MORTGAGE LOAN WAREHOUSE AND SECURITY AGREEMENT
SUMMIT BANK
- TO -
COMMUNITY HOME MORTGAGE CORPORATION
Dated: November 15, 1999
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MORTGAGE LOAN WAREHOUSE AND SECURITY AGREEMENT
THIS MORTGAGE LOAN WAREHOUSE AND SECURITY AGREEMENT is entered into as
of this 15 day of November, 1999, between COMMUNITY HOME MORTGAGE CORPORATION, a
New York corporation, and SUMMIT BANK, a New Jersey banking association.
SECTION 1
DEFINITIONS
1.1 The following terms as used in this Mortgage Loan Warehouse and
Security Agreement shall have the meanings hereinafter provided:
(a) "Adjusted Tangible Net Worth:" At anytime of the
determination thereof, the sum of:
(i) Tangible Net Worth plus subordinated notes
payable to stockholders; plus
(ii) one (1%) percent of the aggregate outstanding
principal balance of the Borrower's FNMA, FHLMC and GNMA mortgage loan servicing
portfolio and one-half of one percent (.50%) of the Borrower's private investor
mortgage loan servicing portfolio (internally generated or acquired by purchase)
less the sum of;
(iii) any amounts included in Tangible Net Worth
(however designated on the financial statements) allocated to the purchase of
the Borrower's servicing portfolio or any part thereof, or any amounts (however
designated on the financial statements) attributable to the capitalization of
servicing fees in excess of the cost of servicing; and
(iv) any amounts related to non-mortgage banking
items included in Tangible Net Worth (however designated on the financial
statements) which the Lender may exclude in its sole discretion.
(b) "Affiliate:" Any -
(i) entity that directly or indirectly owns,
controls, or holds with power to vote, ten (10%) percent or more of the
outstanding voting securities of the Borrower, other than an entity that holds
such securities -
(1) in a fiduciary or agency capacity
without sole discretionary power to vote such securities; or
(2) solely to secure a debt, if such entity
has not in fact exercised such power to vote;
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(ii) corporation, ten (10%) percent or more of whose
outstanding voting securities are directly or indirectly owned, controlled, or
held with power to vote, by the Borrower, or by an entity that directly or
indirectly owns, controls, or holds with power to vote, ten (10%) percent or
more of the outstanding voting securities of the Borrower, other than an entity
that holds such securities -
(1) in fiduciary or agency capacity without
sole discretionary power to vote such securities; or
(2) solely to secure a debt, if such entity
has not in fact exercised such power to vote;
(iii) person whose business is operated under a lease
or operating agreement by the Borrower, or any person substantially all of whose
property is operated under an operating agreement with the Borrower; or
(iv) entity that operates the business or
substantially all of the property of the Borrower under a lease or operating
agreement.
(c) "Agreement:" The contents hereof together with the
contents of any and all Exhibits annexed hereto and made a part hereof and all
other writings submitted by the Borrower to the Lender pursuant hereto.
(d) "Available Amount:" The maximum amount available to be
borrowed by the Borrower from time to time under the Line of Credit as
calculated pursuant to Subsection 2.1(a) hereof.
(e) "Borrower:" Community Home Mortgage Corporation, a New
York corporation.
(f) "Collateral:" All -
(i) Mortgage Loans, Mortgage Notes, Mortgages and all
other property rights, guaranties, proceeds and payments relating to Mortgage
Loans, which have been pledged or assigned to Lender (whether by delivery to
Lender or to a third party on Lender's behalf or otherwise);
(ii) with respect to the foregoing, accounts,
accounts receivable, payments and prepayments of principal, interest, and other
income due or to become due thereon and all proceeds therefrom, and all the
right, title and interest of every nature whatsoever of Borrower in and to the
same and every part of such property including, without limitation, the
following:
(1) all rights, liens and security interests
existing with respect thereto or as security therefor;
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(2) all hazard insurance policies, title
insurance policies (issued by governmental agencies or otherwise) or
condemnation proceeds with respect thereto;
(3) all prepayment premiums and late payment
charges with respect thereto;
(iii) real estate given as collateral to Borrower for
a Mortgage Loan and acquired by Borrower by deed in lieu of foreclosure or by
foreclosure in connection with the enforcement of any security interest granted
to Borrower attributable to any such Mortgage Loan;
(iv) commitments of Investors, mortgage-backed
securities, and/or pool participation certificates and the proceeds resulting
from sales of same by Borrower;
(v) right, title and interest of Borrower in and to
all files, business records, surveys, certificates, correspondence, appraisals,
environmental reports, computer programs, computer tapes, computer discs,
accounting records, and other records, information, and related data of
Borrower, including, but not limited to, those of the foregoing necessary to
identify and locate the Collateral;
(vi) all right, title and interest of Borrower in
fixtures and other personal property in conjunction with loans made to Persons
by Borrower and assigned to Lender; and
(vii) as to all of the foregoing (i) through (vi)
inclusive, cash proceeds, non-cash proceeds and products thereof, additions and
accessions thereto, replacements and substitutions therefor, and all related
books, records, journals, computer print-outs and data, of the Borrower.
(g) "Controlled Group:" As such term is defined in the
Internal Revenue Code of 1986, as amended.
(h) "Document List:" The Document List in the form of Exhibit
B annexed hereto and made a part hereof.
(i) "Eligible Mortgage Loan:" Only those Mortgage Loans of the
Borrower that are and continue to be acceptable to the Lender in all respects.
Standards of eligibility may be fixed and revised by the Lender from time to
time in the Lender's reasonable discretion. The Lender shall also have the right
to establish appropriate reserves from time to time in the Lender's sole
discretion. In general, the Lender will not deem any Mortgage Loan to be
eligible unless all of the following requirements are met:
(i) The Mortgage Loan is less than thirty (30) days
past due according to its terms;
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(ii) If required by the Lender, the Mortgage Loan has
been specifically assigned to the Lender on a properly executed and validly
recorded Form Assignment of Mortgage;
(iii) The Mortgage Loan is secured by a properly
perfected first mortgage lien upon a fee simple interest in residential property
(1 to 4 family) and all improvements located thereon;
(iv) The Mortgage Loan is evidenced by a Mortgage
Note, in form and substance acceptable to the Lender;
(v) The Mortgage Loan is less than Three Hundred
Fifty Thousand ($350,000.00) Dollars, unless specifically approved by Lender;
(vi) The title of the Borrower to the Mortgage Loan
is absolute, the Mortgage Loan is not subject to any prior liens, except for
that of the Lender, and the Mortgage Loan does not arise out of a contract
which, by its terms, forbids or makes void or unenforceable the liens of the
Borrower;
(vii) The Borrower has not received any note, trade
acceptance, draft, chattel paper or other instrument with respect to or in
payment for the Mortgage Loan;
(viii) The Mortgage Loan is not subject to any set
off, recoupment, counterclaim, defense, deduction, charge back, allowance or
adjustment, or to dispute, objection or complaint by the maker of the Mortgage
Note evidencing the Mortgage Loan and concerning its liability on the Mortgage
Loan, and the contract giving rise to the Mortgage Loan has not been rescinded
or rejected, and the amount shown on the Borrower's books is owing to the
Borrower;
(ix) The Mortgage Loan arose in the ordinary course
of business of the Borrower and no notice of bankruptcy, receivership,
insolvency, dissolution, termination of existence, credit impairment, or the
like of the maker of the Mortgage Note evidencing the Mortgage Loan, and no
notice of death of the maker of the Mortgage Note evidencing the Mortgage Loan
or any partner or co-owner thereof, has been received by the Borrower or the
Lender;
(x) The maker of the Mortgage Note evidencing the
Mortgage Loan is not a person, firm, or corporation which directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Borrower, including, without limitation,
any Subsidiary or Affiliate as to the Borrower and the Borrower as to any
Subsidiary or any Affiliate;
(xi) The Mortgage Loan does not consist of any
accrued or unpaid interest, fees or service charges and shall consist strictly
of the principal amount owed on such Mortgage
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Loan, as such principal amount is reflected on the financial statements of the
Borrower submitted to the Lender pursuant to Subsection 6.13 hereof; provided,
however, that the Mortgage Loan may consist of accrued or unpaid interest only
if the purpose of said Mortgage Loan is to rehabilitate and/or refurbish the
real property which secures said Mortgage Loan;
(xii) The Mortgage Loan is not subject to any contra
offsets by the Borrower;
(xiii) The Lender has not notified the Borrower that
the Mortgage Loan or the maker on the Mortgage Note evidencing the Mortgage Loan
is unsatisfactory in the sole discretion of the Lender due to lack of
creditworthiness;
(xiv) The Borrower is not aware of any terms or
conditions that would make the Mortgage Loan unsalable to an Investor;
(xv) The Mortgage Loan has not been included under
the Line of Credit for a period of time in excess of the Warehouse Period;
(xvi) The Mortgage Loan is subject to a Take-Out
Commitment which is in full force and effect and is in full compliance
therewith;
(xvii) The property securing the Mortgage Loan is
located in an Acceptable Jurisdiction; and
(xviii) The Mortgage Loan is subject to such other
normal and reasonable limitations as the Lender may establish from time to time,
including, without limitation, the applicable requirements set forth by FNMA and
FHLMC.
(j) "ERISA:" The Employee Retirement Income Security Act of
1974.
(k) "Event of Default:" Anyone of the occurrences described in
Section 7.
(1) "FHLMC:" The Federal Home Loan Mortgage Corporation or its
successor.
(m) "FNMA:" The Federal National Mortgage Association or its
successor.
(n) "Floating Base Rate:" The rate of interest established by
the Lender from time to time as a means of pricing some loans to its customers.
The Floating Base Rate is neither tied to any external rate of interest or
index, nor does it necessarily reflect the lowest rate of interest actually
charged by the Lender to any particular class or category of customers.
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(o) "GAAP:" Generally accepted accounting principles in effect
from time to time in the United States of America, applied on a consistent
basis.
(p) "GNMA:" The Government National Mortgage Association or
its successor.
(q) "Guarantor:" Ira Silverman, designated to sign the
Guaranty Agreements.
(r) "Guaranty Agreements:" The Individual Guaranty Agreements
in form and substance acceptable to the Lender.
(s) "Hazardous Substances:" Any substances defined or
designated as hazardous or toxic wastes, hazardous or toxic materials, hazardous
or toxic substances, or similar terms, by any environmental statute, rule or
regulation of any governmental entity presently in effect and applicable to the
Properties.
(t) "Intangible Assets:" The amount of all assets of the
Borrower reflected as goodwill, patents, deferred financing fees, research and
development and all other assets required to be classified as intangible assets
in accordance with GAAP.
(u) "Home Improvement Loans:" Second Mortgage Loans approved
by Lender in its sole discretion which shall not in the aggregate at any time
exceed $3,000,000.00. It is agreed and understood that the Lender shall evaluate
each request for an advance under this Subsection (u) as it shall determine
giving consideration to the nature of each Home Improvement Loan and the
circumstances existing at the time of each request.
(v) "Investor:" A bank, trust company, savings and loan
association, pension fund, governmental authority, insurance company,
institutional investor, investment brokerage firm, mortgage banker, or other
entity, acceptable to the Lender, in its sole discretion.
(w) "Lender:" Summit Bank, a New Jersey banking association,
its successors and assigns.
(x) "Lender's Rights and Remedies:" All of the rights and
remedies of the Lender described in Section 8.
(y) "Liens:" All mortgages, liens, judicial liens,
encumbrances, security interests, charges, pledges, hypothecations, assignments,
conditional sale or other title retention agreements, and the like, relating to
any real or personal property interest of the Borrower whether legal or
equitable.
(z) "Line of Credit:" The line of credit described in
Subsection 2.1(a).
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(aa) "Loans:" Collectively and individually, all Mortgage
Loans.
(bb) "Loan Advance Request:" The loan advance request
certificate in the form of Exhibit A annexed hereto and made a part hereof.
(cc) "Maturity Date:" November 30, 2000.
(dd) "Maximum Line of Credit Amount:" Fifteen Million
($15,000,000.00) Dollars less the aggregate outstanding advances on Home
Improvement Loans and Personal Property Loans.
(ee) "Mortgage:" A mortgage or a deed of trust on real
property securing a Mortgage Loan and also creating a properly perfected, valid
first lien on the fee simple title to real property referred therein subject
only to (i) liens for taxes, not yet due and payable or similar governmental
charges not yet due and payable or still subject to payment without interest or
penalty, (ii) zoning restrictions of record, which shall neither defeat nor
render invalid such lien or the priority thereof, nor materially impair the
marketability or value of such real estate, nor be violated by the existing
improvements or the intended use thereof; and (iii) such other liens as may have
been approved in writing by Lender.
(ff) "Mortgage Loan:" A loan evidenced by a Mortgage Note and
secured by a Mortgage covering a fee simple interest in residential property
(1-4 family) and all improvements and fixtures located thereon.
(gg) "Mortgage Note:" A valid and binding negotiable
instrument, whether in the form of a note, bond or other evidence of
indebtedness, payable to the order of the Borrower, evidencing a Mortgage Loan
and secured by a Mortgage, for which:
(i) The title of the Borrower, to the Mortgage Note
is absolute, the Mortgage Note is not subject to any prior liens, except for
that of the Lender, and the Mortgage Note does not arise out of a contract
which, by its terms, forbids or makes void or unenforceable the lien of the
Borrower;
(ii) The Borrower has not received any note, trade
acceptance, draft, chattel paper or other instrument with respect to or in
payment for the Mortgage Note;
(iii) The Mortgage Note is not subject to any set
off, recoupment, counterclaim, defense, allowance or adjustment, or to dispute,
objection or complaint by the maker of the Mortgage Note and concerning its
liability on the Mortgage Note, and the contract giving rise to the Mortgage
Note has not been rescinded or rejected, and the amount shown on the Borrower's
books is owing to the Borrower, and no partial payment has been made thereon by
anyone;
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(iv) The Mortgage Note was executed by a bona fide
third person who has capacity to contract;
(v) The Mortgage Note is payable in accordance with
terms and conditions acceptable to Lender; and
(vi) The Mortgage Note complies with any other terms
as may be required by Lender from time to time.
(hh) "Obligations:" All loans, advances, indebtedness, notes,
liabilities, and amounts, liquidated or unliquidated, each of every kind, nature
and description, whether arising under this Agreement or otherwise, including,
without limitation, principal and interest, and whether secured or unsecured,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter contracted.
(ii) "PBGC:" The Pension Benefit Guaranty Corporation.
(jj) "Personal Property Loans:" A loan secured by personal
property or fixtures as determined by the Lender in its sole discretion, which
shall not individually exceed $20,000.00 per loan or, in the aggregate, exceed
$500,000.00 at any time. It is agreed and understood that the Lender shall
evaluate each request for an advance under this Subsection (jj) as it shall
determine giving consideration to the nature of each Personal Property Loan and
the circumstances existing at the time of each request, including, without
limitation, evidence of a properly perfected security interest in the underlying
collateral securing such loan.
(kk) "Plan:" Any plan subject to the minimum funding
requirements of Section 412 of the Internal Revenue Code of 1986, as amended.
(ll) "Properties:" Collectively and individually, any and all
properties or lands now, formerly or in the future owned or occupied by the
Borrower.
(mm) "Reportable Event:" As such term is defined in 29
U.S.C.A.ss. 1343.
(nn) "Revolving Loan Master Note:" The Amended and Restated
Revolving Loan Master Note in form and substance acceptable to the Lender and
any promissory notes in renewal thereof or substitution or replacement therefor.
(oo) "Subprime Loans:" An Eligible Mortgage Loan consisting of
non-conforming "A-" through "C-" quality rated loans, as determined by the
Lender, in its sole discretion.
(pp) "Subsidiary:" Any corporation more than a majority (by
number of votes) of the common stock of which is at the time owned or controlled
by the Borrower or a Subsidiary of the Borrower.
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(qq) "Take-Out Commitment:" A bona fide current, unused and
unexpired commitment of an Investor under which such Investor agrees, prior to
or on the expiration thereof, upon satisfaction of certain conditions therein,
to acquire the Collateral, which commitment is not subject to any term or
condition which is not customary in commitments of like nature or which, in the
reasonably anticipated course of events, cannot be fully complied with prior to
the expiration thereof.
(rr) "Tangible Net Worth:" 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 GAAP, constitutes (i) the sum of (A)
stockholders' equity, plus (B) subordinated debt; less (ii) the sum of (V)
treasury stock, (W) any minority interest in Subsidiaries or Affiliates, (X)
amounts due from Subsidiaries and Affiliates, and (y) Intangible Assets.
(ss) "Total Principal Outstanding:" The aggregate outstanding
principal balance of all Loans, as of any date of determination. -
(tt) "Warehouse Period:" The period that is (i) sixty (60)
days from the date such Loan is made and (ii) ninety (90) days with respect to
Subprime Loans, Home Improvement Loans and Personal Property Loans.
1.2 Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given thereto in
accordance with GAAP.
1.3 Any environmental terms used in this Agreement which are not
specifically defined shall have the meanings ascribed to such terms under the
laws of the State of New Jersey, as amended from time to time and/or regulations
promulgated in relation thereto.
1.4 Terms such as "accounts," "accounts receivable," "contract rights,"
"letters of credit," "advises," "confirmations," "farm products," "inventory,"
"equipment," "instruments," "chattel paper," "documents of title," "goods,"
"general intangibles," "account debtors," "proceeds," "products," and the like,
shall, unless otherwise specifically defined herein, have the meanings
applicable to them for the purposes of Article 9 (Secured Transactions) of the
Uniform Commercial Code in force and effect in the State of New Jersey at the
date of this Agreement.
SECTION 2
AMOUNT AND TERMS OF LOAN
2.1 Terms of Line of Credit. Subject to the terms and conditions of
this Agreement, and to the Borrower's observance and performance of, and
compliance with, all terms, conditions,
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warranties, representations and covenants of this Agreement, and the timely
payment of the Obligations of the Borrower to the Lender:
(a) Line of Credit. The Lender shall lend and re-lend to the
Borrower amounts which shall not exceed, in the aggregate of unpaid principal of
such amounts outstanding at anyone time, (1) up to ninety-eight (98%) percent of
the lesser of (i) the Take-Out Commitment for such Eligible Mortgage Loan, or
(ii) the unpaid principal amount of the Mortgage Note with respect to such
Eligible Mortgage Loan and (2) with respect to uncommitted Subprime Loans, Home
Improvement Loans and Personal Loans, up to ninety-sixty (96%) percent of the
unpaid principal amount of the Note with respect to such loan. At no time shall
the aggregate amount outstanding hereunder exceed the Maximum Line of Credit
Amount.
(b) Procedure for Advances. The Borrower shall "comply with
all of the requirements of Subsection 4.2 hereof for any Eligible Mortgage Loan
for which the Borrower will request advances from the Lender under the Line of
Credit. The Lender shall review each request for an advance submitted by the
Borrower, together with the documentation obtained from the Borrower, and the
Lender, in its sole discretion, shall determine whether or not to grant the
requested advance. Amounts loaned or re-loaned to the Borrower pursuant to the
Line of Credit shall be delivered to the Borrower by credit to any general
deposit account maintained by the Borrower with the Lender or by such other
method as agreed to by the Lender and the Borrower.
(c) Interest. The outstanding principal amount of the Line of
Credit shall bear interest at a rate of interest per annum equal to the Floating
Base Rate minus three quarters of one (.75) percent and with respect to all Line
of Credit advances on uncommitted Subprime Loans and Home Improvement Loans, the
Floating Base Rate minus one-quarter of one (.25%) percent, and with respect to
Personal Property Loans, the Floating Base Rate, computed daily, with each
change in the Lender's Floating Base Rate, for the actual number of days elapsed
as if each full calendar year consisted of three hundred sixty (360) days. The
Borrower shall make monthly payments of interest on the outstanding balance of
the Line of Credit on the first day of each month, commencing on the first day
of the month following the initial advance under the Line of Credit.
To the extent permitted by law, whenever there is an Event of
Default hereunder, or non-payment upon demand, the rate of interest on the
unpaid principal balance of the Loan shall, at the option of the Lender, be four
(4%) percent over the prevailing Floating Base Rate. Borrower acknowledges that:
(i) such additional rate is a material inducement to the Lender to make the Line
of Credit available; (ii) the Lender would not have made the Line of Credit
available in the absence of the agreement of the Borrower to pay such default
rate; (iii) such additional rate represents compensation for increased risk to
the
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Lender that the Line of Credit will not be repaid; and (iv) such rate is not a
penalty and represents a reasonable estimate of (a) the cost to the Lender in
allocating its resources (both personal and financial) to the ongoing review,
monitoring, administration and collection of the Line of Credit, and (b)
compensation to the Lender for losses that are difficult to ascertain.
(d) Principal Payments; Delivery of Collateral by Lender;
Final Maturity.
(i) The Borrower shall repay advances granted by the
Lender under the Line of Credit in connection with an Eligible Mortgage Loan, in
immediately available funds, upon the earlier of (1) demand made in accordance
with Subsection 8.1(a), (2) the repayment of the Mortgage Loan by the Borrower's
borrower, (3) the date of the sale of any Mortgage Loan, (4) the subject
Mortgage Loan ceases to be an Eligible Mortgage Loan, (5) the occurrence of a
default or an event of default under the terms and conditions of the Mortgage
Loan by the borrower, (6) the expiration of the Warehouse Period, or (7) the
Maturity Date. The Borrower shall not commingle any cash proceeds received upon
the repayment of the Mortgage Loan by the Borrower's borrower with any other
funds or property of the Borrower, but shall hold those cash proceeds separate
and apart therefrom and upon an express trust for the Lender.
(ii) Provided an Event of Default has not occurred
hereunder, the Lender shall, upon the sale of any Mortgage Loan assigned to
Lender hereunder and receipt of the proceeds of such sale, deliver the Mortgage
Note, an assignment of the Mortgage securing the Mortgage Note, and all other
related documentation submitted to the Lender by the Borrower, as requested by
Borrower in writing, to the Investor.
(iii) The Lender's agreement to grant advances to the
Borrower under this Agreement shall terminate upon the earlier of (1) the
occurrence of an Event of Default, (2) demand made in accordance with Subsection
8.1(a), or (3) the Maturity Date.
(iv) The Borrower hereby agrees that any and all
amounts due and payable under this Subsection (d) may be charged by the Lender
to any checking or loan account maintained by Borrower with the Lender.
(e) Line Usage Fee. The Borrower shall pay to the Lender a
line usage fee of: .25% per annum of the monthly average unused portion of the
Maximum Line of Credit if the average monthly outstanding loan balance is less
than twenty (20%) percent of the Maximum Line of Credit Amount, payable monthly
in arrears.
(f) Loan Package Fee and Costs. The Borrower shall pay to the
Lender a loan package fee in an amount equal to
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Twenty-Five ($25.00) Dollars per warehoused Loan. The loan package fee shall be
due and payable by the Borrower with each payment of interest made in accordance
with Subsection 2.1(c)
(g) Field Examination Fee. The Borrower shall pay to the
Lender a field examination fee not to exceed One Thousand ($1,000.00) Dollars
per annum. The field examination fees shall be due and payable by the Borrower
with each payment of interest made in accordance with Subsection 2.1(c). So long
as no Event of Default has occurred, the field examination fees payable by the
Borrower shall be, in the aggregate, no greater than One Thousand ($1,000.00)
Dollars per calendar year, beginning with the calendar year in which this
Agreement is executed.
(h) Statement of Account. At least once each month the Lender
shall render and send to the Borrower a statement of account showing amounts
loaned, all other charges, expenses and items chargeable to the Borrower
pursuant to Subsection 6.14, payments made by the Borrower against the
Obligations arising pursuant to the Line of Credit, other appropriate debits and
credits and the total of the Obligations of the Borrower to the Lender as of the
date of the statement for loans pursuant to the Line of Credit, and the
statement of account shall be conclusively presumed to be correct in all
respects, except for specific objections which the Borrower makes in writing
within thirty (30) days from the date upon which the statement of account is
sent. Credit for deposits made to the Borrower's account shall be given on a
daily business day basis upon deposit and shall be conditional upon final
payment of the deposited item.
(i) Revolving Loan Master Note. The maximum amount of the Line
of Credit shall be evidenced by the Revolving Loan Master Note, and the balance
due from time to time on the Revolving Loan Master Note shall be conclusively
evidenced by the Lender's records of disbursements and repayments, subject to
Subsection 2.1(h).
SECTION 3
SECURITY INTEREST
3.1 In consideration of the Lender's granting to the Borrower the Line
of Credit in accordance with the terms and conditions of this Agreement, the
Borrower, to secure payment and performance of all of the Obligations of the
Borrower to the Lender, hereby grants to the Lender a security interest in the
Collateral, which security interest shall remain in full force and effect until
all of the Obligations of the Borrower to the Lender are fully paid and
satisfied.
SECTION 4
CONDITIONS PRECEDENT
4.1 The Lender's agreement to lend or re-lend amounts to the Borrower
pursuant to the Line of Credit is conditioned upon,
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where applicable, proper execution by the appropriate party and prior or
simultaneous delivery by the Borrower to the Lender, and the Lender's
satisfactory review, of the documents set forth on the Document List.
4.2 For Any Advance. (a) The Lender's agreement to lend or re-lend
amounts to the Borrower pursuant to the Line of Credit, including, without
limitation, the Lender's agreement to grant the initial advance hereunder, is
conditioned upon delivery by the Borrower to the Lender of:
(i) all documentation required by Subsection 6.29;
and
(ii) a properly executed Loan Advance Request on the
date of the requested advance, evidencing an Available Amount greater than or
equal to the advance requested.
SECTION 5
REPRESENTATIONS AND WARRANTIES BY BORROWER
As a material inducement to the Lender to lend and re-lend amounts to
the Borrower pursuant to the Line of Credit, and to enter into this Agreement,
the Borrower represents and warrants to the Lender that:
5.1 Incorporation, Good Standing and Due Qualification. The Borrower is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of New York, is authorized to transact business in the State
of New York, maintains its principal place of business in the State of New York,
and there are no other jurisdictions in which the character of the properties
owned or the business transacted by the Borrower makes qualification as a
foreign corporation necessary.
5.2 Corporate Power and Authority. The Borrower has the corporate power
to execute, deliver, and perform this Agreement and to borrow hereunder and has
taken all necessary corporate action to authorize (a) the borrowing hereunder on
the terms and conditions of this Agreement, and (b) the execution, delivery and
performance of this Agreement.
5.3 Operation of Business. The Borrower possesses, in full force and
effect, all franchises, patents, licenses, trademarks, trademark rights, trade
names, trade name rights, fictitious name authorizations or certificates and
copyrights to conduct its business as now conducted, including, without
limitation, all necessary mortgage broker and/or bankers licenses, without any
conflict with the franchises, patents, licenses, trademarks, trademark rights,
trade names, trade name rights, fictitious name authorizations or certificates
and copyrights of others.
5.4 Nature of Business. The Borrower is engaged in the business of
making mortgage loans and business relating directly thereto.
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5.5 Financial Condition; Solvency.
(a) The Borrower has furnished to the Lender its reviewed
financial statements for the year ended December 31, 1998 and management
prepared interim statements for the period ended June 30, 1999. Such financial
statements constitute the representation by management of the Borrower that the
information contained in the statements is complete and correct in all material
respects. Since the date of the balance sheet referred to above, there has been
no material and adverse change in the financial condition of the Borrower not
reflected in the financial statements as of that date, and since such date the
business of the Borrower has not been materially and adversely affected by any
occurrence, whether or not insured against.
(b) The Borrower's assets, at a fair valuation, exceed the
Borrower's liabilities (including, without limitation, contingent liabilities),
the Borrower is paying its debts as they become due, and the Borrower has
capital and assets sufficient to carry on its business.
5.6 Taxes. All tax returns of the Borrower which are due have been duly
filed and are correct and all taxes and other governmental charges upon the
Borrower which are due have been paid.
5.7 Litigation. There are no outstanding judgments, actions,
proceedings, claims or investigations pending or threatened before any court or
governmental body which, if adversely determined, may materially and adversely
affect the business, operations or affairs of the Borrower.
5.8 Ownership and Liens. The Borrower has good and marketable title to
all of its properties and assets, including, without limitation, the Collateral,
subject to no Liens except for permitted exceptions described in Subsection 6.8.
The security interest granted in Subsection 3.1 constitutes a valid Lien on the
Collateral, subject to no equal or prior Liens except for permitted exceptions
described in Subsection 6.8.
5.9 Approvals. No consent or approval of any person, landlord, or
mortgagee, no waiver of any lien or right of distraint or other similar right,
and no consent, license, approval, or authorization of or registration,
qualification, designation, declaration or filing (except any recordations
required in connection with the perfection of the security interest granted in
Subsection 3.1) with any governmental authority on the part of the Borrower is
required in connection with the execution, delivery, and performance of this
Agreement or the consummation of any other transactions contemplated hereby.
5.10 Other Agreements and Restrictions. There is no term of any
contract, bond, note, indenture, or other agreement or of any
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charter or other corporate restriction or of any judgment, decree, order,
statute, rule or regulation which materially and adversely limits the business,
operations, or affairs, as presently conducted, of the Borrower or its assets,
and the Borrower is not now in violation of any such term; and the execution,
delivery and performance of, and compliance with, this Agreement will not (with
or without the giving of notice of lapse of time, or both) result in any
violations of, or be in conflict with, or constitute a default under, any such
term, or result in the creation of any Liens upon any of the assets of the
Borrower, except for the Liens created pursuant to this Agreement. The
operations of the Borrower comply with all laws, statutes, rules, regulations,
ordinances, and the like, applicable to them.
5.11 Name Change, Mergers. Within the last six (6) years, the Borrower
has not changed its name, been the surviving corporation of a merger or
consolidation, or acquired all or substantially all of the assets of any person
or entity.
5.12 Place of Business. The only principal place of business, other
places of business of the Borrower and jurisdictions of Borrower approved for
funding by Lender are, as follows:
Principal Place of 510 Broad Hollow Road
Business of Borrower: Melville, New York 11747
--------------------
Other Places of None
Business of Borrower:
--------------------
Acceptable Jurisdictions New York
of Borrower:
-----------
5.143 Location of Collateral and Books and Records. All of the
Collateral, and the records of the Borrower relating to the Collateral, and the
other books, records, journals, orders, receipts, and correspondence of the
Borrower, are located at only the principal place of business of the Borrower
set forth in Subsection 5.12, except as to the corporate minute book and related
records which are maintained at the offices of counsel to the Borrower.
5.14 Reportable Events. No Reportable Event has occurred with respect
to any Plan maintained for employees of: (i) the Borrower; (ii) any Subsidiary
of the Borrower; or (iii) any member of a Controlled Group of which the Borrower
is a part.
5.15 Compliance With Law. The Borrower is in compliance with any and
all state and federal laws and regulations applicable to it including, without
limitation, those established by the Bureau of Alcohol, Tobacco and Fire Arms,
ERISA, the Environmental Protection Agency, the Federal Occupational Safety and
Health Agency, and with Federal Reserve Board Regulations G, T, U and X.
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5.16 Full Disclosure. The representations and warranties of the
Borrower set forth in this Agreement are true and correct in all respects.
5.17 No Event of Default. The Borrower has reviewed this Agreement and
represents that no Event of Default exists and the Borrower is not in default
under any other documents, instruments, writings or agreements to which it is a
party.
5.18 Enforceability of Agreement. This Agreement has been duly executed
and delivered and constitutes the valid and legally binding obligation of the
Borrower, enforceable in accordance with its terms, subject to applicable
Federal and State bankruptcy and insolvency laws affecting generally the rights
of creditors.
5.19 Year 2000. The advent of the year 2000 shall not adversely affect
the Borrower's operations or the performance of its information technology.
Without limiting the generality of the foregoing, (i) the hardware and software
utilized by Borrower are designed to be used prior to, during and after calendar
year 2000 A.D. and such hardware and software will operate during each such time
period without error relating to date data, specifically including any error
relating to, or in the conduct of, date data which represents or references
different centuries or more than one century, (ii) the hardware and software
utilized by Borrower will not abnormally end or provide invalid or incorrect
results as a result of date data, and (iii) the hardware and software utilized
by Borrower have been designed to ensure year 2000 A.D. compatibility, including
date data, century recognition, leap year, calculations which accommodate same
century and multi-currency formulas and date values, and date data interface
values that reflect the century.
SECTION 6
COVENANTS BY BORROWER
As a material inducement to the Lender to lend and re-lend amounts to the
Borrower pursuant to the Line of Credit, and to enter into this Agreement, the
Borrower covenants and agrees with the Lender that:
6.1 Maintain Corporate Existence. The Borrower shall preserve and keep
in full force and effect its corporate existence and all franchises, rights, and
privileges necessary for the proper conduct of its business, including, without
limitation, all necessary franchises, patents, licenses, trademarks, trademark
rights, trade name rights, fictitious name authorizations, or certificates and
copyrights without any conflict with such franchises, patents, licenses,
trademarks, trademark rights, trade name rights, fictitious name authorizations
or certificates and copyrights of others.
6.2 Delivery of Corporate Documents. The Borrower shall promptly
deliver to the Lender copies of any amendments or
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modifications to its certificate of incorporation and by-laws, certified with
respect to the certificate of incorporation by the Secretary of State of the
state of incorporation, and, with respect to the by-laws, by the secretary of
the Borrower.
6.3 Compliance with Laws. The Borrower shall comply with all laws,
ordinances, rules and regulations, now or hereafter in effect, applicable to it
of any federal, state or local government or any instrumentality or agency
thereof.
6.4 Payment of Taxes. The Borrower shall pay and discharge, as they
become due, all taxes, assessments, debts, claims and other governmental or
non-governmental charges lawfully imposed upon it or incurred by it or its
properties and assets, except taxes, assessments, debts, claims and charges
contested in good faith in appropriate proceedings, and provide the Lender, if
requested, evidence of said taxes, assessments, debts, claims, and charges, and
of payment thereof.
6.5 Maintenance of Properties and Assets. The Borrower shall maintain,
preserve and keep all its properties and assets in good repair, working order
and condition, and make, or cause to be made, all necessary or appropriate
repairs, renewals, replacements, substitutions, additions, betterments, and
improvements thereto, so that efficiency of all such properties and assets shall
at all times be properly preserved and maintained.
6.6 Insurance. The Borrower shall maintain, with reputable insurance
companies, such insurance on its Properties and assets, including, without
limitation, the Collateral, against such casualties and in such amounts as is
customarily maintained by similar businesses. All insurance policies shall name
the Lender as a loss payee, mortgagee and as an additional insured. All such
policies of insurance shall provide for at least ten (10) days advance notice in
writing to the Lender of any cancellation or modification thereof. If the
Borrower fails to pay the premiums on any such insurance, the Lender shall have
the right (but shall be under no duty) to pay such premiums for the Borrower's
account. The Borrower shall repay to the Lender any sums which the Lender shall
have so paid, together with interest thereon at the rate payable by the
Borrower, at the time of payment by the Lender. The Borrower shall deliver to
the Lender, upon its request, a detailed list of insurance then in effect,
stating the names of the insurance companies, the amounts and rates of the
insurance, dates of expiration thereof, and the properties and risks covered
thereby; and within fifteen (15) days after notice from the Lender, obtain such
additional insurance as the Lender may reasonably request.
6.7 Investment Company Act. The Borrower is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
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6.8 Permitted Encumbrances. The Borrower shall not directly or
indirectly permit to exist any Liens with respect to the Collateral other than
the following:
(a) Liens for taxes not yet due, or unless and until
foreclosure or other similar proceedings shall have been commenced, being
contested in good faith in appropriate proceedings; and
(b) Liens in favor of the Lender whether such Liens arise
pursuant to this Agreement, or otherwise.
6.9 Litigation. The Borrower shall promptly notify the Lender (a) of
any litigation, actions, proceedings, claims or investigations pending or
threatened against the Borrower, wherein claimant seeks to recover in excess of
Twenty Five Thousand ($25,000.00) Dollars and of the entry of any judgment in
excess of Ten Thousand ($10,000.00) Dollars against the Borrower or the entry of
any Liens, other than Liens permitted by Subsection 6.8, against any of the
Collateral; (b) upon the receipt of any information, notice or claim, or upon
learning of any investigation, as to any alleged use, storage, treatment or
handling, except as expressly permitted in this Agreement, or any discharge,
spill, emission or disposal of, any Hazardous Substances by or on the
Properties; and (c) upon learning of any circumstances or transactions that
would require compliance with any federal, state or local environmental statutes
or regulations.
6.10 Location of Books and Records. The Borrower shall keep its records
relating to the Collateral, and its other books, records, journals, orders,
receipts and correspondence at only those locations of the Borrower set forth in
Subsection 5.13, unless notice is given to the Lender in advance of, and the
Lender consents in writing to, removal of the records relating to the
Collateral, and the other books, records, journals, orders, receipts, and
correspondence, to another location.
6.11 Nature of Business. The Borrower shall not engage in any business
other than as a mortgage lender making loans secured by residential real estate
and business relating directly thereto.
6.12 Change of Principal Place of Business, Etc. The Borrower shall
promptly notify the Lender of any change of location of its principal place of
business or other places of business, of the addition of any new place of
business or of the elimination of any existing place of business.
6.13 Financial Reporting Requirements. The Borrower shall deliver to
the Lender the following:
(a) Within ninety (90) days after the end of each fiscal year
of the Borrower (commencing with the fiscal year in which this Agreement is
executed and continuing until all of the
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Obligations of the Borrower to the Lender are fully paid and satisfied), a
balance sheet of the Borrower as at the end of such year and statements of
income, cash flows and changes in stockholders' equity thereof for such year,
all in reasonable detail and prepared as an audited statement by independent
certified public accountants acceptable to the Lender, which shall be certified
by the principal financial officer of the Borrower to the Lender to be complete
and correct, which certificate shall include a statement of his examination
(which shall include a review of the relevant provisions of this Agreement) and
stating whether his examination has disclosed the existence of any condition or
event which constitutes (or would after notice or lapse of time, or both,
constitute) an Event of Default, and if so, specifying the nature and period of
existence thereof;
(b) Within sixty (60) days after the end of each fiscal
quarter (except for the fourth) a balance sheet of the Borrower as at the end of
such period, and Borrower's cumulative income and surplus statements for the
period beginning on the first day of such fiscal year and ended on the date of
such balance sheet, all in reasonable detail and either reviewed, compiled or
internally prepared, certified by the President of the Borrower which
certification shall state that such statements are true and correct and that
there existed no Event of Default as of the date thereof and shall be
accompanied by evidence of the calculation of compliance with the financial
covenants, and in addition to such statements, any supplementary information to
the financial reports as Lender may reasonably require.
(c) Upon each request for an advance under the Line of Credit
or more frequent if requested by the Lender, a Loan Advance Request, in such
form as the Lender shall reasonably require;
(d) Not later than ninety (90) days after the end of each
calendar year, the personal financial statements of the Guarantors containing
such information as the Lender shall reasonably require, and if requested, on
forms submitted by the Lender and not later than ten (10) days after filing with
the Internal Revenue Service, a true and complete copy of their signed Federal
income tax returns;
(e) At Lender's request, copies of Take-Out Commitments,
credit files or other loan or warehouse credit information concerning the
Mortgage Loans; and
(f) Such additional financial statements or information of the
Borrower as the Lender shall reasonably require.
6.14 Fees and Expenses in Protecting Rights. If at any time or times or
from time to time the Lender employs counselor any
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other professionals or consultants for advice or other representation:
(a) with respect to the Collateral, the Obligations of the
Borrower to the Lender, this Agreement, or any document, instrument, writing or
Agreement related thereto;
(b) to represent the Lender in any litigation, contest,
dispute, suit or proceeding or to commence, defend or intervene or to take any
other action in or with respect to any litigation, contest, dispute, suit or
proceeding (whether instituted by the Lender, Borrower or any other person) in
any way or respect relating to the Collateral, the Obligations of the Borrower
to the Lender, this Agreement or any document, instrument, writing or agreement
related thereto;
(c) to protect, collect, sell, liquidate otherwise dispose of
the Collateral;
(d) to attempt to or to enforce the Lender's liens and
security interests in the Collateral; and/or
(e) in otherwise protecting, enforcing or exercising its
interests, Rights or Remedies created by, connected with or provided in this
Agreement, or performance pursuant to this Agreement;
then, the reasonable attorneys' fees, costs and expenses arising from such
services, and all other expenses, costs, charges and other fees of the Lender in
any way or respect arising in connection with or relating to any of the events
described in this Subsection (expressly including all post-judgment collection
expenses and costs) shall be added to the amount of the Obligations of the
Borrower to the Lender, and shall be payable on demand. The Borrower hereby
authorizes the Lender to charge the Borrower's Line of Credit for payment of any
and all fees and expenses due under this Subsection 6.14 provided however, in
the event of a circumstance occurring under Section 6.14(a), the Lender shall
give the Borrower seven (7) days prior written notice of any amounts to be
charged. Any amounts due hereunder not paid on demand shall bear interest from
the date of demand at the default rate of interest set forth herein. Any of the
amounts payable hereunder by the Borrower may be paid by the Lender, and if and
when so paid, shall be deemed to be advances under the Line of Credit.
6.15 Fees and Expenses Incident to Preparation, Execution and Release
of Agreement. The Borrower shall pay, on demand, all legal fees, recording
expenses and other reasonable and necessary disbursements of the Lender incident
to the preparation, execution and delivery of this Agreement.
6.16 Financial Records in Accordance with GAAP. The Borrower shall, at
all times and in accordance with generally accepted accounting principles,
consistently applied, keep
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complete and accurate books and records concerning its business, affairs and
operations and concerning its properties and assets, including, without
limitation, the Collateral, and shall deliver to the Lender all instruments and
chattel paper (including all executed copies thereof, except such executed
copies retained by the obligors thereunder) representing proceeds of Collateral;
and the Borrower shall deliver to the Lender, promptly at the Lender's request,
from time to time, additional copies of any or all of such papers or writings,
and such other information with respect to any of the said Collateral and other
writings, as the Lender may in its sole discretion deem to be necessary or
effectual to evidence any loan made pursuant to this Agreement or to evidence,
enforce or perfect the Lender's security interest in the Collateral, to
facilitate collection of the Collateral, or to carry into effect the provisions
and intent of this Agreement, all at the sole expense of the Borrower.
6.17 Legends, Etc. on Books and Records and Collateral. The Borrower
shall promptly make, stamp or record such entries or legends on the Borrower's
internal books and records or on any of the Collateral as the Lender shall
request from time to time to indicate and disclose that the Lender has a
security interest in such Collateral.
6.18 Other Reporting Requirements. The Borrower shall furnish to the
Lender: (i) as soon as possible and in any event within thirty (30) days after
the Borrower or a duly appointed administrator of a Defined Benefit Plan knows
or has reason to know that any Reportable Event has occurred with respect to any
Defined Benefit Plan, a statement of the chief financial officer of the Borrower
setting forth details as to such Reportable Event and the action which the
Borrower proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event given to the PBGC or a statement that said
notice will be filed with the annual report to the United States Department of
Labor with respect to such Defined Benefit Plan if required under applicable
regulations; (ii) promptly after the filing thereof with the United States
Department of Labor, the Internal Revenue Service or the PBGC, copies of each
annual and other report with respect to each Defined Benefit Plan; (iii)
promptly after receipt thereof, a copy of any notice the Borrower or any other
member of a Controlled Group may receive from the United States Department of
Labor, the Internal Revenue Service or the PBGC, with respect to any Defined
Benefit Plan; and (iv) promptly after the sending of, making available or filing
of the same, copies of any reports, proxy statements and financial statements
which the Borrower shall send or make available to all of its stockholders, and
any registration statements and any reports which the Borrower shall file with
the Securities and Exchange Commission.
6.19 Use of Loan Proceeds. The Borrower shall use loans and advances
made pursuant to this Agreement solely for the purposes of working capital in
the funding of mortgage loans secured by residential real estate and/or personal
property as set forth herein.
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6.20 Further Assurances. The Borrower shall, as the Lender may request
and require, procure and deliver to the Lender or execute any assignment,
mortgage, security agreement, financing statement or other writing necessary to
evidence, preserve, protect or enforce the Lender's rights and interests to or
in the Collateral or in any other collateral agreed to by the parties.
6.21 Change in Financial Condition. The Borrower shall immediately
notify the Lender of any material loss or damage to, or material diminution in,
or any occurrence which would materially adversely affect, the value of any
Collateral. In the event that the Lender, in its sole discretion, shall
determine that there has been any such material loss, damage or diminution in
value, the Borrower shall, whenever the Lender so requests in its sole
discretion, cause the outstanding principal balance under the Line of Credit to
be in an amount less than or equal to the lesser of (a) the Maximum Line of
Credit Amount, or (b) the amount available for advances based upon the formula
set forth in Subsection 2.1(a) hereof, as of any date of determination.
6.22 Additional Collateral. The Lender may from time to time in the
Lender's sole discretion hold and treat any deposits or other sums at any time
credited by or due from the Lender to the Borrower and any securities or other
property of the Borrower in possession of the Lender, whether for safekeeping or
otherwise, as collateral security for and apply or set off the same against any
of the Obligations of the Borrower to the Lender. Without limiting the
generality of the foregoing, if at any time the amount of the loans or advances
by the Lender as allowed by this Agreement shall be exceeded, the Borrower shall
pay to the Lender, in immediately available funds, the amount of such excess if
the Lender so requests, or the Lender may charge such amount against any deposit
account of the Borrower with the Lender provided however, the Lender shall give
the Borrower seven (7) days prior written notice of any amounts to be charged
under this Subsection 6.22.
6.23 Prohibited Transactions. Without the prior written consent of the
Lender, which consent will not be unreasonably withheld, the Borrower shall not:
(a) Create, incur or assume any liability for borrowed money
which liability is secured by any of the assets of the Borrower, except
liabilities heretofore or hereinafter incurred by the Borrower to the Lender or
to other mortgage warehouse lenders previously disclosed to the Lender.
(b) Assume, guarantee, endorse or otherwise become liable, in
connection with the Obligations of any person, firm or corporation except (i)
liabilities of the Borrower resulting from product warranties made by the
Borrower in the ordinary course of its business, and (ii) liabilities of the
Borrower resulting from its endorsement of items or instruments for deposit or
collection in the ordinary course of its business.
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(c) Sell, lease, abandon, or otherwise dispose of, all or any
substantial part of the properties or assets of the Borrower, other than the
sale of Loans to Investors subject to the provisions of this Agreement.
(d) Purchase, lease, or otherwise acquire, the properties or
assets, or any interest therein, of any person, firm or corporation, except
purchases, leases or other acquisitions of inventory and equipment made by the
Borrower in the ordinary course of its business in bona fide, arm's length
transactions.
(e) Consolidate with, merge into, or participate in any joint
venture with, any person, firm or corporation, or permit any person, firm or
corporation, to consolidate with, merge into, or participate in, any joint
venture with the Borrower.
(f) Create or acquire the obligations, securities or stock of,
or make loans, advances or capital contributions to, any person, firm or
corporation, except upon prior written notice to the Lender; provided, however,
that the Borrower may, without such prior written notice, make loans or advances
in the ordinary course of business and purchase or acquire any of the following:
(i) Marketable direct obligations of the United
States of America;
(ii) Commercial paper issued by corporations
conducting substantially all of their business in the United States of America,
maturing within one hundred eighty (180) days from the date of the original
issue thereof, and rated "prime" by the National Credit Office;
(iii) Bonds of any state, county, or municipality of
the United States of America, (w) which mature within two (2) years from the
date of acquisition thereof, and (x) which are not in default as to principal or
interest, and (y) which are rated Aa, or better, by Moody's Investors Service,
and (z) the interest of which is exempt from federal income tax; and
(iv) Customer's notes, chattel paper, or the like
received as non-cash proceeds of the sale of the inventory of the Borrower in
the ordinary course of its business.
(g) Alter its existing capital stock structure by issuance of
new shares of existing classes of stock, by creation of new classes of stock, or
otherwise, so as to cause a loss of control of the Borrower by the current
owners.
(h) Permit or cause any change in the ownership of its
presently issued and outstanding stock which change would result in a loss of
control of the Borrower by the current owners.
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(i) Declare or pay any cash dividend or make any distribution
on, or redeem, retire or otherwise acquire directly or indirectly, any share of
its stock.
(j) Permit or cause any change in the person of Ira Silverman
as President of the Borrower, except upon sixty (60) days prior notice to the
Lender.
(k) Permit the aggregate available credit under all mortgage
warehouse facilities to exceed $30,000,000.00.
6.24 Information Relating to Operations of Borrower. Upon written
request, the Borrower shall provide to the Lender the following information
pertaining to all operations conducted in or on the Properties:
(a) Copies of all permits obtained from any federal, state or
local agency;
(b) Material safety data sheets for all chemicals in use at,
manufactured at, imported to, or stored at the Properties;
(c) Copies of all materials filed with the Federal
Occupational Safety and Health Agency under OSHA Hazard Communication Standard
and all materials filed with the New York Department of Health, the New York
Department of Environmental Protection, or any other federal, state or local
agency or entity;
(d) Maps, diagrams and site plans showing the location of all
storage areas and storage tanks for Hazardous Substances and the location of
processes using any of them, including details as to the amounts stored or used;
(e) A description of said operations and of their processes;
and
(f) Any other information which the Lender may reasonably
request.
6.25 Notification of Event of Default. The Borrower shall immediately
notify the Lender of the occurrence of an Event of Default and of the nature and
period of existence thereof.
6.26 Separate Assignments. If required by the Lender, the Borrower
shall execute and deliver a separate assignment to the Lender, or at the
Lender's sole and absolute discretion, a certified true copy of such assignment
properly executed in favor of the Lender evidencing a valid and legal assignment
to the Lender, of all of the Borrower's right, title and interest in each
Mortgage Note, each Mortgage and each UCC-l financing statement and any other
property, right, proceeds or payment forming part of the Collateral, including,
but not limited to, all Borrower's rights in and to any applicable commitment of
an
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Investor to purchase a Mortgage Note or Mortgage, and all insurance policies and
proceeds, and the Borrower shall pay the cost of filing the same in all public
offices.
6.27 Minimum Adjusted Tangible Net Worth. The Borrower shall not permit
its Adjusted Tangible Net Worth to be in an amount less than $2,250,000.00 (to
be tested on a quarterly basis).
6.28 Leverage Ratio. The Borrower shall maintain at all times a ratio
of total indebtedness to Adjusted Tangible Net Worth, equal to or less than 14
to 1.0.
6.29 Documentation. The Borrower shall provide the Lender with the
following:
(i) the documents set forth on the applicable Loan Advance
Request;
(ii) with respect to all Mortgage Loans:
(1)(A) certified true copy of the Mortgage, HUD-l and
original Mortgage Note properly endorsed in blank by the Borrower and delivered
to the Lender; and
(2) If required by the Lender, a properly recorded
Assignment of Mortgage, within three (3) business days after the making of an
advance against said Mortgage Loan.
(iii) with respect to all Personal Property Loans, a properly
perfected UCC-l Financing Statement.
6.30 Compliance With Agreement. The Borrower shall observe, perform and
comply with, and shall continue, until all Obligations of the Borrower to the
Lender pursuant to this Agreement are fully paid and satisfied, to observe,
perform and comply with, all of the Borrower's covenants made in this Agreement.
6.31 Quality Control. Not less than five (5%) percent of all funded
Loans hereunder shall be subject to monthly quality control audits at the sole
discretion of the Lender.
SECTION 7
EVENTS OF DEFAULT
There shall be an Event of Default by the Borrower under this Agreement
upon the occurrence of anyone of the following:
7.1 The Borrower's failure to pay, when due, on demand or at maturity
(whether as stated or by acceleration), as the case may be, any payment of
principal, interest or other charges due and owing to the Lender pursuant to any
Obligations of the Borrower to the Lender, including, without limitation, those
Obligations arising pursuant to this Agreement.
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7.2 A material breach by the Borrower or the Guarantor of any covenant
contained in this Agreement or the Guaranty Agreement, including, without
limitation, those covenants contained in Section 6 hereof.
7.3 If any warranty or representation contained in this Agreement,
including, without limitation, the warranties and representations contained in
Section 5, shall be incorrect in any material respect, or if any financial
statement given by the Borrower or the Guarantor to the Lender shall be
incorrect in any material respect.
7.4 Upon dissolution, termination of existence, insolvency, business
failure, appointment of a trustee, receiver or custodian of all or any part of
the properties or assets of the Borrower or the Guarantor; upon an assignment
for the benefit of creditors by, the calling of a meeting of creditors of, or
the commencement of any proceeding under any bankruptcy or insolvency laws of
any state or of the United States by the Borrower or the Guarantor, or the
commencement of any proceeding under any bankruptcy or insolvency laws of any
state or of the United States against the Borrower or the Guarantor.
7.5 The occurrence of any event of default on the part of the Borrower
or the Guarantor in connection with any loans, advances or other extensions of
credit by the Lender to the Borrower or the Guarantor other than those loans
made pursuant to this Agreement.
7.6 If any warranty or representation whether past, contemporaneous or
future made in writing by the Borrower or the Guarantor to the Lender, other
than the warranties or representations set forth in this Agreement, shall be
incorrect in any material respect.
7.7 The death of any Guarantor.
7.8 The Borrower's failure to deliver the documentation required under
Subsection 4.2 within the applicable time periods.
SECTION 8
LENDER'S RIGHTS AND REMEDIES
8.1 Exclusive of the occurrence of an Event of Default, the Lender may:
(a) At least ninety (90) days from the Maturity Date, the
Lender shall notify the Borrower if it does not intend to renew this Agreement
and terminate its agreement to make loans or advances pursuant to the Line of
Credit and demand payment of any and all Obligations of the Borrower to the
Lender, which payment shall be due on the Maturity Date;
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(b) Upon one (1) day's prior notice, call at the Borrower's
place of business during the regular business hours of the Borrower, and at
reasonable intervals to be determined by the Lender and, without hindrance or
delay, inspect, audit, check and make extracts or copies from the Borrower's
books, records, journals, orders, receipts, correspondence, and other data, and
inspect the Collateral;
(c) Endorse the name of the Borrower upon any and all checks,
drafts, money orders and other instruments for the payment of monies which are
payable to the Borrower and constitute proceeds of the Collateral; and
(d) Receive and have access to printouts and all other
information respecting financial records of the Borrower maintained by external
computer service companies; and
(e) Communicate, in the name of a certified public accountant
or public accountant, or in a fictitious name or names, with customers and
account debtors of the Borrower to independently verify the Mortgage Loans.
8.2 Upon the occurrence of an Event of Default the Lender shall have
the following rights and remedies to be exercised within the sole discretion of
the Lender without further demand, presentation or notice, of any kind:
(a) The Lender shall have all of those rights and remedies
provided in this Agreement, in the Uniform Commercial Code and other applicable
law in force and effect in New Jersey;
(b) The Lender's agreement to make any further loans pursuant
to this Agreement, or otherwise, shall cease, and all of the Obligations of the
Borrower to the Lender shall immediately become due and payable;
(c) In protecting, exercising or enforcing its interests,
rights or remedies under this Agreement, receive, open and dispose of mail
addressed to the Borrower, provided that the Lender shall return to the Borrower
all mail not related to the Collateral, or to any of the Obligations, and in
connection therewith, give such notice to any office or officials of the United
States Postal Service, or any successor thereof, to effect such changes of
address as the Lender may deem necessary so that all mail addressed to the
Borrower may be delivered directly to the Lender;
(d) Require the Borrower to assemble the Collateral and make
it available at the principal place of business or other places of business of
the Borrower to allow the Lender to take possession or dispose of the
Collateral;
(e) Take possession of and sell or otherwise dispose of any or
all of the Collateral at public or private sale, and if notice of such sale or
of other action by the Lender is required
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by applicable law, the Borrower agrees that ten (10) days notice to the Borrower
shall be sufficient, which the Lender and the Borrower herewith agree to be
commercially reasonable;
(f) Subrogate to all of the Borrower's interests, rights and
remedies in respect to the Collateral, including the right to stop delivery, and
(upon notice from the Borrower that the account debtor has returned, rejected,
revoked acceptance of or failed to return the goods or that the goods have been
reconsigned or diverted) the right to take possession of and to sell or dispose
of the goods;
(g) Execute in the name of the Borrower any schedules,
assignments, instruments, documents and statements which the Borrower is
obligated to give the Lender;
(h) Sign financing statements in the name of the Borrower, or
file financing statements without the Borrower's signature, in any relevant
state to perfect or maintain the Lender's security interest in any or all of the
Collateral; and
(i) Receive from all or any accountants and auditors employed
by the Borrower at any time during the term of this Agreement copies of any of
the Borrower's financial statements, trial balances or other accounting records
of any sort in their possession, together with any other information concerning
the financial status or business operations of the Borrower.
SECTION 9
BORROWER'S RIGHTS AND REMEDIES
9.1 Subject to Subsection 2.1(d), the Borrower shall have the right to
make Mortgage Loans and to collect payments due thereunder, at its own expense,
in the ordinary course of its business, until an Event of Default has occurred.
9.2 The Borrower shall have all of the rights and remedies provided in
this Agreement and by the Uniform Commercial Code and other applicable law in
force in New Jersey.
SECTION 10
MISCELLANEOUS PROVISIONS
10.1 Obligations and Liabilities of Lender. The Lender shall not be
deemed to have assumed any liability or responsibility to the Borrower or any
third person for the correctness, validity or genuineness of any instruments or
documents that may be released or endorsed to the Borrower by the Lender (which
shall automatically be deemed to be without recourse to the Lender in any
event), or for the existence, character, quantity, quality, condition, value or
delivery of any goods purporting to be represented by any such documents; and
the Lender, by accepting such security interest in the Collateral, or by
releasing any Collateral to the Borrower, shall not be deemed to have assumed
any obligation or liability to any supplier or
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account debtor or to any other third party, and the Borrower agrees to indemnify
and defend the Lender and hold it harmless in respect to any claim or proceeding
arising out of any matter referred to in this Subsection 10.1.
10.2 Waiver of Notices. Notice of default and presentment, demand,
protest and notice of dishonor as to any provision of this Agreement or any
other agreement or instrument is hereby waived by the Borrower, except as may be
otherwise specifically provided in this Agreement.
10.3 Reference to Parties. "Lender" and "Borrower" as used in this
Agreement shall include the successors, representatives, and assigns of those
parties; provided, however, that the Borrower shall not assign or delegate any
of its rights, remedies, warranties, representations or covenants arising under
this Agreement without the prior written consent of the Lender, and any
purported assignment or delegation without such consent shall be void.
10.4 Governing Law; Consent to Jurisdiction.
(a) This Agreement is to be executed and delivered within the
State of New Jersey, is to be principally performed within the State of New
Jersey, and the Borrower and the Lender elect that the laws of the State of New
Jersey shall govern the construction of this Agreement and the rights, remedies,
warranties, representations, covenants, and provisions hereof without giving
effect to the conflict of laws rules of the State of New Jersey, and except to
the extent that the validity or perfection of the security interest or Mortgage
hereunder, or remedies hereunder, in respect of any particular Collateral, are
governed by the laws of a jurisdiction other than the State of New Jersey.
(b) Any legal action or proceeding with respect to this
Agreement or any other document, instrument, writing or agreement related
hereto, may be brought in the courts of the State of New Jersey or of the United
States for the District of New Jersey, and, by execution and delivery of this
Agreement, the Borrower hereby irrevocably accepts for itself in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The Borrower further irrevocably consents to the service of process out
of any of the aforementioned courts and in, any action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Borrower at its address for notices contained in Subsection 10.10 of this
Agreement, such service to become effective thirty (30) days after such mailing.
Nothing contained herein shall affect the right of the Lender to service of
process in any other manner permitted by law or to commence any legal
proceedings or otherwise proceed against the Borrower in any jurisdiction.
(c) The Borrower hereby waives any rights it may have to
transfer or change the venue of any litigation brought against
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it by the Lender which is in any way related to this Agreement or any other
document, instrument, writing or agreement related hereto.
(d) The provisions of this Subsection 10.4 shall survive the
repayment of the Obligations of the Borrower to the Lender and the termination
of this Agreement.
10.5 Severability. If any of the provisions of this Agreement shall
contravene or be held invalid under the laws of any jurisdiction, this Agreement
shall be construed as if not containing such provisions and the rights,
remedies, warranties, representations, covenants, and provisions hereof shall be
construed and enforced accordingly in such jurisdiction and shall not in any
manner affect such provision in any other jurisdiction, or any other provisions
of this Agreement in any jurisdiction.
10.6 Rights and Remedies. Etc. The Events of Default, rights, remedies,
warranties, representations, covenants, and provisions set forth in this
Agreement, or as may be provided by applicable law, shall be cumulative and not
alternative or exclusive, and the Lender's Rights and Remedies may be exercised
by the Lender at such time or times, in such order of preference, as the Lender
in its sole discretion may determine.
10.7 No Party Deemed Drafter. The Borrower and the Lender agree that
(a) no party hereto shall be deemed to be the drafter of this Agreement, and (b)
if this Agreement is ever construed by a court of law, such court shall not
construe this Agreement or any provision of this Agreement against any party
hereto as the drafter of this Agreement.
10.8 Entire Agreement, No Waiver, Etc. This Agreement embodies the
entire agreement and understanding between the Borrower and the Lender and
supersedes all prior agreements and understandings relating to the subject
matter hereof. All warranties, representations and covenants imposed or made
herein shall survive the execution and delivery of this Agreement. No delay or
omission of the Lender in exercising or enforcing any of the Lender's Rights and
Remedies hereunder shall constitute a waiver thereof; and no waiver by the
Lender of any Event of Default should operate as a waiver of any other Event of
Default. No term or provision hereof shall be waived, altered or modified except
with the prior written consent of the Lender, which consent makes explicit
reference to this Agreement. Except as provided in the preceding sentence, no
other agreement or transaction, of whatsoever nature, entered into between the
Lender and the Borrower at any time (whether before, during or after the
effective date or terms of this Agreement), shall be construed in any particular
as a waiver, modification or limitation of any of the Lender's Rights and
Remedies under this Agreement nor shall anything in this
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Agreement be construed as a waiver, modification or limitation of any of the
Lender's Rights and Remedies under this Agreement nor shall anything in this
Agreement be construed as a waiver, modification or limitation of any of the
Lender's Rights and Remedies, not only under the provisions of this Agreement,
but also of any such other agreement or transaction.
10.9 Reference to Days. Any and all references to "days" in this
Agreement shall mean "business days" except as otherwise specifically provided
by law.
10.10 Notices.
(a) All notices, requests, and other communications pursuant
to this Agreement, other than notices or requests by the Borrower for advances
under the Line of Credit or issuance of Letters of Credit, shall be in writing,
either by letter (delivered by hand or sent certified mail, return receipt
requested) or telecopier addressed to the Lender at Summit Bank, 750 Walnut
Avenue, Cranford, New Jersey 07016, "Attention: Elsie Mroczkowski," or to the
Borrower (as the case may be) at its principal place of business as described in
Subsection 5.13 of this Agreement, "Attention: Ira Silverman," or at such other
address as either may give notice to the other as herein provided.
(b) All notices or requests by the Borrower for advances under
the Line of Credit shall be made in writing, delivered by hand or sent certified
mail, return receipt requested, or sent via telecopier, addressed to the Lender
as follows: 750 Walnut Avenue, Cranford, New Jersey 07016, "Attention: Elsie
Mroczkowski," telephone number: 908-931-3284, telecopier number: 908-931-3285,
or at such other address or telephone or telecopier number as the Lender may
give notice to the Borrower as herein provided.
(c) Any notice, request or communication hereunder shall be
deemed to have been given when deposited with a reputable overnight delivery
service, postage prepaid, or in the case of hand delivery, when delivered, or in
the case of notice via telecopier, when transmitted and receipt confirmed,
addressed as aforesaid; provided, however, that notice of a change of address,
as hereinabove provided, shall be deemed to have been given only when actually
received by the party to which it is addressed.
10.11 Ambiguity Between Agreements. In the event of ambiguity or
inconsistency between this Agreement and any agreement, document or instrument
made pursuant hereto, then the terms of this Agreement will govern. This
Agreement supersedes all previous agreements, commitments or any other documents
between the parties concerning this loan transaction.
10.12 Counterparts. This Agreement may be executed in counterparts,
each of which, when taken together, shall be deemed to be one and the same
instrument.
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10.13 Headings. Section headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
10.14 WAIVER OF JURY TRIAL.
(a) THE LENDER AND THE BORROWER HEREBY ACKNOWLEDGE THAT
DISPUTES ARISING UNDER THIS AGREEMENT OR OTHERWISE RELATING TO THE OBLIGATIONS
ARE LIKELY TO BE COMPLEX AND THEY DESIRE TO STREAMLINE AND MINIMIZE THE COST OF
RESOLVING SUCH DISPUTES. THEREFORE, THE LENDER AND THE BORROWER IRREVOCABLY
WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, COUNTERCLAIM, DISPUTE OR
PROCEEDING BASED UPON, OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT OR
OTHERWISE RELATING TO THE OBLIGATIONS. WITHOUT LIMITING THE FOREGOING, THIS
WAIVER AND COVENANT APPLIES:
(i) TO ALL CLAIMS AGAINST ALL PARTIES TO SUCH
DISPUTES, ACTIONS AND PROCEEDINGS INCLUDING THOSE INVOLVING THE LENDER, THE
BORROWER OR ANY OF THEIR RESPECTIVE PARENTS, SUBSIDIARIES, AFFILIATES OR RELATED
ENTITIES, OR ANY OFFICER, DIRECTOR, SHAREHOLDER, MEMBER, ATTORNEY OR PARTNER OF
ANY OF THEM;
(ii) IRRESPECTIVE OF WHETHER SUCH DISPUTE, ACTION OR
PROCEEDING ARISES UNDER THIS AGREEMENT OR ANY OTHER AGREEMENT, LINE OF CREDIT
NOTE, PAPER, INSTRUMENT OR DOCUMENT HERETOFORE OR HEREAFTER EXECUTED RELATING TO
ANY OF THE OBLIGATIONS;
(iii) IRRESPECTIVE OF WHETHER SUCH DISPUTE, ACTION,
OR PROCEEDING ARISES IN CONNECTION WITH OR IS BASED UPON INTENTIONAL OR
UNINTENTIONAL CONDUCT, FRAUD, IMPROPER ACTION OR FAILURE TO ACT, OR ANY OTHER
CIRCUMSTANCES.
(b) THIS WAIVER IS KNOWINGLY, AND VOLUNTARILY MADE BY THE
BORROWER AND THE LENDER, AND THE BORROWER AND THE LENDER ACKNOWLEDGE THAT
NEITHER OF THEM, NOR ANY PERSON ACTING ON BEHALF OF EITHER OF THEM, HAS MADE ANY
REPRESENTATIONS TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY
OR NULLIFY ITS EFFECT. THE BORROWER AND THE LENDER FURTHER ACKNOWLEDGE THAT THEY
HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN
CONNECTION WITH THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER
BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT THEY
HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THE BORROWER AND
THE LENDER FURTHER ACKNOWLEDGE THAT THEY HAVE READ, AND UNDERSTAND THE MEANING
AND RAMIFICATIONS OF, THIS WAIVER.
(c) THE BORROWER AND THE LENDER ACKNOWLEDGE THAT THEY HAVE
BEEN INFORMED BY EACH OTHER THAT THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT
UPON WHICH EACH HAS RELIED IN ENTERING INTO THIS AGREEMENT, AND THAT THIS WAIVER
PARAGRAPH SHALL BE DEEMED ENFORCEABLE INDEPENDENTLY OF ALL OTHER PROVISIONS OF
THIS AGREEMENT. EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OF THIS
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SECTION AS WRITTEN EVIDENCE OF THE CONSENT BY EITHER OF THEM TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY. THE PROVISIONS OF THIS SUBSECTION SHALL SURVIVE
THE REPAYMENT OF THE OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
Executed at ______, New Jersey, on the date first written above.
ATTEST: COMMUNITY HOME MORTGAGE CORPORATION
By:/s/ By: /s/ Ira Silverman
--------------------------- ------------------------------
Ira Silverman, President
SUMMIT BANK
By: /s/ James Liccardo
--------------------------
James Liccardo,
Senior Vice President
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