<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
E-LOAN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 6162 77-0460084
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
5875 ARNOLD ROAD, SUITE 100
DUBLIN, CA 94568
(925) 241-2400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CHRIS LARSEN, CHIEF EXECUTIVE OFFICER
JANINA PAWLOWSKI, PRESIDENT
E-LOAN, INC.
5875 ARNOLD ROAD, SUITE 100
DUBLIN, CA 94568
(925) 241-2400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
MARIO M. ROSATI, ESQ. DONALD M. KELLER, JR., ESQ.
ISSAC J. VAUGHN, ESQ. JON E. GAVENMAN, ESQ.
WILSON SONSINI GOODRICH & ROSATI, P.C. VENTURE LAW GROUP
650 PAGE MILL ROAD A PROFESSIONAL CORPORATION
PALO ALTO, CA 94304 2800 SAND HILL ROAD
(650) 493-9300 MENLO PARK, CA 94025
(650) 854-4488
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO AGGREGATE OFFERING REGISTRATION
BE REGISTERED PRICE(1) FEE
- ----------------------------------------------------------------------------------------------------------------
Common stock, $0.001 par value............................ $55,200,000 $15,346.00
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated March 24, 1999.
Shares
[E-LOAN LOGO] E-LOAN, INC.
Common Stock
----------------------
This is an initial public offering of shares of common stock of E-LOAN. All
of the shares of common stock are being sold by E-LOAN, Inc.
Prior to the offering, there has been no market for the common stock. It is
currently estimated that the initial public offering price per share will be
between $ and $ per share. E-LOAN has applied for quotation of the
common stock on the Nasdaq National Market under the symbol "EELN".
See "Risk Factors" beginning on page 5 to read about certain factors you
should consider before buying shares of the common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per
Share Total
-------- --------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to E-LOAN........................ $ $
</TABLE>
The underwriters may, under certain circumstances, purchase up to an
additional shares from E-LOAN at the initial public offering
price less the underwriting discount.
----------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
----------------------
GOLDMAN, SACHS & CO. DONALDSON, LUFKIN & JENRETTE
HAMBRECHT & QUIST
----------------------
E*TRADE GROUP, INC. DLJDIRECT INC.
Facilitators of Internet distribution
----------------------
Prospectus dated , 1999.
<PAGE> 3
[INSIDE FRONT COVER]
------------------------
E-LOAN(R) is a registered trademark of E-LOAN. All other brand names or
trademarks appearing in this prospectus are the property of their respective
holders.
<PAGE> 4
PROSPECTUS SUMMARY
This summary may not contain all of the information that you should
consider before investing in our common stock. You should read the following
summary together with the more detailed information regarding E-LOAN and the
common stock being sold in this offering and our financial statements and notes
to those statements appearing elsewhere in this prospectus.
E-LOAN, INC.
E-LOAN is a leading online provider of mortgages, offering consumers the
ability to obtain the most suitable mortgages from a wide array of lenders at
substantial savings. E-LOAN's easy-to-use website enables borrowers to search
through over 50,000 products provided by more than 70 lending sources to find
the most competitively priced loans that match the borrowers' criteria.
Borrowers can analyze and compare loans online as well as receive unbiased loan
recommendations based on their personal criteria and financial characteristics.
E-LOAN offers transaction cost savings of over 50% compared to obtaining a
mortgage through traditional mortgage brokers or single source lenders. E-LOAN
provides complete transaction fulfillment and a high level of service through
customer service representatives assigned to each borrower and the proprietary
E-Track loan monitoring service. E-LOAN is the exclusive mortgage provider for
co-branded loan centers that E-LOAN has established with leading websites
including Yahoo!, E*Trade, DLJdirect,Telebank, CBS MarketWatch and Motley Fool.
In 1998, E-LOAN was the leader in the online mortgage market with approximately
$1 billion in closed loans originated.
THE E-LOAN MARKET OPPORTUNITY
E-LOAN believes that the traditional mortgage origination process is highly
inefficient, which is the result of a fragmented, broker-dominated industry,
paper-intensive processes and a baffling array of mortgage products. This
inefficient process has made obtaining a mortgage a time-consuming, expensive,
inconvenient and unpleasant experience for many consumers. E-LOAN believes an
Internet-based distribution model reduces or eliminates many of these
shortcomings and provides a significant opportunity for an open, centralized and
easy-to-use service with a compelling consumer value proposition. Forrester
Research projects the market for online mortgage originations will grow from
$18.7 billion in 1999 to over $91.2 billion in 2003, representing an increase in
online penetration of the existing market from 1.5% in 1999 to 9.6% in 2003.
THE E-LOAN SOLUTION
E-LOAN's website enables consumers to efficiently search, analyze and
compare mortgage products offered by multiple lenders and apply for, qualify for
and obtain the mortgage product that is most compatible with their individual
financial characteristics and borrowing requirements. Key advantages of the
E-LOAN solution include:
- LARGE SELECTION OF MORTGAGE PRODUCTS. E-LOAN offers mortgages from more
than 70 lending sources and searches through over 50,000 products in
response to each customer inquiry.
- SIGNIFICANT CUSTOMER SAVINGS. E-LOAN offers transaction cost savings of
over 50% compared to obtaining a mortgage through traditional mortgage
brokers or single source lenders.
- UNBIASED LOAN RECOMMENDATIONS. E-LOAN offers unbiased recommendations
based on comparative analytical tools that use only borrower-provided
information and criteria to identify the most suitable loan product.
1
<PAGE> 5
- EASY-TO-USE SERVICE WITH VALUE-ADDED FEATURES. E-LOAN's website enables
borrowers to easily and efficiently search, analyze and compare mortgages
in complete privacy, on their own time and free from the sales pressure
typically experienced offline.
- HIGH LEVEL OF CUSTOMER SERVICE. E-LOAN is committed to delivering a high
level of customer service designed to make the mortgage origination
process easier to understand, more responsive and more open to the
consumer. E-LOAN offers its services through customer service
representatives assigned to each borrower and the proprietary E-Track
loan monitoring service.
- ONGOING MORTGAGE MONITORING. E-LOAN enables customers to optimize
refinancing decisions by continuously comparing their existing loan to
new products as they become available and alerting them to opportunities
to save money over the life of their loan.
THE E-LOAN STRATEGY
E-LOAN's strategy is to be the leading Internet-based provider of mortgages
and debt management services for consumers. Key elements of the strategy
include:
- GROW CORE CONSUMER MORTGAGE BUSINESS. E-LOAN intends to become the
leading originator of single family mortgage loans by delivering
significant cost savings, unparalleled product choice and unbiased advice
and assistance to its customers.
- EXPAND MULTI-SOURCE LENDING CAPABILITIES. E-LOAN intends to continue to
broaden the number and variety of its mortgage products and lending
sources.
- USE TECHNOLOGY TO BRING BORROWERS AND CAPITAL MARKETS CLOSER
TOGETHER. E-LOAN intends to continue to streamline and automate mortgage
origination and underwriting processes in order to enable borrowers to
more directly benefit from the cost, speed and convenience of highly
efficient secondary mortgage markets.
- ENHANCE BRAND AWARENESS AND CUSTOMER LOYALTY. E-LOAN intends to become
the first national multi-source lender with a widely recognized consumer
brand name.
- HELP CUSTOMERS BETTER MONITOR AND MANAGE THEIR DEBT. E-LOAN intends to
transform what has traditionally been a single origination transaction
into a long-term, mutually beneficial relationship by assisting customers
in monitoring and managing their mortgages.
2
<PAGE> 6
CORPORATE INFORMATION
We were incorporated in California in August 1996 and we reincorporated in
Delaware in March 1999. References in this prospectus to "E-LOAN", "we", "our",
and "us" refer to E-LOAN, Inc., a Delaware corporation, and its predecessor,
E-LOAN, Inc., a California corporation. Our principal executive offices are
located at 5875 Arnold Road, Suite 100, Dublin, California 94568 and our phone
number is (925) 241-2400. Our Internet address is www.eloan.com. The information
on our website is not part of this prospectus.
E-LOAN and the E-LOAN logo are registered trademarks of E-LOAN. Each
trademark, trade name or service mark of any other company appearing in this
prospectus belongs to its holder.
THE OFFERING
Information in this prospectus assumes that the Underwriters do not
exercise the option granted by E-LOAN to purchase additional shares in this
offering, and unless otherwise noted, this prospectus assumes the conversion of
all outstanding shares of preferred stock into common stock. See "Underwriting".
<TABLE>
<S> <C>
Common stock offered by E-LOAN.......... shares
Common stock to be outstanding after
this offering......................... shares
Use of proceeds......................... Working capital and general corporate purposes,
including capital expenditures. See "Use of
Proceeds".
Proposed Nasdaq National Market
symbol................................ "EELN"
</TABLE>
These share numbers are based on shares outstanding as of December 31, 1998. The
share numbers include 200,000 shares issued upon exercise of a warrant to
purchase Series C preferred stock and exclude:
- 1,181,998 shares of common stock issuable upon exercise of options
outstanding under E-LOAN's 1997 Stock Option Plan with a weighted average
exercise price of $1.56 per share;
- 15,000 shares of common stock issuable upon conversion of 15,000 shares
of Series C preferred stock issuable upon exercise of a warrant to
purchase Series C preferred stock at an exercise price of $2.00 per
share; and
- 318,002 shares of common stock available for issuance under E-LOAN's 1997
Stock Option Plan as of December 31, 1998 (excluding future annual
automatic increases to the number of shares reserved under the plan).
Subsequent to December 31, 1998, E-LOAN granted additional options to purchase
833,760 shares of common stock with a weighted average exercise price of $6.00
per share.
3
<PAGE> 7
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, THREE MONTHS ENDED (UNAUDITED)
----------------------- --------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1998 1998 1998 1998 1998
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................... $ 1,043 $ 6,832 $ 527 $ 1,233 $ 2,051 $ 3,021
Operating expenses:
Operations................ 1,319 7,626 779 1,077 2,127 3,643
Sales and marketing....... 470 5,642 513 874 2,174 2,081
Technology................ 102 1,248 163 371 284 430
General and
administrative.......... 524 2,410 379 436 711 884
Amortization of unearned
compensation............ -- 1,251 44 211 296 700
---------- ---------- ---------- ---------- ---------- -----------
Total operating
expenses.............. 2,415 18,177 1,878 2,969 5,592 7,738
---------- ---------- ---------- ---------- ---------- -----------
Operating loss.............. (1,372) (11,345) (1,351) (1,736) (3,541) (4,717)
---------- ---------- ---------- ---------- ---------- -----------
Other income, net........... (2) 173 20 29 26 98
Net loss.................... $ (1,374) $ (11,172) $ (1,331) $ (1,707) $ (3,515) $ (4,619)
========== ========== ========== ========== ========== ===========
Net loss per share(1):
Basic and diluted......... $ (0.35) $ (2.95) $ (0.34) $ (0.43) $ (0.91) $ (1.23)
========== ========== ========== ========== ========== ===========
Weighted average number of
shares outstanding --
basic and diluted......... 4,087,344 4,133,428 4,107,753 4,122,624 4,140,600 4,161,866
========== ========== ========== ========== ========== ===========
Pro forma net loss per
share(2).................. $ (1.26) $ (0.18) $ (0.22) $ (0.37) $ (0.43)
Pro forma weighted average
number of shares
outstanding(2)............ 8,894,392 7,556,554 7,571,425 9,478,497 10,807,169
OPERATING DATA(3):
Closed loan volume
(dollars)................. 892,780 125,598 215,097 218,325 333,758
Closed loan volume (loans).. 4,186 552 997 1,003 1,634
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Mortgage loans held-for-sale (pledged)................. $42,154 $ 42,154 $
Cash and cash equivalents.............................. 9,141 9,641
Total assets........................................... 55,523 56,023
Warehouse lines payable................................ 41,046 41,046
Mandatorily redeemable preferred stock................. 21,393 --
Long term obligations.................................. 1,290 1,290
Total stockholders' equity (deficit)................... (11,184) 10,709
</TABLE>
- ---------------
(1) Net loss per share includes the accretion for the Series C and Series D
mandatorily redeemable convertible preferred stock.
(2) Pro forma net loss per share has been computed by dividing net loss by the
pro forma weighted average number of shares outstanding. The pro forma
weighted average number of shares outstanding includes the pro forma effects
of the automatic conversion on a weighted average basis of E-LOAN's
preferred stock and Series D warrants as if such conversion occurred on
January 1, 1998 or at date of issuance, if later.
(3) Excludes closed loan referral volume which totaled an estimated $75.0
million on 500 loans for the year ended December 31, 1998.
(4) Pro forma after giving effect to the conversion of all outstanding shares of
convertible preferred stock and the Series D warrants into 6,645,303 shares
of common stock upon the closing of this offering.
(5) As adjusted to give effect to the sale of shares of common stock in
this offering at the initial public offering price of $ per share, less
underwriting discounts and commissions and estimated offering expenses
payable by E-LOAN.
4
<PAGE> 8
RISK FACTORS
You should carefully consider the risks described below before making a
decision to buy our common stock. The risks and uncertainties described below
are not the only ones we face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be adversely affected. In such case,
the trading price of our common stock could decline, and you may lose all or
part of your investment. You should also refer to the other information set
forth in this prospectus, including our financial statements and the related
notes.
WE HAVE A LIMITED OPERATING HISTORY, HAVE ONLY OPERATED DURING PERIODS OF GROWTH
IN THE HOME MORTGAGE MARKET AND CONSEQUENTLY FACE SIGNIFICANT RISKS AND
UNCERTAINTIES
We were incorporated in August 1996 and initiated our online mortgage
operations in June 1997. We have a limited operating history and all of our
operations have occurred during a period in which the home mortgage market has
experienced rapid growth. Since we began our online mortgage operations, we have
never operated during a downturn in the mortgage business and we cannot assure
you that we will be able to operate successfully during such times. We have
generated limited revenues and have never operated profitably. An investor in
our common stock must consider the risks and difficulties frequently encountered
by early stage companies in new and rapidly evolving markets. These risks are
especially pronounced in the mortgage industry where we will face major
challenges from other online multi-lender origination companies such as
QuickenMortgage (Intuit Inc.) and HomeAdvisor (Microsoft Corp.) and single
source lenders such as Countrywide HomeLoans, Inc. and Norwest Mortgage, Inc.
As a result of our limited operating history and our recent growth, it will
be necessary to implement new and expanded operational, financial and
administrative systems and control procedures to enable us to expand, train and
manage our employees and coordinate the efforts of our underwriting, accounting,
finance, marketing, and operations departments. For example, we intend to
implement both a new financial reporting system and a loan production system by
the end of 1999. Historically, our efforts were focused primarily on developing
and scaling our online mortgage operations and less on implementing internal
accounting controls, financial and operational reporting systems and expanding
the size and capabilities of our financial staff. Our auditors noted at December
31, 1998 that as a result of these shortcomings we had significant difficulties
summarizing and preparing accurate financial information on a timely basis. If
these difficulties persist, we may be unable to produce accurate and timely
financial statements, which could limit our ability to conduct loan origination
and sale operations and adversely affect the liquidity and price of our common
stock. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview".
We have a limited history of addressing other material risks in our
business. These risks include our potential inability to:
- mitigate the risks of interest rate fluctuations, fluctuations in the
value of residential mortgage loans in the secondary market and home
buying cyclicality;
- offer competitive loan products;
- increase the number of purchase loans, as opposed to refinance loans,
sold to customers;
- attract a larger number of customers to our website;
- increase the number of closed loans;
- continue to develop and upgrade our technology and website;
- strengthen customer loyalty and satisfaction;
- continue to diversify our customer base geographically;
- maintain and develop warehouse lending relationships;
5
<PAGE> 9
- expand our capability of selling loans into the secondary market;
- add additional strategic partners to increase traffic to our website;
- increase E-LOAN brand awareness;
- address consumer privacy concerns;
- increase the scale and efficiency of our operations;
- respond effectively to competitive pressures, both online and offline;
- satisfy legal and regulatory requirements; and
- attract, retain and motivate qualified personnel.
We also depend on the growing use of the Internet for commerce and on the
continuation of favorable general economic conditions. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
detailed information on our limited operating history.
WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES AND WE MAY NOT ACHIEVE OR
MAINTAIN PROFITABILITY
We have not achieved profitability and expect to continue to incur
operating losses for the foreseeable future. We incurred net losses of $11.2
million for the year ended December 31, 1998. As of December 31, 1998, our
accumulated deficit was $12.6 million. Given that we expect to continue to incur
significant sales and marketing expenses, we will need to generate significant
revenues to achieve and maintain profitability. Although our revenues have grown
in recent quarters, we may not achieve sufficient revenues for profitability.
Even if we achieve profitability, we may not sustain or increase profitability
on a quarterly or annual basis in the future. If revenues grow slower than we
anticipate, or if operating expenses exceed our expectations or cannot be
adjusted accordingly, our business, results of operations and financial
condition will be adversely affected. See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND
SEASONALITY BECAUSE OF MANY FACTORS, ANY OF WHICH COULD ADVERSELY AFFECT OUR
STOCK PRICE
We believe that quarter-to-quarter comparisons of our operating results are
not a good indication of our future performance. It is possible that in some
future periods our operating results may be below the expectations of public
market analysts and investors. In this event, the price of our common stock may
fall. Our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors, many of which are not in our control. These
factors include:
- interest rate fluctuations;
- seasonality or other economic factors impacting the overall demand for
mortgage credit;
- the volume of mortgage loan originations;
- our ability to offer competitive rates;
- changes in market rates for origination and processing fees;
- the mix of refinanced mortgages versus purchase money mortgages;
- new sites, services or products introduced by us or our competitors;
- the level of Internet usage for financial services;
- our ability to upgrade and develop our systems and infrastructure and
attract new personnel in a timely and effective manner;
- the size and timing of loan sales; and
- economic conditions specific to the Internet as well as general economic
conditions.
6
<PAGE> 10
We anticipate that as the online mortgage origination industry matures, our
business will be increasingly susceptible to the same seasonal and cyclical
factors that affect the mortgage industry as a whole.
The volume of loans that we originate and sell in any given period is
difficult to predict because the market for online mortgage lending is at an
early stage of development. A reduction in the volume of loan originations and
sales would reduce our revenues, which would adversely affect our quarterly
financial performance.
We believe that a significant portion of our future revenues will be
derived from our mortgage origination and sale operations, which generate
revenues from origination and processing fees as well as gains on the sale of
loans. Because we identify for prospective borrowers the most suitable products
available on our website, regardless of whether such products are funded
internally or through other lenders, it is difficult to predict the percentage
of our total revenue that will be derived from our loan origination and sale
operations versus our mortgage brokerage operations. We may not succeed in
increasing our loan origination and sale revenues as a percentage of our total
revenues.
We plan to significantly increase our sales and marketing expenses to
increase E-LOAN brand awareness and the number of loan applications that we
receive. We may be unable to adjust spending quickly enough to offset any
unexpected revenue shortfall. If we have a shortfall in revenues in relation to
our expenses, or if our expenses do not lead to increased revenues, then our
operating results would be adversely affected.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for detailed information on our quarterly operating
results.
INTEREST RATE FLUCTUATIONS COULD ADVERSELY AFFECT OUR BUSINESS
A high percentage of our customers use our services to refinance existing
mortgages and are motivated to do so primarily when interest rates fall below
the rates of their existing mortgages. In the event interest rates significantly
increase, consumers' incentive to refinance will be greatly reduced and the
number of loans that we originate could significantly decline. Our failure to
successfully reduce this dependence on refinancings and increase the volume of
our business derived from home purchases could have an adverse affect on our
business.
Our ability to engage in profitable secondary sales of loans may also be
adversely affected by increases in interest rates. We typically establish the
interest rates on the mortgage loans that we originate at the same time we
obtain best-efforts commitments from the anticipated purchasers of such loans.
The mortgage loan purchase commitments we obtain are contingent upon our
delivery of the relevant loans to the purchasers within specified periods. To
the extent that we are unable to deliver the loans that are subject to these
best-efforts commitments within the specified periods and interest rates
increase, we may experience no gain or even a loss on the sale of these loans.
In addition, any increase in interest rates will increase the cost of
maintaining our warehouse and repurchase lines of credit which we depend on to
fund the loans we originate. We currently do not use derivative financial
instruments to hedge these risks and are therefore exposed to losses caused by
fluctuations in interest rates.
In addition, a sharp decrease in interest rates over a short period may
cause customers who have interest rates on mortgages committed through E-LOAN to
either delay closing their loans or refinance with another lender. If this
occurs in significant numbers, it may have an adverse effect on our business or
quarterly results of operations. In addition, if the percentage of committed
loans that convert into closed loans declines substantially, the purchasers of
these loans may raise the rates they charge us or decide not to buy loans from
us.
7
<PAGE> 11
UNCERTAINTY WITH RESPECT TO THE TIME IT TAKES TO CLOSE LOANS CAN LEAD TO
UNPREDICTABLE REVENUE AND PROFITABILITY
The time between the date an application is received from a customer on our
website and the date the loan closes has typically been lengthy and
unpredictable. In past periods, the length of time it has taken us to close a
loan has exceeded the period within which we are obligated to close and deliver
the loan to the committed purchaser at the rate guaranteed. The loan application
and approval process is often subject to delays over which we have little or no
control, including the timing of the customer's decision to commit to an
available interest rate, the timeliness of appraisals and the adequacy of the
customer's own disclosure documentation. This uncertain timetable can have a
direct impact on our revenue and profitability for any given period.
Furthermore, we may expend substantial funds and management resources supporting
the loan completion process and never generate revenue from closed loans.
Therefore, our results of operations for a particular period may be adversely
affected if the loans applied for during that period do not close in a timely
manner or at all. Furthermore, if we are required to extend the closing of loans
beyond the associated interest rate commitment periods, we may incur additional
costs.
WE HAVE EXPERIENCED SIGNIFICANT GROWTH IN OUR BUSINESS IN RECENT PERIODS, AND IF
WE ARE UNABLE TO MANAGE THIS GROWTH, OUR BUSINESS WILL BE ADVERSELY AFFECTED
Our ability to successfully offer financial products and services and
implement our business plan in a rapidly evolving market requires an effective
planning and management process. We have experienced periods of significant
growth, which have placed a significant strain on our resources and will
continue to do so in the future. If we do not manage this growth effectively, it
could adversely affect our business. We may not be successful in managing or
expanding our operations or maintaining adequate management, financial and
operating systems and controls. Our headcount has grown substantially. At
December 31, 1997, we had a total of 40 employees and at December 31, 1998, we
had a total of 224 employees.
Several members of our senior management joined us within the last six
months, including Frank Siskowski, Chief Financial Officer; Harold "Pete"
Bonnikson, Senior Vice President of Operations; and Joseph Kennedy, Senior Vice
President of Marketing and Business Development. These individuals have not
previously worked together and they may not work together effectively.
IF ONLINE MORTGAGES OR OUR SERVICE OFFERINGS DO NOT ACHIEVE WIDESPREAD CONSUMER
ACCEPTANCE, OUR BUSINESS WILL BE ADVERSELY AFFECTED
Our success will depend in large part on widespread consumer acceptance of
purchasing mortgages online. The development of an online market for mortgage
loans has only recently begun, is rapidly evolving and likely will be
characterized by an increasing number of market entrants. Therefore, there is
significant uncertainty with respect to the viability and growth potential of
this market. Our future growth, if any, will depend on the following critical
factors:
- the growth of the Internet as a commerce medium generally, and as a
market for consumer financial products and services specifically;
- our ability to successfully and cost-effectively market our services to a
sufficiently large number of customers; and
- our ability to overcome a perception among many real estate market
participants that obtaining mortgages online is risky for consumers.
There can be no assurance that the market for our services will develop,
that our services will be adopted or that consumers will significantly increase
their use of the Internet for obtaining mortgage loans. If the online market for
mortgage loans fails to develop, or develops more slowly
8
<PAGE> 12
than expected, or if our services do not achieve widespread market acceptance,
our business, results of operations and financial condition would be adversely
affected. In addition, in order to be successful in this emerging market, we
must differentiate ourselves from our competition through our service offerings
and brand name recognition. We may not succeed in differentiating ourselves from
our competition or achieving widespread market acceptance of our services, and
we may experience difficulties that could delay or prevent the successful
development, introduction or marketing of these services. In addition, if we are
unable, for technical or other reasons, to develop and introduce new services or
enhancements of existing services in a timely manner, or if these new services
and enhancements do not achieve widespread market acceptance, our business,
results of operations and financial condition would be adversely affected.
BECAUSE A HIGH CONCENTRATION OF OUR BUSINESS IS IN CALIFORNIA, WE ARE
PARTICULARLY VULNERABLE TO ECONOMIC AND OTHER FACTORS AFFECTING CALIFORNIA
Approximately 83% of the loans we have closed in the year ended December
31, 1998 were from borrowers located in California. No other state generated
more than 10% of our closed loans during such periods. Because a high
concentration of our business is in California, we are particularly vulnerable
to economic factors affecting California. We are likely to originate a
significant amount of our loans in California for the foreseeable future. There
have been times in the past, most recently in 1991 - 1992, when the California
economy has suffered a recession disproportionate with the rest of the country.
Should such a recession happen again in California, our business would be
adversely affected.
In addition, California historically has been vulnerable to certain natural
disasters, such as earthquakes and mudslides, which are not typically covered by
standard hazard insurance policies maintained by borrowers. Uninsured disasters
may adversely impact borrowers' ability to repay mortgage loans we originate and
any sustained period of increased delinquencies or defaults could adversely
affect the pricing of our future secondary loan sales and our overall ability to
sell loans. The occurrence of such natural disasters in California could have an
adverse effect on our business, results of operations and financial condition.
THE LOSS OF ONE OR MORE OF OUR SIGNIFICANT DISTRIBUTION PARTNERS WOULD ADVERSELY
AFFECT OUR BUSINESS
We rely on Internet distribution partners to direct a significant number of
our prospective customers to our website. We maintain co-branded loan centers on
the websites of a number of these partners. If we lose any of our significant
distribution partners, we will likely fail to meet our growth objectives, both
in terms of additional borrowers and increased brand awareness. We consider our
distribution partnerships with Yahoo!, E*Trade and DLJdirect to be the most
critical to our success. During the year ended December 1998, approximately 13%
of our closed loans were derived from the Yahoo! co-branded website and during
the first two months of 1999, approximately 2% and 1% of our closed loans were
derived from the co-branded websites of E*Trade and DLJdirect, respectively. In
the aggregate, approximately 17% of our closed loans were derived from the
websites of our distribution partners in 1998. Our agreements with our
distribution partners are typically short-term, from one to three years in
length, and can be terminated for any reason upon 30 to 60 days prior written
notice. We cannot assure you that any or all of these agreements will not be
terminated or will be renewed or extended past their current expiration dates.
If any of these agreements were to be terminated or were to lapse without
extension, we could lose a considerable number of loan applications and our
business would be adversely affected.
9
<PAGE> 13
WE ARE SUBSTANTIALLY DEPENDENT ON OUR FUNDING PARTNERS AND THE TERMINATION OF
ONE OR MORE OF THESE RELATIONSHIPS WOULD ADVERSELY AFFECT OUR BUSINESS
We are dependent on GE Capital Mortgage Services, Inc. and Bank United to
finance our internal loan funding activities through the warehouse credit
facilities provided by each of these lenders. We are also dependent on Greenwich
Capital Financial Products, Inc. to finance portions of our mortgage loan
inventory pending ultimate sale to mortgage loan purchasers. If either of our
warehouse credit facilities becomes unavailable or our relationship with
Greenwich Capital is terminated, our business would be adversely affected. Under
our agreements with each of these partners we make extensive representations and
warranties. A material breach of these representations and warranties could
result in the termination of our agreements and an obligation to repay all
amounts outstanding at the time of termination.
Our agreements with GE Capital and Bank United require us to comply with
various operating and financial covenants. These covenants restrict our ability
to:
- sell any of our material assets or merge or consolidate with another
company;
- issue additional shares of common stock without their consent;
- pay dividends on our outstanding shares of common stock; and
- amend our Certificate of Incorporation or Bylaws.
These covenants also require us to:
- maintain a minimum tangible net worth;
- limit the amount of debt we incur relative to our net worth; and
- ensure that our current assets are equal to or greater than our current
liabilities.
Our agreements with Greenwich Capital and GE Capital contain various
non-financial negative and affirmative covenants. A failure to satisfy these
covenants could result in the termination of our agreements. In the past, we
have had to obtain waivers from Greenwich Capital and GE Capital as a result of
our failure to comply with certain of these covenants.
Our agreement with Greenwich Capital expires in April 2000, our agreement
with GE Capital expires in June 1999 and our agreement with Bank United expires
in February 2000. Although we are currently negotiating an extension of our
agreement with GE Capital, it can be terminated at any time on 120 days prior
written notice. We are continually seeking to obtain additional warehouse
lending resources, but we may not be successful in this regard.
A DELAY IN THE RECEIPT OF SERVICES FROM CERTAIN THIRD PARTIES WOULD ADVERSELY
AFFECT OUR BUSINESS
We rely on other companies to perform certain aspects of the loan
underwriting process, including appraisals, credit reporting and title searches.
Any interruptions or delays in the provision of these ancillary services may
cause delays in the processing and closing of loans for our customers. The value
of the service we offer and the ultimate success of our business are dependent
on our ability to manage the timely provision of these ancillary services by the
third parties with whom we have business relationships. If we are unsuccessful
in managing the timely delivery of these ancillary services we will likely
experience increased customer dissatisfaction and our business could be
adversely affected.
E-LOAN licenses its mortgage loan origination systems and proprietary marks
to NetB@nk to enable NetB@nk to fund mortgage loans under the E-LOAN brand in
ten of the 16 states where E-LOAN is not licensed as a mortgage banker. E-LOAN
also has agreements with PHH Mortgage Services Corporation and Prism Mortgage
Company relating to the fulfillment of all aspects of loan transaction
processing following origination in the other six states in which E-LOAN is not
licensed as a mortgage banker. Each of these agreements may be terminated by
10
<PAGE> 14
either party upon 30 days prior written notice. Given that we intend to increase
our activities in the states where we rely on the funding and transaction
processing services provided by our business partners, the termination of any or
all of these agreements could have a material adverse effect on our business.
WE EXPECT TO BE DEPENDENT UPON AUTOMATED UNDERWRITING, AND THE LOSS OF OUR
RELATIONSHIP WITH FANNIE MAE OR ANY OTHER SIGNIFICANT PROVIDER OF AUTOMATED
UNDERWRITING WOULD HAVE AN ADVERSE AFFECT ON OUR BUSINESS
We expect to be dependent on automated underwriting and other services
offered by government sponsored and other mortgage investors, such as Fannie Mae
and Freddie Mac, to help ensure that our mortgage services can be offered
efficiently and on a timely basis. Automated underwriting will permit us to
streamline mortgage origination by moving underwriting to the initial stages of
the loan process.
We currently have an agreement with Fannie Mae that authorizes our use of
their automated underwriting services and enables us to sell qualified first
mortgages to Fannie Mae. We cannot assure you that we will remain in good
standing with Fannie Mae or that Fannie Mae will not terminate our relationship.
We expect to process a significant portion of our conforming loans using the
Fannie Mae system until we are able to obtain automated underwriting services
from other providers. Our agreement with Fannie Mae can be terminated by either
party immediately upon the delivery of a written termination notice. The
termination of our agreement with Fannie Mae would adversely impact our business
by reducing our ability to streamline the mortgage origination process.
Furthermore, we may not be able to successfully implement the automated
underwriting services of Fannie Mae or other automated underwriting providers in
a manner that will lead to substantial processing efficiencies.
WE MAY INCUR LOSSES ON LOANS IF WE BREACH REPRESENTATIONS OR WARRANTIES TO
MORTGAGE LOAN PURCHASERS
In connection with the sale and exchange of loans, we make customary
representations and warranties to mortgage loan purchasers relating to, among
other things, compliance with laws and origination practices. In the event we
breach any of these representations and warranties, we may be required to
repurchase or substitute certain mortgage loans and bear any subsequent losses
on the repurchased loans. We may also be required to indemnify mortgage loan
purchasers for certain losses and claims with respect to mortgage loans for
which there was a breach of representations and warranties. In addition, certain
of our agreements with mortgage loan purchasers prohibit our solicitation of
borrowers with respect to the refinancing of loans we originate and sell. The
mortgage loan purchasers under these agreements may construe our Mortgage
Monitor service, which enables borrowers to compare their mortgages to other
products on the market to identify favorable refinancing opportunities, as
violating these non-solicitation provisions, in which case they may elect to
terminate their agreements with us or may seek recovery from us for damages
sustained by them. Furthermore, certain of our agreements with mortgage loan
purchasers prohibit us from refinancing mortgage loans for certain time periods,
even without our solicitation, unless we pay penalties to the mortgage loan
purchasers or obtain their consent. These agreements also require us to return
any premiums paid by a mortgage loan purchaser if the mortgage loans purchased
are prepaid in full during periods of up to 12 months following the date the
mortgage loan is purchased.
11
<PAGE> 15
THE MORTGAGE LENDING INDUSTRY IS INTENSELY COMPETITIVE, AND IF WE FAIL TO
SUCCESSFULLY COMPETE IN THIS INDUSTRY, OUR MARKET SHARE AND BUSINESS WILL BE
ADVERSELY AFFECTED
In each of the geographic markets in which we operate, we face competition
from established mortgage providers, including commercial banks and thrifts.
Competition can take place on various levels, including convenience in obtaining
mortgage loans, service, marketing, pricing and brand awareness. There can be no
assurance that we will be able to successfully compete with these mortgage
providers on any or all of these levels.
In addition, we face increasing direct competition from other companies
offering mortgage loans or other home buying services over the Internet.
Principal among these competitors are Microsoft HomeAdvisor, Intuit
QuickenMortgage, HomeShark Inc., Keystroke Financial, Inc. and Mortgage.com.
Traditional lenders, such as Countrywide, Norwest, Wells Fargo and BankAmerica,
also offer access to their mortgage products over the Internet. Furthermore,
competition is likely to increase significantly as new companies enter the
market and current competitors expand their services. Many of these current and
potential competitors enjoy substantial competitive advantages, including:
- longer operating histories;
- greater name recognition;
- larger, established customer bases; and
- substantially greater financial, marketing, technical and other
resources.
These competitors are able to undertake more extensive marketing campaigns
for their brands and services, adopt more aggressive advertising pricing
policies and make more attractive offers to potential employees, distribution
partners, commerce companies, and third-party service providers. Accordingly, we
may not be able to grow our customer base at historical levels, our competitors
may experience greater growth than we do or our strategic partners may terminate
their agreements with us. We may not be able to compete successfully against our
current or future competitors and competitive pressures we face may have a
material adverse effect on our business, results of operations and financial
condition.
To compete successfully, we must respond promptly and effectively to the
challenges of technological change, evolving standards and our competitors'
innovations by continuing to enhance and expand our services, as well as our
sales and marketing channels. Increased competition, particularly online
competition, could result in price reductions, reduced margins or loss of market
share, any of which could adversely affect our business. We may not be able to
compete successfully in our market environment and our failure to do so could
have an adverse effect on our business, results of operations and financial
condition.
IF WE FAIL TO COMPLY WITH THE NUMEROUS LAWS AND REGULATIONS THAT GOVERN OUR
INDUSTRY, OUR BUSINESS COULD BE ADVERSELY AFFECTED
The residential mortgage financing industry is highly regulated. Our
business is subject to extensive and complex rules and regulations of, and
licensing and examination by, various federal, state and local government
authorities. These rules impose obligations and restrictions on our residential
loan brokering and lending activities. In particular, these rules limit the
broker fees, interest rates, finance charges and other fees we may assess,
require extensive disclosure to our customers, prohibit discrimination and
impose on us multiple qualification and licensing obligations. We may not always
have been and may not always be in compliance with these requirements. Failure
to comply with these requirements may result in, among other things, revocation
of required licenses or registrations, loss of approved status, voiding of loan
contracts or security interests, indemnification liability or the obligation to
repurchase mortgage loans sold to mortgage loan purchasers, rescission of
mortgage loans, class action lawsuits, administrative enforcement actions and
civil and criminal liability.
12
<PAGE> 16
As a mortgage company doing business exclusively through the Internet, we
face an additional level of regulatory risk given that the statutes and
regulations governing mortgage transactions have not been substantially revised
or updated to fully accommodate e-commerce. Most of the federal and state laws,
rules and regulations governing mortgage loans contemplate or assume paper-based
transactions and do not currently address the delivery of required disclosures
and other documents through electronic communications. Until such laws, rules
and regulations are revised to clarify their applicability to transactions
through e-commerce, any company offering mortgage loans through the Internet or
other means of e-commerce will face uncertainty as to compliance. Our policies
and procedures may not be deemed acceptable by any regulatory body examining our
activities. Any adverse regulatory actions could seriously damage our business.
In addition, revisions to the laws, rules and regulations applicable to
e-commerce may not be adopted and, if adopted, may not be timely or adequate to
eliminate such uncertainty.
At the state level, we are subject to licensing and regulation in most of
the states where we act as a mortgage broker or lender. In addition, any person
who acquires 10% or more of our stock may be subject to certain state licensing
regulations, which require the periodic filing of certain financial information
and other personal and business information. If any person holding 10% or more
of our stock refuses or fails to comply with such filing requirements, our
existing licensing arrangements could be jeopardized. The loss of required
licenses could have an adverse effect on our business, results of operations and
financial condition.
State laws limit the broker fees, interest rates, finance charges and other
fees we may assess, including late charges, insufficient funds charges for
returned checks and prepayment penalties, and may require payment of interest on
escrow balances. State laws also require extensive disclosure to our customers
concerning such matters as fees and charges, brokerage agreements, lock-in
agreements and commitments, alternative mortgage transactions, such as
adjustable rate loans, escrows for taxes and insurance, choosing settlement
attorneys and insurance agents and private mortgage insurance, among others.
These laws regulate both the content and timing of disclosures. In addition,
many state laws regulate advertising claims in connection with the solicitation
of mortgage loan applications. State and federal laws also prohibit unfair and
deceptive trade practices in the mortgage finance business. We cannot assure you
that we will always be in compliance with all of these laws and regulations.
Non-compliance with applicable state laws or regulations could have an adverse
effect on our business and may result in our being prohibited from continuing to
broker and fund mortgage loans in one or more states.
At the federal level, our mortgage brokering and funding activities are
regulated under a variety of laws, including, but not limited to, the Truth in
Lending Act and Regulation Z, the Equal Credit Opportunity Act and Regulation B,
the Fair Housing Act, the Fair Credit Reporting Act, the Real Estate Settlement
Procedures Act and Regulation X, and the Home Mortgage Disclosure Act of 1975
and Regulation C. These statutes generally require detailed disclosure of
information concerning mortgage loans, and they regulate the manner in which
such loans are made, including advertising, disclosure of consumer information,
servicing (and transfer of servicing) of mortgage loans, payments for settlement
services and reporting of consumer data. These laws regulate both the content
and timing of disclosures. Any non-compliance with applicable federal laws or
regulations could have an adverse effect on our business and may result in our
being prohibited from continuing to sell mortgage loans or subject us to fines
or other penalties, including criminal sanctions.
The laws, rules and regulations applicable to our business are subject to
periodic modification. There are currently proposed various laws, rules and
regulations which, if adopted, could impact our business by making compliance
much more difficult or expensive, restricting our ability to originate, broker,
purchase or sell loans, further limiting or restricting the amount of
13
<PAGE> 17
commissions, interest and other charges earned on loans we originate, broker,
purchase or sell, or otherwise adversely affecting our business or prospects.
These proposed laws, rules and regulations, or other such laws, rules or
regulations, may not be adopted in the future.
ANY ACQUISITIONS THAT WE UNDERTAKE COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR
BUSINESS, DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS
We may acquire or make investments in complementary businesses,
technologies, services or products if appropriate opportunities arise. These
acquisitions and investments could disrupt our ongoing business, distract our
management and employees and increase our expenses. From time to time we have
had discussions with companies regarding our acquiring, or investing in, their
businesses, products, services or technologies. We have no contracts or letters
of intent relating to any such acquisition or investment. We may not be able to
identify suitable acquisition or investment candidates. Even if we do identify
suitable candidates, we may not be able to make such acquisitions or investments
on commercially acceptable terms. If we acquire a company, we could have
difficulty in assimilating that company's personnel, operations, technology and
software. In addition, the key personnel of the acquired company may decide not
to work for us. If we make other types of acquisitions, we could have difficulty
in integrating the acquired products, services or technologies into our
operations. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our results
of operations. Furthermore, we may incur indebtedness or issue equity securities
to pay for any future acquisitions. The issuance of equity securities could be
dilutive to our existing stockholders.
OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS,
AND THE LOSS OF ANY OF THESE OFFICERS OR KEY PERSONNEL WOULD LIKELY HAVE AN
ADVERSE AFFECT ON OUR BUSINESS
Our future success depends to a significant extent on the continued
services of our senior management and other key personnel, particularly
co-founders Chris Larsen, Chief Executive Officer, and Janina Pawlowski,
President. Ms. Pawlowski, a licensed real estate broker, is responsible for all
of our activities in California and several other states. If Ms. Pawlowski were
to terminate her relationship with us for any reason we would not be able to
conduct business in these states until a replacement with adequate education and
experience is found. The loss of the services of Mr. Larsen, Ms. Pawlowski or
certain other key employees, would also likely have an adverse effect on our
business, results of operations and financial condition. We have not entered
into employment agreements with any of our executives, except Joseph Kennedy,
Senior Vice President, Marketing and Business Development, and do not maintain
"key person" life insurance for any of our personnel. Please see "Management"
for detailed information on our key personnel.
WE MAY NOT BE ABLE TO RECRUIT AND RETAIN THE PERSONNEL WE NEED TO SUCCEED
Our future success depends on our continuing to attract, retain and
motivate highly skilled employees, particularly with respect to our loan
processing functions. Competition for personnel throughout our industry is
intense. We may be unable to retain our key employees or attract, assimilate or
retain other highly qualified employees in the future. We have from time to time
in the past experienced, and we expect to continue to experience in the future,
difficulty in hiring and retaining employees with appropriate qualifications. If
we do not succeed in attracting new personnel or retaining and motivating our
current personnel, our business will be adversely affected.
OUR BUSINESS WILL BE IMPAIRED IF CONSUMERS DO NOT CONTINUE TO USE THE INTERNET
Our business would be adversely affected if Internet usage does not
continue to grow, particularly by homebuyers. A number of factors may inhibit
Internet usage by consumers, including inadequate network infrastructure,
security concerns, inconsistent quality of service,
14
<PAGE> 18
and lack of availability of cost-effective, high-speed service. If Internet
usage grows, the Internet infrastructure may not be able to support the demands
placed on it by this growth and its performance and reliability may decline. In
addition, many websites have experienced service interruptions as a result of
outages and other delays occurring throughout the Internet infrastructure. If
these outages or delays frequently occur in the future, Internet usage, as well
as the usage of our website, could grow more slowly or decline.
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO EXPAND AND PROMOTE OUR BRAND
RECOGNITION
There are a growing number of Internet websites which offer services that
are similar to and competitive with the services offered by us. Therefore, we
believe that brand recognition will become an increasingly important competitive
advantage. Establishing and maintaining our brand is critical to attracting and
expanding our customer base, solidifying our business relationships and
successfully implementing our business strategy. We cannot assure you that our
brand will continue to be positively accepted by the market or that our
reputation will remain strong. In order to attract and retain customers and
business partners and to promote and maintain our brand in response to
competitive pressures, we intend to increase substantially our financial
commitment to creating and maintaining prominent brand awareness. The programs
we have in place include:
- online advertising and marketing;
- print advertising campaigns;
- radio advertisements in key markets; and
- selected television advertising.
Promotion and enhancement of our brand will also depend, in part, on our
success in providing a high-quality customer experience. We cannot assure you
that we will be successful in achieving this goal. To date we are aware of
numerous customer complaints regarding the quality of our service. If these
complaints persist they may significantly damage our reputation and offset the
efforts we make in promoting and enhancing our brand and could have an adverse
effect on our business, results of operations and financial condition. In
addition, we may need to expend additional resources to build our brand. If we
do not generate a corresponding increase in revenues as a result of our
marketing efforts or we otherwise fail to promote our brand successfully, or if
these efforts lead to our incurring excessive expenses, our business, results of
operations and financial condition will be adversely affected. If visitors to
our website do not perceive our existing services to be of high quality or if we
alter or modify our brand image, introduce new services or enter into new
business ventures that are not favorably received, the value of our brand could
be diluted, thereby decreasing the attractiveness of our service to potential
customers.
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO ADAPT TO THE RAPID TECHNOLOGICAL
CHANGE THAT CHARACTERIZES OUR INDUSTRY
Our market is characterized by rapidly changing technologies, frequent new
product and service introductions and evolving industry standards. The recent
growth of the Internet and e-commerce, and the intense competition in our
industry magnify these market characteristics. Our future success will depend on
our ability to adapt to rapidly changing technologies by continually improving
the performance features and reliability of our services. To operate our website
and provide our mortgage services, we utilize software packages from a variety
of third parties which are customized and integrated with code that we have
developed ourselves. In particular, we rely on third party software products and
services related to automated underwriting functions which will enable us to
realize processing efficiencies that are central to our operations. If we are
unable to integrate this software in a fully functional manner, we may
experience difficulties that could delay or prevent the successful development,
introduction or marketing of new products and services. In addition,
enhancements of our products and services
15
<PAGE> 19
must meet the requirements of our current and prospective customers and must
achieve significant market acceptance. We could also incur substantial costs if
we need to modify our services or infrastructure to adapt to these changes.
REGULATION OF THE INTERNET IS UNSETTLED, AND FUTURE REGULATIONS COULD HAVE AN
ADVERSE AFFECT ON OUR BUSINESS
Laws and regulations directly applicable to the Internet and e-commerce may
become more prevalent in the future. Such legislation could dampen the growth in
Internet usage generally and decrease the acceptance of the Internet as a
commercial medium. Although our business is based in California, the governments
of other states or foreign countries might attempt to regulate our activities or
levy sales or other taxes on us. The laws governing the Internet remain largely
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy and taxation apply to the Internet. In addition,
the growth and development of the market for e-commerce may prompt calls for
more stringent consumer protection laws, both in the United States and abroad,
that may impose additional burdens on companies conducting business over the
Internet. In the event the Federal Trade Commission or other governmental
authorities adopt or modify laws or regulations relating to the Internet, our
business, results of operations and financial condition could be adversely
affected.
ANY FAILURES OF, OR CAPACITY CONSTRAINTS IN, OUR SYSTEMS OR THE SYSTEMS OF THIRD
PARTIES ON WHICH WE RELY COULD ADVERSELY AFFECT OUR BUSINESS
Our communications hardware and certain of our other computer hardware
operations are located at the facilities of Exodus Communications, Inc. in Santa
Clara, California and Jersey City, New Jersey. The hardware for our internal
loan and product database, as well as our loan processing operations is
maintained in our Dublin, California facility. Fires, floods, earthquakes, power
losses, telecommunications failures, break-ins and similar events could damage
these systems. Computer viruses, electronic break-ins or other similar
disruptive problems could also adversely affect our website. Our business could
be adversely affected if our systems were affected by any of these occurrences.
Our insurance policies may not adequately compensate us for any losses that may
occur due to any failures or interruptions in our systems.
Our website must accommodate a high volume of traffic and deliver
frequently updated information, the accuracy and timeliness of which is critical
to our business. Our website has in the past and may in the future experience
slower response times or decreased traffic for a variety of reasons. In
addition, our users depend on Internet service providers, online service
providers and other website operators for access to our websites. Many of them
have experienced significant outages in the past, and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
Moreover, the Internet infrastructure may not be able to support continued
growth in its use. Any of these problems could adversely affect our business.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO SAFEGUARD THE
SECURITY AND PRIVACY OF OUR CUSTOMERS' FINANCIAL DATA
A significant barrier to e-commerce and online communications has been the
need for secure transmission of confidential information over the Internet.
Internet usage could decline if any well-publicized compromise of security
occurred. We may incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by such breaches. We also
retain on our premises personal financial documents that we receive from
prospective borrowers in connection with their loan applications. These
documents are highly sensitive and if a third party were to misappropriate our
users' personal information, users could possibly bring legal claims against us.
We cannot assure you that our privacy policy will be deemed sufficient by our
16
<PAGE> 20
prospective customers or any federal or state laws governing privacy which may
be adopted in the future.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS FROM THIRD PARTY CHALLENGES OR IF WE ARE SUBJECT TO
LITIGATION
Trademarks and other proprietary rights are important to our success and
our competitive position. Although we seek to protect our trademarks and other
proprietary rights through a variety of means, we cannot assure you that the
actions we have taken are adequate to protect these rights. We may also license
content from third parties in the future and it is possible that we could become
subject to infringement actions based upon the content licensed from these third
parties. Any claims brought against us, regardless of their merit, could result
in costly litigation and the diversion of our financial resources and technical
and management personnel. Further, if such claims are proved valid, through
litigation or otherwise, we may be required to change our trademarks and pay
financial damages, which could adversely affect our business.
We typically enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our rights. The steps we have taken may not prevent misappropriation of our
proprietary rights, particularly in foreign countries where laws or law
enforcement practices may not protect our proprietary rights as fully as in the
United States.
We expect that we may be subject to legal proceedings and claims from time
to time in the ordinary course of our business, including claims of alleged
infringement of the trademarks and other intellectual property rights of third
parties by us and our licensees. Such claims, even if without merit, could
result in the expenditure of significant financial and managerial resources.
Further, if such claims are successful, we may be required to change our
trademarks, alter our content and pay financial damages, which could adversely
affect our business.
We may be required to obtain licenses from others to refine, develop,
market and deliver new services. There can be no assurance that we will be able
to obtain any such license on commercially reasonable terms or at all, or that
rights granted pursuant to licenses will be valid and enforceable.
IF OUR INTERNAL SYSTEMS, OR THE INTERNAL SYSTEMS OF OUR SUPPLIERS, ARE NOT YEAR
2000 COMPLIANT, OUR BUSINESS COULD BE SERIOUSLY DISRUPTED
Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Thus, the year 2000 will appear as
"00", which the system might consider to be the year 1900 rather than the year
2000. This could result in system failures, delays or miscalculations. Computer
systems and software that have not been developed or enhanced recently may need
to be upgraded or replaced to comply with Year 2000 requirements.
We believe that each of our software systems on a stand-alone basis is
currently Year 2000 compliant. However, we rely on software components acquired
from third parties which may not be Year 2000 compliant. Furthermore, the
Internet operations of many of our customers and suppliers may be affected by
Year 2000 complications. The failure of our customers or suppliers to ensure
that their systems are Year 2000 compliant could have an adverse effect on our
customers and suppliers, resulting in decreased Internet usage or our inability
to obtain necessary data communication and telecommunication capacity, which in
turn could have an adverse effect on our business, results of operations and
financial condition.
17
<PAGE> 21
The potential worst case scenario includes:
- slowdown in online applications due to a general failure of the Internet;
- corruption of data in our internal information systems;
- delays in our processing capabilities that depend on third-party systems;
- financial losses associated with delays in closing loans; and
- failure of infrastructure services provided by third parties, including
public utilities and Internet service providers.
We have not incurred significant costs to date complying with Year 2000
requirements, and we do not believe that we will incur significant costs for
such purposes in the foreseeable future. If we discover any Year 2000 errors or
defects in our internal systems, we could incur substantial costs in making
repairs. The resulting disruption of our operations could seriously damage our
business. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000".
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK AND AN ACTIVE TRADING MARKET
MAY NOT DEVELOP FOLLOWING THIS OFFERING
Before this offering, there has not been a public market for our common
stock and the trading market price for our common stock may decline below the
initial public offering price. We cannot predict the extent to which a market
will develop or how liquid that market might become. The initial public offering
price for the shares of our common stock will be determined by negotiations
between us and the representatives of the underwriters and may not be indicative
of prices that will prevail in the trading market. See "Underwriting" for a
discussion of the factors considered in determining the initial public offering
price.
OUR STOCK PRICE COULD BE VOLATILE AND COULD DECLINE FOLLOWING THIS OFFERING
The stock market has experienced significant price and volume fluctuations,
and the market prices of technology companies, particularly Internet-related
companies, have been highly volatile. Investors may not be able to resell their
shares at or above the initial public offering price. See "Underwriting". In the
past, securities class action litigation has often been instituted against
companies following periods of volatility in the market price of their
securities. Such litigation could result in substantial costs and a diversion of
management's attention and resources.
PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS WILL RETAIN SUBSTANTIAL
CONTROL OVER OUR BUSINESS AFTER THE OFFERING AND MAY MAKE DECISIONS THAT ARE NOT
IN THE BEST INTEREST OF ALL STOCKHOLDERS
Upon completion of this offering, our executive officers, directors and
greater than 5% stockholders, and their affiliates, will, in the aggregate, own
approximately % of our outstanding common stock. As a result, such persons,
acting together, will have the ability to substantially influence all matters
submitted to the stockholders for approval, including the election and removal
of directors and any merger, consolidation or sale of all or substantially all
of our assets, and to control our management and affairs. Accordingly, such
concentration of ownership may have the effect of delaying, deferring or
preventing a change in control, impeding a merger, consolidation, takeover or
other business combination involving us or discouraging a potential acquirer
from making a tender offer or otherwise attempting to obtain control of our
business, even if such a transaction would be beneficial to other stockholders.
See "Principal Stockholders".
18
<PAGE> 22
FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE
Sales of significant amounts of our common stock in the public market after
this offering or the perception that such sales will occur could adversely
affect the market price of our common stock or our future ability to raise
capital through an offering of our equity securities. Of the
shares of common stock to be outstanding upon the closing of this offering, the
shares offered hereby will be eligible for immediate sale in the
public market without restriction, unless the shares are purchased by our
"affiliates" within the meaning of Rule 144 under the Securities Act of 1933.
The remaining 11,031,320 shares of our common stock held by existing
stockholders upon the closing of this offering will be "restricted securities",
as that term is defined in Rule 144. Restricted securities may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 under the Act. All of the holders of
these restricted securities, including our officers and directors, have entered
into lock-up agreements providing that, subject to certain limited exceptions,
they will not sell, directly or indirectly, any common stock without the prior
consent of Goldman, Sachs & Co. for a period of 180 days from the date of this
prospectus. Subject to the provisions of Rules 144, 144(k) and 701, 10,791,320
shares of common stock will be available for sale in the public market, subject
to compliance with certain volume restrictions in the case of shares held by
affiliates, upon expiration of this 180-day period.
In addition, as of March 19, 1999, there were outstanding options to
purchase 1,971,206 shares of common stock which will be eligible for sale in the
public market from time to time subject to vesting and the expiration of lock-up
agreements. In addition, certain stockholders, representing approximately
5,947,465 shares of common stock, including shares issuable upon the exercise of
certain warrants to purchase common stock, will be entitled to certain demand
and piggy-back registration rights, subject to certain conditions. As of March
19, 1999, there was outstanding a warrant to purchase 15,000 shares of Series C
preferred stock, convertible into 15,000 shares of common stock after this
offering, and a warrant to purchase 53,996 shares of Series D preferred stock,
convertible into 53,996 shares of common stock after this offering. The 68,996
shares of common stock that will be issuable upon exercise of these warrants
will be eligible for sale in the public market from time to time subject to the
expiration of lock-up agreements and Rule 144. See "Management -- Stock Plans",
"Description of Capital Stock -- Registration Rights", "Shares Available for
Future Sale" and "Underwriting".
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN
This prospectus contains forward-looking statements that involve risks and
uncertainties. You should not rely on these forward-looking statements. We use
words such as "anticipates," "believes," "plans," "expects," "future," "intends"
and similar expressions to identify such forward-looking statements. This
prospectus also contains forward-looking statements attributed to certain third
parties relating to their estimates regarding the growth of e-commerce and
mortgage loan markets. You should not place undue reliance on those
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described in "Risk Factors" and elsewhere in this prospectus.
19
<PAGE> 23
USE OF PROCEEDS
The net proceeds to us from the sale of the shares of common
stock offered by us are estimated to be $ after deducting the
underwriting discount, estimated offering expenses and assuming no exercise of
the underwriters' over-allotment option to purchase additional
shares of common stock from us. We expect to use the majority of such proceeds
for working capital and general corporate purposes. It is our intent to focus
our operating efforts on increasing client satisfaction with the E-LOAN
experience by further streamlining the mortgage process. This focused effort
will include expenditures on technology and system upgrades, corporate training,
and recruitment of key management and personnel to improve our operating and
customer service practices. In addition, we may use a portion of the net
proceeds to acquire complementary products, technologies or businesses; however,
we currently have no commitments or agreements and are not involved in any
negotiations to do so. We intend to invest the net proceeds of this offering in
interest-bearing, investment-grade securities pending their use.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. The covenants made by us under our existing line of credit
prohibit the payment of dividends.
20
<PAGE> 24
CAPITALIZATION
The following table sets forth the following information:
- the actual capitalization of E-LOAN as of December 31, 1998;
- the pro forma capitalization of E-LOAN after giving effect to the
conversion of all outstanding shares of convertible preferred stock and
53,996 warrants to purchase Series D preferred stock at $9.26 per share
into 6,645,303 shares of common stock upon the closing of this offering;
and
- the pro forma as adjusted capitalization after giving effect to the sale
of shares of common stock in this offering at the initial
public offering price of $ per share, less underwriting discounts and
commissions and estimated offering expenses payable by E-LOAN.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ --------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Lease obligations, long-term portion........................ $ 719 $ 719 $
Notes payable, long-term.................................... 570 570
Mandatorily redeemable convertible preferred stock:
Series C, 4,467,912 shares authorized; 4,069,936 shares
issued and outstanding, actual (aggregate liquidation
preference $4,999,998); no shares issued and
outstanding, pro forma as adjusted...................... $ 5,526 $ --
Series C-1, 4,467,912 shares authorized; no shares issued
and outstanding, actual (liquidation preference $1.22852
per share); no shares issued and outstanding, pro forma
as adjusted............................................. -- --
Series D, 1,950,000 shares authorized; 1,662,529 shares
issued and outstanding, actual (aggregate liquidation
preference $15,400,006); no shares issued and
outstanding, pro forma as adjusted...................... 15,867 --
------------ --------
Stockholders' deficit:
Convertible preferred stock;
Series A, 428,635 shares authorized; 428,635 shares
issued and outstanding, actual (aggregate liquidation
preference $94,300) no shares issued and outstanding,
pro forma and as adjusted............................. 91 --
Series B, 450,708 shares authorized; 430,207 shares
issued and outstanding, actual (aggregate liquidation
preference $412,999); no shares issued and
outstanding, pro forma as adjusted.................... 411 --
Preferred stock; no shares authorized, actual; 5,000,000
shares authorized, pro forma as adjusted, no shares
issued and outstanding, actual, pro forma as adjusted...
Common stock; 20,000,000 shares authorized and 4,174,951
shares issued and outstanding, actual; 70,000,000
authorized, 10,820,254 shares issued and outstanding,
pro forma, shares issued and outstanding, pro
forma as adjusted....................................... 27 22,422
Less: subscription receivable............................. (4) (4)
Additional paid-in capital................................ 5,367 5,367
Unearned compensation..................................... (4,477) (4,477)
Accumulated deficit....................................... (12,599) (12,599)
------------ --------
Total stockholders' deficit........................ $ (11,184) $ 10,709
------------ --------
Total mandatorily redeemable convertible stock and
stockholders' equity (deficit)................... $ 10,209 $ 10,709
------------ --------
Total capitalization........................................ $ 11,498 $ 11,998 $ --
============ ======== ========
</TABLE>
21
<PAGE> 25
This table excludes the following shares:
- 1,181,998 shares of common stock issuable upon exercise of options
outstanding under E-LOAN's 1997 Stock Option Plan with a weighted average
exercise price of $1.56 per share;
- 15,000 shares of common stock issuable upon conversion of 15,000 shares
of Series C preferred stock issuable upon exercise of a warrant to
purchase Series C preferred stock at an exercise price of $2.00 per
share; and
- 318,002 shares of common stock available for issuance under E-LOAN's 1997
Stock Option Plan as of December 31, 1998 (excluding future annual
automatic increases to the number of shares reserved under the plan).
See "Management -- Stock Plans", "Description of Capital Stock" and Notes
11, 12 and 16 of Notes to Financial Statements.
22
<PAGE> 26
DILUTION
The pro forma net tangible book value of our common stock on December 31,
1998 was $10.7 million, or approximately $0.99 per share. Pro forma net tangible
book value per share represents the amount of our total tangible assets less
total liabilities, divided by the 10,820,254 pro forma number of shares of
common stock outstanding (assuming the conversion of all outstanding convertible
preferred stock and 53,996 warrants to purchase Series D preferred stock into
shares of common stock at $9.26 per share). Dilution in net tangible book value
per share represents the difference between the amount per share paid by
purchasers of shares of our common stock in this offering and the net tangible
book value per share of our common stock immediately after the offering. After
giving effect to our sale of the shares of common stock offered
hereby and after deducting the underwriting discounts and commissions and
estimated offering expenses payable by E-LOAN, E-LOAN's net tangible book value
would have been $ or $ per share. This represents an immediate increase
in net tangible book value of $ per share to existing stockholders and an
immediate dilution in net tangible book value of $ per share to new
investors. The following table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
--------
Pro forma net tangible book value per share as of December
31, 1998............................................... $ 0.99
--------
Increase per share attributable to new investors.......... $
--------
Pro forma net tangible book value per share after the
offering.................................................. $
--------
Dilution in pro forma net tangible book value per share to
new investors............................................. $
========
</TABLE>
The following table sets forth, as of December 31, 1998, the number of
shares of common stock purchased from E-LOAN by existing stockholders and by the
new investors together with the total price and average price per share paid by
each of these groups. The information presented is based upon an assumed initial
public offering price of $ per share, before deducting underwriting
discounts and commissions and estimated offering expenses payable by E-LOAN.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 10,820,254 % $ % $
New investors...................
Total......................... % $ % $
========== ===== ======= =====
</TABLE>
The information set forth above is based upon the number of shares of
common stock outstanding on December 31, 1998 and gives effect to the conversion
of all outstanding shares of E-LOAN's preferred stock and 53,996 warrants to
purchase Series D preferred stock into shares of common stock upon the closing
of this offering. This information excludes:
- 1,181,998 shares of common stock issuable upon exercise of options
outstanding under E-LOAN's 1997 Stock Option Plan with a weighted average
exercise price of $1.56 per share;
- 15,000 shares of common stock issuable upon conversion of 15,000 shares
of Series C preferred stock issuable upon exercise of a warrant to
purchase Series C preferred stock at an exercise price of $2.00 per
share; and
- 318,002 shares of common stock available for issuance under E-LOAN's 1997
Stock Option Plan as of December 31, 1998 (excluding future annual
automatic increases to the number of shares reserved under the plan).
See "Management -- Stock Plans", "Description of Capital Stock" and Notes
11, 12 and 16 of Notes to Financial Statements.
23
<PAGE> 27
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and is qualified by reference to the Financial Statements and Notes
thereto appearing elsewhere in this prospectus. The balance sheet data set forth
below as of December 31, 1997 and 1998 and the income statement data for each of
the three years in the period ended December 31, 1998 are derived from, and are
qualified by reference to, the audited financial statements of E-LOAN included
elsewhere in this prospectus. The selected balance sheet financial data set
forth below as of December 31, 1995 and 1996 and the income statement data for
the year ended December 31, 1995 are derived from the unaudited financial
statements of E-LOAN not included herein. The historical results are not
necessarily indicative of results to be expected for any future period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1996 1997 1998
-------- -------- ------- --------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................... $ 1,603 $ 893 $ 1,043 $ 6,832
Operating expenses:
Operations................................................ 1,368 903 1,319 7,626
Sales and marketing....................................... -- -- 470 5,642
Technology................................................ -- -- 102 1,248
General and administrative................................ 152 97 524 2,410
Amortization of unearned compensation..................... -- -- -- 1,251
-------- -------- ------- --------
Total operating expenses................................ 1,520 1,000 2,415 18,177
-------- -------- ------- --------
Loss from operations.................................. 83 (107) (1,372) (11,345)
Other income, net........................................... -- (3) (2) 173
-------- -------- ------- --------
Net income (loss)........................................... $ 83 $ (110) $(1,374) $(11,172)
======== ======== ======= ========
Net loss per share:
Basic and diluted....................................... $ .02(1) $ (0.03) $ (0.35) $ (2.95)
======== ======== ======= ========
BALANCE SHEET DATA(2) (AT END OF PERIOD):
Mortgage loans held-for-sale (pledged).................... -- -- -- $ 42,154
Cash and cash equivalents................................. $ 47 $ 2 $ 4,218 9,141
Total assets.............................................. 81 40 4,680 55,523
Warehouse lines payable................................... -- -- -- 41,046
Long term obligations..................................... -- -- -- 1,290
Mandatorily redeemable preferred stock.................... -- -- 3,208 21,393
Total stockholders' equity (deficit)...................... 58 (52) (966) (11,184)
</TABLE>
- ---------------
(1) The balance sheet amounts for December 31, 1994 related to PAFG, the
predecessor company, are de minimis and the income statement amounts for the
year ended December 31, 1994 are not available.
(2) Does not give effect to the sale of shares of common stock in this
offering. See "Use of Proceeds", "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
24
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with E-LOAN's
Consolidated Financial Statements and Notes thereto and the other financial
information appearing elsewhere in this prospectus. In addition to historical
information, the following discussion and other parts of this prospectus contain
forward-looking information that involves risks and uncertainties. E-LOAN's
actual results could differ materially from those anticipated by such
forward-looking information due to competitive factors, risks associated with
E-LOAN's expansion plans and other factors discussed under "Risk Factors" and
elsewhere in this prospectus.
OVERVIEW
E-LOAN is a leading provider of mortgage services online and is engaged in
the brokerage, origination and sale of mortgage loans secured by residential
real estate.
E-LOAN was incorporated in August 1996 and began marketing its services and
initiated online mortgage brokerage operations in June 1997. E-LOAN first
derived revenues from the origination and sale of mortgage loans in June 1998.
In December 1997, E-LOAN merged with Palo Alto Funding Group (PAFG), a
traditional mortgage brokerage firm established in 1992, and suspended PAFG's
operations. In compliance with applicable reporting requirements, the results of
PAFG have been included in E-LOAN's financial statements as a predecessor
company beginning in 1995. However, E-LOAN believes that reported results prior
to 1998, which are primarily composed of PAFG results, are not indicative of
E-LOAN's current business operations.
E-LOAN's revenues are derived from the brokering of loans and the
origination and sale of loans. Brokered loans are funded through lending
partners and E-LOAN never takes title to the mortgage. Brokerage revenues are
comprised of the mark-up to the lending partner's loan price, and processing and
credit reporting fees. These revenues are recognized at the time a loan is
closed. Originated and sold loans are loans that are funded through E-LOAN's own
warehouse lines of credit and sold to mortgage loan purchasers. Loan origination
and sale revenues are comprised of proceeds in excess of the carrying value of
the loan, origination fees less certain direct origination costs, other
processing fees and interest paid by borrowers on loans that E-LOAN holds for
sale. These revenues are recognized at the time the loan is sold or, for
interest income, as earned during the period from funding to sale. E-LOAN earns
additional revenue from its loan origination and sale operations as compared to
brokered loan operations because the sale of loans includes a service release
premium.
E-LOAN's loan origination and sale operations were initiated in June 1998
and represented 32% of total revenues for the year ended December 31, 1998.
E-LOAN expects revenues derived from its loan origination and sale operations to
continue to increase as a percentage of total revenues.
In generating revenues, E-LOAN relies on a number of strategic Internet
distribution partners to direct a significant number of prospective customers to
its website. E-LOAN considers its distribution partnerships with Yahoo!, E*Trade
and DLJdirect to be the most critical to its ability to generate revenues. Both
Yahoo! and E*Trade have made equity investments in E-LOAN. See "Certain
Transactions" and "Risk Factors -- The loss of one or more of our significant
distribution partners would adversely affect our business".
As a result of our limited operating history and our recent growth, it will
be necessary to implement new and expanded operational, financial and
administrative systems and control procedures to enable us to expand, train and
manage our employees and coordinate the efforts of our underwriting, accounting,
finance, marketing, and operations departments. For example,
25
<PAGE> 29
we intend to implement both a new financial reporting system and a loan
production system by the end of 1999.
Historically, our efforts were focused primarily on developing and scaling
our online mortgage operations and less on implementing internal accounting
controls, financial and operational reporting systems and expanding the size and
capabilities of our financial staff. Our auditors noted at December 31, 1998
that as a result of these shortcomings we had significant difficulties
summarizing and preparing accurate financial information on a timely basis.
In the fourth quarter of 1998, we hired a Chief Financial Officer and in
1999, we hired a Director of Finance and two other accounting managers as well
as additional full time and temporary financial personnel. We have also
documented and are in the process of enhancing our procedures and controls to
address the deficiencies in our financial reporting and loan production system.
See "Risk Factors -- We have a limited operating history, have only operated
during periods of growth in the home mortgage market and consequently face
significant risks and uncertainties".
AMORTIZATION OF UNEARNED COMPENSATION
In connection with the offering of shares of our common stock, certain
options granted in the years ended December 1997 and 1998 have been considered
to be compensatory. Deferred compensation associated with such options for the
year ended December 31, 1998 and for the period from January 1, 1999 to March
23, 1999 amounted to $5.7 million and $35.0 million, respectively. Of this
amount, $1.25 million was charged to operations for the year ended December 31,
1998 and the remainder will be amortized over the 48 month vesting period of the
applicable options.
26
<PAGE> 30
COMPARISON OF QUARTERS ENDED MARCH 31, 1998 THROUGH DECEMBER 31, 1998
The following table sets forth the results of operations for E-LOAN on a
quarterly basis and expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998
-------- -------- --------- --------
<S> <C> <C> <C> <C>
REVENUES............................................ $ 527 $ 1,233 $ 2,051 $ 3,021
Operating expenses:
Operations........................................ 779 1,077 2,127 3,643
Sales and marketing............................... 513 874 2,174 2,081
Technology........................................ 163 371 284 430
General and administrative........................ 379 436 711 884
Amortization of unearned compensation............. 44 211 296 700
Total operating expenses....................... 1,878 2,969 5,592 7,378
Loss from operations................................ (1,351) (1,736) (3,541) (4,717)
Other income, net................................... 20 29 26 98
Net loss............................................ $(1,331) $(1,707) $(3,515) $(4,619)
======= ======= ======= =======
AS A PERCENTAGE OF NET REVENUES:
Revenues............................................ 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Operations........................................ 148 87 103 120
Sales and marketing............................... 97 71 106 69
Technology........................................ 31 30 14 14
General and administrative........................ 72 35 35 29
Amortization of unearned compensation............. 8 17 14 23
------- ------- ------- -------
Total operating expenses....................... 376 241 273 244
------- ------- ------- -------
Loss from operations................................ (256) (141) (173) (156)
Other income, net................................... 4 2 1 3
------- ------- ------- -------
Net loss............................................ (253) (139) (171) (153)
======= ======= ======= =======
</TABLE>
REVENUES
Revenues increased sequentially each quarter throughout 1998 from $0.5
million to $3.0 million. Substantially all of these increases resulted from
growth in the number of loans closed and the initiation of E-LOAN's loan
origination and sale operations in June 1998. E-LOAN did not significantly
change its pricing during 1998. E-LOAN expects that the rate of its revenue
growth in future periods will decline from the rates of revenue growth
experienced in recent quarters. E-LOAN expects revenues derived from its loan
origination and sale operations to continue to increase as a percentage of its
total revenues.
OPERATING EXPENSES
OPERATIONS. Operations expense is comprised of both fixed and variable
expenses, including salaries, benefits and expenses associated with the
brokering, and the origination and sale of mortgage loans, and interest expense
paid by E-LOAN under the warehouse facilities it uses to fund loans held for
sale. Operations expense increased sequentially from the first quarter to the
fourth quarter of 1998 from $0.8 million to $3.6 million and decreased as a
percentage of revenues from 148% to 120%. This increase in absolute dollars was
primarily attributable to an operations headcount increase necessary to support
the growth in E-LOAN's total closed loan volume. In addition, E-LOAN established
its loan origination and sale business in the last two
27
<PAGE> 31
quarters, which resulted in additional headcount and an increase in interest
expense due to an increase in the number of loans held for sale. The decrease in
operations expense as a percentage of total revenue between the first and second
quarter is due to revenue growth exceeding growth in operations expense with an
increase in the third and fourth quarter from the establishment of the loan
origination and sale business. E-LOAN expects operations expense to increase in
absolute dollars over the next two years and intends to increase operations
capacity in anticipation of an increase in the number of loans funded.
SALES AND MARKETING. Sales and marketing expense is primarily comprised of
salaries, benefits and other expenses related to advertising, promotion and
distribution partnerships. Sales and marketing expense increased from the first
quarter to the fourth quarter of 1998 from $0.5 million to $2.1 million and
decreased as a percentage of revenues from 97% to 69%. Sales and marketing
expense increased in absolute dollars due to increases in compensation
associated with additional headcount and, in the third and fourth quarters, a
substantial increase in expenses for advertising, promotion and distribution
partnerships. Sales and marketing decreased between the first and second quarter
as a percentage of revenues due to revenue growth exceeding growth in sales and
marketing expense, with an increase in the third and fourth quarters due to the
initiation of a major advertising campaign. E-LOAN intends to significantly
increase absolute dollar spending in sales and marketing activities over the
next two years in an effort to drive origination volume and increase overall
brand awareness.
TECHNOLOGY. Technology expense includes salary, benefits and consulting
fees related to website development, the introduction of new technologies and
the support of E-LOAN's existing technological infrastructure. Technology
expense increased from the first quarter to the fourth quarter of 1998 from $0.2
million to $0.4 million and decreased as a percentage of revenues from 31% to
14%. Aside from a decrease from the second to third quarters of 1998 as a result
of higher recruitment costs in the second quarter 1998, technology expense
increased in absolute dollars sequentially in each quarter throughout 1998. The
absolute dollar increases were primarily the result of the growth in engineering
and management information systems personnel to support the expansion of online
operations. Technology expense decreased sequentially as a percentage of
revenues due to revenue growth exceeding growth in technology expense. E-LOAN
intends to significantly increase absolute dollar spending on technology over
the next two years in an effort to further improve the online mortgage
origination process.
GENERAL AND ADMINISTRATIVE. General and administrative expense is primarily
comprised of salary, benefits, rent and depreciation and amortization. General
and administrative expense increased sequentially from the first quarter to the
fourth quarter of 1998 from $0.4 million to $0.9 million and decreased as a
percentage of revenues from 72% to 29%. On an absolute dollar basis, general and
administrative expense increased sequentially throughout 1998 primarily as a
result of:
- the addition of general and administrative headcount;
- increase in professional services fees;
- increase in rent and building expense resulting from the fourth quarter
move into a new facility; and
- growth in depreciation and amortization expense on computer equipment and
leasehold improvements.
General and administrative expense as a percentage of revenues decreased
between the first and second quarters of 1998 due to revenue growth excluding
growth in general and administrative expenses, but remained relatively flat
during the remaining quarters of 1998 due to the above mentioned factors
offsetting revenue growth. General and administrative expenses are expected to
increase in absolute dollars over the next two years.
28
<PAGE> 32
AMORTIZATION OF UNEARNED COMPENSATION. Amortization of unearned
compensation increased sequentially from $44,000 to $0.7 million from the first
to the fourth quarter of 1998.
OTHER INCOME, NET
Other income, net, is comprised of interest income on non-warehouse
facility borrowings. Other income, net, increased sequentially from $20,000 to
$0.1 million from the first to the fourth quarter of 1998 primarily due to an
increase of cash from the sale of equity securities.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1998
The following table sets forth the results of operations for E-LOAN
expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1997 1998
------- --------
<S> <C> <C>
Revenues.................................... $ 1,043 $ 6,832
Operating expenses:
Operations................................ 1,319 7,626
Sales & marketing......................... 470 5,642
Technology................................ 102 1,248
General & administrative.................. 524 2,410
Amortization of unearned compensation..... -- 1,251
------- --------
Total Operating expenses............... 2,415 18,177
Operating loss.............................. (1,372) (11,345)
Other income, net......................... (2) 173
------- --------
Net loss.................................... $(1,374) $(11,172)
======= ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1997 1998
---- ----
<S> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES:
Operating expenses:
Operations....................................... 126% 112%
Sales & marketing................................ 45% 83%
Technology....................................... 10% 18%
General & administrative......................... 50% 35%
Amortization of unearned compensation............ 0% 18%
---- ----
Total Operating expenses...................... 232% 266%
Operating loss..................................... (132)% (166)%
Other income, net................................ 0% 3%
Net loss........................................... (132)% (164)%
==== ====
</TABLE>
REVENUES
Revenues for the year ended December 31, 1998 increased $5.8 million to
$6.8 million as compared to $1.0 million for the same period in 1997. This
increase resulted primarily from
29
<PAGE> 33
growth in the number of loans closed and the initiation of E-LOAN's loan
origination and sale operations in June 1998. E-LOAN expects that the rate of
its revenue growth in future periods will decline from the rates of revenue
growth experienced in recent quarters.
OPERATING EXPENSES
OPERATIONS. Operations expense increased $6.3 million to $7.6 million for
the year ended December 31, 1998 as compared to $1.3 million in 1997 and
decreased as a percentage of revenues from 112% to 128% for the same period. The
absolute dollar increase was attributable to an operations headcount increase to
187 as of December 31, 1998 from 27 as of December 31, 1997. This increase was
primarily necessary to support the growth in E-LOAN's origination volume and to
establish its loan origination and sale operations. The decrease as a percentage
of revenues was primarily due to revenues growing much faster than operations
expense.
SALES AND MARKETING. Sales and marketing expense increased $5.2 million to
$5.6 million for 1998, as compared to $0.5 million for 1997 and increased as a
percentage of revenues from 45% to 83% for the same period. These increases were
primarily attributable to:
- the initiation of a major advertising campaign in 1998;
- increased costs related to third party distribution partnership
agreements; and
- the addition of sales and marketing personnel.
Sales and marketing headcount increased to six as of December 31, 1998 from
three as of December 31, 1997.
TECHNOLOGY. Technology expense increased $1.1 million to $1.2 million for
1998, as compared to $0.1 million for 1997 and increased as a percentage of
revenues from 10% to 18% for the same period. These increases were primarily the
result of the growth in engineering and management information systems personnel
to 14 as of December 31, 1998 from two as of December 31, 1997 to support the
initiation of online operations in June 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased
$1.9 million to $2.4 million for 1998, as compared to $0.5 million for 1997 and
decreased as a percentage of revenues from 49% to 35% for the same period. The
absolute dollar increase is primarily attributable to:
- the addition of general and administrative headcount;
- increase in rent and building expense resulting from the move into a new
facility; and
- growth in depreciation and amortization expense on computer equipment and
leasehold improvements.
General and administrative headcount increased to 15 as of December 31,
1998 from eight as of December 31, 1997. The decrease as a percentage of
revenues was primarily due to revenues growing much faster than general and
administrative expense.
AMORTIZATION OF UNEARNED COMPENSATION. Amortization of unearned
compensation increased from zero to $1.3 million for the year ended December 31,
1998.
OTHER INCOME, NET
Other income, net, increased from an expense of $2,000 in 1997 to income of
$0.2 million for the year ended December 31, 1998. The increase is attributable
to interest income on cash proceeds from sale of equity partially offset by
interest expense on non-warehouse facility borrowings.
30
<PAGE> 34
INCOME TAXES
As of December 31, 1998, E-LOAN had approximately $10 million of federal
net operating loss carryforwards for tax reporting purposes available to offset
future taxable income. E-LOAN's federal net operating loss carryforwards begin
to expire in 2011. Certain future changes in share ownership of E-LOAN, as
defined in the Tax Reform Act of 1986, may restrict the utilization of
carryforwards. A valuation allowance has been recorded for the entire deferred
tax asset as a result of uncertainties regarding the realization of the asset
due to the lack of E-LOAN's earnings history.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, E-LOAN has financed its operations primarily through
private placements of convertible preferred stock and borrowings under warehouse
lines of credit and other credit facilities. As of December 31, 1998, E-LOAN had
approximately $9.1 million in cash and cash equivalents.
E-LOAN's sources of cash flow include cash from the sale of mortgage loans,
borrowings under warehouse lines of credit and other credit facilities,
brokerage fees, interest income, and the sale of equity securities. E-LOAN's
uses of cash include the funding of mortgage loans, repayment of amounts
borrowed under warehouse lines of credit, operating expenses, payment of
interest, and capital expenditures primarily comprised of furniture, fixtures,
computer equipment, software and leasehold improvements. Net cash from operating
activities was ($52.3) million in 1998 and $0.7 million in 1997. Net cash used
in operating activities was primarily due to an increase in net losses and
increase in mortgage loans held for sale.
Net cash used in investing activities was $1.6 million in 1998 and $0.2
million in 1997. Net cash from operating activities during these periods was
primarily for the purchase of furniture and equipment.
Net cash provided by financing activities was $58.8 million in 1998 and
$3.7 million in 1997. Net cash provided in these periods was primarily from the
sale of preferred stock and borrowings under E-LOAN's warehouse lines of credit
and other credit facilities, partially offset by repayments of warehouse lines
of credit.
At December 31, 1998, E-LOAN had a warehouse line of credit for borrowings
up to approximately $18.8 million, including a temporary overdraft limit of
approximately $3.8 million for interim financing of mortgage loans. The interest
rate charged on borrowings against the warehouse line of credit was 2.0% over
the 30 day commercial paper rate of the lender. Borrowings are collateralized by
the mortgage loans held for sale. The warehouse line of credit expires on June
30, 1999. Upon expiration, management believes that it will either renew its
existing line or obtain sufficient additional lines. At December 31, 1998,
approximately $15.0 million was outstanding under this warehouse line of credit.
At December 31, 1998, E-LOAN had a commitment from a third party to finance
up to $35 million of E-LOAN's mortgage loan inventory. The funds borrowed
pursuant to this commitment are secured by the related mortgage loans and accrue
interest at LIBOR plus 1.25%. This agreement includes various non-financial
negative and affirmative covenants. Either E-LOAN or the lender can terminate
the agreement at any time. At December 31, 1998, approximately $26.1 million was
outstanding under this financing commitment.
As of December 31, 1998 the principal source of liquidity for E-LOAN was
$9.1 million in cash and cash equivalents and $4.4 million in unused credit
facilities. In December 1998, E-LOAN entered into two credit facilities for
working capital and equipment financing in the aggregate amount of $5.0 million.
The first credit facility in the amount of $1.5 million has an interest rate of
prime plus 0.5%. This facility expires in one year. The second credit facility
is a $3.5 million term
31
<PAGE> 35
loan with an interest rate of prime plus 0.5%. As of December 31, 1998, $642,000
was outstanding under these two credit facilities.
E-LOAN has entered into several marketing service agreements with third
parties. Under these agreements, the third parties display E-LOAN's logo and
loan information on their websites and provide related marketing services.
E-LOAN pays for these services in minimum monthly and quarterly installments
plus, in some cases, a per view charge for each time the information is
displayed. Future minimum payments under these agreements are $5.5 million in
1999, $2.3 million in 2000 and $212,000 in 2001.
E-LOAN believes that its existing cash and cash equivalents, the net
proceeds from this offering and existing and available credit facilities will be
sufficient to fund its operating activities, capital expenditures and other
obligations for the foreseeable future. However, if during that period or
thereafter E-LOAN is not successful in generating sufficient cash flow from
operations, or in raising additional capital when required in sufficient amounts
and on terms acceptable to E-LOAN, these failures could have a material adverse
affect on E-LOAN's business, results of operations and financial condition. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of its then-current stockholders would be reduced.
DISCLOSURE ABOUT MARKET RISK
Interest rate movements significantly impact E-LOAN's volume of closed
loans. As such, interest rate movements represent the primary component of
market risk to E-LOAN. In a higher interest rate environment, consumer demand
for mortgage loans, particularly refinancing of existing mortgages, declines.
Interest rate movements affect the interest income earned on loans held for
sale, interest expense on the warehouse lines payable, the value of mortgage
loans held for sale and ultimately the gain on sale of mortgage loans. In
addition, in an increasing interest rate environment, E-LOAN's mortgage loan
brokerage volume is adversely affected.
E-LOAN originates mortgage loans and manages the market risk related to
these loans by pre-selling them on a best efforts basis to the anticipated
purchaser at the same time that E-LOAN establishes the borrowers' interest
rates. If E-LOAN can process loans within the applicable purchasers' commitment
timeframes E-LOAN has no interest rate risk exposure on such loans. However, if
E-LOAN cannot process the loan within this timeframe and interest rates
increase, E-LOAN may experience a reduced gain or may even incur a loss on the
sale of the loan. See "Risk Factors -- The uncertainty of the time it takes to
close loans can lead to unpredictable revenue and profitability".
With the exception of pre-selling loans through best-efforts commitments,
E-LOAN currently does not engage in any hedging activities.
E-LOAN currently does not maintain a trading portfolio. As a result, E-LOAN
is not exposed to market risk as it relates to trading activities. The majority
of E-LOAN's portfolio is held for sale which requires E-LOAN to perform market
valuations of its pipeline, its mortgage portfolio held for sale and related
forward sale commitments in order to properly record the portfolio and the
pipeline at the lower of cost or market. Therefore, E-LOAN monitors the interest
rates of its loan portfolio as compared to prevailing interest rates in the
market.
Because E-LOAN pre-sells its mortgage loan commitments forward, E-LOAN
believes that a 100 basis point increase or decrease in long-term rates would
not have a significant adverse effect on E-LOAN's earnings from its interest
rate sensitive assets. E-LOAN pays off the warehouse lines payable when the loan
is sold and as such would not be expected to incur significant losses from an
increase in interest rates on the line due to the short timeframe that the line
is drawn down. However, since a high percentage of E-LOAN's closed loan volume
is from refinancings, E-LOAN's future operating results are more sensitive to
interest rate movements than a mortgage lender who has a lower proportion of
refinancings.
32
<PAGE> 36
In the future, if E-LOAN does not pre-sell the mortgage commitments, its
market risk could change significantly.
RECENT ACCOUNTING PRONOUNCEMENTS
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS No. 133). SFAS No. 133 is effective for
all fiscal quarters of all fiscal years beginning after June 15, 1999 (January
1, 2000 for E-LOAN). SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. E-LOAN is in the
process of evaluating the impact of SFAS No. 133 on its financial statements.
In October 1998, the Financial Accounting Standards Board issued SFAS No.
134, Accounting for Mortgage-Backed Securities Retained after the Securitization
of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise. SFAS No. 134
amends SFAS No. 65, Accounting for Certain Mortgage Backed Securities, to
require that after an entity that is engaged in mortgage banking activities has
securitized mortgage loans that are held for sale, it must classify the
resulting retained mortgage-backed securities or other retained interests based
on its ability and intent to sell or hold those investments. This statement is
effective for the first fiscal quarter beginning after December 15, 1998, with
earlier application encouraged. At this time, E-LOAN does not anticipate any
impact from the adoption of this standard.
The American Institute of Certified Public Accountants issued Statement of
Position ("SOP") No. 98-1, "Software for Internal Use," which provides guidance
on accounting for the cost of computer software developed or obtained for
internal use. SOP No. 98-1 is effective for financial statements for fiscal
years beginning after December 15, 1998. E-LOAN is in the process of evaluating
the impact of SOP No. 98-1 on its financial statements.
YEAR 2000
Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Thus, the year 2000 will appear as
"00", which the system might consider to be the year 1900 rather than the year
2000. This could result in system failures, delays or miscalculations. Computer
systems and software that have not been developed or enhanced recently may need
to be upgraded or replaced to comply with Year 2000 requirements.
We believe that each of our software systems on a stand-alone basis is
currently Year 2000 compliant. We have internally developed a variety of
software programs that run our website, including E-Track. Although we designed
such software to be Year 2000 compliant, we have not completed our testing of
the software for compliance. We anticipate that we will complete this testing by
the end of April 1999. We also use multiple software systems and products
developed by third party vendors, including systems and products used in
operations and finance, and systems that operate our facilities. We are
currently in the process of requesting compliance certificates from these
vendors to certify their Year 2000 readiness. We have received compliance
certificates from substantially all of these vendors and expect to receive the
balance of these certificates by the end of April 1999.
The Internet operations of many of our customers and suppliers may be
affected by Year 2000 complications. The failure of our customers or suppliers
to ensure that their systems are Year 2000 compliant could have an adverse
effect on our customers and suppliers, resulting in decreased Internet usage or
our inability to obtain necessary data communication and telecommunication
capacity, which in turn could have an adverse effect on our business, results of
operations and financial condition.
33
<PAGE> 37
The potential worst case scenario includes:
- slowdown in online applications due to a general failure of the Internet;
- corruption of data in our internal information systems;
- delays in our processing capabilities that depend on third-party systems;
- financial losses associated with delays in closing loans; and
- failure of infrastructure services provided by third parties, including
public utilities and Internet service providers.
We have not incurred significant costs to date complying with Year 2000
requirements, and we do not believe that we will incur significant costs for
such purposes in the foreseeable future. If we discover any Year 2000 errors or
defects in our internal systems, we could incur substantial costs in making
repairs. The resulting disruption of our operations could seriously damage our
business.
34
<PAGE> 38
BUSINESS
E-LOAN is a leading online provider of mortgages, offering consumers the
ability to obtain the most suitable mortgages from a wide array of lenders at
substantial savings. E-LOAN's easy-to-use website enables borrowers to search
through over 50,000 products provided by more than 70 lending sources to find
the most competitively priced loans that match the borrowers' criteria.
Borrowers can analyze and compare loans online as well as receive unbiased loan
recommendations based on their personal criteria and financial characteristics.
E-LOAN offers transaction cost savings of over 50% compared to obtaining a
mortgage through traditional mortgage brokers or single source lenders. E-LOAN
provides complete transaction fulfillment and a high level of service through
customer service representatives assigned to each borrower and the proprietary
E-Track loan monitoring service. E-LOAN is the exclusive mortgage provider for
co-branded loan centers that E-LOAN has established with leading websites,
including Yahoo!, E*Trade, DLJdirect, Telebank, CBS MarketWatch and Motley Fool.
In 1998, E-LOAN was the leader in the online mortgage market with approximately
$1 billion in closed loans originated.
INDUSTRY BACKGROUND
ELECTRONIC COMMERCE
The Internet has emerged as a global medium for communication, information
and commerce. International Data Corporation estimates that there were 97
million Internet users worldwide at the end of 1998 and anticipates this number
will grow to approximately 320 million users by the end of 2002. The Internet
possesses a number of unique characteristics that differentiate it from
traditional media and methods of commerce, including:
- users communicate or access information without geographic or temporal
limitations;
- companies can reach and serve a large and global group of customers
electronically from a central location;
- companies can provide personalized, low-cost and real-time customer
interaction;
- users enjoy greater privacy and face less sales pressure; and
- users have an enormous diversity of easily accessible content and
commerce offerings.
As a result of these unique characteristics and the Internet's growing
adoption rate, businesses have an enormous opportunity to conduct commerce over
the Internet. International Data Corporation estimates that commerce over the
Internet will increase from approximately $32 billion worldwide in 1998 to
approximately $130 billion worldwide in 2000. While many companies initially
focused on facilitating and conducting transactions between businesses over the
Internet, more recently there has been a proliferation of companies focused on a
wide variety of consumer transactions. These companies have typically offered
products and services that do not necessarily require the customer's physical
presence to purchase, such as books, CDs, videocassettes, automobiles,
mortgages, airline tickets and online banking and stock trading. The Internet
gives these companies the opportunity to develop one-to-one relationships with
customers worldwide without having to make the significant investments to build
and manage a local market presence or develop the printing and mailing
capabilities associated with traditional direct marketing activities.
TRADITIONAL UNITED STATES MORTGAGE MARKET
The Mortgage Bankers Association estimates the United States mortgage
market to total over $4.3 trillion in terms of loans outstanding and projects
mortgage originations to be $1.2 trillion in 1999.
35
<PAGE> 39
The mortgage industry is divided broadly into four major segments today:
- mortgage origination -- sourcing, verification and documentation of
mortgage loans, typically done by mortgage brokers and single-source
lenders;
- mortgage funding -- underwriting, funding and selling closed loans to
mortgage loan purchasers;
- securitization -- aggregating loans for sale into the secondary market;
and
- servicing -- ongoing billing, collection and foreclosure/collateral
management.
Over the past two decades, the mortgage industry has evolved dramatically.
Until the late 1970s, the mortgage market was primarily a captive banking market
where retail banks and savings and loan institutions originated loans through
their branches, underwrote and closed loans internally, funded loans from their
own customer deposits and then serviced the loans themselves. This internal
chain of production was broken by the emergence of the pure mortgage bank that
could buy mortgages from mortgage brokers and sell to government sponsored
mortgage investors, such as Fannie Mae and Freddie Mac, and the development of a
large, liquid secondary funding and trading market for mortgage debt. This
efficient new market for mortgage funding made it viable for the first time to
uncouple from the large retail banks both the front-end functions of mortgage
origination and mortgage funding and the back-end function of servicing.
A significant transformation of the mortgage origination, banking and
servicing businesses into specialized functions conducted primarily by
independent companies has also occurred during the last two decades. This
transformation has created both a large, concentrated and efficient secondary
mortgage market and a large, fragmented and inefficient mortgage origination and
banking market. There are over 20,000 mortgage brokerage operations in the
United States, according to the National Association of Mortgage Brokers.
However, there is no multi-lender originator that operates nationally and enjoys
a widely recognized consumer brand. In 1998, no mortgage originator had over 7%
market share. While increased competition at all levels of the industry has
resulted in tremendous innovation in the mortgage choices available to
consumers, the level of complexity associated with these loans has also
increased. In addition, the underwriting and lending processes remain paper and
time-intensive, with little visibility into the process for consumers. As a
result, we believe that the traditional mortgage lending process causes many
consumers to feel:
- uncertain that their single source lenders and brokers are providing
unbiased advice and recommending the most suitable mortgage products;
- skeptical that rates initially quoted will ultimately be available;
- intimidated by the number and variety of mortgage products available;
- pressured to commit to a particular product before they have researched
and compared products to their satisfaction;
- frustrated with the amount and types of fees they are required to pay;
and
- overwhelmed by the substantial time and effort that it takes to get a
mortgage loan.
Furthermore, many borrowers receive little ongoing assistance in managing
their debt after the loan is closed. Many direct lenders who also engage in
mortgage servicing are not committed to proactive monitoring of their customers'
loans because they risk losing servicing fees if customers refinance with other
lenders. Multi-lender brokers have the incentive to pursue refinancing
opportunities, but typically lack the technological capability to proactively
monitor for large customer bases the market changes of thousands of loan
products in real time.
MARKET OPPORTUNITY FOR ONLINE MORTGAGE ORIGINATION
According to Forrester Research, the market for online mortgage
originations is expected to grow from an estimated $18.7 billion in 1999 to over
$91.2 billion in 2003, representing an
36
<PAGE> 40
increase in online penetration of the existing market from 1.5% in 1999 to 9.6%
in 2003. Mortgage origination is well suited to an Internet-based distribution
model for a number of reasons, including:
- mortgages are information products that need no physical delivery or
warehousing;
- complex mortgage products can be made more understandable through the use
of graphical and dynamic real-time presentations, including explanation
of terminology and ready access to detailed supporting information;
- borrower data can be efficiently captured through a website, allowing
real time automated underwriting and streamlined overall processing; and
- costly local offices or brokers and the expensive fee structure
associated with the traditional distribution model are not required.
Many companies have attempted to address this significant market
opportunity. Existing mortgage banks have created websites to sell their loans
directly online as an alternative front end to the traditional process. These
sources, however, do not offer the consumer a multi-lender selection or
comparison of products and may be reluctant to reduce fees due to the risk of
cannibalizing their traditional distribution channels.
A number of websites have been created that act as multi-lender
distribution channels for mortgage banks. While many of these referral sites
offer a selection of lenders, they do not offer complete transaction fulfillment
for the consumer and, therefore, do not control the entire mortgage process.
Furthermore, because these websites do not eliminate the services of
commissioned loan agents, they are unable to substantially reduce the cost to
the consumer of securing a mortgage.
As a result of the shortcomings inherent in these and other online
approaches to mortgage origination, we believe there exists a significant market
opportunity for a centralized, globally accessible and easy-to-use online
service with a broad selection of lenders, a compelling value proposition based
upon saving borrowers money, time and effort, and an open, integrated service
that provides complete transaction fulfillment.
THE E-LOAN SOLUTION
E-LOAN is a leading online provider of mortgages offering consumers the
ability to obtain the most suitable mortgage from a wide array of lenders at
substantial savings. Utilizing E-LOAN's website, borrowers can efficiently
search, analyze and compare mortgage products offered by multiple lenders and
apply for, qualify for and obtain the mortgage product that is most compatible
with their individual financial characteristics and borrowing requirements.
E-LOAN also enables borrowers to track online the status of their mortgage
applications from submission through closing and to monitor their mortgages on
an ongoing basis after closing. E-LOAN recognizes the importance to borrowers of
selecting the right mortgage product and performing ongoing debt management
given that mortgages typically represent the single largest debt component of an
individual's financial portfolio. To assist borrowers in this regard, E-LOAN
provides unbiased recommendations as well as an array of online analytical and
product comparison tools. E-LOAN also provides a high level of customer service
designed to make the mortgage process significantly more streamlined,
transparent to the borrower and efficient. In 1998, E-LOAN was the leader in the
online mortgage market with approximately $1 billion in closed loans originated.
The E-LOAN solution provides the following key advantages to its customers:
LARGE SELECTION OF MORTGAGE PRODUCTS. E-LOAN offers mortgages from more
than 70 lending sources, including nationally-recognized institutions. Each
customer inquiry triggers a proprietary rate search algorithm that sorts through
over 50,000 products updated in real time.
37
<PAGE> 41
The result, delivered in seconds, is a set of the most competitively priced
loans that best match the customer's criteria. E-LOAN believes this large
selection of lenders and loans available in a single destination saves borrowers
time and effort in searching for and obtaining the most suitable mortgage.
SIGNIFICANT CUSTOMER SAVINGS. E-LOAN offers savings of over 50% as compared
to the transaction costs of obtaining mortgages from traditional mortgage
brokers or single source lenders. These savings are possible because of the
elimination of the commissioned loan agent and the inherent cost benefits of
online mortgage origination. For a $200,000 loan, borrowers who originate their
loans through E-LOAN typically realize approximately $1,500 in upfront savings.
UNBIASED LOAN RECOMMENDATIONS. E-LOAN provides the borrower with unbiased
recommendations regarding available loan products. E-LOAN formulates its
recommendations by using powerful, comparative and analytical tools designed to
assist the borrower in determining the most suitable mortgage. These
recommendations are based solely upon borrower-provided information and
criteria. This approach differs substantially from that of traditional brokers,
who often recommend and promote mortgage products based on associated
commissions, which can vary by lender. By contrast, E-LOAN charges the same
brokerage fee regardless of whether the loans are funded internally or through
other lenders.
EASY-TO-USE SERVICE WITH VALUE-ADDED FEATURES. E-LOAN's website enables
borrowers to easily and efficiently search, analyze and compare mortgage
products offered by multiple lenders in complete privacy, on their own time and
free from the sales pressures typically experienced offline. Prospective
borrowers can also determine online which mortgage products they qualify for
based on their individual financial characteristics and borrowing requirements
and ultimately apply for and obtain the selected mortgage product. E-LOAN offers
a number of value-added features designed to further promote a more open and
borrower-oriented loan process. For example, E-LOAN's unique E-Track service
enables borrowers to monitor the status of their loans at every stage of the
lending process in real time, removing much of the uncertainty and inconvenience
that has tended to reduce borrowers' comfort in obtaining a loan.
HIGH LEVEL OF CUSTOMER SERVICE. E-LOAN is committed to providing a high
level of customer service, as evidenced by referrals received from satisfied
customers. Because customer service is a strategic priority, E-LOAN bases the
compensation of its loan production personnel in part on their contribution to
improving customer satisfaction. E-LOAN implements its customer service
objectives by:
- providing consumer resources through its information rich website, which
includes a comprehensive guide to every aspect of the mortgage process;
- working with the customer throughout the entire transaction process, in
contrast to many online websites which refer customers to third party
lenders;
- assigning a personal customer service representative to each borrower to
serve as a single point of contact and support throughout the entire loan
process;
- providing borrowers with a real time window into every stage of the
lending process through its proprietary E-Track service; and
- maintaining a call center to respond promptly to phone and e-mail
inquiries.
ONGOING MORTGAGE MONITORING. E-LOAN enables customers to optimize refinance
decisions by continuously comparing their existing loan to new products
available in the market and alerting them to opportunities to save money over
the life of their loan. E-LOAN's monitoring algorithm takes into account the
borrower's investment objectives, prospective hold period, risk profile and
marginal tax rate. E-LOAN's monitoring capability promotes long-term
relationships with its customers.
38
<PAGE> 42
THE E-LOAN STRATEGY
The E-LOAN strategy is to be the leading Internet-based provider of
mortgages and debt management services for consumers worldwide. Key elements of
the E-LOAN strategy include:
GROW CORE CONSUMER MORTGAGE BUSINESS. E-LOAN intends to become a leading
originator of single family mortgage loans, capturing market share from
traditional funding sources by delivering to its customers significant cost
savings, unparalleled product choice and unbiased advice and assistance. E-LOAN
believes that its Internet-based business model will continue to reduce the
costs and inefficiencies in mortgage origination and increase the productivity
of its mortgage operation through reduced brokerage commissions and ongoing
process improvements. In addition, E-LOAN's ability to control the entire loan
fulfillment process will provide a more efficient and consistent customer
experience. Over time, E-LOAN expects to enhance its product offerings,
capitalizing on its customer base, brand name and fulfillment capabilities by
expanding into additional activities customers may need as part of their ongoing
debt management efforts. As part of an alliance with Stater BV, E-LOAN has
established an online mortgage origination subsidiary to serve the European
market. E-LOAN intends to continue to expand into other key international
markets in the future.
EXPAND MULTI-SOURCE LENDING CAPABILITIES. E-LOAN believes that its ability
to satisfy customers' specific borrowing requirements by offering the most
comprehensive selection of mortgages available nationwide is one of its greatest
competitive advantages. Accordingly, E-LOAN intends to continue to broaden the
number and variety of its mortgage products and lending sources.
USE TECHNOLOGY TO BRING BORROWERS AND CAPITAL MARKETS CLOSER
TOGETHER. E-LOAN intends to continue to streamline and automate mortgage
origination and underwriting processes in order to enable borrowers to more
directly benefit from the cost, speed and convenience of highly efficient
secondary mortgage markets. By continually incorporating and upgrading automated
underwriting techniques and technologies into our service, E-LOAN will increase
its ability to match borrowers with lenders earlier in the process, resulting in
reduced documentation requirements, faster approval and lower pricing. E-LOAN
believes these techniques and technologies will enable it to provide the most
cost-effective and tailored mortgage solutions for its customers.
ENHANCE BRAND AWARENESS AND CUSTOMER LOYALTY. E-LOAN intends to become the
first national multi-source lender with a widely recognized consumer brand name.
E-LOAN uses both traditional and online marketing strategies to maximize
customer awareness and enhance brand recognition. Through its advertising and
promotional activities, E-LOAN targets prospective homebuyers, homeowners and
Realtors interested in efficient, easy and economical mortgage origination.
Traditional advertising efforts include a mix of radio, television, outdoor and
print campaigns aimed at building brand awareness nationwide. E-LOAN also
partners with many leading financial services-related online companies,
including Yahoo!, E*Trade, DLJdirect, Telebank, CBS MarketWatch and Motley Fool.
Online partnering arrangements include placing a co-branded mortgage center on
partners' websites, placing links and banner advertisements on those sites and
establishing monitoring services for those partners. In addition, E-LOAN will
continue to focus on promoting customer loyalty and maximizing the lifetime
value of its customer relationships through the implementation of superior
personalization features and the continuous enhancement of its customer service
offerings. E-LOAN also intends to extend its traditional and online marketing
strategies to international markets to develop brand recognition abroad as it
expands into foreign markets.
HELP CONSUMERS MONITOR AND MANAGE THEIR DEBT. By assisting consumers in
monitoring and managing their mortgages, E-LOAN intends to transform what have
traditionally been single origination transactions into long-term, mutually
beneficial relationships. Since mortgages typically comprise the single largest
consumer liability, E-LOAN has a unique opportunity to build valuable
39
<PAGE> 43
ongoing relationships with its customers. E-LOAN's services include continuous
loan monitoring that provide customers with unbiased assistance in refinancing
decisions and promotes long-term customer relationships. Recognizing that
mortgage and mortgage-related financing represent the lowest cost, most tax
efficient capital for consumers, E-LOAN intends to further develop its services
and product offerings to assist customers in managing their overall debt
portfolio, with the objective of maintaining the lowest overall cost of debt.
PRODUCTS AND SERVICES
E-LOAN is an online service that offers first mortgages to homebuyers and
homeowners seeking to refinance, along with second mortgages and home equity
lines of credit. E-LOAN handles all aspects of loan origination, including
quoting rates, collecting and verifying borrower data, locking the rate,
pre-underwriting the loan package, communicating with the lender and arranging
for appraisal and settlement services for the borrower. In addition, E-LOAN can
provide complete transaction fulfillment, including underwriting, funding and
packaging loans for sale to the secondary markets. Through its easy to use
website, E-LOAN offers:
LOAN PRODUCTS. E-LOAN has relationships with over 70 lending sources who
are eligible to quote product rates on E-LOAN's website. E-LOAN's website
currently offers a wide array of loan products, including 30-year and 15-year
fixed rate loans, a variety of adjustable rate mortgages (ARMs),
fixed/adjustable products, products with balloon payments, second mortgages and
home equity lines of credit.
RATE SEARCH. E-LOAN's database contains rates for over 50,000 loan products
at any given time and is updated multiple times daily. Prospective borrowers can
quickly obtain customized rate quotes for multiple loan types and amounts in a
single search by completing a brief questionnaire. E-LOAN's search function
features an algorithm that identifies the most competitive products available
based on individual borrower information and the total costs of the various
products, including applicable interest rates, points and fees. Borrowers can
click on a link to see even more loans of those types if they so choose.
LOAN COMPARISON. Borrowers can compare loans returned from a rate search. A
basic comparison shows how any two loans differ on rate, points, prepayment
penalties, interest rate costs over time, and, for ARMs, life cap, index type,
margin and periodic adjustments. An advanced comparison allows borrowers to
forecast how the loans would perform based on various interest rate scenarios
and taking into account debt objectives, hold periods, return on other
investments and marginal tax rates.
LOAN RECOMMENDATIONS. To help borrowers find the most suitable loan among
the broad array of available products, E-LOAN provides a recommendation feature.
This feature consists of a brief questionnaire that enables borrowers to
describe their investment objectives and prospective hold period, select an
interest rate scenario and indicate the loan amount sought. E-LOAN's proprietary
algorithm uses this information to deliver a set of suitable loan products.
Borrowers can then adjust various parameters, such as the hold period or
interest-rate scenario, to see how that recommendation might change.
E-TRACK. E-LOAN has developed a proprietary online tracking system,
E-Track, in order to make the mortgage process more open and convenient for
consumers. E-Track allows borrowers to track the progress of their loan
application as well as the amount of anticipated closing costs from preliminary
estimate to final settlement. E-LOAN establishes an E-Track account for each
borrower at the time an application is completed online. Each E-Track account is
personalized and password-protected, and contains:
- a timeline of the loan application and approval process;
- an updated list of estimated closing costs, including explanations of all
disclosure terms;
- a product details page explaining all of the terms of the loan;
40
<PAGE> 44
- a list of the documents required by the lender in order to approve the
application;
- an area where a borrower can request an interest rate commitment online;
- contact information, status and results of appraisal; and
- contact information for designated customer service representatives.
All of these items are updated in real time as the loan application is
processed, thereby enabling borrowers to keep close track of their progress
anytime.
RATE WATCH. The Rate Watch service allows prospective borrowers to input a
target interest rate for the desired loan type. E-LOAN searches its database of
approximately 50,000 loan products on a daily basis to determine if a product
has become available that meets the borrower's criteria. If a suitable product
is found, the borrower receives an e-mail alert inviting them to visit E-LOAN's
website and apply for the loan.
MORTGAGE MONITOR. The Mortgage Monitor service allows the prospective
borrower to input the terms for an existing mortgage and immediately compare
that loan to all other suitable products available through E-LOAN. In addition,
the prospective borrower can choose to receive an e-mail alert whenever a
product becomes available that can beat that rate. All E-LOAN customers are
automatically enrolled in the Mortgage Monitor service once their loan closes.
PRE-QUALIFICATION/PRE-APPROVAL SERVICES. E-LOAN assists prospective
borrowers in making their home buying decisions by enabling them to determine
the exact amount of the loan they are qualified to obtain through its online
pre-qualification and pre-approval services.
INFORMATION FOR BORROWERS. E-LOAN's website hosts a rich array of
information on the home buying and refinancing processes, including articles
about how to evaluate loan products, maximizing your home buying power, timing a
refinance and a glossary of mortgage terms. Detailed explanations of the overall
process of obtaining a loan is also available.
REALTOR INFORMATION AND SERVICES. Realtors can use the E-LOAN website to
help their clients calculate the loan amount they can afford, generate a
pre-qualification letter or obtain a pre-approval before selecting a property,
search for rates and educate them on the mortgage process and terms. In
addition, E-LOAN's website offers Realtors a free service allowing them to
generate custom flyers to advertise their listings.
INTERNATIONAL MORTGAGES. Under E-LOAN's alliance with Stater BV, E-LOAN and
Stater BV will cooperate to support E-LOAN's online mortgage origination
subsidiary in establishing and operating a service that offers residential
mortgage loans through the Internet directly to consumers in the European Union,
other than the United Kingdom. The initial term of the alliance is five years.
E-LOAN expects to begin launching European services in the third quarter of
1999. E-LOAN intends to continue to expand into other key international markets
in the future.
MORTGAGE OPERATIONS
E-LOAN is engaged in the mortgage loan origination business as a
multi-source lender. As such, E-LOAN originates, underwrites, funds and sells
mortgage loans. Originations are funded either through lending partners or
through E-LOAN's own warehouse lines of credit. E-LOAN's loan originations are
principally prime credit quality first-lien mortgage loans secured by single
family residences. E-LOAN also offers second mortgages and home equity lines of
credit in many states. All loans are underwritten pursuant to standards
established by E-LOAN and conform to the underwriting standards of the ultimate
purchasers of the loans.
Principal sources of income are loan origination fees, gains from the sale
of loans, if any, and interest earned on mortgage loans during the period that
they are held pending sale, net of interest paid on borrowed funds. Since
E-LOAN's policy is to sell all loans that it originates,
41
<PAGE> 45
E-LOAN does not perform loan servicing functions and therefore does not generate
ongoing servicing revenues that are customarily earned by traditional mortgage
lenders.
E-LOAN accepts online applications from customers in 50 states and the
District of Columbia. In 34 states and the District of Columbia, E-LOAN is
licensed as a mortgage broker and mortgage banker and can fund all of the loans
that it originates. E-LOAN licenses its mortgage loan origination systems and
proprietary marks to NetB@nk to enable NetB@nk to fund mortgage loans under the
E-LOAN brand in ten of the 16 states in which E-LOAN is not licensed as a
mortgage banker. E-LOAN also has agreements with PHH Mortgage Services
Corporation and Prism Mortgage Company relating to the fulfillment of all
aspects of loan transaction processing following origination in the other six
states in which E-LOAN is not licensed as a mortgage banker.
OBTAINING AN E-LOAN LOAN. The loan origination process begins when the
customer completes a loan application online through the E-LOAN website. Once
the application is submitted, E-LOAN initiates a series of steps to efficiently
underwrite and process the loan while providing a consistent level of customer
service. Within two days of submitting an application, customers receive a
welcome package from E-LOAN in the mail which is designed to further brand the
E-LOAN experience and contains the necessary disclosure documents mandated by
governmental authorities.
An E-Track account is created at the time a loan application is received
and serves as the customer's primary communication system with E-LOAN throughout
the loan process. Customers are invited to visit their E-Track account
frequently to review key steps in the loan process, receive updated information
regarding their loan product, closing costs, and interest rate lock, and view
the progress of their loan approval.
Although the E-Track account is available 24x7, E-LOAN believes that a more
personalized touch from a customer service perspective is necessary to truly
brand the E-LOAN experience and build customer loyalty. Therefore, assigned
customer service representatives maintain telephone contact with borrowers
throughout the loan process to communicate major events and answer questions.
Customer service contact begins once the online application has been received,
continues through approval and funding, and is available until loan monitoring
account preferences have been established.
Loan packages are pre-underwritten upon E-LOAN's receipt of completed
paperwork along with a nominal check to cover the cost of obtaining credit
reports and utilizing automated underwriting systems, if applicable. All
conforming loans are underwritten utilizing an automated system such as Fannie
Mae's Desktop Underwriter (DU). Loans that do not immediately qualify for
automated underwriting are underwritten using standard manual processes.
As additional loan documentation is received, data provided by the customer
at the time of initial origination is validated. Appraisals, credit reports, and
title and survey documents are ordered and reviewed by the designated
underwriting teams.
Once the underwriting process is completed, customers are invited to
request interest rate commitments for their selected loan through their E-Track
accounts. E-LOAN then confirms that this request can be obtained from mortgage
loan purchasers or lending sources. Once the requested rate has been confirmed,
customers are notified and provided with all relevant product and execution
conditions.
Final loan approval is secured once all critical data elements have been
validated and have been confirmed to satisfy the guidelines of the lending
program sought by the borrower. If a borrower's loan does not satisfy lender
guidelines, the designated service team will research additional lenders for the
customer. For more complex situations, customers will be referred to an E-LOAN
loan specialist for special assistance. If a product cannot be secured for the
42
<PAGE> 46
customer, the customer will receive a denial letter stating the reasons that a
loan could not be obtained.
After loans have been approved and all relevant conditions have been met,
E-LOAN will either prepare or request preparation of loan documents to be signed
by the borrower. The assigned customer service representative will work with the
borrower to obtain the necessary signatures for funding and schedule the closing
of the loan. Once the borrower has signed all documentation, the loan file is
reviewed to identify any missing requirements. The loan is then funded and
recorded as closed.
A quality control review of E-LOAN sourced and funded loans is performed
prior to forwarding the loan documentation to the final mortgage loan purchaser
or its designated custodian. An accounting audit is also performed to reconcile
settlement information provided by escrow/attorney settlement agents with
E-LOAN's internal information. Loan documentation relating to closed loans is
then shipped to the mortgage loan purchaser or its designated custodian, and
documentation is maintained to satisfy regulatory and company record retention
requirements.
E-LOAN then establishes ongoing loan monitoring accounts for all closed
loans to ensure that its customers remain in the most suitable loan products
based on their specified personal financial requirements. E-LOAN also solicits
customer feedback regarding the loan process to measure overall E-LOAN customer
loyalty and to utilize in developing future product and service enhancements
that are responsive to customer concerns.
LOAN PRODUCTION. E-LOAN originates conventional mortgage loans (conforming
and jumbo loans) and home equity lines of credit, a high percentage of which
were refinancings of existing mortgages in 1998. A majority of the conventional
loans originated are conforming loans, which are eligible for sale in programs
sponsored by Fannie Mae or Freddie Mac. While E-LOAN does not currently sell
directly to Fannie Mae or Freddie Mac, the conforming loans E-LOAN originates
are ultimately eligible for sale in the secondary markets supported by these
organizations.
The remainder of the conventional loans are non-conforming loans. These
include loans with an original balance in excess of $240,000 that otherwise meet
all other Fannie Mae or Freddie Mac guidelines (jumbo loans), and other loans
that do not meet those guidelines. As part of E-LOAN's multi-source lending
activities, E-LOAN originates loans with original balances of up to $2 million.
E-LOAN offers the following categories of loan products:
- long term adjustable rate mortgages;
- intermediate term adjustable rate mortgages;
- fixed rate mortgages;
- balloons;
- home equity lines of credit; and
- no cost loans.
43
<PAGE> 47
The following table sets forth the number and dollar amount of the various
types of loan products sold to customers for the periods indicated.
TOTAL NUMBER OF CLOSED LOANS BY PRODUCT
<TABLE>
<CAPTION>
1998
------------------------------------------------------------------------------------------
Q1 Q2 Q3
---------------------------- ---------------------------- ----------------------------
LOAN % OF LOAN % OF LOAN % OF
DOLLAR TOTAL DOLLAR TOTAL DOLLAR TOTAL
NUMBER VOLUME DOLLAR NUMBER VOLUME DOLLAR NUMBER VOLUME DOLLAR
TYPE OF LOAN OF LOANS ($ MILL) VOLUME OF LOANS ($ MILL) VOLUME OF LOANS ($ MILL) VOLUME
------------ -------- -------- ------ -------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30 Year Fixed................ 333 $ 74.7 60% 617 $129.7 60% 683 $147.9 68%
15 Year Fixed................ 117 $ 23.8 19% 203 $ 39.1 18% 238 $ 47.3 24%
30 Year ARM.................. 100 $ 26.7 21% 173 $ 46.2 22% 77 $ 22.3 7%
Other Products............... 2 $ 0.4 --% 4 $ 0.1 --% 5 $ 8 1%
--- ------ --- ----- ------ --- ----- ------ ---
Total..................... 552 $125.6 100% 997 $215.1 100% 1,003 $218.3 100%
<CAPTION>
1998
----------------------------
Q4
----------------------------
LOAN % OF
DOLLAR TOTAL
NUMBER VOLUME DOLLAR
TYPE OF LOAN OF LOANS ($ MILL) VOLUME
------------ -------- -------- ------
<S> <C> <C> <C>
30 Year Fixed................ 1,043 $211.7 63%
15 Year Fixed................ 384 $ 65.2 20%
30 Year ARM.................. 176 $ 54.7 16%
Other Products............... 31 $ 2.2 1%
----- ------ ---
Total..................... 1,634 $333.8 100%
</TABLE>
AUTOMATED UNDERWRITING. Automated underwriting is expected to contribute
significantly to E-LOAN's goal of increasing the efficiency of multi-source
lending by providing customers faster, more cost-efficient credit reviews and
decisions. AU may further offer efficiency enhancements through reduced costs in
property appraisals. In addition, E-LOAN believes customers will also value the
less onerous and time-consuming nature of AU relative to more traditional
underwriting processes. E-LOAN will continue to seek to enhance its AU
capabilities and incorporate as many techniques and technologies as are
warranted by its business needs and the needs of its major business partners.
E-LOAN has recently been approved by Fannie Mae to be an originator under
Fannie Mae's Desktop Originator and Desktop Underwriter system (DU). DU is
expected to help automate the lending process for all conforming loans and loans
aimed at low-and moderate-income borrowers. The goal of DU is to reduce the time
and expense of property appraisals. The DU system is expected to enable E-LOAN
to implement a comprehensive, integrated point-of-sale solution providing
expedited loan decisions. E-LOAN is the largest exclusive online originator
approved to use the DU system. E-LOAN also expects to implement additional AU
systems, including Freddie Mac's Loan Prospector and GECMC's Good Decisions.
LOAN UNDERWRITING. E-LOAN's guidelines for underwriting conventional
conforming loans comply with the underwriting criteria employed by Fannie Mae
and/or Freddie Mac. E-LOAN's underwriting guidelines and property standards for
all other conventional non-conforming loans are based on the underwriting
standards employed by the secondary mortgage loan purchasers of such loans.
E-LOAN considers the following general underwriting criteria in determining
whether to approve a loan application:
- employment and income;
- credit history;
- property value and characteristics;
- borrower characteristics; and
- available assets.
44
<PAGE> 48
GEOGRAPHIC DISTRIBUTION. The following table sets forth the geographic
distribution by state of E-LOAN's loan originations for the year ended December
31, 1998.
DISTRIBUTION BY STATE OF E-LOAN'S LOAN ORIGINATIONS
<TABLE>
<CAPTION>
1998
-----------------------------------
NUMBER OF CLOSED PERCENT OF TOTAL
STATE LOANS CLOSED LOANS
----- ---------------- ----------------
<S> <C> <C>
California........... 3,483 83%
Washington........... 246 6%
Texas................ 104 2%
Colorado............. 78 2%
All Others........... 275 7%
----- ----
Total...... 4,186 100%
</TABLE>
The following table sets forth the distribution by county of E-LOAN's
California loan originations for the year ended December 31, 1998.
DISTRIBUTION BY COUNTY OF E-LOAN'S CALIFORNIA LOAN ORIGINATIONS
<TABLE>
<CAPTION>
1998
-----------------------------------
NUMBER OF CLOSED PERCENT OF TOTAL
STATE LOANS CLOSED LOANS
----- ---------------- ----------------
<S> <C> <C>
Santa Clara.......... 823 24%
Alameda.............. 530 15%
San Mateo............ 341 10%
Contra Costa......... 317 9%
Los Angeles.......... 283 8%
Orange............... 238 7%
San Francisco........ 145 4%
Other................ 806 23%
----- ---
Total...... 3,483 100%
</TABLE>
SALE OF LOANS. E-LOAN sells all loans that it originates, on a loan by loan
basis, along with the loan servicing rights. Substantially all prime credit
quality first mortgage loans sold by E-LOAN are sold without recourse.
Generally, E-LOAN sells its non-conforming conventional loan production to large
buyers in the secondary market.
E-LOAN minimizes its credit exposure on loans funded through its warehouse
credit facilities by selling such loans within 14 days of funding on average. To
facilitate the rapid sale of each loan, E-LOAN enters into a best-efforts
commitment with the mortgage loan purchaser at the same time the customer's
interest rate commitment is obtained. E-LOAN sells its loans on a best efforts
basis, as opposed to a mandatory basis, in order to avoid the potential
financial penalties associated with failing to deliver a loan to the mortgage
loan purchaser under a mandatory commitment. With the interest rate risk limited
by the commitments to sell originated loans, E-LOAN does not enter into any
hedging transactions in order to offset the risk that a change in interest rates
will result in a decrease in the value of E-LOAN's current mortgage loan
inventory or its commitments to purchase or originate mortgage loans.
FINANCING OF INTERNAL MORTGAGE FUNDING OPERATIONS. E-LOAN's principal
financing requirements are associated with its internal loan funding activities.
To satisfy these requirements, E-LOAN currently draws on warehouse credit
facilities it has established with Bank United and
45
<PAGE> 49
E-LOAN has also secured an additional credit facility with Greenwich Capital.
E-LOAN had committed and uncommitted funds available through its warehouse
credit facilities and its agreement with Greenwich Capital aggregating
approximately $50 million as of December 31, 1998. E-LOAN is negotiating with
Greenwich Capital to increase its commitment to finance E-LOAN's mortgage loan
inventory to $200 million effective upon the closing of this offering. Pending
the successful completion of the negotiations, the funding sources available to
E-LOAN under each of its current warehouse credit facilities and its agreement
with Greenwich Capital would be as follows:
<TABLE>
<S> <C>
Greenwich Capital...................... $100 million
Bank United............................ $ 40 million
GE Capital............................. $ 15 million
</TABLE>
If E-LOAN continues to achieve its historical 14-day average turnover of
mortgage loans funded internally, the existing warehouse credit facilities
together with an increase in the Greenwich Capital commitment would enable
E-LOAN to internally fund approximately $310 million in mortgage loans during
each 30-day period, increasing to approximately $510 million upon the closing of
this offering.
E-LOAN intends to increase and diversify further its short-term funding
capabilities and continue to identify and pursue alternative and supplementary
methods to finance its operations through the public and private capital
markets.
CUSTOMER SERVICE
E-LOAN devotes significant resources to providing personalized, timely
customer service and support to minimize the potential uncertainty, anxiety and
inconvenience of the loan process. By combining high-tech communications with
highly personalized attention, E-LOAN believes it provides a level of customer
service superior to that experienced in the traditional loan application
process.
To help prospective customers understand the mortgage process, E-LOAN's
website provides a rich assortment of information on how to choose the most
suitable mortgage, descriptions of the various types of loan products, articles
about buying and refinancing a home, a glossary of mortgage terms, and answers
to frequently asked questions. Prospective customers may call E-LOAN toll-free
with general questions or click on one of the many "contact us" links throughout
its website to send questions via e-mail. Call center staff respond to both
phone calls and e-mail requests within 24 hours, and are available from 6 AM to
6 PM California time Monday through Saturday. To respond promptly to questions
from Realtors, E-LOAN also maintains a toll-free Realtor hotline staffed during
the same hours.
Once a loan application is submitted online, E-LOAN assigns the customer a
personal customer service representative (CSR). The CSR becomes the customer's
primary point of contact with E-LOAN, ensuring prompt and personalized
attention. The CSR maintains regular e-mail and phone communication with the
borrower to answer questions, address any problems and generally facilitate
closing the loan by coordinating with E-LOAN's underwriting and processing
staff. After closing, E-LOAN asks each borrower to rate the level of customer
service received from the CSR, as well as from appraisal and settlement
personnel. The survey results are factored into the CSR's compensation, ensuring
a strong commitment to continually improving the quality of customer service.
Every online application also triggers the opening of a password-protected
E-Track account. Using E-Track, customers can track the process of their loan
applications online at any time. Each event that occurs throughout the various
stages of the loan process, such as the receipt of appraisal details or a
lender's request for documentation from the borrower, generates an automated
e-mail alert to the borrower. The information is also logged in E-Track so the
46
<PAGE> 50
borrower has a continuously updated record of all loan application developments.
With a customer's permission, Realtors may also access the E-Track account to
keep abreast of the progress of a loan.
TECHNOLOGY
E-LOAN's technology systems use a combination of its own proprietary
technologies and commercially available, licensed technologies from such
industry leading providers as Sun Microsystems, Cisco Systems and Oracle.
E-LOAN's systems were designed around industry standard architecture to reduce
downtime in the event of outages or catastrophic occurrences. Our systems
provide 24x7 availability, and have capacity for a tenfold increase in activity
before requiring additional hardware or support. The system architecture and
user interface were designed by E-LOAN's co-founders and 15 person engineering
staff.
USER INTERFACE. The E-LOAN website is designed for fast downloads and
compatibility with the most basic browsers. Pages are built with minimal
graphics and do not require client-side plug-ins or Java to view.
RATE SEARCHES AND COMPARISONS. Many of the mortgage services that E-LOAN
offers its customers are facilitated through its proprietary database. The
database features a rate-loading mechanism that enables electronic data feeds
from E-LOAN's lenders to be received and added to the database multiple times
per day. This mechanism provides prospective borrowers searching E-LOAN's
database with timely access to rates as the market changes. The database
currently contains rates and other details for about 50,000 products on an
average day and is designed to support a virtually limitless number of products
or search parameters. The database supports the dynamic comparison of loans
according to such characteristics as rate, term and points, and in the case of
adjustable-rate mortgages, margin, index and life cap. The rate-loading and
search capabilities of our database are the focus of significant development
resources and we plan to continuously improve and enhance these features.
LOAN APPLICATION AND TRACKING. When a customer applies for a loan online,
the application data is stored in a file server. As additional information, such
as credit reports, appraisal details and financial documentation, is obtained
throughout the loan process and added to the borrower's file, e-mails are
automatically sent to the borrower and Realtor to inform them of the current
status of the loan application. At the same time, the borrower's E-Track account
is updated. Each day, E-LOAN sends thousands of automated e-mails and updates
hundreds of E-Track accounts.
SECURITY. In order to safeguard borrowers' sensitive financial data,
E-LOAN's systems provide the most secure online transaction capability
available. Customer information sent via the website is encrypted using a Secure
Socket Layer. The server is protected with industry-leading firewall software.
The website itself is locked down, with only two people authorized to change the
content on the production server. E-Track is password-protected so that only the
borrower may access the account. For an extra measure of protection, none of the
borrower's credit or financial information is contained in the E-Track account.
The file server containing borrower data is accessible only to authorized users
within E-LOAN. There is no external access to this internal server via modem,
even by E-LOAN employees.
PARTNER TEMPLATES. E-LOAN's ability to develop and support co-branded loan
centers in partnership with websites such as Yahoo!, E*Trade and DLJdirect is
critical to driving applications and expanding the E-LOAN brand. E-LOAN has
developed a unique template system that allows for the rapid development and
deployment of co-branded loan centers within several hours of signing a
distribution agreement. In addition, our partners' websites contain customized
data and retain unique appearances. E-LOAN currently maintains over 40
co-branded loan centers.
47
<PAGE> 51
SERVER HOSTING AND BACK-UP. E-LOAN's website system hardware is hosted at
the Exodus facilities in Santa Clara, California and Jersey City, New Jersey,
providing redundant communication lines and emergency power back-up. We have
implemented load balancing systems and our own redundant servers to provide for
fault tolerance. Scheduled maintenance takes place without taking the website
offline.
MARKETING
E-LOAN's marketing strategy is to attract loan applicants to its website by
promoting the E-LOAN brand as a byword for choice, selection, competitive
pricing and service in the mortgage industry. E-LOAN relies on a variety of
methods to promote its brand. By providing superior customer service, E-LOAN
promotes online referrals from satisfied borrowers. Strategic partnerships with
online financial websites, including Yahoo!, E*Trade, DLJdirect, Telebank, CBS
MarketWatch, and Motley Fool, drive applications through co-branded mortgage
loan centers on those websites. Offline marketing campaigns featuring radio, TV,
print and outdoor advertising in key markets and nationwide target the
demographic segments with the highest propensity to utilize an online mortgage
provider. E-LOAN also engages in a number of marketing activities at trade shows
and other events in the real estate industry in order to encourage Realtors to
refer homebuyers directly to our website.
E-LOAN entered into an agreement with Yahoo!, Inc. in September 1998, which
was extended in March 1999 to run through February 2001. Pursuant to this
agreement, E-LOAN is the exclusive provider of mortgage related information on
the "Yahoo! Loan Center" website.
REGULATION OF MORTGAGE BROKERS AND LENDERS
The residential mortgage financing industry is highly regulated. E-LOAN's
business is subject to extensive and complex rules and regulations of, and
licensing and examination by, various federal, state and local government
authorities. These rules impose obligations and restrictions on E-LOAN's
residential loan brokering and lending activities. In particular, these rules
limit the broker fees, interest rates, finance charges and other fees E-LOAN may
assess, require extensive disclosure to E-LOAN's customers, prohibit
discrimination and impose multiple qualification and licensing obligations on
E-LOAN. Failure to comply with these requirements may result in, among other
things, revocation of required licenses or registrations, loss of approved
status, voiding of the loan contracts or security interests, indemnification
liability or the obligation to repurchase mortgage loans sold to mortgage loan
purchasers, rescission of mortgage loans, class action lawsuits, administrative
enforcement actions and civil and criminal liability. E-LOAN believes it is in
substantial compliance with these rules and regulations.
As a mortgage company doing business exclusively through the Internet,
E-LOAN faces an additional level of regulatory risk given the fact that the
statutes and regulations governing mortgage transactions have not been
substantially revised or updated to fully accommodate electronic commerce. Most
of the federal and state laws, rules and regulations governing mortgage loans
contemplate or assume paper-based transactions and do not currently address the
delivery of required disclosures and other documents through electronic
communications. Until such laws, rules and regulations are revised to clarify
their applicability to transactions through e-commerce, any company offering
mortgage loans through the Internet or other means of e-commerce will face
uncertainty as to compliance. In addition, there is no assurance that revisions
to the laws, rules and regulations will be adopted and, if adopted, will be
timely or adequate to eliminate such uncertainty. Nonetheless, E-LOAN believes
that it has taken prudent steps to mitigate these risks in offering its mortgage
loan services through the Internet.
At the state level, E-LOAN is subject to licensing and regulation in most
of the states where it acts as a mortgage broker or lender. In addition, any
person who acquires 10% or more of E-LOAN's stock may become subject to certain
state licensing regulations requiring such person
48
<PAGE> 52
to periodically file certain financial information and other personal and
business information. If any person holding 10% or more of E-LOAN's stock
refuses or fails to comply with such filing requirements, E-LOAN's existing
licensing arrangements could be jeopardized. The loss of required licenses could
have a material adverse effect on E-LOAN's results of operations and financial
condition.
State laws limit the broker fees, interest rates, finance charges and other
fees E-LOAN may assess, including late charges, insufficient funds charges for
returned checks and prepayment penalties, and may require payment of interest on
escrow balances. State laws also require extensive disclosure to E-LOAN's
customers concerning such matters as fees and charges, brokerage agreements,
lock-in agreements and commitments, alternative mortgage transactions, such as
adjustable rate loans, escrows for taxes and insurance, choosing settlement
attorneys and insurance agents and private mortgage insurance, among others.
These laws regulate both the content and timing of disclosures. In addition,
many state laws regulate advertising claims in connection with the solicitation
of mortgage loan applications. State and federal laws also prohibit unfair and
deceptive trade practices in the mortgage finance business. E-LOAN believes that
it has obtained all licenses material to our business in the jurisdictions where
it conducts business, and is operating substantially in compliance with the laws
of such jurisdictions.
At the federal level, E-LOAN's mortgage brokering and lending activities
are regulated under a variety of laws, including, but not limited to, the Truth
in Lending Act and Regulation Z (TILA), the Equal Credit Opportunity Act and
Regulation B (ECOA), the Fair Housing Act, the Fair Credit Reporting Act (FCRA),
the Real Estate Settlement Procedures Act and Regulation X (RESPA) and the Home
Mortgage Disclosure Act of 1975 and Regulation C (HMDA). These statutes
generally require detailed disclosure of information concerning mortgage loans,
and they regulate the manner in which such loans are made, including
advertising, disclosure of consumer information, servicing (and transfer of
servicing) of mortgage loans, payments for settlement services and reporting of
consumer data. These laws regulate both the content and timing of disclosures.
E-LOAN believes that it is operating substantially in compliance with such laws
as they apply to E-LOAN's business.
Under TILA, lenders are required to provide consumers with uniform,
understandable information concerning certain terms and conditions of their loan
and credit transactions. Such disclosures include providing the annual
percentage rate, monthly payment amount and total amount financed, plus certain
disclosures concerning alternative mortgage transactions. In addition, TILA
gives borrowers, among other things, the right to rescind loan transactions in
certain circumstances if the lender fails to provide the requisite disclosure.
Under ECOA, creditors are prohibited from discriminating against applicants
on the basis of race, color, sex, age, religion, national origin or marital
status. The regulations under ECOA also restrict creditors from requesting
certain types of information from loan applicants. FCRA requires lenders to
supply applicants with certain information (called an "adverse action notice")
when the lender denies its applicants credit. The Fair Housing Act prohibits
discrimination in mortgage lending on the basis of race, color, religion, sex,
handicap, familial status or national origin. Finally, E-LOAN, when acting as a
mortgage lender, must also file annual reports with HUD pursuant to HMDA, which
requires the collection and reporting of statistical data concerning loan
transactions.
RESPA requires certain disclosures, including a good faith estimate of
closing costs and fees, as well as mortgage servicing transfer practices. RESPA
also prohibits the payment or receipt of kickbacks or referral fees, fee shares
or splits, or unearned fees in connection with the provision of real estate
settlement services. It is a common practice for online mortgage companies to
enter into advertising, marketing and distribution arrangements with other
Internet companies and websites whereby the mortgage companies pay the Internet
companies fees for such advertising, marketing and distribution services and
other goods and facilities based on the
49
<PAGE> 53
number of click-throughs, completed loan applications or closed loans derived
from such arrangements. The applicability of RESPA's referral fee prohibitions
to the compensation provisions of these arrangements is unclear and the
Department of Housing and Urban Development has provided no guidance to date on
the subject. Although E-LOAN believes that it has structured its relationships
with Internet advertisers to ensure compliance with RESPA, some level of risk is
inherent absent amendments to the law or regulations, or clarification from
regulators.
The laws, rules and regulations applicable to E-LOAN are subject to
periodic modification and change. There are currently proposed various laws,
rules and regulations which, if adopted, could impact E-LOAN. There can be no
assurance that these proposed laws, rules and regulations, or other such laws,
rules or regulations, will not be adopted in the future which could make
compliance much more difficult or expensive, restrict E-LOAN's ability to
originate, broker, purchase or sell loans, further limit or restrict the amount
of commissions, interest and other charges earned on loans originated, brokered,
purchased or sold by E-LOAN, or otherwise adversely affect the business or
prospects of E-LOAN.
COMPETITION
The market for the origination of mortgage loans is rapidly evolving, both
online and through traditional channels, and competition for borrowers is
intense and is expected to increase significantly in the future. E-LOAN faces
competition from companies directly competing with us by offering mortgage loans
or other home buying services over the Internet. Principal among these
competitors are Microsoft HomeAdvisor, Intuit QuickenMortgage, HomeShark,
Keystroke and Mortgage.com. Traditional lenders, such as Countrywide, Norwest,
Wells Fargo and Bank America, also provide access to their mortgage loan
offerings over the Internet. Increased competition, particularly online
competition, could result in price reductions, reduced margins or loss of market
share, any of which could adversely affect our business. Further, there can be
no assurance that E-LOAN's competitors and potential competitors will not
develop services and products that are equal or superior to those of E-LOAN or
that achieve greater market acceptance than its products and services.
E-LOAN believes that the primary competitive factors in creating a
financial services resource on the Internet are functionality, brand
recognition, customer loyalty, ease-of-use, quality of service, reliability and
critical mass. Competition is likely to increase significantly as new companies
enter the market and current competitors expand their services. Many of these
potential competitors are likely to enjoy substantial competitive advantages,
including:
- longer operating histories;
- greater name recognition;
- larger, established customer bases; and
- substantially greater financial, marketing, technical and other
resources.
LEGAL PROCEEDINGS
E-LOAN is not currently subject to any material legal proceedings. E-LOAN
may from time to time become a party to various legal proceedings arising in the
ordinary course of its business.
INTELLECTUAL PROPERTY
Trademarks and other proprietary rights are important to our success and
our competitive position. E-LOAN currently has a number of trademarks and
copyrights; however, it does not hold any patents. Although E-LOAN seeks to
protect its trademarks and other proprietary rights through a variety of means,
E-LOAN may not have taken adequate steps to protect these rights. E-LOAN may
also license content from third parties in the future and it is possible that it
could
50
<PAGE> 54
be subjected to infringement actions based upon the content licensed from these
third parties. Any claims brought against E-LOAN, regardless of their merit,
could result in costly litigation and the diversion of its financial resources
and technical and management personnel. Further, if such claims are proved
valid, through litigation or otherwise, E-LOAN may be required to change its
trademarks and pay financial damages, which could adversely affect its business.
E-LOAN typically enters into confidentiality or license agreements with its
employees, consultants and corporate partners, and generally controls access to
and distribution of its technologies, documentation and other proprietary
information. Despite its efforts to protect its proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
E-LOAN's rights. The steps E-LOAN has taken may not prevent misappropriation of
its proprietary rights, particularly in foreign countries where laws or law
enforcement practices may not protect E-LOAN's proprietary rights as fully as in
the United States.
EMPLOYEES
As of February 24, 1999, E-LOAN employed 228 full-time employees, of whom
181 were in operations, 22 were in administration, 12 were in marketing and
business development and 13 were in engineering. As E-LOAN continues to grow and
introduce more products, it expects to hire more personnel, particularly in the
areas of mortgage operations and marketing. None of E-LOAN's current employees
is represented by a labor union or is the subject of a collective bargaining
agreement. E-LOAN believes that relations with its employees are good.
FACILITIES
E-LOAN is headquartered in Dublin, California, where it leases
approximately 43,000 square feet of space primarily in a single building. E-LOAN
also occupies approximately 2,000 square feet of space in Palo Alto, California.
The lease for E-LOAN's office space in Dublin expires in October 2003, and the
lease for E-LOAN's office space in Palo Alto is month to month. E-LOAN currently
anticipates that it will require additional space as more personnel are hired.
51
<PAGE> 55
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of E-LOAN as of March 19, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Chris Larsen............................ 38 Chief Executive Officer and Director
Janina Pawlowski........................ 38 President and Director
Frank Siskowski......................... 51 Chief Financial Officer
Harold "Pete" Bonnikson................. 44 Senior Vice President, Operations
William Crane........................... 37 Vice President, Engineering
Doug Galen.............................. 37 Vice President, Business Development &
Sales
Janet Hammond........................... 41 Vice President, Underwriting
Joseph Kennedy.......................... 39 Senior Vice President, Marketing and
Business Development
Steve Majerus........................... 35 Vice President, Secondary Markets
Sharon Ruwart........................... 35 Vice President, Marketing
Ira M. Ehrenpreis(1)(2)................. 30 Director
Robert C. Kagle(1)(2)................... 43 Director
Tim Koogle(1)(2)........................ 47 Director
Wade Randlett........................... 34 Director
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
CHRIS LARSEN co-founded E-LOAN in August 1996 and has served as its Chief
Executive Officer since June 1998. From August 1996 to June 1998, Mr. Larsen
served as the President of E-LOAN. Mr. Larsen has been a Director of E-LOAN
since its incorporation in August 1996. From October 1992 to August 1996, Mr.
Larsen was the President of the Palo Alto Funding Group, the mortgage brokerage
he co-founded in 1992 and E-LOAN's predecessor company. Mr. Larsen holds an
M.B.A. degree from Stanford University and a B.S. degree from San Francisco
State University.
JANINA PAWLOWSKI co-founded E-LOAN in August 1996 and has served as its
President since June 1998. From August 1996 to June 1998, Ms. Pawlowski served
as the Chief Executive Officer of E-LOAN. Ms. Pawlowski has been a Director of
E-LOAN since its incorporation in August 1996. From October 1992 to August 1996,
Ms. Pawlowski was the Chief Executive Officer of the Palo Alto Funding Group,
the mortgage brokerage she co-founded in 1992 and E-LOAN's predecessor company.
Ms. Pawlowski holds an M.B.A. degree from the University of Rochester and a B.S.
degree from Cornell University.
FRANK SISKOWSKI has served as the Chief Financial Officer of E-LOAN since
October 1998. Prior to joining the Company, Mr. Siskowski was the Senior Vice
President and Chief Financial Officer of The Indus Group, Inc. from September
1996 to August 1998. From July 1991 to September 1996, Mr. Siskowski served as
Senior Vice President and Controller of VISA International. From January 1985 to
July 1991, Mr. Siskowski served as the Vice President and Chief Financial
Officer of the MCI Pacific Division of MCI Communications Corporation. Mr.
Siskowski holds an M.B.A. degree from Fordham University and a B.A. degree from
Manhattan College.
HAROLD "PETE" BONNIKSON has served as the Senior Vice President of
Operations of E-LOAN since January 1999. Prior to joining E-LOAN, Mr. Bonnikson
was with North American Mortgage
52
<PAGE> 56
and its predecessor companies since 1981. Mr. Bonnikson was the Executive Vice
President of North American Mortgage from 1993 to 1999. Mr. Bonnikson holds a
B.S. degree from California State University at Sacramento.
WILLIAM CRANE has served as the Vice President of Engineering of E-LOAN
since April 1998. Prior to joining E-LOAN, Mr. Crane was the Vice President of
Engineering of FrontOffice Technologies from January 1996 to April 1998. From
November 1992 to January 1996, Mr. Crane was the Vice President of Engineering
of Network Computing Devices. Mr. Crane holds a B.S. degree from Texas A&M
University.
DOUG GALEN has served as the Vice President of Business Development of
E-LOAN since September 1997. Prior to joining E-LOAN, Mr. Galen was the Vice
President of Business Development of Owners.com from August 1996 to August 1997.
From January 1996 to August 1996, Mr. Galen was the Vice President of Limar
Realty. From June 1988 to January 1996, Mr. Galen was the Vice President of The
Shilder Group. Mr. Galen holds an M.B.A. degree and a B.A. degree from the
University of California, Berkeley.
JANET HAMMOND has served as the Vice President of Underwriting of E-LOAN
since March 1999. From June 1998 to March 1999, Ms. Hammond served as the
Director of Operations of E-LOAN. From December 1997 to June 1998, Ms. Hammond
served as a manager of Customer Service and then as the Director of Customer
Service of E-LOAN. Prior to joining E-LOAN, from May 1997 to December 1997, Ms.
Hammond was a project manager with PMI Mortgage Insurance, Inc. From September
1990 to May 1997, Ms. Hammond was a Loan Manager for Rockwell Federal Credit
Union. Ms. Hammond holds a B.A. degree from California State University, Fresno.
JOSEPH KENNEDY has served as the Senior Vice President of Marketing and
Business Development of E-LOAN since February 1999. Mr. Kennedy was the Vice
President of Sales, Service and Marketing of Saturn Corporation from October
1995 to February 1999. From December 1993 to September 1995, Mr. Kennedy was the
General Director of Marketing and Product Planning for the Cadillac Motor Car
Division of General Motors Corporation. From September 1992 to December 1993,
Mr. Kennedy was the Director of Product Portfolio Planning for the North
American Operations of General Motors Corporation. Mr. Kennedy holds an M.B.A.
degree from Harvard Business School and a B.S. degree from Princeton University.
STEVE MAJERUS has served as the Vice President of Secondary Markets of
E-LOAN since January 1999. From April 1998 to January 1999, Mr. Majerus served
as the Director of Mortgage Banking of E-LOAN. Prior to joining E-LOAN, Mr.
Majerus was the Director of Mortgage Lending for of CMG Mortgage from January
1996 to March 1998. From February 1993 to November 1995, Mr. Majerus was the
President of Trans Capital Mortgage, a company which he co-founded.
SHARON RUWART has served as the Vice President of Marketing of E-LOAN since
December 1998. From April 1998 to December 1998, Ms. Ruwart served as Director
of Marketing of E-LOAN. Prior to joining E-LOAN, Ms. Ruwart held a variety of
positions at the San Jose Mercury News, a division of Knight-Ridder, Inc.,
including Brand Group Manager and Recruitment Advertising Manager from January
1995 to April 1998. Ms. Ruwart holds an M.B.A. degree from Stanford University
and a B.A. degree from Yale University.
IRA M. EHRENPREIS has served as a Director of E-LOAN since January 1998.
Since 1996 Mr. Ehrenpreis has been a General Partner of TPW Management V, L.P.
the general partner of Technology Partners Fund VI, L.P. Mr. Ehrenpreis holds
J.D. and M.B.A. degrees from Stanford University and a B.A. degree from the
University of California, Los Angeles.
ROBERT C. KAGLE has served as a Director of E-LOAN since January 1998. Mr.
Kagle has been a member of Benchmark Capital Management Co., L.L.C., since its
founding in May 1995. Mr. Kagle also has been a General Partner of Technology
Venture Investors since January 1984. Mr. Kagle is also a director of eBay Inc.,
a leading online trading community. Mr. Kagle holds a
53
<PAGE> 57
B.S. degree from the General Motors Institute (renamed Kettering University in
January 1998) and an M.B.A. degree from Stanford University.
TIM KOOGLE has served as a Director of E-LOAN since September 1998. Mr.
Koogle has been the Chief Executive Officer of Yahoo!, Inc. and a member of
Yahoo!'s Board of Directors since August 1995. He has also been Yahoo!'s
Chairman since January 1999 and was its President from August 1995 until January
1999. Prior to joining Yahoo!, Mr. Koogle was President of Intermec Corporation,
a manufacturer of data collection and data communication products, from 1992 to
1995. During that time, he also served as a corporate Vice President of
Intermec's parent company, Western Atlas. Mr. Koogle holds a B.S. degree from
the University of Virginia and an M.S. degree from Stanford University.
WADE RANDLETT has served as a Director of E-LOAN since June 1997. Mr.
Randlett has been the Political Director of TechNet since February 1997. From
November 1992 until February 1997, Mr. Randlett was self-employed as a Policy
Consultant. Mr. Randlett holds a B.S. degree from Princeton University.
BOARD COMPOSITION
E-LOAN currently has authorized six directors. E-LOAN's Restated
Certificate of Incorporation will provide that, effective upon the closing of
this offering, the terms of office of the members of the Board of Directors will
be divided into three classes: Class I, whose term will expire at the annual
meeting of stockholders to be held in 2000, Class II, whose term will expire at
the annual meeting of stockholders to be held in 2001, and Class III, whose term
will expire at the annual meeting of stockholders to be held in 2002. The Class
I directors are Messrs. Ehrenpreis and Randlett, the Class II directors are
Messrs. Kagle and Koogle and the Class III directors are Mr. Larsen and Ms.
Pawlowski. At each annual meeting of stockholders after the initial
classification, the successors to directors whose term will then expire will be
elected to serve from the time of election and qualification until the third
annual meeting following election. In addition, E-LOAN's Bylaws will provide
that the authorized number of directors may be changed only by resolution of the
Board of Directors. Any additional directorships resulting from an increase in
the number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the total number of
directors. This classification of the Board of Directors may have the effect of
delaying or preventing changes in control or management of E-LOAN.
Each officer is elected by, and serves at the discretion of, the Board of
Directors. Each of E-LOAN's officers and directors, other than nonemployee
directors, devotes full time to the affairs of E-LOAN. E-LOAN's nonemployee
directors devote such time to the affairs of E-LOAN as is necessary to discharge
their duties. There are no family relationships among any of the directors,
officers or key employees of E-LOAN.
BOARD COMMITTEES
The Audit Committee of the Board of Directors reviews the internal
accounting procedures of E-LOAN and consults with and reviews the services
provided by E-LOAN's independent accountants. The Audit Committee currently
consists of Messrs. Ehrenpreis, Kagle and Koogle.
The Compensation Committee of the Board of Directors reviews and recommends
to the Board the compensation and benefits of all executive officers of E-LOAN,
administers E-LOAN's stock option plan and establishes and reviews general
policies relating to compensation and benefits of employees of E-LOAN. The
Compensation Committee currently consists of Messrs. Ehrenpreis, Kagle and
Koogle. No interlocking relationships exist between E-LOAN's Board of Directors
or Compensation Committee and the board of directors or compensation committee
of any other company, nor has any such interlocking relationship existed in the
past.
54
<PAGE> 58
DIRECTOR COMPENSATION
Our directors do not currently receive cash compensation from E-LOAN for
their service as members of the Board of Directors, although they are reimbursed
for certain expenses in connection with attendance at Board and Committee
meetings. E-LOAN does not provide additional compensation for committee
participation or special assignments of the Board of Directors. From time to
time, certain directors of E-LOAN have received grants of options to purchase
shares of E-LOAN's common stock pursuant to the 1997 Stock Option Plan. See "--
Stock Plans" and "-- Certain Transactions".
EXECUTIVE COMPENSATION
The following table sets forth the total compensation received for services
rendered to E-LOAN during the fiscal year ended December 31, 1998 by our Chief
Executive Officer and certain other executive officers who received salary and
bonus for such fiscal year in excess of $100,000. The executive officers listed
in the table below are sometimes referred to as Named Executive Officers.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION NUMBER OF
---------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
--------------------------- ---------- --------- ---------------------
<S> <C> <C> <C>
Chris Larsen
Chief Executive Officer.................... $129,807 $ -- --
Janina Pawlowski
President.................................. 129,808 -- --
Doug Galen
Vice President, Business Development &
Sales................................... 114,496 -- 50,000
Steve Majerus
Vice President, Secondary Marketing........ 115,773 47,336 75,000
</TABLE>
Mr. Bonnikson joined E-LOAN in January 1999 as its Senior Vice President of
Operations and will be compensated at an annual base salary of $150,000 during
the fiscal year ended December 31, 1999. Mr. Crane joined E-LOAN in April 1998
as its Vice President of Engineering and will be compensated at an annual base
salary of $130,000 during the fiscal year ended December 31, 1999. Mr. Kennedy
joined E-LOAN in February 1999 as its Senior Vice President of Marketing and
Business Development will be compensated at an annual base salary of $200,000
during the fiscal year ended December 31, 1999. Mr. Siskowski joined E-LOAN in
October 1998 as its Chief Financial Officer and will be compensated at an annual
base salary of $170,000 during the fiscal year ended December 31, 1999.
55
<PAGE> 59
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain summary information concerning
grants of stock options to each of the Named Executive Officers for the year
ended December 31, 1998. E-LOAN has never granted any stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(3)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------
NAME(1) GRANTED FISCAL YEAR(2) ($/SH) DATE 5% 10%
------- ---------- -------------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Chris Larsen................... -- -- -- -- -- --
Janina Pawlowski............... -- -- -- -- -- --
Doug Galen..................... 40,000 03.9% $0.65 03/12/08 $16,351 $41,437
10,000 01.0% $3.00 08/11/08 $18,867 $47,812
Steve Majerus.................. 75,000 07.4% $0.65 05/07/08 $30,659 $77,695
</TABLE>
- ---------------
(1) In January 1999, E-LOAN granted to Mr. Bonnikson an option to purchase
218,087 shares of common stock at an exercise price of $6.00 per share,
which expires on January 13, 2009. In May 1998, E-LOAN granted to Mr. Crane
an option to purchase 165,000 shares of common stock at an exercise price of
$0.65 per share, which expires on May 7, 2008. In February 1999, E-LOAN
granted to Mr. Kennedy an option to purchase 249,173 shares of common stock
at an exercise price of $6.00 per share, which expires on February 22, 2009.
In November 1998, E-LOAN granted to Mr. Siskowski an option to purchase
128,459 shares of common stock at an exercise price of $4.00 per share,
which expires November 25, 2008.
(2) In 1998, E-LOAN granted options to purchase an aggregate of 1,027,209 shares
of common stock, of which 1,017,959 were granted to employees and 9,250 were
granted to consultants.
(3) The 5% and 10% assumed annual rates of stock price appreciation are mandated
by the rules of the Securities and Exchange Commission and do not represent
E-LOAN's estimate or projection of future common stock prices. The potential
realizable value is calculated by assuming that the stock price on the date
of grant appreciates at the indicated rate for the entire term of the option
and that the option is exercised at the exercise price and sold on the last
day at the appreciated price.
FISCAL YEAR END OPTION VALUES
The following table provides certain summary information concerning stock
options held as of December 31, 1998 by each of the Named Executive Officers.
None of the Named Executive Officers exercised options in fiscal 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT
AT DECEMBER 31, 1998 DECEMBER 31, 1998
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Chris Larsen...................................... -- --
Janina Pawlowski.................................. -- --
Doug Galen........................................ 30,000 110,000
Steve Majerus..................................... -- 75,000
</TABLE>
56
<PAGE> 60
There was no public trading market for E-LOANS's common stock as of
December 31, 1998. Accordingly, the value of unexercised in-the-money options as
of such date was calculated on the basis of an assumed initial public offering
price of $ per share.
STOCK PLANS
1997 Stock Plan
E-LOAN's 1997 Stock Plan (1997 Plan) provides for the granting to employees
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (Code), and for the granting to employees,
directors and consultants of nonstatutory stock options and stock purchase
rights (SPRs). The 1997 Plan was approved by the Board of Directors in August
1997 and by the stockholders in November 1997. The Board approved amendments to
the 1997 Plan to increase the number of shares reserved under the 1997 Plan in
May 1998 and January 1999, and the stockholders also approved these amendments
to the 1997 Plan in May 1998 and January 1999. Unless terminated sooner, the
1997 Plan will terminate automatically in 2007. A total of 2,500,000 shares of
common stock is currently reserved for issuance pursuant to the 1997 Plan, plus
annual increases equal to the lesser of 1,500,000 shares, 4% of the outstanding
shares on such date, or a lesser amount determined by the Board.
The 1997 Plan may be administered by the board of directors or a committee
of the board (as applicable, the "Administrator"), which committee shall, in the
case of options intended to qualify as "performance-based compensation" within
the meaning of Section 162(m) of the Code, consist of two or more "outside
directors" within the meaning of Section 162(m) of the Code. The Administrator
has the power to determine the terms of the options or SPRs granted, including
the exercise price, the number of shares subject to each option or SPR, the
exercisability thereof, and the form of consideration payable upon such
exercise. The board has the authority to amend, suspend or terminate the 1997
Plan, provided that no such action may adversely affect any share of common
stock previously issued and sold or any option previously granted under the 1997
Plan.
Options and SPRs granted under the 1997 Plan are not generally transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee only by such optionee. Options granted under the 1997 Plan must
generally be exercised within three months of the Optionee's separation of
service from E-LOAN, or within 12 months after such optionee's termination by
death or disability, but in no event later than the expiration of the option's
ten year term. In the case of SPRs, unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant E-LOAN a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service for E-LOAN for any reason, including death or
disability. The purchase price for Shares repurchased pursuant to the Restricted
Stock Purchase Agreement shall be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness of the purchaser to E-LOAN. The
repurchase option shall lapse at a rate determined by the Administrator. The
exercise price of all incentive stock options granted under the 1997 Plan must
be at least equal to the fair market value of the common stock on the date of
grant. The exercise price of nonstatutory stock options and SPRs granted under
the 1997 Plan is determined by the Administrator and in all cases must be at
least equal to 85% of the fair market value of the common stock on the date of
grant. With respect to nonstatutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the exercise price must at least be equal to the fair market value of the
common stock on the date of grant. With respect to any participant who owns
stock possessing more than 10% of the voting power of all classes of E-LOAN's
outstanding capital stock, the exercise price of any stock option granted must
equal at least 110% of the fair market value on the grant date and the term of
any incentive stock option must not exceed five years. The term of all other
options granted under the 1997 Plan may not exceed ten years.
57
<PAGE> 61
The 1997 Plan provides that in the event of a merger of E-LOAN with or into
another corporation or a sale of substantially all of E-LOAN's assets, each
option or SPR shall be assumed or an equivalent option or SPR substituted by the
successor corporation. If each outstanding option or SPR is not assumed or
substituted as described in the preceding sentence, the Administrator shall
notify the Optionees that each such option or SPR shall be fully vested and
exercisable, including shares as to which it would not otherwise be exercisable,
for a period of 15 days from the date of such notice, and the option or SPR will
terminate upon the expiration of such period.
1999 Employee Stock Purchase Plan
E-LOAN's 1999 Employee Stock Purchase Plan (1999 Purchase Plan) was adopted
by the Board of Directors in March 1999 subject to stockholder approval. A total
of 500,000 shares of common stock has been reserved for issuance under the 1999
Purchase Plan, plus annual increases on the first day of E-LOAN's fiscal year
beginning in or after 2000 equal to the lesser of 500,000 shares, 2% of the
outstanding shares on such date or a lesser amount determined by the Board. As
of the date of this Prospectus, no shares have been issued under the 1999
Purchase Plan.
The 1999 Purchase Plan, which is intended to qualify under Section 423 of
the Internal Revenue Code of 1986, as amended, contains successive six-month
offering periods. The offering periods generally start on the first trading day
on or after May 1 and November 1 of each year, except for the first such
offering period which commences on the first trading day on or after the
effective date of this Offering and ends on the last trading day on or before
October 31.
Employees are eligible to participate if they are customarily employed by
E-LOAN or any participating subsidiary for at least 20 hours per week and more
than five months in any calendar year. However, to the extent any employee (a)
immediately after a grant would own stock or hold options to purchase stock
possessing 5% or more of the total combined voting power or value of all classes
of the capital stock of E-LOAN or (b) would have rights to purchase stock under
all employee stock purchase plans of E-LOAN which exceed $25,000 worth of stock
for each calendar year in which such options are outstanding, such employee may
be not be granted an option to purchase stock under the 1999 Purchase Plan. The
1999 Purchase Plan permits participants to purchase common stock through payroll
deductions of up to 15% of the participant's "compensation". Compensation is
defined as the participant's base straight time gross earnings, commissions,
cash incentive payments and bonuses, but exclusive of payments for overtime,
profit sharing payments, shift premium payments, non-cash compensation and other
compensation. The maximum number of shares a participant may purchase during a
single offering period is 1,250 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each offering period. The price of stock
purchased under the 1999 Purchase Plan is 85% of the lower of the fair market
value of the common stock at the beginning or end of the offering period.
Participants may end their participation at any time during an offering period,
and they will be paid their payroll deductions to date. Participation ends
automatically upon termination of employment with E-Loan.
Rights granted under the 1999 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1999 Purchase Plan. The 1999 Purchase Plan provides
that, in the event of a merger of E-Loan with or into another corporation or a
sale of substantially all of E-Loan's assets, each outstanding option may be
assumed or substituted for by the successor corporation. If the successor
corporation refuses to assume or substitute for the outstanding options, the
offering period then in progress will be shortened and a new exercise date will
be set. After shares have been purchased on the New
58
<PAGE> 62
Exercise Date, the 1999 Purchase Plan will terminate. Unless terminated earlier,
the 1999 Purchase Plan will terminate in 2009. The Board of Directors has the
authority to amend or terminate the 1999 Purchase Plan, except that no such
action may adversely affect any outstanding rights to purchase stock under the
1999 Purchase Plan.
401(K) PLAN
E-LOAN maintains an employee savings and retirement plan (401(k) Plan)
which covers all eligible employees of E-LOAN (Participants). Pursuant to the
401(k) Plan, Participants may elect to reduce their current compensation, on a
pre-tax basis, up to 15%, or the statutorily prescribed annual limit, whichever
is lower, and have the amount of such reduction contributed to the 401(k) Plan.
Participants' salary reduction contributions are fully vested at all times.
E-LOAN, in its sole discretion, may make discretionary employer contributions,
qualified discretionary employer contributions and matching contributions to the
401(k) Plan. Each Participants' interest in their employer discretionary
contributions and matching contributions generally vest in accordance with a
four-year graduated vesting schedule. Participants may receive loans and
hardship distributions while in service and are eligible for a distribution from
the 401(k) Plan upon separation from service with E-LOAN. The 401(k) Plan is
intended to qualify under Section 401(a) of the Code, and its accompanying trust
is intended to be a tax-exempt trust under Section 501(a) of the Code.
Contributions made on behalf of Participants, on a pre-tax basis, to the 401(k)
Plan, and income earned on such contributions, are not currently taxable to
Participants until distributed to them. All such contributions are tax
deductible by E-LOAN. The trustee under the 401(k) Plan, at the direction of
Participants, invests the assets of the 401(k) Plan in any of seven designated
investment options.
EMPLOYMENT AGREEMENT AND CHANGE OF CONTROL ARRANGEMENTS
Under the terms of E-LOAN's offer of employment to Mr. Kennedy, if Mr.
Kennedy's employment is terminated by E-LOAN or a successor company to E-LOAN
within six months prior to or 12 months following a change of control, E-LOAN
has agreed to pay Mr. Kennedy three years of salary, accelerate vesting of all
shares under Mr. Kennedy's option and pay a gross-up for any taxation Mr.
Kennedy incurs in connection with such payment and acceleration above standard
individual taxes for ordinary income. Alternatively, if Mr. Kennedy's employment
is terminated by E-LOAN at any time, E-LOAN has agreed to give Mr. Kennedy three
months notice of termination, pay Mr. Kennedy 12 months of salary and accelerate
vesting of that number of shares under Mr. Kennedy's option that would have been
exercisable on the date 12 months following the date of termination. E-LOAN is
not required to perform any of these obligations if Mr. Kennedy's termination
from E-LOAN is due to a criminal act or gross violation of E-LOAN policy. E-LOAN
has also agreed to reimburse Mr. Kennedy for relocation expenses he incurred in
relocating to the Bay Area.
In accordance with the terms of their option agreements under E-LOAN's 1997
Stock Plan, whether or not the options are assumed or substituted in a merger,
acquisition or asset sale, each Named Executive Officer's outstanding options
vest and become exercisable as to an additional 50% of the unvested shares at
the time of such merger, acquisition or sale of assets.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
E-LOAN's Restated Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a corporation will not be personally liable for monetary
damages for breach of their fiduciary duties as directors, except liability for:
- breach of their duty of loyalty to the corporation or its stockholders;
59
<PAGE> 63
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
Such limitation of liability does not apply to liabilities arising under
the federal or state securities laws and does not affect the availability of
equitable remedies such as injunctive relief or rescission.
E-LOAN's Bylaws provide that E-LOAN shall indemnify its directors,
officers, employees and other agents to the fullest extent permitted by law.
E-LOAN believes that indemnification under its Bylaws covers at least negligence
and gross negligence on the part of indemnified parties. E-LOAN's Bylaws also
permit it to secure insurance on behalf of any officer, director, employee or
other agent for any liability arising out of his or her actions in such
capacity, regardless of whether the Bylaws permit such indemnification.
E-LOAN has entered into agreements to indemnify its directors and executive
officers, in addition to the indemnification provided for in its Bylaws. These
agreements, among other things, indemnify E-LOAN's directors and executive
officers for certain expenses (including attorneys' fees), judgments, fines and
settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of E-LOAN arising out of such person's
services as a director, officer, employee, agent or fiduciary of E-LOAN, any
subsidiary of E-LOAN or any other company or enterprise to which the person
provides services at the request of E-LOAN. E-LOAN believes that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.
At present, there is no pending litigation or proceeding involving a
director or officer of E-LOAN in which indemnification is required or permitted,
and E-LOAN is not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
60
<PAGE> 64
CERTAIN TRANSACTIONS
In December 1997, E-LOAN issued shares of Series B preferred stock to
certain investors at a purchase price of $0.96 per share, which shares will
automatically convert into 430,207 shares of common stock upon the completion of
this offering. Also in December 1997, E-LOAN issued shares of Series C preferred
stock to certain investors at a purchase price of $1.23 per share, which shares
will automatically convert into 4,269,936 shares of common stock upon completion
of this offering. In September 1998 and February 1999, E-LOAN issued shares of
Series D preferred stock to certain investors at a purchase price of $9.26 per
share, which shares will automatically convert into 1,702,529 shares of common
stock upon the completion of this offering. The investors in the Series B
preferred stock, Series C preferred stock and Series D preferred stock include
the following affiliates of E-LOAN:
<TABLE>
<CAPTION>
SHARES OF SHARES OF SHARES OF
SERIES B SERIES C SERIES D
PREFERRED PREFERRED PREFERRED
INVESTOR STOCK STOCK STOCK
-------- --------- --------- ---------
<S> <C> <C> <C>
Doug Galen.............................................. 15,625 -- --
Benchmark Capital Partners II L.P.(1)................... -- 2,589,959 97,161
Entities Affiliated with Technology Partners(2)......... -- 1,479,977 75,570
Entities Affiliated With STV IV, LLC(3)................. -- -- 777,286
Yahoo!, Inc.(4)......................................... -- -- 323,869
Harold "Pete" Bonnikson................................. -- -- 40,000
</TABLE>
- -------------------------
(1) Mr. Kagle, a director of E-LOAN, is a member of Benchmark Capital Management
Co., L.L.C., the general partner of Benchmark Capital Partners II L.P.
(2) Technology Partners Fund V, L.P. holds 739,989 shares of Series C preferred
stock and 16,361 shares of Series D preferred stock. Technology Partners
Fund VI, L.P. holds 739,988 shares of Series C preferred stock and 59,209
shares of Series D preferred stock. Mr. Ehrenpreis, a director of E-LOAN, is
a general partner of TPW Management V, L.P., the general partner of
Technology Partners Fund V, L.P. and is a managing member of TP Management
VI, L.L.C., the general partner of Technology Partners Fund VI, L.P.
(3) Softbank Holdings, Inc., L.P. holds 388,643 shares of Series D preferred
stock, Softbank Technology Advisors Fund, L.P. holds 7,306 shares of Series
D preferred stock, and Softbank Technology Ventures IV, L.P. holds 381,337
shares of Series D preferred stock.
(4) Mr. Koogle, a director of E-LOAN, is the Chief Executive Officer of Yahoo!
In December 1997, E-LOAN entered into an agreement with Yahoo!, Inc., under
which E-LOAN became the exclusive provider of mortgage related information on
the "Yahoo! Loan Center" website and E-LOAN and Yahoo! will conduct joint
marketing activities. In September 1998, E-LOAN entered into a subsequent
agreement with Yahoo!, which became effective in March 1999 upon the expiration
of the December 1997 agreement, under which E-LOAN would continue to be the
exclusive provider of mortgage related information on the "Yahoo! Loan Center"
website and E-LOAN and Yahoo! would continue to conduct joint marketing
activities through February 2000. In March 1999, the parties extended this
agreement through February 2001. Pursuant to the agreement, E-LOAN is required
to pay a slotting fee plus click-through fees to Yahoo! Tim Koogle, a director
of E-LOAN, is the Chief Executive Officer of Yahoo!
In October 1997, March 1998 and August 1998, E-LOAN granted to Doug Galen,
its Vice President of Business and Sales, options to purchase 90,000, 40,000 and
10,000 shares of common stock, respectively, at $0.15, $0.65 and $3.00 per
share, respectively. These options vest according to the following schedules:
1/4(th) of the total number of shares subject to each
61
<PAGE> 65
option vests on August 26, 1998, March 12, 1999 and August 11, 1999,
respectively, and 1/48(th) of the total number of shares subject to each option
vests at the end of each full month thereafter.
In December 1997 and August 1998, E-LOAN granted to Janet Hammond, its Vice
President of Underwriting, an option to purchase 15,000 shares and two separate
options to purchase 10,000 shares of common stock each, respectively, at $0.65
and $3.00 per share, respectively. These options vest according to the following
schedules: 1/4(th) of the total number of shares subject to each option vests
on December 10, 1998, May 1, 1999 and August 11, 1999, respectively, and
1/48(th) of the total number of shares subject to each option vests at the end
of each full month thereafter.
In May 1998, E-LOAN granted to Bill Crane, its Vice President of
Engineering, an option to purchase 165,000 shares of common stock at $0.65 per
share. This option vests according to the following schedule: 1/4(th) of the
total number of shares vests on April 20, 1999 and 1/48(th) of the total number
of shares vests at the end of each full month thereafter.
In May 1998, January 1999 and February 1999, E-LOAN granted to Sharon
Ruwart, its Vice President of Marketing, options to purchase 60,000, 10,000 and
5,000 shares of common stock, respectively, at $0.65, $6.00 and $6.00 per share,
respectively. These options vest according to the following schedules: 1/4(th)
of the total number of shares subject to each option vests on May 1, 1999,
January 1, 2000 and February 22, 2000, respectively, and 1/48(th) of the total
number of shares subject to each option vests at the end of each full month
thereafter.
In May 1998 and February 1999, E-LOAN granted to Steve Majerus, its Vice
President of Secondary Marketing, options to purchase 75,000 and 25,000 shares
of common stock, respectively, at $0.65 and $6.00 per share, respectively. These
options vest according to the following schedules: 1/4(th) of the total number
of shares subject to each option vests on April 27, 1999 and February 22, 2000,
respectively, and 1/48(th) of the total number of shares subject to each option
vests at the end of each full month thereafter.
In November 1998, E-LOAN granted to Frank Siskowski, its Chief Financial
Officer, an option to purchase 128,459 shares of common stock at $4.00 per
share. This option vests according to the following schedule: 1/4(th) of the
total number of shares vests on October 26, 1999 and 1/48(th) of the total
number of shares vests at the end of each full month thereafter.
In January 1999, E-LOAN granted to Harold "Pete" Bonnikson, its Senior Vice
President of Operations, an option to purchase 218,087 shares of common stock at
$6.00 per share. This option vests according to the following schedule: 1/4(th)
of the total number of shares vests on January 13, 2000 and 1/48(th) of the
total number of shares vests at the end of each full month thereafter.
In February, 1999, E-LOAN granted to Joseph Kennedy, its Senior Vice
President of Marketing, an option to purchase 249,173 shares of common stock at
$6.00 per share. This option vests according to the following schedule: 1/4(th)
of the total number of shares vests on February 22, 2000 and 1/48(th) of the
total number of shares vests at the end of each full month thereafter. For a
description of the terms of the employment arrangement between E-LOAN and Mr.
Kennedy, see "Management -- Employment Agreement and Change of Control
Arrangements".
E-LOAN has entered into indemnification agreements with its officers and
directors containing provisions that require E-LOAN, among other things, to
indemnify its officers and directors against certain liabilities that may arise
by reason of their status or service as officers or directors, other than
liabilities arising from willful misconduct of a culpable nature, and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified.
62
<PAGE> 66
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of E-LOAN's common stock as of March 19, 1999 and as adjusted to
reflect the sale of common stock offered by this prospectus and the automatic
conversion of all outstanding shares of preferred stock into shares of common
stock, in each case reflecting the common stock beneficially held by the
following individuals or groups:
- each person known by E-LOAN to beneficially own more than 5% of its
outstanding common stock;
- each director of E-LOAN;
- each Named Executive Officer listed in the Summary Compensation Table;
and
- all directors and executive officers of E-LOAN as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The address for each listed director and officer is
c/o E-LOAN, Inc., 5875 Arnold Road, Suite 100, Dublin, California 94568. Except
as indicated by footnote, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them. The number of
shares of common stock outstanding used in calculating the percentage for each
listed person includes the shares of common stock underlying options or warrants
held by such person that are exercisable within 60 days of March 19, 1999, but
excludes shares of common stock underlying options or warrants held by any other
person. Percentage of beneficial ownership is based on 11,031,320 shares of
common stock outstanding as of March 19, 1999, after giving effect to the
conversion of the outstanding preferred stock, and shares of common stock
outstanding after completion of this offering.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
BENEFICIALLY OWNED
SHARES --------------------
BENEFICIALLY PRIOR TO AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
------------------------ ------------ -------- --------
<S> <C> <C> <C>
Benchmark Capital Partners II L.P.(1).................. 2,687,120 24.4%
Robert C. Kagle
Entities affiliated with Technology Partners(2)........ 1,555,547 14.1%
Ira M. Ehrenpreis
Entities affiliated with STV IV, LLC(3)................ 1,101,530 9.99%
Chris Larsen(4)........................................ 1,851,707 16.8%
Janina Pawlowski(5).................................... 1,837,309 16.7%
Doug Galen(6).......................................... 56,458 *
Steve Majerus(7)....................................... 18,750 *
Tim Koogle(8).......................................... 323,869 2.9%
Wade Randlett.......................................... 500 *
All directors and executive officers as a group (14
persons)(9).......................................... 9,515,040 85.4%
</TABLE>
- -------------------------
* Represents beneficial ownership of less than one percent of E-LOAN's common
stock.
(1) Mr. Kagle, a director of E-LOAN, is a member of Benchmark Capital
Management Co., L.L.C., the general partner of Benchmark Capital Partners
II, L.P. and disclaims beneficial ownership of the shares held by Benchmark
Capital Partners II, L.P. except to the extent of his proportionate
partnership interest therein.
63
<PAGE> 67
(2) Consists of 799,197 shares held of record by Technology Partners Fund VI,
L.P. and 756,350 shares held of record by Technology Partners Fund V, L.P.
Excludes 79,311 and 19,224 shares beneficially owned by Chris Larsen and
pledged to Technology Partners Fund V, L.P. and Technology Partners Fund
VI, L.P., respectively, pursuant to Loan and Pledge Agreements between such
entities and Mr. Larsen. Also excludes 79,311 and 19,224 shares
beneficially owned by Janina Pawlowski and pledged to Technology Partners
Fund V, L.P. and Technology Partners Fund VI, L.P., respectively, pursuant
to Loan and Pledge Agreements dated between such entities and Ms.
Pawlowski. Mr. Ehrenpreis, a director of E-LOAN, is a general partner of
TPW Management V, L.P., the general partner of Technology Partners Fund V,
L.P. and is a managing member of TP Management VI, L.L.C., the general
partner of Technology Partners Fund VI, L.P. and disclaims beneficial
ownership of the shares held by Technology Partners Fund VI, L.P. and
Technology Partners Fund V, L.P. except to the extent of his proportionate
partnership interest therein.
(3) Consists of 388,643 shares held of record by Softbank Holdings, Inc. L.P.,
381,337 shares held of record by Softbank Technology Ventures IV, L.P.,
7,306 shares held of record by Softbank Technology Advisors Fund, L.P., and
324,244 shares held of record by Softbank America Inc. Excludes 126,183,
123,509, 2,675 and 115,577 shares beneficially owned by Chris Larsen and
pledged to Softbank Holdings, Inc., Softbank Technology Ventures IV, L.P.,
Softbank Technology Advisors Fund, L.P., and Softbank America Inc.,
respectively, pursuant to Loan and Pledge Agreements between such entities
and Mr. Larsen. Also excludes 126,183, 123,509, 2,675 and 101,129 shares
beneficially owned by Janina Pawlowski and pledged to Softbank Holdings,
Inc., Softbank Technology Ventures IV, L.P., Softbank Technology Advisors
Fund, L.P., and Softbank America Inc., respectively, pursuant to Loan and
Pledge Agreements between such entities and Ms. Pawlowski.
(4) Included 50,000 shares held of record by the Larsen Trust. Also includes
858,859 shares that are pledged to certain investors to secure $10.8 million
in full recourse loans made to Mr. Larsen by these investors. All of Mr.
Larsen's pledged shares are also subject to put and call options pursuant to
agreements between Mr. Larsen and these investors. See "Description of
Capital Stock -- Put/Call Options on Common Stock".
(5) Includes 50,000 shares held of record by the Pawlowski Trust. Also includes
844,411 shares that are pledged to certain investors to secure $10.1 million
in full recourse loans made to Ms. Pawlowski by these investors. All of Ms.
Pawlowski's pledged shares are also subject to put and call options pursuant
to agreements between Ms. Pawlowski and these investors. See "Description of
Capital Stock -- Put/Call Options on Common Stock".
(6) Includes 48,333 shares subject to stock options that are exercisable within
60 days of March 19, 1999.
(7) Includes 109,333 shares subject to stock options that are exercisable
within 60 days of March 19, 1999.
(8) Consists of 323,869 shares held of record by Yahoo!, Inc. Mr. Koogle, a
director of E-LOAN, is Chief Executive Officer of Yahoo! and disclaims
beneficial ownership of the shares held by Yahoo!
(9) Includes 109,333 shares subject to stock options that are exercisable within
60 days of March 19, 1999.
64
<PAGE> 68
DESCRIPTION OF CAPITAL STOCK
GENERAL
E-LOAN's Restated Certificate of Incorporation, which will become effective
upon the closing of this offering, authorizes the issuance of up to 70 million
shares of common stock, par value $0.001 per share, and 5 million shares of
preferred stock, par value $0.001 per share, the rights and preferences of which
may be established from time to time by E-LOAN's Board of Directors. As of March
19, 1999, 4,200,013 shares of common stock were issued and outstanding and
6,831,307 shares of preferred stock convertible into 6,831,307 shares of common
stock upon the completion of this offering were issued and outstanding. As of
March 19, 1999, E-LOAN had 68 stockholders.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the stockholders and there are no cumulative voting
rights. Subject to preferences to which holders of preferred stock issued after
the sale of the common stock offered hereby may be entitled, holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy". In the event of a liquidation, dissolution or
winding up of E-LOAN, holders of common stock would be entitled to share in
E-LOAN's assets remaining after the payment of liabilities and the satisfaction
of any liquidation preference granted the holders of any outstanding shares of
preferred stock. Holders of common stock have no preemptive or conversion rights
or other subscription rights and there are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are, and the shares of common stock offered by E-LOAN in this offering,
when issued and paid for, will be, fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any series
of preferred stock which E-LOAN may designate in the future.
PREFERRED STOCK
Upon the closing of this offering, the Board of Directors will be
authorized, subject to any limitations prescribed by law, without stockholder
approval, from time to time to issue up to an aggregate of 5 million shares of
preferred stock, in one or more series, each of such series to have such rights
and preferences, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences as shall be determined by the
Board of Directors. The rights of the holders of common stock will be subject
to, and may be adversely affected by, the rights of holders of any preferred
stock that may be issued in the future. Issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, a majority of the outstanding voting stock of E-LOAN. E-LOAN has no
present plans to issue any shares of preferred stock.
WARRANTS
As of March 19, 1999, E-LOAN had outstanding a warrant to purchase 15,000
shares of Series C preferred stock at an exercise price of $2.00 per share,
convertible into 15,000 shares of common stock upon the effectiveness of this
offering, and a warrant to purchase 53,996 shares of Series D preferred stock at
an exercise price of $9.26 per share, convertible into 53,996 shares of common
stock upon the effectiveness of this offering. Each warrant has a net exercise
provision under which the holder may, in lieu of payment of the exercise price
in cash, surrender the warrant and receive a net amount of shares, based on the
fair market value of
65
<PAGE> 69
E-LOAN's stock at the time of the exercise of the warrant, after deducting the
aggregate exercise price. The warrant for 53,996 shares of Series D preferred
stock will expire upon the closing of this offering. The warrant for 15,000
shares of Series C Preferred Stock shall expire three years from the effective
date of this offering.
REGISTRATION RIGHTS
Pursuant to the terms of an Investor Rights Agreement among E-LOAN and
certain holders of E-LOAN's securities, after the closing of this offering, the
holders of 5,947,465 shares of the outstanding common stock or their permitted
transferees, including shares issuable upon the exercise of certain warrants to
purchase common stock, are entitled to certain rights with respect to the
registration of such shares under the Securities Act. The holders of at least
66 2/3% of the shares entitled to registration rights may require E-LOAN,
subject to certain limitations, to file a registration statement covering shares
entitled to registration rights with an aggregate gross offering price of at
least $1.5 million. E-LOAN is not required to effect (i) more than two such
registrations pursuant to such demand registration rights; (ii) a registration
within 60 days following the determination by the Board of Directors of E-LOAN
to file a registration statement; (iii) a registration during the period in
which any other registration statement has been filed or has been declared
effective within the prior 120 days; or (iv) a registration for a period not to
exceed 120 days, if the Board of Directors of E-LOAN has made a good faith
determination that such registration would be seriously detrimental to E-LOAN or
to its stockholders. Furthermore, pursuant to the terms of the Investor Rights
Agreement, the holders of the shares entitled to registration rights are
entitled to certain piggyback registration rights in connection with any
registration by E-LOAN of its securities for its own account or the account of
other security holders. In the event that E-LOAN proposes to register any shares
of common stock under the Securities Act, the holders of such piggyback
registration rights are entitled to receive notice of such registration and are
entitled to include their shares therein, subject to certain limitations.
At any time after E-LOAN becomes eligible to file a registration statement
on Form S-3, holders of 20% or more of the Registrable Securities may require
E-LOAN to file an unlimited number of registration statements on Form S-3 under
the Securities Act with respect to their shares of common stock.
Each of the foregoing registration rights is subject to certain conditions
and limitations, including the right of the underwriters in any underwritten
offering to limit the number of shares to be included in such registration. The
registration rights with respect to any holder thereof terminate upon the
earlier of (i) 7 years from the effective date of this offering or (ii) when the
shares held by such holder may be sold under Rule 144 during any three-month
period. E-LOAN is generally required to bear all of the expenses of all such
registrations, except underwriting discounts and commissions. Registration of
any of the shares entitled to registration rights would result in such shares
becoming freely tradable without restriction under the Securities Act
immediately upon effectiveness of such registration. The Investor Rights
Agreement also contains a commitment of E-LOAN to indemnify the holders of
registration rights, subject to certain limitations.
PUT/CALL OPTIONS ON COMMON STOCK
In December 1997, Chris Larsen, E-LOAN's Chief Executive Officer, and
Janina Pawlowski, E-LOAN's President, each entered into a separate Loan and
Pledge Agreement with certain investors under which each of these officers were
loaned $250,000 on a full recourse basis. Each officer secured his or her loan
with a pledge of 203,497 shares of common stock and a security interest in such
officer's rights under a Put Option Agreement and Call Option Agreement among
certain investors and each officer. The loans are due December 19, 2002 and bear
interest, compounded annually, at a rate of 7% per annum. Under the Call Option
Agreements, each officer granted certain investors an option to call the 203,497
shares covered by the option at any
66
<PAGE> 70
time from the date of the agreement up to December 19, 2001 at an exercise price
equal to an aggregate of $500,000. Under the Put Option Agreements, certain
investors granted to each officer an option to put the 203,497 shares covered by
the option to the investors at an exercise price equal to an aggregate of
$500,000 together with interest at the rate of 7% per annum, compounded
annually, at any time during the eleven-month period beginning January 20, 2002
and ending November 19, 2002.
In August 1998, each of these officers entered into a separate Loan and
Pledge Agreement with certain investors under which each officer was loaned $5.0
million on a full recourse basis. Each officer secured his or her loan with a
pledge of 539,785 shares of common stock and a security interest in such
officer's rights under a Put Option Agreement and Call Option Agreement among
certain investors and each officer. The loans are due August 31, 2003 and bear
interest, compounded annually, at a rate of 6% per annum. Under the Call Option
Agreement, each officer granted certain investors an option to call the 539,785
shares covered by the option at any time from the date of the agreement up to
August 31, 2002 at an exercise price equal to an aggregate of $10.0 million.
Under the Put Option Agreements, certain investors granted to each officer an
option to put the 539,785 shares covered by the option to the investors at an
exercise price equal to an aggregate $10.0 million together with interest of the
rate of 6% per annum, compounded annually, at any time during the eleven-month
period beginning January 1, 2003 and ending November 30, 2003.
Softbank Stock Purchase and Related Transactions
In March 1999, Softbank America Inc. purchased an aggregate of 324,244
shares of common stock and preferred stock from certain stockholders of E-LOAN,
including 84,423 and 73,871 shares of common stock from Mr. Larsen and Ms.
Pawlowski, respectively, at a purchase price of $48.00 per share. The
stockholders agreement with Softbank America provides that Softbank America will
not dispose of the acquired shares prior to March 23, 2000.
Concurrently with these purchases, Mr. Larsen and Ms. Pawlowski each
entered into a separate Loan and Pledge Agreement with Softbank America under
which Mr. Larsen was loaned $5.5 million on a full recourse basis and Ms.
Pawlowski was loaned $4.8 million on a full recourse basis. Mr. Larsen secured
his loan with a pledge of 115,577 shares of common stock and Ms. Pawlowski
secured her loan with a pledge of 101,129 shares of common stock and both
granted Softbank America a security interest in such officer's rights under a
Put Option Agreement and a Call Option Agreement. The loans are due March 23,
2004 and bear interest, compounded annually, at a rate of 7% per annum. Under
the Call Option Agreements, both Mr. Larsen and Ms. Pawlowski granted certain
investors an option to call all of the shares covered by the option at any time
from the date of the agreement up to March 23, 2003 at an exercise price equal
to $5.5 million and $4.8 million, respectively. Under the Put Option Agreements,
Softbank America granted to both Mr. Larsen and Ms. Pawlowski an option to put
all of the shares covered by the option at an exercise price equal to an
aggregate of $5.5 million and $4.8 million, respectively, together with interest
at the rate of 7% per annum, compounded annually, at any time during the
eleven-month period beginning in March 2003 and ending February 2004.
EFFECT OF CERTAIN PROVISIONS OF E-LOAN'S RESTATED CERTIFICATE OF INCORPORATION
AND BYLAWS, AND THE DELAWARE ANTITAKEOVER STATUE
Certain provisions of E-LOAN's Restated Certificate of Incorporation and
Bylaws, which will become effective upon the closing of this offering, may have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of E-LOAN. Such
provisions could limit the price that certain investors might be willing to pay
in the future for shares of E-LOAN's common stock. Certain of these provisions
allow E-LOAN to issue preferred stock without any vote or further action by the
stockholders, eliminate the right of
67
<PAGE> 71
stockholders to act by written consent without a meeting and eliminate
cumulative voting in the election of directors. These provisions may make it
more difficult for stockholders to take certain corporate actions and could have
the effect of delaying or preventing a change in control of E-LOAN. In addition,
E-LOAN is subject to Section 203 of the Delaware General Corporation Law which,
subject to certain exceptions, prohibits a Delaware corporation from engaging in
any business combination with any interested stockholder, unless:
- prior to such date, the Board of Directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding (a) shares owned by persons who are
directors and also officers, and (b) shares owned by employee stock plans
in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered
in a tender or exchange offer; or
- on or subsequent to such date, the business combination is approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
E-LOAN's Restated Certificate of Incorporation provides that, upon the
closing of this offering, the Board of Directors will be divided into three
classes of directors with each class serving a staggered three-year term. The
classification system of electing directors may tend to discourage a third party
from making a tender offer or otherwise attempting to obtain control of E-LOAN
and may maintain the incumbency of the Board of Directors, as the classification
of the Board of Directors generally increases the difficulty of replacing a
majority of the directors. E-LOAN's Bylaws eliminate the right of stockholders
to call special meetings of stockholders. The authorization of undesignated
preferred stock makes it possible for the Board of Directors to issue preferred
stock with voting or other rights or preferences that could impede the success
of any attempt to change control of E-LOAN. These and other provisions may have
the effect of deferring hostile takeovers or delaying changes in control or
management of E-LOAN. The amendment of any of these provisions would require
approval by holders of at least 66 2/3% of the outstanding common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Chase Mellon
Shareholder Services.
68
<PAGE> 72
SHARES AVAILABLE FOR FUTURE SALE
Prior to this offering there has been no public market for E-LOAN's common
stock. Future sales of substantial amounts of E-LOAN's common stock in the
public market or the availability of such shares for sale, could adversely
affect the prevailing market price and the ability of E-LOAN to raise equity
capital in the future.
Upon the closing of this offering, E-LOAN will have an aggregate of
shares of common stock outstanding, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options to
purchase common stock.
Of the shares of common stock to be outstanding upon the
closing of this offering, the shares offered hereby will be
eligible for immediate sale in the public market without restriction, unless the
shares are purchased by "affiliates" of E-LOAN within the meaning of Rule 144
promulgated under the Securities Act of 1933. The remaining 11,031,320 shares of
common stock held by existing stockholders upon the closing of this offering
will be "restricted securities", as that term is defined in Rule 144. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rules 144, 144(k) or 701 under
the Securities Act. All of the holders of these "restricted securities,"
including officers and directors of E-Loan, have entered into "lock-up
agreements" providing that they will not sell, directly or indirectly, any
common stock without the prior consent of the representatives of Goldman, Sachs
& Co. for a period of 180 days from the date of this prospectus. Subject to the
provisions of Rules 144, 144(k) and 701, 10,791,320 shares will be available for
sale in the public market, subject in the case of shares held by affiliates to
compliance with certain volume restrictions, upon expiration of this 180-day
period.
In general, under Rule 144, a person or persons whose shares are
aggregated, including an affiliate who has beneficially owned shares for at
least one year, is entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the outstanding shares of
common stock, or the average weekly trading volume of the common stock during
the four calendar weeks preceding the date on which notice of such sale is
filed, subject to certain restrictions. In addition, a person who is not deemed
to have been an affiliate of E-LOAN at any time during the three months
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least two years would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above. To the extent that shares
were purchased from an affiliate of E-LOAN, the purchasers' holding period for
the purpose of effecting a sale under Rule 144 commences on the date of purchase
from the affiliate. As of March 19, 1999, there were outstanding options to
purchase 1,965,206 shares of common stock which will be eligible for sale in the
public market from time to time subject to vesting and the expiration of lock-up
agreements. As of March 19, 1999, there was outstanding a warrant to purchase
15,000 shares of Series C preferred stock convertible into 15,000 shares of
common stock upon the effectiveness of this offering and a warrant to purchase
53,996 shares of Series D Preferred Stock, convertible into 53,996 shares of
common stock upon the effectiveness of this offering. The 68,996 shares of
common stock that will be issuable upon exercise of this warrant after this
offering will be eligible for sale in the public market from time to time
subject to the expiration of lock-up agreements and Rule 144. The possible sale
of a significant number of shares by the holders thereof may have an adverse
effect on the price of the common stock.
E-LOAN is unable to estimate the number of shares that will be sold under
Rule 144, as this will depend on the market price for the common stock of
E-LOAN, the personal circumstances of the sellers and other factors. Prior to
this offering, there has been no public market for the common stock, and there
can be no assurance that a significant public market for the common stock will
develop or be sustained after this offering. Any future sale of substantial
amounts of
69
<PAGE> 73
common stock in the open market may adversely affect the market price of the
common stock offered hereby.
E-LOAN will file a registration statement on Form S-8 under the Securities
Act to register the shares of common stock reserved for issuance under its 1997
Stock Option Plan and 1999 Employee Stock Purchase Plan. As a result, shares
issued upon exercise of stock options granted under the Stock Option Plan will
be available, subject to special rules for affiliates, for resale in the public
market after the effective date of such registration statement. See
"Management -- Stock Plans".
Pursuant to an Investor Rights Agreement among E-Loan and certain holders
of E-Loan's securities, after the closing of this offering, subject to certain
conditions, the holders of 5,947,465 shares of outstanding common stock,
including shares issuable upon the exercise of certain warrants to purchase
common stock, will be entitled to certain demand and piggyback registration
rights. Registration of such shares under the Securities Act would result in
such shares becoming freely tradable without restriction under the Securities
Act, except for shares purchased by Affiliates. Please see "Description of
Capital Stock -- Registration Rights".
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
E-LOAN by Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto, California. Certain
legal matters will be passed upon for the Underwriters by Venture Law Group, A
Professional Corporation, Menlo Park, California. As of the date of this
prospectus, WS Investment Company 96B and WS Investment Company 97B, investment
partnerships composed of certain current and former members of and persons
associated with Wilson Sonsini Goodrich & Rosati, P.C., and a certain member of
Wilson Sonsini Goodrich & Rosati, P.C., beneficially own an aggregate of 55,626
shares of E-LOAN's common stock.
EXPERTS
The financial statements of E-LOAN as of December 31, 1997 and 1998 and for
each of the three years in the period ended December 31, 1998 included in this
Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
E-LOAN has filed with the Securities and Exchange Commission, a
Registration Statement on Form S-1, including the exhibits and schedules
thereto, under the Securities Act with respect to the shares to be sold in this
offering. This prospectus does not contain all the information set forth in the
Registration Statement. For further information with respect to E-LOAN and the
shares to be sold in this offering, reference is made to the Registration
Statement. Statements contained in this prospectus as to the contents of any
contract, agreement or other document referred to, are not necessarily complete,
and in each instance reference is made to the copy of such contract, agreement
or other document filed as an exhibit to the Registration Statement, each
statement being qualified in all respects by such reference.
You may read and copy all or any portion of the Registration Statement or
any reports, statements or other information E-LOAN files with the Commission at
the Commission's public reference room at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.C., Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. You can request copies of these documents upon payment
of
70
<PAGE> 74
a duplicating fee, by writing to the Commission. Please call the Commission at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. E-LOAN's Commission filings, including the Registration Statement will
also be available to you on the Commission's Internet site. The address of this
site is http://www.sec.gov.
E-LOAN intends to send to its stockholders annual reports containing
audited consolidated financial statements for each fiscal year and quarterly
reports containing unaudited consolidated financial statements for the first
three quarters of each fiscal year.
71
<PAGE> 75
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................... F-2
Balance Sheet at December 31, 1997 and 1998............... F-3
Statement of Operations for the years ended December 31,
1996, 1997 and 1998.................................... F-4
Statement of Stockholders' Deficit for the years ended
December 31, 1996, 1997 and 1998....................... F-5
Statement of Cash Flows for the years ended December 31,
1996, 1997 and 1998.................................... F-6
Notes to Financial Statements............................. F-7
</TABLE>
F-1
<PAGE> 76
REPORT OF INDEPENDENT ACCOUNTANTS
March 24, 1999
To the Stockholders and Board of Directors of E-Loan, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, stockholders' equity (deficit) and cash flows present fairly, in
all material respects, the financial position of E-Loan, Inc. (the Company) at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
F-2
<PAGE> 77
E-LOAN, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY AT
DEC. 31, 1998
1997 1998 (UNAUDITED)
ASSETS ----------- ------------ -------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 4,217,687 $ 9,141,367 $ 9,641,367
Mortgage loans held-for-sale........................... -- 42,153,648
Accounts receivable, net............................... 33,924 411,058
Prepaids and other current assets...................... 168,577 720,681
----------- ------------ ------------
Total current assets............................. 4,420,188 52,426,754 $ 52,926,754
Furniture and equipment, net........................... 146,207 2,365,564
Deposits and other assets.............................. 113,480 730,938
----------- ------------ ------------
Total assets..................................... $ 4,679,875 $ 55,523,256 $ 56,023,256
=========== ============ ============
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Warehouse lines payable................................ $ -- $ 41,046,122
Accounts payable, accrued expenses and other........... 518,186 2,654,623
Capital lease obligation............................... -- 252,475
Notes payable.......................................... 78,868 71,299
Advances payable....................................... 1,840,996 --
----------- ------------
Total current liabilities........................ 2,438,050 44,024,519
Capital lease obligations.............................. -- 719,294
Notes payable.......................................... -- 570,393
----------- ------------
2,438,050 45,314,206
----------- ------------
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series C, 4,467,912 shares authorized; 2,589,959 and
4,069,936 shares issued and outstanding at December
31, 1997 and 1998 (aggregate liquidation preference
$4,999,998)........................................ 3,207,720 5,525,904 $ --
Series C-1, 4,467,912 shares authorized; 0 shares
issued and outstanding (liquidation preference
$1.22852 per share)................................ -- --
Series D, 1,950,000 shares authorized; 1,662,529
shares issued and outstanding (aggregate
liquidation preference $15,400,006)................ -- 15,867,098 --
----------- ------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS' DEFICIT:
Convertible preferred stock:
Series A, 428,635 shares authorized; 428,635 shares
issued and outstanding (aggregate liquidation
preference $94,300)................................ 90,901 90,901 --
Series B, 450,708 shares authorized; 430,207 shares
issued and outstanding (aggregate liquidation
preference $412,999)............................... 411,482 411,482 --
Common stock, 20,000,000 shares authorized; 4,085,000
and 4,174,951 shares issued and outstanding at
December 31, 1997 and 1998; 70,000,000 shares
authorized; 10,820,254 shares issued and outstanding
on a pro forma basis (unaudited)..................... 4,085 26,867 22,422,252
Less: subscription receivable.......................... (4,085) (4,085) (4,085)
Unearned compensation.................................. -- (4,477,000) (4,477,000)
Additional paid-in capital............................. (41,667) 5,366,548 5,366,548
Accumulated deficit.................................... (1,426,611) (12,598,665) (12,598,665)
----------- ------------ ------------
Total stockholders' equity (deficit)............. (965,895) (11,183,952) $ 10,709,050
----------- ------------ ------------
Total liabilities, mandatorily redeemable
convertible preferred stock and stockholders'
deficit....................................... $ 4,679,875 $ 55,523,256 $ 56,023,256
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 78
E-LOAN, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
---------- ----------- ------------
<S> <C> <C> <C>
Revenues (Note 13).............................. $ 892,995 $ 1,042,729 $ 6,831,546
Operating expenses:
Operations.................................... 902,736 1,318,342 7,626,413
Sales and marketing........................... -- 470,323 5,642,394
Technology.................................... -- 102,074 1,247,528
General and administrative.................... 96,865 524,076 2,409,591
Amortization of unearned compensation......... -- -- 1,251,000
---------- ----------- ------------
Total operating expenses.............. 999,601 2,414,815 18,176,926
---------- ----------- ------------
Loss from operations....................... (106,606) (1,372,086) (11,345,380)
Other income, net............................... (3,438) (2,407) 173,326
---------- ----------- ------------
Net loss.............................. $ (110,044) $(1,374,493) $(11,172,054)
========== =========== ============
Net loss per share:
Basic and diluted............................. $ (0.03) $ (0.35) $ (2.95)
========== =========== ============
Weighted-average shares -- basic.............. 4,085,000 4,087,344 4,133,428
========== =========== ============
Pro forma net loss per share (unaudited):
Basic and diluted............................. $ (1.26)
============
Weighted-average shares -- basic.............. 8,894,392
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 79
E-LOAN, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
SERIES A SERIES B
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
----------------- ------------------ ------------------- SUBSCRIPTION UNEARNED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT RECEIVABLE COMPENSATION
------- ------- ------- -------- --------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995.......... -- -- -- -- 4,085,000 $ 4,085 $(4,085) --
Net loss..............................
------- ------- ------- -------- --------- ------- ------- -----------
Balance at December 31, 1996.......... -- -- -- -- 4,085,000 4,085 (4,085) --
Series A preferred stock issued for
cash, net of issuance costs of
$3,399 at $0.22 per share in June
1997................................ 428,635 $90,901
Series B preferred stock issued for
cash, net of issuance costs of
$15,763 at $0.96 per share in
December 1997....................... 430,207 $411,482
Accretion for preferred stock Series
C...................................
Net loss..............................
------- ------- ------- -------- --------- ------- ------- -----------
Balance at December 31, 1997.......... 428,635 90,901 430,287 411,482 4,085,000 4,085 (4,085)
Common Stock issued for cash.......... 45,496 20,027
Common Stock issued for cash upon
exercise of stock options........... 44,455 2,755
Accretion for preferred stock Series
C...................................
Accretion for preferred stock Series
D...................................
Issuance of warrants for capital
lease...............................
Issuance of warrants in relation to
marketing agreements................
Issuance of stock options for services
rendered............................
Unearned Compensation................. $(4,477,000)
Net Loss..............................
------- ------- ------- -------- --------- ------- ------- -----------
Balance at December 31, 1998.......... 428,635 $90,901 430,207 $411,482 4,174,951 $26,867 $(4,085) $(4,477,000)
<CAPTION>
ADDITIONAL TOTAL
PAID ACCUMULATED STOCKHOLDERS'
IN CAPITAL DEFICIT DEFICIT
---------- ------------ -------------
<S> <C> <C> <C>
Balance at December 31, 1995.......... -- $ 57,926 $ 57,926
Net loss.............................. (110,044) (110,044)
---------- ------------ ------------
Balance at December 31, 1996.......... -- (52,118) (52,118)
Series A preferred stock issued for
cash, net of issuance costs of
$3,399 at $0.22 per share in June
1997................................ 90,901
Series B preferred stock issued for
cash, net of issuance costs of
$15,763 at $0.96 per share in
December 1997....................... 411,482
Accretion for preferred stock Series
C................................... $ (41,667) (41,667)
Net loss.............................. (1,374,493) (1,374,493)
---------- ------------ ------------
Balance at December 31, 1997.......... (41,667) (1,426,611) (965,895)
Common Stock issued for cash.......... 20,027
Common Stock issued for cash upon
exercise of stock options........... 2,755
Accretion for preferred stock Series
C................................... (500,000) (500,000)
Accretion for preferred stock Series
D................................... (513,352) (513,352)
Issuance of warrants for capital
lease............................... 29,575 29,575
Issuance of warrants in relation to
marketing agreements................ 640,150 640,150
Issuance of stock options for services
rendered............................ 23,842 23,842
Unearned Compensation................. 5,728,000 1,251,000
Net Loss.............................. (11,172,054) (11,172,054)
---------- ------------ ------------
Balance at December 31, 1998.......... $5,366,548 $(12,598,665) $(11,183,952)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 80
E-LOAN, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
--------- ----------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... $(110,044) $(1,374,493) $ (11,172,054)
Adjustments to reconcile net loss to cash used in
operating activities:
Amortization of unearned compensation.......... -- -- 1,251,000
Depreciation and amortization.................. -- 6,860 512,998
Loss on disposal of furniture and equipment.... -- 37,361 41,092
Changes in operating assets and liabilities:
Accounts receivable......................... (3,300) (30,624) (377,134)
Net change in mortgage loans
held-for-sale............................. -- -- (42,153,648)
Prepaids, deposits and other assets......... 2,862 (276,960) (641,899)
Accounts payable, accrued expenses, advances
payable and other......................... 33,668 2,315,579 295,441
Notes payable, short term................... 33,565 32,303 (7,569)
--------- ----------- -------------
Net cash provided by (used in)
operating activities................. (43,249) 710,026 (52,251,773)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture and equipment........... (4,557) (160,775) (1,608,899)
--------- ----------- -------------
Net cash used in investing
activities........................... (4,557) (160,775) (1,608,899)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock......... -- -- 22,782
Payments on obligations under capital leases... -- -- (26,875)
Proceeds from long term notes payable.......... -- -- 570,393
Proceeds from warehouse lines payable.......... -- -- 241,242,483
Repayments of warehouse lines payable.......... -- -- (200,196,361)
Proceeds from issuance of preferred stock,
net......................................... -- 3,668,436 17,171,930
--------- ----------- -------------
Net cash provided by financing
activities........................... 0 3,668,436 58,784,352
--------- ----------- -------------
Net increase (decrease) in cash................ (47,806) 4,217,687 4,923,680
Cash and cash equivalents at beginning of
year........................................ 47,806 0 4,217,687
--------- ----------- -------------
Cash and cash equivalents at end of year....... $ 0 $ 4,217,687 $ 9,141,367
========= =========== =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest...................... $ 1,124 $ 7,036 $ 588,987
========= =========== =============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Furniture and equipment under capital
leases.................................... $ 0 $ 0 $ 998,642
========= =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 81
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
E-Loan, Inc. (the Company) was incorporated on August 26, 1996 and began
marketing its services in June 1997. Prior to that date, the Company conducted
business through a predecessor company, Palo Alto Funding Group (PAFG) which was
established in 1992 as a mortgage broker. The stockholders of PAFG and the
Company were the same and on December 18, 1997 PAFG merged with the Company. The
transaction was accounted for in a manner similar to a pooling of interests and,
as a result, the accompanying financial statements represent the combined
balance sheets and results of operations of the Company and PAFG.
The Company is a provider of mortgage offerings online and is engaged in
the brokerage, origination, and sale of mortgage loans secured by residential
real estate. The Company serves U.S. consumers in the first and second home
mortgage loan market over the internet.
2. BASIS OF PRESENTATION
The Company has sustained net losses and negative cash flows from
operations since its inception. The Company's ability to meet its obligations in
the ordinary course of business is dependent upon its ability to establish
profitable operations or raise additional financing through public or private
equity financings, collaborative or other arrangements with corporate sources,
or other sources of financing to fund operations. However, there can be no
assurance that the Company will be able to achieve profitable operations.
Management believes that its current funds and available lines of credit will be
sufficient to enable the Company to meet its planned expenditures through at
least December 31, 1999.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RISKS AND UNCERTAINTIES
The Company has a limited operating history and its prospects are subject
to the risks, expenses and uncertainties frequently encountered by companies in
the new and rapidly evolving markets for internet products and services. These
risks include the failure to develop and extend the Company's online service
brands, the rejection of the Company's services by consumers, vendors and/or
advertisers, the inability of the Company to maintain and increase the levels of
traffic on its online services, as well as other risks and uncertainties.
Additionally, in the normal course of business, companies in the mortgage
banking industry encounter certain economic and regulatory risks. Economic risks
include interest rate risk, credit risk and market risk. The Company is subject
to interest rate risk to the extent that in a rising interest rate environment,
the Company will generally experience a decrease in loan production which may
negatively impact the Company's operations. Credit risk is the risk of default,
primarily in the Company's mortgage loan portfolio that result from the
mortgagors' inability or unwillingness to make contractually required payments.
Market risk reflects changes in the value of mortgage loans held-for-sale and in
commitments to originate loans.
F-7
<PAGE> 82
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Company sells loans to mortgage loan purchasers on a servicing released
basis without recourse. As such, the risk of loss or default by the borrower has
been assumed by these purchasers. However, the Company is usually required by
these purchasers to make certain representations relating to credit information,
loan documentation and collateral. To the extent that the Company does not
comply with such representations, or there are early payment defaults, the
Company may be required to repurchase the loans and indemnify these purchasers
for any losses from borrower defaults. For the year ended December 31, 1998, the
Company had not repurchased any loans.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid monetary instruments with an
original maturity of three months or less from the date of purchase to be cash
equivalents.
MORTGAGE LOANS HELD-FOR-SALE
Mortgage loans held-for-sale consist of residential property mortgages
having maturities up to 30 years. Pursuant to the mortgage terms, the borrowers
have pledged the underlying real estate as collateral for the loans. It is the
Company's practice to sell these loans to mortgage loan purchasers shortly after
they are funded. Mortgage loans held-for-sale are recorded at the lower of cost
or aggregate market value. Cost generally consists of loan principal balance
adjusted for net deferred fees and costs. No valuation adjustment was required
at December 31, 1998.
FURNITURE AND EQUIPMENT
Furniture and equipment, including furniture and equipment under capital
leases, are recorded at cost and depreciated using the straight-line method over
their useful lives, which is generally three years for computers and five years
for furniture and fixtures. Assets under capital leases are depreciated over the
shorter of the useful life of the asset or the term of the lease. Leasehold
improvements are amortized over the remaining life of the lease. Maintenance and
repairs are charged to expense as incurred, and improvements and betterments are
capitalized. When assets are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations in the period realized.
BROKERAGE FEES
Brokerage fees represent compensation earned for the processing of mortgage
loan applications for third party lenders. The Company does not take title to
the mortgages and the funding for these customers is provided by third party
lenders. The fees for providing these services are recognized at such time as
the loans are funded by the lender.
GAIN ON SALE OF LOANS
Gain on sale of loans includes gains or losses determined by loan sales
proceeds less the carrying value of the loans sold. Origination fees, net of
certain direct origination costs, are deferred and recognized when the loan is
sold. The carrying value of the loan is adjusted for the deferred origination
fees and costs. Gain on sale of loans are recognized at the time of settlement
with the mortgage loan purchaser.
F-8
<PAGE> 83
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INTEREST INCOME ON LOANS
Interest income is accrued as earned. Loans are placed on non-accrual
status when any portion of principal or interest is ninety days past due or
earlier when concern exists as to the ultimate collectibility of principal or
interest. Loans return to accrual status when principal and interest become
current and are anticipated to be fully collectible.
ADVERTISING COSTS
Advertising costs related to various media content advertising such as
television, radio, and print are charged to other operating expenses as
incurred. These costs include the cost of production as well as the cost of any
airtime.
INCOME TAXES
The Company accounts for income taxes using the liability method in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts
expected to be realized. The provision for income tax expense represents taxes
payable for the current period, plus the net change in deferred tax assets and
liabilities.
STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and complies with the disclosure
provision of SFAS No. 123, Accounting for Stock-Based Compensation. Under APB
No. 25, compensation expense is based on the excess of the estimated fair value
of the Company's stock over the exercise price, if any, on the date of the
grant.
NET INCOME (LOSS) PER SHARE
The Company computes net loss per share in accordance with SFAS No. 128,
Earnings per Share. Under the provisions of SFAS No. 128 basic net loss per
share is computed by dividing the net loss available to common stockholders for
the period by the weighted average number of common shares outstanding during
the period. Diluted net loss per share is computed by dividing the net loss
available to common stockholders for the period by the weighted average number
of common and common equivalent shares outstanding during the period, to the
extent such common equivalent shares are dilutive. Common equivalent shares are
composed of incremental common shares issuable upon the exercise of stock
options and warrants and upon conversion of Series A, B, C and Series D
convertible preferred stock.
F-9
<PAGE> 84
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the computation of basic and diluted net
loss per share for the years ended December 31:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Numerator:
Net loss............................. (110,044) $(1,374,493) $(11,172,054)
Accretion of Series C and D
mandatorily redeemable convertible
preferred stock to redemption
value............................. -- (41,667) (1,013,352)
----------- ----------- ------------
Net loss available to common
shareholders............... (110,044) $(1,416,160) $(12,185,406)
=========== =========== ============
Denominator:
Weighted average common shares --
basic and diluted................. 4,085,000 4,087,334 4,133,428
----------- ----------- ------------
Net loss per share:
Basic and diluted.................... $ (0.03) $ (0.35) $ (2.95)
=========== =========== ============
</TABLE>
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share for the year ended December 31, 1998 is
computed using the weighted average number of common shares outstanding,
including the pro forma effects of the automatic conversion of the Company's
Series A and Series B convertible preferred stock, Series C and Series D
mandatorily redeemable preferred stock and 53,996 warrants to purchase Series D
preferred stock at $9.26 per share into shares of the Company's Common Stock
effective upon the closing of the Company's initial public offering as if such
conversion occurred on January 1, 1998, or at date of original issuance, if
later. The resulting pro forma adjustment includes an increase of 4,760,964 in
the weighted average shares used to compute basic net loss per share for the
year ended December 31, 1998. Pro forma diluted net loss per share is computed
only using the pro forma weighted average number of common shares as common
stock equivalents are antidilutive.
Effective upon the closing of the Company's proposed initial public
offering, the outstanding shares of Series A and Series B convertible preferred
stock, Series C and D mandatorily redeemable preferred stock and warrants to
purchase Series D preferred stock will automatically convert into 428,635,
430,207, 4,069,936, 1,662,529 shares and 53,996, respectively, of Common Stock
(for a total of 6,645,303 shares). The pro forma effects of these transactions
are unaudited and have been reflected in the accompanying pro forma consolidated
balance sheet at December 31, 1998.
COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, Reporting Comprehensive Income, during
1998. The Company classifies items of "other comprehensive income" by their
nature in a financial statement and displays the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of the balance sheet. To date the Company has not
had any transactions that are required to be reported in comprehensive income.
F-10
<PAGE> 85
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEGMENT REPORTING
The FASB issued SFAS No. 131, Disclosure about Segments of an Enterprise
and Related Information. SFAS No. 131 establishes standards for the way public
business enterprises are to report information about operating segments in
annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports. The Company
has determined that it does not have any separately reportable business
segments.
4. SIGNIFICANT CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK
All cash deposits are held by two financial institutions and exceed
existing federal deposit insurance coverage limits at each institution.
Additionally, approximately 67% of all loans sold during the year ended December
31, 1998 were sold to one mortgage loan purchaser.
5. MORTGAGE LOANS HELD-FOR-SALE
The inventory of mortgage loans consists primarily of first trust deed
mortgages on residential properties located throughout the United States,
primarily concentrated in California. As of December 31, 1998, the Company has
net mortgage loans held-for-sale of $42,153,648, all of which are on accrual
basis. All mortgage loans held-for-sale are pledged as collateral for borrowings
at December 31, 1998 (see Note 8). There were no mortgage loans held-for-sale at
December 31, 1997.
6. FURNITURE AND EQUIPMENT
Furniture and equipment at December 31, 1997 and 1998 are recorded at cost
and consist of the following:
<TABLE>
<CAPTION>
1997 1998
-------- ----------
<S> <C> <C>
Computer equipment................................. $133,295 $ 929,486
Furniture and fixtures............................. 19,772 646,847
Equipment under capital leases..................... -- 998,642
Leasehold improvements............................. -- 144,541
-------- ----------
153,067 2,719,516
Accumulated depreciation and amortization.......... (6,860) (353,952)
-------- ----------
$146,207 $2,365,564
======== ==========
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1997
and 1998 was $6,860 and $347,092, respectively.
As of December 31, 1998, accumulated amortization for equipment under
capital leases was $203,447. There was no amortization for equipment under
capital leases as of December 31, 1997. All equipment under capital leases
serves as collateral for the related lease obligation (see Note 10).
F-11
<PAGE> 86
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES
There was no benefit for income taxes for the years ended December 31,
1996, 1997 and 1998 due to the Company's inability to recognize the benefit of
net operating losses. At December 31, 1998, the Company had net operating loss
carryforwards of approximately $10.0 million for both federal and state income
tax purposes. The federal carryforwards expire in the years 2011 through 2018.
For federal and state tax purposes, a portion of the Company's net operating
loss may be subject to certain limitations on annual utilization in case of
changes in ownership, as defined by federal and state tax laws.
The primary components of temporary differences, which give rise to
deferred taxes are as follows:
<TABLE>
<CAPTION>
1997 1998
--------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 466,197 $ 4,017,567
Other..................................................... 78,951 227,984
--------- -----------
Total deferred tax assets......................... 545,148 4,245,551
Valuation allowance......................................... (545,148) (4,245,551)
--------- -----------
$ -- $ --
========= ===========
</TABLE>
Management evaluates the recoverability of the deferred tax asset and the
level of the valuation allowance. Due to the uncertainty surrounding the
realization of the favorable tax attributes in future tax returns, the Company
has recorded a valuation allowance against its net deferred tax asset at both
December 31, 1997 and 1998. At such time as it is determined that it is more
likely than not that the deferred tax asset will be realizable, the valuation
allowance will be reduced.
8. WAREHOUSE LINES PAYABLE
As of December 31, 1998, the Company had a warehouse line of credit for
borrowings up to $15.0 million, with a temporary overdraft limit of $3.75
million, for interim financing of mortgage loans. The interest rate charged on
borrowings against the warehouse line of credit is variable based on the
commercial paper rate of the lender plus various percentage rates. Borrowings
are collateralized by the mortgage loans held-for-sale. The line of credit which
is uncommitted expires on June 30, 1999. Upon expiration, management believes it
will either renew its existing line or obtain sufficient additional lines. At
December 31, 1998, approximately $15.0 million was outstanding under this line.
Either the Company or the Lender can terminate the agreement at any time.
This line of credit agreement generally requires the Company to comply with
various financial and non-financial covenants. The Company was not in compliance
with certain covenants contained in the credit agreement and has obtained a
waiver from the lender.
Two of the Company's founding stockholders have provided guarantees for the
Company's obligations under this line of credit.
Additionally, the Company has a commitment to finance up to $35.0 million
of mortgage loan inventory pending sale of these loans to the ultimate mortgage
loan purchasers. This additional loan inventory financing is secured by the
related mortgage loans. The interest rate charged is LIBOR plus 1.25%. Either
the Company or the lender can terminate the agreement at any time. At December
31, 1998, approximately $26.1 million was outstanding under this financial
commit-
F-12
<PAGE> 87
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ment. This agreement includes various non-financial negative and affirmative
covenants. The Company was not in compliance with a covenant contained in the
agreement and has obtained a waiver from the lender.
9. NOTES PAYABLE
In December 1998, the Company entered into two credit facilities in the
aggregate principal amount of $5,000,000 for working capital and equipment
financing. The first credit facility in the amount of $1,500,000 has an interest
rate of prime plus 0.50% and expires in December 1999. The second credit
facility is a $3,500,000 term loan with an interest rate of prime plus 0.50% and
expires in September 2002. At December 31, 1998, $641,692 was outstanding under
these two credit facilities.
These credit facilities require the Company to meet various financial
covenants. The Company was not in compliance with one of these covenants and has
obtained a waiver from the lender.
10. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases office space under an operating lease which provides for
renewal in October 2003. Rent expense under operating leases amounted to
$77,037, $107,652 and $374,794 for the years ended December 31, 1996, 1997 and
1998, respectively.
During April 1998, the Company entered into a 48-month capital lease for
equipment (see Note 6). The Company's lease obligations under capital and
operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, CAPITAL OPERATING
------------------------ ---------- ----------
<S> <C> <C>
1999............................................ $ 300,408 $ 532,580
2000............................................ 332,068 665,797
2001............................................ 332,068 686,336
2002............................................ 162,424 706,874
2003............................................ -- 603,325
---------- ----------
Total minimum lease payments.................... 1,126,968 $3,194,912
==========
Less amount representing interest....................... (155,199)
----------
Present value of minimum lease payments................. 971,769
Less current portion of capital lease obligations....... (252,475)
----------
Long-term portion....................................... $ 719,294
==========
</TABLE>
Under the terms of the office lease, the Company maintains a $900,000
stand-by letter of credit in favor of the lessor. The Company has deposited
$255,000 as collateral for this letter of credit which is recorded as deposits
and other assets in the accompanying balance sheet.
FINANCIAL INSTRUMENT CONTINGENCIES
At December 31, 1998, the Company was party to commitments to fund loans at
interest rates previously agreed (locked) by both the lender and the borrower
for specified periods of time. Prior to originating loans under these
commitments, the Company evaluates each customer's credit and collateral
worthiness. The Company uses its best efforts to fund these locked loans within
the agreed-upon locked period. If the loan cannot be funded within this
F-13
<PAGE> 88
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
period, or if the Company is unable to secure a rate lock from the lender equal
to or less than the rate lock extended to the borrower, the Company will earn
less revenue than it anticipated at the time it locked with the borrower. At
December 31, 1998, the Company has provided locks to originate loans amounting
to approximately $99.1 million (the "locked pipeline"). In addition, the Company
had commitments, in its capacity as a broker, amounting to approximately $45.0
million.
At December 31, 1998, the Company has entered into non-mandatory forward
loan sale agreements, including commitments with lenders for brokered loans,
amounting to approximately $186.3 million (this includes the mortgage loans
held-for-sale at December 31, 1998, of approximately $42.2 million). The forward
loan sale agreements do not subject the Company to mandatory delivery and there
is no penalty if the Company does not deliver into the commitment. The Company
is exposed to the risk that these counterparties may be unable to meet the terms
of these sale agreements. The investors are well-established U.S financial
institutions; the Company does not require collateral to support these
commitments, and there has been no failure on the part of the counterparties to
these agreements to date.
LEGAL
In the normal course of business, the Company is at times subject to
pending and threatened legal actions and proceedings. After reviewing pending
and threatened actions and proceedings with counsel, management believes that
the outcome of such actions or proceedings is not expected to have a material
adverse effect on the financial position or results of operation of the Company.
MORTGAGE BANKERS' BLANKET BOND
At December 31, 1998, the Company carried a mortgage bankers' blanket bond
for $300,000 and carried errors and omissions insurance coverage for $2,000,000.
The premiums for the bond and insurance coverage are paid through May 27, 1999
and January 9, 1999, respectively.
MARKETING SERVICE AGREEMENTS
The Company has entered into several marketing service agreements with
third parties. Under these agreements the third parties will display the
Company's logo and loan information on their internet websites and provide
related marketing services. The Company pays for these services in minimum
monthly and quarterly installments plus, in some cases, a per view charge for
each time the information is displayed. Future minimum payments under these
agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1999.......................................... $5,463,300
2000.......................................... 2,309,800
2001.......................................... 212,000
Thereafter.................................... --
----------
$7,985,100
==========
</TABLE>
Two of these marketing agreements are with a stockholder of the Company.
The Company has incurred approximately $1.04 million in marketing service
expenses under these agreements with this stockholder during the year ended
December 31, 1998. There were no such agreements as of December 31, 1996 and
1997.
F-14
<PAGE> 89
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. STOCKHOLDERS' (DEFICIT) AND MANDATORILY REDEEMABLE PREFERRED STOCK
COMMON AND CONVERTIBLE PREFERRED STOCK
At December 31, 1998, the Company was authorized to issue 20,000,000 shares
of common stock and 11,765,167 shares of preferred stock. The Company has
designated 428,635 shares of the authorized preferred stock as Series A
preferred stock, 450,708 shares as Series B preferred stock, 4,467,912 shares as
Series C preferred stock, 4,467,912 shares as Series C-1 preferred stock and
1,950,000 shares as Series D preferred stock.
REDEMPTION
Series A and B preferred stock are not redeemable.
The Series C and C-1 preferred stock are redeemable at any time after
December 17, 2001 at the request of no less than 66.67% of the then outstanding
Series C and C-1 stockholders. The redemption price is equal to $1.22852 per
share plus 10% per annum on the amount payable plus all declared but unpaid
dividends. The redemption amounts are payable in three annual installments.
The Series D preferred stock is redeemable at any time after September 4,
2002 at the request of no less than 66.67% of the then outstanding Series D
stockholders and subject to the consent of a majority of the Series C and C-1
preferred stockholders. The redemption price is equal to $9.263 per share plus
10% per annum on the amount payable plus all declared but unpaid dividends. The
redemption amounts are payable in three annual installments.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the holders of preferred stock retain
liquidation preference over common stockholders. The liquidation amounts are
$0.22 per share of Series A, $0.96 per share of Series B, $1.22852 per share of
Series C, $1.22852 per share of Series C-1, and $9.263 per share of Series D
preferred stock.
The remaining assets and funds of the Company available for distribution
shall be distributed ratably among all holders of Series C, Series C-1, and
Series D preferred stock and common stock pro rata based on the number of shares
of common stock held by each holder (assuming conversion of all Series C, Series
C-1, and Series D preferred stock) until, with respect to holders of Series C
and Series C-1, such holders shall have received an aggregate of $3.6855 per
share and the holders of Series D preferred stock have received an aggregate of
$13.89 per share. Any remaining assets shall be distributed among the holders of
common stock on a pro rata basis.
In December 1997, the Company received approximately $1.8 million from a
venture capital fund for which the Company issued Series C preferred stock in
July 1998. This amount is reflected as advances payable in the 1997 balance
sheet.
VOTING RIGHTS
Holders of preferred stock are entitled to vote together with holders of
common stock. The number of votes granted to preferred shareholders is to equal
the number of full shares of common stock into which each share of preferred
stock could be converted as described in the Company's Articles of
Incorporation. Special voting rights are provided to Series C, C-1, and D
preferred stockholders for the election of Board of Director members.
F-15
<PAGE> 90
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
CONVERSION
At the option of the holder, each share of preferred stock is convertible
at any time into shares of common stock as determined by dividing the Issuance
Price by the Conversion Price. The Issuance Price and Conversion Price for the
preferred stock are as follows: $0.22 per share and $0.22 per share for Series
A; $0.96 per share and $0.96 per share for Series B; $1.22852 per share and
$1.22852 per share for Series C; $1.22852 per share and $1.22852 per share for
Series C-1; and $9.26 per share and $9.26 per share for Series D, respectively.
The Conversion Price for each series of preferred stock is subject to adjustment
as described in the Company's articles of incorporation. Additionally, Series C
preferred stock may be automatically converted to Series C-1 preferred stock in
the event such holders of Series C preferred stock do not exercise their right
of first refusal as set forth in the restated investors' rights agreement.
All preferred shares will automatically be converted into shares of common
stock upon the earlier of (i) a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of 1933
at an offering price of not less than $13.89 per share (as adjusted to reflect
any stock splits, stock dividends, or combinations), and an aggregate offering
price of $15.0 million; or (ii) the date specified by written consent or
agreement of (a) the holders of a majority of the then outstanding shares of
Series C and Series C-1 preferred stock, (b) the holders of a majority of the
then outstanding shares of Series D preferred stock and (c) the holders of a
majority of the then outstanding shares of preferred stock.
DIVIDENDS
Holders of preferred stock are entitled to receive, when and if declared by
the Board of Directors, dividends at the rate of $0.02 per share of Series A,
$0.096 per share of Series B, $0.122852 per share of Series C, $0.122852 per
share of Series C-1 and $0.926 per share of Series D, respectively, per year,
payable in preference to any payment of any dividend on common stock. After such
dividend payment, any additional dividends declared shall be payable entirely to
the holders of Series C and Series C-1 preferred stock and common stock on a pro
rata basis. The dividends are non-cumulative.
WARRANTS
In February 1998, the Company issued warrants to purchase up to 15,000
shares of Series C preferred stock at an exercise price of $1.225 per share to a
lender in connection with a capital lease. In addition, in connection with two
separate strategic alliance agreements, the Company issued warrants to purchase
200,000 shares of Series C preferred stock at an exercise price of $2.40 per
share in May 1998 and 53,996 shares of Series D preferred stock at an exercise
price of $9.26 per share in September 1998.
As of December 31, 1998, no warrants had been exercised.
12. STOCK OPTION PLAN AND UNEARNED COMPENSATION
The Company has reserved up to 1,500,000 shares of common stock issuable
upon exercise of options issued to certain employees, directors, and consultants
pursuant to the Company's 1997 Stock Option Plan. Such options are exercisable
at prices established at the date of grant, and have a term of ten years. Each
optionee has a vested interest in 25% of the option shares upon the optionee's
completion of one year of service measured from the grant date. The balance will
vest in equal successive monthly installments of 1/48 upon the optionee's
completion
F-16
<PAGE> 91
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
of each of the next 36 months of service. If an option holder ceases to be
employed by the Company, vested options held at the date of termination may be
exercised within three months. As of December 31, 1997 and 1998, 611,883 and
1,027,209 options have been granted and 288,117 and 318,002 options were still
available for grant under the Company's stock option plan. There were no options
granted in 1996.
Options granted during the years ended December 31, 1997 and 1998 resulted
in unearned compensation of $0 and $5.5 million, respectively. The amounts
recorded represent the difference between the exercise price and the deemed fair
value of the Company's common stock for shares subject to the options granted.
The amortization of deferred compensation is being charged to operations over
the four-year vesting period of the options. For the year ended December 31,
1998, the amortization of unearned compensation was $1,251,000.
Options under the plan may be either Incentive Stock Options, as defined
under Section 422 of the Internal Revenue Code, or Nonstatutory Options.
The following information concerning the Company's stock option plan is
provided in accordance with Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123). As permitted by SFAS 123,
the Company accounts for such plans in accordance with APB No. 25 and related
interpretations. The fair value of each stock option is estimated on the date of
grant using the minimum value option-pricing model with the following weighted
average assumptions.
<TABLE>
<S> <C>
Expected life............................................... 5 years
Risk-free interest rate..................................... 5.00%
Expected dividend rate...................................... 0.00%
Estimated volatility........................................ 0.00%
</TABLE>
As a result of the above assumptions, the weighted average fair value of
options granted during the years ending December 31, 1997 and 1998 was $0.42 and
$6.10, respectively.
The following pro forma net loss information has been prepared as if the
Company had followed the provisions of SFAS No. 123:
<TABLE>
<CAPTION>
1997 1998
----------- ------------
<S> <C> <C>
Net loss:
As reported................................. $(1,374,493) $(11,172,054)
Pro forma................................... $(1,389,583) $(11,228,315)
Net loss per share:
As reported................................. $ (0.35) $ (2.95)
Pro-forma................................... $ (0.35) $ (2.96)
</TABLE>
F-17
<PAGE> 92
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A summary of the status of the Company's stock option plan as of December
31, 1997 and 1998 and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
1997 1998
-------------------------- --------------------------
EXERCISE NUMBER EXERCISE
NUMBER OF PRICE PER OF PRICE PER
SHARES SHARE SHARES SHARE
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Outstanding at beginning of
year............................ -- -- 611,883 $0.15 - $1.00
Granted......................... 611,883 $0.15 - $1.00 1,027,209 $0.65 - $4.00
Exercised....................... -- -- (44,174) $0.15 - $0.65
Terminated/forfeited............ -- -- (412,920) $0.15 - $4.00
------- ------------- --------- -------------
Outstanding at end of year........ 611,883 $0.15 - $1.00 1,181,998 $0.15 - $4.00
======= ============= ========= =============
Options exercisable at end of
year............................ 12,262 $ 0.15 81,457 $0.15 - $1.00
======= ============= ========= =============
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
RANGE OF NUMBER AVERAGE REMAINING NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE EXERCISABLE EXERCISE PRICE
- --------------- ----------- -------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.15 196,894 $0.15 8.52 73,862 $0.15
$0.65 526,500 $0.65 9.19 6,504 $0.65
$1.00 77,645 $1.00 9.42 1,091 $1.00
$3.00 135,000 $3.00 9.57 -- $3.00
$4.00 245,959 $4.00 9.81 --
--------- ------
1,181,998 81,457
========= ======
</TABLE>
13. REVENUES AND OTHER INCOME, NET
The following table provides the components of revenues for the years ended
December 31,
<TABLE>
<CAPTION>
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Brokerage fees..................... $892,995 $1,042,729 $4,456,070
Gain on sale of loans.............. -- -- 1,709,195
Interest income on loans........... -- -- 666,281
-------- ---------- ----------
Total revenues............. $892,995 $1,042,729 $6,831,546
======== ========== ==========
</TABLE>
The following table provides the components of other income, net for the
years ended December 31,
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Interest on short-term investments.................... -- $ 4,629 $237,187
Interest expense on non-warehouse facility
borrowings.......................................... $(3,438) (7,036) (63,861)
------- ------- --------
$(3,438) $(2,407) $173,326
======= ======= ========
</TABLE>
F-18
<PAGE> 93
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
14. OPERATING EXPENSES
The following table provides the detail of the Company's operating expenses
classified by the following categories:
<TABLE>
<CAPTION>
1996 1997 1998
-------- ---------- -----------
<S> <C> <C> <C>
Compensation and benefits................... $378,149 $ 923,766 $ 7,387,104
Processing costs............................ 394,977 624,210 1,219,869
Advertising and marketing................... 11,430 360,524 5,118,727
Professional services....................... 11,201 125,010 307,854
Occupancy costs............................. 77,037 107,652 374,794
Computer and internet....................... 23,775 42,693 248,929
General and administrative.................. 103,032 230,960 1,510,618
Interest expense on warehouse borrowings.... -- -- 758,031
Amortization of unearned compensation....... -- -- 1,251,000
-------- ---------- -----------
Total operating expenses.......... $999,601 $2,414,815 $18,176,926
======== ========== ===========
</TABLE>
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount for which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced liquidation sale. Fair value estimates are subjective in
nature and involve uncertainties and therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
The fair value of mortgage loans held-for-sale including the related
commitments to sell those mortgage loans exceeds the carrying value of the
mortgage loans held-for-sale by approximately $300,000. The fair value of
commitments to originate mortgage loans and the related commitments to sell
those loans resulted in an unrecognized gain of approximately $500,000. The fair
value of mortgage loans held-for-sale are estimated using quoted market prices
for similar loans or prices for mortgage backed securities backed by similar
loans and the fair value of the commitments to originate and commitments to sell
mortgage loans are estimated using quoted market prices.
The carrying value of the Company's other financial instruments, including
cash and cash equivalents, accounts receivable and all other financial assets
and liabilities approximate their fair value because of the short-term maturity
of those instruments or because they carry interest rates which approximate
market.
16. SUBSEQUENT EVENTS
INITIAL PUBLIC OFFERING
In March 1999, the Company's Board of Directors authorized the Company to
file a registration statement with the Securities and Exchange Commission for
the purpose of the initial public offering of the Company's common stock. Upon
the completion of the offering, if requirements set forth in the Certificate of
Incorporation are met, all of the Company's outstanding preferred stock will be
converted into shares of common stock, and all such outstanding shares of
preferred stock will be cancelled and retired. Upon the conversion of the
preferred stock, all rights to accrued and unpaid dividends are waived.
F-19
<PAGE> 94
E-LOAN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WAREHOUSE AND OTHER CREDIT LINES PAYABLE
During January 1999, the Company entered into an agreement for an
additional uncommitted warehouse line of credit for borrowings up to $40,000,000
for interim financing of mortgage loans. The interest rate charged on borrowings
against the warehouse line of credit is LIBOR plus 1.85%. Borrowings are
collateralized by the mortgage loans held-for-sale. This agreement includes
various non-financial negative and affirmative covenants. Either the Company or
the lender can terminate the agreement at any time. This line of credit expires
in February 2000.
During March 1999, the Company obtained a commitment of $5.0 million for a
revolving line of credit capital facility. The interest rate will be based on
the prime rate and the facility will expire at the earlier of March 2000 or the
closing of the Company's initial public offering. Two of the Company's founding
stockholders have provided guarantees for the Company's obligation under this
line of credit.
STOCK OPTION PLAN
On January 13, 1999, the Board of Directors of the Company voted to
increase the authorized number of common stock options available for grant under
the 1997 Stock Option Plan from 1,500,000 to 2,500,000. During January and
February of 1999, the Company issued 833,716 additional stock options to
employees. These options were issued at exercise prices less than the fair value
of the common stock at the date of the grant. As a result the Company expects to
record unearned compensation amount of approximately $35.0 million.
Approximately $4.2 million of this amount will be recognized as compensation
expense for the quarter ending March 31, 1999.
SERIES D PREFERRED STOCK PURCHASE
During February 1999, the Company sold 40,000 shares of Series D
convertible and manditorily redeemable preferred stock at a price of $9.26 per
share for aggregate proceeds of $370,520 to an officer of the Company in
connection with his employment by the Company. This price was below the fair
value of the common stock and will result in a compensation charge equal to the
difference between the fair value of the Series D preferred stock and the price
paid for these shares. This charge will be recognized during 1999.
F-20
<PAGE> 95
UNDERWRITING
E-LOAN and the Underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., Donaldson, Lufkin
& Jenrette Securities Corporation and Hambrecht & Quist LLC are the
representatives of the underwriters.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Goldman, Sachs & Co.........................................
Donaldson, Lufkin, & Jenrette Securities Corporation........
Hambrecht & Quist LLC.......................................
Total.............................................
</TABLE>
------------------------
If the underwriters sell more than the total number set forth in the table
above, the underwriters have an option to buy up to an additional
shares from E-LOAN to cover such sales. They may exercise that
option for 30 days. If any shares are purchased pursuant to this option, the
underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.
The following tables show the per share and total underwriting discounts
and commissions to be paid to the underwriters by E-LOAN. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
PAID BY E-LOAN
----------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per Share............................. $ $
Total....................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
public offering price, the representatives may change the offering price and the
other selling terms.
E-LOAN has agreed with the underwriters not to dispose of or hedge any of
its common stock or securities convertible into or exchangeable for shares of
common stock during the period from the date of this prospectus continuing
through the date 180 days after the date of this prospectus, except with the
prior written consent of the representatives. This agreement does not apply to
any grants under E-LOAN's existing employee benefit plans. See "Shares Available
for Future Sale" for a discussion of certain transfer restrictions.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among E-LOAN and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be E-LOAN's historical performance, estimates of the business
potential and earnings prospects of E-LOAN, an assessment of E-LOAN's management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.
U-1
<PAGE> 96
Application has been made for the quotation of the common stock on the
Nasdaq National Market under the symbol "EELN".
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in this offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while this offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
The underwriters have reserved for sale, at the initial public offering
price, up to % of the common stock offered by this prospectus for certain
individuals designated by E-LOAN who have expressed an interest in purchasing
such shares of common stock in the offering. The number of shares available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares not so purchased will be offered by
the underwriters to the general public on the same basis as other shares offered
hereby.
E-LOAN estimates that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $ .
E-LOAN has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
U-2
<PAGE> 97
[INSIDE BACK COVER]
<PAGE> 98
- ----------------------------------------------------------
- ----------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 1
Risk Factors............................ 5
Use of Proceeds......................... 20
Dividend Policy......................... 20
Capitalization.......................... 21
Dilution................................ 23
Selected Consolidated Financial Data.... 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 25
Business................................ 35
Management.............................. 52
Certain Transactions.................... 61
Principal Stockholders.................. 63
Description of Capital Stock............ 65
Shares Available for Future Sale........ 69
Legal Matters........................... 70
Experts................................. 70
Available Information................... 70
Index to Financial Statements........... F-1
Underwriting............................ U-1
</TABLE>
Through and including , 1999 (25 days after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as underwriter and with respect to an unsold allotment or subscription.
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Shares
E-LOAN, INC.
Common Stock
----------------------
[LOGO GOES HERE]
----------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
HAMBRECHT & QUIST
----------------------
E*TRADE GROUP, INC.
DLJDIRECT INC.
Facilitators of Internet distribution
- ----------------------------------------------------------
- ----------------------------------------------------------
<PAGE> 99
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discounts, payable by the Registrant in connection with the sale of
the securities being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq/ NMS listing fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 15,346
NASD Filing Fee............................................. 6,020
Nasdaq National Market Listing Fee.......................... 50,000
Printing Costs.............................................. 150,000
Legal Fees and Expenses..................................... 400,000
Accounting Fees and Expenses................................ 200,000
Blue Sky Fees and Expenses.................................. 10,000
Transfer Agent and Registrar Fees........................... 10,000
Miscellaneous............................................... 158,634
----------
Total..................................................... $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. Article VII of our current
Certificate of Incorporation (Exhibit 3.1 hereto) and Article VI of our current
Bylaws (Exhibit 3.3 hereto) provide for indemnification of our directors,
officers, employees and other agents to the maximum extent permitted by Delaware
law. In addition, we have entered into Indemnification Agreements (Exhibit 10.1
hereto) with our officers and directors. The Underwriting Agreement (Exhibit
1.1) also provides for cross-indemnification among E-LOAN and the Underwriters
with respect to certain matters, including matters arising under the Securities
Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since our incorporation in August 1996, we have sold and issued the
following securities:
1. On September 30, 1996 we issued 4,000,000 shares of common stock to two
founders for an aggregate consideration of $4,000.00. On September 30,
1996 we also issued 85,000 shares of common stock to two investors for
an aggregate consideration of $85.00
2. On June 10, 1997 we issued 428,635 shares of Series A preferred stock
to nine investors for an aggregate consideration of $94,299.70.
3. On December 17, 1997 we issued 430,207 shares of Series B preferred
stock to twenty-two investors for an aggregate consideration of
$412,998.72.
4. On December 19, 1997 we issued 4,069,936 shares of Series C preferred
stock to two accredited investors for an aggregate consideration of
$4,999,997.77.
5. On March 4, 1998 we issued a warrant for 15,000 shares of Series C
preferred stock to an equipment lessor in connection with a Master
Lease Agreement. Such warrants have an exercise price of $2.00 per
share.
II-1
<PAGE> 100
6. On March 20, 1998 we issued a warrant for 200,000 shares of Series C
preferred stock to one of our marketing partners pursuant to a
Marketing Agreement. Such warrants had an exercise price of $2.40 per
share and were exercised on January 13, 1999 for aggregate
consideration of $480,000.00
7. On April 16, 1998 we issued 500 shares of common stock to one of our
directors for services rendered valued at $325.00.
8. On June 1, 1998 we issued 26,246 shares of common stock to one investor
for an aggregate consideration of $19,684.50.
9. On September 4, 1998 we issued 1,662,529 shares of Series D preferred
stock to twelve accredited investors for an aggregate consideration of
$15,400,006.14.
10. On September 4, 1998, we issued a warrant for 53,938 shares of Series D
preferred stock to one of our marketing partners pursuant to a
Marketing Agreement. Such warrant has an exercise price of $9.27 per
share.
11. On February 24, 1999, we issued 40,000 shares of Series D preferred
stock to an employee for an aggregate consideration of $370,520 paid in
cash.
12. Since our incorporation, we have issued an aggregate of 2,472,852
options to purchase our common stock to employees, directors, and
consultants with exercise prices ranging from $0.15 to $6.00.
The issuance of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such
Securities Act as transactions by an issuer not involving any public offering.
In addition, certain issuances described in Item 12 were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and warrants issued
in such transactions. All recipients had adequate access, through their
relationships with us, to information about us.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of E-LOAN as currently in
effect.
3.2 Form of Restated Certificate of Incorporation of E-LOAN to
be filed immediately following the closing of the offering
made under this Registration Statement.
3.3 Bylaws of E-LOAN.
3.4 Form of Bylaws of E-LOAN to be adopted immediately following
the closing of the offering made under this Registration
Statement.
4.1* Specimen Common Stock Certificate.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement between the Registrant and
each of its directors and officers.
10.2 1997 Stock Plan and form of agreements thereunder.
10.3 1999 Employee Stock Purchase Plan and form of agreements
thereunder.
10.4 Restated Investor Rights Agreement dated September 4, 1998
among E-LOAN and certain investors.
10.5 Warrant Agreement to Purchase Shares of the Series C
Preferred Stock of E-Loan, Inc. dated March 4, 1998.
10.6* Employment Agreement with Joseph Kennedy dated
, 1999.
10.7+ Marketing Agreement with DLJdirect, Inc. dated September 4,
1998.
10.8+ Co-Marketing Agreement with E*Trade Group, Inc. dated March
26, 1998.
</TABLE>
II-2
<PAGE> 101
<TABLE>
<C> <S>
10.9+ Marketing Agreement with MarketWatch.com dated February 8,
1999.
10.10 Marketing Agreement with Prism Mortgage Company dated July
6, 1998.
10.11+ License Agreement with Yahoo!, Inc. dated September 1998 and
amended in March 1999.
10.12 Warehousing Credit and Security Agreement with Bank United,
a federal savings bank, dated February 3, 1999.
10.13 Broker Agreement with Citicorp Mortgage, Inc. dated
September 23, 1997.
10.14+ Underwriting Review Agreement with CMAC Service Company
dated September 3, 1998.
10.15 Warehouse Credit Agreement with Cooper River Funding, Inc.
and GE Capital Mortgage Services, Inc. dated June 24, 1998.
10.16 Loan Purchase Agreement with Countrywide Home Loans, Inc.
dated September 25, 1998.
10.17 Conventional Loan Purchase Agreement with Crestar Mortgage
Corporation dated July 1, 1998.
10.18 GMAC Mortgage Corporation Seller's Agreement for Residential
Mortgage Loans with GMAC Mortgage Corporation dated July 1,
1998.
10.19 Mortgage Loan Purchase and Sale Agreement with Greenwich
Capital Financial Products, Inc. dated September 25, 1998.
10.20 License, Staffing, Purchase and Sale Agreement with NetB@nk
dated October 1, 1998.
10.21 Mortgage Loan Processing Agreement with NetB@nk dated
October 1, 1998.
10.22 Wholesale Mortgage Purchase Agreement with PHH Mortgage
Services Corporation dated June 1, 1998.
10.23 Underwriting Services Agreement with PMI Mortgage Services
Co. Dated June 12, 1998.
10.24 Mortgage Purchase Agreement with Resource Bancshares
Mortgage Group, Inc. dated May 1, 1998.
10.25 Mortgage Selling and Servicing Contract with Federal
National Mortgage Association dated February 12, 1999.
10.26 Multi-Tenant Office Triple Net Lease with Creekside South
Trust dated August 19, 1998.
10.27 Alliance Agreement between E-Loan, Inc., E-Loan Europe BV
and Stater BV dated March 19, 1999.
10.28 Lease Agreement between JTC and Palo Alto Funding Group,
Inc. dated June 20, 1996.
10.29 Mortgage Loan Origination Agreement with Chase Home Mortgage
Corporation dated November 30, 1992.
10.30 Correspondent Agreement with Citicorp Mortgage, Inc. dated
June 15, 1998.
10.31 Conventional Wholesale Mortgage Purchase Agreement with
Colonial Mortgage Company dated September 1, 1998.
10.32 Lender Associate Agreement with GreenPoint Mortgage dated
November 9, 1998.
10.33 Correspondent Broker Agreement with New America Financial,
Inc.
10.34 Correspondent Mortgage Services Agreement with PHH Mortgage
Services Corporation dated May 20, 1998.
10.35 Correspondent Purchase Agreement with Prism Mortgage Company
dated March 22, 1998.
10.36 Wholesale Lending Agreement with Union Federal Savings Bank
of Indianapolis dated March 6, 1998.
10.37 Master Lease Agreement with Comdisco, Inc. dated March 4,
1998.
10.38 Loan and Security Agreement with Silicon Valley Bank dated
December 9, 1998.
10.39 Internet Data Center Services Agreement with Exodus
Communications, Inc. dated November 10, 1997.
</TABLE>
II-3
<PAGE> 102
<TABLE>
<C> <S>
10.40 Marketing Agreement with PHH Mortgage Services Corporation
dated January 19, 1998.
11.1 Statement regarding computation of per share earnings.
21.1 List of Subsidiary of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment requested.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering
thereof.
II-4
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Palo Alto, State of
California on March 24, 1999.
By: /s/ CHRIS LARSEN
------------------------------------
Chris Larsen
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Chris
Larsen and Frank Siskowski, and each of them, as his or her attorney-in-fact,
with full power of substitution, for him or her in any and all capacities, to
sign any and all amendments to this registration statement (including
post-effective amendments), and any and all registration statements filed
pursuant to Rule 462 under the Securities Act of 1933, as amended, in connection
with or related to the offering contemplated by this registration statement and
its amendments, if any, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said registration statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CHRIS LARSEN Chief Executive Officer and Director March 24, 1999
- ------------------------------------ (Principal Executive Officer)
Chris Larsen
/s/ JANINA PAWLOWSKI President and Director March 24, 1999
- ------------------------------------
Janina Pawlowski
/s/ FRANK SISKOWSKI Chief Financial Officer March 24, 1999
- ------------------------------------ (Principal Financial and Accounting Officer)
Frank Siskowski
/s/ IRA M. EHRENPREIS Director March 24, 1999
- ------------------------------------
Ira M. Ehrenpreis
/s/ ROBERT C. KAGLE Director March 24, 1999
- ------------------------------------
Robert C. Kagle
/s/ TIM KOOGLE Director March 24, 1999
- ------------------------------------
Tim Koogle
/s/ WADE RANDLETT Director March 24, 1999
- ------------------------------------
Wade Randlett
</TABLE>
II-5
<PAGE> 104
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ------------------------------------------------------------ ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of E-LOAN as currently in
effect.
3.2 Form of Restated Certificate of Incorporation of E-LOAN to
be filed immediately following the closing of the offering
made under this Registration Statement.
3.3 Bylaws of E-LOAN.
3.4 Form of Bylaws of E-LOAN to be adopted immediately following
the closing of the offering made under this Registration
Statement.
4.1* Specimen Common Stock Certificate.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement between the Registrant and
each of its directors and officers.
10.2 1997 Stock Plan and form of agreements thereunder.
10.3 1999 Employee Stock Purchase Plan and form of agreements
thereunder.
10.4 Restated Investor Rights Agreement dated September 4, 1998
among E-LOAN and certain investors.
10.5 Warrant Agreement to Purchase Shares of the Series C
Preferred Stock of E-Loan, Inc. dated March 4, 1998.
10.6* Employment Agreement with Joseph Kennedy dated
, 1999.
10.7+ Marketing Agreement with DLJdirect, Inc. dated September 4,
1998.
10.8+ Co-Marketing Agreement with E*Trade Group, Inc. dated March
26, 1998.
10.9+ Marketing Agreement with MarketWatch.com dated February 8,
1999.
10.10 Marketing Agreement with Prism Mortgage Company dated July
6, 1998.
10.11+ License Agreement with Yahoo!, Inc. dated September 1998 and
amended in March 1999.
10.12 Warehousing Credit and Security Agreement with Bank United,
a federal savings bank, dated February 3, 1999.
10.13 Broker Agreement with Citicorp Mortgage, Inc. dated
September 23, 1997.
10.14+ Underwriting Review Agreement with CMAC Service Company
dated September 3, 1998.
10.15 Warehouse Credit Agreement with Cooper River Funding, Inc.
and GE Capital Mortgage Services, Inc. dated June 24, 1998.
10.16 Loan Purchase Agreement with Countrywide Home Loans, Inc.
dated September 25, 1998.
10.17 Conventional Loan Purchase Agreement with Crestar Mortgage
Corporation dated July 1, 1998.
10.18 GMAC Mortgage Corporation Seller's Agreement for Residential
Mortgage Loans with GMAC Mortgage Corporation dated July 1,
1998.
10.19 Mortgage Loan Purchase and Sale Agreement with Greenwich
Capital Financial Products, Inc. dated September 25, 1998.
10.20 License, Staffing, Purchase and Sale Agreement with NetB@nk
dated October 1, 1998.
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ------------------------------------------------------------ ------------
<C> <S> <C>
10.21 Mortgage Loan Processing Agreement with NetB@nk dated
October 1, 1998.
10.22 Wholesale Mortgage Purchase Agreement with PHH Mortgage
Services Corporation dated June 1, 1998.
10.23 Underwriting Services Agreement with PMI Mortgage Services
Co. Dated June 12, 1998.
10.24 Mortgage Purchase Agreement with Resource Bancshares
Mortgage Group, Inc. dated May 1, 1998.
10.25 Mortgage Selling and Servicing Contract with Federal
National Mortgage Association dated February 12, 1999.
10.26 Multi-Tenant Office Triple Net Lease with Creekside South
Trust dated August 19, 1998.
10.27 Alliance Agreement between E-Loan, Inc., E-Loan Europe BV
and Stater BV dated March 19, 1999.
10.28 Lease Agreement between JTC and Palo Alto Funding Group,
Inc. dated June 20, 1996.
10.29 Mortgage Loan Origination Agreement with Chase Home Mortgage
Corporation dated November 30, 1992.
10.30 Correspondent Agreement with Citicorp Mortgage, Inc. dated
June 15, 1998.
10.31 Conventional Wholesale Mortgage Purchase Agreement with
Colonial Mortgage Company dated September 1, 1998.
10.32 Lender Associate Agreement with GreenPoint Mortgage dated
November 9, 1998.
10.33 Correspondent Broker Agreement with New America Financial,
Inc.
10.34 Correspondent Mortgage Services Agreement with PHH Mortgage
Services Corporation dated May 20, 1998.
10.35 Correspondent Purchase Agreement with Prism Mortgage Company
dated March 22, 1998.
10.36 Wholesale Lending Agreement with Union Federal Savings Bank
of Indianapolis dated March 6, 1998.
10.37 Master Lease Agreement with Comdisco, Inc. dated March 4,
1998.
10.38 Loan and Security Agreement with Silicon Valley Bank dated
December 9, 1998.
10.39 Internet Data Center Services Agreement with Exodus
Communications, Inc. dated November 10, 1997.
10.40 Marketing Agreement with PHH Mortgage Services Corporation
dated January 19, 1998.
11.1 Statement regarding computation of per share earnings.
21.1 List of Subsidiary of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment requested.
<PAGE> 1
EXHIBIT 1.1
E-LOAN, INC.
COMMON STOCK
( PAR VALUE)
----------
UNDERWRITING AGREEMENT
___________ ,1999
Goldman, Sachs & Co.,
Donaldson, Lufkin, & Jenrette Securities
Corporation
Hambrecht & Quist LLC
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
2765 Sand Hill Road,
Menlo Park, California 94025
Ladies and Gentlemen:
E-Loan, Inc. a Delaware corporation (the "Company"), proposes, subject
to the terms and conditions stated herein, to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of _________ shares
(the "Firm Shares") and, at the election of the Underwriters, up to _________
additional shares (the "Optional Shares") of Common Stock ("Stock") of the
Company (the Firm Shares and the Optional Shares that the Underwriters elect to
purchase pursuant to Section 2 hereof being collectively called the "Shares").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-____________)
(the "Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in the
form heretofore delivered to you, and, excluding exhibits thereto, to you for
each of the other Underwriters, have been declared effective by the Commission
in such form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and no
stop order suspending the effectiveness of the Initial Registration Statement,
any post-effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a) of
the rules and regulations of the
<PAGE> 2
Commission under the Act is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective, each as amended at
the time such part of the Initial Registration Statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or hereafter
becomes effective, are hereinafter collectively called the "Registration
Statement"; and such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus").
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement and
any amendment thereto, and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(d) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included in the Prospectus
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus;
(e) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such
-2-
<PAGE> 3
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries;
(f) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is subject to
no material liability or disability by reason of the failure to be so qualified
in any such jurisdiction; and each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation;
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the Stock contained in the Prospectus; and all
of the issued shares of capital stock of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and (except for directors' qualifying shares) are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities or claims;
(h) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(i) The issue and sale of the Shares by the Company and the compliance
by the Company with all of the provisions of this Agreement and the consummation
of the transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the Company
of the transactions contemplated by this Agreement, except (i) for consents in
certain states where the Company is licensed as a broker, which consents have
been obtained, (ii) the registration under the Act of the Shares and (iii) such
consents, approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters;
(j) Neither the Company nor any of its subsidiaries is in violation of
its Certificate of Incorporation or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it or any of
its properties may be bound;
(k) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock, and
-3-
<PAGE> 4
under the caption "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate and
complete;
(l) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material adverse
effect on the current or future consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries; and, to the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(m) The Company is not and, after giving effect to the offering and sale
of the Shares, will not be an "investment company", as such term is defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act");
(n) Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075, Florida Statutes;
(o) To the Company's knowledge, PricewaterhouseCoopers LLP, who have
certified certain financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder;
(p) The Company has reviewed its operations and that of its subsidiaries
and any third parties with which the Company or any of its subsidiaries has a
material relationship to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries will be affected by the Year 2000
Problem. As a result of such review, the Company has no reason to believe, and
does not believe, that the Year 2000 Problem will have a material adverse effect
on the general affairs, management, the current or future consolidated financial
position, business prospects, stockholders' equity or results of operations of
the Company and its subsidiaries, or result in any material loss or interference
with the Company's business or operations. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of mechanical or
electrical systems of any kind will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as effectively as in the
case of dates or time periods occurring prior to January 1, 2000;
(q) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to banking and
mortgage banking, including any provisions of the Truth in Lending Act and
Regulation Z, the Home Ownership and Equity Protection Act of 1994, the Equal
Credit Opportunity Act and Regulation B, the Fair Housing Act, the Fair Credit
Reporting Act, the Real Estate Settlement Procedures Act and Regulation X, the
Home Mortgage Disclosure Act of 1975 and Regulation C, or the rules and
regulations promulgated thereunder, except for such violations which, singly or
in the aggregate, would not have a material adverse effect on the business,
prospects, financial condition or results of operation of the Company and its
subsidiaries, taken as a whole.
(r) The Company owns, or possesses adequate rights to use, all material
trademarks, service marks, trade names, trademark registrations, service mark
registrations, domain names and copyrights necessary for the conduct of its
business and, except as set forth in the Prospectus, has no reason to believe
that the conduct of its business will conflict with, and has
-4-
<PAGE> 5
not received any notice of any claim of conflict with any such rights of others
except as would not have a material adverse effect on the business, financial
condition, results of operations or prospects of the Company; and, to the
Company's knowledge, neither the Company nor any of its subsidiaries have
infringed or are infringing any trademarks, services marks, trade names,
trademark registrations, service mark registrations, domain names or copyrights,
which infringement could reasonably be expected to result in any material
adverse change, or in any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries;
(s) The Company owns, or possesses adequate rights to use, all material
patents necessary for the conduct of its business; to the Company's knowledge,
no valid Unites States patent is or would be infringed by the activities of the
Company, except as would not have a material adverse effect on the business,
financial condition, results of operations or prospects of the Company; there
are no actions, suits or judicial proceedings pending relating to patents or
proprietary information to which the Company is a party or of which any property
of the Company is subject, and, to the knowledge of the Company, no actions,
suits or judicial proceedings are threatened by governmental authorities or,
except as set forth in the Prospectus, others, in each case except as would not
result in any material adverse change, or in any development involving a
prospective material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries; except as set forth or incorporated by
reference in the Prospectus or as would not result in any material adverse
change, or in any development involving a prospective material adverse change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, the Company is not aware of any claim by others that the Company
is infringing or otherwise violating the patents or other intellectual property
of others and is not aware of any rights of third parties to any of the
Company's patent applications, licensed patents or licenses which could affect
materially the use thereof by the Company;
(t) The Company carries, or is covered by, insurance that, to the
Company's knowledge, is customary for companies similarly situated and engaged
in similar businesses in similar industries;
(u) There are no contracts or other documents which are required to be
described in the Prospectus or to be filed as exhibits to the Initial
Registration Statement by the Act which are not so described or filed;
(v) No labor disturbance by the employees of the Company exists or, to
the knowledge of the Company, is imminent which might be expected to have a
material adverse effect on the business, financial condition, results of
operations or prospects of the Company;
(w) The Company has no material subsidiaries; and
(x) The Company has obtained and is operating in compliance with all
authorizations, licenses, permits, consents and certificates of federal and
state banking and mortgage banking regulatory agencies material to the conduct
of its business, all of which are valid and in full force and effect, and the
Company has not received any notice of proceedings relating to the revocation or
modification of any such authorization, license, permit, consent or certificate.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $______ , the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto
-5-
<PAGE> 6
and (b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Shares as provided below, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the purchase price
per share set forth in clause (a) of this Section 2, that portion of the number
of Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction, the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to ____________ Optional Shares, at the purchase price per
share set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as Goldman, Sachs & Co. may request upon at least forty-eight
hours' prior notice to the Company shall be delivered by or on behalf of
the Company to Goldman, Sachs & Co., through the facilities of the
Depository Trust Company ("DTC") for the account of such Underwriter,
against payment by or on behalf of such Underwriter of the purchase
price therefor by wire transfer of Federal (same-day) funds to the
account specified by the Company to Goldman, Sachs & Co. at least
forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging
at least twenty-four hours prior to the Time of Delivery (as defined
below) with respect thereto at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of such delivery
and payment shall be, with respect to the Firm Shares, 9:30 a.m., New
York City time, on _______________ , 1999 or such other time and date as
Goldman, Sachs & Co. and the Company may agree upon in writing, and,
with respect to the Optional Shares, 9:30 a.m., New York time, on the
date specified by Goldman, Sachs & Co. in the written notice given by
Goldman, Sachs & Co. of the Underwriters' election to purchase such
Optional Shares, or such other time and date as Goldman, Sachs & Co. and
the Company may agree upon in writing. Such time and date for delivery
of the Firm Shares is herein called the "First Time of Delivery", such
time and date for delivery of the Optional Shares, if not the First Time
of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross receipt for the Shares and any additional documents requested by
the Underwriters pursuant to Section 7(k) hereof, will be delivered at
the offices of Wilson Sonsini Goodrich & Rosati, 650 Page
-6-
<PAGE> 7
Mill Road, Palo Alto, California 94304 (the "Closing Location"), and the
Shares will be delivered at the Designated Office, all at such Time of
Delivery. A meeting will be held at the Closing Location at _____ p.m.,
New York City time, on the New York Business Day next preceding such
Time of Delivery, at which meeting the final drafts of the documents to
be delivered pursuant to the preceding sentence will be available for
review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to
close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you with copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or
of any request by the Commission for the amending or supplementing of
the Registration Statement or Prospectus or for additional information;
and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, promptly to use its
best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to
time, to furnish the Underwriters with copies of the Prospectus in New
York City in such quantities as you may reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration
of nine months after the time of issue of the Prospectus in connection
with the offering or sale of the Shares and if at such time any event
shall have occurred as a result of which the Prospectus as then amended
or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such period to amend or
supplement the Prospectus in order to comply with the Act, to notify you
and upon your request to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as
-7-
<PAGE> 8
you may from time to time reasonably request of an amended Prospectus or
a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter, to
prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a) of
the Act and the rules and regulations thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than (i) pursuant to employee stock option plans
existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement[,
or (ii) pursuant to an acquisition transaction, provided that any person
who acquires securities of the Company in this manner agrees not to
offer, sell, contract to sell or otherwise dispose of such securities
for the period of time beginning from the date of acquisition of such
securities and continuing to and including the date 180 days after the
date of the Prospectus]), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries certified by independent
public accountants) and, as soon as practicable after the end of each of
the first three quarters of each fiscal year (beginning with the fiscal
quarter ending after the effective date of the Registration Statement),
to make available to its stockholders consolidated summary financial
information of the Company and its subsidiaries for such quarter in
reasonable detail;
(g) During a period of three years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders, and
to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished
to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
-8-
<PAGE> 9
(i) To use its best efforts to list for quotation the Shares on
the National Association of Securities Dealers Automated Quotations
National Market System ("NASDAQ");
(j) To file with the Commission such information on Form 10-Q or
Form 10-K as may be required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the
date of this Agreement, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey
(iv) all fees and expenses in connection with listing the Shares on the NASDAQ;
(v) the filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of the
Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; and (viii) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become
effective by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by
the Commission; and all requests for additional information on
-9-
<PAGE> 10
the part of the Commission shall have been complied with to your
reasonable satisfaction;
(b) Venture Law Group, A Professional Corporation, counsel for
the Underwriters, shall have furnished to you such written opinion or
opinions (a draft of each such opinion is attached as Annex II(a)
hereto), dated such Time of Delivery, with respect to the matters
covered in paragraphs (i), (ii), (vii), (xi) and (xiii) of subsection
(c) below as well as such other related matters as you may reasonably
request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon
such matters;
(c) Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel for the Company, shall have furnished to you their written
opinion (a draft of such opinion is attached as Annex II(b) hereto),
dated such Time of Delivery, in form and substance satisfactory to you,
to the effect set forth in subsections (i) through (xvi) below (it being
understood that with respect to the matters covered by subsections (xiv)
and (xvi), such opinion shall only be given with respect to State of
California and local mortgage banking laws, regulations and and
regulatory agencies), and Negroni & Winston, PLLC, regulatory counsel
for the Company, shall have furnished to you their written opinion (a
draft of such opinion is attached as Annex II(c) hereto), dated such
Time of Delivery, in form and substance satisfactory to you, to the
effect set forth in subsections (xiv) through (xviii) below (it being
understood that with respect to the matters covered by subsections (xiv)
and (xvi), such opinion shall only be given with respect to federal,
[State of Washington, State of Texas, State of Colorado] and local
mortgage banking laws, regulations and and regulatory agencies):
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital
stock of the Company (including the Shares being delivered at
such Time of Delivery) have been duly and validly authorized and
issued and are fully paid and non-assessable; and the Shares
conform to the description of the Stock contained in the
Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to
require such qualification, except where the failure to be so
qualified would not have a material adverse effect on the
Company (such counsel being entitled to rely in respect of the
opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the
Company, provided that such counsel shall state that they
believe that both you and they are justified in relying upon
such opinions and certificates);
(iv) [intentionally omitted].
(v) Any real property and buildings held under lease by
the Company are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of
such property and buildings by the Company;
-10-
<PAGE> 11
(vi) To such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company is a party or of which
any property of the Company is the subject which, if determined
adversely to the Company, would individually or in the aggregate
have a material adverse effect on the current consolidated
financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to such
counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others;
(vii) This Agreement has been duly authorized, executed
and delivered by the Company;
(viii) The issue and sale of the Shares being delivered
at such Time of Delivery by the Company and the compliance by
the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
agreement included as an exhibit to the Registration Statement
(a "Material Agreement"), nor will such action result in any
violation of the provisions of the Certificate of Incorporation
or By-laws of the Company or any statute or any order, rule or
regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties;
(ix) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale
of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except (i) in
certain states where the Company is licensed as a broker dealer,
(ii) the registration under the Act of the Shares, and (iii)
such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters;
(x) Neither the Company nor any of its subsidiaries is
in violation of its Certificate of Incorporation or By-laws or,
[to such counsel's knowledge], in default in the performance or
observance of any material obligation, covenant or condition
contained in any Material Agreement;
(xi) The statements set forth in the Prospectus under
the caption "Description of Capital Stock", insofar as they
purport to constitute a summary of the terms of the Stock and
under the caption "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair;
(xii) The Company is not an "investment company", as
such term is defined in the Investment Company Act;
(xiii) The Registration Statement and the Prospectus and
any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules and financial data therein, as
to which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the Act and
the rules and regulations thereunder; although they do not
assume any responsibility for the accuracy, completeness or
fairness of the statements
-11-
<PAGE> 12
contained in the Registration Statement or the Prospectus,
except for those referred to in the opinion in subsection (xi)
of this section 7(c), they have no reason to believe that, as of
its effective date, the Registration Statement or any further
amendment thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related
schedules and financial data therein, as to which such counsel
need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company
prior to such Time of Delivery (other than the financial
statements and related schedules and financial data therein, as
to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading or that, as of such Time of Delivery, either the
Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and
related schedules and financial data therein, as to which such
counsel need express no opinion) contains an untrue statement of
a material fact or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading; and they do not know
of any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character
required to be filed as an exhibit to the Registration Statement
or required to be described in the Registration Statement or the
Prospectus which are not filed or described as required;
(xiv) To such counsel's knowledge, the Company is not in
violation of any federal, State of California, State of
Washington, State of Texas, State of Colorado or local law or
regulation relating to mortgage banking, including any
provisions of the Truth in Lending Act and Regulation Z, the
Home Ownership and Equity Protection Act of 1994, the Equal
Credit Opportunity Act and Regulation B, the Fair Housing Act,
the Fair Credit Reporting Act, the Real Estate Settlement
Procedures Act and Regulation X, the Home Mortgage Disclosure
Act of 1975 and Regulation C, or the rules and regulations
promulgated thereunder, except for such violations which, singly
or in the aggregate, would not have a material adverse effect on
the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole
(such counsel being entitled to rely in respect of the opinion
in this clause upon opinions of local counsel and, except with
respect to the California portion of the opinion, upon an
examination of such laws, rules and regulations as are reported
in standard unofficial compilations);
(xv) [intentionally omitted];
(xvi) To such counsel's knowledge, the Company has
obtained all authorizations, licenses, permits, consents and
certificates of federal and [State of California, State of
Washington, State of Texas and State of Colorado] mortgage
banking regulatory agencies material to the conduct of its
business as presently conducted or as proposed in the Prospectus
to be conducted, all of which are valid and in full force and
effect and, to the best of such counsel's knowledge, the Company
has not received any notice of proceedings relating to the
revocation or modification of any such authorization, license,
permit, consent or certificate (such counsel
-12-
<PAGE> 13
being entitled to rely in respect of the opinion in this clause
upon opinions of local counsel and, except with respect to the
California portion of the opinion, upon an examination of such
laws, rules and regulations as are reported in standard
unofficial compilations);
(xvii) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, neither the Company nor any
of its officers, directors or employees is a party or subject to
the provisions of any regulatory action, injunction, judgment,
decree or order of any federal or state mortgage banking
regulatory agency, nor is there any charge, action, suit,
proceeding or investigation pending before or threatened by any
federal or state mortgage banking regulatory agency; and
(xviii) The statements set forth in the Prospectus under
the captions "Risk Factors--If we fail to comply with the
numerous laws and regulations that govern our industry, our
business could be adversely affected" and "Business--Regulation
of Mortgage Brokers and Lenders," to the extent such statements
relate to regulatory or other legal matters, have been reviewed
by such counsel and are accurate, complete and fair in all
material respects.
(d) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, PricewaterhouseCoopers LLP shall have furnished
to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior
to the execution of this Agreement is attached as Annex I(a) hereto and
a draft of the form of letter to be delivered on the effective date of
any post-effective amendment to the Registration Statement and as of
each Time of Delivery is attached as Annex I(b) hereto);
(e) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Prospectus, and (ii) since the respective dates as of which information
is given in the Prospectus there shall not have been any change in the
capital stock or long-term debt of the Company or any of its
subsidiaries (except for changes occurring as a result of the exercise
of previously issued warrants or previously granted stock options) or
any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in Clause
(i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(f) [intentionally omitted];
(g) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in trading
in securities generally on the New York Stock Exchange or on NASDAQ;
(ii) a suspension or material limitation in trading in the Company's
securities on NASDAQ; (iii) a general moratorium on commercial banking
-13-
<PAGE> 14
activities declared by either Federal or New York or California State
authorities; or (iv) the outbreak or escalation of hostilities involving
the United States or the declaration by the United States of a national
emergency or war, if the effect of any such event specified in this
Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(h) The Shares to be sold at such Time of Delivery shall have
been duly listed for quotation on NASDAQ;
(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from all stockholders of the Company,
substantially to the effect set forth in Subsection 5(e) hereof in form
and substance satisfactory to you;
(j) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of this Agreement;
and
(k) The Company shall have furnished or caused to be furnished
to you at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as
to the performance by the Company of all of its obligations hereunder to
be performed at or prior to such Time of Delivery, as to the matters set
forth in subsections (a) and (e) of this Section and as to such other
matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
-14-
<PAGE> 15
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to
-15-
<PAGE> 16
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (d) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (d),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Shares, or the Company notifies you that it
has so arranged for the purchase of such Shares, you or the Company shall have
the right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase
-16-
<PAGE> 17
the number of shares which such Underwriter agreed to purchase hereunder at such
Time of Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter except as provided in Sections 6
and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9th Floor, New York, New York 10005, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other
-17-
<PAGE> 18
person shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Shares from any Underwriter shall be deemed a successor
or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
-18-
<PAGE> 19
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and each of the Representatives plus one
for each counsel counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
E-LOAN, INC.
By:_________________________________
Name:
Title:
ACCEPTED AS OF THE DATE HEREOF:
Goldman, Sachs & Co.
Donaldson, Lufkin, & Jenrette Securities
Corporation
Hambrecht & Quist
By:_______________________________
(Goldman, Sachs & Co.)
Donaldson, Lufkin, & Jenrette Securities
Corporation
By:_______________________________
Name:
Title:
Hambrecht & Quist LLC
By:_______________________________
Name:
Title:
SIGNATURE PAGE TO UNDERWRITING AGREEMENT
<PAGE> 20
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ---------
<S> <C> <C>
Goldman, Sachs & Co.....................................
Donaldson, Lufkin, & Jenrette Securities
Corporation...........................................
Hambrecht & Quist LLC...................................
[OTHERS]................................................
Total............................................
</TABLE>
<PAGE> 21
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified Public
Accountants of the unaudited consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have been
separately furnished to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon copies of which have
been separately furnished to the Representatives and on the basis of
specified procedures including inquiries of officials of the Company who
have responsibility for financial and accounting matters regarding
whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all
material respects with the applicable accounting requirements of the Act
and the related published rules and regulations, nothing came to their
attention that cause them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the related published rules and regulations;
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Prospectus
agrees with the corresponding amounts (after restatements where
applicable) in the audited consolidated financial statements for such
five fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and
on the basis of limited procedures specified in such letter nothing came
to their attention as a result of the foregoing procedures that caused
them to believe that this information does not conform in all material
respects with the disclosure requirements of Items 301, 302, 402 and
503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the date of
the latest audited financial statements
<PAGE> 22
included in the Prospectus, inquiries of officials of the Company and
its subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of
the Act and the related published rules and regulations, or (ii)
any material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows
included in the Prospectus for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree with
the corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements
included in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with the
basis for the audited consolidated financial statements included
in the Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those
statements;
(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Prospectus) or any increase in the consolidated long-term debt
of the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other
items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared
with amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date
referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or
per share amounts of
-2-
<PAGE> 23
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable
period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in
each case for decreases or increases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
(vii) In addition to the examination referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (vi) above, they have carried out certain
specified procedures, not constituting an examination in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives,
which are derived from the general accounting records of the Company and
its subsidiaries, which appear in the Prospectus, or in Part II of, or
in exhibits and schedules to, the Registration Statement specified by
the Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting records of the
Company and its subsidiaries and have found them to be in agreement.
-3-
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF E LOAN, INC.
ARTICLE I
The name of this corporation is E-Loan, Inc.
ARTICLE II
The address of the corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle, Zip Code 19801. The name of its
registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of Delaware.
ARTICLE IV
This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
31,765,167 shares. 20,000,000 shares shall be Common Stock with a par value of
$0.001. 11,765,167 shares shall be Preferred Stock with a par value of $0.001,
428,635 of which shall be designated as Series A Preferred Stock, 450,708 of
which shall be designated as Series B Preferred Stock, 4,467,912 of which shall
be designated as Series C Preferred Stock, 4,467,912 of which shall be
designated as Series C-1 Preferred Stock, and 1,950,000 of which shall be
designated as Series D Preferred Stock.
ARTICLE V
The rights, preferences, privileges and restrictions
granted to or imposed upon the Common Stock and Preferred Stock are as follows:
1. Dividend Provisions. When and as declared by the corporation's board of
directors, the holders of Preferred Stock shall be entitled to receive, out of
any funds legally available therefor, dividends at the rate of $0.02 per share
of Series A Preferred Stock, $0.096 per share of Series B Preferred Stock,
$0.122852 per share of Series C Preferred Stock, $0.122852 per share of Series
C-1 Preferred Stock and $0.9263 per share of Series D Preferred Stock,
respectively, per annum, payable in preference to any payment of any dividend on
Common Stock. After payment of such dividends, any additional dividends declared
shall be payable entirely to the holders of Series C and Series C-1
<PAGE> 2
Preferred Stock and Common Stock on a pro rata basis (as determined on a per
annum basis and on an as converted basis for the Series C and Series C-1
Preferred Stock). The right of the holders of Preferred Stock to receive
dividends shall not be cumulative, and no right shall accrue to holders of
Preferred Stock by reason of the fact that dividends on such shares are not
declared or paid in any prior year.
2. Liquidation Preference.
(a) Preferred Preference. In the event of any liquidation, dissolution
or winding up of the corporation, either voluntary or involuntary, the holders
of Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the corporation to the
holders of Common Stock by reason of their ownership thereof, the amount of
$0.22 per share for each share of Series A Preferred Stock, $0.96 per share for
each share of Series B Preferred Stock, $1.22852 per share for each share of
Series C Preferred Stock, $1.22852 per share for each share of Series C-1
Preferred Stock and $9.263 per share of Series D Preferred Stock, respectively,
then held by them, and, in addition, an amount equal to all declared but unpaid
dividends on the respective series of Preferred Stock. If the assets and funds
thus distributed among the holders of the Preferred Stock are insufficient to
permit the payment to such holders of their full preferential amount, then the
entire assets and funds of the corporation legally available for distribution
shall be distributed among the holders of Preferred Stock in proportion to the
number of shares of Preferred Stock held by each such holder in proportion to
the preferential amount each such holder is otherwise entitled to receive.
(b) Remaining Assets. Upon the completion of the distribution required
by subsection (a) of this Section 2, the remaining assets of this corporation
available for distribution to stockholders shall be distributed among the
holders of Series C, Series C-1 and Series D Preferred Stock and Common Stock
pro rata based on the number of shares of Common Stock held by each (assuming
full conversion of all such Series C, Series C-1 and Series D Preferred Stock)
until with respect to the holders of Series C and Series C-1 Preferred Stock,
such holders shall have received an aggregate of $3.6855 per share, and with
respect to the holders of Series D Preferred, such holders shall have received
an aggregate of $13.89 per share (as adjusted for any stock splits, stock
dividends, recapitalizations or the like) (including amounts paid pursuant to
subsection (a) of this Section 2); thereafter, if assets remain in this
corporation, the holders of the Common Stock of this corporation shall receive
all of the remaining assets of this corporation pro rata based on the number of
shares of Common Stock held by each.
(c) Reorganization or Merger.
(i) A reorganization or merger of the corporation with or into
any other corporation or entity, or a sale of all or substantially all of the
assets of the corporation, in which transaction the corporation's stockholders
immediately prior to such transaction own immediately after such transaction
less than 50% of the equity securities of the surviving corporation or its
parent, shall be deemed to be a liquidation within the meaning of this Section
2.
-2-
<PAGE> 3
(ii) In any of such events, if the consideration received by this
corporation is other than cash, its value will be deemed its fair market value.
Any securities shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through the
Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the thirty (30)
day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) days prior to
the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by this
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as mutually determined by this corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
such Preferred Stock.
3. Conversion. The holders of Preferred Stock shall have conversion rights
as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing the Issuance Price (as defined below) by the Conversion Price (as
defined below) in effect at the time of conversion. The Issuance Price for the
Series A Preferred Stock shall be $0.22. The Conversion Price for the Series A
Preferred Stock shall initially be $0.22, subject to adjustment as provided
below. The Issuance Price for the Series B Preferred Stock shall be $0.96. The
Conversion Price for the Series B Preferred Stock shall initially be $0.96,
subject to adjustment as provided below. The Issuance Price for the Series C and
Series C-1 Preferred Stock shall be $1.22852. The Conversion Price for the
Series C and Series C-1 Preferred Stock shall initially be $1.22852, subject to
adjustment as provided below. The Issuance Price for the Series D Preferred
Stock shall be $9.263. The Conversion Price for the Series D Preferred Stock
shall initially be $9.263, subject to adjustment as provided below. The number
of shares of Common Stock into which a share of series of Preferred Stock is
convertible is hereinafter referred to as the "Conversion Rate" of such series
of Preferred Stock.
-3-
<PAGE> 4
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Rate immediately upon the earlier of (i) a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933 (the "Act") covering the offer and sale of
Common Stock for the account of the corporation at a per share offering price of
not less than $13.89 per share (as adjusted for stock splits, dividends or
combinations) and an aggregate offering price of $15,000,000; or (ii) the date
specified by written consent or agreement of (A) the holders of a majority of
the then outstanding shares of Series C and Series C-1 Preferred Stock (voting
together as a single class), (B) the holders of a majority of the then
outstanding shares of Series D Preferred Stock (voting together as a single
class) and (C) the holders of a majority of the then outstanding shares of
Preferred Stock (voting together as a single class).
(c) Mechanics of Conversion. Before any holder of Preferred Stock
shall be entitled to convert the same into full shares of Common Stock and to
receive certificates therefor, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation or of any
transfer agent for the Preferred Stock, and shall give written notice to the
corporation at such office that such holder elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
Section 3(b) above, the outstanding shares of Preferred Stock shall be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
corporation or its transfer agent, and provided further that the corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such automatic conversion unless the certificates evidencing
such shares of Preferred Stock are either delivered to the corporation or its
transfer agent as provided above, or the holder notifies the corporation or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the corporation to indemnify the
corporation from any loss incurred by it in connection with such certificates.
The corporation shall, as soon as practicable after such delivery, or such
agreement and indemnification in the case of a lost certificate, issue and
deliver at such office to such holder of Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which the holder shall
be entitled and a check payable to the holder in the amount of any cash amounts
payable as the result of a conversion into fractional shares of Common Stock.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Preferred Stock to be
converted, or in the case of automatic conversion, on the date of closing of the
offering, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
(d) Conversion Price Adjustments of Preferred Stock for Certain
Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series
C Preferred Stock and Series D Preferred Stock shall be subject to adjustment
from time to time as follows:
(i) (A) If this corporation shall issue, after the date upon
which any shares of Series C Preferred Stock and Series D Preferred Stock were
first issued (the respective series "Purchase Date"), any Additional Stock (as
defined below) without consideration or for a
-4-
<PAGE> 5
consideration per share less than the Conversion Price for such series in effect
immediately prior to the issuance of such Additional Stock, the Conversion Price
for such series in effect immediately prior to each such issuance shall
forthwith (except as otherwise provided in this clause (i)) be adjusted to a
price determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of the series of Preferred
Stock being adjusted outstanding immediately prior to such issuance plus the
number of shares of the series of Preferred Stock being adjusted that the
aggregate consideration received by this corporation for such issuance would
purchase at such Conversion Price; and the denominator of which shall be the
number of shares of the series of Preferred Stock outstanding immediately prior
to such issuance plus the number of shares of such Additional Stock.
(B) No adjustment of the Conversion Price for any series of
Preferred Stock shall be made in an amount less than one cent per share,
provided that any adjustments that are not required to be made by reason of this
sentence shall be carried forward and shall be either taken into account in any
subsequent adjustment made prior to three (3) years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of three (3) years from the date of the event giving rise to the adjustment
being carried forward. Except to the limited extent provided for in subsections
(E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this
subsection 3(d)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or after
the applicable Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 3(d)(i) and subsection 3(d)(ii):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (to the extent then exercisable) of such options
to purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections
3(d)(i)(C) and (d)(i)(D)), if any, received by this corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights for the Common Stock covered thereby.
-5-
<PAGE> 6
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of, or in exchange (to the extent then
convertible or exchangeable) for, any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by this corporation for any such
securities and related options or rights (excluding any cash received on account
of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by this corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner provided in
subsections 3(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this corporation
upon exercise of such options or rights or upon conversion of or in exchange for
such convertible or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof (unless such options
or rights or convertible or exchangeable securities were merely deemed to be
included in the numerator and denominator for purposes of determining the number
of shares of Common Stock outstanding for purposes of subsection 3(d)(i)(A)),
the Conversion Price of the Series C Preferred Stock or Series D Preferred Stock
to the extent in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price of the Series C Preferred Stock and Series D Preferred
Stock, to the extent in any way affected by or computed using such options,
rights or securities or options or rights related to such securities (unless
such options or rights were merely deemed to be included in the numerator and
denominator for purposes of determining the number of shares of Common Stock
outstanding for purposes of subsection 3(d)(i)(A)), shall be recomputed to
reflect the issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities that remain in effect) actually issued
upon the exercise of such options or rights, upon the conversion or exchange of
such securities or upon the exercise of the options or rights related to such
securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections 3(d)(i)(E)(1)
and (2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either subsection 3(d)(i)(E)(3) or (4).
-6-
<PAGE> 7
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(d)(i)(E))
by this corporation after the Purchase Date other than:
(A) Common Stock issued pursuant to a transaction
described in subsection 3(f) hereof;
(B) Common Stock issued or issuable upon conversion of
the Preferred Stock; or
(C) 1,500,000 Shares of Common Stock issuable or issued
to employees, consultants, directors or vendors (if in transactions with
primarily non-financing purposes) of this corporation directly or pursuant to a
stock option plan or restricted stock plan approved by the Board of Directors of
this corporation and any other shares issued in connection with transactions
(including additions to the stock option plan) provided such issuances are
unanimously approved by the Board of Directors of this corporation.
(e) Fractional Shares. In lieu of any fractional shares to which
the holder of Preferred Stock would otherwise be entitled, the corporation shall
pay cash equal to such fraction multiplied by the fair market value of one share
of Preferred Stock as determined by the board of directors of the corporation.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Preferred Stock of each
holder at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(f) Adjustment of Conversion Price. The Conversion Price of each
series of Preferred Stock shall be subject to adjustment from time to time as
follows:
(1) If the number of shares of Common Stock outstanding at
any time after the date hereof is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the date such payment is made or such change is effective, the
Conversion Price of the Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of any shares of
Preferred Stock shall be increased in proportion to such increase of outstanding
shares.
(2) If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination, the
Conversion Price of the Preferred Stock shall be appropriately increased so that
the number of shares of Common Stock issuable on conversion of any shares of
Preferred Stock shall be decreased in proportion to such decrease in outstanding
shares.
(3) In case the corporation shall declare a cash dividend
upon its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of its capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the corporation or other persons, assets (excluding cash
-7-
<PAGE> 8
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
the Preferred Stock shall, concurrent with the distribution to holders of Common
Stock, receive a like distribution based upon the number of shares of Common
Stock into which such Preferred Stock is then convertible.
(4) In case, at any time after the date hereof, of any
capital reorganization, or any reclassification of the stock of the corporation
(other than as a result of a stock dividend or subdivision, split-up or
combination of shares), or the consolidation or merger of the corporation with
or into another person (other than a consolidation or merger in which the
corporation is the continuing entity and which does not result in any change in
the Common Stock), the shares of Preferred Stock shall, after such
reorganization, reclassification, consolidation, merger, sale or other
disposition, be convertible into the kind and number of shares of stock or other
securities or property of the corporation or otherwise to which such holder
would have been entitled if immediately prior to such reorganization,
reclassification, consolidation, merger, sale or other disposition such holder
had converted its shares of Preferred Stock into Common Stock. The provisions of
this clause (iv) shall similarly apply to successive reorganizations,
reclassification, consolidations, mergers, sales or other dispositions.
(5) All calculations under this Section 3 shall be made to
the nearest cent or to the nearest one hundredth (1/100) of a share, as the case
may be.
(g) Minimal Adjustments. No adjustment in the Conversion Price
for the Preferred Stock need be made if such adjustment would result in a change
in the Conversion Price of less than $0.01. Any adjustment of less than $0.01
which is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts to
an adjustment of $0.01 or more in the Conversion Price.
(h) No Impairment. The corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment. This
provision shall not restrict the corporation's right to amend its Articles of
Incorporation with the requisite stockholder consent.
(i) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for the Preferred Stock
pursuant to this Section 3, the corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The corporation shall, upon written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) all
-8-
<PAGE> 9
such adjustments and readjustments, (ii) the Conversion Rate at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the conversion of
such holder's shares of Preferred Stock.
(j) Notices of Record Date. In the event of any taking by the
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the corporation
shall mail to each holder of Preferred Stock at least ten (10) days prior to
such record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution or right, and the amount
and character of such dividend, distribution or right.
(k) Notices. Any notice required by the provisions of this
Section 3 to be given to any holder of Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at such holder's address appearing on the corporation's books.
(l) Pay-to-Play; Special Mandatory Conversion.
(i) At any time following the Purchase Date, if (a) the
holders of shares of Series C Preferred Stock are entitled to exercise the right
of first offer (the "Preemptive Rights") set forth in Section 3 of the Restated
Investors' Rights Agreement, dated September 4, 1998 by and among this
corporation and certain investors, as amended from time to time (the "Rights
Agreement"), with respect to an equity financing of this corporation to which
Section 3(d) would be applicable (the "Equity Financing"), (b) this corporation
has complied with its notice obligations, or such obligations have been waived,
under the Right of First Offer with respect to such Equity Financing and this
corporation thereafter proceeds to consummate the Equity Financing, and (c) such
holder (a "Non-Participating Holder") does not by exercise of such holder's
Right of First Offer acquire his, her or its Pro Rata Share (as defined in
Section 3 of the Rights Agreement) offered in such Equity Financing (a
"Mandatory Offering"), then all of such Non-Participating Holder's shares of
Series C Preferred Stock shall automatically and without further action on the
part of such holder be converted effective upon, subject to, and concurrently
with, the consummation of the Mandatory Offering (the "Mandatory Offering Date")
into an equivalent number of shares of Series C-1 Preferred Stock; provided,
however, that no such conversion shall occur in connection with a particular
Equity Financing if, pursuant to the written request of this corporation, such
holder agrees in writing to waive his, her or its Right of First Offer with
respect to such Equity Financing. Upon conversion pursuant to this subsection
3(l)(i), the shares of Series C Preferred Stock so converted shall be canceled
and not subject to reissuance.
(ii) The holder of any shares of Series C Preferred Stock
converted pursuant to this subsection 3(l) shall deliver to this corporation
during regular business hours at the office of any transfer agent of this
corporation for the Series C Preferred Stock, or at such other place as may be
designated by this corporation, the certificate or certificates for the shares
so converted,
-9-
<PAGE> 10
duly endorsed or assigned in blank or to this corporation. As promptly as
practicable thereafter, this corporation shall issue and deliver to such holder,
at the place designated by such holder, a certificate or certificates for the
number of full shares of the Series C-1 Preferred Stock to be issued and such
holder shall be deemed to have become a stockholder of record of Series C-1
Preferred Stock on the Mandatory Offering Date unless the transfer books of this
corporation are closed on that date, in which event he, she or it shall be
deemed to have become a stockholder of record of Series C-1 Preferred Stock on
the next succeeding date on which the transfer books are open.
(iii) In the event that any Series C-1 Preferred Stock
shares are issued, concurrently with such issuance, this corporation shall use
its best efforts to take all such action as may be required, including amending
its Articles of Incorporation, (a) to cancel all authorized shares of Series C-1
Preferred Stock that remain unissued after such issuance, (b) to create and
reserve for issuance upon Special Mandatory Conversion of any Series C Preferred
Stock a new series of Preferred Stock equal in number to the number of shares of
Series C-1 Preferred Stock so canceled and designated Series C-2 Preferred
Stock, with the designations, powers, preferences and rights and the
qualifications, limitations and restrictions identical to those then applicable
to the Series C-1 Preferred Stock, except that the Conversion Price for such
shares of Series C-2 Preferred Stock once initially issued shall be the Series C
Conversion Price in effect immediately prior to such issuance and (c) to amend
the provisions of this subsection 3(l) to provide that any subsequent Special
Mandatory Conversion will be into shares of Series C-2 Preferred Stock rather
than Series C-1 Preferred Stock. This corporation shall take the same actions
with respect to the Series C-2 Preferred Stock and each subsequently authorized
series of Preferred Stock upon initial issuance of shares of the last such
series to be authorized. The right to receive any dividend declared but unpaid
at the time of conversion on any shares of Preferred Stock converted pursuant to
the provisions of this subsection 4(l) shall accrue to the benefit of the new
shares of Preferred Stock issued upon conversion thereof.
4. Redemption.
(a) At any time after December 17, 2001, but within ninety (90) days
after the receipt by this corporation of a written request from the holders of
not less than sixty-six and two-thirds percent (66-2/3%) of the then outstanding
Series C and Series C-1 Preferred Stock (voting together as a single class) that
all or, if less than all, a specified percentage of such holders' shares of
Series C and Series C-1 Preferred Stock be redeemed, and concurrently with
surrender by such holders of the certificates representing such shares, this
corporation shall, to the extent it may lawfully do so, redeem in three (3)
annual installments (each payment date being referred to herein as a "Series C
Redemption Date") the shares specified in such request by paying in cash
therefor a sum per share equal to (i) $1.22852 per share of Series C and Series
C-1 Preferred Stock (as adjusted for any stock splits, stock dividends,
recapitalizations or the like, and with respect to the Series C Preferred Stock
as adjusted in accordance with Section 3(d)) plus (ii) ten percent (10%) per
annum on the amount payable under this Section 4(a) accruing from the date
hereof, plus (iii) all declared but unpaid dividends on such share (the "Series
C Redemption Price"). The number of shares of Series C and Series C-1 Preferred
Stock that this corporation shall be required to redeem on any one Series C
Redemption Date shall be equal to the amount determined by dividing (i) the
aggregate
-10-
<PAGE> 11
number of shares of Series C and Series C-1 Preferred Stock outstanding
immediately prior to such Series C Redemption Date that have been requested to
be redeemed pursuant to this Section 4(a) by (ii) the number of remaining Series
C Redemption Dates (including the Redemption Date to which such calculation
applies). Any redemption of Series C and Series C-1 Preferred Stock effected
pursuant to this subsection 4(a) shall be made on a pro rata basis among the
holders of the Series C and Series C-1 Preferred Stock in proportion to the
number of shares of Series C and Series C-1 Preferred Stock proposed to be
redeemed by such holders. No other capital stock of the corporation is
redeemable prior to the Series C or Series C-1 Preferred Stock without the prior
written consent of the holders of a majority of the Series C and Series C-1
Preferred Stock (voting together as a single class).
(b) At any time after September 4, 2002, but within ninety (90) days
after the receipt by this corporation of a written request from the holders of
not less than sixty-six and two-thirds percent (66-2/3%) of the then outstanding
Series D Preferred Stock (voting together as a single class) that all or, if
less than all, a specified percentage of such holders' shares of Series D
Preferred Stock be redeemed, and concurrently with surrender by such holders of
the certificates representing such shares, this corporation shall, to the extent
it may lawfully do so, redeem in three (3) annual installments (each payment
date being referred to herein as a "Series D Redemption Date") the shares
specified in such request by paying in cash therefor a sum per share equal to
(i) $9.263 per share of Series D Preferred Stock (as adjusted for any stock
splits, stock dividends, recapitalizations or the like, and with respect to the
Series D Preferred Stock as adjusted in accordance with Section 3(d)) plus (ii)
ten percent (10%) per annum on the amount payable under this Section 4(a)
accruing from the date hereof, plus (iii) all declared but unpaid dividends on
such share (the "Series D Redemption Price"). The number of shares of Series D
Preferred Stock that this corporation shall be required to redeem on any one
Series D Redemption Date shall be equal to the amount determined by dividing (i)
the aggregate number of shares of Series D Preferred Stock outstanding
immediately prior to such Series D Redemption Date that have been requested to
be redeemed pursuant to this Section 4(b) by (ii) the number of remaining Series
D Redemption Dates (including the Redemption Date to which such calculation
applies). Any redemption of Series D Preferred Stock effected pursuant to this
subsection 4(b) shall be made on a pro rata basis among the holders of the
Series D Preferred Stock in proportion to the number of shares of Series D
Preferred Stock proposed to be redeemed by such holders. No other capital stock
of the corporation is redeemable prior to the Series D Preferred Stock without
the prior written consent of the holders of a majority of the Series D Preferred
Stock (voting together as a single class).
(c) At least fifteen (15) but no more than thirty (30) days prior to
each Redemption Date, written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the business day
next preceding the day on which notice is given) of the Series C, Series C-1
Preferred Stock or Series D Preferred Stock (collectively the Redeemable
Preferred) to be redeemed, at the address last shown on the records of this
corporation for such holder, notifying such holder of the redemption to be
effected on the applicable Redemption Date, specifying the number of shares to
be redeemed from such holder, the Redemption Date, the Redemption Price, the
place at which payment may be obtained and calling upon such holder to surrender
to this corporation, in the manner and at the place designated, his, her or its
certificate or
-11-
<PAGE> 12
certificates representing the shares to be redeemed (the "Redemption Notice").
Except as provided in subsection (4)(d), on or after each Redemption Date, each
holder of Redeemable Preferred Stock to be redeemed on such Redemption Date
shall surrender to this corporation the certificate or certificates representing
such shares, in the manner and at the place designated in the Redemption Notice,
and thereupon the applicable Redemption Price of such shares shall be payable to
the order of the person whose name appears on such certificate or certificates
as the owner thereof and each surrendered certificate shall be canceled. In the
event less than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares.
(d) From and after each Redemption Date, unless there shall have been
a default in payment of the Redemption Price, all rights of the holders of
shares of Redeemable Preferred Stock designated for redemption on such
Redemption Date in the Redemption Notice as holders of Redeemable Preferred
Stock (except the right to receive the applicable Redemption Price without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of this corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of this corporation legally available for redemption of
shares of Redeemable Preferred Stock on a Redemption Date are insufficient to
redeem the total number of shares of Redeemable Preferred Stock to be redeemed
on such date, those funds that are legally available will be used to redeem the
maximum possible number of such shares ratably among the holders of such shares
to be redeemed such that each holder of a share of Redeemable Preferred Stock
receives the same percentage of the applicable Redeemable Redemption Price. The
shares of Redeemable Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of this corporation are legally available for
the redemption of shares of Redeemable Preferred Stock, such funds will
immediately be used to redeem the balance of the shares that this corporation
has become obliged to redeem on any Redemption Date but that it has not
redeemed.
(e) On or prior to each Redemption Date, this corporation shall
deposit the Redemption Price of all shares of Redeemable Preferred Stock
designated for redemption on such Redemption Date in the Redemption Notice, and
not yet redeemed or converted, with a bank or trust corporation having aggregate
capital and surplus in excess of $100,000,000 as a trust fund for the benefit of
the respective holders of the shares designated for redemption and not yet
redeemed, with irrevocable instructions and authority to the bank or trust
corporation to publish the notice of redemption thereof and pay the Redemption
Price for such shares to their respective holders on or after the Redemption
Date, upon receipt of notification from this corporation that such holder has
surrendered his, her or its share certificate to this corporation pursuant to
subsection (4)(c) above. As of the date of such deposit (even if prior to the
Redemption Date), the deposit shall constitute full payment of the shares to
their holders, and from and after the date of the deposit the shares so called
for redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be stockholders with respect
to such shares and shall have no rights with respect thereto except the rights
to receive from the bank or trust corporation payment of the Redemption Price of
the shares, without interest, upon surrender of their certificates therefor, and
the right to convert such shares as provided in Article IV(3) hereof. Such
instructions shall also provide that any moneys deposited by this corporation
pursuant to this subsection (4)(e) for the redemption
-12-
<PAGE> 13
of shares thereafter converted into shares of this corporation's Common Stock
pursuant to Article IV(3) hereof prior to the Redemption Date shall be returned
to this corporation forthwith upon such conversion. The balance of any moneys
deposited by this corporation pursuant to this subsection (4)(e) remaining
unclaimed at the expiration of two (2) years following the Redemption Date shall
thereafter be returned to this corporation upon its request expressed in a
resolution of its Board of Directors.
5. Voting Rights.
(a) General Voting Rights. The holder of each share of Preferred Stock
shall be entitled to notice of any stockholders' meeting in accordance with the
bylaws of the corporation and shall vote with holders of the Common Stock upon
the election of directors and upon any other matter submitted to a vote of
stockholders, except those matters required by law to be submitted to a class
vote and except as otherwise set forth herein. The holder of each share of
Preferred Stock shall be entitled to that number of votes equal to the number of
shares of Common Stock into which each share of Preferred Stock could be
converted on the record date for the vote or consent of stockholders. Fractional
votes shall not, however, be permitted and any fractional voting rights
resulting from the above formula (after aggregating all shares of Preferred
Stock held by each holder) shall be disregarded.
(b) Voting for the Election of Directors. As long as at least a
majority of the shares of Series C Preferred Stock originally issued remain
outstanding (including shares subsequently converted into shares of Series C-1
Preferred Stock), the holders of such shares of Series C and Series C-1
Preferred Stock shall be entitled to elect two (2) directors of this corporation
at each annual election of directors. As long as at least a majority of the
shares of Series D Preferred Stock originally issued remain outstanding, the
holders of Series D Preferred shall be entitled to elect one (1) director of
this corporation at each annual election of directors. The holders of
outstanding Common Stock shall be entitled to elect two (2) directors of this
corporation at each annual election of directors. The holders of Preferred Stock
and Common Stock (voting together as a single class and not as separate series,
and on an as-converted basis) shall be entitled to elect the remaining
directors.
In the case of any vacancy (other than a vacancy caused by removal) in
the office of a director occurring among the directors elected by the holders of
a class or series of stock pursuant to this Section 5(b), the remaining
directors so elected by that class or series may by affirmative vote of a
majority thereof (or the remaining director so elected if there be but one, or
if there are no such directors remaining, by the affirmative vote of the holders
of a majority of the shares of that class or series), elect a successor or
successors to hold office for the unexpired term of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by the holders of a class or series of stock or by any directors so elected as
provided in the immediately preceding sentence hereof may be removed during the
aforesaid term of office, either with or without cause, by, and only by, the
affirmative vote of the holders of the shares of the class or series of stock
entitled to elect such director or directors, given either at a special meeting
of such stockholders duly called for that purpose or pursuant to a written
consent of stockholders, and any vacancy thereby
-13-
<PAGE> 14
created may be filled by the holders of that class or series of stock
represented at the meeting or pursuant to unanimous written consent.
6. Protective Provisions.
(a) General. In addition to any other class vote that may be required
by law, so long as any shares of Preferred Stock are outstanding, this
corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a majority of the then
outstanding shares of Preferred Stock voting together as a single class:
(i) adversely alter or change the powers, preferences or special
rights of the Preferred Stock; or
(ii) increase or decrease (other than by redemption or
conversion) the aggregate number of authorized shares of Preferred Stock; or
(iii) create, authorize or issue any new class or series of
shares having any powers, preferences, or special rights superior to or on a
parity with the Preferred Stock as to dividends, liquidation, conversion rights
or voting rights; or
(iv) redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose) any share or shares of Preferred
Stock or Common Stock; provided, however, that this restriction shall not apply
to (i) the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for this corporation
or any subsidiary pursuant to agreements under which this corporation has the
option to repurchase such shares at cost or at cost upon the occurrence of
certain events, such as the termination of employment or (ii) the redemption of
any share or shares of Preferred Stock in accordance with Section 4;
(v) sell, convey, or otherwise dispose of all or substantially
all of its property or business or merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary corporation) or effect any
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of this corporation is disposed of;
(vi) declare or pay any dividend on any shares of Common Stock;
or
(vii) change the authorized number of directors of this
corporation.
(b) Series D Protective Provisions. So long as at least a majority of
the shares of Series D Preferred Stock originally issued remain outstanding,
this corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding shares of Series D Preferred Stock:
(i) adversely alter or change the powers, preferences or special
rights of the Series D Preferred Stock;
-14-
<PAGE> 15
(ii) increase or decrease (other than by redemption or
conversion) the aggregate number of authorized shares of Series D Preferred
Stock;
(iii) create, authorize or issue any new class or series of
shares having any powers, preferences, or special rights superior to or on a
parity with the Series D Preferred Stock as to dividends, liquidation,
conversion rights or voting rights;
(iv) change the authorized number of directors of this
corporation; or
(v) sell, convey, or otherwise dispose of all or substantially
all of its property or business or merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary corporation) or effect any
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of this corporation is disposed, provided that such
transaction has an aggregate pre-money valuation of this corporation of less
than or equal to $165,000,000 and such approval is not unreasonably withheld.
7. Residual Rights. All rights accruing to the outstanding shares of
capital stock not expressly provided for to the contrary herein shall be vested
in the Common Stock.
ARTICLE VI
The following is applicable to the Common Stock:
1. Dividend Rights. Subject to the prior rights of holders of all classes
of stock at the time outstanding having prior rights as to dividends, the
holders of the Common Stock shall be entitled to receive, when and as declared
by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding up of
the corporation, the assets of the corporation shall be distributed as provided
in Section 3 of Article Five hereof.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock shall have the
right to one vote, and shall be entitled to notice of any stockholders' meeting
in accordance with the Bylaws of the corporation, and shall be entitled to vote
upon such matters and in such manner as may be provided by law.
ARTICLE VII
The corporation is to have perpetual existence.
-15-
<PAGE> 16
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
ARTICLE IX
The election of directors need not be by written ballot unless
the Bylaws of the corporation shall so provide.
ARTICLE X
To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The corporation shall indemnify to the fullest extent permitted by the law, any
person made or threatened to be made a party, to any action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
the he or she, or his or her testator or intestate, is or was a director or
officer of the corporation or any predecessor of the corporation, or serves or
served at any other enterprise as a director or officer at the request of the
corporation or any predecessor to the corporation. Neither any amendment nor
repeal of this Article, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article, shall eliminate or reduce the
effect of this Article in respect of any matter occurring, or any cause of
action, suit or claim that, but for this Article, would accrue or arise, prior
to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE XI
The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ARTICLE XII
The name and mailing address of the incorporator are:
Christian Larsen
5875 Arnold Road, Suite 100
Dublin, CA 94568
-16-
<PAGE> 17
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying,
under penalties of perjury, that this is my act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand this 19th day of
February, 1999.
/s/ Chris Larsen
------------------------------
Christian Larsen, Incorporator
<PAGE> 1
EXHIBIT 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
E-LOAN, INC.
E-Loan, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
A. The name of the corporation is E-Loan, Inc. The corporation was
originally incorporated under the same name, and the original Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
February 19, 1999.
B. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Restated Certificate of Incorporation restates and
amends the provisions of the Certificate of Incorporation of the corporation.
C. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
ARTICLE I
The name of this corporation is E-Loan, Inc.
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
The corporation is authorized to issue two classes of shares of stock
to be designated, respectively, Common Stock, $0.001 par value, and Preferred
Stock, $0.001 par value. The total number of shares that the corporation is
authorized to issue is 75,000,000 shares. The number of shares of Common Stock
authorized is 70,000,000. The number of shares of Preferred authorized is
5,000,000.
<PAGE> 2
The Preferred Stock may be issued from time to time in one or more
series pursuant to a resolution or resolutions providing for such issue duly
adopted by the board of directors (authority to do so being hereby expressly
vested in the board). The board of directors is further authorized to determine
or alter the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock and to fix the number
of shares of any series of Preferred Stock and the designation of any such
series of Preferred Stock. The board of directors, within the limits and
restrictions stated in any resolution or resolutions of the board of directors
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of shares in any such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
The authority of the board of directors with respect to each such class
or series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the
number of shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or
series shall be declared and paid, or set aside for payment, whether dividends
at the rate so determined shall be cumulative or accruing, and whether the
shares of such class or series shall be entitled to any participating or other
dividends in addition to dividends at the rate so determined, and if so, on what
terms;
(c) the right or obligation, if any, of the corporation to redeem
shares of the particular class or series of Preferred Stock and, if redeemable,
the price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any, and
the amount or amounts per share, which the shares of such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the corporation;
(e) the terms and conditions, if any, upon which shares of such
class or series shall be convertible into, or exchangeable for, shares of
capital stock of any other class or series, including the price or prices or the
rate or rates of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the corporation to retire, redeem
or purchase shares of such class or series pursuant to a sinking fund or fund of
a similar nature or otherwise, and the terms and conditions of such obligation;
(g) voting rights, if any, on the issuance of additional shares
of such class or series or any shares of any other class or series of Preferred
Stock;
(h) limitations, if any, on the issuance of additional shares of
such class or series or any shares of any other class or series of Preferred
Stock; and
-2-
<PAGE> 3
(i) such other preferences, powers, qualifications, special or
relative rights and privileges thereof as the board of directors of the
corporation, acting in accordance with this Restated Certificate of
Incorporation, may deem advisable and are not inconsistent with law and the
provisions of this Restated Certificate of Incorporation. ARTICLE V
The corporation reserves the right to amend, alter, change, or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this right.
ARTICLE VI
The corporation is to have perpetual existence.
ARTICLE VII
1. Limitation of Liability. To the fullest extent permitted by the
General Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, a director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
2. Indemnification. The corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the corporation, or any predecessor of
the corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any predecessor to the
corporation.
3. Amendments. Neither any amendment nor repeal of this Article VII,
nor the adoption of any provision of the corporation's Certificate of
Incorporation inconsistent with this Article VII, shall eliminate or reduce the
effect of this Article VII, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VII, would accrue
or arise, prior to such amendment, repeal, or adoption of an inconsistent
provision.
ARTICLE VIII
In the event any shares of Preferred Stock shall be redeemed or
converted pursuant to the terms hereof, the shares so converted or redeemed
shall not revert to the status of authorized but unissued shares, but instead
shall be canceled and shall not be re-issuable by the corporation.
-3-
<PAGE> 4
ARTICLE IX
Holders of stock of any class or series of the corporation shall not be
entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders, unless such cumulative voting is
required pursuant to Sections 2115 or 301.5 of the California General
Corporation Law, in which event each such holder shall be entitled to as many
votes as shall equal the number of votes which (except for this provision as to
cumulative voting) such holder would be entitled to cast for the election of
directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and the holder may cast all of such votes for a
single director or may distribute them among the number of directors to be voted
for, or for any two or more of them as such holder may see fit, so long as the
name of the candidate for director shall have been placed in nomination prior to
the voting and the stockholder, or any other holder of the same class or series
of stock, has given notice at the meeting prior to the voting of the intention
to cumulate votes.
1. Number of Directors. The number of directors which constitutes the
whole Board of Directors of the corporation shall be designated in the Amended
and Restated Bylaws of the corporation. The directors shall be divided into
three classes with the term of office of the first class (Class I) to expire at
the annual meeting of stockholders held in 2000; the term of office of the
second class (Class II) to expire at the annual meeting of stockholders held in
2001; the term of office of the third class (Class III) to expire at the annual
meeting of stockholders held in 2002; and thereafter for each such term to
expire at each third succeeding annual meeting of stockholders after such
election.
2. Election of Directors. Elections of directors need not be by written
ballot unless the Amended and Restated Bylaws of the corporation shall so
provide.
ARTICLE X
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Amended and Restated Bylaws of the corporation.
ARTICLE XI
No action shall be taken by the stockholders of the corporation except
at an annual or special meeting of the stockholders called in accordance with
the Amended and Restated Bylaws and no action shall be taken by the stockholders
by written consent. The affirmative vote of sixty-six and two-thirds percent (66
2/3%) of the then outstanding voting securities of the corporation, voting
together as a single class, shall be required for the amendment, repeal or
modification of the provisions of Article IX, Article X or Article XII of this
Restated Certificate of Incorporation or Sections 2.3 (Special Meeting), 2.4
(Notice of Stockholders' Meeting), 2.5 (Advanced Notice of Stockholder Nominees
and Stockholder Business), 2.10 (Voting), or 2.12 (Stockholder Action by
-4-
<PAGE> 5
Written Consent Without a Meeting), or 3.2 (Number of Directors) of the
corporation's Amended and Restated Bylaws.
ARTICLE XII
Meetings of stockholders may be held within or without the State of
Delaware, as the Amended and Restated Bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Amended and Restated
Bylaws of the corporation.
-5-
<PAGE> 6
IN WITNESS WHEREOF, E-Loan, Inc. has caused this certificate to be
signed by Chris Larsen, its Chief Executive Officer, this___________day
of_____________, 1999.
-------------------------------------------
Chris Larsen, Chief Executive Officer
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
E-LOAN, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I CORPORATE OFFICES ................................................... 1
1.1 REGISTERED OFFICE 1
1.2 OTHER OFFICES ........................................................ 1
ARTICLE II MEETINGS OF STOCKHOLDERS ........................................... 1
2.1 PLACE OF MEETINGS 1
2.2 ANNUAL MEETING ....................................................... 1
2.3 SPECIAL MEETING ...................................................... 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS ..................................... 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS ...... 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE ......................... 3
2.7 QUORUM ............................................................... 4
2.8 ADJOURNED MEETING; NOTICE ............................................ 4
2.9 CONDUCT OF BUSINESS .................................................. 4
2.10 VOTING ............................................................... 4
2.11 WAIVER OF NOTICE ..................................................... 5
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING .............. 5
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS .......... 5
2.14 PROXIES .............................................................. 6
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE ................................ 6
ARTICLE III DIRECTORS ......................................................... 7
3.1 POWERS ............................................................... 7
3.2 NUMBER OF DIRECTORS .................................................. 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS .............. 7
3.4 RESIGNATION AND VACANCIES ............................................ 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ............................. 8
3.6 REGULAR MEETINGS ..................................................... 8
3.7 SPECIAL MEETINGS; NOTICE ............................................. 9
3.8 QUORUM ............................................................... 9
3.9 WAIVER OF NOTICE ..................................................... 9
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING .................... 10
3.11 FEES AND COMPENSATION OF DIRECTORS ................................... 10
3.12 APPROVAL OF LOANS TO OFFICERS ........................................ 10
3.13 REMOVAL OF DIRECTORS ................................................. 10
ARTICLE IV COMMITTEES ......................................................... 11
4.1 COMMITTEES OF DIRECTORS .............................................. 11
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
4.2 COMMITTEE MINUTES .................................................... 11
4.3 MEETINGS AND ACTION OF COMMITTEES .................................... 11
ARTICLE V OFFICERS ............................................................ 12
5.1 OFFICERS ............................................................. 12
5.2 APPOINTMENT OF OFFICERS .............................................. 12
5.3 SUBORDINATE OFFICERS ................................................. 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES ............... 12
5.5 CHAIRMAN OF THE BOARD ................................................ 13
5.6 CHIEF EXECUTIVE OFFICER .............................................. 13
5.7 PRESIDENT ............................................................ 13
5.8 VICE PRESIDENTS ...................................................... 13
5.9 SECRETARY ............................................................ 13
5.10 CHIEF FINANCIAL OFFICER .............................................. 14
5.11 ASSISTANT SECRETARY .................................................. 14
5.12 ASSISTANT TREASURER .................................................. 15
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ....................... 15
5.14 AUTHORITY AND DUTIES OF OFFICERS ..................................... 15
ARTICLE VI INDEMNITY .......................................................... 15
6.1 THIRD PARTY ACTIONS .................................................. 15
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION ........................ 16
6.3 SUCCESSFUL DEFENSE ................................................... 16
6.4 DETERMINATION OF CONDUCT ............................................. 16
6.5 PAYMENT OF EXPENSES IN ADVANCE ....................................... 17
6.6 INDEMNITY NOT EXCLUSIVE .............................................. 17
6.7 INSURANCE INDEMNIFICATION ............................................ 17
6.8 THE CORPORATION ...................................................... 17
6.9 EMPLOYEE BENEFIT PLANS ............................................... 18
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES .......... 18
ARTICLE VII RECORDS AND REPORTS ............................................... 18
7.1 MAINTENANCE AND INSPECTION OF RECORDS ................................ 18
7.2 INSPECTION BY DIRECTORS .............................................. 19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS ..................................... 19
ARTICLE VIII GENERAL MATTERS .................................................. 19
8.1 CHECKS ............................................................... 19
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS ..................... 20
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES ............................... 20
8.4 SPECIAL DESIGNATION ON CERTIFICATES .................................. 20
8.5 LOST CERTIFICATES .................................................... 21
8.6 CONSTRUCTION; DEFINITIONS ............................................ 21
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
8.7 DIVIDENDS ............................................................ 21
8.8 FISCAL YEAR .......................................................... 21
8.9 SEAL ................................................................. 21
8.10 TRANSFER OF STOCK .................................................... 22
8.11 STOCK TRANSFER AGREEMENTS ............................................ 22
8.12 REGISTERED STOCKHOLDERS .............................................. 22
ARTICLE IX AMENDMENTS ......................................................... 22
</TABLE>
-iii-
<PAGE> 5
BYLAWS
OF
E-LOAN, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, either within or
without the State of Delaware, as may be designated by the board of directors or
in the manner provided in these bylaws. In the absence of any such designation,
stockholders' meetings shall be held at the registered office of the corporation
in the State of Delaware.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the second
Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding
<PAGE> 6
business day. At the meeting, directors shall be elected and any other proper
business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president or the
secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article
II, that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than ten (10) nor more than sixty (60) days after
the receipt of the request. Nothing contained in this paragraph of this Section
2.3 shall be construed as limiting, fixing, or affecting the time when a meeting
of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.5 of these bylaws not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notice shall specify
the place, date, and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
Subject to the rights of holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation,
(i) nominations for the election of directors, and
(ii) business proposed to be brought before any stockholder meeting
may be made by the board of directors or proxy committee appointed by the board
of directors or by any stockholder entitled to vote in the election of directors
generally if such nomination or business proposed is otherwise proper business
before such meeting. However, any such stockholder may nominate one or more
persons for election as directors at a meeting or propose business to be brought
before a meeting, or both, only if such stockholder has given timely notice in
proper written form of their intent to make such nomination or nominations or to
propose such business. To be
-2-
<PAGE> 7
timely, such stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation not less than one hundred
twenty (120) calendar days in advance of the first anniversary date of mailing
of the corporation's proxy statement released to stockholders in connection with
the previous year's annual meeting of stockholders; provided, however, that in
the event that no annual meeting was held in the previous year or the date of
the annual meeting has been changed by more than thirty (30) days from the date
contemplated at the time of the previous year's proxy statement, notice by the
stockholder to be timely must be so received a reasonable time before the
solicitation is made. To be in proper form, a stockholder's notice to the
secretary shall set forth:
(a) the name and address of the stockholder who intends to make
the nominations or propose the business and, as the case may be, of
the person or persons to be nominated or of the business to be
proposed;
(b) a representation that the stockholder is a holder of record
of stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
(c) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder;
(d) such other information regarding each nominee or each matter
of business to be proposed by such stockholder as would be required to
be included in a proxy statement filed pursuant to the proxy rules of
the Securities and Exchange Commission had the nominee been nominated,
or intended to be nominated, or the matter been proposed, or intended
to be proposed by the board of directors; and
(e) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting shall refuse to acknowledge the nomination
of any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
-3-
<PAGE> 8
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (i) the Chairman of the meeting or (ii)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.10 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the Delaware General
Corporation Law (relating to voting rights of fiduciaries, pledgors and joint
owners of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.10, or as
may be otherwise provided in the certificate of incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, each
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such stockholder normally
is entitled to cast) if the candidates' names have been properly placed in
nomination (in accordance with these bylaws) prior to commencement of the voting
and the stockholder requesting cumulative voting or any other stockholder voting
at the meeting in person or by proxy has given notice prior to commencement of
the voting of the
-4-
<PAGE> 9
stockholder's intention to cumulate votes. If cumulative voting is properly
requested, each holder of stock, or of any class or classes or of a series or
series thereof, who elects to cumulate votes shall be entitled to as many votes
as equals the number of votes which (absent this provision as to cumulative
voting) such person would be entitled to cast for the election of directors with
respect to his shares of stock multiplied by the number of directors to be
elected by such person, and that such person may cast all of such votes for a
single director or may distribute them among the number to be voted for, or for
any two or more of them, as such person may see fit.
2.11 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
Delaware General Corporation Law or of the certificate of incorporation or these
bylaws, a written waiver, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these bylaws.
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any
action required to be taken at any annual or special meeting of stockholders of
a corporation, or any action that may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the
Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the Delaware General Corporation Law.
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change,
-5-
<PAGE> 10
conversion or exchange of stock or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the first date on which
a signed written consent is delivered to the corporation.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.14 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by a written
proxy, signed by such stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if such stockholder's name is placed on the proxy by any
reasonable means including, but not limited to, by facsimile signature, manual
signature, typewriting, telegraphic transmission or otherwise, by such
stockholder or such stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the Delaware General Corporation Law.
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at
-6-
<PAGE> 11
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. Such list shall presumptively
determine the identity of the stockholders entitled to vote at the meeting and
the number of shares held by each of them.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Delaware General Corporation Law and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be six (6) until
changed by a bylaw amending this Section 3.2, duly adopted by the board of
directors or by the stockholders.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors shall
resign from the board of directors, effective at a future date, a majority of
the directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and each director so
chosen shall hold office as provided in this section in the filling of other
vacancies.
-7-
<PAGE> 12
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the Delaware General Corporation Law.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the
Delaware General Corporation Law as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these bylaws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of such board of directors,
or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting pursuant to this section shall
constitute presence in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
-8-
<PAGE> 13
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute, the certificate of incorporation, or
these bylaws. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
Delaware General Corporation Law, the certificate of incorporation, or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when such person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
-9-
<PAGE> 14
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or
these bylaws, any action required or permitted to be taken at any meeting of the
board of directors, or of any committee thereof may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.11 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or
these bylaws, the board of directors shall have the authority to fix the
compensation of directors.
3.12 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, so long as stockholders of the corporation are entitled to cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect such director if then cumulatively voted at an election of the entire
board of directors or, if there be classes of directors, at an election of the
class of directors of which such director is a part.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
-10-
<PAGE> 15
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors, or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority (i) approving or adopting or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval or
(ii) adopting, amending, or repealing any bylaws of the corporation; and, unless
the board resolution establishing the committee, the bylaws or the certificate
of incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the Delaware
General Corporation Law.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.6 (regular
meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum),
Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting),
with such changes in the context of those bylaws as are necessary to substitute
the committee and its members for the board of directors and its members;
provided, however, that the time of regular meetings of committees may be
determined either by resolution of the board of directors or by resolution of
the committee, that special meetings of committees may also be called by
resolution of the board of directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors
-11-
<PAGE> 16
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant vice presidents, one or more assistant secretaries, one or
more assistant treasurers, and any such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these bylaws. Any number of
offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
bylaws, shall be appointed by the board of directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to
appoint, such other officers and agents as the business of the corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
-12-
<PAGE> 17
Any vacancy occurring in any office of the corporation shall be filled
by the board of directors.
5.5 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to the
chairman of the board by the board of directors or as may be prescribed by these
bylaws. If there is no president and no one has been appointed chief executive
officer, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.6 of these bylaws.
5.6 CHIEF EXECUTIVE OFFICER
The board of directors shall select a chief executive officer of the
corporation who shall be subject to the control of the board of directors and
have general supervision, direction and control of the business and the officers
of the corporation. The chief executive officer shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the board,
at all meetings of the board of directors.
5.7 PRESIDENT
The president shall have the general powers and duties of management
usually vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the board of directors or these
bylaws. In addition and subject to such supervisory powers, if any, as may be
given by the board of directors to the chairman of the board, if no one has been
appointed chief executive officer, the president shall be the chief executive
officer of the corporation and shall, subject to the control of the board of
directors, have the powers and duties described in Section 5.6.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized
-13-
<PAGE> 18
and the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. The chief financial
officer shall disburse the funds of the corporation as may be ordered by the
board of directors, shall render to the president and directors, whenever they
request it, an account of all his transactions as chief financial officer and of
the financial condition of the corporation, and shall have other powers and
perform such other duties as may be prescribed by the board of directors or
these bylaws.
The chief financial officer shall be the treasurer of the corporation.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these bylaws.
-14-
<PAGE> 19
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the chief financial officer or in the event of his or
her inability or refusal to act, perform the duties and exercise the powers of
the chief financial officer and shall perform such other duties and have such
other powers as may be prescribed by the board of directors or these bylaws.
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
5.14 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the corporation, which approval shall not be unreasonably
withheld) actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to
-15-
<PAGE> 20
believe such person's conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) and amounts paid in settlement (if such settlement is approved in advance
by the corporation, which approval shall not be unreasonably withheld) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding any other
provision of this Article VI, no person shall be indemnified hereunder for any
expenses or amounts paid in settlement with respect to any action to recover
short-swing profits under Section 16(b) of the Securities Exchange Act of 1934,
as amended.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the director, officer, employee
or agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in Sections 6.1 and 6.2. Such
determination shall be made (1) by the Board of Directors or the Executive
Committee by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding or (2) or if such quorum is not
obtainable or, even if obtainable, a quorum of disinterested directors so
directs, by
-16-
<PAGE> 21
independent legal counsel in a written opinion, or (3) by the stockholders.
Notwithstanding the foregoing, a director, officer, employee or agent of the
Corporation shall be entitled to contest any determination that the director,
officer, employee or agent has not met the applicable standard of conduct set
forth in Sections 6.1 and 6.2 by petitioning a court of competent jurisdiction.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding, by an individual who may be entitled to indemnification pursuant to
Section 6.1 or 6.2, shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article VI shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under and subject to the provisions of this Article VI (including,
without limitation the provisions of Section 6.4) with respect to the resulting
or surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
-17-
<PAGE> 22
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive officer or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
-18-
<PAGE> 23
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
-19-
<PAGE> 24
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if such person were
such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon. 8.4 SPECIAL
DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock
-20-
<PAGE> 25
a statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in (i) the Delaware General Corporation Law or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
-21-
<PAGE> 26
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal bylaws.
-22-
<PAGE> 27
CERTIFICATE OF ADOPTION OF BYLAWS
OF
E-LOAN, INC.
Certificate by Secretary
The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of E-Loan, Inc. and that the foregoing Bylaws,
comprising twenty-two (22) pages, were adopted as the Bylaws of the corporation
on February 22, 1999 by the board of directors of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 22nd day of February 1999.
/s/ Mario M. Rosati
------------------------------------
Mario M. Rosati, Secretary
-23-
<PAGE> 1
EXHIBIT 3.4
AMENDED AND RESTATED BYLAWS
OF
E-LOAN, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I CORPORATE OFFICES ................................................... 1
1.1 REGISTERED OFFICE .................................................... 1
1.2 OTHER OFFICES ........................................................ 1
ARTICLE II MEETINGS OF STOCKHOLDERS ........................................... 1
2.1 PLACE OF MEETINGS .................................................... 1
2.2 ANNUAL MEETING ....................................................... 1
2.3 SPECIAL MEETING ...................................................... 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS ..................................... 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS ...... 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE ......................... 3
2.7 QUORUM ............................................................... 4
2.8 ADJOURNED MEETING; NOTICE ............................................ 4
2.9 CONDUCT OF BUSINESS .................................................. 4
2.10 VOTING ............................................................... 4
2.11 WAIVER OF NOTICE ..................................................... 5
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING .............. 5
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS .......... 5
2.14 PROXIES .............................................................. 6
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE ................................ 6
ARTICLE III DIRECTORS ......................................................... 7
3.1 POWERS ............................................................... 7
3.2 NUMBER OF DIRECTORS .................................................. 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS .............. 7
3.4 RESIGNATION AND VACANCIES ............................................ 8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ............................. 8
3.6 REGULAR MEETINGS ..................................................... 9
3.7 SPECIAL MEETINGS; NOTICE ............................................. 9
3.8 QUORUM ............................................................... 9
3.9 WAIVER OF NOTICE ..................................................... 9
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING .................... 10
3.11 FEES AND COMPENSATION OF DIRECTORS ................................... 10
3.12 APPROVAL OF LOANS TO OFFICERS ........................................ 10
3.13 REMOVAL OF DIRECTORS ................................................. 10
ARTICLE IV COMMITTEES ......................................................... 11
4.1 COMMITTEES OF DIRECTORS .............................................. 11
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
4.2 COMMITTEE MINUTES .................................................... 11
4.3 MEETINGS AND ACTION OF COMMITTEES .................................... 11
ARTICLE V OFFICERS ............................................................ 12
5.1 OFFICERS ............................................................. 12
5.2 APPOINTMENT OF OFFICERS .............................................. 12
5.3 SUBORDINATE OFFICERS ................................................. 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES ............... 12
5.5 CHAIRMAN OF THE BOARD ................................................ 13
5.6 CHIEF EXECUTIVE OFFICER .............................................. 13
5.7 PRESIDENT ............................................................ 13
5.8 VICE PRESIDENTS ...................................................... 13
5.9 SECRETARY ............................................................ 13
5.10 CHIEF FINANCIAL OFFICER .............................................. 14
5.11 ASSISTANT SECRETARY .................................................. 14
5.12 ASSISTANT TREASURER .................................................. 15
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ....................... 15
5.14 AUTHORITY AND DUTIES OF OFFICERS ..................................... 15
ARTICLE VI INDEMNITY .......................................................... 15
6.1 THIRD PARTY ACTIONS .................................................. 15
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION ........................ 16
6.3 SUCCESSFUL DEFENSE ................................................... 16
6.4 DETERMINATION OF CONDUCT ............................................. 16
6.5 PAYMENT OF EXPENSES IN ADVANCE ....................................... 17
6.6 INDEMNITY NOT EXCLUSIVE .............................................. 17
6.7 INSURANCE INDEMNIFICATION ............................................ 17
6.8 THE CORPORATION ...................................................... 17
6.9 EMPLOYEE BENEFIT PLANS ............................................... 18
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES .......... 18
ARTICLE VII RECORDS AND REPORTS ............................................... 18
7.1 MAINTENANCE AND INSPECTION OF RECORDS ................................ 18
7.2 INSPECTION BY DIRECTORS .............................................. 19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS ..................................... 19
ARTICLE VIII GENERAL MATTERS .................................................. 19
8.1 CHECKS ............................................................... 19
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS ..................... 20
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES ............................... 20
8.4 SPECIAL DESIGNATION ON CERTIFICATES .................................. 20
8.5 LOST CERTIFICATES .................................................... 21
8.6 CONSTRUCTION; DEFINITIONS ............................................ 21
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
8.7 DIVIDENDS ............................................................ 21
8.8 FISCAL YEAR .......................................................... 21
8.9 SEAL ................................................................. 21
8.10 TRANSFER OF STOCK .................................................... 22
8.11 STOCK TRANSFER AGREEMENTS ............................................ 22
8.12 REGISTERED STOCKHOLDERS .............................................. 22
ARTICLE IX AMENDMENTS ......................................................... 22
</TABLE>
-iii=
<PAGE> 5
AMENDED AND RESTATED BYLAWS
OF
E-LOAN, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, either within or
without the State of Delaware, as may be designated by the board of directors or
in the manner provided in these amended and restated bylaws. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation in the State of Delaware.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the second
Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding
<PAGE> 6
business day. At the meeting, directors shall be elected and any other proper
business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the chief executive
officer, or by the president.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president or the
secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article
II, that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than ten (10) nor more than sixty (60) days after
the receipt of the request. Nothing contained in this paragraph of this Section
2.3 shall be construed as limiting, fixing, or affecting the time when a meeting
of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.6 of these amended and
restated bylaws not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting. The
notice shall specify the place, date, and hour of the meeting, and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
Subject to the rights of holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation,
(i) nominations for the election of directors, and
(ii) business proposed to be brought before any stockholder meeting
may be made by the board of directors or proxy committee appointed by the board
of directors or by any stockholder entitled to vote in the election of directors
generally if such nomination or business proposed is otherwise proper business
before such meeting. However, any such stockholder may nominate one or more
persons for election as directors at a meeting or propose business to be brought
before a meeting, or both, only if such stockholder has given timely notice in
proper written form of their intent to make such nomination or nominations or to
propose such business. To be timely, such stockholder's notice must be delivered
to or mailed and received at the principal
-2-
<PAGE> 7
executive offices of the corporation not less than one hundred twenty (120)
calendar days in advance of the first anniversary date of mailing of the
corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting of stockholders; provided, however, that in the
event that no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than thirty (30) days from the date
contemplated at the time of the previous year's proxy statement, notice by the
stockholder to be timely must be so received a reasonable time before the
solicitation is made. To be in proper form, a stockholder's notice to the
secretary shall set forth:
(a) the name and address of the stockholder who intends to make
the nominations or propose the business and, as the case may be, of
the person or persons to be nominated or of the business to be
proposed;
(b) a representation that the stockholder is a holder of record
of stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
(c) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder;
(d) such other information regarding each nominee or each matter
of business to be proposed by such stockholder as would be required to
be included in a proxy statement filed pursuant to the proxy rules of
the Securities and Exchange Commission had the nominee been nominated,
or intended to be nominated, or the matter been proposed, or intended
to be proposed by the board of directors; and
(e) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting shall refuse to acknowledge the nomination
of any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
-3-
<PAGE> 8
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (i) the Chairman of the meeting or (ii)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
amended and restated bylaws otherwise require, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting the corporation may
transact any business that might have been transacted at the original meeting.
If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
2.9 CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.10 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.13 of these amended
and restated bylaws, subject to the provisions of Sections 217 and 218 of the
Delaware General Corporation Law (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).
Except as may be otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
Notwithstanding the foregoing, if the stockholders of the corporation
are entitled, pursuant to Sections 2115 and 301.5 of the California Corporations
Code, to cumulate their votes in the election of directors, each such
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes that such stockholder normally
is entitled to cast) only if the candidates' names have been properly placed in
nomination (in accordance with these Amended and Restated Bylaws) prior to
commencement of the voting, and the stockholder
-4-
<PAGE> 9
requesting cumulative voting has given notice prior to commencement of the
voting of the stockholder's intention to cumulate votes. If cumulative voting is
properly requested, each holder of stock, or of any class or classes or of a
series or series thereof, who elects to cumulate votes shall be entitled to as
many votes as equals the number of votes that (absent this provision as to
cumulative voting) he or she would be entitled to cast for the election of
directors with respect to his or her shares of stock multiplied by the number of
directors to be elected by him, and he or she may cast all of such votes for
single director or may distribute them among the number to be voted for, or for
any two or more of them, as he or she may see fit.
2.11 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
Delaware General Corporation Law or of the certificate of incorporation or these
amended and restated bylaws, a written waiver, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the certificate of incorporation or these amended and restated
bylaws.
2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any
action required to be taken at any annual or special meeting of stockholders of
a corporation, or any action that may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the
Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the Delaware General Corporation Law.
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other
-5-
<PAGE> 10
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the first date on which
a signed written consent is delivered to the corporation.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.14 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by a written
proxy, signed by such stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if such stockholder's name is placed on the proxy by any
reasonable means including, but not limited to, by facsimile signature, manual
signature, typewriting, telegraphic transmission or otherwise, by such
stockholder or such stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the Delaware General Corporation Law.
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
-6-
<PAGE> 11
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. Such list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Delaware General Corporation Law and
any limitations in the certificate of incorporation or these amended and
restated bylaws relating to action required to be approved by the stockholders
or by the outstanding shares, the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or under the direction
of the board of directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of six (6) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation. Upon the closing of the first sale of the
corporation's common stock pursuant to a firmly underwritten registered public
offering (the "IPO"), the directors shall be divided into three classes, with
the term of office of the first class, which class shall initially consist of
two directors, to expire at the first annual meeting of stockholders held after
the IPO; the term of office of the second class, which shall initially consist
of two directors, to expire at the second annual meeting of stockholders held
after the IPO; the term of office of the third class, which class shall
initially consist of two directors, to expire at the third annual meeting of
stockholders held after the IPO; and thereafter for each such term to expire at
each third succeeding annual meeting of stockholders held after such election.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these amended and restated bylaws,
directors shall be elected at each annual meeting of stockholders to hold office
until the next annual meeting. Directors need not be stockholders unless so
required by the certificate of incorporation or these amended and restated
bylaws, wherein other qualifications for directors may be prescribed. Each
director, including a director elected to fill a vacancy, shall hold office
until his successor is elected and qualified or until his earlier resignation or
removal.
Elections of directors need not be by written ballot.
-7-
<PAGE> 12
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors shall
resign from the board of directors, effective at a future date, a majority of
the directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and each director so
chosen shall hold office as provided in this section in the filling of other
vacancies.
Unless otherwise provided in the certificate of incorporation or these
amended and restated bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these amended and restated
bylaws, or may apply to the Court of Chancery for a decree summarily ordering an
election as provided in Section 211 of the Delaware General Corporation Law.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the
Delaware General Corporation Law as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
-8-
<PAGE> 13
Unless otherwise restricted by the certificate of incorporation or
these amended and restated bylaws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
such board of directors, or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting pursuant to
this section shall constitute presence in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute, the certificate of incorporation, or
these amended and restated bylaws. If a quorum is not present at any meeting of
the board of directors, then the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
-9-
<PAGE> 14
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
Delaware General Corporation Law, the certificate of incorporation, or these
amended and restated bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when such person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these amended and restated bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or
these amended and restated bylaws, any action required or permitted to be taken
at any meeting of the board of directors, or of any committee thereof may be
taken without a meeting if all members of the board or committee, as the case
may be, consent thereto in writing and the writing or writings are filed with
the minutes of proceedings of the board or committee.
3.11 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or
these amended and restated bylaws, the board of directors shall have the
authority to fix the compensation of directors.
3.12 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these amended and restated bylaws, any director or the
entire board of directors may be removed, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election of directors;
provided, however, that, so long as stockholders of the corporation are entitled
to cumulative voting, if less than the entire board is to be removed, no
director may be removed without cause if the votes cast against his removal
would be sufficient to elect such director if then cumulatively voted at an
election of the entire board of directors or, if there be classes of directors,
at an election of the class of directors of which such director is a part.
-10-
<PAGE> 15
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors, or in the amended and restated bylaws of
the corporation, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority (i) approving or adopting or recommending to the stockholders, any
action or matter expressly required by the Delaware General Corporation Law to
be submitted to stockholders for approval or (ii) adopting, amending, or
repealing any amended and restated bylaws of the corporation; and, unless the
board resolution establishing the committee, the amended and restated bylaws or
the certificate of incorporation expressly so provide, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the Delaware General Corporation Law.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these amended and
restated bylaws, Section 3.5 (place of meetings and meetings by telephone),
Section 3.6 (regular meetings), Section 3.7 (special meetings and notice),
Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action
without a meeting), with such changes in the context of those amended and
restated bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by resolution of the
board of directors or by resolution of the committee, that special meetings of
committees may
-11-
<PAGE> 16
also be called by resolution of the board of directors and that notice of
special meetings of committees shall also be given to all alternate members, who
shall have the right to attend all meetings of the committee. The board of
directors may adopt rules for the government of any committee not inconsistent
with the provisions of these amended and restated bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant vice presidents, one or more assistant secretaries, one or
more assistant treasurers, and any such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these amended and restated
bylaws. Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
amended and restated bylaws, shall be appointed by the board of directors,
subject to the rights, if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to
appoint, such other officers and agents as the business of the corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these amended and restated bylaws or
as the board of directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
-12-
<PAGE> 17
Any vacancy occurring in any office of the corporation shall be filled
by the board of directors.
5.5 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to the
chairman of the board by the board of directors or as may be prescribed by these
amended and restated bylaws. If there is no president and no one has been
appointed chief executive officer, then the chairman of the board shall also be
the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 5.6 of these amended and restated bylaws.
5.6 CHIEF EXECUTIVE OFFICER
The board of directors shall select a chief executive officer of the
corporation who shall be subject to the control of the board of directors and
have general supervision, direction and control of the business and the officers
of the corporation. The chief executive officer shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the board,
at all meetings of the board of directors.
5.7 PRESIDENT
The president shall have the general powers and duties of management
usually vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the board of directors or these
amended and restated bylaws. In addition and subject to such supervisory powers,
if any, as may be given by the board of directors to the chairman of the board,
if no one has been appointed chief executive officer, the president shall be the
chief executive officer of the corporation and shall, subject to the control of
the board of directors, have the powers and duties described in Section 5.6.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these amended
and restated bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all
-13-
<PAGE> 18
meetings and actions of directors, committees of directors, and stockholders.
The minutes shall show the time and place of each meeting, whether regular or
special (and, if special, how authorized and the notice given), the names of
those present at directors' meetings or committee meetings, the number of shares
present or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these amended and restated bylaws. The secretary shall keep the seal of the
corporation, if one be adopted, in safe custody and shall have such other powers
and perform such other duties as may be prescribed by the board of directors or
by these amended and restated bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. The chief financial
officer shall disburse the funds of the corporation as may be ordered by the
board of directors, shall render to the president and directors, whenever they
request it, an account of all his transactions as chief financial officer and of
the financial condition of the corporation, and shall have other powers and
perform such other duties as may be prescribed by the board of directors or
these amended and restated bylaws.
The chief financial officer shall be the treasurer of the corporation.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these amended and restated bylaws.
-14-
<PAGE> 19
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the chief financial officer or in the event of his or
her inability or refusal to act, perform the duties and exercise the powers of
the chief financial officer and shall perform such other duties and have such
other powers as may be prescribed by the board of directors or these amended and
restated bylaws.
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
5.14 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the corporation, which approval shall not be unreasonably
withheld) actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to
-15-
<PAGE> 20
believe such person's conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) and amounts paid in settlement (if such settlement is approved in advance
by the corporation, which approval shall not be unreasonably withheld) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding any other
provision of this Article VI, no person shall be indemnified hereunder for any
expenses or amounts paid in settlement with respect to any action to recover
short-swing profits under Section 16(b) of the Securities Exchange Act of 1934,
as amended.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the director, officer, employee
or agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in Sections 6.1 and 6.2. Such
determination shall be made (1) by the Board of Directors or the Executive
Committee by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding or (2) or if such quorum is not
obtainable or, even if obtainable, a quorum of disinterested directors so
directs, by
-16-
<PAGE> 21
independent legal counsel in a written opinion, or (3) by the stockholders.
Notwithstanding the foregoing, a director, officer, employee or agent of the
Corporation shall be entitled to contest any determination that the director,
officer, employee or agent has not met the applicable standard of conduct set
forth in Sections 6.1 and 6.2 by petitioning a court of competent jurisdiction.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding, by an individual who may be entitled to indemnification pursuant to
Section 6.1 or 6.2, shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article VI shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under and subject to the provisions of this Article VI (including,
without limitation the provisions of Section 6.4) with respect to the resulting
or surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
-17-
<PAGE> 22
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive officer or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these amended and restated bylaws as
amended to date, accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
-18-
<PAGE> 23
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
-19-
<PAGE> 24
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these amended
and restated bylaws, may authorize any officer or officers, or agent or agents,
to enter into any contract or execute any instrument in the name of and on
behalf of the corporation; such authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if such person were
such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock
-20-
<PAGE> 25
a statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these amended and restated bylaws. Without limiting
the generality of this provision, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both a
corporation and a natural person. 8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in (i) the Delaware General Corporation Law or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
-21-
<PAGE> 26
8.9 SEAL
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The amended and restated bylaws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its certificate of incorporation, confer the power
to adopt, amend or repeal amended and restated bylaws upon the directors. The
fact that such power has been so conferred upon the directors shall not divest
the stockholders of the power, nor limit their power to adopt, amend or repeal
amended and restated bylaws.
-22-
<PAGE> 27
CERTIFICATE OF ADOPTION OF
AMENDED AND RESTATED BYLAWS
OF
E-LOAN, INC.
Certificate by Secretary
The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of E-Loan, Inc. and that the foregoing Amended
and Restated Bylaws, comprising twenty-two (22) pages, were adopted as the
Amended and Restated Bylaws of the corporation on __________, 1999 by the board
of directors of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this ____ day of _________ 1999.
---------------------------------------
Frank Siskowski, Secretary
-23-
<PAGE> 1
EXHIBIT 5.1
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
TELEPHONE 650-493-9300 FACSIMILE 650-493-6811
WWW.WSGR.COM
Palo Alto, California John Arnot Wilson
Kirkland, Washington Retired
Austin, Texas
March 23, 1999
E-Loan, Inc.
5875 Arnold Road, Suite 100
Dublin, CA 94568
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on March 23, 1999 (as such may be amended or
supplemented, the "Registration Statement"), in connection with the registration
under the Securities Act of 1933, as amended, of shares of Common Stock of
E-Loan, Inc. (the "Shares"). The Shares, which include shares of Common Stock
issuable pursuant to an over-allotment option granted to the underwriters, are
to be sold to the underwriters as described in such Registration Statement for
the sale to the public or issued to the Representatives of the underwriters. As
your counsel in connection with this transaction, we have examined the
proceedings proposed to be taken in connection with said sale and issuance of
the Shares.
It is our opinion that, upon approval by the pricing committee duly
authorized by the Company's Board of Directors, the Shares when issued and sold
in the manner referred to in the Registration Statement will be legally and
validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part hereof, and
any amendment thereto.
Very truly yours,
/s/ Wilson Sonsini Goodrich & Rosati
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE> 1
EXHIBIT 10.1
E-LOAN, INC.
FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of March 19,
1999 by and between E-Loan, Inc., a Delaware corporation (the "Company"), and
NAME~ ("Indemnitee").
WHEREAS, effective as of the date hereof, E-Loan, Inc., a California
corporation, is reincorporating into Delaware;
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in connection with the Company's reincorporation, the Company and
Indemnitee desire to continue to have in place the additional protection
provided by an indemnification agreement, with such changes as are required to
conform the existing agreement to Delaware law and to provide indemnification
and advancement of expenses to the Indemnitee to the maximum extent permitted
by Delaware law;
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as
set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. Certain Definitions.
a. "Change in Control" shall mean, and shall be deemed to have occurred
if, on or after the date of this Agreement, (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than a trustee or other fiduciary holding
<PAGE> 2
securities under an employee benefit plan of the Company acting in such
capacity or a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of stock
of the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing
more than 50% of the total voting power represented by the Company's then
outstanding Voting Securities, (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, (iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series
of related transactions) all or substantially all of the Company's assets.
b. "Claim" shall mean with respect to a Covered Event: any threatened,
pending or completed action, suit, proceeding or alternative dispute resolution
mechanism, or any hearing, inquiry or investigation that Indemnitee in good
faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil,
criminal, administrative, investigative or other.
c. References to the "Company" shall include, in addition to E-Loan,
Inc., any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger to which E-Loan, Inc. (or any of its
wholly owned subsidiaries) is a party which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, employees, agents or fiduciaries, so that if Indemnitee is or was a
director, officer, employee, agent or fiduciary of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
d. "Covered Event" shall mean any event or occurrence related to the fact
that Indemnitee is or was a director, officer, employee, agent or fiduciary of
the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
-2-
<PAGE> 3
e. "Expenses" shall mean any and all expenses (including attorneys' fees
and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of any Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement.
f. "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
g. "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other Indemnitees under
similar indemnity agreements).
h. References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
i. "Reviewing Party" shall mean, subject to the provisions of Section
2(d), any person or body appointed by the Board of Directors in accordance with
applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Company's Board of
Directors, Independent Legal Counsel or any other person or body not a party to
the particular Claim for which Indemnitee is seeking indemnification.
j. "Section" refers to a section of this Agreement unless otherwise
indicated.
k. "Voting Securities" shall mean any securities of the Company that vote
generally in the election of directors.
2. Indemnification.
a. Indemnification of Expenses. Subject to the provisions of Section
2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest
extent permitted by law if
-3-
<PAGE> 4
Indemnitee was or is or becomes a party to or witness or other participant in,
or is threatened to be made a party to or witness or other participant in, any
Claim (whether by reason of or arising in part out of a Covered Event),
including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses.
b. Review of Indemnification Obligations. Notwithstanding the foregoing,
in the event any Reviewing Party shall have determined (in a written opinion,
in any case in which Independent Legal Counsel is the Reviewing Party) that
Indemnitee is not entitled to be indemnified hereunder under applicable law,
(i) the Company shall have no further obligation under Section 2(a) to make any
payments to Indemnitee not made prior to such determination by such Reviewing
Party, and (ii) the Company shall be entitled to be reimbursed by Indemnitee
(who hereby agrees to reimburse the Company) for all Expenses theretofore paid
to Indemnitee to which Indemnitee is not entitled hereunder under applicable
law; provided, however, that if Indemnitee has commenced or thereafter
commences legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee is entitled to be indemnified hereunder under
applicable law, any determination made by any Reviewing Party that Indemnitee
is not entitled to be indemnified hereunder under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the Company for any
Expenses theretofore paid in indemnifying Indemnitee until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse
the Company for any Expenses shall be unsecured and no interest shall be
charged thereon.
c. Indemnitee Rights on Unfavorable Determination; Binding Effect. If any
Reviewing Party determines that Indemnitee substantively is not entitled to be
indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any
determination by any Reviewing Party shall be conclusive and binding on the
Company and Indemnitee.
d. Selection of Reviewing Party; Change in Control. If there has not been
a Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's Certificate of Incorporation or Bylaws
as now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company
agrees to abide by such opinion. The Company agrees to pay the reasonable fees
of the Independent Legal Counsel referred to above and to indemnify fully such
-4-
<PAGE> 5
counsel against any and all expenses (including attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto. Notwithstanding any other provision of this
Agreement, the Company shall not be required to pay Expenses of more than one
Independent Legal Counsel in connection with all matters concerning a single
Indemnitee, and such Independent Legal Counsel shall be the Independent Legal
Counsel for any or all other Indemnitees unless (i) the employment of separate
counsel by one or more Indemnitees has been previously authorized by the
Company in writing, or (ii) an Indemnitee shall have provided to the Company a
written statement that such Indemnitee has reasonably concluded that there may
be a conflict of interest between such Indemnitee and the other Indemnitees
with respect to the matters arising under this Agreement.
e. Mandatory Payment of Expenses. Notwithstanding any other provision
of this Agreement other than Section 10 hereof, to the extent that Indemnitee
has been successful on the merits or otherwise, including, without limitation,
the dismissal of an action without prejudice, in defense of any Claim,
Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in
connection therewith.
3. Expense Advances.
a. Obligation to Make Expense Advances. Upon receipt of a written
undertaking by or on behalf of the Indemnitee to repay such amounts if it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
therefore by the Company hereunder under applicable law, the Company shall make
Expense Advances to Indemnitee.
b. Form of Undertaking. Any obligation to repay any Expense Advances
hereunder pursuant to a written undertaking by the Indemnitee shall be
unsecured and no interest shall be charged thereon.
c. Determination of Reasonable Expense Advances. The parties agree that
for the purposes of any Expense Advance for which Indemnitee has made written
demand to the Company in accordance with this Agreement, all Expenses included
in such Expense Advance that are certified by affidavit of Indemnitee's counsel
as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
a. Timing of Payments. All payments of Expenses (including without
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than thirty (30) business days after such
written demand by Indemnitee is presented to the Company, except in the case of
Expense Advances, which shall be made no later than ten (10) business days
after such written demand by Indemnitee is presented to the Company.
-5-
<PAGE> 6
b. Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to Indemnitee's right to be indemnified or Indemnitee's right to
receive Expense Advances under this Agreement, give the Company notice in
writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
c. No Presumptions; Burden of Proof. For purposes of this Agreement,
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court
has determined that indemnification is not permitted by this Agreement or
applicable law. In addition, neither the failure of any Reviewing Party to
have made a determination as to whether Indemnitee has met any particular
standard of conduct or had any particular belief, nor an actual determination
by any Reviewing Party that Indemnitee has not met such standard of conduct or
did not have such belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee should be
indemnified under this Agreement under applicable law, shall be a defense to
Indemnitee's claim or create a presumption that Indemnitee has not met any
particular standard of conduct or did not have any particular belief. In
connection with any determination by any Reviewing Party or otherwise as to
whether the Indemnitee is entitled to be indemnified hereunder under applicable
law, the burden of proof shall be on the Company to establish that Indemnitee
is not so entitled.
d. Notice to Insurers. If, at the time of the receipt by the Company of
a notice of a Claim pursuant to Section 4(b) hereof, the Company has liability
insurance in effect which may cover such Claim, the Company shall give prompt
notice of the commencement of such Claim to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such Claim in accordance
with the terms of such policies.
e. Selection of Counsel. In the event the Company shall be obligated
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by
Indemnitee (which approval shall not be unreasonably withheld) upon the
delivery to Indemnitee of written notice of the Company's election to do so.
After delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees or expenses of separate counsel
subsequently retained by or on behalf of Indemnitee with respect to the same
Claim; provided that, (i) Indemnitee shall have the right to employ
Indemnitee's separate counsel in any such Claim at Indemnitee's expense and
(ii) if (A) the employment of separate counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
-6-
<PAGE> 7
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or (C) the Company shall not
continue to retain such counsel to defend such Claim, then the fees and
expenses of Indemnitee's separate counsel shall be Expenses for which
Indemnitee may receive indemnification or Expense Advances hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
a. Scope. The Company hereby agrees to indemnify the Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify
a member of its board of directors or an officer, employee, agent or fiduciary,
it is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, such change, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder except as set forth in Section 10(a) hereof.
b. Nonexclusivity. The indemnification and the payment of Expense
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's Certificate of Incorporation,
its Bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of
the total amount thereof, the Company shall nevertheless indemnify Indemnitee
for the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that
in certain instances, federal law or applicable public policy may prohibit the
Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future
to undertake with the Securities and Exchange Commission to submit the
-7-
<PAGE> 8
question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if
Indemnitee is not an officer or director but is a key employee, agent or
fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement, the
Company shall not be obligated pursuant to the terms of this Agreement:
a. Excluded Actions or Omissions. To indemnify or make Expense Advances
to Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving indemnification
under applicable law.
b. Claims Initiated by Indemnitee. To indemnify or make Expense
Advances to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's Certificate of Incorporation or Bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, Expense Advances, or insurance recovery, as
the case may be.
c. Lack of Good Faith. To indemnify Indemnitee for any Expenses
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
d. Claims Under Section 16(b). To indemnify Indemnitee for Expenses and
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended, or any similar successor statute.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
-8-
<PAGE> 9
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part,
of the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the
Company or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or Interpretation.
In the event that any action is instituted by Indemnitee under this Agreement
or under any liability insurance policies maintained by the Company to enforce
or interpret any of the terms hereof or thereof, Indemnitee shall be entitled
to be indemnified for all Expenses incurred by Indemnitee with respect to such
action (including without limitation attorneys' fees), regardless of whether
Indemnitee is ultimately successful in such action, unless as a part of such
action a court having jurisdiction over such action makes a final judicial
determination (as to which all rights of appeal therefrom have been exhausted
or lapsed) that each of the material assertions made by Indemnitee as a basis
for such action was not made in good faith or was frivolous; provided, however,
that until such final judicial determination is made, Indemnitee shall be
entitled under Section 3 to receive payment of Expense Advances hereunder with
respect to such action. In the event of an action instituted by or in the name
of the Company under this Agreement to enforce or interpret any of the terms of
this Agreement, Indemnitee shall be entitled to be indemnified for all Expenses
incurred by Indemnitee in defense of such action (including without limitation
costs and expenses incurred with respect to Indemnitee's counterclaims and
cross- claims made in such action), unless as a part of such action a court
having jurisdiction over such action makes a final judicial determination (as
to which all rights of appeal therefrom have been exhausted or lapsed) that
each of the material defenses asserted by Indemnitee in such action was made in
bad faith or was frivolous; provided, however, that until such final judicial
determination is made, Indemnitee shall be entitled under Section 3 to receive
payment of Expense Advances hereunder with respect to such action.
14. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.
15. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for
-9-
<PAGE> 10
by the party addressed, on the date of such delivery, or (ii) if mailed by
domestic certified or registered mail with postage prepaid, on the third
business day after the date postmarked. Addresses for notice to either party
are as shown on the signature page of this Agreement, or as subsequently
modified by written notice.
16. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out
of or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
17. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
18. Choice of Law. This Agreement, and all rights, remedies, liabilities,
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and to be performed entirely
in the State of Delaware without regard to principles of conflicts of laws.
19. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
20. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
21. Integration and Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.
22. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
E-LOAN, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address: 5875 Arnold Road, Suite 100
Dublin, CA 94568
AGREED TO AND ACCEPTED
INDEMNITEE:
-----------------------------------
(Signature)
[NAME]
-----------------------------------
Name
-----------------------------------
Address
-----------------------------------
-11-
<PAGE> 1
EXHIBIT 10.2
E-LOAN, INC.
1997 STOCK PLAN
(as amended and restated _________, 1999)
1. Purposes of the Plan. The purposes of this 1997 Stock Plan are:
- to attract and retain the best available personnel for positions
of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means E-Loan, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
<PAGE> 2
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
-2-
<PAGE> 3
(p) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1997 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or Consultant.
-3-
<PAGE> 4
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 2,500,000 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year (beginning in 2000) equal to the lesser
of (i) 1,500,000 Shares, (ii) 4% of the outstanding shares on such date or (iii)
a lesser amount determined by the Board. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered
by different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
-4-
<PAGE> 5
(iv) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
-5-
<PAGE> 6
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
-6-
<PAGE> 7
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 750,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 750,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the canceled Option will be counted against the limits
set forth in subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
-7-
<PAGE> 8
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
-8-
<PAGE> 9
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
-9-
<PAGE> 10
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option shall vest and become exercisable in full, including Shares as to
which it would not otherwise be vested or exercisable, and the Option may be
exercised within such period of time as is specified in the Option Agreement
(but in no event later than the expiration of the term of such Option as set
forth in the Notice of Grant), by the Optionee's estate or by a person who
acquires the right to exercise the Option by bequest or inheritance. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. The
Option may be exercised by the executor or administrator of the Optionee's
estate or, if none, by the person(s) entitled to exercise the Option under the
Optionee's will or the laws of descent or distribution. If the Option is not so
exercised within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted
-10-
<PAGE> 11
Stock Purchase Agreement shall be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness of the purchaser to the Company.
The repurchase option shall lapse at a rate determined by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
-11-
<PAGE> 12
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has not
been previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the
-12-
<PAGE> 13
determination shall be provided to each Optionee within a reasonable time after
the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
-13-
<PAGE> 14
19. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
-14-
<PAGE> 15
E-LOAN, INC.
1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
<PAGE> 16
Termination Period:
This Option may be exercised for three months after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option may
be exercised for one year after Optionee ceases to be a Service Provider. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"),
this Option is intended to qualify as an Incentive Stock Option under Section
422 of the Code. However, if this Option is intended to be an Incentive Stock
Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d)
it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Secretary of the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be
<PAGE> 17
exercised upon receipt by the Company of such fully executed Exercise Notice
accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares; or
(e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of the Security Agreement attached hereto
as Exhibit B. The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement.
4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE
-3-
<PAGE> 18
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an ISO,
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at least one year,
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
-4-
<PAGE> 19
(c) Notice of Disqualifying Disposition of ISO Shares. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: E-LOAN, INC.
-5-
<PAGE> 20
- ----------------------------------- ----------------------------------------
Signature By
- ----------------------------------- ----------------------------------------
Print Name Title
- -----------------------------------
Residence Address
- -----------------------------------
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
----------------------------------------
Spouse of Optionee
-6-
<PAGE> 21
EXHIBIT A
E-LOAN, INC.
1997 STOCK PLAN
EXERCISE NOTICE
E-Loan, Inc.
540 University Avenue, Suite 350
Palo Alto, CA 94301
Attention: Secretary
1. Exercise of Option. Effective as of today, ________________, _____,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of E-Loan, Inc. (the "Company") under and
pursuant to the 1997 Stock Plan (the "Plan") and the Stock Option Agreement
dated _________, ____ (the "Option Agreement"). The purchase price for the
Shares shall be $________ , as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE> 22
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
Submitted by: Accepted by:
PURCHASER: E-LOAN, INC.
- ---------------------------------- -------------------------------------
Signature By
- ---------------------------------- -------------------------------------
Print Name Its
Address: Address:
- ---------------------------------- E-Loan, Inc.
540 University Avenue, Suite 350
- ---------------------------------- Palo Alto, CA 94301
-------------------------------------
Date Received
-2-
<PAGE> 23
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of __________, _____ between E-Loan,
Inc. a Delaware corporation ("Pledgee"), and _________________________
("Pledgor").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1997 Stock Plan, and Pledgor's election under the terms of the Option
to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________. The Note and
the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of the
transfer of the Shares to Pledgor under the Option Agreement, Pledgor, pursuant
to the California Commercial Code, hereby pledges all of such Shares (herein
sometimes referred to as the "Collateral") represented by certificate number
______, duly endorsed in blank or with executed stock powers, and herewith
delivers said certificate to the Secretary of Pledgee ("Pledgeholder"), who
shall hold said certificate subject to the terms and conditions of this Security
Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledge holder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
<PAGE> 24
c. Margin Regulations. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are declared or
made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this pledge,
subscription Options or other rights or options shall be issued in connection
with the pledged Shares, such rights, Options and options shall be the property
of Pledgor and, if exercised by Pledgor, all new stock or other securities so
acquired by Pledgor as it relates to the pledged Shares then held by
Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder here-
-2-
<PAGE> 25
under upon payments of the principal of the Note. The number of the pledged
Shares which shall be released shall be that number of full Shares which bears
the same proportion to the initial number of Shares pledged hereunder as the
payment of principal bears to the initial full principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross negligence,
Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms
of this Security Agreement shall be binding on their respective successors and
assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall
be deemed to include, for all purposes, the respective designees, successors,
assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.
-3-
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR"
----------------------------------------
Signature
----------------------------------------
Print Name
Address:
----------------------------------------
----------------------------------------
"PLEDGEE" E-LOAN, INC.,
a Delaware corporation
----------------------------------------
Signature
----------------------------------------
Print Name
----------------------------------------
Title
"PLEDGEHOLDER"
----------------------------------------
Secretary of
E-Loan, Inc.
-4-
<PAGE> 27
EXHIBIT C
NOTE
$ Palo Alto, Ca.
- ----------------------------
--------------, -----
FOR VALUE RECEIVED, _______________ promises to pay to E-Loan, Inc. a
Delaware corporation (the "Company"), or order, the principal sum of
_______________________ ($_____________), together with interest on the unpaid
principal hereof from the date hereof at the rate of _______________ percent
(____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, _____.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
----------------------------------------
----------------------------------------
<PAGE> 28
1997 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the 1997 Stock Plan and the Restricted Stock
Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a
part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: E-LOAN, INC.
- --------------------------- --------------------------------
Signature By
- --------------------------- --------------------------------
Print Name Title
<PAGE> 29
EXHIBIT A-1
1997 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
Service Provider, and the Purchaser's continued participation is considered by
the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser a Stock
Purchase Right subject to the terms and conditions of the Plan and the Notice of
Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per Share purchase price and as otherwise described in
the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.
3. Repurchase Option.
(a) In the event the Purchaser ceases to be a Service Provider for
any or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (see Section 4), the Company
shall, upon the date of such termination (as reasonably fixed and determined by
the Company) have an irrevocable, exclusive option (the "Repurchase Option") for
a period of sixty (60) days from such date to repurchase up to that number of
shares which constitute the Unreleased Shares (as defined in Section 4) at the
original purchase price per share (the "Repurchase Price"). The Repurchase
Option shall be exercised by the Company by delivering written notice to the
Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at
the Company's option, (i) by delivering to the Purchaser or the Purchaser's
executor a check in the amount of the aggregate Repurchase Price, or (ii) by
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of
<PAGE> 30
(i) and (ii) so that the combined payment and cancellation of indebtedness
equals the aggregate Repurchase Price. Upon delivery of such notice and the
payment of the aggregate Repurchase Price, the Company shall become the legal
and beneficial owner of the Shares being repurchased and all rights and
interests therein or relating thereto, and the Company shall have the right to
retain and transfer to its own name the number of Shares being repurchased by
the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the Fair Market Value of the Shares to
be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. Release of Shares From Repurchase Option.
(a) _______________________ percent (______%) of the Shares shall be
released from the Company's Repurchase Option [one year] after the Date of Grant
and __________________ percent (______%) of the Shares [at the end of each month
thereafter], provided that the Purchaser does not cease to be a Service Provider
prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the
Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
5. Restriction on Transfer. Except for the escrow described in Section 6
or the transfer of the Shares to the Company or its assignees contemplated by
this Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until such Shares
are released from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
6. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Repurchase
Option, the Purchaser shall, upon execution of this Agreement, deliver and
deposit with an escrow holder designated by the Company (the "Escrow Holder")
the share certificates representing the Unreleased Shares, together with the
stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and
-2-
<PAGE> 31
stock assignment shall be held by the Escrow Holder, pursuant to the Joint
Escrow Instructions of the Company and Purchaser attached hereto as Exhibit A-3,
until such time as the Company's Repurchase Option expires. As a further
condition to the Company's obligations under this Agreement, the Company may
require the spouse of Purchaser, if any, to execute and deliver to the Company
the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow while acting
in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to
be issued for the released Shares and shall deliver the certificate to the
Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to the Shares while they are held in
escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any, issued
hereunder shall be endorsed with the following legend (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of Shares and
the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
-3-
<PAGE> 32
9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that the
Purchaser (and not the Company) shall be responsible for the Purchaser's own tax
liability that may arise as a result of the transactions contemplated by this
Agreement. The Purchaser understands that Section 83 of the Internal Revenue
Code of 1986, as amended (the "Code"), taxes as ordinary income the difference
between the purchase price for the Shares and the Fair Market Value of the
Shares as of the date any restrictions on the Shares lapse. In this context,
"restriction" includes the right of the Company to buy back the Shares pursuant
to the Repurchase Option. The Purchaser understands that the Purchaser may elect
to be taxed at the time the Shares are purchased rather than when and as the
Repurchase Option expires by filing an election under Section 83(b) of the Code
with the IRS within 30 days from the date of purchase. The form for making this
election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
THE PURCHASER'S BEHALF.
10. General Provisions.
(a) This Agreement shall be governed by the internal substantive
laws, but not the choice of law rules of California. This Agreement, subject to
the terms and conditions of the Plan and the Notice of Grant, represents the
entire agreement between the parties with respect to the purchase of the Shares
by the Purchaser. Subject to Section 15(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given
by either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
Any notice to the Escrow Holder shall be sent to the Company's address with
a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of,
-4-
<PAGE> 33
and be enforceable by the Company's successors and assigns. The rights and
obligations of the Purchaser under this Agreement may only be assigned with the
prior written consent of the Company.
(d) Either party's failure to enforce any provision of this Agreement
shall not in any way be construed as a waiver of any such provision, nor prevent
that party from thereafter enforcing any other provision of this Agreement. The
rights granted both parties hereunder are cumulative and shall not constitute a
waiver of either party's right to assert any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED:
-----------------------
PURCHASER: E-LOAN, INC.
- ------------------------------ ----------------------------------------
Signature By
- ------------------------------ ----------------------------------------
Print Name Title
-5-
<PAGE> 34
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto ______________________________ (__________) shares of the Common
Stock of E-Loan, Inc. standing in my name of the books of said corporation
represented by Certificate No. _____ herewith and do hereby irrevocably
constitute and appoint to transfer the said stock on the books of the within
named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between________________________ and
the undersigned dated ______________, ____.
Dated: _______________, _____
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 35
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
----------, --
Corporate Secretary
E-Loan, Inc.
540 University Avenue, Suite 350
Palo Alto, Ca 94301
Dear _______________:
As Escrow Agent for both E-Loan, Inc., a Delaware corporation (the
"Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively as the "Company") exercises the Company's Repurchase Option set
forth in the Agreement, the Company shall give to Purchaser and you a written
notice specifying the number of shares of stock to be purchased, the purchase
price, and the time for a closing hereunder at the principal office of the
Company. Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
<PAGE> 36
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after Purchaser ceases to be a Service Provider, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
-2-
<PAGE> 37
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: E-Loan, Inc.
540 University Avenue, Suite 350
Palo Alto, CA 94301
PURCHASER:
----------------------------------------
----------------------------------------
----------------------------------------
ESCROW AGENT: Corporate Secretary
E-Loan, Inc.
540 University Avenue
Palo Alto, CA 94301
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
-3-
<PAGE> 38
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the internal substantive laws, but not the
choice of law rules, of California.
Very truly yours,
E-LOAN, INC.
----------------------------------------
By
----------------------------------------
Title
PURCHASER:
----------------------------------------
Signature
----------------------------------------
Print Name
ESCROW AGENT:
- -------------------------------------
Corporate Secretary
-4-
<PAGE> 39
EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________________, spouse of ___________________, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of the Company's grant to my spouse of the right to purchase
shares of E-Loan, Inc., as set forth in the Agreement, I hereby appoint my
spouse as my attorney-in-fact in respect to the exercise of any rights under the
Agreement and agree to be bound by the provisions of the Agreement insofar as I
may have any rights in said Agreement or any shares issued pursuant thereto
under the community property laws or similar laws relating to marital property
in effect in the state of our residence as of the date of the signing of the
foregoing Agreement.
Dated: _______________, _____
----------------------------------------
Signature of Spouse
<PAGE> 40
EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: ___________ shares (the "Shares") of the Common Stock of E-Loan,
Inc. (the "Company").
3. The date on which the property was transferred is: _____________, ________.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $_______________.
6. The amount (if any) paid for such property is:
$_______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: ___________________, ____________________________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, ____________________________________________________
Spouse of Taxpayer
<PAGE> 1
EXHIBIT 10.3
E-LOAN, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean E-Loan, Inc., a Delaware corporation, and
any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings,
commissions, cash incentive compensation and bonuses, exclusive of payments for
overtime, shift premium, non-cash incentive compensation and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Offering Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "Offering Period" shall mean a period of approximately six (6)
months during which an option granted pursuant to the Plan may be exercised,
commencing on the first Trading Day on or after May 1 and terminating on the
last Trading Day in the period ending the following October 31, or commencing on
the first Trading Day on or after November 1 and terminating on the last Trading
Day in the period ending the following April 30; provided, however, that the
first Offering Period under the Plan shall commence with the first Trading Day
on or after the date on which the Securities and Exchange Commission declares
the Company's Registration Statement effective and ending on the last Trading
Day on or before October 31. The duration of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower; provided, however, that the Purchase Price
may be adjusted by the Board pursuant to Section 20.
(n) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(p) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
-2-
<PAGE> 3
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after May 1 and November 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 20 hereof; provided, however, that the first Offering Period under the
Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company's Registration Statement
effective and ending on the last Trading Day on or before October 31. The Board
shall have the power to change the duration of Offering Periods (including the
commencement dates thereof) with respect to future offerings without stockholder
approval if such change is announced at least five (5) days prior to the
scheduled beginning of the first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
-3-
<PAGE> 4
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during an
Offering Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than 1,250
shares (subject to any adjustment pursuant to Section 19), and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The
Option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the
-4-
<PAGE> 5
Exercise Date, and the maximum number of full shares subject to option shall be
purchased for such participant at the applicable Purchase Price with the
accumulated payroll deductions in his or her account. No fractional shares shall
be purchased; any payroll deductions accumulated in a participant's account
which are not sufficient to purchase a full share shall be retained in the
participant's account for the subsequent Offering Period, subject to earlier
withdrawal by the participant as provided in Section 10 hereof. Any other monies
left over in a participant's account after the Exercise Date shall be returned
to the participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, the shares purchased upon exercise of his or her
option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an
Employee for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 15 hereof, and such participant's
option shall be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant's customary number of hours per week of employment during the
period in which the participant is subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
-5-
<PAGE> 6
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 500,000 shares, plus an annual increase to be added on the first day of
the Company's fiscal year beginning in 2000 equal to the lesser of (i) 500,000
shares, (ii) 2% of the outstanding shares on such date or (iii) a lesser amount
determined by the Board. If, on a given Exercise Date, the number of shares with
respect to which options are to be exercised exceeds the number of shares then
available under the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
-6-
<PAGE> 7
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase per Offering Period (pursuant to Section 7), as well as
the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
-7-
<PAGE> 8
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, the Offering Period
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"). The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its stockholders. Except as provided
in Section 19 and Section 20 hereof, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any other applicable law, regulation or stock exchange rule), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(1) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
-8-
<PAGE> 9
(2) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(3) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
-9-
<PAGE> 10
EXHIBIT A
E-LOAN, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in the
E-Loan, Inc. 1999 Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's Common
Stock in accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 15%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my ability
to exercise the option under this Subscription Agreement is subject to
stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only): _________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be treated
for federal income tax purposes as having received ordinary income at the
time of such disposition in an amount equal to the excess of the fair
market value of the shares at the time such shares were purchased by me
over the price which I paid for the shares. I hereby agree to notify the
Company in writing within 30 days after the date of any
<PAGE> 11
disposition of shares and I will make adequate provision for Federal, state
or other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock. The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary to
make available to the Company any tax deductions or benefits attributable
to sale or early disposition of Common Stock by me. If I dispose of such
shares at any time after the expiration of the 2-year holding period, I
understand that I will be treated for federal income tax purposes as having
received income only at the time of such disposition, and that such income
will be taxed as ordinary income only to the extent of an amount equal to
the lesser of (1) the excess of the fair market value of the shares at the
time of such disposition over the purchase price which I paid for the
shares, or (2) 15% of the fair market value of the shares on the first day
of the Offering Period. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) _____________________________________________________
(First) (Middle) (Last)
Relationship
_____________________________ _______________________________________
(Address)
Employee's Social
Security Number: _______________________________________
Employee's Address: _______________________________________
_______________________________________
-2-
<PAGE> 12
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ___________________ ________________________________________
Signature of Employee
________________________________________
Spouse's Signature (If beneficiary other
than spouse)
-3-
<PAGE> 13
EXHIBIT B
E-LOAN, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the E-Loan, Inc. 1999
Employee Stock Purchase Plan which began on ___________, ______ (the "Enrollment
Date") hereby notifies the Company that he or she hereby withdraws from the
Offering Period. He or she hereby directs the Company to pay to the undersigned
as promptly as practicable all the payroll deductions credited to his or her
account with respect to such Offering Period. The undersigned understands and
agrees that his or her option for such Offering Period will be automatically
terminated. The undersigned understands further that no further payroll
deductions will be made for the purchase of shares in the current Offering
Period and the undersigned shall be eligible to participate in succeeding
Offering Periods only by delivering to the Company a new Subscription Agreement.
Name and Address of Participant:
________________________________________
________________________________________
________________________________________
Signature:
________________________________________
Date: __________________________________
<PAGE> 1
EXHIBIT 10.4
E-LOAN, INC.
RESTATED INVESTOR RIGHTS AGREEMENT
This Restated Investor Rights Agreement (the "Agreement") is effective
as of September 4, 1998 by and among E-Loan, Inc. (the "Company") and the
investors listed on Schedule A attached hereto (the "Investors"). This Agreement
amends and restates the Investor Rights Agreement dated as of December 18, 1997
("Prior Agreement").
The Prior Agreement is hereby terminated in its entirety and restated
herein. Such termination and restatement is effective upon the execution of this
Agreement by the holders of at least a majority of the shares of Registrable
Securities (as the term is defined under the Prior Agreement) outstanding as of
the date of this Agreement.
RECITALS
A. Pursuant to that certain Series D Preferred Stock Purchase Agreement
of even date herewith (the "Series D Agreement"), the Company has agreed to sell
to certain Investors (the "Series D Holders") a total of up to 1,950,000 shares
of the Series D Preferred Stock of the Company and, as an inducement for the
Series D Holders to purchase such shares, the Company agreed to enter into this
Agreement. The shares of Series D Preferred Stock sold pursuant to the Series D
Agreement are referred to herein as the "Shares."
1. Registration Rights.
1.1 Definitions. For purposes of this Section 1:
(a) The term "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (1) the Common Stock
issued or issuable upon conversion of the outstanding Series C Preferred Stock
and the Series D Preferred Stock issued or issuable pursuant to the Series D
Preferred Stock Purchase Agreement dated August 31, 1998, and any Common Stock
held by the Investors and any of their affiliates, (2) the Common Stock issued
or issuable upon conversion of any Series C-1 Preferred Stock issued or issuable
in exchange for Series C Preferred Stock pursuant to Article IV, Section 3(d) of
the Company's Amended and Restated Articles of Incorporation, and (3) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Preferred Stock or Common Stock, excluding in all cases, however, (i) any
Registrable Securities sold by a person in a transaction in which such person's
rights under this
<PAGE> 2
Section 1 are not assigned, or (ii) any Registrable Securities sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities;
(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof;
(e) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission (the "SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC; and
(f) The term "Act" shall mean the Securities Act of 1933, as
amended.
1.2 Request for Registration .
(a) If the Company shall receive at the earlier of (i) December
31, 2001 or (ii) six (6) months after the effective date of the Company's
initial registration statement (but not within six (6) months of the effective
date of a registration statement for a public offering of securities of the
Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction)), a written request from
the Holders of at least 66 2/3% of the Registrable Securities then outstanding
(including securities convertible into Registrable Securities) that the Company
file a registration statement under the Act covering the registration of
Registrable Securities having an aggregate offering price in excess of
$1,500,000, then the Company shall, within ten (10) days of the receipt thereof,
give written notice of such request to all Holders and shall, subject to the
limitations of Section 1.2(b), effect as soon as practicable, and in any event
within 90 days of the receipt of such request, the registration under the Act of
all Registrable Securities which the Holders request to be registered within
twenty (20) days of the mailing of such written notice by the Company; provided,
however, that the Company shall not be obligated to take any action to effect
any such registration, qualification or compliance pursuant to this Section
1.2(a):
(i) During the period starting with the date sixty (60)
days prior to the Company's estimated date of filing of, and ending on the date
120 days immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective;
-2-
<PAGE> 3
(ii) After the Company has effected two such registrations
pursuant to this Section 1.2(a), and both registrations have been declared or
ordered effective; or
(iii) If the Company shall furnish to such Holders a
certificate signed by the Chairman of the Board of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its shareholders for a registration statement to
be filed at such time, then the Company's obligation to use its best efforts to
register, qualify or comply under this Section 1.2(a) shall be deferred for a
period not to exceed 120 days from the date of receipt of written request from
the Holders; provided, however, that the Company may not utilize this right more
than once in any twelve-month period.
(b) If the Holders initiating the registration request hereunder
(the "Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 1.2 and the
Company shall include such information in the written notice referred to in
Section 1.2(a). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.
1.3 Company Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, the Company
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20)
days after mailing of written notice by the Company, the Company shall, subject
to the provisions of Section 1.8, cause to be registered under the Act all of
the Registrable Securities that each such Holder has requested to be registered.
1.4 Obligations of the Company. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
-3-
<PAGE> 4
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement provided that such underwriting agreement
shall not provide for indemnification or contribution obligations on the part of
the holders greater than the obligations set forth in Section 1.10(b).
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, or
otherwise fails to comply with the requirements of the Act and the rules and
regulations promulgated thereunder. The Company shall, promptly upon the
happening of any such event, provide each such Holder with revised prospectuses
correcting any such untrue statement or omission or failure to comply.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes
-4-
<PAGE> 5
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) if such offering is being underwritten, a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters.
1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with the
registration, filing or qualification pursuant to Section 1.2, including all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 1.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
Participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to a demand
registration pursuant to Section 1.2; provided further, however, that if at the
time of such withdrawal, the Holders have learned of a material adverse change
in the condition, business, or prospects of the Company from that known to the
Holders at the time of their request, then the Holders shall not be required to
pay any of such expenses and shall retain their rights pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including all registration, filing, and qualification fees,
printers and accounting fees relating or apportionable thereto and the fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding underwriting discounts and commissions relating to Registrable
Securities.
1.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company; provided that such
underwriting agreement shall not provide for
-5-
<PAGE> 6
indemnification or contribution obligations on the part of the Holders greater
than the obligations set forth in Section 1.10(b). If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling shareholders
according to the total amount of securities entitled to be included therein
owned by each selling shareholder or in such other proportions as shall mutually
be agreed to by such selling shareholders, provided that the Holders shall have
the first right to include all of their shares in the offering before any shares
held by other selling shareholders) and in no event shall the Holder's shares be
reduced below 25% of the shares sold in any offering with the exception of the
Company's initial public offering. For purposes of apportionment, any selling
shareholder which is a Holder of Registrable Securities and which is a
partnership or corporation, the affiliated partnerships, partners, retired
partners and shareholders of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling shareholder", and
any pro rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder," as defined in
this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, amended (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law; and the Company will pay to each
such Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity
-6-
<PAGE> 7
agreement contained in this Section 1.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other selling Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this Section 1.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity under this Section 1.10(b) exceed the net
proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10, but the omission to so deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10.
-7-
<PAGE> 8
(d) If the indemnification provided for in Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective
-8-
<PAGE> 9
date of the first registration statement filed by the Company), the Act and the
1934 Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without registration or
pursuant to such form.
1.12 Form S-3 Registration.
(a) In case the Company shall receive from any Holder or Holders
who hold 20% of the Company's Registrable Securities, a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(ii) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within 15 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than
$1,500,000; (3) if the Company shall furnish to the Holders a certificate signed
by the Chairman of the Board of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than 120 days after receipt of the request of the Holder or Holders under this
Section 1.12; provided, however, that the Company shall not utilize this right
more than once in any twelve (12) month period; or (4) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(b) If the Holders initiating the registration request hereunder
(the "Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as part of their request made pursuant to this Section 1.12 and the
Company shall include such information in the written notice referred to in
Section 1.12(a)(i). In such event, the right of any Holder to include his
Registrable Securities in such
-9-
<PAGE> 10
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in Section 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 1.12, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders and use its best efforts to keep such
registration statement effective until the registered shares are sold or for
three months, whichever comes first. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including all registration,
filing, qualification, printer's and accounting fees and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding any underwriters' discounts or commissions associated with Registrable
Securities, shall be borne by the Company. Registrations effected pursuant to
this Section 1.12 shall not be counted as demands for registration or
registrations effected pursuant to Section 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned by a Holder to a transferee or assignee who acquires at least 500,000
shares of Registrable Securities, provided the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. Notwithstanding the above, such rights may be assigned
by a Holder to a limited partner, general partner, affiliated partnership,
former partner, majority owned subsidiary or other affiliate of an Investor (the
"Transferee") regardless of the number of shares acquired by such Transferee.
For purposes of determining the number of shares of Registrable Securities held
by a transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided that
all assignees, and transferees who would not qualify individually for assignment
of registration rights shall have a single attorney-in-fact for the purpose of
exercising any rights, receiving notices or taking any action under this Section
1.
-10-
<PAGE> 11
1.14 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of at least a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder to include such securities in any registration filed under Section 1.2
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included.
1.15 "Market Stand-Off" Agreement. Each holder of securities which
are or at one time were Registrable Securities (or which are or were convertible
into Registrable Securities) hereby agrees that, during a period not to exceed
180 days, following the effective date of a registration statement of the
Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, sell or otherwise transfer or dispose of (other
than to a donee who agrees to be similarly bound) any Common Stock of the
Company held by it at any time during such period except Common Stock included
in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) all officers and directors of the Company enter into
similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 Termination of Registration Rights. No shareholder shall be
entitled to exercise any right provided for in this Section 1 after the earlier
of seven (7) years following the consummation of the sale of securities pursuant
to a registration statement filed by the Company under the Act in connection
with the initial firm commitment underwritten offering of its securities to the
general public or when all Registrable Securities can be sold in any three month
period under Rule 144.
2. Information Rights.
2.1 Delivery of Financial Statements. The Company shall deliver to
each Investor which holds, together with its affiliates, an aggregate of 500,000
shares of Preferred Stock (or Common Stock issued or issuable upon conversion of
Preferred Stock and as adjusted for stock dividends, splits, combinations and
the like):
-11-
<PAGE> 12
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, statements of operations
and cash flow for such fiscal year, a balance sheet of the Company as of the end
of such year, and a schedule as to the sources and applications of funds for
such year, such year-end financial reports to be in reasonable detail, prepared
in accordance with generally accepted accounting principles ("GAAP"), and
audited and certified by independent public accountants of nationally recognized
standing selected by the Company;
(b) as soon as practicable, but in any event at least thirty
(30) days prior to the commencement of each fiscal year of the Company, an
annual budget and plan of operations for the upcoming fiscal year;
(c) within forty five (45) days of the end of each fiscal
quarter, and until a public offering of Common Stock of the Company, an
unaudited statement of operations and balance sheet for and as of the end of
such quarter, in reasonable detail and prepared in accordance with GAAP, subject
to year end audit adjustments and the absence of footnotes;
(d) within thirty (30) days of the end of each month, an
unaudited income statement and statement of cash flows and balance sheet for and
as of the end of such month, in reasonable detail;
(e) with respect to the financial statements called for in
subsection (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods and fairly present the financial condition of the
Company and its results of operation for the period specified, subject to
year-end audit adjustments and the absence of footnotes.
2.2 Inspection. The Company shall permit each Investor which holds,
together with is affiliates, an aggregate of 500,000 shares of Preferred Stock
(or Common Stock issued or issuable upon conversion of such Preferred Stock), at
such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Investor; provided, however, that the Company shall not be
obligated pursuant to this Section 2.2 to provide access to any information
which the Board of Directors reasonably considers to be a trade secret or
similar confidential information.
2.3 Termination of Covenants. The covenants set forth in Sections
2.1, and 2.2 shall terminate as to Investors and be of no further force or
effect when the sale of securities pursuant to a registration statement filed by
the Company under the Act in connection with the firm commitment underwritten
offering of its securities to the general public is consummated in which the
public offering price is less than $13.89 per share and in which the aggregate
offering price is not less than $15,000,000 or when the Company first becomes
subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the
Securities Exchange Act of 1934, whichever event shall first occur.
-12-
<PAGE> 13
2.4 Board of Directors.
(a) With respect to those two (2) members of the Company's Board
of Directors that the Articles of Incorporation provides are to be elected by
the holders of Series C and Series C-1 Preferred Stock, the Investors hereby
agree to vote all of their shares of Preferred Stock now owned or hereafter
acquired in favor of the election of two designees of Benchmark Capital Partners
II.
(b) With respect to those two (2) members of the Company's Board
of Directors that the Articles of Incorporation provides are to be elected by
the holders of Common Stock, the Investors hereby agree to vote all of their
shares of Preferred Stock now owned or hereafter acquired in favor of the
election of two designees of the holders of outstanding Common Stock.
(c) With respect to the member of the Company's Board of
Directors that the Articles of Incorporation provides are to be elected by the
holders of Series D Preferred Stock, the Investors hereby agree to vote all of
their shares of Preferred Stock now owned or hereafter acquired in favor of the
election of one designee of the holders of outstanding Series D Preferred Stock.
(d) With respect to the remaining members of the Company's Board
of Directors that the Articles of Incorporation provides are to be elected by
the holders of Preferred Stock and Common Stock (voting together as a single
class and not as a separate series, and on an as-converted basis), the Investors
hereby agree to vote all of their shares of Preferred Stock and Common Stock now
owned or hereafter acquired in favor of the election of designees acceptable to
a majority of the members of the Board of Directors and a majority of the
outstanding shares of Series C and Series C-1 Preferred Stock (voting on an
as-converted basis) and a majority of the outstanding shares of Series D
Preferred Stock (voting on an as converted basis), voting as separate classes.
(e) This Section 2.4 shall terminate in its entirety and be of
no further force or effect upon the earlier to occur of (i) the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the firm commitment underwritten offering of its
securities to the general public is consummated in which the public offering
price is less than $13.89 per share and in which the aggregate offering price is
not less than $15,000,000, or (ii) the date upon which the Company first becomes
subject to the reporting requirements of Sections 12(g) or 15(d) of the 1934
Act.
2.5 Observer Rights. As long as affiliates of Softbank own not less
than fifty percent (50%) of the shares of the Series D Preferred it is
purchasing on an even date herewith (or an
-13-
<PAGE> 14
equivalent amount of Common Stock issued upon conversion thereof), the Company
shall invite a representative of Softbank to be an Observer As long as any funds
affiliated with Sequoia Capital ("Sequoia") owns not less than fifty percent
(50%) of the shares of the Series D Preferred it is purchasing on an even date
herewith (or an equivalent amount of Common Stock issued upon conversion
thereof), the Company shall invite a representative of Sequoia to be an
Observer. As long as any funds affiliated with Technology Partners ("Technology
Partners") owns not less than fifty percent (50%) of the shares of the Series C
Preferred Stock it purchased on December 18, 1997 (or an equivalent amount of
Common Stock or Series C-1 Preferred Stock issued upon conversion thereof), the
Company shall invite a representative of Technology Partners to be an Observer.
For purposes of this Agreement, an Observer shall attend all meetings of its
Board of Directors in a nonvoting observer capacity and, in this respect, shall
be given copies of all notices, minutes, consents, and other materials that the
Company provides to its directors; provided, however, that the Observer shall
agree to hold in confidence and trust and to act in a fiduciary manner with
respect to all information so provided; and, provided further, that the Company
reserves the right to withhold any information and to exclude the Observer from
any meeting or portion thereof if access to such information or attendance at
such meeting could adversely affect the attorney-client privilege between the
Company and its counsel or would result in disclosure of trade secrets to the
Observer or if Softbank, Sequoia or Technology Partners, or the Observer is a
direct competitor of the Company.
2.6 Series D Preferred Stock Protective Provision. In the exercise
of the rights set forth in Article IV Section 6(b)(v), the holders of Series D
Preferred Stock of the Company hereby agree that the Series D Preferred Stock
approval of a sale, merger or other transaction shall not be unreasonably
withheld.
3. Preemptive Rights.
3.1 Grant of Right. Subject to the terms and conditions specified in
this Section 3, the Company hereby grants to each Series D Holder and other
Investor holding more than 500,000 shares of Preferred Stock a preemptive right
with respect to future sales by the Company of its Future Shares (as hereinafter
defined).
3.2 Future Shares. "Future Shares" shall mean shares of any capital
stock of the Company, whether now authorized or not, and any rights, options or
warrants to purchase such capital stock, and securities of any type that are, or
may become, convertible into such capital stock; provided however, that "Future
Shares" do not include (i) the shares Common Stock issued or issuable upon the
conversion of Preferred Stock currently outstanding, (ii) securities offered
pursuant to a registration statement filed under the Act, (iii) securities
issued pursuant to the acquisition of another corporation by the Company by
merger or, purchase of substantially all of the assets or other reorganization,
(iv) securities issued in connection with or as consideration for a
collaborative partnership arrangement, acquisition or licensing of technology or
other significant assets to be used in the Company's business and (v) up to
1,500,000 shares of Common Stock issuable or issued to employees, consultants,
directors or vendors (if in transactions with primarily non-financing
-14-
<PAGE> 15
purposes) of this corporation directly or pursuant to a stock option plan or
restricted stock plan approved by the Board of Directors of the Company and any
other shares issued in connection with transactions (including additions to the
stock option plan) provided such issuances are unanimously approved by the Board
of Directors of this corporation.
3.3 Notice. In the event the Company proposes to offer any of its
Future Shares, the Company shall first make an offering of such Future Shares to
each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail (the
"Notice") to the Investors stating (i) its bona fide intention to offer such
Future Shares, (ii) the number of such Future Shares to be offered, (iii) the
price, if any, for which it proposes to offer such Future Shares, and (iv) a
statement as to the number of days from receipt of such Notice within which the
Investor must respond to such Notice.
(b) Within 20 calendar days after receipt of the Notice, the
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Future Shares which equals
the proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Registerable Securities then held, by such
Investor bears to the total number of shares of Common Stock issued and
outstanding, including shares issuable upon conversion of convertible securities
issued and outstanding. Each Investor shall be entitled to assign or apportion
the right of first offer hereby granted it among itself and its partners and
affiliates (including in the case of a venture capital fund other venture
capital funds affiliated with such fund) in such proportions as it deems
appropriate. The Company shall promptly, in writing, inform each Investor which
purchases all of the Future Shares available to it (the "Fully-Exercising
Investor") of any other Investor's failure to do likewise. During the ten-day
period commencing after receipt of such information, each Fully-Exercising
Investor shall be entitled to obtain that portion of the Future Shares offered
to the Investors which was not subscribed for, which is equal to the proportion
that the number of shares of Common Stock issued and held, or issuable upon
conversion of the Shares then held, by such Fully-Exercising Investor bears to
the total number of shares of Common Stock issued and outstanding, including
shares issuable upon conversion of convertible securities issued and outstanding
then held, by all Fully-Exercising Investors who wish to purchase some of the
unsubscribed shares.
3.4 Sale after Notice. If all such Future Shares referred to in the
Notice are not elected to be obtained as provided in Section 3.3 hereof, the
Company may, during the 90-day period following the expiration of the period
provided in Section 3.3 hereof, offer the remaining unsubscribed Future Shares
to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the Future Shares within such
period, or if such agreement is not consummated within 90 days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Future Shares shall not be offered unless first reoffered to the Investors in
accordance herewith.
-15-
<PAGE> 16
3.5 Assignment. In addition to the rights to assign or apportion set
forth in Section 3.3(b), the right of first offer granted under this Section 3
is assignable by the Investors to any transferee who acquires at least the
lesser of all of the shares owned by such Investor or a minimum of 500,000
shares of Common Stock (including any shares of Common Stock into which shares
of Preferred Stock are convertible).
3.6 Termination of Rights. No shareholder shall be entitled to
exercise any right provided for in this Section 3, (i) upon the consummation of
the sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with a firm commitment underwritten offering of its
securities to the general public in which the public offering price is less than
$13.89 per share and in which the aggregate offering price is not less than
$15,000,000 or (ii) when the Company first becomes subject to the periodic
reporting requirements of Section 12(g) or 15(d) of the Securities Exchange Act
of 1934, whichever event shall first occur.
4. Miscellaneous Provisions.
4.1 Waivers and Amendments. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least a majority of the shares of Registrable Securities. Any amendment or
waiver effected in accordance with this Section 3.1 shall be binding upon each
person or entity which are granted certain rights under this Agreement and the
Company.
4.2 Notices. All notices and other communications required or
permitted hereunder shall be in writing and, except as otherwise noted herein,
shall be deemed effectively given upon personal delivery, delivery by nationally
recognized courier or five business days after deposit with the United States
Post Office (by first class mail, postage prepaid), addressed: (a) if to the
Company, at 540 University Avenue, Suite 350, Palo Alto, CA 94301 (or at such
other address as the Company shall have furnished to the Investors in writing)
attention of President and (b) if to an Investor, at the latest address of such
person shown on the Company's records.
4.3 Descriptive Headings. The descriptive headings herein have been
inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.
4.4 Governing Law. This Agreement shall be governed by and
interpreted under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the State
of California.
4.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument, but only one of which
need be produced.
-16-
<PAGE> 17
4.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
4.7 Successors and Assigns. Except as otherwise expressly provided
in this Agreement, this Agreement shall benefit and bind the successors,
assigns, heirs, executors and administrators of the parties to this Agreement.
4.8 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter of this Agreement.
4.9 Separability; Severability. Unless expressly provided in this
Agreement, the rights of each Investor under this Agreement are several rights,
not rights jointly held with any other Investors. Any invalidity, illegality or
limitation on the enforceability of this Agreement with respect to any Investor
shall not affect the validity, legality or enforceability of this Agreement with
respect to the other Investors. If any provision of this Agreement is judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be affected or impaired.
4.10 Stock Splits. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the date of this Agreement.
-17-
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.
COMPANY:
E-LOAN, INC.
By:
-------------------------------
Title:
-------------------------------
INVESTORS:
YAHOO! INC.
By:
-------------------------------
Title:
-------------------------------
SOFTBANK HOLDINGS, INC.
By:
-------------------------------
Title:
-------------------------------
SOFTBANK TECHNOLOGY VENTURES IV L.P.
By: STV IV LLC
Its General Partner
By:
-------------------------------
RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 19
SOFTBANK TECHNOLOGY ADVISORS FUND L.P.
By: STV IV LLC
Its General Partner
By:
-------------------------------
SEQUOIA CAPITAL
as nominee for:
Sequoia Capital VIII
Sequoia International Technology Partners VIII
Sequoia International Technology Partners VIII-Q
Sequoia 1997
CMS Partners
By:
-------------------------------
Title:
-------------------------------
BENCHMARK CAPITAL PARTNERS II, L.P.
By: BENCHMARK CAPITAL MANAGEMENT CO. II, L.L.C.
Its General Partner
By:
-------------------------------
Member
TECHNOLOGY PARTNERS FUND VI, L.P.
By: TP Management VI, L.L.C.
By:
-------------------------------
Ira Ehrenpreis, Managing Member
TECHNOLOGY PARTNERS FUND V, L.P.
By: TPW Management V, L.P.
By:
-------------------------------
Ira Ehrenpreis, General Partner
E*TRADE GROUP, INC.
By:
-------------------------------
Title:
-------------------------------
RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 20
EXHIBIT A
LIST OF INVESTORS
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES SERIES
- ------------------------------------------------ ---------------- --------
<S> <C> <C>
Yahoo! Inc. 323,869 Series D
Softbank Holdings, Inc. 388,643 Series D
Softbank Technology Ventures IV, L.P. 380,402 Series D
Softbank Technology Advisors Fund, L.P. 8,241 Series D
Sequoia Capital VIII 352,227 Series D
Sequoia International Technology Partners VIII 4,469 Series D
Sequoia International Technology Partners VIII-Q 23,319 Series D
Sequoia 1997 855 Series D
CMS Partners 7,773 Series D
Benchmark Capital Partners II 97,161 Series D
2,589,959 Series C
Technology Partners Fund V, L.P. 10,111 Series D
739,989 Series C
Technology Partners Fund VI, L.P. 65,459 Series D
739,988 Series C
E*TRADE Group, Inc. 200,000 Series C
</TABLE>
RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 1
Exhibit 10.5
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
TO PURCHASE SHARES OF THE SERIES C PREFERRED STOCK OF
E-LOAN, INC.
DATED AS OF MARCH 4, 1998 (THE "EFFECTIVE DATE")
WHEREAS, E-Loan, Inc., a California corporation (the "Company") has
entered into a Master Lease Agreement dated as of March 4, 1998, Equipment
Schedules No. VL-1 and VL-2 dated as of March 4, 1998, and related Summary
Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in
consideration for such Leases, the right to purchase shares of its Series C
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
For value received, the Company hereby grants to the Warrantholder, and
the Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from the Company that
number of fully paid and assessable shares of the Company's Series C Preferred
Stock ("Preferred Stock") equal to Thirty Thousand Dollars ($30,000.00)
("Aggregate Purchase Price") divided by the exercise price as set forth below
("Exercise Price").
Notwithstanding the foregoing, the Exercise Price shall equal $2.00 per
share if Company raises a round of equity financing of at least $1,000,000.00
(the "Next Round") or issues additional warrants within 120 days from the date
hereof. In the event the Next Round or a warrant issuance does not occur within
such 120 day period, the Exercise Price shall equal to the sum of $1.22852 per
share (the "Last Round") plus the product of (a) the difference between the
price per share of the Next Round and the Last Round, multiplied by (b) the
fraction resulting from dividing (x) the number of days from the date of closing
of the Last Round to the date of execution of the Leases, by (y) the number of
days from the date of the closing of the Last Round to the date of closing of
the Next Round; provided however, if the Next Round is not successfully
completed within twenty-four (24) months of the date hereof, then the Exercise
Price shall be equal to $1.22852 per share.
The number and purchase price of such shares are subject to adjustment
as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i)
seven (7) years or (ii) three (3) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of
- 1 -
<PAGE> 2
Exercise"), duly completed and executed. Promptly upon receipt of the Notice of
Exercise and the payment of the purchase price in accordance with the terms set
forth below, and in no event later than twenty-one (21) days thereafter, the
Company shall issue to the Warrantholder a certificate for the number of shares
of Preferred Stock purchased and shall execute the acknowledgment of exercise in
the form attached hereto as Exhibit II (the "Acknowledgment of Exercise")
indicating the number of shares which remain subject to future purchases, if
any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued
to the Warrantholder.
Y = the number of shares of Preferred Stock
requested to be exercised under this Warrant
Agreement.
A = the fair market value of one (1) share of
Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's
Registration Statement relating to such public offering has been
declared effective by the SEC, then the fair market value per share
shall be the product of (x) the initial "Price to Public" specified in
the final prospectus with respect to the offering and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection
with the Company's initial public offering, and:
(a) if traded on a securities exchange, the
fair market value shall be deemed to be the product of (x) the
average of the closing prices over a twenty-one (21) day
period ending three days before the day the current fair
market value of the securities is being determined and (y) the
number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
or
(b) if actively traded over-the-counter, the
fair market value shall be deemed to be the product of (x) the
average of the closing bid and asked prices quoted on the
NASDAQ system (or similar system) over the twenty-one (21) day
period ending three days before the day the current fair
market value of the securities is being determined and (y) the
number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of Preferred
Stock shall be the product of (x) the highest price per share which the
Company could obtain from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its
Board of Directors and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not
the surviving party, in which case the fair market value of Preferred
Stock shall be deemed to be the value received by the holders of the
Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and
- 2 -
<PAGE> 3
conditions of such amended Warrant Agreement shall be identical to those
contained herein, including, but not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required
to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the Securities Act of 1933, as amended ("1933 Act"), as then
in effect, or any similar Federal statute then enforced, or any state securities
law, required by reason of any transfer involved in such conversion), or listing
on any domestic securities exchange, before such shares may be issued upon
conversion, the Company will, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered, listed or
approved for listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
- 3 -
<PAGE> 4
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding (on an as-converted basis) immediately prior to such dividend
or distribution, and (ii) the denominator of which shall be the total number of
all shares of the Company's stock outstanding (on an as-converted basis)
immediately after such dividend or distribution. The Warrantholder shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of shares of Preferred Stock (calculated to the nearest
whole share) obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of shares of Preferred Stock issuable
upon the exercise hereof immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to
the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall
- 4 -
<PAGE> 5
be made without charge to the Warrantholder for any issuance tax in respect
thereof, or other cost incurred by the Company in connection with such exercise
and the related issuance of shares of Preferred Stock. The Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
and the issuance and delivery of any certificate in a name other than that of
the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) The authorized capital of the Company consists of (A)
10,000,000 shares of Common Stock, of which 4,113,750 shares are issued
and outstanding, and (B) 450,000 shares of Series A preferred stock, of
which 428,635 shares are issued and outstanding and are convertible
into 428,635 shares of Common Stock at $1.00 per share, 450,207 shares
of Series B preferred stock, of which 430,207 shares are issued and
outstanding and are convertible into 430,207 shares of Common Stock at
$1.00 per share, 4,467,912 shares of Series C preferred stock, of which
4,061,738 shares are issued and outstanding and are convertible into
4,061,738 shares of Common Stock at $1.00 per share and 4,467,912
shares of Series C-1 preferred stock, of which no shares are issued and
outstanding.
(ii) The Company has reserved (A) 890,000 shares of Common
Stock for issuance under its Incentive/Nonqualified Stock Option Plan,
under which 425,378 options are outstanding. There are no other
options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of
the Company.
(iii) In accordance with the Company's Articles of
Incorporation, no shareholder of the Company has preemptive rights to
purchase new issuances of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in
this Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt
- 5 -
<PAGE> 6
of such request, a written statement confirming the Company's compliance with
the filing requirements of the Securities and Exchange Commission as set forth
in such Rule, as such Rule may be amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. REQUESTS FOR REGISTRATION
Warrantholder and Company agree that all shares of Preferred Stock subject to
the Warrant Agreement shall have the same registration rights and be subject to
the same terms and conditions with respect to the registration and sale
- 6 -
<PAGE> 7
of such stock as possessed by the Series C Shareholders as provided for in the
Investor Rights Agreement dated December 19, 1997, by and among the Company and
those certain Purchasers identified therein, attached hereto as Exhibit V.
12. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof,
this Warrant Agreement and all rights hereunder are transferable in whole or in
part by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices
and the payment to the Company of all transfer taxes and other governmental
charges imposed on such transfer.
13. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
California.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at 6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention.: General Counsel, (and/or, if
by facsimile, (847) 518-5465 and (847)518-5088) and (ii) to the Company at 540
University Av., Suite 150, Palo Alto, CA 94301, Attention:______ (and/or if by
facsimile, (650) 617-0410) or at such other address as any such party may
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of
this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
- 7 -
<PAGE> 8
(j) Amendments. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000, the Company will also provide Warrantholder with an opinion
from the Company's counsel with respect to those same representations,
warranties and covenants. The Company shall also supply such other documents as
the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
COMPANY: E-LOAN, INC.
By: /s/ Chris Larsen
--------------------------
Title: President
-----------------------
WARRANTHOLDER: COMDISCO, INC.
By: /s/ Illegible
--------------------------
Title: President, Comdisco
Ventures Division
-----------------------
- 8 -
<PAGE> 9
EXHIBIT I
NOTICE OF EXERCISE
TO: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares
of the Series ____ Preferred Stock of _________________, pursuant to
the terms of the Warrant Agreement dated the ______ day of
________________________, 19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and
tenders herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series ____ Preferred Stock of
________________________________________, the undersigned hereby
confirms and acknowledges the investment representations and warranties
made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ____ Preferred Stock in the name of the undersigned or in such
other name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
WARRANTHOLDER: COMDISCO, INC.
By: _________________________
Title: _________________________
Date: _________________________
- 9 -
<PAGE> 10
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________________________________, hereby
acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase
____ shares of the Series ____ Preferred Stock of _________________, pursuant to
the terms of the Warrant Agreement, and further acknowledges that ______ shares
remain subject to purchase under the terms of the Warrant Agreement.
COMPANY:
By: _________________________
Title: _________________________
Date: _________________________
- 10 -
<PAGE> 11
EXHIBIT III
TRANSFER NOTICE
(TO TRANSFER OR ASSIGN THE FOREGOING WARRANT AGREEMENT EXECUTE THIS FORM AND
SUPPLY REQUIRED INFORMATION. DO NOT USE THIS FORM TO PURCHASE SHARES.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
___________________________________________________________________
(Please Print)
whose address is___________________________________________________
___________________________________________________________________
Dated: ___________________________________
Holder's Signature: _____________________
Holder's Address: _____________________
___________________________________________
Signature Guaranteed: ____________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as
it appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing Warrant Agreement.
- 11 -
<PAGE> 1
EXHIBIT 10.7
MARKETING AGREEMENT
This Marketing Agreement (the "Agreement") is made as of September 4,
1998 by and between DLJDIRECT Inc., a Delaware corporation with an address at
One Pershing Plaza, Jersey City, NJ 07399 ("DLJdirect"), and E-LOAN, INC., a
California corporation with an address at 540 University Avenue, Palo Alto,
California 94301 ("E-Loan"), for the purpose of defining the terms and
conditions for providing loan services and hypertext links from the DLJdirect
Web site to the E-Loan Web site.
Whereas DLJdirect and E-Loan intend to enter into an arrangement to
offer DLJdirect customers access to E-Loan content and services:
1. LOAN CENTER.
1.1 LOAN CENTER. E-Loan will create a "Loan Center," an
internet site accessible by DLJdirect customers and the general public, for
DLJdirect that will have the DLJdirect "look and feel," including the current
DLJdirect navigation header, with a graphical reference to E-Loan. The Loan
Center will contain various hypertext links to mortgage tools, services, and
articles provided by E-Loan and shall enable customers of DLJdirect to, at a
minimum, (a) search for rates for mortgages, second mortgages, home equity
loans, and refinancings (collectively, "Loan Products") from a variety of
lenders; (b) apply online for a Loan Product; and (c) prequalify for a Loan
Product. All hypertext links from the Loan Center shall be subject to the prior
written approval of DLJdirect. All tools, services and articles will have an
E-Loan/DLJdirect co-branded header ("Co-Branded Pages"), and use the current
DLJdirect navigation header and E-Loan sidebar and footer. Both parties shall
agree to the "look and feel" of the Loan Center.
1.2 NUMBER OF LENDERS. E-Loan shall guarantee that for the
duration of the Agreement it will maintain a relationship with at least [*]
lenders that are eligible to offer Loan Products to DLJdirect customers in the
Loan Center. DLJdirect shall have the right to exclude certain lenders from the
Loan Center for any reason.
1.3 MORTGAGE LICENSES. E-Loan shall take steps necessary at
its own cost and expense to become licensed in at least [*] states [*]
by the end of 1998 and in [*] states and [*] by the end of June, 1999 as
a mortgage broker and as a mortgage bank. E-Loan represents that it will not
offer or process mortgage loans in states where it is not licensed or authorized
to do so. Further, E-Loan represents that the establishment of the Loan Center
and the anticipated compensation of DLJdirect hereunder does not constitute
mortgage brokerage by DLJdirect (provided that appropriate disclosures are made
on the Loan Center).
1.4 COMPLIANCE WITH CONSUMER LAW AND REGULATION. With regard
to both E-Loan's activities in general and, in particular, in its handling of
each application for each Loan Product, E-Loan shall comply with all State,
Federal and local laws, rules and regulations, including but not limited to:
(i) the Federal Truth in Lending Act, as amended ("TILA"), and Federal Reserve
Regulation Z thereunder; (ii) the Federal Equal Credit Opportunity Act ("ECOA")
and Federal Reserve Regulation B thereunder; (iii) the Federal Fair Credit
Reporting
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
<PAGE> 2
Act; (iv) the Federal Real Estate Settlement Procedures Act as amended (RESPA),
and Regulation X thereunder; (v) the Home Mortgage Disclosure Act and
Regulation C thereunder; (vi) the Fair Housing Act; and (vii) the National
Affordable Housing Act. In connection with ECOA and Regulation B, E-Loan agrees
that it will not discourage or pre-screen any applicant or in any other manner
violate the Act and Regulation. Further, E-Loan or its agents, or, if
applicable, the originating lender shall be responsible for timely providing
all consumer compliance disclosures (such as Good Faith Estimates of Settlement
Services; HUD-1 Settlement Statements; ECOA adverse action notifications; TILA
disclosures) required by the foregoing laws and regulations. E-Loan shall
maintain, available for DLJdirect's inspection, and shall deliver to DLJdirect
upon demand, evidence of compliance with all such requirements.
2. LOAN COLLATERALIZED BY SECURITIES ACCOUNT. E-Loan and DLJdirect
will develop a loan product ("Loan Collateralized By Securities Account" or
"LCBSA") that allows customers of DLJdirect to use their DLJdirect account as
collateral for a home mortgage. E-Loan agrees not to offer or announce its
intention to offer a similar product to the customers of any other financial
services company until [*]. E-Loan shall not preclude any other Loan Center
lenders from originating loans collateralized by DLJdirect securities accounts
through the Loan Center, which lenders have been approved in writing by
DLJdirect to do so. If, for any reason, a separate written agreement is not
executed by the parties regarding the terms of the LCBSA on or before [*] either
party may, at its option, terminate all obligations under this Paragraph 2. In
such event, either party may enter into agreements with other parties to develop
and market LCBSA products. All other provisions of this Agreement shall continue
unchanged in the event either party elects to terminate all obligations of
Paragraph 2.
3. DEBT TRACKER. At DLJdirect's request, E-Loan will work with
DLJdirect to integrate E-Loan's Debt Tracker service into DLJdirect's Web site,
which will allow DLJdirect customers and visitors to the DLJdirect site to
monitor their mortgages. DLJdirect reserves the right not to offer Debt Tracker
to all or some of its customers/visitors.
4. MARKETING FEES.
4.1 MARKETING FEES. E-Loan will pay a marketing fee to
DLJdirect the greater of (i) [*] per month or (ii) [*] per click-through from
the Loan Center to any of the links to E-Loan services (excluding links to
articles or calculators). Upon the delivery of a written opinion of counsel
acceptable to, and in form and substance satisfactory to DLJdirect, to the
effect that RESPA and other applicable laws permit payment on a per completed
loan application or closed loan basis, the marketing fee payment to DLJdirect
with respect to all loans sourced or originated by E-Loan in connection with the
"Co-Branded Pages" shall be not less than [*] per completed application or [*]
per closed loan, whichever is greater (and not on the basis set forth in the
preceding sentence). This fee structure will be re-negotiated by the parties in
good faith if DLJdirect or its affiliates becomes a licensed mortgage broker or
licensed mortgage banker.
4.2 PAYMENT. Payment on a click-through basis shall be made
no more than thirty (30) days after the last day of each calendar month. E-Loan
will issue DLJdirect a user code,
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
-2-
<PAGE> 3
which must be used by DLJdirect to allow E-Loan to monitor traffic coming from
the Loan Center. When and if payment is ever made on a per completed
application or on a per closed loan basis, payment shall be made no more than
sixty (60) days after the last day of each calendar month.
4.3 MARKETING. In return for the marketing fees, DLJdirect
shall:
(a) Issue a joint press release with E-Loan which
shall be mutually agreed upon by both parties.
(b) Announce the Loan Center in its quarterly
newsletter to customers, IQ.
(c) Announce the Loan Center in a statement message.
(d) Establish a link to the Loan Center from within
at least one (1) of the six (6) main sections of the DLJdirect site (currently
Market Monitor).
(e) Include the Loan Center in its marketplace area,
when such area becomes available on its site, but not later than November 30,
1998.
(f) Refer to the Loan Center in the "Awards and
Announcements" section of its home page under the heading "DLJdirect Facts."
(g) Refer to the Loan Center in the "Common
Questions" section of its home page.
4.4 HOME EQUITY LINE OF CREDIT. E-Loan shall offer customers
of DLJdirect, who apply for and obtain a first mortgage loan through the Loan
Center, a Home Equity Line of Credit ("HELOC"), which must close concurrently
with the first mortgage loan. E-Loan will charge no additional fees for the
HELOC and E-Loan will credit DLJdirect customers [*] for closing both the first
mortgage loan and the HELOC. The [*] will be credited to DLJdirect customers at
the time of closing. E-LOAN agrees not to offer this product to customers of any
other company until November 1, 1998.
5. WARRANTS. In consideration of DLJdirect entering into this
Agreement, E-Loan shall issue to DLJdirect warrants to purchase $500,000 of
E-Loan stock per the Warrant Purchase Agreement ("Purchase Agreement") dated
September 4, 1998 and the Warrant to Purchase Preferred Stock of E-Loan
("Warrant to Purchase Preferred Stock") dated September 4, 1998, both of which
are attached hereto. Any warrants that have become exercisable pursuant to the
Warrant to Purchase Preferred Stock shall be deemed vested and non-forfeitable.
6. DONALDSON, LUFKIN & JENRETTE (DLJ). With respect to residential
mortgage loans sourced or originated by E-Loan in connection with the
"Co-Branded Pages" and utilizing DLJ's posted price, E-Loan shall sell such
loans to DLJ Mortgage Capital, Inc. (or another DLJ company, at the direction
of DLJdirect), provided the mutually agreed upon underwriting guidelines have
been satisfied.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
-3-
<PAGE> 4
7. USAGE INFORMATION. E-Loan will monitor user traffic coming from the
Loan Center and provide DLJdirect with a report of this information on a
monthly basis. DLJdirect shall provide E-Loan with a monthly report of the
number of page views for any page on its site which links to the Loan Center.
8. LICENSE.
8.1 LICENSE OF MARKS. DLJdirect and E-Loan each grants to the
other during the term of this Agreement a non-exclusive, non-transferable,
royalty-free, worldwide license to use those of its trademarks, service marks,
trade names, legal or other commercial or product designations (collectively,
"Marks") on the other's Web site solely in connection with the object of this
Agreement, including but not limited to inclusion in hypertext links,
marketing, promotion, inclusion in content directories or indexes, and in
electronic or print advertising, publicity materials, press releases,
newsletters, and mailings, subject to the prior written approval by the
licensing party of each individual use of that party's Mark(s).
8.2 LICENSE OF OTHER PROPRIETARY INTELLECTUAL PROPERTY
MATERIALS. DLJdirect and E-Loan each grants to the other during the term of
this Agreement a non-exclusive, non-transferable, royalty-free, worldwide
license to use any and all other proprietary materials, whether protected under
copyright, patent, trade secret or other law (collectively, "IP Materials") on
the other's Web site solely in connection with the object of this Agreement,
including but not limited to inclusion in Web content pages, marketing,
promotion, inclusion in content directories or indexes, and in electronic or
print advertising, publicity materials, press releases, newsletters, and
mailings, subject to the prior written approval by the licensing party of the
first use of each piece of IP Material and the right of that party to terminate
the use of that IP Material upon thirty (30) days written notice.
8.3 PROVIDED IN GOOD FAITH. Both parties represent and
warrant that their respective Web sites, their Marks, and their IP Materials,
as well as all products or services available either through their respective
Web sites or otherwise are provided in good faith, in compliance with
applicable law and current business practices and do not violate the terms of
any agreements with third parties.
8.4 REMOVAL OF MARKS. DLJdirect may, upon written request of
E-Loan or on its own initiative, remove the E-Loan Marks and all other
references to E-Loan from its site.
9. CONTENT. Subject to Paragraphs 1.1 and 10, E-Loan shall give prior
notice to DLJdirect in the event that it intends to materially alter the
essential nature of its Internet site such that it materially affects the
content being provided therein.
10. ADVERTISING. E-Loan shall not display advertisements of any type
or references to third parties on the Loan Center or on the Co-Branded Pages or
on any of the links from the Loan Center without the prior written consent of
DLJdirect. DLJdirect shall not display advertisements of any type on any pages
which display the E-Loan Marks without the written approval of E-Loan, except
that DLJdirect may display links to other content providers and that this shall
not prevent DLJdirect from linking to the Loan Center from the marketplace
section of its site.
-4-
<PAGE> 5
11. EXCLUSIVITY. E-Loan will be the exclusive content provider of home
mortgage comparison services to DLJdirect during the first year of this
Agreement. This does not limit DLJdirect from selling advertising to other
single source mortgage providers (e.g. banks) on all pages of the DLJdirect Web
site other than the Loan Center or the Co-Branded pages. Exclusivity will only
be extended during the second year of the term if DLJdirect elects to receive
the second installment of warrants as specified in the Warrant to Purchase
Preferred Stock. Exclusivity shall not apply to the provision of the LCBSA
described in Paragraph 2 in the event either party terminates the obligations
set forth in Paragraph 2.
12. INTELLECTUAL PROPERTY RIGHTS. Each party represents and warrants
that it owns all right, title and interest or, to the extent not owned, has all
necessary rights to use all materials owned by any third party which are used
in its online service or Web site, and in its Marks and its IP Materials, and
that the use thereof shall not violate any U.S. patent, copyright, intellectual
property, contractual or other right of any third party.
13. BENEFITS ON THIRD PARTIES. Nothing in this agreement shall be
construed to confer benefits on third parties, including but not limited to the
customers of DLJdirect or E-Loan and/or users of or visitors to the E-Loan Web
site.
14. AUDIT. Either party may, at its own expense, upon reasonable
notice and during normal business hours, no more than once annually, inspect
and audit the other party's records directly relating to the terms of this
Agreement. Such audits shall be conducted by an independent certified public
accountant at the cost of the requesting party and shall be limited in scope to
a period of twelve (12) months prior to the month in which the audit commences,
but not to include any period of time prior to the commencement of this
Agreement.
15. INDEMNIFICATION. Each party (indemnitor) shall indemnify and hold
harmless the other (indemnitee) from and against any losses or damages
(including reasonable attorneys' fees and disbursements) suffered by the
indemnitee arising from any and all claims, suits, actions or causes of action
seeking damages for losses caused by the actions or omissions of the
indemnitor, including without limitation any breach of any warranty made by the
indemnitor in this Agreement, except to the extent that such claims, suits,
actions or causes of action relate to the negligence or willful misconduct of
the indemnitee. E-Loan shall indemnify DLJdirect from all costs and expenses
(including attorneys and other experts) of any mortgage regulatory inquiry that
may be initiated relating to this Agreement. DLJdirect shall indemnify E-Loan
from all costs and expenses (including fees and disbursements of attorneys and
other experts) of any regulatory inquiry related to a securities transaction in
a customer's DLJdirect account that may be initiated relating to this
Agreement. Further, E-Loan shall indemnify DLJdirect from all costs and
expenses (including attorneys, other experts and any related court costs)
arising from E-Loan's failure to comply with the consumer appliance laws and
regulations set forth in Paragraph 1.4 of this Agreement, and in particular,
for failure to timely provide all of the disclosures required by such laws and
regulations.
-5-
<PAGE> 6
16. NOTIFICATION. Each party shall notify the other as soon as
practicable in the event that it receives a complaint, claim or regulatory
inquiry concerning the other or becomes aware of any misuse of or
misrepresentation concerning Marks, IP Material, Confidential Information, or
services of the other party.
17. DISCLAIMER OF WARRANTIES. Both parties shall provide all services
hereunder "AS IS" and without any warranty of any kind. E-Loan does not
guarantee continuous or uninterrupted display or distribution of the Co-Branded
Pages and DLJdirect does not guarantee continuous or uninterrupted operation of
its Web site. In the event of interruption of display or distribution of the
Loan Center or of the Co-Branded Pages or of DLJdirect's Web site, the affected
party's sole obligation shall be to restore service as soon as reasonably
possible.
18. LIMITATIONS ON LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT
NOT LIMITED TO, SUCH DAMAGES ARISING FROM BREACH OF CONTRACT OR WARRANTY OR
FROM NEGLIGENCE OR STRICT LIABILITY), OR FOR INTERRUPTED COMMUNICATIONS OR LOSS
OF USE THEREOF, LOST BUSINESS, LOST DATA OR LOST PROFITS, ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.
19. TERM AND TERMINATION.
19.1 TERM. The initial term of this Agreement shall be for
[*] years and this Agreement shall automatically renew for one (1) year periods
thereafter unless and until terminated by written notice from one party to the
other given not less than sixty (60) days prior to the beginning of the next one
(1) year period. The following Paragraphs shall survive the termination of this
Agreement: 15; 18; 19; 21; 22; 23; and 26.
19.2 TERMINATION FOR BREACH. Except as expressly provided
elsewhere in this Agreement, either party may terminate this Agreement at any
time in the event of a breach of the Agreement by the other party which remains
uncured after thirty (30) days written notice thereof to the other party (or
such shorter period as may be specified elsewhere in this Agreement); provided
that the cure period with respect to any scheduled payment will be fifteen (15)
days following the due date.
19.3 TERMINATION FOR BANKRUPTCY/INSOLVENCY. Either party may
terminate this Agreement immediately following written notice to the other
party if the other party (i) abandons its business in the normal course; (ii)
becomes or is declared insolvent or bankrupt; (iii) is the subject of any
proceeding related to its liquidation or insolvency (whether voluntary or
involuntary) which is not dismissed within ninety (90) calendar days; or (iv)
makes an assignment for the benefit of creditors.
19.4 TERMINATION ON CHANGE OF CONTROL. In the event of a
change of control of DLJdirect resulting in control of DLJdirect by an
interactive mortgage comparison service company, E-Loan may terminate this
Agreement by providing thirty (30) days prior written notice of such intent to
terminate. In the event of a change of control of E-Loan resulting in control
of E-Loan by an online brokerage service or other securities firm, DLJdirect
may
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
-6-
<PAGE> 7
terminate this Agreement by providing thirty (30) days prior written notice of
such intent to terminate. A change of control shall be defined as ownership of
more than 50% of the applicable company by a different entity than the owner as
of the date of this Agreement.
19.5 TERMINATION ON ACQUISITION OF COMPETITOR. In the event
E-Loan acquires ownership or control of a provider of securities brokerage
services or establishes its own offering of securities brokerage services, then
DLJdirect may terminate this Agreement by providing thirty (30) days prior
written notice of such intent to terminate. In the event DLJdirect acquires
ownership and control of an interactive mortgage comparison service or
establishes its own interactive mortgage comparison service, then E-Loan may
terminate this Agreement by providing thirty (30) days prior written notice of
such intent to terminate.
20. ARBITRATION. All disputes, claims or controversies arising out of
this Agreement shall be exclusively settled in accordance with the rules of
arbitration of the National Association of Securities Dealers Regulation, Inc.
whose decision shall be final and binding upon the parties. The parties further
agree that the arbitrators shall have the power to grant injunctive relief.
Each party shall bear its own cost and expense of the arbitration. The decision
of the arbitrators may be enforced in a court of competent jurisdiction in New
York City. The location for all arbitration hearings shall be in New York City.
21. CONFIDENTIAL INFORMATION. Each party acknowledges that during the
term of this Agreement such party may come into possession of Confidential
Information of the other party. For the purposes of this Agreement,
"Confidential Information" means any information which the party disclosing the
information (the "Discloser") designated as confidential or which the party
receiving the information (the "Receiver") knows or has reason to know is
confidential to the Discloser. Without limitation on the foregoing,
Confidential Information includes: the terms of this Agreement, the E-Loan
server logs and all information contained therein, all information provided by
users to E-Loan in connection with the use of the Co-Branded Pages, the
Co-Branded Pages specifications, code for the Co-Branded Pages and the company
content. Confidential Information does not include information which is (a)
already known by the Receiver at time of disclosure; (b) is or becomes, through
no act or fault of the Receiver, publicly known; (c) received by the Receiver
from a third party without a restriction on disclosure or use; (d)
independently developed by the Receiver without reference to Discloser's
Confidential Information; or (e) required to be disclosed by a court or
governmental agency pursuant to a statute, regulation, or valid order.
22. GOVERNING LAW. This Agreement will be governed and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflict of laws.
23. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding and agreement of the parties and supersedes any and all oral or
written agreements or understandings between the parties as to the subject
matter of this Agreement. This Agreement may only be amended in a writing
jointly executed by both parties hereto.
24. ASSIGNMENT. This Agreement is not assignable by either party
without the written consent of the other party except that either party may
assign this Agreement in full to the
-7-
<PAGE> 8
surviving entity in a merger or acquisition or to a purchaser of more than 50%
of its assets, but subject to Paragraph 19.4. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the
successors and permitted assigns of the parties.
25. YEAR 2000 WARRANTY. E-Loan represents and warrants that its
proprietary technology, system and processes ("Software") will record, store,
process, calculate, and present calendar dates falling on or after (and if
applicable, spans of time including) January 1, 2000, in the same manner, and
with the same functionality, data integrity and performance, as the Software
records, stores, processes, calculates and presents calendar dates on or before
December 31, 1999 ("2000 Compliant"). E-Loan represents that the Software (i)
will lose no functionality with respect to the introduction of records
containing dates falling on or after January 1, 2000; and (ii) will function
with other software used by DLJdirect and/or Pershing ("Other Software") which
may deliver records to the Software or receive records from Software, or
interact with the Software, including but not limited to back-up and archived
data, except to the extent that Other Software is not 2000 Compliant.
26. GENERAL. If any provision of this Agreement is held to be invalid
or unenforceable for any reason, the remaining provisions will continue in full
force without being impaired or invalidated in any way. The parties of this
Agreement are independent contractors, and no agency, partnership, joint
venture or employee-employer relationship is intended or created by this
Agreement.
<TABLE>
<CAPTION>
DLJDIRECT INC.: E-LOAN, INC.:
<S> <C>
By: /s/ Lia Hecht By: /s/ Doug Galen
-------------------------------- ------------------------------------
Lia Hecht Douglas Galen
Vice President Vice President of Sales & Business
Development
Date: Date:
-------------------------------- ----------------------------------
</TABLE>
-8-
<PAGE> 9
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT ("Agreement") is made as of the 4th
day of September, 1998, by and among E-Loan, Inc., a California corporation
(the "Company"), and DLJdirect, a Delaware corporation ("DLJdirect" or the
"Holder").
RECITALS:
WHEREAS, pursuant to the terms of the Marketing Agreement, by and
between the Company and DLJdirect, dated September 4, 1998 (the "Marketing
Agreement"), and in consideration thereof, the Company desires to issue a
Warrant (as hereafter defined) to DLJdirect, and DLJdirect wishes to receive a
Warrant, to purchase that number of shares of the Company's Series D Preferred
Stock ("Series D Preferred Stock") as determined in this Agreement and in the
Warrant;
WHEREAS, the parties also wish to set forth certain representations,
warranties, covenants, and agreements relating to the purchase of the Warrant
provided for herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Authorization and Issuance of the Warrant.
1.1 Authorization. The Company has authorized the sale and
issuance of the Warrant to DLJdirect.
1.2 Sale and Issuance of the Warrant. Subject to the terms
and conditions hereof, the Company agrees to issue to the Holder a Warrant
exercisable, at a price per share equal to $9.27, for that number of shares of
Series D Preferred Stock as calculated in accordance with Section 1 of the
Warrant, the form of which is attached hereto as Exhibit A (the "Warrant").
2. Closing.
2.1 Closing; Closing Date. The closing of the issuance of the
Warrant under this Agreement (the "Closing") shall take place on the date of
this Agreement (the "Closing Date"), in accordance with arrangements mutually
satisfactory to the Holder and counsel for the Company.
2.2 Closing Delivery. At the Closing, the Company will
deliver to the Holder a Warrant to purchase that number of shares of Series D
Preferred Stock as set forth in Section 1.2 hereto.
3. Market Stand-Off. The Holder hereby agrees that the Holder shall be
bound by the following market stand-off requirements with respect to the Series
D Preferred Stock obtained upon exercise of the Warrant, and the Common Stock
obtained upon conversion of the Series D Preferred Stock, or any securities
issued in exchange or replacement thereof (any of the foregoing, and
collectively, the "Warrant Shares"):
<PAGE> 10
The Holder hereby agrees that, during a period not to exceed 180 days,
following the effective date of a registration statement of the Company filed
under the Securities Act of 1933, as amended (the "Act"), it shall not, to the
extent requested by the Company and the representative(s) of the underwriters
in connection therewith, directly or indirectly sell, offer to sell, contract
to sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any Warrant Shares of the Company held by it at any time
during such period except Common Stock included in such registration; provided,
however, that:
3.1 Such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
3.2 all officers and directors of the Company enter into
similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Warrant Shares until the end of
any applicable restricted period.
4. Representations And Warranties of the Company.
4.1 Authorization. Subject to necessary corporate action to
designate and authorize a sufficient number of Warrant Shares to affect the
exercise of the Warrant, all corporate action on the part of the Company, its
officers, directors, and shareholders necessary for the authorization,
execution, and delivery of this Agreement, the performance of all the Company's
obligations hereunder and for the authorization, issuance, sale, and delivery
of the Warrant and the Warrant Shares has been taken or will be taken prior to
the Closing.
4.2 Validity of Warrant and Warrant Shares. The Warrant, when
issued in accordance with the terms of this Agreement, shall be duly and
validly issued. The issuance of the Warrant and any subsequent issuance of the
Warrant Shares are not and will not be subject to any preemptive rights and,
when issued, sold, and delivered in compliance with the provisions of this
Agreement and the terms of the Warrant and in accordance with the Company's
Articles of Incorporation, as amended or restated, the Warrant and the Warrant
Shares will be validly issued, fully paid, and nonassessable, and will be free
of any liens or encumbrances; provided, however, that the Warrant and the
Warrant Shares may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
4.3 Governmental Consents. All consents, approvals, orders,
or authorizations of, or registrations, qualifications, designations,
declarations, or filings with, any governmental authority, required on the part
of the Company in connection with the valid execution and delivery of this
Agreement, the offer, sale, or issuance of the Warrant and the Warrant Shares,
or the consummation of any other transaction contemplated hereby shall have
been obtained and will be effective at the Closing, except (i) for necessary
corporate action to designate and authorize a sufficient number of Warrant
Shares to affect the exercise of the Warrant and (ii) for notices required
-2-
<PAGE> 11
or permitted to be filed with certain state and federal securities commissions,
which notices will be filed on a timely basis.
5. Representations and Warranties of the Holder. The Holder hereby
represents and warrants to the Company as follows:
5.1 Legal Authority. It has the requisite legal power to
enter into this Agreement, to purchase the Warrant hereunder and to carry out
and perform its obligations under the terms of this Agreement.
5.2 Due Execution. This Agreement has been duly authorized,
executed, and delivered by it, and, upon execution and delivery by the Company,
this Agreement will be a valid and binding agreement of it.
5.3 Investment Representations.
(a) It is acquiring the Warrant for its own account,
not as nominee or agent, for investment and not with a view to, or for resale
in connection with, any distribution or public offering of the Warrant or
Warrant Shares within the meaning of the Securities Act of 1933, as amended
(the "1933 Act").
(b) It understands that (i) the Warrant and Warrant
Shares have not been registered under the 1933 Act by reason of a specific
exemption therefrom, that they must be held by it indefinitely, and that Holder
must, therefore, bear the economic risk of such investment indefinitely, unless
a subsequent disposition thereof is registered under the 1933 Act or is exempt
from such registration; and (ii) the Warrant and each certificate representing
the Warrant Shares will be endorsed with the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL (WHO MAY BE COUNSEL
TO THE COMPANY) SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
(c) It has been furnished with such materials and
has been given access to such information relating to the Company as it or its
qualified representative has requested and it has been afforded the opportunity
to ask questions regarding the Company and the Warrant and the Warrant Shares,
all as it has found necessary to make an informed investment decision.
(d) By reason of its business or financial
experience, or the business or financial experience of its professional
advisor, it has the capacity to protect its own interests in connection with
this transaction.
-3-
<PAGE> 12
(e) If it is a corporation, partnership, trust, or
other entity, it was not formed for the specific purpose of acquiring the
Warrant or the Warrant Shares offered hereunder.
(f) It is an "accredited investor" as provided under
the 1933 Act and regulations adopted thereunder; and all information supplied
by such Holder to the Company with respect to his or its purchase of the
Warrant and the Warrant Shares has been and shall be true, complete, and
accurate.
6. Miscellaneous.
6.1 California Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR
SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE
IS SO EXEMPT.
6.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the State
of California.
6.3 Successors and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto.
6.4 Entire Agreement. This Agreement, the Marketing Agreement
and the Exhibit hereto, and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other party in any manner by any representations, warranties, covenants, or
agreements except as specifically set forth herein or therein.
6.5 Separability. In case any provision of this Agreement
shall be invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
6.6 Amendment and Waiver. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived with the
written consent of the Company and the Holder.
-4-
<PAGE> 13
6.7 Communications. All notices or other communications
hereunder shall be in writing and shall be given by personal delivery,
confirmed facsimile, overnight courier service, or by registered or certified
mail (postage prepaid and return receipt requested) addressed as set forth
below (or at such other address as a party may designate by notice to the other
parties):
If to the Company:
E-LOAN, INC.
540 University Ave #350
Palo Alto, CA 94301
If to the Holder:
At the address indicated for the Holder on the signature
pages hereof
Notice sent pursuant to or required by this Agreement shall be deemed given (i)
in the case of personal delivery, on the date of such delivery, (ii) in the
case of telex or facsimile transmission, on the date on which the sender
receives confirmation by telex or facsimile transmission that such notice was
received by the addressee, provided that a copy of such transmission is
additionally sent by overnight air courier or mail as set forth in (iii) or
(iv), respectively, below; (iii) in the case of overnight air courier, on the
next business day following the day sent, with receipt confirmed by the
courier; and (iv) in the case of mailing by first class certified or registered
mail, postage prepaid, return receipt requested, on the fifth business day
following such mailing.
6.8 Expenses. The Company and the Holder shall each bear its
respective expenses and legal fees incurred with respect to this Agreement and
the transactions contemplated hereby.
6.9 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
6.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.
-5-
<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant Purchase
Agreement to be signed by its duly authorized officer.
E-LOAN, INC.
By: /s/ D. Galen
--------------------------------------
Name: Douglas Galen
------------------------------------
Title: VP
-----------------------------------
DLJDIRECT.
By: /s/ Lia Hecht
--------------------------------------
Name: Lia Hecht
------------------------------------
Title: Vice President
-----------------------------------
One Pershing Plaza
Jersey City, NJ 07399
-6-
<PAGE> 15
EXHIBIT A
FORM OF WARRANT
E-1
<PAGE> 16
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
WARRANT TO PURCHASE SERIES D PREFERRED STOCK
OF
E-LOAN, INC.
VOID AFTER SEPTEMBER 4, 2001
This Warrant is issued to DLJdirect, a Delaware corporation,
or its registered assigns ("Holder") by E-Loan, Inc., a California corporation
(the "Company"), on September 4, 1998 (the "Warrant Issue Date"). This Warrant
is issued pursuant to the terms of that certain Marketing Agreement, by and
between the Company and DLJdirect, dated as of the date hereof (the "Marketing
Agreement") and the Warrant Purchase Agreement, dated as of the date hereof
(the "Purchase Agreement").
1. Purchase of Shares. Subject to the terms and conditions hereinafter
set forth and set forth in the Purchase Agreement, the Holder is entitled, upon
surrender of this Warrant at the principal office of the Company (or at such
other place as the Company shall notify the holder hereof in writing), to
purchase from the Company up to that number of fully paid and nonassessable
shares of Series D Preferred Stock of the Company, as more fully described
below, that equals the quotient obtained by dividing (a) five hundred thousand
dollars ($500,000), by (b) $9.27. The shares of Series D Preferred Stock
issuable pursuant to this Section 1 (the "Shares") shall also be subject to
adjustment pursuant to Section 8 hereof.
2. Exercise Price. The purchase price for the Shares shall be $9.27.
Such price shall be subject to adjustment pursuant to Section 8 hereof (such
price, as adjusted from time to time, is herein referred to as the "Exercise
Price").
3. Exercise Period. This Warrant shall become exercisable upon the
later of (i) 30 days after the date of the initial commercial launch of the
"Loan Center" as described in Section 1.1 of the Marketing Agreement and (ii)
the first to occur of (A) the closing of a Corporate Transaction (as hereafter
defined) or (B) the closing of the Company's Series D Financing; provided,
however, that this Warrant shall not become exercisable with respect to 50% of
the shares purchasable hereby unless DLJdirect shall have irrevocably elected
to extend the term of E-Loan to be the exclusive content provider of home
mortgage comparison services for an additional year in accordance with Section
11 of the Marketing Agreement. This Warrant shall remain so exercisable
<PAGE> 17
until 5:00 p.m. on September 4, 2001; provided, however, that in the event of
(a) the closing of the issuance and sale of shares of Common Stock of the
Company in the Company's first underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "IPO"), (b) the closing of the Company's sale or transfer of all or
substantially all of its assets, or (c) the closing of the acquisition of the
Company by another entity by means of merger, consolidation or other
transaction or series of related transactions, resulting in the exchange of the
outstanding shares of the Company's capital stock such that the stockholders of
the Company prior to such transaction own, directly or indirectly, less than
50% of the voting power of the surviving entity, this Warrant shall, on the
date of such event, no longer be exercisable and become null and void. In the
event of a proposed transaction of the kind described above (any of the
foregoing, a "Corporate Transaction"), the Company shall notify the holder of
the Warrant at least twenty (20) business days prior to the consummation of
such event or transaction; provided that the Board of Directors of the Company
may shorten such twenty (20) business day notice period upon its good faith
determination that a shorter period shall be required to consummate an
acquisition transaction so long as Holder has a reasonable period of time to
exercise the Warrant.
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(a) the surrender of the Warrant, together with a duly
executed copy of the form of Notice of Election attached hereto, to the
Secretary of the Company at its principal offices; and
(b) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Shares being purchased.
5. Net Exercise. In lieu of exercising this Warrant pursuant to
Section 4, the Holder may elect to receive, without the payment by the Holder
of any additional consideration, shares of Series D Preferred Stock equal to
the value of this Warrant (or the portion thereof being canceled) by surrender
of this Warrant at the principal office of the Company together with notice of
such election, in which event the Company shall issue to the holder hereof a
number of shares of Series D Preferred Stock computed using the following
formula:
Y (A - B)
---------
X = A
Where: X = The number of shares of Series D Preferred
Stock to be issued to the Holder pursuant
to this net exercise;
Y = The number of Shares in respect of which
the net issue election is made;
A = The fair market value of one share of the
Series D Preferred Stock at the time the
net issue election is made;
B = The Exercise Price (as adjusted to the date
of the net issuance).
-2-
<PAGE> 18
For purposes of this Section 5, the fair market value of one share of Series D
Preferred Stock (or, to the extent all such Series D Preferred Stock has been
converted into the Company's Common Stock) as of a particular date shall be
determined as follows: (i) if traded on a securities exchange or through the
Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty (30) day
period ending three (3) days prior to the net exercise election; (ii) if traded
over-the-counter, the value shall be deemed to be the average of the closing
bid or sale prices (whichever is applicable) over the thirty (30) day period
ending three (3) days prior to the net exercise; and (iii) if there is no
active public market, the value shall be the fair market value thereof, as
determined in good faith by the Board of Directors of the Company; provided,
that, if the Warrant is being exercised upon the closing of the IPO, the value
will be the initial "Price to Public" of one share of such Series D Preferred
Stock (or Common Stock issuable upon conversion of such Series D Preferred
Stock) specified in the final prospectus with respect to such offering.
6. Certificates for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter (with appropriate
restrictive legends, if applicable), and in any event within thirty (30) days
of the delivery of the subscription notice.
7. Issuance of Shares. The Company covenants that the Shares, when
issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and
charges with respect to the issuance thereof.
8. Adjustment of Exercise Price and Number of Shares. The number of
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the
Company shall at any time prior to the expiration of this Warrant subdivide its
Series D Preferred Stock, by split-up or otherwise, or combine its Series D
Preferred Stock, or issue additional shares of its Series D Preferred Stock or
Common Stock as a dividend with respect to any shares of its Series D Preferred
Stock, the number of Shares issuable on the exercise of this Warrant shall
forthwith be proportionately increased in the case of a subdivision or stock
dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the purchase price payable per
share, but the aggregate purchase price payable for the total number of Shares
purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this Section 8(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In
case of any reclassification, capital reorganization, or change in the Series D
Preferred Stock of the Company (other than as a result of a subdivision,
combination, or stock dividend provided for in Section 8(a) above), then, as a
condition of such reclassification, reorganization, or change, lawful provision
shall be made, and duly executed documents evidencing the same from the Company
or its successor shall be delivered to the Holder, so that the Holder shall
have the right at any time prior to the expiration
-3-
<PAGE> 19
of this Warrant to purchase, at a total price equal to that payable upon the
exercise of this Warrant, the kind and amount of shares of stock and other
securities and property receivable in connection with such reclassification,
reorganization, or change by a holder of the same number of shares of Series D
Preferred Stock as were purchasable by the Holder immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to
any shares of stock or other securities and property deliverable upon exercise
hereof, and appropriate adjustments shall be made to the purchase price per
share payable hereunder, provided the aggregate purchase price shall remain the
same.
(c) Notice of Adjustment. When any adjustment is required to
be made in the number or kind of shares purchasable upon exercise of the
Warrant, or in the Warrant Price, the Company shall promptly notify the holder
of such event and of the number of shares of Series D Preferred Stock or other
securities or property thereafter purchasable upon exercise of this Warrant.
(d) Other Events. In case any event shall occur as to which
the provisions of Section 8(a) and Section 8(b) hereof are not strictly
applicable but the failure to make any adjustment would not, in the opinion of
the Holder of this Warrant, fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles of such
Sections, then, at the request of such holder, the Company and such Holder
shall appoint a mutually and reasonably acceptable arbiter which shall give an
opinion upon the adjustment to this Warrant, if any, on a basis consistent with
the essential intent and principles established in Section 8(a) and Section
8(b) hereof, necessary to preserve the purchase rights represented by this
Warrant. Upon receipt of such opinion, the Company will promptly make the
adjustments described therein. If no adjustment to this Warrant are described
therein, then such Holder shall pay the fees and expenses of such arbiter, and
otherwise the Company shall pay such fees and expenses.
9. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
10. No Stockholder Rights. Prior to exercise of this Warrant, the
Holder shall not be entitled to any rights of a stockholder with respect to the
Shares, including (without limitation) the right to vote such Shares, receive
dividends or other distributions thereon, exercise preemptive rights or be
notified of stockholder meetings, and such holder shall not be entitled to any
notice or other communication concerning the business or affairs of the
Company. However, nothing in this Section 10 shall limit the right of the
Holder to be provided the Notices required under this Warrant or the Purchase
Agreement.
11. Transfers of Warrant. Subject to compliance with applicable
federal and state securities laws, this Warrant and all rights hereunder are
transferable in whole or in part by the Holder to any person or entity upon
written notice to the Company. The transfer shall be recorded on the books of
the Company upon the surrender of this Warrant, properly endorsed, to the
Company at its principal offices, and the payment to the Company of all
transfer taxes and other governmental charges imposed on such transfer. In the
event of a partial transfer, the Company shall issue to the holders one or more
appropriate new warrants.
-4-
<PAGE> 20
12. Successors and Assigns. The terms and provisions of this Warrant
and the Purchase Agreement shall inure to the benefit of, and be binding upon,
the Company and the Holders hereof and their respective successors and assigns.
13. Amendments and Waivers. Any term of this Warrant may be amended
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively), with
the written consent of the Company and the Holder.
14. Notices. All notices required under this Warrant shall be deemed
to have been given or made for all purposes upon confirmation of receipt when
delivered by: (i) personal delivery, (ii) facsimile; (iii) professional
overnight courier service, or (iv) registered or certified mail. Notices to the
Company shall be sent to the principal office of the Company (or at such other
place as the Company shall notify the Holder hereof in writing). Notices to the
Holder shall be sent to the address of the Holder on the books of the Company
(or at such other place as the Holder shall notify the Company hereof in
writing).
15. Attorneys' Fees. If any action of law or equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which it may be entitled.
16. Captions. The section and subsection headings of this Warrant are
inserted for convenience only and shall not constitute a part of this Warrant
in construing or interpreting any provision hereof.
17. Governing Law. This Warrant shall be governed by the laws of the
State of California as applied to agreements among California residents made
and to be performed entirely within the State of California.
IN WITNESS WHEREOF, E-Loan, Inc. caused this Warrant to be executed by
an officer thereunto duly authorized.
E-Loan, Inc.
/s/ D. Galen
---------------------------------------------
Print Name: Douglas Galen
----------------------------------
Title: VP
---------------------------------------
-5-
<PAGE> 21
NOTICE OF EXERCISE
To: [CORPORATION NAME]
The undersigned hereby elects to [check applicable
subsection]:
- -------------- (a) Purchase _______ shares of Series D Preferred Stock
of ______________, pursuant to the terms of the
attached Warrant and payment of the Exercise Price
per share required under such Warrant accompanies
this notice;
OR
- -------------- (b) Exercise the attached Warrant for [all of the
shares] [________ of the shares] [cross out
inapplicable phrase] purchasable under the Warrant
pursuant to the net exercise provisions of Section 5
of such Warrant.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.
WARRANTHOLDER:
----------------------------------------------
By:
-------------------------------------------
[NAME]
Address:
----------------------------------------------
----------------------------------------------
Date:
---------------------------------------
Name in which shares should be registered:
- --------------------------------------------
<PAGE> 1
EXHIBIT 10.8
CO-MARKETING AGREEMENT
This Co-Marketing Agreement ("Agreement") is made and entered into as of
March 26, 1998 ("Effective Date"), by and between E-Loan Inc., a California
corporation located at 540 University Avenue, Palo Alto, CA 94301 ("E-Loan")
and E*TRADE Group, Inc., a Delaware corporation located at Four Embarcadero
Place, 2400 Geng Road, Palo Alto, CA 94303 ("E*TRADE").
1. Definitions.
a. "Co-Branded Site" means the Co-Branded version of the E-Loan Site as
specified in Exhibit A attached hereto.
b. "E*TRADE Services" means E*TRADE's electronic brokerage services and
related products available at the E*TRADE Site.
c. "E*TRADE Site" means E*TRADE's web site located at
(http://www.etrade.com) (or any replacement or successor address).
d. "E-Loan Services" means E-Loan's on-line mortgage brokerage services
and related products available through the E-Loan Site.
e. "E-Loan Site" means E-Loan's web site located at
(http://www.eloan.com) (or any replacement or successor address) and all third
party Co-Branded or mirrored addresses or sites thereof.
f. "Investor Tools Page" means the investor tools page on the E*TRADE
Site at (http://www.etrade.com/cgi- bin/cgitrade/investors).
2. Co-Branded Web Site; Promotion.
a. Scope. The parties shall undertake and perform the obligations for
the marketing and promotion of the E-Loan Services along with the E*TRADE
Services on the CoBranded Site, the E-Loan Site and E*TRADE Site, as described
in Exhibit A attached hereto. All such promotional activity shall be subject
to the prior approval of both parties, such approval not to be unreasonably
withheld. E-Loan shall not sell advertising to, or otherwise promote, any
other securities brokers on the Co-Branded Site. E-Loan shall not sell any
advertising space on the ELoan Site to any third party on-line securities
brokers. E*TRADE shall not sell advertising to, or otherwise promote, any
other multi-lender vendor or mortgage product offering on the Co-Branded Site.
E*TRADE shall not offer or sell any advertising space on the E*TRADE Site to
any third party multi-lender vendor. E*TRADE will be included on all other
E-Loan Co-Branded sites, unless prohibited by third party agreement. However,
upon request from E*TRADE, E-Loan agrees to remove E*TRADE from any E-Loan
Co-Branded site if so instructed by E*TRADE.
<PAGE> 2
b. Exclusive. E-Loan will be the exclusive multi-lender vendor
featured on the E*TRADE Site; E*TRADE will be the exclusive on-line securities
broker listed in E-Loan's Site.
c. Customer Service and Loan Service Support. E-Loan agrees to provide
customer service support to users accessing the E-Loan Services. E-Loan will
provide E*TRADE with its standard customer service metrics and policies. E-
Loan agrees to provide the same level of service to E*TRADE customers as would
be provided to other E-Loan customers. However, in no case shall such metrics
or policies be below accepted industry standards.
d. Restrictions. Other than by engaging in the activities described in
Section 2.a and 2.b above, E-Loan and its employees will not (i) describe
E*TRADE's brokerage services (other than disseminating or posting promotional
or advertising materials approved in each case by E*TRADE pursuant to Section 3
below); (ii) recommend or endorse specific securities (other than by
disseminating publications or information prepared by third parties that are
responsible for such content); (iii) become involved in the financial services
offered by E*TRADE, including, without limitation, by: (A) opening,
maintaining, administering, or closing customer brokerage accounts with
E*TRADE; (B) soliciting, processing, or facilitating securities transactions
relating to customer brokerage accounts with E*TRADE; (C) extending credit to
any customer for the purpose of purchasing securities through, or carrying
securities with, E*TRADE; (D) answering E*TRADE customer inquiries or engaging
in negotiations involving brokerage accounts or securities transactions; (E)
accepting customer securities orders, selecting among broker-dealers or routing
orders to markets for E*TRADE execution; (F) handling funds or securities of
E*TRADE customers, or effecting clearance or settlement of customer securities
trades; or (G) resolving or attempting to resolve any problems, discrepancies,
or disputes involving E*TRADE customer accounts or related transactions.
E-Loan acknowledges that engaging in any of the above activities may subject
E-Loan to broker-dealer registration requirements under the Securities Exchange
Act of 1934 and applicable state law.
3. Licensed Marks.
a. License to E*TRADE Marks. Subject to all the terms and conditions
of this Agreement, E*TRADE hereby grants E-Loan a nonexclusive,
non-transferable, non-sublicensable license to use the E*TRADE Marks solely on
the E-Loan Site and Co-Branded Site, and solely in connection with the
marketing and promotion of the E-Loan Services and the E*TRADE Services.
"E*TRADE Marks" shall mean solely the E*TRADE name and logo specified in
Exhibit B hereto; provided, however, that E*TRADE, in its sole discretion from
time to time, may change the appearance and/or style of the E*TRADE Marks or
add or subtract from the list in Exhibit B, provided that, unless required
earlier by a court order or to avoid potential infringement liability, E-Loan
shall have fourteen (14) days' notice to implement any such changes. E-Loan
hereby acknowledges and agrees that (i) the E*TRADE Marks are owned solely and
exclusively by E*TRADE, (ii) except as set forth herein, E-Loan has no rights,
title or interest in or to the E*TRADE Marks and (iii) all use of the E*TRADE
Marks by E-Loan shall inure to the benefit of E*TRADE. E-Loan agrees not to
apply for registration of the E*TRADE Marks (or any mark confusingly similar
thereto) anywhere in the world. E-Loan agrees that it shall not engage,
-2-
<PAGE> 3
participate or otherwise become involved in any activity or course of action
that diminishes and/or tarnishes the image and/or reputation of any E*TRADE
Mark.
b. Use and Display of E*TRADE Marks. E-Loan acknowledges and agrees
that the presentation and image of the E*TRADE Marks should be uniform and
consistent with respect to all services, activities and products associated
with the E*TRADE Marks. Accordingly, E-Loan agrees to use the E*TRADE Marks
solely in the manner which E*TRADE shall specify from time to time in E*TRADE's
sole discretion. All usage by E-Loan of the E*TRADE Marks shall include the
registered trademark symbol and shall be in the following form, as appropriate:
[E*TRADE Mark](R). All literature and materials printed, distributed or
electronically transmitted by E-Loan and containing the E*TRADE Marks shall
include the following notice:
[E*TRADE Mark] is a registered trademark of
E*TRADE Group, Inc.
c. License to E-Loan Marks. Subject to all the terms and conditions of
this Agreement, E-Loan hereby grants E*TRADE a nonexclusive, non-transferable,
non-sublicensable license to use the E-Loan Marks solely on the E*TRADE Site
and in connection with the marketing and distribution of the E*TRADE Services
to its customers. "E-Loan Marks" shall mean solely the E-Loan trade names,
marks and logos specified in Exhibit C hereto; provided, however, that E-Loan,
in its sole discretion from time to time, may change the appearance and/or
style of the E-Loan Marks or add or subtract from the list in Exhibit C,
provided that, unless required earlier by a court order or to avoid potential
infringement liability, E*TRADE shall have fourteen (14) days' notice to
implement any such changes. E*TRADE hereby acknowledges and agrees that, (i)
the E-Loan Marks are owned solely and exclusively by E-Loan, (ii) except as set
forth herein, E*TRADE has no rights, title or interest in or to the E-Loan
Marks and (iii) all use of the E-Loan Marks by E*TRADE shall inure to the
benefit of E-Loan. E*TRADE agrees not to apply for registration of the E-Loan
Marks (or any mark confusingly similar thereto) anywhere in the world. E*TRADE
agrees that it shall not engage, participate or otherwise become involved in
any activity or course of action that diminishes and/or tarnishes the image
and/or reputation of any E-Loan Mark.
d. Use and Display of E-Loan Marks. E*TRADE acknowledges and agrees
that the presentation and image of the E- Loan Marks should be uniform and
consistent with respect to all services, activities and products associated
with the E- Loan Marks. Accordingly, E*TRADE agrees to use the E-Loan Marks
solely in the manner which E-Loan shall specify from time to time in E-Loan's
sole discretion. All usage by E*TRADE of the E-Loan Marks shall include the
appropriate trademark symbol and shall be in the following form, as
appropriate: [E-Loan Mark](R) or [E-Loan Mark](TM). All literature and
materials printed, distributed or electronically transmitted by E-Loan and
containing the E-Loan Marks shall include the following notice:
[E-Loan Mark] is a [registered] trademark of
E-Loan Group, Inc.
-3-
<PAGE> 4
4. Payment; Reports; Audit Rights.
a. Fees. Subject to the terms and conditions of this Agreement, E-Loan
agrees to pay E*TRADE the following fees:
(i) "Click-Through" Fees. E-Loan shall pay to E*TRADE [*]
per each click-through by a user via hyperlinks (hereinafter
"click-through") from the E*TRADE Site to the Co-Branded Site. E-Loan
shall guarantee a monthly minimum payment of click-through fees of [*]
to E*TRADE during such time as E-Loan is featured on the Investor Tools
Page. Once E*TRADE moves E- Loan content to a new center (yet to be
named) on the E*TRADE Site that includes, among other things,
information on mortgage loans as described in Exhibit A hereto
(hereinafter the "Financial Services Center"), E- Loan shall pay to
E*TRADE the greater of actual click-through fees for such period or the
following minimum click-through fees: [*]. At the end of [*] with [*]
being defined as beginning with the date E-Loan content is moved into
the Financial Services Center and continuing for the subsequent twelve
month period, provided that such period may be extended up to two
months, by the approval of both parties, in order to make up for any
shortfall of minimum click- through fees. At the end of [*], with [*]
being defined as beginning at the end of [*] (including any
extension) and continuing for the next twelve month period, provided
that such term may be extended up to three months, by the approval of
both parties, in order to make up for any shortfall of minimum
click-through fees. At the end of [*] with [*] being defined as
beginning at the end of [*] (including any extension) and continuing for
the next twelve month period, provided that such term may be extended up
to three months, by the approval of both parties, in order to make up
for any shortfall of minimum click-through fees.
(ii) Educational Articles and Calculators. E-Loan will
provide to E*TRADE educational articles and calculators to E*TRADE for
use on the E*TRADE Site and, which will be served on the E*TRADE
server, free of charge.
(iii) Compensation in Connection with Loans. When the
regulations promulgated under the Real Estate Settlement Procedures Act
("RESPA") are revised to permit payments of commissions for referrals of
loan candidates, E-Loan shall pay to E*TRADE either [*] or, if such loan
application results in a closed loan, [*]. E-Loan shall pay to E*TRADE
an additional [*] for each such loan that qualifies for volume rebates
from the lender (for a total of [*] qualifying for volume rebates).
These loan fees will be paid in lieu of the click-through fees listed in
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
-4-
<PAGE> 5
Section 4.a(i) above. E-Loan shall guarantee a monthly minimum payment
of loan fees of [*] during such time as E-Loan is featured on the
Investor Tools Page. Once E*TRADE moves E-Loan content to the Financial
Services Center, E-Loan shall pay to E*TRADE the greater of the actual
loan fees for such period or the following minimum loan fees: [*]. At
the end of [*], such twelve month period may be extended up to two
months, by the approval of both parties, in order to make up for any
shortfall of minimum loan fees. At the end of [*] each such twelve
month period may be extended up to three months, by the approval of both
parties, in order to make up for any shortfall of minimum loan fees.
(iv) Credit Reports and Services. E-Loan shall pay to
E*TRADE [*] of all revenue E-Loan earns from the sale of three agency
credit reports, single agency credit reports, and subscriptions to
credit monitoring services sold through the Co-Branded Site.
(v) New Services. E-Loan and E*TRADE agree to negotiate in
good faith to determine the terms and conditions for sharing the
revenue generated from any new services, such as car loans, that become
features on the Co-Branded Site.
b. Impression Guarantees. E*TRADE guarantees to provide the following
page impressions, with impressions being defined as each time a user views a
page on the E*TRADE site featuring the E-Loan Services, as follows: [*] provided
that E-Loan's sole remedy for E*TRADE's failure to meet the foregoing guarantees
shall be the right to terminate this Agreement pursuant to Section 6.b(vi)
below.
c. Advertising Revenues. If the parties decide to have third party
advertising on the Co-Branded Site or in E- Loan articles or calculators hosted
by E*TRADE, revenues generated from advertising sales will be shared as
follows:
(i) If E*TRADE sells and serves the advertisement, E*TRADE
shall retain a commission of [*] of the total advertising revenues
therefrom. Advertising revenue remaining after the commission and other
required third party fees have been paid will be split equally between
E*TRADE and E- Loan.
(ii) If E-Loan sells and serves the advertisement, E-Loans
shall retain a commission of [*] of the total advertising revenues
therefrom. Advertising revenue remaining after the commission and other
required third party fees have been paid will be split equally between
E*TRADE and E-Loan.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
-5-
<PAGE> 6
(iii) If a third party sells and serves the advertisement,
advertising revenue remaining after the commission to such third party
and other related fees have been paid will be split equally between
E*TRADE and E-Loan.
All advertising activity hereunder shall be subject to the prior approval
of both parties, such approval not to be unreasonably withheld.
d. Reports and Payment. The parties shall deliver to one another the
following reports and payments:
(i) E*TRADE Reports and Payments. Within ten (10) days
following the end of each month, E*TRADE shall furnish E-Loan with a
report detailing (1) the number of impressions and sources, if
available, for pages on the E*TRADE Site with links to E-Loan Services
(2) the number of click-throughs from each link at the E*TRADE Site to
the Co-Branded Site, and (3) all advertisements that E*TRADE has sold
and served for the Co-Branded Site. All fees owning to one party from
the other pursuant to such report shall be paid within thirty (30) days
after the end of each month in which they accrue.
(ii) E-Loan Reports and Payments. Within thirty (30) days
following the end of each month, E-Loan shall furnish E*TRADE with a
report detailing (1) all advertisements that are sold and/or served
during such month pursuant to Section 4.c above, whether sold by
E-Loan, E*TRADE or any third party, (2) the number of three party
credit reports, single agency credit reports, and subscriptions to
credit monitoring services sold through the Co-Branded Site, and (3)
when referral payments are permitted under RESPA, the number of loan
applications, closed loans, and closed loans qualifying for volume
discounts from the lender during such month. Along with each such
report, E-Loan shall submit all payments due to E*TRADE, including
payments for click-through fees or loan referral payments, whichever is
applicable, along with the basis for calculating such payments for each
such month.
e. Audit Rights. Each party shall keep, maintain and preserve for at
least two (2) years following termination or expiration of the term of this
Agreement or any renewal(s) thereof, accurate records relating to such party's
payment obligations hereunder. Such records shall be maintained as
confidential, but shall be available for inspection and audit as provided
herein. Each party shall have the right at least once per calendar year to
have an independent public accountant, reasonably acceptable to the other
party, examine such other party's relevant books, records and accounts for the
purpose of verifying the accuracy of payments made to the other party as
required under this Agreement. Each party acknowledges and agrees that such
accountant shall not have access to the books, records, and accounts relating
to other products or services except as such books, records and accounts also
directly relate to the payments due hereunder. Each audit will be conducted at
the audited party's place of business, or other place agreed to by E-Loan and
-6-
<PAGE> 7
E*TRADE, during the audited party's normal business hours and with at least
five (5) business days prior written notice to the audited party. The auditing
party shall pay the fees and expenses of the auditor for the examination;
provided that should any examination disclose a greater than five percent (5%)
shortfall in the payments due the auditing party for the period being audited,
the audited party shall pay the reasonable fees and expenses of the auditor for
that examination.
5. Ownership. Each party or their respective licensors and third party
information and content providers retain all rights, title and interest in and
to all of the information, content, data designs, materials and all copyrights,
patent rights, trademarks rights and other proprietary rights thereto provided
by such Party pursuant to this Agreement. Except as expressly provided herein,
no other right or license with respect to any copyrights, patent rights,
trademark rights or other proprietary rights is granted under this Agreement.
All rights not expressly granted hereunder by a party are expressly reserved to
such party and its licensors and information and content providers.
6. Term and Termination.
a. This Agreement shall commence on the Effective Date ad shall remain
in full force and effect (unless terminated earlier as provided below) for an
initial term of [*].
b. This Agreement may be terminated by a party for cause immediately by
written notice upon the occurrence of any of the following events:
(i) If the other ceases to do business, or otherwise
terminates its business operations, except as a result of an assignment
permitted under Section 13.a below; or
(ii) If the other shall fail to promptly secure or renew
any license, registration, permit, authorization or approval for the
conduct of its business in the manner contemplated by this Agreement or
if any such license, registration, permit, authorization or approval is
revoked or suspended and not reinstated within sixty (60) days; or
(iii) If the other materially breaches any material
provision of this Agreement and fails to cure substantially such breach
within thirty (30) days of written notice describing the breach,
excepting a breach of Section 10, in which case the other party shall
have the right to immediately terminate upon written notice to the
breaching party; or
(iv) Effective immediately and without notice if the other
becomes insolvent or seeks protection under any bankruptcy,
receivership, trust deed, creditors arrangement, composition or
comparable proceeding, or if any such proceeding is instituted against
the other (and not dismissed within ninety (90) days).
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
-7-
<PAGE> 8
(v) E-Loan is unable to meet the guaranteed annual
(including extension periods) click-throughs as stated in Section 4.a,
E*TRADE shall have the right to terminate this Agreement with 30 days
written notice.
(vi) E*TRADE is unable to provide the guaranteed annual
(including extension periods) impressions as stated in Section 4.b, and
such shortfall prevents E-Loan from meeting its guaranteed annual
click-throughs as stated in Section 4.a, E-Loan shall have the right to
terminate this Agreement with 30 days written notice.
(vii) E-Loan does not meet the service level standards as
specified in Exhibit D to this Agreement for a period of 3 consecutive
months or 3 out of 6 months. In such event, E*TRADE shall have the
right to immediately terminate this Agreement upon written notice.
c. Survival. Sections 4.d and 5 through and including 13, all accrued
payment obligations and, except as otherwise expressly provided herein, any
right of action for breach of this Agreement prior to termination shall survive
any termination of this Agreement. Furthermore, upon termination or expiration
of this Agreement, the Co-Branded Site shall be discontinued and the licenses
and obligations in Sections 2 and 3 shall cease.
7. Warranty; Disclaimer. Each party represents and agrees that any
information, content or other materials or services provided, uploaded or
transmitted by or for it to the other party or any of its customers or
licensees will not, to the best actual knowledge of the providing party (a)
violate any local, state, federal or other law or regulation, (b) contain any
libelous, defamatory, disparaging, pornographic or obscene materials, (c)
contain, or introduce to any system or database of the other party or any of
its customers or licensees, any virus or similar destructive programs, codes,
routines or algorithms or other materials that will interfere with use of such
databases, systems, or networks or will cause any system, network or database
to become erased, contaminated, inoperable or otherwise incapable of being used
in the manner in which they were used prior to introduction of such materials
(collectively "Viruses"), (d) infringe any copyright, trademark or other
proprietary right of any person or (e) give rise to any civil liability. Each
party agrees that it will only use computer systems or services employing
reasonable means to check for and prevent (i) the spread of Viruses and (ii)
use or access by unauthorized persons. Except for the foregoing, NEITHER PARTY
MAKES ANY WARRANTIES TO ANY PERSON OR ENTITY WITH RESPECT TO ANY INFORMATION,
CONTENT OR OTHER MATERIALS PROVIDED OR MADE AVAILABLE BY IT HEREUNDER AND
DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8. Indemnification. Each party (the "Indemnitor") shall defend or settle
at its expense a claim or suit against the other party (the "Indemnitee"), its
sublicensees, distributors, and end users arising out of or in connection with
an assertion that the information, content or other
-8-
<PAGE> 9
materials or services provided or made available by the Indemnitor or the use
thereof as specifically authorized by the Indemnitor, infringe any copyright or
trademark rights of any third party, or are a misappropriation of any third
party's trade secret, or contain any libelous, defamatory, disparaging,
pornographic or obscene materials. The Indemnitor shall indemnify and hold
harmless the Indemnitee against and from damages, costs, and attorneys' fees,
if any, incurred in defending and/or resolving such suit; and in addition,
E-Loan will indemnify and hold harmless E*TRADE against and from damages,
costs, and attorneys' fees, if any, incurred as a result of any claims for
violations of RESPA rules or regulations relating to transactions under this
Agreement; provided that (a) the Indemnitor is promptly notified in writing of
such claim or suit, (b) the Indemnitor shall have the sole control of the
defense and/or settlement thereof, (c) the Indemnitee furnishes to the
Indemnitor, on request, information available to the Indemnitee for such
defense, and (d) the Indemnitee cooperates in any defense and/or settlement
thereof as long as the Indemnitor pays all of the Indemnitee's reasonable out
of pocket expenses and attorneys' fees. The Indemnitee shall not admit any
such claim without prior consent of the Indemnitor.
9. Limited Liability. EXCEPT AS OTHERWISE PROVIDED BELOW, AND
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY
SHALL BE LIABLE OR OBLIGATED UNDER ANY SECTION OF THIS AGREEMENT OR UNDER
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR
ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS OR COST OF PROCUREMENT
OF SUBSTITUTE GOODS OR SERVICES. THE LIMITATIONS IN THIS SECTION 9 SHALL NOT
APPLY TO ANY BREACH OF SECTION 10.
10. Confidential Information.
a. Each party ("Receiving Party") agrees to keep confidential and not
disclose or use except in performance of its obligations under this Agreement,
confidential or proprietary information related to the other party's
("Disclosing Party") technology or business that the Receiving Party learns in
connection with this Agreement and any other information received from the
other, including without limitation, to the extent previously, currently or
subsequently disclosed to the Receiving Party hereunder or otherwise:
information relating to products or technology of the Disclosing Party or the
properties, composition, structure, use or processing thereof, or systems
therefor, or to the Disclosing Party's business (including, without limitation,
computer programs, code, algorithms, schematics, data, know- how, processes,
ideas, inventions (whether patentable or not), names and expertise of employees
and consultants, all information relating to customers and customer
transactions and other technical, business, financial, customer and product
development plans, forecasts, strategies and information), all of the
foregoing, "Confidential Information"). Neither party shall disclose the terms
of this Agreement to any third party without the prior written consent of the
other party. Each party shall use reasonable precautions to protect the
other's Confidential Information and employ at least those precautions that
such party employs to protect its own confidential or proprietary information.
"Confidential Information" shall not include information the Receiving Party
can document (a) is in or (through no improper action or inaction by the
Receiving Party or any affiliate, agent or employee) enters the
-9-
<PAGE> 10
public domain (and is readily available without substantial effort), or (b) was
rightfully in its possession or known by it prior to receipt from the
Disclosing Party, or (c) was rightfully disclosed to it by another person
without restriction, (d) was independently developed by it by persons without
access to such information and without use of any Confidential Information of
the Disclosing Party or (e) is required to be disclosed to a governmental
entity or agency in connection with seeking any governmental or regulatory
approval, or pursuant to the lawful requirement or request of a governmental
entity or agency, provided that reasonable measures are taken to guard against
further disclosure.
b. The Receiving Party acknowledges and agrees that due to the unique
nature of the Disclosing Party's Confidential Information, there can be no
adequate remedy at law for any breach of its obligations hereunder, that any
such breach may allow the Receiving Party or third parties to unfairly compete
with the Disclosing Party resulting in irreparable harm to the Disclosing
Party, and therefore, that upon any such breach or any threat thereof, the
Disclosing Party shall be entitled to appropriate equitable relief in addition
to whatever remedies it might have at law and to be indemnified by the
Receiving Party from any loss or harm, including, without limitation, lost
profits and attorney's fees, in connection with any breach or enforcement of
the Receiving Party's obligations hereunder or the unauthorized use or release
of any such Confidential Information. The Receiving Party will notify the
Disclosing Party in writing immediately upon the occurrence of any such
unauthorized release or other breach. Any breach of this Section 10 will
constitute a material breach of this Agreement.
11. Relationship of Parties. The parties hereto expressly understand and
agree that each party is an independent contractor in the performance of each
and every part of this Agreement, is solely responsible for all of its
employees and agents and its labor costs and expenses arising in connection
therewith. Neither party nor its agents or employees are the representatives
of the other party for any purpose and neither party has the power or authority
as agent, employee or any other capacity to represent, act for, bind or
otherwise create or assume any obligation on behalf of the other party for any
purpose whatsoever.
12. Notices. Notices under this Agreement shall be sufficient only if
personally delivered, delivered by a major commercial rapid delivery courier
service or mailed, postage or charges prepaid, by certified or registered mail,
return receipt requested to a party at its addresses set forth on the first
page above or as amended by notice pursuant to this Section. If not received
sooner, notice by mail shall be deemed received five (5) days after deposit in
the U.S. mails.
13. Miscellaneous.
a. Prohibition Against Assignment. Neither this Agreement nor any
rights, licenses or obligations hereunder, may be assigned by either party
without the prior written approval of the non-assigning party. Notwithstanding
the foregoing, either party may assign this Agreement to any acquiror of all or
of substantially all of such party's equity securities, assets or business
relating to the subject matter of this Agreement. Any attempted assignment in
violation of
-10-
<PAGE> 11
this Section will be void and without effect. Subject to the foregoing, this
Agreement will benefit and bind the parties' successors and assigns.
b. Applicable Law; Attorneys' Fees. This Agreement shall be governed
by and construed in accordance with the laws of the State of California without
reference to conflict of law principles thereof. In any action to enforce this
Agreement the prevailing party will be entitled to costs and attorneys' fees.
c. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all prior discussions, documents, agreements and prior course of dealing, and
shall not be effective until signed by both parties.
d. Amendment and Waiver. Except as otherwise expressly provided
herein, any provision of this Agreement may be amended or modified and the
observance of any provision of this Agreement may be waived (either generally
or any particular instance and either retroactively or prospectively) only with
the written consent of the parties. The failure of either party to enforce its
rights under this Agreement at any time for any period shall not be construed
as a waiver of such rights.
e. Severability. In the event that any of the provisions of this
Agreement shall be held by a court or other tribunal of competent jurisdiction
to be unenforceable, such provisions shall be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain in full
force and effect and enforceable.
f. Publicity. Any press releases in connection with this Agreement
shall be subject to the prior written mutual approval of the parties.
g. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
h. Third Party Beneficiaries. E*TRADE's and E-Loan's third party
licensors and information providers are intended beneficiaries of this
Agreement.
i. Headings. Headings and captions are for convenience only and are
not to be used in the interpretation of this Agreement.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date. All signed copies of this Agreement shall be deemed originals.
E-LOAN INC.
By: /s/ Chris Larsen
------------------------------------
Name: Chris Larsen
----------------------------------
Title: President
---------------------------------
E*TRADE GROUP, INC.
By: /s/ Judy Balint
------------------------------------
Name: Judy Balint
----------------------------------
Title: Senior Vice President
---------------------------------
-12-
<PAGE> 13
EXHIBIT A
E-Loan's Promotional Obligations
Pursuant to Section 2.a of the Agreement, E-Loan's promotional efforts
and obligations shall include but are not limited to the following:
1. Placement of E*TRADE Content. E-Loan shall feature the E*TRADE's
Marks, text descriptions of the E*TRADE Services and hyperlinks to the
E*TRADE Site with prominent display, as agreed upon by the parties, on
the "Online Resources" area (http://www.eloan.com/cgi-bin/resources)
or similar area of all versions of the E-Loan Site, including without
limitation, third party Co-Branded and mirrored versions of the E-Loan
Site, so long as such placement is not required to be excluded by the
third party. Such logos, content and hyperlinks will be featured with
prominence no less than that provided to other financial service
companies who may, over time, be listed in the E-Loan's Online
Resources area. E-Loan shall use materials and content provided by
E*TRADE for such promotion. E*TRADE shall have the right to the
review and prior approval of all uses of the E*TRADE Marks and
content, with such approval not unreasonably withheld.
2. Co-Branded Site. E-Loan shall develop and host a Co-Branded
version of the E-Loan Site which shall include, without limitation,
E-Loan's search engine and process to view, search, monitor, qualify
and apply for a loan, as well as information to aid the consumer with
the loan selection and financing process ("Co-Branded Site"). The
Co-Branded Site shall be available and promoted only to customers from
the E*TRADE Site and shall be framed by E*TRADE and will include
E*TRADE's logo, navigation buttons and hyperlinks back to the E*TRADE
Site. E*TRADE shall have the right to the review and prior approval of
the co-branding and all uses of the E*TRADE Marks and content, with
such approval not unreasonably withheld.
3. Promotion of the relationship created by this Agreement through a
joint press release and in other appropriate promotional materials and
campaigns mutually agreed upon by the parties.
E*TRADE's Promotional Obligations
E*TRADE's promotional efforts will include, but are not limited to the
following:
1. E*TRADE will initially feature a description of E-Loan and the
E-Loan Services and a hyperlink to the Co- Branded Site on the Investor
tools page (http://www.etrade.com/cgi-bin/cgitrade/investors) of the
E*TRADE Site. By June 1998, E*TRADE will create a center on the
E*TRADE Site that will include information on mortgage loans. E-Loan
will receive a premium position in this center that will serve as the
access point to the Co-Branded Site. This position will, at minimum,
include space for an E-Loan logo and a brief text description.
-13-
<PAGE> 14
2. E*TRADE will provide its standard level of partner marketing
support, which includes:
- a joint press release with E-Loan announcing the relationship
and other promotions as appropriate.
- inclusion of E-Loan in the quarterly E*TRADE Edge newsletter.
- a headline at the top of the Main Menu page
(http://www.etrade.com/cgi- bin/cgitrade/MainMenu) for a
period of no less than one week within one month of the move
of E- Loan's content to the Financial Services Center.
These marketing activities will include use of content provided by
E-Loan for such purposes, provided that E- Loan shall have the right to review
and prior approval of such use of E-Loan content, such approval shall not be
unreasonably withheld.
3. E*TRADE shall utilize excess banner inventory to promote the
Financial Services Center.
-14-
<PAGE> 15
EXHIBIT B
E*TRADE Marks
E*TRADE(R)E*TRADE Securities, Inc. (R)
E*TRADE Group, Inc.(R)
TELE*MASTER (R)
Someday, we'll all invest this way.SM
Personal Market Page SM
E*TRADE Logo(R)
-15-
<PAGE> 16
EXHIBIT C
E-Loan Marks
-16-
<PAGE> 17
EXHIBIT D
1. PERFORMANCE.
a) Average less than [*] of requests. Measures server response time only, not
network transmission time.
b) Average [*] up time.
c) Post an approved message in the event of a system outage.
2. MONITORING/REPORTING
a) Provide details on the method used to monitor performance times.
b) Provide weekly and monthly reporting which details server up time with the
following details per period:
o average response
o actual daily response time detail
o average server up time
o actual daily up time
This information will be emailed to the appropriate contact within the E*TRADE
Information Systems Division on Monday of each week for the previous week's
reports and the first working day of each month for the previous month's
reports.
3. ESCALATION PROCEDURES
a) Notify E*TRADE via the following email addresses in case of a service
outage:
o [email protected]
o [email protected]
b) Notify E*TRADE within 5 minutes of a service outage. Status information to
include:
o reason for the outage.
o ETA for service restoral.
c) If E*TRADE experiences a service outage and has not been notified by email
by E-Loan, E*TRADE will contact (insert E-Loan contact name) at E-Loan at
(insert E-Loan contact phone number) and will be given the information
listed in 3.b.
d) Continue to notify E*TRADE with updated status for the duration of the
outage.
e) Provided a post incident summary. This summary should include:
o the cause of the problem.
o method used to correct the problem.
o measures E-Loan will take to prevent further occurrences.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
-17-
<PAGE> 18
4. BUSINESS RESUMPTION
a) E-Loan must prove the ability to switch processing from the primary server
to a hot backup server within 10 minutes. Testing of this procedure will
be conducted as requested by E*TRADE on a designated weekend by both E-Loan
and E*TRADE personnel.
b) Perform an analysis that documents all of the single points of failure in
the E-Loan network and system configuration. Include network components
such as routers, hardware and software components.
c) Provide geographic redundancy to primary server within 2 months from the
date of the effective date of the Co-Marketing Agreement between E*TRADE
and E-Loan.
d) Eliminate all of the single points of failure within the E-Loan domain
within 3 months from the effective date of the Co-Marketing Agreement
between E*TRADE and E-Loan.
5. REVENUE IMPACT RECOUPMENT
a) In the event that E-Loan fails to meet the performance objectives defined
in Section 1.a), a penalty of [*] will be due E*TRADE.
b) In the event that E-Loan fails to meet the performance objectives defined
in Section 1.b), E-Loan will credit E*TRADE a prorated amount of the
monthly service fee as compensation for the service outage. The
calculation for this credit will be as follows: The monthly fee as
specified in Section 4.a.(i) divided by 720 hours (30 days per month times
24 hours per day) times the total time of the outage.
c) In the event that E-Loan fails to meet the performance objectives defined
in Section 1.c), a penalty of [*] will be due E*TRADE.
d) These penalties will be credited to the month's billing in which the
performance failure occurred.
e) Failure by E-Loan to meet these performance objectives for 3 consecutive
months or 3 out of 6 months shall constitute a breach of this Agreement and
E*TRADE will have the right to terminate immediately after providing
written notice to E-Loan of such intent.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
-18-
<PAGE> 19
[LOGO PAGE]
<PAGE> 1
EXHIBIT 10.9
MARKETING AGREEMENT
This Marketing Agreement is entered into as of February 8, 1999
("Contract Date") by and between MarketWatch.com, Inc., a Delaware corporation
having an office at 825 Battery Street, San Francisco, CA 94111 ("MarketWatch")
and E-LOAN, Inc., a California corporation having an office at 540 University
Avenue, Palo Alto, California 94301 ("E-LOAN"). The Launch Date of this
Agreement shall be the date the program described in the Marketing Agreement is
made available to the public ("Launch Date").
Whereas, MarketWatch is engaged in providing news, expert analysis and
market data for the investing community via its website located at
cbs.marketwatch.com; and
Whereas, E-LOAN is engaged in marketing mortgage services and related
services via the Internet, including, but not limited to attracting visitors to
E-LOAN's website located at www.eloan.com, providing visitors with a variety of
mortgage loan options, and displaying competitive products in the market for
various types of loans; and
Whereas, E-LOAN is also engaged in providing various services, goods
and facilities to companies on the Internet, including, but not limited to
website design, technology support and troubleshooting, maintenance of hardware
and software configurations, maintenance of communication links and equipment,
licensing of its brand name, trademarks and service marks; and
Whereas MarketWatch and E-LOAN wish to develop a program ("Program")
for the purpose of which will be to market E-LOAN's loan products to visitors to
MarketWatch's website;
Now, therefore, in consideration of the mutual promises contained
herein, the parties hereby agree as follows:
1. The Program.
(A) As soon as possible after the Contract Date, E-LOAN will
create and host (at no charge to MarketWatch) a Loan Center
("Loan Center") for MarketWatch that will have the MarketWatch
"look and feel" with a graphical reference to E-LOAN. The Loan
Center will contain various hyperlinks to mortgage tools,
services and articles provided by E-LOAN for use by
MarketWatch visitors. All tools, services and articles
provided by E-LOAN will be co-branded and mutually agreed
upon.
(B) MarketWatch will place hyperlinks to the Loan Center
reasonably acceptable to MarketWatch as set forth below;
(i) The MarketWatch Front Page, left-side navigation
bar.
1
<PAGE> 2
(ii) Additional hyperlinks to the Loan Center will be
added to the bottom of all articles relating to interest
rates, real estate or additional articles that
MarketWatch deems appropriate.
(iii) MarketWatch will provide E-LOAN with [*] ROS
banner advertisements each month of the first year of
the Agreement. Should this Agreement enter into a
second year, both parties will mutually agree in
advance of the second year upon the number of banner
advertisements E-LOAN will receive each month.
(iv) MarketWatch will promote the Loan Center to its
e-mail member base no less than once per quarter.
Both parties will mutually agree upon the content
contained in each e-mail.
(v) MarketWatch will offer its portfolio members the
capability to include a customized module, the E-LOAN
Mortgage Tracker, as part of the portfolio service.
(C) MarketWatch guarantees a minimum of [*] page views
delivered containing hyperlinks to the Loan Center for the first
year of this Agreement ("Minimum Guarantee"). Should this
Agreement enter into a second year, both parties will mutually
agree upon a Minimum Guarantee. In the event that MarketWatch does
not meet the Minimum Guarantee set forth above, the Agreement will
be extended until the Minimum Guarantee is met.
(D) Within sixty (60) days after execution of this
Agreement, MarketWatch will develop or otherwise make
available new services or features for MarketWatch visitors
which will include, but are not limited to, a "bond area" and
a "taxation area", as reasonably defined by MarketWatch.
Subject to any limitations arising from any existing
agreements, MarketWatch will provide hyperlinks to the Loan
Center and further integration within these areas. All
hyperlinks and integration will be mutually agreed upon.
(E) In the event that MarketWatch plans to develop or modify
a service on its site which will have as its primary feature
mortgages, real estate or mortgage interest rates, MarketWatch
will notify E-LOAN in advance on a confidential basis to allow
discussion about the possible provision of such services by
E-LOAN. MarketWatch agrees to discuss such possible provision
of services by E-LOAN; provided that neither MarketWatch nor
E-LOAN will be obligated to contract for such services unless
agreed by both parties in detail in writing.
(F) E-LOAN will ensure that MarketWatch has control over all
ads that appear on the Loan Center, subject to Section 5.
MarketWatch will have the sole right to collect revenue from
such ads.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
2
<PAGE> 3
2. Compensation.
(A) E-LOAN will compensate MarketWatch for setting up this
marketing agreement in the nonrefundable amount of [*] per month
for the first year of this Agreement ("Monthly Fee"), payable in
advance of each such month. The Monthly Fee is not based on
MarketWatch providing loan origination services, rather, this fee
is to compensate MarketWatch for the advertising aspect inherent
in the links it will be providing E-LOAN.
(B) Forty five (45) days prior to the end of the first year
of this Agreement, both parties shall have the right to
re-evaluate the fair market value of the goods and services
being provided by MarketWatch and notify the other party
should they wish to amend the Monthly Fee. If both parties
cannot come to an agreement on the amended Monthly Fee, this
Agreement will be terminated upon the expiration of the first
year's term.
(C) In addition to the Monthly Fee, E-LOAN will compensate
MarketWatch [*] for each "Lead", defined as a complete loan
application submitted through the Loan Center from an
applicant who reached the Loan Center via the MarketWatch
website, in excess of [*] Leads in the first year. Should this
Agreement enter into a second year, both parties will mutually
agree in advance of the commencement of such second year, upon
a new fee per Lead.
(D) The Monthly Fee shall be paid to MarketWatch within
thirty (30) business days after the beginning of each
three-month period. The parties acknowledge and agree that the
Monthly Fee reflects the reasonable and fair market value of
the marketing services to be provided to E-LOAN by MarketWatch
under the Program.
3. Term and Termination.
(A) Initial and Renewal Terms. The term of this Agreement
shall be for a period of [*] years commencing on the Launch Date,
unless earlier terminated in accordance with the provisions of
this Section 3 or 2(B) above. Upon expiration of the initial
two-year term, the Agreement shall automatically renew for
additional one-year periods unless and until terminated by a
45-day written notice from the terminating party to the other
party. The initial and any renewal terms are referred to
collectively as the "Term."
(B) Termination by the Parties. Both parties may terminate
this Agreement (1) in the event that either party fails to
substantially perform its obligations to each other hereunder,
upon 30 days written notice from the terminating party to the
other party specifying the default and providing 30 days to
cure the default, or (2) in the event that either party
discontinues its business, becomes insolvent or in the event of
its bankruptcy.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
3
<PAGE> 4
(C) Rights and Obligations Following Termination. Following
termination of this Agreement for any reason, (1) E-LOAN shall
continue to process, in due course, any mortgage loan
applications submitted by consumers prior to termination and
(2) E-LOAN's obligation to pay any then-due Monthly Fees will
be pro-rated as of the date of termination. In addition,
Sections 6 through 10 and 12 through 19 will survive
termination of this Agreement for any reason.
4. Reporting.
(A) Within fifteen (15) days after the last day of each
calendar month, MarketWatch-will provide E-LOAN with a monthly
report of user traffic to include the number of impressions,
click-through rates and page views for any links, banner
advertising or other promotions provided by MarketWatch to the
Loan Center and E-LOAN.
(B) Within fifteen (15) days after the last day of each
calendar month, E-LOAN will provide MarketWatch with a monthly
report of users and applications received from the Loan Center.
5. Exclusivity. During the term of this Agreement, E-LOAN will be the
exclusive, integrated mortgage company of MarketWatch. No other
mortgage lending services will be offered on the Loan Center other than
E-LOAN. This does not limit MarketWatch from selling banner
advertisements, on a cost per thousand or any other basis, to other
mortgage providers; except that MarketWatch is prohibited from selling
banner advertisements, sponsorships or other forms of advertisements to
other mortgage providers on the Loan Center.
6. Relationship. The relationship between MarketWatch and E-LOAN shall be
that of independent contractors and neither party shall be or represent
itself to be an agent, employee, partner or joint venturer of the
other, nor shall either party have or represent itself to have any
power or authority to act for, bind or commit the other.
7. Severability. If any provision of this Agreement is held invalid,
illegal or in conflict with any applicable state or federal law or
regulation, such law or regulation shall control, to the extent of such
conflict, without affecting the remaining portions of this Agreement.
8. Representations and Warranties.
(A) Authority/Legal Actions. MarketWatch is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware with full corporate power and
authority to transact any and all business contemplated by this
Agreement and it possesses all requisite authority, power,
licenses, permits and franchises to conduct its business as
presently conducted. Its execution,
4
<PAGE> 5
delivery and compliance with its obligations under the terms of
this Agreement are not prohibited or restricted by any government
agency. There is no claim, action, suit, proceeding or
investigation pending or, to the best of MarketWatch's knowledge,
threatened against it or against any of its principal officers,
directors or key employees, which, either in any one instance or
in the aggregate, may result in any adverse change in the
business, operations, financial condition, properties or assets
of MarketWatch, or in any impairment of the right or ability of
MarketWatch to carry on its business substantially as now
conducted through its existing management group, or in any
material liability on the part of MarketWatch, or which would
draw into question the validity of this Agreement.
(B) MarketWatch's Compliance. MarketWatch website format,
information, content and the marketing and use thereof by
MarketWatch shall be in full compliance with all applicable
federal and state laws. MarketWatch has obtained, or will have
obtained in connection with the transactions contemplated by this
Agreement, all necessary federal and state approvals in
connection with operation and ownership of its website and the
content thereof. The Privacy Notices and Privacy Policies of
MarketWatch website shall be consistent with the Federal Trade
Commission's procedure or rules, and comply with acceptable trade
practices.
(C) E-LOAN's Compliance. E-LOAN's website format,
information, content and marketing and use thereof by E-LOAN shall
be in full compliance with all applicable federal and state laws.
E-LOAN has obtained, or will have obtained in connection with the
transactions contemplated by this Agreement, all necessary federal
and state approvals in connection with operation and ownership of
its website and the content thereof. The Privacy Notices and
Privacy Policies of E-LOAN's website shall be consistent with the
Federal Trade Commission's procedure or rules, and comply with
acceptable trade practices.
(D) Execution/Conflict with Existing Laws or Contracts. The
parties have taken all necessary action to authorize their
respective execution, delivery and performance of this Agreement.
The execution and delivery of this Agreement and the performance
of the obligations of the respective parties hereunder will not
(i) conflict with or violate the Certificate of Incorporation or
By-laws of either party, or any provision of any law or regulation
or any decree, demand or order to which either party is subject,
or (ii) conflict with or result in a breach of or constitute a
default (or an event which, with notice or lapse of time, or
both, would constitute a default) under any of the terms,
conditions or provisions of any agreement or instrument to which
either party is a party or by which it is bound, or any order or
decree applicable to either party, or result in the creation or
imposition of any lien on any of their assets or property.
5
<PAGE> 6
(E) Noninfringing Content. All content provided by E-LOAN to
MarketWatch or any third party in connection with this Agreement
which is the subject of any intellectual property right(s) of any
third party(s), including but not limited to and copyright and
trademark rights, and the use of such content by MarketWatch and
third parties as contemplated in this Agreement, will be licensed
or otherwise permitted by the owner(s) of such intellectual
property right(s) and will not infringe such intellectual property
rights in any way.
9. Indemnification/Hold Harmless.
(A) E-LOAN agrees to indemnify, defend and hold MarketWatch
harmless from and against any and all claims, suits, actions,
liability, losses, expenses or damages which may hereafter arise,
which MarketWatch, its affiliates, directors, officers, agents or
employees may sustain due to, or arising out of any breach of any
representation or warranty herein, or arising out of any act or
omission by E-LOAN, its affiliates, officers, agents,
representatives or employees in connection with this Agreement.
However, the above indemnification shall not provide coverage for
(a) any claim, suit, action, liability, loss, expense or damage to
the extent resulting from an act or omission of MarketWatch or
(b) the amount by which any cost, fee, expense or loss associated
with any of the foregoing were increased as a result of an act or
omission on the part of MarketWatch. As a condition of the
foregoing indemnity obligation, MarketWatch agrees to give E-LOAN
reasonably prompt notice of any third party claim which may be
indemnified, cooperation and, at E-LOAN's sole cost and expense,
sole control of the defense and settlement of such claim.
(B) MarketWatch agrees to indemnify, defend and hold E-LOAN
harmless from and against any and all claims, suits, actions,
liability, losses, expenses or damages which may hereafter arise,
which E-LOAN, its affiliates, directors, officers, agents or
employees may sustain due to, or arising out of any breach of any
representation or warranty herein, or arising out of any act or
omission by MarketWatch, its affiliates, officers, agents,
representatives or employees or out of any act by MarketWatch, its
affiliates, officers, agents, representatives or employees in
connection with this Agreement. However, the above indemnification
shall not provide coverage for (a) any claim, suit, action,
liability, loss, expense or damage to the extent resulting from an
act or omission of E-LOAN or (b) the amount by which any cost,
fee, expense or loss associated with any of the foregoing were
increased as a result of an act or omission on the part of E-LOAN.
As a condition of the foregoing indemnity obligation, E-LOAN
agrees to give MarketWatch reasonably prompt notice of any third
party claim which may be indemnified, cooperation and, at
MarketWatch's-LOAN's sole cost and expense, sole control of the
defense and settlement of such claim.
(C) Notice of Claims. Each party shall promptly notify the
other in writing of any and all litigation and claims known to
such party made against it or the other party in connection with
this Agreement.
6
<PAGE> 7
10. Capitalized Terms. Capitalized terms used herein shall have the
meanings set forth herein.
11. Trademark Licenses.
(A) For the term of this Agreement, MarketWatch hereby
grants to E-LOAN a non-exclusive, royalty-free, worldwide license
to reproduce, display, and affix MarketWatch's Marks (as defined
below) in electronic media in connection with any link from or in
conjunction with the E-LOAN's website. Neither party may use the
other party's trademarks, service marks, trade names, logos or
other commercial or product designation (collectively, "Marks")
for any purpose whatsoever without the prior written consent of the
other party except as set forth in this section.
(B) For the term of this Agreement, E-LOAN hereby grants to
MarketWatch a non-exclusive, royalty-free, worldwide license to
reproduce, display, and affix E-LOAN's Marks (as defined below) in
electronic media in connection with any link from or in conjunction
with the MarketWatch website. Neither party may use the other
party's trademarks, service marks, trade names, logos or other
commercial or product designation (collectively, "Marks") for any
purpose whatsoever without the prior written consent of the other
party except as set forth in this section.
(C) Subject only to the express rights granted above, each
party will retain all proprietary rights and interest in and to its
respective Marks and retain and own all goodwill in and to such
Marks resulting from their use, whether such use is by or for the
owner or the licensee.
12. Confidential Information. Each party recognizes that during the Term,
its directors, officers, employees and authorized representatives such
as attorneys and accountants, may obtain knowledge of trade secrets,
customer lists, membership lists and other confidential information of
the other party which is valuable, proprietary, special or unique to
the continued business of that party, which information is initially
delivered in written form including electronic form or is summarized
and delivered in writing within thirty (30) days after initial delivery
in nonwritten form, and which writing is marked "Confidential" or in a
similar nature to indicate its nonpublic and proprietary nature
("Confidential Information"). However, Confidential Information does
not include information that is (i) or becomes available to the general
public other than through a breach by the recipient party, (ii) is
already known to the recipient party as of the time of communication to
the recipient party, (iii) is developed by the recipient party
independently of and without reference to information communicated by
the other party, or (iv) rightfully received by the recipient party
from a third party which third party is not under a legal duty of
confidentiality with respect to such information. Accordingly, each
7
<PAGE> 8
party as a recipient of the other's Confidential Information agrees to
hold the Confidential Information of the communicating party and the
terms and conditions of this Agreement in confidence and to use
diligent efforts to ensure that the communicating party's Confidential
Information the terms hereof are held in confidence by its officers,
directors, employees, representatives and others over whom it exercises
control. Upon discovering any unauthorized disclosure of the
communicating party's Confidential Information or the terms of this
Agreement, the recipient party will use diligent efforts to recover
such information and to prevent its further disclosure to additional
third parties. The recipient party will promptly notify the
communicating party in writing of any such authorized disclosure of the
communicating party's Confidential Information by the recipient party
or its personnel. The parties' obligations under this paragraph will
survive for a period of three (3) years following the expiration or
earlier termination of this Agreement.
13. Notices. All notices required or permitted by this Agreement shall by
in writing and shall be given by certified mail, return receipt
requested, or by reputable overnight courier with package tracing
capability and shall be sent to the address at the head of this
Agreement or to such other address that a party specifies in writing in
accordance with this section.
14. Disclaimer Concerning Tax Effects. Neither party to this Agreement
makes any representation or warranty to the other regarding the effect
that this Agreement and the consummation of the transactions
contemplated hereby may have upon the foreign, federal, state or local
tax liability of the other.
15. Disclaimer of Warranties. Both parties provide all service hereunder
"AS IS" and without any warranty of any kind. E-LOAN does not guarantee
continuous or uninterrupted display or distribution of the link and
MarketWatch does not guarantee continuous or uninterrupted operation of
its Web site. In the event of interruption of display or distribution
of E-LOAN's link or of MarketWatch's web site, both parties' sole
obligation shall be to restore service as soon as reasonably possible.
16. Amendments. The terms and conditions of this Agreement may not be
modified or amended other than by a writing signed by both parties.
17. Assignment/Binding Nature. Neither party may assign, voluntarily, by
operation of law, or otherwise, any rights, or delegate any duties
under this Agreement without the other party's prior written consent,
except that either party may assign this Agreement or any of its rights
or obligations arising hereunder to the surviving entity in a merger,
acquisition, or consolidation in which it participates, or to a
purchaser of substantially all of its assets; provided that the
assigning party will give reasonable written notice to the nonassigning
party in advance of such merger, acquisition or other assignment.
Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the
parties.
18. Entire Agreement. This Agreement and any exhibits attached hereto
constitute the entire agreement between the parties and supersede all
oral and written negotiations of the parties with respect to the
subject matter hereof.
8
<PAGE> 9
19. LIMITATION OF LIABILITY. EXCEPT FOR THE PARTIES' RESPECTIVE OBLIGATIONS
UNDER SECTIONS 9 AND 12 HEREOF, IN NO EVENT WILL EITHER PARTY BE LIABLE
TO THE OTHER PARTY FOR ANY SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, [AND] WHETHER OR NOT THAT PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
20. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of California without giving
effect to its conflicts of laws principles. Both parties agree to
submit to jurisdiction in California, and further agree that any cause
of action arising under this Agreement may be brought in a court in
Santa Clara County, California.
In witness whereof, the parties have caused this Agreement to be
executed the day and year first above written.
E-LOAN, Inc. MarketWatch.com, Inc.
By: /s/ D. Galen By: /s/Signature Illegible 2/8/99
------------------------- -----------------------------
Name: DOUGLAS GALEN Name: WILLIAM BISHOP
---------------------- --------------------------
Title: VP Bus. Dev. Title: VP, BUSINESS DEVELOPMENT
---------------------- --------------------------
9
<PAGE> 1
Exhibit 10.10
MARKETING AGREEMENT
This Marketing Agreement ("Agreement") is entered into as of May 1, 1998
("Effective Date") between Prism Mortgage Company ("Prism"), an Illinois
corporation having an office at 350 West Hubbard Street, Chicago, Illinois
60610 and E-Loan, Inc., a California corporation having an office at 540
University Way, Palo Alto, California 94301 ("E-Loan") (the "Parties")
WHEREAS, Prism is engaged in providing mortgage services that include
counseling, processing, origination, and funding mortgage loans secured by
residential properties located in the United States; and
WHEREAS, E-Loan is engaged in marketing mortgage services via the Internet
including attracting visitors to E-Loan's website, providing visitors with a
variety of mortgage options, and displaying the most competitive products on
the market for various types of loans.
WHEREAS, Prism and E-Loan wish to develop a marketing program ("Program")
the purpose of which will be to market Prism's loan products to visitors of
E-Loan's web site.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties hereby agree as follows:
1. The Program.
(a) E-Loan shall market Prism's various mortgage programs and products to
Internet users. The Program shall include a comprehensive marketing
plan designed, executed, and paid for by E-Loan, that will attract
visitors to E-Loan's website ("Customers") for the purpose of
obtaining mortgage loans from Prism and other mortgage companies. In
addition, E-Loan will advise Customers regarding the various mortgage
programs and products that Prism offers and match Customers with
specific Prism mortgage products. E-Loan will then engage Customers in
on-line prequalification interviews and help Customers complete an
on-line preliminary application form for Prism mortgage products. As
part of the Program, E-Loan will transfer all completed preliminary
applications to Prism for further processing.
(b) Although E-Loan shall market Prism to its Customers as required by
the Program: (i) E-Loan shall not be required to, and shall not,
endorse Prism, in any communications under the Program that are
targeted to Customers; (ii) E-Loan shall not be required to recommend
Prism as a mortgage provider and (iii) E-Loan shall not be required
to, and shall not as part of the Program, provide advice, counseling
or assistance to Customers in connection with any particular mortgage
loan, for which they have applied to Prism.
2. Compensation.
(a) Beginning the Effective Date, Prism shall pay a fee to E-Loan
("Semiannual Marketing Fee") for the marketing provided under the
Program every six months during the term of this Agreement. The amount
of the Semiannual Marketing Fee shall be $72,000 ("First Semiannual
Marketing Fee"), unless adjusted as provided in this Section 2.
(b) The First Semiannual Marketing Fee will be paid as follows: (i)
$20,000 shall be paid within ten (10) days of the Effective Date and
(ii) $13,000 shall be paid within ten (10) days following July 31,
1998 and each month thereafter for a total of four (4) months.
<PAGE> 2
(c) All Semiannual Marketing Fees thereafter shall be paid in arrears, in
equal monthly installments, within ten (10) days following the end of
each month. The Parties each acknowledge and agree that the Semiannual
Marketing Fee reflects the reasonable and fair market value of the
goods and services to be provided by E-Loan under the Program, without
regard to the value or volume of mortgage loans that may be
attributable to the Program.
(d) Not more than once each six-month term, either party may notify the
other, in writing, of its determination (Determination), and the bases
therefore, that the Semiannual Marketing Fee amount may fail to
reflect the reasonable and fair market value of the goods and services
to be provided by E-Loan, and upon other information made available to
the Parties including but not limited to: (i) the number of visitors
to E-Loan's website; (ii) E-Loan's marketing coverage; and (iii)
E-Loan's effectiveness in disseminating accurate information regarding
mortgage programs and products as indicated by surveys or other mean.
If the other party agrees with the Determination, the Semiannual
Marketing Fee amount shall be so adjusted, effective upon the
commencement of the next six-month term. If there is disagreement, the
Parties shall attempt in good faith to resolve the disagreement.
(e) E-Loan guarantees the delivery of no less than one hundred and forty
(140) referrals of similar quality of all referrals to Prism by the
61st day following the Effective Date.
(f) Referrals pertain to sales leads only. The actual number of closed
loans resulting from the Program does not affect this Agreement in any
way, including, but not limited to, the guarantee in this Section
2(e).
3. Relationship. The relationship between Prism and E-Loan shall be that of
independent contractors and neither party shall be or represent itself to
be an agent, employee, partner or joint venture of the other, nor shall
either party have or represent itself to have any power or authority to act
for, bind or commit the other.
4. Confidential Information. Each party recognizes that, during the term of
this Agreement, its directors, officers or employees may obtain knowledge
of trade secrets, membership lists and other confidential information of
the other party which are valuable, special or unique to the continued
business of that party. Accordingly, each party hereby agrees to hold such
information and all information contained in or pertaining to this
Agreement in confidence and to use its best efforts to ensure that such
information is held in confidence by its officers, directors and employees.
5. Disclaimer. Neither Prism or E-Loan make any representation or warranty to
the other regarding the effect that this agreement and the consummation of
the transactions contemplated hereby may have upon the Foreign, Federal,
State or local tax liability of the other.
<PAGE> 3
6. Severability. If any provision of this Agreement should be invalid, illegal
or in conflict with any applicable state or federal law or regulation, such
law or regulation shall control, to the extent of such conflict, without
affecting the remaining provisions of this Agreement.
7. Term and Termination.
(a) The term of this Agreement shall be for a period of one (1) year
commencing on its Effective Date unless earlier terminated in
accordance with the provisions of this Section 8. Upon expiration of
the initial one (1) year term, this Agreement shall automatically
renew from year to year unless earlier terminated in accordance with
the provisions of this Section 8.
(b) Prism may terminate this Agreement, at any time, with or without cause
by providing thirty (30) written days notice to E-Loan. E-Loan may
terminate this Agreement with or without cause by providing thirty
(30) written days notice to Prism.
(c) Upon termination of this Agreement, as provided herein: (i) Prism
shall continue to process, in due course, any mortgage loan
applications submitted by E-Loan's customers prior to termination of
this Agreement and (ii) Prism's obligation to pay any then due
Semiannual Marketing Fee will be prorated as of such date, and the
provisions of Section 5 and 9 of this Agreement shall survive.
8. Hold Harmless:
(a) Prism agrees to indemnify, defend and hold E-Loan harmless from and
against any and all claims, suits, actions, liability, losses,
expenses or damages which may hereafter arise, which E-Loan, its
affiliates, directors, officers, agents or employees may sustain due
to or arising out of any negligent act or omission by Prism, its
affiliates, officers, agents, representatives or employees or out of
any act by Prism, its affiliates, officers, agents, representatives or
employees in violation of this Agreement or in violation of any
applicable law or regulation. Provided, however, the above
indemnification shall not provide coverage for (a) any claim, suit,
action, liability, loss, expense or damage that resulted from an act
or omission of E-Loan or (b) the amount by which any cost, fee,
expense or loss associated with any of the foregoing were increased as
a result of an act or omission on the part of E-Loan.
(b) E-Loan agrees to indemnify, defend and hold Prism harmless from and
against any and all claims, suits, actions, liability, losses,
expenses or damages which may hereafter arise, which Prism, its
affiliates, directors, officers, agents or employees may sustain due
to or arising out of any negligent act or omission by E-Loan, its
affiliates, officers, agents, representatives or employees or out of
any act by E-Loan, its affiliates, officers, agents, representatives
or employees in violation of this Agreement or in violation of any
applicable law or regulation. Provided, however, the above
indemnification shall not provide coverage for (a) any claim, suit,
action, liability, loss, expense or damage that resulted from an act
or omission of Prism or (b) the amount by which any cost, fee, expense
or loss associated with any of the foregoing were increased as a
result of an act or omission on the part of Prism.
<PAGE> 4
9. Notices. All notices required or permitted by this Agreement shall be in
writing and shall be given by certified mail, return receipt requested or
by reputable overnight courier with package tracing capability and sent to
the address at the head of this Agreement or such other address that a
party specified in writing in accordance with this paragraph.
10. Amendment. The terms and conditions of this Agreement may not be modified
or amended other than by a writing signed by both parties.
11. Assignment: Binding Nature. The terms of this Agreement shall be binding
upon and shall inure to the benefit of the Parties hereto. This Agreement
shall not be assigned by any party without the express prior written
consent of the other party.
12. Entire Agreement. This Agreement and any Exhibits attached hereto
constitute the entire Agreement between the Parties and supersede all oral
and written negotiations of the Parties with respect to the subject matter
hereof.
13. Governing Law. This agreement shall be subject to and construed under the
laws of the State of California, without reference to conflicts of law
provisions thereof.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
the day and year first above written.
E-LOAN
Attest: Signature: /s/ Doug Galen
-------------------------- ---------------------------
By: Doug Galen
----------------------------------
Its: VP Bus. Dev.
---------------------------------
PRISM MORTGAGE COMPANY
Attest: Signature: /s/ Daniel Fisher
-------------------------- ---------------------------
By: Daniel Fisher
----------------------------------
Its: VP Bus. Dev.
---------------------------------
<PAGE> 1
EXHIBIT 10.11
YAHOO! INC. - E-LOAN INC.
LICENSE AGREEMENT
This License Agreement (the "Agreement") is entered into as of
___________, 1998 (the "Effective Date") between Yahoo!, Inc., a California
corporation with offices at 3420 Central Expressway, Santa Clara, CA 95051
("Yahoo") and E-LOAN Inc., a California corporation with offices at 540
University Avenue, Suite 150, Palo Alto, CA 94301 ("E-Loan").
WHEREAS, Yahoo and E-Loan entered into a License Agreement on December 5,
1997 the ("License Agreement") which contained, among other things, a license to
certain of E-Loan's mortgage related content and services; and
WHEREAS, the parties wish to enter into this Agreement, where subject to
the terms contained herein, E-Loan will license to Yahoo certain of E-Loan's
mortgage related content and services upon the expiration of the term of License
Agreement and the parties will conduct other joint marketing activities.
In consideration of the mutual promises contained herein, the parties agree as
follows:
SECTION 1: DEFINITIONS.
Unless otherwise specified, capitalized terms used in this Agreement shall have
the meanings attributed to them in Exhibit A hereto.
SECTION 2: LICENSES.
2.1 License to Yahoo. Subject to the terms and conditions of this Agreement,
E-Loan hereby grants to Yahoo, under E-Loan's Intellectual Property Rights:
(a) A non-exclusive, worldwide license to use, modify, reproduce, distribute,
display and transmit the E-Loan Content in connection with the Yahoo Loan
Center and other Yahoo Properties and to permit Users to download and
print the E-Loan Content. Yahoo's license to modify the E-Loan Content
shall be limited to modifying the E-Loan Content to fit the format and
look and feel of the Yahoo Property.
(b) A non-exclusive, worldwide, fully paid license to use, reproduce and
display the E-Loan Brand Features: (i) in connection with the presentation
of the E-Loan Content on the Yahoo Properties; and (ii) in connection with
the marketing and promotion of the Yahoo Properties.
(c) Yahoo shall be entitled to sublicense the rights set forth in this Section
2.1 (i) to its Affiliates only for inclusion in Yahoo Properties, and (ii)
in connection with
1
CONFIDENTIAL
<PAGE> 2
any mirror site, derivative site, or distribution arrangement concerning a
Yahoo Property.
2.2 License to E-Loan. Subject to the terms and conditions of this Agreement,
Yahoo hereby grants to E-Loan, under Yahoo's Intellectual Property Rights a
non-exclusive, worldwide, fully paid license to use, reproduce and display the
Yahoo Brand Features (i) in connection with the co-branded banner described in
3.2(a), (ii) to indicate the location of the graphic link described in Section
3.2(f) below and (iii) in connection with the marketing and promotion of the
Yahoo Loan Center, provided that Yahoo has the right to approve all marketing
and promotional material and all other uses of the Yahoo Brand Features prior to
its first distribution.
2.3 Exclusivity.
(a) In the Yahoo Loan Center, E-Loan shall be the exclusive integrated on-line
provider of home mortgage content that provides the User with the same
features as the E-Loan Transaction Content. Nothing in this Section
2.3(a) shall preclude Yahoo from including in the Yahoo Loan Center (i)
[*], so long as Yahoo does not include content or a direct link to content
from [*] on the Yahoo Loan Center that has the same features and
functionality as the E-Loan Transaction Content, (ii) other merchants with
content relating to loans and home mortgages and (iii) a directory of and
links to other mortgage providers. E-Loan acknowledges that Yahoo shall
not be precluded from including links to merchants and mortgage providers
on the Yahoo Loan Center that may provide content with the same features
as the E-Loan Transaction Content or that allow a user to apply for a loan
on-line so long as such content is not one click away from the Yahoo Loan
Center. In addition, Yahoo shall not be restricted from placing banner
advertisements or other advertisements and promotions from any source on
the Yahoo Loan Center; provided that Yahoo shall not place any banner
advertising on the first page of the Yahoo Loan Center by or on behalf of
any third party whose primarily business is providing customers with
customized mortgage quotes for first or second home mortgage products
on-line.
(b) E-Loan shall not license, distribute or integrate its content, features or
services at a level similar or greater than that contained herein with any
of Yahoo's competitors (which currently include, but are not limited to,
Excite, Lycos, AOL, Microsoft, C/net, Intuit, Netscape and Infoseek and
their successors). Notwithstanding the foregoing, E-Loan shall not be
restricted from placing banner advertisements or links to the E-Loan Site
below the line in the normal course of business on any of the foregoing
sites.
SECTION 3: RESPONSIBILITIES OF THE PARTIES.
3.1 Yahoo's Responsibilities.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
2
CONFIDENTIAL
<PAGE> 3
(a) Yahoo shall be solely responsible for the design, layout, posting, and
maintenance of the Yahoo Loan Center and the Co-Branded Pages. The E-Loan
Content shall appear on the Yahoo Loan Center in a manner similar to the
example set forth on Exhibit D. E-Loan shall have the right to approve
---------
any material changes to the design and placement of the E-Loan Content,
such consent not to be unreasonably withheld. Except for the E-Loan
Transaction Content and except for Yahoo's obligations regarding the
module in My Yahoo described in Section 3.1(f) below, Yahoo is under no
obligation, express or implied, to post or otherwise include any of the
E-Loan Content in any Yahoo Property, including without limitation, on the
Yahoo Loan Center.
(b) Co-Branded Pages will include a co-branded banner with the Yahoo Brand
Features and the E-Loan Brand Features in a manner similar to the example
set forth in Exhibit D. [*]. Yahoo shall include on the Co-Branded Pages a
text link above the fold, and a link at the bottom of the page that shall
direct users to E-Loan Transaction Content pages hosted by Yahoo.
(c) Yahoo will include a text link to the Yahoo Loan Center on the Yahoo
Properties as set forth below. The appearance and placement of such text
link is in Yahoo's sole discretion.
(i) [*]
(ii) The front page of Yahoo Finance currently located at
http://quote.yahoo.com/
(iii)The residential real estate listings of Yahoo Real Estate
Classifieds, which currently appears at the bottom of each such page
but may be changed as determined by Yahoo.
(iv) The front page and on the left side, where applicable (or in
such other location as determined by Yahoo), of the real estate page
of Yahoo Classifieds currently located at [*]
(v) For not less than [*] days during the Term, on the front page of
the Yahoo Main Site; provided that such text link may link to the
front page of the Yahoo Loan Center or any subpages. The timing,
placement and
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
3
CONFIDENTIAL
<PAGE> 4
appearance of such text link shall be at Yahoo's sole discretion and
shall be subject to availability.
(vi) For not less than [*] days during the Term, on the "Inside
Yahoo" module on the top pages of [*]
(vii) On a navigational area on the top page of real estate news
that appears in Yahoo Real Estate.
(viii) A text link or graphic button (to be determined in Yahoo's
sole discretion) on the keyword and directory pages related to real
estate on the Yahoo Main Site as set forth on Exhibit E. From time
to time and at any time Yahoo shall have the right to change such
keyword and directory pages.
[*]
[*]
(d) Yahoo shall provide [*] page views of banner advertisements that link to
the Yahoo Loan Center. Such banner advertisements shall be created by
Yahoo and placed, subject to availability, on run of Yahoo network. In
the event that Yahoo fails to deliver such number of page views at the
expiration of the Term, Yahoo will "make good" the shortfall by extending
its obligations to place such banner advertisements beyond the end of the
Term until such page view obligation is satisfied. The provisions set
forth in this Section 3.1(d) set forth the entire liability of Yahoo, and
E-Loan's sole remedy, for Yahoo's breach of its page view obligations.
(e) Yahoo shall integrate a text link to the Co-Branded Pages in each
residential real estate listing of Yahoo Real Estate Classifieds. The
appearance and look and feel of such text link shall be at Yahoo's
discretion.
(f) Yahoo will continue to offer users of My Yahoo the capability to include a
customized module on the finance page of My Yahoo of E-Loan's monitor a
loan feature.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
4
CONFIDENTIAL
<PAGE> 5
(g) [*]
3.2 E-Loan Responsibilities.
(a) E-Loan shall provide and host the initial page and all subsequent pages
that contain the results of User's inquiries in connection with the E-Loan
Transaction Content. Such pages will be co-branded with the Yahoo Brand
Features and the E-Loan Brand Features. The design and content of such
pages shall be mutually agreed upon by the parties and shall (i) reflect
the Yahoo look and feel and (ii) contain a graphic link provided by Yahoo
that links back to Yahoo. The parties agree that the design and content of
such pages currently hosted by E-Loan as of the Effective Date are deemed
acceptable for purposes of this Section 3.2(a).
(b) E-Loan shall continue to provide users of My Yahoo with customized monitor
a loan results on a daily basis via the User's account with My Yahoo.
(c) E-Loan shall use best efforts to ensure that all pages of the E-Loan Site
linked from any Yahoo Property comply with the scale, speed and
performance equivalent to that provided by the Yahoo Main Site but in no
event less than the current speed, scale and performance of the E-Loan
Site. E-Loan shall also operate and maintain the E-Loan Site to be
competitive with other similar sites on the world wide web, based on
performance, quality and comparative standing of the E-Loan Site.
(d) E-Loan shall provide Yahoo the E-Loan Content and shall use best efforts
to ensure that Users receive results of inquiries in connection with the
E-Loan Transaction Content that are accurate, comprehensive and
error-free. Users that click-through to the E-Loan Site to apply for a
loan shall also receive results of such requests that are accurate,
comprehensive and error-free.
(e) In no event shall any page on the E-Loan Site linked from any Yahoo
Property contain graphic or textual hyperlinks, sponsorships or
advertising banners of any kind from [*]
(f) E-Loan shall place a Yahoo graphic link on those pages of the E-Loan Site
to which users Click-through. Such Yahoo graphic link shall (a) be placed
on the E-
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
5
CONFIDENTIAL
<PAGE> 6
Loan Site in a manner approved by Yahoo (b) contain the Yahoo name and
logo as provided by Yahoo and (c) directly link the user back to a page
designated by Yahoo on the Yahoo Properties. Yahoo shall provide all
graphic images, text, URLs, URL formats, and any other information or
technology necessary for E-Loan to place such Yahoo graphic link back to
Yahoo.
(g) In the event that E-Loan includes a "tools/other resources" (or similar
area) on the E-Loan Site, E-Loan shall place a text link to Yahoo Finance.
In addition, if E-Loan elects to promote any free email service in the
"tools/other resources" (or similar area) on the E-Loan Site, then E-Loan
shall promote Yahoo Mail in such area of the E-Loan Site and in a manner
mutually agreed upon by the parties. E-Loan shall not promote or feature
any other email service in any manner on the E-Loan Site.
(h) E-Loan shall ensure that all information provided by users of the E-Loan
Site is maintained, accessed and transmitted in a secure environment and
in compliance with security specifications equal to that currently
provided on the E-Loan Site as of the Effective Date.. E-Loan shall
provide a link to its policy (or to Yahoo's policy) regarding the
protection of user data on those pages of the E-Loan Site where the user
is requested to provide personal or financial information.
(i) E-Loan shall deliver the E-Loan Content and all updates to Yahoo in
accordance with the delivery specifications set forth in Exhibit C.
3.3 Mutual Responsibilities.
(a) Yahoo and E-Loan shall continue the current process where certain
information submitted by a user is transmitted in an intelligent query to
E-Loan from Yahoo. For example, if a User is looking for a $1,000,000
home, that information will be sent to the E-Loan Site and would appear as
mortgage information for that User.
(b) Each party shall comply with the trademark guidelines provided by the
other party with respect to the use of such party's Brand Features and
neither party will alter or impair any acknowledgment of copyright or
other Intellectual Property Rights of the other.
(c) E-Loan will remain solely responsible for the operation of the E-Loan
Site, and Yahoo will remain solely responsible for the operation of the
Yahoo Properties. Each party, subject to the terms of this Agreement,
retains sole right and control over the programming, content and conduct
of transactions over its respective site.
(d) Each party shall provide on-going assistance to the other party with
regard to technical, administrative and service-oriented issues relating
to the utilization, transmission and maintenance of the E-Loan Content, as
may be reasonably requested.
6
CONFIDENTIAL
<PAGE> 7
SECTION 4: COMPENSATION.
4.1 Slotting Fee. In consideration of Yahoo's performance and obligations as set
forth herein, E-Loan will pay to Yahoo a total slotting fee equal to [*]. The
slotting fee shall not be determined in any manner by the number or amount of
loan applications taken or loans originated by E-Loan. Such fee shall be paid to
Yahoo quarterly on the dates set forth below with the first payment designated
as a set up fee for the design, consultation, development, implementation and
placement of the E-Loan Content.
<TABLE>
<CAPTION>
Payment Date
- --------- ---------------------------------
<S> <C>
[*] [*]
</TABLE>
4.2 Click-through Fee. In addition to the slotting fee, E-Loan shall pay to
Yahoo a fee equal to [*] per Click-through after a total of [*] Click-throughs
have occurred and continuing until [*] Click-throughs have occurred. Thereafter,
E-Loan shall pay Yahoo [*] per Click-through. The Click-through fee shall not
be determined in any manner by the number or amount of loan applications taken
or loans originated by E-Loan. Payments of the Click-through fee are due and
payable within thirty (30) days after the last day of each calendar quarter
during the term of this Agreement.
4.3 Audit Rights. Yahoo shall have the right, at its own expense, to direct an
independent certified public accounting firm to inspect and audit the accounting
and sales books and records of E-Loan that are relevant to the payments set out
in Section 4.2 above; provided, however, that: (i) Yahoo shall provide E-Loan
[*] days notice prior to such audit; (ii) any such inspection and audit shall be
conducted during regular business hours in such a manner as not to interfere
with normal business activities; (iii) in no event shall audits be made more
frequently than [*] per calendar year unless an underpayment of more than [*] is
revealed in any audit and then, no more than [*] every quarter; and (iv) in the
event that any audit reveals an underpayment of more than [*] of the amounts due
Yahoo for any calendar quarter, E-Loan will reimburse the reasonable cost of
such audit. If any audit shall reveal an overpayment of the amounts due Yahoo,
E-Loan shall be entitled to credit such amounts against further payments due,
and if no further payments are due, Yahoo shall promptly refund such amount to
E-Loan.
4.4 Advertising Revenue. Yahoo shall have the sole right to sell, license or
otherwise dispose of all advertising and promotional rights with respect to the
Yahoo Properties, including the Yahoo Loan Center, the Co-Branded Pages and all
other pageviews to
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
7
CONFIDENTIAL
<PAGE> 8
Yahoo's servers. E-Loan shall have the sole right to sell, license or otherwise
dispose of all advertising and promotional rights with respect to the E-Loan
Site and all other pageviews to E-Loan's servers.
4.5 Payment Information. All payments herein are non-refundable and
non-creditable (except as set forth in Section 4.3 above) and shall be made by
E-Loan in U.S. dollars via wire transfer into Yahoo's main account pursuant to
the wire transfer instructions set forth on Exhibit F. Any portion of the above
payments which has not been paid on the dates set forth above shall bear
interest at the lesser of (i) one percent (1%) per month or (ii) the maximum
amount allowed by law. Notwithstanding the foregoing, any failure by E-Loan to
make the payments specified in Sections 4.1 and 4.2 on the dates set forth
therein shall constitute a material breach of this Agreement.
SECTION 5: REPRESENTATIONS AND WARRANTIES.
5.1 Each of Yahoo and E-Loan represents and warrants that at all times during
the term of this Agreement it shall have all licenses and approvals to
enter into this Agreement and grant the licenses contained herein and that
the negotiation, entry and performance of this Agreement will not violate,
conflict with, interfere with, result in a breach of, or constitute a
default under any other agreement to which they are a party or any
government order or decree to which they are subject.
5.2 E-Loan represents and warrants that it is, and at all times during the
term of this Agreement shall be, in compliance with any and all applicable
laws, rules and regulations of any jurisdiction, including, without
limitation, the Federal Real Estate Settlement Procedures Act of 1974 and
HUD Regulation X promulgated thereunder, the Federal Equal Credit
Opportunity Act, and Federal Reserve Regulation B, the Federal Truth in
Lending Act and Federal Reserve Regulation Z promulgated thereunder, the
Federal Fair Credit Reporting Act, and all federal, state and local
privacy laws, rules and regulations and any other applicable laws of any
jurisdiction now in effect and that may come into existence during the
term hereof.
5.3 E-Loan represents and warrants that the E-Loan Content is substantially
free from programming errors or viruses and will produce results in
response to User's inquiries that are accurate, comprehensive and
error-free. E-Loan further represents and warrants that all User
information will be obtained, maintained and distributed in a secure
environment and will not be used or disclosed except as allowed herein.
SECTION 6: INDEMNIFICATION.
6.1 E-Loan, at its own expense, will indemnify, defend and hold harmless
Yahoo, its Affiliates and their employees, representatives, agents and
affiliates, against any claim, suit, action, or other proceeding brought
against Yahoo or an Affiliate
8
CONFIDENTIAL
<PAGE> 9
based on or arising from a claim (a) that, if true, would constitute a
breach of the representations and warranties set forth in Section 5 above
or (b) that the E-Loan Brand Features, any E-Loan Content or any material,
product, information, data or service produced, distributed, offered or
provided by E-Loan or any material presented on any site on the Internet
produced, maintained, or published by E-Loan, infringes in any manner any
copyright, patent, trademark, trade secret or any other intellectual
property right of any third party, is or contains any material or
information that is obscene, defamatory, libelous, slanderous, or that
violates any law or regulation, is negligently performed, or that
otherwise violates or breaches any duty toward, or rights of any person or
entity, including, without limitation, rights of publicity, privacy or
personality, or has otherwise resulted in any consumer fraud, product
liability, tort, breach of contract, injury, damage or harm of any kind to
any person or entity and also including any claim relating to any mortgage
loan approval or mortgage application provided by E-Loan; provided;
however, that in any such case: (x) Yahoo provides E-Loan with prompt
notice of any such claim; (y)Yahoo permits E-Loan to assume and control
the defense of such action, with counsel chosen by E-Loan (who shall be
reasonably acceptable to Yahoo); and (z) E-Loan does not enter into any
settlement or compromise of any such claim without Yahoo's prior written
consent, which consent shall not be unreasonably withheld. E-Loan will pay
any and all costs, damages, and expenses, including, but not limited to,
reasonable attorneys' fees and costs awarded against or otherwise incurred
by Yahoo or an Affiliate in connection with or arising from any such
claim, suit, action or proceeding. It is understood and agreed that Yahoo
does not intend and will not be required to edit or review for accuracy or
appropriateness any E-Loan Content.
6.2 Yahoo, at its own expense, will indemnify, defend and hold harmless E-Loan
and its employees, representatives, agents and affiliates, against any
claim, suit, action, or other proceeding brought against E-Loan based on
or arising from a claim [*] provided, however, that in any such case: (x)
E-Loan provides Yahoo with prompt notice of any such claim; (y) E-Loan
permits Yahoo to assume and control the defense of such action upon
Yahoo's written notice to E-Loan of its intention to indemnify; and (z)
upon Yahoo's written request, and at no expense to E-Loan, E-Loan will
provide to Yahoo all available information and assistance necessary for
Yahoo to defend such claim. Yahoo will not enter into any settlement or
compromise of any such claim, which settlement or compromise would result
in any liability to E-Loan, without E-Loan's prior written consent, which
shall not unreasonably be withheld. Yahoo will pay any and all costs,
damages, and expenses, including, but not limited to, reasonable
attorneys' fees and costs awarded against or otherwise incurred by E-Loan
in connection with or arising from any such claim, suit, action or
proceeding.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
9
CONFIDENTIAL
<PAGE> 10
SECTION 7: LIMITATION OF LIABILITY.
EXCEPT AS PROVIDED IN SECTIONS 4 AND 6, UNDER NO CIRCUMSTANCES
SHALL E-LOAN, YAHOO, OR ANY AFFILIATE BE LIABLE TO ANOTHER PARTY FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING FROM THIS
AGREEMENT, EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR
LOST BUSINESS.
SECTION 8: TERM AND TERMINATION.
8.1 Term. This Agreement will become effective as of the Effective Date and
shall, unless sooner terminated as provided below or as otherwise agreed, remain
effective for a term of twelve (12) months following the Launch Date.
(a) [*] after the Launch Date, Yahoo will provide written notice
to E-Loan in the event that Yahoo, in its sole discretion, elects to extend the
program described in this Agreement [*].
8.2 Termination for Cause. Notwithstanding the foregoing, this Agreement may be
terminated by either party immediately upon notice if the other party: (w)
becomes insolvent; (x) files a petition in bankruptcy; (y) makes an assignment
for the benefit of its creditors; or (z) breaches any of its obligations under
this Agreement in any material respect, which breach is not remedied within
thirty (30) days (ten (10) days in the case of a failure to pay) following
written notice to such party. . In the event that Yahoo provides a notice of
termination under clause (z) above due to a failure to pay, Yahoo shall have the
right to suspend performance under Sections 2.3(a) and 3.1 of this Agreement for
the notice period until the breach is fully remedied by E-Loan.
8.3 Effect of Termination. Any termination pursuant to this Section 8 shall be
without any liability or obligation of the terminating party, other than with
respect to any breach of this Agreement prior to termination. The provisions of
Sections 4.1, 4.3, 4.5, and 5 - 12 shall survive any termination or expiration
of this Agreement; except that if this Agreement terminates due to a breach by
Yahoo, then Section 4.1 shall not survive.
SECTION 9: OWNERSHIP.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
10
CONFIDENTIAL
<PAGE> 11
9.1 By E-Loan. Yahoo acknowledges and agrees that: (i) as between E-Loan on the
one hand, and Yahoo and its Affiliates on the other, E-Loan owns all right,
title and interest in the E-Loan Content and the E-Loan Brand Features; (ii)
nothing in this Agreement shall confer in Yahoo or an Affiliate any right of
ownership in the E-Loan Content or the E-Loan Brand Features; and (iii) neither
Yahoo or its Affiliates shall now or in the future contest the validity of the
E-Loan Brand Features.
9.2 By Yahoo. E-Loan acknowledges and agrees that: (i) as between E-Loan on the
one hand, and Yahoo and its Affiliates on the other, and subject to E-Loan's
right in the E-Loan Content and the E-Loan Brand Features, Yahoo or the
Affiliates own all right, title and interest in the Yahoo Loan Center, the
Co-Branded Pages and any other Yahoo Property and the Yahoo Brand Features; (ii)
nothing in this Agreement shall confer in E-Loan any license or right of
ownership in the Yahoo Brand Features; and (iii) E-Loan shall not now or in the
future contest the validity of the Yahoo Brand Features.
9.3 [*]
SECTION 10: PUBLIC ANNOUNCEMENTS; CONFIDENTIALTIY.
10.1 Public Announcements. The parties will cooperate to create any and all
appropriate public announcements relating to the relationship set forth in this
Agreement. Neither party shall make any public announcement regarding the
existence or content of this Agreement without the other party's prior written
approval and consent. Yahoo will publicly announce this relationship by issuing
a joint press release.
10.2 Confidentiality. Yahoo and E-Loan have previously entered into a Mutual
Nondisclosure Agreement, dated December 10, 1997, and expressly acknowledge that
such Mutual Nondisclosure Agreement remains in full force and effect in
accordance with its terms.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
11
CONFIDENTIAL
<PAGE> 12
SECTION 11: INSURANCE.
E-Loan agrees that it will maintain insurance with a carrier that is reasonably
acceptable to Yahoo and with coverage for commercial general liability of at
least two million dollars per occurrence. Prior to the launch of the E-Loan
Content on the Yahoo Loan Center, E-Loan shall obtain coverage for errors and
omissions of at least two million dollars per occurrence and E-Loan will name
Yahoo as an additional insured on such insurance. E-Loan will provide evidence
of such insurance to Yahoo prior to the launch of the E-Loan Content on the
Yahoo Loan Center. Yahoo shall have the right to terminate this Agreement upon
written notice to E-Loan without liability or obligation of any kind to E-Loan
for any such termination by Yahoo. E-Loan shall not cancel or modify such
insurance without Yahoo's prior written consent and such insurance shall remain
in effect after the termination hereof except that E-Loan shall not be obligated
to continue to name Yahoo as an additional insured after the expiration of the
term of this Agreement.
SECTION 12: NOTICE; MISCELLANEOUS PROVISIONS
12.1 Notices. All notices, requests and other communications called for by this
Agreement shall be deemed to have been given immediately if made by telecopy or
electronic mail (confirmed by concurrent written notice sent first class U.S.
mail, postage prepaid), if to Yahoo at 3420 Central Expressway, Santa Clara, CA
95051, Fax: (408) 731-3301 Attention: Vice President (e-mail:
[email protected]), with a copy to its General Counsel (e-mail:
[email protected]), and if to E-Loan at the physical and electronic mail
addresses set forth on the signature page of this Agreement, or to such other
addresses as either party shall specify to the other. Notice by any other means
shall be deemed made when actually received by the party to which notice is
provided.
12.2 Miscellaneous Provisions. This Agreement will bind and inure to the benefit
of each party's permitted successors and assigns. Neither party may assign this
Agreement, in whole or in part, without the other party's written consent;
provided, however, that: (i) either party may assign this Agreement without such
consent in connection with any merger, consolidation, any sale of all or
substantially all of such party's assets or any other transaction in which more
than fifty percent (50%) of such party's voting securities are transferred. Any
attempt to assign this Agreement other than in accordance with this provision
shall be null and void. This Agreement will be governed by and construed in
accordance with the laws of the State of California, without reference to
conflicts of laws rules, and without regard to its location of execution or
performance. If any provision of this Agreement is found invalid or
unenforceable, that provision will be enforced to the maximum extent permissible
and the other provisions of this Agreement will remain in force. The prevailing
party in any action to enforce this Agreement shall be entitled to reimbursement
of its expenses, including reasonable attorneys' fees. Neither this Agreement,
nor any terms and conditions contained herein may be construed as creating or
constituting a partnership, joint venture or agency relationship between the
parties. No failure of either party to exercise or enforce any of its rights
under this Agreement will act
12
CONFIDENTIAL
<PAGE> 13
as a waiver of such rights. Except as provided in Section 10.2 and except that
the License Agreement shall continue in effect until it terminates according to
its terms, this Agreement and its exhibits are the complete and exclusive
agreement between the parties with respect to the subject matter hereof,
superseding and replacing any and all prior agreements, communications, and
understandings, both written and oral, regarding such subject matter.
Notwithstanding the foregoing, the provisions of this Agreement expressly
supersedes and replaces the provisions set forth in Section 8.1(a) of the
License Agreement with respect to continuing the program beyond the term set
forth in the License Agreement. This Agreement may only be modified, or any
rights under it waived, by a written document executed by both parties. No third
party beneficiaries are created or established by this Agreement. Except as
otherwise specifically provided for herein, each party shall bear its own
expenses for the negotiation of and the performance of this Agreement. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute a single instrument. Execution and delivery of this
Agreement may be evidenced by facsimile transmission.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first written above.
YAHOO! INC. E-LOAN, INC.
By: By:
--------------------------- ----------------------------
Title: Title:
--------------------------- ----------------------------
Address: Address:
--------------------------- ----------------------------
Telecopy: Telecopy:
--------------------------- ----------------------------
E-mail: E-mail:
--------------------------- ----------------------------
13
CONFIDENTIAL
<PAGE> 14
EXHIBIT A
DEFINITIONS
"Affiliates" shall mean any company or any other entity world-wide,
including, without limitation, corporations, partnerships, joint ventures, and
Limited Liability Companies, in which Yahoo owns at least a twenty percent
ownership, equity, or financial interest.
"Click-through" shall mean a user presence at the E-Loan Site that
originated from a Yahoo Property.
"Co-Branded Pages" shall mean those pages hosted by Yahoo that are
co-branded and that solely contain E-Loan Content.
"Launch Date" shall mean March 1, 1999.
"E-Loan Brand Features" shall mean all trademarks, service marks, logos
and other distinctive brand features of E-Loan that are used by E-Loan,
including, without limitation, the trademarks, service marks and logos described
in Exhibit B hereto.
"E-Loan Content" shall mean information and data relating to first and
second mortgage loans and the loan process and includes the E-Loan Transaction
Content as mutually agreed upon from time to time.
"E-Loan Transaction Content" shall mean (i) E-Loan's mortgage quote
feature that provides a user with customized quotes on mortgage products
designated by the user, (ii) E-Loan's mortgage loan recommendation feature that
provides recommendations on mortgage products based on the user's response to a
series of questions, (iii) E-Loan's mortgage qualification feature that provides
an analysis of a user's position as a borrower compared to general lender
guidelines and, in response to a series of questions, will match a user's
borrowing criteria against a database of lenders and their guidelines, and (iv)
E-Loan's monitor a loan service that, in response to a series of questions,
determines whether any mortgage products are available in the market that are
superior to a user's current mortgage. E-Loan Transaction Content includes the
foregoing features and services set forth in clauses (i) through (iv) above as
applied to second loans and home equity loans when such features and services
are available in a significant number of states and acceptable to both parties
and does not include any content or feature allowing a user to apply for a loan
on-line.
"E-Loan Site" shall mean E-Loan's World Wide Web site currently located at
http://www.eloan.com.
"Intellectual Property Rights" shall mean all rights in and to trade
secrets, patents, copyrights, trademarks, know-how, as well as moral rights and
similar rights of any type under the laws of any governmental authority,
domestic or foreign.
CONFIDENTIAL
<PAGE> 15
"Internet" shall mean the collection of computer networks commonly known
as the Internet, and shall include, without limitation, the World Wide Web.
"My Yahoo" shall mean that personalized web product that is part of the
Yahoo Main Site and currently located at http://www.my.yahoo.com.
"User" shall mean a user of the Yahoo Properties.
"Yahoo Brand Features" shall mean all trademarks, service marks, logos and
other distinctive brand features of Yahoo that are used in or relate to a Yahoo
Property, including, without limitation, the trademarks, service marks and logos
described in Exhibit B.
"Yahoo Loan Center" shall mean the Yahoo branded U.S. based property with
information relating to home mortgages currently located at
http://loan.yahoo.com/. Yahoo shall have the right to change the name of the
Yahoo Loan Center from time to time.
"Yahoo Main Site" shall mean Yahoo's principal U.S. based directory to the
World Wide Web currently located at http://www.yahoo.com.
"Yahoo Real Estate Classifieds" shall mean the portion of Yahoo's U.S.
based web site that contains classified listings of residential real estate and
is currently located at http://classifieds.yahoo.com/residential.html
"Yahoo Properties" shall mean any Yahoo branded or co-branded media
properties, including, without limitation, Internet guides, developed in whole
or in part by Yahoo or its Affiliates and distributed or made available by Yahoo
or its Affiliates over the Internet.
CONFIDENTIAL
<PAGE> 16
EXHIBIT B
E-LOAN BRAND FEATURES
YAHOO BRAND FEATURES
Yahoo!
Yahoo related logos
CONFIDENTIAL
<PAGE> 17
EXHIBIT C
A. E-Loan's Responsibilities:
E-Loan will deliver the E-Loan Content to Yahoo via e-mail.
B. Yahoo's Responsibilities:
CONFIDENTIAL
<PAGE> 18
EXHIBIT D
SAMPLE PAGES
Co-Branded Page (E-Loan Content)
[GRAPHIC]
CONFIDENTIAL
<PAGE> 19
Co-Branded Page (E-Loan Transaction Content)
[GRAPHIC]
CONFIDENTIAL
<PAGE> 20
Inside Yahoo! Module
[GRAPHIC]
CONFIDENTIAL
<PAGE> 21
EXHIBIT E
KEYWORD AND DIRECTORY PAGES
[*]
CONFIDENTIAL
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
<PAGE> 22
EXHIBIT F
WIRE TRANSFER INSTRUCTIONS
[*]
CONFIDENTIAL
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
<PAGE> 23
AMENDMENT
YAHOO, INC. - E-LOAN INC.
LICENSE AGREEMENT
This Amendment is entered into as of March 19, 1999 (the
"Effective Date") between Yahoo! Inc., a California corporation ("Yahoo") and
E-LOAN Inc., a California corporation ("E-Loan") and amends the License
Agreement (the "Agreement") entered into between Yahoo and E-Loan with a Launch
Date of March 1, 1999.
For good and valuable consideration, the receipt of which is hereby
acknowledged, Yahoo and E-Loan hereby agree to amend the Agreement as follows:
1. The term of the Agreement described in Section 8.1 will be extended for an
additional term of one year commencing March 1, 2000 and continuing until
February 28, 2001 (the "Subsequent Term").
2. During the Subsequent Term, Section 4.1 of the Agreement which describes the
slotting fee to be paid by E-Loan will be replaced in its entirety by the
following paragraph:
"4.1 Slotting Fee. In consideration of Yahoo's performance and obligations as
set forth herein, E-Loan will pay to Yahoo a slotting fee calculated as follows:
[*]
3. During the Subsequent Term, E-loan will pay Yahoo a Click-through fee as
described in Section 4.2 of the Agreement. In addition, during the original term
of the Agreement and the Subsequent Term, the following provisions are added to
the end to the last sentence of Section 4.2:
"Click-through fees are calculated and will be paid by E-Loan based on Yahoo's
advertising tracking system. [*]
4. The following new provision is added to Section 3.2 regarding E-Loan
Responsibilities:
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
<PAGE> 24
"(j) E-Loan shall deliver to Yahoo a monthly report specifying the following:
[*]
5. The following amendments are made to the definitions set forth in Exhibit A:
The definition of Click-through is replaced by the following:
"Click-through" shall mean a user presence at the E-Loan Site that originated
from a Yahoo Property including, without limitation, a user selecting or
clicking on any link on a Yahoo Property that will link the user to the E-Loan
Site.
A new definition of Unique Users is added as follows:
"Unique Users" shall mean the total number of unduplicated users that visited
the Yahoo Loan Center once during any month as reported by Media Metrix or
similar third party internet measurement and reporting agency.
The definition of Yahoo Loan Center is replaced by the following:
"Yahoo Loan Center" shall mean the Yahoo branded U.S. based property with
information related to loans currently located at http://loan.yahoo.com."
6. Except as expressly amended as set forth herein, the Agreement shall remain
in full force and effect in accordance with its terms.
7. This Amendment has been executed by the duly authorized representatives of
the parties, effective as of the date first set forth above.
YAHOO! INC. E-LOAN INC.
By: Illegible By: /s/ Doug Galen
----------------------- -----------------------
Name: Illegible Name: Doug Galen
--------------------- ---------------------
Title: VP Title: VP
-------------------- ---------------------
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
<PAGE> 1
EXHIBIT 10.12
================================================================================
WAREHOUSING CREDIT AND SECURITY AGREEMENT
(SINGLE-FAMILY MORTGAGE LOANS)
BETWEEN
E-LOAN, INC.,
A CALIFORNIA CORPORATION
AND
BANK UNITED,
A FEDERAL SAVINGS BANK
DATED AS OF FEBRUARY 3, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
1. DEFINITIONS.........................................................................................Page 1
1.1 Defined Terms..............................................................................Page 1
1.2 Other Definitional Provisions.............................................................Page 11
2. THE CREDIT.........................................................................................Page 11
2.1 The Commitment............................................................................Page 11
2.2 Procedures for Obtaining Advances.........................................................Page 12
2.3 Note......................................................................................Page 13
2.4 Interest..................................................................................Page 13
2.5 Principal Payments........................................................................Page 14
2.6 Expiration of Commitment..................................................................Page 16
2.7 Method of Making Payments.................................................................Page 16
2.8 Non-Usage Fee.............................................................................Page 16
2.9 Miscellaneous Charges.....................................................................Page 17
2.10 Bailee....................................................................................Page 17
3. COLLATERAL.........................................................................................Page 17
3.1 Grant of Security Interest................................................................Page 17
3.2 Security Interest in Mortgage-backed Securities...........................................Page 18
3.3 Delivery of Collateral Documents..........................................................Page 19
3.4 Delivery of Additional Collateral or Mandatory Prepayment.................................Page 19
3.5 Right of Redemption from Pledge...........................................................Page 20
3.6 Collection and Servicing Rights...........................................................Page 20
3.7 Return or Release of Collateral at End of Commitment......................................Page 20
3.8 Master Repurchase Agreement...............................................................Page 20
4. CONDITIONS PRECEDENT...............................................................................Page 21
4.1 Initial Advance...........................................................................Page 21
4.2 Each Advance..............................................................................Page 22
5. REPRESENTATIONS AND WARRANTIES.....................................................................Page 23
5.1 Organization; Good Standing; Subsidiaries.................................................Page 23
5.2 Authorization and Enforceability..........................................................Page 23
5.3 Financial Condition.......................................................................Page 24
5.4 Litigation................................................................................Page 24
5.5 Compliance with Laws......................................................................Page 24
5.6 Regulation U..............................................................................Page 25
5.7 Investment Company Act....................................................................Page 25
5.8 Agreements................................................................................Page 25
5.9 Title to Properties.......................................................................Page 25
5.10 ERISA.....................................................................................Page 25
5.11 Eligibility...............................................................................Page 25
</TABLE>
Page i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
5.12 Special Representations Concerning Collateral.............................................Page 26
5.13 RICO......................................................................................Page 28
5.14 Proper Names..............................................................................Page 28
5.15 Direct Benefit From Loans.................................................................Page 28
5.16 Loan Documents Do Not Violate Other Documents.............................................Page 28
5.17 Consents Not Required.....................................................................Page 28
5.18 Material Fact Representations.............................................................Page 29
5.19 Place of Business.........................................................................Page 29
5.20 Use of Proceeds; Business Loans...........................................................Page 29
5.21 No Undisclosed Liabilities................................................................Page 29
5.22 Tax Returns and Payments..................................................................Page 29
5.23 Subsidiaries..............................................................................Page 30
5.24 Holding Company...........................................................................Page 30
5.25 Year 2000 Issue...........................................................................Page 30
6. AFFIRMATIVE COVENANTS..............................................................................Page 30
6.1 Payment of Note...........................................................................Page 30
6.2 Financial Statements and Other Reports....................................................Page 30
6.3 Maintenance of Existence; Conduct of Business.............................................Page 31
6.4 Compliance with Applicable Laws...........................................................Page 32
6.5 Inspection of Properties and Books........................................................Page 32
6.6 Notice....................................................................................Page 32
6.7 Payment of Debt, Taxes, etc...............................................................Page 32
6.8 Insurance.................................................................................Page 33
6.9 Other Loan Obligations....................................................................Page 33
6.10 Use of Proceeds of Advances...............................................................Page 33
6.11 Special Affirmative Covenants Concerning Collateral.......................................Page 33
6.12 Cure of Defects in Loan Documents.........................................................Page 34
6.13 Year 2000 Compliant.......................................................................Page 34
7. NEGATIVE COVENANTS.................................................................................Page 35
7.1 Contingent Liabilities....................................................................Page 35
7.2 Pledge of Mortgage Loans..................................................................Page 35
7.3 Merger; Acquisitions......................................................................Page 35
7.4 Loss of Eligibility.......................................................................Page 35
7.5 Debt to Adjusted Tangible Worth Ratio.....................................................Page 35
7.6 Minimum Adjusted Tangible Net Worth.......................................................Page 36
7.7 Transactions with Affiliates..............................................................Page 36
7.8 Limits on Corporate Distributions.........................................................Page 36
7.9 RICO......................................................................................Page 36
7.10 No Loans or Investments Except Approved Investments.......................................Page 36
7.11 Charter Documents and Business Termination................................................Page 37
7.12 Changes in Accounting Methods.............................................................Page 37
7.13 Changes in Business or Assets.............................................................Page 37
7.14 Changes in Office or Inventory Location...................................................Page 37
</TABLE>
Page ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
7.15 Special Negative Covenants Concerning Collateral..........................................Page 37
7.16 No Indebtedness...........................................................................Page 38
8. DEFAULTS; REMEDIES.................................................................................Page 38
8.1 Events of Default.........................................................................Page 38
8.2 Remedies..................................................................................Page 41
8.3 Application of Proceeds...................................................................Page 43
8.4 Lender Appointed Attorney-in-Fact.........................................................Page 44
8.5 Right of Set-Off..........................................................................Page 44
9. NOTICES............................................................................................Page 45
10. REIMBURSEMENT OF EXPENSES; INDEMNITY...............................................................Page 45
11. FINANCIAL INFORMATION..............................................................................Page 46
12. MISCELLANEOUS......................................................................................Page 47
12.1 Terms Binding Upon Successors; Survival of Representations................................Page 47
12.2 Assignment................................................................................Page 47
12.3 Amendments................................................................................Page 47
12.4 Governing Law.............................................................................Page 47
12.5 Participations............................................................................Page 47
12.6 Relationship of the Parties...............................................................Page 47
12.7 Severability..............................................................................Page 48
12.8 Usury.....................................................................................Page 48
12.9 CONSENT TO JURISDICTION...................................................................Page 49
12.10 Arbitration...............................................................................Page 49
12.11 ADDITIONAL INDEMNITY......................................................................Page 50
12.12 No Waivers Except in Writing..............................................................Page 51
12.13 Waiver of Jury Trial......................................................................Page 51
12.14 Multiple Counterparts.....................................................................Page 51
12.15 No Third Party Beneficiaries..............................................................Page 51
12.16 RELEASE OF LENDER LIABILITY...............................................................Page 51
12.17 Entire Agreement; Amendment...............................................................Page 52
12.18 NO ORAL AGREEMENTS........................................................................Page 52
EXHIBIT "A".................................................................................................Page 54
EXHIBIT "B".................................................................................................Page 56
EXHIBIT "C".................................................................................................Page 57
EXHIBIT "D".................................................................................................Page 61
EXHIBIT "E".................................................................................................Page 62
</TABLE>
Page iii
<PAGE> 5
<TABLE>
<S> <C>
EXHIBIT "F".................................................................................................Page 63
ANNEX "A"...................................................................................................Page 64
EXHIBIT "G".................................................................................................Page 66
EXHIBIT "H".................................................................................................Page 67
EXHIBIT "I".................................................................................................Page 68
EXHIBIT "J".................................................................................................Page 69
EXHIBIT "K".................................................................................................Page 73
EXHIBIT "L".................................................................................................Page 75
EXHIBIT "M".................................................................................................Page 76
EXHIBIT "N".................................................................................................Page 79
</TABLE>
Page iv
<PAGE> 6
WAREHOUSING CREDIT AND SECURITY AGREEMENT
THIS WAREHOUSING CREDIT AND SECURITY AGREEMENT (this "Agreement"), is
dated as of February 3, 1999, by and between E-LOAN, INC., a California
corporation (the "Company"), having its principal office at 5875 Arnold Road,
Dublin, California 94568, and BANK UNITED, a federal savings bank (the
"Lender"), having its principal office at 3200 Southwest Freeway, Suite 2000,
Houston, Texas 77027.
WHEREAS, the Company has requested the Lender to make certain loans to
the Company to finance the origination or purchase of Mortgage Loans (as that
term is herein defined) which loans are for the benefit of the Company;
WHEREAS, the Lender is willing to make such loans as herein provided,
upon the terms, agreements and covenants and subject to the conditions
hereinafter set forth and in reliance on the representations and warranties
herein made and referred to; and
WHEREAS, the Company and the Lender desire to set forth herein the
terms and conditions upon which the Lender shall provide warehouse financing to
the Company;
NOW, THEREFORE, for good and valuable consideration, the amount and
sufficiency of which are hereby acknowledged by the parties hereto, to induce
the Lender to provide the warehouse financing facility to the Company and in
reliance of the representations and warranties made herein, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. Capitalized terms defined below or elsewhere in this
Agreement (including the exhibits hereto) shall have the following meanings:
"Adjusted Tangible Net Worth" means, with respect to Company
at any date, the Tangible Net Worth of Company at such date plus 1.0%
of the sum of the outstanding principal balances of Mortgage Loans for
which Company owns the Servicing Rights plus Subordinated Debt of the
Company.
"Advance" means a disbursement by the Lender under the
Commitment pursuant to Article 2 of this Agreement.
"Advance Request" has the meaning set forth in Section 2.2(a)
hereof.
"Affiliate" shall mean any Person controlling, controlled by
or under common control with any other Person. For purposes of this
definition "control" (including "controlled by" and "under common
control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract, or otherwise or owning or possessing
Page 1
<PAGE> 7
the power to vote 10% or more of any class of voting securities of any
Person. Without limiting the generality of the foregoing, for purposes
of this Agreement, Company and each of its respective Subsidiaries
shall be deemed to be Affiliates of one another.
"Aged Mortgage Loans" means an Eligible Mortgage Loan that has
been included in Collateral for a period of more than ninety (90) days.
"Agreement" means this Warehousing Credit and Security
Agreement (Single Family Mortgage Loans), either as originally executed
or as it may from time to time be supplemented, modified or amended.
"Applicable Law" shall mean the laws of the State of Texas and
the United States of America in effect from time to time and applicable
to the transactions between the Lender and the Company pursuant to this
Agreement and the other Loan Documents whichever permits the charging
and collection of the highest nonusurious rate of interest on such
transactions. For purposes of determining Texas law with respect to the
highest nonusurious rate of interest, the weekly ceiling permitted
under Chapter 1D. of the Texas Credit Title, as amended, shall be
controlling.
"Approved Custodian" means a Person acceptable to the Lender
from time to time in its sole discretion, who possesses Mortgage Loans
that secure Mortgaged-backed Securities.
"Bailee Letter" has the meaning set forth in Section 3.3
hereof.
"Business Day" means any day excluding Saturday, Sunday and
any day on which Lender is closed for business.
"Capitalized Lease" shall mean any lease under which rental
payments are required to be capitalized on a balance sheet of the
lessee in accordance with GAAP.
"Capitalized Rentals" shall mean the amount of aggregate
rentals due and to become due under all Capitalized Leases under which
the Company is a lessee that would be reflected as a liability on a
balance sheet of the Company.
"Collateral" has the meaning set forth in Section 3.1 hereof.
"Collateral Documents" means all of the documents and other
items described on EXHIBIT "C" hereto and required to be delivered to
the Lender in connection with an Advance.
"Collateral Value" means
(a) with respect to any Eligible Mortgage Loan, an
amount equal to the least of (i) the actual out-of-pocket cost
of such Mortgage Loan to the Company, i.e.,
Page 2
<PAGE> 8
the net amount actually funded against such Mortgage Loan or
the net purchase price of such Mortgage Loan, (ii) the Par
Value thereof, (iii) the amount which the Investor has
committed to pay for such Mortgage Loan pursuant to a
Purchase Commitment, or (iv) the Fair Market Value of such
Mortgage Loan;
(b) with respect to Mortgage-backed Securities, an
amount equal to the least of (i) the sum of the principal
balances of the Mortgage Loans from which such Mortgage-backed
Securities were created, (ii) the amount which the Investor
has committed to pay for such Mortgage-backed Securities
pursuant to a Purchase Commitment, or (iii) the Fair Market
Value of such Mortgage-backed Security;
(c) with respect to Collateral that is not described
within (a) or (b), and that is pledged pursuant to Section 3.4
hereof, Collateral Value shall equal an amount established by
Lender in its sole discretion;
(d) with respect to Collateral that is not described
in (a), (b), or (c) the Collateral Value shall be equal to
$0.00;
(e) notwithstanding the foregoing, with respect to
Mortgage Loans that are not Eligible Mortgage Loans, the
Collateral Value thereof shall equal $0.00.
"Commitment" has the meaning set forth in Section 2.1(a)
hereof.
"Company" has the meaning set forth in the first paragraph of
this Agreement.
"Conventional Mortgage Loan" means a Single-family Mortgage
Loan, other than an FHA Loan or VA Loan, that complies with all
applicable material requirements for purchase under the FNMA or FHLMC
standard form of conventional mortgage purchase contract.
"Debt" means, with respect to any Person, at any date (a) all
indebtedness or other obligations of such Person which, in accordance
with GAAP, would be included in determining total liabilities as shown
on the liabilities side of a balance sheet of such Person at such date;
and (b) all indebtedness or other obligations of such Person for
borrowed money or for the deferred purchase price of property or
services; provided that for purposes of this Agreement, there shall be
excluded from Debt at any date loan loss reserves, deferred taxes
arising from capitalized excess service fees, and operating leases.
"Default" means the occurrence of any event or existence of
any condition which, but for the giving of notice, the lapse of time,
or both, would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 2.4(c)
hereof.
"Electronic Request" has the meaning set forth in Section
2.2(a) hereof.
Page 3
<PAGE> 9
"Eligible Mortgage Loan" means a Conventional Mortgage Loan,
FHA Loan, Jumbo Loan, or VA Loan that, at all times during the term of
this Agreement, (a) is evidenced by loan documents that are the
standard forms approved by FNMA or FHLMC or forms previously approved,
in writing, by the Lender in its sole discretion; (b) is validly
pledged to the Lender, subject to no other Liens; (c) is not in default
in the payment of principal and interest or in the performance of any
obligation under the Mortgage Note or the Mortgage evidencing or
securing such Eligible Mortgage Loan for a period of 60 days or more;
(d) has closed less than 25 days prior to the date of the Advance made
in connection with such Eligible Mortgage Loan; and (e) is covered by a
Purchase Commitment.
"Eligible Mortgage Pool" means a pool of Mortgage Loans that
will secure a "mortgage related security", as defined in Section
3(a)(41) of the Exchange Act administered or to be administered by a
trustee acceptable to Lender in its sole discretion where the Mortgage,
Mortgage Note and other documents relating to such Mortgage Loans are
held or to be held by an Approved Custodian.
"ERISA" means the Employee Retirement Income Security Act of
1974 and all rules and regulations promulgated thereunder, as amended
from time to time and any successor statute.
"Event of Default" means any of the conditions or events set
forth in Section 8.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time and any successor statute.
"Fair Market Value" shall mean, at any date, with respect to:
(a) any Mortgage-backed Security, the bid price rate
reflected on the Telerate screen for a Mortgage-backed
Security with the closest coupon rate that does not exceed
that of the Mortgage-backed Security in question multiplied by
the original face amount of such Mortgage-backed Security, and
multiplied by the current pool factor for such Mortgage-backed
Security.
(b) any Mortgage Loan, the market price rate
reflected on the Telerate screen for thirty (30) day mandatory
future delivery of such Mortgage Loan multiplied by the
outstanding principal balance thereof.
In the event Telerate ceases to publish either the market or
bid price referenced in (a) and (b) above, the average bid price quoted
in writing to the Lender as of the date of determination by any two
nationally recognized dealers reasonably selected by Lender that are
making a market in similar Mortgage Loans or Mortgaged-backed
Securities shall be utilized in lieu of the market or bid price, as the
case may be.
"FHA" means the Federal Housing Administration and any
successor thereto.
Page 4
<PAGE> 10
"FHA Loan" means a Single-family Mortgage Loan, payment of
which is partially or completely insured by the FHA under the National
Housing Act or Title V of the Housing Act of 1949 or with respect to
which there is a current, binding and enforceable commitment for such
insurance issued by the FHA.
"FHLMC" means the Federal Home Loan Mortgage Corporation and
any successor thereto.
"FHLMC Guide" means the Freddie Mac Sellers' and Servicers'
Guide, dated September 17, 1984, applicable bulletins, the applicable
MIDANET Users Guide (or the MIDAPHONE User's Guide) and any particular
purchase documents as defined in the Sellers' and Servicers' Guide, as
revised prior to the date hereof.
"FICA" means the Federal Insurance Contributions Act.
"First Mortgage" means a mortgage or deed of trust which
constitutes a first Lien on the property covered thereby.
"First Mortgage Loan" means a Mortgage Loan secured by a First
Mortgage.
"Floating Rate" has the meaning set forth in Section 2.4(a)
hereof.
"FNMA" means the Federal National Mortgage Association and any
successor thereto.
"FNMA Guide" means the FNMA Servicing Guide dated June 30,
1990, as revised prior to the date hereof.
"Funding Account" means the non-interest bearing demand
checking account established with, maintained by, and pledged to Lender
into which shall be deposited the proceeds of Advances, the proceeds
from any sale of Collateral, and from which funds shall be disbursed
for the acquisition of Mortgage Loans.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession, which
are applicable to the circumstances as of the date of determination.
"GNMA" means the Government National Mortgage Association and
any successor thereto.
"GNMA Guide" means the GNMA I Mortgage-Backed Securities
Guide, Handbook GNMA 5500.1 REV. 6, as revised prior to the date
hereof, and as may be revised from time
Page 5
<PAGE> 11
to time, and GNMA II Mortgage-Backed Securities Guide Handbook GNMA
5500.2, as revised prior to the date hereof.
"HUD" means the Department of Housing and Urban Development
and any successor thereto.
"Indebtedness" shall mean and include, without duplication,
(1) all items which in accordance with GAAP, consistently applied,
would be included on the liability side of a balance sheet on the date
as of which Indebtedness is to be determined (excluding shareholders'
equity), (2) Capitalized Rentals under any Capitalized Lease, (3)
guaranties, endorsements and other contingent obligations in respect
of, or any obligations to purchase or otherwise acquire, Indebtedness
of others, and (4) indebtedness secured by any mortgage, pledge,
security interest or other Lien existing on any property owned by the
Person with respect to which indebtedness is being determined, whether
or not the indebtedness secured thereby shall have been assumed.
"Indemnified Liabilities" has the meaning set forth in Article
10 hereof.
"Interim Date" has the meaning set forth in Section 4.1(a)(5)
hereof.
"Internal Revenue Code" means the Internal Revenue Code of
1986, or any subsequent federal income tax law or laws, as any of the
foregoing have been or may from time to time be amended.
"Investor" means FNMA, FHLMC, GNMA, any of the Persons listed
in EXHIBIT "L" hereto, or a financially responsible institution which
is acceptable to Lender, in its sole discretion; provided that at any
time by written notice to Company Lender may disapprove any Investor in
its reasonable discretion, whether or not that Person is named as an
Investor in this definition or in EXHIBIT "L" or has been previously
approved as an Investor by Lender. Upon receipt of such notice, the
Persons named in Lender's notice shall no longer be Investors from and
after the date of the receipt of such notice; provided, that Pledged
Mortgages covered by Purchase Commitments from Persons named in such
notice and held by the Lender prior to the date of the receipt of such
notice shall not cease being Eligible Mortgage Loans because of such
disapproval.
"Jumbo Loan" means a Single-family 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 such
Mortgage Loan exceeds the maximum amount under those requirements, but
in no event shall the amount of such Single-family Mortgage Loan exceed
$650,000.00.
"Lender" has the meaning set forth in the first paragraph of
this Agreement.
"LIBOR Rate" means a rate of interest equal to the London
Interbank Offered Rate for U. S. dollar deposits as quoted by Telerate,
Bloomberg or any other rate quoting service,
Page 6
<PAGE> 12
selected by Lender in its sole discretion for an interest period of one
month, effective two (2) Business Days from the date of quotation. In
the event such rate ceases to be published, LIBOR Rate shall mean a
comparable rate of interest reasonably selected by Lender.
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Loan Documents" means this Agreement, the Note, and each
other document, instrument or agreement executed by the Company or any
other Person in connection herewith or therewith, as any of the same
may be amended, restated, renewed or replaced from time to time.
"Margin Stock" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as
in effect from time to time.
"Master Repurchase Agreement" means that certain Master
Repurchase Agreement dated of even date herewith by and between Company
and Lender.
"Maximum Rate" shall mean the maximum lawful non-usurious rate
of interest (if any) that, under Applicable Law, the Lender may charge
the Company on the Advances from time to time. To the extent that the
interest rate laws of the State of Texas are applicable and unless
changed in accordance with law, the applicable rate ceiling shall be
the weekly ceiling determined in accordance with Chapter 1D. of the
Texas Credit Title, as amended.
"Monthly Average LIBOR Rate" means the average of all LIBOR
Rates quoted during a given month. In the event (i) the Note is paid in
full and the Commitment is terminated prior to a month end; or (ii) the
initial Advance hereunder occurs on a date other than the first day of
that month on which LIBOR Rates are quoted, the Monthly Average LIBOR
Rate shall mean, in the case of clause (i), the average of all LIBOR
Rates quoted that month up to and including the last Business Day prior
to such payment in full; or, in the case of clause (ii), the LIBOR
Rates quoted on the date of the initial Advance through the end of that
month.
"Mortgage" means a First Mortgage or Second Mortgage on
improved real property.
"Mortgage-backed Securities" means FHLMC, GNMA or FNMA
securities that are backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage Note. A
Mortgage Loan, unless otherwise expressly stated herein, means a
Single-family Mortgage Loan.
"Mortgage Note" means a note secured by a Mortgage.
Page 7
<PAGE> 13
"Mortgage Note Amount" means, as of the date of determination,
the then outstanding unpaid principal amount of a Mortgage Note.
"Mortgage Pool" means a pool of Mortgage Loans that were
warehoused with the Lender, on the basis of which there is to be issued
a Mortgage-backed Security.
"Mortgaged Property" means the property, real, personal,
tangible or intangible, securing a Mortgage Note.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA that is maintained for employees of the
Company or a Subsidiary of the Company.
"Net Investable Balances" means the average collected balances
in non-interest bearing deposit accounts controlled or maintained by
the Company and its Subsidiaries in accounts at the Lender, less
balances to support float, activity charges, reserve requirements,
Federal Deposit Insurance Corporation insurance premiums and such other
assessments as may be imposed by governmental authorities from time to
time.
"Non-Usage Fee" has the meaning set forth in Section 2.8
hereof.
"Note" has the meaning set forth in Section 2.3 hereof.
"Notices" has the meaning set forth in Article 9 hereof.
"Obligations" shall mean any and all indebtedness, obligations
and liabilities of the Company to the Lender (whether now existing or
hereafter arising, voluntary or involuntary, whether or not jointly
owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time
decreased or extinguished and later increased, created or incurred),
arising out of or related to the Loan Documents, or any of them.
"Officer's Certificate" means a certificate executed on behalf
of the Company by its chief financial officer or its treasurer or by
such other officer as may be designated herein, in form and substance
satisfactory to Lender.
"OTS" means the Office of Thrift Supervision.
"Par Value" means, with respect to any Mortgage Loan, the
unpaid principal balance of such Mortgage Loan, on the date of the
Advance made against such Mortgage Loan.
"Participant" has the meaning set forth in Section 12.5
hereof.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trusts,
Page 8
<PAGE> 14
banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and federal and state
governments and agencies or regulatory authorities and political
subdivisions thereof.
"Plans" has the meaning set forth in Section 5.10 hereof.
"Pledged Mortgages" has the meaning set forth in Section
3.1(a) hereof.
"Pledged Securities" has the meaning set forth in Section
3.1(b) hereof.
"PMI" means any private mortgage insurance company selected by
Company and reasonably acceptable to Lender.
"Purchase Commitment" means a written commitment, in form and
substance reasonably satisfactory to the Lender, issued in favor of the
Company by an Investor pursuant to which that Investor commits to
purchase Mortgage Loans or Mortgage-backed Securities.
"Purchase Price" shall have the meaning set forth in the
Master Repurchase Agreement.
"Redemption Amount" has the meaning set forth in Section 3.5
hereof.
"RICO" means the Racketeer Influenced and Corrupt
Organizations Act of 1970, as amended.
"Second Mortgage" means a mortgage or deed of trust which
constitutes a second Lien on the property covered thereby.
"Second Mortgage Loan" means a Mortgage Loan secured by a
Second Mortgage.
"Securities" means the Mortgage Notes, securities, and
financial instruments sold by Company to the Lender under the Master
Repurchase Agreement at any time and from time to time.
"Servicing Contract" means, with respect to any Person, the
arrangement, whether or not in writing, pursuant to which such Person
has the right to service Mortgage Loans.
"Servicing Rights" means (a) the rights, obligations,
remedies, powers, and responsibilities of a Person to service Mortgage
Loans owned by that Person, including without limitation the right to
collect principal and interest payments, administer escrow accounts,
and the right to own and possess loan files and all records, documents,
and data relating to such Mortgage Loans, and (b) the obligations,
rights, remedies, powers, privileges, benefits and responsibilities of
a Person to service Mortgage Notes for GNMA, FNMA or FHLMC under and in
accordance with the GNMA Guide, the FNMA Guide and
Page 9
<PAGE> 15
the FHLMC Guide, respectively or for any Investor under any Servicing
Contract, including, without limitation, (i) the right to receive
servicing fees, termination fees, net sales proceeds, late charges,
insufficient fund fees, and other ancillary income relating to the
Mortgage Notes (ii) the right to hold and administer the escrow
accounts, and (iii) the right to all loan files, insurance files, tax
records, collection records, documents, ledgers, computer printouts,
computer tapes and other records, data or information relating to the
Mortgage Notes, the escrow accounts or the servicing or otherwise
necessary or proper to perform the obligations of servicer.
"Single-family Mortgage Loan" means a Mortgage Loan secured by
a Mortgage covering improved real property containing one to four
family residences.
"Statement Date" has the meaning set forth in Section
4.1(a)(5) hereof.
"Subordinated Debt" means, with respect to any Person, all
Indebtedness of such Person, for borrowed money, which is, by its terms
(which terms shall have been approved by the Lender) or by the terms of
a subordination agreement, in form and substance satisfactory to the
Lender, effectively subordinated in right of payment to all other
present and future obligations and all indebtedness of such Person, of
every kind and character, owed to the Lender.
"Subsidiary" means any corporation, association or other
business entity in which more than fifty percent (50%) of the total
voting power or shares of stock entitled to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the
other Subsidiaries of that Person or a combination thereof.
"Tangible Net Worth" means, with respect to any Person at any
date, the sum of the total shareholders' equity in such Person
(including capital stock, additional paid-in capital, and retained
earnings, but excluding treasury stock, if any), on a consolidated
basis; less the aggregate book value of all intangible assets of such
Person (as determined in accordance with GAAP), including without
limitation, goodwill, trademarks, trade names, service marks,
copyrights, patents, licenses, franchises, and Servicing Rights, each
to be determined in accordance with GAAP consistent with those applied
in the preparation of the financial statements referred to in Section
5.3 hereof; provided that, for purposes of this Agreement, there shall
be excluded from total assets, advances or loans to shareholders,
officers or Affiliates, investments in Affiliates, assets pledged to
secure any liabilities not included in the Debt of such Person and
those other assets which would be deemed by HUD to be non-acceptable in
calculating adjusted net worth in accordance with its requirements in
the Audit Guide for Audit of Approved Non-Supervised Mortgagees", as in
effect as of such date.
"Termination Date" shall mean February 2, 2000, or such
earlier date upon which Lender's obligation to fund shall be terminated
pursuant to the terms of this Agreement.
Page 10
<PAGE> 16
"Tribunal" shall mean any court or governmental department,
commission, board, bureau, agency, or instrumentality of any state,
commonwealth, nation, territory, possession, county, parish, or
municipality, whether now or hereafter constituted and/or existing.
"VA" means the Veterans Administration and any successor
thereto.
"VA Loan" means a Single-family Mortgage Loan, payment of
which is partially or completely guaranteed by the VA under the
Servicemen's Readjustment Act of 1944 or Chapter 37 of Title 38 of the
United States Code or with respect to which there is a current binding
and enforceable commitment for such a guaranty issued by the VA.
"Wet Settlement Advance" means a disbursement by the Lender
under the Commitment and pursuant to Section 2.2(a) of this Agreement,
in respect of the closing or settlement of a Single-family Mortgage
Loan, in anticipation of and pending subsequent delivery and
examination of the Collateral Documents as provided in Section II of
EXHIBIT "C".
"Year 2000 Issue" means the failure of computer software,
hardware, and firmware systems and equipment containing embedded
computer chips to properly receive, transmit, process, manipulate,
store, retrieve, re-transmit or in any other way utilize data and
information due to the occurrence of the year 2000 or the inclusion of
dates on or after January 1, 2000.
1.2 Other Definitional Provisions.
(a) Accounting terms not otherwise defined herein shall have
the meanings given the terms under GAAP.
(b) Defined terms may be used in the singular or the plural,
as the context requires.
2. THE CREDIT.
2.1 The Commitment.
(a) Subject to the terms and conditions of this Agreement and
provided no Default or Event of Default has occurred and is continuing,
the Lender agrees, from time to time during the period from the date
hereof to and including the Termination Date, to make Advances to the
Company, provided the sum of the total aggregate principal amount
outstanding at any one time of all such Advances plus the aggregate
Purchase Prices of all Securities which have not been repurchased by
the Company under the Master Repurchase Agreement shall not exceed
FORTY MILLION AND NO/100 DOLLARS ($40,000,000.00). The obligation of
the Lender to make Advances hereunder up to such limit is hereinafter
referred to as the "Commitment." Within the Commitment, the Company may
borrow, repay and reborrow. All Advances under this Agreement shall
constitute a single indebtedness,
Page 11
<PAGE> 17
and all of the Collateral shall be security for the Note and for the
performance of all the Obligations of the Company to the Lender.
Notwithstanding anything contained herein to the contrary or otherwise,
each purchase of Securities by the Lender under the Master Repurchase
Agreement will automatically reduce by the amount of the purchase price
for such Securities, dollar for dollar, the principal amount available
to be borrowed within the Commitment for so long as that purchase is
outstanding under the Master Repurchase Agreement.
(b) Advances shall be used by the Company solely for the
purpose of funding the acquisition or origination of Mortgage Loans, as
specified in the Advance Request and none other, and shall be made at
the request of the Company in the manner hereinafter provided in
Section 2.2, against the pledge of such Mortgage Loans and such other
collateral as is set forth in Section 3.1 hereof as Collateral
therefor. Advances shall also be subject to the following restrictions:
(1) No Advance shall be made against Mortgage Loans
which are not Eligible Mortgage Loans.
(2) The aggregate amount of Wet Settlement Advances
outstanding at any one time shall not exceed FOUR MILLION AND
NO/100 DOLLARS ($4,000,000.00).
(3) The aggregate amount of Advances against Second
Mortgage Loans outstanding at any one time shall not exceed
FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00).
(4) The aggregate amount of Advances against Aged
Mortgage Loans outstanding at any one time shall not exceed
FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00).
(c) No Advance against a Mortgage Loan shall exceed an amount
equal to 99% of the Collateral Value of such Mortgage Loan, to be
determined as of the date such Mortgage Loan is pledged to Lender.
2.2 Procedures for Obtaining Advances.
(a) The Company may obtain an Advance hereunder subject
to the following:
(1) The Company may obtain an Advance hereunder,
subject to the satisfaction of the conditions set forth in
Sections 4.1 and 4.2 hereof, upon compliance with the
procedures set forth in this Section 2.2 and in EXHIBIT "C"
attached hereto and made a part hereof. Requests for Advances
shall be initiated by the Company (i) by delivering to the
Lender and its designee, by telecopy (with original to be sent
immediately thereafter by overnight mail) a completed and
signed request for an Advance (an "Advance Request") in the
form of EXHIBIT "A" attached
Page 12
<PAGE> 18
hereto and made a part hereof, or (ii) by using the electronic
data transmission service provided by the Lender and its
licensor, MBMS Incorporated, to transmit to the Lender a
request for Advance ("Electronic Request"), which shall
include all information required by EXHIBIT "A" through the
Warehouse Management System software provided by the Lender
and its licensor, MBMS Incorporated. The Lender shall have the
right, on not less than three (3) Business Days' prior notice
to the Company, to modify the Advance Request, Electronic
Request, or any exhibits hereto to conform to current legal
requirements or Lender practices, and, as so modified, said
Advance Request, Electronic Request or exhibits shall be
deemed a part hereof. In consideration of the Lender
permitting the Company to make Electronic Requests for
Advances utilizing the Warehouse Management System software or
Advance Requests by telecopy, the Company covenants and agrees
to assume liability for and to protect, indemnify and save the
Lender harmless from, any and all liabilities, obligations,
damages, penalties, claims, causes of action, costs, charges
and expenses, including attorneys' fees and expenses of
employees, which may be imposed, incurred by or asserted
against the Lender by reason of any loss, damage or claim
howsoever arising or incurred because of, out of or in
connection with (i) any action of the Lender pursuant to
Electronic Requests or Advance Requests by telecopy, (ii) the
breach of any provisions of this Agreement by the Company or,
willful misconduct or gross negligence (iii) the transfer of
funds pursuant to such Electronic Requests or Advance Requests
by telecopy. The Lender is entitled to rely upon and act upon
Electronic Requests or Advance Requests by telecopy, and the
Company shall be unconditionally and absolutely estopped from
denying (x) the authenticity and validity of any such
transaction so acted upon by the Lender once the Lender has
advanced funds and has deposited or transferred such funds as
requested in any such Electronic Request or Advance Request by
telecopy, and (y) the Company's liability and responsibility
therefor.
(2) In the case of any Wet Settlement Advances, the
Company shall follow the procedures and, at or prior to the
Lender's making of such Wet Settlement Advance, shall deliver
to the Lender or its designee the documents set forth in
Section II of EXHIBIT "C" hereto. In case of Collateral
financed through a Wet Settlement Advance, the Company shall
cause all Collateral Documents to be delivered to the Lender
or its designee within five (5) Business Days after the date
of the Wet Settlement Advance relating thereto.
(3) Before funding, the Lender and its designee shall
have a reasonable time to examine such Advance Request and the
Collateral Documents to be delivered prior to such requested
Advance, as set forth in the applicable Exhibit hereto, and
may reject such of them as do not meet the requirements of
this Agreement or of the related Purchase Commitment. The
Advance Request and the Collateral Documents must be received
by Lender no later than 2:00 p.m. Houston, Texas time in order
for funding to occur the same day.
Page 13
<PAGE> 19
(b) To make an Advance, the Lender shall credit the Funding
Account upon compliance by the Company with the terms of this
Agreement.
2.3 Note. The Company's obligation to pay the principal of, and
interest on, all Advances made by the Lender shall be evidenced by a promissory
note (the "Note") of the Company dated as of the date hereof, in form of EXHIBIT
"N" hereto. The term "Note" shall include all extensions, renewals and
modifications of the Note and all substitutions therefor. All terms and
provisions of the Note are hereby incorporated herein.
2.4 Interest.
(a) (1) The unpaid amount of each Advance against Mortgage
Loans that are not Aged Mortgage Loans shall bear interest
from the date of such Advance until paid in full, at a rate of
interest equal to the lesser of (i) the Maximum Rate, or (ii)
a floating rate of interest (the "Floating Rate") which is
equal to 185 basis points (1.85%) per annum over the Monthly
Average LIBOR Rate.
(2) The unpaid amount of each Advance outstanding
against Mortgage Loans that are Aged Mortgage Loans shall bear
interest from the date such Mortgage Loans become Aged
Mortgage Loans until such Advance is paid in full at a rate of
interest equal to the lesser of (i) the Maximum Rate or (ii) a
variable rate of interest which is equal to 285 basis points
(2.85%) per annum over the Monthly Average LIBOR Rate.
(3) Notwithstanding Section 2.4(a)(1) and (2) above
to the contrary, the unpaid portion of Advances ("NIB
Advances") equal to Net Investable Balances shall bear
interest at the following rates in the following priority:
(i) First, NIB Advances against Mortgage
Loans that are not Aged Mortgage Loans shall bear
interest at the rate of 1.85% per annum; and,
(ii) Second, the balance, if any, of NIB
Advances against Aged Mortgage Loans shall bear
interest at the rate of 2.85% per annum.
(b) Interest shall be computed on the basis of a 360-day year
and applied to the actual number of days elapsed in each interest
calculation period and shall be payable monthly in arrears, on the
first day of each month, commencing with the first month following the
date of this Agreement, and ending on Termination Date.
(c) Obligations not paid when due (whether at stated maturity,
upon acceleration following the occurrence of an Event of Default or
otherwise) shall bear interest, from the date due until paid in full,
at a rate of interest ("Default Rate") at all times equal to the lesser
of (i) four percent (4%) per annum over the Floating Rate; or (ii) the
Maximum Rate, said interest to be payable on demand by Lender.
Page 14
<PAGE> 20
2.5 Principal Payments.
(a) The outstanding unpaid principal amount of all Advances
shall be payable in full upon February 2, 2000.
(b) The Company shall have the right to prepay the outstanding
Advances in whole or in part, from time to time, without premium or
penalty, subject to the Company's obligation to pay the Non-Usage Fee
pursuant to Section 2.8 hereof.
(c) The Company shall be obligated to pay to the Lender,
without the necessity of prior demand or notice from the Lender, and
the Company authorizes the Lender to charge the Funding Account or any
other accounts of the Company (excluding any monies held by Company in
trust for third parties) in Lender's possession for the amount of any
outstanding Advance against a specific Mortgage Loan, upon the earliest
occurrence of any of the following events:
(1) The expiration of ninety (90) days from the date
of any Advance for any Mortgage Loan (excluding Aged Mortgage
Loans);
(2) The expiration of thirty (30) days from the date
the Mortgage Loan was delivered to an Investor for examination
and purchase, without the purchase being made;
(3) The expiration of forty-five (45) days from the
date Mortgage Loan is delivered to the certificating custodian
acceptable to the Lender for the issuance of a Mortgage-backed
Security;
(4) The expiration of five (5) Business Days from the
date a Wet Settlement Advance was made without receipt of all
Collateral Documents relating to such Mortgage Loan, or such
Collateral Documents, upon examination by the Lender, are
found not to be in compliance with the requirements of this
Agreement or the related Purchase Commitment;
(5) The expiration of fifteen (15) calendar days from
the date a Collateral Document in connection with such
Mortgage Loan was delivered to the Company for correction or
completion, without being returned to the Lender, corrected or
completed;
(6) The Mortgage Loan is in default and such default
continues for a period of sixty (60) days or more;
(7) The expiration of five (5) Business Days after
the date on which the related Purchase Commitment, if any,
expires, is terminated or otherwise canceled or no longer in
full force and effect and the specific Mortgage Loan was not
delivered under the Purchase Commitment prior to such
termination, expiration or cancellation;
Page 15
<PAGE> 21
(8) Upon sale of the Mortgage Loan.
Upon receipt of such payment by the Lender, such Mortgage
Loans or Mortgage-backed Securities shall be considered to have been
redeemed from pledge, and the Collateral Documents relating thereto
which have not been delivered to the Investor or the pool custodian or
pool trustee shall be released by the Lender to the Company.
(d) With respect to each Aged Mortgage Loan, the Company shall
be obligated to pay to the Lender (and the Company authorizes the
Lender to charge the Funding Account or any other accounts of the
Company [excluding monies held by the Company in trust for third
parties] in Lender's possession for the payment thereof), the principal
payments in the amounts and on the dates specified below:
(1) On the date a Pledged Mortgage becomes an Aged
Mortgage Loan, a principal payment in an amount equal to
twenty percent (20%) of the outstanding unpaid Advances
against such Aged Mortgage Loan;
(2) On the date an Aged Mortgage Loan has been
included in the Collateral for 120 days (computed from the
date it was originally pledged as Collateral), a principal
payment in an amount equal to ten percent (10%) of the
outstanding unpaid Advances against such Aged Mortgage Loan;
(3) On the date an Aged Mortgage Loan has been
included in the Collateral for 150 days (computed from the
date it was originally pledged as Collateral), a principal
payment in an amount equal to ten percent (10%) of the
outstanding unpaid Advances made against such Aged Mortgage
Loan;
(4) On the date an Aged Mortgage Loan has been
included in the Collateral for 180 days (computed from the
date it was originally pledged as Collateral), an amount equal
to the balance of the aggregate outstanding unpaid Advances
against such Aged Mortgage Loan.
2.6 Expiration of Commitment. Unless extended or terminated
earlier as permitted hereunder, the Commitment shall expire of its own term, and
without the necessity of action by the Lender, at the close of business on the
Termination Date. However, the remainder of this Agreement shall remain in full
force and effect until all amounts due on the Obligations have been paid in
full. The Lender has not made, and does not hereby make, any commitment to
renew, extend, rearrange or otherwise refinance the outstanding and unpaid
principal of the Note or accrued interest thereon. In the event, however, the
Lender from time to time renews, extends, rearranges, increases and/or otherwise
refinances any portion or all of any Obligation and any accrued interest thereon
at any time, such refinancing shall be evidenced by an appropriate promissory
note in form and substance satisfactory to the Lender and, unless otherwise
noted or modified at such time or times by the terms of such promissory note or
any agreements executed in connection therewith, any such promissory note or
notes and refinancing evidenced thereby shall be governed in all respects by the
terms of this Agreement.
Page 16
<PAGE> 22
2.7 Method of Making Payments. Except as otherwise specifically
provided herein, all payments hereunder shall be made to the Lender not later
than the close of business (Houston time) on the date when due unless such date
is a non-Business Day, in which case, such payment shall be due on the first
Business Day thereafter, and shall be made in lawful money of the United States
of America in immediately available funds.
2.8 Non-Usage Fee. At the end of each month during the term of this
Agreement (i.e., from its effective date through the Termination Date), the
Lender shall determine average usage of the Commitment by calculating the
arithmetic daily average of the outstanding balance of Advances in the preceding
month. The Lender shall then subtract the average usage (the "Used Portion")
from the Commitment (the result being called the "Unused Portion") and the
Company shall pay in arrears (without duplication of payment), on or before five
(5) days after the later of (a) the end of each month or (b) the Company's
receipt of the Lender's bill for such monthly period, a Non-Usage Fee equal to
0.250% per annum on the total amount of the Unused Portion of the Commitment, as
compensation to the Lender for its agreement to make the Commitment available to
the Company during that month and not as compensation for the use, forbearance
or detention of money (i.e., as a "true commitment fee" under Texas law);
provided that such fee shall be waived for the first two (2) calendar months
following the execution of this Agreement and for any month if the Unused
Portion for such month is equal to or less than fifty percent (50%) of the
Commitment. Each calculation by the Lender of the amount of any Non-Usage Fee
shall be conclusive and binding on the Company, absent manifest error.
2.9 Miscellaneous Charges. At the end of each month during the term
of this Agreement, the Company shall pay to the Lender in arrears on or before
five (5) days after the later of (a) the end of each calendar month or (b) the
Company's receipt of the Lender's bill for such monthly period, a transaction
fee equal to $20.00 per Pledged Mortgage held by Lender during such month and
for which Lender has not previously received a transaction fee, for the handling
and administration of Advances and Collateral. For the purposes hereof, Company
shall, at its sole cost and expense, pay all miscellaneous charges and expenses
incurred by the Lender in connection with the handling and administration of
Advances and Collateral, including, without limitation, all charges for security
delivery fees and charges for overnight delivery of Collateral to Investors.
Miscellaneous charges are due when incurred, but shall not be delinquent if paid
within ten (10) days after receipt of an invoice or an account analysis
statement from the Lender.
2.10 Bailee. Lender appoints Company - and Company shall act - as
its bailee to (i) hold in trust for Lender (A) the original recorded copy of the
mortgage, deed of trust, or trust deed securing each Pledged Mortgage, (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
Company) insuring the Company's perfected, first priority Lien created by that
mortgage, deed of trust, or trust deed, (C) the original insurance policies for
each Pledged Mortgage, and (D) all other original documents relating to each
Pledged Mortgage, including any promissory notes, any other loan documents, and
supporting documentation, surveys, settlement statements, closing instructions,
and Mortgage-backed Securities, and (ii) deliver to Lender any of the foregoing
items as soon as reasonably practicable upon Lender's request.
Page 17
<PAGE> 23
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of the
Note and for the performance of all of the Company's Obligations hereunder, the
Company hereby assigns and transfers all right, title and interest in and to and
grants a security interest to the Lender in the following described property,
whether now owned or hereafter acquired (the "Collateral"):
(a) All Mortgage Loans including all Mortgage Notes and
Mortgages evidencing such Mortgage Loans including without limitation
all Mortgage Loans in respect of which Wet Settlement Advances have
been made by the Lender, which from time to time are delivered or
caused to be delivered to the Lender or its designee, come into the
possession, custody or control of the Lender for the purpose of
assignment or pledge or in respect of which an Advance has been made by
the Lender hereunder (the "Pledged Mortgages").
(b) All Mortgage-backed Securities which are from time to time
delivered or caused to be delivered to, or are otherwise in the
possession of the Lender, or its designee, its agent, bailee or
custodian as assignee or pledged to the Lender, or for such purpose are
registered by book-entry in the name of the Lender (the "Pledged
Securities").
(c) All private mortgage insurance and all commitments issued
by the FHA or VA to insure or guarantee any Mortgage Loans included in
the Pledged Mortgages; all guaranties related to Pledged Securities;
all Purchase Commitments held by the Company covering the Pledged
Mortgages or the Pledged Securities and all proceeds resulting from the
sale thereof to Investors pursuant thereto; all personal property,
contract rights, servicing and servicing fees and income or other
proceeds, amounts and payments payable to the Company as compensation
or reimbursement, accounts and general intangibles of whatsoever kind
relating to the Pledged Mortgages, the Pledged Securities and all other
documents or instruments relating to the Pledged Mortgages, the Pledged
Securities, including, without limitation, any interest of the Company
in any fire, casualty or hazard insurance policies and any awards made
by any public body or decreed by any court of competent jurisdiction
for a taking or for degradation of value in any eminent domain
proceeding as the same relate to the Pledged Mortgages.
(d) All right, title and interest of the Company in and to all
escrow accounts, documents, instruments, files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records (including all information, records, tapes, data,
programs, discs and cards necessary or helpful in the administration or
servicing of the foregoing Collateral) and other information and data
of the Company relating to the foregoing Collateral.
(e) All now existing or hereafter acquired cash delivered to
or otherwise in the possession of the Lender or its agent, bailee or
custodian or designated on the books and records of the Company as
assigned and pledged to the Lender.
Page 18
<PAGE> 24
(f) All cash and non-cash proceeds of the foregoing
Collateral, including all dividends, distributions and other rights in
connection with, and all additions to, modifications of and
replacements for, the foregoing Collateral, and all products and
proceeds of the foregoing Collateral, together with whatever is
receivable or received when the foregoing Collateral or proceeds
thereof are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, including,
without limitation, all rights to payment with respect to any cause of
action affecting or relating to the foregoing Collateral or proceeds
thereof.
3.2 Security Interest in Mortgage-backed Securities. The Company's
ability to convert Mortgage Loans that are within the Collateral to
Mortgage-backed Securities are subject to the following conditions:
(a) Pledged Mortgages that are to be transferred to a pool
custodian in connection with the issuance of Mortgage-backed
Securities, shall be released from the Lender's security interest only
against payment to the Lender of the amount due the Lender in
connection with such Pledged Mortgages as determined in accordance with
Section 3.5 of this Agreement or against the issuance of such
Mortgage-backed Securities and the continuation of the Lender's first
priority, perfected security interest in such Mortgage-backed
Securities and the proceeds thereof until payment due the Lender in
respect of said Pledged Mortgages is made to the Lender.
(b) In the case of Mortgage-backed Securities created from
Pledged Mortgages, the Lender shall have the exclusive right to the
possession of the Mortgage-backed Securities or, if the Mortgage-backed
Securities are not to be issued in certificated form, shall have the
right to have the book entries for the Mortgage-backed Securities
issued in the Lender's name or the name or names of its designees.
Lender shall cause delivery of the Mortgage-backed Securities to be
made to the Investor or the book entries registered in the name of the
Investor or the Investor's designee only against payment therefor. The
Company acknowledges that the Lender may enter into one or more
standing arrangements with other financial institutions for the
issuance of Mortgage-backed Securities in book entry form in the name
of such other financial institutions, as agent for the Lender, and the
Company agrees upon request of the Lender, to execute and deliver to
such other financial institutions the Company's written concurrence in
any such standing arrangements.
3.3 Delivery of Collateral Documents. The Lender or its designee
exclusively shall deliver Pledged Mortgages or Pledged Securities to (a) an
Investor that has issued a Purchase Commitment with respect thereto for its
examination and purchase, or (b) an Approved Custodian for purposes of
examination or delivery in connection with the issuance of Mortgage-backed
Securities. In such cases where the Lender must deliver documents to an Investor
or Approved Custodian, the Lender must receive signed shipping instructions (in
the form of EXHIBIT "D" attached hereto), no later than 2:00 p.m. Houston, Texas
time one (1) Business Day prior to the expiration of the appended Purchase
Commitment, in addition to any other documents listed in Section III of EXHIBIT
"C" in respect of the issuance of Mortgage-backed Securities. If shipping
instructions are received by Lender before 2:00 p.m. Houston, Texas time of any
Business Day,
Page 19
<PAGE> 25
Lender will ship the documents together with the Bailee Letter (in form of
EXHIBIT "K") to the Investor or Approved Custodian on the same Business Day,
otherwise Lender will ship the documents the next Business Day following receipt
of shipping instructions. In any case in which an Advance has been made
hereunder against Pledged Mortgages, based on the existence of a Purchase
Commitment covering such Pledged Mortgages, the Company agrees that such Pledged
Mortgages will not be placed in any mortgage pool other than an Eligible
Mortgage Pool, unless such Pledged Mortgages have been redeemed from pledge as
permitted hereunder or other arrangements, satisfactory to the Lender in its
sole discretion, have been made for the redemption of such Pledged Mortgages
from pledge hereunder. The Lender may deliver any document relating to the
Collateral to the Company for correction or completion against a trust receipt
in the form of EXHIBIT "E" attached hereto executed by the Company. The Company
hereby represents and warrants to and agrees with the Lender that any request by
the Company for release of the Collateral consisting of or relating to Mortgage
Loans to the Company shall be solely for the purposes of correcting clerical or
non-substantial documentation problems in preparation for returning such
Collateral to the Lender for ultimate sale or exchange and the aggregate
Collateral Value of the Collateral released to the Company pursuant to this
Section 3.3 will not exceed $500,000.00; the Company shall request such release
in compliance with all of the terms and conditions of such release set forth
herein; and the Company will return to the Lender such documentation released to
the Company pursuant to this Section 3.3 within ten (10) calendar days after
such delivery.
3.4 Delivery of Additional Collateral or Mandatory Prepayment. At
any time that the aggregate Collateral Value of the Collateral then pledged
hereunder is less than the aggregate amount of the Advances then outstanding
hereunder, the Lender may request, and the Company shall within two (2) Business
Days after Notice by the Lender (a) deliver to the Lender or its designee for
pledge hereunder additional Mortgage Loans and/or cash, in aggregate amounts
sufficient to cover the difference between the Collateral Value of the
Collateral pledged and the aggregate amount of Advances outstanding hereunder,
or (b) repay the Advances in an amount sufficient to reduce the aggregate
balance thereof outstanding to an amount equal to or below the Collateral Value
of the Collateral pledged hereunder.
3.5 Right of Redemption from Pledge. So long as no Event of
Default has occurred the Company may redeem a Mortgage Loan or, Mortgage-backed
Security, by notifying the Lender of its intention to redeem such Mortgage Loan
or Mortgage-backed Security, from pledge and by paying, or causing an Investor
to pay, to the Lender, for application to prepayment of the principal balance of
the Note, an amount (the "Redemption Amount") equal to the amount of the Advance
made with respect to or relating to such Mortgage Loan or Mortgage-backed
Security.
3.6 Collection and Servicing Rights. So long as no Event of
Default shall have occurred, the Company shall be entitled to service and
receive and collect directly all sums payable to the Company in respect of the
Collateral other than proceeds of any Purchase Commitment or proceeds of the
sale of any Collateral unless deposited to funding account. Following the
occurrence of any Event of Default the Lender or its designee shall thereafter
be entitled to service and receive and collect all sums payable to the Company
in respect of the Collateral, and in such case (a) the Lender or its designee in
its discretion may, in its own name or in the name of the Company or otherwise,
demand, sue for, collect or receive any money or property at any time payable or
receivable on
Page 20
<PAGE> 26
account of or in exchange for any of the Collateral, but shall be under no
obligation to do so, (b) the Company shall, if the Lender so requests, forthwith
pay to the Lender at its principal office all amounts thereafter received by the
Company upon or in respect of any of the Collateral, advising the Lender as to
the source of such funds, and (c) all amounts so received and collected by the
Lender shall be held by it as part of the Collateral.
3.7 Return or Release of Collateral at End of Commitment. If (a)
the Commitment shall have expired or been terminated, and (b) no Advances,
interest or other Obligations evidenced by the Loan Documents or due under this
Agreement shall be outstanding and unpaid, the Lender shall deliver or release
all Collateral in its possession to the Company. The receipt of the Company for
any Collateral released or delivered to the Company pursuant to any provision of
this Agreement shall be a complete and full acquittance for the Collateral so
returned, and the Lender shall thereafter be discharged from any liability or
responsibility therefor.
3.8 Master Repurchase Agreement. If the Lender purchases any
Pledged Mortgages under the Master Repurchase Agreement, the Purchase Price to
be paid by the Lender for such Pledged Mortgage under the Master Repurchase
Agreement shall be credited against the Note in an amount equal to the
outstanding Advance made against such Pledged Mortgage and the balance of the
Purchase Price after such application, if any, shall be paid to the Company. Any
Pledged Mortgage shall be eligible for purchase by Lender under the Master
Repurchase Agreement following delivery of such Pledged Mortgage to the
Investor.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. The obligation of the Lender to make the
initial Advance under this Agreement is subject to the satisfaction, in the sole
discretion of the Lender, on or before the date thereof, of the following
conditions precedent:
(a) The Lender shall have received the following, all of which
must be satisfactory in form and content to the Lender, in its sole
discretion:
(1) The Loan Documents dated as of the date hereof
duly executed by the Company;
(2) Certified copies of the Company's articles of
incorporation and bylaws and certificates of good standing
dated no less recently than ninety (90) days prior to the date
of this Agreement and a certification from the taxing
authority of the state of incorporation stating that the
Company is in good standing with said taxing authority;
(3) An original resolution of the board of directors
of the Company, certified as of the date of this Agreement by
its corporate secretary, authorizing the execution, delivery
and performance of this Agreement and the other Loan
Page 21
<PAGE> 27
Documents, and all other instruments or documents to be
delivered by the Company pursuant to this Agreement;
(4) A certificate (in the form of EXHIBIT "J") of the
Company's corporate secretary as to the resolution of the
board of directors of the Company authorizing the execution,
delivery and performance of this Agreement and the other Loan
Documents and the incumbency and authenticity of the
signatures of the officers of the Company executing this
Agreement and the other Loan Documents and each Advance
Request and all other instruments or documents to be delivered
pursuant hereto (the Lender being entitled to rely thereon
until a new such certificate has been furnished to the
Lender);
(5) Financial statements of the Company (and its
Subsidiaries, on a consolidated basis) containing a balance
sheet as of September 30, 1998 (the "Statement Date") and
related statements of income, changes in stockholders' equity
and cash flows for the period ended on the Statement Date and
a balance sheet as of December 31, 1998 ("Interim Date") and
related statement of income for the period ended on the
Interim Date, all prepared in accordance with GAAP applied on
a basis consistent with prior periods and in the case of the
statements as of the Statement Date, audited by independent
certified public accountants of recognized standing acceptable
to the Lender;
(6) A favorable written opinion of counsel to the
Company, dated as of the date of this Agreement, to be in
substantially the form of EXHIBIT "M" hereto, and addressed to
the Lender;
(7) A tax, lien and judgment search of the
appropriate public records for the Company, including a search
of Uniform Commercial Code financing statements, which search
shall not have disclosed the existence of any prior Lien on
the Collateral other than in favor of the Lender or as
permitted hereunder;
(8) Copies of the certificates, documents or other
written instruments which evidence the Company's eligibility
described in Section 5.11 hereof, all in form and substance
satisfactory to the Lender;
(9) Copies of the Company's errors and omissions
insurance policy or mortgage impairment insurance policy and
blanket bond coverage policy, all in form and content
satisfactory to the Lender, showing compliance by the Company
as of the date of this Agreement with the related provisions
of Section 6.8 hereof and showing Lender as an additional loss
payee on such policies;
(10) Executed financing statements in recordable form
covering the Collateral and ready for filing in all
jurisdictions required by the Lender;
Page 22
<PAGE> 28
(11) Evidence that the Funding Account has been
established with the Lender.
4.2 Each Advance. The obligation of the Lender to make the
initial and each subsequent Advance under this Agreement is subject to
the satisfaction, in the sole discretion of the Lender, as of the date
of each such Advance, of the following additional conditions precedent:
(a) In connection with an Advance, the Company shall have
delivered to the Lender the Advance Request or the Electronic Request,
Collateral Documents, and documents required under and shall have
satisfied the procedures set forth in Section 2.2 and EXHIBIT "C",
according to the type of Collateral to be financed through the
requested Advance. All items delivered to the Lender or its designee
shall be satisfactory to the Lender in form and content, and the Lender
may reject such of them as do not meet the requirements of this
Agreement or of the related Purchase Commitment.
(b) The Lender shall have received evidence satisfactory to it
as to the making and/or continuation of any book entry or the due
filing and recording in all appropriate offices of all financing
statements and other instruments as may be necessary to perfect the
security interest of the Lender in the Collateral under the Uniform
Commercial Code of Texas or other applicable law.
(c) The representations and warranties of the Company
contained in Article 5 hereof shall be accurate and complete in all
material respects as if made on and as of the date of each Advance.
(d) The Company shall have performed all agreements to be
performed by it hereunder, including without limitation, the payment of
all Non-Usage Fees when due hereunder, and, as of the date of the
Advance Request, and after giving effect to the requested Advance,
there shall exist no Default or Event of Default hereunder.
(e) The Company shall not have incurred any material
liabilities, direct or contingent, except as approved by Lender
pursuant to Section 7.16, since the dates of the Company's most recent
financial statements theretofore delivered to the Lender.
(f) The Lender shall have received from counsel for the
Company, if requested by the Lender in its sole discretion, an updated
opinion, in form and substance satisfactory to the Lender, addressed to
the Lender and dated as of the date of such Advance, covering such of
the matters as the Lender may reasonably request.
(g) Such additional documents, instruments, and information as
Lender or its legal counsel may require.
Acceptance of the proceeds of the requested Advance by the Company
shall be deemed a representation by the Company that all conditions set forth in
this Article 4 shall have been satisfied as of the date of such Advance.
Page 23
<PAGE> 29
5. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Lender, as of the
date of this Agreement and (unless otherwise notified in writing by the Company
and Lender, in its sole discretion, approves in writing) as of the date of each
Advance Request and the making of each Advance, that:
5.1 Organization; Good Standing; Subsidiaries. The Company and
each Subsidiary of the Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
has the full legal power and authority to own its property and to carry on its
business as currently conducted and is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction in which the
transaction of its business makes such qualification necessary, except in
jurisdictions, if any, where a failure to be in good standing has no material
adverse effect on the business, operations, assets or financial condition of the
Company or any such Subsidiary. For the purposes hereof, good standing shall
include qualification for any and all licenses and payment of any and all taxes
required in the jurisdiction of its incorporation and in each jurisdiction in
which the Company transacts business. The Company has no Subsidiaries except as
set forth on EXHIBIT "F" hereto. EXHIBIT "F" sets forth with respect to each
such Subsidiary, its name, address, place of incorporation, each state in which
it is qualified as a foreign corporation, and the percentage ownership of the
Company in such Subsidiary.
5.2 Authorization and Enforceability. The Company has all
requisite corporate power and authority to execute, deliver, create, issue,
comply and perform this Agreement, the Note and all other Loan Documents to
which the Company is party and to make the borrowings hereunder. The execution,
delivery and performance by the Company of this Agreement, the Note and all
other Loan Documents to which the Company is party and the making of the
borrowings hereunder and thereunder, have been duly and validly authorized by
all necessary corporate action on the part of the Company (none of which actions
has been modified or rescinded, and all of which actions are in full force and
effect) and do not and will not conflict with or violate any provision of the
articles of incorporation or by-laws of the Company, conflict with or result in
a breach of or constitute a default or require any consent under any contracts
to which Company is a party, or result in the creation of any Lien upon any
property or assets of the Company other than the Lien on the Collateral granted
hereunder, or result in or require the acceleration of any Indebtedness of the
Company pursuant to any agreement, instrument or indenture to which the Company
is a party or by which the Company or its property may be bound or affected, or
to the Company's knowledge, materially violate any provision of law applicable
to the Company. This Agreement, the Note and all other Loan Documents
contemplated hereby or thereby constitute legal, valid, and binding obligations
of the Company, enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other such laws affecting the enforcement
of creditors' rights generally.
5.3 Financial Condition. The balance sheet of the Company provided
to Lender pursuant to Section 4.1(a)(5) hereof (and if applicable, its
Subsidiaries, on a consolidating and consolidated basis) as at the Statement
Date, and the related statements of income, changes in stockholders' equity, and
cash flows for the fiscal year ended on
Page 24
<PAGE> 30
the Statement Date, heretofore furnished to the Lender, fairly present the
financial condition of the Company and its Subsidiaries as at the Statement Date
and the Interim Date and the results of its and their operations for the fiscal
period ended on the Statement Date and the Interim Date. The Company had, on the
Statement Date and the Interim Date, no known material liabilities, direct or
indirect, fixed or contingent, matured or unmatured, or liabilities for taxes,
long-term leases or unusual forward or long-term commitments not disclosed by,
or reserved against in, said balance sheet and related statements, and at the
present time there are no material unrealized or anticipated losses from any
loans, advances or other commitments of the Company except as heretofore
disclosed to the Lender in writing. Said financial statements were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved. Since the Statement Date, there has been no material adverse change in
the business, operations, assets or financial condition of the Company or its
Subsidiaries, nor is the Company aware of any state of facts particular to the
Company which (with or without notice or lapse of time or both) would or could
result in any such material adverse change.
5.4 Litigation. Except as disclosed on EXHIBIT "H", there are no
actions, claims, suits or proceedings pending, or to the knowledge of the
Company, threatened or reasonably anticipated against or affecting the Company
or any Subsidiary of the Company in any court or before any arbitrator or before
any government commission, board, bureau or other administrative agency which,
if adversely determined, may reasonably be expected to result in any material
and adverse change in the business, operations, assets or financial condition of
the Company or any of Company's Subsidiaries, as a whole.
5.5 Compliance with Laws. To the knowledge of Company, neither the
Company nor any Subsidiary of the Company is in violation of any provision of
any law, or of any judgment, award, rule, regulation, order, decree, writ or
injunction of any court or public regulatory body or authority which might have
a material adverse effect on the business, operations, assets or financial
condition of the Company or any of Company's Subsidiaries, as a whole.
5.6 Regulation U. The Company is not engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying Margin Stock, and no part of the proceeds of
any Advances made hereunder will be used to purchase or carry any Margin Stock
or to extend credit to others for the purpose of purchasing or carrying any
Margin Stock.
5.7 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" or controlled by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
5.8 Agreements. Neither the Company nor any Subsidiary of the
Company is a party to any agreement, instrument or indenture, or subject to any
restriction, materially and adversely affecting its business, operations, assets
or financial condition, except as disclosed in the financial statements
described in Section 5.3 hereof. The Company and each Subsidiary of the Company
are not in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement, instrument, or
indenture which default could have a material adverse effect on the business,
operations, properties or financial condition of the Company as a whole. No
holder of any Indebtedness of the Company or of any of its Subsidiaries has
given notice
Page 25
<PAGE> 31
of any alleged default thereunder or, if given, the same has been cured or will
be cured by Company within the cure period provided therein, and no liquidation
or dissolution of the Company or any of its Subsidiaries and no receivership,
insolvency, bankruptcy, reorganization or other similar proceedings relative to
the Company or any of its Subsidiaries or any of their respective properties is
pending, or to the knowledge of the Company, threatened.
5.9 Title to Properties. The Company and each Subsidiary of the
Company has good, valid, insurable (in the case of real property) and marketable
title to all of its properties and assets (whether real or personal, tangible or
intangible) reflected on the financial statements described in Section 5.3
hereof, and all such properties and assets are free and clear of all Liens
except as disclosed in such financial statements and not prohibited under this
Agreement.
5.10 ERISA. All plans ("Plans") of a type described in Section 3(3)
of ERISA in respect of which the Company or any Subsidiary of the Company is an
"Employer," as defined in Section 3(5) of ERISA, are in substantial compliance
with ERISA, and none of such Plans is insolvent or in reorganization, has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Internal Revenue Code, and neither the Company nor any Subsidiary of the
Company has incurred any material liability (including any material contingent
liability) to or on account of any such Plan pursuant to Sections 4062, 4063,
4064, 4201 or 4204 of ERISA; and no proceedings have been instituted to
terminate any such Plan, and no condition exists which presents a material risk
to the Company or a Subsidiary of the Company of incurring a liability to or on
account of any such Plan pursuant to any of the foregoing Sections of ERISA. No
Plan or trust forming a part thereof has been terminated since December 1, 1974.
5.11 Eligibility. The Company has all requisite corporate power and
authority to carry on its business as now conducted. The Company has all
necessary licenses, permits, franchises and all other authorizations to own its
property and to carry on its business as now conducted, except where the failure
to have such licenses, permits, franchises, and other authorizations has no
material adverse effect on the business operations, assets or financial
condition of the Company or any Subsidiary of Company. If approved now or
hereafter as a lender or seller/servicer for any one or more of the governmental
agencies as set forth below, the Company will remain at all times approved and
qualified and in good standing and meet all requirements applicable to such
status:
(a) FNMA approved seller/servicer of Mortgage Loans, eligible
to originate, purchase, hold, sell, and service Mortgage Loans to be
sold to FNMA.
(b) FHLMC approved seller/servicer of Mortgage Loans, eligible
to originate, purchase, hold, sell, and service Mortgage Loans to be
sold to FHLMC.
(c) GNMA approved seller/servicer of Mortgage Loans, eligible
to originate, purchase, hold, sell, and service Mortgage Loans to be
sold to GNMA.
(d) HUD approved lender, eligible to originate, purchase,
hold, sell and service FHA-insured Mortgage Loans.
Page 26
<PAGE> 32
(e) VA lender in good standing under the VA loan guarantee
program eligible to originate, purchase, hold, sell, and service
VA-guaranteed Mortgage Loans.
5.12 Special Representations Concerning Collateral. The Company
hereby represents and warrants to the Lender, as of the date of this Agreement
and as of the date of each Advance, that:
(a) The Company is the legal and equitable owner and holder,
free and clear of all Liens (other than Liens granted hereunder), of
the Pledged Mortgages and the Pledged Securities. All Pledged
Mortgages, Pledged Securities, and Purchase Commitments have been duly
authorized and validly granted or issued to the Company, and all of the
foregoing items of Collateral comply with all of the requirements of
this Agreement, and have been validly pledged or assigned to the
Lender, subject to no other Liens.
(b) The Company has, and will continue to have, the full
right, power and authority to pledge the Collateral pledged and to be
pledged by it hereunder.
(c) Any Mortgage Loan and related documents included in the
Pledged Mortgages (1) as of the date of the Advance Request for such
Mortgage Loan, has been duly executed and delivered by the parties
thereto at a closing held not more than sixty (60) days prior to such
date; (2) has been made in compliance with all requirements of the Real
Estate Settlement Procedures Act, Equal Credit Opportunity Act, the
federal Truth-In-Lending Act and all other applicable laws and
regulations; (3) is valid and enforceable in accordance with its terms,
without defense or offset; (4) has not been modified or amended except
in writing, which writing is part of the Collateral Documents, nor any
requirements thereof waived; and (5) complies with the terms of this
Agreement and, if applicable, with the related Purchase Commitment held
by the Company. Each Mortgage Loan has been fully advanced in the face
amount thereof and each Mortgage creates a Lien on the premises
described therein.
(d) No monetary default, nor, to the knowledge of the Company,
any event which, with notice or lapse of time or both, would become a
default, has occurred and is continuing under any Mortgage Loan
included in the Pledged Mortgages; provided, however, that, with
respect to Pledged Mortgages which have already been pledged as
Collateral hereunder, if any such default or event has occurred, the
Company will promptly notify the Lender and the same shall not have
continued for more than sixty (60) days.
(e) The Company has complied with all laws, rules and
regulations in respect of the FHA insurance or VA guarantee of each
Mortgage Loan included in the Pledged Mortgages designated by the
Company as an FHA insured or VA guaranteed Mortgage Loans, and such
insurance or guarantee is in full force and effect. All such FHA
insured and VA guaranteed Mortgage Loans comply in all respects with
all applicable requirements for purchase under the FNMA standard form
of selling contract for FHA insured and VA guaranteed loans and any
supplement thereto then in effect.
(f) All fire and casualty policies covering Mortgaged Property
encumbered by a Pledged Mortgage (1) name the Company and its
successors and assigns as the insured
Page 27
<PAGE> 33
under a standard mortgagee clause, (2) are and will continue to be in
full force and effect, and (3) afford and will continue to afford
insurance against fire and such other risks as are usually insured
against in the broad form of extended coverage insurance from time to
time available, as well as insurance against flood hazards if the same
is required by FHA or VA.
(g) Pledged Mortgages encumbering Mortgaged Property located
in a special flood hazard area designated as such by the Secretary of
HUD are and shall continue to be covered by special flood insurance
under the National Flood Insurance Program.
(h) Each FHA insured Mortgage Loan pledged hereunder meets all
applicable governmental requirements for such insurance. Each Mortgage
Loan, against which an Advance is made on the basis of a Purchase
Commitment meets all requirements of such Purchase Commitment. The
Company shall assure that Mortgage Loans pledged pursuant to this
Agreement and intended to be used in the formation of Mortgage-backed
Securities shall comply, or prior to the formation of any such
Mortgage-backed Security, shall comply with the requirements of the
governmental instrumentality, department or agency guaranteeing such
Mortgage-backed Security.
(i) For Pledged Mortgages which will be used to secure GNMA
Mortgage-backed Securities, the Company has received from GNMA a
Confirmation Notice or Confirmation Notices for Request Additional
Commitment Authority and for Request Pool Numbers, and there remains
available thereunder a commitment on the part of GNMA sufficient to
permit the issuance of GNMA Mortgage-backed Securities in an amount at
least equal to the amount of such Pledged Mortgages designated by the
Company as the Mortgage Loans to be used to secure such GNMA
Mortgage-backed Securities; each such Confirmation Notice is in full
force and effect; each of such Pledged Mortgages has been assigned by
the Company to one of such Pool Numbers and a portion of the available
GNMA Commitment has been allocated thereto by the Company, in an amount
at least equal to the principal amount of each Mortgage Note secured by
such Pledged Mortgages; and each such assignment and allocation has
been reflected in the books and records of the Company.
(j) Each Pledged Mortgage in excess of $250,000.00 is
supported by an appraisal that meets the appraisal requirements of FNMA
or FHLMC (in the case of residential Mortgaged Property), or the Office
of Thrift Supervision for the type of Mortgaged Property securing that
Pledged Mortgage; or, alternatively, such Pledged Mortgage is eligible
for purchase or is guaranteed or insured by a U.S. Government agency or
a U.S. Government sponsored enterprise.
5.13 RICO. The Company is not in violation of any laws, statutes or
regulations, including, without limitation, RICO, which contain provisions which
could potentially override Lender's security interest in the Collateral.
5.14 Proper Names. The Company does not operate in any jurisdiction
under a trade name, division, division name or name other than those names set
forth on EXHIBIT "I" attached
Page 28
<PAGE> 34
hereto and all such names included on EXHIBIT "I" are utilized by the Company
only in the jurisdictions listed therein.
5.15 Direct Benefit From Loans. The Company has received, or, upon
the execution and funding thereof, will receive (a) direct benefit from the
making and execution of this Agreement and the other Loan Documents to which it
is a party, and (b) fair and independent consideration for the entry into, and
performance of, this Agreement and the other Loan Documents to which it is a
party. Contemporaneously with the disbursements of each Advance by the Lender to
the Company, all such proceeds will be used to finance the origination or
purchase of Mortgage Loans.
5.16 Loan Documents Do Not Violate Other Documents. Neither the
execution and delivery by the Company of this Agreement or any other Loan
Document to which it is a party nor the consummation of the transactions herein
and therein contemplated, nor the performance of, or compliance with, the terms
and provisions hereof and thereof, does or will contravene, breach or conflict
with any provision of either of its articles of incorporation or by-laws, or, to
its knowledge, any applicable law, statute, rule or regulation or any judgment,
decree, writ, injunction, franchise, order or permit applicable to the Company
or its assets or properties, or does or will conflict or be inconsistent with,
or does or will result in any breach or default of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of any Lien upon any of the property or assets of the
Company pursuant to the terms of any indenture, mortgage, deed of trust, loan
agreement, or other instrument to which the Company is a party or by which the
Company or any of its property may be bound, the contravention, conflict,
inconsistency, breach or default of which will have a materially adverse effect
on the Company's condition, financial or otherwise, or affect its ability to
perform, promptly and fully, its obligations hereunder or under any of the other
Loan Documents.
5.17 Consents Not Required. Except for those consents that have
already been obtained and delivered to Lender or required as a condition to any
Advance hereunder, no consent of any Person and no consent, license, permit,
approval, or authorization of, exemption by, or registration or declaration
with, any Tribunal is required in connection with the execution, delivery,
performance, validity, or enforceability of this Agreement or any of the Loan
Documents by the Company.
5.18 Material Fact Representations. Neither the Loan Documents nor
any other agreement, document, certificate, or written statement furnished to
the Lender by or on behalf of the Company in connection with the transactions
contemplated in any of the Loan Documents contains any untrue statement of a
material adverse fact. There are no material adverse facts or conditions
relating to the making of the Commitment, any of the Collateral, and/or the
financial condition and business of the Company known to the Company which have
not been fully disclosed, in writing, to the Lender, it being understood that
this representation is made as of, and shall be limited to the date of this
Agreement. All writings heretofore or hereafter exhibited or delivered to the
Lender by or on behalf of the Company are and will be genuine and what they
purport to be.
5.19 Place of Business. The principal place of business of the
Company is 5875 Arnold Road, Dublin, California 94568, and the chief executive
office of the Company and the office where
Page 29
<PAGE> 35
it keeps its financial books and records relating to its property and all
contracts relating thereto and all accounts arising therefrom is located at the
address set forth for the Company in Section 9 hereof.
5.20 Use of Proceeds; Business Loans. The Company will use the
proceeds of the Advances made pursuant to the Commitment solely as follows, and
for no other purpose: finance the origination and purchase of Mortgage Loans.
All loans evidenced by the Note are and shall be "business loans", as such term
is used in the Depository Institutions Deregulation and Monetary Control Act of
1980, as amended, and such loans are for business or commercial purposes and not
primarily for personal, family, household or agricultural use, as such terms are
used or defined in Texas Revised Civil Statutes, Texas Credit Title, Regulation
Z promulgated by the Board of Governors of the Federal Reserve System, and
Titles I and V of the Consumer Credit Protection Act. The provisions of the
Texas Credit Title which regulate revolving loans and revolving triparty
accounts) shall not apply to this Agreement.
5.21 No Undisclosed Liabilities. Other than as permitted in Section
7.16 hereof and as disclosed in the financial statements delivered to Lender
prior to the date hereof, the Company does not have any liabilities or
Indebtedness, direct or contingent, except for liabilities or Indebtedness
which, in the aggregate, do not exceed $25,000.00.
5.22 Tax Returns and Payments. All federal, state and local income,
excise, property and other tax returns required to be filed with respect to
Company's operations and those of its Subsidiaries in any jurisdiction have been
filed on or before the due date thereof (plus any applicable extensions); all
such returns are true and correct; all taxes, assessments, fees and other
governmental charges upon the Company, and Company's Subsidiaries and upon its
property, income or franchises, which are due and payable have been paid,
including, without limitation, all FICA payments and withholding taxes, if
appropriate, other than those which are being contested in good faith by
appropriate proceedings, diligently pursued and as to which the Company has
established adequate reserves determined in accordance with GAAP, consistently
applied. The amounts reserved, as a liability for income and other taxes
payable, in the financial statements described in Section 5.3 hereof are
sufficient for payment of all unpaid federal, state and local income, excise,
property and other taxes, whether or not disputed, of the Company and its
Subsidiaries, accrued for or applicable to the period and on the dates of such
financial statements and all years and periods prior thereto and for which the
Company, and Company's Subsidiaries may be liable in their own right or as
transferee of the assets of, or as successor to, any other Person.
5.23 Subsidiaries. The Company has not issued, and does not have
outstanding, any warrants, options, rights or other obligations to issue or
purchase any shares of its capital stock or other securities. The outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. All of Company's Subsidiaries are
listed on EXHIBIT "H", attached hereto.
5.24 Holding Company. The Company is not a "holding company" or a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Page 30
<PAGE> 36
5.25 Year 2000 Issue. The Company and its Subsidiaries are in the
process of reviewing the effect of the year 2000 Issue on the computer software,
hardware, and firmware systems and equipment containing embedded microchips
owned or operated by or for the Company and its Subsidiaries or used or relied
upon in the conduct of their business (including systems and equipment supplied
by others or with which such computer systems of the Company and its
Subsidiaries interface if the failure of such systems would have a material
adverse effect on the operations of the Company or its Subsidiaries ). The
Company and its Subsidiaries currently do not believe that the costs to the
Company and its Subsidiaries of any reprogramming required as a result of the
Year 2000 Issue to permit the proper functioning of such systems and equipment
and the proper processing of data, and the testing of such reprogramming, and of
the reasonably foreseeable consequences of the year 2000 Issue to the Company or
any of its Subsidiaries (including reprogramming errors and the failure of
systems or equipment supplied by others if the failure of such systems would
have a material adverse effect on the operations of the Company or its
Subsidiaries), are not reasonably expected to result in a Default or Event of
Default or to have a material adverse effect on the business, assets,
operations, prospects, or condition (financial or otherwise) of the Company or
its Subsidiaries.
6. AFFIRMATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the Commitment
is outstanding or there remain any Obligations of the Company to be paid or
performed under this Agreement or under any other Loan Document, the Company
shall:
6.1 Payment of Note. Punctually pay or cause to be paid the
principal of, interest on and all other amounts payable hereunder and under the
Note in accordance with the terms thereof.
6.2 Financial Statements and Other Reports. Deliver to the
Lender:
(a) As soon as available and in any event within thirty (30)
days after the end of each calendar month, statements of income and
changes in stockholders' equity and cash flow of the Company and, if
applicable, Company's Subsidiaries, on a consolidated and consolidating
basis for the immediately preceding month, and related balance sheet as
at the end of the immediately preceding month, all in reasonable
detail, prepared in accordance with GAAP applied on a consistent basis,
and certified as to the fairness of presentation by the president or
chief financial officer of the Company, subject, however, to year-end
audit adjustments.
(b) As soon as available and in any event within ninety (90)
days after the close of each fiscal year: statements of income, changes
in stockholders' equity and cash flows of the Company, and, if
applicable, Company's Subsidiaries, on a consolidated and consolidating
basis for such year, the related balance sheet as at the end of such
year (setting forth in comparative form the corresponding figures for
the preceding fiscal year), all in reasonable detail, prepared in
accordance with GAAP applied on a consistent basis throughout the
periods involved, and accompanied by an opinion in form and substance
satisfactory to the Lender and prepared by an accounting firm
reasonably satisfactory to the
Page 31
<PAGE> 37
Lender, or other independent certified public accountants of recognized
standing selected by the Company and acceptable to the Lender, as to
said financial statements and a certificate signed by the president or
chief financial officer of the Company stating that said financial
statements fairly present the financial condition and results of
operations of the Company and, if applicable, Company's Subsidiaries as
at the end of, and for, such year.
(c) Together with each delivery of financial statements
required in this Section 6.2, an Officer's Certificate in substantially
the form of EXHIBIT "F" hereto.
(d) Reports in respect of the Pledged Mortgages and Pledged
Securities, in such detail and at such times as the Lender in its
discretion may request at any time or from time to time, including,
without limitation, a monthly pipeline report in form satisfactory to
Lender, to be delivered with the monthly financial statements required
in Section 6.2(a).
(e) Copies of all regular or periodic financial and other
reports, if any, which the Company shall file with the Securities and
Exchange Commission or any governmental agency successor thereto and
copies of any audits completed by GNMA, FHLMC, or FNMA. Copies of the
Mortgage Bankers' Financial Reporting Forms (FNMA Form 1002) which the
Company shall have filed with FNMA.
(f) From time to time, with reasonable promptness, such
further information regarding the business, operations, properties or
financial condition of the Company as the Lender may reasonably
request.
6.3 Maintenance of Existence; Conduct of Business. Preserve and
maintain its corporate existence in good standing and all of its rights,
privileges, licenses and franchises necessary in the normal conduct of its
business, including, without limitation, its eligibility as lender,
seller/servicer and issuer described under Section 5.11 hereof; conduct its
business in an orderly and efficient manner; maintain a net worth of acceptable
assets as required by HUD at any and all times for maintaining the Company's
status as a FHA approved mortgagee; and make no material change in the nature or
character of its business or engage in any business in which it was not engaged
on the date of this Agreement.
6.4 Compliance with Applicable Laws. Comply with the requirements
of all applicable laws, rules, regulations and orders of any governmental
authority, a breach of which could materially adversely affect its business,
operations, assets, or financial condition, except where contested in good faith
and by appropriate proceedings, and with sufficient reserves established
therefor.
6.5 Inspection of Properties and Books. Permit authorized
representatives of the Lender to (a) discuss the business, operations, assets
and financial condition of the Company and Company's Subsidiaries with their
officers and employees and to examine their books of account, records, reports
and other papers and make copies or extracts thereof, and (b) inspect all of the
Company's property and all related information and reports at Lender's expense,
all at such reasonable times as the Lender may request. The Company will provide
its accountants with a copy of this Agreement promptly after the execution
hereof and will instruct its accountants to answer candidly any and all
Page 32
<PAGE> 38
questions that the officers of the Lender or any authorized representatives of
the Lender may address to them in reference to the financial condition or
affairs of the Company and Company's Subsidiaries. The Company may have its
representatives in attendance at any meetings between the officers or other
representatives of the Lender and the Company accountants held in accordance
with this authorization.
6.6 Notice. Give prompt written notice to the Lender of (a) any
action, suit or proceeding instituted by or against the Company or any of its
Subsidiaries in any federal or state court or before any commission or other
regulatory body (federal, state or local, domestic or foreign) which action,
suit or proceeding has at issue in excess of Seventy-Five Thousand Dollars
($75,000.00) (except for normal collection and foreclosure proceedings initiated
by the Company in connection with a Mortgage Loan or any other mortgage loan),
or any such proceedings threatened against the Company, or any of Company's
Subsidiaries in writing containing the details thereof, (b) the filing,
recording or assessment of any federal, state or local tax Lien against it, or
any of its assets or any of its Subsidiaries, (c) the occurrence of any Event of
Default hereunder or the occurrence of any Default and continuation thereof for
five (5) days, (d) the suspension, revocation or termination of the Company's
eligibility, in any respect, as approved lender, seller/servicer or issuer as
described under Section 5.11 hereof, (e) the transfer, loss or termination of
any Servicing Contract to which the Company is a party, or which is held for the
benefit of the Company, and the reason for such transfer, loss or termination,
if known to the Company, and (f) any other action, event or condition of any
nature which may lead to or result in a material adverse effect upon the
business, operations, assets, or financial condition of the Company or Company's
Subsidiaries or which, with or without notice or lapse of time or both, would
constitute a default under any other agreement instrument or indenture to which
the Company is a party or to which the Company its properties or assets may be
subject.
6.7 Payment of Debt, Taxes, etc. Pay and perform all obligations
and Indebtedness of the Company, and cause to be paid and performed all
obligations and Indebtedness of its Subsidiaries in accordance with the terms
thereof and pay and discharge or cause to be paid and discharged all taxes,
assessments and governmental charges or levies imposed upon the Company or its
Subsidiaries, or upon their respective income, receipts or properties before the
same shall become past due, as well as all lawful claims for labor, materials
and supplies or otherwise which, if unpaid, might become a Lien or charge upon
such properties or any part thereof; provided, however, that the Company and its
Subsidiaries shall not be required to pay obligation, Indebtedness, taxes,
assessments or governmental charges or levies or claims for labor, materials or
supplies for which the Company or its Subsidiaries shall have obtained an
adequate bond or adequate insurance or which are being contested in good faith
and by proper proceedings which are being reasonably and diligently pursued if
such proceedings do not involve any likelihood of the sale, forfeiture or loss
of any such property or any interest therein while such proceedings are pending,
and provided further that book reserves adequate under generally accepted
accounting principles shall have been established with respect thereto and
provided further that the owing Person's title to, and its right to use, its
property is not materially adversely affected thereby.
6.8 Insurance. Maintain (a) errors and omissions insurance or
mortgage impairment insurance and blanket bond coverage, with such companies and
in such amounts as satisfy prevailing
Page 33
<PAGE> 39
PFNMA and FHLMC requirements applicable to a qualified mortgage originating
institution, and (b) liability insurance and fire and other hazard insurance on
its properties, with responsible insurance companies approved by the Lender, in
such amounts and against such risks as is customarily carried by similar
businesses operating in the same vicinity; and (c) within thirty (30) days after
notice from the Lender, obtain such additional insurance as the Lender shall
reasonably require, all at the sole expense of the Company. Copies of such
policies shall be furnished to the Lender without charge upon obtaining such
coverage or any renewal of or modification to such coverage.
6.9 Other Loan Obligations. Perform all obligations under the
terms of each loan agreement, note, mortgage, security agreement or debt
instrument by which the Company is bound or to which any of its property is
subject, and promptly notify the Lender in writing of a declared default under
or the termination, cancellation, reduction or non-renewal of any of its other
lines of credit or financing agreements with any other lender. EXHIBIT "B"
hereto is a true and complete list of all such lines of credit or financing
agreements as of the date hereof.
6.10 Use of Proceeds of Advances. Use the proceeds of each Advance
solely for the purpose of financing or purchasing Pledged Mortgages, including
the issuance of Mortgage-backed Securities based thereon.
6.11 Special Affirmative Covenants Concerning Collateral.
(a) Warrant and defend the right, title and interest of the
Lender in and to the Collateral against the claims and demands of all
Persons whomsoever.
(b) Service or cause to be serviced all Pledged Mortgages in
accordance with the standard requirements of the issuers of Purchase
Commitments covering the same and all applicable FHA and VA
requirements, including without limitation taking all actions necessary
to enforce the obligations of the obligors under such Mortgage Loans.
The Company shall service or cause to be serviced all Mortgage Loans
backing Pledged Securities in accordance with applicable governmental
requirements and issuers of Purchase Commitments covering the same. The
Company shall hold all escrow funds collected in respect of Pledged
Mortgages and Mortgage Loans backing Pledged Securities in trust,
without commingling the same with non-custodial funds, and apply the
same for the purposes for which such funds were collected.
(c) Execute and deliver to the Lender such Uniform Commercial
Code financing statements with respect to the Collateral as the Lender
may request. The Company shall also execute and deliver to the Lender
such further instruments of sale, pledge or assignment or transfer, and
such powers of attorney, as required by the Lender to secure the
Collateral, and shall do and perform all matters and things necessary
or desirable to be done or observed, for the purpose of effectively
creating, maintaining and preserving the security and benefits intended
to be afforded the Lender under this Agreement. The Lender shall have
all the rights and remedies of a secured party under the Uniform
Commercial Code of Texas, or any other applicable law, in addition to
all rights provided for herein.
Page 34
<PAGE> 40
(d) Notify the Lender within two (2) Business Days after
receipt of notice from an Investor of any default under, or of the
termination of, any Purchase Commitment relating to any Pledged
Mortgage, Eligible Mortgage Pool or Pledged Security.
(e) Promptly comply in all respects with the terms and
conditions of all Purchase Commitments, and all extensions, renewals
and modifications or substitutions thereof or thereto. The Company will
cause to be delivered to the Investor the Pledged Mortgages and Pledged
Securities to be sold under each Purchase Commitment not later than the
expiration thereof.
(f) Maintain, at its principal office or in a regional office
approved by the Lender, or in the office of a computer service bureau
engaged by the Company and approved by the Lender, and, upon request,
shall make available to the Lender the originals, or copies in any case
where the originals have been delivered to the Lender or to an
Investor, of its Mortgage Notes and Mortgages included in Pledged
Mortgages, Mortgage-backed Securities delivered to the Lender as
Pledged Securities, Purchase Commitments, and all related Mortgage Loan
documents and instruments, and all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records and other information and data relating to the
Collateral.
6.12 Cure of Defects in Loan Documents. The Company will promptly
cure and cause to be promptly cured any defects in the creation, issuance,
execution and delivery of this Agreement and the other Loan Documents; and upon
request of the Lender and at the Company's expense, the Company will promptly
execute and deliver, and cause to be executed and delivered, to the Lender or
its designee, all such additional documents, agreements and/or instruments in
compliance with or in accomplishment of the covenants and agreements of this
Agreement and the other Loan Documents, and/or to create, perfect, preserve,
extend and/or maintain any and all Liens created pursuant hereto or pursuant to
any other Loan Document as valid and perfected Liens (of a priority as set forth
in this Agreement) in favor of the Lender to secure the Obligations, all as
reasonably requested from time to time by the Lender.
6.13 Year 2000 Compliant. Will take all necessary reasonable action
to complete in all material respects by July 1, 1999, the reprogramming of
computer software, hardware, and firmware systems used or relied upon in the
conduct of the Company's business (including systems and equipment supplied by
others or with which such systems of Company interface if the failure of such
system would have a material adverse effect on the operations of the Company or
its Subsidiaries) required as a result of the Year 2000 Issue to permit the
proper functioning of such computer systems and other equipment and testing of
such systems and equipment, as so reprogrammed. At the request of the Lender,
Company shall provide to the Lender reasonable assurance of its compliance with
the preceding sentence.
7. NEGATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the Commitment
is outstanding or there remain any Obligations of the Company to be paid or
performed under this Agreement or
Page 35
<PAGE> 41
any other Loan Document, the Company shall not, either directly or indirectly,
without the prior written consent of the Lender:
7.1 Contingent Liabilities. Assume, incur, create, guarantee,
endorse, or otherwise become or be liable for the obligation of any Person other
than the Company except by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and excluding the sale of Mortgage
Loans with recourse in the ordinary course of the company's business.
7.2 Pledge of Mortgage Loans. Except for Mortgage Loans pledged to
the lenders described in EXHIBIT "B", pledge or grant a security interest in any
existing or future Mortgage Loans acquired by the Company other than to the
Lender except as otherwise expressly permitted in this Agreement; provided,
however, that if no Default or Event of Default has occurred and is continuing,
servicing on individual Mortgage Loans may be sold concurrently with and
incidental to the sale of such Mortgage Loans (with servicing released) in the
ordinary course of the Company's business.
7.3 Merger; Acquisitions. Company shall, or shall permit any of
its Subsidiaries which are engaged in the mortgage banking business to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation (except mergers or consolidations of a Subsidiary into the
Company, with the Company as the surviving corporation), or convey, sell, lease
or otherwise dispose of (or agree to do any of the foregoing at any future time)
all or any part of its property or assets which are material (including, but not
limited to, any rights to service Mortgage Loans), individually or in the
aggregate, other than obsolete or worn out property, whether now owned or
hereafter acquired, other than in the ordinary course of business as presently
conducted and at fair market value, without the prior approval of the Lender
(which approval shall not be reasonably withheld), except that the Company and
its Subsidiaries may, in the ordinary course of business, acquire Mortgage Loans
for resale and sell Mortgage Loans and Mortgage-backed Securities.
7.4 Loss of Eligibility. Take any action that would cause the
Company to lose all or any part of its status as an eligible lender,
seller/servicer and issuer as described under Section 5.11 hereof.
7.5 Debt to Adjusted Tangible Worth Ratio. Permit the ratio of
Debt to Adjusted Tangible Worth of the Company (and its Subsidiaries, on a
consolidated basis) to exceed 10:1 computed as of the end of each calendar
month.
7.6 Minimum Adjusted Tangible Net Worth. Permit Adjusted Tangible
Net Worth of the Company (and its Subsidiaries, on a consolidated basis) to be
less than Twelve Million Dollars ($12,000,000.00), computed as of the end of
each calendar month.
7.7 Transactions with Affiliates. Directly or indirectly (a) make
any loan, advance, extension of credit or capital contribution to any of its
Affiliates, (b) transfer, sell, pledge, assign or otherwise dispose of any of
its assets to or on behalf of such Affiliates, or (c) merge or consolidate
Page 36
<PAGE> 42
with or purchase or acquire assets from such Affiliates except for transactions
described in clauses (a) through (c) of this Section 7.7 involving not more than
$25,000.00 each.
7.8 Limits on Corporate Distributions. Pay, make or declare or
incur any liability to pay, make or declare any dividend (excluding stock
dividends) or other distribution, direct or indirect, on or on account of any
shares of its stock or any redemption or other acquisition, direct or indirect,
of any shares of its stock or of any warrants, rights or other options to
purchase any shares of its stock nor purchase, acquire, redeem or retire any
stock or ownership interest in itself whether now or hereafter outstanding
except that so long as no Default, Event of Default or violation of Sections 7.5
and 7.6 hereof exists at such time, or would exist immediately thereafter, the
Company may declare and pay cash dividends to its shareholders; provided,
however, that (a) such cash dividends must be declared and paid within 20 days
after delivery to Lender of the financial statements described in Section 6.2(a)
hereof; and (b) provided, further that such dividends shall not exceed, in the
aggregate during any fiscal year, fifty percent (50%) of the Company's net
income for such fiscal year; provided, however, that this restriction shall not
apply to the repurchase of shares of common stock from employees, officers,
directors, consultants or other persons performing services for this Company or
any Subsidiary pursuant to agreements under which this Company has the option to
repurchase such shares upon the occurrence of certain events, such as the
termination of employment.
7.9 RICO. Violate any laws, statutes or regulations, whether
federal or state, for which forfeiture of its properties is a potential penalty,
including, without limitations, RICO.
7.10 No Loans or Investments Except Approved Investments. Without
the prior written consent of Lender, make or permit to remain outstanding any
loans or advances to, or investments in, any Person, except that the foregoing
restriction shall not apply to:
(a) investments in marketable obligations maturing no later
than 180 days from the date of acquisition thereof by the Company and
issued and fully guaranteed, directly, by the full faith and credit of
the Government of the United States of America or any agency thereof;
and
(b) investments in certificates of deposit maturing no later
than 180 days from the date of issuance thereof and issued by
commercial banks in the United States and such banks rated by Moody's
Investor Service, Inc. and receiving a rating of Prime-2 or higher on
Moody's short term debt rating or rated by Standard & Poor's
Corporation and receiving a rating of AA-/A1+ or higher on S&P's short
term debt rating, or issued by Lender, it being acknowledged and agreed
that the foregoing requirements shall pertain to certificates of
deposit issued and/or received on a date on or after the date of this
Agreement); and
(c) investments not to exceed $100,000.00 in the aggregate.
Page 37
<PAGE> 43
7.11 Charter Documents and Business Termination.
(a) Except as permitted in Section 7.3 hereof, issue, sell or
commit to issue or sell any shares of its capital stock of any class,
or other equity or investment security,
(b) Amend or otherwise modify its corporate charter or
otherwise change its corporate structure in any manner which will have
a materially adverse effect on the Company's condition, financial or
otherwise, or which will have a material adverse effect upon the
Company's ability to perform, promptly and fully, its obligations
hereunder or under any of the other Loan Documents, or
(c) Take any action with a view toward its dissolution,
liquidation or termination, or, in fact, dissolve, liquidate or
terminate its existence.
7.12 Changes in Accounting Methods. Make any change in its
accounting method as in effect on the date of this Agreement or change its
fiscal year ending date from September 30, unless such changes (a) are required
for conformity with generally accepted accounting principles and, in such event,
the Company will give prior written notice of each such change to the Lender or
(b) or if not so required, are in conformity with generally accepted accounting
principles and have the prior written approval of the Lender which approval
shall not be unreasonably withheld.
7.13 Changes in Business or Assets. Except as permitted by Section
7.3 hereof, make any substantial change (a) in the nature of its business as now
conducted, or (b) in the use of its property as now used and proposed to be
used.
7.14 Changes in Office or Inventory Location. Change the address
and/or location of its chief executive office or principal place of business or
the place where it keeps its books and records or its inventory to a location
outside the State of California unless, prior to any such change, the Company
shall execute and cause to be executed such additional agreements and/or lien
instruments as the Lender may reasonably request to conform with the provisions
hereof and the transactions and perfected Liens in the Collateral contemplated
under this Agreement and the other Loan Documents.
7.15 Special Negative Covenants Concerning Collateral.
(a) The Company shall not amend or modify, or waive any of the
terms and conditions of, or settle or compromise any claim in respect
of, any Pledged Mortgages or Pledged Securities.
(b) The Company shall not sell, assign, transfer or otherwise
dispose of, or grant any option with respect to, or pledge or otherwise
encumber (except pursuant to this Agreement or as permitted herein) any
of the Collateral or any interest therein.
(c) The Company shall not make any compromise, adjustment or
settlement in respect of any of the Collateral or accept other than
cash in payment or liquidation of the Collateral.
Page 38
<PAGE> 44
7.16 No Indebtedness. Except for the Indebtedness described in
EXHIBIT "B" hereto, without the prior written consent of Lender, the Company
will not incur, create, assume or guarantee or in any manner become or be liable
or permit to be outstanding any Indebtedness (including obligations for the
payment of rentals other than provided for herein) nor guarantee any contract or
other obligation, and will not in any way become or be responsible for
obligations of any Person, whether by agreement to purchase the Indebtedness of
any other Person or agreement for the furnishing of funds to any other Person
through the purchase of goods, supplies or services (or by way of stock
purchase, capital contribution, advance or loan) for the purpose of paying or
discharging the Indebtedness of any other Person or otherwise, except that the
foregoing restrictions shall not apply to:
(a) the Obligations.
(b) liabilities for taxes, assessments, governmental charges
or levies which are not yet due and payable or which are being
contested in good faith by appropriate proceedings diligently conducted
if reserves adequate under generally accepted accounting principles
have been established therefor.
(c) endorsements of negotiable instruments for collection in
the ordinary course of business.
(d) Indebtedness incurred in the ordinary course of business
in connection with normal trade or business obligations which are
payable within 90 days of the occurrence thereof, provided, however,
that no Indebtedness shall be incurred by the Company to any Affiliate
other than in the ordinary course of business and upon substantially
the same or better terms as it could obtain in an arm's length
transaction with a Person who is not an Affiliate.
(e) Indebtedness of less than $100,000.00, in the aggregate,
incurred in the ordinary course of business.
(f) Indebtedness incurred in the ordinary course of business
for the purpose of leasing office space or equipment to be used in the
conduct of the business of the Company.
8. DEFAULTS; REMEDIES.
8.1 Events of Default. The occurrence of any of the following
conditions or events shall be an event of default ("Event of Default"):
(a) Failure to pay the principal of any Advance when due,
whether at stated maturity, by acceleration, or otherwise; or failure
to pay any installment of interest on any Advance or any other amount
due under this Agreement within ten (10) days after the due date; or
failure to pay, beyond any applicable grace period, the principal or
interest on any other indebtedness due the Lender; or
Page 39
<PAGE> 45
(b) Failure of the Company to pay any sums due and payable
under the Master Repurchase Agreement or Company's breach or default of
any term, condition, covenant, or agreement of the Master Repurchase
Agreement and such default shall not have been remedied or waived
within ten (10) days after receipt of notice from the Lender of such
default; or
(c) Failure of the Company or any of its Subsidiaries to pay,
or any default in the payment of any principal or interest on, any
other Indebtedness or in the payment of any contingent obligation
beyond any period of grace provided; or breach or default with respect
to any other material term of any other Indebtedness of any loan
agreement, mortgage, indenture or other agreement relating thereto, if
the effect of such failure, default or breach is to cause, or to permit
the holder or holders thereof (or a trustee on behalf of such holder or
holders) to cause, Indebtedness of the Company or its Subsidiaries in
the aggregate amount of Fifty Thousand Dollars ($50,000.00) or more to
become or be declared due prior to its stated maturity (upon the giving
or receiving of notice, lapse of time, both, or otherwise) or failure
of the Company to comply with Section 6.11 hereof; or
(d) Any of the Company's representations or warranties made or
deemed made herein or in any other Loan Document, or in any statement
or certificate at any time given by the Company in writing pursuant
hereto or thereto shall be inaccurate or incomplete in any materially
adverse respect on the date as of which made or deemed made; or
(e) The Company shall default in the performance of or
compliance with any term or covenant contained in this Agreement and
such default shall not have been remedied or waived within thirty (30)
days after receipt of notice from the Lender of such default other than
those referred to above in Subsections 8.1(a), 8.1(b), 8.1(c), or
8.1(d); or
(f) (1) A court having jurisdiction shall enter a decree or
order for relief in respect of the Company or any of Company's
Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect in respect
of the Company or any of Company's Subsidiaries, which decree or order
is not stayed; or a filing of an involuntary case under any applicable
bankruptcy, insolvency or other similar law in respect of the Company
or any of Company's Subsidiaries has occurred; or (2) any other similar
relief shall be granted under any applicable federal or state law; or a
decree or order of a court having jurisdiction for the appointment of a
receiver, liquidator, sequestrator, trustee, custodian or other officer
having similar powers over the Company or any of Company's
Subsidiaries, or over all or a substantial part of their respective
property, shall have been entered; or the involuntary appointment of an
interim receiver, trustee or other custodian of the Company or any of
Company's Subsidiaries, for all or a substantial part of their
respective property; or the issuance of a warrant of attachment,
execution or similar process against any substantial part of the
property of the Company or any of Company's Subsidiaries, and the
continuance of any such events in Subsections (1) and (2) above for
sixty (60) days unless dismissed or discharged; or
Page 40
<PAGE> 46
(g) The Company or any of Company's Subsidiaries shall have an
order for relief entered with respect to it or commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall consent to the entry of an order
for relief in an involuntary case, or to the conversion to an
involuntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; the making by
the Company or any of Company's Subsidiaries of any assignment for the
benefit of creditors; or the failure of the Company or any of Company's
Subsidiaries, or the admission by any of them of its inability, to pay
its debts as such debts become due; or
(h) Any money judgment, writ or warrant of attachment, or
similar process involving in any case an amount in excess of One
Hundred Thousand Dollars ($100,000.00) shall be entered or filed
against the Company or any of its Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event no later than
five (5) days prior to the date of any proposed sale thereunder; or
(i) Any order, judgment or decree shall be entered against the
Company decreeing the dissolution or split up of the Company and such
order shall remain undischarged or unstayed for a period in excess of
twenty (20) days; or
(j) Any Plan maintained by the Company or any of Company's
Subsidiaries shall be terminated within the meaning of Title IV of
ERISA or a trustee shall be appointed by an appropriate United States
district court to administer any Plan, or the Pension Benefit Guaranty
Corporation (or any successor thereto) shall institute proceedings to
terminate any Plan or to appoint a trustee to administer any Plan if as
of the date thereof the Company's or any Subsidiary's liability (after
giving effect to the tax consequences thereof) to the Pension Benefit
Guaranty Corporation (or any successor thereto) for unfunded guaranteed
vested benefits under the Plan exceeds the then current value of assets
accumulated in such Plan by more than One Hundred Thousand Dollars
($100,000.00) (or in the case of a termination involving the Company or
any of Company's Subsidiaries as a "substantial employer" (as defined
in Section 4001(a)(2) of ERISA) the withdrawing employer's
proportionate share of such excess shall exceed such amount); or
(k) The Company or any of Company's Subsidiaries as employer
under a Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the plan sponsor of such
Multiemployer Plan shall have notified such withdrawing employer that
such employer has incurred a withdrawal liability in an annual amount
exceeding One Hundred Thousand Dollars ($100,000.00); or
(l) The Company shall purport to disavow its obligations
hereunder or shall contest the validity or enforceability hereof, or
the Lender's security interest on any portion of the Collateral shall
become unenforceable or otherwise impaired; provided that, subject to
the Lender's approval, no Event of Default shall occur as a result of
such impairment if all
Page 41
<PAGE> 47
Advances made against any such Collateral shall be paid in full within
ten (10) days of the date of such impairment; or
(m) The Company dissolves or terminates its existence, or
discontinues its usual business; or
(n) Any court shall find or rule, or the Company shall assert
or claim, (i) that the Lender does not have a valid, perfected,
enforceable Lien and security interest in the Collateral of the
priority as represented in this Agreement or in any other Loan
Document, or (ii) that this Agreement or any of the Loan Documents does
not or will not constitute the legal, valid, binding and enforceable
obligations of the party or parties (as applicable) thereto, or (iii)
that any Person has a conflicting or adverse Lien, claim or right in,
or with respect to, the Collateral and the Company is unable within 10
days to have such finding or ruling reversed or to have such adverse
Lien, claim or right removed; or
(o) The Company shall have concealed, removed, or permitted to
be concealed or removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or shall
have made any transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly situated have not
been paid; or shall have suffered or permitted, while insolvent, any
creditor to obtain a Lien upon any of its property through legal
proceedings or distraint or other process which is not vacated within
60 days from the date thereof; or
8.2 Remedies.
(a) Upon the occurrence of any Event of Default described in
Sections 8.1(f) or 8.1(g), the Commitment shall be terminated and all
Obligations of the Company shall automatically become due and payable,
without presentment for payment, demand, notice of non-payment,
protest, notice of protest, notice of intent to accelerate, notice of
acceleration, maturity, or any other notices or requirements of any
kind of Lender to the Company or any other Person liable thereon or
with respect thereto, all of which are hereby expressly waived by the
Company.
(b) Upon the occurrence of any Event of Default, other than
those described in Sections 8.1(f) or 8.1(g), the Lender may, by
written notice to the Company, terminate the Commitment and/or declare
all Obligations of the Company to be immediately due and payable,
whereupon the same shall forthwith become due and payable, together
with all accrued and unpaid interest thereon, and the obligation of the
Lender to make any Advances shall thereupon terminate.
(c) Upon the occurrence of any Event of Default, the Lender
may also do any of the following:
Page 42
<PAGE> 48
(1) Foreclose upon or otherwise enforce its security
interest in and Lien on the Collateral to secure all payments
and performance of Obligations of the Company in any manner
permitted by law or provided for hereunder.
(2) Notify all obligors in respect of the Collateral
that the Collateral has been assigned to the Lender and that
all payments thereon are to be made directly to the Lender or
such other party as may be designated by the Lender; settle,
compromise, or release, in whole or in part, any amounts owing
on the Collateral, any such obligor or any Investor or any
portion of the Collateral, on terms acceptable to the Lender;
enforce payment and prosecute any action or proceeding with
respect to any and all Collateral; and where any such
Collateral is in default, foreclose on and enforce security
interests in, such Collateral by any available judicial
procedure or without judicial process and sell property
acquired as a result of any such foreclosure.
(3) Act, or contract with a third party to act, as
servicer or subservicer of each item of Collateral requiring
servicing and perform all obligations required in connection
with Purchase Commitments, such third party's fees to be paid
by the Company.
(4) Require the Company to assemble the Collateral
and/or books and records relating thereto and make such
available to the Lender at a place to be designated by the
Lender.
(5) Enter onto property where any Collateral or books
and records relating thereto are located and take possession
thereof with or without judicial process.
(6) Prior to the disposition of the Collateral,
prepare it for disposition in any manner and to the extent the
Lender deems appropriate.
(7) Exercise all rights and remedies of a secured
creditor under the Uniform Commercial Code of Texas or other
applicable law, including, but not limited to, selling or
otherwise disposing of the Collateral, or any part thereof, at
one or more public or private sales, whether or not such
Collateral is present at the place of sale, for cash or credit
or future delivery, on such terms and in such manner as the
Lender may determine, including, without limitation, sale
pursuant to any applicable Purchase Commitment. If notice is
required under such applicable law, the Lender will give the
Company not less than ten (10) days' notice of any such public
sale or of the date after which private sale may be held. The
Company agrees that ten (10) days' notice shall be reasonable
notice. The Lender may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned
from time to time by announcement at the time and place fixed
for the sale, and such sale may be made at any time or place
to which the same may be so adjourned. In case of any sale of
all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Lender
until the selling price is paid by the purchaser thereof, but
the Lender shall not incur any liability in case of the
failure of
Page 43
<PAGE> 49
such purchaser to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may again be
sold upon like notice. The Lender may, however, instead of
exercising the power of sale herein conferred upon it, proceed
by a suit or suits at law or in equity to collect all amounts
due upon the Collateral or to foreclose the pledge and sell
the Collateral or any portion thereof under a judgment or
decree of a court or courts of competent jurisdiction, or
both.
(8) Proceed against the Company on the Note.
(d) The Lender shall incur no liability as a result of the
sale or other disposition of the Collateral, or any part thereof, at
any public or private sale or disposition. The Company hereby waives
(to the extent permitted by law) any claims it may have against the
Lender arising by reason of the fact that the price at which the
Collateral may have been sold at such private sale was less than the
price which might have been obtained at a public sale or was less than
the aggregate amount of the outstanding Advances and the unpaid
interest accrued thereon, even if the Lender accepts the first offer
received and does not offer the Collateral to more than one offeree and
none of the actions described herein shall render Lender's disposition
of the Collateral in such a manner as commercially unreasonable.
(e) The Company specifically waives (to the extent permitted
by law) any equity or right of redemption, all rights of redemption,
stay or appraisal which the Company has or may have under any rule of
law or statute now existing or hereafter adopted, and any right to
require the Lender to (1) proceed against any Person, (2) proceed
against or exhaust any of the Collateral or pursue its rights and
remedies as against the Collateral in any particular order, or (3)
pursue any other remedy in its power. The Lender shall not be required
to take any steps necessary to preserve any rights of the Company
against holders of mortgages prior in lien to the Lien of any Mortgage
included in the Collateral or to preserve rights against prior parties.
(f) The Lender may, but shall not be obligated to, advance any
sums or do any act or thing necessary to uphold and enforce the Lien
and priority of, or the security intended to be afforded by, any
Mortgage included in the Collateral, including, without limitation,
payment of delinquent taxes or assessments and insurance premiums. All
advances, charges, costs and expenses, including reasonable attorneys'
fees and disbursements, incurred or paid by the Lender in exercising
any right, power or remedy conferred by this Agreement, or in the
enforcement hereof, together with interest thereon, at the Default
Rate, from the time of payment until repaid, shall become a part of the
principal balance outstanding hereunder and under the Note.
(g) No failure on the part of the Lender to exercise, and no
delay in exercising, any right, power or remedy provided hereunder, at
law or in equity shall operate as a waiver thereof; nor shall any
single or partial exercise by the Lender of any right, power or remedy
provided hereunder, at law or in equity preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
Without intending to limit the foregoing, all defenses based on the
statute of limitations are hereby waived by the Company to the extent
Page 44
<PAGE> 50
permitted by law. The remedies herein provided are cumulative and are
not exclusive of any remedies provided at law or in equity.
8.3 Application of Proceeds. The proceeds of any sale, disposition
or other enforcement of the Lender's security interest in all or any part of the
Collateral shall be applied by the Lender:
First, to the payment of the costs and expenses of such sale
or enforcement, including reasonable compensation to the Lender's
agents and counsel, and all expenses, liabilities and advances made or
incurred by or on behalf of the Lender in connection therewith;
Second, to the payment of any other amounts due (other than
principal and interest) under the Note or this Agreement;
Third, to the payment of interest accrued and unpaid on the
Note;
Fourth, to the payment of the outstanding principal balance of
the Note; and
Finally, to the payment to the Company, or to its successors
or assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
If the proceeds of any such sale, disposition or other enforcement are
insufficient to cover the costs and expenses of such sale, as aforesaid, and the
payment in full of all Obligations of the Company, the Company shall remain
liable for any deficiency.
8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby
appointed the attorney-in-fact of the Company, with full power of substitution,
for the purpose of carrying out the provisions hereof and taking any action and
executing any instruments which the Lender may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Lender shall have the right and power to give notices of its
security interest in the Collateral to any Person, either in the name of the
Company or in its own name, to endorse all Pledged Mortgages or Pledged
Securities payable to the order of the Company, to change or cause to be changed
the book-entry registration or name of subscriber or Investor on any Pledged
Security, or to receive, endorse and collect all checks made payable to the
order of the Company representing any payment on account of the principal of or
interest on, or the proceeds of sale of, any of the Pledged Mortgages or Pledged
Securities and to give full discharge for the same.
8.5 Right of Set-Off. If the Company shall default in the payment
of the Note, any interest accrued thereon, or any other sums which may become
payable hereunder when due, or in the performance of any of its other
Obligations under this Agreement, the Lender, shall have the right, at any time
and from time to time, without notice, to set-off and to appropriate or apply
any and all property or indebtedness of any kind at any time held or owing by
the Lender to or for the credit of the account of the Company (excluding any
monies held by the Company in trust for third parties) against and on account of
the Obligations, irrespective of whether or not the Lender shall have made any
demand hereunder and whether or not said Obligations shall have matured;
provided,
Page 45
<PAGE> 51
however, that the Lender shall not be allowed to set-off against funds in
accounts with respect to which (i) the Company is a trustee or an escrow agent
in respect of bona fide third parties other than Affiliates, and (ii) such trust
or escrow arrangement was so denominated at the time of the creation of such
account.
9. NOTICES.
All notices, demands, consents, requests and other communications
required or permitted to be given or made hereunder (collectively, "Notices")
shall, except as otherwise expressly provided hereunder, be in writing and shall
be delivered in person or mailed, first class, return receipt requested, postage
prepaid, or delivered by overnight courier, addressed to the respective parties
hereto at their respective addresses hereinafter set forth or, as to any such
party, at such other address as may be designated by it in a Notice to the
other. All Notices shall be conclusively deemed to have been properly given or
made when duly delivered, in person or by overnight courier, or if mailed on the
third Business Day after being deposited in the mails, addressed as follows:
If to the Company: E-LOAN, INC.
Attn: Chris Larsen
5875 Arnold Road
Dublin, California 94568
Fax No.: (925) 556-2178
If to the Lender: Bank United
Attn: Ms. Julie Persse, Vice President
Mortgage Banker Financing
1646 North California, Suite 342
Walnut Creek, California 94596
Fax No.: (510) 210-8065
with a copy to: Bank United
Attn: Frank Hattemer
Managing Director, Mortgage Banker
Financing
3200 Southwest Freeway, Suite 1300
Houston, Texas 77027
Fax No.: (713) 543-6022
and: Bank United
Attn: Jonathon K. Heffron
General Counsel
3200 Southwest Freeway, Suite 1300
Houston, Texas 77027
Fax No.: (713) 543-6469
Page 46
<PAGE> 52
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.
The Company shall: (a) pay all out-of-pocket costs and expenses of the
Lender, including, without limitation, reasonable attorneys' fees, in connection
with the preparation, negotiation, documentation, enforcement and administration
of this Agreement, the Note, and other Loan Documents and the making and
repayment of the Advances and the payment of interest thereon; provided,
however, costs and expenses of Lender for attorneys fees in connection with the
preparation, negotiation and documentation of the lending transaction evidenced
by this Agreement shall not exceed $3,000.00 plus the reasonable expenses of
Lender's counsel; (b) pay, and hold the Lender and any holder of the Note
harmless from and against, any and all present and future stamp, documentary
and other similar taxes with respect to the foregoing matters and save the
Lender and the holder or holders of the Note harmless from and against any and
all liabilities with respect to or resulting from any delay or omission to pay
such taxes; (C) INDEMNIFY, PAY AND HOLD HARMLESS THE LENDER AND ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS AND ANY SUBSEQUENT HOLDER OF THE NOTE
FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND
WHATSOEVER (THE "INDEMNIFIED LIABILITIES") (INCLUDING, WITHOUT LIMITATION,
INDEMNIFIED LIABILITIES RESULTING, IN WHOLE OR IN PART, FROM LENDER'S OWN
NEGLIGENCE OR STRICT LIABILITY) WHICH MAY BE IMPOSED UPON, INCURRED BY OR
ASSERTED AGAINST THE LENDER OR SUCH HOLDER IN ANY WAY RELATING TO OR ARISING
OUT OF THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY TO THE EXTENT THAT ANY SUCH
INDEMNIFIED LIABILITIES RESULT (DIRECTLY OR INDIRECTLY) FROM ANY CLAIMS MADE,
OR ANY ACTIONS, SUITS OR PROCEEDINGS COMMENCED OR THREATENED, BY OR ON BEHALF
OF ANY CREDITOR (EXCLUDING THE LENDER AND THE HOLDER OR HOLDERS OF THE NOTE),
SECURITY HOLDER, SHAREHOLDER, CUSTOMER (INCLUDING, WITHOUT LIMITATION, ANY
PERSON HAVING ANY DEALINGS OF ANY KIND WITH THE COMPANY), TRUSTEE, DIRECTOR,
OFFICER, EMPLOYEE AND/OR AGENT OF THE COMPANY ACTING IN SUCH CAPACITY, THE
COMPANY OR ANY GOVERNMENTAL REGULATORY BODY OR AUTHORITY. THE FOREGOING
INDEMNITY SHALL NOT APPLY TO THE EXTENT THE INDEMNIFIED LIABILITIES RESULT FROM
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER OR LENDER'S OWN
VIOLATIONS OF REGULATIONS APPLICABLE TO IT. THE AGREEMENT OF THE COMPANY
CONTAINED IN THIS SUBSECTION (C) SHALL SURVIVE THE EXPIRATION OR TERMINATION OF
THIS AGREEMENT AND THE PAYMENT IN FULL OF THE NOTE. ATTORNEYS' FEES AND
DISBURSEMENTS INCURRED IN ENFORCING, OR ON APPEAL FROM, A JUDGMENT PURSUANT
HERETO SHALL BE RECOVERABLE SEPARATELY FROM AND IN ADDITION TO ANY OTHER AMOUNT
INCLUDED IN SUCH JUDGMENT, AND THIS CLAUSE IS INTENDED TO BE SEVERABLE FROM THE
OTHER PROVISIONS OF THIS
Page 47
<PAGE> 53
AGREEMENT AND TO SURVIVE AND NOT BE MERGED INTO SUCH JUDGMENT.
11. FINANCIAL INFORMATION.
All financial statements and reports furnished to the Lender hereunder
shall be prepared in accordance with GAAP, applied on a basis consistent with
that applied in preparing the financial statements as at, and for the period
ended, the Statement Date (except to the extent otherwise required to conform to
good accounting practice).
12. MISCELLANEOUS.
12.1 Terms Binding Upon Successors; Survival of Representations.
The terms and provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
All representations, warranties, covenants and agreements herein contained on
the part of the Company shall survive the making of any Advance and the
execution of the Note, and shall be effective so long as the Commitment is
outstanding hereunder or there remain any Obligations of the Company hereunder
or under the Note to be paid or performed.
12.2 Assignment. This Agreement may not be assigned by the Company.
The Lender may assign, at any time, in whole or in part, its rights and delegate
its obligations under this Agreement and the other Loan Documents, along with
the Lender's security interest in any or all of the Collateral, and any assignee
thereof may enforce this Agreement and the other Loan Documents, and such
security interest.
12.3 Amendments. Except as otherwise provided in this Agreement,
this Agreement may not be amended, modified or supplemented unless such
amendment, modification or supplement is set forth in a writing signed by the
parties hereto.
12.4 Governing Law. This Agreement and the other Loan Documents
shall be governed by the laws of the State of Texas, without reference to its
principles of conflicts of laws.
12.5 Participations. The Lender may at any time sell, assign or
grant participations in, or otherwise transfer to any other Person (a
"Participant"), all or part of the Obligations of the Company under this
Agreement. Without limitation of the exclusive right of the Lender to collect
and enforce such Obligations, the Company agrees that each disposition will give
rise to a debtor-creditor relationship of the Company to the Participant, and
the Company authorizes each Participant, upon the occurrence of an Event of
Default, to proceed directly by right of setoff, banker's lien, or otherwise,
against any assets of the Company which may be in the hands of such Participant.
The Company authorizes the Lender to disclose to any prospective Participant and
any Participant any and all information in the Lender's possession concerning
the Company, this Agreement and the Collateral.
Page 48
<PAGE> 54
12.6 Relationship of the Parties. This Agreement provides for the
making of Advances by the Lender, in its capacity as a lender, to the Company,
in its capacity as a borrower, and for thepayment of interest, repayment of
principal by the Company to the Lender, and for the payment of certain fees by
the Company to the Lender. The relationship between the Lender and the Company
is limited to that of creditor/secured party, on the one hand, and debtor, on
the other hand. The provisions herein for compliance with financial covenants
and delivery of financial statements are intended solely for the benefit of the
Lender to protect its interests as lender in assuring payments of interest and
repayment of principal and payment of certain fees, and nothing contained in
this Agreement shall be construed as permitting or obligating the Lender to act
as a financial or business advisor or consultant to the Company, as permitting
or obligating the Lender to control the Company or to conduct the Company's
operations, as creating any fiduciary obligation on the part of the Lender to
the Company, or as creating any joint venture, agency, or other relationship
between the parties hereto other than as explicitly and specifically stated in
this Agreement. The Company acknowledges that it has had the opportunity to
obtain the advice of experienced counsel of its own choosing in connection with
the negotiation and execution of this Agreement and to obtain the advice of such
counsel with respect to all matters contained herein, including, without
limitation, the provision for waiver of trial by jury. The Company further
acknowledges that it is experienced with respect to financial and credit matters
and has made its own independent decisions to apply to the Lender for credit and
to execute and deliver this Agreement.
12.7 Severability. If any provision of this Agreement shall be
declared to be illegal or unenforceable in any respect, such illegal or
unenforceable provision shall be and become absolutely null and void and of no
force and effect as though such provision were not in fact set forth herein, but
all other covenants, terms, conditions and provisions hereof shall nevertheless
continue to be valid and enforceable.
12.8 Usury. It is the intent of Lender and the Company in the
execution and performance of this Agreement and the Note or any Loan Document to
remain in strict compliance with Applicable Law from time to time in effect. In
furtherance thereof, Lender and the Company stipulate and agree that none of the
terms and provisions contained in the Note, this Agreement or any Loan Document
shall ever be construed to create a contract to pay for the use, forbearance or
detention of money with interest at a rate or in an amount in excess of the
Maximum Rate or amount of interest permitted to be charged under Applicable Law.
For purposes of this Agreement, the Note and any other Loan Document, "interest"
shall include the aggregate of all charges which constitute interest under
Applicable Law that are contracted for, taken, charged, reserved, or received
under this Agreement, the Note or any other Loan Document. The Company shall
never be required to pay unearned interest or interest at a rate or in an amount
in excess of the Maximum Rate or amount of interest that may be lawfully charged
under Applicable Law, and the provisions of this paragraph shall control over
all other provisions of this Agreement and the Note or any Loan Document, which
may be in actual or apparent conflict herewith. If the Note is prepaid, or if
the maturity of the Note is accelerated for any reason, or if under any other
contingency the effective rate or amount of interest which would otherwise be
payable under the Note would exceed the Maximum Rate or amount of interest
Lender or any other holder of the Note is allowed by Applicable Law to charge,
contract for, take, reserve or receive, or in the event Lender or any holder of
the Note shall charge, contract for, take, reserve or receive monies that are
deemed to constitute interest which would, in
Page 49
<PAGE> 55
the absence of this provision, increase the effective rate or amount of interest
payable under the Note to a rate or amount in excess of that permitted to be
charged, contracted for, taken, reserved or received under Applicable Law then
in effect, then the principal amount of the Note or the amount of interest which
would otherwise be payable under the Note or both shall be reduced to the amount
allowed under Applicable Law as now or hereinafter construed by the courts
having jurisdiction, and all such moneys so charged, contracted for, taken,
reserved or received that are deemed to constitute interest in excess of the
Maximum Rate or amount of interest permitted by Applicable Law shall immediately
be returned to or credited to the account of the Company upon such
determination. Lender and the Company further stipulate and agree that, without
limitation of the foregoing, all calculations of the rate or amount of interest
contracted for, charged, taken, reserved or received under the Note which are
made for the purpose of determining whether such rate or amount exceeds the
Maximum Rate, shall be made to the extent not prohibited by Applicable Law, by
amortizing, prorating, allocating and spreading during the period of the full
stated term of the Note, all interest at any time contracted for, charged,
taken, reserved or received from the Company or otherwise by Lender or any other
holder of the Note.
12.9 CONSENT TO JURISDICTION. SUBJECT TO THE PROVISIONS OF SECTION
12.9 OF THIS AGREEMENT, THE COMPANY HEREBY AGREES THAT ANY ACTION OR PROCEEDING
UNDER THIS AGREEMENT, THE NOTE OR ANY DOCUMENT DELIVERED PURSUANT HERETO MAY BE
COMMENCED AGAINST IT IN ANY COURT OF COMPETENT JURISDICTION WITHIN THE STATE OF
TEXAS, BY SERVICE OF PROCESS UPON THE COMPANY BY FIRST CLASS REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE COMPANY AT ITS
ADDRESS LAST KNOWN TO THE LENDER. THE COMPANY AGREES THAT ANY SUCH SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER SUCH
DOCUMENT MAY BE INSTITUTED IN HARRIS COUNTY, STATE DISTRICT COURT OR IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF TEXAS AT THE OPTION OF THE
LENDER; AND THE COMPANY HEREBY WAIVES ANY OBJECTION TO THE VENUE, OR ANY CLAIM
AS TO INCONVENIENT FORUM, OF ANY SUCH SUIT, ACTION OR PROCEEDING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE LENDER TO ACCOMPLISH SERVICE OF PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION OR COURT.
12.10 Arbitration. To the maximum extent not prohibited by law, any
controversy, dispute or claim arising out of, in connection with, or relating to
the Commitment or the Loan Documents or any transaction provided for therein,
including but not limited to any claim based on or arising from an alleged tort
or an alleged breach of any agreement contained in any of the Loan Documents,
shall, at the request of any party to the Loan Documents (either before or after
the commencement of judicial proceedings), be settled by arbitration pursuant to
Title 9 of the United States Code, which the parties hereto acknowledge and
agree applies to the transaction involved herein, and in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). If Title 9 of the United States Code is inapplicable to any such claim,
dispute or controversy for any reason, such arbitration shall be conducted
pursuant to the Texas General Arbitration Act and in accordance with the
Commercial Arbitration Rules of the AAA. In any such arbitration proceeding: (i)
all statutes of limitations which would otherwise be applicable shall apply; and
(ii) the proceeding shall be conducted in Houston, Texas, by a single
arbitrator, if the amount in controversy is $1,000,000.00 or less, or by a panel
of three arbitrators if the amount in controversy is over $1,000,000.00. All
arbitrators shall be selected by the process of appointment
Page 50
<PAGE> 56
from a panel pursuant to Section 13 of the AAA Commercial Arbitration Rules and
each arbitrator shall be either an active attorney, a mortgage banker or retired
judge with an AAA acknowledged expertise in the subject matter of the
controversy, dispute or claim. Any award rendered in any such arbitration
proceeding shall be final and binding, and judgment upon any such award may be
entered in any court having jurisdiction.
If any party to any Loan Document files a proceeding in any court to
resolve any such controversy, dispute or claim, such action shall not constitute
a waiver of the right of such party or a bar to the right of any other party to
seek arbitration under the provisions of this Section of that or any other
claim, dispute or controversy, and the court shall, upon motion of any party to
the proceeding, direct that such controversy, dispute or claim be arbitrated in
accordance with this Section.
Notwithstanding any of the foregoing, the parties hereto agree that no
arbitrator or panel of arbitrators shall possess or have the power to (i) assess
punitive damages, (ii) dissolve, rescind or reform (except that the arbitrator
may construe ambiguous terms) any Loan Document, (iii) enter judgment on the
debt, (iv) exercise equitable powers or issue or enter any equitable remedies
with respect to matters submitted to arbitration, or (v) allow discovery of
attorney/client privileged information. The Commercial Arbitration Rules of the
AAA are hereby modified to this extent for the purpose of arbitration of any
dispute, controversy or claim arising out of, in connection with, or relating to
the Loan or any Loan Document. The parties hereby further agree to waive, each
to the other, any claims for punitive damages and agree neither an arbitrator
nor any court shall have the power to assess such damages.
No provision of, or the exercise of any rights under, this Section
shall limit or impair the right of any party to any Loan Document before, during
or after any arbitration proceeding to: (i) exercise self-help remedies such as
setoff or repossession; (ii) foreclose (judicially or otherwise) any Lien on or
security interest in any real or personal Collateral; or (iii) obtain emergency
relief from a court of competent jurisdiction to prevent the dissipation,
damage, destruction, transfer, hypothecation, pledging or concealment of assets
or of Collateral securing any Indebtedness, obligation or guaranty referenced in
any Loan Document. Such emergency relief may be in the nature of, but is not
limited to: pre-judgment attachments, garnishments, sequestrations, appointments
of receivers, or other emergency injunctive relief to preserve the status quo.
12.11 ADDITIONAL INDEMNITY. IN ADDITION TO THE INDEMNITY PROVIDED IN
SECTION 10, THE COMPANY SHALL INDEMNIFY AND HOLD THE LENDER, ITS SUCCESSORS,
ASSIGNS, AGENTS, AND EMPLOYEES, HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
ACTIONS, SUITS, PROCEEDINGS, COSTS, EXPENSES, DAMAGES, FINES, PENALTIES, AND
LIABILITIES, INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND COSTS, ARISING
OUT OF, CONNECTED WITH, OR RESULTING FROM (A) THE OPERATION OF THE COMPANY'S
BUSINESSES, (B) THE LENDER'S PRESERVATION OR ATTEMPTED PRESERVATION OF
COLLATERAL, AND (C) ANY FAILURE OF THE SECURITY INTERESTS AND LIENS IN THE
COLLATERAL GRANTED TO THE LENDER PURSUANT TO THIS AGREEMENT TO BE OR TO REMAIN
PERFECTED OR TO
Page 51
<PAGE> 57
HAVE THE PRIORITY AS CONTEMPLATED THEREIN REGARDLESS OF WHETHER THE CLAIM IS
CAUSED BY OR ARISES OUT OF, IN WHOLE OR IN PART, THE NEGLIGENCE OF THE LENDER OR
MAY BE BASED ON THE STRICT LIABILITY OF THE LENDER. THIS INDEMNITY SHALL NOT
APPLY TO THE EXTENT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES
OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER. AT THE LENDER'S
REQUEST, THE COMPANY SHALL, AT ITS OWN COST AND EXPENSE, DEFEND OR CAUSE TO BE
DEFENDED ANY AND ALL SUCH ACTIONS OR SUITS THAT MAY BE BROUGHT AGAINST THE
LENDER AND, IN ANY EVENT, SHALL SATISFY, PAY, AND DISCHARGE ANY AND ALL
JUDGMENTS, AWARDS, PENALTIES, COSTS, AND FINES THAT MAY BE RECOVERED AGAINST THE
LENDER IN ANY SUCH ACTION, PLUS ALL ATTORNEYS' FEES AND COSTS RELATED THERETO TO
THE EXTENT PERMITTED BY APPLICABLE LAW; PROVIDED, HOWEVER, THAT THE LENDER SHALL
GIVE THE COMPANY (TO THE EXTENT THE LENDER SEEKS INDEMNIFICATION THEREFOR FROM
THE COMPANY UNDER THIS SECTION 12.11) WRITTEN NOTICE OF ANY SUCH CLAIM, DEMAND,
OR SUIT AFTER THE LENDER HAS RECEIVED WRITTEN NOTICE THEREOF, AND THE LENDER
SHALL NOT SETTLE ANY SUCH CLAIM, DEMAND, OR SUIT, IF THE LENDER SEEKS
INDEMNIFICATION THEREFOR FROM THE COMPANY, WITHOUT FIRST GIVING NOTICE TO THE
COMPANY OF THE LENDER'S DESIRE TO SETTLE AND OBTAINING THE CONSENT OF THE
COMPANY TO THE SAME, WHICH CONSENT THE COMPANY HEREBY AGREES NOT TO UNREASONABLY
WITHHOLD. ALL OBLIGATIONS OF THE COMPANY UNDER THIS SECTION 12.11 SHALL SURVIVE
THE PAYMENT OF THE NOTE AND THE OBLIGATIONS.
12.12 No Waivers Except in Writing. No failure or delay on the part
of the Lender in exercising any power or right hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. No notice to or demand on
the Company or any other Person in any case shall entitle the Company or such
other Person to any other or further notice or demand in similar or other
circumstances.
12.13 Waiver of Jury Trial. Company hereby expressly waives any
right to a trial by jury in any action or legal proceeding arising out of or
relating to this Agreement or any other Loan Document for the transactions
contemplated hereby or thereby.
12.14 Multiple Counterparts. This Agreement may be executed in any
number of counterparts, all of which, taken together, shall constitute one and
the same instrument.
12.15 No Third Party Beneficiaries. This Agreement is for the sole
and exclusive benefit of the Company and Lender. This Agreement does not create,
and is not intended to create, any rights in favor of or enforceable by any
other Person. This Agreement may be amended or modified
Page 52
<PAGE> 58
by the agreement of the Company and Lender, without any requirement or necessity
for notice to, or the consent of or approval of any other Person.
12.16 RELEASE OF LENDER LIABILITY. TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW FROM TIME TO TIME IN EFFECT, THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY (AND AFTER IT HAS CONSULTED WITH ITS OWN ATTORNEY)
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT NO CLAIM MAY BE MADE BY THE COMPANY
AGAINST THE LENDER OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS,
ACCOUNTANTS, AGENTS OR INSURERS, OR ANY OF ITS OR THEIR SUCCESSORS AND ASSIGNS,
FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY
BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM IS BASED ON CONTRACT OR TORT OR
DUTY IMPOSED BY LAW) ARISING OUT OF, OR RELATED TO, THE TRANSACTIONS
CONTEMPLATED BY ANY OF THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN DOCUMENTS, OR
ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH. IN
FURTHERANCE OF THE FOREGOING, THE COMPANY HEREBY WAIVES, RELEASES AND AGREES NOT
TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER
OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
12.17 Entire Agreement; Amendment. This Agreement, the Note, and the
other Loan Documents referred to herein embody the final, entire Agreement among
the parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof. The provisions of this Agreement and the other Loan
Documents to which the Company is a party may be amended or waived only by an
instrument in writing signed by the parties hereto.
12.18 NO ORAL AGREEMENTS. THE WRITTEN LOAN 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
E-LOAN, INC.
a California corporation
By: /s/ signature illegible
---------------------------------
STEVEN M. MAJERUS, Director,
Mortgage Banking
Page 53
<PAGE> 59
BANK UNITED
By:
---------------------------------
Name:
------------------------------
Title:
-----------------------------
EXHIBITS:
A - Advance Request
B - Existing Company Indebtedness
C - Procedures and Documentation for Warehousing Single-family Mortgage Loans
D - Shipping Instructions
E - Trust Receipt
F - Officer's Certificate
G - Subsidiaries
H - Litigation
I - Trade Names
J - Secretary's Certificate
K - Bailee Letter
L - Investors
M - Legal Opinion
N - Note
Page 54
<PAGE> 60
EXHIBIT "A"
REQUEST FOR ADVANCE SINGLE-FAMILY MORTGAGE LOANS
Mortgage Company: E-LOAN, INC. Loan Number:
Mortgagor: Prepared By:
---------------------- --------------------------
Address: Warehouse Date:
---------------------- -----------------------
Social Security No.: Loan Type (check all that apply):
------------ -----
Advance Type (check all that apply):
Jumbo Conventional
--- ---
Wet Settlement Advance VA FHA
- ------ --- ---
Dry Settlement Advance First Second
- ------ --- ---
Interest Rate:
Note Amount: ---------
------------------- Requested Warehouse
Note Date: Amount:
--------------------- ----------
Credit Rating: Investor Expiration Date:
------------------ -----------
Investor:
----------------------
Investor Takeout Price:
---------
Purchase Commitment No.:
--------
METHOD OF ADVANCE
( ) Wire Transfer (see attached instructions) Amount of Wire/Check:$
( ) Check No. Date of Wire/Check:
Page 55
<PAGE> 61
REQUIRED DOCUMENTATION
(in addition to this Advance Request)
Attached please find the following documents in connection with the above
request:
Wet Settlement Advance
o Copy of check funding the Single-family Mortgage Loan, if not funded by
wire transfer.
o Copy of closing instructions to title company or closing agent, noting
Lender's security interest in the Single-family Mortgage Loan.
o Copy of specific Purchase Commitment.
Dry Settlement Advance
o Copy of check funding the Single-family Mortgage Loan, if not funded by
wire transfer.
o Original Mortgage Note, endorsed in blank.
o Certified copy of Mortgage.
o Recordable Assignment of Mortgage (in blank).
o Certified copies of all interim Assignments (if
applicable).
o Copy of specific Purchase Commitment.
BAILEE PLEDGE
The Company creates and grants in favor and for the benefit of the
Lender a security interest in and to the Single-family Mortgage Loans listed
above and all instruments and documents described as Required Documentation
above.
The Company has given to ___________________________________ ("Closing
Agent") who has possession of such instruments and documents, notice of the
foregoing described security interest in favor of the Lender.
The Company further agrees to deliver the documents described above to
Lender, immediately upon the request of the Lender (whether written or oral),
but in any event, on or before five (5) Business Days from the date hereof.
The Company further agrees that this Agreement shall be binding upon
and inure to the benefit of the legal representatives, successors or assigns of
the Lender.
The Company further agrees that all rights, interests, duties and
liabilities arising hereunder shall be determined according to the laws of the
State of Texas.
Executed as of the ____________ day of ____________________, 199__.
E-LOAN, INC., a California corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
EXHIBIT "A"
Page 56
<PAGE> 62
EXHIBIT "B"
LIST OF EXISTING INDEBTEDNESS OF COMPANY
<TABLE>
<CAPTION>
=========================================================================================
LENDER TYPE OF FINANCING COMMITMENT COLLATERAL AVERAGE BALANCE
AMOUNT OUTSTANDING AS OF
DECEMBER 31, 1998
=========================================================================================
<S> <C> <C> <C> <C>
G.E. Warehouse 15 million 10 million
- -----------------------------------------------------------------------------------------
Greenwich Warehouse 35 milliion 25 million
=========================================================================================
</TABLE>
EXHIBIT "B"
Page 57
<PAGE> 63
EXHIBIT "C"
PROCEDURES AND DOCUMENTATION FOR WAREHOUSING
SINGLE-FAMILY MORTGAGE LOANS
The following procedures and documentation requirements must be
observed in all respects by the Company. All documents must be satisfactory to
Lender in its sole discretion. Terms used below, which are not otherwise
defined, shall have the meanings given them in the Warehousing Credit and
Security Agreement, as amended, modified or renewed from time to time. The HUD,
FNMA and FHLMC form numbers referred to herein are for convenience only and the
Company shall use the equivalent forms required at the time of delivery of the
Mortgage Loans or Mortgage-backed Securities.
I. Prior to making an Advance that is not a Wet Settlement Advance, the
Lender must receive the following:
(1) Copy of settlement or funding check issued to, or signed wire
transfer request directing funds to escrow/title company or
closing agent.
(2) If not an Electronic Request, Original Request for Advance
against Single-Family Mortgage Loans (Exhibit "A").
(3) Original signed Mortgage Note, endorsed by the Company in
blank with corresponding interim endorsements, if applicable.
(4) Copy of the Mortgage certified true by the escrow/title
company or closing agent.
(5) Certified true copies of all interim assignments (recorded or
sent for recordation) of the Mortgage.
(6) An Assignment of the Mortgage to the Lender in recordable form
but unrecorded.
(7) Copy of specific Purchase Commitment.
II. Prior to making a Wet Settlement Advance, the Lender must receive the
following:
(1) Copy of settlement or funding check issued to, or signed wire
transfer request directing funds to escrow/title company or
closing agent.
(2) If not an Electronic Request, Original Request for Advance
against Single-Family Mortgage Loans (Exhibit "A").
(3) Copy of specific Purchase Commitment.
EXHIBIT "C"
Page 58
<PAGE> 64
(4) A copy of the Company's final closing instructions to the
title company or closing agent, noting Lender's security
interest in the loan, as provided below:
"You are hereby notified that Bank United, a federal savings
bank (the "Lender") has a security interest in the promissory
note, the deed of trust or mortgage, and all other supporting
documents for the above referenced loan. Unless the Lender
otherwise instructs you, all loan documents are to be returned
to the undersigned company within twenty-four (24) hours after
settlement."
The Mortgage Note and other supporting documents described in Section I
must be received by the Lender within five (5) Business Days of the
date of the Wet Settlement Advance.
III. The Lender exclusively shall deliver Pledged Mortgages or Pledged
Securities and all related loan documents and/or pool documents to
Investor or Approved Custodian unless otherwise agreed in writing.
A. The following procedures are to be followed for deliveries of
Pledged Mortgages to Investors:
No later than 2:00 p.m. Houston, Texas time one (1) Business Day prior
to the expiration date of the Purchase Commitment, the Lender must receive the
following:
(1) Signed or electronic shipping instructions for the delivery of
the Pledged Mortgages including the following:
(a) Name and address of the office of the Investor to
which the loan documents are to be shipped and the
preferred method of delivery;
(b) Instructions for endorsement of the Mortgage Note;
(c) Names of Mortgagor and Mortgage Note Amounts of
Pledged Mortgages to be shipped; and
(d) Number and expiration date of the Purchase
Commitment.
(2) All loan documents related to the Pledged Mortgages required
for delivery to the Investor.
(3) For deliveries of Pledged Mortgages to FNMA for cash purchase,
the following additional documents are required:
a) Original Loan Schedule (FNMA Form 1068 or 1069)
showing the Lender's designated FNMA payee code as
recipient of the loan purchase proceeds.
(4) For deliveries of Pledged Mortgages to FHLMC for cash
purchase, the following additional documents are required:
EXHIBIT "C"
Page 59
<PAGE> 65
a) Original completed Warehouse Lender Release of
Security Interest (FHLMC Form 996) to be executed by
the Lender.
b) Original Wire Transfer Authorization for a Cash
Warehouse Delivery (FHLMC Form 987), designating the
Lender as the Warehouse Lender and showing the cash
collateral account designated by the Lender as the
receiving account for loan purchase proceeds.
B. The following procedures are to be followed for deliveries of
Pledged Mortgages to Approved Custodians:
No later than one (1) Business Day prior to required delivery date to
the Approved Custodian, the Lender must receive the following:
1. Signed or electronic shipping instructions for the delivery of
the Pledged Mortgages to the Approved Custodian including the
following:
a) Name and address of the office of the Approved
Custodian to which the loan documents are to be
shipped and the preferred method of delivery;
b) Instructions for endorsement of the Mortgage Note;
and
c) Names of Mortgagor and Mortgage Note Amounts of
Pledged Mortgages to be shipped.
d) Commitment number and expiration date of the Purchase
Commitment for the Pledged Securities.
2. All loan documents related to the Pledged Mortgages required
for the issuance of the Mortgage-backed Securities.
3. For FNMA Mortgage-backed Securities issuance, the following
additional documents are required:
a) Original Schedule of Mortgages (FNMA Form 2005 or
2025).
b) Original executed Security Release Certification
(FNMA Form 2004) to be executed by the Lender.
c) Original Delivery Schedule (FNMA Form 2014),
instructing FNMA to issue the Mortgage-backed
Securities in the name of the Company with the Lender
as pledgee and to deliver the Mortgage-backed
Securities to the Lender's custody account at
Banker's Trust (Account No. 92798) and bearing the
following instructions: These instructions may not be
changed without the prior written consent of Bank
United.
EXHIBIT "C"
Page 60
<PAGE> 66
4. For FHLMC Mortgage-backed Securities issuance, the following
additional documents are required:
a) Original Settlement Information and Delivery
Authorization (FHLMC Form 939), designating the
Lender as the Warehouse Lender and instructing FHLMC
to deliver the Mortgage-backed Securities to the
Lender's custody account at Banker's Trust, Account
No. 92798.
5. For GNMA Mortgage-backed Securities issuance, the following
additional documents are required:
a) Signed original Schedule of Mortgages (HUD Form
11706).
b) Signed original Schedule of Subscribers (HUD Form
11705) instructing GNMA to issue the Mortgage-backed
Securities in the name of the Company and designating
Bankers Trust as Agent for the Lender as the
subscriber, using the following language: BANKERS
TRUST AS AGENT FOR BANK UNITED and deliver the
Mortgage-backed Securities to the Lender's custody
Account No. 92798 at Bankers Trust. The following
instructions must also be included on the form:
"These instructions may not be changed without the
prior written consent of Bank United."
c) Completed original Release of Security Interest (HUD
Form 11711A) to be executed by the Lender.
Upon instruction by the Company, the Lender will complete the
endorsement of the Mortgage Note and make arrangements for the delivery
of the complete loan package with the appropriate Bailee Letter to the
Investor or Approved Custodian. Upon receipt of Mortgage-backed
Securities, the Lender will cause such Mortgage-backed Securities to be
delivered to the Investor which issued the Purchase Commitment.
Mortgage-backed Securities will be released to the Investor only upon
payment of the purchase proceeds to the Lender. Cash proceeds of sales
of Pledged Mortgages and Pledged Securities shall be applied to related
Advances outstanding under the Commitment. Provided no Default exists,
the Lender shall return any excess proceeds of the sale of Mortgage
Loans or Mortgage-backed Securities to the Company, unless otherwise
instructed in writing.
EXHIBIT "C"
Page 61
<PAGE> 67
EXHIBIT "D"
FORM OF SHIPPING REQUEST AND AUTHORIZATION
[Company Letterhead]
Date:
BANK UNITED
[Address]
Attention: Re: Commitment No.
This letter is to serve as authorization for you to endorse and ship Loan
Documents for the following loans:
LOAN NUMBER BORROWER NAME NOTE AMOUNT
----------- ------------- -----------
to the following address:
NAME:
ADDRESS:
ATTENTION:
Please endorse the notes as follows:
Please ship the Loan Documents either by _________________________ or by such
other courier service we have specifically approved in writing. You are not
responsible for any delays in shipment or any other actions or inactions of the
courier. However, because the commitment expires on _________________________,
19___, we ask that you deliver the Loan Documents to the courier no later than
_________________________, 19___.
Please have the courier bill us by using our account no. _______________. If you
should have any questions, or should feel the need for additional documentation,
please do not hesitate to call _____________________.
E-LOAN, INC., a California corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
EXHIBIT "D"
Page 62
<PAGE> 68
EXHIBIT "E"
TRUST RECEIPT
Trust Receipt No. ______________, 19___
The undersigned, E-LOAN, INC., a California corporation (the
"Company"), acknowledges receipt from Bank United, a federal savings bank
("Lender"), pursuant to that certain Warehousing Credit and Security Agreement
(Single-Family Mortgage Loans) dated effective as of February 3, 1999, by and
between the Company and Lender (the "Agreement"), of the following described
property (the "Trust Property"), possession of which is herewith entrusted to
the Company for the purposes set forth below:
Mortgage Loan No. Note Amount:
Obligor:
Purpose: [Specify nature of clerical or other documentation
problem to be corrected.]
The Company hereby acknowledges that a security interest in the Trust
Property and in the proceeds of the Trust Property has been granted to the
Lender pursuant to the Agreement.
In consideration of the delivery of the Trust Property by the Lender to
the Company, the Company hereby agrees to hold the Trust Property in trust for
the Lender as provided under and in accordance with all provisions of the
Agreement and to return the Trust Property to the Lender no later than the close
of business on the tenth day following the date hereof or, if such day is not a
Business Day, on the following Business Day. The Company further agrees that the
aggregate Collateral Value of Single-family Mortgage Loans with respect to which
notes or other documentation has been released under trust receipts, does not
exceed $500,000.00.
E-LOAN, INC., a California corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
Delivery to Company Acknowledged
BANK UNITED
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
The undersigned, acknowledges that the above-mentioned Trust Property
has been returned to the Lender on __________________, 19___.
BANK UNITED
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
EXHIBIT "E"
Page 63
<PAGE> 69
EXHIBIT "F"
OFFICER'S CERTIFICATE
COMPANY: E-LOAN, INC., a California corporation
LENDER: BANK UNITED
DATE:
REPORTING PERIOD: ended , 199___
This certificate is delivered to Lender under the Warehousing Credit
and Security Agreement dated effective as of February 3, 1999, between Company
and Lender (the "Agreement"), all the defined terms of which have the same
meanings when used herein.
I hereby certify that: (a) I am, and at all times mentioned herein have
been, the duly elected, qualified, and acting officer of Company designated
below; (b) to the best of my knowledge, the Financial Statements of Company for
the period shown above (the "Reporting Period") and which accompany this
certificate were prepared in accordance with GAAP and present fairly the
financial condition of Company as of the end of the Reporting Period and the
results of its operations for the Reporting Period; (c) a review of the
Agreement and of the activities of the Company during the Reporting Period has
been made under my supervision with a view to determining Company's compliance
with the covenants, requirements, terms, and conditions of the Agreement, and
such review has not disclosed the existence during or at the end of the
Reporting Period (and I have no knowledge of the existence as of the date
hereof) of any Event of Default or Default, except as disclosed on Annex "A"
hereto (which specifies the nature and period of existence of each Event of
Default or Default, if any, and what action Company has taken, is taking, and
proposes to take with respect to each); (d) the calculations described on the
attached Annex "A" evidence that the Company is in compliance with the
requirements of Sections 7.5 and 7.6 of the Agreement at the end of the
Reporting Period (or if Company is not in compliance, showing the extent of
non-compliance and specifying the period of non-compliance and what actions the
Company proposes to take with respect thereto; (e) the Company was, as of the
end of the Reporting Period, in compliance and good standing with applicable
FNMA, GNMA, FHLMC, and HUD net worth requirements.
E-LOAN, INC., a California corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
EXHIBIT "F"
Page 64
<PAGE> 70
ANNEX "A"
COMPANY NAME: E-LOAN, INC., a California corporation
REPORTING PERIOD:
All financial calculations set forth herein are as of the Reporting Period.
<TABLE>
<S> <C>
(a) TANGIBLE NET WORTH
The Tangible Net Worth of the Company is:
GAAP Net Worth: $_______________
Minus: Intangible Assets, including Capitalized Servicing Rights: $_______________
Minus: Advances or loans to shareholders, officers or Affiliates $_______________
Minus: Investments in Affiliates: $_______________
Minus: Assets pledged to secure liabilities not included in Debt: $_______________
Minus: Any other HUD nonacceptable assets: $_______________
TANGIBLE NET WORTH: $_______________
(b) ADJUSTED TANGIBLE NET WORTH
The Adjusted Tangible Net Worth of the Company is:
Tangible Net Worth (from above): $_______________
Plus: Subordinated Debt $_______________
Plus: 1% of Servicing Rights $_______________
ADJUSTED TANGIBLE NET WORTH: $_______________
MINIMUM ADJUSTED TANGIBLE NET WORTH IS $12,000,000.00
Covenant Satisfied:__________ Covenant Not Satisfied:__________
</TABLE>
ANNEX "A"
Page 65
<PAGE> 71
<TABLE>
<S> <C>
(c) DEBT OF THE COMPANY
Total Liabilities: $_______________
DEBT: $_______________
(d) DEBT TO ADJUSTED TANGIBLE NET WORTH
The ratio of Debt to Adjusted Tangible Net Worth is: _______ to 1.
MAXIMUM DEBT TO ADJUSTED TANGIBLE NET WORTH RATIO IS 10:1.
Covenant Satisfied:_________ Covenant Not Satisfied:___________
(e) DEFAULTS OR EVENTS OF DEFAULT (DISCLOSE NATURE AND PERIOD OF EXISTENCE
AND ACTION BEING TAKEN IN CONNECTION THEREWITH; IF NONE, STATE NONE)
</TABLE>
ANNEX "A"
Page 66
<PAGE> 72
EXHIBIT "G"
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
================================================================================
NAME ADDRESS OF STATE OF WHERE COMPANY'S
PRINCIPAL INCORPORATION QUALIFIED PERCENTAGE
OFFICE FOREIGN CORP. OWNERSHIP
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
None.
EXHIBIT "G"
Page 67
<PAGE> 73
EXHIBIT "H"
DISCLOSURE OF PENDING LITIGATION
(Include the caption of the case, including styling, cause number, and court in
which it is pending, date filed, status of the proceedings, and description of
claims, counterclaims and damages asserted.)
None.
EXHIBIT "H"
Page 68
<PAGE> 74
EXHIBIT "I"
TRADE NAMES OF COMPANY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TRADE NAME JURISDICTION USED
- --------------------------------------------------------------------------------
<S> <C>
None.
- --------------------------------------------------------------------------------
</TABLE>
EXHIBIT "I"
Page 69
<PAGE> 75
EXHIBIT "J"
CERTIFICATE OF CORPORATE RESOLUTIONS
AND INCUMBENCY OF OFFICERS
(BORROWING AUTHORITY)
I, the undersigned, hereby certify that I am the Secretary of E-LOAN,
INC., a corporation duly organized and existing under the laws of the State of
California (the "Corporation").
I further certify that true and correct copies of the Articles of
Incorporation and Bylaws of the Corporation together with all amendments thereto
are attached hereto as EXHIBITS "A" AND "B", respectively, and that such
articles and bylaws remain unaltered and in full force and effect.
I further certify that the following resolutions were duly adopted by
the Board of Directors of the Corporation at a meeting of the Board of Directors
of the Corporation, duly and legally called and held in accordance with the
Articles of Incorporation and Bylaws of the Corporation on the _____ day of
February, 1999, at which meeting a quorum was present and voting throughout, or
(if the foregoing date was not completed) pursuant to a written consent signed
by all of the members of the Board of Directors of the Corporation in accordance
with the Articles of Incorporation and Bylaws of the Corporation, and that such
resolutions are now in full force and effect and have not been amended, modified
or revoked:
"RESOLVED, that each of the following officers of this Corporation:
Chris Larsen
Janina Pawlowski
Steven M. Majerus
acting alone without the joinder of any other officer, is hereby
authorized in the name and on behalf of this Corporation (i) to borrow
from and to otherwise incur liabilities to BANK UNITED ("Lender") from
time to time, in such amounts, for such periods of time, at such rates
of interest and payable in such manner as such officers may deem
necessary or proper, and (ii) as evidence of such indebtedness so
incurred, to execute and deliver to Lender such promissory notes, loan
agreements and other instruments, documents and agreements, containing
such terms and provisions as may be acceptable or agreeable to any one
of such officers, such acceptance and agreement to be conclusively
evidenced by the execution and delivery thereof by any one of such
officers;
FURTHER RESOLVED, that this Corporation grant to Lender a lien
and/or security interest upon such assets of this Corporation as may be
agreed upon between any one of the above named officers and Lender, as
security for all present and future indebtedness, obligations and
liabilities of this Corporation to Lender and that each of said
officers, acting alone without the joinder of any other officer, is
hereby authorized in the name and on behalf of this Corporation to
execute and deliver such
EXHIBIT "J"
Page 70
<PAGE> 76
security agreements, deeds of trust and other instruments, documents
and agreements as may be required by Lender in connection with each
such grant of a lien and/or security interest and containing such terms
and provisions as may be acceptable or agreeable to any one of such
officers, such acceptance and agreement to be conclusively evidenced by
the execution and delivery thereof by any one of such officers;
FURTHER RESOLVED, that any one of the above named officers,
acting alone without the joinder of any other officer, is hereby
authorized in the name and on behalf of this Corporation to take such
further action and to do all things that any one of such officers deems
necessary in connection with any (i) increases, renewals, extensions,
rearrangements, retirements or compromises of any indebtedness,
obligations and liabilities owing to Lender from time to time by this
Corporation, either directly or by assignment, and (ii) amendments to
any of the provisions contained in any instruments, documents or
agreements evidencing, securing, governing and/or pertaining to any
indebtedness, obligations and liabilities owing to Lender by this
Corporation from time to time;
FURTHER RESOLVED, that any one of the above named officers, or
any one of the following representatives of this Corporation:
Cheri Toth
Margo Howe
Jan Hammond
acting alone without the joinder of any other officer or
representative, is hereby authorized in the name and on behalf of this
Corporation to (i) make requests for advances under any credit facility
that this Corporation may have with Lender from time to time, and (ii)
do or cause to be done all such acts or things and to sign and deliver,
or cause to be signed and delivered, all such instruments, documents,
agreements and certificates (including without limitation, any and all
notices and certificates required or permitted to be given or made to
Lender under the terms of any of the instruments, documents or
agreements executed on behalf of this Corporation in connection with
these resolutions), as any and all of such officers or representatives
may deem necessary, advisable or appropriate to effectuate and carry
out the purposes and intent of the foregoing resolutions and to perform
the obligations of this Corporation under all instruments, documents
and agreements executed on behalf of this Corporation in connection
with any indebtedness, obligations or liabilities incurred by this
Corporation to Lender from time to time;
FURTHER RESOLVED, that any one of the above named officers,
acting alone without joinder of any other officer or representative is
hereby authorized in the name and on behalf of this Corporation (i) to
sell and transfer notes, securities and financial instruments of this
Corporation to the Lender, from time to time, in such amounts and on
such terms and conditions and in such manner as any one of
EXHIBIT "J"
Page 71
<PAGE> 77
such officers may deem necessary or proper and (ii) in connection
therewith, to execute and deliver to the Lender a master repurchase
agreement and such other documents and agreements containing such terms
and provisions as may be acceptable or agreeable to any one of such
officers, such acceptance and agreement to be conclusively evidenced by
the execution and delivery thereof by any one of such officers;
FURTHER RESOLVED, that all acts, transactions or agreements
with Lender undertaken prior to the adoption of the foregoing
resolutions by any one or more of the officers and/or representatives
of this Corporation in its name and on its behalf in connection with
the foregoing matters are hereby ratified, confirmed and adopted by
this Corporation; and
FURTHER RESOLVED, that each of the officers of this
Corporation is hereby authorized and directed to certify these
resolutions to Lender;
FURTHER RESOLVED, the foregoing resolutions shall continue in
full force and effect, and the Lender is authorized to rely upon the
foregoing resolutions unless and until (i) countermanded by resolution
of the Board of Directors of this Corporation, and (ii) a copy of such
resolution, properly certified by an officer of this Corporation, has
actually been received by Lender."
I further certify that the foregoing resolutions do not conflict with
the Articles of Incorporation or Bylaws of the Corporation, or any amendments
thereto.
I further certify that neither the seal of the Corporation, nor the
attestation by the Secretary, Assistant Secretary or any other officer of the
Corporation, is necessary to make any instruments, documents or agreements
executed by the officers or representatives of this Corporation pursuant to the
foregoing resolutions, enforceable against the Corporation, unless such seal is
affixed to, or such attestation is provided on, such instruments, documents or
agreements.
I further certify that the officers of the Corporation set forth below
have been duly elected and qualified and as of the date hereof hold the
specified offices with the Corporation, that the signature set forth beside each
officer's name is the true signature of such officer, and that the signature set
forth beside the name of each of the representatives specified in the foregoing
resolutions is the true signature of such representative:
<TABLE>
<CAPTION>
TITLE TYPED NAME SIGNATURE
----- ---------- ---------
<S> <C> <C>
CEO Chris Larsen ------------------------
President Janina Pawlowski ------------------------
Dir., Mortgage Banking Operations Steven M. Majerus ------------------------
</TABLE>
EXHIBIT "J"
Page 72
<PAGE> 78
<TABLE>
<CAPTION>
TITLE TYPED NAME SIGNATURE
----- ---------- ---------
<S> <C> <C>
Secretary Janina Pawlowski ------------------------
- ------------------------ Cheri Toth ------------------------
- ------------------------ Margo Howe ------------------------
- ------------------------ Jan Hammond ------------------------
</TABLE>
IN WITNESS WHEREOF, I hereunto subscribe my name this _____ day of
February, 1999.
By:
Janina Pawlowski, Secretary
STATE OF CALIFORNIA )
)
COUNTY OF _______________ )
The foregoing instrument was acknowledged before me this __________ day
of February, 1999, by Janina Pawlowski, Secretary of E-LOAN, INC., a California
corporation, on behalf of said corporation.
---------------------------------
NOTARY PUBLIC IN AND FOR
[Seal] THE STATE OF CALIFORNIA
EXHIBIT "J"
Page 73
<PAGE> 79
EXHIBIT "K"
BAILEE LETTER
(Investor Name and Address)
Re: Purchase of Mortgage Loans from E-LOAN, INC., a California
corporation .
Ladies and Gentlemen:
Attached please find those Mortgage Loans listed separately on the
attached schedule, which Mortgage Loans are owned by E-LOAN, INC., a California
corporation (the "Company") and are being delivered to you for purchase.
The Mortgage Loans comprise a portion of the Collateral under (and as
the term "Collateral" and capitalized terms not otherwise defined hereunder are
defined in) that certain Warehousing Credit and Security Agreement
(Single-family Mortgage Loans) ("Warehouse Agreement") dated effective as of
February 3, 1999, by and between the Company and BANK UNITED, a federal savings
bank ("Lender"). Each of the Mortgage Loans is subject to a security interest in
favor of Lender, which security interest shall be automatically released upon
our receipt of the full amount due to the Lender under the Warehouse Agreement
in connection with such Mortgage Loans (as set forth on the schedule attached
hereto) by wire transfer to the following account:
Bank United
Houston, Texas
ABA #313071904
Credit:
Account:
Until payment therefor is received, the aforesaid security interest
therein will remain in full force and effect, and you shall hold possession of
such Collateral and the documentation evidencing same as custodian, agent and
bailee for and on behalf of Lender. In the event any Mortgage Loan is
unacceptable for purchase, return the reject item directly to the undersigned at
the address set forth below. In no event shall any Mortgage Loan be returned or
sales proceeds remitted in full no later than thirty (30) days from the date
hereof. If you are unable to comply with the above instructions, please so
advise the undersigned immediately.
NOTE: BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS
LETTER, YOU CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR LENDER
ON THE TERMS DESCRIBED IN THIS LETTER. THE UNDERSIGNED REQUESTS THAT
YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE LOANS AND THIS
EXHIBIT "K"
Page 74
<PAGE> 80
LETTER BY SIGNING AND RETURNING THE ENCLOSED COPY OF THIS LETTER TO THE
UNDERSIGNED AT THE FOLLOWING ADDRESS: 3200 Southwest Freeway, Suite 2025,
Houston, Texas 77027.
HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH CONSENT.
Sincerely,
BANK UNITED
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
IRREVOCABLY ACKNOWLEDGED
AND AGREED TO:
[INVESTOR]
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
EXHIBIT "K"
Page 75
<PAGE> 81
EXHIBIT "L"
LIST OF INVESTORS
<TABLE>
<CAPTION>
================================================================================
INVESTOR CONTACT PERSON PHONE NUMBER
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
{See Attached}
EXHIBIT "L"
Page 76
<PAGE> 82
EXHIBIT "M"
OPINION LETTER
February 3, 1999
Bank United
3200 Southwest Freeway
Suite 1300
Houston, Texas 77027
Re: Warehousing Credit and Security Agreement (Single-Family
Mortgage Loans)
Gentlemen:
We have acted as special counsel for E-LOAN, INC., a California
corporation (the "Company"), in connection with the negotiation and execution of
the following documents (collectively, the "Credit Documents"):
1. the Warehousing Credit and Security Agreement (Single-Family
Mortgage Loans) dated effective as of February 3, 1999 (the
"Loan Agreement"), between the Company and Bank United (the
"Lender"); and
2. the Note dated effective as of February 3, 1999 (the "Note"),
executed and delivered by the Company.
Unless otherwise provided herein, terms used herein which are defined
in the Credit Documents (including schedules and exhibits thereto) and not
defined herein shall have the meanings attributed thereto in the Credit
Documents.
I. BASIS OF OPINION.
As the basis for the conclusions expressed in this opinion letter, we
have examined, considered and relied upon the following:
(1) A copy of each of the Credit Documents executed by the
Company;
(2) A Recent Certificate of Domestic Status of the Company
issued by the Secretary of State of California;
(3) A copy of the Articles of Incorporation and amendments
thereto, and a copy of the Bylaws of the Company, in each case as certified to
us by the Company Certificate;
(4) Such other documents and records as we have deemed
relevant, necessary or appropriate in connection with or as a basis for the
opinions hereafter set forth; and
EXHIBIT "M"
Page 77
<PAGE> 83
Bank United
February 3, 1999
(5) Such matters of law as we have considered necessary or
appropriate for the expression of the opinions contained herein.
For the purposes of this opinion letter, the documents and information
referred to in this Section A are herein collectively referred to as the
"Documents".
II. OPINIONS.
Based upon our examination and consideration of the foregoing
Documents, and subject to the comments, assumptions, exceptions, qualifications
and limitations set forth in Section C below, we are of the opinion that:
(1) The Company (i) is a corporation duly organized, validly
existing, and in good standing under the laws of the State of California (ii)
has the full legal power and authority and all necessary licenses, permits,
franchises, and other authorizations to own and operate its property and assets
and to transact the business in which it is engaged, and (iii) is duly qualified
to transact business as a foreign corporation in each jurisdiction where the
nature of the business it transacts or the property it owns requires such
qualification or licensing except in such jurisdictions where the failure to be
in good standing or be licensed (as the case may be) would have no material
adverse effect on the Company.
(2) The Company has the requisite corporate power to execute,
deliver, and perform the terms and provisions of each of the Credit Documents
and has taken all necessary corporate action to authorize the execution,
delivery, and performance by it of each such Credit Document. The Company has
duly executed each of the Credit Documents, and each such Credit Document
constitutes its legal, valid, and binding obligation enforceable in accordance
with its terms, except as the enforceability of the rights and remedies of the
Lender under each of the Credit Documents may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(regardless of whether the issue of enforceability is considered in a proceeding
in equity or at law) including requirements of reasonableness and good faith in
the exercise of rights and remedies under the Credit Documents.
(3) Neither the execution, delivery, or performance by the
Company of the Credit Documents, nor compliance by it with the terms and
provisions thereof, (i) will contravene any law, statute, rule, or regulation;
(ii) to the best of our knowledge, will contravene any order, writ, injunction,
or decree of any court or governmental instrumentality; (iii) to the best of our
knowledge, will conflict or be inconsistent with or result in any breach of any
of the material terms, covenants, conditions, or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any lien upon any of the property or assets of the Company
EXHIBIT "M"
Page 78
<PAGE> 84
Bank United
February 3, 1999
pursuant to the terms of any agreement of the Company; (iv) will violate any
provision of the Articles of Incorporation or Bylaws of the Company.
(4) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with, (i) the execution,
delivery and performance of any Credit Document, or (ii) the legality, validity,
binding effect or enforceability of any such Credit Document.
(5) To the best of our knowledge, there are no actions, suits,
or proceedings pending or threatened (i) with respect to any Credit Document or
(ii) that could materially and adversely affect the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Company.
(6) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(7) The Company is not a "holding company" or a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(8) The execution and delivery of the Loan Agreement by the
Borrower is effective to create a valid and enforceable security interest in
favor of the Lender in the Collateral and the proceeds thereof.
(9) The Lender will have a valid and duly perfected security
interest, without further requirements for perfection, in (a) the Pledged
Mortgages and Pledged Securities upon the delivery thereof to the Lender and (b)
the other Collateral described in the Financing Statements to the extent that a
security interest therein may be perfected under Article 9 of the UCC solely by
filing a financing statement with the Secretary of State of California, which
lien shall be superior to any other interests therein.
III. COMMENTS, ASSUMPTIONS, LIMITATION, QUALIFICATIONS AND
EXCEPTIONS.
The opinions expressed in Section B above are based upon, and subject
to, the further comments, assumptions, limitations, qualifications and
exceptions set forth below:
Respectfully submitted,
EXHIBIT "M"
Page 79
<PAGE> 85
EXHIBIT "N"
PROMISSORY NOTE
$40,000,000.00 Houston, Texas February 3, 1999
FOR VALUE RECEIVED, the undersigned, E-LOAN, INC., a California
corporation (herein called the "Borrower"), hereby promises to pay to the order
of BANK UNITED, a federal savings bank (the "Lender" or, together with its
successors and assigns, the "Holder") whose principal place of business is 3200
Southwest Freeway, Suite 1300, Houston, Texas 77027, or at such other place as
the Holder may designate from time to time, the principal sum of FORTY MILLION
AND NO/100 DOLLARS ($40,000,000.00) or so much thereof as may be outstanding
from time to time pursuant to the Warehousing Credit and Security Agreement (the
"Agreement') dated the date hereof between the Borrower and the Lender, as the
same may be amended or supplemented from time to time, and to pay interest on
said principal sum or such part thereof as shall remain unpaid from time to
time, from the date of each Advance until repaid in full, and all other fees and
charges due under the Agreement, at the rate and at the times set forth in the
Agreement. All payments hereunder shall be made in lawful money of the United
States and in immediately available funds.
This Note is given to evidence an actual warehouse line of credit in
the above amount and is the Note referred to in the Agreement, and is entitled
to the benefits thereof. Reference is hereby made to the Agreement (which is
incorporated herein by reference as fully and with the same effect as if set
forth herein at length) for a description of the Collateral, a statement of the
covenants and agreements, a statement of the rights and remedies and securities
afforded thereby and other matters contained therein. Capitalized terms used
herein, unless otherwise defined herein, shall have the meanings given them in
the Agreement.
The entire unpaid principal balance of this Note plus all accrued and
unpaid interest shall be due and payable in full on February 2, 2000.
This Note may be prepaid in whole or in part at any time without
premium or penalty.
Should this Note be placed in the hands of attorneys for collection,
the Borrower agrees to pay, in addition to principal and interest, fees and
charges due under the Agreement, and all costs of collecting this Note,
including reasonable attorneys' fees and expenses.
This Note shall be construed and enforced in accordance with the laws
of the State of Texas, without reference to its principles of conflicts of law,
and applicable federal laws of the United States of America.
This Note is secured by all security agreements, collateral
assignments, deeds of trust and lien instruments executed by the Borrower in
favor of Lender, or executed by any other Person as security for this Note,
including any executed prior to, simultaneously with, or after the date of this
Note.
EXHIBIT "N"
Page 80
<PAGE> 86
The Borrower and any and each co-maker, guarantor, accommodation party,
endorser or other Person liable for the payment or collection of this Note
expressly waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, bringing of suit, and diligence in
taking any action to collect amounts called for hereunder and in the handling of
Collateral at any time existing as security in connection herewith, and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence, act or omission as or
with respect to the collection of any amount called for hereunder or in
connection with any Lien at any time had or existing as security for any amount
called for hereunder.
It is the intention of the parties hereto to conform strictly to usury
laws applicable to the Lender. Accordingly, if the transactions contemplated
hereby would be usurious under applicable law (including the laws of the United
States of America and the State of Texas), then, in that event, notwithstanding
anything to the contrary herein or in the Agreement or in any other Loan
Document or agreement entered into in connection with or as security for this
Note, it is agreed as follows: (i) the aggregate of all consideration which
constitutes interest under law applicable to the Lender that is contracted for,
taken, reserved, charged, or received herein or under the Agreement or under any
of the other aforesaid Loan Documents or agreements or otherwise in connection
herewith shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be credited by the Lender on the principal
amount of the Obligations (or, if the principal amount of the Obligations shall
have been paid in full, refunded by the Lender to the Borrower, as required);
and (ii) in the event that the maturity of this Note is accelerated by reason of
an election of the Lender resulting from any Event of Default under the
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest under law applicable to the
Lender may never include more than the maximum amount allowed by such applicable
law, and excess interest, if any, provided for in the Agreement or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by the Lender on the
principal amount of the Obligations (or, if the principal amount of the
Obligations shall have been paid in full, refunded by the Lender to the
Borrower, as required). Without limiting the foregoing, all calculations of the
rate of interest taken, reserved, contracted for, charged, received or provided
for under this Note or any of the Loan Documents which are made for the purpose
of determining whether the interest rate exceeds the Maximum Rate shall be made,
to the extent allowed by law, by amortizing, prorating, allocating and spreading
in equal parts during the period of the full stated term of the loan evidenced
hereby, all interest at any time taken, reserved, contracted for, charged,
received, or provided for under this Note of any of the Loan Documents. To the
extent that the Texas Credit Title is relevant for purposes of determining the
Maximum Rate, the Lender hereby elects to determine the applicable rate ceiling
under such statute by the weekly rate ceiling from time to time in effect,
subject to the Lender's right subsequently to change such method in accordance
with applicable law.
EXHIBIT "N"
Page 81
<PAGE> 87
E-LOAN, INC.,
a California corporation
By:
--------------------------------
STEVEN M. MAJERUS, Director,
Mortgage Banking
EXHIBIT "N"
Page 82
<PAGE> 88
FINANCING STATEMENT
This Financing Statement is presented to a Filing Officer in the Office
of the Secretary of State of the State of California for filing pursuant to the
Uniform Commercial Code.
1. The name, address and federal tax number of the Debtor is:
E-LOAN, INC.
6200 Village Parkway, Suite 102
Dublin, California 94568
Federal Tax I.D. 77-0460084
2. The name, address and federal tax number of the Secured Party is:
BANK UNITED
3200 Southwest Freeway, Suite 1300
Houston, Texas 77027
Federal Tax I.D. No. 76-0266000
3. This Financing Statement covers all right, title, and interest of
Debtor in, to and under the following, whether now owned or hereafter
acquired (collectively, the "Collateral"):
(a) All Mortgage Loans, including all Mortgage Notes and
Mortgages evidencing such Mortgage Loans including without limitation
all Mortgage Loans in respect of which Wet Settlement Advances have
been made by the Secured Party, which from time to time are delivered
or caused to be delivered to the Secured Party or its designee, come
into the possession, custody or control of the Secured Party for the
purpose of assignment or pledge or in respect of which an Advance has
been made by the Secured Party (the "Pledged Mortgages").
(b) All Mortgage-backed Securities which are from time to time
delivered or caused to be delivered to, or are otherwise in the
possession of the Secured Party, or its designee, its agent, bailee or
custodian as assignee or pledged to the Secured Party, or for such
purpose are registered by book-entry in the name of the Secured Party
(the "Pledged Securities").
(c) All private mortgage insurance and all commitments issued
by the FHA or VA to insure or guarantee any Mortgage Loans included in
the Pledged Mortgages; all guaranties related to Pledged Securities;
all Purchase Commitments held by the Debtor covering the Pledged
Mortgages or the Pledged Securities and all proceeds resulting from the
sale thereof to Investors pursuant thereto; all personal property,
contract rights, servicing and servicing fees and income or other
proceeds, amounts and payments payable to the Debtor as compensation or
reimbursement, accounts and general intangibles of whatsoever kind
relating to the Pledged Mortgages, the Pledged Securities, and all
other documents or
Page 1
<PAGE> 89
instruments relating to the Pledged Mortgages and the Pledged
Securities, including, without limitation, any interest of the Debtor
in any fire, casualty or hazard insurance policies and any awards made
by any public body or decreed by any court of competent jurisdiction
for a taking or for degradation of value in any eminent domain
proceeding as the same relate to the Pledged Mortgages.
(d) All right, title and interest of the Debtor in and to all
escrow accounts, documents, instruments, files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records (including all information, records, tapes, data,
programs, discs and cards necessary or helpful in the administration or
servicing of the foregoing Collateral) and other information and data
of the Debtor relating to the foregoing Collateral.
(e) All now existing or hereafter acquired cash delivered to
or otherwise in the possession of the Secured Party or its agent,
bailee or custodian or designated on the books and records of the
Debtor as assigned and pledged to the Secured Party.
(f) All cash and non-cash proceeds of the foregoing
Collateral, including all dividends, distributions and other rights in
connection with, and all additions to, modifications of and
replacements for, the foregoing Collateral, and all products and
proceeds of the foregoing Collateral, together with whatever is
receivable or received when the foregoing Collateral or proceeds
thereof are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, including,
without limitation, all rights to payment with respect to any cause of
action affecting or relating to the foregoing Collateral or proceeds
thereof.
4. Definitions: The following terms shall have the meanings set forth
below unless the context otherwise requires. Such definitions shall be
equally applicable to the singular and plural forms of the terms
defined.
"Advance" means any advance by the Secured Party to Debtor
under the Warehouse Credit Agreement.
"Collateral Documents" has the meaning set forth in the
Warehouse Credit Agreement.
"FHA" means the Federal Housing Administration and any
successor thereto.
"FHLMC" means the Federal Home Loan Mortgage Corporation and
any successor thereto.
"FHLMC Guide" means the Freddie Mac Sellers' and Servicers'
Guide dated September 17, 1984, as amended, revised, modified and
supplemented from time to time heretofore, now and hereafter.
Page 2
<PAGE> 90
"FHLMC Pool" means a "group" or "grouping" of Mortgage Loans
assembled in accordance with (and as such term is used in) the FHLMC
Guide.
"First Mortgage" means a mortgage or deed of trust which
constitutes a first lien on the property covered thereby.
"FNMA" means the Federal National Mortgage Association and any
successor thereto.
"FNMA Guide" means the Fannie Mae Servicing Guide dated June
30, 1990, as amended, revised, modified and supplemented from time to
time heretofore, now and hereafter.
"FNMA Pool" means a "group" or "grouping" of Mortgage Loans
assembled in accordance with (and as such term is used in) the FNMA
Guide.
"GNMA" means the Government National Mortgage Association and
any successor thereto.
"GNMA Guide" means, as applicable under the circumstances, (a)
the GNMA I Mortgage-Backed Securities Guide, Handbook GNMA 5500.1
REV-6, as amended, revised, modified and supplemented from time to time
heretofore, now and hereafter or (b) the GNMA II Mortgage-Backed
Securities Guide, Handbook GNMA 5500.2, as amended, revised, modified
and supplemented from time to time heretofore, now and hereafter..
"GNMA Pool" means, as applicable under the circumstances, a
"pool" of Mortgage Loans assembled in accordance with (and as such term
is used in) the GNMA Guide.
"Investor" means FNMA, FHLMC, GNMA, or a financially
responsible institution which is acceptable to Secured Party, in its
sole discretion; provided that at any time by written notice to Debtor
Secured Party may disapprove any Investor in its sole discretion for
any reason, whether or not that Person is named as an Investor in this
definition or has been previously approved as an Investor by Secured
Party. Upon receipt of such notice, the Persons named in Secured
Party's notice shall no longer be Investors from and after the date of
the receipt of such notice.
"Mortgage" means a First Mortgage or Second Mortgage on
improved real property.
"Mortgage-backed Securities" means FHLMC, GNMA or FNMA
securities that are backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage Note.
"Mortgage Note" means a note secured by a Mortgage.
Page 3
<PAGE> 91
"Mortgage Pool" means (a) a FHLMC Pool, (b) a FNMA Pool, or
(c) a GNMA Pool.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether
or not legal entities, and federal and state governments and agencies
or regulatory authorities and political subdivisions thereof.
"Purchase Commitment" means a written commitment, in form and
substance satisfactory to the Secured Party, issued in favor of the
Debtor by an Investor pursuant to which that Investor commits to
purchase Mortgage Loans or Mortgage-backed Securities.
"Second Mortgage" means a mortgage or deed of trust which
constitutes a second lien on the property covered thereby.
"Servicing Contract" means, with respect to any Person, the
arrangement, whether or not in writing, pursuant to which such Person
has the right to service Mortgage Loans.
"Single-family Mortgage Loan" means a Mortgage Loan secured by
a Mortgage covering improved real property containing one to four
family residences.
"VA" means the Veterans Administration and any successor
thereto.
"Warehouse Credit Agreement" means the Warehousing Credit and
Security Agreement dated of even date herewith between Debtor and
Secured Party.
"Wet Settlement Advance" means an Advance by the Secured Party
pursuant to Section 2.2(a) of the Warehouse Credit Agreement, in
respect of the closing or settlement of a Single-family Mortgage Loan,
in anticipation of and pending subsequent delivery and examination of
the Collateral Documents as provided in Section II of EXHIBIT "C" to
the Warehouse Credit Agreement.
EXECUTED effective as of the 3rd day of February, 1999.
DEBTOR:
E-LOAN, INC.,
a California corporation
By:
-------------------------------
STEVEN M. MAJERUS, Director,
Mortgage Banking
Page 4
<PAGE> 92
SECURED PARTY:
BANK UNITED
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
After recording, return copy to:
Strasburger & Price, L.L.P.
Attn: Jeff J. Brashier
1221 McKinney Street, Suite 2800
Houston, Texas 77010
Page 5
<PAGE> 93
PROMISSORY NOTE
$40,000,000.00 Houston, Texas February 3, 1999
FOR VALUE RECEIVED, the undersigned, E-LOAN, INC., a California
corporation (herein called the "Borrower"), hereby promises to pay to the order
of BANK UNITED, a federal savings bank (the "Lender" or, together with its
successors and assigns, the "Holder") whose principal place of business is 3200
Southwest Freeway, Suite 1300, Houston, Texas 77027, or at such other place as
the Holder may designate from time to time, the principal sum of FORTY MILLION
AND NO/100 DOLLARS ($40,000,000.00) or so much thereof as may be outstanding
from time to time pursuant to the Warehousing Credit and Security Agreement (the
"Agreement') dated the date hereof between the Borrower and the Lender, as the
same may be amended or supplemented from time to time, and to pay interest on
said principal sum or such part thereof as shall remain unpaid from time to
time, from the date of each Advance until repaid in full, and all other fees and
charges due under the Agreement, at the rate and at the times set forth in the
Agreement. All payments hereunder shall be made in lawful money of the United
States and in immediately available funds.
This Note is given to evidence an actual warehouse line of credit in
the above amount and is the Note referred to in the Agreement, and is entitled
to the benefits thereof. Reference is hereby made to the Agreement (which is
incorporated herein by reference as fully and with the same effect as if set
forth herein at length) for a description of the Collateral, a statement of the
covenants and agreements, a statement of the rights and remedies and securities
afforded thereby and other matters contained therein. Capitalized terms used
herein, unless otherwise defined herein, shall have the meanings given them in
the Agreement.
The entire unpaid principal balance of this Note plus all accrued and
unpaid interest shall be due and payable in full on February 2, 2000.
This Note may be prepaid in whole or in part at any time without
premium or penalty.
Should this Note be placed in the hands of attorneys for collection,
the Borrower agrees to pay, in addition to principal and interest, fees and
charges due under the Agreement, and all costs of collecting this Note,
including reasonable attorneys' fees and expenses.
This Note shall be construed and enforced in accordance with the laws
of the State of Texas, without reference to its principles of conflicts of law,
and applicable federal laws of the United States of America.
This Note is secured by all security agreements, collateral
assignments, deeds of trust and lien instruments executed by the Borrower in
favor of Lender, or executed by any other Person as security for this Note,
including any executed prior to, simultaneously with, or after the date of this
Note.
Page 1
<PAGE> 94
The Borrower and any and each co-maker, guarantor, accommodation party,
endorser or other Person liable for the payment or collection of this Note
expressly waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, bringing of suit, and diligence in
taking any action to collect amounts called for hereunder and in the handling of
Collateral at any time existing as security in connection herewith, and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence, act or omission as or
with respect to the collection of any amount called for hereunder or in
connection with any Lien at any time had or existing as security for any amount
called for hereunder.
It is the intention of the parties hereto to conform strictly to usury
laws applicable to the Lender. Accordingly, if the transactions contemplated
hereby would be usurious under applicable law (including the laws of the United
States of America and the State of Texas), then, in that event, notwithstanding
anything to the contrary herein or in the Agreement or in any other Loan
Document or agreement entered into in connection with or as security for this
Note, it is agreed as follows: (i) the aggregate of all consideration which
constitutes interest under law applicable to the Lender that is contracted for,
taken, reserved, charged, or received herein or under the Agreement or under any
of the other aforesaid Loan Documents or agreements or otherwise in connection
herewith shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be credited by the Lender on the principal
amount of the Obligations (or, if the principal amount of the Obligations shall
have been paid in full, refunded by the Lender to the Borrower, as required);
and (ii) in the event that the maturity of this Note is accelerated by reason of
an election of the Lender resulting from any Event of Default under the
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest under law applicable to the
Lender may never include more than the maximum amount allowed by such applicable
law, and excess interest, if any, provided for in the Agreement or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by the Lender on the
principal amount of the Obligations (or, if the principal amount of the
Obligations shall have been paid in full, refunded by the Lender to the
Borrower, as required). Without limiting the foregoing, all calculations of the
rate of interest taken, reserved, contracted for, charged, received or provided
for under this Note or any of the Loan Documents which are made for the purpose
of determining whether the interest rate exceeds the Maximum Rate shall be made,
to the extent allowed by law, by amortizing, prorating, allocating and spreading
in equal parts during the period of the full stated term of the loan evidenced
hereby, all interest at any time taken, reserved, contracted for, charged,
received, or provided for under this Note of any of the Loan Documents. To the
extent that the Texas Credit Title is relevant for purposes of determining the
Maximum Rate, the Lender hereby elects to determine the applicable rate ceiling
under such statute by the weekly rate ceiling from time to time in effect,
subject to the Lender's right subsequently to change such method in accordance
with applicable law.
Page 2
<PAGE> 95
E-LOAN, INC.,
a California corporation
By:
------------------------------
STEVEN M. MAJERUS, Director,
Mortgage Banking
Page 3
<PAGE> 1
EXHIBIT 10.13
Broker Program
BROKER {PRIVATE}
AGREEMENT
- ---------
This Agreement to dated and effective the 23 day of SEPTEMBER
-- ---------
1997
-
between Citicorp Mortgage, Inc. for itself or on behalf of
Citibank, FSB, Citibank (NYS), Citibank, N.A. and/or Citibank (Nevada), N.A.
(each referred to hereinafter as "Lender") and E-LOAN, INC. ("Broker"). In
------------
consideration of the terms contained in this Agreement. Lender and Broker agree
as follows;
NOTE: Only One Box Should Be Checked.
TABLE FUNDING BROKERS - THE FOLLOWING PROVISIONS ARE APPLICABLE:
1. APPLICATION SUBMISSION; ELIGIBLE PRODUCTS
Broker may submit mortgage loan application package(s)
("Application(s)") to Lender in contemplation of
possible table funding by lender. "Table fund" or "Table
funding" means lender provides the funding at or before
closing, closing occurs in the name of Broker, and
Broker assigns all rights to each loan ("Loan") to
Lender simultaneously with closing of the Loan.
Applications shall related to the various residential
mortgage loan products described in Lender's "Citicorp
Mortgage, Inc. Broker's Guide," which Lender may modify
at any time following 7 calendar days written notice to
Broker. Lender will have complete discretion to approve
or disapprove Applications for table funding.
If Lender agrees to table fund a Loan, Lender shall be
responsible for the underwriting of the Loan. Broker
shall close such Loan using loan documentation and
accounting to producers approved by Lender. Each
appraisal of property securing a Loan will be appraised
only by an appraises included in Lender's list of
approved appraisers, are in effect from time to time.
2. FUNDING
Lender will provide table funding for each approved Loan
under the terms described in the Citicorp Mortgage, Inc.
Table Funding Commitment executed following Citicorp
approval of the Application. The Citicorp Funding
Commitment may vary from Loan to Loan.
[X]PROCESSING BROKERS - THE FOLLOWING PROVISIONS ARE APPLICABLE:
/s/ J. Pawlowski 2. PRODUCTS AND SERVICES
Broker may submit mortgage loan application(s)
("Application(s)") to Lender. Lender will make available
various residential mortgage loan products and services
described in lender's "Citicorp Mortgage, Inc. Broker's
a Guide," which Lender may modify at any time following
7 calendar days written notice to Broker. Lender will
have complete discretion to approve or disapprove
Applications and will close each approved loan ("Loan")
in its own name.
3. BORROWER FEES AND DISCLOSURE
Lender will not impose any charges other than those set
forth in Lender's customer disclosures and pricing
bulletins in affect from time to time.
<PAGE> 2
Nothing in this Agreement will prohibit Broker from
imposing loan ("Broker Fees") on its customers for
consultations and other services ("Broker Services"),
provided any Broker Pass are imposed pursuant to a
written agreement and in accordance with applicable law.
Broker Fees may be disbursed from closing funds if
authorized in writing by the customer. The payment of
Broker Fees will not be a condition of closing. Any
dispute regarding a Broker Fee shall be resolved by the
Broker and the customer without involvement by Lender.
<PAGE> 3
Broker Program
BROKER
AGREEMENT
- ---------
If any Loan or Application submitted by Broker to Lender
is rescinded or withdrawn pursuant to the Federal
Truth-in-Lending Act, applicable Federal regulations or
any State law, Broker will refund to the rescinding
customer any and all Broker Fees it received. Broker
will immediately reimburse Lender upon request for any
Broker Fee refunded by Lender in the event of such a
rescission or withdrawal.
THE FOLLOWING PROVISIONS ARE APPLICABLE TO ALL BROKERS:
3. REPRESENTATIONS, WARRANTIES AND COVENANTS Broker
represents, warrants and covenants throughout the term
of this Agreement as follows:
(a) That it is a (corporation)(banking
association)(partnership)(proprietorship)(limited
liability company/partnership) (cross out
inapplicable choices) duly organized, validly
existing and in good standing and is authorized to
do business in the State(s) of CALIFORNIA and that
----------
all corporate of other actions and approvals
necessary for the execution and performance of this
Agreement have been taken and/or received.
(b) That it is the holder of one or more valid lender,
broker or other applicable license(s) bearing
number(s) 01223430 issued by the State(s) of
--------
CALIFORNIA, which Broker shall maintain in good
----------
standing throughout the term of this Agreement, and
is in compliance with any mortgage lender or broker
or other laws applicable to its activities under
this Agreement. Broker agrees to promptly provide
Lender with copies of all such license(s) upon
request by Lender.
(c) That the (principals)(partners)(owners) forces out
inapplicable choices) consent to allow Lender to
periodically investigate their backgrounds. The
scope of background checks will include but not be
limited to obtaining credit bureau reports. The
aforesaid individual(s) acknowledge that Lender
reserves the right to obtain updates to all such
background information on a periodic basis and the
aforesaid individual(s) will, upon written request
by Lender, execute all documents necessary to obtain
such updates.
(d) That it is thoroughly familiar with and will comply
with all applicable Federal, State and local laws
and regulations directly or indirectly relating to
its activities under this Agreement (including but
not limited to involvement in such activities of
individuals convicts of crimes involving dishonesty
or branch of trust).
(e) That this Agreement is nonexclusive and that Broker
maintains loan funding relationships with more than
one funding source.
(f) That Broker has obtained "Citicorp Mortgages, Inc.
Broker's Guide" and has reviewed, or promptly will
review it, and will comply with its contents and
will process such Application and close each loan in
accordance with the instructions and criteria
contained in such Guide and any amendment(s)
thereto. Such instructions and criteria shall
include but not be limited to underwriting criteria,
documentation requirements and closing criteria.
Both parties agree that the aforesaid Guide and all
amendments, supplements, and bulletins to such Guide
shall be incorporated by references herein and shall
form part of this Agreement.
(g) That all information provided by Broker, including
information obtained by Broker from other sources,
is true, correct, currently valid and genuine.
<PAGE> 4
(h) That each Application will be originated by Broker
and not by any third party, such as a correspondent
of Broker.
<PAGE> 5
Broker Program
BROKER
AGREEMENT
- ---------
(i) That Broker does not currently and will not in the
future employ any entity or individual on the FHLMC
exclusionary list.
(j) That Broker will immediately notify Lender if it (i)
fails to maintains any licenses in violation of (b)
above, (ii) becomes subject to any enforcement
and/or investigative proceeding by any licensing or
regulatory authority or agency and/or (iii) is named
as a party or becomes involved in any material
litigation.
(k) That Broker will immediately notify Lender if (i)
Broker and/or any of its principal owner(s) becomes
the debtor in any voluntary or involuntary
bankruptcy proceeding, (ii) Broker and/or any of its
principal owner(s) requests the appointment of a
receiver and/or (iii) Broker and/or any of the
principal owner(s) has incurred or is likely to
incur is material, adverse change in its/their
financial condition.
(l) That Broker will immediately notify Lender of any
material change in ownership and/or management.
(m) That Broker will promptly respond to or otherwise
comply with Lender's responsible request(s) for
periodic financial statements of Broker and/or any
of its principal owner(s).
4. ADVERTISING
Brokers may advertise to the public the availability of
lending programs, but Broker may not in any may identity
Lender in any advertising unless otherwise required by
applicable law and Lender has given its advance written
approval.
Broker agrees that the borrower(s) on all Loans
purchased by Lender are the exclusive customers of
Lender. Neither Broker nor any of its affiliates shall
directly target the Loan borrower(s) for any loan
refinance solidation(s). Without the prior written
consent of Lender. Broker shall not sell or distribute
any customer list incorporating the names of such
borrower(s) and shall include any such that to solicit
or promotes, or to allow any other person to solicit or
promote, the sale of any financial services of products
to any such borrower(s).
5. TERM
This Agreement is for an initial one-year term and shall
automatically renew for successive one-year terms,
unless terminated pursuant to section of this Agreement.
6. RELATIONSHIP BETWEEN LENDER AND BROKER.
This Agreement will not create any agency between Broker
and Lender, Broker shall conduct its business under this
Agreement as an independent contractor and shall have
the rights and responsibilities of an independent
contractor.
Notwithstanding the above, Broker shall be deemed an
agent of Lender for the sale and limited purpose of
directly engaging real salaries ?? from Lender's
approved list of real estate appraisers as revised from
times to time by Lender. Any selection of a real estate
appraiser by Broker not on Lender's list of approved
real estimate appraisers than in effect shall be
construed as an act outside the scope of this limited
agency. Under no circumstances shall Broker's
appointment as a limited agent under this paragraph be
continued by any person an confusing any authority
respond the simple engagement of real estate appraiser.
The limited agency created Lender this paragraph may be
revoked by Lender in its discretion at any time upon
notice to Broker.
Broker's sections under this Agreement shall be demand
to be for the inclusive benefit of its customers. Lender
shall not be responsible for any actions or omissions by
Broker.
<PAGE> 6
Broker Program
BROKER
AGREEMENT
- ---------
Broker agrees it will not represent, orally, in writing,
by implication or otherwise, that it can secure,
guarantee or otherwise obtain credit or loan approval
by, or otherwise act in any capacity on behalf of,
Lender. Lender is prescribing no marketing plan for
Broker and exercises no control over the methods,
operations and practices (including but not limited to
any mortgage pre-qualification practices) of Broker
except as provided in this Agreement and procedures
adopted by Lender relating to the submission of
Applications by Broker. Broker acknowledges it is not
selling or distributing Lender's services and Lender has
made no premises, representation or warranty regarding
the profitability of any arrangement with Lender.
Broker acknowledges Lender will be providing Broker with
valuable proprietary information ("Confidential
Information"), including but not limited to information
regarding Lender's products, programs, underwriting
policies, procedures and customers. Except as necessary
to perform its obligations under this Agreement or as
required by law. Broker will not disclose any
Confidential Information to any person outside Broker's
organization and will limit access to this information
within its organization on a strict "need to know"
basis.
Broker will require all of its employees and other
agents to meet its obligations under this Agreement
regarding Confidential Information.
7. TERMINATION
Lender may immediately terminate this Agreement without
notice and Lender then will have no further obligations
under this Agreement upon: (1) the failure of Broker to
perform or abide by any term or obligation contained in
this Agreement; (2) any representation or warranty made
by Broker being found by Lender to be false or incorrect
in any material respect; (3) commencement by or against
Broker of any bankruptcy, insolvency of similar
proceedings; (4) the failure of loan applications
referred by Broker to satisfy Lender's expectations
regarding loan quality and performance; or (5) Lender's
determination that Broker's actions contravene the terms
of this Agreement or could adversely impact Lender's
activities of reputation. Either party may terminate
this Agreement for any other reason upon 10 calendar
days prior notice to the other. In the event of
termination, Broker shall fully cooperate with and
insist Lender in obtaining the documentation necessary
to complete the processing and full resolution of all
matters relating to registered applications eligible for
closing and all closed loans.
8. ASSIGNMENT
Broker may not assign this Agreement or delegate any of
us responsibilities under this Agreement. Lender
reserves the right, upon notice to Broker, to assign or
delegate in whole or in part its obligations and
responsibilities under this Agreement to any affiliated
entity engaged in the business of residential financing.
9. NON-EXCLUSIVE AGREEMENT
Broker's rights under this Agreement are on a
non-exclusive basis. Lender shall be free to market its
products and services to, and to contract with, other
parties and customers as it deems appropriate. Broker is
under no obligation to submit Applications or to refer
its customers to Lender for any purpose.
10. INDEMNIFICATION
Broker agrees to indemnify and hold Lender nominee from
any and all claims, actions and costs, including
reasonable attorneys' fees and costs, arising from (i)
Broker's performance or failure to perform under the
terms of this Agreement, (ii) any fraud,
misrepresentation or breach of any representation,
warranty or covenant contained in this Agreement and/or
(iii) Broker's advertisements, promotions or other
activities. This indemnification shall extend to any
action or inaction by employees, officers, agents,
independent contractors or other representatives of
Broker and shall survive the expiration and termination
of this Agreement.
<PAGE> 7
Broker Program
BROKER
AGREEMENT
- ---------
11. CURE OR REPURCHASE
If Lender, in its sole and exclusive discretion, determines
that any Loan:
(i) was underwritten and/or originated in violation of any
term or condition of this Agreement, the Guide
referenced in Section 3(f) above and all amendments
thereto:
(ii) was underwritten and/or originated based on any
materially inaccurate information or material
misrepresentation made by the loan borrower(s),
Broker, Broker's employees, agents and/or affiliates,
or any other party providing information relating to
said Loan;
(iii)was or is capable of being rescinded by the applicable
borrower(s) pursuant to the provisions of any
applicable federal or state law or regulation
including but not limited to the federal
Truth-In-Lending Act; and/or
(iv) must be repurchased from any secondary manual Investor
(including but not limited to the Federal National
Mortgage Association and Federal Home Loan Mortgage
Corporation) due to a breach by Broker of any
representation, warranty or covenant contained in this
Agreement. the Guide referenced in Section 3(f) above
and all amendment thereto
Broker ??, upon notification by Lender and/or such
secondary market Investor, (i) Immediately correct or
pure such defect within the time prescribed by Lender
and/or any such secondary market Investor to the full
and complete satisfaction of Lender and/or any such
secondary market Investor or (ii) repurchase such
defective Loan from Lender or such secondary market
investor and the price required by Lender or such
secondary market, investor ("Buyout Price"). If Lender
or such secondary market investor requests such
repurchase. Broker shall, within ten (10) business days
of Broker's receipt of such repurchase request, pay to
Lender and/or such secondary market investor the Buyout
Price by cashier's check or wire transfer of immediately
available federal funds.
Broker agrees and acknowledges that the provisions of
this Section 11 do not, in any way, eliminate, diminish
or impair the indemnification obligations contained in
Section 10.
12. GOVERNING LAW
This Agreement shall be governed by the laws of the
State of Missouri and applicable federal law.
13. NOTICE
All notices shall be in writing and shall be sent by
registered, certified or first-class mail, postage fully
prepaid. All notices addressed to Lender should be sent
to its office at:
<TABLE>
<S> <C>
REGULAR MAIL OVERNIGHT MAIL
Citicorp Mortgage, Inc. Citicorp Mortgage, Inc.
Attn.: Intermediary Management Attn.: Intermediary Management
P.O. Box 790150 12558 N. Outer Forty Road
St. Louis, MO 83178-0150 St. Louis, MO 83141
</TABLE>
or to such other address designated in writing by Lender
from time to time.
All notices addressed to Broker should be sent to its
office at:
590 UNIVERSITY AVE SUITE 350
----------------------------
PALO ALTO, CA 94301
-------------------
or to such other address designated in writing by Broker
from time to time.
<PAGE> 8
Broker Program
BROKER
AGREEMENT
- ---------
IN WITNESS WHEREOF, the parties have signed this Agreement.
<TABLE>
<S> <C>
Citicorp Mortgage, Inc. ("Lender") E-LOAN, INC.(Broker)
------------
By /s/ Signature Illegible By JANINA PAWLOWSKI /s/ Signature Illegible
----------------
Title /s/ Signature Illegible Title C.E.O.
-------
Date 10/30/97 Date 9-23-97
-------- -------
</TABLE>
Karen M. Lopez, VP,
CMI - Credit Analyst
1 Sansome Street, 6th Floor
San Francisco, CA 94104
NOTE: THE TEXT OF THIS AGREEMENT MAY NOT BE CHANGED IN ANY MANNER WHATSOEVER
WITHOUT THE PRIOR WRITTEN PERMISSION OF CMI.
<PAGE> 1
EXHIBIT 10.14
UNDERWRITING REVIEW AGREEMENT
This AGREEMENT, made and entered into this 3rd day of September, 1998,
---
by and between CMAC SERVICE COMPANY, a corporation organized and existing under
the laws of the Commonwealth of Pennsylvania, with its principal offices
located at 1601 Market Street, Philadelphia, Pennsylvania 19103 (hereinafter
referred to as "CMAC-SC") and E-LOAN, INC., a corporation organized and
existing under the laws of the State of California, with its principal office
located at 6200 Village Parkway, Suite 102, Dublin, California 94568
(hereinafter referred to as "Customer").
WITNESSETH:
----------
WHEREAS, Customer originates and/or purchases residential mortgage
loans and in connection therewith desires certain underwriting services; and
WHEREAS, CMAC-SC is willing to provide underwriting services to the
Customer in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
1. DEFINITIONS
-----------
When used in this Agreement, the following terms shall have the
specific meaning shown unless the context of any provision hereof
clearly indicates otherwise:
(A) "Application" shall mean a residential loan application
completed by a borrower and prepared by an employee or agent
of Customer and submitted to CMAC-SC for underwriting
pursuant to this Agreement. An Application shall contain all
of the supporting documentation customarily included in
residential loan packages including, without limitation:
verifications of employment and income, and source of down
payment and other funds, residential appraisals, credit
reports, and such other forms and/or documents as CMAC-SC
and/or Customer may reasonably require.
(B) "Approved Correspondent Lender or Broker" shall mean those
mortgage originators who Customer has approved.
(C) "Automated Underwriting Application" shall mean a FannieMae
Form 1003 or Freddie Mac Form 65, or such other information
as may be required, prepared by an employee or agent of
Customer and submitted to CMAC-SC for underwriting pursuant
to this Agreement.
-1-
<PAGE> 2
(D) "Automated Underwriting Guidelines" shall mean the most
current applicable Underwriting and/or submission guidelines
for Desktop Underwriter, Loan Prospector, or any other
Automated Underwriting System approved by CMAC-SC for use by
Customer as set forth on Exhibit "C."
(E) "Automated Underwriting System" shall mean FannieMae Desktop
Underwriter ("DU"), Freddie Mac Loan Prospector ("LP") and/or
any other AutomatedUnderwriting System approved in writing by
CMAC-SC for use by Customer.
(F) "Business Day" shall mean any regularly scheduled work day
for employees of the United States Government or CMAC-SC.
(G) "Loan" shall mean any note, bond, or other evidence of
indebtedness secured by a mortgage, deed of trust, or other
instrument which constitutes or is equivalent to a first lien
charge on Property. For purposes of this Agreement, no Loan
shall exceed $500,000.
(H) "Property" shall mean residential real property, including
all improvements thereon, securing a Loan and shall be
limited to any building, or units in a condominium designed
for occupancy by not more than four (4) families.
(I) "Underwriting Guidelines" shall mean those specific
underwriting criteria set forth in the Federal National
Mortgage Association ("FannieMae") and/or Federal Home Loan
Mortgage Corporation ("Freddie Mac") Seller's Guide and/or
such other underwriting Guidelines as set forth on Exhibit
"D" as agreed upon by CMAC-SC and Customer as of the
effective date of this Agreement, as updated or amended by
FannieMae or Freddie Mac or Customer in writing.
(J) "Exclusions" shall mean those specific property and loan
types as set forth on Exhibit "E."
(K) "Mortgage Insurance Standards" shall mean all programs
acceptable to CMAC for Mortgage Insurance and any limitations
as set forth in Exhibit "F."
2. UNDERWRITING SERVICES
---------------------
In consideration of the payment by Customer of the appropriate fees as
hereinafter set forth, CMAC-SC hereby agrees to review Applications
for Customer and determine if such Applications comply with the
Underwriting Guidelines, as appropriate.
For Automated Underwriting Applications, CMAC-SC agrees to properly
submit the Application data to the applicable Automated Underwriting
System, and to accurately report to Customer the Automated
Underwriting System's decision with regard to the Loan.
-2-
<PAGE> 3
Customer hereby agrees that any and all decisions made by CMAC-SC
pursuant to this Agreement constitute decisions of Customer and any
action taken in respect thereof shall be deemed undertaken solely on
behalf of Customer.
3. APPLICATION PROCESSING
----------------------
The procedures set forth in this Section 3 shall be followed for each
Application submitted to CMAC-SC under this Agreement.
(A) Customer shall deliver complete Applications to the
appropriate office of CMAC-SC, the addresses of which are set
forth on Exhibit "A", and/or to such other offices as CMAC-SC
may notify Customer in writing. CMAC-SC shall stamp each
Application upon receipt and such date stamp shall be
conclusive evidence of the date of receipt by CMAC-SC.
(B) CMAC-SC shall be entitled to retain all documents submitted
by or on behalf of Customer and shall have no obligation to
complete its review with respect to any Application unless
such Application is complete.
(C) In the event any Application is found to be incomplete or in
the opinion of CMAC-SC, additional information or
documentation is required, CMAC-SC shall notify Customer of
the missing or required documentation. Customer shall provide
such missing or additional documentation within ten (10)
Business Days of the date of such notice.
(D) CMAC-SC shall provide Customer with a monthly report
detailing all Applications received and processed during the
prior month. Such statement shall list with respect to each
Application set forth, the Application number, borrower's
name, date of receipt, date of decision and such other
information as Customer may reasonably require.
(E) CMAC-SC shall use reasonable best efforts to review each
Application within two (2) to five (5) Business Days after
its receipt of a complete Application and complete its review
and notify Customer of its decision. Such notification shall
be made by telephone and thereafter confirmed in writing.
(F) Applications reviewed pursuant to this Agreement may be
classified in one of three categories:
(1) "APPROVED". An Approved Application is one which is
----------
determined to be in conformity with the Underwriting
Guidelines. An Approved Loan may have conditions
added to it which Customer or a borrower must
satisfy prior to or upon the closing of the Loan.
(2) "DENIED. A Denied Application is one which is
-------
determined not to be in conformity with the
Underwriting Guidelines.
-3-
<PAGE> 4
(3) "SUSPENDED". A Suspended Application is one which is
-----------
determined to be incomplete according to sub-section
(C) above.
(G) Automated Underwriting Applications reviewed pursuant to this
Agreement shall be classified according to the designation(s)
given by the applicable Automated Underwriting System.
4. ON-SITE PROVISIONS
------------------
Where Customer elects to invite, and CMAC-SC agrees to place, an
underwriter(s) on the Customer's premises, Section 3 (A) and (B) shall
not apply, and the following provisions shall apply to any Loan(s)
underwritten at the location(s) set forth in Exhibit "B" hereto.
(A) Work Space(s). Customer agrees to provide CMAC-SC's
-------------
underwriter(s) with appropriate work space(s) at the
location(s) set forth on Exhibit "B" hereto.
(B) Application Processing. Customer shall deliver complete
----------------------
Applications to CMAC-SC's underwriter(s) at the Customer's
business location(s) as set forth in Exhibit "B" and/or to
such other offices as CMAC-SC and Customer may agree in
writing. CMAC-SC's Underwriter shall follow the procedures
set forth in Sections 3(C) through 3(F).
(C) File Maintenance. Customer represents and warrants that it
----------------
shall maintain a complete Application file, including the
complete documentation included in the original Application
file, and in accordance with the requirements of FannieMae
and/or Freddie Mac if applicable, for each Loan underwritten
by CMAC-SC pursuant to the Agreement. Customer acknowledges
that CMAC-SC will rely on Customer for all file maintenance.
(D) File Review. Customer agrees that upon reasonable notice from
-----------
CMAC-SC, it will copy and forward to CMAC-SC, or allow
CMAC-SC access to any Application file(s) requested by
CMAC-SC for audit, review, or any other purpose.
(E) Failure to Maintain or Produce Files. In the event that
------------------------------------
Customer does not provide for maintenance of Application
files as noted above, or fails to produce such Application
files upon reasonable request, CMAC-SC shall have no
liability whatsoever for the Loan or Loans in question and
Customer shall waive those sections of the Agreement relating
to its indemnification.
5. PRIVATE MORTGAGE GUARANTY INSURANCE
-----------------------------------
Nothing contained in this Agreement shall be deemed to be a
representation, warranty or commitment that CMAC-SC shall be obligated
to obtain private mortgage guaranty or pool insurance for any Loan.
Notwithstanding, the fact that any Application is classified as
Approved hereunder, CMAC-SC makes no representation or warranty of any
nature regarding the insurability of any such Application.
-4-
<PAGE> 5
Upon request of Customer, CMAC-SC shall forward any Application to
Commonwealth Mortgage Assurance Company ("CMAC") for mortgage
insurance underwriting pursuant to the Mortgage Insurance Standards
set forth on Exhibit "F" of this Agreement.
6. FEES
----
Customer and/or Approved Correspondent Lender or Broker agrees to pay
CMAC-SC an Underwriting Review Fee pursuant to the terms and
conditions of this Agreement; regardless of the underwriting decision
reached.
(A) Applications for Loans insured by CMAC:
[*]
(B) Applications for Loans not insured with CMAC:
[*]
(C) [*]
(D) Automated Underwriting Applications: Pursuant to the fee
schedule set forth on Exhibit "C."
Customer shall be responsible for all costs of delivering Applications
to CMAC-SC. CMAC-SC shall provide Customer with a monthly invoice
detailing the total number of Applications reviewed and, if a per diem
rate under Section 6(C), an itemized accounting of the hours worked
per underwriter during the previous month, and the total charges owed
to CMAC-SC. Customer shall pay any such invoice within fifteen (15)
days of its receipt by Customer.
To the extent Customer requires that Applications be underwritten at
sites which are not set forth in Exhibit "A", Customer hereby agrees
to reimburse CMAC-SC for all travel and lodging expenses incurred by
CMAC-SC employees relating to this Agreement. CMAC-SC shall provide
Customer with a detailed summary of such expenses and Customer shall
remit the amount due to CMAC-SC within fifteen (15) days of its
receipt thereof. CMAC-SC will not incur any costs for travel and
lodging without the Customer's prior approval.
In the event an Application is determined by CMAC-SC to be incomplete
and the missing or required documentation is not provided within the
time period set forth in Section 3(C) above, Customer shall be
obligated to pay CMAC-SC an Underwriting Review Fee, notwithstanding
the fact, that the review of such Application has not been completed.
If Customer subsequently completes the Application and requests a new
review of the Application in question, an additional Underwriting
Review Fee shall be required.
- ----------
*Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.
-5-
<PAGE> 6
7. REPRESENTATIONS, WARRANTIES OF CUSTOMER
---------------------------------------
Customer makes the following representations and warranties
to CMAC-SC:
(A) CMAC-SC shall be entitled to rely upon the information and
documents constituting the Application or Automated
Underwriting Application and shall incur no liability for the
accuracy thereof in fulfilling its obligations under this
Agreement. In addition, CMAC-SC shall not have any obligation
to independently verify any information provided to it, nor
shall the terms of this Agreement imply any duty upon CMAC-SC
to determine whether such information is false. CMAC-SC and
its officers, employees, and agents may rely upon any
information or document submitted by Customer to CMAC-SC in
connection with an Application or Automated Underwriting
Application, and shall not be responsible to Customer or any
other person for errors and omissions therein, so long as
such information or document appears to be: (a) regular on
its face; (b) properly executed; and (c) is either included
with an Application or Automated Underwriting Application or
is supplied to CMAC-SC by (i) Customer, (ii) Customer's
employees, (iii) persons or entities to whom CMAC-SC has been
referred to by Customer, or (iv) persons or entities
identified in any document supplied by Customer as part of an
Application or Automated Underwriting Application.
(B) Customer is a corporation duly organized, validly existing
and in good standing under the laws of the State of
California and has all the requisite power and authority to
carry on its business as currently conducted.
8. REPRESENTATIONS, WARRANTIES OF CMAC-SC
--------------------------------------
CMAC-SC makes the following representations and warranties to
Customer:
(A) CMAC-SC is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of
Pennsylvania and has all the requisite power and authority to
carry on its business as currently conducted.
(B) All Applications reviewed pursuant to this Agreement shall be
underwritten pursuant to the Underwriting Guidelines and/or
the Automated Underwriting Guidelines.
(C) CMAC-SC is an independent contractor. Nothing contained in
this Agreement shall be deemed to create a joint venture or
partnership relationship between CMAC-SC and Customer.
9. INDEMNIFICATION OF CMAC-SC
--------------------------
CMAC-SC shall have no duty hereunder to either: (i) ensure
that any Application complies with or (ii) review any Application for
compliance with any state, federal or local laws or regulations
relating to consumer credit protection, truth-in-lending or equal
credit opportunity, including but not limited to the Consumer Credit
Protection Act and Regulation Z promulgated thereunder, the Equal
Credit Opportunity Act and Regulation B promulgated thereunder, Title
VIII of the Fair Housing Act of 1968, the Real Estate Settlement
Procedures
-6-
<PAGE> 7
Act, the Fair Credit Reporting Act, and the Home Mortgage Disclosure
Act ("HMDA"). Customer shall comply, or instruct its designee that
submitted an Application to comply, with the Equal Credit Opportunity
Act notification requirements and all other requirements under state
or federal law for notification to applicants for Loans with respect
to each Application reviewed by CMAC-SC. CMAC-SC shall also have no
duty to provide any Loan borrower or other third party with any
disclosure required under any of the foregoing laws or regulations, it
being understood that Customer shall provide such disclosures or cause
its designee that submitted the Application to provide such
disclosures.
Customer acknowledges that CMAC-SC obtains any and all HMDA data from
Customer and/or Approved Correspondent Lender or Broker, and Customer
agrees that CMAC-SC shall have no liability for the accuracy or
completeness of such HMDA data.
Customer agrees to indemnify and hold CMAC-SC and its affiliates, and
each of their directors, officers, employees and agents
("Indemnitees"), harmless from all losses, damages, penalties, fines,
expenses (including attorneys' fees) and costs ("Losses"), incurred by
each Indemnitee resulting or arising, directly or indirectly, from:
(i) any failure by Customer to provide any disclosures set forth
above, and (ii) any claim, demand, suit or other proceeding brought by
a borrower with respect to the application by CMAC-SC of the
applicable Underwriting Guidelines to the Application, except for
Losses resulting or arising under Section 10 herein.
In the event that any claim, action or proceeding indemnified against
herein shall be brought or commenced against CMAC-SC, any affiliated
company or any officer, director, employee or agent thereof, then upon
written notice to Customer, Customer shall provide promptly for such
action or defense as may be necessary to effectuate the provisions
hereof. CMAC-SC hereby agrees to cooperate with Customer and counsel
designated by Customer, provided, however, that nothing contained
herein shall preclude CMAC-SC from taking such actions as may be
necessary or appropriate to mitigate and/or prevent any loss, damage,
cost or expense.
10. INDEMNIFICATION OF CUSTOMER
---------------------------
(A) Indemnification
---------------
(1) Subjective Interpretation. The parties recognize and
-------------------------
agree that the Underwriting Guidelines and their
application to any Loan entail a certain degree of
subjective interpretation and necessarily involve
subjective analysis of certain data where the
judgment of prudent underwriters could differ.
Accordingly, CMAC-SC does not guarantee or warrant
that any third party, including, but not limited to,
any reviewing authority or investor, will agree with
CMAC-SC that a Loan complies with the Underwriting
Guidelines.
(2) Standard of Care. Notwithstanding anything contained
----------------
in this Agreement to the contrary, CMAC-SC will not
be liable, in connection with this Agreement or the
-7-
<PAGE> 8
services rendered by CMAC-SC hereunder, to Customer
or any other person or entity, in contract, tort,
strict liability, equity or otherwise, for any act,
failure to act, error, mistake, or omission in
reviewing a Loan hereunder, unless all of the
following conditions are satisfied:
(a) such act, failure to act, error, mistake,
or omission materially restricts or impairs
the salability of such Loan or results in a
material reduction of the value of such
Loan; and
(b) such act, failure to act, error, mistake,
or omission constitutes gross negligence or
willful misconduct and results from CMAC-SC
failure to perform underwriting review
services for such Loan File in accordance
with the terms and conditions of this
Agreement; and
(c) Customer provides written notice of such
act, failure to act, error, mistake, or
omission to CMAC-SC within thirty (30) days
after Customer discovers, or should
reasonably have discovered, such act,
failure to act, error, mistake, or
omission, but in no event later than: three
(3) years after underwriting review
services for such Loan were performed by
CMAC-SC.
(3) Subrogation. In the event and to the extent that
-----------
CMAC-SC is liable to Customer under this Agreement,
Customer shall preserve and, absent CMAC-SC's prior,
express, written consent, shall not modify or
release, any and all rights which Customer may have
against any other person or entity which may be
liable to Customer in connection with any Loan for
which CMAC-SC is liable to Customer. CMAC-SC shall
be subrogated to Customer's rights against such
other person or entity and Customer shall assign to
CMAC-SC such rights.
(B) Limitation of Liability
-----------------------
It is hereby understood and agreed that in the event Customer
is entitled to indemnification pursuant to Section 10(A),
CMAC-SC shall, within thirty (30) days of receipt of a
written demand for indemnification from Customer, elect one
of the following options:
(1) Provide for such additional insurance or other
credit enhancement that will be satisfactory to
Customer, the cost of which is to be borne by
CMAC-SC; or
(2) Purchase the Loan in question, at a price equal to
the sum of:
(a) the unpaid principal balance at the time of
purchase; plus (in the case of original
purchase price premiums), or minus (in the
case of original purchase price discounts)
the original purchase price discount, or as
appropriate, premium percentage multiplied
by the unpaid principal balance at the time
of purchase; plus
-8-
<PAGE> 9
(b) accrued and unpaid interest amount through
the date the Loan is purchased.
(3) In the event that CMAC-SC elects to purchase the
Loan pursuant to Section 10 (B) (2) above, Customer
represents and warrants that the Loan is free of any
other defects and has been closed in conformity with
Customer's regular policies and procedures. Customer
warrants that the mortgage loan documents and the
transaction taken as a whole comply with all
applicable state and federal laws. Customer agrees
to provide CMAC-SC with a complete closed loan
package for its review prior to the purchase
hereunder and to cure any defect, whether or not
discovered at that time, for the life of the Loan.
(C) Exclusive Remedy
----------------
Any liability of CMAC-SC set forth in this section shall be
exclusive and in lieu of any other remedy or liability.
CMAC-SC shall not be liable for any special, indirect,
consequential, punitive or other damages which Customer or
any other entity suffers or incurs as a result of any act or
omission of CMAC-SC. Upon the purchase of a Loan or the
provision of additional insurance or other credit
enhancement, CMAC-SC shall have no further obligation or
liability to Customer in respect of the Loan in question.
11. ARM'S LENGTH TRANSACTION
------------------------
CMAC-SC and Customer agree that any payments made to CMAC-SC
are being made solely in respect of the underwriting review services
provided hereunder and in no way reflect or constitute payment to CMAC
for any underwriting performed by CMAC in connection with any private
mortgage guaranty or pool insurance.
12. TERMINATION
-----------
This Agreement may be terminated by either party as of the
end of any calendar month by giving the other party thirty (30) days
written notice.
The obligation of CMAC-SC to accept Applications to be
reviewed shall cease upon the effective date of the notice of
termination. However, any such notice of termination shall not have
the effect of terminating any other right or obligation of any party
to this Agreement, and this Agreement shall remain in full force and
effect, with respect to all Applications previously processed by
CMAC-SC, on behalf of Customer under and pursuant to this Agreement.
Provided, however, that the provisions of this Agreement shall
continue in full force and effect with respect to all Applications
registered as being en-route to CMAC-SC prior to the receipt of the
notice of termination. Any such list of registered Applications shall
be delivered to CMAC-SC with the notice of termination.
13. MISCELLANEOUS PROVISIONS
------------------------
(A) Assignment
----------
This Agreement may not be assigned by either party without
the prior written consent of the other party.
-9-
<PAGE> 10
(B) Attorney's Fees
---------------
In the event any action or proceeding at law or in equity is
brought to enforce or interpret the provisions of this
Agreement, the prevailing party shall be entitled to recover
its reasonable attorney's fees and costs including attorney's
fees and costs incurred in any appeal in addition to any
other remedy or relief to which such prevailing party may be
entitled.
(C) Amendment, Modification
-----------------------
This Agreement may not be modified, amended or superseded
except in writing signed by both parties.
(D) Notices
-------
Any notices required or permitted to be given under this
Agreement may be affected either by personal delivery in
writing or by certified mail, postage prepaid, addressed as
follows:
CMAC SERVICE COMPANY
1601 Market Street
Philadelphia, Pennsylvania 19103
Attention: C. Robert Quint (Financial Notices)
Attention: Timothy W. Hunter (Legal Notices)
E-Loan, Inc.
600 Village Parkway, Suite 102
Dublin, California 94568
Attention: Karen Bacchetti, Senior Underwriter
(E) Severability
------------
If any of the provisions of this Agreement are held by a
court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions hereof shall
nevertheless continue in full force and effect, without being
impaired or invalidated in any way.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the day and year first above written.
CMAC SERVICE COMPANY
By: /s/ Susan Kropp
-----------------------------------------
Susan Kropp, Vice President, National Underwriting Director
Attest: /s/ Signature Illegible
-------------------------------------
E-Loan, Inc.
By: /s/ Steven M. Majerus
-----------------------------------------
Steven M. Majerus Director Mortgage Banking Operations
Attest: /s/ Signature Illegible
-11-
<PAGE> 12
EXHIBIT "A" - CMAC-SC Locations
E-Loan, Inc. shall deliver Loan Packages to CMAC-SC at the following
addresses:
<TABLE>
<CAPTION>
CMAC SERVICE COMPANY
<S> <C>
4647 North 32nd Street 100 W. Big Beaver Road
Suite 245 Suite 160
Phoenix, Arizona 85018 Troy, Michigan 48084
2010 Main Street 2001 Killebrew Drive
Suite 215 Suite 157
Irvine, California 92614 Bloomington, Minnesota 55425
4275 Executive Square 13610 Barrett Office Drive
Suite 335 Suite 110
La Jolla, California 93037 Manchester, Missouri 63021
4000 Moorpark Avenue The Plazas, Suite D305
Suite 100 2340 Paseo Del Prado
San Jose, California 95117 Las Vegas, Nevada 89102
Orchard Place IV, Suite 130 425 Broadhollow Road
5990 Greenwood Plaza Blvd. Suite 400
Englewood, Colorado 80111 Melville, New York 11747
4901 NW 17th Way 6060 J.A. Jones Drive
Suite 506 Suite 310
Fort Lauderdale, Florida 33309 Charlotte, North Carolina 28287
Westshore Place II 130 East Wilson Bridge Road
4300 West Cypress, Suite 1075 Suite 205
Tampa, Florida 33607 Worthington, Ohio 43085
5775 Peachtree Dunwoody Road 3501 Northwest 63rd Street
Suite 460, Building C Suite 401
Atlanta, Georgia 30342 Oklahoma City, Oklahoma 73116
One Century Centre One Lincoln Center, Suite 420
1750 East Golf Road, Suite 290 10300 SW Greenburg Road
Schaumburg, Illinois 60173 Portland, Oregon 97223
10 Forbes Road (temporary - starting September 1998)
2nd Floor, East Building 400 Market Street, 2nd floor
Braintree, Massachusetts 02184 Philadelphia, Pennsylvania 19106
</TABLE>
(continued)
-12-
<PAGE> 13
EXHIBIT "A" - CMAC-SC Locations (continued)
13760 Noel Road
Suite 614
Dallas, Texas 75240-9990
Three Northborough
12707 North Freeway, Suite 390
Houston, Texas 77060
Centennial Plaza
45 West 10000 South, Suite 309
Sandy, Utah 84070
7600 West Leesburg Pike, Suite 250
Falls Church, Virginia 22043
Bellevue Corporate Plaza
600 108th Avenue, Suite 1020
Bellevue, Washington 98004
-13-
<PAGE> 14
EXHIBIT "B" - Customer's On-Site Location(s)
CMAC-SC's underwriter(s) shall perform the Underwriting Services at
the following location:
6200 Village Parkway, Suite 102
Dublin, California 94568
-14-
<PAGE> 15
EXHIBIT "C" - Automated Underwriting Fee Schedule
NOT APPLICABLE
-15-
<PAGE> 16
EXHIBIT "E" - Exclusions
Property and Loan types not eligible for underwriting services under this
Agreement
o Closed Loan Transactions
o Condomium-Hotel Properties
o Construction Loan Transactions (end loans acceptable)
o Cooperative Properties
o Federal Housing Administration (FHA) Loans
o Foreign National Borrowers
o Guam, Hawaii, Puerto Rico, Alaska, Virgin Islands
o Lot Loans
o Rural Housing Service (RHS) Loans [formerly FmHA]
o Single-wide Mobile Homes
o Subordinate Financing (home equity, junior liens, combination loans)
o Sub-prime Products
o Time Shares
o Veterans Administration (VA) Loans
CMAC-SC reserves the right to review all products and exclude those deemed not
eligible for underwriting services.
-17-
<PAGE> 17
EXHIBIT "F"
For special CMAC Mortgage Insurance Standards issued by CMAC's Credit Policy
Division, if applicable.
-18-
<PAGE> 1
EXHIBIT 10.15
$15,000,000
WAREHOUSE CREDIT AGREEMENT
among
E-LOAN, INC., as Borrower,
COOPER RIVER FUNDING INC., as Lender
and
GE CAPITAL MORTGAGE SERVICES, INC., as Agent
Dated as of June 24, 1998
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION 1
1.01 Defined Terms 1
1.02 Principles of Construction 14
SECTION 2. AMOUNT AND TERMS OF CREDIT 15
2.01 Commitment 15
2.02 Minimum Borrowing Amount 15
2.03 Pledge of Collateral 15
2.04 Request for Advance 16
2.05 Disbursement of Funds 16
2.06 Note 16
2.07 Interest 17
SECTION 3. FEES 17
3.01 Fees 17
SECTION 4. PREPAYMENTS; PAYMENTS 18
4.01 Voluntary Prepayments 18
4.02 Mandatory Prepayments 18
4.03 Release of Collateral; Substitution 20
4.04 Sale of Collateral to Investors 21
4.05 Method and Place of Payment 22
4.06 Net Payments 22
SECTION 5. CONDITIONS PRECEDENT 22
5.01 Execution of Agreement; Note 22
5.02 No Default; Representations and Warranties 22
5.03 Request for Advance 22
5.04 Opinion of Counsel 23
5.05 Diligence 23
5.06 Corporate Documents; Proceedings 23
5.07 Financial Statements 23
5.08 Mandatory Prepayment 23
5.09 Warehouse Security Agreement 24
5.10 No Adverse Change 24
5.11 Insurance 24
5.12 [Intentionally omitted] 24
5.13 Delivery of the Collateral 24
5.14 Fees 25
5.15 No Litigation 25
5.16 Liquidity Agreement 25
5.17 Acknowledgment 25
5.18 Legal or Regulatory Proceedings 25
5.19 Guaranty Agreement 25
5.20 Support Agreement 25
5.21 Intercreditor Agreement 25
5.22 Treatment of Existing Liens 26
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS 26
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
6.01 Corporate Status 26
6.02 Corporate Power and Authority 26
6.03 No Violation 26
6.04 Governmental Approvals 27
6.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; etc. 27
6.06 Litigation 27
6.07 True and Complete Disclosure 27
6.08 Use of Proceeds; Margin Regulations 28
6.09 Tax Returns and Payments 28
6.10 Compliance with ERISA 28
6.11 Capitalization 28
6.12 Subsidiaries 29
6.13 Compliance with Statutes, etc 29
6.14 Investment Company Act 29
6.15 No Burdensome Agreement 29
6.16 Security Interests 29
6.17 Registration 29
6.18 Representations Relating to the Mortgage Loans 30
6.19 Representations Relating to the Mortgage-backed Securities 31
6.20 Insurance 31
6.21 Title to Property 32
6.22 No Recourse Sales 32
6.23 Fictitious Names 32
SECTION 7. AFFIRMATIVE COVENANTS 32
7.01 Information Covenants 32
7.02 Books, Records and Inspections 35
7.03 Maintenance of Property, Insurance 35
7.04 Corporate Franchises 36
7.05 Compliance with Statutes, etc. 36
7.06 ERISA 36
7.07 Performance of Obligations 37
7.08 Mortgage Loans 37
7.09 Payment of Taxes 37
7.10 Corporate Separateness 38
7.11 Collateral 38
7.12 Portfolio Hedging Arrangements 38
7.13 Borrowing Base Valuation Reports 38
SECTION 8. NEGATIVE COVENANTS 39
8.01 Liens 39
8.02 Consolidation, Merger, Sale of Assets, etc. 39
8.03 Dividends 39
8.04 [Intentionally omitted] 40
8.05 Advances, Investments and Loans 40
8.06 Transactions with Affiliates 40
8.07 Capital Expenditures 41
8.08 Maximum Adjusted Leverage Ratio 41
8.09 Minimum Adjusted Tangible Net Worth 41
8.10 [Intentionally omitted] 41
8.11 Modifications of Certificate of Incorporation, By-Laws,
Certain Other Agreements and Collateral 41
8.12 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions 41
8.13 Limitation on Issuances of Capital Stock by Subsidiaries 41
8.14 Business 42
8.15 Portfolio Aging 42
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
8.16 Minimum Current Ratio 42
SECTION 9. EVENTS OF DEFAULT 42
9.01 Payments 42
9.02 Representations, etc. 42
9.03 Covenants 42
9.04 Default Under Other Agreements 42
9.05 Default Under Agreements With Agent 43
9.06 Bankruptcy, etc. 43
9.07 ERISA 43
9.08 Warehouse Security Agreement 43
9.09 [Intentionally omitted] 43
9.10 Management 43
9.11 Judgments 44
9.12 Material Adverse Change 44
9.13 Default Not a Condition of a 120-Day Demand 44
SECTION 10. THE AGENT 44
10.01 Authorization and Action 44
10.02 Agent's Duties 45
10.03 GE Capital Mortgage Services, Inc. and Affiliates 45
10.04 Successor Agent 45
SECTION 11. MISCELLANEOUS 46
11.01 Payment of Expenses; Indemnity 46
11.02 Notices 51
11.03 Benefit of Agreement 51
11.04 Remedies Cumulative 51
11.05 Calculations; Computations 51
11.06 Governing Law; Submission to Jurisdiction; Venue 51
11.07 No Proceedings 52
11.08 Counterparts 52
11.09 Effectiveness 52
11.10 Headings Descriptive 52
11.11 Amendment or Waiver 52
11.12 Survival 52
11.13 Waiver of Jury Trial 53
SCHEDULES
SCHEDULE 6.11 CAPITALIZATION
SCHEDULE 6.12 LIST OF SUBSIDIARIES
SCHEDULE 7.01(p) CREDIT PACKAGE DOCUMENTS (LIST OF DOCUMENTS TO BE
DELIVERED WITH RESPECT TO A PLEDGED MORTGAGE)
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
EXHIBIT A-1 - FORM OF PLEDGE OF COLLATERAL
EXHIBIT A-2 - FORM OF REQUEST FOR ADVANCE BY CHECK
EXHIBIT A-3 - FORM OF REQUEST FOR ADVANCE BY WIRE
EXHIBIT B-1 - FORM OF WET ADVANCE DISBURSEMENT INSTRUCTION
EXHIBIT B-2 - FORM OF BORROWER'S WET ADVANCE DISBURSEMENT INSTRUCTION
EXHIBIT C - INTENTIONALLY OMITTED
EXHIBIT D - FORM OF NOTE
EXHIBIT E - FORM OF OPINION OF SPECIAL COUNSEL FOR THE BORROWER
EXHIBIT F-1 - FORM OF OFFICERS' CERTIFICATE FOR BORROWER
EXHIBIT F-2 - FORM OF OWNERS' AND OFFICERS' CERTIFICATION
EXHIBIT G - CREDIT SCORES
EXHIBIT H - FORM OF ACKNOWLEDGEMENT OF COLLATERAL AGENT'S RIGHTS
EXHIBIT I - FORM OF WAREHOUSE SECURITY AGREEMENT
EXHIBIT J - FORM OF GUARANTY AGREEMENT
EXHIBIT K - FORM OF SUPPORT AGREEMENT
EXHIBIT L - FORM OF INTERCREDITOR AGREEMENT
</TABLE>
iv
<PAGE> 6
WAREHOUSE CREDIT AGREEMENT (as modified, supplemented or amended from
time to time, this "Agreement"), dated as of June 24, 1998, among E-LOAN, INC.,
a California corporation (the "Borrower"), COOPER RIVER FUNDING INC., a Delaware
corporation (the "Lender"), and GE CAPITAL MORTGAGE SERVICES, INC., a New Jersey
corporation (the "Agent").
WITNESSETH:
----------
WHEREAS, subject to and upon the terms and conditions herein set forth,
the Lender is willing to make available to the Borrower the credit facilities
provided for herein;
NOW, THEREFORE, IT IS AGREED:
Section 1. Definitions and Principles of Construction.
------------------------------------------
1.01 Defined Terms. As used in this 'Agreement, the following terms
-------------
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Adjusted Leverage Ratio" shall mean, as to any Person, the ratio of
-----------------------
the Consolidated Liabilities of such Person to the Adjusted Tangible Net Worth
of such Person.
"Adjusted Tangible Net Worth" shall mean, as to any Person, (x) the
----------------------------
sum of, without duplication, the Consolidated Net Worth of such Person and its
Subsidiaries, plus an amount equal to 0% of the aggregate principal amount of
the Servicing Portfolio of such Person, plus the principal amount of any
Indebtedness that is subordinated to the payment of the Obligations on such
terms as are acceptable to the Agent and that does not permit or require any
principal payment in respect thereof prior to the Expiry Date in effect from
time to time, less (y) the sum of (i) the amount of all intangible items,
including, without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, brand names, write-ups of
assets and purchased, capitalized or excess servicing, (ii) all receivables from
any officer, director or Affiliate of the Borrower, (iii) all unpaid stock
subscriptions, (iv) the Contingent Obligations of such Person as determined by
the Agent and (v) any other assets determined by the Agent in its reasonable
discretion.
"Advance" shall have the meaning provided in Section 2.01.
-------
"Advance Account" shall mean the depositary account of the Borrower
---------------
designated by the Borrower by written notice to the Agent and the Lender.
"Affiliate" shall mean, as to any Person, any other Person (other
---------
than an individual) directly or indirectly controlling, controlled by, or under
direct or indirect common control with, such
<PAGE> 7
Person; provided, however, that for purposes of Section 8.06, an Affiliate of
-------- -------
the Borrower shall include any Person that directly or indirectly owns more than
5% of the Borrower and any officer or director of the Borrower or any such
Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such other Person, whether through the ownership
of voting securities, by contract or otherwise.
"Bankruptcy Code" shall mean Title 11 of the United States Code
---------------
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto.
"Borrower's Wet Advance Disbursement Instruction" shall have the
-----------------------------------------------
meaning provided in Section 2.05.
"Borrowing Base" shall mean, as of any date, an amount that is the sum
--------------
of the following, with respect to all Eligible Mortgage Loans, Eligible
Nonconforming Mortgage Loans and Liquid Assets pledged to the Security Agent as
of such date: (1) the sum for all Conforming Loans that are Committed Mortgage
Loans and are the subject of an Interest Rate Commitment of the product of (x)
the Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y)
100% of the Market Value of such Mortgage Loan, (2) the sum for all other
Conforming Loans that are Committed Mortgage Loans of the product of (x) the
Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y) 99% of
the Market Value of such Mortgage Loan, (3) the sum for all Jumbo Loans (each of
which shall be a Committed Mortgage Loan) which are the subject of an Interest
Rate Commitment of the product of (x) the Mortgage Loan Aging Percentage with
respect to such Mortgage Loan and (y) 100% of the Market Value of such Mortgage
Loan, (4) the sum for all other Jumbo Loans (each of which shall be a Committed
Mortgage Loan) of the product of (x) the Mortgage Loan Aging Percentage with
respect to such Mortgage Loan and (y) 99% of the Market Value of such Mortgage
Loan, (5) the sum for all Mortgage Loans that are FHA Loans, VA Loans or State
Loans of the product of (x) the Mortgage Loan Aging Percentage with respect to
such Mortgage Loan and (y) 99% of the Market Value of such Mortgage Loan, (6) 0%
of the Market Value of each Mortgage-backed Security, (7) an amount equal to the
aggregate principal amount of the Liquid Assets, (8) the sum for all Credit A-
Loans of the product of (x) the Nonconforming Mortgage Loan Aging Percentage
with respect to such Mortgage Loan and (y) 99% of the Market Value of such
Mortgage Loan, (9) the sum for all Credit B Loans of the product of (x) the
Nonconforming Mortgage Loan Aging Percentage with respect to such Mortgage Loan
and (y) 99% of the Market Value of such Mortgage Loan, (10) the sum for all
Credit C Loans of the product of (x) the Nonconforming Mortgage Loan Aging
Percentage with respect to such Mortgage Loan and (y) 98% of the Market Value of
such Mortgage Loan and (11) the sum for all Credit D Loans of the product of (x)
the Nonconforming Mortgage Loan Aging Percentage with respect to such Mortgage
Loan and (y) 0% of the Market Value of such Mortgage Loan.
"Borrowing Base Valuation Report" shall have the meaning provided in
-------------------------------
Section 7.13.
"Business Day" shall mean any day except Saturday, Sunday and any
------------
day which shall be in New York, New York, a legal holiday or a day on which
banking institutions are authorized or required by law or other government
action to close.
2
<PAGE> 8
"Cash Equivalents" means (i) securities with maturities of sixty days
----------------
or less from the date of acquisition issued or fully guaranteed or insured by
the United States Government or any agency thereof, (ii) certificates of
deposit, eurodollar time deposits, overnight bank deposits, bankers' acceptances
and repurchase agreements of any commercial bank whose short-term obligations
are rated "A-1" by S&P and, if rated by Moody's, "P-1" by Moody's and, if rated
by Fitch, "F-1" by Fitch, having maturities of sixty days or less from the date
of acquisition, (iii) commercial paper having maturities of sixty days or less
from the date of acquisition, rated at least "A-1" by S&P or "P-1" by Moody's
and, if rated by Fitch, "F-1" by Fitch, (iv) money market funds rated at least
"AAAm" or "AAA-G" by S&P or "P-1" by Moody's and, if rated by Fitch, "AAA" by
Fitch, and (v) repurchase agreements with counterparties whose short-term
obligations are rated at least "A-1" by S&P or "P-1" by Moody's and, if rated by
Fitch, "F-1" with a term of sixty days or less.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
"Collateral" shall mean all "Collateral" as defined in the Warehouse
----------
Security Agreement.
"Collateral Agent" shall mean General Electric Capital Corporation in
----------------
its capacity as collateral agent pursuant to the Cooper River Security
Agreement.
"Collateral Documents" shall mean, as to a Mortgage Loan which has
--------------------
been or is to be pledged to the Security Agent as Collateral, the following
documents and instruments:
(i) The original Mortgage Note executed with respect to such
Mortgage Loan by a third party in favor of the Borrower (or
properly endorsed to the Borrower if purchased or acquired by
the Borrower) and endorsed in blank by the Borrower;
(ii) The original recorded Mortgage securing such Mortgage Note or
a copy of the original Mortgage securing such Mortgage Note,
certified by the Borrower or a title company or escrow company
reasonably satisfactory to the Security Agent to be a true
copy of the original instrument submitted for recording;
(iii) If the Mortgage Note was purchased by the Borrower, an
original properly recorded assignment of the related Mortgage
to the Borrower or a copy of such assignment certified by the
Borrower or a title or escrow company reasonably satisfactory
to the Security Agent to be a true copy of the original
instrument submitted for recording and a certified copy of
each intervening assignment of such Mortgage, if any;
(iv) An assignment of the Mortgage by the Borrower to the Security
Agent fully completed and in recordable form. If appropriate
filing and recording information regarding the Mortgage has
not been inserted into the assignment, the Borrower hereby
authorizes the Security Agent to insert such information, when
available. Such assignment shall not be filed for recordation
unless the Security Agent shall in good faith deem such action
necessary to further secure any Advances, in which
3
<PAGE> 9
case the Security Agent may file of record any or all such
assignments. The Borrower shall immediately reimburse the
Security Agent for any and all costs and expenses incurred by
the Security Agent in connection with such recordation;
(v) A closing protection letter executed by an authorized
representative of a title insurance company or escrow company
reasonably satisfactory to the Agent stating that the closing
agent with respect to such Mortgage Loan is an authorized
agent of such title insurance company or escrow company; and
(vi) Such other documents as the Security Agent may reasonably
require from time to time, including, without limitation, a
copy of any Purchase Commitment or Master Commitment relating
to the Mortgage Loan.
"Collateral Value" shall mean, at any time, with respect to a Mortgage
---------------
Loan or a Mortgage-backed Security, the amount resulting from that part of the
calculation of the Borrowing Base at such time that relates to such Mortgage
Loan or Mortgage-backed Security.
"Combined Loan-to-Value Ratio" shall mean, as to any Mortgage Loan,
----------------------------
the ratio expressed as a percentage that the sum of the original principal
balance of such Mortgage Loan and the then current principal balance of any
related first priority mortgage bears to the appraised value of the related
mortgaged property at the time such Mortgage Loan was originated.
"Commercial Paper" shall mean the short-term promissory notes of the
----------------
Lender.
"Commercial Paper Rate" shall mean with respect to any calendar month,
---------------------
a rate per annum determined by annualizing the aggregate interest expense of
Lender (determined on an accrual basis) for such calendar month in respect of
(i) Commercial Paper outstanding during such calendar month and (ii) any
borrowings made by Lender under the Liquidity Agreement.
"Commitment" shall mean the obligation of the Lender to make Advances
----------
in an aggregate principal amount outstanding at any time not to exceed
$15,000,000.
"Committed Mortgage Loans" shall mean all Mortgage Loans pledged to
------------------------
the Security Agent pursuant to the terms of this Agreement and of the Warehouse
Security Agreement (i) which satisfy all of the requirements of any Purchase
Commitment or are covered by a Hedging Contract, (ii) which could be delivered
under any such Purchase Commitment, and (iii) which, in respect of all Mortgage
Loans of a particular type and yield, do not in the aggregate have a principal
amount in excess of the sum of (A) the aggregate then remaining amount of all
Purchase Commitments the requirements of which are satisfied by Mortgage Loans
of such type and yield owned by the Borrower plus (B) the aggregate amount of
all Hedging Contracts that cover Mortgage Loans of such type and yield owned by
the Borrower.
"Conforming Loan" shall mean a Mortgage Loan (other than a VA Loan,
---------------
an FHA Loan or a State Loan) that is underwritten in conformity with FHLMC or
FNMA underwriting standards and is otherwise eligible for purchase by FNMA or
FHLMC.
4
<PAGE> 10
"Consolidated Liabilities" shall mean, as to any Person, the
------------------------
liabilities of such Person and its Subsidiaries determined on a consolidated
basis and in accordance with generally accepted accounting principles in the
United States, applied on a consistent basis, and shall include in any event the
Contingent Obligations of such Person and its Subsidiaries.
"Consolidated Net Worth" shall mean, as to any Person, the Net Worth
----------------------
of such Person and its Subsidiaries determined on a consolidated basis and in
accordance with generally accepted accounting principles in the United States,
applied on a consistent basis.
"Consolidated Subsidiaries" shall mean, as to any Person, all
-------------------------
Subsidiaries of such Person which are or are required to be consolidated with
such Person for financial reporting purposes in accordance with generally
accepted accounting principles in the United States.
"Contingent Obligation" shall mean, as to any Person, any obligation
---------------------
of such Person arising from an existing condition or situation that involves
uncertainty as to outcome and that will be resolved by the occurrence or
nonoccurrence of some future event, including but not limited to any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly; provided,
--------
however, that the term Contingent Obligation shall not include endorsements of
- -------
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by the Agent.
"Cooper River Security Agreement" shall mean the Assignment and
-------------------------------
Security Agreement dated as of March 1, 1993 among the Lender, the Collateral
Agent and the cash collateral bank named therein (as such agreement may be
amended, supplemented or modified from time to time).
"Credit A-Loan" shall mean a Mortgage Loan (other than a Mortgage
-------------
Loan that satisfies all the requirements of an Eligible Mortgage Loan) the
obligor of which has a Credit Score as described on Exhibit G hereto.
"Credit B Loan" shall mean a Mortgage Loan (other than a Mortgage
-------------
Loan that satisfies all the requirements of an Eligible Mortgage Loan) the
obligor of which has a Credit Score as described on Exhibit G hereto.
"Credit C Loan" shall mean a Mortgage Loan (other than a Mortgage
-------------
Loan that satisfies all the requirements of an Eligible Mortgage Loan) the
obligor of which has a Credit Score as described on Exhibit G hereto.
5
<PAGE> 11
"Credit D Loan" shall mean a Mortgage Loan (other than a Mortgage
-------------
Loan that satisfies all the requirements of an Eligible Mortgage Loan) the
obligor of which has a Credit Score as described on Exhibit G hereto.
"Credit Documents" shall mean this Agreement, the Note and the
----------------
Warehouse Security Agreement.
"Credit Package Documents" shall have the meaning provided in Section
------------------------
7.01(p).
"Credit Score" shall mean the numeric consumer credit score developed
------------
by Fair Isaac & Co., Inc. and referred to as a "FICO Score".
"Current Ratio" shall mean, as to any Person, the ratio of current
-------------
assets to current liabilities, as determined in accordance with generally
accepted accounting principles in the United States, applied on a consistent
basis.
"Custodian" shall mean, with respect to any Investor, any financial
---------
institution selected by such Investor to act as a custodian for Mortgage Loans
acquired or to be acquired by such Investor; provided that such financial
institution has been approved by the Security Agent and meets all applicable
requirements of such Investor to act as such custodian.
"Default" shall mean any event, act or condition which with notice
-------
or lapse of time, or both, would constitute an Event of Default.
"Depositary" shall mean Bankers Trust Company, a New York banking
----------
corporation, in its capacity as issuing and paying agent for the Commercial
Paper under the Depositary Agreement.
"Depositary Agreement" shall mean the Depositary Agreement entered
--------------------
into by the Lender, the Depositary, and the agent under the Liquidity Agreement,
as such agreement may be supplemented or modified from time to time.
"Effective Date" shall have the meaning provided in Section 11.09.
--------------
"Eligible Mortgage Loan" shall mean at the time of the determination
----------------------
thereof (a) a Mortgage Loan, which at such time (i) is pledged as Collateral
pursuant to the terms of this Agreement and of the Warehouse Security Agreement
and is not pledged as security for any Indebtedness owing to, or otherwise
subject to a Lien for the benefit of, any person other than the Lender, (ii) is
a First Mortgage Loan, (iii) is, without duplication, a Conforming Loan, a Jumbo
Loan, an FHA Loan, a VA Loan or a State Loan, (iv) is subject to a Purchase
Commitment or covered by a Hedging Contract or is a Mortgage Loan that bears
interest at an adjustable rate and is covered by a Master Commitment, (v) in the
case of a Mortgage Loan that is not subject to a Wet Advance, has an Origination
Date that is less than 180 calendar days prior to such time, (vi) in the case of
a Mortgage Loan that is subject to a Wet Advance, has an Origination Date that
is not more than five Business Days prior to such time and (vii) has a Combined
Loan-to-Value Ratio of 100% or less, excluding in all such cases, however, any
Mortgage Loan about which any of the
6
<PAGE> 12
representations, warranties and agreements contained in Section 6.18 is not true
and correct; provided that, in the case of a Mortgage Loan (other than a State
--------
Loan), the interest rate on such Mortgage Loan was, as of the date on which
such interest rate was set or established, at least equal to the then current
market rate of interest for mortgage loans of the same type as determined by the
Agent; or (b) a Mortgage-backed Security which at such time (i) is subject to a
Purchase Commitment, (ii) is pledged as Collateral pursuant to the terms of this
Agreement and of the Warehouse Security Agreement and (iii) was issued by FNMA,
FHLMC or GNMA not more than 60 calendar days prior to such time.
"Eligible Nonconforming Mortgage Loan" shall mean at the time of the
------------------------------------
determination thereof, a Mortgage Loan, which at such time (i) is pledged as
Collateral pursuant to the terms of this Agreement and of the Warehouse Security
Agreement and is not pledged as security for any Indebtedness owing to, or
otherwise subject to a Lien for the benefit of, any person other than the
Lender, (ii) is, without duplication, a First Mortgage Loan or a Second Mortgage
Loan, (iii) is subject to a Purchase Commitment, (iv) has and has had no
delinquency with respect to any payment due thereunder, (v) has no deficiencies
in respect of the documentation therefor, (vi) is, without duplication, a Credit
A- Loan, a Credit B Loan, a Credit C Loan or a Credit D Loan, (vii) in the case
of a Mortgage Loan that is not subject to a Wet Advance, has an Origination Date
that is less than 20 calendar days prior to such time, (viii) in the case of a
Mortgage Loan that is subject to a Wet Advance, has an Origination Date that is
not more than five Business Days prior to such time and (ix) has a Combined
Loan-to-Value Ratio of 100% or less, excluding in all such cases, however any
Mortgage Loan about which any of the representations, warranties and agreements
contained in Section 6.18 is not true and correct; provided that the interest
---------
rate on such Mortgage Loan was, as of the date on which such interest rate was
set or established, at least equal to the then current market rate of interest
for mortgage loans of the same type as determined by the Agent.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" shall mean any person (as defined in Section 3(9)
---------------
of ERISA) which together with the Borrower or any of its Subsidiaries would be a
member of the same "controlled group" within the meaning of Section 414(b), (m),
(c) and (o) of the Code.
"Event of Default" shall have the meaning provided in Section 9.
----------------
"Existing Indebtedness" shall have the meaning provided in Section
---------------------
8.04(ii).
"Expiry Date" shall mean the earlier of (i) June 30, 1999 as such
-----------
date may be extended upon mutual agreement among the Borrower, the Lender and
the Agent from time to time, (ii) the date which is fifteen days prior to the
Liquidity Termination Date in effect from time to time and (iii) the date that
is 120 days after the date on which the Lender shall have given the Borrower the
notice referred to in Section 9.13 hereof.
7
<PAGE> 13
"Facility Documents" shall mean the Credit Documents, the Collateral
------------------
Documents, the Liquidity Agreement, the Depositary Agreement, the Reimbursement
Agreement, the Cooper River Security Agreement, any letters of credit issued
pursuant to the terms of the Reimbursement Agreement, the Commercial Paper and
any agreements entered into by the Lender with placement agent(s) or dealer(s)
for the placement or sale of Commercial Paper.
"Fees" shall mean all fees and expenses required to be paid by the
----
Borrower pursuant to Section 3.01.
"FHA" shall mean the Federal Housing Administration or any successor
---
thereto.
"FHA Loan" shall mean a Mortgage Loan which (i) is eligible for
--------
insurance by FHA and (ii) is so insured or is subject to a current binding and
enforceable commitment for such insurance pursuant to the provisions of the
National Housing Act, as now in effect and as may be hereafter amended from time
to time, and is otherwise eligible for inclusion in a GNMA Mortgage-backed
Security pool.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation or
-----
any successor thereto.
"First Mortgage Loan" shall mean a Mortgage Loan that is underwritten
-------------------
in conformity with underwriting standards approved by the applicable Investor
and is secured by a first priority Mortgage.
"Fitch" shall mean Fitch Investors Service, L.P.
-----
"FNMA" shall mean the Federal National Mortgage Association or any
----
successor thereto.
"GNMA" shall mean the Governmental National Mortgage Association or
----
any successor thereto.
"Guaranty Agreement" shall have the meaning provided in Section 5.19.
------------------
"Hedging Contract" shall mean a written contractual arrangement
----------------
designed to provide protection against fluctuations in interest rates with
respect to Mortgage Loans and commitments made to prospective Mortgage Loan
obligors to extend Mortgage Loans at specified rates of interest, in each case
in accordance with guidelines acceptable to the Agent.
"HUD" shall mean the Department of Housing and Urban Development or
---
any successor thereto.
"Indebtedness" shall mean, as to any Person, without duplication,
------------
(i) all indebtedness (including principal; interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the face amount of all letters of credit issued for the account
of such Person and all drafts drawn thereunder, (iii) all liabilities secured by
any Lien
8
<PAGE> 14
on any property owned by such Person, whether or not such liabilities have been
assumed by such Person, (iv) the aggregate amount required in accordance with
generally accepted accounting principles to be capitalized under leases under
which such Person is the lessee and (v) all Contingent Obligations of such
Person.
"Initial Borrowing Date" shall mean the date on which the initial
----------------------
incurrence of Advances occurs.
"Insolvency Event" shall mean, with respect to any Person, the
----------------
occurrence of any of the following events: (i) such Person shall become
insolvent or generally fail to pay, or admit in writing its inability to pay,
its debts as they become due, or shall voluntarily commence any proceeding or
file any petition under any bankruptcy, insolvency or similar law or seeking
dissolution, liquidation or reorganization or the appointment of a receiver,
trustee, custodian, conservator or liquidator for itself or a substantial
portion of its property, assets or business or to effect a plan or other
arrangement with its creditors, or shall file any answer admitting the
jurisdiction of the court and the material allegations of an involuntary
petition filed against it in any bankruptcy, insolvency or similar proceeding,
or shall be adjudicated bankrupt, or shall make a general assignment for the
benefit of creditors, or such Person, or a substantial part of its property,
assets or business, shall be subject to, consent to or acquiesce in the
appointment of a receiver, trustee, custodian, conservator or liquidator for
itself or a substantial portion of its property, assets or business; (ii)
corporate action shall be taken by such Person for the purpose of effectuating
any of the foregoing; (iii) an order for relief shall be entered in a case under
the Bankruptcy Code in which such Person is a debtor; or (iv) involuntary
proceedings or an involuntary petition shall be commenced or filed against such
Person under any bankruptcy, insolvency or similar law or seeking the
dissolution, liquidation or reorganization of such Person or the appointment of
a receiver, trustee, custodian, conservator or liquidator for such Person or of
a substantial part of the property, assets or business of such Person, or any
writ, order, judgment, warrant of attachment, execution or similar process shall
be issued or levied against a substantial part of the property, assets or
business of such Person, and such proceeding or petition shall not be dismissed,
or such execution or similar process shall not be released, vacated or fully
bonded, within sixty (60) days after commencement, filing or levy, as the case
may be.
"Interest Rate Commitment" shall mean a commitment whereby the
------------------------
Borrower agrees to deliver a Mortgage Loan to GE Capital Mortgage Services,
Inc., as investor, according to the terms of a Purchase Commitment and GE
Capital Mortgage Services, Inc. agrees to a specified interest rate and purchase
price for a designated length of time.
"Investor" shall mean FHLMC, FNMA, GNMA or any financial institution,
--------
broker, dealer, institutional investor or state agency or instrumentality
approved by the Agent.
"Jumbo Loan" shall mean a Mortgage Loan (other than an FHA Loan, a
----------
VA Loan, or a State Loan) that is underwritten in accordance with standards
approved by the Agent that are generally comparable to the standards established
by FNMA or FHLMC in all respects other than the original principal amount of the
Mortgage Loan and that were established by an Investor (other than FHLMC, FNMA
or GNMA).
9
<PAGE> 15
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
----
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Liquid Assets" shall mean (i) certificates of deposit of any
-------------
commercial bank whose short-term obligations are rated "A-1+" by S&P and, if
rated by Moody's, "P-1" by Moody's and, if rated by Fitch, "F-1+" by Fitch
having maturities of 60 days or less from the date of acquisition and (ii)
securities issued or fully guaranteed or insured by the United States
Government or any agency thereof having maturities of 60 days or less from the
date of acquisition.
"Liquidity Agreement" shall mean the Liquidity Agreement dated as of
-------------------
March 1, 1993 among the Lender, the liquidity lenders party thereto and General
Electric Capital Corporation, as liquidity agent, as the same may be amended or
modified from time to time.
"Liquidity Lenders" shall mean the banks and financial institutions
-----------------
that are parties to the Liquidity Agreement from time to time.
"Liquidity Termination Date" shall mean the earlier of (i) March 31,
--------------------------
1999, as such date may be extended in accordance with the terms of the Liquidity
Agreement and (ii) the date on which the commitment of the Liquidity Lenders
under the Liquidity Agreement is terminated following the occurrence of an event
of default thereunder.
"LOC Providers" shall mean those banks and financial institutions
-------------
that are parties to the Reimbursement Agreement.
"Margin Stock" shall have the meaning provided in Regulation U of the
------------
Board of Governors of the Federal Reserve System.
"Market Value" shall mean as of any date at which the amount thereof
------------
is to be determined, (i) as to any Mortgage-backed Security, the purchase price
therefor (exclusive of any accrued interest included in such purchase price)
under the Purchase Commitment with respect thereto; and (ii) as to any Mortgage
Loan an amount equal to the lower of (A) an amount equal to (1) with respect to
a Mortgage Loan that was funded directly by the Borrower to the obligor
thereunder, the outstanding principal amount of such Mortgage Loan or (2) with
respect to a Mortgage Loan that was purchased by the Borrower, the lesser of (x)
the purchase price paid by the Borrower therefor (exclusive of any accrued
interest or servicing release premium included in such purchase price) and (y)
the outstanding principal amount of such Mortgage Loan, as applicable, (B) the
amount determined by the Agent, in its reasonable discretion, as the price
(exclusive of any accrued interest that would be included in such price) at
which such Mortgage Loan could on the date of such determination be sold in the
secondary market to a bona fide investor in an arm's-length transaction and (C)
the price at which an Investor has committed to purchase such Mortgage Loan.
- --- -----
10
<PAGE> 16
"Master Commitment" shall mean a written master commitment or any
-----------------
other written commitment, on general terms and conditions approved by the Agent,
from an Investor to purchase from the Borrower from time to time up to a
specified dollar amount of Mortgage Loans without specification of the yield or
purchase price of each such Mortgage Loan.
"Moody's" shall mean Moody's Investors Service, Inc.
-------
"Mortgage" shall mean a first or second mortgage, first or second
--------
deed of trust, first or second deed to secure debt or other first or second
security device which is customary and serves the same function as a mortgage
under the law and practice in the jurisdiction in which the premises subject to
the mortgage are located. For all Mortgage Loans secured by premises located in
states in which it is customary to use deeds of trust or security deeds as the
security device, a deed of trust or security deed, as the case may be, shall be
used as the security device. Mortgages shall, unless the Agent shall otherwise
approve, be on forms acceptable to FNMA, GNMA or FHLMC.
"Mortgage-backed Securities" shall mean securities that are (A)(i)
--------------------------
issued in accordance with guidelines established by GNMA, FNMA or FHLMC, (ii)
guaranteed as to payment by GNMA, FNMA or FHLMC in accordance with the
guidelines established by such entities and (iii) secured by a pool of Mortgage
Loans originally included as Eligible Mortgage Loans hereunder, or which would
have otherwise satisfied the requirements for Eligible Mortgage Loans if such
Mortgage Loans had been pledged to the Security Agent pursuant to the terms of
this Agreement and of the Warehouse Security Agreement, (B) subject to a
Purchase Commitment and (C) issued in book-entry form.
"Mortgage Bankers' Reporting Forms" shall have the meaning provided
---------------------------------
in Section 7.01(o).
"Mortgage Loan" shall mean a loan evidenced by a Mortgage Note and
-------------
secured by a Mortgage encumbering a completed one to four family residential
property (including, without limitation, condominium units and excluding
cooperative ownership interests).
"Mortgage Loan Aging Percentage" shall mean, as of any date, with
------------------------------
respect to any Eligible Mortgage Loan, (i) 100% if such Mortgage Loan has an
Origination Date that is less than 90 days prior to such date, (ii) 75% if such
Mortgage Loan has an Origination Date that is less than 120 days and more than
89 days prior to such date, (iii) 50% if such Mortgage Loan has an Origination
Date that is less than 150 days and more than 119 days prior to such date, (iv)
25% if such Mortgage Loan has an Origination Date that is less than 180 days and
more than 149 days prior to such date and (v) 0% if such Mortgage Loan has an
Origination Date that is 180 or more days prior to such date.
"Mortgage Note" shall mean a promissory note executed by a competent
-------------
party which is secured by a Mortgage.
11
<PAGE> 17
"Net Worth" shall mean, as to any Person, the sum of (i) its capital
---------
stock, capital in excess of par or stated value of shares of its capital stock,
retained earnings and any other account which, in accordance with generally
accepted accounting principles in the United States, constitutes stockholder
equity less (ii) any treasury stock, any unpaid stock subscriptions and any
subordinated or other loans from stockholders, in each case to the extent
included in clause (i).
"Nonconforming Commitment" shall have the meaning provided in Section
------------------------
2.01.
"Nonconforming Mortgage Loan Aging Percentage" shall mean, as of any
--------------------------------------------
date, with respect to any Eligible Nonconforming Mortgage Loan, (i) 100% if such
Mortgage Loan has an Origination Date that is less than 60 days prior to such
date, (ii) 50% if such Mortgage Loan has an Origination Date that is less than
90 days and more than 59 days prior to such date and (iii) 0% if such Mortgage
Loan has an Origination Date that is 90 days or more prior to such date.
"Note" shall have the meaning provided in Section 2.06.
----
"Obligations" shall mean all amounts owing to the Lender or the Agent
-----------
pursuant to the terms of this Agreement and any other Credit Document.
"Office" shall mean the office of the Agent located at Three Executive
------
Campus, Cherry Hill, New Jersey 08002 or such other address as the Agent may
specify from time to time in a written notice to the Borrower and the Lender.
"Origination Date" shall mean, with respect to any Mortgage Loan, the
----------------
date such Mortgage Loan was funded to the obligor thereon.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Section 4002 of ERISA or any successor thereto.
"Person" shall mean any individual, partnership, joint venture, firm,
------
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer plan or single-employer plan as
----
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of), or at any time during the
five calendar years preceding the date of this Agreement was maintained or
contributed to by (or to which there is an obligation to contribute of), the
Borrower or by a Subsidiary of the Borrower or an ERISA Affiliate.
"Purchase Commitment" shall mean a current binding and enforceable
-------------------
written commitment (or contract for purchase) from an Investor to purchase from
the Borrower Mortgage Loans or Mortgage-backed Securities of a particular type
and yield owned by the Borrower at a committed price, which commitment shall at
all times be subject to approval by the Agent as to terms and conditions.
12
<PAGE> 18
"Rating Agency" shall mean each credit rating agency that the Lender
-------------
shall have requested to provide a credit rating with respect to the Commercial
Paper and which is then providing such a credit rating.
"Reimbursement Agreement" shall mean the Letter of Credit and
-----------------------
Reimbursement Agreement dated as of March 1, 1993 among the Lender, the banks
and financial institutions party thereto and General Electric Capital
Corporation, as letter of credit agent, as such agreement may be amended,
supplemented or modified from time to time.
"Reportable Event" shall mean an event described in Section 4043(b)
----------------
of ERISA with respect to a Plan as to which the 30-day notice requirement has
not been waived by the PBGC.
"Request for Advance" shall have the meaning provided in Section 2.04.
-------------------
"S&P" shall mean Standard & Poor's Corporation.
---
"Second Mortgage Loan" shall mean a Mortgage Loan that is underwritten
--------------------
in conformity with underwriting standards approved by the applicable Investor
and is secured by a second priority Mortgage.
"Security Agent" shall mean GE Capital Mortgage Services, Inc. in its
--------------
capacity as security agent for the Lender pursuant to the Warehouse Security
Agreement.
"Servicing Portfolio" shall mean, as to any Person, all Mortgage Loans
-------------------
the servicing or subservicing rights for which are owned by such Person and with
respect to which such Person functions as the servicing institution.
"State Loan" shall mean a Mortgage Loan that is (i) underwritten in
----------
conformity with underwriting standards that are established by a state agency or
instrumentality and approved by the Agent and (ii) subject to a Purchase
Committment from such state agency or instrumentality.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
----------
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has (A) more than a 50% equity interest at the time or (B) an
interest satisfying the provisions of clause (i) hereof in any general partner
of any limited partnership or joint venture.
"Support Agreement" shall have the meaning provided in Section 5.20.
-----------------
"Taxes" shall have the meaning provided in Section 11.01(e).
-----
13
<PAGE> 19
"UCC" shall mean the Uniform Commercial Code as from time to time in
---
effect in New Jersey or any other relevant jurisdiction, as applicable.
"Unfunded Current Liability" of any Plan means the amount, if any, by
--------------------------
which the present value of the accrued benefits under the Plan as of the close
of its most recent plan year, determined in accordance with Statement of
Financial Accounting Standards No. 35, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan, exceeds
the fair market value of the assets allocable thereto, determined in accordance
with Section 412 of the Code.
"VA" shall mean the Veterans Administration or any successor thereto.
--
"VA Loan" shall mean a Mortgage Loan which is eligible for guarantee
-------
by VA and is either so guaranteed or is subject to a current binding and
enforceable commitment for such guarantee pursuant to the provisions of the
Servicemen's Readjustment Act, as now in effect and as may be hereafter amended
from time to time, and is otherwise eligible for inclusion in a GNMA
Mortgage-backed Security pool.
"Warehouse Payment Account" shall mean the segregated direct deposit
-------------------------
account number 00-377-975 maintained by the Collateral Agent with respect to
this Agreement at Bankers Trust Company in accordance with the terms of the
Cooper River Security Agreement.
"Warehouse Security Agreement" shall have the meaning provided in
----------------------------
Section 5.09.
"Wet Advance" shall mean an Advance made by the Lender against the
-----------
pledge of Eligible Mortgage Loans or Eligible Nonconforming Mortgage Loans with
respect to which the Borrower has delivered to the Agent a Request for Advance
in accordance with Section 2.04 in lieu of the delivery of the Mortgage Note
related thereto: provided, however, that from and after the date on which the
-------- -------
Mortgage Note with respect to any such Mortgage Loan is received by the Security
Agent, such Advance shall cease to be a Wet Advance.
"Wet Advance Disbursement Instruction" shall have the meaning provided
------------------------------------
in Section 2.05.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
-----------------------
corporation 100% of whose capital stock is at the time owned by such Person
and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any
partnership, association, joint venture or other entity in which such Person
and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity
interest at such time.
1.02 Principles of Construction. (a) All references to sections,
--------------------------
schedules and exhibits are to sections, schedules and exhibits in or to this
Agreement unless otherwise specified. The words "hereof," "herein," "hereto" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement.
14
<PAGE> 20
(b) All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles in
conformity with those used in the preparation of the financial statements
referred to in Section 6.05(a).
Section 2. Amount and Terms of Credit.
--------------------------
2.01 Commitment. Subject to and upon the terms and conditions set
----------
forth herein, the Lender agrees, at any time and from time to time prior to the
Expiry Date (or such earlier date as the Commitment shall have been terminated
pursuant to the terms hereof), to make an advance or advances (each an "Advance"
and, collectively, the "Advances") to the Borrower, which Advance: (i) shall be
made at any time and from time to time in accordance with the terms hereof on
and after the Effective Date and prior to the Expiry Date; (ii) shall bear
interest as provided in Section 2.07; (iii) may be prepaid and reborrowed in
accordance with the provisions hereof; and (iv) shall be made against the pledge
by the Borrower of Eligible Mortgage Loans, Eligible Nonconforming Mortgage
Loans or Liquid Assets as Collateral for such Advance as provided herein and in
the Warehouse Security Agreement; provided, however, that (1) the aggregate
-------- -------
principal amount of Advances outstanding at any time shall not exceed the lesser
of (x) the Commitment and (y) the Borrowing Base, at such time, (2) the
aggregate principal amount of Advances outstanding at any time secured by
Mortgage-backed Securities shall not exceed 0% of the Commitment, (3) the
aggregate principal amount of Wet Advances outstanding at any time shall not
exceed 30% of the Commitment, (4) the aggregate principal amount of Advances
outstanding at any time secured by Jumbo Loans shall not exceed 75% of the
Commitment, (5) the aggregate principal amount of Advances outstanding at any
time secured by Eligible Nonconforming Mortgage Loans shall not exceed
$1,500,000 (the "Nonconforming Commitment"), (6) the aggregate principal amount
of Advances outstanding at any time secured by Credit A- Loans shall not exceed
100% of the Nonconforming Commitment, (7) the aggregate principal amount of
Advances outstanding at any time secured by Credit B Loans shall not exceed 100%
of the Nonconforming Commitment, (8) the aggregate principal amount of Advances
outstanding at any time secured by Credit C Loans shall not exceed 50% of the
Nonconforming Commitment and (9) the aggregate principal amount of Advances
outstanding at any time secured by Credit D Loans shall not exceed 0% of the
Nonconforming Commitment.
2.02 Minimum Borrowing Amount. The principal amount of each
------------------------
Advance shall not be less than $500.
2.03 Pledge of Collateral. Whenever the Borrower desires to
--------------------
pledge a Mortgage Loan or Mortgage-Backed Security to the Security Agent, it
shall deliver to the Agent at its office a pledge of Collateral substantially in
the form of Exhibit A-1 (the "Pledge of Collateral"). Each Pledge of Collateral:
(i) shall be appropriately completed by an authorized employee of the Borrower
to describe the Collateral to be pledged; and (ii) shall have attached thereto
each of the Collateral Documents required in the Pledge of Collateral,
including, without limitation, in the case of a Mortgage Loan with respect to
which a Wet Advance is being requested in accordance with Section 2.04, an
assignment by the Borrower to the Security Agent of the related Mortgage fully
completed and in recordable form.
15
<PAGE> 21
2.04 Request for Advance. Whenever the Borrower desires to incur
-------------------
an Advance hereunder, it shall deliver to the Agent at its Office a request
for Advance substantially in the form of Exhibit A-2 or Exhibit A-3, as
applicable (the "Request for Advance") not later than the close of business on
the Business Day prior to the proposed date of such Advance; provided, however,
--------- -------
that before submitting a request for an Advance to be secured by a Mortgage
Loan with an outstanding principal amount in excess of $650,000, the Borrower
shall have obtained the prior approval of the Agent. Each Request for Advance:
(i) shall be appropriately completed by an authorized employee of the Borrower
to specify the aggregate principal amount of the Advance or Wet Advance to be
made and the proposed date of such Advance (which shall be a Business Day); and
(ii) shall, in the case of a Wet Advance, include instructions with respect to
the disbursement of such Wet Advance.
2.05 Disbursement of Funds. (a) No later than 3:00 P.M. (New York
---------------------
City time) on the date specified in the Request for Advance with respect to any
Advance other than a Wet Advance, the Lender shall make available to the
Borrower the amount of such Advance requested to be made on such date by wire
transfer of funds to the Borrower's Advance Account.
(b) No later than 3:00 P.M. (New York City time) on the date specified
in the Request for Advance with respect to any Wet Advance, the Agent shall
disburse the amount of such Wet Advance directly to the appropriate title
company, escrow agent or closing agent, by cashier's check or wire transfer in
accordance with the instructions set forth in the related Request for Advance,
the Agent's customary practice and the requirements of applicable law.
(c) In the event that a Wet Advance is disbursed by a cashier's check
sent by the Agent or the Agent's bank to the appropriate title company, escrow
agent or closing agent, the Agent shall disburse the amount of such Wet Advance
under cover of an instruction letter substantially in the form of Exhibit B-1 (a
"Wet Advance Disbursement Instruction"). In the event that a Wet Advance is to
be disbursed by wire transfer or by a cashier's check printed at the Borrower's
office and sent by the Borrower to the appropriate title company, escrow agent
or closing agent, the Borrower shall deliver to the appropriate title company,
escrow agent or closing agent an instruction letter substantially in the form of
Exhibit B-2 (a "Borrower's Wet Advance Disbursement Instruction"). Upon the
request of the Agent, the Borrower shall deliver to the Agent a copy of any
Borrower's Wet Advance Disbursement Instruction delivered by the Borrower.
2.06 Note. The Borrower's obligation to pay the principal of, and
----
interest on, all Advances made to it by the Lender shall be evidenced by a
promissory note substantially in the form of Exhibit D (the "Note"). The Note
shall (i) be executed by the Borrower, (ii) be payable to the order of the
Lender and be dated on or prior to the Initial Borrowing Date, (iii) be in a
stated principal amount equal to the Commitment and be payable in the aggregate
principal amount of the Advances evidenced thereby, (iv) mature, with respect to
each Advance evidenced thereby, on the Expiry Date, (v) bear interest as
provided in Section 2.07, (vi) be subject to mandatory prepayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents. The Lender will note on its internal records the amount
of each Advance made by it and each payment in respect thereof and will prior to
any transfer of the Note endorse on the
16
<PAGE> 22
reverse side thereof the outstanding principal amount of Advances evidenced
thereby. Failure to make any such notation shall not affect the Borrower's
obligations in respect of such Advances.
2.07 Interest. (a) The Borrower agrees to pay interest in respect
--------
of the outstanding principal amount of the Advances from the date the proceeds
thereof are made available to the Borrower until the maturity thereof (whether
by acceleration or otherwise) (i) with respect to Advances secured by Eligible
Mortgage Loans, at a rate per annum equal to 2.00% in excess of the Commercial
Paper Rate in effect from time to time and (ii) with respect to Advances secured
by Eligible Nonconforming Mortgage Loans, at a rate per annum equal to 2.25% in
excess of the Commercial Paper Rate in effect from time to time; provided,
--------
however, that with respect to any Advance which is disbursed by cashier's check,
- -------
which Advance has been outstanding for less than sixteen days (16), the
applicable rate of interest, calculated in accordance with the provisions of
this Section 2.07(a), shall be reduced by .50%.
(b) Overdue principal and, to the extent permitted by law, overdue
interest, and any other overdue amount payable by the Borrower hereunder, shall
bear interest at a rate per annum equal to 4% per annum in excess of the rate
specified in clause (a) above in effect from time to time; provided, however,
-------- -------
that no Advance shall bear interest at a rate in excess of the maximum rate
permitted by applicable law.
(c) Accrued (and theretofore unpaid) interest shall be payable in
respect of the Advances (i) monthly in arrears on the fifth Business Day of each
calendar month with respect to interest accrued during the preceding calendar
month, (ii) on any prepayment which reduces the outstanding Advances to zero,
(iii) at maturity (whether by acceleration, demand or otherwise) and (iv) after
such maturity, on demand. The Agent shall provide the Borrower with a notice
setting forth the interest accrued with respect to each calendar month not later
than the third Business Day following the end of such calendar month.
Section 3. Fees.
----
3.01 Fees. (a) The Borrower shall pay the Agent an administration
----
fee (the "Administration Fee") with respect to each calendar month during the
term of this Agreement in an amount equal to the sum of $20.00 for each Mortgage
Loan pledged as Collateral for the first time during such calendar month. In
addition, the Borrower shall pay all administrative costs of the Lender or the
Agent in connection with the making of an Advance and the handling of
Collateral, including, but not limited to, the costs of overnight and express
delivery, cashier's checks and wire transfers. The Administration Fee and
administrative costs with respect to each calendar month. will be due and
payable on the fifth Business Day following the end of such calendar month.
(b) The Agent shall provide the Borrower with a notice setting forth
the Administration Fee accrued and the administrative costs with respect to each
calendar month not later than the third Business Day following the end of such
calendar month.
17
<PAGE> 23
Section 4. Prepayments; Payments.
---------------------
4.01 Voluntary Prepayments. The Borrower shall have the right to
---------------------
prepay the Advances, without premium or penalty, in whole or in part from time
to time on the following terms and conditions: (i) the Borrower shall give the
Agent at its Office notice of its intent to prepay not later than 2:00 p.m. (New
York City time) at least one Business Day prior to the date of such prepayment;
provided, however, that with respect to any prepayment of an amount in excess
- --------- -------
of 30% of the Advances then outstanding, the Borrower shall give the Agent
notice of its intent to prepay at least 5 Business Days prior to the date of
such prepayment, and (ii) the amount of such prepayment shall be at least
$10,000.
4.02 Mandatory Prepayments. Except as set forth in Section
---------------------
4.03(b), a prepayment of Advances shall be required, without notice or demand
of any kind to the Borrower, as follows:
(a) if on any date the aggregate principal amount of Advances
outstanding (after giving effect to all other repayments thereof on
such date) exceeds the lesser of (x) the Commitment or (y) the
Borrowing Base, as then in effect, the Borrower shall immediately
prepay the principal of Advances in an aggregate amount equal to such
excess;
(b) if on any date the aggregate principal amount outstanding
of Advances secured by Mortgage-backed Securities exceeds 0% of the
Commitment, the Borrower shall immediately prepay the principal of
Advances secured by Mortgage-backed Securities in an aggregate amount
equal to such excess;
(c) if on any date the aggregate principal amount outstanding
of Wet Advances exceeds 30% of the Commitment, the Borrower shall
immediately prepay the principal of Wet Advances in an aggregate amount
equal to such excess;
(d) if on any date the aggregate principal amount outstanding
of Advances secured by Jumbo Loans exceeds 75% of the Commitment, the
Borrower shall immediately prepay the principal of Advances secured by
Jumbo Loans in an aggregate amount equal to such excess;
(e) if (i) 60 calendar days shall have elapsed from the date
of first issuance of a Mortgage-backed Security in respect of which an
Advance has been made hereunder, and (ii) such Mortgage-backed Security
has not been sold by the Borrower and paid for by an Investor and (iii)
the Advances secured by such Mortgage-backed Security have not been
prepaid pursuant to any other clause of this Section 4.02, the Borrower
shall immediately prepay the principal of Advances in an aggregate
amount equal to the Collateral Value of such Mortgage-backed Security;
(f) if the Agent shall have notified the Borrower or the
Borrower otherwise becomes aware that any Mortgage Loan or
Mortgage-backed Security originally included as an Eligible Mortgage
Loan or an Eligible Nonconforming Mortgage Loan no longer constitutes
an Eligible Mortgage Loan or an Eligible Nonconforming Mortgage Loan
pursuant to the terms and standards set forth herein and in the
Warehouse Security
18
<PAGE> 24
Agreement, the Borrower shall immediately prepay the principal of Advances in an
aggregate amount equal to the Collateral Value of such Mortgage Loan or
Mortgage-backed Security;
(g) if a Mortgage Loan or a Mortgage-backed Security in respect of
which an Advance has been made hereunder is sold, the Borrower shall on the date
of settlement for such sale prepay the principal of Advances in an aggregate
amount equal to the Collateral Value of such Mortgage Loan or Mortgage-backed
Security;
(h) if 21 calendar days shall have elapsed from the date a Mortgage
Loan is sent from the Security Agent to an Investor or the Custodian for an
Investor as provided in Section 4.04 and in the Warehouse Security Agreement and
such Mortgage Loan has neither been redelivered to the Security Agent nor
purchased pursuant to the letter of transmittal delivered therewith, the form of
which shall be that customarily used by the Security Agent or, if appropriate,
the form required by FNMA or FHLMC, the Borrower shall immediately prepay the
principal of Advances in an aggregate amount equal to the Collateral Value of
such Mortgage Loan;
(i) if 14 calendar days shall have elapsed from the date on which the
Borrower is requested by the Security Agent to obtain a substantially corrected
or completed copy of any material document in connection with any Mortgage Loan
or Mortgage-backed Security and the same shall not have been delivered to the
Security Agent with the appropriate completion or correction, the Borrower shall
immediately prepay the principal of Advances in an aggregate amount equal to the
Collateral Value of such Mortgage Loan or Mortgage-backed Security;
(j) if (1) there shall be a default in the payment of principal or
interest by the obligor under (x) an Eligible Mortgage Loan in respect of which
an Advance has been made hereunder and such default shall be continuing for 60
days or more or (y) a Mortgage-backed Security in respect of which an Advance
has been made hereunder and such default shall be continuing for 3 Business Days
or more or (z) an Eligible Nonconforming Mortgage Loan in respect of which an
Advance has been made hereunder and such default shall be continuing for 60 days
or more, (2) an Insolvency Event shall occur in respect of an obligor on any
Mortgage Loan in respect of which an Advance has been made hereunder or (3)
foreclosure or similar proceedings shall be commenced in respect of the premises
which secure any Mortgage Loan in respect of which an Advance has been made
hereunder, the Borrower shall immediately prepay the principal of Advances in an
aggregate amount equal to the Collateral Value of such Mortgage Loan or
Mortgage-backed Security;
(k) if the Mortgage Loan to be funded with the proceeds of any Wet
Advance is not funded on the date of such Wet Advance, the Borrower shall
immediately prepay the full principal amount of such Wet Advance;
(l) if the Mortgage Note in respect of any Mortgage Loan securing a Wet
Advance is not delivered to the Lender within five Business Days following the
date on
19
<PAGE> 25
which such Wet Advance was made, the Borrower shall immediately prepay
the full principal amount of such Wet Advance;
(m) if on any date the aggregate principal amount of Advances
outstanding at any time secured by Eligible Nonconforming Mortgage
Loans exceeds the Nonconforming Commitment then in effect, the Borrower
shall immediately prepay the principal of Advances in an aggregate
amount equal to such excess;
(n) if on any date the aggregate principal amount of Advances
secured by Credit A- Loans exceeds 100% of the Nonconforming
Commitment, the Borrower shall immediately prepay the principal of
Advances secured by Credit A- Loans in an aggregate amount equal to
such excess;
(o) if on any date the aggregate principal amount of Advances
secured by Credit B Loans exceeds 100% of the Nonconforming Commitment,
the Borrower shall immediately prepay the principal of Advances secured
by Credit B Loans in an aggregate amount equal to such excess;
(p) if on any date the aggregate principal amount of Advances
secured by Credit C Loans exceeds 50% of the Nonconforming Commitment,
the Borrower shall immediately prepay the principal of Advances secured
by Credit C Loans in an aggregate amount equal to such excess; and
(q) if on any date the aggregate principal amount of Advances
secured by Credit D Loans exceeds 0% of the Nonconforming Commitment,
the Borrower shall immediately prepay the principal of Advances secured
by Credit D Loans in an aggregate amount equal to such excess.
4.03 Release of Collateral; Substitution. (a) So long as no
-----------------------------------
Default or Event of Default has occurred and is continuing or would result
therefrom, upon the Borrower's request therefor accompanied by a prepayment by
the Borrower of Advances in an amount sufficient to cause the amount of Advances
outstanding to be less than or equal to the Borrowing Base (calculated without
reference to any Collateral which the Borrower requests be released from the
Lien granted pursuant to the Warehouse Security Agreement) and a deposit by the
Borrower of such amount as the Agent shall reasonably designate as a reserve for
application to any fees, accrued interest or breakage costs payable with respect
to the calendar month in which such prepayment occurs, the Security Agent shall,
within one Business Day after the later of the receipt of such request or such
prepayment and deposit, release from the Lien granted pursuant to the Warehouse
Security Agreement and deliver to the Borrower in accordance with the terms of
the Warehouse Security Agreement (i) the Collateral corresponding to such
Mortgage Loan(s) or Mortgage-backed Security(ies) and (ii) the Collateral
Documents pertaining thereto.
(b) So long as no Default or Event of Default has occurred and is
continuing in lieu of any required pre-payment of principal pursuant to Section
4.02, the Borrower may, subject to the terms and conditions hereof and the prior
consent of the Agent, substitute and pledge additional Eligible Mortgage Loans
and/or Eligible Nonconforming Mortgage Loans (together with all
20
<PAGE> 26
required Collateral Documents with respect thereto) having an aggregate
Collateral Value in an amount such that immediately after giving effect to such
substitution or addition, such prepayment is no longer required.
4.04 Sale of Collateral to Investors. (a) The Security Agent
-------------------------------
shall arrange, in accordance with the provisions of the Warehouse Security
Agreement, for the delivery of Mortgage Loans pledged to the Security Agent to
an Investor (or such Investor's Custodian) pursuant to a Purchase Commitment for
examination and purchase thereof by such Investor; provided, however, that prior
-------- -------
thereto the Security Agent shall have received from the Borrower one Business
Day's prior written notice describing the Mortgage Loan(s) to be delivered and
the shipping or wiring instructions therefor, such notice executed by an
authorized employee of the Borrower and identifying the Investor and the price
which such Investor has agreed to pay for such Collateral and/or the
Mortgage-backed Security that is to be issued against the delivery and release
of such Collateral.
(b) The Security Agent shall release Collateral consisting of
Mortgage-backed Securities to the Investor under the related Purchase Commitment
on the settlement date specified in such Purchase Commitment by book-entry
transfer of such Mortgage-backed Securities to the account of such Investor
against the wire transfer to the account of the Security Agent of the full
purchase price specified in such Purchase Commitment; provided
--------
that (i) the Security Agent shall have received from the Investor or the
Borrower appropriate instructions with respect to such delivery, transfer and
payment and (ii) the Borrower shall have made all deposits (if any) required in
connection therewith pursuant to Section 4.04(c) below.
(c) The Borrower shall make a deposit in immediately available funds
into the Warehouse Payment Account by 4:00 p.m. on the Business Day on which the
release of the Security Agent's security interest in such Mortgage Loan or
Mortgage-backed Securities is scheduled to occur pursuant to the purchase by an
Investor under a Purchase Commitment, in an amount equal to the amount by which
the aggregate amount of Advances outstanding exceeds the Borrowing Base
(calculated without reference to any such Mortgage Loan or Mortgage-backed
Security).
(d) Each delivery of Collateral pursuant to this Section 4.04 shall be
accompanied by a bailee letter in accordance with the requirements of the
Warehouse Security Agreement. All payments in respect of such Collateral so
purchased shall not be deemed received by the Security Agent until such funds
constitute "immediately available" funds in the Warehouse Payment Account or
such Mortgage-backed Securities have been credited to the account of the
Security Agent. For purposes hereof, confirmation of receipt of wired funds
shall constitute "immediately available" funds.
(e) In the event that the Borrower has entered into an agreement which
provides for the sale by the Borrower to an Investor of the rights to service
any Mortgage Loan (which sale is separate from the sale of such Mortgage Loan)
pledged to the Security Agent pursuant to the terms of this Agreement and the
Warehouse Security Agreement, the Borrower shall provide such Investor with
written notice (in a form satisfactory to the Agent) that the payment for such
servicing rights shall be made directly to the Agent for the account of the
Lender.
21
<PAGE> 27
(f) The Borrower shall deliver to the Agent, on or prior to 10:30 a.m.
on the Business Day following receipt by the Security Agent of payment from an
Investor for Mortgage Loans (or the right to service Mortgage Loans) or
Mortgage-backed Securities purchased, notice designating the Mortgage Loans or
Mortgage-backed Securities to which such payment applies. An amount equal to the
funds transferred to the Security Agent in respect of Mortgage Loans (or the
right to service Mortgage Loans) or Mortgage-backed Securities purchased by an
Investor (whether such funds were transferred by the Borrower pursuant to
Section 4.04(c) or by the Investor pursuant to Sections 4.04(b), 4.04(d) or
4.04(e)) shall be applied by the Security Agent as a prepayment of Advances.
4.05 Method and Place of Payment. Except as otherwise specifically
---------------------------
provided herein, all payments under this Agreement and the Note shall be made to
the Agent for the account of the Lender not later than 2:00 p.m. (New York City
time) on the date when due and shall be made in immediately available funds for
deposit to the Warehouse Payment Account. Any payment received after 2:00 p.m.
(New York City time) on any Business Day shall be treated as being received on
the next succeeding Business Day. Whenever any payment to be made hereunder or
under the Note shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest, fees and penalties shall be
payable at the rate otherwise applicable. The Borrower hereby authorizes the
Lender, with prior notice to the Borrower by the Lender, to deduct from each
Advance to be made hereunder, all amounts due and owing to the Lender or Agent
including interest, penalties, fees or mandatory prepayments.
4.06 Net Payments. All payments made by or on behalf of the
------------
Borrower hereunder will be made without setoff, counter-claim or other defense.
Section 5. Conditions Precedent.
--------------------
The obligation of the Lender to make each Advance to the Borrower
hereunder is subject, at the time of the making of each such Advance (except as
hereinafter indicated), to the satisfaction of the following conditions:
5.01 Execution of Agreement; Note. On or prior to the Initial
----------------------------
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Lender the Note executed by the Borrower in the
amount, maturity and as otherwise provided herein.
5.02 No Default; Representations and Warranties. At the time of
------------------------------------------
the making of each Advance and also after giving effect thereto (i) there shall
exist no Default or Event of Default, and (ii) all representations and
warranties contained herein and in the other Credit Documents shall be true and
correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Advance.
5.03 Request for Advance. Prior to the making of each Advance,
-------------------
the Agent shall have received a Request for Advance with respect thereto meeting
the requirements of Section 2.04.
22
<PAGE> 28
5.04 Opinion of Counsel. On the Initial Borrowing Date, the Lender
------------------
shall have received from outside counsel for the Borrower (who shall be
reasonably satisfactory to the Lender) an opinion addressed to the Lender and
dated the Initial Borrowing Date covering the matters set forth in Exhibit E and
such other matters incident to the transactions contemplated herein as the
Lender may reasonably request.
5.05 Diligence. On or prior to the Effective Date, the Agent shall
---------
have satisfactorily completed its due diligence review of the Borrower's
operations, business, financial condition and underwriting and origination of
Mortgage Loans.
5.06 Corporate Documents: Proceedings. (a) On the Initial
--------------------------------
Borrowing Date, the Lender shall have received a certificate, dated the Initial
Borrowing Date, signed by the President or any Vice President of the Borrower,
and attested to by the Secretary or any Assistant Secretary of the Borrower,
substantially in the form of Exhibit F-1 and with appropriate insertions,
together with copies of the Certificate of Incorporation and By-Laws of the
Borrower, the resolutions of the Borrower referred to in such certificate and a
good-standing certificate from the Secretary of State of the jurisdiction of
incorporation of the Borrower.
(b) All corporate and legal proceedings and all instruments and
agreements in connection with the transactions contemplated in this Agreement
and the other Credit Documents shall be reasonably satisfactory in form and
substance to the Lender, and the Lender shall have received all information and
copies of all documents and papers, including records of corporate proceedings
and governmental approvals, if any, which the Lender reasonably may have
requested in connection therewith, such documents and papers where appropriate
to be certified by proper corporate or governmental authorities.
5.07 Financial Statements. On or prior to the Initial Borrowing
--------------------
Date, the Lender shall have received (i) the consolidated and consolidating
balance sheets of the Borrower and its Consolidated Subsidiaries for the fiscal
year most recently ended and the related statements of income and retained
earnings and statements of cash flows of the Borrower and its Consolidated
Subsidiaries for such fiscal year, in each case certified by an independent
certified public accountant reasonably acceptable to the Lender and prepared in
accordance with generally accepted accounting principles in the United States
consistently applied, together with any "management letters" detailing any
"material weaknesses in internal controls" (as defined by the Financial
Accounting Standards Board) noted by such accountants for such period and (ii)
copies of any uniform single audit reports in respect of the Borrower required
or requested by FNMA or FHLMC, any audits or financial reports in respect of the
Borrower completed or requested by HUD, GNMA, FNMA, FHLMC or any other
governmental agency or Investor and any Mortgage Bankers' Reporting Forms
prepared by the Borrower, in each case during the year preceding the date
hereof.
5.08 Mandatory Prepayment. After giving effect to the proposed
--------------------
Advance, no prepayment would be required pursuant to Section 4.02.
23
<PAGE> 29
5.09 Warehouse Security Agreement. The Borrower shall have duly
----------------------------
authorized, executed and delivered a Warehouse Security Agreement substantially
in the form of Exhibit I (as modified, supplemented or amended from time to
time, the "Warehouse Security Agreement") covering all of the Borrower's present
and future Collateral, together with:
(a) acknowledgment copies of proper financing statements (Form UCC-1)
duly filed under the UCC of each jurisdiction as may be necessary or,
in the opinion of the Security Agent, desirable to perfect the security
interests purported to be created by the Warehouse Security Agreement;
(b) certified copies of "Requests for Information or Copies" (Form
UCC-11), or equivalent reports, listing the financing statements
referred to in clause (a) above and all other effective financing
statements that name the Borrower as debtor and that are filed in the
jurisdictions referred to in said clause (a), together with copies of
such other financing statements (none of which shall cover the
Collateral, except to the extent evidencing Liens permitted pursuant to
Section 8.01); and
(c) evidence of the completion of all other recordings and filings of,
or with respect to, the Warehouse Security Agreement and the taking of
all other actions as may be necessary or, in the opinion of the
Security Agent, desirable to perfect the security interests purported
to be created by the Warehouse Security Agreement.
5.10 No Adverse Change. Since April 30, 1998, there shall have
-----------------
been no material adverse change in the operations, business, property, assets or
financial condition or prospects of the Borrower.
5.11 Insurance. On or prior to the Initial Borrowing Date, the
---------
Lender shall have received from the Borrower, a copy of a fidelity bond and
policy of insurance containing errors and omissions coverage and such other
insurance as the Lender shall require, each of which policies, where applicable,
shall be in such form, with such companies and in such amounts as are in
accordance with the Agent's requirements and shall name the Lender and the Agent
as loss payees and certificate holders.
5.12 [Intentionally omitted]
5.13 Delivery of the Collateral. Prior to the making of an
--------------------------
Advance, the Security Agent shall have received (a) if such Advance is to be
made inrespect of Mortgage Loans and is not to be a Wet Advance, the Collateral
Documents relating to the Mortgage Loans pledged to secure such Advance; (b) if
such Advance is to be a Wet Advance, a duly executed assignment by the Borrower
to the Security Agent of the related Mortgage fully completed and in recordable
form, a copy of the Purchase Commitment or the Master Commitment, if applicable,
and satisfactory confirmation that the Collateral Documents relating thereto are
to be delivered to an escrow agent, closing agent or title company acceptable to
the Lender with instructions that such Collateral Documents are to be delivered
directly to the Security Agent; or (c) if such Advance is to be made in respect
of Mortgage-backed Securities, copies of the applicable mortgage schedules and
FNMA,
24
<PAGE> 30
FHLMC or GNMA delivery schedules, the confirmed trade ticket and satisfactory
confirmation of the Security Agent's interest in such Mortgage-backed
Securities.
5.14 Fees. Prior to the making of an Advance, the Borrower shall
----
have paid all Fees then due and payable to the Lender and the Agent.
5.15 No Litigation. There shall be no judgment, order, injunction
-------------
or other restraint which shall prohibit or impose, and no litigation pending or
threatened against or affecting the Borrower or any of its Subsidiaries which,
in the opinion of the Lender or the Agent, would prohibit or result in the
imposition of materially adverse conditions upon, the financing contemplated
hereby, or otherwise have a material adverse effect on the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Borrower or any of its Subsidiaries.
5.16 Liquidity Agreement. The Liquidity Agreement shall be in full
-------------------
force and effect and the Lender shall have obtained sufficient funds to permit
it to make such Advance through the issuance of Commercial Paper as provided in
the Liquidity Agreement or through the borrowing of such funds from the
Liquidity Lenders.
5.17 Acknowledgment. On or prior to the Initial Borrowing Date,
--------------
the Borrower shall have executed and delivered to the Agent an Acknowledgment of
Collateral Agent's Rights substantially in the form of Exhibit H pursuant to
which the Borrower shall have acknowledged that all of the right, title and
interest of the Lender in and to this Agreement, the Note and the Collateral has
been pledged and assigned to, and will be enforceable by, General Electric
Capital Corporation, as Collateral Agent for the secured parties under the
Cooper River Security Agreement.
5.18 Legal or Regulatory Proceedings. On or prior to the Initial
-------------------------------
Borrowing Date, the Borrower shall have delivered to the Agent certificates of
the principal shareholders and senior officers of the Borrower, in substantially
the form of Exhibit F-2, with respect to certain legal and regulatory
proceedings relating to such persons.
5.19 Guaranty Agreement. On or prior to the Initial Borrowing
------------------
Date, the Lender shall have received from Christian A. Larsen and Janina D.
Pawlowski (each a "Guarantor" and collectively the "Guarantors") a duly
executed Guaranty and Surety Agreement substantially in the form of Exhibit J
hereto (as modified, supplemented or amended from time to time, the "Guaranty
Agreement").
5.20 Support Agreement. On or prior to the Initial Borrowing Date,
-----------------
the Lender shall have received from Christian A. Larsen and Janina D. Pawlowski
a duly executed Support Agreement substantially in the form of Exhibit K hereto
(as modified, supplemented or amended from time to time, the "Support
Agreement").
5.21 Intercreditor Agreement. Within sixty (60) days after the
-----------------------
Borrower shall have entered into any agreement with a lender pursuant to which
such lender agrees to make available to the Borrower a revolving warehouse line
of credit, the Borrower shall deliver to the Agent an
25
<PAGE> 31
Intercreditor Agreement substantially in the form of Exhibit L hereto, duly
executed by such lender and by the Borrower (as modified, supplemented or
amended from time to time, the "Intercreditor Agreement").
5.22 Treatment of Existing Liens. Within ten (10) days after the
---------------------------
Initial Borrowing Date, the Borrower shall have delivered to the Agent for
filing a proper amendment to financing statement (Form UCC-2) duly executed by
Silicon Valley Bank, evidencing the amendment of the original financing
statement filed by such lender to make clear that the collateral covered by such
financing statement does not include any of the Collateral.
The acceptance of the benefits of each Advance shall constitute a
representation and warranty by the Borrower to the Lender that all the
conditions specified in Sections 5.02, 5.08, 5.10 and 5.15 exist as of that
time. All of the Note, certificates and other documents and papers referred to
in this Section 5, unless otherwise specified, shall be delivered to the Agent
at the Office for the account of the Lender and shall be reasonably satisfactory
in form and substance to the Agent.
Section 6. Representations. Warranties and Agreements.
------------------------------------------
In order to induce the Lender to enter into this Agreement and to make
the Advances, the Borrower makes the following representations, warranties and
agreements as of the Effective Date, all of which shall survive the execution
and delivery of this Agreement and the Note and the making of the Advances (with
the execution and delivery of this Agreement and the making of each Advance
thereafter being deemed to constitute a representation and warranty that the
matters as specified in this Section 6 are true and correct in all respects on
and as of the date hereof and as of the date of such Advance, unless stated to
relate to a specific earlier date):
6.01 Corporate Status. Each of the Borrower and its Subsidiaries
----------------
(i) is a duly organized and validly existing corporation in good standing under
the laws of the jurisdiction of its incorporation, (ii) has the power and
authority to own its property and assets and to transact the business in which
it is engaged and (iii) is duly qualified as a foreign corporation and in good
standing in each jurisdiction where the ownership, leasing or operation of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not have a material adverse effect on
the business and operations of the Borrower.
6.02 Corporate Power and Authority. The Borrower has the corporate
-----------------------------
power to execute, deliver and perform the terms and provisions of each of the
Credit Documents and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of each of such Credit Documents. The
Borrower has duly executed and delivered each of the Credit Documents, and each
of such Credit Documents constitutes its legal, valid and binding obligation
enforceable in accordance with its terms, subject to the effect of applicable
bankruptcy and other similar laws affecting the rights of creditors generally
and the effect of equitable principles whether applied in an action at law or a
suit in equity.
6.03 No Violation. Neither the execution, delivery or performance
------------
by the Borrower of the Credit Documents, nor compliance by it with the terms and
provisions thereof, (i) will
26
<PAGE> 32
contravene any provision of any law, statute, rule or regulation or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of any of the
material terms, covenants, conditions or provisions of, or constitute a material
default under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien other than a Lien permitted pursuant to Section 8.01
upon any of the property or assets of the Borrower pursuant to the terms of any
indenture, mortgage, deed of trust, credit agreement, loan agreement or any
other agreement, contract or instrument to which the Borrower is a party or by
which it or any of its property or assets is bound or to which it may be subject
or (iii) will violate any provision of the certificate of incorporation or
by-laws of the Borrower.
6.04 Governmental Approvals. No order, consent, approval, license,
----------------------
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made prior to the Effective Date), or exemption
by, any governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with, (i) the execution,
delivery and performance of any Credit Document or (ii) the legality, validity,
binding effect or enforceability of any such Credit Document.
6.05 Financial Statements; Financial Condition; Undisclosed
------------------------------------------------------
Liabilities; etc. (a)
- ----------------
The consolidated and consolidating balance sheet of the Borrower and its
Consolidated Subsidiaries and the related consolidated and consolidating
statements of income and retained earnings and statements of cash flows of the
Borrower and its Consolidated Subsidiaries furnished to the Lender in accordance
with Section 5.07 hereof present fairly the consolidated and consolidating
financial condition of the Borrower and its Consolidated Subsidiaries at the
dates of such balance sheets and the consolidated and consolidating results of
the operations of the Borrower and its Consolidated Subsidiaries for the fiscal
periods covered by such statements of income and retained earnings and
statements of cash flows. All such financial statements have been prepared in
accordance with generally accepted accounting principles and practices in the
United States consistently applied. Since April 30, 1998 there has not been any
material adverse change in the business, operations, property, assets, condition
(financial or otherwise) or prospects of the Borrower.
(b) Except as fully reflected on the financial statements referred to
in Section 6.05(a), there will be as of the Effective Date no liabilities or
obligations with respect to the Borrower or any of its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in the aggregate, would be
material to the Borrower or to the Borrower and its Subsidiaries taken as a
whole.
6.06 Litigation. There are no actions, suits or proceedings
----------
pending or threatened (i) with respect to any Credit Document or (ii) that could
materially and adversely affect the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower.
6.07 True and Complete Disclosure. All factual information (taken
----------------------------
as a whole) heretofore or contemporaneously furnished by or on behalf of the
Borrower to the Lender or the Agent (including, without limitation, all
information contained in the Credit Documents) for purposes of or in connection
with this Agreement, the Warehouse Security Agreement or any transaction
contemplated herein or therein is, and all other such factual information (taken
as a
27
<PAGE> 33
whole) hereafter furnished by or on behalf of the Borrower to the Lender or the
Agent will be, true and accurate in all material respects on the date furnished
to the Lender or the Agent and not incomplete by omitting to state any fact
necessary to make such information (taken as a whole) not misleading in any
material respect at such time in light of the circumstances under which such
information was provided.
6.08 Use of Proceeds; Margin Regulations. All proceeds of each
-----------------------------------
Advance will be used by the Borrower for the financing of the Borrower's
mortgage lending business; provided that no part of the proceeds of any Advance
--------
will be used by the Borrower to purchase or carry any Margin Stock or to extend
credit to others for the purpose of purchasing or carrying any Margin Stock.
Neither the making of any Advance nor the use of the proceeds thereof will
violate or be inconsistent with the provisions of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
6.09 Tax Returns and Payments. The Borrower and each of its
------------------------
Subsidiaries has filed all tax returns required to be filed by it and has paid
all income taxes payable by it which have become due pursuant to such tax
returns and all other taxes and assessments payable by it which have become due,
other than those not yet delinquent and except for those contested in good faith
and for which adequate reserves have been established. The Borrower and each of
its Subsidiaries has paid, or has provided adequate reserves (in the good faith
judgment of the management of the Borrower or such Subsidiary, as the case may
be) for the payment of, all federal, state and foreign income taxes applicable
for all prior fiscal years and for the current fiscal year to the date hereof.
6.10 Compliance with ERISA. Each Plan is in substantial compliance
---------------------
with ERISA and the Code; no Reportable Event has occurred with respect to a
Plan; no Plan is insolvent or in reorganization, no Plan has an Unfunded Current
Liability, and no Plan has an accumulated or waived funding deficiency or
permitted decreases in its funding standard account within the meaning of
Section 412 of the Code; neither the Borrower nor any ERISA Affiliate of the
Borrower has incurred any material liability to or on account of a Plan pursuant
to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of
ERISA or Section 4971 or 4975 of the Code or expects to incur any liability
under any of the foregoing sections on account of the termination of,
participation in or contributions to any such Plan; no proceedings have been
instituted to terminate any Plan; no condition exists which presents a material
risk to the Borrower or any ERISA Affiliate of incurring a liability to or on
account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no
Lien imposed under the Code or ERISA on the assets of the Borrower exists or is
likely to arise on account of any Plan; and the Borrower may terminate
contributions to any other employee benefit plans maintained by it without
incurring any material liability to any Person interested therein.
6.11 Capitalization. Set forth on Schedule 6.11 is an accurate
--------------
and complete list of all Persons who own 5% or more of the voting stock of the
Borrower, together with the percentage ownership of each. All outstanding shares
of the Borrower's capital stock have been duly and validly issued, are fully
paid and non-assessable. The Borrower does not have outstanding any securities
convertible into or exchangeable for its capital stock or outstanding any rights
to subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for
28
<PAGE> 34
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock except as set forth on Schedule
6.11 hereto.
6.12 Subsidiaries. Set forth on Schedule 6.12 is an accurate and
------------
all Subsidiaries of the Borrower and the percentage ownership by the Borrower in
each such Subsidiary on the Effective Date, together with a brief description of
the business of each such Subsidiary.
6.13 Compliance with Statutes, etc. The Borrower and each of its
-----------------------------
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property, except such noncompliances as would not (i) in the aggregate,
have a material adverse effect on the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrower and (ii) affect
in any respect the validity or enforceability of any Credit Document or the
Security Agent's rights in the Collateral.
6.14 Investment Company Act. Neither the Borrower nor any
----------------------
Subsidiary of the Borrower is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
6.15 No Burdensome Agreement. Neither of the Borrower nor any
-----------------------
Subsidiary is a party to any indenture, loan or credit agreement or any lease or
other agreement or instrument or subject to any charter or corporate restriction
which by its terms would have a material adverse effect on the business,
condition (financial or otherwise), operations or properties of the Borrower or
such Subsidiary or on the ability of the Borrower to carry out its obligations
under the Note or the other Credit Documents to which it is a party.
6.16 Security Interests. The Warehouse Security Agreement creates,
------------------
as security for the Obligations, valid and enforceable security interests in and
Liens on all of the Collateral in favor of the Security Agent on behalf of the
Lender which are perfected and superior and prior to the rights of all third
Persons and subject to no other Liens (other than Liens permitted pursuant to
Section 8.01). The Borrower has, or will have at the time of pledge thereof,
good and marketable title to all of the Collateral, free and clear of all Liens
except those described in the preceding sentence.
6.17 Registration. The Borrower currently is, and will be at all
------------
times at which any Advance is outstanding hereunder, licensed, registered,
approved, qualified or otherwise authorized in good standing to the extent
required under applicable law, as a mortgage banker, mortgage broker, real
estate broker, servicer of mortgage loans or otherwise in each jurisdiction in
which the conduct of its business requires such licensing, registration,
approval, qualification or other authorization, including, without limitation,
as applicable, as a (i) GNMA approved seller and/or servicer of Mortgage Loans
and issuer of Mortgage-backed Securities guaranteed by GNMA, (ii) FNMA approved
seller and/or servicer of Mortgage Loans, eligible to originate, purchase, hold,
sell and service Mortgage Loans to be sold to FNMA, (iii) FHLMC approved seller
and/or servicer of Mortgage Loans, eligible to originate, purchase, hold, sell
and service Mortgage Loans to be sold to FHLMC, (iv) lender in good standing
under the VA loan guaranty program eligible to originate,
29
<PAGE> 35
purchase, hold, sell and service VA Loans, (v) HUD approved lender, eligible to
originate, purchase, hold, sell and service FHA Loans and (vi) licensed mortgage
banker in each state in which it originates Mortgage Loans. To the best of the
Borrower's knowledge, all appraisers providing services in connection with the
origination of Mortgage Loans by the Borrower have all licenses, registrations,
approvals and qualifications required by all applicable laws or regulations.
6.18 Representations Relating to the Mortgage Loans. (a) At all
----------------------------------------------
times during which a Mortgage Loan is pledged as Collateral for Advances
hereunder, such Mortgage Loan will (i) be an FHA Loan, a VA Loan, a Conforming
Loan, a Jumbo Loan, a State Loan, a Credit A- Loan, a Credit B Loan, a Credit C
Loan or a Credit D Loan; (ii) be an Eligible Mortgage Loan or an Eligible
Nonconforming Mortgage Loan and be free of any default and the Borrower will
have had no notice of any event which has occurred which may, with the passage
of time or the giving of notice, or both, become a default; (iii) comply with
the terms of this Agreement and with the relevant Purchase Commitment and/or
Master Commitment, if any; (iv) be a legal, valid and binding obligation of the
mortgagor and the mortgagee thereunder enforceable in accordance with its terms
and subject to no offset, defense or counterclaim, obligating such mortgagor to
make the payments specified therein, and each FHA Loan and each VA Loan will be
fully eligible for, and the Borrower will have complied with all applicable
requirements of law, rule or regulation in respect of, FHA insurance or VA
guaranty, respectively; (v) if such Mortgage Loan is an Eligible Nonconforming
Mortgage Loan, be subject to a Purchase Commitment, or if such Mortgage Loan is
an Eligible Mortgage Loan, be subject to a Purchase Commitment or Hedging
Contract or, if it is a Mortgage Loan that bears interest at an adjustable rate,
a Master Commitment which Purchase Commitment or Master Commitment is a legal,
valid and binding obligation of the Investor party thereto, is enforceable
against such Investor in accordance with its terms (subject to the effect of
applicable bankruptcy and other similar laws affecting the rights of creditors
generally and the effect of equitable principles whether applied in an action at
law or a suit in equity), and, except as is otherwise notified in writing by the
Borrower to the Lender and Agent, permits the assignment thereof to the Security
Agent; (vi) be owned by the Borrower and be subject to no Lien or claim
whatsoever, either legal or equitable, other than that granted to the Security
Agent for the benefit of the Lender; (vii) be fully disbursed, the final
disbursement to the mortgagor in connection therewith having been made no more
than 30 days prior to the date of pledge if such disbursement was made by the
Borrower (unless such Mortgage Loan is delivered as Collateral securing the
initial Advance made to the Borrower hereunder); (viii) not be modified (except
as to correction of clerical or scrivener errors), amended, superseded or
otherwise subject to any other agreement or contract of any kind with the
relevant mortgagor under such Mortgage Loan except to the extent such amendment,
modification or other agreement or contract has been disclosed in writing to the
Security Agent by the Borrower at the time of the pledge and does not affect the
salability of such Mortgage Loan pursuant to any applicable Master Commitment or
Purchase Commitment; (ix) be a valid first or second lien on the mortgaged
premises subject thereto; (x) if required by the Investor, have a title
insurance policy or binder, in ALTA form satisfactory to the Agent insuring the
priority of the Borrower's first or second lien therein subject only to (1) the
lien of the related first mortgage, if any, (2) the lien of current real
property taxes and assessments, (3) covenants, conditions and restrictions,
rights of way, easements and other matters of public record as of the date of
recording of the related mortgage or deed of trust, such exceptions appearing of
record being acceptable to mortgage lending institutions generally in the area
wherein the property subject
30
<PAGE> 36
thereto is located and (4) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the security
intended to be provided by the related mortgage or deed of trust and (xi) not
have been selected for pledge hereunder utilizing procedures, other than those
necessary to comply with the representations and warranties set forth herein,
which are adverse to the interests of the Lender.
(b) At the time of the pledge of each Mortgage Loan, the Borrower will
have received with respect to each such Mortgage Loan (i) a hazard insurance
policy with a standard mortgagee clause in a form satisfactory to the Agent and
with extended coverage in an amount which is at least equal to the maximum
insurable value of the improvements securing such Mortgage Loan from time to
time or the principal balance owing on such Mortgage Loan, whichever is less and
(ii) a policy, or other satisfactory evidence, of flood insurance or
satisfactory documentation to demonstrate that the mortgaged premises are not
located in a special flood hazard area. Such documentation will be retained in
the Borrower's files relating to such Mortgage Loan.
(c) With respect to each Mortgage Loan pledged to the Security Agent,
the Borrower has fully complied with, and will fully comply with, or the
original mortgagee thereof has fully complied with and will fully comply with,
(A) all applicable state and federal laws and regulations, including but not
limited to (i) the Real Estate Settlement Procedures Act of 1974, (ii) the Equal
Credit Opportunity Act, (iii) the Federal Truth in Lending Act and Regulation Z
of the Board of Governors of the Federal Reserve System, (iv) any laws requiring
persons providing appraisals of property values to be properly licensed, and (v)
all other usury, disclosure, consumer credit protection or truth-in-lending laws
which may apply, and in each such case with all regulations promulgated in
connection therewith as the same may be from time to time amended and will
maintain sufficient documentary evidence in its file to substantiate such
compliance (including, without limitation, delivery of all necessary disclosure
statements) and (B) all of the terms and provisions of such Mortgage Loan and of
any contractual escrow arrangements applicable thereto.
6.19 Representations Relating to the Mortgage-backed Securities.
----------------------------------------------------------
At the time a Mortgage-backed Security is pledged as Collateral, such
Mortgage-backed Security will be (i) an Eligible Mortgage Loan free of any
default, (ii) subject to a Purchase Commitment which is a legal, valid and
binding obligation of the Investor party thereto, is enforceable against such
Investor in accordance with its terms, permits the assignment thereof to the
Security Agent and the Collateral Agent and may be enforced against such
Investor by the Security Agent or the Collateral Agent, (iii) comply with all of
the terms of such Purchase Commitment, (iv) a legal, valid and binding
obligation of the issuer thereof enforceable in accordance with its terms, and
(v) subject to no Lien or claim whatsoever, either legal or equitable, other
than that granted to the Security Agent for the benefit of the Lender and the
interest of the Investor under the related Purchase Commitment.
6.20 Insurance. The Borrower has blanket fidelity bond coverage
---------
and errors and omissions insurance coverage in such form, with such companies
and in such amounts as are in accordance with standards and requirements
satisfactory to the applicable Investor.
31
<PAGE> 37
6.21 Title to Property. The Borrower has good and marketable title
-----------------
to all of its property, the value of which is included in the financial
statements delivered pursuant hereto, subject to no Liens, encumbrances or
claims other than those disclosed on such financial statements.
6.22 No Recourse Sales. No commitment or other contractual
-----------------
arrangement pursuant to which the Borrower has sold or currently has a right to
sell Mortgage Loans to a third party provides for any recourse to the Borrower
except in the event of a breach of representations or warranties made in
connection with such sale.
6.23 Fictitious Names. Neither the Borrower nor any Subsidiary
----------------
of the Borrower operates or does business under any assumed, trade or fictitious
name.
Section 7. Affirmative Covenants.
---------------------
The Borrower covenants and agrees that as of the Effective Date, and
thereafter for so long as this Agreement is in effect and until the Commitment
has terminated, the Note is no longer outstanding and the Advances, together
with interest, Fees and all other Obligations, are paid in full:
7.01 Information Covenants. The Borrower will furnish to the Agent
---------------------
(unless otherwise indicated):
(a) Monthly Financial Statements. Within 30 days after the close
----------------------------
of each monthly accounting period of the Borrower, the consolidated
statements of financial condition of the Borrower and its Consolidated
Subsidiaries as at the end of such period, and the related consolidated
statements of income and retained earnings and statements of cash flows
for such period and for the elapsed portion of the fiscal year ended
with the last day of such period, setting forth comparative figures for
the related periods in the prior fiscal year, all of which shall be in
form and substance satisfactory to the Agent and certified as to
fairness of presentation by the Chief Financial Officer of the
Borrower, subject to normal year-end audit adjustments and accompanied
by a certificate from such financial officer to the effect that no
Default or Event of Default has occurred and is continuing, and a
statement as to the beneficial ownership of all of the issued and
outstanding capital stock of the Borrower as at the end of such period,
certified as accurate by such financial officer.
(b) Annual Financial Statements. Within 90 days after the close
---------------------------
of each fiscal year of the Borrower, the consolidated and consolidating
statements of financial conditions of the Borrower and its Consolidated
Subsidiaries as at the end of such fiscal year, and the related
consolidated and consolidating statements of income and retained
earnings and statements of cash flows for such fiscal year, in form and
substance satisfactory to the Agent and setting forth comparative
figures for the preceding fiscal year and certified, in the case of the
consolidated financial statements, by independent certified public
accountants reasonably acceptable to the Agent, together with a report
of such accounting firm stating that its regular audit of the financial
statements of the Borrower was conducted in accordance with generally
accepted auditing standards.
32
<PAGE> 38
(c) Management Letters. Promptly, and in no event later than
------------------
five days, after receipt by the Borrower thereof, a copy of any
"management letter" received by the Borrower from its certified public
accountants detailing any "material weaknesses in internal control"
noted by such accountants (as defined by the Financial Accounting
Standards Board).
(d) Officer's Certificates. At the time of the delivery of the
----------------------
financial statements provided for in Section 7.01(a) and (b), a
certificate of the Chief Financial Officer of the Borrower to the
effect that, to the best of his knowledge, no Default or Event of
Default has occurred and is continuing or, if any Default or Event of
Default has occurred and is continuing, specifying the nature and
extent thereof and any actions taken or proposed to be taken to cure
any such Default or Event of Default, which certificate shall set forth
the calculations required to establish whether the Borrower was in
compliance with the provisions of Sections 8.08 and 8.09, at the end of
such month or fiscal year, as the case may be.
(e) Notices. Promptly (and in no event later than five days
-------
following the occurrence thereof), notice of (i) the occurrence of any
event which constitutes a Default or Event of Default, detailing the
nature of such Default or Event of Default and any actions taken or
proposed to be taken to cure such Default or Event of Default, (ii) the
commencement of any action, suit or proceeding against the Borrower or
any of its Subsidiaries before any court, arbitrator or governmental
department, commission, board, bureau, agency or instrumentality which
(A) could result in liability or loss of $250,000 or more, in excess of
any applicable insurance coverage to the Borrower or such Subsidiary,
as the case may be, or (B) would otherwise materially adversely affect
the management or the condition or operations (financial or otherwise)
of the Borrower or any of its Subsidiaries, (iii) any change in any of
the President, Chief Executive Officer, Chief Financial Officer or
Director of Mortgage Banking Operations of the Borrower, or (iv) any
loss or any threatened loss known to the Borrower of any authorization,
qualification, license or permit issued by any governmental or
regulatory authority to the Borrower or any of its Subsidiaries the
loss of which could have a material adverse effect upon the financial
condition or business of the Borrower or any of its Subsidiaries.
(f) Reports Relating to Collateral. In respect of the Collateral,
------------------------------
bi-weekly or more frequently as Agent may, from time to time, request a
position valuation report from the Borrower in a form acceptable to the
Agent (the "Position Valuation Report").
(g) Monthly Servicing Reports. Within 30 days after the close of
-------------------------
each calendar month in which the Borrower owns a Servicing Portfolio, a
consolidated report of the Borrower providing a summary, for all
Mortgage Loans the servicing rights to which are owned by the Borrower,
regardless of whether such Mortgage Loans are pledged to the Lender, of
(i) the entities that own such Mortgage Loans, (ii) the original terms
of such Mortgage Loans and whether such Mortgage Loans bear interest at
a fixed rate or an adjustable rate, (iii) the weighted average interest
rate and the weighted average net servicing fee with respect to such
Mortgage Loans, (iv) whether any such Mortgage Loans were sold by the
Borrower with recourse and the nature of such recourse, (v) which of
such Mortgage Loans (A) are current and in good standing, (B) are more
than 30, 60 or 90 days past due,
33
<PAGE> 39
respectively, (C) are the subject of pending litigation, bankruptcy or
foreclosure proceedings, and (D) have been converted (through
foreclosure or other proceedings in lieu thereof) by the Borrower into
real estate owned by the Borrower, and (vi) any reserves established by
the Borrower for losses in respect of delinquent Mortgage Loans or real
estate owned by the Borrower.
(h) Other Reports and Filings. Promptly, and in any event within
-------------------------
10 days following the filing thereof, copies of all financial
information, proxy materials and other information and reports, if any,
which the Borrower shall file with the Securities and Exchange
Commission or any governmental agencies substituted therefor.
(i) Servicing Transactions. (i) Promptly, and in any event within
----------------------
10 days following the execution thereof, copies of any agreements
executed by the Borrower which provide for the sale by the Borrower to
an Investor of the rights to service any Mortgage Loan, which sale is
separate from the sale of the related Mortgage Loan, pledged to the
Security Agent pursuant to the terms of this Agreement and the
Warehouse Security Agreement and (ii) written notice not less than 10
days prior to any purchase or sale of mortgage servicing rights or any
other transaction which would result in greater than a 10 percent
increase or decrease in the aggregate unpaid principal balance of all
Mortgage Loans included in the Servicing Portfolio of the Borrower.
(j) Leases. Written notice not less than 10 days prior to any
------
agreement to rent or lease any real or personal property which would
result in aggregate payments thereunder by the Borrower (including,
without limitation, any property taxes paid as additional rent or lease
payments) in excess of $250,000.
(k) Capital Expenditures. Written notice not less than 10 days
-------------------
prior to any agreement by the Borrower pursuant to which the Borrower
intends to make any expenditure for fixed or capital assets (including,
without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with generally accepted accounting
principles and including capitalized lease obligations) which will
exceed $250,000.
(l) [Intentionally omitted]
(m) Commitment Default. Notice within 2 Business Days of any
------------------
default under, or of the termination, invalidation or cancellation of,
any Purchase Commitment or Master Commitment relating to any Mortgage
Loan or Mortgage-backed Security constituting Collateral.
(n) Collateral Servicing Report. Within five (5) Business Days
---------------------------
after the end of each calendar month, a report detailing the identities
of the entities other than the Borrower, if any, servicing any Mortgage
Loans pledged as Collateral hereunder or which secure a Mortgage-backed
Security pledged as Collateral hereunder.
34
<PAGE> 40
(o) Other Information. Promptly, and in any event within five
-----------------
(5) Business Days after the Borrower's receipt or filing thereof, (i)
copies of any notices or information given to or received from the
holders of any Indebtedness of the Borrower relating to any actual or
alleged default, demand for payment or acceleration of payment, or from
the PBGC or the United States Department of Labor in connection with
any matter arising with respect to ERISA, (ii) copies of all audits
completed by HUD, GNMA, FNMA, FHLMC or any other governmental agency or
Investor with respect to the Borrower, (iii) all Mortgage Bankers'
Financial Reporting Form Statement of Condition (designated as FHLMC
Form 1055 and FNMA Form 1002, respectively, and any successor thereto
or replacement thereof) (the "Mortgage Bankers' Reporting Forms") filed
by the Borrower with FHLMC or FNMA, (iv) copies of any uniform single
audit reports required or requested by FNMA or FHLMC, and (v) such
other information or documents (financial or otherwise) as the Agent or
the Lender may reasonably request.
(p) Credit Package Documents. Promptly upon the written request
------------------------
by the Agent, to the extent available, each of the documents listed in
Schedule 7.01(p) (collectively, the "Credit Package Documents"), as
applicable.
(q) Guarantors' Financial Information. (i) Within 90 days after
---------------------------------
the close of each calendar year, an updated personal financial
statement of each Guarantor and (ii) copies of each Guarantor's federal
income tax returns within 30 days after the filing date of each such
return.
7.02 Books, Records and Inspections. The Borrower will, and will
------------------------------
cause each of its Subsidiaries to, keep proper books of record and account in
which full, true and correct entries in conformity with generally accepted
accounting principles in the United States and all requirements of law shall be
made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its Subsidiaries to,
permit officers and designated representatives of the Agent or the Lender to
visit and inspect any of the properties of the Borrower or such Subsidiary, and
to examine the books of record and account of the Borrower or such Subsidiary
and discuss the affairs, finances and accounts of the Borrower or such
Subsidiary with, and be advised as to the same by, its and their officers,
employees and independent accountants, all at such reasonable times and
intervals and to such extent as the Agent or the Lender may request. Any such
inspection and/or examination may include an audit by the Agent of the servicing
of the Collateral and the Borrower's Servicing Portfolio and such procedures as
the Agent deems appropriate to confirm the reporting of Mortgage Loan balances.
7.03 Maintenance of Property, Insurance. The Borrower will, and
----------------------------------
will cause each of its Subsidiaries to, (i) keep all property necessary for the
operation of its business in good working order and condition, (ii) except as
otherwise provided in clause (iii) below, maintain with financially sound and
reputable insurance companies insurance in at least such amounts and against at
least such risks as are customarily insured against by companies in the same or
similar business, (iii) maintain fidelity bond coverage and errors and omissions
insurance coverage in accordance with standards and requirements reasonably
satisfactory to the applicable Investor and the Agent and (iv) furnish to the
Agent or the Lender, upon written request, full information as to
35
<PAGE> 41
the insurance carried. The provisions of this Section 7.03 shall be deemed to be
supplemental to, but not duplicative of, the provisions of any of the security
documents that require the maintenance of insurance.
7.04 Corporate Franchises. The Borrower will, and will cause each
--------------------
of its Subsidiaries to, do or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and its material rights,
franchises, qualifications, licenses, permits and patents; provided, however,
--------- -------
that nothing in this Section 7.04 shall prevent the withdrawal by the Borrower
or any of its Subsidiaries of its qualification as a foreign corporation in any
jurisdiction where such withdrawal could not have a material adverse effect on
the business, operations, property, assets, condition (financial or otherwise)
or prospects of the Borrower or such Subsidiary.
7.05 Compliance with Statutes, etc. The Borrower will, and will
------------------------------
cause each of its Subsidiaries and will use commercially reasonable efforts to
cause each appraiser, correspondent, broker or other service provider that
participates with the Borrower in the origination or servicing of Mortgage Loans
to, comply with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to (1) licensing or registration (as described in Section 6.17 hereof)
and (2) environmental standards and controls), except such noncompliances as
could not (i) adversely affect in any manner the legality, validity or
enforceability of any Mortgage Loan, Mortgage-backed Security, Purchase
Commitment or Hedging Contract or (ii) in the aggregate, have a material adverse
effect on the business, operations, property, assets, condition (financial or
otherwise) or prospects of the Borrower or the Borrower and its Subsidiaries
taken as a whole.
7.06 ERISA. As soon as possible and, in any event, within 10 days
-----
after the Borrower or any of its Subsidiaries or ERISA Affiliates knows or has
reason to know any of the following, the Borrower will deliver to the Agent a
certificate of the Chief Financial Officer of the Borrower setting forth details
as to such occurrence and such action, if any, which the Borrower, such
Subsidiary or such ERISA Affiliate is required or proposes to take, together
with any notices required or proposed to be given to or filed with or by the
Borrower, such Subsidiary, such ERISA Affiliate, the PBGC, a Plan participant or
the Plan administrator with respect thereto; that a Reportable Event has
occurred; that an accumulated funding deficiency has been incurred or an
application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code with respect to a Plan; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability giving rise to a Lien under
ERISA; that proceedings may be or have been instituted to terminate a Plan; that
a proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan; or that the Borrower, any of its Subsidiaries
or ERISA Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination of or withdrawal from a
Plan under Section 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or with respect
to a Plan under Section 4971 or 4975 of the Code or Section 409, 502(i) or
502(1) of ERISA. The Borrower will deliver to the Agent a complete copy of the
annual report (Form 5500) of each Plan required to be
36
<PAGE> 42
filed with the Internal Revenue Service. In addition to any certificates or
notices delivered to the Agent pursuant to the first sentence hereof, copies of
annual reports and any other notices received by the Borrower or any of its
Subsidiaries required to be delivered to the Agent hereunder shall be delivered
to the Agent no later than 10 days after the later of the date such report or
notice has been filed with the Internal Revenue Service or the PBGC, given to
Plan participants or received by the Borrower or such Subsidiary.
7.07 Performance of Obligations. The Borrower will, and will
--------------------------
cause each of its Subsidiaries to, perform all of its obligations under the
terms of each mortgage, indenture, security agreement and other debt instrument
by which it is bound, except such non-performances as could not in the
aggregate, have a material adverse effect on the business, operations, property,
assets, condition (financial or otherwise) or prospects of the Borrower or of
the Borrower and its Subsidiaries taken as a whole.
7.08 Mortgage Loans. (a) The Borrower will not modify or waive
--------------
any term of any pledged Mortgage Loan or release any security or obligor, if as
a result thereof such Mortgage Loan would become, nor cause, through any
activity or inactivity, a Mortgage Loan to become, ineligible for FHA insurance
or VA guaranty, if applicable, or for purchase in accordance with the relevant
Master Commitment or Purchase Commitment. The Borrower will notify the Agent of
(i) any payment default in respect of any pledged Collateral which has continued
for 30 days, 60 days or 90 days, respectively, (ii) the occurrence of an
Insolvency Event of which the Borrower has knowledge in respect of an obligor on
any Mortgage Loan pledged as Collateral, (iii) the commencement of foreclosure
or similar proceedings in respect of the premises which secure any Mortgage Loan
pledged as Collateral and (iv) any other material default in any other term of
any pledged Collateral, such notice to be delivered not later than three (3)
Business Days following the occurrence thereof in the case of an event specified
in clauses (i) or (iii) and promptly upon the Borrower's receiving notice or
otherwise becoming aware thereof in the case of an event specified in clauses
(ii) or (iv).
(b) All FHA Loans, and VA Loans will comply in all respects with all
applicable requirements for purchase under the applicable GNMA or FNMA standard
form of selling contract for FHA insured and VA guaranteed loans and any
supplement thereto then in effect. All Conforming Mortgage Loans will comply in
all respects with all applicable requirements for purchase under the applicable
FNMA or FHLMC selling contract for Mortgage Loans of such type and any
supplement thereto then in effect. All Jumbo Loans will comply in all respects
with all applicable requirements for purchase under any Purchase Commitment
relating thereto. All State Loans will comply in all respects with all
applicable requirements for purchase by the state agency or instrumentality that
issued a Purchase Commitment in respect thereof. All Eligible Nonconforming
Mortgage Loans will comply in all respects with all applicable requirements for
purchase under any Purchase Commitment relating thereto. All Mortgage Loans will
be serviced and administered in accordance with all requirements of any Investor
that has issued a Purchase Commitment or a Master Commitment applicable thereto.
7.09 Payment of Taxes. The Borrower will pay and discharge all
----------------
taxes, assessments and governmental charges or liens imposed upon the Borrower
or upon the Borrower's income or
37
<PAGE> 43
profits, or upon any properties belonging to the Borrower, prior to the date on
which any penalties attach thereto, and all lawful claims which, if unpaid,
might become a Lien upon any such property.
7.10 Corporate Separateness. The Borrower will, and will cause
----------------------
each of its Subsidiaries to, take such actions as are necessary to keep its
operations and the operations of each of its Subsidiaries separate and apart
from each of the other's, including, without limitation, insuring that all
customary formalities regarding the corporate existence of the Borrower and each
such Subsidiary, including holding regular meetings and maintenance of its
current minute books, are followed.
7.11 Collateral. The Borrower will (a) warrant and defend the
----------
right, title and interest of the Lender and the Security Agent in and to the
Collateral against the claims and demands of all persons whomsoever; (b)
service, or cause to be serviced, all Mortgage Loans in accordance with the
requirements of the issuers of Master Commitments and Purchase Commitments
covering the same and all applicable FHA and VA requirements (including without
limitation taking all actions necessary to enforce the obligations of the
obligors under such Mortgage Loans) and service, or cause to be serviced, all
Mortgage Loans backing Mortgage-backed Securities in accordance with applicable
governmental requirements and the requirements of issuers of Purchase
Commitments covering the same; (c) hold all escrow funds collected in respect of
Mortgage Loans and mortgage loans backing Mortgage-backed Securities in trust,
without commingling the same with non-custodial funds, and apply the same for
the purposes for which such funds were collected; (d) comply in all respects
with the terms and conditions of all Master Commitments and Purchase
Commitments, and all extensions, renewals and modifications or substitutions
thereof or thereto, and deliver or cause to be delivered to the applicable
Investor the Mortgage Loans and Mortgage-backed Securities to be sold under each
Purchase Commitment not later than three (3) Business Days prior to the
expiration thereof; and (e) maintain, and, upon request, shall make available to
the Lender, the Agent or the Security Agent the originals, or copies in any case
where the original has been delivered to the Security Agent or to an Investor,
of its Mortgage Notes, Mortgages, Purchase Commitments, Master Commitments,
Hedging Contracts and all related Mortgage Loan documents and instruments, and
all files, surveys, certificates, correspondence, appraisals, computer programs,
tapes, discs, cards, accounting records and other information and data relating
to the Collateral.
7.12 Portfolio Hedging Arrangements. The Borrower will enter into
------------------------------
and maintain from time to time Hedging Contracts with respect to Mortgage Loans
held by it and commitments made by it to prospective Mortgage Loan obligors to
extend Mortgage Loans at specified rates of interest.
7.13 Borrowing Base Valuation Reports. The Agent will prepare and
--------------------------------
deliver to the Borrower weekly, or more frequently as the Agent may from time to
time determine, a report with respect to all Eligible Mortgage Loans, Eligible
Nonconforming Mortgage Loans and Liquid Assets pledged to the Security Agent as
of such date (a "Borrowing Base Valuation Report"). Unless the Borrower shall,
within 48 hours after receiving any such Borrowing Base Valuation Report, notify
the Agent that the Borrower disagrees with the information contained therein,
the Borrower shall be deemed to have certified to the Agent that, as of the date
of the Borrowing Base
38
<PAGE> 44
Valuation Report: (a) the calculations contained therein are accurate and have
been prepared in accordance with the terms and conditions of the Warehouse
Credit Agreement; and (b) no prepayment is required under the terms of Section
4.02 of the Warehouse Credit Agreement.
Section 8. Negative Covenants.
------------------
The Borrower covenants and agrees that as of the Effective Date, and
thereafter for so long as this Agreement is in effect and until the Commitment
has terminated, the Note is no longer outstanding and the Advances, together
with interest, Fees and all other Obligations, are paid in full, without the
prior written consent of the Lender:
8.01 Liens. The Borrower will not, and will not permit any of its
-----
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to (i) any Collateral, or (ii) any right of the Borrower or any of its
Subsidiaries to service Mortgage Loans; provided that the provisions of this
--------
Section 8.01 shall not prevent the creation, incurrence, assumption or existence
of:
(a) Liens for taxes not yet due, or Liens for taxes being contested in
good faith and by appropriate proceedings for which adequate reserves
have been established;
(b) Liens created pursuant to the Warehouse Security Agreement; and
(c) Liens in favor of FNMA, GNMA or FHLMC on the right of the Borrower
to service Mortgage Loans sold to such agencies.
8.03 Dividends. (a) Upon the occurrence and during the continuance
---------
of any Default or Event of Default (determined after giving effect to any
proposed action of the Borrower), the Borrower will not, and will not permit any
of its Subsidiaries to, declare or pay any dividends, or return any capital, to
its stockholders or authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for a consideration, any
shares of any class of its capital stock now or hereafter outstanding (or any
options or warrants issued by the Borrower or by such Subsidiary with respect to
its capital stock), or set aside any funds for any of the foregoing purposes, or
permit
39
<PAGE> 45
any of its Subsidiaries to purchase or otherwise acquire for a consideration any
shares of any class of the capital stock of the Borrower or such Subsidiary now
or hereafter outstanding (or any options or warrants issued by the Borrower or
such Subsidiary with respect to its capital stock), except that any Subsidiary
may pay dividends to the Borrower or to any Wholly-Owned Subsidiary of the
Borrower.
(b) The Borrower will not at any time declare or pay any dividends, or
return any capital, to its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for a consideration, any shares of any class of its capital stock now or
hereafter outstanding (or any options or warrants issued by the Borrower with
respect to its capital stock), or set aside any funds for any of the foregoing
purposes, or permit any of its Subsidiaries to purchase or otherwise acquire for
a consideration any shares of any class of the capital stock of the Borrower now
or hereafter outstanding (or any options or warrants issued by the Borrower with
respect to its capital stock), or pay any special distributions or bonuses not
in the ordinary course of business to any officer or employee that owns capital
stock of the Borrower, if after giving effect thereto the Adjusted Tangible Net
Worth of the Borrower would be less than the amount required by Section 8.09
hereof.
8.04 [Intentionally omitted]
8.05 Advances, Investments and Loans. The Borrower will not, and
-------------------------------
will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any other Person, except for:
(a) Mortgage Loans or other loans extended in the ordinary
course of the Borrower's or any Subsidiary's mortgage banking
business; or
(b) cash, Cash Equivalents and Mortgage-backed Securities.
8.06 Transactions with Affiliates. The Borrower will not, and
----------------------------
will not permit any of its Subsidiaries to, enter into any transaction or series
of related transactions, whether or not in the ordinary course of business, with
any Affiliate of the Borrower, other than on terms and conditions substantially
as favorable to the Borrower or such Subsidiary as would be obtainable by the
Borrower or such Subsidiary at the time in a comparable arm's-length transaction
with a Person other than an Affiliate; provided, however, that the Borrower
-------- --------
will not, and will not permit any of its Subsidiaries to:
(a) use, furnish, or rely upon an insurance policy (including but not
limited to title insurance and hazard insurance) underwritten by or
issued by any Affiliate of the Borrower;
(b) use, furnish, or rely upon an appraisal issued by any Affiliate or
by any Person controlled by any Affiliate of the Borrower except with
respect to FHA Loans, VA Loans or State Loans; or
40
<PAGE> 46
(c) pledge any Mortgage Loan to the Lender under which the Borrower or
any Affiliate thereof is a mortgagor or guarantor for such Mortgage
Loan.
8.07 Capital Expenditures. The Borrower will not, and will not
--------------------
permit any of its Subsidiaries to, make any expenditure for fixed or capital
assets (including, without limitation, expenditures for maintenance and repairs
which should be capitalized in accordance with generally accepted accounting
principles and including capitalized lease obligations) other than such
expenditures made in the ordinary course of such Person's business in an amount
not in excess of $250,000.
8.08 Maximum Adjusted Leverage Ratio. The Borrower will not permit
-------------------------------
its Adjusted Leverage Ratio at any time during any fiscal year to be greater
than 15 to 1.
8.09 Minimum Adjusted Tangible Net Worth. The Borrower will not
-----------------------------------
permit its Adjusted Tangible Net Worth at any time during any fiscal year to be
less than $1,500,000.
8.10 [Intentionally omitted]
8.11 Modifications of Certificate of Incorporation, By-Laws,
--------------------------------------------------------
Certain Other Agreements and Collateral. The Borrower will not, without prior
- ---------------------------------------
written notice to the Lender, amend, modify or change its certificate of
incorporation (including, without limitation, by the filing or modification of
any certificate of designation) or by-laws, or any agreement entered into by it,
with respect to its capital stock, or enter into any new agreement with respect
to its capital stock. The Borrower will not, without the prior written consent
of the Lender, amend, modify or waive any of the terms of, or settle or
compromise any claim with respect to, any Collateral or any Collateral Document.
8.12 Limitation on Restrictions on Subsidiary Dividends and Other
------------------------------------------------------------
The Distributions.
- -----------------
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or any Subsidiary
of the Borrower, (b) make loans or advances to the Borrower or (c) transfer any
of its properties or assets to the Borrower, except for such encumbrances or
restrictions existing under or by reasons of (i) applicable law, (ii) this
Agreement and (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Borrower or any Subsidiary of
the Borrower.
8.13 Limitation on Issuances of Capital Stock by Subsidiaries.
--------------------------------------------------------
The Borrower will not permit any of its Subsidiaries to issue any capital stock
(including by way of sales of treasury stock) or any options or warrants to
purchase, or securities convertible into, capital stock, except for (i)
transfers and replacements of then outstanding shares of capital stock and (ii)
any issuance of shares after which the Borrower continues to own or control,
directly or indirectly, in the aggregate fifty-one percent (51%) or more of the
voting capital stock of such Subsidiary.
41
<PAGE> 47
8.14 Business. The Borrower will not, and will not permit any of
--------
its Subsidiaries to, without the prior written consent of the Lender (which
consent shall not be unreasonably withheld), engage (directly or indirectly) in
any business other than the business in which the Borrower or such Subsidiary,
respectively, is engaged on the Effective Date.
8.15 Portfolio Aging. The Borrower will not at any time permit the
---------------
aggregate principal amount of the Eligible Mortgage Loans then pledged as
Collateral that have an Origination Date that is more than 60 days prior to such
time, to exceed 0% of the aggregate principal amount of all Eligible Mortgage
Loans that are pledged as Collateral at such time and will not at any time
permit the aggregate principal amount of the Eligible Nonconforming Mortgage
Loans then pledged as Collateral that have an Origination Date that is more than
60 days prior to such time to exceed 0% of the aggregate principal amount of all
Eligible Nonconforming Mortgage Loans that are pledged as Collateral at such
time.
8.16 Minimum Current Ratio. The Borrower will not permit its
---------------------
Current Ratio to be less than 1.0 to 1.0 at any time during any fiscal year.
Section 9. Events of Default.
-----------------
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment when
--------
due of any principal of any Advance or (ii) default, and such default shall
continue unremedied for 3 or more days, in the payment when due of any interest
on any Advance or any Fees or any other amount owing hereunder or under any
Credit Document; or
9.02 Representations, etc. Any representation, warranty or
--------------------
statement made or deemed made by the Borrower herein or in any other Credit
Document or in any certificate delivered pursuant hereto or thereto or to the
Agent as part of the Agent's due diligence review of the Borrower shall prove to
be untrue in any material respect on the date as of which made or deemed made;
or
9.03 Covenants. The Borrower shall (i) default in the due
---------
performance or observance by it of any term, covenant or agreement contained in
Sections 7.01(e), 7.04, 7.05, 7.06, 7.07, 7.08 or 8 or (ii) default in the due
performance or observance by it of any term, covenant or agreement contained in
this Agreement (other than those referred to in Sections 9.01 and 9.02 and
clause (i) of this Section 9.03) and such default shall continue unremedied for
a period of 15 days; or
9.04 Default Under Other Agreements. (a) The Borrower or any of
------------------------------
its Subsidiaries shall (i) default in any payment of any Indebtedness pursuant
to which the Borrower is obligated in any manner in an amount in excess of
$250,000 (other than the Obligations) beyond the period of grace (not to exceed
30 days), if any, provided in the instrument or agreement under which such
Indebtedness was created or (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness (other than the
Obligations) or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit the
42
<PAGE> 48
holder or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause (determined without regard to whether any notice is
required), any such Indebtedness to become due prior to its stated maturity; or
(b) any Indebtedness (other than the Obligations) of the Borrower or any
Indebtedness of its Subsidiaries pursuant to which the Borrower is obligated in
any manner shall be declared to be due and payable, or required to be prepaid
other than by a regularly scheduled required prepayment or as a mandatory
prepayment (unless such required prepayment or mandatory prepayment results from
a default thereunder or an event of the type that constitutes an Event of
Default), prior to the stated maturity thereof; or
9.05 Default Under Agreements With Agent. The Borrower, or any of
-----------------------------------
its Subsidiaries, shall default under any contract, agreement or arrangement
between the Borrower, or such Subsidiary, and the Agent or any Affiliate of the
Agent, or the Borrower or such Subsidiary shall terminate, for any reason
whatsover (other than the failure of any such Mortgage Loan to be funded to the
obligor thereunder), any commitment of the Agent or any Affiliate of the Agent
to purchase Mortgage Loans originated or owned by the Borrower or such
Subsidiary; or
9.06 Bankruptcy, etc. An Insolvency Event shall occur with respect
---------------
to the Borrower or any of its Subsidiaries or any Guarantor or any Person who
has executed the Support Agreement; or
9.07 ERISA. Any Plan shall fail to satisfy the minimum funding
-----
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code, any Plan is, shall have been or is likely to be terminated or the
subject of termination proceeding under ERISA, any Plan shall have an Unfunded
Current Liability, or the Borrower or any of its Subsidiaries or ERISA
Affiliates has incurred or is likely to incur a liability to or on account of a
Plan under Section 409, 501(i), 501(1), 515, 4062, 4063, 4064, 4069, 4201 or
4204 of ERISA or Section 4971 or 4975 of the Code, and there shall result from
any such event or events the imposition of a Lien upon the assets of the
Borrower or any of its Subsidiaries, the granting of a security interest, or a
liability or a material risk of incurring a liability to the PBGC or a Plan or a
trustee appointed under ERISA or a penalty under Section 4971 of the Code, which
lien, security interest, liability or penalty, singly or in the aggregate
exceeds $100,000; or
9.08 Warehouse Security Agreement. The Warehouse Security
----------------------------
Agreement or any provision thereof shall cease to be in full force and effect,
or shall cease to give the Security Agent the Liens, rights, powers and
privileges purported to be created thereby, or the Borrower shall default in the
due performance or observance of any term, covenant or agreement on its part to
be performed or observed pursuant to the Warehouse Security Agreement; or
9.09 [Intentionally omitted]
9.10 Management. Steven M. Majerus shall cease to be actively
----------
involved in the management of the Borrower and its Subsidiaries with
substantially the same duties as currently performed and, within 90 days
thereafter, the Borrower shall have failed to replace such individual
43
<PAGE> 49
with a substitute reasonably satisfactory to the Lender and the Agent, based on
such individual's experience and background in mortgage banking; or
9.11 Judgments. One or more judgments or decrees shall be entered
---------
against the Borrower or any of its Subsidiaries involving in the aggregate for
the Borrower and its Subsidiaries a liability (not paid or fully covered by
insurance) of $100,000 or more, and all such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 30 days after
the entry thereof; or
9.12 Material Adverse Change. A material adverse change shall
-----------------------
occur in the financial condition, operations or prospects of the Borrower or any
of its Subsidiaries or any Guarantor or any Person who has executed the Support
Agreement; or any material adverse action shall be taken by any state or federal
regulatory body or any court against the Borrower or any of its Subsidiaries
which may result in the loss of any agreement, permit or license of the Borrower
or any of its Subsidiaries, or otherwise limit the business or operations of the
Borrower or any of its Subsidiaries which loss or limitation would have a
material adverse effect on the financial condition, operations or prospects of
the Borrower;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent may, and upon the written request of the
Lender shall, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent, the Lender or
the holder of the Note to enforce its claims against the Borrower (provided,
--------
that, if an Event of Default specified in Section 9.06 shall occur with respect
to the Borrower, the result which would occur upon the giving of written notice
by the Agent to the Borrower as specified in clauses (i) and (ii) below shall
occur automatically without the giving of any such notice): (i) declare the
Commitment terminated, whereupon the Commitment of the Lender shall forthwith
terminate immediately and any Fees shall forthwith become due and payable
without any other notice of any kind; and (ii) declare the principal of and any
accrued interest in respect of all Advances and all Obligations to be, whereupon
the same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower.
9.13 Default Not a Condition of a 120-Day Demand. Notwithstanding
-------------------------------------------
any of the other terms of this Agreement, including, without limitation, the
preceding provisions of this Section 9, the Lender shall have the right to
demand payment of the outstanding Advances at any time, upon 120 days' prior
written notice to the Borrower, whether or not any Default or Event of Default
exists or the Expiry Date has occurred.
Section 10. The Agent.
---------
10.01 Authorization and Action. The Lender hereby appoints and
------------------------
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto. The
Lender hereby delegates to the Agent all of its powers hereunder.
44
<PAGE> 50
9.14 Consolidation, Merger, Sale of Assets, etc. The Borrower
-------------------------------------------
shall, or shall permit any of its Subsidiaries which are engaged in the mortgage
banking business to, wind up, liquidate or dissolve its affairs or enter into
any transaction of merger or consolidation (except mergers or consolidations of
a Subsidiary into the Borrower, with the Borrower as the surviving corporation),
or convey, sell, lease or otherwise dispose of (or agree to do any of the
foregoing at any future time) all or any part of its property or assets which
are material (including, but not limited to, any rights to service Mortgage
Loans in the Borrower's Servicing Portfolio), individually or in the aggregate,
other than obsolete or worn out property, whether now owned or hereafter
acquired, other than in the ordinary course of business as presently conducted
and at fair market value, without the prior approval of the Lender or the Agent
(which approval shall not be reasonably withheld), except that the Borrower and
its Subsidiaries may, in the ordinary course of business, acquire Mortgage Loans
for resale and sell Mortgage Loans and Mortgage-backed Securities.
<PAGE> 51
10.02 Agent's Duties. The Agent shall follow its customary
--------------
standards, policies and procedures in performing its duties as Agent hereunder
and in performing such duties shall use that degree of care and attention that
the Agent exercises with respect to the administration of comparable financing
facilities that the Agent extends for its own account. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them as Agent under or in connection with
this Agreement (including, without limitation, the Agent's servicing,
administering or collecting Collateral as Security Agent pursuant to the
Warehouse Security Agreement), except for its or their own willful misconduct,
gross negligence or bad faith. Without limiting the generality of the foregoing,
the Agent: (i) may consult with legal counsel, independent public accountants
and other experts selected by it 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; (ii) makes no warranty or representation to the
Lender and shall not be responsible to the Lender for any statements, warranties
or representations (whether written or oral) made by the Borrower in or in
connection with this Agreement; (iii) shall not be responsible to the Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement, the Note, any other Credit Document, any Collateral
Document or any other instrument or document furnished pursuant hereto; and (iv)
shall incur no liability under or in respect of this Agreement by acting upon
any notice (including notice by telephone), consent, certificate or other
instrument or writing (which may be by telecopier, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
10.03 GE Capital Mortgage Services, Inc. and Affiliates. GE Capital
-------------------------------------------------
Mortgage Services, Inc. and its Affiliates may generally engage in any kind of
business with the Borrower, any of its Affiliates and any person who may do
business with or own securities of the Borrower or any of its Affiliates, all as
if GE Capital Mortgage Services, Inc. were not the Agent and without any duty to
account therefor to the Lender.
10.04 Successor Agent. The Agent may resign at any time by giving
---------------
written notice thereof to the Lender and the Borrower; provided, that each
Rating Agency shall have confirmed in writing that such resignation shall not
result in a withdrawal or reduction of the then current rating by such Rating
Agency of the Commercial Paper. Upon any such resignation, the Lender shall have
the right to appoint a successor Agent, subject to (i) the prior written
approval of such successor Agent by each LOC Provider and each Liquidity Lender
and (ii) receipt of written confirmation from each Rating Agency that such
appointment shall not result in a withdrawal or downgrading of the then current
credit rating of the Commercial Paper. If no successor Agent shall have been so
appointed by the Lender or shall have accepted such appointed within 15 days
after the retiring Agent's giving of notice of resignation, the Agent, on behalf
of the Lender, may appoint a successor Agent. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and from such time the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Section
10 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
45
<PAGE> 52
Section 11. Miscellaneous.
-------------
11.01 Payment of Expenses; Indemnity. (a) Whether or not the
------------------------------
transactions contemplated hereby are consummated, in addition to the rights of
indemnification granted to the Indemnified Parties under Section 11.01(b)
hereof, the Borrower agrees to pay on demand all costs and expenses in
connection with the preparation, execution, delivery, modification, amendment,
administration and monitoring of the Credit Documents and the other documents to
be delivered thereunder (including the costs in respect of the perfection and
maintenance of the security interests and conducting due diligence with respect
to the Borrower and its business), including, without limitation, the fees and
out-of-pocket expenses of counsel for the Lender and the Agent, and of local
counsel who may be retained by the Lender and the Agent, with respect thereto
and with respect to advising the Lender and the Agent as to their rights and
remedies under the Credit Documents, and including all reasonable costs and
expenses in connection with the servicing and liquidation of the Collateral. The
Borrower further agrees to pay on demand all costs and expenses, if any
(including, without limitation, reasonable counsel fees and expenses), in
connection with the enforcement (whether through negotiations, workout, legal
proceedings or otherwise) of the Credit Documents and the other documents to be
delivered thereunder, including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under this Section
11.01(a).
(b) (i) The Borrower shall reimburse the Lender, upon demand (which
demand shall contain reasonable details thereof), for all fees, expenses or
increased costs payable by the Lender to any Liquidity Lender pursuant to the
Liquidity Agreement due to either (x) the effectiveness of or the introduction
of, or any change in, or in the interpretation of, any law or regulation or (y)
compliance by such Liquidity Lender with any guideline or request from any
central bank or other governmental authority or official (whether or not having
the force of law), which subjects such Liquidity Lender (A) to an increase in
the cost of making, funding or maintaining any loan or any commitment under the
Liquidity Agreement or (B) to make a payment calculated by reference to the
principal of, or interest on, such loan or such commitment made by such
Liquidity Lender.
(ii) The Borrower shall reimburse the Lender upon demand (which
demand shall contain reasonable details thereof), for all fees, expenses or
increased costs payable by the Lender to any Liquidity Lender or any LOC
Provider (the Liquidity Lenders and the LOC Providers collectively referred to
in this Section 11.01(b) as the "Financial Institutions" and, individually, as a
"Financial Institution") pursuant to the Liquidity Agreement or the
Reimbursement Agreement, respectively, due to either (x) the effectiveness of or
the introduction of, or any change in, or in the interpretation of, any law or
regulation or (y) compliance by any Financial Institution with any guideline or
request from any central bank or other governmental authority or official
(whether or not having the force of law and including, in any event, any law,
regulation, interpretation, or guideline with respect to capital adequacy or
request in connection with any of the foregoing and any law, regulation,
interpretation, guideline or request contemplated by the report dated July, 1988
entitled "International Convergence of Capital Measurement and Capital
Standards" issued by the Basle Committee on Banking Regulations and Supervisory
Practices at the Bank for International Settlements) which has or would have the
effect of reducing the rate of return on the capital of such Financial
Institution, or any corporation controlling such Financial Institution, as a
46
<PAGE> 53
consequence of its obligations under the Liquidity Agreement, the Reimbursement
Agreement or the Letters of Credit, as the case may be, to a level below that
which such Financial Institution, or such controlling corporation, could have
otherwise achieved but for such adoption, change or compliance (taking into
consideration such Financial Institution's, or the respective controlling
corporation's, policies with respect to capital adequacy) or which has or would
have the effect of increasing the amount of capital required or expected to be
maintained by such Financial Institution, or such controlling corporation, as a
consequence of its obligations under the Liquidity Agreement, the Reimbursement
Agreement or the Letters of Credit, as the case may be.
(iii) The Borrower shall reimburse the Lender, upon demand (which
demand shall contain reasonable details thereof), for any increase in any sum
payable by the Lender to any Liquidity Lender under the Liquidity Agreement to
compensate such Liquidity Lender for deductions for Liquidity Taxes (as defined
below) applicable to such sum (including deductions for Liquidity Taxes
applicable to such increase in such sum) such that such Liquidity Lender shall
receive an amount equal to the sum it would have otherwise received had no such
deductions for Liquidity Taxes been made. As used in this Section 11.01(b), the
term "Liquidity Taxes" shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities, with respect
to any sum payable under the Liquidity Agreement (but excluding taxes that would
not be imposed but for a connection between the Liquidity Lenders or the
Liquidity Agent (as the case may be) and the jurisdiction imposing such tax,
other than a connection arising by virtue of the activities of the Liquidity
Lenders or the Liquidity Agent (as the case may be) pursuant to or in respect of
the Liquidity Agreement or under any other Facility Document, including, without
limitation, the entering into, the loan of money or the extension of credit
pursuant to, the receipt of payments under, or the enforcement of, the Liquidity
Agreement or any other Facility Document).
(iv) The Borrower shall reimburse the Lender, upon demand (which
demand shall contain reasonable details thereof), for all costs or expenses
payable by the Lender under the Liquidity Agreement for any present or future
stamp, recording or documentary taxes or similar levies arising from any payment
made under the Liquidity Agreement or from the execution, delivery or
registration of, or otherwise with respect to, the Liquidity Agreement or the
promissory notes delivered by the Lender thereunder or from the execution,
delivery or registration of, or otherwise with respect to, the Liquidity
Agreement or such promissory notes.
(v) The Borrower shall reimburse the Lender, upon demand (which
demand shall contain reasonable details thereof), for any increase in any
payment payable by the Lender to any LOC Provider under the Reimbursement
Agreement to compensate such LOC Provider for deductions of LOC Taxes (as
defined below) such that such increase results in a yield to such LOC Provider
(after payment of all LOC Taxes) of interest or any other amounts payable under
the Reimbursement Agreement at the rates or in the amounts specified in the
Reimbursement Agreement. As used in this Section 11.01(b), the term "LOC Taxes"
shall mean any present or future stamp or other taxes, levies, imports, duties,
charges, fees, deductions, withholdings or restrictions or conditions of any
nature whatsoever, now or hereafter imposed, levied, collected, withheld or
assessed by any jurisdiction or by any political subdivision or taxing authority
thereof or therein in respect of any payment made under the Reimbursement
Agreement (but excluding, in
47
<PAGE> 54
the case of each LOC Provider, any tax imposed on or measured by the net income
of such LOC Provider pursuant to the laws of any jurisdiction (or any political
subdivision or taxing authority thereof or therein) in which the principal
office of such LOC Provider is located).
(vi) The Borrower shall reimburse the Lender, upon demand (which
demand shall contain reasonable details thereof), for all indemnities payable by
the Lender to any placement agents or dealers for the Commercial Paper.
(vii) In the event the Lender enters into agreements for the making
of advances to one or more borrowers other than the Borrower, the Lender shall
allocate the liability for the costs, expenses and other amounts referred to in
clauses (i) through (vi), inclusive, of this Section 11.01(b) and Section
11.01(c) to the Borrower and each other borrower who has so agreed, provided
--------
that if such costs, expenses or amounts are attributable to the Borrower or the
Credit Documents and not attributable to any other borrower, the Borrower shall
be solely liable for such costs, expenses and amounts.
(c) Without limiting any other rights which the Lender, the Agent, the
Security Agent, the LOC Providers, the Liquidity Lenders, the Collateral Agent,
the Depositary or any Affiliate of any thereof, as well as their respective
directors, officers, employees and agents (each, an "Indemnified Party") may
have hereunder or under applicable law, the Borrower hereby agrees to indemnify
each Indemnified Party from and against any and all claims, losses, damages,
expenses and liabilities (including reasonable attorneys' fees) (all of the
foregoing being collectively referred to as "Indemnified Amounts") arising out
of, relating to or resulting from this Agreement, any other Facility Document,
any Mortgage Loan, Mortgage-backed Security or other Collateral or the use of
any proceeds of Advances, excluding, however, Indemnified Amounts to the extent
(i) resulting from gross negligence or willful misconduct (as determined by a
final judgment of a court of competent jurisdiction) on the part of such
Indemnified Party or any Affiliate of such Indemnified Party which directly or
indirectly controls, is controlled by or is under common control with such
Indemnified Party or is a director or officer of such Indemnified Party or of an
Affiliate of such Indemnified Party or (ii) resulting from negligence (as
determined by a final judgment of a court of competent jurisdiction) on the part
of such Indemnified Party or any -Affiliate of such Indemnified Party which
directly or indirectly controls, is controlled by or is under common control
with such Indemnified Party or is a director or officer of such Indemnified
Party or of an Affiliate of such Indemnified Party, which negligence directly
and proximately results in the loss of a Mortgage Note, the receipt of which
Mortgage Note was previously acknowledged in writing by such Indemnified Party
and the loss of which Mortgage Note cannot be mitigated by the cooperative
efforts of the Borrower and the Indemnified Party. Without limiting or being
limited by the foregoing, the Borrower shall pay on demand to each Indemnified
Party any and all amounts necessary to indemnify such Indemnified Party from and
against any and all Indemnified Amounts relating to or resulting from:
(i) the making of an Advance secured by a pledge of a Mortgage
Loan or Mortgage-backed Security which is not at the date of
the creation of such security interest an Eligible Mortgage
Loan or an Eligible Nonconforming Mortgage Loan or
48
<PAGE> 55
which thereafter ceases to be an Eligible Mortgage Loan or an
Eligible Nonconforming Mortgage Loan;
(ii) reliance on any representation or warranty or statement
made or deemed made by the Borrower (or any of its officers)
under or in connection with any Credit Document which shall
have been incorrect when made;
(iii) the failure by the Borrower to comply with any
applicable law, rule or regulation with respect to any
Collateral, or the nonconformity of any Collateral with any
such applicable law, rule or regulation;
(iv) the failure to vest in the Security Agent under the
Warehouse Security Agreement a valid first priority security
interest in the Mortgage Loans, the Mortgage-backed Securities
and the other Collateral, except as otherwise permitted by
this Agreement;
(v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Collateral, whether at the
time of any Advance or at any subsequent time;
(vi) any breach or violation, or alleged violation, of federal
or state securities laws in connection with the offering of
the Commercial Paper;
(vii) any investigation, litigation or proceeding related to
this Agreement or, any other Credit Document or the use of
proceeds of Advances or in respect of any Mortgage Loan or
other Collateral;
(viii) the loss, misplacement or destruction of any cashier's
check issued by the Lender in respect of any Advance after
receipt of such check by the closing agent, escrow agent,
title company, attorney or any other authorized party
identified in the Request for Advance relating to such
Advance, it being understood and agreed that, notwithstanding
the indemnity under this Section 11.01(c)(viii) or any such
loss, misplacement or destruction, the funds represented by
any such lost, misplaced or destroyed cashier's check shall
constitute an Advance hereunder; and
(ix) the making of any wire transfer to an incorrect account
or in an incorrect amount in accordance with instructions
received from the Borrower, it being understood and agreed
that, notwithstanding the indemnity under this Section
11.01(c)(ix), the funds represented by any such wire shall
constitute an Advance hereunder.
(d) If after the date hereof due to either (a) the effectiveness
or introduction of, or any change in, or any change in the interpretation of,
any law or regulation by any court or administrative or governmental authority
charged with administration thereof or (b) compliance
49
<PAGE> 56
with any guideline or request from any central bank or other governmental
authority or official (whether or not having the force of law and including, in
any event, any law, regulation or interpretation with respect to capital
adequacy or request in connection with any of the foregoing), there shall be an
increase in the cost to the Lender of making, funding or maintaining any Advance
or the Commitment hereunder or the Lender shall be required to make a payment
calculated by reference to the principal of, or interest on, any Advance made by
it or the Commitment (other than any such increased cost, reduction in the
amount receivable, or payment required to be made resulting from the imposition
or an increase in the rate of any Taxes unless such Taxes are payable by the
Borrower under Section 11.01(e) or there shall be an increase in the amount of
capital required or expected to be maintained by the Lender or any corporation
controlling the Lender and the Lender reasonably determines that the amount of
such capital is increased by or based upon the existence of the Lender's
agreement, in its discretion, to make or maintain Advances hereunder and other
similar agreements and facilities), then the Borrower shall, from time to time,
upon demand by the Lender, immediately pay to the Lender additional amounts
sufficient to compensate the Lender for any such increased cost or increase in
capital (to the extent the Lender reasonably determines such increase in capital
to be allocable to the existence of the Lender's agreements hereunder). A
certificate of an officer of the Lender as to such amounts (and the calculation
thereof) submitted to the Borrower shall be conclusive and binding for all
purposes, absent manifest error.
(e) Promptly upon (and in no event later than 10 days following)
notice from the Lender or the Agent to the Borrower, the Borrower agrees to pay,
prior to the date on which penalties attach thereto, all present and future
income, stamp and other taxes, levies, or costs and charges whatsoever imposed,
assessed, levied or collected on or in respect of an Advance and/or the
recording, registration, notarization or other formalization of an Advance or
the execution and delivery or otherwise with respect to the Agreement or the
other Credit Documents and/or any payments of principal, interest or other
amounts made on or in respect of an Advance (all such taxes, levies, costs and
charges being herein collectively called "Taxes"); provided that Taxes shall not
--------
include taxes imposed on or measured by the overall net income or receipts of
the Lender by the United States of America or any political subdivision or
taxing authority thereof or therein. The Borrower agrees to also pay such
additional amounts equal to increases in taxes payable by the Lender described
in the foregoing proviso, which increases arise solely from the receipt by the
Lender of payments made by the Borrower described in the immediately preceding
sentence of this Section 11.01(e). Promptly (and in no event later than 10 days)
after the date on which payment of any such Tax is due pursuant to applicable
law, the Borrower will, at the request of the Lender, furnish to the Lender
evidence, in form and substance satisfactory to the Lender, that the Borrower
has met its obligation under this Section 11.01(e). The Borrower agrees to
indemnify the Lender against, and reimburse the Lender on demand for, any Taxes,
as reasonably determined by the Lender in good faith. The Lender shall provide
the Borrower with appropriate receipts for any payments or reimbursements made
by the Borrower pursuant to this Section 11.01(e).
(f) Notwithstanding anything to the contrary provided herein, the
maximum aggregate amount that the Borrower shall be obligated to pay to the
Lender or to any Indemnified Party pursuant to the provisions of Sections
11.01(b), (d) and (e) shall be $250,000.
50
<PAGE> 57
11.02 Notices. Except as otherwise expressly provided herein, all
-------
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to the Borrower, the
Lender or the Agent, at its address specified opposite its signature below, or
at such other address as shall be designated by such party in a written notice
to the other parties hereto. All such notices and communications shall, when
mailed, telegraphed, telecopied or sent by overnight courier, be effective when
deposited in the mails, delivered to the telegraph company or overnight courier,
as the case may be, or sent by telecopier, except that notices and
communications given to the Agent or the Lender pursuant to Section 2 and
Section 4 shall not be effective until received by the Agent or the Lender, as
the case may be.
11.03 Benefit of Agreement. This Agreement shall be binding upon
--------------------
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that the Borrower may not
-------- --------
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent and the Lender. The Lender may at any time assign
any of its rights and obligations hereunder or under the Note.
11.04 Remedies Cumulative. No failure or delay on the part of the
-------------------
Agent or the Lender or the holder of the Note in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between the Borrower and the Agent or the Lender or the holder of the Note shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights, powers and remedies herein or
in any other Credit Document expressly provided are cumulative and not exclusive
of any rights, powers or remedies which the Agent or the Lender or the holder of
the Note would otherwise have. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the Agent
or the Lender or the holder of the Note to any other or further action in any
circumstances without notice or demand.
11.05 Calculations; Computations. (a) The financial statements to
--------------------------
be furnished to the Lender pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved (except as set forth in the
notes thereto or as otherwise disclosed in writing by the Borrower to the
Lender); provided that, except as otherwise specifically provided herein, all
--------
computations determining compliance with Section 8 shall utilize accounting
principles and policies in conformity with those used to prepare the historical
financial statements referred to in Section 6.05(a).
(b) All computations of interest and the Fees hereunder shall be made
on the basis of a year of 360 days for the actual number of days occurring in
the period for which such interest or fees are payable.
11.06 Governing Law; Submission to Jurisdiction; Venue. (a) This
------------------------------------------------
Agreement and the other Credit Documents and the rights and obligation of the
parties hereunder and thereunder shall be construed in accordance with and be
governed by the law of the State of New York, without
51
<PAGE> 58
regard to principles of conflicts of laws. Any legal action or proceeding
against the Borrower with respect to this Agreement or any other Credit Document
may be brought in the courts of the State of New Jersey located in Camden County
or in the United States Federal courts located in Camden County, and, by
execution and delivery of this Agreement, the Borrower hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts.
(b) The Borrower hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
11.07 No Proceedings. The Borrower hereby covenants and agrees
--------------
that, prior to the date which is one year and one day after the payment in full
of all outstanding Commercial Paper, it will not institute against, or join any
other Person in instituting against, the Lender, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
11.08 Counterparts. This Agreement may be executed in any number
------------
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
11.09 Effectiveness. This Agreement shall become effective on the
-------------
date (the "Effective Date") on which the Borrower, the Lender and the Agent
shall have signed a copy hereof (whether the same or different copies) and shall
have delivered the same to the Agent at its Office.
11.10 Headings Descriptive. The headings of the several sections
--------------------
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
11.11 Amendment or Waiver. Neither this Agreement nor any other
-------------------
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Lender, the Agent and the Borrower.
11.12 Survival. All indemnities set forth herein including, without
--------
limitation, in Section 11.01 shall survive the execution and delivery of this
Agreement and the Note and the making and repayment of the Advances.
52
<PAGE> 59
Waiver of Jury Trial. THE LENDER, THE AGENT AND THE BORROWER BY
--------------------
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE ??H OF THEM MAY HAVE TO A
TRIAL BY JURY OF, UNDER OR IN ??N WITH THIS AGREEMENT, THE NOTE AND ANY
AGREEMENT ??ATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE ??JCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR ??OR ACTIONS OF ANY PARTY
RELATING HERETO OR THERETO. THIS ?? IS A MATERIAL INDUCEMENT FOR THE LENDER AND
THE AGENT TO ??TO THIS AGREEMENT.
WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to ??d deliver this Agreement as of the date first above written.
<TABLE>
<CAPTION>
E-LOAN, INC.
<S> <C>
??age Parkway, Suite 102
??CA 94568
??: Steven M. Majerus By /s/ Janina Pawlowski
?? No.: (925) 556-2614 Title: CEO
Capital Mortgage Services, Inc. COOPER RIVER FUNDING INC.
Executive Campus
?? Hill, NJ 08002
??ion: Martin A. Schroeter By /s/ Signature Illegible
??mile No.: (609) 661-7528 Title: Assistant Treasurer
GE CAPITAL MORTGAGE SERVICES, INC.,
??e Executive Campus as Agent
??ry Hill, NJ 08002
??tion: Martin A. Schroeter
??imile No.: (609) 661-7528 By /s/ Signature Illegible
Title: Vice President
</TABLE>
53
<PAGE> 1
EXHIBIT 10.16
LOAN PURCHASE AGREEMENT
This Agreement, dated as of September 25, 1998, is made by and between
Countrywide Home Loans, Inc., a New York corporation ("Countrywide"), and
E-Loan, Inc. , a California corporation ("Seller"), for mutual considerations
set forth herein.
Countrywide agrees to purchase certain loans secured by real property, together
with the servicing thereof (the "Loans"), from Seller under Countrywide's
mortgage loan programs, and Seller agrees to sell to Countrywide certain such
Loans pursuant to the terms and conditions set forth herein and in
Countrywide's Correspondent Lending Division Loan Purchase Program Seller's
Manual, as amended from time to time (the "Manual"). In connection therewith,
the parties agree as follows:
1. ELIGIBLE LOANS
A. Only those Loans fully complying with the standards for Conforming
Conventional, Jumbo Conventional, Government and Second Mortgage Loan
Programs set forth in the Mortgage Programs section of the Manual are
eligible for purchase under this Agreement. Seller must be approved,
qualified and/or licensed to originate such Loans.
B. Seller shall fully underwrite each Loan prior to submission to
Countrywide in accordance with Underwriting Guidelines and Lending
Requirements sections of the Manual, or, if available, use a
Countrywide-approved automated underwriting system for underwriting the
Loan.
C. Seller shall be responsible for assuring that Loans submitted to
Countrywide comply with all terms and conditions of this Agreement and
the Manual.
2. COMMITMENT TO PURCHASE LOANS
The procedure pursuant to which Seller may commit to sell a Loan to
Countrywide is detailed in the Loan Registration section of the Manual.
For purposes of this Agreement, Countrywide and Seller define a best
effort commitment to be a mandatory commitment if the Loan closes.
Countrywide will confirm the conditions of the sale of the Loan to
Countrywide by delivering a confirmation ("Commitment") to Seller which
sets forth the terms of the transaction, including the price Countrywide
will pay for each Loan, as determined pursuant to the Pricing standards
set forth in the Manual (the "Purchase Price"). The terms of the
Commitment, including the Purchase Price, shall be in effect for the
period of time requested by Seller and approved by Countrywide (the
"Commitment Period"). If Seller is approved by Countrywide to sell Loans
to Countrywide on a bulk sale basis, Countrywide and Seller shall execute
the Addendum to Loan Purchase Agreement (Bulk Sales) which shall be
attached to and incorporated into this Agreement by reference.
3. UNDERWRITING AND PROPERTY APPRAISAL
A. Countrywide shall have the right, but not the obligation, to underwrite
any Loan submitted for purchase pursuant to this Agreement, or
otherwise insure that any Loan submitted for purchase complies with all
terms and conditions of this Agreement and the Manual; provided that
neither the existence nor the exercise of this right shall affect in
any way Seller's obligations hereunder, including without limitation,
Seller's repurchase obligations under Section 7 hereof and Seller's
hold harmless obligations under Section 9 hereof. The applicable
procedures are set forth in the Prior Approval section of the Manual.
B. Seller shall deliver to Countrywide an appraisal of the real estate
security for each such Loan, signed by a qualified appraiser, as
defined in the Manual, prior to Countrywide's approval to purchase such
Loan.
<PAGE> 2
4. DELIVERY OF LOAN DOCUMENTATION
A Loan shall be deemed delivered to Countrywide if: (A) it is received by
Countrywide within the Commitment Period; (B) it is in compliance with the
requirements set forth in the Delivery of Closed Loans and Funding
Documentation sections of the Manual; and (C) there are no outstanding
conditions which would prevent Countrywide from funding the purchase of
the Loan. Failure by Seller to deliver to Countrywide within 120 days from
the date a Loan was purchased one or more of the original documents
specified in the Delivery of Closed Loans section of the Manual shall
result in assessment by Countrywide of a fee of $50 per month for each
month, after the initial 120 day period, during which one or more of such
documents is outstanding, i.e., has not been delivered to Countrywide for
any period of time during the month. Such fee shall be $50 regardless of
the number of such documents. Failure by Seller to deliver to Countrywide
one or more of the original documents specified in the Delivery of Closed
Loans section of the Manual within 270 days from the date the Loan was
purchased by Countrywide shall obligate Seller to repurchase the Loan
pursuant to the provisions of Section 7 of this Agreement.
5. PAYMENT OF PURCHASE PRICE AND SELLER'S WIRE INSTRUCTIONS
Countrywide shall, after receipt of a Loan documentation package which
fully complies with the requirements of the Manual, deliver the Purchase
Price (less any fees or discounts due to Countrywide) set forth in the
applicable Commitment to Seller in accordance with Seller's wire
instructions or in accordance with any bailee letter or trust receipt
submitted with the Loan, as determined in the sole and absolute discretion
of Countrywide.
6. SELLER'S OBLIGATIONS, REPRESENTATIONS AND WARRANTIES
A. Seller represents and warrants to Countrywide as to each Loan offered
for sale under this Agreement that as of the date of Countrywide's
purchase of such Loan:
(1) The Loan documents have been duly executed by the
trustor/mortgagor, acknowledged and recorded; each Loan is valid
and complies with all criteria contained in the Manual; the note
and deed of trust/mortgage constitute the entire Agreement
between the trustor/mortgagor and the beneficiary/mortgagee, and
there is no verbal understanding or written modification which
would affect the terms of the note or the deed of trust/mortgage
except by written instrument delivered and expressly made known
to the beneficiary/mortgagee and recorded if recording is
necessary to protect the interests of the beneficiary/mortgagee.
(2) Seller is the sole owner of the Loan and has authority to sell,
transfer and assign the same on the terms set forth herein and in
the Manual. There has been no assignment, sale or hypothecation
thereof by Seller, except the usual hypothecation of the
documents in connection with Seller's normal banking transactions
in the conduct of its business.
(3) The full principal amount of the Loan has been advanced to the
trustor/mortgagor, either by payment directly to such person or
by payment made on such person's request or approval. The unpaid
principal balance of the Loan is as represented by Seller. All
costs, fees and expenses incurred in making, closing and
recording the Loan have been paid. No part of the mortgaged
property has been released from the lien of the Loan, the terms
of the Loan have in no way been changed or modified, and the Loan
is current and not in default.
(4) Each Loan is a valid first lien or, if specifically approved by
Countrywide, a valid second lien on the mortgaged property, and
the mortgaged property is free and clear of all encumbrances and
liens having priority over the lien of such Loan, except for the
first lien, if applicable, and liens for real estate taxes and
special assessments not yet due and payable and those exceptions
allowed in connection with Government Loans and other exceptions
set forth in the Manual.
(5) The mortgaged property is free and clear of all mechanics' and
materialmen's liens or liens in the nature thereof, and no rights
are outstanding that under law could give rise to any such lien,
nor is Seller aware of any facts which could give rise to any
such lien.
2
<PAGE> 3
(6) Each Loan which Seller represents to be insured or guaranteed is,
or will within 120 days from the date of delivery of such Loan to
Countrywide be, so insured or guaranteed. No action has been
taken or failed to have been taken which has resulted or will
result in an exclusion from, denial of, or defense to, coverage
under such insurance or guarantee; and all conditions within the
control of Seller as to the validity of the insurance or guaranty
as required by the National Housing Act of 1934 and the rules and
regulations thereunder, or as required by the Servicemen's
Readjustment Act of 1944 and the rules and regulations
thereunder, or imposed by the mortgage insurance companies or
other insurers have been properly satisfied, and said insurance
or guaranty is valid and enforceable.
(7) All federal and state laws, rules and regulations applicable to
the mortgage Loans have been complied with, including but not
limited to: the Real Estate Settlement Procedures Act, the Flood
Disaster Protection Act, the Federal Consumer Credit Protection
Act including the Truth-in-Lending and Equal Credit Opportunity
Acts, and all applicable statutes or regulations governing fraud,
lack of consideration, unconscionability, consumer credit
transactions or interest charges.
(8) No Loan is the subject of, and Seller is not aware of any facts
which could give rise to, litigation which could affect
Countrywide's ability to enforce the terms of the obligation or
its rights under the mortgage documents.
(9) There is in force for each Loan either (a) a paid-up title
insurance policy on the Loan issued by a Countrywide approved
title company in an amount at least equal to the outstanding
principal balance of the Loan or (b) an attorney's mortgage lien
opinion. (Negatively amortizing loans require additional
coverage.)
(10) There is in force for each Loan valid hazard insurance policy
coverage and, where applicable, valid flood insurance policy
coverage, and such coverages meet the requirements of Countrywide
specified in the Manual.
(11) Seller will record the corporate assignment in the name of
Countrywide Home Loans, Inc., at the time the deed of
trust/mortgage is recorded, and the assignment of the Loan from
Seller to Countrywide shall be valid and enforceable.
(12) The borrower has no rights of rescission, set-offs,
counter-claims or defenses to the note or deed of trust/mortgage
securing the note arising from the acts and/or omissions of
Seller.
(13) Seller has no knowledge that any improvement located on or being
part of the mortgaged property is in violation of any applicable
zoning law or regulation.
(14) All improvements included for the purpose of determining the
appraised value of the mortgaged property lie wholly within the
boundaries and building restriction lines of such property, and
no improvements on adjoining properties encroach upon the
mortgaged property.
(15) There is no proceeding pending for total or partial condemnation
of any mortgaged property and said property is free of
substantial damage (including, but not limited to, any damage by
fire, earthquake, windstorm, vandalism or other casualty) and in
good repair.
(16) Seller has no knowledge of any circumstances or conditions with
respect to any Loan, mortgaged property, trustor/mortgagor or
trustor's/mortgagor's credit standing that reasonably could be
expected to cause private institutional investors to regard any
Loan as an unacceptable investment, cause any Loan to become
delinquent or adversely affect the value or marketability of the
Loan.
(17) All documents submitted are genuine. All other representations as
to each such Loan are true and correct and meet the requirements
and specifications of all parts of this Agreement and the Manual.
3
<PAGE> 4
B. Seller represents and warrants to Countrywide that as of the date first
set forth above and as of the date of Countrywide's purchase of each Loan
hereunder:
(1) Seller is duly organized, validly existing and in good standing
under the laws of its state of incorporation and is qualified
and/or licensed as necessary to transact business, including the
originating and selling of mortgage loans, and is in good
standing in each state where the property securing a Loan is
located.
(2) Seller has the full power and authority to hold and sell each
Loan; and neither the execution and delivery of this Agreement,
nor the acquisition or origination of the Loans, nor the sale of
the Loans, nor the consummation of the transactions contemplated
herein, nor the fulfillment of or compliance with the terms and
conditions of this Agreement will conflict with, or result in a
breach of any term, condition or provision of, Seller's
certificate of incorporation or by-laws, any license held by
Seller or governing Seller's activities or any agreement to which
Seller is a party or by which Seller is bound, or constitute a
material default or result in an acceleration under any of the
foregoing.
(3) No consent, approval, authorization or order of any court,
governmental body or any other person or entity is required for
the execution, delivery and performance by Seller of this
Agreement, including but not limited to, the sale of the Loans to
Countrywide.
(4) Neither Seller nor its agents know of any Suit, action,
arbitration or legal or administrative or other proceeding
pending or threatened against Seller which would affect its
ability to perform its obligations under this Agreement.
(5) Seller is not a party to, bound by or in breach or violation of
any agreement or instrument, or subject to or in violation of any
statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction
over it, which materially and adversely affects, or may in the
future materially and adversely affect, the ability of Seller to
perform its obligations under this Agreement or the Manual,
including, without limitation, Seller's repurchase and
indemnification obligations pursuant to Sections 7, 8 and 9 of
this Agreement.
7. SELLER'S REPURCHASE OBLIGATIONS
A. Seller shall repurchase any Loan sold to Countrywide pursuant to this
Agreement within twenty business days of receipt of written notice from
Countrywide of any of the following circumstances (the "Repurchase
Obligation"):
(1) Seller fails to deliver to Countrywide within 270 days from the
date each Loan was purchased the original documents specified in
the Delivery of Closed Loans section of the Manual.
(2) Countrywide determines that there is any evidence of fraud in the
origination of the Loan or in the sale of the Loan to Countrywide
or that any matter in the mortgage loan file is not true and
correct.
(3) If Countrywide determines the Loan is not eligible for GNMA, FNMA
or FHLMC pool participation or whole loan purchase or purchase by
a private investor, or, if Countrywide has sold such Loan in
whole or in part to GNMA, FNMA, FHLMC or a private investor, and
GNMA, FNMA, FHLMC or the private investor requires Countrywide to
repurchase said interest or reimburse it for losses, or the
mortgage insurer denies coverage on the Loan; provided the reason
for such ineligibility, repurchase, reimbursement or denial shall
be due to a failure of the Loan to meet requirements specified in
the Manual at the time of Countrywide's purchase of the Loan from
Seller.
4
<PAGE> 5
(4) If the first payment due Countrywide is not received by
Countrywide, whether from the borrower directly or forwarded by
Seller if the Borrower has submitted the payment to Seller, by
the last day of the month in which it is due, and, in addition,
at any time within the first twelve months after the Loan has
been purchased by Countrywide, the Borrower is 90 days delinquent
with respect to a monthly payment. For this purpose a Borrower
shall be considered to be 90 days delinquent on a monthly payment
if it is not received by Countrywide by the last day of the third
month, regardless of the number of days in the month. For
example, if the Borrower has not made his/her January payment by
the last day of March, the Borrower shall be considered 90 days
delinquent with respect to the January payment. Seller shall not
have the right to advance funds for or on behalf of a Borrower
for any delinquent payment or to otherwise make funds available
to any Borrower to avoid or cure a default by the Borrower. A
payment for which Countrywide deducted funds at the time it
purchased the Loan from Seller shall not be considered the first
payment due Countrywide.
(5) Seller fails to observe or perform or breaches in any material
respect any of the representations, warranties or agreements
contained in this Agreement or the Manual with respect to a
particular Loan.
(6) With respect solely to VA Loans purchased by Countrywide pursuant
to an Assignment of Trade Addendum to this Agreement or on a
Direct Trade basis pursuant to a Direct Trade Addendum to this
Agreement, if the Loan goes into foreclosure within 24 months
from the date of sale of the Loan to Countrywide as to those
Loans with full guarantees from the VA and 48 months from the
date of sale of the Loan to Countrywide as to those Loans with
partial guarantees from the VA and as to which the VA gives
Countrywide a no-bid instruction in conjunction with the
foreclosure sale on such Loan.
B. The option to request or accept repurchase of any Loan is at the sole
discretion of Countrywide. Notwithstanding that a Seller may be
obligated pursuant to the terms of this Section 7 to repurchase a Loan,
if such Loan is in compliance with all requirements of this Agreement
and the Manual at the time of its purchase by Countrywide and if there
is no evidence of fraud or misrepresentation in connection with the
Loan, Countrywide, in its sole discretion and on terms determined
solely by Countrywide, may consider permitting Seller to indemnify
Countrywide against all suits, costs, damages, losses, fees or claims,
including without limitation reasonable attorneys' fees, which may be
incurred by Countrywide in connection with such Loan. Such
indemnification shall be substantially in the form of the applicable
Indemnification Agreement, the provisions of which shall include,
without limitation, the requirement that the Seller shall pay to
Countrywide, at the time that the Indemnification Agreement is
executed, the amount specified by Countrywide as the amount necessary
to cover its projected and potential costs and losses, and including
the service release premium paid by Countrywide to the Seller with
respect to the Loan.
C. It is agreed by the parties that Seller's Repurchase Obligation with
respect to a Loan shall not be obviated by the fact that the property
securing the Loan has been foreclosed upon and said property has been
acquired by Countrywide or a third party, it being understood that the
term Repurchase Obligation encompasses within its meaning the
repurchase of the property from Countrywide if Countrywide has acquired
the property, or, if a third party has acquired the property,
reimbursing Countrywide in the amount specified in Section 8.C. of this
Agreement.
D. It is further agreed by the parties that if Countrywide has made demand
on Seller to repurchase a Loan pursuant to Section 7 of this Agreement,
Countrywide shall have the right to withhold any moneys due Seller in
connection with the Loan(s) subject to the Repurchase Obligation or any
other Loans until the parties have agreed that the Repurchase
Obligation is satisfied.
5
<PAGE> 6
8. REPURCHASE PRICE
A. The repurchase price for Loans subject to a Repurchase Obligation
pursuant to Section 7 hereof shall be as follows:
(1) The current unpaid principal balance of such Loan if it has been
pooled or resold. If such loan has not been pooled or resold by
Countrywide, the repurchase price shall be at the original price,
less principal reduction since the original purchase of the Loan
by Countrywide; plus
(2) All interest accrued but unpaid on the principal balance of the
Loan from the paid-to-date of the loan through and including the
last day of the month in which the repurchase is made; plus
(3) All expenses, including but not limited to reasonable fees and
expenses of counsel, incurred by Countrywide in enforcing
Seller's obligation to repurchase such Loan; plus
(4) The original servicing release premium paid by Countrywide with
respect to such Loan; plus
(5) Any unreimbursed advances of taxes or insurance made by
Countrywide with regard to such Loan as of the date of
repurchase; less
(6) Any proceeds of mortgage insurance with respect to the Loan
collected by Countrywide.
Upon any such repurchase of Loans by Seller, Countrywide shall
endorse the promissory note (without recourse) and shall assign
any security interest (without recourse and in recordable form)
to Seller.
B. If the real property security for the Loan has been foreclosed upon and
purchased by Countrywide at the foreclosure sale, then the repurchase
price pursuant to Section 7 hereof, notwithstanding the amount of
Countrywide's credit bid, shall be:
(1) The current unpaid principal balance of such Loan if it has been
pooled or resold. If such loan has not been pooled or resold by
Countrywide, the repurchase price shall be at the original price,
less principal reduction since the original purchase of the Loan
by Countrywide; plus
(2) All interest accrued but unpaid on the principal balance of the
Loan from the paid-to-date of the loan through and including the
last day of the month in which the foreclosure sale occurs; plus
(3) All costs and expenses, including but not limited to reasonable
fees and expenses of counsel, incurred by Countrywide in
connection with the foreclosure and in enforcing Seller's
Repurchase Obligations hereunder; plus
(4) The original servicing release premium paid by Countrywide with
regard to such Loan; plus
(5) Any unreimbursed advances of taxes or insurance made by
Countrywide with regard to such Loan as of the date of
repurchase; plus
(6) Interest on the amounts set forth in paragraphs (1) through (5)
above at the Loan rate from the end of the month in which the
foreclosure sale occurred until and including the date of
repurchase by Seller; less
(7) Any proceeds of mortgage insurance collected by Countrywide with
respect to the Loan.
Upon payment of the repurchase price, Countrywide shall transfer
title to the property securing such Loan to Seller.
6
<PAGE> 7
C. If the real property security for the Loan has been sold at foreclosure
and purchased by a third party, the amount Seller shall pay Countrywide
to fulfill its Repurchase Obligation pursuant to Section 7 of this
Agreement shall be as follows:
(1) The current unpaid principal balance of such Loan if it has been
pooled or resold. If such loan has not been pooled or resold by
Countrywide, the repurchase price shall be at the original price,
less principal reduction since the original purchase of the Loan
by Countrywide; plus
(2) All interest accrued but unpaid on the principal balance of the
Loan from the paid-to-date of the loan through and including the
last day of the month in which the foreclosure sale occurs; plus
(3) All costs and expenses, including but not limited to reasonable
fees and expenses of counsel, incurred by Countrywide in
enforcing Seller's Repurchase Obligations hereunder; plus
(4) The original servicing release premium paid by Countrywide with
regard to such Loan; plus
(5) Any unreimbursed advances of taxes or insurance made by
Countrywide with regard to such Loan as of the date of
repurchase; plus
(6) Interest on the amounts set forth in paragraphs (1) through (5)
above at the Loan rate from the end of the month in which the
foreclosure sale occurred until and including the date of
repurchase by Seller; less
(7) The net proceeds of the foreclosure sale (sale price minus costs
and expenses, including but not limited to reasonable fees and
expenses of counsel, incurred by Countrywide in connection with
the foreclosure sale); less
(8) Any proceeds of mortgage insurance collected by Countrywide in
connection with the Loan.
9. HOLD HARMLESS
A. Seller shall hold Countrywide harmless and shall indemnify Countrywide
from and against any and all suits, costs, damages, losses, fees or
claims, including without limitation reasonable attorney's fees
("Loss"), arising out of or in connection with any negligence, fraud or
a material omission on the part of Seller in receiving, processing or
funding any Loan committed to Countrywide for sale under Section 2
above, during the origination period and Commitment Period up to and
including the date the Loan is purchased by Countrywide. Seller's
obligation to Countrywide in this regard shall remain effective after
Countrywide's purchase of the Loan if the Loss arose prior to purchase
but was undetected at time of purchase. This paragraph shall not modify
Seller's obligations contained elsewhere in this Agreement.
B. Seller shall also hold Countrywide harmless and shall indemnify
Countrywide from and against any and all suits, costs, damages, fees or
claims, including without limitation reasonable attorneys' fees,
arising out of or in connection with any one or more of the items set
forth in paragraphs (1) through (6) of Section 7 A.
of this Agreement.
10. NO SOLICITATION
Loans sold to Countrywide cannot be solicited by Seller for refinance for
a period of 12 months from the date the Loan is purchased by Countrywide.
Borrowers requesting a refinance from Seller within the 12 month period
must be referred to Countrywide or, provided the refinanced loan meets all
Countrywide requirements as specified in the Manual, may be processed by
the Seller and sold to Countrywide for a service release premium, if any,
to be negotiated by the parties.
<PAGE> 8
11. PROHIBITION AGAINST USE OF NAME OR AFFILIATION
Seller shall not hold itself out as a joint venturer, partner,
representative, employee or agent of Countrywide. Nor shall it use
Countrywide's name in any advertising or written or broadcast material
without Countrywide's express prior written consent. This prohibition
shall not prevent Seller from using any advertising media provided to it
by Countrywide for use by Seller and containing any copyrighted
Countrywide name or logo. Such copyrighted name or logo shall remain in
place.
12. TERMINATION- SUSPENSION
A. This Agreement may be terminated as to future commitments for sale of
Loans by either party at any time, but such termination shall not in
any respect change or modify the obligation of Seller with respect to
Loans already subject to a Commitment. The effective time of
termination shall be the earlier of the time written notice is actually
received by the other party or five days after written notice is posted
in the United States Postal Service by the canceling party. Termination
of this Agreement shall not in any way affect either Seller's or
Countrywide's obligations, representations, warranties or
indemnifications with respect to Loans already purchased by
Countrywide; provided, however, that Countrywide may immediately
terminate its obligations hereunder without notice and immediately
return to Seller any Loans subject to a Commitment, and Seller shall
accept such loans if Countrywide reasonably determines that there has
been any deception, fraud, concealment or material misrepresentation by
Seller in performing any of its duties, obligations, responsibilities
or actions undertaken in connection with this Agreement or in
connection with any Loan sold to Countrywide pursuant to this
Agreement.
B. In addition to the termination rights set forth in Paragraph A. above,
in the event that Countrywide believes in good faith that Seller has
breached an obligation (including a Repurchase Obligation under Section
7), representation, warranty or covenant under the Agreement, or will
be unable to fulfill any of its obligations under the Agreement or the
Manual (including a Repurchase Obligation under Section 7), Countrywide
may, in its sole and absolute discretion, suspend this Agreement as to
future Commitments for the sale of Loans by Seller. Such suspension
shall be effective immediately upon Seller's receiving written notice
of same from Countrywide and shall last until Countrywide, in its sole
discretion, determines to reactive or terminate this Agreement.
13. EXHIBITS
All exhibits attached hereto or material referred to in this Agreement,
including the Manual, are incorporated by reference into this Agreement.
To the extent there are differences between requirements as stated in the
Manual and as stated in this Agreement, the provisions of this Agreement
shall govern.
14. ENTIRE AGREEMENT
The entire agreement between the parties is contained in this Agreement
and in the Manual and cannot be modified in any respect except by an
amendment in writing signed by both parties. The invalidity of any portion
of this Agreement shall in no way affect the balance thereof.
15. ASSIGNMENT
Seller may not assign its rights or delegate its duties or obligations
under this Agreement without the prior written consent of Countrywide.
This Agreement shall be binding on and inure to the benefit of the
permitted successors and assigns of the parties hereto.
8
<PAGE> 9
16. ATTORNEYS' FEES AND EXPENSES-CHOICE OF LAW AND FORUM
If any party hereto shall bring suit or other proceeding against the other
as a result of any alleged breach or failure by the other party to fulfill
or perform any covenants or obligations under this Agreement, then the
prevailing party obtaining final judgment in such action shall be entitled
to receive from the non-prevailing party reasonable attorneys' fees
incurred by reason of such action and all costs of suit and preparation
thereof at both trial and appellate levels. This Agreement shall be
governed by and construed and enforced in accordance with applicable
federal law and the laws of the State of California. In addition, any such
suit or proceeding shall be brought in the federal or state courts located
in Los Angeles County, California, which courts shall have sole and
exclusive in personam, subject matter and other jurisdiction in connection
with such suit or proceedings, and venue shall be appropriate for all
purposes in such courts.
17. NO REMEDY EXCLUSIVE--WAIVER
No remedy under this Agreement is exclusive of any other available remedy,
but each remedy shall be cumulative and shall be in addition to other
remedies given under this Agreement or existing at law or in equity.
Any forbearance by a party to this Agreement in exercising any right or
remedy under this Agreement or otherwise afforded by applicable law shall
not be a waiver or preclude the exercise of that or any other right or
remedy.
18. NOTICE
Unless otherwise provided in this Agreement, all notices under this
Agreement shall be in writing, deemed effective upon receipt and addressed
as indicated below.
To: Countrywide Home Loans, Inc. To Lender/Seller: E-Loan, Inc.
Correspondent Lending Division Mortgage Banking Department
---------------------------
155 North Lake Avenue 6200 Village Parkway, Suite 10
---------------------------
Mail Stop No. 5-53 Dublin, CA 94562-3004
---------------------------
Pasadena, California 91101 Attention: Leslie Chang
---------------------------
Attention: Vice President of Production
---------------------------
AGREED TO AND ACCEPTED BY:
Seller: E-Loan, Inc. Countrywide Home Loans, Inc.
-------------------------
By: Steve M. Majerus By: /s/ signature illegible
------------------------- --------------------------
Signature Signature
Name: Steven M. Majerus Name: Martin Govaerts
------------------------- --------------------------
Title: Director, Mortgage Banking Title: Assistant Vice President
------------------------- --------------------------
Dated: September 25, 1998 Dated: 10/28/98
------------------------- --------------------------
9
<PAGE> 10
Addendum to LOAN Purchase Agreement for Junior Loans
THIS ADDENDUM, IS MADE THIS 25th DAY OF SEPTEMBER 1998 BETWEEN
COUNTRYWIDE HOME LOANS, INC., ("COUNTRYWIDE"), AND E-LOAN, INC.
("SELLER"), TO THE LOAN PURCHASE AGREEMENT ("LPA") DATED AS OF:
SEPTEMBER 25, 1998
1. For the purposes of the sale of loans secured by liens that are other than
senior loans ("Seconds"), including home equity lines of credit ("HELOCs") and
fixed rate loans secured by junior liens, all provisions of the LPA shall be
applicable and remain valid, binding and in full force and effect, except as
specifically modified herein. For the purposes of the sale of all Loans other
than Seconds, the provisions of the LPA as they currently exist without the
modifications provided herein shall remain valid, binding and in full force and
effect. The provisions in this Addendum shall have no effect upon the
applicability of the LPA to Loans other than Seconds.
2. Wherever in the LPA the term "note" is used, the term shall include home
equity credit line agreements, and agreements of similar import. Wherever in
the LPA the term "manual" is used, the term "Guide" shall be used in its stead.
3. For the purposes of HELOCs, the first sentence of Section 6.A.(3) of the LPA
is amended and restated in its entirety as follows: "The full amount of the
draw indicated on the Authorization to Pay (as indicated in the Guide)
delivered to Lender, and no other amount, has been fully funded to the
borrower."
4. Section 6.A.(9) of the LPA is amended and restated in its entirety as
follows: "(9) There is in force for the Loan either (a) a paid-up valid and
enforceable lenders title insurance policy on the Loan insuring Seller, its
successors and assigns, issued by a Countrywide approved title company, as to
the first or second priority lien position, as applicable, in full compliance
with all requirements in the Guide, (b) an attorney's mortgage lien opinion, or
(c) if permitted under the requirements specified in the Guide, a title
guarantee or title search.
5. Section 6.A.(18) of the LPA is added to the LPA as follows: "(18) If the
Loan is in a second lien position, none of the documents evidencing, securing
or otherwise relating to the mortgage loan in the first lien position in any
way restricts or prohibits the borrower(s) from obtaining the Loan or from
creating any of the liens granted as security for the Loan and the Loan does
not violate any term or condition imposed by any such document."
6. Section 6.B.(1) of the LPA is hereby amended and restated in its entirety as
follows: "(1) Seller is duly organized, validly existing and in good standing
under the laws of its state of incorporation and is qualified and/or licensed
as necessary to transact business, including the originating and selling of
each Loan, including without limitation, with rates of interest, loan type and
other terms provided in the Loan documents, and is in good standing in each
state where property securing a Loan is located."
7. All references in Section 8 of the LPA to "service release premium" are
replaced with "premium paid to Seller by Countrywide at the time of its
purchase of the Loan".
8. The following is added as Sections 8.A.4a, 8.B.4a and 8.C.4a: "any
un-reimbursed advances made by Countrywide with respect to such Loan, including
but not limited to payments authorized by the loan documents or law to protect
the security interest; plus", and Sections 8.A(1), 8.B(1) and 8.C(1) are
amended and restated in their entirety as follows: "The repurchase price shall
be the original purchase price, less principal reduction made since the Closing
Date."
THE PARTIES HERETO DO AGREE TO THE FOREGOING AS OF THE DATE ABOVE FIRST
WRITTEN.
SELLER: E-Loan, Inc. COUNTRYWIDE HOME LOANS, INC.
---------------------
a: California Corporation A NEW YORK CORPORATION
---------------------
By: /s/ Steve M. Majerus By: /s/ illegible
--------------------- ----------------------------
SIGNATURE SIGNATURE
Name: Steven M. Majerus Name: Martin Govaerts
--------------------- --------------------------
Title: Director, Mortgage Banking Title: Assistant Vice President
--------------------- --------------------------
<PAGE> 11
ADDENDUM TO LOAN PURCHASE AGREEMENT
THIS ADDENDUM is made this 25th day of September, 1998 between Countrywide Home
Loans, Inc., ("COUNTRYWIDE") and E-LOAN, Inc. ("SELLER") to the Loan Purchase
Agreement ("LPA") dated as of September 25, 1998.
1. Definitions. The terms "Subprime Loan", "Mortgage Loan Schedule",
"Commitment", "Commitment Letter", "Pool Commitment", "Spot Commitment" and
"Closing Date" shall have the meanings set forth therefor in the "Guide" (as
defined below).
2. Commitment to Purchase Loans. The following is hereby added at the
end of the first sentence of Section 2: ", except that for the purposes of
Subprime Loans, the procedure pursuant to which Seller may commit to sell a
Subprime Loan to Countrywide is detailed in the Subprime section of the Guide."
3. Representations and Warranties.
A. Section 6.A(7) is amended and restated in its entirety as
follows: "All federal and state laws, rules and regulations applicable to the
Loan for its applicable Loan Type have been complied with, including but not
limited to: the Real Estate Settlement Procedures Act, the Flood Disaster
Protection Act, the Federal Consumer Credit Protection Act including the
Truth-in-Lending and Equal Credit Opportunity Acts, the Federal Fair Housing
Act, the Home Ownership and Equity Protection Act of 1994 and all applicable
federal and state statutes or regulations governing fraud, lack of
consideration, unconscionability, consumer credit transactions, consumer
protection, interest or other charges, licensing and mortgage insurance."
B. Section 6.B(1) is amended and restated in its entirety as
follows: "Seller is duly organized, validly existing and in good standing under
the laws of its state of incorporation and is qualified and/or licensed as
necessary to transact business, including the originating and selling of each
Loan, including without limitation, with rates of interest, loan type and other
terms provided in the Loan documents, and is in good standing in each state
where property securing a Loan is located."
C. Section 6.A(18) is added as follows: "For each Subprime
Loan, all information regarding such Subprime Loan in the Confirmation therefor
and the Mortgage Loan Schedule attached to such Confirmation is true and
correct."
4. Purchase Limitation. The obligation to purchase any Subprime Loans
identified in a Confirmation does not extend to any Loans that would violate
any representation and warranty by Seller contained in the LPA.
5. Purchase Price. The purchase price of each Subprime Loan shall be
calculated by multiplying the unpaid principal balance of each Subprime Loan
(as adjusted for the borrower's next payment) on the Closing Date by its
applicable purchase price percentage calculated in accordance with the rate
sheet at the time of purchase for "Spot" Commitments, or as stated in the
Commitment letter for "Pool" Commitments (the "PURCHASE PRICE"). If a
borrower's payment is due 15 days or earlier after the Closing Date (an "Early
Payment"), the portion of such payment attributable to principal shall be
deducted from the unpaid principal balance for calculating the Purchase Price.
Seller shall then retain borrower's Early Payment when made. The purchase
proceeds paid by Countrywide to Seller shall consist of the Purchase Price plus
accrued interest as of the Closing Date and less (i) any positive escrow
balances, and (ii) any amounts actually owed and paid by Seller for Mortgage
Loan tax service contracts and flood certification determinations which are
transferable and transferred to Countrywide on the Closing Date. Without
limitation on Countrywide's other rights herein, the Purchase Price is subject
to change if it is determined that the loan characteristics of the Subprime
Loan to be purchased differ from the characteristics represented on the
Mortgage Loan Schedule.
<PAGE> 12
6. Premium Recapture. Should any Borrower prepay a Subprime Loan
during the twelve month period following Countrywide's purchase of the loan,
Seller shall reimburse Countywide, upon demand, some or all of the purchase
price premium above par paid by Countrywide. The reimbursement shall be
calculated using the following formula for "Spot" commitments and "Pool"
commitments unless stated otherwise in the "Pool" commitment letter:
<TABLE>
<S> <C> <C> <C>
Purchase Price 12 minus the number of months
Premium x expired since the date of purchase - Prepay = Premium
----------------------------------
paid by Countrywide 12 penalty Refund
</TABLE>
7. Repurchase Price. For the purposes of determining the repurchase
price of a Subprime Loan, Sections 8.A(4), 8.B(4) and 8.C(4) are deleted, and
Sections 8.A(1), 8.B(1) and 8.C(1) are amended and restated in their entirety
as follows: "The repurchase price shall be the original Purchase Price (as
defined in this Addendum), less principal reduction made since the Closing
Date."
8. Seller's Guide. All references to "Countrywide's Correspondent
Lender Division Loan Purchase Program Seller's Manual" or "Manual" throughout
the LPA are replaced with "Countrywide's Correspondent Lending Seller's Guide"
or "Guide", respectfully. Seller acknowledges receipt of the Guide, which may
be amended, modified or supplemented from time to time by Countrywide, in its
sole and absolute discretion, which amendments, modifications or supplements
shall be effective upon Countrywide's sending the same to Seller.
9. Brokers. Neither party has employed or otherwise engaged, nor shall
employ, or otherwise engage, any broker or finder in connection with the
negotiation or execution of the LPA, this Addendum or any Commitment, nor with
respect to the transactions contemplated by this Addendum, in such a manner as
to give rise to any claim, against any party, for any brokerage commission,
finder's fee or similar payment. Each party shall indemnify and defend the
other party for any claims for brokerage commission, finder's fee or similar
payment based upon statements or agreements alleged to have been made by the
indemnifying party.
10. LPA Terms. All provisions of the LPA shall be applicable and
remain valid, binding and in full force and effect, except as specifically
modified herein.
The parties hereto do hereby agree to the foregoing as of the date
above first written.
Seller: Countrywide:
E-Loan, Inc,
--------------------- COUNTRYWIDE HOME LOANS, INC.
a: California Corporation A NEW YORK CORPORATION
---------------------
By: /s/ J. Pawlowski By: /s/ illegible
--------------------- ----------------------------
Name: Janina Pawlowski Name: Martin Govaerts
--------------------- --------------------------
Title: President Title: Assistant Vice President
--------------------- --------------------------
<PAGE> 13
MANDATORY COMMITMENTS (BULK SALES)
This agreement (the "Addendum") constitutes an Addendum to that Loan Purchase
Agreement dated September, 1998 by and between Countrywide Home Loans, Inc. a
New York Corporation ("Countrywide"), E-Loan, Inc. and a CA corporation
("Seller") (the "Agreement").
This Addendum is for the purpose of setting forth the obligations of the Seller
to Countrywide in accordance with Countrywide's mandatory commitment program,
which is further described in the Seller's Manual. The terms and conditions of
the Loan Purchase Agreement are incorporated herein by reference. This Addendum
shall modify, amend, and form a part of the terms of the Agreement. All terms
contained herein shall have the same meaning as in the Agreement, unless
otherwise defined herein. In the event of any conflict between the terms and
conditions of the Agreement and this Addendum as it pertains to the mandatory
commitment program, the terms and conditions of this Addendum shall prevail.
GENERAL
Seller may elect to deliver loans to Countrywide under the mandatory commitment
program by entering into a mandatory delivery commitment (a "Commitment") to
deliver a specified amount and type of loan on or before a specified date.
Under the mandatory commitment program, the Seller shall be obligated to pay a
mark-to-market pair-off fee if the Seller fails to deliver qualifying loans by
the date specified in the Commitment (the Commitment Expiration Date"), in the
amount specified in the Commitment (the "Commitment Amount"), or otherwise
under the terms provided in the applicable Commitment.
I. PAIR-OFF ASSESSMENT
Pair-off fees shall be assessed as of the dates and times (the "Pair-Off
Assessment Date") provided for:
(a) as of the date and time that the Seller notifies Countrywide
of its election for a reduction of any portion of the
Commitment Amount; or
(b) as of the date and time that the Seller notifies Countrywide
of its election for a program substitution as described in
the Seller's Manual for any portion of the mandatory
commitment (such substitution to be treated as a reduction of
the Commitment Amount); or
(c) as of the close of the Commitment Expiration Date if
qualifying loan files are not delivered by seller in an
amount equal to the Commitment Amount, less the allowable
delivery variance provided for in the Commitment; or
(d) as of the close of business on such date subsequent to the
Commitment Expiration Date that Countrywide determines that a
loan delivered by the Commitment Expiration Date was not
eligible for purchase.
I. PAIR-OFF CALCULATION AND PAYMENT OF PAIR-OFF FEES
The pair-off fee shall be assessed and calculated as provided:
(a) A pair-off fee shall be assessed should the Seller notify
Countrywide of its election to pair-off all or a portion of
the Commitment Amount prior to the Commitment Expiration Date
pursuant to the provisions of paragraphs I(a) and I(b) above.
In such event, the Commitment shall be amended to require
Seller to deliver, and for Countrywide to purchase, the
original Commitment Amount reduced by the amount paired-off
by Seller (the "Amended Commitment Amount") with all other
terms of the Commitment remaining unchanged. Any such amount
which Seller elects to pair-off shall hereinafter be referred
to as the "Amount Paired-Off By Seller."
(b) A pair-off fee shall be assessed should Seller fail to
deliver qualifying loans by the Commitment Expiration Date
with an aggregate principal balance equal to the Commitment
Amount or the Amended Commitment Amount applicable, less the
allowable delivery variance provided for in the Commitment.
Any such shortfall in the delivery of qualifying loans by the
Commitment Expiration Date shall be hereinafter referred to
as the "Delivery Shortfall Amount.")
<PAGE> 14
(c) The pair-off fee to be assessed on Amounts Paired-Off by
Seller and Delivery Shortfall Amounts shall be calculated by
multiplying the Amount Paired-Off by Seller or Delivery
Shortfall Amount, as applicable, by a percentage equal to the
sum of .125% (the "Administrative Fee"), plus the positive
price difference, if any, between the percentage price posted
by Countrywide as of the Pair-Off Assessment Date (on the
loans which were the subject of the Commitment), and the
percentage price to have been paid by Countrywide pursuant to
the Commitment. Countrywide's posted percentage price on the
Pair-Off Assessment Date shall be determined as follows:
i. If the Pair-Off Assessment Date is the Commitment
Expiration Date, or a subsequent date, pursuant to paragraph
I(c) and (d) above, the posted percentage price to be used
shall be that percentage price posted by Countrywide
applicable to the earliest delivery option available on such
Pair-Off Assessment Date (e.g., the price for a mandatory 2
day delivery).
ii. If the Pair-Off Assessment Date is earlier than
the Commitment Expiration Date pursuant to paragraphs I (a)
or I (b), then the posted price to be used shall be the
posted mandatory delivery price applicable to the delivery
period option which expires closest to, but not after the
Commitment Expiration Date. For Example, if the Pair-Off
Assessment Date is 40 days prior to the Commitment Expiration
Date, the posted price to be used for the pair-off fee
calculation shall be Countrywide's 29 day mandatory delivery
price on the Pair-Off assessment Date. (For purposes of this
example, available mandatory delivery periods are: 2, 7, 15,
29, 45, 60 and 75 days.)
(a) Notwithstanding the provisions of paragraph II (c) above, the
administrative fee shall be a minimum of $100.
(b) The pair-off fees assessed hereunder shall be due and payable
within five (5) business days after the Pair-Off Assessment
Date. In addition to Countrywide's other remedies, if
pair-off fees are not paid within this time period, Seller
agrees that Countrywide shall be entitled to net and offset
such fees against other amounts owed by Countrywide to
Seller.
AUTHORIZED AGENTS
The following person(s) have been authorized by appropriate resolution of
Seller to execute this Addendum and all documents necessary and appropriate to
bind Seller pursuant to the terms of this Addendum. Countrywide may rely on any
instructions received from such person(s) and the same shall be fully binding
on Seller until such time as Countrywide shall receive written instructions
revoking the authority of such person to bind Seller to any future
transactions.
1. Steve Majerus
--------------------------------------------------------
2. Christian Larsen
--------------------------------------------------------
3. Janina Pawlowski
--------------------------------------------------------
4.
--------------------------------------------------------
COUNTRYWIDE HOME LOANS, INC. ("BUYER")
BY: /s/ illegible
-------------------------------------------------------
TITLE: Assistant Vice President
-------------------------------------------------------
DATE: 10/28/98
-------------------------------------------------------
("SELLER")
BY: /s/ J. Pawlowski
-------------------------------------------------------
TITLE: President
-------------------------------------------------------
DATE: September 25, 1998
-------------------------------------------------------
<PAGE> 1
EXHIBIT 10.17
CONVENTIONAL LOAN PURCHASE AGREEMENT
This Purchase Agreement dated as of July 1, 1998, by and between
CRESTAR MORTGAGE CORPORATION, a Virginia corporation with its principal office
at 901 Semmes Avenue, Richmond, VA 23224, ("Purchaser"), and E. LOAN, Inc., a
California corporation with its principal office at 6200 Village Parkway # 102
Dublin, CA 94568 ("Seller"), provides as follows:
Section 1. RECITALS. Seller desires to originate and sell to Purchaser
on a servicing released basis certain conventional residential Mortgage Loans as
set forth in the Manual, defined below, provided to Seller by Purchaser.
Purchaser and Seller desire to set forth in this Agreement the terms and
conditions under which Mortgage Loans originated by Seller will be purchased by
Purchaser, in consideration of the mutual promises and covenants contained
herein, Seller agrees to sell Mortgage Loans to Purchaser and Purchaser agrees
to purchase Mortgage Loans from Seller, all subject to the following terms and
conditions of this Agreement.
Section 2. DEFINITIONS. As used herein, the term:
Section 2.1. "BORROWER" means the Individual(s) obligated to
repay a Mortgage Loan.
Section 2.2. "BUSINESS DAY" means any day on which Purchaser
is open to the public for business, Purchaser is normally open to the public for
business on any day other than (i) a Saturday or Sunday or (ii) New Year's Day,
Martin Luther King Day, President's Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.
Section 2.3. "CLOSING" means the time when a Borrower signs a
Note evidencing a Mortgage Loan and the Mortgage securing payment of such Note.
Section 2.4. "CLOSING PACKAGE" shall have the same meaning as
defined in the Manual.
Section 2.5. "CONFORMING" means that the Loan Amount of a
Mortgage Loan is within FHLMC/FNMA Requirements.
Section 2.6. "CONSUMER DISCLOSURES" means all disclosures or
notices required, or customarily used by residential mortgage lenders, to comply
with all applicable federal, state and local laws and regulations applying to
consumer credit transactions Involving loans secured by residential real estate,
including, without limitation, the Truth-In-Lending Act, the Real Estate
Settlement Procedures Act, the Equal Credit Opportunity Act, and the Fair Credit
Reporting Act.
Section 2.7. "CREDIT PACKAGE" shall have the same meaning as
defined in the Manual.
Section 2.8. "DELINQUENT" means that all or any part of the
monthly installment of principal and interest due on a Note is unpaid after the
due date set forth in the Note or that Escrows or other amounts required by the
Mortgage to be paid have not been paid.
Section 2.9. "ESCROWS" means all funds collected from the
Borrower to pay expenses required to be paid pursuant to the Mortgage,
including, without limitation, hazard Insurance premiums, mortgage insurance
premiums, taxes, special assessments, ground rents, water, sewer and other
governmental charges that, if not paid, may result in liens on the Secured
Property with priority over the Mortgage Loan.
<PAGE> 2
Section 2.10. "FALLOUT LOAN" means a Mortgage Loan subject to
a Lock-In which cannot be delivered according to the terms of the Lock-In,
including, without limitation, (i) a Mortgage Loan which never reaches Closing
due to Seller's denial of the Borrower's loan application or the Borrower's
withdrawal of the loan application, or (ii) a Mortgage Loan which cannot be
delivered under the terms of the Lock-In because of a change in the type of loan
requested by the Borrower, or (iii) a Mortgage Loan which Purchaser for any
reason declines to purchase.
Section 2.11. "FHLMC" means the Federal Home Loan Mortgage
Corporation.
Section 2.12. "FNMA" means the Federal National Mortgage
Association.
Section 2.13. "FHLMC/FNMA REQUIREMENTS" mean the requirements,
representations and warranties established from time to time by FHLMC and FNMA
as set forth in the FHLMC Sellers' and Servicers" Guide, the FNMA Selling Guide
or the FNMA Servicing Guide.
Section 2.14. "LOAN AMOUNT" means the principal amount of a
Mortgage Loan at the time of Closing.
Section 2.15. "LOCK-IN" means an agreement between Seller and
Purchaser establishing the price and terms for the purchase of a Mortgage Loan.
Section 2.16. "MANUAL" means the manual provided to Seller by
Purchaser, as the same may be amended and updated from time to time by
Purchaser.
Section 2.17. "MORTGAGE" means the security instrument
securing a Mortgage Loan with real property, Including, without limitation, a
mortgage, a deed of trust, a deed to secure debt, a security deed or any other
security instrument.
Section 2.18. "MORTGAGE LOAN" means any eligible conventional
Mortgage Loan product as set forth in the Manual and meeting all the
requirements of Section 4 of this Agreement. The term Mortgage Loan encompasses
all of the Seller's right, title and interest in and to the Mortgage Loan,
including, without limitation, the servicing rights, all Escrows, the Note, the
Mortgage, all applicable insurance policies and all other documentation and
Information collected by Seller in connection with the Mortgage Loan.
Section 2.19. "NON-CONFORMING" means the Loan Amount of the
Mortgage Loan exceeds FHLMC/FNMA Requirements.
Section 2.20. "NOTE" means the written Instrument evidencing
the Borrower's promise to repay the Loan Amount, plus interest, of the Mortgage
Loan.
Section 2.21. "POST CLOSING DOCUMENTS" shall have the same
meaning as defined in the Manual.
Section 2.22. "PURCHASE DATE" means the date on which the
Purchaser remits funds to Seller or to Seller's warehouse lender for the
purchase of a Mortgage Loan.
Section 2.23. "PURCHASE PRICE" means the price paid by
Purchaser for a Mortgage Loan exclusive of any Servicing-Release Premium.
Section 2.24. "SECURED PROPERTY" means the land and
improvements thereon subject to the lien of the Mortgage securing a Mortgage
Loan.
2
<PAGE> 3
Section 2.25. "SERVICING RELEASE PREMIUM" means the amount in
addition to the Purchase Price that Purchaser pays, if any, to obtain a Mortgage
Loan without reservation by Seller of the servicing right for such Mortgage
Loan.
Section 3. GENERAL. This Agreement sets forth the conditions
and procedures under which Seller will sell Mortgage Loans to Purchaser and
Purchaser will purchase Mortgage Loans from Seller. No obligation is created by
this Agreement for Seller to sell or Purchaser to purchase a particular amount
of Mortgage Loans or any particular Mortgage Loan.
Section 4. MORTGAGE LOANS ELIGIBLE FOR PURCHASE. A Mortgage
Loan must meet the following criteria to be eligible for purchase by Purchaser
pursuant to this Agreement:
Section 4.1. ELIGIBLE PROPERTY AND LIEN STATUS. A Mortgage
Loan must be secured by a first priority lien Mortgage on a one-to-four family
residential dwelling located in a state or jurisdiction in the United States
approved by Purchaser, as set forth in the Manual.
Section 4.2. PURCHASE OF LOANS ORIGINATED BY A PARTY OTHER
THAN SELLER. Purchaser shall have no obligation to purchase a Mortgage Loan
originated by a person other than Seller. For purposes of this Section 4.2,
origination by a person other than Seller shall mean that any or all of the
following conditions, as applicable, exist: (i) the loan application was taken
by, or (ii) documents evidencing the credit-worthiness of the Mortgage Loan were
collected by, or (iii) the appraisal of the Secured Property was obtained by, or
(iv) the Mortgage Loan was closed by and/or in the name of a person other than
Seller or other than a person in the direct and principal employment of Seller
or other than a settlement agent acting on behalf of Seller. Notwithstanding the
foregoing, for purposes of this paragraph Section 4.2, loan applications
transferred from another lender to Seller for the convenience of the borrower
and not as part of any business arrangement between the lender and Seller shall
not be considered by Purchaser to be an origination by a person other than
Seller.
Section 4.3. UNDERWRITING GUIDELINES. Each Mortgage Loan
purchased by Purchaser pursuant to this Agreement must conform to Purchaser's
underwriting guidelines as set forth in the Manual as of the date the Credit
Package is received by Purchaser or by Purchaser's designated underwriter.
Section 4.4. SUBJECT TO LOCK-IN. Each Mortgage Loan purchased
by Purchaser pursuant to this Agreement must be subject to a Lock-In no later
than one Business Day prior to delivery of the Mortgage Loan to Purchaser.
Section 5. TERMS OF LOCK-IN.
Section 5.1. LOCK-IN OF PURCHASE TERMS. Seller must obtain
from Purchaser a Lock-In for each Mortgage Loan to be offered for sale to
Purchaser not later than one Business Day prior to delivery of the Mortgage Loan
to Purchaser. The Lock-In shall establish the agreement of Seller to sell and
Purchaser to purchase a particular Mortgage Loan subject to the terms and
conditions of this Agreement and the Manual. Each Lock-In must relate to a
particular Mortgage Loan. Seller may obtain a Lock-In of the Purchase Price and
purchase terms for a particular Mortgage Loan according to procedures described
in the Manual. Each Lock-In will have a stated expiration date. In addition to
the purchase terms established by the Lock-In, Purchaser may charge to Seller
fees in connection with the purchase or underwriting of Mortgage Loans,
including without limitation underwriting and funding fees as set forth in the
Manual.
Section 5.2. TIME WHEN LOCK-IN PRICES ARE ESTABLISHED.
Purchaser will establish each Business Day, the Purchase Price and
Servicing-Release Premium it will pay for Mortgage Loans and will communicate
such information to Seller in the time and manner set forth in the Manual.
Section 5.3. CONFIRMATION OF LOCK-IN. Purchaser will confirm
any Lock-In in writing according to procedures described in the Manual.
3
<PAGE> 4
Section 5.4. CLOSING OF MORTGAGE LOAN SUBJECT TO A LOCK-IN.
Seller agrees to close and deliver the Mortgage Loan on or before the expiration
of a Lock-In. If the Mortgage Loan is not closed and delivered on or before the
expiration of the Lock-In, the Mortgage Loan shall be subject to repricing as
described in the Manual.
Section 5.5. DELIVERY OF MORTGAGE LOAN SUBJECT TO A LOCK-IN.
Seller agrees to deliver the Mortgage Loan to Purchaser for purchase within
fifteen calendar days after its Closing. If such delivery is not made, the
Mortgage Loan shall be subject to repricing as described in the Manual.
Section 5.6. BEST EFFORTS LOCK-INS AND MANDATORY LOCK-INS.
Purchaser may offer either "best efforts" Lock-Ins or "mandatory" Lock-Ins, or
both. The terms of best efforts Lock-Ins include: (1) Seller will use its best
efforts to close the Mortgage Loan according to the terms of the Lock-In, (2) if
the Borrower changes the type of Mortgage Loan requested with the result that
the terms of the Mortgage Loan no longer agree with the terms of the Lock-In,
Seller will notify Purchaser in accordance with the procedures in the Manual and
the Lock-In price may be changed at Purchaser's discretion, and (3) after
Closing, the Mortgage Loan is required to be delivered to Purchaser. Seller must
notify Purchaser of any Mortgage Loan subject to a Lock-In that does not reach
Closing in accordance with the procedures with the Manual. Purchaser reserves
the right to verify with the Borrower or by other means that the Mortgage Loan
did not reach Closing. If Seller fails to deliver to Purchaser after Closing a
Mortgage Loan subject to a best efforts Lock-In, such failure constitutes an
Event of Default under this Agreement and, notwithstanding any other remedies
set forth in Section 13 of this Agreement, Purchaser in its sole discretion may
assess a pair-off fee as described and calculated in accordance with the
provisions of the Manual. If the Lock-In is designated as a mandatory Lock-In,
Seller must deliver the Mortgage Loan to Purchaser or pay Purchaser a pair-off
fee, as described and calculated in accordance with the provisions of the
Manual, regardless of whether or not the Mortgage Loan closes.
Section 5.7. FALLOUT LOANS.
a. NOTIFICATION. Seller shall notify Purchaser
immediately in accordance with the procedures in the Manual of any Mortgage Loan
which is a Fallout Loan. Such Notification must include the reason the Mortgage
Loan became a Fallout Loan, documented in accordance with the Manual.
b. MONITORING THE AMOUNT OF FALLOUT LOANS. Purchaser
shall evaluate Seller's performance in managing Fallout Loans according to
parameters described in the Manual. Seller's failure to manage Fallout Loans
effectively may cause Purchaser to terminate this Agreement pursuant to 17
below.
Section 6. APPROVAL OF MORTGAGE LOANS.
Section 6.1. SUBMISSION OF CREDIT PACKAGE. Prior to closing a
Mortgage Loan, Seller shall submit to Purchaser or Purchaser's designated
underwriter the Credit Package for such Mortgage Loan as described and defined
in the Manual. Seller agrees to pay an underwriter fee as set forth in the
Manual for each conforming Mortgage Loan purchased and for each non-conforming
Mortgage Loan submitted to Purchaser for review. Underwriting fees will be
deducted from the funding on conforming and non-conforming Mortgage Loans. The
FHLMC/FNMA Requirements and the requirements of the Manual applicable to credit
and appraisal standards in effect as of the date a Credit Package is received by
Purchaser shall apply to the related Mortgage Loan.
Section 6.2. NOTIFICATION OF APPROVAL DECISION. Purchaser will
use its best efforts to review and notify Seller of its purchase decision within
two Business Days, but in no event later than five Business Days, after
receiving the Credit Package for a Conforming Mortgage Loan. For Non-conforming
Mortgage Loans, the underwriting may be performed by a mortgage insurance
company or Investor designated by Purchaser and that company's policy concerning
turnaround time shall apply. If the Credit Package is incomplete, Purchaser or
Purchaser's designated underwriter shall notify Seller of the missing
documentation, and Purchaser shall have no obligation to make a purchase
decision on the Mortgage Loan until such documentation is received.
4
<PAGE> 5
Section 6.3. ISSUANCE OF UNDERWRITER'S APPROVAL. Upon approval
of a Credit Package for purchase, Purchaser shall issue to Seller a notification
that the Mortgage Loan has been approved (the "Underwriter's Approval"), stating
the conditions upon which purchase shall be made. The Lock-In, rather than the
Underwriter's Approval, shall establish the Purchase Price for the Mortgage
Loan. Unless an Underwriter's Approval has been issued with respect to a Credit
Package, Purchaser shall have no obligations under this Agreement to purchase
the related Mortgage Loan. The purchase will be subject to the conditions set
forth in the Underwriter's Approval, the Lock-In, the Manual and this Agreement.
Each Underwriter's Approval shall state an expiration date. If Seller does not
close a Mortgage Loan on or before such expiration date, Seller shall resubmit
to Purchaser the Credit Package along with such updated information as may be
required by Purchaser for reapproval and issuance of a new Underwriter's
Approval.
Section 6.4. RETENTION OF CREDIT PACKAGE. If an Underwriter's
Approval has been issued, Purchaser will retain the Credit Package pending
Closing and purchase of the Mortgage Loan unless alternative arrangements are
agreed to by Purchaser and Seller.
Section 7. CLOSING OF MORTGAGE LOANS.
Section 7.1. CLOSING A MORTGAGE LOAN SUBJECT TO A LOCK-IN.
Seller agrees to notify Purchaser of the Closing not later than one Business Day
after the Closing of any Mortgage Loan subject to a Lock-In. Seller agrees not
to close any Mortgage Loan subject to a Lock-In unless Purchaser has issued an
Underwriter's Approval which is in effect at the Closing.
Section 7.2. TRANSMITTAL OF CLOSING PACKAGE TO PURCHASER.
Within fifteen calendar days after the Closing of a Mortgage Loan, Seller shall
provide to Purchaser the Closing Package as described and defined in the Manual.
Seller agrees to do all acts necessary to transfer ownership of Mortgage Loan to
Purchaser and shall assign and deliver the Closing Package to Purchaser with
respect to the purchase of each Mortgage Loan, subject to the approval of
Purchaser as to proper form, content and execution of all documents related to
the Mortgage Loan. Purchaser shall use its best efforts to notify Seller within
two Business Days, but in no event in more than five Business Days, if the
Closing Package complies with Purchaser's requirements. The Closing Package will
not be satisfactory if (i) it does not satisfy the terms and conditions of the
Underwriter's Approval, the Lock-In, the Manual and this Agreement, or (ii) it
contains one or more errors or is incomplete. If Purchaser determines that a
Closing Package is not satisfactory due to an error or an omission that can be
corrected, Purchaser shall grant to Seller an additional period of five Business
Days, starting on the date that Purchaser notifies Seller of an unsatisfactory
Mortgage Loan or starting fifteen calendar days After Closing, whichever occurs
later, to correct any defect. If Seller corrects the defect within such five
Business Day period, Purchaser shall purchase the Mortgage Loan in accordance
with the Lock-In terms. If the defect is corrected after this time period,
Purchaser shall have the option to establish a new Purchase Price for the
Mortgage Loan.
Section 7.3. ORIGINAL NOTE. If a copy of the Note was provided
to Purchaser with the Closing Package, Seller agrees to deliver the original
Note, properly endorsed, to Purchaser prior to the Purchase Date.
Section 7.4. PURCHASE FUNDS. In the event Purchaser determines
that a Mortgage Loan is acceptable for purchase, Purchaser shall transmit the
purchase funds for the Mortgage Loan within five Business Days after receiving
the Closing Package for such Mortgage Loan, provided, however, if the Note is
received by Purchaser five or more Business Days after receipt of the Closing
Package, Purchaser shall have two Business Days after receipt of the Note in
which to transmit the purchase funds. The purchase funds will be transmitted net
of any amounts due Purchaser in connection with such purchase, including,
without limitation, all funds held in Escrow. Any funds due Seller by Purchaser
in connection with such purchase, including, without limitation, per diem
interest and any Servicing-Release Premium that may be owed, will be added to
the purchase funds transmitted to Seller on the Purchase date. Purchaser shall
have the right to offset any amount owed by Seller to Purchaser against any and
all balances, credits, deposits, accounts or monies of Seller then or thereafter
held by Purchaser.
5
<PAGE> 6
title insurance policy with respect to the Secured Property issued by a title
insurance company acceptable to Purchaser on standard ALTA mortgagee policy
forms in an amount satisfactory to Purchaser and containing all applicable
endorsements. By assignment or endorsement of Seller's Interest, Purchaser, its
successors and assigns, is designated as a mortgagee and additional named
insured with regard to the title insurance. Seller has not done, by act or
omission, anything which would impair the title insurance coverage.
Section 8.6. SECURED PROPERTY INTACT. The Secured Property has
not been damaged so as to adversely and materially affect its value and is
otherwise in good repair. There are no proceedings pending for the partial or
total condemnation of the Secured Property.
Section 8.7. HAZARD AND CASUALTY INSURANCE. There is in force
for the Mortgage Loan adequate hazard and casualty insurance coverage with
respect to the Secured Property in an amount and pursuant to a policy of
insurance satisfactory to Purchaser insuring against fire or other casualty,
and, if required by federal law, flood insurance. By assignment or endorsement
of Seller's Interest, Purchaser, its successors and assigns, is designated as a
mortgagee and additional named insured with regard to such insurance.
Section 8.8. DELINQUENT STATUS. As of the Purchase Date, the
Mortgage Loan is not sixteen calendar days or more Delinquent and Seller has no
knowledge of any default or breach existing or threatened under the Security
Instrument or Note.
Section 8.9. MODIFICATION OF MORTGAGE LOAN DOCUMENTATION. The
terms of the Mortgage Loan have in no way been changed or modified and the lien
of the Security Instrument has not been released or subordinated. All Mortgage
Loan documentation submitted to Purchaser is genuine, complete and accurate, and
all representations as to each Mortgage Loan are true and correct and meet the
requirements and specifications of all parts of this Agreement.
Section 8.10. TAXES. All taxes due and payable on or prior to
the Purchase date with respect to the Secured Property have been paid in full.
Section 8.11. ACCEPTABLE INVESTMENT. Seller has no knowledge
of any circumstances or conditions with respect to the Mortgage Loan, the real
property secured by the Security Instrument, the Borrower or the Borrower's
credit standing that can reasonably be expected to: (i) cause private
institutional investors to regard the Mortgage Loan as an unacceptable
Investment; or (ii) cause the Mortgage Loan to become delinquent; or (iii)
adversely affect the Mortgage Loan's value or marketability.
Section 8.12. ASSIGNMENT. A valid and recordable instrument of
assignment, recorded, has been duly executed and delivered by the proper
person(s) or entity(ies) to Purchaser, and such assignment is not subject to any
other assignment, claim, lien, mortgage, pledge, charge, security interest or
encumbrance.
Section 8.13. QUALIFICATION OF SELLER. Seller has been duly
incorporated and is validly existing and in good standing under the laws of the
state of its incorporation. Seller is duly and validly qualified and authorized
to do business and to originate and sell the Mortgage Loans in each state where
the Secured Property is located or, in the event Seller is not so qualified, the
lending of money and the acquisition and holding of Mortgage Loans does not
constitute doing business in such state. Seller has all licenses required to
engage in such transactions in each state where it originates Mortgage Loans.
Section 8.14. QUALIFICATION OF APPRAISER. All appraisers
performing and furnishing appraisals with respect to a Mortgage Loan must meet
the qualifications set forth in the Manual.
Section 9. OTHER WARRANTIES AND REPRESENTATIONS. Seller represents and
warrants to Purchaser as of the date of this Agreement as follows:
Section 9.1. DUE EXECUTION AND DELIVERY. The execution and
delivery of this Agreement are within the corporate powers of Seller and have
been duly authorized by all necessary action on the part of the
7
<PAGE> 7
Seller and neither the execution and delivery of this Agreement by Seller, nor
the consummation by Seller of the transactions herein contemplated nor
compliance with the provisions hereof by Seller will (i) conflict with or result
in a breach of, or constitute a default under, any of the provisions of the
articles of Incorporation or bylaws of Seller or any law, governmental rule or
regulation, or any Judgment, decree, or order binding on Seller, or any of its
properties, or any of the provisions of any indenture, mortgage, deed of trust,
contract or other instrument to which it is a party or by which it is bound or
(ii) result in the creation or imposition of any lien, charge, or encumbrance
upon any of its properties pursuant to the terms of any such indenture,
mortgage, deed of trust, contract or other instrument.
Section 9.2. BINDING AGREEMENT. This Agreement has been
executed and delivered by Seller and constitutes a legal, valid and binding
agreement of Seller, enforceable in accordance with Its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization, Insolvency,
or other similar laws affecting creditors rights generally from time to time in
effect, and to general principles of equity.
Section 9A. SURVIVAL OF WARRANTIES. The representations and warranties
made in this Agreement in Sections 8 and 9 above or elsewhere, shall survive the
Purchase Date and shall Inure to the benefit of Purchaser, its successors,
affiliates and assigns and with respect to any Mortgage Loan, regardless of any
review or investigation made by or on behalf of Purchaser.
Section 10. COVENANT REGARDING TAXES. Seller hereby covenants and
agrees with Purchaser that if any taxes relating to the Secured Property are due
within the sixty calendar days following the Closing date, and the bills for
such taxes are available as of the Closing date, Seller will cause the taxes to
be paid in full by the due date.
Section 11. REPURCHASE REQUIREMENTS. In addition to any other rights
and remedies which Purchaser may have against Seller, Seller agrees to
repurchase any Mortgage Loan within ten calendar days after Purchaser's demand,
and to indemnify Purchaser for any incurred loss or liability resulting from the
occurrence of any of the following events:
Section 11.1. BREACH OF WARRANTY OR REPRESENTATION. Purchaser
has determined that there exists a breach of any representation or warranty made
pursuant to this Agreement, provided that Seller shall have fifteen calendar
days following notice thereof to cure any breach resulting from a clerical
error.
Section 11.2. TIMELY DELIVERY OF POST-CLOSING DOCUMENTS. The
Post-closing Documents or any other documentation or corrections of any
documentation have not been delivered within the time periods set forth in this
Agreement.
Section 11.3. FALSE OR MISLEADING STATEMENTS. Purchaser
determines that any information submitted to seller or any statement, report or
document furnished by Seller to Purchaser hereunder was incomplete, inaccurate,
false, or misleading in any material respect when made or delivered. This
provision includes any condominium or PUD warranties made by Seller to
Purchaser.
Section 11.4. REPURCHASE OF EARLY DEFAULTS. Seller agrees to
repurchase any conforming or non-conforming conventional Mortgage Loan from
Purchaser if a default occurs with respect to the payment of any installment of
principal and interest due on the first payment due date after the Purchase
Date.
Section 12. REPURCHASE PRICE. In the event Seller is obligated to
repurchase a Mortgage Loan, the repurchase price shall be at par or at the
purchase price paid by Purchaser, whichever is greater, in an amount equal to
the then unpaid principal balance of such Mortgage Loan, plus all accrued and
unpaid interest and any costs or expenses, including, without limitation,
reasonable attorney's fees and expenses and court costs incurred by Purchaser in
connection with the repurchase of any such Mortgage Loan, enforcing such
repurchase obligation, enforcing any obligation of the Borrower arising under
the Note or foreclosing on the Secured Property. In addition, Seller shall repay
to Purchaser any Servicing-Release Premium paid by Purchaser in connection with
such repurchased Mortgage Loan. Purchaser shall have the right to offset the
8
<PAGE> 8
amount owed by Seller to Purchaser against any and all balances, credits,
deposits, accounts or monies of Seller then or thereafter held by Purchaser.
Purchaser may, at the request of Seller, perform the servicing of a Mortgage
Loan that Seller is required to repurchase pursuant to the provisions of this
Agreement. The repurchase obligations under this Agreement shall survive (i)
purchase of the Mortgage Loan; (ii) any transfer or grant of any interest in or
sale of the Mortgage Loan by Purchaser or its affiliates or any of their
successors or assignees; and (iii) termination of this Agreement.
Section 13. EVENTS OF DEFAULT. Purchaser, at its option, shall have the
right to immediately terminate this Agreement without notice should an Event of
Default occur. In the event this Agreement is terminated, no additional Lock-Ins
will be permitted. The following shall be Events of Default under this
Agreement:
Section 13.1. Repeated breaches by Seller of any warranty or
representation contained in this Agreement, regardless of any action by Seller
to cure breaches.
Section 13.2. Repeated failure by Seller to deliver to
Purchaser any Closing Documents or Post-closing Documents within the time
periods required by the Manual or this Agreement.
Section 13.3. Detection by Purchaser of participation by
Seller or any of Seller's employees in fraudulently documenting one or more
Mortgage Loans that are sold or offered for sale to Purchaser.
Section 13.4. Failure by Seller to use its best efforts to
close and deliver Mortgage Loans subject to a Lock-In to Purchaser for purchase
pursuant to the terms of this Agreement.
Section 14. INDEMNITY. Seller hereby agrees to indemnify and hold
harmless Purchaser and its affiliates and the successors and assigns of
Purchaser and its affiliates collectively referred to herein as "Indemnities"
from and against any and all claims, losses, damages, fines, penalties,
forfeitures, legal fees, judgments and any costs, fees and expenses relating to
(i) a breach by Seller of any representation, warranty or obligation contained
in or made pursuant to the Manual, this Agreement or any other agreement between
Seller and Purchaser relating to the purchase of Mortgage Loans, (ii) a failure
by Seller to disclose any information that renders any such representation or
warranty misleading or inaccurate, or (iii) any material inaccuracy in
information provided to Purchaser or misrepresentation made to Purchaser
concerning any Mortgage Loan which is known to Seller or which Seller should
have known if it exercised practices customarily undertaken by prudent
residential mortgage lenders. This indemnification shall survive purchase, sale
or transfer of the Mortgage Loan or any Interest therein by any of the
indemnities, the liquidation of the Mortgage Loan or the termination of this
Agreement.
Section 15. RELATIONSHIP OF PARTIES. The parties understand and agree
that neither party shall be deemed an agent, employee or legal representative of
the other party, and that each party is acting solely on its own behalf and as
an independent contractor. Neither party to this Agreement shall have the power
or authority to represent, act for, bind or commit the other party in connection
with any action taken pursuant to this Agreement. Neither execution nor
performance of this Agreement shall be construed to establish any partnership or
joint venture between the parties.
Section 16. NOTICES. All Notices required to be given hereunder shall
be in writing; provided, however, that at Seller's request Purchaser may give
any notice orally to Seller, and provided further, that in the event any notice
is given orally by Purchaser, Purchaser shall not be liable or responsible in
any respect for any error, omission or delay in providing such oral notice. Any
written notice required or permitted to be given hereunder shall be sufficient,
if either personally delivered or sent by U.S. Mail, postage prepaid, to the
following addresses:
If to Purchaser: Crestar Mortgage Corporation
901 Semmes Avenue
Richmond, Virginia 23224
Attention: Correspondent Loan Department
9
<PAGE> 9
If to Seller: E LOAN, Inc.
6200 Village Parkway #102
Dublin, CA 94568
Attn: Frank Mu??
Section 17. TERM OF AGREEMENT. This Agreement may be terminated by
either party at any time without cause by giving fifteen calendar days notice to
the other party. In addition, this Agreement may be terminated by Purchaser
pursuant to the provision of Section 13 hereof. Upon such notification,
Purchaser shall cease accepting Mortgage Loans for credit approval as of the
effective date of termination, but purchase pursuant to the terms of this
Agreement any Mortgage Loans for which as Underwriter's Approval is in effect as
of the termination date. Seller's representations, warranties, covenants and its
obligation to indemnify Purchaser as to repurchase Mortgage Loans shall survive
termination of this Agreement.
Section 18. FINANCIAL STATEMENTS. Seller will deliver to Purchaser
financial statements of Seller, as specified in the manual, within ninety
calendar days after the end of the Seller's fiscal year.
Section 19. ASSIGNMENT. This Agreement may not be assigned by Seller
without prior written consent of Purchaser.
Section 20. THE MANUAL. The Manual provided to Seller by Purchaser is
incorporated herein by reference and shall be deemed to supplement this
Agreement. All Mortgage Loans purchased pursuant to the Agreement will be
subject to the terms of the Manual and this Agreement. Purchaser reserves the
right to amend the Manual in its sole discretion from time to time by giving
written notice of such amendments to Seller.
Section 21. ENTIRE AGREEMENT. This Agreement and the Manual constitute
the entire understanding of the parties with respect to the purchase and safe of
Mortgage Loans covered by this Agreement. No modification or amendment of this
Agreement shall be valid unless set forth in writing and executed by both Seller
and Purchaser
Section 22. NO WAIVER; RIGHTS AND REMEDIES CUMULATIVE. No failure or
any delay on the part of Purchaser in exercising its rights, powers, privileges
or remedies hereunder shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other future exercise or the exercise of
any other rights, powers, privileges or remedies, all of which shall be
cumulative
Section 23. CAPTIONS. The captions of the various sections of this
Agreement have been inserted only for purposes of convenience. Such captions are
not part of this Agreement and shall not be deemed in any manner to modify,
explain, enlarge or restrict any provisions of this Agreement.
Section 24. APPLICABLE LAW. This Agreement shall be enforced and
interpreted in accordance with the laws of the Commonwealth of Virginia.
Section 25. TRAINING FEES. Seller agrees to reimburse Purchaser for
travel expenses incurred during training of Seller should training be mutually
agreed upon as necessary.
Section 26. VALID AGREEMENT. This Agreement is not valid until accepted
and signed by Purchaser.
Section 27. AGREEMENT OF NON-SOLICITATION. Seller agrees it will not,
after the execution of this Agreement, make any direct solicitation of any kind
of the Borrowers, including, without limitation, solicitation to refinance any
of the Mortgage Loans, or take any other action which would otherwise encourage
the prepayment of any of the Mortgage Loans. In addition, Seller agrees that it
will neither transfer or otherwise disclose any
10
<PAGE> 10
information with respect to the Mortgage Loans to a third party, nor assist any
other person or entity in making any direct solicitation of the respective
Borrowers.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by its
duly authorized officer, all as of the date first above written.
CRESTAR MORTGAGE CORPORATION SELLER
By: /s/ Signature Illegible By: /s/ Steve M. Majerus
Title: /s/ Signature Illegible Title: Director, Mortgage Banking
11
<PAGE> 1
EXHIBIT 10.18
GMAC MORTGAGE CORPORATION SELLER'S AGREEMENT
RESIDENTIAL MORTGAGE LOANS
BETWEEN
E-LOAN, INC.
"SELLER"
AND
GMAC MORTGAGE CORPORATION
"PURCHASER"
DATED AS OF
JULY 1, 1998
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
SECTION Page
<S> <C> <C>
Definitions 1
ARTICLE II
SALE AND DELIVERY OF MORTGAGE LOANS
2.1 Offer 4
2.2 Acceptance 4
2.3 Exclusions 4
2.4 Closing 4
2.5 Computation; Adjustment 5
2.6 Refund of Premium 5
ARTICLE III
GENERAL REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Due Organization and Good Standing 6
3.2 Authority and Capacity 6
3.3 Effective Agreement 6
3.4 Compliance with Contracts and Regulations 6
3.5 Sale Treatment 6
3.6 Litigation; Compliance with Laws 6
3.7 Statements Made 7
3.8 Bulk Sales 7
3.9 Compliance 7
3.10 Agency Approvals 7
3.11 Financial Statements 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO MORTGAGE LOANS
4.1 Origination of Mortgage Loans 8
4.2 Information 8
4.3 Mortgage File 8
4.4 Ownership of Mortgage Loans 8
4.5 Compliance with Applicable Law 8
4.6 Right of Rescission 8
4.7 Enforceability; No Setoff 8
4.8 Enforceable Provisions 8
4.9 Lien Priority 9
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
SECTION Page
<S> <C> <C>
4.10 Assignment of Mortgage 9
4.11 No Modifications 9
4.12 Mortgage In Effect 9
4.13 No Default 9
4.14 Trustee 9
4.15 Title Insurance 9
4.16 Hazard and Flood Insurance 10
4.17 Appraisals 10
4.18 No Condemnation 10
4.19 Property Condition 10
4.20 Senior Lienholders 10
4.21 Proceeds Disbursed 10
4.22 Mechanic's Liens 10
4.23 No Accrued Liabilities 11
4.24 No Adverse Selection 11
4.25 Acceptable Investment 11
4.26 Environmental Conditions 11
4.27 Fraud 11
4.28 Reverse Mortgages 11
4.29 Qualified Originator 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 Due Organization and Good Standing 12
5.2 Authority and Capacity 12
5.3 Effective Agreement 12
5.4 Litigation 12
5.5 Consent 12
5.6 Agency Approval 12
ARTICLE VI
COVENANTS
6.1 Further Assurances and Corrective Instruments 13
6.2 Transfer of Insurance 13
6.3 Insurance Prepayment 13
6.4 Post-closing Payments 13
6.5 No Solicitation 13
6.6 Use of Name 13
6.7 Limited Power of Attorney 13
6.8 Public Announcement 14
6.9 Certain Notifications 14
6.10 Post-closing Reporting 14
6.11 Ongoing Due Diligence Review 15
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
SECTION Page
<S> <C> <C>
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
7.1 Representations 16
7.2 Compliance with this Agreement 16
7.3 Documentation and Files; Compliance 16
7.4 Corporate Resolution 16
7.5 Opinion 16
7.6 Officer's Certificate 16
7.7 Material Adverse Change 16
ARTICLE VIII
REMEDIES
8.1 Indemnification by Seller 17
8.2 Repurchase 17
8.3 Indemnification by Purchaser 18
8.4 Notice of Claim 18
8.5 Limitation of Liability 18
ARTICLE IX
TERMINATION
9.1 Termination without Cause 19
9.1 Termination without Cause 19
9.3 Seller's Termination for Cause 19
9.4 Effect of Termination 20
9.5 Survival of Obligations and Covenants 20
ARTICLE X
MISCELLANEOUS
10.1 Costs and Expenses 21
10.2 Confidentiality of Information 21
10.3 Broker's Fees 21
10.4 Survival 21
10.5 Notices 21
10.6 Applicable Law 22
10.7 Jurisdiction and Venue 22
10.8 Integration 22
10.9 Modification 22
10.10 Third Party Beneficiaries 22
10.11 Construction 22
10.12 Captions 22
10.13 Counterparts 22
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
SECTION Page
<S> <C> <C>
10.14 Attorneys' Fees 23
10.15 Binding Effect and Assignment 23
10.16 Incorporation of Exhibits 23
EXHIBITS
- --------
EXHIBIT A Mortgage Loan Schedule
EXHIBIT B Contents of Mortgage File
EXHIBIT C Purchaser's Guidelines
EXHIBIT D Form of Corporate Resolution
EXHIBIT E Form of Opinion of Counsel
EXHIBIT F Form of Officer's Certificate
EXHIBIT G GMAC Mortgage Servicing Released Delivery Transmittal
</TABLE>
iv
<PAGE> 6
GMAC MORTGAGE CORPORATION SELLER'S AGREEMENT
(MORTGAGE LOANS - FLOW DELIVERY)
GMAC MORTGAGE CORPORATION SELLER'S AGREEMENT (the "Agreement"), dated as
of June 29, 1998 by and between E-LOAN, INC. ("Seller"), a Massachusetts
corporation with its principal office located at 6200 Village Parkway, Suite
102, Dublin, CA 94568 and GMAC MORTGAGE CORPORATION ("Purchaser"), a
Pennsylvania corporation with its principal office located at 100 Witmer Road,
Horsham, Pennsylvania 19044.
RECITALS
1. Seller is engaged in the origination and sale of Mortgage Loans (as
hereinafter defined); and
2. Seller desires to sell on a servicing-released basis, from time to
time, and Purchaser desires to purchase, from time to time, all right, title,
and interest in and to Mortgage Loans originated by Seller in accordance with
the terms and conditions of this Agreement. This Agreement shall apply to every
sale transaction and transfer between Purchaser and Seller with respect to
Mortgage Loans, except as otherwise agreed by the parties.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
All words or phrases defined in this Article I (except as herein
otherwise expressly provided or unless the context otherwise requires) shall,
for the purposes of this Agreement, have the respective meanings specified in
this Article.
1.1 AFFILIATE means with respect to any party hereto, any person or
entity which controls, is controlled by, or is under common control with, such
party.
1.2 AGENCIES means The Federal National Mortgage Association and The
Federal Home Loan Mortgage Corporation, The Department of Housing and Urban
Development, and the Government National Mortgage Association or any successor
organizations thereto.
1.3 AGREEMENT means this GMAC Mortgage Corporation Seller's Agreement
and all exhibits, schedules, amendments and supplements attached hereto, and any
written amendments or modifications hereto signed by both Seller and Purchaser.
<PAGE> 7
1.4 APPLICABLE LAW means all applicable federal, state and local legal
and regulatory requirements (including statutes, rules, regulations and
ordinances), all other requirements and guidelines of each governmental agency,
board, commission, instrumentality and other governmental body or officer having
jurisdiction, and all applicable judicial and administrative judgments, orders,
stipulations, awards, writs and injunctions. Applicable Law includes without
limitation applicable provisions of the Equal Credit Opportunity Act, the
Truth-in-Lending Act, the Real Estate Settlement Procedures Act, the Flood
Disaster Protection Act, the Fair Credit Reporting Act, the Fair Housing Act,
the Home Mortgage Disclosure Act and regulations promulgated with respect
thereto.
1.5 ASSIGNMENT OF MORTGAGE means an assignment of all of Seller's right,
title and interest in and to a Mortgage, in a form acceptable to Purchaser, to
be executed by Seller in connection with each Mortgage Loan purchased hereunder.
1.6 BUSINESS DAY means a day of the week other than Saturday, Sunday, or
a day which is a legal holiday in the Commonwealth of Pennsylvania, or the State
of Florida.
1.7 CLOSING DATE means, with respect to each purchase of Mortgage Loans
hereunder, the date on which such purchase shall occur and the applicable
Purchase Price shall be paid, all as specified in the related Confirmation.
1.8 CONFIRMATION means a written confirmation letter delivered by
Purchaser to Seller which shall provide, with respect to a purchase of Mortgage
Loans hereunder, a Mortgage Loan Schedule, the Purchase Price to be paid by
Purchaser for each Eligible Mortgage Loan to be purchased, additional terms and
conditions pertaining to the purchase of Eligible Mortgage
Loans, and the scheduled Closing Date.
1.9 CUTOFF DATE means, with respect to a purchase of Mortgage Loans, the
date on which on which the unpaid principal balance of such Mortgage Loans shall
be fixed for the purpose of calculating the Purchase Price, all as specified in
the related Confirmation.
1.10 DEFECT means a determination by Purchaser, in its sole judgment,
that with respect to a Mortgage Loan (a) any representation or warranty made by
Seller herein is untrue or incorrect in any respect; (b) Seller has failed to
comply with any covenant herein contained; (c) any document constituting a part
of the Mortgage Loan Documents is defective, inaccurate or incomplete in any
respect, and/or (d) any closing document shall not be valid and binding.
1.11 ELIGIBLE MORTGAGE LOAN means a Mortgage Loan which complies, in all
material respects, with Purchaser's Guidelines.
1.12 MORTGAGE means a valid and enforceable mortgage, deed of trust, or
other security instrument creating a first or second lien, as the case may be,
upon described real property improved by a one-to-four family dwelling which
secures a Mortgage Note.
1.13 MORTGAGE FILE means the Mortgage Loan Documents, records and other
items referred to in Exhibit B attached hereto pertaining to a particular
Mortgage Loan. Except to the extent required by Applicable Law, the Mortgage
File may be retained in microfilm, microfiche, optical storage or magnetic media
in lieu of hard copy.
1.14 MORTGAGE LOAN means an individual mortgage loan or home equity line
of credit originated by Seller which is secured by an interest in residential (1
to 4 family) real estate, and which is the subject of a purchase under this
Agreement.
2
<PAGE> 8
1.15 MORTGAGE LOAN DOCUMENTS means the Mortgage Notes, Mortgages and all
accompanying instruments, insurance policies, if applicable, evidence of
compliance with Applicable Law, and other writings that document, evidence or
relate to the Mortgage Loans purchased hereunder which include, without
limitation, all documents required to be delivered by Seller to Purchaser
pursuant to the terms of this Agreement, the related Confirmation and
Purchaser's Guidelines.
1.16 MORTGAGE NOTE means a written promise by a Mortgagor to pay a sum
of money at a stated interest rate during a specified term that evidences a
Mortgage Loan.
1.17 MORTGAGE LOAN SCHEDULE means a list of Mortgage Loans to be
purchased by Purchaser, as may be supplemented or amended from time to time, the
form of which is attached hereto as Exhibit A.
1.18 MORTGAGED PROPERTY means the real property and improvements subject
to a Mortgage, constituting security for repayment of the debt evidenced by the
related Mortgage Note.
1.19 MORTGAGOR means the Mortgagor on a Mortgage Note.
1.20 PURCHASE PRICE means the purchase price to be paid with respect to
a Mortgage Loan, which shall be calculated, as of the related Closing Date, as
the sum of (a) the unpaid principal balance of the Mortgage Loan as of the
Cutoff Date, (b) any accrued and unpaid interest thereon, and (c) any purchase
premium or discount which shall be specified in the related Confirmation.
1.21 PURCHASER'S GUIDELINES means the Purchaser's written guidelines
attached as Exhibit C hereto with respect to loan terms, minimum loan amount,
underwriting criteria, sale criteria, and other matters relating to the
eligibility of loans for purchase by Purchaser, which shall include without
limitation applicable requirements of the Agencies, and which may be
supplemented or amended in writing from time to time.
1.22 REPURCHASE PRICE means the sum of (a) the unpaid principal balance
of a Mortgage Loan as of the date of repurchase, (b) all accrued and unpaid
interest thereon calculated at the Mortgage Note rate through the last day of
the month of repurchase, (c) any and all costs and expenses incurred by
Purchaser with respect to such Mortgage Loan, including without limitation
reasonable attorneys' fees and expenses incurred by Purchaser to secure a
priority lien position with respect to the Mortgage Loan, and (d) any premium
paid by Purchaser as part of the Purchase Price for such Mortgage Loan.
1.23 WIRE TRANSFER means (a) a bank wire transfer of immediately
available funds or (b) an ACH transaction resulting in availability of funds on
the same date as would have been the case had a bank wire transfer of
immediately available funds been employed.
3
<PAGE> 9
ARTICLE II
SALE AND DELIVERY OF MORTGAGE LOANS
2.1 OFFER. From time to time during the term of this Agreement, Seller
shall submit, for Purchaser's review and approval, (a) an offer to sell mortgage
loans having a specified aggregate unpaid principal balance on a
servicing-released basis under the terms of this Agreement, or (b) a proposed
Mortgage Loan Schedule containing information concerning one or more mortgage
loans offered by Seller for sale on a servicing-released basis under the terms
of this Agreement. Such information shall be furnished in accordance with the
requirements of Purchaser's Guidelines and in a format acceptable to Purchaser.
2.2 ACCEPTANCE. Upon receipt and review of any proposed Mortgage Loan
Schedule, and any related information requested by Purchaser, Purchaser shall,
in its absolute and sole discretion, approve or decline each loan for purchase.
Within a mutually agreeable period of time, Purchaser shall issue a Confirmation
with respect to the Eligible Mortgage Loans to be purchased by Purchaser, which
shall include, without limitation, a preliminary Mortgage Loan Schedule which
shall identify such Eligible Mortgage Loans, the Purchase Price to be paid for
each Eligible Mortgage Loan, Purchaser's delivery requirements, and the
scheduled Closing Date. The Confirmation shall also provide for liquidated
damages in the event that Seller should fail to deliver the required Mortgage
Loans. Only loans which are Eligible Mortgage Loans shall be accepted for
purchase by Purchaser. When executed by both parties, the Confirmation shall
constitute an acceptance of Seller's offer, and shall be incorporated herein and
made part of this Agreement. Notwithstanding anything to the contrary contained
in this Agreement, in the absence of a binding Confirmation issued by Purchaser
with respect to an Eligible Mortgage Loan and accepted by Seller in a timely
fashion, Purchaser shall have no obligation to purchase any loan offered by
Seller.
2.3 EXCLUSIONS. At any time prior to the Closing Date, either Seller or
Purchaser shall have the right to exclude from the related sale transaction any
loan subject to a Confirmation, in the event that either party should determine
that such loan will not be an Eligible Mortgage Loan as of the related Closing
Date.
2.4 CLOSING. On each Closing Date hereunder:
(a) No later than two (2) Business Days prior to such Closing Date,
Seller shall deliver to Purchaser a final Mortgage Loan Schedule acceptable to
Purchaser, and, with respect to each Mortgage Loan, and the related Mortgage
Loan Documents specified in Exhibit B hereto, including a duly executed
Assignment of Mortgage, Seller shall pay all costs of preparing and furnishing
to Purchaser all Mortgage Files, including original or certified copies of the
respective Mortgage Loan Documents and the Assignments of Mortgage.
(b) Subject to, and upon the terms and conditions of, this Agreement,
Seller shall sell, transfer, assign, transfer, convey and deliver to Purchaser,
and Purchaser shall purchase, all right, title and interest in and to the
Mortgage Loans.
(c) The Purchaser shall deposit funds in an amount equal to the Purchase
Price by Wire Transfer, (i) in accordance with the terms of any bailee letter
delivered to Purchaser by Seller, (ii) in the
4
<PAGE> 10
absence of any such bailee letter, to a bank account to be designated in writing
by Seller, or (iii) as otherwise agreed upon in writing by the parties.
(d) Upon payment of the Purchase Price, title to the Mortgage Loans,
Mortgage Loan Documents, and all rights, benefits, collateral, payments,
recoveries, proceeds and obligations arising from or in connection with the
Mortgage Loans shall vest in Purchaser.
2.5 COMPUTATION; ADJUSTMENT. It is understood and agreed that:
(a) All wiring instructions and Purchase Price information necessary to
effect payment of the Purchase Price shall be provided to Purchaser at least two
Business Days prior to the date of payment.
(b) If the principal balance of any of the Mortgage Loans used in
computing the payment of the Purchase Price shall be found to be incorrectly
computed, the Purchase Price shall be promptly and appropriately adjusted and
payment promptly made by the appropriate party.
2.6 REFUND OF PREMIUM. In the event that a purchase premium is paid by
the Purchaser to the Seller with respect to a Mortgage Loan and such Mortgage
Loan is prepaid in full, within a six month period following the related Closing
Date, by the related Mortgagor, other than through refinancing by Purchaser or
any Affiliate of Purchaser, Seller shall, upon demand by Purchaser, refund to
Purchaser such purchase premium.
5
<PAGE> 11
ARTICLE III
GENERAL REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement, Seller
represents and warrants as follows, as of each Closing Date:
3.1 DUE ORGANIZATION AND GOOD STANDING. Seller is a corporation validly
existing and in good standing under the laws of the state of its incorporation
during the time of its activities with respect to the Mortgage Loans. To the
extent required by Applicable Law, Seller is properly licensed and qualified to
transact business in all appropriate jurisdictions and to conduct all activities
performed with respect to the origination of the Mortgage Loans.
3.2 AUTHORITY AND CAPACITY. Seller has all requisite corporate power,
authority and capacity to enter into this Agreement and to perform the
obligations required of it hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have each
been duly and validly authorized by all necessary corporate action. This
Agreement constitutes the valid and legally binding agreement of Seller
enforceable in accordance with its terms, subject to bankruptcy laws and other
similar laws of general application affecting rights of creditors and subject to
the application of the rules of equity, including those respecting the
availability of specific performance.
3.3 EFFECTIVE AGREEMENT. The execution, delivery and performance of this
Agreement by Seller, its compliance with the terms hereof and consummation of
the transactions contemplated hereby (assuming receipt of the various consents
required pursuant to this Agreement) will not violate, conflict with, result in
a breach of, constitute a default under, be prohibited by or require any
additional approval under its certificate of incorporation, bylaws, or any
instrument or agreement to which it is a party or by which it is bound or which
affects the Mortgage Loan, or under Applicable Law.
3.4 COMPLIANCE WITH CONTRACTS AND REGULATIONS. Prior to each Closing
Date, Seller will have complied with all material obligations under all
contracts to which it was a party, and under Applicable Law, to the extent that
such obligations might affect any of the Mortgage Loans being purchased by
Purchaser hereunder. Seller has done and Seller will do, no act or thing which
may adversely affect the Mortgage Loans.
3.5 SALE TREATMENT. The sale of each Mortgage Loan shall be reflected on
Seller's balance sheet and other financial statements as a sale of assets by
Seller, Seller will not take any action or omit to take any action which would
cause the transfer of the Mortgage Loans to Purchaser to be treated as anything
other than a sale to Purchaser of all of Seller's right, title and interest in
and to each Mortgage Loan.
3.6 LITIGATION; COMPLIANCE WITH LAWS. There is no litigation, proceeding
or governmental investigation pending, or any order, injunction or decree
outstanding which might materially affect any of the Mortgage Loans.
Additionally, there is no litigation, proceeding or governmental investigation
existing or pending or, to the knowledge of Seller threatened, or any order,
injunction or decree outstanding against or relating to Seller, that has not
been disclosed by Seller to Purchaser or its counsel in writing prior to the
execution of this Agreement, which could have a material adverse effect upon the
Mortgage Loans, nor does Seller know of any basis for any such litigation,
proceeding, or governmental investigation. Seller has not violated any
applicable law, regulation, ordinance, order, injunction or decree, or any other
requirement
6
<PAGE> 12
of any governmental body or court, which may materially affect any of the
Mortgage Loans or the Servicing.
3.7 STATEMENTS MADE. No representation, warranty or written statement
made by Seller in this Agreement or in any exhibit, schedule, written statement
or certificate furnished to Purchaser in connection with the transactions
contemplated hereby by Seller contains or will contain any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.
3.8 BULK SALES. The transfer, assignment and conveyance of Mortgage
Loans by Seller pursuant to this Agreement are in the ordinary course of
Sellers' business and are not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction. Seller is not
transferring the Mortgage Loans with an actual intent to hinder, delay or
defraud any of its creditors. Seller is solvent and will not be rendered
insolvent by the sale of any Mortgage Loans.
3.9 COMPLIANCE. The sale, transfer, assignment and conveyance of the
Mortgage Loans by Seller to Purchaser pursuant to this Agreement does not and
shall not violate Applicable
Law or the terms of any license held by Seller.
3.10 AGENCY APPROVAL. Seller is an approved seller/servicer for either
one or both of the Agencies in good standing and is a mortgagee approved by the
Secretary of the U.S. Department of Housing and Urban Development pursuant to
Section 203 of the National Housing
Act.
3.11 FINANCIAL STATEMENTS. Seller's financial statements furnished to
Purchaser were prepared in accordance with generally accepted accounting
principles consistently applied, and fully and fairly represent the financial
condition of Seller as of the respective dates thereof, and the results of
operations for the respective periods indicated therein, and there has been no
material adverse change in the financial condition or business of Seller since
the date of the last of such financial statements.
7
<PAGE> 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO MORTGAGE LOANS
As further inducement to Purchaser to enter into this Agreement, Seller
represents and warrants to Purchaser as of each Closing Date, with respect to
each Mortgage Loan sold and transferred to Purchaser thereon, as follows:
4.1 ORIGINATION OF MORTGAGE LOANS. Except as disclosed in writing to
Purchaser and accepted by Purchaser prior to the Closing Date, each Mortgage
Loan has been originated in accordance with applicable Purchaser's Guidelines
and the terms and conditions of the applicable Confirmation.
4.2 INFORMATION. All information set forth as to each Mortgage Loan in
each Mortgage Loan Schedule, is true and correct as of the date thereof. All
other information furnished to Purchaser in writing by Seller with respect to
the Mortgage Loan is true and correct.
4.3 MORTGAGE FILE. For each Mortgage Loan, the related Mortgage File
contains each of the documents and instruments specified to be included therein.
4.4 OWNERSHIP OF MORTGAGE LOANS. Except with respect to the liens of
certain warehouse lenders, as identified in Schedule 4.4 hereto, (a) Seller is
the sole owner of the Mortgage Loan and has good and marketable title thereto,
and has the right to assign, sell and transfer the Mortgage Loan to Purchaser
free and clear of any encumbrance, lien, pledge, charge, claim or security
interest, and (b) Seller has not sold, assigned or otherwise transferred any
right or interest in or to the Mortgage Loan and has not pledged the Mortgage
Loan as collateral for any debt or other purpose.
4.5 COMPLIANCE WITH APPLICABLE LAW. Each Mortgage Loan has been
originated and, where applicable, serviced, in accordance with Applicable Law.
Each Mortgage Loan meets or its exempt from Applicable Law and/or other
requirements pertaining to usury, and the Mortgage Loan is not usurious. The
forms of the related Mortgage Note, Mortgage, and other Mortgage Loan Documents
are acceptable to the Agencies and comply with Applicable Law. The originator of
each Mortgage Loan, whether Seller or any other entity, was duly licensed to
participate in the making of such loan to the extent required by Applicable Law.
4.6 RIGHT OF RESCISSION. Any applicable period during which the
Mortgagor may rescind the Mortgage Loan has expired.
4.7 ENFORCEABILITY; NO SETOFF. All parties to each Mortgage Note and
Mortgage had legal capacity to enter into the respective Mortgage Loan and to
execute and deliver the Mortgage Note and the Mortgage, and no Mortgagor has
been released in whole or in part from any liability under the Mortgage Note.
The Mortgage Note and the Mortgage have been duly and properly executed and
delivered by such parties, and are in every respect genuine and each is the
legal, valid and binding obligation of the maker thereof and is not subject to
any discount, allowance, setoff, counterclaim, presently pending bankruptcy, or
other defenses.
4.8 ENFORCEABLE PROVISIONS. The Mortgage Note and Mortgage contain
customary, valid, legal and enforceable provisions such as to render the rights
and remedies of the holder thereof adequate for the realization against the
mortgage property of the benefits of the security created thereby. The Mortgage
Note and Mortgage contain a provision for the acceleration of the payment of the
unpaid
8
<PAGE> 14
principal balance of the Mortgage Loan in the event that the related real
property is sold without the prior consent of the mortgage thereunder.
4.9 LIEN PRIORITY. Each Mortgage Loan is secured by a valid, enforceable
Mortgage lien, of the agreed-upon priority, on the fee simple title to the
related real property, and the Mortgage has been duly and properly filed,
recorded or otherwise perfected in accordance with Applicable Law in order to
give constructive notice thereof to all subsequent purchasers or encumbrances of
the Mortgaged Property.
4.10 ASSIGNMENT OF MORTGAGE. Each Assignment of Mortgage is in
recordable form and is acceptable for recording under Applicable Law. The
endorsement of each Mortgage Note and the delivery to Purchaser of the original
endorsed Mortgage Note and of the related Assignment of Mortgage are sufficient
to permit Purchaser to avail itself of all protection available under Applicable
Law against the claims of any present of future creditors of Seller, and are
sufficient to prevent any other sale, transfer, assignment, pledge or
hypothecation of the Mortgage and the Mortgage Note by the Seller from being
enforceable.
4.11 NO MODIFICATION. The terms, covenants and conditions of each
Mortgage Loan have not been waived, altered, impaired or modified in any
respect. The monthly payments of each Mortgage Loan, whether fixed or adjusted
from time to time under the terms of the Note, are sufficient to amortize the
original principal balance over the original term and to pay
interest in arrears at the interest rate on the Note.
4.12 MORTGAGE IN EFFECT. The Mortgage securing any Mortgage Loan has not
been satisfied, released, canceled, deferred or subordinated, in whole or in
part, and the Real Property has not been released from the lien of the Mortgage,
in whole or in part, nor has any instrument been executed that would affect any
satisfaction, release, cancellation, subordination, deferral or rescission.
4.13 NO DEFAULT. All payments required under the terms of the Mortgage
Note to have been made up to the Closing Date have been made. There is no
default, breach, violation or event of acceleration existing under the terms and
covenants of each Mortgage Loan nor has any event occurred which, upon the
giving of notice or the lapse of time, or both, would constitute a default,
breach, violation or event of acceleration, nor has Seller waived any of the
foregoing. All requirements set forth in the Mortgage Loan Documents and all
requirements of any applicable Laws have been fully met and complied with. All
costs, fees and expenses incurred in making, closing and recording each Mortgage
Loan have been paid and all proceeds of each Mortgage Loan have been fully
disbursed and received by, or for the benefit of, the Mortgagor. There is no
requirement or obligation for future advances under each Mortgage Loan. There is
not outstanding any advance of funds by Seller to or on behalf of the Mortgagor
to be used by the Mortgagor for the payment on any monthly installment,
principal, interest or other charges payable under any Mortgage Loan.
4.14 TRUSTEE. If the Mortgage is 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 Purchaser to such trustee, except in connection
with a trustee's sale after default by the related Mortgagor.
4.15 TITLE INSURANCE. Seller holds a title insurance policy issued by a
title insurer reasonably acceptable to Purchaser and qualified to do business in
the jurisdiction where the Mortgaged Property is located insuring the Mortgage
to be a lien of the agreed-upon priority upon the Mortgaged Property therein
described (except for agreed-upon senior mortgages, the lien of current real
property taxes and
9
<PAGE> 15
assessments not yet due and payable, other matters to which like properties are
commonly subject, and standard printed policy exceptions) having a liability
limit at least as great as the unpaid principal balance of the Mortgage Loan and
naming Seller and/or its successors and/or assigns as loss payee.
4.16 HAZARD AND FLOOD INSURANCE. The Mortgaged Property is insured
against loss by fire or other casualty under a standard hazard and casualty
insurance policy (including fire and extended coverage and other matters as are
customary in the area of the Mortgaged Property) with a standard mortgagee
clause naming Seller as loss payee "and/or its successors or assignees as their
interests may appear." The insurance policy must be for an amount not less than
the full replacement cost of the Mortgaged Property, and must be issued by an
insurer reasonably acceptable to Purchaser and qualified to do business in the
jurisdiction where the Mortgaged Property is located. The insurance policy must
be in a form such that it may be endorsed to Purchaser as loss payee as required
hereunder, and there are no facts or circumstances which could provide a basis
for revocation of any policies or defense to any claims made thereon. With
respect to any Mortgage Loan secured by Mortgaged Property located in a
federally designated flood hazard area, as identified by the Federal Emergency
Management Agency, such Mortgaged Property is insured by a flood insurance
policy which complies with Applicable Law, and where applicable provisions of
this Section 4.16 pertaining to hazard and casualty insurance policies.
4.17 APPRAISALS. All real estate appraisals made in connection with the
Mortgage Loan have been performed in accordance in all material respects with
industry standards in the appraising industry in the area where the appraised
property is located, and are completed
on forms acceptable to the Agencies.
4.18 NO CONDEMNATION. There is pending no proceeding for total or
partial condemnation of the Mortgaged Property or any part thereof and the
Mortgaged Property is free of material damage. No improvement encumbered by the
Mortgage Loan is in violation of any applicable zoning law or regulation,
building code or any valid restrictive or protective covenant or setback line.
No improvement on the Mortgaged Property is a mobile home or manufactured home
unless specifically approved by Purchaser in writing prior to purchase.
4.19 PROPERTY CONDITION. The Mortgaged Property is free of material
damage and waste and is in good repair.
4.20 SENIOR LIENHOLDERS. Where required or customary in the jurisdiction
in which the Mortgaged Property is located, Seller has filed for record a
request for notice of any action by a senior lienholder under a senior lien, and
Seller has notified any senior lienholder in writing of the existence of the
Mortgage Loan and requested notification of any action to be taken against the
Mortgagor by the senior lienholder. Seller shall, upon request of Purchaser,
cooperate in recording a new request for action in favor of Purchaser and in
providing senior lienholders with written requests for notification to Purchaser
of actions against the Mortgagor.
4.21 PROCEEDS DISBURSED. The proceeds of the Mortgage Loan, including
any escrows of such proceeds, have been fully disbursed, and any and all
requirements as to completion of on-site and off-site improvements and
disbursements of any escrow funds therefor have been
complied with.
4.22 MECHANIC'S LIENS. There are no mechanic's liens or similar liens or
claims which have been filed for work, labor or material affecting the Mortgaged
Property which are or may be liens prior to or equal with the lien of the
Mortgage.
10
<PAGE> 16
4.23 NO ACCRUED LIABILITIES. There are and shall be no accrued
liabilities, including any recording fees, of Seller with respect to the
Mortgage Loans, or circumstances which occurred prior to the Closing Date, which
could result in such accrued liabilities being asserted against Purchaser as
successor to Seller.
4.24 NO ADVERSE SELECTION. Seller did not use any adverse selection
procedures in selecting the Mortgage Loans from among the outstanding loans in
Seller's portfolio.
4.25 ACCEPTABLE INVESTMENT. Except as disclosed to Purchaser in writing
and as accepted by Purchaser, Seller has no knowledge of any circumstances or
conditions with respect to any Mortgage Loan, the relative Mortgage, real
property, Mortgagor, or Mortgagor's credit standing that can be reasonably
expected to cause the Agencies or prudent private investors in the secondary
market to regard the Mortgage Loan as an unacceptable investment, increase the
likelihood that the Mortgage Loan will become delinquent, or adversely affect
the value or marketability of the Mortgage Loan.
4.26 ENVIRONMENTAL CONDITIONS. Seller has not been advised, has received
no notice or report of, and has no knowledge that, any hazardous or toxic
materials, wastes, products regulated by Applicable Law, asbestos or asbestos
products or material, polychlorinated biphenyls or urea formaldehyde insulation
have been used or employed in the construction, use or maintenance of the
Mortgaged Property or have ever been stored, treated at, or disposed of on the
Mortgaged Property, or that there has occurred or that any person or entity has
alleged that there has occurred upon the Mortgaged Property any spillage,
leakage, discharge or release into the air, soil or groundwater of any hazardous
material or regulated wastes.
4.27 FRAUD. No fraud has taken place on the part of the Seller, any
Affiliate of the Seller, or any third-party originator in connection with the
origination of any Mortgage
Loan.
4.28 REVERSE MORTGAGES. None of the Mortgage Loans are reverse mortgage
loans.
4.29 QUALIFIED ORIGINATOR. Each Mortgage Loan was originated by the
Seller or, as identified on the Mortgage Loan Schedule, by a third-party
originator possessing all necessary licenses, qualifications and approvals for
the origination of mortgage loans in the jurisdiction in which the related
Mortgaged Property is located.
11
<PAGE> 17
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement, Purchaser
represents and warrants as follows, as of each Closing Date:
5.1 DUE ORGANIZATION AND GOOD STANDING. Purchaser is a corporation
validly existing and in good standing under the laws of the state of its
incorporation. To the extent required by Applicable Law, Purchaser is properly
licensed and qualified to transact
business in all appropriate jurisdictions.
5.2 AUTHORITY AND CAPACITY. Purchaser has all requisite corporate power,
authority and capacity to enter into this Agreement and to perform the
obligations required of it hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have each
been duly and validly authorized by all necessary corporate action. This
Agreement constitutes the valid and legally binding agreement of the Purchaser
enforceable in accordance with its terms, subject to bankruptcy laws and other
similar laws of general application affecting rights of creditors and subject to
the application of the rules of equity, including those respecting the
availability of specific performance.
5.3 EFFECTIVE AGREEMENT. The execution, delivery and performance of this
Agreement by Purchaser, its compliance with the terms hereof and the
consummation of the transactions contemplated hereby will not violate, conflict
with, result in a breach of, constitute a default under, be prohibited by or
require any additional approval under its certificate of incorporation, bylaws,
or any instrument or agreement to which it is a party or by which it is bound.
5.4 LITIGATION. There is no action, suit or proceeding or investigation
pending, or to Purchaser's knowledge, threatened, against Purchaser that, if
determined adversely to Purchaser, would adversely affect the sale of the
Mortgage Loans, the execution, delivery or
enforceability of this Agreement.
5.5 CONSENT. No consent, approval, authorization or order of any court
or governmental authority is required for the execution and delivery of this
Agreement by Purchaser or for the performance by Purchaser of its obligations
hereunder, other than such consent, approval, authorization or order as has been
or will be obtained prior to each Closing Date.
5.6 AGENCY APPROVAL. Purchaser is an approved seller/servicer for the
Agencies in good standing and is a mortgagee approved by the Secretary of the
U.S. Department of Housing and Urban Development pursuant to Section 203 of the
National Housing Act.
12
<PAGE> 18
ARTICLE VI
COVENANTS
6.1 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. To the extent
permitted by Applicable Law, Purchaser and Seller agree that they shall
cooperate and assist each other, as reasonably requested, in carrying out the
other's covenants, agreements, duties and responsibilities under this Agreement,
and, in connection therewith, shall from time to time, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such additional
instruments, assignments, endorsements, papers and documents as may reasonably
be required or appropriate to further express the intention, or to facilitate
the performance, of this Agreement during the term hereof.
6.2 TRANSFER OF INSURANCE. Seller shall advise any relevant insurance
carrier of the sale of each Mortgage Loan and shall effect an assignment to the
Purchaser of the loss payee endorsement for hazard and flood insurance, any
credit life and disability insurance, and any and all other insurance respecting
the Mortgaged Property and/or the improvements
located thereon.
6.3 INSURANCE PREPAYMENT. Insurance refunds or credits of any kind
whatsoever shall be the sole responsibility of Seller in the event of prepayment
of any Mortgage Loan, cancellation of insurance or any other event requiring
refunding or crediting of unearned insurance premiums. Upon Purchaser's demand,
Seller shall pay to Purchaser, from Seller's own funds, any required insurance
premium rebate resulting from the prepayment, cancellation, refinancing or other
termination of any Mortgage Loan. Upon any such payment and upon Seller's
request, Purchaser shall assign to Seller any rights of Purchaser against the
related insurer for any payment made to the Mortgagor.
6.4 POST-CLOSING PAYMENTS. All monies received by Seller after the
Closing Date relating to any Mortgage Loan shall be promptly turned over to
Purchaser, and until so remitted shall be held in trust for Purchaser and
segregated from all other assets of Seller.
6.5 NO SOLICITATION. Seller agrees that neither Seller nor any Affiliate
of Seller shall use information derived from the origination and/or sale of the
Mortgage Loans for the purpose of soliciting, or assisting in the solicitation,
directly or indirectly, for any purpose including without limitation refinance,
home equity or insurance, any of the Mortgage Loans. Seller further agrees to
use its best efforts to cause any third-party originator of the Mortgage Loans
to refrain from taking any action which is prohibited under this section with
respect to the Mortgage Loans and/or Mortgagors. Seller shall not provide a
listing of Mortgagors to any third party. Nothing contained in this Section 6.6
shall be construed to prohibit advertising or communications directed to the
general public. In the event that any Mortgagor contacts Seller with respect to
any new loan to be secured by Mortgaged Property which secures a Mortgage Loan,
Seller agrees that Purchaser shall have a right of first refusal with respect to
the purchase of such new loan.
6.6 USE OF NAME. Seller shall not engage in any form of advertising
whatsoever utilizing either the name of Purchaser or of any affiliate of
Purchaser unless specifically authorized by Purchaser in writing to do so.
6.7 LIMITED POWER OF ATTORNEY. Seller hereby appoints Purchaser, its
agents, employees, successors and assigns, the true and lawful attorney in fact
of Seller with the full power of substitution for and in the place and stead of
Seller on behalf and for the benefit of Purchaser, to demand and control
13
<PAGE> 19
any and all of the sums due on the Mortgage Loans, and to enforce any and all
rights with respect thereto, and to endorse the name of Seller where Seller's
name is designated as the payee upon any notes, collateral, security,
acceptances, checks, drafts, money orders or other evidences of payment coming
into the hands of Purchaser in full or partial payment of any of the Mortgage
Loans, and to make "satisfied" and to release or cause to be marked or release,
all liens and securities related thereto, when and if Purchaser may reasonably
so determine.
6.8 PUBLIC ANNOUNCEMENT. The timing and content of any press release or
other public announcement relating to the transactions contemplated by this
Agreement shall be subject to the approval of Seller and Purchaser.
6.9 CERTAIN NOTIFICATIONS.
(a) Seller shall promptly notify the Purchaser in writing of the
occurrence of any event which will or could reasonably be expected to result in
the failure to satisfy any of the conditions to the obligations of Purchaser
specified in Article VII of the Agreement.
(b) Seller shall immediately notify Purchaser should there by any
material and/or adverse change to Seller's financial condition, corporate
structure or senior management personnel, or to Seller's relationship with or
authority from any Agency. In addition, Seller shall immediately notify
Purchaser of any threatened or pending lawsuit or of any threatened or pending
administrative, judicial, governmental or agency hearing or proceeding involving
Seller or any of Seller's principals, the outcome of which may materially and/or
adversely affect Seller's ability to do business or to perform under the terms
and conditions of this Agreement.
6.10 POST-CLOSING REPORTING.
During the term of this Agreement, and any extension or renewal thereof,
Seller shall provide Purchaser with the following information:
(a) Audited financial statements for Seller shall be submitted
annually, within ninety (90) days after the end of Seller's fiscal year.
(b) A Uniform Standard Audit Program ("USAP") letter shall be
prepared by independent auditors with respect to mortgage loans serviced
by Seller. The USAP letter shall be submitted to Purchaser along with
Seller's audited financial statements.
(c) Unaudited quarterly financial statements for Seller shall be
submitted within forty-five (45) days after the end of each quarter, and
shall be certified as complete and accurate by an officer of Seller.
(d) Seller shall provide Purchaser with immediate written notice
of (i) the filing of a petition for relief under the U.S. Bankruptcy
Code on behalf of Seller, (ii) institution of any receivership or
conservatorship with respect to Seller, (iii) any material change in the
senior management of Seller, (iv) any change in material ownership of
Seller, (v) any event which effects a material, adverse change in
Seller's financial condition, and (vi) any change in Seller's Fidelity
Bond/E&O coverage.
(e) Evidence of Fidelity Bond/E&O coverage in conformity with
Investor requirements shall be submitted to Purchaser annually.
14
<PAGE> 20
6.11 ONGOING DUE DILIGENCE REVIEW.
From time to time during the term of this Agreement, Purchaser shall,
upon reasonable notice and during regular business hours, have access to
materials and facilities necessary to conduct an on-site or off-site due
diligence review. At Purchaser's option, the pertinent materials may be
delivered to Purchaser. In the absence of a material breach of any
representation, warranty and/or covenant contained in this Agreement, Purchaser
agrees that such reviews may be conducted no more frequently than four (4) times
in any calendar year during the term of this Agreement. Purchaser's ongoing due
diligence review will include its verification that:
(a) The books, records and accounts of Seller with respect to the
Mortgage Loans are in order pursuant to Applicable Law and Agency
requirements, and the information provided to Purchaser in
connection with the Mortgage Loans is true and correct; and
(b) The Mortgage Loans meet Purchaser's credit underwriting and
quality control standards, and Seller's origination practices are
satisfactory to Purchaser.
15
<PAGE> 21
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder with respect to each purchase of
Mortgage Loans, shall be subject to satisfaction of each of the following
conditions:
7.1 REPRESENTATIONS. The representations and warranties made by Seller
in this Agreement are true and correct in all material respects and shall
continue to be true and correct in all material respects on each Closing Date.
7.2 COMPLIANCE WITH THIS AGREEMENT. All of the terms, covenants, and
conditions of this Agreement required to be complied with and performed by
Seller at or prior to each Closing Date shall have been duly complied with and
performed in all material respects.
7.3 DOCUMENTATION AND FILES; COMPLIANCE.
Prior to each Closing Date, Purchaser shall have determined that
(a) The books, records and accounts of Seller with respect to the
Mortgage Loans are in order pursuant to Applicable Law, and the
information provided to Purchaser in connection with the Mortgage
Loans is true and correct;
(b) The Mortgage Loans meet Purchaser's credit underwriting and
quality control standards, and Seller's origination practices are
satisfactory to Purchaser; and
(c) Any pending class action litigation against Seller, and any
settlement or consent decree entered into by Seller with respect
to class action litigation, will not have a material adverse
effect on the Servicing.
7.4 CORPORATE RESOLUTION. A certified copy of duly adopted board
resolutions, in the form attached as Exhibit D to this Agreement, shall be
delivered to Purchaser simultaneously with the execution and delivery of this
Agreement.
7.5 OPINION. An opinion of counsel of Seller in the form attached as
Exhibit E to this Agreement, shall be delivered to Purchaser simultaneously with
the execution and delivery of this Agreement.
7.6 OFFICER'S CERTIFICATE. An Officer's Certificate of a senior officer
of Seller in the form attached as Exhibit F to this Agreement, shall be
delivered to Purchaser simultaneously with the execution and delivery of this
Agreement.
7.7 MATERIAL ADVERSE CHANGE. There shall not have occurred, prior to any
Closing Date, any event which constitutes a change in the Mortgage Loans and/or
Seller's financial condition, which change, in the judgment of Purchaser,
materially and adversely affects Seller's ability to perform its obligations
under this Agreement, including without limitation Seller's obligation to
provide indemnification and/or repurchase pursuant to Article VIII.
16
<PAGE> 22
ARTICLE VIII
REMEDIES
8.1 INDEMNIFICATION BY SELLER. Seller shall indemnify and hold Purchaser
harmless from and shall reimburse Purchaser for any losses, damages,
deficiencies, claims, causes of action or expenses of any nature (including
reasonable attorneys' fees and expenses) incurred by Purchaser before or after
the Closing Date which arise out of, result from, or in any way relate to:
(a) Any breach of any representation and/or warranty of Seller contained
in this Agreement, or in any exhibit, schedule, statement or certificate
furnished by Seller pursuant to this Agreement;
(b) Any breach of any covenant or obligation of Seller contained in this
Agreement, or in any exhibit, schedule, statement or certificate
furnished by Seller pursuant to this Agreement;
(c) Any Defect in any Mortgage Loan existing as of the Closing Date
(including those Defects subsequently discovered), or as a result of any
act or omission of Seller prior thereto;
(d) Damage to any Mortgaged Property which is security for a Mortgage
Loan, from fire, earthquake, or other casualty, or environmental hazard,
or any similar circumstances or conditions occurring prior to the
Closing Date, which would cause any Mortgage Loan to become delinquent,
or adversely affect the value or marketability of the Mortgage Loan;
(e) Errors in originating any of the Mortgage prior to the Closing Date
or as a result of Seller's acts or omissions prior thereto. Such errors
may include improper action or failure to act when required to do so,
and
(f) Any litigation pending or threatened against Purchaser arising out
of events occurring on or prior to the Closing Date in connection with
the Seller's origination or sale of the Mortgage Loans.
8.2 REPURCHASE.
(a) Following the purchase of any Mortgage Loan, and notwithstanding the
review of the Mortgage Loan Documents by Purchaser, if there is a Defect
in any Mortgage Loan, Seller shall cure, to Purchaser's satisfaction,
such Defect within thirty (30) days from its receipt of notice of the
existence thereof, or such shorter period as may be required by
Applicable Law, or by Agency or investor requirements. If the Defect is
not cured within such thirty (30) day period, or such shorter period, if
applicable, Seller shall, not later than the expiration of the thirty
(30) day period or such shorter period, repurchase the related Mortgage
Loan or Mortgage Loans for the Repurchase Price.
(b) In the event that any Mortgagor fails to make the initial payment
due with respect to a Mortgage Loan more than thirty (30) days following
the related Closing Date, Purchaser may, at its option, require Seller
to repurchase such Mortgage Loan, upon demand, for the Repurchase Price.
(c) In the event of repurchase, Purchaser shall, upon receipt of the
Repurchase Price, assign and deliver the related Mortgage Documents to
Seller without recourse, representation or warranty.
17
<PAGE> 23
If Seller fails to repurchase a defective Mortgage Loan or Mortgage
Loans at the time and in the manner provided in this Section, Purchaser
shall have all other rights and remedies provided in this Agreement or
by law or equity.
8.3 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify and hold
Seller harmless from and shall reimburse Seller for any losses, damages,
deficiencies, claims, causes of action or expenses of any nature (including
reasonable attorneys' fees and expenses) incurred by Seller and arising after
the Closing Date which result from any breach of any representation, warranty or
covenant made by Purchaser under this Agreement.
8.4 NOTICE OF CLAIM. If any action is brought against any person
entitled to indemnification pursuant to Section 8.1 or Section 8.3 (a
"Claimant") in respect of a claim under Section 8.1 or Section 8.3, as
applicable (an "Indemnifiable Claim"), the Claimant shall promptly notify
Purchaser or Seller, as the case may be, in writing of the institution of such
action (but the failure so to notify shall not relieve Seller or Purchaser, as
the case may be (the "Indemnifying Party") from any liability the Indemnifying
Party may have except to the extent such failure materially prejudices the
Indemnifying Party). Unless otherwise agreed to by the Seller or Purchaser, as
the case may be, the Indemnifying Party shall assume and direct the defense of
such action, including the employment of counsel, and all fees, costs and
expenses incurred in connection with defending or settling the Indemnifiable
Claim shall be borne solely by the Indemnifying Party; provided, however, that
such counsel shall be satisfactory to the Claimant in the exercise of its
reasonable judgment and that the Indemnifying Party shall not compromise any
claim without the prior written consent of the Claimant, which consent shall not
be unreasonably withheld. If the Indemnifying Party shall undertake to
compromise or defend any such asserted liability, it shall promptly notify the
Claimant of its intention to do so, and the Claimant agrees to cooperate fully
with the Indemnifying Party and its counsel in the compromise of, defense
against, any such asserted liability. Notwithstanding an election by the
Indemnifying Party to assume the defense of such action or proceeding, the
Claimant shall have the right to employ separate counsel and to participate in
the defense of such action or proceeding, and the Indemnifying Party shall bear
the reasonable fees, costs and expenses of such separate counsel (and shall pay
such fees, costs and expenses at least quarterly), if (a) the use of counsel
chosen by the Indemnifying Party to represent the Claimant would present such
counsel with a conflict of interest; (b) the defendants in, or targets of, any
such action or proceeding include both a Claimant and the Indemnifying Party,
and the Claimant shall have reasonably concluded that there may be legal
defenses available to it or to other Claimants which are different from or
additional to those available to the Indemnifying Party (in which case the
Indemnifying Party shall not have the right to direct the defense of such action
or proceeding on behalf of the Claimant); or (c) the Indemnifying Party shall
authorize the Claimant to employ separate counsel at the expense of the
Indemnifying Party. All costs and expenses incurred in connection with a
Claimant's cooperation shall be borne by the Indemnifying Party. In any event,
the Claimant shall have the right at its own expense to participate in the
defense of such asserted liability.
8.5 LIMITATION OF LIABILITY. In no event will either Purchaser or Seller
be liable to the other party to this Agreement for incidental or consequential
damages, including, without limitation, loss of profit or loss of business or
business opportunity, regardless of the form of action whether in contract, tort
or otherwise.
18
<PAGE> 24
ARTICLE IX
TERMINATION
9.1 TERMINATION WITHOUT CAUSE. Either Purchaser or Seller may terminate
this Agreement without cause on thirty (30) days prior written notice (such
notice in compliance with Section 10.5 below) to the other party. Following the
effective date of such termination without cause, Purchaser will purchase
Mortgage Loans subject to the terms and conditions of any outstanding
Confirmation issued prior to such effective date.
9.2 PURCHASER'S TERMINATION FOR CAUSE. Notwithstanding anything to the
contrary contained herein, Purchaser shall have the right to immediately
terminate this Agreement for cause. For purposes of this section 9.2, "cause"
shall include any of the following:
(a) Seller's breach of any of the representations, warranties and/or
covenants contained in this Agreement; including without limitation its
obligations under Article VIII;
(b) the filing of a petition for relief by or against Seller, under the
U.S. Bankruptcy Code or any other applicable insolvency or
reorganization statute;
(c) institution of any receivership or conservatorship with respect to
Seller, including without limitation receivership or conservatorship
imposed by the FDIC;
(d) Seller's admission in writing of its inability to pay its debts
generally as they become due;
(e) termination of Seller's status as an approved Agency seller/servicer
or as an approved FHA mortgagee;
(f) any material change in the senior management or ownership of Seller;
and/or;
(g) any event which, in Purchaser's opinion, constitutes a material,
adverse change in Seller's financial condition.
9.3 SELLER'S TERMINATION FOR CAUSE. Notwithstanding anything to the
contrary contained herein, Seller shall have the right to immediately terminate
this Agreement for cause. For purposes of this section 9.3, "cause" shall
include any of the following:
(a) Purchaser's material, uncured breach of any of the representations,
warranties and/or covenants contained in this Agreement;
(b) the filing of a petition for relief by Purchaser, under the U.S.
Bankruptcy Code or any other applicable insolvency or reorganization
statute;
(c) institution of any receivership or conservatorship with respect to
Purchaser;
19
<PAGE> 25
(d) Purchaser's admission in writing of its inability to pay its debts
generally as they become due; or
(e) termination of Purchaser's status as an approved Agency
seller/servicer or as an approved FHA mortgagee;
9.4 EFFECT OF TERMINATION. Upon termination of this Agreement under
section 9.2 above, Purchaser shall have no further obligation to purchase, or
accept transfer of mortgage loan servicing from Seller, and this Agreement shall
be null and void and have no further force and effect except for those
provisions identified in Section 9.4 of this Agreement, which provisions shall
survive any such termination and continue in effect thereafter.
9.5 SURVIVAL OF OBLIGATIONS AND COVENANTS. Notwithstanding anything to
the contrary expressed in this Agreement, the termination of this Agreement
shall not affect any obligations of Seller under this Agreement. The
representations, warranties, covenants and indemnification of Seller under
Articles III, IV and VI hereof shall continue without regard
to any termination hereof.
20
<PAGE> 26
ARTICLE X
MISCELLANEOUS
10.1 COSTS AND EXPENSES. Except as specifically provided to the contrary
in this Agreement, Purchaser and Seller shall each bear its own accounting,
legal and related costs and expenses in connection with the negotiation and
preparation of this Agreement and the performance by each of Purchaser and
Seller of its respective obligations arising under this Agreement.
10.2 CONFIDENTIALITY OF INFORMATION. Seller and Purchaser and their
Affiliates shall, and shall cause their respective directors, officers,
employees and authorized representatives to, hold in strict confidence and not
use or disclose to any other party except their respective Affiliates without
the prior written consent of the other party all information concerning
customers or proprietary business procedures, servicing fees or prices, policies
or plans of the other party or any of its affiliates received by them from the
other party in connection with the transactions contemplated hereby.
10.3 BROKER'S FEES. Each party hereto represents and warrants to the
other that it has made no agreement to pay any agent, finder, or broker or any
other representative, any fee or commission in the nature of a finder's or
originator's fee arising out of or in connection with the subject matter of this
Agreement, and both the parties hereto covenant with each other and agree to
indemnify and hold each other harmless from and against any such obligation or
liability and any expense incurred in investigating or defending (including
reasonable attorneys' fees and expenses) any claim based upon the other party's
actions in connection with such obligation.
10.4 SURVIVAL. Each party hereto covenants and agrees that the
representations and warranties, covenants and obligations contained in Articles
III through VI, VIII, and Sections 10.2 through 10.4 of this Agreement, and in
any document delivered or to be delivered pursuant hereto, shall survive the
execution hereof, and the Closing Date, and any inspection, investigation, or
determination made by, or on behalf of, either party, and expiration or
termination of this Agreement.
10.5 NOTICES. All notices, requests, demands and other communications
which are required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been duly given if personally delivered,
sent by overnight courier, or mailed by certified mail, return receipt
requested, postage prepaid, or transmitted by facsimile and confirmed by a
similar mailed writing:
(a) If to the Purchaser, to:
GMAC Mortgage Corporation
100 Witmer Road
Horsham, PA 19044
Attention: Chief Financial Officer
with a copy to:
Glen W. Snyder
General Counsel
21
<PAGE> 27
GMAC Mortgage Corporation
100 Witmer Road
Horsham, PA 19044
(b) If to Seller, to:
E-LOAN, INC.
6200 Village Parkway
Suite 102
Dublin, CA 94568
Attn: Steven Majerus
or to such other address as Purchaser or Seller shall have specified in writing
to the other.
10.6 APPLICABLE LAW. The construction of this Agreement and the rights,
remedies, and obligations arising by, under, through, or on account of it shall
be governed by the internal laws of the Commonwealth of Pennsylvania (without
regard to its conflicts of laws principles) except to the extent the same are
preempted by the laws of the United States of
America.
10.7 JURISDICTION AND VENUE. Purchaser and Seller mutually agree that
any legal cause of action arising out of a dispute concerning this Agreement or
the enforceability of any part thereof shall be subject to the jurisdiction of
the United States District Court in and
for the Eastern District of Pennsylvania.
10.8 INTEGRATION. This Agreement constitutes a final and complete
integration of the Agreement of the parties respecting the subject matter
hereof, thereby superseding all previous oral or written agreements. There are
no contemporaneous oral agreements.
10.9 MODIFICATION. This Agreement may not be changed orally but only by
an agreement in writing, signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought. Subject to the foregoing,
any of the terms or conditions of this Agreement may be waived or modified at
any time by the party entitled to the benefit thereof, but no such waiver,
express or implied, shall affect or impair the right of the waiving party to
require observance, performance, or satisfaction of either (1) the same term or
condition as it applies on a subsequent or previous occasion or (2) any other
term or condition hereof.
10.10 THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto only. There shall be no third party beneficiaries
hereof.
10.11 CONSTRUCTION. In construing the words of this Agreement, plural
constructions shall include the singular, and singular constructions shall
include the plural. The words "herein", "hereof", and other similar compounds of
the word "here" shall mean and refer to this entire Agreement, not to any
particular provision, section, or subsection of it.
10.12 CAPTIONS. Paragraph captions in this Agreement are for ease of
reference only and shall be given no substantive or restrictive meaning or
significance whatsoever.
10.13 COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be an original regardless of whether all parties sign the
same document. Regardless of the number of counterparts, they shall constitute
only one agreement. It shall not be necessary in making proof of this Agreement
to produce or account for more than one
counterpart.
22
<PAGE> 28
10.14 ATTORNEYS' FEES. If any action of law or in equity, including an
action for declaratory relief, is brought to enforce or interpret the provisions
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees from the other party. Such fees may be set by the court in the
trial of such action or may be enforced in a separate action brought for that
purpose. Such fees shall be in addition to any other relief that may be awarded.
10.15 BINDING EFFECT AND ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors and
assigns. Nothing in this Agreement, express or implied, is intended to confer on
any person other than the parties hereto and their successors and assigns, any
rights, obligations, remedies or liabilities. No party may, or shall have the
power to, assign this Agreement without the prior written consent of the other,
except that Purchaser may assign this Agreement to an affiliated entity having
all necessary resources to complete the transactions contemplated herein.
10.16 INCORPORATION OF EXHIBITS. Exhibits A through F attached hereto
shall be incorporated herein and shall be understood to be a part hereof as
though included in the body of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
23
<PAGE> 29
IN WITNESS WHEREOF, each of the undersigned parties to this GMAC
Mortgage Corporation Seller's Agreement has caused this GMAC Mortgage
Corporation Seller's Agreement to be duly executed in its corporate name by one
of its duly authorized officers, all as of the date first above written.
PURCHASER:
ATTEST: GMAC MORTGAGE CORPORATION
By: By: /s/ Signature Illegible
-----------------------------
Name: Barry Bior
Title: Senior Vice President
----------------------
SELLER:
ATTEST: E-LOAN, INC.
By: /s/ Steve M. Majerus By: /s/ Chris Larsen
-----------------------------
Name: Chris Larsen
Title: CEO
24
<PAGE> 30
EXHIBIT "B"
CONTENTS OF MORTGAGE FILES
Mortgage Files (where applicable, original microfiche files or hard copy files)
shall include, without limitation the following:
a) All origination documentation including:
- Transmittal Summary FNMA/FHLMC Form 1008
- Loan Application Form 1003 (initial and final signed
application)
- Credit Report
- Final Truth-in-Lending Disclosure Statement
- Verification of Employment
- IRS Form 4506 for self-employed borrowers (Request for
copy of Tax Form)
- Verification of Deposit
- HUD 1 on previous property, if applicable
- HUD 1/Settlement Statement on subject property
- Appraisal
- Satisfactory Completion Certificate Form 442, if
applicable
- Executed Sales Contract;
b) Original Note endorsed to GMAC Mortgage Corporation;
c) Original limited power of attorney, if applicable;
d) Original recorded Mortgage/Deed of Trust or copy of the original,
certified by the recording agency to be a true and exact copy of the recorded
document;
e) Original final Title Policy;
f) Original PMI Certificate (if applicable);
g) Original LGC/MIC (if applicable);
h) Original recorded intervening Assignment to GMAC Mortgage
Corporation;
i) Abstract of Title - in states where required other than those where
evidence exists indicating sent to borrower; and
j) Previous assumption information, if applicable.
25
<PAGE> 31
EXHIBIT "C"
PURCHASER'S GUIDELINES
----------------------
Conventional Loans: Must be eligible for sale to the Federal National Mortgage
Association
(FNMA) through it's Mortgage Backed Securities program and must have been
originated, underwritten and closed in conformity with the FNMA Seller's Guide.
Government Loans: Must be eligible for sale through the Government National
Mortgage
Association's Mortgage Backed Security program. All loans must have the required
insurance certificate from the VA or FHA as required.
Seller will be responsible for providing all documents necessary for initial and
final certification of the pools. All loans sold will not be 30 days or greater
delinquent prior to the receipt of the first payment.
All loan documents will be received in a timely manner.
26
<PAGE> 32
EXHIBIT "D"
FORM OF SECRETARY'S CERTIFICATE
-------------------------------
27
<PAGE> 33
EXHIBIT "E"
FORM OF OPINION OF COUNSEL
--------------------------
GMAC Mortgage Corporation
100 Witmer Road
Horsham, PA 19044-0963
Dear Sirs:
You have requested my opinion, as counsel to E-LOAN, INC., a Massachusetts
corporation (the "Seller"), with respect to certain matters in connection with
the sale by the Seller pursuant to that certain GMAC Mortgage Corporation
Seller's Agreement, dated as of ______, 199_ (the "Purchase and Sale Agreement")
between you and the Seller, of certain Mortgage Loans as defined in the Purchase
and Sale Agreement. Capitalized terms not otherwise defined herein have their
respective meanings set forth in the Purchase and Sale Agreement.
I have examined the following documents:
1. the Purchase and Sale Agreement; and
2. such other documents, records and papers as I have deemed necessary and
relevant as a basis for this opinion.
I have assumed that each party other than the Seller had the power and authority
to enter into and perform all obligations thereunder and, as to each such party,
I also have assumed the due authorization by all requisite corporate action, the
due execution and delivery and the validity and binding effect and
enforceability of such documents.
Based upon the foregoing, and subject to the qualification set forth at the end
of this letter, it is my opinion that:
1. The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida.
2. The Seller has the requisite power to engage in the transactions
contemplated by the Purchase and Sale Agreement and all requisite power,
authority and legal right to execute and deliver the Purchase and Sale
Agreement and to perform and observe the terms and conditions of such
instrument.
3. The Purchase and Sale Agreement has been duly authorized, executed and
delivered by the Seller and is a legal, valid and binding agreement
enforceable in accordance with its terms against the Seller, subject to
bankruptcy laws and other similar laws of general application affecting
rights of creditors and subject to the application of the rules of
equity, including those respecting the availability of specific
performance.
28
<PAGE> 34
4. No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Seller of, or of compliance by the Seller with, the
Purchase and Sale Agreement, or the consummation of the transactions
contemplated by the Purchase and Sale Agreement.
5. Neither the consummation of the transactions contemplated by, nor the
fulfillment of the terms of the Purchase and Sale Agreement conflicts or
will conflict with or results or will result in a breach of or
constitutes or will constitute a default under the charter or by-laws of
the Seller, the terms of any material indenture or other material
agreement or instrument to which the Seller is a party or by which it is
bound or to which it is subject, or any statute or order, rule,
regulation, writ, injunction or decree of any court, governmental
authority or regulatory body to which the Seller is subject or by which
it is bound.
6. There is no action, suit, proceeding or investigation pending or, to the
best of my knowledge, threatened against the Seller which, in my
judgment, either in any one instance or in the aggregate, may reasonably
be expected to result in any material adverse change in the business,
operations, financial condition, properties or assets of the Seller or
in any material impairment of the right or ability of the Seller to
carry on its business substantially as now conducted or in any material
liability on the part of the Seller or which would draw into question
the validity of the Purchase and Sale Agreement or of any action taken
or to be taken in connection with the transactions contemplated thereby,
or which would be likely to impair materially the ability of the Seller
to perform under the terms of the Purchase and Sale Agreement.
In rendering this opinion letter, I do not express any opinion concerning any
law other than the federal common law of the United States of America (excluding
federal securities law) and the law of the ____ of _____. Additionally, I do not
express any opinion on any issue not expressly addressed above.
I bring to your attention the fact that my legal opinions are an expression of
professional judgment and are not a guarantee of a result.
I do not undertake to advise you of matters which may come to my attention
subsequent to the date hereof which may affect my legal opinions expressed
herein.
This opinion is delivered to you solely for your use in connection with the
execution and delivery of the Purchase and Sale Agreement. This opinion is not
to be used, circulated, quoted or otherwise referred to for any other purpose,
or to or by any other person, with or without reference to my name, without my
prior express written consent.
Very truly yours,
29
<PAGE> 35
EXHIBIT "F"
FORM OF OFFICER'S CERTIFICATE
-----------------------------
OFFICER'S CERTIFICATE
I, ____________________ hereby certify that I am the duly elected
_______________ of E-LOAN, INC. (the "Company"), a corporation organized and
existing under the laws of the State of California, and further as follows:
1. Attached hereto is a true and correct copy of the Articles of
Incorporation and By-laws of the Company and a Certificate of Good
Standing for the Company, all of which are in full force and effect on
the date hereof.
2. There are no actions, suits or proceedings pending (nor are any
actions, suits or proceedings threatened) against or affecting the
Company which if adversely determined, individually or in the aggregate,
would adversely affect the Company's obligations under the GMAC Mortgage
Corporation Seller's Agreement (the "Purchase and Sale Agreement") dated
as of _______________, 199_, between the Company and GMAC Mortgage
Corporation.
3. Each person who, as an officer or representative of the Company,
signed (a) the Purchase and Sale Agreement, and (b) any other document
delivered prior hereto or on the date hereof in connection with the
transaction described in the Purchase and Sale Agreement was, at the
respective times of such signing and delivery duly elected or appointed,
qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their genuine
signatures.
4. Each of the Mortgage Loans referred to in the Purchase and Sale
Agreement was originated or acquired by the Company.
5. The Mortgage Loans referred to in the Purchase and Sale Agreement are
not subject to any security interest, pledge or hypothecation for the
benefit of any entity, institution or person.
6. Attached hereto is a certified true copy of the resolution of the
Board of Directors of the Company with respect to the transactions
governed by the Agreement.
IN WITNESS WHEREOF, I have hereunto signed my name on behalf of the
Company.
Dated: ______, 199_
By: ____________________
Name:
Title:
30
<PAGE> 36
I, ________________, Secretary of E-LOAN, INC., hereby certify that
___________________ is the duly elected, qualified and acting ________________
of the Company and that the signature appearing above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: __________, 199_
By:__________________________
Name:
Title:
31
<PAGE> 1
EXHIBIT 10.19
WHOLE LOANS
WHOLE LOAN PURCHASE AND SALE AGREEMENT
MORTGAGE LOAN PURCHASE AND SALE AGREEMENT
between
---------------------------
Seller,
and
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
Purchaser
600 Steamboat Road
Greenwich, Connecticut 0680
DATED:__________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 1. Definitions......................................................................1
Section 2. Procedures for Purchases of Mortgage Loans.......................................6
Section 3. Sale of Mortgage Loans to Takeout Investor.......................................7
Section 4. Completion Fee...................................................................9
Section 5. Servicing of the Mortgage Loans.................................................10
Section 6. Trade Assignments...............................................................11
Section 7. Transfers of Beneficial Interest in Mortgage Loans by Purchaser.................11
Section 8. Record Title to Mortgage Loans; Intent of Parties; Security Interest............11
Section 9. Representations and Warranties..................................................12
Section 10. Covenants of Seller............................................................19
Section 11. Term...........................................................................22
Section 12. Exclusive Benefit of Parties; Assignment.......................................22
Section 13. Amendments; Waivers; Cumulative Rights.........................................22
Section 14. Execution in Counterparts......................................................22
Section 15. Effect of Invalidity of Provisions.............................................22
Section 16. Governing Law..................................................................22
Section 17. Notices........................................................................22
Section 18. Entire Agreement...............................................................22
Section 19. Costs of Enforcement...........................................................23
Section 20. Consent to Service.............................................................23
Section 21. Submission to Jurisdiction.....................................................23
Section 22. Jurisdiction Not Exclusive.....................................................23
Section 23. Construction...................................................................23
</TABLE>
<PAGE> 3
MORTGAGE LOAN PURCHASE AND SALE AGREEMENT
This Mortgage Loan Purchase and Sale Agreement ("Agreement"),
dated as of the date set forth on the cover page hereof, is by and between
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. ("Purchaser") and the Seller whose
name is set forth on the cover page hereof ("Seller").
PRELIMINARY STATEMENT
Seller may, in its sole discretion, offer to sell to Purchaser
from time to time a 100% undivided ownership interest in certain Mortgage Loans,
and Purchaser, in its sole discretion, may agree to purchase such Mortgage Loans
from Seller in accordance with the terms and conditions set forth in this
Agreement. Seller, subject to the terms hereof, will cause each Mortgage Loan to
be purchased by Takeout Investor. During the period from the purchase of a
Mortgage Loan to the sale of the Mortgage Loan to Takeout Investor, Purchaser
expects to rely entirely upon Seller to service such Mortgage Loan.
The parties hereto hereby agree as follows:
Section 1. Definitions.
Capitalized terms used but not defined herein shall have the
meanings set forth in the Custodial Agreement. As used in this Agreement, the
following terms shall have the following meanings:
"Act of Insolvency": With respect to Seller, (a) the commencement
by Seller as debtor of any case or proceeding under any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar law, or Seller's seeking the
appointment of a receiver, trustee, custodian or similar official for Seller or
any substantial part of its property, or (b) the commencement of any such case
or proceeding against Seller, or another's seeking such appointment, or the
filing against Seller of an application for a protective decree which (1) is
consented to or not timely contested by Seller, (2) results in the entry of an
order for relief, such an appointment, the issuance of such a protective decree
or the entry of an order having a similar effect, or (3) is not dismissed within
thirty (30) days, (c) the making by Seller of a general assignment for the
benefit of creditors, or (d) the admission in writing by Seller that Seller is
unable to pay its debts as they become due or the nonpayment generally by Seller
of its debts as they become due.
"Agency Guide": The FHLMC Guide, the FNMA Guide or the GNMA
Guide, as applicable.
"Agency Program": The FHLMC Program, the FNMA Program or the GNMA
Program, as applicable.
"Applicable Agency": GNMA, FNMA or FHLMC, as applicable.
"Assignee": As defined in Section 7.
<PAGE> 4
"Business Day": Any day other than (a) a Saturday, Sunday or
other day on which banks located in The City of New York, New York are
authorized or obligated by law or executive order to be closed or (b) any day on
which Purchaser or Seller is closed for business, provided that notice thereof
shall have been given not less than seven (7) calendar days prior to such day,
and provided further that such closing does not conflict with any business
between Seller and Purchaser scheduled for such date prior to the giving of such
notice.
"Collateral": As defined in Section 8(c).
"Commitment Amount": The aggregate outstanding principal amount
of Mortgage Loans to be purchased pursuant to a Takeout Commitment. If the
Commitment Amount is expressed as a fixed amount plus or minus a percentage in
the related Takeout Confirmation, then the amount required to be delivered by
Seller shall be the minimum amount of such range and the amount required to be
purchased by Takeout Investor shall be the maximum amount of such range.
"Commitment Date": The date set forth in a Takeout Confirmation
as the commitment date.
"Commitment Guidelines": The guidelines, if any, issued by
Takeout Investor regarding the issuance of Takeout Commitments, as amended from
time to time by Takeout Investor.
"Commitment Number": With respect to a Takeout Commitment, the
number identified on the Takeout Confirmation as the commitment number.
"Completion Fee": With respect to each Mortgage Loan Pool, an
amount equal to the Discount plus the Net Carry Adjustment, less any reduction
pursuant to Section 4(c), which amount shall be payable to Seller by Purchaser
as compensation to Seller for its services hereunder in connection with the
purchase of a Mortgage Loan Pool.
"Confirmation": A written confirmation of Purchaser's intent to
purchase a Mortgage Loan Pool, which written confirmation shall be substantially
in the form attached hereto as Exhibit F.
"Credit File": All Mortgage Loan papers and documents required to
be maintained pursuant to the Sale Agreement, and all other papers and records
of whatever kind or description whether developed or originated by Seller or
others, required to document or service the Mortgage Loan provided, however,
that such Mortgage Loan papers, documents and records shall not include any
Mortgage Loan papers, documents or records which are contained in the Custodial
File.
"Cure Date": With respect to a Mortgage Loan, the date occurring
15 Business Days after the expiration of the Takeout Commitment unless extended
in writing by the Purchaser.
"Custodial Account": As defined in Section 5(b).
"Custodial Agreement": The Custodial Agreement, dated as of the
date set forth on the cover sheet thereof, among Seller, Purchaser and
Custodian.
"Custodial File": As defined in the Custodial Agreement.
-2-
<PAGE> 5
"Custodian": The Custodian whose name is set forth on the cover
page of the Custodial Agreement and its permitted successors thereunder.
"Cut-off Date": With respect to a Mortgage Loan, the last day of
a month on which the Settlement Date can occur if accrued interest for such
month is to be collected by Takeout Investor.
"Defective Mortgage Loan": With respect to any Mortgage Loan,
either (i) the Document File does not contain a document required to be
contained therein, (ii) a document within a Document File is, in the judgment of
Takeout Investor, defective or inaccurate in any material respect, as determined
upon evaluation of the Document File against the requirements of the Sale
Agreement, or (iii) a document in the Document File is not legal, valid and
binding.
"Discount": With respect to Mortgage Loan Pool sold by Seller to
Purchaser, the amount set forth on the related Confirmation as the Discount.
"Document File": The Credit File and the Custodial File.
"Due Date": The day of the month on which the Monthly Payment is
due on a Mortgage Loan.
"Exhibit B-1 Letter": As defined in Section 2(a).
"Exhibit C-1 Letter": As defined in Section 2(a).
"Expiration Date": With respect to any Takeout Commitment, the
expiration date thereof.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any successor
thereto.
"FNMA": Federal National Mortgage Association or any successor
thereto.
"GNMA": Government National Mortgage Association or any successor
thereto.
"HUD": United States Department of Housing and Urban Development
or any successor thereto.
"Losses": Any and all losses, claims, damages, liabilities or
expenses (including interest and reasonable attorneys' fees) incurred by any
person specified; provided, however, that "Losses" shall not include any losses,
claims, damages, liabilities or expenses which would have been avoided had such
person taken reasonable actions to mitigate such losses, claims, damages,
liabilities or expenses.
"Monthly Payment": The scheduled monthly payment of principal and
interest on a Mortgage Loan.
-3-
<PAGE> 6
"Mortgage": The mortgage, deed of trust or other instrument
creating a lien on an estate in fee simple in real property securing a Mortgage
Note.
"Mortgage File": Each of the documents identified on Exhibit I
hereto.
"Mortgage Interest Rate": The annual rate of interest borne on a
Mortgage Note.
"Mortgage Loan": A mortgage loan which is subject to this
Agreement, and which satisfies the requirements of the Sale Agreement as the
same may be modified from time to time.
"Mortgage Loan Pool": A group of Mortgage Loans purchased by
Purchaser hereunder and subject to a single Confirmation.
"Mortgage Note": The note or other evidence of the indebtedness
of a Mortgagor secured by a Mortgage.
"Mortgaged Property": The property subject to the lien of the
Mortgage securing a Mortgage Note.
"Mortgagor": The obligor on a Mortgage Note.
"NCUA": National Credit Union Administration, or any successor
thereto.
"Net Carry Adjustment": As defined in Section 4(b).
"Notice of Rejection of Trade Assignment": With respect to any
Mortgage Loan that Purchaser elects not to purchase, a notification by Purchaser
to Takeout Investor in the form of Exhibit G.
"OTS": Office of Thrift Supervision or any successor thereto.
"Parent Company": A corporation or other entity owning at least
50% of the outstanding shares of voting stock of Seller.
"Pass-Through Rate": With respect to each Mortgage Loan Pool
purchased by Purchaser hereunder, the rate at which interest from the Mortgage
is passed through to Purchaser which initially shall be the rate of interest
specified in the related Confirmation as the Pass-Through Rate, subject to
adjustment in the manner agreed to by Purchaser and Seller.
"Price Adjustment": With respect to a Takeout Commitment, the
incremental percentage by which the trade price is adjusted by applying the
appropriate formula set forth in a price adjustment summary sheet when delivered
by Purchaser to Seller which price adjustment summary sheet may be amended from
time to time by Purchaser's delivery to Seller of a new price adjustment summary
sheet.
-4-
<PAGE> 7
"Purchase Date": With respect to any Mortgage Loan Pool purchased
by Purchaser hereunder, the date of payment thereof by Purchaser to Seller of
the Purchase Price.
"Purchase Price": With respect to each Mortgage Loan Pool
purchased by Purchaser hereunder, an amount equal to the Trade Principal less an
amount equal to the product of the Trade Principal and the Discount.
"Purchaser": Greenwich Capital Financial Products, Inc. and its
successors in interest, including, but not limited to, a party to whom a Trust
Receipt is assigned as provided hereunder and in the Custodial Agreement.
"Purchaser's Wire Instructions": The wire instructions set forth
in a letter in the form of Exhibit E.
"RTC": Resolution Trust Corporation or any successor thereto.
"Sale Agreement": The agreement providing for the purchase by
Takeout Investor of Mortgage Loans from Seller.
"Seller": The Seller whose name is set forth on the cover page
hereof and its permitted successors hereunder.
"Seller's Wire Instructions": The wire instructions set forth in
a letter in the form of Exhibit C-2.
"Settlement Date": With respect to any Mortgage Loan, the date of
payment thereof by Takeout Investor to Purchaser of the Takeout Proceeds.
"Settlement Modification Letter": A letter in the form of Exhibit
H.
"Security": A GNMA Security, a FNMA Security or a FHLMC Security.
"Successor Servicer": An entity designated by Purchaser, with
notice provided in conformity with Section 17, to replace Seller as issuer and
servicer, mortgagee or seller/servicer of the Mortgage Loans evidenced by a
Trust Receipt.
"Takeout Commitment": A commitment of Seller to sell one or more
Mortgage Loans to Takeout Investor and of Takeout Investor to purchase one or
more Mortgage Loans from Seller.
"Takeout Confirmation": The written notification to Seller from
Takeout Investor containing all of the relevant details of the Takeout
Commitment, which notification may take the form of a trade confirmation.
"Takeout Investor": An Agency or a Conduit, as applicable.
-5-
<PAGE> 8
"Takeout Proceeds": With respect to any Mortgage Loan Pool, the
related Trade Principal plus accrued interest as calculated in accordance with
Section 3(a)(2), as amended by any related Settlement Modification Letter
accepted by Purchaser.
"Third Party Underwriter": Any third party, including but not
limited to a mortgage loan pool insurer, who underwrites the Mortgage Loan(s)
prior to the purchase by Purchaser of the related Mortgage Loan Pool.
"Third Party Underwriter's Certificate": A certificate issued by
a Third Party Underwriter with respect to a Mortgage Loan, certifying that such
Mortgage Loan complies with its underwriting requirements.
"Trade Assignment": The assignment by Seller to Purchaser of
Seller's rights under a specific Takeout Commitment, in the form of Exhibit D-1,
or of Seller's rights under all Takeout Commitments, in the form of Exhibit D-2.
"Trade Price": The trade price set forth on a Takeout Commitment
less any applicable Price Adjustment.
"Trade Principal": With respect to any Mortgage Loan Pool, the
aggregate outstanding principal balance of such Mortgage Loan multiplied by a
percentage equal to the Trade Price.
"Warehouse Lender": Any lender providing financing to Seller for
the purpose of originating or purchasing Mortgage Loans which has a security
interest in such Mortgage Loans as collateral for the obligations of Seller to
such lender.
"Warehouse Lender's Wire Instructions": The wire instructions set
forth in a letter in the form of Exhibit B-2.
Section 2. Procedures for Purchases of Mortgage Loans
(a) Purchaser may, in its sole discretion, from time to time,
purchase one or more Mortgage Loan Pools from Seller. Prior to Purchaser's
actual purchase of any Mortgage Loan Pool, Purchaser shall have received from
Custodian (i) an original Trust Receipt relating to all Mortgage Loans
(including the Mortgage Loan Pool being purchased) relating to Cash Window
Transactions or Conduit Transactions, as applicable, fully completed and
authenticated by Custodian, (ii) a copy of the Takeout Confirmation related to
the Mortgage Loan(s) in such Mortgage Loan Pool together with a Trade Assignment
in the form of Exhibit D-1 and/or an Acknowledgement of Assignment in the form
of Exhibit D-2, executed by Seller and Takeout Investor, and (iii) an original
letter in the form of Exhibit B-1 (an "Exhibit B-1 Letter") from the applicable
Warehouse Lender (if any), or an original letter in the form of Exhibit C-1 (an
"Exhibit C-1 Letter") in the event that there is no Warehouse Lender.
Simultaneously with the payment by Purchaser of the Purchase Price, in
accordance with the Warehouse Lender's Wire Instructions or Seller's Wire
Instructions, as applicable, with respect to a Mortgage Loan pool, Seller hereby
conveys to Purchaser all of Seller's right, title and interest in and to the
related Mortgage Loan(s) free and clear of any lien, claim or encumbrance.
Notwithstanding the
-6-
<PAGE> 9
satisfaction by Seller of the conditions specified in this Section 2(a),
Purchaser is not obligated to purchase any Mortgage Loans offered to it
hereunder.
(b) If Purchaser elects to purchase any Mortgage Loan Pool,
Purchaser shall pay the amount of the Purchase Price for such Mortgage Loan Pool
by wire transfer of immediately available funds in accordance with the Warehouse
Lender's Wire Instructions or if there is no Warehouse Lender, Seller's Wire
Instructions. Upon such payment and not otherwise, Purchaser shall be deemed to
have accepted the related Trade Assignment. In the event that Purchaser rejects
a Mortgage Loan for purchase for any reason and/or does not transmit the
applicable Purchase Price, (i) the Trust Receipt delivered by Custodian to
Purchaser in anticipation of such purchase shall automatically be null and void
and the previously existing Trust Receipt for that type of transaction shall be
in full force and effect, (ii) Purchaser shall not consummate the transactions
contemplated in the applicable Takeout Confirmation and shall deliver to Takeout
Investor (with a copy to Seller and Custodian) a Notice of Rejection of Trade
Assignment, provided, however, that failure of Purchaser to give such notice
shall not affect the rejection by Purchaser of the Trade Assignment, and (iii)
if Purchaser shall nevertheless receive any portion of the related Takeout
Proceeds, Purchaser shall promptly pay such Takeout Proceeds to Seller in
accordance with Seller's Wire Instructions.
(c) The terms and conditions of the purchase of each Mortgage
Loan Pool shall be as set forth in this Agreement.
Section 3. Sale of Mortgage Loans to Takeout Investor.
(a) With respect to Mortgage Loan(s) that Purchaser has elected
to purchase, Purchaser may, at its option, either (i) instruct Custodian to
deliver to Takeout Investor, in accordance with Takeout Investor's instructions,
the Custodial File in respect of such Mortgage Loans, in the manner and at the
time set forth in the Custodial Agreement, or (ii) provide for the delivery of
the Custodial File through an escrow arrangement satisfactory to Purchaser and
Takeout Investor. Seller shall on or after the Purchase Date, but in no event
later than the related Expiration Date, promptly deliver to Takeout Investor the
related Credit File and thereafter any and all additional documents requested by
Takeout Investor to enable Takeout Investor to purchase such Mortgage Loan(s) on
or before the related Cure Date.
(b) Except when Purchaser has accepted a Settlement Modification
Letter, unless the Takeout Proceeds are received by Purchaser (in immediately
available funds in accordance with Purchaser's Wire Instructions) with respect
to the Mortgage Loans in a Mortgage Pool, on or before the related Cure Date,
the Completion Fee relating to such Mortgage Pool shall not be payable until the
earlier to occur of (1) the date of receipt by Purchaser of the Takeout Proceeds
and, (2) the satisfaction by Seller of its obligations pursuant to the exercise
by Purchaser of any remedial election authorized by this Section 3. Upon receipt
by Purchaser, prior to the Cure Date, of a Settlement Modification Letter, duly
executed by Takeout Investor and Seller, Purchaser may, at its election, agree
to the postponement of the Settlement Date and such other matters as are set
forth in the Settlement Modification Letter. If Purchaser elects to accept a
Settlement Modification Letter, Purchaser shall, not later than two (2) Business
Days after receipt of such Settlement Modification Letter execute the Settlement
Modification Letter and send, via facsimile, copies of such fully executed
Settlement Modification Letter to Seller and Takeout Investor. Upon execution by
Purchaser of a Settlement Modification Letter, Purchaser
-7-
<PAGE> 10
shall recalculate the amount of the Completion Fee, if any, due to Seller using
the new terms included in the Settlement Modification Letter and shall pay to
Seller, not later than two (2) Business Days after Purchaser's execution of such
Settlement Modification Letter, the amount of such recalculated Completion Fee.
(c)(1) If a breach by Seller of this Agreement results in any
Mortgage Loan being a Defective Mortgage Loan at the time of the delivery of the
related Trust Receipt to Purchaser and in Purchaser's sole judgment the defects
in such Mortgage Loan will not be cured (or in fact are not cured) by Seller
prior to the Cure Date, Purchaser, at its election, may require that Seller,
upon receipt of notice from Purchaser of its exercise of such right, either (i)
immediately repurchase Purchaser's ownership interest in such Defective Mortgage
Loan by remitting to Purchaser (in immediately available funds in accordance
with Purchaser's Wire Instructions) the amount paid by Purchaser for such
Defective Mortgage Loan plus interest at the Pass-Through Rate on the principal
amount thereof from the date of Purchaser's purchase of the related Mortgage
Loan Pool to the date of such repurchase or (ii) deliver to Custodian a Mortgage
Loan in exchange for such Defective Mortgage Loan, which newly delivered
Mortgage Loan shall be in all respects acceptable to Purchaser in Purchaser's
reasonable discretion. If the aggregate principal balance of all Mortgage
Loan(s) that are accepted by Purchaser pursuant to clause (ii) of the
immediately preceding sentence is less than the aggregate principal balance of
all Defective Mortgage Loan(s) that are being replaced by such Mortgage Loan(s),
Seller shall remit with such Mortgage Loan to Purchaser an amount equal to the
difference between the aggregate principal balance of the new Mortgage Loan(s)
accepted by Purchaser and the aggregate principal balance of the Defective
Mortgage Loan(s) being replaced thereby.
(c)(2) If Seller fails to comply with its obligations in the
manner described in Section 3(c)(1), not later than the third day after receipt
by Seller of notice from Purchaser, Seller's rights and obligations to service
Mortgage Loan(s) as provided in this Agreement, shall terminate. If an Act of
Insolvency occurs at any time, Seller's rights and obligations to service the
Mortgage Loan(s), as provided in this Agreement, shall terminate immediately,
without any notice or action by Purchaser. Upon any such termination, Purchaser
is hereby authorized and empowered as the exclusive agent for Seller to sell and
transfer such rights to service the Mortgage Loan(s) for such price and on such
terms and conditions as Purchaser shall reasonably determine, and Seller shall
not otherwise attempt to sell or transfer such rights to service without the
prior consent of Purchaser. Seller shall perform all acts and take all action so
that the Mortgage Loan(s) and all files and documents relating to such Mortgage
Loan(s) held by Seller, together with all escrow amounts relating to such
Mortgage Loan(s), are delivered to Successor Servicer. To the extent that the
approval of any Third Party Underwriter or any other insurer or guarantor is
required for any such sale or transfer, Seller shall fully cooperate with
Purchaser to obtain such approval. Upon exercise by Purchaser of its remedies
under this Section 3(c)(2), Seller hereby authorizes Purchaser to receive all
amounts paid by any purchaser of such rights to service the Mortgage Loan(s) and
to remit such amounts to Seller subject to Purchaser's rights of set-off under
this Agreement. Upon exercise by Purchaser of its remedies under this Section
3(c)(2), Purchaser's obligation to pay and Seller's right to receive any portion
of the Completion Fee relating to such Mortgage Loan(s) shall automatically be
canceled and become null and void, provided that such cancellation shall in no
way relieve Seller or otherwise affect the obligation of Seller to indemnify and
hold Purchaser harmless as specified in Section 3(f).
(d) Each Mortgage Loan required to be delivered to Successor
Servicer by Section 3(c)(2) shall be delivered free of any servicing rights in
favor of Seller and free of any title, interest,
-8-
<PAGE> 11
lien, encumbrance or claim of any kind of Seller and Seller hereby waives its
right to assert any interest, lien, encumbrance or claim of any kind. Seller
shall deliver or cause to be delivered all files and documents relating to each
Mortgage Loan held by Seller to Successor Servicer. Seller shall promptly take
such actions and furnish to Purchaser such documents that Purchaser deems
necessary or appropriate to enable Purchaser to cure any defect in each such
Mortgage Loan or to enforce such Mortgage Loans, as appropriate.
(e) In the event that a Mortgage Loan or Mortgage Pool is not
purchased by a Takeout Investor on or before the Cure Date, upon not less than
five (5) days notice from Purchaser to Seller, Seller shall either obtain a
Takeout Commitment from another Takeout Investor to purchase such Mortgage Loan
or Mortgage Pool or issue a Takeout Commitment on its own behalf to purchase
such Mortgage Loan or Mortgage Pool.
(f) Seller agrees to indemnify and hold Purchaser and its assigns
harmless from and against all Losses resulting from or relating to any breach or
failure to perform by Seller of any representation, warranty, covenant, term or
condition made or to be performed by Seller under this Agreement.
(g) No exercise by Purchaser of its rights under this Section 3
shall relieve Seller of responsibility or liability for any breach of this
Agreement.
(h) Seller hereby grants Purchaser a right of set-off against the
payment of any amounts that may be due and payable to Purchaser from Seller,
such right to be upon any and all monies or other property of Seller held or
received by Purchaser, or due and owing from Purchaser to Seller.
Section 4. Completion Fee.
(a) With respect to each Mortgage Loan Pool that Purchaser elects
to purchase hereunder, Purchaser shall pay to Seller a Completion Fee. The
Completion Fee shall be payable by Purchaser as provided in subsection (e)
below.
(b) For purposes of calculating that portion of the Completion
Fee composed of the "Net Carry Adjustment", the Net Carry Adjustment shall be an
amount (which may be a negative number) equal to (A) the product obtained by
multiplying the number of days in the period beginning on the Purchase Date to
but not including the Settlement Date and the difference between (i) the product
of the rate of interest to be borne by the related Mortgage Loans in the
Mortgage Pool and the aggregate principal amount of such Mortgage Loans and (ii)
the daily application of the applicable Pass-Through Rate to the Purchase Price;
divided by (B) 360.
(c)(i) If a Mortgage Loan Pool is purchased by Purchaser in the
month prior to the month in which the related Settlement Date occurs, (A) all
interest which accrues on the related Mortgage Loans, on and after the Purchase
Date, through the last day of the month prior to the month in which such
Settlement Date occurs, shall be paid to Purchaser by Seller, as servicer, on
the related Settlement Date and (B) all interest which accrues on the Mortgage
Loans in such Mortgage Loan Pool on and after the first day of the month in
which such Settlement Date occurs, through the day immediately prior to such
Settlement Date, will be paid to Purchaser by Takeout Investor on such
Settlement Date unless such Settlement Date occurs after the Cut-off Date of
such month in which event
-9-
<PAGE> 12
Seller, as servicer, shall pay such amount to Purchaser on such Settlement Date.
If a Mortgage Loan Pool is purchased by Purchaser in the same month in which the
related Settlement Date occurs, (A) all interest, if any, which accrues on such
Mortgage Loan(s) from the first day of such month to but not including the
related Purchase Date shall be paid by Purchaser to Seller on such Settlement
Date, and (B) all interest which accrues on such Mortgage Loan(s), on and after
the Purchase Date to but not including the Settlement Date will be paid to
Purchaser by Takeout Investor on the Settlement Date unless such Settlement Date
occurs after the Cut-off Date or in a month in which interest has been prepaid
by the Mortgagor in either of which events Seller, as servicer, shall pay such
amount to Purchaser on such Settlement Date. For purposes of this paragraph all
interest payments shall be deemed to accrue at the applicable rate set forth in
the related Takeout Commitment.
(ii) In circumstances where a Mortgage Loan is not purchased by
the Takeout Investor on or before the Settlement Date, in the event Purchaser
elects not to declare a default hereunder, Purchaser may adjust and reduce the
Completion Fee as specified by Purchaser in the Confirmation. Notwithstanding
the preceding sentence, Purchaser is under no obligation to waive any default or
forebear from exercising its remedies hereunder and one waiver or forebearance
shall not constitute evidence of any pattern or create any obligation by
Purchaser to waive or forebear in the future.
(d) It is understood by Seller and Purchaser that, if Seller
requests and Purchaser agrees to pay the Completion Fee prior to the Settlement
Date, the amount of such Completion Fee shall be adjusted as mutually agreed by
Seller and Purchaser.
(e) The Completion Fee relating to each Mortgage Loan Pool is
payable on the earlier to occur of (1) the date of receipt by Purchaser of the
Trade Price, and (2) the satisfaction by Seller of its obligations pursuant to
this Agreement notwithstanding the exercise by Purchaser of any remedial
election authorized herein.
Section 5. Servicing of the Mortgage Loans.
(a) Seller shall service and administer the Mortgage Loan(s) on
behalf of Purchaser in accordance with prudent mortgage loan servicing standards
and procedures generally accepted in the mortgage banking industry and in
accordance with the requirements of Takeout Investor, provided that Seller shall
at all times comply with applicable law, and the requirements of any applicable
insurer or guarantor including, without limitation, any Third Party Underwriter,
so that the insurance in respect of any Mortgage Loan is not voided or reduced.
Seller shall at all times maintain accurate and complete records of its
servicing of each Mortgage Loan, and Purchaser may, at any time during Seller's
business hours on reasonable notice, examine and make copies of such records. In
addition, if a Mortgage Loan is not purchased by Takeout Investor on or before
the Cure Date, Seller shall at Purchaser's request deliver to Purchaser monthly
reports regarding the status of such Mortgage Loan, which reports shall include,
but shall not be limited to, a description of each Mortgage Loan in default for
more than thirty (30) days, and such other circumstances with respect to any
Mortgage Loan (whether or not such Mortgage Loan is included in the foregoing
list) that could materially adversely affect any such Mortgage Loan, Purchaser's
ownership of any such Mortgage Loan or the collateral securing any such Mortgage
Loan. Seller shall deliver such a report to Purchaser every thirty (30) days
until (i) the purchase by Takeout Investor of such Mortgage Loan pursuant to the
related Takeout Commitment or (ii) the exercise by Purchaser of any remedial
election pursuant to Section 3.
-10-
<PAGE> 13
(b) Within five (5) business days of notice from Purchaser,
Seller shall establish and maintain a separate custodial account (the "Custodial
Account") entitled "Greenwich Capital Financial Products, Inc. and its assignees
under the Mortgage Loan Purchase and Sale Agreement dated [the date of this
Agreement]" and shall promptly deposit into such account in the form received
with any necessary endorsements all collections received in respect of each
Mortgage Loan that are payable to Purchaser as the owner of each such Mortgage
Loan.
(c) Amounts deposited in the Custodial Account with respect to
any Mortgage Loan shall be held in trust for Purchaser as the owner of such
Mortgage Loan and shall be released only as follows:
(1) Except as otherwise provided in Section 5(c)(2),
following receipt by Purchaser or its designee of the Takeout
Proceeds for such Mortgage Loan from Takeout Investor, amounts
deposited in the Custodial Account related to such Mortgage Loan
not otherwise subject to setoff as provided hereunder shall be
released to Seller. The amounts paid to Seller (if any) pursuant
to this Section 5(c)(1) shall constitute Seller's sole
compensation for servicing the Mortgage Loans as provided in this
Section 5.
(2) If Successor Servicer takes delivery of such Mortgage
Loan (either under the circumstances set forth in Section 3 or
otherwise), all amounts deposited in the Custodial Account shall
be paid to Purchaser promptly upon such delivery.
(3) If a Mortgage Loan is not purchased by Takeout
Investor on or before the Cure Date, during the period thereafter
that Seller remains as servicer, all amounts deposited in the
Custodial Account shall be released only in accordance with a
Purchaser's written instructions.
Section 6. Trade Assignments. Seller hereby assigns to Purchaser,
free of any security interest, lien, claim or encumbrance of any kind, Seller's
rights, under each Takeout Commitment to deliver the Mortgage Loan(s) specified
therein to the related Takeout Investor and to receive the Takeout Proceeds
therefor from such Takeout Investor. Purchaser shall not be deemed to have
accepted any Trade Assignment unless and until it purchases the related Mortgage
Loans, and nothing set forth herein shall be deemed to impair Purchaser's right
to reject any Mortgage Loan for any reason, in its sole discretion.
Section 7. Transfers of Beneficial Interest in Mortgage Loans by
Purchaser. Purchaser may, in its sole discretion, assign all of its right, title
and interest in or grant a security interest in any Mortgage Loan sold by Seller
hereunder and all rights of Purchaser under this Agreement and the Custodial
Agreement, in respect of such Mortgage Loan to a tri-party custody and clearing
agent ("Assignee"), subject only to an obligation on the part of Assignee to
deliver each such Mortgage Loan to Takeout Investor pursuant to Section 6 or to
Purchaser to permit Purchaser or its designee to make delivery thereof to a
Takeout Investor pursuant to Section 6. It is anticipated that such assignment
to an Assignee will be made by Purchaser, and Seller hereby irrevocably consents
to such assignment. No notice of such assignment shall be given by Purchaser to
Seller or Takeout Investor. Assignment by
-11-
<PAGE> 14
Purchaser of the Mortgage Loans as provided in this Section 7 shall not release
Purchaser from its obligations under this Agreement.
Without limitation of the foregoing, an assignment of the
Mortgage Loans to an Assignee, as described in this Section 7, shall be
effective upon delivery to the Assignee of a duly executed and authenticated
Trust Receipt.
Section 8. Record Title to Mortgage Loans; Intent of Parties;
Security Interest.
(a) From and after the issuance and delivery of the related Trust
Receipt, and subject to the remedies of Purchaser in Section 3, Seller shall
remain the last named payee or endorsee of each Mortgage Note and the mortgagee
or assignee of record of each Mortgage in trust for the benefit of Purchaser,
for the sole purpose of facilitating the servicing of such Mortgage Loan.
(b) Seller shall maintain a complete set of books and records for
each Mortgage Loan which shall be clearly marked to reflect the ownership
interest in each Mortgage Loan of the holder of the related Trust Receipt.
(c) Purchaser and Seller confirm that the transactions
contemplated herein are intended to be sales of the Mortgage Loans by Seller to
Purchaser rather than borrowings secured by the Mortgage Loans. In the event,
for any reason, any transaction is construed by any court or regulatory
authority as a borrowing rather than as a sale, Seller and Purchaser intend that
Purchaser or its Assignee, as the case may be, shall have a perfected first
priority security interest in the Mortgage Loans, the Custodial Account, and all
proceeds thereof, the Takeout Commitments and the proceeds of any and all of the
foregoing (collectively, the "Collateral"), free and clear of adverse claims. In
such case, Seller shall be deemed to have hereby granted to Purchaser or
Assignee, as the case may be, a first priority security interest in and lien
upon the Collateral, free and clear of adverse claims. In such event, this
Agreement shall constitute a security agreement, the Custodian shall be deemed
to be an independent custodian for purposes of perfection of the security
interest granted to Purchaser or Assignee, as the case may be, and Purchaser or
Assignee, as the case may be, shall have all of the rights of a secured party
under applicable law.
(d) Upon not less than two Business Days prior written notice,
Seller shall deliver to Custodian (or if so requested, directly to Purchaser or
its Assignee) a complete Mortgage File containing all of the documents listed in
Exhibit I hereto.
Section 9. Representations and Warranties.
(a) Seller hereby represents and warrants to Purchaser as of the
date hereof and as of the date of each issuance and delivery of a Trust Receipt
that:
(i) Seller is duly organized, validly existing and in good
standing under the laws of the state of its organization and has
all licenses necessary to carry on its business as now being
conducted and is licensed, qualified and in good standing in the
state where the Mortgaged Property is located if the laws of such
state require licensing
-12-
<PAGE> 15
or qualification in order to conduct business of the type
conducted by Seller. Seller has all requisite power and authority
(including, if applicable, corporate power) to execute and
deliver this Agreement and to perform in accordance herewith; the
execution, delivery and performance of this Agreement (including
all instruments of transfer to be delivered pursuant to this
Agreement) by Seller and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this
Agreement evidences the valid, binding and enforceable obligation
of Seller; and all requisite action (including, if applicable,
corporate action) has been taken by Seller to make this Agreement
valid and binding upon Seller in accordance with its terms;
(ii) No approval of the transactions contemplated by this
Agreement from the OTS, the NCUA, the FDIC or any similar federal
or state regulatory authority having jurisdiction over Seller is
required, or if required, such approval has been obtained. There
are no actions or proceedings pending or affecting Seller which
would adversely affect its ability to perform hereunder. The
transfers, assignments and conveyances provided for herein are
not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction;
(iii) The consummation of the transactions contemplated by
this Agreement are in the ordinary course of business of Seller
and will not result in the breach of any term or provision of the
charter or by-laws of Seller or result in the breach of any term
or provision of, or conflict with or constitute a default under
or result in the acceleration of any obligation under, any
agreement, indenture or loan or credit agreement or other
instrument to which Seller or its property is subject, or result
in the violation of any law, rule, regulation, order, judgment or
decree to which Seller or its property is subject;
(iv) This Agreement, the Custodial Agreement and every
document to be executed by Seller pursuant to this Agreement is
and will be valid, binding and subsisting obligations of Seller,
enforceable in accordance with their respective terms. No
consents or approvals are required to be obtained by Seller or
its Parent Company for the execution, delivery and performance of
this Agreement or the Custodial Agreement by Seller;
(v) Seller has not sold, assigned, transferred, pledged or
hypothecated any interest in any Mortgage Loan sold hereunder to
any person other than Purchaser, and upon delivery of a related
Trust Receipt to Purchaser, Purchaser will be the sole owner
thereof, free and clear of any lien, claim or encumbrance; and
(vi) All information relating to Seller that Seller has
delivered or caused to be delivered to Purchaser, including, but
not limited to, all documents related to this Agreement, the
Custodial Agreement or Seller's financial statements, does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made therein or
herein in light of the circumstances under which they were made,
not misleading.
-13-
<PAGE> 16
(b) Seller hereby represents and warrants to Purchaser as of the date
hereof and as of each Purchase Date the Custodian is an eligible custodian as
determined by FNMA, FHMLC and GNMA, and is not an Affiliate of the Seller.
(c) Seller hereby represents, warrants and covenants to Purchaser with
respect to each Mortgage Loan as of each Purchase Date of the related Mortgage
Loan that:
(i) The Mortgage Loan conforms in all respects to the
requirements of this Agreement, the Sale Agreement, the
Commitment Guidelines and the requirements of the related Third
Party Underwriter's Certificate;
(ii) Seller is the sole owner and holder of the Mortgage
Loan free and clear of any and all liens, pledges, charges or
security interests of any nature and has full right and
authority, subject to no interest or participation of, or
agreement with, any other party, to sell and assign the same
pursuant to this Agreement;
(iii) No servicing agreement has been entered into with
respect to the Mortgage Loan, or any such servicing agreement has
been terminated and there are no restrictions, contractual or
governmental, which would impair the ability of Purchaser or
Purchaser's designees from servicing the Mortgage Loan;
(iv) The Mortgage is a valid and subsisting lien on the
property therein described and the Mortgaged Property is free and
clear of all encumbrances and liens having priority over the lien
of the Mortgage except for liens for real estate taxes and
special assessments not yet due and payable and other liens
permitted by Purchaser. In the event that the Mortgage is not a
first priority lien on the property described therein, there is
no event of default or situation which upon the passage of time
would become a default under any obligation secured by a senior
lien on the Mortgaged Property. Any pledge account, security
agreement, chattel mortgage or equivalent document related to,
and delivered to Purchaser with the Mortgage, establishes in
Seller a valid and subsisting lien on the property described and
the priority provided therein, and Seller has full right to sell
and assign the same to Purchaser;
(v) Neither Seller nor any prior holder of the Mortgage
has modified the Mortgage in any material respect; satisfied,
canceled or subordinated the Mortgage in whole or in part;
released the Mortgaged Property in whole or in part from the lien
of the Mortgage; or executed any instrument of release,
cancellation, modification or satisfaction unless such release,
cancellation, modification or satisfaction does not adversely
affect the value of the Mortgage Loan and is contained in the
related Document File;
(vi) The Mortgage Loan is not in default, and all Monthly
Payments due prior to the Purchase Date and all taxes,
governmental assessments, insurance premiums, water, sewer and
municipal charges, leasehold payments or ground rents have been
paid. Seller has not advanced funds, or induced or solicited any
advance of funds by a party other than the Mortgagor directly or
indirectly, for the payment of any amount required by the
Mortgage Loan. The collection practices used by each entity which
has
-14-
<PAGE> 17
serviced the Mortgage Loan have been in all respects legal,
proper, prudent, and customary in the mortgage servicing
business. With respect to escrow deposits and payments in those
instances where such were required, there exist no deficiencies
in connection therewith for which customary arrangements for
repayment thereof have not been made and no escrow deposits or
payments or other charges or payments have been capitalized under
any Mortgage or the related Mortgage Note;
(vii) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the related Mortgage
Note and no event which, with the passage of time or with notice
and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration; and Seller
has not waived any default, breach, violation or event of
acceleration;
(viii) The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including the
defense of usury, nor will the operation of any of the terms of
the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the
defense of usury, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto;
(ix) The Mortgage Note and the related Mortgage are
genuine and each is the legal, valid and binding obligation of
the maker thereof, enforceable in accordance with its terms. All
parties to the Mortgage Note and the Mortgage had legal capacity
to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage have been duly and properly executed by the
Mortgagor;
(x) The Mortgage Loan meets, or is exempt from, applicable
state or federal laws, regulations and other requirements
pertaining to usury, and the Mortgage Loan is not usurious;
(xi) Any and all requirements of any federal, state or
local law including, without limitation, truth-in-lending, real
estate settlement procedures, consumer credit protection, equal
credit opportunity or disclosure laws applicable to the Mortgage
Loan have been complied with, and Seller shall deliver to
Purchaser upon demand, evidence of compliance with all such
requirements;
(xii) Either: (A) Seller and every other holder of the
Mortgage, if any, were authorized to transact and do business in
the jurisdiction in which the Mortgaged Property is located at
all times when such party held the Mortgage; or (B) the loan of
mortgage funds, the acquisition of the Mortgage (if Seller was
not the original lender), the holding of the Mortgage and the
transfer of the Mortgage did not constitute the transaction of
business or the doing of business in such jurisdiction;
(xiii) Not less than 95% of the proceeds of the Mortgage
Loan have been fully disbursed, there is no requirement for
future advances thereunder greater than 5% of the Mortgage Loan
and any and all requirements as to completion of any on site or
-15-
<PAGE> 18
off-site improvements and as to disbursements of any escrow
funds, therefore, have been or will be complied with. All costs,
fees and expenses incurred in making, closing or recording the
Mortgage Loans were paid;
(xiv) The related Mortgage contains customary and
enforceable provisions such as to render the rights and remedies
of the holder thereof adequate for the realization against the
Mortgaged Property of the benefits of the security, including,
(i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial foreclosure. There
is no homestead or other exemption available to the Mortgagor
which would interfere with the right to sell the Mortgaged
Property at a trustee's sale or the right to foreclose the
Mortgage;
(xv) The Mortgage Loan was originated free of any
"original issue discount" with respect to which the owner of the
Mortgage Loan could be deemed to have income pursuant to Sections
1271 et seq. of the Internal Revenue Code;
(xvi) Each Mortgage Loan was originated by an institution
described in Section 3(a)(41)(A)(ii) of the Securities Exchange
Act of 1934, as amended;
(xvii) At origination, the Mortgaged Property was free and
clear of all mechanics' and materialmen's liens or liens in the
nature thereof which are or could be prior to the Mortgage lien
except as provided in the Mortgage, and no rights are outstanding
that under law could give rise to any such lien;
(xviii) All of the improvements which are included for the
purpose of determining the appraised value of the Mortgaged
Property lie wholly within the boundaries and building
restriction lines of such property, and no improvements on
adjoining properties encroach upon the Mortgaged Property;
(xix) At origination, no improvement located on or being
part of the Mortgaged Property was in violation of any applicable
zoning law or regulation and all inspections, licenses and
certificates required to be made or issued with respect to all
occupied portions of the Mortgaged Property, and with respect to
the use and occupancy of the same, including but not limited to
certificates of occupancy and fire underwriting certificates, had
been made or obtained from the appropriate authorities and the
Mortgaged Property was lawfully occupied under applicable law. No
improvement located on or being part of the Mortgaged Property is
in violation of any applicable zoning law or regulation and all
inspections, licenses and certificates required to be made or
issued with respect to the Mortgaged Property, and with respect
to the use and occupancy of the same, including but not limited
to certificates of occupancy and fire underwriting certificates,
have been made or obtained from the appropriate authorities and
the Mortgaged Property is lawfully occupied under applicable law;
(xx) There is no proceeding pending for the total or
partial condemnation of the Mortgaged Property and said property
is undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty;
-16-
<PAGE> 19
(xxi) The Custodial File contains and the Credit File
contains or shall contain prior to the Cure Date each of the
documents and instruments specified to be included therein duly
executed and in due and proper form and each such document or
instrument is either in form acceptable to the Applicable Agency
or is a uniform instrument. Each Mortgage Note and Mortgage are
on forms approved by or to the best of the Seller's knowledge
would be approved by the Applicable Agency with such riders as
have been approved by or to the best of the Seller's knowledge
would be approved by the Applicable Agency; Seller is currently
in possession of the Custodial File for each Mortgage Loan and is
in possession or shall be prior to the Expiration Date of the
Credit File for each Mortgage Loan and there are no custodial
agreements in effect adversely affecting the rights of Seller to
make the deliveries required within the required time. Seller
shall not deliver a Credit File to Takeout Investor after the
related Commitment Date;
(xxii) Each Mortgage Loan is covered by a mortgage title
insurance policy acceptable to FNMA, issued by, and the valid and
binding obligation of, a title insurer acceptable to FNMA and
qualified to do business in the jurisdiction where the Mortgaged
Property is located, insuring Seller, its successors and assigns,
as to the validity and appropriate priority of the lien created
by the Mortgage in the original principal amount of the Mortgage
Loan, Seller is the named insured and the sole insured of such
mortgage title insurance policy, the assignment to Purchaser of
Seller's interest in such mortgage title insurance policy does
not require the consent of or notification to the insurer, such
mortgage title insurance policy is in full force and effect and
will be in full force and effect and inure to the benefit of
Purchaser upon the consummation of the transactions contemplated
by this Agreement and no claims have been made under such
mortgage title insurance policy and no prior holder of the
related Mortgage, including Seller, has done, by act or omission,
anything which would impair the coverage of such mortgage title
insurance policy;
(xxiii) All buildings upon the Mortgaged Property are
insured against loss by fire, hazards of extended coverage and
such other hazards as are customary in the area where the
Mortgaged Property is located, pursuant to fire and hazard
insurance policies with extended coverage or other insurance
required by the Sale Agreement, in an amount at least equal to
the lesser of (i) the outstanding principal balance of the
Mortgage Loan or (ii) the maximum insurable value (replacement
cost without deduction for depreciation) of the improvements
constituting the Mortgaged Property. If applicable laws limit the
amount of such insurance to the replacement cost of the
improvements constituting the Mortgaged Property or to some other
amount, then such insurance is in an amount equal to the maximum
allowed by such laws. Such insurance amount is sufficient to
prevent the Mortgagor or the loss payee under the policy from
becoming a co-insurer. The insurer issuing such insurance is
acceptable pursuant to the Sale Agreement. All individual
insurance policies contain a standard mortgagee clause naming
Seller, its successors and assigns, as mortgagee and all premiums
thereon have been paid. Each Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at Mortgagor's cost and
expense, and upon the Mortgagor's failure to do so, authorizes
the holder of the Mortgage to obtain and maintain such insurance
at
-17-
<PAGE> 20
Mortgagor's cost and expense and to seek reimbursement therefor
from the Mortgagor. Any flood insurance required by applicable
law has been obtained;
(xxiv) The original principal amount of the related
Mortgage Note (plus the amount of all other prior obligations for
which their is a senior lien on the Mortgaged Property) either
(a) was not more than 80% of the lesser of (i) the purchase price
of the Mortgaged Property paid by the Mortgagor at the
origination of the Mortgage Loan and (ii) the appraised value of
the Mortgaged Property, such appraised value being, for the
purposes hereof, the amount set forth in an appraisal made in
connection with the origination of such Mortgage Loan, or (b) is
and will be insured as to payment defaults by a policy of primary
mortgage guaranty insurance in accordance with the Sale Agreement
and all provisions of such primary mortgage guaranty insurance
policy have been and are being complied with, such policy is in
full force and effect, and all premiums due thereunder have been
paid. Any Mortgage Loan subject to any such policy of primary
mortgage guaranty insurance obligates the Mortgagor thereunder to
maintain such insurance and pay all premiums and charges in
connection therewith. The original principal amount of each
Mortgage Note was not more than 95% of the purchase price of the
related Mortgaged Property paid by the Mortgagor at the
origination of the Mortgage Loan. No action, event or state of
facts exists or has existed which, because involving or arising
from any dishonest, fraudulent, criminal, negligent or knowingly
wrongful act, error or omission by the Mortgagor or the
originator or servicer of the Mortgage Loan, would result in the
exclusion from, denial of, or defense to coverage which otherwise
would be provided by such insurance;
(xxv) At the time that the related Mortgage Loan was made
the Mortgagor represented that the Mortgagor would occupy such
Mortgaged Property as Mortgagor's primary residence;
(xxvi) The Mortgaged Property consists of a single parcel
of real property;
(xxvii) There are no circumstances or conditions with
respect to the Mortgage, the Mortgaged Property, the Mortgagor or
the Mortgagor's credit standing that can be reasonably expected
to cause private institutional investors to regard the Mortgage
Loan as an unacceptable investment, cause the Mortgage Loan to
become delinquent or adversely affect the value or marketability
of the Mortgage Loan;
(xxviii) Such Mortgage Loan was, immediately prior to the
sale to Purchaser of the related Mortgage Loan Pool, owned solely
by Seller, is not subject to any lien, claim or encumbrance,
including, without limitation, any such interest pursuant to a
loan or credit agreement for warehousing mortgage loans, and was
originated and serviced in accordance with all applicable law and
regulations, including without limitation the Federal
Truth-in-Lending Act, the Real Estate Settlement Procedures Act,
regulations issued pursuant to any of the aforesaid, and any and
all rules, requirements, guidelines and announcements of the
Applicable Agency, and, as applicable, the FHA and VA, as the
same may be amended from time to time;
-18-
<PAGE> 21
(xxix) The improvements on the land securing such Mortgage
Loan are and will be kept insured at all times by responsible
insurance companies reasonably acceptable to Purchaser against
fire and extended coverage hazards under policies, binders or
certificates of insurance with a standard mortgagee clause in
favor of Seller and its assigns, providing that such policy may
not be canceled without prior notice to Seller. Any proceeds of
such insurance shall be held in trust for the benefit of
Purchaser. The scope and amount of such insurance shall satisfy
the rules, requirements, guidelines and announcements of the
Applicable Agency, and shall in all cases be at least equal to
the lesser of (A) the principal amount of such Mortgage Loan or
(B) the maximum amount permitted by applicable law, and shall not
be subject to reduction below such amount through the operation
of a coinsurance, reduced rate contribution or similar clause;
(xxx) Each Mortgage is a valid first lien on the mortgaged
property and is covered by an attorney's opinion of title
acceptable to GNMA, FNMA or FHLMC, as applicable, or by a policy
of title insurance on a standard ALTA or similar lender's form in
favor of Seller and its assigns, subject only to exceptions
permitted by the GNMA, FNMA or FHLMC Program, as applicable.
Seller shall hold in trust for Purchaser such policy of title
insurance, and, upon request of Purchaser, shall immediately
deliver such policy to Purchaser or to the Custodian on behalf of
Purchaser;
(xxxi) To the extent applicable, such Mortgage Loan is
either insured by the FHA under the National Housing Act,
guaranteed by the VA under the Servicemen's Readjustment Act of
1944 or is otherwise insured or guaranteed in accordance with the
requirements of the GNMA, FNMA or FHLMC Program, as applicable,
and is not subject to any defect that would prevent recovery in
full or in part against the FHA, VA or other insurer or
guarantor, as the case may be;
(xxxii) Such Mortgage Loan is in strict compliance with
the requirements and specifications (including, without
limitation, all representations and warranties required in
respect thereof) set forth in the GNMA Guide, FNMA Guide or FHLMC
Guide, as applicable; and
(xxxiii) To the extent applicable, each Mortgage Loan is
being serviced by a mortgage sub-servicer having all Approvals
necessary to make such Mortgage Loan eligible to back a GNMA,
FNMA or FHLMC Security, as applicable.
(d) Seller hereby represents and warrants to Purchaser as of the date
hereof and as of the date of each delivery of a Mortgage Loan Pool that the
Custodian is an eligible custodian under the Agency Guide and Agency Program,
and is not an Affiliate of the Seller.
The representations and warranties of Seller in this Section 9 are
unaffected by and supersede any provision in any endorsement of any Mortgage
Loan or in any assignment with respect to such Mortgage Loan to the effect that
such endorsement or assignment is without recourse or without representation or
warranty.
-19-
<PAGE> 22
Section 10. Covenants of Seller. Seller hereby covenants and
agrees with Purchaser as follows:
(a) Seller shall deliver to Purchaser:
(i) Within one hundred twenty (120) days after the end of
each fiscal year of Seller, consolidated balance sheets of Seller
and its consolidated subsidiaries and the related consolidated
statements of income showing the financial condition of Seller
and its consolidated subsidiaries as of the close of such fiscal
year and the results of operations during such year, and a
consolidated statement of cash flows, as of the close of such
fiscal year, setting forth, in each case, in comparative form the
corresponding figures for the preceding year, all the foregoing
consolidated financial statements to be reported on by, and to
carry the report (acceptable in form and content to Purchaser) of
an independent public accountant of national standing acceptable
to Purchaser;
(ii) Within sixty (60) days after the end of each of the
first three fiscal quarters of each fiscal year of Seller,
unaudited consolidated balance sheets and consolidated statements
of income, all to be in a form acceptable to Purchaser, showing
the financial condition and results of operations of Seller and
its consolidated subsidiaries on a consolidated basis as of the
end of each such quarter and for the then elapsed portion of the
fiscal year, setting forth, in each case, in comparative form the
corresponding figures for the corresponding periods of the
preceding fiscal year, certified by a financial officer of Seller
(acceptable to Purchaser) as presenting fairly the financial
position and results of operations of Seller and its consolidated
subsidiaries and as having been prepared in accordance with
generally accepted accounting principles consistently applied, in
each case, subject to normal year-end audit adjustments;
(iii) Promptly upon receipt thereof, a copy of each other
report submitted to Seller by its independent public accountants
in connection with any annual, interim or special audit of
Seller;
(iv) Promptly upon becoming aware thereof, notice of (1)
the commencement of, or any determination in, any legal, judicial
or regulatory proceedings, (2) any dispute between Seller or its
Parent Company and any governmental or regulatory body, (3) any
event or condition, which, in any case of (1) or (2) if adversely
determined, would have a material adverse effect on (A) the
validity or enforceability of this Agreement, (B) the financial
condition or business operations of Seller, or (C) the ability of
Seller to fulfill its obligations under this Agreement or (4) any
material adverse change in the business, operations, prospects or
financial condition of Seller, including, without limitation, the
insolvency of Seller or its Parent Company;
(v) Promptly upon becoming available, copies of all
financial statements, reports, notices and proxy statements sent
by its Parent Company, Seller or any of Seller's consolidated
subsidiaries in a general mailing to their respective
stockholders and of all reports and other material (including
copies of all registration statements under the Securities Act of
1933, as amended) filed by any of them with any securities
-20-
<PAGE> 23
exchange or with the Securities and Exchange Commission or any
governmental authority succeeding to any or all of the functions
of said Commission;
(vi) Promptly upon becoming available, copies of any press
releases issued by its Parent Company or Seller and copies of any
annual and quarterly financial reports and any reports on Form
H-(b)12 which its Parent Company or Seller may be required to
file with the OTS or the RTC or comparable reports which a Parent
Company or Seller may be required to file with the FDIC or any
other federal banking agency containing such financial statements
and other information concerning such Parent Company's or
Seller's business and affairs as is required to be included in
such reports in accordance with the rules and regulations of the
OTS, the RTC, the FDIC or such other banking agency, as may be
promulgated from time to time;
(vii) Such supplements to the aforementioned documents and
such other information regarding the operations, business,
affairs and financial condition of its Parent Company, Seller or
any of Seller's consolidated subsidiaries as Purchaser may
request;
(viii) A copy of (1) the articles of incorporation of
Seller and any amendments thereto, certified by the Secretary of
State of Seller's state of incorporation, (2) a copy of Seller's
by-laws, together with any amendments thereto, (3) a copy of the
resolutions adopted by Seller's Board of Directors authorizing
Seller to enter into this Agreement and the Custodial Agreement
and authorizing one or more of Seller's officers to execute the
documents related to this Agreement and the Custodial Agreement,
and (4) a certificate of incumbency and signature of each officer
of Seller executing any document in connection with this
Agreement;
(ix) Neither Seller nor any affiliate thereof will acquire
at any time any economic interest in or obligation with respect
to any Mortgage Loan;
(x) Under generally accepted accounting principles
("GAAP") and for federal income tax purposes, Seller will report
each sale of a Mortgage Loan to the Purchaser hereunder as a sale
of the ownership interest in the Mortgage Loan. Seller has been
advised by or has confirmed with its independent public
accountants that the foregoing transactions will be so classified
under GAAP;
(xi) The consideration received by Seller upon the sale of
each Mortgage Loan Pool will constitute reasonably equivalent
value and fair consideration for the ownership interest in the
Mortgage Loans included therein;
(xii) Seller will be solvent at all relevant times prior
to, and will not be rendered insolvent by, any sale of a Mortgage
Loan to the Purchaser; and
(xiii) Seller will not sell any Mortgage Loan to the
Purchaser with any intent to hinder, delay or defraud any of
Seller's creditors.
-21-
<PAGE> 24
(b) Seller shall comply, in all material respects, with all laws,
rules and regulations to which it is or may become subject.
(c) Seller shall, upon request of Purchaser, promptly execute and
deliver to Purchaser all such other and further documents and instruments of
transfer, conveyance and assignment, and shall take such other action as
Purchaser may require more effectively to transfer, convey, assign to and vest
in Purchaser and to put Purchaser in possession of the property to be
transferred, conveyed, assigned and delivered hereunder and otherwise to carry
out more effectively the intent of the provisions under this Agreement.
Section 11. Term. This Agreement shall continue in effect until
terminated as to future transactions by written instruction signed by either
Seller or Purchaser and delivered to the other, provided that no termination
will affect the obligations hereunder as to any of the Mortgage Loans purchased
hereunder.
Section 12. Exclusive Benefit of Parties; Assignment. This
Agreement is for the exclusive benefit of the parties hereto and their
respective successors and assigns and shall not be deemed to give any legal or
equitable right to any other person, including the Custodian. Except as provided
in Section 7, no rights or obligations created by this Agreement may be assigned
by any party hereto without the prior written consent of the other parties.
Section 13. Amendments; Waivers; Cumulative Rights. This
Agreement may be amended from time to time only by written agreement of Seller
and Purchaser. Any forbearance, failure or delay by either party in exercising
any right, power or remedy hereunder shall not be deemed to be a waiver thereof,
and any single or partial exercise by Purchaser of any right, power or remedy
hereunder shall not preclude the further exercise thereof. Every right, power
and remedy of Purchaser shall continue in full force and effect until
specifically waived by Purchaser in writing. No right, power or remedy shall be
exclusive, and each such right, power or remedy shall be cumulative and in
addition to any other right, power or remedy, whether conferred hereby or
hereafter available at law or in equity or by statute or otherwise.
Section 14. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.
Section 15. Effect of Invalidity of Provisions. In case any one
or more of the provisions contained in this Agreement should be or become
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall in
no way be affected, prejudiced or disturbed thereby.
Section 16. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to conflict of laws rules.
-22-
<PAGE> 25
Section 17. Notices. Any notices, consents, elections, directions
and other communications given under this Agreement shall be in writing and
shall be deemed to have been duly given when telecopied or delivered by
overnight courier, personally delivered, or on the third day following the
placing thereof in the mail, first class postage prepaid, to the respective
addresses set forth on the cover page hereof for Seller and Purchaser, or to
such other address as either party shall give notice to the other party pursuant
to this Section 17. Notices to any Assignee shall be given to such address as
Assignee shall provide to Seller in writing.
Section 18. Entire Agreement. This Agreement and the Custodial
Agreement contain the entire agreement between the parties hereto with respect
to the subject matter hereof, and supersede all prior and contemporaneous
agreements between them, oral or written, of any nature whatsoever with respect
to the subject matter hereof.
Section 19. Costs of Enforcement. In addition to any other
indemnity specified in this Agreement, in the event of a breach by Seller of
this Agreement, the Custodial Agreement or a Takeout Commitment, Seller agrees
to pay the reasonable attorneys' fees and expenses of Purchaser and/or Assignee
incurred as a consequence of such breach.
Section 20. Consent to Service. Each party irrevocably consents
to the service of process by registered or certified mail, postage prepaid, to
it at its address given in or pursuant to Section 17.
Section 21. Submission to Jurisdiction. With respect to any claim
arising out of this Agreement each party (a) irrevocably submits to the
nonexclusive jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in New York City, and
(b) irrevocably waives (i) any objection which it may have at any time to the
laying of venue of any suit, action or proceeding arising out of or relating
hereto brought in any such court, (ii) any claim that any such suit, action or
proceeding brought in any such court has been brought in any inconvenient forum
and (iii) the right to object, with respect to such claim, suit, action or
proceeding brought in any such court, that such court does not have jurisdiction
over such party.
Section 22. Jurisdiction Not Exclusive. Nothing herein will be
deemed to preclude either party hereto from bringing an action or proceeding in
respect of this Agreement in any jurisdiction other than as set forth in Section
21.
Section 23. Construction. The headings in this Agreement are for
convenience only and are not intended to influence its construction. References
to Sections, Exhibits and Annexes in this Agreement are to the Sections of and
Exhibits to this Agreement. The Exhibits are part of this Agreement, and are
incorporated herein by reference. The singular includes the plural, the plural
the singular, and the words "and" and "or" are used in the conjunctive or
disjunctive as the sense and circumstances may require.
-23-
<PAGE> 26
IN WITNESS WHEREOF, Purchaser and Seller have duly executed this
Agreement as of the date and year set forth on the cover page hereof.
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
By:
----------------------------------------------
Name:
Title:
-------------------------------------------------
By:
----------------------------------------------
Name:
Title:
Address (if different from cover page):
-24-
<PAGE> 27
EXHIBIT A
THIS TRUST RECEIPT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS
TRUST RECEIPT OR ANY INTEREST HEREIN WITHOUT REGISTRATION HEREOF
UNDER THE ACT MAY ONLY BE MADE IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT.
TRUST RECEIPT
RESIDENTIAL MORTGAGE LOANS
No.________ Date:________
______ , as custodian (the "Custodian"), certifies that GREENWICH CAPITAL
FINANCIAL PRODUCTS, INC. ("Purchaser") is the registered owner of this Trust
Receipt evidencing ownership of certain mortgage loans (the "Mortgage Loans")
listed by identifying number on the schedule attached to this Trust Receipt and
further identified in the books and records of the Custodian, owned of record
and serviced by __________ (the "Seller"). The Mortgage Note and Mortgage for
each Mortgage Loan are held by Custodian, pursuant to the terms and conditions
of that certain Custodial Agreement dated as of ______ , 199_ (the "Agreement")
among Purchaser, Seller and Custodian. To the extent not defined herein, the
capitalized terms used herein have the meanings assigned in the Agreement. This
Trust Receipt is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the holder of this Trust Receipt
by virtue of the acceptance hereof assents and by which such holder is bound.
This Trust Receipt supersedes any Trust Receipt applying to the same
transaction type (i.e., Cash Window Transaction or Conduit Transaction) bearing
an earlier date.
This Trust Receipt shall not be valid or become obligatory for any purpose
unless and until the Certificate of Authentication appearing below has been duly
executed by the Custodian.
<PAGE> 28
IN WITNESS WHEREOF, the Custodian has caused this Trust Receipt to be duly
executed under its official seal.
-----------------------------,
as Custodian
By:
--------------------------
Authorized Officer
(Seal)
Attest:
By:
---------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This Trust Receipt is one of
the Trust Receipts issued under
the above-described Agreement.
Dated:
By:
-----------------------------
Authorized Officer
<PAGE> 29
TRUST RECEIPT NO.
RESIDENTIAL MORTGAGE LOANS
Following are the identifying numbers of the Mortgage Loans subject to this
Trust Receipt:
<PAGE> 30
EXHIBIT B-1
[WAREHOUSE LENDER'S RELEASE]
Greenwich Capital Financial Products, Inc.
600 Steamboat Avenue
Greenwich, Connecticut 06830
Ladies and Gentlemen:
We hereby release all right, interest or claim of any kind,
including any security interest or lien, with respect to the mortgage loan(s)
referenced below, such release to be effective automatically without any further
action by any party, upon receipt, in one or more installments, from Greenwich
Capital Financial Products, Inc., in accordance with the wire instructions which
we delivered to you in a letter dated , 199-, in immediately available funds, of
an aggregate amount equal to the product of A multiplied by B (such product
being rounded to the nearest $0.01) multiplied by C.*
Street
Loan # Mortgagor Address City State Zip
Very truly yours,
[WAREHOUSE LENDER]
By:
------------------------
Name:
---------------------
Title:
---------------------
*A = weighted average trade price
B = principal amount of the mortgage loan(s)
C = 1 minus the discount set forth on the related
participation certificate
<PAGE> 31
EXHIBIT B-2
[WAREHOUSE LENDER'S WIRE INSTRUCTIONS]
Greenwich Capital Financial
Products, Inc.
600 Steamboat Avenue
Greenwich, Connecticut 06830
Re: Greenwich Capital Financial Products, Inc. Mortgage Loan
Purchase Program with [Seller]
Ladies and Gentlemen:
Set forth below are [Warehouse Lender's] wire instructions
applicable to the above-referenced Non-Conforming Purchase Program.
Wire Instructions:
Bank Name:
City, State:
ABA #:
Account #:
Account Name:
<PAGE> 32
Please acknowledge receipt of this letter in the space provided
below. This letter supersedes and replaces any prior notice specifying the name
of [Warehouse Lender] and setting forth wire instructions and shall remain in
effect until superseded and replaced by a letter, in the form of this letter,
executed by each of us and acknowledged by you.
Very truly yours,
[SELLER]
By:
------------------------------------
Name:
Title:
[WAREHOUSE LENDER(S)]*
By:
------------------------------------
Name:
Title:
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
By:__________________________
Name:________________________
Title:_______________________
- -----------------------
* The authorized officer of each warehouse lender executing this letter must be
the same authorized officer as signs the Exhibit B-1 Letter. Not applicable
if there is no warehouse lender.
<PAGE> 33
EXHIBIT C-1
[SELLER'S RELEASE]
Greenwich Capital Financial Products, Inc.
600 Steamboat Plaza
Greenwich, Connecticut 06830
Ladies and Gentlemen:
With respect to the mortgage loan(s) referenced below (a) we
hereby certify to you that the mortgage loan(s) is not subject to a lien of any
warehouse lender and (b) we hereby release all right, interest or claim of any
kind with respect to such mortgage loan, such release to be effective
automatically without any further action by any party upon payment from
Purchaser to Seller of an aggregate amount equal to the product of A multiplied
by B (such product being rounded to the nearest $0.01) multiplied by C* in
accordance with our wire instructions in effect on the date of such payment.
Street
Loan # Mortgagor Address City State Zip
Very truly yours,
[SELLER]
By:
------------------------
Name:
---------------------
Title:
---------------------
**Confirmed by:
[WAREHOUSE LENDER]
By:
---------------------------
Name:
Title:
*A = weighted average trade price
B = principal amount of the mortgage loan(s)
C = 1 minus the discount set forth on the related participation certificate
** If applicable.
<PAGE> 34
EXHIBIT C-2
[SELLER'S WIRE INSTRUCTIONS]
Greenwich Capital Financial
Products, Inc.
600 Steamboat Avenue
Greenwich, Connecticut 06830
Re: Custodial Agreement dated as of ________________, 199_,
among Greenwich Capital Financial Products, Inc.
[Seller] and [Custodian]______________________________
Ladies and Gentlemen:
Capitalized terms used herein and not defined herein shall have
the meanings ascribed to such terms in the above-referenced Custodial Agreement.
Set forth below are Seller's Wire Instructions applicable to the
above-referenced Custodial Agreement.
Wire Instructions:
Bank Name:
City, State:
ABA #:
Account #:
Account Name:
Please acknowledge receipt of this letter in the space provided
below. This letter supersedes and replaces any prior notice specifying the name
of Seller and Seller's Wire Instructions and shall remain in effect until
superseded and
<PAGE> 35
replaced by a letter, in the form of this letter, executed by each of us and
acknowledged by you.
Very truly yours,
[SELLER]*
By:
------------------------
Name:
---------------------
Title:
---------------------
Receipt acknowledged by:
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By:
------------------------------
Name:
Title:
- -----------
* The authorized officer executing this letter must be the same authorized
officer as signs the Exhibit C-1 Letter. Applicable only if there is no
Warehouse Lender.
<PAGE> 36
EXHIBIT D-1
[TRADE ASSIGNMENT]
___________ ("Takeout Investor")
[Address]
Attention:
Ladies and Gentlemen:
Attached hereto is a correct and complete copy of your
confirmation of commitment (the "Commitment"), trade-dated ______ _, 19 , to
purchase $ of mortgage loans (the "Mortgage Loans") at a purchase price of .
This is to confirm that (i) the Commitment is in full force and effect, (ii) the
Commitment is hereby assigned to Greenwich Capital Financial Products, Inc.
("GCFP"), (iii) you will accept delivery of such Mortgage Loans directly from
GCFP, (iv) you will pay GCFP for such Mortgage Loans, (v) upon GCFP's acceptance
of this assignment, GCFP is obligated to make delivery of such Mortgage Loans to
you in accordance with the attached Commitment and (vi) upon GCFP's acceptance
of this assignment, you will release Seller from its obligation to deliver the
Mortgage Loans to you under the Commitment. Upon GCFP's determination not to
accept an assignment, GCFP will notify you that this assignment is rejected. Not
later than 2:00 P.M. Eastern Standard Time one business day prior to your
satisfaction of the Commitment, you shall fax a purchase confirmation to GCFP at
(203) 625-2700, Attention:__________. Payment will be made to GCFP in
immediately available funds.
Very truly yours,
[SELLER]
By:
------------------------
Name:
---------------------
Title:
---------------------
Agreed to, confirmed and accepted:
[TAKEOUT INVESTOR]
By:
------------------------------
Name:
Title:
<PAGE> 37
EXHIBIT D-2
[ACKNOWLEDGEMENT OF ASSIGNMENT]
Date:
___________ ("Takeout Investor")
[Address]
Attention:
Ladies and Gentlemen:
As you are aware, from time to time mortgage loans, which are
currently subject to a purchase commitment issued by you to us, are delivered to
you under bailment. Please acknowledge that notwithstanding anything to the
contrary contained in any agreement between us, we may assign to Greenwich
Capital Financial Products, Inc. our rights to sell such mortgage loans to you
and our right to receive payment from you on account of such mortgage loans as
set forth in the purchase commitment.
Nothing herein shall release us from any and all obligations to
you under any agreements between us.
Very truly yours,
[SELLER]
By:
------------------------
Name:
---------------------
Title:
---------------------
Agreed to, confirmed and accepted:
[TAKEOUT INVESTOR]
By:
------------------------------
Name:
Title:
<PAGE> 38
EXHIBIT 1 to EXHIBIT D-2
[WITHDRAWAL OF CONSENT TO BLANKET TRADE ASSIGNMENT]
[Seller]
[Address]
Ladies and Gentlemen:
The undersigned hereby terminates its agreement to Seller's assignment of
Commitments to GCFP, which approval was given pursuant to the Trade Assignment
dated . This termination shall be effective as of but shall not affect the
assignment of any Commitment which assignment was made prior to the date hereof.
Capitalized terms not defined herein shall have the meanings set forth in the
Trade Assignment.
Very truly yours,
[TAKEOUT INVESTOR]
By:
------------------------
Name:
---------------------
Title:
---------------------
Copy to: [Purchaser]
<PAGE> 39
EXHIBIT E
[PURCHASER'S WIRE INSTRUCTIONS]
[Takeout Investor]
[Address]
Re: Custodial Agreement dated as of , 199_, among
Greenwich Capital Financial Products, Inc.,
[Seller] and [Custodian]_______________________
Ladies and Gentlemen:
Capitalized terms used herein and not defined herein shall have
the meanings ascribed to such terms in the above-referenced Custodial Agreement.
Set forth below are the Purchaser's Wire Instructions applicable
to the above-referenced Custodial Agreement.
Wire Instructions:
Bank Name:
City, State:
ABA #:
Account #:
Account Name:
Please acknowledge receipt of this letter in the space provided
below. This letter supersedes and replaces any prior notice specifying the name
of Purchaser and the Purchaser's Wire Instructions and shall remain in effect
until superseded and replaced by a letter, in the form of this letter, executed
by each of us and acknowledged by you.
Very truly yours,
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By:
------------------------
Name:
---------------------
Title:
---------------------
Receipt acknowledged by:
[TAKEOUT INVESTOR]
By:
---------------------------
Name:
Title:
cc: [Seller]
<PAGE> 40
[Custodian]
<PAGE> 41
EXHIBIT F
[FORM OF CONFIRMATION]
TO: [NAME AND ADDRESS OF SELLER]
DATE:
RE: Confirmation of Purchase of Mortgage Loans
Greenwich Capital Financial Products, Inc. ("Purchaser") is pleased to
confirm its agreement to purchase and your agreement to sell the Mortgage Loans
relating to the pool number referred to herein, pursuant to the Mortgage Loan
Purchase and Sale Agreement, dated as of , 199 (the "Mortgage Loan Purchase and
Sale Agreement"), between Purchaser and Seller, under the following terms and
conditions:
Pool No.__________________
Check as appropriate:
Cash Window Transaction
___Conduit Transaction (Conduit:____) Purchase Date__________
Settlement Date_________________________
Discount________________________________
Purchase Price__________________________
Pass-Through Rate_______________________
Total Principal Amount of the Pool______
Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed in the Mortgage Loan Purchase and Sale Agreement.
Very truly yours,
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By:
------------------------
Name:
---------------------
Title:
---------------------
<PAGE> 42
EXHIBIT G
[NOTICE OF REJECTION OF TRADE ASSIGNMENT]
("Takeout Investor") [Address]
Attention:
Ladies and Gentlemen:
Greenwich Capital Financial Products, Inc. ("GCFP") hereby
notifies you that it does not intend to purchase a 100% ownership interest in $
in mortgage loans (the "Mortgage Loans") that you committed to purchase from the
[Seller] pursuant to your confirmation of commitment (the "Commitment")
trade-dated , 19 a copy of which is attached hereto. Accordingly, the assignment
of the Commitment by Seller to GCFP is hereby rejected, and GCFP shall have no
obligations thereunder.
Very truly yours,
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By:
------------------------
Name:
---------------------
Title:
---------------------
cc: [Seller]
[Custodian]
<PAGE> 43
EXHIBIT H
[SETTLEMENT MODIFICATION LETTER]
Greenwich Capital Financial Products, Inc. [DATE]
600 Steamboat Plaza
Greenwich, Connecticut 06830
Attention:_________
[SELLER]
[ADDRESS]
Re: The Attached Confirmation of Commitment
Ladies and Gentlemen:
Attached hereto is a correct and complete copy of our
confirmation of commitment ("Commitment"). We hereby confirm that we have
irrevocably approved the Mortgage Loans subject to the Commitment for purchase
by us and we hereby agree to purchase such Mortgage Loan(s) from Greenwich
Capital Financial Products, Inc. ("GCFP") in accordance with the terms of the
Commitment or, if this letter is executed by GCFP and [SELLER], in accordance
with the terms of the Commitment as amended hereby.
We hereby request that the Commitment be amended as follows:
(i) the Settlement Date set forth in the Commitment shall be ;
(ii)the aggregate outstanding principal balance of the Mortgage
Loans shall be $ _________________ ;
(iii) the aggregate amount of accrued interest on the Mortgage
Loans shall be $ ;
(iv) the trade price shall be %; and
(v) the total amount payable to GCFP shall be $
If we fail to pay you the amount set forth in clause (v) above on the amended
Settlement Date, interest shall accrue on such amount at a rate equal to the
weighted average of the Pass-Through Rates related to such Mortgage Loans.
<PAGE> 44
If the amendments to the Commitment set forth above are acceptable to you,
please so indicate by executing this letter in the appropriate space provided
below and return it to us via facsimile at
[TAKEOUT INVESTOR]
By:
-------------------------
Title:
Agreed to:
[SELLER]
By:
---------------------
Title:
Facsimile #:.
Agreed to:
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
By:
---------------------
Title:
------------------
<PAGE> 45
EXHIBIT I
(Mortgage File)
I (i) The original Mortgage Note bearing all intervening
endorsements with the last endorsement endorsed, "Pay to the order of ,
without recourse" and signed in the name of Seller by an authorized
officer of Seller; (if applicable), and if the Mortgage Note has been
signed by a third party on behalf of the Mortgagor, the original power
of attorney or other instrument that authorized and empowered such
Entity to sign or a copy of such power of attorney together with an
officer's certificate (or a certificate from the recorder's office)
certifying that such copy presents a true and correct reproduction of
the original and that such original has been duly recorded or delivered
for recordation in the appropriate records of the jurisdiction in which
the related Mortgaged Property is located;
(ii) The original of the guarantee executed in connection with
the Mortgage Note (if any);
(iii) The original Mortgage with evidence of recording indicated
thereon, subject to paragraph II below;
(iv) If Seller did not originate a Mortgage Loan, all necessary
original intervening assignments to show a complete chain of title from
the originating mortgagee to Seller;
(v) An original Assignment of Mortgage, in blank, in recordable
form but unrecorded (which Assignment of Mortgage may be in the form of
a blanket assignment of two or more such Mortgages to the extent
permitted by applicable law) signed in the name of Seller by an
authorized officer;
(vi) Any assumption, modification (with evidence of recording
thereon), consolidation or extension agreements;
(vii) The original policy of title insurance (or a commitment for
title insurance, if the policy is being held by the title insurance
company pending recordation of the Mortgage);
(viii) The original of any security agreement, chattel mortgage
or equivalent document executed in connection with the Mortgage Loan;
(ix) The original assignment of leases and rents, if any, with
evidence of recording thereon, or a copy thereof together with an
officer's certificate of the Seller certifying that such copy represents
a true and correct copy of the original that has been submitted for
recordation in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located;
(x) The original assignment of assignment of leases and rents, if
any, from the Seller in blank, in form and substance acceptable for
recording; and
(xi) The certificate of primary mortgage guaranty insurance, if
any, issued with repsect to such Mortgage Loan.
<PAGE> 46
II With respect to all Mortgage Files
From time to time, the Seller shall forward to the Custodian
additional original documents or additional documents evidencing any
assumption, modification, consolidation or extension of a Mortgage Loan
approved by the Seller, in accordance with the terms of the Purchase and
Sale Agreement, and upon receipt of any such other documents, the
Custodian shall hold such other documents for the Purchaser.
With respect to any documents which have been delivered or are
being delivered to recording offices for recording and have not been
returned to the Borrower in time to permit their delivery hereunder at
the time required, in lieu of delivering such original documents, Seller
shall deliver to Purchaser a true copy thereof with an Officer's
Certificate certifying that such copy is a true, correct and complete
copy of the original, which has been transmitted for recordation. The
Seller shall deliver such original documents to Custodian promptly when
they are received.
<PAGE> 1
EXHIBIT 10.20
EXECUTION COPY
LICENSE, STAFFING, PURCHASE AND SALE AGREEMENT
BETWEEN
E-LOAN, INC.
AND
NET.B@NK
Dated as of June 1, 1998
<PAGE> 2
THIS LICENSE, STAFFING, PURCHASE AND SALE AGREEMENT (this "Agreement") is made
and entered into as of June 1, 1998 between E-LOAN, INC., a California
corporation having an office at 540 University Avenue, Palo Alto, CA 94301
("Licensor"), and NET.B@NK, a Federal savings bank having an office located at
950 North Point Parkway, Suite 350, Alpharetta, Georgia 30005 ("Licensee").
WHEREAS, Licensor owns a unique and distinctive format and system (the "System")
relating to the establishment and operation of a proprietary single-family
residential mortgage loan origination system utilizing the Internet and
telemarketing call centers (the "Program");
WHEREAS, Licensor identifies the System by means of certain trade names, service
marks, trademarks, logos, emblems and indicia of origin, including but not
limited to the Licensor's name and the marks and logos and such other trade
names, service marks, and trademarks as are now designated (and may hereinafter
be designated by Licensor in writing) for use in connection with the System (the
"Proprietary Marks");
WHEREAS, Licensor continues to develop, use, and control the use of such
Proprietary Marks in order to identify for the public its ownership of the
System, and to represent the System's high standards of quality and service;
WHEREAS, Licensee desires to enter into the business of operating the Program in
order to make single-family residential mortgage loans ("Loans") under
Licensor's System and wishes to obtain a non-exclusive, non-transferable license
(the "License") from Licensor to operate the Program and use the Proprietary
Marks in connection therewith, as well as to receive other assistance to be
provided by Licensor in connection therewith;
WHEREAS, Licensor operates and outsources a telemarketing call center in support
of the operations of financial services companies, including mortgage companies,
and Licensee desires assistance with its staffing, space and equipment needs on
an interim basis as it establishes its Internet and telemarketing call center
under the trade name "E-Loan" ("E-Loan Internet Origination Center").
NOW THEREFORE, the parties, in consideration of the undertakings and commitments
of each party to the other party set forth herein, hereby agree as follows:
1. GRANT AND LICENSE FEE
1.1 Licensor grants Licensee a non-exclusive license to use the
System, including the Program and the Proprietary Marks, solely
in regard to those states indicated in that attached Appendix A
(as may be modified from time to time by mutual written consent
of the parties hereto) and during the term of this Agreement
(the
1
<PAGE> 3
"License"). Said Appendix A, including any such modifications,
is incorporated as part of this Agreement.
1.2 Upon execution of this Agreement, Licensee shall pay to Licensor
a one-time fee of One Thousand Dollars and No/100 ($1,000.00) as
full compensation to Licensor for its grant of the License
hereunder.
2. TERM AND RENEWAL
2.1 Except as otherwise provided herein, the term of this Agreement
shall expire one (1) year from the date of this Agreement.
2.2 At its option exercisable by giving written notice to Licensee at
least sixty (60) days prior to the first anniversary of the date
of this Agreement, Licensor may renew this Agreement for one (1)
additional term of one (1) year if Licensor shall have satisfied
all monetary obligations owed by Licensor to Licensee and its
parent, subsidiaries and affiliates under this Agreement and
under any other contract between the parties as of the date of
such notice and as of the date of commencement of the renewal
term.
2.3 At its option exercisable by giving written notice to Licensor at
least sixty (60) days prior to the first anniversary of the date
of this Agreement, Licensee may renew this Agreement for one (1)
additional term of one (1) year if Licensee shall have satisfied
all monetary obligations owed by Licensee to Licensor and its
parent, subsidiaries and affiliates under this Agreement and
under any other contract between the parties as of the date of
such notice and as of the date of commencement of the renewal
term.
2.4 This Agreement may be terminated with or without cause by Licensor or
Licensee upon thirty (30) days' written notice to the other party.
3. FUNDING, PURCHASE AND SALE OF LOANS
3.1 Licensor agrees to purchase from Licensee, and Licensee agrees to
sell to Licensor, in accordance with and subject to the terms and
conditions of this Agreement, all Loans made by Licensee under
the Program and processed, underwritten and closed under the
separate Mortgage Loan Processing Agreement between the parties
dated as of even date herewith (the "Processing Agreement"), with
each Loan purchase and sale to be consummated (by payment of the
Purchase Price for such Loan in accordance with Section 3.2
hereof) within forty-eight (48) hours after Loan settlement and
funding to the greatest extent practicable and in all events
within seven (7) calendar days after Loan settlement and funding.
Such Loans will be sold by Licensee and purchased by Licensor
without recourse and on a servicing-released basis, with Licensor
undertaking servicing of all Loans so purchased by Licensor.
2
<PAGE> 4
3.2 The purchase price ("Purchase Price") to be paid by Licensor and
accepted by Licensee for each Loan sold to Licensor pursuant to
Section 3.1 hereof shall be equal to the sum of: (1) the Net
Funding Amount (as defined in Section 1.1.11 of the Processing
Agreement), plus (2) the accrued and unpaid interest (at the
interest rate specified in the Loan note) on the Net Funding
Amount through and including the date on which the purchase and
sale of the Loan is consummated, plus (3) a Loan Administration
Fee (as defined in Section 3.3 hereof) per Loan. The Purchase
Price for each Loan shall be deposited by Licensor in immediately
available funds in an account to be maintained with Licensee in
the name of Licensor (the "Licensor's Account") and shall be
deemed to have been paid to Licensee upon Licensee's drafting the
Licensor's Account for the amount of such Purchase Price. Upon
Licensor's deposit (in accordance with this Section 3.2) of the
Purchase Price applicable to any Loan which Licensor is obligated
to purchase under this Agreement, Licensee (i) shall, at
Licensee's expense, deliver to Licensor any and all documents and
instruments which evidence, secure, or otherwise relate to such
Loan and which are then in Licensee's actual possession, (ii)
shall release in Licensor's favor any and all rights of Licensee
in, to, and under such documents and instruments, and (iii) shall
be entitled to draft the Licensor's Account for the amount of
such Purchase Price, whereupon Licensee shall give Licensor
written notification that Licensee has so drafted the Licensor's
Account.
3.3 As part of the Purchase Price for each Loan, Licensor shall pay
a Loan Administration Fee to Licensee in accordance with this
Section 3.3. The "Loan Administration Fee" shall be $300.00 per
Loan.
3.4 Upon Licensor's delivery of the Purchase Price (including,
without limitation, the Loan Administration Fee) applicable to
any Loan, Licensee (1) shall deliver to Licensor any and all
documents and instruments which evidence, secure, or otherwise
relate to such Loan and which are then in Licensee's actual
possession and (2) shall release in Licensor's favor any and all
rights of Licensee in, to, and under such documents and
instruments; provided that no later than the first business day
following Licensee's receipt of the Purchase Price from Licensor
for any Loan sold by Licensee to Licensor pursuant to this
Agreement, Licensee shall duly endorse the original promissory
note evidencing such Loan and shall deliver same to Licensor.
3.5 If Licensor fails to deliver the Purchase Price (including,
without limitation, the Loan Administration Fee) for any Loan
within seven (7) calendar days after notification by Licensee
that Licensee is in possession of the original promissory note
evidencing such Loan or if Licensor otherwise fails to consummate
the purchase of such Loan in accordance with this Section 3,
Licensee, in its sole discretion, shall be entitled to exercise
any and all rights and remedies, at law or in equity or
otherwise, with respect to any and all such failures by Licensor
and any and all Loans subject to such failures by Licensor,
including, without limitation, the following:
3
<PAGE> 5
(1) Licensee shall be entitled to effect the sale of any and
all such Loans to any other person(s) or entity(ies) at
any commercially reasonable price(s) (any such sale being
an Alternative Sale"), with Licensor being obligated to
indemnify Licensee for any and all losses, damages,
liabilities, claims, legal fees, and other expenses
incurred by Licensee as a direct or indirect consequence
of any and all Alternative Sales, including, without
limitation, (i) the Loan Administration Fee which is due
for any such Loan under this Agreement and which has not
been paid to Licensee and (ii) any positive difference
between the Purchase Price due under this Agreement for
any such Loan and the price actually received by Licensee
through the Alternative Sale of such Loan; and
(2) Licensee shall be entitled to specific performance of
Licensor's obligation to purchase any and all such Loans,
together with monetary relief for any and all losses,
damages, liabilities, claims, legal fees, and other
expenses incurred by Licensee as a direct or indirect
consequence of Licensor's breach of this Agreement.
3.6 If Licensor delivers the Purchase Price (including, without
limitation, the Loan Administration Fee) for any Loan within
seven (7) calendar days after notification by Licensee that
Licensee is in possession of the original promissory note
evidencing such Loan, and if Licensee nonetheless fails to
consummate the sale of such Loan in accordance with this Section
3, Licensor, in its sole discretion, shall be entitled to
exercise any and all rights and remedies, at law or in equity or
otherwise, with respect to any and all such failures by Licensee
and any and all Loans subject to such failures by Licensee,
including, without limitation, the remedy of specific performance
of Licensee's obligation to sell any and all such Loans, together
with monetary relief for any and all losses, damages,
liabilities, claims, legal fees, and other expenses incurred by
Licensor as a direct [or indirect] consequence of Licensee's
breach of this Agreement.
3.7 Each party hereto agrees to reimburse the other party hereto (the
"Damaged Party") for up to $1,000.00 per Loan in actual losses
and damages incurred by the Damaged Party as a direct result of
any error, mistake, negligent act or omission, or breach of this
Agreement or the Processing Agreement in the course of the
reimbursing party's performance of its obligations under this
Agreement or the Processing Agreement.
4. DUTIES OF LICENSOR
4.1 Licensor shall provide to Licensee technical and administrative
support, including the service of contract employees and the
rental of requisite space and equipment, as set forth in Section
9 below.
4.2 Licensor shall provide periodic and continuing advisory
assistance to Licensee as to the operation and promotion of the
Program as Licensor deems advisable.
4
<PAGE> 6
4.3 Licensor shall market and promote the Program, as set forth in
Section 10 below.
5. DUTIES OF LICENSEE
5.1 Licensee shall operate the Program, under a separate division of
Licensee to be known as "E-Loan, a division of Net.B@nk," or as
otherwise denominated by Licensee after consultation with
Licensor. Such division shall be operated and managed separately
from the mortgage lending operations of Licensee.
5.2 Licensee will prominently use the Proprietary Marks, subject to
specific prior review and approval by Licensor, in all aspects of
the Program and otherwise, including, without limitation, in the
operation of the Program in relation to prospective borrowers.
5.3 Licensee acknowledges the proprietary interest of Licensor in all
information with respect to the System and Program. Licensee
undertakes to comply with its obligations under the Agreement
with respect to all Licensor Confidential Information, as defined
in Section 8.4 below, and at no time to divulge, disclose,
reference, or transfer to any other person such Licensor
Confidential Information, including the identities of customers
and related information or to use the same for any purpose other
than its operations under the License, without the written
consent of Licensor.
5.4 Except as otherwise required by law, all statements of any kind
whatsoever by Licensee with regard to the System and Program
shall identify Licensor as the sole owner and developer the
System and Program. Licensee shall at no time or in any manner
whatsoever claim or represent itself to have any rights or
interest in the development or ownership of the System or
Program, except as explicitly provided by this Agreement.
5.5 Licensee understands and acknowledges that the rights and duties
set forth in this Agreement are solely related to Licensee, and
that Licensor has granted this License in reliance on Licensee's
business skill, financial capacity, and personal character.
Accordingly, Licensee shall not, without prior written consent of
Licensor, transfer, pledge, or in any way encumber either the
rights and obligations of Licensee under this Agreement or any
interest in the System or Program hereunder, except to a
permitted assignee under Section 16.1 hereof.
5.6 Licensee covenants to operate in compliance with the System and
shall use best efforts to maintain the highest degree of quality
and services. Licensee shall operate the Program in strict
conformity with such methods, standards, and specifications as
Licensor may from time to time prescribe in the Manual of
Operation, as mutually agreed in writing.
5
<PAGE> 7
5.7 Licensee acknowledges that, subject to Licensor's compliance
with its obligations under this Agreement and subject to
compliance of the System and the Program with all applicable
laws, rules and regulations: (1) Licensor has the full,
exclusive authority over the information presented in the
Program and over all rules and standards included therein; and
(2) in its sole discretion, Licensor may change such content at
any time and from time to time; provided that any material
changes that would affect Licensee's Program operations or
product information will require prior notification of at least
three (3) business days to Licensee.
6. PROPRIETARY MARKS
6.1 Licensor represents and warrants to Licensee that Licensor is the
owner of all right, title, and interest in and to the Proprietary
Marks, free and clear of all liens, encumbrances and claims of
any kind.
6.2 With respect to Licensee's use of the Proprietary Marks
designated by Licensor, Licensee shall use them only in the
manner authorized and permitted by Licensor.
6.3 Licensee shall use the Proprietary Marks designated only for the
operation of the Program licensed hereunder.
6.4 Unless otherwise authorized or required by Licensor, Licensee
shall operate the Program only under the name permitted under
Section 5.1 hereof, without prefix or suffix.
6.5 During the term of this Agreement and renewal thereof, Licensee
shall identify Licensor (in a manner reasonably acceptable to
Licensor) as the owner of the System and Program in conjunction
with any use of the Proprietary Marks.
6.6 Licensee's right to use the Proprietary Marks is limited to such
uses as are designated by Licensor or authorized under this
Agreement, and any unauthorized use thereof shall constitute an
infringement of Licensor's rights if Licensee continues such use
on or after the tenth (10th) calendar day following Licensee's
receipt of written notice from Licensor to cease such
unauthorized use.
6.7 Licensee expressly understands and acknowledges that:
6.7.1 Licensor is the owner of all rights, title and interests
in and to the Proprietary Marks and the goodwill
associated with and symbolized by them.
6.7.2 The Proprietary Marks are valid and serve to identify
the System and Program and those who are authorized to
operate under the System.
6.7.3 Neither Licensee nor any affiliate of Licensee shall
directly or indirectly contest the validity of
Licensor's ownership of the Proprietary Marks, nor
6
<PAGE> 8
shall Licensee, directly or indirectly, seek to register
the Proprietary Marks with any government agency, except
with Licensor's express written permission.
6.7.4 Licensee's use of the Proprietary Marks does not give
Licensee any ownership interest or other interest in or
to the Proprietary Marks, except the License granted by
this Agreement.
6.7.5 Any and all goodwill arising from Licensee's use of the
Proprietary Marks shall inure solely and exclusively to
Licensor's benefit, and upon expiration or termination
of this Agreement and the License herein granted, no
monetary amount shall be assigned as attributable to any
goodwill associated with Licensee's use of the System or
the Proprietary Marks.
6.7.6 The right and license to use the Proprietary Marks
granted hereunder to Licensee is non-exclusive, and
Licensor thus has and retains the rights, among others:
to use the Proprietary Marks itself in connection with
selling products and services; to grant other licenses
for the Proprietary Marks; and to develop and establish
other systems using the same or similar Proprietary
Marks, or any other proprietary marks, and to grant
licenses or franchises thereto without providing any
rights therein to Licensee.
6.7.7 Licensor reserves the right to substitute different
proprietary marks for use in identifying the System and
Program and the businesses operating thereunder if
Licensor's currently owned Proprietary Marks no longer
can be used, or if Licensor, in its sole discretion,
determines that substitution of different proprietary
marks is desirable.
6.8 Licensee shall require all signs and other materials and
documentation which may be designated by Licensor to bear the
Proprietary Marks in the form, color, location and manner
prescribed by Licensor.
7. (SECTION INTENTIONALLY DELETED)
8. CONFIDENTIAL INFORMATION
8.1 Licensor retains all rights of ownership and copyright in the
System and Program and Proprietary Marks except as provided for
temporary use by the Licensee under the terms of this Agreement.
8.2 As between Licensor and Licensee, the System and Program,
including its design, structure, operation, programming, output,
content, graphics, and all derivative works thereof (other than
the proprietary logos and graphics of Licensee), are the
7
<PAGE> 9
sole and exclusive property of Licensor to be licensed under the
terms of this Agreement for use by Licensee.
8.3 Except for the non-exclusive, non-transferable License to use the
System and operate the Program, Licensee has no, and shall not
acquire any, ownership or other rights or interest in the System
or Program as a result of this Agreement or any business
relationship with the Licensor, unless the parties hereafter
agree to the contrary.
8.4 Licensee understands and acknowledges that the System and Program
contain and embody valuable trade secrets of Licensor. Licensee
shall keep confidential the Program and all other information
provided by Licensor to Licensee or otherwise acquired by
Licensee through the operation of the Program as referred to in
Section 10.1 hereof (collectively, the "Licensor Confidential
Information") and all copies or physical embodiments thereof in
its possession, and shall limit access to the Licensor
Confidential Information to those of its personnel. Licensee
shall not use any part of the Licensor Confidential Information
in any manner other than as expressly permitted under this
Agreement. Licensee shall secure and protect the Licensor
Confidential Information and any and all copies thereof in its
possession through security measures at least as protective as
those used by Licensee to maintain the security of its valuable
confidential and proprietary information. Upon termination of
this Agreement for any reason, Licensee shall upon request return
to Licensor all tangible embodiments of Licensor Confidential
Information in its possession or under its control, or destroy
all such tangible embodiments and certify such destruction in
writing. The obligations provided in this Section 8.4 shall not
apply to any information which (1) is generally known to the
public or in the trade or becomes so generally known without
breach of this Agreement by Licensee; (2) is shown by written
record to have been known to Licensee prior to its disclosure by
Licensor hereunder; (3) is disclosed to Licensee without
restriction of confidentiality by a third party who is not in
breach of an obligation of confidentiality to Licensor in making
such disclosure; or (4) is disclosed by Licensee pursuant to
judicial, administrative, or other legally binding order. The
obligations of this Section 8.4 shall survive any termination of
this Agreement. The parties hereto further acknowledge that they
are bound by that certain Nondisclosure Agreement dated September
9, 1998, as duly executed by the parties hereto.
8.5 Licensee acknowledges that any failure to comply with the
requirements of this Section 8 will cause Licensor irreparable
injury, and Licensee agrees to pay all court costs and
reasonable attorney's fees incurred by Licensor in any
successful action or proceeding to obtain specific performance
of, or an injunction against violation of, the requirements of
this Section 8.
8
<PAGE> 10
9. STAFFING, SPACE AND EQUIPMENT
9.1 In order to enable Licensee to utilize the License and make Loans
thereunder, Licensor will provide personnel to Licensee on an "as
needed" basis and in sufficient number to support the
telemarketing functions of the E-Loan Internet Origination Center
(the "Support Work"). Such employees shall be assigned to the
Support Work on a full-time basis (40 hours per week). All
personnel provided for the Support Work shall be selected and
trained by Licensor under standards that are consistent with the
Program and are not less than those used by Licensor for its own
call center operations.
9.2 Each assigned employee is and shall remain an employee of
Licensor and shall not be considered an employee of Licensee.
Although it is the responsibility of Licensee to supervise and
review the Support Work of each Licensor employee, Licensee will
also be entitled to review such Support Work. Any questions or
problems with assigned employees shall be communicated to
Licensor immediately by Licensee. All contact with an assigned
Licensor employee regarding assignment scheduling for Support
Work must be coordinated through Licensor.
9.3 Licensor guarantees satisfaction with each Licensor employee
assigned to Support Work for Licensee. If, for any reason,
Licensee is dissatisfied with any such Licensor employee's
performance, a different Licensor employee will immediately be
assigned to the Support Work.
9.4 Licensor represents and warrants that its employees are
adequately covered by workers' compensation insurance and that
Licensor assumes total responsibility to pay the employees'
salary, all related federal, state, and local payroll taxes and
any other applicable charges required by law, and applicable
employee benefits, such as health insurance, retirement, etc., if
any.
9.5 Licensor agrees to provide all necessary space to Licensee for
the E-Loan Internet Origination Center, as well as the use of
telephone, computer and other equipment on an "as needed" basis
for the operation of Licensee's E-Loan Internet Origination
Center during the term of this Agreement. Licensor and Licensee
will review monthly the space and equipment needs of Licensee.
Licensee is authorized to utilize reasonable signage or other
marks to indicate to the public Licensee's presence in operating
its E-Loan Internet Origination Center.
9.6 As compensation for the staffing, space and equipment provided to
Licensee by Licensor in accordance with this Section 9, Licensee
shall, with respect to each calendar month during the term
hereof, pay Licensor the Staffing Fee and the Facility Fee (as
both are hereinafter defined) due for such calendar month, in
arrears, on or before the seventh (7th) calendar day of the next
succeeding calendar month. All Staffing Fees and Facility Fees
shall be paid in immediately available Funds.
9
<PAGE> 11
9.7 The "Staffing Fee" shall be $75.00 per Loan funded by Licensee
pursuant to the Processing Agreement and purchased by Licensor
pursuant to this Agreement.
9.8 The "Facility Fee" shall be: (1) $25.00 per Loan with respect to
the first 100 Loans funded by Licensee pursuant to the Processing
Agreement and purchased by Licensor pursuant to this Agreement
during any calendar month during the term of this Agreement; and
(2) $50.00 per Loan with respect to the 101st and subsequent
Loans so funded and purchased during any calendar month during
the term of this Agreement.
9.9 It is the intent of the parties that all compensation received by
Licensor in the form of Staffing Fees and Facility Fees shall not
exceed the reasonable value of the services rendered or goods or
facilities furnished within the meaning of the Real Estate
Settlement Procedures Act, 12 U.S.C. Section 2601 et seq. as
amended from time to time and the regulations which are
promulgated thereunder.
10. MARKETING AND PROMOTION
10.1 Licensor shall have sole responsibility for the marketing of the
Program on behalf of Licensee, including, without limitation,
television, radio, print, or electronic advertising and other
promotion.
10.2 Licensee shall at no time advertise, promote, or in any manner
whatsoever publish or communicate its role in operation of the
System or Program, without the prior written approval of
Licensor, except as required by law or regulation.
11. DEFAULT, TERMINATION, AND OBLIGATIONS THEREAFTER; ARBITRATION
11.1 If either party or any person holding a controlling interest
(direct or indirect) in Licensee becomes a debtor in proceedings
under the U.S. Bankruptcy Code or any similar law in the United
States or elsewhere, it is the parties' understanding and
agreement that any transfer of the License, or any obligations
and/or rights hereunder, shall be subject to written approval of
the transfer or termination of the Agreement at the sole
discretion of the Licensor.
11.2 Licensee shall be deemed to be in default and Licensor may, at
its option, terminate this Agreement and all rights granted
hereunder, without affording Licensee any opportunity to cure
the default, effective immediately upon the delivery of written
notice to Licensee by Licensor, upon the occurrence of any of
the following events, provided that Licensor shall have remitted
to Licensee, prior to any such termination being effective, any
and all amounts due Licensee from Licensor under this Agreement
as of the date of such termination:
11.2.1 If Licensee at any time ceases to operate or otherwise
abandons use of the System and operation of the Program;
10
<PAGE> 12
11.2.2 If Licensee or any senior policy making officer thereof
is convicted of a felony, a crime involving moral
turpitude, or any other crime or offense that is
reasonably likely to have a material adverse effect on
the System, the Proprietary Marks, the goodwill
associated therewith, or Licensor's interest therein;
11.2.3 If Licensee purports to transfer any rights or
obligations under this Agreement or any interest to any
third party in a manner that is contrary to the terms of
this Agreement; or
11.2.4 If, contrary to the terms hereof, Licensee discloses or
divulges the Licensor Confidential Information provided
to Licensee by Licensor without the written approval of
Licensor.
11.3 Subject to the provisions of Section 11.4 hereof, this Agreement
may be terminated by either party during the existence of any of
the following conditions.
11.3.1 If the other party ("Other Party") is the subject of any
of the following: (1) a court having jurisdiction shall
have entered a decree or order constituting an order for
relief in respect of the Other Party under Title 11 of
the United States Code, as now constituted or hereafter
amended, or any other applicable federal or state
bankruptcy law or other similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian,
sequestrator, or similar official of the Other Party or
any substantial part of its properties, or ordering the
winding-up or liquidation of the affairs of the Other
Party, or any petition seeking such relief or
appointment shall have been filed in such a court and
shall not have been dismissed within a period of
forty-five (45) days (2) the Other Party shall have
filed a petition, answer, or consent seeking relief
under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other
applicable federal or state bankruptcy law or other
similar law, or the Other Party shall consent to the
institution of proceedings thereunder or to the filing
of any such petition or to the appointment or taking of
possession of a receiver, liquidator, assignee, trustee,
custodian, sequestrator, or other similar official of
the Other Party or of any substantial part of
properties, or the Other Party shall fail generally to
pay its debts as such debts become due, or the Other
Party shall take any corporate action in furtherance of
any such action; (3) any admission by the Other Party of
its insolvency or inability to pay its debts as they
fall due; or (4) the adjudication of the Other Party as
bankrupt or insolvent;
11.3.2 If the Other Party fails to pay the terminating party
any amount within sixty (60) days after the date on
which such amount was first due the terminating party in
accordance with this Agreement or, if a due date is
11
<PAGE> 13
not specified herein or therein, within sixty (60) days
after the Other Party's receipt of an invoice for such
amount.
11.3.3 If the Other Party is in material breach of or material
default under this Agreement.
11.3.4 If the Other Party engages in any dishonest or
fraudulent conduct; or
11.3.5 If it becomes unlawful for the parties hereto to do
business in accordance with this Agreement.
11.4 Upon either party's issuance of proper notice of termination of
this Agreement pursuant to this Section 11 or Section 2.4
hereof:
11.4.1 The parties agree to continue their cooperation in order
to effect an orderly termination of their relationship.
Each party shall immediately cease accepting Loan
applications under the Program, provided, however, that
Licensor shall, at Licensee's option, continue the
Support Work under the terms and conditions of this
Agreement in order to consummate any Loan(s) for which
an application has been received by Licensor or Licensee
on or prior to the date of termination. All compensation
due any party in connection with any such Loan(s) shall
be paid in accordance with this Agreement, and
Licensor's obligation to purchase any such Loan(s) shall
be in full force and effect in accordance with and
subject to the terms and conditions of this Agreement.
11.4.2 Licensee shall comply with Section 11.8 hereof.
11.5 Any controversy arising in conjunction with or relating to this
Agreement, and any amendment hereof, shall be determined and
settled by arbitration in a location mutually agreed upon by the
parties, in accordance with the rules of the American Arbitration
Association. Any arbitration award rendered hereunder shall be
final and binding on each of the parties hereto and their
respective successors and assigns, and judgment may be entered
thereon by any court having jurisdiction. The parties shall
continue their performance under this Agreement while the
arbitration proceeding is pending.
11.6 Licensee agrees, if at any time it operates or begins hereafter
to operate any other similar System or Program, not to use any
reproduction, counterfeit copy, or colorable imitation of the
Proprietary Marks, either in connection with such other System or
Program or the promotion thereof, which is likely to cause
confusion, mistake or deception or which is likely to dilute
Licensor's rights in and to the Proprietary Marks, and further
agrees not to utilize any designation of origin, description,
trademark, service mark, or representation which suggests or
represents a present or past association or connection with
Licensor, the System, or the Proprietary Marks.
12
<PAGE> 14
11.7 Licensee shall pay Licensor all damages, costs, and expenses
(including reasonable attorney's fees) incurred by Licensor,
subsequent to the termination of this Agreement pursuant to
Section 11.2 hereof, in any successful action or proceeding to
obtain injunctive or other relief for the enforcement of any
provisions of this Section 11.
11.8 Licensee shall immediately upon expiration or termination of this
Agreement deliver to Licensor all manuals, records, and
instructions containing Licensor Confidential Information
(including without limitation any copies thereof, even if such
copies were made in violation of this Agreement), all of which
are acknowledged to be the property of Licensor.
11.9 Licensor shall provide such access to any copies of records
delivered pursuant to Section 11.8, or any reports prepared by
Licensee hereunder for any federal or state regulator asserting
authority over the activities of Licensee as shall be required by
law or regulation or as shall be requested in writing by
Licensee.
12. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
12.1 It is understood and agreed by the parties that: (1) neither this
Agreement nor the Processing Agreement creates a fiduciary
relationship between them; (2) Licensee shall be an independent
contractor in its use of the License; (3) Licensor shall be an
independent contractor in performing its obligations under
Section 9 hereof; and (4) nothing in this Agreement or the
Processing Agreement is intended to constitute either party an
agent, legal representative, subsidiary, joint venturer, partner,
employee, or servant of the other for any purpose whatsoever.
12.2 It is understood and agreed that nothing in this Agreement
authorizes either party to make any contract, agreement,
warranty, or representation on the other party's behalf, or to
incur any debt or other obligation in the other party's name; and
that the other party shall in no event assume liability for, or
be deemed liable hereunder as a result of, any such action.
12.3 Licensor shall indemnify and hold Licensee harmless from and
against any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (collectively,
"Liabilities"), and agrees to promptly defend Licensee from, and
reimburse Licensee for, all such Liabilities, including, without
limitation, reasonable attorney's fees, arising or resulting
from: (1) any challenge by another person to any patent,
trademark or intellectual property interest used by Licensee
under this Agreement; or (2) Licensor's negligence or wrongdoing
in any related proceeding; or (3) any failure of the System, the
Program or Licensor to comply, and to cause all Loans to be in
compliance, with any applicable Federal or state law, rule or
regulation (including without limitation the Consumer Credit
Protection Act, the Fair Credit Reporting Act, the Real Estate
Settlement Procedures Act, the Federal Trade Commission Act, and
state statutes purporting
13
<PAGE> 15
to regulate or license the origination of or terms and
conditions of Loans generated by the Program); (4) any challenge
to Licensee's authority to use the System and operate the
Program; (5) any breach of Licensor's representations and
warranties under this Agreement; or (6) any and all claims by
borrowers relating to any matters referenced under foregoing
clauses (1) through (5), inclusive. This Section 12.3 shall
survive the expiration or termination of this Agreement.
12.4 Licensee shall indemnify and hold Licensor harmless against any
and all claims arising directly from or as a result of: (1)
Licensee's use of the System and operation of the Program (as
well as the costs, including reasonable attorney's fees, of
defending against them) in violation of this Agreement; or (2)
any breach of Licensee's representations and warranties under
this Agreement. This Section 12.4 shall survive the expiration or
termination of this Agreement.
13. APPROVALS AND WAIVERS
13.1 No delay, waiver, omission, or forbearance on the part of either
party to exercise any right, option, duty, or power arising out
of any breach or default by the other party under any of the
terms, provisions, covenants, or conditions hereof, shall
constitute a waiver by such first party to enforce any such
right, option, duty or power against the other party, or as to
subsequent breach or default by the other party.
14. SEVERABILITY AND CONSTRUCTION
14.1 Each portion, section, part, term, and/or provision of this
Agreement shall be considered severable; and if, for any reason,
any section, part, term, and/or provision herein is determined to
be invalid and contrary to, or in conflict with, any existing or
future law or regulation by a court or agency asserting
jurisdiction, such shall not impair the operation of, or have any
other effect upon, such other portions, sections, parts, and/or
provisions of this Agreement as may remain otherwise
intelligible; and the latter shall continue to be given full
force and effect and bind the parties hereto; and said invalid
portions, sections, parts, terms and/or provisions shall be
deemed not to be part of this Agreement.
14.2 All captions in this Agreement are intended solely for the
convenience of the parties, and shall not be deemed to affect the
meaning or construction of any provision hereof.
14.3 All provisions of this Agreement which, by their terms or
intent, are designed to survive the expiration or termination of
this Agreement, shall so survive the expiration and/or
termination of the this Agreement. Without limiting the
immediately preceding sentence, all warranties and indemnities
by either party under this Agreement shall survive the
expiration or termination of this Agreement.
14
<PAGE> 16
14.4 No right or remedy conferred upon or reserved to Licensor or
Licensee by this Agreement is intended to be, nor shall be
deemed, exclusive of any other right.
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR AND LICENSEE.
15.1 Licensor hereby represents, warrants and covenants to Licensee
as follows:
15.1.1 Licensor is a corporation duly organized, validly
existing, and in good standing under the laws of the
State of California and that it has all requisite
corporate power and authority necessary to make and
perform its obligations under this Agreement. The
execution and delivery of this Agreement and all
documents, instruments and agreements required to be
executed by Licensor pursuant hereto, and the
consummation of the transactions contemplated hereby,
have each been duly and validly authorized by all
necessary action of Licensor. This Agreement constitutes
a valid, legal and binding agreement of Licensor
enforceable by Licensee in accordance with its terms,
subject to bankruptcy, insolvency, reorganization,
receivership or other laws affecting rights of creditors
generally and subject to general equity principles.
15.1.2 Licensor is qualified to do business in all states and
in any other jurisdiction in which such qualification is
required or where Licensor maintains an office or does
substantial business.
15.1.3 The execution, delivery and performance of this
Agreement by Licensor, its compliance with the terms
hereof and consummation of the transactions contemplated
hereby will not violate, conflict with, result in a
breach of, give to any right of termination,
cancellation or acceleration under, constitute a default
under, be prohibited by or require any additional
approval under: (1) Licensor's charter, by-laws, or
other organizational documents, or any other material
instrument or agreement to which Licensor is a party or
by which Licensor is bound or which affects this
Agreement, or (2) any and all laws, orders, injunctions
or decrees applicable to Licensor.
15.1.4 Licensor possesses and will maintain at all times while
this Agreement is in effect any and all necessary
licenses and permits required by any and all laws
necessary to conduct the business contemplated by the
terms of this Agreement. Licensee's obligations under
this Agreement and the Processing Agreement do not
require Licensee to obtain or maintain any such state or
local licenses or permits.
15.1.5 Neither Licensor nor its agents know of, or with the
exercise of reasonable diligence, would know of any
suit, action, arbitration or legal or administrative or
other proceeding pending or threatened against Licensor
15
<PAGE> 17
which would affect is ability to perform its obligations
under this Agreement.
15.2 Licensee hereby represents, warrants and covenants to Licensor
as follows:
15.2.1 Licensee is a federal savings bank duly chartered,
validly existing, and in good standing under the laws of
the United States and that it has all requisite
corporate power and authority necessary to make and
perform this Agreement. The execution and delivery of
this Agreement and all documents, instruments and
agreements required to be executed by Licensee pursuant
hereto, and the consummation of the transactions
contemplated hereby, have each been duly and validly
authorized by all necessary action of Licensee. This
Agreement constitutes a valid, legal and binding
agreement of Licensee enforceable by Licensor in
accordance with its terms, subject to bankruptcy,
insolvency, reorganization, receivership or other laws
affecting rights of creditors generally and subject to
general equity principles.
15.2.2 Subject to Licensor's full compliance with Licensor's
representations and warranties under this Agreement:
(1) The execution, delivery and performance of this
Agreement by Licensee, its compliance with the
terms hereof and consummation of the
transactions contemplated hereby will not
violate, conflict with, result in a breach of,
give rise to any right of termination,
cancellation or acceleration under, constitute a
default under, be prohibited by or require any
additional approval under: (i) Licensee's
charter, by-laws, or other organizational
documents, or any other material instrument or
agreement to which Licensee is a party or by
which Licensee is bound or which affects this
Agreement, or (ii) any and all laws, orders,
injunctions or decrees applicable to Licensee.
(2) Licensee possesses and will maintain its federal
savings bank charter at all times while this
Agreement is in effect.
(3) Neither Licensee nor its agents know of, or with
the exercise of reasonable diligence, would know
of any suit, action, arbitration or legal or
administrative or other proceeding pending or
threatened against Licensee which would affect
its ability to perform its obligations under
this Agreement.
15.2.3 Each party agrees that it will not use the trademarks,
service marks, logo, name or any other proprietary
descriptions of the other party or the other party's
parent or affiliates, whether registered or
unregistered, without the other party's prior written
consent.
16
<PAGE> 18
15.2.4 Each party agrees to notify the other as soon as
practicable of any formal request by a governmental
agency to examine records pertaining to the other party
or its customers, if the party being subjected to such
examination is permitted to so notify the other party.
Each party agrees that the other party is authorized to
fully cooperate with any such examination, and that such
cooperation will not constitute a breach of this
Agreement, including, without limitation, a breach of
the confidentiality provisions in Section 10.13 hereof.
16. MISCELLANEOUS.
16.1 This Agreement may not be assigned, in whole or in part, by any
party hereto without the prior written consent of the other party,
except to: (1) a parent company or wholly owned subsidiary of the
assigning party, (2) a person or entity that purchases in excess
of fifty percent (50%) of either party's voting stock, or (3) any
entity which purchases substantially all assets of the assigning
party. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns.
16.2 All notices required to be given hereunder will be considered
delivered when placed in the United States Mail, certified mail,
return receipt requested, properly addressed, or when delivered by
courier, to the parties at their respective addresses as set forth
on the signature page of this Agreement; provided that a party may
change its address for notices hereunder by giving the other party
written notice of such change.
16.3 This Agreement constitutes the entire agreement of the parties and
supersedes all prior understandings, whether written or oral,
between the parties thereto. This Agreement will not be modified
except by written instrument duly executed by Licensor and
Licensee. Any approvals or consents required by either party by
the terms of this Agreement shall not be unreasonably withheld.
Notwithstanding the above, in the event either party expressly
waives a default or breach of the other party, this waiver will
not be considered a waiver of a later default or breach of the
same or any other provision of this Agreement. If either party
fails to object or take affirmative action with respect to any
conduct of the other party which is in violation of the terms of
this Agreement, this failure shall not be construed as a waiver of
such terms between the parties hereto.
16.4 This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same agreement.
16.5 Neither party shall be liable to the other party for any loss or
damage due to delays or failure to perform resulting from an event
of "Force Majeure," which shall mean and include: an act of God;
accident; war; fire; lockout; strike or labor dispute; riot
17
<PAGE> 19
or civil commotion; act of public enemy; enactment, rule, order
or act of civil or military authority; acts or omissions of the
other party; judicial action; inability to secure adequate
materials, labor, or facilities; the inability of carriers to
make scheduled deliveries; or any other event beyond the
reasonable control of such party. Notwithstanding the foregoing,
Force Majeure shall not excuse either party from making payments
when due.
16.6 This Agreement shall be construed fairly as to both parties and
not in favor of or against either party, regardless of which party
prepared this Agreement.
16.7 This Agreement will be interpreted and construed in accordance
with, and will be governed by, the laws of the State of Georgia.
The parties hereto irrevocably submit themselves to the
jurisdiction of the courts of the State of Georgia. Any suit or
action arising out of this Agreement may be brought in the court
of competent jurisdiction in the County of Fulton, State of
Georgia. Service of process may be made, in addition to any other
method permitted by law, by certified mail, return receipt
requested, sent to the applicable address set forth herein.
16.8 Notwithstanding anything to the contrary in this Agreement,
Licensee may enter into any agreement with third parties for
similar services or otherwise directly offer, originate or make
mortgage loans in any states.
16.9 In the event Licensor makes secondary market commitments in the
name of Licensee to sell Loans on behalf of Licensee and pursuant
to this Agreement, Licensor agrees to sell and deliver such Loans
in accordance with the secondary market commitments made in the
name of and on behalf of Licensee with respect to such Loans;
provided that nothing in this Agreement shall authorize Licensor
to make such commitments in the name of or on behalf of Licensee.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed and delivered
this Agreement in duplicate on the day and year first above written.
NET.B@NK E-LOAN, INC.
LICENSEE LICENSOR
By: /s/ illegible By: /s/ Doug Galen
----------------------------- ------------------------------
Name: Illegible Name: Doug Galen
--------------------------- ----------------------------
Title: President Title: VP
-------------------------- ---------------------------
[BANK SEAL] [CORPORATE SEAL]
Address for Notices:
NET.B@NK E-LOAN, Inc.
950 North Point Parkway 540 University Avenue
Suite 350 Palo Alto, CA 94301
Alpharetta, GA 30005
Fax: (770) 753-1403 Fax: (650) 617-0410
Attn: Jeff Watson Attn: Doug Galen
19
<PAGE> 21
APPENDIX A
List of Applicable States
<PAGE> 1
EXHIBIT 10.21
EXECUTION COPY
MORTGAGE LOAN PROCESSING AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of the 1st day of June, 1998
by and between E-LOAN, INC. ("PROCESSOR"), a California corporation having an
office 540 University Avenue, Palo Alto, CA 94301, and NET.B@NK ("LENDER"), a
Federal savings bank having an office located at 950 North Point Parkway, Suite
350, Alpharetta, Georgia 30005.
RECITALS
PROCESSOR operates a program that is characterized by borrower
convenience features such as direct on-line Internet access, a 24-hour toll-free
interest rate hotline, toll-free telephone access, speed of commitment, and
nationwide availability. PROCESSOR will establish a loan processing service
bureau (the "Loan Processing Program") to allow LENDER to offer residential
mortgage products in certain states through its Internet and telemarketing call
center facilities operated by LENDER under the trade name "E-Loan" ("E-Loan
Internet Origination Center") pursuant to a separate License, Staffing, Purchase
and Sale Agreement between the parties, dated as of even date herewith (the
"License Agreement").
In consideration of the above recitals, the terms and covenants of this
Agreement, and other valuable consideration, the receipt and sufficiency of
which are acknowledged, the parties agree as follows:
AGREEMENT
1. Loan Processing Program.
1.1 Duties of PROCESSOR. PROCESSOR will perform the following loan
processing and underwriting services on behalf of LENDER in connection
with all loans originated through LENDER's E-Loan Internet Origination
Center with respect to certain states as identified in the attached
Appendix A (as may be modified from time to time by mutual written
consent of the parties hereto). Said Appendix A, including any such
modifications, is incorporated as part of this Agreement.
1.1.1 PROCESSOR will provide information on loan products and interest rate
pricing information to LENDER, to be updated each business day.
1.1.2 PROCESSOR will provide support and counseling services to assist with
the completion of loan applications and will receive loan applications
transmitted by LENDER or LENDER's customers by electronic mail or other
means. PROCESSOR will handle all aspects of loan processing and
underwriting, including verification of borrower information, loan
approval, closing, shipping and post-closing. PROCESSOR will underwrite
the loans in conformity with underwriting standards adopted by the
LENDER.
<PAGE> 2
All loans made under the Loan Processing Program will be closed in the
name of the LENDER and be funded by LENDER. PROCESSOR will issue
instructions to LENDER for funding and will supervise the closing of
loans.
1.1.3 PROCESSOR will make all disclosures required by federal or state law to
loan applicants, including disclosures required by the Real Estate
Settlement Procedures Act, Truth in Lending Act, and Equal Credit
Opportunity Act. PROCESSOR warrants that it will issue all disclosures
within the applicable legal time period.
1.1.4 Pursuant to the License Agreement, the PROCESSOR shall purchase, on a
non-recourse basis, all loans closed and funded by LENDER under the Loan
Processing Program.
1.1.5 PROCESSOR will assist LENDER in compiling information required by
federal or state regulatory agencies, including information required by
LENDER for compliance with the Home Mortgage Disclosure Act and
Community Reinvestment Act.
1.1.6 PROCESSOR will provide LENDER with status reports of the Loan Processing
Program upon demand of LENDER, which reports will include information on
Program usage and comments by users.
1.1.7 PROCESSOR will respond promptly and professionally to questions,
comments, complaints and other reasonable requests regarding loans from
LENDER's customers or on request by LENDER and shall cooperate and
assist in promptly answering same.
1.1.8 PROCESSOR shall promptly provide copies to LENDER of all written
correspondence related to the Loan Processing Program or any loan
originated thereunder which could reasonably lead to a claim or demand
against LENDER and/or its affiliates by any third party or any liability
of LENDER and/or its affiliates to a third party.
1.1.9 At its sole discretion, PROCESSOR shall use commercially reasonable
efforts to market the Loan Processing Program and shall, at a minimum,
cooperate with and reasonably assist LENDER by supplying material,
advice and information for LENDER's marketing and promotional activities
which relate to the Loan Processing Program.
1.1.10 PROCESSOR hereby represents and warrants to LENDER, and covenants in
favor of LENDER, that all loans originated on LENDER's behalf pursuant
to this Agreement and the License Agreement will be underwritten,
processed, originated, and closed (i) in conformity with all conditions
and requirements necessary for sale of such loans in the secondary
market for single-family residential mortgage loans and (ii) in
compliance with all applicable federal, state and local laws, rules and
regulations, including, without limitation, the Real Estate Settlement
Procedures Act, Truth in Lending Act, Flood Disaster Protection Act,
Equal Credit Opportunity Act, applicable usury limitations, and
applicable lending laws (all conditions, requirements, laws, rules and
regulations referenced in clauses (i) and (ii) of this Section 1.1.10
being herein collectively referred to as the "Applicable Requirements").
PROCESSOR further represents and warrants to LENDER, and covenants in
favor of LENDER, that PROCESSOR (and its agents and
2
<PAGE> 3
employees performing work pursuant to this Agreement and the License
Agreement) have such familiarity and experience with the Applicable
Requirements as is necessary to ensure the accuracy of the foregoing
representation and warranty under this Section 1.1.10 and the
fulfillment of the foregoing covenant under this Section 1.1.10.
1.1.11 LOAN FUNDINGS
No later than 4:00 p.m. (prevailing Atlanta, Georgia time) on the
business day immediately preceding the business day on which funding for
any Loan will be due from LENDER in accordance with Section 1.2.7
hereof, PROCESSOR shall deliver to LENDER true, correct and complete
copies of (1) a nationally recognized title insurance company's insured
closing letter covering the applicable closing attorney with respect to
such Loan, (2) the pertinent borrower's loan application and transmittal
summary, (3) the PROCESSOR's "Net Check Letter to Escrow Agent"
(including, without limitation, itemization of settlement fees) with
respect to such Loan, which Net Check Letter shall specify the net
amount to be funded by LENDER for closing of such Loan (the "Net Funding
Amount"), and (4) wiring instructions. Within three (3) business days
after closing of each Loan pursuant to this Agreement and the License
Agreement, PROCESSOR shall cause delivery to LENDER of (i) the fully
executed original promissory note evidencing such Loan (LENDER agrees to
notify PROCESSOR of receipt of such note) and (ii) true, correct and
complete copies of the security instrument (i.e., mortgage, deed of
trust, or deed to secure debt) securing such Loan and of the closing
settlement statement for such Loan. Each Loan funded by LENDER pursuant
to this Agreement shall be the sole and exclusive property of LENDER
until such Loan is duly sold by LENDER. So long as any such Loan is the
property of LENDER: (a) all documents evidencing, securing, or otherwise
relating to such Loan shall likewise be the sole and exclusive property
of LENDER and shall specify LENDER as sole holder of such Loan; and (b)
any such documents remaining in the possession of PROCESSOR or its
closing attorney or other agent shall be deemed to be held by PROCESSOR
as custodian for LENDER, with PROCESSOR hereby being charged with all
reasonable due care in safeguarding such documents on behalf of LENDER
and hereby being authorized to take only those actions (with respect to
such documents) which LENDER hereafter authorizes in writing. LENDER
shall not, without PROCESSOR's prior consent, incorporate any fees into
any Loan transaction except as contemplated by this Agreement, the
License Agreement, and the terms and conditions of such Loan.
1.2 Duties of LENDER.
LENDER will use the Loan Processing Program as its exclusive mortgage
lending program for loans originated by it through its E-Loan Internet
Origination Center with respect to those states identified in Appendix
A. In connection with the Loan Processing Program, LENDER will perform
the following functions:
1.2.1 LENDER will originate and deliver to PROCESSOR applications for mortgage
loans in accordance with all applicable mortgage loan specifications and
guidelines agreed upon by LENDER and PROCESSOR.
3
<PAGE> 4
1.2.2 LENDER will transmit to PROCESSOR, by electronic mail or other means,
any mortgage loan application received from its customers by LENDER
through the E-Loan Internet Origination Center with respect to the
states identified in Appendix A. The complete application packages must
be transmitted to PROCESSOR for processing within 24 hours of receipt.
1.2.3 Underwriting standards utilized by LENDER will be in conformity with
applicable law and with guidelines of secondary market investors,
including the Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, and the Government National Mortgage Association,
and/or the guidelines of private investors, as applicable.
1.2.4 LENDER will retain ultimate responsibility for underwriting decisions
and will review and approve or deny each loan, including PROCESSOR's
recommended credit and underwriting decisions for each loan. LENDER
shall have the opportunity to provide a "second review" of all denied or
incomplete loan application files.
1.2.5 LENDER will be named as the payee on all loans and all disclosures will
be given to borrowers in the name of the LENDER.
1.2.6 LENDER will fund all loans originated through the Loan Processing
Program, using its own funds or funds obtained through a warehouse line
of credit, which funds shall be disbursed by LENDER to PROCESSOR or its
agent in accordance with funding instructions from PROCESSOR for the
loan closing.
1.2.7 LENDER agrees to sell to PROCESSOR all loans made by LENDER under the
Loan Processing Program under terms and conditions set forth in the
License Agreement. Such loans will be sold on a non-recourse basis.
1.3 Exclusive Agreement.
During the term of this Agreement, PROCESSOR will have the exclusive
right to perform the duties outlined above as part of the Loan
Processing Program and LENDER will not enter into any agreement with
third parties for similar services (whether in the aggregate or singly)
with respect to the operation of the E-Loan Internet Origination Center.
PROCESSOR retains the right to offer residential mortgage loans to any
customer who applies to PROCESSOR through another of the PROCESSOR's
mortgage loan programs or through a loan offer made to the public by
PROCESSOR. PROCESSOR also retains the right to offer similar Loan
Processing Programs to other lenders.
1.3.1 LENDER retains the right to offer residential mortgage loans to any
customer who applies to LENDER through another of the LENDER's mortgage
loan programs or through a loan offer made to the public by LENDER.
4
<PAGE> 5
2. Compensation.
2.1 For its efforts, PROCESSOR will be paid by LENDER all loan related fees
paid to LENDER by borrowers (other than fees passed-through to third
parties), including without limitation, any and all fees charged to
borrowers and designated as underwriting fees, processing fees, document
preparation fees, lock-in fees, commitment fees, and other types of
closing-related fees. Payment will be made in the form of PROCESSOR's
retention of such fees in respect of all loans sold to PROCESSOR by
LENDER under the License Agreement.
2.2 It is the intent of the parties that all compensation received by
PROCESSOR shall not exceed the reasonable value of the services rendered
within the meaning of the Real Estate Settlement Procedures Act, 12
U.S.C. Section 2601 et seq. as amended from time to time and the
regulations which are promulgated thereunder.
3. Term.
3.1 Except as otherwise provided herein, the term of this Agreement shall
expire one (1) year from the date of this Agreement.
3.2 At its option exercisable by giving written notice to LENDER at least
sixty (60) days prior to the first anniversary of the date of this
Agreement, PROCESSOR may renew this Agreement for one (1) additional
term of (1) year if PROCESSOR shall have satisfied all monetary
obligations owed by PROCESSOR to LENDER and its parent, subsidiaries,
and affiliates under this Agreement and any other contract between the
parties as of the date of such notice and as of the date of commencement
of the renewal term.
3.3 At its option exercisable by giving written notice to PROCESSOR at least
sixty (60) days prior to the first anniversary of the date of this
Agreement, LENDER may renew this Agreement for one (1) additional term
of (1) year if LENDER shall have satisfied all monetary obligations owed
by LENDER to PROCESSOR and its parent, subsidiaries, and affiliates
under this Agreement and any other contract between the parties as of
the date of such notice and as of the date of commencement of the
renewal term.
3.4 This Agreement may be terminated with or without cause by PROCESSOR or
LENDER upon sixty (60) days' written notice to the other party.
3.5 In the event this Agreement is terminated by either party, PROCESSOR
will continue to process, underwrite and close any complete loan
application that has been received from LENDER (as of the date of
notification of termination) under the same terms and conditions of this
Agreement. In addition, LENDER shall continue to be obligated under the
same terms and conditions of this Agreement to fund all such loans and
pay for the services provided by PROCESSOR.
5
<PAGE> 6
4. Legal Fees.
In the event action is taken by either party to enforce the provisions
of this Agreement, whether suit is brought or not, the prevailing party
shall be entitled to reasonable attorney's fees and costs from the
nonprevailing party.
5. Indemnity.
5.1 Each party hereby indemnifies and agrees to hold harmless the other
party against liabilities, damages, costs, charges, legal fees,
judgments, expenses (including attorneys' fees) or any other losses
(collectively, the "Liabilities") incurred as a result of a third
party's use of LENDER's E-Loan Internet Origination Center to the extent
such Liabilities result from any negligent acts or omissions, bad faith,
or willful misconduct of the indemnifying party or its employees, agents
or affiliates.
5.2 PROCESSOR will indemnify and hold LENDER harmless against, and will at
its own expense defend, any action brought against LENDER to the extent
such action is based upon a breach of this Agreement by PROCESSOR;
provided that PROCESSOR is promptly notified in writing by LENDER of any
such action; and provided, further, that PROCESSOR shall have the
exclusive right to control such defense. In no event shall LENDER settle
any such claim, lawsuit or proceeding without PROCESSOR's prior written
approval.
5.3 LENDER will indemnify and hold PROCESSOR harmless against, and will at
its own expense defend, any action brought against PROCESSOR to the
extent such action is based upon a breach of this Agreement by LENDER;
provided that LENDER is promptly notified in writing by PROCESSOR of any
such action; and provided, further that LENDER shall have the exclusive
right to control such defense. In no event shall PROCESSOR settle such
claim, lawsuit or proceeding without LENDER's prior written approval.
6. Liability.
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (SUCH AS, BUT
NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS)
ARISING FROM THE USE OR INABILITY TO USE THE E-LOAN INTERNET ORIGINATION
CENTER AND THE LOAN PROCESSING PROGRAM OR ARISING FROM THE USE OF ANY
LINKED UP INTERNET SITE (EVEN IF THAT PARTY HAS BEEN ADVISED OF, OR HAS
FORESEEN THE POSSIBILITY OF, SUCH DAMAGES).
7. Miscellaneous.
7.1 PROCESSOR represents that it is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
California, and that it has all corporate power necessary to make and
perform its obligations under this Agreement.
6
<PAGE> 7
7.2 LENDER represents that it is a federal savings bank duly chartered,
validly existing, and in good standing under the laws of the United
States and that it has all corporate power necessary to make and perform
this Agreement.
7.3 LENDER represents and warrants that it has not entered into any other
agreement, whether written or oral, or engaged in any course of conduct,
that is currently binding or continuing that would prohibit it from
entering into this Agreement.
7.4 Each party agrees that it will not use the trademarks, service marks,
logo, name or any other proprietary descriptions of the other party or
the other party's parent or affiliate(s), whether registered or
unregistered, without the other party's prior written consent.
7.5 Each party agrees to notify the other as soon as practicable of any
formal request by a governmental agency to examine records pertaining to
the other party or its customers, if the party being subjected to such
examination is permitted to so notify the other party. Each party agrees
that the other party is authorized to fully cooperate with any such
examination, and that such cooperation will not constitute a breach of
this Agreement, including, without limitation, a breach of the
confidentiality provisions in paragraph 7.15.
7.6 Nothing in this Agreement or the License Agreement will be deemed to
constitute a partnership, joint venture, employment, affiliated business
arrangement, or agency relationship between the parties.
7.7 This Agreement may not be assigned, in whole or in part, by any party
hereto without the prior written consent of the other party, except to:
(1) a parent company or wholly owned subsidiary of the assigning party,
(2) a person or entity that purchases in excess of fifty percent (50%)
of either party's voting stock, or (3) any entity which purchases
substantially all assets of the assigning party. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
7.8 All notices required to be given hereunder shall be made by regular
mail, facsimile or express courier to the addresses as set forth at the
beginning of this Agreement.
7.9 This Agreement constitutes the entire agreement of the parties and
supersedes all prior understandings, whether written or oral, between
the parties thereto. This Agreement will not be modified except by
written instrument executed by PROCESSOR and LENDER. Any approvals
required by either party by the terms of this Agreement shall not be
unreasonably withheld. Notwithstanding the above, in the event either
party expressly waives a default or breach of the other party, this
waiver will not be considered a waiver of a later default or breach of
the same or any other provision of the Agreement. If either party fails
to object or take affirmative action with respect to any conduct of the
other party which is in violation of the terms of this Agreement, this
failure shall not be construed as a waiver of such understanding or
representations, between the parties hereto, whether oral or written.
7
<PAGE> 8
7.10 This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and
the same agreement.
7.11 Neither party shall be liable to the other party for any loss or damage
due to delays or failure to perform resulting from an event of "Force
Majeure," including without limitation: an act of God; accident; war;
fire; lockout; strike or labor dispute; riot or civil commotion; act of
public enemy; enactment, rule, order or act of civil or military
authority; acts or omissions of the other party; defaults of
subcontractors or suppliers; the inability of carriers to make scheduled
deliveries; or any other event beyond the reasonable control of such
party. Notwithstanding the foregoing, such Force Majeure shall not
excuse either party from making payments when due.
7.12 The invalidity, in whole or in part, of any term of this Agreement does
not affect the validity of the remainder of the Agreement.
7.13 This Agreement will be interpreted and construed in accordance with, and
will be governed by, the laws of the State of Georgia. The parties
hereto irrevocably submit themselves to the jurisdiction of the courts
of the State of Georgia. Any suit or action arising out of this
Agreement may be brought in the court of competent jurisdiction in the
County of Fulton, State of Georgia. Service of process may be made, in
addition to any other method permitted by law, by certified mail, return
receipt requested, sent to the applicable address set forth herein.
7.14 The parties acknowledge and agree that the Loan Processing Program is
not intended to permit the access or transmission of LENDER's customer
names, screen names, addresses or any information concerning LENDER's
customers ("Customer Information"), other than that required to be
accessed or transmitted in connection with a Mortgage Loan application.
7.15 The parties agree to maintain the terms and conditions of this Agreement
confidential during the term of this Agreement. In addition, each party
acknowledges that in performing under this Agreement it may gain access
to confidential information belonging to the other party and its
customers, including but not limited to business, financial and
technological information (collectively, "Confidential Information"),
which Confidential Information constitutes and shall constitute valuable
assets and trade secrets. Accordingly, when a party (the "Receiving
Party") receives Confidential Information from another party (the
"Owning Party"), the Receiving Party shall, both during the term of this
Agreement and following the termination thereof, (i) keep secret and
retain in strict confidence any Confidential Information received from
the Owning Party, (ii) not disclose to any third party any Confidential
Information received from the Owning Party for any reason whatsoever,
(iii) not disclose any Confidential Information received from the Owning
Party to the Receiving Party's employees, except on a need-to-know
basis, and (iv) not make use of any Confidential Information received
from the Owning Party for its own purposes or for the benefit of any
third party except as authorized by this Agreement. Notwithstanding the
foregoing, the parties' duty regarding Confidential Information shall
not apply when disclosure is made pursuant to (i) any state or federal
8
<PAGE> 9
law or regulation, or (ii) the order of any state or federal court or
agency, provided the party disclosing such Confidential Information
provides prior written notice, wherever practicable, to the other party.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date and year first set forth above.
E-LOAN, INC.
By: /s/ Douglas Galen
-------------------------------------
Name: Doug Galen
-----------------------------------
Title: VP
----------------------------------
[CORPORATE SEAL]
NET.B@NK
By: /s/ illegible
-------------------------------------
Name: Illegible
-----------------------------------
Title: President
----------------------------------
[BANK SEAL]
10
<PAGE> 11
APPENDIX A
List of Applicable States
<PAGE> 1
EXHIBIT 10.22
WHOLESALE MORTGAGE PURCHASE AGREEMENT
BETWEEN
E-LOAN INC.
----------------------------------------
(Fill in Seller's Licensed Name)
AND
PHH MORTGAGE SERVICES CORPORATION
Tier VI
Revised Date: 12/30/97
<PAGE> 2
TIER VI
WHOLESALE MORTGAGE PURCHASE AGREEMENT
This Wholesale Mortgage Purchase Agreement ("Agreement") is entered
into as of the 1st day of June, 1998, between PHH MORTGAGE SERVICES CORPORATION
("PHH"), a New Jersey Corporation having an office at 6000 Atrium Way, Mt.
Laurel, New Jersey 08054, and E-Loan Inc. (the "Seller"), a California
Corporation having an office at 6200 Village Parkway, #102, Dublin. CA 94568.
WHEREAS the Seller desires to originate, process and close both
government and conventional first mortgage loans ("Loans") with PHH and PHH
desires to purchase such Loans, pursuant to the terms of this Agreement, as
amended in writing from time to time.
NOW THEREFORE, in consideration of the mutual promises above and
covenants contained hereinafter, the parties agree as follows:
I. Manuals: The Seller acknowledges that it has received and read the PHH
Sales Manual and the PHH Wholesale Operations Manual ("Manuals"). All
provisions of the Manuals, as amended from time to time, are
incorporated by reference into this Agreement and shall be binding upon
both parties. All terms used herein shall have the same meaning as such
terms have in the Manuals, unless the context clearly requires
otherwise.
II. Mortgage Defined: It is understood that the word "mortgage", as used
herein, includes Notes, Bond, Mortgage/Deed of Trust, Extension
Agreement, Assumption of Indebtedness, and any other documents
constituting the basic instruments for a Loan secured by real and
personal property in the state in which the mortgaged premises is
located.
III. Eligible Loans: Only those loans complying with standards for
Conforming Conventional, Jumbo Conventional and Government Mortgage
Loan Programs as set forth in the Manuals are eligible for purchase
under this Agreement. All Loans shall be originated, processed, closed
and registered in conformance with the procedures set forth in the
Manuals.
IV. Loan Pricing:
A. Interest Rates/Points: The Seller shall sell Loans in
accordance with the price reflected on the daily PHH rate
sheet. PHH shall transmit, via electronic facsimile, the PHH
Rate Sheet to the Seller by 10:30 am Eastern Time every
business day. Seller may call PHH between the hours of 8:30 am
and 10:00 pm Eastern Time to obtain the latest price quotes.
Prices are subject to change without notice.
1
<PAGE> 3
B. Rate Lock Options: The Seller shall abide by all interest rate
lock options and provisions as outlined in the Manuals.
C. Best Efforts Delivery: All Loans purchased under this
Agreement shall be on a Best Efforts Basis, unless
specifically negotiated otherwise. Best Efforts delivery shall
mean a mandatory delivery of Loans registered with PHH if the
Loan closes. All locked Loans which are not declined by PHH
shall be delivered to PHH, if closed by the Seller. Seller
shall not deliver the Loan to any other lender and shall not
assist in closing the loan with any other lender. The Best
Efforts Delivery Policy will be closely monitored by the
Quality Control Department at PHH. In the event of the
settlement of any locked Loan by Seller and subsequent
non-delivery to PHH, Seller shall be subject to fees as
described in the Manuals.
V. Reciprocal Representations and Warranties Made by Each Party to This
Agreement:
A. Such party is duly organized, validly existing and in good
standing under the laws of its jurisdiction or organization.
In addition, such party has the requisite power and authority
to enter into this Agreement and all other agreements which
are contemplated hereunder and to carry out its obligations
under this Agreement.
B. This Agreement has been duly authorized, executed and
delivered by such party and constitutes a validly and legally
binding agreement of such party enforceable in accordance with
its terms.
C. There is no action, proceeding or investigation pending or
threatened, nor any basis therefor known to such party, that
questions the validity or prospective validity of this
Agreement.
D. Such party is not in violation of any charter, articles of
incorporation, by-laws, mortgage, indenture, indebtedness,
agreement, instrument, judgment, decree, order, statute, rule
or regulation and no such obligation adversely affects its
capacity to fulfill any of its promises or duties under this
Agreement. The execution of and performance pursuant to this
Agreement will not result in a violation of any of the
foregoing.
Failure by either party to comply with the aforementioned
representations and warranties shall be deemed a breach of
this Agreement and both parties hereby agree to indemnify and
hold harmless the other from any and all claims or damages
arising out of such breach.
VI. Seller's Obligations, Representations and Warranties with Respect to
Each Loan Sold Under This Agreement:
A. Each Loan shall be insured by an ALTA title insurance policy
acceptable to PHH evidencing that the Loan is a valid first
lien on the mortgaged property, and the mortgaged property is
free and clear of all encumbrances, including all mechanic's
or materialman's liens, except liens for real estate taxes and
special assessments not yet due and payable. All taxes due
within 30 days of purchase by PHH shall be paid by Seller.
B. All parties to the mortgage have the legal capacity to execute
the same.
2
<PAGE> 4
C. Each Loan shall be accompanied by an appraisal of the property
provided by a properly licensed and certified appraiser which
indicates that said property is free of substantial damage
(including but not limited to, any damage by fire, windstorm,
vandalism or other casualty) and is in good repair.
D. All federal and state laws, rules and regulations applicable
to the Loans have been complied with including but not limited
to: Regulation Z (Truth-in-Lending Act), Fair Credit Reporting
Act; Flood Disaster Protection Act of 1973; Real Estate
Settlement Procedures Act of 1974 (RESPA) and Regulation X, as
amended and Regulation B (Equal Credit Opportunity Act), as
amended.
E. Seller agrees, within 120 days of the Loan closing date to
execute, transmit and/or obtain any and all Final
Documentation over which said Seller can be reasonably
expected to have control and which PHH deems necessary to
properly complete a sale of any Loan, and/or to perfect a
first lien.
F. The Loan documents have been duly executed by the mortgagor,
acknowledged and sent for recordation by the closing agent;
and each Loan complies with the Underwriting Guidelines
contained in the Manuals. Provided, however, the Seller does
not make any representations or warranties regarding the
underwriting decision.
G. Seller is the sole owner of the Loan and has authority to
sell, transfer and assign the Loan on the terms set forth in
this Agreement.
H. The full principal amount of the Loan has been advanced to the
mortgagor, either by payment directly to such person or by
payment made on such person's request or approval. The unpaid
balance is as stated. All costs, fees and expenses incurred in
making, closing and recording the Loan have been paid. No part
of the mortgaged property has been released from the lien of
the Loan and the terms of the Loan have in no way been changed
or modified, and the Loan is current and not in default.
I. Each Loan requiring insurance or a guaranty is properly
insured or guaranteed. Any premiums, required to be paid under
such policies within 30 days of purchase by PHH, shall be paid
by Seller.
J. There is in force a hazard insurance policy and flood
insurance policy, where applicable, meeting the requirements
of PHH. Any premiums, required to be paid under such policies
within 30 days of purchase by PHH, shall be paid by Seller.
K. Seller shall submit a certified true copy of a completed
Assignment in the name of PHH Mortgage Services Corporation
with the Loan package prior to PHH funding the Loan. Once the
Loan is funded by PHH, the Seller shall have forty-eight (48)
hours to send the original Assignment for recordation. All
endorsements and assignments by Seller of promissory notes and
security interest shall be without recourse.
3
<PAGE> 5
L. The Seller has no knowledge of the borrower having any
set-offs, counter-claims or defenses to the Promissory Note or
Deed of Trust or Mortgage securing the Promissory Note arising
from the acts and/or omissions of Seller in the origination of
the Loan.
M. Seller has no knowledge of any improvement located on or being
part of the mortgaged property which is in violation of any
applicable zoning laws or regulations.
N. Seller has no knowledge of any circumstances or conditions
with respect to the Loan, mortgaged property, mortgagor or
mortgagor's credit standing that could be expected to cause a
reasonable investor to regard the Loan as an unacceptable
investment, cause the Loan to become delinquent or adversely
affect the value or marketability of the Loan.
O. All documents submitted to PHH are genuine, true, correct and
proper. All other representations, for which the Seller has
responsibility under this Agreement, are true and correct and
meet the requirements and specifications of this Agreement and
the Sales Manual.
P. The Seller states that the warranties and representations
required under Section III of this Agreement have been
satisfied. Provided, however, Seller does not make any
warranties or representations regarding the underwriting
decision, which is the responsibility of PHH, made on the
Loans.
All of the aforementioned warranties shall survive and inure to the
benefit of any person, partnership, firm or entity to which PHH may
assign or sell any of such Loans or Servicing Rights under this
Agreement.
Upon discovery of any breach of any of these representations and
warranties, PHH shall give prompt, written notice to the Seller. If the
breach is not cured within thirty (30) days of written notice, Seller
shall be in default under the terms of this Agreement and become
subject to repurchase of such Loan(s) as described in Section IX.
VII. Quality Control:
A. Seller shall maintain a Quality Control function acceptable to
PHH, FNMA, FHLMC and/or GNMA and shall, upon request, supply
the results of such Quality Control activities to PHH.
B. Seller agrees to supply to PHH copies of Quality Control
audits performed by Seller or the agencies listed in Paragraph
A of this Section and hereby indemnifies PHH against any
adverse action taken by these agencies that may affect PHH in
any way. If, in PHH's sole discretion, the Agency audits
determine the Quality Control function to be unacceptable, the
Seller shall be in default under this contract and PHH may
exercise any of the remedies described in Section VIII and IX.
C. At any time, PHH shall have the right to conduct quality
control audits to verify all documentation submitted by Seller
including full documentation of Loans closed as "no income"
Loans. Seller agrees to cooperate fully with these audits. If
it is discovered that there
4
<PAGE> 6
was improper documentation or documentation that does not
support the information supplied with the Loan submission, PHH
may exercise those remedies set forth in Sections VIII and IX.
If a Loan is determined to be fraudulent, Seller agrees to
indemnify and hold PHH harmless from all claims, liabilities,
losses, damages, expenses and lawsuits (including attorney's
fees), in connection therewith.
VIII. Seller's Repurchase Obligations: Seller agrees to repurchase any
Loan(s) sold to PHH under this Agreement within ten (10) business days
of written notice from PHH of any of the following:
A. Seller fails to observe or perform, or breaches, in any
material respect, any of the representations, warranties or
covenants contained in this Agreement and/or the Manuals with
respect to a particular Loan and such failure continues for
thirty (30) days following PHH's written notification of such
failure to Seller.
B. Seller fails to deliver to PHH within 270 calendar days from
the date each Loan was purchased, all of the Final Documents
as set forth in the Manuals.
C. PHH determines that there is evidence of fraud or
misrepresentation in the origination of the Loan or any matter
in the mortgage loan file is not true and correct.
D. Seller fails to observe or perform or breaches, in any
material respect, any of the representations, warranties or
agreements set forth in this Agreement.
IX. Repurchase Price: The price to be paid by Seller to PHH in the event of
a repurchase of a mortgage loan shall be an amount equal to the sum PHH
was required to pay in order to repurchase the loan from its investor
plus interest accrued but unpaid on the principal balance of the Loan
from the date of settlement through the date of repurchase plus any
premiums paid to Seller and any and all costs and expenses incurred by
PHH in connection with the repurchase.
Upon any such repurchase of Loans by Seller, PHH shall endorse the
Promissory Note(s) (without recourse) and shall forward an assignment
(without recourse and in recordable form) in any security interest to
Seller.
X. Delivery of Final Documents: Seller shall deliver all of the documents
listed on the Final Document Transmittal Form within 120 calendar days
from the date the Loan is purchased by PHH. However, failure by Seller
to deliver to PHH within 150 calendar days from the date a Loan was
purchased, one or more of the original documents listed on the Final
Document Transmittal Form shall result in assessment by PHH of a fee of
$50 per 30 days per loan for each 30 days, after the 150 day period,
during which one or more of such documents is outstanding. Such fees
shall be $50 regardless of the number of loan documents outstanding.
Seller shall be billed for such penalty. In the event Seller odes not
pay the penalty within thirty (30) days of receipt of invoice, then
such penalty shall be deducted out of the Seller's funds on the next
loan sold to PHH following expiration of the thirty (30) day period.
Provided, however, if Seller fails to deliver to PHH the Final
Documents within the 150 day period because such documents have not
been received from the applicable recorder's officer or the title
company respectively, and not because of any delay within Seller's
control, then PHH shall extend the
5
<PAGE> 7
150 day period for any reasonable time necessary for Seller to deliver
the documents and no penalty shall be assessed.
XI. Seller's Compensation: PHH shall purchase closed Loans for which it has
received full and correct Loan documentation. PHH shall disburse funds
to the Seller using the following calculations:
A. The Unpaid Principal Balance of the Loan at the price quoted
by PHH;
B. Plus, any accrued interest owed to the Seller;
C. Less, any accrued interest or fees owed to PHH;
D. Less, any other fees or costs as set forth in this Agreement
or in the Fee Structure contained in the Manuals.
XII. Servicing Rights: PHH shall own the Servicing Rights of all Loans
closed under this Agreement and is entitled to all escrow fees, buydown
funds and rights thereof. Such funds shall be netted out of the funds
paid to Seller as described in Section XI.
XIII. Termination:
A. This Agreement shall terminate upon the occurrence of any one
of the following events:
(1) In the event either party is required to discontinue
its performance of this Agreement because of an order
of any appropriate state or federal Court or
regulatory body to do so.
(2) To the extent permitted by applicable law, upon the
filing by a party of any action under any
reorganization, insolvency or moratorium law, or upon
the appointment of any receiver, trustee or
conservator to take possession of the properties of
such party.
(3) In the event PHH commits any breach of its terms,
conditions, representations or warranties under this
Agreement, and such breach is not cured within thirty
(30) days of PHH's receipt of written notice of such
breach.
(4) In the event Seller commits any breach of its terms,
conditions, representations or warranties under this
Agreement, and such breach is not cured within thirty
(30) days of Seller's receipt of written notice of
the breach.
(5) In the event of fraud on the part of Seller in
performing its duties hereunder, immediately upon
receipt by Seller of notice of termination.
(6) Upon thirty (30) days written notice by either party
to the other.
B. In the event of a breach of the representations and warranties
set forth in Section V and VI either party may terminate this
Agreement immediately upon providing written notice to the
other. In addition, such breach shall void all rate locks on
applicable loans.
6
<PAGE> 8
XIV. Fair Lending Compliance:
A. Seller agrees with and fully support the fair lending laws
including: the Equal Credit Opportunity Act, Fair Housing Act
and the Home Mortgage Disclosure Act. Specifically, Seller
shall not collect overages or price loans in violation of
applicable fair housing laws. To that end. Seller shall ensure
that all customers are reviewed and treated on the basis of
their qualifications as a borrower regardless of any non-merit
factors (i.e., race, religion or gender). Upon request, PHH
agrees to provide its own procedures which it utilizes in
fulfilling its fair lending goals. In addition, in the spirit
of promoting fair lending, the Seller agrees to make their
best efforts to maintain an employment staff that reflects the
racial, cultural and gender makeup of its local area.
B. In furtherance of its fair lending commitment, PHH and Seller
also agree to use their best efforts to utilize minority and
women owned businesses when selecting vendors and outside
services.
XV. Assignment: This Agreement may not be assigned or transferred, in whole
or in part, by the Seller without the prior written consent of PHH.
XVI. Notices: All notices required or permitted by this Agreement shall be
in writing and shall be given by certified mail, return receipt
requested or via overnight mail and sent to the address at the head of
the Agreement or such other address that a party specifies in writing
in accordance with this paragraph.
XVII. IRS Designation Clause: Pursuant to the requirements of the Internal
Revenue Procedures and in accordance with the applicable provisions of
the IRS Code, the Parties hereby desire to clarify the 1098 reporting
responsibilities of PHH and Seller.
PHH will provide a 1098 return for the amount of interest it actually
collects in each transaction. This reporting shall be limited to the
interest collected by PHH as servicer of the subject Loan. Seller shall
provide a 1098 return to the borrower for the amount of interest and
points collected by it prior to PHH taking over the servicing of the
Loan. The total of these two returns will equal the total fees paid by
the customer on each Loan.
The Parties agree that these provisions shall cover all loans sold by
Seller to PHH for the term of this Agreement. PHH and Seller agree that
individual designation agreements will not be drawn up on each
individual loan closing or on an annual basis covering Seller's volume.
XVIII. Non-Solicitation: The Seller agrees, for a period of 270 calendar days
from the date of purchase of a Loan by PHH from Seller, that Seller
shall be prohibited from refinancing such Loans. A refinancing shall
have occurred if the Loan closes within such 270 day period. In the
event Seller refinances any Loans closed within such 270 calendar days,
Seller shall pay to PHH a penalty equal to the service release premium
(calculated as 1% of the principal loan amount at closing on adjustable
rate loans and 1 1/2% on fixed rate loans) paid to Seller on the
original loan closing.
A. Provided, however, in the event a customer contacts Seller for
refinance and Seller can improve the customer's current
interest rate by at least 1/2% or an equivalent benefit in
points paid by the customer, Seller shall contact PHH's
Pricing Department for approval to refinance such Loan. If
such approval is granted, no penalty will be assessed.
7
<PAGE> 9
XIX. Indemnification: Seller agrees to defend, indemnify and hold harmless
PHH, its successors, assigns, stockholders, officers, directors,
employees, agents, attorneys, affiliates and subsidiaries from and
against any and all liabilities, damages or expenses whatsoever,
including, without limitation, attorney's fees, resulting, directly or
indirectly, from any actual or threatened claim or demand arising,
directly or indirectly, under, from or out of or in connection with (i)
any failure by Seller to perform its obligations under this Agreement,
(ii) Seller's negligence or willful misconduct in the performance of
its obligations under this Agreement, or (iii) Seller's failure to
comply fully with any and all federal, state and local laws, rules and
regulations governing the origination of mortgage loans.
PHH agrees to defend, indemnify and hold harmless Seller, its
successors, assigns, stockholders, officers, directors, employees,
agents, attorneys, affiliates and subsidiaries from and against any and
all liabilities, damages or expenses whatsoever, including, without
limitation attorneys' fees, resulting, directly or indirectly, from any
actual or threatened claim or demand arising, directly or indirectly,
under, from or out of or in connection with (i) any failure by PHH to
perform its obligations under this Agreement, (ii) PHH's negligence or
willful misconduct in the performance of its obligations under this
Agreement, or (iii) PHH's failure to comply fully with any and all
federal, state and local laws, rules and regulations governing the
processing, underwriting, closing or servicing of mortgage loans.
XX. Miscellaneous Provisions:
A. PHH makes no representation or warranty to Seller or its members
regarding the effect that this Agreement and the consummation of the
transactions contemplated hereby may have upon their foreign, federal,
state or local tax liabilities.
B. Seller shall promptly advise PHH of any changes of ownership, financial
condition or principal officers of the Company and/or Senior
Management.
C. In the case that any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
D. If any party hereto shall bring suit against the other as a result of
any alleged breach or failure by the other party to fulfill or perform
any covenants or obligations under this Agreement, then the prevailing
party obtaining final judgment in such action shall be entitled to
receive from the non-prevailing party reasonable attorneys' fees
incurred by reason of such action and all costs of suit and preparation
thereof at both trial and appellate levels. This Agreement shall be
governed by, and construed and enforced in accordance with applicable
federal law and the laws of the State of New Jersey without reference
to conflict of law provisions hereof.
E. This Agreement sets forth the complete terms of the Agreement between
PHH and Seller. No terms or conditions of this Agreement may be waived
or modified unless in writing by each party hereto.
8
<PAGE> 10
XXI. Force Majuer. Neither party shall be deemed to be in violation of this
Agreement if such party is prevented from performing its obligations
hereunder for any reason beyond its reasonable control, including,
without limitation, Acts of God or any public enemy, elements, floods
or strikes.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed this 1st day of June, 1998.
E. Loan, Inc. PHH MORTGAGE SERVICES CORPORATION
- --------------------------------------------
SELLER'S LICENSED NAME
Signature: /s/ Steve M. Majerus Signature: /s/ Signature Illegible
By: Steven M. Majetus By: William Brown
---------------------------------------- -----------------------------
Title: Director, Mortgage Banking Operations Title: Vice President
------------------------------------- ------------------------
9
<PAGE> 1
EXHIBIT 10.23
UNDERWRITING SERVICES AGREEMENT
PMI OFFICE AND ON-SITE
This Agreement (the "Agreement") is entered between E-LOAN, a California
corporation, located at 6200 Village Parkway, Dublin, CA 94568 ("E-Loan"), and
PMI MORTGAGE SERVICES CO., a California corporation, located at 601 Montgomery
Street, San Francisco, CA 94111 ("PMI").
1. DEFINITIONS
AGENCY UNDERWRITING GUIDELINES - The underwriting guidelines of
the Federal National Mortgage Association ("Fannie Mae") and the Federal Home
Loan Mortgage Corporation ("Freddie Mac"), as the case may be (collectively, the
"Agencies"), as may be amended or modified by the Agencies from time to time
pursuant to Paragraph 5A.
AUTHORIZED REPRESENTATIVE OF E-LOAN - Those individuals
designated in writing from time to time by E-Loan as persons authorized to make
revisions to the Platinum Plus Underwriting Guidelines as defined below.
BUSINESS DAY - Any day other than (i) Saturday or Sunday, (ii) a
day on which banking institutions in every state where there is a Review Office
are authorized or obligated by law or executive order to be closed, and (iii) a
day observed as a holiday by PMI.
COMPLIANCE - The conformance of a Mortgage Loan to the applicable
set of underwriting guidelines as requested pursuant to the procedures as set
forth at Paragraph 2A.
CONDITIONAL COMPLIANCE - The conformance of a Mortgage Loan to
the applicable underwriting guidelines, pursuant to a Credit Review
Underwriting.
CORRESPONDENT - A mortgage lender, mortgage broker or credit
union who has entered into an agreement with E-Loan for the purchase by E-Loan
of the Correspondent's Mortgage Loans.
CREDIT REVIEW UNDERWRITING - The underwriting review of a
Mortgage Loan with regard to the applicable underwriting guidelines, pursuant to
the procedures set forth at Paragraph 2C but without a review of the appraisal
report relating to the Mortgage Loan.
MATERIAL ERROR - Any material act, failure to act, error,
mistake, or omission (the "Material Error") committed by PMI in rendering the
services described in Paragraph 2
of this Agreement that (i) materially restricts or impairs the salability of a
mortgage loan or causes the repurchase of a mortgage loan by E-Loan from a third
party investor, (ii) constitutes gross negligence and (iii) results from PMI's
failure to apply a specific underwriting requirement or standard set forth under
any of the applicable underwriting guidelines. A Mortgage Loan in respect to
which E-Loan asserts a Material Error is hereinafter referred to as a "Disputed
Mortgage Loan". Notwithstanding the foregoing, no
Page 1 of 12
<PAGE> 2
Material Error can be asserted with respect any underwriting error relating to a
Mortgage Loan for which PMI has conducted a Credit Review Underwriting, or any
Mortgage Loan which has been designated an accepted Mortgage by either Fannie
Mae's Desktop Underwriter(R) or Freddie Mac's Loan Prospector(R).
MORTGAGE INSURANCE - Mortgage guaranty insurance issued by either
(i) PMI Mortgage Insurance Co., ("PMI MIC"), an affiliate of PMI, with respect
to an eligible Mortgage Loan pursuant to the PMI MIC's Underwriting Guidelines;
or (ii) CMG, with respect to an eligible Mortgage Loan submitted by a credit
union pursuant to CMG's Underwriting Guidelines, collectively defined below as
the PMI Underwriting Guidelines and ascribed a certificate number.
MORTGAGE INSURANCE UNDERWRITING - The underwriting of a Mortgage
Loan to determine if it meets the PMI Underwriting Guidelines.
MORTGAGE LOAN - An individual residential mortgage loan which is
secured by a first lien or charge, and which is underwritten pursuant to this
Agreement.
MORTGAGE LOAN DOCUMENTS - With respect to a Mortgage Loan, the
documents required by the applicable underwriting guidelines.
MORTGAGE LOAN PACKAGE - With respect to a Mortgage Loan, a copy
of the Mortgage Loan Documents, a completed and executed application for
mortgage guaranty insurance in form specified by PMI which has been executed by
E-Loan (for those loans for which Mortgage Insurance is requested), and such
other additional information or documents that PMI or
E-Loan may provide or add.
MORTGAGE LOAN PACKAGE REVIEW - The initial review of a Mortgage
Loan Package by PMI to determine whether all Mortgage Loan Documents have been
received by PMI so as to
allow it to conduct the Mortgage Loan Underwriting.
MORTGAGE LOAN UNDERWRITING - The underwriting review of a
Mortgage Loan Package by PMI to determine whether it is in Compliance.
NOTICE OF APPROVAL - A notice, in substantially the form attached
hereto as Exhibit B, completed by PMI and delivered to E-Loan, with respect to
each Mortgage Loan determined by PMI to be in Compliance.
NOTICE OF DECLINATION - A notice, substantially in the form
attached hereto as Exhibit D, delivered to E-Loan, with respect to each Mortgage
Loan determined by PMI to not be in Compliance.
NOTICE OF PEND - A notice, in substantially the form attached
hereto as Exhibit C, and delivered to E-Loan, which shows that it has been
placed in a pended status pursuant
to Paragraph 2B, 2C(ii), or 2E(ii).
ON-SITE REVIEW - Underwriting services provided by PMI
underwriters at one or more locations designated by E-Loan, pursuant to the
written request of E-Loan and agreement by PMI to provide On-Site Reviews,
subject to the terms and conditions contained in this Agreement.
Page 2 of 12
<PAGE> 3
PLATINUM PLUS UNDERWRITING GUIDELINES - The underwriting
guidelines of E-Loan, attached hereto as Exhibit A, as may be amended or
modified by E-Loan from time to time pursuant to Paragraph 5B.
PMI UNDERWRITING GUIDELINES - The underwriting guidelines of
either PMI MIC or CMG for the appropriate geographic area, as may be amended or
modified by either PMI MIC or CMG from time to time pursuant to Paragraph 5C.
Any reference to "PMI MIC", "PMI Underwriting Guidelines", "PMI Certificate
Number" or "PMI identification number" in this Agreement pertaining to the
issuance of Mortgage Insurance shall, in the event and each time a Mortgage Loan
is submitted to PMI by a credit union that requests Mortgage Insurance on a
Mortgage Loan, shall be deemed to be a reference to "CMG", "CMG Underwriting
Guidelines", "CMG Certificate Number" or "CMG identification number", as the
case may be.
REVIEW FEE - The amounts to be paid by E-Loan to PMI pursuant to
Paragraph 3 and specified on Exhibit G of this Agreement.
REVIEW LOCATIONS - Such location or locations designated in
writing by PMI from time to time. The Review Location(s) designated at the time
of execution of this Agreement
are the locations listed on Exhibit E.
TRANSMITTAL - A transmittal form, in the form attached hereto as
Exhibit F, as may be amended or modified by PMI and E-Loan from time to time,
used in connection with the submission of any Mortgage Loan Documents by E-Loan
under this Agreement.
2. SERVICES PROVIDED BY PMI
A. MORTGAGE LOAN PACKAGE SUBMISSION. To submit a Mortgage Loan for
review under this Agreement, E-Loan [or the Correspondent, as the case may be]
shall attach a PMI Transmittal which requests review under one of the following:
(i) the Agency Underwriting Guidelines for the particular Agency or
Agencies designated in the PMI Transmittal and, if the
appropriate conditions are met, issuance of an Agency
Underwriting Certificate ("AUC"); or,
(ii) the Platinum Plus Underwriting Guidelines and, if the appropriate
conditions are met, issuance of a Platinum Plus Cert sm; or,
(iii) Desktop Underwriter (R) or Loan Prospector (R), as the case may
be, to determine whether a Mortgage Loan has been approved and is
eligible for delivery to Fannie Mae, or may be sold to Freddie
Mac, respectively. Mortgage Loans submitted for review under
Desktop Underwriter (R) shall be reviewed in accordance with
Rider A, and Mortgage Loans submitted for review under Loan
Prospector (R) shall be reviewed in accordance with Rider B
attached to this Agreement.
Page 3 of 12
<PAGE> 4
In addition, each transmittal should request, if desired, issuance of Mortgage
Insurance.
B. MORTGAGE LOAN PACKAGE REVIEW. With respect to each Mortgage Loan, PMI
shall conduct a Mortgage Loan Package Review to determine whether all Mortgage
Loan Documents necessary for PMI to conduct the Mortgage Loan Underwriting or
Credit Review Underwriting, and, if appropriate, the Mortgage Insurance
Underwriting, are contained in the Mortgage Loan Package. If a Mortgage Loan
Package does not contain any required Mortgage Loan Document or any other
information which PMI may determine in its reasonable discretion is necessary to
conduct the Mortgage Loan Underwriting or the Mortgage Insurance Underwriting,
PMI shall place such loan in a pend status and provide E-Loan with notice of
such action by completing and transmitting by facsimile a Notice of Pend. Upon
receipt of the complete Mortgage Loan Package, PMI shall conduct the appropriate
underwriting. If such documents or information are not received by PMI within
fifteen (15) days after delivery of the Notice of Pend, PMI shall provide a
Notice of Declination to E-Loan.
C. MORTGAGE LOAN AND CREDIT REVIEW UNDERWRITING. With respect to each
Mortgage Loan which is not subject to a Notice of Pend, PMI shall conduct a
Mortgage Loan Underwriting, or Credit Review Underwriting, as requested, and
notify E-Loan as follows:
(i) if the Mortgage Loan is in Compliance, PMI shall provide E-Loan
a Notice of Approval by facsimile or as otherwise directed,
before the close of the following Business Day;
(ii) with respect to each Mortgage Loan Package that does not contain
an appraisal, PMI shall conduct a Credit Review Underwriting to
determine whether the Mortgage Loan is in Conditional
Compliance. If the Mortgage Loan is in Conditional Compliance,
PMI shall provide E-Loan a Notice of Approval by facsimile or as
otherwise directed, before the close of the following Business
Day;
(iii) if the Mortgage Loan is not in Compliance or Conditional
Compliance, but compliance could, in PMI's reasonable
determination, be achieved by having additional information or
documentation, PMI shall provide E-Loan with a Notice of Pend.
Upon receipt of the requested additional information or
documentation, PMI shall complete the appropriate underwriting.
If such documents or information are not received by PMI within
fifteen (15) days after delivery of the Notice of Pend, PMI
shall provide a Notice of Declination; or
(iv) if the Mortgage Loan is not in Compliance or Conditional
Compliance, and PMI determines not to proceed as provided in
Paragraph 2(C)(ii), PMI shall notify E-Loan by facsimile or as
otherwise directed, by transmitting a Notice of Declination. If
additional documentation or information, as noted in the Notice
of Declination, is submitted within fifteen (15) days of the
date of such notice, PMI shall conduct an additional Mortgage
Loan Underwriting or Credit Review Underwriting, as the case may
be, of such Mortgage Loan Package in accordance with Paragraph
2(C) without the charge of an additional Review Fee.
Page 4 of 12
<PAGE> 5
D. CERTIFICATE ISSUANCE. Each Mortgage Loan which is determined to be in
Compliance shall be issued an underwriting certificate as follows:
(i) For a Mortgage Loan submitted with a request for review under
the Agency Underwriting Guidelines which so conforms, PMI will
issue a AUC, or;
(ii) For a Mortgage Loan submitted with a request for review under
the Platinum Plus Underwriting Guidelines which so conforms, PMI
will issue a Platinum Plus Cert sm.
(iii) With respect to each Mortgage Loan submitted to PMI without an
appraisal and for which PMI has conducted a Credit Review
Underwriting to determine that the Mortgage Loan is in
Conditional Compliance, no Certificate shall be issued, and the
Notice of Approval shall serve as PMI's review decision.
E. MORTGAGE INSURANCE UNDERWRITING. With respect to each Mortgage Loan
for which Mortgage Insurance has been requested, PMI shall conduct a Mortgage
Insurance Underwriting to determine if the loan meets the PMI Underwriting
Guidelines, and take the following actions:
(i) if the Mortgage Loan meets the PMI Underwriting Guidelines, in
the notice sent to E-Loan and/or the Correspondent, as directed,
PMI shall assign a PMI MIC Certificate Number or other PMI MIC
identifying number;
(ii) if the Mortgage Loan does not meet the PMI Underwriting
Guidelines, but could, in PMI's reasonable determination, by
having E-Loan or the Correspondent provide additional information
or documentation, PMI shall provide E-Loan and/or the
Correspondent, as directed, with a Notice of Pend. If additional
documentation or information is submitted within fifteen (15)
days of the date of such notice, PMI shall conduct an additional
Mortgage Insurance Underwriting of such Mortgage Loan Package in
accordance with Paragraph 2E; or
(iii) if the Mortgage Loan does not meet the PMI Underwriting
Guidelines and PMI determines not to proceed as provided in
Paragraph 2E(ii), PMI shall provide E-Loan and/or the
Correspondent, as directed, by facsimile or as otherwise
directed, with information as to why the Mortgage Loan does not
meet the PMI Underwriting Guidelines. If additional
documentation or information is submitted within fifteen (15)
days of the date of such notice, PMI shall conduct an additional
Mortgage Insurance Underwriting of such Mortgage Loan Package in
accordance with Paragraph 2E.
(iv) With respect to each Mortgage Loan (a) for which Mortgage
Insurance has been requested and (b) that PMI determines meets
the PMI Underwriting Guidelines, E-Loan authorizes PMI and any
contract underwriter to complete and sign an application or
other specified transmittal form for Mortgage Insurance (the
"Application") on behalf of E-Loan, and E-Loan acknowledges that
such signature shall constitute E-Loan's signature as if an
employee or representative of E-Loan had signed such
Application. E-Loan agrees that the representations and
warranties contained in any Application signed by
Page 5 of 12
<PAGE> 6
4. SUBCONTRACTING
A. SUBCONTRACTING PERMITTED. E-Loan acknowledges that it understands
that the services performed by PMI hereunder may be performed either by
employees of PMI or by contract underwriters hired by PMI, at the discretion of
PMI. If services are provided by contract underwriters hired by PMI, all
provisions of this Agreement shall continue to apply with respect to such
services, and no additional amounts or costs shall be charged to E-Loan with
respect to the work done by contract underwriters.
5. GUIDELINE CHANGES AND REVIEW STANDARDS
A. AGENCY UNDERWRITING GUIDELINES. Revisions to the Agency Underwriting
Guidelines shall be effective on the effective date specified in the notice of
revision by the applicable Agency.
B. PLATINUM PLUS UNDERWRITING GUIDELINES. The parties agree that any
request by E-Loan for review under Platinum Plus Underwriting Guidelines shall
commence five (5) Business Days following the receipt by PMI of such guidelines
forming part of Exhibit A hereto from an Authorized Representative of E-Loan.
Revisions to the Platinum Plus Underwriting Guidelines shall be effective on the
later of (i) five (5) Business Days following the receipt by PMI of such
revisions from an Authorized Representative of E-Loan, or (ii) the effective
date specified in the notice of revision.
C. PMI UNDERWRITING GUIDELINES. Revisions to the PMI Underwriting
Guidelines shall be effective on the later of (i) five (5) Business Days
following notice by PMI of such revisions to E-Loan, or (ii) the effective date
specified in the notice of revision.
D. STANDARD OF CARE. PMI shall use reasonable efforts and due diligence
in carrying out PMI's duties hereunder. E-Loan represents and warrants that the
information set forth in each Mortgage Loan Package is true and correct, and PMI
shall be entitled to rely upon and will incur no liability respecting the
correctness thereof in fulfilling its obligations under this Agreement. In
addition, PMI shall not have any obligation to verify any information provided
to it, nor shall the terms of this Agreement infer any duty upon PMI to
determine whether such information is false.
E. STATUTORY COMPLIANCE. PMI shall have no duty hereunder to either: (i)
ensure that any Mortgage Loan Package complies with or (ii) review any Mortgage
Loan Package for compliance with any state, federal or local laws or regulations
relating to consumer credit protection, truth-in-lending or equal credit
opportunity, including but not limited to the Consumer Credit Protection Act and
Regulation Z promulgated thereunder, the Equal Credit Opportunity Act and
Regulation B promulgated thereunder, Title VIII of the Fair Housing Act of 1968,
the Real Estate Settlement Procedures Act, and the Fair Credit Reporting Act.
E-Loan shall comply, or instruct its designee that submitted a Mortgage Loan
Package to comply, with the Equal Credit Opportunity Act notification
requirements and all other requirements under state or federal law for
notification to applicants for Mortgage Loans with respect to each Mortgage Loan
Package reviewed by PMI. PMI shall also have no duty to provide any Mortgage
Loan borrower or other third party with any disclosure required under any of the
foregoing laws or regulations, it being understood that E-Loan shall provide
such disclosures or cause its designee that submitted the Mortgage
Page 7 of 12
<PAGE> 7
Loan Package to provide such disclosures.
6. LIABILITY
A. SUBJECTIVE INTERPRETATION. E-Loan and PMI recognize and agree that
the application of underwriting guidelines to a particular Mortgage Loan Package
entails a certain degree of subjective interpretation and necessarily involves
subjective analysis of certain data where the judgement of prudent underwriters
could differ. Accordingly, PMI does not guarantee or warrant that any third
party, including but not limited to any reviewing authority or investor, will
agree with PMI's determination that a Mortgage Loan Package does or does not
comply with the Agency Underwriting Guidelines, the Platinum Plus Underwriting
Guidelines, or the PMI Underwriting Guidelines, as applicable.
B. FAILURE TO FOLLOW PROCEDURES. The actual damages that E-Loan may
sustain by reason of any deviation by PMI from review and approval procedures
set forth in Paragraph 2 are uncertain and difficult to ascertain. Consequently,
PMI shall be liable only for material deviations from such review and approval
procedures. E-Loan and PMI agree that E-Loan's total damages resulting from such
material deviation shall be limited to the Review Fee received by PMI with
respect to the Mortgage Loan.
C. LIABILITY IN CONNECTION WITH UNDERWRITING. The actual damages that
may result from a Material Error under this Agreement are uncertain and
difficult to ascertain. Therefore, PMI shall be liable only for damages
attributable to Material Errors and calculated in accordance with Paragraph
6C(iii) herein. Notwithstanding the foregoing, PMI shall not be liable for
damages attributable to a Material Error unless (i) PMI receives written notice
from E-Loan that it intends to assert the occurrence of a Material Error within
fifteen (15) days after E-Loan discovers it, and (ii) further provided that not
more than twelve (12) months have elapsed from the time PMI has completed its
underwriting of the Disputed Mortgage Loan. In all cases where E-Loan proposes
to assert a Material Error, PMI may elect, at its sole discretion, any one of
the following remedies:
(i) PMI may, within thirty (30) days after receiving written notice
from E-Loan, cure the Material Error, or;
(ii) If the Disputed Mortgage Loan is a loan which is legally
insurable, PMI may request PMI MIC to issue a PMI Certificate (a
"Policy"), (coverage under which will be endorsed in favor of
the then-owner of the Disputed Mortgage Loan) such that, when
coupled with any existing primary mortgage insurance policy, the
aggregate coverage on the Disputed Mortgage Loan shall be equal
to up to 35% of the then-outstanding principal balance of the
Disputed Mortgage Loan, or up to such higher coverage as may be
required by either Fannie Mae or Freddie Mac for the Disputed
Mortgage Loan, if it will become the owner of such loan. The
Policy shall remain in effect for a period equal to the
then-remaining term of the promissory note relating to the
Disputed Mortgage Loan, or until the promissory note is paid
off, whichever is shorter.
Notwithstanding anything set forth herein, in any Policy, or
elsewhere to the contrary, it is understood and agreed that
coverage under any Policy shall not be denied or terminated if
the cause for denial or termination arises out of, or is related
to, a Material
<PAGE> 8
Error.
Any Policy issued by PMI MIC under this Paragraph 6C(ii) shall be
supplemental and secondary to any other policy of mortgage
insurance in force with respect to the Disputed Mortgage Loan. If
any other such policy is in force at the time the Material Error
is discovered, any action or inaction of E-Loan or owner of the
affected Mortgage Loan to cancel such policy shall relieve PMI of
its responsibility to cause to be issued a Policy under this
Paragraph 6C(ii).
(iii) PMI may, within ten (10) days after making a determination of
the appropriate amount, pay to E-Loan an amount equal to the
lesser of (i) Three Thousand Five Hundred ($3,500.00) or (ii)
the actual damages suffered by E-Loan as a direct and proximate
result of the Material Error in connection with selling,
re-selling, or re-acquiring the Disputed Mortgage Loan. PMI
shall have the right to assist E-Loan in finding a buyer for the
Disputed Mortgage Loan, and PMI may require E-Loan to sell the
Disputed Mortgage Loan to a buyer selected by PMI if that
results in the mitigation of the amount of the payment payable
by PMI to E-Loan hereunder. In the event neither E-Loan nor PMI
is able to obtain an offer to purchase the Mortgage Loan within
thirty (30) days from the time E-Loan has asserted the
occurrence of a Material Error, PMI shall elect one of the other
remedies set forth in this Paragraph 6C and provide E-Loan with
such remedy.
D. LIMITATION OF LIABILITY. PMI shall not have liability under this
Agreement to any entity other than E-Loan, and E-Loan acknowledges and agrees
that the remedies set forth in this Paragraph 6 shall be E-Loan's sole and
exclusive remedies with respect to Material Errors under this Agreement.
Notwithstanding the provisions of Paragraphs 6B and C:
(i) PMI will not be liable for any indirect, special, incidental or
consequential damages arising out of the services to be rendered
to E-Loan under this Agreement, with respect to a Disputed
Mortgage Loan or otherwise.
(ii) If PMI MIC issues a Policy covering a Disputed Mortgage Loan,
E-Loan shall have no remedy against PMI or PMI MIC under this
Agreement for any breach of this Agreement and shall be limited
to its rights, if any, under the Policy.
(iii) In no event shall the liability of PMI under this Agreement
exceed the total amount of Review Fees billed by PMI for
services rendered under this Agreement during the calendar year
in which the services were rendered with respect to the Disputed
Mortgage Loan which is the subject of a remedy under this
Paragraph 6.
(iv) Notwithstanding the foregoing, in no event shall the liability
of PMI under this Agreement with respect to any Material Errors
resulting from or in connection with any Mortgage Loan with
respect to which PMI has conducted a Credit Review Underwriting
and has determined that said Mortgage Loan is in Conditional
Compliance exceed the Review Fee received by PMI with respect to
said Mortgage Loan.
<PAGE> 9
(v) In no event shall the liability of PMI under this Agreement with
respect to Mortgage Loan Packages underwritten during On-Site
Reviews for which Mortgage Insurance is not issued, exceed the
Review Fee received by PMI with respect to the Disputed Mortgage
Loan which is the subject of a remedy under this Paragraph 6.
E. INDEMNIFICATION. E-Loan agrees to indemnify and hold PMI, CMG and
their respective affiliates, and each of their directors, officers, employees
and agents ("Indemnities"), harmless from all losses, damages, penalties, fines,
expenses (including attorneys' fees) and costs ("Losses"), incurred by each
Indemnitee resulting or arising, directly or indirectly, from: (i) any breach by
E-Loan of any covenant, representation or warranty contained in this Agreement,
(ii) any failure by E-Loan to provide any disclosures set forth at Paragraph 5E
above, and (iii) any claim, demand, suit or other proceeding based upon or
arising out of this Agreement, including the application by PMI of the
applicable Guidelines to the Mortgage Loan Packages, provided the provision of
the Agreement which gives rise to the claim for Indemnification inures to the
benefit of CMG, except for Losses resulting or arising under Paragraph 6 herein.
7. TERMINATION
A. This Agreement shall commence on the date of its execution and shall
remain in full force and effect until either party shall give the other thirty
(30) days prior written notice of its intention to terminate this Agreement.
B. Any provision of this Agreement may be amended by PMI upon thirty
(30) days prior written notice to E-Loan (the "Amending Notice"). Upon receipt
of the Amending Notice, E-Loan shall have thirty (30) days (the "Prescribed
Period") to elect to either accept or refuse the proposed amendment. In the
event E-Loan refuses to accept the proposed amendment and indicates said refusal
to PMI in writing, said refusal shall be deemed to be a notice of termination by
E-Loan pursuant to subparagraph 7A herein. Should E-Loan fail to respond to the
Amending Notice within the Prescribed Period, E-Loan shall be deemed to have
accepted the proposed amendment.
C. PMI may terminate this Agreement at any time for failure by E-Loan to
pay the Review Fees due hereunder if such failure is not cured within ten (10)
days of transmittal of written notice of such failure to pay.
D. This Agreement shall be deemed to have been terminated if at any time
during its term, E-Loan fails to submit any Mortgage Loan Packages for review
hereunder for a period of six (6) months.
E. In case of termination in accordance with this Paragraph 7, the
provisions of Paragraphs 2F, 6 and 8 shall survive termination and continue in
full force and effect to bind the parties, as applicable.
8. CONFIDENTIAL INFORMATION
<PAGE> 10
Each party agrees that any information disclosed to it by the other
party in connection with this Agreement shall be used only in furtherance of the
purposes of this Agreement, and that such restrictions will be placed upon all
persons, employees, agents, representatives and any other third parties who are
permitted access to any information disclosed in connection with this Agreement.
9. MISCELLANEOUS PROVISIONS
A. NOTICES. Any notice required or permitted under this Agreement shall
be in writing addressed to the appropriate party at the addresses listed below
and shall be sent via overnight courier service, U.S. Express Mail or facsimile
telephone transmission and shall be deemed to have been received the next
business day after delivery to an overnight courier, deposit with U.S. Express
Mail service, or sent by facsimile transmission.
Notices shall be sent to the following addresses or to such address as a
party may notify the other of in writing in accordance with this notice
provision:
E-Loan:E-Loan, Inc.
Dublin, CA 94568
Attn: Steve Majerus
Telephone Number: (925) 271-2407
Facsimile Telephone Number:
(925) 556-2643
PMI: PMI MORTGAGE SERVICES CO.
Contract Underwriting Services
601 Montgomery Street
San Francisco, California 94111
Telephone Number: (800) 288-1970
Facsimile Telephone Number:
(415) 393-6420
B. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement and all exhibits
hereto, all of which are expressly incorporated into this Agreement, constitute
the entire agreement between the parties with respect to the subject matter
hereto. There are no oral agreements or understandings affecting this instrument
and any future alteration, modification or waiver (other than amendments or
modifications to the Agency Underwriting Guidelines, the Platinum Plus
Underwriting Guidelines, or the PMI Underwriting Guidelines, which may be
amended as set forth herein) must be in writing and signed by both parties.
C. WAIVER. No waiver of a breach of any provision hereof will be deemed
a waiver of any subsequent breach of the same or similar nature.
D. ASSIGNMENT. Neither party may assign its rights or obligations
hereunder to another party without the prior written consent of the other party,
which consent may be denied in the other party's sole discretion, provided,
however, that PMI may, without the prior consent of E-Loan, assign this
agreement to any entity owned 80% by PMI, or which has the same parent
corporation as PMI.
<PAGE> 11
E. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on and enure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Nothing herein express or implied, is intended to confer on
any person, other than the parties hereto and their respective successors and
assigns, any right, remedies, obligations or liabilities under or by reason of
this Agreement.
F. RELATIONSHIP OF PARTIES. Nothing contained in this Agreement shall be
deemed to create a joint venture or partnership between PMI and E-Loan. All acts
undertaken by PMI pursuant to this Agreement shall be done as an independent
contractor or as an agent of
E-Loan.
G. APPLICABLE LAW. The laws of the State of California will govern with
respect to all matters and controversies arising under this Agreement.
H. DISPUTES. In the event of disputes concerning this Agreement, the
prevailing party shall be entitled to payment of all its costs, including
reasonable attorney's fees.
I. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which so executed shall be deemed to be an original, and such
counterparts together shall constitute but one and the same instrument.
J. EFFECTIVE DATE. This Agreement shall become effective as of the date
of execution of the last party to sign.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this instrument on the date set forth below.
E-LOAN PMI MORTGAGE SERVICES CO.
/s/ Steve M. Majerus /s/Signature Illegible
By: Steven M. Majerus By: Gene Campion
Its: Director, Mortgage Banking Its: National Underwriting Vice President
Date: June 9 , 1998 Date: June 12, 1998
Page 12 of 12
<PAGE> 12
EXHIBITS
Exhibit A Platinum Plus Underwriting Guidelines
Exhibit B Notice of Approval
Exhibit C Notice of Pend
Exhibit D Notice of Declination
Exhibit E Review Locations
Exhibit F Transmittal
Exhibit G Review Fees
<PAGE> 13
EXHIBIT A
PLATINUM PLUS UNDERWRITING GUIDELINES
FOR THE FOLLOWING INVESTORS:
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE")
FEDERAL HOME LOAN MORTGAGE CORPORATION ("FREDDIE MAC")
CITICORP MORTGAGE INC. ("CITICORP")
TO BE PROVIDED BY E-LOAN
PURSUANT TO PARAGRAPH 2A OF THE
UNDERWRITING SERVICES AGREEMENT
<PAGE> 14
APPROVAL NOTICE
PMI Mortgage Services Co.
Investor Loan Id: Date:
Correspondent Loan Id: PMI Control:
Correspondent: PMI U/W:
Borrower(s): Property Address:
Loan Purpose: Loan Amount:
Loan Term: Sales Price:
Appraised Value: LTV/CLTV:
Qualifying Rate: Note Rate:
Property Type: Occupancy:
Application: Credit Doc Expired:
This loan has been underwritten to the following guidelines:
Underwriting Conditions:
EXHIBIT B
The captioned loan is approved with the rate and terms as submitted subject to
the above conditions if applicable. These conditions must be met prior to
funding/settlement. Any changes in these conditions, interest rate or loan terms
must be submitted and approved in writing prior to funding/settlement of this
loan.
<PAGE> 15
SUSPEND NOTICE
PMI Mortgage Services Co.
Investor Loan Id: Date:
Correspondent Loan Id: PMI Control:
Correspondent: PMI U/W:
Borrower(s): Property Address:
Loan Purpose: Loan Amount:
Loan Term: Sales Price:
Appraised Value: LTV / CLTV:
Qualifying Rate: Note Rate:
Property Type: Occupancy:
Application: Credit Doc Expired:
This loan has been underwritten to the following guidelines:
Required prior to underwriting decision:
EXHIBIT C
<PAGE> 16
DECLINE NOTICE
PMI Mortgage Services Co.
Investor Loan Id: Date:
Correspondent Loan Id: PMI Control:
Correspondent: PMI U/W:
Borrower(s): Property Address:
Loan Purpose: Loan Amount:
Loan Term: Sales Price:
Appraised Value: LTV / CLTV:
Qualifying Rate: Note Rate:
Property Type: Occupancy:
Application: Credit Doc Expired:
This loan has been underwritten to the following guidelines:
Reason(s) for Decline:
EXHIBIT D
<PAGE> 17
<TABLE>
<S> <C> <C>
PMI
MORTGAGE INSURANCE CO. PMI MORTGAGE SERVICES CO.
UNDERWRITING OFFICES
CENTRAL STATES
TEXAS [northern]* DU / LP Sharon Wilson, Senior Regional Underwriting Manager
OKLAHOMA Lynelle Ragsdale, Senior Account Underwriter
LOUISIANA* 1341 West Mockingbird Lane, Suite 400E
Dallas, TX 75247
phone-(800) 533-4764 fax-(214) 891-9743
TEXAS [southern]* DU / LP Emily Falkenburg, Regional Underwriting Manager
Deanna Arnold, Senior Account Underwriter
1415 North Loop West, Suite 260
Houston, TX 77008
phone-(800) 392-2238 fax-(713) 863-8742
DU Deborah Fannie, Account Underwriter
9130 Jollyville, Suite 185
Austin, TX 78759
phone - (800) 236-6449 fax - (512) 231-0972
Judy Baum, Account Underwriter
901 NE Loop, Suite 410
San Antonio, TX 78209
phone - (210) 826-4015 fax - (210) 826-6873
Toni Manno, Account Underwriter
13317 South Choctaw, Suite C-4
Baton Rouge, LA 70815
phone - (504) 275-1079 fax - (504) 275-1086
ILLINOIS* DU / LP Stephen Hoepfner, Senior Regional Underwriting Manager
Larry Poirier, Senior Account
Underwriter Two Mid-America Plaza,
Suite 1000 Oakbrook Terrace, IL
60181 phone - (800) 759-4764 fax -
(630) 571-3008
WISCONSIN* DU Tom Grenell, Account Underwriter
125 North Executive Drive
Brookfield, WI 53005
phone - (414) 821-8668 fax - (414) 821-1681
KANSAS* DU / LP Wendy Smith, Regional Underwriting Manager
MISSOURI* 6900 College Boulevard, Suite 565
Overland Park, KS 66211
phone - (800) 382-8880 fax - (913) 661-0728
Dan Jestic, Account Underwriter
1215 Fernridge Parkway, Suite 109
St. Louis, MO 63131
phone - (314) 579-7498 fax - (314) 579-7465
</TABLE>
1
<PAGE> 18
<TABLE>
<S> <C> <C>
MINNESOTA* DU / LP Stephen Hoepfner, Senior Regional Underwriting Manager
IOWA Barbara Robinson, Senior Account Underwriter
NEBRASKA 7760 France Avenue South, Suite 280
SOUTH DAKOTA Bloomington, MN 55435-5833
NORTH DAKOTA phone - (800) 766-4764 fax - (612) 835-9609
MICHIGAN* DU / LP Renate O'Keefe, Regional Underwriting Manager
Somerset Place, Tower 1
2301 West Big Beaver Road, Suite 623
Troy, MI 48084
phone - (800) 627-4764 fax - (800) 727-8976
OHIO* DU / LP Jerri Thedford, Regional Underwriting Manager
KENTUCKY Nicholas Franzese, Senior Account Underwriter
INDIANA 100 Old Wilson Bridge Road, Suite 316
WEST VIRGINIA Worthington, OH 43085
phone - (800) 765-4764 fax - (614) 846-4805
DU Robin Lien, Account Underwriter
6450 Rockside Woods Boulevard South, Suite 100
Independence, OH 44131
phone - (216) 328-2013 fax - (216) 901-1689
</TABLE>
* state with an underwriting office
2
<PAGE> 19
<TABLE>
<S> <C> <C>
PMI
MORTGAGE INSURANCE CO. PMI MORTGAGE SERVICES CO.
UNDERWRITING OFFICES
EASTERN STATES
FLORIDA* DU / LP Diana Del Campo, Regional Underwriting Manager
Elaine McCall, Senior Account Underwriter
1715 North Westshore Boulevard, Suite 266
Tampa, FL 33607
phone - (800) 950-4764 fax - (813) 289-8560
Michael Vinson, Account Underwriter
13550 SW 88th Street, Suite
206 Miami, FL 33186 hone -
(305) 380-8771fax - (305) 380-6298
Debbie Edmundson, Account Underwriter
2090 NW 107th Terrace
Sunrise, FL 33323
phone - (954) 749-1252 fax - (954) 749-1253
GEORGIA* DU / LP Linda Jenacaro, Regional Underwriting Manager
ALABAMA Karen Piercy, Senior Account Underwriter
Six Concourse Parkway, Suite 385
Atlanta, GA 30328-6111
phone - (800) 399-4764 fax - (770) 393-2759
MASSACHUSETTS* DU / LP Julie Lyons, Regional Underwriting Manager
CONNECTICUT Susan Cerceillo, Senior Account Underwriter
MAINE 50 Braintree Hill Park, Suite 101
NEW HAMPSHIRE Braintree, MA 02184
VERMONT phone - (800) 933-4764 fax - (617) 848-6534
RHODE ISLAND
NEW YORK* DU / LP Jackie Vunk, Regional Underwriting Manager
Becky Webster, Senior Account Underwriter
20 Madison Avenue Extension, Suite 125
Albany, NY 12203-5326
phone - (800) 374-4764 fax - (518) 464-1687
NORTH CAROLINA* DU / LP Joann Kaiser, Regional Underwriting Manager
SOUTH CAROLINA 6302 Fairview Road, Suite 320
TENNESSEE Charlotte, NC 28210
ARKANSAS phone - (800) 695-4764 fax - (704) 364-1086
MISSISSIPPI
VIRGINIA* DU / LP Sue Johnson, Regional Underwriting Manager
DISTRICT OF COLUMBIA Vickie Madden, Senior Account Underwriter
MARYLAND 3975 Fair Ridge Drive, Suite 450
Fairfax, VA 22033
phone - (800) 876-4764 fax - (703) 691-8638
</TABLE>
1
<PAGE> 20
<TABLE>
<S> <C> <C>
PENNSYLVANIA* DU / LP Marty Selgrath, Senior Regional Underwriting Manager
NEW JERSEY Doug Gray, Senior Account Underwriter
DELAWARE 1018 West 9th Avenue, Suite 207
King of Prussia, PA 19406-1225
phone - (800) 395-4764 fax - (610) 337-3297
DU Paul Prybolsky, Account Underwriter
Joseph Swatsky, Account Underwriter
2030 Tilghman Street
Allentown, PA 18104
phone - (610) 774-9666 fax - (610) 774-9907
</TABLE>
* state with an underwriting office
2
<PAGE> 21
<TABLE>
<S> <C> <C>
PMI
MORTGAGE INSURANCE CO.(R) PMI MORTGAGE SERVICES CO.
UNDERWRITING OFFICES
WESTERN STATES
ARIZONA * DU/LP Pam Tucker, Regional Underwriting Manager
NEW MEXICO 2025 North Third Street, Suite 157
NEVADA Phoenix, AZ 85004-1425
phone - (800) 321-8411 fax - (602) 254-7828
Steve Hartung, Account Underwriter
6117 East Grant Road
Tucson, AZ 85712
phone - (520) 733-0470 fax - (520) 733-0467
CALIFORNIA [northern] *DU / LP Jennifer Huntley, Senior Regional Underwriting Manager
HAWAII Cathy Varni, Senior Account Underwriter
ADP Plaza II
2000 Crow Canyon Place, Suite
350 San Ramon, CA 94583 phone
- (800) 678-4243 fax - (925) 244-7265
Bruce Moseley, Account Underwriter
2377 Gold Meadow Way, Suite
100 Sacramento, CA 95670
phone - (916) 526-8316 fax - (916) 526-8318
CALIFORNIA [southern] *DU / LP Mike Wirtz, Senior Regional Underwriting Manager
Rick Carlson, Senior Account Underwriter
4 Hutton Centre Drive, Suite
500 Santa Ana, CA 92707
phone - (800) 488-4764 fax - (714) 979-4814
DU Patty Quinn, Account Underwriter
5060 Shoreham Place, Suite 200
San Diego, CA 92122
phone - (619) 458-5848 fax - (619) 458-5963
Wendy Murnane, Account Underwriter
6320 Canoga Avenue, Suite
1550 Woodland Hills, CA 91367
phone - (818) 227-5070 fax - (818) 227-5067
COLORADO * DU / LP Patty Ruwoldt, Regional Underwriting Manager
UTAH 6300 South Syracuse Way, Suite 590
WYOMING Englewood, CO 80111-6724
phone - (800) 444-1594 fax - (800) 847-5481
</TABLE>
1
<PAGE> 22
<TABLE>
<S> <C> <C>
WASHINGTON * DU / LP Sue Nakata, Senior Regional Underwriting Manager
OREGON Diane Colistro, Senior Account Underwriter
ALASKA 3420 Carillon Point
MONTANA Kirkland, WA 98033-7354
IDAHO phone - (800) 426-0626 fax - (800) 625-4194
OREGON * Bob Schoenman, Manager
(both Kirkland and Tigard U/W for Oregon) Mortgage Lending Services, Inc.
11830 SW Kerr Parkway
Lake Oswego, OR 97034
phone - (503) 977-5380 fax - (503) 977-5379
</TABLE>
* state with an underwriting office
2
<PAGE> 23
EXHIBIT F
TRANSMITTAL
TO BE PROVIDED BY E-LOAN
AND APPROVED BY PMI
<PAGE> 24
EXHIBIT G
REVIEW FEES
The Review Fee for each Mortgage Loan Package submitted hereunder shall be as
follows:
(i) for those Mortgage Loan Packages underwritten under the Agency
Underwriting Guidelines for which Mortgage Insurance is not
issued, the Review Fee shall be Seventy-Five Dollars ($75.00),
and the Review Fee for those Mortgage Loan Packages underwritten
under the Agency Underwriting Guidelines for which Mortgage
Insurance is requested from PMI MIC shall be Twenty-Five Dollars
($25.00).
(ii) for those Mortgage Loan Packages underwritten under the Platinum
Plus Underwriting Guidelines for which Mortgage Insurance is not
issued, the Review Fee shall be Seventy-Five Dollars ($75.00),
and the Review Fee for those Mortgage Loan Packages underwritten
under the Platinum Plus Underwriting Guidelines for which
Mortgage Insurance is requested from PMI MIC shall be Twenty-Five
Dollars ($25.00).
<PAGE> 25
RIDER A
to the
UNDERWRITING SERVICES AGREEMENT
for Fannie Mae's Desktop Underwriter(R)
PMI will submit certain Mortgage Loans designated by E-Loan under the
Underwriting Services Agreement ("Agreement") through Fannie Mae's Desktop
Underwriter(R) subject to the Agreement and the following terms and conditions
of this Rider A.
1. Definitions:
In general, as used in this Rider, capitalized terms defined in the Agreement
shall have the respective meanings thereby provided as well as the meanings
ascribed in the Fannie Mae Software License Subscription Agreement.
DESKTOP UNDERWRITER(R) - The current release of Fannie Mae's software
product designed to support and facilitate the electronic underwriting of
mortgage loans and/or the performance of Prequalification Analyses in production
by PMI at the time of submission.
ELIGIBILITY - The designation of a Mortgage Loan as an "Approve Eligible
Mortgage" under Fannie Mae's Desktop Underwriter(R) criteria.
RESPONSE DOCUMENT - A document generated by Desktop Underwriter(R) and
delivered by PMI to E-Loan indicating a response to each Mortgage Loan reviewed
under the Desktop Underwriter(R) criteria, as may be amended or replaced by PMI
from time to time.
2. Services provided by PMI:
A. PMI's duties hereunder shall be limited to ascertaining whether the documents
in the Mortgage Loan Package conform to the Desktop Underwriter(R) criteria and
to submit each Mortgage Loan to Desktop Underwriter(R) to obtain a Response
Document, and notify E-Loan as follows:
(i) if the Mortgage Loan is Eligible, PMI shall notify E-Loan by
facsimile or as otherwise directed, before the close of the
following Business Day;
(ii) if the Mortgage Loan is not Eligible, as evidenced by a Refer or
Refer with Caution notice (the "Refer Notice") from Desktop
Underwriter(R), E-Loan shall (i) obtain any additional
information or documentation needed to have PMI resubmit the
Mortgage Loan to Desktop Underwriter(R) in order to obtain an
"Approve Mortgage" designation; or (ii) submit the Mortgage Loan
Package for review by PMI under the Agreement; or (iii) notify
PMI that PMI shall have no further obligations or liability in
connection with the underwriting of said Mortgage Loan.
B. If E-Loan instructs PMI to complete the appropriate underwriting of the
Mortgage Loan, PMI
Page 1 of 3
<PAGE> 26
shall conduct a Mortgage Loan Underwriting of such Mortgage Loan Package in
accordance with Paragraph 2C of the Agreement.
C. With respect to each Mortgage Loan requiring Mortgage Insurance, PMI shall
conduct a Mortgage Insurance Underwriting to determine if the loan meets the PMI
Underwriting Guidelines, in accordance with the procedures set forth at
Paragraph 2E of the Agreement.
D. PMI will, in addition to the reports provided pursuant to Paragraph 2H of the
Agreement, provide to E-Loan a monthly activity report detailing the number of
Mortgage Loans submitted to Desktop Underwriter(R).
3. Desktop Underwriter (R) Loan Submission Charges.
A. The Access Fee for each Mortgage Loan PMI submits to Desktop Underwriter (R)
at a PMI review location on behalf of E-Loan will be $50.00 unless (i) E-Loan is
billed directly by Fannie Mae, in which case PMI shall not charge the Access Fee
or (ii) PMI will charge E-Loan an Access Fee in such other amount indicated by
Fannie Mae with respect to said E-Loan. The Access Fee payable pursuant to this
section 3A shall be in addition to any Review Fee or Data Input Fee payable
under section 3B below, or the Agreement. The Access Fees for Desktop
Underwriter (R) are further subject to change by Fannie Mae as may be set forth
in any subsequent notice by Fannie Mae to PMI, and PMI specifically reserves the
right to change the Access Fees at any time upon written notice to E-Loan. No
additional Access Fee shall be charged for the resubmission of a Mortgage Loan
provided E-Loan shall not have exceeded the maximum number of included
submissions per Mortgage Loan as established by Desktop Underwriter (R) from
time to time.
B. In addition to the Access Fee, a Data Input Fee in the amount of $25.00 shall
be charged for each Mortgage Loan PMI submits to Desktop Underwriter (R)
respecting the input of data only and excluding any data validation or Mortgage
Loan Underwriting.
C. No Access Fee shall be charged for the submission of the Mortgage Loan
on-site at E-Loan's location using E-Loan's direct Desktop Underwriter (R)
access.
D. The Review Fee, Access Fee and Data Input Fee for Desktop Underwriter (R)
Loan Submissions excludes any additional services or products offered by Desktop
Underwriter (R) that are not specifically covered by the Agreement or this
Rider.
4. Consumer Reports.
In connection with the processing and evaluation of Consumer Credit Data by PMI
for purposes of obtaining an underwriting recommendation or performing a
Prequalification Analysis through Desktop Underwriter (R) on behalf of E-Loan,
E-Loan expressly appoints PMI as its agent, as that term is defined in the FCRA.
For purposes of this section:
"Consumer Credit Data" shall mean any information obtained by PMI,
either directly or indirectly (including from E-Loan), which bears on a
consumer's creditworthiness, credit
Page 2 of 3
<PAGE> 27
standing, credit capacity, character, general reputation, personal
characteristics, or mode of living and which is used or expected to be
used or collected in whole or in part for the purpose of serving as a
factor in underwriting a Mortgage Loan or performing a Prequalification
Analysis.
"FCRA" shall mean the federal Fair Credit Reporting Act, codified at 15
U.S.C. '1681 et seq., and the Federal Trade Commission's Official Staff
Commentary to the Fair Credit Reporting Act.
"Prequalification Analysis" shall mean the evaluation of Consumer Credit
Data with respect to a prospective mortgage loan applicant for the
purpose of evaluating such prospective applicant's qualification for
mortgage financing, other than in connection with a Mortgage Loan
application.
5. Notice Requirements.
E-Loan acknowledges and understands that it may be required to provide certain
disclosures to the mortgage loan applicant when E-Loan's decision whether to
extent credit is, in certain respects, affected by information contained in a
consumer report. Such disclosure obligations may be imposed under the FCRA, the
Equal Credit Opportunity Act, and the latter's implementing regulation,
Regulation B, and other federal and/or state statutes and regulations. E-Loan
expressly understands and agrees that it bears sole responsibility for complying
with such disclosure obligations and that such obligations shall in no event be
considered imposed upon or shared by PMI by virtue of its electronic processing
of mortgage loan application data through Desktop Underwriter (R) under this
Rider A or the Agreement.
6. Verification of Information
PMI shall be entitled to rely upon and will incur no liability respecting the
correctness of any data contained in any Mortgage Loan submitted under this
Rider. In addition, PMI shall not have any obligation to verify any information
provided to it, nor shall the terms of this Rider or the Agreement infer any
duty upon PMI to determine whether such information is true. E-Loan acknowledges
that unverified Mortgage Loan data provided to PMI for submission to Desktop
Underwriter (R) must be fully supported and verifiable in order for the Response
Document, including any waiver of representations and warranties, to be
enforceable.
Page 3 of 3
<PAGE> 1
EXHIBIT 10.24
ADDENDUM TO MORTGAGE PURCHASE AGREEMENT
FOR
AUTOMATED UNDERWRITING SERVICES
This Addendum to Mortgage Purchase Agreement for Automated Underwriting
Services (the "Addendum") is made and entered into this 13th day of August,
1998, by and between RESOURCE BANCSHARES MORTGAGE GROUP, INC. (hereinafter
referred to as "Buyer") and E-Loan Inc. (hereinafter referred to as "Seller").
WHEREAS, Buyer and Seller have previously entered into a Mortgage
Purchase Agreement (the "Agreement"), dated May 1, 1998, pursuant to which
Seller has agreed to sell and Buyer has agreed to purchase certain Mortgage
Loans on the terms and conditions contained in such Agreement; and
WHEREAS, Seller desires that Buyer or a third party contract underwriter
satisfactory to the Buyer (the "Third Party Underwriter") perform the
underwriting of certain conventional Mortgage Loans intended for sale to Buyer,
pursuant to the terms and conditions of this Addendum (the "Underwriting
Function"); and
WHEREAS, Buyer is willing to accept loans in which the Underwriting
Function has been performed by The Third Party Underwriter.
NOW, THEREFORE, in consideration of the benefits flowing to each party
hereunder, Buyer and Seller agree as follows:
1. Seller agrees that it will submit to the Third Party Underwriter via
facsimile the documentation required for Underwriting Function to be performed
through an automated underwriting system, in accordance with Buyer's procedures,
which Seller acknowledges receiving. Seller further agrees that if the
underwriting decision is other than Loan Prospector "accept", or Desktop
Underwriter "approve/eligible" the Third Party Underwriter will perform a
subsequent underwriting review through a nonautomated procedure.
2. Seller agrees that its representations and warranties in the
agreement concerning compliance with Buyer's underwriting contingencies for each
Mortgage Loan in the Agreement will remain in effect even though the
underwriting is performed by the Third Party Underwriter.
3. Seller agrees that Buyer is entitled to rely on the underwriting
decision of the Third Party Underwriter.
4. Buyer agrees that if the Third Party Underwriter denies the Mortgage
Loan, Buyer will send to Seller the adverse action statement required by the
Equal Credit Opportunity Act. If no credit is offered to the applicant by any
lender, or if credit is not accepted by the applicant, Seller shall deliver
Buyer's adverse action notice to the related applicant.
5. Seller agrees that if Buyer performs the Underwriting Function, and
denies the loan, its decision will govern, and Seller will not subsequently
submit the mortgage credit package to the Third Party Underwriter.
Page 1 of 2
<PAGE> 2
6. Seller agrees that it is obligated to pay to the Third Party
Underwriter the underwriting fee that is charged for each Mortgage Loan, as set
forth in Buyer's procedures, as may be amended from time to time, for each
Mortgage Loan reviewed by the Third Party Underwriter pursuant to the terms of
this Addendum, and Seller indemnifies Buyer against any claim, loss, damages,
costs and expenses in connection with or resulting from Seller's failure to pay
the underwriting fee. Seller further agrees that Buyer may apply any service
release premiums due Seller with respect to a Mortgage Loan, to any underwriting
fees owed to Buyer by Seller pursuant to this Amendment and Buyer's procedures,
and outstanding.
7. Buyer reserves the right to suspend or terminate Seller's
participation under the terms of this Addendum upon written notice to Seller,
sent by registered or certified mail, postage prepaid, or by express courier
service.
8. Except as expressly amended hereby, the terms of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
duly executed and sealed as of the day and year first above written.
(CORPORATE SEAL) SELLER:
ATTEST:
[ILLEGIBLE] E-LOAN, INC.
- ---------------------------------- -----------------------------------------
Its: Sr. Underwriter By: [ILLEGIBLE]
----------------------------- -------------------------------------
Name and Title: [ILLEGIBLE]
-------------------------
Director, Mortgage
Banking
BUYER:
(CORPORATE SEAL) RESOURCE BANCSHARES MORTGAGE GROUP, INC.
ATTEST:
[ILLEGIBLE] By: JUDY B. SCHNEIDER
- ---------------------------------- -----------------------------------------
Its: VP Name and Title: Judy B. Schneider
------------------------------ -------------------------
[Title ILLEGIBLE]
Page 2 of 2
<PAGE> 3
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
MORTGAGE PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into this 1st day
of [ILLEGIBLE], 199[ILLEGIBLE], by and between RESOURCE BANCSHARES MORTGAGE
GROUP, INC. (hereinafter referred to as "Buyer") and E-Loan Inc.,(hereinafter
referred to as "Seller") in consideration of the mutual premises and conditions
hereinafter set forth.
1. Purchase and Sale of Mortgage Loans. From time to time pursuant to
this Agreement, Seller shall sell and Buyer shall buy mortgage loans on real
estate (hereinafter collectively called the "Mortgage Loans" and individually
the "Mortgage Loan"). This Agreement shall govern the sale and transfer of such
Mortgage Loans by Seller to Buyer and each such Mortgage Loan shall be subject
to the warranties, representations, and agreements set forth herein, subject,
however, to the terms and conditions of any separate written offering or
commitment letters applying to the Mortgage Loans.
All future purchases of Mortgage Loans by Buyer from Seller shall be
governed by the terms contained herein unless the parties shall agree in writing
before or at the time such purchases are made that the purchases shall be
governed by a different agreement. The purchase price and service release
premiums paid for each Mortgage Loan shall be established by written agreement
between the parties. The terms and conditions of any separate offering or
commitment letters signed by the parties hereto and pursuant to which the Buyer
shall agree to buy and the Seller shall agree to sell any Mortgage Loans shall
survive and be deemed to be part of this Agreement. To the extent that the terms
of this Agreement conflict with the terms and conditions of any such offering or
commitment letter, the terms and conditions of the offering or commitment letter
shall supersede the terms and conditions of this Agreement and this Agreement
shall be deemed modified and amended to conform to the terms and conditions of
such offering or commitment letter with respect to the Mortgage Loans purchased
thereunder. However, such modification and amendment shall be made only to the
extent of the non-conformity and all other terms and conditions of this
Agreement shall apply.
2. Definitions. Unless the context requires otherwise, the following
terms shall, for all purposes of this Agreement, have the meanings hereinafter
specified.
(a) The term "Mortgage Note" shall mean a valid and enforceable note or
evidence of indebtedness secured by a Mortgage (as hereinafter defined).
(b) The term "Mortgage" shall mean a valid and enforceable mortgage,
deed of trust or other security instrument creating a first lien upon
described real property that secures a Mortgage Note.
-1-
<PAGE> 4
(c) The term "Mortgage Loan" shall mean (i) a Mortgage Note and
Mortgage; (ii) all documents, agreements, or instruments relating to the
Mortgage Note and Mortgage and Seller's rights and benefits therein; and
(iii) Seller's rights and benefits as owner of the Mortgage Note and
Mortgage including, without limitation, its right to receive payments
thereunder.
3. Seller's Representations, Warranties, and Covenants. Seller
represents, warrants, and covenants as follows:
A. With respect to Seller:
(a) Seller is and will continue to be duly organized, validly
existing, and in good standing under the laws of the United States or
under the laws of the jurisdiction in which it was incorporated or
organized, as applicable, and has and will continue to maintain all
licenses, registrations, and certifications necessary to carry on its
business as now being conducted, and is and will continue to be
licensed, registered, qualified, and in good standing in each state
where property securing a Mortgage Loan is located if the laws of such
state require licensing, registration, or qualification in order to
conduct business of the type conducted by Seller.
(b) Seller has and will maintain the full corporate or
partnership power and authority to execute and deliver the documents
contemplated by this Agreement and to perform in accordance with each of
the terms thereof and the terms of the Correspondent Manual. The
execution, delivery, and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby, have been duly and
validly authorized. This Agreement is a legal valid, binding, and
enforceable obligation of Seller, and all requisite corporate or
partnership action has been taken by Seller to make this Agreement valid
and binding upon Seller, and enforceable in accordance with its terms.
(c) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of Seller, and the
transfer, assignment, and conveyance of the Mortgage Notes and Mortgages
by Seller are not subject to the bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction.
(d) Neither the execution and delivery of this Agreement, the
acquisition and/or making of the Mortgage Loans by Seller, the sale of
the Mortgage Loans to Buyer or the transactions contemplated thereby,
nor the fulfillment of or compliance with the terms and conditions of
this Agreement, will conflict with or result in a breach of any of the
terms, conditions, or provisions of Seller's articles of incorporation,
charter, by-laws, partnership agreement, or other organizational
documents, or of any legal restriction or regulatory directive or any
agreement or instrument to which Seller is a party or by which it is
bound.
(e) Seller has the ability to perform each and every obligation
of and/or satisfy each and every requirement imposed on Seller pursuant
to this Agreement, and no offset, counterclaim, or defense exists to the
full performance by Seller of the requirements of this Agreement.
-2-
<PAGE> 5
(f) There is no action, suit, proceeding, inquiry, review, audit,
or investigation pending or threatened by or against Seller that, either
in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition,
properties, or assets of Seller, or in any material liability on the
part of Seller, or that would draw into question the validity or
enforceability of this Agreement or the Mortgage Loans or of any action
taken or to be taken in connection with the obligations of Seller
contemplated in this Agreement, or that would be likely to impair
materially the ability of Seller to perform under the terms of this
Agreement.
(g) No consent, approval, authority, or order of any court or
governmental agency or body is required for the execution and
performance by Seller of, or compliance by Seller with, this Agreement,
the sale of any of the Mortgage Loans, or the consummation of any of the
transactions contemplated by this Agreement.
(h) Neither the Correspondent Application, this Agreement, nor
any statement, report, or other document furnished or to be furnished by
Seller pursuant to this Agreement contains any untrue statement of
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
(i) Seller has complied with, and has not violated any law,
ordinance, requirement, regulation, rule or other order applicable to
its business or properties, the violation of which might adversely
affect the operations or financial condition of Seller to consummate the
transactions contemplated by this Agreement.
(j) Seller will comply with all provisions of this Agreement and
the Correspondent Manual and will promptly notify Buyer of any
occurrence, act, or omission regarding Seller, the Mortgage Loan, the
property securing the Mortgage Loan, or the mortgagor of which Seller
has knowledge, which occurrence, act or omission may materially affect
Seller, the Mortgage Loan, the property securing the Mortgage Loan, or
the mortgagor.
B. With respect to each Mortgage Loan offered for sale under this
Agreement:
(a) The Mortgage and the Mortgage Note have been duly executed by
the mortgagor and create valid and legally binding obligations of the
mortgagor, and the Mortgage has been duly acknowledged and recorded and
is a valid and prior first lien on the real property securing the
Mortgage Note that is superior to all other liens or other claims.
(b) The Seller is the sole owner of the Mortgage Loan and has
absolute authority to sell, transfer, and assign the same on the terms
set forth herein, and there has been no prior assignment, sale, or
hypothecation of the Mortgage Loan by the Seller.
(c) There are no actions, suits, or proceedings pending or
threatened against Seller in any court or before any administrative
agency the adverse outcome of which
-3-
<PAGE> 6
would have an effect on its title to any Mortgage Loan and servicing
rights that may be sold or purchased hereunder.
(d) As to each Mortgage Loan purchased by Buyer, (i) the full
principal amount of the Mortgage Loan has been advanced to the
mortgagor, either by payment directly to him or by payment made on his
request or approval; (ii) the unpaid principal balance is as set forth
on that certain statement to be provided by Seller to Buyer pursuant to
Section 4(g) hereof; (iii) all costs, taxes, fees, and expenses incurred
in making and closing the Mortgage Loan and in recording and assigning
the Mortgage have been paid; (iv) no part of the mortgaged property has
been released from the lien of the Mortgage; (v) the terms of the
Mortgage Loan have in no way been changed or modified; (vi) all payments
required under the terms of the Mortgage Loan are current and are not in
default including, but not limited to, payments of principal and
interest and escrow payments for mortgage insurance, taxes, and hazard
insurance; and (vii) unless otherwise negotiated, on the date of
delivery of the Mortgage Loan to Buyer, no more than ten (10) months
shall have elapsed following the closing of the Mortgage Loan or
recordation of the Mortgage, whichever shall have occurred last.
(e) The Seller has not made or knowingly received from others any
direct or indirect advance of funds in connection with the Mortgage Loan
on behalf of the mortgagor. This warranty does not cover payment of
interest from the earlier of:
(i) the date of the Mortgage Note; or
(ii) the date on which the Mortgage Loan proceeds were disbursed;
or
(iii) the date one month before the first installment of
principal and interest on the Mortgage Loan is due.
(f) Each Mortgage Loan that Seller represents to be insured by a
private mortgage insurance company is so insured with an insurer that
has either been approved by the Federal National Mortgage Association
("FNMA") or by the Federal Home Loan Mortgage Corporation ("FHLMC") or
otherwise has been approved by the Buyer. Each Mortgage Loan that Seller
represents to be insured by the Federal Housing Administration ("FHA")
or to be guaranteed by the Veterans Administration ("VA") is so insured
by FHA under the National Housing Act or Title V of the Housing Act of
1949 or other applicable laws or regulations or is so guaranteed by the
VA under the Servicemen's Readjustment Act of 1944 or Chapter 37 of
Title 38 of the United States Code or other applicable laws or
regulations, and such insurance or guaranty is valid and enforceable in
accordance with its terms.
(g) There is in force a paid-up mortgagee title insurance policy
on the Mortgage Loan (in an amount that is at least equal to the
outstanding principal balance of the Mortgage Loan) issued by a title
insurance company that has been approved by the Buyer, and there is an
insured closing agreement for each Mortgage Loan issued by the title
insurance company that issued the mortgagee title insurance policy. If
the Mortgage Loan is a graduated payment mortgage, the policy shall be
for an amount at least equal to
-4-
<PAGE> 7
the highest anticipated outstanding principal balance of the Mortgage
Loan. If the Mortgage Loan provides for or permits negative
amortization, the policy shall be for an amount that is not less than
the highest allowable outstanding principal balance of the Mortgage
Loan. If the Mortgage Loan is a variable rate mortgage loan, the policy
shall contain a variable rate endorsement. If the property secured by
the Mortgage is located in a condominium or planned unit development
("PUD"), the policy shall contain an appropriate condominium or PUD
endorsement. If the improvements on the property secured by the Mortgage
include a manufactured home, the policy shall contain an ALTA 7 or
equivalent endorsement.
(h) There is a valid paid-up hazard insurance policy in force at
the time of the purchase of the Mortgage Loan by Buyer issued or written
by an insurance company approved by Buyer and with a Best's Key Rating
Guide financial size category of Class III and at least a "B" general
policyholder's rating. The hazard insurance policy shall be for an
amount at least equal to the full replacement value of the improvements
on the property secured by the Mortgage. Unless a higher maximum amount
is required by state law, the maximum deductible should be the lesser of
$1,000.00 or 1% of the policy face amount. The policy shall be of a type
at least as protective as fire and extended coverage and shall contain a
mortgagee clause and loss payable clause to the Buyer in the form of the
standard New York mortgagee clause, and shall contain suitable
provisions for payment on all present and future mortgages on such
premises in order of precedence. For properties in special flood hazard
areas, there is in force a flood insurance policy as required under
applicable federal law and regulations, the maximum available coverage
has been obtained, and the application for flood insurance or the
original flood insurance policy will be provided. If property securing
the Mortgage Loan is located in a condominium or PUD project, a
certificate of insurance naming Buyer as the insured plus a certified
true copy of the Master Hazard and Liability Policy will be provided.
(i) All applicable federal, state, and local laws, rules and
regulations have been complied with including, but not limited to, the
Real Estate Settlement Procedures Act and Regulation X, the Equal Credit
Opportunity Act and Regulation B, the Federal Truth-in-Lending Act and
Regulation Z, the Fair Credit Reporting Act, the Flood Disaster
Protection Act, the Fair Housing Act, and federal, state, and local
laws, rules or regulations, including, but not limited to, those
relating to licensing and those that prohibit or limit fees, charges, or
costs that lenders may impose on borrowers.
(j) There are no defenses, counterclaims, or rights of setoff
affecting any Mortgage Loan or affecting the validity or enforceability
of any private mortgage insurance or FHA insurance applicable to any
Mortgage Loan or any VA guaranty with respect to any Mortgage Loan.
(k) The assignment of the Mortgage Loan from the Seller to Buyer
is valid and sufficient to assign to and perfect in Buyer all of
Seller's right, title, and interest in and to the Mortgage Loan. The
Mortgage Loan is freely assignable and transferable by Buyer and the
sale and transfer of the Mortgage Loan from Seller to Buyer is free and
clear of any and all claims or encumbrances.
-5-
<PAGE> 8
(l) The real property secured by the Mortgage has been improved
as a single-family (1-4 unit) dwelling or by a condominium/PUD unit that
is approved by the FHA, VA, FNMA, or FHLMC, as applicable to the related
Mortgage Loan.
(m) All documents submitted by Seller pursuant to this Agreement
are genuine; the Mortgage, the Mortgage Note and any other documents
submitted by Seller to Buyer that Buyer requires to be original
documents are original documents; all certified copies of original
documents are true copies of the originals; and all other
representations by Seller as to each Mortgage Loan are true and correct
and meet the applicable requirements and specifications of this
Agreement.
(n) Nothing involving the Mortgage Loan, the real property
secured by the Mortgage, the mortgagor, or the mortgagor's credit
standing can reasonably be expected to:
(i) cause private institutional investors to regard the
Mortgage Loan as an unacceptable investment; or
(ii) cause the Mortgage Loan to become delinquent; or
(iii) adversely affect the Mortgage Loan's value or
marketability; or
(iv) if the Mortgage Loan is an FHA or VA loan, render the
Mortgage Loan ineligible for inclusion in a GNMA or FNMA pool.
(o) No Mortgage Loan sold and purchased pursuant to this
Agreement shall have a payment past due more than thirty (30) days.
(p) As demonstrated by a survey of the real property secured by
the Mortgage, all improvements secured by the Mortgage are wholly within
the boundaries and comply with all building restriction laws or the
mortgagee's title insurance policy insuring the Mortgage affirmatively
insures against loss or damage by reason of any violation, variation,
encroachment, or other adverse circumstance disclosed by the survey.
(q) No Mortgage Loan sold and purchased pursuant to this
agreement shall have real estate taxes, assessments, etc. due within
sixty (60) days of the loan closing. In the event that real estate
taxes, assessments, etc. due within sixty (60) days of closing have not
been paid, Seller shall be liable to Buyer for an amount equal to any
interest and penalty charged for late payment.
(r) The property securing the Mortgage Loan is not damaged by
fire, wind or other cause of loss. There are no proceedings pending for
the partial or total condemnation of the property.
(s) The Mortgage Loan complies with any special investor
requirements and/or underwriting contingencies communicated to Seller
prior to closing.
-6-
<PAGE> 9
(t) In the event that FHA or VA loans are sold hereunder, Seller
is an approved mortgagee in good standing with FHA or VA, as the case
may be, and Seller also has any further FHA or VA approvals required for
origination, closing, and sale to Buyer of the Mortgage Loans.
(u) There is no mechanic's or similar lien or claim that has been
filed for work, labor, or material (and no rights are outstanding that
under applicable law could give rise to such a lien or claim), affecting
the related property, which is or may be a lien prior to, or equal with,
the lien of the related Mortgage.
4. Delivery of Documents. Seller agrees to do all acts necessary to
perfect title to the Mortgage Loans in Buyer and shall sell, assign, and deliver
to Buyer, with respect to the purchase of each such Mortgage Loan, the documents
set forth hereinafter, all subject to the approval of Buyer and its legal
counsel as to proper form and execution. No later than ten (10) business days
following the closing and disbursement (or at such earlier time as may be
required by Buyer in the Correspondent Manual), Seller shall forward to Buyer
the Mortgage Loan file including:
(a) The original Mortgage Note properly endorsed by Seller.
(b) The Mortgage, duly recorded and accompanied by a properly
executed assignment of the Mortgage and the Mortgage Note appropriate in
the jurisdiction in which the real property described in the Mortgage is
located and in recordable form or a certified "clocked-in" copy thereof.
The assignment is to be recorded at Seller's expense to perfect Buyer's
interest in the Mortgage.
(c) A signed copy of the most recently conducted report of
appraisal or certification of valuation of the property secured by the
Mortgage. In addition, if the Mortgage Loan is not an FHA insured loan
or a loan guaranteed at least 25% by the VA, Seller shall obtain and
deliver to Buyer a valid appraisal report of the real estate securing
the Mortgage Loan, which appraisal shall be made by a qualified
appraiser approved by Buyer who has no direct or indirect interest in
the real estate securing the Mortgage Loan.
(d) A mortgage title insurance binder, including copies of
exceptions, issued by a title insurance company approved by Buyer and in
such form and subject to such exceptions as are approved by Buyer and
the Buyer's legal counsel.
(e) A survey of the property secured by the Mortgage to the
extent required by applicable state law or required in order to enable
Buyer to sell the Mortgage to or place the Mortgage with the Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC"), or the Government National Mortgage Association
("GNMA").
(f) A hazard insurance policy with paid receipt issued or written
by an insurance company that has been approved by Buyer and meeting the
requirements set forth in Section 3(h) hereof.
-7-
<PAGE> 10
(g) A statement showing the unpaid principal balance of the
Mortgage Loan, the amount of periodic installments, and the date(s) to
which principal, interest, and any escrows have been paid; and, if
requested by Buyer, a ledger card or ledger history reflecting all
receipts and disbursements from the inception of the Mortgage Loan
including the date of each receipt or disbursement.
(h) A flood insurance policy or copy of the application, if
applicable, with a copy of letter requesting an endorsement naming Buyer
as mortgagee.
(i) With respect to any Mortgage Loan that is also secured by a
junior lien or second mortgage, such documentation as is required by
Buyer to indicate that the liens on the property securing the Mortgage
do not exceed applicable loan-to-value ratio requirements imposed by
Buyer or any other requirement relating to secondary financing as
determined by FHA, VA, FNMA, FHLMC, or by any other subsequent investor
or purchaser of the Mortgage Loan.
(j) A completed tax information sheet together with a copy of the
paid receipt.
(k) A copy of the Settlement Statement (HUD-1) and
Truth-in-Lending Disclosure Statement prepared in connection with the
Mortgage Loan indicating that the mortgagor has received the disclosures
required by the Truth-in-Lending Act and Real Estate Settlement
Procedures Act and, when applicable, any required adjustable rate
mortgage disclosures.
(l) Seller shall deliver to Buyer such other follow-up
documentation as reasonably requested.
Buyer shall, within three (3) business days after receipt of the
above referenced documents, fund the purchase price of the Mortgage Loan being
purchased, net of any applicable discount points, purchase fees, escrow items,
or interim interest but including service release premiums and accrued interest,
by wire transfer of funds as directed by Seller.
No later than ninety (90) days following the purchase of the
Mortgage Loan by Buyer, Seller shall deliver to Buyer the following:
(a) The original recorded Mortgage.
(b) The original recorded assignments of the Mortgage and
the Mortgage Note.
(c) The final title insurance policy insuring the lien of
the Mortgage and including an indemnity from Seller against any changes
in the final title insurance policy.
(d) Any and all documents, agreements or instruments
related to the Mortgage or the Mortgage Note and Seller's right and
benefits therein (including but not
-8-
<PAGE> 11
limited to the FHA Mortgage Insurance Certificate or the VA Loan
Guaranty Certificate), all documents relating to the making and closing
of the Mortgage Loan and any other documents, agreements, or instruments
related to the Mortgage Loan or required by Buyer in order to perfect
its right, title, and interest in and to the Mortgage Loan or required
by Buyer in order to enable Buyer to sell the Mortgage Loan to or place
the Mortgage Loan with GNMA, FNMA, FHLMC, or a private investor.
In the event Seller shall fail to deliver a fully
documented loan package as specified hereinabove, Seller shall be
subject to a delinquency penalty of Twenty-Five and no/100 Dollars
($25.00) per missing document per week, which penalty shall be paid by
Seller within 30 days of Buyer's request. In addition, Buyer reserves
the right to withhold service release premiums if required documentation
is not received in a timely manner or if the penalty described above is
not paid in a timely manner. Buyer's rights to demand payment of such a
penalty and to withhold payment of service release premiums shall be in
addition to and not in lieu of Buyer's other remedies hereunder
(including the remedy of repurchase as provided in Section 6), and
Buyer's exercise of such rights shall not be deemed an election of
remedies or a waiver of such other remedies. Buyer shall be entitled to
offset against service release premiums or other amounts payable to
Seller any costs or expenses incurred by Buyer in resolving Seller's
documentation deficiencies.
Seller acknowledges and agrees: (1) that all documents in the
mortgage file and all other documents and records of whatever kind or
description (whether prepared by Seller or by others on behalf of
Seller) that are related to the origination, processing, closing,
delivery, sale, or servicing of any Mortgage Loan sold by Seller to
Buyer hereunder (the "Documents") will be, and will remain at all times,
the property of Buyer; (2) that any such Documents in the possession of
Seller are retained by Seller in a custodial capacity only; (3) that
(except as required in the ordinary course of business) Seller shall not
transfer the Documents to a party other than Buyer without Buyer's
written permission; (4) that Seller will permit Buyer, at any time, to
inspect the Documents in the possession of Seller; (5) that Seller shall
transfer the Documents to Buyer (or Buyer's designee) promptly upon
Buyer's request; and (6) that Seller shall be liable to Buyer for and
shall indemnify Buyer and hold Buyer harmless for any loss, damage, or
expense (including court costs and reasonable attorney fees) that Buyer
may incur as a result of Seller's retention of such Documents.
5. Escrow Deposits. Seller hereby transfers, assigns, and conveys
to Buyer all of Seller's right, title, and interest in and to all escrow
deposits and other trusts or escrowed funds held in connection with all
Mortgage Loans and related agreements, and all unreimbursed advances
made by the Seller for principal, interest, taxes, hazard insurance,
mortgage insurance or similar items in connection with the Mortgage or
related agreements, and all of Seller's right to collect, recover, and
be reimbursed for the same.
6. Repurchase of Mortgage Loans. Seller agrees to repurchase any
Mortgage Loan subject to this Agreement upon the terms and conditions
hereinafter set forth in the event that:
-9-
<PAGE> 12
(a) Any misstatement of material fact is discovered by
Buyer or its representative or assigns or disclosed to Buyer or
its representative or assigns by inspection by Buyer or its
representatives, or otherwise; or
(b) Any term of this Agreement is breached by the Seller;
or
(c) Any representation or warranty of the Seller under
Section 3 is determined by Buyer to have been false; or
(d) Any FHA insurance, VA guaranty, or private mortgage
insurance insuring or guaranteeing the loan secured by the
Mortgage lapses as a result of any act or omission by Seller or
the failure by Seller to obtain such insurance or guaranty within
ninety (90) days from the date of funding; or
(e) Buyer is required to repurchase any Mortgage Loan sold
to GNMA, FNMA, FHLMC, or other investor, due to a deficiency in
or omission with respect to the documents, instruments, and
agreements pertaining to any Mortgage Loan; or
(f) Seller does not comply with all of Buyer's
underwriting contingencies.
(g) Any material third party fraud or misrepresentation is
determined to exist through the post-closing quality control
review by Buyer or another investor. This includes, but is not
limited to, any misrepresentation of income, funds on deposit, or
employment.
Except as provided below, the repurchase price for any Mortgage
Loan that Seller is required to repurchase from Buyer shall be an amount equal
to the then unpaid principal balance of the Mortgage Loan plus accrued interest
through the date of repurchase (plus any premium paid to Seller by Buyer for
servicing), and the costs and expenses (including attorney's fees) incurred by
Buyer in connection with the repurchase.
In the event that Buyer is required to repurchase a Mortgage Loan
sold by Buyer to GNMA, FNMA, FHLMC, or any other investor, or pledged or placed
by Buyer in a mortgage pool for any of the reasons set forth in Subsections (a)
through (g) of this Section 6, the price to be paid by Seller to Buyer on
repurchase of the Mortgage Loan by Seller shall be an amount equal to the sum
Buyer was required to pay in order to repurchase the Mortgage Loan plus accrued
interest from the date of the repurchase of the Mortgage Loan by Buyer through
the date of the repurchase of the Mortgage Loan by Seller plus any service
release premium paid to Seller by Buyer plus any costs and expenses (including
reasonable attorney's fees) incurred by Buyer in connection with the
transaction.
7. Option to Repurchase or Indemnify as to Delinquent Loans. In
the event that a Mortgage Loan purchased hereunder (other than a Mortgage Loan
underwritten by Buyer
-10-
<PAGE> 13
prior to purchase) becomes sixty (60) calendar days or more delinquent during
the first four (4) months following the first payment due to Buyer and is
subsequently recommended for foreclosure within twelve (12) months following the
first payment due to Buyer, then Seller shall either--
(i) repurchase such Mortgage Loan and the servicing rights related
thereto in the manner described in Section 6 above, or
(ii) indemnify Buyer in lieu of repurchase as follows: Seller shall
deposit with Buyer a foreclosure expense deposit of $2,500.00 and a foreclosure
processing fee of $500.00 and shall reimburse Buyer for the price paid for the
servicing rights for the related Mortgage Loan. Buyer will complete the
foreclosure process and file the claim with FHA, VA, or the applicable Private
Mortgage Insurance company. Seller shall be responsible for all losses, costs,
and expenses resulting from foreclosure and/or disposition of the property,
including but not limited to all of Buyer's out-of-pocket costs, Buyer's
unreimbursed cost of funds, and any losses resulting from any VA "no-bid" loan.
Upon determination of the final settlement amount, Buyer will furnish to Seller
an accounting of the claim and shall either (a) refund any unused portion of the
foreclosure expense deposit or (b) bill the Seller for payment of the excess of
all losses, costs and expenses over the foreclosure expense deposit. Seller
shall pay any amount billed within ten days of the billing date. It is expressly
understood and agreed that the foreclosure processing fee of $500.00 is designed
to compensate Buyer for its internal administrative costs in processing the
foreclosure and shall not be applied against other amounts for which Seller is
responsible. In the event that a VA Mortgage Loan becomes a "no-bid" loan, Buyer
will so advise Seller and will work with Seller to mitigate any eventual loss.
8. Refund of Service Release Premiums. If any Mortgage Loan is
prepaid within six (6) months following the date of purchase by Buyer, Seller
shall refund to Buyer all service release premiums received from Buyer with
respect to that Mortgage Loan.
9. Eligibility of Mortgage Loans for Sale or Transfer. Seller
agrees to take such action and to prepare, execute, assign, and deliver to Buyer
such documents, including but not limited to the Mortgage, assignment of the
Mortgage and Mortgage Note to Buyer, and Mortgage Note properly endorsed, in
such form as shall enable Buyer at Buyer's option to place or pledge any FHA
insured or VA guaranteed Mortgage Loan in a mortgage pool under the Government
National Mortgage Association's Mortgage-Backed Securities Program or to place
or pledge any conventional Mortgage Loan in a mortgage pool under the Federal
National Mortgage Association's Conventional Mortgage-Backed Securities Program
or to sell the Mortgage Loans to GNMA, FNMA, FHLMC, or a private investor.
10. Indemnification. Seller will indemnify, defend, and hold
Buyer harmless from and against any and all claims, losses, costs, or damages,
including, but not limited to, reasonable attorney's fees and expenses (i)
arising out of any act or omission of Seller or any employee or agent of Seller;
(ii) arising in connection with or out of the failure of Seller to comply with
any applicable statutes, rules, or regulations; or (iii) arising out of Seller's
failure to perform any of its obligations hereunder; or (iv) arising out of or
in connection with any falsity,
-11-
<PAGE> 14
incorrectness, or incompleteness in any material respect of any representation
or warranty made by Seller herein. Buyer may bill Seller for, and Seller shall
pay within ten days of billing, any amounts due to Buyer in connection with
transactions under this Agreement (including but not limited to amounts
determined to be due as a result of errors or adjustments in the funding of
loans), and Buyer shall be entitled to offset against service release premiums
or other amounts payable to Seller any such amounts due to Buyer.
Seller understands that Buyer may enter into commitments to sell
mortgage-backed securities to be based on or backed by the Mortgage Loans
deliverable by Seller to Buyer under this Agreement, or that Buyer otherwise may
enter into commitments to sell such Mortgage Loans to investors, and that Buyer
may incur claims, losses, expenses, and other liabilities if it repudiates,
breaches, or defaults under such commitments to sell mortgage-backed securities
or to sell such Mortgage Loans. If Seller enters into any agreement or
commitment for the sale of Mortgage Loans to Buyer hereunder, Seller agrees to
indemnify Buyer and hold Buyer harmless against any such claims, losses,
expenses, and liabilities that arise from Seller's failure to deliver any such
Mortgage Loans, if closed, to Buyer, in accordance with the provisions of the
Correspondent Manual. Buyer shall be entitled to offset against service release
premiums or other amounts payable to Seller any amounts due to Buyer as
described above.
11. Financial Statements. Seller shall furnish to Buyer for as
long as this Agreement is in effect, as soon as available, and in any event
within ninety (90) days after the end of each fiscal year of Seller, audited
financial statements of Seller consisting of a balance sheet as of the end of
such fiscal year together with related statements of income or loss and
reinvested earnings and changes in financial position of Seller for such fiscal
year, prepared by independent certified public accountants in accordance with
generally accepted accounting principles. In addition, Seller shall also provide
to Buyer, from time to time, upon reasonable request and sixty (60) days notice,
any other financial reports or statements required by Buyer.
12. Insurance. Seller shall maintain in full force Errors and
Omissions and Fidelity Bond insurance coverage in such amounts as Buyer may
reasonably require to indemnify it from any loss or damage incurred in
connection with the transactions contemplated by this Agreement.
13. Assignment. Buyer shall have the right to assign this
Agreement and its duties, obligations, or rights hereunder upon written notice
to Seller. In the event that Buyer sells or assigns all or part or its interest
in any Mortgage Loans that are subject to this Agreement to a third party, such
third party shall succeed to all of the rights of Buyer hereunder with respect
to such Mortgage Loans. Seller shall not have the right to assign this Agreement
or any of its duties, obligations, or rights hereunder without the prior written
consent of Buyer.
14. Events of Default. Each of the following shall constitute an
Event of Default on the part of Seller under this Agreement: (i) any breach by
Seller of any of Seller's representations, warranties, or covenants set forth in
this Agreement; (ii) the failure of Seller to perform any of its obligations
under this Agreement; (iii) the occurrence of an act of insolvency or bankruptcy
concerning Seller; and (iv) Seller's failure to meet any capital, leverage, or
other
-12-
<PAGE> 15
financial standard imposed by any applicable regulatory authority, or in Buyer's
sole discretion, any material adverse change occurs in the financial condition
of Seller.
15. Amendment/Termination. Buyer shall have the right to amend
this Agreement with written notice to the Seller. At Buyer's request, Seller
shall acknowledge changes to the Agreement in writing, but Seller's failure to
provide written acknowledgment of any amendment shall not impair the
enforceability of such amendment. This Agreement may also be terminated with
respect to future purchases of Mortgage Loans by either party at any time by
giving written notice of termination to the other party. In addition, upon the
occurrence of any Event of Default as described in Section 14, and without
affecting any other rights or remedies available to Buyer under this Agreement
or at law or in equity, Buyer may immediately suspend all registrations and
lock-ins and may refuse to fund any or all Mortgage Loans, pending the cure, to
Buyer's satisfaction, of such Event of Default. Termination of this Agreement
shall not in any respect change, alter, or modify the obligations of Buyer and
Seller with respect to Mortgage Loans that have been purchased by Buyer from
Seller prior to the date of such termination or (except as provided in the
preceding sentence) with respect to Mortgage Loans that are the subject of then
outstanding written commitments or agreements between Buyer and Seller at the
time of such termination.
16. Notices. Any notice or demand that is required or permitted
to be given by a provision of this Agreement shall be deemed to have been
sufficiently given if either served personally or sent by prepaid first class,
registered, or certified mail, addressed to the party at its address set forth
below:
Seller: E-Loan, Inc.
540 University Ste. #356
Palo Alto, CA 94301
Attn: STEVE [ILLEGIBLE]
Buyer: Resource Bancshares Mortgage Group, Inc.
Post Office Box 7486
Columbia, SC 29202-7486
Attn: MARK [ILLEGIBLE]
With Copy to: Resource Bancshares Mortgage Group, Inc.
Post Office Box 7486
Columbia, SC 29202-7486
Attn: David W. Johnson
Either party may change its address by written notice to the
other.
17. Correspondent Manual. In addition to all of the obligations
and agreements specifically set forth herein, Seller hereby agrees to comply
with all of the provisions
-13-
<PAGE> 16
of the Correspondent Manual (including any policies and procedures contained in
program announcements, memoranda, or other similar communications) delivered to
Seller, as may be modified or amended from time to time. Notwithstanding the
provisions of Section 18, modifications and additions to the Correspondent
Manual by Buyer shall not require the signature of Seller to be effective and
shall become effective upon receipt.
18. Entire Agreement. This Agreement and the Correspondent Manual
contain the entire agreement of the parties with respect to the subject matter
hereof, and there are no representations, inducements, or other provisions other
than those expressed in writing and therein. All changes, additions, or
deletions to this Agreement must be made in writing and signed by each of the
parties hereto. This Agreement restates, amends, and supersedes any and all
prior Mortgage Purchase Agreements between the parties.
19. Survival of Provisions; Severability. All of the covenants,
agreements, representations, and warranties made herein by the parties hereto
shall survive and continue in effect after the termination of the Agreement or
the consummation of the transactions contemplated hereby. All section headings
contained herein are for convenience only and shall not be construed as part of
this Agreement. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction, and, to this end, the provisions hereof are
severable. This Agreement may be executed in counterparts, all of which taken
together shall constitute one and the same instrument.
20. Governing Law, Jurisdiction, and Venue. This Agreement shall
be governed by and construed in accordance with the laws of the State of South
Carolina and any applicable federal laws. Each of the parties irrevocably
submits to the jurisdiction of any state or federal court located in Richland
County, South Carolina, over any action, suit or proceeding to enforce or defend
any right under this Agreement or otherwise arising from any transaction
existing in connection with this Agreement, and each of the parties irrevocably
agrees that all claims in respect of any such action or proceeding shall be
heard or determined in such state or federal court. Each of the parties
irrevocably waives the defense of an inconvenient forum to the maintenance of
any such action or proceeding and any other substantive or procedural objection
it may have with respect to the maintenance of any such action or proceeding in
any such forum. Each of the parties agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by law.
Each of the parties further agrees not to institute any legal actions or
proceedings against the other party or any director, officer, employee,
attorney, agent or property of the other party, arising out of or relating to
this Agreement, in any court other than as hereinabove specified in this Section
20.
21. Attorney's Fees. In the event Seller defaults in any of its
warranties, representations, or obligations under this Agreement or in any
document or obligation relating to this Agreement, Seller shall pay Buyer its
reasonable attorney's fees incurred in enforcing its rights hereunder.
-14-
<PAGE> 17
22. No Agency. This Agreement and transactions entered into
pursuant hereto shall not create between Seller and Buyer a relationship of
agency, legal representation, joint venture, partnership, or employment, and
Seller and Buyer agree that neither party is in any way authorized to make any
contract, agreement, warranty, or representation, or to create any obligation,
express or implied, on behalf of the other.
23. Change in Ownership of Seller. A sale or other transfer of a
substantial portion of the assets of Seller or any change in the ownership of a
majority interest in Seller, whether by sale of assets, merger, consolidation,
sale of stock interest in Seller, or any other circumstances where the effect is
to pass ownership of a majority interest in Seller, shall be deemed an
assignment for purposes of Section 13.
24. Waiver. No modification or waiver of any provision of this
Agreement, nor any consent to any departure by Seller therefrom shall in any
event be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to nor demand on the Seller in any case shall entitle the
Seller to any other or further notice or demand in the same, similar, or other
circumstances. Neither any failure nor any delay on the part of the Buyer in
exercising any right, power, or privilege hereunder shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege.
25. Endorsement of Instruments. Seller hereby irrevocably
authorizes and empowers Buyer, without notice to Seller, whether in its name or
in the name of Seller, to endorse in the name of Seller any checks, drafts or
other orders payable to Seller for application to the respective Mortgage Loan,
and this authority shall be irrevocable until the Mortgage Loan has been fully
paid and discharged.
26. Acceptance. This Agreement shall become binding upon
acceptance by Buyer at its home office in Columbia, South Carolina.
-15-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and sealed as of the day and year first above written.
SELLER:
(CORPORATE SEAL) NO CORP SEAL
[ILLEGIBLE] By: [ILLEGIBLE]
- ---------------------------------- --------------------------------------
Its: Senior Underwriter Its:[ILLEGIBLE]
----------------------------- -------------------------------------
BUYER:
(CORPORATE SEAL) RESOURCE BANCSHARES MORTGAGE GROUP, INC.
ATTEST:
[ILLEGIBLE] By: [ILLEGIBLE]
- ---------------------------------- -------------------------------------
Its: Vice President Its: [ILLEGIBLE]
----------------------------- ------------------------------------
-16-
<PAGE> 1
Exhibit 10.25
ADDENDUM TO MORTGAGE SELLING AND SERVICING CONTRACT
(Seller Only)
This Addendum modifies the Mortgage Selling and Servicing Contract (the
"Contract") dated February 12, 1999 between the Federal National Mortgage
Association ("Fannie Mae", "we", "our", "us"), and E-Loan, Inc. (the "Lender").
This Addendum modifies the Contract to establish the Lender only as an approved
seller of mortgages and participation interests to us and not as an approved
servicer of such mortgages and participation interests in accordance with the
following terms and conditions:
1. Section I.A. of the Contract, "Purpose of Contract," is modified to
delete the following phrases:
- - to establish the Lender as an approved servicer of mortgages we have
purchased or in which we have purchased a participation interest; and
- - to provide the terms and conditions of servicing.
2. Section II.A.1.of the Contract, "Meet Fannie Mae Standards," is amended
to read as follows:
"The Lender, in our judgment, must have at all times the capacity to
sell to us mortgages and participation interests that meet our purchase
standards and the standards generally imposed by private institutional
mortgage investors."
3. Notwithstanding any other provisions of the Contract to the contrary,
the Lender shall not service any mortgages we purchase or in which we
purchase a participation interest.
4. Before we purchase any mortgage or any participation interest in any
mortgages, the Lender shall arrange for the servicing of those
mortgages or participation interests to be transferred to another
lender that is acceptable to us and has signed a Mortgage Selling and
Servicing Contract with us. The transferee servicer must, among other
things, accept the origination and servicing obligations for all
mortgages sold to Fannie Mae by the Lender. The Lender and the
transferee servicer must sign documents acceptable to Fannie Mae and
take other reasonable steps as may be required by Fannie Mae to perfect
the assignment of such mortgages to the transferee servicer and to
otherwise protect Fannie Mae's interests.
5. The Lender agrees to sell mortgages to us only on a negotiated basis
through our Western Regional Office. Without Fannie Mae's prior written
authorization, the Lender cannot use Fannie Mae's Desktop Trader or
cash commitment window.
<PAGE> 2
-2-
6. Notwithstanding anything to the contrary in the Fannie Mae Selling and
Servicing Guides, the Lender shall be required to maintain an
acceptable net worth (as determined by Fannie Mae in its sole
discretion) of at least $2.5 million, plus .1 percent (.001) of the
cumulative mortgage deliveries by the Lender to Fannie Mae. For
example:
<TABLE>
<CAPTION>
Deliveries Minimum Adjusted Net Worth
---------- --------------------------
<S> <C>
$ 0 $ 2.5 million
500 million 3.0 million
1 billion 3.5 million
</TABLE>
In addition, the Lender agrees to the following:
- The Lender must obtain sufficient additional capital infusion
to maintain adequate working capital (as determined by Fannie
Mae in its sole discretion) to meet the Lender's ongoing
business obligations, liabilities, and risks. The Lender
understands that the Lender's insufficient capital and/or
negative earnings (as determined by Fannie Mae in its sole
discretion) may be deemed a breach of the Contract.
- The Lender must submit interim monthly financial statements to
Fannie Mae within 30 days of the effective date of such
financial statements.
- The Lender must promptly submit monthly quality control
reports to Fannie Mae.
7. Notwithstanding anything to the contrary in the Fannie Mae Selling and
Servicing Guides, the Lender has agreed that it will only deliver to
Fannie Mae, and Fannie Mae will only accept, mortgages that are
processed through Desktop Underwriter ("DU") and on which DU displays
the recommendation "Approved/Eligible."
8. Fannie Mae may terminate, with or without cause, the provisions of the
Contract, as amended, by giving notice to the Lender pursuant to the
terms of the Contract.
9. All other terms of the Contract, including any previous modification
made to it, remain in effect.
<PAGE> 3
-3-
By executing this Addendum, the Lender and we agree to the terms hereof. This
Addendum takes effect on the date we sign this Addendum.
E-LOAN, INC.
By: /s/ Steve M. Majerus
--------------------------
(Authorized Signature)
V.P. Secondary Marketing
------------------------
(Type Name and Title)
Date: 2/23/99
-------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
By: /s/ Laddie A. Schmidtbauer
--------------------------------
(Authorized Signature)
--------------------------------
(Type Name and Title)
Date: FEB 12 1999
--------------------------------
<PAGE> 4
FANNIEMAE
MORTGAGE SELLING AND SERVICING CONTRACT
This contract establishes your contractual relationship with Fannie Mae and
states the terms and conditions of selling and servicing mortgages on our
behalf. Your application package must include two signed originals of this form:
one for us to keep and the other for us to complete and return to you upon
approving your application.
INSTRUCTIONS
Once you have read this contract to ensure your understanding of its terms, you
are ready to complete the "signature page" (page 22), as follows:
- - Complete all fields above the line "Federal National Mortgage
Association."
- - For "Lender," enter your company name exactly as you entered it on the
Application for Fannie Mae Approval to avoid confusion. (i.e., If you
abbreviate it on the application form, use the same abbreviation on
this form.)
- - Have this form signed by an individual who is listed as a principal of
your company on the Authorization for Verification of Credit and
Business References (Form 1001).
<PAGE> 5
FannieMae Contents
---------
Contract
Page
----
MORTGAGE SELLING AND SERVICING CONTRACT
I General Information 1
II Eligibility Requirements for Lenders 2
III Sale of Mortgages and Participation Interests 3
IV Sale of Mortgages and Participation Interests-
Lender's Warranties 4
V Servicing Mortgages 8
VI Assignment, Consideration and Continuance 10
VII Assigning Mortgage Servicing 11
VIII Breaches of Contract 11
IX Termination of Contract 14
X Continuance of Responsibilities or Liabilities 17
XI Participation Interests--Special Provisions 18
XII Notice 20
XIII Prior Agreements 21
XIV Severability and Enforcement 21
XV Captions 21
XVI Scope of Contract 21
XVII Signatures and Date 22
------------------
08/86
------------------
<PAGE> 6
-------------------
FANNIEMAE GENERAL INFORMATION
-------------------
CONTRACT
MORTGAGE SELLING AND SERVICING CONTRACT
This contract for selling and servicing mortgages (the "Contract") is between
the Mortgage Lender (the "Lender") that signs this document and the Federal
National Mortgage Association ("Fannie Mae", "we", "our", "us"), a
corporation organized and existing under the laws of the United States.
I GENERAL INFORMATION
This section contains important basic information about the
Contract, which we are permitted to enter into under authority
of Title III of the National Housing Act (12 U.S.C. 1716, et.
seq.), which is also known as the Federal National Mortgage
Association Charter Act.
A. PURPOSE OF CONTRACT
The purpose of this Contract is:
- to establish the Lender as an approved seller of mortgages and
participation interests to us;
- to provide the terms and conditions of the sales;
- to establish the Lender as an approved servicer of mortgages
we have purchased or in which we have purchased a
participation interest; and
- to provide the terms and conditions of servicing.
B. CONSIDERATION
In consideration of the purpose of this Contract and of all the
provisions and mutual promises contained in it, the Lender and Fannie
Mae agree to all that this Contract contains.
C. OUR GUIDES
We issue Fannie Mae's Guides to Lenders (our "Guides") and furnish them
to the Lender. These Guides are:
- Selling;
- Servicing; and
- Multifamily.
Whenever there is a reference to the Guides in this Contract, it means
the Guides as they exist now and as they may be amended or supplemented
in writing. We may amend or supplement them, at our sole discretion, by
furnishing amendments or supplementary matter to the Lender.
The term "Guides" also includes anything that, in whole or in part,
supersedes or is a substituted for the Guides.
D. IMPORTANT DEFINITIONS
Anywhere the words that appear below are used in this Contract, the
following definitions apply:
1. "MORTGAGE" -- A loan, evidenced by a note, bond or other instrument
of indebtedness. The loan is secured by a mortgage, deed of trust, deed
to secure debt or other instrument of security that applies to
property. "Mortgage" includes such instruments of indebtedness and
security, together with
- the evidence of title;
- the chattel mortgage or security agreement and financing
statement; and
<PAGE> 7
- all other documents, instruments and papers pertaining to the
loan.
---------------
Page 1 of 22
---------------
08/86
---------------
<PAGE> 8
- -----------------------
ELIGIBILITY REQUIREMENTS
FOR LENDERS
- -----------------------
CONTRACT
2. "FHA/VA MORTGAGE" -- A mortgage insured or guaranteed in whole or in
part by the Federal Housing Administration or Veterans Administration.
3. "CONVENTIONAL MORTGAGE" -- A mortgage other than an FHA/VA mortgage,
which Fannie Mae is authorized to purchase under the Federal National
Mortgage Association Charter Act.
4. "PROPERTY" OR "MORTGAGED PROPERTY" -- The property that is now
subject to a mortgage, or was subject to such mortgage, where the
mortgage has been foreclosed or possession or title to the property
has been taken by Fannie Mae or on our behalf.
5. "PARTICIPATION INTEREST" or "PARTICIPATION INTEREST IN MORTGAGES" --
An undivided interest in mortgages, specified in the applicable
participation certificate that is evidence of such interest. A
"participation interest" or "participation interest in mortgages"
consists of a specified percentage of the principal (and a like
percentage of all rights and benefits of the mortgagee or equivalent
party under such mortgage) together with a specified yield on it.
II ELIGIBILITY REQUIREMENTS FOR LENDERS
For us to purchase mortgages or participation interests from a Lender,
the Lender must meet the eligibility requirements specified in this
section.
A. GENERAL REQUIREMENTS
These are the general requirements the Lender must meet to be eligible
to sell us mortgages or participation interests or service mortgages
for us:
1. MEET FANNIE MAE STANDARDS. The Lender must have as two of its
principal business purposes:
- making mortgages of the type that we will purchase entirely or
purchase a participation interest in under this Contract; and
- servicing such mortgages.
In addition, the Lender, in our judgment, must have at all times the
capacity to originate and sell to us mortgages and participation
interests that meet our purchase standards and the standards generally
imposed by private institutional mortgage investors, and must at all
times have the capacity to service such mortgages for us under those
standards.
2. HAVE QUALIFIED STAFF AND ADEQUATE FACILITIES. The Lender must, at
all times, have employees who are well trained and qualified to perform
the functions required of the Lender under this Contract.
In addition, the Lender must maintain facilities that are adequate to
perform its functions under this Contract.
3. MAINTAIN FIDELITY BONDS AND ERRORS AND OMISSIONS COVERAGE. The
Lender must maintain, at its own expense, a fidelity bond and errors
and omissions insurance, as required by our Guides.
4. REPORT BASIC CHANGES. The Lender must notify us promptly in writing
of any changes that occur in its principal purpose, activities,
staffing or facilities.
-----------------
Page 2 of 22
-----------------
08/86
-----------------
<PAGE> 9
---------------------
SALE OF MORTGAGES AND
FANNIEMAE PARTICIPATION INTERESTS
----------------------
CONTRACT
B. OWNERSHIP AND STATUS OF LENDER
When we approve a Lender, one of the major considerations is the And
information the Lender has provided about the eligibility,
qualifications and financial status of the Lender and its owners.
Consequently, the Lender must give us immediate notice of a change in
its status or ownership, including any:
- sale or transfer of a majority interest in it;
- merger;
- consolidation; or
- change in legal structure.
C. FINANCES
In order to remain an approved Lender under this Contract, the Lender
must meet our current net worth requirements. These requirements are
contained in our Guides.
The required net worth must be maintained in the form of assets
acceptable to us.
The Lender must give us a copy of its annual financial statements and
any other related information that we may require.
D. ACCESS TO LENDER'S RECORDS
The Lender agrees to permit our employees or designated representatives
to examine or audit records or accounts relating to mortgages or
participation interests sold or serviced under this Contract. All
records relative to the Lender's continued eligibility to sell or
service mortgages under this Contract may also be examined or audited.
Any examination or audit made on our behalf will be conducted during
regular business hours unless the Lender agrees otherwise.
III SALE OF MORTGAGES AND PARTICIPATION INTERESTS
This section contains the basic rules governing our purchase of
mortgages and participation interests.
A. WHAT GOVERNS PURCHASES
Purchases of mortgages and participation interests will be governed by:
- our written commitment to purchase;
- our Guides, including all amendments in effect on the day we
make our written commitment; and
- this Contract.
B. WHAT WE PURCHASE
The mortgages or participation interests that we purchase must meet the
requirements found in our Guides on the day we make our written
commitment.
C. LENDER'S OBLIGATION TO PURCHASE FANNIE MAE STOCK
If our Guides require, the Lender will promptly purchase our common
stock each time it delivers a mortgage or participation interest to us.
The amount of stock to be purchased and the procedures for buying it
are also found in our Guides.
D. FANNIE MAE HAS NO OBLIGATION TO PURCHASE
The fact that we have signed this Contract does not mean that we must
make a commitment to purchase any mortgage or participation interest
from the Lender.
--------------------
Page 3 of 22
--------------------
<PAGE> 10
- ---------------------------
SALE OF MORTGAGES AND
PARTICIPATION INTERESTS
LENDER'S WARRANTIES
- --------------------------
CONTRACT
IV SALE OF MORTGAGES AND PARTICIPATION INTERESTS -- LENDER'S WARRANTIES
The Lender makes certain warranties to us.
These warranties:
- apply to each mortgage sold to us in its entirety;
- apply to each mortgage in which a participation interest is
sold to us;
- are made as of the date transfer is made to us;
- continue after the purchase of the mortgage or participation
interest;
- continue after payment by us of the purchase price to the
Lender; and
- are for our benefit as well as the benefit of our successors
and assigns.
Warranties may be waived, but only by us in writing.
A. SPECIFIC WARRANTIES
Following are the specific warranties made by the Lender.
1. MORTGAGE MEETS REQUIREMENTS. The mortgage conforms to all the
applicable requirements in our Guides and this Contract.
2. LENDER AUTHORIZED TO DO BUSINESS. The Lender and any other party
that held the mortgage were, at all times during which the holder held
the mortgage, authorized to transact business in the jurisdiction where
the property is located.
However, if the Lender or any other party that held the mortgage was
not authorized to do business in the jurisdiction where the property is
located, then the warranty is made that none of the following
activities of the Lender or other parties constituted doing business in
that jurisdiction:
- lending the mortgage funds;
- acquiring the mortgage;
- holding the mortgage; or
- transferring the mortgage in whole or to the extent of a
participation interest.
3. LENDER HAS FULL RIGHT TO SELL AND ASSIGN. The Lender is the sole
owner and holder of the mortgage and has full right and authority to
sell and assign it, or a participation interest in it, to us. In
addition, the Lender's right to sell or assign is not subject to any
other party's interest or to an agreement with any other party.
4. LENDER'S LIEN ON PROPERTY. The mortgage, whether represented by the
Lender as the first lien or as the second lien, is a valid and
subsisting lien on the property described in it.
If the mortgage is represented by the Lender as the first lien, the
property is free and clear of all encumbrances and liens having
priority over it except for liens for real estate taxes, and liens for
special assessments, that are not yet due and payable.
- ---------------------
Page 4 of 22
- ---------------------
08/86
- ---------------------
<PAGE> 11
-----------------------
SALE OF MORTGAGES AND
FANNIEMAE PARTICIPATION INTERESTS
LANDER'S WARRANTIES
----------------------
CONTRACT
If the mortgage is represented by the Lender as the second lien, the
property is free and clear of all encumbrances and liens having
priority over it except for one properly recorded first mortgage lien,
real estate taxes and liens of special assessments not yet due and
payable.
Any security agreement, chattel mortgage or equivalent document that is
related to the mortgage and that is held by the Lender or delivered to
us, is a valid and subsisting lien on the property described in such
document, of the same priority as the mortgage.
The Lender has full right and authority to sell or assign each lien to
us or to an extent that is proportionate to our participation interest.
5. DOCUMENTS ARE VALID AND ENFORCEABLE. The mortgage and any security
agreements, chattel mortgages, or equivalent documents relating to it
have been properly signed, are valid, and their terms may be enforced
by us, our successors and assigns, subject only to bankruptcy laws,
Soldiers' and Sailors' Relief Acts, laws relating to administering
decedents' estate, and general principles of equity.
6. PROPERTY NOT SUBJECT TO LIENS. The Property is free and clear of all
mechanics' liens, materialmen's liens or similar types of liens. There
are no rights outstanding that could result in any of such liens being
imposed on the property.
This warranty is not made if the Lender furnishes us with title
insurance that gives us substantially the same protection as this
warranty.
7. TITLE INSURANCE. There is a mortgage title insurance policy, or
other title evidence acceptable to us, on the property. The title
insurance policy is on a current ALTA form (or other generally
acceptable form) issued by a generally acceptable insurance company.
The title insurance insures (or the other title evidence protects) us
or the Lender and its successors and assigns, as holding a lien of the
priority warranted in "4. Lender's Lien On Property."
8. MODIFICATION OR SUBORDINATION OF MORTGAGE. The Lender has not done
any of the following:
- materially modified the mortgage;
- satisfied or cancelled the mortgage in whole or in part;
- subordinated the mortgage in whole or in part, unless it is
represented to us as a second mortgage;
- released the property in whole or in part from the mortgage
lien; or
- signed any release, cancellation, modification or satisfaction
of the mortgage.
This warranty is not made if any of the things just mentioned have been
done but have been expressly brought to our attention in a letter
before we make payment to the Lender. The letter must be acknowledged
by us in writing.
---------------------
Page 5 of 22
---------------------
06/96
---------------------
<PAGE> 12
- ------------------------
SALE OF MORTGAGES AND
PARTICIPATION INTERESTS
LENDER'S WARRANTIES
- ------------------------
CONTRACT
9. Mortgage In Good Standing. There are no defaults under the mortgage,
and all of the following that have become due and payable have been
paid or an escrow of funds sufficient to pay them has been established:
- taxes;
- government assessments;
- insurance premiums;
- water, sewer and municipal charges;
- leasehold payments; or
- ground rents.
10. Advances. The Lender has not made or knowingly received from
others, any direct or indirect advance of funds in connection with the
loan transaction on behalf of the borrower except as provided in our
Guides. This warranty does not cover payment of interest from the
earlier of:
- the date of the mortgage note; or
- the date on which the mortgage proceeds were disbursed to
- the date one month before the first installment of principal
and interest on the mortgage is due.
11. Property Conforms To Zoning Laws. The Lender has no knowledge that
any improvement to the property is in violation of any applicable
zoning law or regulation.
12. Property Intact. The property is not damaged by fire, wind or other
cause of loss. There are no proceedings pending for the partial or
total condemnation of the property.
13. Improvements. Any improvements that are included in the appraised
value of the property are totally within the property's boundaries and
building restriction lines. No improvements on adjoining property
encroach on the mortgaged property unless FHA or VA regulations or our
Guides permit such an encroachment.
14. Mortgage Not Usurious. The mortgage is not usurious and either
meets or is exempt from any usury laws or regulations.
15. Compliance With Consumer Protection Laws. The Lender has complied
with any applicable federal or state laws, regulations or other
requirements on consumer credit, equal credit opportunity and
truth-in-lending.
16. Property Is Insured. A casualty insurance policy on the property is
in effect. It is written by a generally acceptable insurance company
and provides fire and extended coverages for an amount at least equal
to the amount required by our Guides.
- --------------
Page 6 of 22
- --------------
08/86
- --------------
<PAGE> 13
------------------------
SALE OF MORTGAGES AND
FANNIEMAE PARTICIPATION INTERESTS-
LENDER'S WARRANTIES
-----------------------
CONTRACT
A flood insurance policy is in effect on the property if any part of it
is in an area listed in the Federal Register by the Federal Emergency
Management Agency as an area with special flood hazards, and if
insurance is available. The flood insurance is written by a generally
acceptable insurance company, meets current guidelines of the Federal
Insurance Administration, and is for an amount at least equal to the
amount required by our Guides.
The Lender will make sure the required insurance is maintained as long
as it services the mortgage. Any policy mentioned in this warranty
contains a standard mortgage clause that names us or the Lender and its
successors and assigns as mortgagee.
17. Mortgage Is Acceptable Investment. The Lender knows of nothing
involving the mortgage, the property, the mortgagor or the mortgagor's
credit standing that can reasonably be expected to:
- cause private institutional investors to regard the mortgage
as an unacceptable investment;
- cause the mortgage to become delinquent; or
- adversely affect the mortgage's value or marketability.
18. Mortgage Insurance Or Guaranty In Force. If the Lender represents
that the mortgage is insured or guaranteed under the National Housing
Act as amended, or under the Servicemen's Readjustment Act of 1944 as
amended, or by a contract with a mortgage insurance company, the
insurance or guaranty is in full force. In addition, the Lender has
complied with all applicable provisions and related regulations of the
Act, or the insurance contract, that covers the mortgage.
19. Adjustable Mortgages. If the mortgage provides that the interest
rate or the principal balance of the mortgage may be adjusted, all of
the terms of the mortgage may be enforced by us, our successors and
assigns.
These adjustments will not affect the priority of the lien warranted in
"4. Lender's Lien On Property."
20. Participation Information Is Correct. All the information and
statements in any participation certificate that the Lender delivers to
us are complete, correct and true.
B. CONSEQUENCES OF UNTRUE WARRANTIES --REPURCHASE
We may require the Lender to repurchase a mortgage or participation
interest sold to us if any warranty made by the Lender about the
mortgage or participation interest is untrue (whether the warranty is
in this Contract or was made at our specific request).
We may require repurchase whether or not the Lender had actual
knowledge of the untruth. We may also enforce any other available
remedy.
The Lender must pay us the repurchase price within 30 days of our
demand. The repurchase price, as provided in our Guides, will not be
adjusted because the Lender paid us fees or charges or subscribed to
our capital stock.
---------------------
Page 7 of 22
--------------------
08/86
--------------------
<PAGE> 14
- --------------------
SERVICING MORTGAGES
- --------------------
CONTRACT
C. CONSEQUENCES OF UNTRUE WARRANTIES TERMINATION OF CONTRACT
While untrue warranties about a particular mortgage or participation
interest may be the basis for requiring repurchase of the particular
mortgage or participation interest, there can be additional
consequences. They may also give rise to responsibilities of the Lender
under "D. Indemnification For Breach Of Warranty; Holding Us Harmless."
In addition, untrue warranties can, under certain circumstances, be
treated as a breach of contract that could result in the withdrawal of
our approval of a Lender and the termination of this Contract (details
are contained in Sections VIII and IX).
D. INDEMNIFICATION FOR BREACH OF WARRANTY; HOLDING US HARMLESS
If there is a breach of warranty under this Contract, the Lender, at
our request, will indemnify us and hold us harmless against any related
losses, damages, judgments or legal expenses.
V SERVICING MORTGAGES
This section contains the basic rules governing the servicing of
mortgages that we purchase, or in which we purchase a participation
interest.
A. SERVICING DUTIES OF THE LENDER
The servicing duties of the Lender are:
1. Scope Of Duties. The Lender will diligently perform all duties that
are necessary or incident to the servicing of:
- - all mortgages it is servicing for us on the date this Contract takes
effect; and
- - all other mortgages that the Lender is required to service by the terms
of this Contract or any other existing or future agreement between us
and the Lender.
2. Mortgages To Be Serviced. Any mortgage we have purchased from the
Lender, or in which we have purchased a participation interest from the
Lender. will be serviced by the Lender for us according to the terms of
this Contract, unless:
- the mortgage is not within any category of those that are
required by our Guide to be serviced; or
- we give the Lender written notification or consent that a
mortgage to be purchased by us will not be serviced by the
Lender.
3. Service According To Guides. Any mortgage serviced under this
Contract, which we own or in which we have purchased a participation
interest, must be serviced by the Lender according to the provisions in
our Guides that are in effect on the date of this Contract or as
amended in the future. This is true regardless of when:
- the mortgage was originated;
- the mortgage or a participation interest in it was transferred
to us; or
- the Lender began servicing the mortgage.
The Lender will also follow other reasonable instructions we give it
and must strictly follow accepted industry standards when servicing a
mortgage for us.
- --------------------
Page 8 of 22
- --------------------
08/86
- --------------------
<PAGE> 15
--------------------
FANNIEMAE SERVICING MORTGAGES
--------------------
CONTRACT
4. Service At Lender's Own Expense. The cost of servicing will be the
Lender's unless our Guides expressly provide otherwise.
5. Special Responsibilities In Foreclosures. Among the other duties
that may be assigned to the Lender through our special instructions or
under the terms of our Guides is the responsibility to manage and
appropriately dispose of property when a mortgage it is servicing for
us has been foreclosed, or possession or title has been taken by us or
on our behalf.
The Lender must manage and dispose of the property according to the
terms of the mortgage and our Guides.
6. Service Until Need Ends. The Lender must service each mortgage
continuously from the date its servicing duties begin until:
- the mortgage's principal and interest have been paid in full;
- the mortgage has been liquidated and the mortgaged property
properly disposed of (if the Lender is required to do these
things); or
- the Lender's servicing duties are terminated according to
Section IX of this Contract.
B. COMPENSATION
The Lender's compensation for servicing mortgages, including the
management and disposal of properties, under this Contract is specified
in our Guides.
We may change the Lender's compensation by modifying our Guides at any
time. However, such a change will not affect mortgages that we have
purchased or committed to purchase before the date of the change.
C. OWNERSHIP OF RECORDS
All mortgage records reasonably required to document or properly
service any mortgage we own in its entirety are our property at all
times. This is true whether or not the Lender developed or originated
them.
The following are considered mortgage records:
- all mortgage documents;
- tax receipts;
- insurance policies;
- insurance premium receipts;
- ledger sheets;
- payment records;
- insurance claim files and correspondence;
- foreclosure files and correspondence;
- current and historical data files; and
- all other papers and records.
-------------------
Page 9 of 22
-------------------
08/86
-------------------
<PAGE> 16
- -------------------------
ASSIGNMENT, CONSIDERATION
AND CONTINUANCE
- -------------------------
CONTRACT
1. Lender As Custodian. The mortgage records belong to us. The Lender
can have possession of the mortgage records only with our approval, and
the Lender is acting as our custodian. This is true whether the Lender
receives the mortgage records from an outside source or prepares them
itself.
2. Delivery. When we ask for any mortgage records in writing, the
Lender will deliver them to us or someone we choose. The Lender must
also send us a list that identifies each mortgage, and must give us
other information we request to identify the mortgages delivered.
We will not be required to sign or deliver any trust receipts before
the Lender delivers the mortgage records we have requested.
If we ask the Lender in writing for reproductions of any mortgage
records the Lender microfilmed or condensed, the Lender will reproduce
them promptly at no cost to us or the party to whom we want them
delivered.
3. Joint Ownership. If we own a participation interest in a mortgage,
the other owners and we own the mortgage records jointly. For these
mortgages, the Lender possesses the mortgage records as a custodian for
the joint owners.
If we ask for copies of the mortgage records and servicing information
about any such mortgages, the Lender will furnish them. Or, if we need
any mortgage records for legal evidence or other purposes, the Lender
will release them to us for a reasonable time.
D. AGREEMENT TO INDEMNIFY AND HOLD HARMLESS
The Lender will indemnify us and hold us harmless against all losses,
damages, judgments or legal expenses that result from its failure in
any way to perform services and duties in connection with servicing
mortgages or managing or its disposing of property according to this
Contract or our Guides.
If any private entity or governmental agency sues us, makes a claim
against us or starts a proceeding against us based on the Lender's acts
or omissions in servicing mortgages or managing or disposing of
property, the Lender's obligation to indemnify and hold us harmless
must be met regardless of whether the suit, claim or proceeding has
merit or not
The Lender's obligation does not apply, however, if during a suit,
claim or proceeding, we give the Lender express written instructions
and as a result of the Lender following them we suffer losses, damages,
judgments or legal expenses.
E. OWNERSHIP OF OUR STOCK
If our Guides require, the Lender will continuously own our common
stock in connection with all mortgages it services under this Contract.
The amount of stock to be owned will be established by our Guides as
they were in existence on the date the Lender started servicing the
applicable mortgages.
VI ASSIGNMENT, CONSIDERATION AND CONTINUANCE
This section describes our requirements covering assignment of,
consideration for and continuance of this Contract.
- -------------------
Page 10 of 22
- -------------------
08/88
- -------------------
<PAGE> 17
---------------------
ASSIGNING MORTGAGE
FANNIEMAE SERVICING
---------------------
CONTRACT
A. ASSIGNMENT
Because the relationships created by this Contract are personal, the
Lender not, may without our prior written approval, assign:
- - this Contract under any circumstances, either voluntarily or
involuntarily, by operation of law, or otherwise; or
- - its responsibility for servicing individual mortgages we own or in
which we have a participation interest. (See Section VII of this
Contract for required procedures governing assignments of servicing).
B. LIMITED VALUE OF CONTRACT TO LENDER
The Lender acknowledges that it has paid us no monetary consideration
for making it an approved mortgage seller or servicer, except an
application fee to reimburse us for the expenses of reviewing its
application.
The Lender also agrees that, except for the purchase of mortgages, the
servicing of mortgages, or any fee for the termination of this
Contract, this Contract has no value to the Lender.
C. REQUIREMENTS FOR CONTINUANCE
The Lender's right to continue selling and servicing mortgages under
this Contract depends on, among other things, its continuing to meet
the eligibility requirements in Section II of this Contract.
VII ASSIGNING MORTGAGE SERVICING
The Lender may not assign its responsibility for servicing all or any
part of the mortgages that it is servicing for us without first
obtaining our written consent.
Any Lender to which servicing is assigned must:
- be acceptable to us; and
- sign a Mortgage Selling and Servicing Contract with us.
We may require that the Lender and transferee lender sign documents and
take other reasonable steps to perfect the assignment.
VIII BREACHES OF CONTRACT
The Lender's taking certain actions, or failing to take certain
actions, can be treated by us as a breach of contract. A breach of
contract can lead to a termination of the Contract. Termination is
provided for in detail in Section IX.
A. SPECIFIC BREACHES OF CONTRACT
Breaches of this Contract include the following:
1. HARM, DAMAGE, LOSS OR UNTRUE WARRANTIES. It is a breach if any act
or omission of the Lender in connection with the origination and sale
to us of any mortgage or participation interest causes us harm, damage
or loss. It is also a breach if the Lender sells us any mortgage or
participation interest knowing that any of the mortgage warranties are
untrue (these warranties are listed in Section IV A).
------------------------
Page 11 of 22
------------------------
08/86
------------------------
<PAGE> 18
- --------------------------
BREACHES OF CONTRACT
- --------------------------
CONTRACT
2. FAILURE TO COMPLY WITH THIS CONTRACT OR OUR GUIDES. It is a breach
if the Lender does not comply with this Contract or our Guides through
any act or omission, including, without limitation, the following:
- failure to establish and maintain accounts for our funds or
mortgagors' funds as required by our Guides;
- use of our or mortgagors' funds in any manner other than that
permitted by our Guides, including the Lender's failure to
deposit all mortgage funds if, when, and to the extent
required by our Guides;
- failure to remit all funds due to us within the time periods
required by our Guides;
- failure to make or ensure, according to the provisions of each
mortgage or of applicable laws or regulations, proper and
timely payment of all:
-- taxes;
-- assessments;
-- leasehold payments;
-- ground rents;
-- insurance premiums (including premiums of casualty, liability
and mortgage insurance and other forms of required insurance);
-- required interest on escrow funds; and
-- other required payments with respect to any mortgage
(including mortgaged property) serviced;
unless the Lender is relieved of these responsibilities by the express
provisions of our Guides, or by our written instructions that relate to
a particular mortgage or property;
- failure to renew or ensure renewal of any required insurance
policy on any mortgage (including mortgaged property) serviced
under this Contract;
- failure to maintain adequate and accurate accounting records
and mortgage servicing records for the mortgages, or to
maintain proper identification of the applicable loan files
and mortgage records that prove our outstanding participation
interests;
- failure to submit adequate and accurate accounting and
mortgage servicing reports within the time required by our
Guides; or
- failure to take prompt and diligent action under applicable
law or regulation to collect past due sums on mortgages, or to
take any other diligent action described in our Guides that we
reasonably require for mortgages in default.
- ---------------------
Page 12 of 22
- --------------------
08/96
- ---------------------
<PAGE> 19
----------------------
FANNIEMAE BREACHES OF CONTRACT
----------------------
CONTRACT
3. FAILURE TO PROPERLY FORECLOSE OR LIQUIDATE. Where a mortgage is in
default and the Lender is required or has decided to foreclose or
liquidate it, it is a breach if the Lender fails to take prompt and
diligent action consistent with applicable law or regulations to
foreclose on or otherwise appropriately liquidate such mortgage and to
perform all incident actions. It is a breach whether or not the failure
results from the acts or omissions of an attorney, trustee or other
person or entity the Lender chooses to effect foreclosure or
liquidation.
4. FAILURE TO PROPERLY MANAGE, DISPOSE OF, OR EFFECT PROPER CONVEYANCE
OF TITLE. It is a breach if any mortgage serviced under this Contract
has been foreclosed or the possession or title to the property has been
taken by us or on our behalf, or on behalf of other owners of a
participation interest in the mortgage, and the Lender:
- fails to properly manage, dispose of or effect proper
conveyance of title to the mortgaged property; or
- fails to do the above in accordance with this Contract, our
Guides, and any pertinent laws, regulations, or mortgage
insurance policies or contracts.
5. LENDER'S FINANCIAL ABILITY IMPAIRED. It is a breach if there is a
change in the Lender's financial status that, in our opinion,
materially and adversely affects the Lender's ability to satisfactorily
service mortgages.
Changes of this type include:
- the Lender's insolvency;
- adjudication of the Lender as a bankrupt;
- appointment of a receiver for the Lender; or
- the Lender's execution of a general assignment for the benefit
of its creditors.
If any such change does take place:
- no interest in this Contract will be considered an asset or
liability of the Lender or of its successors or assigns; and
- no interest in this Contract will pass by operation of law
without our consent.
6. FAILURE TO OBTAIN OUR PRIOR WRITTEN CONSENT. It is a breach if the
Lender fails to obtain our prior written consent for:
- a sale of the majority interest in the Lender; or
- a change in its corporate status or structure.
7. FAILURE TO COMPLY WITH THIS CONTRACT OR OUR GUIDES. It is a breach
if the Lender fails at any time to meet our standards for eligible
mortgage sellers or servicers so that, in our opinion, the Lender's
ability to comply with this Contract or our Guides is adversely
affected.
------------------
Page 13 of 22
-----------------
08/86
-----------------
<PAGE> 20
- ---------------------
TERMINATION OF CONTRACT
- ------------------------
CONTRACT
8. COURT FINDINGS AGAINST LENDER OR PRINCIPAL OFFICERS. It is a breach
if:
- a court of competent jurisdiction finds that the Lender or any
of its principal officers has committed an act of civil fraud;
or
- the Lender or any of its principal officers is convicted of
any criminal act related to the Lender's lending or mortgage
selling or servicing activities or that, in our opinion,
adversely affects the Lender's reputation or our reputation or
interests.
B. ACTIONS TO CORRECT A BREACH
If there is a breach of contract by the Lender, we will have the right
to take any reasonable action to have any breach corrected by the
Lender before we exercise any right we have to terminate this Contract
in whole or in part; however, we are not required to try to have a
breach corrected before termination.
Any forbearance by us in exercising our right to terminate this
Contract in whole or in part will not be a waiver of any present or
future right we have under this Contract to so terminate it.
IX TERMINATION OF CONTRACT
The reason why this Contract may be terminated and the ways in which
this may be done are outlined in this section. When the Contract is
terminated, the entire relationship between the Lender and us ends
(with certain exceptions that are explained in this section).
A. TERMINATION BY EITHER PARTY OF MORTGAGE SELLING ARRANGEMENTS
The provisions of this Contract covering the sale of mortgages or
participation interests under this Contract may be terminated by the
Lender or by us, with or without cause, by giving notice to the other
party. Notice of termination may be given at any time but must conform
to Section XII of this Contract.
Termination is effective immediately upon notice of termination, unless
the notice specifies later termination.
Termination will not affect any outstanding commitments we have made to
purchase mortgages or participation interests from the Lender. However,
if the Lender has breached this Contract, we may declare any or all
outstanding commitments void.
B. TERMINATION BY LENDER OF MORTGAGE SERVICING ARRANGEMENTS FOR
WHOLLY-OWNED MORTGAGES
The Lender may terminate the provisions of this Contract covering the
servicing of mortgages we entirely own by giving us notice at any time.
Notice must conform to Section XII of this Contract.
Termination is effective the last day of the third calendar month after
the calendar month in which notice is given.
If the Lender terminates this Contract in whole or in part, we will not
pay the Lender a termination fee.
- --------------------
Page 14 of 22
- --------------------
08/86
- --------------------
<PAGE> 21
-----------------------
FANNIEMAE TERMINATION OF CONTRACT
----------------------
CONTRACT
C. We may terminate the provisions of this Contract covering the
TERMINATION servicing under this Contract of any or all mortgages that we
BY US OF entirely own. This may be done by following the procedures
SERVICING outlined below.
ARRANGEMENTS
FOR WHOLLY-OWNED
MORTGAGES
1. Termination Without Cause. We may terminate servicing for
any reason, by giving the Lender notice of the termination. If
we do so, the provisions of this Contract covering the
servicing of the affected mortgages will automatically
terminate on the thirtieth day following the day our notice is
given. Whenever we do this (and the termination is not because
of any breach by the Lender as described in Section IX C2) we
will pay the Lender, for each mortgage on which servicing is
terminated, a lump-sum termination fee as provided in a below.
However, whenever we terminate solely in order to transfer the
servicing to another Lender, and there has been no sale of our
interest in the affected mortgages, the provisions of b below
will apply.
a. Termination Fee. The termination fee will be an amount
equal to twice the Lender's annualized servicing compensation,
at the rate of compensation that is in effect for the mortgage
as of the date of the termination, applied against the unpaid
principal balance of the mortgage as of such date.
For purposes of determining the termination fee:
- The Lender's servicing compensation consists of the
servicing fee at the Applicable Servicing Rate plus
any previously agreed upon excess yield that the
Lender is permitted to retain on the applicable
mortgage.
- "Applicable Servicing Rate" means the rate of the
servicing fee for the servicing of the mortgage,
expressed as an annualized fractional percentage.
[Refer to appropriate sections of our Guides for more detailed
information regarding the computation of termination fees.]
b. Termination To Effect Transfer. Whenever we terminate
servicing solely in order to transfer servicing of the
mortgages to another Lender, and there has been no sale of our
interest in the mortgages, we will give the Lender notice of
the required transfer. Within the 90-day period immediately
following the date our notice is given, the Lender may arrange
for the sale of the servicing to another Fannie Mae-approved
Lender in good standing that, in our judgment, will properly
service the mortgages to be transferred. Within that 90-day
period, the Lender will give notice of any proposed sale to
us, together with all related information. The sale of
servicing is conditioned upon our approval, which will not be
unreasonably withheld. Any resulting transfer of servicing
will be completed not later than 60 days after our approval of
the transfer; and
- the Lender will be entitled to the proceeds of the
sale of servicing, and will bear all costs and
expenses related to the sale and transfer of
servicing;
- the Lender will not pay us a transfer fee;
- we will not pay the Lender a termination fee;
----------------------
Page 15 of 22
----------------------
<PAGE> 22
- -----------------------
Termination Of Contract
- -----------------------
CONTRACT
- we may require the purchaser of the servicing to
assume any or all warranties that were made to us in
connection with the sale to us of the affected
mortgages; and
- the purchaser of the servicing will succeed to the
Lender's obligations, rights and servicing
compensation, under the provisions of this Contract
covering the servicing of the affected mortgages. For
all of the affected mortgages that we purchased under
a net-yield contract, the servicing compensation will
include the specified minimum servicing fee, plus the
Lender's share of that portion of the yield which
exceeds the stated net yield, as provided under the
commitment contract.
[Refer to appropriate sections of our Guides for more detailed
information regarding the computation of the Lender's servicing
compensation.]
If at the end of the 90-day period following our notice, the
Lender has not arranged to sell and transfer the servicing of
the affected mortgages to another Lender acceptable to us and
given us the required notice, the provisions of this Contract
covering the servicing of the mortgages will automatically
terminate on the fifteenth day following the end of the 90-day
period, and we will transfer the servicing to a Lender of our
choice. In such a case, we will pay the Lender, for each
mortgage on which servicing is terminated, a termination fee
computed as provided under a. above. We will deduct from the
termination fee paid to the Lender a transfer fee that is the
greater of $500.00 or 1/100 of 1% of the aggregate unpaid
principal balance of all of the affected mortgages on which
servicing is transferred.
c. General Criteria For Termination Fees. Notwithstanding
anything to the contrary in this Contract, we may change the
amount of termination fee that we pay, or other provisions of
this Section IX C1, from time to time, by changing the
appropriate provisions of our Guides. However, such a change
will not affect mortgages that we have purchased or that we
have committed to purchase before the date of the change.
Our written tender of the termination fee to the Lender, or
its successors or assigns, is complete compensation for each
mortgage serviced by the Lender on which servicing is
terminated. Any sums we owe the Lender for servicing prior to
the termination date are not included in the termination fee.
When we pay a termination fee, the Lender will not be entitled
to the proceeds for any sale of the servicing involved.
2. TERMINATION WITH CAUSE. We may terminate if the Lender
breaches any agreement in this Contract, including, without
limitation, any of those breaches listed in Section VIII A.
This may be done by giving the Lender notice of termination.
Notwithstanding anything in this Contract to the contrary, if
we terminate for breach, we may make it effective immediately,
and we will not pay the Lender a termination fee or proceeds
from any sale of the servicing involved. Furthermore, we will
not pay a servicing termination fee if a mortgage is
repurchased by the Lender because a warranty is untrue.
- ------------------
Page 16 of 22
- ------------------
08/86
- ------------------
<PAGE> 23
-----------------------
Continuance Of
FannieMae Responsibilities Or
Liabilities
-----------------------
CONTRACT
D. If the Lender breaches any agreement in this
TERMINATION Contract, including, without limitation, any breach
BY US OF listed in Section VIII A, we may terminate the
SERVICING provisions of this Contract covering the servicing of
ARRANGEMENTS any or all mortgages in which we own a participation
FOR MORTGAGES interest. This may be done by giving notice of
IN WHICH WE termination. Such termination may be effective
HAVE A immediately, and we will not pay the Lender a
PARTICIPATION termination fee.
INTEREST
1. TRANSFER OF LENDER'S POWERS. Upon termination, we
will automatically succeed to all the Lender's rights
in and responsibilities for servicing of the affected
mortgages. We will also have the option to exercise
all the Lender's powers relating to these mortgages,
and to designate any person or firm to exercise those
powers. However, exercise of the Lender's powers must
be consistent with the Lender's and our respective
participation interests.
The mortgage instruments for these mortgages and all
related mortgage records will be delivered to us or a
party we designate. The Lender will also deliver
necessary assignments, transfers and documents of
authority.
2. TRANSFER OF SERVICING. If we terminate the
Lender's servicing of any such mortgages, we are
authorized to transfer the servicing of the mortgages
to new servicers and pay the new servicers a fee. The
fee will apply to the total outstanding principal
balance on each mortgage, including our participation
interest in each mortgage as well as the
participation interest of the Lender and of any other
owner.
3. LIABILITY FOR FEES. The Lender and all additional
owners of a participation interest will be liable for
their respective shares of the servicing fee we pay.
They will also be liable for their respective shares
of advances that, in our sole discretion, are
required. Advances may be required for insurance,
taxes, maintenance, improvements or other necessary
outlays.
If the Lender or other owners fail to promptly
provide their share of funds for advances, or for any
other necessary expenses, during any period, we may
supply the funds. The fact that we do this does not
release the Lender or other owners from their
liability. We may deduct any amount we advance the
next time we owe money to the Lender or other owners.
E. The exercise of a right of termination under any
RIGHTS OF provision of this Contract will not impair any
TERMINATION further right of termination under another provision.
NOT IMPAIRED
X CONTINUANCE OF RESPONSIBILITIES OR LIABILITIES
Responsibilities or liabilities of the Lender that
exist before the termination of this Contract will
continue to exist after termination unless we
expressly release the Lender from any of them in
writing. This is true whether the Contract was
terminated by the Lender or by us.
------------------------
Page 17 of 22
------------------------
08/86
------------------------
<PAGE> 24
- -------------------------
Participation Interests-
Special Provisions
- -------------------------
CONTRACT
XI PARTICIPATION INTERESTS-SPECIAL PROVISIONS
This section contains special provisions that govern
participation interests.
A. Listed below are the consequences of the sale of a
participation interest.
AFTER THE
SALE OF A
PARTICIPATION
INTEREST
1. TRANSFER OF UNDIVIDED INTEREST. When the Lender sells and
conveys to us a participation interest in one or more
mortgages, this is a transfer of an undivided interest in each
mortgage.
The sale and conveyance of the participation interest will
have the same force and effect as:
- a separate assignment of each mortgage executed and
delivered to us by the Lender; and
- a promissory note separately endorsed or transferred
to us.
2. ASSURANCE OF OUR LEGAL RIGHTS. If federal or state laws or
regulations now, or later, provide that the purchase of a
participation interest is an extension of credit, the Lender
will take whatever additional steps we may require to assure
our legal rights as a purchaser of participation interests.
Such steps may include:
- placing legends on promissory notes;
- endorsing promissory notes in blank and delivering
them to us; and
- executing mortgage assignments in a form acceptable
to us and delivering them to us.
3. NO PARTNERSHIP OR JOINT VENTURE. Neither the simultaneous
ownership of interests in one or more mortgages nor any
provision of this Contract will mean that a partnership or
joint venture exists between the Lender and us.
B. The Lender will make the following payments to us, according
to our Guides, for mortgages in which both the Lender and we
own an interest:
PAYMENTS TO US
1. RATABLE SHARING OF PRINCIPAL. The Lender will ratably share
with us all mortgage principal payments.
2. PARTICIPATION SHARE OF INTEREST. The Lender will pay us our
participation share of interest payments up to:
- an amount sufficient for us to earn our yield on each
mortgage; plus
- any amounts due us pursuant to this section.
C. As required by our Guides, the Lender will enforce the
ENFORCEMENT OF due-on-sale provisions and call options in the mortgages it
DUE-ON-SALE services for us.
AND CALL OPTIONS
- ----------------------
Page 18 of 22
- ----------------------
08/86
- ----------------------
<PAGE> 25
- ----------------------- --
Participation Interests-
FannieMae Special Provisions
- ----------------------- --
CONTRACT
D. The Lender will have the option to repurchase our interest in
REPURCHASE a mortgage if:
OPTION
- the Lender is required by our Guides to enforce a
due-on-sale clause of a mortgage in which the Lender
and we own an interest; or
- we elect to exercise a call option provision of such
a mortgage.
If the Lender wishes to repurchase our interest in such a
mortgage, it may do so by:
- giving us notice of its intention to repurchase; and
- paying us an amount calculated according to the
provisions of our Guides.
E. The note rate of a mortgage is stated in the participation
NOTE RATE certificate or attached loan schedule.
INCREASE,
FORECLOSURE
EXPENSES AND
PREPAYMENT
CHARGES
1. NOTE RATE INCREASE. If, for any reason, there is an
increase of the note rate of a mortgage in which we hold a
participation interest, the Lender will pay us, according to
our Guides, a percentage of the increase equal to the
percentage represented by our participation interest in the
mortgage. This amount will be in addition to our yield on the
mortgage.
2. FORECLOSURE EXPENSES. The Lender will ratably share with us
any reasonable foreclosure and related expenses in connection
with a mortgage in which we own a participation interest.
3. PREPAYMENT CHARGES. The Lender will ratably share with us
any prepayment charges collected for mortgages in which we own
a participation interest.
F. The Lender will not make any optional or voluntary advances to
ADVANCES the borrower under an open-end mortgage in which we own a
participation interest.
G. Participation interests may be assigned either by the Lender
ASSIGNMENT or us, as follows:
OR SALE OF
PARTICIPATION
INTERESTS
1. BY US. Without the Lender's consent we may assign:
- our participation interest in any mortgage; and
- all rights in the mortgage we own under this Contract
or under any other instruments.
2. BY LENDER TO TRANSFEREE. The Lender may sell or transfer
all or part of any participation interest that it owns in any
mortgage under this Contract unless expressly prohibited from
doing so by our Guides.
This sale or transfer of participation interests is subject to
the conditions below, as well as to our Guides as they are in
effect on the date of our commitment to purchase.
For every sale or transfer, the Lender must obtain and furnish
us with a properly executed instrument by which the
transferee:
- agrees to be bound by the terms of this Contract: and
- acknowledges our rights and interests under this
Contract with respect to the mortgage.
------------------
Page 19 of 22
------------------
08/86
------------------
<PAGE> 26
- ----------------------
Notice
- ----------------------
CONTRACT
Our rights and interests that must be acknowledged include,
without limitation, the right to assess a servicing fee
against the owner of each participation interest if we:
- assume the servicing of the mortgage; or
- transfer the servicing to a new servicer under Section IX D of
this Contract.
The sale or transfer of a participation interest does not relieve the
Lender of any responsibility or liability under this Contract. For
example, the Lender continues to be liable for any fees and other
amounts charged under Section IX D3 of this Contract against the
participation interest that is transferred. We may collect these
amounts from the Lender or from the transferee.
3. BY LENDER TO BANK. The Lender may be a member of, or be
required to maintain reserves with a Federal Home Loan Bank or
Federal Reserve Bank. If so, and the Lender transfers its
participation interests in any mortgage under this Contract to
such a bank to secure one or more advances, then the bank will
not be deemed to have assumed the mortgage warranties found in
Section IV A.
Also, such a transfer to the bank will not relieve the Lender
of any responsibility or liability under this Contract.
XII NOTICE
Whenever notice is required under this Contract, it must be
given as described in this section.
A. Any notice of termination given under this Contract must be:
NOTICE OF
TERMINATION
- in writing;
- delivered in person or sent by registered or
certified mail, with a return receipt requested; and
- addressed to the party to which notice is being
given.
Delivery and notice is given when we or the Lender mail or
register the notice with any post office.
B. Our Guides, including any amendments or supplements, and any
OUR GUIDES other notices, demands or requests under this Contract or
AND OTHER applicable law will be:
DOCUMENTS
- in writing;
- delivered in person or mailed from any post office,
substation, or letter box;
- enclosed in a postage prepaid envelope; and
- addressed to the Lender to which the matter is
directed.
C. For purposes of notice, the following rules apply:
ADDRESS
1. Our address is the address of our regional office given in
this Contract.
2. The Lender's address is that of its principal place of
business given in this Contract.
Any change of address must be given in writing.
- -------------------
Page 20 of 22
- -------------------
08/86
- -------------------
<PAGE> 27
-----------------------
FannieMae Prior Agreements
-----------------------
CONTRACT
XIII PRIOR AGREEMENTS
This Contract supersedes any prior agreements between the
Lender and us that govern selling or servicing of mortgages
and participation interests to which this Contract relates.
However, this section will not release the Lender from any
responsibility or liability under any prior agreements and
understandings.
XIV SEVERABILITY AND ENFORCEMENT
If any provision of this Contract conflicts with applicable
law, the other provisions of this Contract that can be carried
out without the conflicting provision will not be affected.
All rights and remedies under this Contract are distinct and
cumulative not only as to each other but as to any rights or
remedies afforded by law or equity. They may be exercised
together, separately or successively. These rights and
remedies are for our benefit and that of our successor and
assigns.
XV CAPTIONS
This Contract's captions and headings are for convenience only
and are not part of the Contract.
XVI SCOPE OF CONTRACT
The following provisions apply, whether or not they are
contrary to other provisions in this Contract.
A. We reserve the right to restrict the Lender's sale or
RESTRICTION servicing of mortgages or of participation interests to the
OF LENDER type that the Lender and its employees have the experience and
ability to originate, sell or service.
B. This Contract covers only the sale of mortgages and
TYPES OF participation interests and the servicing of mortgages, within
MORTGAGES the following categories:
COVERED
SEE ATTACHED ADDENDUM
--------------------
Page 21 of 22
--------------------
08/86
--------------------
<PAGE> 28
- ------------------------
Signatures And Date
- ------------------------
CONTRACT
XVII SIGNATURES AND DATE
By executing this Contract, the Lender and we agree to all of
this Contract's terms and provisions. Both the Lender and we
have signed and dated this Contract below.
This Contract takes effect on the date we sign it.
Lender: E LOAN, Inc.
------------
5875 Arnold Road
----------------
(Address)
Dublin, CA 94568
----------------
----------------------------------------------
By: /s/ Signature Illegible
(Authorized Signature)
Christian Larsen, CEO
---------------------
(Type Name and Title)
Date: 12/22/98
--------
Federal National Mortgage Association
135 N. Los Robles, Suite 300
Pasadena, CA 91101-1707
-----------------------
(Address)
----------------------------------------------
----------------------------------------------
By: /s/ Signature Illegible
(Authorized Signature)
for LADDIE A. SCHMIDTBAUER
Vice President, Quality Control/Operations
------------------------------------------
----------------------------------------------
(Type Name and Title)
Date: FEB 12 1999
-----------
- ----------------------
Page 22 of 22
- ----------------------
08/86
- ----------------------
<PAGE> 1
EXHIBIT 10.26
MULTI-TENANT OFFICE TRIPLE NET LEASE
Effective Date: August 19, 1998
(The date set forth below Landlord's signature.)
BASIC LEASE INFORMATION
Landlord: CREEKSIDE SOUTH TRUST,
a Maryland business trust
Landlord's Address Carlyle Realty
For Notice: 4675 MacArthur Court
Newport Beach, California 92660
Attn: Paul Brady
Telephone: (714) 757-0535
Fax: (714) 757-0720
with copies to:
ZKS Real Estate Partners
3697 Mt. Diablo Boulevard, Suite 100
Lafayette, California 94549
Attn: David A. Kingery
Telephone: (925) 283-8280
Fax: (925) 283-7638
Allen, Matkins, Leck, Gamble and Mallory LLP
333 Bush Street, Suite 1700
San Francisco, California 94104
Attn: Richard C. Mallory, Esq.,
Telephone: (415) 837-1515
Fax: (415) 837-1516
Landlord's Address Creekside South Trust
For Payment of Rent: c/o CB Richard Ellis
Department No. 01685
San Francisco, California 94139-1685
Tenant: E-LOAN, INC.
a, California corporation
<PAGE> 2
Tenant's Address E-Loan, Inc.
For Notice: 540 University Avenue, Suite 350
Palo Alto, California 94301
Attn: Doug Galen
Telephone: (650) 847-3700
Fax: (650) 617-0410
Project: Southern parcel of Creekside Business Park
Building: Building "C"
Premises: Approximately 42,789 Rentable Square Feet as shown
in Exhibit A.
Premises Address:
Street: 5875 Arnold Drive
City and State: Dublin, California
Term: Five (5) years
Estimated Commencement October 15, 1998
Date:
Base Rent Per Month:
<TABLE>
<CAPTION>
Monthly Base Rent
Year of Term Per Rentable Square Foot
------------ ------------------------
<S> <C>
1 $1.25
2 $1.29
3 $1.33
4 $1.37
5 $1.41
</TABLE>
Tenant's Share of Fifty percent (50%)
Operating Expenses:
Security Deposit: Fifty Thousand Dollars ($50,000) plus the Letter or
Credit pursuant to Section 3.3
Broker: Landlord's Broker: Colliers Parrish International,
Inc.
Tenant's Broker: John Robbins & Associates
-ii-
<PAGE> 3
Lease Year: Shall refer to each three hundred sixty-five (365)
day period during the Term commencing on the
Commencement Date and on each anniversary thereof.
Rentable Square Feet: Shall mean the total square footage of the Premises
measured from drip line to drip line.
Permitted Uses: General office use and no other uses shall be
permitted without the prior written consent of
Landlord
Options: One (1) option to renew for five (5) years
ADDENDUM
EXHIBITS
A Premises
B Work Letter
C Commencement Date Memorandum
D Rules and Regulations
E Estoppel Certificate
The Basic Lease Information set forth above and the Addendum and
Exhibits attached hereto are incorporated into and made a part of the following
Lease. Each reference in this Lease to any of the Basic Lease Information shall
mean the respective information above 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 the Basic Lease Information
and the provisions of the Lease, the latter shall control.
LANDLORD (_______) AND TENANT (_______) AGREE.
initial initial
-iii-
<PAGE> 4
Table of Contents
Page
----
1. PREMISES...............................................................1
1.1 Premises......................................................1
1.2 Common Area...................................................1
1.3 Reserved Rights...............................................1
2. TERM...................................................................2
2.1 Commencement Date.............................................2
2.2 Possession....................................................2
3. RENT...................................................................2
3.1 Rent..........................................................2
3.2 Late Charge and Interest......................................3
3.3 Security Deposit..............................................4
4. UTILITIES..............................................................6
5. TAXES..................................................................6
5.1 Real Property Taxes...........................................6
5.2 Definition of Real Property Taxes.............................6
5.3 Personal Property Taxes.......................................7
6. OPERATING EXPENSES.....................................................7
6.1 Operating Expenses............................................7
6.2 Definition of Operating Expenses..............................7
7. ESTIMATED EXPENSES.....................................................9
7.1 Payment.......................................................9
7.2 Adjustment....................................................9
8. INSURANCE..............................................................9
8.1 Landlord......................................................9
8.2 Tenant.......................................................10
8.3 General......................................................11
8.4 Indemnity....................................................12
8.5 Exemption of Landlord from Liability.........................12
9. REPAIRS AND MAINTENANCE...............................................13
9.1 Tenant.......................................................13
9.2 Landlord.....................................................13
10. ALTERATIONS...........................................................14
10.1 Trade Fixtures; Alterations..................................14
-iv-
<PAGE> 5
10.2 Damage; Removal..............................................15
10.3 Liens........................................................15
10.4 Standard of Work.............................................15
11. USE...................................................................15
12. ENVIRONMENTAL MATTERS.................................................16
12.1 Hazardous Materials..........................................16
12.2 Indemnification..............................................17
13. DAMAGE AND DESTRUCTION................................................18
13.1 Casualty.....................................................18
13.2 Tenant's Fault...............................................19
13.3 Uninsured Casualty...........................................19
13.4 Waiver.......................................................20
13.5 Force Majeure................................................20
14. EMINENT DOMAIN........................................................20
14.1 Total Condemnation...........................................20
14.2 Partial Condemnation.........................................20
14.3 Award........................................................21
14.4 Temporary Condemnation.......................................21
15. DEFAULT...............................................................21
15.1 Events of Defaults...........................................21
15.2 Remedies.....................................................22
15.3 Cumulative...................................................23
16. ASSIGNMENT AND SUBLETTING.............................................24
17. ESTOPPEL, ATTORNMENT AND SUBORDINATION................................25
17.1 Estoppel.....................................................25
17.2 Subordination................................................26
17.3 Attornment...................................................26
18. MISCELLANEOUS.........................................................26
18.1 General......................................................26
18.2 Signs........................................................28
18.3 Waiver.......................................................28
18.4 Financial Statements.........................................28
18.5 Limitation of Liability......................................28
18.6 Notices......................................................29
18.7 Brokerage Commission.........................................29
18.8 Authorization................................................29
18.9 Holding Over; Surrender......................................29
18.10 Joint and Several............................................30
-v-
<PAGE> 6
18.11 Covenants and Conditions.....................................30
18.12 Addenda......................................................30
19. OPTION TO EXTEND......................................................30
19.1 Option Right.................................................30
19.2 Option Rent..................................................30
19.3 Exercise of Options..........................................31
19.4 Determination of Option Rent.................................31
20. PARKING...............................................................32
21. RIGHT OF FIRST OFFER..................................................32
-vi-
<PAGE> 7
1. PREMISES.
1.1 Premises. Landlord hereby leases to Tenant the Premises as
shown on Exhibit A attached hereto, but excluding the Common Area (defined
below) and any other portion of the Project. Tenant has determined that the
Premises are acceptable for Tenant's use and Tenant acknowledges that, except as
set forth in the Work Letter, if any, neither Landlord nor any broker or agent
has made any representations or warranties in connection with the physical
condition of the Premises or their fitness for Tenant's use upon which Tenant
has relied directly or indirectly for any purpose. By taking possession of the
Premises, Tenant accepts the Premises "AS-IS" and waives all claims of defect in
the Premises, except as set forth in the Work Letter.
1.2 Common Area. Tenant may, subject to rules made by Landlord,
use the following areas ("Common Area") in common with Landlord and other
tenants of the Project: refuse facilities, landscaped areas, driveways necessary
for access to the Premises, parking spaces and other common facilities
designated by Landlord from time to time for the common use of all tenants of
the Project. Landlord shall have the right, in Landlord's sole discretion, from
time to time (i) to make changes to the Common Area, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscape areas, and walkways; (ii) to close
temporarily any of the Common Area for maintenance purposes so long as
reasonable access to the Premises remains available; (iii) to designate other
land outside the boundaries of the Project to be part of the Common Area; (iv)
to install, use, maintain, repair, alter, relocate or replace any Common Area or
to add additional buildings and improvements to the Common Area; (v) to use the
Common Area while engaged in making additional improvements, repairs or
alterations to the Project, or any portion thereof; and (vi) to do and perform
such other acts and make such other changes in, to or with respect to the Common
Area and the Project as Landlord may, in the exercise of sound business
judgment, deem to be appropriate or prudent.
1.3 Reserved Rights. Landlord reserves the right to enter the
Premises for any reason upon reasonable notice to Tenant (except in case of an
emergency) and/or to undertake the following all without abatement of rent or
liability to Tenant: inspect the Premises and/or the performance by Tenant of
the terms and conditions hereof; make such alterations, repairs, improvements or
additions to the Premises as required hereunder; change boundary lines of the
Common Areas; install, use, maintain, repair, alter, relocate or replace any
pipes, ducts, conduits, wires, equipment and other facilities in the Building;
grant easements on the Project, dedicate for public use portions thereof and
record covenants, conditions and restrictions ("CC&Rs") affecting the Project
and/or amendments to existing CC&Rs which do not unreasonably interfere with
Tenant's use of the Premises or impose additional material monetary obligations
on Tenant; change the name of the Project; affix reasonable signs and displays;
and, during the last nine (9) months of the Term, show the Premises to
prospective tenants.
2. TERM.
2.1 Commencement Date. The Term of the Lease shall commence
("Commencement Date") on the first day of the first full month following the
date on which the Premises are
<PAGE> 8
Substantially Complete (as hereinafter defined), subject to any Tenant Delays,
as provided in Section 3 of the Work Letter attached hereto as Exhibit B (the
"Work Letter") except that if Substantial Completion occurs on the first day of
a month, that date shall be the Commencement Date, and the Lease shall continue
in full force and effect for the period of time specified as the Term or until
this Lease is terminated as otherwise provided herein. The Premises shall be
deemed to be "Substantially Complete" on the earliest of the date on which: (1)
Landlord files or causes to be filed with the City in which the Premises are
located (if required) and delivers to Tenant an architect's notice of
substantial completion, or similar written notice that the Premises are
substantially complete, (2) Tenant commences business operations in the
Premises, or (3) a certificate of occupancy (or a reasonably substantial
equivalent such as a signoff from a building inspector or a temporary
certificate of occupancy) is issued for the Premises. Landlord shall arrange for
the construction of certain Tenant Improvements (as defined in the Work Letter),
if any, in accordance with and subject to the terms of the Work Letter . Tenant
shall, upon demand after delivery of the Premises to Tenant, execute and deliver
to Landlord a Commencement Date Memorandum in the form attached hereto as
Exhibit C acknowledging (i) the Commencement Date, (ii) the final square footage
of the Premises and (iii) Tenant's acceptance of the Premises. If the Premises
are not Substantially Complete on the Estimated Commencement Date as extended by
Force Majeure events and Tenant Delays (as defined in the Lease or Work Letter,
if any), this Lease shall remain in effect, Landlord shall not be subject to any
liability, and the Commencement Date shall be delayed until the date the
Premises are Substantially Complete.
2.2 Possession. Tenant's possession of the Premises during the
period of time, if any, from the date on which Landlord tenders possession of
the Premises to Tenant in a Substantially Completed condition (the "Possession
Date") to the Commencement Date, shall be subject to all the provisions of this
Lease and shall not advance the expiration date. Rent shall be paid for such
period at the rate stated in the Basic Lease Information, prorated on the basis
of a thirty (30) day month, and shall be due and payable to Landlord on or
before the Commencement Date. Tenant shall upon demand acknowledge in writing
the Possession Date in the form attached hereto as Exhibit C.
3. RENT.
3.1 Rent. Prior to the Commencement Date, Landlord will cause its
architect to measure and certify in writing to Landlord the Rentable Square Feet
(as defined in the Basic Lease Information) of the Premises, following which
time the Base Rent and other figures based upon the Rentable Square Feet
contained in the Premises shall be determined in accordance with the rental
rates set out in the Basic Lease Information. Except in the case of manifest
error, the certification from Landlord's architect of the Rentable Square Feet
of the Premises shall be binding upon Landlord and Tenant. Tenant shall pay to
Landlord, at Landlord's Address for Payment of Rent designated in the Basic
Lease Information, or at such other address as Landlord may from time to time
designate in writing to Tenant for the payment of Rent, the Base Rent, without
notice, demand, offset or deduction, in advance, on the first day of each
calendar month. Landlord shall have no obligation to notify Tenant of any
increase in Rent and Tenant's obligation to pay all Rent (and any increases)
when due shall not be modified or altered by such
-2-
<PAGE> 9
lack of notice from Landlord. Acceptance of a payment of Rent which is less than
the amount then due shall not be a waiver of Landlord's rights to the balance of
such Rent, regardless of Landlord's endorsement of or deposit of any check so
stating. It is intended that this Lease be a "triple net lease," and that the
Rent to be paid hereunder by Tenant will be received by Landlord without any
deduction or offset whatsoever by Tenant, foreseeable or unforeseeable. Except
as expressly provided to the contrary in this Lease, Landlord shall not be
required to make any expenditure, incur any obligation, or incur any liability
of any kind whatsoever in connection with this Lease or the ownership,
construction, maintenance, operation or repair of the Premises or the Project.
Upon the execution of this Lease, Tenant shall pay to Landlord the first month's
Base Rent. If the Term commences (or ends) on a date other than the first (or
last) day of a month, Base Rent shall be prorated on a per diem basis with
respect to the portion of the first month and/or last month within the Term. All
sums other than Base Rent which Tenant is obligated to pay under this Lease
shall be deemed to be additional rent due hereunder, whether or not such sums
are designated "additional rent" and shall be due and payable to Landlord
commencing on the Possession Date. The term "Rent" means the Base Rent and all
additional rent payable hereunder. Notwithstanding the foregoing, Tenant shall
only pay Base Rent on 20,000 Rentable Square Feet of the Premises for the first
six (6) months of the Term and shall only pay Base Rent on 30,000 Rentable
Square Feet of the Premises for months seven (7) through nine (9) of the Term;
provided, however, if Tenant is actually using any more space during such
applicable months, then Tenant shall pay Base Rent on the total amount of
Rentable Square Feet being used by Tenant. Beginning with the tenth (10th) month
and continuing throughout the remainder of the Term, Tenant shall pay Base Rent
on the total Rentable Square Feet of the Premises whether or not Tenant is
occupying the total space.
3.2 Late Charge and Interest. The late payment of any Rent will
cause Landlord to incur additional costs, including administration and
collection costs and processing and accounting expenses and increased debt
service ("Delinquency Costs"). If Landlord has not received any installment of
Rent within five (5) business days after such amount is due more than two (2)
times in any year of the Term, Tenant shall pay a late charge of ten percent
(10%) of the delinquent amount, which is agreed to represent a reasonable
estimate of the Delinquency Costs incurred by Landlord. In addition, all such
delinquent amounts shall bear interest from the date such amount was due until
paid in full at a rate per annum ("Applicable Interest Rate") equal to the
lesser of (a) the maximum interest rate permitted by law or (b) five percent
(5%) above the rate publicly announced by Bank of America, N.A. (or if Bank of
America, N.A. ceases to exist, the largest bank then headquartered in the State
of California) ("Bank") as its "Reference Rate." If the use of the announced
Reference Rate is discontinued by the Bank, then the term Reference Rate shall
mean the announced rate charged by the Bank which is, from time to time,
substituted for the Reference Rate. Landlord and Tenant recognize that the
damage which Landlord shall suffer as a result of Tenant's failure to pay such
amounts is difficult to ascertain and said late charge and interest are the best
estimate of the damage which Landlord shall suffer in the event of late payment.
If a late charge becomes payable for any three (3) installments of Rent within
any twelve (12) month period, then the Rent shall automatically become due and
payable quarterly in advance.
-3-
<PAGE> 10
3.3 Security Deposit and Letter of Credit.
3.3.1 Security Deposit. Upon the execution of this Lease,
Tenant shall pay to Landlord the Security Deposit . The Security Deposit shall
secure the full and faithful performance of each provision of this Lease to be
performed by Tenant. Landlord shall not be required to pay interest on the
Security Deposit or to keep the Security Deposit separate from Landlord's own
funds. If Tenant fails to perform fully and timely all or any of Tenant's
covenants and obligations hereunder, Landlord may, but without obligation, apply
all or any portion of the Security Deposit toward fulfillment of Tenant's
unperformed covenants and/or obligations. If Landlord does so apply any portion
of the Security Deposit, Tenant shall immediately pay Landlord sufficient cash
to restore the Security Deposit to the amount of the then current Base Rent per
month. After Tenant vacates the Premises, upon the expiration or sooner
termination of this Lease, if Tenant is not then in default, Landlord shall
return to Tenant any unapplied balance of the Security Deposit. Should the
Permitted Use be amended to accommodate a change in the business of Tenant or to
accommodate a subtenant or assignee, Landlord shall have the right to increase
the Security Deposit to the extent necessary, in Landlord's reasonable judgment,
to account for any increased risk to the Premises or increased wear and tear
that the Premises may suffer as a result thereof. If a change in control of
Tenant occurs during this Lease and following such change the financial
condition of Tenant is, in Landlord's reasonable judgment, materially reduced,
Tenant shall deposit such additional monies with Landlord as shall be sufficient
to cause the Security Deposit to be at a commercially reasonable level based on
said change in financial condition.
3.3.2 Letter of Credit. By no later than 4:00 p.m. on August
21, 1998, Tenant shall deliver to Landlord an irrevocable standby letter of
credit in the amount of Nine Hundred Thousand Dollars ($900,000.00) ("Letter of
Credit") as additional security for the faithful performance by Tenant of its
obligations under this Lease. Notwithstanding anything to the contrary provided
herein, if Tenant has not received its venture capital contribution by August
31, 1998 pursuant to that certain letter dated August 6, 1998 from Douglas Galen
to David A. Kingery, then Tenant shall increase the Additional Security Deposit
to One Million Five Hundred Thousand Dollars ($1,500,000.00) by September 15,
1998. The Letter of Credit shall be upon the terms and subject to the following
provisions of this Section 3.3.2.
3.3.2.1 Application of Letter of Credit. If Tenant
defaults with respect to any provision of this Lease during the Lease Term, in
addition to any other rights held by Landlord, Landlord may draw upon and apply
all or any part of the Letter of Credit to the payment of any Rent or Operating
Expenses or other Event of Default as defined in Section 15.1 below, the payment
of any other amount which Landlord may spend or become obligated to spend by
reason of such default, and/or to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of such default, to the full extent
permitted by law and contemplated by this Lease. If any portion of the Letter of
Credit is so applied, Tenant shall, within ten (10) business days after written
demand therefor, deposit cash with Landlord in an amount sufficient to restore
the Letter of Credit to its then required amount or provide a replacement Letter
of Credit to bring the face amount of the then available letter of credit to its
-4-
<PAGE> 11
then required amount, and Tenant's failure to do so shall be a non-curable
default under this Lease.
3.3.2.2 Terms of Letter of Credit. The Letter of Credit
shall have a term commencing upon the date of execution of this Lease, and
continuing until the expiration of the initial Lease Term. The Letter of Credit
shall be (i) issued by Silicon Valley Bank ("Bank") and (ii) in a form
containing the required provisions set forth in Sections (a) through (d) below.
Notwithstanding the foregoing, Tenant shall have the right to transfer the
Letter of Credit to another bank approved by Landlord. The premium or purchase
price of, or any other Bank fees associated with, such Letter of Credit shall be
paid by Tenant. The Letter of Credit shall, without limiting the foregoing,
provide that:
(a) Such Letter of Credit shall be transferable,
irrevocable and unconditional, so that Landlord, or its successor(s) in
interest, may at any time "call" for any portion of the then uncalled upon
amount thereof without regard to and without the Bank inquiring as to the right
or lack of right of the holder of the Letter of Credit to effect such calls or
the existence or lack of existence of any defenses by Tenant with respect
thereto;
(b) Landlord agrees not to draw upon the Letter of
Credit unless Landlord claims default by Tenant under the Lease after giving
notice thereof to Tenant in accordance with the terms of this Lease and the
expiration of any applicable cure period set forth in this Lease, but if
Landlord does effect such a "draw," such "draw" amount may, at Landlord's
option, be in the full amount of the Letter of Credit or a partial draw as
necessary to compensate Landlord for such default.
(c) Any failure or delay of Landlord to "draw" any
portion of the Letter of Credit shall not act as a waiver of Landlord's right to
do so at any time thereafter or constitute a waiver of any default with respect
to the Lease.
(d) Tenant agrees not to interfere in any way with
payment to Landlord of the proceeds of the Letter of Credit, either prior to or
following a "draw" by Landlord of any portion of the Letter of Credit,
regardless of whether any dispute exists between Tenant and Landlord as to
Landlord's right to "draw" from the Letter of Credit. No condition or term of
this Lease shall be deemed to render the Letter of Credit conditional upon this
Lease or to justify the issuer of the Letter of Credit in failing to honor a
draw upon such Letter of Credit in a timely manner. In the event Landlord is
determined through any dispute resolution procedure agreed upon by the parties
or by a court of competent jurisdiction to have improperly drawn on the Letter
of Credit, then Tenant shall be entitled to receive a prompt refund of such
amount from Landlord. Tenant hereby waives the provisions of Section 1950.7 of
the California Civil Code, and all other provisions of law, now or hereafter in
force, which provide that Landlord may claim from a security deposit (including
the Letter of Credit) only those sums reasonably necessary to remedy defaults in
the payment of rent or other Event of Default, it being agreed that Landlord
may, in addition, claim those sums reasonably necessary to compensate Landlord
for any other loss or damage, foreseeable or unforeseeable, caused by the act or
omission of Tenant or any officer, employee, agent or invitee of Tenant which is
an Event of Default.
-5-
<PAGE> 12
3.3.2.3 Release of Letter of Credit. Commencing on the
first day of the twenty-fifth month of the Term and continuing every three (3)
months thereafter throughout the remaining Term until the amount of the Letter
of Credit reaches Zero Dollars ($0.00) , Tenant shall have the right to have the
amount of the Letter of Credit reduced by Seventy-Five Thousand Dollars
($75,000.00) of the Additional Security Deposit as long as Tenant is not in
default under the terms of this Lease. Notwithstanding the foregoing, if
Tenant's net income reaches One Million Dollars ($1,000,000.00) for three (3)
consecutive quarters after the anniversary of the Commencement Date and provided
Tenant is not in default under the terms of this Lease, then Tenant shall have
the right to cancellation of the Letter of Credit in its entirety .
4. UTILITIES. Landlord shall provide the utility service connections into
the Premises as required in the Working Drawings as part of the Tenant
Improvement work. Tenant shall pay all charges for heat, water, gas,
electricity, telephone and any other utilities used on or provided to the
Premises. Landlord shall not be liable to Tenant for interruption in or
curtailment of any utility service, nor shall any such interruption or
curtailment constitute constructive eviction or grounds for rental abatement. In
the event the Premises is not separately metered, Tenant shall have the option,
subject to Landlord's prior written consent and the terms of this Lease, to
cause the Premises to be separately metered at Tenant's cost and expense. If
Tenant does not elect to cause the Premises to be separately metered, Tenant
shall pay a reasonable proration of utilities, as determined by Landlord.
5. TAXES.
5.1 Real Property Taxes. Tenant shall pay to Landlord Tenant's
Share of the Real Property Taxes in each calendar year; provided, however,
Landlord may, at its election, require that Tenant pay any increase in the
assessed value of the Project based upon the value of the Tenant Improvements
(as defined in the Work Letter) relative to the value of the other improvements
on or to the other buildings in the Project, as reasonably determined by
Landlord. Upon Tenant's request, Landlord shall endeavor to provide Tenant with
a breakdown of Landlord's determination of Tenant's increased share of Real
Property Taxes resulting from the Tenant Improvements.
5.2 Definition of Real Property Taxes. "Real Property Taxes" shall
be the sum of the following: all real property taxes, possessory-interest taxes,
business or license taxes or fees, service payments in lieu of such taxes or
fees, annual or periodic license or use fees, excises, transit and traffic
charges, housing fund assessments, open space charges, childcare fees, school,
sewer and parking fees or any other assessments, levies, fees, exactions or
charges, general and special, ordinary and extraordinary, unforeseen as well as
foreseen (including fees "in-lieu" of any such tax or assessment) which are
assessed, levied, charged, conferred or imposed by any public authority upon the
Project (or any real property comprising any portion thereof) or its operations,
together with all taxes, assessments or other fees imposed by any public
authority upon or measured by any Rent or other charges payable hereunder,
including any gross receipts tax or excise tax levied by any governmental
authority with respect to receipt of rental income, or
-6-
<PAGE> 13
upon, with respect to or by reason of the development, possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises or any portion thereof, or documentary transfer taxes
upon this transaction or any document to which Tenant is a party creating or
transferring an interest in the Premises, together with any tax imposed in
substitution, partially or totally, of any tax previously included within the
aforesaid definition or any additional tax the nature of which was previously
included within the aforesaid definition, together with any and all costs and
expenses (including, without limitation, attorneys, administrative and expert
witness fees and costs) of challenging any of the foregoing or seeking the
reduction in or abatement, redemption or return of any of the foregoing, but
only to the extent of any such reduction, abatement, redemption or return. All
references to Real Property Taxes during a particular year shall be deemed to
refer to taxes accrued during such year, including supplemental tax bills
regardless of when they are actually assessed and without regard to when such
taxes are payable. The obligation of Tenant to pay for supplemental taxes shall
survive the expiration or early termination of this Lease. Nothing contained in
this Lease shall require Tenant to pay any franchise, corporate, estate or
inheritance tax of Landlord, or any income, profits or revenue tax or charge
upon the net income of Landlord.
5.3 Personal Property Taxes. Prior to delinquency, Tenant shall
pay all taxes and assessments levied upon trade fixtures, alterations,
additions, improvements, inventories and other personal property located and/or
installed on the Premises by Tenant; and Tenant shall provide Landlord copies of
receipts for payment of all such taxes and assessments. To the extent any such
taxes are not separately assessed or billed to Tenant, Tenant shall pay the
amount thereof as invoiced by Landlord.
6. OPERATING EXPENSES.
6.1 Operating Expenses. Tenant shall pay to Landlord Tenant's
Share of the Operating Expenses in each calendar year. Notwithstanding the
foregoing, Tenant shall only pay Tenant's Share of Operating Expenses on 20,000
Rentable Square Feet of the Premises which shall be Twenty-three and 27/100
percent (23.27%) for the first six (6) months of the Term and shall only pay
Tenant's Share of Operating Expenses on 30,000 Rentable Square Feet of the
Premises which shall be Thirty-Five and 06/100 percent (35.06%) for months seven
(7) through nine (9) of the Term; provided, however, if Tenant is actually using
any more space during such applicable months, then Tenant shall pay Tenant's
Share of Operating Expenses on the total amount of Rentable Square Feet being
used by Tenant. Beginning with the tenth (10th) month and continuing throughout
the remainder of the Term, Tenant shall pay Tenant's Share of Operating Expenses
on the total Rentable Square Feet of the Premises whether or not Tenant is
occupying the total space.
6.2 Definition of Operating Expenses. "Operating Expenses" shall
include all reasonable and necessary expenses incurred by Landlord in the
ownership, operation, maintenance, repair and management of the Project, the
Common Area and/or the Building, including, but not limited to, (a)
non-structural repairs to and maintenance of the roof (and roof membrane),
skylights and exterior walls of the Building (including painting) except for
latent
-7-
<PAGE> 14
defects; (b) repair, maintenance, utility costs and landscaping of the
Common Area, including, but not limited to, any and all costs of maintenance,
repair and replacement of all parking areas (including bumpers, sweeping,
striping and slurry coating), loading and unloading areas, trash areas, common
driveways, sidewalks, outdoor lighting, signs, directories, walkways, parkways,
landscaping, irrigation systems, fences and gates and other costs which are
allocable to the real property of which the Premises are a part; (c) insurance
deductibles (subject to Section 13.3 below) and the costs relating to the
insurance maintained by Landlord with respect to the Project (including, without
limitation, the Building), including, without limitation, Landlord's cost of any
self insurance deductible or retention; (d) maintenance contracts for heating,
ventilation and air-conditioning (HVAC) systems and elevators, if any; (e)
maintenance, monitoring and operation of the fire/life safety and sprinkler
system; (f) trash collection, security services and the costs of any
environmental inspections; (g) Real Property Taxes; (h) capital improvements
made to or capital assets acquired for the Project after the Commencement Date
that are intended to reduce Operating Expenses or are reasonably necessary for
the health and safety of the occupants of the Project or are required under any
governmental law or regulation, which capital costs, or an allocable portion
thereof, shall be amortized over its reasonably anticipated useful life
according to Federal income tax guidelines, together with interest on the
unamortized balance at the Applicable Interest Rate; (i) to the extent used,
commercially reasonable reserves set aside for maintenance and repair; and (j)
any other costs incurred by Landlord related to the Project. Operating Expenses
shall also include an administrative fee to Landlord for accounting and project
management services relating to the Project in an amount equal to ten percent
(10%) of the sum of Operating Expenses not including Real Property Taxes and
insurance costs (other than the administrative fee). Operating Expenses shall
also include all costs and fees incurred by Landlord in connection with the
management of this Lease and the Premises including the cost of those services
which are customarily performed by a property management services company. In no
event will Landlord or its property manager be required to keep separate
accounting records for the components of the Operating Expenses or to create any
ledgers or schedules not already in existence. Notwithstanding the foregoing,
all costs Landlord incurs that are solely attributable to the Premises shall be
borne by Tenant, such that Tenant shall reimburse Landlord for one hundred
percent (100%) of same as additional rent.
6.3 Operating Expense Exclusions. Notwithstanding the provisions
of Section 6.2 above, in no event shall Operating Expenses include any of the
following: (i) replacement of or structural repairs to the roof or the exterior
walls; (ii) repairs to the extent covered by insurance proceeds, or paid by
Tenant or other third parties; (iii) alterations solely attributable to tenants
of the Project other than Tenant; (iv) the costs for any utilities which are
separately metered to the Premises or to another Tenant's premises, (v) except
as provided in Section 6.2 above, capital improvements to the Project, (vi)
expenses related to the management and operation of Landlord as an entity to the
extent they do not relate to the operation, ownership and maintenance or the
Project, except for the management fee permitted above, (vii) any fines or
penalties due to any failure by Landlord to remit timely payments and/or
violation by Landlord of any governmental rule or authority or Legal
Requirements (excepting Tenant's specific compliance obligations hereunder),
(viii) profit increment paid to subsidiaries or affiliates of Landlord for
services on or to the Project, to the extent only that the costs of such
services exceed competitive costs of such
-8-
<PAGE> 15
services were they not so rendered by a subsidiary or affiliate, (ix) any
advertising and promotional expenditures, (x) costs and expenses incurred in
connection with repairs or alteration, for defects (including latent defects) in
the design or construction of the Project or arising from the failure of the
Project to comply with governmental rules or regulations as of the Commencement
Date, (xi) items and services for which Tenant or any other tenant in the
Project directly reimburses Landlord and costs reimbursed by insurance proceeds,
condemnation proceeds or otherwise, (xii) financing and interest charges, and
(xiii) salaries of employees not related to the management or maintenance of the
Project.
7. ESTIMATED EXPENSES.
7.1 Payment. "Estimated Expenses" for any particular year shall
mean Landlord's estimate of Operating Expenses and Real Property Taxes for a
calendar year. Tenant shall pay Tenant's Share of the Estimated Expenses with
installments of Base Rent in monthly installments of one-twelfth (1/12th)
thereof on the first day of each calendar month during such year. If at any time
Landlord determines that Operating Expenses and Real Property Taxes are
projected to vary from the then Estimated Expenses, Landlord may, by notice to
Tenant, revise such Estimated Expenses, and Tenant's monthly installments for
the remainder of such year shall be adjusted so that by the end of such calendar
year Tenant has paid to Landlord Tenant's Share of the revised Estimated
Expenses for such year.
7.2 Adjustment. "Operating Expenses and Real Property Taxes
Adjustment" (or "Adjustment") shall mean the difference between Tenant's Share
of Estimated Expenses and Tenant's Share of Operating Expenses and Real Property
Taxes for any calendar year. After the end of each calendar year, Landlord shall
deliver to Tenant a statement of Tenant's Share of Operating Expenses and Real
Property Taxes for such calendar year, accompanied by a computation of the
Adjustment. If Tenant's payments are less than Tenant's Share, then Tenant shall
pay the difference within twenty (20) days after receipt of such statement.
Tenant's obligation to pay such amount shall survive the termination of this
Lease. If Tenant's payments exceed Tenant's Share, then (provided that Tenant is
not in default), Landlord shall credit such excess amount to future installments
of Tenant's Share for the next calendar year. If Tenant is in default, Landlord
may, but shall not be required to, credit such amount to Rent arrearages.
8. INSURANCE.
8.1 Landlord. Landlord shall maintain insurance through individual
or blanket policies insuring the Building against fire and extended coverage
(including, if Landlord elects, "all risk" coverage, earthquake/volcanic action,
flood and/or surface water insurance) for the full replacement cost of the
Building, with deductibles and the form and endorsements of such coverage as
selected by Landlord, together with rental abatement insurance against loss of
Rent in an amount equal to the amount of Rent for a period of at least twelve
(12) months commencing on the date of loss. Landlord may also carry such other
insurance as Landlord may deem prudent or advisable, including, without
limitation, liability insurance in such amounts and on such terms as Landlord
shall determine; provided, however, that such insurance shall be in a form and
for an amount as carried by other landlord's of buildings with comparable age,
size,
-9-
<PAGE> 16
specifications, location and quality of construction in the Dublin, California
area. Tenant shall pay to Landlord, as a portion of the Operating Expenses, the
costs of the insurance coverages described herein, including, without
limitation, Landlord's cost of any self-insurance deductible or retention.
8.2 Tenant. Tenant shall, at Tenant's expense, obtain and keep in
force at all times the following insurance:
8.2.1 Liability Insurance. A commercial general liability
insurance policy or an equivalent thereto, written on an occurrence form that
includes personal injury coverage, advertising injury coverage, and contractual
liability coverage, at Tenant's expense, insuring against liability arising out
of the ownership, use, occupancy or maintenance of the Premises, and the
business operated by Tenant and any subtenants of Tenant in the Premises. The
initial amount of such insurance shall be Two Million Dollars ($2,000,000.00)
each occurrence/ Two Million Dollars ($2,000,000.00) general aggregate on a per
location basis, Two Million Dollars ($2,000,000) for personal injury and
advertising injury coverage and Five Hundred Thousand Dollars ($500,000.00) for
property damage. However, the amount of such insurance shall not limit Tenant's
liability nor relieve Tenant of any obligation hereunder. Tenant shall, at
Tenant's expense, maintain such other liability insurance as Tenant deems
necessary to protect Tenant.
8.2.2 Casualty Insurance. A policy or policies of standard
fire, extended coverage and special extended coverage insurance ("All Risks"),
including energy systems coverage and a vandalism and malicious mischief
endorsement, coverage for water damage to contents, sprinkler leakage coverage
and, if required by Landlord, earthquake sprinkler leakage with extended
coverage and naming Landlord as an additional insured, in an amount adequate to
cover the cost of replacement of all equipment, furniture, fixtures, trade
fixtures, and personal property of Tenant or which may be located in, upon or
about the Premises in the event of fire or extended coverage loss.
8.2.3 Workers' Compensation and Employer's Liability
Insurance. Workers' compensation insurance having limits not less than those
required by state statute and federal statute, if applicable, and covering all
persons employed by Tenant in the conduct of its operations on the Premises
(including the all states endorsement and, if applicable, the volunteers
endorsement), together with employer's liability insurance coverage in the
amount of at least One Million Dollars ($1,000,000); and
8.2.4 Business Interruption. Tenant shall obtain and maintain
loss of income and extra expense insurance in amounts as will reimburse Tenant
for direct or indirect loss of earnings attributable to all perils commonly
insured against by prudent lessees in the business of Tenant or attributable to
prevention of access to the Premises as a result of such perils.
8.2.5 Additional Insurance Obligations. Such other reasonable
types of insurance coverage, including, without limitation, loss of earnings
insurance, and in such reasonable amounts covering the Premises and Tenant's
operations therein, as may be reasonably requested by Landlord.
-10-
<PAGE> 17
8.3 General.
8.3.1 Insurance Companies. Insurance required to be maintained
by Tenant shall be written by companies licensed to do business in the state in
which the Premises are located and having a "General Policyholders Rating" of at
least "A - VIII" (or such higher rating as may be required by a lender having a
lien on the Premises) as set forth in the most current issue of "Best's
Insurance Guide."
8.3.2 Certificates of Insurance. Tenant shall deliver to
Landlord certificates of insurance for all insurance required to be maintained
by Tenant in a form acceptable to Landlord in its sole discretion, no later than
seven (7) days prior to the date of possession of the Premises. Tenant shall, at
least ten (10) days prior to expiration of the policy, furnish Landlord with
certificates of renewal or "binders" thereof. Each certificate shall expressly
provide that such policies shall not be cancelable or otherwise subject to
modification except after sixty (60) days prior written notice to the parties
named as additional insureds in this Lease (except in the case of cancellation
for nonpayment of premium in which case cancellation shall not take effect until
at least ten (10) days' notice has been given to Landlord). If Tenant fails to
maintain any insurance required in this Lease, Tenant shall be liable for all
losses and cost resulting from said failure.
8.3.3 Additional Insureds. Landlord, Landlord's lender, if
any, and any property management company of Landlord for the Premises shall be
named as additional insureds on a form approved by Landlord under all of the
policies required by Section 8.2.1. The policies required under Section 8.2.1
shall provide for severability of interest.
8.3.4 Primary Coverage. All insurance to be maintained by
Tenant shall, except for workers' compensation and employer's liability
insurance, be primary, without right of contribution from insurance of Landlord.
Any umbrella liability policy or excess liability policy (which shall be in
"following form") shall provide that if the underlying aggregate is exhausted,
the excess coverage will drop down as primary insurance. The limits of insurance
maintained by Tenant shall not limit Tenant's liability under this Lease.
8.3.5 Waiver of Subrogation. Landlord and Tenant each hereby
waive any and all rights of recovery against the other or against the officers,
employees, agents and representatives of the other, on account of loss or damage
occasioned to such waiving party or its property or the property of others under
its control, to the extent that such loss or damage is insured against under any
fire and extended coverage insurance policy which either may have in force at
the time of such loss or damage. Tenant shall, if required, for each of the
policies of insurance required under this Lease, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is contained
in this Lease.
8.3.6 Notification of Incidents. Tenant shall notify Landlord
within twenty-four (24) hours after the occurrence of any accidents or incidents
in the Premises, the Building, Common Areas or the Project which could give rise
to a claim under any of the insurance policies required under this Section 8.
-11-
<PAGE> 18
8.4 Indemnity. Tenant shall indemnify, protect, defend (by counsel
reasonably acceptable to Landlord) and hold harmless Landlord and its partners,
directors, officers, employees, shareholders, lenders, agents, contractors and
each of their successors and assigns (collectively, "Landlord Indemnities") from
and against any and all claims, judgments, causes of action, damages, penalties,
costs, liabilities, and expenses, including all costs, attorneys' fees, expenses
and liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon (collectively, "Claims"), arising at any time during
or after the Term as a result (directly or indirectly) of or in connection with
(i) any default in the performance of any obligation on Tenant's part to be
performed under the terms of this Lease, or (ii) Tenant's use of the Premises,
the conduct of Tenant's business or any activity, work or things done, permitted
or suffered by Tenant in or about the Premises, the Building, the Common Area or
other portions of the Project, except for claims caused solely by Landlord's
gross negligence or willful misconduct (such excluded Claims shall be referred
to herein as "Landlord Caused Claims"), but specifically including Landlord's
negligence (other than gross negligence). The obligations of Tenant under this
Section 8.4 shall survive the termination of this Lease with respect to any
claims or liability arising prior to such termination. Landlord hereby agrees to
protect, defend and indemnify and hold harmless Tenant and Tenant's partners,
officers, directors, shareholders, agents and employees (collectively, "Tenant
Indemnitees") against and save the Tenant Indemnified Parties harmless from any
such Landlord Caused Claims, but only to the extent the Landlord Caused Claims
have not otherwise been waived by Tenant pursuant to Section 8.5 below, and are
not covered by Tenant's insurance maintained pursuant to this Section 8 (and
would not have been covered by such insurance had Tenant obtained the same as
required in this Section 8). Notwithstanding anything to the contrary contained
in this Lease, including the indemnities set forth in this Section 8.4, nothing
in this Lease (including this Section 8) shall impose any obligations on Tenant
or Landlord to be responsible or liable for, and each hereby releases the other
from, all liability for consequential damages, including, without limitation, in
the case of Tenant, any claim relating to any interruption of or interference
with the conduct of Tenant's business. If any action or proceeding is brought
against the indemnified party for any Claim against which the indemnifying party
is obligated to indemnify the indemnified party hereunder, the indemnifying
party upon notice from the indemnified party shall defend such action or
proceeding at the indemnifying party's sole expense by counsel reasonably
acceptable to the indemnified party.
8.5 Exemption of Landlord from Liability. Tenant, as a material
part of the consideration to Landlord, hereby assumes all risk of damage to
property including, but not limited to, Tenant's fixtures, equipment, furniture
and alterations or injury to persons in, upon or about the Premises, the
Building, the Common Area or other portions of the Project arising from any
cause, and Tenant hereby waives all claims in respect thereof against Landlord,
except to the extent such claims are caused by Landlord's gross negligence or
willful misconduct. Tenant hereby agrees that Landlord shall not be liable for
injury to Tenant's business or any loss of income therefrom or for damage to the
property of Tenant, or injury to or death of Tenant, Tenant's employees,
invitees, customers, agents or contractors or any other person in or about the
Premises, the Building, the Common Area or the Project, whether such damage or
injury is caused by fire, steam, electricity, gas, water or rain, or from the
breakage, leakage or other
-12-
<PAGE> 19
defects of sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether said damage or injury results from
conditions arising upon the Premises, upon other portions of the Building or
from other sources or places, and regardless of whether the cause of such damage
or injury or the means of repairing the same is inaccessible to Tenant, except
to the extent caused by Landlord's gross negligence or willful misconduct.
Landlord shall not be liable for any damages arising from any act or neglect of
any other tenant, if any, of the Building or the Project or Landlord's failure
to enforce the terms of any agreements with parties other than Tenant. It is
expressly understood and agreed that Tenant's waivers under this section shall
apply to all costs, liabilities, damages, deaths and injuries caused by
Landlord's negligence (other than its gross negligence).
9. REPAIRS AND MAINTENANCE.
9.1 Tenant. Tenant, at Tenant's sole cost and expense, shall keep
and maintain the Premises (interior and exterior), including loading docks,
doors and ramps, floors, subfloors and floor coverings, walls and wall
coverings, doors, windows, glass, plate glass, ceilings, skylights, lighting
systems, interior plumbing, electrical and mechanical systems and wiring,
appliances and devices using or containing refrigerants, fixtures and equipment
in good repair and in a clean and safe condition, and repair and/or replace any
and all of the foregoing in a clean and safe condition, in good order, condition
and repair; provided, however, that Tenant shall not be responsible for any such
maintenance caused by any latent defects. Without limiting the foregoing, Tenant
shall, at Tenant's sole expense, (a) immediately replace all broken glass in the
Premises with glass equal to or in excess of the specification and quality of
the original glass; and (b) repair any area damaged by Tenant, Tenant's agents,
employees, invitees and visitors, including any damage caused by any roof
penetration, whether or not such roof penetration was approved by Landlord. In
the event Tenant fails, in the reasonable judgment of Landlord, to maintain the
Premises in accordance with the obligations under the Lease, which failure
continues at the end of ten (10) days following Tenant's receipt of written
notice from Landlord stating with particularity the nature of the failure,
Landlord shall have the right to enter the Premises and perform such
maintenance, repairs or refurbishing at Tenant's sole cost and expense. Tenant
shall maintain written records of maintenance and repairs, as required by any
applicable law, ordinance or regulation, and shall use certified technicians to
perform such maintenance and repairs, as so required. Tenant shall deliver full
and complete copies of all service or maintenance contracts entered into by
Tenant for the Premises to Landlord within sixty (60) days after the
Commencement Date.
9.2 Landlord. Landlord shall, subject to the following
limitations, repair damage to the roof, foundation and exterior portions of
exterior walls (excluding wall coverings, interior painting, glass and doors) of
the Building; provided, if such damage is caused by an act or omission of
Tenant, Tenant's employees, agents, invitees, subtenants, or contractors, then
such repairs shall be at Tenant's sole expense. Landlord shall not be required
to make any repair resulting from (i) any alteration or modification to the
Building or to mechanical equipment within the Building performed by, for or
because of Tenant or to special equipment or systems installed by, for or
because of Tenant, (ii) the installation, use or operation of Tenant's property,
-13-
<PAGE> 20
fixtures and equipment, (iii) the moving of Tenant's property in or out of the
Building or in and about the Premises, (iv) Tenant's use or occupancy of the
Premises in violation of Section 11 of this Lease or in the manner not
contemplated by the parties at the time of the execution of this Lease, (v) the
acts or omissions of Tenant and Tenant's employees, agents, invitees,
subtenants, licensees or contractors, (vi) fire and other casualty, except as
provided by Section 13 of this Lease or (vii) condemnation, except as provided
in Section 14 of this Lease. Landlord shall have no obligation to make repairs
under this Section 9.2 until thirty (30) days after receipt of written notice
from Tenant of the need for such repairs. There shall be no abatement of Rent
during the performance of such work. Landlord shall not be liable to Tenant for
injury or damage that may result from any defect in the construction or
condition of the Premises, nor for any damage that may result from interruption
of Tenant's use of the Premises during any repairs by Landlord, except as a
result of Landlord's gross negligence or willful misconduct. Tenant waives any
right to repair the Premises, the Building and/or the Common Area at the expense
of Landlord under any applicable governmental laws, ordinances, statutes, orders
or regulations now or hereafter in effect which might otherwise apply.
9.3 Tenant's Right to make Repairs. If Tenant provides notice to
Landlord of an event or circumstance which requires the action of Landlord with
respect to the provision of repairs and/or maintenance as set forth in this
Article 9, and Landlord fails to respond to Tenant's notice regarding such
action as required by the terms of this Lease, then Tenant may proceed to take
the required action upon delivery of an additional ten (10) business days notice
to Landlord specifying that Tenant is taking such required action, and if such
action was required under the terms of this Lease to be taken by Landlord, then
Tenant shall be entitled to prompt reimbursement by Landlord of Tenant's
reasonable costs and expenses in taking such action plus interest at the
Applicable Interest Rate. In the event Tenant takes such action, and such work
will affect the roof or the Building systems and equipment, Tenant shall use
only those contractors used by Landlord in the Building for such work.
10. ALTERATIONS.
10.1 Trade Fixtures; Alterations. Tenant may install necessary
trade fixtures, equipment and furniture in the Premises, provided that such
items are installed and are removable without structural or material damage to
the Premises, the Building, the Common Area or the Project. Tenant shall not
construct, nor allow to be constructed, any alterations or physical additions
in, about or to the Premises costing more than Twenty-Five Thousand Dollars
($25,000) and which do not affect the Building structure without obtaining the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed but shall be conditioned upon Tenant's compliance with
Landlord's reasonable requirements regarding construction of improvements and
alterations; provided, however, that Tenant shall notify Landlord of its intent
to make such alterations even if Landlord's consent is not required. Tenant
shall submit plans and specifications to Landlord with Tenant's request for
approval and shall reimburse Landlord for all third party costs which Landlord
may incur in connection with granting approval to Tenant for any such
alterations and additions, including any costs or expenses which Landlord may
incur in electing to have outside architects and engineers review
-14-
<PAGE> 21
said matters. For those alterations requiring Landlord's approval, If Landlord
does not respond to a written request from Tenant within fifteen (15) business
days, then Landlord shall be deemed to approve such request. In the event Tenant
makes any alterations to the Premises that trigger or give rise to a requirement
that the Building or the Premises come into compliance with any governmental
laws, ordinances, statutes, orders and/or regulations (such as ADA
requirements), Tenant shall be fully responsible for complying, at its sole cost
and expense, with same. Tenant shall file a notice of completion after
completion of such work and provide Landlord with a copy thereof. Tenant shall
provide Landlord with a set of "as-built" drawings for any such work whether or
not Landlord's approval is required.
10.2 Damage; Removal. Tenant shall repair all damage to the
Premises and/or the Building caused by the installation or removal of Tenant's
fixtures, equipment, furniture and alterations. Upon the termination of this
Lease, except for Tenant Improvements, Tenant shall remove any or all trade
fixtures, alterations, additions, improvements and partitions made or installed
by Tenant and restore the Premises to its condition existing prior to the
construction of any such items, ordinary wear and tear excepted; provided,
however, Landlord has the absolute right to require Tenant to have all or any
portion of such items designated by Landlord to remain on the Premises, in which
event they shall be and become the property of Landlord upon the termination of
this Lease. All such removals and restoration shall be accomplished in a good
and workmanlike manner and so as not to cause any damage to the Premises, the
Building, the Common Area or the Project whatsoever.
10.3 Liens. Tenant shall promptly pay and discharge all claims for
labor performed, supplies furnished and services rendered at the request of
Tenant and shall keep the Premises free of all mechanics' and materialmen's
liens in connection therewith. Tenant shall provide at least ten (10) days prior
written notice to Landlord before any labor is performed, supplies furnished or
services rendered on or at the Premises and Landlord shall have the right to
post on the Premises notices of non-responsibility. If any lien is filed, Tenant
shall cause such lien to be released and removed within ten (10) days after the
date of filing, and if Tenant fails to do so, Landlord may take such action as
may be necessary to remove such lien and Tenant shall pay Landlord such amounts
expended by Landlord together with interest thereon at the Applicable Interest
Rate from the date of expenditure.
10.4 Standard of Work. All work to be performed by or for Tenant
pursuant hereto shall be performed diligently and in a first class, workmanlike
manner, and in compliance with all applicable laws, ordinances, regulations and
rules of any public authority having jurisdiction over the Premises and/or
Tenant and Landlord's insurance carriers. Landlord shall have the right, but not
the obligation, to inspect periodically the work on the Premises.
11. USE. The Premises shall be used only for the Permitted Uses set forth
in the Basic Lease Information and for no other uses. Tenant's use of the
Premises shall be in compliance with and subject to all applicable governmental
laws, ordinances, statutes, orders and regulations and any CC&Rs (including
payments thereunder, if any) or any supplement thereto recorded in any official
or public records with respect to the Project or any portion thereof. Tenant, at
Tenant's
-15-
<PAGE> 22
sole cost and expense, shall comply with the rules and regulations attached
hereto as Exhibit D, together with such additional rules and regulations as
Landlord may from time to time prescribe of which Landlord shall provide Tenant
with written notice. Tenant shall not commit waste, overload the floors or
structure of the Building, subject the Premises, the Building, the Common Area
or the Project to any use which would damage the same or increase the risk of
loss or violate any insurance coverage, permit any unreasonable odors, smoke,
dust, gas, substances, noise or vibrations to emanate from the Premises, take
any action which would constitute a nuisance or would disturb, obstruct or
endanger any other tenants, take any action which would abrogate any warranties,
or use or allow the Premises to be used for any unlawful purpose. Tenant further
agrees that Landlord shall not be responsible for enforcing any parking rights
in the Project or non-compliance by any other tenant or occupant of the Project
with, or Landlord's failure to enforce, any of the rules or regulations or CC&Rs
or any other terms or provisions of such tenant's or occupant's lease. Tenant
shall promptly comply with the reasonable requirements of any board of fire
insurance underwriters or other similar body now or hereafter constituted.
Tenant shall not do any act which shall in any way encumber the title of
Landlord in and to the Premises, the Building or the Project.
12. ENVIRONMENTAL MATTERS.
12.1 Hazardous Materials. Tenant shall not cause nor permit, nor
allow any of Tenant's employees, agents, customers, visitors, invitees,
licensees, contractors, assignees or subtenants (collectively, "Tenant's
Parties") to cause or permit, any Hazardous Materials to be brought upon,
stored, manufactured, generated, blended, handled, recycled, treated, disposed
or used on, under or about the Premises, the Building, the Common Area or the
Project, except for routine office and janitorial supplies in usual and
customary quantities stored, used and disposed of in accordance with all
applicable Environmental Laws. As used herein, "Hazardous Materials" means any
chemical, substance, material, controlled substance, object, condition, waste,
living organism or combination thereof which is or may be hazardous to human
health or safety or to the environment due to its radioactivity, ignitability,
corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity,
phytotoxicity, infectiousness or other harmful or potentially harmful properties
or effects, including, without limitation, petroleum and petroleum products,
asbestos, radon, polychlorinated biphenyls (PCBs), refrigerants (including those
substances defined in the Environmental Protection Agency's "Refrigerant
Recycling Rule," as amended from time to time) and all of those chemicals,
substances, materials, controlled substances, objects, conditions, wastes,
living organisms or combinations thereof which are now or become in the future
listed, defined or regulated in any manner by any Environmental Law based upon,
directly or indirectly, such properties or effects. As used herein,
"Environmental Laws" means any and all federal, state or local environmental,
health and/or safety-related laws, regulations, standards, decisions of courts,
ordinances, rules, codes, orders, decrees, directives, guidelines, permits or
permit conditions, currently existing and as amended, enacted, issued or adopted
in the future which are or become applicable to Tenant, the Premises, the
Building, the Common Area or the Project. Tenant and Tenant's Parties shall
comply with all Environmental Laws and promptly notify Landlord of the violation
of any Environmental Law or presence of any Hazardous Materials, other than
office and janitorial supplies as permitted above, on the
-16-
<PAGE> 23
Premises. Landlord shall have the right with prior notice to Tenant except in
the case of emergencies to enter upon and inspect the Premises and to conduct
tests, monitoring and investigations. If such tests indicate the presence of any
environmental condition which occurred during the Term of this Lease other than
underground migration from a site outside of the Premises or from the use or
operation of the business of any other tenant of the Building, Tenant shall
reimburse Landlord for the cost of conducting such tests. The phrase
"environmental condition" shall mean any adverse condition relating to any
Hazardous Materials or the environment, including surface water, groundwater,
drinking water supply, land, surface or subsurface strata or the ambient air and
includes air, land and water pollutants, noise, vibration, light and odors
caused by Tenant or Tenant's Parties. In the event of any such environmental
condition, Tenant shall promptly take any and all steps necessary to rectify the
same to Landlord's reasonable satisfaction or shall, at Landlord's election,
reimburse Landlord, upon demand, for the cost to Landlord of performing
rectifying work. The reimbursement shall be paid to Landlord in advance of
Landlord's performing such work, based upon Landlord's reasonable estimate of
the cost thereof; and upon completion of such work by Landlord, Tenant shall pay
to Landlord any shortfall within thirty (30) days after Landlord bills Tenant
therefor or Landlord shall within thirty (30) days refund to Tenant any excess
deposit, as the case may be.
12.2 Indemnification. Tenant shall indemnify, protect, defend (by
counsel acceptable to Landlord) and hold harmless Landlord and its partners,
directors, officers, employees, shareholders, lenders, agents, contractors and
each of their respective successors and assigns (individually and collectively,
"Indemnitees") from and against any and all claims, judgments, causes of action,
damages, penalties, fines, taxes, costs, liabilities, losses and expenses
arising at any time during or after the Term as a result (directly or
indirectly) of or in connection with (a) Tenant and/or Tenant's Parties' breach
of any prohibition or provision of the preceding section, or (b) the presence of
Hazardous Materials on, under or about the Premises or other property as a
result (directly or indirectly) of Tenant's and/or Tenant's Parties' activities,
or failure to act, in connection with the Premises. This indemnity shall include
the cost of any required or necessary repair, cleanup or detoxification, and the
preparation and implementation of any closure, monitoring or other required
plans, whether such action is required or necessary prior to or following the
termination of this Lease. Neither the written consent by Landlord to the
presence of Hazardous Materials on, under or about the Premises, nor the strict
compliance by Tenant with all Environmental Laws, shall excuse Tenant from
Tenant's obligation of indemnification pursuant hereto. Tenant's obligations
pursuant to the foregoing indemnity shall survive the termination of this Lease.
12.3 Landlord Warranty. Landlord warrants and represents that
Landlord has no actual knowledge of any Hazardous Materials which are not
disclosed in the Phase I Environmental Analysis of the Property (the "Phase I
Report"), or the soil sampling which Landlord has provided to Tenant. As used
herein, the phrase "actual knowledge" shall mean the actual knowledge of David
A. Kingery without investigation or inquiry or duty of investigation or inquiry.
David A. Kingery is making such representation and warranty on behalf of
Landlord and not in his individual capacity and, as a result, Landlord (and not
such individual) shall be liable in the event of a breach of this
representation. Tenant acknowledges that, other than the
-17-
<PAGE> 24
Phase I Report, Landlord has not conducted any other investigations regarding
the environmental condition of the Property.
13. DAMAGE AND DESTRUCTION.
13.1 Casualty. If the Premises or Building should be damaged or
destroyed by fire or other casualty, Tenant shall give immediate written notice
to Landlord. Within thirty (30) days after receipt from Tenant of such written
notice, Landlord shall notify Tenant whether the necessary repairs can
reasonably be made: (a) within ninety (90) days; (b) in more than ninety (90)
days but in less than one hundred twenty (120) days; or (c) in more than one
hundred twenty (120) days after the date of the issuance of permits for the
necessary repair or reconstruction of the portion of the Building or Premises
which was damaged or destroyed.
13.1.1 Less Than 90 Days. If the Premises or Building should
be damaged only to such extent that rebuilding or repairs can reasonably be
completed within ninety (90) days after the issuance of permits for the
necessary repair or reconstruction of the portion of the Building or Premises
which was damaged or destroyed, this Lease shall not terminate and, provided
that insurance proceeds are available to fully repair the damage, Landlord shall
repair the Premises, except that Landlord shall not be required to rebuild,
repair or replace Tenant's Property which may have been placed in, on or about
the Premises by or for the benefit of Tenant. If Tenant is required to vacate
all or a portion of the Premises during Landlord's repair thereof, the Base Rent
payable hereunder shall be abated proportionately on the basis of the size of
the area of the Premises that is damaged (e.g., the number of square feet of
floor area of the Premises that is damaged compared to the total square footage
of the floor area of the Premises) from the date Tenant vacates all or a portion
of the Premises that was damaged only to the extent rental abatement insurance
proceeds are received by Landlord and only during the period the Premises are
unfit for occupancy.
13.1.2 Greater Than 90 Days. If the Premises or Building
should be damaged only to such extent that rebuilding or repairs can reasonably
be completed in more than ninety (90) days but in less than one hundred twenty
(120) days after the issuance of permits for the necessary repair or
reconstruction of the portion of the Building or Premises which was damaged or
destroyed, then Landlord shall have the option of: (a) terminating the Lease
effective upon the occurrence of such damage, in which event the Rent shall be
abated from the date Tenant vacates the Premises; or (b) electing to repair the
Premises, provided insurance proceeds are available to fully repair the damage
(except that Landlord shall not be required to rebuild, repair or replace
Tenant's Property which may have been placed in, on or about the Premises by or
for the benefit of Tenant). If Tenant is required to vacate all or a portion of
the Premises during Landlord's repair thereof, the Base Rent payable hereunder
shall be abated proportionately on the basis of the size of the area of the
Premises that is damaged (e.g., the number of square feet of floor area of the
Premises that is damaged compared to the total square footage of the floor area
of the Premises) from the date Tenant vacates all or a portion of the Premises
that was damaged only to the extent rental abatement insurance proceeds are
received by Landlord and only during the period the Premises are unfit for
occupancy. In the event that Landlord should fail to
-18-
<PAGE> 25
substantially complete such repairs within one hundred twenty (120) days after
the issuance of permits for the necessary repair or reconstruction of the
portion of the Building or Premises which was damaged or destroyed, (such period
to be extended for delays caused by Tenant or because of any items of Force
Majeure, as hereinafter defined) and Tenant has not re-occupied the Premises,
Tenant shall have the right, as Tenant's exclusive remedy, within ten (10) days
after the expiration of such one hundred twenty (120) day period, to terminate
this Lease by delivering written notice to Landlord as Tenant's exclusive
remedy, whereupon all rights hereunder shall cease and terminate thirty (30)
days after Landlord's receipt of such notice.
13.1.3 Greater Than 120 Days. If the Premises or Building
should be so damaged that rebuilding or repairs cannot be completed within one
hundred twenty (120) days after the issuance of permits for the necessary repair
or reconstruction of the portion of the Building or Premises which was damaged
or destroyed, either Landlord or Tenant may terminate this Lease by giving
written notice within ten (10) days after notice from Landlord specifying such
time period of repair; and this Lease shall terminate and the Rent shall be
abated from the date Tenant vacates the Premises. In the event that neither
party elects to terminate this Lease, Landlord shall promptly commence and
diligently prosecute to completion the repairs to the Building or Premises,
provided insurance proceeds are available to repair the damage (except that
Landlord shall not be required to rebuild, repair or replace Tenant's Property
which may have been placed in, on or about the Premises by or for the benefit of
Tenant). If Tenant is required to vacate all or a portion of the Premises during
Landlord's repair thereof, the Base Rent payable hereunder shall be abated
proportionately on the basis of the size of the area of the Premises that is
damaged (e.g., the number of square feet of floor area of the Premises that is
damaged compared to the total square footage of the floor area of the Premises),
from the date Tenant vacates all or a portion of the Premises that was damaged
only to the extent rental abatement insurance proceeds are received by Landlord
and only during the period that the Premises are unfit for occupancy.
13.2 Tenant's Fault. If the Premises or any portion of the Building
is damaged resulting from the negligence or breach of this Lease by Tenant or
any of Tenant's Parties, Rent shall not be reduced during the repair of such
damage and Tenant shall be liable to Landlord for the cost of the repair caused
thereby to the extent such cost is not covered by insurance proceeds from
policies of insurance required to be maintained pursuant to the provisions of
this Lease.
13.3 Uninsured Casualty. Tenant shall be responsible for and shall
pay to Landlord any deductible amount payable under the property insurance for
the Building; provided, however, that Tenant shall only pay its prorata share of
any deductible which prorata share shall not exceed Ten Thousand Dollars
($10,000). In the event that the Premises or any portion of the Building is
damaged to the extent Tenant is unable to use the Premises and such damage is
not covered by insurance proceeds received by Landlord or in the event that the
holder of any indebtedness secured by the Premises requires that the insurance
proceeds be applied to such indebtedness, then Landlord shall have the right at
Landlord's option either (i) to repair such damage as soon as reasonably
possible at Landlord's expense, or (ii) to give written notice to Tenant within
thirty (30) days after the date of the occurrence of such damage of Landlord's
-19-
<PAGE> 26
intention to terminate this Lease as of the date of the occurrence of such
damage. In the event Landlord elects to terminate this Lease, Tenant shall have
the right within ten (10) days after receipt of such notice to give written
notice to Landlord of Tenant's intention to pay the cost of repair of such
damage, in which event, following the securitization of Tenant's funding
commitment in a form acceptable to Landlord, this Lease shall continue in full
force and effect, Landlord shall make such repairs as soon as reasonably
possible and Tenant shall reimburse Landlord for such repairs within fifteen
(15) days after receipt of an invoice from Landlord. If Tenant does not give
such notice within the ten (10) day period, this Lease shall terminate
automatically as of the date of the occurrence of the damage.
13.4 Waiver. With respect to any damage or destruction which
Landlord is obligated to repair or may elect to repair, Tenant waives all rights
to terminate this Lease pursuant to rights otherwise presently or hereafter
accorded by law.
13.5 Force Majeure. "Force Majeure," as used in this Section 13
only and shall not apply elsewhere unless otherwise specified, means delays
resulting from causes beyond the reasonable control of Landlord, including,
without limitation, any delay caused by any action, inaction, order, ruling,
moratorium, regulation, statute, condition or other decision of any private
party or governmental agency having jurisdiction over any portion of the
Project, over the construction anticipated to occur thereon or over any uses
thereof, or by delays in inspections or in issuing approvals by private parties
or permits by governmental agencies, or by fire, flood, inclement weather,
strikes, lockouts or other labor or industrial disturbance (whether or not on
the part of agents or employees of Landlord engaged in the construction of the
Premises), civil disturbance, order of any government, court or regulatory body
claiming jurisdiction or otherwise, act of public enemy, war, riot, sabotage,
blockage, embargo, failure or inability to secure materials, supplies or labor
through ordinary sources by reason of shortages or priority, discovery of
hazardous or toxic materials, earthquake, or other natural disaster, delays
caused by any dispute resolution process, or any cause whatsoever beyond the
reasonable control (excluding financial inability) of the party whose
performance is required, or any of its contractors or other representatives,
whether or not similar to any of the causes hereinabove stated.
14. EMINENT DOMAIN.
14.1 Total Condemnation. If all of the Premises is condemned by
eminent domain, inversely condemned or sold under threat of condemnation for any
public or quasi-public use or purpose ("Condemned"), this Lease shall terminate
as of the earlier of the date the condemning authority takes title to or
possession of the Premises, and Rent shall be adjusted to the date of
termination.
14.2 Partial Condemnation. If any portion of the Premises or the
Building is Condemned and such partial condemnation materially impairs Tenant's
ability to use the Premises for Tenant's business as reasonably determined by
Landlord, Landlord shall have the option of either (i) relocating Tenant to
comparable space within the Project or (ii) terminating this Lease as of the
earlier of the date title vests in the condemning authority or as of the date an
-20-
<PAGE> 27
order of immediate possession is issued and Rent shall be adjusted to the date
of termination. If such partial condemnation does not materially impair Tenant's
ability to use the Premises for the business of Tenant, Landlord shall promptly
restore the Premises to the extent of any condemnation proceeds recovered by
Landlord, excluding the portion thereof lost in such condemnation, and this
Lease shall continue in full force and effect except that after the date of such
title vesting Rent shall be adjusted as reasonably determined by Landlord.
14.3 Award. If the Premises are wholly or partially Condemned,
Landlord shall be entitled to the entire award paid for such condemnation, and
Tenant waives any claim to any part of the award from Landlord or the condemning
authority; provided, however, Tenant shall have the right to recover from the
condemning authority such compensation as may be separately awarded to Tenant in
connection with costs in removing Tenant's merchandise, furniture, fixtures,
leasehold improvements and equipment to a new location. No condemnation of any
kind shall be construed to constitute an actual or constructive eviction of
Tenant or a breach of any express or implied covenant of quiet enjoyment.
14.4 Temporary Condemnation. In the event of a temporary
condemnation not extending beyond the Term, this Lease shall remain in effect,
Tenant shall continue to pay Rent and Tenant shall receive any award made for
such condemnation except damages to any of Landlord's property. If a temporary
condemnation is for a period which extends beyond the Term, this Lease shall
terminate as of the date of initial occupancy by the condemning authority and
any such award shall be distributed in accordance with the preceding section. If
a temporary condemnation remains in effect at the expiration or earlier
termination of this Lease, Tenant shall pay Landlord the reasonable cost of
performing any obligations required of Tenant with respect to the surrender of
the Premises.
15. DEFAULT.
15.1 Events of Defaults. The occurrence of any of the following
events shall, at Landlord's option, constitute an "Event of Default":
15.1.1 Vacation without providing a commercially reasonable
level of security or abandonment of the Premises for a period of thirty (30)
consecutive days;
15.1.2 Failure to pay Rent on the date when due more than two
(2) times per year and the failure continuing for a period of five (5) days
after such payment is due;
15.1.3 Failure to perform Tenant's covenants and obligations
hereunder (except default in the payment of Rent) where such failure continues
for a period of thirty (30) days after written notice from Landlord; provided,
however, if the nature of the default is such that more than thirty (30) days
are reasonably required for its cure, Tenant shall not be deemed to be in
default if Tenant commences the cure within the thirty (30) day period and
diligently and continuously prosecutes such cure to completion;
-21-
<PAGE> 28
15.1.4 The making of a general assignment by Tenant for the
benefit of creditors; the filing of a voluntary petition by Tenant or the filing
of an involuntary petition by any of Tenant's creditors seeking the
rehabilitation, liquidation or reorganization of Tenant under any law relating
to bankruptcy, insolvency or other relief of debtors and, in the case of an
involuntary action, the failure to remove or discharge the same within sixty
(60) days of such filing; the appointment of a receiver or other custodian to
take possession of substantially all of Tenant's assets or this leasehold;
Tenant's insolvency or inability to pay Tenant's debts or failure generally to
pay Tenant's debts when due; any court entering a decree or order directing the
winding up or liquidation of Tenant or of substantially all of Tenant's assets;
Tenant taking any action toward the dissolution or winding up of Tenant's
affairs; the cessation or suspension of Tenant's use of the Premises; or the
attachment, execution or other judicial seizure of substantially all of Tenant's
assets or this leasehold;
15.1.5 The making of any material misrepresentation or
omission by Tenant or any successor in interest of Tenant in any materials
delivered by or on behalf of Tenant to Landlord or Landlord's lender pursuant to
this Lease; or
15.1.6 Intentionally Deleted.
15.1.7 The occurrence of an Event of Default as otherwise
designated as an Event of Default in the Lease.
15.2 Remedies.
15.2.1 Termination. In the event of the occurrence of any
Event of Default, Landlord shall have the right to give a written termination
notice to Tenant (which notice may be the notice given under Section 15.1 above,
if applicable, and which notice shall be in lieu of any notice required by
California Code of Civil Procedure Section 1161, et seq.) and, on the date
specified in such notice, this Lease shall terminate unless on or before such
date all arrears of Rent and all other sums payable by Tenant under this Lease
and all costs and expenses incurred by or on behalf of Landlord hereunder shall
have been paid by Tenant and all other Events of Default at the time existing
shall have been fully remedied to the satisfaction of Landlord, as required by
law and the terms of this Lease.
15.2.1.1 Repossession. Following termination, without
prejudice to other remedies Landlord may have, Landlord may (i) peaceably
re-enter the Premises upon voluntary surrender by Tenant or remove Tenant
therefrom and any other persons occupying the Premises, using such legal
proceedings as may be available; (ii) repossess the Premises or relet the
Premises or any part thereof for such term (which may be for a term extending
beyond the Term), at such rental and upon such other terms and conditions as
Landlord in Landlord's sole discretion shall determine, with the right to make
reasonable alterations and repairs to the Premises; and (iii) remove all
personal property therefrom.
15.2.1.2 Unpaid Rent. Landlord shall have all the
rights and remedies of a landlord provided by applicable law, including the
right to recover from Tenant: (a) the worth,
-22-
<PAGE> 29
at the time of award, of the unpaid Rent that had been earned at the time of
termination, (b) the worth, at the time of award, of the amount by which the
unpaid Rent that would have been earned after the date of termination until the
time of award exceeds the amount of loss of rent that Tenant proves could have
been reasonably avoided, (c) the worth, at the time of award, of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of the loss of rent that Tenant proves could have been
reasonably avoided, and (d) any other amount, and court costs, necessary to
compensate Landlord for all detriment proximately caused by Tenant's default.
The phrase "worth, at the time of award," as used in (a) and (b) above, shall be
computed at the Applicable Interest Rate, and as used in (c) above, shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
15.2.2 Continuation. Even though an Event of Default may have
occurred, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession; and Landlord may enforce all of
Landlord's rights and remedies under this Lease, including the remedy described
in California Civil Code Section 1951.4 ("lessor" may continue Lease in effect
after "lessee's" breach and abandonment and recover Rent as it becomes due, if
"lessee" has the right to sublet or assign, subject only to reasonable
limitations) to recover Rent as it becomes due. Landlord, without terminating
this Lease, may, to the extent allowed by applicable law during the period
Tenant is in default, enter the Premises and relet the same, or any portion
thereof, to third parties for Tenant's account and Tenant shall be liable to
Landlord for all costs Landlord incurs in reletting the Premises, including,
without limitation, brokers' commissions, expenses of remodeling the Premises
and like costs. Reletting may be for a period shorter or longer than the
remaining Term. Tenant shall continue to pay the Rent on the date the same is
due. No act by Landlord hereunder, including acts of maintenance, preservation
or efforts to lease the Premises or the appointment of a receiver upon
application of Landlord to protect Landlord's interest under this Lease, shall
terminate this Lease unless Landlord notifies Tenant that Landlord elects to
terminate this Lease. In the event that Landlord elects to relet the Premises,
the rent that Landlord receives from reletting shall be applied to the payment
of, first, any indebtedness from Tenant to Landlord other than Base Rent and
Tenant's Share of Operating Expenses and Real Property Taxes; second, all costs,
including maintenance, incurred by Landlord in reletting; and, third, Base Rent
and Tenant's Share of Operating Expenses and Real Property Taxes under this
Lease. After deducting the payments referred to above, any sum remaining from
the rental Landlord receives from reletting shall be held by Landlord and
applied in payment of future Rent as Rent becomes due under this Lease. In no
event, and notwithstanding anything in Section 16 to the contrary, shall Tenant
be entitled to any excess rent received by Landlord. If, on the date Rent is due
under this Lease, the rent received from the reletting is less than the Rent due
on that date, Tenant shall pay to Landlord, in addition to the remaining Rent
due, all costs, including maintenance, which Landlord incurred in reletting the
Premises that remain after applying the rent received from reletting as provided
hereinabove. So long as this Lease is not terminated, Landlord shall have the
right to remedy any default of Tenant, to maintain or improve the Premises, to
cause a receiver to be appointed to administer the Premises and new or existing
subleases and to add to the Rent payable hereunder all of
-23-
<PAGE> 30
Landlord's reasonable costs in so doing, with interest at the Applicable
Interest Rate from the date of such expenditure.
15.3 Cumulative. Each right and remedy of Landlord provided for
herein or now or hereafter existing at law, in equity, by statute or otherwise
shall be cumulative and shall not preclude Landlord from exercising any other
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity, by statute or otherwise. No payment by Tenant of a lesser
amount than the Rent nor any endorsement on any check or letter accompanying any
check or payment as Rent shall be deemed an accord and satisfaction of full
payment of Rent; and Landlord may accept such payment without prejudice to
Landlord's right to recover the balance of such Rent or to pursue other
remedies.
16. ASSIGNMENT AND SUBLETTING.
16.1 Assignment and Subletting. . Tenant shall not assign, sublet
or otherwise transfer, whether voluntarily or involuntarily or by operation of
law (collectively, "Transfer"), the Premises or any part thereof, except as
provided in Section 16.2 below, without Landlord's prior written approval, which
shall not be unreasonably withheld; provided, however, Tenant agrees it shall be
reasonable for Landlord to disapprove of a requested Transfer , if the sublessee
or assignee does not have a tangible net worth (as determined in accordance with
generally accepted accounting principles consistently applied) equal to or
greater than that of Tenant as of the date of the Lease as shown in the
financial information provided to Landlord. Except as provided in Section 16.2
below, the merger of Tenant with any other entity or the transfer of any
controlling or managing ownership or beneficial interest in Tenant, or the
assignment of a substantial portion of the assets of Tenant, whether or not
located at the Premises, shall constitute an assignment hereunder. If Tenant
desires to Transfer any or all of the Premises, Tenant shall give Landlord
written notice thereof with copies of all related documents and agreements
associated with the Transfer , including without limitation, the financial
statements of any proposed assignee or subtenant, twenty (20) days prior to the
anticipated effective date of the Transfer . Tenant shall pay Landlord's
reasonable attorneys' fees incurred in the review of such documentation plus an
administrative fee of Five Hundred Dollars ($500.00) for each proposed transfer.
Landlord shall have a period of ten (10) business days following receipt of such
notice and all related documents and agreements to notify Tenant in writing of
Landlord's approval or disapproval of the proposed Transfer . If Landlord fails
to notify Tenant in writing of such election, Landlord shall be deemed to have
disapproved such Transfer . This Lease may not be assigned by operation of law.
Any purported Transfer contrary to the provisions hereof shall be void and shall
constitute an Event of Default hereunder. If Tenant receives rent or other
consideration for any such transfer in excess of the Rent, or in case of the
sublease of a portion of the Premises, in excess of such Rent that is fairly
allocable to such portion, after appropriate adjustments to assure that all
other payments required hereunder are appropriately taken into account, Tenant
shall pay Landlord fifty percent (50%) of the difference between each such
payment of rent or other consideration and the Rent required hereunder. Landlord
may, without waiving any rights or remedies, collect rent from the assignee,
subtenant or occupant and apply the net amount collected to the Rent herein
reserved and apportion any excess rent so collected in accordance
-24-
<PAGE> 31
with the terms of the preceding sentence. Such acceptance of Rent shall in no
event be deemed to imply that Landlord is approving a subtenant or assignee
which Landlord has not approved in writing pursuant to the requirements of this
Section 16. Tenant shall continue to be liable as a principal and not as a
guarantor or surety to the same extent as though no Transfer had been made.
Landlord may consent to subsequent Transfer of this Lease or amendments or
modifications to the Lease by assignees of Tenant without notifying Tenant or
any successor of Tenant and without obtaining their consent. No permitted
Transfer shall be effective until there has been delivered to Landlord a
counterpart of the transfer instrument in which the transferee agrees to be and
remain jointly and severally liable with Tenant for the payment of Rent
pertaining to the Premises and for the performance of all the terms and
provisions of this Lease relating thereto arising on or after the date of the
transfer.
16.2 Non-Transfers. Notwithstanding anything to the contrary in
Section 16, Tenant shall have the right, without prior consent of Landlord, to
assign this Lease or sublet the whole or any part of the Premises to a "Tenant
Affiliate" (as defined below), and such assignment or sublease shall not be
deemed a Transfer under this Section 16, provided that any transfer to a Tenant
Affiliate shall be subject to the following conditions: (a) at least twenty (20)
days prior to the effective date of the Transfer, Tenant shall deliver to
Landlord written notice thereof and any documents or information, including
financial information reasonably requested by Landlord regarding such Tenant
Affiliate and such assignment or sublease, (b) Tenant shall remain fully liable
during the unexpired term of the Lease, including renewal options; (c) such
Transfer is not used as a subterfuge by Tenant to avoid its obligations under
this Lease or the restrictions on Transfers pursuant to this Section 16, (d) any
such Transfer shall be subject to all of the terms, covenants and conditions of
the Lease, and (e) the Tenant Affiliate shall expressly assume the obligations
of Tenant under the Lease as confirmed in a written assumption agreement
reasonably satisfactory to Landlord which shall be consistent with the terms of
this Lease. As used in this Lease, "Tenant Affiliate" shall mean and refer to a
corporation or entity which (i) is Tenant's parent organization; or (ii) is a
wholly-owned subsidiary of Tenant or Tenant's parent corporation; or (iii) is a
corporation which Tenant or Tenant's parent owns in excess of twenty-five
percent (25%) of the outstanding capital stock; or (iv) is a corporation or
entity, resulting from the consolidation or merger with Tenant and/or Tenant's
parent corporation, or (v) is a corporation or entity to which substantially all
of Tenant's assets may be transferred.
17. ESTOPPEL, ATTORNMENT AND SUBORDINATION.
17.1 Estoppel. Within ten (10) days after written request by
Landlord, Tenant shall deliver an estoppel certificate duly executed (and
acknowledged if required by any lender), in the form attached hereto as Exhibit
E, or in such other form as may be acceptable to the lender, which form may
include some or all of the provisions contained in Exhibit E, to any proposed
mortgagee, purchaser or Landlord. Tenant's failure to deliver said statement in
such time period shall be an Event of Default hereunder and shall be conclusive
upon Tenant that (a) this Lease is in full force and effect, without
modification except as may be represented by Landlord; (b) there are no uncured
defaults in Landlord's performance and Tenant has no right of offset,
counterclaim or deduction against Rent hereunder; and (c) no more than one
month's Base Rent
-25-
<PAGE> 32
has been paid in advance. If any financier should require that this Lease be
amended (other than in the description of the Premises, the Term, the Permitted
Use, the Rent or as will substantially, materially and adversely affect the
rights of Tenant), Landlord shall give written notice thereof to Tenant, which
notice shall be accompanied by a Lease supplement embodying such amendments.
Tenant shall, within ten (10) days after the receipt of Landlord's notice,
execute and deliver to Landlord the tendered Lease supplement.
17.2 Subordination. This Lease shall be subject and subordinate to
all ground leases, master leases and the lien of all mortgages and deeds of
trust which now or hereafter affect the Premises or the Project or Landlord's
interest therein, and all amendments thereto, all without the necessity of
Tenant's executing further instruments to effect such subordination. If
requested, Tenant shall execute and deliver to Landlord within ten (10) days
after Landlord's request whatever documentation that may reasonably be required
by Landlord or any lender of Landlord to further effect the provisions of this
paragraph including, without limitation, a subordination, nondisturbance and
attornment agreement in a form as may be acceptable to the lender.
17.3 Attornment and Non-disturbance. In the event of a foreclosure
proceeding, the exercise of the power of sale under any mortgage or deed of
trust or the termination of a ground lease, Tenant shall, if requested, attorn
to the purchaser thereupon and recognize such purchaser as Landlord under this
Lease; provided, however, Tenant's obligation to attorn to such purchaser shall
be conditioned upon Tenant's receipt of a non-disturbance agreement.
18. MISCELLANEOUS.
18.1 General.
18.1.1 Entire Agreement. This Lease sets forth all the
agreements between Landlord and Tenant concerning the Premises; and there are no
agreements either oral or written other than as set forth herein.
18.1.2 Time of Essence. Time is of the essence of this Lease.
18.1.3 Attorneys' Fees. In any action or proceeding which
either party brings against the other to enforce its rights hereunder, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees, which amounts shall be a part of the
judgment in said action or proceeding.
18.1.4 Severability. If any provision of this Lease or the
application of any such provision shall be held by a court of competent
jurisdiction to be invalid, void or unenforceable to any extent, the remaining
provisions of this Lease and the application thereof shall remain in full force
and effect and shall not be affected, impaired or invalidated.
18.1.5 Law. This Lease shall be construed and enforced in
accordance with the laws of the state in which the Premises are located.
-26-
<PAGE> 33
18.1.6 No Option. Submission of this Lease to Tenant for
examination or negotiation does not constitute an option to lease, offer to
lease or a reservation of, or option for, the Premises; and this document shall
become effective and binding only upon the execution and delivery hereof by
Landlord and Tenant.
18.1.7 Successors and Assigns. This Lease shall be binding
upon and inure to the benefit of the successors and assigns of Landlord and,
subject to compliance with the terms of Section 16, Tenant.
18.1.8 Third Party Beneficiaries. Nothing herein is intended
to create any third party benefit.
18.1.9 Memorandum of Lease. Tenant shall not record this Lease
or a short form memorandum hereof without Landlord's prior written consent which
Landlord can withhold in its sole discretion.
18.1.10 Agency, Partnership or Joint Venture. Nothing
contained herein nor any acts of the parties hereto shall be deemed or construed
by the parties hereto, nor by any third party, as creating the relationship of
principal and agent or of partnership or of joint venture by the parties hereto
or any relationship other than the relationship of landlord and tenant.
18.1.11 Merger. The voluntary or other surrender of this Lease
by Tenant or a mutual cancellation thereof or a termination by Landlord shall
not work a merger and shall, at the option of Landlord, terminate all or any
existing subtenancies or may, at the option of Landlord, operate as an
assignment to Landlord of any or all of such subtenancies.
18.1.12 Headings. Section headings have been inserted solely
as a matter of convenience and are not intended to define or limit the scope of
any of the provisions contained therein.
18.1.13 Auctions. Tenant shall not conduct, nor permit to be
conducted, any auction upon the Premises without Landlord's prior written
consent. Landlord shall not be obligated to exercise any standard of
reasonableness in determining whether to permit an auction.
18.1.14 Consents. Except as otherwise provided elsewhere in
this Lease, Landlord's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Tenant for any
Landlord consent, including but not limited to consents to an assignment, a
subletting or the presence or use of a Hazardous Substance, shall be paid by
Tenant upon receipt of an invoice and supporting documentation therefor.
Landlord's consent to any act, assignment or subletting shall not constitute an
acknowledgment that no Event of Default or breach by Tenant of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Event of
Default or breach, except as may be otherwise specifically stated in writing by
Landlord at the time of such consent. Except as otherwise set forth herein, the
failure to specify herein any particular condition to Landlord's consent shall
not preclude the imposition by
-27-
<PAGE> 34
Landlord at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
18.1.15 Intentionally Deleted.
18.1.16 Security Measures. Tenant hereby acknowledges that
Landlord shall have no obligation to provide a guard service or other security
measures whatsoever. Tenant assumes all responsibility for the protection of the
Premises, Tenant, its agents and invitees and their property from the acts of
third parties.
18.2 Signs. All signs and graphics of every kind visible in or from
public view or corridors, the Common Areas or the exterior of the Premises shall
be subject to Landlord's prior written approval and shall be subject to any
applicable governmental laws, ordinances, and regulations and in compliance with
Landlord's signage program. Tenant shall remove all such signs and graphics
prior to the termination of this Lease. Such installations and removals shall be
made in such manner as to avoid injury or defacement of the Premises; and Tenant
shall repair any injury or defacement, including without limitation,
discoloration caused by such installation or removal. Notwithstanding the
foregoing, Tenant shall be entitled to exterior signage on the Building in a
location as approved by Landlord. All fabrication, installation, maintenance,
repair, restoration and removal of such signage shall be at Tenant's sole cost
and expense. All of Tenant's signage shall comply with all applicable
governmental regulations and any CC&Rs applicable to the Project.
18.3 Waiver. No waiver of any default or breach hereunder shall be
implied from any omission to take action on account thereof, notwithstanding any
custom and practice or course of dealing. No waiver by either party of any
provision under this Lease shall be effective unless in writing and signed by
such party. No waiver shall affect any default other than the default specified
in the waiver and then such waiver shall be operative only for the time and to
the extent therein stated. Waivers of any covenant shall not be construed as a
waiver of any subsequent breach of the same.
18.4 Financial Statements. Tenant shall provide to any lender,
purchaser or Landlord, within ten (10) days after request, a current, accurate,
certified financial statement for Tenant and Tenant's business and financial
statements for Tenant and Tenant's business for each of the three (3) years
prior to the current financial statement year prepared under generally accepted
accounting principles consistently applied; provided, however, that Tenant shall
not be required to produce a financial statement for any year prior to 1996.
Tenant shall also provide within said 10-day period such other certified
financial information or tax returns as may be reasonably required by Landlord,
purchaser or any lender of either. All such financial statements shall be
confidential and used only for the purposes set forth herein.
18.5 Limitation of Liability. The obligations of Landlord under
this Lease are not personal obligations of the individual partners, directors,
officers, shareholders, agents or employees of Landlord; and Tenant shall look
solely to the Building for satisfaction of any liability of Landlord and shall
not look to other assets of Landlord nor seek recourse against the
-28-
<PAGE> 35
assets of the individual partners, directors, officers, shareholders, agents or
employees of Landlord. Whenever Landlord transfers its interest, Landlord shall
be automatically released from further performance under this Lease and from all
further liabilities and expenses hereunder and the transferee of Landlord's
interest shall assume all liabilities and obligations of Landlord hereunder from
the date of such transfer.
18.6 Notices. All notices to be given hereunder shall be in writing
and mailed postage prepaid by certified or registered mail, return receipt
requested, or delivered by personal or courier delivery, or sent by facsimile
(immediately followed by one of the preceding methods), to Landlord's Address
and Tenant's Address, or to such other place as Landlord or Tenant may designate
in a written notice given to the other party. Notices shall be deemed served
upon the earlier of receipt or three (3) days after the date of mailing.
18.7 Brokerage Commission. Landlord shall pay a brokerage
commission to Landlord's Broker specified in the Basic Lease Information in
accordance with a separate agreement between Landlord and Landlord's Broker.
Landlord shall have no further or separate obligation for payment of any
commissions or fees to any other broker or finder. Tenant warrants to Landlord
that Tenant's sole contact with Landlord or with the Premises in connection with
this transaction has been directly with Landlord, Landlord's Broker and Tenant's
Broker specified in the Basic Lease Information, and that no other broker or
finder can properly claim a right to a commission or a finder's fee based upon
contacts between the claimant and Tenant. Any commissions or fees payable to
Tenant's Broker with respect to this transaction shall be paid by Landlord's
Broker or Tenant, and Landlord shall have not obligation with respect thereto.
Subject to the foregoing, Tenant agrees to indemnify and hold Landlord harmless
from any claims or liability, including reasonable attorneys' fees, in
connection with a claim by any person for a real estate broker's commission,
finder's fee or other compensation based upon any statement, representation or
agreement of Tenant, and Landlord agrees to indemnify and hold Tenant harmless
from any such claims or liability, including reasonable attorneys' fees, based
upon any statement, representation or agreement of Landlord.
18.8 Authorization. Each individual executing this Lease on behalf
of Tenant represents and warrants that he or she is duly authorized to execute
and deliver this Lease on behalf of Tenant and that such execution is binding
upon Tenant.
18.9 Holding Over; Surrender.
18.9.1 Holding Over. If Tenant holds over the Premises or any
part thereof after expiration of the Term, such holding over shall, at
Landlord's option, constitute a month-to-month tenancy, at a rent equal to one
hundred fifty percent (150%) of the Base Rent in effect immediately prior to
such holding over and shall otherwise be on all the other terms and conditions
of this Lease. This paragraph shall not be construed as Landlord's permission
for Tenant to hold over. Acceptance of Rent by Landlord following expiration or
termination shall not constitute a renewal of this Lease or extension of the
Term except as specifically set forth above. If Tenant fails to surrender the
Premises upon expiration or earlier termination of this Lease, Tenant shall
indemnify and hold Landlord harmless from and against all loss or liability
-29-
<PAGE> 36
resulting from or arising out of Tenant's failure to surrender the Premises,
including, but not limited to, any amounts required to be paid to any tenant or
prospective tenant who was to have occupied the Premises after the expiration or
earlier termination of this Lease and any related attorneys' fees and brokerage
commissions.
18.9.2 Surrender. Upon the termination of this Lease or
Tenant's right to possession of the Premises, Tenant will surrender the Premises
broom clean, together with all keys, in good condition and repair, reasonable
wear and tear excepted. Tenant shall patch and fill all holes within the
Premises and all penetrations of the roof shall be resealed to a watertight
condition. In no event may Tenant remove from the Premises any mechanical or
electrical systems or any wiring or any other aspect of any systems within the
Premises. Conditions existing because of Tenant's failure to perform
maintenance, repairs or replacements shall not be deemed "reasonable wear and
tear."
18.10 Joint and Several. If Tenant consists of more than one person,
the obligation of all such persons shall be joint and several.
18.11 Covenants and Conditions. Each provision to be performed by
Tenant hereunder shall be deemed to be both a covenant and a condition.
18.12 Addenda. The Addenda attached hereto, if any, and identified
with this Lease are incorporated herein by this reference as if fully set forth
herein.
19. OPTION TO EXTEND.
19.1 Option Right. Landlord hereby grants Tenant one (1) option to
extend the initial Term of the Lease for the entire Premises for a period of
five (5) years (the "Option Term"), which option shall be exercisable only by
written Exercise Notice (as defined below) delivered by Tenant to Landlord as
provided below, provided that, as of the date of delivery of such Exercise
Notice, Tenant is not in a state of uncured monetary or other default following
the expiration of the applicable cure periods under the Lease. Upon the proper
exercise of such option to extend, and provided that, as of the end of the
initial Term, Tenant is not in default, as described above, under the Lease, the
initial Term shall be extended for the Option Term. The rights contained in this
Section 19 shall be personal to the original Tenant executing the Lease and any
Tenant Affiliate and may only be exercised by the original Tenant or Tenant
Affiliate, as the case may be, (not any other assignee, sublessee or other
transferee of Tenant's interest in the Lease) if the original Tenant or Tenant
Affiliate, as the case may be, occupies the entire Premises as of the date of
the Exercise Notice.
19.2 Option Rent. The annual basic rent payable by Tenant during
the Option Term (the "Option Rent") shall be equal to ninety-five percent (95%)
of the "Fair Market Rent" which for purposes hereof means the annual basic rent,
taking into account whether the then current market is using leases based on a
base year, an expense stop, or a triple net, at which tenants, as of the
commencement of the Option Term, are leasing non-sublease space comparable in
size, location and quality to the Premises for a comparable term, which
comparable space is located in
-30-
<PAGE> 37
the Building and in comparable first-class office "flex" buildings with prudent
ownership (with management practices comparable with institutional ownership),
in the Dublin, California area, taking into consideration all concessions and
inducements generally being granted at such time. All other terms and conditions
of the Lease shall apply throughout the Option Term; however, any obligation of
Landlord to construct Tenant Improvements or provide an allowance shall not
apply during the Option Term, except to the extent such provisions are included
in the definition of Fair Market Rent, and Tenant shall, in no event, have the
option to extend the initial Term of the Lease beyond the Option Term described
in Section 19.1 above.
19.3 Exercise of Options. The option contained in this Section 19
shall be exercised by Tenant, if at all, on or before the date (the "Exercise
Date") which is at least one hundred eighty (180) days prior to the expiration
of the initial Term, as the case may be, by delivering written notice ("Exercise
Notice") thereof to Landlord. Tenant may notify Landlord earlier than the
Exercise Date of its intent to exercise its option and Landlord will work with
Tenant to establish the Fair Market Rent at that time. After the Exercise Date,
the parties shall follow the procedure and the Fair Market Rent shall be
determined as set forth in Section 19.4 below. Tenant's failure to deliver the
Exercise Notice on or before the Exercise Date shall be deemed to constitute
Tenant's waiver of its extension right hereunder.
19.4 Determination of Option Rent. In the event Tenant timely and
appropriately objects in writing to the Fair Market Rent initially determined by
Landlord, Landlord and Tenant shall attempt to agree upon the Fair Market Rent,
using their best good-faith efforts. If Landlord and Tenant fail to reach
agreement within ten (10) business days following Tenant's objection to the Fair
Market Rent (the "Outside Agreement Date"), then each party shall submit to the
other party a separate written determination of the Fair Market Rent within
fifteen (15) business days after the Outside Agreement Date, and such
determinations shall be submitted to arbitration in accordance with Sections
19.4.1 through 19.4.7 below. Failure of Tenant or Landlord to submit a written
determination of the Fair Market Rent within such fifteen (15) business day
period shall conclusively be deemed to be the non-determining party's approval
of the Fair Market Rent submitted within such ten (10) business day period by
the other party.
19.4.1 Landlord and Tenant Arbitrators. Landlord and Tenant
shall each appoint one arbitrator who shall by profession be an independent real
estate broker who shall have no ongoing business relationship with Tenant or
Landlord and who shall have been active over the five (5) year period ending on
the date of such appointment in the leasing of first-class office buildings in
the Dublin, California area. The determination of the arbitrators shall be
limited solely to the issue of whether Landlord's or Tenant's submitted Fair
Market Rent is the closest to the actual Fair Market Rent as determined by the
arbitrators, taking into account the requirements of Section 19.2. Each such
arbitrator shall be appointed within thirty (30) days after the Outside
Agreement Date.
19.4.2 Third Arbitrator. The two (2) arbitrators so appointed
shall within ten (10) days of the date of the appointment of the last appointed
arbitrator agree upon and appoint a third
-31-
<PAGE> 38
arbitrator who shall be qualified under the same criteria as set forth
hereinabove for qualification of the initial two (2) arbitrators.
19.4.3 Arbitrator's Decision. The three (3) arbitrators shall
within thirty (30) days after the appointment of the third arbitrator reach a
decision as to whether Landlord's or Tenant's submitted Fair Market Rent is the
closest to the actual Fair Market Rent, and shall use the closest of Landlord's
or Tenant's submitted Fair Market Rent as the Fair Market Rent for purposes of
calculating the Option Rent, and shall notify Landlord and Tenant thereof.
19.4.4 Binding Decision. The decision of the majority of the
three (3) arbitrators shall be binding upon Landlord and Tenant.
19.4.5 Failure to Appoint Arbitrator. If either Landlord or
Tenant fails to appoint an arbitrator within thirty (30) days after the Outside
Agreement Date, the arbitrator appointed by one of them shall reach a decision,
notify Landlord and Tenant thereof, and such arbitrator's decision shall be
binding upon Landlord and Tenant.
19.4.6 Failure of Arbitrators to Agree. If the two (2)
arbitrators fail to agree upon and appoint a third arbitrator within the time
period provided in Section 19.2 above, then the parties shall mutually select
the third arbitrator. If Landlord and Tenant are unable to agree upon the third
arbitrator within ten (10) days, then either party may, upon at least five (5)
days' prior written notice to the other party, request the Presiding Judge of
the Alameda County Superior Court, acting in his private and nonjudicial
capacity, to appoint the third arbitrator. Following the appointment of the
third arbitrator, the panel of arbitrators shall within thirty (30) days
thereafter reach a decision as to whether Landlord's or Tenant's submitted Fair
Market Rent shall be used and shall notify Landlord and Tenant thereof.
19.4.7 Arbitration Costs. The cost of the arbitrators and the
arbitration proceeding shall be paid by the non-prevailing party.
20. PARKING. Landlord shall provide, for the initial term of the Lease and any
extensions thereof, a minimum of three and seven-tenths (3.7) parking spaces per
each one thousand (1,000) Rentable Square Feet of space in the Building then
leased by Tenant, including any space leased by Tenant pursuant to Section 21
below, which, based upon the initial Rentable Square Feet of the Premises, is
equal to one hundred forty-eight (148) parking spaces. There shall be no charge
for parking during the initial Term and any such charge during the Option Term,
if any, shall be based on ninety-five percent (95%) of the then current market
for the vicinity surrounding the Project.
21. RIGHT OF FIRST OFFER. Landlord and Tenant hereby acknowledge and agree that
in the event any space in the Building which is contiguous to the Premises (an
"Additional Space") becomes available for leasing to third parties after
expiration of the lease of the then existing tenant thereof, Landlord shall
notify Tenant in writing ("Landlord's Notice") of the availability of the
Additional Space and the terms upon which Landlord is willing to rent such
Additional Space to Tenant, including, but not limited to, the commencement
date, term, the base for the
-32-
<PAGE> 39
Additional Space, and Tenant improvements to be constructed at Tenant's cost
therein, if any. For a period of five (5) business days following receipt of
Landlord's Notice, Tenant shall have a right of first offer to lease such
Additional Space upon the lease terms and conditions set forth in Landlord's
Notice. If Tenant fails to timely exercise the right of first offer set forth
herein, the Landlord shall be entitled to place the Additional Space on the open
market for lease to third parties and Tenant's right of first offer with respect
to such Additional Space shall expire and be of no further force or effect. If
Tenant exercise such right of first offer, Tenant shall take possession of the
Additional Space and the Lease Term therefor shall commence upon the date
specified in Landlord's Notice. Notwithstanding anything to the contrary
contained herein, Tenant must elect to exercise its right of first offer, if at
all, with respect to the entire Additional Space then offered by Landlord to
Tenant, and Tenant may not elect to lease only a portion thereof. If Tenant
timely exercises Tenant's right to lease the Additional Space as set forth
herein, Landlord and Tenant shall within fifteen (15) business days thereafter
execute an amendment to this Lease memorializing Tenant's lease of such
Additional Space.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
set forth above.
"Landlord" "Tenant"
CREEKSIDE SOUTH TRUST, E-LOAN, INC.,
a Maryland business trust a California corporation
By: /s/ Daniel D'Aniello By: Janina Pawlowski
------------------------------ --------------------------------
Name: Daniel D'Aniello Name: Janina Pawlowski
------------------------- --------------------------
Its: Managing Director Its: President
-------------------------- ---------------------------
Date: Date: 8/18/98
---------------------------- -----------------------------
By:
--------------------------------
Name:
---------------------------
Its:
----------------------------
Date:
------------------------------
-33-
<PAGE> 40
EXHIBIT A
PREMISES
[LANDLORD TO PROVIDE.]
A-1
<PAGE> 41
EXHIBIT B
WORK LETTER
Tenant acknowledges and agrees that the Premises is satisfactory and
shall be accepted by Tenant in its "AS IS" condition as of the date of execution
of this Lease and on the Lease Commencement Date; provided, however, that
Landlord shall construct certain modifications to the interior of the Premises
pursuant to the Approved Working Drawings in accordance with the following
provisions of this Tenant Work Letter.
SECTION 1
CONSTRUCTION DRAWINGS FOR THE PREMISES
Landlord and Tenant will approve a detailed space plan for the
construction of certain improvements in the Premises, which space plan will be
prepared by MGRT Architects and submitted to Landlord not later than August 24,
1998(the "Final Space Plan"). Based upon and in conformity with the Final Space
Plan, Landlord shall cause its architect and engineers to prepare and deliver to
Tenant, for Tenant's approval, detailed specifications and engineered working
drawings for the tenant improvements shown on the Final Space Plan (the "Working
Drawings"). The Working Drawings shall incorporate modifications to the Final
Space Plan as necessary to comply with the floor load and other structural and
system requirements of the Building. To the extent that the finishes and
specifications are not completely set forth in the Final Space Plan for any
portion of the tenant improvements depicted thereon, the actual specifications
and finish work shall be in accordance with the specifications for the
Building's standard improvement package items, as determined by Landlord. Within
three (3) business days after Tenant's receipt of the Working Drawings, Tenant
shall approve or disapprove the same, which approval shall not be unreasonably
withheld; provided, however, that Tenant may only disapprove the Working
Drawings to the extent such Working Drawings are inconsistent with the Final
Space Plan and only if Tenant delivers to Landlord, within such three (3)
business days period, specific changes proposed by Tenant which are consistent
with the Final Space Plan and do not constitute changes which would result in
any of the circumstances described in items (i) through (iv) below. If any such
revisions are timely and properly proposed by Tenant, Landlord shall cause its
architect and engineers to revise the Working Drawings to incorporate such
revisions and submit the same for Tenant's approval in accordance with the
foregoing provisions, and the parties shall follow the foregoing procedures for
approving the Working Drawings until the same are finally approved by Landlord
and Tenant. Upon Landlord's and Tenant's approval of the Working Drawings, the
same shall be known as the "Approved Working Drawings". Once the Approved
Working Drawings have been approved by Landlord and Tenant, Tenant shall make no
changes, change orders or modifications thereto without the prior written
consent of Landlord, which consent may be withheld in Landlord's sole discretion
if such change or modification would: (i) directly or indirectly delay the
Substantial Completion of the Premises; (ii) increase the cost of designing or
constructing the Tenant Improvements above the cost of the tenant improvements
depicted in the Final Space Plan; (iii) be of a quality lower than the quality
of the standard improvement package items for the Building; and/or (iv) require
any
B-1
<PAGE> 42
changes to the base, shell and core work or structural improvements or systems
of the Building. The Final Space Plan, Working Drawings and Approved Working
Drawings shall be collectively referred to herein as, the "Construction
Drawings". The tenant improvements shown on the Approved Working Drawings shall
be referred to herein as the "Tenant Improvements".
SECTION 2
CONSTRUCTION AND COSTS
Landlord shall cause Webcon (the "Contractor") to (i) obtain all
applicable building permits for construction of the Tenant Improvements, and
(ii) construct the Tenant Improvements as depicted on the Approved Working
Drawings, in compliance with such building permits and all applicable laws in
effect at the time of construction, including all environmental laws and the
Americans with Disabilities Act, and in good workmanlike manner. Landlord shall
pay for the cost of the design and construction of the Tenant Improvements,
including space planning, engineering, construction drawings, signage,
construction supervision, and any necessary permits, in an amount up to, but not
exceeding, One Million Two Hundred Thousand Dollars ($1,200,000.00) which is
equal to Thirty Dollars ($30.00) per Rentable Square Foot of the Premises (the
"Tenant Improvement Allowance"); provided, however, that the Tenant Improvement
Allowance shall not be used to pay the traffic impact fee which shall be paid
separately by Landlord. Tenant shall pay for all costs in excess of the Tenant
Improvement Allowance, which payment shall be made to Landlord in cash within
ten (10) days after Tenant's receipt of invoice therefor from Landlord. In no
event shall Landlord be obligated to pay for any of Tenant's furniture, computer
systems, telephone systems, equipment or other personal property which may be
depicted on the Construction Drawings; such items shall be paid for by Tenant.
Tenant shall be entitled to receive as a credit against Rent any portion of the
Tenant Improvement Allowance not used to pay for the cost of the design and
construction of the Tenant Improvements.
SECTION 3
DELAY IN SUBSTANTIAL
COMPLETION OF THE TENANT IMPROVEMENTS
Delay of the Substantial Completion of the Premises. If there shall be
a delay or there are delays in the Substantial Completion, as defined in Section
2.1 of the Lease, of the Premises as a direct, indirect, partial, or total
result of any of the following (collectively, "Tenant Delays"):
3.1 Tenant's failure to timely approve the Final Space Plan and
the Working Drawings or any other matter requiring Tenant's approval;
3.2 A breach by Tenant of the terms of this Work Letter or the Lease;
3.3 Tenant's request for changes in any of the Construction Drawings;
B-2
<PAGE> 43
3.4 Tenant's requirement for materials, components, finishes or
improvements which are not available in a commercially reasonable time given the
estimated date of Substantial Completion of the Premises, as set forth in the
Lease, or which are different from, or not included in, Landlord's standard
improvement package items for the Building;
3.5 Changes to the base, shell and core work, structural
components or structural components or systems of the Building required by the
Approved Working Drawings; or
3.6 Any other acts or omissions of Tenant, or its agents, or employees;
then, notwithstanding anything to the contrary set forth in the Lease and
regardless of the actual date of Substantial Completion, the Lease Commencement
Date (as set forth in the Basic Lease Information) shall be deemed to be the
date the Lease Commencement Date would have occurred if no Tenant Delay or
Delays, as set forth above, had occurred.
SECTION 4
MISCELLANEOUS
Provided that Tenant and its agents do not interfere with Contractor's
work in the Building and the Premises, Contractor shall allow Tenant access to
the Premises prior to the Substantial Completion of the Premises for the purpose
of Tenant installing overstandard equipment, furniture or fixtures (including
Tenant's data and telephone equipment) in the Premises. Prior to Tenant's entry
into the Premises as permitted by the terms of this Section 4, Tenant shall
submit a schedule to Landlord and Contractor, for their approval, which schedule
shall detail the timing and purpose of Tenant's entry. Tenant shall hold
Landlord harmless from and indemnify, protect and defend Landlord against any
loss or damage to the Premises or Property and against injury to any persons
caused by Tenant's actions pursuant to this Section 4.
B-3
<PAGE> 44
EXHIBIT C
COMMENCEMENT DATE MEMORANDUM
With respect to that certain lease ("Lease") dated August ___, 1998,
between E-LOAN, INC., a California corporation ("Tenant"), and CREEKSIDE SOUTH
TRUST, a Maryland business trust ("Landlord"), whereby Landlord leased to Tenant
and Tenant leased from Landlord approximately 40,000 rentable square feet of the
building located at Creekside Business Park, Dublin, California ("Premises"),
Tenant hereby acknowledges and certifies to Landlord as follows:
(1) Landlord delivered possession of the Premises to Tenant in
a Substantially completed condition on _____________________ ("Possession
Date");
(2) The Lease commenced on _______________________
("Commencement Date");
(3) The Premises contain _________ square feet of space; and
(4) Tenant has accepted and is currently in possession of the
Premises and the Premises are acceptable for Tenant's use.
IN WITNESS WHEREOF, this Commencement Date Memorandum is executed this
___ day of ______________________, 1998.
"Tenant"
E-LOAN, INC.,
a California corporation
By:________________________________
Name:___________________________
Its:____________________________
By:________________________________
Name:___________________________
Its:____________________________
C-1
<PAGE> 45
EXHIBIT D
RULES AND REGULATIONS
[LANDLORD TO PROVIDE.]
D-1
<PAGE> 46
EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
The undersigned, as Tenant under that certain Multi-Tenant Office
Triple Net Lease (the "LEASE") made and entered into as of _________________,
19__ and between _________________________________, a ________________________
as Landlord, and the undersigned as Tenant, for Premises on the ___________
floor(s) of the Building located at _________________________, Dublin,
California hereby certifies as follows:
1. Attached hereto as Exhibit A is a true and correct copy of the Lease
and all amendments and modifications thereto. The documents contained in Exhibit
A represent the entire agreement between the parties as to the Premises.
2. The undersigned has commenced occupancy of the Premises described in
the Lease, currently occupies the Premises, and the Lease Term commenced on
_________.
3. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Exhibit A.
4. Tenant has not transferred, assigned, or sublet any portion of the
Premises nor entered into any license or concession agreements with respect
thereto except as follows:
5. Tenant shall not modify the documents contained in Exhibit A or
prepay any amounts owing under the Lease to Landlord in excess of thirty (30)
days without the prior written consent of Landlord's mortgagee.
6. Base Rent became payable on _______________.
7. The Lease Term expires on _________________.
8. All conditions of the Lease to be performed by Landlord necessary to
the enforceability of the Lease have been satisfied and Landlord is not in
default thereunder.
9. No rental has been paid in advance and no security has been
deposited with Landlord except as provided in the Lease.
10. As of the date hereof, there are no existing defenses or offsets
that the undersigned has, which preclude enforcement of the Lease by Landlord.
11. All monthly installments of Base Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through _________________. The current monthly installment of Base Rent is
$__________.
E-1
<PAGE> 47
12. The undersigned acknowledges that this Estoppel certificate may be
delivered to Landlord's prospective mortgagee, or a prospective purchaser, and
acknowledges that it recognizes that if same is done, said mortgagee,
prospective mortgagee, or prospective purchaser will be relying upon the
statements contained herein in making the loan or acquiring the property of
which the Premises are a part, and in accepting an assignment of the Lease as
collateral security, and that receipt by it of this certificate is a condition
of making of the loan or acquisition of such property.
13. If Tenant is a corporation or partnership, each individual
executing this Estoppel Certificate on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in California and that Tenant has full right and authority to execute
and deliver this Estoppel Certificate and that each person signing on behalf of
Tenant is authorized to do so.
Executed at __________________ on the _____ day of ______________,
19___.
"Tenant":
E-LOAN, INC.,
a California corporation
By:____________________________________
Name:_______________________________
Its:________________________________
E-2
<PAGE> 48
FIRST AMENDMENT TO LEASE
This FIRST AMENDMENT TO LEASE ("First Amendment") is made and
entered into as of the 11th day of September, 1998, by and between CREEKSIDE
SOUTH TRUST, a Maryland business trust ("Landlord"), and E-LOAN, INC., a
California corporation ("Tenant").
R E C I T A L S :
A. Landlord and Tenant entered into that certain Multi-Tenant
Office Triple Net Lease dated as of August 19, 1998 (the "Lease"), pursuant to
which Landlord leased to Tenant and Tenant leased from Landlord certain
"Premises" as described in the Lease and located in that certain office building
located at 5875 Arnold Drive, Dublin, California (the "Building").
B. Landlord and Tenant now desire to amend the Lease in
certain respects, including to provide for an additional tenant improvement
allowance, all upon the terms and conditions as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Capitalized Terms. All capitalized terms when used herein
shall have the same meanings given such terms in the Lease unless expressly
superseded by the terms of this First Amendment.
2. Additional Allowance. In addition to the Tenant Improvement
Allowance provided by Landlord to Tenant pursuant to Section 2 of Exhibit B
attached to the Lease (the "Work Letter"), Landlord shall provide to Tenant an
additional allowance in the amount up to, but not exceeding, Two Hundred
Thirteen Thousand Nine Hundred Forty-Five Dollars ($213,945.00) (which is Five
Dollars ($5.00) per Rentable Square Foot of the Premises)(the "Additional
Allowance") to pay for the Tenant Improvement work pursuant to Section 2 of the
Work Letter, which Additional Allowance shall be amortized over the initial term
of the Lease at an interest rate of twelve percent (12%) per annum by increasing
the monthly Base Rent Per Rentable Square Foot payable under the Lease each year
by Two point Two Two Four Cents ($0.02224) for every One Dollar ($1.00) per
Rentable Square Foot of the Premises of Additional Allowance drawn by Tenant.
For example, if Tenant draws the maximum amount of Additional Allowance, then
the initial monthly Base Rent Per Rentable Square Foot payable under the Lease
on the Commencement Date shall increase by Eleven point One Two Two Cents
($0.11122) from One and 25/100 Dollars ($1.25) per Rentable Square Foot of the
Premises to One Dollar and Thirty-Six point One Two Two Cents ($1.36122) per
Rentable Square Foot of the Premises for a total of Fifty-Eight Thousand Two
Hundred Forty-Five and 24/100 Dollars ($58,245.24)
<PAGE> 49
and each subsequent year of the Lease Term, the monthly Base Rent Per Rentable
Square Foot shall be increased by Eleven point One Two Two Cents ($0.11122).
3. No Further Modification. Except as set forth in this First
Amendment, all of the terms and provisions of the Lease shall remain unmodified
and in full force and effect.
IN WITNESS WHEREOF, this First Amendment has been executed as
of the day and year first above written.
"LANDLORD" CREEKSIDE SOUTH TRUST,
a Maryland business trust
By:
------------------------
Daniel D'Aniello
Its: Managing Director
"TENANT" E-LOAN, INC.,
a California corporation
By: /s/ Janina Pawlowksi
------------------------
Name: Janina Pawlowksi
------------------
Its: President
By:
-----------------------
Name:
-------------------
Its:
-------------------
-2-
<PAGE> 1
EXHIBIT 10.27
ALLIANCE AGREEMENT
This Alliance Agreement (the "AGREEMENT") is made and entered into as of
this 19th day of March, 1999 (the "EFFECTIVE DATE") by and among E-Loan, Inc., a
corporation organized and existing under the laws of the State of Delaware,
United States of America, having its principal place of business at 5875 Arnold
Rd., Suite 100, Dublin, California 94568, United States of America ("E-LOAN");
Stater BV, a private company with limited liability, organized and existing
under the laws of The Netherlands, having its principal place of business at De
Brand 40, 3823 LL Amersfoort, The Netherlands ("STATER"); and E-Loan Europe BV,
a private company with limited liability organized and existing under the laws
of The Netherlands ("E-LOAN EUROPE").
BACKGROUND
A. E-Loan is engaged in an Internet-based marketing business in the
United States in which E-Loan acts as an on-line mortgage originator, offering
automated loan application processes that allow Internet users to apply for and
obtain residential mortgage loans and related services quickly and without a
traditional loan agent; and
B. Stater is engaged in the creation and provision of integrated systems
and back-office services related to origination, automated lending decision
management, documentation, payment, loan management, debtor management,
collections, arrears management, default management and related services, all
relating to mortgages and related products; and
C. E-Loan and Stater desire to cooperate to support E-Loan Europe, in
establishing and operating a Multi-Lender Site (as defined below) that offers,
over the Internet, residential mortgage loans for which the underlying real
property is located in the Territory (as defined below) and insurance and other
related services ancillary to such mortgages; and
D. Partly in consideration of such cooperation and assistance by Stater
as outlined below, E-Loan Europe and Stater wish to make Stater the preferred
provider to E-Loan Europe Bank (as defined below) of certain services related to
loans funded by E-Loan Europe Bank, all as described more fully below.
NOW THEREFORE, in consideration of the promises and mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 "AFFILIATE" of an entity means any company that controls, is
controlled by or is under common control with such entity, where "control" means
beneficial ownership (direct or indirect) of at least fifty percent (50%) of the
shares of such entity entitled to vote in the election of directors (or in the
case of an entity that is not a corporation, for the election of the
corresponding managing authority).
1.2 "BROKERAGE FUNCTIONALITY" means technology and/or services to allow a
user to compare, select and apply for residential mortgage loans.
<PAGE> 2
1.3 "MORTGAGE MANAGEMENT SERVICES" means the automated lending decision
management, documentation, payment, loan management, debtor management,
collections, arrears management, default management and other similar mortgage
management services, in each case to the extent customarily provided by Stater
or its Affiliates. Mortgage Management Services exclude services including or
related to Brokerage Functionality.
1.4 "MULTI-LENDER SITE" means a service by which residential mortgage
loans are offered directly to the public, through the Internet, World Wide Web,
commercial on-line service, interactive broadcast, or any other electronic
on-line means, and that offers or intermediates residential mortgage loans for
multiple lenders, in a format that allows the user to compare, select and apply
for residential mortgage loans through such service.
1.5 "ON LINE RESIDENTIAL MORTGAGE LOAN SITE" means a service by which
residential mortgage loans are offered directly to the public, through the
Internet, World Wide Web, commercial on-line service, interactive broadcast, or
any other electronic on-line means.
1.6 "SECURITIZATION MANAGEMENT SERVICES" means the offering and sale of
securities, which securities consist primarily of a pool of residential mortgage
loans originated by E-Loan Europe Bank through the operation by E-Loan Europe of
a Multi-Lender Site, and the related consulting, due diligence and other
portfolio management activities and services, in each case to the extent
commonly associated with the offering and sale of mortgage-backed securities in
the Territory.
1.7 "STATER SERVICES" means the Mortgage Management Services and the
Securitization Management Services provided by Stater pursuant to this
Agreement.
1.6 "TERRITORY" means the countries identified in EXHIBIT A.
ARTICLE 2 -- COOPERATION AND ASSISTANCE BY STATER
2.1 SERVICES IN SUPPORT OF E-LOAN EUROPE. Stater agrees to use
commercially reasonable efforts to provide to E-Loan Europe, upon E-Loan
Europe's request from time to time, services and facilities to assist E-Loan
Europe in establishing and operating a Multi-Lender Site for residential
mortgage loans on properties located in the Territory. Such services and
facilities shall include, among other things:
(a) Preparation of a business plan ("BUSINESS PLAN") for the initial
activities of E-Loan Europe, with input and assistance from E-Loan, which
Business Plan shall include:
(i) a study assessing the feasibility of the successful
establishment and operation of a Multi-Lender Site by E-Loan Europe in
the Territory;
(ii) an analysis of the legal, tax and regulatory implications
associated with the operation of a Multi-Lender Site by E-Loan Europe
in the Territory;
2
<PAGE> 3
(iii) projections of revenue and income (or loss) over a
five-year period, commencing on the Effective Date, in connection with
the operation of a Multi-Lender Site by E-Loan Europe in the
Territory;
(iv) an annual business plan and budget for E-Loan Europe for the
fiscal years ending December 31, 1999, and December 31, 2000, which
shall include, but not be limited to, a balance sheet, an income
statement, a statement of cash flows, cash management and a detail of
product development and personnel costs;
(v) a proposed time-table under which E-Loan Europe shall make a
Multi-Lender Site operational in each of the countries included in the
Territory;
(vi) a summary of the terms and conditions under which E-Loan
Europe shall be managed and under which the operations of E-Loan
Europe, including its product development and personnel costs, shall
be financed;
(vii) a summary of the terms and conditions under which E-Loan
shall license its proprietary information, including proprietary
software, trademark, tradename, or other intellectual property, to
E-Loan Europe for the purpose of operating a Multi-Lender Site in the
Territory;
(viii) a detailed description of the Mortgage Management Services
and Securitization Management Services that Stater shall provide
E-Loan Europe Bank pursuant to the terms of this Agreement;
(ix) a detailed description of the other services and assistance
that shall be provided by Stater pursuant to the terms of this
Agreement;
(x) a detailed description of the services and assistance that
shall be provided by E-Loan pursuant to the terms of this Agreement;
and
(xi) a detailed description of the terms under which Stater could
participate in the equity of E-Loan Europe.
(b) Providing facilities for the offices of E-Loan Europe, and E-Loan
Europe Bank (as defined below);
(c) Consulting regarding regulatory approvals, requirements for
localization and modification of E-Loan's technology for use by E-Loan Europe,
and the like.
2.2 PAYMENT.
(a) BY STATER. Within thirty (30) days after the Effective Date, in
consideration of the covenants and obligations of E-Loan and E-Loan Europe
herein, Stater agrees to pay to E-Loan Europe the sum of five hundred fifty
thousand (550,000) Euros ("EXPENSE ADVANCE"). The parties agree that this amount
will be applied by E-Loan Europe toward the establishment by
3
<PAGE> 4
E-Loan Europe of a Multi-Lender Site in the Territory, beginning with the
preparation of the Business Plan for such Multi-Lender Site, and other steps to
establish the Multi-Lender Site.
(b) BY E-LOAN EUROPE. In support of the facilities and services to be
provided by Stater under Section 2.1, E-Loan Europe agrees to reimburse Stater
for the direct costs reasonably incurred by Stater in providing such services
and facilities, up to a maximum amount to be agreed upon in writing by E-Loan
Europe and Stater from time to time prior to the time such facilities and
services are provided. E-Loan Europe agrees to pay such costs monthly in
arrears, within thirty (30) days after the date of Stater's invoice therefor.
2.3 BOARD OF DIRECTORS. The business and affairs of E-Loan Europe shall be
managed by its Board of Directors. For the purpose of this Agreement, the "Board
of Directors" shall mean the Supervisory Board of E-Loan Europe, to the extent
E-Loan Europe is required by law to have a Supervisory Board; otherwise, the
Board of Directors shall be deemed to be the Management Board of E-Loan Europe.
Stater shall be entitled to appoint at least one member of the Board of
Directors of E-Loan Europe.
2.4 INITIAL CAPITALIZATION OF E-LOAN EUROPE. Within thirty (30) days after
the Effective Date, E-Loan shall subscribe for and purchase four hundred fifty
thousand (450,000) shares of capital stock of E-Loan Europe and shall deliver to
E-Loan Europe, in connection with such subscription and purchase, four hundred
fifty thousand (450,000) Euros.
ARTICLE 3 -- STATER SERVICES
3.1 STATER SERVICES TO E-LOAN BANK. The parties anticipate that E-Loan
Europe may organize an entity (or group of entities), or a division of E-Loan
Europe, that will itself (or themselves) fund residential mortgage loans in the
Territory (the "E-LOAN EUROPE BANK"). To the extent that E-Loan Europe Bank
requires Mortgage Management Services, E-Loan agrees to cause E-Loan Europe Bank
to purchase such Mortgage Management Services from Stater, and Stater agrees to
provide such Mortgage Management Services to the E-Loan Europe Bank, all subject
to the terms and conditions of this Article 3.
(a) PRICING AND TERMS. Stater agrees to provide such Mortgage
Management Services, and any other technology and services described in (b)
below, to E-Loan Europe Bank (i) at prices that are no higher than the prices at
which Stater or its Affiliates provide the same or similar services or
technology to any party (including without limitation any Affiliate); and (ii)
upon other terms and conditions no less favorable, in any material respect, than
those under which Stater provides any such services or technology to any party
(including without limitation any Affiliate). In addition, the parties
anticipate that Stater will provide such technology and services to E-Loan
Europe Bank at prices that are discounted from the prices charged for such
services and technology to any party that is not an Affiliate of Stater;
however, due to the complexity of pricing for the variety of services offered by
Stater, such discounts must be negotiated in good faith by Stater and E-Loan
Europe taking into account the country in which such technology or services will
be provided, the volume of such technology or services to be provided, and the
time period during which such technology or services will be provided.
4
<PAGE> 5
(b) TIME TO MARKET ADVANTAGE. In the event that Stater introduces
technology or services specifically designed for use in operating an On Line
Residential Mortgage Loan Site, (i) Stater agrees to offer such technology or
services to E-Loan Europe Bank, and (ii) if E-Loan Europe Bank wishes to use
such technology or services, Stater agrees not to provide such technology and
services to any third party that is not an Affiliate of Stater, for use in an On
Line Residential Mortgage Loan Site, until six (6) months after providing such
technology or services to E-Loan Europe Bank. Notwithstanding the foregoing,
Stater's commitment in clause (ii) above shall not apply to the extent that such
technology or services are developed specifically for a particular customer
under a contract between Stater and such customer and such contract precludes
Stater from providing E-Loan Europe with the time advantage described in (ii)
above.
3.2 SECURITIZATION MANAGEMENT SERVICES. To the extent that E-Loan Europe
Bank requires Securitization Management Services, E-Loan agrees to cause E-Loan
Europe Bank to purchase such Securitization Management Services from Stater, and
Stater agrees to provide Securitization Management Services to the E-Loan Europe
Bank, all subject to the terms and conditions of this Article 3. Stater agrees
to provide such Securitization Management Services to E-Loan Europe Bank upon
such terms and conditions no less favorable, in any material respect, than those
under which Stater provides any such Securitization Management Services to any
party (including without limitation any Affiliate).
3.3 EXCLUSIVITY OF STATER SERVICES. The parties intend that Stater will be
the preferred provider of Mortgage Management Services and Securitization
Management Services to E-Loan Europe Bank as set forth below.
(a) Accordingly, E-Loan agrees to not contract with (and agrees to
cause E-Loan Europe Bank not to contract with) any party other than Stater or
its Affiliates to provide Mortgage Management Services or Securitization
Management Services to E-Loan Europe Bank; and E-Loan and E-Loan Europe agree
(and shall cause E-Loan Europe Bank to agree) not to provide such services for
their own account, unless (i) the price, availability, service level, terms, or
other aspects of the Mortgage Management Services or Securitization Management
Services offered by Stater to E-Loan Europe Bank are, on the whole, materially
less favorable than those available from a third party (or in the case of
services that E-Loan Europe and E-Loan Europe Bank propose to provide for their
own account, on the whole, materially less favorable than those available to
E-Loan Europe Bank through such means), or (ii) Stater is otherwise not then
able to meet the reasonable requirements of E-Loan Europe Bank.
(b) E-Loan agrees to cause E-Loan Europe Bank to provide Stater with
at least one hundred eighty (180) days notice prior to first obtaining Mortgage
Management Services or Securitization Management Services for residential
mortgage loans on properties in each particular country of the Territory other
than The Netherlands, Luxembourg, Germany or Belgium.
(c) In the event of a dispute as to whether E-Loan Europe or E-Loan
Europe Bank has the right to obtain any services from a third party (or to
provide such services for their own account), E-Loan Europe or E-Loan Europe
Bank may proceed to obtain such services from a third party, or provide them for
their own account, and will not be deemed in breach of this
5
<PAGE> 6
Section 3.3 during the period prior to a determination under Section 7.2(b) that
E-Loan Europe or E-Loan Europe Bank is obligated to obtain such services from
Stater.
(d) Nothing in this Section 3.3 will be deemed to restrict E-Loan
Europe or E-Loan Europe Bank from performing, itself (i.e. in lieu of obtaining
such services from Stater or a third party), any services currently provided by
E-Loan in the United States as of the Effective Date.
3.4 LIMITATION. Any provision contained in this Agreement to the contrary
notwithstanding, in no event shall Stater be required to provide the Mortgage
Management Services or Securitization Management Services in any country within
the Territory in which Stater is not engaged in the business of providing the
same or similar services to other customers of Stater or in which Stater is
prohibited from providing such services by applicable law, rule or regulation.
3.5 SERVICING AGREEMENTS. It is anticipated that the terms and conditions
under which Stater shall perform the Stater Services described in this Article 3
will be set forth in detail in one or more agreements ("SERVICING AGREEMENTS")
between Stater (or an Affiliate of Stater) and E-Loan Europe (or E-Loan Europe
Bank); provided, however, that the terms and conditions of any such Servicing
Agreements shall not vary in any material respect from the provisions of this
Article 3, unless otherwise agreed in writing by E-Loan Europe and Stater.
ARTICLE 4 -- EXCLUSIVITY OF EFFORTS
4.1 PROTECTION OF CONFIDENTIAL INFORMATION. The parties acknowledge that
by virtue of their activities under this Agreement, they will each receive
confidential and proprietary information of E-Loan Europe that would assist the
other parties to unfairly compete with E-Loan Europe. To protect such
confidential information, the parties agree as follows:
(a) STATER. During the term of this Agreement, Stater shall not,
directly or indirectly, through any Affiliate: (i) purchase or hold any equity
interest in any company that operates, as its principal line of business, a
Multi-Lender Site that includes residential mortgage loans on properties located
in the Territory, or (ii) provide Brokerage Functionality for use in a
Multi-Lender Site (other than a Multi-Lender Site operated by E-Loan Europe)
with respect to properties in the Territory.
(b) E-LOAN. During the term of this Agreement, E-Loan shall not,
directly or indirectly, through any Affiliate other than the E-Loan Europe: (i)
purchase or hold any equity interest in any company that operates, as its
principal line of business, a Multi-Lender Site that includes residential
mortgage loans on properties located in the Territory, or (ii) provide Brokerage
Functionality for use in a Multi-Lender Site (other than a Multi-Lender Site
operated by E-Loan Europe) with respect to properties in the Territory.
4.2 EVENTS UPON CHANGE OF CONTROL.
(a) As used herein, "CHANGE OF CONTROL" means (i) a merger or
reorganization of any party to this Agreement (such party, the "SELLING PARTY")
into any other corporation or
6
<PAGE> 7
corporations pursuant to which the Selling Party's stockholders immediately
prior to such transaction own, immediately after and as a result of such
transaction, less than fifty percent (50%) of the equity securities of the
surviving corporation; or (ii) a sale of all or substantially all of the assets
of the Selling Party's business relating to residential mortgage loans on
properties in the Territory, or all or substantially all of the outstanding
stock of the Selling Party, pursuant to which transaction the Selling Party's
stockholders immediately prior to such transaction own, immediately after and as
a result of such transaction, less than fifty percent (50%) of the equity
securities of the surviving corporation; provided, however, that in no event
will a public offering of a Selling Party's capital stock in which the
purchasers are not acting together as a group be deemed a Change of Control.
(b) TERMINATION. Upon a Change of Control, the Selling Party agrees
to promptly give notice to all other parties of such Change of Control, and the
Selling Party, or any other party to this Agreement may, in its sole discretion,
either (i) terminate this Agreement upon written notice within ninety (90) days
following the closing of such Change of Control, and such termination will be
without penalty to any party to this Agreement or the party who has obtained
control of Selling Party, or (ii) allow the Agreement to continue in full force
and effect in which case, all of Selling Party's rights and obligations under
this Agreement will be assumed in accordance with Section 7.3 below.
ARTICLE 5 -- TERMINATION
5.1 TERM. The term of this Agreement will commence on the Effective Date,
and, unless terminated earlier as described in Section 4.2 above or Section 5.2
below, will continue in effect for five (5) years thereafter.
5.2 BREACH AND REMEDIES. In the event of a material breach by any party of
a material provision hereof, which breach is not cured within ninety (90) days
after written notice thereof by the other party, then the nonbreaching party
may, effective ninety (90) days after written notice of failure to cure to the
breaching party, terminate this Agreement. The parties agree that such
termination will be the terminating party's sole remedy for breach of this
Agreement by any other party, except for any liability that arises under Article
6 (Non-Disclosure).
5.3 EFFECT OF TERMINATION. The termination of this Agreement will not in
any way operate to impair or destroy any of the rights or remedies of any party,
or to relieve any party of its obligations to comply with any of the provisions
of this Agreement which accrue prior to the date of termination, and the
provisions of Articles 1, 6, and 7 will survive the expiration and any
termination of this Agreement. In the event that this Agreement is terminated by
Stater due to breach by E-Loan or E-Loan Europe under Section 5.2, E-Loan Europe
shall promptly return to Stater the Expense Advance, less any amount that E-Loan
Europe (a) shall have expended in connection with the establishment by E-Loan
Europe of a Multi-Lender Site in the Territory, up to a maximum amount to be
agreed upon in writing by E-Loan Europe and Stater from time to time prior to
the time any such expenses are incurred, or (b) shall have reimbursed to Stater
in accordance with the provisions of Section 2.2(b) above.
7
<PAGE> 8
ARTICLE 6 -- NONDISCLOSURE
6.1 DEFINITION. "CONFIDENTIAL INFORMATION" means any information disclosed
by any party to any other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including without limitation
documents, prototypes, samples, plant and equipment), which is designated as
"Confidential, " "Proprietary" or some similar designation. Information
communicated orally will be considered Confidential Information if such
information is confirmed in writing as being Confidential Information within a
reasonable time after the initial disclosure. Confidential Information may also
include information disclosed to a disclosing party by other parties.
Confidential Information will not, however, include any information which (i)
was publicly known and made generally available in the public domain prior to
the time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
the disclosing party as shown by the receiving party's files and records
immediately prior to the time of disclosure; (iv) is obtained by the receiving
party from another party without a breach of such other party's obligations of
confidentiality; (v) is independently developed by the receiving party without
use of or reference to the disclosing party's Confidential Information, as shown
by documents and other competent evidence in the receiving party's possession;
or (vi) is required by law to be disclosed by the receiving party, provided that
the receiving party gives the disclosing party prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the information from public disclosure.
6.2 NON-USE AND NON-DISCLOSURE. As used in this Article 6, "E-LOAN
COMPANIES" refers to E-Loan and E-Loan Europe together. The E-Loan Companies (on
the one hand) and Stater (on the other hand) each agree not to use any
Confidential Information of the other for any purpose except to exercise its
rights and perform its obligations under this Agreement. The E-Loan Companies
and Stater each agree not to disclose any Confidential Information of the other
to third parties or to such party's employees, except to those employees of the
receiving party with a need to know. The E-Loan Companies and Stater each agree
not to reverse engineer, disassemble or decompile any prototypes, software or
other tangible objects which embody the other's Confidential Information and
which are provided hereunder.
6.3 MAINTENANCE OF CONFIDENTIALITY. Each party agrees to take reasonable
measures to protect the secrecy of and avoid disclosure and unauthorized use of
the Confidential Information of the other parties. Without limiting the
foregoing, each party agrees to take at least those measures that it takes to
protect its own most highly confidential information and agrees to ensure that
its employees who have access to Confidential Information of any other party
have signed a non-use and non-disclosure agreement in content similar to the
provisions hereof, prior to any disclosure of Confidential Information to such
employees. No party shall make any copies of the Confidential Information of any
other party unless the same are previously approved in writing by the other
party. Each party agrees to reproduce any other party's proprietary rights
notices on any such approved copies, in the same manner in which such notices
were set forth in or on the original.
8
<PAGE> 9
6.4 RETURN OF MATERIALS. Upon the termination of this Agreement, each
party agrees to deliver to each other party all of such other party's
Confidential Information that such party may have in its possession or control.
ARTICLE 7 -- MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement will be governed by and interpreted in
accordance with the laws of California, U.S.A., without reference to conflict of
laws principles.
7.2 ARBITRATION DISPUTES.
(a) If the parties are unable to resolve any dispute, controversy, or
claim arising out of or relating to the validity, construction, enforceability,
or performance of this Agreement (a "DISPUTE") between or among them arising out
of this Agreement, any party may, by written notice to the other, have such
Dispute referred to the Chief Executive Officers of all parties for attempted
resolution by good faith negotiations within thirty (30) days after such notice
is received.
(b) FULL ARBITRATION. Any Dispute, including Disputes relating to
alleged breach or termination of this Agreement that is not resolved pursuant to
Section 7.2(a) above, will be settled by binding arbitration in the manner
described in this Section 7.2. The arbitration will be conducted pursuant to the
Commercial Rules and Supplementary Procedures for Large, Complex Disputes of the
American Arbitration Association then in effect. Notwithstanding those rules,
the following provisions will apply to the arbitration hereunder:
(i) ARBITRATORS. The arbitration will be conducted by a single
arbitrator; provided that at the request of either party, the arbitration will
be conducted by a panel of three (3) arbitrators, chosen according to the Rules
of the American Arbitration Association. In any event, the arbitrator or
arbitrators selected in accordance with this Section 7.2 are referred to herein
as the "PANEL."
(ii) PROCEEDINGS. Except as otherwise provided herein, the
parties and the arbitrators shall use their best efforts to complete the
arbitration within one (1) year after the appointment of the Panel under Section
7.2(b)(i) above, unless a party can demonstrate to the Panel that the complexity
of the issues or other reasons warrant the extension of one or more of the time
tables. In such case, the Panel may extend such time table as reasonably
required. The Panel shall, in rendering its decision, apply the substantive law
of California, U.S.A., without regard to its conflicts of laws provisions. The
proceeding will be conducted in English and will take place in New York, New
York. All pleadings and written evidence will be in the English language. Any
written evidence in a language other than English will be submitted in English
translation accompanied by the original or true copy thereof. The fees of the
Panel will be paid by the losing party or parties, if deemed appropriate by the
Panel. If the Panel does not designate otherwise, the fees will be split equally
between the parties. Each party will bear the costs of its own attorneys' and
experts' fees; provided that the Panel may in its discretion award the
prevailing party or parties all or part of the costs and expenses incurred by
the prevailing party or parties in connection with the arbitration proceeding.
No party may initiate an arbitration hereunder unless it has attempted to
resolve the matter in accordance with Section 7.2(a).
9
<PAGE> 10
7.3 ASSIGNMENT. No party may assign this Agreement without the prior
written consent of the other parties, except that each party may assign this
Agreement to a person or entity into which it has merged or which has otherwise
succeeded to all or substantially all of its business or assets relating to
residential mortgage loan business and which has assumed in writing or by
operation of law the assigning party's obligations under this Agreement. Each
party agrees that in any merger in which it is not the surviving company, the
surviving company will assume, in writing or by operation of law, such party's
obligations under this Agreement. Any purported assignment in violation of the
foregoing will be null and void. Subject to the foregoing, the provisions of
this Agreement will apply to and bind the successors and permitted assigns of
the parties. Upon a permitted assignment of this Agreement, all references to
the assigning party herein will be deemed references to the assignee.
7.4 INTELLECTUAL PROPERTY. If at any time either Stater or E-Loan (the
"DISCLOSING PARTY") discloses or provides any technology or intellectual
property, including without limitation modifications or additions to E-Loan
Europe's or the Disclosing Party's technology or intellectual property, the
Disclosing Party agrees to describe such technology or intellectual property to
E-Loan Europe in writing prior to such disclosure. Following receipt of such
description, E-Loan Europe and the Disclosing Party agree to confer concerning
the nature of the proposed technology or intellectual property and agree in
writing upon the terms, if any, under which such modifications or additions
should be made. The parties acknowledge that the Business Plan shall be the
property of E-Loan Europe.
7.5 LANGUAGE. This Agreement is in the English language only, which
language will be controlling in all respects, and all versions hereof in any
other language will be for accommodation only and will not be binding upon the
parties hereto. All communications and notices to be made or given pursuant to
this Agreement will be in the English language.
7.6 CONSTRUCTION. All parties have been represented by legal counsel
during the negotiation and drafting of this Agreement. Accordingly, any rule of
construction relating to the author of specific language will not apply.
7.7 NOTICES. Any notice or other communications required or permitted
hereunder must be in writing and must be mailed by registered or certified mail,
postage prepaid, or otherwise delivered by hand, or by commercial express
courier service, addressed as follows:
To E-Loan:
E-Loan, Inc.
5875 Arnold Rd., Suite 100
Dublin, California 94568
Attention: President
10
<PAGE> 11
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attn: Kenneth A. Clark
To Stater:
Stater BV
De Brand 40
3823 LL, Amersfoort
The Netherlands
Attn: President
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
816 Congress Avenue, Suite 1900
Austin, Texas 78701
Attention: John Strickland
To E-Loan Europe:
E-Loan Europe BV
c/o E-Loan, Inc.
5875 Arnold Rd., Suite 100
Dublin, California 94568
Attention: President
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attn: Kenneth A. Clark
Such notices will be deemed to have been served when delivered or, if delivery
is not accomplished by reason of some fault of the addressee, when tendered.
7.8 PARTIAL INVALIDITY. If any paragraph, provision, or clause hereof in
this Agreement is found or held to be invalid or unenforceable in any
jurisdiction in which this Agreement is being performed, the remainder of this
Agreement will be valid and enforceable and the parties shall use their
respective best efforts to negotiate a substitute, valid and
11
<PAGE> 12
enforceable provision which most nearly effects the parties' intent in entering
into this Agreement. In the event a party to this Agreement seeks to avoid a
provision of this Agreement by asserting that such provision is invalid, illegal
or otherwise unenforceable (or by prompting a governmental authority to make
such an assertion), then whichever party did not make such an assertion (or
prompt such governmental assertion) will have the right to terminate this
Agreement upon sixty (60) days notice, unless such assertion is eliminated
within such sixty (60) day period.
7.9 COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, all of which, taken together, will be regarded as one and the same
instrument.
7.10 WAIVER. The failure of any party to enforce at any time the provisions
of this Agreement will in no way be construed to be a present or future waiver
of such provisions, nor in any way affect the validity of any party to enforce
each and every such provision thereafter.
7.11 ENTIRE AGREEMENT. The terms and conditions herein contained constitute
the entire agreement between the parties and supersede all previous agreements
and understandings, whether oral or written, between the parties hereto with
respect to the subject matters hereof and thereof and no agreement or
understanding varying or extending the same will be binding upon any party
hereto unless in a written document signed by the party to be bound thereby.
7.12 SECTION HEADINGS. The Section headings contained in this Agreement are
for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
7.13 PUBLICITY. Each of the parties hereto agrees not to disclose the terms
of this Agreement to any other party, without the prior written consent of all
other parties hereto, except to advisors, investors and others on a need-to-know
basis under circumstances that reasonably ensure the confidentiality thereof, or
the extent required by law.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by duly authorized officers or representatives as of the date first above
written.
E-LOAN, INC. STATER BV
By: __________________________________ By: __________________________________
Name: ________________________________ Name: ________________________________
Title: _______________________________ Title: _________________________________
E-LOAN EUROPE BV
By: __________________________________
Name: ________________________________
Title: _______________________________
13
<PAGE> 14
EXHIBIT A
TERRITORY
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Hungary
Italy
Luxembourg
Monaco
Poland
Portugal
Republic of Ireland
Spain
The Netherlands
Sweden
<PAGE> 1
EXHIBIT 10.28
LEASE
THIS LEASE is made and entered into this 20th day of June 1996, by and
between JTC, a California general partnership (hereinafter called "Lessor"), and
Palo Alto Funding Group, Inc. a California Corporation (hereinafter called
"Lessee"), for the promises and on the terms and conditions described herein.
1. SCHEDULE:
A. PREMISES: Lessor hereby leases to Lessee and Lessee hereby leases
from Lessor, that certain office space (herein called "Premises") outlined on
Exhibit "A" which is incorporated herein by this reference, known as Suite
number 300 situated on the 1st floor of that certain office building commonly
known as University Court, 540 University Avenue, Palo Alto, CA 94301.
The parties hereto agree that said letting and hiring is upon and
subject to the terms, covenants and conditions herein set forth and Lessee
covenants as a material part of the consideration for this Lease to keep and
perform each and all of said terms, covenants and conditions by it to be kept
and performed and that this Lease is made upon the condition of such
performance.
B. TERM: Twelve (12) months commencing August 1, 1996, and ending at
5:00 P.M. on July 31, 1997, subject to the provisions herein.
C. BASE RENT: $6,850.20 per month, payable in equal installments in
said amount in advance on the 1st day of each month, commencing August 1, 1996
and continuing on the same day of each month until the end of the lease. Rent
shall be payable to the Lessor at 540 University Avenue Suite 105, Palo Alto,
California or at such other place as Lessor may designate in writing. Lessor
acknowledges receipt of $6,850.20 rent for the month of August.
D. RENTAL INCREASE: see paragraph 30.
E. SECURITY DEPOSIT: $6,850.20, receipt of which is hereby
acknowledged. Security deposit payable upon signging of this lease is $2,390.60
which is calculated as follows: $6,850.20 less $1,450.00 the deposit on account
from Suite 150 and less $3,009.60 the deposit on account from Suite 350.
F. USE OF PREMISES: General office and related activities.
G. REPRESENTATIONS RECONDITION OF PREMISES: There shall be no lessee
improvements.
H. SERVICES TO BE PROVIDED BY LESSOR: Five-day-a-week janitor, common
area heating, ventilating and water shall be provided by Lessor. Electricity,
heat and air-conditioning to the Premises shall be separately metered and paid
by Lessee.
I. LEASEHOLD IMPROVEMENTS TO BE PROVIDED BY LESSOR: Building Standard"
improvements as specified on Exhibit "A", "A-1" hereof.
J. REMOVAL OF PROPERTY: At any time Lessee may, and prior to the end of
the lease term Lessee shall, remove from the Premises furniture, equipment, and
other personal property installed by Lessee or at Lessee's expense. Lessee shall
not remove any fixtures or leasehold improvements without Lessor's prior written
consent, except fixtures installed by Lessee which can be removed without damage
to the premises. Lessee shall repair any damage to the Premises caused by
removal of any property, and shall restore the Premises to its condition at the
commencement of the
LEASE 1 SUITE 300
<PAGE> 2
the commencement of the term, less reasonable wear and tear. All of such removal
and restoration shall be accomplished at Lessee's expense prior to the end of
the lease term.
K. LESSEE'S INSURANCE: Bodily Injury and Property Damage Liability
insurance of not less than One Million Dollars ($1,000,000) combined each
occurrence and as further specified in paragraph 11 hereof.
L. TAXES: Base Tax Year N/A Percent of Building occupied by Lessee N/A
Percent of land occupied by Lessee N/A.
M. BROKER
None
2. TERM AND RENT: The term of this lease and the rent which Lessee
agrees to pay to Lessor are specified in the Schedule. Lessee agrees to pay the
rent to Lessor in lawful money of the United States of America, without
deduction or offset. Rent for partial months shall be prorated.
Lessee additionally agrees to pay to Lessor, concurrent with the Base
Rent unless otherwise provided herein, all other sums of money that may become
due and payable hereunder, which sums shall be deemed additional rental.
3. DEPOSIT: Upon the execution of this lease, Lessee will pay to Lessor
as a security the sum specified as "Deposit" in the schedule. If Lessee shall
pay all rent and observe and perform all of the terms, covenants, and conditions
of this lease during the term and all extensions and renewals thereof, Lessor
will repay the deposit to Lessee, without interest, within five (5) business
days after Lessee vacates the premises. If Lessee defaults in the payment of
rent or other sums due hereunder, damages the Premises, fails to leave the
Premises clean upon termination of the tenancy, or defaults in any of the other
terms, covenants, or conditions of this lease, Lessor may use or apply so much
of the security deposit as is reasonably necessary to remedy such default.
Lessee agrees to restore the security deposit to the full original amount
immediately upon receipt of demand from Lessor therefor.
4. POSSESSION: If Lessor is unable to deliver possession of the
Premises to Lessee at the commencement of the term for any reason whatsoever,
the lease shall not be void or voidable for a period of forty-five (45) days
thereafter, nor shall Lessor be liable to Lessee for any loss or damage
resulting therefrom, but the rent shall abate until Lessor delivers possession
of the Premises to Lessee. If Lessor is unable to deliver possession of the
Premises within forty-five (45) days after the commencement date, this lease may
be terminated by either Lessor or Lessee by a written notice to the other at any
time thereafter prior to the date possession is delivered to Lessee.
5. USE: The Premises shall be used for the purpose specified in the
Schedule, and for no other purpose without the prior written consent of Lessor.
Lessee shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate of or affect any fire or other insurance upon the Building or any
of its contents, cause cancellation of any insurance policy covering said
Building or any part thereof or any of its contents. Lessee shall not do or
permit anything to be done in or about the Premises which will in an way
obstruct or interfere with the
LEASE 2 SUITE 300
<PAGE> 3
rights of other tenants or occupants of the Building or injure or annoy them or
use of allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Lessee cause, maintain or permit any nuisance
in, on or about the Premises. Tenants shall not commit or suffer to be committed
any waste in or upon the Premises.
6. ABANDONMENT: Lessee will not vacate, abandon, or surrender the
Premises during the term, and if Lessee does, or is dispossessed by process of
law, or otherwise, any personal property belonging to Lessee left on the
Premises shall be deemed to be abandoned at the option of Lessor.
7. CONDITION OF PREMISES: Lessee's taking possession of the Premises
and occupying the same for thirty (30) days without giving written notice to
Lessor within said period of any defect in the Premises shall be conclusive
evidence as against Lessee that the Premises were in good order and satisfactory
condition when Lessee took possession. No promise to alter, remodel, or improve
the Premises or the Building and no representation respecting the condition of
the Premises or the Building have been made by Lessor to Lessee, unless the same
is set forth in the Schedule. Lessee waives all right to make repairs at the
expense of Lessor, or to deduct the cost thereof from the rent, and Lessee
waives all rights under Sections 1941 and 1942 of the Civil Code of the State of
California. At the termination of this lease by lapse of time or otherwise,
Lessee shall surrender the Premises in as clean and good a condition as when
Lessee took possession, ordinary wear or loss by fire or other natural force
excepted, failing which Lessor may restore the Premises to such condition and
Lessee shall pay the cost thereof to Lessor upon demand.
8. ALTERATIONS AND REPAIRS: Lessee shall not make or permit to be made
any alterations, additions, improvements, or changes in the Premises without the
prior written consent of Lessor, which consent Lessor shall not unreasonably
withhold, provided that Lessor may make such consent subject to reasonable
conditions. Subject to the services to be rendered by Lessor as set forth in the
Schedule, Lessee shall, at Lessee's own expense, keep the Premises in good
order, condition, and repair during the term, including the replacement of all
broken glass with glass of the same size and quality under the supervision and
with the approval of Lessor. If Lessee does not make repairs promptly and
adequately, Lessor may, but need not, make repairs and Lessee shall pay promptly
the reasonable cost thereof. At any time or times, Lessor, either voluntarily or
pursuant to governmental requirements, may, at Lessor's own expense, make
repairs, alterations, or improvements in or to the Building or any part thereof,
including the Premises, and, during such operations Lessor may close entrances,
doors, corridors, elevators, or other facilities, all without any liability to
Lessee by reason of interference, inconvenience, or annoyance; provided that
Lessee shall have access to the Premises sufficient for conduct of Lessee's
business. Lessor shall not be liable to Lessee for any expense, injury, loss, or
damage resulting from work done in or upon, or the use of, any adjacent or
nearby building, land, street, or alley, provided that Lessor makes a reasonable
effort to minimize the disruption to Lessee's business. In the event Lessee
requests that repairs, alterations, decorating, or other work in the Premises be
made during periods other than ordinary business hours, Lessee shall pay Lessor
for overtime and other additional expenses incurred because of such request.
9. LIENS: Lessee agrees to keep the Premises and the property on which
the Premises are located free from any liens arising out of any work performed,
materials furnished, or obligations incurred by Lessee.
10. INDEMNIFICATION: Lessee waives all claims against Lessor for
damages to property, or to goods, wares and merchandise stored in, upon, or
about the Premises, and for injuries to persons in, upon or about the Premises
from any cause arising at any time, except as may be caused by the act,
omission, or negligence of Lessor, and Lessee agrees to indemnify and hold
Lessor exempt and harmless for and on account of any damage or injury to any
person or
LEASE 3 SUITE 300
<PAGE> 4
property arising from the use of the Premises by Lessee or from the failure of
Lessee to keep the Premises in good condition as herein provided. Lessor shall
not be liable to Lessee for any damage because of any act or negligence of any
covenant or other occupant of the same Building, or by any owner or occupant of
adjourning or contiguous property, nor for overflow, breakage, or leakage of
water, steam, gas, or electricity from pipes, wires, or otherwise. Lessee will
pay for all damage to the Building and to the tenants and occupants thereof
caused by the misuse or neglect of the Premises by Lessee or its invitees.
Lessee's obligations to indemnify and defend shall include, without
limitation, the obligation to pay Lessor's reasonable attorney fees and other
costs incurred after Lessor's first notice of each such claim.
11. LESSEE'S INSURANCE OBLIGATION: Lessee further covenants and agrees
that from and after substantial completion of the premises Lessee will carry and
maintain, at its sole cost and expense, the following types of insurance, in the
amounts specified and in the form hereinafter provided for:
A. PUBLIC LIABILITY AND PROPERTY DAMAGE. Bodily injury and property
damage liability insurance with coverage limits of not less than One Million
Dollars ($1,000,000) combined each occurrence and in the aggregate insuring
against any and all liability of the insured with respect to said premises or
arising out of the maintenance, use or occupancy thereof. All such bodily injury
liability insurance and property damage liability insurance shall specifically
insure the performance by Lessee of the indemnity agreement as to liability for
injury or death of persons and damage to property in this Article 11 contained.
B. PLATE GLASS: Insurance covering all plate glass on the premises.
Lessee shall have the option to either insure the risk or to self-insure.
C. EQUIPMENT: Machinery insurance on all air conditioning equipment and
systems exclusively serving the premises. If said equipment and the damage that
it may cause are not covered by Lessee All Risk insurance, then the insurance
specified in this subparagraph C, shall be in an amount not less than One
Hundred Thousand Dollars ($100,000). If Lessee requires boilers or other
pressure vessels to serve the premises, they should also be insured in the
amount required by this subparagraph.
D. LESSEE IMPROVEMENTS: Insurance covering Lessee's fixtures,
merchandise, and personal property from time to time in, on or upon the
premises, in an amount not less than ninety (90%) percent of their full
replacement cost from time to time after the Effective Date providing protection
against any peril included within the classification "All Risk," together with
insurance against sprinkler damage. Any policy proceeds shall be used for the
repair or replacement of the property damaged or destroyed unless this Lease
shall cease and terminate under the provisions of Article 15.
C. POLICY FORM.
C.1. All policies of insurance provided for herein shall be issued by
insurance companies with general policyholder's rating of not less than A and a
financial rating of not less than Class X as rating in the most current
available "Best's" Insurance Reports, qualified to do business in the State
where the Premises are situated. All such policies shall be issued in the names
of Lessor and Lessee, and if requested by Lessor, Lessor's first mortgagee or
beneficiary, which policies shall be for the mutual and joint benefit and
protection of Lessor, Lessee and Lessor's first mortgagee or beneficiary.
Executed copies of such policies of insurance or certificates thereof shall be
delivered to Lessor within (10) ten days after substantial completion of the
premises, and thereafter executed copies of renewal policies or certificates
thereof shall be delivered to Lessor within thirty (30) days prior to the
expiration of the term of each such policy. All public liability damage and
property damage policies shall contain a provision that Lessor, although
LEASE 4 SUITE 300
<PAGE> 5
named as an insured, shall nevertheless be entitled to recover under said
policies for any loss occasioned to it, its servants, agents and employees by
reason of the negligence of Lessee. As often as any such policy shall expire or
terminate, renewal or additional policies shall be procured and maintained by
Lessee in like manner and to like extent. All policies of insurance delivered to
Lessor must contain a provision that the company writing said policy will give
to Lessor twenty (20) days' notice in writing in advance of any cancellation,
lapse or reduction in the amounts of insurance. All public liability, property
damage and other casualty policies shall be written as primary policies, not
contributing with or in excess of coverage which Lessor may carry.
C.2. Notwithstanding anything to the contrary contained within this
Article 11, Lessee's obligations to carry the insurance provided for herein may
be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Lessee, provided, however, that Lessor and
Lessor's first mortgage or beneficiary shall be named as an additional insured
thereunder as their interests may appear and that the coverage afforded Lessor
will not be reduced or diminished by reason of the use of such blanket policy
insurance, and provided further that the requirements set forth herein are
otherwise satisfied. Lessee agrees to permit Lessor at all reasonable times to
inspect any policies of insurance of Lessee which policies or copies thereof are
not delivered to Lessor.
C.3. If Lessor's insurance rates for the Premises are increased at any
time during the term as a result of the nature of Lessee's use and occupancy of
the Premises, Lessee agrees to reimburse Lessor for the full amount of such
increase immediately upon receipt of demand from Lessor thereof. Such increase
shall be prorated as of the expiration of the term, if applicable.
12. MUTUAL WAIVER OF SUBROGATION RIGHTS: Lessor and Lessee hereby waive
any rights each may have against the other and Lessee hereby waives any rights
it may have against any of the parties to the Agreement referred to in Article
10 on account of any loss or damage occasioned to Lessor or Lessee, as the case
may be, to their respective property, the premises, its contents or to other
portions of the premises, arising from any risk generally covered by All Risk
insurance; and the parties each, on behalf of their respective insurance
companies insuring the property of either Lessor or Lessee against any such
loss, waive any right of subrogation that either may have against the other, as
the case may be. Lessee, on behalf of its insurance companies insuring the
premises, of its contents, Lessee's other property or other portions of the
office building, waives any right of subrogation which such insurer or insurers
may have against any of the parties to the Agreement. The foregoing waivers of
subrogation shall be operative only so long as available in the State where the
office building is situated and provided further that no such policy is
invalidated thereby.
13. Taxes: Lessee will pay before delinquency any and all taxes,
assessments and license fees, and public charges levied, assessed, or imposed
and which become payable during the term hereof upon Lessee's fixtures,
furniture, and personal property installed or located in the Building.
Lessee shall pay his/its pro rata share of any increase in the parking
assessment fees, charges or bond amortization levied by the University Avenue
Parking Assessment District or the University Avenue Parking Lot Maintenance
Assessment or the City of Palo Alto or any other authorized or successor
authority during the term of this lease. Lessee's pro rata share shall be based
upon the portion that Lessee's Premises bears to the leased space of the entire
building.
Lessee shall be considered the owner during the term of any leasehold
improvements installed at Lessee's expense, and any such leasehold improvements
may be assessed to Lessee for property tax purposes. Except as otherwise
provided in the Schedule, Lessee shall not remove from the Premises any
leasehold improvements installed by Lessee without Lessor's prior written
LEASE 5 SUITE 300
<PAGE> 6
consent, and the ownership of any such leasehold improvements shall revert to
Lessor upon the expiration of the term or upon sooner termination of the
tenancy.
14. SERVICES: So long as Lessee is not in default hereunder, Lessor
will furnish the Premises with such services as are specified in the Schedule
and Exhibit "B," and Lessee will pay for all other services supplied to the
Premises. Lessor shall not be liable to Lessee or to any other party for any
claim, injury, damage, rebate, or charge of any, kind whatsoever which may arise
or accrue in case of the interruption of the supply of water, heat, electricity,
elevator service, air conditioning, gas, compressed air, or refrigeration caused
by conditions beyond Lessor's control, or by accident, failure of power supply,
repairs, strikes, fire, flood, act of God, or on account of any defect of the
Building or the Premises, nor shall any such interruption be grounds for
termination of this lease provided Lessor exercises reasonable diligence to
remedy such interruption.
15. DESTRUCTION: In the event of a partial destruction of the Building
or appurtenances during the term from a cause which is insured under Lessor's
fire and extended coverage insurance, Lessor shall forthwith repair the same,
provided such repairs can be made within ninety (90) days under the laws and
regulations of the state, county, federal, or municipal authorities, but such
partial destruction shall not annul or void this lease, except that Lessee shall
be entitled to a proportionate reduction of rent while such repairs are being
made, such proportionate reduction to be based upon the extent to which the
making of repairs interferes with the business carried on by Lessee in the
Premises.
If the partial destruction is caused by a casualty which is not insured
under Lessor's fire and extended covered insurance or if such repairs cannot be
made in ninety (90) days, either Lessor or Lessee may terminate this lease by
giving written notice to the other party within thirty (30) days after the
damage occurs. If the lease is not terminated, Lessor shall make such repairs
within a reasonable time with this lease continuing in full force and effect and
the rent proportionately reduced while the repairs are being made.
In the event the Building in which the Premises are located is
destroyed to the extent of not less than 33 1/3% of the then current replacement
cost thereof, Lessor may elect to terminate this lease by giving written notice
of termination to Lessee within thirty (30) days after damage occurs, regardless
of whether the Premises are damaged, whether the partial destruction is caused
by a casualty covered by insurance, or whether the repairs can be made within
ninety (90) days. A total destruction of the Building in which the Premises are
located shall terminate this lease. In respect to any partial destruction which
Lessor is obligated to repair or may elect to repair under the terms of this
paragraph and which can be made within ninety (90) days the provisions of
Section 1932, Subdivision 2, and of Section 1933, Subdivision 4, of the Civil
Code of the State of California are waived by Lessee.
In the event of termination of this lease pursuant to any of the
provisions of this paragraph, rent and Lessee's portion of any parking
assessment fee increase shall be apportioned on a per diem basis and shall be
paid to the date of the casualty. In no event shall Lessor be liable to Lessee
for any damages resulting to Lessee from the happening of such casualty or from
the repairing or reconstruction of the Premises or of the Building, or from the
termination of this lease as herein provided, nor shall Lessee be relieved
thereby or in any such event from Lessee's obligations hereunder except to the
extent and upon the conditions expressly stated in this paragraph.
16. EMINENT DOMAIN: If the whole or any substantial part of the
Building or appurtenant real property shall be taken or condemned by any
competent authority for any public use or purpose, the term of this lease shall
end upon, and not before, the date when the possession of the part so taken
shall be required for such use or purpose. Rent shall be apportioned as of the
LEASE 6 SUITE 300
<PAGE> 7
date of such termination. Lessee shall be entitled to receive any damages
awarded by the court for leasehold improvements installed at Lessee's expense.
The entire balance of the award shall be the property of Lessor.
17. ASSIGNMENT AND SUBLETTING: Lessee shall not assign this lease, or
any interest herein, and shall not sublet the Premises or any part thereof, or
any right or privilege appurtenant thereto, or suffer any other person (the
agents or employees of Lessee excepted) to occupy or use the Premises, or any
portion thereof, without the prior written consent of Lessor, and a consent to
one assignment, subletting, occupation, or use by any other person shall not be
deemed to be a consent to any subsequent assignment, subletting, occupation, or
use by any other person. Any such assignment or subletting without such consent
shall be void, and shall, at the option of Lessor, terminate this lease. Any
transfer or assignment of this lease by operation of law without the consent of
Lessor shall make this lease voidable at the option of Lessor.
Lessor will not unreasonably withhold its consent to an assignment or
subletting by Lessee, provided that (a) the assignee or sublessee is financially
responsible and proposes to use the Premises for the same purpose or a purpose
which is permitted by applicable zoning ordinances and regulations; (b) the
proposed use is not injurious to the Premises and will not disturb the other
tenants of Lessor in the Building or immediate vicinity; and (c) the assignee or
sublessee executes and delivers to Lessor a written assumption of this lease in
form acceptable to Lessor.
Every assignment of sublease shall recite that it is and shall be
subject and subordinate to the provisions of this lease, and the termination of
this lease shall constitute a termination of every such assignment of sublease.
18. SUBORDINATION: The rights of Lessee under this lease shall be and
they are subject and subordinate at all times to the lien of any mortgage or
deed of trust now or hereafter in force against the property, and to all
advances made or hereafter to be made upon the security thereof, and Lessee
shall execute such further instruments subordinating this lease to the lien of
any such encumbrance, as shall be requested by Lessor, provided the holder of
such encumbrance agrees to recognize Lessee's interest hereunder if Lessee is
not then in default. Lessee hereby irrevocably appoints Lessor as attorney in
fact for Lessee with full power and authority to execute and deliver in the name
of Lessee any such instrument.
If any mortgagee or beneficiary elects to have this lease superior to
its mortgage or deed of trust and gives notice of such fact to Lessee, then this
lease shall be deemed superior to the lien of any such encumbrance, whether this
lease or a memorandum thereof is dated or recorded before or after said
encumbrance.
19. SIGNS: Lessee shall not place any signs, lettering, marks,
photographs, or any other material whatsoever, on the interior or exterior of
the doors, windows, hallways, or any other place, in, on, or about the Premises,
the Building, or its appurtenances, without Lessor's prior written approval of
the size, style, design, color, material, manner of applying of fastening, and
location thereof. All signs shall be strictly in accordances with the Lessor's
Building standards and illuminated signs of any nature are prohibited.
20. REMOVAL OF PROPERTY: Lessee hereby irrevocably appoints Lessor as
agent and attorney in fact of Lessee, to enter upon the Premises, in the event
of default by Lessee in the payment of any rent herein reserved, or in the
performance of any term, covenant, or condition herein contained to be kept or
performed by Lessee, and to remove any and all furniture and personal property
whatsoever situated upon the Premises, and to place such property in storage for
the account of and at the expense of Lessee. In the event that Lessee shall not
pay the cost of storing any such property after the property has been stored for
a period of ninety (90) days or more, Lessor may sell any or all such property,
at public or private sale, in such manner and at
LEASE 7 SUITE 300
<PAGE> 8
such times and places as Lessor in its sole discretion may deem proper, without
notice to Lessee or any demand upon Lessee for the payment of any part of such
charges or the removal of any of such property, and shall apply the proceeds of
such sale first to the cost and expenses of such sale, including reasonable
attorney's fees actually incurred; second, to the payment of the costs of or
charges for storing any such property; third, to the payment of any other sums
of money which may then or thereafter be due to Lessor from Lessee under any of
the terms hereof; and fourth, the balance, if any, to Lessee.
21. SURRENDER: The voluntary or other surrender of this lease by
Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Lessor, terminate all or any existing subleases or subtenancies,
or may, at the option of Lessor, operate as an assignment to Lessor of any or
all such subleases or subtenancies.
22. TRANSFER OF SECURITY: Lessor may transfer or deliver any security
given by Lessee to secure the faithful performance of any of the covenants of
this lease to the purchaser or successor of Lessor's interest in the Premises,
and thereupon Lessor shall be discharged from any further liability in reference
thereto.
23. WAIVER: The waiver by Lessor or Lessee of any breach of any term,
covenant, or condition herein contained shall not be deemed to be a waiver of
such term, covenant, or condition or and subsequent breach of the same or any
other term, covenant, or condition herein contained. The subsequent acceptance
of rent hereunder by Lessor shall not be deemed to be a waiver of any preceding
breach by Lessee at any term, covenant, or condition of this lease, other than
the failure of Lessee to pay the particular rent so accepted, regardless of
Lessor's knowledge of such preceding breach at the time of acceptance of such
rent.
24. HOLDING OVER: Any holding over after the expiration of the term,
with the consent of Lessor, shall be construed to be a tenancy from month to
month on the same terms and conditions specified herein as far as applicable.
25. ATTORNEY'S FEES: If any action at law or in equity shall be brought
to recover any rent under this lease, or for or on account of any breach of or
to enforce or interpret any of the terms, covenants, agreements, or conditions
of this lease, or for the recovery of the possession of the Premises, the
prevailing party shall be entitled to recover from the other party as a part of
the prevailing party's costs a reasonable attorney's fees and costs, the amount
of which shall be fixed by the court and shall be made a part of any judgment
rendered.
26. NOTICES: All notices to be given to Lessee may be given in writing
personally or by depositing the same in the United States mail, postage prepaid
certified mail return receipt requested, and addressed to Lessee at Dallas
Semiconductor, 4401 S. Beltwood Parkway, Dallas Texas 75244 and at property
address. Notice to Lessor may be given in writing personally or by depositing
the same in the United States mail, postage prepaid, and addressed to Lessor at
the address to which the rent is paid.
27. GENERAL PROVISIONS: This lease contains all of the terms,
covenants, and conditions agreed to by Lessor and Lessee and it may not be
modified orally or in any manner other than by an agreement in writing signed by
all of the parties to this lease or their respective successors in interest.
Each term and each provision of this lease performable by Lessee shall
be construed to be both a covenant and a condition. The covenants and conditions
hereof, subject to the provisions as to subletting and assignment, shall apply
to and bind the heirs, successors, executor, administrators, sublessees, and
assigns of the parties.
All persons who have signed this lease shall be jointly and severally
liable hereunder.
LEASE 8 SUITE 300
<PAGE> 9
When the context of this lease requires, the masculine gender includes
the feminine, a corporation, or a partnership, and the singular number includes
the plural.
The captions of this lease are for convenience only and are not a part
of this lease and do not in any way limit or amplify the terms and provisions of
this lease.
This lease shall be governed by and construed in accordance with the
laws of the State of California.
Time is of the essence as to all of the provisions of this lease.
28. RULES: The following rules and regulations in addition to those set
forth in Exhibit "C" hereof, relating to the safety, care and cleanliness of the
Premises and the preservation of good order thereon, are hereby expressly made a
part hereof, and Lessee agrees to obey all such rules and regulations.
A. PEACEFUL ENJOYMENT: Lessee, its employees, and visitors shall not
interfere with the peaceful enjoyment of the Premises by other lessees, if any,
or those having business with them. Lessee shall not permit the placing of
litter in or upon the Building and grounds and shall not permit any animal,
bicycle, motorcycle, or vehicle to be brought into or kept in the Building.
Bicycle parking is provided in the basement only.
B. MOVING HEAVY OBJECTS: Lessee shall be responsible to repair any
damage occasioned by the moving of freight, furniture, or other objects into,
within, or out of the Building. No heavy objects of any nature shall be placed
upon any floor without Lessor's prior written approval as to the adequacy of the
allowable floor loading at the point where the objects are intended to be moved
or stored. Lessor may specify the time of moving to minimize inconvenience to
other lessees, if any.
C. OBSTRUCTIONS, WASTE, MARKINGS: No drapes or sunscreens of any nature
shall be installed without Lessor's prior approval. The sash doors, sashes,
windows, glass doors, lights, and skylights that reflect or admit light into the
Building shall not be covered or obstructed. The toilets and urinals shall not
be used for any purpose other than those for which they were constructed, and no
rubbish, newspapers or other substances of any kind shall be thrown into them.
Waste and excessive or unusual use of water shall not be allowed. Lessee shall
not mark, drive nails, screw or drill into, paint, nor in any way deface any
surface or part of the Building except that Lessee may hang pictures,
blackboards, or similar objects, providing that prior to end of the term Lessee
shall restore the Premises to its condition at the commencement of the term,
less reasonable wear and tear. The expense of repairing any breakage, stoppage,
or damage resulting from a violation of this rule shall be borne by the Lessee
who has caused such breakage, stoppage, or damage.
D. LOCKS: No additional lock or locks shall be placed by Lessee on any
door unless written consent of Lessor shall first be obtained. Two keys shall be
surrendered to Lessor upon termination or expiration of the lease term.
E. JANITORIAL SERVICES: If Lessor supplies janitorial services, Lessee
shall not, without Lessor's prior consent, employ any person or persons, other
than the janitor of Lessor, for the purposes of cleaning the leased Premises.
Lessor shall not be responsible for the loss of property from the leased
Premises, however occurring, or for any damage to any Lessee occasioned by any
of Lessee's employees or subcontractors or by any other person.
F. OUTSIDE STORAGE: No materials, supplies, equipment, finished
products, or semi-finished products, raw materials, or articles of any nature
shall be stored upon or permitted to remain on any portion of the leased
Premises outside of the Building constructed thereon, except with the prior
written consent of the Lessor.
LEASE 9 SUITE 300
<PAGE> 10
G. OTHER RULES: Lessor reserves the right to make such other rules and
regulations, including parking regulations, as in Lessor's judgment may from
time to time be necessary for the safety, cleanliness, and orderly operation of
the Premises. Lessee agrees to require its employees to abide by any such rules
and regulations, including parking regulations.
H. RULES AND REGULATIONS: Lessee shall faithfully observe and comply
with the "Rules and Regulations," a copy of which is attached hereto and marked
Exhibit "C," and those set forth herein above and all reasonable and
nondiscriminatory modifications thereof and additions thereto from time to time
put into effect by Lessor. Lessor shall not be responsible to Lessee for the
violation or non-performance by any other lessee or occupant of the Building of
any of said Rules and Regulations.
29. DEFINITIONS:
A) BUILDING STANDARD WORK: All the work to be done, or which has
been done, at Lessor's expense in the Premises pursuant to the Provisions of the
Work Letter Agreement attached hereto as Exhibit "B";
B) BUILDING NON-STANDARD WORK: All the work to be done, or which
has been done in the Premises by Lessor pursuant to the provisions of the Work
Letter Agreement other than the Building Standard Work;
C) LEASEHOLD IMPROVEMENTS: The aggregate of the Building Standard
Work and the Building Non-Standard Work;
D) COMMENCEMENT DATE: The earlier of the following dates:
(i) The date upon which the Lessee takes possession of or
commences the operation of its business in the Premises, possible after the
issuance of the Certificate of Occupancy or temporary Certificate of Occupancy
for the Premises.
(ii) The date upon which the Leasehold Improvements have
been substantially completed as determined by Lessor's architect or space
planner (except that if completion of the Leasehold Improvements is delayed by
Lessee's design decisions, revisions, or additional work of Lessee or its
agents, then the Commencement Date which would otherwise be established shall be
accelerated by the number of days of said delay.
30. ANNUAL RENT INCREASE DURING THE OPTION YEARS: The rent payable
during second and third year of this lease (option terms and/or the extended
term) as stated in Paragraph 46 shall be increased for each year ("Subsequent
Year") of the extended term of this Lease following the first year if the
Consumer Price Index for All Urban Consumers (San Francisco Bay Area; Base:
1982-84=100) ("Index"), as published by the United States Department of Labor
Statistics, for the "Comparison Month" (described below) increases over the
Index for the calendar month ("Base Month" in which the extended term commences.
The Base Month Index shall be compared with the Index for the same calendar
month for each Subsequent Year ("Comparison Month"). If the Index for the
Comparison Month is higher than the Base Month Index for the year immediately
preceding, then the rent payable for the Subsequent Year following the
Comparison Month shall be increased with the first month of such Subsequent Year
by an identical percentage as such increase. In no event shall the rent for a
Subsequent Year be less than the rent for the year immediately preceding.
Should the Bureau discontinue the publication of the above Index or
publish the same less frequently, or alter the same, then Lessor shall adopt a
substitute procedure which reasonably reflects and monitors consumer prices.
LEASE 10 SUITE 300
<PAGE> 11
Notwithstanding the foregoing the rent for each Subsequent Year of this
Lease shall increase by not less than 4% nor more than 8% percent of the rent in
effect for the lease year immediately preceding each Subsequent Year.
31. LATE CHARGES: In the event Lessee fails to pay any installment of
rent when due or in the event Lessee fails to make any other payment to be made
by it under this Lease when due, then Lessee shall pay to Lessor a late charge
equal to five (5%) percent per month of the amount due to compensate Lessor for
the extra costs incurred as a result of such late payment, but in no event shall
the late charges exceed the maximum allowed by law.
32. PROPERTY TAX INCREASE: Notwithstanding any language to the
contrary, in the event that after July 15, 1996, the property taxes on the
leased Premises are increased as a result of action by the State Legislature
and/or the State Initiative process, which action amends the tax rate and/or the
valuation for the purpose of levying property taxes, Lessee agrees to pay
Lessor, not less than ten (10) days prior to delinquency, its pro rata share of
any such tax increase (over and above the amount of property taxes that would
have been paid without such action) from the effective date thereof through the
balance of the lease term or any renewal period. Lessor agrees to furnish Lessee
with appropriate documentation relating thereto.
33. BROKERS: The parties recognize that the brokers who negotiated this
Lease are the brokers whose names are stated in Paragraph 1(M), and agree that
Lessor shall be solely responsible for the payment of brokerage commissions to
said brokers, and that Lessee shall have no responsibility therefor. Lessee
warrants that Lessee has not had any dealings with any realtor, broker, or
agent, other than as specified in the Schedule hereto, in connection with
negotiating or securing this lease.
If Lessee has dealt with any other person or real estate broker with
respect to leasing or renting space in the Building, Lessee shall be solely
responsible for the payment of any fee due said person or firm and Lessee shall
hold Lessor free and harmless against any liability in respect thereto,
including attorney's fees and costs.
34. DAMAGE TO LESSEE'S PROPERTY: Lessor or its said agents shall not be
liable for any damage to property entrusted to employees of the Building, not
for loss of or damage to any property by theft or otherwise, not for any injury
or damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from any part of
the Building or from the pipes, appliances or plumbing works therein or from the
roof, street or sub-surface or from any other place or resulting from dampness
or any other cause whatsoever. Lessor or its agents shall not be liable for
interference with light or other incorporeal herediments, nor shall Lessor be
liable for any latent defect in the Premises or in the Building. Lessee shall
give prompt notice to Lessor in case of fire or accidents in the Premises or in
the Building or of defects therein or in the fixtures or equipment.
35. ESTOPPEL CERTIFICATE:
(a) Within ten (10) days following any written request which Lessor may
make from time to time, Lessee shall execute and deliver to Lessor a statement
certifying:
(i) The date of commencement of this Lease;
(ii) the fact that this lease is unmodified and in full force
and effect (or, if there have been modifications hereto, that this lease is in
full force and effect, and stating the date and nature of such modifications);
LEASE 11 SUITE 300
<PAGE> 12
(iii) the date to which the rental and other sums payable under
this lease have been paid.
(iv) that there are no current defaults under this lease by either
Lessor or Lessee except as specified in Lessee's statement; and
(v) such other matters requested by Lessor.
Lessor and Lessee intend that any statement delivered pursuant to this Paragraph
36 may be relied upon by any mortgage, beneficiary, purchaser or prospective
purchaser of the Building or any interest therein.
(b) Lessee's failure to deliver such statement within such time shall
be conclusive upon Lessee:
(i) That this lease is in full force and effect, without
modification except as may be represented by Lessor,
(ii) that there are no uncured defaults in Lessor's performance,
and
(iii) that not more than one (1) month's rental has been paid in
advance.
36. MORTGAGE PROTECTION: In the event of any default on the part of
Lessor, Lessee will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgage covering the Premises whose address
shall have been furnished to Lessee, and shall offer such beneficiary or
mortgagee a reasonable opportunity to cure the default, including time to obtain
possession of the Premises by power of sale or a judicial foreclosure, if such
should prove necessary to effect a cure.
37. DEFINITION OF LESSOR: The term "Lessor" as used in this lease, so
far as covenants or obligations on the part of Lessor are concerned, shall be
limited to mean and include only the owner or owners, at the time in question,
of the fee title or any Lessees under ground lease, if any of the Premises. In
the event of any such transfer, assignment or other conveyance or transfer of
any such title, Lessor's herein named (and in case of any subsequent transfers
or conveyances, the then grantor) shall be automatically freed and relieved from
and after the date of such transfer, assignment of conveyance of all liability
as respects the performance of any covenants or obligations on the part of
Lessor contained in this lease thereafter to be performed. Without further
agreement, the transferee of such title shall be deemed to have assumed and
agreed to observe and perform any and all obligations of Lessor hereunder,
during its ownership of the Premises. Lessor may transfer it interest in the
Premises without the consent of Lessee and such transfer or subsequent transfer
shall not be deemed a violation on Lessor's part of any of the terms and
conditions of this lease.
38. INDEMNIFICATION OF LESSEE: If more than one person executes this
Lease as Lessee:
(a) each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions, provisions
and agreements of this lease to be kept, observed and performed by Lessee, and
(b) the term "Lessee" as used in this lease shall mean and include each
of them jointly and severally.
LEASE 12 SUITE 300
<PAGE> 13
The act of or notice from, or notice or refund to, or the signature of, any one
or more of them, with respect to the tenancy of this lease, including, but not
limited to, any renewal, extension, expiration, termination or modification of
this Lease, shall be binding upon each and all of the persons executing this
lease as Lessee with the same force and effect as if each and all of them had
acted so given or received such notice or refund or so signed.
39. AUTHORITY OF PARTIES:
(a) CORPORATE AUTHORITY. If Lessee is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the by-laws of said
corporation in accordance with its terms.
(b) LIMITED PARTNERSHIP. If the Lessor herein is a limited partnership,
it is understood and agreed that any claims by Lessee on Lessor shall be limited
to the assets of the limited partnership, and furthermore, Lessee expressly
waives any and all rights to proceeds against the individual partners or the
officers, directors or shareholders of any corporate partner, except to the
extent of their interest in said limited partnership.
40 RIDERS: Clauses, plats and riders, if any, signed by Lessor and
Lessee and affixed to this lease are a part hereof.
41. MODIFICATION FOR LENDER: If, in connection with obtaining
construction, interim or permanent financing for the Building, the lender shall
request reasonable modifications in this lease as a condition to such financing,
Lessee will not unreasonably withhold, delay or defer its consent thereto,
provided that such modifications do not increase the obligations of Lessee
hereunder or materially adversely affect the leasehold interest hereby created
or Lessee's rights hereunder.
42. ACCORD AND SATISFACTION: No payment by Lessee or receipt by Lessor
of a lesser amount than the rent payment herein stipulated shall be deemed to be
other than on account of the rent, 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 Lessor may accept such check or payment without
prejudice to Lessor's right to recover the balance of such rent or pursue any
other remedy provided in this lease.
Lessee agrees that each of the foregoing covenants and agreements shall
be applicable to any covenant or agreement either expressly contained in this
lease or imposed by any statute or at common law.
43. FINANCIAL STATEMENTS: At any time during the term of this lease,
Lessee shall, upon ten (10) days prior written notice from Lessor, provide
Lessor with a current financial statement and financial statements of the two
(2) years prior to the current financial statement year. Such statement shall be
prepared in accordance with generally accepted accounting principles and, if
such is the normal practice of Lessee, shall be audited by an independent
certified public accountant.
44. SEPARABILITY: Any provision of this lease which shall prove to be
invalid, void or illegal in no way affects, impairs or invalidates any other
provisions hereof and such other provisions shall remain in full force and
effect.
45. DEFAULTS AND REMEDIES:
LEASE 13 SUITE 300
<PAGE> 14
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Lessee:
(i) The vacation or abandonment of the Premises by Lessee.
Abandonment is herein defined to include, but it is not limited to, any absence
by Lessee from the Premises for five (5) days or longer while in default of any
provision of this lease.
(ii) The failure by Lessee to make any payment required to be made
by Lessee hereunder, as and when due, where such failure shall continue for a
period of three (3) days after written notice thereof from Lessor to Lessee;
provided, however, that any such notice shall be in lieu of, and not in addition
to, any notice required under California Code of Civil Procedure Section 1161
regarding unlawful detainer actions.
(iii) The failure by Lessee to observe or perform any of the
express or implied covenants or provisions of this lease to be observed or
performed by Lessee, other than as specified in Subparagraph 45(a)(i) and (ii)
above, where such failure shall continue for a period of ten (10) days after
written notice thereof from Lessor to Lessee; provided, however, that any such
notice shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure Section 1161 regarding unlawful detainer
actions; provided, further, that if the nature of Lessee's default is such that
more than ten (10) days are reasonably required of its cure, then Lessee shall
not be deemed to be in default of Lessee shall commence such cure within said
ten-day period and thereafter diligently prosecute such cure to completion,
which completion shall not occur later than sixty (60) days from the date of
such notice from Lessor.
(iv) (1) The making by Lessee of any general assignment for the
benefit of creditors;
(2) the filing by or against Lessee of a petition to have
Lessee adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Lessee, the same is dismissed within thirty (30) days;
(3) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this lease, where possession is not restored to Lessee
within thirty (30) days; or
(4) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease where such seizure is not discharged within thirty (30)
days.
(b) In the event of any such default by Lessee, in addition to any
other remedies available to Lessor at law or in equity, Lessor shall have the
option to immediately terminate this Lease and all rights of Lessee hereunder.
In the event that Lessor shall elect to so terminate this Lease then Lessor may
recover from Lessee:
(i) The worth at the time of award of any unpaid rent which had
been accrued at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rent which would have been accrued after termination until the time of
award exceeds the amount of such rental loss that Lessee proves could have been
reasonably avoided; plus
LEASE 14 SUITE 300
<PAGE> 15
(4) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease where such seizure is not discharged within thirty (30)
days.
(b) In the event of any such default by Lessee, in addition to any
other remedies available to Lessor at law or in equity, Lessor shall have the
option to immediately terminate this Lease and all rights of Lessee hereunder.
In the event that Lessor shall elect to so terminate this Lease then Lessor may
recover from Lessee:
(i) The worth at the time of award of any unpaid rent which had
been accrued at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rent which would have been accrued after termination until the time of
award exceeds the amount of such rental loss that Lessee proves could have been
reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Lessee proves could be reasonably avoided; plus
(iv) any other amount necessary to compensate Lessor for all the
detriment proximately caused by Lessee's failure to perform his obligations
under this lease or which in the ordinary course of things would be likely to
result therefrom.
As used in Subparagraphs 45(b)(ii) above, the "worth at the time of
award" is computed by allowing interest at the maximum rate permitted by law per
annum. As used in Subparagraph 45(b)(iii) above, the "worth at the time of
award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one (1%)
percent.
(c) In the event of any default by Lessee, Lessor shall also have the
right, with or without terminating this lease, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of this Subparagraph 45(c) shall be construed as an election to terminate this
lease unless a written notice of such intention to be given to Lessee unless the
termination thereof be decreed by a court of competent jurisdiction.
(d) All rights, options, and remedies of Lessor contained in this lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Lessor shall have the right to pursue any one or all
of such remedies or any other remedy or relief which may be provided by law,
whether or not stated in this lease. No waiver of any default of Lessee
hereunder shall be implied from any acceptance by Lessor of any rent or other
payments due hereunder or any omission by Lessor to take any action on account
of such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The consent or
approval of Lessor to or of any act by Lessee requiring Lessor's consent or
approval shall not be deemed to waive or render unnecessary Lessor's consent or
approval to or of any subsequent similar acts by Lessee.
46. RENEWAL OPTION: Provided that Lessee is not in default under any of the
terms, covenants or conditions of this lease at the conclusion of the initial
term or any extended term, Lessee shall have the option to renew this lease for
two additional periods of one year each, (hereinafter "extended term" following
expiration of the original term upon giving notice to Lessor at least 90 days
before the expiration of the original term of this lease of Lessee's election to
exercise this renewal option. The
LEASE 15 SUITE 300
<PAGE> 16
extended term shall be upon all of the terms and conditions contained in this
lease, except rent shall be adjusted to the fair market rent for comparable
office in the Palo Alto-downtown University Avenue area with the minimum
increase being in accordance with provisions of paragraph 30 of this lease, but
in no event shall the rent be less than the rent in effect at the end of the
lease term which is in effect at the time the option is exercised.
EXECUTED this 21ST day of June, 1986 at Palo Alto, of California.
LESSEE: LESSOR:
Palo Alto Funding Group JTC (a California General Partnership)
BY: s Signature Illegible BY:
-------------------------- ------------------------------------
Chris Larson Steve Jarvis, Partner
BY: s Signature Illegible
--------------------------
Janina Pawlowski
LEASE 16 SUITE 300
<PAGE> 17
EXHIBIT "A"
OUTLINE OF TENANTS FLOOR PLAN
UNIVERSITY COURT, 540 University Ave., Palo Alto, California Suite 300.
LEASE: Att. 1 Suite 300
<PAGE> 18
EXHIBIT "A-1"
LESSEE IMPROVEMENTS
Lessor shall, at Landlord's sole cost and expense, provide the following
interior improvements to the premises:
1- Walls touch-up painted.
2- Steam Clean the carpets.
3- Replace soiled or damaged ceiling tiles.
LEASE: Att. 2 Suite 300
<PAGE> 19
EXHIBIT "B"
SERVICES PROVIDED BY LESSOR
The following services will be provided by Lessor to Lessee at no additional
cost:
1. Five day a week janitorial service.
2. Exterior and interior window washing (maximum two times per year.)
3. Heating and air conditioning maintenance. Air conditioning operating
hours are as follows:
Weekdays: 8:00 AM to 8:00 PM
Saturdays: 8:00 AM to 2:00 PM
Sundays: OFF ALL DAY
4. Elevator maintenance.
Lessor /s/ Signature Illegible (Initial)
Lessee /s/ Signature Illegible (Initial)
LEASE: Att. 3 Suite 300
<PAGE> 20
EXHIBIT "C"
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be installed
or displayed on any part of the outside or inside of the Building without the
prior written consent of the Lessor. Lessor shall have the right to remove, at
Lessee's expense and without notice, any sign installed or displayed in
violation of this rule. All approved signs or lettering on doors and walls shall
be printed, painted, affixed or inscribed at the expense of Lessee by a person
chosen by Lessor.
2. If Lessor objects in writing to any curtains, blinds, shades, screens or
hanging plants or other similar objects attached to or used in connection with
any window or door of the Premises, Lessee shall immediately discontinue such
use. No awning shall be permitted on any part of the Premises. Lessee shall not
place anything against or near glass partitions or doors or windows which may
appear unsightly from outside the Premises.
3. Lessee shall not obstruct any sidewalks, halls, passages, exits, entrances,
elevators, escalators, or stairways of the Building. The halls, passages, exits,
entrances, shopping malls, elevators, escalators and stairways are not open to
the general public. Lessor shall in all cases retain the right to control and
prevent access thereto of all persons whose presence in the judgment of Lessor
would be prejudicial to the safety, character, reputation and interest of the
Building and its tenants; provided that nothing herein contained shall be
construed to prevent such access to persons with whom any lessee normally deals
in the ordinary course of its business, unless such persons are engaged in
illegal activities. No lessee and no employee or invitee of any lessee shall go
upon the roof of the Building.
4. The directory of the Building will be provided exclusively for the display of
the name and location of Tenants only and Lessor reserves the right to exclude
any other names therefrom.
5. All cleaning and janitorial services for the Building and the Premises shall
be provided exclusively through Lessor, and except with the written consent of
Lessor, no person or persons other than those approved by Lessor shall be
employed by Lessee or permitted to enter the Building for the purpose of
cleaning the same. Lessee shall not cause any unnecessary labor by carelessness
or indifference to the good order and cleanliness of the Premises. Lessor shall
not in any way be responsible to any Lessee for any loss of property on the
Premises, however occurring, or for any damage to any Lessee's property by the
janitor or any other employee or any other person.
6. Lessor will furnish Lessee, free of charge, with two keys to each door lock
in the Premises. Lessor may make a reasonable charge for any additional keys.
Lessee shall not make or have made additional keys, and Lessee shall not alter
any lock, or install a new additional lock or bolt on any door of its Premises.
Lessee, upon the termination of its tenancy, shall deliver to Lessor the keys of
all doors which have been furnished to Lessee, and in the event of loss of any
keys so furnished, shall pay Lessor thereafter.
7. If Lessee requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions in
their installation.
LEASE: Att. 4 Suite 300
<PAGE> 21
8. Any freight elevator shall be available for use by all tenants in the
Building, subject to such reasonable scheduling as Lessor in its discretion
shall deem appropriate. No equipment, materials, furniture, packages, supplies,
merchandise or other property will be received in the Building or carried in the
elevators except between such hours and in such elevators as may be designated
by Lessor.
9. Lessee shall not place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry and which is
allowed by law. Lessor shall have the right to prescribe the weight, size, and
position of all equipment, materials, furniture or other property brought into
the Building. Heavy objects shall, if considered necessary by Lessor, stand on
such platforms as determined by Lessor to be necessary to properly distribute
the weight. Business machines and mechanical equipment belonging to Lessee,
which cause noise or vibration that may be transmitted to the structure of the
Building or to any space therein to such a degree as to be objectionable to
Lessor or to any tenants in the Building shall be placed and maintained by
Lessee, at Lessee's expense, on vibration eliminators or other devices
sufficient to eliminate noise or vibration. The persons employed to move such
equipment in or out of the Building must be acceptable to Lessor. Lessor will
not be responsible for loss of or damage to any such equipment or other property
from any cause, and all damage done to the Building by maintaining or moving
such equipment or other property shall be repaired at the expense of Lessee.
10. Lessee shall not use of keep in the Premises any kerosene, gasoline or other
flammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of office equipment. Lessee shall not
use or permit to be used in the Premises any foul or noxious gas or substance,
or permit or allow the Premises to be occupied or used in a manner offensive or
objectionable to Lessor or other occupants of the Building by reason of noise,
odors, or vibrations, nor shall Lessee bring into or keep in or about the
Premises any birds or animals.
11. Lessee shall not use any method of heating or air-conditioning other than
that supplied by Lessor.
12. Lessee shall not waste electricity, water or air conditioning and agrees to
cooperate fully with Lessor to assure the most effective operation of the
Building's heating and air-conditioning and to comply with any governmental
energy-saving rules, laws or regulations of which Lessee has actual notice, and
shall refrain from adjusting controls. Lessee shall keep corridor doors closed,
and shall close window coverings at the end of each business day.
13. Lessor reserves the right to exclude from the Building between the hours of
6 p.m. and 7 a.m. the following day, or such other hours as may be established
from time to time by Lessor, and on Sundays and legal holidays, any person
unless that person is know to the person or employee in charge of the Building
and has a pass or is properly identified. Lessee shall be responsible for all
persons for whom it requests passes and shall be liable to Lessor for all acts
of such persons. Lessor shall not be liable for damages for any error with
regard to the admission to or exclusion from the Building of any person. Lessor
reserves the right to prevent access to the Building in case of invasion, mob,
riot, public excitement or other commotion by closing the doors or by other
appropriate action.
15. Lessee shall close and lock the doors of its Premises and entirely shut off
all water faucets or other water apparatus, and electricity, gas or air outlets
before lessee and its employees leave the Premises. Lessee shall be responsible
for any damage or injuries
LEASE: Att. 5 Suite 300
<PAGE> 22
sustained by other tenants or occupants of the Building or by Lessor for
noncompliance with this rule.
16. Lessee shall not obtain for use on the Premises ice, drinking water, food,
beverage, towel or other similar services or accept barbering or bootblacking
service upon the Premises, except at such hours and under such regulations as
may be fixed by Lessor.
17. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein. The expense of
any breakage, stoppage or damage resulting from the violation of this rule shall
be borne by the Lessee who, or whose employees or invitees shall have caused.
18. Lessee shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises. Lessee shall not make any room-to-room
solicitation of business from other tenants in the Building. Lessee shall not
use the Premises for any business or activity other than that specifically
provided for in Lessee's Lease.
19. Lessee shall not install any radio or television antenna, loudspeaker or
other device on the roof or exterior walls of the Building. Lessee shall not
interfere with radio or television broadcasting or reception from or in the
Building or elsewhere.
20. Lessee shall not mark, drive nails, screw or drill into the partitions,
woodwork or plaster or in any way deface the Premises or any part thereof.
Lessor reserves the right to direct electricians as to where and how telephone
and telegraph wires are to be introduced to the Premises. Lessee shall not cut
or bore holes for wires. Lessee shall not affix any floor covering to the floor
of the Premises in any manner except as approved by Lessor. Lessee shall repair
any damage resulting from noncompliance with this rule.
21. Lessee shall not install, maintain or operate upon the Premises any vending
machine without the written consent of Lessor.
22. Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Building are prohibited, and each lessee shall
cooperate to prevent same.
23. Lessor reserves the right to exclude or expel from the building any person
who, in Landlord's judgment, is intoxicated or under the influence of liquor or
drugs or who is in violation of any of the Rules and Regulations of the
Building.
24. Lessee shall store all its trash and garbage within its Premises. Lessee
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal.
All garbage and refuse disposal shall be made in accordance with directions
issued from time to time by Lessor.
25. The Premises shall not be used for lodging or for manufacturing of any kind,
nor shall the Premises be used for any improper, immoral or objectionable
purpose. No cooking shall be done or permitted by any lessee on the Premises,
except that use by Lessee of Underwriter's Laboratory approved equipment for
brewing coffee, tea, hot chocolate and similar beverages shall be permitted,
provided that such equipment and use in accordance with all applicable federal,
state, county and city laws, codes, ordinances rules and regulations.
LEASE: Att. 6 Suite 300
<PAGE> 23
26. Lessee shall not use in any space or in the public halls of the Building any
hand trucks except those equipped with rubber tires and side guards or such
other material-handling equipment as Lessor may approve. Lessee shall not bring
in any other vehicle of any kind into the Building.
27. Without the written consent of Lessor, Lessee shall not use the name of the
Building in connection with or in promoting or advertising the business of
Lessee except as Lessee's address.
28. Lessee shall comply with all safety, fire protection and evacuation
procedures and regulations established by Lessor or any governmental agency.
29. Lessee assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
30. The requirements of Lessee will be attended to only upon appropriate
application to the office of the Building by an authorized individual. Employees
of Lessor shall not perform any work or do anything outside of their regular
duties unless under special instructions from Lessor, and no employee of Lessor
will admit any person (Lessee or otherwise) to any office without specific
instructions from Lessor.
31. Lessor may waive any one or more of these rules and Regulations for the
benefit of Lessee or any other Lessee but no such waiver by Lessor shall be
construed as a continuous waiver of such Rules and Regulations in favor of
Lessee or any other Lessee, nor prevent Lessor from thereafter enforcing any
such Rules and Regulations against any or all of the tenants of the Building.
32. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of premises in the Building.
33. Lessor reserves the right to make such other reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety and
security, for care and cleanliness of the Building and for preservation of good
order therein. Lessee agrees to abide by all such Rules and Regulations
hereinabove stated and any additional rules and regulations which are adopted.
34. Lessee shall be responsible for the observance of all the foregoing rules by
Lessee's employees, agents, clients, customers, invitees and guests.
Lessor:/s/ Signature Illegible (Initial)
Lessee /s/ Signature Illegible (Initial)
LEASE: Att. 7 Suite 300
<PAGE> 24
ATTACHMENT
PERSONAL GUARANTEE: OF CHRIS LARSEN, OF THE LEASE FOR PREMISES LOCATED AT 540
UNIVERSITY SUITE 300, PALO ALTO, CALIFORNIA 94301, WHICH LEASE WAS EXECUTED ON
JUNE 20, 1996 BY PALO ALTO FUNDING GROUP, A CALIFORNIA CORPORATION.
CHRIS LARSEN ("Guarantor"), whose address is 201 Hudson Street #400, San
Francisco, CA 94105 and who is President of Palo Alto Funding Group, a
California corporation, as a material inducement to and in consideration of JTC
Development, a California General Partnership ("Lessor") entering into a written
Lease with PALO ALTO FUNDING GROUP, a California corporation, ("Lessee"), dated
June 20, 1996, unconditionally guarantees and promises to and for the benefit of
Lessor that Lessee shall perform the provisions of the Lease that Lessee is to
perform. Not withstanding any other provisions of the guarantee, this guarantee
shall remain in force and effect during the term of the original Lease.
Guarantor waives the benefit of any statute of limitations affecting Guarantor's
liability under this Guarantee.
The provisions of the Lease may be changed by agreement between Lessor and
Lessee at any time, or by course or conduct, without the consent of the
Guarantor. This guarantee shall guarantee the performance of the Lease as
changed. Assignment of the Lease (as permitted by the Lease) shall not affect
this Guarantee.
This guarantee shall not be affected by Lessor's failure or delay to enforce any
of its rights.
If Lessee defaults under the Lease, Lessor can proceed immediately against
Guarantor or Lessee, or both, or Lessor can enforce against Guarantor or Lessee,
or both, any rights that it has under the Lease, or pursuant to applicable laws.
If the Lease terminated and Lessor has any rights it can enforce against Lessee
after termination, Lessor can enforce those rights against Guarantor without
giving previous notice to Lessee or Guarantor, or without making any demands on
either of them.
Guarantor waives the right to require Lessor to (1) proceed against Lessee; (2)
proceed against or exhaust any security that Lessor holds from Lessee; or (3)
pursue any other remedy in Lessor's power. Guarantor waives any defense by
reason or any disability of Lessee, and waives any other defense based on the
termination of Lessee's liability from any cause. Until all Lessee's obligation
to Lessor have been discharged in full, Guarantor has no right of subrogation
against Lessee. Guarantor waives its right to enforce any remedies that Lessee
now has, or later may have, against Lessor. Guarantor waives all presentments,
demands for performance, notices of nonperformance, protests, notices of
protect, notices of dishonor, and notices of acceptance of this Guarantee, and
waives all notices of the existence, creation or incurring of new or additional
obligations.
If an action is brought to interpret or enforce this guaranty, the prevailing
party shall be entitled to recover all costs incurred, including, without
limitation, reasonable attorney's fees.
Guarantor's obligations under this Guarantee shall be binding on Guarantor's
successors.
<PAGE> 25
Lessee and Guarantor shall have the right at any time during the term of the
Lease to Lease the Lease subject only to Lessor's prior written consent which
consent shall not be unreasonably withheld and; provided the rent is maintained
current Lessor shall give Guarantor sixty days (60) from day of default to Lease
or release the premises.
As used in this Guarantee, the following words are defined as follow:
LAW - any judicial decision, statute, constitution, ordinance, regulation, rule,
administrative order, or other requirement of any municipal, county, state,
federal, or other government agency or authority having jurisdiction over the
parties of the premises, or both, in effect either at the time of execution of
the Lease or at any time during the term, including without limitation, any
regulation or order of a quasi-official entity or body (e.g., Board of Fire
Examiner or public utilities).
PROVISION - any term, agreement, covenant, condition, clause, qualification,
restriction, reservation, or other stipulation in the Lease that defines or
otherwise controls, establishes, or limits the performance required or permitted
by either party.
SUCCESSOR - assigned, transferred, personal representative, heir, or other
person or entity succeeding lawfully, and pursuant to the provisions of this
Lease to the rights or obligations of either party.
DATED: 6/21/96 /s/ Signature Illegible
------- ----------------------------
CHRIS LARSEN
<PAGE> 26
ATTACHMENT
PERSONAL GUARANTEE: OF JANINA PAWLOWSKI, OF THE LEASE FOR PREMISES LOCATED AT
540 UNIVERSITY SUITE 300, PALO ALTO, CALIFORNIA 94301, WHICH LEASE WAS EXECUTED
ON JUNE 20, 1996 BY PALO ALTO FUNDING GROUP, A CALIFORNIA CORPORATION.
JANINA PAWLOWSKI ("Guarantor"), whose address is 1125 Lafayatte Drive,
Sunnyvale, CA and who is CEO of Palo Alto Funding Group, a California
corporation, as a material inducement to and in consideration of JTC
Development, a California General Partnership ("Lessor") entering into a written
Lease with PALO ALTO FUNDING GROUP, a California corporation, ("Lessee"), dated
June 20, 1996, unconditionally guarantees and promises to and for the benefit of
Lessor that Lessee shall perform the provisions of the Lease that Lessee is to
perform. Not withstanding any other provisions of the guarantee, this guarantee
shall remain in force and effect during the term of the original Lease.
Guarantor waives the benefit of any statute of limitations affecting Guarantor's
liability under this Guarantee.
The provisions of the Lease may be changed by agreement between Lessor and
Lessee at any time, or by course or conduct, without the consent of the
Guarantor. This guarantee shall guarantee the performance of the Lease as
changed. Assignment of the Lease (as permitted by the Lease) shall not affect
this Guarantee.
This guarantee shall not be affected by Lessor's failure or delay to enforce any
of its rights.
If Lessee defaults under the Lease, Lessor can proceed immediately against
Guarantor or Lessee, or both, or Lessor can enforce against Guarantor or Lessee,
or both, any rights that it has under the Lease, or pursuant to applicable laws.
If the Lease terminated and Lessor has any rights it can enforce against Lessee
after termination, Lessor can enforce those rights against Guarantor without
giving previous notice to Lessee or Guarantor, or without making any demands on
either of them.
Guarantor waives the right to require Lessor to (1) proceed against Lessee; (2)
proceed against or exhaust any security that Lessor holds from Lessee; or (3)
pursue any other remedy in Lessor's power. Guarantor waives any defense by
reason or any disability of Lessee, and waives any other defense based on the
termination of Lessee's liability from any cause. Until all Lessee's obligation
to Lessor have been discharged in full, Guarantor has no right of subrogation
against Lessee. Guarantor waives its right to enforce any remedies that Lessee
now has, or later may have, against Lessor. Guarantor waives all presentments,
demands for performance, notices of nonperformance, protests, notices of
protect, notices of dishonor, and notices of acceptance of this Guarantee, and
waives all notices of the existence, creation or incurring of new or additional
obligations.
If an action is brought to interpret or enforce this guaranty, the prevailing
party shall be entitled to recover all costs incurred, including, without
limitation, reasonable attorney's fees.
Guarantor's obligations under this Guarantee shall be binding on Guarantor's
successors.
<PAGE> 27
Lessee and Guarantor shall have the right at any time during the term of the
Lease to Lease the Lease subject only to Lessor's prior written consent which
consent shall not be unreasonably withheld and; provided the rent is maintained
current Lessor shall give Guarantor sixty days (60) from day of default to Lease
or release the premises.
As used in this Guarantee, the following words are defined as follow:
LAW - any judicial decision, statute, constitution, ordinance, regulation, rule,
administrative order, or other requirement of any municipal, county, state,
federal, or other government agency or authority having jurisdiction over the
parties of the premises, or both, in effect either at the time of execution of
the Lease or at any time during the term, including without limitation, any
regulation or order of a quasi-official entity or body (e.g., Board of Fire
Examiner or public utilities).
PROVISION - any term, agreement, covenant, condition, clause, qualification,
restriction, reservation, or other stipulation in the Lease that defines or
otherwise controls, establishes, or limits the performance required or permitted
by either party.
SUCCESSOR - assigned, transferred, personal representative, heir, or other
person or entity succeeding lawfully, and pursuant to the provisions of this
Lease, to the rights or obligations of either party.
DATED: 6-21-96 /s/ Signature Illegible
------- --------------------------
JANINA PAWLOWSKI
<PAGE> 1
[CHASE LOGO] EXHIBIT 10.29
MORTGAGE LOAN ORIGINATION AGREEMENT
[An Option 1 Correspondent]
This Agreement is made on the 30 day of November 1992, between CHASE HOME
MORTGAGE CORPORATION ("CHMC"), a Delaware corporation whose principal office is
located at 4915 Independence Parkway, Tampa, Florida 33634-7540, its successors
and assigns, and PALO ALTO FUNDING GROUP ("Correspondent"), whose principal
office is located at 540 University Ave., #350, Palo Alto, CA 94301.
BACKGROUND
Correspondent aids in origination of residential mortgage loans for
licensed lenders. CHMC originates and acquires residential mortgage loans.
Correspondent wishes to assign residential mortgage loan application packages
("Loan Packages') to CHMC, which Loan Packages meet CHMC requirements.
The parties agree as follows:
TERMS
1. LOAN PACKAGES. Correspondent may, from time to time, submit Loan
Packages to CHMC on terms specified by CHMC. Current origination procedures are
set forth in the CHMC Manual or CHMC issued notices or bulletins (collectively
referred to as the "CHMC Manual"). The CHMC Manual is the manual provided to
Correspondent by CHMC which establishes CHMC guidelines and procedures.
Correspondent is under no obligation to submit a specific number of Loan
Packages to CHMC.
2. ACCEPTANCE/REJECTION OF LOAN PACKAGE. Based on applicable
underwriting and origination guidelines as interpreted by CHMC, CHMC may accept
or reject a Loan Package. If the Loan Package is rejected, CHMC shall return
same to the Correspondent.
<PAGE> 2
Correspondent may, at any time after receipt of a written application for
an eligible loan, request a rate and rate reservation for a period in accordance
with CHMC policy set forth in the CHMC Manual. Within the period specified by
CHMC (usually a minimum of fifteen business days before the expiration date of
the rate reservation period), CHMC must receive a complete Loan Package and any
required fee. CHMC reserves the right to require additional information
concerning the property and/or the applicant. Correspondent agrees to execute,
transmit and/or obtain any and all additional documentation which CHMC may
reasonably deem necessary to properly complete any Loan Package.
3. REVISION OF REQUIREMENTS. CHMC may from time to time amend or revise
its documentation requirements, underwriting criteria or other requirements
pertaining to any residential mortgage loan program. Any Loan Package already
submitted by the Correspondent will not be adversely affected by such
amendment or revision.
4. COMPENSATION AND EXPENSES. Unless CHMC agrees, no fees, commissions or
any other consideration shall be paid by CHMC to Correspondent for any Loan
Package, regardless of whether a loan is approved, funded or closed by CHMC. On
the closing date, CHMC shall instruct the closing agent to remit to the
Correspondent any compensation due Correspondent from CHMC or the applicant for
its loan services, including unreimbursed, qualified out-of-pocket expenses. If
CHMC elects, such sums due from CHMC shall be paid to the Correspondent by CHMC
directly.
Final settlement of all amounts due Correspondent shall be made at the
closing or, if applicable, after the rescission period has elapsed for
rescindable loans. No amounts will be payable to Correspondent by CHMC or
applicant thereafter.
Qualified out-of-pocket expenses shall consist of reasonable fees paid to
third parties including, but not limited to, any credit report fee, appraisal
fee or survey fee.
The Correspondent's compensation shall conform to the amount disclosed on
the Good Faith Estimate of Closing Costs. If the amounts differ, Correspondent
shall reconcile any discrepancy with appropriate explanation and documentation
submitted with the Loan Package. Correspondent represents that the compensation
received by Correspondent shall not exceed the fair market value of its
services and that it will accept no additional compensation from applicant
except as described in this Section 4. Correspondent shall not accept any fee
or other compensation except as permitted by applicable law and disclosed in
writing to the applicant.
<PAGE> 3
5. COMPLIANCE. Correspondent will submit Loan Packages that, to the best
of its knowledge, after reasonable diligence, are true, correct, complete and
genuine. With regard to both Correspondent's activities in general and each Loan
Package in particular, Correspondent shall comply with all State and Federal
laws, rules and regulations, including, but not limited to (i) the Federal Truth
in Lending Act of 1969, as amended, and Federal Reserve Regulation Z thereunder;
(ii) the Federal Equal Credit Opportunity Act ("ECOA") and Federal Reserve
Regulation B thereunder; (iii) the Federal Fair Credit Reporting Act; (iv) the
Federal Real Estate Settlement Procedures Act of 1974, as amended, and
Regulation X thereunder; (v) the Flood Disaster Protection Act of 1973 (as if
Correspondent were an entity subject to such statute and/or regulations,
regardless of whether Correspondent is specifically subject to such statute
and/or regulations); (vi) the Fair Housing Act; (vii) the Home Mortgage
Disclosure Act; and (viii) the Financial Institutions Reform Recovery and
Enforcement Act of 1989.
Correspondent shall timely deliver to each applicant a completed Regulation
Z disclosure statement, Good Faith Estimate of Closing Costs, Federally mandated
ARM disclosures and HUD booklets. Correspondent shall be responsible for
compliance with ECOA concerning notification of adverse action to an applicant
whose Loan Package CHMC does not accept (CHMC may, at its option, deliver notice
of adverse action to Correspondent for further delivery to applicant).
Correspondent shall comply with Regulation Z concerning return of all monies
paid by the applicant to Correspondent should the applicant rescind and
Correspondent shall not seek reimbursement from CHMC for such refund.
Upon request, Correspondent shall furnish to CHMC evidence, in a form
satisfactory to CHMC, of any section taken by Correspondent to comply with such
laws, including copies of any notice or disclosure form furnished to an
applicant.
6. REPRESENTATIONS AND WARRANTIES. Correspondent represents and warrants
to CHMC that it has all necessary licenses, qualifications and registrations
needed to engage in the business conducted by Correspondent and the activities
contemplated by this Agreement. Correspondent further represents and warrants
that this Agreement does not conflict with the provisions of any other
agreement to which Correspondent is a party and that this Agreement is a legal,
valid and binding obligation of Correspondent. Correspondent shall notify CHMC
immediately of any material changes in its ownership, financial condition or
management.
7. INDEMNIFICATION. Correspondent shall indemnify and hold harmless CHMC
from any loss, damage, cost or expense, including all attorneys fees, resulting
from (i) the breach by the Correspondent of any of its covenants or agreements
or (ii) the inaccuracy of any representation or warranty made by Correspondent.
This indemnification shall survive any termination or cancellation of this
Agreement.
<PAGE> 4
8. RELATIONSHIP BETWEEN PARTIES. No exclusive relationship between
Correspondent and CHMC shall result from this Agreement. Correspondent is an
independent contractor and not an agent of CHMC. Correspondent shall not make
any statement which leads a third party to reasonably believe that it is an
agent of CHMC. Correspondent shall not use or refer to CHMC's name in any form
of advertising, written materials or circulars, except as may be required by
law.
9. NO THIRD PARTY BENEFITS. This Agreement is made for the express
benefit of Correspondent and CHMC, not for the benefit or interest of any other
persons or entities, and accordingly, no third party shall obtain or acquire any
rights or interest in this Agreement or by reason of the performance or failure
of performance of either of the parties hereto or of their respective rights,
privileges, duties or obligations arising hereunder.
10. TERMINATION. This Agreement may be terminated, as to the future
submission of any Loan Packages to CHMC, by either party upon written notice of
termination.
If, before such termination, CHMC has provided a rate reservation to the
Correspondent in connection with a Loan Package, then CHMC shall accept such
Loan Package if (i) such Loan Package conforms to CHMC's customary underwriting
and origination guidelines and (ii) CHMC did not terminate this Agreement for
cause. In connection with any such Loan Package, Correspondent's responsibility
to supply outstanding documentation on a timely basis, its representations and
warranties and its obligation to indemnify, shall survive such termination.
11. ENTIRE AGREEMENT. This Agreement and the CHMC Manual constitute the
whole understanding of the parties regarding the subject matter hereof, and any
other agreements, oral or written, are superseded and of no effect. Any
amendments or modifications of this Agreement shall not be valid unless they
are in writing and executed by each of the parties.
12. NOTICE. Any notice required to be given to a party hereto under the
provisions of this Agreement must be in writing and delivered either personally
or by mail to the other party at the addresses indicated herein above.
13. ASSIGNMENT. Correspondent may not assign nor delegate any rights or
duties hereunder without the written consent of CHMC. CHMC reserves the right to
reject assignment in its sole discretion.
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
CHASE HOME MORTGAGE CORPORATION
By: /s/ [Signature Illegible]
-----------------------------------------------------
Title: [Title Illegible]
--------------------------------------------------
PALO ALTO FUNDING GROUP
--------------------------------------------------------
[CORRESPONDENT]
By: /s/ [Signature Illegible] /[s] [Signature Illegible]
-----------------------------------------------------
Title: Principal / Principal
--------------------------------------------------
<PAGE> 1
Exhibit 10.30
CORRESPONDENT This Agreement is dated the 15th day of June, 1998,
AGREEMENT between Citicorp Mortgage, Inc. ("Citicorp") and E Loan, Inc.
("Correspondent").
FORM 200
In consideration of the terms contained in this Agreement, Citicorp and
Correspondent agree as follows:
1. PURCHASE AND SALE OF MORTGAGE LOANS
From time to time, Correspondent may sell to Citicorp and Citicorp may
purchase from Correspondent one or more mortgage loans in accordance
with the procedures and on the terms and conditions set forth in
Citicorp's Correspondent Manual ("Manual"), Citicorp's requirements
("Program Requirements") as amended from time to time for each type of
loan, and this Agreement.
Regarding each mortgage loan proposed to be sold by Correspondent to
Citicorp, Correspondent will deliver to Citicorp loan documentation in
accordance with the procedures and requirements set forth in the Manual
and Program Requirements. Citicorp may purchase mortgage loans with or
without a complete review of the loan documentation. Citicorp's review
of, or failure to review, the loan documentation shall not affect
Citicorp's rights to demand repurchase of a mortgage loan or other
relief provided by this Agreement.
For each mortgage loan Citicorp agrees to purchase, Citicorp shall pay
the amount agreed upon by Citicorp and Correspondent in accordance with
the procedure set forth in the Manual ("Purchase Price"). Citicorp may
offset against the Purchase Price any outstanding fees or other amounts
owing from Correspondent to Citicorp in connection with the particular
purchase or other transactions.
As of the date Citicorp purchases each mortgage loan, Correspondent
hereby transfers to Citicorp all of its rights and interest in and to
the mortgage loan, including without limitation all documents held or
subsequently acquired by Citicorp relating to the loan.
2. REPRESENTATIONS AND WARRANTIES
Correspondent makes the following representations and warranties:
(a) That it is a (corporation)/(banking
association)/(partnership)/(proprietorship)/(limited liability
company/partnership) [cross out inapplicable choices] duly
organized, validly existing and in good standing under the
laws of the state of its incorporation or domicile or under
Federal law; that it is authorized to do business in each
state where it makes mortgage loans or where a property
securing any of its mortgage loans is located; that all
corporate or other actions and approvals necessary for the
execution and performance of this Agreement have been taken
and/or received; and that no consent from any third party is
required for the execution and performance of this Agreement.
(b) That, if required by applicable law, it is the holder of a
valid lender, broker or other applicable license or licenses
bearing number(s) __________________ issued by the State(s) of
California, which Correspondent shall maintain in good
standing throughout the term of this Agreement, and is in
compliance with any mortgage lender or broker or other laws
applicable to its activities under this Agreement.
<PAGE> 2
Correspondent agrees to provide Citicorp with copies of all
such license(s) upon request by Citicorp.
(c) If the Correspondent is a partnership, proprietorship or
limited liability company or partnership, that the owners and
senior officers of Correspondent consent to allow Citicorp to
periodically investigate their backgrounds. The scope of
background checks will include but not be limited to obtaining
credit bureau reports. Correspondent acknowledges and shall
notify all such owners and senior officers of Citicorp's right
to obtain updates to all such background information on a
periodic basis and the aforesaid individual(s) will, upon
written request by Citicorp, execute all documents necessary
to obtain such updates.
(d) That it is thoroughly familiar with and will comply with all
applicable Federal, State and local laws and regulations
directly or indirectly relating to its activities under this
Agreement (including but not limited to involvement of
individuals convicted of crimes involving dishonesty or breach
of trust).
<PAGE> 3
CORRESPONDENT
AGREEMENT
FORM 200
(e) That Correspondent is an approved seller/servicer of
conventional residential adjustable and fixed-rate mortgage
loans for FNMA, FHLMC or FHA; that Correspondent is duly
qualified, licensed, registered and otherwise authorized under
all applicable laws and regulations and is in good standing to
endorse, originate, sell mortgage loans to, and service
mortgage loans in the jurisdiction(s) where the properties
securing its mortgage loans are located for FNMA, FHLMC or
FHA, and no event has occurred that would make Correspondent
unable to comply with FNMA, FHLMC or FHA eligibility
requirements or that would require notification to FNMA, FHLMC
or FHA.
(f) That Correspondent does not believe, nor does it have any
reason or cause to believe, it cannot perform every covenant
contained in this Agreement or continue to carry on its
business substantially as now conducted; that it is solvent
and the sale of mortgage loans will not cause it to become
insolvent; that no action, suit, proceeding or investigation
pending or threatened against Correspondent, either alone or
in the aggregate, may result in its inability to carry on its
business substantially as now conducted; and that the sale of
mortgage loans under this Agreement is not undertaken with the
intent to hinder, delay or defraud any of its creditors.
(g) That Correspondent does not currently and will not in the
future employ any entity or individual on the FHLMC
exclusionary list.
(h) That neither this Agreement nor any statement, report or other
information provided or to be provided pursuant to this
Agreement (including but not limited to the statements and
information contained in the documentation for each mortgage
loan purchased by Citicorp) contains or will contain any
misrepresentation or untrue statement of fact or omits or will
omit to state a fact necessary to make the information not
misleading. The provisions of this sub-section shall not apply
to information obtained from (i) appraisers, escrow agents,
title companies, closers, credit reporting agencies or any
other entity approved by Citicorp ("Approved Entity") unless
Correspondent knows or has reason to believe that any
information provided by such Approved Entity is not true,
correct or valid in any material respect and (ii) the mortgage
loan applicant(s) unless Correspondent knows, has reason to
believe or, after performing its normal due diligence and
quality control review, should have known that any information
provided by the mortgage loan applicant(s) is not true,
correct or valid in any material respect.
(i) That the documentation for each mortgage loan sold to Citicorp
shall be duly executed by the mortgagor and create a valid and
legally binding obligation of the mortgagor and first lien on
the property securing the loan; that the mortgage loan shall
be fully enforceable and originated in accordance with the
Manual and Program Requirements and all amendments and
bulletins thereto which are in effect as of the mortgage loan
closing date, serviced in accordance with FNMA, FHLMC or FHA
requirements and industry standards, and subject to no
defects, including but not limited to damage to the property
securing the loan, lien imperfections or environmental risk.
(j) That any third-party originators referring, or in any way
involved with, any mortgage loan shall be at a minimum
approved by Correspondent according to FNMA and FHLMC
guidelines for approving third-party originators, as further
described in the Manual.
<PAGE> 4
(k) That Correspondent has obtained the Manual and Program
Requirements and all amendments and bulletins thereto and has
reviewed, or upon execution of this Agreement will promptly
obtain and review them, and will comply with all instructions
and criteria contained in such Manual and Program Requirements
and all amendments and bulletins thereto. Both parties agree
that the aforesaid Manual and Program Requirements and all
amendments and bulletins to such Manual and Program
Requirements shall be incorporated by reference herein and
shall form part of this Agreement.
(l) That Correspondent will immediately notify Citicorp if it (i)
fails to maintain any license in violation of (b) above and/or
(ii) becomes subject to any enforcement and/or investigative
proceeding by any licensing or regulatory authority or agency.
(m) That Correspondent will promptly respond to or otherwise
comply with Citicorp's reasonable request(s) for periodic
financial statements of Correspondent and/or any of its
principal owner(s).
2 of 6
<PAGE> 5
CORRESPONDENT
AGREEMENT
FORM 200
3. COSTS
Correspondent shall pay all costs and expenses incurred in
connection with the transfer and delivery of mortgage loans,
including but not limited to assignment preparation and
recording fees, fees for title policy endorsements and
continuations, and Correspondent's attorneys' fees.
4. ADVERTISING
Correspondent may advertise to the public the availability of
lending programs, but may not in any way identify Citicorp in
any advertising unless otherwise required by applicable law
and Citicorp has given its advance written approval.
During the first twelve (12) months after the date any
mortgage loan is purchased by Citicorp, Correspondent
represents and warrants that Correspondent, Correspondent's
employees, agents and/or affiliates will not, without the
prior written permission of Citicorp, (i) use targeted
advertising, solicit or otherwise directly encourage or incent
the loan borrower(s) to refinance the mortgage loan that was
purchased by Citicorp or (ii) sell or distribute any customer
list incorporating the names of such loan borrower(s) to any
outside party. Lender and Correspondent agree that nothing
contained herein shall prohibit advertising or solicitation by
Correspondent that is directed to the general public in the
area where the mortgage loan borrower(s) reside(s).
5. TERM
This Agreement is for an initial one-year term and shall
automatically renew for successive one-year terms, unless
terminated pursuant to Section 7 of this Agreement.
6. RELATIONSHIP BETWEEN CITICORP AND CORRESPONDENT
This Agreement will not create any agency between
Correspondent and Citicorp. Correspondent shall conduct its
business under this Agreement as an independent contractor and
shall have the rights and responsibilities of an independent
contractor.
Citicorp shall not be responsible for any actions or omissions
by Correspondent. Correspondent agrees it will not represent,
orally, in writing, by implication or otherwise, that it can
act in any capacity on behalf of Citicorp.
Citicorp is prescribing no marketing plan for Correspondent
and exercises no control over the methods, operations and
practices of Correspondent except as provided in this
Agreement and the Manual and Program Requirements.
Correspondent acknowledges it is not selling or distributing
Citicorp's services, and Citicorp has made no promise,
representation or warranty regarding the profitability of any
arrangement with Correspondent.
Correspondent acknowledges Citicorp will be providing
Correspondent with valuable proprietary information
("Confidential Information"), including but not limited to
information regarding Citicorp's products, programs,
underwriting policies, procedures and customers. Except as
necessary to perform its obligations under this Agreement or
as required by law, Correspondent will not disclose any
Confidential Information to any person outside Correspondent's
<PAGE> 6
organization and will limit access to this information within
its organization on a strict "need to know" basis.
Correspondent will require all of its employees and other
agents to meet its obligations under this Agreement regarding
Confidential Information.
7. TERMINATION
Citicorp may immediately terminate this Agreement without
notice and Citicorp then will have no further obligations
under this Agreement upon: (1) the failure of Correspondent to
perform or abide by any term or obligation contained in this
Agreement; (2) any representation or warranty made by
Correspondent being found by Citicorp to be false or incorrect
in any material respect; (3) commencement by or against
Correspondent of any bankruptcy, insolvency or similar
proceedings; (4) Citicorp's determination that Correspondent's
actions contravene the terms of this Agreement or adversely
impact Citicorp's activities or reputation; or (5) the failure
of loans sold by Correspondent to Citicorp pursuant to this
Agreement to satisfy Citicorp's expectations regarding loan
quality and/or performance. Either party may terminate this
Agreement for any other reason upon 10 days
3 of 6
<PAGE> 7
CORRESPONDENT
AGREEMENT
FORM 200
prior written notice to the other. In the event of
termination, Correspondent shall fully cooperate with and
assist Citicorp in obtaining the documentation necessary to
complete the processing and full resolution of all matters
(including but not limited to the delivery of all application
and/or closed loan documents) relating to registered
applications eligible for closing and all closed loans. In the
event of termination, Citicorp will process loan registrations
made on or before the termination date provided all such
registrations comply in all material respects with Citicorp's
loan origination and/or closing requirements related to each
such loan registration.
8. ASSIGNMENT
Correspondent may not assign this Agreement or any of its
responsibilities under this Agreement. Citicorp reserves the
right, upon notice, to assign its obligations and
responsibilities under this Agreement to any affiliated entity
engaged in the business of residential financing.
9. NON-EXCLUSIVE AGREEMENT
Correspondent's rights under this Agreement are on a
non-exclusive basis. Citicorp shall be free to market its
products and services to, and to contract with, other parties
and customers as it deems appropriate. Correspondent is under
no obligation to submit mortgage loans for purchase by
Citicorp.
10. INDEMNIFICATION
Correspondent agrees to indemnify and hold Citicorp harmless
from any and all claims, actions and costs, including
reasonable attorneys' fees and costs, arising from
Correspondent's performance or failure to perform under the
terms of this Agreement, or arising from any fraud,
misrepresentation or breach of warranty or covenant under this
Agreement or arising from Correspondent's advertisements,
promotions or other activities. This indemnification shall
extend to any action or inaction by employees, officers,
agents, independent contractors or other representatives of
Correspondent and shall survive the expiration and termination
of this Agreement.
11. GOVERNING LAW
This Agreement shall be governed by the laws of the State of
Missouri and applicable federal law.
12. NOTICE
All notices shall be in writing and shall be sent by
registered, certified or first-class mail, postage fully
prepaid. All notices addressed to Citicorp should be sent to:
Citicorp Mortgage, Inc.
12855 North Outer Forty Drive, MT-904
St. Louis, MO 63141
Attn.: Ms. Linda Schmersahl
or another address designated in writing by
Citicorp from time to time.
All notices addressed to Correspondent should be sent to its
office at:
E-Loan, Inc.
6200 Village Parkway #102
<PAGE> 8
Dublin CA 94568
Attn: Steve Majerus
or another address designated in writing by Correspondent from
time to time.
13. ADVERSE ACTION NOTICE REQUIREMENTS
Correspondent agrees to provide adverse action notices as
appropriate in accordance with the requirements of the Federal
Equal Credit Opportunity Act and Federal Reserve Regulation B.
In accordance with Regulation B 202.9(g), Correspondent agrees
that in the event Citicorp reviews a mortgage loan application
prior to closing by Correspondent and the application is not
approved by Citicorp or Correspondent, Correspondent shall
provide an adverse action and identify each creditor,
including Citicorp, on whose behalf the notice is given.
4 of 6
<PAGE> 9
CORRESPONDENT
AGREEMENT
FORM 200
14. MODIFICATION, MERGER, NO WAIVER OF RIGHTS
This Agreement may not be modified except in a writing signed
by Citicorp and Correspondent. This Agreement (including the
Manual and Program Requirements and all amendments and
bulletins thereto) contains the entire agreement of the
parties and supersedes all previous agreements (including all
amendments thereto) between the parties hereto. Any
representations, promises or agreements not contained in this
Agreement shall have no effect. The failure of either party to
exercise any right given to it under this Agreement or to
insist on strict compliance of any obligation under this
Agreement shall not constitute a waiver of any right,
including the right to insist on strict compliance in the
future.
15. CUSTOMER CONTACT
Prior to the purchase of the related mortgage loan, Citicorp
may contact any loan borrower if Citicorp considers such
contact reasonably necessary and appropriate for processing
the loan purchase request.
16. CURE OR REPURCHASE
If Citicorp, in its sole and exclusive discretion, determines
any mortgage loan purchased pursuant to this Agreement:
(i) was underwritten and/or originated in violation of any term or
condition of this Agreement, the Manual and/or Program
Requirements and all amendments and bulletins thereto which
was (or were) in effect as of the mortgage loan closing date;
(ii) was or is capable of being rescinded by the applicable
borrower(s) pursuant to the provisions of any applicable
federal or state law or regulation including but not limited
to the federal Truth-In-Lending Act; and/or
(iii) must be repurchased from any secondary market investor
(including but not limited to the Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation) due to
a breach by Correspondent of any representation or warranty
contained in this Agreement, the Manual and/or Program
Requirements and all amendments and bulletins thereto.
Correspondent will, upon notification by Citicorp and/or such
secondary market investor, (i) immediately correct or cure
such defect within the time prescribed by Citicorp and/or any
such secondary market investor to the full and complete
satisfaction of Citicorp and/or any such secondary market
investor or (ii) repurchase such defective loan from Citicorp
or such secondary market investor at the price required by
Citicorp or such secondary market investor ("Repurchase
Price"). If Citicorp or such secondary market investor
requests such repurchase, Correspondent shall, within ten (10)
business days of Correspondent's receipt of such repurchase
request, pay to Citicorp and/or such secondary market investor
the Repurchase Price by cashier's check or wire transfer of
immediately available federal funds. If such defective loan is
owned by Citicorp at the time of repurchase by Correspondent,
Citicorp shall, upon receipt of the Repurchase Price, release
to Correspondent the related mortgage file and shall execute
and deliver such instruments of transfer or assignment, in
each case without recourse or warranty, as shall be necessary
to vest in Correspondent or its designee title to the
repurchased loan.
<PAGE> 10
Correspondent agrees and acknowledges that the provisions of
this Section 16 do not, in any way, eliminate, diminish or
impair Correspondent's indemnification obligations contained
in Section 10.
17. ON-SITE REVIEW
Correspondent shall permit any employee or designated
representative of Citicorp, at any reasonable time during
regular business hours and upon reasonable advance written
notice by Citicorp, to examine and make audits of any of the
processes implemented and documents kept by Correspondent
regarding any loan purchased by Citicorp pursuant to this
Agreement and to reproduce and take copies of any such
documents.
5 of 6
<PAGE> 11
CORRESPONDENT
AGREEMENT
FORM 200
18. AUTHORITY TO EXECUTE AGREEMENT
Correspondent represents and warrants that it has all
requisite power, authority and capacity to enter into this
Agreement and to perform all obligations required of it
hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have
each been duly and validly authorized by all necessary
action(s). Correspondent shall, upon request by Citicorp,
execute such supplemental resolutions, acknowledgments and/or
certifications as may be reasonably necessary to evidence such
power, authority and capacity.
IN WITNESS WHEREOF, the parties have signed this Agreement.
CITICORP MORTGAGE, INC. E - Loan, Inc.
(CORRESPONDENT)
By:/s/ Robert Wetherell By:/s/ Steve Majerus
------------------------------- --------------------------------
Title Vice President Title Director, Mortgage Banking
----------------------------- ------------------------------
Date 7/31/98 Date 6/15/98
------------------------------ -------------------------------
NOTE THE TEXT OF THIS AGREEMENT MAY NOT BE CHANGED IN ANY MANNER WHATSOEVER
WITHOUT THE PRIOR WRITTEN PERMISSION OF CITICORP.
6 of 6
<PAGE> 12
Correspondent Program
RESOLUTION
OF BOARD OF
DIRECTORS
FORM 102
of E Loan, Inc.
(Name of Correspondent)
RESOLVED that
Chris Larsen the CEO, and
(Name) (Title)
Jarina Pawlowski the President, and
(Name) (Title)
Steven M. Majerus the Director, Mortgage Banking, and
(Name) (Title)
Frank Murnane the CFO, and
(Name) (Title)
of this corporation, or any one or more of them or their duly elected
or appointed successors in office, be and each of them is hereby
authorized and empowered in the name of and on behalf of this
corporation and under its corporate seal, from time to time while this
resolution is in effect, to execute any and all agreements, contracts,
assignments, endorsements and issuance of checks or drafts, reports,
mortgage documents, and other papers in connection with documents, and
furnish any information required or deemed necessary or proper by
Citicorp Mortgage, Inc., in connection with the foregoing.
CERTIFICATION
I HEREBY CERTIFY that the foregoing is a true and correct copy of a
resolution presented to and adopted by the Board of Directors of E Loan
Inc. at a meeting duly called and held at Palo Alto, CA on the 15th day
of June, 1998, at which a quorum was present and voted, and that such
resolution is duly recorded in the minute book of this corporation;
that the officers named in said resolution have been duly elected or
appointed to, and are the present incumbents of, the respective offices
set after their respective names.
(Corporate Seal)
/s/ Signature Illegible
Assistant Secretary
1 of 1
<PAGE> 1
Exhibit 10.31
CONVENTIONAL WHOLESALE
MORTGAGE PURCHASE
Colonial Mortgage Company AGREEMENT
CONVENTIONAL WHOLESALE MORTGAGE PURCHASE AGREEMENT
Effective Sept. 1, 1998, COLONIAL MORTGAGE COMPANY (hereinafter referred to as
CMC), and E. Loan, Inc, (hereinafter referred to as CORRESPONDENT), agree to the
following:
CORRESPONDENT warrants that it is a duly organized and validly existing entity
for the primary purpose of originating, for fee Income, single family
residential mortgages for sale to various Secondary Market Lenders for marketing
gains and that it is in good standing under applicable laws, licensing
requirements (if any), and regulations of the United States and of the State of
California.
CORRESPONDENT and CMC have the requisite corporate authority and capacity to
enter Into this LOAN CORRESPONDENT AGREEMENT (hereinafter referred to as
AGREEMENT). CORRESPONDENT's and CMC's compliance with terms and conditions of
this Agreement will not violate any provisions of CORRESPONDENT's or CMC's
articles of Incorporation or by-laws, any Instrument relating to the conduct of
its business, or any other agreement to which either may be a party.
CORRESPONDENT intends, from time to time, to offer for sale to CMC conventional
mortgage loans that it has originated, and for which it has obtained appraisal
and credit documentation.
All loans submitted to CMC must be originated and processed by the
CORRESPONDENT. No third party loans will be accepted.
CMC warrants that it is a duly organized and validly existing entity which, as
part of its normal business operation, purchases loans from various
Correspondents for the purpose of sale into the Secondary Market and servicing
of said loans, and it is in good standing under the applicable laws and
regulations of the United States and of the State of Alabama.
CORRESPONDENT and CMC are acting as Independent contractors and neither party
shall be deemed an agent, employee, partner, joint venturer, franchised or other
associate of the other party. CORRESPONDENT and CMC each understand and agree
that neither party is authorized to make any agreements or commitments on behalf
of the other party.
Until this AGREEMENT is canceled by either CMC or CORRESPONDENT, CMC will make
available to CORRESPONDENT FHA/VA loan programs at terms and interest rates
subject to change by CMC from time to time.
The following are the terms and conditions under which CMC will register,
underwrite, and purchase eligible loan applications offered by CORRESPONDENT:
1. From time to time, CMC will publish a list of types of loans it will
accept, including interest rates, loan limits, terms, loan-to-value
ratios, and discount points (CMC's required net yield) and fees. Loan
registrations and approvals will be issued to CORRESPONDENT in
accordance with CMC's current lending policies and procedures.
Registration and approval will be issued in writing covering only the
particular loan or loans submitted by CORRESPONDENT for approval.
2. CORRESPONDENT warrants that any loan it submits to CMC for approval
will be in compliance with all applicable federal, state, and local
statutes, ordinances, and regulations, including, but not limited to,
the Rent Estate Procedures
<PAGE> 2
Act, the Equal Credit Opportunity Act, the Tenth in Lending Act, the
Fair Credit Reporting Act, the Flood Disaster Protection Act (National
Flood Insurance Program), and with regulations issued pursuant thereto.
CMC will also comply with the inforementioned federal, state, and local
statutes, ordinances, and regulations. It is understood that
CORRESPONDENT will be responsible for providing loan applicants with
timely and correct GOOD FAITH ESTIMATES OF SETTLEMENT CHARGES, AND
SETTLEMENT COST BOOKLETS, TRUTH IN LENDING DISCLOSURE STATEMENTS,
SERVICING TRANSFER DISCLOSURE STATEMENTS (AT APPLICATION), ADJUSTABLE
RATE MORTGAGE DISCLOSURES, CONSUMER HANDBOOKS ON ADJUSTABLE RATE
MORTGAGES, AND ANY DISCLOSURES REQUIRED BY STATE LAW.
3. CORRESPONDENT understands CMC intends to sell closed loans to Investors
and into the Secondary Market. CORRESPONDENT warrants that in
submitting loan applications to CMC it is in full compliance with all
pertinent requirements and warranties of the investor, or
Mortgage-Based Security (MBS) program, to which CMC Intends to sell the
loan(s), in accordance with program guidelines supplied by CMC. CMC
agrees to provide CORRESPONDENT access to pertinent program guidelines
for Its various loan programs as they are provided to CMC. However, It
is the responsibility of the CORRESPONDENT to insure full compliance
with the said requirements and guidelines. CORRESPONDENT understands
that some loans must be approved by CMC's Investor prior to loan
closing, and the decision of the Investor is final.
4. CORRESPONDENT agrees to Indemnify and hold CMC harmless for any act or
omission, whether international or unintentional during the origination
process by CORRESPONDENT or any agent of CORRESPONDENT.
5. CMC will purchase approved loans that close in the CORRESPONDENT's
name. CORRESPONDENT will immediately endorse the Mortgage Note to CMC,
"without recourse" and execute an Assignment of the Security Instrument
to CMC.
6. CORRESPONDENT agrees that the responsibility for reporting all amounts
considered to be points to be reported on Federal Form 1098 (as
described in Internal Revenue code Section 605011(6)(z)(c) shall rest
solely with CMC. CORRESPONDENT further agrees to execute a separate
Designation Agreement with CMC which sets forth the responsibility for
reporting points.
7. CORRESPONDENT shall use real estate appraisers and closing agents
approved by CMC. CMC shall provide CORRESPONDENT with printed listings,
from time to time, of appraisers and closing agents that are acceptable
to CMC. CMC reserves the right to refuse credit reports from certain
credit reporting agencies. CORRESPONDENT shall be notified in writing
of any such unacceptable agencies. In the event that CORRESPONDENT
shall submit an appraisal or credit report from a person or entity not
acceptable to CMC. CMC, at its sole discretion, may reject or accept
the loan package.
8. CORRESPONDENT authorizes CMC to obtain a personal and/or business
credit report with respect to CORRESPONDENT upon mutual execution of
this AGREEMENT.
9. CORRESPONDENT agrees to release to CMC all interest in the servicing
rights for loans closed under this AGREEMENT. CORRESPONDENT further
acknowledges that any value attributed to such servicing rights shall
be incorporated in the interest rate and discount points (CMC's net
yield) quoted to CORRESPONDENT. It is further agreed that for any
loan(s) that closes in the name of CORRESPONDENT which produces a net
yield greater than CMC's required net yield, the yield differential
(secondary marketing/service release fee) shall accrue to CORRESPONDENT
as discount on the HUD-1 and shall be disbursed to CORRESPONDENT at
loan closing. In the event the yield differential is greater than
discount collected at closing the additional amount due CORRESPONDENT
shall be paid as a secondary market/service release fee. CMC shall
remit to CORRESPONDENT any amount due within five (5) working days of
receipt of mortgage documents in CMC's designated office.
CORRESPONDENT agrees that for any loan(s) which CMC does not receive a
discount at closing in an amount necessary to produce its required
yield the amount due CMC shall be paid as a secondary marketing fee.
The CORRESPONDENT shall remit the amount due CMC with the loan closing
documents.
<PAGE> 3
10. At CORRESPONDENT's request, CMC will review and approve the Title
Binder/Commitment and Survey prior to loan closing. If CORRESPONDENT
elects to assume responsibility for these documents, CORRESPONDENT will
be held fully liable for any damages that may arise and could be asked
to repurchase the loan as described in Section 11 of this AGREEMENT.
11. CORRESPONDENT agrees that upon request, it will immediately purchase at
the current outstanding loan balance, any closed loan that is not in
compliance with: the above-mentioned statutes, ordinances or
regulations (see paragraph 2 above) and/or any and all covenants and
warranties contained elsewhere in this AGREEMENT. Further, the
CORRESPONDENT shall purchase any closed loan that is the subject of any
misrepresentation or fraudulent.
2 of 3
<PAGE> 4
documentation. In the event that CORRESPONDENT does not immediately
comply with CMC's request for purchase, CMC shall have no further
obligation to CORRESPONDENT to fund any other loans that may have been
submitted by CORRESPONDENT, whether or not approved by CMC. Further,
CORRESPONDENT shall be responsible for may and a loss, cost or other
damages Incurred by CMC, Including CMC's attorney's fees, with respect
to the CORRESPONDENT failure to comply with the requirements of this
paragraph.
12. CORRESPONDENT understands that all loans submitted to CMC pursuant to
this AGREEMENT will be underwritten accordance with investor
requirements. CMC will approve to decline loan applications in
accordance with its current underwriting policies. CMC, and/or the
private investor, at its sole discretion, shall make underwriting
determinations, and its decision is final.
13. CORRESPONDENT understands that CMC routinely conducts quality control
audits to reverify credit documentation and appraisals submitted by
Correspondents. CORRESPONDENT understands such audits may be conducted
prior to loan being closed. CMC may conduct an on-site audit at the
CORRESPONDENT's place of business and CORRESPONDENT agrees to fully
cooperate therewith.
14. CORRESPONDENT will provide to CMC a Transfer of Property and Servicing
Rights letter, in the format provided by CMC, on each loan to be
purchased by CMC under this AGREEMENT.
15. This AGREEMENT to sell or purchase loans may be canceled, with or
without cause, by either CMC or CORRESPONDENT. Cancellation shall be
effective Immediately upon issuance of written notice.
16. This AGREEMENT is non-transferable.
17. CMC reserves the right to amend or change the terms of this AGREEMENT
with written notification to CORRESPONDENT, and said amendments and/or
changes will be effective immediately upon CMC's written notification
with respect to all loans including those submitted to and approved by
CMC.
18. CORRESPONDENT acknowledges and agrees that the CORRESPONDENT POLICY AND
PROCEDURES MANUAL provided CORRESPONDENT by CMC is an addendum to and
part of this AGREEMENT. CORRESPONDENT agrees to adhere to the policies
and procedures as stated in the MANUAL, and with any future changes or
amendments that may occur.
19. INDEMNIFICATION: Without limiting any of CMC's rights continued in this
AGREEMENT, CORRESPONDENT shall Indemnify, defend, and hold CMC, its
successors and assigns, and its officers, agents, and employees
harmless against any claim, action, liability, cost or expense,
Including judgments, court costs and attorneys fees related to any
breach any warranty, representation, or covenant continued in the
AGREEMENT or set forth in any program offered pursuant this AGREEMENT.
This Indemnification shall survive the terms of this AGREEMENT for all
loans purchased until the sooner of: a) written release by CMC and any
successor or assign; b) payoff of the loan; or c) the lapse of any
applicable statute of limitations.
20. All aforementioned warranties, conditions, representations and
indemnifications shall survive the delivery and purchase of any
mortgage loan(s) offered for sale under the AGREEMENT and shall insure
to the benefit of all future successors and assigns of CMC; any
cancellation of this AGREEMENT, and/or any change in management or
ownership in CMC or CORRESPONDENT.
CORRESPONDENT understands and accepts the terms of this AGREEMENT, as evidenced
by the signature of its duly authorized corporate officer.
FOR E-Loan, Inc FOR COLONIAL MORTGAGE COMPANY
BY /s/ J. Pawlowski BY /s/ Signature Illegible
TITLE President TITLE /s/ Signature Illegible
<PAGE> 5
DATE 9/1/98 DATE 9/10/98
3 of
<PAGE> 6
ADDENDUM
This Addendum made and entered into this 1 day of September, 1998, by
Colonial Mortgage Company, an Alabama Corporation, hereinafter referred to as
("Colonial") and E-Loan Inc, hereinafter referred to as ("Correspondent").
WITNESSETH
1. This Addendum is hereby incorporated into the Loan Correspondent
Agreement between the above referenced parties dated 9/1/98 as if the same was
set forth therein. In the event there is a conflict in the terms of this
Addendum and the terms of the Loan Correspondent Agreement, the terms and
conditions of this Addendum shall control and be given priority.
2. The parties to this Addendum agree that certain loan programs
offered by Colonial require that the loans be closed in the name of Colonial.
Should that be the case, the terms and conditions of this Addendum shall control
as to those items of the Loan Correspondent Agreement relating to the closing of
a loan in the Correspondents name. However, each party agrees that all of the
other representations, warranties and requirements of the Loan Correspondent
Agreement will remain in full force and effect.
3. As is contemplated in the Loan Correspondent Agreement, the specific
conditions of any loan program must be followed both by the Correspondent and
Colonial and will be controlling for that particular loan.
In Witness Whereof, this Addendum was executed on the day and year
above first written.
Colonial Mortgage Company
By: /s/ Signature Illegible
Its: /s/ Signature Illegible
Correspondent
By: /s/ J. Pawlowski
Its: President
<PAGE> 7
COLONIAL MORTGAGE COMPANY
DESIGNATION AGREEMENT
This agreement is in accordance with Internal Revenue Service Revenue Procedure
92-11, for purposes of making information returns for points, as described in
Internal Revenue Code Section 6050H(b)(2)(C). Under the terms of this agreement,
the lender of record Identified below shall not report to any borrower on
Federal Form 1098 any points paid In connection with mortgage loans purchased by
Colonial Mortgage Company. The responsibility for reporting all amounts
considered to be points, for purposes of Federal Form 1098, rests solely with
the designee, Colonial Mortgage Company, for mortgage loans that it purchases.
The lender of record represents to the designee that he did not, as a part of
any overall mortgage transaction, lend to any borrower any of the amounts
indicated on a settlement statement that would otherwise be treated as paid
directly by the borrower, for the purpose of allowing these amounts to be
treated as paid directly by the borrower. The lender of record makes this
representation for any and all loans purchased by Colonial Mortgage Company. The
lender of record understands that the must retain a copy of this agreement for
four years following the close of the calendar year in which the last loan
covered under this agreement is purchased by Colonial Mortgage Company.
LENDER OF RECORD DESIGNEE
COLONIAL MORTGAGE COMPANY
P.O. Box 250C
One Commerce Street
Montgomery, Alabama 36142
/s/ J. Pawlowski /s/ Signature Illegible
Signature Signature
President President
Title Title
9/1/98 3/23/92
Date Date
CMC APPROVAL NUMBER: __________________
<PAGE> 1
Exhibit 10.32
GREENPOINT MORTGAGE
LENDER ASSOCIATE AGREEMENT
THIS LENDER ASSOCIATE AGREEMENT ("Agreement"), made this the 9th day of November
1998, by and between E-LOAN, Inc. a California Corporation duly organized and
validly existing under the laws of California with its principal place of
business at 540 University, Ave, Suite 350, Palo Alto, CA 94301 ("Associate"),
and GreenPoint Mortgage Corp., ("GreenPoint") a corporation duly organized and
validly existing under the laws of New York, with its principal place of
business at 5032 Parkway Plaza Boulevard, Charlotte, North Carolina 28217.
WHEREAS, Associate intends from time to time to originate conventional mortgage
loans ("loans" or, individually, a "loan") and to offer, servicing released, to
GreenPoint such loan applications that meet GreenPoint's underwriting standards
in effect at time of each assignment and delivery; and
WHEREAS, GreenPoint, as part of its business, from time to time makes loans
meeting specific requirements, and GreenPoint intends to take assignment and
delivery from Associate certain loan applications, and the servicing rights
relating thereto, that the Associate originates and that GreenPoint, in its sole
discretion, deems advisable.
NOW, THEREFORE, in consideration of the above named premises and the terms and
conditions herein contained, the Associate and GreenPoint hereby agree as
follows:
1. DEFINITIONS:
Originate means to take a loan application and process it. Originate,
as used herein, NEVER includes underwriting or closing:
Mortgage and mortgages, as used herein, mean mortgage(s), security
deed(s), trust deed(s), and deeds(s) of trust. Mortgagor and
mortgagors, as used herein, mean mortgagor(s), trustor(s) of trust
deed(s) or deed(s) of trust, and grantor(s) or security deed(s).
Trustees under trust deeds or deeds of trust are subject to GreenPoint
approval.
To take an application means to obtain information and signature(s)
from applicant(s) by thoroughly completing an application form and
supplement AND to obtain authorization signature(s) on forms necessary
to verify application information AND to obtain miscellaneous items
that are obtainable at application, all in accordance with the
requirements of the Manual.
Manual or Guide, as used herein, is a description of GreenPoint's
Wholesale Guide, including applicable procedures, policies and loan
products, and each provision of the Manual, together with all revisions
to it, is incorporated into this Agreement for all purposes.
<PAGE> 2
2. REPRESENTATIONS AND WARRANTIES:
Associate and GreenPoint each represent to the other that as to itself
it is a duly organized and validly existing entity and that it is in
good standing under applicable laws and regulations of the United
States and of the State of its organization; that it and its officers
acting on its behalf have the requisite corporate authority and
capacity to enter
8/96
<PAGE> 3
GREENPOINT MORTGAGE
into this Agreement and engage in the transactions contemplated hereby;
and that its compliance with the terms and conditions of this Agreement
do not violate any provisions of its Charter or Articles of
Incorporation or by-laws or any instrument relating to the conduct of
its business or any other agreement to which it may be a part.
Associate further represents and warrants that it is duly qualified and
in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires
such qualification.
Associate represents and warrants that it complies and will continue to
comply with the Real Estate Settlement Procedures Act, the Equal Credit
Opportunity Act, the Truth In Lending Act, the Fair Credit Report Act,
the Flood Disaster Protection Act, and all other applicable federal,
state, and local laws and regulations to the extent that they apply to
the Associate's undertaking herein. Associate further represents and
warrants that applications submitted to GreenPoint will not contain
misrepresentations or material inaccuracies and will not involve fraud.
Associate acknowledges that certain loans and loan applications may be
subject to guidelines issued by the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC") or other investors whose guidelines may be provided to
Associate by GreenPoint from time to time. Associate represents and
warrants that in submitting applications to GreenPoint, Associate is in
compliance with all applicable guidelines relating to the processing
and the submission of such applications.
3. GENERAL DESCRIPTION:
With the signing of this Agreement by Associate and GreenPoint, a relationship
is formed as follows:
Associate takes application, prepares and provides applicant with Good
Faith Estimate and initial Truth In Lending disclosures, provides
applicant with Settlement Cost Booklet and, if applicable, ARM booklet
and disclosure, collects deposit for appraisal and credit report and
underwriting and accounts for same, processes the application, obtains
mortgage insurance when applicable, and otherwise complies with the
requirements of the Manual. Associate forwards to GreenPoint a copy of
application, a copy of Good Faith Estimate and initial Truth In Lending
disclosures, a copy of sales contract, and all other documents required
by the Manual. GreenPoint underwrites the application and provides the
Associate with underwriting decision. Associate advises applicant of
loan approval, provides GreenPoint with information necessary for
preparing closing instructions, and performs all other duties as
outlined in the Manual. GreenPoint is responsible for servicing
thereafter. GreenPoint pays to Associate, at loan closing, ONE HUNDRED
percent (100.00%) of the origination fee plus any discount in excess of
that required by GreenPoint.
4. LOCK-INS:
In accordance with the Manual, Associate can obtain from GreenPoint
pricing information and can lock a loan. Associate may issue a lock-in
letter to an applicant using the form approved by state regulators but
said lock letter shall not be binding on GreenPoint.
8/96
<PAGE> 4
GREENPOINT MORTGAGE
Upon issuance of a lock-in confirmation and receipt of all required
documentation by GreenPoint, GreenPoint is obligated to underwrite the
loan, and if the application package is approved, GreenPoint is
obligated to close the loan in accordance with the lock confirmation,
provided that all requirements contained in GreenPoint's closing
instructions are met. Associate will provide its best efforts to
process the loan application in a timely manner and submit same for
underwriting. GreenPoint will use its best efforts to underwrite and
approve (or decline) all such applications in a timely manner. It is
expressly agreed that neither product availability nor interest rate
nor discount is guaranteed until issuance of a lock-in confirmation by
GreenPoint.
6/98
<PAGE> 5
GREENPOINT MORTGAGE
5. REQUIRED DELIVERY:
All loan applications locked with GreenPoint or underwritten by
GreenPoint must be assigned and delivered to GreenPoint unless reasons
for non-assignment and non-delivery are beyond reasonable control of
the Associate. To evidence the reason for non-delivery and
non-assignment, Associate will furnish GreenPoint a copy of the Equal
Credit Opportunity Act adverse action notice that it provided to the
applicant and/or such other information and documentation as GreenPoint
may require. If an applicant cancels his or her application after such
application has been locked in with or underwritten by GreenPoint, and
such applicant subsequently applies to Associate for a loan type
offered by GreenPoint, Associate must offer such loan application to
GreenPoint for assignment and delivery.
6. LOAN TYPES:
From time to time GreenPoint will provide Product Description Sheets to
Associate as part of the Manual. These sheets represent loan types
available to the Associate and may provide information concerning, but
not limited to, fees, maximum loan-to-value, private mortgage
insurance, underwriting, income ratios, and assumptions. Any or all of
said types and the processing and closing requirements for said types
may be changed or canceled at any time; however, such change or
cancellation does not affect existing lock-in commitments. GreenPoint
will notify Associate of changes and/or cancellations by Associate
Program Announcements and/or by revisions to the Manual. Approvals of
individual loans by GreenPoint will take the form of a written approval
letter if the loan involves proposed construction and written closing
instructions if the loan involves existing construction.
7. TERMINATION OR MODIFICATION:
This Agreement will continue until terminated by either GreenPoint or
Associate. Said termination will be effective fifteen (15) days after
written termination notice is received by the other party. Applications
locked-in with GreenPoint at time of termination will thereafter be
delivered by Associate to GreenPoint under terms of this Agreement as
if it had not been terminated. All representations, warranties, rights
to audits, repurchase obligations, and other remedies will survive said
termination.
This Agreement may be modified only if done so in writing and signed by
both Associate and GreenPoint. Associate acknowledges that GreenPoint
may at any time modify the provisions of the Manual, including
descriptions of the loan types offered by GreenPoint.
8. REPURCHASE:
Subject to the right to cure described below, Associate agrees to
repurchase from GreenPoint within thirty business days after
GreenPoint's demand any closed loan: (1) if Associate has failed to
fully comply in its activities relating to the loan with any applicable
laws and regulations or with any applicable provisions relating to the
secondary market; (2) if the loan documentation for which Associate is
responsible is incomplete, incorrect, or improperly prepared; (3) if a
loan in default has a material misrepresentation by the mortgagor and
such misrepresentation was a material cause for the default; or (4) if
any representation or warranty by Associate was otherwise breached. If
Associate cures to GreenPoint's satisfaction the defect or deficiency
identified by GreenPoint within the thirty day period described above,
Associate shall not be obligated to repurchase the loan in question.
8/96
<PAGE> 6
GREENPOINT MORTGAGE
The repurchase price shall be as follows: (1) if the loan has been
assigned to a secondary market investor by GreenPoint, the repurchase
price shall be equal to the net amount paid by GreenPoint to such
assignee to repurchase such loan, plus accrued but unpaid interest on
such loan from date of repurchase by GreenPoint through date of
repurchase by Associate, less borrower's current escrow/impound
balance, if any, deposited with GreenPoint; or (2) if the loan has
never been assigned by GreenPoint, the repurchase price shall be equal
to the unpaid balance of the loan, less borrower's current
escrow/inpound balance, if any, deposited with GreenPoint, plus
GreenPoint's cost to carry the loan for the period from date of loan
closing by GreenPoint through the date of repurchase by Associate.
9. DEFAULT AND REMEDIES:
Associate will be in default under this Agreement if it breaches any of
the terms of this Agreement, including but not limited to: (a) any
obligation contained in Section 8 hereof; (b) failing to deliver all
applications locked-in except if excused under provisions of Section 5
hereof; (c) failing to deliver to GreenPoint any loan application for a
loan type offered by GreenPoint relating to the same applicant, and
secured by the same property that was the subject of a previously
locked in or underwritten loan application that was not delivered; (d)
failing to make best efforts in loan origination responsibilities; and
(e) failing to follow any policy or procedure contained in the Manual
as may be revised from time to time. If Associate is in default under
this Agreement, GreenPoint will be entitled to elect any remedy that
may be available to it at law. All remedies provided in this Agreement
are cumulative and non-exclusive. If GreenPoint engages an attorney to
enforce this Agreement and prevails, GreenPoint will be entitled to be
reimbursed by Associate for all court costs, expenses and attorney fees
associated with such an enforcement action.
10. LOAN DENIALS:
GreenPoint alone shall make its underwriting determinations in
accordance with its underwriting guidelines. If GreenPoint declines a
loan application, it shall prepare and send an adverse action notice to
the Lender Associate. If GreenPoint declines a loan application and the
Lender Associate is unable to make or arrange for an offer of credit
with another creditor or if the applicant does not expressly accept or
use any credit offered, Lender Associate shall deliver to the applicant
the adverse action notice provided by GreenPoint as required by
applicable law.
11. PREPAYMENT IN FULL:
GreenPoint shall provide Associate with written notice should
GreenPoint, or its successors or assigns, receive funds sufficient to
prepay in full any Loan within Ninety (90) calendar days following the
date GreenPoint purchases such a Loan from Associate. Within thirty
(30) calendar days following the date of such notice, Associate shall
forward to GreenPoint an amount equal to the total of all compensation
paid, directly or indirectly, to Associate by GreenPoint in connection
with such a Loan.
12. MISCELLANEOUS PROVISIONS:
A. GreenPoint's failure to enforce a provision of this Agreement
does not constitute a waiver of that or any other provision of
this Agreement.
B. This Agreement shall be construed and governed by the laws of
the State of North Carolina.
8/98
<PAGE> 7
GREENPOINT MORTGAGE
C. Concerning each and every term, condition and provision of
this Agreement and the commitments entered pursuant thereto,
time is of the essence.
D. Associate's rights and obligations hereunder are not
assignable without GreenPoint's written consent. GreenPoint
has the right to assign this Agreement and its duties,
obligations or rights hereunder upon written notice to
Associate.
E. Associate will promptly advise GreenPoint of any substantial
change in its ownership, financial condition, or senior
management. In addition to GreenPoint 's rights to terminate
this Agreement as provided above, GreenPoint may refuse to
lock in Associate's loans if GreenPoint reasonably determines
that Associate will be unable to fulfill any of its
obligations under this Agreement.
F. GreenPoint will have access to books and records of Associate
as it may reasonably require in order to verify that locked in
loans not delivered by Associate were not closed because of
reason permitted under Section 5 above.
G. Associate shall cooperate with GreenPoint in furnishing
documents and information as requested from time to time by
GreenPoint.
IN WITNESS WHEREOF, GreenPoint and Associate hereto execute this Agreement as
evidenced by the signatures of the duly authorized officers of each.
GreenPoint Mortgage Corp.
(GreenPoint) (Associate)
BY: BY: /s/ Janina Pawlowski
TITLE: TITLE: President
DATE: DATE: 11/9/98
ATTEST: ATTEST:
(SEAL) (SEAL)
8/98
<PAGE> 1
Exhibit 10.33
CORRESPONDENT BROKER AGREEMENT
This agreement is entered into between NEW AMERICA FINANCIAL, INC. ("New
America"), whose address is 3131 Turtle Creek Boulevard, Suite 700, Dallas,
Texas 75219, and the broker identified on the signature page (the "Broker").
1. New America and Broker hereby agree that, on a non-exclusive basis as to
both parties, Broker may locate and qualify potential borrowers for
conventional residential mortgage loans which New America will underwrite,
close, and sell into the secondary mortgage market. Broker shall be an
independent contractor and not the agent of New America or a partner or
joint venturer of New America.
2. Broker warrants that all information about Broker submitted to New America
by Broker is and will be accurate. Broker acknowledges that New America is
relying upon such information as an inducement to entering into this
agreement and will be relying on such information in connection with the
funding of loans submitted to New America. If there should be any material
adverse change in such information, Broker will promptly advise New America
of such fact. Upon request from New America, Broker shall furnish New
America copies of Broker's most recent financial statements (audited if
available).
3. Broker shall not represent itself to be the agent of New America or in any
relationship with New America other than that of independent contractor.
Broker has no authority to commit New America or bind it to any contract.
4. If the law applicable to Broker requires that Broker be licensed to conduct
its business as loan broker, Broker represents that Broker has all of the
necessary licenses and shall furnish New America copies of such licenses and
keep such licenses in effect during the term of this Agreement.
5. Broker agrees to obtain information about the loan programs offered by New
America, explain such programs to its customers, qualify prospects at New
America's then-current rates, and prepare a preliminary Good Faith Estimate
of Settlement Charges including any fees to be paid to Broker.
6. By submitted a loan application to New America, Broker shall warrant and
represent the following:
a. Broker will have verified all information on loan applications submitted
by Broker in accordance with prudent underwriting standards.
b. All documents submitted to New America are genuine.
c. All representations with respect to the application are true.
d. All appraisals and credit reports have been obtained from sources which
have been approved in writing by New America.
Page 1 of 4
<PAGE> 2
e. Broker has disclosed all information known to or suspected by Broker
with respect to the application, the prospective borrower, and the
security for the loan, and agrees to immediately disclose to New America
any additional such information Broker may obtain between the time of
submission of the loan to New America and the funding of the loan.
f. Broker has full authority to submit such loan application to New America
without violating any agreement, law, or order relating to Broker.
g. The procedures, eligibility requirements, forms, and other aspects of
the loan application shall be in accordance with the requirements of
Federal National Mortgage Association or Federal Home Loan Mortgage
Corporation, and in compliance with all applicable federal, state, and
local laws, regulations, and ordinances including, without limitation
the Truth-in- Lending Act, the Real Estate Settlement Procedures Act,
the Fair Credit Reporting Act, the Home Mortgage Disclosure Act, the
Community Reinvestment Act, and the Equal Credit Opportunity Act. Every
loan submitted to New America by Broker shall include written evidence
of such compliance.
7. No loan application submitted to New America shall be approved by New
America except by written notification to Broker. Such approval may be
granted or withheld by New America in its sole discretion, and New America
is not obligated to approve any application.
8. Broker will submit to New America all information New America may request
with respect to an application. New America may verify any information with
respect to an applicant or Broker, including, without limitation, obtaining
credit reports on Broker and the applicants. No such verification and no
quality control audits or reviews by New America will relieve Broker from
responsibility for Broker's warranties and representations made hereunder or
a waiver of any claim New America may have for the incorrectness of any such
representations or warranties.
9. Neither New America nor Broker shall be responsible for the other's
compliance or failure to comply with any applicable laws, regulations, or
ordinance.
10. No rate quotations, lock-ins, or commitments will be binding upon New
America unless in writing and signed by an authorized representative of New
America.
11. Broker will not share Broker's compensation with any other party, and the
loan proceeds will not be paid (except for payment to a lender to satisfy an
existing loan on the subject property) to any party who compensates or is
compensated by Broker, is under common ownership or control with Broker, or
shares profits or losses with Broker.
12. This Agreement shall continue until terminated, with or without cause, by
either party by giving written notice of termination to the other. The
termination shall be immediate upon the giving of such notice but shall not
affect any representation or warranty by Broker with respect to an
application or loan which has funded and will not affect any commitment
which New America has previously issued in writing.
Page 2 of 4
<PAGE> 3
13. Broker hereby agrees to indemnify New America against and hold New America
harmless from all liability, loss, cost, and expense, including, without
limitation, reasonable attorneys' fees and costs of investigation, resulting
from any breach of Broker's warranties, representations, or covenants herein
or from any acts or omissions of Broker or its agents or employees. Broker
agrees to promptly reimburse New America for any loss, cost, or expense New
America may incur as a result of the liquidation of any loan or the security
for any loan submitted to New America by Broker.
14. New America shall have a contractual right to set off any money New America
owes to Broker against any obligation of Broker to New America, but any such
setoff shall not constitute an accord and satisfaction unless agreed to in
writing by the parties. If Broker collects any funds in connection with any
loan submitted to New America, Broker shall hold such funds in trust for New
America in a separate account.
15. No failure to act or exercise any remedy for any violation of this Agreement
by either party shall constitute a waiver of such violation or consent to
any future violation.
16. This Agreement may not be assigned by either party hereto but is personal
between New America and Broker. Neither party will reveal any confidential
information about the other which it may receive in connection with this
Agreement except pursuant to subpoena or other court order.
17. Broker has no authority to make any representations on behalf of New America
except to quote loan rates and terms which have been quoted by New America
in writing.
18. This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors.
19. This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas. Any action to enforce or interpret this
Agreement shall be brought in Dallas County, Texas. All disputes under this
Agreement shall be resolved by binding arbitration conducted in Dallas,
Texas under the rules of the American Arbitration Association then in force.
The prevailing party in any such proceeding shall be entitled to recover its
reasonable attorneys' fees as part of any award.
20. All notices hereunder shall be in writing and deemed delivered when
delivered in person or three days after depositing in the United States
mails, properly addressed, postage prepaid, registered or certified mail,
return receipt requested, addressed to New America at the address shown
above or to Broker at the address shown below Broker's signature.
Page 3 of 4
<PAGE> 4
21. This Agreement contains the entire agreement of the parties with respect to
the subject matter hereof, supersedes all prior understandings or
agreements, and can be amended only by written instrument signed by the
party to be bound by such amendment. There are no unwritten or oral
agreements between the parties with respect to the subject matter hereof. If
any part of this Agreement is unenforceable, the unenforceable provision
shall be disregarded and the balance of the Agreement shall be enforced in
accordance with its terms.
Executed ________________, 199____.
NEW AMERICA:
NEW AMERICA FINANCIAL, INC.
By:
--------------------------------------
Authorized Officer
BROKER:
E-LOAN, INC.
-----------------------------------------
(Name)
By: /s/ Janina Pawlowski
--------------------------------------
Name: Janina Pawlowski
-----------------------------------
Title: President
-----------------------------------
Address: 6200 Village Parkway, Ste. 102
--------------------------------
Dublin, CA 94568-3004
--------------------------------
Page 4 of 4
<PAGE> 1
Exhibit 10.34
CORRESPONDENT
MORTGAGE SERVICES AGREEMENT
This Mortgage Services Agreement ("Agreement") is made as of the 20th
day of May, 1998 by and between PHH MORTGAGE SERVICES CORPORATION, a New Jersey
corporation having an office at 6000 Atrium Way, Mt. Laurel, New Jersey ??54
("PHH"), and E-Loan (the "Correspondent"), a California corporation having an
office at 540 University Avenue, #350, Palo Alto, CA 94301.
WITNESSETH:
WHEREAS, PHH is an experienced provider, on a nationwide basis, of
residential mortgage services and products to its clients and customers,
including financial institutions;
WHEREAS, Correspondent desires to engage PHH to provide certain
government and conventional residential mortgage services and products to
Correspondent and its customers as described in and in accordance with the terms
specified in this Agreement.
NOW, THEREFORE, in consideration of mutual promises hereinafter set
forth, the parties hereto agree as follows:
PROCEDURES
Eligible Loans. As of the loan closing date, Correspondent shall ensure
that all loans are in full compliance with the Federal National
Mortgage Association Conventional Selling Contract Supplement, the
Federal Home Loan Mortgage Corporation Sellers Guide, the Government
National Mortgage Association Seller/Servicing Guide and the Veterans
Administration Guidelines, as may be applicable or comply with those
modifications that PHH may authorize in writing from time to time.
Interest Rates and Program Terms. The Correspondent shall originate
loans that bear interest in accordance with the price quoted by PHH and
have origination terms, fees and other program features that conform
fully to PHH guidelines. PHH shall close all loans in accordance with
the program options, interest rates and fees provided in the PHH
pricing policy, as well as current price change notices in effect on
the registration date. Any change in the pricing policy shall be
provided by PHH immediately to Correspondent and shall be considered to
be effective upon telephone notification. PHH shall verify all such
changes in writing.
<PAGE> 2
Loan Origination Procedures. Correspondent shall originate, register
and process all loans in conformance with the procedures and policies
described in the PHH Operations Bulletin, which is incorporated herein
by reference. Correspondent shall submit the documents required in the
Operations Bulletin to PHH for underwriting. PHH shall accept or reject
all loans within forty-eight (48) hours of receipt of a complete
underwriting submission package using the underwriting guidelines
described in the Operations Bulletin and shall close all acceptable
loans in accordance with its normal procedures. Such guidelines may be
amended from time to time by PHH. PHH shall notify Correspondent in
writing of any such changes.
Title and Lien Requirements. Correspondent shall ensure that each loan
is securable by a first mortgage or deed of trust creating a valid
first lien and shall be insurable by an ALTA title policy acceptable to
PHH.
PMI Insurance. On conventional loans with a loan-to-value ratio in
excess of 80%, either Correspondent or PHH shall order private mortgage
insurance and obtain approval that is acceptable to PHH. The private
mortgage insurance required on mortgage programs for relocation buyers
shall be ordered by PHH. Written approval from the private mortgage
insurance company must be received by PHH prior to PHH closing the
loan.
A. Correspondent shall submit an additional copy of the appraisal
and application (Form 1003) for all PMI and Pool Insurance
loans.
Prior Approval. Any loan utilizing a program which requires prior
approval by an investor must receive that approval prior to closing.
PHH will submit such loan for any investor approval.
I. Documentation. Correspondent agrees, within a reasonable time, to
execute, transmit and/or obtain any and all documentation over which
they can be reasonably expected to have control and which PHH, FNMA,
FHLMC or GNMA may deem necessary to properly complete the sale of any
loan; and/or to perfect a first lien. All required documentation shall
be delivered to PHH within thirty (30) days of the closing date or
Correspondent shall, at PHH's option, be required to repurchase the
loan upon demand in accordance with the provisions of this Agreement.
The right to process loans under this Agreement is contingent upon
FNMA, FHLMC and/or GNMA approving Correspondent should such approval be
required by any agency at the time of signing this Agreement or at any
time subsequent.
II. Quality Control. At any time PHH shall have the right to conduct
quality control audits to verify all documentation submitted by
Correspondent including full documentation of loans closed as "no
income" loans. Correspondent agrees to cooperate fully with these
audits including the procurement or verification of any requested
information and with the verification of any audit findings.
Correspondent acknowledges that the findings of these audits could lead
to a request for repurchase of loans or termination of this Agreement
in the event of the discovery of improper documentation, documentation
which does not support the information supplied with the loan
submission, or breach of any warranty contained herein.
-2-
<PAGE> 3
Failure to comply with this Section is a default under this Agreement and PHH,
upon such default, may terminate this Agreement and is entitled to request the
repurchase of any improper loans and any damages suffered as a result of such
breach.
Correspondent Warranty.
A. Correspondent hereby warrants the following to PHH with respect to all loans
submitted under this Agreement:
1. That the mortgagor understands the mortgage will not be
subordinated, in whole or in part, and the mortgaged premises
will not be released from the lien of the mortgage, in whole
or in part until the debt is paid in full;
2. That the property will be subject to a valid, subsisting and
enforceable first lien, and there shall be no simultaneous
secondary financing unless prior approved by PHH;
3. That any assistance necessary to conform with any and all
requirements as to completion of any on-site or off-site
improvements and as to disbursement of any escrow funds will
be performed in a timely manner;
4. That as of the date of warranty correspondent has no knowledge
of damage to the mortgaged premises that would adversely
affect the value thereof;
5. That the mortgage loan was processed by Correspondent in
compliance with all applicable federal, state and local laws
in existence at the time of closing, including but not limited
to: Regulation Z (Truth-in-Lending Act); Fair Credit Reporting
Act; Flood Disaster Protection Act of 1973; Regulation X (Real
Estate Settlement Procedures Act of 1974) (RESPA), as amended,
and Regulation B (Equal Credit Opportunity Act), as amended.
6. All documents submitted to PHH are genuine, true and proper.
All other representations are true and correct and meet the
requirements and specifications of this Agreement.
7. Correspondent further makes all FNMA, FHLMC and GNMA
warranties and representations, as may be applicable, required
at the time of closing of the loans.
All of the aforementioned warranties shall survive and inure to the benefit of
any person, partnership, firm or entity to which PHH may assign or sell any such
loans under this Agreement. In the event of a breach of warranty as described in
this paragraph or failure to deliver the required documentation described in
Paragraph VII, Correspondent agrees to immediately repurchase said loan upon
demand by PHH and shall indemnify and hold PHH harmless from all claims,
liabilities, losses, damages, expenses and lawsuits (including attorney's fees),
in connection therewith.
-3-
<PAGE> 4
Compensation for Correspondent's Services.
Upon receipt of the documents required in Paragraph VII, including
clearance of any approval conditions, PHH shall close the loan. PHH
shall compensate Correspondent at the closing table (unless PHH, in its
sole discretion, notifies Correspondent from the mortgage rate or fees
Correspondent charges the applicant which differ from the that
compensation will be paid after conditions are cleared) based upon the
difference between the mortgage interest rate and/or fees charged the
mortgage and that charged by PHH, less $225 which represents a PHH
underwriting fee. The total Broker compensation paid to the
Correspondent (excluding any closing fees) from the customer, PHH or
Seller, shall not exceed 325 basis points of the original principal
balance of each loan.
Rate Locks. All Loans brokered under this Agreement shall be on a Best
Efforts Basis, unless specifically negotiated otherwise. Best Efforts
delivery shall mean a mandatory delivery of Loans registered with PHH
if the Loan closes. All locked Loans which are not declined by PHH
shall be delivered to PHH. Correspondent shall not broker the Loan to
any other lender and shall not assist in closing the loan with any
other lender. The Best Efforts Delivery Policy will be closely
monitored by the Quality Control Department at PHH. In the event
Correspondent brokers any locked Loan to a lender other than PHH,
Correspondent shall be subject to a pair off fee.
I. Cancellations: In the event the Correspondent requests a loan file
returned from PHH after PHH has underwritten and approved the loan, the
Correspondent will be charged an underwriting fee of $225.
II. Disclaimer. PHH makes no representation or warranty to Correspondent or
its members regarding the effect that this Agreement and the
consummation of the transaction contemplated hereby may have upon their
Foreign, Federal, State or local tax liabilities.
V. Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired.
V. Servicing. PHH shall own the servicing rights of all loans closed under
this Agreement and is entitled to all escrow fees, buydown funds and
rights thereof. Any escrow or buydown fees shall be submitted to PHH
via separate check(s). The check(s) shall be made payable to "PHH
Mortgage Services Corporation", and shall be submitted with the final
closed loan package.
VI. Assignability.
A. Subject to Section VI(B), neither Correspondent nor PHH may
assign its rights or obligations hereunder without the prior
written consent of the other party and any attempted
assignment without such consent shall be void.
B. Notwithstanding the provisions of VI(A), PHH may assign this
Agreement and/or delegate its responsibilities hereunder to
any majority-owned subsidiary without obtaining the consent of
Correspondent.
-4-
<PAGE> 5
VII. Indemnification.
A. Correspondent agrees to defend, indemnify and hold harmless
PHH, its successors, assigns, stockholders, officers,
directors, employees, agents, attorneys, affiliates and
subsidiaries from and against any and all liabilities, damages
or expenses whatsoever, including, without limitation,
attorney's fees, resulting, directly or indirectly, from any
actual or threatened claim or demand arising, directly or
indirectly, under, from or out of or in connection with (i)
any failure by Correspondent to perform its obligations under
this Agreement, (ii) Correspondent's negligence or willful
misconduct in the performance of its obligations under this
Agreement, or (iii) Correspondent's failure to comply fully
with any and all federal, state and local laws, rules and
regulations governing the origination of mortgage loans.
B. PHH agrees to defend, indemnify and hold harmless
Correspondent, its successors, assigns, stockholders,
officers, directors, employees, agents, attorneys, affiliates
and subsidiaries from and against any and all liabilities,
damages or expenses whatsoever, including, without limitation
attorney's fees, resulting, directly or indirectly, from any
actual or threatened claim or demand arising, directly or
indirectly, under, from or out of or in connection with (i)
any failure by PHH to perform its obligations under this
Agreement, (ii) PHH's negligence or willful misconduct in the
performance of its obligations under this Agreement, or (iii)
PHH's failure to comply fully with any and all federal, state
and local laws, rules and regulations governing the
processing, underwriting, closing or servicing of mortgage
loans.
VIII. Compliance with Laws. Correspondent hereby agrees to comply fully with
all Federal, State and local laws governing the origination and
processing of mortgage loans. Correspondent further agrees to indemnify
and hold PHH harmless from any and all claims or damages arising out of
Correspondent's failure to comply with such laws.
IX. Fair Lending Compliance.
A. Correspondent agrees with and fully supports the Fair Lending
laws including: the Equal Credit Opportunity Act, Fair Housing
Act and the Home Mortgage Disclosure Act. To that end,
Correspondent agrees to implement procedures to ensure that
all customers are reviewed on the basis of their
qualifications as a borrower regardless of any non-merit
factors (i.e., race, religion or gender). Upon request, PHH
agrees to provide its own procedures which it utilizes in
fulfilling its fair lending goals. In addition, in the spirit
of promoting fair lending, the Correspondent agrees to make
their best efforts to maintain an employment staff that
reflects the racial, cultural and gender makeup of its local
area.
B. In furtherance of its fair lending commitment, PHH and
Correspondent also agree to use their best efforts to utilize
minority and women owned businesses when selecting vendors and
outside services.
-5-
<PAGE> 6
X. Termination.
A. This Agreement shall terminate upon the occurrence of any one
of the following events:
(1) In the event either party is required to discontinue
its performance of this Agreement because of an order
of any appropriate state or federal Court or
regulatory body to do so.
(2) To the extent permitted by applicable law, upon the
filing by a party of any action under any
reorganization, insolvency or moratorium law, or upon
the appointment of any receiver, trustee or
conservator to take possession of the properties of
such party.
(3) In the event PHH commits any breach of its terms,
conditions, representations or warranties under this
Agreement, and such breach is not cured within thirty
(30) days of PHH's receipt of written notice of such
breach.
(4) In the event Correspondent commits any breach of its
terms, conditions, representations or warranties
under this Agreement, and such breach is not cured
within thirty (30) days of Correspondent's receipt of
written notice of the breach.
(5) In the event of fraud on the part of Correspondent in
performing its duties hereunder, immediately upon
receipt by Correspondent of notice of termination.
(6) Upon thirty (30) days written notice by either party
to the other.
B. Notwithstanding the termination of this Agreement, the
obligation of PHH to pay Correspondent any outstanding fees
and the indemnification provisions under Section XVII
hereunder shall survive such termination and continue in full
force and effect until fully performed or satisfied.
XI. Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly submitted
when received by the respective party at the address set forth above,
or at such other address as that party may specify to the other by
written notice.
XII. Non-Solicitation. The Correspondent agrees, for a period of 270
calendar days from the date of closing of a Loan, that Correspondent
shall be prohibited from refinancing such Loan. A refinancing shall
have occurred if the Loan closes within such 270 day period. In the
event Correspondent refinances any Loans closed within such 270
calendar days, Correspondent shall pay PHH a penalty in the amount of
the compensation paid to Correspondent on the original loan closing.
Provided, however, in the event a customer contracts Correspondent for
refinance and Correspondent improves the customer's current interest
rate by at least 1/2% or an equivalent benefit in points paid by the
customer. Correspondent shall contact PHH's Pricing Department for
approval to refinance such Loan. If such approval is granted, no
penalty shall be assessed.
XIII. Complete Agreement. This letter sets forth the complete terms of the
Agreement between PHH and Correspondent. No terms or conditions of the
Agreement may be waived or modified unless in writing by each party
hereto.
-6-
<PAGE> 7
IV. Force Majeure. Neither party shall be deemed to be in violation of this
Agreement if such party is prevented from performing its obligations
hereunder for any reason beyond its reasonable control, including,
without limitation, Acts of God or any public enemy, elements, floods
or strikes.
V. Governing Laws. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New Jersey without
reference to conflict of law provisions thereof.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed the and year first above written.
E-Loan, Inc PHH MORTGAGE SERVICES CORPORATION
CORRESPONDENT'S LICENSE NAME
Chris Larsen By: /s/ Signature Illegible
Title: President Title: Vice President
-7-
<PAGE> 1
EXHIBIT 10.35
Prism Mortgage Company
Correspondent Purchase Agreement
This Agreement is made this 22nd day of March 1998 between, E-Loan, Inc. a
Corporation duly organized and in good standing under the laws of the State of
California with its principal place of business at 540 University Ave. #350/Palo
Alto, CA 94301 (Seller) and Prism Mortgage Company (Purchaser), a corporation
duly organized and validly existing under the laws of the State of Colorado with
its principal place of business at 350 West Hubbard, Ste. 222, Chicago, Illinois
60610 (Purchaser). This Agreement shall govern the sale and transfer of mortgage
loans from Seller to Purchaser and such sale shall be subject to the warranties,
representations, terms and conditions contained herein. The purchase price and
any other additional terms of purchase for each such sale will be established
from time to time either by written agreement between the parties hereto or by
Seller's full compliance with all of the policies and procedures outlined by
Purchaser from time to time in writing (Manual), which may be modified from time
to time in accordance with procedures specified in the Manual. Seller is and
shall remain an independent contractor and agrees that it is not an employee,
servant, agent, partner or joint venture/partner of Prism Mortgage Company.
Other than those application packages registered, Purchaser is not obligated to
accept nor is Seller obligated to submit any application packages for
underwriting. Except as expressly stated in the Agreement, neither the Seller
nor Purchaser shall have any control over the operation of the other's business.
Seller shall not advertise Purchaser's loan products under Purchaser's name nor
represent to anyone that it is authorized to represent Purchaser in any manner
not specifically authorized by this Agreement without Purchaser's prior written
consent.
IN CONSIDERATION OF THE MUTUAL COVENANTS HEREIN, THE PARTIES AGREE AS
FOLLOWS:
REPRESENTATIONS AND WARRANTIES:
As to each mortgage loan offered to Purchaser for sale under this Agreement,
Seller hereby makes the following representations and warranties, each of which
is true, survives loan closing and all deliveries made hereunder, and is
material and is being relied upon by Purchaser:
A. Seller and any other entity that held the mortgage loan are, and were
at all relevant times, authorized to transact business in the
jurisdiction where the real estate securing the mortgage loan is
located unless the activities performed by Seller or such other entity
in originating, selling, and/or holding the mortgage loans did not
require such authorization pursuant to the laws of the jurisdiction
where said real estate is located.
B. Seller is the sole unencumbered owner of the mortgage loan and has full
right and authority to sell, transfer and assign same to Purchaser free
and clear of all liens, claims and encumbrances whatsoever.
C. All mortgage loans have been originated in accordance with requirements
set forth in the Manual. All documents related to the mortgage loan are
genuine and have been duly executed by the mortgagor and properly
acknowledged where necessary; the mortgage (or Deed of Trust or other
acceptable security instrument hereafter referred to as the Mortgage)
has been recorded in the appropriate recorder's office or registered
with the registrar of titles so as to create a valid and subsisting
lien against the real estate securing the loan pursuant to all
applicable laws of the jurisdiction where the real estate is located.
D. The full principal amount of the mortgage has been advanced to the
mortgagor, either by payment direct to the mortgagor or by payment made
on mortgagor's request or approval; the unpaid principal balance is as
stated; all costs, fees and expenses incurred in making, closing and
recording the mortgage have been paid; no part of the mortgaged
property has been released from the lien of the mortgage the terms of
the mortgage have in no way been changed or modified, canceled,
satisfied, subordinated or
<PAGE> 2
rescinded; and the mortgage is current and not in default on the date
of delivery to Purchaser
Page 1
<PAGE> 3
E. Seller has obtained and shall deliver to Purchaser a written report of
appraisal on Federal National Mortgage Association/Federal Home Loan
Mortgage Corporation (FNMA/FHLMC) approved forms of the real estate
securing the mortgage loan, signed by a qualified appraiser who is
currently licensed and is in accordance with the Purchaser's approval
process, and who has no interest, direct or indirect, in the real
estate or in any loan secured by the real estate and whose compensation
is not affected by the approval or rejection of the mortgage loan.
F. Seller has carefully reviewed and verified the appraisal report,
employment verification, credit standing and other documentation
submitted by the mortgagor as if Seller were originating the loan for
its own portfolio and based on said review, no fact or circumstance
exists which is known or should be known by Seller to cause FNMA, FHLMC
or a private institutional investor to regard the mortgage loan as an
unacceptable investment or which would adversely affect the value or
marketability of the mortgage loan.
G. There is in force a paid-up ALTA mortgage title insurance policy or
other title evidence satisfactory to Purchaser insuring the mortgage
and issued by an accredited title company acceptable to FNMA and
Purchaser, in an amount at least equal to the outstanding principal of
the mortgage loan. Said mortgage title policy insets Purchaser, its
successors and assigns that the mortgage loan is a first lien against
the real estate subject only to those exceptions to title which are
customary in the jurisdiction where such real estate is located and
which do not affect the marketability of title of the mortgage loan,
Said title policy also insures Purchaser against loss of lien priority
due to the adjustments to the interest rate or principal balance of the
loan, if any, pursuant to the terms of the mortgage documents.
H. If private mortgage insurance is required on the loan pursuant to the
Manual, Seller has obtained and will deliver to Purchaser a standard
mortgage insurance policy, issued by a private mortgage insurance
company acceptable to Purchaser.
ASSIGNMENT OF APPLICATION PACKAGE
The submission of an application package to Purchaser for underwriting shall
constitute Seller assignment of all it right, title and interest therein to
Purchaser and Purchaser's approval of an application package as set forth in
paragraph 6 shall constitute Purchaser's acceptance of the assignment. No
further or separate documentation shall be required to evidence as accepted
assignment.
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE SELLER REGARDING LOANS
Seller represents, warrants, and covenants to Purchaser that in connection with
each loan transaction:
a. All signatures, names, addresses, amounts, credit information,
property appraisal, and other statements of fact contained in
and associated with the loan transaction are complete,
accurate, true, correct, and genuine, in all material
respects;
b. There are no bankruptcy, foreclosure, or litigation suits
pending or threatened against the borrower;
c. There will be no claims or defenses as to the loan by reason
of any act or omission of Seller or its directors, officers,
agents, or employees;
d. The loan has not been refereed or brokered to Seller by
another lender or third party;
e. There is no undisclosed secondary financing involved in this
transaction;
Page 2
<PAGE> 4
f. Seller has complied with all material respects with all
applicable federal, state, and local laws and regulations
including, but not limited to, Real Estate Settlement and
Procedures Act, the Flood Insurance Protection Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act, the
Consumer Credit Protection Act, and Truth in Lending Act.
Seller, by signing and accepting this Agreement, does hereby
warrant that all loans delivered under this Agreement were so
originated and do comply with all applicable state and federal
laws and regulations. Sufficient documentary evidence to
substantiate such compliance shall be contained in each
respective loan file;
g. The loans shall be qualified in all material respects to FNMA
and FHLMC unless specifically waive by Purchaser during the
underwriting process.
COMPENSATION
Seller's compensation for performing under this Agreement shall:
a. Be paid by applicant.
b. Be disclosed, agreed to, and signed by the applicant in
writing at the tie of application, which agreement shall
(i) clearly state the amount (or the way the amount in
which the amount will be determined)
(ii) the fact that payment is solely the obligation of the
applicant
(iii) any conditions pursuant to which payment will be
waived or a refund will be made in whole or part,
(iv) the time at and manner in which payment is due and
(v) the specific services to be performed by Seller and
the estimated date(s) by which they will be
performed.
c. Be lawful.
d. Be disclosed in accordance with the requirements of applicable
law.
e. Be reasonable in amount and solely for services actually
performed and not include, in whole or part, anything of value
paid pursuant to any agreement or understanding that business
be referred to or by it.
f. Seller has neither said nor done anything in its dealings with
any other borrower or otherwise that give rise to any
fiduciary duty to any borrower, and the documentation between
Seller and each borrower contains an acknowledgment by
borrower that no such duty exists.
g. Seller has not made any representations to any borrower with
regard to the comparison of the market lending rates offered
by Purchaser to the market lending rate of any other lender
and Seller has not made any representations or promises to any
borrower to the effect that the market lending rates offered
by Purchaser are lower than the market rates offered by all
other mortgage lenders.
h. Seller and each of its directors, officers, agents, and
employees maintain all licenses required of them;
i. The execution and delivery of the Agreement by Seller and the
obligations which it will perform hereunder do not, and will
not, violate any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or
award having applicability to Seller or the Articles of
Incorporation or Bylaws of Seller;
j. Seller agrees it will not use for its own benefit or will not
disclose to any person or entity confidential information
relating to Purchaser which it may acquire during the term of
this Agreement.
k. Seller has in full force and effect an errors and omissions
policy or policies and mortgage bankers blanket bond covering
all its activities hereunder. Seller hereby agrees to provide
Purchaser evidence that both policies are in full force and
effect upon renewal each year.
l. Seller will not, during the term of this Agreement, either
directly or indirectly, promote, solicit, or otherwise contact
in any manner, any borrower of a loan sold hereunder for the
purpose of offering to refinance or assist in the refinancing
of such loan.
Page 3
<PAGE> 5
m. Seller will not, during the term of this Agreement, either
directly or indirectly, promote, solicit, or otherwise contact
in any manner, any borrower of loan sold, hereunder, for the
purpose of offering insurance services including, but not
limited to, hazard insurance or mortgage credit insurance.
n. There is in force a paid-up fire and extended coverage hazard
insurance policy issued by a company acceptable to Purchaser
and in an amount at least equal to the outstanding principal
balance of the mortgage loan or the full insurable value of
the improvements whichever is less, containing a standard
mortgage clause and providing for at least 10 days prior
written notice of cancellation to the mortgagee.
o. There is in force such flood insurance policy as is required
under the Flood Disaster Protection Act of 1973, as amended
and its implementing regulations regardless of whether Seller
is specifically subject to such statute or regulations.
p. All documentation containing all required up-front disclosures
for fixed rate mortgage loan programs and for loan programs
which provide for adjustments to the interest rate, principal
balance, payment amount and/or loan term shall be provided by
Seller to borrower in a timely manner. If the mortgage loan
documents provide for adjustments to the interest rates and/or
principal balance of the loan, all terms of the mortgage loan
may be enforced by Purchaser or its successors and assigns and
any such adjustments will not affect the first lien status of
the mortgage loan.
q. There are no defaults under the terms of the mortgage loan
documents as of the date of sale of the loans to the
Purchaser.
r. Seller has no knowledge that any improvements located on the
real estate securing the mortgage loan:
1) violate any applicable zoning laws or regulations
2) have been damaged by fire, wind or other casualty:
3) are subject to condemnation proceedings: or
4) encroach on any property lot lines or building lines
unless such encroachment has been approved in writing
by Purchaser
s. With regard to both Seller's activities in general and each
mortgage loan in particular, Seller shall comply with all loan
disclosure rules and regulations issued by the Office of
Thrift Supervision, the Office of the Comptroller of the
Currency, and the Federal Deposit Insurance Corporation and
with all applicable State and Federal laws, rules and
regulations, enacted or adopted now and in the future,
including but not limited to: licensing requirements, usury
limitations, the Real Estate Settlement Procedures Act, the
Fair Housing Act, the Equal Credit Opportunity Act, the Flood
Disaster Protection Act (as if it were a covered entity), the
Truth-In-Lending Act of 1969, the Fair Credit Reporting Act,
the Home Mortgage Disclosure Act, the Financial Institutions
Reform Recovery and Enforcement Act of 1989, and all
regulations issued pursuant thereto. Seller shall timely
deliver to each applicant a completed Regulation Z disclosure
statement, Good Faith Estimate of Closing Costs, Federally
mandated ARM disclosures and HUD booklets. Seller shall be
responsible for compliance with ECOA concerning notification
of adverse action to an applicant whose mortgage loan
application Purchaser does not accept Purchaser may, at its
option, deliver notice of adverse action to Seller for further
delivery to applicant.) Seller shall comply with Regulation Z
concerning return of all monies paid by the applicant to
Seller should the applicant rescind and Seller shall not seek
reimbursement from Purchaser for such refund. Seller shall
deliver evidence of such compliance upon demand by Purchaser.
t. All taxes governmental assessments, condominium assessments,
planned unit development and similar homeowner association
assessments, insurance premiums, water, sewer and municipal
charges have been paid.
u. Seller has no knowledge of any facts which could cause the
mortgage note or the mortgage to be subject to any set off,
counterclaim or defense.
v. There are no proceedings pending affecting the Seller or any
loan or mortgage which would adversely affect its ability to
perform herein.
w. There are no mortgage brokers or other consultants or finders
that were consulted or contacted in connection with or in
bringing about the mortgage or this mortgage sale transaction,
that would be due a fee.
Page 4
<PAGE> 6
SERVICES OF SELLER
a. Seller will assist prospective borrowers in completing credit
applications and such other documents in the form designated
by Purchaser and as may be required for residential mortgage
loans that meet the then current underwriting standards and
loan policies of either FNMA, FHLMC, or Purchaser. Seller will
promptly submit all information generated pursuant to such
application to Purchaser for its review and approval.
b. Seller shall make no credit commitments on behalf of Purchaser
since Purchaser shall have the sole discretion to determine
whether a loan will be granted and under what terms and
conditions.
c. Seller shall obtain real estate appraisals only from Purchaser
approved appraisers as determined in the Seller Manual
provided by Purchaser. All appraisers must meet state or
national licensing requirements.
d. Seller, at its own expense, shall furnish to Purchaser all
credit data, financial statements, real estate information,
and such additional items as Purchaser, from time to time, may
require. In addition, Seller, at its own expense, shall
perform such other functions as Purchaser may require to
close, fund, and complete the loan transaction.
e. Immediately after funding of the loan by Purchaser, Seller
agrees to execute such assignments, endorsements, or other
documentation as necessary to transfer ownership of the loan
to Purchaser and/or assignee as may be designated by Purchaser
concurrent with the closing of such loan or as Purchaser may
otherwise direct.
ORIGINATION, REGISTRATION, PROCESSING AND SUBMISSION FOR APPROVAL
Seller may originate, register, process and submit application packages to
Purchaser for underwriting in accordance with the following procedures and
requirements:
a. Seller must register each application. Registration may be
accomplished by either of the following: (i) faxing to
Purchaser's lock-in desk a forward lock during normal business
hours or (ii) by presenting to the underwriting office (as
designated in the Seller Manual) a completed loan credit
application package fully processed as industry standards from
FNMA. Upon registration of either of the above the Seller will
be assigned a Purchaser loan number via either (1) a lock
confirmation or (2) an underwriting transmittal indicating the
status of the loan.
It is the Seller's responsibility to notify immediately upon
receipt in the event that:
1. the terms in the confirmation conflict with Seller's
understanding of the registration terms
2. Seller becomes aware of any mistake,
misunderstanding, error or inconsistency regarding
the registration
3. the loan terms applied for changed subsequent to
registration; or
4. the application is withdrawn or canceled by the
applicant, or Seller becomes aware that the loan
applied for will fail to close for any other reason.
b. Each application package must evidence that the property to be
secured by the mortgage is improved acceptable real estate,
such as defined in the loan program materials supplied
periodically in writing by Purchaser. Each loan shall be fully
secured by a mortgage. Each loan shall be eligible by FNMA,
FHLMC or other specific secondary market investor approved by
Purchaser. Credit of the borrower and the condition and
location of the property shall be subject to approval of
Purchaser prior to purchase.
Page 5
<PAGE> 7
c. The following documentation, in form and substance and, as
applicable, from a source acceptable to Purchaser, which
acceptance shall not be unreasonably withheld (the
"application package"), must accompany each request to
Purchaser for credit and property underwriting:
1. Purchaser's loan submission form.
2. Transmittal Summary 1008 or the equivalent FHLMC
form, or the most current version of either of them
as subsequently revised by FNMA or FHLMC.
3. Signed and dated Residential Loan Application and
Statement of Assets and Liabilities, if necessary
(FNMA 1003 and 1003A or the equivalent FHLMC form or
the most current versions of them if they are
subsequently revised by FNMA or FHLMC), including
monitoring information, unless collection of such
information is prohibited by law.
4. Credit reports for each borrower who will be
personally obliged to repay the loan with three (3)
major credit repositories and credit scores.
5. Verification(s) of Employment and Deposit (FNMA forms
1005 and 1006 or the equivalent FHLMC form, or the
most current versions of them if they are
subsequently revised by FNMA or FHLMC).
6. Uniform Residential Appraisal Form (appropriate to
the subject property type by FNMA or the equivalent
FHLMC form) signed by an Appraiser acceptable to
Purchaser per the Seller Manual with a copy of the
Appraiser's current license.
7. Interest rate and discount point commitment between
Seller and applicant(s) that meets all requirements
of applicable laws.
8. Written evidence that the applicant(s) has been
notified of the right to freely select the
provider(s) of certain insurance services, and the
right to select a private mortgage insurance premium
payment plan, if required by applicable law.
9. Written evidence that a copy of the Dept. of Housing
and Urban Development (HUD) booklet "Settlement
Costs" and a properly completed Good Faith Estimate
of settlement costs were either delivered or placed
in the mail to the applicant(s) no later than three
(3) business days following the date of the
application, if required by the Real Estate
Settlement Procedures Act (RESPA) or the regulations
promulgated pursuant to it.
10. For each adjustable rate mortgage (ARM) loan
application, proof that all disclosure requirements
of applicable law have been timely met.
11. Written evidence that all loan program information
was timely disclosed in accordance with the
requirements of applicable law.
12. Written evidence that a properly completed
Truth-in-Lending disclosure statement was personally
delivered or placed in the mail to the applicant(s)
no later than three (3) business days following the
Seller's receipt of the application.
13. Written evidence of the applicant's timely receipt of
any escrow related disclosures or forms required by
law.
14. Written evidence that the applicant(s) has been
provided with all disclosures required pursuant to
any applicable law, including without limitation,
each federal, state and local consumer protection
statute, regulation, ordinance, rule or ruling, as
for example and again without limitation, RESPA, any
non-discriminatory regulations, the Equal Credit
Opportunity Act (ECOA), and the Truth-in-Lending Act
(TIL).
15. Written evidence that the Seller has complied with
the requirements of Section K (Compensation).
16. Any additional document(s) which Purchaser reasonably
determines are necessary to (I) aid it in evaluating
the credit worthiness of the applicant(s) or (ii)
meet the requirements of FNMA or FHLMC, of its
underwriting standards or of the applicable loan
program, and all correspondence or other items
received by Seller in connection with the
application.
d. Each application must be for a loan program that has expressly
been made available to Seller by Purchaser and which is in
effect on the date of application. All applications must
comply with Purchaser's underwriting standards and lending
requirements in effect on the date of application.
Page 6
<PAGE> 8
c. All documents must meet either FNMA or FHLMC aging
requirements, unless specified otherwise by Purchaser at the
time of closing as well as at the time of Purchaser's
underwriting approval.
f. From time to time throughout the term of this Agreement,
Purchaser will make available its current interest rate and
discount point requirements available to Seller, by telephone,
facsimile reproduction, or in another mutually acceptable
means. Purchaser's rates and discount points shall be subject
to change at any time, at the sole discretion of Purchaser and
without notice.
DELIVERY OF DOCUMENTS.
Seller agrees to do all acts necessary to perfect title to each mortgage in the
Purchaser, and shall sell, assign, and deliver to the Purchaser prior to the
purchase of each such mortgage, the following supporting documents, all subject
to the approval and reverification by the Purchaser and its legal counsel as to
proper form and execution:
1. Mortgage note properly endorsed to Purchaser without
recourse.
2. Copies of the recorded mortgage and assignment of
mortgage certified as true and correct by the title
company insuring the lien status of the mortgage
loan.
3. Signed appraisal report.
4. Commitment for Mortgage title insurance policy.
Exceptions listed on such policy shall be subject to
the Purchaser's approval.
5. A current (six months) survey of the real estate
identifying the property by legal description and
common address and showing all improvements to be
within lot lines and applicable building lines,
except for such encroachments approved in writing by
Purchaser, or in the alternative, title insurance
(including a location note endorsement where
available), insuring over survey defects, if any.
6. Hazard insurance policy meeting the requirements of
this Agreement
7. Private mortgage insurance policy, if required.
8. Any other documents required by the Purchaser
pursuant to its Manual, as amended from time to time.
The original recorded mortgage and assignment of mortgage shall be delivered to
the Purchaser as soon as possible following the purchase but not later than 60
days following purchase of the mortgage loan unless the delay is caused solely
by the local recorder/registrar, in which case documents shall be forwarded
immediately upon registration.
INDEMNIFICATION
The representations and warranties set forth herein shall survive and continue
in force for the full remaining life of the loan and are made for the benefit of
Purchaser and its successors and assigns. Seller, upon Purchaser's request,
shall promptly indemnify and hold harmless Purchaser from and against any and
all losses, damages, costs or expenses of any nature, including loss of
marketability and attorneys' fees resulting from (a) breach of any
representation or warranty, covenant or agreement made by Seller with respect to
each mortgage loan; or (b) any misstatement or omission of material fact in each
mortgage loan file or credit file, whether such misstatement or omission is
intentional or not, whether disclosed by actual inspection by Purchaser or its
representative, or otherwise. This indemnification shall survive any termination
or cancellation of this Agreement.
This Agreement is intended to require Seller to indemnify Purchaser to the
fullest permitted by law, regardless of whether a claim against Purchaser is
based on tort, breach of contract, strict liability intentional misconduct or
violation of federal or state statute or regulation, and regardless of whether
such claim arises out of the conduct of Purchaser. If the law does not permit
Seller to indemnify Purchaser for any judgment rendered against Purchaser,
Seller shall nonetheless indemnify Purchaser for all expenses of litigation,
including but not limited to all attorney fees reasonable and necessarily
incurred in defense of any such claim.
Page 7
<PAGE> 9
REPURCHASE OF MORTGAGE LOANS
Seller agrees to repurchase, upon Purchaser's request, any mortgage loan covered
by this Agreement if:
I. there is a breach of any warranty or representation set forth in
Section I (Representations and Warranties) or any other provision of
this Agreement;
II. any misstatement or omission of material fact is made by the Seller or
the Seller's agents, representatives or Sellers;
III. any loan file contains fraudulent documentation, which is executed or
submitted by or on behalf of the borrower respect to any material
matter;
IV. any loan documentation is not delivered pursuant to the terms set forth
in Section II of this Agreement; or 5) any loan that becomes ninety
days or more delinquent with the delinquency having originated within
the first six months after purchase by Purchaser or subsequently
becomes ineligible for sale to FNMA, FHLMC or a private investor, or
whose repurchase is requested by FNMA, FHLMC or the private investor
who owns it due to a delinquency that originated within the first six
months after purchase by Purchaser regardless of whether or not a
foreclosure is instituted in connection with such delinquency. Such
repurchase shall be for an amount equal to the then unpaid principal of
the mortgage loan plus accrued interest, the consideration originally
paid by the Purchaser to Seller for the servicing rights of such
mortgage and costs including reasonable attorney's fees incurred by the
Purchaser for action taken. In the event the Purchaser sells all or any
part of or this Agreement; or
V. any loan that becomes ninety days or more delinquent with the
delinquency having originated within the first six months after
purchase by Purchaser or subsequently becomes ineligible for sale to
FNMA, FHLMC or a private investor, or whose repurchase is requested by
FNMA, FHLMC, or the private investor which owns it due to a delinquency
that originated within the first six months after purchase by Purchaser
regardless of whether or not a foreclosure is instituted in connection
with said delinquency. Such repurchase shall be for an amount equal to
the then unpaid principal of the mortgage loan plus accrued interest,
the consideration originally paid by Purchaser to Seller for the
servicing rights of such mortgage, and costs including reasonable
attorney's fees incurred by the Purchaser for action taken. In the
event the Purchaser sells all or any parts of its interest in the
mortgages covered by this Agreement to a third party or parties
including the sale of participating interest therein, such third
parties shall succeed to all of the rights of the Purchaser hereunder
and this agreement shall remain in full force and effect.
Seller shall repurchase any such loan within 10 days after notice from
Purchaser if Purchaser discovers, in its sole discretion that a loan
purchased pursuant to the terms of this Agreement were not closed and
documented in strict conformity under each and every requirement of
this Agreement or any loan in which the first payment due Purchaser or
its assigns is not made and becomes delinquent.
TERMINATION.
This Agreement may be terminated without cause as to the future acceptance of
mortgages by either party at any time upon thirty days written notice of
termination to the other party, but such termination shall not change or modify
the rights, duties and obligations of Purchaser and Seller hereunder with
respect to either mortgages previously purchased by Purchaser, or mortgages
which are the subject of the then outstanding written commitments and/or
Agreements between Purchaser and Seller.
In addition, Purchaser shall have the right to terminate this Agreement
immediately by notice in writing to Seller in the event of any of the following:
1. Sellers defaults in any of its obligations under this
Agreement or any other agreements between the parties and such
default is not cured within ten (10) business days after
notice to Seller of such default:
2. Seller fails to deliver acceptable loans to Purchaser under
the terms and conditions of any commitment agreement;
3. Seller shall initiate or suffer any proceedings of insolvency
or reorganization under the Bankruptcy Code or other Federal
or state receivership laws, or make common law assignment for
the benefit of creditors, or be unable to pay its debts as the
same become due;
4. Seller assigns or attempts to assign its rights and
obligations hereunder;
5. Seller by operation of law becomes unable to faithfully
perform its duties pursuant to this Agreement;
6. Purchaser suffers any involuntary sale or execution upon any
interest in any loan purchased hereunder and such is the
result of any act or omission on the part of the Seller.
Page 8
<PAGE> 10
Termination shall not affect the obligations of Seller with respect to any event
occurring before termination. However, termination of this Agreement, shall be
deemed to be for or with cause, and Purchaser at its option shall have the right
to cancel any open commitment agreement(s) issued on the date of termination.
Seller agrees that in the event of a breach of this Agreement or any other
agreement between Purchaser and Seller, or upon the default of Seller under any
instrument payable to Purchaser, or upon failure of Seller to pay any amounts
due Purchaser, Purchaser shall have the immediate right of set-off from and
against any amounts otherwise due and payable to Seller.
DEFINITIONS
The terms mortgage and mortgages as used herein shall include mortgages,
security deeds, trust deeds, and deeds of trust, and the words mortgagor and
mortgagors shall be deemed to mean mortgagors, trustors of trust deeds and the
deeds of trust, and grantors of any security deeds it being agreed that the
appointment of any trustees under any trust deeds of trust shall be subject to
the approval of the Purchaser.
SERVICING
All mortgage loans sold hereunder shall be sold with servicing released to
Purchaser. The consideration to be paid by Purchaser for the servicing rights of
such mortgage loans shall be published from time to time in writing by
Purchaser, or shall be quoted by Purchaser as part of the purchase price of the
mortgage loan pursuant to Purchaser's Manual.
ATTORNEYS' FEES AND EXPENSES.
If any party to this Agreement brings legal action against the other as
a result of an alleged breach or failure by the other party to fulfill
or perform any covenant or obligation under this Agreement the
prevailing party obtaining final judgment shall be entitled to receive,
from the non-prevailing party reasonable attorneys fees incurred by
reason of such action and all other costs of suit and preparation
thereof at both trial and appellate levels.
MISCELLANEOUS PROVISIONS
A. Purchaser's failure to enforce any provision of this Agreement
shall not be deemed a waiver of that or any other provision of
this Agreement.
B. Seller's rights and obligations hereunder shall not be
assignable without Purchaser's prior written consent.
C. This agreement is entered into, maintained in, and shall be
governed by, and construed and enforced in accordance with the
laws of the State of Illinois. The parties hereby consent to
service of process, personal jurisdiction, and venue in the
courts of general jurisdiction of Chicago, Illinois or Cook
County, Illinois, and any federal court with concurrent
jurisdiction, with respect to any action or proceeding brought
to enforce any liability or obligation under this Agreement.
D. This Agreement contains all of the terms and conditions agreed
to by the parties and shall supersede all prior Agreements,
and any modification of the terms of the Agreement must be in
writing, executed by the parties hereto.
E. In the event that any provision of this Agreement is held to
be invalid or unenforceable by a court of law, such provisions
may be stricken from the Agreement and such findings skit have
no effect as to the validity or enforceability of any other
provisions of this Agreement.
Page 9
<PAGE> 11
F. Time is of the essence with respect to each and every term,
condition and provision of this Agreement and the commitments
entered into pursuant thereto.
G. Seller shall notify Purchaser immediately of any material
changes in its ownership, financial condition or management.
H. Seller agrees to provide its most recent audited financial
statement, on yearly basis, alone with a resolution by its
Board of Directors, with specimen signatures, authorizing the
individual signing this Agreement to enter into contracts on
behalf of the Seller and authorizing the specific individuals
who may accept Purchasers pricing of individual loans to be
purchased hereunder. Seller also agrees to provide to the
Purchaser on an annual basis, proof of the Seller's renewal of
its fidelity and errors and omission insurance coverage in an
amount acceptable to the Purchaser.
1. All representations and warranties hereunder are made directly
from Seller to Purchaser for the mortgage loans originated by
Seller and all such representations and warranties shall
survive this Agreement.
j. Purchaser may, from time, to time, review, at Seller's place
of business, or at Purchaser's place of business, Seller's
loan files, policies, procedures and records, in order to
determine whether Seller meets Purchaser's quality control
standards set forth in the Manual.
K. No exclusive relationship between the Seller and the Purchaser
shall result from this Agreement. Seller is and shall remain
an independent contractor and agrees that it is not an
employee, servant agent or partner of Purchaser and shall not
hold itself out as an agent of the Purchaser. Seller shall not
make any statement which leads any third party to reasonably
believe that it is an agent of Purchaser. Seller shall not use
or refer to Purchaser's name in any form of advertising
written materials or circulars except as may be required by
law.
L. Seller shall be responsible for obtaining the Manual from
Purchaser at or immediately after the execution of this'
Agreement
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
and year indicated below:
Purchaser SELLER
Prism Mortgage Company E-Loan, Inc.
By: /s/ David Fisher By: /s/ Christian A. Larsen
Name: David Fisher Name: Christian A. Larsen
Title: Vice President Title: President
ATTEST: ATTEST:
By: /s/ Kurt Bokenkump By: /s/ Janina Pawlowski
Name: Kurt Bokenkump Name: Janina D. Pawlowski
Title: Vice President Title: CEO
(SEAL) (SEAL) N/A
Page 10
<PAGE> 1
EXHIBIT 10.36
WHOLESALE LENDING AGREEMENT
THIS AGREEMENT is made and entered into as of March 6, 1998, between
UNION FEDERAL SAVINGS BANK OF INDIANAPOLIS, a federally chartered savings bank
with its principal offices located in Indianapolis, Indiana (hereinafter
"UFSB"), and E - Loan, Inc. with its principal offices located at Palo Alto,
California (hereinafter "Client Mortgage Company" or "CMC") under the following
circumstances:
A. UFSB is engaged in the business of, among other activities,
purchasing and/or funding mortgage loans on residential real estate ("Mortgage
Loans") and reselling such loans in the secondary mortgage market. CMC is
engaged in the business of negotiating Mortgage Loans and performing certain
residential mortgage application functions on behalf of Mortgagors in exchange
for a fee or other consideration.
B. During the term of this Agreement, UFSB will advise CMC of UFSB's
various FHA, VA, and Conventional Mortgage Loan products as well as select Bond
Program Mortgage Loan products, and CMC intends, from time to time, to offer to
UFSB for purchase and/or funding certain FHA, VA, and Conventional Mortgage
Loans as well as select Bond Program Mortgage Loans which fall within the
parameters of UFSB's said Mortgage Loan products.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
hereinafter set forth, the parties agree as follows:
ARTICLE I
Definitions
All words and phrases defined in this Article 1 (except as herein
otherwise expressly provided or unless the context otherwise requires) shall,
for the purposes of this Agreement, have the respective meanings specified in
this Article:
1.01. "Agreement" means this Wholesale Lending Agreement and any
written and agreed to amendments or modifications hereto signed by both
UFSB and CMC.
1.02. "Bond Authority" means a federal, state or local authority
established for the purpose of making residential mortgage loans to low
and moderate income borrowers at below market interest rates and/or
upon other terms and conditions favorable to the borrowers and issuing
bonds or other obligations to fund such loans.
1.03. "Bond Program" means a qualified single family residential
mortgage loan program of a local, state or federal housing authority
under which residential mortgage loans are made available to low and
moderate income borrowers at below market interest rates and/or upon
other terms and conditions favorable to the borrowers.
1.04. "Business Day" or "Day" means any day of the week other than a
Saturday, Sunday, or a legal holiday or a bank holiday in the State of
Indiana.
1.05. "Defect" means a breach in any respect of any representation or
warranty herein contained with respect to a Mortgage Loan or any
failure by CMC to comply with any covenant herein contained with
respect to a Mortgage Loan which could reasonably be expected to result
in a loss or damage to UFSB or a subsequent purchaser of such Mortgage
Loan.
1
<PAGE> 2
1.06. "Defective Loan" means any Mortgage Loan that contains a Defect.
1.07. "FHLMC" means Federal Home Loan Mortgage Corporation.
1.08. "FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
1.09. "FNMA" means the Federal National Mortgage Association or any
successor thereto.
1.10. "GNMA" means the Government National Mortgage Association or any
successor thereto.
1.11. "Mortgage" means a valid and enforceable Mortgage, Deed of Trust,
or other Security Instrument creating a first lien upon described real
property improved by a one-to-four family dwelling which secures a
Mortgage Note.
1.12. "Mortgage Documents" means all documents specified in the
Wholesale Seller Guide pertaining to a particular Mortgage Loan.
1.13. "Mortgage Loan" means an individual mortgage loan which is the
subject to this Agreement.
1.14. "Mortgage Loans" means the mortgage loans which are the subject
of this Agreement.
1.15. "Mortgage Loan Application" or "Mortgage Loan Applications" means
an application for a Mortgage Loan processed by CMC in accordance with
the provisions of the Wholesale Seller Guide and the terms of this
Agreement.
1.16. "Mortgage Note" means a written promise to pay a sum of money at
a stated interest rate during a specified term that is secured by a
Mortgage Loan.
1.17. "Mortgagor" means the obligor on a Mortgage Note.
1.18. "Repurchase" means CMC's purchase of a Mortgage Loan from UFSB
that was previously sold to UFSB from CMC.
1.19. "RESPA" means the Real Estate Settlement Procedures Act of 1974
(12 U.S.C. 2601, et seq.), as amended from time to time.
1.20. "Servicing Rights" or "Servicing" means the right, title, and
interest in and to the servicing of the Mortgage Loans and the
maintenance and servicing of the escrow accounts, along with the right
to receive the servicing fee income and any and all ancillary income
arising from or connected to any Mortgage Loan.
1.21. "Wholesale Seller Guide" means a manual prepared by UFSB, and
amended from time to time, which contains the terms and conditions
under which UFSB has agreed to purchase and/or fund Mortgage Loans from
CMC as well as practices and procedures which UFSB will require CMC to
implement and follow with respect to those Mortgage Loans offered for
sale and/or funding to UFSB.
2
<PAGE> 3
ARTICLE II
Purchase and/or Funding of Loans
2.01. PURCHASE AND/OR FUNDING OF LOANS BY UFSB. UFSB agrees to purchase
and/or fund certain Mortgage Loans from CMC; provided the following requirements
are met:
(a) Immediately upon payment by UFSB of the purchase price of each
such Mortgage Loan so purchased and/or funded, all rights,
title and interest (including all Servicing Rights) in said
Mortgage Loans shall be assigned from CMC to UFSB;
(b) All FHA, VA, Conventional and select Bond Program Mortgage
Loans shall have been closed in the name of CMC unless another
name is specifically authorized by UFSB; and
(c) All such Mortgage Loans shall meet the UFSB's lending
requirements as set forth herein or in the Wholesale Seller
Guide.
2.02. UFSB LOAN REQUIREMENTS. UFSB will advise CMC from time to time
regarding the types of FHA, VA and conventional Mortgage Loan products
("Qualified Products") it is interested in purchasing and/or funding, including,
without limitation, information concerning interest rates, loan limits,
loan-to-value ratios, points, fees, and underwriting requirements. Any
commitment from UFSB to CMC to purchase and/or fund any Mortgage Loan or
Mortgage Loans or Mortgage Loan Applications will be issued in accordance with
UFSB's current lending policy. Such commitment will be in writing and the terms
of such commitment will be applicable only to the Mortgage Loan or Mortgage
Loans specified therein. UFSB may, at its sole discretion, cancel or discontinue
any of the Qualified Products, with or without notice to CMC. UFSB will attempt
to give reasonable advance notice of such changes but shall have no obligation
to do so. CMC agrees to follow the practices and procedures set forth in the
Wholesale Seller's Guide. The terms and provisions contained in the Wholesale
Seller Guide are incorporated herein as though set out in full.
2.03. PRICING OF LOANS; LOCK-IN RATES. UFSB will provide price
protection for the Mortgage Loans it agrees to purchase and/or fund hereunder in
the form of a lock-in according to its lock-in policies set forth in the
Wholesale Seller Guide. The time at which the interest rate for a Mortgage Loan
is locked-in shall be solely at CMC's option. However, a Mortgage Loan with a
lock-in interest rate must be presented to UFSB for purchase and/or funding at
the locked-in price within the lock-in period. For purposes of this Agreement,
the "lock-in period" shall be determined in accordance with the provisions of
the Wholesale Seller Guide. If such Mortgage Loan is not presented to UFSB's
Wholesale Branch at the address noted in the Wholesale Seller Guide within the
lock-in period, Said Loan will be re-priced at UFSB's option. Transfer by CMC of
a locked-in Mortgage Loan during the lock-in period to an entity other than UFSB
shall constitute a violation of this Agreement, and CMC shall be liable for any
loss sustained as a result thereof by UFSB. In addition, CMC shall notify UFSB
immediately should any commitment for a locked-in Mortgage Loan be canceled,
withdrawn, or otherwise determined not to be set for purchase and/or funding by
UFSB.
3
<PAGE> 4
Article III
Warranties and Representations
3.01. CMC'S WARRANTIES AND REPRESENTATIONS. CMC hereby warrants,
represents and covenants to UFSB with regard to each Mortgage Loan submitted to
UFSB for underwriting, purchase and/or funding that the following are true,
complete and correct as of the date of such submission as if such warranties,
representations and covenants are again made by CMC on those dates:
(a) CMC is duly organized, validly existing and in good standing
under the laws of each jurisdiction in which it originates
Mortgage Loans delivered to UFSB pursuant to this Agreement
and has complied with all applicable statutes, laws, rules and
regulations, orders and decrees of all federal, state, county
and municipal authorities. CMC further has qualified,
registered and obtained all licenses and taken all other
requisite action required in order to originate any Mortgage
Loans delivered to UFSB pursuant to this Agreement. The
execution and delivery of this Agreement and the transactions
contemplated hereby are duly authorized and binding on CMC;
(b) All Mortgage Loans CMC submits to UFSB have met all
requirements of federal, state, or local laws, including, but
not limited to, Usury, Truth-In-Lending, Real Estate
Settlement Procedures, Consumer Credit Protection, Equal
Credit Opportunity, Loan Disclosure Laws, the Flood Disaster
Protection Act, and the Fair Credit Reporting Act and CMC
shall maintain in its possession, available for UFSB's
inspection, and shall deliver to UFSB upon demand, evidence of
compliance with all such requirements;
(c) CMC has no knowledge of any circumstances or conditions with
respect to the Mortgage Loan submitted to UFSB for
underwriting, purchase and/or funding, the mortgaged property,
the mortgagor or the mortgagor's credit standing that can be
reasonably expected to cause institutional investors to regard
the Mortgage Loan as an unacceptable investment, cause the
Mortgage Loan to become delinquent or adversely affect the
value or marketability of the Mortgage Loan;
(d) With regard to FHA or VA insured Mortgage Loans, the Federal
Housing Commissioner or VA, as applicable, has or will issue
his Mortgage Insurance Certificate or Loan Guaranty
Certificate; and payment due on the mortgage insurance premium
has been paid to the insuring authority; nothing has been done
or omitted, and no circumstances exist, the effect of which
act, omission or circumstance would invalidate the contract of
insurance with the FHA or VA as applicable; and the Mortgage
Loan complies with the regulations of the FHA or VA as
applicable;
(e) All of the appraisers selected by CMC who have performed
appraisals in connection with the Mortgage Loans submitted to
UFSB for purchase and/or funding have been properly licensed
and are currently approved in accordance with the provisions
of the Wholesale Seller Guide;
(f) The appraisal submitted in connection with each Mortgage Loan
meets the requirements of FIRREA and USPAP;
(g) The underwriting for each Mortgage Loan, if performed by CMC,
has been performed in accordance with the provisions of the
Wholesale Seller Guide and the terms of this Agreement;
(h) No legal actions are pending or threatened which might affect
the Mortgage Loan or CMC's ability to transfer it or otherwise
perform hereunder;
4
<PAGE> 5
(i) CMC is not in default with respect to any material agreement
to which it is party or by which it is bound, and the
execution and performance of this Agreement will not violate
any law, or term of its association documents or bylaws, as
amended, or instrument to which CMC is a party or by which it
is bound and will not violate or conflict with any other
restriction of any kind of character to which it is subject;
(j) All information submitted by CMC to UFSB with regard to the
Mortgage Loan, including all written materials, are presented
and warranted by CMC to be true, correct, currently valid and
genuine;
(k) All FHA and VA insured and Bond Program Mortgage Loans
submitted to UFSB for purchase are eligible for inclusion in
GNMA or FNMA pools;
(l) The Mortgage Loan and all documentation and other materials
submitted to UFSB in connection therewith do not contain any
fraudulent statement or any misstatement or omission of
material fact, and the Mortgage Loan has been originated in a
manner consistent with prudent mortgage banking practices and
consistent with the guidelines and policies established by
UFSB, GNMA, FNMA, FHLMC, a Bond Authority, the FHA, or the VA,
as applicable;
(m) To the best of CMC's knowledge, there are no undisclosed
agreements between the Mortgagor and the seller or CMC or any
other party concerning any facts or conditions, whether past,
present or future, which might in any way affect the
obligations of the Mortgagor to make timely payments or make
the Mortgage Loan unsalable in the secondary market;
(n) CMC shall promptly advise UFSB of any material change relating
to CMC including, but not limited to, a change in ownership,
financial condition or senior management;
(o) All Mortgage Loan Applications and/or Mortgage Loans presented
to UFSB by CMC for underwriting, purchase and/or funding have
been originated by CMC, and no such Mortgage Loan Applications
and/or Mortgage Loans have been originated by a third party
unless UFSB specifically authorizes CMC to present such third
party loans to UFSB for purchase and/or funding; and
(p) With respect to subsections (a) through (o), inclusive of this
Section 3.01, CMC will promptly notify UFSB if CMC becomes
aware that any terms, conditions, warranties, representations
or covenants hereunder become untrue or incomplete in the
future.
3.02. UFSB'S WARRANTIES AND REPRESENTATIONS. UFSB represents and
warrants that UFSB possesses all necessary licenses from any applicable
regulatory authority to engage in the activities contemplated by this Agreement.
Article IV
Post-Closing Documentation
4.01. CMC'S OBLIGATIONS REGARDING POST-CLOSING DOCUMENTATION. CMC
agrees that it is responsible for obtaining and delivering post-closing
documents required to complete closed Mortgage Loan packages within the time
frames established by UFSB in its Wholesale Seller Guide or otherwise. Should
UFSB incur loss due to CMC's failure to deliver documents in a timely manner
(i.e., in keeping with commitment deadlines and post-closing documentation
deadlines), then, at UFSB's option, CMC will either reimburse UFSB for such loss
within twenty (20) days of written notice thereof, or CMC will immediately
repurchase the Mortgage Loan in question in accordance with the provisions
contained in Article V regarding repurchase of Mortgage Loans.
5
<PAGE> 6
Article V
Indemnification; Repurchase by CMC.
5.01. INDEMNIFICATION BY CMC. CMC agrees to indemnify and hold UFSB
harmless from any and all liability, claims, loss or damage resulting from any
act or omission of CMC. If any claim, action or proceeding shall be asserted or
brought against UFSB by reason of any such act or omission of CMC, CMC shall,
upon demand, obtain representation by legal counsel acceptable to UFSB to defend
UFSB against any such action and/or claim and CMC shall pay all costs incurred
in such defense. Furthermore, CMC agrees to defend, indemnify and hold UFSB
harmless with respect to any damages arising from or in connection with CMC's
use, for any Mortgage Loan, of any form not provided or approved by UFSB. CMC
further agrees to defend, indemnify and hold UFSB harmless from miscalculations
and other errors which results from CMC's independent application, processing
and closing procedures and for its misuse of forms required by UFSB. CMC also
agrees to defend, indemnify and hold UFSB harmless from claims asserted against
UFSB under provisions of RESPA, including, without limitation, claims based
upon, or arising as a result of, any payments received by CMC in the nature of
yield spread premium, service released premium, back points, discount points,
broker rebates, and the like. All of the aforementioned representations and
warranties shall survive the closing of each Mortgage Loan transaction, and
shall inure to the benefit of UFSB, and its successors and future assignees.
5.02. INDEMNIFICATION BY UFSB. UFSB agrees to indemnify and hold CMC
harmless from any and all liability, claims, loss or damage (including, without
limitation, attorney fees and other litigation expense) incurred by CMC
resulting solely from the negligence or misconduct of UFSB.
5.03. REPURCHASE OBLIGATION. CMC agrees to repurchase on UFSB's demand,
any Mortgage Loans subject to this Agreement upon the terms and conditions
hereinafter set forth in the event that:
(a) Any misstatement of material fact, fraud or breach of any
warranty contained herein or other material breach of this
Agreement, is discovered by UFSB or its representatives or by
CMC; or
(b) UFSB is required to purchase any Mortgage Loan which it has
sold to an investor, or which it has placed in or pledged to a
mortgage pool, which purchase requirement is as a result of
the Mortgage Loan being a Defective Loan, or as the result of
any act or omission of CMC; or
(c) The mortgagor(s) fails to make the first payment due UFSB
within 30 days of payment due date on any Mortgage Loan
purchased and/or funded by UFSB; or
(d) If the CMC made the credit underwriting decision, the Mortgage
Loan becomes 90 days or more delinquent on any of the first
six (6) monthly payments due UFSB.
5.04. REPURCHASE PRICE. With respect to any Mortgage Loan required to
be repurchased pursuant to this Article V, the repurchase price to be paid by
CMC to UFSB shall be an amount equal to the outstanding principal balance at par
of such Mortgage Loan plus accrued interest to the date of repurchase plus any
costs or expenses incurred by UFSB relating to the repurchase. Notwithstanding
the foregoing, in the event UFSB paid a premium to CMC for the Mortgage Loan at
the time of the original purchase and/or funding, CMC's repurchase price shall
also include a premium which is the same percentage of the then outstanding
principal balance as the original premium was of the principal balance at the
time of the original purchase of the Mortgage Loan. In the event CMC is required
to repurchase a loan from UFSB, CMC agrees to repurchase such loan not later
than thirty (30) days from receipt of written notice for repurchase from UFSB.
5.05. RIGHT OF SET-OFF. CMC grants UFSB the right of set-off, and UFSB
may deduct any fees, penalties or other sums owed by CMC to UFSB hereunder from
the purchase price or loan funding of any Mortgage Loans purchased and/or funded
by UFSB.
6
<PAGE> 7
Article VI
Miscellaneous Provisions
6.01. AMENDMENT OF AGREEMENT. This Agreement may not be amended except
in writing executed by both parties.
6.02. WAIVER NONBINDING. The failure of UFSB to insist in any one or
more instances upon strict performance of any of the covenants, agreements or
conditions of this Agreement or to exercise any rights hereunder, shall not be
construed as a waiver or a relinquishment for the future of such covenants,
agreements, conditions or rights.
6.03. NO OBLIGATION TO MAKE LOANS. Nothing contained in this Agreement
shall be construed to require UFSB to approve, purchase and/or fund any Mortgage
Loan or Mortgage Loans submitted by CMC pursuant to the terms hereof. Approval
and funding of any such Mortgage Loan or Mortgage Loans shall be in the sole
discretion of UFSB, and said decision will be made on a loan by loan basis.
6.04. NO AGENCY OR EMPLOYMENT RELATIONSHIP. Both parties understand and
agree that it is not intended that this Agreement create or establish a
relationship of employer / employee between UFSB and CMC, nor is it intended
that CMC is designated as agent for UFSB. CMC is an independent contractor, and
is hereby expressly prohibited from holding itself out as an agent,
representative or employee of UFSB or of having any endorsement from or
affiliation with UFSB.
6.05. TERMINATION. This Agreement may be terminated by either party for
any reason, with or without cause, breach or other justification, upon thirty
(30) calendar days prior written notice, and may be terminated immediately for
breach of any covenant, obligation or duty herein contained or for violation of
any law, ordinance, statute, rule or regulation governing the conduct of either
party hereto. Termination shall not affect the obligations with respect to any
Mortgage Loans submitted prior to such termination, except that UFSB shall not
be obligated to purchase and/or fund any such Mortgage Loans approved prior to
termination if UFSB terminates this Agreement for breach by CMC on the basis of
fraud or negligence of CMC.
6.06. ENTIRE AGREEMENT. The arrangements and relationships contemplated
in this Agreement are the sole understandings and agreements of the parties. No
further arrangements between the parties will be considered valid unless they
are in writing and executed by each of the parties.
6.07. SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality, and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired.
6.08. BINDING EFFECT. The provisions of this Agreement shall be binding
upon, and shall inure to the benefit of the successors and assigns of UFSB and
CMC.
6.09. GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed by the laws of the State of Indiana.
6.10. ATTORNEYS' FEES. In the event a dispute arises under this
Agreement between CMC and UFSB, which disputes result in legal action being
taken by one or both of the parties, the prevailing party shall be entitled to
recover its reasonable attorney fees, costs and other expenses associated with
the enforcement of its rights under this Agreement.
7
<PAGE> 8
6.11. NOTICES. Any notices necessary to be given under the provisions
of this Agreement will be sufficient if in writing and delivered personally, by
U.S. certified mail, return receipt requested or by courier service to the
addresses set forth below:
If to UFSB: Union Federal Savings Bank of Indianapolis
7500 West Jefferson Boulevard
Fort Wayne, Indiana 46804
Attention: Sr. Vice President, Wholesale Lending
If to CMC: E-Loan Inc.
540 University Avenue
Suite #350
Palo Alto, CA 94301
Attention: Elaine Barnkos
IN WITNESS WHEREOF, the parties hereto have executed the above and
foregoing Agreement as of the day and year first above written.
"UFSB" UNION FEDERAL SAVINGS BANK
OF INDIANAPOLIS
By /s/ Signature Illegible
-----------------------
Its Asst Vice President
-------------------
"CMC" E-Loan, Inc.
By /s/ Chris Larsen
-----------------------
Its President
---------
8
<PAGE> 1
EXHIBIT 10.37
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT(the "Master Lease") dated March 4, 1998 by and between
COMDISCO, INC. ("Lessor") and E-Loan, Inc. ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. PROPERTY LEASED.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. TERM.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. RENT AND PAYMENT.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. SELECTION; WARRANTY AND DISCLAIMER OF WARRANTIES.
4.1 SELECTION. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 WARRANTY AND DISCLAIMER OF WARRANTIES. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. TITLE; RELOCATION OR SUBLEASE; AND ASSIGNMENT.
5.1 TITLE. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 RELOCATION OR SUBLEASE. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee meets
the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 ASSIGNMENT BY LESSOR. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The Secured
Party will not disturb Lessee's quiet and peaceful possession and unrestricted
use of the Equipment so long as Lessee is not in default and the Secured Party
continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured Party,
despite any defense or claim which it has against Lessor. Lessee reserves its
right to have recourse directly against Lessor for any defense or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. NET LEASE; TAXES AND FEES.
6.1 NET LEASE. Each Summary Equipment Schedule constitutes a net lease. Lessee's
obligation to pay Rent and all other amounts due hereunder is absolute and
unconditional and is not subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment for any reason whatsoever.
6.2 TAXES AND FEES. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR.
7.1 CARE, USE AND MAINTENANCE. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided
re-certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 INSPECTION BY LESSOR. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents, warrants
and covenants that with respect to the Master Lease and each Schedule executed
hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not
- 1 -
<PAGE> 2
contravene any law or governmental rule, regulation or order applicable to it,
do not and will not contravene any provision of, or constitute a default under,
any indenture, mortgage, contract or other instrument to which it is a party or
by which it is bound, and the Master Lease and each Schedule constitute legal,
valid and binding agreements of the Lessee, enforceable in accordance with their
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally and rules of law concerning
equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending or, to the
knowledge of the Lessee, threatened against or affecting the Lessee in any court
or before any governmental commission, board or authority which, if adversely
determined, will have a material adverse effect on the ability of the Lessee to
perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the Lessee
will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee is a
party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. DELIVERY AND RETURN OF EQUIPMENT.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. LABELING.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. INDEMNITY.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. RISK OF LOSS.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any representation,
warranty or condition contained in such policies and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. DEFAULT, REMEDIES AND MITIGATION.
13.1 DEFAULT. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due if
that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule or
the material inaccuracy of any representation or warranty made by the Lessee in
the Schedule or in any document or certificate furnished to the Lessor hereunder
if that failure or inaccuracy continues for ten (10) business days after written
notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee
or the filing against Lessee of any petition under any bankruptcy or insolvency
law or for the appointment of a trustee or other officer with similar powers,
the adjudication of Lessee as insolvent, the liquidation of Lessee, or the
taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary Equipment
Schedule or other agreement between Lessee and Lessor or its Assignee or Secured
Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule by
appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default Costs;
(c) with notice and demand, recover all sums due and accelerate and recover the
present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession,
except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing the Equipment. The proceeds from any
sale, lease or other disposition of the Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the Default
Costs; or
- 2 -
<PAGE> 3
(b) if leased, the present value (discounted at three percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. ADDITIONAL PROVISIONS.
14.1 BOARD ATTENDANCE. Upon invitation of Lessee, one representative of Lessor
will have the right to attend Lessee's corporate Board of Directors meetings and
Lessee will give Lessor reasonable notice in advance of any special Board of
Directors meeting, which notice will provide an agenda of the subject matter to
be discussed at such board meeting. Lessee will provide Lessor with a certified
copy of the minutes of each Board of Directors meeting within thirty (30) days
following the date of such meeting held during the term of this Master Lease.
14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each month (and
in any event within thirty (30) days), Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Master Lease
and all relevant Schedules. If Lessor elects to consent to the assignment,
Lessee and its successor will sign the assignment documentation provided by
Lessor. If Lessor elects to terminate the Master Lease and all relevant
Schedules, then Lessee will pay Lessor all amounts then due and owing and a
termination fee equal to the present value (discounted at 6%) of the remaining
Rent for the balance of the Initial Term(s) of all Schedules, and will return
the Equipment in accordance with Section 9. Lessor hereby consents to any Merger
in which the acquiring entity has a Moody's Bond Rating of BA3 or better or a
commercially acceptable equivalent measure of creditworthiness as reasonably
determined by Lessor.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to constitute
a waiver of compliance with any representation, warranty or covenant contained
in this Master Lease or a Schedule. The waiver by Lessor or Lessee of a breach
of any provision of this Master Lease or a Schedule will not operate or be
construed as a waiver of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the benefit of
Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (3) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this Master Lease or
any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products which
will at all times remain the property of the owner of the Licensed Products. A
license from the owner may be required and it is Lessee's responsibility to
obtain any required license before the use of the Licensed Products. Lessee
agrees to treat the Licensed Products as confidential information of the owner,
to observe all copyright restrictions, and not to reproduce or sell the Licensed
Products.
14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master Lease,
provide Lessor with a secretary's certificate of incumbency and authority. Upon
the execution of each Schedule with a purchase price in excess of $1,000,000,
Lessee will provide Lessor with an opinion from Lessee's counsel in a form
acceptable to Lessor regarding the representations and warranties in Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby agrees that
Lessor shall not, by virtue of its entering into this Master Lease, be required
to remit any payments to any manufacturer or other third party until Lessee
accepts the Equipment subject to this Master Lease.
14.18 DEFINITIONS.
ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution of
each Schedule.
ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights as
owner and Lessor of Equipment.
CASUALTY LOSS - means the irreparable loss or destruction of Equipment.
CASUALTY VALUE - means the greater of the aggregate Rent remaining to be paid
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
COMMENCEMENT DATE - is defined in each Schedule.
DEFAULT COSTS - means reasonable attorney's fees and remarketing costs resulting
from a Lessee default or Lessor's enforcement of its remedies.
DELIVERY DATE - means date of delivery of Inventory Equipment to Lessee's
address.
EQUIPMENT - means the property described on a Summary Equipment Schedule and any
replacement for that property required or permitted by this Master Lease or a
Schedule.
EVENT OF DEFAULT - means the events described in Subsection 13.1.
- 3 -
<PAGE> 4
FAIR MARKET VALUE - means the aggregate amount which would be obtainable in an
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
INITIAL TERM - means the period of time beginning on the first day of the first
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
INTERIM RENT - means the pro-rata portion of Rent due for the period from the
Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.
LATE CHARGE - means the lesser of five percent (5%) of the payment due or the
maximum amount permitted by the law of the state where the Equipment is located.
LICENSED PRODUCTS - means any software or other licensed products attached to
the Equipment.
LIKE EQUIPMENT - means replacement Equipment which is lien free and of the same
model, type, configuration and manufacture as Equipment.
MERGER - means any consolidation or merger of the Lessee with or into any other
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
NOTICE PERIOD - means not less than ninety (90) days nor more than twelve (12)
months prior to the expiration of the lease term.
OWNER - means the owner of Equipment.
RENT - means the rent Lessee will pay for each item of Equipment expressed in a
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
RENT INTERVAL - means a full calendar month or quarter as indicated on a
Schedule.
SCHEDULE - means either an Equipment Schedule or a Licensed Products Schedule
which incorporates all of the terms and conditions of this Master Lease.
SECURED PARTY - means an entity to whom Lessor has granted a security interest
for the purpose of securing a loan.
SUMMARY EQUIPMENT SCHEDULE - means a certificate provided by Lessor summarizing
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
E-LOAN, INC. COMDISCO, INC.,
as Lessee as Lessor
By: /s/ Chris Larsen By: /s/ Illegible
-------------------------------- ---------------------------
Title: President Title: President, Comdisco
----------------------------- Ventures Division
------------------------
-4-
<PAGE> 5
ADDENDUM TO THE
MASTER LEASE AGREEMENT DATED AS OF MARCH 4, 1998
BETWEEN E-LOAN, INC., AS LESSEE
AND COMDISCO, INC., AS LESSOR
The undersigned hereby agree that the terms and conditions of the
above-referenced Master Lease Agreement are hereby modified and amended as
follows:
1) SECTION 4.2 "WARRANTY AND DISCLAIMER OF WARRANTIES."
First Sentence, line 2, delete the words "Lessee is not in default" and
insert "no Event of Default has occurred and is continuing, neither
Lessor nor any person or entity claiming by or through Lessor".
2) SECTION 5.1 "TITLE."
Delete the first sentence in its entirety and replace with: "Lessee
shall have no right, title or interest in the Equipment except as set
forth in this Master Lease or in any Schedule."
Third Sentence, line 3, after the words "caused by Lessor", insert "or
parties claiming by or through Lessor".
3) SECTION 5.3 "ASSIGNMENT BY LESSOR."
In Paragraph (a), second sentence, lines 3 and 4, delete the words
"Lessee is not in default and the Secured Party continues to receive
all Rent payable under the Schedule." and replace with "no Event of
Default has occurred and is continuing".
In Paragraph (b), insert the following clause at the beginning thereof:
"Upon written notice from Lessor,".
4) SECTION 6.1 "NET LEASE."
At the end of second sentence insert the following, ";provided,
however, that Lessee's ability to bring suit against Lessor for breach
of this Master Lease shall not be affected by this Section 6.1.".
5) SECTION 6.2 "TAXES AND FEES."
First Sentence, line 3 delete "accrued for or arising" and replace with
"attributable to periods".
-1-
<PAGE> 6
6) SECTION 7.1 "CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR."
Delete the fourth sentence in its entirety and replace with: "With Lessor's
prior written consent, Lessee may have the Equipment maintained by a party
other than the manufacturer. Lessor approves Lessee as such maintenance
contractor.".
7) SECTION 8. "REPRESENTATIONS AND WARRANTIES OF LESSEE."
Paragraph (f) insert the following at the end thereof: ", except where the
failure to do so would not reasonably be expected to have a material
adverse effect.".
8) SECTION 9. "DELIVERY AND RETURN OF EQUIPMENT."
Second sentence, line 3, after the words "to Lessor's" insert the word
"reasonable".
Fourth sentence, line 1, after the words "under Section 2" insert
", subject to Lessee's security requirements,".
Insert the following sentence at the end of Section 9: "All such
demonstrations will be conducted in such manner as to minimize any
interference with Lessee's operations.".
9) SECTION 11. "INDEMNITY."
Second sentence, in line 3, after the words "negligent acts" insert "or
willful conduct.".
10) SECTION 13.1 "DEFAULT."
Paragraph (c), insert the following at the end thereof: "(and any such
involuntary event has not been dismissed or vacated within 30 days)".
11) SECTION 13.2 "REMEDIES."
Paragraph (c), line 5, delete "6%" and insert "U.S. Treasury Notes of
comparable maturity to the remaining term of the defaulted Schedule".
12) SECTION 13.3 "MITIGATION"
Paragraph (b), lines 2 and 3, delete "3 percent (3%) over the U.S. Treasury
Notes of comparable maturity to the term of" and insert, "the same interest
rate implicit in".
-2-
<PAGE> 7
13) 14.1., "BOARD ATTENDANCE"
Delete this section in its entirety.
14) 14.2., "FINANCIAL STATEMENTS"
In the first sentence, delete the phrase "the same information which
Lessee provides to its Board of Directors, but which will include not less
than" and change the words "month" and "monthly" to "quarter" and
"quarterly".
At the end of the second sentence, insert the phrase "if required by the
Lessee's Board of Directors".
15) SECTION 14.3 "OBLIGATION TO LEASE ADDITIONAL EQUIPMENT."
In line 3, delete "Lessee is in default" and replace with "an Event of
Default has occurred or is continuing".
In line 6 after the words "material indebtedness" insert "for borrowed
money in an amount in excess of $75,000".
16) SECTION 14.4 "MERGER AND SALE PROVISIONS."
In line 2, delete "sixty (60)" and replace with "ten (10)".
In the fourth sentence, change "6%" to "7%".
17) SECTION 14.6 "NO WAIVER."
First sentence, insert the following at the beginning thereof: "Except
for a written waiver,".
18) SECTION 14.7 "BINDING NATURE."
Second sentence, insert the following at the end thereof: "EXCEPT IN
ACCORDANCE WITH SECTION 14.4.".
19) SECTION 14.9 "NOTICES."
Line 3, delete "three (3)" and insert "five (5)"; delete "postage prepaid
by regular or air mail" and insert "certified mail, return receipt
requested".
-3-
<PAGE> 8
20) SECTION 14.13 "LICENSED PRODUCTS."
After the first sentence insert: "To the extent that Lessor, by reason
of its ownership of the Equipment, holds any license to a Licensed Product,
Lessor shall obtain the right for Lessee to use any such Licensed Product
for the duration of the lease term.".
Third sentence, line 2, after the word "owner" insert "of such Licensed
Product".
21) SECTION 14.18 "DEFINITIONS."
"Delivery Date" revise the word "Inventory" to read "inventory".
"Like Equipment" delete the words "of the same model, type, configuration,
and manufacture as Equipment." and replace with "of the same manufacture
and of a type, model and feature configuration having a capability and
value equal to or greater than the Equipment being replaced.".
Except as amended hereby, all other terms and conditions of the Master Lease
Agreement remain in full force and effect.
E-LOAN, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Chris Larsen By: /s/ Illegible
------------------------------ ---------------------------
Title: President Title: President, Comdisco
--------------------------- Ventures Division
Date: 3/1/98 ------------------------
---------------------------- Date: March 6, 1998
-------------------------
-4-
<PAGE> 9
EQUIPMENT SCHEDULE VL-1
DATED AS OF MARCH 4, 1998
TO MASTER LEASE AGREEMENT
DATED AS OF MARCH 4, 1998 (THE "MASTER LEASE")
LESSEE: E-LOAN, INC. LESSOR: COMDISCO, INC.
ADMIN. CONTACT/PHONE NO.: ADDRESS FOR ALL NOTICES:
Controller 6111 North River Road
Phone: (650) 617-0400 Rosemont, Illinois 60018
Fax: (650) 617-0410 Attn.: Venture Group
Address for Notices:
540 University Av. Suite 150
Palo Alto, CA 94301
Central Billing Location: Rent Interval: Monthly
same as above
Attn.:
Lessee Reference No.:
(24 digits maximum)
Location of Equipment: Initial Term: 48 months
540 University Av. Suite 150 (Number of Rent Intervals)
Palo Alto, CA 94301
6200 Village Parkway, Suite 102
Dublin, CA 95468 Lease Rate Factor:
Months 1-6: 0%
Months 7-48: 2.771%
Exodus Communications
2650 San Tomas Expressway
Santa Clara, CA 95051
EQUIPMENT (as defined below): Advance: $18,011.50
Equipment specifically approved by Lessor, which shall be delivered to
and accepted by Lessee during the period March 4, 1998 through March 4,
1999 ("Equipment Delivery Period"), for which Lessor receives vendor
invoices approved for payment, up to an aggregate purchase price of
$650,000.00 ("Commitment Amount"); excluding custom use equipment,
leasehold improvements, installation costs and delivery costs, rolling
stock, special tooling, "stand-alone" software, application software
bundled into computer hardware, hand held items, molds and fungible
items.
- 1 -
<PAGE> 10
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease
to Lessee, either by one of the first three categories listed below or by
providing Lessee with Equipment from the fourth category, in an aggregate value
up to the Commitment Amount referred to on the face of this Schedule. If the
Equipment acquired is of category (i), (ii) , (iii) below, the effectiveness of
this Schedule as it relates to those items of Equipment is contingent upon
Lessee's acknowledgment at the time Lessor acquires the Equipment that Lessee
has either received or approved the relevant purchase documentation between
vendor and Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment
which is obtained from a vendor by Lessee for its use subject
to Lessor's prior approval of the Equipment, which approval
shall not be unreasonably withheld.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and
ownership may be considered by Lessor for inclusion under this
Lease (the "Sale-Leaseback Transaction"). Any request for a
Sale-Leaseback Transaction must be submitted to Lessor in
writing (along with accompanying evidence of Lessee's
Equipment ownership satisfactory to Lessor for all Equipment
submitted) no later than April 4, 1998 *. Lessor will not
perform a Sale-Leaseback Transaction for any request or
accompanying Equipment ownership documents which arrive after
the date marked above by an asterisk (*). Further, any
sale-leaseback Equipment will be placed on lease subject to:
(1) Lessor prior approval of the Equipment; and (2) if
approved, at Lessor's actual net appraised Equipment value
pursuant to the schedule below:
<TABLE>
<CAPTION>
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
-------------------------- ----------------------------------
<S> <C>
Between 12/04/97 and 3/4/98 (90 days) 100%
Between 10/04/97 and 12/03/97 (60 days) 80%
Between 7/05/97 and 10/03/97(90 days) 70%
</TABLE>
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment
which is obtained from a third party by Lessee for its use
subject to Lessor's prior approval of the Equipment , which
approval shall not be unreasonably withheld, and at Lessor's
appraised value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800
Direct Service, Lessor will purchase new or used Equipment
from a third party or Lessor will supply new or used Equipment
from its inventory for use by Lessee at rates provided by
Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800 Number
Equipment shall be fifteen (15) days from the ship date, such ship date to be
set forth on the vendor invoice or if unavailable on the vendor invoice the ship
date will be determined by Lessor upon other supporting shipping documentation.
Lessor will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar quarter into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the
Initial Term will begin the first day of the calendar quarter thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
- 2 -
<PAGE> 11
3. OPTION TO EXTEND
So long as no Event of Default has occurred and is continuing
hereunder, and upon written notice no earlier than twelve (12) months and no
later than ninety (90) days prior to the expiration of the Initial Term of a
Summary Equipment Schedule, Lessee will have the right to extend the Initial
Term of such Summary Equipment Schedule for a period of one (1) year. In such
event, the rent to be paid during said extended period shall be mutually agreed
upon and if the parties cannot mutually agree, then the Summary Equipment
Schedule shall continue in full force and effect pursuant to the existing terms
and conditions until terminated in accordance with its terms. The Summary
Equipment Schedule will continue in effect following said extended period until
terminated by either party upon not less than ninety (90) days prior written
notice, which notice shall be effective as of the date of receipt.
4. PURCHASE OPTION
So long as no Event of Default has occurred and is continuing
hereunder, and upon written notice no earlier than twelve (12) months and no
later than ninety (90) days prior to the expiration of the Initial Term or the
extended term of the applicable Summary Equipment Schedule, Lessee will have the
option at the expiration of the Initial Term of the Summary Equipment Schedule
to purchase all, but not less than all, of the Equipment listed therein for a
purchase price not to exceed 15% of the Equipment cost and upon terms and
conditions to be mutually agreed upon by the parties following Lessee's written
notice, plus any taxes applicable at time of purchase. Said purchase price shall
be paid to Lessor no later than the expiration date of the Initial Term or
extended term. Title to the Equipment shall automatically pass to Lessee upon
payment in full of the purchase price but, in no event, earlier than the
expiration of the fixed Initial Term or extended term, if applicable. If the
parties are unable to agree on the purchase price or the terms and conditions
with respect to said purchase, then the Summary Equipment Schedule with respect
to this Equipment shall remain in full force and effect. Notwithstanding the
exercise by Lessee of this option and payment of the purchase price, until all
obligations under the applicable Summary Equipment Schedule have been fulfilled,
it is agreed and understood that Lessor shall retain a purchase money security
interest in the Equipment listed therein and the Summary Equipment Schedule
shall constitute a Security Agreement under the Uniform Commercial Code of the
state in which the Equipment is located.
In the event Lessee gives less than 90 days notice as required in
Section 3 and Section 4, any Rent due after the expiration of the Initial Term
of the Summary Equipment Schedule or extended term shall be at the Lease Rate
Factor based on an amount equal to 15% of the Summary Equipment Schedule cost.
5. TECHNOLOGY EXCHANGE OPTION
If Lessee is not in default, and there is no material adverse change in
Lessee's credit, on or after the expiration of the 12th month of any Summary
Equipment Schedule, Lessee shall have the option to replace any of the Equipment
subject to such summary Equipment Schedule with new technology equipment ("New
Technology Equipment") utilizing the following guidelines:
A. Equipment being replaced with New Technology Equipment shall have an
aggregate original cost equal to or greater than $20,000 and be comprised of
full configurations of equipment.
B. This technology Exchange Option shall be limited to a maximum in the
aggregate of fifty percent (50%) of the original equipment cost and shall not
apply to software.
C. The cost of the New Technology Equipment must be equal to or greater than the
original equipment cost of the replaced equipment, but in no event shall exceed
150% of the original equipment cost.
D. The remaining lease payments applicable to the equipment being replaced by
the New Technology Equipment will be discounted to present value at 7%.
The wholesale market value of the equipment being replaced will be established
by Comdisco based upon then current market conditions. Upon the return of the
replaced equipment, the wholesale price will be deducted from the present value
of the remaining rentals and the differential will be added to the cost of the
New Technology Equipment in calculating the new rental. The lease for the New
Technology Equipment will contain terms and conditions substantially similar to
those for the replaced equipment and will have an Initial Term not less than the
balance of the remaining Initial Term for the replaced equipment.
- 3 -
<PAGE> 12
6. SPECIAL TERMS
The terms and conditions of the Lease as they pertain to this Schedule
are hereby modified and amended as follows:
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
E-LOAN, INC. COMDISCO, INC.
AS LESSEE AS LESSOR
By: /s/ Chris Larsen By: /s/ Illegible
-------------------------------- ---------------------------
Title: President Title: President, Comdisco
----------------------------- Ventures Division
Date: 3/1/98 ------------------------
------------------------------ Date:
-------------------------
- 4 -
<PAGE> 13
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
2. Initial Term Starts on: Initial Term:
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
4. Lease Rate Factor:
5. Rent:
6. Acceptance Doc Type:
- 5 -
<PAGE> 14
EQUIPMENT SCHEDULE VL-2
DATED AS OF MARCH 4, 1998
TO MASTER LEASE AGREEMENT
DATED AS OF MARCH 4, 1998 (THE "MASTER LEASE")
LESSEE: E-LOAN, INC. LESSOR: COMDISCO, INC.
ADMIN. CONTACT/PHONE NO.: ADDRESS FOR ALL NOTICES:
Controller 6111 North River Road
Phone: (650) 617-0400 Rosemont, Illinois 60018
Fax: (650) 617-0410 Attn.: Venture Group
Address for Notices:
540 University Av. Suite 150
Palo Alto, CA 94301
Central Billing Location: Rent Interval: Monthly
same as above
Attn.:
Lessee Reference No.:
(24 digits maximum)
Location of Equipment: Initial Term: 48 months
540 University Av. Suite 150 (Number of Rent Intervals)
Palo Alto, CA 94301
6200 Village Parkway, Suite 102
Dublin, CA 94568 Lease Rate Factor:
Months 1-6: 0%
Exodus Communications Months 7-48: 2.771%
2650 San Tomas Expressway
Santa Clara, CA 95051
EQUIPMENT (as defined below): Advance: $9,698.50
Software and tenant improvements specifically approved by Lessor, which shall be
delivered to and accepted by Lessee during the period March 4, 1998 through
March 4, 1999 ("Equipment Delivery Period") for which Lessor receives vendor
invoices approved for payment, up to an aggregate purchase price of $350,000.00
("Commitment Amount"); excluding custom use equipment, installation costs and
delivery costs, rolling stock, special tooling, hand held items, molds and
fungible items.
- 1 -
<PAGE> 15
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease
to Lessee, either by one of the first three categories listed below or by
providing Lessee with Equipment from the fourth category, in an aggregate value
up to the Commitment Amount referred to on the face of this Schedule. If the
Equipment acquired is of category (i), (ii) , (iii) below, the effectiveness of
this Schedule as it relates to those items of Equipment is contingent upon
Lessee's acknowledgment at the time Lessor acquires the Equipment that Lessee
has either received or approved the relevant purchase documentation between
vendor and Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment
which is obtained from a vendor by Lessee for its use subject
to Lessor's prior approval of the Equipment, which approval
shall not be unreasonably withheld.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and
ownership may be considered by Lessor for inclusion under this
Lease (the "Sale-Leaseback Transaction"). Any request for a
Sale-Leaseback Transaction must be submitted to Lessor in
writing (along with accompanying evidence of Lessee's
Equipment ownership satisfactory to Lessor for all Equipment
submitted) no later than April 4, 1998 *. Lessor will not
perform a Sale-Leaseback Transaction for any request or
accompanying Equipment ownership documents which arrive after
the date marked above by an asterisk (*). Further, any
sale-leaseback Equipment will be placed on lease subject to:
(1) Lessor prior approval of the Equipment; and (2) if
approved, at Lessor's actual net appraised Equipment value
pursuant to the schedule below:
<TABLE>
<CAPTION>
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
-------------------------- ----------------------------------
<S> <C>
Between 12/04/97 and 3/4/98 (90 days) 100%
Between 10/04/97 and 12/03/97 (60 days) 80%
Between 7/05/97 and 10/03/97(90 days) 70%
</TABLE>
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment
which is obtained from a third party by Lessee for its use
subject to Lessor's prior approval of the Equipment, which
approval shall not be unreasonably withheld, and at Lessor's
appraised value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800
Direct Service, Lessor will purchase new or used Equipment
from a third party or Lessor will supply new or used Equipment
from its inventory for use by Lessee at rates provided by
Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800 Number
Equipment shall be fifteen (15) days from the ship date, such ship date to be
set forth on the vendor invoice or if unavailable on the vendor invoice the ship
date will be determined by Lessor upon other supporting shipping documentation.
Lessor will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar quarter into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the
Initial Term will begin the first day of the calendar quarter thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
- 2 -
<PAGE> 16
3. MISCELLANEOUS
In consideration of Lessor financing software and tenant improvements
hereunder, Lessee agrees in addition to its last Monthly Rent Payment to remit
to Lessor an amount equal to 15% of Lessor's aggregate cost of software and
tenant improvements provided hereunder.
4. SPECIAL TERMS
The terms and conditions of the Lease as they pertain to this Schedule
are hereby modified and amended as follows:
(a) Section 9, Delivery and Return of Equipment
Delete second, third and fourth sentences in their entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
E-LOAN, INC. COMDISCO, INC.
AS LESSEE AS LESSOR
By: /s/ Chris Larsen By: /s/ Illegible
-------------------------------- ---------------------------
Title: President Title: President, Comdisco
----------------------------- Ventures Division
Date: 3/1/98 ------------------------
------------------------------ Date: March 6, 1998
-------------------------
- 3 -
<PAGE> 17
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
2. Initial Term Starts on: Initial Term:
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
4. Lease Rate Factor:
5. Rent:
6. Acceptance Doc Type:
- 4 -
<PAGE> 18
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
TO PURCHASE SHARES OF THE SERIES C PREFERRED STOCK OF
E-LOAN, INC.
DATED AS OF MARCH 4, 1998 (THE "EFFECTIVE DATE")
WHEREAS, E-Loan, Inc., a California corporation (the "Company") has
entered into a Master Lease Agreement dated as of March 4, 1998, Equipment
Schedules No. VL-1 and VL-2 dated as of March 4, 1998, and related Summary
Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in
consideration for such Leases, the right to purchase shares of its Series C
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
For value received, the Company hereby grants to the Warrantholder, and
the Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from the Company that
number of fully paid and assessable shares of the Company's Series C Preferred
Stock ("Preferred Stock") equal to Thirty Thousand Dollars ($30,000.00)
("Aggregate Purchase Price") divided by the exercise price as set forth below
("Exercise Price").
Notwithstanding the foregoing, the Exercise Price shall equal $2.00 per
share if Company raises a round of equity financing of at least $1,000,000.00
(the "Next Round") or issues additional warrants within 120 days from the date
hereof. In the event the Next Round or a warrant issuance does not occur within
such 120 day period, the Exercise Price shall equal to the sum of $1.22852 per
share (the "Last Round") plus the product of (a) the difference between the
price per share of the Next Round and the Last Round, multiplied by (b) the
fraction resulting from dividing (x) the number of days from the date of closing
of the Last Round to the date of execution of the Leases, by (y) the number of
days from the date of the closing of the Last Round to the date of closing of
the Next Round; provided however, if the Next Round is not successfully
completed within twenty-four (24) months of the date hereof, then the Exercise
Price shall be equal to $1.22852 per share.
The number and purchase price of such shares are subject to adjustment
as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i)
seven (7) years or (ii) three (3) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of
- 1 -
<PAGE> 19
Exercise"), duly completed and executed. Promptly upon receipt of the Notice of
Exercise and the payment of the purchase price in accordance with the terms set
forth below, and in no event later than twenty-one (21) days thereafter, the
Company shall issue to the Warrantholder a certificate for the number of shares
of Preferred Stock purchased and shall execute the acknowledgment of exercise in
the form attached hereto as Exhibit II (the "Acknowledgment of Exercise")
indicating the number of shares which remain subject to future purchases, if
any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued
to the Warrantholder.
Y = the number of shares of Preferred Stock
requested to be exercised under this Warrant
Agreement.
A = the fair market value of one (1) share of
Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's
Registration Statement relating to such public offering has been
declared effective by the SEC, then the fair market value per share
shall be the product of (x) the initial "Price to Public" specified in
the final prospectus with respect to the offering and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection
with the Company's initial public offering, and:
(a) if traded on a securities exchange, the
fair market value shall be deemed to be the product of (x) the
average of the closing prices over a twenty-one (21) day
period ending three days before the day the current fair
market value of the securities is being determined and (y) the
number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
or
(b) if actively traded over-the-counter, the
fair market value shall be deemed to be the product of (x) the
average of the closing bid and asked prices quoted on the
NASDAQ system (or similar system) over the twenty-one (21) day
period ending three days before the day the current fair
market value of the securities is being determined and (y) the
number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of Preferred
Stock shall be the product of (x) the highest price per share which the
Company could obtain from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its
Board of Directors and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not
the surviving party, in which case the fair market value of Preferred
Stock shall be deemed to be the value received by the holders of the
Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and
- 2 -
<PAGE> 20
conditions of such amended Warrant Agreement shall be identical to those
contained herein, including, but not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required
to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the Securities Act of 1933, as amended ("1933 Act"), as then
in effect, or any similar Federal statute then enforced, or any state securities
law, required by reason of any transfer involved in such conversion), or listing
on any domestic securities exchange, before such shares may be issued upon
conversion, the Company will, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered, listed or
approved for listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
- 3 -
<PAGE> 21
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding (on an as-converted basis) immediately prior to such dividend
or distribution, and (ii) the denominator of which shall be the total number of
all shares of the Company's stock outstanding (on an as-converted basis)
immediately after such dividend or distribution. The Warrantholder shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of shares of Preferred Stock (calculated to the nearest
whole share) obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of shares of Preferred Stock issuable
upon the exercise hereof immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to
the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall
- 4 -
<PAGE> 22
be made without charge to the Warrantholder for any issuance tax in respect
thereof, or other cost incurred by the Company in connection with such exercise
and the related issuance of shares of Preferred Stock. The Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
and the issuance and delivery of any certificate in a name other than that of
the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) The authorized capital of the Company consists of (A)
10,000,000 shares of Common Stock, of which 4,113,750 shares are issued
and outstanding, and (B) 450,000 shares of Series A preferred stock, of
which 428,635 shares are issued and outstanding and are convertible
into 428,635 shares of Common Stock at $1.00 per share, 450,207 shares
of Series B preferred stock, of which 430,207 shares are issued and
outstanding and are convertible into 430,207 shares of Common Stock at
$1.00 per share, 4,467,912 shares of Series C preferred stock, of which
4,061,738 shares are issued and outstanding and are convertible into
4,061,738 shares of Common Stock at $1.00 per share and 4,467,912
shares of Series C-1 preferred stock, of which no shares are issued and
outstanding.
(ii) The Company has reserved (A) 890,000 shares of Common
Stock for issuance under its Incentive/Nonqualified Stock Option Plan,
under which 425,378 options are outstanding. There are no other
options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of
the Company.
(iii) In accordance with the Company's Articles of
Incorporation, no shareholder of the Company has preemptive rights to
purchase new issuances of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in
this Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt
- 5 -
<PAGE> 23
of such request, a written statement confirming the Company's compliance with
the filing requirements of the Securities and Exchange Commission as set forth
in such Rule, as such Rule may be amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. REQUESTS FOR REGISTRATION
Warrantholder and Company agree that all shares of Preferred Stock subject to
the Warrant Agreement shall have the same registration rights and be subject to
the same terms and conditions with respect to the registration and sale
- 6 -
<PAGE> 24
of such stock as possessed by the Series C Shareholders as provided for in the
Investor Rights Agreement dated December 19, 1997, by and among the Company and
those certain Purchasers identified therein, attached hereto as Exhibit V.
12. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof,
this Warrant Agreement and all rights hereunder are transferable in whole or in
part by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices
and the payment to the Company of all transfer taxes and other governmental
charges imposed on such transfer.
13. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
California.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at 6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention.: General Counsel, (and/or, if
by facsimile, (847) 518-5465 and (847)518-5088) and (ii) to the Company at 540
University Av., Suite 150, Palo Alto, CA 94301, Attention:______ (and/or if by
facsimile, (650) 617-0410) or at such other address as any such party may
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of
this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
- 7 -
<PAGE> 25
(j) Amendments. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000, the Company will also provide Warrantholder with an opinion
from the Company's counsel with respect to those same representations,
warranties and covenants. The Company shall also supply such other documents as
the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
COMPANY: E-LOAN, INC.
By: /s/ Chris Larsen
--------------------------
Title: President
-----------------------
WARRANTHOLDER: COMDISCO, INC.
By: /s/ Illegible
--------------------------
Title: President, Comdisco
Ventures Division
-----------------------
- 8 -
<PAGE> 26
EXHIBIT I
NOTICE OF EXERCISE
TO: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares
of the Series ____ Preferred Stock of _________________, pursuant to
the terms of the Warrant Agreement dated the ______ day of
________________________, 19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and
tenders herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series ____ Preferred Stock of
________________________________________, the undersigned hereby
confirms and acknowledges the investment representations and warranties
made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ____ Preferred Stock in the name of the undersigned or in such
other name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
WARRANTHOLDER: COMDISCO, INC.
By: _________________________
Title: _________________________
Date: _________________________
- 9 -
<PAGE> 27
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________________________________, hereby
acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase
____ shares of the Series ____ Preferred Stock of _________________, pursuant to
the terms of the Warrant Agreement, and further acknowledges that ______ shares
remain subject to purchase under the terms of the Warrant Agreement.
COMPANY:
By: _________________________
Title: _________________________
Date: _________________________
- 10 -
<PAGE> 28
EXHIBIT III
TRANSFER NOTICE
(TO TRANSFER OR ASSIGN THE FOREGOING WARRANT AGREEMENT EXECUTE THIS FORM AND
SUPPLY REQUIRED INFORMATION. DO NOT USE THIS FORM TO PURCHASE SHARES.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
___________________________________________________________________
(Please Print)
whose address is___________________________________________________
___________________________________________________________________
Dated: ___________________________________
Holder's Signature: _____________________
Holder's Address: _____________________
___________________________________________
Signature Guaranteed: ____________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as
it appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing Warrant Agreement.
- 11 -
<PAGE> 1
EXHIBIT 10.38
E-LOAN, INC.
LOAN AND SECURITY AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION.........................................1
1.1 Definitions.................................................1
1.2 Accounting and Other Terms..................................7
2. LOAN AND TERMS OF PAYMENT............................................7
2.1 Credit Extensions...........................................7
2.2 Overadvances................................................9
2.3 Interest Rates, Payments, and Calculations..................10
2.4 Crediting Payments..........................................10
2.5 Fees........................................................10
2.6 Additional Costs............................................11
2.7 Term........................................................11
3. CONDITIONS OF LOANS..................................................11
3.1 Conditions Precedent to Initial Credit Extension............11
3.2 Conditions Precedent to all Credit Extensions...............12
4. CREATION OF SECURITY INTEREST........................................12
4.1 Grant of Security Interest..................................12
4.2 Delivery of Additional Documentation Required...............12
4.3 Right to Inspect............................................12
5. REPRESENTATIONS AND WARRANTIES.......................................13
5.1 Due Organization and Qualification..........................13
5.2 Due Authorization; No Conflict..............................13
5.3 No Prior Encumbrances.......................................13
5.4 Bona Fide Accounts..........................................13
5.5 Merchantable Inventory......................................13
5.6 Intellectual Property.......................................13
5.7 Name; Location of Chief Executive Office....................13
5.8 Litigation..................................................14
5.9 No Material Adverse Change in Financial Statements..........14
5.10 Solvency....................................................14
5.11 Regulatory Compliance.......................................14
5.12 Environmental Condition.....................................14
5.13 Taxes.......................................................14
5.14 Subsidiaries................................................15
5.15 Government Consents.........................................15
5.16 Full Disclosure.............................................15
6. AFFIRMATIVE COVENANTS................................................15
6.1 Good Standing...............................................15
6.2 Government Compliance.......................................15
6.3 Financial Statements, Reports, Certificates.................15
6.4 Inventory; Returns..........................................16
6.5 Taxes.......................................................16
6.6 Insurance...................................................16
6.7 Principal Depository........................................17
6.8 Quick Ratio.................................................17
i
<PAGE> 3
6.9 Profitability/Loss..........................................17
6.10 Liquidity, Debt Service Coverage............................17
6.11 Further Assurances..........................................17
7. NEGATIVE COVENANTS...................................................17
7.1 Dispositions................................................17
7.2 Changes in Business, Ownership, Management or Business
Locations...................................................17
7.3 Mergers or Acquisitions.....................................18
7.4 Indebtedness................................................18
7.5 Encumbrances................................................18
7.6 Distributions...............................................18
7.7 Investments.................................................18
7.8 Transactions with Affiliates................................18
7.9 Intellectual Property Agreements............................18
7.10 Subordinated Debt...........................................19
7.11 Inventory...................................................19
7.12 Compliance..................................................19
8. EVENTS OF DEFAULT....................................................19
8.1 Payment Default.............................................19
8.2 Covenant Default............................................19
8.3 Material Adverse Change.....................................20
8.4 Attachment..................................................20
8.5 Insolvency..................................................20
8.6 Other Agreements............................................20
8.7 Subordinated Debt...........................................20
8.8 Judgments...................................................20
8.9 Misrepresentations..........................................20
9. BANK'S RIGHTS AND REMEDIES...........................................21
9.1 Rights and Remedies.........................................21
9.2 Power of Attorney...........................................22
9.3 Accounts Collection.........................................22
9.4 Bank Expenses...............................................22
9.5 Bank's Liability for Collateral.............................23
9.6 Remedies Cumulative.........................................23
9.7 Demand; Protest.............................................23
10. NOTICES..............................................................23
11. CHOICE OF LAW AND VENUE..............................................23
12. GENERAL PROVISIONS...................................................24
12.1 Successors and Assigns......................................24
12.2 Indemnification.............................................25
12.3 Time of Essence.............................................25
12.4 Severability of Provisions..................................25
12.5 Amendments in Writing, Integration..........................25
12.6 Counterparts................................................25
12.7 Survival....................................................25
12.8 Confidentiality.............................................25
ii
<PAGE> 4
This LOAN AND SECURITY AGREEMENT is entered into as of December 9,
1998, by and between SILICON VALLEY BANK ("Bank") and E-LOAN, INC. ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions.
As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means a loan advance under
the Committed Revolving Line.
"Affiliate" means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, partners and, for
any Person that is a limited liability company, such Persons, managers and
members.
"Bank Expenses" means all: reasonable costs or
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the preparation, negotiation, administration, and enforcement of
the Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred
in amending, enforcing or defending the Loan Documents (including fees and
expenses of appeal or review, or those incurred in any Insolvency Proceeding),
whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and
records including without limitation: ledgers; records concerning Borrower's
assets or liabilities, the Collateral, business operations or financial
condition; and all computer programs, or tape files, and the equipment,
containing such information.
"Borrowing Base" means, for any applicable date of
determination, an amount equal to eighty percent (80%) of Borrower's brokerage
and referral fee revenue, calculated on a trailing three-month rolling average
basis, as determined by Bank with reference to the most recent financial
statements of Borrower delivered pursuant to Section 6.3 hereof.
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit
A attached hereto.
1
<PAGE> 5
"Committed Revolving Line" means a credit extension
of up to One Million Five Hundred Thousand Dollars ($1,500,000).
"Committed Equipment Line" means a credit extension
of up to Three Million Five Hundred Thousand Dollars ($3,500,000).
"Contingent Obligation" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any indebtedness, lease, dividend, letter of credit
or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted or
sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Copyrights" means any and all copyright rights,
copyright applications, copyright registrations and like protections in each
work or authorship and derivative work thereof, whether published or unpublished
and whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, Equipment
Advance, Letter of Credit or any other extension of credit by Bank for the
benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current assets
on the consolidated balance sheet of Borrower and its Subsidiaries as at such
date.
"Current Liabilities" means, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Credit Extensions made under this Agreement, including all
Indebtedness that is payable upon demand or within one year from the date of
determination thereof unless such Indebtedness is renewable or extendable at the
option of Borrower or any Subsidiary to a date more than one year from the date
of determination, but excluding Subordinated Debt.
"Debt Service Coverage" means, as measured quarterly
as of the last day of each fiscal quarter of Borrower, on a consolidated basis
determined in accordance with GAAP, the ratio of (a) an amount equal to the sum
of (i) net income for such quarter, plus (ii) depreciation and amortization of
intangible assets and other non-cash charges to income for such quarter plus
(iii) quarterly interest expense minus (iv) capitalized software expense for
such quarter to (b) an amount equal to the sum of (x) all scheduled repayments
and mandatory prepayments of principal on account of long-term Indebtedness for
such quarter plus (y) quarterly interest expense.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"Equipment Advance" has the meaning set forth in
Section 2.1.5.
"Equipment Availability End Date" has the meaning set
forth in Section 2.1.5.
2
<PAGE> 6
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles
as in effect in the United States from time to time.
"Indebtedness" means (a) all indebtedness for
borrowed money or the deferred purchase price of property or services, including
without limitation reimbursement and other obligations with respect to surety
bonds and letters of credit, (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all capital lease obligations and (d) all
Contingent Obligations.
"Insolvency Proceeding" means any proceeding
commenced by or against any person or entity under any provision of the United
States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means all of
Borrower's right, title and interest in and to the following:
(a) Copyrights, Trademarks, Patents, and Mask Works;
(b) Any and all trade secrets, and any and all
intellectual property rights in computer software and computer software products
now or hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available
to Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past,
present and future infringement of any of the rights included above, with the
right, but not the obligation, to sue for and collect such damages for said use
or infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the
Copyrights, Patents, Trademarks, or Mask Works, and all license fees and
royalties arising from such use to the extent permitted by such license or
rights;
(f) All amendments, renewals and extensions of any of
the Copyrights, Trademarks, Patents or Mask Works; and
(g) All proceeds and products of the foregoing,
including without limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above.
"Investment" means any beneficial ownership of
(including stock, partnership interest or other securities) any Person, or any
loan, advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
3
<PAGE> 7
"Letter of Credit" means a letter of credit or
similar undertaking issued by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth
in Section 2.1.2.
"Lien" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes executed by Borrower, and any other present or future
agreement entered into between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, extended or restated from time
to time.
"Mask Works" means all mask works or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired.
"Material Adverse Effect" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"Maturity Date" means September 8, 2002.
"Negotiable Collateral" means all of Borrower's
present and future letters of credit of which it is a beneficiary, notes,
drafts, instruments, securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Patents" means all patents, patent applications and
like protections, including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same.
"Payment Date" means the eighth (8th) calendar day of
each month, commencing on the first such date after the Closing Date and ending
on the Maturity Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising
under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(c) Indebtedness to trade creditors and with respect
to surety bonds and similar obligations incurred in the ordinary course of
business;
(d) Subordinated Debt;
(e) Indebtedness of Borrower to any Subsidiary and
Contingent Obligations of any Subsidiary with respect to obligations of Borrower
(provided that the primary obligations are not prohibited hereby), and
Indebtedness of any Subsidiary to any other Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of any other
Subsidiary (provided that the primary obligations are not prohibited hereby);
(f) Indebtedness secured by Permitted Liens;
4
<PAGE> 8
(g) Capital leases or indebtedness incurred solely to
purchase equipment which is secured in accordance with clause (c) of "Permitted
Liens" below and is not in excess of the lesser of the purchase price of such
equipment or the fair market value of such equipment on the date of acquisition;
and
(h) Extensions, refinancings, modifications,
amendments and restatements of any of items of Permitted Indebtedness (a)
through (g) above, provided that the principal amount thereof is not increased
or the terms thereof are not modified to impose more burdensome terms upon
Borrower or its Subsidiary, as the case may be.
"Permitted Investment" means:
(a) Investments existing on the Closing Date
disclosed in the Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank;
(c) Investments consisting of the endorsement of
negotiable instruments for deposit or collection or similar transaction in the
ordinary course of business;
(d) Investments accepted in connection with Transfers
permitted by Section 7.1;
(e) Investments consisting of (i) compensation of
employees, officers and directors of Borrower or its Subsidiaries so long as the
Board of Directors of Borrower determines that such compensation is in the best
interests of Borrower, (ii) travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business, and (iii) loans
to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower's Board of Directors;
(f) Investments (including debt obligations) received
in connection with the bankruptcy or reorganization of customers or suppliers
and in settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of business;
(g) Investments pursuant to or arising under currency
agreements or interest rate agreements entered into in the ordinary course of
business;
(h) Investments consisting of notes receivable of, or
prepaid royalties and other credit extensions to, customers and suppliers who
are not Affiliates, in the ordinary course of business; provided that this
paragraph (i) shall not apply to Investments by Borrower in any Subsidiary;
(i) Investments constituting acquisitions permitted
under Section 7.3;
(j) Deposit accounts of Borrower in which Bank has a
Lien prior to any other Lien; and
(k) Deposit accounts of any Subsidiaries maintained
in the ordinary course of business.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;
5
<PAGE> 9
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, provided the same have
no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such Equipment;
(d) Liens on Equipment leased by Borrower or any
Subsidiary pursuant to an operating or capital lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred solely for
the purpose of financing the lease of such Equipment (including Liens pursuant
to leases permitted pursuant to Section 7.1 and Liens arising from UCC financing
statements regarding leases permitted by this Agreement);
(e) Leases or subleases and licenses or sublicenses
granted to others in the ordinary course of Borrower's business not interfering
in any material respect with the business of Borrower and its Subsidiaries taken
as a whole, and any interest or title of a lessor, licensor or under any lease
or license, provided that such leases, subleases, licenses and sublicenses do
not prohibit the grant of the security interest granted hereunder;
(f) Liens on assets (including the proceeds thereof
and accessions thereto) that existed at the time such assets were acquired by
Borrower or any Subsidiary (including Liens on assets of any corporation that
existed at the time it became or becomes a Subsidiary); provided such Liens are
not granted in contemplation of or in connection with the acquisition of such
asset by Borrower or a Subsidiary;
(g) Liens arising from judgments, decrees or
attachments in circumstances not constituting an Event of Default under Section
8.8;
(h) Easements, reservations, rights-of-way,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances affecting real property not constituting a Material Adverse
Effect;
(i) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payments of customs duties in connection
with the importation of goods;
(j) Liens that are not prior to the Lien of Bank
which constitute rights of set-off of a customary nature or banker's Liens with
respect to amounts on deposit, whether arising by operation of law or by
contract, in connection with arrangement entered in to with banks in the
ordinary course of business;
(k) Earn-out and royalty obligations existing on the
date hereof or entered into in connection with an acquisition permitted by
Section 7.3;
(l) Liens on insurance proceeds in favor of insurance
companies granted solely as security for financed premiums; and
(m) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a), (c), (d), (e), (f) and (k) above, provided that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
6
<PAGE> 10
"Prime Rate" means the variable rate of interest, per
annum, most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the
unrestricted cash; unrestricted cash-equivalents; net, billed accounts
receivable and investments with maturities of fewer than one year of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief
Executive Officer, the President, the Chief Financial Officer and the Controller
of Borrower.
"Revolving Maturity Date" means the date immediately
preceding the first anniversary of the Closing Date.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by
Borrower that is subordinated to the debt owing by Borrower to Bank on terms
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person,
corporation, partnership, company association, joint venture, or any other
business entity of which more than fifty percent (50%) of the voting stock or
other equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.
"Tangible Net Worth" means, as of any applicable
date, the consolidated total assets of Borrower and its Subsidiaries minus,
without duplication, (i) the sum of any amounts attributable to (a) goodwill,
(b) intangible items such as unamortized debt discount and expense, patents,
trade and service marks and names, copyrights and research and development
expenses except prepaid expenses, and (c) all reserves not already deducted from
assets, and (ii) Total Liabilities.
"Total Liabilities" means, as of any applicable date,
all obligations that should, in accordance with GAAP, be classified as
liabilities on the consolidated balance sheet of Borrower, including in any
event all Indebtedness, but specifically excluding Subordinated Debt.
"Trademarks" means any trademark and servicemark
rights, whether registered or not, applications to register and registrations of
the same and like protections, and the entire goodwill of the business of
Assignor connected with and symbolized by such trademarks.
1.2 Accounting and Other Terms.
All accounting terms not specifically defined herein
shall be construed in accordance with GAAP and all calculations and
determinations made hereunder shall be made in accordance with GAAP. When used
herein, the term "financial statements" shall include the notes and schedules
thereto. The terms "including" / "includes" shall always be read as meaning
"including (or includes) without limitation," when used herein or in any other
Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions.
Borrower promises to pay to the order of Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder. Borrower
shall also pay interest on the unpaid principal amount of such Credit Extensions
at rates in accordance with the terms hereof.
7
<PAGE> 11
2.1.1 Revolving Advances
(a) Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to Borrower in an
aggregate outstanding amount not to exceed (i) (a) the Committed Revolving Line
minus the Credit Card Sublimit minus the Merchant Services Sublimit, or (b) the
Borrowing Base, whichever is less, minus (ii) the face amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit);
provided, that Borrower shall not request or receive any Advances until Bank has
received Borrower's financial projections for the 1999 fiscal year. Subject to
the terms and conditions of this Agreement, amounts borrowed pursuant to this
Section 2.1.1 may be repaid and reborrowed at any time prior to the Revolving
Maturity Date.
(b) Whenever Borrower desires an Advance,
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. Pacific time, on the Business Day that the Advance is to be made. Each
such notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer, or without instructions if in
Bank's discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer or a designee thereof, and Borrower shall indemnify and hold Bank
harmless for any damages or loss suffered by Bank as a result of such reliance.
Bank will credit the amount of Advances made under this Section 2.1 to
Borrower's deposit account.
(c) The Committed Revolving Line shall
terminate on the Revolving Maturity Date, at which time all Advances under this
Section 2.1.1 shall be immediately due and payable.
2.1.2 Letters of Credit.
(a) Subject to the terms and conditions of
this Agreement, Bank agrees to issue or cause to be issued Letters of Credit for
the account of Borrower in an aggregate outstanding face amount not to exceed
(i) the lesser of (a) the Committed Revolving Line minus the Credit Card
Sublimit, minus the Merchant Services Sublimit, or (b) the sum of the Borrowing
Base plus $1,100,000, whichever is less, minus (ii) the then outstanding
principal balance of the Advances. Each Letter of Credit shall have an expiry
date no later than the Revolving Maturity Date. All Letters of Credit shall be,
in form and substance, acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form of standard Application and
Letter of Credit Agreement.
(b) The obligation of Borrower to
immediately reimburse Bank for drawings made under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and such Letters of Credit, under
all circumstances whatsoever. Borrower shall indemnify, defend, protect and hold
Bank harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit.
(c) Borrower may request that Bank issue a
Letter of Credit payable in a currency other than United States Dollars. If a
demand for payment is made under any such Letter of Credit, Bank shall treat
such demand as an Advance to Borrower of the equivalent of the amount thereof
(plus cable charges) in United States currency at the then prevailing rate of
exchange in San Francisco, California, for sales of that other currency for
cable transfer to the country of which it is the currency.
(d) Upon the issuance of any Letter of
Credit payable in a currency other than United States Dollars, Bank shall create
a reserve under the Committed Revolving Line for Letters of Credit against
fluctuations in currency exchange rates, in an amount equal to ten percent (10%)
of the face amount of such
8
<PAGE> 12
Letter of Credit. The amount of such reserve may be amended by Bank from time to
time to account for fluctuations in the exchange rate. The availability of funds
under the Committed Revolving Line shall be reduced by the amount of such
reserve for so long as such Letter of Credit remains outstanding.
2.1.3 Credit Card Sublimit.
Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued corporate credit cards for
the executives of Borrower in an aggregate credit limit not to exceed Five
Hundred Thousand Dollars ($500,000) (the "Credit Card Sublimit"). All agreements
executed in connection with the Credit Card Sublimit shall be, in form and
substance, acceptable to Bank, in its sole discretion.
2.1.4 Merchant Services Sublimit.
Subject to the terms and conditions of this
Agreement, Borrower may utilize up to an aggregate amount not to exceed One
Hundred Thousand Dollars ($100,000) (the "Merchant Services Sublimit") for
merchant credit card services provided by Bank as defined in that certain
Merchant Services Agreement provided to Borrower in connection herewith (a
"Merchant Service", or the "Merchant Services"). Any amounts actually paid by
Bank in respect of a Merchant Service or Merchant Services shall, when paid,
constitute an Advance under the Committed Revolving Line.
2.1.5 Equipment Advances.
(a) Subject to and upon the terms and
conditions of this Agreement, at any time from the date hereof through September
8, 1999 (the "Equipment Availability End Date"), Bank agrees to make advances
(each an "Equipment Advance" and, collectively, the "Equipment Advances") to
Borrower in an aggregate outstanding amount not to exceed the Committed
Equipment Line; provided, that Borrower shall not request or receive Equipment
Advances in excess of $1,000,000 in the aggregate until Bank has received
Borrower's financial projections for the 1999 fiscal year. To evidence the
Equipment Advance or Equipment Advances, Borrower shall deliver to Bank, within
thirty (30) days after the date of each Equipment Advance request, an invoice
for the equipment or software to be purchased. The Equipment Advances shall be
used only to purchase or refinance Equipment and software purchased on or after
April 1, 1998 and shall not exceed one hundred percent (100%) of the invoice
amount of such equipment or software approved from time to time by Bank,
excluding taxes, shipping, warranty charges, freight discounts and installation
expense.
(b) Interest shall accrue from the date of
each Equipment Advance at the rate specified in Section 2.3(a), and shall be
payable monthly for each month through the month in which the Equipment
Availability End Date falls. Any Equipment Advances that are outstanding on the
Equipment Availability End Date will be payable in thirty-six (36) equal monthly
installments of principal, plus all accrued interest, beginning on the Payment
Date of each month following the Equipment Availability End Date and ending on
the Maturity Date, at which time all amounts owing under this Agreement shall be
immediately due and payable. Equipment Advances, once repaid, may not be
reborrowed.
(c) When Borrower desires to obtain an
Equipment Advance, Borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no later than 3:00 p.m.
Pacific time one (1) Business Day before the day on which the Equipment Advance
is to be made. Such notice shall be substantially in the form of Exhibit B. The
notice shall be signed by a Responsible Officer or its designee and include a
copy of the invoice for the Equipment to be financed.
2.2 Overadvances.
If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement
is greater than the lesser of (i) the Committed Revolving Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess. If, at any time or for any reason, the amount of Obligations owed
by Borrower to Bank pursuant to Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4 is
9
<PAGE> 13
greater than the lesser of (i) the Committed Revolving Line or (ii) the
Borrowing Base plus $1,100,000, Borrower shall immediately pay to Bank, in cash,
the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section
2.3(b), any Advances and/or Equipment Advances shall bear interest on the
average daily balance thereof, at a per annum rate equal to the Prime Rate plus
0.50%.
(b) Default Rate. All Obligations shall bear
interest, from and after the occurrence of an Event of Default, at a rate equal
to five (5) percentage points above the interest rate applicable immediately
prior to the occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and
payable on each Payment Date. Borrower hereby authorizes Bank to debit any
accounts with Bank, including, without limitation, Account Number __________ for
payments of principal and interest due on the Obligations and any other amounts
owing by Borrower to Bank. Bank will notify Borrower of all debits which Bank
has made against Borrower's accounts. Any such debits against Borrower's
accounts in no way shall be deemed a set-off. Any interest not paid when due
shall be compounded by becoming a part of the Obligations, and such interest
shall thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 12:01 a.m. on the day the Prime
Rate is changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments.
Prior to the occurrence of an Event of Default, Bank
shall credit a wire transfer of funds, check or other item of payment to such
deposit account or Obligation as Borrower specifies. After the occurrence of an
Event of Default, the receipt by Bank of any wire transfer of funds, check, or
other item of payment, whether directed to Borrower's deposit account with Bank
or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon Pacific
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees.
Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Ten
Thousand Dollars ($10,000), which fee shall be due on the Closing Date and shall
be fully earned and non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
10
<PAGE> 14
(c) Bank Expenses. Upon demand from Bank, including,
without limitation, upon the date hereof, all Bank Expenses incurred through the
date hereof, including reasonable attorneys' fees and expenses not in excess of
$2,500 and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 Additional Costs.
In case any change in any law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments
of principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with
respect to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error; provided, however, that Borrower shall
not be liable for any such amount attributable to any period prior to the date
of hundred eighty (180) days prior to the date of such statement.
2.7 Term.
Except as otherwise set forth herein, this Agreement
shall become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations (excluding
Obligations under Section 2.6 and 12.2 to the extent they remain inchoate at the
time outstanding payment obligations are paid in full) are outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension.
The obligation of Bank to make the initial Credit
Extension is subject to the condition precedent that Bank shall have received,
in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) financing statements (Forms UCC-1);
11
<PAGE> 15
(d) insurance certificate;
(e) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof; and
(f) such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions.
The obligation of Bank to make each Credit Extension,
including the initial Credit Extension, is further subject to the following
conditions:
(a) timely receipt by Bank of the Payment/Advance
Form as provided in Section 2.1; and
(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Advance as to the
accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest.
Borrower grants and pledges to Bank a continuing
security interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt payment of any and all Obligations and in
order to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof. Borrower
acknowledges that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations, in each case, to the extent that a
security interest in such Collateral can be perfected by the filing of a
financing statement or, in the case of Collateral consisting of instruments,
documents, chattel paper or certificated securities, to the extent that Bank
takes possession of such Collateral. Bank agrees to execute and deliver to
Borrower from time to time such subordination agreements as Borrower may request
and as are necessary to give to other lenders which finance equipment for
Borrower a first priority security interest in the equipment financed so long as
the Liens and the Indebtedness incurred with respect to such equipment financing
are permitted under this Agreement. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.
4.2 Delivery of Additional Documentation Required.
Borrower shall from time to time execute and deliver
to Bank, at the request of Bank, all Negotiable Collateral, all financing
statements and other documents that Bank may reasonably request, in form
satisfactory to Bank, to perfect and continue perfected Bank's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents.
4.3 Right to Inspect.
Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and
12
<PAGE> 16
to make copies thereof and to check, test, and appraise the Collateral in order
to verify Borrower's financial condition or the amount, condition of, or any
other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification.
Borrower and each Subsidiary is a corporation duly existing
and in good standing under the laws of its state of incorporation and qualified
and licensed to do business in, and is in good standing in, any state in which
the conduct of its business or its ownership of property requires that it be so
qualified, except for states as to which any failure to so qualify would not
have a Material Adverse Effect.
5.2 Due Authorization; No Conflict.
The execution, delivery, and performance of the Loan Documents
are within Borrower's powers, have been duly authorized, and are not in conflict
with nor constitute a breach of any provision contained in Borrower's
Articles/Certificate of Incorporation or Bylaws, nor will they constitute an
event of default under any material agreement to which Borrower is a party or by
which Borrower is bound except to the extent that certain intellectual property
agreements prohibit the assignment of the rights thereunder to a third party
without the Borrower's or other party's consent and the Loan Documents
constitute an assignment. Borrower is not in default under any agreement to
which it is a party or by which it is bound, which default could reasonably be
expected to have a Material Adverse Effect.
5.3 No Prior Encumbrances.
Borrower has good and indefeasible title to the Collateral,
free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Accounts.
The Accounts are bona fide existing obligations. The service
or property giving rise to such Accounts has been performed or delivered to the
account debtor or to the account debtor's agent for immediate shipment to and
unconditional acceptance by the account debtor.
5.5 Merchantable Inventory.
All Inventory is in all material respects of good and
marketable quality, free from all material defects.
5.6 Intellectual Property.
Borrower is the sole owner of the Intellectual Property
Collateral, except for non-exclusive licenses granted by Borrower to its
customers in the ordinary course of business. Each of the Patents is valid and
enforceable, and no part of the Intellectual Property Collateral has been judged
invalid or unenforceable, in whole or in part, and no claim has been made that
any part of the Intellectual Property Collateral violates the rights of any
third party.
5.7 Name; Location of Chief Executive Office.
Except as disclosed in the Schedule, Borrower has not done
business and will not, without at least thirty (30) days prior written notice to
Bank, do business under any name other than that specified on the signature page
hereof. The chief executive office of Borrower is located at the address
indicated in Section 10 hereof.
13
<PAGE> 17
5.8 Litigation.
Except as set forth in the Schedule, there are no actions or
proceedings pending or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary before any court or administrative agency in which an
adverse decision could reasonably be expected to have a Material Adverse Effect
or a material adverse effect on Borrower's interest or Bank's security interest
in the Collateral.
5.9 No Material Adverse Change in Financial Statements.
All consolidated financial statements related to Borrower and
any Subsidiary that have been delivered by Borrower to Bank fairly present in
all material respects Borrower's consolidated financial condition as of the date
thereof and Borrower's consolidated results of operations for the period then
ended. There has not been a material adverse change in the consolidated
financial condition of Borrower since the date of the most recent of such
financial statements submitted to Bank on or about the Closing Date.
5.10 Solvency.
The fair saleable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions
contemplated by this Agreement; and Borrower is able to pay its debts (including
trade debts) as they mature.
5.11 Regulatory Compliance.
Borrower and each Subsidiary has met the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to
ERISA. No event has occurred resulting from Borrower's failure to comply with
ERISA that is reasonably likely to result in Borrower's incurring any liability
that could reasonably be expected to have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 Environmental Condition.
None of Borrower's or any Subsidiary's properties or assets
has ever been used by Borrower or any Subsidiary or, to the best of Borrower's
knowledge, by previous owners or operators, in the disposal of, or to produce,
store, handle, treat, release, or transport, any hazardous waste or hazardous
substance other than in accordance with applicable law; to the best of
Borrower's knowledge, none of Borrower's properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute; no lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned by Borrower or any Subsidiary; and
neither Borrower nor any Subsidiary has received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal, state
or other governmental agency concerning any action or omission by Borrower or
any Subsidiary resulting in the release or other disposition of hazardous waste
or hazardous substances into the environment.
5.13 Taxes.
Borrower and each Subsidiary has filed or caused to be filed
all tax returns required to be filed on a timely basis, and has paid, or has
made adequate provision for the payment of, all taxes reflected therein, except
those being contested in good faith by proper proceedings with adequate reserves
under GAAP.
14
<PAGE> 18
5.14 Subsidiaries.
Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments.
5.15 Government Consents.
Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted except
where the failure to obtain any such consent, approval or authorization, to make
any such declaration or filing, or to be given any such notice could not
reasonably be expected to have a Material Adverse Effect.
5.16 Full Disclosure.
No representation, warranty or other statement made
by Borrower in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower are not to be viewed as facts and that actual
results during the period or period covered by any such projections and
forecasts may differ from the projected or forecasted results).
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
all outstanding Obligations, and for so long as Bank may have any commitment to
make a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing.
Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect. Borrower shall maintain, and shall cause each of its Subsidiaries to
maintain, to the extent consistent with prudent management of Borrower's
business, in force all licenses, approvals and agreements, the loss of which
could reasonably be expect to have a Material Adverse Effect.
6.2 Government Compliance.
Borrower shall meet, and shall cause each Subsidiary
to meet, the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and government rules
and regulations to which it is subject, noncompliance with which could
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates.
Borrower shall deliver to Bank: (a) as soon as
available, but in any event within thirty (30) days after the end of each month,
a company prepared consolidated balance sheet and income statement covering
Borrower's consolidated operations during such period, in a form and certified
by an Officer of Borrower reasonably acceptable to Bank; (b) as soon as
available, but in any event within one hundred twenty (120) days after the end
of Borrower's fiscal year, audited consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently applied, together with an
unqualified opinion on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank; (c) within five (5) days
of filing, copies of all statements, reports and notices sent or made available
generally by Borrower to its security holders or to any
15
<PAGE> 19
holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower or
any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand Dollars ($100,000) or more; (e) as soon as
available, but in any event not later than December 31, 1998, Borrower's
financial projections for the 1999 fiscal year, approved by Borrower's board of
directors; and (f) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
Within thirty (30) days after the last day of each
month, Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit C hereto.
6.4 Inventory; Returns.
Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes.
Borrower shall make, and shall cause each Subsidiary
to make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is (i)contested in good faith
by appropriate proceedings, (ii) is reserved against (to the extent required by
GAAP) by Borrower and (iii) no lien other than a Permitted Lien results.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as are reasonably satisfactory to
Bank. All such policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee thereof and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must give
at least twenty (20) days notice to Bank before canceling its policy for any
reason. At Bank's request, Borrower shall deliver to Bank certified copies of
such policies of insurance and evidence of the payments of all premiums
therefor. So long as no Event of Default has occurred and is continuing,
Borrower shall have the option of applying the proceeds of any casualty policy
to the replacement or repair of destroyed or damaged property; provided, that
after the occurrence and during the continuance of an Event of Default, all
proceeds payable under any such policy shall, at the option of Bank, be payable
to Bank to be applied on account of the Obligations.
16
<PAGE> 20
6.7 Principal Depository.
Borrower shall maintain its principal depository and
operating accounts with Bank.
6.8 Quick Ratio.
Borrower shall maintain, as of the last day of each
calendar month, a ratio of Quick Assets to Current Liabilities of at least 2.0
to 1.0.
6.9 Profitability/Loss.
Borrower shall not incur a loss of more than
$2,500,000 for the fiscal quarter ended December 31, 1998. Prior to February 15,
1999, Borrower and Bank shall agree upon minimum operating performance covenants
for the fiscal quarter ended March 31, 1999 and thereafter. If no agreement has
been made by such date, this Agreement shall automatically terminate, and all
Obligations owing hereunder shall be immediately due and payable.
6.10 Liquidity, Debt Service Coverage.
(a) Subject to the remainder of this section,
Borrower shall maintain, as of the last day of each calendar month, a Liquidity
Ratio of at least 2.0 to 1.0. Notwithstanding the foregoing, if Borrower attains
two consecutive quarters of profitability and a Debt Service Coverage of not
less than 1.5 to 1.0, then Liquidity Ratio will no longer be tested and instead
Borrower shall maintain, as of the last day of each of Borrower's fiscal
quarters, a Debt Service Coverage of at least 1.5 to 1.0. For purposes of this
Section, "Liquidity Ratio" means as of any date for which it is tested, the
ratio of (a) an amount equal to (i) cash and cash equivalents minus (ii) the
aggregate amount of outstanding Advances under Section 2.1.1 to (b) the
aggregate amount of outstanding Equipment Advances.
6.11 Further Assurances.
At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit
Extension hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Advances, Borrower will not do any of the following:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than Transfers (i) of inventory
in the ordinary course of business, (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business, (iii) Transfers of worn-out or obsolete Equipment
or Equipment financed by other vendors, (iv) Transfers which constitute
liquidation of Investments permitted under Section 7.7, and (v) other Transfers
not otherwise permitted by this Section 7.1 not exceeding One Hundred Thousand
Dollars ($100,000) in the aggregate in any fiscal year.
7.2 Changes in Business, Ownership, Management or
Business Locations.
Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership or
management. Borrower will not,
17
<PAGE> 21
without at least thirty (30) days prior written notification to Bank, relocate
its chief executive office or add any new offices or business locations.
7.3 Mergers or Acquisitions.
Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person if no Event
of Default has occurred and is continuing or would exist after giving effect to
such action, provided that this Section 7.3 shall not apply to (i) the purchase
of inventory, equipment or intellectual property rights in any transaction
valued at less than One Hundred Thousand Dollars ($100,000) in the ordinary
course of business, (ii) transactions among Subsidiaries or among Borrower and
its Subsidiaries in which Borrower is the surviving entity, or (iii) such
transactions that do not involve an amount that in the aggregate exceeds Two
Million Dollars ($2,000,000) during the term of this Agreement.
7.4 Indebtedness.
Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances.
Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions.
Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock, provided, that (i) Borrower may declare and make any dividend payment or
other distribution payable in its equity securities, (ii) Borrower may convert
any of its convertible securities into other securities pursuant to the terms of
such convertible securities or otherwise in exchange therefor and (iii) for so
long as an Event of Default has not occurred, Borrower may repurchase stock from
former employees of Borrower in accordance with the terms of repurchase or
similar agreements between Borrower and such employees.
7.7 Investments.
Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates.
Directly or indirectly enter into or permit to exist
any material transaction with any Affiliate of Borrower except for transactions
that are in the ordinary course of Borrower's business, upon fair and reasonable
terms that are no less favorable to Borrower than would be obtained in an arm's
length transaction with a non-affiliated Person and except for transactions with
a Subsidiary that are upon fair and reasonable terms and transactions
constituting Permitted Investments.
7.9 Intellectual Property Agreements.
Borrower shall not permit the inclusion in any
material contract to which it becomes a party of any provisions that could or
might in any way prevent the creation of a security interest in Borrower's
rights and interests in any property included within the definition of the
Intellectual Property Collateral acquired under such contracts, except to the
extent that such provisions are necessary in Borrower's exercise of its
reasonable business judgment.
18
<PAGE> 22
7.10 Subordinated Debt.
Make any payment in respect of any Subordinated Debt,
or permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in
any documentation relating to the Subordinated Debt without Bank's prior written
consent.
7.11 Inventory.
Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.12 Compliance.
Become an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Advance for such
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 Payment Default.
If Borrower fails to pay, when due, any of the
Obligations;
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under
Sections 6.3, 6.6, 6.7, 6.8, 6.9, 6.10 or 6.11 or violates any of the covenants
contained in Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep,
or observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within ten (10) days after the occurrence
thereof; provided, however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot after diligent attempts by Borrower be
cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional reasonable
period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to have cured
such default shall not be deemed an Event of Default (provided that no Advances
will be required to be made during such cure period);
19
<PAGE> 23
8.3 Material Adverse Change.
If there (i) occurs a material adverse change in the
business, operations, or condition (financial or otherwise) of Borrower or (ii)
is a material impairment of the prospect of repayment of any portion of the
Obligations or (iii) is a material impairment of the value or priority of Bank's
security interests in the Collateral;
8.4 Attachment.
If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency.
If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements.
If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could reasonably be expect to have a Material Adverse Effect;
8.7 Subordinated Debt.
If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments.
If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations.
If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
20
<PAGE> 24
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies.
Upon the occurrence and during the continuance of an
Event of Default, Bank may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrower:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank
in an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Liquidate any Exchange Contracts not yet settled
and demand that Borrower immediately deposit cash with Bank in an amount
sufficient to cover any losses incurred by Bank due to liquidation of the
Exchange Contracts at the then prevailing market price;
(e) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(f) Without notice to or demand upon Borrower, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's premises, Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge, in order
to exercise any of Bank's rights or remedies provided herein, at law, in equity,
or otherwise;
(g) Without notice to Borrower set off and apply to
the Obligations any and all (i) balances and deposits of Borrower held by Bank,
or (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(h) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section 9.1,
to use, without charge, Borrower's labels, patents, copyrights, mask works,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral and, in connection with Bank's exercise of its rights
under this Section 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Bank's benefit;
(i) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's
21
<PAGE> 25
premises) as Bank determines is commercially reasonable, and apply the proceeds
thereof to the Obligations in whatever manner or order Bank deems appropriate;
(j) Bank may credit bid and purchase at any public
sale, or at any private sale as permitted by law; and
(k) Any deficiency that exists after disposition of
the Collateral as provided above will be paid immediately by Borrower.
(l) Bank shall have a non-exclusive, royalty-free
license to use the Intellectual Property Collateral to the extent reasonably
necessary to permit Bank to exercise its rights and remedies upon the occurrence
of an Event of Default.
9.2 Power of Attorney.
Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; (e) settle and adjust disputes and
claims respecting the accounts directly with account debtors, for amounts and
upon terms which Bank determines to be reasonable; (f) to file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; and (g) to transfer the Intellectual Property Collateral
into the name of Bank or a third party to the extent permitted under the
California Uniform Commercial Code, provided Bank may exercise such power of
attorney to sign the name of Borrower on any of the documents described in
Section 4.2 regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide advances hereunder is terminated.
9.3 Accounts Collection.
At any time from the date of this Agreement, Bank may
notify any Person owing funds to Borrower of Bank's security interest in such
funds and verify the amount of such Account. Borrower shall collect all amounts
owing to Borrower for Bank, receive in trust all payments as Bank's trustee,
and, if requested or required by Bank, immediately deliver such payments to Bank
in their original form as received from the account debtor, with proper
endorsements for deposit.
9.4 Bank Expenses.
If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
22
<PAGE> 26
9.5 Bank's Liability for Collateral.
So long as Bank complies with its obligations under
Section 9207 of the Code, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative.
Bank's rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative. Bank shall have
all other rights and remedies not expressly set forth herein as provided under
the Code, by law, or in equity. No exercise by Bank of one right or remedy shall
be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.7 Demand; Protest.
Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower: E-Loan, Inc.
6200 Village Parkway, Suite 102
Dublin, CA 94568
Attn: Frank M. Siskowski
FAX: (925) 556-2178
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn: Scott Wiebe
FAX: (408) 748-9478
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE
The Loan Documents shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN
23
<PAGE> 27
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns.
(a) This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participations in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder, subject to the provisions of this
Section 12.1.
(b) Bank may sell, negotiate or grant participations
to other financial institutions in all or part of the obligations of the
Borrower outstanding under the Loan Documents, without notice to or the approval
of Borrower; provided that any such sale, negotiation or participation shall be
in compliance with the applicable federal and state securities laws and the
other requirements of this Section 12.1. Notwithstanding the sale, negotiation
or grant of participations, Bank shall remain solely responsible for the
performance of its obligations under this Agreement, and Borrower shall continue
to deal solely and directly with Bank in connection with this Agreement and the
other Loan Documents.
(c) The grant of a participation interest shall be on
such terms as Bank determines are appropriate, provided only that (1) the holder
of such a participation interest shall not have any of the rights of Bank under
this Agreement except, if the participation agreement so provides, rights to
demand the payment of costs of the type described in Section 2.6, provided that
the aggregate amount that the Borrower shall be required to pay under Section
2.6 with respect to any ratable share of the Committed Revolving Line or any
Advance (including amounts paid to participants) shall not exceed the amount
that Borrower would have had to pay if no participation agreements had been
entered into, and (2) the consent of the holder of such a participation interest
shall not be required for amendments or waivers of provisions of the Loan
Agreement other than those which (i) increase the amount of the Committed
Revolving Line, (ii) extend the term of this Agreement, (iii) decrease the rate
of interest or the amount of any fee or any other amount payable to Bank under
this Agreement, (iv) reduce the principal amount payable under this Agreement,
or (v) extend the date fixed for the payment of principal or interest or any
other amount payable under this Agreement.
(d) Bank may assign, from time to time, all or any
portion of the Committed Revolving Line to an Affiliate of Bank or to The
Federal Reserve Bank or, subject to the prior written approval of Borrower
(which approval will not be unreasonably withheld), to any other financial
institution; provided, that (i) the amount of the Committed Revolving Line being
assigned pursuant to each such assignment shall in no event be less than Five
Hundred Thousand Dollars ($500,000) and shall be an integral multiple of One
Hundred Thousand Dollars ($100,000) and (ii) the parties to each such assignment
shall execute and deliver to Borrower an assignment agreement in a form
reasonably acceptable to each. Upon such execution and delivery, from and after
the effective date specified in such assignment agreement (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such assignment
agreement, have the rights and obligations of a Bank hereunder and (y) Bank
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such assignment agreement, relinquish its rights and be released
from its obligations under this Agreement (other than pursuant to this Section
12.1(d)), and, in the case of an assignment agreement covering all or the
remaining portion of Bank's rights and obligations under this Agreement, Bank
shall cease to be a party hereto. In the event of an assignment hereunder, the
parties agree to amend this Agreement to
24
<PAGE> 28
the extent necessary to reflect the mechanical changes which are necessary to
document such assignment. Each party shall bear its own expenses (including
without limitation attorneys' fees and costs) with respect to such an amendment.
12.2 Indemnification.
Borrower shall indemnify, defend, protect and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence.
Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 Severability of Provisions.
Each provision of this Agreement shall be severable
from every other provision of this Agreement for the purpose of determining the
legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration.
This Agreement cannot be amended or terminated except
by a writing signed by Borrower and Bank. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts.
This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival.
All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations (excluding Obligations under Section 2.6 and 12.2 to the extent they
remain inchoate at the time the outstanding payment Obligations are paid in
full) remain outstanding. The obligations of Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 12.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run, provided that
so long as the obligations referred to in the first sentence of this Section
12.7 have been satisfied, and Bank has no commitment to make any Credit
Extensions or to make any other loans to Borrower, Bank shall release all
security interests granted hereunder and redeliver all Collateral held by it in
accordance with applicable law.
12.8 Confidentiality.
In handling any confidential information, Bank shall
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement,
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided
25
<PAGE> 29
that they have entered into a comparable confidentiality agreement in favor of
Borrower and have delivered a copy to Borrower, (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order, (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may deem appropriate in connection with
the exercise of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
E-LOAN, INC.
By: /s/ Frank Siskowski
------------------------------------
Title: Chief Financial Officer
---------------------------------
SILICON VALLEY BANK
By: /s/ Scott M. Wiebe
------------------------------------
Title: Assistant Vice President
---------------------------------
26
<PAGE> 30
EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
(e) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing;
(g) All Borrower's Books relating to the foregoing and any and all
claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof.
A-1
<PAGE> 31
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
----------------------
FAX#: (408) 496-2426 TIME:
----------------------
FROM:
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
----------------------------------------------------------
PHONE NUMBER:
------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
---------------- ----------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $
-----------------------------------
PRINCIPAL PAYMENT (ONLY) $
-----------------------------------
INTEREST PAYMENT (ONLY) $
-----------------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
-----------------------------------
OTHER INSTRUCTIONS:
------------------------------------------------------------
- --------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan and Security
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
- ----------------------------------- ----------------------------
Authorized Requester Phone #
- ----------------------------------- ----------------------------
Received By (Bank) Phone #
--------------------------------------
Authorized Signature (Bank)
B-1
<PAGE> 32
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: E-LOAN, INC.
The undersigned authorized officer of E-Loan, Inc. hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in
complete compliance for the period ending _______________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER
"COMPLIES" COLUMN.
<TABLE>
<S> <C> <C>
REPORTING COVENANT REQUIRED COMPLIES
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain on the following Basis:
Minimum Quick Ratio (Monthly) 2.0:1.0 _____:1.0 Yes No
Liquidity Ratio (Monthly)(1) 2.0:1.0 _____:1.0 Yes No
Minimum Debt Service(Quarterly)(2) 1.5:1.0 _____:1.0 Yes No
Profitability: Quarterly $________(3) $________ Yes No
</TABLE>
(1)Converts to Debt Service Coverage after two consecutive quarters of Debt
Service Coverage of at least 1.5 to 1.0.
(2)Tested after conversion of Liquidity Ratio.
(3)No loss exceeding $2,500,000 for the fiscal quarter ended 12/31/98.
Subsequent operating performance covenants to be agreed upon by 2/15/99.
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
- ---------------------------------
SIGNATURE
- ---------------------------------
TITLE
- ---------------------------------
DATE
BANK USE ONLY
Received by:
----------------------------------------
AUTHORIZED SIGNER
Date:
-----------------------------------------------
Verified:
-------------------------------------------
AUTHORIZED SIGNER
Date:
-----------------------------------------------
Compliance Status: Yes No
D-1
<PAGE> 33
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: E-Loan, Inc. Bank: Silicon Valley Bank
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $1,500,000, and a Variable Rate, Equipment Line of Credit in a
principal amount up to $3,500,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: working capital and
purchase of equipment.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
<TABLE>
<CAPTION>
Revolving Line Equipment Line
<S> <C> <C>
Amount paid to Borrower directly: $ $
-------- -------
Undisbursed Funds $ $
-------- -------
Principal $ $
-------- -------
</TABLE>
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
<TABLE>
<S> <C>
Prepaid Finance Charges Paid in Cash: $
-----------
$10,000 Loan Fee
$ Accounts Receivables Audit
-----
Other Charges Paid in Cash: $
-----------
$ UCC Search Fees
-----
$ UCC Filing Fees
-----
$ Patent Filing Fees
-----
$ Trademark Filing Fees
-----
$ Copyright Filing Fees
-----
$ Outside Counsel Fees and Expenses (Estimate)
-----
Total Charges Paid in Cash $
-----------
</TABLE>
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered __________ the amount of any loan payment. If the
funds in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF DECEMBER 9, 1998.
BORROWER:
E-Loan, Inc.
- ----------------------------
Authorized Officer
<PAGE> 34
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: E-Loan, Inc. BANK: Silicon Valley Bank
INSURANCE REQUIREMENTS. E-Loan, Inc. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation
that coverage will not be cancelled or
diminished without a minimum of twenty (20)
days' prior written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of December 9, 1998, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER
9, 1998.
GRANTOR:
E-Loan, Inc.
x /s/ Frank Siskowski
------------------------------
Authorized Officer
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
---------------------------------------- -----------------
AGENT'S NAME:
------------------------------------------------------------------
INSURANCE COMPANY:
-------------------------------------------------------------
POLICY NUMBER:
-----------------------------------------------------------------
EFFECTIVE DATES:
---------------------------------------------------------------
COMMENTS:
----------------------------------------------------------------------
<PAGE> 35
CORPORATE RESOLUTIONS TO BORROW
BORROWER: E-Loan, Inc.
I, the undersigned Secretary or Assistant Secretary of E-Loan, Inc.
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of .
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation
(or by other duly authorized corporate action in lieu of a meeting), duly called
and held, at which a quorum was present and voting, the following resolutions
were adopted:
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
- ------------------------- ------------------- ----------------------------
Christian Larsen CEO /s/ Chris Larsen
- ------------------------- ------------------- ----------------------------
Janina Pawlowski President /s/ Janina Pawlowski
- ------------------------- ------------------- ----------------------------
Frank Siskowski CFO /s/ Frank Siskowski
- ------------------------- ------------------- ----------------------------
- ------------------------- ------------------- ----------------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of December 9, 1998 (the "Loan
Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Bank's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to Bank
one or more renewals, extensions, modifications, refinancings, consolidations,
or substitutions for one or more of the notes, or any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
1
<PAGE> 36
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
ISSUE WARRANTS. To issue warrants to purchase the Corporation's capital
stock, for such series and number, and on such terms, as an officer of the
Corporation shall deem appropriate.
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder, and
in all cases, to do and perform such other acts and things, to pay any and all
fees and costs, and to execute and deliver such other documents and agreements
as they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on 12/11, 1998 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X /s/ Chris Larsen
------------------------------
2
<PAGE> 1
EXHIBIT 10.39
EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES AGREEMENT
THIS INTERNET DATA CENTER SERVICES AGREEMENT (this "Agreement") is made
effective as of the Submission Date (November 10, 1997) indicated in the
initial Internet Data Center Services Order Form accepted by Exodus, by and
between Exodus Communications, Inc. ("Exodus") and the customer identified below
("Customer").
PARTIES:
CUSTOMER NAME: E-Loan, Inc.
---------------------------------------------------------
ADDRESS: 540 University Ave. Ste. 350
---------------------------------------------------------
Palo Alto, CA 94301
---------------------------------------------------------
PHONE: 650-617-0400
---------------------------------------------------------
FAX: 650-617-0410
---------------------------------------------------------
EXODUS COMMUNICATIONS, INC.
2650 San Tomas Expressway
Santa Clara, CA 95051
Phone: (408) 346-2200
Fax: (408) 346-2206
1. INTERNET DATA CENTER SERVICES.
Subject to the terms and conditions of this Agreement, during the term of this
Agreement, Exodus will provide to Customer the services described in the
Internet Data Center Services Order Form(s) ("IDC Services Order Form(s)")
accepted by Exodus, or substantially similar services if such substantially
similar services would provide Customer with substantially similar benefits
("Internet Data Center Services"). All IDC Services Order Forms accepted by
Exodus are incorporated herein by this reference, each as of the Submission Date
indicated in such form.
2. FEES AND BILLING.
2.1 Fees. Customer will pay all fees due according to the IDC Services
Order Form(s).
2.2 Billing Commencement. Billing for Internet Data Center Services,
other than Setup Fees, indicated in the initial IDC Services Order Form shall
commence on the earlier to occur of (i) the "Installation Date" indicated in the
initial IDC Services Order Form, regardless of whether Customer has commenced
use of the Internet Data Center Services, unless Customer is unable to install
the Customer Equipment and/or use the Internet Data Center Services by the
Installation Date due to the fault of Exodus, then billing will not begin until
the date Exodus has remedied such fault and (ii) the date the "Customer
Equipment" (Customer's computer hardware and other tangible equipment, as
identified in the Customer Equipment List which is incorporated herein by this
reference) is placed by Customer in the "Customer Area" (the portion(s) of the
Internet Data Centers, as defined in Section 3.1 below, made available to
Customer hereunder for the placement of Customer Equipment) and is operational.
All Setup Fees will be billed upon receipt of a Customer signed IDC Services
Order Form. In the event that Customer orders additional Internet Data Center
Services, billing for such services shall commence on the date Exodus first
provides such additional Internet Data Center Services to Customer or as
otherwise agreed to by Customer and Exodus.
2.3 Billing and Payment Terms. Customer will be billed monthly in
advance of the provision of Internet Data Center Services, and payment of such
fees will be due within thirty (30) days of the date of each Exodus invoice. All
payments will be made in U.S. dollars. Late payments hereunder will accrue
interest at a rate of one and one-half percent (1 -1/2%) per month, or the
highest rate allowed by applicable law, whichever is lower. If in its judgment
Exodus determines that Customer is not creditworthy or is otherwise not
financially secure, Exodus may, upon written notice to Customer, modify the
payment terms to require full payment before the provision of Internet Data
Center Services or other assurances to secure Customer's payment obligations
hereunder.
2.4 Taxes. All payments required by this Agreement are exclusive of all
national, state, municipal or other governmental excise, sales, value-added,
use, personal property, and occupational taxes, excises, withholding taxes and
obligations and other levies now in force or enacted in the future, all of which
Customer will be responsible for and will pay in full, except for taxes based on
Exodus' net income.
3. CUSTOMER'S OBLIGATIONS.
3.1 Compliance with Law and Rules and Regulations. Customer agrees that
Customer will comply at all times with all applicable laws and regulations and
Exodus' general rules and regulations relating to its provision of Internet Data
Center Services, as updated by Exodus from time to time ("Rules and
Regulations"). Customer acknowledges that Exodus exercises no control whatsoever
over the content of the information passing through its sites containing the
Customer Area and equipment and facilities used by Exodus to provide Internet
Data Center Services ("Internet Data Centers"), and that it is the sole
responsibility of Customer to ensure that the information it transmits and
receives complies with all applicable laws and regulations.
3.2 Customer's Costs. Customer agrees that it will be solely
responsible, and at Exodus's request will reimburse Exodus, for all costs and
expenses (other than those included as part of the Internet Data Center Services
and except as otherwise expressly provided herein) it incurs in connection with
this agreement.
3.3 Access and Security. Customer will be fully responsible for any
charges, costs, expenses (other than those included in the Internet Data Center
Services), and third party claims that may result from its use of, or access to,
the Internet Data Centers and/or the Customer Area including but not limited to
any unauthorized use of any access devices provided by Exodus hereunder. Except
with the advanced written consent of Exodus, Customer's access to the Internet
Data Centers will be limited solely to the individuals identified and authorized
by Customer to have access to the Internet Data Centers and the Customer Area in
accordance with this Agreement, as identified in the Customer Registration Form,
as amended from time to time, which is hereby incorporated by this reference
("Representatives").
3.4 No Competitive Services. Customer may not at any time permit any
Internet Data Center Services to be utilized for the provision of any services
that compete with any Exodus services, without Exodus' prior written consent.
3.5 Insurance.
(a) Minimum Levels. Customer will keep in full force and effect during
the term of this Agreement: (i) comprehensive general liability insurance in an
amount not less than $5 million per occurrence for bodily injury and property
damage; (ii) employer's liability insurance in an amount not less than $1
million per occurrence; and (iii) workers' compensation insurance in an amount
not less than that required by applicable law. Customer also agrees that it
will, and will be solely responsible for ensuring that its agents (including
contractors and subcontractors) maintain, other insurance at levels no less than
those required by applicable law and customary in Customer's and its agents'
industries.
(b) Certificates of Insurance. Prior to installation of any Customer
Equipment in the Customer Area, Customer will furnish Exodus with certificates
of insurance which evidence the minimum levels of insurance set forth above.
(c) Naming Exodus as an Additional Insured. Customer agrees that prior
to the installation of any Customer Equipment, Customer will cause its insurance
provider(s) to name Exodus as an additional insured and notify Exodus in writing
of the effective date thereof.
4. CONFIDENTIAL INFORMATION.
4.1 Confidential Information. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including
the terms and conditions of this Agreement ("Confidential Information").
Confidential Information will include, but not be limited to, each party's
proprietary software and customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, nor disclose to any third party
(except as required by law or to that party's attorneys, accountants and other
advisors as reasonably necessary), any of the other party's Confidential
Information and will take reasonable precautions to protect the confidentiality
of such information.
4.2 Exceptions. Information will not be deemed Confidential Information
hereunder if such information: (i) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (ii)
becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party; or (iv) is independently developed by
the receiving party.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Warranties by Customer.
(a) Customer Equipment. Customer represents and warrants that it owns
or has the legal right and authority, and will continue to own or maintain the
legal right and authority during the term of this Agreement, to place and use
the Customer Equipment as contemplated by this Agreement. Customer further
represents and warrants that its placement, arrangement, and use of the Customer
Equipment in the Internet Data Centers complies with the Customer Equipment
Manufacturer's environmental and other specifications.
(b) Customer's Business. Customer represents and warrants that
Customer's services, products, materials, data, information and Customer
Equipment used by Customer in connection with this Agreement as well as
Customer's and its permitted customers' and users' use of the Internet Data
Center Services (collectively, "Customer's Business") does not as of the
Installation Date, and will not during the term of this Agreement operate in any
manner that would violate any applicable law or regulation.
(c) Rules and Regulations. Customer has read the Rules and Regulations
and represents and warrants that Customer and Customer's Business are currently
in full compliance with the Rules and Regulations, and will remain so at all
times during the term of this Agreement.
(d) Breach of Warranties. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity, Exodus will have the right immediately,
in Exodus' sole discretion, to suspend any related Internet Data Center Services
if deemed reasonably necessary by Exodus to prevent any harm to Exodus and its
business.
5.2 Warranties and Disclaimers by Exodus.
(a) Service Level Warranty. In the event Customer is unable to transmit
and receive information from Exodus' Internet Data Centers to other portions of
the Internet and
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL (REV 10/97) PAGE 1
<PAGE> 2
Customer notifies Exodus immediately of such event and Exodus determines in its
reasonable judgment that such inability was caused by Exodus' failure to provide
Internet Data Center Services for reasons within Exodus' reasonable control and
not as a result of any actions or inactions of Customer or any third parties
(including failure of third party equipment), Exodus will, upon Customer's
request, credit Customer's account as follows: If Exodus failed to provide the
Internet Data Center Services for (i) more than two (2) consecutive hours in a
calendar month, Exodus will credit Customer's account the connectivity charges
for one (1) day of service; and (ii) more than eight (8) consecutive hours in a
calendar month, Exodus will credit Customer's account the connectivity charges
for one (1) week of service. Customer may receive only one of the foregoing
credits in any single calendar month, regardless of the number of such
occurrences. Exodus' scheduled maintenance of the Internet Data Centers and
Internet Data Center Services, as described in the Rules and Regulations, shall
not be deemed to be a failure of Exodus to provide Internet Data Center
Services. THIS WARRANTY DOES NOT APPLY TO ANY INTERNET DATA CENTER SERVICES THAT
EXPRESSLY EXCLUDE THIS WARRANTY. THIS SECTION 5.2(a) STATES CUSTOMER'S SOLE AND
EXCLUSIVE REMEDY (OTHER THAN TERMINATION OF THIS AGREEMENT) FOR ANY FAILURE BY
EXODUS TO PROVIDE INTERNET DATA CENTER SERVICES.
(b) No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTY SET OUT IN
SUBSECTION (a) ABOVE, THE INTERNET DATA CENTER SERVICES ARE PROVIDED ON AN "AS
IS" BASIS, AND CUSTOMER'S USE OF THE INTERNET DATA CENTER SERVICES IS AT ITS OWN
RISK. EXODUS DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS
AND/OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE,
AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE.
EXODUS DOES NOT WARRANT THAT THE INTERNET DATA CENTER SERVICES WILL BE
UNINTERRUPTED, ERROR-FREE, OR COMPLETELY SECURE.
(c) Disclaimer of Actions Caused by and/or Under the Control of Third
Parties. EXODUS DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM EXODUS'
INTERNET DATA CENTERS AND OTHER PORTIONS OF THE INTERNET. SUCH FLOW DEPENDS IN
LARGE PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR CONTROLLED BY
THIRD PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY THESE THIRD PARTIES CAN
PRODUCE SITUATIONS IN WHICH EXODUS' CUSTOMERS' CONNECTIONS TO THE INTERNET (OR
PORTIONS THEREOF) MAY BE IMPAIRED OR DISRUPTED. ALTHOUGH EXODUS WILL USE
COMMERCIALLY REASONABLE EFFORTS TO TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY
AND AVOID SUCH EVENTS, EXODUS CANNOT GUARANTEE THAT THEY WILL NOT OCCUR.
ACCORDINGLY, EXODUS DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM OR RELATED TO
SUCH EVENTS.
6. LIMITATIONS OF LIABILITY.
6.1 Personal Injury. EACH REPRESENTATIVE AND ANY OTHER PERSONS VISITING
THE INTERNET DATA CENTERS DOES SO AT ITS OWN RISK AND EXODUS ASSUMES NO
LIABILITY WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE OTHER
THAN EXODUS' GROSS NEGLIGENCE OR WILLFUL MISCONDUCT RESULTING IN PERSONAL INJURY
TO SUCH PERSONS DURING SUCH A VISIT.
6.2 Damage to Customer Equipment or Business. EXODUS ASSUMES NO
LIABILITY FOR ANY DAMAGE TO, OR LOSS RELATING TO, CUSTOMER'S BUSINESS RESULTING
FROM ANY CAUSE WHATSOEVER. CERTAIN CUSTOMER EQUIPMENT, INCLUDING BUT NOT LIMITED
TO CUSTOMER EQUIPMENT LOCATED ON CYBERRACKS, MAY BE DIRECTLY ACCESSIBLE BY OTHER
CUSTOMERS. EXODUS ASSUMES NO LIABILITY FOR ANY DAMAGE TO, OR LOSS OF, ANY
CUSTOMER EQUIPMENT RESULTING FROM ANY CAUSE OTHER THAN EXODUS' GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. TO THE EXTENT EXODUS IS LIABLE FOR ANY DAMAGE TO, OR LOSS
OF, THE CUSTOMER EQUIPMENT FOR ANY REASON, SUCH LIABILITY WILL BE LIMITED SOLELY
TO THE THEN-CURRENT VALUE OF THE CUSTOMER EQUIPMENT.
6.3 Exclusions. EXCEPT AS SPECIFIED IN SECTIONS 6.1 AND 6.2, IN NO
EVENT WILL EXODUS BE LIABLE TO CUSTOMER, ANY REPRESENTATIVE, OR ANY THIRD PARTY
FOR ANY CLAIMS ARISING OUT OF OR RELATED TO THIS AGREEMENT, CUSTOMER EQUIPMENT,
CUSTOMER'S BUSINESS OR OTHERWISE, AND ANY LOST REVENUE, LOST PROFITS,
REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF DATA, OR INTERRUPTION OR LOSS OF USE
OF SERVICE OR OF ANY CUSTOMER EQUIPMENT OR CUSTOMER'S BUSINESS, EVEN IF ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER THEORY OF CONTRACT, TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
6.4 Maximum Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, EXODUS'S MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY
CUSTOMER TO EXODUS HEREUNDER FOR THE PRIOR TWELVE (12) MONTH PERIOD.
6.5 Customer's Insurance. Customer agrees that it will not pursue any
claims against Exodus for any liability Exodus may have under or relating to
this Agreement until Customer first makes claims against Customer's insurance
provider(s) and such insurance provider(s) finally resolve(s) such claims.
6.6 Basis of the Bargain; Failure of Essential Purpose. Customer
acknowledges that Exodus has set its prices and entered into this Agreement in
reliance upon the limitations of liability and the disclaimers of warranties and
damages set forth herein, and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purpose.
7. INDEMNIFICATION.
7.1 Exodus' Indemnification of Customer. Exodus will indemnify, defend
and hold Customer harmless from and against any and all costs, liabilities,
losses, and expenses (including, but not limited to, reasonable attorneys' fees)
(collectively, "Losses") resulting from any claim, suit, action, or proceeding
(each, an "Action") brought against Customer alleging (i) the infringement of
any third party registered U.S. copyright or issued U.S. patent resulting from
the provision of Internet Data Center Services pursuant to this Agreement (but
excluding any infringement contributorily caused by Customer's Business or
Customer Equipment) and (ii) personal injury to Customer's Representatives from
Exodus's gross negligence or willful misconduct.
7.2 Customer's Indemnification of Exodus. Customer will indemnify,
defend and hold Exodus, its affiliates and customers harmless from and against
any and all Losses resulting from or arising out of any Action brought by or
against Exodus, its affiliates or customers alleging: (a) with respect to the
Customer's Business: (i) infringement or misappropriation of any intellectual
property rights; (ii) defamation, libel, slander, obscenity, pornography, or
violation of the rights of privacy or publicity; or (iii) spamming, or any other
offensive, harassing or illegal conduct or violation of the Rules and
Regulations; (b) any damage or destruction to the Customer Area, the Internet
Data Centers or the equipment of Exodus or any other customer by Customer or
Representative(s) or Customer's designees; or (c) any other damage arising from
the Customer Equipment or Customer's Business.
7.3 Notice. Each party will provide the other party prompt written
notice upon of the existence of any such event of which it becomes aware, and an
opportunity to participate in the defense thereof.
8. TERM AND TERMINATION.
8.1 Term. This Agreement will be effective for a period of one (1) year
from the Installation Date, unless earlier terminated according to the
provisions of this Section 8. The Agreement will automatically renew for
additional terms of one (1) year each.
8.2 Termination.
(a) For Convenience.
(i) By Customer During First Thirty Days. Customer may terminate this
Agreement for convenience by providing written notice to Exodus at any time
during the thirty (30) day period beginning on the Installation Date.
(ii) By Either Party. Either party may terminate this Agreement for
convenience at any time effective after the first (1st) anniversary of the
Installation Date by providing ninety (90) days' prior written notice to the
other party at any time thereafter.
(b) For Cause. Either party will have the right to terminate this
Agreement if: (i) the other party breaches any material term or condition of
this Agreement and fails to cure such breach within thirty (30) days after
receipt of written notice of the same, except in the case of failure to pay
fees, which must be cured within five (5) days after receipt of written notice
from Exodus; (ii) the other party becomes the subject of a voluntary petition in
bankruptcy or any voluntary proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors; or (iii) the other
party becomes the subject of an involuntary petition in bankruptcy or any
involuntary proceeding relating to insolvency, receivership, liquidation, or
composition for the benefit of creditors, if such petition or proceeding is not
dismissed within sixty (60) days of filing.
8.3 No Liability for Termination. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with its
terms.
8.4 Effect of Termination. Upon the effective date of expiration or
termination of this Agreement: (a) Exodus will immediately cease providing the
Internet Data Center Services; (b) any and all payment obligations of Customer
under this Agreement will become due immediately; (c) within thirty (30) days
after such expiration or termination, each party will return all Confidential
Information of the other party in its possession at the time of expiration or
termination and will not make or retain any copies of such Confidential
Information except as required to comply with any applicable legal or accounting
record keeping requirement; and (d) Customer will remove from the Internet Data
Centers all Customer Equipment and any of its other property within the Internet
Data Centers within five (5) days of such expiration or termination and return
the Customer Area to Exodus in the same condition as it was on the Installation
Date, normal wear and tear excepted. If Customer does not remove such property
within such five-day period, Exodus will have the option to (i) move any and all
such property to secure storage and charge Customer for the cost of such removal
and storage, and/or (ii) liquidate the property in any reasonable manner.
8.5 Customer Equipment as Security. In the event that Customer fails to
pay Exodus all amounts owed Exodus under this Agreement when due, Customer
Agrees that upon written notice, Exodus may take possession of any Customer
Equipment and store it, at Customer's expense, until taken in full or partial
satisfaction of any lien or judgment, all without being liable to prosecution or
for damages.
8.6 Survival. The following provisions will survive any expiration or
termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8 and 9.
9. MISCELLANEOUS PROVISIONS.
9.1 Force Majeure. Except for the obligation to pay money, neither
party will be liable for any failure or delay in its performance under this
Agreement due to any cause beyond its reasonable control, including act of war,
acts of God, earthquake, flood, embargo, riot, sabotage, labor shortage or
dispute, governmental act or failure of the Internet, provided that the delayed
party: (a) gives the other party prompt notice of such cause, and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
9.2 No Lease. This Agreement is a services agreement and is not
intended to and will not constitute a lease of any real or personal property.
Customer acknowledges and agrees that (i) it has been granted only a license to
occupy the Customer Space and use the Internet Data Centers and any equipment
provided by Exodus in accordance with this Agreement, (ii) Customer has not been
granted any real property interest in the Customer Space or Internet Data
Centers, and (iii) Customer has no rights as a tenant or otherwise under any
real property or landlord/tenant laws, regulations, or ordinances. For good
cause, including the exercise of any rights under Section 8.5 above, Exodus may
suspend the right of any Representative or other person to visit the Internet
Data Centers.
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL (REV 10/97) PAGE 2
<PAGE> 3
9.3 Marketing. Customer agrees that Exodus may refer to Customer by
trade name and trademark, and may briefly describe Customer's Business, in
Exodus' marketing materials and web site. Customer hereby grants Exodus a
license to use any Customer trade names and trademarks solely in connection with
the rights granted to Exodus pursuant to this Section 9.3.
9.4 Government Regulations. Customer will not export, re-export,
transfer, or make available, whether directly or indirectly, any regulated item
or information to anyone outside the U.S. in connection with this Agreement
without first complying with all export control laws and regulations which may
be imposed by the U.S. Government and any country or organization of nations
within whose jurisdiction Customer operates or does business.
9.5 Non-Solicitation. During the period beginning on the Installation
Data and ending on the first anniversary of the termination or expiration of
this Agreement in accordance with its terms, Customer agrees that it will not,
and will ensure that its affiliates do not, directly or indirectly, solicit or
attempt to solicit for employment any persons employed by Exodus during such
period.
9.6 Governing Law; Dispute Resolution, Severability; Waiver. This
Agreement is made under and will be governed by and construed in accordance with
the laws of the State of California (except that body of law controlling
conflicts of law) and specifically excluding from application to this Agreement
that law known as the United Nations Convention on the International Sale of
Goods. Any dispute relating to the terms, interpretation or performance of this
Agreement (other than claims for preliminary injunctive relief or other
pre-judgment remedies) will be resolved at the request of either party through
binding arbitration. Arbitration will be conducted in Santa Clara County,
California, under the rules and procedures of the Judicial Arbitration and
Mediation Society ("JAMS"). The parties will request that JAMS appoint a single
arbitrator possessing knowledge of online services agreements; however the
arbitration will proceed even if such a person is unavailable. In the event any
provision of this Agreement is held by a tribunal of competent jurisdiction to
be contrary to the law, the remaining provisions of this Agreement will remain
in full force and effect. The waiver of any breach or default of this Agreement
will not constitute a waiver of any subsequent breach or default, and will not
act to amend or negate the rights of the waiving party.
9.7 Assignment; Notices. Neither party may assign its rights or
delegate its duties under this Agreement either in whole or in part without the
prior written consent of the other party, except that this Agreement may be
assigned in whole as part of a corporate reorganization, consolidation, merger,
or sale of substantially all of its assets. Any attempted assignment or
delegation without such consent will be void. This Agreement will bind and inure
to the benefit of each party's successors and permitted assigns. Any notice or
communication required or permitted to be given hereunder may be delivered by
hand, deposited with an overnight courier, sent by confirmed facsimile, or
mailed by registered or certified mail, return receipt requested, postage
prepaid, in each case to the address of the receiving party indicated on the
signature page hereof, or at such other address as may hereafter be furnished in
writing by either party hereto to the other. Such notice will be deemed to have
been given as of the date it is delivered, mailed or sent, whichever is earlier.
9.8 Relationship of Parties. Exodus and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Exodus and
Customer. Neither Exodus nor Customer will have the power to bind the other or
incur obligations on the other's behalf without the other's prior written
consent, except as otherwise expressly provided herein.
9.9 Entire Agreement; Counterparts. This Agreement, including all
documents incorporated herein by reference, constitutes the complete and
exclusive agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces any and all prior or contemporaneous
discussions, negotiations, understandings and agreements, written and oral,
regarding such subject matter. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
Customer's and Exodus' authorized representatives have read the foregoing and
all documents incorporated therein and agree and accept such terms effective as
of the date first above written.
CUSTOMER EXODUS COMMUNICATIONS, INC.
Signature: /s/ Chris Larsen Signature: /s/ Illegible
---------------------------- ----------------------------
Print Name: Chris Larsen Print Name: Illegible
--------------------------- ---------------------------
Title: President Title: Illegible
-------------------------------- --------------------------------
EXODUS COMMUNICATIONS, INC. CONFIDENTIAL REV 10/97) Page 3
<PAGE> 1
EXHIBIT 10.40
MARKETING AGREEMENT
BY AND BETWEEN
E-LOAN, INC.
AND
PHH MORTGAGE SERVICES CORPORATION
Release Date:
REVISED DATE: 2/4/98
<PAGE> 2
MARKETING AGREEMENT
This Marketing Agreement ("Agreement") is entered into as of the 19th
day of January, 1998 ("Effective Date"), between PHH Mortgage Services
Corporation ("PHH"), a New Jersey corporation having an office at ??000 Atrium
Way, Mt. Laurel, New Jersey 08054 and E-LOAN, INC., having an office at 540
University Avenue, Suite 150, Palo Alto, CA 94301 ("E-Loan") (the "Parties").
WHEREAS, PHH is engaged in providing mortgage services that include
counseling, efficient processing, origination, and servicing of mortgage loans
on homes located in the United States; and
WHEREAS, E-Loan is a mortgage broker which provides marketing and
access services to mortgage senders via the internet.
WHEREAS, PHH and E-Loan wish to develop a marketing and access program
("Program") the purpose of which will be to market PHH's mortgage services on
the internet.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Parties hereby agree as follows:
The Program.
(a) E-Loan shall provide access to PHH and market PHH and its
various mortgage programs and products on the internet at
various web sites. The web sites shall include promotional
information about PHH and educational materials to customers
regarding the mortgage process. E-Loan shall be responsible
for developing and maintaining the web sites which shall
enable customers to access information regarding various loan
programs and products, provide comparative product
descriptions, costs and similar information, allow the
customer to prequalify for a mortgage loan, and select the
most suitable loan product under their circumstances.
(b) The Parties contemporaneously have agreed upon additional
details concerning their respective obligations under the
Program, including but not limited to, as applicable, the
frequency, size, number and general content of the web sites
to be advertised. E-Loan shall review and make suggestions to
PHH regarding PHH's advertisements and the most effective
manner in which to promote its programs and products on the
internet. PHH shall have sole discretion in selecting the
marketing materials which are ultimately placed on the web
site.
(c) As part of the Program, E-Loan shall provide monthly reports
to PHH (E-Loan Reports), in form and format reasonably
acceptable to the Parties, that describe, among other things,
the extent to which E-Loan has met its obligations under the
Program.
(d) In addition, PHH shall provide to E-Loan its standard monthly
reporting on registrations, cancellations, closings and
pipeline so that E-Loan may monitor the effectiveness and
quality of the mortgage services provided by PHH.
2
<PAGE> 3
Compensation. Beginning January 19, 1998, PHH shall pay a fee to E-Loan
("Semiannual Marketing Fee") for the access and marketing provided
under the Program every six months during the term of this Agreement
(Semiannual term). The amount of the Semiannual Marketing Fee shall be
$100,000 unless adjusted as provided in this Section 2. The Semiannual
Marketing Fee shall be paid in two equal installments. The first
installment of $50,000 shall be paid within 30 days of execution of
this Agreement and the second installment of $50,000 shall be paid
within 10 days of the end of the Semiannual period. The Parties each
acknowledge and agree that the Semiannual Marketing Fee reflects the
reasonable and fair market value of the goods and services to be
provided by E-Loan under the Program, without regard to the value or
volume of mortgage loans that may be attributable to the Program. Not
more frequently than once each six months, either party may notify the
other, in writing, of its determination (Determination), and the bases
therefor, that the Semiannual Marketing Fee amount may fail to reflect
the reasonable and fair market value of the goods and services to be
provided in the E-Loan Reports, and upon other information made
available to the Parties including but not limited to: (i) the number
of web sites maintained by E-Loan; (ii) the number of customers
visiting the web site; (iii) E-Loan's marketing area; (iv) changes
thereto since the prior six month period (collectively, the Data). To
the extent they are reasonably available to it, E-Loan agrees to
provide the Data to PHH as part of its E-Loan Reports. If the other
party agrees with the Determination, the Semiannual Marketing Fee
amount shall be so adjusted, effective upon the commencement of the
next six month term. If there is disagreement, the Parties shall
attempt in good faith to resolve the disagreement. If unable to do so,
the Semiannual Marketing Fee shall not be adjusted in response to that
Determination.
Regulatory Compliance. Each party will comply with all applicable
regulatory requirements of the United States or any state with respect
to its services to be provided under this Agreement. Each party shall
maintain any and all government approvals, licenses or authorizations
required by the laws of the United States or any state to engage in the
activities described in this Agreement.
Relationship. The relationship between PHH and E-Loan shall be that of
independent contractors and neither party shall be or represent itself
to be an agent, employee, partner or joint venturer of the other, nor
shall either party have or represent itself to have any power or
authority to act for, bind or commit the other. PHH shall have sole
discretion and authority with respect to product development,
origination, processing, underwriting and servicing of all mortgage
financing.
Confidential Information. Each party recognizes that, during the term
of this Agreement, its directors, officers or employees may obtain
knowledge of trade secrets, membership lists and other confidential
information of the other party which are valuable, special or unique to
the continued business of that party. Accordingly, each party hereby
agrees to hold such information in confidence and to use its best
efforts to ensure that such information is held in confidence by its
officers, directors and employees and to be utilized only in accordance
with the terms of this agreement.
Trademarks. Each party shall grant the other party a license to use
certain of its trademarks during the term of this Agreement. Each party
agrees that nothing herein shall give to the other party any right,
title or interest in the other party's Marks, except to use the Marks
in accordance with the terms of this Agreement and that the PHH Marks
and the E-Loan Marks are the sole and exclusive property of PHH and
E-Loan, respectively.
3
<PAGE> 4
Disclaimer. Neither PHH nor E-Loan make any representation or warranty
to the other regarding the effect that this Agreement and the
consummation of the transactions contemplated hereby may have upon the
Foreign, Federal, State or local tax liability of the other.
Severability. If any provision of this Agreement should be invalid,
illegal or in conflict with any applicable state or federal law or
regulation, such law or regulation shall control, to the extent of such
conflict, without affecting the remaining provisions of this Agreement.
Term and Termination.
(a) The term of this Agreement shall be for a period of one (1)
year commencing on its Effective Date unless earlier
terminated in accordance with the provisions of this Section
9. Upon expiration of the initial one (1) year term, this
Agreement shall automatically renew from year to year unless
earlier terminated in accordance with the provisions of this
Section 9.
(b) Either party may terminate this Agreement, at any time, with
or without cause by providing sixty (60) days written notice
to the other.
(c) Upon termination of this Agreement, as provided herein: (i)
E-Loan shall refrain from any and all further use of or
reference to materials utilizing PHH; (ii) PHH shall continue
to process, in due course, any mortgage loan applications
submitted by E-Loan's customers prior to termination of this
Agreement; and (iii) PHH shall be obligated to pay any then
due Semiannual Marketing Fee, and (iv) the provisions of
Sections 5 and 10 of this Agreement shall survive.
Hold Harmless.
(a) PHH agrees to indemnify, defend and hold E-Loan harmless from
and against any and all claims, suits, actions, liability,
losses, expenses, or damages which may hereafter arise, which
E-Loan, its affiliates, directors, officers, agents or
employees may sustain due to or arising out of any negligent
act or omission by PHH, its affiliates, officers, agents,
representatives or employees or out of any act by PHH, its
affiliates, officers, agents, representatives or employees in
violation of this Agreement or in violation of any applicable
law or regulation. Provided, however, the above
indemnification shall not provide coverage for (a) any claim,
suit, action, liability, loss, expense or damage that resulted
from an act or omission of E-Loan or (b) the amount by which
any cost, fee, expense or loss associated with any of the
foregoing were increased as a result of an act or omission on
the part of E-Loan.
(b) E-Loan agrees to indemnify, defend and hold PHH harmless from
and against any and all claims, suits, actions, liability,
losses, expenses, or damages which may hereafter arise, which
PHH, its affiliates, directors, officers, agents or employees
may sustain due to or arising out of any negligent act or
omission by E-Loan, its affiliates, officers, agents,
representatives or employees or out of any act by E-Loan, its
affiliates, officers, agents, representatives or employees in
violation of this Agreement or in violation of any applicable
law or regulation. Provided,
4
<PAGE> 5
however, the above indemnification shall not provide coverage
for (a) any claim, suit, action, liability, loss, expense or
damage that resulted from an act or omission of PHH or (b) the
amount by which any cost, fee, expense or loss associated with
any of the foregoing were increased as a result of an act or
omission on the part of PHH.
1. Notices. All notices required or permitted by this Agreement shall be
in writing and shall be given by certified mail, return receipt
requested or by reputable overnight courier with package tracing
capability and sent to the address at the head of this Agreement or
such other address that a party specified in writing in accordance with
this paragraph.
2. Amendment. The terms and conditions of this Agreement may not be
modified or amended other than by a writing signed by both Parties.
3. Assignment; Binding Nature. The terms of this Agreement shall be
binding upon and shall inure to the benefit of the Parties hereto. This
Agreement shall not be assigned by any party without the express prior
written consent of the other party.
4. Entire Agreement. This Agreement and any Exhibits attached hereto
constitute the entire Agreement between the Parties and supersede all
oral or written negotiations of the Parties with respect to the subject
matter hereof.
5. Governing Law. This agreement shall be subject to and construed under
the laws of the State of New Jersey, without reference to conflicts of
law provisions thereof.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed the day and year first above written.
E-LOAN, INC. PHH MORTGAGE SERVICES CORPORATION
Signature: /s/ Signature Illegible Signature: /s/ Signature Illegible
By: DOUG GALEN By: Bruce Isaacson
---------- --------------
Title: V.P. Sales & Bus Dev. Title: Vice President Marketing
--------------------- ------------------------
5
<PAGE> 1
EXHIBIT 11.1
SCHEDULE RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
1996 1997 1998
---------- ----------- ------------
<S> <C> <C> <C>
Net loss $ (110,044) $(1,374,493) $(10,527,054)
Accretion for mandatorily redeemable
preferred stock -- (41,667) (1,013,352)
---------- ----------- ------------
Net loss for common stockholders $ (110,044) $(1,416,160) $(12,185,406)
---------- ----------- ------------
Weighted average number of common shares
outstanding - basic and diluted 4,085,000 4,087,334 4,133,428
---------- ----------- ------------
Net loss per share - basic and diluted $(0.03) $(0.35) $(2.95)
====== ====== ======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARY LIST
E-LOAN EUROPE BV
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 23, 1999 relating
to the financial statements of E-Loan, Inc., which appears in such Prospectus.
We also consent to the references to us under the headings "Experts" and
"Selected Financial Data" in such Prospectus. However, it should be noted that
PricewaterhouseCoopers LLP has not prepared or certified such "Selected
Financial Data"
/s/ PricewaterhouseCoopers LLP
San Francisco, CA
March 23, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,141,367
<SECURITIES> 0
<RECEIVABLES> 411,058
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 52,426,754
<PP&E> 2,719,516
<DEPRECIATION> 353,952
<TOTAL-ASSETS> 55,523,256
<CURRENT-LIABILITIES> 44,024,519
<BONDS> 0
21,393,002
502,383
<COMMON> 26,867
<OTHER-SE> (11,713,202)
<TOTAL-LIABILITY-AND-EQUITY> 34,130,254
<SALES> 0
<TOTAL-REVENUES> 6,831,546
<CGS> 0
<TOTAL-COSTS> 18,176,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 758,031
<INCOME-PRETAX> (11,172,054)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,172,054)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,172,054)
<EPS-PRIMARY> 2.95
<EPS-DILUTED> 0
</TABLE>
