additional assignments,
acknowledgments, agreements, powers and instruments as are reasonably required
by Nikko to carry into effect the purposes of the Agreement, to perfect the
interests of Nikko in the Purchased Securities or to better assure and confirm
unto Nikko its rights, powers and remedies hereunder.
SECTION 24. ENTIRE AGREEMENT. This Agreement supersedes and integrates all
previous negotiations, contracts, agreements and understandings between the
parties relating to a sale and repurchase of Purchased Securities and Additional
Purchased Securities thereto, and it, together with the other Program Documents,
each Confirmation, and the other documents delivered pursuant hereto or thereto,
contains the entire final agreement of the parties. No prior negotiation,
agreement, understanding or prior contract shall have any validity hereafter.
SECTION 25. TERMINATION. This Agreement shall remain in effect until such time
as it is terminated by Nikko or Seller by giving written notice of termination
hereof to the other. However, no such termination shall affect Seller's
outstanding obligations to Nikko at the time of such termination. Seller's
obligations to indemnify Nikko pursuant to this Agreement shall survive the
termination hereof.
SECTION 26. ASSIGNMENT. The Program Documents are not assignable by Seller.
Nikko may from time to time assign all or a portion of its rights and
obligations under this Agreement and the Program Documents; provided, however
that Nikko shall maintain, for review by Seller upon written request, a register
of assignees and a copy of an executed assignment and acceptance by Nikko and
assignee ("Assignment and Acceptance"), specifying the percentage or portion of
such rights and obligations assigned. Upon such assignment, (a) such assignee
shall be a party hereto and to each Program Document to the extent of the
percentage or portion set forth in the Assignment and Acceptance, and shall
succeed to the applicable rights and obligations of Nikko hereunder, and (b)
Nikko shall, to the extent that such rights and obligations have been so
assigned by it, be released from its obligations hereunder and under the Program
Documents. Unless otherwise stated in the Assignment and Acceptance, Seller
shall continue to take directions solely from Nikko unless otherwise notified by
Nikko in writing. Nikko may distribute to any prospective assignee any document
or other information delivered to Nikko by Seller.
SECTION 27. AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement nor any consent to any failure to comply herewith or therewith shall
in any event be effective unless the same shall be in writing and signed by
Seller and Nikko, and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 28. SEVERABILITY. If any Program Document is declared invalid by any
court of competent jurisdiction, such invalidity shall not affect any other
provision, and each Program Document shall be enforced to the fullest extent
permitted by law.
SECTION 29. BINDING EFFECT; GOVERNING LAW. This Agreement shall be binding and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that Seller may not assign or transfer any of its rights or
obligations under this Agreement, Confirmation or any other Program Document
without the prior written consent of Nikko. This Agreement shall be construed in
accordance with, and governed by, the law of the State of New York, without
giving effect to the conflict of laws principles thereof.
SECTION 30. CONSENT TO JURISDICTION. Seller hereby waives trial by jury. Seller
hereby irrevocably consent to the non-exclusive jurisdiction of any court of the
State of New York, or in the United States District Court for the Southern
District of New York, arising out of or relating to the Program Documents in any
action or proceeding. Seller hereby submits to, and waives any objection Seller
may have to, personal jurisdiction and venue in the courts of the State of New
York and the United States District Court for the Southern District of New York,
with respect to any disputes arising out of or relating to the Program
Documents.
SECTION 31. SINGLE AGREEMENT. Seller and Nikko acknowledge that, and have
entered hereunto and will enter into each Transaction hereunder in consideration
of and in reliance upon the fact that, all Transactions hereunder constitute a
single business and contractual relationship and have been made in consideration
of each other. Accordingly, Seller and Nikko each agree (i) to perform all of
its obligations in respect of each Transaction hereunder, and that a default in
the performance of any such obligations shall constitute a default by it in
respect of all Transactions hereunder, and (ii) that payments, deliveries and
other transfers made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries and other
transfer in respect of any other Transaction hereunder, and the obligations to
make any such payments, deliveries and other transfers may be applied against
each other and netted.
SECTION 32. INTENT. Seller and Nikko recognize that each Transaction is a
"repurchase agreement" as that term is defined in Section 101 of Title 11 of the
United States Code, as amended ("USC") (except insofar as the Loans subject to
such Transaction or the term of such Transaction would render such definition
inapplicable), and a "securities contract" as that term is defined in Section
741 of Title 11 of the USC (except insofar as the Loans subject to such
Transaction or the term of such Transaction would render such definition
inapplicable).
It is understood that Nikko's right to liquidate the Purchased Securities
delivered to it in connection with the Transactions hereunder or to exercise any
other remedies pursuant to Section 19 hereof is a contractual right to liquidate
such Transaction as described in Sections 555 and 559 of Title 112 of the USC.
Seller and Nikko agree and acknowledge that if Seller is an "insured deposit
institution," as such term is defined in the Federal Deposit Insurance Act, as
amended ("FDIA"), then each Transaction hereunder is a "qualified financial
contract," as that term is defined in FDIA and any rules, order or policy
statements thereunder (except insofar as the Loans such to such Transaction
would render such definition inapplicable).
It is understood that this Agreement constitutes a "netting contract" as defined
in and subject to Title IV of the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), and each payment entitlement and payment
obligation under any Transaction hereunder shall constitute a "covered
contractual payment entitlement" or "covered contractual payment obligation",
respectively, as defined in and subject to FDICIA (except insofar as one or both
of the parties is not a "financial institution" as that term is defined in
FDICIA).
SECTION 33. NOTICES AND OTHER COMMUNICATIONS. Any notice required or permitted
by this Agreement shall be in writing and shall be effective and deemed
delivered only when received by the party to which it is sent; provided,
however, that a facsimile transmission shall be deemed to be received when
transmitted so long as the transmitting machine has provided an electronic
confirmation of such transmission. Any such notice shall be sent to a party at
the address or facsimile transmission number set forth in the signature page of
the Custody Agreement.
IN WITNESS WHEREOF, Seller and Nikko have caused their names to be signed to
this Master Repurchase Agreement by their respective officers thereunto duly
authorized as of the date first above written.
Direct Mortgage Parners, as Seller
By:/s/ Chris Castoro
Name: Chris Castoro
Title:Director
Nikko Financial Services, Inc., as Buyer
By:/s/ Shiro Kaneko
Name:Shiro Kaneko
Title:President
<PAGE>
EXHIBIT A
TRANSACTION NOTICE #____________
DATE:
Nikko Financial Services, Inc.
200 Liberty Street, 28th Floor
New York, New York 10281-1092
Attention: Asset-Backed Finance Desk
Telephone: (212) 416-5591
Facsimile: (212) 416-5561
The undersigned executes and delivers this notice ("Transaction Notice")
pursuant to the requirements of the Master Repurchase Agreement, dated as of
___________________, 1997 (the "Repurchase Agreement") between Nikko Financial
Services, Inc. ("Nikko") and
__________________________________________________________ ("Seller"), as such
Agreement may be modified from time to time, in connection with the submission
for sale thereunder of the Purchased Securities identified on the Loan Schedule
delivered herewith (together with any other Collateral related thereto) and the
delivery of the related Custodian's Loan Files to Custodian. All capitalized
terms used in this Transaction Notice shall have the same meanings herein as
they have in the Repurchase Agreement.
Seller hereby represents and certifies to Nikko that:
1. As of this date, Seller is in compliance with all of the terms and
conditions of the Repurchase Agreement.
2. Except as otherwise previously disclosed in writing to Nikko, Seller's
representations and warranties set forth in the Program Documents and any
other related document are true and accurate as of the date of this
Transaction Notice.
3. The Purchased Securities, which are identified on such Loan Schedule
satisfy the requirements of the eligibility set forth in the Program
Documents between Nikko and Seller.
4. Upon payment to Seller by Nikko of the Purchase Price in respect of the
Transaction involving the Purchased Securities, all of Seller's right
(including the power to convey title thereto), title and interest in and to
each document constituting the Custodian's Loan Files delivered to
Custodian or held by or on behalf of Seller with respect to each Purchased
Security shall be transferred, assigned, set over and otherwise conveyed to
Nikko.
5. The proposed general terms of the sale for the Purchased Securities as of
the Purchase Date shall be:
A. Original Principal/Par Amount: $
B. Outstanding Principal Balance: $
C. Number of Loans:
D. Loan Type:
E. Repurchase Date:
F. Lien Payoff required: No ____ Yes ____ $ ______ to
G. Buyer's Margin Percentage: %
6. Other items transferred (see definition of Purchased Assets)
___________________, as Seller
By:
<PAGE>
APPENDIX A
REPRESENTATIONS AND WARRANTIES REGARDING--LOAN TYPE: ALL SINGLE-FAMILY
MORTGAGE LOANS LOANS AS DESCRIBED. The information set forth in the Trust
Receipt and the related Loan Schedule is complete, true and correct in all
respects.
PAYMENTS CURRENT; NO DEFAULT. All payments required to be made under the terms
of the Loan Note have been made and credited. No payment required under the Loan
has been delinquent at any time since the date the Loan was originated. There is
no default, breach, violation or event of acceleration existing under the
Mortgage or the Loan Note and no event that, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration, and neither Seller nor
Seller predecessors have waived any default, breach, violation or event of
acceleration.
NO OUTSTANDING CHARGES. There are no defaults in complying with the terms of the
Mortgage, and all taxes, governmental assessments, insurance premiums, water,
sewer and municipal charges, leasehold payments or ground rents that previously
became due and owing have been paid, or an escrow of funds has been established
in an amount sufficient to pay for every such item that remains unpaid and that
has been assessed but is not yet due and payable. Seller have not advanced
funds, or induced, solicited or knowingly received any advance of funds by a
party other than the Obligor, directly or indirectly, for the payment of any
amount required under the Loan, except for interest accruing from the date of
the Loan Note or date of disbursement of the Loan proceeds, whichever is
greater, to the day that precedes by one month the due date of the first
installment of principal and interest.
ORIGINAL TERMS UNMODIFIED. The terms of the Loan Note and Mortgage have not been
impaired, waived, altered or modified in any respect, except by a written
instrument that has been recorded, if necessary to protect the interest of Nikko
and that has been delivered to Nikko or its designee. The substance of any such
waiver, alteration or modification has been approved by the title insurer, to
the extent required by the policy, and its terms are reflected on the Loan
Schedule. No Obligor has been released, in whole or in part, except in
connection with an assumption agreement approved by the issuer of any related
PMI Policy and the title insurer, to the extent required by the policy, and
which assumption agreement is included in the mortgage file delivered to Nikko
or its designee and the terms of which are reflected in the Loan Schedule.
NO DEFENSES. The Loan is not subject to any right of rescission, set-off,
counterclaim or defense, including without limitation the defense of usury, nor
will the operation of any of the terms of the Loan Note or the Mortgage, or the
exercise of any right thereunder, render either the Loan Note or the Mortgage
unenforceable, in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including without limitation the defense of
usury, and no such right of rescission, set-off, counterclaim or defense has
been asserted with respect thereto.
COMPLIANCE WITH APPLICABLE LAWS. Any and all requirements of any federal, state
or local law including, without limitation, usury, truth-in-lending, real estate
settlement procedure, consumer credit protection, equal credit opportunity or
disclosure laws applicable to the Loan have been complied with, and Seller shall
maintain in its possession, available for Nikko's inspection, and shall deliver
to Nikko upon demand, evidence of compliance with all such requirements.
NO SATISFACTION OF MORTGAGE. The Mortgage has not been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the mortgaged property has
not been released from the lien of the Mortgage, in whole or in part, nor has
any instrument been executed that would effect any such release, cancellation,
subordination or rescission.
USE OF MORTGAGED PROPERTY. No portion of the mortgaged property is used for
commercial purposes.
VALIDITY AND RECORDABILITY OF MORTGAGE DOCUMENTS. The Loan Note and the Mortgage
are genuine, and each is the legal, valid and binding obligation of the maker
thereof enforceable in accordance with its terms. All parties to the Loan Note
and the Mortgage had legal capacity to enter into the Loan and to execute and
deliver the Loan Note and the Mortgage, and the Loan Note and the Mortgage have
been duly and properly executed by such parties. The assignment of mortgage is
in recordable form and is acceptable for recording under the laws of the
jurisdiction in which the mortgaged property is located.
DOING BUSINESS. All parties that have had any interest in the Loan, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) (1) in compliance with any and
all applicable licensing requirements of the laws of the state wherein the
mortgaged property is located, and (2) organized under the laws of such state,
or (3) qualified to do business in such state, or (4) federal savings and loan
associations or national banks having principal offices in such state, or (5)
not doing business in such state.
LOCATION OF IMPROVEMENTS; NO ENCROACHMENTS. All improvements that were
considered in determining the appraised value of the mortgaged property lay
wholly within the boundaries and building restriction lines of the mortgaged
property and no improvements on adjoining properties encroach upon the mortgaged
property. No improvement located on or being part of the mortgaged property is
in violation of any applicable zoning law or regulation.
DEEDS OF TRUST. In the event the Mortgage constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Mortgage, and no fees or
expenses are or will become payable by Nikko to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the Obligor.
ACCEPTABLE INVESTMENT. Seller has no knowledge of any circumstances or
conditions with respect to the Mortgage, the mortgaged property, the Obligor or
the Obligor's credit standing that can reasonably be expected to cause private
institutional investors to regard the Loan as an unacceptable investment, cause
the Loan to become delinquent, or adversely affect the value or marketability of
the Loan.
CONDITION OF THE MORTGAGED PROPERTY. There is no proceeding pending or
threatened for the total or partial condemnation of the mortgaged property. The
mortgaged property is undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty so as to affect adversely the value
of the mortgaged property as security for the Loan or the use for which the
premises were intended. The mortgaged property is free from any and all toxic or
hazardous substances and there exists no violation of any local, state or
federal environmental law, rule or regulation.
CONDITION OF LOAN. The Loan is eligible, and in the form required, (i) for
securitization, or (ii) purchase under the relevant Agency program, or (iii)
purchase by the relevant Authorized Purchaser. The Loan is a bona fide Loan of
the type that it purports to be, made to one or more borrowers each having
substantially the credit standing he or she is represented to have.
EXECUTION. The Loan Note, the Mortgage and all other documents related thereto
have been duly executed and delivered by the parties thereto.
COMPLIANCE WITH LAWS. The Loan has been made in compliance with all applicable
laws, regulations, rules, directives and orders of all governmental authorities,
including without limitation, all requirements of the Real Estate Settlement
Procedures Act, the Federal Truth-In-Lending Act and the Homeownership and
Equity Protection Act of 1994. All notices required to be delivered pursuant to
the Homeownership and Equity Protection Act of 1994 have been given and are part
of the Custodian's Loan File.
VALIDITY. The Loan Note, Mortgage and all other documents related to the Loan
are and will be valid and enforceable in accordance with their terms, without
defense, offset or right of rescission, and have not been and will not be
modified or amended nor any requirements thereof waived, and the assignment of
mortgage is in recordable form and is acceptable for recording under the laws of
the jurisdiction in which the mortgaged property is located.
DEFAULTS. No default, nor any event that, with notice or lapse of time or both,
would become a default, has occurred and is continuing under any such Loan.
WET LOANS. Each Wet Loan conforms in all respects to the description thereof set
forth on the related Wet Closing Notice (as such terms are defined in the
Custody Agreement), and Seller will perform, and Seller have no reason to
believe that Seller will be unable to perform, Seller obligation to deliver to
Custodian within the time period agreed to in the Custody Agreement the
documents required to be delivered with respect thereto.
UNDERWRITING GUIDELINES. The Loan was underwritten in conformance in all
respects with the Underwriting Guidelines and there is no material amendment,
modification or supplement to the Underwriting Guidelines that has not been
previously approved by Nikko.
<PAGE>
ADDITIONAL REPRESENTATIONS AND WARRANTIES--LOAN TYPE: FIRST LIEN
SINGLE-FAMILY MORTGAGE LOANS
Definitions:
"FIRST MORTGAGE" means a Mortgage which creates a first lien on the fee simple
interest of real property securing the related Loan Note.
"FIRST MORTGAGE LOAN" means a Loan which is secured by a First Mortgage.
INSURANCE POLICIES IN EFFECT. The fire and casualty insurance policy covering
the mortgaged property (1) affords and will afford sufficient insurance against
fire and such other risks as are usually insured against in the broad form of
extended coverage insurance from time to time available, as well as insurance
against flood hazards if the mortgaged property is in an area identified by the
Federal Emergency Management Agency as having special flood hazards; (2) is a
standard policy of insurance for the locale where the mortgaged property is
located, is in full force and effect, and the amount of insurance is in the
amount of the full insurable value of the mortgaged property on a replacement
cost basis; (3) names (and will name) the present owner of the mortgaged
property as the insured; and (4) contains a standard mortgagee loss payable
clause in favor of Seller and its successors and assigns.
VALID FIRST LIEN. The Mortgage is a valid, existing and enforceable first lien
on the mortgaged property, including all buildings on the mortgaged property and
all installations and mechanical, electrical, plumbing, heating and air
conditioning systems located in or annexed to such building, and all additions,
alterations and replacements made at any time with respect to the foregoing. The
lien of the Mortgage is subject only to:
a) the lien of the current real property taxes and assessments not yet
due and payable.
b) covenants, conditions and restrictions, rights of way, easements and
other matters of the public record as of the date of recording
acceptable to mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the
originator of the Loan and (A) referred to or otherwise considered in
the appraisal made for the originator of the Loan or (B) that do not
adversely affect the appraised value of the mortgaged property set
forth in such appraisal; and
c) 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 the Mortgage or the use, enjoyment, value or
marketability of the related mortgaged property.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Loan establishes and creates a valid,
subsisting and enforceable first lien and first priority security interest on
the property described therein and Seller have full right to pledge and assign
the same to Nikko or its designee (including Custodian).
FULL DISBURSEMENT OF PROCEEDS. The proceeds of the Loan secured by a Mortgage
with a first priority lien have been fully disbursed and there is no requirement
of future advances thereunder, and any and all requirements as to completion of
any on-site or off-site improvement and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing said Loan and the recording of the Mortgage were paid, and the
Obligor is not entitled to any refund of any amounts paid or due under the Loan
Note or Mortgage.
LTV; PMI POLICY. The original LTV of the Loan either was not more than 80% or
the excess over 80% is and will be insured as to payment defaults by a policy of
primary mortgage guaranty insurance issued by a generally accepted insurance
carrier (a "PMI Policy") until the LTV of such Loan is reduced to 80%. All
provisions of such PMI Policy have been and are being complied with, such policy
is in full force and effect, and all premiums due thereunder have been paid. Any
Loan subject to a PMI Policy obligates the Obligor thereunder to maintain the
PMI Policy and to pay all premiums and charges in connection therewith. The
mortgage interest rate for the Loan as set forth on the Loan Schedule is net of
any such insurance premium. Any private mortgage insurance with respect to such
Loan is by a company of recognized standing acceptable to the relevant Agency or
Authorized Purchaser, if applicable, at the time that such loan was originated
and at the time that the respective Advance is made
TITLE INSURANCE. The Loan is secured by a Mortgage with a first priority lien
and is covered by either (1) an attorney's opinion of title and abstract of
title the form and substance of which is acceptable to mortgage lending
institutions making similar Loans in the area where the mortgaged property is
located or (2) an ALTA lender's title insurance policy or other generally
acceptable form of policy of insurance, issued by a title insurer and qualified
to do business in the jurisdiction where the mortgaged property is located,
insuring Seller, Seller successors and assigns, as to the first priority lien of
the Mortgage in the amount of 100% of the original principal amount of the Loan,
subject only to the exceptions contained in clauses (1), (2) and (3) of
paragraph (b) in this Appendix B and, with respect to adjustable rate Loans,
against any loss by reason of the invalidity or unenforceability of the lien
resulting from the provisions of the Mortgage providing for adjustment to the
mortgage interest rate and monthly payment. Seller is the sole insured of such
lender's title insurance policies, and such lender's title insurance policies
are in full force and effect and will be in force and effect upon the
consummation of the transactions contemplated by the Program Documents. No
claims have been made under such lender's title insurance policies, and no prior
holder of the Mortgages, including Seller, has done, by act or omission,
anything that would impair the coverage of such lender's title insurance
policies.
NO MECHANICS' LIENS. There are no mechanics' or similar liens or claims that
have been filed for work, labor or material (and no rights are outstanding that
under the law could give rise to such liens) affecting the mortgaged property
that are or may be liens prior to, or equal or coordinate with, the lien of the
Mortgage, unless title insurance coverage exists with respect to such liens or
claims in an amount at least equal to such liens or claims.
ORIGINATION; PAYMENT TERMS. The Loan was originated an originator properly
licensed in the state where the related mortgaged property is located. The
documents, instruments and agreements submitted for loan underwriting were not
falsified and contain no untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the information
and statements therein not misleading. With respect to adjustable rate Loans,
the Mortgage interest rate is adjusted periodically on each interest rate
adjustment date to equal the index plus the gross margin, rounded up or down to
the nearest 1/8%, subject to the mortgage interest rate cap and the installments
of interest are subject to change due to the adjustments to the mortgage
interest rate on each interest rate adjustment date, with interest calculated
and payable in arrears, sufficient to amortize the Loan fully by the stated
maturity date, over an original term of not more than thirty years from
commencement of amortization. With respect to fixed rate Loans, the Loan Note is
payable each month in equal monthly installments of principal and interest.
DUE ON SALE. The Mortgage contains an enforceable provision for the acceleration
of the payment of the unpaid principal balance of the Loan in the event that the
mortgaged property is sold or transferred without the prior written consent of
the mortgagee thereunder.
BUYDOWN PROVISIONS; GRADUATED PAYMENTS OR CONTINGENT INTERESTS. With respect to
Loans which contain provisions pursuant to which monthly payments are paid or
partially paid with funds deposited in any separate account established by
Seller, the Obligor or anyone on behalf of the Obligor, which may constitute a
"buydown" provision, the amount of each assistance payment shall be the sum
necessary to make up the difference between the monthly principal and interest
payment required by the terms of the note and the reduced monthly payment, as
stated in the buydown certification. However, if for any reason the assistance
payments from the escrow funds are not made by the escrow agent as contemplated,
it shall be the obligation of the Obligor to make the monthly payments required
by the terms of the note. With respect to graduated payment Loans, the scheduled
annual payment adjustments are sufficient to cover all interest due and to fully
amortize the loan in 15 years.
CONSOLIDATION OF FUTURE ADVANCES. Any future advances made prior to the date
such Loan was delivered to Custodian have been consolidated with the outstanding
principal amount secured by the Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term. The lien
of the Mortgage securing the consolidated principal amount is expressly insured
as having first lien priority by a title insurance policy or an endorsement to
the policy insuring the mortgagee's consolidated interest or by other title
evidence acceptable to Nikko. The consolidated principal amount does not exceed
the original principal amount of the Loan.
COLLECTION PRACTICES; ESCROW DEPOSITS; INTEREST RATE ADJUSTMENTS. The
origination and collection practices used with respect to the Loan have been in
all respects in accordance with industry custom and practice, and have been in
all respects legal and proper. With respect to escrow deposits and escrow
payments, all such payments are in Seller's or the servicer's possession and
there exist no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. All escrow payments have
been collected in full compliance with state and federal law. An escrow of funds
is not prohibited by applicable law and has been established in an amount
sufficient to pay for every item that remains unpaid and has been assessed but
is not yet due and payable. No escrow deposits or escrow payments or other
charges or payments due Seller have been capitalized under the Mortgage or the
Loan Note. All Mortgage interest rate adjustments have been made in strict
compliance with state and federal law and the terms of the related Loan Note.
Any interest required to be paid pursuant to state and local law has been
properly paid and credited.
APPRAISAL. The mortgage file contains an appraisal of the related mortgaged
property signed prior to the approval of the Loan application by a qualified
appraiser, duly appointed by Seller, who had no interest, direct or indirect in
the mortgaged property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Loan, and the
appraisal satisfies the requirements of Title XI of the Federal Institutions
Reform, Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, all as in effect on the date the Loan was originated.
<PAGE>
ADDITIONAL REPRESENTATIONS AND WARRANTIES--LOAN TYPE: SECOND LIEN
SINGLE-FAMILY MORTGAGE LOANS
Definitions:
"SECOND MORTGAGE" means a Mortgage which creates a second lien on the fee simple
interest of the real property securing the related Loan Note.
"SECOND MORTGAGE LOAN" means a Loan which is secured by a Second Mortgage.
INSURANCE POLICIES IN EFFECT. The fire and casualty insurance policy covering
the mortgaged property (1) affords and will afford sufficient insurance against
fire and such other risks as are usually insured against in the broad form of
extended coverage insurance from time to time available, as well as insurance
against flood hazards if the mortgaged property is in an area identified by the
Federal Emergency Management Agency as having special flood hazards; (2) is a
standard policy of insurance for the locale where the mortgaged property is
located, is in full force and effect, and the amount of insurance is in the
amount of the full insurable value of the mortgaged property on a replacement
cost basis; (3) names (and will name) the present owner of the mortgaged
property as the insured; and (4) contains a standard mortgagee loss payable
clause in favor of Seller and its successors and assigns.
VALID SECOND LIEN. The Mortgage is a valid, existing and enforceable second lien
on the mortgaged property, including all buildings on the mortgaged property and
all installations and mechanical, electrical, plumbing, heating and air
conditioning systems located in or annexed to such building, and all additions,
alterations and replacements made at any time with respect to the foregoing. The
lien of the Mortgage is subject only to:
a) the first mortgage lien on the mortgaged property;
b) the lien of the current real property taxes and assessments not yet
due and payable;
c) covenants, conditions and restrictions, rights of way, easements and
other matters of the public record as of the date of recording
acceptable to mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the
originator of the Loan and (A) referred to or otherwise considered in
the appraisal made for the originator of the Loan or (B) that do not
adversely affect the appraised value of the mortgaged property set
forth in such appraisal; and
d) 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 the Mortgage or the use, enjoyment, value or
marketability of the related mortgaged property;
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with any Loan secured by a Second Mortgage establishes
and creates a valid, subsisting and enforceable second lien and second priority
security interest on the property described therein and Seller have full right
to pledge and assign the same to Nikko or its designee (including Custodian).
LTV; PMI POLICY. The original LTV of the Loan either was not more than 80% or
the excess over 80% is and will be insured as to payment defaults by a policy of
primary mortgage guaranty insurance issued by a generally accepted insurance
carrier (a "PMI Policy") until the LTV of such Loan is reduced to 80%. All
provisions of such PMI Policy have been and are being complied with, such policy
is in full force and effect, and all premiums due thereunder have been paid. Any
Loan subject to a PMI Policy obligates the Obligor thereunder to maintain the
PMI Policy and to pay all premiums and charges in connection therewith. The
mortgage interest rate for the Loan as set forth on the Loan Schedule is net of
any such insurance premium.
TITLE INSURANCE. The Loan secured by a Second Mortgage is covered by either (1)
an attorney's opinion of title or (2) an abstract of title the form and
substance of which is acceptable to mortgage lending institutions making similar
Loans in the area where the mortgaged property is located or (3) an ALTA
lender's title insurance policy or other generally acceptable form of policy of
insurance, issued by a title insurer and qualified to do business in the
jurisdiction where the mortgaged property is located, insuring Seller, Seller's
successors and assigns, as to the second priority lien of the Mortgage in the
amount of 100% of the original principal amount of the Loan, subject only to the
exceptions contained in clauses (1), (2), (3) and (4) of paragraph (b) of this
Appendix C and, with respect to adjustable rate Loans, against any loss by
reason of the invalidity or unenforceability of the lien resulting from the
provisions of the Mortgage providing for adjustment to the mortgage interest
rate and monthly payment. Seller is the sole insured of such lender's title
insurance policies, and such lender's title insurance policies are in full force
and effect and will be in force and effect upon the consummation of the
transactions contemplated by the Program Documents. No claims have been made
under such lender's title insurance policies, and no prior holder of the
Mortgages, including Seller, has done, by act or omission, anything that would
impair the coverage of such lender's title insurance policies.
NO MECHANICS' LIENS. There are no mechanics' or similar liens or claims that
have been filed for work, labor or material (and no rights are outstanding that
under the law could give rise to such liens) affecting the mortgaged property
that are or may be liens prior to, or equal or coordinate with, the lien of the
Mortgage, unless title insurance coverage exists with respect to such liens or
claims in an amount at least equal to such liens or claims.
ORIGINATION; PAYMENT TERMS. The Loan was originated by an originator properly
licensed in the state where the related mortgaged property is located. The
originator of the Loan is a HUD-approved mortgagee. The documents, instruments
and agreements submitted for loan underwriting were not falsified and contain no
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the information and statements therein
not misleading. With respect to adjustable rate Loans, the mortgage interest
rate is adjusted periodically on each interest rate adjustment date to equal the
index plus the gross margin, rounded up or down to the nearest 1/8%, subject to
the mortgage interest rate cap and the installments of interest are subject to
change due to the adjustments to the mortgage interest rate on each interest
rate adjustment date, with interest calculated and payable in arrears,
sufficient to amortize the Loan fully by the stated maturity date, over an
original term of not more than thirty years from commencement of amortization.
With respect to fixed rate Loans, the Loan Note is payable each month in equal
monthly installments of principal and interest.
DUE ON SALE. The Mortgage contains an enforceable provision for the acceleration
of the payment of the unpaid principal balance of the Loan in the event that the
mortgaged property is sold or transferred without the prior written consent of
the mortgagee thereunder.
BUYDOWN PROVISIONS; GRADUATED PAYMENTS OR CONTINGENT INTERESTS. With respect to
Loans which contain provisions pursuant to which monthly payments are paid or
partially paid with funds deposited in any separate account established by
Seller, the Obligor or anyone on behalf of the Obligor, which may constitute a
"buydown" provision, the amount of each assistance payment shall be the sum
necessary to make up the difference between the monthly principal and interest
payment required by the terms of the note and the reduced monthly payment, as
stated in the buydown certification. However, if for any reason the assistance
payments from the escrow funds are not made by the escrow agent as contemplated,
it shall be the obligation of the Obligor to make the monthly payments required
by the terms of the note. With respect to graduated payment Loans, the scheduled
annual payment adjustments are sufficient to cover all interest due and to fully
amortize the loan in 15 years.
CONSOLIDATION OF FUTURE ADVANCES. Any future advances made prior to the date
such Loan was delivered to Custodian have been consolidated with the outstanding
principal amount secured by the Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term. The lien
of the Mortgage securing the consolidated principal amount is expressly insured
as having second lien priority by a title insurance policy or an endorsement to
the policy insuring the mortgagee's consolidated interest or by other title
evidence acceptable to Nikko. The consolidated principal amount does not exceed
the original principal amount of the Loan.
COLLECTION PRACTICES; ESCROW DEPOSITS; INTEREST RATE ADJUSTMENTS. The
origination and collection practices used with respect to the Loan have been in
all respects in accordance with industry custom and practice, and have been in
all respects legal and proper. With respect to escrow deposits and escrow
payments, all such payments are in Seller's possession and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. All escrow payments have been collected in
full compliance with state and federal law. An escrow of funds is not prohibited
by applicable law and has been established in an amount sufficient to pay for
every item that remains unpaid and has been assessed but is not yet due and
payable. No escrow deposits or escrow payments or other charges or payments due
Seller have been capitalized under the Mortgage or the Loan Note. All mortgage
interest rate adjustments have been made in strict compliance with state and
federal law and the terms of the related Loan Note. Any interest required to be
paid pursuant to state and local law has been properly paid and credited.
APPRAISAL. The mortgage file contains an appraisal of the related mortgaged
property signed prior to the approval of the Loan application by a qualified
appraiser, duly appointed by Seller, who had no interest, direct or indirect in
the mortgaged property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Loan, and the
appraisal satisfies the requirements of Title XI of the Federal Institutions
Reform, Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, all as in effect on the date the Loan was originated.
CAPITALIZATION OF INTEREST. Except as otherwise set forth on the Loan Schedule,
the Loan does not provide for the capitalization or forbearance of interest.
NO DEFAULT. No default, nor any event that, with notice or lapse to time or
both, would become a default, has occurred and is continuing under the first
lien to which the Loan is subject.
COMPLIANCE WITH LAWS. The Loan was originated and has been serviced in
compliance with all applicable federal, state and local laws regarding Loans
secured by second liens.
DEFAULTS UNDER FIRST MORTGAGE LIEN. Seller has the right to cure any default
with respect to the Loan that constitutes the first lien.
<PAGE>
ADDITIONAL REPRESENTATIONS AND WARRANTIES--LOAN TYPE: 125 LOANS
Definitions:
"FICO SCORE" means the credit evaluation score as developed by Fair, Isaac and
Company, or its equivalent as developed by a company of comparable industry
standing.
"125 MORTGAGE LOAN" means a Second Mortgage Loan wherein the combined LTV of the
First Mortgage Loan and the Second Mortgage Loan is not more than 125% of the
appraised value of the related mortgaged property.
"SECOND MORTGAGE" means a Mortgage which creates a second lien on the fee simple
interest of the real property securing the related Mortgage Note.
"SECOND MORTGAGE LOAN" means a Loan which is secured by a Second Mortgage.
VALID SECOND LIEN. The Mortgage is a valid, existing and enforceable second lien
on the mortgaged property, including all buildings on the mortgaged property and
all installations and mechanical, electrical, plumbing, heating and air
conditioning systems located in or annexed to such building, and all additions,
alterations and replacements made at any time with respect to the foregoing. The
lien of the Mortgage is subject only to:
a) the first mortgage lien on the mortgaged property;
b) the lien of the current real property taxes and assessments not yet
due and payable;
c) covenants, conditions and restrictions, rights of way, easements and
other matters of the public record as of the date of recording
acceptable to mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the
originator of the Loan and (A) referred to or otherwise considered in
the appraisal made for the originator of the Loan or (B) that do not
adversely affect the appraised value of the mortgaged property set
forth in such appraisal; and
d) 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 the Mortgage or the use, enjoyment, value or
marketability of the related mortgaged property.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with any Loan secured by a Second Mortgage establishes
and creates a valid, subsisting and enforceable second lien and second priority
security interest on the property described therein and Seller have full right
to pledge and assign the same to Nikko or its designee (including Custodian).
TITLE INSURANCE. The Loan secured by a Second Mortgage is covered by either (1)
an attorney's opinion of title or (2) an abstract of title the form and
substance of which is acceptable to mortgage lending institutions making similar
Loans in the area where the mortgaged property is located or (3) an ALTA
lender's title insurance policy or other generally acceptable form of policy of
insurance, issued by a title insurer and qualified to do business in the
jurisdiction where the mortgaged property is located, insuring Seller, Seller's
successors and assigns, as to the second priority lien of the Mortgage in the
amount of 100% of the original principal amount of the Loan, subject only to the
exceptions contained in clauses (1), (2), (3) and (4) of paragraph (a) of this
Appendix D and, with respect to adjustable rate Loans, against any loss by
reason of the invalidity or unenforceability of the lien resulting from the
provisions of the Mortgage providing for adjustment to the mortgage interest
rate and monthly payment. Seller is the sole insured of such lender's title
insurance policies, and such lender's title insurance policies are in full force
and effect and will be in force and effect upon the consummation of the
transactions contemplated by the Program Documents. No claims have been made
under such lender's title insurance policies, and no prior holder of the
Mortgages, including Seller, has done, by act or omission, anything that would
impair the coverage of such lender's title insurance policies.
NO MECHANICS' LIENS. There are no mechanics' or similar liens or claims that
have been filed for work, labor or material (and no rights are outstanding that
under the law could give rise to such liens) affecting the mortgaged property
that are or may be liens prior to, or equal or coordinate with, the lien of the
Mortgage, unless title insurance coverage exists with respect to such liens or
claims in an amount at least equal to such liens or claims.
ORIGINATION; PAYMENT TERMS. The Loan was originated by an originator properly
licensed in the State where the related mortgaged property is located. The
originator of the Loan is a HUD-approved mortgagee. The documents, instruments
and agreements submitted for loan underwriting were not falsified and contain no
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the information and statements therein
not misleading. With respect to adjustable rate Loans, the mortgage interest
rate is adjusted periodically on each interest rate adjustment date to equal the
index plus the gross margin, rounded up or down to the nearest 1/8%, subject to
the mortgage interest rate cap and the installments of interest are subject to
change due to the adjustments to the mortgage interest rate on each interest
rate adjustment date, with interest calculated and payable in arrears,
sufficient to amortize the Loan fully by the stated maturity date, over an
original term of not more than thirty years from commencement of amortization.
With respect to fixed rate Loans, the Loan Note is payable each month in equal
monthly installments of principal and interest.
DUE ON SALE. The Mortgage contains an enforceable provision for the acceleration
of the payment of the unpaid principal balance of the Loan in the event that the
mortgaged property is sold or transferred without the prior written consent of
the mortgagee thereunder.
BUYDOWN PROVISIONS; GRADUATED PAYMENTS OR CONTINGENT INTERESTS. With respect to
Loans which contain provisions pursuant to which monthly payments are paid or
partially paid with funds deposited in any separate account established by
Seller, the Obligor or anyone on behalf of the Obligor, which may constitute a
"buydown" provision, the amount of each assistance payment shall be the sum
necessary to make up the difference between the monthly principal and interest
payment required by the terms of the note and the reduced monthly payment, as
stated in the buydown certification. However, if for any reason the assistance
payments from the escrow funds are not made by the escrow agent as contemplated,
it shall be the obligation of the Obligor to make the monthly payments required
by the terms of the note. With respect to graduated payment Loans, the scheduled
annual payment adjustments are sufficient to cover all interest due and to fully
amortize the loan in 15 years.
CONSOLIDATION OF FUTURE ADVANCES. Any future advances made prior to the date
such Loan was delivered to Custodian have been consolidated with the outstanding
principal amount secured by the Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term. The lien
of the Mortgage securing the consolidated principal amount is expressly insured
as having second lien priority by a title insurance policy or an endorsement to
the policy insuring the mortgagee's consolidated interest or by other title
evidence acceptable to Nikko. The consolidated principal amount does not exceed
the original principal amount of the Loan.
COLLECTION PRACTICES; ESCROW DEPOSITS; INTEREST RATE ADJUSTMENTS. The
origination and collection practices used with respect to the Loan have been in
all respects in accordance with industry custom and practice, and have been in
all respects legal and proper. With respect to escrow deposits and escrow
payments, all such payments are in Seller's possession and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. All escrow payments have been collected in
full compliance with state and federal law. An escrow of funds is not prohibited
by applicable law and has been established in an amount sufficient to pay for
every item that remains unpaid and has been assessed but is not yet due and
payable. No escrow deposits or escrow payments or other charges or payments due
Seller have been capitalized under the Mortgage or the Loan Note. All mortgage
interest rate adjustments have been made in strict compliance with state and
federal law and the terms of the related Loan Note. Any interest required to be
paid pursuant to state and local law has been properly paid and credited.
APPRAISAL. The appraisal of the related mortgaged property is either (i) an "as
stated value" appraisal if the original principal amount of the 125 Mortgage
Loan is less than $35,000; or (ii) a "desk top" appraisal if the original
principal amount of the 125 Mortgage Loan is $35,000 or more, in each case as
further described in the underwriting guidelines previously delivered by
Customer to Nikko.
CAPITALIZATION OF INTEREST. Except as otherwise set forth on the Loan Schedule,
the Loan does not provide for the capitalization or forbearance of interest.
FULLY ADVANCED. The Loan has been fully advanced in the face amount thereof.
FICO SCORE. The FICO Score exceeds 620.
EXHIBIT 10.27
SOFTWARE LICENSE AGREEMENT
This Agreement, dated the 30TH day of OCTOBER, 1997, is between MBMS
INCORPORATED, a New York corporation having a place of business at 95 John Muir
Drive, Suite 106, Amherst, New York 14228, ("MBMS") and BANKERS DIRECT MORTGAGE
CORPORATION, a Company having a place of business at, 580 VILLAGE BLVD., SUITE
120, WEST PALM BEACH, FL 33409, (the "Company").
MBMS has the right to license, maintain and modify the computer
programs (the "Software") described in Exhibit-A to this Agreement. The Company
has requested that MBMS grant a license to use the Software to the Company and
each corporation that is controlled by the Company, controls the Company or is
controlled by a corporation that controls the Company (an "Affiliate"), and MBMS
desires to grant such a license to the Company and each Affiliate, upon the
terms and conditions set forth in this Agreement. Therefore, MBMS and the
Company agree as follows:
SECTION 1: LICENSE.
MBMS grants to the Company and each Affiliate in perpetuity a license
to use the object code for the Software only (a) in the ordinary course of the
business of the Company or any Affiliate and (b) at the places of business of
the Company or any Affiliate indicated in Exhibit A to this Agreement, at any
other place of business of the Company or any Affiliate added to such exhibit by
the mutual agreement of MBMS and Company and at any place of business of the
Company or any Affiliate substituted for a place of business now or subsequently
listed on such exhibit after the Company gives MBMS notice of such substitution
or addition no more than thirty days after such substitution or addition
(individually an "Installation Location"). Such license is nonexclusive and MBMS
may also grant such a license to any corporation, governmental authority,
individual, partnership or other entity (a "Person") other than the Company.
SECTION 2: LICENSE FEE.
The Company shall pay to MBMS a fee for such license in the amount,
and at the times, set forth in Exhibit A to this Agreement.
SECTION 3: RESPONSIBILITIES OF THE COMPANY.
The Company is responsible at the cost and expense of the Company for
(a) purchasing, leasing or otherwise acquiring any equipment (including, but not
limited to, any computers or peripheral devices) that may be needed to use the
Software pursuant to this Agreement, (b) installing and maintaining such
equipment, (c) preparing each Installation Location for the installation and
operation of the Software and such equipment, (d) obtaining the right to use the
operating system software for such equipment and any related application
software and (e) obtaining access to any telephone lines that may be necessary
in order to use the Software or such equipment.
SECTION 4: LIMITED INTEREST.
(a) Title to the Software is not being transferred to the Company or
any Affiliate pursuant to this Agreement. Except for the right to use the
Software pursuant to this Agreement, neither the Company nor any Affiliate is
obtaining any proprietary or other interest in the Software. Neither the Company
nor any Affiliate shall (i) copy the Software, (ii) sublicense or otherwise
allow any Person (other than an employee or other agent of the Company or any
Affiliate) to use the Software, (iii) transfer the Software to any other Person
(other than such an employee or other agent) or (iv) grant to any Person the
right to do anything prohibited in clause (i), (ii) or (iii) of this sentence,
except as set forth in paragraph (b) of this Section.
(b) The Company may from time to time make a backup copy of the
Software to be used by the Company only (i) in the ordinary course of the
business of the Company, at an Installation Location and upon the loss,
destruction or theft of the copy of the Software given to the Company by MBMS,
(ii) at an Installation Location or a site that is not an Installation Location
where the purpose of usage is to perform disaster recovery testing and where
such testing does not exceed a period of 30 consecutive days and (iii) at an
emergency site that is not an Installation Location during any period in which
an Installation Location is unavailable for any reason. The following notice
shall be placed by the Company in a prominent location on any such backup copy:
"Copyright 1994 James E. Kunert."
SECTION 5: DELIVERY AND ACCEPTANCE.
(a) Upon the request of the Company, MBMS shall install the Software
at each Installation Location at a mutually agreed upon time. After such
installation, MBMS shall test the Software to determine whether the Software
operates substantially in conformance with the user documentation provided by
MBMS to the Company with the Software. Once MBMS determines that the Software
operates substantially in accordance with such user documentation, MBMS shall
notify the Company that the Software is ready to be placed into service and used
in production by the Company or any Affiliate ("Software Delivery").
(b) During the period beginning upon Software Delivery and ending 90
days after Software Delivery, the Company may test the Software to determine
whether it operates substantially in accordance with the user documentation
provided by MBMS to the Company with the Software. The Software shall be deemed
to have been accepted by Company, as reasonably determined by MBMS, upon the
earlier to occur of (i) the Company's notifying MBMS that the Software is
accepted, (ii) the use of the Software by the Company or any Affiliate in
production or (iii) 90 days after Software Delivery plus the number of days
taken by MBMS to deliver to the Company satisfactory corrections of any
nonperformance of the Software reported by the Company during such 90 days.
SECTION 6: WARRANTIES.
MBMS warrants and represents to the Company that (a) MBMS has the
right to license to the Company and each Affiliate, maintain and modify the
Software pursuant to this Agreement and (b) during the period beginning upon
Software Delivery and ending 90 days after Software Delivery (the "Warranty
Period"), the Software shall perform substantially in accordance with the user
documentation provided by MBMS to the Company with the Software. EXCEPT AS
SPECIFICALLY PROVIDED IN THIS SECTION, MBMS MAKES NO WARRANTY OR REPRESENTATION
OF ANY KIND TO THE COMPANY, ANY AFFILIATE OR ANY OTHER PERSON WITH RESPECT TO
THE SOFTWARE OR ANY OTHER MATTER RELATING TO THIS AGREEMENT. WITHOUT LIMITING
THE GENERALITY OF THE PRECEDING SENTENCE, MBMS DISCLAIMS ALL IMPLIED WARRANTIES
(INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE).
SECTION 7: MAINTENANCE AND SUPPORT.
During the Warranty Period, MBMS shall render to the Company
maintenance and support services pursuant to the Maintenance and Support
Agreement used by MBMS in the ordinary course of its business, except that there
shall be no additional charge to the Company for such services. After the
Warranty Period and upon the request of the Company, MBMS shall provide such
services pursuant to the terms and conditions of such Maintenance and Support
Agreement.
SECTION 8: INFRINGEMENT.
MBMS shall indemnify and hold harmless the Company and each Affiliate
for any claim, cost, damage, expense and loss incurred by the Company and each
Affiliate (including, but not limited to, all reasonable fees and disbursements
counsel to the Company and each Affiliate) arising from the infringement by the
Software of any copyright, patent or trade secret of any Person.
SECTION 9: LIMITATION OF LIABILITY.
(a) If the Software does not perform during the Warranty Period as
warranted by MBMS pursuant to this Agreement, the only liability of MBMS to the
Company and each Affiliate shall be for MBMS to modify the Software so that it
performs as so warranted. The aggregate liability of MBMS to the Company, any
Affiliate and any other Person for the failure of MBMS to so modify the Software
or, except in the case of a claim for indemnification pursuant to Section 8 of
this Agreement, for any other claim relating to this Agreement or the Software,
whether such claim is for breach of contract, based upon the occurrence of a
tort or otherwise, shall be limited to the actual and direct damages incurred by
the Company, any Affiliate and any other Person not to exceed the license fee
paid by the Company to MBMS pursuant to this Agreement.
(b) Any provision of this Section to the contrary notwithstanding,
MBMS shall in no event have any responsibility or incur any liability to the
Company or any Affiliate for (i) any matter the responsibility for which rests
with the Company pursuant to this Agreement, (ii) any consequential, incidental,
indirect or special damages (including, but not limited to, lost profits)
incurred by the Company, any Affiliate or any other Person even if the
possibility of such damages could have been foreseen by MBMS, (iii) except as
specifically set forth in Section 8 of this Agreement, any claim made by any
Person against the Company or any Affiliate and (iv) any failure or delay in the
performance by MBMS of any obligation under this Agreement resulting from an act
of God, an act of any governmental authority, a failure of any utility or any
other event not reasonably within the control of MBMS.
SECTION 10: TAXES.
Any fee payable by the Company pursuant to this Agreement does not
include any applicable federal, state, county or local tax. Any such tax (except
for any such tax on the income of MBMS) assessed upon the Company's or any
Affiliate's licensing the Software pursuant to this Agreement or otherwise
relating to this Agreement (including, but not limited to, any excise, property,
sales or use tax) shall be added to such fee and paid to MBMS by the Company
within thirty days after the Company receives an invoice from MBMS with respect
to such tax.
SECTION 11: CONFIDENTIALITY.
(a) The Company shall (i) take all necessary steps to protect the
proprietary and confidential nature of the Software and all documents and other
tangible items relating to the Software and (ii) any other action with respect
thereto that MBMS may reasonably request. In addition, the Company shall not at
any time disclose to any Person other than MBMS any information relating to the
Software (including, but not limited to, the source code for the Software if a
copy of it is received by the Company or any Affiliate for any reason) or any
document or other tangible item containing or relating to such information.
(b) MBMS shall (i) take all necessary steps to protect the proprietary
and confidential nature of all information of the Company or any Affiliate that
is disclosed by the Company or such Affiliate to MBMS and that is identified to
MBMS in writing by the Company as confidential and (ii) any other action with
respect to such information that the Company may reasonable request. In
addition, MBMS shall not at any time disclose to any Person other than the
Company or any Affiliate any such information or any document or other tangible
item containing or relating to such information.
(c) Any provision of paragraph (a) or (b) of this Section to the
contrary notwithstanding, neither MBMS nor the Company shall have any obligation
pursuant to this Section with respect to any information or any tangible item
containing or relating to such information to the extent that satisfaction of
such obligation would violate applicable law or such information is generally
know to the public.
(d) Any provision of paragraph (a) of this Section to the contrary
notwithstanding, the Company may disclose information relating to the Software
to auditors, regulator's employees, or agents of the Company, to the extent
necessary in connection with such auditors, regulator's employees and agents of
the Company performing their respective duties.
SECTION 12: TERMINATION.
(a) MBMS may terminate this Agreement if the Company fails to perform
any obligation of the Company pursuant to this Agreement and such failure
continues for more than thirty days after notice of such failure is given by
MBMS to the Company; provided, however, that the right of MBMS to terminate this
Agreement pursuant to this sentence shall be in addition to, and not in lieu of,
each other right and remedy MBMS may have under this Agreement or applicable law
(including, but not limited to, monetary damages).
(b) The Company may terminate this Agreement at any time by giving
notice to MBMS in writing of such termination. No such termination shall entitle
the Company to a refund or abatement of any amount previously paid or becoming
due pursuant to this Agreement, except that if the Company so terminates this
Agreement (i) prior to the Software's being accepted by the Company pursuant to
Section 5 of this Agreement, or (ii) as a result of a breach of this agreement
by MBMS during the warranty period pursuant to which the Company is entitled to
a refund, the Company shall receive a refund of the license fee paid by it
pursuant to Section 2 of this Agreement. Upon the Company's receiving such
refund, MBMS shall not have any other liability to the Company pursuant to this
Agreement or otherwise.
(c) Upon the termination of this Agreement, whether pursuant to this
Section or otherwise, the Company shall (i) return to MBMS each copy of the
Software and each document and other tangible item relating to the Software in
the possession or under the control of the Company or any Affiliate, (ii) not
use or permit any Person under the control of the Company or any Affiliate to
use the Software and (iii) unless such termination occurs at the request of the
Company because MBMS has failed to perform any obligation of MBMS pursuant to
this Agreement, pay to MBMS all amounts owing under this Agreement that have not
previously been paid.
(d) The provisions of Sections 9(b) and 11 shall survive the
termination of this Agreement for any reason and may be enforced after such
termination.
SECTION 13: EQUITABLE RELIEF.
The Company acknowledges that a remedy at law will be inadequate if
the Company violates any provision of Sections 1, 4, 11 or 12(a) of this
Agreement and MBMS acknowledges to the Company that a remedy at law will be
inadequate if MBMS violates any provision of Section 11 of this Agreement. Each
of MBMS and the Company consent to the other's obtaining from a court having
jurisdiction an injunction, a restraining order, specific performance or any
other equitable relief against the other to enforce any such provision. The
right of MBMS and the Company to obtain such equitable relief shall be in
addition to, and not in lieu of, each other remedy that they may have under this
Agreement or applicable law (including, but not limited to, monetary damages).
SECTION 14: AMENDMENTS.
This Agreement contains the entire agreement between MBMS and the
Company with respect to the subject matter of this Agreement, and supersedes
each course of conduct previously pursued or acquiesced in, and each oral
agreement and representation previously made, by MBMS or the Company with
respect thereto, whether or not relied or acted upon. No course of performance
or other conduct subsequently pursued or acquiesced in, and no oral agreement or
representation subsequently made, by MBMS or the Company, whether or not relied
or acted upon, and no usage of trade, whether or not relied or acted upon, shall
amend this Agreement or impair or otherwise affect any of MBMS's or the
Company's obligations pursuant to this Agreement or any of MBMS's or the
Company's rights and remedies pursuant to this Agreement. No amendment to this
Agreement shall be effective unless made in a writing duly executed by MBMS and
the Company and specifically referring to each provision of this Agreement being
amended.
SECTION 15: WAIVER.
No failure of MBMS or the Company to exercise, and no delay by MBMS or
the Company in exercising, any right or remedy under this Agreement shall
constitute a waiver of such right or remedy. No waiver by MBMS or the Company of
any such right or remedy under this Agreement shall be effective unless made in
a writing duly executed by MBMS or the Company, whichever the case may be, and
specifically referring to each such right or remedy being waived.
SECTION 16: SEVERABILITY.
Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law.
However, if any provision of this Agreement shall be prohibited by or invalid
under such law, it shall be deemed modified to conform to the minimum
requirements of such law or, if for any reason it is not deemed so modified, it
shall be prohibited or invalid only to the extent of such prohibition or
invalidity without the remainder thereof or any other such provision being
prohibited or invalid.
SECTION 17: BINDING.
This Agreement shall be binding upon and inure to the benefit of MBMS
and the Company, and each of MBMS's and the Company's successors and assignees,
except that none of the Company's rights or obligations under this Agreement may
be assigned by the Company to another Person without first obtaining the written
consent of MBMS.
SECTION 18: GOVERNING LAW.
This Agreement shall be governed by, and interpreted and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflict of laws.
As conclusive evidence of the acceptance of the terms and conditions
of this Agreement by MBMS and the Company, they have executed this Agreement on
the date indicated in the first paragraph of this Agreement.
MBMS, INCORPORATED
By: /S/ JAMES E. KUNERT
JAMES E. KUNERT, PRESIDENT DATE
BANKERS DIRECT MORTGAGE CORPORATION
By: /S/ DON "DUSTY" LASHBROOK
DON "DUSTY" LASHBROOK DATE
<PAGE>
EXHIBIT A
SOFTWARE
A. SOFTWARE
Site license for the Warehouse Management System, object code only.
B. LICENSE FEE $45,000
Payable as follows:
36 Monthly Installments of $ 1,440 each (beginning next month following
software Delivery.)
C. INSTALLATION LOCATIONS
1. Bankers Direct Mortgage Corporation
580 Village Blvd., Suite 120
West Palm Beach, FL 33409
EXHIBIT 10.28
MASTER LEASE AGREEMENT
BANKONE
Banc One Leasing Corporation
This MASTER LEASE AGREEMENT is made, entered and dated as of by and between:
LESSOR: LESSEE: BANKERS DIRECT MORTGAGE
CORPORATION
BANC ONE LEASING CORPORATION 560 VILLAGE BLVD. SUITE 360
1111 Polaris Parkway, Suite A-3 WEST PALM BEACH, FL 33049
Columbus, Ohio 43240
1 . LEASE OF EQUIPMENT: Lessor leases to Lessee, and Lessee leases from Lessor,
all the property described in the Lease Schedules which are signed from time to
time by Lessor and Lessee.
2. CERTAIN DEFINITIONS: "Schedule" means each Lease Schedule signed by Lessee
and Lessor which incorporates the terms of this Master Lease Agreement, together
with all exhibits, riders, attachments and addenda thereto. "Equipment" means
the property described in each Schedule, together with all attachments,
additions, accessions, parts, repairs, improvements, replacements and
substitutions thereto. "Lease", "herein", "hereunder", "hereof' and similar
words mean this Master Lease Agreement and all Schedules, together with all
exhibits, riders, attachments and addenda to any of the foregoing, as the same
may from time to time be amended, modified or supplemented. "Prime Rate" means
the prime rate of interest announced from time to time as the prime rate by Bank
One, Columbus, NA; provided, that the parties acknowledge that the Prime Rate is
not intended to be the lowest rate of interest charged by said bank in
connection with extensions of credit. "Lien" means any security interest, lien,
mortgage, pledge, encumbrance, judgment, execution, attachment, warrant, writ,
levy, other judicial process or claim of any nature whatsoever by or of any
person. "Fair Market Value" means the amount which would be paid for an item of
Equipment by an informed and willing buyer (other than a used equipment or scrap
dealer) and an informed and willing seller neither under a compulsion to buy or
sell. "Lessor's Cost" means the invoiced price of any item of Equipment plus any
other cost to Lessor of acquiring an item of Equipment. All terms defined in the
Lease are equally applicable to both the singular and plural form of such terms,
3. LEASE TERM AND RENT: The term of the lease of the Equipment described in each
Schedule ("Lease Term") commences on the date stated in the Schedule and
continues for the term stated therein. As rent for the Equipment described in
each Schedule, Lessee shall pay Lessor the rent payments and all other amounts
stated in such Schedule, payable on the dates specified therein. All payments
due under the Lease shall be made in United States dollars at Lessor's office
stated in the opening paragraph or as otherwise directed by Lessor in writing.
4. ORDERING, DELIVERY, REMOVAL AND INSPECTION OF EQUIPMENT: If an event of
default occurs or if for any reason Lessee does not accept, or revokes its
acceptance of, equipment covered by a purchase order or purchase contract or if
any commitment or agreement of Lessor to lease equipment to Lessee expires,
terminates or is otherwise canceled, then automatically upon notice from Lessor,
any purchase order or purchase contract and all obligations thereunder shall be
assigned to Lessee and Lessee shall pay and perform all obligations thereunder
Lessee agrees to pay, defend, indemnify and hold Lessor harmless from any
liabilities, obligations, claims, costs and expenses (including reasonable
attorney fees and expenses) of whatever kind imposed on or asserted against
Lessor in any way related to any purchase orders or purchase contracts. Lessee
shall make all arrangements for, and Lessee shall pay all costs of,
transportation, delivery, installation and testing of Equipment. The Equipment
shall be delivered to Lessee's premises stated in the applicable Schedule and
shall not be removed without Lessor's prior written consent. Lessor has the
right upon reasonable notice to Lessee to inspect the Equipment wherever
located. Lessor may enter upon any premises where Equipment is located and
remove it immediately, without notice or liability to Lessee, upon the
expiration or other termination of the Lease Term.
5. MAINTENANCE AND USE: Lessee agrees it will, at its sole expense: (a) repair
and maintain the Equipment in good condition and working order and supply and
install all replacement parts or other devices when required to so maintain the
Equipment or when required by applicable law or regulation, which parts or
devices shall automatically become part of the Equipment ; (b) use and operate
the Equipment in a careful manner in the normal course of its business and only
for the purposes for which it was designed in accordance with the manufacturer's
warranty requirements, and comply with all laws and regulations relating to the
Equipment and obtain all permits or licenses necessary to install, use or
operate the Equipment; and (c) make no alterations, additions, subtractions,
upgrades or improvements to the Equipment without Lessor's prior written
consent, but any such alterations, additions, upgrades or improvements shall
automatically become part of the Equipment. The Equipment will not be used or
located outside of the United States.
6. NET LEASE; NO EARLY TERMINATION: The Lease is a net lease. Lessee's
obligation to pay all rent and all other amounts payable under the Lease is
absolute and unconditional under any and all circumstances and shall not be
affected by any circumstances of any character including, without limitation,
(a) any setoff, claim, counterclaim, defense or reduction which Lessee may have
at any time against Lessor or any other party for any reason, or (b) any defect
in the condition, design or operation of, any lack of fitness for use of, any
damage to or loss of, or any lack of maintenance or service for any of the
Equipment. Each Schedule is a noncancelable lease of the Equipment described
therein and Lessee's obligation to pay rent and perform all other obligations
thereunder and under the Lease are not subject to cancellation or termination by
Lessee toe any reason.
7. NO WARRANTIES BY LESSOR: LESSOR LEASES THE EQUIPMENT AS-IS, WHERE-IS, AND
WITH ALL FAULTS. LESSOR MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, OF ANY KIND AS TO THE EQUIPMENT INCLUDING, WITHOUT LIMITATION: ITS
MERCHANTABILITY; ITS FITNESS FOR ANY PARTICULAR PURPOSE; ITS DESIGN, CONDITION,
QUALITY, CAPACITY, DURABILITY, CAPABILITY, SUITABILITY OR WORKMANSHIP; ITS
NON-INTERFERENCE WITH OR NON-INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR
OTHER INTELLECTUAL PROPERTY RIGHT; OR ITS COMPLIANCE WITH ANY LAW, RULE,
SPECIFICATION, PURCHASE ORDER OR CONTRACT PERTAINING THERETO.
Lessor hereby assigns to Lessee the benefit of any assignable manufacturer's or
supplier's warranties, but Lessor, at Lessee's written request, will cooperate
with Lessee in pursuing any remedies Lessee may have under such warranties. Any
action taken with regard to warranty claims against any manufacturer or supplier
by Lessee will be at Lessee's sole expense.
LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND
AS TO THE FINANCIAL CONDITION OR FINANCIAL STATEMENTS OF ANY PARTY OR AS TO THE
TAX OR ACCOUNTING TREATMENT OR CONSEQUENCES OF THE LEASE, THE EQUIPMENT OR THE
RENTAL PAYMENTS.
8. INSURANCE: Lessee at its sole expense shall at all times keep each item of
Equipment insured against all risks of loss or damage from every cause
whatsoever for an amount not less than the greater of the full replacement value
or the Lessor's Cost of such item of Equipment. Lessee at its sole expense shall
at all times Garry public liability and property damage insurance in amounts
satisfactory to Lessor protecting Lessee and Lessor from liabilities for
injuries to persons and damage to property of others relating in any way to the
Equipment, All insurers shall be reasonably satisfactory to Lessor. Lessee shall
deliver to Lessor satisfactory evidence of such coverage. Proceeds of any
insurance covering damage or loss of the Equipment shall be payable to Lessor as
loss payee and shall, at Lessor's option, be applied toward (a) the replacement,
restoration or repair of the Equipment, or (b) payment of the obligations of
Lessee under the Lease. Proceeds of any public liability or property insurance
shall be payable first to Lessor as additional insured to the extent of its
liability, then to Lessee. If an event of default occurs and is continuing, or
if Lessee fails to make timely payments due under Section 9 hereof, then Lessee
automatically appoints Lessor as Lessee's attorney-in-fact with full power and
authority in the place of Lessee and in the name of Lessee or Lessor to make
claim for, receive payment of, and sign and endorse all documents, checks or
drafts for loss or damage under any such policy. Each insurance policy will
require that the insurer give Lessor at least 30 days prior written notice of
any cancellation of such policy and will require that Lessor's interests remain
insured regardless of any act, error, omission, neglect or misrepresentation of
Lessee. The insurance maintained by Lessee shall be primary without any right of
contribution from insurance which may be maintained by Lessor.
9. LOSS AND DAMAGE: (a) Lessee bears the entire risk of loss, theft, damage or
destruction of Equipment in whole or in part from any reason whatsoever
("Casualty Loss"). No Casualty Loss to Equipment shall relieve Lessee from the
obligation to pay rent or from any other obligation under the Lease. In the
event of Casualty Loss to any item of Equipment, Lessee shall immediately notify
Lessor of the same and Lessee shall, if so directed by Lessor, immediately
repair the same. If Lessor determines that any item of Equipment has suffered a
Casualty Loss beyond repair ("Lost Equipment"), then Lessee, at the option of
Lessor, shall: (1) Immediately replace the Lost Equipment with similar equipment
in good repair, condition and working order free and clear of any Liens and
deliver to Lessor a bill of sale covering the replacement equipment, in which
event such replacement equipment shall automatically be Equipment under the
Lease, or (2) On the rent payment date which is at least 30 but no more than 60
days after the date of the Casualty Loss, pay to Lessor all amounts then due and
payable by Lessee under the Lease for the Lost Equipment plus the Stipulated
Loss Value for such Lost Equipment as of the date of the Casualty Loss. Upon
payment by Lessee of all amounts due under the above clause (2), the lease of
the Lost Equipment will terminate and Lessor shall transfer to Lessee all of
Lessor's right, title and interest in such Equipment on an "as-is, where-is"
basis with all faults, without recourse and without representation or warranty
of any kind, express or implied.
(b) "Stipulated Loss Value" of any item of Equipment during its Lease Term
equals the present value discounted in arrears to the applicable date at the
applicable SLV Discount Rate of (1) the remaining rents and all other amounts
[including, without limitation, any balloon payment and, as to a terminal rental
adjustment clause ("TRAC") lease, the TRAC value stated in the Schedule, and any
other payments required to be paid by Lessee at the end of the applicable Lease
Term] payable under the Lease for such item on and after such date to the end of
the applicable Lease Term and (2) an amount equal to the Economic Value of the
Equipment. For any item of Equipment, "Economic Value" means the Fair Market
Value of the Equipment at the end of the applicable Lease Term as originally
anticipated by Lessor at the Commencement Date of the applicable Schedule;
provided, that Lessee agrees that such value shall be determined by the books of
Lessor as of the Commencement Date of the applicable Schedule. After the payment
of all rent due under the applicable Schedule and the expiration of the Lease
Term of any item of Equipment, the Stipulated Loss Value of such item equals the
Economic Value of such item. Stipulated Loss Value shall also include any Taxes
payable by Lessor in connection with its receipt thereof. For any item of
Equipment, "SLV Discount Rate" means an interest rate equal to the Prime Rate in
effect on the Commencement Date of the Schedule for such item minus two
percentage points.
10. TAX BENEFITS INDEMNITY. (a) The Lease has been entered into on the basis
that Lessor shall be entitled to such deductions, credits and other tax benefits
as are provided by federal, state and local income tax law to an owner of the
Equipment (the "Tax Benefits") including, without limitation: (1) modified
accelerated cost recovery deductions on each item of Equipment under Section 168
of the Code (as defined below) in an amount determined commencing with the
taxable year in which the Commencement Date of the applicable Schedule occurs,
using the maximum allowable depreciation method available under Section 168 of
the Code, using a recovery period (as defined in Section 168 of the Code)
reasonably determined by Lessor, and using an initial adjusted basis which is
equal to the Lessor's Cost of such item; (2) amortization of the expenses paid
by Lessor in connection with the Lease on a straight-line basis over the term of
the applicable Schedule; and (3) Lessor's federal taxable income will be subject
to the maximum rate on corporations in effect under the Code as of the
Commencement Date of the applicable Schedule.
(b) If on any one or more occasions (1) Lessor shall lose, shall not have or
shall lose the right to claim all or any part of the Tax Benefits, (2) there
shall be reduced, disallowed, recalculated or recaptured all or any part of the
Tax Benefits, or (3) all or any part of the Tax Benefits is reduced by a change
in law or regulation (each of the events described in subparagraphs 1, 2 or 3 of
this paragraph (b) will be referred to as a "Tax Loss"), then, upon 30 days
written notice by Lessor to Lessee that a. Tax Loss has occurred, Lessee shall
pay Lessor an amount which, in the reasonable opinion of Lessor and after the
deduction of all taxes required to be paid by Lessor with respect to the receipt
of such amount, will provide Lessor with the same after-tax net economic yield
which was originally anticipated by Lessor as of the Commencement Date of the
applicable Schedule.
(c) A Tax Loss shall occur upon the earliest of: (1) the happening of any
event (such as disposition or change in use of an item of Equipment) which may
cause such Tax Loss; (2) Lessor's payment to the applicable taxing authority of
the tax increase resulting from such Tax Loss; or (3) the adjustment of Lessor's
tax return to reflect such Tax Loss.
(d) Lessor shall not be entitled to payment under this section for any Tax
Loss caused solely by one or more of the following events: (1) a disqualifying
sale or disposition of an item of Equipment by Lessor prior to any default by
Lessee, (2) Lessor's failure to timely or properly claim the Tax Benefits in
Lessor's tax return; (3) a disqualifying change in the nature of Lessor's
business or liquidation thereof , (4) a foreclosure by any person holding
through Lessor a security interest on an item of Equipment which foreclosure
results solely from an act of Lessor; or (6) Lessor's failure to have sufficient
taxable income or tax liability to utilize the Tax Benefits.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended. For the
purposes of this section 10, the term "Lessor' shall include any affiliate group
(within the meaning of section 1504 of the Code) of which Lessor is a member for
any year in which a consolidated income tax return is filed for such affiliated
group. Lessee's obligations under this section shall survive the expiration,
cancellation or termination of the Lease.
11. GENERAL TAX INDEMNITY: Lessee will pay, and will defend, indemnify and hold
Lessor harmless on an after-tax basis from, any and all Taxes (as defined below)
and related audit and contest expenses on or relating to (a) any of the
Equipment, (b) the Lease, (c) purchase, acceptance, ownership, lease,
possession, use, operation, transportation, return or other disposition of any
of the Equipment, and (d) rentals or earnings relating to any of the Equipment
or the Lease. "Taxes" means present and future taxes or other governmental
charges that are not based on the net income of Lessor, whether they are
assessed to or payable by Lessee or Lessor, including, without limitation (i)
sales, use, excise, licensing, registration, titling, franchise, business and
occupation, gross receipts, stamp and personal property taxes, (ii) levies,
imposts, duties, assessments, charges and withholdings, (iii) penalties, fines,
and additions to tax and (iv) interest on any of the foregoing. Unless Lessor
elects otherwise, Lessor will prepare and file all reports and returns relating
to any Taxes and will pay all Taxes to the appropriate taxing authority. Lessee
will reimburse Lessor for all such payments promptly on request. On or after any
applicable assessment/levy/lien date for any personal property Taxes relating to
any Equipment, Lessee agrees that upon Lessor's request Lessee shall pay to
Lessor the personal property Taxes which Lessor reasonably anticipates will be
due, assessed, levied or otherwise imposed on any Equipment during its Lease
Term. If Lessor elects in writing, Lessee will itself prepare and file all such
reports and returns, pay all such Taxes directly to the taxing authority, and
send Lessor evidence thereof. Lessee's obligations under this section shall
survive the expiration, cancellation or termination of the Lease.
12. GENERAL INDEMNITY: Lessee assumes all risk and liability for, and shall
defend, indemnify and keep Lessor harmless on an after-tax basis from, any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs and expenses, including reasonable attorney fees and expenses, of
whatsoever kind and nature imposed on, incurred by or asserted against Lessor,
in any way relating to or arising out of the manufacture, purchase, acceptance,
reject joint ownership, possession, use, selection, delivery, lease, operation,
condition, sale, return or other disposition of the Equipment or any part
thereof (including, without limitation, any claim for latent or other defects,
whether or not discoverable by Lessee or any other person, any claim for
negligence, tort or strict liability, any claim under any environmental
protection or hazardous waste law. and any claim for patent, trademark or
copyright infringement). Lessee will not indemnify Lessor under this section for
loss or liability arising from events which occur after the Equipment has been
returned to Lessor or for loss or liability caused directly and solely by the
gross negligence or willful misconduct of Lessor. In this section, "Lessor" also
includes any director, officer, employee, agent, successor or assign of Lessor.
Lessee's obligations under this section shall survive the expiration,
cancellation or termination of the Lease.
13. PERSONAL PROPERTY: Lessee represents and agrees that the Equipment is, and
shall at all times remain, separately identifiable personal property
Upon Lessor's request, Lessee shall furnish Lessor a landlord's and/or
mortgagee's waiver and consent to remove all Equipment. Lessor may display
notice of its interest in the Equipment by any reasonable identification. Lessee
shall not alter or deface any such indication of Lessor's interest.
14. DEFAULT: Each of the following events shall constitute an event of default
under the Lease: (a) Lessee fails to pay any rent or other amount due under the
Lease within ten days of its due date-, or (b) Lessee fails to perform or
observe any of its obligations in Sections 8, 18, or 22 hereof or (c) Lessee
fails to perform or observe any of its other obligations in the Lease for more
than 30 days after Lessor notifies Lessee of such failure; or (d) Lessee or any
Lessee affiliate defaults in the payment, performance or observance of any
obligation under any loan, credit agreement or other lease in which Lessor or
any subsidiary (direct or indirect) of Banc One Corporation (which is Lessor's
ultimate parent corporation) is the creditor or lessor, or (e) any statement,
representation or warranty made by Lessee in the Lease, in any Schedule or in
any document, certificate or financial statement in connection with the Lease
proves at any time to have been untrue or misleading in any material respect as
of the time when made; or (f) Lessee becomes insolvent or bankrupt, or Lessee
admits its inability to pay its debts as they mature, or Lessee makes an
assignment for the benefit of creditors, or Lessee applies for, institutes or
consents to the appointment of a receiver, trustee or similar official for
Lessee or any substantial part of its properly or any such official is appointed
without Lessee's consent, or Lessee applies for, institutes or consents to any
bankruptcy, insolvency, reorganization, debt moratorium, liquidation, or similar
proceeding relating to Lessee or any substantial part of its property under the
laws of any jurisdiction or any such proceeding is instituted against Lessee
without stay or dismissal for more than 30 days, or Lessee commences any act
amounting to a business failure or a winding up of its affairs, or Lessee ceases
to do business as a going concern, or (g) with respect to any guaranty, letter
of credit, pledge agreement, security agreement, mortgage, deed of trust, debt
subordination agreement or other credit enhancement or credit support agreement
(whether now existing of hereafter arising) signed or issued by any party in
connection with all or any part of Lessee's obligations under the Lease, the
party signing or issuing any such agreement defaults in its obligations
thereunder or any such agreement shall cease to be in full force and effect or
shall be declared to be null, void, invalid or unenforceable by the party
signing or issuing it; or (h) there shall occur in Lessor's reasonable opinion
any material adverse change in the financial condition, business or operations
of Lessee.
14. DEFAULT (CONTINUED):
As used in this section 14, the term 'Lessee" also includes any guarantor
(whether now existing or hereafter arising) of all or any part of Lessee's
obligations under the Lease and/or any issuer of a letter of credit (whether now
existing or hereafter arising) relating to all or any part of Lessee's
obligations under the Lease, and the term "Lease" also includes any guaranty or
letter of credit (whether now existing or hereafter arising) relating to all or
any part of Lessee's obligations under the Lease.
15. REMEDIES. If any event of default exists, Lessor may exercise in any order
one or more of the remedies described in the lettered subparagraphs of this
section, and Lessee shall perform its obligations imposed thereby:
(a) Lessor may require Lessee to return any or all Equipment as provided in
the Lease.
(b) Lessor or its agent may repossess any or all Equipment wherever found, may
enter the premises where the Equipment is located and disconnect, render
unusable and remove it, and may use such premises without charge to store or
show the Equipment for sale.
(c) Lessor may sell any or all Equipment at public or private sale, with or
without advertisement or publication, may re-lease or otherwise dispose of it or
may use, hold or keep it.
(d) Lessor may require Lessee to pay to Lessor on a date specified by Lessor,
with respect to any or all Equipment (i) all accrued and unpaid rent, late
charges and other amounts due under the Lease on or before such date, plus (ii)
as liquidated damages for loss of a bargain and not as a penalty, and in lieu of
any further payments of rent, the Stipulated Loss Value of the Equipment on such
date, plus (iii) interest at the Overdue Rate on the total of the foregoing
("Overdue Rate" means an interest rate per annum equal to the higher of 18% or
2% over the Prime Rate, but not to exceed the highest rate permitted by
applicable law). The parties acknowledge that the foregoing money damage
calculation reasonably reflects Lessor's anticipated loss with respect to the
Equipment and the related Lease resulting from the event of default. If an event
of default under section 14 (f) of this Master Lease Agreement exists, then
Lessee will be automatically liable to pay Lessor the foregoing amounts as of
the next rent payment date unless Lessor otherwise elects in writing.
(e) Lessee shall pay all costs, expenses and damages incurred by Lessor
because of the event of default or its actions under this section, including,
without limitation any collection agency and/or attorney fees and expenses, any
costs related to the repossession, safekeeping, storage, repair, reconditioning
or disposition of the Equipment and any incidental and consequential damages.
(f) Lessor may terminate the Lease and/or any or all Schedules, may sue to
enforce Lessee's performance of its obligations under the Lease and/or may
exercise any other right or remedy then available to Lessor at law or in equity.
Lessor is not required to take any legal process or give Lessee any notice
before exercising any of the above remedies. None of the above remedies is
exclusive, but each is cumulative and in addition to any other remedy available
to Lessor. Lessor's exercise of one or more remedies shall not preclude its
exercise of any other remedy. No action taken by Lessor shall release Lessee
from any of its obligations to Lessor. No delay or failure on the part of Lessor
to exercise any right hereunder shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right preclude any other exercise thereof or the exercise of any other right.
After any default, Lessor's acceptance of any payment by Lessee under the Lease
shall not constitute a waiver by Lessor of such default, regardless of Lessor's
knowledge or lack of knowledge at the time of such payment, and shall not
constitute a reinstatement of the Lease if the Lease has been declared in
default by Lessor, unless Lessor has agreed in writing to reinstate the Lease
and to waive the default.
If Lessor actually repossesses any Equipment, then it will use commercially
reasonable efforts under the then current circumstances to attempt to mitigate
its damages provided, that Lessor shall not be required to sell, re-lease or
otherwise dispose of any Equipment prior to Lessor enforcing any of the remedies
described above. Lessor may sell or re-lease the Equipment in any manner it
chooses, free and clear of any claims or rights of Lessee and without any duty
to account to Lessee with respect thereto except as provided below. If Lessor
actually sells or re-leases the Equipment, it will credit the net proceeds of
any sale of the Equipment, or the net present value (discounted at the then
current Prime Rate) of the rents payable under any new lease of the Equipment,
against and LIP to (but not exceeding) the Stipulated Loss Value of the
Equipment and any other amounts Lessee owes Lessor, or will reimburse Lessee for
and up to (but not exceeding) Lessee's payment thereof. The term "net" as used
above shall mean such amount after deducting the costs and expenses described in
clause (e) above of this section. If Lessor elects in writing not to sell or
re-lease any Equipment, it will similarly credit or reimburse Lessee for
Lessor's reasonable estimate of such Equipment's Fair Market Value.
16. LESSOR'S RIGHT TO PERFORM: If Lessee fails to make any payment under the
Lease or fails to perform any of its other agreements in the Lease (including,
without limitation, its agreement to provide insurance coverage as stated in the
Lease), Lessor may itself make such payment or perform such agreement, and the
amount of such payment and the amount of the expenses of Lessor incurred in
connection with such payment or performance shall be deemed to be additional
rent, payable by Lessee on demand.
17. FINANCIAL REPORTS: Lessee agrees to furnish to Lessor: (a) annual financial
statements setting forth the financial condition and results of operation of
Lessee (financial statements shall include the balance sheet, income statement
and changes in financial position and all notes thereto) within 120 days of the
end OF EACH FISCAL YEAR OF LESSEE; (B) QUARTERLY financial statements setting
forth the financial condition and results of operation of Lessee within 60 days
of the end of each of the first three fiscal quarters of Lessee; and (c) such
other financial information as Lessor may from time to time reasonably request
including, without limitation, financial reports filed by Lessee with federal or
state regulatory agencies. All such financial information shall be prepared in
accordance with generally accepted accounting principles. If Lessee fails to
furnish the annual financial statements to Lessor within 30 days of Lessor's
written request, then Lessor may, at its option, charge Lessee a non-performance
fee equal to all the rentals due under the Lease for the then current month
(unless otherwise prohibited by law) and such fees shall be deemed to be
additional rent, payable by Lessee on demand.
18. NO CHANGES IN LESSEE: Lessee shall not: (a) liquidate, dissolve or suspend
business; (b) sell, transfer or otherwise dispose of all or a majority of its
assets, except that Lessee may sell its inventory in the ordinary course of its
business; (c) enter into any merger, consolidation or similar reorganization
unless j! is the surviving corporation; (d) transfer all or any substantial part
of its operations or assets outside of the United States of America; or (e)
without 30 days advance written notice to Lessor, change its name or chief place
of business. Lessee shall at all times maintain a tangible net worth which is no
less than the greater of 75% of its tangible net worth as of the date of the
Master Lease Agreement or 75% of its highest tangible net worth thereafter.
19. LATE CHARGES: If any rent or other amount payable under the Lease is not
paid when due, then as compensation for the administration and enforcement of
Lessee's obligation to make timely payments, Lessee shall pay with respect to
each overdue payment on demand an amount equal to the greater of fifteen dollars
($15.00) or five percent (5%) of the each overdue payment (but not to exceed the
highest late charge permitted by applicable law) plus any collection agency fees
and expenses.
20. NOTICES; POWER OF ATTORNEY: (a) Service of all notices under the Lease shall
be sufficient if given personally or couriered or mailed to the party involved
at its respective address set forth herein or at such other address as such
party may provide in writing from time to time. Any such notice mailed to such
address shall be effective three days after deposit in the United States mail
with postage prepaid. (b) With respect to any power of attorney covered by the
Lease, the powers conferred on Lessor thereby: are powers coupled with an
interest; are irrevocable; are solely to protect Lessor's interests under the
Lease, and do not impose any duty on Lessor to exercise such powers. Lessor
shall be accountable solely for amounts it actually receives as a result of its
exercise of such powers.
21. ASSIGNMENT BY LESSOR: Lessor and any assignee of Lessor, with or without
notice to or consent of Lessee, may sell, assign, transfer or grant a security
interest in all or any part of Lessor's rights, obligations, title or interest
in the Equipment, the Lease, any Schedule or the amounts payable under the Lease
or any Schedule to any entity ("tranferee"). The transferee shall succeed to all
of Lessor's rights in respect to the Lease (including, without limitation, all
rights to insurance and indemnity protection described in the Lease). Lessee
agrees to sign any acknowledgment and other documents reasonably requested by
Lessor or the transferee in connection with any such transfer transaction.
Lessee, upon receiving notice of any such transfer transaction, shall comply
with the terms and conditions thereof. Lessee agrees that it shall not assert
against any transferee any claim, defense, setoff, deduction or counterclaim
which Lessee may now or hereafter be entitled to assert against Lessor. Unless
otherwise agreed in writing, the transfer transaction shall not relieve Lessor
of any of its obligations to Lessee under the Lease and Lessee agrees that the
transfer transaction shall not be construed as being an assumption of such
obligations by the transferee.
22. NO ASSIGNMENT, SUBLEASE OR LIEN BY LESSEE: LESSEE SHALL NOT, DIRECTLY OR
INDIRECTLY, (a) MORTGAGE, ASSIGN, SELL, TRANSFER, OR OTHERWISE DISPOSE OF THE
LEASE OR ANY INTEREST THEREIN OR THE EQUIPMENT OR ANY PART THEREOF, OR (b,
SUBLEASE, RENT, LEND OR TRANSFER POSSESSION OR USE OF THE EQUIPMENT OR ANY PART
THEREFOR TO ANY PARTY, OR (c) CREATE, INCUR, GRANT, ASSUME OR ALLOW TO EXIST ANY
LIEN ON THE LEASE, ANY SCHEDULE, THE EQUIPMENT OR ANY PART THEREOF.
23. EXPIRATION OF LEASE TERM (a) at least 90 days( or earlier if otherwise
specified), but no more than 270 days prior to expiration of the Lease Term of
each Schedule. Lessee shall give electing one of the following options for all
(but not less than all) of the Equipment covered by such Schedule: return the
Equipment under clause (b) below; or purchase the Equipment under clause (c)
below. The election of an option shall be irrevocable. If Lessee fails to give
timely notice of its election, it shall be deemed to have elected to return the
Equipment.
(b) If Lessee elects or is deemed to have elected to return the Equipment at
the expiration of the Lease Term of a Schedule or if Lessee is obligated at any
time to return the Equipment, then Lessee shall, at its sole expense and risk,
deinstall, disassemble, pack, crate, insure and return the Equipment to Lessor
(all in accordance with applicable industry standards) at any location in the
continental United States of America selected by Lessor. The Equipment shall be
in the same condition as when received by Lessee, reasonable wear, tear and
depreciation resulting from normal and proper use excepted (or, if applicable,
in the condition set forth in the Lease or the Schedule), shall be in good
operating order and maintenance as required by the Lease, shall be certified as
being eligible for any available manufacturer's maintenance program, shall be
free and clear of any Liens as required by the Lease, shall comply with all
applicable laws and regulations and shall include all manuals, specifications,
repair and maintenance records and similar documents. Until Equipment is
returned as required above, all terms of the Lease shall remain in full force
and effect including, without limitation, obligations to pay rent and insure the
Equipment; provided, that after the expiration of any Schedule and before Lessee
has completed its return of the Equipment or its purchase option (if elected),
the term of the lease of the Equipment covered by such Schedule shall be
month-to-month or such shorter period as may be specified by Lessor.
(c) If Lessee gives Lessor timely notice of its election to purchase Equipment,
then on the expiration date of the applicable Schedule Lessee shall purchase all
(but not less than all) of the Equipment and shall pay to Lessor the Fair Value
of the Equipment plus all Taxes (other than income taxes on Lessor's gains on
such sale), costs and expenses incurred or paid by Lessor in connection with
such sale plus all accrued or unpaid amounts clue with respect to the Equipment
and/or the Schedule. The Stipulated Loss Value or Economic Value of any item of
Equipment shall have no bearing or influence on the determination of Fair Market
Value under this clause (c). Upon payment in full of the above amounts, and if
no default has occurred and is continuing under the Lease, Lessor shall transfer
title to such Equipment to Lessee "as-is, where-is" with all faults and without
recourse to Lessor and without any representation or warranty of any kind
whatsoever by Lessor, express or implied.
(d) For purposes of the purchase option of the Lease, the determination of the
Fair Market Value of any Equipment shall be determined (1) without deducting any
costs of dismantling or removal from the location of use, (2) on the assumption
that the Equipment is in the condition required by the applicable return and
maintenance provisions of the Lease and is free and clear of any Liens as
required by the Lease, and (3) shall be determined by mutual agreement of Lessee
and Lessor or, if Lessor and Lessee are not able to agree on such value, by the
Appraisal Procedure, "Appraisal Procedure" means the determination of Fair
Market Value by an independent appraiser a table to Lessor and Lessee, or, if
the parties are unable to agree on an acceptable appraiser, by averaging the
valuation (disregarding the one which differs the most from the other two) of
three independent appraisers, the first appointed by Lessor, the second
appointed by Lessee and the third appointed by the first two appraisers. For
purposes of the "Remedies" section of the Lease, the Fair Market Value shall be
determined by Lessor in good faith and any such valuation shall be on an "as-is,
where is" basis without regard to the first sentence of this clause (d). Lessee,
at its sole expense, shall pay all fees, costs and expenses of the above
described appraisers.
24. GOVERNING LAW: THE INTERPRETATION, CONSTRUCTION AND VALIDITY OF THE LEASE
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF OHIO. WITH RESPECT TO ANY ACTION
BROUGHT BY LESSOR AGAINST LESSEE TO ENFORCE ANY TERM OF THE LEASE, LESSEE HEREBY
IRREVOCABLY CONSENTS TO THE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT
IN THE FRANKLIN COUNTY, OHIO. WHERE LESSOR HAS ITS PRINCIPAL PLACE OF BUSINESS
AND WHERE PAYMENTS ARE TO BE MADE BY LESSEE.
25. MISCELLANEOUS: (a) Subject to the limitations herein, the Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, administrators, successors and assigns. (b) This Master Lease Agreement
and each Schedule may be executed in any number of counterparts, which together
shall constitute a single instrument. Only one counterpart of each Schedule
shall be marked "Lessor's Original" and all other counterparts shall be marked
"Duplicate". A security interest in any Schedule may be created through transfer
and possession only of the counterpart marked "Lessor's Original". (c) Section
and paragraph headings in this Master Lease Agreement and the Schedules are for
convenience only and have no independent meaning. (d) The terms of the Lease
shall be severable and if any term thereof is declared unconscionable, invalid,
illegal or void, in whole or in part, the decision so holding shall not be
construed as impairing the other terms of the Lease and the Lease shall continue
in full force and effect as if such invalid, illegal, void or unconscionable
term were not originally included herein. (e) All indemnity obligations of
Lessee under the Lease and all rights, benefits and protections provided to
Lessor by warranty disclaimers shall survive the cancellation, expiration or
termination of the Lease. (f) Lessor shall not be liable to Lessee for any
indirect, consequential or special damages for any reason whatsoever. (g) Each
payment made by Lessee shall be applied by Lessor in such manner as Lessor
determines in its discretion which may include, without limitation, application
as follows: first, to accrued late charges second, to accrued rent; and third,
the balance to any other amounts then due and payable by Lessee under the Lease.
(h) If the Lease is signed by more than one Lessee, each of such Lessees shall
be jointly and severally liable for payment and performance of all of Lessee's
obligations under the Lease.
26. ENTIRE AGREEMENT: THE LEASE REPRESENTS THE FINAL, COMPLETE AND ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO. THERE ARE NO ORAL OR UNWRITTEN AGREEMENTS
OR UNDERSTANDINGS AFFECTING THE LEASE OR THE EQUIPMENT. Lessee agrees that
Lessor is not the agent of any manufacturer or supplier, that no manufacturer or
supplier is an agent of Lessor, and that any representation, warranty or
agreement made by a manufacturer, supplier or their employees, sales
representatives or agents shall not be binding on Lessor.
27 JURY WAIVER: ALL PARTIES TO THIS MASTER LEASE AGREEMENT WAIVE ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY
AGAINST ANY OTHER PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF, IN CONNECTION
WITH OR IN ANY WAY RELATED TO THIS MASTER LEASE AGREEMENT.
<PAGE>
BANC ONE LEASING CORPORATION BANKERS DIRECT MORTGAGE
Lessor CORPORATION Lessee
By: By: /S/ VINCENT CASTORO
Title Title: PRESIDENT
Lessee's Witness: /S/ ROBERT SIMM
Regardless of any prior, present or future oral agreement or course of
dealing, no term or condition of the Lease may be amended, modified, waived,
discharged, canceled or terminated except by a written instrument signed by
the party to be bound; except Lessee authorizes Lessor to complete the
Acceptance Date of each Schedule and the serial numbers of any Equipment
BANKERS DIRECT MORTGAGE CORPORATION
Lessee
By:
Title:
<PAGE>
SCHEDULE A-1 EQUIPMENT LEASED HEREUNDER
QUANTITY DESCRIPTION PAGE
1
"ALL PROPERTY DESCRIBED IN THE INVOICES IDENTIFIED BELOW, WHICH PROPERTY MAY BE
GENERALLY DESCRIBED AS COMPUTER EQUIPMENT."
LOCATION: 580 VILLAGE BLVD., SUITE 360
WEST PALM BEACH, FL 33049
COUNTY: PALM BEACH
COST: $100,072.44
VENDOR NAME INVOICE DATE AMOUNT
ALLIED BUSINESS COMM., INC. PROPOSAL 06/11/97 $43,460.00
ALLIED BUSINESS COMM., INC. PROPOSAL 06/02/97 $10,456.90
ALLIED BUSINESS COMM., INC. PROPOSAL 06/11/97 $10,456.90
ALLIED BUSINESS COMM., INC. 8592 07/01/97 $6,354.70
ALLIED BUSINESS COMM., INC. 8591 06/16/97 $402.80
ALLIED BUSINESS COMM., INC. 8594 07/01/97 $1,048.34
ALLIED BUSINESS COMM., INC. 8595 07/03/97 $1,155.40
ALLIED BUSINESS COMM., INC. 8596 07/09/97 $2,787.80
ALLIED BUSINESS COMM., INC. 8598~ 07/16/97 $950.00
ALLIED BUSINESS COMM., INC. 8630 07/14/97 $540.60
ALLIED BUSINESS COMM., INC. 8603 07/26/97 $641.30
FERRIN SIGNS 7.25 07/21/97 $9,609.20
FERRIN SIGNS PROPOSAL 07/23/97 $3,756.00
CONTOUR SOFTWARE, INC. PROPOSAL 06/23/97 $5,200.00
MORTGAGE TECH. 05/16/97 $1,190.00
CONTOUR SOFTWARE, INC. PROPOSAL 05/05/97 $2,062.50
TOGETHER WITH ALL ATTACHMENTS, ADDITIONS, ACCESSIONS, PARTS, REPAIRS,
IMPROVEMENTS, REPLACEMENTS AND SUBSTITUTIONS THERETO.
This Schedule A-1 is attached to and made a part of Lease Number 100006217Q and
constitutes a true and accurate description of the equipment.
Lessee:
BANKERS DIRECT MORTGAGE CORPORATION
By: /s/ Dusty Lashbroock
Date: 8/22/97
<PAGE>
CORPORATE GUARANTY
Dated
Master Lease Agreement Date:
Lessee Name: BANKERS DIRECT MORTGAGE CORPORATION
EQUIPMENT Cost: $ 100,072.44
1. For valuable consideration, the receipt of which is hereby acknowledged,
the undersigned jointly and severally unconditionally guarantee to BANC ONE
LEASING CORPORATION (hereinafter called "Lessor") the full and prompt
performance by the lessee identified above (hereinafter called "Lessee") of all
obligations which Lessee now has or may hereafter have to Lessor, including but
not limited to obligations under equipment leases and promissory notes executed
in connection with anticipated equipment leases (including but not limited to
all present and future lease schedules and promissory notes under the Master
Lease identified above, with a total original equipment cost to the Lessor of no
more than the amount of the Equipment Cost set forth above), and unconditionally
guarantee the prompt payment when due (whether at scheduled maturity, upon
acceleration or otherwise) of any and all sums, indebtedness and liabilities of
whatsoever nature, due or to become due, direct or indirect, absolute or
contingent, now or hereafter at any time owed or contracted by Lessee to Lessor,
and all costs and expenses of and incidental to collection of any of the
foregoing, including reasonable attorneys' fees (all of the foregoing
hereinafter called "Obligations"). It is the undersigned's express intention
that this guaranty in addition to covering all present obligations of Lessee to
Lessor, shall extend to all future Obligations of Lessee to Lessor, whether or
not such obligations are reduced or entirely extinguished and thereafter
increased or are reincurred, whether or not such Obligations are related to the
Master Lease identified above, whether or not such Obligations exceed the
Equipment Cost identified above, and whether or not such obligations are
specifically contemplated by the undersigned, Lessee, and Lessor as of the date
hereof.
2. This is an absolute and unconditional guarantee of payment and not of
collection. Lessor shall not be required, as a condition of the liability of the
undersigned, to resort to, enforce or exhaust any of its remedies against the
Lessee or any other party who may be liabie for payment on any obligation or to
resort to, marshall, enforce or exhaust any of its remedies against any leased
property or any property given or held as security for this Guaranty or any
obligation.
3. The undersigned hereby waive and grant to Lessor, without notice to the
undersigned and without in any way affecting the liability of the undersigned,
the right at any time and from time to time, to extend other and additional
credit, leases, loans or financial accommodations to Lessee apart from the
obligations, to deal in any manner as it shall see fit with any Obligation of
Lessee to Lessor and with any leased property or security for such Obligation,
including, but not limited to, W accepting partial payments on account of any
obligation, (ii) granting extensions or renewals of all or any part of any
obligation, (iii) releasing, surrendering, exchanging, dealing with, abstaining
from taking, taking, abstaining from perfecting, perfecting, or accepting
substitutes for any or all leased property or security which it holds or may
hold for any obligation, (iv) modifying, waiving, supplementing or otherwise
changing any of the terms, conditions or provisions contained in any obligation
and (v) the addition or release of any other party or person liable hereon,
liable on the Obligations or liable on any other guaranty executed to guarantee
any of Lessee's Obligations. The undersigned jointly and severally hereby agree
that any and all settlements, compromises, compositions, accounts stated and
agreed balances made in good faith between Lessor and Lessee shall be binding
upon the undersigned.
4. Every right, power and discretion herein granted to Lessor shall be for
the benefit of the successors or assigns of Lessor and of any transferee or
assignee of any Obligation covered by this Guaranty, and in the event any such
obligation shall be transferred or assigned, every reference herein to Lessor
shall be construed to mean, as to such obligation, the transferee or assignee
thereof. This Guaranty shall be binding upon each of the undersigned's
executors, administrators, heirs, successors and assigns.
5. This Guaranty shall continue in force for so long as Lessee shall be
obligated to Lessor, and thereafter until Lessor shall have actually received
written notice of the termination hereof from the undersigned, it being
contemplated that Lessee may borrow, lease, repay and subsequently borrow money
from or lease property from, or become obligated to, Lessor from time to time,
and the undersigned, not having given notice of the termination hereof as herein
provided for, shall be deemed to have permitted this Guaranty to remain in full
force and effect for the purpose of inducing Lessor to make further leases or
loans to Lessee; provided, however, no notice of termination of this Guaranty
shall affect in any manner the rights of Lessor arising under this Guaranty with
respect to the following: (a) any obligation incurred by Lessee in connection
with the Master Lease identified above with a total equipment cost of no more
than the amount of the Total Equipment Cost set forth above, whether such
obligation is in the form of a lease or a promissory note; or (b) any obligation
incurred by Lessee prior to receipt by Lessor of written notice of termination
or any obligation incurred after receipt of such written notice pursuant to a
written agreement entered into by Lessor prior to receipt of such notice. The
undersigned expressly waive notice of the incurring by Lessee of any obligation
to Lessor. The undersigned also waive presentment, demand of payment, protest,
notice of dishonor or nonpayment of or nonperformance of any obligation.
6. The undersigned hereby waive any claims or rights which they might now
have or hereafter acquire against Lessee or any other person primarily or
contingently liable on any Obligation of Lessee, which claims or rights arise
from the existence or performance of the undersigned's obligations under this
Guaranty or any other guaranty or under any instrument or agreement with respect
to any leased property or any property constituting collateral or security for
this Guaranty or any other guaranty, including, without limitation, any right of
subrogation reimbursement, exoneration, contribution, indemnification, or any
right to participate in any claim or remedy of Lessor or any other creditor
which the undersigned now has or hereafter acquires, whether such claim or right
arises in equity, under contract or statute, at common law, or otherwise.
7. Lessor's rights hereunder shall be reinstated and revived, and this
Guaranty shall be fully enforceable, with respect to any amount at any time paid
on account of the Obligations which thereafter shall be required to be restored
or returned by Lessor upon the bankruptcy, insolvency or reorganization of the
Lessee, the undersigned, or any other person, or as a result of any other fact
or circumstance, all as though such amount had not been paid.
8. The undersigned jointly and severally agree to pay to Lessor all costs
and expenses, including reasonable attorneys' fees, incurred by Lessor in the
enforcement or attempted enforcement of this Guaranty, whether or not suit is
filed in connection therewith, or in the exercise by Lessor of any right,
privilege, power or remedy conferred by this Guaranty.
9. The undersigned represent and warrant that they have relied exclusively
ON THEIR OWN independent investigation of Lessee, the leased property and the
collateral for their decision to guarantee Lessee's Obligations now existing or
thereafter arising. The undersigned agree that they have sufficient knowledge of
the Lessee, the leased property, and the collateral to make an informed decision
about this Guaranty, and that Lessor has no duty or obligation to disclose any
information in its possession or control about Lessee, the leased property, and
the collateral to the undersigned. The undersigned warrant to Lessor that they
have adequate means to obtain from the Lessee on a continuing basis information
concerning the financial condition of the Lessee and that they are not relying
on Lessor to provide such information either now or in the future.
10. As long as any indebtedness under any of the Obligations remains unpaid
or any credit is available to Lessee under any of the obligations, the
undersigned agree to furnish to Lessor: (a) annual financial statements setting
forth the financial condition and results of operation of the undersigned
(financial statements shall include balance sheet, income statement, changes in
financial position and all notes thereto) within 120 days of the end of each
fiscal year*of the undersigned; (b) quarterly financial statements setting forth
the financial condition and results of operation of the undersigned within 60
days of the end of each of the first three fiscal quarters of the undersigned;
and (c) such other financial information as Lessor may from time to time request
including, without limitation, financial reports filed by the undersigned with
federal or state regulatory agencies. .
11. NO POSTPONEMENT or delay on the part of Lessor in the enforcement of
any right hereunder shall constitute a waiver of such right. The failure of any
person or entity to sign this Guaranty shall not discharge the liability of any
of the undersigned.
12. This Guaranty remains fully enforceable IRRESPECTIVE OF ANY CLAIM,
Idefense or counterclaim which the Lessee may or could assert on any of the
obligations including but not limited to failure of consideration, breach of
warranty, payment, statute of frauds, statute of limitations, fraud, bankruptcy,
accord and satisfaction, and usury, same of which the undersigned hereby waive
along with any standing by the undersigned to assert any said claim, defense or
counterclaim.
13. This Guaranty contains the entire agreement of the parties and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Guaranty is not intended to replace
or SUPERSEDE ANY OTHER GUARANTY WHICH THE UNDERSIGNED have entered into or may
enter INTO IN THE FUTURE. The undersigned may enter into additional guaranties
in the FUTURE WHICH MAY or may not refer to the Master Lease identified above
and such guaranties are not intended to replace or supersede this Guaranty
unless specifically provided in that additional guaranty. The interpretation,
construction and validity of this guaranty shall be governed by the laws of the
State of Ohio. With respect to any action brought by Lessor against Guarantor to
enforce any term of this guaranty, Guarantor hereby irrevocably consents to the
jurisdiction and venue of any state or federal court in Franklin County, Ohio,
where Lessor has its principal place of business and where payments are to be
made by Lessee and Guarantor.
ALL PARTIES TO THIS GUARANTY, INCLUDING GUARANTOR AND LESSOR, WAIVE ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY
AGAINST ANY OTHER PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF, IN CONNECTION
WITH OR IN ANY WAY RELATED TO THIS GUARANTY.
Guarantor:
CFI MORTGAGE DELAWARE
BY:
Title: President
Witness:
Exhibit 10.29
LEASE AGREEMENT
THIS LEASE, made and entered into this _______ day of June, 1994 by and
between EASTPARK, a General Partnership (hereinafter referred to as "Landlord")
and MARYLAND NATIONAL MORTGAGE CORP., a Maryland Corporation (hereinafter
referred to as "Tenant").
1. DEFINITIONS
(a) "Premises" shall mean the area within the Building located in the
northwest side of the second (2nd) floor and outlined on the floor plan attached
to this Lease as Exhibit "A" and incorporated herein. The Premises contains
approximately [Text Deleted]. The Premises shall include the Building Standard
Improvements and Tenant Improvements as defined below.
(b) "Rentable Area" shall mean the gross area enclosed by the surface of
the exterior windows, the mid-point of any walls separating portions of the
Premises from those of adjacent tenants, the slab penetration line of all walls
separating the Premises from Service Areas, and the corridor side of walls
separating the Premises from Common Areas. The stipulated number of square feet
of Rentable Area in the Premises, as set forth in 1(a) above, is Landlord's
current estimate of such Rentable Area and such figure may be revised, at
Landlord's election, if Landlord's architect determines such estimate to be
inaccurate after examination of the final drawings of the Premises and the
Building.
(c) "Total Leaseable Area" shall mean all of the Rentable Areas within the
Building, including the Premises, that Landlord has made available for lease.
Landlord estimates the Total Leaseable Area of the Building to be approximately
31,860 square feet. During the term of this Lease, if Landlord or Landlord's
architect determines this estimate to be inaccurate, or if Landlord adds
Rentable Areas or deletes Rentable Areas in the Building as provided herein,
this figure may, at Landlord's election, be revised.
(d) "Property" shall mean inclusively all of the real property and
improvements located thereon, including without limitation, the Building and
Exterior Grounds, all of which the Premises is a part of, and all of which are
situated on Lot 9, Block Z, Eastpark II. The address of the Property is 1790
38th Street, Boulder, Colorado.
(e) "Building," as used in this Lease, shall mean an office building which
will be constructed by Landlord, at Landlord's expense, in accordance with the
Building plans dated 11/30/93 by Brothers & Vandervorst Architects (Project
#V8819). The "Building" shall include, without limitation: the building
structure, including the roof, roof drains, foundations, floors, exterior walls
and windows; exterior doors and entrances; fire and other emergency systems;
elevator car, shaft and equipment; the Total Leaseable Area, including the
Premises; all Common Areas; all Service Areas, and all other related building
improvements of a 36,000 square foot, three-story, office building, of which the
Premises is a part thereof.
(f) "Service Areas" shall mean those areas within the outside walls of the
Building used for elevator, mechanical rooms, building stairs, fire towers,
elevator shafts, flues, vents, stacks, pipe shafts and vertical ducts (but shall
not include any such areas for the exclusive use of a particular tenant).
(g) "Common Areas," as used in this Lease, shall mean those portions within
the Building which have been designated and improved by Landlord for common use;
including but not limited to, entryways, atrium, corridors, main and secondary
stairways, walkways, the elevator and elevator foyers, restrooms, shower and
locker facilities, mechanical rooms, janitorial closets, vending areas,
electrical and telephone closets, and other similar facilities and areas which
are provided for the common use and benefit of tenants generally and/or the
public, within the Building of which the Premises is a part. Any portion of the
Building so included within the common areas shall be excluded therefrom when
designated by Landlord for a non-common use, and any portion thereof not now
included within the common areas shall be included when so designated and
improved for common use.
(h) "Exterior Grounds" shall mean the real property and the improvements
constructed thereon surrounding the Building, which has been provided for the
common use and benefit of tenants generally and/or the public, and which
includes such items as the parking lot (including curbs, gutters,
asphalt/concrete surfaces, striping and graphics), landscaping, sidewalks,
parking lot lighting, retaining walls, landscape watering systems, drainage
facilities, general building signage and/or directories, etc.
(i) "Operating Expenses" shall mean all direct and indirect costs and
expenses incurred in maintaining, operating, repairing and managing the Property
and the Premises, which costs and expenses shall include, but not be limited to,
the following: maintenance, repair and replacement costs; security; management
fees, wages and benefits payable to employees of Landlord whose duties are
directly connected with the operation and maintenance of the Property; all
services, utilities, supplies, repairs, replacements or other expenses for
maintaining and operating the Property and the Premises; the cost, including
interest, amortized over its useful life, of any capital improvement made to the
Property by Landlord after the date of this Lease which is required under any
governmental law or regulation that was not applicable to the Property at the
time it was constructed; the cost, including interest, amortized over its useful
life, of installation of any device or other equipment which improves the
operating efficiency of any system within the Property or Premises and thereby
reduces operating expenses; all other expenses which would generally be regarded
as operating and maintenance expenses which would reasonably be amortized over a
period not to exceed five years; all real property taxes and installments of
special assessments, including dues and assessments by means by deed restriction
and/or owner's associations which accrue against the Property of which the
Premises are a part during the term of this Lease; and all insurance premiums
Landlord is required to pay or deems necessary to pay, including public
liability insurance, with respect to the Property. The term "Operating Expenses"
does not include the following: repairs, restoration or other work occasioned by
the wind, the elements or other casualty which is covered by insurance; expenses
incurred in leasing to or procuring of tenants. leasing commissions, advertising
expenses and expense for the renovating of space for new tenants, any
depreciation allowance or expense except as provided for above; any principal or
interest on any mortgage or mortgages which may be a lien against the fee simple
of said premises or the Landlord's estate or interest therein; any franchise or
income tax which is or may become payable by the Landlord or any gift,
inheritance, transfer, estate, or succession tax by reason of any existing law
or any law which hereafter may be enacted; or operating expenses which are the
responsibility of Landlord.
(j) "Rent" shall mean all sums or money payable by Tenant to Landlord under
the terms of this Lease, including, without imitation, the Minimum Monthly Rent
set forth in Paragraph 5.1, Additional Rent as provided for in Paragraph 5.3,
and all other payments to Landlord hereunder.
(k) "Net Lease" means that the Rent payable by Tenant to Landlord, shall be
absolutely net to Landlord, so that this Lease shall yield to Landlord each
month during the term of this Lease, after the payment of all operating
expenses, the Minimum Monthly Rental specified in Paragraph 5.1, with
adjustments in the Minimum Monthly Rental being made throughout the Term of this
Lease in accordance with terms set forth herein.
(l) "Building Standard Improvements" includes such items as demising walls
separating the Premises from Common Areas, Service Areas and other tenants in
the Building; the ceiling; light fixtures; window coverings; heating and
air-conditioning mixing boxes and thermostats; fire sprinkler heads; all of
which are more specifically described in Exhibit B, attached hereto.
(m) "Tenant Finish Improvements" shall mean, in addition to Building
Standard Improvements, other improvements which are necessary for Tenants
occupancy and use of the Premises. These improvements will be installed in
accordance with Tenant's design and specifications, as described in Exhibit C
attached hereto, subject to the approval of Landlord, which approval shall not
be unreasonably withheld. Landlord will contract with a general contractor of
Landlord's choosing to install these improvements on behalf of the Tenant. A
cost estimate for the Tenant Finish Improvements will be reviewed and approved
by Tenant and Landlord prior to construction.
(n) "Tenant Finish Improvement Allowance." Landlord will provide Tenant
with an allowance, not to exceed Twelve Dollars ($12.00) per square foot times
the Rentable Area, to construct the Tenant Finish Improvements described in
Exhibit C. This allowance must be used immediately by Tenant, and can only be
used for the installation of the Tenant Finish Improvements. Any portion of this
allowance not used by Tenant within one (1) month after Tenant's occupancy of
the Premises, will be forfeited by Tenant. Tenant shall immediately reimburse to
Landlord, within fifteen (15) days after receipt of a statement therefore, all
costs incurred by Landlord in the installation of the Tenant Improvements which
exceeds this Tenant Finish Improvement Allowance, plus twenty (20%) percent for
overhead and supervision. Any equipment or work, other than those items
specifically enumerated in Exhibits B & C, which Landlord installs or constructs
on the Premises on Tenant's behalf, shall be paid for by Tenant within fifteen
(15) days after receipt of a statement from Landlord at cost, plus twenty (20%)
percent for overhead and supervision.
2. LEASE GRANT
Subject to and upon the terms herein set forth, Landlord leases to Tenant
and Tenant leases from Landlord the Premises.
3. TERM OF LEASE
3.1 COMMENCEMENT OF TERM.
(a) The Term of this Lease ("Commencement of Term"), including the payment
of Rent, shall commence upon Landlord's Substantial Completion of the Building
Standard Improvements and Tenant Finish Improvements within the Premises
("Plans"), "Substantial Completion" being defined as the occurrence of the
earlier of one of the following:
(i) on the day the Tenant occupies the Premises, or
(ii) January 15, 1995.
(b) Tenant agrees to occupy the Premises no later than thirty (30) days
after the date of Commencement of Term and, thereafter, to continuously occupy
the Premises during the remaining Term of this Lease.
(c) Prior to occupancy, Tenant shall have inspected and accepted the
Premises as to its conformity with the Plans, which acceptance shall not be
unreasonably withheld. The Premises shall not be deemed unacceptable for
occupancy if only minor or insubstantial details of construction, decoration,
mechanical adjustments, or any work contracted for by Tenant remains to be done.
(d) Unless Tenant provides written notice to Landlord to the contrary
within five (5) days following Tenant's occupancy of the Premises, Tenant shall
be deemed to have accepted the Premises in the condition that then exists.
3.2 TERMINATION OF TERM.
(a) The Term of this Lease, including Tenant's occupancy of the Premises
thereof, shall terminate FORTY-EIGHT (48) months after the beginning of the
first full month following the Commencement of Term of this Lease as described
in Paragraph 3.1 above.
(b) If Substantial Completion of the Premises has not occurred by the end
of the day dated March 31, 1995, Tenant shall have the right to terminate this
Lease by giving notice of such fact to Landlord in accordance with the notice
provisions contained in this Lease, and Landlord shall, within thirty (30) days
from receipt of said notice, return any sums paid to Landlord by Tenant under
the terms of this Lease. Tenant shall have no other claims against Landlord for
any damages, actual or consequential, which may result from Landlord's failure
to deliver the Premises.
3.3 OPTION TO EXTEND THE TERM.
Upon full and complete performance of all terms, covenants, and conditions
herein contained by Tenant and the timely payment of all Rent due under the
terms hereof, Tenant shall be given ONE (1) option(s) to renew the Term of this
Lease for an additional FORTY-EIGHT (48) month period (per each option), based
upon the same terms and conditions as herein contained, except Landlord shall
have the right to adjust the Minimum Monthly Rent, defined in Paragraph 5.1, to
an amount equal to the then current market Net Lease Rate for similar space in
Boulder, Colorado. In no event shall the total renewals exceed a total of
FORTY-EIGHT (48) months. In the event Tenant desires to exercise said option,
Tenant shall give written notice of such fact to Landlord no less than one
hundred twenty (120) days nor more than one hundred fifty (150) days prior to
the termination of this Lease. Within fifteen (15) days following Landlord's
receipt of such notice, Landlord shall advise Tenant of the current market Net
Lease Rate. Tenant shall have fifteen (15) days following Tenant's receipt of
such notification, to reject the current market Net Lease Rate by providing
written notice of such rejection to Landlord which rejection shall also operate
as Tenant's cancellation of Tenant's exercise of any renewal option and the
Lease shall then terminate at the scheduled termination date. If Tenant does not
reject the current market Net Lease Rate as determined by Landlord within such
fifteen (15) days, then this Lease will renew according to the renewal option
exercised at such rate. At all times, Landlord shall have the complete
discretion to determine the current market Net Lease Rate for the Minimum
Monthly Rent for the first year of any renewal period.
3.4 HOLDOVER TENANCY.
If, after the expiration of the term of this Lease, Tenant shall remain in
possession of the Premises and continue to pay Rent without a written agreement
as to such possession, then Tenant shall be deemed a month-to-month Tenant and
the rental rate during such hold-over tenancy shall be equivalent to the Rent
due for the last month of tenancy under this Lease plus fifty (50%) percent. No
holding over by Tenant shall operate to renew or extend this Lease without the
written consent of Landlord to such renewal or extension having been first
obtained.
4. IMPROVEMENT DEPOSIT
Tenant has deposited contemporaneously with Tenant's execution of this
Lease, TWO THOUSAND EIGHT HUNDRED AND NO/100's DOLLARS ($2,800.00) ("Security
Deposit") to retained by Landlord as security for Tenant's faithful performance
of all the terms and conditions of this Lease, including, without limitation,
payment of all Rent. The Security Deposit shall be held by Landlord without
liability for interest and as security for the performance by Tenant of Tenant's
covenants and obligations under this Lease, it being expressly understood that
the Security Deposit shall not be considered an advance payment of Rent or any
type or a measure of Landlord's damages in case of default by Tenant. Landlord
may commingle the Security Deposit with Landlord's other funds. Landlord may,
from time to time, without prejudice to any other remedy, use the Security
Deposit to the extent necessary to make good any arrearages of Rent or to
satisfy another covenant or obligation of Tenant hereunder. Following any such
application of the Security Deposit, Tenant shall pay to Landlord on demand the
amount so applied in order to restore the Security Deposit to its original
amount. If Tenant is not in default at the termination of this Lease and has
paid in full all Rent, then Landlord will return to Tenant within thirty (30)
days following termination of this Lease. the balance of the Security Deposit
remaining after any such application. If Landlord transfers it interest in the
Premises during the term of this Lease, Landlord may assign the Security Deposit
to the transferee and thereafter shall have no further liability for the return
of such Security Deposit.
5. RENT
Tenant agrees to pay in advance on the First day of each and every calendar
month during the Term of this Lease hereof, to Landlord at its address specified
in this Lease, or at such other place as Landlord may from time to time
designate in writing, without notice, demand, set-off, or abatement, the
following as Rent for the Premises:
5.1 MINIMUM MONTHLY RENTAL.
(a) The "Minimum Monthly Rent" to be paid by the Tenant to the Landlord
during the term of this Lease, including all Lease extension periods, shall be
TWO THOUSAND SEVEN HUNDRED SIXTY-FIVE AND 13/100'S DOLLARS ($2,765.13 per
month).
(b) The first month's Minimum Monthly Rent of $2,765.13 shall be due and
payable upon the execution of this Lease, with proper adjustments to be made if
Commencement of Term does not occur on the first day of the month.
(c) The Minimum Monthly Rent is based upon an annual Net Lease Rate of
$11.80 per square foot of Rentable Area.
(d) All sums due under this Lease shall be paid in lawful money of the
United States.
5.2 MINIMUM MONTHLY RENT ADJUSTMENTS.
At the option of Landlord, on each anniversary of this Lease, including all
renewal Periods, Landlord may adjust the "Minimum Monthly Rent" due under the
terms hereof by the Percentage increase in the U.S. Bureau of Labor Statistics
Consumer Price Index, "All Urban Consumers," "All Items" 1967 = 100, for the
Denver Metropolitan Area ("Index"). It is acknowledged that the "Minimum Monthly
Rent" set forth herein is based upon the "All Items" Index published for the
1994 "January-June" Average (hereby known as the "Base Index"). Such adjustment
shall be accomplished by multiplying the "Minimum Monthly Rent" established in
Paragraph 5.1 above by twelve (12) (the "Minimum Yearly Rent"), and then
multiplying the Minimum Yearly Rental by a fraction (the denominator of said
fraction being the Base Index, the numerator of the fraction being the most
recently published corresponding Index preceding the first day of the lease year
for which the adjustment is made) and then dividing the Minimum Yearly Rental by
twelve (12) to arrive at the new Minimum Monthly Rent. The increased Minimum
Monthly Rent, as so determined, shall commence as of the first day of the month
immediately following the annual anniversary date and shall continue in equal
monthly installments until readjusted as herein provided. In the event said
Index ceases to be made available, Landlord shall use as a basis of calculation
such Other nationally recognized index as Landlord shall determine in Landlord's
reasonable discretion. In no event, shall the "Minimum Monthly Rent" ever be
decreased below the "Minimum Monthly Rent" for the immediately preceding year.
5.3 ADDITIONAL RENT.
This is a Net Lease and Tenant agrees to pay to Landlord within thirty (30)
days after Landlord renders a statement therefore to Tenant, as Additional Rent,
Tenant's proportionate share of all Operating Expenses incurred by Landlord
including without limitation those expenses more particularly described in
Paragraphs 7, 16, 22, 24 and 25 hereof. Except as otherwise provided herein, all
Operating Expenses will be prorated according to their relation to the Total
Leasable Area of the Building. Therefore, Tenant's share of all Operating
Expenses is EIGHT AND 83/100's PERCENT (8.83%). If the Total Leasable Area of
the Building or Rentable Area of the Premises should change during the term
hereof, Landlord will adjust Tenant's percentage accordingly.
Without in any way limiting the foregoing, Tenant agrees to deposit with
Landlord on the first day of each month, during the term of this Lease, as
Additional Rent, $1,220.00 per month, which sum shall be held, without liability
for interest, in escrow ("Operating Expense Escrow"), so that Landlord shall
have a sufficient amount available for the payment of all Operating expenses
when they become due and payable. It is recognized that $1,220.00) is only an
estimate. Accordingly, appropriate adjustments in the Operating Expense Escrow
and the future monthly payment schedule may be made based upon the actual
statements for the Operating Expenses. In the event a deficiency exists in the
Operating Expense Escrow at any time during the term of this Lease, Tenant shall
promptly pay any such deficiency within thirty (30) days after receipt of such
notice. In the event any excess is paid by Tenant within any quarter of one year
of this Lease, Landlord shall credit to Tenant such excess. Upon reasonable
request Landlord will provide Tenant with an accounting of all amounts which
make up the Operating Expenses. Landlord may commingle the Operating Expense
Escrow with Landlord's other funds. Without limiting the foregoing, in the event
Landlord's lender(s) should require Landlord to escrow for real estate taxes
and/or property insurance with the lender(s), then the proportional monthly
amount deposited by Tenant with Landlord for the payment of real estate taxes
and/or insurance shall be based upon the amount Landlord is required to deposit
with Landlord's lender(s).
It is further agreed that if any real estate tax is payable in full before
the expiration of the fiscal tax year, whether in installments or by lump sum
payment, the monthly payments by Tenant shall be in amounts such that there
shall be a fund in Landlord's hands sufficient to meet the payment or any tax or
installment thereof as it falls due. In the case of special assessments which
are imposed during the term hereof, together with interest on deferred payments,
Landlord and Tenant agree, at Landlord's sole option, to take such steps as may
be prescribed by law to take advantage of any opportunity to pay any such
assessment in the maximum number of installments. Tenant shall be obligated for
Tenant's pro rata portion of any interest imposed upon the installment payment
of any such assessment.
6. USE OF PREMISES
Tenant shall use the Premises for the purpose or a Professional Office.
Tenant shall refrain from the sale of merchandise and performance of services
not usually incidental to such business. The operation of any other business on
the Premises is hereby expressly prohibited. Tenant shall keep the business
being conducted on the Premises open for business during normal business hours
of all business days applicable to such business. Nothing in this Lease shall be
construed as granting Tenant an exclusive right to the sale or furnishing of any
particular merchandise or service. Tenant shall continuously and uninterruptedly
during the term of this Lease occupy and use the Premises for the purposes
hereinabove specified unless prevented from so doing by causes beyond Tenant's
control. No auction, fire or bankruptcy sales may be conducted in the Premises
without the prior written approval and consent of Landlord. Tenant shall not
carry any stock of goods or do anything in or about the Premises which will, in
any way, void or make voidable or tend to increase the rates for any insurance
on the Premises or the Property. Tenant agrees to pay, as Additional Rent, an
amount equal to any increase in the insurance premiums that may be charged
during the term of this Lease for the amount of the insurance carried by
Landlord on the Property when such increase results from activities carried on
by Tenant on the Premises, whether or not Landlord has consented to the same.
7. SERVICES TO BE PROVIDED BY LANDLORD
Except as otherwise provided for in this Lease, Landlord is not required to
pay for any utility services, supplies or upkeep in connection with the Premises
at Property. However, because the Premises is located in a multi-tenant
building, Landlord will provide and supervise, for the benefit of Tenant and
other tenants of the Building, the following services:
(a) All heat and air conditioning, water, sewer, gas and electricity used
and consumed in the operation and maintenance of the Property and Premises;
(b) Routine maintenance of central heat and air conditioning equipment for
the Building, to provide such temperatures and in such amounts as are considered
to be customary for similar office buildings in Boulder, Colorado,
(c) Routine maintenance and general upkeep of the Property;
(d) Routine janitorial services within the Premises and Common Areas of the
Building. Routine janitorial service within the Premises shall mean vacuuming
the carpet, emptying trash cans and light dusting of surface areas, not more
than three (3) times a week. If more service is required in the Premises, Tenant
will be responsible to immediately reimburse Landlord for any increased costs
incurred by Landlord in providing same;
(e) General window washing of all Building exterior glass, not more than
three (3) times per year on the outside or more than one (1) time per year on
the inside;
(f) Repairing and maintaining in a manner deemed appropriate by Landlord,
the roof, exterior walls, parking lot, and all other improvements of the
Property (excluding the Premises per Paragraph 9 herein); and
(g) Repair or replacement of all glass on the Property, excluding all glass
located inside the Premises, but including all exterior windows and any other
glass surrounding the Premises.
In accordance with Paragraph 5.3 herein, Tenant agrees to promptly
reimburse Landlord, as Additional Rent, for any and all costs and expenses
incurred by Landlord in providing the above. Tenant's proportional share is
EIGHT AND 83/100's PERCENT (8.83%).
The failure by Landlord to any extent to furnish any service, or the
interruption or termination of these defined services in whole or in part, or
any resulting damage Tenant may incur therefrom, shall not render Landlord
liable in any respect for any damages, actual or consequential, which may result
therefrom, not be construed as an eviction of Tenant, nor work an abatement of
Rent, nor relieve Tenant from the obligation to fulfill any covenant or
agreement hereof, unless the same shall have directly resulted from the gross
negligence or willful misconduct of the Landlord, its employees, agents or
contractors. Should any or the equipment or machinery used in the provision of
such services for any cause cease to function properly, Tenant shall have no
claim for offset or abatement of Rent or damages on account of an interruption
in service occasioned thereby or resulting therefrom. However, if interruption
of service should continue unabated for more than five (5) consecutive business
days after written notice to Landlord, Tenant may then elect to repair the
problem, at Tenant's cost and expense. If the repair is for areas outside of the
Premises, then Tenant may offset the charges for said repair, less Tenant's
proportional share of said expense, from the rent.
8. TENANT RESPONSIBILITY FOR UTILITY SERVICES
Tenant warrants that Tenant will not overload the electrical service,
heating or air conditioning systems, or any other utility service within the
Building and Premises. Tenant will not install any fixtures Or equipment which
exceeds either the rated capacities at design loads of the Premises and Building
and/or any fixtures or equipment which would tend to use more utilities (gas,
electricity, water, sewer, telephone, etc.) than what is typical for the use
specified in Paragraph 6 herein. This includes, but is not limited to, the
installation or dishwashers, showers, air conditioned computer rooms, special
lighting, an excessive number of computers, etc. Tenant is prohibited from using
any type of manufacturing equipment within the Building and Premises. Tenant
shall, within ten (10) days after receiving notice from Landlord, remove such
equipment to achieve compliance. Alternatively, upon receiving Landlord's prior
written approval, such fixtures or equipment may remain in the Premises,
provided however, Tenant shall pay for all costs of installation and maintenance
of transformers, wiring, air conditioning and other items required by Landlord,
in Landlord's discretion, plus pay for all increased utility charges and/or
other expenses as may be determined appropriate by Landlord.
9. TENANT MAINTENANCE, CARE AND REPAIR OF PREMISES
Except as otherwise expressly provided herein. Landlord shall not be
required to maintain or make any repairs to the Premises. Tenant agrees that
Tenant will be responsible, at Tenant's own cost and effort, to maintain and
make all repairs to the Premises, including, but not limited to:
(a) Keep and maintain the interior of the Premises, including without
limitation, plumbing, heating and air conditioning system, electrical systems,
telephone and cable services, carpet and other floor covering, walls, paint and
other wall coverings, glass, window coverings, ceilings, doors and door hardware
(including all entry doors into the Premises) in good condition and repair at
Tenant's cost and expense; and
(b) Replace light bulbs or ballasts burned out within the Premises.
Tenant further agrees at the end of the term to return the Premises to
Landlord in substantially as good condition as when received, except for usual
and ordinary wear and tear.
10. IMPROVEMENTS AND ALTERATIONS BY TENANT
Tenant agrees not to make or allow to be made any alterations to the
Premises, install any vending machines on the Premises, add to any electrical or
other utility service, change window or door coverings, or place signs anywhere
on the Property or in any windows or doors of the Premises, without first
obtaining written consent of Landlord in each such instance, which consent may
be given on such reasonable conditions as Landlord may elect. Prior to the
cutting of any holes in any exterior surface or prior to any work being
performed and/or any equipment being installed on the roof by Tenant, the
written approval of Landlord, which approval may be withheld in the exercise of
Landlord's sole discretion, must be obtained by Tenant. The Tenant shall not
contract for any work or service which might involve the employment of labor
incompatible with Landlord's employees or other tenants and their employees or
contractors doing work or performing services by or on behalf of the Landlord.
As a condition to Landlord granting approval, Landlord shall have the right to
require Tenant to furnish a bond or other security acceptable to Landlord
sufficient to insure completion of and payment for any such work to be so
performed. Any and all alterations to the Premises shall become the property of
Landlord upon termination of this Lease (except for movable equipment or
furniture owned by Tenant). Landlord may, nonetheless, require Tenant to remove
any and all fixtures, equipment and other improvement installed on the Premises
and thereafter to restore the Premises. In the event that Landlord so elects,
and Tenant fails to remove such improvements, Landlord may remove such
improvements at Tenant's cost, and Tenant shall pay Landlord on demand the cost
of restoring the Building Standard Improvements, as defined in Exhibit B, to the
Premises.
11. LIENS
Tenant will not permit any mechanics', materialmen's, laborers' or other
liens to be placed upon the Premises or any other part of the Property, and
nothing in this Lease shall be deemed or construed in any way as constituting
the consent or request of Landlord, express or implied, by inference or
otherwise, to any person for the performance of any labor or the furnishing of
any materials to the Premises, or any part thereof. nor as giving Tenant any
right, power, or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to any
mechanics', materialmen's, laborers' or other liens against the Premises or the
Property. In the event any such lien is attached to the Premises or Property,
then, in addition to any other right or remedy of Landlord, Landlord, may, but
shall not be obligated to, discharge the same. Any amount paid by Landlord for
any of the aforesaid purposes shall be paid by Tenant to Landlord on demand as
Rent.
12. BUILDING SIGNS AND GRAPHICS
Landlord shall provide and install, at Tenant's cost, all letters or
numerals on doors in the Premises and Tenant's name on the building directory(s)
by the main entrance(s) to the Building; all such letters and numerals shall be
in the standard graphics for the Building and no others shall be used or
permitted on the Premises or elsewhere without Landlord's prior written consent.
13. TENANT LIABILITY FOR OVERLOAD
Tenant shall be liable for the cost of any damage to the Premises or the
Property, including without limitation, floors, sidewalks and pavements, which
results from the movement of heavy articles. Tenant shall not unduly load or
overload the floors or any part of the Premises.
14. COMPLIANCE WITH LAWS
Tenant shall comply with all applicable covenants, conditions and
restrictions now or hereafter affecting the Premises, with all laws, ordinances,
rules, regulations, directives and requirements over the Premises or Tenant's
business, including, without limitation, those relating to health (including
restrictions on the use of any chemicals in the mechanical systems in the
Premises), safety, the Americans with Disabilities Act of 1990), noise,
environmental protection, waste disposal, water and air quality (including,
without limitation, the Clean Air Act), the use, storage and disposal of
hazardous materials ( in compliance with all environmental laws as defined in
paragraph 17, hereof), fire regulations of any governmental unit having
jurisdiction over the Premises and with the certificate of occupancy for the
Premises and shall not permit anything to be done on the Premise in violation
thereof. Tenant warrants that its business and all activities to be conducted or
performed in, on, or about the Premises shall comply with all laws. Upon written
demand, Tenant shall change, reduce, or discontinue any use of the Premises in
violation of the Laws and shall be responsible for all costs and expenses of any
fines levied or remedial or corrective actions necessary because of such
violations.
15. TENANTS USE OF HAZARDOUS WASTE
The Tenant covenants that it will not use or permit to be used any part of
the Premises or Property for the generation, treatment, storage or disposal of
Hazardous Materials without the written permission of Landlord, which permission
may be withheld in the exercise of Landlord's sole discretion. For the purposes
of this Lease, "Hazardous Materials" means any explosives, radioactive
materials, hazardous wastes, or hazardous substances, including, without
limitation, substances defined as "hazardous substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. 9601-9657); the Hazardous Materials Transportation Act of 1975 (49 U.S.C.
1801-1812); the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
6901-6987); or any other federal, state, or local statute, law, ordinance, code,
rule, regulation, order, or decree regulating, relating to, or imposing
liability or standards of conduct concerning hazardous materials, waste, or
substances now or at any time hereafter in effect (collectively, "Environmental
Laws"). In the event Landlord permits the generation, treatment, storage or
disposal of any such Hazardous Materials, then prior to the termination of this
Lease, Tenant shall remove all such wastes from the Premises and Property which
were generated by Tenant or its subtenants or assignees during the term of this
Lease. In addition, if so directed by any federal, state or local governmental
or regulatory body, Tenant shall remove such wastes from any adjacent property
upon which such wastes and hazardous substances generated by the Tenant during
the term of this Lease may be located. Tenant shall not be responsible for and
shall not be required to remove any such wastes and hazardous substances which
were not generated by Tenant. Tenant will deliver to the Landlord (i) copies of
any documents received from the United States Environmental Protection Agency
and/or any state, county or municipal environmental or health agency concerning
the Tenant's operations upon the Premises; and (ii) copies of any documents
submitted by the Tenant to the United States Environmental Protection Agency
and/or any state, county or municipal environmental or health agency concerning
its operations on the Premises. The terms of this section shall survive the
termination of this Lease.
16. LANDLORD CONTROL AND CARE OF COMMON AREAS
(a) All Common Areas, Service Areas and Exterior Areas of the Property
shall at all times be subject to the exclusive control and management of
Landlord. The Landlord reserves the right and authority to change the areas,
locations and arrangements and to restrict the use of any and all common
facilities or areas of the Property and to do such other acts in and to said
areas and improvements as the Landlord shall determine to be advisable in the
best interest of the Property.
(b) Except as otherwise provided, Landlord shall keep and maintain the
Common Areas, Service Areas and Exterior Areas, all of which the Premises are a
part of, in good repair and condition, and in a manner deemed appropriate by
Landlord. In accordance with Paragraph 5.3 herein, Tenant agrees to promptly
reimburse Landlord, as Additional Rent, for any and all costs and expenses
incurred by Landlord in providing the above. Tenants proportional share is EIGHT
AND 83/100's PERCENT (8.83%).
17. TENANT USE AND CARE OF PROPERTY
All receiving and all refuse removal shall be made only by way of the rear
and/or other service door provided therefore. In the event the Premises shall
have no such door, then these matters shall be handled in a manner satisfactory
to Landlord. No storage of any material outside of the Premises shall be allowed
unless first approved by Landlord in writing, and then in only such wells as are
designated by Landlord. Tenant shall not commit or suffer any waste in the
Premises or Property nor shall Tenant permit any nuisance to be maintained on
the Premises, or Property, or permit any disorderly conduct, noise, odors, or
other activity having a tendency to annoy or disturb any occupants of any part
of the Building of which the Premises are a part and/or an adjoining property.
Tenant further agrees to be responsible to repair or replace any damage
done to the Property, caused by Tenant or Tenant's agents, employees, invitees,
or visitors, and such repairs shall restore the damaged Property to as good a
condition as it was in prior to such damage, and shall be effected in compliance
with all applicable laws; provided, however, if Tenant fails to make such
repairs or replacements promptly, Landlord may, at its option, make repairs or
replacements and Tenant shall pay the cost thereof to Landlord on demand as
Rent.
18. TENANT ACCESS TO PREMISES
Landlord shall provide Tenant non-exclusive access to the Premises through
and across land and/or other improvements owned by Landlord. Landlord shall have
the right to designate, during the term of this Lease, all such nonexclusive
access and other common facilities of the land and/or improvements of which the
Premises are a part.
19. PARKING
Throughout the term of this Lease, Landlord shall provide a reasonably
hard-surfaced area for off-street parking for use of visitors of Tenant in
common with visitors of other occupants or other portions or the Building or
which the Premises are a part. Tenant shall park all vehicles of whatever type
used by Tenant and/or Tenant's employees only in those areas which are
designated by Landlord for this purpose, and Tenant accepts the responsibility
of seeing that Tenant's employees park only in such areas as so designated.
Tenant shall, within five days after receipt of written notice from Landlord,
furnish Landlord the automobile license numbers of Tenant's vehicles and any and
all vehicles assigned or belonging to Tenant's employees.
20. FUTURE LANDLORD IMPROVEMENTS
Landlord reserves the right at any time to make alterations or additions to
the Property and/or to build additions or other structures adjoining the
Building. Landlord also reserves the right to construct other buildings and/or
improvements in the immediate area of the Property and to make alterations or
additions thereto, all as Landlord shall determine. Easements for light and air
are not included in the leasing of the Premises to Tenant. Landlord further
reserves the exclusive right to the Property except as provided for in this
Lease. Landlord also reserves the right at any time to relocate, vary, and
adjust the size of any of the Property's parking areas, or other areas relating
to the land and/or improvements of which the Premises are a part, provided,
however, that all such changes shall be in compliance with the minimum
requirements of governmental authorities having jurisdiction over the Property.
21. RULES AND REGULATIONS FOR THE PROPERTY
Landlord reserves the right to adopt and promulgate rules and regulations
applicable to the Premises and the Property of which the Premises are a part and
from time to time to amend or supplement said rules or regulations. Notice of
such rules and regulations and amendments and supplements thereto, shall be
given to Tenant. and Tenant agrees to comply with and observe rules and
regulations and amendments and supplements thereto, provided, however, the same
shall apply uniformly to all tenants of the Property.
22. REAL PROPERTY TAXES - RESPONSIBILITIES
Tenant shall be responsible for EIGHT AND 83/100's PERCENT (8.83%) of the
general real property taxes and/or special assessments which are levied and
assessed against the Property each year during the term hereof. Tenant shall
promptly reimburse Landlord for said taxes and/or assessments in accordance with
Paragraph 5.3 herein. In the event the first and last lease years, as
hereinabove defined, are not calendar years, the liability of Tenant under the
terms hereof shall be prorated with Tenant being liable for only those number of
days during which this Lease was in effect.
23. PERSONAL PROPERTY TAXES-RESPONSIBILITIES
Tenant shall be responsible and pay for any and all taxes and/or
assessments levied and assessed against any furniture, fixtures, equipment, and
items of similar nature installed and/or located in or about the Premises by or
for Tenant.
24. PROPERTY INSURANCE-RESPONSIBILITIES
(a) The Landlord shall have and maintain in effect all times, fire,
extended coverage, vandalism, and malicious mischief insurance in such amounts
as shall be determined appropriate by Landlord to insure the Property. Tenant
shall be responsible for EIGHT AND 83/100'S PERCENT (8.83%) of the insurance
premium and shall Promptly reimburse Landlord for said premium in accordance
with Paragraph 5.3 herein. If necessary, the amount due hereunder shall be
prorated on the basis of that portion of the term of this Lease as to the term
of the Policy for which the charge hereunder has been made.
(b) Tenant shall maintain at its expense, in an amount equal to full
replacement cost, fire and extended coverage insurance on all of its personal
property, including removable trade Fixtures, located in the Premises and in
such additional amounts as are required to meet Tenant's obligations pursuant to
Paragraph 27 hereof. If Tenant uses, in the Premises, any kind of steam or other
high pressure boiler or other apparatus which presents any possibility of damage
to the Premises or Property, or to the life or limb of persons within such
premises, Tenant agrees to carry appropriate boiler insurance in any amount
satisfactory to Landlord to indemnify against any loss resulting from any
explosion or other damage or liability.
(c) Tenant shall provide Landlord with current certificates of insurance
evidencing Tenant's compliance with this paragraph 24 and Paragraph 25 and
naming Landlord as an additional insured or loss payee, as the case may be.
Tenant shall obtain the agreement of Tenant's insurer to notify Landlord that a
policy is due to expire at least thirty (30) days prior to such expiration. Such
insurance may, at Tenant's election be carried under any general blanket
coverage of Tenant.
25. LIABILITY INSURANCE-RESPONSIBILITIES
(a) Tenant shall, at its expense, maintain a policy or policies of
commercial general liability insurance with respect to its activities in the
Premises and Property, with the premiums thereon fully paid on or before the due
date and issued by and binding upon an insurance company, which insurance
company shall have a minimum rating of "A" per the latest rating publication of
Property and Casualty Insurance by the A M Best Company and who are lawfully
doing business in the State of Colorado. Said insurance shall afford minimum
protection of not less than $1,000,000 combined single limit coverage of bodily
injury, property damage or combination thereof.
(b) Landlord shall not be required to maintain insurance against thefts
within the Premises.
(c) Landlord shall maintain liability insurance with respect to the
Properly in the form of one or more policies. such insurance to afford minimum
protection of not less than $1,000,000 combined single limit coverage of bodily
injury, property damage or combination thereof. Tenant shall be responsible for
EIGHT AND 83/100'S PERCENT (8.83%) of the insurance premium and shall promptly
reimburse Landlord for said premium in accordance with Paragraph 5.3 herein. If
necessary, the amount due hereunder shall be prorated on the basis of that
portion of the term of this Lease as to the term of the policy for which the
charge hereunder has been made.
26. WAIVER OF SUBROGATION RIGHTS
Except as otherwise provided in Paragraph 27(g), Landlord and Tenant each
hereby waives on behalf of itself and its insurers (none of which shall ever be
assigned any such claim or be entitled thereto due to subrogation or otherwise)
and all rights of recovery, claim action, or cause of action, against the other,
its agents, officers, or employees, for any loss or damage that may occur to the
Premises, or any improvements thereto, or the Property or any improvements
thereto, or any personal property of such party therein, by reason of fire, the
elements, or any other cause or causes which are insured against under the terms
of the standard fire and extended coverage insurance policies referred to in
Paragraph 24 and 25 hereof, regardless of whether such insurance is actually
maintained and regardless of the cause or origin, including negligence of the
other party hereto, its agents, officers, or employees.
27. DAMAGE TO PREMISES
(a) If the Premises or any part thereof shall be damaged by flood, fire or
other casualty, Tenant shall give prompt written notice thereof to Landlord.
(b) In the event the Premises and/or the Building of which the Premises are
a part shall be totally destroyed by fire or other casualty or be so badly
damaged that, in the sole opinion of Landlord, it is not feasible to repair or
rebuild same (whether or not the Premises shall have been damaged by the
casualty affecting the Building), or in the event any mortgagee of Landlord's
should require that the insurance proceeds, or any portion thereof, payable as a
result of a casualty be applied to the payment of the mortgage debt, or in the
event of any material uninsured loss to the Property or the Premises, Landlord
shall have the right to terminate this Lease by notifying Tenant, in writing, of
such termination within the later to occur of ninety (90) days after the date of
receipt by Landlord of Tenant's notice or within ninety (90) days after the date
of such casualty. Landlord shall have no liability to Tenant for the Landlord's
termination of the Lease in accordance with the provisions hereof, or for any
inconvenience or annoyance to Tenant or injury to the business or property of
Tenant resulting in any way from the occurrence of a casualty or from the repair
of any damage or destruction related thereto.
(c) If Landlord does not elect to terminate this Lease, Landlord shall
proceed with reasonable diligence to restore, first, the Building and all of its
Common and Service Areas and, second, the Premises to substantially the same
condition they were in immediately prior to the casualty occurrence. Landlord's
obligation to restore the Premises shall not exceed the scope of the work
required to be done by Landlord in originally constructing the Premises for
Tenant, nor shall Landlord be required to spend for such work an amount in
excess of the insurance proceeds actually received by Landlord as a result of
the casualty. Tenant agrees to resume occupancy upon Substantial Completion of
the reconstruction or, the improvements, Substantial Completion being defined as
the occurrence of the earlier of one of the following:
(i) on the day the Tenant re-occupies the Premises; or
(ii) five (5) days after Tenant has been notified by
Landlord, in writing, that the Premises are
complete and have been approved for re-occupancy
by the licensing authority of the City or
Boulder. Prior to re-occupancy, Tenant will have
inspected and accepted the Premises as to its
conformity with the Reconstruction Plans, which
acceptance will not be unreasonably withheld. The
Premises shall not be deemed unacceptable if
only minor or insubstantial details of
construction, decoration, mechanical
adjustments, or any work contracted for by Tenant
remains to be done.
(d) If the Premises shall be partially damaged by fire or other casualty
and, except if caused by Tenant's negligence. said Premises are not rendered
untenable thereby, as determined by Landlord, a pro rata reduction of the Rent
shall be allowed for the unoccupied portion of the Premises until Substantial
Completion of the reconstruction.
(e) If the Premises are rendered wholly untenable by fire or other
casualty, except if caused by Tenant's negligence, Tenant may, at its election,
with written notice being given to Landlord within ninety (90) days after the
date of such casualty, terminate this Lease as of the day of damage.
(f) If the Premises are tendered untenable but Tenant elects not to
terminate the Lease, except if caused by Tenant's negligence, the Rent shall
abate in proportion to the loss of use of the Premises by Tenant until
Substantial Completion.
(g) If the Premises or any portion of the Property be damaged by fire or
other casualty resulting from the fault or negligence of Tenant or any of
Tenant's agents, employees, licensees, or invitees, the Rent hereunder shall not
be diminished, and regardless of whether this Lease is terminated, Tenant shall
be liable to Landlord for the cost of the repair and restoration of the Premises
and all other parts of the Property, to the extent such cost and expenses exceed
the amount of insurance proceeds actually received by Landlord, and Landlord
shall retain all other rights and remedies that Landlord may have at law, in
equity or pursuant to the Lease.
(h) Anything in this Lease to the contrary notwithstanding, if more than
fifteen percent (15%) of the Premises are damaged by fire or other casualty or
if all or any portion of the Premises is damaged by fire or other casualty
during the last year of the term (excluding any renewal terms, unless such fire
or casualty occurs during a renewal term) of this Lease, then Landlord may, at
its option, terminate this Lease by notifying Tenant in writing of such
termination within the later to occur of ninety (90) days after the date of
receipt by Landlord of Tenant's notice or within ninety (90) days after the date
of such casualty.
(i) In any event, proceeds from any insurance loss shall be paid to
Landlord for the repair and replacement of improvements erected upon the
Premises and for any unpaid rents due under the within Lease. In any event,
Landlord shall not be liable to Tenant in any manner whatsoever for any loss
sustained as a result of any damage to the Premises.
28. ENTRY BY LANDLORD
Landlord, and/or Landlord's agents and employees, shall have the right to
enter the Premises at all times during regular business hours and at all times
during emergencies, to examine the Premises, to show the Premises to lenders,
lenders contractors and to prospective purchasers of the Property, to make such
repairs, alterations, improvements, or additions as Landlord may deem necessary
or desirable, and Landlord shall be allowed to take all materials into and upon
said premises that may be required therefore without the same constituting an
eviction of Tenant in whole or in part, and the Rent reserved shall in no way
abate while such repairs, alterations, improvements, or additions are being
made, by reason of loss or interruption of business of Tenant or otherwise.
During the six (6) months prior to the expiration of the term of this Lease or
any renewal thereof, Landlord may exhibit the Premises to prospective tenants
and/or purchasers, and may place upon the Premises the usual notices indicating
the Premises are for lease and/or sale.
Landlord shall use reasonable efforts to not materially interfere with
Tenant's business.
29. TENANT DEFAULT / REMEDIES OF LANDLORD
29.1 EVENTS OF DEFAULT.
The following events are referred to, collectively, as "Events of Default"
or, individually, as an "Event of Default":
(a) Tenant fails to pay by the 10th of any month any Rent or any other sum
due hereunder;
(b) Tenant breaches any other agreements, terms, covenants or conditions
which this Lease requires Tenant to perform, other than payment of Rent, and
such breach continues for a period of thirty (30) days after written notice from
Landlord to Tenant or, if such breach cannot be cured reasonably within such
30-day period, if Tenant fails to diligently commence to cure said breach within
thirty (30) days after written notice from Landlord and to complete such cure
within a reasonable time thereafter;
(c) Tenant vacates or abandons the Premises for more than ten (10)
consecutive business days;
(d) This Lease or the Premises or any part of the Premises are taken upon
execution or by other process of law directed against Tenant, or are taken upon
or subject to any attachment by any creditor of Tenant or claimant against
Tenant, and said attachment is not discharged or disposed of within fifteen (15)
days after its levy;
(e) Tenant Files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United States or
under any insolvency act of any state, or admits the material allegations of any
such petition by answer or otherwise, or is dissolved or makes an assignment for
the benefit of creditors;
(f) Involuntary proceedings under any such bankruptcy law or insolvency act
or for the dissolution of Tenant are instituted against Tenant, or a receiver or
trustee is appointed for all or substantially all of the property of Tenant, and
such proceeding is not dismissed or such receivership or trusteeship vacated
within sixty (60) days after such institution or appointment; or
(g) Tenant fails to occupy the Premises in accordance with the terms set
forth in Paragraph 3.1.
29.2 LANDLORD'S REMEDIES.
If any one or more Events of Default set forth in Paragraph 29.1 occurs
then Landlord has the right, at its election:
(a) To terminate this Lease in which event Tenant shall immediately
surrender possession of the Premises to Landlord, or
(b) Without terminating this Lease, and without terminating Tenant's
liability for payment of Rent or any other obligation hereunder, to terminate
Tenant's right to occupy and possess the Premises by reentering and taking
possession of the Premises or any part of the Premises, repossess the same,
expel Tenant and those claiming through or under Tenant, and remove the effects
of both or either, using such force for such purposes as many be necessary,
without being liable for prosecution, without being deemed guilty of any manner
of trespass, and without prejudice to any remedies for arrears of Rent or other
amounts payable under this Lease or as a result of any preceding breach of
covenants or conditions; or
(c) Without further demand or notice to cure any Event of Default and to
charge Tenant for the cost of effecting, such cure, including, without
limitation, reasonable attorneys' fees and interest on the amount so advanced at
the rate set forth in Paragraph 31, provided that Landlord will have no
obligation to cure any such Event of Default of Tenant.
No such reentry or taking possession of the Premises by Landlord, pursuant to
this paragraph 29.2, will be construed as an election on Landlord's part to
terminate this Lease unless a written notice of such intention in given to
Tenant. No written notice from Landlord under this Paragraph 29.2 or under a
forcible or unlawful entry and detainer statute or similar law will constitute
an election by Landlord to terminate this Lease unless such notice specifically
so states.
29.3 CERTAIN DAMAGES.
In the event that Landlord does not elect to terminate this Lease as
permitted in Paragraph 29.2(a), but on the contrary, elects to take possession
as provided in Paragraph 29.2(b) and terminate Tenant's right to possession of
the Premises, Tenant will pay to Landlord, at Landlord's election, damages based
upon one of the following calculations:
(a) CONTINUING RENT. The sum of the following amounts:
(i) Monthly Rent and other sums as provided in this
Lease, which would be payable under this Lease if
such repossession had not occurred, less
(ii) the net proceeds, if any, of any reletting of the
Premises after deduction all of Landlord's
reasonable expenses in connection with such
reletting, including, without limitation, all
repossession costs, brokerage commissions,
attorneys' fees, expenses of employees,
alteration and repair costs, and expenses of
preparation for such reletting.
If, in connection with any reletting, the new lease term extends beyond the
existing Term, or the premises covered by new lease includes other premises not
part of the Premises, a fair apportionment of the rent received from such
reletting and the expenses incurred in connection with such reletting as
provided in this paragraph will be made in determining the net proceeds from
such reletting, and any rent concessions will be equally apportioned over the
term of the new lease. Tenant will pay such rent and other sums to Landlord
monthly on the day on which the Rent would have been payable under this Lease if
possession had not been retaken and Landlord will be entitled to receive such
rent and other sums from Tenant on each such day.
(b) ACCELERATED RENT. An amount equal to Rent and other amounts which would
have been owing by Tenant for the balance of the Term less the net proceeds, if
any, of any reletting of the Premises by Landlord subsequent to such
termination, after deducting all of Landlord's expenses in connection with such
reletting, including, without limitation, (the expenses enumerated in Paragraph
29.3(a), which amounts shall be the total of the following:
(i) The amount, at the time the award of damages is
calculated, of the unpaid Rent which had been earned
at the time Tenant's right to possession was
terminated together with interest at the rate set
forth in Paragraph 31 herein;
(ii) The amount, at the time the award of damages is
calculated, of the unpaid Rent which accrues
after the time Tenant's right to possession was
terminated to the date of such award, together
with interest at the rate set forth in Paragraph
31 herein, less the amount of such rental loss
that Tenant proves could have been reasonably
avoided;
(iii) The amount, at the time the award of damages
is calculated, of the unpaid Rent that will
accrue after such date until the end of the term
of this Lease in effect at the time Tenant's
right to possession was terminated, less the
amount of such rental loss that Tenant proves
could have been reasonably avoided, which amount
shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of
Kansas City, Missouri, at the time of award plus
one (1%) percent; and
(iv) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's
failure to perform its obligations under this Lease
or which in the ordinary course of things would be
likely to result therefrom.
29.4 MISCELLANEOUS REMEDIES.
Each right and remedy provided for in this Lease or existing at law or in
equity or by statute or otherwise, and the exercise or beginning of the
exercises by Landlord of any or all of such rights and remedies will not
preclude the simultaneous or later exercise by Landlord of any or all other of
such rights or remedies.
No payment by Tenant, or acceptance by Landlord, of a lesser amount than
shall be due from Tenant from Landlord shall be treated otherwise than a payment
on account. The acceptance by Landlord of a check for a lesser amount with an
endorsement or statement thereon, or upon any letter accompanying such check,
that such lesser amount is payment in full, shall be given no effect, and
Landlord may accept such check without prejudice to any other rights or remedies
which Landlord may have against Tenant.
No payment of money by Tenant to Landlord after (the termination of this
Lease in any manner, or after the giving of any notice (other than a demand for
the payment of money) by Landlord to Tenant, shall reinstate, continue or extend
the term of this Lease or affect any notice given to Tenant prior to the payment
of such money, it being agreed that after the commencement of a suit, Landlord
may receive and collect any sums of Rent due, and the payment if such sums of
money whether as Rent or otherwise, shall not waive said notice, or in any
manner affect any pending suit or judgment theretofore or subsequently obtained.
In any event, and regardless of whether a suit at law or in equity is
commenced, and in addition to any sums due hereunder. Tenant shall be obligated
to pay to Landlord all reasonable costs and expenses, including without
limitation all court costs and reasonable attorney's fees, suffered or incurred
as a result of any breach of Tenant's obligations hereunder.
In the event of such default by Tenant, and regardless of whether the
Premises shall be relet or repossessed by Landlord, any fixtures, additions,
furniture, and the like, then on the Premises may be retained by Landlord. In
the event Tenant is in default under the terms hereof and, at the sole
determination of Landlord, has abandoned the Premises, Landlord shall have the
right to remove all of the Tenant's property from the Premises and dispose of
said property in such manner as determined best by Landlord, all at the cost and
expense of Tenant and without liability of Landlord for the actions so taken.
No delay or omission of Landlord to exercise any right or power shall be
considered to be a waiver of any such default or acquiescence thereof. The
acceptance of Rent by Landlord shall not be deemed to be a waiver of any breach
of any of the covenants herein contained or of any of the rights of Landlord to
any remedies herein given.
30. NO IMPLIED WAIVER
The failure of Landlord to insist at any time upon the strict performance
of any covenant or agreement herein or to exercise any option, right, power or
remedy contained in the Lease shall not be construed as a waiver or a
relinquishment thereof for the future. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly installment of Rent due under this
Lease shall be deemed to be other than on account of the earliest Rent due
hereunder, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or pursue any other remedy that may be
provided for in this Lease.
31. INTEREST ON PAST DUE OBLIGATIONS
Any amount due to Landlord not paid when due shall bear interest at One and
one-half Percent (1.5%) per month from due date until paid. Payment of such
interest shall not excuse or cure any default by Tenant under this Lease.
32. LATE CHARGES
The Landlord shall have the right to collect from Tenant as additional
Rent, in addition to any amounts due under Paragraph 7 above, a monthly
collection service charge for any payments due to Landlord hereunder which is
delinquent ten (10) days or longer, said charge being Twenty-Five and no/100's
Dollars ($25.00) or Three Percent (3%) of said payment, whichever sum shall be
greater.
33. LEGAL PROCEEDINGS
In the event of any proceeding at law or in equity wherein either party,
without being in default as to its covenants under the terms hereof, shall be
made a party to any litigation by reason of either party's interest in the
Premises or, in the event either party shall be required to commence any legal
proceedings relating to Tenant's occupancy of the Premises thereof and/or
Tenant's relation thereto, the prevailing party shall be allowed to collect all
costs and expenses incurred by the prevailing party, including a reasonable
attorney's fee. Further, in the event Landlord engages the services of an
attorney to enforce Landlord's rights under this Lease, Tenant shall pay, as
Additional Rent, such reasonable attorneys fees incurred by Landlord, whether or
not any legal proceeding is actually commenced.
Landlord and Tenant by this paragraph 33 waive trial by Jury in any action,
proceeding or counterclaim brought by either of the parties to this Lease
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Premise, or any other claims (except claims for personal
injury or property damage).
34. HOLD HARMLESS
Each party shall indemnify and hold the other party harmless from and
against any and all claims, losses, expenses, costs, judgments, and/or demands
arising from the conduct of the other party on the Premises or and/or on account
of any operation or action by the other party and/or from and against all claims
arising from any breach or default on the part of the other party or any act of
negligence of the other party, its agents, contractors, servants, employees,
licensees, or invitees, or any accident, injury, or death of any person or
damage to any property in or about the Premises.
35. LANDLORD LIABILITY
In no event shall Landlord be liable to Tenant either for (i) any loss or
damage that may be occasioned by or through the acts or omissions of other
tenants of the Property or of any other persons whomsoever, unless the same
shall have directly resulted from the gross negligence or willful misconduct of
the Landlord, its employees, agents or contractors, or (ii) any consequential
damages regardless of causation. With respect to tort claims against Landlord,
Landlord shall not be liable to Tenant or to any other person for any act or
omission of Landlord or of its agents or employees, negligent or otherwise,
except for actual damages or costs incurred as a direct result of and caused
directly by the willful misconduct or gross negligence of Landlord (or of
Landlord's agents or employees) in circumstances in which Landlord is deemed to
be liable at law for such acts or omissions. Nothing contained in the
immediately preceding sentence shall ever be construed as creating liability in
excess of that existing at law or, in any event, increasing the liability of
Landlord, under any theory or cause of action, however denominated, from that
existing at law. Further, the liability of Landlord to Tenant for (a) any
default by Landlord under the terms of this Lease, (b) for any tort liability of
Landlord to Tenant, or (c) in any other circumstance in which Landlord is
judicially determined to have some liability to Tenant, for whatever reason,
shall, in each such instance, be limited to the interest of Landlord in the
Property and Tenant agrees to look solely to Landlord's interest in the Property
for the recovery of any judgment from the Landlord, it being intended that
Landlord shall never be personally liable for any judgment or deficiency.
Further, Landlord shall not be liable to Tenant for any loss or damage to
any Property Or person occasioned by theft, fire, act of God, windstorm, flood
or other natural disasters, public enemy, injunction, riot, strike,
insurrection, war, court order, requisition, or order of governmental body or
authority or by any other causes, except if specifically provided for in this
Lease. Nor shall Landlord be liable for any damage or inconvenience which may
arise through (i) the leasing of other space within the Property to whomsoever
Landlord chooses for whatever use is allowed by Landlord, so long as the use is
legal, or (ii) repair or alteration of any part of the Property or Premises or
to the construction of leasehold improvements for other tenants in the Property.
In the event of any alleged default in the obligation of Landlord under
this Lease, Tenant will deliver to Landlord notice of such default and Landlord
will have thirty (30) days following receipt of such notice to cute such alleged
default or, in the event the alleged default cannot reasonable be cured within a
thirty-day period, to commence action and proceed diligently to cure such
alleged default.
36. GOVERNMENTAL ACQUISITION OF PROPERTY
In the event the Premises, or any part thereof, be taken under power of
eminent domain by any public or quasi-public authority or sold in lieu of
condemnation, the rights and duties of the parties hereto with respect to this
Lease and to the aggregate award for such taking shall be as follows:
(a) If the entire Premises, or any part thereof, be taken, this Lease shall
terminate and expire as of the date of such taking, and Tenant thereupon shall
be released from any liability thereafter accruing hereunder, and the award
shall be received by Landlord.
(b) If only part of the Premises be taken and a part remaining be of such
shape or size as to prevent its being reasonably used by Tenant for the purpose
to which the Premises were put at the time of such taking, this Lease shall
terminate with the same effect as the entire taking, and the award shall be
received by Landlord only.
(c) If only a part of the Premises be taken and a part remaining be or such
size and shape as to permit its being reasonably used by Tenant for the purpose
to which the Premises were put at the time of such taking, this Lease shall
continue in full force and effect as to the said remaining portion, but the
rental shall be pro rata reduced and the award shall be received by the Landlord
only.
(d) The taking of all or any portion of the Premises noted herein shall not
be considered as a breach of this Lease by Landlord, nor give rise to any claims
by Tenant for damages or compensation from Landlord. In any event, Tenant shall
in no manner be construed to have any claim to any portion of any award made to
Landlord as a result of any partial or entire taking or sale under threat of
condemnation, the Tenant's sole right being limited to a separate claim against
the governmental entity for the value of any alleged improvements taken or sold
as a result of said condemnation.
37. TENANT SUBORDINATION TO LENDERS
Tenant agrees that its Lease rights will be subordinate to those of any
lending institutions making loan upon the Property of which the Premises are a
part. Tenant further agrees to sign all reasonable documents reflecting this
subordination when and if requested by the Landlord and/or Landlord's lender. In
that regard, Tenant further agrees to execute such documents having the effect
of amending the within Lease Agreement as shall be reasonably required by any
lender or lenders of Landlord.
38. TRANSFERS BY LANDLORD
Landlord shall have the right to transfer and assign, in whole or in part,
all its; rights and obligations hereunder and in the Property referred to
herein, and in such event and upon such transfer Landlord shall be released from
any further obligations hereunder, and Tenant agrees to look solely to such
successor in interest of Landlord for the performance of such obligations.
39. TENANT CERTIFICATION OF LEASE EFFECTIVENESS
Tenant shall, at any time on five (5) days prior written notice by
Landlord, execute, acknowledge, and deliver to Landlord a written statement
certifying that this Lease continues unmodified and in full force and effect (or
if there have been modifications, that this Lease continues in full force and
effect as modified and stating the modifications) and the dates to which the
rent and the additional rent have been paid and stating whether Landlord is in
default in performing any covenant of this Lease, and, should Landlord be
alleged to be in default, specifying each and every such default, it being
intended that such statement delivered pursuant to this paragraph may be relied
on by Landlord or any prospective purchaser or mortgagee of the fee or any
assignee of any mortgages of the fee of the Premises.
Tenant's failure to execute and deliver to Landlord the above described
certification within the time specified shall be deemed a breach of this Lease
Agreement.
40. CONTROLLING LAW
This Lease, and all terms hereunder, shall be construed consistent with the
laws of the State of Colorado. Any dispute resulting in litigation hereunder
shall be resolved in court proceedings instituted in the State of Colorado and
County of Boulder and in no other jurisdiction.
41. BINDING UPON SUCCESSORS
The covenants and agreements herein contained shall bind and inure to the
benefit of Landlord and Tenant and their respective successors. This Lease may
be signed by parties in duplicate, each of which shall be a complete and
effective original Lease.
42. PARTIAL INVALIDITY
If any term or condition of this Lease or application thereof to any person
or circumstances shall, to any extent, be invalid or unenforceable the remainder
of the Lease or the application of such term, covenant, or condition to persons
and circumstances other than those to which it has been held invalid or
unenforceable, shall not be affected thereby, and each term, covenant and
condition of this Lease shall be valid and shall be enforced to the fullest
extent permitted by law.
43. MODIFICATION OR EXTENSIONS
No modification or extension of this Lease shall be binding unless in
writing, signed by the parties hereto and endorsed hereon or attached hereto.
44. MEMORANDUM OF LEASE - RECORDING
Either party to this Lease may record this Lease or a Memorandum of Lease
in the records of the office of the Clerk and Recorder of the County of Boulder,
State of Colorado.
45. PEACEFUL ENJOYMENT
Landlord covenants it has good right to lease the Premises in the manner
described herein and that Tenant shall peaceably and quietly have, hold, occupy,
and enjoy the Premises during the terms of the Lease, provided that Tenant pays
the Rent to be paid by Tenant and performs all of Tenant's covenants and
agreement, herein contained.
46. CERTAIN RIGHTS RESERVED TO THE LANDLORD
The Landlord reserves the following rights:
(a) To name the Building and to change the name and street address of the
Building at any time, without responsibility to Tenant for any advertising,
printed materials or any other items of expense incurred by Tenant in regard to
a prior Building name or street address.
(b) To designate all sources furnishing vending machines, mobile vending or
catering services, and like services used on the Premises or in the Building.
(c) To constantly have pass keys to the Premises.
(d) To establish such rules and regulations as deemed appropriate by
Landlord to maintain quality of interior air inside the Building, including if
necessary, the banning of smoking inside the Building.
47. MISCELLANEOUS
All marginal notations and paragraph headings are for the purpose of
reference and shall not effect the meaning and intent of the terms hereof.
Throughout this Lease, wherever the words "Landlord" and "Tenant" are used, they
shall include the singular, plural, persons both male and female, companies,
partnerships, and corporations, and in reading said Lease, the necessary
grammatical changes required to make the provisions hereof mean and apply as
aforesaid shall be made in the same manner as through originally included in
said Lease.
This Lease may be executed in any number of counterparts, all of which are
deemed originals and all of which shall constitute one and the same agreement;
provided, however, it shall only be necessary to produce one copy of such lease
as proof.
The submission of this Lease for examination does not constitute a
reservation of or option for the Premises and this Lease becomes effective as a
Lease only upon execution and delivery thereof by Landlord and Tenant.
48. PROCEDURE FOR NOTICES
All notices, demands, and requests which may or are required to be given by
either party to the other shall be in writing and properly given if delivered to
Tenant or any employee of Tenant or sent to Tenant by United States registered
mail, return receipt requested, properly stamped, and addressed:
MARYLAND NATIONAL MORTGAGE CORP.,
111 Market Place, Suite 700
Baltimore, MD 21202
Attn: Ronald L Basteck
Vice President, Administration
with a copy to:
FIRST TENNESSEE NATIONAL CORP.
P.O. Box 84
Memphis, TN 38101
Attn: Corporate Real Estate Division
or at any such other place as Tenant may from time to time designate in a
written notice to Landlord; and such as are to be given to Landlord shall be
deemed to have been properly given if personally served on Landlord or if sent
to Landlord, United States registered mail, return receipt requested, properly
stamped and addressed:
Eastpark Associates
P.O. Box 190
Boulder Colorado 80306
Attn: Bill Arnold
or at such other place as Landlord may from time to time designate in written
notice to Tenant. Any notice given by mailing shall be effective as of the date
of mailing as shown by the receipt given therefore.
49. ASSIGNMENT OR SUBLETTING
Tenant shall not assign this Lease nor any interest herein, either
voluntarily or involuntarily by operation of law, or sublease the Premises or
any right or privilege connected therewith, or allow any other person except
agents and employees of Tenant to occupy the Premises or any part thereof
without first obtaining the written consent of Landlord, which consent may be
withheld by Landlord in the exercise of Landlord's reasonable discretion. For
the purposes of this Paragraph, a merger, consolidation, sale of substantially
all of the stock of Tenant is deemed to be an assignment requiring the consent
of Landlord. However, consent shall not be withheld if the assignee is of the
same, or better, financial condition as Tenant or if Tenant remains liable under
the Lease. Any unauthorized assignment, sublease, or license to occupy by the
Tenant shall be void and shall, at the option of Landlord, be deemed a default
hereunder. Any consent to assignment or subletting given by Landlord shall not
constitute a waiver of the necessity for such consent to any subsequent
assignment or subletting. Notwithstanding any such assignment or sublease
hereof, Tenant shall be fully liable under this Lease and shall not be released
from performing its terms, covenants, and conditions.
50. GUARANTEE AND FINANCIAL STATEMENTS
A current financial statement of Tenant and any parties so guaranteeing
this Lease shall be provided to Landlord prior to execution hereof and annually
thereafter, if so requested.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
hereof.
TENANT: LANDLORD:
MARYLAND NATIONAL MORTGAGE CORP., EASTPARK, a General Partnership
a Maryland Corporation
By:/S/Maryland National Mortgage Corporation By: /S/ WILLIAM G. ARNOLD, III
William G. Arnold, III
General Partner
Exhibit 10.30
LEASE AGREEMENT
FOR
OFFICE FACILITIES
TABLE OF CONTENTS
Paragraph Page
Basic Lease Information ii
1. The Premises and the Term 1
2. Rental 1
3. Security Deposit 2
4. Possession 2
5. Use 2
6. Acceptance of the Premises 2
7. Tenant's Care and Covenants 2
8. Hours of Operation of the Building 3
9. Services 3
10. Destruction or Damage to the Premises 3
11. Default by Tenant - Landlord's Remedies 4
12. Acceleration of Rentals 4
13. Assignment and Subletting 5
14. Condemnation 5
15. Inspections 5
16. Subordination 5
17. Indemnity and Hold Harmless 6
18. Tenant's Insurance and Waiver of Subrogation 6
19. Remedies Cumulative 6
20. Holding Over 6
21. Entire Agreement - No Waiver 6
22. Headings 6
23. Notices 6
24. Heirs and Assigns - Parties 6
25. Attorney's Fees 6
26. Alterations Required by Law 7
27. Time of Essence 7
28. Standard Tenant Allowance 7
29. Parking Arrangements 7
30. Rules and Regulations 7
31. Right to Relocate 7
32. Rights Reserved to Landlord 7
33. Governmental Orders 8
34. Severability 8
35. Arbitration 8
36. Brokerage Commission 8
37. Abandonment 8
38. Corporate Authority 8
39. Estoppel Certificates 8
40. Counterparts 9
Execution and Witness Page 9
Exhibit "A" Floor Plan
Exhibit "B" Standard Tenant Allowance
Exhibit "C" Special Stipulations (attached and acknowledged where required)
Exhibit "D" Definition of Operating Expenses
Exhibit "E" Guaranty of Lease
<PAGE>
BASIC LEASE INFORMATION
LANDLORD: Laing Palisades, L.L.C., a Georgia limited liability company
ADDRESS OF LANDLORD: 5901-B Peachtree Dunwoody Road, Suite 555
Atlanta, GA 30328
c/o Laing Properties. Inc.
CONTACT: Ms. Nancy Ziegler TELEPHONE: 770-551-3400
TENANT: Direct Mortgage Partners, Inc., a
corporation of the State of Delaware d/b/a
Bankers
Direct Mortgage
ADDRESS OF TENANT: 5901-B Peachtree Dunwoody Road, Suite 375,
Atlanta, GA 30328
CONTACT: TELEPHONE:
Paragraph 3
SECURITY DEPOSIT: Seven thousand four hundred sixty-three and
85/100 ($7,463.85) Dollars
Paragraph 5
USE: General office APPROXIMATE NO. OF EMPLOYEES:
Paragraph 29
PARKING SPACE REQUIREMENT: 18
Paragraph 36
BROKER REPRESENTING LANDLORD: See Special Stipulation #41
BROKER REPRESENTING TENANT: See Special Stipulation #41
THE FOREGOING BASIC LEASE INFORMATION IS HEREBY INCORPORATED INTO AND MADE A
PART OF THIS LEASE. EACH REFERENCE IN THIS LEASE TO ANY OF THE BASIC LEASE
INFORMATION SHALL MEAN THE RESPECTIVE INFORMATION HEREINABOVE SET FORTH AND
SHALL BE CONSTRUED TO INCORPORATE ALL OF THE TERMS PROVIDED UNDER THE PARTICULAR
LEASE PARAGRAPH PERTAINING TO SUCH INFORMATION. IN THE EVENT OF ANY CONFLICT
BETWEEN ANY BASIC LEASE INFORMATION AND THE LEASE, THE LATTER SHALL CONTROL.
Acknowledgment by Tenant: Acknowledgment by Landlord:
<PAGE>
LEASE AGREEMENT
FOR
OFFICE FACILITIES
THIS LEASE is made this 20TH day of October, 1997, between Laing Palisades,
L.L.C., a Georgia limited liability company, (herein called "Landlord") and
Direct Mortgage Partners, Inc., d/b/a/ Bankers Direct Mortgage, a corporation of
the State of Delaware (herein called "Tenant").
1. THE PREMISES AND THE TERM
Landlord hereby leases to Tenant, and Tenant hereby rents and leases from
Landlord the following described space (herein called the "Premises")
Project: Palisades Building: B
5901 Peachtree
Address: Dunwoody Road Floor: Third (3rd)
City: Atlanta Suite: 375
County: Fulton Rentable Square Feet: 4,535
State: Georgia
Premises are more particularly shown as outlined on the floor plan attached
hereto as Exhibit "A" and hereby made a part hereof, and are leased for a term
to commence on the 1st day of November, 1997 and end at midnight at the end of
the 31st day of January, 2001 (such period being herein called the "Term").
2. RENTAL
(a) or the purposes of this Lease:
(i) the term "Tenant's Share" means 3.919% which percentage was determined
by dividing 4,535, the rentable square feet in the Premises, by 115,732 square
feet, the total rentable square feet in the Building.
DELETED TEXT NOT SHOWN.
Page 1i of the Lease between Laing Palisades, L.L.C., a Georgia limited
liability company, and Direct Mortgage Partners, Inc., a corporation of the
State of Delaware, d/b/a Bankers Direct Mortgage, dated October 20, 1997.
Paragraph 2 (a) (ii) through (g) (vii) of the Lease is deleted in its
entirety and replaced with the following language:
A. Subject to the provisions of this Paragraph, from November 1, 1997
through January 31, 2001, Tenant shall pay to Landlord at its offices in
Atlanta, Georgia, or at such other place or to such other person or persons as
Landlord may from time to time designate in writing, without demand, deduction
or set-off, rental payable in accordance with the following schedule in equal
monthly installments in advance on the first day of each calendar month during
the Term (such monthly rental installments being hereinafter referred to as
"Monthly Rental"):
Lease Months Monthly Rental Annualized Rental
11/1/97 - 1/31/98 $5,111.96 $61,343.52
2/1/98 - 1/31/99 $7,463.85 $89,566.20
2/1/99 - 1/31/00 $7,687.77 $92,253.24
2/1/00 - 1/31/01 $7,918.40 $95,020.80
If the Term begins on other than the first day of the calendar month, the next
installment of Monthly Rental payable to Landlord shall be prorated with respect
thereto. If the Term ends on other than the last day of the calendar month, the
installment of Monthly Rental for such partial calendar month shall be prorated
with respect thereto.
B. 1. For the purpose of this Lease:
a. The term "Additional Rental" means payments to which Landlord is
entitled pursuant to the relevant provisions hereof.
b. The term "Escalation Year" means each calendar year or a portion thereof
during the Term, commencing with the calendar year 1999.
c. The term "Operating Expense Base" means an amount equal to what the
actual Operating Expenses (as hereinafter defined) per rentable square foot of
the Premises for the calendar year 1998 will be.
d. The term "Operating Expenses" is defined on Exhibit "D" of the Lease.
e. The term "Tenant's Share" means 3.919%, which percentage was determined
by dividing 4,535, the rentable square feet in the Premises, by 115,732, the
total rentable square feet in the Building.
2. For each Escalation Year, Tenant shall pay to Landlord Additional Rental
equal to Tenant's Share of the amount by which the actual Operating Expenses for
such Escalation Year exceed the Operating Expense Base.
3. Prior to the commencement of each Escalation Year, Landlord shall
provide Tenant with an estimate of the estimated Operating Expenses for that
calendar year and the resulting Additional Rental. Tenant shall pay, in addition
to the Monthly Rental and on the first day of each calendar month, 1/12 of the
estimated Additional Rental throughout that Escalation Year.
4. Within ninety (90) days, or as soon thereafter as possible, of the
conclusion of each Escalation Year, Landlord shall furnish to Tenant a statement
of the Operating Expenses incurred by Landlord in the prior calendar year. In
the event that the estimated Additional Rental paid by Tenant during such prior
calendar year is less than Tenant's Share of any increase in the Operating
Expenses for the prior calendar year over the Operating Expense Base (such
increase being hereinafter referred to as the "Operating Expense Increase"),
Tenant shall pay the balance of the Additional Rental due to Landlord within
thirty (30) days of Landlord's delivery to Tenant of such statement. In the
event the estimated Additional Rental paid by Tenant for any such prior calendar
year exceeds Tenant's Share of any Operating Expense Increase, the amount of
such overpayment (1) shall be credited against the next succeeding
installment(s) of Monthly Rental or (2), if determined after the expiration of
the Term, shall
Page 1ii of the Lease between Laing Palisades, L.L.C., a Georgia limited
liability company, and Direct Mortgage Partners, Inc., a corporation of the
State of Delaware, d/b/a Bankers Direct Mortgage, dated October 20, 1997.
promptly be paid by Landlord to Tenant. Any payment or credit made shall be made
without prejudice to the right of Tenant to dispute, or Landlord to correct,
said payment or credit.
5. In the event the Term commences on a date other than January 1, the
Additional Rental payable for the first Escalation Year partial calendar year
occurring thereafter shall be prorated based on the number of days in the
partial calendar year occurring between the commencement date of the Term and
January 1 of the next succeeding calendar year.
6. It is understood and agreed that Tenant's failure to pay Additional
Rental due hereunder shall entitle Landlord to all remedies provided herein and
at law or equity on account of Tenant's failure to pay rent. It is further
understood and agreed that Tenant's payments of Additional Rental shall not be
deemed payments of base rental as that term is construed relative to
governmental wage and price controls or analogous governmental actions affecting
the amount of rental which Landlord may charge Tenant.
7. In no event shall the total rental (i.e., the sum of Monthly Rental and
monthly Additional Rental) due under this Paragraph be less than Monthly Rental
specified above.
8. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord under this Lease, including but
not limited to Monthly Rental and Additional Rental, whether or not expressly
denominated as rent shall constitute rent for the purposes of Section 502(b)(7)
of the Bankruptcy Code, 11 U.S.C. Section 502(b)(7)."
DELETED TEXT NOT SHOWN
3. SECURITY DEPOSIT
Tenant has this day deposited with Landlord the amount specified as
Security Deposit in the Basic Lease Information as security for the performance
by Tenant of all the terms, covenants and conditions of this Lease upon Tenant's
part to be performed, which sum shall be returned to Tenant within thirty (30)
days after the expiration of the Term, provided Tenant has fully performed
hereunder. Landlord shall have the right to apply any part of said deposit to
cure any default of Tenant and if Landlord does so, Tenant shall upon demand
deposit with Landlord the amount so applied so that Landlord will have the full
deposit on hand at all times during the Term. In the event of a sale of the
Building or a lease of the Building, subject to this Lease, Landlord shall
transfer the security deposit to the vendee or lessee and Landlord shall
thereupon be released from all liability for the return of such security deposit
and Tenant shall look to the new landlord solely for the return of said security
deposit and this provision shall apply to every transfer or assignment made of
the security deposit to a new landlord; provided, however, Tenant agrees not to
look for the return of any such security deposit to any holder or beneficiary of
a deed of trust or other security instrument affecting the real property of
which the Premises form a part which acquires title to such property by
foreclosure, deed in lieu thereof or otherwise, unless such party shall have
actually received such security deposit from the prior landlord. The security
deposit under this Lease shall not be assigned or encumbered by Tenant without
the written consent of Landlord and any such assignment or encumbrance shall be
void.
4. POSSESSION
If the premises are not available for occupancy on the commencement date
hereinabove set forth and if such unavailability or unreadiness is not
occasioned or caused by Tenant (such as by Tenant's failure promptly to approve
plans, make material or color selections, make improvements to the Premises
which are to be made by Tenant, or make other decisions or take other actions
necessary to the preparation of the Premises for occupancy), then the term shall
commence on a date fixed by Landlord in a notice to Tenant which notice shall
state that the Premises are available or, on or before the commencement date
fixed in the notice will be, available and ready for occupancy, and in such
event, Tenant waives any claim for damages due to such delay and Landlord waives
the right to receive payment of any rental until Landlord delivers possession of
the Premises to Tenant.
5. USE
Tenant shall use and occupy the Premises as general offices only. Tenant's
use of the Premises shall not violate any ordinance, law or regulation of any
governmental body or the rules and regulations of Landlord herein provided for.
Tenant agrees to conduct its business in the manner and according to the
generally accepted business principles of the business or profession in which
Tenant is engaged. Tenant anticipates that it will have the approximate number
of employees working in the Premises as specified in the Basic Lease
Information.
Tenant shall use and occupy the premises for general office purposes and
for no other use or purpose without the prior written consent of Landlord.
Tenant shall not do or permit anything to be done in or about the premises which
will in any way obstruct or interfere with the rights of other tenants or
occupants of the Building or injure or annoy them, nor use or allow the premises
to be used for any improper, immoral, unlawful, or objectionable purposes or for
any business, use or purpose deemed to be disreputable or inconsistent with the
operation of a first class office building, nor shall Tenant cause or maintain
or permit any nuisance in, on, or about the premises. Tenant shall not commit or
suffer the commission or any waste in, on, or about the premises.
6. ACCEPTANCE OF THE PREMISES
The taking of possession of the Premises by Tenant at the commencement of
the Term shall be conclusive evidence as against Tenant that Tenant accepts the
same "as is" subject to a punch list and that the Premises and the Building were
in good and satisfactory condition for the use intended at the time such
possession was taken.
7. TENANT'S CARE AND COVENANTS
(a) Tenant will, at Tenant's expense, take good care of the Premises and
the fixtures and appurtenances therein, and will suffer no active or permissive
waste or injury thereof; and Tenant will, at Tenant's expense, but under the
direction of Landlord, promptly repair any injury or damage to the Premises or
the Building caused by the misuse or neglect thereof by Tenant, or by persons
permitted on the Premises by Tenant, or by Tenant's moving in or out of the
Premises.
(b) Tenant will not, without Landlord's written consent, make alterations,
additions or improvements in or about the Premises and will not do anything to
or on the Premises which will increase the rate of fire insurance on the
Building. All alterations, additions or improvements of a permanent nature made
or installed by Tenant to the Premises shall become the property of Landlord at
the expiration of this Lease, but Landlord reserves the right to require Tenant
to remove any improvements or additions made to the Premises by Tenant and to
repair and restore the Premises to their condition prior to such alteration,
addition or improvement. Tenant further agrees to do so prior to the expiration
of the Term.
(c) No later than the last day of the Term, Tenant will remove all Tenant's
personal property and repair all injury done by or in connection with
installation or removal of said property and surrender the Premises (together
with all keys to the Premises) in as good a condition as they were at the
beginning of the Term, reasonable wear and damage by fire, the elements or
casualty excepted. All property of Tenant remaining on the Premises after
expiration of the Term shall be deemed conclusively abandoned and may be removed
by Landlord and Tenant shall reimburse Landlord for the cost of removing the
same, subject however, to Landlord's right to require Tenant to remove any
improvements or additions made to the Premises by Tenant pursuant to
subparagraph 7(b).
(d) In doing any work related to the installation of Tenant's furnishings,
fixtures, or equipment in the Premises, Tenant will use only contractors or
workmen approved by Landlord. Tenant will promptly remove any lien for material
or labor claimed against the Premises by such contractors or workmen if such
claim should arise and hereby indemnifies and holds Landlord harmless from and
against any and all claims, losses, damages, costs, expenses (including but not
limited to attorney's fees and costs of litigation) or liabilities incurred by
or threatened against Landlord as a result of such liens.
(e) Tenant will not place nor maintain any food or drink coin-operated or
vending machines within the Premises or the Building without the written consent
of Landlord; such consent shall not preclude Landlord from charging Tenant for
utility costs therefor pursuant to subparagraph 9(b) hereof.
(f) Tenant agrees that all personal property brought into the Premises by
Tenant, its contractors, employees, licensees, guests and invitees shall be at
the sole risk of Tenant, and Landlord shall not be liable for theft thereof or
of money deposited therein or for any damages thereto, such theft or damage
being the sole responsibility of Tenant.
(g) Tenant at its sole expense will comply with all statutes, regulations,
rules, ordinances and orders of any governmental body, department or agency
thereof, and abide by and observe the rules and regulations printed on this
Lease, which are hereby made a part of this Lease, together with such amendments
thereto and such rules and regulations of the management of the Building as may
hereafter, from time to time, be established in writing by Landlord and served
upon Tenant.
(h) Tenant will report immediately in writing to Landlord any defective
condition in or about the Premises known to Tenant and a failure to so report
shall make Tenant liable to Landlord for any expense of, or damage to Landlord,
resulting from such defective condition.
8. HOURS OF OPERATION OF THE BUILDING
The normal business hours of the Building shall be from 8:00 a.m. to 6:00
p.m. on Monday through Friday, and 8:00 a.m. to 1:00 p.m. on Saturday. The
Building will not operate on Sundays or governmental holidays.
9. SERVICES
(a) Landlord shall provide, at Landlord's expense, except as otherwise
provided, the following services:
(i) Subject to the restrictions of subparagraph 9(a)(iv),
public utilities to furnish the electricity, gas and water utilized in operating
the Building and its facilities serving the Premises.
(ii) Hot and cold water at those points of supply provided for
general use of other tenants in the Building; central heat and air conditioning
in season, at such temperatures and in such amounts as required to reasonably
heat or cool the Premises except in extreme temperature conditions; routine
maintenance and electric lighting service for all public areas and special
service areas of the Building.
(iii) janitorial service on a five (5) day week basis
excluding holidays.
(iv) Electrical facilities to furnish sufficient power for
typewriters, calculating machines, duplicating machines and other machines of
similar low electrical consumption, normally utilized in general purpose office
space. This does not include special power requirements, including, but not
necessarily limited to, power for such items as freestanding or main frame
computers (or power for special cooling equipment associated therewith), any
special heating or cooling equipment not normally furnished by Landlord as part
of the Building systems, special printing equipment or any other equipment not
normally found in a general purpose-office space and/or which requires a voltage
other than 120 volts single phase.
(v) All building standard fluorescent bulb replacements in all
areas and all incandescent bulb replacements in public areas, toilet and
restroom areas and stairwells.
(vi) Elevator service.
(b) Should Tenant require any additional work or service, including service
furnished outside the stipulated hours of operation of the Building, Landlord
may, on terms to be agreed and upon reasonable advance notice from Tenant,
furnish such additional service and Tenant agrees to pay Landlord such charges
as may be agreed on, but in no event at a charge less than Landlord's actual
cost plus overhead for the additional services provided.
(c) It is understood that Landlord does not warrant that any of the
services referred to above, or any other services which Landlord may supply,
will be free from interruption, Tenant acknowledging that any one or more such
services may be suspended by reason of accidents or of repairs, alterations, or
improvements necessary to be made, or by strikes or lockouts, or by reason of
operation of the law, or causes beyond the reasonable control of Landlord. Any
such interruption or discontinuance of service shall not be deemed an eviction
or disturbance to Tenant's use and possession of the Premises, or any part
thereof, or render Landlord liable to Tenant for damages by abatement of rent or
otherwise, or relieve Tenant from performance of Tenant's obligations under this
Lease.
10. DESTRUCTION OR DAMAGE TO THE PREMISES
(a) If the Premises are totally destroyed (or so substantially damaged as
to be untenantable) by storm, fire, earthquake, or other casualty, rent shall
abate from the date of such damage or destruction and Landlord shall have sixty
(60) days to commence the restoration of the Premises to a tenantable condition;
provided, however, if in Landlord's sole judgment such restoration cannot be
completed within one hundred twenty (120) days following such damage or
destruction, Landlord may, by written notice furnished to Tenant within thirty
(30) days of such casualty, terminate this Lease, whereupon rental and all other
obligations hereunder shall be adjusted between the parties as of the date of
such casualty. In the event the Landlord elects to complete such restoration but
fails to do so within one hundred twenty (120) days of such damage or
destruction, this Lease may be terminated as of the date of such damage or
destruction upon written notice from either party to the other given not more
than ten (10) days following ex pi ration of said one hundred twenty (120) day
period. In the event such notice is not given, then this Lease shall remain in
force and effect and rent shall commence upon delivery of the Premises to Tenant
in a tenantable condition.
(b) If the Premises are damaged but not rendered wholly untenantable by any
of the events set forth in subparagraph I 1(a) above, rental shall abate in such
proportion as the Premises have been damaged and Landlord shall restore the
premises as speedily as practicable whereupon full rent shall commence.
(c) In no event shall rent abate nor shall Tenant be entitled to terminate
this Lease if the damage or destruction of the Premises, whether total or
partial, is the result of the negligence of Tenant, its agents, employees,
contractors, invitees, licensees or guests.
11. DEFAULT BY TENANT - LANDLORD'S REMEDIES
(a) The following shall constitute events of default and in any of said
events, Landlord at its option may during continuance of such default, terminate
this Lease by written notice to Tenant, whereupon this Lease shall end: (i)
Tenant's failure for five (5) days in paying any and all installments of Monthly
Rental or Additional Rental, or monthly installments based on estimates thereof,
reserved herein; or (ii) Tenant's failure for fifteen (15) days after written
notice thereof in performing any other of its obligations hereunder; or (iii)
the entry against Tenant of a decree or order for relief in an involuntary case
under the federal bankruptcy laws (as now or hereafter constituted) or other
applicable federal or state bankruptcy, insolvency or other similar law, or the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) for Tenant or for any substantial part of
Tenant's property, or an order for the winding-up of liquidation of Tenant's
affairs and the continuance of any such decree or order is unstayed and in
effect for a period of sixty (60) consecutive days; or, (iv) the commencement by
Tenant of a voluntary case under the federal bankruptcy laws (as now or
hereafter constituted) or any other applicable federal or state bankruptcy,
insolvency, or other similar law, or the consent by Tenant to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) for Tenant or for any substantial part
of Tenant's property, or the making by Tenant of any assignment for the benefit
of creditors, or the failure of Tenant generally to pay its debts as such debts
become due, or the taking of corporate action by Tenant in furtherance of any of
the foregoing; or (v) the levy upon or attachment under process against the
Premises or Tenant's effects or interest therein which is not satisfied or
dissolved within fifteen (15) days after such levy upon or attachment; or, (vi)
the abandonment or vacating of the Premises by Tenant during the Term and (vii)
in the event of a monetary default failure of Tenant to provide Landlord with an
audited financial statement within sixty (60) days thereafter. After an
authorized assignment the occurring of any of the foregoing defaults or events
of default shall affect this Lease only if caused by or happening to the
assignee. Upon such termination by Landlord, Tenant will at once surrender
possession of the Premises to Landlord and remove all of Tenant's effects
therefrom; and Landlord may forthwith re-enter the Premises and repossess itself
thereof; and remove all persons and effects therefrom using such force as may be
necessary without being guilty of or liable for trespass, forcible entry,
detainer or other tort.
(b) Payments of Monthly Rental, Additional Rental or any other payment
required hereunder received after the fifth day of the month may be assessed an
additional five percent (5%) charge as agreed liquidated damages and may be
assessed an additional five percent (5%) charge each month thereafter until paid
in full. Provided however that should such late charge at any time be deemed to
violate any applicable usury or similar laws, the late charge and interest
charged shall be the highest permissible by such laws. Acceptance by Landlord of
a payment in an amount less than that which is currently due shall in no way
affect Landlord's rights under this Lease and in no way be an accord and
satisfaction.
(c) Landlord, as Tenant's agent, without termination of this Lease, upon
Tenant's default or breach of this Lease, may at Landlord's option, evidenced by
written notice to Tenant, terminate Tenant's right to possession and enter upon
and rent the Premises at the best price obtainable by reasonable effort, without
advertisement, and by private negotiations and for any term Landlord deems
proper. Tenant shall upon receipt of such notice surrender possession of the
Premises to Landlord and remove all of Tenant's effects therefrom; and Landlord
may forthwith re-enter the Premises and repossess itself thereof; and remove all
persons and effects therefrom, using such force as may be necessary without
being guilty of or liable for trespass, forcible entry, detainer or other tort.
Tenant shall be liable to Landlord for the deficiency, if any, between the
amount of all rent including Monthly Rental and Additional Rental reserved in
this Lease and the net rent, if any, collected by Landlord in reletting the
Premises, which deficiency shall be due and payable by Tenant for the period in
which Monthly Rental and Additional Rental reserved in the Lease would have been
due and payable. Net rent shall be computed by deducting from gross rents
collected all expenses or costs of whatever nature incurred by Landlord in
reletting including, but not limited to, attorney's fees, brokers' commissions
and the cost of renovating or remodeling the Premises.
(d) No termination of this Lease prior to the normal ending thereof by
lapse of time or otherwise shall affect Tenant's obligation to pay and
Landlord's right to collect the rent including Monthly Rental and Additional
Rental accrued hereunder to the end of the Term.
(e) In the event Landlord elects to terminate this Lease as hereinabove
provided, Landlord may, in addition to any other remedies it may have, recover
from Tenant all damages Landlord may incur by reason of such default, including
the cost of recovering the Premises, reasonable attorney's fees and including
the worth at the time of such termination of the excess, if any, of the amount
of Monthly Rental and Additional Rental reserved in this Lease for the remainder
of the Term over the then reasonable rental value of the Premises for the
remainder of the Term.
Landlord may, at Landlord's option, enter into and upon the leased
premises, with or without process of law, if Landlord determines in its sole
discretion that Tenant is not acting within a commercially reasonable time to
maintain, repair or replace anything for which Tenant is responsible hereunder
and correct the same, without being deemed in any manner guilty of trespass,
eviction or forcible entry and detainer and without incurring any liability for
any damage resulting therefrom and Tenant agrees to reimburse Landlord, on
demand, as additional rent, for any expenses which Landlord may incur in thus
effecting compliance with Tenant's obligations under this Lease.
(f) Pursuit of any one or more of the foregoing remedies shall not preclude
pursuit of any of the other remedies herein provided or any other remedies
provided by law.
(g) The term "reserved" as applied to Monthly Rental or Additional Rental
herein means any and all payments to which Landlord is entitled hereunder during
the Term.
12. ACCELERATION OF RENTALS
Landlord, upon notification to Tenant of its intention to do so (as
expressed by a notice sent certified mail, return receipt requested (the
"Notice") may, upon a material default of the provisions of this Lease,
accelerate all remaining minimum or base rentals, percentage rentals, and all
other sums of money (hereinafter collectively, the "Rentals") that Tenant is
required to pay under this Lease, same to become due and payable after the
Notice Period (as same is hereinafter defined) shall have expired without
payment in full to Landlord. Landlord and Tenant agree that this provision is a
term for liquidated damages, and the sums accelerated, which have not already
become due by the expiration of the Notice Period, shall be reduced to present
value, as of the date of said expiration. The "Notice Period" shall be fifteen
(15) days from tenant's receipt of the Notice. Actual receipt of the Notice is
not required, all that is required to make the Notice effective is for the
Landlord to mail the Notice to the Tenant's last known address, as same has been
provided to Landlord by Tenant. If there is no actual acceptance or receipt of
the Notice, then the Notice Period shall be deemed to be expired on the
eighteenth (18) day from the date of mailing of the Notice. If Landlord elects
to accelerate the Rentals, it shall undertake to seek another tenant for the
Premises, and credit any amounts received to the obligation of the Tenant for
Rentals, less the following:
(a) reimbursement for all expenses incurred as a result of the Tenant's
failure to perform its other obligations under the Lease including taxes, common
area maintenance, (if any) Tenant's failure to make repairs and comply with
insurance and other requirements;
(b) the cost of advertising the Premises and for real estate broker's
commissions;
(c) the cost of painting, repairing, replacing, altering, dividing or
consolidating the Premises to accommodate the needs of and new tenant.
In any event, the rights of the Landlord as expressed herein are cumulative
of any and all other rights expressed in the Lease. Tenant agrees that it will
remain liable for Rentals from and after any action by Landlord under a
Proceeding Against Tenant Holding Over, or Distress Warrant, whether or not
Tenant retains the right to possession of the Premises.
13. ASSIGNMENT AND SUBLETTING
(a) Tenant may not, without the prior written consent of Landlord endorsed
hereon, assign this Lease or any interest thereunder, or sublet Premises or any
part thereof, or permit the use of Premises by any party other than Tenant.
Landlord shall not unreasonably withhold said consent. Consent by Landlord to
one assignment or sublease shall not destroy or waive this provision, and all
later assignments and subleases shall likewise be made only upon prior written
consent of Landlord. Sublessees or assignees shall become liable directly to
Landlord for all obligations of Tenant hereunder without relieving Tenant's
liability. Tenant shall notify Landlord of Tenant's intent to sublease or assign
this Lease, and Landlord shall within thirty (30) days from receipt of such
notice (i) consent to such proposed subletting, or (ii) refuse such consent, or
(iii) elect to terminate this Lease. In the event of Landlord's election to
terminate, Tenant shall have ten (10) days from receipt Of Such notice in which
to notify Landlord of Tenant's acceptance of such termination or Tenant's desire
to remain in possession of Premises under the terms and conditions and for the
remainder of the Term of this Lease. In the event Tenant fails to so notify
Landlord of Tenant's election to accept termination or to continue as Tenant
hereunder, such failure shall be deemed an election to terminate and such
termination shall be effective as of the end of the 10-day period provided for
in Landlord's notice as hereinabove provided. In the event this Lease is either
terminated or a sub-lease or assignment is made as herein provided, Tenant shall
pay Landlord all actual and reasonable legal and accounting services required in
order to accomplish such termination, assignment, or subletting.
(b) If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, U.S.C. Section 101 et seq. (The "Bankruptcy
Code"), any and all monies or other considerations payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of Landlord and be promptly paid
to or turned over to Landlord. If sublet rental exceeds the monthly rent set
forth in paragraph 2, fifty percent (50%) of the profit shall go to the
Landlord.
(c) If Tenant or any trustee of Tenant assumes this Lease and Tenant or any
trustee of Tenant proposes to assign the same pursuant to the provisions of the
Bankruptcy Code to any person or entity who shall have made a bona fide offer to
accept an assignment of this Lease on terms acceptable to Tenant, then notice of
such proposed assignment, setting forth (i) the name and address of such person
or entity, (ii) all of the terms and conditions of such offer, and (iii) the
adequate assurance to be provided Landlord to assure such person's or entity's
future performance under this Lease, including, without limitation, the
assurance referred to in Section 365(b)(3) of the Bankruptcy Code, shall be
given to Landlord by Tenant no later than twenty (20) days after receipt by
Tenant, but in any event no later than Ten (10) days prior to the date that
Tenant shall make application to a court of competent jurisdiction for authority
and approval to enter into such assignment and assumption, and Landlord shall
thereupon have the prior right and option, to be exercised by notice to Tenant
given at any time prior to the effective date of such proposed assignment, to
accept an assignment of this Lease upon the same terms and conditions and for
the same consideration, if any, as the bona fide offer made by such person, less
any brokerage commissions which may be payable out of the consideration to be
paid by such person for the assignment of this Lease.
(d) Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or deed to
have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall upon demand execute and deliver
to Landlord the instrument evidencing such assignment and an instrument
confirming such assumption.
14. CONDEMNATION
If all or any part of Premises are taken by virtue of eminent domain, and
if the remaining portion of the Premises is thereby rendered untenantable or
unusable for the purposes herein stated, this Lease shall not expire on the date
when the condemnation petition if filed but rather when the condemning authority
takes possession, and any rent paid for any period beyond possession by the
condemning authority shall be repaid to Tenant.
15. INSPECTIONS
Landlord may enter the Premises: (a) with reasonable notice to Tenant and
at reasonable hours to exhibit same to prospective purchasers or tenants; (b) to
inspect the Premises to see that Tenant is complying with all its obligations
hereunder; and (c) to make repairs required of Landlord under the terms hereof
or repairs to any other portion of the Building.
16. SUBORDINATION
Unless any holder or beneficiary of any deed of trust or other security
instrument affecting the real property of which the Premises form a part
otherwise elect in writing, this Lease shall be subject and subordinate to any
such deeds of trust or other security instruments. In confirmation of the
subordination set forth in this Paragraph 16, (or, if any holder or beneficiary
of a deed of trust or other security instrument elects in writing, superiority)
Tenant shall, at Landlord's request, execute and deliver such further
instruments as may be desired by any holder or beneficiary of such deed of trust
or other security instrument.
17. INDEMNITY AND HOLD HARMLESS
Tenant shall indemnify, and hold harmless the Landlord and the Premises, at
Tenant's expense, against: (i) any default by Tenant, or any assignee or
sublessee permitted hereunder; (ii) any act of negligence of Tenant or its
agents, contractors, employees, invitees, guests or licensees; and (iii) all
claims, losses, damages, costs, expenses (including but not limited to
attorney's fees and costs of litigation) or liabilities incurred or suffered by
persons or property by reason of the use or occupancy of the Premises.
18. TENANT'S INSURANCE AND WAIVER OF SUBROGATION
Tenant shall carry fire and extended coverage insurance insuring its
interest in Tenant's improvements in the Premises and its interest in its office
furniture, equipment, supplies and other personal property, and Tenant hereby
waives any right of action against Landlord for loss or damage to its
improvements, fixtures or personal property in the Premises.
Tenant agrees to purchase at its own expense and to keep in force during
the term of this Lease a policy or policies of worker's compensation and
comprehensive general liability insurance, including personal injury and
property damage, with contractual liability endorsement, in the amount of Five
Hundred Thousand Dollars ($500,000.00) for property damage, and One Million
Dollars ($1,000,000.00) per occurrence for personal injuries or deaths of
persons occurring in or about the premises. Said policies shall: (i) name
Landlord as an additional insured and insure Landlord's contingent liability
under this Lease (except for the worker's compensation policy, which shall
instead include waiver of subrogation endorsement in favor of Landlord), (ii) be
issued by an insurance company which is acceptable to Landlord and licensed to
do business in the State of Georgia, and (iii) provide that said insurance shall
not be cancelled unless thirty (30) days prior written notice shall have been
given to Landlord. Said policy or policies or certificates thereof shall be
delivered to Landlord by Tenant upon commencement of the term of the Lease and
upon each renewal of said insurance.
19. REMEDIES CUMULATIVE
The rights given to Landlord herein are in addition to any rights that may
be given to Landlord by statute or under law.
20. HOLDING OVER
If Tenant remains in possession after expiration of the Term with
Landlord's acquiescence and without any distinct agreement between the parties,
Tenant shall be a tenant at will and such tenancy shall be subject to all the
provisions hereof, except that the Monthly Rental shall be the amount agreed
upon between Tenant and Landlord. If no such agreement is reached prior to the
expiration of the term, then the Monthly Rental shall be equal to two hundred
percent (200%) of the Monthly Rental specified in Paragraph 2 hereof and there
shall be no renewal of this Lease by operation of law. Nothing in this Paragraph
shall be construed as a consent by Landlord to the possession of the Premises by
Tenant after the expiration of the Term.
21. ENTIRE AGREEMENT - NO WAIVER
This Lease contains the entire agreement of the parties hereto and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties not embodied herein, shall be of any force or effect. The failure of
either party to insist in any instance on strict performance of any covenant or
condition hereof, or to exercise any option herein contained, shall not be
construed as a waiver of such covenant, condition or option in any other
instance. This Lease cannot be modified or terminated orally.
22. HEADINGS
The headings in this Lease are included for convenience only and shall not
be taken into consideration in any construction or interpretation of this Lease
or any of its provisions.
23. NOTICES
(a) Any notice by either party to the other shall be valid only if in
writing and shall be deemed to be duly given only if delivered personally or
sent by registered or certified mail, return receipt requested addressed (i) if
to Tenant, at the Premises and (ii) if to Landlord, at Landlord's address set
forth above, or at such other address for either party as that party may
designate by notice to the other. Notice shall be deemed given, if delivered
personally, upon delivery thereof, and if mailed in accordance with the terms of
this Paragraph 23, upon the mailing thereof.
(b) Tenant hereby appoints as its agent to receive service of all
dispossessory or distraint proceedings, any employee of Tenant who may be
present at Premises at the time of said service of process; and if there is no
person occupying same, then such service may be made by attachment thereof on
the main entrance of the Premises.
24. HEIRS AND ASSIGNS - PARTIES
(a) Subject to the provisions of Paragraph 13 hereof, the provisions of
this Lease shall bind and inure to the benefit of Landlord and Tenant, and their
respective successors, heirs, legal representatives and assigns, it being
understood that the term "Landlord" as used in this Lease, means only the owner
or the lessee for the time being of the land and the Building of which the
Premises are a part, so that in the event of any sale or sales of said property
or of any lease thereof, the Landlord named herein shall be and hereby is
entirely freed and relieved of all covenants and obligations of Landlord
hereunder accruing thereafter, and it shall be deemed without further agreement
that the purchaser, or the lessee, as the case may be, has assumed and agreed to
carry out any and all covenants and obligations of Landlord hereunder during the
period such party has possession of the land and the Building. Should the land
and the building be severed as to ownership by sale and/or lease, then the owner
of the building or lessee of the Building that has the right to lease space in
the building to tenants shall be deemed the Landlord. Tenant shall be bound to
any such succeeding party landlord for performance by Tenant of all the terms,
covenants, and conditions of this Lease and agrees to execute any attornment
agreement not in conflict with the terms and provisions of this Lease at the
request of any such succeeding landlord.
(b) The terms "Landlord," "Tenant," and "Agent" and pronouns relating
thereto, as used herein, shall include male, female, singular and plural,
corporation, partnership or individual, as may fit the particular parties.
25. ATTORNEY'S FEES
If any amounts owing under this Lease are collected, directly or
indirectly, by or through an attorney at law, Tenant shall pay as Additional
Rent all actual and reasonable attorney's fees. Tenant shall also pay all
attorney's fees incurred by Landlord as a result of any breach or default by
Tenant under this Lease.
In the event any action or proceeding is brought to enforce any term,
covenant or condition of this Lease on the part of, Landlord or Tenant, the
prevailing party in such litigation shall be entitled to reasonable attorney's
fees awarded by the court in such action or proceeding.
26. ALTERATIONS REQUIRED BY LAW
If, because of the nature of Tenant's use or occupancy of the Premises, any
addition, alteration, change, repair or other work of any nature, structural or
otherwise, shall be required or ordered or become necessary at any time during
the Term because of any law, or governmental regulation now or hereafter in
effect, or any order or decree of any court, the entire expense thereof,
irrespective of when the same shall be incurred or become due, shall be the sole
liability of Tenant, and Landlord shall not contribute thereto.
27. TIME OF ESSENCE
Time is of the essence of this Lease.
28. STANDARD TENANT ALLOWANCE
Landlord shall at its own expense provide those items in Exhibit "B"
attached hereto and hereby made a part hereof. Any and all costs above the
Standard Tenant Allowance set forth in Exhibit "B" shall be the sole
responsibility of Tenant and paid by Tenant prior to occupancy.
29. PARKING ARRANGEMENTS
Tenant shall have the right to use in common with the other Tenants in the
Building the parking spaces provided by Landlord adjacent to the Building for
parking of Tenant's automobiles and those of its employees and visitors, subject
to the rules and regulations now or hereafter adopted by Landlord. Tenant shall
not use nor permit any of its employees, agents or visitors to use any parking
spaces in an area owned by Landlord other than the parking area assigned to the
Building. If Landlord deems it advisable, Landlord may set aside a part of the
total parking field for use as a separate area for visitors. Landlord reserves
the right to adopt any regulations necessary to curtail unauthorized parking,
including the required use of parking permits or assigning to Tenant a specific
area in which Tenant's employees shall be required to park. Tenant anticipates
that it shall require the amount of parking spaces stipulated in the Basic Lease
Information for its employees and parking in excess of that number shall not be
permitted without Landlord's approval. If such approval is granted that parking
shall be in such quantities and at such locations as Landlord may designate.
30. RULES AND REGULATIONS
(a) The sidewalks, entry passages, corridors, halls, elevators and
stairways shall not be obstructed by Tenant or used by it for purposes other
than those of ingress and egress. The floors, skylights and windows that reflect
or admit light into any place in the Building shall not be covered or obstructed
by Tenant in anyway. The water closets and other water apparatus shall not be
used for any other purpose than those for which they were constructed, and no
sweeping, rubbish, or other obstructing substances shall be thrown therein.
(b) Landlord reserves the right to approve Tenant's moving arrangements,
including but not limited to, requiring that the delivery and removal of
Tenant's possessions to and from the Premises be performed before or after the
building's normal business hours as provided in Paragraph 8 hereof.
(c) No advertisement, sign or other notice shall be inscribed, painted or
affixed on any part of the outside or inside of the Building, except upon the
interior doors as permitted by Landlord, which signs shall be of such order,
size and style, and at such places as shall be designated by Landlord. Signs on
Tenant's entrance doors will be provided for Tenant by Landlord, the cost of the
signs to be charged to and paid for by Tenant. Blinds furnished by Landlord
shall be used to give uniform color exposure through exterior windows. Landlord
at Landlord's sole discretion may furnish blinds for those windows facing onto
the Building atrium or common areas. No painting shall be done, nor shall any
alterations be made to any part of the Building by putting up or changing any
partitions, doors, or windows, nor shall there by any nailing, boring, or
screwing into the woodwork or plastering, nor shall any connection be made to
the electric wires or electric fixtures without the consent in writing on each
occasion of Landlord. All glass, locks and trimmings in or upon the doors and
windows of the Building shall be kept whole and shall not be changed without
Landlord's approval and, when any part thereof shall be broken, the same shall
be immediately replaced or repaired at Tenant's expense and put in order under
the direction and to the satisfaction of the Landlord, and shall be left whole
and in good repair. Tenant shall not injure, or overload or deface the building,
the woodwork or the walls of the Premises, nor carry on upon the Premises any
noxious, noisy or offensive business. Tenant shall not (without Landlord's
written consent) install or operate any computer, duplicating or other large
business machine, equipment, or any other machinery upon the Premises or carry
on any mechanical business thereon. If Tenant requires any interior wiring such
as for a business machine, intercom, printing equipment or copying equipment,
such wiring shall be done by the electrician of the Building only, and no
outside wiring men shall be allowed to do work of this kind unless the written
permission of Landlord is obtained. If telegraphic or telephonic service is
desired, the wiring for same shall be done as directed by the electrician of the
Building or by some other employee of Landlord who may be instructed by the
superintendent of the Building to supervise same, and no boring or cutting for
wiring shall be done unless approved by Landlord.
(d) Landlord in all cases retains the right to approve the weight per
square foot and position of heavy articles including, but not limited to, iron
safes, files, storage shelving, printing equipment, computer and duplicating
equipment or air compressors. Tenant must make arrangements with the
superintendent of the Building when the elevator is required for the purpose of
carrying any kind of freight.
31. RIGHT TO RELOCATE
If this Lease is for an area of three thousand (3,000) rentable square feet
or less, Landlord shall have the right at anytime during the Term upon giving
Tenant not less than sixty (60) days prior written notice, to provide and
furnish Tenant with space of approximately the same size as the Premises at
another location in the property and remove and place Tenant in such space, with
Landlord to pay all reasonable costs and expenses incurred as a result of such
relocation of Tenant. Should Tenant refuse to permit Landlord to move Tenant to
such new space at the end of said sixty (60) day period, Landlord shall have the
right, in addition to any and all other rights that Landlord may have, to cancel
and terminate this Lease effective ninety (90) days from the date of original
notification by Landlord. If Landlord moves Tenant to such new space, this Lease
and each and all of its terms, covenants and conditions shall remain in full
force and effect and be deemed applicable to such new space, and such new space
shall thereafter be deemed to be the Premises as though Landlord and Tenant had
entered into an express written amendment of this Lease with respect thereto.
32. RIGHTS RESERVED TO LANDLORD
Landlord reserves the following rights:
(a) to name the Building and to change the name or street address of the
Building;
(b) to install and maintain a sign or signs on the exterior of the
Building;
(c) to designate all sources furnishing sign painting and lettering,
vending machines, mobile vending services, and like services used on the
Premises or in the Building;
(d) to constantly have pass keys to the Premises;
(e) on reasonable prior notice to Tenant, to exhibit the Premises to
prospective tenants during the last twelve (12) months of the Term and to any
prospective purchaser, tender, mortgagee, or assignee of any mortgage or other
security instrument on the real property of which the Premises form a part and
to others having a legitimate interest at any time during the Term;
(f) at any time in the event of an emergency, and otherwise at reasonable
times, to take any and all measures, including inspections, repairs,
alterations, additions and improvements to the Premises or to the Building, as
may be necessary or desirable for the safety, protection or preservation of the
Premises or the Building or the Landlord's interest therein, or as may be
necessary or desirable in the operation or improvement of the Building or in
order to comply with all laws, orders and requirements of any governmental or
other authority;
(g) to install vending machines of all kinds in the Premises, and to
provide mobile vending service therefor, arid to receive all of the revenue
derived therefrom; provided, however, that no vending machines shall be
installed by Landlord in the Premises nor shall any mobile vending service be
provided therefor, unless Tenant so requests;
(h) for so long as Tenant is not in default hereunder, to grant Tenant a
non-exclusive revocable license to use and occupy in common with others so
entitled, the common areas of the Building, including, but not limited to,
corridors. stairways, elevators, restrooms, lobbies, entranceways, parking
areas, service roads, loading facilities, sidewalks, and other facilities as may
be designated from time to time by Landlord subject to the terms and conditions
of this Lease.
33. GOVERNMENTAL ORDERS
Except as otherwise provided in Paragraph 26 or subparagraph 7(g) hereof,
in the event Landlord, during the Term, shall be required by any governmental
authority, or by the order or decree of any court, to repair, alter, remove,
construct, reconstruct, or improve any part or all of the Building or the
Premises, then Such action may be taken by Landlord at its expense, and such
action shall not in any way affect Tenant's obligations under this Lease, and
Tenant waives all claim for injury, damages or abatement of rent because of such
repair, alteration, removal, construction, reconstruction or improvement;
provided, however, that (a) if such action by Landlord shall render the Premises
wholly untenantable, or (b) if in Landlord's judgment such acts cannot be
completed within ninety days (90) days after notice to Landlord to perform such
acts by such governmental authority, then this Lease may, at the option of
Landlord, or, in the event of the occurrence of the untenantability provided for
in (a) above, shall terminate as of the date of said notice to Landlord by such
governmental authority or court, and in such event Tenant shall immediately
surrender the Premises and rent shall be apportioned and be paid up to and
including the date the Premises became wholly untenantable, or the date of
optional termination by Landlord, as the case may be.
34. SEVERABILITY
In the event that any one or more of the provisions, sentences, clauses,
phrases or words of this Lease, and the application thereof in any circumstance,
shall be invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any other such provision, sentence,
clause, phrase or word of this Lease, and the application thereof in other
circumstances, shall not be in any way impaired, it being intended that every
part of this Lease shall be enforceable to the fullest extent provided by law.
35. ARBITRATION
In the event a non-monetary dispute, it is agreed that such dispute shall
be submitted to arbitration in accordance with the rules of the American
Arbitration Association then prevailing. The submission of a dispute to
arbitration shall not suspend any of the obligations of the parties hereunder
and any payments made by Tenant during the pendency of such arbitration are
subject to adjustment at the conclusion of such arbitration. The costs and
expenses of the arbitration shall be borne by the party seeking arbitration
unless the party seeking arbitration is granted the relief or award sought in
which case each party shall bear their own costs and expenses.
36. BROKERAGE COMMISSION
Tenant (except with respect to Broker designated in the Basic Lease
Information) and Landlord (except with respect to Broker designated in the Basic
Lease Information) each represents and warrants to the other that no broker,
agent, commission salesman or other person has represented the warranting party
in the negotiation of this Lease or the procurement of the Premises and that no
commission, fee or compensation of any kind is due and payable in connection
herewith to any broker, agent, commission salesman or other person. Each party
agrees to indemnify and hold the other harmless from and against any claim,
loss, damage, liability, cost and expense (including but not limited to
attorney's fees and cost of litigation) which the other shall suffer, incur or
be threatened with because of the claim of any broker, agent, commission
salesman or other person claiming by, through or under such party, whether or
not such claim is meritorious. Any party listed in parenthesis in the first
sentence of this Paragraph 36, and thus excluded from the above warranty, shall
be entitled to a commission, fee or other compensation only if it has entered
into a separate written agreement with Landlord or Tenant, as the case may be.
37. ABANDONMENT
Tenant shall not vacate or abandon the premises at any time during the
term, and if Tenant shall abandon, vacate, or surrender said premises or be
dispossessed by process of law, or otherwise, any personal property belonging to
Tenant and left on the premises shall, at the option of Landlord, be deemed to
be abandoned and title thereto shall thereupon pass to Landlord.
38. CORPORATE AUTHORITY
If Tenant signs as a corporation, each of the persons executing this Lease
on behalf of Tenant does hereby covenant and warrant that Tenant is a duly
authorized and existing corporation, that Tenant has and is qualified to do
business in Georgia, that the corporation has full right and authority to enter
into this Lease, and that each and both of the persons signing on behalf of the
corporation were authorized to do so. Upon Landlord's request, Tenant shall
provide Landlord with evidence reasonably satisfactory to Landlord confirming
the foregoing covenants and warranties.
39. ESTOPPEL CERTIFICATES
Within ten (10) days following any written request which Landlord may make
from time to time, Tenant shall execute and deliver to Landlord an Estoppel
Certificate indicating thereon any exceptions thereto which may exist at that
time.
Failure of the Tenant to execute and deliver such certificate shall
constitute an acceptance of the premises and acknowledgement by Tenant that the
statements are true and correct without exception. Landlord and Tenant intend
that any statement delivered pursuant to this paragraph may be relied upon by
Land lord or by any mortgagee, beneficiary, purchaser or prospective purchaser
of the Building or any interest therein or anyone to whom Landlord may provide
said certificate.
40. COUNTERPARTS
This Lease may be executed in two or more counterparts, each of which shall
constitute an original, but when taken together shall constitute but one Lease.
Each counterpart shall be effective if it bears the signatures of all parties
hereto: or so many counterparts as shall contain all of the signatures of the
parties hereto shall constitute one Lease, and shall be effective as such.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, as
of the day and year first above written.
Signed, sealed and delivered Tenant: Direct Mortgage Partners,
in the presence of: Inc., a corporation of the State
/s/ Patricia E. Klamert of Delaware d/b/a Bankers
- ---------------------------- Direct Mortgage
Witness
/s/ Joy Orsini /s/ Roger W. Stubbs (SEAL)
- --------------------------- ----------------------------
Notary Authorized Signaure
Name: Roger W. Stubbs
Title: EVP
Attest: /s/Christopher Castoro
(SEAL)
------------------------------
Title: Chairman Director
Signed, sealed and delivered Landlord: Laing Palisades,
in the presence of: L.L.C., a Georgia limited
/s/ liability company
- ----------------------------- By: LAING PROPERTIES, INC.
Witness Manager
/s/ By: /s/Laing Properties, Inc.(SEAL)
Notary Public --------------------------
Title: EVP
Attest:/s/ Robert R. Stubbs (SEAL)
---------------------------------
Title: Vice President & Secretary
<PAGE>
EXHIBIT B
STANDARD TENANT ALLOWANCE
Exhibit "B" to the Lease between Laing Palisades, L.L.C., a Georgia limited
liability company, and Direct Mortgage Partners, Inc., a corporation of the
State of Delaware, d/b/a Bankers Direct Mortgage, dated October 20, 1997.
Landlord will, at its expense, construct improvements to the portion of the
Premises outlined in Exhibit A which shall be limited to standard carpet, paint,
rekeying the lock and standard signage at the entrance door to the Premises.
Prior to February 1, 1998, Landlord will, at its expense, construct improvements
to the portion of the Premises outlined in Exhibit A-1 based on plans to be
drawn by Carlsten Associates at Landlord's direction. The combined construction
cost of the entire Premises (that which is outlined in both Exhibit A and
Exhibit A-1) shall not exceed $18,140.00. If the cost to construct such
improvements exceeds such amount, such excess cost shall be paid by Tenant to
Landlord upon construction completion. Final construction documents shall be
approved by Landlord and Tenant prior to construction commencement.
All preliminary construction documents required to achieve Tenant's occupancy
shall be paid for by Landlord outside of the improvement allowance outlined
above.
<PAGE>
EXHIBIT C
SPECIAL STIPULATIONS
To the extent the following Special Stipulations conflict with the other terms
of this Lease, the Special Stipulations shall control.
Exhibit "C" to the Lease between Laing Palisades, L.L.C., a Georgia limited
liability company, and Direct Mortgage Partners, Inc., a corporation of the
State of Delaware, d/b/a Bankers Direct Mortgage, dated October 20, 1997.
41. BROKER DISCLOSURE
Pursuant to Georgia Real Estate Commission Regulation 520-1-08 Richard Bowers &
Company and Laing Marketing Company make the following disclosures concerning
this Lease transaction:
A. In this transaction, Laing Marketing Company represents Landlord and not
Tenant.
B. In this transaction, Richard Bowers & Company represents Tenant and not
Landlord.
C. In this transaction, both Richard Bowers and Company and Laing
Marketing Company shall receive their compensation from Landlord
exclusively.
Both Tenant and Landlord acknowledge, agree with and consent to the
representation and compensation disclosed above.
42. EXPANSION OF PREMISES
Tenant shall occupy Suite 375 (3,106 RSF) from November 1, 1997 through January
31, 1997 at which time Tenant shall expand into the contiguous space in Suite
380 (1,429 RSF). The combined square footage for both suites equates to the
total square footage for the entire Premises. The Rental Schedule outlined on
Page 1i includes the total rental due for both suites through the Term of the
Lease.
43. CONTINGENCY
This Lease shall be contingent upon the Landlord and existing Tenant reaching a
mutually acceptable termination of their existing lease for the Premises.
44. GUARANTY OF LEASE
Simultaneous with the execution of this Lease, Landlord and CR Mortgage, Inc., a
Delaware Corporation agree to enter into that certain Guaranty of Lease attached
hereto as Exhibit "E" and hereby made a part hereof. Such Guaranty of Lease is
referenced and attached hereto, because Landlord requires, as a condition
precedent to its execution of the Lease, that Guarantor (as defined therein)
guaranty the full performance of the obligations of Tenant under the Lease,
subject to the terms of such Guaranty of Lease.
45. ENVIRONMENTAL MATTERS
(a) Tenant and Landlord each covenant to the other that they will not
knowingly cause or permit any "Hazardous Wastes" (as hereinafter defined) to be
brought upon, disposed on or stored in or on the Premises or Building
respectively or any "Hazardous Material" (as hereinafter defined) to be released
in, on or about the Premises or Building and that it will comply with any and
all applicable laws, ordinances, rules, regulations and requirements respecting
the presence, use or release of Hazardous Materials in, on or about the
Premises, or Building respectively.
(b) Tenant and Landlord each covenant to the other that it will immediately
notify the other, in writing, of any existing, pending or threatened (i)
investigation, inquiry, claim or action by any governmental authority in
connection with any "Environmental Laws" (as hereinafter defined); (ii) third
party claims; (iii) regulatory actions; and/or (iv) contamination of the
Premises.
(c) Tenant or Landlord shall, at its own expense, investigate, monitor,
remediate, and/or clean up any Hazardous Material, Hazardous Waste, or other
environmental condition on, about, or under the Premises or Building,
respectively required as a result of Tenant's or Landlord's use or occupancy of
the Premises or Building.
(d) Tenant covenants that it shall keep the Premises free of any lien
imposed pursuant to any Environmental Laws.
(e) Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all claims, judgments, damages, penalties, fines, costs
(including, without limitation, attorney's fees and court costs), liabilities or
losses (collectively, hereinafter referred to as the "Tenant Indemnified
Claims") resulting from (i) the presence of Hazardous Wastes in or about the
Premises (other than Hazardous Wastes present as of the date of this Addendum to
Lease which are covered by Landlord's indemnity in subparagraph ((f) below) or
the release of Hazardous Materials in, on or about the Premises on or after the
date of this Addendum to Lease, except to the extent that the Tenant Indemnified
Claims are caused by Landlord, its agents, employees or contractors, and (ii)
any Hazardous Waste placed or any Hazardous Materials released elsewhere in the
Project by Tenant, its agents, invitees, employees and contractors.
Landlord shall indemnify, defend and hold Tenant harmless from and against
any Landlord Indemnified Claims resulting from the presence of Hazardous Wastes
in or on the Premises as of the date of this Addendum to Lease or the release of
Hazardous Materials in or on the Premises prior to the date of this Addendum to
Lease, except to the extent that the Landlord Indemnified Claims are caused by
Tenant, its agents, employees, invitees or contractors.
(g) The provisions of these Environmental Matters shall survive the
expiration or termination of the Lease.
(h) Landlord represents that, to the best of the knowledge of the
individual(s) executing this lease on behalf of Landlord, no "Hazardous Waste"
as said term is defined in the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. ss.6901 et. seq. (hereinafter referred to as "RCRA"), has
been brought upon, disposed or stored in or on the premises, and no hazardous
material as hereinafter defined has been released in or on the Premises.
(i) For the purposes of the Lease, the term "Hazardous Material" is defined
to include those matters described in the Comprehensive Environmental Response
Compensation and Liability Act, as amended, 42 U.S.C. ss.9601 et. seq.
(hereinafter referred to as "CERCLA"). As used herein the term "Hazardous
Materials" shall also mean (i) asbestos, or any substance containing asbestos;
(ii) polychlorinated biphenyls; (iii) lead; (iv) radon; (v) pesticides; (vi)
petroleum or any other substance containing hydrocarbons; (vii) any substance
which, when on the Premises, is prohibited by any Environmental Laws; and (viii)
any other substance, material or waste which, (1) by any Environmental Laws
requires special handling or notification of any governmental authority in its
collection, storage, treatment, or disposal, or (2) is defined or classified as
hazardous, dangerous or toxic pursuant to any legal requirement.
For purposes of the Lease, "Environmental Laws" shall mean: any and all federal,
state and local laws, statutes, codes, ordinances, regulations, rules or other
requirements relating to human health or safety, or to the environment,
including, but not limited to, those applicable to the storage, treatment,
disposal, handling and release of any Hazardous Waste or Hazardous Materials,
all as amended or modified from time to time.
<PAGE>
EXHIBIT "D"
DEFINITION OF OPERATING EXPENSES
Exhibit "D" to the Lease between Laing Palisades, L.L.C., a Georgia limited
liability company, and Direct Mortgage Partners, Inc., a corporation of the
State of Delaware, d/b/a Bankers Direct Mortgage, dated October 20, 1997.
DEFINITIONS
(a) Operating Expenses:
"Operating Expenses" are those costs attributable in whole or in part to
the Project which are to be paid by Tenant as Additional Rent as set forth in
Paragraph * of this Lease.
Operating Expenses as used in the Lease shall consist of the following
components (all of which are defined below): (i) Real Estate Taxes; and (ii)
Operating Costs.
(i) Real Estate Taxes:
Real Estate Taxes (or "Taxes") shall mean all general property
taxes (whether real or personal) and all special and general
assessments which may be levied during the Term upon the
Building and the land upon which the Building is located (or
any part thereof) of which the Premises are a part. Real
Estate Taxes shall also include all costs of contesting any
Real Estate Taxes or the valuation of the Project. Real Estate
Taxes shall not include water or sewer connection or tap-in
charges or any penalties incurred for any late payment, unless
caused directly or indirectly, by Tenant.
In the event such Taxes are eliminated or reduced by any federal, state, or
municipal body or governmental agency having jurisdiction thereof, and another
tax is imposed by way of substitution for (or in addition thereto) all or any
part of such Taxes, then such substituted (or additional) tax shall be included
as Taxes under the Lease.
For the purpose of calculating Additional Rent, Taxes shall be attributable
to the Lease Year or the calendar year (depending on the applicable provisions
of the Lease) in which they first become due and payable.
(ii) Operating Costs:
"Operating Costs," as that term is used herein, shall consist of all
reasonable, actual expenses and costs (but excluding specific charges separately
billed or chargeable to specific tenants) of every kind and nature which
Landlord shall pay or incur because of or in connection with the ownership,
maintenance and operation of the Building, computed on an accrual basis and
determined in accordance with generally accepted accounting principles
consistently applied.
a. Operating Costs shall include, but not be limited to, the following:
i. Wages, salaries, fringe benefits, workers compensation and other such
governmental charges and other direct and indirect costs of all personnel
engaged in the operation, maintenance, security and access control of the
Building;
ii. Cost of all supplies, tools, equipment and materials, whether purchased
or leased, used in the operation and maintenance of the Building;
iii. Cost of utilities for the Building, including, but not limited to, the
cost of electricity, water, sewer, gas, and the cost of power for heating,
lighting, air conditioning and ventilating the Building;
iv. Management fee cost recovery ("Management Fee Cost Recovery") equal to
three percent (3%) of the sum of Tenant's Annual Base Rental (excluding any
abatement of Base Rental granted to Tenant in this Lease) and Estimated
Operating Expenses;
v. Cost of all maintenance and service agreements for the Building and the
equipment therein, including, without limitation, alarm service, security
service, access control, parking areas, window cleaning, Page 2 of Exhibit "D"
to the Lease between Laing Palisades, L.L.C., a Georgia limited liability
company, and Direct Mortgage Partners, Inc., a corporation of the State of
Delaware, d/b/a Bankers Direct Mortgage, dated October 20, 1997, janitorial
service, landscape maintenance, trash removal, air conditioning and heating
service and maintenance, and elevator and escalator maintenance;
vi. Cost of accounting and other professional services only to the extent
such costs are incurred directly in connection with Operating Costs, including
the costs of audits by certified public accountants;
vii. Cost of all insurance, including but not limited to, fire, casualty,
liability, and rent loss insurance applicable to the Building and Landlord's
personal property used in connection therewith (but only such personal property
as is actually used in connection with the operation, maintenance and access
control of the Building), plus the cost of all deductible payments made by
Landlord in connection therewith;
viii. Cost of repairs, replacements and general maintenance to the Building
including the parking areas;
ix. Cost of any and all common area maintenance related to public areas,
including sidewalks and landscaping on the Building;
x. Costs of licenses, permits and inspection fees related to the Building;
xi. Amortization of the cost, together with reasonable financing charges,
(or depreciation of the cost, if not financed) of furnishing and installing any
system, apparatus, device, equipment, or other Building improvement which
Landlord in good faith believes will actually accomplish the purpose of A)
reducing Operating Costs, B) promoting safety, or C) meeting requirements of
governmental authorities; all such costs shall be amortized over the reasonable
life of such items in accordance with generally accepted accounting principles
(in no event to extend beyond the reasonable remaining life of the Building);
xii. Any other expense which under generally accepted accounting principles
would be considered a reasonable maintenance or operating expense.
b. Operating Costs shall not include:
i. Expenses for any capital replacements or improvements; except as
described in (a) (ii) a. xi;
ii. Costs of special services rendered to individual tenants for which a
special charge is made;
iii. Interest and principal payments on loans or indebtedness secured by
the Building;
iv. Costs of improvements for other tenants of the Building;
v. Legal fees, brokerage commissions, advertising costs, or other related
expenses incurred by Landlord in connection with the leasing of space to
individual tenants in the Building;
vi. Repairs, alterations, additions, improvements, or replacements made to
rectify or correct any defect in the original design, materials or workmanship
of the Building or common areas;
vii. Damage and repairs attributable to fire or other casualty; excluding
insurance deductibles, however said exclusion shall not exceed more than one
$10,000 deductible per calendar year;
Page 3 of Exhibit "D" to the Lease between Laing Palisades, L.L.C., a Georgia
limited liability company, and Direct Mortgage Partners, Inc., a corporation of
the State of Delaware, d/b/a Bankers Direct Mortgage, dated October 20, 1997.
viii. Damage and repairs necessitated by the gross negligence or willful
misconduct of Landlord, or its employees, contractors or agents;
ix. Executive salaries or salaries of service personnel to the extent that
such service personnel perform services not in connection with the management,
operation, repair or maintenance of the Building;
x. Landlord's general overhead expenses not related to the Building;
xi. Legal fees, accountants' fees and other expenses incurred in connection
with disputes with tenants or other occupants of the Building or associated with
the enforcement of the terms of any leases with tenants or the defense of
Landlord's title to or interest in the Building or any part thereof;
xii. Costs (including permit, license and inspection fees) incurred in
renovating or otherwise improving, decorating or painting, or altering space for
individual tenants or vacant space in the Building;
xiii. Costs incurred due to a violation by Landlord or any other tenant of
the Building of the terms and conditions of a lease;
xiv. Any other expense which, under generally accepted accounting
principles, would not be considered a reasonable maintenance or operating
expense; and
xv. Expenses for repair, replacements and general maintenance paid by the
proceeds of insurance or by Tenant or third parties, or through condemnations
awards.
<PAGE>
EXHIBIT "E"
Exhibit "E" to the Lease between Laing Palisades, L.L.C., a Georgia limited
liability company, and Direct Mortgage Partners, Inc. Inc., a corporation of the
State of Delaware, d/b/a Bankers Direct Mortgage, dated October 20, 1997.
GUARANTY OF LEASE
In order to induce Laing Palisades, L.L.C., a Georgia limited liability company,
whose principal place of business and mailing address is 5901-B
Peachtree-Dunwoody Road, Suite 555, Atlanta, Georgia, 30328 (hereinafter
referred to as "Landlord"), to execute and enter into that certain Lease, of
even date herewith (hereinafter referred to as the "Lease"), with, a sole
proprietor, having its principal place of business and mailing address at 5901-B
Peachtree-Dunwoody Road, Suite 375, Atlanta, Georgia, 30328 (hereinafter
referred to as "Tenant"), the undersigned CFI Mortgage, Inc., a Delaware
corporation (hereinafter referred to as "Guarantor"), hereby guarantees the full
performance of, and agrees to perform or cause to be performed, each and all of
the terms, covenants and conditions of the Lease on the part of Tenant to he
kept and performed, including the payment of all rental, reimbursables and other
amounts provided therein. Guarantor and Landlord further agree as follows:
1. That this Guaranty of Lease is an absolute and unconditional Guaranty of
payment and of performance without regard to the validity, regularity, or
enforceability of any obligation of Tenant and regardless of any law,
regulation, or decree now or hereafter in effect which might in any manner
affect the obligations of Tenant, any rights of Landlord, or cause or permit to
be involved any alteration of time, amount, currency, or manner of payment of
any of the obligations hereby guaranteed;
2. That this Guaranty of Lease will continue unchanged by any bankruptcy,
reorganization or insolvency of Tenant or of Tenant's successors or assigns or
by any disaffirmance of abandonment by a trustee of Tenant;
3. That Landlord may assign this Guaranty of Lease in whole or in part;
however, Landlord shall give notice to Tenant and Guarantor that such assignment
has been made, but the failure of Landlord to give such notice shall not affect
the validity hereof or of the assignment;
4. Should any litigation be commenced between the parties hereto concerning
this Guaranty of the rights or duties or either in relation thereto, the party
prevailing in such litigation shall be entitled, in addition to such other
relief as may be granted, to a reasonable sum as and for its attorney's fees in
such litigation which shall be determined by the Court;
5. That the terms and provisions of this Guaranty of Lease shall be binding
upon and inure to the benefit of the heirs, legal representatives and assigns of
the parties hereto;
6. That if for any reason any of the provisions hereof are or become
unenforceable or ineffective, all the remaining provisions shall be and remain
in full force and effect;
7. That this Guaranty of Lease shall be governed by and construed in
accordance with the laws of the State of Georgia. Guarantor submits to the
jurisdiction of the courts of the State of Georgia and agrees that notice of
service of process may be made on Guarantor by certified or registered mail,
postage prepaid, addressed at the addresses shown below following Guarantor's
signatures, or at such other address as such Guarantor may designate from time
to time by written notice to Landlord;
8. Landlord agrees that, on default by Tenant under the Lease, upon giving
written notice of such default to Tenant, Landlord shall simultaneously furnish
Guarantor with a copy of such notice. Landlord may, at its option, bring a
separate action or actions against Guarantor whether or not an action is brought
against Tenant and whether or not Tenant is joined in any such action.
Page 2 of Exhibit "E" to the Laing Palisades, L.L.C., a Georgia limited
liability company, and Direct Mortgages Partners, Inc., a corporation of the
State of Delaware, d/b/a Bankers Direct Mortgage, dated October 20, 1997.
IN WITNESS WHEREOF, Guarantor and Landlord have executed these presents the day
of October, 1997.
Signed, Sealed and delivered in GUARANTOR: CFI Mortgage, Inc.,
the presence of: a Delaware Corporation
/S/ PATRICIA E. KLAMERT
Witness By: /S/ ROGER W. STUBBS
Title: Executive Vice President
/S/ JOY ORSINI
Notary Public Address of Guarantor:
580 Village Blvd; Suite 120
West Palm Beach, FL 33409
Attest: /s/
Title: Chairman
Signed, Sealed and delivered in LANDLORD: Laing Palisades,
the presence of: L.L.C., a Georgia limited
liability company
/S/
Notary Public By: LAING PROPERTIES, INC.
Manager
/S/ By: /S/ Laing Properties, Inc.
Witness Title: Executive Vice President
ATTEST: /S/ ROGER R. STUBBS
Title: Vice President and Secretary
Exhibit 10.31
LEASE AGREEMENT
THIS LEASE, dated this 11th day of August, 1997, by and between PEARL
PROPERTIES, LTD., a Florida Limited Partnership, of 1000 North Dixie Highway,
Suite A, West Palm Beach, Florida 33401 (hereinafter referred to as the
"Lessor"), and BANKERS DIRECT MORTGAGE CORPORATION, 580 Village Blvd., Suite
120, West Palm Beach, FL., 33409 (hereinafter referred to as the "Lessee");
WITNESSETH:
1. DEMISED PREMISES:
Lessor, in consideration of the rents and covenants hereinafter stipulated
to be paid and performed by the Lessee, does hereby demise and Lease to Lessee,
and Lessee hereby rents from Lessor, the following described premises (herein
called "Demised Premises"), situated in the City of West Palm Beach, County of
Palm Beach, State of Florida, being a portion of the Building known as PEARL
CORPORATE CENTRE, located at 2200 North Florida Mango Road, West Palm Beach,
Florida 33409, and more fully described as follows:
o Known as being Suite 201, consisting of approximately 6,000
square feet of space. The Demised Premises are stipulated for
all purposes to contain approximately 6,000 square feet of
"net rentable area."
o "Net rentable area" means the gross area within the
exterior surface of the exterior walls to the midpoint of any
walls separating portions of the Demised Premises from those
of adjacent Lessees and to the outside of the walls separating
the Demised Premises from common areas, except that "net
rentable area" shall not include any common areas, core
factor, loss factor or common area factor, except such areas
that may be in the exclusive control and possession of the
Lessee.
2. USE:
The Demised Premises shall be occupied and used solely for the purpose of a
general office and operations center for a mortgage/finance company and
activities incidental thereto.
Lessee covenants and agrees not to use or occupy or permit said Demised
Premises or any part thereof to be used or occupied for any purpose contrary to
law or the rules or regulations of any public authority. Lessee shall actively
and diligently operate its business in the Demised Premises in a reputable
manner, and shall not commit or permit any waste in the Demised Premises.
3. TERM:
To have and to hold for and during the term of 36 months, commencing on the
date Lessor shall have executed this Lease and turned over the Demised Premises
for Lessee's work. (Commencement Date), and expiring on the last day of the 36th
month.
4. RENT:
Lessee hereby covenants and agrees to pay Lessor as rent for the Demised
Premises the sum of $179,000, plus those items specified at paragraphs 8, 11,
15, and elsewhere in this Lease as additional rent or otherwise. For convenience
purposes, so long as Lessee satisfies each of the covenants and provisions of
this Lease Agreement, the same shall be paid in monthly installments as per the
following schedule:
YEAR RENT PER SQ. FT. ANNUAL RENT MONTHLY RENT
1 (1st 2 mo. Free) 10.00 (net eff rnt 8.33) 50,000 5,000.
2 10.50 63,000 5,250.
3 11.00 66,000 5,500.
Said monthly rental payments, plus the applicable sales tax currently in
the amount of six percent (6%), shall be payable in advance on or before the
first day of each month. Lessee shall be responsible for any increase in sales
tax which will be reflected in increased monthly rental as of the first day of
the month following any tax increase. It is the purpose and intent of Lessor and
Lessee that the rent shall be absolutely net to Lessor. Any payment due from
Lessee to Lessor not received by Lessor within ten (10) days after the due date
shall bear a late fee equal to six percent (6%) of the actual payment. It is
understood and agreed that Lessor waives the first two months rent under this
Lease Agreement, or the 60 day period following delivery of the Demised Premises
by Lessor to Lessee. At the expiration of the sixty day rent free period, in the
event the delivery date of the Demised Premises was on a day other than the
first day of the month, Lessee shall pay to Lessor the balance of rent due after
expiration of the initial 60 day rent free period and the commencement of the
first full month of rent due under this Lease Agreement.
5. PREPAID RENT:
Upon the execution and delivery of this Lease, Lessee shall deposit with
Lessor the sum of $5,000.00 in cash, to be held by Lessor as a deposit for
assurance of the payment of the rent and the full and faithful performance of
all of the terms, covenants and conditions of this Lease.
Lessee shall also pay upon execution and delivery of this lease, the first
month's rent totaling $5,000 plus $300.00 sales tax and the last month's rent
totaling $5,000 plus $300.00 sales tax. (Total Payment upon execution of lease:
($16,130.00).
In no event shall any portion of the deposit be used for the payment of any
rental hereunder. If Lessee shall fail at any time to perform any of the terms,
covenants and conditions of this lease, Lessor shall have the right to apply the
deposit, or any part thereof, to any deficiency caused by such default, without
jeopardizing any other rights reserved to Lessor herein, but in no event shall
Lessor be required to use or apply the deposit for any such purpose. If Lessor
so applies all or any portion of the Deposit, Lessee shall promptly deposit with
Lessor an amount sufficient to restore the deposit to the amount first herein
mentioned. If Lessee shall have faithfully performed all of the terms, covenants
and conditions of this Lease, Lessor shall refund to Lessee the aforesaid
deposit within thirty (30) days after the termination of this Lease and the
vacation of the Demised Premises by Lessee. Notwithstanding anything to the
contrary which may be contained hereinabove, insofar as Lessee shall be deemed
in full compliance with all the terms, conditions, and covenants of this lease,
the Deposit as provided for herein shall be applied to the rental installment of
the 30th month of the Lease Term.
6. OPTION TO RENEW:
Lessee will have option to renew for one 3 year period (8/l/00-7/31/03).
The rent applicable for the option period will be the then "Fair Market" rental
rate for the area, but in no event shall the rent be lower than the rate in
effect at the termination of the Lease. The option may be exercised by Lessee,
provided Lessee is not in default under any of the terms and conditions of this
Lease as provided herein and Lessee shall have given Lessor at least one hundred
and twenty (120) days written notice of Lessee's intent to exercise the option
period.
7. ALTERATIONS & IMPROVEMENTS:
Lessor shall deliver the Demised Premises to Lessee "AS IS." Any additional
work with respect to the Demised Premises as may be contemplated by Lessee,
which shall modify, change, or otherwise alter the scope or specifications of
the Demised Premises shall be at the sole cost and expense of Lessee. Lessor's
delivery of the Demised Premises shall include that all mechanical systems,
electrical, plumbing and HVAC Systems shall be in good working order and in
compliance with regulatory authorities.
All alterations, improvements, additions to the Demised Premises during the
Lease Term by Lessee, and the contractors, subcontractors or other workmen
performing such alterations, improvements or additions, must be approved by
Lessor, which consent shall not be unreasonably withheld, and be in accordance
with Lessor's building rules and regulations and architectural plans and shall
at once when made or installed be deemed to have attached to the real property
and shall remain for the benefit of Lessor at the end of the term hereof,
excluding Lessee's furniture, removable fixtures and office equipment. Lessor's
delivery of the Demised Premises and Lessee's occupancy of same shall indicate
Lessee's acceptance of the Demised Premises in all respects, except that Lessee
shall have five (5) working days from the first day of occupancy to inspect the
Demised Premises for any defects as may exist.
8. UTILITIES:
Lessee's use of water, waste, electrical, security monitoring or other
utility services furnished by Lessor shall be separately metered or invoiced,
and all such bills for utility services shall be paid by the Lessee. Lessor
shall insure that utility services are provided to Building and to the Demised
Premised. In such event as any utility services shall be interrupted, Lessor
shall diligently pursue the resumption of service.
9. REAL ESTATE TAXES:
Lessee shall pay its proportionate share of increases in the real estate
taxes over the prior year assessed against the real estate and Building on and
in which the Demised Premises are located during the term of this Lease, which
shall include all real estate taxes, assessments and any other governmental
impositions and charges of every kind and nature, whatsoever, which shall or
may, during the Lease term, be levied, assessed or imposed. Lessee's
proportionate share shall be computed each year by multiplying the total amount
of the annual real estate taxes by a fraction, the numerator of which shall be
the net rentable area occupied by the Lessee and the denominator of which shall
be the total rental area of the Building (.1365436). Notwithstanding the
foregoing, provided that the increase in real estate taxes to Lessor shall be
equal to or less than five percent (5%), Lessee shall incur no additional rent
with respect to real estate taxes; however, in the event that the increase in
real estate taxes shall exceed five percent (5%), Lessee shall pay its
proportionate share of any such increase.
10. PERSONAL PROPERTY TAXES:
Lessee agrees to pay, when due, all taxes assessed Lessee's personal
property located in the Demised Premises.
11. MAINTENANCE AND REPAIR:
Lessee covenants and agrees to keep and maintain in good order, condition
and repair the Demised Premises and any part thereof, including, but not limited
to all doors, entrances, elevators, windows, glass, plumbing, heating, air
conditioning, and electrical equipment and fixtures, interior walls, floors and
ceilings, all plate glass specific to the Demised Premises, storefront and its
components, all partitions, door frames, moldings, locks and hardware, fixtures,
equipment and appurtenances thereof and improvements thereto (as installed by
Lessee) and shall maintain same (including periodic painting and decoration as
may be necessary.) Lessee agrees to pay for an Annual Service Contract with a
reputable air conditioning company and a reputable elevator service company,
approved by Lessor, to provide for the air conditioning systems: quarterly
compressor and air handler checks, lubrication, duct inspections, filter
changes, freon level and pressure checks; and for the elevator, routine
examination, lubrication, cleaning, adjustment, parts replacement and
performance of safety tests, including an annual relief pressure test, and to
pay for all necessary repairs to and replacement of systems up to $300. per
occurrence. Lessor agrees to pay for elevator and air conditioning repairs in
excess of Lessee's $300. per occurrence obligation, provided that the repair is
not due to Lessee negligence in the use of the systems or failure to provide the
Annual Service Contracts as noted above. Repairs to the elevator and air
conditioning systems are defined as work necessitated by failures in the systems
provided upon occupancy of the Demised Premises. Any additional systems, or
specialized air conditioning or heating needs that may arise during the Lease
Term, or any specialized requests for air flow, temperature distribution, or
environmental requirements within the Demised Premises will be at the sole cost
and expense of the Lessee. Lessee shall at Lessee's own cost and expense, repair
any damage done to the Demised Premises, including replacement of damaged
portions, or items as may be caused by Lessee or Lessee's agents, employees,
invitees, or visitors. All such work or repairs by Lessee shall be effected in
compliance with all applicable laws; provided, however, if Lessee fails to make
such repairs or replacements promptly, Lessor may, at its option, upon 30 days
notice to Lessee, make such repairs or replacements, and Lessee shall pay the
costs thereof to the Lessor within ten (10) days of Lessor's demand thereof, as
additional rent. Lessor shall maintain at Lessor's sole cost and expense all
structural and exterior components of the building and the Demised Premises, all
capital improvements, including but not limited to the plumbing in the slab or
the walls, electrical in the walls and to the electric panel and all building
mechanical systems, except for elevator and air conditioning systems, which will
be a joint responsibility as described above.
12. MAINTENANCE & CONTROL OF COMMON AREAS:
Lessor covenants and agrees that during the term of this Lease or any
renewal or extension thereof, it shall keep and maintain the "common areas" in
good repair and reasonably lighted. For these services, Lessee shall pay its
proportionate share of the annual increases in cost and expense to Lessor of
operating and maintaining and repairing the common areas. For the purpose of
this article, common area maintenance costs shall mean all sums incurred in
connection with the operation, maintenance, and repair of the common areas,
excluding capital improvements, and shall include, but not be limited to, the
costs and expense of the following:
o Maintenance and repair of all parking lot surfaces,
sidewalks, curbs and driveways, including cleaning, sweeping,
sealing, striping, and repaving.
o Landscaping, replanting, and replacing of flowers, shrubbery,
plants and trees and watering the same.
o Maintenance and repair of the storm and
sanitary drainage systems; lighting systems, emergency
water and sprinkler systems and security systems, including
electrical charges, bulbs and fixtures which shall always be
included in the computation of Lessee's common area
maintenance costs.
o Normal maintenance to the exterior of the Building,
including, but not limited to painting the exterior, roof
repairs, and structural repairs.
o Trash removal, not including wood pallets, other non
compatible items or trash generated off the premises.
o Normal maintenance and cleaning of exterior windows
Common area maintenance expense shall be computed by multiplying the total
amount of the common area maintenance costs each year by a fraction, the
numerator of which shall be the net rentable area occupied by the Lessee and the
denominator of which shall be the total square footage of the Building
(1365436). Lessee's proportionate share of increases in the common area
maintenance costs for each calendar year and partial calendar year shall be
billed annually. Notwithstanding the foregoing, provided that the increase in
common area maintenance to Lessor shall be equal to or less than five percent
(5%), Lessee shall incur no additional rent with respect to common area
maintenance; however, in the event that the increase in common area maintenance
shall exceed five percent (5%), Lessee shall pay its proportionate share of any
such increase.
13. PARKING:
During the term of this Lease, Lessee shall have the exclusive use of six
(6) parking spaces marked BDM 1-6, and the non-exclusive use in common with
Lessor, other Lessees of the building. Their guests and invitees, of the
non-reserved, common automobile parking and truck loading areas, driveways and
rights-of-way, subject to rules and regulations for the use thereof as
prescribed from time to time by Lessor. No specific designated parking spaces
shall be assigned to Lessee, except for the six (6) referenced above. Any other
agreements between Lessee and Lessor regarding parking must be in writing.
Lessor shall have the right to reserve parking spaces as it elects and condition
use thereof on such terms as it elects.
14. SIGNS:
Any signs erected or placed on any exterior portion of the Demised Premises
or the Building shall conform to the requirements and regulations established by
the Lessor, including, but not limited to size, colors, aesthetics, and
location. Signs will be at the sole expense of the Lessee. All signage as
contemplated herein shall be subject to Lessor's approval, which approval shall
not be unreasonably withheld.
15. COMPLIANCE WITH LAWS AND ORDINANCES:
Lessee, at Lessee's sole cost and expense, will comply with all Federal,
State, County, and City laws, ordinances, rules and regulations of any duly
constituted authority, affecting or respecting the Demised Premises, as pertains
to Lessee's usage of the Demised Premises.
16. FIRE AND EXTENDED COVERAGE INSURANCE:
Lessor shall be responsible during the term of this Lease to procure and
maintain fire, extended coverage, vandalism, malicious mischief and property
insurance on the Building in which the Demised Premises are located. In the
event of any loss covered by such insurance, the policy or policies shall
provide that the proceeds therefrom shall be payable to the Lessor. Lessee shall
pay its proportionate share of increases in the cost of property insurance
policies during the term of this Lease which shall be computed by multiplying
the total cost of the insurance by a fraction, the numerator of which shall be
the net rentable area occupied by the Lessee and the denominator of which shall
be the total rentable area of the Building (. 1365436). Notwithstanding the
foregoing, provided that the increase in fire and extended coverage insurance to
Lessor shall be equal to or less than five percent (5%), Lessee shall incur no
additional rent with respect to fire and extended coverage insurance; however,
in the event that the increase in fire and extended coverage insurance shall
exceed five percent (5%), Lessee shall pay its proportionate share of any such
increase. Lessee shall be solely responsible in the event that the cost of the
property insurance is increased as a result of Lessee's use and occupancy of the
Demised Premises.
17. INDEMNITY AND LIABILITY INSURANCE:
Lessee shall indemnify and hold Lessor harmless from all suits, actions,
damages, liability, expenses and associated fees and costs, attorney's and
otherwise, as a result of Lessee's use of the Demised Premises and any damage or
destruction to person (s) or property, loss of life, loss of income from any
cause whatsoever, provided that such indemnification as set forth shall not
extend to any acts of gross willfull negligence by Lessor, its agents,
employees, affiliates and assigns. Lessee convenants and agrees that it will
protect, save and hold Lessor forever harmless and indemnified against and from
any penalty or damage or charges imposed for any violation of any law or
ordinance, whether occasioned by the gross negligence of Lessee or those holding
under Lessee, and that Lessee will at all times protect, indemnify, save and
hold harmless Lessor against and from all claims, losses, costs, damages,
liabilities or expenses arising out of, or from any accident or other occurrence
on or about the Demised Premises causing injury to any person or property
whomsoever or whatsoever, and will protect, indemnify, save and hold harmless
Lessor against and from any and all claims, losses, costs, damages, liabilities
or expenses arising out of any failure of Lessee in any respect to comply with
and perform all the requirements and provisions of this Lease.
Lessee, at all times during the term of this Lease, shall procure and
maintain in full force and effect, general public liability insurance, insuring
the Lessee against any and all claims, actions, causes of action, costs,
liabilities and expenses for or, on account of any injury to or the death of any
person or persons, or for or on account of any loss of, damage to or destruction
of any property, caused by or resulting from any act or omission occurring on or
about the Demised Premises with combined single limits of not less than ONE
MILLION DOLLARS ($1,000,000.00) for injuries to one or more than one person in
any one accident, and not less than TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00) for property damage. Such insurance shall be written with a
company authorized to engage in the business of general liability insurance in
the State of Florida and shall name Lessor as an additional insured thereunder.
Said insurance shall provide that it may not be canceled without the Lessor
being given thirty (30) days prior written notice by the insurance company.
Lessee shall provide Lessor with current certificates of insurance and shall
also provide Lessor with paid receipts or other evidence satisfactory to Lessor
indicating payment of the premium for said insurance policy or policies at least
thirty (30) days prior to the expiration of the policy or policies of insurance.
17.1 WAIVER OF SUBROGATION:
In any event of Lessee's loss or damage to the Building, the Premises,
and/or any contents, Lessee shall look first to any insurance in its favor
before making any claim against the Lessor.
Lessee shall obtain for each policy of such insurance, provisions
permitting waiver of any claim against the Lessor for loss or damage within the
scope of such insurance. Lessee, to such extent permitted, for itself and its
insurers, waives all such insured claims against Lessor.
Notwithstanding any other provision of this Lease, Lessor shall carry, at
its own cost, fire and extended coverage insurance and vandalism and malicious
mischief insurance on the Leased Premises and the building in which the Leased
Premises are a part to the extent Lessor shall deem appropriate, and Lessee
shall carry, at its own costs, fire and extended coverage insurance, and
vandalism and malicious mischief insurance on the property of the Lessee placed
in or upon the Demised Premises to the extent that Lessee shall deem
appropriate. Each party obtaining such insurance shall have their insurer under
such policies of insurance waive, in writing, any and all rights of subrogation
that such insurer might otherwise have against the other party to this Lease.
Lessee shall pay the cost of such waiver if a charge is made by Lessor's
insurer. Each party to this Lease waives any and all rights of recovery against
the other party for losses covered or normally covered by fire and extended
coverage insurance and vandalism and malicious mischief insurance.
18. RIGHT OF FIRST REFUSAL:
Lessee shall have the Right of First Refusal to lease Suite 102, when it
becomes available, except for during the first ninety (90) days of the Lease
Period, or (8/l/97-10/31/97), whichever period is longer, during which period,
Semco Manufacturing/Unison Technologies shall have the right. Thereafter, Lessee
will have the Right of First Refusal, which must be exercised by Lessee within 7
days of notification by Lessor of an offer to lease the Option Premises. Lessor
shall forward to Lessee a registered offer and acceptance of the Option Premises
whereupon Lessee, at Lessee's election, may determine to lease the Option
Premises under the same terms, conditions and covenants of the Demised Premises,
except that the rent for Option Premises shall by $.50 per square foot more than
for the Demised Premises. If Lessee shall have determined to lease the Option
Premises, then the Leases for the Demised Premises and Option Premises shall be
coterminous, except for the aforementioned rent rate differential. In the event
Lessee does not exercise the Right of First Refusal within 7 days of
notification by Lessor, the option shall be deemed by both parties as not
exercised and therefore the Right of First Refusal expired.
19. STORAGE AREA:
It is understood and agreed that Lessor will permit Lessee to store a
reasonable number of dead files in unit 401 at no additional charge, provided
unit 401 is not rented and at Lessor's sole discretion.
20. MECHANIC'S LIEN:
Lessee shall not permit to be created nor to remain undischarged any lien,
encumbrance or charge arising out of any work performed on behalf of Lessee at
Lessee's sole request of any contractor, mechanic, laborer or materialman which
might be or become a lien or encumbrance or charge upon the Demised Premises or
the Building of which the Demised Premises is a part, or the income therefrom ,
and Lessee shall not suffer any other matter or thing whereby the estate, right
and interest of Lessor in the Demised Premises or in the Building of which
Demised Premises is a part might be impaired. Lessee shall include in all
contracts and subcontracts for work to be performed on Lessee's behalf at the
Demised Premises provisions wherein such contractor or subcontractor
acknowledges that Lessor has no liability under such contracts and subcontracts,
and that such contractor or subcontractor waives any right it may have to lien
or attach Lessor's Building or the real estate upon which the Building is
located. If any lien or notice of lien on account of an alleged debt of Lessee
or any notice of contract by a party engaged by Lessee or Lessee's contractor to
work in the Demised Premises shall be filed against the Demised Premises or the
Building of which the Demised Premises is a part, or the real property on which
the building is located, Lessee shall, within twenty (20) days after notice of
the filing thereof, cause the same to be discharged of record by payment,
deposit, bond, order of a court of competent jurisdiction or otherwise. If
Lessee shall fail to cause such lien or notice of lien to be discharged within
the period provided, then Lessor, in addition to any other rights or remedies,
may, but shall not be obligated to, discharge the same by either paying the
amounts claimed to be due or by procuring the discharge of such lien by deposit
or by bonding proceedings; and in any such event, Lessor shall be entitled, if
Lessor so elects, to defend any prosecution of an action for foreclosure of such
lien by the Lienor and to pay the amount of the judgment in favor of the Lienor
with interest, costs and allowances. Any amount paid by Lessor and all costs and
expenses, including attorney's fees, incurred by Lessor in connection therewith,
together with interest thereon at the maximum legal rate from the respective
dates of Lessor's making payment or incurring of the cost and expense, shall be
paid by Lessee to Lessor on demand as additional rent. Nothing in this Lease
shall be construed as in any way constituting a consent or request by Lessor,
expressed or implied, by inference or otherwise, to any contractor,
subcontractor, laborer or materialman for the performance of any labor or the
furnishings or any materials for any specific or general improvements,
alteration or repair of or to the Demised Premises or to any part thereof.
21. PROPERTY IN THE DEMISED PREMISES:
All fixtures, carpeting, and other structural alterations attached to the
Demised Premises, (other than unattached leasehold improvements, and unattached
fixtures furnished by Lessee), shall at once when furnished or installed be
deemed to have attached to the freehold and to have become the property of
Lessor.
Unattached, removable trade fixtures and leasehold improvement as provided
for herein may be removed by Lessee during the term of the term hereof provided
that any and all damage to the Building or the Demised Premises resulting from
or caused by such removal, if any, shall be promptly repaired at Lessee's sole
cost and expense, and the Demised Premised restored to their original condition
at the inception of this Lease, reasonable wear and tear, damage or destruction
by fire or other insured casualty excepted.
All of Lessee's personal property of every kind or description which may at
any time be in the Demised Premises shall be there at Lessee's sole risk, and
Lessor shall not be liable for any damage to said property or loss suffered by
the business or occupation of Lessee, caused by water from any source
whatsoever, or from the bursting, overflowing or leaking of sewage, or steam
pipes, or from the heating or plumbing fixtures, or from electric wires, or from
odors, or caused in any manner whatsoever.
22. ACCESS TO DEMISED PREMISES:
Lessor shall have access to the Demised Premises at such reasonable times
as shall be mutually agreed to by Lessor and Lessee, notwithstanding, that
Lessor in the event of an emergency shall have access to the Demised Premises as
needed. Lessee shall permit Lessor to make such repairs, alterations,
improvements or additions in and to the Demised Premises that Lessor may deem
desirable or necessary. Lessor reserves the right to temporarily stop,
interrupt, suspend, or curtail utility services because of accident or
emergency, or for alterations, additions, repairs, or improvements to the
building, provided that Lessor makes every effort to minimize inconvenience to
Lessee, including any adverse affect on ingress or egress to the Demised
Premises which might materially, adversely affect the operation of Lessee's
business.
23. ASSIGNMENT & SUBLEASING:
Lessee shall be without right to assign this Lease or the Demised Premises
or sublet the same in whole or in part without the written consent of the Lessor
first having been obtained, which consent shall not be unreasonably withheld,
nor shall there be an assignment of this Lease by operation of law. However,
Lessor agrees and accepts that this Lease shall be assignable to any affiliated
or subsidiary companies of Lessee, with the written consent of the Lessor, which
consent shall not be unreasonably withheld, and freely assignable to any
affiliated or subsidiary company of Lessee, provided said affiliated or
subsidiary company's usage, density and parking requirements shall be
substantially the same as that of Lessee. Lessee shall promptly pay to Lessor
any rent, additional rent or other consideration received by Lessee in
connection with any assignment or subletting in excess of the rent, additional
rent and other charges hereunder. Any change in the control of Lessee, which is
a privately owned corporation, partnership or business trust, herein defined as
any change of ownership in excess of fifty percent (50%) of the outstanding
shares or interest in the company, without the prior written consent of Lessor
to said change in control or operation, shall constitute an attempted assignment
or subletting in violation of this provision and shall be null and void and of
no effect. Any assignment or subletting even with the approval of the Lessor
shall not release the Lessee from liability hereunder. Any change in the use of
the Demised Premises in connection with the assignment or subletting shall be
subject to Lessors consent which Lessor may withhold in its sole discretion. If,
as a result of any approved assignment of the Demised Premises the use thereof
is changed, then the Lessee shall be solely responsible for any alterations and
improvements and any increase in the cost of fire, extended coverage, vandalism
and malicious mischief insurance. Any consent by Lessor to any proposed
assignment or subletting shall not constitute consent to any future or
subsequent assignment or subletting.
24. BANKRUPTCY & INSOLVENCY:
If Lessee's Leasehold estate created hereby shall be taken in execution or
by other process of law, or if any receiver or trustee shall be appointed for
the business and property of Lessee, but only if such execution of other
process, receivership, or trusteeship shall not be discharged or ordered removed
within thirty (30) days after the date that Lessee shall receive actual notice
thereof; or if Lessee shall be adjudicated a bankrupt, or if Lessee shall make a
general assignment of its Leasehold estate created hereby for the benefit of
creditors, then in any such event, Lessor may terminate this Lease by giving
notice thereof to Lessee, except in the event that Lessee continues to make its
rent payments and meets all other obligations of this Lease Agreement, whereupon
this Lease Agreement shall remain in full force and effect.
25. FIRE & CASUALTY:
If the Demised Premises are damaged or destroyed by fire or other casualty,
the following provisions shall determine the effect of the damage or destruction
on this Lease:
o If the Building or the Demised Premises, or
both, are completely destroyed, then either the Lessor
or the Lessee shall have the right, at its option, to
terminate this Lease by giving written notice to the other
within thirty (30) days after the date of such damage or
destruction, in which event this Lease shall terminate as of
the date of such damage or destruction with the same effect as
if the date of such damage or destruction was the expiration
date, and all Rent and Additional Rent and other sums payable
by Lessee hereunder shall be apportioned and paid through and
including the date of such damage or destruction.
o If neither the Lessor nor Lessee terminates
this Lease as aforesaid, then Lessor shall immediately
commence and within one hundred eighty (180) days from the
date of such damage, shall complete the repairs, rebuilding
and/or reconstruction of the Building and the Demised Premises
so as to restore the same with a building of the same general
type of construction as presently exists. From the date of
such damage or destruction and until the Demised Premises are
fully restored the Rent and Additional Rent shall completely
abate if there is total destruction or if there is partial
destruction or occurrence of damage or destruction, then the
Rent and Additional Rent shall be equitably apportioned
according to the area of the Demised Premises which is
unusable by Lessee.
If the Building or the Demised Premises, or both, are partially damaged or
destroyed, but remain suitable for the continued operation of Lessee's business,
by mutual agreement of Lessor and Lessee, then Lessor shall commence the
restoration of the Building or the Demised Premises within thirty (30) days
after the date of occurrence of such damage or destruction therein and shall
complete the repair and restoration of the Demised Premises and/or Building to a
condition which is substantially similar to that which existed immediately prior
to the damage or destruction within ninety (90) days after the date of such
commencement. During such period of time, rent and additional rent shall abate
as set fourth above from the date of such damage or destruction until completion
of the repairs or restoration. Notwithstanding the foregoing, Lessor has the
right to provide Lessee substitute premises, if available, for Lessee's use
during which time Lessee shall continue to pay rent for use of same.
26. CONDEMNATION OR APPROPRIATION:
If, after the execution of this Lease or any extension or renewal hereof,
any portion of the Demised Premises shall be appropriated or condemned under
power of eminent domain or by any competent authority, such taking or
appropriation shall not render this Lease void, except that if the amount taken
makes the Demised Premises untenantable by mutual agreement of Lessor and
Lessee, then this Lease shall become void from the time when possession thereof
is taken as a result of such proceedings, and the Lessee shall pay all rents and
perform and observe all other covenants hereof up to the time when possession is
taken.
In the event that only a portion of the Demised Premises is taken as a
result of such proceedings, and provided Lessor and Lessee agree that the
remaining portion of the Demised Premises is Lesseeable, the Lessor, with all
reasonable dispatch, shall repair the remaining portion of the Demised Premises
so as to restore the same to a complete architectural unit, and there shall be a
proportionate abatement of rent and additional rent, based on the reduced size
of the Demised Premises.
Lessee shall have the right to make a separate/secondary claim for any
damages or loss as shall be occasioned under such taking, insofar as such claim
shall not materially diminish or adversely impact any claim (s) as may be
instituted by Lessor.
27. NOTICES:
All notices herein required or permitted to be given to or served upon
either party shall be in writing. Any such notice shall be sufficiently given or
served if sent by certified mail or by any nationally recognized overnight
carrier to the Lessor or Lessee at the address set fourth on the first page
thereof.
28. RIGHT OF LESSOR TO PERFORM LESSEE'S COVENANTS:
Lessor shall have the right at any time, after thirty (30) days written
notice to Lessee (or without notice in case of an emergency or in case any fine,
penalty, interest or cost may otherwise be imposed), to make any payment or
perform any act required by Lessee under any provision of this Lease, and in
exercising such right, to incur necessary and incidental costs and expense.
Nothing herein shall imply any obligation on the part of Lessor to make any
payment or perform any act required of the Lessee, and the exercise of the right
to do so shall not constitute a Lease of any obligation or a waiver of any
default.
All payments made and all costs and expenses incurred in connection with
any exercise of such right shall be reimbursed by the Lessee within thirty (30)
days after such payment together with interest at two points over the Prime
Lending Rate as stated in The Wall Street Journal from the respective date of
the making of such payment or the incurring of such costs and expense. In
addition to any other rights and remedies available to Lessor, Lessor shall
have, in respect of Lessee's failure to make reimbursement of any amount as
aforesaid, the same rights and remedies as in the case of a default by Lessee in
the payment of rent.
29. DEFAULT BY LESSEE:
The following actions shall constitute a default by Lessee: (1) failure to
make any rental payment, including prorated increases in the cost of Real Estate
Taxes, Common Area Maintenance, Insurance and any other payments due hereunder
(hereinafter "rents") within fifteen (15) days after the same shall become due;
(2) abandonment of the Demised Premises; (3) breach or failure to perform any of
the terms or conditions of this Lease other than the payment of rents, as
defined in (1) above, which if such breach or failure to perform shall continue
after the expiration of thirty (30) days from date the Lessor gives notice to
Lessee of such breach or failure to perform; provided, however, that if such
breach or failure to perform is of such a nature that it cannot be reasonably
corrected within thirty (30) days , then no breach or failure to perform shall
be deemed to have occurred if the Lessee promptly, upon receipt of the notice,
commences the curing of the breach or failure to perform and diligently
prosecutes the same to completion.
In the event of any default as defined herein, the Lessor shall have the
immediate right to end Lessee's right of possession under this Lease, and to
re-enter and remove all persons and property from the Demised Premises, and to
dispose of any such property, all without service of notice to Lessee or resort
to legal process, and without Lessor being liable for any loss which may be
occasioned thereby. Should Lessor elect to re-enter, as herein provided, or
should Lessor take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Lessor may make such alterations and repairs thereof
which Lessor in its sole discretion may deem advisable, and Lessor may re-let
the Demised Premises for such term or terms (which may be for a term extending
beyond the term of this Lease or any extensions or renewals thereof) and at such
rental or rentals and upon such other terms and conditions as Lessor in its sole
discretion may deem advisable. Upon each such reletting, any rentals received by
Lessor from such reletting shall be applied, first, to the payment of any
indebtedness other than rents, as defined in (1) above, due thereunder from
Lessee to Lessor; second, to the payment of any costs and expenses of such
reletting, including brokerage fees, attorney's fees, costs and expenses of
litigation reasonably incurred and the cost of alterations and repairs; third,
to the payment of rents, as defined in (1) above, due and unpaid hereunder; and
the residue, if any, shall be held by Lessor and applied in payment of future
rents, as defined in (1) above, to be paid during that month by Lessee
hereunder. Lessee shall pay the cost any deficiency to Lessor.
No such re-entry or taking of possession of the Demised Premises by Lessor
shall be construed as an election on its part to terminate this Lease in its
entirety unless a written notice of such termination be given to Lessee or
unless the termination be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, Lessor may at any time
thereafter elect to terminate this Lease in its entirely for any default by
Lessee. Should Lessor terminate this Lease in its entirety, for any such
default, in addition to any other remedies it might have, Lessor may recover
from Lessee all damages that Lessor may incur by reason of such default
including, but not limited to, any then due and unpaid rents, as defined in (1)
above, the cost of recovering the Demised Premises and reasonable Attorney's
fees. Should Lessor at any time end Lessee's right of possession for any default
by Lessee, (as hereinbefore provided), without termination of the Lease in its
entirety, in addition to any other remedies it might have, Lessor may recover
from Lessee all damages that Lessor may incur by reason of such default,
including but not limited to, any then due and unpaid rents, as defined in (1)
above, the cost of recovering the Demised Premises, reasonable attorney's fees,
and the balance of the rents as defined in (1) , above unpaid for the remainder
of the term hereof, all of which amounts shall be immediately due and payable
from Lessee to Lessor.
Further, upon breach or threatened breach by Lessee of any provision of
this Lease, Lessor shall have the right of injunction as if other remedies were
not provided for herein. Notwithstanding anything in this lease as may be
contained to the contrary, in the event of default under this Lease by Lessee,
Lessee shall have any and all rights and remedies with respect to default under
Florida State, Federal, Municipal, County, City or other applicable law or
statutes and in no event shall Lessee waive any of those rights or remedies as
contemplated herein excepting waiver of trial by jury, and the right to
interplead any claims, notwithstanding that the provisions of this lease shall
take precedent.
30. WAIVER OF LESSEE'S DEFAULT:
No waiver of any covenant or condition or of the breach of any covenant or
condition of this Lease shall be taken to constitute a waiver of any subsequent
breach of such covenant or condition nor to justify or authorize the
non-observance on any other occasion of the same or of any other covenant or
condition hereof, nor shall the acceptance of rent by Lessor at any time when
Lessee is in default under any covenant or condition hereof, be construed as a
waiver of such default or of Lessor's right to terminate this Lease on account
of such default, nor shall any waiver or indulgence granted by Lessor to Lessee
be taken as an estoppel against Lessor.
31. HOLDING OVER:
In the event Lessee continues to occupy the Demised Premises after the last
day of the initial term hereby created, or after the last day of any renewal or
extension of said term, and if Lessor does not consent to such holding over,
only a month to month tenancy shall be created at 2.0 times the then applicable
rental rate and upon the same terms and conditions contained herein.
32. SUBORDINATION AND COMPLIANCE WITH LENDER REQUIREMENTS:
This Lease is and shall be subject and subordinate to any mortgage or other
lien created by Lessor, whether presently existing or hereinafter arising upon
the Demised Premises or the Building and to any renewals, refinancing and
extension thereof Lessee agrees that any such mortgagee shall have the right at
any time to subordinate such mortgage, or other lien to this Lease on such terms
and subject to such conditions as such mortgagee may deem appropriate. Lessor is
hereby irrevocably vested with full power and authority to subordinate this
Lease to any mortgage, or any other lien now existing or hereinafter placed upon
the Demised Premises or the Building, and Lessee agrees upon demand to execute
such further instruments subordinating this Lease or pursuant to which Lessee
shall attorn to the holder of any such liens as Lessor may request. If Lessee
should fail to execute any subordination or other agreement required hereunder
as requested, within a reasonable period of time, then Lessee hereby irrevocably
constitutes Lessor as its Attorney-in-Fact to execute such instrument in
Lessee's name, place and stead, it being agreed that such power is irrevocable
and is one coupled with an interest. In consideration of the foregoing, Lessor
shall grant to Lessee for the term of this Lease and any subsequent renewal
thereof, a Right of Non-Disturbance with respect to the Demised Premises,
provided that Lessee shall be in compliance with all terms, conditions, and
covenants of this Lease. Lessor shall request any Lender with an interest in the
property to agree that as long as Lessee is current in its obligations under the
Lease, that Lessee's occupancy and rights under the Lease shall not be
disturbed.
Lessee agrees that it will from time to time, within fifteen (15) days
after request by Lessor, execute and deliver to such persons as Lessor shall
request, a statement in recordable form certifying that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the same
is in full force and effect as so modified), stating the dates to which rent and
other charges payable under this Lease have been paid, stating that the Lessor
is not ill default hereunder (or if Lessee alleges a default, stating the nature
of such alleged default) and further stating such other matters as Lessor or its
mortgagee shall reasonably require, including certain financial information
about the Lessee.
33. LESSOR'S LIEN:
Lessee hereby grants to Lessor a lien and security interest on all property
of Lessee now or hereinafter placed in or upon the Demised Premises, and such
property shall be and remain subject to such lien and security interest of the
Lessor for payment of all rents and other sums agreed to be paid by Lessee
hereunder. Provided, however, that Lessor shall not have a lien which would be
superior to a lien from a lending institution, supplier or leasing company, if
such lending institution, supplier or leasing company has a security interest in
the equipment, furniture or other tangible personal property and which security
interest has it origin in a transaction whereby Lessee acquired such equipment,
furniture or other tangible personal property. The provisions of this paragraph
relating to such lien and security interest shall constitute a security
agreement under and subject to the Uniform Commercial Code as enacted and in
force in the state of Florida so that the Lessor shall have and may enforce a
security interest on all property of the Lessee now or hereafter placed in or
upon the Demised Premises, in addition to any and all other rights of the Lessor
provided by law. Lessee agrees to execute as debtor, such financing statement or
statements and other such documents as Lessor may now or hereafter request in
order to protect or further perfect Lessor's security interest.
34. QUIET ENJOYMENT:
Lessor covenants and warrants to Lessee that during the term of this
Agreement, if Lessee is not in default hereunder, Lessee's quiet and peaceable
enjoyment of the Demised Premises shall not be disturbed nor interfered with.
35. INVALIDITY OF A PARTICULAR PROVISION:
If any term or provision of this Lease shall to any extent be deemed
invalid or unenforceable, the remainder of this Lease shall not be affected
thereby, and each term and provision of this Lease shall be valid and shall be
enforced to the fullest extent provided by law.
36. ATTORNEY'S FEES:
As to any dispute or lawsuit hereunder including at appellate level or in
any bankruptcy proceedings, the prevailing party shall be entitled to recover
its reasonable attorney's fees, court cost and other costs of collection from
the non-prevailing party.
37. GOVERNING BODY:
All matters pertaining to this Lease shall be governed by the laws of the
State of Florida.
38. FORCE MAJEURE:
Whenever a period of time is herein prescribed for the taking of any action
by the Lessor, Lessor shall not be liable or responsible for, and there shall be
excluded from the computation of such period of time, any delays due to strikes,
riots, acts of God, shortages of labor or materials, war, governmental laws,
unforeseen conditions, regulations, zoning, building department delays, or
restrictions, or any other cause whatsoever beyond the reasonable control of the
Lessor.
39. SUCCESSORS AND ASSIGNS:
All warranties, covenants and agreements herein shall inure to the benefit
of and be binding upon the heirs, devisee, executors, administrators, successors
and assigns of Lessor and Lessee.
40. RECORDING:
Lessee agrees not to record this Lease or any memorandum hereof, but Lessor
may record this Lease or a memorandum thereof, at its sole discretion.
41. EXONERATION:
The Lessor or any successor in interest that may be an individual, joint
venture, tenancy in common, firm or partnership, general or limited, shall not
be subject to personal liability on such individual or on the members of such
joint venture, tenancy in common, firm or partnership in respect to any of the
covenants or conditions of this Lease. The Lessee shall look solely to the
equity of the Lessor in the building for the satisfaction of the remedies of the
Lessee in the event of a breach by the Lessor. It is mutually agreed that this
clause is and shall be considered an integral part of the aforesaid Lease.
42. BROKERS:
Each party represents and warrants to the other that it has not made any
agreement or taken any action which has not already been disclosed and which may
cause anyone other than Trine Realty Partners to become entitled to a commission
as a result of the transactions contemplated by this Lease, and each will
indemnify and defend the other from any and all claims, actual or threatened,
for compensation by any such third person by reason of such party's breach of
its representation or warranty contained in this Section, except for Trine
Realty Partners, which represents the Lessee, but whose commission will be paid
in its entirety by the Lessor.
43. RADON:
Radon is a naturally occurring radioactive gas that, when it has
accumulated in the building in sufficient quantities, may present health risks
to persons who are exposed to it over time. Levels of radon which exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
or public health unit.
44. COMPLIANCE WITH ADA AND PREMISES:
Lessor, to the best of Lessor's knowledge, shall deliver the Demised
Premises in compliance with current space and access requirements of the
Americans With Disabilities Act as of the date of execution of this Lease
Agreement. Notwithstanding the foregoing, in such event that the Demised
Premises shall not be in compliance with the then current applicable ADA
requirements for space and access, the following shall occur: (1) Lessor may, at
Lessor's sole determination, agree to make such repairs and/or alterations to
accomplish compliance; or (2) Lessor, at Lessor's sole determination, may
terminate this Lease, wherein Lessor and Lessee shall be released from any and
all obligations as may have been assumed under this Lease. Lessee further
warrants that any Lessee improvements in the future will be designed and will be
built in full compliance with the then current space and access requirements of
the Americans With Disabilities Act. Nothing contained herein shall apply to any
instances where Lessee's non compliance with respect to ADA requirements shall
be caused by Lessee's specific usage of the Demised Premises.
45. COMPLIANCE WITH RULES AND REGULATIONS:
Lessee shall observe and comply with all reasonable rules and regulations
hereinafter set forth, which are made a part hereof, and with such further or
amended rules and regulations as Lessor may prescribe, for the safety, care, and
cleanliness of the Building, and the comfort, quiet, and convenience of all
occupants of the Building. A copy of the rules and regulations now existing is
attached hereto as Exhibit "A." Lessor reserves the right to amend and modify
said rules and regulations at any time as Lessor in its sole discretion may deem
necessary. Any such amendments shall be considered a part of this Lease as if
originally attached hereto.
IN WITNESS WHEREOF, the parties have hereunto executed this Lease on the
day and year first above set forth.
WITNESSED BY: "LESSOR"
/S/ SANDY GORMAN PEARL PROPERTIES, LTD.,
Pearl Properties, Inc., General Partner
By: /S/ BILL PEARL
Bill Pearl
Its President
"LESSEE"
BANKERS DIRECT MORTGAGE
CORPORATION
By: /S/ CHRISTOPHER CASTRO
Christopher Castro
Its President
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
Before me, a Notary Public in and for said County and State, personally
appeared the above named Bill Pearl and Christopher Castro who acknowledged that
they did sign the foregoing instrument and that the same is their free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal this 13th day of August, 1997.
FRANK E. MCCOWN
NOTARY PUBLIC
<PAGE>
EXHIBIT "A"
RULES AND REGULATIONS
Attached to and made a Part of Lease
1. The sidewalks, entrances, passages, courts, vestibules, stairways, corridors
and halls shall not be obstructed or used for any purpose other than ingress or
egress without the prior written consent of Lessor.
2. The toilets, wash basins and other plumbing fixtures shall not be used for
any purpose other than those for which they were constructed, and no sweepings,
rubbish, rags or other substances shall be thrown therein. All damage resulting
from any misuse of such fixtures shall be borne by Lessee who, or whose
employees, agents, invitees or sub-Lessees, their employees, agents or invitees,
shall have caused the same.
3. No Lessee shall mark, paint, drill into, or in any way deface any part of the
Premises or the Building; provided, however, that alterations, the construction
of Lessee improvements, and decorating shall be permitted subject to the terms
of the Lease with Lessee. No boring, cutting or stringing of wires, installation
of telephones and call boxes, or laying of floor coverings shall be permitted
without the prior written consent of Lessor (and then subject to such
restrictions as Lessor shall impose as a condition to such consent).
4. No bicycles, vehicles or animals of any kind (except for guide dogs for the
blind) shall be brought into or kept in or about the Premises. No cooking shall
be done or permitted by any Lessee on the Premises without prior written consent
of Lessor (and then subject to such restrictions as Lessor shall impose as a
condition to such consent) excepting the preparation of coffee, tea, hot
chocolate and similar items for Lessee, its employees and invitees and its
sub-Lessees, their employees and invitees. No Lessee shall cause or permit any
unusual or objectionable odors to escape from the Premises.
5. No Lessee shall make, or permit to be made any unseemly or disturbing noises,
sounds or vibrations, or otherwise disturb or interfere with occupants of this
or neighboring buildings or premises or those having business with them, whether
by the use of musical instrument, radio, phonograph, unusual noise, or in any
other way.
6. No Lessee shall throw or store anything out of doors or down the Building
corridors, stairwells or other areas of the Building.
7. All removals, or the carrying in or out of any safes, freight, furniture, or
bulky or heavy matter of any description must take place at the time and in the
manner which Lessor may determine from time to time and with appropriate
assurance to avoid damage to the Building, or any portion thereof. The moving of
safes or other fixtures or bulky or heavy matter of any kind must be made upon
previous notice to the manager of the Building and under his supervision and the
persons employed by any Lessee for such work must be acceptable to Lessor.
Lessor reserves the right to inspect all safes, freight or other bulky or heavy
articles to be brought into the Building and to exclude from the Building all
safes, freight or other bulky or heavy articles which violate any of these Rules
and Regulations or the Lease of which these Rules and Regulations are a part.
Lessor reserves the right to prohibit or impose conditions upon the installation
in the Premises of heavy objects which might overload the Building floors.
8. No Lessee shall purchase or otherwise obtain for use in the Premises vending
machines, barbering, bootblacking or other like services, or purchase or
otherwise obtain janitorial, maintenance or other like services, except from
persons authorized by Lessor, and at hours and under regulations fixed by
Lessor.
9. No Lessee shall engage in any advertising, which in Lessor's opinion, tends
to impair the reputation of the Building or its desirability and upon written
notice from Lessor, any Lessee shall immediately discontinue any such
advertising.
10. The requirements of Lessees will be attended to only upon application to the
Lessor's Office or to such other place as Lessor may from time to time direct.
11. Canvassing, soliciting and peddling in the Building are prohibited and each
Lessee shall cooperate to prevent the same.
12. a. The parking areas shall be used for the parking of
personal transportation vehicles (cars, pickups,
motorcycles, etc.) only. The parking areas shall not be
used for any other use including, without limitation,
washing or repairing vehicles, overnight parking, or other
storage of vehicles, or loading and unloading (except in
such zones as Lessor may from time to time designate for
such purpose).
b. Lessor shall have no obligation to maintain any attendant at or
for the parking areas Lessor shall have no obligation or liability to
Lessee, its agents, employees, or invitees, for any loss or damage
suffered to property or persons on account of the use or misuse of the
parking areas by persons other than Lessor.
c. Lessor reserves the right to use the parking areas for such other
purposes as it may from time to time designate.
d. Lessor reserves the right to tow, or cause to be towed, any vehicle
on account of any violation of these Rules and Regulations, and the
costs thereof shall be borne by the owner or driver of any such
vehicle.
e. Lessor has the absolute right to relocate or redesign the parking
facility.
13. All deliveries made to or on behalf of any Lessee or its Premises shall be
conducted in such a manner to avoid inconvenience to other Lessees and their
employees, clients and customers.
14. Lessee shall familiarize each of its employees with the portions of this
Exhibit pertinent to them.
15. To enhance Building Security, outside overhead door lights have been placed
on electric eyes at the front and rear entrances to the Premises and are powered
on the circuits paid for by the Lessee.
PEARL PROPERTIES, LTD
INDEX OF LEASE
BETWEEN
PEARL PROPERTIES, LTD
AND
BANKERS DIRECT MORTGAGE CORPORATION
SECTION HEADING PAGE
1 Demised Premises 1
2 Use 1
3 Term 1
4 Rent 1
5 Security Deposit, First & Last Month's Rent 2
6 Option to Renew 2
7 "As Is", Alterations & Improvements 2
8 Utilities 2
9 Real Estate Taxes 2
10 Personal Property Taxes 2
11 Maintenance & Repair 3
12 Maintenance & Control of Common Areas 3
13 Parking 3
14 Signs 4
15 Compliance with Laws & Ordinances 4
16 Fire & Extended Coverage Insurance 4
17 Indemnity & Liability Insurance 4
18 Right of First Refusal 5
19 Storage Area 5
20 Mechanic's Lien 5
21 Property in the Demised Premises 6
22 Access to Demised Premises 6
23 Assignment & Subleasing 6
24 Bankruptcy & Insolvency 6
25 Fire & Casualty 7
26 Condemnation or Appropriation 7
27 Notices 7
28 Right of Lessor to Perform Lessee's Covenants 7
29 Default by Lessee 7
30 Waiver of Lessee's Default 8
31 Holding Over 8
32 Subordination and Compliance with Lender 8
33 Lessor's Lien 9
34 Quiet Enjoyment 9
35 Invalidity of a Particular Provision 9
36 Attorney's Fees 9
37 Governing Body 9
38 Force Majeure 9
39 Successors & Assigns 9
40 Recording 9
41 Exoneration 9
42 Brokers 9
43 Radon 10
44 Compliance With ADA & Premises 10
45 Change of Location 10
46 Compliance with Rules & Regulations 10
48 Exhibit "A" 12
EXHIBIT 21
LIST OF SUBSIDIARIES
All subsidiaries are 100% owned by CFI Mortgage Inc.:
* Bankers Direct Mortgage Corporation
* Direct Mortgage Partners, Inc.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from consolidated
balance sheets, and consolidated statements of income of the Company in the
Company's 10-KSB and is qualified in its entirety by reference to such financial
statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,705,216
<SECURITIES> 0
<RECEIVABLES> 37,118,322
<ALLOWANCES> 450,000
<INVENTORY> 0
<CURRENT-ASSETS> 39,477,822
<PP&E> 1,451,259
<DEPRECIATION> 272,137
<TOTAL-ASSETS> 41,589,673
<CURRENT-LIABILITIES> 39,571,001
<BONDS> 554,745
0
20
<COMMON> 22,000
<OTHER-SE> 1,441,907
<TOTAL-LIABILITY-AND-EQUITY> 41,589,673
<SALES> 0
<TOTAL-REVENUES> 8,267,264
<CGS> 0
<TOTAL-COSTS> 12,600,157
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 432,000
<INTEREST-EXPENSE> 1,185,608
<INCOME-PRETAX> (5,950,501)
<INCOME-TAX> (558,000)
<INCOME-CONTINUING> (5,392,501)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,392,501)
<EPS-PRIMARY> (3.11)
<EPS-DILUTED> 0
</TABLE>
