UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ----- SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-6868
LOMAS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-1043392
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 Viceroy Drive
Dallas, Texas 75235
(Address of principal executive offices) (Zip Code)
(214) 879-4000
(Registrant's telephone number, including area code)
<PAGE>
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. YES X NO
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
YES X NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the issuer's classes of
common stock as of February 10, 1994: Common Stock, $1 par value--
20,099,531 shares.
<PAGE>
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1994
LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Consolidated Balance Sheet --
December 31, 1994 and June 30, 1993 3
Statement of Consolidated Operations --
Quarter and Six Months Ended
December 31, 1994 and 1993 4
Statement of Consolidated Cash Flows --
Six Months Ended December 31, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations 11
Liquidity and Capital Resources 15
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES
(in thousands)
December 31, 1994 June 30, 1994
----------------- -------------
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 13,587 $ 7,206
First mortgage loans held
for sale 326,623 257,534
Investments 237,455 117,452
Receivables 104,041 84,155
Foreclosed real estate 5,998 8,934
---------- ----------
674,117 468,075
Less allowance for losses (29,578) (12,262)
---------- ----------
644,539 455,813
Purchased future mortgage
servicing income rights--net 370,978 382,009
Fixed assets--net 85,435 89,154
Prepaid expenses and other
assets 26,668 30,133
Net assets of discontinued
operations 84,191 113,258
---------- ----------
$1,225,398 $1,077,573
========== ==========
Escrow, agency and fiduciary
funds--see contra $ 508,602 $ 603,163
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued
expenses $ 60,618 $ 71,862
Notes payable 557,877 341,047
Term notes payable 379,415 383,311
Senior convertible notes
payable 139,918 139,918
---------- ----------
1,137,828 936,138
---------- ----------
<PAGE>
Stockholders' Equity:
Common stock--20,146 and 20,100
shares issued and outstanding,
respectively 20,146 20,100
Other paid-in capital 309,577 309,429
Retained earnings (deficit) (242,153) (188,094)
---------- ----------
87,570 141,435
---------- ----------
$1,225,398 $1,077,573
========== ==========
Liability for escrow, agency and
fiduciary funds--see contra $ 508,602 $ 603,163
========== ==========
Note: The balance sheet at June 30, 1994 as presented is derived
from the audited financial statements at that date.
See notes to consolidated financial statements.
<PAGE>
STATEMENT OF CONSOLIDATED OPERATIONS (Unaudited)
LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES
(in thousands, except per share amounts)
Quarter Ended Six Months Ended
December 31 December 31
------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
Revenues
Mortgage servicing $ 34,371 $ 37,704 $ 67,285 $ 75,535
Commissions and fees 8,280 7,597 16,411 14,175
Interest 4,957 9,709 10,725 17,509
Investment 5,277 4,592 8,943 13,133
Gain on sales 411 5,188 3,590 12,008
Management fees -- affiliates -- 100 -- 2,952
Other -- affiliates -- -- -- 5,028
Other 4,055 871 4,518 5,485
-------- -------- -------- --------
57,351 65,761 111,472 145,825
-------- -------- -------- --------
Expenses
Interest 18,888 21,412 37,254 41,585
Personnel 15,399 19,720 30,605 39,797
Depreciation and amortization 15,662 49,875 31,864 118,440
Other operating 11,940 9,922 21,737 19,327
Provision for losses 29,171 7,335 31,071 8,877
-------- -------- -------- --------
91,060 108,264 152,531 228,026
-------- -------- -------- --------
Loss from continuing
operations (33,709) (42,503) (41,059) (82,201)
Loss from discontinued
operations (7,500) (5,635) (13,000) (15,504)
-------- -------- -------- --------
Net loss $(41,209) $(48,138) $(54,059) $(97,705)
======== ======== ======== ========
Earnings (loss) per share:
Loss from continuing
operations $(1.67) $(2.11) $(2.04) $(4.08)
Net loss $(2.04) $(2.39) $(2.68) $(4.85)
Average number of shares 20,154 20,132 20,144 20,129
Note: Reclassifications have been made to December 31, 1993 financial
statements for comparative purposes.
See notes to consolidated financial statements.
<PAGE>
STATEMENT OF CONSOLIDATED CASH FLOWS (Unaudited)
LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES
(in thousands)
Six Months Ended
December 31
-------------------
1994 1993
-------- --------
Operating activities:
Loss from continuing operations $(41,059) $(82,201)
Adjustments to reconcile loss from continuing
operations to net cash provided by
operating activities:
Depreciation and amortization 31,864 118,440
Provision for losses 31,071 8,877
-------- --------
Cash provided by operations before working
capital changes 21,876 45,116
Net change in first mortgage loans held for sale (67,210) (129,796)
Net change in sundry receivables, payables, and
other assets (43,127) (30,458)
-------- --------
Net cash used by operating activities (88,461) (115,138)
-------- --------
Investing activities:
Purchases of investments (136,438) (9,335)
Maturities/sales of investments 14,470 54,213
Purchases of loans from pools (6,081) (10,056)
Sales of foreclosed real estate 5,824 10,087
Net purchases of fixed assets (869) (12,300)
Purchases of future mortgage servicing
income rights (28,427) (59,209)
Sales of future mortgage servicing income rights 17,020 327
-------- --------
Net cash used by investing activities (134,501) (26,273)
-------- --------
Financing activities:
Net borrowings of notes payable 216,830 132,063
Term debt repayments (3,896) (4,666)
-------- --------
Net cash provided by financing activities 212,934 127,397
-------- --------
<PAGE>
Net decrease in cash and cash equivalents (10,028) (14,014)
Net cash provided (used) by discontinued operations 16,409 (10,650)
Cash and cash equivalents at beginning of period 7,206 34,368
-------- --------
Cash and cash equivalents at end of period $ 13,587 $ 9,704
======== ========
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES
December 31, 1994
NOTE A -- BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements of Lomas
Financial Corporation ("LFC") and its subsidiaries (collectively, the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not
include all of the information or footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation at December 31, 1994 have been
included. Operating results for the six months ended December 31, 1994 are
not necessarily indicative of the results that may be expected for the fiscal
year ended June 30, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the annual report on
Form 10-K of the Company for the fiscal year ended June 30, 1994.
NOTE B -- EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share data for the quarter and six months
ended December 31, 1994 and 1993 is computed using the weighted average
number of shares of common and, when dilutive, common stock equivalents
outstanding during the period. Common stock equivalents include units and
shares granted under the Lomas Financial Corporation 1991 Long Term Incentive
Plan for Nonemployee Directors, the 1991 Stock Incentive Program and the 1993
Intermediate and Long Term Incentive Plan. Common stock equivalents also
include the assumed exercise of dilutive stock options. Fully diluted per
share data is computed on the same basis as primary, but it also assumes (if
dilutive) the conversion of senior convertible notes with the related
adjustments for interest and federal income tax expenses. For the quarter and
six months ended December 31, 1994 and 1993, the fully diluted per share data
is antidilutive.
NOTE C -- REVERSE INTEREST RATE SWAPS
The Company, through its wholly-owned subsidiary, Lomas Mortgage USA,
Inc. ("Lomas Mortgage"), enters into interest rate swap agreements as a means
of managing its exposure to changes in interest rates. Interest rate swaps
that reduce the exposure of the Company, as a whole, to changes in interest
rates are designated as hedges of the Company's fixed rate debt and treated
as hedges of the debt. Swap agreements that do not reduce the Company's
exposure to changes in interest rates are not considered to be hedges. The
interest differential to be paid or received on swap agreements that are
treated as hedges is accrued over the life of the agreements as an adjustment
to the interest expense of the related debt. Gains or losses on early
termination of interest rate swap agreements designated as hedges, and losses
where the fixed rate debt associated with the swap is reduced below the
notional amount of the swap, are recognized over the remaining term of the
swap agreement. Interest rate swaps that are not considered hedges are
marked to market with the unrealized gain or loss, together with the accrued
interest differential, treated as a gain or loss on such swaps. Under the
terms of the swap agreements in existence at December 31, 1994, the Company
receives an annual fixed rate of interest and pays a floating rate of
interest based on the 30-day average A1/P1 commercial paper rate. The
Company has not entered into any additional interest rate swap agreements
since October 1993.
The swap agreements contain certain default and termination provisions
whereby the counterparty can terminate the agreements prior to their
maturity, including a provision which permits the counterparty to terminate,
if, in its reasonable business judgment, there has been a material adverse
change in the business, assets, operations or financial condition of Lomas
Mortgage since April 1, 1994. The terms of the swaps also provide that the
counterparty, under certain circumstances, can demand collateral from the
Company to protect against mark-to-market exposure attributable to the
agreements. During fiscal 1994, as a result of increases in interest rates,
the Company, at the request of the counterparty, pledged servicing rights
related to approximately $4.8 billion of mortgage loans as collateral.
During the six months ended December 31, 1994, the Company pledged additional
servicing rights related to approximately $2.0 billion of mortgage loans.
At December 31, 1994 interest rate swaps in the aggregate notional
amount of $800 million were outstanding, all of which were designated as
hedges. The Company's notes payable, investment credit lines and certain of
the warehouse debt totaling $800 million were hedged by the interest rate
swaps. The Company receives an average fixed interest rate of 4.765 percent
on these swaps. The floating interest rate, which the Company pays, at
December 31, 1994 was 6.060 percent. During the quarter and six months ended
December 31, 1994, the Company incurred interest expense (income) of $486,000
and $(268,000), respectively, from the swaps. In the same periods of fiscal
1994, the swap income reduced the Company's interest expense by $3.6 million
and $8.4 million, respectively.
Since its inception in July 1992 and through December 31, 1994, the
interest rate swap program has generated net cash of $41.3 million, including
cash related deferred gains of $9.9 million which currently is being
amortized as an offset to future net interest expense at a rate of $3.3
million a year.
At the beginning of the second quarter of fiscal 1995, the amount of
fixed rate debt dropped below the notional amount of the swaps ($800
million), the Company recorded a pro rata loss of approximately $7.4 million
which is included in provision for losses. The fixed rate debt increased
over the notional amount of the swaps during the quarter and the entire $800
million amount of swaps is accounted for as a hedge at December 31, 1994.
The liability resulting from pro rata loss is being amortized over the
remaining life of the swaps.
Based on the current interest rates and the current credit worthiness of
the counterparty, if the swap agreements had been terminated as of December
31, 1994, Lomas Mortgage would have incurred a liability (net of $9.9 million
cash related deferred gains) of approximately $75.1 million. However, the
Company does not intend to terminate these swaps until their maturity in
October 1998, and assuming the A1/P1 commercial paper interest rate remains
at 6.1 percent for the next four years, the cash to be paid by the Company as
interest on the swaps to maturity of the swaps would be $40.9 million and the
discounted present value would be approximately $35.0 million.
NOTE D -- PURCHASED FUTURE MORTGAGE SERVICING INCOME RIGHTS ("PMSRs")
Since April 1993 the Company had been using a simulation methodology to
estimate the future prepayments of the Company's servicing portfolio.
Effective July 1, 1994, the Company changed its estimates of prepayment
speeds from this simulation methodology to using published Constant
Prepayment Rates ("CPRs"). This change in estimate did not have a material
adverse effect on the financial statements of the Company as of July 1, 1994
or for the six months ended December 31, 1994.
PMSRs at December 31, 1994, consisted of the following (in thousands):
Cost of PMSRs $ 552,044
Capitalized excess servicing fees 3,031
---------
555,075
Less: Accumulated amortization (184,097)
---------
$ 370,978
=========
Changes in PMSRs were as follows (in thousands):
Beginning balance at July 1, 1994 $ 382,009
Additions 29,105
Sales and writeoffs (12,276)
Amortization (27,860)
---------
Ending balance at December 31, 1994 $ 370,978
=========
NOTE E -- PROVISIONS FOR LOSSES
Reserves were established at December 31, 1994 in the amount of
$37.1 million, of which $29.6 million relates to continuing operations, as
follows:
-- provisions to cover certain mortgage servicing related receivables
and other assets (approximately $3.0 million noncash charge);
-- reduction in the carrying values of Company-owned buildings and
land (approximately $3.5 million noncash charge);
-- mortgage banking commitments and other contingencies (approximately
$5.7 million noncash charge);
-- pro rata swap loss recognition (approximately $7.4 million noncash
charge); and
-- provisions related to the Company's discontinued operations, ST
Lending, Inc. and Lomas Information Systems, Inc. (approximately
$7.5 million noncash charge).
NOTE F -- REDUCTION IN FORCE AND RESTRUCTURING
In January 1995 the Company began an additional reduction in personnel.
The Company intends to reduce its staff by approximately 200 employees by
June 30, 1995, of which 102 were terminated in January 1995 with an annual
savings of approximately $2.6 million. The involuntary terminations will
result in a provision in the third quarter of fiscal 1995 because the current
accounting standards require the loss to be recorded as a third quarter of
fiscal 1995 transaction as the plan was approved in January 1995.
Restructuring plans announced in fiscal 1994 (the "1994 Plans") resulted
in total charges of $15.6 million for continuing operations. Under the 1994
Plans, approximately 400 employees were terminated and termination benefits
totaling $9.0 million were paid. In addition, $4.6 million of writedowns of
assets were also charged to those reserves. These 1994 Plans were
substantially completed by December 31, 1994.
NOTE G -- DISCONTINUED OPERATIONS
Discontinued operations include the Company's short term lending
operations and information systems operations ("LIS").
On December 16, 1994, the Company completed the sale of substantially
all of the assets of LIS to a subsidiary of an insurance company. As
consideration for the sale, the Company received $2.5 million in cash; an
$8.0 million note due five years after closing and accruing interest at a
rate per annum of 8 percent payable at maturity, which note can be adjusted
based on the future financial performance of the purchaser; and a contingent
interest equal to 35 percent of the purchaser's adjusted gross revenues in
excess of $55 million per year generated during the seven years ending
December 31, 2001. The calculation of the present value of the estimated
discounted cash flow considerations from this transaction is approximately
$40 million using a discount factor of 20 percent. The Company does not
retain operational or management control of the successor entity. The
Company also recorded a $500,000 additional loss on the sale in the December
1994 quarter, or a total loss of $2.0 million in the six months ended
December 31, 1994 and $33.5 million provision at June 30, 1994. The Company
believes that during the period involved, it will recover its remaining
investment, however, there is no assurance that the projected revenues used
in the calculation of the remaining investment will be achieved. The Company
will apply all subsequent receipts related to the transaction to reduce its
remaining book basis. After full recovery of the remaining basis, all
subsequent revenues will be recorded as income as they are received.
<PAGE>
The following table presents a summary of LIS' revenues, expenses and
net operating results during the quarter and six months ended December 31,
1994 and 1993 (in thousands):
Quarter Ended Six Months Ended
December 31 December 31
---------------- ------------------
1994 1993 1994 1993
------- ------- -------- --------
Revenues $ 7,251 $ 9,362 $ 16,050 $ 18,226
Expenses 13,797 14,997 27,889 29,730
------- ------- -------- --------
Loss prior to reserve application (6,546) (5,635) (11,839) (11,504)
Reserve application 6,546 -- 11,839 --
------- ------- -------- --------
Net loss $ -- $(5,635) $ -- $(11,504)
======= ======= ======== ========
The Company's discontinued short term lending operations include ST
Lending, Inc. ("STL"), Lomas Management, Inc. ("LMI"), which manages the
assets of STL, and certain other real estate operations. During the three
years ended June 30, 1994 and six months ended December 31, 1994 the Company
provided reserves totaling $43.9 million to cover projected operating losses
through June 30, 1996 and losses to be realized on the sales of properties.
For the quarter and six months ended December 31, 1994 and 1993, losses of
$7.8 million, $3.7 million, $9.3 million and $5.5 million respectively, were
charged to the reserves.
During the quarter ended September 30, 1994, STL closed a sale of 12 of
its properties and generated cash of approximately $31.1 million. STL made
principal payments of $62.0 million on its secured notes during the six
months ended December 31, 1994 and the notes were paid in full.
Net assets of discontinued short term lending operations at December 31,
1994 were as follows (in thousands):
Assets:
Mortgage notes receivable and foreclosed real estate, net of
allowance for losses of $15,942 $43,459
Cash and cash equivalents 12,131
Other assets 1,532
--------
57,122
Less:
Accounts payable and accrued expenses (1,402)
Future operating loss reserves (3,235)
--------
$52,485
<PAGE>
The yield on STL's earning loans (totaling $5.6 million at December 31,
1994) was approximately 9.80 percent and on its cash (invested primarily in
high-grade commercial paper) was approximately 5.27 percent.
NOTE H -- TRANSACTION WITH AFFILIATE
In November 1994 the Company, through Lomas Mortgage, repurchased 85
percent of a mortgage servicing portfolio with an unpaid principal balance of
$522 million from its affiliate, Lomas Mortgage Partnership (the
"Partnership"), for $10.8 million. The transaction resulted in a gain of
$3.7 million for the Partnership. This mortgage servicing portfolio was
originally sold to the Partnership in January 1994 at a loss of approximately
$1.3 million. Since Lomas Mortgage owns one-third of the Partnership,
one-third of the net gain realized from these transactions of approximately
$800,000 was deferred and is being amortized over approximately nine years
through adjusting the carrying value of the PMSRs related to that portfolio.
NOTE I -- CONTINGENT LIABILITIES
On September 17, 1990 plaintiffs purporting to represent a class of
single-family mortgagors having escrow deposits computed by Lomas Mortgage
within the past ten years filed a class-action complaint in the Circuit Court
of Cook County, Illinois. The complaint alleged that Lomas Mortgage was in
breach of mortgage contracts and was assessing excessive and unlawful escrow
deposits against the plaintiffs. In addition, the complaint asked for
punitive damages. On October 4, 1990 this lawsuit was removed to the United
States District Court for the Northern District of Illinois. Similar actions
for damages, fees and other relief were filed in California and Minnesota
state courts and class-action counterclaims were filed in two pending
Illinois foreclosure actions. The state court actions were removed to federal
court and transferred to the Northern District of Illinois. The state court
counterclaims are stayed.
On December 6, 1994, the United States District Court for the Northern
District of Illinois entered an order finally approving a settlement of this
action and dismissing, with prejudice, all claims that were or could have
been brought by the class. The Minnesota action was also dismissed under
that order. The settlement and dismissal also resolves similar claims raised
in the California action and moots the class-action counterclaims filed in
the Illinois foreclosure actions.
Pursuant to the terms of the settlement, Lomas Mortgage has agreed to
follow certain escrow servicing procedures that result in lower escrow
balances for certain of its mortgagors and has already refunded the surplus
escrow balance to its mortgagors that resulted from the implementation of the
procedure. Lomas Mortgage has also agreed to implement certain special
servicing procedures for its mortgagors whose mortgages are written on older
conventional mortgage forms. In addition to these escrow servicing
procedures, Lomas Mortgage has agreed to provide, once the settlement is
finally approved and the case dismissed, a one-time rebate to its eligible
present and former mortgagors. The total rebate is currently estimated to be
less than $600,000. Finally, Lomas Mortgage has agreed to reimburse class
counsel for their reasonable attorneys' fees and costs. The estimated rebate
and attorney's fees have been provided for by Lomas Mortgage.
The Company is also involved in a number of other lawsuits considered to
be in the normal course of business. In management's opinion, the resolution
of these other disputes will not have a material adverse effect on the
financial position of the Company.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company's continuing operations, after establishing provisions of
$29.6 million, resulted in net losses for the quarter and six months ended
December 31, 1994 of $33.7 million and $41.1 million, respectively, compared
to net losses of $42.5 million and $82.2 million for the quarter and six
months ended December 31, 1993, respectively. Discontinued operations
incurred losses of $7.5 million and $13.0 million in the quarter and six
months ended December 31, 1994, respectively, compared to losses of $5.6
million and $15.5 million for the same periods in fiscal 1994.
The operating results of the Company during the quarter and six months
ended December 31, 1994 and 1993 were as follows (in millions):
Quarter Ended Six Months Ended
December 31 December 31
----------------- ----------------
1993 1992 1993 1992
------ ------ ------ ------
Operating Income (Loss)
Mortgage banking $(28.7) $(36.0) $(29.6) $(75.9)
Other 2.6 (0.9) 1.9 4.6
------ ------ ------ ------
(26.1) (36.9) (27.7) (71.3)
Corporate Expenses
General and administrative (2.1) (2.2) (4.3) (4.3)
Provision for losses (1.9) (0.1) (1.9) (0.1)
Corporate interest (3.6) (3.3) (7.2) (6.5)
------ ------ ------ ------
Loss from continuing
operations (33.7) (42.5) (41.1) (82.2)
Loss from discontinued operations (7.5) (5.6) (13.0) (15.5)
------ ------ ------ ------
Net loss $(41.2) $(48.1) $(54.1) $(97.7)
====== ====== ====== ======
Provision for Losses
Reserves were established at December 31, 1994 in the amount of $37.1
million, of which approximately $27.1 million is noncash, as follows:
-- provisions to cover certain mortgage servicing related receivables
and other assets;
-- reduction in the carrying values of Company-owned buildings and
land;
-- mortgage banking commitments and other contingencies;
-- pro rata swap loss recognition; and
-- provision related to the Company's discontinued operations, ST
Lending, Inc. and Lomas Information Systems, Inc.
Reduction in Force and Restructuring
In January 1995 the Company began an additional reduction in personnel.
The Company intends to reduce its staff by approximately 200 employees by
June 30, 1995, of which 102 were terminated in January 1995 with an annual
savings of approximately $2.6 million. The involuntary terminations will
result in a provision in the third quarter of fiscal 1995 because the current
accounting standards require the loss to be recorded as a third quarter of
fiscal 1995 transaction as the plan was approved in January 1995.
Restructuring plans announced in fiscal 1994 (the "1994 Plans") resulted
in total charges of $15.6 million for continuing operations. Under the 1994
Plans, approximately 400 employees were terminated and termination benefits
totaling $9.0 million were paid. In addition, $4.6 million of writedowns of
assets were also charged to those reserves. These 1994 Plans were
substantially completed by December 31, 1994.
Mortgage Banking
Mortgage banking divisions revenues, expenses, and contributions/loss
from continuing operations for the quarter and six months ended December 31,
1994 and 1993 were derived from the following sources (in millions):
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended December 31 Six Months Ended December 31
--------------------------------- ---------------------------------
1994 1993 1994 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loan administration
Primary servicing $ 31.7 $ 35.0 $ 62.2 $ 69.1
Master servicing 3.1 3.2 5.7 6.7
Expenses (13.7) (16.2) (27.0) (33.3)
Amortization (including
$30 million and $80
million impairment
provisions in the 1993
periods, respectively) (13.5) $ 7.6 (48.6) $(26.6) (27.7) $ 13.2 (115.2) $(72.7)
------ ------ ------ ------
Insurance
Agency 2.2 2.1 4.9 4.1
Mortgage plans 1.5 1.5 2.9 2.5
Expenses (1.5) 2.2 (1.2) 2.4 (2.9) 4.9 (2.3) 4.3
------ ------ ------ ------
Banking (including
warehousing and
investment income and
interest expense)
Revenues 8.9 11.8 16.7 24.3
Expenses (15.6) (6.7) (18.1) (6.3) (30.5) (13.8) (34.9) (10.6)
------ ------ ------ ------
Portfolio production
Revenues 3.9 12.0 10.6 24.5
Expenses (4.5) (0.6) (8.1) 3.9 (9.7) 0.9 (15.1) 9.4
------ ------ ------ ------
Field services
Revenues 3.0 3.8 5.9 7.5
Expenses (3.1) (0.1) (3.5) 0.3 (6.1) (0.2) (6.8) 0.7
------ ------ ------ ------
<PAGE>
Fund and asset management
Revenues -- 0.4 -- 8.3
Expenses -- -- -- 0.4 -- -- (2.1) 6.2
------ ------ ------ ------
General and
administrative expense (3.4) (5.0) (6.9) (8.1)
------ ------ ------ ------
Provision for losses (27.7) (5.1) (27.7) (5.1)
------ ------ ------ ------
Operating loss $(28.7) $(36.0) $(29.6) $(75.9)
====== ====== ====== ======
</TABLE>
<PAGE>
The loan administration unit generated operating income of $13.2 million
in the six months ended December 31, 1994 compared to income of $7.3 million
before an $80 million provision for PMSR impairment in the same period in
fiscal 1994. For the quarter ended December 31, 1994, income was $7.6
million, compared to income of $3.4 million before the $30 million PMSR
impairment for the quarter ended December 31, 1993.
The improved operating results reflected principally a significant
decline in the Company's servicing portfolio runoff rate from an annualized
41.5 percent in the six months ended December 31, 1993 to an annualized rate
of 13.8 percent in the same period of 1994. As a consequence of this
fundamental improvement, portfolio amortization charges (before a $80 million
PMSR impairment) declined from $35.2 million in the December 1993 six months
to $27.7 million in the December 1994 six months. For the December quarters,
such amortization declined from $18.6 million (before a $30 million PMSR
impairment) in the 1993 quarter to $13.5 million in the 1994 quarter.
The increase in net income in the fiscal 1995 periods is also
attributable to cost reductions. Loan administration related expenses
decreased from $16.2 million and $33.3 million in the quarter and six months
ended December 31, 1993 to $13.7 million and $27.0 million in the same
periods in fiscal 1995, respectively. Related revenues decreased from $38.1
million and $75.8 million in the quarter and six months ended December 31,
1993 to $34.8 million and $67.9 million in the same periods in 1994,
respectively. The decrease in revenues is principally due to a decrease in
the division's combined primary and master servicing portfolios from $42.6
billion at December 31, 1993 to $41.3 billion at December 31, 1994.
The following is an analysis of servicing fee income for the quarter and
six months ended December 31, 1994 and 1993 (in thousands):
Quarter Ended Six Months Ended
December 31 December 31
----------------- ------------------
1994 1993 1994 1993
------- ------- ------- -------
Servicing fee income:
Primary servicing portfolio $29,206 $33,232 $57,659 $66,205
Subservicing portfolio 2,038 1,336 3,925 2,677
Master servicing portfolio 3,127 3,136 5,701 6,653
-------- -------- ------- -------
34,371 37,704 67,285 75,535
Other servicing related income 524 430 636 287
-------- -------- ------- -------
Total $34,895 $38,134 $67,921 $75,822
======== ======== ======= =======
<PAGE>
The following table sets forth certain information regarding the
Company's servicing portfolio (dollars in millions):
December 31, 1994 June 30, 1994
------------------ -------------
Portfolio principal balances:
Primary servicing portfolio $27,769 $28,455
Subservicing portfolio 5,430 5,535
------- -------
33,199 33,990
Master servicing portfolio 8,132 8,445
------- -------
$41,331 $42,435
======= =======
Portfolio loan count:
Primary servicing portfolio 484,780 495,524
Subservicing portfolio 66,206 70,007
------- -------
550,986 565,531
Master servicing portfolio 134,674 136,609
------- -------
685,660 702,140
======= =======
Weighted average interest rate 8.4% 8.3%
The banking unit of the mortgage banking division recorded net expenses
of $6.7 million and $13.8 million in the quarter and six months ended
December 31, 1994, respectively, which were $400,000 and $3.2 million higher
than the $6.3 million and $10.6 million net expenses reported for the quarter
and six months ended December 31, 1993, respectively. Banking revenues
decreased by $2.9 million and $7.6 million in the quarter and six months
ended December 31, 1994, respectively. The decrease is attributable
primarily to the fact that the principal amount of the first mortgage loans
held in warehouse pending delivery to permanent investors was substantially
lower in the 1994 period than in the 1993 period. In addition, banking
revenues for the six months ended December 31, 1993 included a $2.3 million
interest rate swap termination fee which was not treated as a hedge. Banking
expenses decreased by $2.5 million and $4.4 million in the quarter and six
months ended December 31, 1994, respectively. Paid-in-full ("PIF") interest,
which is incurred when loans securing payment of mortgage-backed securities
in the Company's primary servicing portfolio are prepaid prior to the end of
a given month, totaled $1.2 million and $2.5 million in the quarter and six
months ended December 31, 1994, respectively, and were $6.5 million and
$12.4 million, respectively, in the 1993 periods. See NOTE C -- REVERSE
INTEREST RATE SWAPS on page 6.
The portfolio production unit recorded $600,000 loss and $900,000 income
in the quarter and six months ended December 31, 1994, respectively, compared
to income of $3.9 million and $9.4 million in the quarter and six months
ended December 31, 1993. Portfolio production through flow acquisitions was
$1.3 billion and $3.2 billion in the quarter and six months ended December
31, 1994, respectively, compared to $3.6 billion and $6.3 billion in the same
periods of fiscal 1994. The production volume in fiscal 1995 was affected by
higher interest rates. Portfolio production revenues for the quarter and six
months ended December 31, 1994 and 1993 included $300,000, $3.6 million, and
$5.8 million and $11.7 million respectively, of gains from sale of first
mortgage loans and related servicing income rights.
Fund and asset management operation was discontinued and transferred to
Capstead Mortgage Corporation during fiscal 1994 when Capstead became
self-administered at September 30, 1993. Accordingly, the unit, which
contributed $6.2 million of income in the six months ended December 31, 1993,
contributed nothing in the 1994 period.
Interest Rate Fluctuations and Market Factors
Lower long term interest rates normally increase new mortgage loan
production volume, which in turn increases fee income and the net interest
spread as a result of the higher average volume of mortgages held for sale.
Lower long term rates also increase prepayment speeds of mortgages on which
PMSRs are currently held, which lowers yields realized on the Company's
investment in PMSRs. Increased prepayment speeds also accelerate PIF
interest expense owed to certain investors. PIF interest is the partial
monthly interest in the month of payoff that is not payable by the mortgagor,
but is receivable by the mortgage security holder.
Higher long term interest rates normally decrease the general volume of
new mortgage originations, decreasing the volume of mortgages held for sale.
These conditions result in reduced fee income and reduced net interest
income. However, the Company's average net yield as a percentage of the
balance held may increase if short term rates do not change by a
corresponding degree. Higher long term rates also decrease the prepayment
speed of mortgages on which PMSRs are currently held, which in turn normally
would increase the yield on and value of the Company's investment in PMSRs.
Decreased prepayment speeds also will decrease PIF interest expense due to
loans which payoff.
The value of the Company's loan servicing portfolio may be adversely
affected if mortgage interest rates decline and loan prepayments increase.
Periods of accelerated prepayments may result in future declines of income
generated from the Company's loan servicing portfolio. Conversely, if
mortgage interest rates increase, the value of the Company's loan servicing
portfolio may be positively affected.
Lower short term interest rates increase the Company's net interest
spread on mortgages held for sale and higher short term interest rates
decrease the net yield on mortgages held for sale unless there is a
corresponding increase in long term interest rates.
Other
The Company's other operations during the quarter and six months ended
December 31, 1994 generated income of $2.6 million and $1.9 million,
respectively, compared to a loss of $900,000 and income of $4.6 million,
respectively, in the 1993 periods.
During the quarter and six months ended December 31, 1994 and 1993, the
other operating results included losses of $700,000, $900,000 and $2.1
million and $1.5 million, respectively, from the Company's image processing
operations. During the quarter and six months ended December 31, 1994, the
Company recorded a gain of $2.8 million from settlement of certain
contractual provisions related to the Company's 1991 sale of ELLCO Leasing
Corporation. Similar settlement of certain other contractual provisions
related to the ELLCO sale resulted in a gain of $3.9 million in the six
months ended December 31, 1993.
Discontinued Operations
On December 16, 1994, the Company completed the sale of substantially
all of the assets of LIS to a subsidiary of an insurance company. For more
information, see NOTE G -- DISCONTINUED OPERATIONS on page 8.
During the quarter and six months ended December 31, 1994, the Company
provided reserves totaling $7.0 million and $12.5 million, respectively, for
the discontinued short term lending operations. These reserves are to cover
projected operating losses through June 30, 1995 and estimated losses to be
realized on the sales of properties. For the quarter and six months ended
December 31, 1994 and 1993, losses of $7.8 million, $3.7 million and $9.3
million and $5.5 million, respectively, were charged to these reserves.
Liquidity and Capital Resources
The capital and credit resources of the Company at December 31, 1993
included (in millions):
Short term debt (self-liquidating) of Lomas Mortgage:
--Secured by first mortgage loans pending delivery
to permanent investors $ 317.0
--Secured by high quality short term investments 205.4
--Borrowings under working capital line of credit 25.0
--Other short term debt 10.5
--------
557.9
--------
Term debt of Lomas Mortgage:
--Notes due in 1997 150.0
--Notes due in 2002 190.0
--Other 39.4
--------
379.4
--------
Convertible notes of LFC due in 2003 139.9
Stockholders' equity 87.6
--------
$1,164.8
========
Short term debt was $557.9 million at December 31, 1994, including
$205.4 million principal amount borrowed under investment lines of credit and
$317.0 million principal amount of warehouse debt and repurchase agreement
borrowings secured by single-family mortgage loans pending delivery to
permanent investors. Investment lines of credit were secured by high quality
short term investments purchased with the proceeds of such lines of credit.
The short term notes payable and repurchase agreements are secured by single-
family mortgage loans which, at that date, were committed for sale to
institutional investors. Such short term notes (and therefore the related
warehouse indebtedness) normally are self-liquidating and require no
supplemental liquidity support from LFC or any of its subsidiaries.
Commercial paper and bank certificates of deposit of non-affiliated
commercial banks are funded with proceeds from, and are pledged as collateral
for, investment lines of credit. The commercial paper and bank certificates
of deposit have fixed rates of interest and generally mature within 31 days,
at which time the investment lines of credit are paid down. As a result, all
short term indebtedness except short term working capital debt is self-
liquidating and none of it constitutes any burden on operating cash flow.
Lomas Mortgage had outstanding at December 31, 1994 interest rate swaps
in the aggregate notional amount of $800 million, all of which were
designated as hedges. For more information on the interest rate swaps, see
NOTE C -- REVERSE INTEREST RATE SWAPS on page 6.
Semi-annual interest payments in the amount of $17.1 million on Lomas
Mortgage's senior notes and $6.3 million on LFC's senior convertible notes
are due in April 1995. In addition, a final payment in the amount of $37.9
million along with accrued interest related to a mortgage note on the
Company's headquarters is due in March 1996 and Lomas Mortgage's $150 million
senior notes are due on October 1, 1997. The Company is required to make
annual deposits of $10 million beginning October 31, 1997 to a sinking fund
for the redemption of LFC's senior convertible notes.
Coverage for the term notes payable of Lomas Mortgage is provided by
cash internally generated by that subsidiary. Lomas Mortgage's operations
during the six months ended December 31, 1994, after paying interest on its
short term debt, generated $49.5 million in cash available for (i) payment of
interest on the subsidiary's $379.4 million term debt, (ii) investment in
portfolio maintenance and growth, (iii) intercompany advances or payment of
dividends to LFC (subject to restricted payment limitations described below),
and (iv) addition to Lomas Mortgage's working capital.
Under the terms of the warehouse agreement, servicing payment agreement
and working capital line of credit that contains the most restrictive
covenants, Lomas Mortgage is restricted from making dividend payments to LFC
if, after giving effect thereto, the aggregate amount of such payments should
exceed the sum of (i) $25 million ($10 million after December 31, 1994) (less
any intercompany advances); plus (ii) 50 percent of Lomas Mortgage's
accumulated consolidated income before tax since October 1, 1992; or reduced
by 100 percent of consolidated loss before income taxes; plus (iii) (a)
before November 30, 1993, the fair value of the aggregate net proceeds
received by Lomas Mortgage from the issuance or sale after October 1, 1992 of
its capital stock (b) after November 30, 1993, the aggregate net cash
proceeds received from the issuance or sale by Lomas Mortgage of its capital
stock and warrants, options and rights to purchase its capital stock. The
minimum net worth requirement, as defined, under these covenants was reduced
effective December 31, 1994 to $150 million. Lomas Mortgage's net worth as
defined at December 31, 1994 was $172.3 million. Also effective December 31,
1994, the covenant related to debt-to-equity ratios was amended and the $25
million intercompany advances to LFC was reduced to $10.0 million. The
Company was in compliance with all covenants in these agreements as changed
effective December 31, 1994. At December 31, 1994, under these agreements,
Lomas Mortgage could transfer as intercompany advances to LFC approximately
$7.0 million.
Coverage for interest payments on LFC's $140 million of convertible
notes due 2003 and general corporate expenses have been and in the future are
expected to be provided by (a) LFC's current cash resources, (b) dividends
(if available) and intercompany advances from Lomas Mortgage, (c) cash
dividends and interest income from other investments, (d) advances or
dividends from STL, and (e) periodic liquidations of other assets. On
September 30, 1994 STL completed the sale of 12 of its remaining properties
for approximately $31.1 million. The proceeds of the sale along with STL's
existing cash enabled payment (on October 31, 1994) in full of STL's
remaining secured debt of $19.0 million and made available approximately
$28.9 million of incremental liquidity to the Company's consolidated
operations. Also, because of the completion of the sale of LIS, LFC will not
be required in the future to fund LIS' cash losses.
As of December 31, 1994, the Company's failure to meet certain ratio
requirements contained in the covenants of the Company's $140 million senior
convertible note indenture and Lomas Mortgage's $340 million note indenture,
while not events of default, limit the Company's ability to issue additional
term debt.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 17, 1990 plaintiffs purporting to represent a class of
single-family mortgagors having escrow deposits computed by Lomas Mortgage
within the past ten years filed a class-action complaint in the Circuit Court
of Cook County, Illinois. The complaint alleged that Lomas Mortgage was in
breach of mortgage contracts and was assessing excessive and unlawful escrow
deposits against the plaintiffs. In addition, the complaint asked for
punitive damages. On October 4, 1990 this lawsuit was removed to the United
States District Court for the Northern District of Illinois. Similar actions
for damages, fees and other relief were filed in California and Minnesota
state courts and class-action counterclaims were filed in two pending
Illinois foreclosure actions. The state court actions were removed to federal
court and transferred to the Northern District of Illinois. The state court
counterclaims are stayed.
On December 6, 1994, the United States District Court for the Northern
District of Illinois entered an order finally approving a settlement of this
action and dismissing, with prejudice, all claims that were or could have
been brought by the class. The Minnesota action was also dismissed under
that order. The settlement and dismissal also resolves similar claims raised
in the California action and moots the class-action counterclaims filed in
the Illinois foreclosure actions.
Pursuant to the terms of the settlement, Lomas Mortgage has agreed to
follow certain escrow servicing procedures that result in lower escrow
balances for certain of its mortgagors and has already refunded the surplus
escrow balance to its mortgagors that resulted from the implementation of the
procedure. Lomas Mortgage has also agreed to implement certain special
servicing procedures for its mortgagors whose mortgages are written on older
conventional mortgage forms. In addition to these escrow servicing
procedures, Lomas Mortgage has agreed to provide, once the settlement is
finally approved and the case dismissed, a one-time rebate to its eligible
present and former mortgagors. The total rebate is currently estimated to be
less than $600,000. Finally, Lomas Mortgage has agreed to reimburse class
counsel for their reasonable attorneys' fees and costs. The estimated rebate
and attorney's fees have been provided for by Lomas Mortgage.
The Company is also involved in a number of other lawsuits considered to
be in the normal course of business. In management's opinion, the resolution
of these other disputes will not have a material adverse effect on the
financial position of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number
-------
10.1 Fourth Amendment to Restated Loan and Security Agreement dated
as of February 28, 1994 among Lomas Mortgage USA, Inc.
("LMUSA"), the bank signatories thereto, Bank One, Texas,
N.A., as Administrative Agent, and Texas Commerce Bank
National Association, as Syndication Agent.
10.2 Eighth Amendment to Restated Loan and Security Agreement dated
as of November 29, 1994 among LMUSA, the bank signatories
thereto, Bank One, Texas, N.A., as Administrative Agent, and
Texas Commerce Bank National Association, as Syndication
Agent.
10.3 Whole Loan Financing Facility dated May 16, 1994 (the "Whole
Loan Financing Facility") between LMUSA and DLJ Mortgage
Capital, Inc. ("DLJ").
10.4 Promissory Note dated as of May 16, 1994 executed by LMUSA for
the benefit of DLJ in the principal amount of $600,000,000
(the "Promissory Note").
10.5 Whole Loan Financing Program Tri-Party Custody Agreement dated
as of May 16, 1994 between LMUSA, as Customer, DLJ and Bank
One, Texas N.A., as Custodian (the "Tri-Party Custody
Agreement").
10.6 Pledge Agreement dated as of May 16, 1994 by and between DLJ
and LMUSA.
10.7 Commitment Letter dated May 18, 1994 between LMUSA and DLJ
relating to the Whole Loan Financing Facility, the Promissory
Note, the Pledge Agreement and the Tri-Party Custody Agreement
(the "Commitment Letter").
10.8 Amendment to the Commitment Letter dated February 8, 1995 and
effective as of December 31, 1994.
10.9 Amendment No. 2 to Amended and Restated Pledge Agreement dated
as of July 15, 1994 between LMUSA, as Pledgor, and Lehman
Brothers Special, Inc., as Pledgee.
10.10 Amendment to Agreement dated as of September 23, 1994 between
the registrant and entities and individuals listed therein as
the Cold Spring Group.
10.11 Agreement dated September 30, 1994 among the registrant,
General Electric Capital Corporation and ELLCO Leasing
Corporation relating to the termination of the General Escrow
and the General Escrow Agreement described therein.
10.12 Asset Purchase Agreement dated as of December 16, 1994 by and
between Lomas Information Systems, Inc., as Seller,
Residential Information Services Limited Partnership, as
Buyer, the registrant, LMUSA and Residential Services
Corporation of America.
10.13 Employment Agreement dated as of December 1, 1994 by and
between the registrant and Eric D. Booth.
10.14 Employment Agreement dated as of December 1, 1994 by and
between the registrant and Robert R. Denton.
10.15 Lomas Financial Corporation 1993 Intermediate and Long Term
Incentive Plan Phantom Stock Agreement dated as of December
12, 1994 between the registrant and Eric D. Booth.
10.16 Lomas Financial Corporation 1993 Intermediate and Long Term
Incentive Plan Phantom Stock Agreement dated as of December
12, 1994 between the registrant and Robert R. Denton.
10.17 Consulting Agreement dated as of August 2, 1994 by and between
the registrant and Jess Hay.
10.18 Consulting Agreement dated as of November 1, 1994 by and
between the registrant and Gary White.
10.19 Consulting Agreement dated as of November 1, 1994 by and
between the registrant and Ramona Taylor.
<PAGE>
10.20 Ninth Amendment to Restated Loan and Security Agreement dated
February 13, 1995 and effective as of December 31, 1994 among
LMUSA, the bank signatories thereto, Bank One, Texas, N.A., as
Administrative Agent, and Texas Commerce Bank National
Association, as Syndication Agent.
11 Computation of Earnings (Loss) Per Share.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
Form 8-K dated December 13, 1994 reporting the appointment of Eric D.
Booth as the registrant's President and Chief Executive Officer and
his election to the registrant's Board of Directors. No financial
statements were filed.
Form 8-K dated December 19, 1994 reporting the completion of the sale of
substantially all of the assets of Lomas Information Systems, Inc. to a
subsidiary of an insurance company. No financial statements were filed.
Form 8-K dated January 24, 1995 reporting change of independent
auditors. No financial statements were filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOMAS FINANCIAL CORPORATION
Date: February 14, 1995 By: /s/ERIC D. BOOTH
--------------------------
Eric D. Booth
President, Chief Executive
Officer and Director
Date: February 14, 1995 By: /s/GARY WHITE
--------------------------
Gary White
Senior Vice President and
Controller
<PAGE>
LOMAS FINANCIAL CORPORATION
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
No. Page
- - ------- ------------
10.1 Fourth Amendment to Restated Loan and Security 23
Agreement dated as of February 28, 1994 among
Lomas Mortgage USA, Inc. ("LMUSA"), the bank
signatories thereto, Bank One, Texas, N.A., as
Administrative Agent, and Texas Commerce Bank
National Association, as Syndication Agent.
10.2 Eighth Amendment to Restated Loan and Security 32
Agreement dated as of November 29, 1994 among
LMUSA, the bank signatories thereto, Bank One,
Texas, N.A., as Administrative Agent, and Texas
Commerce Bank National Association, as
Syndication Agent.
10.3 Whole Loan Financing Facility dated May 16, 1994 42
(the "Whole Loan Financing Facility") between LMUSA
and DLJ Mortgage Capital, Inc. ("DLJ").
10.4 Promissory Note dated as of May 16, 1994 executed 49
by LMUSA for the benefit of DLJ in the principal
amount of $600,000,000 (the "Promissory Note").
10.5 Whole Loan Financing Program Tri-Party Custody 53
Agreement dated as of May 16, 1994 between LMUSA,
as Customer, DLJ and Bank One, Texas N.A., as
Custodian (the "Tri-Party Custody Agreement").
10.6 Pledge Agreement dated as of May 16, 1994 by and 82
between DLJ and LMUSA.
10.7 Commitment Letter dated May 18, 1994 between LMUSA 100
and DLJ relating to the Whole Loan Financing
Facility, the Promissory Note, the Pledge Agreement
and the Tri-Party Custody Agreement (the
"Commitment Letter").
10.8 Amendment to the Commitment Letter dated 106
February 8, 1995 and effective as of December 31,
1994.
10.9 Amendment No. 2 to Amended and Restated Pledge 107
Agreement dated as of July 15, 1994 between LMUSA,
as Pledgor, and Lehman Brothers Special, Inc.,
as Pledgee.
10.10 Amendment to Agreement dated as of September 23, 109
1994 between the registrant and entities and
individuals listed therein as the Cold Spring
Group.
10.11 Agreement dated September 30, 1994 among the 112
registrant, General Electric Capital Corporation
and ELLCO Leasing Corporation relating to the
termination of the General Escrow and the General
Escrow Agreement described therein.
10.12 Asset Purchase Agreement dated as of December 16, 117
1994 by and between Lomas Information Systems,
Inc., as Seller, Residential Information Services
Limited Partnership, as Buyer, the registrant,
LMUSA and Residential Services Corporation of
America.
10.13 Employment Agreement dated as of December 1, 1994 165
by and between the registrant and Eric D. Booth.
10.14 Employment Agreement dated as of December 1, 1994 180
by and between the registrant and Robert R. Denton.
10.15 Lomas Financial Corporation 1993 Intermediate and 195
Long Term Incentive Plan Phantom Stock Agreement
dated as of December 12, 1994 between the registrant
and Eric D. Booth.
10.16 Lomas Financial Corporation 1993 Intermediate and 198
Long Term Incentive Plan Phantom Stock Agreement
dated as of December 12, 1994 between the registrant
and Robert R. Denton.
10.17 Consulting Agreement dated as of August 2, 1994 by 201
and between the registrant and Jess Hay.
10.18 Consulting Agreement dated as of November 1, 1994 210
by and between the registrant and Gary White.
10.19 Consulting Agreement dated as of November 1, 1994 218
by and between the registrant and Ramona Taylor.
10.20 Ninth Amendment to Restated Loan and Security 226
Agreement dated February 13, 1995 and effective as
of December 31, 1994 among LMUSA, the bank
signatories thereto, Bank One, Texas, N.A., as
Administrative Agent, and Texas Commerce Bank
National Association, as Syndication Agent.
11 Computation of Earnings (Loss) Per Share. 230
27 Financial Data Schedule.
EXHIBIT 10.1
FOURTH AMENDMENT TO RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT is entered into as of February 28, 1994, between LOMAS
MORTGAGE USA, INC., a Connecticut corporation (the "Company"), the banks
listed on the signature pages below ("Lenders"), BANK ONE, TEXAS, N.A., as
Administrative Agent (in that capacity "Administrative Agent"), and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, as Syndication Agent (together with
Administrative Agent "Agents").
The Company, Lenders, and Agents have entered into the Restated Loan and
Security Agreement dated as of July 8, 1993 (as amended through the date of
this amendment and as further renewed, extended, amended, and restated, the
"Loan Agreement"), providing for loans to the Company on a revolving basis.
The Company has requested an amendment to the Loan Agreement in order to
approve the addition of certain "Investors" under the Loan Agreement.
Accordingly, for adequate and sufficient consideration, the parties agree as
follows:
1. Certain Definitions. Unless otherwise specified in this amendment
(a) all terms defined in the Loan Agreement have the same meanings when used
in this amendment and (b) all references to "Sections" and "Schedules" are
references to the Loan Agreement's sections and schedules.
2. Amendment. Schedule 1.1(b) is entirely amended in the form of --
and all references in the Loan Papers to it shall be to -- the attached
Second Amended 1.1(b)
3. Conditions Precedent. The foregoing is not effective unless (a)
Agents have received counterparts of this amendment executed by the Company,
by Agents, and at least by Determining Lenders and (b) all of the
representations and warranties -- in this amendment and in all other Loan
Papers are true and correct as of -- as if made on -- the date of this
amendment.
4. Ratifications. This amendment modifies and supersedes all
inconsistent terms and provisions of the other Loan Papers. Except as
expressly modified and superseded by this amendment, the terms and provisions
of the other Loan Papers are ratified and confirmed and continue in full
force and effect. The Company, Determining Lenders, and Agents agree that
the Loan Papers, as amended by this amendment, continue to be legal, valid,
binding, and enforceable in accordance with their respective terms. The
Company ratifies and confirms that all Liens granted to Agents, on behalf of
Lenders, were intended to, do, and continue to secure the full payment and
performance of the Obligations. The Company shall perform such acts and duly
authorize, execute, acknowledge, deliver, file, and record such additional
documents as either Agent or any Lender may reasonably request in order to
perfect and protect such Liens and preserve and protect the rights of Agents
and Lenders in respect of all present and future Collateral.
5. Representations and Warranties. The Company represents and
warrants to Lenders and Agents that (a) this amendment and the other Loan
Papers to be delivered under this amendment have been duly authorized,
executed, and delivered by the Company, (b) no action of, or filing with, any
Tribunal is required to authorize, or is otherwise required in connection
with, the execution, delivery, and performance by the Company of this
amendment and those other Loan Papers (c) this amendment and those other Loan
Papers are valid and binding upon the Company and are enforceable against the
Company in accordance with their respective terms, except as limited by the
Bankruptcy Code of the United States of America and all other similar Laws
affecting the rights of creditors generally, (d) the execution, delivery, and
performance by the Company of this amendment and those other Loan Papers do
not require the consent of any other Person and do not and will not
constitute a violation of any Laws, agreement, or understanding to which the
Company is a party or by which the Company is bound, (e) the representations
and warranties in the Loan Agreement, as amended by this amendment, and each
other Loan Paper are true and correct in all material respects on and as of
the date of this amendment as though made as of the date of this amendment,
and (f) as of the date of this amendment, no Default or Potential Default
exists.
6. References. All references in the Loan Papers to the "Loan
Agreement" refer to the Loan Agreement as amended by this amendment. Because
this amendment is a "Loan Paper" referred to in the Loan Agreement, then the
provisions relating to Loan Papers in Section 10 are incorporated in this
amendment by reference, the same as if included in this amendment verbatim.
7. Counterparts. This amendment may be executed in any number of
counterparts with the same effect as if all signatories had signed the same
document, and all of those counterparts must be construed together to
constitute one and the same document.
8. Parties Bound. This amendment binds and inures to the Company,
Agents, each Lender, and (subject to Section 10.10) their respective
successors and assigns.
9. ENTIRETY. THIS AMENDMENT, THE LOAN AGREEMENT AS AMENDED BY IT, AND
THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES FOR
THE TRANSACTIONS THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]<PAGE>
EXECUTED as of the date first stated.
Lomas Mortgage USA, Inc. LOMAS MORTGAGE USA, INC.,
1600 Viceroy Drive as the Company
Dallas, Texas 75235
Attn: Robert E. Byerley, Jr.,
Executive Vice President &
Treasurer
Telecopy: 214/879-7018 By /S/ROBERT E. BYERLEY, JR.
-------------------------------
Robert E. Byerley, Jr.,
Executive Vice President and
Treasurer
Third Floor, 1717 Main Street BANK ONE, TEXAS, N.A.,
Mortgage Finance Group as Administrative Agent
Dallas, Texas 75201 and a Lender
Attn: Kathleen C. Stewart,
Vice President
Telecopy: 214/290-2275 By /S/KATHLEEN C. STEWART
-------------------------------
Kathleen C. Stewart,
Vice President
Texas Commerce Bank National TEXAS COMMERCE BANK NATIONAL
Association ASSOCIATION, as Syndication Agent
717 Travis Street and a Lender
Houston, Texas 77002
Attn: Robert A. Salcetti,
Senior Vice President
Telecopy: 713/216-2082 By /S/ROBERT A. SALCETTI
-------------------------------
Robert A. Salcetti,
Senior Vice President
First Bank Place FIRST BANK NATIONAL ASSOCIATION,
601 2nd Ave. S. as a Lender
2nd Floor MPFP0801
Minneapolis, MN 55402-4302
Attn: Kathlyn Slater,
Vice President
Telecopy: 612/973-0826 By /S/KATHLYN SLATER
-------------------------------
Kathlyn Slater, Vice President
<PAGE>
8333 Douglas Avenue GUARANTY FEDERAL BANK, F.S.B.,
Dallas, Texas 75255 as a Lender
Attn: James E. Robertson,
Vice President
Telecopy: 214/360-1660 By /S/JAMES E. ROBERTSON
-------------------------------
James E. Robertson,
Vice President
280 Park Avenue, 23 West BANKERS TRUST COMPANY, as a Lender
New York, New York 10017
Attn: Matthew C. Bernstein
Vice President
Telecopy: 212/454-3821 By /S/MATTHEW C. BERNSTEIN
-------------------------------
Matthew C. Bernstein,
Vice President
313 Carondelet HIBERNIA NATIONAL BANK, as a Lender
Suite 1400
New Orleans, Louisiana 70130
Attn: Michael Tennyson,
Vice President
Telecopy: 504/584-2042 By /S/MICHAEL TENNYSON
-------------------------------
Michael Tennyson, Vice President
6222 Wilshire Blvd. BANK HAPOALIM, B.M.,
Los Angeles, CA 90048 LOS ANGELES BRANCH, as a Lender
Attn: Robert Pollak,
Vice President
Telecopy: 213/937-1439 By
-------------------------------
Robert Pollak, Vice President
By
-------------------------------
Name
------------------------------
Title
-----------------------------
<PAGE>
75 Wall Street DRESDNER BANK, AG, NEW YORK BRANCH,
New York, NY 10005-2889 as a Lender
Attn: Charles H. Hill,
Vice President
Telecopy: 212/574-0129 By /S/CHARLES H. HILL
-------------------------------
Name Charles H. Hill
-------------------------------
Title Vice President
-----------------------------
By /S/R. MATTHEW SCHERER
-------------------------------
Name R. Matthew Scherer
-------------------------------
Title Vice President
-----------------------------
100 Federal St. 01-32-041 THE FIRST NATIONAL BANK OF BOSTON,
Boston, MA 02110 as a Lender
Attn: Corinne M. Barrett,
Vice President
Telecopy: (617) 434-7108 By /S/CORINNE M. BARRETT
-------------------------------
Corinne M. Barrett,
Vice President
One Marine Midland Center, MARINE MIDLAND BANK, N.A.,
15th Floor as a Lender
Buffalo, New York 14203
Attn: William F. Dentinger
Vice President
Telecopy: 716/841-2707 By /S/WILLIAM F. DENTINGER
-------------------------------
William F. Dentinger,
Vice President
66th Floor, NATIONSBANK OF TEXAS, N.A.,
NationsBank Plaza as a Lender
901 Main Street
Dallas, Texas 75202
Attn: Beth S. Sorensen,
Vice President
Telecopy: 214/508-0604 By /S/BETH S. SORENSEN
-------------------------------
Beth S. Sorensen, Vice President
<PAGE>
380 Madison Avenue BANK OF SCOTLAND, as a Lender
New York, New York 10017
Attn: Catherine Oniffrey,
Vice President
Telecopy: 713/651-9714 By /S/CATHERINE ONIFFREY
-------------------------------
Catherine Oniffrey,
Vice President
1601 Elm Street, 2nd Floor COMERICA BANK - TEXAS, as a Lender
Dallas, Texas 75201
Attn: W. James Meintjes,
Banking Officer
Telecopy: 214/979-8344 By /S/W. JAMES MEINTJES
-------------------------------
W. James Meintjes,
Banking Officer
1230 Peachtree St. NE, COMMERZBANK AKTIENGESELLSCHAFT,
Suite 3500 ATLANTA AGENCY, as a Lender
Atlanta, Georgia 30309
Attn: Harry P. Yergey,
Vice President
Telecopy: 404/888-6539 By
-------------------------------
Andreas Bremer,
Senior Vice President
By
-------------------------------
Harry P. Yergey, Vice President
499 Thornall Street MIDLANTIC NATIONAL BANK, as a Lender
Edson, New Jersey 08837
Attn: Glenn Hedde,
Vice President
Telecopy: 908/321-2094 By /S/GLENN HEDDE
-------------------------------
Glenn Hedde, Vice President
7485 New Horizon Way THE PRUDENTIAL HOME MORTGAGE
Frederick, Maryland 21701 COMPANY, INC., as a Lender
Attn: Russell R. Anderson,
Vice President
Telecopy: 301/696-7405 By /S/RUSSELL R. ANDERSON
-------------------------------
Russell R. Anderson,
Vice President
<PAGE>
640 Fifth Avenue, 15th Floor BANK OF IRELAND GRAND CAYMAN BRANCH,
New York, New York 10019 as a Lender
Attn: Roger Burns,
Vice President
Telecopy: 212/586-7752 By /S/ROGER BURNS
-------------------------------
Roger Burns, Vice President
15 S. 20th St., 15th Floor COMPASS BANK, as a Lender
Birmingham, Alabama 35233
Attn: John D. West,
Mortgage Banking Officer
Telecopy: 205/715-7994 By /S/JOHN D. WEST
-------------------------------
John D. West,
Mortgage Banking Officer
1 Mercantile Center MERCANTILE BANK OF ST. LOUIS NATIONAL
7th & Washington ASSOCIATION, as a Lender
St. Louis, Missouri 63101
Attn: Michael P. Lane,
Assistant Vice President
Telecopy: 314/425-2162 By /S/MICHAEL P. LANE
-------------------------------
Michael P. Lane,
Assistant Vice President
7700 Wisconsin Avenue SIGNET BANK/MARYLAND, as a Lender
Suite 400
Bethesda, Maryland 20814
Attn: David H. Olson,
Vice President
Telecopy: 301/652-1174 By /S/DAVID H. OLSON
-------------------------------
David H. Olson, Vice President
231 South LaSalle Street CONTINENTAL BANK N.A., as a Lender
Chicago, Illinois 60697
Attn: Mary Jo Hoch,
Vice President
Telecopy: 312/987-5833 By /S/MARY JO HOCH
-------------------------------
Mary Jo Hoch, Vice President
<PAGE>
SECOND AMENDED SCHEDULE 1.1(b)
INVESTORS
I. Bond Programs
Program Trustee
------- -------
Bexar County Housing Finance Corp.,
Series 1990 Ameritrust Texas, N.A.
Brevard County Housing Finance Authority,
Series 1991C Sun Bank, N.A.
East Texas Housing Finance Corp.,
Series 1992A Ameritrust Texas, N.A.
Harris County Housing Finance
Corporation, Series 1991 Texas Commerce Bank, N.A.
Housing Finance Authority of Manatee
County, FL; Series 1991A NationsBank Trust Co. (FL),
N.A.
Housing Finance Authority of Palm Beach
County, FL; Series 1992A NationsBank Trust Co. (FL),
N.A.
New Orleans Home Mortgage Authority,
Series 1991A First National Bank of Commerce
Travis County Housing Finance Corp.,
Series 1991, A&B Ameritrust Texas, N.A.
Orange County Housing Finance Authority,
Series 1992 A & B Sun Bank, N.A.
Housing Finance Authority of Pinellas
County, Series 1991 B NationsBank Trust Co. (FL),
N.A.
Central Texas Housing Finance Corp.,
Series 1991 NCNB Texas National Bank
Ft. Worth
Escambia County Housing Finance Authority,
Series 1992 NationsBank Trust Co. (FL)
Northeast Texas Housing Finance Corp.,
Series 1991 NCNB Texas National Bank Ft.
Worth
<PAGE>
Texas Dept. of Housing & Community
Affairs; No.45 Team Bank, Ft. Worth
Texas Dept. of Housing & Community Affairs
Bond Program No. 44, Series 1991 Team Bank, Ft. Worth
II. Pension Funds
California Public Employees Retirement System
III. Investment Banks
Donaldson, Lufkin & Jenrette
Securities Corp.
Goldman, Sachs & Company
Paine Webber, Inc.
Rauscher Pierce Refsnes, Inc.
Salomon Brothers, Inc.
The First Boston Corporation
Shearson/Lehman Brothers, Inc.
Smith Barney Harris Hupham & Company, Inc.
IV. Other
Veterans Land Board of the State of Texas
Prudential Securities Realty Funding Corporation
Guaranty Federal Bank, F.S.B.
Capstead Mortgage Corporation
Citibank, N.A.
Citicorp Securities, Inc.
Norwest Funding, Inc.
The Prudential Home Mortgage, Inc.
Residential Funding Corporation
EXHIBIT 10.2
EIGHTH AMENDMENT TO RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT is entered into as of November 29, 1994, between LOMAS
MORTGAGE USA, INC., a Connecticut corporation (the "Company"), the banks
listed on the signature pages below ("Lenders"), BANK ONE, TEXAS, N.A., as
Administrative Agent (in that capacity "Administrative Agent"), and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, as Syndication Agent (together with
Administrative Agent, "Agents").
The Company, Lenders, and Agents have entered into the Restated Loan and
Security Agreement (as amended through the date of this amendment and as
further renewed, extended, amended, and restated, the "Loan Agreement") dated
as of July 8, 1993, providing for loans to the Company on a revolving basis.
The Company has requested amendments to the Loan Agreement in order to extend
the Termination Date, update certain provisions to further confirm that
Syndication Agent no longer has a swing commitment, modify certain financial
covenants, and change several addresses. Accordingly, for adequate and
sufficient consideration, the parties agree as follows:
1. Certain Definitions. Unless otherwise specified in this amendment
(a) all terms defined in the Loan Agreement have the same meanings when used
in this amendment and (b) all references to "Sections" and "Schedules" are
references to the Loan Agreement's sections and schedules.
2. Amendments.
(a) The following definition in Section 1.1 is entirely amended as
follows:
"Termination Date" means the earlier of (a) November 28, 1995,
and (b) the date that all Lenders' commitments to lend terminate or
are cancelled under this agreement.
(b) Section 2.2(c) is entirely amended as follows:
(c) Swing Borrowings. The following procedures apply to
Swing Borrowings:
(i) The Company may request a Swing Borrowing by giving
to Administrative Agent a Notice of Borrowing for it, which is
irrevocable and binding on the Company and must be received by
Administrative Agent by at least 11:30 a.m. on the Business
Day the Borrowing is requested to be made.
(ii) Administrative Agent shall then elect in its sole
discretion whether to loan any of that Swing Borrowing. If
Administrative Agent elects to not fund the Swing Borrowing,
it shall so notify the Company in writing by facsimile
transmission confirmed by telephone by 1:00 p.m. on the date
that Swing Borrowing is requested to be made. To the extent
that any portion of a requested Swing Borrowing is not funded,
(a) the Notice of Borrowing for that Swing Borrowing shall be
deemed to be a Notice of Borrowing for a Ratable Borrowing in
the amount of that portion, (b) Administrative Agent shall use
its best efforts to promptly -- but at least by 2:00 p.m. on
that day -- give a copy of the Notice of Borrowing to each
Lender, marked by Administrative Agent to indicate that
portion of the requested Swing Borrowing that was not made,
and (c) each Lender shall make reasonable efforts to pay its
Commitment Percentage of that Borrowing to Administrative
Agent's principal office in Dallas, Texas, in immediately
available funds by 3:00 p.m. on that day but in any event each
Lender will comply with Section 2.2(b) with respect to that
portion.
(iii) If Administrative Agent elects to loan that
Swing Borrowing, then Administrative Agent shall deposit the
funds into the Note Payment Account by 3:00 p.m. on the date
the Borrowing is requested to be made.
(c) Section 2.9(a) is entirely amended as follows:
2.9 Participations Between Lenders.
(a) Each Lender irrevocably and unconditionally agrees
to purchase and agrees to pay Administrative Agent for, and
Administrative Agent irrevocably and unconditionally agrees to
sell to that Lender, a ratable participation in the Principal
Debt of Swing Borrowings outstanding from time to time;
provided that each Lender's purchase of a participation in the
Principal Debt of any Swing Borrowing shall be limited so as
to exclude that portion of the Principal Debt of that Swing
Borrowing that would cause the Principal Debt owed to that
Lender to exceed that Lender's Commitment. Upon demand by
Administrative Agent, each Lender shall pay to Administrative
Agent in immediately available funds, by 2:00 p.m. on the day
that the demand is made -- if demand is given before 12:00
noon on any Business Day, or, if made at any other time, on
the next Business Day following the date of demand -- that
Lender's Commitment Percentage of the Principal Debt of Swing
Borrowings outstanding at such time, together with interest at
the Federal-Funds Rate (minus 1.25% per annum) from (and
including) the day when its payment was due to (but excluding)
the Business Day that payment is made prior to 2:00 p.m. or,
if made after 2:00 p.m. on any Business Day, the next Business
Day following the date of payment.
(i) Prior to the time that a Lender pays for its
participation in the Principal Debt of Swing Borrowings
under clause (a) above, and until that Lender makes the
required payment (A) Administrative Agent is deemed to
continue to have outstanding a Swing Borrowing in the
amount of that Lender's unpaid principal participation
obligation for all purposes of this agreement other than
those provisions requiring the other Lenders to purchase
a participation in that Swing Borrowing, (B) all interest
accruing on Swing Borrowings before the funding date of
any participation is payable solely to Administrative
Agent for its own account, and (C) payments received by
Administrative Agent of the Principal Debt of that part
of the Swing Borrowing purchased by that Lender shall be
retained by Administrative Agent for its own account,
shall not constitute trust funds of that Lender held by
Administrative Agent, and shall be deemed to
proportionately reduce that amount payable by that Lender
under clause (a) above. The Company shall make each
payment of all or any part of any Swing Borrowing to
Administrative Agent for the ratable benefit of
Administrative Agent and those Lenders who have funded
their participations in Swing Borrowings under clause (a)
above. Even after the time that a Lender pays for its
participation in the Principal Debt of Swing Borrowings,
all subsequent payments of interest that had accrued
prior to the time that Lender pays for its participation
are paid for the benefit of Administrative Agent.
However, Administrative Agent agrees to refund to any
Lender late-payment interest it actually paid, if any,
under clause (a) above at such time that Administrative
Agent actually receives interest from the Company for the
same period on the same portion of the Swing Borrowings.
(d) Section 7.2(b) is entirely amended as follows:
Total Liabilities in excess of 700% of the Company's
Consolidated Net Worth; or
(e) Section 7.2(c) is entirely amended as follows:
Total Liabilities in excess of 900% of Consolidated Adjusted
Tangible Net Worth.
(f) For purposes of Section 10.4, the addresses and telecopy
numbers for the Company and each Agent, respectively, are amended as
reflected on the signature pages to this amendment.
(g) Exhibit E-2 is amended in its entirety -- and all references
in the Loan Papers to it are changed to -- the attached Amended
Exhibit E-2.
(h) Schedule 2 to Exhibit F is amended in its entirety -- and all
references in the Loan Papers to it are changed to -- the attached
Amended Schedule 2 to Exhibit F.
3. Conditions Precedent. The foregoing is not effective unless (a)
Agents receive counterparts of this amendment executed by the Company, by
Agents, and all Lenders and (b) Bank receives an officers' certificate
executed by Borrower's Secretary or Assistant Secretary, certifying to (i)
the resolutions adopted by its directors authorizing the transactions
contemplated by this amendment, (ii) incumbency of officers, and (iii)
changes in its corporate charter and bylaws since September 14, 1994, if any,
(c) all of the representations and warranties -- in this amendment and in all
other Loan Papers are true and correct as of -- as if made on -- the date of
this amendment.
4. Ratifications. This amendment modifies and supersedes all
inconsistent terms and provisions of the other Loan Papers. Except as
expressly modified and superseded by this amendment, the terms and provisions
of the other Loan Papers are ratified and confirmed and continue in full
force and effect. The Company, all Lenders, and Agents agree that the Loan
Papers, as amended by this amendment, continue to be legal, valid, binding,
and enforceable in accordance with their respective terms. The Company
ratifies and confirms that all Liens granted to Agents, on behalf of Lenders,
were intended to, do, and continue to secure the full payment and performance
of the Obligations. The Company shall perform such acts and duly authorize,
execute, acknowledge, deliver, file, and record such additional documents as
either Agent or any Lender may reasonably request in order to perfect and
protect such Liens and preserve and protect the rights of Agents and Lenders
in respect of all present and future Collateral.
5. Representations and Warranties. The Company represents and
warrants to Lenders and Agents that (a) this amendment and the other Loan
Papers to be delivered under this amendment have been duly authorized,
executed, and delivered by the Company, (b) no action of, or filing with, any
Tribunal is required to authorize, or is otherwise required in connection
with, the execution, delivery, and performance by the Company of this
amendment and those other Loan Papers (c) this amendment and those other Loan
Papers are valid and binding upon the Company and are enforceable against the
Company in accordance with their respective terms, except as limited by the
Bankruptcy Code of the United States of America and all other similar Laws
affecting the rights of creditors generally, (d) the execution, delivery, and
performance by the Company of this amendment and those other Loan Papers do
not require the consent of any other Person and do not and will not
constitute a violation of any Laws, agreement, or understanding to which the
Company is a party or by which the Company is bound, (e) the representations
and warranties in the Loan Agreement, as amended by this amendment, and each
other Loan Paper are true and correct in all material respects on and as of
the date of this amendment as though made as of the date of this amendment,
and (f) as of the date of this amendment, no Default or Potential Default
exists.
6. References. All references in the Loan Papers to the "Loan
Agreement" refer to the Loan Agreement as amended by this amendment. Because
this amendment is a "Loan Paper" referred to in the Loan Agreement, then the
provisions relating to Loan Papers in Section 10 are incorporated in this
amendment by reference, the same as if included in this amendment verbatim.
7. Counterparts. This amendment may be executed in any number of
counterparts with the same effect as if all signatories had signed the same
document, and all of those counterparts must be construed together to
constitute one and the same document.
8. Parties Bound. This amendment binds and inures to the Company,
Agents, each Lender, and (subject to Section 10.10) their respective
successors and assigns.
9. ENTIRETY. THIS AMENDMENT, THE LOAN AGREEMENT AS AMENDED BY IT, AND
THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES FOR
THE TRANSACTIONS THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE(S) FOLLOW.
<PAGE>
EXECUTED as of the date first stated above.
1600 Viceroy Dr., 8th Floor LOMAS MORTGAGE USA, INC., as the Company
Dallas, Texas 75235
Attn: Robert E. Byerley, Jr.,
Executive Vice President and
Treasurer
Telecopy: 214/879-7018 By /S/ROBERT E. BYERLEY, JR.
--------------------------------------
Robert E. Byerley, Jr.,
Executive Vice President and Treasurer
Mortgage Finance Group BANK ONE, TEXAS, N.A.,
1717 Main Street, 4th Floor as Administrative Agent and a Lender
Dallas, Texas 75201
Attn: Kathleen C. Stewart,
Vice President
Telecopy: 214/290-2275 By /S/KATHLEEN C. STEWART
------------------------------------
Kathleen C. Stewart, Vice President
717 Travis Street - 7-TCB-S56 TEXAS COMMERCE BANK NATIONAL
Houston, Texas 77002 ASSOCIATION, as Syndication Agent
Attn: Carlotta M. Hudler, and a Lender
Vice President
Telecopy: 713/216-2082 By /S/CARLOTTA M. HUDLER
------------------------------------
Carlotta M. Hudler, Vice President
First Bank Place, 2nd Floor MPFP0801 FIRST BANK NATIONAL ASSOCIATION,
601 Second Avenue South as a Lender
Minneapolis, Minnesota 55402-4302
Attn: Kathlyn K. Slater,
Vice President
Telecopy: 612/973-0826 By /S/KATHLYN K. SLATER
------------------------------------
Kathlyn K. Slater, Vice President
8333 Douglas Avenue GUARANTY FEDERAL BANK, F.S.B.,
Dallas, Texas 75255 as a Lender
Attn: Abbie Y. Tidmore,
Vice President
Telecopy: 214/360-1660 By /S/ABBIE Y. TIDMORE
------------------------------------
Abbie Y. Tidmore, Vice President
<PAGE>
AMENDED EXHIBIT E-2
Aggregate Collateral Value Determination
TO: Lomas Mortgage USA, Inc. and Texas Commerce Bank National Association
FROM: Bank One, Texas, N.A.
AS OF DATE:
------------------------------
DATE PREPARED:
------------------------------
I. COLLATERAL VALUE OF ELIGIBLE COLLATERAL
A. Mortgage Collateral(1)
1. Aggregate principal amount $
-------
Less:
Aggregate principal amount ($ )
of Mortgage Collateral that -------
is not Eligible Collateral
2. Aggregate principal amount
of Mortgage Collateral that
is Eligible Collateral $
========
3. 95% of item 2 above $
========
4. 95% of Market Value of
total Mortgage Collateral
that is Eligible Collateral $
--------
5. Lesser of items 3 and 4 $
========
B. Cash
1. Cash deposited in the Note
Payment Account representing
proceeds for the sale of Collateral $
========
- - --------------------
(1) With respect to Non-Conforming Loans (excluding any Mortgage Loans
included in the CALPERS Program), (a) the aggregate Collateral Value
attributed to Non-Conforming Loans may not exceed 20% of the total
Commitments, (b) the aggregate Collateral Value attributed to Non-
Conforming Loans in excess of $600,000 each may not exceed 5% of the
total Commitments, and (c) the Collateral Value attributed to a single
Non-Conforming Loan may not exceed $750,000.
<PAGE>
C. Treasury Bills
1. Cost of Treasury Bills
pledged to secure the
Obligations $
-------
2. Par value of Treasury Bills
pledged to secure the
Obligations $
-------
3. Market Value of Treasury
Bills pledged to secure
the Obligations $
-------
4. Lesser of items 1, 2 & 3 $
========
D. Other Collateral
1. ---------------------- $
-------
2. ---------------------- $
-------
3. Total Collateral other than
Mortgage Collateral, Cash and
Treasury Bills that qualifies
as Eligible Collateral $
========
TOTAL COLLATERAL VALUE OF ELIGIBLE COLLATERAL: $
========
II. PRINCIPAL DEBT OUTSTANDING - RATABLE BORROWINGS
A. Aggregate outstanding Ratable Borrowings
funded by Bank One, Texas, N.A. $
-------
B. Aggregate outstanding Ratable Borrowings
funded by Texas Commerce Bank
National Association $
-------
C. Aggregate outstanding Ratable Borrowings
funded by First Bank National
Association $
-------
D. Aggregate outstanding Ratable Borrowings
funded by Guaranty Federal Bank $
-------
E. Total outstanding Ratable Borrowings $
-------
III. PRINCIPAL DEBT OUTSTANDING - SWING BORROWINGS
A. Aggregate outstanding Swing Borrowings
funded by Bank One, Texas, N.A. $
-------
B. Total Outstanding Swing Borrowings $
-------
<PAGE>
C. (1) Swing Commitment $
-------
(2) Aggregate outstanding Swing Borrowings
(Line B above) $
-------
(3) Line (1) minus Line (2) $
-------
IV. WET BORROWINGS
A. (1) Wet Sublimit $
-------
(2) Portion of Ratable Borrowings
representing Wet Borrowings $
-------
(3) Portion of Swing Borrowings
representing Wet Borrowings $
-------
(4) Total of Line (2) and Line (3) $
-------
(5) Line (1) minus Line (4) $
-------
V. COLLATERAL SURPLUS (DEFICIT)
A. (1) Total Collateral Value of
Eligible Collateral $
-------
(2) Total Commitments $
-------
(3) Principal Debt $
-------
(4) The lesser of Line (1) and
Line (2) minus Line (3) $
-------
Collateral Surplus (Deficit) $
-------
BANK ONE, TEXAS, N.A.
By
--------------------------
Name
-------------------------
Title
------------------------
<PAGE>
AMENDED SCHEDULE 2 TO EXHIBIT F
Collateral Document Transmittal Letter
Wet Borrowings
Bank One, Texas, N.A.
Mortgage Finance Collateral Operations
1900 Pacific St., 6th Floor
Dallas, Texas 75201
Attn: Gloria Sadler
Re: Delivery of Collateral Documents
Pursuant to the terms of that certain Restated Loan and Security
Agreement (as renewed, extended, amended, or restated, the "Loan Agreement")
dated as of July 8, 1993, between Lomas Mortgage USA, Inc., (the "Company"),
certain Lenders (the "Lenders"), Bank One, Texas, N.A., as administrative
agent (in that capacity, "Administrative Agent"), and Texas Commerce Bank
National Association, as syndication agent (in that capacity, "Syndication
Agent," and with Administrative Agent, "Agents"), attached is a description
of each Mortgage Loan (including the loan number, borrower name, original
mortgage amount, outstanding principal balance, interest rate, type of loan,
date of loan, and funding amount) and the other documents required to be
delivered to you under the Loan Agreement. The Company agrees to deliver the
described documents to Administrative Agent within five Business Days of this
letter and hereby grants to Administrative Agent, for the benefit of the
Lenders, a first-priority lien in the described documents pursuant to the
Loan Agreement.
EXHIBIT 10.3
WHOLE LOAN FINANCING FACILITY
CONFORMING AND NONCONFORMING MORTGAGE LOANS
Dated: May 16, 1994
Lomas Mortgage USA, Inc.
1600 Viceroy Drive
Dallas, Texas 75235
Gentlemen:
DLJ Mortgage Capital, Inc. ("DLJ") is pleased to advise you of the
availability of a whole loan financing facility (the "Facility") secured by
mortgage loans on the terms set forth in this letter. Capitalized terms not
defined herein shall have the respective meanings given such terms in the
Pledge Agreement, dated the date hereof, between you and DLJ (the "Pledge
Agreement").
1. The Advances. DLJ agrees to consider from time to time your requests
that DLJ make advances (each, an "Advance", and, collectively, the
"Advances") to you in an aggregate principal amount outstanding at any one
time not to exceed the amount of the Promissory Note (the "Maximum Credit").
Unless otherwise agreed in writing, this Facility is not a commitment to
lend, but rather this Facility sets forth the procedures to be used in
connection with periodic requests for Advances. You hereby acknowledge that
DLJ is under no obligation to agree to make, or to make, any Advance pursuant
to this Facility. All Advances made by DLJ hereunder shall be evidenced by
the promissory note duly executed by you (the "Promissory Note"). Although
the Promissory Note shall be dated the date of issue, interest in respect
thereof shall be payable only for the periods during which the Advances
evidenced thereby are outstanding, and although the stated amount of the
Promissory Note shall be equal to the Maximum Credit, the Promissory Note
shall be enforceable only to the extent of the unpaid aggregate principal
amount of the Advances then outstanding, plus accrued and unpaid interest
thereon, plus any other amounts due thereunder. Subject to the limit of the
Maximum Credit, you may borrow, repay pursuant to Section 3 hereof and
reborrow pursuant to Section 2 hereof.
2. Making the Advances. (a) Prior to 10:00 A.M. (New York City time) on
the Business Day you desire to borrow funds from DLJ under this Facility, you
shall notify DLJ by telephone, facsimile or letter that you wish to borrow
money on a specified date, in a specified principal amount and for a
specified term.
(b) Upon receipt of your request for an Advance, DLJ may make an offer to
you specifying the terms for such Advance, including the interest rate per
annum (the "Quoted Rate") to be paid by you in respect of such Advance. You
shall immediately notify DLJ as to whether or not you elect to borrow such an
Advance. Each such election by you shall be evidenced by a notice (each, a
"Notice of Borrowing") substantially in the form attached hereto, with the
blanks appropriately completed and duly executed. On the date of such
Advance, as so agreed by you and DLJ, DLJ will make its Advance to you upon
the satisfaction of the conditions precedent to such Advance set forth in
Section 6 hereof. Promptly thereafter, DLJ will send to you a written
confirmation of such Advance (each, a "Confirmation"), and your acceptance of
the related proceeds shall constitute your agreement to the terms of such
Confirmation. Such Confirmation may be termed a "Repo Confirmation", but for
purposes hereof the term "Repo", when used in any such Confirmation, shall be
deemed to mean "Advance."
3. Payment of Principal and Interest. You shall repay, and shall pay
interest on, the principal amount of each Advance in accordance with the
terms of this Facility, the Promissory Note and the Notice of Borrowing, it
being understood that upon each disbursement of funds as set forth in Section
2 above you shall have effected a borrowing from DLJ hereunder and shall be
indebted to DLJ for the principal amount thereof, plus interest thereon, in
accordance with the terms of this Facility, the Promissory Note and the
Notice of Borrowing.
4. Procedures for Payments. You shall repay the principal amount of each
Advance made to you, and the interest thereon, not later than 5:00 P.M. (New
York City time) on the maturity date (the "Maturity Date") specified in the
related Notice of Borrowing in United States Dollars and in same day funds.
5. Representations, Warranties and Covenants. You hereby represent,
warrant and covenant as follows:
(a) You are a corporation duly organized, validly existing and in good
standing under the laws of your jurisdiction of incorporation and your
principal place of business.
(b) You are an approved seller/servicer or issuer in good standing with
each Agency to which Agency Mortgage Loans will be submitted.
(c) Your execution, delivery and performance of the Program Documents
are within your charter and corporate powers, have been duly authorized
by all necessary corporate action, and do not contravene (i) your
charter or bylaws or (ii) any rule, regulation or other law or
contractual restriction binding on or affecting you or your property.
(d) Other than the necessary filings with the Agencies regarding the
Collateral (to the extent that the Collateral includes Agency Mortgage
Loans), no authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is
required for your due execution, delivery and performance of the Program
Documents.
(e) The Program Documents are your legal, valid and binding
obligations, enforceable against you in accordance with their respective
terms, except as limited by bankruptcy, insolvency or other such laws
now or hereafter in effect affecting the enforcement of creditor's
rights and by the application of equitable principles.
(f) The available balance sheets, statements of income and changes in
financial condition of you and your subsidiaries as of your most
recently completed fiscal year and quarter, fairly present your
financial condition and results of operations for the period then ended
and are in accordance with generally accepted accounting principles
consistently applied, and copies of such statements, together with the
most recent opinion with respect to such statements of an independent
public accounting firm, have been provided to DLJ, and since such date
there has been no material adverse change in such financial condition,
operations or business prospects.
(g) There is no pending or, to our knowledge, threatened action or
proceeding affecting you or any of your subsidiaries before any court,
governmental agency or arbitrator, that may materially and adversely
affect the financial condition, operations or business prospects of you
or any of your subsidiaries.
(h) Unless otherwise agreed, at any time any Advance is made or shall
be outstanding, the Collateral Value of the items of Collateral related
to such Advance shall be at least 102% of the Advance then outstanding;
provided, however, that with respect to Nonagency Mortgage Loans (i) to
the extent that a Purchase Commitment is in effect, the Collateral Value
shall be at least 105% of the principal amount of the Advance then
outstanding and (ii) to the extent that a Purchase Commitment is not in
effect, the Collateral Value shall be at least 110% of the principal
amount of the Advance then outstanding. Notwithstanding the foregoing,
DLJ and you may agree upon such other percentage for purposes of
determining Collateral Value for any particular Advance. To the extent
that a deficiency in Collateral Value exists, you shall promptly cure
any such deficiency by delivering cash, securities or other additional
Collateral acceptable to DLJ.
(i) You are duly licensed, qualified and in good standing in every
state in which you transact business, except in states, if any, where a
failure to be in good standing would not have a material adverse effect
on your business or operations.
(j) The Program Documents are not entered into in contemplation of
insolvency or with any intent to hinder, delay or defraud any of your
creditors.
6. Conditions Precedent.
(a) Initial Advance. As conditions precedent to the making of the initial
Advance, DLJ shall have received on or before the day of such Advance the
following, in form and substance satisfactory to DLJ and duly executed by
you:
(i) The Program Documents;
(ii) Evidence that all other actions necessary or, in the opinion of
DLJ, desirable to perfect and protect the security interests and liens
created by the Pledge Agreement have been taken, including without
limitation duly executed Uniform Commercial Code financing statements on
Form UCC-1 with respect to the Collateral;
(iii) A certified copy of your corporate resolution approving the
Program Documents and borrowings thereunder (either specifically or by
general resolution approving borrowings of the type described in the
Program Documents), and all documents evidencing other necessary
corporate action or governmental approvals as may be required in
connection with the Program Documents;
(iv) A certificate of your Corporate Secretary or an Assistant Secretary
certifying the names, true signatures and titles of your officers duly
authorized to request Advances and sign the Program Documents and the
other documents to be delivered thereunder; and
(v) A favorable opinion of your counsel, which may be internal counsel,
as to such matters as DLJ may reasonably request.
(b) Each Advance. As conditions precedent to making each Advance, DLJ shall
have received on or before the day of such Advance the following, in form and
substance satisfactory to DLJ and duly executed:
(i) A Notice of Borrowing, the related Collateral Receipt and, if any
item of Collateral securing such Advance is a Wet Mortgage Loan, the
related Wet Closing Notice, each of which must bear the same number;
(ii) If the Collateral is subject to a security interest or lien
immediately prior to the Advance, a letter from the holder of such
security interest or lien releasing the Collateral from such security
interest or lien upon receipt of a stated sum that is less than or equal
to the related Advance;
(iii) If the Collateral consists of Agency Mortgage Loans submitted
to Custodian in accordance with Section 3, 4 or 5 of the Custody
Agreement, either (A) an assignment by you to Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC") of the related Purchase
Commitment, in form and substance acceptable to DLJ in its sole
discretion, or (B) evidence that you have instructed the relevant Agency
to pay the purchase price for such Agency Mortgage Loans under the
related Purchase Commitment directly to DLJ or its designee, unless
otherwise agreed by DLJ;
(iv) If the Collateral consists of Nonagency Mortgage Loans, and if
applicable, evidence that such Nonagency Mortgage Loans are covered by
pool insurance and a pool insurance certificate (not a commitment to
insure) issued by a Pool Insurer, in form and substance and for such
amounts acceptable to DLJ in its sole discretion, unless otherwise
agreed by DLJ; and
(v) Such other documents as DLJ may reasonably request.
7. DLJ Entitled to Rely. In making any Advance or taking any other action
pursuant to the Program Documents, DLJ may conclusively rely upon, and shall
incur no liability to you in acting upon, any request or other communication
that DLJ believes to have been given or made by a person authorized to borrow
on your behalf, whether or not such person is listed on the certificate
delivered pursuant to Section 6(a)(iv).
8. Termination. This Facility shall remain in effect until such time as it
is terminated by either DLJ or you giving written notice of termination
hereof to the other, but no such termination shall affect your obligations
with respect to any Advances outstanding at the time of such termination or
shall be effective with respect to any Advances made prior to DLJ's receipt
of notice thereof. Your obligation to indemnify DLJ pursuant to this
Facility shall survive the termination hereof.
9. Assignment; Amendments, Etc. The Program Documents are not assignable
by you. The Program Documents are assignable by DLJ in whole or in part. In
connection with any such prospective assignment by DLJ, DLJ may distribute to
any such prospective assignee any of the Program Documents and any document
or other information delivered to DLJ pursuant thereto. No amendment or
waiver of any provision of this Facility or the Promissory Note, nor any
consent to any departure by you therefrom, shall in any event be effective
unless the same shall be in writing and signed by DLJ, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. The Program Documents
supersede all previous letters of intent and other agreements between the
parties that deal with the same subject matter.
10. Indemnity. You shall indemnify and hold DLJ harmless for all reasonable
losses, costs, expenses and liabilities which DLJ may sustain (i) if any
repayment of the principal amount of any Advance, together with interest
thereon, is not made on the Maturity Date thereof or (ii) in connection with
the protection of DLJ's rights under or the enforcement of the Program
Documents or any other instrument or document delivered in connection
therewith.
11. Notices. All written communications hereunder shall be mailed,
telecopied or delivered at the respective addresses as listed in the Custody
Agreement or at such other address as shall be designated by a party in a
written notice to the other party. All such notices and communications shall
be effective when delivered to the party to which such notice is to be given.
12. Governing Law; Consent to Jurisdiction. This letter shall be construed
in accordance with, and governed by, the law of the State of New York,
without giving effect to the conflict of law principles thereof. You waive
trial by jury. You hereby irrevocably consent to the non-exclusive
jurisdiction of any court of the State of New York, or in the United States
District Court for the Southern District of New York, arising out of or
relating to the Program Documents in any action or proceeding. You hereby
submit to, and waive any objection you may have to personal jurisdiction and
venue, in the courts of the State of New York and the United States District
Court for the Southern District of New York, over any disputes arising out of
or relating to the Program Documents.
If the terms of this letter are satisfactory to you, please indicate your
agreement and acceptance thereof by signing this letter and returning it to
us, whereupon this letter shall become an agreement between us as of the date
of this letter.
Very truly yours,
DLJ MORTGAGE CAPITAL, INC.
By: /S/ROD ENNICO
------------------------------
Name: Rod Ennico
------------------------------
Title: Senior Vice President
----------------------------
Agreed and Accepted:
LOMAS MORTGAGE USA, INC.
By: /S/PAUL D. FLETCHER
------------------------------
Name: Paul D. Fletcher
------------------------------
Title: Senior Vice President
----------------------------
<PAGE>
NOTICE OF BORROWING NO.
DLJ Mortgage Capital, Inc.
140 Broadway, 26th Floor
New York, New York 10005-1285
Attention: Whole Loan Financing Program
Facsimile (212) 504-8125
RE: Agency/Nonagency Identification/Pool #
----------- --------------
Security Rate % Maturity:
------ ---------
Pursuant to the Whole Loan Financing Facility, dated May 16, 1994, between
you and the undersigned (as amended from time to time, the "Facility"), the
undersigned hereby gives notice of its election to borrow from you an Advance
and, in connection therewith, sets forth below the following information
(each capitalized term used herein shall have the meaning specified therefor
in the Facility):
1. The aggregate unpaid principal of the
Mortgage Loans is $ .
-----------------------
2. The principal amount of this Advance is $ .
-----------------------
3. The Quoted Rate for this Advance is % per annum.
--------
4. The beginning Business Day of this
Advance is , 199.
------------------
5. The Maturity Date of this Advance is , 199.
------------------
6. The Collateral Value of the items of
Collateral shall be %.
----------------------
7. If applicable, the aggregate principal amount of the Mortgage Loans
that are secured by second or third liens on the related mortgaged
property is $-------------------, which represents ------% of the
Mortgage Loans.
The undersigned hereby certifies that the following statements are true and
correct on the date hereof and shall be true and correct on the date of the
Advance requested herein, before and after giving effect thereto: (a) each of
the representations and warranties contained in the Facility and the Pledge
Agreement are true and correct in all material respects, (b) no Default or
Event of Default (as such terms are defined in the Pledge Agreement) has
occurred and is continuing, (c) if applicable, the undersigned has,
coincident or prior to this Notice of Borrowing, delivered and validly
assigned genuine and enforceable Purchase Commitments to DLJSC for Agency
Mortgage Loans or an Agency Security or to DLJ for Nonagency Mortgage Loans,
each in an aggregate amount equal to the Face Value of the Pool, and (d)
Customer has satisfied all of the conditions precedent in Section 6(b) of the
Facility.
<PAGE>
The Advance made pursuant hereto shall be made in connection with the items
of Collateral described in the Collateral Receipt No. --------------, dated
- - -------------------, 199--- and, if applicable, the Wet Closing Notice of
even number and date therewith.
Lomas Mortgage USA, Inc., as Customer
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
Date: , 199
------------------------- -----
EXHIBIT 10.4
COPY
PROMISSORY NOTE
$600,000,000 Dated: May 16, 1994
New York, New York
FOR VALUE RECEIVED, the undersigned, Lomas Mortgage USA, Inc. ("Customer"),
HEREBY PROMISES TO PAY to the order of DLJ Mortgage Capital, Inc. ("DLJ"),
for the benefit of DLJ and the holders from time to time of interests herein,
in lawful money of the United States of America, the lesser of (i) six
hundred million dollars ($600,000,000) and (ii) the aggregate unpaid
principal amount of all Advances made by DLJ to Customer pursuant to the
Whole Loan Financing Facility, dated the date hereof (as amended from time to
time, the "Facility"), between DLJ and Customer, on the respective Maturity
Date for each such Advance, together with interest on each such Advance
outstanding, from and including the date on which such Advance is made until
the principal amount of such Advance is paid in full on such Maturity Date
(and, as to any overdue principal and accrued interest thereon, on demand),
at an interest rate per annum with respect to such Advance equal to the
Quoted Rate applicable to such Advance. Each Advance under this promissory
note (the "Promissory Note") shall be made pursuant to an executed Notice of
Borrowing.
1. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Whole Loan Financing Facility
("Facility") or the Pledge Agreement ("Pledge Agreement") executed by
Customer and dated the date hereof.
2. Late Payments. Customer shall pay interest on any overdue principal of
each Advance and (to the extent permitted by applicable law) accrued interest
thereon, payable daily at a fluctuating interest rate per annum equal to 2%
above the rate of interest per annum quoted as the prime rate in The Wall
Street Journal (the "Default Rate"), each change in such Default Rate to take
effect simultaneously with any change in such prime rate.
3. Whole Loan Financing Facility. This Promissory Note is the Promissory
Note referred to in the Facility and is entitled to the benefit thereof and
shall be subject to the provisions thereof and of the Pledge Agreement. This
Promissory Note is secured pursuant to the Pledge Agreement.
4. No Prepayment. Customer shall have no right to prepay any principal
amount of any Advance without the prior written consent of DLJ.
5. Payments and Computations. Customer shall make each payment hereunder
not later than 5:00 P.M. (New York City time) on the day when due to DLJ
pursuant to DLJ's instructions in same day funds. All computations of
interest shall be made by DLJ on the basis of a year of 360 days for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable. Any payment to
be made hereunder on a day other than a Business Day shall be made on the
next succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest.
6. Events of Default. If any of the following events (each, an "Event of
Default") shall occur and be continuing:
(a) Customer shall fail to pay when due any principal of, interest on
or other amount due and payable under this Promissory Note attributable
to any Advance made hereunder, which failure is not cured within 1
Business Day; or
(b) Customer shall fail to perform or observe any other term, covenant
or agreement contained in the Program Documents on its part to be
performed or observed when required, or within any applicable grace
period; or
(c) any representation or warranty made by Customer (or any of its
officers) in the Program Documents or in any document delivered in
connection therewith shall prove to have been incorrect in any material
respect when made; or
(d) Customer shall fail to pay any of its indebtedness for borrowed
money in excess of $1,000,000 or any interest or premium thereon when
due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such indebtedness; or any other default under any
agreement or instrument relating to any such indebtedness, or any other
event, shall occur and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such
default or event is to accelerate, or to permit the acceleration of, the
maturity of such indebtedness; or if any such indebtedness shall be
declared to be due and payable, or required to be prepaid (other than by
a regularly scheduled required prepayment), prior to the stated maturity
thereof; or
(e) a custodian, receiver, conservator, liquidator, trustee,
sequestrator or similar official for Customer, or of any of its
property, is appointed or takes possession of such property; or Customer
generally fails to pay its debts as they become due; or Customer is
adjudicated bankrupt or insolvent; or an order for relief is entered
under the Federal Bankruptcy Code, any successor or similar applicable
statute, or any administrative insolvency scheme, against Customer; or
any of its property is sequestered by court or administrative order; or
a petition is filed against Customer under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
subsequently in effect; or
(f) Customer files a voluntary petition in bankruptcy or seeks relief
under any provision of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction whether now or subsequently in effect; or consents to the
filing of any petition against it under any such law; or consents to the
appointment of or taking possession by a custodian, receiver,
conservator, trustee, liquidator, sequestrator or similar official for
Customer, or of all or any part of its property; or makes an assignment
for the benefit of its creditors; or
(g) any judgment or order for the payment of money in excess of
$1,000,000 shall be rendered against Customer and shall remain
undischarged, unvacated, unbonded or unstayed for a period of 30 days;
or
(h) any governmental authority or agency or any person, agency or
entity acting or purporting to act under governmental authority shall
have taken any action to condemn, seize or appropriate, or to assume
custody or control of, all or any substantial part of the property of
Customer, or shall have taken any action to displace the management of
Customer or to curtail its authority in the conduct of the business of
Customer, or any Agency takes any action to remove, limit or restrict
the approval of Customer as an issuer, lender or a seller/servicer of
mortgage loans; or
(i) Customer shall default under, or fail to perform as requested
under, or shall otherwise breach the terms of any instrument, agreement
or contract between it and DLJ or any of DLJ's affiliates, which default
is not cured within any applicable grace periods; or
(j) any material adverse change occurs in the financial condition,
operations, business prospects or corporate structure of Customer;
then, and in any such event, DLJ may (i) by notice to Customer, declare this
Promissory Note and all Advances made hereunder, the outstanding principal of
and all interest accrued thereon and all other amounts payable under the
Program Documents to be immediately due and payable, whereupon this
Promissory Note and all such Advances, interest and other amounts shall
become and be immediately due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly
waived by Customer, and (ii) exercise or cause to be exercised all rights and
remedies of DLJ as secured party under the Pledge Agreement; provided, that
upon occurrence of any Event of Default described in paragraphs (e) and (f)
above, the outstanding principal of and accrued interest on this Promissory
Note and all other amounts payable under the Program Documents shall
immediately and automatically become due and payable without presentment,
demand, protest or notice of any kind.
7. Amendments, Etc. No amendment or waiver of any provision of this
Promissory Note, nor any consent to any departure by Customer therefrom,
shall be effective unless the same shall be in writing and signed by DLJ, and
then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.
8. Notices. All written communications hereunder shall be mailed,
telecopied or delivered at the respective addresses as listed in the Custody
Agreement or at such other address as shall be designated by Customer or DLJ
in a written notice to the other. All such notices and communications shall
be effective when delivered to the party to which such notice is to be given.
9. No Waiver, Remedies. No failure on the part of DLJ to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any other
remedies provided in equity or at law.
10. Binding Effect; Governing Law; Venue. This Promissory Note shall be
binding upon Customer and its successors and assigns, and shall inure to the
benefit of DLJ and its successors and assigns. Customer may not assign its
obligations under this Promissory Note without the prior written consent of
DLJ. DLJ may assign, by bookkeeping entry on DLJ's records or otherwise, all
or any part of, or any interest in, DLJ's rights and benefits hereunder,
including, without limitation, its right to payments of principal and
interest with respect to a particular Advance. To the extent of such
assignment, such assignee shall have the same rights and benefits against
Customer as it would have had if it were DLJ hereunder; provided, however,
that nothing contained herein shall preclude DLJ from continuing to exercise
all of its rights hereunder for the benefit of any such assignee of DLJ, and
Customer shall continue to take directions solely from DLJ unless otherwise
notified by DLJ in writing. This Promissory Note shall be construed in
accordance with, and governed by, the laws of the State of New York, without
giving effect to the conflict of law principles thereof. Customer waives
trial by jury. Customer hereby irrevocably consents to the non-exclusive
jurisdiction of any court of the State of New York, or in the United States
District Court for the Southern District of New York, in any action or
proceeding arising out of or relating to this Promissory Note. Customer
hereby submits to, and waives any objection it may have to personal
jurisdiction and venue in, the courts of the State of New York and the United
States District Court for the Southern District of New York, over any
disputes arising out of or relating to this Promissory Note.
<PAGE>
IN WITNESS WHEREOF, Customer has caused this Promissory Note to be executed
by its officer thereunto duly authorized, as of the date first above written.
Lomas Mortgage USA, Inc., as Customer
By: /S/PAUL D. FLETCHER
-----------------------------------
Name: Paul D. Fletcher
----------------------------------
Title: Senior Vice President
---------------------------------
EXHIBIT 10.5
WHOLE LOAN FINANCING PROGRAM
TRI-PARTY CUSTODY AGREEMENT
AMONG
LOMAS MORTGAGE USA, INC.
("Customer")
and
DLJ MORTGAGE CAPITAL, INC.
("DLJ")
and
BANK ONE, TEXAS, N.A.
("Custodian")
DATED: May 16, 1994
<PAGE>
This TRI-PARTY CUSTODY AGREEMENT ("Agreement") is made and entered into as of
the date written on the cover hereof, among Customer, Custodian and DLJ, for
itself and its successors and assigns.
PRELIMINARY STATEMENT
DLJ may, from time to time, make advances (each, an "Advance") to Customer
with respect to the mortgage loans related to this agreement, and DLJ may,
from time to time, assign all or part of its interests therein to one or more
investors. Customer has granted or shall hereafter grant to DLJ and its
successors and assigns a security interest in and lien on certain collateral
(the "Collateral") as security for the performance of the obligations of
Customer in connection with Advances. DLJ has also agreed to lend funds to
Customer to allow Customer to originate or acquire mortgage loans secured by
enforceable first lien mortgages on real properties, which loans made by DLJ
to Customer will be disbursed by a bank or a title company or its designated
agent (collectively or individually, a "Title Company"). Customer intends,
from time to time, to deliver certain items of Collateral to Custodian, and
Custodian is willing to hold such Collateral in custody as bailee of and as
agent for DLJ and its successors and assigns, in order to perfect the
security interest in and lien on such Collateral of DLJ, its successors and
assigns. Certain items of Collateral constitute mortgage loans ("Agency
Mortgage Loans") intended either to secure or underlie securities or
certificates issued or guaranteed by the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") or
the Federal Home Loan Mortgage Corporation ("FHLMC"; GNMA, FNMA and FHLMC,
each, an "Agency") or to be purchased for cash by an Agency, and certain
items of Collateral constitute mortgage loans ("Nonagency Mortgage Loans")
intended to be purchased for cash by a purchaser listed on Schedule I hereto
("Nonagency Purchaser"), as such schedule may be amended from time to time.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. Appointment of Custodian. DLJ hereby appoints Custodian, and Custodian
hereby accepts its appointment, to act as the bailee of and agent for DLJ,
and its successors and assigns, for the purpose of taking custody of such
Collateral and the proceeds thereof or substitutions therefor. With respect
to each Agency Mortgage Loan, Custodian's appointment as DLJ's bailee and
agent shall terminate upon the issuance by an Agency of a security that is
backed in whole or in part by such Agency Mortgage Loan, upon settlement of
purchase of such Agency Mortgage Loan by an Agency or upon notice from DLJ.
With respect to each Nonagency Mortgage Loan, Custodian's appointment as
DLJ's bailee and agent shall terminate upon settlement of purchase of such
Nonagency Mortgage Loan by a Nonagency Purchaser or upon notice from DLJ.
2. Deposit of Collateral. Customer shall deposit with Custodian, and
Custodian agrees to hold in pledge as bailee of and as agent for DLJ, and its
successors and assigns, such Collateral that may, from time to time, be so
deposited hereunder. Custodian shall maintain such Collateral so deposited
in separate records and files.
3. GNMA Required Documents. For each mortgage loan intended to be included
in a GNMA pool, Customer shall deposit with Custodian the following required
documents (the "GNMA Required Documents"), and/or all such other documents as
GNMA or DLJ may require from time to time for the issuance of the related
GNMA securities, duly authorized and completed:
(a) the original note, endorsed "Pay to the order of ---------------,
without recourse", unless otherwise specified by GNMA:
(b) an assignment of mortgage with assignee in blank but otherwise in
recordable form, but not recorded, and all interim assignments if any, unless
otherwise specified by GNMA;
(c) a Collateral Receipt, substantially in the form attached hereto
("Collateral Receipt");
(d) a completed Warehouse Lender's Release Letter, substantially in the form
attached hereto ("Warehouse Lender's Release Letter");
(e) a Schedule of Subscribers and GNMA Contractual Agreement on Form HUD-
11705 listing Donaldson, Lufkin & Jenrette Securities Corporation, 140
Broadway, 26 Floor, New York, New York 10005, taxpayer number 13-2741729 or
its designee, as the only subscriber and as the sole person who is authorized
to take delivery of the related GNMA security;
(f) a Schedule of Pooled Mortgages on Form HUD-11706;
(g) a Release of Security Interest on Form HUD-11711A, with the authorized
signature of the person signing for DLJ or Custodian on behalf of DLJ, in
blank;
(h) a Certification and Agreement Regarding Security Interest on Form HUD-
11711B; and
(i) a Summary of Guaranty Agreement on Form HUD-11716 (level payment), HUD-
1746 (GPM or GEM) or HUD-1733 (serial notes) as appropriate.
4. FNMA Required Documents. For each mortgage loan intended to be included
in a FNMA pool, Customer shall deposit with Custodian the following required
documents (the "FNMA Required Documents"), and/or all such other documents as
FNMA or DLJ may require from time to time for the issuance of the related
FNMA securities or the purchase by FNMA of such mortgage loans, duly
authorized and completed:
(a) the original note endorsed "Pay to the order of ----------------,
without recourse", unless otherwise specified by FNMA;
(b) an assignment of mortgage with assignee in blank but otherwise in
recordable form, but not recorded, and all interim assignments if any, unless
otherwise specified by FNMA;
(c) a Collateral Receipt;
(d) a completed Warehouse Lender's Release Letter;
(e) a Security Release Certification on Form 2004, with the authorized
signature of the person signing for DLJ, or Custodian on behalf of DLJ, in
blank;
(f) a Schedule of Mortgages on Form 2005 (fixed rate), Form 2025 (ARMs, GEMs
and VRMs) or other appropriate form; and
(g) either a Delivery Schedule on Form 2014 listing Donaldson, Lufkin &
Jenrette Securities Corporation or its designee as the only subscriber and as
the sole person to which the related FNMA securities shall be delivered or,
if the mortgage loans are to be purchased by FNMA, either (i) a Loan Schedule
(Form 1068 or 1069) listing DLJ's (or Custodian's for the benefit of DLJ)
Payee Code, or (ii) a bailee letter for execution by the Custodian
substantially in the form attached hereto (the "Bailee Letter").
5. FHLMC Required Documents. For each mortgage loan intended to be
included in a FHLMC pool, Customer shall deposit with Custodian the following
required documents (the "FHLMC Required Documents"), and/or all such other
documents as FHLMC or DLJ may require from time to time for either the
issuance of the related FHLMC securities or the purchase by FHLMC of such
mortgage loans, duly authorized and completed:
(a) the original note endorsed "Pay to the order of ----------------,
without recourse", unless otherwise specified by FHLMC;
(b) an assignment of mortgage with assignee in blank but otherwise in
recordable form but not recorded, and all interim assignments if any, unless
otherwise specified by FHLMC;
(c) a Collateral Receipt;
(d) a completed Warehouse Lender's Release Letter;
(e) a Mortgage Loan Submission Schedule on Form 11 (fixed rate), Mortgage
Submission Voucher on Form 13SF (ARM, GPM), or other appropriate form;
(f) a Contract Delivery Summary on Form 381;
(g) a Warehouse Lender Release of Security Interest on Form 996 listing
either (i) Donaldson, Lufkin & Jenrette Securities Corporation or its
designee as the only subscriber and as the sole person to which the related
FHLMC securities shall be delivered, or (ii) wire transfer instructions
listing either DLJ or Custodian's Settlement Account as the recipient of such
funds wired, with the authorized signature of the person signing on behalf of
DLJ in blank; and
(h) either (i) a Security Settlement Information and Delivery Authorization
on Form 939 listing Donaldson, Lufkin & Jenrette Securities Corporation or
its designee as the only subscriber and as the sole person to which the
related FHLMC securities shall be delivered; (ii) a Wire Transfer
Authorization for Cash Warehouse Delivery on Form 987 listing either DLJ or
Custodian's Settlement Account as the recipient of such funds wired; or (iii)
a Bailee Letter for execution by Custodian.
6. Interim Required Documents. For each (i) Agency Mortgage Loan for which
Customer has not yet selected the applicable Agency to which the mortgage
loan will be submitted, or (ii) Nonagency Mortgage Loan, Customer shall
deposit with Custodian the following required documents (the "Interim
Required Documents"), and/or all such other documents as GNMA, FNMA, FHLMC or
DLJ may require from time to time for the issuance of the related Agency
securities, the purchase by an Agency of such mortgage loans, or the purchase
by a Nonagency Purchaser of the related Nonagency Mortgage Loans, as the case
may be, duly authorized and completed:
(a) the original note endorsed "Pay to the order of -----------------,
without recourse";
(b) an assignment of mortgage with assignee in blank but otherwise in
recordable form, but not recorded, and all interim assignments, if any;
(c) a Collateral Receipt;
(d) if applicable, a completed Warehouse Lender's Release Letter; and
(e) a schedule of mortgage loans in a form acceptable to DLJ and Custodian.
7. Refinancing Required Documents. For each mortgage loan intended to be
financed or refinanced by Customer through funds provided by DLJ directly to
a Title Company, Customer shall deposit, or cause to be deposited, with
Custodian the following required documents (the "Refi Required Documents"),
and/or all such other documents as DLJ may require from time to time for the
purchase of such mortgage loans by an Agency or the issuance of the related
Agency securities, duly authorized and completed:
(a) the original note endorsed "Pay to the order of -------- without
recourse";
(b) an assignment of mortgage with assignee in blank but otherwise in
recordable form, but not recorded, and all interim assignments, if any;
(c) a Collateral Receipt;
(d) a schedule of mortgage loans in a form acceptable to DLJ and Custodian,
the aggregate unpaid principal balance of which equals the aggregate unpaid
principal balance stated on the Collateral Receipt; and
(e) an escrow letter executed by a Title Company substantially in the form
attached hereto ("Escrow Letter").
8. Establishment of the DDA and the Settlement Accounts. For each mortgage
loan intended to be financed by Customer through funds provided by DLJ
directly to a Title Company, DLJ, Customer and Custodian agree as follows:
(a) Custodian shall establish and maintain a demand deposit account (the
"DDA Account") for and on behalf of DLJ entitled "Lomas Mortgage USA, Inc.,
Account # 0100165026 Re: Bank One, Texas Tri-Party Custody Agreement, dated
May 16, 1994." All Advances by DLJ shall be deposited in the DDA Account.
All related fees and expenses for such DDA Account shall be borne by
Customer. Upon request, Custodian shall provide the Title Company, Customer
or DLJ with the federal wire reference number for a particular payment.
(b) Custodian shall establish and maintain a demand deposit account (the
"Settlement Account") for and on behalf of DLJ entitled "Lomas Mortgage USA,
Inc., Account #0100165059 Re: Bank One, Texas Tri-Party Custody Agreement,
dated May 16, 1994." All proceeds from the sale of designated mortgage loans
to such Agency or to a Nonagency Purchaser will either be sent directly to
DLJ or to the Settlement Account. Funds in the Settlement Account may be
withdrawn only upon the instructions of DLJ in accordance with this
Agreement. All related fees and expenses for such Settlement Account shall
be borne by Customer. Customer shall provide Custodian and DLJ with notice
of funds anticipated to be received by Custodian and DLJ respectively.
(c) Unless otherwise agreed, with respect to the DDA Account, Customer will
enter disbursement instructions through Custodian's ECDA Wire System and
Custodian will release such wire instructions and immediately disburse such
funds provided (i) sufficient funds exists in the DDA Account, (ii) such
instructions do not include Customer as payee, (iii) Custodian has received
an executed Escrow Letter from such payee, if applicable, and (iv) if a
conflict exists between the instructions of DLJ and the instructions of
Customer, Custodian shall follow DLJ's instructions.
(d) Unless otherwise agreed, with respect to the Settlement Account,
Customer will submit to Custodian and DLJ a position and settlement report as
separately agreed to by the parties hereto (the "P&S Report"), and Custodian
will immediately disburse such funds in the Settlement Account as directed in
the P&S Report provided (i) sufficient funds exist in the Settlement Account,
and (ii) DLJ has authorized such wire instructions. Notwithstanding the
foregoing sentence, if a conflict exists between the instructions of DLJ and
the instructions of Customer, Custodian shall follow DLJ's instructions.
9. Certification of Documentation. (a) Custodian, upon receipt of all of
the GNMA, FNMA, FHLMC, Interim or Refi Required Documents, as the case may be
(collectively, the "Required Documents"), shall review such Required
Documents in accordance with the review and certification guidelines
established by GNMA, FNMA, FHLMC or DLJ (as separately agreed to by DLJ and
Custodian), as the case may be, for their respective pool to verify whether
all are complete, whether each such document purporting to be an original
appears on its face to be so, and whether each such document purporting to be
a certified photocopy or conformed copy appears on its face to be a true copy
of its original. Subject to the provisions set forth in the third sentence
of Section 9(b) with respect to Wet Mortgage Loans, Custodian shall notify
Customer and DLJ of any documents that are missing, incomplete on their face
or patently inconsistent. Customer shall promptly deposit such missing
documents with Custodian or complete or correct the documents. When the
Required Documents have been received in full and correct form, Custodian
will: (a) promptly deliver a signed Collateral Receipt and Warehouse
Lender's Release Letter to DLJ; (b) upon the request of Customer, promptly
deliver the Required Documents referred to in Section 3, 4 or 5 (other than
such Required Documents referred to in Sections 3(a), (b), (c) and (d), 4(a),
(b), (c) and (d), and 5(b), (c) and (d) hereof, unless otherwise required by
GNMA, FNMA or FHLMC) to GNMA, FNMA or FHLMC, as the case may be; and (c) upon
request of DLJ, deliver copies of the Required Documents to DLJ. In making
such verification, Custodian may rely conclusively on the portion of the
Collateral Receipt completed by Customer, the Required Documents and the
documents constituting Custodian's mortgage file, and Custodian shall have no
obligation to independently verify the correctness of Customer's
certification on such Collateral Receipt or the effectiveness, sufficiency,
validity, enforceability, collectibility, recordability or adequacy of such
portion of the Collateral Receipt completed by Customer, Required Documents
and the documents constituting the Custodian's mortgage file.
(b) Customer may pledge, as part of the Collateral securing an Advance, a
mortgage loan on or prior to the date of such Advance and for which all of
the related Required Documents have not been deposited with Custodian on or
prior to the date of such Advance (a "Wet Mortgage Loan"). In connection
with any such pledge of a Wet Mortgage Loan, Customer, not later than 12:00
noon New York City time on the Business Day of the related Advance, shall
deposit with Custodian a fully completed schedule of Mortgage Loans for such
Wet Mortgage Loans, substantially in the form as separately agreed to by the
parties hereto (a "Wet Closing Notice"). The Wet Closing Notice shall
constitute a Required Document, and the deposit of the Wet Closing Notice
shall be deemed to satisfy the requirement for the deposit of the documents
set forth in Section 7(a) and (b) solely for purposes of the execution of the
Collateral Receipt as of the date thereof. Notwithstanding the foregoing,
Customer shall deposit with Custodian the documents set forth in Section 7(a)
and (b) for such Wet Mortgage Loan within five (5) Business Days after the
date of the related Custodial Receipt. For purposes of this Agreement,
"Business Day" shall mean any day other than a Saturday, Sunday or a public
or bank holiday in New York City or Dallas. If Customer does not deposit
such documents with Custodian within such five (5) day period, Custodian
shall promptly notify DLJ. Upon deposit of such documents with Custodian,
Custodian shall review such documents in accordance with the standards set
forth in Section 9(a), shall promptly notify DLJ if such documents do not
comply with the requirements thereof and shall indicate on its records that
Custodian maintains possession of such documents for DLJ hereunder. Customer
hereby represents, warrants and covenants to DLJ and Custodian that Customer
and any person or entity acting on behalf of Customer that has possession of
any of the documents set forth in Section 7(a) or (b), as applicable, for
such Wet Mortgage Loan prior to the deposit thereof with Custodian will hold
such documents in trust for DLJ.
10. Further Obligations of Custodian. Custodian shall promptly notify DLJ
if (i) Customer fails to pay any amount due to Custodian under this Agreement
or otherwise, and such failure results in Custodian's accelerating the
payment of any amount owed to Custodian by Customer, or (ii) Custodian has
actual knowledge that any mortgage, pledge, lien, security interest or other
charge or encumbrance (other than for the benefit of DLJ, its affiliates or
its successors and assigns) has been placed on any account maintained by
Customer with Custodian or on the Required Documents or that GNMA, FNMA or
FHLMC has rejected any Required Document.
Custodian shall use reasonable care and due diligence in the performance of
its duties hereunder, shall hold the Required Documents in its fire rated
storage vault or fire rated filing cabinet under its exclusive custody and
control, in accordance with customary standards for such custody, and shall
maintain a fidelity bond plus document hazard insurance as customarily
maintained by commercial banks in a sufficient amount to cover any and all
transactions contemplated by this Agreement.
Custodian hereby represents and warrants to DLJ that Custodian is not
controlled by, under common control with or otherwise affiliated with
Customer, and covenants and agrees with DLJ that prior to any such
affiliation in the future, Custodian shall promptly notify DLJ.
Custodian hereby represents and warrants to DLJ that this Agreement has been
duly authorized, executed and delivered by Custodian and constitutes the
legal, valid and binding obligation of Custodian, enforceable in accordance
with its terms.
Custodian hereby agrees to recognize any security interest or lien granted to
Donaldson, Lufkin & Jenrette Securities Corporation.
If Customer desires to sell mortgage loans directly to an Agency, Custodian,
if instructed by Customer, shall complete the endorsements and forward such
related Required Documents as instructed by Customer to effect such sale to
the respective Agency, together with a duly executed and completed Bailee
Letter; provided, however, that any Required Documents that are unacceptable
to the Agency shall be returned directly to Custodian and held by Custodian
for DLJ in accordance with this Agreement.
11. Release of Required Documents. (a) Customer may from time to time
request DLJ and Custodian in writing to permit the temporary withdrawal of
certain Required Documents for the purpose of correction of errors therein or
for permanent withdrawal. Custodian may permit the withdrawal of up to two
(2) mortgage loans per pool at any given time for the purpose of correcting
such mortgage loans, without the written consent of DLJ. If more than two
(2) mortgage loans for a particular pool have been and remain released for
correction, any additional request for release in conjunction with such pool
will require the consent of DLJ. Any request for release by Customer shall
be in the form of the Request and Receipt attached hereto. Custodian shall
execute an acknowledgment of release of such Required Documents, shall return
one original to Customer, shall forward one original to DLJ, and shall retain
one original. Promptly upon completion of such correction and with respect
to any Required Document that is a mortgage note, in any event within twenty-
one (21) days, Customer shall return such Required Documents to Custodian.
(b) Upon the request of Customer, Custodian may deliver the documents
referred to in Sections 6(a), (b) and (e) above, to a Nonagency Purchaser so
long as such Interim Required Documents are accompanied by a Bailee Letter
addressed to such Nonagency Purchaser. Custodian shall make a reasonable
effort to require such Nonagency Purchaser to execute such Bailee Letter and
return it to Custodian.
12. Right to Inspect. Custodian shall permit (i) inspection at all
reasonable times during regular business hours by DLJ (or by its auditors
when requested by DLJ) of the Required Documents and the records of Custodian
relating to this Agreement and (ii) DLJ (or its auditors when requested by
DLJ) to make copies of the Required Documents and the records of Custodian
relating to this Agreement.
13. Delivery of Required Documents to DLJ. Custodian shall promptly deliver
to DLJ or its designee any or all Required Documents and other items of
Collateral in Custodian's custody upon DLJ's written request. DLJ shall
provide Customer with a copy of any such notice delivered to Custodian.
Written instructions as to the method of shipment and shipper(s) Custodian is
directed to utilize in connection with the transmission of Required Documents
in the performance of Custodian's duties hereunder shall be delivered by DLJ
to Custodian prior to any shipment of Required Documents pursuant to the
request of DLJ hereunder. DLJ will arrange for the provision of such
services at its sole cost and expense (or, at Custodian's option, reimburse
Custodian for all costs and expenses incurred by Custodian consistent with
such instructions) and will maintain such insurance against loss or damage to
the required Documents as Customer deems appropriate.
14. Custodian Fees. It is understood that Custodian, or its successor, will
charge such fees for its services under this Agreement as are set forth in a
separate agreement between Custodian and Customer, the payment of which,
together with Custodian's expenses in connection herewith, shall be solely
the obligation of Customer.
15. Termination. Custodian may terminate its obligations under this
Agreement upon thirty (30) days prior written notice to Customer and DLJ. In
the event of such termination, Customer shall appoint a successor custodian,
subject to approval by DLJ, and Custodian shall promptly transfer to the
successor custodian, as directed, all Required Documents and other items of
Collateral being held by Custodian under this Agreement. If, however, a
successor custodian is not appointed by Customer or DLJ within sixty (60)
days, all duties and obligations of Custodian shall cease and terminate.
Custodian's sole responsibility thereafter shall be to safely maintain all of
the Custodian's mortgage files and to deliver the same to a successor
custodian; provided, however, if Customer and DLJ have not appointed a
successor custodian within thirty (30) days after the expiration of the
aforementioned sixty (60) day period, Custodian shall deliver such documents
to DLJ.
16. Representations by Customer. Customer hereby represents and warrants to
DLJ and Custodian that:
(a) Any payee from the DDA Account is an entity that is engaged in escrow
activities or is a Title Company as a normal course of its business;
(b) Any and all funds advanced from the DDA Account pursuant to Customer's
request in accordance with Section 8(a) shall be deemed to be an Advance to
Customer;
<PAGE>
(c) The DDA Account shall be used only to wire funds to (i) Title Companies
or other mortgage originators or their warehouse lenders for the purpose of
funding or purchasing the related mortgage loan, (ii) Customer's other
warehouse lenders, (iii) Customer's operating account for the purpose of
reimbursing Customer for funds expended in funding or purchasing the related
mortgage loan prior to the date of the Advance, or (iv) to wire funds to DLJ;
(d) No mortgage loan held by Custodian pursuant to this Agreement shall
remain deposited with Custodian for more than one hundred and eighty (180)
consecutive days; and
(e) Except for the funds advanced by DLJ to a Title Company as provided
herein, all other documents and requirements to create an enforceable first
lien mortgage on the related real property have been completed and duly
executed.
17. Notices. All written communications hereunder shall be mailed,
telecopied or delivered to each party at its address as indicated on the
signature page hereof or at such other address as shall be designated by such
party in a written notice to the other parties. All notices and
communications shall be effective when delivered.
18. Concerning the Custodian. Custodian shall not be liable for any action
or omission to act hereunder, except for its own gross negligence or willful
misconduct. In no event shall Custodian have any responsibility to ascertain
or take action with respect to the Required Documents or other items of
Collateral, except as expressly provided herein. Custodian may act in
reliance upon any written communication of Customer and DLJ concerning the
delivery of the Required Documents and other items of Collateral pursuant to
this Agreement. Custodian does not assume and shall have no responsibility
for, and makes no representation as to, monitoring the value of the Required
Documents and other items of Collateral.
19. Representations by Custodian. Custodian hereby represents and warrants
that it does not have, and will not assert, any security interest, lien,
claim or other adverse interest against the Required Documents or any other
item of Collateral. However, Custodian makes no representations as to the
title thereto, or as to the validity or adequacy of the security afforded
thereby or hereby (except as to Custodian's authority to enter into this
Agreement and the legality, validity, binding effect and enforceability of
this Agreement with respect to Custodian), and Custodian shall incur no
liability or responsibility in respect of any such matters.
20. Duties of Custodian. Custodian shall have no duties or responsibilities
except those that are specifically set forth herein, and no duties or
obligations shall be implied in this Agreement against Custodian. Custodian
shall be under no responsibility or duty with respect to the disposition of
any Required Documents while such Required Documents are not in its
possession. If Custodian shall request instructions from DLJ with respect to
any act, action or failure to act in connection with this Agreement,
Custodian shall be entitled to refrain from taking such action and continue
to refrain from acting unless and until Custodian shall have received written
instructions from DLJ without incurring any liability therefor to DLJ,
Customer or any other person.
If Custodian shall at any time receive conflicting instructions from DLJ and
Customer with respect to Custodian's mortgage files and the conflict between
such instructions cannot be resolved by reference to the terms of this
Agreement, Custodian shall be entitled to rely on the instructions of DLJ.
In the absence of bad faith, gross negligence or willful misconduct on the
part of Custodian, Custodian may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
request, instruction, certificate, opinion or other document furnished to
Custodian, reasonably believed by Custodian to be genuine and to have been
signed or presented by the proper party or parties and conforming to the
requirements of this Agreement. Custodian may rely upon the validity of
documents delivered to it, without investigation as to their authenticity or
legal effectiveness, and Customer will hold Custodian harmless from any
claims that may arise or be asserted against Custodian because of the
invalidity of any such documents or their failure to fulfill their intended
purpose. Custodian shall not be responsible to DLJ or any other party for
recitals, statements or warranties or representations of Customer contained
herein, or in any document, or be bound to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement or any other
agreement on the part of any party, except as may otherwise be specifically
set forth herein. No provision of this Agreement shall require Custodian to
expend or risk its own funds or otherwise incur financial liability in the
performance of its duties under this Agreement if it shall have the
reasonable grounds for believing that repayment of such funds or adequate in-
demnity is not reasonably assured to it. Custodian may consult with counsel
with regard to legal questions arising out of or in connection with this
Agreement and the advice or opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken, omitted
or suffered by Custodian in good faith in accordance therewith.
DLJ hereby authorizes and directs Custodian to sign on behalf of DLJ each of
the Required Documents referred to in Sections 3, 4 and 5 hereof. Without
limiting the generality of the foregoing, Custodian may rely upon and shall
be protected in acting in good faith upon any notice or other communication
received by it and which it reasonably believes to be genuine and duly
authorized with respect to all matters pertaining to this Agreement and its
duties hereunder; provided, however, that nothing set forth in this section
shall relieve Custodian of its obligations set forth in Section 9 of this
Agreement.
21. Indemnification. Customer agrees to reimburse, indemnify and hold
harmless Custodian, its directors, officers, employees or agents from and
against any and all liability, loss, cost and expense, including reasonable
fees and expenses of counsel arising from or connected with Custodian's
execution and performance of this Agreement, including but not limited to the
claims of any third parties, including DLJ, except in the case of loss,
liability or expense resulting from gross negligence or willful misconduct on
the part of Custodian or DLJ. To the extent Custodian is not reimbursed,
indemnified or held harmless by Customer, DLJ will reimburse, indemnify and
hold harmless Custodian, its directors, officers, employees and agents for
liability, loss or expense arising from any action or refraining from action
in accordance with instructions given to Custodian by DLJ, and Customer shall
reimburse DLJ for any sums so expended by DLJ. The Custodian may enter into
a settlement agreement with respect to any matter for which indemnity is
granted pursuant to this paragraph. The foregoing indemnification shall
survive any termination of this Agreement.
22. Authorizations. The persons whose signatures and titles appear on
Schedule II hereof ("Authorized Representatives") are authorized, acting
singly, to act for Customer, DLJ or Custodian, as the case may be, under this
Agreement. From time to time, each party may supplement or amend the list of
Authorized Representatives and specimen signatures by notice to the other
parties, but each of the parties shall be entitled to rely conclusively on
the then current list until receipt of a superseding list. Custodian may
rely, and shall be protected in acting or refraining to act, upon any written
instruction, notice, order, request, direction, certificate, opinion or other
instrument or document believed by Custodian to be genuine and to have been
signed or presented by an Authorized Representative in the case of Customer
and DLJ and by the proper party or parties, in all other cases.
23. Amendments, Etc. Except as otherwise expressly provided herein, no
amendment or waiver of any provision of this Agreement nor consent to any
departure herefrom shall in any event be effective unless the same shall be
in writing and signed by all the parties hereto (provided that DLJ may modify
the Required Documents set forth in Sections 3, 4, 5, 6 and 7 hereof by
giving notice of such modification to Customer and Custodian, which notice is
not objected to within one (1) Business Day after being given), and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. This Agreement constitutes the
entire agreement and understanding of the parties with respect to those
matters and transactions contemplated by this Agreement and supersedes any
prior agreement and understandings with respect to those matters and
transactions. The provisions of this Agreement set forth the exclusive
duties of Custodian and no implied duties shall be read into this Agreement
against Custodian. Schedule I hereto may be amended from time to time by
agreement between DLJ and Customer with notice to Custodian.
24. Severability. If any provision of this Agreement is declared invalid by
any court of competent jurisdiction, such invalidity shall not affect any
other provision, and this Agreement shall be enforced to the fullest extent
permitted by law.
25. Binding Effect; Governing Law. This Agreement shall be binding and
inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that neither Customer nor Custodian may
assign this Agreement or any of its rights or obligations hereunder, except
with the prior written consent of DLJ. DLJ may assign its security interest
in or lien on certain items of Collateral held by Custodian hereunder,
whereupon DLJ will act for the benefit of such assignee hereunder. This
Agreement shall be construed in accordance with, and governed by the law of
the State of New York, without giving effect to the conflict of law
principles thereof. The parties hereto waive trial by jury. Customer,
Custodian, and DLJ each irrevocably consent to the non-exclusive jurisdiction
of any court of the State of New York, or in the United States District Court
for the Southern District of New York, in any action or proceeding arising
out of or relating to this Agreement. The parties hereby submit to, and
waive any objection they may have to personal jurisdiction and venue in, the
courts of the State of New York and the United States District Court for the
Southern District of New York, over any disputes arising out of or relating
to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date and
year first above written.
LOMAS MORTGAGE, USA, INC., as Customer
By: /S/PAUL FLETCHER
-------------------------------------
Name: Paul Fletcher
-----------------------------------
Title: Senior Vice President
----------------------------------
Address: 1600 Viceroy Drive, Dallas, Texas 75235
Attention: Paul Fletcher
Telephone: 214-879-7010
Facsimile: 214-879-7018
BANK ONE, TEXAS, N.A., as Custodian
By: /S/KATHLEEN C. STEWART
-------------------------------------
Name: Kathleen C. Stewart
-----------------------------------
Title: Vice President
----------------------------------
Address: 1900 Pacific Street, Dallas, Texas 75201
Mortgage Loan Custody Department
Attention: Ms. Gloria Reed, Vice President
Telephone: (214) 290-6082
Facsimile: (214) 290-6069
DLJ MORTGAGE CAPITAL, INC.
By: /S/ROD ENNICO
-------------------------------------
Name: Rod Ennico
-----------------------------------
Title: Senior Vice President
----------------------------------
Address: 140 Broadway, 40th Floor, New York, New York 10005-1285
Attention: Money Desk/Whole Loan Financing Program
Telephone: (212) 504-8071 (800) 437-5979
Facsimile: (212) 504-8072
<PAGE>
SCHEDULE I
AUTHORIZED LIST OF NONAGENCY PURCHASERS
1. Advanta Mortgage USA
2. American Residential Mortgage Corp.
3. BancBoston Mortgage Corporation
4. Bear, Stearns, & Company, Inc.
5. California Public Employees Retirement System
6. Capital Holding Corporation
7. Capstead Mortgage Corporation
8. Chemical Mortgage Corp.
9. Citicorp Mortgage, Inc
10. ContiMortgage
11. Countrywide Funding Corporation
12. Countrywide Mortgage Investments, Inc.
13. Delta Funding Corporation
14. DLJ Mortgage Capital, Inc.
15. Farm & Home Savings Association
16. FBS Mortgage Corporation
17. Federal Home Loan Mortgage Corporation
18. Federal National Mortgage Association
19. First Alliance Mortgage Co.
20. Fleet Mortgage Group
21. Ford Motor Credit
22. GE Capital Mortgage Services, Inc.
23. GE Mortgage Insurance Corporation
24. Goldman, Sachs & company
25. Greenwich Capital
26. Guaranty Federal Bank F.S.B.
27. Hamilton Financial Services Corp.
28. Hamilton Financial Corp.
29. Household Financial Services
30. ICI Funding Corporation
31. Imperial Credit Industries, Inc.
32. J. I. Kislak
33. Kidder, Peabody, Inc.
34. Lehman Capital Corporation
35. Lehman Commercial Paper, Inc
36. Long Beach Bank
37. Meridian Capital Markets
38. Merrill Lynch & Company, Inc.
39. Morgan Keegan
40. NationsBank
<PAGE>
SCHEDULE II
AUTHORIZED REPRESENTATIVES
CUSTOMER AUTHORIZATIONS:
Any of person whose signature and title appears below is authorized, acting
singly, to act for Customer under this Agreement:
Please refer to attached schedule
- - --------------------------------------------------------------------------
Title:
-------------------------------------------------------------------
CUSTODIAN AUTHORIZATIONS:
Any person whose signature and title appears below is authorized, acting
singly, to act for Custodian, or for Custodian as Agent for DLJ, under this
Agreement:
- - --------------------------------------------------------------------------
Title:
-------------------------------------------------------------------
DLJ AUTHORIZATIONS:
Any person whose signature and title appears on the attached is authorized,
acting singly, to act for DLJ under this Agreement.
<PAGE>
EXHIBIT A
COLLATERAL RECEIPT No.
DLJ Mortgage Capital, Inc. CUSTODIAN: Bank One,
Texas, N.A.
140 Broadway, 26th Floor Address: 1900 Pacific
Street
New York, New York 10005-1285 Dallas, Texas 75201
Attn: Clearance Dept/Whole Loan Financing Program Attn: Mortgage Loan Custody
Department
Facsimile: (212) 504-8125 Facsimile: (214) 290-
6069
RE: Agency/Nonagency ---------- Identification/Pool #----------
Security Rate------% Maturity:---------
Reference is made to the Tri-Party Custody Agreement dated May 16, 1994 (the
"Custody Agreement") among Lomas Mortgage USA, Inc. ("Customer"), Bank One,
Texas, N.A. ("Custodian") and DLJ Mortgage Capital, Inc. ("DLJ").
Capitalized terms not defined herein have the respective meanings assigned
thereto in the Tri-Party Custody Agreement.
I. Certification of Customer. In consideration of DLJ making an Advance to
finance the securitization or cash purchase period for the mortgage loans
having an aggregate face value of $-------------------- and a weighted
average interest rate of ------%, as more fully described in Schedule I
attached hereto, the undersigned duly authorized officer of Customer
represents and warrants that (a) the Required Documents with respect to such
mortgage loans have been or are hereby submitted to Custodian pursuant to the
Custody Agreement, (b) all other documents related to such mortgage loans
(including but not limited to mortgages, insurance policies, loan
applications and appraisals) have been or will be created and held by
Customer in trust for DLJ, and (c) all documents related to such mortgage
loans withdrawn from Custodian shall be held in trust by Customer for DLJ,
and Customer will not attempt to pledge, hypothecate or otherwise transfer
such mortgage loans to any other party until the Advance to which the
mortgage loans are related has been paid in full by Customer. Customer has
granted to DLJ a first priority perfected security interest in and lien on
such mortgage loans. At the request of DLJ, all such other related documents
will be delivered to Custodian, DLJ or its assigns and may be inspected or
verified at any time by such parties.
- - --- No lien exists with respect to the mortgage loans constituting the
mortgage pools described above.
- - --- A lien secured by mortgage loans constituting the mortgage pools
described above is still in effect with DLJ.
- - --- A lien secured by the mortgage loans constituting the mortgage pools
described above is currently in effect.
A Warehouse Lender's Release Letter has been delivered to Custodian
under separate cover.
<PAGE>
Lomas Mortgage USA, Inc., as Customer
By:
--------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Date:
------------------------------------
II. Certification of Custodian. Custodian hereby (a) certifies that, as to
each mortgage loan listed on Schedule I hereto, it has reviewed the documents
delivered to it by Customer, it has received all Required Documents, the
Required Documents conform to the requirements of Section 9 of the Custody
Agreement and it will continue to hold the Required Documents as bailee of
and agent for DLJ and its successors and assigns pursuant to the Custody
Agreement until the related Agency (or Nonagency) Security has been issued by
the respective entity, and (b) represents and warrants that it is an approved
custodian in good standing for the Agency to which such mortgage loans will
be submitted.
BANK ONE, TEXAS, N.A., as Custodian
By:---------------------------------
Name:-------------------------------
Title: -----------------------------
Date: ------------------------------
<PAGE>
EXHIBIT B
WAREHOUSE LENDER'S RELEASE LETTER
Date: , 199--
DLJ Mortgage Capital, Inc.
140 Broadway, 26th Floor
New York, New York 10005-1285
Attn: Clearance Department/Whole Loan Financing Program
Facsimile: (212) 504-8125
RE: Customer: Lomas Mortgage USA, Inc.
RE: Agency/Nonagency----------- Identification/Pool #----------
Security Rate------% Maturity:---------
The undersigned (the "Warehouse Lender") hereby releases all right, interest
or claim of any kind with respect to the mortgage loans constituting the
mortgage pool referenced above, as may be further described in the attached
schedule, such release to be effective automatically without any further
action by any party, upon payment for the account of Customer of $-----------
- - -------------- in immediately available funds to account number #-----------
at (specify Bank) for the account of --------------------------.
Very truly yours,
, as Warehouse Lender
- - ----------------------------------------
By:
-----------------------------------
Name:
--------------------------------
Title:
--------------------------------
Telephone:
-----------------------------
copy to:
, as Customer
- - ----------------------------------------
Address:
-------------------------------
Attention:
----------------------------
Note: The above dollar amount should be EQUAL TO or LESS THAN the amount
being funded.
If no lien exists, this form must still be sent - Customer should
put a slash through the form, indicated "NOT APPLICABLE" and sign.<PAGE>
EXHIBIT C
BAILEE LETTER
Date: -------------, 199--
Purchaser:
-----------------------------
Address:
------------------------------
Attention:
----------------------------
Gentlemen:
Attached please find those mortgage loans listed separately on the attached
schedule (the "Mortgage Loans"), which Mortgage Loans are owned by Lomas
Mortgage USA, Inc. ("Borrower") and are being delivered to you for purchase.
The Mortgage Loans comprise a portion of the Collateral (as such term is
defined in the hereinafter defined Custody Agreement) under the Tri-Party
Custody Agreement ("Custody Agreement"), dated as of May 16, 1994, as it may
hereafter be amended, by and among Borrower, Bank One, Texas, N.A. as
Custodian ("Custodian"), and DLJ Mortgage Capital, Inc., as Lender ("DLJ").
Each of the Mortgage Loans is subject to a security interest in favor of DLJ,
which security interest shall be automatically released upon DLJ's receipt of
the full amount of the purchase price of such Mortgage Loan (as set forth on
the schedule attached hereto) by wire transfer to the following account
maintained with DLJ:
Bank One, Texas, N.A./ ABA#111000614, For Further Credit to DLJ Mortgage
Capital, Inc.
Reference: Whole Loan Financing Program/ (Customer Name)
Pending your purchase of each Mortgage Loan and until payment therefor is
received by DLJ, 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 Custodian for DLJ. In the event any Mortgage Loan is unacceptable
for purchase, return the rejected item directly to the undersigned at the
address set forth below. In no event shall any Mortgage Loan be returned or
sales proceeds remitted to the Borrower. The Mortgage Loan must be so
returned or sales proceeds remitted in full no later than forty five (45)
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 COLLATERAL AGENT ON BEHALF
OF THE LENDER ON THE TERMS DESCRIBED IN THIS LETTER. THE UNDERSIGNED
REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE LOANS AND THIS
LETTER BY SIGNING AND RETURNING THE ENCLOSED COPY OF THIS LETTER TO THE
UNDERSIGNED AT THE FOLLOWING ADDRESS: 1900 PACIFIC STREET, DALLAS, TEXAS
75201 ATTN: GLORIA REED; HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH
CONSENT.
Address:
<PAGE>
Sincerely,
Acknowledged and Agreed:
BANK ONE, TEXAS, N.A.
----------------------------------
as Custodian for DLJ, its successors as Purchaser
and assigns
By: By:
------------------------------ ------------------------------
Name: Name:
---------------------------- ---------------------------
Title: Title:
---------------------------- ----------------------------<PAGE>
EXHIBIT D
ADDENDUM TO ESCROW INSTRUCTIONS
Dated: , 199--
--------------
Escrow #:
---------------------------------------
Borrower:
---------------------------------------
The funds to be used for closing this transaction may be provided via wire
transfer from Bank One, Texas, N.A..
You are to hold the closing funds in trust for Bank One, Texas, N.A. until
such time as the funds are disbursed in accordance with the escrow
instructions. If the loan is not funded within three (3) Business Days of
receipt of the funds, you are to return such funds via federal funds wire to
Bank One, Texas, N.A. as follows:
Bank One, Texas, N.A., ABA #111000614
for further credit to Account # ----------
Reference: Gloria Reed/Bank One/Lomas Mortgage USA, Inc.
Between the time the funds are received and the loan is funded you are to
accept instructions regarding the use of the funds that are in conflict with
the escrow instructions only in writing from Bank One, Texas, N.A..
This Addendum to Escrow Instructions shall be irrevocable and can only be
modified with the express approval of Bank One, Texas, N.A..
Agreed and Acknowledged:
Title Company:
---------------------------------------
By:
---------------------------------------------------
Escrow Officer
<PAGE>
EXHIBIT E
REQUEST AND RECEIPT
To: Bank One, Texas, N.A. Request #
-------------------
Re: Tri-Party Custody Agreement, among DLJ Mortgage Capital, Inc. ("DLJ"),
Lomas Mortgage USA, Inc. ("Lomas") and Bank One, Texas, N.A.
("Custodian"), dated May 16, 1994 (the "Agreement").
In connection with the Mortgage Loans held by Custodian for DLJ, Lomas hereby
requests and acknowledges receipt of the Required Documents for the Mortgage
Loan described below, for the reason indicated. Custodian, DLJ and Lomas
shall, by signature below, acknowledge such action as appropriate and Lomas
certifies that it has sent a copy of this Request and Receipt to the other
parties.
Mortgagor's Name, Address and Zip Code:
------------------------------------
Mortgage Loan Number: Original Principal Amount: $
------------------- -------
Reason for Requesting Documents (circle one):
1. Mortgage Loan paid in full
2. Mortgage Loan being permanently withdrawn from the Collateral
(Lomas hereby certifies that the Advance related to such Mortgage
Loan has been repaid in full)
3. Mortgage Loan liquidated by
--------------------------------------
(Lomas hereby certifies that the Advance related to such Mortgage
Loan has been repaid in full)
4. Mortgage Loan in Foreclosure
5. Document correction (explain)
-----------------------------------
6. Other (explain)
-------------------------------------------------
If item 1, 2, 3, or 4 is circled, Custodian shall release to Lomas any and
all documents in its possession relating to the specified Mortgage Loan. If
item 5 or 6 is circled, Custodian shall release the specified documents to
Lomas and Lomas acknowledges (a) such documents are being held by Custodian
in pledge on behalf of and as agent for DLJ pursuant to the Agreement and are
subject to a security interest in favor of DLJ, and (b) that it agrees to
hold such documents as custodian, agent and bailee for and on behalf of
Custodian for DLJ.
<PAGE>
DLJ Mortgage Capital, Inc.
- - ---------------------------------------
(required if item 1, 2, 3, or 6 is circled)
By: By:
----------------------------------- -------------------------------
Name: Name:
-------------------------------- -----------------------------
Title: Title:
------------------------------- ----------------------------
Date: Date:
------------------------------- ----------------------------
<PAGE>
Acknowledgment that documents have been returned to Custodian:
By: Date: , 199--
-------------------------------- --------------------
Name: Title:
------------------------------ -----------------------------
Acknowledgment that documents have been released to Lomas:
By: Date: , 199--
-------------------------------- ---------------------
Name: Title:
------------------------------ ----------------------------
<PAGE>
EXHIBIT F
DLJ'S REVIEW AND CERTIFICATION GUIDELINES
1. Custodian shall verify whether all original notes:
(a) are endorsed "Pay to the order of without
recourse"; ---------------
(b) are complete on their face; and
(c) appear on their face to be an original.
2. Custodian shall verify whether all assignments of mortgage are
assigned in blank but not recorded, and include all interim
assignments;
3. Custodian shall verify whether all Warehouse Lender's Release
Letters are complete;
4. Custodian shall verify that the schedule of mortgage loans is in a
form acceptable to DLJ and Custodian;
5. Custodian shall verify that for each mortgage loan listed on the
schedule of mortgage loans:
(a) there is an original note;
(b) there is an assignment of mortgage assigned in blank together
with all interim assignments; and
(c) the unpaid principal balance listed on the schedule of mortgage
loans does not exceed the face value of the mortgage note submitted
with respect to such loan.
6. Custodian shall verify that, for loans intended to be sold to FNMA,
a Loan Schedule (Form 1068 or 1069) listing:
(a) DLJ's Payee Code that represents the following wire
instructions Chemical NYC/DLJ Mortgage Capital, Inc. A/C# 066214351
ABA 021000128 Reference: DLJ Whole Loan Finance/Lomas; or
(b) Custodian's Payee Code that represents the following wire
instructions Bank One, Texas ABA 111000614 for further credit to
A/C# (Settlement Account) Reference: DLJ Whole Loan Finance/Lomas.
7. Custodian shall verify that for loans intended to be sold to FHLMC:
(a) a Wire Transfer Authorization for Cash Warehouse Delivery on
Form 987 listing either DLJ or Custodian's wire instructions as per
below; and
(b) a Warehouse Lender Release of Security Interest on Form 996,
listing either of the following wire instructions:
Chemical NYC/DLJ Mortgage Capital, Inc. A/C# 066214351 ABA
021000128 Reference: DLJ Whole Loan Finance/Lomas; or
Bank One, Texas ABA 111000614 for further credit to A/C#
(Settlement Account) Reference: DLJ Whole Loan Finance/Lomas.
<PAGE>
EXHIBIT G
PROCEDURES - DLJ FINANCING PROGRAM
(all time references are Dallas time)
DAY ONE
LOMAS:
1. Transmits to Custodian a "Mortgage Loan Schedule" detail in compatible
format
2. Sends collateral package and original Mortgage Loan Schedule via local
courier to Custodian
3. Enters wire instructions through Custodian's ECDA system for same day
disbursements from DDA Account to Title Companies or as permitted in
this Agreement in suspended release mode
4. Faxes morning P&S Report and Collateral Receipt to Custodian by 12 PM
5. Faxes Notice of Borrowing to DLJ by 11 AM
6. Faxes afternoon P&S Report to Custodian by 2 PM
CUSTODIAN:
1. Receives collateral packages, verifies Lomas' transmission, and notifies
Lomas of non receipt of package by 11 AM
2. Reviews Required Documents in the collateral package by 12 PM provided
volume of loans does not exceed 100 (if over 100, but less than 200, by
1 PM)
3. Ensures Mortgage Loan Schedule and Outstanding Collateral Listing
reports agree with morning P&S Report
4. Faxes Collateral Receipt to DLJ and immediately follows with (a) a
telephone call and (b) sends original to DLJ via overnight courier
service on a weekly basis
5. Before 2 PM, releases suspended wires from ECDA DDA Account using
special test keys to Title Companies (thereby immediately wires funds)
6. Before 2 PM, receives afternoon P&S Report from Lomas. Verifies/updates
Collateral Account
7. Upon approval from DLJ, wires funds to Lomas and/or DLJ as appropriate.
DLJ:
1. Inputs DDA Account trade ticket for same day settlement (only if P&S
Report and Collateral Receipt signed by Custodian)
2. Upon receiving Collateral Receipt, promptly wires funds to Custodian DDA
account and, if necessary, indicates Fed Reference number
3. Inputs Settlement Account trade ticket for same day settlement (only if
P&S Report and Collateral Receipt signed by Custodian)<PAGE>
LOMAS:
1. Forms Agency loan pools and delivers required forms to Custodian
2. Faxes P&S and "Paid Loan Detail" Reports to Custodian
CUSTODIAN:
1. Delivers required files/Agency forms to Agency (to include Release of
Security Interest and Bailee Letter, if appropriate)
2. Receives funds from Agency and deposits into Settlement Account; wires
funds to Lomas and DLJ as indicated on the afternoon P&S Report.
3. Reviews Paid Loan Detail and updates Collateral Account. Upon request,
issues Outstanding Collateral Listing to DLJ and Lomas.
SAMPLE FLOW OF FUNDS
1. Custodian submits Collateral Receipt to DLJ
2. DLJ wires Custodian DDA Account funds
3. Custodian disburses funds to Title Companies
4. Custodian receives funds from Agency in Settlement Account
5. Lomas notifies DLJ and Custodian of incoming money via P&S Report
8. DLJ authorizes wiring of funds from Settlement Account
9. Custodian disburses funds to DLJ and Lomas as appropriate.
REPORTS TO BE ISSUED BY CUSTODIAN WEEKLY (or on demand)
1. Collateral Listing of all loans outstanding at close of business each
Thursday
2. Paid Loan Report at close of business each Thursday
3. Shipped and Not Paid Report over 15, 30 and 45 days at close of business
each Thursday
4. Mark to Market Report at close of business each Thursday
<PAGE>
OUTSTANDING COLLATERAL LISTING REPORT
No. Date
----------------------------- ------------------------
1. Aggregate Loan Value as of last Collateral Receipt: $
--------------
2. Add: Loan Value of additional Collateral delivered: $
-------------
3. Less: Loan Value of Collateral Paid: $
--------------
4. ADJUSTMENT re: $
--------------
5. Closing Aggregate Loan Value as of the date hereof: $
--------------
Approved this day of , 199
------ -------------------------- ---
BANK ONE, TEXAS, N.A., as Collateral Agent
By:
---------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE>
WITHDRAWAL OF COLLATERAL PROCEDURES
Lomas and Custodian will adhere to the following procedures with respect to
the withdrawal of Required Documents:
1. A Request and Receipt form will be prepared by Lomas and signed by an
authorized officer of the Lomas and submitted to Custodian.
2. Custodian will review the Request and Receipt and ensure that not more
than 2 Mortgage Documents in aggregate are being, or have been,
withdrawn.
If 2 or less Mortgage Documents are being requested or have been
withdrawn, Custodian shall acknowledge such release on the Request
and Receipt form and maintain a log of each Request and Receipt
form indicating the sequential number, date issued, Mortgage Loan
number, Obligor, note amount and date Documents returned.
If 2 or more Mortgage Documents are being requested or have been
withdrawn, or if the Mortgage Documents are being permanently
withdrawn, Custodian shall only release Mortgage Documents with the
express written approval of DLJ.
3. Upon return of the Mortgage Documents to the Custodian, the Request and
Receipt form will be surrendered to the Custodian for cancellation.
4. Custodian will maintain all original Request and Receipt forms in a
vault, drawer or other depository of a type which is suitable and
customary for such documents controlled solely by Custodian with the
forms filed in numerical order.
Acknowledged and Agreed:
LOMAS MORTGAGE USA, Inc.: By:
-------------------- -------------------------
CUSTODIAN: BANK ONE,
TEXAS, N.A. By:
-------------------- -------------------------
DLJ MORTGAGE CAPITAL, INC: By:
-------------------- -------------------------
<PAGE>
ATTACHMENT I TO SCHEDULE I
DLJ MORTGAGE CAPITAL INC. "DLJ" AUTHORIZATIONS
Any of the persons whose signatures and titles appear below are authorized,
acting singly, to act for DLJ under this Agreement.
Roddy R. Ennico, Senior Vice President /S/RODDY R. ENNICO
---------------------------
Robin Beck, Vice President /S/ROBIN BECK
---------------------------
Patrick M. McGrath, Assistant Vice President /S/PATRICK M. MCGRATH
---------------------------
John Dwyer, Senior Vice President /S/JOHN DWYER
---------------------------
Chris Campbell, Vice President /S/CHRIS CAMPBELL
---------------------------
Donald O'Toole, Assistant Vice President /S/DONALD O'TOOLE
---------------------------
<PAGE>
ATTACHMENT II TO SCHEDULE I
Bank One, Texas, N.A. (as Custodian) Authorizations
Any of the persons whose signatures and titles appear below are authorized,
acting singly, to act for Bank One, Texas, N.A. as Custodian, under the
Agreement:
Kathleen C. Stewart, Vice President /S/KATHLEEN C. STEWART
---------------------------------
Gloria Reed, Vice President /S/GLORIA REED
---------------------------------
D'Ann Robinson, Assistant Vice President /S/D'ANN ROBINSON
---------------------------------
Bill Hudson, Banking Officer /S/BILL HUDSON
---------------------------------
Linda Hurt, Supervisor - Banking Officer /S/LINDA HURT
---------------------------------
Bank One, Texas, N.A. (as Custodian) Notices
Please send all Notices to the following:
Gloria Reed
Vice President
Bank One, Texas, N.A.
1900 Pacific Avenue
Dallas, TX 75201
(214) 290-6082
(214) 290-6069
EXHIBIT 10.6
PLEDGE AGREEMENT
Dated: May 16, 1994
This PLEDGE AGREEMENT ("Pledge Agreement") is made by and between DLJ
Mortgage Capital, Inc. ("DLJ"), on behalf of itself and holders from time to
time of interests in the Promissory Note, and Lomas Mortgage USA, Inc.
("Customer").
PRELIMINARY STATEMENT
Customer and DLJ have entered into a Whole Loan Financing Facility, dated the
date hereof (as amended from time to time, the "Facility"), pursuant to which
DLJ may make certain Advances (as defined below) to Customer. Customer has
agreed to secure its Obligations (as defined below) by granting a security
interest in the Collateral (as defined below) pursuant to the terms hereof.
The parties hereto have agreed that certain items of Collateral are to be
deposited with and retained by Custodian (as defined below), acting as bailee
of and agent for DLJ and its affiliates, successors and assigns.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS. The following terms have the meanings indicated when used
herein:
"Advance" means an Advance as defined in the Facility.
"Agency" means any of the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC").
"Agency Mortgage Loan" means a mortgage loan described in a Collateral
Receipt and eligible and intended to secure or underlie Agency Securities or
eligible for purchase by an Agency.
"Agency Securities" means securities or certificates issued or guaranteed by
GNMA, FNMA or FHLMC.
"Business Day" means any day other than a Saturday, Sunday or a public or
bank holiday in New York City or Dallas.
"CALPERS" mean the California Public Employees Retirement System.
"Collateral" shall have the meaning assigned to it in Section 2.1 hereof.
"Collateral Receipt" means a document duly executed by Customer and Custodian
with respect to each delivery of Mortgage Loans and containing a schedule of
all Mortgage Loans submitted therewith, in the form attached as Exhibit A to
the Custody Agreement.
"Collateral Value" means the Market Value of an item of Collateral; provided,
however, that (i) if the principal of and/or interest on any item of
Collateral remains due and unpaid for more than sixty (60) days and is not
covered by a Purchase Commitment by CALPERS, such item of Collateral shall
have a Collateral Value of zero and (ii) for any item of Collateral that
constitutes Wet Mortgage Loan, if Customer fails to deliver to Custodian the
documents required to be delivered under the related Custody Agreement within
five (5) Business Days of the date of the related Advance, such Wet Mortgage
Loan shall have a Collateral Value of zero.
"Custodian" means each entity acting as bailee of and agent for DLJ with
respect to any item of Collateral.
"Custody Agreement" means each Tri-Party Custody Agreement, as amended from
time to time, among Customer, DLJ and a Custodian, with respect to any
Collateral delivered in conjunction with this Pledge Agreement.
"Default" means any event that, with the giving of notice or the lapse of
time or both, would constitute an Event of Default.
"Default Rate" means the Default Rate as defined in the Promissory Note.
"DLJSC" means Donaldson, Lufkin & Jenrette Securities Corporation
"Event of Default" means an Event of Default as defined in the Promissory
Note.
"FHA/VA Commitment" means a commitment issued by the Federal Housing
Administration (the "FHA") or the Department of Veterans Affairs (the "VA")
to insure or guarantee a Mortgage Loan.
"Good Delivery" shall have the meaning ascribed to such term in the PSA Guide
in connection with the standard requirements for the delivery and settlement
of an Agency Security.
"Market Value" means the Takeout Price under the related Purchase Commitment
which has been assigned by Customer to DLJ and of which DLJ has accepted such
assignment, or, if no such Purchase Commitment exists with respect to such
Collateral, the lesser of the unpaid principal amount of an item of
Collateral or the market bid price obtainable for an item of Collateral, as
determined on a reasonable basis by DLJ.
"Mortgage Loan" means an Agency Mortgage Loan or a Nonagency Mortgage Loan.
"Nonagency Purchaser" means any bona fide purchaser acceptable to DLJ in its
sole discretion.
"Nonagency Mortgage Loan" means a mortgage loan described in a Collateral
Receipt intended to be purchased for cash by a Nonagency Purchaser.
"Notice of Borrowing" means a Notice of Borrowing as defined in the Facility.
"Obligations" means (a) all indebtedness, obligations and liabilities
(including without limitation, guarantees and other contingent liabilities)
of Customer to DLJ, its affiliates or Custodian arising under, or in
connection with, the Program Documents or any other related document, whether
now existing or hereafter arising, including without limitation each Advance
made or to be made; (b) any and all sums paid by DLJ or on behalf of DLJ in
order to preserve the Collateral or its security interest therein and lien
thereon; (c) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities of Customer referred to in
clause (a) after an Event of Default shall have occurred and be continuing,
the reasonable expenses of retaking, holding, collecting, preparing for sale,
selling or otherwise disposing of or realizing on the Collateral, or of any
exercise by DLJ of its rights under the Program Documents, together with
reasonable attorneys' fees and disbursements and court costs; and (d) all
indemnity obligations of Customer to DLJ or Custodian pursuant to the Program
Documents.
"Pool Insurer" means the General Electric Mortgage Insurance Corporation, PMI
Mortgage Insurance Company, United Guaranty Insurance Company or any other
pool insurer acceptable to DLJ in its sole discretion.
"Program Documents" means the Facility, this Pledge Agreement, the Promissory
Note, each Custody Agreement, each Notice of Borrowing and each Collateral
Receipt.
"Promissory Note" means the Promissory Note, dated the date hereof, executed
by Customer, as amended from time to time.
"PSA Guide" The Uniform Practices for the Clearance and Settlement of
Mortgage-Backed Securities and Other Related Securities, published (and
periodically updated as supplemented) by the Public Securities Association
("PSA").
"Purchase Commitment" means an obligation of (i) a bona fide purchaser to
purchase an Agency Security, (ii) an Agency to purchase Agency Mortgage Loans
or (iii) a Nonagency Purchaser to purchase Nonagency Mortgage Loans, in each
case at a specific price on a specific date.
"Required Documents" means Required Documents as defined in the Custody
Agreement.
"Second Mortgage" means the mortgage that is the second lien (as customarily
referred to in the industry) on the real property securing the related
mortgage note.
"Servicing Records" means all servicing records, including but not limited to
any and all servicing agreements, subservicing agreements, custodial
agreements, files, documents, records, data bases, customer lists, computer
software, computer tapes, copies of computer tapes, proof of insurance
coverage, insurance policies, appraisals, other closing documentation,
payment history records, and any other data and records relating to or
evidencing the servicing of the Mortgage Loans described in each Collateral
Receipt.
"Takeout Price": As to each Purchase Commitment, the purchase price
(expressed as a percentage of par) set forth therein.
"Third Mortgage" means the mortgage that is the third lien (as customarily
referred to in the industry) on the real property securing the related
mortgage note.
"Wet Closing Notice" shall have the meaning assigned to it in the respective
Custody Agreement or, if not defined therein, shall be inapplicable for
purposes of the related Advance under the Program Documents.
"Wet Mortgage Loan" shall have the meaning assigned to it in the respective
Custody Agreement or, if not defined therein, shall be inapplicable for
purposes of the related Advance under the Program Documents.
2. SECURITY INTEREST.
2.1 Grant of Security Interest to DLJ. In consideration for the making of
each respective Advance and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Customer does hereby
convey, transfer, mortgage, hypothecate, pledge, grant and assign to DLJ and
its successors and assigns, as security for the payment of the Obligations,
a first priority perfected security interest in and lien on all of Customer's
right, title and interest in, under and to the following properties, estates,
rights and privileges, whether now existing or hereafter acquired
(collectively, the "Collateral"):
(a) All Mortgage Loans described in a Collateral Receipt or a Wet Closing
Notice, all payments of principal and interest thereon and all related items
constituting the complete file for each such Mortgage Loan (including,
without limitation, mortgage notes, mortgages, title insurance policies,
primary mortgage insurance policies, guarantees, applications, appraisals,
surveys and all other documents evidencing or relating to the Mortgage Loan),
wherever located and whether now or hereafter held in whole or in part by a
Custodian, DLJ, Customer or otherwise;
(b) All FHA/VA Commitments and Purchase Commitments related to the Mortgage
Loans that are described in, and all other documents required to be submitted
in connection with, a Collateral Receipt, wherever located and whether now or
hereafter held in whole or in part by a Custodian, DLJ, Customer or
otherwise;
(c) All Agency Securities related to the Mortgage Loans that are described
in a Collateral Receipt, wherever located and whether now or hereafter held
in whole or in part by a Custodian, DLJ, DLJSC, Customer or otherwise;
(d) All securities or cash on deposit with, or received by, DLJ or Custodian
for the account of Customer in connection with this transaction or in respect
of such Mortgage Loans or Agency Securities, or representing proceeds of
Collateral;
(e) All tangible and intangible personal property of whatever kind,
including all payments with respect thereto and all proceeds thereof, that
relates to such Mortgage Loans, Agency Securities, FHA/VA Commitments or
Purchase Commitments, wherever located and whether now or hereafter held in
whole or in part by a Custodian, DLJ, Customer or otherwise;
(f) All property held for the account of Customer by any affiliate of DLJ;
(g) All rights, powers and privileges of Customer related to the servicing
of the Mortgage Loans, including all Servicing Records; and
(h) All proceeds of any of the foregoing.
2.2 Grant of Subordinated Security Interests. To induce DLJ and its
affiliate Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") to
accept assignment of Purchase Commitments for Agency Securities related to
the Mortgage Loans, Customer does hereby convey, transfer, mortgage,
hypothecate, pledge, grant and assign to DLJ and DLJSC as security for
Customer's performance under such Purchase Commitments, a security interest
in, and lien on, the Collateral that is solely subordinate to, and junior to,
the liens set forth in Section 2.1 hereof.
2.3 Release of Collateral. Upon the full satisfaction of all outstanding
principal, accrued interest on, and all other Obligations owing with respect
to any Advance, or otherwise as provided in the Custody Agreement, and so
long as no Default or Event of Default has occurred and is continuing, but
subject to the rights of any holder of a lien on the items of Collateral of
which DLJ has notice, DLJ shall, and shall direct Custodian to, release the
Collateral related to such Advance. Subject to the provisions of this
Section 2.3, on the Maturity Date of each Advance, if requested by Customer,
DLJ will deliver against payment any related Agency Securities being held by
it as security for such Advance, and apply the net proceeds received from
such sale to the repayment of such Advance.
3. REPRESENTATIONS AND WARRANTIES.
Customer, as of the date hereof and as of the date of each Advance, hereby
represents and warrants to DLJ as follows:
3.1 Ownership of Collateral; No Encumbrance. Customer is the sole legal and
equitable owner and holder of the Collateral, free and clear of all security
interests, liens, pledges, participation interests or other encumbrances
whatsoever, except (i) the security interests and liens granted hereunder,
(ii) if payment hereunder will satisfy any existing security interest, lien
or other encumbrance on the Collateral, (iii) with respect to Mortgage Loans
that are Second Mortgages, the first lien on the related mortgaged property
and (iv) with respect to Mortgage Loans that are Third Mortgages, the first
and second liens on the related mortgaged property. All Agency Securities,
FHA/VA Commitments and Purchase Commitments have been or will be duly
authorized and validly issued, and all Mortgage Loans that are part of the
Collateral are duly and validly originated by or conveyed to Customer. All
of the items of Collateral (a) comply with all of the requirements of this
Pledge Agreement and (b) have been duly and validly pledged or assigned to
DLJ in such a manner that DLJ's first priority security interest therein is
fully perfected.
3.2 Authority to Pledge Collateral. Customer has, and will continue to
have, the full right, power and authority to grant to DLJ a first priority
perfected security interest in the Collateral.
3.3 Conformity; Eligibility.
(a) All Agency Mortgage Loans, Required Documents applicable thereto and
related Purchase Commitments conform to the requirements for submission to
the relevant Agency, and Customer has furnished to Custodian all mortgage
documents required to be submitted to the relevant Agency or Custodian in
connection with the issuance of the Agency Securities or the cash purchase of
the Agency Mortgage Loans by the relevant Agency.
(b) All Nonagency Mortgage Loans, Required Documents applicable thereto and
Purchase Commitments conform to the underwriting requirements of the relevant
Nonagency Purchaser and, unless otherwise agreed by DLJ, any relevant Pool
Insurer.
3.4 Mortgage Loans. (a) Each Agency Mortgage Loan and, to the extent a
Purchase Commitment is in effect with respect thereto, each Nonagency
Mortgage Loan meets all of the following requirements as of the date
delivered to Custodian, and except for (viii) below, continuously while it is
part of the Collateral:
(i) It is eligible, and in the form required, for securitization or
purchase under the relevant Agency program or by the relevant Nonagency
Purchaser. It is a bona fide Mortgage Loan of the type it purports to
be, made to one or more borrowers each having substantially the credit
standing he or she is represented to have;
(ii) It has been fully advanced in the face amount thereof;
(iii) It is and will be secured by a valid and enforceable "first lien"
(as customarily referred to in the industry), except that (i) with
respect to Mortgage Loans that are Second Mortgages, it is and will be
secured by a valid and enforceable "second lien" that is not a
wraparound mortgage and (ii) with respect to Mortgage Loans that are
Third Mortgages, it is and will be secured by a valid and enforceable
"third lien" that is not a wraparound mortgage, in each case upon an
existing site-built residential real property of the type represented to
secure the loan, having substantially the value represented in the
appraisal;
(iv) The documents related thereto have been duly executed and
delivered by the parties thereto;
(v) It has been made in compliance with all applicable laws,
regulations, rules, directives and orders of all governmental
authorities, including all requirements of the Real Estate Settlement
Procedures Act and the Federal Truth-In-Lending Act;
(vi) The promissory note, mortgage or deed of trust and all other
documents related to the Mortgage Loan are and will be valid and
enforceable in accordance with their terms, without defense, offset or
right of rescission, and they have not been and will not be modified or
amended nor any requirements thereof waived;
(vii) Any private mortgage insurance with respect to such loan is by a
company of recognized standing acceptable to the relevant Agency or the
relevant Nonagency Purchaser at the time that such loan was originated
and at the time that the respective Advance is made;
(viii) No default, nor any event that, with notice or lapse of time or
both, would become a default, has occurred and is continuing under any
such Mortgage Loan. With respect to Mortgage Loans that are Second
Mortgages, no default, nor any event that, with notice or lapse to time
or both, would become a default, has occurred and is continuing under
the first lien. With respect to Mortgage Loans that are Third
Mortgages, no default, nor any event that, with notice or lapse of time
or both, would become a default, has occurred and is continuing under
the first and second liens;
(ix) With respect to each Mortgage Loan that is a Second Mortgage or a
Third Mortgage, it was originated and has been serviced in compliance
with all applicable federal, state and local laws regarding second and
third liens;
(x) With respect to each Mortgage Loan that is a Second Mortgage, the
Customer has the right to cure any default with respect to the mortgage
loan that constitutes the first lien. With respect to each Mortgage
Loan that is a Third Mortgage, the Customer has the right to cure any
default with respect to the mortgage loans that constitute the first and
second liens;
(xi) Each Wet Mortgage Loan conforms in all respects to the description
thereof set forth on the related Wet Closing Notice, and Customer will
perform, and has no reason to believe that it will be unable to perform,
its obligation to deliver to Custodian the documents required to be
delivered with respect thereto under the related Custody Agreement
within five (5) Business Days of the date of the related Advance.
(b) Each Nonagency Mortgage Loan, to the extent no Purchase Commitment is in
effect with respect thereto, meets all of the representations set forth on
Appendix A hereto as of the date delivered to Custodian and continuously
while it is a part of the Collateral.
3.5 Compliance with FHA/VA Requirements. Each Mortgage Loan that is
designated by Customer as being insured by the FHA or partially guaranteed by
the VA has complied and will comply with all laws, rules and regulations with
respect to such insurance or guaranty, and such insurance or guaranty is, or
will be, in full force and effect.
3.6 Insurance Policies in Effect. Each fire and casualty insurance policy
covering each of the premises securing a Mortgage Loan that is a part of the
Collateral:
(a) Affords and will afford sufficient insurance against fire and such other
risks as are usually insured against in the broad form of extended coverage
insurance from time to time available, as well as insurance against flood
hazards if the same is required by (i) the FHA, the VA or the relevant Agency
or (ii) the relevant Nonagency Purchaser;
(b) Is a standard policy of insurance for the locale where the premises are
located; is in full force and effect; and the amount of the insurance is in
the amount of the full insurable value of the premises on a replacement cost
basis or the unpaid principal balance of the Mortgage Loan, whichever is
less;
(c) Names and will name the present owner of the premises as the insured;
and
(d) Contains a standard mortgagee loss payable clause in favor of the
servicer of the loan.
3.7 Purchase Commitments. All Purchase Commitments that are part of the
Collateral are valid and enforceable obligations.
4. COVENANTS OF CUSTOMER.
4.1. Defense of Title. Customer warrants and will defend the right, title
and interest of DLJ in and to all Collateral against all adverse claims and
demands.
4.2. No Amendment or Compromise. Without DLJ's prior consent, Customer and
those acting on behalf of Customer shall not amend or modify, or waive any
term or condition of, or settle or compromise any claim in respect of, any
item of Collateral or any related rights.
4.3. No Assignment. Customer shall not sell, assign, transfer or otherwise
dispose of, or grant any option with respect to, or pledge, hypothecate or
grant a security interest in or lien on or otherwise encumber (except
pursuant to this Pledge Agreement), any of the Collateral or any interest
therein, provided that this section shall not prevent any transfer of
Collateral in accordance with this Pledge Agreement and the Custody
Agreement.
4.4. Servicing of Mortgages.
(a) Customer shall service, or cause to be serviced, all Mortgage Loans that
are part of the Collateral in accordance with the standard industry
practices, employing at least the same procedures and exercising the same
care that it customarily employs in servicing Mortgage Loans for its own
account, and in accordance with all applicable requirements of the relevant
Agency or Pool Insurer that covers any of such Mortgage Loans. Upon the
occurrence of a material adverse change in the business of Customer, as
determined in good faith by DLJ, Customer shall notify or cause to be
notified all servicers servicing Mortgage Loans of DLJ's interest hereunder.
Customer shall notify DLJ of the name and address of all servicers. DLJ
shall have the right to approve each servicer that is not an Agency-approved
servicer and the form of all related servicing agreements. Customer shall
hold or cause to be held all escrow funds collected with respect to such
Mortgage Loans in trust accounts and shall apply the same for the purposes
for which such funds were collected.
(b) Upon DLJ's reasonable request, Customer shall provide to DLJ a letter
addressed to each servicer of Mortgage Loans (the "Servicer Letters"), in
form and substance reasonably satisfactory to DLJ, advising such servicer of
DLJ's security interest in the Collateral and such other matters as DLJ may
reasonably request.
(c) If Customer should discover that, for any reason whatsoever, it or any
entity responsible to it by contract for managing or servicing any such
Mortgage Loan has failed to perform fully Customer's obligations under the
Program Documents or any of the obligations of such entities with respect to
the Collateral, and such failure would have a material adverse effect on the
Collateral or DLJ's perfection of security interest therein, Customer shall
promptly so notify DLJ.
4.5 Preservation of Collateral. Customer shall do all things necessary to
preserve the Collateral so that it remains effective security hereunder.
Without limiting the foregoing, Customer will, in its dealings with the
Collateral, comply with all rules, regulations and other laws of any
governmental authority and cause the Collateral to comply with all applicable
rules, regulations and other laws. Customer will not allow any default for
which it is responsible to occur under any Collateral, and Customer shall
fully perform or cause to be performed when due all of its obligations under
any Collateral.
4.6. Maintenance of Papers, Records and Files.
(a) Customer shall acquire and it or its servicer shall build, maintain and
have available a complete file in accordance with industry custom and
practice for each Mortgage Loan that is part of the Collateral. Customer or
such servicer will maintain all such papers, records and files not in the
possession of Custodian in good and complete condition in accordance with
industry practices and preserve them against loss.
(b) Customer shall collect and maintain or cause to be collected and
maintained all papers, records and files relating to the Collateral in
accordance with industry custom and practice, including those maintained
pursuant to subparagraph (a) above, and all such materials shall be in
Custodian's or Customer's possession unless DLJ otherwise approves. Customer
will not allow any such papers, records or files that are an original or an
only copy to leave its or Custodian's possession, except for individual items
removed in connection with servicing a specific Mortgage Loan, in which event
Customer will obtain or cause to be obtained a receipt from a financially
responsible person for any such paper, record or file.
(c) For so long as DLJ has a security interest in or lien on any Collateral,
Customer will hold or cause to be held any paper, record or file related to
the Collateral in trust for DLJ. Customer shall notify every other party
holding any such paper, record or file of the security interests and liens
granted hereby.
(d) Upon reasonable advance notice from Custodian or DLJ, and during regular
business hours, Customer shall make any and all such papers, records or files
available to Custodian or DLJ to examine any such papers, records and files,
either by its own officers or employees, or by agents or contractors, or
both, and make copies of all or any portion thereof.
4.7. Preservation and Perfection of Security Interest. Customer shall
execute and deliver such further instruments and shall do and perform all
matters and things necessary or expedient to be done or observed for the
purpose of effectively treating, perfecting, maintaining and preserving the
security interests, liens and other benefits intended to be afforded by this
Pledge Agreement. This shall include, upon request of DLJ, the delivery of
documents to Custodian, or additional filings and recordations with
governmental authorities.
4.8. Stamp. Customer shall, upon request of DLJ, stamp on its records
concerning the Collateral or a portion thereof a notation, in form and
substance satisfactory to DLJ, of the security interest and lien of DLJ
hereunder.
4.9. Additional Rights of DLJ. Upon the occurrence of an Event of Default,
DLJ, at its option, shall have the right to do, or to request Custodian to
do, any or all of the following, and upon a request therefor by DLJ, Customer
agrees to cooperate with DLJ and Custodian, as the case may be, to accomplish
such request:
(a) DLJ or, at its direction, DLJ's designee may take possession of all
original papers, records and files relating to the Collateral. In
Custodian's discretion, Custodian shall move such records and files to a
location acceptable to and under the control of Custodian.
(b) Customer will instruct all persons servicing the Mortgage Loans that are
part of the Collateral to take instructions from, make all reports to and
make all remittances to, Custodian for the account of Customer. If DLJ so
desires, and to the extent permissible under the applicable servicing
agreement, Customer will change the servicer for any such Mortgage Loans to
a company acceptable to DLJ.
(c) Customer shall cause all sums received with respect to the Collateral to
be deposited with Custodian.
4.10. DLJ Appointed Attorney-in-Fact. Upon the occurrence of an Event of
Default, DLJ is hereby appointed the attorney-in-fact of Customer for the
purpose of carrying out the provisions hereof and taking any action and
executing any instruments that DLJ may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest. Without limiting the generality of the foregoing, DLJ
shall have the right and power to receive, endorse and collect all checks
made payable to the order of Customer representing any payment on account of
the Collateral and to give full discharge for the same.
5. DEFAULT - RIGHTS AND REMEDIES.
5.1. Events of Default; Remedies.
(a) Should any Event of Default occur, DLJ, at its option, in addition to
its rights and remedies under the Promissory Note, shall have any or all of
the following rights and remedies, which may be exercised by DLJ or by
Custodian in accordance with the instructions of DLJ:
(i) DLJ may cause the disposition of all or any portion of the
Collateral to be conducted immediately upon the occurrence of an Event
of Default, or upon the expiration of any period of delay or notice
required by law. Should DLJ decide to conduct more than one such sale
or disposition, DLJ may at its option cause the same to be conducted
simultaneously or successively on the same day or upon such different
days or at such different times and in such order as DLJ may deem to be
in the best interests of the holders of interests in the Promissory
Note. Customer waives, to the fullest extent permitted by law, any
prejudice resulting to it from any such decision.
(ii) DLJ shall have the right to sell the Collateral in one or more
lots, at one or more times, at such place or places, at public or
private sales and with or without notice of any kind, as DLJ may elect,
at such prices and on such terms, as to cash or credit, as DLJ may deem
proper, provided that notwithstanding any provision of this Pledge
Agreement to the contrary, two (2) Business Days' notice of all sales of
all or any portion of the Collateral shall be given to Customer. DLJ
shall have the right to become a purchaser at any such sale that is open
to the public and to apply all unpaid Obligations toward the purchase
price of all or any portion of the Collateral sold to DLJ. If notice is
given of public sale, it is agreed that notice shall be satisfactorily
given if such notice is published at least once in The Wall Street
Journal not less than two (2) Business Days prior to such sale. The
foregoing notice provisions shall not preclude DLJ's rights to foreclose
upon the Collateral in any other manner permitted under the Uniform
Commercial Code as in effect in the applicable jurisdiction; however, a
sale of the Collateral in accordance with such notice requirements shall
be deemed a disposal of the Collateral in a commercially reasonable
manner. DLJ shall have the right to sell the Collateral, or to
foreclose, sue upon, or otherwise seek to enforce the same in its own
name or in the name of either Custodian or Customer. Subject to the
foregoing provisions of this paragraph, if an Event of Default shall
have occurred and be continuing, DLJ shall have the right to renew,
extend the time of payment of, or otherwise modify, amend, supplement,
settle or compromise, in any manner, any obligations for the payment of
money included in the Collateral, any security therefor and any other
agreements, instruments, claims or choses in action of any kind, that
may be included in the Collateral. In view of the nature of the
Collateral, the parties agree that liquidation of the Collateral does
not require a public sale and that one or more good faith private sales,
including such private sales at which DLJ shall have the right to become
a purchaser, is a commercially reasonable disposition of the Collateral.
(iii) DLJ, or upon its direction Custodian, may take possession of
all or any portion of the Collateral that is not already in its or
Custodian's possession, and Customer agrees to assemble and make
available the Collateral to DLJ at a convenient location. DLJ, acting
through Custodian if it so desires, may manage and protect the
Collateral, do any acts that DLJ deems proper to protect the Collateral
as security hereunder, and sue upon any contract or claim relating to
the Collateral and receive any payments due thereon or any damages
thereunder, and apply all sums received to the payment of the
Obligations in accordance with the same order of priorities as set forth
in Section 5.3 hereof. Any such actions of DLJ or Custodian shall not,
absent written ratification by DLJ, be deemed to impose upon DLJ or
Custodian any of Customer's obligations under any contracts.
(iv) DLJ may direct the servicers to take such action with respect to
the Collateral as DLJ determines is appropriate.
(b) DLJ shall, without regard to the adequacy of the security for the
Obligations, be entitled to the appointment of a receiver by any court having
jurisdiction, without notice, to take possession of and protect, collect,
manage, liquidate, and sell the Collateral or any portion thereof, collect
the payments due with respect to the Collateral or any portion thereof, and
do anything that DLJ or Custodian are authorized hereunder to do. Customer
shall pay all costs and expenses incurred by DLJ in connection with the
appointment and activities of such receiver.
(c) DLJ may enforce its rights and remedies hereunder without prior judicial
process or hearing, and Customer hereby expressly waives, to the extent
permitted by law, any right Customer might otherwise have to require DLJ to
enforce its rights by judicial process. Customer also waives, to the extent
permitted by law, any defense Customer might otherwise have to the
Obligations arising from use of nonjudicial process, enforcement and sale of
all or any portion of the Collateral or from any other election of remedies.
Customer recognizes that nonjudicial remedies are consistent with the usages
of the trade, are responsive to commercial necessity and are the result of a
bargain at arm's length.
(d) Notwithstanding the foregoing, upon the occurrence of any Event of
Default described in paragraphs 6(e) and 6(f) of the Promissory Note, DLJ
shall have the right to exercise any of its rights and/or remedies without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Customer.
5.2. Delay not Waiver; Remedies are Cumulative.
(a) No failure on the part of DLJ or Custodian to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by DLJ or Custodian of any
right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
(b) All remedies of DLJ or Custodian provided for herein are cumulative and
in addition to any and all other rights and remedies provided by law, the
Program Documents and the other instruments and agreements contemplated
hereby and thereby. DLJ may exercise at any time after the occurrence of an
Event of Default one or more remedies, as it so desires, and may thereafter
at any time and from time to time exercise any other remedy or remedies.
5.3. Application of Proceeds. The proceeds of any sale or disposition of
each item of the Collateral pursuant to this Article shall be applied as
follows:
(a) First, to the payment of the costs and expenses of such sale or
disposition, or any other enforcement action pursuant hereto, including
reasonable attorney's fees (including the allocated expenses of internal
counsel to DLJ and Custodian), and all other expenses incurred in connection
therewith, with a reasonable reserve for any liabilities incurred in
connection therewith and full repayment with interest of all advances made or
incurred in connection therewith;
(b) Second, to the payment in full, in such order as DLJ shall determine, of
(i) the accrued interest on the Advance secured by the item of Collateral
sold or otherwise disposed of, (ii) the outstanding principal on the Advance
secured by the item of Collateral sold or otherwise disposed of and (iii) all
other Obligations due and owing to the holder of such Advance secured by the
item of Collateral sold or otherwise disposed of, whether such holder is DLJ
or an assignee of DLJ;
(c) Third, to the payment in full, in such order as DLJ shall determine, of
(i) the accrued interest on the Promissory Note, (ii) the outstanding
principal on the Promissory Note and (iii) all other Obligations; and
(d) Finally, to the payment to the person or persons entitled thereto, or as
a court of competent jurisdiction directs.
If the proceeds of any such sale are insufficient to cover the costs and
expenses of such sale, as aforesaid, and the payment in full of the
Promissory Note, including without limitation all Advances thereunder, and
all other Obligations, Customer shall remain liable for any deficiency.
5.4. Reimbursement. All sums expended by DLJ or Custodian in connection with
the exercise of any right or remedy provided for herein shall be and remain
the obligation of Customer. At the option of DLJ, all such sums may be paid
from the Collateral, or may be advanced by DLJ or Custodian, in which event
they shall be deemed to have been advanced to Customer and shall be
reimbursed by Customer to the party advancing such amount, with interest at
the Default Rate until reimbursement is made. During the continuance of an
Event of Default, Customer waives, and shall not have, any right to restrict
or control the expenditures by DLJ or Custodian from any cash which
constitutes Collateral.
5.5. Indemnity.
(a) The powers conferred on DLJ or Custodian hereunder are solely for their
protection and do not impose any duty on them to exercise any such powers.
Following an Event of Default, DLJ and Custodian shall have no duty of care
to Customer as to any Collateral or with respect to the taking of any
necessary steps to preserve rights against other parties, or any other
obligation pertaining to the Collateral. Customer, its successors and
assigns, waive all rights whatsoever against DLJ or Custodian for any loss,
expense, liability or damage suffered by Customer as a result of actions
taken pursuant to this Pledge Agreement, including those arising under any
"mortgagee in possession" doctrine or the like. Customer agrees to indemnify
and hold harmless DLJ and Custodian, and any contractors hired by them, and
their respective officers, agents, attorneys and employees, from each and
every obligation, liability, loss, cost, expense, death, injury, or damage
resulting from, or arising out of the Program Documents and all other
documents related thereto, and all actions taken pursuant thereto (including,
without limitation, any such obligation, liability, loss, cost, expense,
death, injury or damage resulting from any action taken by DLJ or Custodian
pursuant to Section 5 hereof), other than those caused by the gross
negligence or willful misconduct of DLJ or Custodian.
(b) Without limiting the application of Section 5.5(a), Customer agrees to
pay, or reimburse DLJ and Custodian for all fees and taxes in connection with
the recording or filing of instruments and documents in public offices,
payment or discharge of any taxes or liens upon or in respect of the
Collateral and all other fees, costs and expenses in connection with
protecting, maintaining or preserving the Collateral and DLJ's interest
therein, whether through judicial proceedings or otherwise, or in defending
or prosecuting any actions, suits or proceedings arising out of or relating
to the Collateral.
5.6. Survival. The indemnity obligations of Customer contained in this
Pledge Agreement shall continue in full force and effect notwithstanding the
full payment of the Promissory Note and all of the other Obligations and
notwithstanding the discharge thereof.
5.7. Waiver of Redemption and Deficiency Rights. Customer hereby expressly
waives, to the fullest extent permitted by law, every statute of limitation,
any right of redemption, any moratorium or redemption period, any limitation
on a deficiency judgment, any reduction in the proceeds of any Collateral as
a result of restrictions upon DLJ or Custodian contained in the Program
Documents or any other instrument delivered in connection therewith, and any
right that it may have to direct the order in which any of the Collateral
shall be disposed of in the event of any disposition pursuant hereto.
6. MISCELLANEOUS.
6.1. Notices. All written communications hereunder shall be mailed,
telecopied or delivered at the respective address set forth in the Custody
Agreement or at such other address as shall be designated by a party in a
written notice to the other parties pursuant to the Custody Agreement. All
such notices and communications shall be effective when delivered to the
party to which such notice is to be given.
6.2. Costs of Collection. Customer agrees to pay, with interest at the
Default Rate, the reasonable out-of-pocket expenses (including estimated
allocated costs for internal counsel) and reasonable attorneys' fees incurred
by DLJ or Custodian in connection with the administration and enforcement of
the Program Documents, the taking of any action, including legal action,
required or permitted to be taken by DLJ or Custodian pursuant thereto, or in
connection with any refinancing or restructuring in the nature of a
"workout".
6.3. Entire Agreement. This Pledge Agreement supersedes and integrates all
negotiations, contracts, agreements and understandings between the parties
relating thereto, and it, together with the other Program Documents and the
other documents delivered pursuant hereto or thereto, contains the entire
final agreement of the parties. No prior negotiation, agreement,
understanding or prior contract shall have any validity hereafter.
6.4. Amendments, Etc. No amendment or waiver of any provision of this Pledge
Agreement nor any consent to any departure herefrom shall in any event be
effective unless the same shall be in writing and signed by all the parties
hereto, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
6.5. Severability. If any provision of this Pledge Agreement is declared
invalid by any court of competent jurisdiction, such invalidity shall not
affect any other provision, and this Pledge Agreement shall be enforced to
the fullest extent permitted by law.
6.6. Binding Effect; Governing Law. This Pledge Agreement shall be binding
and inure to the benefit of the parties hereto and their respective
successors and assigns. Customer may not assign this Pledge Agreement or any
of Customer's rights or obligations hereunder. DLJ may assign, in whole or
in part, its rights hereunder, including without limitation its security
interest in and lien on those items of Collateral securing a particular
Advance, whether in conjunction with an assignment of DLJ's interest, in
whole or in part, in the Promissory Note, a particular Advance thereunder or
otherwise. Nothing contained herein shall preclude DLJ from continuing to
exercise all of its rights hereunder for the benefit of any such assignee of
DLJ, and Customer shall continue to take directions solely from DLJ unless
otherwise notified by DLJ in writing. This Agreement shall be construed in
accordance with, and governed by, the law of the State of New York, without
giving effect to the conflict of laws principles thereof.
IN WITNESS WHEREOF, this Pledge Agreement has been executed by the parties
hereto as of the date first above written.
LOMAS MORTGAGE USA, INC.,
as Customer
By: /S/PAUL D. FLETCHER
------------------------------
Name: Paul D. Fletcher
-----------------------------
Title: Senior Vice President
----------------------------
DLJ MORTGAGE CAPITAL, INC.
By: /S/ROD ENNICO
-------------------------------
Name: Rod Ennico
-----------------------------
Title: Senior Vice President
----------------------------
<PAGE>
APPENDIX A
Representations and Warranties Regarding Nonagency Mortgage Loans Without a
Purchase Commitment
(a) Mortgage Loans as Described. The information set forth in the
Collateral Receipt, the related mortgage loan schedule (the "Mortgage Loan
Schedule") and the Wet Closing Notice, if any, is complete, true and correct.
(b) Payments Current; No Default. All payments required to be made under
the terms of the mortgage note have been made and credited. No payment
required under the Mortgage Loan has been delinquent at any time since the
date the Mortgage Loan was originated. There is no default, breach,
violation or event of acceleration existing under the mortgage or the
mortgage note and no event that, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration, and neither Customer nor its
predecessors have waived any default, breach, violation or event of
acceleration.
(c) No Outstanding Charges. There are no defaults in complying with the
terms of the mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground
rents that previously became due and owing have been paid, or an escrow of
funds has been established in an amount sufficient to pay for every such item
that remains unpaid and that has been assessed but is not yet due and
payable. Customer has not advanced funds, or induced, solicited or knowingly
received any advance of funds by a party other than the mortgagor, directly
or indirectly, for the payment of any amount required under the Mortgage
Loan, except for interest accruing from the date of the mortgage note or date
of disbursement of the Mortgage Loan proceeds, whichever is greater, to the
day that precedes by one month the due date of the first installment of
principal and interest.
(d) Original Terms Unmodified. The terms of the mortgage note and mortgage
have not been impaired, waived, altered or modified in any respect, except by
a written instrument that has been recorded, if necessary to protect the
interest of DLJ and that has been delivered to DLJ or its designee (including
the Custodian). The substance of any such waiver, alteration or modification
has been approved by the issuer of any related PMI Policy (as defined below)
and the title insurer, to the extent required by the policy, and its terms
are reflected on the Mortgage Loan Schedule. No mortgagor has been released,
in whole or in part, except in connection with an assumption agreement
approved by the issuer of any related PMI Policy (as defined below) and the
title insurer, to the extent required by the policy, and which assumption
agreement is included in the mortgage file delivered to DLJ or its designee
(including the Custodian) and the terms of which are reflected in the
Mortgage Loan Schedule.
(e) No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without limitation
the defense of usury, nor will the operation of any of the terms of the
mortgage note or the mortgage, or the exercise of any right thereunder,
render either the mortgage note or the mortgage unenforceable, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or
defense, including without limitation the defense of usury, and no such right
of rescission, set-off, counterclaim or defense has been asserted with
respect thereto.
(f) Insurance Policies in Effect. The fire and casualty insurance policy
covering the mortgaged property (1) affords and will afford sufficient
insurance against fire and such other risks as are usually insured against in
the broad form of extended coverage insurance from time to time available, as
well as insurance against flood hazards if the mortgaged property is in an
area identified by the Federal Emergency Management Agency as having special
flood hazards; (2) is a standard policy of insurance for the locale where the
mortgaged property is located, is in full force and effect, and the amount of
insurance is in the amount of the full insurable value of the mortgaged
property on a replacement cost basis or the unpaid balance of the Mortgage
Loans, whichever is less; (3) names (and will name) the present owner of the
mortgaged property as the insured; and (4) contains a standard mortgagee loss
payable clause in favor of Customer.
(g) Compliance with Applicable Laws. Any and all requirements of any
federal, state or local law including, without limitation, usury, truth-in-
lending, real estate settlement procedure, consumer credit protection, equal
credit opportunity or disclosure laws applicable to the Mortgage Loan have
been complied with, and Customer shall maintain in its possession, available
for DLJ's inspection, and shall deliver to DLJ upon demand, evidence of
compliance with all such requirements.
(h) No Satisfaction of Mortgage. The mortgage has not been satisfied,
canceled, subordinated or rescinded, in whole or in part, and the mortgaged
property has not been released from the lien of the mortgage, in whole or in
part, nor has any instrument been executed that would effect any such
release, cancellation, subordination or rescission.
(i) Use of Mortgaged Property. No portion of the mortgaged property is used
for commercial purposes.
(j) Valid First Lien. The mortgage is a valid, existing and enforceable
first lien (except with respect to Second Mortgages and Third Mortgages) on
the mortgaged property, including all buildings on the mortgaged property and
all installations and mechanical, electrical, plumbing, heating and air
conditioning systems located in or annexed to such building, and all
additions, alterations and replacements made at any time with respect to the
foregoing. The lien of the mortgage is subject only to:
(1) the lien of the current real property taxes and assessments not yet
due and payable.
(2) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of recording
acceptable to mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan and (A) referred to or otherwise
considered in the appraisal made for the originator of the Mortgage Loan
or (B) that do not adversely affect the appraised value of the mortgaged
property set forth in such appraisal; and
(3) other matters to which like properties are commonly subject that do
not materially interfere with the benefits of the security intended to
be provided by the mortgage or the use, enjoyment, value of
marketability of the related mortgaged property.
Any security agreement, chattel mortgage or equivalent document related
to and delivered in connection with the Mortgage Loan establishes and
creates a valid, subsisting and enforceable first lien and first
priority security interest on the property described therein and
Customer has full right to pledge and assign the same to DLJ or its
designee (including Custodian).
(k) Validity of Mortgage Documents. The mortgage note and the mortgage are
genuine, and each is the legal, valid and binding obligation of the maker
thereof enforceable in accordance with its terms. All parties to the
mortgage note and the mortgage had legal capacity to enter into the Mortgage
Loan and to execute and deliver the mortgage note and the mortgage, and the
mortgage note and the mortgage have been duly and properly executed by such
parties.
(l) Full Disbursement of Proceeds. The proceeds of the Mortgage Loan have
been fully disbursed and there is no requirement of future advances
thereunder, and any and all requirements as to completion of any on-site or
off-site improvement and as to disbursements of any escrow funds therefor
have been complied with. All costs, fees and expenses incurred in making or
closing the Mortgage Loan and the recording of the mortgage were paid, and
the mortgagor is not entitled to any refund of any amounts paid or due under
the mortgage note or mortgage.
(m) Doing Business. All parties that have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during
the period in which they held and disposed of such interest, were) (1) in
compliance with any and all applicable licensing requirements of the laws of
the state wherein the mortgaged property is located, and (2) organized under
the laws of such state, or (3) qualified to do business in such state, or (4)
federal savings and loan associations or national banks having principal
offices in such state, or (5) not doing business in such state.
(n) LTV; PMI Policy. The original LTV of the Mortgage Loan either was not
more than 75% or the excess over 75% is and will be insured as to payment
defaults by a policy of primary mortgage guaranty insurance issued by a
generally accepted insurance carrier (a "PMI Policy") until the LTV of such
Mortgage Loan is reduced to 75%. All provisions of such PMI Policy have been
and are being complied with, such policy is in full force and effect, and all
premiums due thereunder have been paid. Any Mortgage Loan subject to a PMI
Policy obligates the mortgagor thereunder to maintain the PMI Policy and to
pay all premiums and charges in connection therewith. The mortgage interest
rate for the Mortgage Loan as set forth on the Mortgage Loan Schedule is net
of any such insurance premium.
(o) Title Insurance. The Mortgage Loan is covered by either (1) an
attorney's opinion of title and abstract of title the form and substance of
which is acceptable to mortgage lending institutions making mortgage loans in
the area where the mortgaged property is located or (2) an ALTA lender's
title insurance policy or other generally acceptable form of policy of
insurance, issued by a title insurer and qualified to do business in the
jurisdiction where the mortgaged property is located, insuring Customer, its
successors and assigns, as to the first priority lien of the mortgage in the
amount of 100% of the original principal amount of the Mortgage Loan, subject
only to the exceptions contained in clauses (1), (2) and (3) of paragraph (j)
above and, with respect to adjustable rate Mortgage Loans, against any loss
by reason of the invalidity or unenforceability of the lien resulting from
the provisions of the mortgage providing for adjustment to the mortgage
interest rate and monthly payment. Customer is the sole insured of such
lender's title insurance policy, and such lender's title insurance policy is
in full force and effect and will be in force and effect upon the
consummation of the transactions contemplated by this Agreement. No claims
have been made under such lender's title insurance policy, and no prior
holder of the mortgage, including Customer, has done, by act or omission,
anything that would impair the coverage of such lender's title insurance
policy.
(p) No Mechanics' Liens. There are no mechanics' or similar liens or claims
that have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
mortgaged property that are or may be liens prior to, or equal or coordinate
with, the lien of the Mortgage, unless title insurance coverage exists with
respect to such liens or claims in an amount at least equal to such liens or
claims.
(q) Location of Improvements; No Encroachments. All improvements that were
considered in determining the appraised value of the mortgaged property lay
wholly within the boundaries and building restriction lines of the mortgaged
property and no improvements on adjoining properties encroach upon the
mortgaged property. No improvement located on or being part of the mortgaged
property is in violation of any applicable zoning law or regulation.
(r) Origination; Payment Terms. The Mortgage Loan was originated by
Customer or a savings and loan association, a savings bank, a commercial bank
or similar banking institution that is supervised and examined by a Federal
or State authority. The originator of the Mortgage Loan is a HUD-approved
mortgagee. The documents, instruments and agreements submitted for loan
underwriting were not falsified and contain no untrue statement of material
fact or omit to state a material fact required to be stated therein or
necessary to make the information and statements therein not misleading.
With respect to adjustable rate Mortgage Loans, the mortgage interest rate is
adjusted annually on each interest rate adjustment date to equal the index
plus the gross margin, rounded up or down to the nearest 1/8%, subject to the
mortgage interest rate cap. With respect to fixed rate Mortgage Loans, the
mortgage note is payable each month in equal monthly installments of
principal and interest. With respect to adjustable rate Mortgage Loans,
installments of interest are subject to change due to the adjustments to the
mortgage interest rate on each interest rate adjustment date, with interest
calculated and payable in arrears, sufficient to amortize the Mortgage Loan
fully by the stated maturity date, over an original term of not more than
thirty years from commencement of amortization.
(s) Deeds of Trust. In the event the mortgage constitutes a deed of trust,
a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the mortgage, and
no fees or expenses are or will become payable by DLJ to the trustee under
the deed of trust, except in connection with a trustee's sale after default
by the mortgagor.
(t) Acceptable Investment. Customer has no knowledge of any circumstances
or conditions with respect to the mortgage, the mortgaged property, the
mortgagor or the mortgagor's credit standing that can reasonably be expected
to cause private institutional investors to regard the Mortgage Loan as an
unacceptable investment, cause the Mortgage Loan to become delinquent, or
adversely affect the value or marketability of the Mortgage Loan.
(u) Due on Sale. The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage
Loan in the event that the mortgaged property is sold or transferred without
the prior written consent of the mortgagee thereunder.
(v) Buydown Provisions; Graduated Payments or Contingent Interests. With
respect to mortgage loans which contain provisions pursuant to which monthly
payments are paid or partially paid with funds deposited in any separate
account established by Customer, the mortgagor or anyone on behalf of the
mortgagor, which may constitute a "buydown" provision, the amount of each
assistance payment shall be the sum necessary to make up the difference
between the monthly principal and interest payment required by the terms of
the note and the reduced monthly payment, as stated in the buydown
certification. However, if for any reason the assistance payments from the
escrow funds are not made by the escrow agent as contemplated, it shall be
the obligation of the mortgagor to make the monthly payments required by the
terms of the note.
With respect to graduated payment mortgage loans, the scheduled annual
payment adjustments are sufficient to cover all interest due and to fully
amortize the loan in 15 years.
(w) Consolidation of Future Advances. Any future advances made prior to the
date such Mortgage Loan was delivered to Custodian have been consolidated
with the outstanding principal amount secured by the mortgage, and the
secured principal amount, as consolidated, bears a single interest rate and
single repayment term. The lien of the mortgage securing the consolidated
principal amount is expressly insured as having first lien priority by a
title insurance policy or an endorsement to the policy insuring the
mortgagee's consolidated interest or by other title evidence acceptable to
DLJ. The consolidated principal amount does not exceed the original
principal amount of the Mortgage Loan.
(x) Mortgaged Property Undamaged. There is no proceeding pending or
threatened for the total or partial condemnation of the mortgaged property.
The mortgaged property is undamaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty so as to affect
adversely the value of the mortgaged property as security for the Mortgage
Loan or the use for which the premises were intended.
(y) Collection Practices; Escrow Deposits; Interest Rate Adjustments. The
origination and collection practices used with respect to the Mortgage Loan
have been in all respects in accordance with industry custom and practice,
and have been in all respects legal and proper. With respect to escrow
deposits and escrow payments, all such payments are in the possession of
Customer and there exist no deficiencies in connection therewith for which
customary arrangements for repayment thereof have not been made. All escrow
payments have been collected in full compliance with state and federal law.
An escrow of funds is not prohibited by applicable law and has been
established in an amount sufficient to pay for every item that remains unpaid
and has been assessed but is not yet due and payable. No escrow deposits or
escrow payments or other charges or payments due Customer have been
capitalized under the Mortgage or the mortgage note. All mortgage interest
rate adjustments have been made in strict compliance with state and federal
law and the terms of the related mortgage note. Any interest required to be
paid pursuant to state and local law has been properly paid and credited.
<PAGE>
(z) Appraisal. The mortgage file contains an appraisal of the related
mortgaged property signed prior to the approval of the Mortgage Loan
application by a qualified appraiser, who had no interest, direct or indirect
in the mortgaged property or in any loan made on the security thereof, and
whose compensation is not affected by the approval or disapproval of the
Mortgage Loan, and the appraisal satisfies the requirements of Title XI of
the Federal Institutions Reform, Recovery, and Enforcement Act of 1989 and
the regulations promulgated thereunder, all as in effect on the date the
Mortgage Loan was originated.
EXHIBIT 10.7
DONALDSON, LUFKIN & JENRETTE
DLJ Mortgage Capital, Inc. -- 140 Broadway, Suite 4000 --
New York, NY 10005-1285 -- (212) 504-8071
May 18, 1994
Lomas Mortgage USA, Inc.
1600 Viceroy Drive
Dallas, Texas 75235
Telephone: 214-879-7010
Facsimile: 214-879-7018
Attention: Paul Fletcher
This Commitment Letter confirms our agreement between Lomas Mortgage USA
("Lomas") and DLJ Mortgage Capital, Inc. ("DLJ") pursuant to which DLJ shall
provide committed financing collateralized by eligible Mortgage Loans or
Other Loans in accordance with the terms and conditions hereof and as set
forth in the Whole Loan Funding Facility, the Promissory Note, and the Pledge
Agreement dated May 16, 1994 and the Tri-Party Custody Agreement(s) executed
by Lomas related thereto (collectively, the "Agreements"). Capitalized terms
not defined herein shall have the meanings ascribed to them in the
Agreements.
In the event of a conflict between the terms of this Commitment Letter and
the terms of the Agreements, the terms of this Commitment Letter shall
control with respect to those purchases of whole mortgage loans or any
interests in any whole mortgage loans by DLJ or Advances made by DLJ up to
the amount committed below. Amounts purchased by or borrowed from DLJ in
excess of that committed herein shall be made in accordance with the
Agreements.
Subject to the terms and conditions hereof and the Agreements, including the
performance by Lomas of its obligations set forth below, DLJ hereby commits
to:
1. Provide a revolving credit line for residential Mortgage Loans under the
Agreements until May 31, 1995 as follows, after which DLJ shall have no
further obligation to purchase or to make Advances under this Commitment
Letter, unless amended in writing by the parties hereto:
(a) $200 million for Mortgage Loans and Required Documents delivered to
Custodian in accordance with Section 3, 4 or 5 of the Custody
Agreement and where related Purchase Commitments have been assigned
and delivered to DLJSC ("Gestation Transactions");
(b) $200 million for Mortgage Loans, which shall include all other
first-lien Mortgage loans, and Required Documents delivered to
Custodian in accordance with Section 6 or 7 of the Custody
Agreement ("Interim Transactions");
(c) $200 million for Title I second mortgage Mortgage Loans,
manufactured housing loans, other second mortgage Mortgage Loans
and Required Documents delivered to Custodian in accordance with
the Custody Agreement ("Other Transactions");
provided, however, that:
(i) the total committed credit line of (a) and (b) above, when
combined, shall not exceed $200 million;
(ii) no Mortgage Loan shall be in excess of $650,000;
(iii) the total of all Advances involving Mortgage Loans not yet
delivered, but which shall be delivered, to Custodian in
accordance with Section 9(b) of the Custody Agreement ("Wet
Transaction"), shall not exceed $50 million; and
(iv) Lomas maintains outstanding transactions in an amount such that the
monthly average of all Interim Transactions exceeds the monthly
average outstanding of all Wet Transactions for each calendar
month.
2. Maintain a funding rate as follows:
(a) 50 basis points over the offered LIBOR rate of comparable maturity
for any Mortgage-Backed Security repurchase agreement transaction
("MBS Repo");
(b) 75 basis points over the offered LIBOR rate of comparable maturity
for any Gestation Transaction;
(c) 110 basis points over the opening Federal Funds rate of comparable
maturity for any Interim Transaction; and
(d) 150 basis points over the opening Federal Funds rate of comparable
maturity for any Other Transaction.
provided, however, that (i) on any calendar quarter end the funding rate
shall be as quoted by DLJ in good faith, (ii) DLJ may charge Lomas for
any related daylight overdraft charge imposed by Custodian, if any, and
(iii) DLJ shall charge Lomas additional basis points as a funding rate
(as agreed upon by Lomas and DLJ) for the impact on DLJ's capital of any
MBS Repo. The foregoing commitment by DLJ is hereinafter referred to as
the "Commitment."
3. DLJ shall maintain a funding rate of 1.625% for any Interim Transaction
that has been balance funded by escrow deposits at a financial
institution approved by DLJ in its sole discretion, provided that Lomas
irrevocably assigns any compensation that may be payable to it by such
financial institution to DLJ.
Lomas commits to:
1. Pay DLJ a Commitment Fee of $306,000 (15 bp Commitment plus $6,000 Due
Diligence review) payable as follows: $31,000 upon execution of this
Commitment Letter and $25,000 on the first Business Day of each month,
commencing July 1, 1994.
2. With respect to each Advance, provide to DLJ, when such Advance is made
and thereafter on a daily mark to market basis collateral consisting of,
amongst other items specified in the Agreements, eligible Mortgage Loans
equal to:
a. For Advances related to MBS Repo Transactions covered by a Purchase
Commitment from CALPERS, 101% of each such Advance;
b. For Advances related to Gestation Transactions, 102% of each such
Advance;
c. For Advances related to Wet Transactions and Interim Transactions
(other than Title I second mortgage Mortgage Loans, manufactured
housing loans, or other second mortgage Mortgage Loans), 102% of
each such Advance;
d. For Advances related to Wet and Interim Transactions Advances
related to Other Transactions, 105% of each such Advance;
3. Provide Purchase Commitment assignments related to the Collateral to
DLJ, such Purchase Commitments to adhere to "Good Delivery" guidelines;
4. Commencing with August 1994, pay DLJ by the tenth day of each month or
of the month following the expiration or termination of the Commitment,
a Non-usage Fee if the average principal balance of all Advances
outstanding during the immediately preceding calendar month is less than
$100 million. Such Non-usage Fee shall be calculated by multiplying (a)
the amount representing the difference between $100 million and the
average outstanding principal balance of all Advances for the relevant
month by (b) 15 basis points, and dividing such product by 12;
5. Provide evidence to DLJ that Lomas has, and will continue to maintain,
insurance coverage for itself and its subsidiaries that encompasses
employee dishonesty, forgery or alteration, theft, disappearance and
destruction, robbery and safe burglary, property (other than money and
securities), and computer fraud in an aggregate amount of at least
$1,000,000 and shall include DLJ Mortgage Capital, Inc. as a Loss Payee;
and
6. Notify DLJ of its intent to borrow under an Advance no later than 11
a.m. (New York time) on the day of such Advance.
Notwithstanding the foregoing, Lomas may request DLJ to increase its
aggregate credit line up to $400 million. Upon the payment of an additional
Commitment Fee of $100,000 per annum (prorated on the number of days
remaining until May 31, 1995), and upon 30 days advance notice, DLJ hereby
agrees to amend its Commitment by increasing the overall credit line up to
$400 million until May 31, 1995.
DLJ shall have the right to terminate this Commitment Letter, and DLJ shall
no longer be obligated to make Advances under this Commitment and may
accelerate the maturity dates of all Advances then outstanding, upon the
occurrence of a Commitment Letter Termination Event. Upon such termination,
DLJ shall have no obligation to return any fees collected and may utilize any
remedy provided in the Agreements. A Commitment Letter Termination Event
shall include any one or more of the following:
1. An "Event of Default" shall have occurred under any of the Agreements
which shall include a breach by Lomas of any agreement contained in this
Commitment Letter (following the expiration of any grace or notice
period) including the items set forth under "Required Financial
Statements", or there occurs any event set forth under "Litigation",
"Consolidation and Merger" or "Financial Requirements", in Annex A
attached hereto (following the expiration of any grace or notice
period).
2. A "Material Adverse Change" shall have occurred in the business or
operations of Lomas which is defined as the occurrence of any of the
events or circumstances set forth under "Financial Requirements" in
Annex A.
3. There occurs a change in ownership of Lomas, unless (i) the resulting,
surviving or transferee entity is a corporation organized under the laws
of the United States of America or a political subdivision thereof;
(ii) such entity assumes all the obligations of Lomas under this
Commitment Letter and Agreements and each outstanding Advance (or has
such obligations guaranteed in a manner and by a Guarantor acceptable to
DLJ); and (iii) DLJ receives as part of the aforementioned transaction
prior assurances or additional credit support from such entity and any
Guarantor to the extent that DLJ would not otherwise be satisfied with
the financial condition of the surviving entity or Guarantor.
"Guarantor" shall mean a guarantor or a party providing a similar
obligation satisfactory to DLJ.
4. There occurs a catastrophic event or events resulting in the effective
absence of a "repo market" for a period of at least 30 consecutive days
respecting mortgage loans and the same results in DLJ not being able to
finance any Advance through the repo market with DLJ's traditional repo
counterparties. Upon the occurrence of such an event, Lomas shall not
be obligated to make any further payments of Commitment Fees or Non-
usage Fees.
Please acknowledge your agreement to the foregoing by signing and returning
the enclosed duplicate of this letter, whereby this Commitment Letter shall
become a binding agreement between DLJ and Lomas.
DLJ Mortgage Capital, Inc.
BY: /S/ROD ENNICO
------------------------------
NAME: Rod Ennico
-----------------------------
TITLE: Senior Vice President
----------------------------
AGREED AND ACCEPTED as of the date first above written:
Lomas Mortgage USA, Inc.
BY: /S/PAUL D. FLETCHER
-------------------------------
NAME: Paul D. Fletcher
-----------------------------
TITLE: Senior Vice President
----------------------------
<PAGE>
ANNEX A
1. Litigation: Any litigation or proceeding affecting Lomas and its
subsidiaries that is likely to be adversely determined and which, if
adversely determined, could have a material adverse effect on the
Collateral or the ability of Lomas to pay and perform on the
Obligations.
2. Consolidation and Merger: Lomas consolidates or amalgamates with, or
merges into or transfers all or substantially all its assets to another
entity and, at the time of such consolidation, amalgamation, merger, or
transfer, the resulting, surviving or transferee entity fails to assume
all the obligations of Lomas and its subsidiaries under this Commitment
Letter and the Agreements by operation of law or pursuant to an
agreement satisfactory to DLJ.
3. Financial Requirements:
(a) A material adverse change in Lomas' business, operations or
financial condition that would materially and adversely affect the
ability of Lomas to perform its obligation under this Commitment
Letter and the Agreements as determined in good faith by DLJ;
(b) GAAP Net Worth is less than $200 million;
(c) Lomas, directly or indirectly, engages in any business other than
the mortgage banking business other than businesses related to the
mortgage banking industry or typically engaged in by participants
in such industry;
(d) Lomas sells any asset other than in the ordinary course of its
business; and
(e) Lomas guarantees the debt obligation of any other entity or
entities that, in aggregate, exceeds $50 million.
4. Required Financial Statements:
(a) Lomas shall deliver to DLJ within 90 days after the last day of its
fiscal year, its audited consolidated statements of income and
statement of changes in cash flow for such year and balance sheet
as of the end of such year in each case presented fairly in
accordance with GAAP and the requirements of HUD Handbook IG 4000.3
REV and accompanied, in all cases, by an unqualified report of
Ernst & Young or another firm of independent certified public
accountants reasonably acceptable to DLJ.
(b) Lomas shall deliver to DLJ within 60 days after the last day of
each of the first three fiscal quarters in any fiscal year of
Lomas, its consolidated statements of income and statement of
changes in cash flow for such quarter and balance sheet as of the
end of such quarter presented fairly in accordance with GAAP and
accompanied by FNMA Form 1002 and FHLMC Form 1055.
(c) Lomas shall deliver to DLJ within 30 days after the last day of
each calendar month that is not a quarter or year end in any fiscal
year of Lomas, (i) its consolidated statement of income for such
month and balance sheet as of the end of such month accompanied in
each case by a certificate of the chief financial officer or
treasurer of Lomas stating that such financial statements are
presented fairly in accordance with GAAP and the requirements of
HUD Handbook IG 4000.3 REV (subject to routine and year-end audit
adjustments) and (ii) an officer's certificate from its chief
financial officer or treasurer certifying that there does not exist
an event of default in the Agreements or in this Annex.
(d) Lomas shall deliver to DLJ as soon as available copies of all proxy
statements, financial statements, and reports which Lomas sends to
its stockholders, and copies of all regular, periodic and special
reports, and all registration statements (without exhibits, unless
requested by DLJ) under the Securities Act of 1933, as amended,
which it files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with
any national securities exchange.
(e) Lomas shall deliver or cause to be delivered to DLJ as soon as the
same are available, copies of all regular, periodic and special
audit reports conducted by GNMA, FNMA and/or FHLMC with respect to
Lomas' operations.
EXHIBIT 10.8
February 8, 1995
BY FEDERAL EXPRESS
Lomas Mortgage USA, Inc.
1600 Viceroy Drive
Dallas, Texas 75235
Attn: Mr. Paul Fletcher
Senior Vice President
RE: AMENDMENT TO THE COMMITMENT LETTER ("COMMITMENT LETTER") DATED MAY
18, 1994 BETWEEN DLJ MORTGAGE CAPITAL, INC. ("DLJMC") AND LOMAS
MORTGAGE USA, INC. ("LOMAS")
Dear Mr. Fletcher:
Pursuant to your request, we hereby agree, effective as of December 31, 1994,
to revise the following terms and conditions of the Commitment Letter:
Page 1, Paragraph 1 (iii):
The total of all Advances as Wet Transactions is decreased from $50 million
to $25 million.
Page 3, Paragraph following Paragraph 6:
Lomas' option to increase its aggregate credit line up to $400 million upon
payment of an additional Commitment Fee and upon 30 days advance notice is no
longer available.
Annex A, Page 4, Paragraph 3 (b):
The minimum GAAP Net Worth requirement is lowered from $200 million to $150
million.
All other terms and conditions contained in the Commitment Letter remain
unchanged.
Please acknowledge your agreement to the foregoing by signing and returning
the enclosed duplicate of this letter, whereby this Amendment to the
Commitment Letter shall become a binding agreement between Lomas and DLJ.
<PAGE>
AGREED AND ACCEPTED as of the above date:
DLJ MORTGAGE CAPITAL, INC.: LOMAS MORTGAGE USA, INC.:
By: /S/VINCENT P. BROWNE By: /S/PAUL D. FLETCHER
-------------------------- ----------------------------
Name: Vincent P. Browne Name: Paul D. Fletcher
------------------------ -------------------------
Title: Senior Vice President Title: Senior Vice President
----------------------- ------------------------
EXHIBIT 10.9
AMENDMENT NO. 2 TO AMENDED AND RESTATED PLEDGE AGREEMENT
AMENDMENT NO. 2, dated as of July 15, 1994, to the AMENDED AND
RESTATED PLEDGE AGREEMENT, dated as of April 7, 1994 (as amended, the "Pledge
Agreement"), made by Lomas Mortgage USA, Inc. ("Pledgor") to Lehman Brothers
Special Financing Inc. ("Pledgee"). Capitalized terms used but not defined
herein shall have the meanings assigned to them in the Pledge Agreement.
WHEREAS, Pledgor has entered into the Pledge Agreement with Pledgee
and has agreed to pledge and deliver any collateral that Pledgor is required
to deliver to secure its obligations under the Agreement or any Swap
Transaction pursuant to the terms of the Pledge Agreement; and
WHEREAS, Pledgor and Pledgee now wish to amend the Pledge
Agreement;
NOW, THEREFORE, for due consideration, the receipt and sufficiency
of which are hereby acknowledged by Pledgor and Pledgee, the Pledgor and the
Pledgee agree that Exhibit A of the Pledge Agreement, and consequently the
definitions of "Mortgage Notes" and "Mortgage Servicing Collateral" in the
Pledge Agreement, shall be amended by (i) substituting the mortgage notes
which are described by Pool Number on Annex I hereto, (ii) upon Pledgor's
pledge of the Third Mortgage Servicing Collateral as described in paragraph
(ii) of the letter agreement (the "Letter Agreement") dated May 25, 1994
between the Pledgor and the Pledgee, by adding the mortgage notes which are
described by pool number on an Annex 2 hereto delivered to Pledgee
substantially in the form of Annex 1 hereto, and (iii) upon Pledgor's pledge
of additional Acceptable Mortgage Servicing Collateral as described in
paragraph (iv) of the Letter Agreement, by adding the mortgage notes which
are described by pool number on sequentially numbered Annex (commencing with
Annex 3) delivered to Pledgee substantially in the form of Annex 1 hereto.
As amended by this Amendment No. 2, the Pledge Agreement is in all
respects ratified and confirmed and the Agreement (as supplemented by
Confirmations of Swap Transactions and amended by the Letter Agreement) and
the Pledge Agreement (as supplemented by Confirmations of Swap Transactions
and as amended by that certain Amendment No. 1 and this Amendment No. 2) will
form a single agreement between Pledgor and Pledgee.
<PAGE>
IN WITNESS WHEREOF, Pledgor has caused this Amendment No. 2 to be
duly executed and delivered on the day and year first above written.
LOMAS MORTGAGE USA, INC.
By: /S/JAMES L. CROWSON
----------------------------
James L. Crowson
Title: Executive Vice President
-------------------------
<PAGE>
The unpaid principal balances of the specific mortgage notes relating to the
servicing rights pledged under the Amended and Restated Pledge Agreement
dated as of April 7, 1994, made by Lomas Mortgage USA, Inc. to Lehman
Brothers Special Financing Inc. (as amended by Amendment No. 1 thereto dated
as of May 25, 1994 and Amendment No. 2 thereto dated as of July 15, 1994 and
filed herewith), change from time to time but aggregate approximately
$7,000,000,000 as of December 31, 1994.
EXHIBIT 10.10
AMENDMENT TO AGREEMENT
AMENDMENT, dated as of September 23, 1994 between Lomas Financial
Corporation, a Delaware corporation (the "Company"), and each of the entities
and individuals listed under the heading "The Cold Spring Group" on the
signature pages hereof (such entities and individuals being referred to
collectively herein as the "Cold Spring Group").
RECITALS
WHEREAS, the Company and the Cold Spring Group have entered into that
certain Agreement, dated as of August 3, 1993 (the "Agreement"); and
WHEREAS, the Company and the Cold Spring Group desire to amend the
Agreement.
In consideration of the mutual agreements and promises made in this
Amendment, and other good and valuable consideration, the receipt and
sufficiency of which the parties acknowledge, the parties hereto agree as
follows:
1. Certain Definitions. Unless otherwise specified herein, all terms
used herein have the meanings given thereto in the Agreement, and all
references to "Sections" are references to sections of the Agreement.
2. Amendments. Effective as of the date hereof, the Agreement shall
be modified and amended as follows:
(a) Section 3 of the Agreement is amended to read in its entirety
as follows:
3. The Company hereby agrees (i) to file its preliminary
proxy statement and other material for the 1993 Meeting with the
Securities and Exchange Commission (the "SEC") no later than
September 7, 1993, and (ii) to use its best efforts to hold the
1993 Meeting no later than November 30, 1993; provided, however,
that the parties hereto recognize and accept that the proxy
statement to be filed with the SEC regarding the solicitation of
proxies for the 1993 Meeting will be subject to the SEC's review
processes and the proxy statement or the 1993 Meeting could also be
subject to other SEC action or a court action or other proceeding
instituted by a third party, any of which events could result in a
delay of the 1993 Meeting beyond November 30, 1993 (in which event
the Company will hold the 1993 Meeting as soon as possible
thereafter). Except in order to fill vacancies on the Board in a
manner consistent with Section 8 of this Agreement, directors of
the Company will only be elected at Annual Meetings of stockholders
to be held (i) on November 1, 1994 (the "1994 Meeting") (provided,
however, that the parties hereto recognize and accept that the
proxy statement or the 1994 Meeting could be subject to SEC action
or a court action or other proceeding instituted by a third party,
any of which events could result in a delay of the 1994 Meeting
beyond November 1, 1994 (in which event the Company will hold the
1994 Meeting as soon as possible thereafter)), and (ii) thereafter,
no earlier than 12 months from the prior such Annual Meeting.
(b) Section 6 of the Agreement is amended to read in its entirety
as follows:
6. If the Designees (as defined in Section 8 hereof) and any
of their successors pursuant to Section 8 continue to serve on the
Board pursuant to this Agreement at the time of the 1994 Meeting,
then, at the 1994 Meeting, (i) the total number of directors
serving on the Board shall be decreased from seventeen (17) to ten
(10), (ii) the following persons selected by the Cold Spring Group
shall be nominated as directors of the Company: Mark M. Feldman,
Robert LeBuhn, Reid Nagle and Paul S. Wolansky (the "1994 Meeting
Designees"; collectively, the 1993 Meeting Designees and the 1994
Meeting Designees shall be referred to as the "Meeting Designees")
or any of their successors pursuant to the provisions of Section 8
of this Agreement, and (iii) each member of the Cold Spring Group
shall vote all shares in respect of which it or he has voting power
in favor of the Company's other six (6) nominees for director.
3. Ratification. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Agreement and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement are ratified and
confirmed and shall continue in full force and effect. The Company and the
Cold Spring Group agree that the Agreement, as amended hereby, shall continue
to be legal, valid, binding and enforceable in accordance with its terms.
4. Reference to the Agreement. The Agreement and any and all other
agreements, documents or instruments now or hereafter executed and delivered
pursuant to the terms hereof or pursuant to the terms of the Agreement, as
amended hereby, are hereby amended so that any reference in such agreements,
documents and instruments to the Agreement shall mean a reference to the
Agreement as amended hereby.
5. Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the
same instrument.
6. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware without reference to the
conflict of laws principles thereof.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed by each of the
parties hereto through their respective authorized representatives, as of the
day and year first above written.
LOMAS FINANCIAL CORPORATION
By: /S/JESS HAY
------------------------------------
Name: Jess Hay
Title: Chairman and Chief
Executive Officer
THE COLD SPRING GROUP:
COLD SPRING ASSOCIATES, L.P.
By: Cold Spring Management, Inc.
General Partner
By: /S/MARK M. FELDMAN
--------------------------------
Name: Mark M. Feldman
Title: President
GREEN POND ASSOCIATES, L.P.
By: Green Pond Management, Inc.
General Partner
By: /S/MARK M. FELDMAN
--------------------------------
Name: Mark M. Feldman
Title: President
RIVER ROAD INTERNATIONAL, L.P.
By: River Road Capital Management
General Partner
By: /S/S. DONALD SUSSMAN
--------------------------------
S. Donald Sussman, General Partner
By: River Road Partners
General Partner
By: /S/S. DONALD SUSSMAN
--------------------------------
S. Donald Sussman, General Partner
<PAGE>
PALOMA SECURITIES, L.P.
By: /S/ROBERT JONES
------------------------------------
Robert Jones, General Partner
By: Paloma Partners Management
Company, General Partner
By: /S/S. DONALD SUSSMAN
--------------------------------
S. Donald Sussman, President
S. DONALD SUSSMAN
/S/S. DONALD SUSSMAN
--------------------------------
MARK M. FELDMAN
/S/MARK M. FELDMAN
--------------------------------
PAUL WOLANSKY
/S/PAUL WOLANSKY
--------------------------------
EXHIBIT 10.11
September 30, 1994
Mr. J. Gordon Smith
Manager of Finance
General Electric Capital Corporation
Treasurer
ELLCO Leasing Corporation
44 Old Ridgeberry Road
Danbury, CT 06810
Dear Mr. Smith:
The Stock Purchase Agreement between General Electric Capital Corporation
("GECC") and Lomas Financial Corporation and certain affiliates ("Lomas")
dated April 30, 1990 (the "Stock Purchase Agreement"), which agreement
related to the sale of all the stock of ELLCO Leasing Corporation ("ELLCO")
to GECC, provided for (i) a Tax Escrow Agreement (the "Tax Escrow Agreement")
(the Tax Escrow Agreement being executed simultaneously with the Stock
Purchase Agreement), that provided for the escrow of $10 million (the "Tax
Escrow") for the purpose of ensuring liquidity in four identified tax classes
for related indemnifications of GECC under the Stock Purchase Agreement with
regard to certain potential liabilities as set out in Section 5.4(c) of the
Stock Purchase Agreement (together with other pre-closing tax liabilities as
defined in Section 1.25 of the Stock Purchase Agreement, herein referred to
as the "Taxes"), and (ii) a General Escrow Agreement (the "General Escrow
Agreement") (the General Escrow Agreement being executed simultaneously with
the Stock Purchase Agreement and the Tax Escrow Agreement), that provided for
the escrow of $10 million (the "General Escrow") for the purpose of ensuring
liquidity for indemnifications of GECC under the Stock Purchase Agreement
with regard to certain potential liabilities as described in the Stock
Purchase Agreement. By letter agreement dated September 30, 1993 from James
L. Crowson to J. Gordon Smith related to the Tax Escrow, Lomas, GECC, and
ELLCO agreed to terminate the Tax Escrow and established the terms under
which such termination would occur (the "Tax Escrow Letter"). Lomas, GECC,
and ELLCO have now determined that it is to their mutual benefit to terminate
the General Escrow and the General Escrow Agreement as soon as practicable.
Accordingly, GECC, Lomas, and ELLCO each hereby agree to terminate the
General Escrow and the General Escrow Agreement pursuant to the following
terms:
Mr. J. Gordon Smith
September 30, 1994
Page 2
1. On or before October 14, 1994, Lomas will receive $9.25 million to be
released from the General Escrow and GECC will receive the remaining
$.75 million to be released from the General Escrow. Lomas and GECC
will each cooperate fully with the other and shall execute and deliver
to the Escrow Agent (as defined in the General Escrow Agreement) by
October 11, 1994, the notice as contemplated by Section 1.6 of the
General Escrow Agreement in substantially the form of Exhibit A hereto
(or such other form as the parties hereto may mutually agree to which
complies with the General Escrow Agreement) and any and all such other
documents as may be required or reasonably requested by the Escrow Agent
to effectuate the disbursement of funds as set forth herein so that the
funds shall be released and delivered to the parties not later than
October 14, 1994. Following the release of the General Escrow, the
General Escrow Agreement shall be terminated.
2. In connection with the release of the General Escrow and the termination
of the Escrow Agreement as agreed to in Item l above, GECC, Lomas, and
ELLCO agree as follows:
(a) The Tax Escrow Letter remains in full force and effect according to
its terms except as specifically modified by this letter.
(b) Except as specifically modified by this letter and the Tax Escrow
Letter the indemnities by Lomas of GECC and ELLCO of certain
liabilities as set out in the Stock Purchase Agreement remain in
full force and effect in accordance with their terms.
(c) With regard to claims for Damages (as defined in the Stock Purchase
Agreement) related to Taxes (if any) that may be made under the
Stock Purchase Agreement after giving effect to the releases
contained in the Tax Escrow Letter and notwithstanding anything to
the contrary set forth in the Stock Purchase Agreement, none of
GECC, ELLCO, or any of their respective directors, officers,
employees, and agents shall be entitled to indemnification for
Damages related to Taxes unless and until the aggregate of all
claims for damages related to Taxes shall exceed $200,000 (the "Tax
Indemnity Basket"), and Lomas and the Lomas Subsidiaries (as
defined in the Stock Purchase Agreement), jointly and severally,
shall indemnify GECC and each of its directors, officers, employees
and agents, ELLCO and each of its directors, officers, employees
and agents only to the extent such Damages exceed, in the
aggregate, the Tax Indemnity Basket.
<PAGE>
Mr. J. Gordon Smith
September 30, 1994
Page 3
If this letter satisfactorily sets forth the agreement among GECC, ELLCO, and
Lomas regarding the matters set forth herein, please sign below in the spaces
provided.
Very truly yours,
LOMAS FINANCIAL CORPORATION
By: /S/JAMES L. CROWSON
--------------------------
Name: James L. Crowson
Title: Executive Vice
President
AGREED:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /S/J. GORDON SMITH
-------------------------------
Name: J. Gordon Smith
Title: Manager of Finance
ELLCO LEASING CORPORATION
By: /S/J. GORDON SMITH
-------------------------------
Name: J. Gordon Smith
Title: Treasurer
<PAGE>
EXHIBIT "A"
October 11, 1994
(By telecopy Number 212/613-7788)
Mr. Bob Stanislaro
Trust Officer
Manufacturers Hanover Trust Company
450 West 33rd Street
New York, New York 10001
Attention: Escrow Administration
15th Floor
Re: General Escrow Agreement dated April 30, 1990 (the "Escrow
Agreement") by and among General Electric Capital Corporation
("GECC"), Lomas Financial Corporation ("LFC") and Manufacturers
Hanover Trust Company, as escrow agent ("Agent")
Gentlemen:
In accordance with Section 1.6 of the Escrow Agreement, the Agent shall
disburse to GECC and LFC on or before October 14, 1994, the respective
portions of $10,000,000 presently being held in escrow as set forth below to
the accounts of GECC and LFC as indicated:
To GECC: $750,000
Wiring instructions:
Bankers Trust Company
One Bankers Trust Plaza, 20th Floor
New York, NY 10015, Attn: Doris Adams
ABA No.: 021-001-033
GE Capital Corporation/Commercial Equipment
Financing, Acct No.: 50202962
<PAGE>
Mr. Bob Stanislaro
October 11, 1994
Page 2
To LFC: $9,250,000
Wiring instructions:
Bank One, Texas, N.A.
Dallas, Texas
ABA: 111000614
Lomas Financial Corporation Operating
Acct. 95298856
In accordance with Section 2.6 of the Escrow Agreement, the Agent shall be
indemnified and held harmless by each of GECC and LFC from and against any
and all expenses or loss suffered by the Agent in connection with this
Notice, the actions to be taken by the Agent contemplated in this Notice, or
otherwise as stated in such Section 2.6 of the Escrow Agreement.
GECC and LFC each agree to deliver or cause to be delivered such further
documents and instruments and shall do and cause to be done such further acts
as the Agent shall reasonably request to carry out the provisions and
purposes of this Notice or otherwise pursuant to Section 4 of the Escrow
Agreement.
Immediately following the disposition of all of the amounts held in escrow as
set forth above, the Escrow Agreement shall be terminated in accordance with
Section 5.1 of the Escrow Agreement.
Very truly yours,
General Electric Capital Corporation
By: /S/J. GORDON SMITH
------------------------------
Name: J. Gordon Smith
Title: Manager of Finance
Address: 44 Old Ridgeberry Road
Danbury, CT 06810
Telephone: 203/796-1997
<PAGE>
Lomas Financial Corporation
By: /S/JAMES L. CROWSON
------------------------------
Name: James L. Crowson
Title: Executive Vice President
Address: 1600 Viceroy Drive
Dallas, TX 75235
Telephone: 214/879-5522
EXHIBIT 10.12
===========================================================================
===========================================================================
ASSET PURCHASE AGREEMENT
dated as of
December 16, 1994
between
Residential Information Services Limited Partnership,
as Buyer
and
Lomas Information Systems, Inc.,
as Seller
and
Residential Services Corporation of America
Lomas Financial Corporation
Lomas Mortgage USA, Inc.
for certain purposes provided herein
===========================================================================
===========================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
PURCHASE AND SALE
Section 2.01. Purchase and Sale. . . . . . . . . . . . . . . . . . 11
Section 2.02. Excluded Assets. . . . . . . . . . . . . . . . . . . 12
Section 2.03. Assumption of Liabilities. . . . . . . . . . . . . . 12
Section 2.04. Excluded Liabilities . . . . . . . . . . . . . . . . 13
Section 2.05. Limitation on Assignment of Purchased Assets . . . . 14
Section 2.06. Purchase Price; Filing of IRS Form 8594. . . . . . . 15
Section 2.07. Closing . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.08. Prorations; Receivables and Payables . . . . . . . . 16
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND LFC
Section 3.01. Corporate Existence and Power. . . . . . . . . . . . 17
Section 3.02. Corporate Authorization. . . . . . . . . . . . . . . 17
Section 3.03. Governmental Authorization . . . . . . . . . . . . . 18
Section 3.04. Non-Contravention. . . . . . . . . . . . . . . . . . 18
Section 3.05. Financial Statements . . . . . . . . . . . . . . . . 18
Section 3.06. Absence of Certain Changes . . . . . . . . . . . . . 18
Section 3.07. Non-IPR Properties . . . . . . . . . . . . . . . . . 19
Section 3.08. Litigation . . . . . . . . . . . . . . . . . . . . . 19
Section 3.09. Assumed Contracts. . . . . . . . . . . . . . . . . . 19
Section 3.10. Compliance with Laws and Court Orders. . . . . . . . 20
Section 3.11. Intellectual Property. . . . . . . . . . . . . . . . 20
Section 3.12. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.13. Finders' Fees. . . . . . . . . . . . . . . . . . . . 22
Section 3.14. Licenses and Permits. . . . . . . . . . . . . . . . 22
Section 3.15. Certain Interests. . . . . . . . . . . . . . . . . . 22
Section 3.16. No Insolvency. . . . . . . . . . . . . . . . . . . . 22
Section 3.17. Ability to Conduct Business. . . . . . . . . . . . . 22
Section 3.18. Known Intended Expansion by Customers. . . . . . . . 22
Section 3.19. Enforceability and Fair Consideration. . . . . . . . 23
Section 3.20. Effect of Investigation. . . . . . . . . . . . . . . 23
ARTICLE 3.1
REPRESENTATIONS AND WARRANTIES OF LFC AND LOMAS MORTGAGE
Section 3.1.01. Corporate Existence and Power. . . . . . . . . . . 23
Section 3.1.02. Corporate Authorization. . . . . . . . . . . . . . 23
Section 3.1.03. Governmental Authorization . . . . . . . . . . . . 24
Section 3.1.04. Non-Contravention. . . . . . . . . . . . . . . . . 24
Section 3.1.05. Compliance with Laws and Court Orders. . . . . . . 24
Section 3.1.06. No Insolvency. . . . . . . . . . . . . . . . . . . 24
<PAGE>
ARTICLE 3.2
REPRESENTATIONS AND WARRANTIES WITH RESPECT
TO ANCILLARY AGREEMENTS
Section 3.2.01. Corporate Authorization. . . . . . . . . . . . . . 24
Section 3.2.02. Governmental Authorization . . . . . . . . . . . . 25
Section 3.2.03. Non-Contravention. . . . . . . . . . . . . . . . . 25
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF RSCA AND BUYER
Section 4.01. Organization and Existence . . . . . . . . . . . . . 25
Section 4.02. Authorization . . . . . . . . . . . . . . . . . . . 25
Section 4.03. Governmental Authorization . . . . . . . . . . . . . 26
Section 4.04. Non-Contravention. . . . . . . . . . . . . . . . . . 26
Section 4.05. Finders' Fees. . . . . . . . . . . . . . . . . . . . 26
Section 4.06. Financing. . . . . . . . . . . . . . . . . . . . . . 26
Section 4.07. Litigation . . . . . . . . . . . . . . . . . . . . . 26
Section 4.08. No Insolvency. . . . . . . . . . . . . . . . . . . . 26
ARTICLE 5
COVENANTS OF SELLER AND LFC
Section 5.01. Confidential Information and Noncompetition. . . . . 27
Section 5.02. Cooperation Concerning Assumed Contracts . . . . . . 28
Section 5.03. Restrictions on Distributions. . . . . . . . . . . . 28
ARTICLE 6
COVENANTS OF BUYER AND RSCA
Section 6.01. Confidentiality. . . . . . . . . . . . . . . . . . . 29
Section 6.02. RSCA Agreement to Convert. . . . . . . . . . . . . . 30
ARTICLE 7
COVENANTS OF BOTH PARTIES
Section 7.01. Reasonable Efforts; Further Assurances . . . . . . . 30
Section 7.02. Certain Filings. . . . . . . . . . . . . . . . . . . 31
Section 7.03. Public Announcements . . . . . . . . . . . . . . . . 31
Section 7.04. Trademarks, Tradenames . . . . . . . . . . . . . . . 31
ARTICLE 8
TAX MATTERS
Section 8.01. Tax Schedules. . . . . . . . . . . . . . . . . . . . 32
Section 8.02. Transfer Taxes . . . . . . . . . . . . . . . . . . . 32
Section 8.03. Cooperation on Tax Matters . . . . . . . . . . . . . 33
ARTICLE 9
EMPLOYMENT MATTERS
Section 9.01. Employees and Offers of Employment . . . . . . . . . 33
Section 9.02. Excluded Liabilities Related to Employment . . . . . 33
Section 9.03. WARN Notices, Requirements . . . . . . . . . . . . . 34
Section 9.04. Covenants Relating to Seller's Employees . . . . . . 34
<PAGE>
ARTICLE 10
CONDITIONS TO CLOSING
Section 10.01. Conditions to the Obligations of Each Party . . . . 35
Section 10.02. Conditions to Obligation of Buyer . . . . . . . . . 35
Section 10.03. Conditions to Obligation of Seller. . . . . . . . . 36
ARTICLE 11
SURVIVAL; INDEMNIFICATION
Section 11.01. Survival. . . . . . . . . . . . . . . . . . . . . . 37
Section 11.02. Indemnification . . . . . . . . . . . . . . . . . . 38
Section 11.03. Notice and Settlement of Claims . . . . . . . . . . 40
Section 11.04. Certain Indemnities With Respect to the
Arrangements . . . . . . . . . . . . . . . . . . 42
Section 11.05. Payment; Interest on Late Payments. . . . . . . . . 42
Section 11.06. No Waiver or Discharge; Subordination . . . . . . . 43
Section 11.07. Overall Limitations on Indemnification Obligations. 43
Section 11.08. Disputes. . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 12
TERMINATION
Section 12.01. Grounds for Termination . . . . . . . . . . . . . . 47
Section 12.02. Effect of Termination . . . . . . . . . . . . . . . 47
ARTICLE 13
MISCELLANEOUS
Section 13.01. No Warranties to Continue Business; Absence of
Other Duties. . . . . . . . . . . . . . . . . . . 47
Section 13.02. Notices . . . . . . . . . . . . . . . . . . . . . . 48
Section 13.03. Amendments and Waivers. . . . . . . . . . . . . . . 51
Section 13.04. Expenses. . . . . . . . . . . . . . . . . . . . . . 51
Section 13.05. Successors and Assigns. . . . . . . . . . . . . . . 51
Section 13.06. Governing Law . . . . . . . . . . . . . . . . . . . 51
Section 13.07. Counterparts, Effectiveness . . . . . . . . . . . . 51
Section 13.08. Entire Agreement. . . . . . . . . . . . . . . . . . 51
Section 13.09. Captions. . . . . . . . . . . . . . . . . . . . . . 52
EXHIBITS
Exhibit A - Form of Lease Agreement
Exhibit B - Form of Management Data Processing Services Agreement
Exhibit C - Form of Telecommunications Services Agreement
Exhibit D - Form of Service Bureau Agreement
Exhibit E - Form of Trademark Assignment
Exhibit F - Form of Copyright Assignment
Exhibit G - Form of Promissory Note
Exhibit H - Form of Guaranty
Exhibit I - Form of Adjustable Earn-Out Certificate
Exhibit J - Form of Assignment and Assumption Agreement
Exhibit K - Form of Legal Opinion of Davis Polk and Wardwell
Exhibit L - Form of Legal Opinion of Hughes and Luce
Exhibit M - Form of Senior Officer Certificate - Trust Indentures
Exhibit N - Form of Senior Officer Certificate - Enforceability
Exhibit O - Form of Assignment - MSS and Certain Assets
Exhibit P - Form of Opinion of Louis Gregory, Esq.
Exhibit Q - Form of Opinion of Brownstein Zeidman & Lore A Professional
Corporation
Exhibit R - Form of Opinion of Porter & Hedges, L.L.P.
Exhibit S - Form of Opinion of Jeffrey P. Marston, Esq.
SCHEDULES
Schedule 1.01 A Third Party Rights Relating to EXCELIS Conduit Mortgage
System
Schedule 1.01 B Third Party Rights Relating to EXCELIS Loan Production
System
Schedule 1.01 C Third Party Rights Relating to EXCELIS Mortgage Loan
Servicing System
Schedule 1.01 D Third Party Rights Relating to EXCELIS Master Servicing
System
Schedule 1.01 E Third Party Rights Relating to EXCELIS Secondary
Marketing System
Schedule 1.01 F Certain Non-Proprietary IPR Necessary to Excelis
Schedule 1.01 G Service Change Schedule
Schedule 1.01 H List of Assumed Contracts
Schedule 2.01 List of Included Assets
Schedule 2.02 List of Excluded Assets
Schedule 2.05 List of Group 1 and Group 2 Contracts
Schedule 3.01 List of Jurisdictions in Which Qualified to do Business
Schedule 3.03 List of Governmental Approvals
Schedule 3.04 List of Required Direct Consents
Schedule 3.06 List of Changes
Schedule 3.07(a) List of Limitations in Title of Non-IPR Property
Schedule 3.07(b) List of Non-IPR Leasehold Property
Schedule 3.08 List of Litigation
Schedule 3.09(a) List of Defaults on Contracts
Schedule 3.09(b) List of Missing Material Contracts
Schedule 3.11(d) List of Claims or Infringement of Any Intellectual
Property Right
Schedule 3.11(e) Indemnification Demands
Schedule 3.11(f) Limitations of Title to Intellectual Property Rights
Schedule 3.11(g) Exceptions to Exclusive Right to Commercial Exploitation
Schedule 3.14 List of Government Permits
Schedule 3.15 List of Certain Interests
Schedule 3.18 List of Known Intended Expansion
Schedule 3.1.03 List of Governmental Approvals
Schedule 3.1.04 List of Required Indirect Consents
Schedule 3.2.02 List of Certain Other Governmental Approvals
Schedule 3.2.03 List of Certain Other Required Indirect Consents
Schedule 4.07 List of Litigation
Schedule 7.04 List of Seller Tradenames (not being assigned)
Schedule 8.01 List of Taxing Jurisdictions<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT dated as of December 16, 1994, by and
between Lomas Information Systems, Inc., a Nevada corporation ("Seller"),
Residential Information Services Limited Partnership, a Delaware limited
partnership ("Buyer"), Lomas Financial Corporation, a Delaware corporation
("LFC"), Lomas Mortgage USA, Inc., a Connecticut corporation ("Lomas
Mortgage"), and Residential Services Corporation of America, a Delaware
corporation ("RSCA").
W I T N E S S E T H:
WHEREAS, Seller conducts a business which provides (i) information
management services and systems for the mortgage banking industry, including:
services (on both a service bureau and licensing basis) for loan production,
secondary marketing, conduit management, master servicing and mortgage loan
servicing; (ii) corporate management information systems; (iii) computer
utility outsourcing; (iv) voice and data communications services; and (v) a
broad range of information systems-related consulting services (clauses (i)
and (iii) collectively, the "Business"); and
WHEREAS, Buyer desires to purchase substantially all of the assets of
the Business from Seller, and Seller desires to sell substantially all of the
assets of the Business to Buyer, upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, LFC is the sole stockholder of all of the shares of issued and
outstanding common stock of both Seller and Lomas Mortgage; and
WHEREAS, Lomas Mortgage contracts for data processing services through
a service bureau arrangement with Seller with respect to Lomas Mortgage's
servicing of mortgage loans and management information services from Seller;
and
WHEREAS, LFC and Lomas Mortgage receive certain voice and data
communications services from Seller, and Seller will retain the assets with
which such voice and data services are provided; and
WHEREAS, Lomas Mortgage desires to continue receiving such data
processing and management information services, and Buyer desires to receive
voice and data communication services, for a limited transition period after
Buyer purchases substantially all of the assets of the Business; and
WHEREAS, Buyer desires certain undertakings, assurances and indemnities
from LFC and Lomas Mortgage as a condition to its purchase of substantially
all of the assets of the Business, its assumption of certain liabilities of
Seller and its offer of employment to substantially all of Seller's
employees; and
WHEREAS, LFC and Lomas Mortgage acknowledge and agree that they will
receive substantial financial benefit, whether directly or indirectly, by
virtue of the sale of substantially all of the assets of the Business, the
assumption of certain liabilities of Seller by Buyer and the employment, by
Buyer, of substantially all of Seller's employees; and
WHEREAS, as an incentive for and inducement to Buyer to enter into the
transactions described in this Agreement, acknowledging and agreeing that
Buyer is relying thereupon as a material condition to the consummation of the
transactions provided by this Agreement and the Ancillary Agreements, LFC and
Lomas Mortgage are willing to assume those undertakings, and make or give
such assurances and indemnities as expressly provided herein.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
(a) The following terms, as used herein, have the following meanings:
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Affiliate" means, with respect to any person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
other person.
"After-Tax Basis" means (i) increasing or "grossing up" the amount of
any Loss for which any Buyer or Seller Indemnified Party is indemnified under
Article 11 such that, after the indemnified party subtracts all federal,
state and local income taxes (or franchise tax if such tax is computed or
assessed with reference to income or net income) with respect to the
inclusion of such payment in the indemnified party's gross income (it being
understood for this purpose that the Indemnified Party will include any such
payment in income only following a final determination by the relevant Taxing
Authority, which the Indemnified Party has contested in good faith, that such
inclusion is required), as grossed up, the net amount then remaining shall be
equal to the amount of the Loss for which the indemnified party is entitled
to be indemnified under Article 11, and (ii) decreasing the amount of such
Loss to reflect the hypothetical Tax benefits with respect to such Loss (for
example, any deduction available in respect of the Loss) to the Indemnified
Party, determined herein. In making any such calculations, the Indemnified
Party shall be deemed to be taxable at the highest marginal federal, state
and local income tax (or franchise tax if such franchise tax is computed or
assessed with reference to income or net income) rates then in effect without
regard to its then actual overall effective rate of income taxation or actual
tax liability, taking into account, however, the deductibility of any state
or local or foreign income (or franchise) taxes payable with respect to such
indemnification payment for federal income tax purposes. Seller acknowledges
that Buyer is a partnership and that, for federal income tax purposes and
state income tax purposes in certain states, a partnership is not a taxable
entity and partners are taxed directly on their ratable shares of partnership
net income. In lieu of making calculations on an "After-Tax Basis" with
respect to each partner's separate tax circumstances, the parties hereto
agree that calculations of the increased or decreased amount due on an
"After-Tax Basis" shall be made, solely for the purposes of the calculation
of After-Tax Basis with respect to any Loss, as if Buyer were a single
corporate entity taxable as a corporation and subject only to United States
federal, New Jersey state and Newark city Tax. In determining After-Tax
Basis, any amount paid pursuant to Article 11 shall be treated as an
adjustment to the Purchase Price of the Purchased Assets pursuant to Section
11.02(h) hereof.
"Agreement" means this Agreement and all Exhibits and Schedules hereto
as the same may from time to time be amended or supplemented by one or more
instruments executed by all parties hereto.
"Ancillary Agreements" means (i) the Management Data Processing Services
Agreement, (ii) the Service Bureau Agreement, (iii) the Lease Agreement, (iv)
the Telecommunications Services Agreement, (v) the Copyright Assignment, (vi)
the Trademark Assignment and (vii) the Assignment and Assumption Agreement.
"Arrangements" means the service bureau contracts or other arrangements
between (i) Seller and PNC Mortgage Corporation, as successor in interest to
Sears Mortgage Corporation, and (ii) Seller and Huntington Mortgage
Corporation or its Affiliate.
"Assignment and Assumption Agreement" means that certain Assignment and
Assumption Agreement between Buyer and Seller in the form of Exhibit J
hereto.
"Assumed Contracts" means those contracts or agreements listed on
Schedule 1.01H attached hereto, and includes those nontransferable contracts
with respect to which the arrangements described in Section 2.05 hereof are
made.
"Balance Sheet" means the unaudited balance sheet of Seller as of
September 30, 1994, prepared in accordance with generally accepted accounting
principles consistently applied.
"Balance Sheet Date" means September 30, 1994.
"Benefit Arrangement" means any employment, collective bargaining,
severance or similar contract or arrangement whether or not written, or any
plan, policy, fund, program or contract or arrangement (whether or not
written) providing for compensation (other than salary in the ordinary
course), bonus, profit-sharing, stock option or other stock related rights or
other forms of incentive or deferred compensation, sick leave, vacation
benefits, insurance coverage (including any self-insured or self-funded
arrangements), health, medical or welfare benefits, disability benefits,
worker's compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
deferred compensation, health, disability, medical or life insurance or other
benefits, whether provided by insurance, funded or unfunded, self-insured,
self-funded or any other arrangements) that (i) is not an Employee Plan, (ii)
is entered into, maintained, administered or contributed to, as the case may
be, by Seller or any of its Affiliates (or independent agents on behalf of
Seller or its Affiliates) and (iii) covers any of Seller's past or present
employees.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in the State of Maryland or Texas are authorized or
required to be closed.
"Buyer Indemnifying Party" means any one or more of Buyer or RSCA
required (as applicable) to indemnify any Seller Indemnified Party pursuant
to Article 11 hereof.
"Closing Date" means the date of the Closing which shall be deemed to
occur on December 16, 1994.
"CMS" means all of the Intellectual Property Rights, including but not
limited to Computer Programming Code and Documentation, and any programming
or documentation (including programming in the form of built-in
"workbenches," programming tools, and higher-level (or "proprietary")
languages, used or required for the development, maintenance and
implementation of the Computer Programming Code and/or Documentation) that
comprises the full functionality (as of the date hereof) of the EXCELIS
Conduit Management System.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provisions of succeeding law).
"Computer Programming Code" means (i) computer programming code in high
level programming languages, including all comments and procedural code
(e.g., job control language statements), plus all related development
documents (e.g., flow charts, schematics, statements of principles of
operations, end-user manuals, architectural standards, and any other
specifications that are used to create or that comprise the computer
programming code), and (ii) computer programming code in machine-readable
form generated by compilation of computer programming code and contained in
a medium that permits it to be loaded into and operated on computer equipment
compatible with the Excelis Systems, in each case as it relates to the
Excelis Systems.
"Copyright Assignment" means that certain Copyright Assignment from
Seller to Buyer in the form of Exhibit F hereto.
"Default Rate" means that rate of interest per annum, compounded
annually, equal to the prime rate of interest as published from time to time
in the money rates column in The Wall Street Journal, plus three percentage
points. The Default Rate shall be adjusted as of the first Business Day of
every calendar quarter.
"Documentation" means the user manuals and other written materials as
the same may be updated or revised through the Closing Date that relate to
particular Computer Programming Code, including materials utilized for design
(e.g., logic manuals, flow charts, and principles of operation) of such
Computer Programming Code and machine readable text or graphic files subject
to display or printout relating to such Computer Programming Code.
"Employee Plan" means any "employee benefit plan", as defined in Section
3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to by Seller or any of its Affiliates
and (iii) covers any of Seller's past or present employees.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions,
currently in effect, relating to human health, the environment or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including without limitation
ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"Environmental Liabilities" means any and all liabilities of or relating
to the Seller (including any entity which is, in whole or in part, a
predecessor of the Seller), whether contingent or fixed, actual or potential,
which (i) arise under or relate to matters covered by Environmental Laws and
(ii) relate to actions occurring or conditions existing on or prior to the
Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of
the Code.
"Excelis Systems" means MLS, MSS, LPS, SMS and CMS.
"Functional Specifications" means the most current published
specifications for the Excelis Systems as set forth in the Documentation.
"Group" means any affiliated, consolidated, combined or unitary group of
Persons, for Tax purposes, of which Seller is a member and with which Seller
files any Return.
"Hazardous Substance" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and
other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"Individual Account Plan" means the Lomas 401(k) Savings Plan.
"Intellectual Property Right" means any trademark, service mark, trade
name, service name, brand name, brand mark, invention, patent, trade secret,
know-how, process, copyright (including any registration or application for
registration of any of the foregoing), or any other similar type of
proprietary intellectual property right. Intellectual Property Rights shall
not include the right to use the names "Lomas" or "Lomas and Nettleton."
"Interest Rate" means that rate of interest per annum, compounded
annually, equal to the prime rate of interest as published from time to time
in the money rates column in The Wall Street Journal. The Interest Rate
shall be adjusted as of the first Business Day of every calendar quarter.
"Knowledge" means, for any Person, the actual knowledge of such person
after due inquiry by such Person.
"Lease Agreement" means that certain Lease Agreement between Buyer and
Lomas Mortgage, in substantially the form of Exhibit A hereto.
"LFC Trust Indenture" means that certain Indenture dated as of November
1, 1991, by and between LFC and Texas Commerce Bank National Association, as
Trustee, relating to the issuance by LFC of $140,000,000 in 9% Convertible
Notes due 2003, as the same may have been amended through the date hereof.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance, purchase option or other
adverse claim of any kind in respect of such properly or asset. Without
limitation of the foregoing, for the purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any property or asset which it has
acquired or holds subject to the interest of a seller, vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement relating to such property or asset.
"Lomas Mortgage Trust Indenture" means that certain Indenture dated as
of October 1, 1992 by and between Lomas Mortgage and Bankers Trust Company,
as Trustee, relating to the issuance by Lomas Mortgage of $150,000,000 in 9
3/4% Senior Notes due October 1, 1997 and $190,000,000 in 10 1/4% Senior
Notes due October 1, 2002, as the same may have been amended through the date
hereof.
"Loss" means any and all out-of-pocket damage, loss, liability, cost,
expense, assessment, settlement, judgment, penalty or fine, and includes
without limitation reasonable expenses of investigation and reasonable
attorneys', accountants' and consultants' fees and expenses in connection
with any claim, action, suit or proceeding; provided, however, that Loss
shall not include any amount for lost business, profit or revenue
opportunities. For purposes of establishing whether any matter is
indemnifiable pursuant to Article 11 hereof and the amount of any Loss, the
accuracy of the representations and warranties made in this Agreement or in
any certificate or other writing delivered pursuant hereto or in accordance
herewith shall be determined without giving effect to the qualifications to
such representations and warranties concerning "materiality" or "Material
Adverse Effect."
"LPS" means all of the Intellectual Property Rights, including but not
limited to Computer Programming Code and Documentation, and any programming
or documentation (including programming in the form of built-in
"workbenches," programming tools, and higher-level (or "proprietary")
languages, used or required for the development, maintenance and
implementation of the Computer Programming Code and/or Documentation) that
comprise the full functionality (as of the date hereof) of the EXCELIS Loan
Production System.
"Management Data Processing Services Agreement" means that certain
Management Data Processing Services Agreement between Buyer and Lomas
Administrative Services, Inc. in the form of Exhibit B attached hereto.
"Material Adverse Effect" means a material adverse effect on the
business, assets, financial condition or result of operations of the Business
taken as a whole.
"MLS" means all of the Intellectual Property Rights, including but not
limited to Computer Programming Code and Documentation, and any programming
or documentation (including programming in the form of built-in
"workbenches," programming tools, and higher-level (or "proprietary")
languages, used or required for the development, maintenance and
implementation of the Computer Programming Code and/or Documentation) that
comprise the full functionality (as of the date hereof) of the EXCELIS
Mortgage Loan Servicing System.
"MSS" means all of the Intellectual Property Rights, including but not
limited to Computer Programming Code and Documentation, and any programming
or documentation (including programming in the form of built-in
"workbenches," programming tools, and higher-level (or "proprietary")
languages, used or required for the development, maintenance and
implementation of the Computer Programming Code and/or Documentation) that
comprise the full functionality (as of the date hereof) of the EXCELIS Master
Servicing System.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) or Section 4001(a)(3) of ERISA.
"Non-IPR Property" means any and all properties or assets of Seller,
other than Intellectual Property Rights, used principally or held principally
for use in the Business.
"Non-Proprietary IPR" means (i) any and all Intellectual Property Rights
detailed or described in each of Schedules 1.01A (relating to CMS), 1.01B
(relating to LPS), 1.01C (relating to MLS), 1.01D (relating to MSS) and 1.01E
(relating to SMS), and (ii) any and all other Intellectual Property Rights
that Seller leases, licenses or in which Seller otherwise has nonexclusive or
limited ownership or use rights but which are necessary to implement, achieve
or exploit the full functionality (as of the date hereof) of the Excelis
Systems, described on Schedule 1.01F hereto.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means the Lomas Financial Group Pension Plan.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
"Proprietary IPR" means any and all Intellectual Property Rights
constituting the Excelis Systems, other than those detailed or described in
each of Schedules 1.01A, 1.01B, 1.01C, 1.01D, 1.01E and 1.01F.
"Return" means any Tax return, statement, report and form (including
estimated tax or information returns and reports) required to be filed with
any Taxing Authority by or on behalf of Seller, either separately or as a
member of a Group.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Indemnifying Party" means any one or more of Seller, LFC or
Lomas Mortgage required (as applicable) to indemnify any Buyer Indemnified
Party pursuant to Article 11 hereof.
"Senior Officer" of any entity means an officer of such entity with a
title of Senior Vice President or higher or a director of such entity.
"Service Bureau Agreement" means that certain Service Bureau Agreement
between Buyer and Lomas Mortgage, in substantially the form of Exhibit C
hereto.
"SMS" means all of the Intellectual Property Rights, including but not
limited to Computer Programming Code and Documentation, and any programming
or documentation (including programming in the form of built-in
"workbenches," programming tools, and higher-level (or "proprietary")
languages, used or required for the development, maintenance and
implementation of the Computer Programming Code and/or Documentation) that
comprise the full functionality (as of the date hereof) of the EXCELIS
Secondary Marketing System.
"Tax" or "Taxes" means (i) any net income, alterative or add-on minimum
tax, gross income, gross receipts', sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental or
windfall profit tax, custom, duty or other tax, governmental fee or other tax
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any Taxing
Authority, (ii) liability of the Seller for the payment of any amounts of the
type described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group, or being a party to any agreement or
arrangement whereby liability of the Seller for payments of such amounts was
determined or taken into account with reference to the liability of any other
person for any Tax period, and (iii) liability of the Seller for the payment
of any amounts as a result of being a party to any Tax Sharing Agreement or
with respect to the payment of any amounts of the type described in (i) or
(ii) as a result of any express or implied obligation to indemnity any other
Person.
"Tax Asset" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or
tax attribute which could reduce Taxes (including, without limitation,
deductions and credits related to alterative minimum Taxes).
"Tax Sharing Agreements" means all existing Tax sharing agreements or
arrangements (whether or not written) binding the Seller and any agreements
or arrangements which afford any other person the benefit of any Tax Asset of
Seller, afford Seller the benefit of any Tax Asset of any other Person, or
require or permit the transfer or assignment of income, revenues, receipts,
or gains.
"Taxing Authority" means any governmental authority, domestic or
foreign, responsible for the imposition, assessment, enforcement or
collection of any Tax.
"Telecommunications Services Agreement" means that certain
Telecommunications Services Agreement between Buyer and Lomas Administrative
Services, Inc. in the form of Exhibit C attached hereto.
"Trademark Assignment" means that certain Trademark Assignment by Seller
to Buyer in the form of Exhibit E hereto.
"Wages" has the meaning given such term by Section 3401(a) of the Code.
"Work In-Progress" means Computer Programming Code and Documentation in
development, and other intellectual property developed or being developed by
Seller in connection with the Business, including but not limited to the
Computer Programming Code and Documentation in development with respect to
items listed on Seller's "Service Change Schedule," attached as part of
Schedule 1.01G hereto.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
Adjustable Earn-Out Certificate 2.06
Assumed Liabilities 2.03
Buyer Note 2.06
Buyer Indemnified Parties 11.02
Capped Indemnity Obligations 11.07
Comptroller 8.05
Closing 2.07
Confidential Information 5.04
Conveyance Documents 2.07
Damages 11.02
Demand for Indemnification Payment 11.05
Early Termination Fees 2.02
Excluded Assets 2.02
Excluded Liabilities 2.04
Financial Statements 3.05
Governmental Permits 3.01
Huntington 2.02
Indemnified Party 11.03
Indemnifying Party 11.03
Indemnity Floor 11.07
Non-IPR Leasehold Property 3.07
Notice of Disagreement 11.08
PHMC 6.02
PNC 2.02
Pre-Closing Certificate Taxes 8.02
Purchased Assets 2.01
Purchase Price 2.06
RSCA Guaranty 2.06
Rules 11.08
Seller Indemnified Parties 11.02
Seller Tradenames 7.04
Transfer Taxes 8.02
Unlimited Indemnity Obligations 11.07
WARN 9.04
Wrongful Termination 12.02
ARTICLE 2
PURCHASE AND SALE
Section 2.01. Purchase and Sale. Except as otherwise provided in this
Agreement, upon the terms and subject to the conditions of this Agreement,
Buyer agrees to purchase from Seller and Seller agrees to sell, transfer,
assign and deliver, or cause to be sold, transferred, assigned and delivered,
to Buyer at Closing, all of Seller's right, title and interest in, to and
under the assets and properties of every kind or description, wherever
located, personal or mixed, tangible or intangible, owned or otherwise used
by Seller principally in the Business or held by Seller principally for use
in the Business as the same shall exist on the Closing Date (the "Purchased
Assets"), including, without limitation, all right, title and interest of
Seller in, to and under:
(A) all Non-IPR Property identified on Schedule 2.01 hereto; and
(B) all Proprietary IPR, Work-In-Progress and, subject to Section 2.05
hereof, Non-Proprietary IPR, and any and all other Intellectual
Property Rights, if any, that Seller leases, licenses or in which
Seller otherwise has nonexclusive or limited ownership or use
rights which are used principally in the conduct of Seller's
Business (such assets or properties described in clauses (A) and
(B) including but not limited to):
(i) subject to Section 2.08 hereof, all prepaid expenses,
including but not limited to ad valorem taxes, leases and rentals,
related to the Purchased Assets;
(ii) all rights, claims, credits, causes of action or
rights of set-off against third parties relating to the Purchased
Assets or Assumed Liabilities, including, without limitation,
unliquidated rights under manufacturers' and vendors' warranties;
(iii) all transferable Governmental Permits used
principally or held principally for use in the Business;
(iv) all books, records, files and papers, whether in hard
copy or computer format, used principally or relating principally
to the Business,including, without limitation, engineering
information, sales and promotional literature, manuals and data,
sales and purchase correspondence, lists of present and former
suppliers, lists of present and former customers, personnel and
employment records, and any information relating to Tax imposed on
the Purchased Assets;
(v) copyright, trademark or other similar registration
certificates issued to Seller in connection with all Proprietary
IPR, which shall be separately assigned to Buyer in accordance with
those certain forms of Trademark and Copyright Assignments attached
hereto as Exhibits E and F hereto; and
(vi) all goodwill associated with the Business or the
Purchased Assets.
Section 2.02. Excluded Assets. (a) Notwithstanding anything else
contained herein, Purchased Assets shall not include any of Seller's right,
title or interest in, to or under the following assets and properties (the
"Excluded Assets"):
(i) all cash and cash equivalents on hand in banks;
(ii) insurance policies;
(iii) except as provided in Section 2.02(b) hereof,
accounts receivable attributable to the period prior to the Closing
Date whether or not booked by Seller prior to the Closing Date;
provided, however, that with respect to any unbooked receivables,
Seller provides Buyer with reasonable evidence that the receivable
is properly attributable to the period preceding the Closing Date;
and
(iv) the assets listed on Schedule 2.02.
(b) Notwithstanding anything else contained herein, Excluded Assets
shall include any and all amounts actually received by Seller on or prior to
the Closing Date from PNC Mortgage Corporation ("PNC") and/or Huntington
Mortgage Corporation or any of its Affiliates ("Huntington"), as fees or
damages paid in connection with the early termination of the Arrangements
("Early Termination Fees"). Purchased Assets shall include, however, the
right to any payment of Early Termination Fees actually made by PNC and/or
Huntington after the Closing Date (as determined by postmark or other date
reflected on the mail or other means of delivery of such payment), as well as
all payments related to services rendered by Buyer to PNC and/or Huntington
with respect to the Arrangements from and after the Closing Date.
Section 2.03. Assumption of Liabilities. Upon the terms and subject to
the conditions of this Agreement, Buyer agrees, effective at the Closing
Date, to assume all obligations of Seller under the Assumed Contracts, but
only to the extent they relate exclusively to performance obligations arising
on or after, or accrue or are otherwise properly attributable to the period
of time beginning on or after the Closing Date (the "Assumed Liabilities");
OTHER THAN THE ASSUMED LIABILITIES, THE BUYER DOES NOT AND WILL NOT ASSUME OR
OTHERWISE BE RESPONSIBLE FOR IN ANY WAY WHATSOEVER ANY OTHER DUTIES, DEBTS,
OBLIGATIONS OR LIABILITIES OF, AND/OR PENALTIES, FINES, CLAIMS, JUDGMENTS OR
LIENS AGAINST, SELLER OR ITS SHAREHOLDER (OR ANY OF THEIR RESPECTIVE AGENTS,
CONTRACTORS, EMPLOYEES, OFFICERS, DIRECTORS, OR AFFILIATES). Buyer will
assist Seller and/or LFC or its Affiliates, upon written request therefrom,
in obtaining releases of all obligations of Seller and/or LFC or its
Affiliates under the Assumed Contracts to the extent they constitute Assumed
Liabilities of Buyer, including but not limited to the release of any
guarantee by LFC or its Affiliates of Seller's obligations under any Assumed
Contract.
Section 2.04. Excluded Liabilities. Notwithstanding anything else
contained herein, except for those liabilities or obligations expressly
identified in the definition of "Assumed Liabilities," the term "Assumed
Liabilities" shall not include any or all debts, obligations, claims, liens,
contracts, liabilities, judgments, penalties, fines of Seller of any kind,
character or description whether known or unknown, accrued, absolute,
contingent or otherwise (collectively, all such liabilities or obligations
not being assumed herein shall be referred to as the "Excluded Liabilities"),
including without limitation the following:
(i) any and all liabilities or obligations reflected on the
Balance Sheet;
(ii) any and all liabilities or obligations of Seller arising
or accruing prior to the Closing Date and, except with respect to
the Assumed Liabilities, the period on or after the Closing Date;
(iii) any and all liabilities or obligations of Seller or any
Affiliate of Seller for any and all Taxes;
(iv) any and all liabilities or obligations of Seller or any
Affiliate of Seller under, pursuant to, in connection with or
arising out of any Benefit Arrangement, any Employee Plan, the
Pension Plan, the Individual Account Plan, any Multiemployer Plan,
or any compliance or noncompliance by Seller or any of Seller's
Affiliates with ERISA (including but not limited to any obligation
of Seller or its Affiliates under Section 4980(B)(f) of ERISA with
respect to continuation of group medical coverage for their
employees), any and all liabilities or obligations of Seller or any
Affiliate thereof to PBGC, and any liability or obligation of
Seller to its Senior Officers or other employees;
(v) any and all liabilities or obligations of Seller or any
Affiliate of Seller under, pursuant to, in connection with or
arising out of WARN, Seller's "Employee Protection Plan" dated May
21, 1993, the classification of Seller's employees as "exempt"
employees not required to be paid overtime under the Fair Labor
Standards Act and Department of Labor regulations related thereto
during any period prior to the Closing Date, any workmen's
compensation liability with respect to such period and any and all
other labor-related liabilities with respect to Seller's employees,
independent contractors or employment practices, terms or
conditions prior to the Closing Date;
(vi) any and all liabilities or obligations related to or
arising from any claim, action, suit, investigation, proceeding,
judgment or lien relating to or arising out of the Business or the
Purchased Assets that is pending on the Closing Date, including but
not limited to all litigation listed on Schedule 3.08, provided,
however, that Seller shall have no affirmative obligation to Buyer
hereunder to continue to prosecute any litigation listed on
Schedule 3.08, provided, further, however, that the absence of any
such obligation shall not be construed as an express or implied
limitation or restriction on any of Seller's representations or
warranties under this Agreement, and, provided, finally, that
Seller shall cooperate with Buyer in the continuation of any such
litigation by Buyer and be entitled to reimbursement of its
reasonable costs and expenses in connection with such cooperation
in accordance with Section 7.01(b) hereof);
(vii) any and all liabilities or obligations relating solely
to an Excluded Asset;
(viii) any and all Environmental Liabilities of Seller or any
of its Affiliates;
(ix) any and all liabilities or obligations of Seller to its
shareholders or to any Affiliate of Seller or to the shareholders
of any Affiliate; and
(x) any and all other liabilities or obligations incurred or
otherwise properly attributable to any period prior to the Closing
Date, whether contingent, fixed, known or unknown, matured or
unmatured, liquidated or unliquidated, whether in contract, tort,
imposed by statute, regulation or other law, including but not
limited to accounts payable attributable to the period prior to the
Closing Date, whether or not booked by Seller by such date.
Section 2.05. Limitation on Assignment of Purchased Assets. Anything in
this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any Purchased Asset or any claim or right
or any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a third party thereto, would
constitute a breach or other contravention thereof or in any way adversely
affect the rights of Buyer or Seller thereunder. Seller and Buyer will use
good faith, reasonable efforts (but, except as provided below, without any
payment of money by Buyer or Seller) to obtain the consent of the other
parties to any such Purchased Asset for the assignment thereof to Buyer as
Buyer may request. Buyer and Seller shall each pay one-half of any costs or
expenses incurred to effect the transfer from Seller to Buyer of those
Purchased Assets described on Schedule 2.05. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
adversely affect the rights of Seller thereunder so that Buyer would not in
fact receive all such rights, at Buyer's option, Seller and Buyer will
cooperate in a mutually agreeable arrangement under which Buyer would obtain
the benefits and assume the obligations thereunder in accordance with this
Agreement, including subcontracting, sub-licensing, or sub-leasing to Buyer,
or under which Seller would enforce for the benefit of Buyer, with Buyer
assuming Seller's obligations (and indemnifying Seller and its Affiliates for
all liabilities thereunder to the extent such liabilities are Assumed
Liabilities), any and all rights of Seller against a third party thereto.
Seller will promptly pay to Buyer when received all monies received by Seller
under any Purchased Asset or any claim or right or any benefit arising
thereunder, except to the extent the same represents an Excluded Asset.
Section 2.06. Purchase Price; Filing of IRS Form 8594.
(a) The purchase price for the Purchased Assets (the "Purchase Price")
is: (i) Two Million Five Hundred Thousand Dollars ($2,500,000) in cash; plus
(ii) a Promissory Note of Buyer in the original principal amount of Eight
Million Dollars ($8,000,000), in substantially the form of Exhibit G hereto
(the "Buyer Note") and guaranteed by RSCA pursuant to the guaranty in the
form of Exhibit H hereto (the "RSCA Guaranty"); plus (iii) the Adjustable
Earn-Out Certificate, in substantially the form of Exhibit I hereto (the
"Adjustable Earn-Out Certificate"). Seller expressly acknowledges that,
under the Buyer Note and the Adjustable Earn-Out Certificate, it is possible,
however likely or unlikely, by virtue of the provisions of that note and
certificate relating to the calculation, reduction or offset of amounts
otherwise due thereunder, that the amount ultimately payable under the Buyer
Note and/or the Adjustable Earn-Out Certificate may be zero. The Purchase
Price shall be paid as provided in Section 2.07.
(b) Buyer and Seller hereby agree that the fair market value of all
tangible property owned by Seller (such as furniture and equipment) and
purchased by Buyer pursuant to this Agreement is $1,560,000, or such other
amount as the parties shall agree in writing within ten (10) Business Days
after the closing, and agree to report such amount as aggregate fair market
value of "Class III" assets on Internal Revenue Service Form 8594 for the
taxable year in which Closing occurs and to reflect such amount in such form
as the amount of the allocation of sales price to such Class. Buyer and
Seller further agree to file all Returns (including, without limitation,
filing on a timely basis Forms 8594 with its Federal income tax return for
the taxable year that includes the date of the Closing and subsequent taxable
years in which payments are required to be made under the Buyer Note or
Adjustable Earn-Out Certificate hereof) consistent with such valuation and
allocation, and maintain such valuation in the course of any tax audit, tax
review or tax litigation relating thereto. Neither Seller nor Buyer will
assert that the valuation of Seller's tangible property purchased by Buyer as
set forth in this Section 2.06(b) was not separately bargained for at arm's
length and in good faith.
Section 2.07. Closing. Concurrently with the execution of this
Agreement (the "Closing"):
(a) Buyer shall deliver to Seller:
(i) in immediately available funds, the sum of Two Million
Five Hundred Thousand Dollars ($2,500,000) by wire transfer of such
amount to an account of Seller with a bank in Dallas, Texas
designated by Seller, by notice to Buyer; and
(ii) the Buyer Note, together with RSCA's Guaranty of the
Note; and
(iii) the Adjustable Earn-Out Certificate.
(b) Seller and Buyer shall enter into an Assignment and Assumption
Agreement substantially in the form attached hereto as Exhibit J, and Seller
shall deliver to Buyer the Copyright Assignment, the Trademark Assignment
(substantially in the form of Exhibits F and E, respectively) and such other
bills of sale, endorsements, consents, assignments and other good and
sufficient instruments of assignment (the "Conveyance Documents") as the
parties and their respective counsel shall deem reasonably necessary or
appropriate to vest in Buyer title to the Purchased Assets.
Section 2.08. Prorations; Receivables and Payables.
(a) All payments under or pursuant to the Assumed Liabilities relating
to periods prior to the Closing Date, personal property taxes related to the
Purchased Assets relating to periods prior to the Closing Date, whether or
not payable after the Closing Date, shall be prorated between Buyer and
Seller, as the case may be, on the basis of a 365-day year and the number of
days elapsed as of the Closing Date. All prepaid maintenance fees and
prepaid expenses related to the Purchased Assets shall be pro rated between
the Buyer and Seller based on the portion of the period of time covered by
such assets or expenses that has elapsed up to the Closing Date.
(b) With respect to any products sold (or services rendered) pursuant
to any of the Assumed Contracts, Seller and Buyer shall use their best
efforts to arrange for vendors to bill and customers to pay Seller directly
for products or services provided through the Closing Date and Buyer directly
for products or services provided after the Closing Date. Buyer will deliver
to Seller promptly upon receipt any bills or other claims for payment of
amounts due relating to Excluded Liabilities (including, for example, the tax
assessment for Seller's personal property taxes for 1994). Seller will
deliver to Buyer promptly upon receipt any bills or other claims for payment
of amounts due constituting Assumed Liabilities. Buyer and Seller will each
remit to the other party promptly upon receipt any bills or other demands for
payment it receives and any receivables it receives or collects which, by the
terms of this Agreement, belong to or are attributable to the other party.
(c) Within ninety (90) days following the Closing Date, there shall be
an accounting with respect to receivables and payables to determine the
amount of any receivables and payables that are attributable to Seller or
Buyer as provided by the terms of this Agreement through the Closing Date,
with compensating payments made to the respective party who has erroneously
been paid or received the receivables or who has erroneously paid payables,
and to determine, to the extent then possible, the outstanding payables and
receivables remaining attributable to Seller and to Buyer as of the Closing
Date. Such accounting shall initially be made by Buyer's accountants, and a
detailed statement thereof shall be provided, in writing, within five (5)
Business Days following the end of such ninety (90) day period to Seller,
accompanied by any payment determined as due from Buyer to Seller as a result
of such determination, or with a demand for payment of the amount thereby
determined as due from the Seller to Buyer. Within ten (10) Business Days
following the receipt of such statement, Seller shall pay the amount declared
as due thereunder or, if it disputes any portion thereof, shall notify Buyer,
in writing, that it disputes such calculation, accompanied by a detailed
statement setting forth the basis for its disputes and its alternative
calculations. Resolution of such dispute shall be made in accordance with
the procedures set forth in Section 11.08 hereof. Within one hundred and
eighty (180) days after the Closing Date, there shall be a final accounting
(but not final with respect to receivables and payables pursuant to ongoing
arrangements made in accordance with Section 2.05 hereof) with respect to
such determination, conducted in the manner provided in this Section 2.08(c).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND LFC
LFC and Seller jointly and severally represent and warrant to Buyer as
of the Closing Date that:
Section 3.01. Corporate Existence and Power. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of
the State of Nevada, and has all corporate powers and all material
governmental licenses, authorizations, permits, consents and approvals (the
"Governmental Permits") required to carry on its operations as now conducted.
Seller is duly qualified to do business as a foreign corporation and is in
good standing in the State of Texas. Seller has heretofore delivered to
Buyer true and complete copies of the articles of incorporation and bylaws of
Seller as currently in effect. Schedule 3.01 lists all jurisdictions in
which Seller is qualified to do business as a foreign corporation.
Section 3.02. Corporate Authorization. The execution, delivery and
performance by Seller of this Agreement are within Seller's corporate powers
and have been duly authorized by all necessary corporate action on the part
of Seller. This Agreement constitutes a valid and binding agreement of
Seller.
Section 3.03. Governmental Authorization. The execution, delivery and
performance by Seller of this Agreement require no material action by or in
respect of, or filing with, any governmental body, agency or official other
than (i) as set forth in Schedule 3.03 or (ii) such filings or actions the
failure to make or take would not, individually or in the aggregate, have a
Material Adverse Effect.
Section 3.04. Non-Contravention. The execution, delivery and
performance by Seller of this Agreement (i) do not and will not violate the
articles of incorporation or bylaws of Seller, (ii) assuming compliance with
the matters referred to in Section 3.03, will not violate any applicable law,
rule, regulation, judgment, injunction, order or decree, or (iii) except as
set forth in Schedule 3.04, will not (x) constitute a default under or give
rise to any right of termination, cancellation or acceleration of any right
or obligation of Seller or to a loss of any benefit relating to the Business
to which Seller is entitled under any provision of any agreement, contract or
other instrument binding upon Seller or by which any of the Purchased Assets
is or may be bound or any Governmental Permit or (y) result in the creation
or imposition of any Lien on any Purchased Asset, other than, in the case of
(ii) or (iii), for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 3.05. Financial Statements. The audited balance sheet and the
related statements of operations for the years ended June 30, 1992, 1993, and
1994, the unaudited interim balance sheet of Seller as of September 30, 1994,
and the related unaudited interim statement of operations for the three
months ended September 30, 1994 (collectively, the "Financial Statements"),
present fairly, in all material respects, in conformity with generally
accepted accounting principles applied on a consistent basis (except as may
be indicated in the notes thereto), the financial position of Seller as of
the dates thereof and its results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements).
Section 3.06. Absence of Certain Changes. Since the Balance Sheet Date,
except as disclosed on Schedule 3.06, the Business has been conducted in the
ordinary course consistent with past practices, and there has not been:
(i) any event, occurrence, development or state of circumstance or
facts which has or would reasonably be expected to have a Material
Adverse Affect;
(ii) any creation, assumption or other incurrence of any Lien
on any Purchased Asset (other than purchase money security interests) in
excess of $50,000 in the aggregate;
(iii) any material labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of Seller, which
employees were not subject to a collective bargaining agreement at the
Balance Sheet Date, or any material lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to any employees of the
Seller;
(iv) any material damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the Business or any
Purchased Asset; or
(v) any transaction or commitment made, or any contract or
agreement entered into, by Seller relating to the Business or its assets
(including the acquisition or disposition of any assets) or any
relinquishment by Seller of any contract or other right which, in each
case, has had or would have a Material Adverse Effect, other than
transactions and commitments in the ordinary course of business
consistent with past practices and those contemplated by this Agreement.
Section 3.07. Non-IPR Properties.
(a) Except as otherwise disclosed on Schedule 3.07(a) hereto, after the
Closing and giving effect to the transactions contemplated hereby, Buyer will
have good and marketable title to all Non-IPR Property (whether real or
personal, tangible or intangible), other than the Excluded Assets, which
property and assets Seller purports to own, free and clear of any Liens,
except: (i) Liens disclosed on the Schedules hereto: or (ii) Liens for Taxes
not yet due or being contested in good faith, or (iii) any other Liens which
in the aggregate exceed $50,000.
(b) Schedule 3.07(b) sets forth a list of all material real and
personal Non-IPR Property leases to which Seller is a party as lessee or
lessor (the "Non IPR Leasehold Property"). Except as set forth in Schedule
3.07(b), each such lease is a valid and binding agreement of Seller and in
full force and effect and neither Seller nor, to Seller's Knowledge, any
other party thereto is in default or breach under, and no condition exists
that with notice or lapse of time or both would constitute a default by
Seller under the terms of any such lease, except for such matters as would
not, individually or in the aggregate, have a Material Adverse Effect.
Section 3.08. Litigation. Except as disclosed on Schedule 3.08, there
is no action, suit, investigation or proceeding pending against, or to
Seller's or LFC's Knowledge, threatened against or affecting, Seller, the
Business or Seller's properties before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks
to prevent, enjoin, alter or delay the transactions contemplated hereby or
which, if pursued, would have a Material Adverse Effect.
Section 3.09. Assumed Contracts.
(a) Except as set forth on Schedule 3.09(a), each Assumed Contract is
a valid and binding agreement of Seller and is in full force and effect, and
neither Seller nor, to Seller's Knowledge, any other party thereto is in
default or breach under and no condition exists that with notice or lapse of
time or both would constitute a default by Seller under, the terms of any
such Assumed Contract, except for such matters as would not, individually or
in the aggregate, have a Material Adverse Effect.
(b) Except as set forth on Schedule 3.09(b), the Assumed Contracts
constitute all of the material contracts, agreements or other instruments (i)
which generate revenue to Seller, or (ii) upon which Seller currently relies
for the use of property not owned by it or the provision of goods or services
in the conduct of the Business.
Section 3.10. Compliance with Laws and Court Orders. To Seller's
Knowledge, Seller is not in violation of, and is not under investigation with
respect to and has not been threatened to be charged with or given notice of
any violation of, any law, rule, regulation, judgment, injunction, order or
decree applicable to Seller or the conduct of the Business that would have a
Material Adverse Effect.
Section 3.11. Intellectual Property.
(a) Except as set forth on Schedules 1.01A - 1.01G, Seller and LFC
represent and warrant that the intellectual property rights comprising the
Excelis Systems are exclusively proprietary to Seller to the extent that such
types of intellectual property rights are protected by applicable law.
(b) Schedules 1.01A - 1.01F specify all modules, components or parts of
the Excelis Systems that Seller and LFC represent and warrant that Seller
leases, licenses or in which Seller otherwise has nonexclusive or limited
ownership or use rights but which are necessary to implement, achieve or
exploit the full functionality (as of the date hereof) of the Excelis Systems
(unless included within Excluded Assets). Except as set forth in such
schedules, each such license or lease is a valid and binding agreement of
Seller and in full force and effect and neither Seller nor, to Seller's
Knowledge, any other party thereto is in default or breach under, and no
condition exists that with notice or lapse of time or both would constitute
a default by Seller under the terms of any such lease, except for such
matters as would not, individually or in the aggregate, have a Material
Adverse Effect.
(c) The Proprietary and Non-Proprietary IPR and the other Intellectual
Property Rights to be transferred to Buyer pursuant to Section 2.01
constitute all of the material Intellectual Property Rights used principally
or held principally for use in connection with the Business. The Excelis
Systems' Computer Programming Code (not including any Work-In-Progress) will
function on the equipment identified in the Documentation and with operating
systems for which they are designed, and the Excelis Systems' Computer
Programming Code (not including any Work-In-Progress) conforms in all
material respects to the Functional Specifications and is sufficient, as of
the Closing Date, to perform Buyer's then current obligations under the
Assumed Contracts and the Service Bureau Agreement, except for such matters
as would not, individually or in the aggregate, have a Material Adverse
Effect.
(d) Except as set forth on Schedule 1.01 A through Schedule 1.01 G,
there are no circumstances that renders any of the Proprietary or, to
Seller's knowledge, Non-Proprietary IPR, unenforceable, invalid or capable of
invalidation, except for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth on Schedule
3.11(d) and except for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect, (i) neither Seller nor any
Affiliate is a defendant in any action, suit or proceeding relating to, or
has otherwise been notified of or is aware of, any alleged claim of
infringement by Seller or Affiliate of any patents, trademarks, trade
secrets, tradenames, service marks or copyrights of any other Person, (ii)
Seller has no Knowledge of any infringement or continuing infringement by any
other Person of any Proprietary IPR and (iii) no Proprietary IPR or Non-
Proprietary IPR is subject to any outstanding lien, encumbrance, judgment,
injunction, order, decree or agreement restricting the use thereof by Seller
or, except for restrictions on use or transferability contained in agreements
with respect to Non-Proprietary IPR leased or licensed by Seller, restricting
the licensing or assignment thereof by Seller to any Person. Except as set
forth on Schedule 3.11(d), to Seller's Knowledge there are no outstanding
claims, judgments, or settlements to be paid by Seller relating to the
Proprietary IPR or Non-Proprietary IPR.
(e) Except as set forth in Schedule 3.11(e) hereof, neither Seller nor
any Affiliate is currently subject to any demand by any Person to indemnify
any other Person against any material charge of infringement by Seller of any
third party's Intellectual Property Right.
(f) Except as disclosed in Schedules 1.01 A through Schedule 1.01 G
hereof, Seller has good title to all of the Proprietary IPR, free and clear
of any adverse claims, liens, encumbrances, charges or licenses (either as
licensee or licensor), or options or other ownership interests, including,
without limitation, claims or rights of employees, agents, consultants, joint
venturers, former employers of any of Seller's current or former employees,
or other Persons involved in the development or creation of such Intellectual
Property Rights, except for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect. Except with respect to items set
forth in Schedules 1.01 A through 1.01 E, Seller has the full right and
license to use, sublicense, assign, modify, and transfer the Proprietary IPR
free and clear of any adverse claim, limitation on use, encumbrance, option,
or other charge or restriction, and the Buyer, upon Closing, will have the
free and unfettered right to use all of the Proprietary IPR after the Closing
without restriction, charge, option, claim or encumbrance, of any sort
whatsoever. Except as set forth in Schedules 1.01 A through Schedule 1.01 G,
none of the Proprietary IPR (not including any Work-In-Progress) is dependent
upon any other intellectual property in order to freely operate or be fully
utilized in the manner heretofore utilized by Seller in its Business, except
for such matters as would not, individually or in the aggregate, have a
Material Adverse Effect.
(g) Except as disclosed on Schedule 3.11(g) hereof, after Closing and
giving effect to the transactions contemplated hereby, Buyer will have the
exclusive right to use or exploit any of the Excelis Systems (considering
such systems as a whole, as opposed to certain individual components or
modules thereof which may be Non-Proprietary IPR) for commercial purposes (as
distinguished from any licenses of any other Person to use such property, or
any portion thereof, solely for its own internal use), and no Persons have
any licenses from Seller or any Affiliate to use all or any portion of MLS,
MSS, LPS, SMS or CMS (considering each such system as a whole, as opposed to
certain individual components or modules thereof which may be Non-Proprietary
IPR) for commercial purposes within or without the United States.
(h) Neither Seller nor LFC makes any representation or warranty as to
any rights or other matters relating to any or all of the Excelis Systems
outside of the United States.
Section 3.12. [INTENTIONALLY OMITTED]
Section 3.13. Finders' Fees. Except for Solomon Brothers Inc. and
Lazard Freres Inc., whose fees, if any, will be paid by Seller, there is no
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Seller who might be entitled
to any fee or commission in connection with the transactions contemplated by
this Agreement.
Section 3.14. Licenses and Permits. Schedule 3.14 correctly describes
each Governmental Permit, and such Governmental Permits are valid and in full
force and effect.
Section 3.15. Certain Interests. Except as set forth in Schedule 3.15,
to Seller's actual knowledge (without any duty to inquire), no Senior Officer
of Seller has any material interest in any business, corporate or otherwise,
that materially competes with the Business or other than any entity that,
directly or indirectly, has securities that are publicly traded securities.
Since the Balance Sheet Date, there has not been any amount paid or asset
sold by Seller to, or to Seller by, any Senior Officer other than salaries
and employee benefits in accordance with the established policies of Seller
or otherwise in accordance with the ordinary course of Seller's business.
Section 3.16. No Insolvency. Seller is not, and shall not be rendered
as a result of the consummation of the transactions provided for and
described in this Agreement, "insolvent" or "bankrupt" within the meaning of
Title 11 of the United States Code or any other Federal, Texas or Nevada
statute relating to the relief of financially distressed debtors.
Section 3.17. Ability to Conduct Business. The Purchased Assets, the
Assumed Contracts, the employees to be employed by Buyer as provided in
Section 9.01 hereof and the lease of facilities pursuant to the Lease are
sufficient in all material respects for Buyer to continue the conduct of the
Business (as the same is conducted on the Closing Date).
Section 3.18. Known Intended Expansion by Customers. The Senior Officer
signing this Agreement on behalf of Seller below hereby represents and
warrants that, except as set forth on Schedule 3.18 hereto, to such Senior
Officer's actual knowledge (without having made independent inquiry), no
existing or former customers of Seller (excluding Seller's Affiliates) that
use or have used MLS intend significantly to increase (or are actively
considering increasing) their volume of loans on MLS (or, in the case of
former customers of Seller, intend to enter into, or are actively considering
entering into, a long-term contract or other arrangement with Seller or with
Buyer for use of MLS), excluding any increase in MLS usage attributable to
normal course of business increases in any such customer's servicing volume,
in a manner that would cause an increase in the "Adjusted Principal Amount"
of the Buyer Note in accordance with Section 2.C thereof.
Section 3.19. Enforceability and Fair Consideration. This Agreement and
each of the Ancillary Agreements are enforceable according to their
respective terms. The consideration paid, delivered and given (including but
not limited to the assumption of the Assumed Liabilities) by Buyer and RSCA
(as applicable) for (i) the acquisition of the Purchased Assets and (ii) the
obligations undertaken by Seller and/or its Affiliates under this Agreement
and the Ancillary Agreements, is fair, reasonable and equivalent value
therefor to Seller (and, as applicable, to Seller's Affiliates), bargained
for and arrived at through arm's length negotiations by and between Buyer and
Seller and their respective Affiliates as parties to this Agreement. Seller
presently intends to use, (i) within a reasonable period of time after
Closing, an amount of cash substantially equal to the cash portion of the
Purchase Price, to pay the expenses of the transactions contemplated by this
Agreement and accrued but unpaid liabilities of Seller or LFC and (ii) the
remainder of the Purchase Price for the general corporate purposes of Seller
and LFC. Seller and LFC entered into this Agreement and consummated the
transactions contemplated hereunder for good faith, bona fide business
purposes and not with an intent to hinder, delay or defraud any creditor of
Seller or LFC.
Section 3.20. Effect of Investigation. No due diligence or other
investigation by Buyer or other information received by Buyer (other than
those items specifically disclosed on all Schedules hereto except Schedules
1.01 H, 2.01 and 2.05) shall operate as a waiver or otherwise affect any
representation, warranty or agreement given or made by Seller, LFC or Lomas
Mortgage under this Agreement.
ARTICLE 3.1
REPRESENTATIONS AND WARRANTIES OF LFC AND LOMAS MORTGAGE
LFC and Lomas Mortgage severally, and not jointly, each represent and
warrant to Buyer as to itself as of the Closing Date that:
Section 3.1.01. Corporate Existence and Power. It is a corporation duly
incorporated, validly existing and in good standing under the laws of the
state of its incorporation, and has all corporate powers and all material
Governmental Permits required to carry on its operations as now conducted,
and is in good standing in the state of its incorporation and in the State of
Texas.
Section 3.1.02. Corporate Authorization. The execution, delivery and
performance of this Agreement by it are within its corporate powers and have
been duly authorized by all necessary corporate action on its part. This
Agreement constitutes its valid and binding agreement.
Section 3.1.03. Governmental Authorization. The execution, delivery and
performance by it of this Agreement require no material action by or in
respect of, or filing with, any governmental body, agency or official other
than (i) as set forth in Schedule 3.1.03 or (ii) such filings or actions the
failure to make or take would not, individually or in the aggregate, have a
Material Adverse Effect.
Section 3.1.04. Non-Contravention. The execution, delivery and
performance by Seller and by it of this Agreement do not and will not (i)
violate its articles of incorporation or bylaws, (ii) assuming compliance
with the matters referred to in Section 3.1.03, violate any applicable law,
rule, regulation, judgment, injunction, order or decree or (iii) except as
set forth in Schedule 3.1.04, (x) constitute a default under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of itself or to a loss of any benefit relating to its business to
which it is entitled under any provision of any agreement, contract,
agreement or other instrument binding upon it or by which any of its assets
is or may be bound or any of its Governmental Permits or (y) result in the
creation or imposition of any Lien on any of its assets, except, in the case
of (ii) or (iii), for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 3.1.05. Compliance with Laws and Court Orders. To its
Knowledge, it is not in violation of, and is not under investigation with
respect to and has not been threatened to be charged with or given notice of
any violation of, any law, rule, regulation, judgment, injunction, order or
decree applicable to it which in any manner prohibits, restricts, or seeks to
prevent, enjoin, alter or delay the transactions contemplated hereby.
Section 3.1.06. No Insolvency. It is not, nor will it be rendered as a
result of the consummation of the transactions provided for and described in
this Agreement, "insolvent" or "bankrupt" within the meaning of Title 11 of
the United States Code or any other federal, Texas, Delaware (in the case of
LFC) or Connecticut (in the case of Lomas Mortgage) statute relating to the
relief of financially distressed debtors.
ARTICLE 3.2
REPRESENTATIONS AND WARRANTIES WITH RESPECT
TO ANCILLARY AGREEMENTS
LFC and LIS severally, and not jointly, each represent and warrant to
Buyer as to itself as of the Closing Date that:
Section 3.2.01. Corporate Authorization. The execution, delivery and
performance of the Lease and the Service Bureau Agreement by Lomas Mortgage
are within Lomas Mortgage's corporate powers and have been duly authorized by
all necessary corporate action on Lomas Mortgage's part. The Lease and
Service Bureau Agreement constitute valid and binding agreements of Lomas
Mortgage.
Section 3.2.02. Governmental Authorization. The execution, delivery and
performance by Lomas Mortgage of the Lease and the Service Bureau Agreement
require no material action by or in respect of, or filing with, any
governmental body, agency or official other than (i) as set forth in Schedule
3.2.02 or (ii) such filings or actions the failure to make or take would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 3.2.03. Non-Contravention. The execution, delivery and
performance by Lomas Mortgage of the Lease and the Service Bureau Agreement
do not and will not (i) violate Lomas Mortgage's articles of incorporation or
bylaws, (ii) assuming compliance with the matters referred to in Section
3.1.08, violate any applicable law, rule, regulation, judgment, injunction,
order or decree or (iii) except as set forth in Schedule 3.2.03, (x)
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Lomas Mortgage or
to a loss of any benefit relating to Lomas Mortgage's business to which Lomas
Mortgage is entitled under any provision of any agreement, contract,
agreement or other instrument binding upon it or by which any of its assets
is or may be bound or any of its Governmental Permits or (y) result in the
creation or imposition of any Lien on any of Lomas Mortgage's assets, except,
in the case of (ii) or (iii), for such matters as would not, individually or
in the aggregate, have a Material Adverse Effect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF RSCA AND BUYER
Buyer and RSCA jointly represent and warrant to Seller as of the Closing
Date that:
Section 4.01. Organization and Existence. Buyer is a limited
partnership duly formed under the laws of Delaware and has all powers and all
material Governmental Permits required to carry on the Business as conducted
as of the Closing Date. RSCA is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware and has all
corporate powers and all material Governmental Permits required to carry on
its operations as now conducted. The sole general partner of Buyer is
Residential Information Services, Inc., a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware and having
all corporate powers and all material Governmental Permits required to carry
on its operations as general partner of Buyer. The sole limited partner of
Buyer is RSCA.
Section 4.02. Authorization. The execution, delivery and performance by
Buyer, and, where RSCA is a signatory, of RSCA, of this Agreement, the Buyer
Note, the RSCA Guaranty, the Adjustable Earn-Out Certificate and the
Ancillary Agreements are within the respective powers of RSCA and Buyer and
have been duly authorized by all necessary corporate or partnership action,
as the case may be, on the part of RSCA and Buyer. This Agreement, the Buyer
Note, the RSCA Guaranty, the Adjustable Earn-Out Certificate and the
Ancillary Agreements constitute valid and binding agreements of Buyer, and,
where RSCA is a signatory, of RSCA.
Section 4.03. Governmental Authorization. The execution, delivery and
performance by Buyer and, where RSCA is a signatory, RSCA, of this Agreement,
the Buyer Note, the RSCA Guaranty, the Adjustable Earn-Out Certificate and
the Ancillary Agreements require no action by or in respect of, or filing
with, any governmental body, agency or official.
Section 4.04. Non-Contravention. The execution, delivery and
performance by Buyer, and, where RSCA is a signatory, of RSCA, of this
Agreement, the Buyer Note, the RSCA Guaranty, the Adjustable Earn-Out
Certificate and the Ancillary Agreements do not and will not (i) violate the
certificate of incorporation or bylaws of RSCA or the limited partnership
agreement of Buyer, respectively, or (ii) assuming compliance with the
matters referred to in Section 4.03, violate any applicable law, rule,
regulation, judgment, injunction, order or decree or any agreements or
contracts to which RSCA or Buyer is a party.
Section 4.05. Finders' Fees. Except for Lehman Brothers, whose fees
have been and/or will be paid by or on behalf of Buyer, there is no
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of RSCA or Buyer in connection
with the transactions contemplated in this Agreement who might be entitled to
any fee or commission in connection with such transactions.
Section 4.06. Financing. Buyer has or will have as of the Closing Date
sufficient cash or other sources of immediately available funds to enable it
to pay to Seller the funds required pursuant to Section 2.07(a)(i), but in no
event less than Two Million Five Hundred Thousand Dollars ($2,500,000).
Section 4.07. Litigation. Except as disclosed on Schedule 4.07, there
is no action, suit, investigation or proceeding pending against, or to
Buyer's or RSCA's Knowledge, threatened against or affecting, Buyer or RSCA
before any court or arbitrator or any governmental body, agency or official
which in any manner challenges or seeks to prevent, enjoin, alter or delay
the transactions contemplated hereby or which, if pursued, would have a
Material Adverse Effect.
Section 4.08. No Insolvency. Neither RSCA nor Buyer is, and neither
will be rendered as a result of the consummation of the transactions provided
for and described in this Agreement, "insolvent" or "bankrupt" within the
meaning of Title 11 of the United States Code or any other federal, Delaware
or Texas statute relating to the relief of financially distressed debtors.
ARTICLE 5
COVENANTS OF SELLER AND LFC
Section 5.01. Confidential Information and Noncompetition.
(a) Confidential Information. On or promptly after the Closing Date,
all copies of the Excelis Systems' Computer Programming Code and
Documentation possessed by Seller or any of its Affiliates (other than user
manuals for the use of Affiliates of Seller) shall be delivered to Buyer.
After the Closing, neither Seller nor any of its Affiliates shall, directly
or indirectly, use any Confidential Information (as defined below) in any
way, or divulge, disclose or make available or accessible any Confidential
Information to any person, firm, partnership, corporation, trust or any other
entity or third party (other than when required to do so by a lawful order of
a court of competent jurisdiction); provided that LFC or Seller may disclose
such information to officers, directors, employees, accountants, counsel,
consultants, advisors and agents of Seller, LFC or other Affiliate
("Affiliated Persons") so long as such Affiliated Persons are informed by LFC
or Seller of the confidential nature of such information and are directed by
LFC or Seller to treat such information confidentially. The obligation of
LFC, Seller, their Affiliates and their Affiliated Persons to hold any such
information in confidence shall be satisfied if they exercise the same care
with respect to such information as they would take to preserve the
confidentiality of their own similar information. In addition, after the
Closing Seller shall not create any derivative work or other product based on
or resulting from any Confidential Information. For purposes of this
Agreement, "Confidential Information" shall mean the Excelis Systems'
Computer Programming Code and Documentation, all financial information
respecting the Business or Buyer and its partners, Buyer's business plans or
strategies, and all other information respecting the Business and activities
of Seller and, after the Closing, the activities of Buyer, including, without
limitation, customers or vendees, and computer or other files, projects,
products, computer disks or other media, methodologies, know-how, processes,
practices, formats, systems, and data gathering methods with respect to the
Excelis Systems. Notwithstanding the immediately preceding sentence,
Confidential Information shall not include (i) any information that is in, or
becomes generally applicable to, the public domain through no breach of any
duty of confidentiality by Seller, any of its Affiliates or any Affiliated
Persons, or (ii) lawfully acquired subsequent to Closing by the Seller, LFC
or Affiliated Persons from sources other than Buyer or any of its Affiliates.
(b) Noncompetition. Neither Seller, LFC nor Lomas Mortgage shall, from
the Closing Date through December 31, 2001, within or with respect to the
United States of America, engage in or undertake, directly or indirectly, any
business or activity which competes in any material manner with (i) the
marketing, use, exploitation or provision of services based upon the Excelis
Systems, as the same may exist as of the Closing Date, (ii) the business of
providing data processing services of the type or types provided (as of the
Closing Date) by any of the Excelis Systems or other systems designed to
perform similar functions either through a service bureau or a licensing
arrangement; provided, however, that nothing herein shall prevent Seller, LFC
or Lomas Mortgage or any Persons that are their Affiliates as of the Closing
Date from acting as a servicer, subservicer or master servicer for investors
in such loans.
(c) Nonsolicitation. Neither Seller, LFC nor Lomas Mortgage shall,
directly or indirectly, from the Closing Date through December 31, 1997,
induce any person in the employment of Buyer (other than purely clerical
employees) to (i) terminate such employment, or consulting arrangement or
(ii) accept employment, or enter into any consulting arrangement, with anyone
other than Buyer; provided, however, that Seller, LFC and Lomas Mortgage may
advertise generally their employment vacancies and may hire such employees of
Buyer who respond to such general advertisements.
(d) Injunctive Relief. Seller acknowledges and agrees that Buyer will
have no adequate remedy at law, and would be irreparably harmed, if Seller or
any of its Affiliates breaches or threatens to breach any of the provisions
of this Section 5.04, Seller agrees that Buyer shall be entitled to equitable
and/or injunctive relief to prevent any breach or threatened breach of this
Section 5.04, and to specific performance of each of the terms of such
Section in addition to any other legal or equitable remedies that Buyer may
have. Seller further agrees that it shall not, in any equity proceeding
relating to the enforcement of the terms of this Section 5.04, raise the
defense that Buyer has an adequate remedy at law.
(e) Special Severability. The terms and provisions of this Section
5.04 are intended to be separate and divisible provisions and if, for any
reason, any one or more of them is held to be invalid or unenforceable,
neither the validity nor the enforceability of any other provision of this
Agreement shall thereby be affected. It is the intention of the parties to
this Agreement that the potential restrictions on Seller's future business
imposed by this Section 5.04 be reasonable in both duration and geographic
scope and in all other respects. If for any reason any court of competent
jurisdiction shall find any provision of this Section 5.04 unreasonable in
duration or geographic scope or otherwise, Seller and Buyer agree that the
restrictions and prohibitions contained herein shall be effective to the
fullest extent allowed under applicable law in such jurisdiction.
Section 5.02. Cooperation Concerning Assumed Contracts. Seller shall
cooperate with Buyer and shall use commercially reasonable efforts (not
including the payment of amounts not otherwise owed to the Persons whose
consent is sought or the incurrence of any additional obligations other than
with respect to the transfer to Buyer of those Purchased Assets described on
Schedule 2.05) to assist Buyer in obtaining consents to the assignment to
Buyer of the Assumed Contracts.
Section 5.03. Restrictions on Distributions. LFC agrees that it will
not cause, or permit to occur, the distribution or other expenditure of
moneys or other property received by Seller, or by it or any other Affiliate
as successor-in-interest to Seller, from Buyer pursuant to the terms of this
Agreement in a manner which would violate or breach any applicable
restrictions thereon pursuant to the LFC Trust Indenture or the Lomas
Mortgage Trust Indenture.
ARTICLE 6
COVENANTS OF BUYER AND RSCA
Section 6.01. Confidentiality.
(a) Confidentiality. RSCA and Buyer each agrees that prior to the
Closing Date and after any termination of this Agreement, RSCA, Buyer and
their Affiliates will hold, and will use all reasonable business efforts to
cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of
law, all confidential documents and information concerning the Business,
Seller, LFC and the Affiliates of LFC furnished to RSCA or Buyer or their
Affiliates in connection with the transactions contemplated by this
Agreement, except to the extent that such information can be shown to have
been (i) previously known on a nonconfidential basis by Buyer, (ii) in the
public domain through no fault of RSCA or Buyer or (iii) later lawfully
acquired by RSCA or Buyer on a nonconfidential basis from sources other than
Seller or any of its Affiliates; provided that RSCA or Buyer may disclose
such information to its officers, directors, employees, accountants, counsel,
consultants, advisors and agents in connection with the transactions
contemplated by this Agreement so long as such Persons are informed by RSCA
or Buyer of the confidential nature of such information and are directed by
RSCA or Buyer to treat such information confidentially. The obligation of
RSCA, Buyer and their Affiliates to hold any such information in confidence
shall be satisfied if they exercise the same care with respect to such
information as they would take to preserve the confidentiality of their own
similar information. If this Agreement is terminated, RSCA, Buyer and their
Affiliates will, and will use all reasonable business efforts to cause their
respective officers, directors, employees, accountants, counsel, consultants,
advisors and agents to, destroy or deliver to Seller, upon request, all
documents and other materials, and all copies thereof, obtained by RSCA,
Buyer or their Affiliates or on their behalf from Seller, LFC or any of their
Affiliates in connection with this Agreement that are subject to such
confidentiality.
(b) Injunctive Relief. RSCA and Buyer each acknowledges and agrees
that Seller, LFC and their Affiliates will have no adequate remedy at law,
and would be irreparably harmed, if RSCA, Buyer or any of their Affiliates
breaches or threatens to breach any of the provisions of this Section 6.01.
RSCA and Buyer each agrees that Seller, LFC and their Affiliates shall be
entitled to equitable and/or injunctive relief to prevent any breach or
threatened breach of this Section 6.01, and to specific performance of each
of the terms of such Section in addition to any other legal or equitable
remedies that they may have. RSCA and Buyer each further agrees that it
shall not, in any equity proceeding relating to the enforcement of the terms
of this Section 6.01, raise the defense that Seller, LFC or any of its
Affiliates seeking relief hereunder has an adequate remedy at law.
(c) Special Severability. The terms and provisions of this Section
6.01 are intended to be separate and divisible provisions and if, for any
reason, any one or more of them is held to be invalid or unenforceable,
neither the validity nor the enforceability of any other provision of this
Agreement shall thereby be affected. It is the intention of the parties to
this Agreement that the potential restrictions on RSCA's or Buyer's future
business imposed by this Section 6.01 be reasonable in all respects. If for
any reason any court of competent jurisdiction shall find any provision of
this Section 6.01 unreasonable, Seller, LFC, RSCA and Buyer agree that the
restrictions and prohibitions contained herein shall be effective to the
fullest extent allowed under applicable law in such jurisdiction.
Section 6.02. RSCA Agreement to Convert. Upon termination of the
existing contract between The Prudential Home Mortgage Company, Inc. ("PHMC")
and Computer Power, Inc., in accordance with that contract's terms, RSCA
agrees that it will cause PHMC to enter into a service bureau agreement with
Buyer to convert the data processing of PHMC's mortgage loan servicing
operations to use of MLS (as the same may have been modified at such time)
for all first-lien, closed-end, residential mortgage loans serviced by PHMC
and/or any of RSCA's or PHMC's controlled subsidiaries, on reasonable and
fair market terms and conditions. Any transfer of such servicing rights to
any Affiliate of PHMC or RSCA will be subject to the execution of a
substantially similar service bureau agreement with Buyer. RSCA will use
good faith reasonable efforts to seek to cause The Prudential Insurance
Company of America and any of its controlled entities to execute comparable
covenants.
ARTICLE 7
COVENANTS OF BOTH PARTIES
Buyer and Seller agree that:
Section 7.01. Reasonable Efforts; Further Assurances.
(a) Subject to the terms and conditions of this Agreement, Buyer
and Seller will each use good faith reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement and the Ancillary Agreements.
Seller and Buyer each agree to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement and to vest in
Buyer all of Seller's right, title and interest in or to title to the
Purchased Assets.
(b) Seller hereby constitutes and appoints, effective as of the
Closing Date, Buyer and its successors and assigns as the true and lawful
attorney of Seller with full power of substitution in the name of Buyer or in
the name of Seller, but for the benefit of Buyer (i) to collect for the
account of Buyer any items of Purchased Assets and (ii) to institute and
prosecute all proceedings which Buyer may in its sole discretion deem proper
in order to assert or enforce any right, title or interest in, to or under
the Purchased Assets, and to defend or compromise any and all actions, suits
or proceedings in respect of the Purchased Assets; provided that Seller
and/or LFC shall cooperate with Buyer in connection with such activities
described in clauses (i) and (ii) to the extent such request for cooperation
and the cooperation or assistance asked to be provided by Buyer is
reasonable; and, provided, further, that Buyer shall promptly reimburse
Seller and LFC for any costs and expenses incurred in connection therewith
upon presentation of bills, invoices or other written evidence thereof
together with written demand for reimbursement. Buyer shall be entitled to
retain for its own account any amounts collected pursuant to the foregoing
powers, including any amounts payable as interest in respect thereof.
Section 7.02. Certain Filings. Seller and Buyer shall cooperate with
one another (a) in determining whether any action by or in respect of, or
filing with, any governmental body, agency, official or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
taking such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such
actions, consents, approvals or waivers.
Section 7.03. Public Announcements. Any press release or other public
statement with respect to this Agreement or the transactions contemplated
hereby and the method of its release shall be approved in writing by both
Buyer (or RSCA on behalf of Buyer) and Seller (or LFC on behalf of Seller)
and no such publicity shall be released without such approval, except as may
be required by applicable law or any listing agreement with any national
securities exchange.
<PAGE>
Section 7.04. Trademarks, Tradenames.
(a) Except as set forth in the other subsections of this Section 7.04,
after the Closing, Buyer and its Affiliates shall not use any of the names
listed in Schedule 7.04. Such names shall be referred to, collectively or
individually as the context requires, as the "Seller Tradenames."
(b) After the Closing, Buyer shall have the right to use existing
packaging, labeling, containers, supplies, advertising materials, technical
data sheets and any similar materials bearing any Seller Tradenames until the
earlier of (i) one year after the Closing Date and (ii) the date existing
stocks are exhausted. Buyer shall have the right to use Seller Tradenames in
advertising that cannot be changed by Buyer using reasonable efforts for a
period not to exceed one year after the Closing Date. Buyer shall comply
with all applicable laws or regulations in any use of packaging or labelling
containing Seller Tradenames.
(c) The obliteration of Seller Tradenames shall be deemed compliance
with Buyer's covenants not to use Seller Tradenames pursuant to this Section
7.04.
(d) Buyer agrees to cease using Seller Tradenames on buildings and
other fixed assets as soon as reasonably possible after the Closing Date.
ARTICLE 8
TAX MATTERS
Section 8.01. Tax Schedules. Schedule 8.01 contains a list of all
jurisdictions (whether foreign or domestic) to which any Tax is properly
payable by the Seller.
Section 8.02. Transfer Taxes.
(a) All transfer, documentary, sales, use, stamp, registration, value
added and other such Taxes and fees (including any penalties and interest)
incurred in connection with the sale of the Purchased Assets or otherwise in
connection with the transactions effected pursuant to this Agreement
(collectively, the "Transfer Taxes") shall be borne and paid by the Seller,
notwithstanding any provision of Texas or other law otherwise imposing
primary liability therefor on Buyer. To the extent permissible under Texas
law or regulations, Seller shall undertake such actions and file such returns
or other forms or instruments as may be necessary to make payment of any
Transfer Taxes due with respect to the sale of the Purchased Assets prior to
or as soon as practicable after (but in no event later than six months from)
the Closing Date, and present evidence of such payment promptly to Buyer.
(b) Seller shall request (or, if Buyer must make such request under
Texas law, Buyer shall request), within thirty (30) days after the Closing
Date, a certificate from the Comptroller of Public Accounts of the State of
Texas (the "Comptroller") stating that as of the first Business Day following
the Closing Date, no Transfer Tax is due by Seller or a statement of the
amount required to be paid with respect to the issuance of such certificate,
such certificate or statement as of a date subsequent to the Closing Date,
and Seller shall promptly make its records available to representatives of
the Comptroller for audit and shall otherwise cooperate with Buyer and
representatives of the Comptroller with respect to obtaining such
certificate. Seller shall send Buyer a copy of such certificate promptly
following its receipt by Seller. Any Transfer Taxes which are reflected as
being due on such subsequent certificate shall be paid when due in accordance
with applicable law, unless Seller contests the Comptroller's determination
of the assessment or amount thereof in accordance with applicable law. If
for any reason such Transfer Tax liability is assessed against Buyer and
Seller is in good faith contesting the assessment or amount thereof upon a
reasonable basis, and if Seller so requests, in writing, Buyer will not pay
such Transfer Tax; provided, however, that Seller's contest prevents or
suspends the imposition of any liens upon Buyer or its assets or any interest
or penalties assessable against Buyer on or with respect to the Transfer Tax
liability. If, subject to the foregoing, Buyer is required (in order to
prevent the imposition of such a lien or such interest or penalties) to pay
any portion of the Transfer Taxes, Seller and LFC shall be deemed to have
breached Section 8.02(a) hereof as of the date of Buyer's payment and Buyer
shall become entitled to indemnification therefor pursuant to Article 11
hereof, and such claim shall be treated as an indemnification claim described
in Section 11.01(i) hereof.
Section 8.03. Cooperation on Tax Matters.
(a) From and after the Closing Date, Buyer and Seller shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the preparation and filing of any Return (including any
report required pursuant to Section 6043 of the Code and all Treasury
Regulations promulgated thereunder), and in connection with any audit,
litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Seller agrees and, to the extent books and
records are transferred to Buyer as part of the Purchased Assets, Buyer
agrees, (i) to retain all books and records with respect to Tax matters
pertinent to Seller and the Group relating to any Pre-Closing Tax Period, and
to abide by all record retention agreements entered into with any Taxing
Authority, and (ii) to give Buyer or Seller, as the case may be, reasonable
written notice prior to destroying or discarding any such books and records
and, if Buyer or Seller, as the case may be, so requests, Seller or Buyer, as
the case may be, shall allow the other party reasonable access to such books
and records.
(b) Buyer and Seller further agree, upon request, to use all reasonable
efforts to timely obtain any certificate or other document from any
governmental authority or customer of Seller or any other Person as may be
necessary to calculate, mitigate, reduce or eliminate any Tax that will or
could be imposed (including, but not limited to, Taxes with respect to the
transactions contemplated hereby, and calculation of the Transfer Taxes due
for purposes of Section 8.02(b) hereof).
ARTICLE 9
EMPLOYMENT MATTERS
Section 9.01. Employees and Offers of Employment. Buyer has extended
offers of "at will" employment to all but eleven of Seller's employees.
Buyer agrees that it will not terminate the employment of any persons who
accept employment with Buyer for a period of seventy (70) days following the
Closing Date; provided, however, that Buyer may terminate any such person for
cause based on demonstrable performance problems.
Section 9.02. Excluded Liabilities Related to Employment. The following
obligations or liabilities of Seller and/or its Affiliates shall be treated
as Excluded Liabilities:
(a) All liabilities and obligations of Seller arising under any group
life, accident, medical, dental or disability plan or similar arrangement
(whether or not insured) to the extent that such liability or obligation
relates to contributions or premiums accrued (whether or not payable prior to
the opening of business on the first Business Day following the Closing
Date), or to claims incurred (whether or not reported prior to the opening of
business on the first Business Day following the Closing Date), prior to the
opening of business on the first Business Day following the Closing Date. A
claim shall be deemed to be incurred when the services giving rise to such
claim are rendered.
(b) With respect to any of Seller's employees hired by Buyer (including
any beneficiary or dependent thereof) who enters a hospital under any
Employee Plan or Benefit Arrangement prior to the opening of business on the
first Business Day following the Closing Date and continues in a hospital
after the opening of business on the first Business Day following the Closing
Date, Seller and/or LFC shall be responsible for claims and expenses incurred
both before and after the opening of business on the first Business Day
following the Closing Date in connection with such Person, until such time as
such person has returned to work and worked for Buyer for at least one
complete day (or, if a beneficiary or dependent of an employee, until such
time as the beneficiary or dependent is discharged from the hospital).
(c) Buyer is not, and shall not be deemed to be, a successor employer
to Seller or any Affiliate thereof with respect to any Benefit Agreement, the
Pension Plan, Individual Account Plan or any other Employee Plan; and no plan
adopted or maintained by Buyer after the Closing is or shall be deemed to be
a "successor plan," as such term is defined in Section 4021(a) of ERISA, of
the Pension Plan, the Individual Account Plan or any Employee Plan. No
assets held under the Pension Plan, the Individual Account Plan or any other
Employee Plan shall be transferred from any such plan to Buyer or to any plan
adopted or maintained by Buyer. Except as specifically set forth in Section
9.01 hereof, Buyer shall not be obligated to assume or continue any term or
condition of employment currently or previously promised or maintained by
Seller with regard to its current, former or retired employees or
contractors, and shall not be responsible for any debt, payment, obligation,
claim, liability or agreement which relates to or arises from Seller's
employment (or termination of employment) of, or contract (or termination of
contract) with its current, former or retired employees, regardless of
whether such employees are offered employment by Buyer. No service for
Seller or an ERISA Affiliate under any Benefit Arrangement, the Pension Plan,
Individual Account Plan or any other Employee Plan shall be treated as
service for the Buyer under any employee benefit plan maintained or
contributed to by Buyer.
(d) No present, former or future employee or contractor of Buyer or
Seller shall be treated as a third party beneficiary in or under this
Agreement.
Section 9.03. WARN Notices, Requirements. Seller and Buyer covenant
that they shall comply with all requirements of the Worker Adjustment and
Restraining Notification Act ("WARN"), if any, applicable with respect to the
sale of the Purchased Assets or termination of any of Seller's employees
following the Closing Date.
Section 9.04. Covenants Relating to Seller's Employees.
On or before the Closing Date, Seller and/or LFC shall pay any and all
employees hired by Buyer effective as of the day after the Closing Date each
such employee's accumulated, unused sick days and vacation days to the extent
such employees are entitled thereto in accordance with Seller's and/or LFC's
employment practices and policies.
ARTICLE 10
CONDITIONS TO CLOSING
Section 10.01. Conditions to the Obligations of Each Party. The
obligations of Buyer and Seller to consummate the Closing are subject to the
satisfaction of the following conditions:
(i) Buyer and Seller shall have executed and delivered each of the
Ancillary Agreements, including the Assignment and Assumption Agreement.
(ii) Seller shall have received all material approvals from
governmental agencies referred to in Section 3.03 and all consents and
authorizations described on Schedule 2.05 hereto, in each case in form
and substance reasonably satisfactory to Buyer, and no such consents,
authorization or approval shall have been revoked.
(iii) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of
the Closing.
Section 10.02. Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the
following further conditions:
(i) Seller shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to
the Closing Date.
(ii) Buyer shall have received an opinion of Davis Polk & Wardwell,
counsel to Seller, dated the Closing Date, substantially in the form
attached as Exhibit K.
(iii) Delivery of certification from a Senior Officer of LFC
certifying that LFC has received an opinion from Salomon Brothers that
the consideration for the purchase of the Purchased Assets is fair from
a financial point of view, and that such opinion is satisfactory in all
respects to LFC. Buyer acknowledges and agrees that it is not a third
party beneficiary of the Salomon Brothers opinion, and disclaims any
right as against Salomon Brothers with respect to such opinion or the
services performed by it in rendering such opinion.
(iv) Delivery of a legal opinion from Hughes and Luce, Dallas,
Texas, substantially in form attached as Exhibit L.
(v) Delivery of certificates of a Senior Officer of LFC and Lomas
Mortgage that the consummation of the transactions contemplated by this
Agreement will not violate any condition or covenant of the LFC Trust
Indenture or Lomas Mortgage Trust Indenture, or trigger or accelerate
the right of the noteholders under such indentures to require the
complete or partial redemption of the notes, and that the obligations
undertaken by LFC or Lomas Mortgage under this Agreement will not breach
any covenant or condition of the LFC or Lomas Mortgage Trust Indentures,
in the form of Exhibit M hereto.
(vi) Delivery of a certificate of a Senior Officer of LFC and
Seller affirming and reiterating the representation and warranty of
Section 3.19 hereof, in the form of Exhibit N hereto.
(vii) Delivery of a description by a Senior Officer of LFC of
the history of the process and manner in which the sale of Seller's
assets was arranged, considered by others and achieved, through
September 19, 1994, the date of execution of a Letter of Intent between
Seller and Buyer for the purchase of substantially all of Seller's
assets.
(viii) Buyer shall have received all documents it may reasonable
request relating to the existence of Seller and the authority of Seller
to enter into this Agreement, all in form and substance reasonably
satisfactory to Buyer.
(ix) Since September 30, 1994, there shall not have occurred any
change in the Business or the financial condition of Seller that,
individually or collectively, has a Material Adverse Effect.
(x) Lomas Mortgage shall have assigned all of its right, title and
interest in and to (A) MSS, and (B) certain assets to Seller, as
evidenced by appropriate written instruments in form and substance
reasonably satisfactory to Buyer, in the form of Exhibit O hereto.
(xi) Buyer shall have received an opinion of Louis Gregory, Esq.,
counsel for Seller, LFC and Lomas Mortgage, dated the Closing Date,
substantially in the form of Exhibit P hereto.
Section 10.03. Conditions to Obligation of Seller. The obligation of
Seller to consummate the Closing is subject to the satisfaction of the
following further conditions:
(i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Closing Date, (ii) the representations and warranties of Buyer contained
in this Agreement and in any certificate or other writing delivered by
Buyer pursuant hereto shall be true in all material respects at and as
of the Closing Date, as if made at and as of such date and (iii) Seller
shall have received a certificate signed by a Senior Officer of Buyer to
the foregoing effect.
(ii) Seller shall have received all documents it may reasonably
request relating to the existence of Buyer and RSCA and the authority of
Buyer and RSCA to enter into this Agreement, all in form and substance
reasonably satisfactory to Seller.
(iii) Seller shall have received an opinion of Brownstein,
Zeidman & Lore, A Professional Corporation, counsel to Buyer, dated the
Closing Date, substantially in the form attached as Exhibit Q.
(iv) Seller shall have received an opinion of Porter & Hedges,
L.L.P., counsel to Buyer, dated the Closing Date, substantially in the
form attached as Exhibit R.
(v) Seller shall have received an opinion of Jeffrey P. Marston,
Esq., counsel to RSCA, dated the Closing Date, substantially in the form
of Exhibit S hereto.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
Section 11.01. Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection
herewith shall survive the Closing only as set forth below:
(i) all covenants, agreements, representations and warranties
contained in this Agreement or in any certificate or schedule delivered
pursuant hereto or in connection herewith relating to Excluded
Liabilities (including but not limited to Taxes and Transfer Taxes) and
Assumed Liabilities shall survive for the entire period of the
applicable statute of limitations with respect to such liabilities;
(ii) the obligations of Seller and LFC pursuant to Section
11.02(f) hereof (relating to liabilities for violation of certain
federal and state securities' laws) shall survive for the applicable
statute of limitations with regard to any violations of law giving rise
to indemnity claims thereunder;
(iii) the representations and warranties made by Seller and LFC
pursuant to Section 3.19 hereof shall survive until and including
December 31, 1996;
(iv) all representations and warranties contained in Section 3.11
hereof shall survive for a period of three (3) years from the Closing
Date;
(v) all covenants, agreements, representations and warranties
contained in Sections 5.01(a) and (b), 6.01, 6.02 and 7.04 hereof shall
survive until and including December 31, 2001;
(vi) all covenants, agreements, representations and warranties
contained in Sections 5.01(c) hereof shall survive until and including
December 31, 1997; and
(vii) all other covenants, agreements, representations and
warranties contained in this Agreement or in any certificate or other
writing delivered pursuant hereto not described in clauses (i) through
(vi) above shall survive until and including December 31, 1995.
Notwithstanding the provisions of this Section 11.01 or Section 11.07, all
covenants, agreements, representations and warranties in respect of which
indemnification may be sought under this Agreement shall survive the time
they would otherwise terminate pursuant to clauses (i) through (vii) above if
notice of the inaccuracy or breach thereof giving rise to a right of
indemnification under this Article 11 shall have been given to the party
against whom such indemnification may be subject prior to such time.
Section 11.02. Indemnification.
(a) LFC and Seller jointly and severally agree to indemnify Buyer, its
general partner(s) and the directors, Senior Officers and shareholders of the
general partner(s) (the "Buyer Indemnified Parties"), without duplication,
against and agree to hold them harmless, on an After-Tax Basis, from any Loss
incurred or suffered by any Buyer Indemnified Party related to, in connection
with or as a result of (a) misrepresentation or breach of warranty, covenant
or agreement made or to be performed by Seller pursuant to this Agreement or
(b) any Excluded Liability. or (c) enforcing or collecting amounts owed by
Seller pursuant to this Agreement.
(b) LFC agrees to indemnify the Buyer Indemnified Parties, without
duplication, against and agree to hold them harmless, on an After-Tax Basis,
from any and all Loss incurred or suffered by any Buyer Indemnified Party
related to, in connection with or as a result of (a) misrepresentation or
breach of warranty, covenant or agreement made or to be performed by LFC
pursuant to this Agreement, or (b) enforcing or collecting amounts owed by
LFC pursuant to this Agreement.
(c) Lomas Mortgage agrees to indemnify the Buyer Indemnified Parties,
without duplication, against and agree to hold them harmless, on an After-Tax
Basis, from any and all Loss incurred or suffered by any Buyer Indemnified
Party related to, in connection with or as a result of (a) misrepresentation
or breach of warranty made by Lomas Mortgage pursuant to this Agreement, (b)
any Taxes for which. under applicable law, Lomas Mortgage is jointly and
severally liable with Seller, or (c) enforcing or collecting amounts owed by
Lomas Mortgage pursuant to this Agreement.
(d) RSCA and Buyer hereby indemnify Seller, its directors, Senior
Officers and Affiliates (the "Seller Indemnified Parties") against and agrees
to hold the Seller Indemnified Parties harmless, on an After-Tax Basis, from
any and all Loss incurred or suffered by any Seller Indemnified Party related
to, in connection with or as a result of (a) misrepresentation or breach of
warranty, covenant or agreement made or to be performed by Buyer pursuant to
this Agreement, (b) any Assumed Liability (including but not limited to any
obligation of any Affiliate of Seller (whether such obligation is created by
contract or otherwise and whether or not such obligation is joint and several
with Seller) to the extent such obligation relates to an Assumed Liability
(including any guaranty of any Assumed Liability) (all such Affiliate
obligations, "Related Obligations")); provided, however, that Buyer's and
RSCA's agreement to indemnify Affiliates of Seller with respect to any
Related Obligations shall not in any way cause the amount of their aggregate
liability hereunder to exceed the amount of Buyer's liability under the
express terms of the Assumed Contract giving rise to the Assumed Liability,
or (c) enforcing or collecting amounts owed by Buyer pursuant to this
Agreement.
(e) RSCA hereby indemnifies the Seller Indemnified Parties against and
agrees to hold them harmless, on an After-Tax Basis, from any and all Loss
incurred or suffered by any Seller Indemnified Party related to, in
connection with or as a result of (a) misrepresentation or breach of
warranty made by RSCA, or nonperformance or other breach of Sections 6.01 or
6.02 hereof, or (b) enforcing or collecting amounts owed by RSCA pursuant to
this Agreement.
(f) Seller and LFC hereby agree to indemnify and hold Buyer harmless
from any and all Loss incurred or suffered by Buyer with respect to any
violation by Seller, LFC or any of LFC's Affiliates of any federal or state
securities law or any other law in connection with the sale or other transfer
of the Buyer Note or Adjustable Earn-Out Certificate.
(g) The fact that more than one of Seller, LFC and Lomas Mortgage or
more than one of Buyer and RSCA may be subject to an indemnification
obligation under this Section shall not reduce the amount of the
indemnification obligation of any indemnifying party under this Agreement,
and each such indemnifying party shall be fully liable to the Buyer or Seller
Indemnified Parties, as the case may be, for the entire amount of Loss, on an
After-Tax Basis related to its obligation under Sections 11.02 (a), (b), (c),
(d) (e) or (f), as the case may be; provided, however, that the Indemnified
Parties may not collect more than the amount of Loss, on an After-Tax Basis,
due hereunder from all indemnifying parties obligated under this Article 11
to the Indemnified Parties. In any case in which such joint and several or
other form of multiple party liability exists under this Section 11.02, the
party seeking indemnification hereunder is not and shall not be required to
pursue or exhaust any and all rights or remedies it may have against any one
or more of such parties before proceeding against any other of such parties.
(h) The parties agree to treat any amount paid pursuant to this Article
11 as an adjustment to purchase price of the Purchased Assets for Tax
purposes unless there is a final determination by the relevant Taxing
Authority, which the Indemnified Party has contested in good faith, that such
amount is required to be included in income.
(i) No investigation by Buyer or any of its Affiliates at or prior
to the Closing Date shall relieve Seller, LFC or Lomas Mortgage of, or
otherwise reduce or mitigate, any of their liability hereunder.
Section 11.03. Notice and Settlement of Claims.
(a) Notice. Each signatory party to this Agreement ("Party") shall
promptly notify all other Parties in writing of the existence of any material
fact known to it giving rise to any obligations of the other Parties under
this Article 11 and, in the case of any claim, action or proceeding
(including any Tax audit) brought or initiated by a third party which may
give rise to any such obligations, each Party shall promptly notify the other
Parties of the making of such claim or the commencement of such action or
proceeding by a third party as and when same becomes known to it, and the
Party seeking indemnification shall provide reasonable supporting
documentation for such claim, action or proceeding.
(b) Assumption of Defense or Prosecution. Following the receipt of
written notice in accordance with Section 11.03(a), the indemnifying party
(the "Indemnifying Party") shall seek to cure the problem giving rise to the
claim, demand, action or proceeding, if possible, within thirty (30) Business
Days. The Indemnifying Party may, at its own cost and expense, elect within
such thirty (30) Business Day period by written notice to the indemnified
party or parties (the "Indemnified Party") to assume and control defense of
any claim, demand, action or proceeding including, without limitation, the
right to designate counsel and to control all negotiations, litigation,
settlements, compromises and appeals of any such claim or potential claim;
provided that the counsel is satisfactory to the Indemnified Party in the
exercise of its reasonable discretion, and provided, further, that the
Indemnifying Party first admits, in writing to the Indemnified Party, that
the Indemnifying Party is obligated under this Article 11 to and shall
indemnify the Indemnified Party for the Loss incurred by the Indemnified
Party with respect to any such claim or potential claim, action or proceeding
as to which the Indemnifying Party assumes such control. If the Indemnifying
Party assumes such defense, (i) so long as the Indemnifying Party retains
such control the Indemnified Party may not settle such claim without the
Indemnified Party's prior written consent, (ii) the Indemnified Party shall
have the right (but not the duty) to participate in the defense thereof at
its own cost and expense, and to employ counsel, at its own cost and expense,
separate from the counsel employed by the Indemnifying Party (which cost and
expense shall not be a Loss to which it is entitled to indemnification
hereunder), and (iii) the Indemnifying Party shall thereafter consult with
Indemnified Party upon the Indemnified Party's reasonable request for such
consultation from time to time with respect to such suit, action or
proceeding. The Indemnifying Party shall be entitled to settle, compromise,
decline to appeal, or otherwise dispose of any claim without the prior
written consent of the other Party if (i) any monetary damages payable as a
result thereof are paid directly by the Indemnifying Party to the claimant(s)
and (ii) the settlement, compromise, declination to appeal or other
disposition does not result in injunctive or other relief (excepting the
payment of monetary damages by the Indemnifying Party) against the
Indemnified Party that could materially interfere with the business,
operations, assets, condition or prospects of such Indemnified Party.
Following the discharge of the Indemnifying Party's obligations under this
Article 11, the Indemnified Party shall assign to the Indemnifying Party any
and all related claims against third parties. Within fifteen (15) days after
receipt, the Indemnified Party shall refund to the Indemnifying Party the
amounts of all recoveries received by the Indemnified Party for any claim
with respect to which it is reimbursed for Loss.
(c) Right to Control Upon Waiver. Notwithstanding the foregoing, if
the Indemnifying Party elects to participate in the defense of any claim,
action or proceeding against the Indemnified Party, the Indemnified Party
shall have sole, absolute and exclusive right, at any time, to contest,
assume the defense of, compromise, settle, litigate, appeal or otherwise deal
with any such suit, action or proceeding (including a Tax audit) in respect
of which indemnity may be sought hereunder in its sole and absolute
discretion without any right of cooperation or participation of any
Indemnifying Party in the defense of such claim, action or proceeding if all
appropriate Indemnified Parties elect, in written notice delivered to the
Indemnifying Party, to waive any and all rights to indemnification under this
Agreement for all Loss related to such suit, action or proceeding (including
a Tax audit) and the subject matter thereof; provided, however, that the
foregoing shall not in any manner limit the right of the Indemnifying Party
to defend or otherwise deal with any claim, action or proceeding against it.
Unless the appropriate Indemnified Parties have made the election to waive
indemnification in accordance with the foregoing sentence, Indemnifying Party
shall be liable for the fees and expenses of counsel employed by the
Indemnified Party for any period during which the Indemnifying Party has not
assumed the defense thereof but shall not be so liable for such costs and
expenses incurred after the assumption thereof.
(d) Effect of Failure to Assume Defense. If the Indemnifying Party
fails to elect to assume the defense of any claim, action, suit or proceeding
(including any Tax audit) for which an Indemnified Party is entitled to
indemnification under this Article 11 within the thirty (30) Business Day
period as provided in Section 11.03(b), the Indemnified Party may pay,
compromise or contest the claim, action or proceeding at issue, as in its
sole and unfettered discretion it sees fit, and the Loss incurred by the
Indemnified Party with respect to such controversy shall, to the extent such
Loss otherwise qualifies for indemnification under this Article 11,
constitute a Loss for which the Indemnified Party is entitled to be
indemnified under this Article 11.
(e) Effect of Failure to Notify. The Indemnifying Party shall not be
liable under this Article 11 with respect to any Loss of an Indemnified Party
resulting from a third party claim or demand, or action or proceeding of
which Indemnifying Party had no actual knowledge and the defense of which
Indemnifying Party was not offered the opportunity to assume as provided
under this Section 11.03, but only to the extent the Indemnifying Party's
liability under this Article 11 is adversely affected as a result of a
failure by the Indemnified Party to notify Indemnifying Party in sufficient
time for the Indemnified Party to effectively defend against such Loss (or
items thereof).
(f) Agent for Indemnification Claims. Any claim of any of Buyer's
Affiliates entitled to indemnification under this Section 11.03 may be made
and enforced by Buyer on behalf of such Affiliates.
Section 11.04. Certain Indemnities With Respect to the Arrangements.
(a) Notwithstanding anything to the contrary in this Agreement, Buyer
shall not be required or obligated at any time to participate in, bring,
continue or prosecute any action or lawsuit or collection activities brought
or initiated by Seller in connection with the Arrangements or which Seller
would have been entitled to bring in connection with the Arrangements.
(b) Buyer shall have no liability to any Person and Seller shall
indemnify and hold Buyer harmless from and against any and all liabilities,
costs, expenses, claims with respect to any act or omissions to act of Seller
or any Affiliate thereof with respect to any action or lawsuit brought in
connection with the Arrangements. Neither Seller nor any Affiliate thereof
shall have any liability to Buyer or any other Person (and Buyer shall
indemnify and hold Seller and its Affiliates harmless for any acts or
omissions to act (excluding omissions to act permitted by Section 11.04(a)
above) of Buyer or any of its Affiliates with respect to any action or
lawsuit brought in connection with the Arrangements), or shall be required to
assist in the collection of any amounts that Buyer may assert it is owed
under the Arrangements. Notwithstanding the foregoing, Seller shall cease
prosecution of any action or lawsuit brought by it in connection with the
Arrangements on the Closing Date and cooperate with Buyer to either terminate
or hand over the prosecution thereof to Buyer, as Buyer shall elect in its
sole discretion.
Section 11.05. Payment; Interest on Late Payments.
(a) Any indemnification payment required to be made to an Indemnified
Party pursuant to this Article 11 shall be made not later than thirty (30)
days after receipt by the Indemnifying Party of written notice from the
Indemnified Party stating that any Loss has been incurred or paid (subject,
however, to the contest rights and other provisions of Section 11.08 hereof)
by the Indemnified Party and the amount thereof, together with written
evidence of payment thereof, and of the indemnity payment requested by the
Indemnified Party, as calculated on an After-Tax Basis (such notice referred
to herein as a "Demand for Indemnification Payment"). The Indemnified Party
shall promptly provide any other information or documentation as may
reasonably be requested by the Indemnifying Party or related to such Loss.
As to any claim for indemnity for which the Demand for Indemnification
Payment is given as hereinbefore provided, the corresponding obligation of
indemnity shall continue to survive until whichever of the following events
first occurs: (1) the Indemnifying Party shall have discharged its obligation
of indemnity to the Indemnified Party with respect to such claim as required
hereunder; (2) arbitrators have finally determined that the Indemnifying
Party is not liable to the Indemnified Party with respect to such claim in
accordance with Section 11.08 hereof; (3) if the Indemnified Party is a Buyer
Indemnified Party, Buyer has offset the unpaid indemnity amount against
Buyer's obligations under the Adjustable Earn-Out Certificate in accordance
with the terms thereof, or (4) the Indemnified Party shall have released in
writing (or be held to have released) the Indemnified Party from any
liability with respect to such claim.
(b) Any payment required to be made by an Indemnifying Party under this
Article 11 that is not made when due shall bear interest from the date that
the Indemnified Party has paid such Loss at the Default Rate until paid;
provided, however, that any amount owed by a Seller Indemnifying Party under
this Article 11 which may not be collected when due because such amount
exceeds the Out-Of-Pocket Collection Limit (as defined in Section 11.07
hereof) shall accrue interest at the Interest Rate until such amounts are
offset by Buyer against the amounts otherwise payable by Buyer under the
Adjustable Earn-Out Certificate as permitted by Section 11.07(c) hereof.
Section 11.06. No Waiver or Discharge; Subordination.
Each Indemnifying Party shall be fully liable to any Indemnified Party
hereunder whether or not the Indemnified Party has or shall obtain any other
or further guaranties, or indemnities, and irrespective of whether other or
further guarantees or indemnities are effective or enforceable or are related
in whole or in part, voluntarily or involuntarily, or by operation of law or
otherwise. The Indemnified Party shall have no obligation to pursue or
attempt to pursue any rights or remedies under any other or further
guaranties or indemnification obligations and may enforce all rights and
obligations hereunder, irrespective of the existence or nonexistence of other
or further guaranties or indemnification obligations.
Section 11.07. Overall Limitations on Indemnification Obligations.
(a) Notwithstanding any other provision of this Agreement to the
contrary, neither Buyer Indemnified Parties, on the one hand, nor Seller
Indemnified Parties on the other, shall be entitled to indemnification under
this Article 11, in the aggregate for any or all members of each such
respective groups, with respect to claims or demands for indemnification
described in Section 11.01 other than Sections 11.01(i) and (ii) thereof (the
"Capped Indemnity Obligations") in excess of the following amounts:
(i) $10,000,000 (in excess of the "Indemnity Floor," as defined
below) for any and all claims or demands for indemnification with
respect to Capped Indemnity Obligations made on or prior to the first
anniversary of the Closing Date;
(ii) the excess of $5,000,000 (in excess of the Indemnity
Floor) over any amounts paid or determined to be due with respect to
claims made under Section 11.07(a)(i) for any and all claims or demands
for indemnification with respect to Capped Indemnity Obligations made
after the first anniversary of the Closing Date and on or prior to the
third anniversary of the Closing Date; provided, however, that in the
event of a claim or demand for indemnification relating to the
inaccuracy of Section 3.19 hereof made after the first anniversary of
the Closing Date and on or before the second anniversary of the Closing
Date, then the limit with respect to such claim relating to the
inaccuracy of Section 3.19 under this clause (ii) shall be increased by
$3,000,000; and
(iii) zero for any and all claims or demands for
indemnification with respect to Capped Indemnity made after the third
anniversary of the Closing Date;
provided, however, that (A) no Seller Indemnifying Party shall be obligated
to pay any claims or demands for indemnification claims with respect to
Capped Indemnity Obligations under this Article 11 unless and until the Buyer
Indemnified Parties have suffered or incurred, in the aggregate, at least
Seven Hundred Fifty Thousand Dollars ($750,000) of Loss with respect to
Capped Indemnity Obligations and then only to the extent of amounts in excess
thereof (the "Indemnity Floor"), and (B) the maximum amount that all Buyer
Indemnified Parties may collect, in the aggregate, pursuant to this Article
11 with respect to Capped Indemnity Obligations from all Seller Indemnifying
Parties shall not exceed the sum of Two Million Five Hundred Thousand Dollars
($2,500,000) plus the amount of cash actually paid under the Adjustable Earn-
Out Certificate to Seller (such sum, the "Out-of-Pocket Collection Limit"),
its successors or assigns and the holders of the Adjustable Earn-Out
Certificate, and the remaining portion of any amounts owed by any Seller
Indemnifying Party in accordance with this Article 11 with respect to Capped
Indemnity Obligations shall be recouped by the Buyer Indemnified Parties, if
at all, solely as an offset or reduction to the amount, if any, otherwise
payable pursuant to the terms of the Adjustable Earn-Out Certificate. To the
extent that any indemnity payments due from a Seller Indemnifying Party in
accordance with this Article 11 do not exceed the remaining Out-of-Pocket
Collection Limit then outstanding, the Buyer Indemnified Party shall first
provide the Seller Indemnifying Party or Parties with the opportunity to make
such indemnity payment prior to offsetting such amount against the Adjustable
Earn-Out Certificate; provided, however, that if the relevant Seller
Indemnifying Party or Parties have not paid such amount within thirty (30)
days of the date such payment is due, the Buyer Indemnified Party shall no
longer be required to first seek payment from the relevant Seller
Indemnifying Party or Parties but may seek collection thereof or offset the
amount due under the Adjustable Earn-Out Certificate when and as it in its
sole and absolute discretion determines.
(b) There is and shall be no limitation upon the amount of any
Indemnifying Parties' obligations under this Article 11 with respect to
claims or demands for indemnification described in Sections 11.01(i) and (ii)
hereof (the "Unlimited Indemnity Obligations").
(c) Except as provided in Section 11.07(a) hereof, Buyer may, in its
sole and absolute discretion, offset any indemnity payments due to any Buyer
Indemnified Party in accordance with this Article 11 (provided that amounts
being disputed in any arbitration proceeding pursuant to Section 11.08 hereof
shall not be considered due under this Article 11 during the pendency of such
arbitration proceeding) and unpaid against amounts payable by Buyer under the
Adjustable Earn-Out Certificate in accordance with the terms thereof in lieu
of collecting or enforcing collection any such amounts from the appropriate
Indemnifying Party. The Adjustable Earn-Out Certificate is delivered to
Seller by Buyer as part of the consideration for Buyer's acquisition of the
Purchased Assets, and the parties hereto intend that the mechanism
established in this Agreement and in the Adjustable Earn-Out Certificate for
reduction of amounts otherwise payable under such certificate by indemnity
amounts owed in accordance with this Article 11 is intended to correctly
measure and reflect the proper purchase price ultimately to be paid by Buyer
to Seller. Accordingly, Buyer shall retain such right of offset without
regard to (i) the lapse of any period of time between the date the indemnity
payment is otherwise due under this Article 11 and the date Buyer elects to
offset such amount against the Adjustable Earn-Out Certificate (provided that
such amount has still not been paid), (ii) any action or inaction of any
Buyer Indemnified Party to collect such amount, and (iii) the continuing
existence of any or all of Seller Indemnified Parties, their ability to pay,
or any cancellation or discharge of their obligations under this Article 11
in whole or in part in bankruptcy or by other operation of law.
Section 11.08. Disputes.
(a) Notice of Dispute. In the event that Indemnifying Party disagrees
with any Demand for Indemnification Payment under this Article 11 presented
in accordance with Section 11.05 hereof, whether the Indemnifying Party
contests the validity, timing or amount thereof or otherwise, the
Indemnifying Party may, within thirty (30) Business Days after receiving the
Indemnified Party's demand, deliver a notice of disagreement to the
Indemnified Party setting forth in reasonable detail a written explanation of
the basis for Indemnifying Party's dispute (the "Notice of Disagreement").
Failure by Indemnifying Party to deliver the Notice of Disagreement to the
Indemnified Party within such thirty (30) Business Day period shall be
conclusively deemed to constitute complete and final acceptance by the
Indemnifying Party of the validity and correctness of the calculation of the
Loss and the amount to which the Indemnified Party is entitled, and that
indemnification under this Article 11 is properly due, and the Indemnifying
Party may not otherwise contest or dispute the validity, timing,
determination or assessment of such Loss or the calculation of the amount due
by the Indemnifying Party under this Article 11.
(b) Efforts to Resolve. The Indemnified Party and Indemnifying Party
will use reasonable good faith efforts to resolve any such disagreement. If,
within thirty (30) Business Days after the date of receipt by the Indemnified
Party of the Indemnifying Party's Notice of Disagreement, the Indemnified
Party and Indemnifying Party are unable to resolve such disagreement, they
shall promptly proceed to arbitration in accordance with Section 11.08(c)
hereof. To the extent that the Indemnified Party and Indemnifying Party
resolve any dispute initiated by Indemnifying Party pursuant to this Section
11.08(b) and in accordance therewith the Indemnified Party and Indemnifying
Party determine that an amount is owing pursuant to this Article 11, the
Indemnifying, Party shall pay to Indemnified Party such undisputed amount by
wire transfer of funds within three (3) Business Days following resolution of
the dispute as to such items (regardless of whether other disputed items are
to be submitted to arbitration in accordance with Section 11.08).
(c) Arbitration.
(i) Any and all disputes arising out of or in connection with the
validity of any claim for indemnification pursuant to or nonperformance
of this Article 11 or the calculation of amounts due hereunder
unresolved pursuant to Section 11.08(b) hereof shall be solely and
finally settled by a panel of three arbitrators in accordance with the
Commercial Rules of the American Arbitration Association (the "Rules");
provided, however, that in the event of conflict between the Rules and
the terms of this Article 11, the terms of this Article 11 shall govern.
The place of arbitration shall be Dallas, Texas, and the law applicable
to the arbitration procedure shall be the Federal Arbitration Act (9
U.S.C. Sections 2 et seq.). The substantive law which shall be applied
by the arbitrators shall be the law of the State of Texas, without
regard to the principles of conflicts of law thereof. To commence
arbitration of any such dispute, the party desiring arbitration shall
notify the other party in writing in accordance with the Rules. Due
consideration shall be given by the parties to the nature of the dispute
in determining the composition of the arbitration board. In the event
that the parties fail to agree on the selection of the arbitrators
within fifteen (15) Business Days after the delivery of such notice, the
arbitrators shall be selected by the American Arbitration Association
upon the request of either party.
(ii) On the fortieth (40) Business Day following the appointment of
the arbitrators, each party shall submit to the arbitrators its claims
specifying the relief to which such party in good faith believes it is
entitled. Within thirty (30) Business Days after the submission of such
claims, or as soon thereafter as may be reasonably possible, the
arbitrators shall make their written decision. The arbitrators shall be
required to provide the reasons for their decision in writing.
(iii) The arbitrators' award shall be no lower than the lower
of the Seller and the Buyer claims and no higher than the higher of the
Seller and the Buyer claims. The parties agree that the decision of the
arbitrators shall be the sole and exclusive remedy between them
regarding any claims, counterclaims, or issues presented to the
arbitrators. The parties hereto agree that the decision of the
arbitrators shall be final, enforceable and not subject to appeal and
that judgment on the arbitration decision may be entered and enforced in
any court having jurisdiction over the parties or their assets.
(iv) Each party shall, except as otherwise provided herein, be
responsible for its own expenses, including legal fees, incurred in the
course of any arbitration proceedings. The fees of the arbitrators
shall be divided equally between the parties. However, the parties
agree that any costs, fees, or taxes incident to enforcing or collecting
on any decision of the arbitrators shall, to the maximum extent
permitted by law, be charged against the party resisting such
enforcement.
ARTICLE 12
TERMINATION
Section 12.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(i) by mutual written agreement of Seller and Buyer; or
(ii) by either Seller or Buyer if there shall be any law or
regulation that makes the consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if
consummation of the transactions contemplated hereby would violate
any nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction.
The Party desiring to terminate this Agreement pursuant to clause (ii) shall
give notice of such termination to the other Parties.
Section 12.02. Effect of Termination. If this Agreement is terminated
as permitted by Section 12.01, such termination shall be without liability of
any Party (or any stockholder, director, officer, employee, agent, consultant
or representative of such party) to the other Parties to this Agreement;
provided that if such termination shall result from the willful failure of a
Party to fulfill a condition to the performance of the obligations of the
other Parties, the willful failure of a Party to perform a covenant of this
Agreement or a willful misrepresentation as of the date hereof with respect
to any representation or warranty contained herein (any such events a
"Wrongful Termination"), such Party shall be fully liable for the Loss
(calculated for this purpose by excluding the costs for which the party
suffering such Wrongful Termination is responsible in accordance with Section
13.04 hereof) incurred or suffered by the other parties as a result of such
Wrongful Termination. RSCA shall be jointly and severally liable with Buyer
to Seller and its Affiliates for any Wrongful Termination by Buyer or RSCA,
and LFC shall be jointly and severally liable with Seller to Buyer for any
Wrongful Termination by Seller or LFC. The provisions of this Section 12.02
and Sections 6.01 and 13.04 shall survive any termination hereof pursuant to
Section 12.01.
ARTICLE 13
MISCELLANEOUS
Section 13.01. No Warranties to Continue Business; Absence of Other
Duties.
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, THE ANCILLARY
AGREEMENTS OR ANY OTHER EXHIBIT TO THE CONTRARY (OTHER THAN SECTION 6.02
HEREOF), AND NOTWITHSTANDING ANY IMPLICATIONS THEREFROM OR FROM THE TERM OF
THE BUYER NOTE OR THE ADJUSTABLE EARN-OUT CERTIFICATE. (I) BUYER SHALL HAVE
NO AFFIRMATIVE DUTY TO ACTIVELY MARKET MLS, MSS, LPS, SMS OR CMS OR TO
OTHERWISE ATTEMPT TO MAXIMIZE OR INCREASE REVENUES OF THE BUSINESS; (II)
ANY MARKETING ACTIVITIES UNDERTAKEN OR OMITTED BY IT SHALL BE IN ITS SOLE AND
ABSOLUTE DISCRETION, WHETHER REASONABLE OR UNREASONABLE; (III) NEITHER
RESIDENTIAL INFORMATION SERVICES, INC. (THE GENERAL PARTNER OF BUYER), RSCA
NOR ANY OTHER AFFILIATE OF BUYER SHALL HAVE ANY DUTY TO INVEST IN OR TO FUND
OPERATING LOSSES OF BUYER FOR ANY PERIOD OF TIME, BUT ANY SUCH INVESTMENT OR
FUNDING, AND THE MEANS THEREOF, SHALL BE AT SUCH TIMES, IN SUCH MANNER AND IN
SUCH AMOUNTS, IF ANY, AS RESIDENTIAL INFORMATION SERVICES, INC., RSCA OR
OTHER AFFILIATE OF BUYER DEEMS SUFFICIENT OR DESIRABLE IN ITS SOLE AND
ABSOLUTE DISCRETION, WHETHER REASONABLE OR UNREASONABLE; AND (IV) THIS
AGREEMENT, THE ANCILLARY AGREEMENTS AND OTHER EXHIBITS HERETO, AND THE
OBLIGATIONS OF BUYER THEREUNDER SHALL IN NO WAY IMPOSE ANY OBLIGATION OR
IMPLIED WARRANTIES BY BUYER, RESIDENTIAL INFORMATION SERVICES, INC., RSCA OR
ANY OTHER AFFILIATE OF BUYER TO CONTINUE THE BUSINESS OF SELLER FOR ANY
SPECIFIED OR REASONABLE PERIOD OF TIME, OR OTHERWISE RESTRICT, IMPEDE, IMPACT
OR OTHERWISE AFFECT BUYER'S, RESIDENTIAL INFORMATION SERVICES, INC.'S, RSCA'S
OR ANY OTHER AFFILIATE OF BUYER'S UNFETTERED ABILITIES TO MAKE AND IMPLEMENT
THEIR RESPECTIVE BUSINESS PLANS AND MARKETING STRATEGIES.
Section 13.02. Notices. All notices, requests and other communications
to either party hereunder shall be in writing (including facsimile
transmission) and shall be given,
If to Buyer, to:
Residential Information Services Limited Partnership
c/o The Prudential Home Mortgage Company, Inc.
8000 Maryland Avenue, Suite 1400
Clayton, Missouri 63105
Attention: W. Blake Wilson
Telecopy: (314) 726-4423
With a copy to each of:
The Prudential Home Mortgage Company, Inc.
7485 New Horizon Way
Frederick, MD 21701
Attn: Legal Dept.
Telecopy: (301) 696-7555
and:
Brownstein Zeidman and Lore
A Professional Corporation
1401 New York Avenue, N.W.
Suite 900
Washington, D.C. 20004
Attn: Laurence E. Platt, Esq.
Telecopy: (202) 879-5773
<PAGE>
If to Seller, to:
Lomas Information Systems, Inc.
c/o Lomas Financial Corporation
1600 Viceroy Drive
Dallas, Texas 75235
Attention: General Counsel
Telecopy: (214) 879-5528
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Christopher Mayer, Esq.
Telecopy: (212) 450-4800
If to LFC:
Lomas Financial Corporation
1600 Viceroy Drive
Dallas, Texas 75235
Attention: General Counsel
Telecopy: (214) 879-5528
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Christopher Mayer, Esq.
Telecopy: (212) 450-4800
If to Lomas Mortgage:
Lomas Mortgage USA, Inc.
c/o Lomas Financial Corporation
1600 Viceroy Drive
Dallas, Texas 75235
Attention: General Counsel
Telecopy: (214) 879-5528
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Christopher Mayer, Esq.
Telecopy: (212) 450-4800
If to RSCA:
Residential Services Corporation of America
c/o The Prudential Home Mortgage Company, Inc.
7485 New Horizon Way
Frederick, MD 21701
Attn: Legal Dept.
Telecopy: (301) 696-7555
With a copy to:
Brownstein Zeidman and Lore
A Professional Corporation
1401 New York Avenue. N.W.
Suite 900
Washington, D.C. 20004
Attn: Laurence E. Platt. Esq.
Telecopy: (202) 879-5773
or to such other address(es) as may be notified to the other parties hereof.
All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior to
5 p.m. on a business day in the place of receipt. Otherwise, any such
notice, request or communication shall be deemed not to have been received
until the next succeeding business day in the place of receipt.
Section 13.03. Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived prior
to the Closing Date if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement,
or in the case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 13.04. Expenses. Except as otherwise provided herein, all costs
and expenses incurred in connection with this Agreement, including legal,
accounting and other professional fees and expenses, shall be paid by the
party incurring such cost or expense.
Section 13.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto, except that Buyer
may transfer or assign. in whole or from time to time in part, to one or more
of its Affiliates, the right to purchase all or a portion of the Purchased
Assets, but no such transfer or assignment will relieve Buyer of its
obligations hereunder.
Section 13.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Texas, without regard to
the principles of conflicts of law of such state.
Section 13.07. Counterparts, Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by the other party
hereto.
Section 13.08. Entire Agreement. Third Party Beneficiaries. This
Agreement, the Assignment and Assumption Agreement and the Ancillary
Agreements constitute the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter of this Agreement. No representation, inducement,
promise, understanding, condition or warranty not set forth herein has been
made or relied upon by either party hereto. Except as otherwise expressly
provided herein, neither this Agreement nor any provision hereof is intended
to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
Section 13.09. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 13.10. Waiver. LFC, Lomas Mortgage and Seller agree that they
will not assert and hereby waive any claims that they may have against Buyer
or RSCA as a successor-in-interest to Seller except for the rights and
obligations of the parties provided in this Agreement and the Ancillary
Agreements.
[Signatures on next page]<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
RESIDENTIAL INFORMATION SERVICES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Residential Information Services, Inc., a
Delaware corporation,
its General Partner
By: /S/W. BLAKE WILSON
-----------------------------------
Name: W. Blake Wilson
------------------------------
Title: Vice President
-----------------------------
LOMAS INFORMATION SYSTEMS, INC.
By: /S/JAMES L. CROWSON
-----------------------------------
Name: James L. Crowson
------------------------------
Title: Executive Vice President
----------------------------
[Signatures continued on next page]
<PAGE>
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for Asset Purchase Agreement]
THE UNDERSIGNED EXECUTES THIS AGREEMENT SOLELY FOR THE PURPOSE OF
INTENDING TO BE FULLY BOUND BY THE PROVISIONS OF ARTICLES 3, 3.1, 3.2,
11 (AS APPLICABLE) AND 13 AND SECTIONS 5.01, 5.03, 7.03, 9.02, 9.04,
AND 12.02 HEREOF:
LOMAS FINANCIAL CORPORATION
By: /S/JAMES L. CROWSON
-----------------------------------
Name: James L. Crowson
------------------------------
Title: Executive Vice President
----------------------------
THE UNDERSIGNED EXECUTES THIS AGREEMENT SOLELY FOR THE PURPOSE OF
INTENDING TO BE FULLY BOUND BY THE PROVISIONS OF ARTICLES 3.1, 11 (AS
APPLICABLE) AND 13 AND SECTION 5.01 HEREOF:
LOMAS MORTGAGE USA, INC.
By: /S/JAMES L. CROWSON
-----------------------------------
Name: James L. Crowson
------------------------------
Title: Executive Vice President
----------------------------
[Signatures continued on next page]<PAGE>
[Signatures continued from previous page
for Asset Purchase Agreement]
THE UNDERSIGNED EXECUTES THIS AGREEMENT SOLELY FOR THE PURPOSE OF
INTENDING TO BE FULLY BOUND BY THE PROVISIONS OF ARTICLES 4, 6, 11 (AS
APPLICABLE) AND 13, AND SECTIONS 7.03, AND 12.02 HEREOF:
RESIDENTIAL SERVICES CORPORATION
OF AMERICA
By: /S/W. BLAKE WILSON
-----------------------------------
Name: W. Blake Wilson
------------------------------
Title: Vice President
----------------------------
<PAGE>
The Exhibits and Schedules to the Asset Purchase Agreement dated as of
December 16, 1994 by and between Lomas Information Systems, Inc., as
Seller, Residential Information Services Limited Partnership, as Buyer, the
registrant, Lomas Mortgage USA, Inc. and Residential Services Corporation
of America (the "Asset Purchase Agreement") have not been filed herewith
pursuant to Item 601(b)(2) of Regulation S-K. Pursuant to this Regulation,
set forth below is a list briefly identifying the contents of all omitted
Exhibits and Schedules to the Asset Purchase Agreement. In addition,
pursuant to such Regulation, the registrant hereby agrees to furnish
supplementally a copy of any such omitted Exhibits and Schedules to the
Securities and Exchange Commission upon request.
EXHIBITS
Exhibit A - Form of Lease Agreement
Exhibit B - Form of Management Data Processing Services Agreement
Exhibit C - Form of Telecommunications Services Agreement
Exhibit D - Form of Service Bureau Agreement
Exhibit E - Form of Trademark Assignment
Exhibit F - Form of Copyright Assignment
Exhibit G - Form of Promissory Note
Exhibit H - Form of Guaranty
Exhibit I - Form of Adjustable Earn-Out Certificate
Exhibit J - Form of Assignment and Assumption Agreement
Exhibit K - Form of Legal Opinion of Davis Polk and Wardwell
Exhibit L - Form of Legal Opinion of Hughes and Luce
Exhibit M - Form of Senior Officer Certificate - Trust Indentures
Exhibit N - Form of Senior Officer Certificate - Enforceability
Exhibit O - Form of Assignment - MSS and Certain Assets
Exhibit P - Form of Opinion of Louis Gregory, Esq.
Exhibit Q - Form of Opinion of Brownstein Zeidman & Lore A Professional
Corporation
Exhibit R - Form of Opinion of Porter & Hedges, L.L.P.
Exhibit S - Form of Opinion of Jeffrey P. Martson, Esq.
<PAGE>
SCHEDULES
Schedule 1.01 A Third Party Rights Relating to EXCELIS Conduit Mortgage
System
Schedule 1.01 B Third Party Rights Relating to EXCELIS Loan Production
System
Schedule 1.01 C Third Party Rights Relating to EXCELIS Mortgage Loan
Servicing System
Schedule 1.01 D Third Party Rights Relating to EXCELIS Master Servicing
System
Schedule 1.01 E Third Party Rights Relating to EXCELIS Secondary
Marketing System
Schedule 1.01 F Certain Non-Proprietary IPR Necessary to Excelis
Schedule 1.01 G Service Change Schedule
Schedule 1.01 H List of Assumed Contracts
Schedule 2.01 List of Included Assets
Schedule 2.02 List of Excluded Assets
Schedule 2.05 List of Group 1 and Group 2 Contracts
Schedule 3.01 List of Jurisdictions in Which Qualified to do Business
Schedule 3.03 List of Governmental Approvals
Schedule 3.04 List of Required Direct Consents
Schedule 3.06 List of Changes
Schedule 3.07(a) List of Limitations in Title of Non-IPR Property
Schedule 3.07(b) List of Non-IPR Leasehold Property
Schedule 3.08 List of Litigation
Schedule 3.09(a) List of Defaults on Contracts
Schedule 3.09(b) List of Missing Material Contracts
Schedule 3.11(d) List of Claims or Infringement of Any Intellectual
Property Right
Schedule 3.11(e) Indemnification Demands
Schedule 3.11(f) Limitations of Title to Intellectual Property Rights
Schedule 3.11(g) Exceptions to Exclusive Right to Commercial
Exploitation
Schedule 3.14 List of Government Permits
Schedule 3.15 List of Certain Interests
Schedule 3.18 List of Known Intended Expansion
Schedule 3.1.03 List of Governmental Approvals
Schedule 3.1.04 List of Required Indirect Consents
Schedule 3.2.02 List of Certain Other Governmental Approvals
Schedule 3.2.03 List of Certain Other Required Indirect Consents
Schedule 4.07 List of Litigation
Schedule 7.04 List of Seller Tradenames (not being assigned)
Schedule 8.01 List of Taxing Jurisdictions
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of December 1, 1994 by and between
Lomas Financial Corporation, a Delaware corporation, (the "Company") and
Eric D. Booth ("Executive").
WHEREAS, the Company desires to employ Executive as its Chief
Executive Officer ("CEO");
WHEREAS, the parties intend that Executive shall also be a
Director of the Company;
WHEREAS, the Company and Executive desire to enter into an
agreement (the "Agreement") embodying the terms of such employment;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration,
the parties agree as follows:
1. Term of Employment. Executive's employment by the Company
shall be for a term (the "Employment Term") which shall commence on
December 12, 1994 (the "Commencement Date") and shall terminate on June 30,
1996 (the "Initial Term"); provided that, beginning July 1, 1996 the
Employment Term may be extended for successive one year periods (commencing
on July 1 and terminating on June 30) if not earlier than 120 days and not
later than 60 days prior to any such July 1, the Company or Executive shall
have given notice to the other party that he or it desires to extend the
Employment Term. Notwithstanding the foregoing, the Employment Term shall
terminate in any and all events upon the termination of Executive's
employment hereunder.
2. Position. (a) During the Employment Term Executive shall
serve as CEO of the Company. Executive shall report directly to the Board
of Directors of the Company (the "Board") and shall have such duties and
authority as shall be determined from time to time by the Board; provided
that such duties shall be consistent with those of a chief executive
officer. Effective the Commencement Date, Executive shall have been
appointed to the Board and, annually during the Employment Term, shall be
nominated for election to the Board. Executive shall serve on the Board
without additional compensation.
(b) During the Employment Term, Executive shall devote
substantially all of his business time and best efforts to the performance
of his duties hereunder and shall not engage in any other business,
profession or occupation for compensation or otherwise.
(c) Executive shall be permitted to reside in the location of
his choice, but shall spend as much time in Dallas, Texas as he deems
necessary to perform his duties hereunder.
3. Base Salary. During the Employment Term, the Company shall
pay Executive an annual base salary (the "Base Salary") at an initial rate
of $600,000, payable in arrears, in accordance with the usual payment
practices of the Company. Executive's Base Salary shall be subject to
annual increases equal to not less than the greater of the increase in the
National Consumer Price Index for All Urban Consumers as of the close of
the preceding twelve-month period and 5%; provided that for the fiscal year
beginning July 1, 1995, such annual increase shall be equal to not less
than the greater of one-half of the increase in such Consumer Price Index
as of the close of the preceding twelve-month period and 2 1/2%.
4. Incentive Compensation.
(a) During the Employment Term, Executive shall be eligible to
receive, in addition to his Base Salary, an annual bonus (the "Bonus")
equal to up to 50% of Base Salary for such fiscal year, payable by July 15
of the following fiscal year, based upon personal and corporate goals and
objectives agreed upon by Executive and the Company prior to July 1 of such
fiscal year. For the period from December 1, 1994 through June 30, 1995,
Executive shall receive a guaranteed bonus equal to $150,000 plus any
additional amounts the Board may deem appropriate based upon personal and
corporate performance.
(b) Executive shall be eligible to participate in the Company's
1993 Intermediate and Long-Term Incentive Plan (the "Plan"). Effective as
of the Commencement Date, Executive shall have been granted 200,000 phantom
shares of common stock of the Company under the Plan. Such phantom shares
shall entitle Executive to receive a payment with respect to each fiscal
year in the Employment Term equal to the increase in value of such shares
during such year, determined based on the excess, if any, of (i) the
average of the closing prices of a share of common stock of the Company for
the 30 day period immediately preceding June 30 of such fiscal year, as
listed in the Wall Street Journal, over (ii) the "Base Value", which
payment shall be made by July 15 of the following fiscal year. The initial
Base Value of such shares shall be the closing price of a share of common
stock of the Company on December 6, 1994, as listed in the Wall Street
Journal. The Base Value shall be reset as of June 30 of any fiscal year if
the average of the closing prices of a share of common stock for the 30 day
period immediately preceding June 30 as listed in the Wall Street Journal
is higher than the Base Value of such shares during the previous fiscal
year. The new Base Value from and after such date (subject to further
adjustment in accordance with this Section 4) shall be such closing price.
5. Employee Benefits. During the Employment Term, Executive
shall be provided employee benefits (the "Employee Benefits") as shall be
maintained by the Company from time to time on the same basis as the other
senior executives of the Company.
6. Business Expenses and Perquisites. (a) The Company shall
reimburse such of Executive's travel, entertainment and other business
expenses as are reasonably and necessarily incurred by Executive during the
Employment Term in the performance of his duties hereunder, in accordance
with the Company's policies as in effect from time to time. During the
Employment Term, the Company shall (i) reimburse Executive for travel
expenses incurred for one round trip airline fare per week between Dallas
and Detroit to be used by either Executive or his spouse, (ii) furnish
Executive with a suitable furnished Dallas apartment or condominium and an
automobile in Dallas, Texas and (iii) furnish Executive with office
facilities (including secretarial support) in the metropolitan Detroit,
Michigan area commensurate with the Executive's needs, taking into account
the proportion of his business time spent in such location. To the extent
any expenditure under this paragraph 6 is reportable by Executive and the
Company as "wages", Executive shall be entitled to receive additional
compensation commensurately to cover Executive's tax liability resulting
from such reporting and from the receipt of any such additional
compensation.
7. Termination. Except as provided in this Section 7, upon a
termination of employment Executive shall be entitled to no other payment
or benefit under this Agreement or any other plan or program of the
Company, and the entitlements described in this Section 7 shall be his
exclusive entitlements in the event of termination of employment.
(a) For Cause by the Company.
(i) Subject to the notification and cure provisions of
subparagraph (ii) of this Section 7(a), Executive's employment
hereunder may be terminated by the Company for "Cause". For purposes
of this Agreement, "Cause" shall mean (A) Executive's willful and
continued failure substantially to perform his duties hereunder,
including duties directed by the Board consistent with the provisions
of Section 2(a), (other than as a result of total or partial
incapacity due to physical or mental illness), (B) material dishonesty
in the performance of Executive's duties hereunder, (C) an act or acts
on Executive's part constituting a felony under the laws of the United
States or any state thereof, excluding acts imputed to Executive by
reason of his position as CEO of the Company, or (D) any other willful
act or omission which is materially injurious to the Company and its
subsidiaries and affiliates, taken as a whole, financially or
otherwise (including but not limited to breach of the non-competition
and confidentiality covenants set forth in Sections 8 and 9 hereof).
For purposes of subparagraph (D), an act or failure to act, on the
part of Executive, shall be deemed "willful" if done, or omitted to be
done, by Executive not in good faith and without a reasonable belief
that the act or omission was in or not opposed to the best interests
of the Company.
(ii) If the Company proposes to terminate Executive's employment
hereunder for Cause pursuant to clause (A) of Section 7(a)(i), the
Company shall give Executive written notice in accordance with Section
7(f). Such notice shall be given with sufficient particularity that
Executive will have an opportunity to correct the situation to the
reasonable satisfaction of the Company within 60 days. If such
correction is not so made, the Company may, within 60 days after the
expiration of the time within which Executive had the opportunity to
correct such situation, give written notice to Executive that it is
terminating his employment for Cause effective forthwith with the
effect stated in this Section 7(a).
(iii) If Executive is terminated for Cause, he shall be entitled
to receive (i) his Base Salary through the date of termination, (ii) a
prorated portion (based on the number of days in such fiscal year
prior to the date of termination) of the Bonus, if any, determined in
accordance with Section 4(a), for the fiscal year in which employment
is terminated that Executive would have received had he remained
employed through the end of such fiscal year, payable at the time such
Bonus would have been paid absent such termination and (iii) a
prorated portion (based on the number of days in such fiscal year
prior to the date of termination) of any amounts due with respect to
Executive's phantom shares, determined in accordance with Section 4(b)
(except that the phantom share payment shall be determined by
reference to the price of a share of common stock as of the close of
trading on the date of termination rather than at the end of the
fiscal year), as if Executive had remained employed through the end of
such fiscal year, payable at the time such amounts would have been
paid absent such termination. All other benefits due Executive
following Executive's termination of employment pursuant to this
Subsection 7(a) shall be determined in accordance with the plans,
policies and practices of the Company.
(b) Disability or Death. Executive's employment hereunder shall
terminate upon (i) his death or (ii) at the Company's election if Executive
becomes physically or mentally incapacitated and is therefore unable for a
period of 6 consecutive months or for an aggregate of 9 months in any 24
consecutive month period to perform his duties (such incapacity is
hereinafter referred to as "Disability"). Any question as to the existence
of the Disability of Executive as to which Executive and the Company cannot
agree shall be determined in writing by a qualified independent physician
mutually acceptable to Executive and the Company. If Executive and the
Company cannot agree as to a qualified independent physician, each shall
appoint such a physician and those two physicians shall select a third who
shall make such determination in writing. The determination of Disability
made in writing to the Company and Executive shall be final and conclusive
for all purposes of the Agreement.
Upon termination of Executive's employment hereunder by reason of
death, Executive's estate shall receive (i) continued payment of his Base
Salary at the rate in effect at the time of Executive's death through the
end of the month in which his death occurs, (ii) a prorated portion (based
on the number of days in such fiscal year prior to the date of termination)
of the Bonus, if any, determined in accordance with Section 4(a), for the
fiscal year in which employment is terminated that Executive would have
received had he remained employed through the end of such fiscal year,
payable at the time such Bonus would have been paid absent such termination
and (iii) a prorated portion (based on the number of days in such fiscal
year prior to the date of termination) of any amounts due with respect to
Executive's phantom shares, determined in accordance with Section 4(b)
(except that the phantom share payment shall be determined by reference to
the price of a share of common stock as of the close of trading on the date
of termination rather than at the end of the fiscal year), as if Executive
had remained employed through the end of such fiscal year, payable at the
time such amounts would have been paid absent such termination. Upon
termination of Executive's employment hereunder by reason of Disability,
Executive shall receive (i) continued payment of his Base Salary through
the date on which Executive is first eligible to receive payment of
disability benefits in lieu of Base Salary to the maximum extent permitted
under the Company's employee benefit plans as then in effect, (ii) the
Bonus, if any, determined in accordance with Section 4(a), for the fiscal
year in which employment is terminated that Executive would have received
had he remained employed through the end of such fiscal year, payable at
the time such Bonus would have been paid absent such termination and (iii)
any amounts due with respect to Executive's phantom shares, determined in
accordance with Section 4(b) (except that the phantom share payment shall
be determined by reference to the price of a share of common stock as of
the close of trading on the date of termination rather than at the end of
the fiscal year), as if Executive had remained employed through the end of
such fiscal year, payable at the time such amounts would have been paid
absent such termination. All other benefits due Executive following
Executive's termination by reason of Disability or death shall be
determined in accordance with the plans, policies and practices of the
Company.
(c) Without Cause by the Company. If Executive's employment is
terminated by the Company without "Cause" (other than by reason of death or
Disability), subject to compliance with the provisions of Sections 8 and 9
below, Executive shall receive (i) continued payment of Base Salary through
the balance of the Employment Term (assuming no such termination of
employment), (ii) (A) a prorated portion (based on the number of days in
such fiscal year prior to the date of termination) of the Bonus, if any,
determined in accordance with Section 4(a), for the fiscal year in which
employment is terminated that Executive would have received had he remained
employed through the end of such fiscal year and (B) if, after Executive
has given notice pursuant to Section 1 of the Agreement that he desires to
extend the Employment Term, Executive' employment is terminated in the 60
day period prior to the end of the applicable fiscal year, 50% of the Bonus
that he received for the fiscal year in which his employment is terminated,
in each case payable at the time such Bonus would have been paid absent
such termination, (iii) any amounts due with respect to Executive's phantom
shares, determined in accordance with Section 4(b), as if Executive had
remained employed through the end of the Employment Term, payable at the
time such amounts would have been paid absent such termination and (iv) to
the extent permitted by the relevant plans, continued provision of health
and welfare benefits through the balance of the Employment Term (assuming
no such termination of employment). All other benefits due Executive
following Executive's termination of employment by the Company without
Cause shall be determined in accordance with the plans, policies and
practices of the Company.
(d) Termination by Executive. Subject to the notification and
cure provisions of this Section 7(d), Executive may terminate his
employment for Good Reason pursuant to this Section 7(d) and thereupon
shall be entitled to the same payments and benefits as described in Section
7(c) above. For purposes of this Section 7(d), "Good Reason" shall mean
the occurrence of any of the following events without the prior written
consent of Executive: (i) removal of Executive from his position as CEO
other than for Cause, death or Disability, (ii) a failure by the Company to
pay Executive any amounts due hereunder or (iii) a material reduction or
change inconsistent with the provisions of Section 2(a) in Executive's
duties and responsibilities.
If Executive proposes to terminate his employment for Good Reason
pursuant to this Section 7(d), he shall give the Company written notice in
accordance with Section 7(f). Such notice shall be given with sufficient
particularity that the Company will have an opportunity to correct the
situation to the reasonable satisfaction of Executive within 60 days. If
such correction is not so made, Executive may, within 60 days after the
expiration of the time within which the Company had the opportunity to
correct such situation, give written notice to the Company that he is
terminating his employment for Good Reason effective forthwith with the
effect stated in this Section 7(d).
If Executive terminates his employment hereunder other than for
Good Reason as defined in this Section 7(d), he shall be entitled to
receive the payments and benefits to which he would be entitled in the
event of a termination of employment by the Company for Cause.
(e) Termination as a Result of Non-Renewal of the Employment
Term. If Executive's employment with the Company terminates by reason of
the expiration or non-renewal of the Employment Term, Executive shall be
entitled to receive Base Salary, Bonus, if any, and any amounts due with
respect to his phantom shares through the end of the Employment Term. All
other benefits due Executive following Executive's termination of
employment pursuant to this Subsection 7(a) shall be determined in
accordance with the plans, policies and practices of the Company.
(f) Notice of Termination. Any purported termination of
employment by the Company or by Executive shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section
13(h) hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated.
8. Non-Competition. Executive acknowledges and recognizes the
highly competitive nature of the businesses of the Company and accordingly
agrees that:
(a) During the Employment Term, Executive shall not enter into
any competitive endeavors with and shall not undertake any commercial
activity which is contrary to the best interests of the Company, including
becoming an employee, owner (except for passive investments of not more
than 1% of the outstanding shares of, or any other equity interest in, any
company or entity listed or traded on a national securities exchange or in
an over-the-counter securities market), officer, agent or director of any
firm or person in any geographic area in which the Company or any of its
affiliates conducted any such competing line of business.
(b) During the Employment Term and for a period of one year
after termination of Executive's employment, Executive shall not directly
or indirectly knowingly, or under circumstances in which he reasonably
should have known, induce any employee of the Company to engage in any
activity in which Executive is prohibited from engaging by Section 8(a)
above or to terminate his employment with the Company and shall not
directly or indirectly knowingly, or under circumstances in which he
reasonably should have known, employ or offer employment to any such person
unless such person shall have ceased to be employed by the Company and such
cessation of employment shall have occurred at least 3 months prior
thereto, except that Executive may employ or offer employment to any person
whose employment was terminated by the Company (other than at the direction
of Executive).
9. Confidentiality. Executive shall not, during the Employment
Term or thereafter, without the prior written consent of the Board, use,
divulge, disclose or make accessible to any other person, firm, partnership
or corporation any Confidential Information, as hereinafter defined, except
(i) while employed by the Company in the business of and for the benefit of
the Company or (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the business of the
Company or by any administrative body or legislative body, including a
committee thereof, with jurisdiction to order him to divulge, disclose or
make accessible such Information; provided, that in the case of any such
requirement or purported requirement Executive shall provide written notice
to the Company prior to producing such Information, which notice shall be
given at least 10 days prior to the producing of such Information, if
practicable, so that the Company may seek a protective order or other
appropriate remedy. For purposes of this Agreement, "Confidential
Information" shall mean all non-public information concerning the business
of the Company, including, without limitation, information relating to its
financial products, product development, customer lists, relationships with
customers, other information about or provided by customers, financial
information, business and marketing plans and strategies, operating
policies and manuals, securities positions, and current or prospective
transactions, except for specific items which become publicly available
information other than through a breach by Executive of his fiduciary duty
or any confidentiality agreement, including without limitation this Section
9. Executive agrees that upon termination of his employment hereunder for
any reason, he shall return to the Company immediately all memoranda,
books, papers, plans, information, letters and other data, and all copies
thereof or therefrom, in any way relating to the business of the Company,
except that he may retain personal notes, notebooks and diaries. Executive
further agrees that he shall not retain or use for his account at any time
any trade name, trademark, service mark or other proprietary business
designation used or owned in connection with the business of the Company.
10. Specific Performance and Other Remedies. Executive
acknowledges and agrees that the Company has no adequate remedy at law for
a breach or threatened breach of any of the provisions of Sections 8 or 9
and, in recognition of this fact, Executive agrees that, in the event of
such a breach or threatened breach, in addition to any remedies at law, the
Company (i) without posting any bond, shall be entitled to obtain equitable
relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may
then be available and (ii) shall have no further obligation to make any
payments to Executive. Nothing in this Agreement shall be construed as
prohibiting the Company from pursuing any other remedies at law or in
equity that it may have or any other rights that it may have under any
other agreement.
11. Sale of the Company. Upon a termination of employment by
either party within one year of the consummation of a "Sale" of the
Company, Executive shall be entitled to receive a lump sum payment
consisting of (i) payment of Base Salary through the balance of the
Employment Term (assuming no such termination of employment), (ii) 100% of
the Bonus that Executive would have been eligible to receive through the
balance of the Employment Term (assuming no such termination of employment
and assuming all applicable performance goals were satisfied) and (iii) any
amounts due with respect to Executive's phantom shares through the date of
the consummation of the Sale, determined in accordance with Section 4(b)
(except that the phantom share payment shall be determined by reference to
the price of a share of common stock as hereinafter set forth rather than
at the end of the fiscal year). For purposes of determining amounts due
under this Section 11 with respect to Executive's phantom shares, in the
case of a stock purchase, the stock price shall be the price per share of
common stock received by (or imputed to) the shareholders of the Company in
connection with any such transaction, if applicable, or, if no such
transaction price is determinable, the stock price shall be the average of
the closing prices of a share of common stock of the Company for the 30 day
period immediately preceding the date of the Sale as listed in the Wall
Street Journal.
For purposes of this Agreement, the term "Sale" shall mean the
occurrence of any one of the following events:
(i) (A) (x) any "person" (as such term is used in Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934
(the "Act")) subject to the reporting requirements of
Sections 13(d) or 13(g) of the Act with respect to the
Company increases its "beneficial ownership" (as such term
is used in Rule 13d-3 promulgated under the Act) of voting
securities of the Company by 20 or more percentage points or
(y) any other "person" becomes a "beneficial owner" of 20%
or more of the voting securities of the Company, and
(B) at any time during the period beginning upon the occurrence
of an event described in clause (A) above and ending on the
later of (i) the date which is six months after the date of
such occurrence and (ii) the meeting of the Company's
shareholders next following such occurrence, nonemployee
directors of the Board on the Commencement Date (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the nonemployee directors of the Board;
provided that any individual becoming a nonemployee director
subsequent to the Commencement Date whose appointment or
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority
of directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a
person other than the Board; or
(ii) all or substantially all of the business or assets of the
Company is disposed of pursuant to a merger, consolidation or other
transaction.
12. Indemnification. The Company shall indemnify Executive
against liabilities incurred as a result of or in connection with any
actions taken or omitted to be taken in the performance of his duties
hereunder to the fullest extent permitted by Delaware law. Executive
acknowledges that the Company's Certificate of Incorporation currently
provides such indemnification to its officers and directors.
13. Miscellaneous.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS.
(b) Entire Agreement/Amendments. This Agreement contains the
entire understanding of the parties with respect to the employment of
Executive by the Company. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to
the subject matter herein other than those expressly set forth herein and
therein. This Agreement may not be altered, modified, or amended except by
written instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any other
term of this Agreement. Any such waiver must be in writing and signed by
Executive or an authorized officer of the Company, as the case may be.
(d) Severability. It is expressly understood and agreed that
although Executive and the Company consider the restrictions contained in
Sections 8 and 9 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory
restriction in Section 8 or any other restriction contained in Section 8 or
9 is an unenforceable restriction against Executive, such provision shall
not be rendered void but shall be deemed amended to apply to such maximum
time and territory, if applicable, or otherwise to such maximum extent as
such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any
restriction contained in Section 8 or 9 is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such finding
shall not affect the enforceability of any of the other restrictions
contained herein. In the event that any one or more of the other
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment. This Agreement shall not be assignable by
Executive and shall be assignable by the Company only with the consent of
Executive.
(f) Successors; Binding Agreement. This Agreement shall inure
to the benefit of and be binding upon the personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees of the parties hereto.
(g) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when faxed or delivered
or two business days after being mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the execution page of this Agreement or
to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt; provided that all notices to the
Company shall be directed to the attention of the General Counsel with a
copy to the Secretary of the Company; and provided further that a copy of
all notices to Executive shall be sent to:
Mark K. Rabidoux, Esq.
Jaffe, Raitt, Heuer & Weiss
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
(h) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law or
regulation.
(i) Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of Executive's employment
to the extent necessary to the agreed preservation of such rights and
obligations.
(j) Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(k) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EXECUTIVE
/S/ ERIC D. BOOTH
---------------------------
Eric D. Booth
18920 Edenderry Drive
Northville, Michigan 48167
COMPANY
LOMAS FINANCIAL CORPORATION
By:/S/ JESS HAY
-------------------------
Name: Jess Hay
Title: Chairman and Chief Executive Officer
Lomas Financial Corporation
1600 Viceroy Drive
Dallas, Texas 75235
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of December 1, 1994 by and between
Lomas Financial Corporation, a Delaware corporation, (the "Company") and
Robert R. Denton ("Executive").
WHEREAS, the Company desires to employ Executive as Executive
Vice President ("EVP"); and
WHEREAS, the Company and Executive desire to enter into an
agreement (the "Agreement") embodying the terms of such employment;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration,
the parties agree as follows:
1. Term of Employment. Executive's employment by the Company
shall be for a term (the "Employment Term") which shall commence on
December 12, 1994 (the "Commencement Date") and shall terminate on June 30,
1996 (the "Initial Term"); provided that, beginning July 1, 1996 the
Employment Term may be extended for successive one year periods (commencing
on July 1 and terminating on June 30) if not earlier than 120 days and not
later than 60 days prior to any such July 1, the Company or Executive shall
have given notice to the other party that he or it desires to extend the
Employment Term. Notwithstanding the foregoing, the Employment Term shall
terminate in any and all events upon the termination of Executive's
employment hereunder.
2. Position. (a) During the Employment Term Executive shall
serve as EVP of the Company. Executive shall report directly to the chief
executive officer of the Company and shall have such duties and authority
as shall be determined from time to time by the chief executive officer and
the Board of Directors of the Company (the "Board"); provided that such
duties shall be consistent with those of an executive vice president.
(b) During the Employment Term, Executive shall devote
substantially all of his business time and best efforts to the performance
of his duties hereunder and shall not engage in any other business,
profession or occupation for compensation or otherwise; provided that
Executive may continue his present ownership or other present interests in
Pegasus Investment Advisors, Inc. and Woodward Securities Corporation as
long as Executive's attention to such other interests do not materially
detract him from devoting his full attention to his duties to the Company
hereunder.
(c) Executive shall be permitted to reside in the location of
his choice, but shall spend as much time in Dallas, Texas as he deems
necessary to perform his duties hereunder.
3. Base Salary. During the Employment Term, the Company shall
pay Executive an annual base salary (the "Base Salary") at an initial rate
of $250,000, payable in arrears, in accordance with the usual payment
practices of the Company. Executive's Base Salary shall be subject to
annual increases equal to not less than the greater of the increase in the
National Consumer Price Index for All Urban Consumers as of the close of
the preceding twelve-month period and 5%; provided that for the fiscal year
beginning July 1, 1995, such annual increase shall be equal to not less
than the greater of one-half of the increase in such Consumer Price Index
as of the close of the preceding twelve-month period and 2 1/2%.
4. Incentive Compensation.
(a) During the Employment Term, Executive shall be eligible to
receive, in addition to his Base Salary, an annual bonus (the "Bonus")
equal to up to 50% of Base Salary for such fiscal year, payable by July 15
of the following fiscal year, based upon personal and corporate goals and
objectives agreed upon by Executive and the Company prior to July 1 of such
fiscal year. For the period from December 1, 1994 through June 30, 1995,
Executive shall receive a guaranteed bonus equal to $62,500 plus any
additional amounts the Board may deem appropriate based upon personal and
corporate performance.
(b) Executive shall be eligible to participate in the Company's
1993 Intermediate and Long-Term Incentive Plan (the "Plan"). Effective as
of the Commencement Date, Executive shall have been granted 100,000 phantom
shares of common stock of the Company under the Plan. Such phantom shares
shall entitle Executive to receive a payment with respect to each fiscal
year in the Employment Term equal to the increase in value of such shares
during such year, determined based on the excess, if any, of (i) the
average of the closing prices of a share of common stock of the Company for
the 30 day period immediately preceding June 30 of such fiscal year, as
listed in the Wall Street Journal, over (ii) the "Base Value", which
payment shall be made by July 15 of the following fiscal year. The initial
Base Value of such shares shall be the closing price of a share of common
stock of the Company on December 6, 1994, as listed in the Wall Street
Journal. The Base Value shall be reset as of June 30 of any fiscal year if
the average of the closing prices of a share of common stock for the 30 day
period immediately preceding June 30 as listed in the Wall Street Journal
is higher than the Base Value of such shares during the previous fiscal
year. The new Base Value from and after such date (subject to further
adjustment in accordance with this Section 4) shall be such closing price.
5. Employee Benefits. During the Employment Term, Executive
shall be provided employee benefits (the "Employee Benefits") as shall be
maintained by the Company from time to time on the same basis as the other
senior executives of the Company.
6. Business Expenses and Perquisites. (a) The Company shall
reimburse such of Executive's travel, entertainment and other business
expenses as are reasonably and necessarily incurred by Executive during the
Employment Term in the performance of his duties hereunder, in accordance
with the Company's policies as in effect from time to time. During the
Employment Term, the Company shall (i) reimburse Executive for travel
expenses incurred for one round trip airline fare per week between Dallas
and Detroit to be used by either Executive or his spouse, (ii) furnish
Executive with a suitable furnished Dallas apartment or condominium and an
automobile in Dallas, Texas and (iii) furnish Executive with office
facilities (including secretarial support) in the metropolitan Detroit,
Michigan area commensurate with the Executive's needs, taking into account
the proportion of his business time spent in such location. To the extent
any expenditure under this paragraph 6 is reportable by Executive and the
Company as "wages", Executive shall be entitled to receive additional
compensation commensurately to cover Executive's tax liability resulting
from such reporting and from the receipt of any such additional
compensation.
7. Termination. Except as provided in this Section 7, upon a
termination of employment Executive shall be entitled to no other payment
or benefit under this Agreement or any other plan or program of the
Company, and the entitlements described in this Section 7 shall be his
exclusive entitlements in the event of termination of employment.
(a) For Cause by the Company.
(i) Subject to the notification and cure provisions of
subparagraph (ii) of this Section 7(a), Executive's employment
hereunder may be terminated by the Company for "Cause". For purposes
of this Agreement, "Cause" shall mean (A) Executive's willful and
continued failure substantially to perform his duties hereunder,
including duties directed by the Board consistent with the provisions
of Section 2(a), (other than as a result of total or partial
incapacity due to physical or mental illness), (B) material dishonesty
in the performance of Executive's duties hereunder, (C) an act or acts
on Executive's part constituting a felony under the laws of the United
States or any state thereof, excluding acts imputed to Executive by
reason of his position as EVP of the Company, or (D) any other willful
act or omission which is materially injurious to the Company and its
subsidiaries and affiliates, taken as a whole, financially or
otherwise (including but not limited to breach of the non-competition
and confidentiality covenants set forth in Sections 8 and 9 hereof).
For purposes of subparagraph (D), an act or failure to act, on the
part of Executive, shall be deemed "willful" if done, or omitted to be
done, by Executive not in good faith and without a reasonable belief
that the act or omission was in or not opposed to the best interests
of the Company.
(ii) If the Company proposes to terminate Executive's employment
hereunder for Cause pursuant to clause (A) of Section 7(a)(i), the
Company shall give Executive written notice in accordance with Section
7(f). Such notice shall be given with sufficient particularity that
Executive will have an opportunity to correct the situation to the
reasonable satisfaction of the Company within 60 days. If such
correction is not so made, the Company may, within 60 days after the
expiration of the time within which Executive had the opportunity to
correct such situation, give written notice to Executive that it is
terminating his employment for Cause effective forthwith with the
effect stated in this Section 7(a).
(iii) If Executive is terminated for Cause, he shall be entitled
to receive (i) his Base Salary through the date of termination, (ii) a
prorated portion (based on the number of days in such fiscal year
prior to the date of termination) of the Bonus, if any, determined in
accordance with Section 4(a), for the fiscal year in which employment
is terminated that Executive would have received had he remained
employed through the end of such fiscal year, payable at the time such
Bonus would have been paid absent such termination and (iii) a
prorated portion (based on the number of days in such fiscal year
prior to the date of termination) of any amounts due with respect to
Executive's phantom shares, determined in accordance with Section 4(b)
(except that the phantom share payment shall be determined by
reference to the price of a share of common stock as of the close of
trading on the date of termination rather than at the end of the
fiscal year), as if Executive had remained employed through the end of
such fiscal year, payable at the time such amounts would have been
paid absent such termination. All other benefits due Executive
following Executive's termination of employment pursuant to this
Subsection 7(a) shall be determined in accordance with the plans,
policies and practices of the Company.
(b) Disability or Death. Executive's employment hereunder shall
terminate upon (i) his death or (ii) at the Company's election if Executive
becomes physically or mentally incapacitated and is therefore unable for a
period of 6 consecutive months or for an aggregate of 9 months in any 24
consecutive month period to perform his duties (such incapacity is
hereinafter referred to as "Disability"). Any question as to the existence
of the Disability of Executive as to which Executive and the Company cannot
agree shall be determined in writing by a qualified independent physician
mutually acceptable to Executive and the Company. If Executive and the
Company cannot agree as to a qualified independent physician, each shall
appoint such a physician and those two physicians shall select a third who
shall make such determination in writing. The determination of Disability
made in writing to the Company and Executive shall be final and conclusive
for all purposes of the Agreement.
Upon termination of Executive's employment hereunder by reason of
death, Executive's estate shall receive (i) continued payment of his Base
Salary at the rate in effect at the time of Executive's death through the
end of the month in which his death occurs, (ii) a prorated portion (based
on the number of days in such fiscal year prior to the date of termination)
of the Bonus, if any, determined in accordance with Section 4(a), for the
fiscal year in which employment is terminated that Executive would have
received had he remained employed through the end of such fiscal year,
payable at the time such Bonus would have been paid absent such termination
and (iii) a prorated portion (based on the number of days in such fiscal
year prior to the date of termination) of any amounts due with respect to
Executive's phantom shares, determined in accordance with Section 4(b)
(except that the phantom share payment shall be determined by reference to
the price of a share of common stock as of the close of trading on the date
of termination rather than at the end of the fiscal year), as if Executive
had remained employed through the end of such fiscal year, payable at the
time such amounts would have been paid absent such termination. Upon
termination of Executive's employment hereunder by reason of Disability,
Executive shall receive (i) continued payment of his Base Salary through
the date on which Executive is first eligible to receive payment of
disability benefits in lieu of Base Salary to the maximum extent permitted
under the Company's employee benefit plans as then in effect, (ii) the
Bonus, if any, determined in accordance with Section 4(a), for the fiscal
year in which employment is terminated that Executive would have received
had he remained employed through the end of such fiscal year, payable at
the time such Bonus would have been paid absent such termination and (iii)
any amounts due with respect to Executive's phantom shares, determined in
accordance with Section 4(b) (except that the phantom share payment shall
be determined by reference to the price of a share of common stock as of
the close of trading on the date of termination rather than at the end of
the fiscal year), as if Executive had remained employed through the end of
such fiscal year, payable at the time such amounts would have been paid
absent such termination. All other benefits due Executive following
Executive's termination by reason of Disability or death shall be
determined in accordance with the plans, policies and practices of the
Company.
(c) Without Cause by the Company. If Executive's employment is
terminated by the Company without "Cause" (other than by reason of death or
Disability), subject to compliance with the provisions of Sections 8 and 9
below, Executive shall receive (i) continued payment of Base Salary through
the balance of the Employment Term (assuming no such termination of
employment), (ii) (A) a prorated portion (based on the number of days in
such fiscal year prior to the date of termination) of the Bonus, if any,
determined in accordance with Section 4(a), for the fiscal year in which
employment is terminated that Executive would have received had he remained
employed through the end of such fiscal year and (B) if, after Executive
has given notice pursuant to Section 1 of the Agreement that he desires to
extend the Employment Term, Executive' employment is terminated in the 60
day period prior to the end of the applicable fiscal year, 50% of the Bonus
that he received for the fiscal year in which his employment is terminated,
in each case payable at the time such Bonus would have been paid absent
such termination, (iii) any amounts due with respect to Executive's phantom
shares, determined in accordance with Section 4(b), as if Executive had
remained employed through the end of the Employment Term, payable at the
time such amounts would have been paid absent such termination and (iv) to
the extent permitted by the relevant plans, continued provision of health
and welfare benefits through the balance of the Employment Term (assuming
no such termination of employment). All other benefits due Executive
following Executive's termination of employment by the Company without
Cause shall be determined in accordance with the plans, policies and
practices of the Company.
(d) Termination by Executive. Subject to the notification and
cure provisions of this Section 7(d), Executive may terminate his
employment for Good Reason pursuant to this Section 7(d) and thereupon
shall be entitled to the same payments and benefits as described in Section
7(c) above. For purposes of this Section 7(d), "Good Reason" shall mean
the occurrence of any of the following events without the prior written
consent of Executive: (i) removal of Executive from his position as EVP
other than for Cause, death or Disability, (ii) a failure by the Company to
pay Executive any amounts due hereunder or (iii) a material reduction or
change inconsistent with the provisions of Section 2(a) in Executive's
duties and responsibilities.
If Executive proposes to terminate his employment for Good Reason
pursuant to this Section 7(d), he shall give the Company written notice in
accordance with Section 7(f). Such notice shall be given with sufficient
particularity that the Company will have an opportunity to correct the
situation to the reasonable satisfaction of Executive within 60 days. If
such correction is not so made, Executive may, within 60 days after the
expiration of the time within which the Company had the opportunity to
correct such situation, give written notice to the Company that he is
terminating his employment for Good Reason effective forthwith with the
effect stated in this Section 7(d).
If Executive terminates his employment hereunder other than for
Good Reason as defined in this Section 7(d), he shall be entitled to
receive the payments and benefits to which he would be entitled in the
event of a termination of employment by the Company for Cause.
(e) Termination as a Result of Non-Renewal of the Employment
Term. If Executive's employment with the Company terminates by reason of
the expiration or non-renewal of the Employment Term, Executive shall be
entitled to receive Base Salary, Bonus, if any, and any amounts due with
respect to his phantom shares through the end of the Employment Term. All
other benefits due Executive following Executive's termination of
employment pursuant to this Subsection 7(a) shall be determined in
accordance with the plans, policies and practices of the Company.
(f) Notice of Termination. Any purported termination of
employment by the Company or by Executive shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section
13(h) hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated.
8. Non-Competition. Executive acknowledges and recognizes the
highly competitive nature of the businesses of the Company and accordingly
agrees that:
(a) During the Employment Term, Executive shall not enter into
any competitive endeavors with and shall not undertake any commercial
activity which is contrary to the best interests of the Company, including
becoming an employee, owner (except for passive investments of not more
than 1% of the outstanding shares of, or any other equity interest in, any
company or entity listed or traded on a national securities exchange or in
an over-the-counter securities market), officer, agent or director of any
firm or person in any geographic area in which the Company or any of its
affiliates conducted any such competing line of business; provided that
Executive's present ownership or other present interests in Pegasus
Investment Advisors, Inc. and Woodward Securities Corporation shall not be
deemed a breach of this Section 8(a).
(b) During the Employment Term and for a period of one year
after termination of Executive's employment, Executive shall not directly
or indirectly knowingly, or under circumstances in which he reasonably
should have known, induce any employee of the Company to engage in any
activity in which Executive is prohibited from engaging by Section 8(a)
above or to terminate his employment with the Company and shall not
directly or indirectly knowingly, or under circumstances in which he
reasonably should have known, employ or offer employment to any such person
unless such person shall have ceased to be employed by the Company and such
cessation of employment shall have occurred at least 3 months prior
thereto, except that Executive may employ or offer employment to any person
whose employment was terminated by the Company (other than at the direction
of Executive).
9. Confidentiality. Executive shall not, during the Employment
Term or thereafter, without the prior written consent of the Board, use,
divulge, disclose or make accessible to any other person, firm, partnership
or corporation any Confidential Information, as hereinafter defined, except
(i) while employed by the Company in the business of and for the benefit of
the Company or (ii) when required to do so by a court of law, by any
governmental agency having supervisory authority over the business of the
Company or by any administrative body or legislative body, including a
committee thereof, with jurisdiction to order him to divulge, disclose or
make accessible such Information; provided, that in the case of any such
requirement or purported requirement Executive shall provide written notice
to the Company prior to producing such Information, which notice shall be
given at least 10 days prior to the producing of such Information, if
practicable, so that the Company may seek a protective order or other
appropriate remedy. For purposes of this Agreement, "Confidential
Information" shall mean all non-public information concerning the business
of the Company, including, without limitation, information relating to its
financial products, product development, customer lists, relationships with
customers, other information about or provided by customers, financial
information, business and marketing plans and strategies, operating
policies and manuals, securities positions, and current or prospective
transactions, except for specific items which become publicly available
information other than through a breach by Executive of his fiduciary duty
or any confidentiality agreement, including without limitation this Section
9. Executive agrees that upon termination of his employment hereunder for
any reason, he shall return to the Company immediately all memoranda,
books, papers, plans, information, letters and other data, and all copies
thereof or therefrom, in any way relating to the business of the Company,
except that he may retain personal notes, notebooks and diaries. Executive
further agrees that he shall not retain or use for his account at any time
any trade name, trademark, service mark or other proprietary business
designation used or owned in connection with the business of the Company.
10. Specific Performance and Other Remedies. Executive
acknowledges and agrees that the Company has no adequate remedy at law for
a breach or threatened breach of any of the provisions of Sections 8 or 9
and, in recognition of this fact, Executive agrees that, in the event of
such a breach or threatened breach, in addition to any remedies at law, the
Company (i) without posting any bond, shall be entitled to obtain equitable
relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may
then be available and (ii) shall have no further obligation to make any
payments to Executive. Nothing in this Agreement shall be construed as
prohibiting the Company from pursuing any other remedies at law or in
equity that it may have or any other rights that it may have under any
other agreement.
11. Sale of the Company. Upon a termination of employment by
either party within one year of the consummation of a "Sale" of the
Company, Executive shall be entitled to receive a lump sum payment
consisting of (i) payment of Base Salary through the balance of the
Employment Term (assuming no such termination of employment), (ii) 100% of
the Bonus that Executive would have been eligible to receive through the
balance of the Employment Term (assuming no such termination of employment
and assuming all applicable performance goals were satisfied) and (iii) any
amounts due with respect to Executive's phantom shares through the date of
the consummation of the Sale, determined in accordance with Section 4(b)
(except that the phantom share payment shall be determined by reference to
the price of a share of common stock as hereinafter set forth rather than
at the end of the fiscal year). For purposes of determining amounts due
under this Section 11 with respect to Executive's phantom shares, in the
case of a stock purchase, the stock price shall be the price per share of
common stock received by (or imputed to) the shareholders of the Company in
connection with any such transaction, if applicable, or, if no such
transaction price is determinable, the stock price shall be the average of
the closing prices of a share of common stock of the Company for the 30 day
period immediately preceding the date of the Sale as listed in the Wall
Street Journal.
For purposes of this Agreement, the term "Sale" shall mean the
occurrence of any one of the following events:
(i) (A) (x) any "person" (as such term is used in Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934
(the "Act")) subject to the reporting requirements of
Sections 13(d) or 13(g) of the Act with respect to the
Company increases its "beneficial ownership" (as such term
is used in Rule 13d-3 promulgated under the Act) of voting
securities of the Company by 20 or more percentage points or
(y) any other "person" becomes a "beneficial owner" of 20%
or more of the voting securities of the Company, and
(B) at any time during the period beginning upon the occurrence
of an event described in clause (A) above and ending on the
later of (i) the date which is six months after the date of
such occurrence and (ii) the meeting of the Company's
shareholders next following such occurrence, nonemployee
directors of the Board on the Commencement Date (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the nonemployee directors of the Board;
provided that any individual becoming a nonemployee director
subsequent to the Commencement Date whose appointment or
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority
of directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a
person other than the Board; or
(ii) all or substantially all of the business or assets of the
Company is disposed of pursuant to a merger, consolidation or other
transaction.
12. Indemnification. The Company shall indemnify Executive
against liabilities incurred as a result of or in connection with any
actions taken or omitted to be taken in the performance of his duties
hereunder to the fullest extent permitted by Delaware law. Executive
acknowledges that the Company's Certificate of Incorporation currently
provides such indemnification to its officers and directors.
13. Miscellaneous.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS.
(b) Entire Agreement/Amendments. This Agreement contains the
entire understanding of the parties with respect to the employment of
Executive by the Company. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to
the subject matter herein other than those expressly set forth herein and
therein. This Agreement may not be altered, modified, or amended except by
written instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any other
term of this Agreement. Any such waiver must be in writing and signed by
Executive or an authorized officer of the Company, as the case may be.
(d) Severability. It is expressly understood and agreed that
although Executive and the Company consider the restrictions contained in
Sections 8 and 9 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory
restriction in Section 8 or any other restriction contained in Section 8 or
9 is an unenforceable restriction against Executive, such provision shall
not be rendered void but shall be deemed amended to apply to such maximum
time and territory, if applicable, or otherwise to such maximum extent as
such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any
restriction contained in Section 8 or 9 is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such finding
shall not affect the enforceability of any of the other restrictions
contained herein. In the event that any one or more of the other
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment. This Agreement shall not be assignable by
Executive and shall be assignable by the Company only with the consent of
Executive.
(f) Successors; Binding Agreement. This Agreement shall inure
to the benefit of and be binding upon the personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees of the parties hereto.
(g) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when faxed or delivered
or two business days after being mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the execution page of this Agreement or
to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt; provided that all notices to the
Company shall be directed to the attention of the General Counsel with a
copy to the Secretary of the Company; and provided further that a copy of
all notices to Executive shall be sent to:
<PAGE>
Mark K. Rabidoux, Esq.
Jaffe, Raitt, Heuer & Weiss
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
(h) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law or
regulation.
(i) Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of Executive's employment
to the extent necessary to the agreed preservation of such rights and
obligations.
(j) Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(k) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EXECUTIVE
/S/ ROBERT R. DENTON
-------------------------------
Robert R. Denton
COMPANY
LOMAS FINANCIAL CORPORATION
By:/S/ JESS HAY
----------------------------
Name: Jess Hay
Title: Chairman and Chief Executive Officer
Lomas Financial Corporation
1600 Viceroy Drive
Dallas, Texas 75235
EXHIBIT 10.15
LOMAS FINANCIAL CORPORATION
1993 INTERMEDIATE AND
LONG TERM INCENTIVE PLAN
PHANTOM STOCK AGREEMENT
AGREEMENT dated as of December 12, 1994 between Lomas Financial
Corporation, a Delaware corporation (the "Company"), and Eric D. Booth (the
"Executive").
1. (a) The following terms shall have the following meanings:
"Base Value" shall mean the closing price of a share of Common
Stock on December 6, 1994, as reported in the Wall Street Journal, as such
Base Value may be subsequently adjusted pursuant to Section 2(d).
"Employment Agreement" shall mean the Employment Agreement dated
as of December 1, 1994 between the Company and Executive.
"Phantom Shares" shall mean Awards granted under the Plan
hereunder pursuant to the terms and conditions of this Agreement.
"Plan" shall mean the Lomas Financial Corporation 1993
Intermediate and Long Term Incentive Plan.
(b) Defined terms not otherwise defined in this Agreement shall
have the meaning set forth in Section 2 of the Plan.
2. (a) Pursuant to the Plan, the Executive is hereby granted,
on the terms and conditions set forth in this Agreement and in the Plan,
200,000 Phantom Shares.
(b) Each Phantom Share shall entitle Executive to receive a
payment with respect to each fiscal year in the Employment Term (as defined
in the Employment Agreement) equal to the excess, if any, of (i) the
average of the closing prices of a share of Common Stock for the 30 day
period immediately preceding June 30 of such fiscal year over (ii) the Base
Value at the time of such payment.
(c) Except as set forth in Sections 7 and 11 of the Employment
Agreement, payments owing in respect of the Phantom Shares for any fiscal
year shall be made no later than July 15 of the following fiscal year.
(d) If on June 30 of any fiscal year, the average of the closing
prices of a share of Common Stock for the immediately preceding 30 day
period determined for purposes of Section 2(b)(i) above is higher than the
Base Value on such date, such that a payment is made to Executive pursuant
to Section 2(b), the Base Value shall be reset to such price determined for
purposes of Section 2(b)(i) and such reset Base Value shall be the Base
Value for subsequent fiscal years, subject to further adjustment in
accordance with this Section 2(d).
3. Except to the extent set forth in Sections 7 and 11 of the
Employment Agreement, the Phantom Shares shall expire and any rights of
Executive with respect to the Phantom Shares granted hereunder shall
immediately terminate on the date that the Executive ceases for any reason
to be employed by the Company.
4. Phantom Shares are not transferable by the Executive;
however, in the event of the Executive's death, payment of amounts owing to
him in respect of the Phantom Shares will be made to his estate in
accordance with the terms of the Employment Contract.
5. (a) This Agreement is subject to the provisions of the
Plan. The Plan may at any time be amended by the Board or its delegee as
set forth in the Plan. This Agreement may be amended by Committee with the
Executive's consent at any time in any manner not inconsistent with the
terms of the Plan. Except as set forth above, any applicable
determinations, orders, resolutions or other actions of the Committee shall
be final, conclusive and binding on the Company and the Executive.
(b) As a condition to the delivery of payments due with respect
to the Phantom Shares, the Executive is required to satisfy any obligation
in respect of withholding or other taxes in accordance with procedures
established by the Committee.
6. All notices hereunder shall be in writing, and if to the
Company, shall be delivered personally or mailed by first class mail to the
Secretary of the Company at its principal office, 1600 Viceroy Drive,
Dallas, Texas 75235; and if to the Executive, shall be delivered personally
or mailed by first class mail to the Executive at the address then
appearing in the personnel records of the Company. Such addresses, as well
as the officer designated by the Company to receive notices hereunder, may
be changed at any time by notice from one party to the other.
7. This Agreement shall bind and inure to the benefit of the
parties hereto and the successors and assigns of the Company and, to the
extent provided in the Plan and in this Agreement, the successors, assigns
and legal representatives of the Executive.
8. Neither this Agreement nor the award of the Options
hereunder shall be construed as giving the Executive any right to be
retained in the employ of the Company or its affiliates or as limiting in
any manner the Company's right to dismiss the Executive from employment for
any reason.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year set forth above.
COMPANY
LOMAS FINANCIAL CORPORATION
By /S/JESS HAY
------------------------------
Name: Jess Hay
Title: Chairman and Chief Executive
Officer
EXECUTIVE
/S/ERIC D. BOOTH
--------------------------------
Eric D. Booth
EXHIBIT 10.16
LOMAS FINANCIAL CORPORATION
1993 INTERMEDIATE AND
LONG TERM INCENTIVE PLAN
PHANTOM STOCK AGREEMENT
AGREEMENT dated as of December 12, 1994 between Lomas Financial
Corporation, a Delaware corporation (the "Company"), and Robert R. Denton
(the "Executive").
1. (a) The following terms shall have the following meanings:
"Base Value" shall mean the closing price of a share of Common
Stock on December 6, 1994, as reported in the Wall Street Journal, as such
Base Value may be subsequently adjusted pursuant to Section 2(d).
"Employment Agreement" shall mean the Employment Agreement dated
as of December 1, 1994 between the Company and Executive.
"Phantom Shares" shall mean Awards granted under the Plan
hereunder pursuant to the terms and conditions of this Agreement.
"Plan" shall mean the Lomas Financial Corporation 1993
Intermediate and Long Term Incentive Plan.
(b) Defined terms not otherwise defined in this Agreement shall
have the meaning set forth in Section 2 of the Plan.
2. (a) Pursuant to the Plan, the Executive is hereby granted,
on the terms and conditions set forth in this Agreement and in the Plan,
100,000 Phantom Shares.
(b) Each Phantom Share shall entitle Executive to receive a
payment with respect to each fiscal year in the Employment Term (as defined
in the Employment Agreement) equal to the excess, if any, of (i) the
average of the closing prices of a share of Common Stock for the 30 day
period immediately preceding June 30 of such fiscal year over (ii) the Base
Value at the time of such payment.
(c) Except as set forth in Sections 7 and 11 of the Employment
Agreement, payments owing in respect of the Phantom Shares for any fiscal
year shall be made no later than July 15 of the following fiscal year.
(d) If on June 30 of any fiscal year, the average of the closing
prices of a share of Common Stock for the immediately preceding 30 day
period determined for purposes of Section 2(b)(i) above is higher than the
Base Value on such date, such that a payment is made to Executive pursuant
to Section 2(b), the Base Value shall be reset to such price determined for
purposes of Section 2(b)(i) and such reset Base Value shall be the Base
Value for subsequent fiscal years, subject to further adjustment in
accordance with this Section 2(d).
3. Except to the extent set forth in Sections 7 and 11 of the
Employment Agreement, the Phantom Shares shall expire and any rights of
Executive with respect to the Phantom Shares granted hereunder shall
immediately terminate on the date that the Executive ceases for any reason
to be employed by the Company.
4. Phantom Shares are not transferable by the Executive;
however, in the event of the Executive's death, payment of amounts owing to
him in respect of the Phantom Shares will be made to his estate in
accordance with the terms of the Employment Contract.
5. (a) This Agreement is subject to the provisions of the
Plan. The Plan may at any time be amended by the Board or its delegee as
set forth in the Plan. This Agreement may be amended by Committee with the
Executive's consent at any time in any manner not inconsistent with the
terms of the Plan. Except as set forth above, any applicable
determinations, orders, resolutions or other actions of the Committee shall
be final, conclusive and binding on the Company and the Executive.
(b) As a condition to the delivery of payments due with respect
to the Phantom Shares, the Executive is required to satisfy any obligation
in respect of withholding or other taxes in accordance with procedures
established by the Committee.
6. All notices hereunder shall be in writing, and if to the
Company, shall be delivered personally or mailed by first class mail to the
Secretary of the Company at its principal office, 1600 Viceroy Drive,
Dallas, Texas 75235; and if to the Executive, shall be delivered personally
or mailed by first class mail to the Executive at the address then
appearing in the personnel records of the Company. Such addresses, as well
as the officer designated by the Company to receive notices hereunder, may
be changed at any time by notice from one party to the other.
7. This Agreement shall bind and inure to the benefit of the
parties hereto and the successors and assigns of the Company and, to the
extent provided in the Plan and in this Agreement, the successors, assigns
and legal representatives of the Executive.
8. Neither this Agreement nor the award of the Options
hereunder shall be construed as giving the Executive any right to be
retained in the employ of the Company or its affiliates or as limiting in
any manner the Company's right to dismiss the Executive from employment for
any reason.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year set forth above.
COMPANY
LOMAS FINANCIAL CORPORATION
By /S/JESS HAY
-----------------------------
Name: Jess Hay
Title: Chairman and Chief Executive
Officer
EXECUTIVE
/S/ROBERT R. DENTON
-------------------------------
Robert R. Denton
EXHIBIT 10.17
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of August 2, 1994 by and between
Lomas Financial Corporation, a Texas corporation (the "Company") and Jess
Hay ("Consultant").
WHEREAS, Consultant and the Company have previously entered into
an Employment Agreement dated as of October 7, 1983 (the "Employment
Agreement");
WHEREAS, Consultant wishes to resign from his position as
Chairman and Chief Executive Officer of the Company and the parties wish to
terminate the Employment Agreement;
WHEREAS, the Company's management desires that it be able to
continue to call upon the experience and knowledge of Consultant for
consultation services and advice; and
WHEREAS, Consultant is willing to render such services to the
Company on the terms and conditions hereinafter set forth in this
Agreement;
NOW, THEREFORE, in consideration of the promises and mutual
covenants contained herein and Consultant's long prior service to the
Company, and in cancellation and settlement of all obligations under the
Employment Agreement, the parties agree as follows:
1. Resignation and Appointment. (a) Consultant shall remain
employed as an officer of the Company through December 31, 1994, and will
retire effective December 31, 1994. Consultant will resign his positions
of Chairman and Chief Executive Officer of the Company effective upon his
retirement or, if earlier, effective as of the date on which his successor
shall have been appointed by the Company's Board of Directors.
(b) Upon the effectiveness of Consultant's resignation, he shall
be appointed Chairman Emeritus by the Board of Directors.
(c) Consultant shall continue to serve as a director of the
Company until the Company's Annual Meeting of Stockholders in 1995 and
thereafter if he is nominated by the Board of Directors and elected by the
stockholders of the Company. Consultant shall not receive any additional
remuneration (e.g. directors' fees, meeting fees or director stock options
or awards) for any services rendered as a director prior to December 31,
2000.
2. Term of Agreement. Consultant shall be retained by the
Company for a period commencing on January 1, 1995 and terminating on
December 31, 2004, which period may be extended or renewed by mutual
written agreement of the parties hereto. The initial period and any
extensions or renewals thereof shall constitute the "Consulting Term".
3. Position and Responsibilities. Consultant agrees to serve
as a consultant to the Company and to render such advice and services to
the Company as may be reasonably requested by the Chief Executive Officer
or the Board of Directors of the Company; provided, however, that
Consultant shall not be required to render more than 500 hours of service
in the first three years and shall be ratably reduced thereafter in
accordance with amounts payable hereunder. Without limiting the generality
of the foregoing, during the first three calendar years of the Consulting
Term, Consultant shall make himself available in person to render such
services at the Company's headquarters location on a regular basis
equivalent to one day per week, allowing for reasonable and customary
vacations and taking into account the nature of the services provided.
During the Consulting Term, Consultant shall report directly to the Board
of Directors of the Company.
4. Compensation. (a) The Company shall pay Consultant a
retainer (the "Retainer") of (i) $300,000 per year for the period from
January 1, 1995 through December 31, 1997, (ii) $100,000 per year for the
period from January 1, 1998 through December 31, 2000 and (iii) $50,000 per
year for each of the remaining calendar years in the Consulting Term. The
Retainer shall be payable in equal monthly installments during the
Consulting Term. Consultant shall be entitled to the full Retainer
regardless of the amount and frequency of consulting services actually
rendered by him.
(b) During the Consulting Term, the Company shall continue the
participation of Consultant and his spouse in all employee benefit
arrangements of the Company that provide life insurance and health,
medical, hospitalization and similar benefits, to the extent that
Consultant and his spouse are covered under existing policies, if any, on a
basis no less favorable than that on which they are currently covered under
any such plan or policy.
(c) All outstanding stock options granted to Consultant prior to
the date of his retirement under any stock incentive plan of the Company
shall be fully vested as of such date and shall continue to be exercisable
for the remainder of their terms, and the Company shall make such
amendments to the plans and the outstanding awards as may be necessary to
effectuate the provisions of this paragraph 4(c), except that the Company
shall be obliged to make any such amendment only to the extent that
shareholder approval thereof would not be required to maintain the current
status of any such plan under any applicable regulatory regime.
(d) Consultant shall continue to be eligible to participate in
the "success bonus" arrangement established by the Compensation Committee
of the Board of Directors for senior executives of the Company in
connection with the sale of all or a substantial portion of the Company.
(e) Consultant shall be eligible to participate in any bonus or
incentive plan established for the senior corporate executives of the
Company in respect of fiscal year 1995, provided that such bonus shall be
based on amounts actually received by Consultant pursuant to his existing
employment agreement and this Agreement.
5. Expenses and Other Facilities. (a) During the period from
January 1, 1995 through December 31, 1999, the Consultant shall be
reimbursed in accordance with the policies of the Company for necessary and
reasonable business expenses incurred by Consultant in connection with the
performance of his duties hereunder.
(b) During the period from January 1, 1995 through December 31,
1999, the Company shall continue to make available to Consultant, without
any expense to him, Consultant's current office at 2001 Bryan Tower along
with the furniture, fixtures and equipment currently associated therewith.
The Company shall also employ an administrative assistant whose skills,
availability and compensation shall be satisfactory to Consultant; provided
that Consultant agrees that his currently assigned administrative assistant
and her existing compensation arrangements are satisfactory to him.
(c) In the event that the Company is unable to furnish
Consultant with his existing office at 2001 Bryan Tower because the
Company's lease on such space is terminated or modified after the date
hereof or because such space is subleased to a party other than the Company
or an affiliate of the Company, the Company shall provide Consultant and
Consultant's administrative assistant with equivalent and comparable office
facilities (including furniture, equipment and other amenities) located at
the Company's headquarters.
6. Termination and Liquidated Damages. (a) This Agreement and
Consultant's retention hereunder may be terminated at any time by either
party upon sixty (60) days prior written notice to the other party. In the
event of (i) such a termination by the Company, other than a termination
for "Cause", as hereinafter defined, or (ii) a termination at any time by
Consultant as a result of a breach of this Agreement by the Company,
Consultant shall be entitled to receive as liquidated damages an amount in
cash equal to the then present value of all remaining payments due
hereunder during the balance of the Consulting Term. Such amount shall be
calculated using a discount rate of 6% per annum and shall be paid in a
single sum not later than 10 days after any such termination.
(b) In the event of a voluntary termination of his retention
hereunder by the Consultant prior to the end of the Consulting Term other
than as set forth in clause (ii) above, the Company will have no further
obligation to make payments to Consultant following any such termination.
Consultant shall not be subject to liability for breach of this Agreement
by reason of his termination of his retention hereunder.
(c) For purposes of this Agreement, "Cause" shall mean (i)
Consultant's willful and continued failure substantially to perform his
duties hereunder (other than as a result of Disability and other than as a
result of breach of this Agreement by the Company), (ii) Consultant's
dishonesty in the performance of his duties hereunder or (iii) an act or
acts on Consultant's part constituting a felony under the laws of the
United States or any state thereof.
(d) In the event of any termination of this Agreement pursuant
to Paragraph 6(a), the Company shall continue to provide Consultant or his
spouse, or both, with the benefits specified in paragraph 4(b) until
December 31, 2004.
7. Status; Taxes.
(a) Status of Consultant. During the Consulting Term,
Consultant shall not be an employee of the Company and shall not be
entitled to participate in any employee benefit plans or other benefits or
conditions of employment available to the employees of the Company except
to the extent set forth in paragraphs 4(b), (c), (d) and (e). Consultant
shall have no authority to act as an agent of the Company, except on
authority specifically so delegated, and he shall not represent to the
contrary to any person. Consultant shall only consult, render advice and
perform such tasks as Consultant determines are necessary to achieve the
results specified by the Company. He shall not direct the work of any
employee of the Company, or make any management decisions, or undertake to
commit the Company to any course of action in relation to third persons.
Although the Company may specify the results to be achieved by the
Consultant and may control and direct him in that regard, the Company shall
not control or direct the Consultant as to the details or means by which
such results are accomplished. (b) Taxes. It is intended that
the fees paid hereunder shall constitute revenues to Consultant. To the
extent consistent with applicable law, the Company will not withhold any
amounts therefrom as federal income tax withholding from wages or as
employee contributions under the Federal Insurance Contributions Act or any
other state or federal laws. Consultant shall be solely responsible for
the withholding and/or payment of any federal, state or local income or
payroll taxes.
8. Non-Competition. During the period from January 1, 1995
through December 31, 2000, Consultant shall not directly or indirectly be
or remain employed by, or render services for, any person, firm,
partnership, joint venture, association, corporation or other business
organization, entity or enterprise engaged in any business, which is in
competition with any business currently conducted by the Company; provided,
however, that no provision of this paragraph shall in any way restrict
Consultant from engaging in the practice of law or the rendering of legal
services to anyone in any location.
9. Confidentiality. During and after the Consulting Term,
Consultant shall not disclose or use for Consultant's own benefit or
purposes or the benefit or purposes of any other person, firm, partnership,
joint venture, association, corporation or other business organization,
entity or enterprise other than the Company and any of its subsidiaries or
affiliates, any trade secrets, information, data, or other confidential
information relating to customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial
data, manufacturing processes, financing methods, plans, or the business
and affairs of the Company generally, or of any subsidiary or affiliate of
the Company; provided that the foregoing shall not apply to information
which is not unique to the Company or which is generally known to the
industry or the public other than as a result of Consultant's breach of
this covenant. Any provision of this Agreement to the contrary
notwithstanding, Consultant's obligations pursuant to this Paragraph 9
shall survive any termination of this Agreement and Consultant's retention
hereunder.
10. Specific Performance. Consultant acknowledges and agrees
that the Company's remedies at law for a breach or threatened breach of any
of the provisions of Paragraph 8 or Paragraph 9 would be inadequate and, in
recognition of this fact, Consultant agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the
Company, without posting any bond, shall be entitled to obtain equitable
relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may
then be available.
11. Fees and Expenses. The Company agrees to pay any and all
legal fees and related expenses incurred by Consultant in connection with
the formation of this Agreement. The Company also agrees, in the event of
a dispute between Consultant and the Company with respect to any of
Consultant's rights under this Agreement, to reimburse Consultant for any
and all reasonable legal fees and related expenses incurred by Consultant
in connection with enforcing such rights if Consultant is successful as to
at least part of the disputed claim by reason of arbitration, litigation or
settlement.
12. Miscellaneous.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
(b) Entire Agreement; Amendments. This Agreement supersedes all
prior agreements between Consultant and the Company relating to
Consultant's employment and the termination thereof, including, without
limitation, the Employment Agreement, and, together with the agreements
evidencing the stock options and other awards referred to in Paragraph 4(c)
and the documents evidencing the benefits to which Consultant and his
spouse are entitled pursuant to Paragraphs 4(b), (d) and (e), contains the
entire understanding of the parties with respect to the retention of
Consultant by the Company; provided, however, that this Agreement shall not
impair any rights or benefits accrued by Consultant under any benefit plan,
compensation arrangement or pension, excess retirement or management
security plan of the Company prior to the termination of his employment on
December 31, 1994. Except as aforesaid, there are no restrictions,
agreements, promises, warranties, covenants or undertakings between the
parties with respect to the subject matter herein other than those
expressly set forth herein. This Agreement may not be altered, modified,
or amended except by written instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
(d) Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment. This Agreement shall not be assignable by
Consultant and shall be assignable by the Company only with the consent of
Consultant; provided that no such assignment by the Company shall relieve
the Company of any liability hereunder, whether accrued before or after
such assignment.
(f) Arbitration. Any dispute between the parties to this
Agreement arising from or relating to the terms of this Agreement or the
retention of Consultant by the Company shall be submitted to arbitration in
Dallas, Texas under the auspices of the American Arbitration Association.
(g) Successors; Binding Agreement.
(i) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or the assets of the Company to
expressly assume and agree to perform this agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and shall entitle
Consultant to the benefits set forth in Paragraph 6(a).
(ii) This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, representatives,
successors and assigns.
(h) Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the execution page of
this Agreement; provided that all notices to the Company shall be directed
to the attention of Ramona Taylor or to such other address as either party
may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
(i) Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
/S/JESS HAY
-------------------------------
JESS HAY
LOMAS FINANCIAL CORPORATION
By: /S/JAMES L. CROWSON
----------------------------
James L. Crowson
Executive Vice President
ATTEST:
/S/RAMONA TAYLOR
- - -------------------------
Ramona Taylor, Secretary
(SEAL)
EXHIBIT 10.18
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of November 1, 1994, by and between
Lomas Financial Corporation, a Delaware corporation (the "Company") and
Gary White ("Consultant").
WHEREAS, Consultant and the Company have previously entered into an
Employment Agreement dated as of August 1, 1993 (the "Employment
Agreement");
WHEREAS, effective December 1, 1994, Consultant wishes to retire as an
employee of the Company and the parties wish to terminate the Employment
Agreement;
WHEREAS, the Company's management desires that it be able to continue
to call upon the experience and knowledge of Consultant for consultation
services and advice; and
WHEREAS, Consultant is willing to render such services to the Company
on the terms and conditions hereinafter set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and Consultant's long prior service to the Company, and in
cancellation and settlement of all obligations under the Employment
Agreement, the parties agree as follows:
1. Retirement and Appointment. Consultant shall remain employed by
the Company until December 1, 1994, upon which date Consultant shall retire
under the terms (as applicable to Consultant) of the Voluntary Early
Retirement Program that was made available to certain employees of the
Lomas Financial Group on or about September 9, 1994; provided, however,
that Consultant shall continue to be an officer of the Company with the
title of Senior Vice President - Control through December 31, 1996, unless
a successor shall have been elected at an earlier date by the Company's
Board of Directors.
2. Term of Agreement. Consultant shall be retained by the Company
for a period commencing on December 1, 1994 (the "Effective Date"), and
terminating on December 31, 1996 (the "Consulting Term").
3. Position and Responsibilities. Consultant agrees to serve as a
consultant to the Company and to render such advice and services to the
Company as reasonably may be requested by the Chief Executive Officer or
the Board of Directors of the Company. The services to be performed by
Consultant under this Agreement shall include, but not be limited to, the
performance of the services (including supervisory services) that
Consultant was performing in the period immediately preceding the Effective
Date, and Consultant shall continue to perform such services during the
Consulting Term unless and until another person is designated to perform
any of such services by the Chief Executive Officer or the Board of
Directors. Consultant (i) shall not be required to render more than 2,000
hours of service during the first 13 months of the Consulting Term;
provided, however, that during the first 13 months of the Consulting Term
Consultant shall make himself available in person to render such services
at the Company's headquarters location on a regular basis equivalent to not
less than four days per week, allowing for reasonable and customary
vacations and taking into account the nature of the services provided, and
(ii) shall not be required to render more than 925 hours of service during
the final 12 months of the Consulting Term; provided, however, Consultant
(during such final 12 months) shall make himself available in person to
render such services at the Company's headquarters location on a regular
basis equivalent to not less than two and one-half days per week, allowing
for reasonable and customary vacations and taking into account the nature
of the services provided.
4. Compensation. (a) The Company shall pay Consultant a retainer
(the "Retainer") of (i) $239,200 for the period from December 1, 1994
through December 31, 1995, and (ii) $165,000 for the period from January 1,
1996 through December 31, 1996. The Retainer shall be payable in equal
monthly installments during the Consulting Term. Consultant shall be
entitled to the full Retainer regardless of the amount and frequency of
consulting services actually rendered by him.
(b) During the Consulting Term, the Company shall continue the
participation of Consultant and his spouse in all employee benefit
arrangements of the Company that provide life insurance and health,
medical, hospitalization and similar benefits, to the extent that
Consultant and his spouse are covered under existing policies, if any, on a
basis no less favorable than that on which they are currently covered under
any such plan or policy, and, thereafter, on the basis and for the
remainder of the period set forth in the Voluntary Early Retirement
Program.
(c) All outstanding stock options granted to Consultant prior to the
date of his retirement under any stock incentive plan of the Company shall
be fully vested as of such date and shall continue to be exercisable for
the remainder of their terms, and the Company shall make such amendments to
the plans and the outstanding awards as may be necessary to effectuate the
provisions of this paragraph 4(c), except that the Company shall be obliged
to make any such amendment only to the extent that shareholder approval
thereof would not be required to maintain the current status of any such
plan under any applicable regulatory regime.
(d) Consultant shall continue to be eligible to participate in the
"success bonus" arrangement established by the Compensation Committee of
the Board of Directors for senior executives of the Company in connection
with the sale of all or a substantial portion of the Company.
(e) Consultant shall be eligible to participate in any bonus or
incentive plan established for the senior corporate executives of the
Company in respect of fiscal year 1995, provided that such bonus shall be
based on amounts actually received by Consultant pursuant to the Employment
Agreement and this Agreement.
5. Expenses and Other Facilities. (a) During the Consulting Term
the Consultant shall be reimbursed in accordance with the policies of the
Company for necessary and reasonable business expenses incurred by
Consultant in connection with the performance of his duties hereunder.
(b) During the Consulting Term the Company shall continue to make
available to Consultant, without any expense to him, an office and such
administrative staff as reasonably may be necessary to perform his
consulting duties.
6. Termination and Liquidated Damages. (a) This Agreement and
Consultant's retention hereunder may be terminated at any time by either
party upon sixty (60) days prior written notice to the other party. In the
event of (i) such a termination by the Company, other than a termination
for "Cause," as hereinafter defined, or (ii) a termination at any time by
Consultant as a result of a breach of this Agreement by the Company,
Consultant shall be entitled to receive as liquidated damages an amount in
cash equal to the then-present value of all remaining payments due
hereunder during the balance of the Consulting Term. Such amount shall be
calculated using a discount rate of 6% per annum and shall be paid in a
single sum not later than 10 days after any such termination.
(b) In the event of a voluntary termination of his retention
hereunder by the Consultant prior to the end of the Consulting Term other
than as set forth in clause (a) (ii) above, the Company will have no
further obligation to make payments to Consultant following any such
termination. Consultant shall not be subject to liability for breach of
this Agreement by reason of his termination of his retention hereunder.
(c) For purposes of this Agreement, "Cause" shall mean (i)
Consultant's willful and continued failure substantially to perform his
duties hereunder (other than as a result of "disability" [as defined under
the Company's Long-Term Disability Plan] and other than as a result of
breach of this Agreement by the Company), (ii) Consultant's dishonesty in
the performance of his duties hereunder or (iii) an act or acts on
Consultant's part constituting a felony under the laws of the United States
or any state thereof.
(d) In the event of any termination of this Agreement pursuant to
Paragraph 6(a), the Company shall continue to provide Consultant or his
spouse, or both, with the benefits specified in paragraph 4(b) until the
expiration of the Consulting Term.
7. Status; Taxes.
(a) Status of Consultant. During the Consulting Term, Consultant
shall not be an employee of the Company and shall not be entitled to
participate in any employee benefit plans or other benefits or conditions
of employment available to the employees of the Company except to the
extent set forth in paragraphs 4(b), (c), (d) and (e). Consultant shall
have no authority to act as an agent of the Company, except on authority
specifically so delegated, and he shall not represent to the contrary to
any person. Consultant shall only consult, render advice and perform such
tasks as Consultant determines are necessary to achieve the results
specified by the Company. Although the Company may specify the results to
be achieved by the Consultant and may control and direct him in that
regard, the Company shall not control or direct the Consultant as to the
details or means by which such results are accomplished.
(b) Taxes. It is intended that the fees paid hereunder shall
constitute revenues to Consultant. To the extent consistent with
applicable law, the Company will not withhold any amounts therefrom as
federal income tax withholding from wages or as employee contributions
under the Federal Insurance Contributions Act or any other state or federal
laws. Consultant shall be solely responsible for the withholding and/or
payment of any federal, state or local income or payroll taxes.
8. Non-Competition. During the Consulting Term Consultant shall not
directly or indirectly be or remain employed by, or render services for,
any person, firm, partnership, joint venture, association, corporation or
other business organization, entity or enterprise engaged in any business,
which is in competition with any business currently conducted by the
Company.
9. Confidentiality. During and after the Consulting Term,
Consultant shall not disclose or use for Consultant's own benefit or
purposes or the benefit or purposes of any other person, firm, partnership,
joint venture, association, corporation or other business organization,
entity or enterprise other than the Company and any of its subsidiaries or
affiliates, any trade secrets, information, data, or other confidential
information relating to customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial
data, manufacturing processes, financing methods, plans, or the business
and affairs of the Company generally, or of any subsidiary or affiliate of
the Company; provided that the foregoing shall not apply to information
which is not unique to the Company or which is generally known to the
industry or the public other than as a result of Consultant's breach of
this covenant. Any provision of this Agreement to the contrary
notwithstanding, Consultant's obligations pursuant to this Paragraph 9
shall survive any termination of this Agreement and Consultant's retention
hereunder.
10. Specific Performance. Consultant acknowledges and agrees that
the Company's remedies at law for a breach or threatened breach of any of
the provisions of Paragraph 8 or Paragraph 9 would be inadequate and, in
recognition of this fact, Consultant agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the
Company, without posting any bond, shall be entitled to obtain equitable
relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may
then be available.
11. Fees and Expenses. The Company agrees, in the event of a
dispute between Consultant and the Company with respect to any of
Consultant's rights under this Agreement, to reimburse Consultant for any
and all reasonable legal fees and related expenses incurred by Consultant
in connection with enforcing such rights if Consultant is successful as to
at least part of the disputed claim by reason of arbitration, litigation or
settlement.
12. Miscellaneous.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
(b) Entire Agreement; Amendments. This Agreement supersedes all
prior agreements between Consultant and the Company relating to
Consultant's employment and the termination thereof, including, without
limitation, the Employment Agreement, and, together with the agreements
evidencing the stock options and other awards referred to in Paragraph 4(c)
and the documents evidencing the benefits to which Consultant and his
spouse are entitled pursuant to Paragraphs 4(b), (d) and (e), contains the
entire understanding of the parties with respect to the retention of
Consultant by the Company; provided, however, that this Agreement shall not
impair any rights or benefits accrued by Consultant under any benefit plan,
compensation arrangement or pension, excess retirement or management
security plan of the Company prior to the termination of his employment on
December 1, 1994. Except as aforesaid, there are no restrictions,
agreements, promises, warranties, covenants or undertakings between the
parties with respect to the subject matter herein other than those
expressly set forth herein. This Agreement may not be altered, modified,
or amended except by written instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
(d) Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment. This Agreement shall not be assignable by Consultant
and shall be assignable by the Company only with the consent of Consultant;
provided that no such assignment by the Company shall relieve the Company
of any liability hereunder, whether accrued before or after such
assignment.
(f) Arbitration. Any dispute between the parties to this Agreement
arising from or relating to the terms of this Agreement or the retention of
Consultant by the Company shall be submitted to arbitration in Dallas,
Texas under the auspices of the American Arbitration Association.
(g) Successors; Binding Agreement.
(i) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or the assets of the Company to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and shall entitle
Consultant to the benefits set forth in Paragraph 6(a).
(ii) This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, representatives,
successors and assigns.
(h) Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the execution page of
this Agreement; provided that all notices to the Company shall be directed
to the attention of the General Counsel of the Lomas Financial Group or to
such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
(i) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
/S/GARY WHITE
------------------------------
GARY WHITE
Address: 13616 Far Hills Lane
Dallas, Texas 75240
LOMAS FINANCIAL CORPORATION
ATTEST: By: /S/JESS HAY
-------------------------
Jess Hay
Chairman and Chief
/S/RAMONA TAYLOR Executive Officer
- - -------------------------
Ramona Taylor, Secretary
Address: 1600 Viceroy Drive
Dallas, TX 75235
(SEAL)
EXHIBIT 10.19
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of November 1, 1994, by and between
Lomas Financial Corporation, a Delaware corporation (the "Company") and
Ramona Taylor ("Consultant").
WHEREAS, Consultant and the Company have previously entered into an
Employment Agreement dated as of April 1, 1993 (the "Employment
Agreement");
WHEREAS, effective December 1, 1994, Consultant wishes to retire as an
employee of the Company and the parties wish to terminate the Employment
Agreement;
WHEREAS, the Company's management desires that it be able to continue
to call upon the experience and knowledge of Consultant for consultation
services and advice; and
WHEREAS, Consultant is willing to render such services to the Company
on the terms and conditions hereinafter set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and Consultant's long prior service to the Company, and in
cancellation and settlement of all obligations under the Employment
Agreement, the parties agree as follows:
1. Retirement and Appointment. Consultant shall remain employed by
the Company until December 1, 1994, upon which date Consultant shall retire
under the terms (as applicable to Consultant) of the Voluntary Early
Retirement Program that was made available to certain employees of the
Lomas Financial Group on or about September 9, 1994; provided, however,
that Consultant shall continue to be an officer of the Company with the
title of Senior Vice President and Secretary through December 31, 1996,
unless a successor shall have been elected at an earlier date by the
Company's Board of Directors.
2. Term of Agreement. Consultant shall be retained by the Company
for a period commencing on December 1, 1994 (the "Effective Date"), and
terminating on December 31, 1996 (the "Consulting Term").
3. Position and Responsibilities. Consultant agrees to serve as a
consultant to the Company and to render such advice and services to the
Company as reasonably may be requested by the Chief Executive Officer or
the Board of Directors of the Company. The services to be performed by
Consultant under this Agreement shall include, but not be limited to, the
performance of the services (including supervisory services) that
Consultant was performing in the period immediately preceding the Effective
Date, and Consultant shall continue to perform such services during the
Consulting Term unless and until another person is designated to perform
any of such services by the Chief Executive Officer or the Board of
Directors. During the first 13 months of the Consulting Term, Consultant
shall render 163 days of service of which at least 108 days shall be
rendered at the Company's headquarters location. During the final 12
months of the Consulting Term, Consultant shall render 150 days of service
of which 100 days shall be rendered at the Company's headquarters location.
4. Compensation. (a) The Company shall pay Consultant a retainer
(the "Retainer") of (i) $141,700 for the period from December 1, 1994
through December 31, 1995, and (ii) $130,800 for the period from January 1,
1996 through December 31, 1996. The Retainer shall be payable in equal
monthly installments during the Consulting Term. Consultant shall be
entitled to the full Retainer regardless of the amount and frequency of
consulting services actually rendered by her.
(b) During the Consulting Term, the Company shall continue the
participation of Consultant in all employee benefit arrangements of the
Company that provide life insurance and health, medical, hospitalization
and similar benefits, to the extent that Consultant is covered under
existing policies, if any, on a basis no less favorable than that on which
she is currently covered under any such plan or policy, and, thereafter, on
the basis and for the remainder of the period set forth in the Voluntary
Early Retirement Program.
(c) All outstanding stock options granted to Consultant prior to the
date of her retirement under any stock incentive plan of the Company shall
be fully vested as of such date and shall continue to be exercisable for
the remainder of their terms, and the Company shall make such amendments to
the plans and the outstanding awards as may be necessary to effectuate the
provisions of this paragraph 4(c), except that the Company shall be obliged
to make any such amendment only to the extent that shareholder approval
thereof would not be required to maintain the current status of any such
plan under any applicable regulatory regime.
(d) Consultant shall continue to be eligible to participate in the
"success bonus" arrangement established by the Compensation Committee of
the Board of Directors for senior executives of the Company in connection
with the sale of all or a substantial portion of the Company.
(e) Consultant shall be eligible to participate in any bonus or
incentive plan established for the senior corporate executives of the
Company in respect of fiscal year 1995, provided that such bonus shall be
based on amounts actually received by Consultant pursuant to the Employment
Agreement and this Agreement.
5. Expenses and Other Facilities. (a) During the Consulting Term
the Consultant shall be reimbursed in accordance with the policies of the
Company for necessary and reasonable business expenses incurred by
Consultant in connection with the performance of her duties hereunder.
(b) During the Consulting Term the Company shall continue to make
available to Consultant, without any expense to her, an office and such
administrative staff as reasonably may be necessary to perform her
consulting duties.
6. Termination and Liquidated Damages. (a) This Agreement and
Consultant's retention hereunder may be terminated at any time by either
party upon sixty (60) days prior written notice to the other party. In the
event of (i) such a termination by the Company, other than a termination
for "Cause," as hereinafter defined, or (ii) a termination at any time by
Consultant as a result of a breach of this Agreement by the Company,
Consultant shall be entitled to receive as liquidated damages an amount in
cash equal to the then present value of all remaining payments due
hereunder during the balance of the Consulting Term. Such amount shall be
calculated using a discount rate of 6% per annum and shall be paid in a
single sum not later than 10 days after any such termination.
(b) In the event of a voluntary termination of her retention
hereunder by the Consultant prior to the end of the Consulting Term other
than as set forth in clause (a) (ii) above, the Company will have no
further obligation to make payments to Consultant following any such
termination. Consultant shall not be subject to liability for breach of
this Agreement by reason of her termination of her retention hereunder.
(c) For purposes of this Agreement, "Cause" shall mean (i)
Consultant's willful and continued failure substantially to perform her
duties hereunder (other than as a result of "disability" [as defined under
the Company's Long-Term Disability Plan] and other than as a result of
breach of this Agreement by the Company), (ii) Consultant's dishonesty in
the performance of her duties hereunder or (iii) an act or acts on
Consultant's part constituting a felony under the laws of the United States
or any state thereof.
(d) In the event of any termination of this Agreement pursuant to
Paragraph 6(a), the Company shall continue to provide Consultant with the
benefits specified in paragraph 4(b) until the expiration of the Consulting
Term.
7. Status; Taxes.
(a) Status of Consultant. During the Consulting Term, Consultant
shall not be an employee of the Company and shall not be entitled to
participate in any employee benefit plans or other benefits or conditions
of employment available to the employees of the Company except to the
extent set forth in paragraphs 4(b), (c), (d) and (e). Consultant shall
have no authority to act as an agent of the Company, except on authority
specifically so delegated, and she shall not represent to the contrary to
any person. Consultant shall only consult, render advice and perform such
tasks as Consultant determines are necessary to achieve the results
specified by the Company. Although the Company may specify the results to
be achieved by the Consultant and may control and direct her in that
regard, the Company shall not control or direct the Consultant as to the
details or means by which such results are accomplished.
(b) Taxes. It is intended that the fees paid hereunder shall
constitute revenues to Consultant. To the extent consistent with
applicable law, the Company will not withhold any amounts therefrom as
federal income tax withholding from wages or as employee contributions
under the Federal Insurance Contributions Act or any other state or federal
laws. Consultant shall be solely responsible for the withholding and/or
payment of any federal, state or local income or payroll taxes.
8. Non-Competition. During the Consulting Term Consultant shall not
directly or indirectly be or remain employed by, or render services for,
any person, firm, partnership, joint venture, association, corporation or
other business organization, entity or enterprise engaged in any business,
which is in competition with any business currently conducted by the
Company.
9. Confidentiality. During and after the Consulting Term,
Consultant shall not disclose or use for Consultant's own benefit or
purposes or the benefit or purposes of any other person, firm, partnership,
joint venture, association, corporation or other business organization,
entity or enterprise other than the Company and any of its subsidiaries or
affiliates, any trade secrets, information, data, or other confidential
information relating to customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial
data, manufacturing processes, financing methods, plans, or the business
and affairs of the Company generally, or of any subsidiary or affiliate of
the Company; provided that the foregoing shall not apply to information
which is not unique to the Company or which is generally known to the
industry or the public other than as a result of Consultant's breach of
this covenant. Any provision of this Agreement to the contrary
notwithstanding, Consultant's obligations pursuant to this Paragraph 9
shall survive any termination of this Agreement and Consultant's retention
hereunder.
10. Specific Performance. Consultant acknowledges and agrees that
the Company's remedies at law for a breach or threatened breach of any of
the provisions of Paragraph 8 or Paragraph 9 would be inadequate and, in
recognition of this fact, Consultant agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the
Company, without posting any bond, shall be entitled to obtain equitable
relief in the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy which may
then be available.
11. Fees and Expenses. The Company agrees, in the event of a
dispute between Consultant and the Company with respect to any of
Consultant's rights under this Agreement, to reimburse Consultant for any
and all reasonable legal fees and related expenses incurred by Consultant
in connection with enforcing such rights if Consultant is successful as to
at least part of the disputed claim by reason of arbitration, litigation or
settlement.
12. Miscellaneous.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
(b) Entire Agreement; Amendments. This Agreement supersedes all
prior agreements between Consultant and the Company relating to
Consultant's employment and the termination thereof, including, without
limitation, the Employment Agreement, and, together with the agreements
evidencing the stock options and other awards referred to in Paragraph 4(c)
and the documents evidencing the benefits to which Consultant is entitled
pursuant to Paragraphs 4(b), (d) and (e), contains the entire understanding
of the parties with respect to the retention of Consultant by the Company;
provided, however, that this Agreement shall not impair any rights or
benefits accrued by Consultant under any benefit plan, compensation
arrangement or pension, excess retirement or management security plan of
the Company prior to the termination of her employment on December 1, 1994.
Except as aforesaid, there are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to
the subject matter herein other than those expressly set forth herein.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
(d) Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment. This Agreement shall not be assignable by Consultant
and shall be assignable by the Company only with the consent of Consultant;
provided that no such assignment by the Company shall relieve the Company
of any liability hereunder, whether accrued before or after such
assignment.
(f) Arbitration. Any dispute between the parties to this Agreement
arising from or relating to the terms of this Agreement or the retention of
Consultant by the Company shall be submitted to arbitration in Dallas,
Texas under the auspices of the American Arbitration Association.
(g) Successors; Binding Agreement.
(i) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or the assets of the Company to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and shall entitle
Consultant to the benefits set forth in Paragraph 6(a).
(ii) This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, representatives,
successors and assigns.
(h) Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the execution page of
this Agreement; provided that all notices to the Company shall be directed
to the attention of the General Counsel of the Lomas Financial Group or to
such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
(i) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
/S/RAMONA TAYLOR
------------------------------
RAMONA TAYLOR
Address: 14765 Lochinvar Drive
Addison, TX 75240
<PAGE>
LOMAS FINANCIAL CORPORATION
By: /S/JESS HAY
-------------------------
Jess Hay
Chairman and Chief Executive Officer
Address: 1600 Viceroy Drive
Dallas, TX 75235
ATTEST:
/S/JAMES L. CROWSON
- - ------------------------------
James L. Crowson, Assistant
Secretary
(SEAL)
EXHIBIT 10.20
NINTH AMENDMENT TO RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT is entered into effective as of December 31, 1994,
between LOMAS MORTGAGE USA, INC., a Connecticut corporation (the "Company"),
the banks listed on the signature pages below ("Lenders"), BANK ONE, TEXAS,
N.A., as Administrative Agent (in that capacity "Administrative Agent"), and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Syndication Agent (together with
Administrative Agent, "Agents").
The Company, Lenders, and Agents have entered into the Restated Loan and
Security Agreement (as amended through the date of this amendment and as
further renewed, extended, amended, and restated, the "Loan Agreement") dated
as of July 8, 1993, providing for loans to the Company on a revolving basis
up to $120,000,000 outstanding at any one time. The Company has requested
amendments to the Loan Agreement in order to modify certain financial
covenants and change certain provisions relating to dividends, loans, and
advances to Lomas Financial Corporation. Accordingly, for adequate and
sufficient consideration, the parties agree as follows:
1. Certain Definitions. Unless otherwise specified in this amendment
(a) all terms defined in the Loan Agreement have the same meanings when used
in this amendment and (b) all references to "Sections" and "Schedules" are
references to the Loan Agreement's sections and schedules.
2. Amendments.
(a) Section 7.2(a) is entirely amended as follows:
Any Debt if, after giving effect thereto and to any
simultaneous retirement of other debt, the Company's consolidated
Debt (other than Excepted Debt) would exceed 250% of the Company's
Consolidated Net Worth;
(b) Section 7.3(b)(i) is entirely amended as follows:
$25,000,000 at any time prior to December 31, 1994, and
$10,000,000 at any time thereafter, as reduced by the outstanding
principal of any advances or loans (at any date of determination)
by the Company or any of its Subsidiaries to Lomas Financial
Corporation permitted under Section 7.8(e), plus
(c) Section 7.4 is entirely amended as follows:
7.4 Consolidated Net Worth. Permit its Consolidated Net
Worth to be less than the greater of either (i) the amount required
by FHA, FHLMC, FNMA, VA, and GNMA at any and all times for
maintaining the Company's status as an approved mortgagee,
seller/servicer, or issuer, or (ii) $150,000,000.
(d) Section 7.8(e) is entirely amended as follows:
While no Potential Default or Default exists, loans or
advances to Lomas Financial Corporation by the Company or any of
its Subsidiaries that never exceed a total of $10,000,000 principal
-- as that amount is reduced by any dividends made to Lomas
Financial Corporation on or after December 31, 1994.
3. Conditions Precedent. The foregoing is not effective unless (a)
Agents receive counterparts of this amendment executed by the Company, by
Agents, and all Lenders and (b) all of the representations and warranties --
in this amendment and in all other Loan Papers are true and correct as of --
as if made on -- the date of this amendment.
4. Ratifications. This amendment modifies and supersedes all
inconsistent terms and provisions of the other Loan Papers. Except as
expressly modified and superseded by this amendment, the terms and provisions
of the other Loan Papers are ratified and confirmed and continue in full
force and effect. The Company, all Lenders, and Agents agree that the Loan
Papers, as amended by this amendment, continue to be legal, valid, binding,
and enforceable in accordance with their respective terms. The Company
ratifies and confirms that all Liens granted to Agents, on behalf of Lenders,
were intended to, do, and continue to secure the full payment and performance
of the Obligations. The Company shall perform such acts and duly authorize,
execute, acknowledge, deliver, file, and record such additional documents as
either Agent or any Lender may reasonably request in order to perfect and
protect such Liens and preserve and protect the rights of Agents and Lenders
in respect of all present and future Collateral.
5. Representations and Warranties. The Company represents and
warrants to Lenders and Agents that (a) this amendment and the other Loan
Papers to be delivered under this amendment have been duly authorized,
executed, and delivered by the Company, (b) no action of, or filing with, any
Tribunal is required to authorize, or is otherwise required in connection
with, the execution, delivery, and performance by the Company of this
amendment and those other Loan Papers (c) this amendment and those other Loan
Papers are valid and binding upon the Company and are enforceable against the
Company in accordance with their respective terms, except as limited by the
Bankruptcy Code of the United States of America and all other similar Laws
affecting the rights of creditors generally, (d) the execution, delivery, and
performance by the Company of this amendment and those other Loan Papers do
not require the consent of any other Person and do not and will not
constitute a violation of any Laws, agreement, or understanding to which the
Company is a party or by which the Company is bound, (e) the representations
and warranties in the Loan Agreement, as amended by this amendment, and each
other Loan Paper are true and correct in all material respects on and as of
the date of this amendment as though made as of the date of this amendment,
and (f) as of the date of this amendment, no Default or Potential Default
(other than any Default or Potential Default which is cured by the
modifications contained within this amendment) exists.
6. References. All references in the Loan Papers to the "Loan
Agreement" refer to the Loan Agreement as amended by this amendment. Because
this amendment is a "Loan Paper" referred to in the Loan Agreement, then the
provisions relating to Loan Papers in Section 10 are incorporated in this
amendment by reference, the same as if included in this amendment verbatim.
7. Counterparts. This amendment may be executed in any number of
counterparts with the same effect as if all signatories had signed the same
document, and all of those counterparts must be construed together to
constitute one and the same document.
8. Parties Bound. This amendment binds and inures to the Company,
Agents, each Lender, and (subject to Section 10.10) their respective
successors and assigns.
9. ENTIRETY. THIS AMENDMENT, THE LOAN AGREEMENT AS AMENDED BY IT, AND
THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES FOR
THE TRANSACTIONS THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE(S) FOLLOW.
<PAGE>
EXECUTED on February 13, 1995, but effective as of the date first stated
above.
1600 Viceroy Dr., 8th Floor LOMAS MORTGAGE USA, INC., as the Company
Dallas, Texas 75235
Attn: Robert E. Byerley, Jr.,
Executive Vice President and
Treasurer By /S/ROBERT E. BYERLEY, JR.
------------------------------------
Telecopy: 214/879-7018 Robert E. Byerley, Jr.,
Executive Vice President and Treasurer
Mortgage Finance Group BANK ONE, TEXAS, N.A.,
1717 Main Street, 4th Floor as Administrative Agent and a Lender
Dallas, Texas 75201
Attn: Kathleen C. Stewart,
Vice President
Telecopy: 214/290-2275 By /S/KATHLEEN C. STEWART
------------------------------------
Kathleen C. Stewart, Vice President
717 Travis Street - 7-TCB-S56 TEXAS COMMERCE BANK NATIONAL
Houston, Texas 77002 ASSOCIATION, as Syndication Agent
Attn: Carlotta M. Hudler, and a Lender
Vice President
Telecopy: 713/216-2082 By /S/CARLOTTA M. HUDLER
------------------------------------
Carlotta M. Hudler, Vice President
First Bank Place, 2nd Floor MPFP0801 FIRST BANK NATIONAL ASSOCIATION,
601 Second Avenue South as a Lender
Minneapolis, Minnesota 55402-4302
Attn: Kathlyn K. Slater,
Vice President
Telecopy: 612/973-0826
By /S/KATHLYN K. SLATER
------------------------------------
Kathlyn K. Slater, Vice President
8333 Douglas Avenue GUARANTY FEDERAL BANK, F.S.B.,
Dallas, Texas 75255 as a Lender
Attn: Abbie Y. Tidmore,
Vice President
Telecopy: 214/360-1660
By /S/ABBIE Y. TIDMORE
------------------------------------
Abbie Y. Tidmore, Vice President
EXHIBIT 11
LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(in thousands, except per share amounts)
Quarter Ended Six Months Ended
December 31 December 31
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
Primary earnings (loss) per share:
Average common shares outstanding 20,132 20,100 20,115 20,099
Common stock equivalents under
Nonemployee Directors Long Term
Incentive Plan 22 32 29 30
-------- -------- -------- --------
Total shares 20,154 20,132 20,144 20,129
======== ======== ======== ========
Loss from continuing operations $(33,709) $ (42,503) $(41,059) $(82,201)
Loss from discontinued operations (7,500) (5,635) (13,000) (15,504)
-------- -------- -------- --------
Net loss $(41,209) $ (48,138) $(54,059) $(97,705)
======== ======== ======== ========
Primary earnings (loss) per share:
Loss from continuing operations $(1.67) $ (2.11) $(2.04) $(4.08)
Loss from discontinued operations (.37) (.28) (.64) (.77)
------ ------ ------ ------
Net loss $(2.04) $ (2.39) $(2.68) $(4.85)
====== ====== ====== ======
Fully diluted earnings (loss) per share:
Average common shares outstanding 20,132 20,100 20,115 20,099
Common stock equivalents under
Nonemployee Directors Long Term
Incentive Plan 22 32 29 30
-------- -------- -------- --------
Total shares 20,154 20,132 20,144 20,129
======== ======== ======== ========
Loss from continuing operations $(33,709) $ (42,503) $(41,059) $(82,201)
Loss from discontinued operations (7,500) (5,635) (13,000) (15,504)
-------- -------- -------- --------
Net loss $(41,209) $ (48,138) $(54,059) $(97,705)
======== ======== ======== ========
Primary earnings (loss) per share:
Loss from continuing operations $(1.67) $ (2.11) $(2.04) $(4.08)
Loss from discontinued operations (.37) (.28) (.64) (.77)
------ ------ ------ ------
Net loss $(2.04) $ (2.39) $(2.68) $(4.85)
====== ====== ====== ======
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000060150
<NAME> GARY WHITE
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 13,587
<SECURITIES> 13,468
<RECEIVABLES> 104,041
<ALLOWANCES> (29,578)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 102,777
<DEPRECIATION> (17,342)
<TOTAL-ASSETS> 1,225,398
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 111,472
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 84,206
<LOSS-PROVISION> 31,071
<INTEREST-EXPENSE> 37,254
<INCOME-PRETAX> (41,059)
<INCOME-TAX> 0
<INCOME-CONTINUING> (41,059)
<DISCONTINUED> (13,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,059)
<EPS-PRIMARY> (2.68)
<EPS-DILUTED> (2.68)
</TABLE>
