CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994
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REPUBLIC BANCORP INC.
(Exact name of registrant as specified in its charter)
Commission File Number 0-15734
Michigan 38-2604669
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1070 East Main Street, Owosso, Michigan 48867
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (517) 725-7337
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $5.00 par value
(Title of Class)
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock (which consists solely of
shares of Common Stock) held by non-affiliates of the registrant as of
February 1, 1995, based on the last reported sale price on that date of
$10.125 of the registrant's Common Stock outstanding: $134,165,980.
Number of shares of the registrant's Common Stock outstanding as of March
10, 1995: 15,115,948
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
PART II: Certain portions of the registrant's Annual Report to Shareholders
for the fiscal year ended December 31, 1994.
PART III: Certain portions of the registrant's definitive Proxy Statement
in connection with the Annual Meeting of Shareholders of the
registrant to be held on April 26, 1995.
<PAGE>
PART I
Item 1. BUSINESS
General
Republic Bancorp Inc. (the "Company") is a bank holding company headquartered
in Ann Arbor, Michigan which offers retail, commercial and mortgage banking
services through its bank subsidiary, Republic Bank, and its savings bank
subsidiary, Republic Savings Bank ("Republic Savings"), formerly Horizon
Savings Bank, and mortgage banking services through its non-depository
mortgage banking subsidiaries, Republic Bancorp Mortgage Inc. ("Republic
Mortgage"), Market Street Mortgage Corporation ("Market Street") and CUB
Funding Corporation ("CUB Funding"). The Company's mortgage banking services
include the origination or purchase, short-term funding, sale and servicing of
residential first mortgage loans, and the purchase and sale of servicing
rights associated with such loans.
At December 31, 1994, the Company had consolidated total assets of $1.4
billion, total deposits of $819 million and shareholders' equity of $118
million. For the year ended December 31, 1994, the Company reported net income
of $15.7 million versus $23.2 million for 1993 and originated or purchased
$2.8 billion of residential mortgage loans versus $4.9 billion for the prior
year. At December 31, 1994, the Company had a mortgage loan servicing
portfolio of $4.7 billion.
The Company's current operating strategy is to grow its mortgage banking fee
income and related interest income while managing its liquidity needs and the
interest rate risks of its balance sheet. The Company's mortgage banking
operations earn origination and loan servicing fees and typically sell their
mortgage loan originations into the secondary market. Between the time the
Company funds its mortgage loans and their delivery into the secondary market,
the mortgage loans are held for sale. The Company can thereby, in effect, earn
long-term interest rates on short-term investments while minimizing interest
rate risk. Consistent with a strategy of managing interest rate risk, the
Company typically securitizes and sells all long-term fixed-rate mortgages and
retains a portion of variable rate and short-term fixed-rate mortgages. The
growth of the Company's residential mortgage origination business has been
funded primarily with Republic Bank's and Republic Savings' retail deposits
and short-term borrowings, and the mortgage subsidiaries' warehousing lines of
credit.
On November 1, 1994, pursuant to an agreement with Home Funding, Inc. of
Hopewell Junction, New York, the Company's subsidiary, Republic Mortgage,
purchased the assets and mortgage origination network of Home Funding, Inc.
The purchase included the acquisition of Home Funding's $130 million mortgage
servicing portfolio. The total purchase price was approximately $2.5 million,
of which $1.2 million was attributable to goodwill. The purchased assets and
results of operations of Home Funding, Inc. are included in the consolidated
financial statements from November 1, 1994, the effective date of the
acquisition.
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<PAGE>
Mortgage Banking
The Company originates residential mortgage loans through 78 retail offices
located in Michigan, Alabama, Arizona, California, Colorado, Connecticut,
Florida, Georgia, Illinois, Massachusetts, Maryland, New York, North Carolina,
Ohio, Texas, Virginia and Washington and through its wholesale operations. The
Company's wholesale operations are conducted from 8 offices (one each in
Michigan, Arizona, Iowa and Oregon and four in California), and involve the
purchase of residential loans from approximately 200 participating
correspondent institutions and brokers.
Each retail office is responsible for processing loan applications and
preparing loan documentation. Residential loans purchased through the
wholesale operation are processed and prepared by the correspondent
institutions and brokers. Quality control personnel then review loans to be
purchased through the wholesale operation using certain verification
procedures. Loan applications are then evaluated by the underwriting
departments of either the Company's mortgage or banking subsidiaries for
compliance with the Company's underwriting criteria, including loan to value
ratios, borrower qualifications and required insurance.
The substantial majority of the loans are conventional mortgage loans which
are secured by residential properties and comply with the requirements for
sale to, or conversion to mortgage-backed securities issued by, the Federal
National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC"). The Company also originates Federal Housing
Administration ("FHA") insured and Department of Veterans Affairs ("VA")
guaranteed mortgage loans for sale in the form of modified pass-through
mortgage-backed securities guaranteed by the Government National Mortgage
Association ("GNMA").
The residential loans originated or purchased by the Company are funded by
either: (1) Republic Bank or Republic Savings retail deposits or short-term
funding sources such as Federal Home Loan Bank ("FHLB") Advances or reverse
repurchase agreements; (2) Republic Mortgage through borrowings under a $20
million warehousing line of credit with NBD Bank, N.A.; (3) Market Street
through borrowings under a $75 million warehousing line of credit with G.E.
Capital Mortgage Services, Inc and Cooper River Funding Inc; or (4) CUB
Funding through borrowings under a $16 million warehousing line of credit with
The Prudential Home Mortgage Company, Inc. While some variable rate
residential loans may be retained by Republic Bank and Republic Savings, the
majority of all residential loans are held for a short period of time
(generally less than 60 days) and are then sold to secondary market investors
either directly or by pooling them and selling the resulting mortgage-backed
securities. Such residential loans and mortgage-backed securities are
typically sold without recourse to the Company in the event of default by the
borrowers. To minimize the interest rate risk, the Company obtains purchase
commitments from investors prior to funding the loans.
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When the Company sells the residential loans it has originated or purchased,
it may either retain or sell the rights to service those loans and to receive
the related fees. While there is an active market for selling servicing rights
(which are generally valued in relation to the present value of the
anticipated cash flow generated by the servicing rights), the aggregation of a
servicing portfolio can also create a substantial continuing source of income.
Republic Mortgage, Market Street and CUB Funding receive servicing fees
ranging generally from 25 to 45 basis points per annum on their respective
servicing portfolios.
Commercial and Retail Banking
The Company's bank subsidiary, Republic Bank, is a Michigan chartered bank
which engages in the business of commercial banking and exercises the powers
of a full service commercial bank with the exception of trust services. See
"Regulation." Republic Bank operates in six distinct market areas in Michigan.
At December 31, 1994, the subsidiary bank had assets of $801 million, deposits
of $608 million, and 25 offices.
The Company's savings bank subsidiary, Republic Savings Bank, is an Ohio
chartered savings bank which engages in the business and exercises the powers
of a savings bank. See "Regulation." Republic Savings operates primarily in
the greater Cleveland, Ohio area and at December 31, 1994, had assets of $407
million, deposits of $217 million and 11 offices.
Republic Bank and Republic Savings offer checking, savings and time deposits,
loans to individuals, commercial enterprises and governmental agencies,
installment credit to consumers and small businesses, and other banking
services. While Republic Bank's and Republic Savings' lending activities focus
primarily on residential real estate mortgages, they also emphasize loans to
small and medium-sized businesses through the Small Business Administration
("SBA"). The Company's general policy is to originate SBA-secured loans or
real estate secured commercial loans with loan to value ratios of 70% or less.
Republic Bank and Republic Savings target that segment of the banking market
which is interested in personalized service for their deposits. The deposits
are primarily retail deposits from within their market areas. At December 31,
1994, the subsidiaries' combined interest-bearing deposits comprised 85% of
total deposits, and time deposits of $100,000 or more comprised 24% of
interest-bearing deposits.
Revenues
The principal sources of revenue for the Company are interest income and fees
on loans and mortgage banking income. On a consolidated basis, interest and
fees on loans accounted for approximately 35%, 39% and 52% of total revenues
in 1994, 1993 and 1992, respectively. Non-interest income, primarily
consisting of mortgage banking income (i.e., gain on sales of mortgage loans
and mortgage servicing rights, origination fee income and mortgage loan
servicing fees, net of amortization), gain on sale of securities, and service
charges accounted for approximately 49%, 54% and 33% of total revenues in
1994, 1993 and 1992, respectively.
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<PAGE>
Interest income from securities, money market investments and interest earning
deposits accounted for approximately 16%, 7% and 15% of total revenues during
1994, 1993 and 1992, respectively.
For further information, see the Company's financial statements incorporated
herein by reference.
Competition
The Company is subject to and has faced increasing competition from other
banking and non-banking institutions in attempting to negotiate bank and
mortgage bank-related acquisitions. Under Michigan and Ohio law, bank holding
companies located in other states having appropriate reciprocal legislation
are also allowed to acquire Michigan or Ohio banking institutions,
respectively. Effective September 29, 1995, under certain circumstances bank
holding companies in other States will be allowed to acquire Michigan or Ohio
banking institutions without regard to State law reciprocity requirements. See
"Recently Enacted and Proposed Legislation". Generally, larger banking
institutions have greater resources to use in making acquisitions and higher
lending limits than the Company's bank or savings bank subsidiaries or any
banking institution that the Company could acquire. Such institutions
can perform certain functions for their customers which the Company or
its subsidiary bank or savings bank may not offer.
The principal factors in the markets for deposits and loans are interest rates
paid and charged. Republic Bank and Republic Savings compete for deposits by
offering depositors a variety of savings accounts, checking accounts,
convenient office locations and other miscellaneous services. The Company
competes for loans through the efficiency and quality of the services it
provides to borrowers, real estate brokers and home builders. The Company
seeks to compete for mortgages primarily on the basis of customer service
including prompt underwriting decisions and funding of loans and by offering a
variety of loan programs as well as competitive interest rates.
Regulation
Bank holding companies, banks and savings banks are subject to extensive
regulation under both federal and state law. To the extent the following
material describes statutory and regulatory provisions, it is qualified in its
entirety by reference to the particular statutory and regulatory provisions. A
change in applicable law or regulation could have a material effect on the
business of the Company.
1. Bank Holding Company
The Company, as a bank holding company, is regulated under the Bank
Holding Company Act of 1956, as amended ("BHC Act"), and is subject to
the supervision of the Board of Governors of the Federal Reserve System
("Federal Reserve Board"). The Company is registered as a bank holding
company with the Federal Reserve Board and is required to file with the
Federal Reserve Board an annual report and such additional information as
the Federal Reserve Board may require pursuant to the BHC Act. The
Federal Reserve Board may also make inspections and examinations of the
Company and its subsidiaries.
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<PAGE>
Under the BHC Act, bank holding companies such as the Company are
prohibited, with certain limited exceptions, from engaging in activities
other than those of banking or of managing or controlling banks and from
acquiring or retaining direct or indirect ownership or control of voting
shares or assets of any company which is not a bank or bank holding
company, other than subsidiary companies furnishing services to or
performing services for its subsidiaries, and other subsidiaries engaged
in activities which the Federal Reserve Board determines to be so closely
related to banking or managing or controlling banks as to be a proper
incident thereto. Under the BHC Act, bank holding companies may not
(subject to certain limited exceptions) directly or indirectly acquire
the ownership or control of more than 5% of any class of voting shares or
substantially all of the assets of any company, including a bank or bank
holding company, without the prior written approval of the Federal
Reserve Board.
The BHC Act prohibits the Federal Reserve Board (subject to certain
limited exceptions) from approving the acquisition, by a bank holding
company such as the Company, the principal banking operations of which
are conducted in one state, of control of a bank or bank holding company
conducting its principal banking operations in another state, unless the
statutory laws of the state in which the principal banking operations of
the bank holding company or bank to be acquired are conducted explicitly
authorize such an acquisition. Effective September 29, 1995, the BHC Act
will no longer prevent the Federal Reserve Board from approving the
acquisition of a bank because of contrary State law. See "Recently
Enacted and Proposed Legislation." Under existing Michigan law and with
the approval of the Commissioner of the Michigan Financial Institutions
Bureau, a Michigan- based bank or bank holding company (such as the
Company) may be acquired by a bank holding company located in any state,
if the laws of such state would grant Michigan-based banks or bank
holding companies the right to acquire one or more banks or bank holding
companies located in such state under conditions which are not unduly
restrictive. Under the Michigan statute, the Commissioner of the Michigan
Financial Institutions Bureau must not approve any such transaction
without first determining among other things that the other state's law
satisfies the reciprocity requirement imposed by the Michigan statute.
Most states have adopted legislation that permits out-of-state bank
holding companies to acquire local banks and bank holding companies
subject, in most cases, to reciprocity requirements.
Under Federal Reserve Board policy, the Company is expected to act as a
source of financial strength to Republic Bank and Republic Savings and to
commit resources to support them. This support may be required at times
when, in the absence of such Federal Reserve Board policy, the Company
would not otherwise be required to provide it.
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<PAGE>
Under Michigan law, if the capital of a Michigan state chartered bank
(such as Republic Bank) has become impaired by losses or otherwise, the
Commissioner of the Michigan Financial Institutions Bureau may require
that the deficiency in capital be met by assessment upon the bank's
shareholders pro rata on the amount of capital stock held by each, and if
any such assessment is not paid by any shareholder within 30 days of the
date of mailing of notice thereof to such shareholder, cause the sale of
the stock of such shareholder to pay such assessment and the costs of
sale of such stock. The Commissioner may appoint a receiver for any bank
failing for two months after receiving such notice from the Commissioner
either to restore its capital or to take steps to liquidate its business.
Any capital loans by a bank holding company to a subsidiary bank are
subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a subsidiary
bank will be assumed by the bankruptcy trustee and entitled to a priority
of payment. This priority would apply to guarantees of capital plans
under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA").
The Federal Reserve Board has adopted capital adequacy guidelines to
provide a framework for supervisory evaluation of the capital adequacy of
bank holding companies. The guidelines measure four principal ratios: (1)
primary capital to total assets; (2) total capital to total assets; (3)
qualifying capital to weighted-risk assets; and (4) Tier 1 capital to
total assets. Primary capital consists of common stock, certain amounts
of perpetual preferred stock, surplus (excluding surplus related to
limited-life preferred stock), undivided profits, capital reserves,
allowance for loan and lease losses, certain types and amounts of
convertible debt instruments, and minority interests in equity accounts
of consolidated subsidiaries. Total capital consists of primary capital
plus certain limited-life preferred stock (and related surplus), certain
unsecured long-term debt, and certain subordinated notes and debentures.
Total assets for purposes of ratios (1) and (2) consist of total assets
plus the allowance for loan and lease losses, all measured at the end of
appropriate fiscal periods. For purposes of ratio (3), weighted-risk
assets consist of total risk-adjusted assets (as described below) less
the amount of assets not included in qualifying capital (as described
below), all measured at the end of appropriate fiscal periods. For
purposes of ratio (4), total assets consist of quarterly average total
assets (net of the allowance for loan and lease losses) less (i)
goodwill, (ii) excess purchased mortgage servicing rights and purchased
credit card relationships, (iii) all other intangibles, (iv) investments
in subsidiaries deducted from Tier 1 capital, and (v) excess deferred tax
assets realizable only from future taxable income.
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The Federal Reserve Board measures ratios (3) and (4) pursuant to its
risk-based capital adequacy guidelines. These guidelines are intended to
make regulatory capital requirements more sensitive to the risk profile
of each bank holding company, to factor off-balance-sheet exposures into
capital adequacy assessment, to minimize disincentives to holding liquid,
low-risk assets, and to further uniformity of capital measurement on a
worldwide basis.
Under the risk-based guidelines, qualifying capital is measured against a
bank holding company's total risk-adjusted assets. Each asset on the
balance sheet, as well as a balance sheet equivalent amount of certain
contingent liabilities that are off-balance-sheet, is assigned to a broad
risk category, ranging from zero to 100%. The sum of these risk-weighted
items is the bank holding company's risk-based assets. Effective March
22, 1995, the Federal Reserve Board has reduced the regulatory capital
requirement for certain recourse obligations resulting from asset
transfers to reflect the maximum contractual liability of the bank
holding company under the recourse agreement. This change was mandated by
the Riegle Community Development and Regulatory Improvement Act of 1994
(the "Riegle Act"). See "Recently Enacted and Proposed Legislation".
Qualifying capital consists of Tier 1 capital and Tier 2 capital less (i)
aggregate investments in banking or finance subsidiaries which are not
consolidated for financial accounting or regulatory purposes and in
certain other subsidiaries to the extent designated by the Federal
Reserve Board, and (ii) aggregate reciprocal holdings of capital
instruments of other banking organizations. Tier 1 capital must comprise
at least 4% of risk-adjusted assets and consists of common stock, related
surplus, retained earnings, net of any treasury stock, certain amounts of
qualifying cumulative and noncumulative perpetual preferred stock
(including related surplus) and certain minority interests in equity
accounts of consolidated subsidiaries, less goodwill, and effective April
1, 1995, deferred tax assets realizable only from future taxable income,
other than the amount of such assets not exceeding the lesser of the
Company's projected taxable income within one year of the relevant
quarter-end report date or 10% of Tier 1 capital (net of goodwill and
intangible assets other than purchased mortgage servicing rights and
purchased credit card relationships but before any disallowed deferred
tax assets are deducted), and generally all identifiable intangibles
other than readily marketable purchased mortgage servicing rights and
purchased credit card relationships, each valued by the bank holding
company at least quarterly at the lesser of 90% of their fair market
value or 100% of their book value, in an aggregate amount not exceeding
50% of Tier 1 capital (net of goodwill and all identifiable intangible
assets other than such purchased mortgage servicing rights and purchased
credit card relationships), with a separate sublimit of 25% of Tier 1
capital for purchased credit card relationships. Tier 2 capital, which
may be included in qualifying total capital in an amount not exceeding
100% of Tier 1 capital (net of goodwill and other identifiable
intangibles required to be deducted from Tier 1 capital), consists of
certain amounts of the reserve for loan and lease losses, perpetual
preferred stock and related surplus, certain types
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<PAGE>
of hybrid capital instruments and mandatory convertible debt instruments,
and certain types and amounts of term subordinated debt and
intermediate-term preferred stock (including related surplus). After
extended consideration of Financial Accounting Standards Board Statement
No. 115 (relating to valuation of investments in debt and equity
securities), in December 1994, the Federal Reserve Board determined to
adhere to longstanding supervisory practice by generally not recognizing
unrealized appreciation or depreciation of such assets in capital ratio
calculations. Unrealized net losses on marketable equity securities will,
however, continue to be deducted from Tier 1 capital.
Under current regulations, the following minimums are prescribed for the
capital adequacy ratios: (1) primary capital to total assets, 5.5%; (2)
total capital to total assets, 6.0%; (3) qualifying capital (Tier 1 plus
Tier 2) to risk-weighted assets, 8.0%; and (4) Tier 1 capital to total
assets, 3.0% to 5.0%.
The Federal Reserve Board has published for public comment two proposed
changes to its capital adequacy regulations for bank holding companies.
If adopted, these proposals would, respectively, (i) change the
conversion factors currently applied to calculate the potential future
exposure resulting from certain derivatives contracts and permit a
reduction in potential future exposure for certain such transactions
which are subject to qualifying bilateral netting arrangements, and (ii)
implement lower regulatory capital requirements for qualifying recourse
transfers of small business loans and leases, as required by the Riegle
Act. The comment periods on these proposals expired on October 21, 1994,
and February 27, 1995, respectively.
FDICIA requires the federal bank regulatory agencies biennially to review
risk-based capital standards to ensure that they adequately address
interest rate risk, concentration of credit risk and risks from
non-traditional activities and, since adoption of the Riegle Act, to do
so taking into account the size and activities of depository institutions
and the avoidance of undue reporting burdens. See "Recently Enacted and
Proposed Legislation." Effective January 17, 1995, the Federal depository
institution regulatory agencies adopted regulations identifying
concentrations of credit risk and risks arising from nontraditional
activities as important factors to consider in assessing an institution's
overall capital adequacy. The agencies have not yet adopted final
regulations concerning interest rate risk.
2. Bank Subsidiaries
The Company's commercial bank subsidiary, Republic Bank, is subject to
regulation and examination primarily by the Michigan Financial
Institutions Bureau. The Company's savings bank subsidiary, Republic
Savings, is subject to regulation and examination primarily by the Ohio
Superintendent of Savings Banks. As insured state banks, Republic Bank
and Republic Savings are also subject to regulation and examination by
the Federal Deposit Insurance Corporation ("FDIC").
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These agencies and federal and state law extensively regulate various
aspects of the banking business including, among other things,
permissible types and amounts of loans, investments and other activities,
capital adequacy, branching, interest rates on loans and on deposits, the
maintenance of non-interest bearing reserves on deposit accounts, and the
safety and soundness of banking practices. As insured banks, Republic
Bank and Republic Savings are subject to uniform real estate lending
regulations adopted by the Federal depository institution regulatory
agencies. These regulations require each institution to adopt
comprehensive and appropriate real estate lending policies, including
underwriting standards and measurable loan to value ratios which are
consistent with safe and sound banking practice, and documentation,
approval and administration standards, all of which are reviewed and
approved annually by the institution's board of directors. The
regulations provide specific guidance on loan to value ratios which are
acceptable, ranging from a maximum of 65% for loans secured by raw land
up to 85% for loans secured by 1-4 family residential construction or
improved property. Although no maximum is prescribed for home equity or
1-4 family permanent mortgage loans, the regulations indicate that such
loans equal to or in excess of a 90% ratio would be expected to be
supported by private mortgage insurance or readily marketable collateral.
The FDIC imposes capital adequacy guidelines on Republic Bank and
Republic Savings. Subject to certain variations and exceptions, these
guidelines are generally similar to those of the Federal Reserve Board
discussed above with respect to bank holding companies.
Banking laws and regulations also restrict transactions by insured banks
owned by a bank holding company, including loans to and certain purchases
from the parent holding company, non-bank and bank subsidiaries of the
parent holding company, principal shareholders, officers, directors and
their affiliates, and investments by the subsidiary bank in the shares or
securities of the parent holding company (or of any other non-bank or
bank affiliates), and acceptance of such shares or securities as
collateral security for loans to any borrower. The bank's regulators also
review other payments, such as management fees, made by the subsidiary
bank to affiliated companies.
The Company's bank subsidiaries are also subject to legal limitations on
the frequency and amount of dividends that can be paid to the Company. A
Michigan state bank may not declare a cash dividend or a dividend in kind
except out of net profits then on hand after deducting all losses and bad
debts, and then only if it will have a surplus amounting to not less than
20% of its capital after the payment of the dividend. Moreover, a
Michigan state bank may not declare or pay any cash dividend or dividend
in kind until the cumulative dividends on its preferred stock, if any,
have been paid in full. Further, if the surplus of a Michigan state bank
is at any time less than the amount of its capital, before the
declaration of a cash dividend or dividend in kind, it must transfer to
surplus not less than 10% of its net profits for the preceding half-year
(in the case of quarterly or semi-annual dividends) or the preceding two
consecutive half-year periods (in the case of annual dividends).
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An Ohio savings bank must pay all its expenses each year only out of its
gross earnings. Only after provision has been made for the payment of
such expenses, interest, and the maintenance of a reserve for absorption
of bad debts and other losses and other net worth accounts at levels
required by Ohio law and regulations of the Ohio Superintendent of
Savings Banks, may an Ohio savings bank declare and pay dividends. Such
dividends may be declared and paid out of current earnings and undivided
profits.
The payment of dividends by the Company and its bank subsidiaries is also
affected by various regulatory requirements and policies, such as the
requirement to maintain adequate capital above regulatory guidelines. The
"prompt corrective action" provisions of FDICIA impose further
restrictions on the payment of dividends by insured banks which fail to
meet specified capital levels and, in some cases, their parent bank
holding companies.
FDICIA establishes five capital categories, and the federal depository
institution regulators, as directed by FDICIA, have adopted, effective
December 19, 1992, and subject to certain exceptions, the following
minimum requirements for each of such categories:
<TABLE>
<CAPTION>
Total Tier 1
Risk-Based Risk-Based Leverage
Capital Ratio Capital Ratio Ratio
<S> <C> <C> <C>
Well capitalized 10% or above 6% or above 5% or above
Adequately capitalized 8% or above 4% or above 4% or above
Undercapitalized Less than 8% Less than 4% Less than 4%
Significantly undercapitalized Less than 6% Less than 3% Less than 3%
Critically undercapitalized
__ __ A ratio of
tangible equity
to total assets
of 2% or less
</TABLE>
Subject to certain exceptions, these capital ratios are generally
determined on the basis of periodic Reports of Condition and Income
("Call Reports") submitted by each depository institution and the reports
of examination by each institution's appropriate federal depository
institution regulatory agency.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized.
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The FDIC may prevent an insured bank from paying dividends if the bank is
in default of payment of any assessment due to the FDIC. In addition,
payment of dividends by a bank may be prevented by the applicable federal
regulatory authority if such payment is determined, by reason of the
financial condition of such bank, to be an unsafe and unsound banking
practice. The Federal Reserve Board has issued a policy statement
providing that bank holding companies and insured banks should generally
only pay dividends out of current operating earnings.
These regulations and restrictions may limit the Company's ability to
obtain funds from its subsidiaries for its cash needs, including funds
for acquisitions, payment of dividends and interest and the payment of
operating expenses.
Republic Bank is subject to FDIC deposit insurance assessments paid to
the Bank Insurance Fund ("BIF"). Republic Savings is subject to FDIC
deposit insurance assessments paid to the Savings Association Insurance
Fund ("SAIF"). Pursuant to FDICIA, the FDIC has implemented a risk-based
assessment scheme. Under this arrangement, each depository institution is
assigned to one of nine categories (based upon three categories of
capital adequacy and three categories of perceived risk to the applicable
insurance fund). The deposit insurance assessment ranges from 23 basis
points for well-capitalized institutions displaying little risk, to 31
basis points for undercapitalized institutions displaying high risk. In
February, 1995, the FDIC published for comment a proposed rule which
would automatically reduce the insurance premium assessments for
BIF-insured institutions in all but the worst assessment risk
classification when the BIF reaches the mandated reserve ratio. Under the
proposal's new schedule, insurance premium assessments for BIF-insured
banks would range from 4 basis points to 31 basis points. Because of
continued underfunding of the SAIF, the FDIC has proposed no change to
the existing insurance assessment for SAIF-insured banks (such as
Republic Savings). The comment period expires April 17, 1995. In
addition, in October, 1994, the FDIC issued an advance notice of proposed
rulemaking to redefine the deposit insurance assessment base. The comment
period expired on February 2, 1995. There can be no assurance whether, or
in what form, either of these regulatory proposals will be finally
adopted.
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") provides for cross-guarantees of the liabilities of insured
depository institutions pursuant to which any insured bank subsidiary of
a holding company may be required to reimburse the FDIC for any loss
incurred or reasonably anticipated to be incurred by the FDIC after
August 9, 1989 in connection with a default of any of such holding
company's other insured subsidiary banks or from assistance provided to
such other subsidiaries in danger of default. This right of recovery by
the FDIC generally is superior to any claim of the shareholders of the
depository institution that is liable or any affiliate of such
institution. The bank and savings bank subsidiaries of the Company are
subject to such cross-guarantees.
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Among other things, FDICIA requires the federal depository institution
regulators to take prompt corrective action in respect of depository
institutions that do not meet minimum capital requirements. The scope and
degree of regulatory intervention is linked to the capital category to
which a depository institution is assigned.
A depository institution may be reclassified to a lower category than is
indicated by its capital position if the appropriate federal depository
institution regulatory agency determines the institution to be otherwise
in an unsafe or unsound condition or to be engaged in an unsafe or
unsound practice. This could include a failure by the institution,
following receipt of a less-than-satisfactory rating on its most recent
examination report, to correct the deficiency.
Among other things, undercapitalized depository institutions are subject
to growth limitations and are required to submit capital restoration
plans. A depository institution's holding company must guarantee a
capital restoration plan, up to an amount equal to the lesser of 5% of
the depository institution's assets at the time it becomes
undercapitalized or the amount of the capital deficiency when the
institution fails to comply with the plan. The Federal depository
institution agencies may not accept a capital plan without determining,
among other things, that the plan is based on realistic assumptions and
is likely to succeed in restoring the depository institution's capital.
If a depository institution fails to submit an acceptable plan, or fails
in any material respect to implement an approved plan, it is treated as
if it is significantly undercapitalized.
In addition to these restrictions applicable to undercapitalized
institutions, significantly undercapitalized depository institutions may
be subject to a number of requirements and restrictions, including orders
to sell sufficient voting stock to become adequately capitalized, reduce
total assets, make changes in management personnel, prohibit payment of
dividends by its parent holding company, and require such holding company
to divest or liquidate any affiliate of the institution under certain
circumstances. Subject to certain exceptions, critically undercapitalized
depository institutions are required to be placed in conservatorship or
receivership, generally within 90 days.
The FDIC is further required by FDICIA to establish the BIF and SAIF
deposit insurance assessment rates, respectively, at a level which will
maintain, or restore over a period of not more than 15 years, the
mandated reserve ratios of 1.25%. In February, 1995, the FDIC published
projections indicating that the BIF would reach the mandated reserve
ratio by July 31, 1995. The FDIC does not expect the SAIF to reach the
mandated reserve ratio until 2002. FDICIA also grants the FDIC the power
to impose special deposit insurance assessments in addition to the
regular assessments.
-12-
<PAGE>
FDICIA added numerous other provisions, including new accounting, audit
and reporting requirements, new regulatory standards in areas such as
asset quality, earnings and compensation, and revised regulatory
standards for, among other things, powers of state chartered banks,
branch closures, and reduction of systemic risk in the payments system.
4. Mortgage Subsidiaries
The Company's non-depository mortgage banking subsidiaries, Republic
Mortgage, Market Street, and CUB Funding are engaged in the business of
originating or purchasing, selling and servicing mortgage loans secured
by residential real estate. In the origination of mortgage loans,
Republic Mortgage, Market Street and CUB Funding are subject to State
usury and licensing laws and to various federal statutes, such as the
Equal Credit Opportunity Act, Fair Credit Reporting Act, Truth in Lending
Act, Real Estate Settlement Procedures Act, and Home Mortgage Disclosure
Act, and the regulations promulgated thereunder, which prohibit
discrimination, specify disclosures to be made to borrowers regarding
credit and settlement costs, and regulate the mortgage loan servicing
activities of such entities, including the maintenance and operation of
escrow accounts and the transfer of mortgage loan servicing. The Riegle
Act imposed new escrow requirements on depository and non-depository
mortgage lenders and servicers under the National Flood Insurance
Program. See "Recently Enacted and Proposed Legislation."
Republic Mortgage, Market Street and CUB Funding purchase mortgage loans
from approved correspondents. In addition to the underwriting done by the
correspondent, each of the mortgage companies performs its own
underwriting review of the mortgage loans it purchases. Correspondents
qualify to participate in Republic Mortgage, Market Street and CUB
Funding's wholesale program only after a review of their reputation,
mortgage lending experience and financial condition, including a review
of references and financial statements. In such activities, the mortgage
companies are also subject to applicable usury and other state and
federal laws, including various states' licensing statutes. As a seller
and servicer of mortgage loans, each of Republic Mortgage, Market Street
and CUB Funding is a participant in the secondary mortgage market with
some or all of the following: private institutional investors, FNMA,
GNMA, FHLMC, VA and FHA. In their dealings with these agencies, Republic
Mortgage, Market Street and CUB Funding are subject to various
eligibility requirements prescribed by the agencies, including but not
limited to net worth, quality control, bonding, financial reporting and
compliance reporting requirements. The mortgage loans which they
originate and purchase are subject to agency-prescribed procedures,
including without limitation inspection and appraisal of properties,
maximum loan-to-value ratios, and obtaining credit reports on prospective
borrowers. On some types of loans, the agencies prescribe maximum loan
amounts, interest rates and fees. When selling mortgage loans to FNMA,
FHLMC, GNMA, VA and FHA, each of Republic Mortgage, Market Street and CUB
Funding represents and warrants that all such mortgage loans sold by it
conform to their requirements. If the
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<PAGE>
mortgage loans sold are found to be non-conforming mortgage loans, such
agency may require the seller (i.e., Republic Mortgage, Market Street or
CUB Funding) to repurchase the non-conforming mortgage loans.
Additionally, FNMA, FHLMC, GNMA, VA and FHA may require Republic
Mortgage, Market Street or CUB Funding, respectively, to indemnify them
against all losses arising from their failure, respectively, to perform
their contractual obligations under the applicable selling or servicing
contract. Certain provisions of the Housing and Community Development Act
of 1992, and regulations adopted thereunder may affect the operations and
programs of FNMA and FHLMC. See "Recently Enacted and Proposed
Legislation."
5. Recently Enacted and Proposed Legislation
The Housing and Community Development Act of 1992 ("HCDA") amended (i)
the Real Estate Settlement Procedures Act ("RESPA") to extend its
coverage to loans made to refinance existing residential loans and to
residential loans secured by junior liens, and (ii) the Home Mortgage
Disclosure Act ("HMDA") to require that covered lenders make a modified
form of their mortgage loan application registers available for public
inspection on request, and more rapidly make available to the public
their mortgage loan disclosure statements. The Federal Reserve Board
published final regulations implementing the changes to HMDA on March 11,
1993.
The Department of Housing and Urban Development ("HUD") adopted
regulations implementing the extension of RESPA to junior lien and
refinancing transactions which became generally effective on August 9,
1994. HUD has also adopted, now effective May 24, 1995 with respect to
new mortgage loans (and phased in over a three-year period for existing
mortgage loans), detailed regulations governing escrow accounting
practices (including mandatory use of the aggregate accounting method)
and periodic escrow disclosures by servicers of mortgage loans (including
lenders which service the loans they originate). Further, effective June
19, 1995, HUD has adopted regulations under RESPA revising the mortgage
servicing transfer disclosure requirements to implement amendments made
to the statute by the Riegle Act, and also to exempt mortgage loans
secured by subordinate liens and open-end lines of credit secured by
first liens from such requirements. Finally, in July, 1994, HUD published
for public comment regulations which would (i) prohibit the payment by an
employer of fees to its employees calculated as a function of the number
or value of referrals of business from the employer to an affiliated
entity, (ii) regulate the operation and fees of computer loan origination
services, and (iii) expand the scope, and require consumer
acknowledgment, of disclosures of business affiliations by mortgage loan
service providers which refer customers to affiliated entities. The
comment period expired September 14, 1994.
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<PAGE>
HCDA established housing goals for FNMA and FHLMC for low- and
moderate-income housing, special affordable housing, and central cities,
rural areas, and other underserved areas, each as defined by the Act.
Each of FNMA and FHLMC is required to (i) review its underwriting
guidelines, (ii) take affirmative steps to assist primary lenders such as
the Company in making housing credit available in areas with
concentrations of low income and minority families, (iii) collect
expanded data from seller servicers on mortgage loans (including race,
gender and income of mortgagors), and (iv) assist governmental agencies
in investigations of, and take remedial actions against, mortgage lenders
violating the Fair Housing Act or Equal Credit Opportunity Act. The
Secretary of HUD is required to issue implementing regulations, and to
monitor and enforce compliance by FNMA and FHLMC with those goals and
provisions.
The Secretary of HUD has extended the 1994 housing goals of FNMA and
FHLMC to 1995 on an interim basis, pending final action on new goals. In
February 1995, the Secretary of HUD published for public comment proposed
regulations for FNMA and FHLMC which among other things would establish
annual goals, stated as a percentage of the number of dwelling units
financed by each agency's mortgage purchases during the year. The
aggregate of the goals for the HCDA - established categories for each of
FNMA and FHLMC under the proposed regulations are 67% for 1995 and 73%
for 1996. The proposal stated the Secretary's intention that
accomplishment of these goals should not cause FNMA or FHLMC to reduce
the volume of their respective purchases of mortgage loans granted to
higher income borrowers. The comment period expires May 2, 1995.
HCDA also established the Office of Federal Housing Enterprise Oversight
("OFHEO"), a new supervisory authority over FNMA and FHLMC. Among other
things, the Director of OFHEO is required to adopt regulations within 18
months of appointment prescribing minimum risk-based capital levels for
FNMA and FHLMC, to take supervisory action against such an enterprise
which fails to meet required capital levels (including the adoption of a
capital restoration plan and restrictions on capital distributions by the
enterprise to its shareholders such as the Company), and, in the
Director's discretion, to take other supervisory action, including
appointment of a conservator for an enterprise which becomes
significantly or critically undercapitalized. These provisions are
generally subject to phased introduction over the period expiring one
year after final adoption of the risk-based capital regulations of the
Director.
In February 1995, the OFHEO published an advance notice of proposed
rule-making, seeking public comment on various issues prior to the
publication of proposed rules to implement the foregoing provisions of
HCDA. It is not possible to predict the potential impact upon the
Company, if any, of compliance by FNMA and FHLMC with the requirements of
HCDA and such regulations.
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<PAGE>
As part of the Omnibus Budget Reconciliation Act of 1993, Congress
amended the Federal Deposit Insurance Act ("FDIA") to require receivers
of failed depository institutions to give priority to depositors over
general creditors, subordinated creditors and shareholders when
distributing assets of a failed institution. This depositor preference
will apply on a nationwide basis.
In 1994, the Congress enacted two major pieces of banking legislation,
the Riegle Act and the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Riegle-Neal Act"). The Riegle Act addressed
such varied issues as the promotion of economic revitalization of defined
urban and rural "qualified distressed communities" through special
purpose "Community Development Financial Institutions", the expansion of
consumer protection with respect to certain loans secured by a consumer's
home and reverse mortgages, and reductions in compliance burdens
regarding Currency Transaction Reports, in addition to reform of the
National Flood Insurance Program, the promotion of a secondary market for
small business loans and leases, and mandating specific changes to reduce
regulatory impositions on depository institutions and holding companies.
Among other reforms to the National Flood Insurance Program, the Riegle
Act requires (i) FNMA and FHLMC to implement procedures reasonably
designed to ensure that mortgage loans sold to such agencies and secured
by properties located in a special flood hazard area (a "Flood Property")
are covered by flood insurance for the full term of the loan, even if the
identification of the special flood hazard area occurs after the loan is
closed, (ii) that if an escrow account is established by a lender or
servicer with respect to a mortgage loan secured by a Flood Property, the
escrow must cover flood insurance payments, and (iii) a lender or
servicer with respect to a mortgage loan secured by a Flood Property to
"force place" flood insurance for such property if the borrower fails to
obtain such insurance. The provisions of the Riegle Act described in
clauses (i) and (ii) apply to mortgage loans made, increased, extended or
renewed after September 23, 1995; the provisions regarding "force
placement" of flood insurance took effect on September 23, 1994.
The Riegle Act seeks to encourage the development of a secondary market
for small business loans and leases by amending the Secondary Mortgage
Market Enhancement Act of 1984 to expand the scope of loans eligible for
securitization thereunder to include small business loans and leases
(subject to the right of any State to opt out within seven years of
enactment), and by making such securities legal investments for
depository institutions. It further facilitates such securitizations by
directing the Federal depository institution regulators to treat
transfers of small business loans and leases by depository institutions
in accordance with generally accepted accounting principles, and to limit
the capital required to be maintained by such institutions with respect
to such transfers to the amount of the institution's contractual recourse
liability.
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<PAGE>
The regulatory reform provisions of the Riegle Act require Federal
banking agencies to consider burdens and benefits to depository
institutions and their customers before imposing new compliance
requirements, and in general to make new or amended regulations effective
on the first day of a calendar quarter. Each such agency must review and
streamline its regulations and policies within two years, and establish
an internal administrative appeal procedure for "material supervisory
determinations" within six months. The agencies are directed to
coordinate their examinations of depository institutions, and to simplify
and permit electronic filing of statements of condition (known as Call
Reports) by depository institutions. The Act also repealed the
requirement of newspaper publication of statements of condition. Among
other things, the Riegle Act also (i) modified certain consumer
disclosure requirements, (ii) directed the agencies to complete their
regulatory review of the Community Reinvestment Act at the earliest
practicable time, (iii) modified the FDIA to give the agencies more
flexibility in implementing safety and soundness standards, (iv) provided
simplified procedures for formation of one-bank bank holding companies,
(v) mandated expedited notice procedures to the Federal Reserve Board for
bank holding companies to engage in non-banking activities, (vi) reduced
the 30-day post-approval waiting period for certain depository
institution mergers and bank holding company acquisitions to 15 days
under certain circumstances, (vii) eliminated the requirement of prior
board of directors' approval of first-mortgage home loans to executive
officers of the depository institution and expanded the Federal Reserve
Board's authority to provide regulatory exceptions in respect of loans to
certain directors and officers of subsidiaries of a bank holding company,
and (viii) modified FDICIA by directing the Federal banking agencies to
take into account the size and activities of depository institutions, and
not to cause undue reporting burdens, in their biennial review of capital
adequacy standards.
The Riegle-Neal Act will substantially change the geographic constraints
applicable to the banking industry. Effective September 29, 1995, the
application of a bank holding company located in one State (the "home
State") to acquire a bank located in any other State (the "host State")
may be approved by the Federal Reserve Board under the BHC Act
notwithstanding any prohibition of such acquisition in the law of the
host State. The Riegle-Neal Act permits States to require that a target
bank have been in operation for a minimum period, up to five years, and
to impose non-discriminatory limits on the percentage of the total amount
of deposits with insured depository institutions in the State which may
be controlled by a single bank or bank holding company. In addition, the
new Act imposes Federal deposit concentration limits (10% of nationwide
total deposits, and 30% of total deposits in the host State on
applications subsequent to the applicant's initial entry to the host
State), and adds new statutory conditions to Federal Reserve Board
approval, i.e., that the applicant meets or exceeds all applicable
Federal regulatory capital standards and is "adequately managed."
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<PAGE>
Also effective September 29, 1995, any bank subsidiary (and, in certain
circumstances thrift subsidiary) of a bank holding company may receive
deposits to existing accounts, renew time deposits, and close, service
and receive payments on (but not disburse proceeds of) loans, as an agent
for its depository institution affiliates without being considered a
branch of the affiliate under any otherwise applicable law. Such agency
activities must be conducted on terms consistent with safe and sound
banking practices.
The Riegle-Neal Act also authorizes, effective June 1, 1997, the
responsible Federal banking agency to approve applications for the
interstate acquisition of branches or mergers of depository institutions
across State lines without regard to whether such activity is contrary to
State law. Any State may, however, by adoption of a non-discriminatory
law after September 29, 1994 and before June 1, 1997, either elect to
have this provision take effect before June 1, 1997 (as Virginia and Utah
have already done) or opt-out of the provision. The effect of opting out
is to prevent banks chartered by, or having their main office located in,
such State from participating in any interstate branch acquisition or
merger. Each State is permitted to prohibit interstate branch
acquisitions (i.e., acquisition of a branch without acquisition of the
entire target bank), to examine acquired or de novo branches of
out-of-State banks with respect to compliance with certain host State
laws, and to retain a minimum age requirement of up to five years, a
non-discriminatory deposit cap, and non-discriminatory notice or filing
requirements. The responsible Federal agency will apply the same Federal
concentration limits and capital and management adequacy requirements
noted above with respect to BHC Act applications. Branches acquired in a
host State by a State-chartered bank will be subject to the activity
limits and other laws of the host State to the same extent as a branch of
a bank chartered by the host State. Branches acquired in a host State by
an out-of-State national bank will be subject to community reinvestment,
consumer protection, fair lending and intrastate branching laws of the
host State (except to the extent the application of such laws to national
banks is preempted by Federal law or is determined by the Comptroller of
the Currency to be discriminatory), and to other non-tax laws of the host
State to the same extent as branches of a national bank having its main
office in the host State. The establishment of de novo branches by an
out-of State bank will continue to require express statutory authority
under the law of the host State and of the chartering jurisdiction.
Among other things, the Riegle-Neal Act also preserves State taxation
authority, prohibits the operation by out-of-State banks of interstate
branches as deposit production offices, imposes additional notice
requirements upon interstate banks proposing to close branch offices in a
low or moderate-income area, and creates new Community Reinvestment Act
evaluation requirements for interstate depository institutions. The Act
mandates new restrictions on interstate activities of foreign banks, and
requires public notice of, and opportunity to comment on, any proposed
ruling by a Federal banking agency which would preempt certain State
laws.
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At the request of the Administration, the Federal depository institution
regulatory agencies published in December 1993 proposed rules to replace
completely existing regulations under the Community Reinvestment Act.
Following receipt of over 6,700 written comments on the December 1993
proposals, the Federal bank regulatory agencies published revised
proposed CRA rules in October, 1994. In January, 1995, the chair of the
House Banking Committee's financial institutions subcommittee wrote to
the agencies requesting a delay in promulgating revised CRA rules until
her panel could conduct hearings. In March, 1995, the Comptroller of the
Currency stated publicly that issuance of the new CRA rules would not
occur until April, 1995. In addition, on March 8, 1994, the Interagency
Task Force on Fair Lending, a body consisting of the Federal depository
institution regulators, the Departments of Justice and Housing and Urban
Development and four other Federal agencies (including the OFHEO), issued
a joint policy statement on discrimination in lending. The policy
statement applies to all lenders, and provides an agreed basis for future
agency rulemaking and administrative enforcement of various federal laws
prohibiting lending discrimination.
Each of the chairman of the House and Senate banking committees has
introduced in Congress a bill to repeal certain of the investment banking
restrictions applicable to commercial banks under the Banking Act of
1933, commonly known as the Glass-Steagall Act. The Administration
announced in February, 1995, that it would propose legislation permitting
common ownership of commercial banks, securities firms and insurance
companies, by repeal of provisions of the Glass-Steagall Act and revision
of the BHC Act. In addition, bills are pending in Congress to impose a
general moratorium on issuance of regulations by Federal agencies, which
may be made applicable to the Federal banking agencies. There can be no
assurance whether, or in what form, any of these bills will become law.
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6. Regulation of Proposed Acquisitions
In general, any direct or indirect acquisition by the Company of any
voting shares of any bank which would result in the Company's direct or
indirect ownership or control of more than 5% of any class of voting
shares of such bank, and any merger or consolidation of the Company with
another bank holding company, will require the prior written approval of
the Federal Reserve Board under the BHC Act. In reaching its decision on
an application for such approval, the Federal Reserve Board must consider
a number of factors, including the effect of the proposed acquisition or
merger on competition in relevant geographic and product markets, the
financial condition of both parties, capital adequacy before and after
the proposed acquisition, the managerial resources and future prospects
of the parties, the convenience and needs of the communities to be
served, and the prior record of both the Company's existing bank
subsidiaries and the bank to be acquired (or the bank subsidiary of the
other party to the merger) under the Community Reinvestment Act.
Amendments made to the BHC Act by FDICIA further require the Federal
Reserve Board (a) to disapprove any application by a bank holding company
which fails to provide the Board with adequate assurances that it will
furnish to the Board information on the operations and activities of such
bank holding company and its affiliates determined by the Board to be
appropriate to determine and enforce compliance with the statute, and (b)
in its consideration of managerial resources, to include consideration of
the competence, experience and integrity of the officers, directors, and
principal shareholders of the parties. In addition, subject to certain
exceptions, the Federal Reserve Board may not approve any such
application by a bank holding company to acquire a bank or bank holding
company located outside the state in which the applicant's banking
subsidiaries conduct their principal banking operations unless the
acquisition is expressly authorized by the statute laws of the state in
which the bank or bank holding company to be acquired is located.
Effective September 29, 1995, the BHC Act will no longer prevent the
Federal Reserve Board from approving the acquisition of a bank because of
contrary State law. See "Recently Enacted and Proposed Legislation."
The merger or consolidation of an existing bank subsidiary of the Company
with another bank, or the acquisition by such a subsidiary of assets of
another bank, or the assumption of liability by such a subsidiary to pay
any deposits in another bank, will require the prior written approval of
the responsible Federal depository institution regulatory agency under
the Bank Merger Act. In reaching its decision, the responsible Federal
depository institution regulatory agency must consider a number of
factors, including the effect of the proposed transaction on competition
in relevant geographic and product markets, the financial and managerial
resources and future prospects of the parties, capital adequacy before
and after the proposed transaction, the convenience and needs of the
communities to be served, and the prior record of both the Company's
existing subsidiaries and the other bank under the Community Reinvestment
Act. In addition, an application to, and the prior approval of, the
Federal Reserve Board may be required under the BHC Act, in certain such
cases.
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<PAGE>
In all of the foregoing cases, the required regulatory approvals are
subject to public notice and comment procedures. Adverse public comments
received, or adverse considerations raised by the regulatory agencies,
may delay or prevent consummation of the proposed transaction. In
addition, such a transaction generally may not be consummated before the
thirtieth calendar day (or if the Attorney General has made no adverse
comment to the Federal Reserve Board thereon, such shorter period not
less than 15 calendar days as the Board may specify with the concurrence
of the Attorney General) after final approval of the transaction by the
Federal depository institution regulatory agency. In some of the
foregoing cases, prior approvals of state bank regulatory authorities
must also be obtained prior to consummation of the proposed transactions.
With certain limited exceptions, the BHC Act prohibits bank holding
companies, such as the Company, from acquiring direct or indirect
ownership or control of voting shares or assets of any company other than
a bank, unless the company involved is engaged solely in one or more
activities which the Federal Reserve Board has determined to be so
closely related to banking or managing or controlling banks as to be a
proper incident thereto. Any such acquisition will require, except in
certain limited cases, at least 60 days' prior written notice to the
Federal Reserve Board.
In evaluating a written notice of such an acquisition, the Federal
Reserve Board will consider whether the performance by an affiliate of
the Company of the activity can reasonably be expected to produce
benefits to the public (such as greater convenience, increased
competition, or gains in efficiency) that outweigh possible adverse
effects (such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices). The
Board may apply different standards to activities proposed to be
commenced de novo and activities commenced by acquisition, in whole or in
part, of a going concern. The Board's consideration will also include an
evaluation of the financial and managerial resources of the Company,
including its existing subsidiaries, and of any entity to be acquired,
and the effect of the proposed transaction on those resources. The
required notice period may be extended by the Board under certain
circumstances, including a notice for acquisition of a company engaged in
activities not previously approved by regulation of the Board. This
required regulatory written notice is subject to public notice and
comment procedures, and adverse public comments received, or adverse
considerations raised by regulatory agencies, may delay or prevent
consummation of such an acquisition. If such a proposed acquisition is
not disapproved or subjected to conditions by the Board within the
applicable notice period, it is deemed approved by the Board. Such an
acquisition may also require 30 days' prior notice to the Department of
Justice and the Federal Trade Commission.
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<PAGE>
FIRREA amended the BHC Act in 1989 to permit the Federal Reserve Board to
approve an application by any bank holding company to acquire and operate
a savings association as a non-bank subsidiary of such bank holding
company. A bank holding company such as the Company may submit a written
notice to the Board of the acquisition of a savings association engaged
in deposit-taking, lending and other activities that the Board has
determined to be permissible for bank holding companies, in accordance
with the procedures and standards described in the preceding paragraph.
Subject to certain exceptions, the direct or indirect association by a
bank holding company such as the Company which does not already control a
savings association will cause the bank holding company to become a
savings and loan holding company. Each company becoming a savings and
loan holding company must register as such with the Office of Thrift
Supervision ("OTS") within 90 days after becoming a savings and loan
holding company. Thereafter, the savings and loan holding company is
subject to regulation, periodic reporting requirements, and examination
by the OTS. In the case of a bank holding company which is also a savings
and loan holding company, such OTS regulation is in addition to
continuing regulation by the Federal Reserve Board under the BHC Act.
Item 2. PROPERTIES AND EMPLOYEES
The executive offices of the Company are located at 1070 East Main Street,
Owosso, Michigan, a two-story building which is also occupied by the Owosso
branch of Republic Bank. This building is owned by Republic Bank. The Company
also maintains administrative offices at the principal office of Republic Bank
in Ann Arbor, Michigan.
Currently, the Company's bank subsidiary Republic Bank, operates 25 offices,
including two loan production offices within the State of Michigan, of which
fourteen are owned and eleven are leased. The Company's state savings bank
operates eleven offices within the state of Ohio, of which two are owned and
nine are leased.
Currently, the Company's mortgage banking subsidiaries operate ten offices in
Michigan, one office in Iowa, twelve offices in Florida, two offices in
Virginia, one office in North Carolina, two offices in Maryland, two offices
in Alabama, one office in Illinois, two offices in Georgia, one office in
Colorado, one office in Texas, five offices in California, three offices in
New York, two offices in Connecticut, one office in Massachusetts, two offices
in Arizona, one office in Washington and one office in Oregon. All of the
Company's mortgage banking offices are leased, with the exception of Republic
Mortgage's corporate office located in Farmington Hills, Michigan.
At December 31, 1994, total annual rental expense under real estate lease
obligations of the Company and its subsidiaries, other than intercompany
items, was approximately $3.7 million. Rental expense for 1995 is expected to
decline due to the closing of certain mortgage banking offices during the
third and fourth quarters of 1994.
The Company had approximately 1,050 full-time equivalent employees at December
31, 1994.
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Item 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to certain ordinary, routine
litigation incidental to the Company's business. Management considers that the
aggregate liability, if any, arising from such actions would not have a
material adverse effect on the consolidated financial position of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The information set forth under caption "Summary of Common Share Market Data"
on Page 46 of the 1994 Annual Report of the Company is incorporated herein by
reference.
Item 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five Year Summary of Selected
Financial Data" on Page 6 of the 1994 Annual Report of the Company is
incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information set forth under the caption "Management's Discussion and
Analysis" on Pages 7 through 20 of the 1994 Annual Report of the Company is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth on Pages 21 through 43 and Pages 45 and 46 of the
1994 Annual Report of the Company is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not Applicable
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of March 1, 1995 are as follows:
<TABLE>
<CAPTION>
Position
Name Position Held Since Age
<S> <C> <C> <C>
Jerry D. Campbell Chairman of the Board, President 1985 54
and Chief Executive Officer
Dana M. Cluckey Executive Vice President, 1986 35
Treasurer and Assistant Secretary
Barry J. Eckhold Vice President, Chief Credit 1990 48
Officer and Secretary
Richard H. Shaffner Vice President 1992 41
Thomas F. Menacher Chief Financial and 1992 38
Accounting Officer
</TABLE>
The information set forth under the caption "Directors" on Pages 5 through 7
of the definitive Proxy Statement of the Company dated March 27, 1995 filed
with the Securities and Exchange Commission pursuant to Regulation 14A is
incorporated herein by reference for information as to directors of the
Company.
Item 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Compensation of Executive
Officers" on Pages 10 through 14 of the definitive Proxy Statement of the
Company dated March 27, 1995 filed with the Securities and Exchange Commission
pursuant to Regulation 14A is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Principal Holders of the
Company's Common Stock" on Pages 2 through 4 of the definitive Proxy Statement
of the Company dated March 27, 1995 filed with the Securities and Exchange
Commission pursuant to Regulation 14A is incorporated herein by reference.
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<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Related Transactions" on Page 9
of the definitive Proxy Statement of the Company dated March 27, 1995 filed
with the Securities and Exchange Commission pursuant to Regulation 14A is
incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements:
<TABLE>
<CAPTION>
Page *
<S> <C>
Consolidated Balance Sheets - December 31, 1994 and 1993... 21
Consolidated Statements of Income - Three Years Ended
December 31, 1994........................................ 22
Consolidated Statements of Shareholders' Equity -
Three Years Ended December 31, 1994...................... 23
Consolidated Statement of Cash Flows - Three
Years Ended December 31, 1994............................ 24-25
Notes to Consolidated Financial Statements................. 26-43
Independent Auditors' Report............................... 45
</TABLE>
*Refers to page number of the Annual Report of the Company for the year ended
December 31, 1994.
2. Schedules:
I - Indebtedness to Related Parties (Not Applicable)
II - Guarantees of Securities of Other Issuers (Not Applicable)
(b) Reports on Form 8-K:
Not Applicable
(c) Exhibits:
3. (a) Articles of Incorporation, are incorporated herein by reference to
Exhibit 3(a) to Form 10K filed March 17, 1994.
(b) Bylaws, as amended, are incorporated herein by reference to Exhibit
3(b) to Registration Statement on Form S-4 filed March 1, 1990,
Registration No. 33-33811.
-25-
<PAGE>
4(a) Indenture dated as of February 1, 1993, between the Company and
NBD Bank, N.A., as Trustee, relating to 9% Subordinated Notes due
2003, including Form of 9% Subordinated Note due 2003: filed as
Exhibit 4(d) to Amendment No. 1 to Form S-4 filed January 28, 1993,
Registration No. 33-56112, and incorporated herein by reference.
4(b) Warehousing Credit Agreement, dated as of December 18, 1992, between
Mayflower Mortgage Corporation, d/b/a Republic Bancorp Mortgage Inc.,
the banks named therein and NBD Bank, N.A., as Agent: filed as
Exhibit 4(c) to Form S-3 filed January 8, 1993, Registration No.
33-56328, and incorporated herein by reference.
4(c) First Amendment to Warehousing Credit Agreement, dated as of May 1,
1993, between Mayflower Mortgage Corporation, d/b/a Republic Bancorp
Mortgage Inc., the banks named therein and NBD Bank, N.A., as Agent,
filed as Exhibit 4(c) to Form S-3, filed May 26, 1993, Registration
No. 33-61842, and incorporated herein by reference.
4(d) Second Amendment to Warehousing Credit Agreement, dated as of
December 17, 1993, between Mayflower Mortgage Corporation, d/b/a
Republic Bancorp Mortgage Inc., the banks named therein and NBD Bank,
N.A., as Agent: filed as Exhibit 4(d) to Form 10-K, filed March 17,
1994 and incorporated herein by reference.
4(e) Third Amendment dated as of March 31, 1994 and Fourth Amendment
dated as of April 30, 1994, to Warehousing Credit Agreement between
Mayflower Mortgage Corporation, d/b/a Republic Bancorp Mortgage Inc.,
the banks named therein and NBD Bank, N.A., as Agent.
4(f) Fifth Amendment to Warehousing Credit Agreement, dated as of
September 1, 1994, between Mayflower Mortgage Corporation, d/b/a
Republic Bancorp Mortgage Inc., NBD Bank, N.A., and NBD Bank, N.A.,
as Agent.
4(g) Revolving Credit Agreement between the Company and Firstar Bank
Milwaukee, N.A., dated as of January 26, 1995.
4(h) Collateral Pledge Agreement between the Company and Firstar Bank
Milwaukee, N.A., dated as of October 1, 1993: filed as Exhibit 4(g)
to Form 10-K, filed March 17, 1994 and incorporated herein by
reference.
4(i) Warehousing Credit Agreement, dated as of July 30, 1993, among Market
Street Mortgage Corporation and G.E. Capital Mortgage Services, Inc.
and Warehousing Credit Agreement, dated as of July 30, 1993, among
Market Street Mortgage Corporation, Cooper River Funding, Inc., as
lender, and G.E. Capital Mortgage Services, Inc., as Agent: filed as
Exhibit 4(h) to Form 10-K, filed March 17, 1994 and incorporated
herein by reference.
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<PAGE>
4(j) Term notes dated December 29, 1992, in the amounts of $2.2 million
and $211,000 given by Republic Mortgage in favor of Poughkeepsie
Savings Bank, FSB: filed as Exhibit 4(h) to Form S-3 filed January 8,
1993, Registration No. 33-56328, and incorporated herein by
reference.
4(k) First Amendment dated as of October 16, 1993, Second Amendment dated
as of February 23, 1994, Third Amendment dated as of May 20, 1994,
Fourth Amendment dated as of July 30, 1994, and Fifth Amendment dated
as of August 31, 1994, to Warehousing Credit Agreement between Market
Street Mortgage Corporation and G.E. Capital Mortgage Services, Inc.
4(l) First Amendment to Warehousing Security Agreement, dated as of
February 23, 1994, between Market Street Mortgage Corporation and
G.E. Capital Mortgage Services, Inc.
4(m) First Amendment dated as of May 20, 1994, Second Amendment dated as
of July 30, 1994, and Third Amendment dated as of August 31, 1994, to
Warehousing Credit Agreement between Market Street Mortgage
Corporation, Cooper River Funding, Inc., as lender, and G.E. Capital
Mortgage Services, Inc. as Agent.
4(n) Term Loan Agreement, dated as of April 29, 1994, between Market
Street Mortgage Corporation and G. E. Capital Mortgage Services, Inc.
4(o) First Amendment to Term Loan Agreement, dated as of November 11,
1994, between Market Street Mortgage Corporation and G.E. Capital
Mortgage Services, Inc.
4(p) Debenture Purchase Agreement dated as of March 30, 1994, between the
Company and Scudder, Stevens & Clark, Inc., Business Men's Assurance
Company of America, Columbus Life Insurance Company and Mutual of
America Life Insurance Company, related to 7.17% Senior Debentures
due 2001.
4(q) Warehousing Credit Agreement, dated as of August 11, 1994, between
CUB Funding Corporation and The Prudential Home Mortgage Company,
Inc.
4(r) First Amendment to Warehousing Credit Agreement, dated as of
November 1, 1994, between CUB Funding Corporation and The Prudential
Home Mortgage Company, Inc.
10(a) Non-Qualified Stock Option Plan of the Company, effective March 24,
1986, as amended and restated: filed as Exhibit 10(b) to Form 10-K,
filed March 23, 1993 and incorporated herein by reference.
10(b) Restricted Stock Plan of the Company, effective March 24, 1986, as
amended and restated: filed as Exhibit 10(c) to Form 10-K, filed
March 23, 1993 and incorporated herein by reference.
-27-
<PAGE>
10(c) Form of Indemnity Agreement and Schedule of officers and directors
of the Company who executed such agreements: filed as Exhibit 10(e)
to Form S-2, Registration No. 33-46069, and incorporated herein by
reference.
10(d) Directors Compensation Plan of the Company, adopted by the Board of
Directors on October 15, 1992: filed as Exhibit 10(e) to Form 10-K,
filed March 23, 1993 and incorporated herein by reference.
10(e) Deferred Compensation Plan of the Company, adopted by the Board of
Directors on December 16, 1993: filed as Exhibit 10(e) to Form 10-K,
filed March 17, 1994 and incorporated herein by reference.
11. Statement Re: Computation of per share earnings (See Annual Report
to Security Holders, Pages 36 and 37, filed herewith as Exhibit 13).
13. 1994 Annual Report of the Company and Independent Auditors' Report
on the Company's December 31, 1994, 1993, and 1992 Financial
Statements.
22. Subsidiaries of the Registrant are incorporated by reference to
Note 1 to the Notes to Consolidated Financial Statements.
23. Consent of Deloitte & Touche LLP to incorporation by reference of its
report dated January 18, 1995 appearing in the Company's Form 10-K
for the year ended December 31, 1994 into the Company's Registration
Statements on Form S-8 dated December 4, 1992, Registration No.
33-55336, and Form S-8 dated December 4, 1992, Registration No.
33-55304, and Form S-8 dated May 10, 1993, Registration No. 33-62508,
and the Company's Registration Statement on Form S-3 dated May 26,
1993, Registration No. 33-61842.
27. Financial Data Schedule containing summary financial information
extracted from the consolidated balance sheet as of December 31, 1994
and consolidated statement of income for the twelve months ended
December 31, 1994.
28(a) Form of Servicing and Disposition Agreement for Inventory and
Construction Loan Portfolio, dated November 21, 1992, between Market
Street Mortgage Corporation and the Company: filed as Exhibit 2(b) to
Form 8-K filed November 23, 1992, and incorporated herein by
reference.
28(b) First Amended and Restated Agreement and Plan of Reorganization,
dated as of October 29, 1992, by and between the Company and Horizon
Financial Services, Inc.: filed as Exhibit 2 to Form 8-K filed
November 6, 1992, and incorporated herein by reference.
28(c) Agreement and Plan of Merger between the Company and Premier
Bancorporation, Inc., dated as of March 31, 1993: filed as Exhibit
28(c) to Form 10-K, filed March 17, 1994 and incorporated herein by
reference.
-28-
<PAGE>
28(d) Agreement of Consolidation, dated as of July 23, 1993, by and among
the following six consolidating banks: Republic Bank, a Michigan
banking corporation, Republic Bank - Central, a Michigan banking
corporation, Republic Bank - North, a Michigan banking corporation,
Republic Bank Ann Arbor, a Michigan banking corporation, Republic
Bank S.E., a Michigan banking corporation (collectively the
"Constituent Banks"), and Premier Bank ("Premier"), a Michigan
banking corporation: filed as Exhibit 28(d) to Form 10-K, filed March
17, 1994 and incorporated herein by reference.
28(e) Purchase and Sale Agreement by and between Republic Bancorp Inc.
("Purchaser") and California United Bank, National Association
("Seller"), dated October 22, 1993: filed as Exhibit 28(e) to Form
10-K, filed March 17, 1994 and incorporated herein by reference.
28(f) Purchase and Sale Agreement by and between Republic Bancorp Mortgage
Inc. ("Purchaser") and Home Funding, Inc. ("Seller"), dated November
1, 1994.
28(g) Purchase and Sale Agreement by and between Republic Bank ("Seller")
and CB North ("Purchaser"), dated as of September 27, 1994.
28(h) Purchase and Sale Agreement by and between Republic Bank ("Purchaser")
and Standard Federal Bank ("Seller"), dated as of November 14, 1994.
NOTE: Items 1, 2, 5, 6, 7, 8, 9, 12, 14, 15, 16, 17, 18, 19, 20, 21, 24,
25, 26, and 29 are not applicable.
-29-
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 16th day
of March, 1995.
/s/ Jerry D. Campbell /s/ Thomas F. Menacher
------------------------- -------------------------
Jerry D. Campbell Thomas F. Menacher
Chief Executive Officer and President Chief Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in their capacity as Directors of the Company on the 16th day
of March, 1995.
/s/ Jerry D. Campbell /s/ Stephen M. Klein
------------------------- -------------------------
Jerry D. Campbell Stephen M. Klein
/s/ Dana M. Cluckey
------------------------- -------------------------
Dana M. Cluckey John J. Lennon
/s/ Bruce L. Cook
------------------------- -------------------------
Bruce L. Cook Sam H. McGoun
/s/ Richard J. Cramer
------------------------- -------------------------
Richard J. Cramer Kelly E. Miller
/s/ George A. Eastman /s/ Joe D. Pentecost
------------------------- -------------------------
George A. Eastman Joe D. Pentecost
/s/ Howard J. Hulsman /s/ George B. Smith
------------------------- -------------------------
Howard J. Hulsman George B. Smith
/s/ Gary Hurand /s/ Jeoffrey K. Stross
------------------------- -------------------------
Gary Hurand Jeoffrey K. Stross
------------------------- -------------------------
Dennis J. Ibold Lyman H. Treadway
Exhibit 4(e)
THIRD AMENDMENT TO
WAREHOUSING CREDIT AGREEMENT
THIS THIRD AMENDMENT TO WAREHOUSING CREDIT AGREEMENT, dated as of March
31, 1994 (this "Amendment"), is by and between MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc., a Michigan corporation (the "Company"),
the banks named in Section 2.1 of the Warehousing Credit Agreement referred to
below (collectively referred to as the "Banks" and individually referred to as
"Bank") and NBD BANK, N.A., a national banking association, as agent for the
Banks (in such capacity, the "Agent").
RECITALS
A. The Company, the Banks and the Agent are parties to a Warehousing
Credit Agreement, dated as of December 18, 1992, and amended by a First
Amendment to Warehousing Credit Agreement dated as of May 1, 1993 and by a
Second Amendment to Warehousing Credit Agreement dated as of December 17, 1993
(as so amended, the "Credit Agreement"), pursuant to which the Banks agreed,
subject to the terms and conditions thereof, to extend credit to the Company.
B. The Company has requested that the maturity date of the Notes be
extended, and the Banks and the Agent have so agreed, subject to the terms and
conditions of this Amendment.
Therefore, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in
Article III hereof, the Credit Agreement shall be amended as follows:
1.1 The definition of "Termination Date" contained in Section 1.1 is
hereby deleted and the following is substituted in place thereof:
"Termination Date" shall mean the earlier to occur of (a) April 30, 1994,
and (b) the date on which the Credit shall be terminated pursuant to Section
2.3 or 7.2.
ARTICLE II. REPRESENTATIONS AND WARRANTS. The Company represents and warrants
to the Agent and the Banks as follows:
2.1 The execution, delivery and performance of this Amendment and all
other agreements and documents executed pursuant hereto have been duly
authorized by all necessary corporate action and are not in contravention of
any Governmental Regulation, or of the terms of its charter or by-laws, or of
any contract or undertaking to which it is a party or by which it or its
property may be bound or affected, the breach of any of which could reasonably
be expected to materially and adversely affect its ability to perform its
obligations under this Amendment, the Credit Agreement or the other Loan
Documents, and do not result in the imposition of any Lien except for
Permitted Liens.
<PAGE>
2.2 This Amendment and all other agreements and documents executed
pursuant hereto are the legal, valid and binding obligations of the Company
enforceable against it in accordance with their respective terms, subject to
the effect of any applicable bankruptcy, insolvency moratorium, reorganization
or other similar laws affecting creditors' rights generally, to the
discretionary nature of specific performance, injunctive relief and other
equitable remedies, and to general principles of equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
2.3 The representations and warranties contained in Article V of the
Credit Agreement are true on and as of the date hereof with the same force and
effect as if made on and as of the date hereof, except that Schedule 5.4
thereto shall be replaced by the attached Schedule 5.4, and the forms of the
Articles of Incorporation, Bylaws, resolutions and certificates of incumbency
of the Company delivered to the Agent and the Banks on December 18, 1992 and
December 17, 1993, continue to be true, correct and complete in all material
respects and have not been modified or amended in any respect.
2.4 No Default or Event of Default exists as of the date hereof.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become
effective until each of the following has been satisfied:
3.1 The Company shall have delivered to the Banks promissory notes in the
forms attached as Exhibits 3.1(a) and (b), appropriately completed for each
bank and duly executed on behalf of the Company (the "New Notes").
3.2 Copies of resolutions adopted by the Board of Directors of the
Company, certified by an officer of the Company as being true and correct and
in full force and effect without amendment as of the date hereof, authorizing
the Company to enter into this Amendment and the New Notes, shall have been
delivered to the Agent and the Banks.
3.3 This Amendment shall have been fully executed and delivered to the
Agent and the Banks.
3.4 The Company shall have delivered to the Agent and the Banks such
other documents and instruments as the Agent or the Banks may request in
connection herewith.
ARTICLE IV. MISCELLANEOUS.
4.1 References in the Credit Agreement or in any other Loan Document to
the Credit Agreement shall be deemed to be references to the Credit Agreement
as amended hereby and as further amended from time to time.
4.2 The Company agrees to pay and to save the Agent and the Banks
harmless from the payment of all costs and expenses arising in connection with
this Amendment, the New Notes and the documents and agreements executed
hereunder or thereunder, including the fees of Honigman Miller Schwartz and
Cohn, counsel to the Agent, in connection with preparing this Amendment, the
New Notes and such other documents and agreements.
<PAGE>
4.3 Except as expressly amended hereby, the Company agrees that the
Credit Agreement, the other Loan Documents and all other documents and
agreements executed by the Company in connection with the Credit Agreement in
favor of the Agent and the Banks are ratified and confirmed and shall remain
in full force and effect and the Company acknowledges and agrees that it has
no setoff, counterclaim or defense with respect to any of the foregoing.
Capitalized terms used but not defined herein shall have the respective
meanings ascribed thereto in the Credit Agreement. Not withstanding anything
in the Credit Agreement or the Collateral Documents to the contrary, all
collateral granted by the Company to the Agent and the Banks pursuant to the
Collateral Documents secures all Advances and all other present and future
indebtedness, obligations and liabilities of the Company owing to the Agent
and the Banks in accordance with such Collateral Documents.
4.4 This Amendment may be signed upon any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have caused this
Amendment to be executed and delivered as of March 31, 1994.
MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc.
By: /s/ Richard H. Shaffner
-----------------------------
Its: President and Chief Executive Officer
NBD Bank, N.A. (as a Bank and as Agent)
By: /s/
-----------------------------
Its:
-------------------------------------
Comerica Bank
By: /s/
---------------------------------
Its:
--------------------------------------
<PAGE>
FOURTH AMENDMENT TO
WAREHOUSING CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO WAREHOUSING CREDIT AGREEMENT, dated as of
April 30, 1994 (this "Amendment"), is by and between MAYFLOWER MORTGAGE
CORPORATION, d/b/a Republic Bancorp Mortgage Inc., a Michigan corporation
(the "Company"), the banks named in Section 2.1 of the Warehousing Credit
Agreement referred to below (collectively referred to as the "Banks" and
individually referred to as "Bank") and NBD BANK, N.A., a national banking
association, as agent for the Banks (in such capacity, the "Agent").
Recitals
A. The Company, the Banks and the Agent are parties to a Warehousing
Credit Agreement, dated as of December 18, 1992, and amended by a First
Amendment to Warehousing Credit Agreement dated as of May 1, 1993, a Second
Amendment to Warehousing Credit Agreement dated as of December 17, 1993 and
a Third Amendment to Warehousing Credit Agreement dated as of March 31,
1994 (as so amended, the "Credit Agreement"), pursuant to which the Banks
agreed, subject to the terms and conditions thereof, to extend credit to
the Company.
B. The parties desire to amend the Credit Agreement on the terms and
conditions of this Amendment.
Therefore, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in
Article III hereof, the Credit Agreement shall be amended as follows:
1.1 The definitions of "Borrowing Base", "Floating Rate" and
"Termination Date" contained in Section 1.1 are hereby deleted and the
following are substituted in place thereof:
"Borrowing Base" shall mean, as of any date, an amount equal to
the sum of the following:
(a) 97% (but not to exceed $10,000,000 in the aggregate) of
the Collateral Value (as defined below) of Acceptable Mortgage
Loans (other than Uncommitted Loans) which are advanced against by
means of a Draft Advance or Good Funds Advance and which have
constituted Collateral for not more than 5 Business Days;
(b) 97% (but not to exceed $15,000,000 in the aggregate) of
the Collateral Value of Gestation Loans);
(c) 97% (but note to exceed $50,000,000 in the aggregate) of
the Collateral Value of Conforming Acceptable Mortgage Loans
(other than Gestation Loans and Uncommitted Loans) which
have constituted Collateral for not more than 90 days;
<PAGE>
(d) 95% (but not to exceed $50,000,000 in the aggregate) of
the Collateral Value of Conforming Acceptable Mortgage Loans
(other than Gestation Loans and Uncommitted Loans) which have
constituted Collateral for 91 to 180 days;
(e) 95% (but not to exceed $1,000,000 in the aggregate) of
the Collateral Value of Uncommitted Loans constituting Acceptable
Mortgage Loans; and
(f) 95% (but not to exceed, when combined with the Mortgage
Loans described in (g) below, $7,500,000 in the aggregate) of the
Collateral Value of Non-Conforming Acceptable Mortgage Loans which
have constituted Collateral for not more than 60 days;
(g) 90% (but not to exceed, when combined with the Mortgage
Loans described in (f) above, $7,500,000 in the aggregate) of the
Collateral Value of Non-Conforming Acceptable Mortgage Loans which
have constituted Collateral for 61 to 120 days.
For purposes of the foregoing, "Collateral Value" shall mean (i) with
respect to a Mortgage Loan subject to an outstanding Purchase
Commitment, the lesser of (A) the unpaid principal amount of such
Mortgage Loan, less all discounts collected by the Company or other
originator in connection with such Mortgage Loan, and (B) the purchase
price with respect to the Purchase Commitment relating to such Mortgage
Loan, and (ii) with respect to an Uncommitted Loan, 95% of the unpaid
principal amount of such Mortgage Loan, less all discounts collected by
the Company or other originator in connection with such Mortgage Loan.
"Floating Rate" shall mean the per annum rate equal to:
(a) with respect to Draft Advances and Good Funds Advances,
the greater of (i) the Prime Rate in effect from time to time or
(ii) 100 basis points plus the Federal Funds Rate;
(b) with respect to Advances secured by Gestation Loans, the
sum of 125 basis points plus the Federal Funds Rate; and
(c) with respect to all other Advances, the sum of 175 basis
points and the Federal Funds Rate.
Such Floating Rate shall change simultaneously with any change in the
Prime Rate or Federal Funds Rate, as the case may be.
"Termination Date" shall mean the earlier to occur of (a) April
28, 1995, and (b) the date on which the Credit shall be terminated
pursuant to Section 2.3 or 7.2.
1.2 Clause (a) of the definition of "Adjusted LIBOR Rate" contained in
Section 1.1 is hereby deleted and the following is substituted in place
thereof:
-2-
<PAGE>
(a) one and three-fourths percent (1-3/4%),
1.3 The following definitions are hereby added to Section 1.1, to be
inserted in appropriate alphabetical order:
"Agency" shall mean FHLMC, FNMA or GNMA.
"Gestation Loan Sublimit" shall mean, with respect to all Banks in
the aggregate, $15,000,000.
"Gestation Loans" shall mean Acceptable Mortgage Loans which have
been certified by the Company to be (a) subject to outstanding Purchase
Commitments and (b) either (i) included by the Company in a pool of
mortgage loans intended to underlie one or more mortgage-backed
securities to be issued or guaranteed by an Agency and certified by the
applicable Agency or its approved document custodian to be eligible for
inclusion in such a pool (or, in the case of a GNMA mortgage-backed
security, initially certified) or (ii) included in a pool of mortgage
loans underlying one or more mortgage-backed securities issued or
guaranteed by an Agency; provided, however, that a Mortgage Loan shall
not be deemed a Gestation Loan under clause (i) above for more than 30
days nor a Gestation Loan under clause (ii) above for more than 15
days.
"Parent" shall mean Republic Bancorp, Inc., a Michigan corporation
and the sole shareholder of the Company.
1.4 The last paragraph of Section 2.1 is hereby deleted and the
following is substituted in place thereof:
Furthermore, in no event shall the aggregate unpaid principal
balance of (i) all outstanding Draft Advances and all outstanding Good
Funds Advances exceed the Wet Closing Sublimit and (ii) all Advances
secured by Gestation Loans exceed the Gestation Loan Sublimit.
1.5 Sections 3.3(d) and 6.2(c) are hereby deleted, and
Section 6.1(d)(iv) is hereby deleted and the following is substituted in
place thereof:
(iv) Upon request, from time to time, by the Agent or any
Bank, a Borrowing Base Certificate in the form of
Exhibit 6.1(d)(iv) appropriately completed as of the last day of
the calendar month immediately preceding the date of such
certificate.
1.6 The Guaranty Agreement is hereby terminated and deemed null and
void for all purposes, including with respect to any and all obligations of
the Company whether incurred before or after the date hereof, and the
Credit Agreement is hereby amended as follows:
-3-
<PAGE>
(a) all references to the "Guaranty Agreement" in the
definition of "Loan Documents", Article VII and Sections 8.8 and
9.17, are hereby deleted;
(b) all references to "Guarantors in the definition of
"Obligations", Article VI (other than any such references in
Section 6.1(d)), Article VII (other than any such references in
Sections 7.1(g), 7.1(h) and 7.1(i)) and Article VIII, are hereby
deleted; and
(c) all remaining references to "Guarantor" in the Credit
Agreement, including those references in Sections 6.1(d), 7.1(g),
7.1(h) and 7.1(i), and in any other Loan Document, are hereby
deemed to be references to "Parent".
1.7 The attached form of Request for Advance (Exhibit 3.1(a)) is
hereby substituted for the form of Request for Advance attached as Exhibit
3.1(a) to the Credit Agreement.
ARTICLE II. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Banks as follows:
2.1 The execution, delivery and performance of this Amendment and all
other agreements and documents executed pursuant hereto have been duly
authorized by all necessary corporate action and are not in contravention
of any Governmental Regulation, or of the terms of its charter or by-laws,
or of any contract or undertaking to which it is a party or by which it or
its property may be bound or affected, the breach of any of which could
reasonably be expected to materially and adversely affect its ability to
perform its obligations under this Amendment, the Credit Agreement or the
other Loan Documents, and do not result in the imposition of any Lien
except for Permitted Liens.
2.2 This Amendment and all other agreements and documents executed
pursuant hereto are the legal, valid and binding obligations of the Company
enforceable against it in accordance with their respective terms, subject
to the effect of any applicable bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally,
to the discretionary nature of specific performance, injunctive relief and
other equitable remedies, and to general principles of equity (regardless
of whether such enforceability is considered in a proceeding at law or in
equity).
2.3 The representations and warranties contained in Article V of the
Credit Agreement are true on and as of the date hereof with the same force
and effect as if made on and as of the date hereof, and the forms of the
Articles of Incorporation, Bylaws, resolutions and certificates of
incumbency of the Company delivered to the Agent and the Banks on
December 18, 1992 and December 17, 1993, continue to be true, correct and
complete in all material respects and have not been modified or amended in
any respect.
-4-
<PAGE>
2.4 No Default or Event of Default exists as of the date hereof.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become
effective until each of the following has been satisfied:
3.1 The Company shall have delivered to the Banks promissory notes in
the forms attached as Exhibits A and B, appropriately completed for each
Bank and duly executed on behalf of the Company (the "New Notes").
3.2 The Company shall have executed and delivered to the Agent, on
behalf of itself and the Banks, a Second Amendment to the Pledge and
Security Agreement in the form attached as Exhibit C (the "Pledge Agreement
Amendment").
3.3 Copies of resolutions adopted by the Board of Directors of the
Company, certified by an officer of the Company as being true and correct
and in full force and effect without amendment as of the date hereof,
authorizing the Company to enter into this Amendment, the New Notes and the
Pledge Agreement Amendment, shall have been delivered to the Agent and the
Banks.
3.4 This Amendment shall have been fully executed and delivered to the
Agent and the Banks.
3.5 The Company shall have delivered to the Agent and the Banks such
other documents and instruments as the Agent or the Banks may request in
connection herewith.
ARTICLE IV. MISCELLANEOUS.
4.1 References in the Credit Agreement or in any other Loan Document
to the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby and as further amended from time to time.
4.2 The Company agrees to pay and to save the Agent and the Banks
harmless from the payment of all costs and expenses arising in connection
with this Amendment, the New Notes, the Pledge Agreement Amendment and the
documents and agreements executed hereunder or thereunder, including the
fees of Honigman Miller Schwartz and Cohn, counsel to the Agent, in
connection with preparing this Amendment, the New Notes, the Pledge
Agreement Amendment and such other documents and agreements.
4.3 Except as expressly amended hereby, the Company agrees that the
Credit Agreement, the other Loan Documents and all other documents and
agreements executed by the Company in connection with the Credit Agreement
in favor of the Agent and the Banks are ratified and confirmed and shall
remain in full force and effect and the Company acknowledges and agrees
that it has no setoff, counterclaim or defense with respect to any of the
foregoing. Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement.
Notwithstanding anything in the Credit Agreement or the Collateral
Documents
-5-
<PAGE>
to the contrary, all collateral granted by the Company to the Agent and the
Banks pursuant to the Collateral Documents secures all Advances and all
other present and future indebtedness, obligations and liabilities of the
Company owing to the Agent and the Banks in accordance with such Collateral
Documents.
4.4 This Amendment may be signed upon any number of counterparts with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have caused this
Amendment to be executed and delivered as of April 30, 1994.
MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc.
By: /s/ Lawrence Rosenberg
-------------------------------
Its: CHIEF FINANCIAL OFFICER
--------------------------
NBD BANK, N.A. (as a Bank and
as Agent)
By:
-------------------------------
Its:
-------------------------
COMERICA BANK
By:
-------------------------------
Its:
-------------------------
-6-
<PAGE>
to the contrary, all collateral granted by the Company to the Agent and the
Banks pursuant to the Collateral Documents secures all Advances and all
other present and future indebtedness, obligations and liabilities of the
Company owing to the Agent and the Banks in accordance with such Collateral
Documents.
4.4 This Amendment may be signed upon any number of counterparts with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have caused this
Amendment to be executed and delivered as of April 30, 1994.
MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc.
By:
-------------------------------
Its:
--------------------------
NBD BANK, N.A. (as a Bank and
as Agent)
By: /s/ Carolann M. Morykwas
-------------------------------
Its: Vice President
-------------------------
COMERICA BANK
By: /s/ Donald Kent
-------------------------------
Its: Vice President
-------------------------
-6-
<PAGE>
Exhibit 3.1(a)
REQUEST FOR ADVANCE
The undersigned, Mayflower Mortgage Corporation, d/b/a Republic Bancorp
Mortgage Inc., a Michigan corporation (the "Company"), hereby certifies as
follows pursuant to the Warehousing Credit Agreement entered into as of
December 18, 1992, as amended, among the Company, the banks which are
parties thereto and NBD Bank, N.A., as agent for such banks (the "Credit
Agreement," to which reference is made for definitions of capitalized terms
not otherwise defined herein):
1. The Company hereby requests an Advance in the aggregate amount of
$_________to be made on ____________, 199__, as specified on Schedule 1
attached hereto. The Company hereby acknowledges that such advance will
become a part of the Obligations owed under the Credit Agreement, as
evidenced by the Notes delivered thereunder.
2. The Company requests that the specified portion of such Advance be
applied to the repayment of the Obligations specified below or be made
available in immediately available funds to the following account:
3. The Company hereby represents and warrants that, after giving
effect to the Advance requested hereby, (a) the aggregate outstanding
amount of all Advances to the Company under the Credit Agreement will not
exceed the lesser of the Borrowing Base and the Total Commitments, (b) if
such Advance is a Draft Advance or Good Funds Advance, the aggregate
outstanding amount of all Draft Advances and Good Funds Advances will not
exceed the Wet Closing Sublimit, and (c) if such Advance is to be secured
by Gestation Loans, the aggregate outstanding amount of all Advances
secured by Gestation Loans will not exceed the Gestation Loan Sublimit.
4. The representations and warranties of the Company in the Credit
Agreement are true and correct in all material respects as of the date
hereof (both before and after giving effect to such Advance).
5. No Default or Event of Default has occurred and is continuing as
of the date hereof (whether before or after giving effect to the Advance
requested hereby).
This Request for Advance is executed and delivered to NBD Bank, N.A.,
as Agent, by the undersigned authorized officer of the Company on ________,
199__.
MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc.
By:
--------------------------------
Title:
------------------------
<PAGE>
Schedule 1
to
Request for Advance
Amount of Applicable Loan
Advance Rate* Period**
---------- ---------- --------
* Specify "Floating" or "Adjusted LIBOR."
** Applicable to LIBOR Rate Loans only; specify 30 or 60 days.
-2-
<PAGE>
Exhibit A
PROMISSORY NOTE
$25,000,000 April 30, 1994
Detroit, Michigan
FOR VALUE RECEIVED, the undersigned, Mayflower Mortgage Corporation,
d/b/a Republic Bancorp Mortgage Inc., a Michigan corporation (the
"Company"), hereby promises to pay to the order of NBD Bank, N.A. (the
"Bank"), at the main office of the Agent (as such term and each other
capitalized term used herein is defined in the Credit Agreement referred to
below) in the City of Detroit, Michigan, or at such other place as the
holder hereof may from time to time designate in writing, in lawful money
of the United States of America and in immediately available funds, the
principal sum of Twenty-Five Million Dollars ($25,000,000), or such lesser
amount as shall have been loaned by the Bank to the Company in accordance
with the Credit Agreement referred to below, together with interest on the
outstanding balance thereof as provided below, payable on the Termination
Date. The indebtedness outstanding hereunder shall bear interest at the
rates per annum and be payable on the dates provided in the Credit
Agreement.
The Bank is hereby authorized by the Company to record on the Schedule
attached hereto, or on the Bank's books and records, the date, amount and
Floating Rate or Adjusted LIBOR Rate, as applicable, of each Advance, and
the amount of each payment or prepayment thereon, which shall be prima
facie evidence of the information set forth therein for all purposes absent
manifest error. The failure of the Bank to record, or any error in
recording, any such information shall not relieve the Company of its
obligation to repay the outstanding principal amount of the Advances, all
accrued interest thereon and other amounts payable with respect thereto in
accordance with the terms of this Promissory Note and the Credit Agreement
referred to below.
The Company and all endorsers, guarantors and sureties of this
Promissory Note severally waive demand, presentment, protest, diligence,
notice of dishonor and any other formality in connection with this
Promissory Note, and expressly agree that the maturity of this Promissory
Note, or any payment hereunder, may be extended from time to time without
in any way affecting the liability of the Company or such endorsers,
guarantors or sureties. If the indebtedness evidenced by this Promissory
Note or any part thereof shall be collected in any proceeding or be placed
in the hands of attorneys for collection, the Company and all endorsers,
guarantors and sureties of this Promissory Note severally agree to pay, in
addition to the principal and interest due and payable herein, all costs of
collecting this Promissory Note, including reasonable attorneys' fees and
expenses.
This Promissory Note evidences the Advances made under a Warehousing
Credit Agreement entered into as of December 18, 1992, and amended by a
<PAGE>
First Amendment to Warehousing Credit Agreement dated as of May 1, 1993, a
Second Amendment to Warehousing Credit Agreement dated as of December 17,
1993, a Third Amendment to Warehousing Credit Agreement dated as of
March 31, 1994 and a Fourth Amendment to Warehousing Credit Agreement dated
as of April 30, 1994 (as so amended and as it may be further amended, the
"Credit Agreement"), by and between the Company, the banks who are parties
thereto and NBD Bank, N.A., as Agent, to which reference is hereby made for
a statement of the circumstances under which this Promissory Note is
subject to prepayment and under which its due date may be accelerated and
other terms applicable to this Promissory Note. This note is secured by
certain collateral referred to in the Credit Agreement and the other Loan
Documents (including, without limitation, the Pledge and Security
Agreement).
This Promissory Note is made under, and shall be governed by and
construed in accordance with, the laws of the State of Michigan applicable
to contracts made and to be performed entirely within such State and
without giving effect to choice of law principles of such State.
This Promissory Note is in replacement of, and substituted for, that
certain promissory note dated March 31, 1994, which in turn had been issued
in replacement of that certain promissory note dated December 17, 1993,
which in turn had been issued in replacement of that certain promissory
note dated December 18, 1992, from the Company to the Bank and shall not be
deemed a notation of, or to have satisfied, such previously issued
promissory notes. Accrued but unpaid interest under such previously
delivered promissory note to the date hereof shall be deemed due and owing
as interest under this Promissory Note on the first Interest Payment Date
under this Promissory Note or, with regard to LIBOR Rate Advances
outstanding on the date hereof under such previously delivered promissory
note, upon expiration of the applicable Advance Period.
MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc.
By:
--------------------------------
Its:
--------------------------
<PAGE>
SCHEDULE TO
PROMISSORY NOTE
Payment or
Adjusted Prepayment
Date of Type of Advance LIBOR of
Advance Amount Advance* Period** Rate** Principal
------- ------ ------- ------- ------ ----------
------------------------------------
* Floating Rate or LIBOR Rate.
** Applicable to LIBOR Rate Advances only.
-3-
<PAGE>
Exhibit B
PROMISSORY NOTE
$25,000,000 April 30, 1994
Detroit, Michigan
FOR VALUE RECEIVED, the undersigned, Mayflower Mortgage Corporation,
d/b/a Republic Bancorp Mortgage Inc., a Michigan corporation (the
"Company"), hereby promises to pay to the order of Comerica Bank, a
Michigan banking corporation (the "Bank"), at the main office of the Agent
(as such term and each other capitalized term used herein is defined in the
Credit Agreement referred to below) in the City of Detroit, Michigan, or at
such other place as the holder hereof may from time to time designate in
writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of Twenty-Five Million Dollars
($25,000,000), or such lesser amount as shall have been loaned by the Bank
to the Company in accordance with the Credit Agreement referred to below,
together with interest on the outstanding balance thereof as provided
below, payable on the Termination Date. The indebtedness outstanding
hereunder shall bear interest at the rates per annum and be payable on the
dates provided in the Credit Agreement.
The Bank is hereby authorized by the Company to record on the Schedule
attached hereto, or on the Bank's books and records, the date, amount and
Floating Rate or Adjusted LIBOR Rate, as applicable, of each Advance, and
the amount of each payment or prepayment thereon, which shall be prima
facie evidence of the information set forth therein for all purposes absent
manifest error. The failure of the Bank to record, or any error in
recording, any such information shall not relieve the Company of its
obligation to repay the outstanding principal amount of the Advances, all
accrued interest thereon and other amounts payable with respect thereto in
accordance with the terms of this Promissory Note and the Credit Agreement
referred to below.
The Company and all endorsers, guarantors and sureties of this
Promissory Note severally waive demand, presentment, protest, diligence,
notice of dishonor and any other formality in connection with this
Promissory Note, or any payment hereunder, may be extended from time to
time without in any way affecting the liability of the Company or such
endorsers, guarantors or sureties. If the indebtedness evidenced by this
Promissory Note or any part thereof shall be collected in any proceeding
or be placed in the hands of attorneys for collection, the Company and all
endorsers, guarantors and sureties of this Promissory Note severally agree
to pay, in addition to the principal and interest due and payable hereon,
all costs of collecting this Promissory Note, including reasonable
attorneys' fees and expenses.
This Promissory Note evidences the Advances made under a Warehousing
Credit Agreement entered into as of December 18, 1992, and amended by a
<PAGE>
First Amendment to Warehousing Credit Agreement dated as of May 1, 1993, a
Second Amendment to Warehousing Credit Agreement dated as of December 17,
1993, a Third Amendment to Warehousing Credit Agreement dated as of
March 31, 1994 and a Fourth Amendment to Warehousing Credit Agreement dated
as of April 30, 1994 (as so amended and as it may be further amended, the
"Credit Agreement"), by and between the Company, the banks who are parties
thereto and NBD Bank, N.A., as Agent, to which reference is hereby made for
a statement of the circumstances under which this Promissory Note is
subject to prepayment and under which its due date may be accelerated and
other terms applicable to this Promissory Note. This note is secured by
certain collateral referred to in the Credit Agreement and the other Loan
Documents (including, without limitation, the Pledge and Security
Agreement).
This Promissory Note is made under, and shall be governed by and
construed in accordance with, the laws of the State of Michigan applicable
to contracts made and to be performed entirely within such State and
without giving effect to choice of law principles of such State.
This Promissory Note is in replacement of, and substituted for, that
certain promissory note dated March 31, 1994, which in turn had been issued
in replacement of that certain promissory note dated December 17, 1993,
which in turn had been issued in replacement of that certain promissory
note dated December 18, 1992, from the Company to the Bank, and shall not
be deemed a notation of, or to have satisfied, such previously issued
promissory notes. Accrued but unpaid interest under such previously
delivered promissory note to the date hereof shall be deemed due and owing
as interest under this Promissory Note on the first Interest Payment Date
under this Promissory Note or, with regard to LIBOR Rate Advances
outstanding on the date hereof under such previously delivered promissory
note, upon expiration of the applicable Advance Period.
MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc.
By: /s/ Lawrence Rosenberg
--------------------------------
Its: CHIEF FINANCIAL OFFICER
--------------------------
-2-
<PAGE>
SCHEDULE TO
PROMISSORY NOTE
Payment or
Adjusted Prepayment
Date of Type of Advance LIBOR of
Advance Amount Advance Period** Rate** Principal
------- ------ ------- -------- -------- ---------
-----------------------------------
* Floating Rate or LIBOR Rate.
** Applicable to LIBOR Rate Advances only.
-3-
<PAGE>
SECOND AMENDMENT TO THE
PLEDGE AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO PLEDGE AND SECURITY AGREEMENT ("Agreement")
dated as of April 30, 1994, is made by and between Mayflower Mortgage
Corporation, d/b/a Republic Bancorp Mortgage Inc., a Michigan corporation
(the "Company"), and NBD Bank, N.A., a national banking association
("NBD"), as agent (in such capacity, "Agent") for the benefit of the banks
("Banks") who are parties from time to time to the Credit Agreement (as
such term is defined below).
Recitals
A. The Company, the Banks and the Agent are parties to a Warehousing
Credit Agreement, dated as of December 18, 1992, as amended by the First
Amendment to Warehousing Credit Agreement dated as of May 1, 1993, the
Second Amendment to Warehousing Credit Agreement dated as of December 17,
1993 and the Third Amendment to Warehousing Credit Agreement dated as of
March 31, 1994 (as so amended, the "Pledge and Security Agreement").
B. It is a condition precedent to the Banks' execution and delivery
of a proposed Fourth Amendment to Warehousing Credit Agreement to be dated
the date hereof that the Company shall have entered into this Agreement.
Therefore, the Company hereby agrees with the Agent as follows:
Article I. Amendment. The Pledge and Security Agreement is hereby
amended by the addition of the following subsection at the end of Section 4
thereof:
(a) A Gestation Loan shall be delivered to the Agent for pledge
under this Agreement by the delivery of the following described
documents to the Agent prior to the making of the related Advance by
the Agent on behalf of the Banks, which documents shall be delivered at
the same time and in the same manner as those instruments and documents
described under subsection 4(c) above are required to be delivered with
respect to such Pledged Mortgage (and for purposes of this Agreement,
the following described documents shall also be deemed "Mortgage Loan
Documents"):
(i) certification of the Company that such Pledged Mortgage
conforms to the definition of a Gestation Loan; and
(ii) evidence of the certification by the applicable Agent
(or its approved document custodian), in form and substance
reasonably satisfactory to the Agent, that such Pledged Mortgage
has been found to be eligible for inclusion in a pool of mortgage
loans intended to underlie, or underlying, one or more
mortgage-backed securities issued or guaranteed by such Agency
(with respect to
<PAGE>
certificates from FHLMC, the parties agree that a copy of the
completed Form 939 from FHLMC shall satisfy this requirement with
regard to Gestation Loans underlying FHLMC mortgage-backed
securities).
Article II. Miscellaneous.
2.1 References in the Credit Agreement or in any other Loan Document
to the Pledge and Security Agreement shall be deemed to be references to
the Pledge and Security Agreement as amended hereby and as further amended
from time to time.
2.2 Except as expressly amended hereby, the Company agrees that the
Credit Agreement, the Pledge and Security Agreement, the other Loan
Documents and all other documents and agreements executed by the Company in
connection with the Credit Agreement in favor of the Agent and the Banks
are ratified and confirmed and shall remain in full force and effect and
the Company acknowledges and agrees that it has no setoff, counterclaim or
defense with respect to any of the foregoing. Terms used but not defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement or the Pledge and Security Agreement.
2.3 This Amendment may be signed upon any number of counterparts with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have caused this
Amendment to be executed and delivered as of April 30, 1994.
MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc.
By: /s/ Lawrence Rosenberg
--------------------------------
Its: CHIEF FINANCIAL OFFICER
--------------------------
NBD BANK, N.A.,
as Agent
By: /s/ Carolann M. Morykwas
--------------------------------
Its: Vice President
--------------------------
<PAGE>
SECOND AMENDMENT TO THE
PLEDGE AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO PLEDGE AND SECURITY AGREEMENT ("Agreement")
dated as of April 30, 1994, is made by and between Mayflower Mortgage
Corporation, d/b/a Republic Bancorp Mortgage Inc., a Michigan corporation
(the "Company"), and NBD Bank, N.A., a national banking association
("NBD"), as agent (in such capacity, "Agent") for the benefit of the banks
("Banks") who are parties from time to time to the Credit Agreement (as
such term is defined below).
Recitals
A. The Company, the Banks and the Agent are parties to a Warehousing
Credit Agreement, dated as of December 18, 1992, as amended by the First
Amendment to Warehousing Credit Agreement dated as of May 1, 1993, the
Second Amendment to Warehousing Credit Agreement dated as of December 17,
1993 and the Third Amendment to Warehousing Credit Agreement dated as of
March 31, 1994 (as so amended, the "Pledge and Security Agreement").
B. It is a condition precedent to the Banks' execution and delivery
of a proposed Fourth Amendment to Warehousing Credit Agreement to be dated
the date hereof that the Company shall have entered into this Agreement.
Therefore, the Company hereby agrees with the Agent as follows:
Article I. Amendment. The Pledge and Security Agreement is hereby
amended by the addition of the following subsection at the end of Section 4
thereof:
(a) A Gestation Loan shall be delivered to the Agent for pledge
under this Agreement by the delivery of the following described
documents to the Agent prior to the making of the related Advance by
the Agent on behalf of the Banks, which documents shall be delivered at
the same time and in the same manner as those instruments and documents
described under subsection 4(c) above are required to be delivered with
respect to such Pledged Mortgage (and for purposes of this Agreement,
the following described documents shall also be deemed "Mortgage Loan
Documents"):
(i) certification of the Company that such Pledged Mortgage
conforms to the definition of a Gestation Loan; and
(ii) evidence of the certification by the applicable Agent
(or its approved document custodian), in form and substance
reasonably satisfactory to the Agent, that such Pledged Mortgage
has been found to be eligible for inclusion in a pool of mortgage
loans intended to underlie, or underlying, one or more
mortgage-backed securities issued or guaranteed by such Agency
(with respect to
<PAGE>
certificates from FHLMC, the parties agree that a copy of the
completed Form 939 from FHLMC shall satisfy this requirement with
regard to Gestation Loads underlying FHLMC mortgage-backed
securities).
Article II. Miscellaneous.
2.1 References in the Credit Agreement or in any other Loan Document
to the Pledge and Security Agreement shall be deemed to be references to
the Pledge and Security Agreement as amended hereby and as further amended
from time to time.
2.2 Except as expressly amended hereby, the Company agrees that the
Credit Agreement, the Pledge and Security Agreement, the other Loan
Documents and all other documents and agreements executed by the Company in
connection with the Credit Agreement in favor of the Agent and the Banks
are ratified and confirmed and shall remain in full force and effect and
the Company acknowledges and agrees that it has no setoff, counterclaim or
defense with respect to any of the foregoing. Terms used but not defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement or the Pledge and Security Agreement.
2.3 This Amendment may be signed upon any number of counterparts with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have caused this
Amendment to be executed and delivered as of April 30, 1994.
MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc.
By: /s/ Lawrence Rosenberg
--------------------------------
Its: CHIEF FINANCIAL OFFICER
--------------------------
NBD BANK, N.A.,
as Agent
By: /s/ Carolann M. Morykwas
--------------------------------
Its: Vice President
--------------------------
Exhibit 4(f)
FIFTH AMENDMENT TO
WAREHOUSING CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO WAREHOUSING CREDIT AGREEMENT, dated as of
September 1, 1994 (this "Amendment"), is by and among MAYFLOWER MORTGAGE
CORPORATION, d/b/a Republic Bancorp Mortgage Inc., a Michigan corporation (the
"Company"), NBD BANK, N.A., a national banking association ("NBD"), and NBD
BANK, N.A., as agent for NBD and such other banks named from time to time as
one of the Banks in the Warehousing Credit Agreement referred to below (in
such capacity, the "Agent").
Recitals
A. The Company, NBD and the Agent are parties to a Warehousing
Credit Agreement, dated as of December 18, 1992, and amended by a First
Amendment to Warehousing Credit Agreement dated as of May 1, 1993, a Second
Amendment to Warehousing Credit Agreement dated as of December 17, 1993, a
Third Amendment to Warehousing Credit Agreement dated as of March 31, 1994,
and a Fourth Amendment to Warehousing Credit Agreement dated as of April 30,
1994 (as so amended, the "Credit Agreement"), pursuant to which NBD and
Comerica Bank agreed, subject to the terms and conditions thereof, to extend
credit to the Company.
B. In connection with a proposed restructuring of the indebtedness
under the Credit Agreement, Comerica Bank has sold, assigned, conveyed and
transferred all of its rights and obligations under the Credit Agreement to
NBD.
C. The parties desire to amend the Credit Agreement on the terms
and conditions ofthis Amendment.
Therefore, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in Article
III hereof, the Credit Agreement shall be amended as follows:
1.1 The definitions of "Commitments" and "Total Commitments"
contained in Section 1.1 are hereby deleted and the following are substituted
in place thereof:
"Commitments" shall mean the commitments of the Banks to make
advances pursuant to Section 2.1 in the amounts set forth opposite
each Bank's name on the attached Schedule 2.1, as such amounts may be
reduced from time to time pursuant to Section 2.3.
"Total Commitments" shall mean the total amount of the
Commitments specified on the attached Schedule 2.1.
<PAGE>
1.2 The following definition is hereby added to Section 1.1, to be
inserted after "Appraised Value":
"Bank" shall mean each of the Banks or other financial
institutions listed from time to time on the attached Schedule 2.1.
1.3 Section 2.1 is hereby deleted and the following is substituted
in place thereof:
2.1 Commitments of the Banks. Each Bank agrees, for itself
only, subject to the terms and conditions of this Agreement, to
advance to the Company from time to time from the Effective Date until
the Termination Date on any Business Day sums not to exceed in
aggregate principal amount at any time outstanding the amount set
forth opposite its name on the attached Schedule 2.1. The aggregate
outstanding amount of the Advances at any time shall not exceed:
(a) the Borrowing Base, as determined by the Agent from its
records, or
(b) the Total Commitments, or
(c) such amount as would cause the unpaid principal balance
of the Note payable to a Bank to exceed the amount of
such Bank's Commitment.
Furthermore, in no event shall the aggregate unpaid principal balance
of (i) all outstanding Draft Advances and all outstanding Good Funds
Advances exceed the Wet Closing Sublimit and (ii) all Advances secured
by Gestation Loans exceed the Gestation Loan Sublimit.
1.4 The attached form of Request for Advance (Exhibit 3.1(a)) is
hereby substituted for the form of Request for Advance attached as Exhibit
3.1(a) to the Credit Agreement.
1.5 The attached Schedule 2.1 is hereby added as Schedule 2.1 to
the Credit Agreement.
ARTICLE II. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Banks as follows:
2.1 The execution, delivery and performance of this Amendment and
all other agreements and documents executed pursuant hereto have been duly
authorized by all necessary corporate action and are not in contravention of
any Governmental Regulation, or of the terms of its charter or by-laws, or of
any contract or undertaking to which it is a party or by which it or its
property may be bound or affected, the breach of any of which could reasonably
be expected to materially and adversely affect its ability to perform its
obligations under this Amendment, the Credit Agreement or the other Loan
Documents, and do not result in the imposition of any Lien except for
Permitted Liens.
2
<PAGE>
2.2 This Amendment and all other agreements and documents executed
pursuant hereto are the legal, valid and binding obligations of the Company
enforceable against it in accordance with their respective terms, subject to
the effect of any applicable bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally, to
the discretionary nature of specific performance, injunctive relief and other
equitable remedies, and to general principles of equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
2.3 The representations and warranties contained in Article V of
the Credit Agreement are true on and as of the date hereof with the same force
and effect as if made on and as of the date hereof, and the forms of the
Articles of Incorporation, Bylaws, resolutions and certificates of incumbency
of the Company delivered to the Agent and the Banks on December 18, 1992 and
December 17, 1993, continue to be true, correct and complete in all material
respects and have not been modified or amended in any respect.
2.4 No default or Event of Default exists as of the date hereof.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become
effective until each of the following has been satisfied:
3.1 The Company shall have delivered to NBD a promissory note in
the form attached as Exhibit A, duly executed on behalf of the Company (the
"New Note").
3.2 Copies of resolutions adopted by the Board of Directors of the
Company, certified by an officer of the Company as being true and correct and
in full force and effect without amendment as of the date hereof, authorizing
the Company to enter into this Amendment and the New Note, shall have been
delivered to the Agent.
3.4 This Amendment shall have been fully executed and delivered to
the Agent and NBD.
3.5 The Company shall have delivered to the Agent and NBD such
other documents and instruments as the Agent or NBD may request in connection
herewith.
ARTICLE IV. MISCELLANEOUS.
4.1 References in the Credit Agreement or in any other Loan
Document to the Credit Agreement or to the Notes shall be deemed to be
references to the Credit Agreement as amended hereby and as further amended
from time to time or to the New Note, respectively.
4.2 The Company agrees to pay and to save the Agent and the Banks
harmless from the payment of all costs and expenses arising in connection with
this Amendment, the New Note and the other documents and agreements executed
hereunder or thereunder (including the Assignment and Assumption Agreement
among NBD, Comerica Bank and the Agent), including
3
<PAGE>
the fees of Honigman Miller Schwartz and Cohn, counsel to the Agent, in
connection with preparing this Amendment, the New Note and such other
documents and agreements.
4.3 Except as expressly amended hereby, the Company agrees that the
Credit Agreement, the other Loan Documents and all other documents and
agreements executed by the Company in connection with the Credit Agreement in
favor of the Agent and the Banks are ratified and confirmed and shall remain
in full force and effect and the Company acknowledges and agrees that it has
no setoff, counterclaim or defense with respect to any of the foregoing.
Capitalized terms used but not defined herein shall have the respective
meanings ascribed thereto in the Credit Agreement. Notwithstanding anything in
the Credit Agreement or the Collateral Documents to the contrary, all
collateral granted by the Company to the Agent and the Banks pursuant to the
Collateral Documents secures all Advances and all other present and future
indebtedness, obligations and liabilities of the Company owing to the Agent
and the Banks in accordance with such Collateral Documents.
4.4 This Amendment may be signed upon any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the
same instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have caused
this Amendment to be executed and delivered as of September 1, 1994.
MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc.
By: /s/ Lawrence Rosenberg
-------------------------------------
Its: CHIEF FINANCIAL OFFICER
--------------------------------
NBD BANK, N.A. (as a Bank and as Agent)
By: /s/ Carolann M. Morykwas
-------------------------------------
Its: VICE PRESIDENT
--------------------------------
4
<PAGE>
Exhibit 3.1(a)
REQUEST FOR ADVANCE
The undersigned, Mayflower Mortgage Corporation, d/b/a Republic
Bancorp Mortgage Inc., a Michigan corporation (the "Company"), hereby
certifies as follows pursuant to the Warehousing Credit Agreement entered into
as of December 18, 1992, among the Company, the banks which are parties
thereto and NBD Bank, N.A., as agent for such banks (as the same may be
further amended, restated, modified or supplemented from time to time, the
"Credit Agreement," to which reference is made for definitions of capitalized
terms not otherwise defined herein):
1. The Company hereby requests an Advance in the aggregate amount of
$_______ to be made on ______________, 199_, as specified on Schedule 1
attached hereto. The Company hereby acknowledges that such advance will
become a part of the Obligations owed under the Credit Agreement, as evidenced
by the Notes delivered thereunder.
2. The Company requests that the specified portion of such Advance be
applied to the repayment of the Obligations specified below or be made
available in immediately available funds to the following account:
3. The Company hereby represents and warrants that, after giving
effect to the Advance requested hereby, (a) the aggregate outstanding amount
of all Advances to the Company under the Credit Agreement will not exceed the
lesser of the Borrowing Base and the Total Commitments, (b) if such Advance is
a Draft Advance or Good Funds Advance, the aggregate outstanding amount of all
Draft Advances and Good Funds Advances will not exceed the Wet Closing
Sublimit, and (c) if such Advance is to be secured by Gestation Loans, the
aggregate outstanding amount of all Advances secured by Gestation Loans will
not exceed the Gestation Loan Sublimit.
4. The representations and warranties of the Company in the Credit
Agreement are true and correct in all material respects as of the date hereof
(both before and after giving effect to such Advance).
5. No Default or Event of Default has occurred and is continuing as of
the date hereof (whether before or after giving effect to the Advance
requested hereby).
This Request for Advance is executed and delivered to NBD Bank, N.A.,
as Agent, by the undersigned authorized officer of the Company on
____________, 199_.
MAYFLOWER MORTGAGE CORPORATION,
d/b/a Republic Bancorp Mortgage Inc.
By:
--------------------------------------
Title:
--------------------------------
<PAGE>
Schedule 1
to
Request for Advance
Amount of Applicable Type of Loan
Advance Rate* Advance** Period***
* Specify "Floating" or "Adjusted LIBOR."
** Specify if a Draft Advance, Good Funds Advance or Gestation Loan.
*** Applicable to LIBOR Rate Loans only; specify 30 or 60 days.
<PAGE>
Schedule 2.1
Banks and Commitment Amounts
Bank Commitment
NBD Bank, N.A. $20,000,000
Exhibit 4(g)
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement (the "Agreement") is made and entered
into this 26th day of January, 1995 by and between Republic Bancorp Inc. (the
"Borrower") and Firstar Bank Milwaukee, N.A. (the "Bank").
ARTICLE I. DEFINITIONS
1.1 Adjusted LIBOR Rate. The term "Adjusted LIBOR Rate" means, for any
Interest Period, one and seventy-five one-hundredths percent (1.75%) per annum
in excess of the annual rate of interest obtained by dividing (i) the LIBOR
Rate for such Interest Period, by (ii) an amount equal to one minus the stated
maximum rate (expressed as a decimal) of all reserve requirements (including
any marginal, emergency, supplemental, special or other reserves) that is
specified on the first day of such Interest Period by the Board of Governors
of the Federal Reserve System (or a successor agency) for determining the
maximum reserve requirement with respect to Eurocurrency fundings (currently
referred to as "Eurocurrency liabilities" in Regulation D of such Board)
maintained by a member bank of such system and having a term equal to such
Interest Period.
1.2 Adjusted LIBOR Rate Loan. The term "Adjusted LIBOR Rate
Loan" means any loan hereunder bearing interest at the Adjusted
LIBOR Rate.
1.3 Business Day. The term "Business Day" means a day other than a
Saturday, Sunday or other day on which the Bank is not open for the
transaction of substantially all of its banking functions; provided, however,
that for purposes of determining the LIBOR Rate for an applicable Interest
Period, references to Business Day shall include only those days on which
dealings in dollar deposits are carried out by U.S. financial institutions in
the London Interbank market.
1.4 Financial Definitions. Except as otherwise provided, all
accounting terms shall be construed in accordance with generally accepted
accounting principles consistently applied and consistent with those applied
in the preparation of the financial statements referred to in section 4.11,
and financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles. As used herein:
(a) The term "Assets" means the sum of all assets
including Loan Loss Reserves of the Subsidiary Bank
accounting principles applicable to banks, consistently
applied.
(b) The term "Consolidated Net Worth" means the consolidated
shareholders' equity of the Borrower and its Subsidiaries
(including common stock, additional paid-in capital, retained
earnings, preferred stock and any paid-in capital attributable
thereto) determined in accordance with generally accepted
accounting principles.
<PAGE>
(c) The term "Fixed Charge Coverage Ratio" means the ratio
calculated on a consolidated basis for the Borrower and its
Subsidiaries of the sum of pre-tax income and Interest Expense to
Interest Expense.
(d) The term "Interest Expense" means the interest expense on
short term and long term borrowings and does not include interest
expense on deposits, fed funds borrowings, advances from any
Federal Home Loan Bank or reverse repurchase agreements.
(e) The term "Loan Loss Reserves" means the loan loss reserves of
the Subsidiary Bank reported in the most recent call report of the
Subsidiary Bank.
(f) The term "Nonperforming Loans" means the sum of those loans 90
days or more past due and those loans classified as non-accrual or
renegotiated as reported in the most recent call report of the
Subsidiary Bank.
(g) The term "Other Real Estate" means the value of all real
estate owned by the Subsidiary Bank and classified as such by the
examiners of the Comptroller of the Currency, Federal Deposit
Insurance Corporation, Federal Reserve Board or appropriate state
agency responsible for examining the Subsidiary Bank, as shown on
the Subsidiary Bank's most recent examination report.
(h) The term "Primary Capital" means primary capital as such term
is used in the risk-based capital guidelines applicable to the
Subsidiary Bank.
(i) The term "Risk-Weighted Assets" will have the meaning
attributed to such term in the Risk-Based Capital Guidelines
issued by the Board of Governors of the Federal Reserve System and
in effect from time to time.
(j) The term "Tier 1 Capital" means tier 1 capital as such term is
used in the risk-based capital guidelines issued by the primary
regulator of the Subsidiary Bank and in effect from time to time.
(k) The term "Total Capital" means core capital and supplementary
capital (provided that supplementary capital shall only be
included in Total Capital to the extent permitted by the
Risk-Based Capital Guidelines issued by the Board of Governors of
the Federal Reserve System and in effect from time to time).
(l) The term "Total Loans" means the aggregate outstanding
principal amount of all loans shown as assets of the Subsidiary
Bank in its most recent call report; provided, however, in any
event Total Loans will include portfolio loans and loans held for
sale.
1.5 Interest Period. The term "Interest Period" means with respect
to each Adjusted LIBOR Rate Loan, the period commencing on the applicable
Borrowing Date and ending 1, 3 or 6 months thereafter, as specified by the
Borrower in the related notice of borrowing pursuant to Section 2.6 below, and
with respect to a Variable Rate Loan converted to an Adjusted LIBOR Rate
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<PAGE>
Loan, or in the case of a continuation of an Adjusted LIBOR Rate Loan for an
additional Interest Period, the period commencing on the date of such
conversion or continuation and ending 1, 3 or 6 months thereafter, as
specified by the Borrower in the related notice pursuant to Section 2.8 below;
provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Business Day will be extended to the next succeeding
Business Day unless such Business Day falls in another calendar
month, in which case such Interest Period will end on the
immediately preceding Business Day;
(b) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in a calendar month at the end of such Interest
Period) will, subject to clause (c) below, end on the last
Business Day of a calendar month; and
(c) no Interest Period for an Adjusted LIBOR Rate Loan
will extend beyond the Termination Date.
1.6 LIBOR Rate. The term "LIBOR Rate" means, for any Interest
Period, the annual rate of interest equal to the rate at which deposits in
dollars are offered to the Bank in the London Interbank Eurocurrency market
for such Interest Period as determined by the Bank from the dollar offered
rates which appear on the Telerate System page setting forth such rates on the
first day of such Interest Period.
1.7 Prime Rate. The term "Prime Rate" means the prime
rate of interest announced by the Bank and in effect from time to
time, with the rate thereon changing as and when such prime rate changes.
1.8 Variable Rate Loan. The term "Variable Rate Loan"
means any loan hereunder bearing interest at the Variable Rate.
1.9 Variable Rate. The term "Variable Rate" means a
rate of interest equal to .25% per annum less than the Prime
Rate. The Variable Rate shall change as and when such Prime Rate
changes.
ARTICLE II. LOANS, INTEREST RATE, FEES
2.1 Revolving Credit Facility. From time to time prior to January
25, 1996 or the earlier termination hereof pursuant to Section VI (the
"Termination Date"), the Borrower may borrow from the Bank up to the aggregate
principal amount outstanding at any one time of up to $18,000,000 (the "Loan
Amount"). All loans hereunder shall be evidenced by a single promissory note
of the Borrower payable to the order of the Bank in the principal amount of
$18,000,000 (the "Note"). Although the Note shall be expressed to be payable
in the amount of $18,000,000, the Borrower shall be obligated to pay only the
amount of loans actually disbursed hereunder, together with accrued interest
on the outstanding balance at the rates and on the dates specified therein and
such other charges provided for herein.
3
<PAGE>
2.2 Advances and Paying Procedure. The Bank is authorized and
directed to credit any of the Borrower's accounts with the Bank (or to the
account the Borrower designates in writing) for the loans made hereunder, and
the Bank is authorized to debit such account or any other account of the
Borrower with the Bank for the amount of any principal or interest due under
the Note or other amount due hereunder on the due date with respect thereto.
The Borrower will maintain a demand deposit account at the Bank to facilitate
borrowings and repayments hereunder.
2.3 Commitment Fee. For the period from the date hereof until
January 25, 1996, the Borrower shall pay to the Bank a commitment fee computed
at a rate of 1/8% per annum of the Loan Amount. Such commitment fee shall be
payable on a quarterly basis in arrears.
2.4 Security. The revolving credit facility provided for hereunder
shall be secured by all of the common and preferred stock of Republic Bank
(the "Subsidiary Bank") now owned or hereafter acquired by the Borrower,
except director qualifying shares, if any.
2.5 Interest Rates, Method of Calculation and Payment Dates.
(a) Interest Rate. The unpaid principal balance of each loan
outstanding from time to time hereunder shall bear interest at the
Variable Rate or the Adjusted LIBOR Rate as selected by the
Borrower in accordance with the procedure set forth in Section
2.6.
(b) Minimum Amount. Each loan shall be in the minimum
amount of $100,000 or in integral multiples of $100,000.
(c) Computations of Interest. All computations of interest and
other amounts due under the Note and this Agreement shall be based
on a year of 360 days using the actual number of days occurring in
the period for which such interest or other amounts are payable.
(d) Payments of Interest. The Borrower shall pay
interest on the outstanding principal balance of the
Note as follows:
(i) Variable Loans. Accrued and unpaid interest on
Variable Rate Loans shall be payable quarterly beginning
March 31, 1995 and continuing on the last day of each third
month thereafter and with the final payment of principal.
(ii) Adjusted LIBOR Rate Loans. Accrued and unpaid
interest on each Adjusted LIBOR Rate Loan with an Interest
Period of 1 or 3 months shall be payable on the last
Business Day of the applicable Interest Period therefor and
with the final payment of principal. Accrued and unpaid
interest on each Adjusted LIBOR Rate Loan with a 6 month
Interest Period shall be payable on a Business Day that is
3 months after the first Business Day of such Interest
Period and the last day of such Interest Period and with
the final payment of principal.
4
<PAGE>
(e) Limitation on Prepayments. A Variable Rate Loan may be
voluntarily prepaid in whole or in part at any time without
premium or penalty. An Adjusted LIBOR Rate Loan may not be paid
prior to the last day of the Interest Period applicable thereto.
(f) Interest Following Maturity. Principal amounts and accrued
interest thereon unpaid at the maturity thereof (whether by fixed
maturity or acceleration of maturity) shall bear interest from and
after maturity until paid computed at a rate equal to two percent
(2%) per annum in excess of the rate or rates then applicable to
each advance hereunder.
2.6 Procedure for Borrowing. The Borrower shall give notice to the
Bank of a proposed borrowing not later than 10:00 a.m. Milwaukee, Wisconsin
time on a proposed borrowing date in the case of a Variable Rate Loan or, in
the case of an Adjusted LIBOR Rate Loan, at least three Business Days prior to
the proposed borrowing date. Each such request shall be effective upon receipt
by the Bank, shall be in writing or by telephone to be promptly confirmed in
writing and sent to the Bank at the address specified below, shall specify the
proposed borrowing date, whether the requested loan is to be a Variable Rate
Loan or an Adjusted LIBOR Rate Loan, the amount of such loan and in case of an
Adjusted LIBOR Rate Loan, the initial Interest Period therefor. Subject to the
terms and conditions of this Agreement, the proceeds of each loan shall be
made available to the Borrower by depositing the proceeds thereof in
immediately available funds in an account maintained by the Borrower at the
Bank.
2.7 Conversion of Variable Rate Loans to Adjusted LIBOR Rate
Loans. So long as no default has occurred and is continuing, the Borrower may
convert all or any part of any outstanding Variable Rate Loan into an Adjusted
LIBOR Rate Loan by giving notice to the Bank of such conversion not later than
10:00 a.m. Milwaukee, Wisconsin time on a Business Day that is at least three
Business Days prior to the date of the requested conversion. Each such notice
shall be effective upon receipt by the Bank, shall be in writing or by
telephone to be promptly confirmed in writing and sent to the Bank at the
address specified below and shall specify the date and the amount of such
conversion and the initial Interest Period therefor. Each conversion of a
Variable Rate Loan to an Adjusted LIBOR Rate Loan shall be on a Business Day.
2.8 Procedures at the End of an Interest Period.
(a) Automatic Conversion. Unless the Borrower requests a new
Adjusted LIBOR Rate Loan in accordance with Section 2.6 above or
requests an extension of an Adjusted LIBOR Rate Loan in accordance
with Section 2.8(b) below, the Bank shall automatically and
without request by the Borrower convert each Adjusted LIBOR Rate
Loan to a Variable Rate Loan on the last day of the Interest
Period applicable thereto.
(b) Extension of Adjusted LIBOR Rate Loan. So long as no default
has occurred and is continuing, the Borrower may cause all or any
part of any outstanding Adjusted LIBOR Rate Loan to continue to
bear interest at an Adjusted LIBOR Rate at the end of an Interest
Period by notifying the Bank not later than 10:00 a.m. Milwaukee,
Wisconsin time on a Business Day that is at least three Business
5
<PAGE>
Days prior to the first day of a new Interest Period. Each such
notice shall be effective upon receipt by the Bank, shall be in
writing or by telephone to be promptly confirmed in writing and
sent to the Bank at the address specified below and shall specify
the first day of the Interest Period, the amount of the new
Adjusted LIBOR Rate Loan and the duration of such Interest Period.
Each new Interest Period for a new Adjusted LIBOR Rate Loan shall
begin on the last Business Day of the immediately preceding
Interest Period.
2.9 Special Provisions.
(a) Basis for Determining Interest Rate Inadequate or
Unfair. If with respect to the Interest Period for any
Adjusted LIBOR Rate Loan:
(i) the Bank determines in good faith (which determination
will be binding and conclusive on all parties) that by
reason of circumstances affecting the London interbank
market adequate and reasonable means do not exist for
ascertaining the applicable Adjusted LIBOR Rate; or
(ii) the Bank reasonably determines (which determination will
be binding and conclusive on all parties) that the Adjusted
LIBOR Rate will not adequately and fairly reflect the cost
of maintaining or funding such Adjusted LIBOR Rate Loan for
such Interest Period, or that the making or funding of
Adjusted LIBOR Rate Loans has become impracticable as a
result of an event occurring after the date of the
Agreement which in the reasonable opinion of the Bank
materially affects Adjusted LIBOR Rate Loans; then, [a] the
Bank will promptly notify the Borrower thereof, and [b] so
long as such circumstances will continue, the Bank will not
be under any obligation to make any Adjusted LIBOR Rate
Loan so affected.
(b) Changes in Law Rendering Certain Loans Unlawful. In the event
that any regulatory change should make it (or, in the good faith
judgment of the Bank, should raise substantial questions as to
whether it is) unlawful for the Bank to make, maintain or fund an
Adjusted LIBOR Rate Loan, (i) the Bank will promptly notify the
Borrower thereof; (ii) the obligation of the Bank to make Adjusted
LIBOR Rate Loans will, upon the effectiveness of such event, be
suspended for the duration of such unlawfulness; and (iii) upon
such notice, any outstanding Adjusted LIBOR Rate Loan will
automatically convert to a Variable Rate Loan.
(c) Funding Losses. The Borrower hereby agrees that upon demand by
the Bank (which demand will be accompanied by a statement setting
forth the basis for the calculations of the amount being claimed)
the Borrower will indemnify the Bank against any net loss or
expense which the Bank may sustain or incur (including, without
limitation, any net loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by
the Bank to fund or maintain Adjusted LIBOR Rate Loans), as
determined by the
6
<PAGE>
Bank, as a result of (i) any payment, prepayment
or conversion of any Adjusted LIBOR Rate Loan of the Bank on a
date other than the last Business Day of an Interest Period
whether or not required by any other provision of the Agreement,
or (ii) any failure of the Borrower to obtain an advance by
reference to the Adjusted LIBOR Rate on a Borrowing Date or to
convert a Variable Rate Loan to an Adjusted LIBOR Rate Loan or to
continue an Adjusted LIBOR Rate Loan at the end of any Interest
Period on a borrowing date, as specified by the Borrower in a
notice to the Bank as set forth above. All notices to the Bank
pursuant to this Agreement with respect to Adjusted LIBOR Rate
Loans will be deemed to be irrevocable.
(d) Conclusiveness of Statements. Determinations and
statements of the Bank pursuant to this Section 2.9 will
be conclusive absent manifest error.
ARTICLE III. CONDITIONS TO BORROWING
3.1 Conditions to Borrowing. The Bank shall not be obligated to
make (or continue to make) advances hereunder unless (i) the Bank has received
executed copies of this Agreement, the Note and Amended and Restated
Collateral Pledge Agreement (together with the Note, collectively, the "Loan
Documents"), in form and content satisfactory to the Bank; (ii) the Bank has
received original stock certificates representing 1,014,389 shares of common
stock of Republic Bank and certificates representing 510,000 shares of
preferred stock of Republic Bank and stock powers thereto; (iii) the Bank has
received certified copies of the Articles of Incorporation, By-Laws and a
certificate of status or good standing for the Borrower and the Subsidiary
Bank; (iv) the Bank has received a certified copy of a resolution or
authorization in form and content satisfactory to the Bank authorizing the
loan and all acts contemplated by this Agreement and all related documents,
and confirmation of proper authorization of all guaranties and other acts of
third parties contemplated hereunder; (v) the Bank has been provided with an
opinion of the Borrower's counsel in form and content satisfactory to the Bank
confirming the matters outlined in Section 4.1 and such other matters as the
Bank reasonably requests; (vi) no default exists under this Agreement or under
any other Loan Documents, or under any other agreements by and between the
Borrower and the Bank; and (vii) all proceedings taken in connection with the
transactions contemplated by this Agreement and all instruments,
authorizations and other documents applicable thereto, shall be satisfactory
to the Bank and its counsel.
ARTICLE IV. WARRANTIES AND COVENANTS
During the term of this Agreement, and while any part of the credit
granted the Borrower is available or any obligations under any of the Loan
Documents are unpaid or outstanding, the Borrower warrants and agrees as
follows:
4.1 Organization and Authority. The Borrower is a validly existing
corporation in good standing under the laws of its state of organization, and
has all requisite power and authority, corporate or otherwise, and possesses
7
<PAGE>
all licenses necessary, to conduct its business and own its properties. The
execution, delivery and performance of this Agreement and the other Loan
Documents (i) are within the Borrower's power; (ii) have been duly authorized
by necessary corporate action; (iii) do not require the approval of any
governmental agency; and (iv) will not violate any law, agreement or
restriction by which the Borrower is bound. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms.
4.2 Subsidiaries. As of the date hereof, the Borrower has five
subsidiaries consisting of the Subsidiary Bank, Mayflower Mortgage
Corporation, Republic Savings Bank, Market Street Mortgage Corporation and CUB
Funding Corporation (individually a "Subsidiary" and together, the
"Subsidiaries"). The Borrower agrees to notify the Bank immediately of any
entities which after the date hereof become subsidiaries of the Borrower or
the Subsidiaries. The Subsidiary Bank, as of the date hereof, has issued and
outstanding 1,014,389 shares of common stock, par value $10 per share, which
are duly authorized, validly issued, fully paid and non-assessable, of which
the Borrower owns 1,014,389 shares, which represent one hundred percent (100%)
of the issued and outstanding common stock of the Subsidiary Bank. The
Subsidiary Bank has issued and outstanding 510,000 shares of preferred stock,
par value $10 per share, which are duly authorized, validly issued, fully paid
and non-assessable, of which the Borrower owns 510,000 shares, which represent
one hundred percent (100%) of the issued and outstanding preferred stock of
the Subsidiary Bank. The common stock and preferred stock of the Subsidiary
Bank are free and clear of any liens, charges, encumbrances, rights of
redemption, preemptive rights or rights of first refusal of any kind or nature
whatsoever, except liens in favor of the Bank. Except as permitted under
Section 4.15, the Subsidiary Bank has no other shares of capital stock (common
or preferred), or securities or other obligations convertible into any of the
foregoing, authorized or outstanding and has no outstanding offers,
subscriptions, warrants, rights or other agreements or commitments obligating
the Subsidiary Bank to issue or sell any of the foregoing.
4.3 Litigation and Compliance with Laws. The Borrower and the
Subsidiaries have complied in all material respects with all applicable
federal and state laws and regulations, the failure to comply with which would
have a material adverse effect on the Borrower and the Subsidiaries taken as a
whole. Except to the extent previously disclosed to Bank, there are no claims,
actions, suits, or proceedings pending, or to the best knowledge of Borrower,
threatened or contemplated against or affecting Borrower or any Subsidiary, at
law or in equity, or before any federal, state or other governmental
authority, or before any arbitrator or arbitration panel, whether by contract
or otherwise which, if adversely decided, would have a material adverse effect
on the Borrower and the Subsidiaries taken as a whole, and there is no decree,
judgment or order of any kind in existence against or restraining Borrower or
any Subsidiary, or any of their officers, employees or directors, from taking
any action of any kind in connection with the business of Borrower or any
Subsidiary which decree, judgment or order has remained unvacated, unbonded
and unstayed for sixty (60) days following the date of entry thereof and
which, if it remains unvacated, unbonded and unstayed, would have a material
adverse effect on Borrower and the Subsidiaries taken as a whole. Except to
the extent previously disclosed to
8
<PAGE>
the Bank, neither Borrower nor any Subsidiary has (i) received from
any regulatory authority any criticisms, recommendations or suggestions
and Borrower has no reason to believe that any such is contemplated,
relating to any problem perceived by such regulatory authority with
any Subsidiary's capital structure, loan policies or portfolio, or
other banking and business practices which problem, if uncorrected, would
have a material adverse effect on the Borrower and the Subsidiaries taken as a
whole and which has not been resolved to the satisfaction of such regulatory
authority prior to taking any enforcement action with respect thereto, or (ii)
entered into any memorandum of understanding or similar arrangement with any
federal or state regulator relating to any unsound or unsafe banking practice
or conduct or any violation of law respecting the operations of the Borrower
or the operations of the Subsidiary Bank, which memorandum of understanding or
similar arrangement reflects a problem with such practice, conduct or
operations that is materially adverse to Borrower and its Subsidiaries taken
as a whole.
4.4 F.D.I.C. Insurance. The Subsidiary Bank and Republic Savings
Bank are insured as to deposits by the Federal Deposit Insurance Corporation
and no act has occurred which would adversely affect the status of such banks
as insured banks.
4.5 Corporate Existence; Business Activities; Assets. The Borrower
shall (i) preserve its corporate existence, rights and franchises; (ii) carry
on its business activities in substantially the manner such activities are
conducted as of the date of this Agreement; (iii) not liquidate, dissolve,
merge or consolidate with or into a nonaffiliated entity; and (iv) not sell,
lease, transfer or otherwise dispose of all or substantially all of its
assets.
4.6 Use of Proceeds; Margin Stock; Speculation. Advances by the
Bank hereunder shall be used by the Borrower to fund the purchase of mortgage
servicing rights and for the Borrower's other corporate purposes. The Borrower
will not use any of the loan proceeds to purchase or carry "margin" stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve
System). No part of any of the proceeds shall be used for speculative
investment purposes, including, without limitation, speculating or hedging in
the commodities and/or futures market.
4.7 Restriction on Liens. The Borrower will not create, incur,
assume or permit to exist any mortgage, pledge, encumbrance or other lien or
levy upon or security interest in any of the Borrower's property now owned or
hereafter acquired, except (i) with respect to taxes and assessments which are
either not delinquent or which are being contested in good faith with adequate
reserves provided; (ii) easements, restrictions and minor title irregularities
and encumbrances which do not, as a practical matter, have an adverse effect
upon the value to the Borrower and use of the affected property; (iii) liens
in favor of the Bank; (iv) other liens disclosed in writing to the Bank prior
to the date hereof; and (v) judgment liens arising in connection with court
proceedings, provided the execution or other enforcement of such judgment
liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings.
9
<PAGE>
4.8 Restriction on Contingent Liabilities. The Borrower will not
guarantee or become a surety or otherwise contingently liable for any
obligations of others, except pursuant to the deposit and collection of
checks, the issuance or confirmation of letters of credit by the Subsidiary
Bank and Republic Savings Bank and similar matters in the ordinary course of
business; provided, however, the Borrower may guarantee or become a surety or
otherwise contingently liable for any obligations of its Subsidiaries to other
creditors under warehouse lines of credit for mortgage loans; and further
provided, the Borrower may guarantee or become a surety or otherwise
contingently liable for any other obligations of its Subsidiaries which do
not, in the aggregate, exceed $10,000,000.
4.9 Insurance. The Borrower will maintain insurance to such
extent, covering such risks and with such insurers as is usual and customary
for businesses operating similar properties, and as is reasonably satisfactory
to the Bank, including insurance for fire and other risks insured against by
extended coverage, public liability insurance and workers' compensation
insurance.
4.10 Taxes and Other Liabilities. The Borrower will pay and
discharge, prior to the time they become delinquent, all of its taxes,
assessments and other liabilities, except when the payment thereof is being
contested in good faith by appropriate procedures which will avoid foreclosure
of liens securing such items, and with adequate reserves provided therefor.
4.11 Financial Statements and Reporting. The financial statements
and other information previously provided to the Bank or provided to the Bank
in the future are or will be complete and accurate and prepared in accordance
with generally accepted accounting principles. There has been no material
adverse change in the Borrower's financial condition since such information
was provided to the Bank. The Borrower will (i) maintain accounting records in
accordance with generally recognized and accepted principles of accounting
consistently applied throughout the accounting periods involved; (ii) provide
the Bank with such information concerning its business affairs and financial
condition (including insurance coverage) as the Bank may reasonably request;
and (iii) without request and provided the Borrower has received the consent
of any person or regulator which it deems necessary or appropriate for
disclosure of such information, if applicable, provide the Bank with:
(a) Borrower's annual financial statements prepared and audited by
a nationally recognized certified public accountant within 90 days
of the end of the Borrower's fiscal year accompanied by a
certificate by the accountants who prepared the audit report, as
of the date of such audit report, stating that in the course of
their audit, nothing has come to their attention suggesting that a
condition or event has occurred which constitutes a default
hereunder or which, after notice or lapse of time or both, would
constitute a default hereunder (or if there was such a condition
or event, specifying the same); but such accountants shall not be
liable for any failure to obtain knowledge of any such condition
or event.
(b) notice of the filing by the Borrower of the following with the
Board of Governors of the Federal Reserve System promptly after
the filing thereof: (i) the Borrower's FR Y-6 Report; (ii) the
10
<PAGE>
Borrower's FR Y-9 Report; (iii) notices of all acquisitions; (iv)
notices of the declaration and/or payment of all
dividends; and (v) notices of additions to and deletions
from the Borrower's Federal Reserve Bank stock;
(c) quarterly call reports prepared on FFIEC forms, or any
successors thereto, of the Subsidiary Bank within 45 days of the
end of each quarter prepared in accordance with the guidelines of
the regulatory agency which regulates such bank;
(d) notice of any memorandum of understanding or any other
agreement with any banking regulatory agencies, or cease and
desist order, immediately after entered into by or issued against
Borrower, any Subsidiary or any of their officers, employees or
directors in their capacity as such;
(e) promptly after request therefor, any other information concerning
the business affairs and financial condition of the Borrower or
its Subsidiaries as the Bank may reasonably request; and
(f) a certificate of the chief financial officer, executive vice
president or treasurer of the Borrower, substantially in the form
of Exhibit A attached hereto, within 30 days of the end of each
fiscal quarter stating (i) that no default or event or condition
which, with notice or lapse of time, or both, would constitute a
default, has occurred and is continuing or, if a default or such
an event or condition has occurred and is continuing, a statement
setting forth the details thereof and the action which the
Borrower has taken and proposes to take with respect thereto, and
(ii) that the Borrower is in compliance with the covenants set
forth in Sections 4.13(a) and (b) hereof.
4.12 Information. The Borrower will make available for review by
the Bank at any reasonable time, promptly upon reasonable notice of a request
therefor, financial statements, call reports and any other records or
documents of the Borrower or any Subsidiary that the Borrower or any
Subsidiary is not prohibited from disclosing. The Borrower and any Subsidiary
will use reasonable efforts to obtain the consent of any person or regulator
which it deems necessary or appropriate for disclosure of the information
described above.
4.13 Financial Status.
(a) The Borrower will maintain as of the end of each fiscal quarter:
(i) Consolidated Net Worth of at least $100,000,000.
(ii) a Fixed Charge Coverage Ratio of greater than 1.75 to 1.
(iii) a four quarter rolling average return on assets of
the Borrower of greater than 0.75%. The Borrower's average
return on assets will not be less than 0.5% for any two
consecutive quarters.
11
<PAGE>
(b) The Borrower will cause the Subsidiary Bank to maintain as of the
end of each fiscal quarter:
(i) a ratio of Primary Capital to Assets of at least 6%.
(ii) a ratio of Nonperforming Loans less loans 90 days
past due but still accruing interest plus Other Real Estate
to Total Loans plus Other Real Estate of not greater than
3%;
(iii) a ratio of Nonperforming Loans less loans 90 days
past due but still accruing interest plus Other Real Estate
to Primary Capital of not greater than 24%.
(iv) a four quarter rolling average return on assets of
at least 0.75%. The average return on assets of the
Subsidiary Bank will not be less than 0.5% for any two
consecutive quarters.
(v) a ratio of Total Capital to Risk-Weighted Assets of at
least 12%.
4.14 Access to Records. The Borrower will permit representatives of
the Bank to visit and inspect any of the properties and examine any books and
records of the Borrower and any Subsidiary including without limitation the
stock transfer records of the Subsidiary Bank, at any reasonable time upon
reasonable notice and as often as the Bank may reasonably desire.
4.15 Issuance of Stock. The Borrower will not permit the Subsidiary
Bank to issue any additional shares of common or preferred stock, or any
options, warrants or other common stock equivalents, or sell or issue
securities or obligations convertible into such ("New Stock"), whether in the
form of stock dividends or stock splits or otherwise, unless such New Stock
shall be issued to the Borrower and delivered by the Borrower to the Bank,
together with any additional documents reasonably required by the Bank in
connection therewith, as additional collateral to secure the loan provided for
hereunder.
ARTICLE V. COLLATERAL
5.1 Collateral. This Agreement and the Note are secured by an
Amended and Restated Collateral Pledge Agreement dated October 1, 1993.
5.2 Credit Balances; Setoff. The Borrower grants the Bank a
security interest and lien in any credit balance or other money now or
hereafter owed the Borrower by the Bank, and, in addition, agrees that the
Bank may, at any time after an occurrence of an event described in Section 6.1
below (notwithstanding any cure periods), without notice or demand, set off
against any such credit balance or other money any indebtedness outstanding
hereunder or under the Note.
The information in this Article V is for information only and the
omission of any reference to an agreement shall not affect the validity or
enforceability thereof. The rights and remedies of the Bank outlined in this
Agreement and the documents identified above are intended to be cumulative.
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<PAGE>
ARTICLE VI. DEFAULTS
6.1 Defaults. The occurrence of one or more of
the following events shall constitute a default:
(a) Nonpayment. The Borrower shall fail to pay (i) any interest
due on the Note, or any other amount payable hereunder, by five
days after the same becomes due; or (ii) any principal amount due
on the Note when due.
(b) Nonperformance. The Borrower or any guarantor shall default in
the performance of any agreement, term, provision, condition, or
covenant (other than a default occurring under Section 6.1(a),
(c), (d), (e), (f), (g) or (h) of this Agreement) required to be
performed or observed by the Borrower or any guarantor hereunder
or under any other Loan Document, continuing for a period of 30
days.
(c) Misrepresentation. Any financial information, statement,
certificate, representation or warranty given to the Bank by the
Borrower or any guarantor (or any of their representatives) in
connection with entering into this Agreement or the other Loan
Documents and/or any borrowing hereunder, or required to be
furnished under the terms hereof, shall prove untrue in any
material respect (as determined by the Bank in the exercise of its
reasonable judgment) as of the time when given.
(d) Default on Other Obligations. The Borrower or any guarantor
shall be in default under the terms of any loan agreement,
promissory note, lease, conditional sale contract or other
agreement, document or instrument evidencing, governing or
securing any indebtedness owing by the Borrower or any guarantor
to the Bank and the period of grace, if any, to cure said default
shall have passed or any indebtedness in excess of $1,000,000
owing by the Borrower to any third party provided the Borrower has
received a notification from such third party declaring the unpaid
balance of the indebtedness together with interest thereon and
other amounts accrued thereunder to be immediately due and
payable.
(e) Judgments. Any judgment shall be obtained against the
Borrower, any guarantor or any Subsidiary, the uninsured amount of
which, together with all other outstanding unsatisfied judgments
against the Borrower, any guarantor or any Subsidiary, shall
exceed the sum of $500,000 and shall remain unvacated, unbonded or
unstayed for a period of 60 days following the date of entry
thereof.
(f) Regulatory Orders. The Borrower or any of its Subsidiaries
shall enter into (i) any memorandum of understanding or other
agreement with any banking regulatory agency relating to any
unsound or unsafe banking practice or conduct or (ii) any
memorandum of understanding or other agreement with any banking
regulatory agency relating to any violation of law respecting the
operation of Borrower or such Subsidiary which has the effect of
prohibiting such Subsidiary from declaring and paying any
dividends or making any other distribution on account of any
shares of any class of its
13
<PAGE>
stock; or Borrower or any Subsidiary or any of their
officers, employees, or directors shall be the subject of
a judicial or administrative determination restraining
any of them from taking any actions of any kind in connection with
the business of Borrower or such Subsidiary, assessing a civil
penalty, finding that any criminal offense occurred in connection
with the operations of Borrower or such Subsidiary, or suspending
or removing any officer or director of Borrower or such
Subsidiary.
(g) Insolvency/Bankruptcy. The Borrower, any of its Subsidiaries
or any guarantor shall: (i) become insolvent; or (ii) be unable,
or admit in writing its inability, to pay its debts as they
mature; or (iii) make a general assignment for the benefit of
creditors or to an agent authorized to liquidate any substantial
amount of its property; or (iv) become the subject of an "Order
for Relief" as said term is defined under the United States
Bankruptcy Code; or (v) file an answer to a creditor's petition
(admitting the material allegations thereof) for reorganization or
to effect a plan or other arrangement with creditors; or (vi)
apply to a court for the appointment of a receiver for any of its
assets; or (vii) have a receiver appointed for any of its assets
(with or without the consent of the Borrower, such Subsidiary or
such guarantor, respectively) and such receiver shall not be
discharged within 60 days after the appointment; or (viii) be
closed or taken over by any regulatory agency; or (ix) sell or
have sold all or substantially all of its assets to any
nonaffiliated entity; or (x) otherwise become the subject of an
insolvency proceeding or an out-of-court settlement with its
creditors.
(h) Adverse Change. There is a material adverse change
in the financial condition of the Borrower, any of the
Subsidiaries or any guarantor.
6.2 Termination of Loans. Upon the occurrence of any of the events
identified in Section 6.1, the Bank may at any time thereafter
(notwithstanding the cure periods identified in Sections 6.1(a), 6.1(b),
6.1(d) and 6.1(e)) immediately terminate its obligation to make additional
loans hereunder, without demand or further notice of any kind, all of which
are hereby waived.
6.3 Acceleration of Obligations. Upon the occurrence of any of the
events identified in Sections 6.1(a) through 6.1(f) and 6.1(h), and the
passage of any applicable cure period, the Bank may at any time thereafter,
(i) by written notice to the Borrower, declare the unpaid principal balance of
the Note, together with the interest accrued thereon and other amounts accrued
hereunder, to be immediately due and payable and the unpaid balance shall
thereupon be due and payable, all without presentation, demand, protest or
further notice of any kind, all of which are hereby waived, and
notwithstanding anything to the contrary contained herein or in any of the
other Loan Documents and (ii) require the Borrower to cause the Subsidiary
Bank to appoint an independent transfer agent for the purpose of registering
and transferring ownership of the capital stock of the Subsidiary Bank. Upon
the occurrence of any event under Section 6.1(g), then the unpaid principal
balance under the Note, together with all interest accrued thereon and other
14
<PAGE>
amounts accrued hereunder, shall thereupon be immediately due and payable, all
without presentation, demand, protest or notice of any kind, all of which are
hereby waived, and notwithstanding anything to the contrary contained herein
or in any of the other Loan Documents.
6.4 Other Remedies. Nothing in this Article VI is intended to
restrict the Bank's rights under any of the Loan Documents or at law, and the
Bank may exercise all such rights and remedies as and when they are available.
ARTICLE VII. MISCELLANEOUS
7.1 Delay; Cumulative Remedies. No delay on the part of the Bank
in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power
or privilege hereunder preclude other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein specified are cumulative and are not exclusive of any rights or
remedies which the Bank would otherwise have.
7.2 Relationship to Other Documents. The warranties, covenants and
other obligations of the Borrower (and the rights and remedies of the Bank)
that are outlined in this Agreement and the other Loan Documents are intended
to supplement each other. In the event of any inconsistencies in any of the
terms in the Loan Documents, all terms shall be cumulative so as to give the
Bank the most favorable rights set forth in the conflicting documents.
7.3 Participations. The Bank may, at its option, sell all or any
interests in the Note and other Loan Documents to other financial
institutions, and in connection with such sales (and thereafter) disclose any
financial information the Bank may have concerning the Borrower to any such
participant or potential participant.
7.4 Successors. The rights, options, powers and remedies granted
in this Agreement shall extend to the Bank and to its successors and assigns,
shall be binding upon the Borrower and its successors and assigns and shall be
applicable hereto and to all renewals and/or extensions hereof.
7.5 Expenses and Attorneys' Fees. The Borrower agrees to reimburse
the Bank for all reasonable fees and out-of-pocket disbursements incurred by
the Bank in connection with the preparation, execution, delivery,
administration and enforcement of this Agreement or any of the other Loan
Documents, and any waivers or amendments with respect hereto, including all
reasonable costs of collection before and after judgment, and including,
without limitation, the reasonable fees and disbursements of counsel
(including inside counsel) for the Bank.
7.6 Payments. Payments due under the Note and other Loan Documents
shall be made in lawful money of the United States, and the Bank is authorized
to charge payments due under the Loan Documents against any account of the
Borrower. All payments may be applied by the Bank to principal, interest and
other amounts due under the Loan Documents in any order which the
Bank elects.
15
<PAGE>
7.7 Notices. All notices, requests and other communications that
are required or may be given under this Agreement shall be in writing, and
shall be deemed to have been given on the date of delivery, if delivered by
hand, telecopier or courier or three days after mailing, if mailed by
certified or registered mail, postage prepaid, return receipt requested,
addressed as set forth below (which addresses may be changed from time to time
by notice given in the manner provided in this Section):
If to Borrower: Republic Bancorp Inc.
1060 East Main Street
P.O. Box 70
Owosso, MI 48867
Telecopy No. (517) 725-2319
Attn: Thomas F. Menacher, Chief Financial
Officer
If to Bank: Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, WI 53202
Telecopy No. (414) 765-6236
Attn: Peter M. Kronberg, Vice President
7.8 Applicable Law and Jurisdiction; Interpretation and
Modification. This Agreement and all other Loan Documents shall be governed by
and interpreted in accordance with the laws of the State of Wisconsin.
Invalidity of any provision of this Agreement shall not affect the validity of
any other provision. The provisions of the Loan Documents shall not be
altered, amended or waived without the express written consent of the Bank
(and the Borrower, when appropriate). THE BORROWER HEREBY CONSENTS TO THE
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITUATED IN THE COUNTY OR
JURISDICTION WHERE THE BANK'S OFFICE WHICH IS DESIGNATED IN THE NOTE AS THE
PLACE FOR PAYMENT IS LOCATED (OR, IN THE ABSENCE OF SUCH DESIGNATION, THE
BANK'S MAIN OFFICE), AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS,
WITH REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS RELATING TO THIS
AGREEMENT, THE COLLATERAL, ANY OTHER LOAN DOCUMENT, OR ANY TRANSACTIONS
ARISING THEREFROM, OR ENFORCEMENT AND/OR INTERPRETATION OF ANY OF THE
FOREGOING. This Agreement, the other Loan Documents and any amendments hereto
(regardless of when executed) will be deemed effective and accepted only at
the Bank's offices, and only upon the Bank's receipt of the executed originals
thereof.
7.9 Waiver of Jury Trial. THE BORROWER AND THE BANK HEREBY JOINTLY
AND SEVERALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING RELATING TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS THEREUNDER
OR ANY TRANSACTION ARISING THEREFROM OR CONNECTED THERETO. THE BORROWER AND
THE BANK EACH REPRESENT TO THE OTHER THAT THIS WAIVER IS KNOWINGLY, WILLINGLY
AND VOLUNTARILY GIVEN.
7.10 Previous Agreement. This Agreement amends,
restates and supersedes the Revolving Credit Agreements dated
January 27, 1994, as amended and December 28, 1992, as amended.
16
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this REVOLVING
CREDIT AGREEMENT as of the 26th day of January, 1995.
REPUBLIC BANCORP INC.
a Michigan corporation
By: /s/ Thomas F. Menacher
-----------------------------
Name and Title: Thomas F. Menacher
Chief Financial Officer
FIRSTAR BANK MILWAUKEE, N.A.
By: /s/ Peter M. Kronberg
-----------------------------
Peter M. Kronberg, Vice President
17
Exhibit 4(k)
AMENDMENT NO. 1 TO WAREHOUSE CREDIT AGREEMENT
THIS AGREEMENT is made as of this 16th day of Oct, 1993, by and between
MARKET STREET MORTGAGE CORPORATION (the "Borrower") and GE CAPITAL MORTGAGE
SERVICES, INC. (the "Lender").
BACKGROUND
The Borrower and the Lender entered into a Warehouse Credit Agreement,
dated as of July 30, 1993 (the "Warehouse Credit Agreement") pursuant to which
the Lender agreed to make advances (the "Advances") to the Borrower in the
maximum aggregate outstanding principal amount of $85,000,000 in accordance
with the provisions of the Warehouse Credit Agreement. All capitalized terms
used herein and not otherwise defined shall have the meanings set forth in the
Warehouse Credit Agreement.
The Advances are evidenced by the Borrower's promissory note dated as of
July 30, 1993 (the "Note") in the stated principal amount of $85,000,000, and
secured by, among other things, a Warehouse Security Agreement dated as of
July 30, 1993 (the "Warehouse Security Agreement") between the Borrower and
the Lender granting the Lender a security interest in certain of the
Borrower's assets.
The Borrower and the Lender now desire to amend the Warehouse Credit
Agreement to provide for a new category of mortgage loan against which the
Borrower may request Advances.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Warehouse Credit Agreement. The Warehouse Credit Agreement is
hereby amended as follows:
a) The definition of "Mortgage Loan" contained in Section 1.01
of the Warehouse Credit Agreement is amended to read in full as follows:
"Mortgage Loan" shall mean a loan evidenced by a Mortgage Note and secured
by a Mortgage encumbering a completed one to four family residential
property (including, without limitation, condominium units and excluding
cooperative ownership interests); provided, however, that each loan listed
on Schedule X shall constitute a Mortgage Loan if such loan is evidenced
by a Mortgage Note and secured by a Mortgage encumbering a one to four
family residential property."
<PAGE>
b) The definition of "Origination Date" contained in Section
1.01 of the Warehouse Credit Agreement is amended to read in full as follows:
"Origination Date" shall mean, with respect to any Mortgage Loan other
than a Mortgage Loan listed on Schedule X, the date such Mortgage Loan was
funded to the obliger thereon and shall mean, with respect to any Mortgage
Loan listed on Schedule X, the date on which the Lender shall make an Advance
to the Borrower against the pledge by the Borrower of such Mortgage Loan as
Collateral for such Advance."
c) Section 2.07(a) of the Warehouse Credit Agreement is
amended to read in full as follows:
"The Borrower agrees to pay interest in respect of the outstanding
principal amount of the Advances from the date the proceeds thereof are
made available to the Borrower until the maturity thereof (whether by
acceleration or otherwise) (i) with respect to Advances secured by
Mortgage Loans (other than Special Collateral or the Mortgage Loans listed
on Schedule X) or Mortgage-backed Securities, at a rate per annum equal to
the lower of (x) 2.25% in excess of the Commercial Paper Rate in effect
from time to time, and (y) 2.25% in excess of the LIBOR Rate in effect
from time to time (provided, however, that at all times that the
Commercial Paper is rated A-1 or better by S&P such rate shall in no event
be less than 1.75% in excess of the Commercial Paper Rate in effect from
time to time, (ii) with respect to Advances secured by Special Collateral,
at a rate per annum equal to .125% in excess of the Prime Lending Rate in
effect from time to time, and (iii) with respect to Advances secured by
the Mortgage Loans listed on Schedule X, at a rate per annum equal to
1.00% in excess of the Prime Lending Rate in effect from time to time".
d) Section 6.19(a), clause (vii) of the Warehouse Credit Agree-
ment is amended to read in full as follows:
"(vii) unless such Mortgage Loan is one of the Mortgage Loans listed on
Schedule X, be fully disbursed, the final disbursement to the
mortgagor in connection therewith having been made no more than 30
days prior to the date of pledge is such disbursement was made by
the Borrower (unless such Mortgage Loan is delivered as Collateral
securing the initial Advance made to the Borrower hereunder, is
delivered as Collateral securing an Advance made for the purpose of
enabling the Borrower to terminate or reduce its obligations under
each warehouse credit facility in existence on the date hereof or
is delivered as Special Collateral);"
<PAGE>
e) There shall be added to the Warehouse Credit Agreement a
new Schedule X which shall read in full as set forth in Exhibit I attached
hereto.
2. Reference to Warehouse Credit Agreement. Except where the context
clearly requires otherwise, all references to the Warehouse Credit Agreement
in the Warehouse Credit Agreement, the Note, the Warehouse Security Agreement
and in any other document delivered to the Lender in connection therewith
shall be deemed to refer to the Warehouse Credit Agreement as amended by this
Amendment No. 1.
3. Ratification of Documents. The Borrower hereby ratifies and
confirms its obligations under the Warehouse Credit Agreement, the Note and
the Warehouse Security Agreement and agrees that the execution and delivery of
this Amendment No. 1 does not in any way diminish or invalidate any of its
obligations under the Warehouse Credit Agreement, the Note and the Warehouse
Security Agreement.
4. Representations and Warranties. The Borrower hereby certifies
that (i) the representations and warranties which it made in the Warehouse
Credit Agreement and the Warehouse Security Agreement are true and correct as
of the date hereof and (ii) no Event of Default and no event which could
become an Event of Default with the passage of time or the giving of notice,
or both, under the Note, the Warehouse Credit Agreement or the Warehouse
Security Agreement exists on the date hereof.
5. Miscellaneous.
(a) This Agreement shall be governed by the construed according
to the laws of the State of New Jersey and shall be binding upon the shall
inure to the benefit of the parties hereto, their successors and assigns.
(b) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
(CORPORATE SEAL:) MARKET STREET MORTGAGE
CORPORATION
ATTEST: By: /s/ Tracy S. Jackson
-------------------------- -------------------------
Secretary Senior Vice President
(CORPORATE SEAL:) GE CAPITAL MORTGAGE SERVICES,
INC.
ATTEST: By: /s/ William E. Mezger
-------------------------- -------------------------
Secretary Senior Vice President
<PAGE>
AMENDMENT NO. 2 TO WAREHOUSE CREDIT AGREEMENT
AMENDMENT NO. 2 TO WAREHOUSE CREDIT AGREEMENT
("Amendment No. 2"), dated as of February 23, 1994, between MARKET STREET
MORTGAGE CORPORATION, a Michigan corporation (the "Borrower"), and GE
CAPITAL MORTGAGE SERVICES, INC., a New Jersey corporation (the "Lender")
WITNESSETH:
WHEREAS, the Borrower and the Lender entered into a Warehouse
Credit Agreement, dated as of July 30, 1993, which was amended by an
Amendment No. 1 thereto dated as of October 16, 1993 (as so amended, the
"Original Warehouse Credit Agreement"), pursuant to which the Lender has
agreed to make certain advances (the "Advances") to the Borrower in a
maximum aggregate principal amount of $85,000,000 (the Original Warehouse
Credit Agreement, as amended by this Amendment No. 2, is herein referred to
as the "Warehouse Credit Agreement"); and
WHEREAS, the Advances are evidenced by the Borrower's
promissory note dated as of July 30, 1993 (the "Note") in the stated
principal amount of $85,000,000, and are secured, among other things, by
the Warehouse Security Agreement, dated as of July 30, 1993, between the
Borrower and the Lender (as amended from time to time, the "Warehouse
Security Agreement"); and
WHEREAS, the Borrower and the Lender desire to further amend
and supplement the Original Warehouse Credit Agreement in order to provide
additional terms and conditions for the incurrence by the Borrower of
certain Advances thereunder;
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Definitions.
(a) Definitions in Original Warehouse Credit
Agreement. All capitalized terms used in this Amendment No. 2 and not
otherwise defined herein shall have the same meanings assigned to such
terms in the Original Warehouse Credit Agreement.
<PAGE>
(b) Amendments to Original Definitions and Exhibits.
(i) The definition of "Borrowing Base" contained
in Section 1.01 of the Original Warehouse Credit Agreement is hereby
amended in its entirety to read as follows:
"Borrowing Base" shall mean, as of any date, an amount
that is the sum of the following, with respect to all Eligible
Mortgage Loans, Special Collateral, Liquid Assets and REO
Collateral pledged to the Lender as of such date: (i) the sum for
all Conforming Loans that are Committed Mortgage Loans of the
product of (x) the Mortgage Loan Aging Percentage with respect to
such Mortgage Loan and (y) 99% of the Market Value of such
Mortgage Loan, (ii) the sum for all Conforming Loans that are
Uncommitted Mortgage Loans of the product of (x) the Mortgage
Loan Aging Percentage with respect to such Mortgage Loan and (y)
96% of the Market Value of such Mortgage Loan, (iii) the sum for
all Nonconforming Loans (each of which shall be a Committed
Mortgage Loan) of the product of (x) the Mortgage Loan Aging
Percentage with respect to such Mortgage Loan and (y) 99% of the
Market Value of such Mortgage Loan, (iv) the sum for all Mortgage
Loans that are FHA Loans, VA Loans or State Loans of the product
of (x) the Mortgage Loan Aging Percentage with respect to such
Mortgage Loan and (y) 98% of the Market Value of such Mortgage
Loan, (v) 99% of the Market Value of each Mortgage-backed
Security, (vi) the sum for all Mortgage Loans that are Special
Collateral of the product of (x) the Special Collateral Advance
Rate with respect to such Mortgage Loan and (y) the outstanding
principal amount of such Mortgage Loan, (vii) if any Liquid
Assets are so pledged, an amount equal to the lesser of (x) the
aggregate principal amount of the Liquid Assets and (y) $0, and
(viii) if any REO Collateral is so pledged, an amount equal to
100% of the Repurchase Price for all REO Loans which are included
in such REO Collateral, provided that the aggregate amount of REO
Advances outstanding at any time may not exceed $3.9 million.
(ii) The definition of "Request for Advance"
contained in Section 1.01 of the Original Warehouse Credit Agreement is
hereby amended in its entirety to read as follows:
"Request for Advance" shall mean (i) with respect to
all Advances other than REO Advances, a request for Advance
substantially in the form of Exhibit A to the Warehouse Credit
Agreement, and (ii) with respect to REO Advances, a request for
Advance substantially in the form of Exhibit A-1 to the Warehouse
Credit Agreement.
- 2 -
<PAGE>
(iii) The Original Warehouse Credit Agreement is
hereby amended to add a new Exhibit A-1, in the form attached hereto, which
shall be used by the Borrower to request REO Advances, and a new Exhibit
I-1, in the form attached hereto, which is an amendment to the Warehouse
Security Agreement.
(c) Additional Defined Terms. Section 1.01 of the
Original Warehouse Credit Agreement is hereby amended to add the following
new definitions, in the appropriate alphabetical order:
"Agency" shall mean, as the context requires, FHLMC,
FNMA or GNMA.
"Agency Agreement" shall mean the agreement or
agreements (including all exhibits and schedules attached thereto
or delivered pursuant thereto and all amendments and supplements
thereof) between the Borrower and an Agency relating to Mortgage
Loans owned by such Agency and the servicing thereof by the
Borrower or otherwise affecting the Servicing Rights associated
with such Mortgage Loans.
"Agency Requirements" shall mean the applicable rules,
regulations, directives and instructions of (i) an Agency,
including, without limitation, the applicable requirements of the
Guides and the Agency Agreements, and (ii) VA and FHA.
"Amendment No. 2" shall mean this Amendment No. 2 to
Warehouse Credit Agreement.
"Amendment No. 1 to Security Agreement" shall mean
Amendment No. 1 to Warehouse Security Agreement, dated as of
February 23, 1994, between the Borrower and the Lender.
"Custodial Agreement" shall mean, with respect to any
Mortgage Loan, the agreement or agreements governing the
retention of the originals of the Mortgage Note, the Mortgage,
any assignment of the Mortgage and any other Mortgage Loan
Documents as referred to and in accordance with the related
Agency Agreement.
"Guides" shall mean, as applicable, (i) the FHLMC
Sellers' & Servicers' Guide, (ii) the FNMA Selling Guide and the
FNMA Servicing Guide, and (iii) the GNMA Mortgage-Backed
Securities Guide, and any amendments and additions to any thereof.
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<PAGE>
"REO Advance" shall mean an Advance made to fund, or to
reimburse the Borrower for payments previously made by the
Borrower to fund, the Repurchase Price of one or more REO Loans.
"REO Claims" shall have the meaning provided in Section
1(c) of Amendment No. 1 to the Warehouse Security Agreement.
"REO Collateral" shall have the meaning provided in
Section 2 of Amendment No. 1 to the Warehouse Security Agreement.
"REO Loan" shall mean a Mortgage Loan in respect of
which monthly payments are delinquent, and which the Borrower is
required, on account of such delinquency, to repurchase from GNMA
in accordance with Agency Requirements.
"REO Obligation" shall have the meaning provided in
Section 1(c) of Amendment No. 1 to the Warehouse Security
Agreement.
"REO Property" shall mean the real property on which a
lien has been granted pursuant to a Mortgage to secure the
repayment of an REO Loan.
"Repurchase Price" shall mean, with respect to any REO
Loan, the aggregate amount which the Borrower is required to
remit to GNMA to repurchase such REO Loan in accordance with
Agency Requirements.
"Serviced Loan" shall have the meaning provided in
Section 1(c) of Amendment No. 1 to the Warehouse Security
Agreement.
"Servicing File" shall have the meaning provided in
Section 1(c) of Amendment No. 1 to the Warehouse Security
Agreement.
"Servicing Rights" shall have the meaning provided in
Section 1(c) of Amendment No. 1 to the Warehouse Security
Agreement.
2. Amendments to Original Warehouse Credit Agreement.
(a) Section 2.01 of the Original Warehouse Credit
Agreement is hereby amended in its entirety to read as follows:
"2.01 Commitment". Subject to and upon the terms and
conditions set forth herein, the Lender agrees, at any time and
from time to time prior to the Expiry Date (or such earlier date
as the Commitment shall have been terminated pursuant to the
terms hereof), to make an
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<PAGE>
advance or advances (each an "Advance" and, collectively, the
"Advances") to the Borrower, which Advance: (i) shall be made at
any time and from time to time in accordance with the terms
hereof on and after the Effective Date and prior to the Expiry
Date; (ii) shall bear interest as provided in Section 2.07; (iii)
may be prepaid and reborrowed in accordance with the provisions
hereof; and (iv) shall be made against the pledge by the Borrower
of Eligible Mortgage Loans, Special Collateral, Liquid Assets or
REO Collateral as Collateral for such Advance as provided herein
and in the Warehouse Security Agreement; provided, however, that
(1) the aggregate principal amount of Advances outstanding at any
time shall not exceed the lesser of (x) the Commitment and (y)
the Borrowing Base, at such time, (2) the aggregate principal
amount of Advances outstanding at any time secured by Mortgage
Loans shall not exceed 100% of the Commitment, (3) the aggregate
principal amount of Advances outstanding at any time secured by
Mortgage-backed Securities shall not exceed 0% of the
Commitment, (4) the aggregate principal amount of Wet Advances
outstanding at any time shall not exceed 40% of the Commitment,
(5) the aggregate principal amount of Advances outstanding at any
time secured by Special Collateral shall not exceed 4.7% of the
Commitment, (6) the aggregate principal amount of Advances
outstanding at any time secured by Nonconforming Loans shall not
exceed 75% of the Commitment, (7) the aggregate principal amount
of Advances outstanding at any time secured by Uncommitted
Mortgage Loans shall not exceed 3% of the Commitment, (8) the
aggregate principal amounts of Advances outstanding at any time
secured by FHA Loans, VA Loans and State Loans shall not exceed
100% of the Commitment, and (9) the aggregate principal amount of
Advances outstanding at any time secured by REO Collateral shall
not exceed 4.6% of the Commitment."
(b) Section 2.04 of the Original Warehouse Credit
Agreement is hereby amended in its entirety to read as follows:
"Whenever the Borrower desires to incur an Advance
hereunder, it shall deliver to the Lender at its office a
Request for Advance substantially in the form of either Exhibit
A or Exhibit A-1, as applicable, not later than 12:30 p.m. (New
York City time) on the Business Day prior to the proposed date
of such Advance. Each Request for Advance in the form of Exhibit
A: (i) shall be appropriately completed to specify the aggregate
principal amount of the Advance or Wet Advance to be made and the
proposed date of such Advance (which shall be a Business Day);
(ii) shall have attached thereto each of the Collateral
Documents specified therein, including, without limitation, in
the case of each Advance or Wet Advance to be secured by a pledge
of a Mortgage Loan, an assignment by the Borrower to the Lender
of the related Mortgage fully completed and in
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<PAGE>
recordable form, and a Borrowing Base certificate substantially
in the form of Exhibit C (a "Borrowing Base Certificate"); and
(iii) shall, in the case of a Wet Advance, include instructions
with respect to the disbursement of such Wet Advance. Each
Request for Advance in the form of Exhibit A-1: (i) shall be
appropriately completed to specify the aggregate principal amount
of the REO Advance to be made and the proposed date of such REO
Advance (which shall be a Business Day); and (ii) shall have
attached thereto a description of each REO Loan the Repurchase
Price of which is to be funded by such REO Advance, which
description shall be in substantially the form of Schedule I to
Exhibit A-1."
(c) Section 2.07(a) of the Original Warehouse Credit
Agreement is hereby amended in its entirety to read as follows:
"(a) The Borrower agrees to pay interest in
respect of the outstanding principal amount of the Advances from the
date the proceeds thereof are made available to the Borrower until the
maturity thereof (whether by acceleration or otherwise) (i) with
respect to Advances secured by Mortgage Loans (other than Special
Collateral or the Mortgage Loans listed on Schedule X) or
Mortgage-backed Securities, at a rate per annum equal to the lower of
(x) 2.25% in excess of the Commercial Paper Rate in effect from time
to time and (y) 2.25% in excess of the LIBOR Rate in effect from time
to time (provided, however, that at all times that the Commercial
Paper is rated A-1 or better by S&P such rate shall in no event be
less than 1.75% in excess of the Commercial Paper Rate in effect from
time to time), (ii) with respect to Advances secured by Special
Collateral, at a rate per annum equal to .125% in excess of the Prime
Lending Rate in effect from time to time, (iii) with respect to
Advances secured by the Mortgage Loans listed on Schedule X, at a rate
per annum equal to 1.00% in excess of the Prime Lending Rate in effect
from time to time, and (iv) with respect to Advances secured by REO
Collateral, at a rate per annum equal to 1.00% in excess of the Prime
Lending Rate in effect from time to time."
(d) The first sentence of Section 3.01(c) of the
Original Warehouse Credit Agreement is hereby amended in its entirety to
read as follows:
"(c) The Borrower shall pay the Lender an
administration fee (the "Administration Fee") with respect to each
calendar month during the term of this Agreement in an amount equal to
the sum of (i) $12.50 for each Mortgage Loan pledged as Collateral for
the first time during such calendar month, and (ii) $12.50 for each
REO Loan the Repurchase Price of which is funded by an REO Advance
during such calendar month."
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<PAGE>
(e) There shall be added to Section 4.02 of the
Original Warehouse Credit Agreement a new paragraph (u), which shall read
in full as follows:
"(u) if on any date the aggregate principal amount
outstanding of REO Advances exceeds 4.6% of the Commitment, the
Borrower shall immediately prepay the principal of REO Advances
in an aggregate amount equal to such excess."
(f) There shall be added to Section 4.03 of the
Original Warehouse Credit Agreement a new paragraph (c), which shall read
in full as follows:
"(c) Anything to the contrary in paragraphs (a)
and (b) above notwithstanding, the Borrower shall be entitled to
have REO Collateral released from the Lien granted pursuant to
the Warehouse Security Agreement, upon the Borrower's written
request therefor to the Lender, without prepaying any Advances;
provided that (i) no Default or Event of Default has occurred and
is continuing at the time of making any such request, or would
result therefrom, (ii) the Borrower reimburses the Lender
promptly upon request for any fees, costs or expenses incurred by
the Lender in effecting such release of REO Collateral, and (iii)
the Borrower shall have demonstrated to the Lender's satisfaction
that immediately following such release the Borrower's Servicing
Portfolio will equal or exceed $600,000,000 and will continue to
comply with Section 7.14 of the Warehouse Credit Agreement."
(g) There shall be added to Section 5 of the Original
Warehouse Credit Agreement a new Section 5.18, which shall read in full as
follows:
"5.18 Conditions Precedent to REO Advances. The obligation of the
Lender to make each REO Advance to the Borrower under the
Warehouse Credit Agreement is subject, at the time of the making
of each such REO Advance, to the satisfaction of the following
conditions precedent, in addition to the satisfaction of all
other applicable conditions precedent described in this Section
5:
(a) Amendment to Warehouse Security Agreement: UCC's.
The Borrower shall have duly authorized, executed and delivered
an amendment to the Warehouse Security Agreement, substantially
in the form of Exhibit I-1 hereto, covering all of the Borrower's
present and future REO Collateral, together with:
(i) acknowledgement copies of proper financing
statements (Form UCC-1) (in form satisfactory to the Lender),
duly filed under the UCC of each jurisdiction as may be necessary
or, in the opinion
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<PAGE>
of the Lender, desirable to perfect the security interest
purported to be created by the Warehouse Security Agreement in
the REO Collateral; and
(ii) copies of such other documents or reports, or
evidence of completion of such other recordings and filings as
the Lender may request comparable to those described in Section
5.09(b), (c) and (d) of this Agreement but with specific
reference to the REO Collateral.
(b) Diligence. Prior to the making of any REO Advance,
the Lender shall have satisfactorily completed any due diligence
review with respect to the Borrower's Servicing Portfolio or
other REO Collateral, as the Lender shall then require."
(h) There shall be added to Section 6 of the Original
Warehouse Credit Agreement a new Section 6.24, which shall read in full as
follows:
"6.24 Representations Relating to Servicing Portfolio, Etc.
(a) The Borrower has serviced all Serviced Loans in the
Borrower's Servicing Portfolio, and has kept and maintained
complete and accurate books and records in connection therewith,
in accordance with all Agency Requirements and all applicable
laws and regulations.
(b)(i) Except for any subservicing arrangements of the
Borrower with respect to some Serviced Loans, the Borrower is the
sole owner and holder of the Servicing Rights, has good and
marketable right, title and interest therein, and has the full
right and authority, subject to no interest or agreement with any
other party, to grant a security interest therein to the Lender;
(ii) except for any pledge or security interest granted in
connection with the Poughkeepsie Savings Bank Note Payable (due
November 30, 1995) described in Item 3 of Schedule V to the
Warehouse Credit Agreement, the Servicing Rights have not been
assigned or pledged to any other party, and the security interest
therein granted pursuant to the Warehouse Security Agreement is
the only outstanding and existing interest that the Borrower has
granted to the Lender or any other party in the Servicing
Rights."
(i) There shall be added to Section 7 of the Original
Warehouse Credit Agreement new Sections 7.13 and 7.14, which shall read in
full as follows:
"7.13 Covenants Respecting REO Loans and REO Claims.
(a) The Borrower will comply promptly and fully with
all Agency Requirements, and all applicable laws, rules and
regulations of any
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<PAGE>
governmental authority or other Person relating to the repurchase
of REO Loans, the filing, processing and collection of all REO
Claims, and all foreclosure or other enforcement actions or
remedial proceedings with respect to all REO Loans and REO
Properties;
(b) The Borrower shall promptly file, and thereafter
shall diligently process to completion, all requests for
reimbursement or collection of all REO Claims, and shall promptly
institute, prosecute and enforce all foreclosure and other
enforcement actions or remedial proceedings with respect to all
REO Loans and REO Properties, which the Borrower is entitled to
institute and prosecute under applicable law;
(c) The Borrower shall promptly advise the Lender, by
facsimile transmission, of its receipt of any amounts collected
with respect to any REO Claim, identifying the mortgagor and
property address for each REO Loan which is the subject of any
such REO Claim."
"7.14 Covenants Respecting Servicing Portfolio.
Except for the impact of transactions undertaken in the
ordinary course of business, the Borrower shall maintain at all
times in the Borrower's Servicing Portfolio a mix of Serviced
Loans having characteristics (including, without limitation,
geographic dispersion of mortgage properties, delinquency rates,
percentage of Conforming Loans, Nonconforming Loans, VA Loans,
FHA Loans, State Loans, balloon loans, variable rate loans,
buy-down loans, refinance loans and loans secured by
condominiums) substantially similar to those in the Borrower's
Servicing Portfolio on the date of Amendment No. 2."
3. Further Assurances. The Assignor shall execute and
deliver to the Lender from time to time all such other agreements,
instruments and documents (including without limitation, any consents,
approvals, acknowledgments or agreements of any Agency) and shall do all
other and further acts and things, as the Lender may request in order to
further evidence or carry out the intent of this Amendment No. 2.
4. Ratification of Original Agreement. This Amendment No. 2
is executed and delivered, and shall be considered as, an amendment and
supplement to the Original Warehouse Credit Agreement and shall form a part
thereof and, except as otherwise provided herein (or in Amendment No. 1 to
the Warehouse Credit Agreement), the provisions of the Original Warehouse
Credit Agreement, including without limitation, all representations,
covenants, agreements, obligations and rights contained therein, are
hereby ratified, confirmed and approved in all respects.
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<PAGE>
5. Confirmation of Other Obligations. The Assignor hereby
confirms and agrees that the execution and delivery of this Amendment No. 2
does not in any way diminish or invalidate any of its obligations under the
Warehouse Security Agreement and the Note.
6. Representations and Warranties. The Borrower hereby
certifies that (i) the representations and warranties which it made in the
Original Warehouse Credit Agreement and the Warehouse Security Agreement
are true and correct as of the date hereof and (ii) no Default or Event of
Default under the Warehouse Credit Agreement, the Warehouse Security
Agreement or the Note has occurred and is continuing on the date hereof.
7. Governing Law. This Amendment No. 2 shall be governed by
and construed according to the laws of the State of New Jersey and shall be
binding upon and shall inure to the benefit of the parties hereto, and
their respective successors and assigns.
8. Counterparts. This Amendment No. 2 may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall
be lodged with the Borrower and the Lender.
9. Effectiveness. This Amendment No. 2 shall become
effective on the date on which the Borrower and the Lender shall have
signed a copy hereof (whether the same or different copies) and shall have
delivered the same to the Lender at its Office.
10. Headings Descriptive. The headings of the several
sections and subsections of this Amendment No. 2 are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Amendment No. 2.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly
authorized officers to execute and deliver this Amendment No. 2 as of the
date first above written.
Address: MARKET STREET MORTGAGE
2650 McCormick Drive, Suite 200 CORPORATION
Clearwater, FL 34619
Attn: Tracy S. Jackson
Facsimile No.: (813) 791-4136 BY: /s/ Tracy S. Jackson
-----------------------------
Title: Senior Vice President
Three Executive Campus GE CAPITAL MORTGAGE
Cherry Hill, NJ 08002 SERVICES, INC.
Attn: William E. Mezger
Facsimile No.: (609) 486-2777
BY: /s/ William E. Mezger
-----------------------------
Title: Senior Vice President
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<PAGE>
AMENDMENT NO. 3 TO WAREHOUSE CREDIT AGREEMENT
THIS AGREEMENT is made as of this 20th day of May, 1994, by and
between MARKET STREET MORTGAGE CORPORATION (the "Borrower") and GE CAPITAL
MORTGAGE SERVICES, INC. (the "Lender").
BACKGROUND
The Borrower and the Lender entered into a Warehouse Credit Agreement,
dated as of July 30, 1993, as amended (as so amended, the "Warehouse Credit
Agreement") pursuant to which the Lender agreed to make advances (the
"Advances") to the Borrower in accordance with the provisions of the Warehouse
Credit Agreement. All capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Warehouse Credit Agreement.
The Advances are evidenced by the Borrower's promissory note dated
July 30, 1993 (the "Note") in the stated principal amount of $85,000,000, and
secured by, among other things, a Warehouse Security Agreement dated as of
July 30, 1993, as amended (as so amended, the "Warehouse Security Agreement")
between the Borrower and the Lender granting the Lender a security interest in
certain of the Borrower's assets.
The Borrower and the Lender now desire to amend the Warehouse Credit
Agreement to extend the period for which the Lender's commitment under the
Warehouse Credit Agreement has been made and to reduce the amount of the
Lender's commitment.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Warehouse Credit Agreement. The Warehouse Credit Agreement is
hereby amended as follows:
a) Effective June 1, 1994, the definition of "Commitment"
contained in Section 1.01 of the Warehouse Credit Agreement is amended to read
in full as follows:
""Commitment" shall mean the obligation of the Lender to make Advances
in an aggregate principal amount outstanding at any time not to exceed
$40,000,000, as such amount may be reduced from time to time pursuant
to Section 2.03."
b) The definition of "Expiry Date" contained in Section 1.01 of
the Warehouse Credit Agreement is hereby amended to read in full as follows:
<PAGE>
""Expiry Date" shall mean the earlier of (i) July 30, 1994, as such
date may be extended upon mutual agreement between the Borrower and
the Lender from time to time and (ii) the date on which the Cooper
River Warehouse Credit Agreement shall terminate."
c) Effective June 1, 1994, Section 2.01 of the Warehouse Credit
Agreement is amended to read in full as follows:
"2.01 Commitment. Subject to and upon the terms and conditions set
forth herein, the Lender agrees, at any time and from time to time
prior to the Expiry Date (or such earlier date as the Commitment shall
have been terminated pursuant to the terms hereof), to make an advance
or advances (each an "Advance" and, collectively, the "Advances") to
the Borrower, which Advance: (i) shall be made at any time and from
time to time in accordance with the terms hereof on and after the
Effective Date and prior to the Expiry Date; (ii) shall bear interest
as provided in Section 2.07; (iii) may be prepaid and reborrowed in
accordance with the provisions hereof; and (iv) shall be made against
the pledge by the Borrower of Eligible Mortgage Loans, Special
Collateral, Liquid Assets or REO Collateral as Collateral for such
Advance as provided herein and in the Warehouse Security Agreement;
provided, however, that (1) the aggregate principal amount of Advances
outstanding at any time shall not exceed the lesser of (x) the
Commitment and (y) the Borrowing Base, at such time, (2) the aggregate
principal amount of Advances outstanding at any time secured by
Mortgage Loans shall not exceed 100% of the Commitment, (3) the
aggregate principal amount of Advances outstanding at any time secured
by Mortgage-backed Securities shall not exceed 0% of the Commitment,
(4) the aggregate principal amount of Wet Advances outstanding at any
time shall not exceed 40% of the Commitment, (5) the aggregate
principal amount of Advances outstanding at any time secured by
Special Collateral shall not exceed 6.75% of the Commitment, (6) the
aggregate principal amount of Advances outstanding at any time secured
by Nonconforming Loans shall not exceed 75% of the Commitment, (7) the
aggregate principal amount of Advances outstanding at any time secured
by Uncommitted Mortgage Loans shall not exceed 3% of the Commitment,
(8) the aggregate principal amount of Advances outstanding at any time
secured by FHA Loans, VA Loans and State Loans shall not exceed 100%
of the Commitment and (9) the aggregate principal amount of Advances
outstanding at any time secured by REO Collateral shall not exceed
9.75% of the Commitment."
d) Effective June 1, 1994, Section 2.03 of the Warehouse Credit
Agreement is amended to read in full as follows:
"2.03 Voluntary Reduction of Commitment. Upon at least ten Business
Days' prior written notice to the Lender, the Borrower shall have the
right
2
<PAGE>
without premium or penalty to terminate or partially reduce the
unutilized Commitment at such time; provided that any partial
reduction pursuant to this Section 2.03 shall be in the amount of
$100,000 or an integral multiple thereof; provided further, that the
Commitment may not be reduced in part to an amount less than
$40,000,000."
e) Effective June 1, 1994, Section 4.02(e) of the Warehouse Credit
Agreement shall be amended to read in full as follows:
"(e) if on any date the aggregate principal amount outstanding of
Advances secured by Special Collateral exceeds 6.75% of the
Commitment, the Borrower shall immediately prepay the principal of
Advances secured by Special Collateral in an aggregate amount equal to
such excess;"
f) Effective June 1, 1994, Section 4.02(u) of the Warehouse Credit
Agreement shall be amended to read in full as follows:
"(u) if on any date the aggregate principal amount outstanding of REO
Advances exceeds 9.75% of the Commitment, the Borrower shall
immediately prepay the principal of REO Advances in an amount equal to
such excess."
2. References to Warehouse Credit Agreement. Except where the
context clearly requires otherwise, all references to the Warehouse Credit
Agreement in the Warehouse Credit Agreement, the Note, the Warehouse Security
Agreement and in any other document delivered to the Lender in
connection therewith shall be deemed to refer to the Warehouse Credit
Agreement as amended by this Amendment No. 3.
3. Ratification of Documents. The Borrower hereby ratifies and
confirms its obligations under the Warehouse Credit Agreement, the Note and
the Warehouse Security Agreement and agrees that the execution and delivery of
this Amendment No. 3 does not in any way diminish or invalidate any
of its obligations under the Warehouse Credit Agreement, the Note and the
Warehouse Security Agreement.
4. Representations and Warranties. The Borrower hereby certifies that
(i) the representations and warranties which it made in the Warehouse Credit
Agreement and the Warehouse Security Agreement are true and correct as of the
date hereof and (ii) no Event of Default and no event which could become an
Event of Default with the passage of time or the giving of notice, or both,
under the Note, the Warehouse Credit Agreement or the Warehouse Security
Agreement exists on the date hereof.
3
<PAGE>
5. Miscellaneous.
(a) This Agreement shall be governed by and construed
according to the laws of the State of New Jersey and shall be binding upon
and shall inure to the benefit of the parties hereto, their successors and
assigns.
(b) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MARKET STREET MORTGAGE CORPORATION
By: /s/ Tracy S. Jackson
--------------------------------
Senior Vice President
GE CAPITAL MORTGAGE SERVICES, INC.
By: /s/ William E. Mezger
--------------------------------
Senior Vice President
4
<PAGE>
AMENDMENT NO. 4 TO WAREHOUSE CREDIT AGREEMENT
THIS AGREEMENT is made as of the 30th day of July, 1994, by and
between MARKET STREET MORTGAGE CORPORATION (the "Borrower") and GE CAPITAL
MORTGAGE SERVICES, INC. (the "Lender").
BACKGROUND
The Borrower and the Lender entered into a Warehouse Credit Agreement,
dated as of July 30, 1993, as amended (as so amended, the "Warehouse Credit
Agreement") pursuant to which the Lender agreed to make advances (the
"Advances") to the Borrower in accordance with the provisions of the Warehouse
Credit Agreement. All capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Warehouse Credit Agreement.
The Advances are evidenced by the Borrower's promissory note dated
July 30, 1993 (the "Note") in the stated principal amount of $85,000,000, and
secured by, among other things, a Warehouse Security Agreement dated as of
July 30, 1993, as amended (as so amended, the "Warehouse Security Agreement")
between the Borrower and the Lender granting the Lender a security interest in
certain of the Borrower's assets.
The Borrower and the Lender now desire to amend the Warehouse Credit
Agreement to extend the period for which the Lender's commitment under the
Warehouse Credit Agreement has been made.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Warehouse Credit Agreement. The definition of "Expiry Date"
contained in Section 1.01 of the Warehouse Credit Agreement is hereby amended
to read in full as follows:
""Expiry Date" shall mean the earlier of (i) August 31, 1994, as such
date may be extended upon mutual agreement between the Borrower and
the Lender from time to time and (ii) the date on which the Cooper
River Warehouse Credit Agreement shall terminate."
2. References to Warehouse Credit Agreement. Except where the
context clearly requires otherwise, all references to the Warehouse Credit
Agreement in the Warehouse Credit Agreement, the Note, the Warehouse Security
Agreement and in any other document delivered to the Lender in connection
therewith shall be deemed to refer to the Warehouse Credit Agreement as
amended by this Amendment No. 4.
<PAGE>
3. Ratification of Documents. The Borrower hereby ratifies and
confirms its obligations under the Warehouse Credit Agreement, the Note and
the Warehouse Security Agreement and agrees that the execution and delivery of
this Amendment No. 4 does not in any way diminish or invalidate any of its
obligations under the Warehouse Credit Agreement, the Note and the Warehouse
Security Agreement.
4. Representations and Warranties. The Borrower hereby certifies that
(i) the representations and warranties which it made in the Warehouse Credit
Agreement and the Warehouse Security Agreement are true and correct as of the
date hereof and (ii) no Event of Default and no event which could become an
Event of Default with the passage of time or the giving of notice, or both,
under the Note, the Warehouse Credit Agreement or the Warehouse Security
Agreement exists on the date hereof.
5. Miscellaneous.
(a) This Agreement shall be governed by and construed
according to the laws of the State of New Jersey and shall be binding upon and
shall inure to the benefit of the parties hereto, their successors and
assigns.
(b) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MARKET STREET MORTGAGE CORPORATION
By: /s/ Tracy S. Jackson
-------------------------------
(Vice) President
GE CAPITAL MORTGAGE SERVICES, INC.
By: /s/ William E. Mezger
-------------------------------
Senior Vice President
2
<PAGE>
AMENDMENT NO. 5 TO WAREHOUSE CREDIT AGREEMENT
THIS AGREEMENT is made as of this 31st day of August, 1994, by and
between MARKET STREET MORTGAGE CORPORATION (the "Borrower") and GE CAPITAL
MORTGAGE SERVICES, INC. (the "Lender").
BACKGROUND
The Borrower and the Lender entered into a Warehouse Credit Agreement,
dated as of July 30, 1993, as amended (as so amended, the "Warehouse Credit
Agreement") pursuant to which the Lender agreed to make advances (the
"Advances") to the Borrower in accordance with the provisions of the Warehouse
Credit Agreement. All capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Warehouse Credit Agreement.
The Advances are evidenced by the Borrower's promissory note dated
July 30, 1993 (the "Note") in the stated principal amount of $85,000,000, and
secured by, among other things, a Warehouse Security Agreement dated as of
July 30, 1993, as amended (as so amended, the "Warehouse Security Agreement")
between the Borrower and the Lender granting the Lender a security interest in
certain of the Borrower's assets.
The Borrower and the Lender now desire to amend the Warehouse Credit
Agreement to extend the period for which the Lender's commitment under the
Warehouse Credit Agreement has been made and to modify certain other terms and
conditions.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Warehouse Credit Agreement. The Warehouse Credit Agreement is
hereby amended as follows:
a) Effective August 1, 1994, the definition of "Commitment" contained
in Section 1.01 of the Warehouse Credit Agreement is amended to read in full
as follows:
""Commitment" shall mean the obligation of the Lender to make Advances
in an aggregate principal amount outstanding at any time not to exceed
$25,000,000, as such amount may be reduced from time to time pursuant
to Section 2.03."
b) The definition of "Expiry Date" contained in Section 1.01 of
the Warehouse Credit Agreement is hereby amended to read in full as follows:
<PAGE>
""Expiry Date" shall mean the earlier of (i) August 31, 1995, as such
date may be extended upon mutual agreement between the Borrower and
the Lender from time to time and (ii) the date on which the Cooper
River Warehouse Credit Agreement shall terminate."
c) Effective September 1, 1994, Section 2.01 of the Warehouse
Credit Agreement is amended to read in full as follows:
"2.01 Commitment. Subject to and upon the terms and conditions set
forth herein, the Lender agrees, at any time and from time to time
prior to the Expiry Date (or such earlier date as the Commitment shall
have been terminated pursuant to the terms hereof), to make an advance
or advances (each an "Advance" and, collectively, the "Advances") to
the Borrower, which Advance: (i) shall be made at any time and from
time to time in accordance with the terms hereof on and after the
Effective Date and prior to the Expiry Date; (ii) shall bear interest
as provided in Section 2.07; (iii) may be prepaid and reborrowed in
accordance with the provisions hereof; and (iv) shall be made against
the pledge by the Borrower of Eligible Mortgage Loans, Special
Collateral, Liquid Assets or REO Collateral as Collateral for such
Advance as provided herein and in the Warehouse Security Agreement;
provided, however, that (1) the aggregate principal amount of Advances
outstanding at any time shall not exceed the lesser of (x) the
Commitment and (y) the Borrowing Base, at such time, (2) the aggregate
principal amount of Advances outstanding at any time secured by
Mortgage Loans shall not exceed 100% of the Commitment, (3) the
aggregate principal amount of Advances outstanding at any time secured
by Mortgage-backed Securities shall not exceed 0% of the Commitment,
(4) the aggregate principal amount of Wet Advances outstanding at any
time shall not exceed 40% of the Commitment, (5) the aggregate
principal amount of Advances outstanding at any time prior to May 14,
1995 secured by Special Collateral shall not exceed 16.0% of the
Commitment and the aggregate principal amount of Advances outstanding
at any time on or after May 14, 1995 secured by Special Collateral
shall not exceed 8% of the Commitment, (6) the aggregate principal
amount of Advances outstanding at any time secured by Nonconforming
Loans shall not exceed 75% of the Commitment, (7) the aggregate
principal amount of Advances outstanding at any time secured by
Uncommitted Mortgage Loans shall not exceed 3% of the Commitment, (8)
the aggregate principal amount of Advances outstanding at any time
secured by FHA Loans, VA Loans and State Loans shall not exceed 100%
of the Commitment and (9) the aggregate principal amount of Advances
outstanding at any time secured by REO Collateral shall not exceed
15.6% of the Commitment."
d) Effective August 1, 1994, Section 2.03 of the Warehouse Credit
Agreement is amended to read in full as follows:
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<PAGE>
"2.03 Voluntary Reduction of Commitment. Upon at least ten Business
Days' prior written notice to the Lender, the Borrower shall have the
right without premium or penalty to terminate or partially reduce the
unutilized Commitment at such time; provided that any partial
reduction pursuant to this Section 2.03 shall be in the amount of
$100,000 or an integral multiple thereof; provided further, that the
Commitment may not be reduced in part to an amount less than
$25,000,000."
e) Effective November 14, 1994, Section 2.07(a) of the Warehouse
Credit Agreement is amended to read in full as follows:
"(a) The Borrower agrees to pay interest in respect of the outstanding
principal amount of the Advances from the date the proceeds thereof
are made available to the Borrower until the maturity thereof (whether
by acceleration or otherwise) (i) with respect to Advances secured by
Mortgage Loans (other than Special Collateral or the Mortgage Loans
listed on Schedule X) or Mortgage-backed Securities, at a rate per
annum equal to the lower of (x) 2.00% in excess of the Commercial
Paper Rate in effect from time to time and (y) 2.00% in excess of the
LIBOR Rate in effect from time to time (provided, however, that at all
times that the Commercial Paper is rated A-1 or better by S&P such
rate shall in no event be less than 1.75% in excess of the Commercial
Paper Rate in effect from time to time), (ii) with respect to Advances
secured by Special Collateral, at a rate per annum equal to 2.50% in
excess of the Commercial Paper Rate in effect from time to time, (iii)
with respect to Advances secured by the Mortgage Loans listed on
Schedule X, at a rate per annum equal to 3.00% in excess of the
Commercial Paper Rate in effect from time to time, and (iv) with
respect to Advances secured by REO Collateral, at a rate per annum
equal to 3.00% in excess of the Commercial Paper Rate in effect from
time to time."
f) Effective September 1, 1994, Section 4.02(e) of the Warehouse
Credit Agreement is amended to read in full as follows:
"(e) if on any date prior to May 14, 1995, the aggregate principal
amount outstanding of Advances secured by Special Collateral exceeds
16% of the Commitment or if on any date on or after May 14, 1995, the
aggregate principal amount outstanding of Advances secured by Special
Collateral exceeds 8% of the Commitment, the Borrower shall
immediately prepay the principal of Advances secured by Special
Collateral in an aggregate amount equal to such excess;"
g) Effective September 1, 1994, Section 4.02(u) of the Warehouse
Credit Agreement is amended to read in full as follows:
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"(u) if on any date the aggregate principal amount outstanding of REO
Advances exceeds 15.6% of the Commitment, the Borrower shall
immediately prepay the principal of REO Advances in an amount equal to
such excess."
h) Section 8.03(c) of the Warehouse Credit Agreement is hereby
amended to read in full as follows:
"(c) The Borrower will not at any time declare or pay any dividends,
or return any capital, to its stockholders or authorize or make any
other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for a consideration, any shares of
any class of its capital stock now or hereafter outstanding (or any
options or warrants issued by the Borrower with respect to its capital
stock), or set aside any funds for any of the foregoing purposes, or
permit any of its Subsidiaries to purchase or otherwise acquire for a
consideration any shares of any class of the capital stock of the
Borrower now or hereafter outstanding (or any options or warrants
issued by the Borrower with respect to its capital stock), or pay any
special distributions or bonuses not in the ordinary course of
business to any officer or employee that owns capital stock of the
Borrower, if after giving effect thereto the Consolidated Tangible Net
Worth of the Borrower would be less than $5,000,000."
i) Section 8.08 of the Warehouse Credit Agreement is hereby
amended to read in full as follows:
"8.08 Maximum Consolidated Tangible Leverage Ratio. The Borrower will
not permit its Consolidated Tangible Leverage Ratio at any time during
any fiscal year to be greater than 18 to 1."
j) Section 8.09 of the Warehouse Credit Agreement is hereby
amended to read in full as follows:
"8.09 Minimum Consolidated Tangible Net Worth. The Borrower will not
permit its Consolidated Tangible Net Worth at any time during any
fiscal year to be less than $5,000,000."
k) Section 8.17 of the Warehouse Credit Agreement is hereby
amended to read in full as follows:
"8.17 Minimum Consolidated Net Worth. The Borrower will not permit its
Consolidated Net Worth at any time during any fiscal year to be less
than $10,000,000."
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2. References to Warehouse Credit Agreement. Except where the
context clearly requires otherwise, all references to the Warehouse Credit
Agreement in the Warehouse Credit Agreement, the Note, the Warehouse Security
Agreement and in any other document delivered to the Lender in connection
therewith shall be deemed to refer to the Warehouse Credit Agreement as
amended by this Amendment No. 5.
3. Ratification of Documents. The Borrower hereby ratifies and
confirms its obligations under the Warehouse Credit Agreement, the Note and
the Warehouse Security Agreement and agrees that the execution and delivery of
this Amendment No. 5 does not in any way diminish or invalidate any of its
obligations under the Warehouse Credit Agreement, the Note and the Warehouse
Security Agreement.
4. Representations and Warranties. The Borrower hereby certifies
that (i) the representations and warranties which it made in the Warehouse
Credit Agreement and the Warehouse Security Agreement are true and correct as
of the date hereof and (ii) no Event of Default and no event which could become
an Event of Default with the passage of time or the giving of notice, or both,
under the Note, the Warehouse Credit Agreement or the Warehouse Security
Agreement exists on the date hereof.
5. Miscellaneous.
(a) This Agreement shall be governed by and construed
according to the laws of the State of New Jersey and shall be binding upon and
shall inure to the benefit of the parties hereto, their successors and
assigns.
(b) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MARKET STREET MORTGAGE CORPORATION
By: /s/ Tracy S. Jackson
--------------------------------
Senior Vice President
GE CAPITAL MORTGAGE SERVICES, INC.
By: /s/ William E. Mezger
--------------------------------
Senior Vice President
5
Exhibit 4(l)
AMENDMENT NO. 1 TO WAREHOUSE SECURITY AGREEMENT
AMENDMENT NO. 1 TO WAREHOUSE SECURITY AGREEMENT
("Amendment No. 1"), dated as of February 23, 1994, between MARKET STREET
MORTGAGE CORPORATION, a Michigan corporation (the "Assignor"), and GE
CAPITAL MORTGAGE SERVICES, INC., a New Jersey corporation (the "Lender")
W I T N E S S E T H:
WHEREAS, the Assignor and the Lender entered into a Warehouse
Credit Agreement, dated as of July 30, 1993, which was amended by an
Amendment No. 1 thereto dated as of October 16, 1993 (as so amended, and as
hereafter amended or supplemented, the "Warehouse Credit Agreement"),
pursuant to which the Lender has agreed to make certain advances (the
"Advances") to the Assignor, in a maximum aggregate principal amount of
$85,000,000; and
WHEREAS, the Advances are evidenced by the Assignor's
promissory note dated as of July 30, 1993 (the "Note") in the stated
principal amount of $85,000,000, and are secured, among other things, by a
Warehouse Security Agreement, dated as of July 30, 1993, between the
Assignor and the Lender (the "Original Warehouse Security Agreement"); and
WHEREAS, the Assignor and the Lender desire to further amend
and supplement the Warehouse Credit Agreement (by an "Amendment No. 2" of
even date herewith) in order to provide additional terms and conditions for
the incurrence by the Assignor of certain Advances thereunder; and
WHEREAS, it is a condition precedent to the effectiveness of
Amendment No. 2 to the Warehouse Credit Agreement that the Assignor shall
have executed and delivered to the Lender this Amendment No. 1 to the
Warehouse Security Agreement;
NOW, THEREFORE, in consideration of the benefits to the
Assignor, the receipt and sufficiency of which are hereby acknowledged, the
Assignor hereby makes the following representations and warranties to the
Lender and hereby covenants and agrees with the Lender as follows:
<PAGE>
1. Definitions.
(a) Definitions in Original Warehouse Security Agreement.
All capitalized terms used in this Amendment No. 1 and not otherwise
defined herein shall have the same meanings assigned to such terms in the
Original Warehouse Security Agreement or in the Warehouse Credit Agreement
(including, without limitation, Amendment No. 2 thereto).
(b) Amendments to Original Definitions. The definition of
"Collateral" in Section 1 of the Original Warehouse Security Agreement is
hereby amended to add the definition of the "REO Collateral" set forth in
Section 2 of this Amendment No. 1, which shall henceforth be deemed to be
paragraph (x) of the definition of "Collateral."
(c) Additional Defined Terms. Section 14 of the Original
Warehouse Security Agreement is hereby amended to add the following new
definitions, in the appropriate alphabetical order:
"Amendment No. 1" shall mean this Amendment No. 1 to
Warehouse Security Agreement.
"Mortgage File" shall mean the file containing the Mortgage
Loan Documents pertaining to a particular Mortgage Loan.
"Mortgage Loan Documents" shall mean the loan documents
pertaining to any Mortgage Loan, including, without limitation,
the Mortgage Note, the Mortgage, any assignment of the Mortgage,
any loan guarantee, the title insurance policy and, if
applicable, the policy of primary mortgage guaranty insurance.
"REO Claims" shall mean all rights of the Assignor to
receive, from an Agency, FHA, VA, or any other Person, any
payment, compensation, reimbursement, cost, expense or other
amount in connection with (i) the Assignor's repurchase of an REO
Loan from GNMA, or (ii) the foreclosure, acquisition, conveyance,
assignment, operation, protection or preservation of any REO Loan
or REO Property (including, without limitation, loan guarantee
payments, servicing advances, taxes, insurance, rental expenses,
inspection fees, costs of maintenance and upkeep, title charges,
bankruptcy fees, costs of sheriff's sales, advertising, filing
fees, appraisals, recording fees and the fees and expenses of
attorneys, appraisers, realtors or other parties in connection
with any of the foregoing).
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<PAGE>
"REO Collateral" shall have the meaning provided in Section
2 of this Amendment No. 1.
"REO Obligations" shall mean Obligations which constitute
any of the following: (a) the obligation of the Assignor to repay
all REO Advances pursuant to the terms of the Warehouse Credit
Agreement, and all other indebtedness, fees, obligations and
liabilities (including, without limitation, guarantees or other
contingent liabilities) of the Assignor to the Lender or the
holder of the Note relating to REO Advances or REO Collateral
arising under or in connection with any Credit Document; (b) any
and all sums advanced by the Lender in order to preserve the REO
Collateral or preserve its security interest in the REO
Collateral and any other amounts owing to the Lender under the
Warehouse Security Agreement in connection with the REO
Collateral; and (c) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations or
liabilities of the Assignor referred to in clause (a) after an
Event of Default shall have occurred and be continuing, the
reasonable expenses of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the REO
Collateral, or of any exercise by the Lender of its rights under
the Warehouse Security Agreement with respect to the REO
Collateral, together with reasonable attorneys' fees and court
costs.
"Serviced Loan" shall mean any Mortgage Loan from time to
time included in the Borrower's Servicing Portfolio.
"Servicing File" shall mean, collectively, the documents,
files and other items pertaining to a Mortgage Loan including,
but not limited to, the computer files, data disks, books,
records, data tapes, notes and all additional documents generated
as a result of, or utilized in originating and/or servicing, such
Serviced Loan.
"Servicing Rights" shall mean, with respect to any Serviced
Loan, any and all of the following: (a) all rights to service the
Serviced Loan; (b) any payments or monies payable or received for
servicing the Serviced Loan; (c) any late fees, assumption fees,
penalties or similar payments payable or received with respect to
the Serviced Loan; (d) all rights to receive (from the mortgagor,
from insurance proceeds, claims settlements, or any other source)
funds advanced (i) to cover delinquent loan payments or (ii) in
the performance of other servicing obligations (including,
without limitation, the preservation, protection, management and
disposition of mortgaged properties and the enforcement of
judicial or other remedial proceedings with respect thereto); (e)
escrow payments or other similar payments payable or received
with respect to the Serviced Loan; (f) all
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<PAGE>
accounts and other rights to payments related to any of the
property described in this paragraph; (g) possession and use of
any and all Servicing Files pertaining to the Serviced Loan or
pertaining to the past, present or prospective servicing of the
Serviced Loan; (h) all rights under all agreements or documents
creating, defining or evidencing any such servicing rights; and
(i) all rights, powers and privileges incident to any of the
foregoing.
2. Pledge of REO Collateral. (a) As additional security for the
prompt and complete payment and performance when due of all REO
Obligations, the Assignor does hereby sell, pledge, assign, hypothecate,
transfer and grant unto the Lender, a continuing security interest of first
priority in all of the right, title and interest of the Assignor in, to and
under all of the following, whether now existing or hereafter from time to
time acquired (all of the following, collectively, the "REO Collateral"):
(i) all Servicing Rights;
(ii) all Servicing Files and Mortgage Files
relating to Serviced Loans;
(iii) all REO Claims;
(iv) All General Intangibles, Instruments,
Documents, Chattel Paper, Receivables, Contracts, and Contract
Rights evidencing, securing, supporting or relating to Servicing
Rights or REO Claims;
(v) All other documents, instruments,
certificates, forms, statements, surveys, appraisals,
correspondence, files, tapes, disks, cards, computer programs,
accounting records and other information and data relating to any
and or all of the foregoing; and
(vi) Any Proceeds of any and all of the foregoing.
(b) The security interest in the REO Collateral granted
pursuant to clause (a) above is intended as additional security for the REO
Obligations only, and does not secure any other Obligations.
3. Amendments to Original Warehouse Security Agreement.
(a) Section 2 of the Original Warehouse Security Agreement
is hereby amended to insert the following provision immediately after the
phrase "to endorse any checks or other instruments or orders in connection
therewith":
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<PAGE>
", to exercise or perform (and to arrange for any subservicer to
exercise or perform) any and all Servicing Rights, to execute and
deliver any consents, approvals, powers of attorney, assignments of
mortgages, assumption agreements, termination agreements, purchase
contracts or any other document related to the Servicing Rights, the
termination or cancellation of the Assignor's rights with respect to
the Servicing Rights, or the transfer or sale to, or assumption by,
the Lender or its designee of any Servicing Rights, and to request,
seek to arrange, and cooperate with any Agency or any other Person in
effecting the termination, sale or transfer of any Servicing Rights or
other REO Collateral."
(b) Section 3 of the Original Warehouse Security Agreement
is hereby amended to add the following sentence at the end of said Section:
"Anything to the contrary herein notwithstanding, any sums of money
paid in respect of any REO Collateral which is received by the
Assignor and paid to the Lender under this Section 3 shall be credited
solely against REO Obligations."
(c) There shall be added to Section 4 of the Original
Warehouse Security Agreement a new paragraph (f), which shall read in full
as follows:
"(c) Anything to the contrary in this Section 4 notwithstanding, the
Borrower shall be entitled to have REO Collateral released from the
Lien granted pursuant to this Agreement, upon the Borrower's written
request therefor to the Lender, without prepaying any Advances;
provided that (i) no Default or Event of Default has occurred and is
continuing at the time of making any such request, or would result
therefrom, (ii) the Borrower reimburses the Lender promptly upon
request for any fees, costs or expenses incurred by the Lender in
effecting such release of REO Collateral, and (iii) the Borrower shall
have demonstrated to the Lender's satisfaction that immediately
following such release the Borrower's Servicing Portfolio will equal
or exceed $600,000,000 and will continue to comply with Section 7.14
of the Warehouse Credit Agreement."
(d) Section 6 of the Original Warehouse Security Agreement
is hereby amended by adding a new paragraph (c) to said Section, to read in
full as follows:
"(c) If any Event of Default shall have occurred and be continuing,
then and in every such case, in addition to the remedies provided
under paragraphs (a) and (b) above, the Lender may, but shall not be
obligated to, assume the servicing of any or all of the Serviced Loans
or arrange for a subservicer with respect thereto. If the Lender
exercises such remedy, the Assignor shall be responsible for, and
shall remit to the Lender promptly upon request, all fees, costs and
expenses incurred by the Lender in connection therewith, and shall use
its best efforts to assist the Lender (or any designated subservicer)
in effectuating the assumption of such servicing rights (including,
without limitation, executing and delivering to the
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<PAGE>
Lender any consents and approvals, powers of attorney, transfer or
assumption documents, or any other document or instrument requested by
Lender, or required pursuant to Agency Requirements or the
requirements of any other governmental authority, and shall also use
its best efforts to obtain for the benefit of the Lender any consents
or approvals of any Agency, or any other Person required to effectuate
such assumption."
(e) Section 8 of the Original Warehouse Security Agreement
is hereby amended by adding a new paragraph (d) to said Section, to read in
full as follows:
"(d) It is further understood by the parties that the proceeds of any
REO Collateral shall be applied (in the order of priority set forth in
clauses (a), (b) and (c) above), solely to the payment of REO
Obligations, and fees and expenses associated with the disposition of
REO Collateral. Notwithstanding the foregoing, nothing in this
paragraph (d) or elsewhere in this Agreement shall limit or restrict
the Lender's right to apply proceeds of any Collateral other than REO
Collateral to the payment of REO Obligations, at such times and in
such order of priority (subject to paragraphs (a), (b) and (c) above)
as the Lender shall determine, nor shall the Lender be required to
realize upon, or exhaust the proceeds of disposition of, any REO
Collateral before using proceeds of other Collateral to satisfy REO
Obligations."
(f) Section 10 of the Original Warehouse Security Agreement
is hereby amended by adding a new paragraph (l) to said Section, to read in
full as follows:
"(l) Servicing Files and Related Records. The Assignor will maintain
(and will cause any subservicer thereof to maintain) satisfactory and
complete records with respect to all Serviced Loans whose related
Servicing Rights are pledged as Collateral hereunder, sufficient to
permit the proper servicing thereof. If an Event of Default shall have
occurred and be continuing, the Assignor will (i) deliver and turn
over the Lender, or at the option of the Lender shall provide the
Lender with access to, at any time on demand of the Lender, the
Servicing Files and Mortgage Files maintained by the Assignor with
respect to such Serviced Loans, and/or (ii) allow the Lender to occupy
the premises of the Assignor where such Servicing Files and Mortgages
Files are located and utilize such premises and the equipment located
thereon to service and administer the Serviced Loans and make
collections with respect to the REO Collateral."
4. Further Assurances. The Assignor shall execute and deliver
to the Lender from time to time all such other agreements, instruments and
documents (including, without limitation, any consents, approvals,
acknowledgments or agreements of any Agency) and shall do all other and
further acts and things as the Lender may
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<PAGE>
request in order to further evidence or carry out the intent of this
Amendment No. 1 or to preserve or perfect the security interests created
hereby or intended so to be.
5. Ratification of Original Warehouse Security Agreement. This
Amendment No. 1 is executed and delivered, and shall be considered as, an
amendment and supplement to the Original Warehouse Security Agreement and
shall form a part thereof and, except as otherwise herein provided, the
provisions of the Original Warehouse Security Agreement, including, without
limitation, all representations, covenants, agreements, obligations and
rights contained therein, are hereby ratified, confirmed and approved in
all respects.
6. Confirmation of Other Obligations. The Assignor hereby
confirms and agrees that the execution and delivery of this Amendment No. 1
does not in any way diminish or invalidate any of its obligations under the
Note and the Warehouse Credit Agreement.
7. Representations and Warranties. The Borrower hereby
certifies that (i) the representations and warranties which it made in the
Original Warehouse Credit Agreement and the Original Warehouse Security
Agreement are true and correct as of the date hereof and (ii) no Event of
Default and no event which could become an Event of Default with the
passage of time or the giving of notice, or both, under the Note, the
Warehouse Credit Agreement or the Warehouse Security Agreement exists on
the date hereof.
8. Governing Law. This Amendment No. 1 shall be governed by and
construed according to the laws of the State of New Jersey and shall be
binding upon and shall inure to the benefit of the parties hereto, and
their respective successors and assigns.
9. Counterparts. This Amendment No. 1 may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall
be lodged with the Assignor and the Lender.
10. Effectiveness. This Amendment No. 1 shall become effective
on the date on which the Assignor and the Lender shall have signed a copy
hereof (whether the same or different copies) and shall have delivered the
same to the Lender at its Office.
11. Headings Descriptive. The headings of the several sections
and subsections of this Amendment No. 1 are inserted for convenience only
and shall not in any way affect the meaning or construction of any
provision of this Amendment No. 1.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly
authorized officers to execute and deliver this Amendment No. 1 as of the
date first above written.
Address: MARKET STREET MORTGAGE
2650 McCormick Drive, Suite 200 CORPORATION, as Assignor
Clearwater, FL 34619
Attn: Tracy S. Jackson
Facsimile No.: (813) 791-4136 BY: /s/ Tracy S. Jackson
------------------------------
Title: Senior Vice President
Three Executive Campus GE CAPITAL MORTGAGE
Cherry Hill, NJ 08002 SERVICES, INC., as Lender
Attn: William E. Mezger
Facsimile No.: (609) 486-2777 BY: /s/ William E. Mezger
------------------------------
Title: Senior Vice President
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Exhibit 4(m)
AMENDMENT NO. 1 TO WAREHOUSE CREDIT AGREEMENT
THIS AGREEMENT is made as of this 20th day of May, 1994, by and among
MARKET STREET MORTGAGE CORPORATION (the "Borrower"), COOPER RIVER
FUNDING INC. (the "Lender") and GE CAPITAL MORTGAGE SERVICES, INC. (the
"Agent").
BACKGROUND
The Borrower, the Lender and the Agent entered into a Warehouse Credit
Agreement, dated as of July 30, 1993 (the "Warehouse Credit Agreement")
pursuant to which the Lender agreed to make advances (the "Advances") to the
Borrower in accordance with the provisions of the Warehouse Credit Agreement.
All capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Warehouse Credit Agreement.
The Advances are evidenced by the Borrower's promissory note dated
July 30, 1993 (the "Note") in the stated principal amount of $50,000,000, and
secured by, among other things, a Warehouse Security Agreement dated as of
July 30, 1993 (the "Warehouse Security Agreement") between the Borrower and
the Agent granting the Agent a security interest in certain of the
Borrower's assets.
The Borrower, the Lender and the Agent now desire to amend the
Warehouse Credit Agreement to extend the period for which the Lender's
commitment under the Warehouse Credit Agreement has been made.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Warehouse Credit Agreement. The Warehouse Credit Agreement
is hereby amended as follows:
a) The definition of "Expiry Date" contained in Section
1.01 of the Warehouse Credit Agreement is amended to read in full as follows:
""Expiry Date" shall mean the earlier of (i) July 30, 1994, as such
date may be extended upon mutual agreement among the Borrower, the
Lender and the Agent from time to time, (ii) the date which is fifteen
days prior to the Liquidity Termination Date in effect from time to
time (which, as of the date of this Amendment No. 1, is March 31,
1995) and (iii) the date on which the GECMSI Warehouse Credit
Agreement terminates."
b) The definition of "Liquidity Termination Date"
contained in Section 1.01 of the Warehouse Credit Agreement is amended to
read in full as follows:
""Liquidity Termination Date" shall mean the earlier of (i) March 31,
1995, as such date may be extended in accordance with the terms of the
Liquidity Agreement and (ii) the date on which the commitment of the
Liquidity Lenders under the Liquidity Agreement is terminated
following the occurrence of an event of default thereunder."
<PAGE>
2. References to Warehouse Credit Agreement. Except where the
context clearly requires otherwise, all references to the Warehouse Credit
Agreement in the Warehouse Credit Agreement, the Note, the Warehouse Security
Agreement and in any other document delivered to the Lender or the Agent in
connection therewith shall be deemed to refer to the Warehouse Credit
Agreement as amended by this Amendment No. 1.
3. Ratification of Documents. The Borrower hereby ratifies and
confirms its obligations under the Warehouse Credit Agreement, the Note and
the Warehouse Security Agreement and agrees that the execution and delivery of
this Amendment No. 1 does not in any way diminish or invalidate any of its
obligations under the Warehouse Credit Agreement, the Note and the Warehouse
Security Agreement.
4. Representations and Warranties. The Borrower hereby certifies
that (i) the representations and warranties which it made in the Warehouse
Credit Agreement and the Warehouse Security Agreement are true and correct as
of the date hereof and (ii) no Event of Default and no event which could
become an Event of Default with the passage of time or the giving of notice,
or both, under the Note, the Warehouse Credit Agreement or the Warehouse
Security Agreement exists on the date hereof.
5. Miscellaneous.
(a) This Agreement shall be governed by and construed
according to the laws of the State of New Jersey and
shall be binding upon and shall inure to the benefit of
the parties hereto, their successors and assigns.
(b) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MARKET STREET MORTGAGE CORPORATION
By: /s/ Tracy S. Jackson
---------------------------------
Senior Vice President
COOPER RIVER FUNDING INC.
By: /s/ William E. Mezger
---------------------------------
Assistant Treasurer
GE CAPITAL MORTGAGE SERVICES, INC.
By: /s/ William E. Mezger
---------------------------------
Senior Vice President
<PAGE>
AMENDMENT NO. 2 TO WAREHOUSE CREDIT AGREEMENT
THIS AGREEMENT is made as of the 30th day of July, 1994, by and among
MARKET STREET MORTGAGE CORPORATION (the "Borrower"), COOPER RIVER
FUNDING INC. (the "Lender") and GE CAPITAL MORTGAGE SERVICES, INC. (the
"Agent").
BACKGROUND
The Borrower, the Lender and the Agent entered into a Warehouse Credit
Agreement, dated as of July 30, 1993, as amended (as so amended, the
"Warehouse Credit Agreement") pursuant to which the Lender agreed to make
advances (the "Advances") to the Borrower in accordance with the provisions of
the Warehouse Credit Agreement. All capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Warehouse Credit
Agreement.
The Advances are evidenced by the Borrower's promissory note dated
July 30, 1993 (the "Note") in the stated principal amount of $50,000,000, and
secured by, among other things, a Warehouse Security Agreement dated as of
July 30, 1993 (the "Warehouse Security Agreement") between the Borrower and
the Agent granting the Agent a security interest in certain of the
Borrower's assets.
The Borrower, the Lender and the Agent now desire to amend the
Warehouse Credit Agreement to extend the period for which the Lender's
commitment under the Warehouse Credit Agreement has been made.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Warehouse Credit Agreement. The Warehouse Credit Agreement is
hereby amended as follows:
a) The definition of "Expiry Date" contained in Section
1.01 of the Warehouse Credit Agreement is amended to read in full as follows:
""Expiry Date" shall mean the earlier of (i) August 31, 1994, as such
date may be extended upon mutual agreement among the Borrower, the
Lender and the Agent from time to time, (ii) the date which is fifteen
days prior to the Liquidity Termination Date in effect from time to
time (which, as of the date of this Amendment No. 2, is June 30, 1995)
and (iii) the date on which the GECMSI Warehouse Credit Agreement
terminates."
b) The definition of "Liquidity Termination Date" contained
in Section 1.01 of the Warehouse Credit Agreement is amended to read in full
as follows:
""Liquidity Termination Date" shall mean the earlier of (i) June 30,
1995, as such date may be extended in accordance with the terms of the
Liquidity Agreement and (ii) the date on which the commitment of the
Liquidity Lenders under the Liquidity Agreement is terminated
following the occurrence of an event of default thereunder."
<PAGE>
2. References to Warehouse Credit Agreement. Except where the
context clearly requires otherwise, all references to the Warehouse Credit
Agreement in the Warehouse Credit Agreement, the Note, the Warehouse Security
Agreement and in any other document delivered to the Lender or the Agent in
connection therewith shall be deemed to refer to the Warehouse Credit
Agreement as amended by this Amendment No. 2.
3. Ratification of Documents. The Borrower hereby ratifies and
confirms its obligations under the Warehouse Credit Agreement, the Note and
the Warehouse Security Agreement and agrees that the execution and delivery of
this Amendment No. 2 does not in any way diminish or invalidate any of its
obligations under the Warehouse Credit Agreement, the Note and the Warehouse
Security Agreement.
4. Representations and Warranties. The Borrower hereby certifies
that (i) the representations and warranties which it made in the Warehouse
Credit Agreement and the Warehouse Security Agreement are true and correct as
of the date hereof and (ii) no Event of Default and no event which could
become an Event of Default with the passage of time or the giving of notice,
or both, under the Note, the Warehouse Credit Agreement or the Warehouse
Security Agreement exists on the date hereof.
5. Miscellaneous.
(a) This Agreement shall be governed by and construed according
to the laws of the State of New Jersey and shall be binding upon and shall
inure to the benefit of the parties hereto, their successors and assigns.
(b) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MARKET STREET MORTGAGE CORPORATION
By: /s/ Tracy S. Jackson
---------------------------------
Senior Vice President
COOPER RIVER FUNDING INC.
By: /s/ William E. Mezger
---------------------------------
Assistant Treasurer
GE CAPITAL MORTGAGE SERVICES, INC.
By: /s/ William E. Mezger
---------------------------------
Senior Vice President
<PAGE>
SCHEDULE I
Exceptions to Representations in
Warehouse Credit Agreement
Capitalization:
40,000 shares of Series A preferred stock were issued in February 1994.
Total shares of preferred stock issued and outstanding are 560,000 for
$14,000,000.
Contracts:
Servicing Sale Agreement with GE Capital Mortgage Services, Inc.
$600-900 million servicing sales in 1994
Date: January 31, 1994
FHLMC Master Commitment #M94032833
$75 million mandatory master commitment
Date: March 28, 1994
$12 million Term Debt with GE Capital Mortgage Services, Inc.
Date: April 29, 1994
Leases:
Additional lease space has been added at the Clearwater home office
and at various branch locations.
<PAGE>
AMENDMENT NO. 3 TO WAREHOUSE CREDIT AGREEMENT
THIS AGREEMENT is made as of the 31st day of August, 1994, by and among
MARKET STREET MORTGAGE CORPORATION (the "Borrower"), COOPER RIVER
FUNDING INC. (the "Lender") and GE CAPITAL MORTGAGE SERVICES, INC. (the
"Agent").
BACKGROUND
The Borrower, the Lender and the Agent entered into a Warehouse Credit
Agreement, dated as of July 30, 1993, as amended (as so amended, the
"Warehouse Credit Agreement") pursuant to which the Lender agreed to make
advances (the "Advances") to the Borrower in accordance with the provisions of
the Warehouse Credit Agreement. All capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Warehouse Credit
Agreement.
The Advances are evidenced by the Borrower's promissory note dated
July 30, 1993 (the "Note") in the stated principal amount of $50,000,000, and
secured by, among other things, a Warehouse Security Agreement dated as of
July 30, 1993 (the "Warehouse Security Agreement") between the Borrower and
the Agent granting the Agent a security interest in certain of the
Borrower's assets.
The Borrower, the Lender and the Agent now desire to amend the
Warehouse Credit Agreement to extend the period for which the Lender's
commitment under the Warehouse Credit Agreement has been made and to modify
certain other terms and conditions.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Warehouse Credit Agreement. The Warehouse Credit Agreement is
hereby amended as follows:
a) The definition of "Expiry Date" contained in Section
1.01 of the Warehouse Credit Agreement is hereby amended to read in full as
follows:
""Expiry Date" shall mean the earlier of (i) August 31, 1995, as such
date may be extended upon mutual agreement among the Borrower, the
Lender and the Agent from time to time, (ii) the date which is fifteen
days prior to the Liquidity Termination Date in effect from time to
time (which, as of the date of this Amendment No. 3, is June 30, 1995)
and (iii) the date on which the GECMSI Warehouse Credit Agreement
terminates."
b) Effective November 14, 1994, Section 2.07(a) of the
Warehouse Credit Agreement is amended to read in full as follows:
"(a) The Borrower agrees to pay interest in respect of the outstanding
principal amount of the Advances from the date the proceeds thereof
are made available to the Borrower until the maturity thereof (whether
by acceleration or otherwise) with respect to Advances secured by
Mortgage Loans or by Mortgage-backed Securities, at a rate per annum
equal to the lower of (x) 2.00%
<PAGE>
in excess of the Commercial Paper Rate in effect from time to time,
and (y) 2.00% in excess of the LIBOR Rate in effect from time to time
(provided, however, that in any month in which the Lender has made no
borrowings under the Liquidity Agreement such rate shall in no event
be less than 1.75% in excess of the Commercial Paper Rate in effect
for such month, and in any month in which the Lender has made
borrowings under the Liquidity Agreement, such rate shall in no event
be less than the greater of (i) 1.75% in excess of the Commercial
Paper Rate (excluding any consideration of borrowings made by the
Lender under the Liquidity Agreement) for such month or (ii) 1.00% in
excess of the Commercial Paper Rate for such month."
c) Section 8.03(c) of the Warehouse Credit Agreement is
hereby amended to read in full as follows:
"(c) The Borrower will not at any time declare or pay any dividends,
or return any capital, to its stockholders or authorize or make any
other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for a consideration, any shares of
any class of its capital stock now or hereafter outstanding (or any
options or warrants issued by the Borrower with respect to its capital
stock), or set aside any funds for any of the foregoing purposes, or
permit any of its Subsidiaries to purchase or otherwise acquire for a
consideration any shares of any class of the capital stock of the
Borrower now or hereafter outstanding (or any options or warrants
issued by the Borrower with respect to its capital stock), or pay any
special distributions or bonuses not in the ordinary course of
business to any officer or employee that owns capital stock of the
Borrower, if after giving effect thereto the Consolidated Tangible Net
Worth of the Borrower would be less than $5,000,000."
d) Section 8.08 of the Warehouse Credit Agreement is
hereby amended to read in full as follows:
"8.08 Maximum Consolidated Tangible Leverage Ratio. The Borrower will
not permit its Consolidated Tangible Leverage Ratio at any time during
any fiscal year to be greater than 18 to 1."
e) Section 8.09 of the Warehouse Credit Agreement is
hereby amended to read in full as follows:
"8.09 Minimum Consolidated Tangible Net Worth. The Borrower will not
permit its Consolidated Tangible Net Worth at any time during any
fiscal year to be less than $5,000,000."
f) Section 8.17 of the Warehouse Credit Agreement is
hereby amended to read in full as follows:
"8.17 Minimum Consolidated Net Worth. The Borrower will not permit its
Consolidated Net Worth at any time during any fiscal year to be less
than $10,000,000."
<PAGE>
2. References to Warehouse Credit Agreement. Except where the
context clearly requires otherwise, all references to the Warehouse Credit
Agreement in the Warehouse Credit Agreement, the Note, the Warehouse Security
Agreement and in any other document delivered to the Lender or the Agent in
connection therewith shall be deemed to refer to the Warehouse Credit
Agreement as amended by this Amendment No. 3.
3. Ratification of Documents. The Borrower hereby ratifies and
confirms its obligations under the Warehouse Credit Agreement, the Note and
the Warehouse Security Agreement and agrees that the execution and delivery of
this Amendment No. 3 does not in any way diminish or invalidate any of its
obligations under the Warehouse Credit Agreement, the Note and the Warehouse
Security Agreement.
4. Representations and Warranties. The Borrower hereby certifies
that (i) the representations and warranties which it made in the Warehouse
Credit Agreement and the Warehouse Security Agreement are true and correct as
of the date hereof and (ii) no Event of Default and no event which could
become an Event of Default with the passage of time or the giving of notice,
or both, under the Note, the Warehouse Credit Agreement or the Warehouse
Security Agreement exists on the date hereof.
5. Miscellaneous.
(a) This Agreement shall be governed by and construed
according to the laws of the State of New Jersey and shall be binding upon and
shall inure to the benefit of the parties hereto, their successors and
assigns.
(b) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MARKET STREET MORTGAGE CORPORATION
By: /s/ Tracy S. Jackson
---------------------------------
Senior Vice President
COOPER RIVER FUNDING INC.
By: /s/ William E. Mezger
---------------------------------
Assistant Treasurer
GE CAPITAL MORTGAGE SERVICES, INC.
By: /s/ William E. Mezger
---------------------------------
Senior Vice President
Exhibit 4(n)
$12,000,000
TERM LOAN AGREEMENT
between
MARKET STREET MORTGAGE CORPORATION, as Borrower,
and
GE CAPITAL MORTGAGE SERVICES, INC., as Lender
____________________________________
Dated as of April 29, 1994
____________________________________
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions and Principles of Construction 1
1.01 Defined Terms 1
1.02 Principles of Construction 12
Section 2. Amount and Terms of Credit 13
2.01 Commitment 13
2.02 Minimum Borrowing Amount 13
2.03 Reserved 13
2.04 Request for Advance 13
2.05 Disbursement of Funds 13
2.06 Note 13
2.07 Interest and Principal Payments 14
2.08 Increased Costs 15
2.09 Increased Capital 15
Section 3. Fees and Charges 16
3.01 Fees and Charges 16
Section 4. Prepayments 17
4.01 Reserved 17
4.02 Mandatory Prepayments 17
4.03 Release of Collateral; Substitution 18
4.04 Sale of Collateral 18
4.05 Method and Place of Payment 19
4.06 Net Payments 19
4.07 Breakage Costs 20
Section 5. Conditions Precedent 20
5.01 Execution of Agreement; Note 20
5.02 No Default: Representations and Warranties 21
5.03 Request for Advance 21
5.04 Opinions of Counsel 21
5.05 Diligence 21
5.06 Corporate Documents; Proceedings 21
<PAGE>
5.07 Financial Statements 22
5.08 Mandatory Prepayment 22
5.09 Term Loan Security Agreement; UCC's 22
5.10 No Adverse Change 23
5.11 Insurance 23
5.12 Fees 23
5.13 No Litigation 23
5.14 Legal or Regulatory Proceedings 24
5.15 Eligible Portfolio 24
5.16 Servicing Documents 25
5.17 Sale and Transfer Dates 25
5.18 No Repurchase; No Material Change 25
5.19 Initial Appraisal 26
5.20 Assignment of Purchase Contract, etc. 26
5.21 Other Conditions Satisfied 26
Section 6. Representations, Warranties and Agreements 26
6.01 Corporate Power and Authority 26
6.02 No Violation 27
6.03 Governmental Approvals 27
6.04 Financial Condition; Undisclosed Liabilities; etc. 27
6.05 Litigation 27
6.06 True and Complete Disclosure 27
6.07 Use of Proceeds; Margin Regulations 28
6.08 Compliance with Statutes, etc 28
6.09 No Burdensome Agreement 28
6.10 Security Interests 28
6.11 Representations in Warehouse Agreement 28
6.12 Representations in Purchase Contracts 29
6.13 Representations Relating to Servicing 29
Section 7. Affirmative Covenants 30
7.01 Information Covenants 31
(a) Financial Statements 31
(b) Notice of Default 31
(c) Agency Related Defaults 31
(d) Change in Servicing Procedures 31
(e) Sale of Servicing Rights 31
(f) Portfolio Appraisal 31
(g) Monthly Portfolio Analysis 32
7.02 Collateral 32
ii
<PAGE>
7.03 Covenants in Warehouse Agreement 32
7.04 Transfer of Servicing Rights 32
Section 8. Negative Covenants 33
8.01 Liens 33
8.02 Indebtedness 33
8.03 Modifications of Certain Agreements and Collateral 33
8.04 Negative Covenants in Warehouse Agreement 34
Section 9 Events of Default 34
9.01 Payments 34
9.02 Representations, etc. 34
9.03 Covenants 35
9.04 Term Loan Security Agreement 35
9.05 Defaults Under Warehouse Agreements 35
Section 10. Miscellaneous 36
10.01 Payment of Expenses; Indemnity 36
10.02 Notices 38
10.03 Benefit of Agreement 38
10.04 No Waiver; Remedies Cumulative 38
10.05 Calculations; Computations 38
10.06 Governing Law; Submission to Jurisdiction; Venue 39
10.07 Participation and Syndication 39
10.08 Obligation to Make Payments in Dollars 39
10.09 Counterparts 40
10.10 Effectiveness 40
10.11 Headings Descriptive 40
10.12 Amendment or Waiver 40
10.13 Survival 40
10.14 Waiver of Jury Trial 40
iii
<PAGE>
EXHIBITS
EXHIBIT A - Form of Request for Advance
EXHIBIT B - Form of Note
EXHIBIT C - Form of Opinion of Special Counsel for
the Borrower
EXHIBIT D-1 - Form of Officers' Certificate for
Borrower
EXHIBIT D-2 - Forms of Owners' and Officers
Certification
EXHIBIT E - Form of Term Loan Security Agreement
EXHIBIT F - Form of Servicing Release Commitment
SCHEDULES
SCHEDULE I - Liabilities and Obligations
SCHEDULE II - Exceptions to Representations in
GE Warehouse Credit Agreement
SCHEDULE III - Existing Indebtedness
iv
<PAGE>
TERM LOAN AGREEMENT, dated as of April 29, 1994, between MARKET STREET
MORTGAGE CORPORATION, a Michigan corporation (the "Borrower"), and GE
CAPITAL MORTGAGE SERVICES, INC., a New Jersey corporation (the "Lender")
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Lender to make a secured term
loan to the Borrower, in an aggregate principal amount not to exceed
$12,000,000, to finance the Borrower's purchase from time to time of
mortgage loan servicing rights; and
WHEREAS, the Lender is willing to make such secured term loan to the
Borrower, but only subject to and upon the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants hereinafter contained, the parties hereto agree as follows:
Section 1. Definitions and Principles of Construction.
1.01 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acknowledgment Agreement" shall mean, with respect to any
Serviced Loan, the agreement or agreements (including all exhibits and
schedules attached thereto or delivered pursuant thereto and all amendments
and supplements thereof), if any, by and among the Borrower, the Lender and
an Agency, pursuant to which the Agency has consented to the Borrower's
grant to the Lender of a security interest in the Servicing Rights
associated with such Serviced Loan to secure Advances made hereunder.
"Adjustable Rate Loan" shall mean a Mortgage Loan where the
initial interest rate is subject to adjustment after closing under the
circumstances described in the Mortgage Note.
"Administrative Costs" shall have the meaning provided in Section
3.01(b).
"Advance" shall have the meaning provided in Section 2.01.
"Affiliate" shall mean, as to any Person, any other Person (other
than an individual) directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person. A Person shall
be deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of
1
<PAGE>
the management and policies of such other Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agency" shall mean, as the context requires, FHLMC, FNMA or
GNMA.
"Agency Agreement" shall mean the agreement or agreements
(including all exhibits and schedules attached thereto or delivered
pursuant thereto and all amendments and supplements thereof) between a
Seller and an Agency relating to Serviced Loans owned by such Agency and
the servicing thereof by the Seller or otherwise affecting the Servicing
Rights associated with such Serviced Loans, which Agency Agreement shall be
transferred to the Borrower pursuant to the Purchase Contract for such
Servicing Rights.
"Agency Consent" shall mean the written consent or approval of an
Agency to the transfer of Servicing Rights from a Seller to the Borrower as
contemplated by the related Purchase Contract.
"Agency Requirements" shall mean the applicable rules,
regulations, directives and instructions of an Agency, including, without
limitation, the applicable requirements of the Guides, the Agency
Agreements, the Agency Consents and the Acknowledgment Agreements.
"Agency Rights" shall mean all rights, powers and prerogatives of
an Agency under or pursuant to any Servicing Documents or the Guides, and
all claims of an Agency arising out of any and all defaults and outstanding
obligations of the Borrower to such Agency.
"Agreement" shall mean this Term Loan Agreement (including all
exhibits and schedules attached hereto or delivered pursuant hereto), as
modified, supplemented or amended from time to time.
"Amortizing Installment" shall have the meaning provided in
Section 2.07(b).
"Appraisal" shall mean any appraisal of a Servicing Portfolio or
of Comparable Servicing Rights made by the Lender or by an Appraiser and
delivered to Lender pursuant to Section 4.03(b), Section 5.19 or Section
7.01(f); provided that (i) no Appraisal shall attribute any value to
Servicing Rights, or the Comparable Servicing Rights described in Section
4.03(b), for Delinquent Loans, Foreclosure Loans, or Mortgage Loans with
respect to which litigation (except any class action suit where the
mortgagor is not the class representative) or bankruptcy proceedings have
been commenced, and (ii) the methodology and assumptions used by any
Appraiser shall have been approved by the Lender in its reasonable
discretion.
2
<PAGE>
"Appraised Value" shall mean, with respect to any Servicing
Portfolio or Comparable Servicing Rights, the value set forth in the most
recent Appraisal thereof which has been delivered to the Lender pursuant to
Section 5.19 or Section 7.01(f).
"Appraiser" shall mean a Person (who shall not be an Affiliate of
the Lender or the Borrower) experienced in the valuation of mortgage
servicing rights, selected by the Borrower and acceptable to the Lender.
"Assignment of Mortgage" shall mean, with respect to any Serviced
Loan, an assignment of the related Mortgage, notice of transfer or
equivalent instrument in recordable form, sufficient under the laws of the
jurisdiction where the related Mortgaged Property is located, to reflect
the sale of the Mortgage to the Agency who has purchased the same, which
assignment, notice of transfer or equivalent instrument may be in the form
of one or more blanket assignments covering Mortgage Loans secured by
Mortgaged Properties located in the same jurisdiction.
"Balloon Loan" shall mean a Mortgage Loan where the scheduled
monthly payments of principal and interest are based on an amortization
schedule longer than the actual loan term and a larger final payment is
required at the end of the loan term to pay the remaining principal
balance.
"Borrower" shall mean Market Street Mortgage Corporation, a
Michigan corporation, and its successors in interest and permitted assigns.
"Borrowing Base" shall mean, with respect to any Servicing
Portfolio, an amount equal to 70% of the lesser of (x) the Purchase Price
of such Servicing Portfolio (excluding, however, any amount allocated under
the Purchase Contract to Servicing Rights for Delinquent Loans, Foreclosure
Loans and Mortgage Loans with respect to which litigation or bankruptcy
proceedings have been commenced) or (y) the Appraised Value of such
Servicing Portfolio (as reflected in an Appraisal delivered pursuant to
Section 5.19); provided that, in any event, (i) the Borrowing Base for any
Servicing Portfolio where the Serviced Loans are owned by FHLMC or FNMA
shall not exceed 1.0% of the aggregate unpaid principal balance of such
Serviced Loans, and (ii) the Borrowing Base for any Servicing Portfolio
where the Serviced Loans are owned by GNMA shall not exceed 1.2% of the
aggregate unpaid principal balance of such Serviced Loans.
"Business Day" shall mean any day except Saturday, Sunday and any
day which shall be in New York, New York, a legal holiday or a day on which
banking institutions are authorized or required by law or other government
action to close.
"Buy-Down Loan" shall mean a Mortgage Loan which is subject to an
interest rate buy-down arrangement whereby the borrower, the seller of the
Mortgaged Property, or another party pays an amount to the lender or its
agent to reduce or subsidize the loan payments, or to obtain a lower
interest rate for all or a portion of the loan term.
3
<PAGE>
"Cash-Out Refinance Loan" shall mean either (i) a Mortgage Loan
obtained to repay an existing debt secured by the Mortgaged Property, where
the loan amount includes additional cash paid to the borrower, in an amount
which would qualify it as a cash-out refinance loan under applicable Agency
Requirements, or (ii) a Mortgage Loan where the borrower is the present
owner of the Mortgaged Property and the Mortgaged Property does not already
have a mortgage lien against it.
"Collateral" shall mean all "Collateral" as defined in the Term
Loan Security Agreement.
"Commercial Paper" shall mean the short-term promissory notes of
GE Capital Corporation.
"Commercial Paper Rate" shall mean, with respect to any calendar
month, a rate per annum determined by annualizing the aggregate interest
expense of GE Capital Corporation (determined on an accrual basis) for such
calendar month in respect of Commercial Paper outstanding during such
calendar month.
"Commitment" shall mean the obligation of the Lender to make
Advances in an aggregate principal amount outstanding at any time not to
exceed $12,000,000.
"Commitment Fee" shall have the meaning provided in Section
3.01(a).
"Comparable Servicing Rights" shall have the meaning provided in
Section 4.03(b).
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (i) to purchase or
repurchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (iv)
otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term
Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder); provided, that with
4
<PAGE>
respect to Contingent Obligations that consist of an obligation to
repurchase Mortgage Loans, or fund any losses related thereto, sold by the
Borrower with recourse the amount of such Contingent Obligations at any
time shall in no event be less than an amount equal to the sum of (i) 40%
of the outstanding principal balance of all such Mortgage Loans as to which
foreclosure proceedings have been commenced with respect to the underlying
property or bankruptcy or insolvency proceedings have been commenced with
respect to the obligor thereon, (ii) 30% of the outstanding principal
balance of all such Mortgage Loans with respect to which any payment due
thereunder is more than 89 days delinquent, (iii) 15% of the outstanding
principal balance of all such Mortgage Loans with respect to which any
payment due thereunder is more than 59, but less than 90 days, delinquent,
(iv) 4% of all such Mortgage Loans with respect to which any payment due
thereunder is more than 29 days, but less then 60 days, delinquent and (v)
0.50% of the aggregate outstanding principal balance of all such Mortgage
Loans as to which no payment due thereunder is more than 29 days past due.
"Cooper River Warehouse Credit Agreement" shall mean the
Warehouse Credit Agreement dated as of July 30, 1993 among the Borrower,
Cooper River Funding Inc., as lender, and GE Capital Mortgage Services,
Inc., as agent, as modified, supplemented or amended from time to time.
"Credit Documents" shall mean this Agreement, the Note and the
Term Loan Security Agreement.
"Custodial Agreement" shall mean, with respect to any Serviced
Loan, the agreement or agreements governing the retention of the originals
of the Mortgage Note, Mortgage, Assignment of Mortgage and other Mortgage
Loan Documents as referred to and in accordance with the related Agency
Agreement, which agreements are to be assigned by the Seller to the
Borrower pursuant to the related Purchase Contract.
"Custodian" shall mean an entity acting as a Mortgage Loan
Document custodian under any Custodial Agreement or pursuant to any Agency
Requirements, and any successor in interest to such entity.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Delinquent Loan" shall mean a Mortgage Loan in respect of which
any Monthly Payment due thereon is more than thirty (30) days overdue.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Downpayment Amount" shall have the meaning provided in Section
4.04(c).
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"Effective Date" shall have the meaning provided in Section
10.10.
"Escrow Account" shall mean an account or accounts maintained for
the deposit of Escrow Payments received in respect of one or more Serviced
Loans.
"Escrow Payments" shall mean, with respect to any Serviced Loan,
the amounts constituting ground rents, taxes, assessments, water rates,
sewer rents, municipal charges, mortgage insurance premiums, fire and
hazard insurance premiums, condominium charges, buy-down funds, optional
insurance funds and any other payments required to be escrowed by the
Mortgagor with the mortgagee pursuant to the requirements of the related
Mortgage, the related Agency Agreement, or any other documents.
"Event of Default" shall have the meaning provided in Section 9.
"Expiry Date" shall mean the earlier of (i) December 31, 1994, as
such date may be extended upon mutual agreement between the Borrower and
the Lender from time to time and (ii) the date on which the commitment to
advance funds to the Borrower pursuant to either the GE Warehouse Credit
Agreement or the Cooper River Warehouse Credit Agreement, or both, shall
terminate.
"Extended Advance" shall have the meaning provided in Section
2.01.
"Extension Period" shall have the meaning provided in Section
3.01(a).
"Fees" shall mean the Commitment Fee and the Administrative
Costs.
"FHA" shall mean the Federal Housing Administration or any
successor thereto.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation or
any successor thereto.
"FHLMC Guide" shall mean the FHLMC Sellers' & Servicers' Guide,
any amendments or additions thereto, and any successor publication
respecting the subject matter thereof.
"FNMA" shall mean the Federal National Mortgage Association, a
corporation in conformance with Title III of the National Housing Act, as
amended, or any successor thereto.
"FNMA Guides" shall mean the FNMA Selling Guide and the FNMA
Servicing Guide, any amendments and additions thereto, and any successor
publication respecting the subject matter thereof.
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"Foreclosure Loan" shall mean a Mortgage Loan with respect to
which foreclosure proceedings have been referred to an attorney or have
been instituted and are pending or have been completed, or a deed in lieu
of foreclosure has been accepted or delivery thereof is pending.
"GE Warehouse Credit Agreement" shall mean the Warehouse Credit
Agreement, dated as of July 30, 1993, between the Borrower and the Lender,
as modified, supplemented or amended from time to time.
"GE Warehouse Security Agreement" shall mean the Warehouse
Security Agreement, dated as of July 30, 1993, between the Borrower and the
Lender, as modified, supplemented or amended from time to time.
"GNMA" shall mean the Governmental National Mortgage Association,
a corporation in conformance with Title VIII of the Housing and Urban
Development Act of 1968, as amended, or any successor thereto.
"GNMA Guide" shall mean the GNMA Mortgage-Backed Securities
Guide, and any amendments and additions thereto, and any successor
publication respecting the subject matter thereof.
"Guides" shall mean the FHLMC Guide, the FNMA Guides and/or the
GNMA Guide, as applicable.
"HUD" shall mean the Department of Housing and Urban Development
or any successor thereto.
"Indebtedness" shall mean, as to any Person, without duplication,
(i) all indebtedness (including principal, interest, fees and charges) of
such Person for borrowed money or for the deferred purchase price of
property or services, (ii) the face amount of all letters of credit issued
for the account of such Person and all drafts drawn thereunder, (iii) all
liabilities secured by any Lien on any property owned by such Person,
whether or not such liabilities have been assumed by such Person, (iv) the
aggregate amount required in accordance with generally accepted accounting
principles to be capitalized under leases under which such Person is the
lessee and (v) all Contingent Obligations of such Person.
"Initial Borrowing Date" shall mean the date on which the initial
incurrence of Advances occurs.
"Lender" shall mean GE Capital Mortgage Services, Inc., a New
Jersey corporation, and its successors in interest and assigns.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or security
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agreement of any kind or nature whatsoever (including, without limitation,
any conditional sale or other title retention agreement, any financing or
similar statement or notice filed under the UCC or any other similar
recording or notice statute, and any lease having substantially the same
effect as any of the foregoing), and any Agency Rights.
"Margin Stock" shall have the meaning provided in Regulation U of
the Board of Governors of the Federal Reserve System.
"Maturity Date" shall have the meaning provided in Section 2.06.
"Monthly Payment" shall mean the scheduled monthly payment of
principal and interest and taxes and insurance on a Mortgage Loan.
"Mortgage" shall mean the mortgage, deed of trust, deed to secure
debt, or other instrument securing a Mortgage Note, which creates a first
lien on an unsubordinated estate in fee simple or a leasehold estate (as
permitted by the relevant Agency) in real property.
"Mortgage File" shall mean the file containing the Mortgage Loan
Documents pertaining to a particular Mortgage Loan.
"Mortgage Bankers' Reporting Forms" shall mean all Mortgage
Bankers' Financial Reporting Form Statement of Condition (designated as
FHLMC Form 1055 and FNMA Form 1002, respectively, and any successor thereto
or replacement thereof) filed by the Borrower with FHLMC or FNMA.
"Mortgage Loan" shall mean a loan evidenced by a Mortgage Note
and secured by a Mortgage encumbering a completed one to four family
residential property (including, without limitation, condominium units and
excluding cooperative ownership interests).
"Mortgage Loan Documents" shall mean the loan documents
pertaining to any Mortgage Loan, including, without limitation, the
Mortgage Note, the Mortgage, any Assignment of the Mortgage and all other
assignments, the title insurance policy and, if applicable, the policy of
primary mortgage guaranty insurance.
"Mortgage Loan Schedule" shall mean, with respect to any
Servicing Portfolio, the mortgage loan schedule setting forth the
information with respect to each Mortgage Loan in the Servicing Portfolio
as required by Agency Requirements.
"Mortgage Note" shall mean the promissory note or other evidence
of the indebtedness of a Mortgagor which is secured by a Mortgage.
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"Mortgaged Property" shall mean the real property securing
repayment of the debt evidenced by a Mortgage Note.
"Mortgagor" shall mean the obligor on a Mortgage Note.
"New Servicer" shall have the meaning provided in Section 4.04.
"Note" shall have the meaning provided in Section 2.06.
"Obligations" shall mean all "Obligations" as defined in the Term
Loan Security Agreement.
"Office" shall mean the office of the Lender located at Three
Executive Campus, Cherry Hill, New Jersey 08002 or such other address as
the Lender may specify from time to time in a written notice to the
Borrower.
"Operating Account" shall mean the operating account number
890-0026723 maintained by the Lender at Bank of New York or such other
account as the Lender may specify from time to time in a written notice to
the Borrower.
"Parent" shall mean Republic Bancorp Inc., a Michigan
corporation.
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government
or political subdivision or any agency, department or instrumentality
thereof.
"Pool" shall mean a group of Mortgage Loans which is segregated
on the basis of applicable Agency Requirements and which is considered to
be aggregated for the purposes of servicing.
"Purchase Contract" shall mean the agreement or agreements
(including all exhibits and schedules attached thereto or delivered
pursuant thereto and all amendments and supplements thereof) pursuant to
which a Seller has agreed to sell and transfer to the Borrower certain
Servicing Rights.
"Purchase Price" shall mean the aggregate amount to be paid by
the Borrower to a Seller pursuant to a Purchase Contract as the full
purchase price for the Servicing Portfolio being purchased thereunder.
"Request for Advance" shall have the meaning provided in Section
2.04.
"Sale Date" shall mean, with respect to any Purchase Contract,
the date on or as of which ownership of all Servicing Rights being
purchased thereunder shall have been sold and transferred to the Borrower
by the Seller in accordance with the terms thereof and
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the Borrower has remitted to the Seller the portion of the Purchase Price
then required to be paid for such Servicing Rights.
"Seller" shall mean a Person who owns certain Servicing Rights
which it has agreed to sell and transfer to the Borrower pursuant to a
Purchase Contract.
"Serviced Loan" shall mean a Mortgage Loan which is subject to an
Agency Agreement and whose Servicing Rights are the subject of a Purchase
Contract.
"Servicing Documents" shall mean, with respect to any Servicing
Portfolio, the following documents and instruments related thereto:
(i) the Purchase Contract;
(ii) the Servicing Manual, if any;
(iii) all Agency Agreements (containing both the original
Mortgage Loan Schedule and an updated Mortgage Loan
Schedule as of the relevant Sale Date);
(iv) all Agency Consents, consents from any other
applicable parties, and tri-party agreements with an
Agency required in order to effect the valid transfer
of the related Servicing Rights pursuant to Agency
Requirements;
(v) all Acknowledgment Agreements;
(vi) all Custodial Agreements; and
(vii) any assignment, conveyance agreement or other
document or instrument (not otherwise described in
clauses (ii) through (vi) above) required under the
terms of the Purchase Contract to be executed and
delivered by the Seller, the Borrower or any other
party to effect the purchase and sale of the
Servicing Rights thereunder.
"Servicing File" shall mean, collectively, the documents, files
and other items pertaining to a particular Serviced Loan including, but not
limited to, the computer files, data disks, books, records, data tapes,
notes, and all additional documents generated as result of or utilized in
originating and/or servicing such Serviced Loan.
"Servicing Manual" shall mean any manual or similar collection of
directories or instructions detailing the procedures pursuant to which the
Seller is to effect the transfer
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of the Servicing Rights, the Servicing Files, the Agency Agreements and all
other applicable Servicing Documents to the Borrower pursuant to the
related Purchase Contract.
"Servicing Portfolio" shall mean all Servicing Rights which are
the subject of a particular Purchase Contract.
"Servicing Rights" shall mean, with respect to a Serviced Loan,
any and all of the following as defined and permitted in the related
Servicing Documents and the Guides: (a) all rights to service the Serviced
Loan; (b) any payments or monies payable or received for servicing the
Serviced Loan; (c) any late fees, assumption fees, penalties or similar
payments payable or received with respect to the Serviced Loan; (d) all
rights to receive (from the Mortgagor, insurance proceeds, claims
settlements, or any other source) funds advanced (i) to cover delinquent
Monthly Payments or (ii) in the performance of other servicing obligations
(including, without limitation, the preservation, protection, management
and disposition of Mortgaged Properties and the enforcement of judicial or
other remedial proceedings with respect thereto); (e) escrow payments or
other similar payments payable or received with respect to the Serviced
Loan; (f) all accounts and other rights to payments related to any of the
property described in this paragraph; (g) possession and use of any and all
Servicing Files pertaining to the Serviced Loan or pertaining to the past,
present or prospective servicing of the Serviced Loan; (h) all rights under
all agreements or documents creating, defining or evidencing any such
servicing rights; and (i) all rights, powers and privileges incident to any
of the foregoing. For purposes of Section 4 and Sections 7.01(f) and (g),
the term "Servicing Rights" shall also include all Comparable Servicing
Rights which have been substituted for Servicing Rights previously pledged
to the Lender pursuant to Section 4.03(b).
"Servicing Sale Agreement" shall mean a written agreement between
the Borrower and a New Servicer which provides for the purchase by the New
Servicer of Servicing Rights which are then pledged as Collateral under the
Term Loan Security Agreement.
"Standard Fee Period" shall mean the period beginning on the
first day immediately succeeding the Expiry Date and ending on the next
succeeding December 31, and each one-year period thereafter (beginning on
each January 1) until the Term Loan shall have been paid in full.
"Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by such
Person and/or one or more Subsidiaries of such Person and (ii) any
partnership, association, joint venture or other entity in which such
Person and/or one or more Subsidiaries of such Person has
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(A) more than a 50% equity interest at the time or (B) an interest
satisfying the provisions of clause (i) above in any general partner of any
limited partnership or joint venture.
"Taxes" shall have the meaning provided in Section 4.06.
"Term Loan" shall have the meaning provided in Section 2.07(b).
"Term Loan Security Agreement" shall have the meaning provided in
Section 5.09.
"Transfer Date" shall mean, in connection with any Purchase
Contract, the date on or as of which (i) the Seller shall have transferred
to the Borrower the Servicing Files, the Agency Agreement, the Mortgage
Files and any other documents relating to the Serviced Loans whose
Servicing Rights were transferred to the Borrower as of the relevant Sale
Date, and (ii) the Borrower shall have assumed the actual servicing of the
Serviced Loans in accordance with the terms of such Purchase Contract and
any relevant Agency Requirements. The Transfer Date may be on or
subsequent to the Sale Date, but in any event shall be no later than three
months after the Sale Date.
"UCC" shall mean the Uniform Commercial Code as from time to time
in effect in New Jersey or Florida or any other relevant jurisdiction, as
applicable.
"United States" and "U.S." shall each mean the United States of
America.
"VA" shall mean the Veterans Administration or any successor
thereto.
"VA Loan" shall mean a Mortgage Loan which is eligible for
guarantee by VA and is either so guaranteed or is subject to a current
binding and enforceable commitment for such guarantee pursuant to the
provisions of the Servicemen's Readjustment Act, as now in effect and as
may be hereafter amended from time to time, and is otherwise eligible for
inclusion in a GNMA mortgage-backed security pool.
1.02 Principles of Construction. (a) All references to
sections, schedules and exhibits are to sections, schedules and exhibits in
or to this Agreement unless otherwise specified. The words "hereof,"
"herein," "hereto" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(b) All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting principles in
conformity with those used in the preparation of the financial statements
referred to in Section 5.07.
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Section 2. Amount and Terms of Credit.
2.01 Commitment. Subject to and upon the terms and conditions
set forth herein, the Lender agrees to make an advance or advances (each an
"Advance" and, collectively, the "Advances") to the Borrower, each of which
Advances: (i) shall be made at any time and from time to time in accordance
with the terms hereof on and after the Effective Date and prior to the
Expiry Date (or such earlier date as the Commitment shall have been
terminated pursuant to the terms hereof); provided, that certain Advances
(herein called "Extended Advances") may be made after the Expiry Date to
fund a purchase of Servicing Rights which was approved for funding by the
Lender prior to the Expiry Date; (ii) shall bear interest and shall be
repaid as provided in Section 2.07; (iii) shall be prepaid in accordance
with the provisions hereof; and (iv) shall be made against the pledge by
the Borrower of Servicing Rights as Collateral for such Advance as provided
herein and in the Term Loan Security Agreement; provided, however, that (1)
the aggregate principal amount of Advances outstanding at any time shall
not exceed the lesser of (x) the Commitment and (y) 70% of the Appraised
Value of all Servicing Portfolios then pledged as Collateral under the Term
Loan Security Agreement (as set forth in the most recent Appraisal
delivered to the Lender hereunder), (2) the aggregate principal amount of
Advances incurred and outstanding as of the Expiry Date shall equal at
least $1.5 million, and (3) the aggregate principal amount of Advances
outstanding at any time secured by a particular Servicing Portfolio shall
not exceed the Borrowing Base for such Servicing Portfolio.
2.02 Minimum Borrowing Amount. The principal amount of each
Advance shall not be less than $500,000 and, if greater, shall be in an
integral multiple of $100,000.
2.03 Reserved.
2.04 Request for Advance. Whenever the Borrower desires to
incur an Advance hereunder, it shall deliver to the Lender at its Office a
request for Advance substantially in the form of Exhibit A (the "Request
for Advance") not later than 12:30 p.m. (New York City time) on the
Business Day prior to the proposed date of such Advance. Each Request for
Advance (i) shall be appropriately completed to specify the aggregate
principal amount of the Advance to be made and the proposed date of such
Advance (which shall be a Business Day), and (ii) shall have attached
thereto each of the exhibits or other attachments specified herein,
including, without limitation, a Borrowing Base certificate substantially
in the form of Schedule I to Exhibit A.
2.05 Disbursement of Funds. No later than 3:00 P.M. (New York
City time) on the date specified in the Request for Advance, the Lender
shall make available to the Borrower the amount of such Advance requested
to be made on such date in Dollars by wire transfer to an account of the
Seller, in accordance with the instructions set forth in the Request for
Advance.
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2.06 Note. The Borrower's obligation to pay the principal of,
and interest on, all Advances made to it by the Lender shall be evidenced
by a promissory note substantially in the form of Exhibit B (the "Note").
The Note shall (i) be executed by the Borrower, (ii) be payable to the
order of the Lender and be dated the Initial Borrowing Date, (iii) be in a
stated principal amount equal to the Commitment, (iv) be payable in the
aggregate principal amount of the Advances evidenced thereby in Amortizing
Installments as provided in Section 2.07, (v) mature (with respect to each
Advance evidenced thereby not previously repaid) on the earlier to occur of
the fifth anniversary of the Effective Date or the maturity of the
promissory note delivered by the Borrower pursuant to the GE Warehouse
Credit Agreement (the "Maturity Date"), (vi) bear interest as provided in
Section 2.07, (vii) be subject to mandatory prepayment as provided in
Section 4.02 and (viii) be entitled to the benefits of this Agreement and
the other Credit Documents. The Lender will note on its internal records
the amount of each Advance made by it and each payment in respect thereof
and, prior to any transfer of the Note, will endorse on the reverse side
thereof the outstanding principal amount of Advances evidenced thereby;
provided, however, that failure to make any such notation shall not affect
the Borrower's obligations in respect of such Advances.
2.07 Interest and Principal Payments. (a) The Borrower agrees
to pay interest in respect of the outstanding principal amount of each
Advance from the date the proceeds thereof are made available to the
Borrower until such principal amount shall be paid in full (whether through
payment of Amortizing Installments, at maturity, by acceleration or
otherwise) at a rate per annum equal to 3.75% in excess of the Commercial
Paper Rate in effect from time to time.
(b) The aggregate principal amount of all Advances which shall
have been incurred and are outstanding as of the Expiry Date, together
with any Extended Advances, is herein referred to as the "Term Loan." The
Borrower shall repay the Term Loan (including any Extended Advances) in
forty-eight (48) consecutive monthly installments (each, an "Amortizing
Installment"), beginning on the first Business Day of the calendar month
immediately succeeding the month in which the Expiry Date occurs and on the
first Business Day of each calendar month thereafter; provided, that, the
repayment of any Extended Advance shall begin on the first Business Day of
the calendar month immediately succeeding the month in which such Extended
Advance was made, and provided, further, that the incurrence of any
Extended Advances will not extend the period for repayment of the Term Loan
beyond the 48-month repayment period described above. Each of the first
forty-seven (47) Amortizing Installments shall be in an amount which would
be sufficient to repay the principal of the Term Loan (including any
Extended Advances) in sixty (60) equal, consecutive monthly installments,
and the forty-eighth (48th) Amortizing Installment shall be in an amount
sufficient to pay the remaining balance of the Term Loan. The amount of
all Amortizing Installments due after the incurrence of any Extended
Advance shall be increased to provide for the repayment of such Extended
Advance in equal installments over the remainder of the original 48-month
repayment period.
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(c) Overdue principal and, to the extent permitted by law,
overdue interest, and any other overdue amount payable by the Borrower
hereunder, shall bear interest at a rate per annum equal to 4% per annum in
excess of the rate specified in clause (a) above in effect from time to
time; provided, however, that no Advance shall bear interest at a rate in
excess of the maximum rate permitted by applicable law.
(d) Accrued (and theretofore unpaid) interest shall be payable
in respect of the Advances (i) monthly in arrears on the fifth Business Day
of each calendar month with respect to interest accrued during the
preceding calendar month, (ii) on any prepayment of Advances permitted
under this Agreement, (iii) on the Maturity Date and (iv) after the
Maturity Date, on demand. The Lender shall provide the Borrower with a
notice setting forth the interest accrued with respect to each calendar
month not later than the third Business Day following the end of such
calendar month.
2.08 Increased Costs. If, due to either (a) the effectiveness
or introduction of, or any change in, or any change in the interpretation
of, any law or regulation by any court or administrative or governmental
authority charged with the administration thereof or (b) compliance after
the date hereof with any guideline or request from any central bank or
other governmental authority or official (whether or not having the force
of law), there shall be an increase in the cost to the Lender of making,
funding or maintaining any Advance or the Commitment hereunder or the
Lender shall be required to make a payment calculated by reference to the
principal of, or interest on, any Advance made by it or the Commitment
(other than any such increased cost, reduction in the amount receivable, or
payment required to be made resulting from the imposition or an increase in
the rate of any Taxes unless such Taxes are payable by the Borrower under
Section 4.06), then the Borrower shall, from time to time, upon demand by
the Lender, pay additional amounts sufficient to compensate the Lender for
any such increased cost (subject, however, to the limitation contained in
the last sentence of this Section). A certificate of an officer of the
Lender as to the amount of any such increased cost actually incurred by the
Lender (and the calculation thereof) submitted to the Borrower shall be
conclusive and binding for all purposes, absent manifest error.
Notwithstanding the foregoing, the Borrower shall not be obligated to pay
any increased cost otherwise payable under this Section 2.08 to the extent
that such payment, when added to the aggregate amount previously paid by
the Borrower under this Section 2.08 and Section 2.09, would exceed 1% of
the aggregate principal amount of Advances then outstanding.
2.09 Increased Capital. If after the date hereof either (a) the
introduction or effectiveness of, or any change in, or in the
interpretation of, any law or regulation or (b) compliance with any
guideline or request from any central bank or other governmental authority
or official (whether or not having the force of law and including, in any
event, any law, regulation or interpretation with respect to capital
adequacy or request in connection with any of the foregoing) affects or
would affect the amount of capital required or expected to be maintained by
the Lender or any corporation controlling the Lender and the Lender
reasonably determines that the amount of such capital is increased by or
based upon the
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existence of the Lender's agreement, in its discretion, to make or maintain
Advances hereunder and other similar agreements or facilities, then, upon
demand by the Lender, the Borrower shall immediately pay to the Lender for
the account of the Lender from time to time, as specified by the Lender,
additional amounts sufficient to compensate the Lender in light of such
circumstances, to the extent that the Lender reasonably determines such
increase in capital to be allocable to the existence of the Lender's
agreements hereunder (subject, however, to the limitation contained in the
last sentence of this Section). A certificate as to such amounts (and the
calculation thereof) submitted to the Borrower by the Lender shall be
conclusive and binding for all purposes, absent manifest error.
Notwithstanding the foregoing, the Borrower shall not be obligated to pay
any amount otherwise payable under this Section 2.09 to the extent that
such payment, when added to the aggregate amount previously paid by the
Borrower under this Section 2.09 and Section 2.08, would exceed 1% of the
aggregate principal amount of Advances then outstanding.
Section 3. Fees and Charges.
3.01 Fees and Charges. (a) The Borrower shall pay the Lender a
commitment fee (the "Commitment Fee") with respect to each Advance made
hereunder, which shall be calculated and paid as follows: (i) on the date
the Advance is made, an amount equal to 0.25% per annum of the principal
amount of such Advance, prorated for the period beginning on such payment
date and ending on the Expiry Date; provided, however, that if the Expiry
Date is subsequently extended pursuant to the terms hereof (the time period
beginning on the first day after the previously stated Expiry Date and
ending on the new Expiry Date being herein referred to as an "Extension
Period") the Borrower shall pay, on the first day of the Extension Period,
an additional Commitment Fee in an amount equal to 0.25% per annum of the
principal amount of all Advances then outstanding, prorated for the
Extension Period, and (ii) beginning on the first Business Day immediately
succeeding the Expiry Date, and on each January 1 thereafter, until the
Term Loan shall have been paid in full, an amount equal to 0.25% per annum
of the principal amount of the Term Loan outstanding on the particular
payment date (which amount shall be prorated for any Standard Fee Period
which is less than a full calendar year, and shall be subject to partial
rebate under the circumstances described in the next sentence of this
Section). If at any time during any Standard Fee Period the Borrower sells
all or any portion of a Servicing Portfolio then pledged as Collateral
under the Term Loan Security Agreement and the Lender shall have received
any required prepayment of Advances with respect thereto and shall have
released its Lien on such Collateral pursuant to Section 4.04, the Lender
shall rebate to the Borrower that portion of the Commitment Fee for such
Standard Fee Period attributable to the Advances being prepaid, pro-rated
for the period beginning on the first day of such Standard Fee Period and
ending on the date of such prepayment; provided, however, that the rebated
amount shall in no event exceed 50% of the total Commitment Fee for such
Standard Fee Period attributable to the prepaid Advances.
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(b) The Borrower shall pay to the Lender, promptly following
the Lender's request therefor, all reasonable costs and expenses (the
"Administrative Costs") incurred by the Lender in connection with (i) the
making of an Advance (including, without limitation, all costs associated
with the review and processing of the applicable Servicing Documents and
any other documents, and the costs of overnight and express delivery, wire
transfers, notary, recording and filing fees and any similar fees and
charges), and (ii) the Lender's review (and, if applicable, preparation) of
Appraisals, and the Lender's review and assessment of the qualifications,
methodology and assumptions of any Appraiser other than the Lender.
(c) The Lender shall provide the Borrower with a notice setting
forth the Commitment Fee accrued with respect to each one-year period
referred to in clause (a) above not later than the third Business Day
following the end of such one-year period and shall provide the Borrower
with a notice setting forth the Administrative Costs incurred with respect
to each calendar month not later than the third Business Day following the
end of such calendar month.
Section 4. Prepayments.
4.01 Reserved.
4.02 Mandatory Prepayments. Except as set forth in Section
4.03(b) and Section 4.04, a prepayment of Advances shall be required,
without notice or demand of any kind to the Borrower, as follows (any such
prepayment occurring after the Expiry Date shall be deemed to refer to
prepayment of the Term Loan or the applicable portion thereof):
(a) if any Servicing Rights in respect of which an Advance has
been made hereunder are sold or otherwise transferred (including, without
limitation, in connection with any repurchase of such Servicing Rights by a
Seller pursuant to the related Purchase Contract), the Borrower shall
immediately prepay outstanding Advances in an aggregate principal amount
equal to the then outstanding principal amount of the Advances which were
incurred to purchase such Servicing Rights;
(b) if on any date the aggregate principal amount of Advances
then outstanding (after giving effect to all other repayments thereof on
such date, including, without limitation, any Amortizing Installment),
exceeds 70% of the Appraised Value of all Servicing Rights then pledged as
Collateral (as set forth in the most recent Appraisal which has been
delivered to the Lender pursuant to Section 7.01(f)), the Borrower shall
immediately prepay outstanding Advances in an aggregate principal amount
equal to such excess amount; and
(c) if the Borrower becomes aware that the Borrower's rights to
service all or any portion of the Serviced Loans whose Servicing Rights
have been pledged as Collateral may be terminated, the Borrower shall
immediately prepay an amount equal to the
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outstanding principal amount of all Advances which were incurred to fund
the purchase of such Servicing Rights.
4.03 Release of Collateral; Substitution. (a) So long as no
Default or Event of Default has occurred and is continuing or would result
therefrom, upon the Borrower's request for the release of the Lender's Lien
with respect to any specified Servicing Rights then pledged as Collateral,
accompanied by a prepayment by the Borrower of Advances in an aggregate
principal amount equal to the then outstanding principal amount of the
Advances which were incurred to purchase such Servicing Rights, and a
deposit by the Borrower of such amount as the Lender shall designate as a
reserve for application to any fees, accrued interest or breakage costs
payable as of or with respect to the calendar month in which such
prepayment occurs, the Lender shall, within one Business Day after the
later of the receipt of such request or such prepayment and deposit,
release from the Lien granted pursuant to the Term Loan Security Agreement
and deliver to the Borrower in accordance with the terms of the Term Loan
Security Agreement the Collateral corresponding to or related to such
Servicing Rights.
(b) So long as no Default or Event of Default has occurred and is
continuing, in lieu of any required prepayment of Advances pursuant to
Section 4.02(a) or Section 4.03(a) or Section 4.04, the Borrower may,
subject to the terms and conditions hereof and the prior consent of the
Lender, substitute and pledge either (i) additional Servicing Rights
comparable to those being released from the Lender's Lien, or (ii) other
comparable servicing rights, reasonably acceptable to the Lender, for
Mortgage Loans originated by the Borrower and not purchased from a Seller
("Comparable Servicing Rights"), whose Appraised Value (based on a new
Appraisal), in either case, is such that immediately after giving effect to
such substitution or addition, such prepayment is no longer required.
4.04 Sale of Collateral. (a) In the event that the Borrower
determines to sell all or any portion of a Servicing Portfolio, the
Borrower shall be required to prepay Advances in an aggregate principal
amount equal to the then outstanding principal amount of the Advances which
were incurred to purchase the Servicing Portfolio (or portion thereof)
being sold.
(b) The Lender shall take such action as the Borrower shall
reasonably request pursuant to this Section 4.04 to effect the sale and
transfer of a Servicing Portfolio, and any related Collateral, to the
purchaser thereof (the "New Servicer"), including, without limitation,
executing and delivering any appropriate amendments to, or assignments of
the Lender's rights under, any pertinent Servicing Documents; provided,
however, that:
(i) prior to taking any action pursuant to this Section
4.04, the Lender shall have received any indemnity or other assurances
requested by the Lender from the Borrower with respect to any actions to be
performed by the Lender pursuant to this Section 4.04;
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(ii) the Borrower shall reimburse the Lender, immediately
upon request, for all costs and expenses (including, without limitation,
attorneys' fees) incurred by the Lender in connection with any such sale of
Collateral and release of Lien and any other actions to be taken by the
Lender pursuant to this Section 4.04; and
(iii) the Lender shall not be required to release its Lien
on any Collateral until it shall have received the full amount of the
prepayment required pursuant to Section 4.04(a).
(c) Upon the execution and delivery by the Borrower and a New
Servicer of a Servicing Sale Agreement, the Lender, at the Borrower's
request and upon receipt of a copy of the executed Servicing Sale
Agreement, shall issue and deliver to the New Servicer a written commitment
(a "Servicing Release Commitment"), substantially in the form set forth in
Exhibit F hereto, whereby the Lender will agree to release the Servicing
Portfolio (or portion thereof) being sold to the New Servicer from the Lien
granted pursuant to the Term Loan Security Agreement, upon the Lender's
receipt from the New Servicer, in immediately available funds, of the full
amount of the prepayment required under Section 4.04(a) on account of the
sale of such Servicing Portfolio (less any applicable Downpayment Amount
previously received by the Lender pursuant to the next sentence of this
subsection (c)). The Borrower shall pay to the Lender immediately upon
receipt (or cause the New Servicer to pay directly to the Lender) the full
amount of any down payment, installment payment, "earnest money" or similar
amount (collectively, the "Downpayment Amount") which the Borrower shall
have received (or be entitled to receive) from the New Servicer pursuant to
the Servicing Sale Agreement prior to the date of the New Servicer's
payment to the Lender pursuant to the immediately preceding sentence of
this subsection (c).
4.05 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement and the
Note shall be made to the Lender not later than 2:00 p.m. (New York City
time) on the date when due and shall be made in Dollars in immediately
available funds for deposit to the Operating Account as directed by the
Lender. Any payment received after 2:00 p.m. (New York City time) on any
Business Day shall be treated as being received on the next succeeding
Business Day. Whenever any payment to be made hereunder or under the Note
shall be stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest, fees and penalties, shall
be payable at the rate otherwise applicable on the scheduled payment date.
The Borrower hereby authorizes the Lender to deduct from each Advance to be
made hereunder all amounts due and owing to the Lender including interest,
penalties, fees or mandatory prepayments.
4.06 Net Payments. All payments made by the Borrower hereunder
will be made without setoff, counterclaim or other defense. Promptly upon
(and in no event later than 10 days following) notice from the Lender to
the Borrower, the Borrower agrees to pay, prior to the date on which
penalties attach thereto, all present and future income,
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stamp and other taxes, levies, or costs and charges whatsoever imposed,
assessed, levied or collected on or in respect of an Advance and/or the
recording, registration, notarization or other formalization of an Advance
or the execution and delivery or otherwise with respect to this Agreement
or the other Credit Documents or any Servicing Documents and/or any
payments of principal, interest or other amounts made on or in respect of
an Advance (all such taxes, levies, costs and charges being herein
collectively called "Taxes"); provided that Taxes shall not include taxes
imposed on or measured by the overall net income or receipts of the Lender
by the United States of America or any political subdivision or taxing
authority thereof or therein. The Borrower agrees to also pay such
additional amounts equal to increases in taxes payable by the Lender
described in the foregoing proviso, which increases arise solely from the
receipt by the Lender of payments made by the Borrower described in the
immediately preceding sentence of this Section 4.06. Promptly (and in no
event later than 10 days) after the date on which payment of any such Tax
is due pursuant to applicable law, the Borrower will, at the request of the
Lender, furnish to the Lender evidence, in form and substance satisfactory
to the Lender, that the Borrower has met its obligation under this Section
4.06. The Borrower agrees to indemnify the Lender against, and reimburse
the Lender on demand for, any Taxes, as reasonably determined by the Lender
in good faith. The Lender shall provide the Borrower with appropriate
receipts for any payments or reimbursements made by the Borrower pursuant
to this Section 4.06.
4.07 Breakage Costs. If the Borrower shall prepay any principal
of Advances, whether pursuant to a voluntary or mandatory prepayment,
Borrower shall pay to the Lender (in addition to principal and interest)
such additional amounts as may be necessary to compensate the Lender for
any loss and any direct or indirect costs, including the cost of
reemployment of funds so prepaid at rates lower than the cost to the Lender
of such funds, except that no such additional amount will be required in
any case where the Borrower has given the Lender at least 45 days' prior
written notice of a particular prepayment of Advances. Such losses and
costs, which the Lender shall exercise reasonable efforts to minimize,
shall be specified in writing to the Borrower by the Lender and, absent
manifest error in computation, shall be binding on the Borrower. The
Borrower shall make any required payment of such costs and losses on the
date on which interest in respect of the Advances prepaid is otherwise due
and payable.
Section 5. Conditions Precedent.
The obligation of the Lender to make each Advance to the Borrower
hereunder is subject, at the time of the making of each such Advance
(except as hereinafter indicated), to the satisfaction of the following
conditions:
5.01 Execution of Agreement; Note. On or prior to the Initial
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there
shall have been delivered to the Lender the Note executed by the Borrower
in the amount, maturity and as otherwise provided herein.
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5.02 No Default Representations and Warranties. At the time of
the making of each Advance and also after giving effect thereto (i) there
shall exist no Default or Event of Default, and (ii) all representations
and warranties contained herein and in the other Credit Documents shall be
true and correct in all material respects with the same effect as though
such representations and warranties had been made on and as of the date of
such Advance.
5.03 Request for Advance. Prior to the making of each Advance,
the Lender shall have received a Request for Advance with respect thereto
meeting the requirements of Section 2.04.
5.04 Opinions of Counsel. On the Initial Borrowing Date, the
Lender shall have received from outside counsel for the Borrower (who shall
be reasonably satisfactory to the Lender) an opinion addressed to the
Lender and dated the Initial Borrowing Date covering the matters set forth
in Exhibit C and such other matters incident to the transactions
contemplated herein as the Lender may reasonably request. If, at the time
of the making of any Advance subsequent to the Initial Borrowing Date, the
Lender shall have requested same, the Lender shall have received from
counsel for the Borrower (who shall be reasonably satisfactory to the
Lender) an opinion in form and substance reasonably satisfactory to the
Lender, addressed to the Lender and dated the date of such Advance,
covering such matters as the Lender shall specify or such other matters
incident to the transactions contemplated herein as the Lender may
reasonably request.
5.05 Diligence. (a) On or prior to the Initial Borrowing Date,
the Lender shall have satisfactorily completed its due diligence review of
the Borrower's operations, business and financial condition and its
mortgage servicing practices and procedures, including, without limitation,
the due diligence practices and procedures employed by the Borrower in
assessing any proposed purchase of Servicing Rights.
(b) Prior to the making of any Advance, the Lender shall have
satisfactorily completed its due diligence review with respect to (i) the
Servicing Rights which are the subject of the particular Advance, the
Seller's servicing practices and procedures with respect thereto, and the
related Servicing Documents and Servicing Files, and/or (ii) the results of
the Borrower's due diligence review with respect to the matters described
in clause (i).
(c) The completion of any due diligence review pursuant to
paragraph (a) or (b) above shall in no manner limit or compromise the
Lender's rights and remedies in the event of any breach by the Borrower of
its obligations, representations or warranties hereunder.
5.06 Corporate Documents; Proceedings. (a) On the Initial
Borrowing Date, the Lender shall have received a certificate, dated the
Initial Borrowing Date, signed by the President or any Vice President of
the Borrower, and attested to by the Secretary or any
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Assistant Secretary of the Borrower, substantially in the form of Exhibit
D-1 and with appropriate insertions, together with copies of the
resolutions of the Borrower referred to in such certificate, a
good-standing certificate from the Secretary of State of the jurisdiction
of incorporation of the Borrower dated not later than 20 days prior to the
Initial Borrowing Date, and any amendments to the Borrower's Certificate of
Incorporation and By-Laws adopted by the Borrower after July 30, 1993.
(b) At the time of making each Advance, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated in this Agreement and the other Credit Documents
shall be reasonably satisfactory in form and substance to the Lender, and
the Lender shall have received all information and copies of all documents
and papers, including records of corporate proceedings and governmental
approvals, if any, which the Lender reasonably may have requested in
connection therewith, such documents and papers where appropriate to be
certified by proper corporate or governmental authorities.
5.07 Financial Statements. On or prior to the Initial Borrowing
Date, the Lender shall have received to the extent not already delivered
pursuant to the GE Warehouse Credit Agreement (i) the consolidated and
consolidating balance sheets of the Borrower and its Parent for the fiscal
year most recently ended and the related statements of income and retained
earnings and statements of cash flows of the Borrower and its Parent for
such fiscal year, certified by an independent certified public accountant
of recognized national standing reasonably acceptable to the Lender and
prepared in accordance with generally accepted accounting principles in the
United States consistently applied, together with "management letters"
detailing any "material weaknesses in internal controls" (as defined by the
Financial Accounting Standards Board) noted by such accountants for such
period and (ii) copies of any uniform single audit reports in respect of
the Borrower, any audits or financial reports in respect of the Borrower
completed or requested by HUD, GNMA, FNMA, FHLMC or any other governmental
agency or institutional investor, and any Mortgage Bankers' Reporting Forms
prepared by the Borrower, in each case during the year preceding the date
hereof.
5.08 Mandatory Prepayment. After giving effect to the proposed
Advance, no prepayment would be required pursuant to Section 4.02.
5.09 Term Loan Security Agreement; UCC's. (a) On or prior to
the Initial Borrowing Date, the Borrower shall have duly authorized,
executed and delivered a Term Loan Security Agreement substantially in the
form of Exhibit E (as modified, supplemented or amended from time to time,
the "Term Loan Security Agreement") covering all of the Borrower's present
and future Collateral, together with:
(i) acknowledgment copies of proper financing statements
(Form UCC-1) (in form satisfactory to the Lender) duly filed
under the UCC of each jurisdiction as may be necessary or, in the
opinion of the Lender, desirable to
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perfect the security interests purported to be created by the
Term Loan Security Agreement;
(ii) certified copies of "Requests for Information or Copies"
(Form UCC-11), or equivalent reports, listing the financing
statements referred to in clause (a) above and all other
effective financing statements that name the Borrower as debtor
and that are filed in the jurisdictions referred to in said
clause (a), together with copies of such other financing
statements (none of which shall cover the Collateral, except to
the extent evidencing Liens permitted pursuant to Section 8.01);
(iii) evidence of the completion of all other recordings and
filings of, or with respect to, the Term Loan Security Agreement
as may be necessary or, in the opinion of the Lender, desirable
to perfect the security interests purported to be created by the
Term Loan Security Agreement; and
(iv) evidence that all other actions necessary or, in the
opinion of the Lender, desirable to perfect and protect the
security interests created by the Term Loan Security Agreement
have been taken.
(b) On or prior to the date of the first Advance in respect of
any Servicing Rights, the Borrower shall have executed and delivered to the
Lender (and any Agency requiring the same) (i) acknowledgement copies of
proper financing statements (Form UCC-1) (in form satisfactory to the
Lender and any such Agency) covering such Servicing Rights and any related
Collateral, which shall have been duly filed under the UCC of each
jurisdiction as may be necessary or, in the opinion of the Lender,
desirable to perfect the Lender's security interest therein, and (ii)
copies of such other documents or reports, or evidence of completion of
such other recordings and filings, described in paragraph (a)(ii)(iii) and
(iv) above but with specific reference to such Servicing Rights and related
Collateral, as the Lender may request.
5.10 No Adverse Change. Since July 30, 1993 there shall have
been no material adverse change in the operations, business, property,
assets or financial condition or prospects of the Borrower or the Parent.
5.11 Insurance. The insurance required pursuant to Section 5.11
of the GE Warehouse Credit Agreement shall be in full force and effect.
5.12 Fees. Prior to the making of any Advance, the Borrower
shall have paid all Fees then due and payable to the Lender.
5.13 No Litigation. There shall be no judgment, order,
injunction or other restraint which shall prohibit or impose, and no
litigation pending or threatened against or affecting the Borrower or any
of its Subsidiaries which, in the opinion of the Lender, would
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prohibit or result in the imposition of materially adverse conditions upon,
the financing contemplated hereby, or otherwise have a material adverse
effect on the business, operations, properties or assets, or on the
condition, financial or otherwise, of the Borrower or any of its
Subsidiaries.
5.14 Legal or Regulatory Proceedings. On or prior to the
Initial Borrowing Date, the Borrower shall have delivered to the Lender
certificates of the principal shareholders and senior officers of the
Borrower, in substantially the form of Exhibit D-2, with respect to certain
legal and regulatory proceedings relating to such persons.
5.15 Eligible Portfolio. The Serviced Loans in a Servicing
Portfolio which is the subject of an Advance shall meet all of the
following criteria as of the applicable Sale Date for such Servicing
Portfolio (except if and to the extent waived in writing by the Lender):
(a) the weighted average age of the Serviced Loans in such
Servicing Portfolio does not exceed nine months;
(b) Serviced Loans totalling at least 95% of the aggregate
principal amount of all Mortgage Loans in the Servicing Portfolio shall
have interest rates not greater than 0.5% above the FHLMC 60-day commitment
rate for Mortgage Loans with like maturities;
(c) no more than 35% of the Serviced Loans shall be VA Loans;
(d) no more than 10% of the Serviced Loans shall be Balloon
Loans;
(e) no more than 10% of the Serviced Loans shall be Buy-Down
Loans;
(f) no more than 10% of the Serviced Loans shall be secured by
Mortgages on condominium units;
(g) no more than 30% of the Serviced Loans shall be Adjustable
Rate Loans;
(h) no more than 5% of the Serviced Loans shall be Cash-Out
Refinance Loans;
(i) no more than 2% of the Serviced Loans shall be secured by
Mortgaged Property which is not owner-occupied;
(j) the delinquency rate of the Serviced Loans shall not exceed
the average delinquency rates applicable to Mortgage Loans of the same type
and location as the Serviced Loans as shown on the most recent National
Delinquency Survey of the Mortgage Bankers Association;
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(k) the geographic dispersion of the Mortgaged Properties which
secure the Serviced Loans has been approved by the Lender in its reasonable
discretion; and
(l) none of the Serviced Loans shall contain graduated payment,
shared appreciation or contingent interest provisions, or be subject to
special escrow arrangements, unless approved by the Lender.
5.16 Servicing Documents. Prior to the making of the first
Advance in respect of any Servicing Rights:
(a) the Lender shall have received executed counterparts (or
certified copies of executed counterparts acceptable to the Lender) of all
related Servicing Documents requested by the Lender;
(b) all such Servicing Documents (i) shall be in form and
substance satisfactory to the Lender, (ii) shall be in full force and
effect, and shall not have been amended, modified or altered except as
previously disclosed to and approved by the Lender, and (iii) shall comply
with all Agency Requirements; and
(c) no default, or event which, with the passage of time or the
giving of notice, or both, would constitute a default under, any such
Servicing Documents shall have occurred and be continuing.
5.17 Sale and Transfer Dates. Prior to or on the date of making
the first Advance in respect of any Servicing Rights:
(a) the related Sale Date shall have occurred;
(b) either the related Transfer Date shall have occurred, or
the Borrower shall have submitted to the Lender certifications or other
assurances satisfactory to Lender in its sole discretion that the Transfer
Date will occur simultaneously with the incurrence of such Advance; and
(c) the Borrower shall have paid to the Seller any portion of
the Purchase Price not being financed through Advances.
5.18 No Repurchase; No Material Change. On the date of making
any Advance, no event shall have occurred and be continuing that would (i)
obligate the Seller to repurchase any of the Servicing Rights which are the
subject of such Advance, (ii) entitle an Agency to terminate the Borrower's
right to service the Serviced Loans, or (iii) cause any material change in
the Borrower's servicing practices and procedures with respect to the
Serviced Loans which in the Lender's reasonable judgment would materially
prejudice the Lender's interest in any of the Collateral or its rights
under this Agreement.
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5.19 Initial Appraisal. Prior to the making of the first
Advance in respect of any Servicing Rights, the Lender shall have received
an Appraisal of such Servicing Rights acceptable to the Lender.
5.20 Assignment of Purchase Contract, etc. Prior to the making
of the first Advance in respect of any Servicing Rights, the Borrower, if
so requested by Lender, shall have executed and delivered to the Lender (a)
an assignment of the Borrower's rights (but not its obligations) under the
related Purchase Contract (together with the Seller's written consent to
such assignment if required under the Purchase Contract), and (b) an
assignment or assignments of the Borrower's rights under any related
Custodial Agreements, Escrow Accounts, tax service contracts or other
agreements related to the Serviced Loans or Servicing Rights.
5.21 Other Conditions Satisfied. Prior to the making of any
Advance, any conditions precedent contained in any Servicing Documents and
any Agency Requirements which relate to or would otherwise affect the sale
of any Servicing Rights to the Borrower or the financing thereof under this
Agreement, and which are required under the terms of such Servicing
Documents or Agency Requirements to have been satisfied as of the date of
such Advance, shall have been satisfied.
The acceptance of the benefits of each Advance shall constitute a
representation and warranty by the Borrower to the Lender that all
conditions required under this Section 5 to have been satisfied as of the
date of such Advance have been satisfied. All of the Note, certificates,
legal opinions, Appraisals and other documents and papers referred to in
this Section 5, unless otherwise specified, shall be delivered to the
Lender at the Office and shall be satisfactory in form and substance to the
Lender.
Section 6. Representations, Warranties and Agreements.
In order to induce the Lender to enter into this Agreement and to
make the Advances, the Borrower makes the following representations,
warranties and agreements as of the Effective Date, all of which shall
survive the execution and delivery of this Agreement and the Note and the
making of the Advances (with the execution and delivery of this Agreement
and the making of each Advance thereafter being deemed to constitute a
representation and warranty that the matters as specified in this Section 6
are true and correct in all respects on and as of the date hereof and as of
the date of such Advance, unless stated to relate to a specific earlier
date):
6.01 Corporate Power and Authority. The Borrower has the
corporate power to execute, deliver and perform the terms and provisions of
each of the Credit Documents and has taken all necessary corporate action
to authorize the execution, delivery and performance by it of each of such
Credit Documents. The Borrower has duly executed and delivered each of the
Credit Documents, and each of such Credit Documents constitutes its legal,
valid and binding obligation enforceable in accordance with its terms.
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6.02 No Violation. Neither the execution, delivery or
performance by the Borrower of the Credit Documents, nor compliance by it
with the terms and provisions thereof, (i) will contravene any provision of
any law, statute, rule or regulation or any order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will conflict or
be inconsistent with or result in any breach of any of the material terms,
covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or
impose) any Lien other than a Lien permitted pursuant to Section 8.01 upon
any of the property or assets of the Borrower pursuant to the terms of any
indenture, mortgage, deed of trust, credit agreement, loan agreement or any
other agreement, contract or instrument to which the Borrower is a party or
by which it or any of its property or assets is bound or to which it may be
subject or (iii) will violate any provision of the certificate of
incorporation or by-laws of the Borrower.
6.03 Governmental Approvals. No order, consent, approval,
license, authorization or validation of, or filing, recording or
registration with (except as have been obtained or made prior to the
Effective Date), or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is
required in connection with, (i) the execution, delivery and performance of
any Credit Document or (ii) the legality, validity, binding effect or
enforceability of any such Credit Document.
6.04 Financial Condition; Undisclosed Liabilities; etc. (a)
Since July 30, 1993, there has not been any material adverse change in the
business, operations, property, assets, condition (financial or otherwise)
or prospects of the Borrower.
(b) Except as fully reflected on the financial statements
referred to in Section 5.07, there will be as of the Effective Date no
liabilities or obligations with respect to the Borrower or any of its
Subsidiaries of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether or not due) which, either individually
or in the aggregate, would be material to the Borrower or to the Borrower
and its Subsidiaries taken as a whole. Except as set forth in Schedule I
to this Agreement, as of the Effective Date the Borrower does not know of
any basis for the assertion against the Borrower or any of its Subsidiaries
of any liability or obligation of any nature whatsoever that is not fully
reflected in the financial statements referred to in Section 5.07 which,
either individually or in the aggregate, could be material to the Borrower.
6.05 Litigation. There are no actions, suits or proceedings
pending or threatened with respect to any Credit Document or any Servicing
Documents to which the Borrower is a party.
6.06 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on
behalf of the Borrower in writing to the Lender (including, without
limitation, all information contained in the Credit Documents or any
Servicing Documents to which the Borrower is a party) for purposes of or in
connection with this Agreement, the Term Loan Security Agreement or any
transaction
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contemplated herein or therein is, and all other such factual information
(taken as a whole) hereafter furnished by or on behalf of the Borrower in
writing to the Lender will be, true and accurate in all material respects
on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect at such time in
light of the circumstances under which such information was provided.
6.07 Use of Proceeds; Margin Regulations. All proceeds of each
Advance will be used by the Borrower to finance the Borrower's acquisition
of Servicing Rights. No part of the proceeds of any Advance will be used
by the Borrower to purchase or carry any Margin Stock or to extend credit
to others for the purpose of purchasing or carrying any Margin Stock.
Neither the making of any Advance nor the use of the proceeds thereof will
violate or be inconsistent with the provisions of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System.
6.08 Compliance with Statutes, etc. The Borrower and each of
its Subsidiaries is in compliance with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and
the ownership of its property, except such noncompliances as would not (i)
in the aggregate, have a material adverse effect on the business,
operations, property, assets, condition (financial or otherwise) or
prospects of the Borrower and (ii) affect in any respect the validity or
enforceability of any Credit Document, any Servicing Document or the
Lender's rights in the Collateral.
6.09 No Burdensome Agreement. Neither the Borrower nor any
Subsidiary is a party to any indenture, loan or credit agreement or any
lease or other agreement or instrument or subject to any charter or
corporate restriction which by its terms would have a material adverse
effect on the business, condition (financial or otherwise), operations or
properties of the Borrower or such Subsidiary or on the ability of the
Borrower to carry out its obligations under the Note, the other Credit
Documents to which it is a party or any Servicing Documents to which it is
or shall become a party.
6.10 Security Interests. The Term Loan Security Agreement
creates, as security for the Obligations, valid and enforceable security
interests in and Liens on all of the Collateral in favor of the Lender
which are perfected and superior and prior to the rights of all third
Persons (except Agency Rights) and are subject to no other Liens (other
than Liens permitted pursuant to Section 8.01). The Borrower has, or will
have at the time of pledge thereof, good and marketable title to all of the
Collateral, free and clear of all Liens except those described in the
preceding sentence.
6.11 Representations in Warehouse Agreement. Except as set
forth in Schedule II, each of the representations, warranties and
agreements made by the Borrower pursuant to Sections 6.01, 6.05(a), 6.06,
6.09, 6.10, 6.11, 6.12, 6.14, 6.16, 6.18, 6.21, 6.22 and 6.23 of the GE
Warehouse Credit Agreement (collectively, the "GE Representations") is
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incorporated herein by reference as if set forth herein in full. As of the
date hereof and as of the date of each Advance the Borrower makes each of
the GE Representations for the benefit of the Lender under this Agreement.
The Borrower's obligation under this Section 6.11 to make the GE
Representations shall continue regardless of, and shall be unaffected by,
the expiration or termination of the GE Warehouse Credit Agreement.
6.12 Representations in Purchase Contracts. The representations
and warranties made by the Seller and the Borrower in the related Purchase
Contract with respect to all matters affecting the related Servicing
Rights, Servicing Documents and Serviced Loans (collectively the "Purchase
Contract Representations") (a) were true and correct in all material
respects on the dates so made, and are deemed to be incorporated herein by
reference as if set forth herein in full. As of the date of each Advance,
the Borrower makes to the Lender, for its benefit under this Agreement,
each of the related Purchase Contract Representations.
6.13 Representations Relating to Servicing. As of the date of
each Advance:
(a) The Borrower, the Seller, and any other parties thereto,
have duly executed and delivered each of the related Servicing Documents
which is required to have been executed and delivered as of such date, and
each of such Servicing Documents constitutes the legal, valid and binding
obligation of all parties thereto, enforceable against such parties in
accordance with their respective terms;
(b) (i) Each Serviced Loan, whose Servicing Rights are the
subject of such Advance, was underwritten in accordance with the
underwriting standards of the related Agency in effect at the time the
Serviced Loan was originated; (ii) each such Serviced Loan is in conformity
with such underwriting standards on the date of such Advance; and (iii) the
related Mortgage Note and Mortgage are on forms acceptable to such Agency;
(c) The Seller has serviced the Serviced Loans and has kept and
maintained complete and accurate books and records in connection therewith,
in accordance with all Agency Requirements and all applicable laws and
regulations, including, without limitation, all FHA and VA regulations, and
the Seller has remitted to each Agency all distributions to which such
Agency is entitled under the relevant Agency Requirements;
(d) The Seller and the Borrower have performed all obligations
to be performed under Agency Requirements in respect of the transfer and
sale of the Servicing Rights and the other transactions contemplated by the
Purchase Contract, and no event has occurred and is continuing which, but
for the passage of time or the giving of notice, or both, would constitute
a default under or breach of such Agency Requirements;
(e) Except as to recourse for breaches of representations and
warranties given by the Seller in Agency Agreements, none of the Servicing
Rights are subject to recourse against the servicer for losses in
connection with the liquidation of a Serviced Loan,
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borrower defaults or repurchase obligations upon the occurrence of
non-payment or any other event;
(f) No Agency Agreement or other Servicing Document contains
any uncustomary, unusual or burdensome servicing obligations with respect
to the Servicing Rights or contains provisions which vary from published
Agency standards; no waivers with respect to any Agency Requirements have
been obtained which adversely affect the quality of any Serviced Loans; and
no Agency Consent reduces or limits the rights or compensation of the
servicer under the applicable Agency Agreement.
(g) (i) Each Serviced Loan included in a Pool of Serviced Loans
meets all eligibility requirements for inclusion in such Pool, in
accordance with all applicable Agency Requirements for loan pooling; (ii)
all such Pools have been finally and properly certified or recertified in
accordance with applicable laws, regulations and Agency Requirements; (iii)
the Servicing Rights in respect of each Pool are eligible under all
applicable laws, regulations and Agency Requirements to be transferred to
the Borrower; (iv) no Serviced Loan has been bought out of a Pool without
all required prior written approvals of the applicable Agency; and (v) the
Servicing Files to be delivered to the Borrower pursuant to the related
Purchase Contract for any Pool of Serviced Loans will include all documents
necessary in order for the appropriate Custodian to recertify such Pool in
accordance with Agency Requirements;
(h) (i) Immediately prior to the transfer and sale of the
Servicing Rights pursuant to the related Purchase Contract, the Seller was
the sole owner and holder of such Servicing Rights; (ii) such Servicing
Rights had not been assigned or pledged to any other party; and (iii) the
Seller had good and marketable right, title and interest therein, and had
the full right and authority, subject to no interest or agreement with any
other party, to sell, transfer and assign the Servicing Rights pursuant to
the Purchase Contract to the Borrower, free and clear of any Lien (except
Agency Rights); and
(i) The security interest in the Servicing Rights granted
pursuant to the Term Loan Security Agreement is the only outstanding and
existing interest that the Borrower has granted to the Lender or any other
party in the Servicing Rights; and
(j) The Borrower has complied in all material respects with and
is not in material violation of, and will comply in all material respects
with and will not be in material violation of, any law, regulation,
Servicing Document or Agency Requirement relating to any Servicing Rights.
Section 7. Affirmative Covenants.
The Borrower covenants and agrees that as of the Effective Date,
and thereafter for so long as this Agreement is in effect and until the
Note is no longer
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outstanding and the Advances, together with interest, Fees and all other
Obligations, are paid in full:
7.01 Information Covenants. The Borrower will furnish to the
Lender (unless otherwise indicated):
(a) Financial Statements. At the times specified in the GE
Warehouse Credit Agreement, the quarterly and annual financial statements,
management letters, officers' certificates and other information required
pursuant to Section 7.01(a), (b), (c) and (d) of the GE Warehouse Credit
Agreement; provided, however, that any references to a "Default" or "Event
of Default" in any certification to be provided under the aforesaid
provisions of the GE Warehouse Credit Agreement shall also include and take
into account, for purposes of the information required under this Section
7.01(a), knowledge of any Default or Event of Default hereunder.
(b) Notice of Default. Promptly (and in no event later than
one Business Day following the occurrence thereof), notice of the
occurrence of any event which constitutes a Default or Event of Default,
detailing the nature of such Default or Event of Default and any actions
taken or proposed to be taken to cure such Default or Event of Default.
(c) Agency Related Defaults. Promptly, and in any event within
five Business Days after the Borrower's receipt thereof, copies of any
notices or information given to or received from any Agency relating to (A)
any actual or alleged default under or breach of any Agency Agreement,
Acknowledgment Agreement or Agency Consent, (B) any request for, or
assertion of rights to, repurchase any Serviced Loan pursuant to the terms
of any Agency Agreement or Agency Requirements, (C) the disqualification
of, or any proposal to disqualify, the Borrower as an Agency-approved
seller/servicer of Serviced Loans, the termination of any Agency Agreement,
or the termination, transfer or sale of any Servicing Rights.
(d) Change in Servicing Procedures. Any material change in the
Borrower's practices or procedures respecting the servicing of any Serviced
Loans, or the practices or procedures or identity of any subservicer
thereof.
(e) Sale of Servicing Rights. Written notice not less than 30
days prior to any sale of Servicing Rights as to which an Advance has been
made and is then outstanding (including, without limitation, any repurchase
by the Seller pursuant to the related Purchase Contract, in any one month,
of more than three of the Serviced Loans whose Servicing Rights were the
subject of such an Advance).
(f) Portfolio Appraisal. On or before (i) October 20, 1994,
and (ii) the 20th day of the calendar quarter immediately succeeding the
calendar quarter in which Expiry Date occurs and on or before the 20th day
of each calendar quarter thereafter, an
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Appraisal of all Servicing Portfolios as to which Advances have been made
and are then outstanding, which shall be in form and substance satisfactory
to the Lender.
(g) Monthly Portfolio Analysis. Borrower shall include in the
monthly servicing report which Borrower is required to furnish to Lender
pursuant to Section 7.01(h) of the GE Warehouse Credit Agreement (in
addition to all information required under Section 7.01(h)) a separate
report containing the following information for all Serviced Loans whose
Servicing Rights are then pledged to Lender under the Term Loan Security
Agreement: (1) the number of such Serviced Loans, (2) the principal balance
of such Serviced Loans as of the end of the calendar month preceding the
month in which the report is furnished, (3) the weighted average interest
rate with respect to such Serviced Loans, (4) the weighted average net
servicing fee with respect to such Serviced Loans, and (5) which of such
Serviced Loans (A) are current and in good standing, (B) are more than 30,
60 or 90 days past due, and (C) are the subject of pending litigation,
bankruptcy or foreclosure proceedings.
7.02 Collateral. The Borrower will (a) warrant and defend the
right, title and interest of the Lender in and to the Collateral against
the claims and demands of all Persons whomsoever (except Agency Rights);
(b) service, or cause to be serviced, all Serviced Loans in accordance with
the requirements of the related Servicing Documents, all applicable Agency
Requirements, and all applicable laws and regulations, including, without
limitation, FHA and VA requirements, and will take all actions necessary to
enforce the obligations of the obligors under such Serviced Loans; (c) hold
all Escrow Payments collected in respect of Serviced Loans in trust,
without commingling the same with non-custodial funds, and apply the same
for the purposes for which such funds were collected; (d) comply in all
respects with the terms and conditions of all Servicing Documents, and all
extensions, renewals and modifications or substitutions thereof or thereto;
and (e) maintain, at its principal office or in a regional office approved
by the Lender, and, upon request, shall make available to the Lender the
originals, or copies in any case where the original has been delivered to
an Agency or subservicer, of all Servicing Files and Mortgage Files
relating to Serviced Loans whose Servicing Rights have pledged as
Collateral, and all other information and data relating to the Collateral.
7.03 Covenants in Warehouse Agreement. The Borrower, for the
benefit of the Lender pursuant to this Agreement, shall perform and observe
each of its covenants and agreements contained in Sections 7.01(e), 7.02
through 7.07, 7.09, 7.10 of the GE Warehouse Credit Agreement
(collectively, the "GE Covenants"), all of which are incorporated herein by
reference as if set forth herein in full. The Borrower's obligation under
this Section 7.03 shall continue regardless of, and shall be unaffected by,
the expiration or termination of the GE Warehouse Credit Agreement.
7.04 Transfer of Servicing Rights. In the event that an Agency
shall exercise its rights under any Agency Agreement, Acknowledgement
Agreement or otherwise to disqualify the Borrower as an Agency-approved
seller/servicer of any Serviced Loans, and
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shall take steps to transfer and sell all or any portion of the related
Servicing Rights, the Lender may (but shall not be obligated to) seek to
arrange the sale or transfer of such Servicing Rights to the Lender or its
designee, or to arrange for an interim servicing agent approved by the
Agency, all in accordance with the related Agency Agreement, Acknowledgment
Agreement and any other Agency Requirements. The Borrower shall cooperate
with the Lender in any way that the Lender may request in order to effect
any such sale or transfer of such Servicing Rights, and shall be
responsible for, and pay promptly upon receipt, all fees and expenses
incurred by the Lender in connection with any such sale or transfer.
Section 8. Negative Covenants.
The Borrower covenants and agrees that as of the Effective Date,
and thereafter for so long as this Agreement is in effect and until the
Note is no longer outstanding and the Advances, together with interest,
Fees and all other Obligations, are paid in full, without the prior written
consent of the Lender:
8.01 Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
or with respect to any Collateral except:
(a) Liens created pursuant to the Term Loan Security Agreement
and the GE Warehouse Security Agreement; and
(b) Agency Rights.
8.02 Indebtedness. Without the prior written consent of the
Lender, which consent shall not be unreasonably withheld, the Borrower will
not, and will not permit any of its Subsidiaries to, contract, create,
incur, assume or suffer to exist any Indebtedness, except (i) Indebtedness
of the Borrower incurred under the Credit Documents, (ii) Indebtedness
incurred or permitted to be incurred or to exist under the GE Warehouse
Credit Agreement and the Cooper River Warehouse Credit Agreement, (iii)
Indebtedness to the Parent, (iv) Indebtedness listed on Schedule III hereto
("Existing Indebtedness"), and (iv) accrued expenses and current trade
accounts payable incurred in the ordinary course of business by the
Borrower, or any of its Subsidiaries, which are to be repaid in full not
more than one year after the date on which such Indebtedness is originally
incurred; provided that the Borrower and its Subsidiaries shall not be
permitted to incur any Indebtedness otherwise permitted under this Section
8.02 so long as any Default or Event of Default has occurred and is
continuing or if a Default or Event of Default would occur as a result of
the incurrence of any such Indebtedness.
8.03 Modifications of Certain Agreements and Collateral. The
Borrower will not (a) amend, modify or waive any of the terms of, or settle
or compromise any claim with respect to, any Collateral or any Servicing
Document, or (b) modify or waive any term
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of any Serviced Loan or release any security or obligor, if as a result
thereof such Serviced Loan would become, nor cause, through any activity or
inactivity, a Serviced Loan to become, ineligible for FHA insurance or VA
guaranty, if applicable, or for repurchase by a Seller or an Agency (to the
extent such repurchase would otherwise be required under the terms of the
related Purchase Contract, Agency Agreement or other Agency Requirements).
8.04 Negative Covenants in Warehouse Agreement. The Borrower,
for the benefit of the Lender pursuant to this Agreement, shall perform and
observe each of its covenants and agreements set forth in Section 8 of the
GE Warehouse Credit Agreement (collectively, the "GE Negative Covenants"),
all of which are incorporated herein by reference as if set forth herein in
full. The Borrower's obligation under this Section 8.04 shall continue
regardless of and shall be unaffected by, the expiration or termination of
the GE Warehouse Credit Agreement. In addition to the foregoing, the
Borrower covenants and agrees that, to the extent any of the GE Negative
Covenants provides that the Borrower will not, and will not permit any of
its Subsidiaries to, engage in certain actions upon the occurrence and
during the continuance of any "Default" or "Event of Default" under the GE
Warehouse Credit Agreement, the Borrower likewise will not, and will not
permit any its Subsidiaries to, engage in any such actions upon the
occurrence and during the continuance of any Default or Event of Default
hereunder.
Section 9. Events of Default.
Upon the occurrence of any of the following specified events
(each an "Event of Default"):
9.01 Payments. The Borrower shall (i) default, and such default
shall continue unremedied for three or more days, in the payment when due
of any principal of any Advance (including, without limitation, any
Amortizing Installment) or (ii) default, and such default shall continue
unremedied for three or more days, in the payment when due of any interest
on any Advance or any Fees or any other amount owing hereunder or under any
Credit Document; or
9.02 Representations, etc.
(a) Any representation, warranty or statement made or
deemed made by the Borrower herein (except for any representations made or
deemed made pursuant to Section 6.13(b) through (h) hereof) or in any other
Credit Document or in any certificate delivered pursuant hereto or thereto
shall prove to be untrue in any material respect on the date as of which
made or deemed made; or
(b) Any representation made or deemed made by the
Borrower pursuant to Section 6.13(b) through (h) hereof shall prove to be
untrue in any material respect on the date as of which made or deemed made
and remains untrue in such material respect for 30 days after the first to
occur of (i) the date the Borrower becomes aware of
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such circumstance or (ii) the date on which the Lender gives notice of such
circumstance to the Borrower; provided, however, that in the case of any
such default that cannot be remedied by the payment of money, if such
default is of such a nature that it cannot be remedied within such 30-day
period but is capable of being remedied, and the Borrower is making
diligent efforts to remedy the same, such default shall not constitute an
Event of Default until such default shall have continued unremedied for a
period of 120 days after the first to occur of the dates specified in (i)
and (ii) above; or
9.03 Covenants. The Borrower shall (i) default in the due
performance or observance by it of any term, covenant or agreement
contained in Sections 7.01(b) or 8 or (ii) default in the due performance
or observance by it of any term, covenant or agreement contained in this
Agreement (other than those referred to in Sections 9.01 and 9.02 and
clause (i) of this Section 9.03) and such default shall continue unremedied
for a period of 30 days after the date on which the Lender gives notice of
such default to the Borrower; provided, however, that in the case of a
default that cannot be remedied by the payment of money, if such default is
of such a nature that it cannot be remedied within such 30-day period, but
is capable of being remedied, and the Borrower is making diligent efforts
to remedy the same, such default shall not constitute an Event of Default
until such default shall have continued for a period of 90 days after the
date of such notice from the Lender; or
9.04 Term Loan Security Agreement. The Term Loan Security
Agreement or any provision thereof shall cease to be in full force and
effect, or shall cease to give the Lender the Liens, rights, powers and
privileges purported to be created thereby, or the Borrower shall default
in the due performance or observance of any term, covenant or agreement on
its part to be performed or observed pursuant to the Term Loan Security
Agreement; or
9.05 Defaults Under Warehouse Agreements. There shall occur any
event which is defined and described as an "Event of Default" under either
the GE Warehouse Credit Agreement or the Cooper River Warehouse Credit
Agreement, regardless of whether either such Agreement is then in effect
and whether the Lender shall have exercised any of its enforcement rights
or remedies with respect thereto;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Lender may, by written notice to the
Borrower, take any or all of the following actions, without prejudice to
the rights of the Lender or the holder of the Note to enforce its claims
against the Borrower: (i) declare the Commitment terminated, whereupon the
Commitment of the Lender shall forthwith terminate immediately and any Fees
shall forthwith become due and payable without any other notice of any
kind; and (ii) declare the principal of and any accrued interest in respect
of all Advances and all Obligations to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
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Section 10. Miscellaneous.
10.01 Payment of Expenses; Indemnity. (a) Whether or not the
transactions contemplated hereby are consummated, the Borrower agrees to
pay on demand all reasonable costs and expenses in respect of the
perfection and maintenance of the security interests created by the Credit
Documents (including, without limitation, reasonable counsel fees and
expenses) and all reasonable costs and expenses in connection with the
servicing, management, handling, processing and liquidation of the
Collateral, any Serviced Loans and any Servicing Documents. The Borrower
further agrees to pay on demand all reasonable costs and expenses, if any
(including, without limitation, reasonable counsel fees and expenses), in
connection with the enforcement (whether through negotiations, workout,
legal proceedings or otherwise) of the Credit Documents and the other
documents to be delivered thereunder, including, without limitation,
reasonable counsel fees and expenses in connection with the enforcement of
rights under this Section 10.01(a).
(b) Without limiting any other rights which the Lender, or any
Affiliate thereof, as well as their respective directors, officers,
employees, agents, successors and assigns (each, an "Indemnified Party")
may have hereunder or under applicable law, the Borrower hereby agrees to
indemnify each Indemnified Party from and against any and all claims,
losses, damages, fees, expenses and liabilities (including reasonable
attorneys' fees) (all of the foregoing being collectively referred to as
"Indemnified Amounts") arising out of, relating to or resulting from (i)
this Agreement, (ii) any Servicing Rights or other Collateral, (iii) any
Serviced Loans or Servicing Documents, (iv) the mortgage servicing, escrow
and custodial practices and procedures of the Borrower, any subservicer or
other agent of the Borrower, or any Seller, and (v) the use of any proceeds
of Advances, excluding, however, Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct (as determined by a
final judgment of a court of competent jurisdiction) on the part of such
Indemnified Party or any Affiliate of such Indemnified Party which directly
or indirectly controls, is controlled by or is under common control with
such Indemnified Party or is a director or officer of such Indemnified
Party or of an Affiliate of such Indemnified Party. Without limiting or
being limited by the foregoing, the Borrower shall pay on demand to each
Indemnified Party any and all amounts necessary to indemnify such
Indemnified Party from and against any and all Indemnified Amounts relating
to or resulting from:
(i) the failure of any Servicing Portfolio to meet the
eligibility requirements of Section 5.15;
(ii) reliance on any representation or warranty or
statement made or deemed made by the Borrower (or any of its
officers, employees and agents) or any Seller under or in
connection with any Credit Document or any Servicing Document
which shall have been incorrect when made;
(iii) the failure by the Borrower to comply with any
applicable law, rule, regulation or Agency Requirement with
respect to any Collateral, any
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Serviced Loan or any Servicing Document, or the nonconformity of
any Collateral, any Serviced Loan or any Servicing Document, with
any such applicable law, rule, regulation or Agency Requirement;
(iv) the failure to vest in the Lender under the Term Loan
Security Agreement a valid first priority security interest in
the Servicing Rights and the other Collateral, except as
otherwise permitted by this Agreement;
(v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other applicable
laws with respect to any Collateral, whether at the time of any
Advance or at any subsequent time;
(vi) the breach of any of the Borrower's or any Seller's
obligations to any Agency in respect of any Servicing Document,
Serviced Loan or Servicing Rights;
(vii) the sale or transfer to the Lender of any Servicing
Rights (including, without limitation, any Agency approvals
related thereto), or the assumption by the Lender of the
servicing with respect to any Serviced Loans;
(viii)(A) the termination of, or inability of the Lender to
enforce its security interest in, the Servicing Rights or any
other Collateral or (B) the Lender's inability to collect, share
in, or receive, or any waiver of, any distribution from the sale
by an Agency of any Servicing Rights or other Collateral, in
either case as a result of the Agency's termination of any Agency
Agreement or any other agreement or arrangement between the
Agency and the Borrower, and regardless of whether the Lender
shall have consented to the occurrence of any of the
circumstances described in clauses (A) or (B) above pursuant to
any Acknowledgement Agreement or other agreement with such
Agency;
(ix) any investigation, litigation or proceeding related
to this Agreement or any other Credit Document or the use of
proceeds of Advances or in respect of any Serviced Loan, any
other Collateral or any Servicing Document; and
(x) the making of any wire transfer to an incorrect
account or in an incorrect amount in accordance with instructions
received from the Borrower or any Seller, it being understood and
agreed that, notwithstanding the indemnity under this Section
10.01(b)(x), the funds represented by any such wire shall
constitute an Advance hereunder.
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10.02 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, telecopier or cable communication)
and mailed, telegraphed, telexed, telecopied, cabled or delivered: if to
the Borrower or the Lender, at its address specified opposite its signature
below, or at such other address as shall be designated by such party in a
written notice to the other party hereto. All such notices and
communications shall, when mailed, telegraphed, telecopied or sent by
overnight courier, be effective when deposited in the mails, delivered to
the telegraph company or overnight courier, as the case may be, or sent by
telecopier, except that notices and communications given to the Lender
pursuant to Section 2 and Section 4 shall not be effective until received
by the Lender.
10.03 Benefit of Agreement. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided, however, that the Borrower may
not assign or transfer any of its rights or obligations hereunder without
the prior written consent of the Lender. The Lender may at any time assign
any of its rights and obligations hereunder or under the Note.
10.04 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Lender or the holder of the Note in exercising any right, power
or privilege hereunder or under any other Credit Document and no course of
dealing between the Borrower and the Lender or the holder of the Note shall
operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or under any other Credit Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder or thereunder. The rights, powers and
remedies herein or in any other Credit Document expressly provided are
cumulative and not exclusive of any rights, powers or remedies which the
Lender or the holder of the Note would otherwise have. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other
or further notice or demand in similar or other circumstances or constitute
a waiver of the rights of the Lender or the holder of the Note to any other
or further action in any circumstances without notice or demand.
10.05 Calculations; Computations. (a) The financial statements
to be furnished to the Lender pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United
States consistently applied throughout the periods involved (except as set
forth in the notes thereto or as otherwise disclosed in writing by the
Borrower to the Lender); provided that, except as otherwise specifically
provided herein, all computations determining compliance with Section 8
shall utilize accounting principles and policies in conformity with those
used to prepare the historical financial statements referred to in Section
5.07.
(b) All computations of interest and the Fees hereunder shall
be made on the basis of a year of 360 days for the actual number of days
occurring in the period for which such interest or fees are payable.
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10.06 Governing Law; Submission to Jurisdiction; Venue. (a) This
Agreement and the other Credit Documents and the rights and obligations of
the parties hereunder and thereunder shall be construed in accordance with
and be governed by the law of the State of New Jersey. Any legal action or
proceeding against the Borrower with respect to this Agreement or any other
Credit Document may be brought in the courts of the State of New Jersey
located in Camden County or in the United States Federal courts located in
Camden County, and, by execution and delivery of this Agreement, the
Borrower hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts.
(b) The Borrower hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
or any other Credit Document brought in the courts referred to in clause
(a) above and hereby further irrevocably waives and agrees not to plead or
claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
10.07 Participation and Syndication. Notwithstanding any other
provision of this Agreement, the Lender may at any time and from time to
time enter into participation agreements or syndication agreements with one
or more participating financial institutions whereby the Lender will
allocate to them certain percentages of the Commitment, or the Lender's
right to receive payments in respect of any Advances. The Borrower
acknowledges that, for the convenience of all parties, this Agreement is
being entered into with the Lender only and that its obligations under this
Agreement are undertaken for the benefit of, and as an inducement to, any
such financial institution as well as the Lender. The Borrower agrees to
cooperate with the Lender and any such participating financial institution
in effectuating such a participation or syndication and shall, upon the
request of the Lender, execute a replacement note or notes and such other
documents or instruments as may be reasonably necessary to evidence the
debtor-creditor relationship between Borrower and such participating
financial institution. The Borrower hereby grants to each participating
financial institution, to the extent of its participation in the
Commitment, or in the Lender's right to receive payments in respect of any
Advances, the right to set off deposit accounts maintained by the Borrower
with such financial institution. The Borrower shall pay all costs and
expenses (including, without limitation, reasonable counsel fees and
expenses incurred by the Lender and the participating financial
institutions) in connection with effectuating any participation or
syndication that is requested by the Borrower; provided, however, that
nothing herein shall obligate the Lender to enter into any participation or
syndication agreement which may be requested by the Borrower.
10.08 Obligation to Make Payments in Dollars. All payments of
the principal and interest on the Note and any other amounts due hereunder
or under any other Credit Document shall be made in Dollars.
39
<PAGE>
10.09 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall
be lodged with the Borrower and the Lender.
10.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which the Borrower and the Lender shall
have signed a copy hereof (whether the same or different copies) and shall
have delivered the same to the Lender at its Office.
10.11 Headings Descriptive. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of
this Agreement.
10.12 Amendment or Waiver. Neither this Agreement nor any other
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the Lender.
10.13 Survival. All indemnities set forth herein including,
without limitation, in Sections 2.08, 2.09, 4.06 and 10.01 shall survive
the execution and delivery of this Agreement and the Note and the making
and repayment of the Advances.
10.14 Waiver of Jury Trial. THE LENDER AND THE BORROWER EACH
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT EACH OF
THEM MAY HAVE TO A TRIAL BY JURY OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE NOTE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY RELATING
HERETO OR THERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER
TO ENTER INTO THIS AGREEMENT.
40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date
first above written.
Address: MARKET STREET MORTGAGE
2650 McCormick Dr., Suite 200 CORPORATION
Clearwater, FL 34619
Attn: Tracy S. Jackson By /s/ Tracy S. Jackson
Facsimile No.: (813) 791-4136 ------------------------------
Title: Sr. V.P. & Treasurer
Three Executive Campus GE CAPITAL MORTGAGE SERVICES, INC.
Cherry Hill, New Jersey 08002
Attn: William E. Mezger By /s/ William E. Mezger Jr.
Facsimile No.: 609-486-2777 ------------------------------
Title: Sr. V.P.
41
Exhibit 4(o)
AMENDMENT NO. 1 TO TERM LOAN AGREEMENT
THIS AMENDMENT NO. 1 TO TERM LOAN AGREEMENT ("Amendment No. 1") is
made as of the 11th day of November, 1994, by and between MARKET STREET
MORTGAGE CORPORATION, a Michigan corporation (the "Borrower") and GE
CAPITAL MORTGAGE SERVICES, INC., a New Jersey corporation (the "Lender").
BACKGROUND
The Borrower and the Lender entered into a Term Loan Agreement,
dated as of April 29, 1994 (the "Term Loan Agreement") pursuant to which
the Lender has agreed to make certain advances (the "Advances") to the
Borrower in a maximum aggregate principal amount of $12,000,000 in
accordance with the provisions of the Term Loan Agreement. All capitalized
terms used herein and not otherwise defined shall have the meanings set
forth in the Term Loan Agreement.
The Advances are evidenced by the Borrower's promissory note dated
May 6, 1994 (the "Note") in the stated principal amount of $12,000,000, and
are secured, among other things, by a Term Loan Security Agreement, dated as
of April 29, 1994, between the Borrower and the Lender (the "Term Loan
Security Agreement") granting the Lender a security interest in certain of
the Borrower's assets.
The Borrower and the Lender desire to amend the Term Loan Agreement
to increase the amount of the Lender's commitment thereunder, to provide
for the amendment and restatement of the Note and to modify certain other
terms and conditions.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Term Loan Agreement. The definition of "Commitment" contained in
Section 1.01 of the Term Loan Agreement is amended to read in full as
follows:
"Commitment" shall mean the obligation of the Lender to make
advances is an aggregate principal amount outstanding at any time not
to exceed $16,000,000."
2. Note. The Borrower shall execute and deliver to the Lender an
amended and restated Note in the stated principal amount of $16,000,000
(the "Amended and Restated Note"). Upon the Lender's receipt of the Amended
and Restated Note, executed by the Borrower, the Lender shall return the
original Note to the Borrower.
3. References to Term Loan Agreement and Note. Except where the
context clearly requires otherwise, all references to the Term Loan
Agreement and the Note in the Term Loan Agreement, the Amended and
Restated Note, the Term Loan Security
<PAGE>
Agreement and in any other document delivered to the Lender in connection
therewith shall be deemed to refer to the Term Loan Agreement as amended by
this Amendment No. 1 and to the Amended and Restated Note.
4 Condition Precedent. The effectiveness of the amendments set forth
above is subject to the condition precedent that the Lender shall have
received, in form and substance satisfactory to the Lender, the Amended and
Restated Note, duly executed by the Borrower.
5. Ratification of Documents. The Borrower hereby ratifies and
confirms its obligations under the Term Loan Agreement, the Note and the
Term Loan Security Agreement and agrees that the execution and delivery of
this Amendment No. 1 does not in any way diminish or invalidate any of its
obligations under the Term Loan Agreement, the Term Loan Security Agreement
and the Note.
6. Representations and Warranties. The Borrower hereby certifies
that (i) except as set forth on the attached Schedule I, the representations
and warranties which it made in the Term Loan Agreement and the Term Loan
Security Agreement are true and correct as of the date hereof and (ii) no
Default or Event of Default under the Term Loan Agreement, the Term Loan
Security Agreement or the Note has occurred and is continuing on the date
hereof.
7. Miscellaneous.
(a) This Amendment No. 1 shall be governed by and construed
according to the laws of the State of New Jersey and shall be binding upon
and shall inure to the benefit of the parties hereto, and their respective
successors and assigns.
(b) This Amendment No. 1 may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute and deliver this Amendment No. 1 as of the date first
above written.
Address: MARKET STREET MORTGAGE
2650 McCormick Dr., Suite 200 CORPORATION
Clearwater, FL 34619 By: /s/ Tracy S. Jackson
Attn.: Tracy S. Jackson ---------------------
Facsimile No.: (813) 791-4136 Title:
Three Executive Campus GE CAPITAL MORTGAGE SERVICES, INC.
Cherry Hill, NJ 08002
Attn.: William E. Mezger By: /s/ William E. Mezger
Facsimile No.: (609) 661-7528 ----------------------
Title:
3
<PAGE>
SCHEDULE I
PREFERRED STOCK
REDUCED TO $8,000,000.
4
<PAGE>
AMENDED AND RESTATED NOTE
U.S. $16,000,000 Cherry Hill, New Jersey
Originally issued: May 6, 1994
Amended and Restated: November 11, 1994
FOR VALUE RECEIVED, MARKET STREET MORTGAGE CORPORATION, a
corporation organized and existing under the laws of Michigan (the
"Borrower"), hereby promises to pay to the order of GE CAPITAL MORTGAGE
SERVICES, INC., a New Jersey corporation (the "Lender"), in lawful money of
the United States of America in immediately available funds on the Expiry
Date (as defined in the Term Loan Agreement referred to below) the
principal sum of Sixteen Million United States Dollars ($16,000,000), or,
if less, the aggregate unpaid principal amount of all Advances (as defined
in the Term Loan Agreement) made by the Lender to the Borrower pursuant to
the Term Loan Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount of each Advance from the date such Advance is made until paid in
full, at the interest rates, and at the times, as specified in the Term
Loan Agreement.
This Note is the Note referred to in the Term Loan Agreement, dated
as of April 29, 1994, as amended (the "Term Loan Agreement"), between the
Borrower and the Lender, and is entitled to the benefits thereof. This Note
is secured by the Term Loan Security Agreement, dated as of April 29, 1994,
between the Borrower and the Lender.
This Note is subject to mandatory prepayment as provided in Section
4.02 of the Term Loan Agreement and, in case an Event of Default (as
defined in the Term Loan Agreement) shall occur and be continuing, the
principal of and accrued interest on this Note may be declared to be due
and payable in the manner and with the effect provided in the Term Loan
Agreement.
This Note amends, restates and supersedes a Note in the principal
amount of $12,000,000 payable to the order of the Lender dated May 6, 1994
(the "Original Note"). However, without duplication, this Amended and
Restated Note shall in no way extinguish Borrower's unconditional
obligation to repay all indebtedness evidenced by the Original Note.
The Borrower hereby waives diligence, presentment, protest, demand
or notice of every kind in connection with this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW JERSEY.
MARKET STREET MORTGAGE CORPORATION
By: /s/ Tracy S. Jackson
-----------------------------
Name: Tracy S. Jackson
Title: Sr. Vice President
Exhibit 4(p)
==========================================================================
REPUBLIC BANCORP INC.
$25,000,000
7.17% SENIOR DEBENTURES DUE APRIL 1, 2001
----------------------------
DEBENTURE PURCHASE AGREEMENT
----------------------------
Dated as of March 30, 1994
==========================================================================
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
1. AUTHORIZATION OF ISSUE OF DEBENTURES. . . . . . . . . . 1
2. PURCHASE AND SALE OF DEBENTURES . . . . . . . . . . . . 1
3. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . 2
4. NO PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . 3
5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 3
6. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . 4
7. REPRESENTATIONS, COVENANTS AND WARRANTIES . . . . . . . 7
8. REPRESENTATIONS OF THE PURCHASERS . . . . . . . . . . . 10
9. SUBSEQUENT OFFERS AND RESALES OF THE SECURITIES . . . . 10
10. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 12
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 15
PURCHASER SCHEDULE
EXHIBIT A - FORM OF DEBENTURE
EXHIBIT B - FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT C - LIST OF AGREEMENTS RESTRICTING DEBT
<PAGE>
REPUBLIC BANCORP INC.
1070 East Main Street
Owosso, Michigan 48867
As of March 30, 1994
SCUDDER, STEVENS & CLARK, INC.
600 Vine Street - Suite 2000
Cincinnati, Ohio 45202
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
One Penn Valley Park
BMA Tower - 18th Floor
Kansas City, Missouri 64141
COLUMBUS LIFE INSURANCE COMPANY
400 Broadway
Cincinnati, Ohio 45202
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
666 Fifth Avenue
New York, New York 10103
Gentlemen:
The undersigned, Republic Bancorp Inc. (herein called the
"Company"), hereby agrees with you as follows:
1. AUTHORIZATION OF ISSUE OF DEBENTURES. The Company will
authorize the issue of its Senior Debentures (herein called the
"Debentures") to be issued in global form, in the aggregate
principal amount of $25,000,000, to be dated the date of issue
thereof, to mature April 1, 2001, to bear interest on the unpaid
balance thereof from the date thereof until the principal thereof
shall have become due and payable at the rate of 7.17% per annum,
paid semiannually, and to be substantially in the form of
Exhibit A attached hereto. The term "Debentures" as used herein
shall include the global Debenture delivered pursuant to any
provision of this Agreement and each Debenture delivered in
substitution or exchange for any such Debenture pursuant to any
such provision.
2. PURCHASE AND SALE OF DEBENTURES. The Company hereby
agrees to sell to you and, subject to the terms and conditions
<PAGE>
herein set forth, you agree to purchase from the Company the
aggregate principal amount of Debentures set forth opposite your
name in the Purchaser Schedule attached hereto at 100% of such
aggregate principal amount.
Payment of the purchase price for and delivery of the
Debentures to be purchased by the Purchasers shall be made
through the systems of the Depository Trust Company, with
delivery of the Debentures to the accounts of the Purchasers to
be made against payment for the Debentures in same day funds, or
in such other manner as shall be agreed upon by the Purchasers
and the Company, at 10:00 A.M. on the fifth New York business day
following the date hereof.
3. CONDITIONS OF CLOSING. Your obligation to purchase and
pay for the Debentures to be purchased by you hereunder is
subject to the satisfaction, on or before the date of closing, of
the following conditions:
3A. Opinion of Purchasers' Special Counsel. You shall have
received from Brown & Wood, who are acting as special counsel for
you in connection with this transaction, a favorable opinion
satisfactory to you as to: (i) the due organization, existence
and good standing of the Company; (ii) the due authorization by
all requisite corporate action, execution and delivery and the
validity, legally binding character and enforceability of this
Agreement and the Debentures; (iii) the absence of any
requirement to register the Debentures under the Securities Act
or to qualify an indenture under the Trust Indenture Act of 1939,
as amended; and (iv) such other matters incident to the matters
herein contemplated as you may reasonably request. In rendering
such opinion, such counsel may rely, as to matters of Michigan
law and the matters specified in clause (i) above, upon the
opinion referred to in paragraph 3B. Such opinion shall also
state that, based upon such investigation and inquiry as is
deemed relevant and appropriate by such counsel, the opinion
referred to in paragraph 3B is satisfactory in form and scope to
such counsel and, while such investigation and inquiry into the
matters covered by such opinion (other than the matters specified
in clauses (ii) and (iii) above) were not sufficient to enable
such counsel independently to render such opinion, nothing has
come to the attention of such counsel which has caused it to
question the legal conclusions expressed in the opinion referred
to in paragraph 3B and such counsel believe that you are
justified in relying on such opinion.
3B. Opinion of Company's Counsel. You shall have received
from Dickinson, Wright, Moon, Van Dusen & Freeman, special
counsel for the Company, a favorable opinion satisfactory to you
and substantially in the form of Exhibit B attached hereto.
2
<PAGE>
3C. Representations and Warranties; No Default. The
representations and warranties contained in Section 7 shall be
true on and as of the date of closing, except to the extent of
changes caused by the transactions herein contemplated; there
shall exist on the date of closing no Event of Default or
Default; and the Company shall have delivered to you an Officer's
Certificate, dated the date of closing, to both such effects.
3D. Proceedings. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated
hereby and all documents incident thereto shall be satisfactory
in substance and form to you, and you shall have received all
such counterpart originals or certified or other copies of such
documents as you may reasonably request.
4. NO PREPAYMENTS. The Company shall not, and shall not
permit any of its Subsidiaries or Affiliates to, prepay or
otherwise retire in whole or in part prior to their stated final
maturity (other than upon acceleration of such final maturity
pursuant to paragraph 6A), or purchase or otherwise acquire,
directly or indirectly, Debentures held by any holder.
5. COVENANTS.
5A. Limitation on Funded Indebtedness and Indebtedness.
The Company will not, and will not permit any Subsidiary to
create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable in respect of any:
(i) Funded Indebtedness unless, after giving effect
thereto, Funded Indebtedness shall not exceed 70% of
Consolidated Net Worth;
(ii) Indebtedness unless, after giving effect thereto,
Indebtedness shall not exceed 75% of Consolidated Net
Worth.
5B. Consolidated Tangible Equity Capital. The Company will
at all times maintain Consolidated Tangible Equity Capital in an
amount no less than the greater of $50 million or 4.0% of
Consolidated Assets.
5C. Restrictions as to Dividends and Certain Other
Payments. So long as the Debentures are outstanding, the Company
will not declare or pay any dividend or make any other
distribution on its capital stock or to its respective
stockholders (other than dividends or distributions payable in
its capital stock) or purchase, redeem or otherwise acquire for
value (except pursuant to a bona fide pledge or employee benefit
plan) any of its capital stock or permit any Subsidiary to do so,
3
<PAGE>
if at the time of such action (i) there exists a default in the
payment of interest on the Debentures which has continued for 15
days or more (except that dividends declared prior to such a
default may be paid) or if such a default has occurred during the
preceding 12 months or such shorter period as the Debentures have
been outstanding, (ii) the aggregate amount of any such
dividends, distributions or other payments during the period from
January 1, 1994 through and including the date of any such
dividend, distribution or other payment would exceed an amount
equal to the Company's cumulative Net Income for such period plus
$10 million or (iii) the Total Shareholders' Equity of the
Company is or as a result of such action would become, less than
$50 million.
5D. Merger, Consolidation or Sale of Assets; Successor
Corporations. The Company will not merge or consolidate with, or
sell all or substantially all of its assets to any person, firm
or corporation unless it is the continuing corporation in such
transaction and, immediately thereafter, it is not in default
under this Agreement or, if it is not the successor, the
successor corporation expressly assumes the Company's obligations
under this Agreement and immediately after such transaction, it
is not in default under this Agreement. Any successor
corporation shall succeed to and be substituted for the Company
as if such successor corporation had been named as the Company in
this Agreement.
5E. Modification of the Debentures or the Debenture
Purchase Agreement. With the consent of the holders of not less
than 66 2/3% in principal amount of the Debentures, any term,
covenant, agreement, or condition of the Debentures or this
Agreement may be amended or compliance therewith waived, provided
that no amendment or waiver shall, without the consent of the
holders of all the Debentures: (i) change the principal amount of
any Debenture or the maturity of the principal of any Debenture
or (ii) reduce the rate or extend the time of payment of interest
on any Debenture or (iii) reduce the percentage of holders of
Debentures required to consent to any such amendment or waiver.
5F. Line of Business. So long as the Debentures are
outstanding, the Company will remain principally engaged in the
business of banking or mortgage banking.
6. EVENTS OF DEFAULT.
6A. Acceleration. If any of the following events shall
occur and be continuing for any reason whatsoever (and whether
such occurrence shall be voluntary or involuntary or come about
or be effected by operation of law or otherwise):
4
<PAGE>
(i) default in the payment of the principal of or
premium, if any, on any Debenture when the same becomes
due and payable at maturity, upon redemption or
otherwise;
(ii) default in the payment of interest on the
Debentures when the same becomes due and payable and
the continuance of such default for a period of 15
days;
(iii) failure to comply with any agreement or covenant
of the Company in, or provisions of, the Debentures or
this Debenture Purchase Agreement and the continuance
of such default for a period of 60 days;
(iv) an event of default occurs under any mortgage,
bond, indenture, loan agreement or other evidence of
indebtedness under which there may be issued or by
which there may be secured or evidenced any
Indebtedness (other than non-recourse Indebtedness) for
money borrowed by the Company or any Subsidiary thereof
(or the payment of which is guaranteed by the Company
or any Subsidiary) whether such Indebtedness or
guarantee now exists or shall be created hereafter;
provided, however, that no such event of default shall
constitute an Event of Default unless the effect of
such Event of Default is to cause the acceleration of
such Indebtedness prior to its stated maturity, which,
together with the principal amount of any other such
Indebtedness so caused to be accelerated, aggregates
$2,000,000 or more at any time;
(v) a final judgment or final judgments for the
payment of money are entered by a court or courts of
competent jurisdiction against the Company or any
Subsidiary thereof which remains or remain undischarged
for a period (during which execution shall not be
effectively stayed) for 45 days, provided that the
aggregate of all such judgements is $10,000,000 or more
at any time;
(vi) any representation or warranty made by the
Company in this Agreement, or made by the Company in
any written statement or certificate furnished by the
Company in connection with the issuance and sale of the
Debentures or furnished by the Company pursuant to this
Agreement proves false in any material respect as of
the date of the issuance or making thereof;
5
<PAGE>
(vii) the Company or any Subsidiary thereof shall
institute proceedings to be adjudicated insolvent, or
shall consent to the filing of an insolvency proceeding
against it, or shall file a petition or answer or
consent seeking reorganization, readjustment,
arrangement, composition, appointment of a receiver or
similar relief under the federal insolvency laws, or
any other similar applicable law of any governmental
unit, domestic or foreign, or shall consent to the
appointment of a receiver or conservator or liquidator
or trustee or assignee in insolvency of it or of a
substantial part of its property, or shall make an
assignment for the benefit of creditors, or shall admit
in writing its inability to pay its debts generally as
they become due, or if the Company shall voluntarily
suspend transaction of its business, or if corporate
action shall be taken by the Company or any Subsidiary
thereof in furtherance of any of the aforesaid
purposes;
then in the cases of (i), (ii), (iv) (v), (vi) and
(vii) above, unless the principal of the Debentures
shall have already become due and payable, holders of
no less than 51% in aggregate principal amount of the
Debentures then outstanding may declare the principal
of the Debentures to be immediately due and payable,
anything in this Agreement or in the Debentures to the
contrary notwithstanding. In the case of (iii) above,
unless the principal of the Debentures shall have
already become due and payable, holders of no less than
51% in aggregate principal amount of the Debentures
then outstanding may declare the principal of the
Debentures to be due and payable, along with all
accumulated interest, 10 days after the Company has
been in default under (iii) above and the applicable
grace period set forth therein has expired. A
Debenture holder, by written notice to the Company, may
waive all defaults and rescind such acceleration and
its consequences as to the Debentures held by such
Debenture holder; but no such waiver or rescission and
annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent
upon any subsequent default.
The Company shall deliver to the Purchasers, within 15
days after it becomes aware of the occurrence thereof,
written notice of any event which with the giving of
notice and the lapse of time or both would become an
Event of Default under (iv) or (v) above, its status
6
<PAGE>
and what action the Company is taking or proposes to
take with respect thereto.
In the event Debenture holders shall have proceeded to
enforce any right under this Agreement and such
proceeding shall have been discontinued or abandoned or
shall have been determined adversely to the holders,
then in every such case the Company and the Debenture
holders shall be restored, respectively, to their
former positions under the Debentures and this
Agreement, and all other rights, remedies and powers of
the Company and the Debenture holders, respectively,
under the Debentures and this Agreement shall continue
as though no such proceedings had been undertaken.
6B. Other Remedies. If any Event of Default or Default
shall occur and be continuing, the holder of any Debenture may
proceed to protect and enforce its rights under this Agreement
and such Debenture by exercising such remedies as are available
to such holder in respect thereof under applicable law, either by
suit in equity or by action at law, or both, whether for specific
performance of any covenant or other agreement contained in this
Agreement or in aid of the exercise of any power granted in this
Agreement. No remedy conferred in this Agreement upon the holder
of any Debenture is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be
in addition to every other remedy conferred herein or now or
hereafter existing at law or in equity or by statute or
otherwise.
7. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants:
7A. Organization. The Company is a corporation duly
organized and existing in good standing under the laws of the
State of Michigan, each Subsidiary is duly organized and existing
in good standing under the laws of the jurisdiction in which it
is incorporated, and the Company has and each Subsidiary has the
corporate power to own its respective property and to carry on
its respective business as now being conducted.
7B. Financial Statements. The consolidated financial
statements of the Company and its subsidiaries included in the
Private Placement Memorandum, dated February 11, 1994 the
"Private Placement Memorandum") present fairly the consolidated
financial position of the Company and its subsidiaries as of and
at the dates indicated and the consolidated results of their
operations for the periods specified and said consolidated
financial statements have been prepared in conformity with
generally accepted accounting principles applied on a basis
7
<PAGE>
consistent in all material respects during the periods involved
and the independent certified public accountants who certified
the financial statements included in the Private Placement
Memorandum are independent public accountants as required by the
Securities Act of 1933 and the rules and regulations thereunder.
7C. Actions Pending. There is no action, suit, investi-
gation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, or any
properties or rights of the Company or any of its Subsidiaries,
by or before any court, arbitrator or administrative or
governmental body which has not been previously disclosed to the
Purchasers and which might result in any material adverse change
in the business, condition or operations of the Company and its
Subsidiaries, taken as a whole.
7D. Outstanding Debt. Neither the Company nor any of its
Subsidiaries has outstanding any debt with a term in excess of
one year except as disclosed in the Private Placement Memorandum.
There exists no default under the provisions of any instrument
evidencing such Debt or of any agreement relating thereto.
7E. Title to Properties. The Company has and each of its
Subsidiaries has good and indefeasible title to its respective
real properties (other than properties which it leases) and good
title to all of its other respective properties and assets,
subject to no Lien of any kind, other than a lien held by Firstar
Bank Milwaukee, N.A. pursuant to a security agreement dated
September 27, 1993 and except for any liens, encumbrances or
defects in title which are not material to the Company and its
Subsidiaries, taken as whole. All leases necessary in any
material respect for the conduct of the respective businesses of
the Company and its Subsidiaries are valid and subsisting and are
in full force and effect.
7F. Taxes. The Company has and each of its Subsidiaries
has filed all Federal, State and other income tax returns which,
to the best knowledge of the officers of the Company, are
required to be filed, and each has paid all taxes as shown on
such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being
contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with
generally accepted accounting principles.
7G. Conflicting Agreements and Other Matters. Neither the
Company nor any of its Subsidiaries is a party to any contract or
agreement or subject to any charter or other corporate
restriction which materially and adversely affects its business,
property or assets, or financial condition. Neither the
8
<PAGE>
execution nor delivery of this Agreement or the Debentures, nor
the offering, issuance and sale of the Debentures, nor
fulfillment of nor compliance with the terms and provisions
hereof and of the Debentures will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the
Company or any of its Subsidiaries pursuant to, the charter or
by-laws of the Company or any of its Subsidiaries, any award of
any arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which the Company or any of its
Subsidiaries is subject. Neither the Company nor any of its
Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing indebtedness of the
Company or such Subsidiary, any agreement relating thereto or any
other contract or agreement (including its charter) which limits
the amount of, or otherwise imposes restrictions on the incurring
of, Debt of the Company of the type to be evidenced by the
Debentures except as set forth in the agreements listed in
Exhibit C attached hereto.
7H. Offering of Debentures. Neither the Company nor, to
the Company's knowledge, any agent acting on its behalf has,
directly or indirectly, offered the Debentures or any similar
security of the Company for sale to, or solicited any offers to
buy the Debentures or any similar security of the Company from,
or otherwise approached or negotiated with respect thereto with,
any Person other than institutional investors, and neither the
Company nor any agent acting on its behalf has taken or will take
any action which would subject the issuance or sale of the
Debentures to the provisions of section 5 of the Securities Act
or to the provisions of any securities or Blue Sky law of any
applicable jurisdiction.
7I. Governmental Consent. Neither the nature of the
Company or of any Subsidiary, nor any of their respective
businesses or properties, nor any relationship between the
Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or
delivery of the Debentures is such as to require any
authorization, consent, approval, exemption or other action by or
notice to or filing with any court or administrative or
governmental body (other than routine filings after the date of
closing with the Securities and Exchange Commission and/or any
state securities commissions) in connection with the execution
and delivery of this Agreement, the offering, issuance, sale or
delivery of the Debentures or fulfillment of or compliance with
the terms and provisions hereof or of the Debentures.
9
<PAGE>
7J. Disclosure. Neither this Agreement nor any other
document, certificate or statement furnished to you by or on
behalf of the Company in connection herewith contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and
therein not misleading. There is no fact peculiar to the Company
or any of its Subsidiaries which materially adversely affects the
business, business prospects, property or assets, or financial
condition of the Company or any of its Subsidiaries and which has
not been set forth in this Agreement or in the other documents,
certificates and statements furnished to you by or on behalf of
the Company prior to the date hereof in connection with the
transactions contemplated hereby.
7K. Rule 144A Eligibility. The Debentures are eligible for
resale pursuant to Rule 144A and will not be, at the Closing
Time, of the same class as securities listed on a national
securities exchange registered under Section 6 of the U.S.
Securities Exchange Act of 1934, as amended (the "1934 Act"), or
quoted in a U.S. automated interdealer quotation system.
7L. No General Solicitation. None of the Company, its
affiliates (as defined in Rule 501(b) under the 1933 Act) or any
person (other than the Purchasers, as to whom the Company makes
no representation) acting on its behalf has engaged, in
connection with the offering of the Securities, in any form of
general solicitation or general advertising within the meaning of
Rule 502(c) under the 1933 Act.
7M. No Registration Required. Subject to compliance by the
Purchasers with the representations and warranties set forth in
Section 8 and the procedures set forth in Section 9 hereof, it is
not necessary in connection with the offer, sale and delivery of
the Securities to the Purchasers and to each Subsequent Purchaser
in the manner contemplated by this Agreement and the Private
Placement Memorandum to register the Debentures under the 1933
Act.
8. REPRESENTATIONS OF THE PURCHASERS.
8A. Each Purchaser hereby represents and warrants to, and
agrees with, the Company that it (i) is a "qualified
institutional buyer" within the meaning of Rule 144A under the
1933 Act and an "accredited investor" within the meaning of
Regulation D under the 1933 Act; (ii) has not and will not
solicit offers for, or offer or sell, Debentures by means of any
general solicitation or general advertising within the meaning of
Rule 502(c) under Regulation D under the 1933 Act; and (iii) will
otherwise act in accordance with the terms and conditions set
forth in this Agreement, including Section 9 hereof, in
10
<PAGE>
connection with the placement of the Debentures contemplated
hereby.
9. SUBSEQUENT OFFERS AND RESALES OF THE SECURITIES.
Each of the Purchasers and the Company hereby establish and
agree to observe the following procedures in connection with the
offer and sale by the Purchasers of the Debentures.
9A. Offers and Sales Only to Institutional Accredited
Investors or Qualified Institutional Buyers. Offers and sales of
the Debentures will be made by the Purchasers only to (i)
institutional investors that are reasonably believed to qualify
as accredited investors (as defined in Rule 501(a) under the 1933
Act) (each such institutional investor being hereinafter referred
to as an "institutional accredited investor"), or (ii), in the
case of Debentures resold or otherwise transferred pursuant to
Rule 144A, to institutional investors that are reasonably
believed to qualify as qualified institutional buyers (as therein
defined) (each such institutional investor being hereinafter
referred to as a "qualified institutional buyer").
9B. No General Solicitation. The Debentures will be
offered by the Purchasers only by approaching prospective
purchasers on an individual basis. No general solicitation or
general advertising (as such terms are used in Regulation D under
the 1933 Act) will be used in connection with the offering of the
Debentures.
9C. Purchases by Non-Bank Fiduciaries. In the case of a
non-bank purchaser of a Security acting as a fiduciary for one or
more third parties, in connection with an offer and sale to such
purchaser pursuant to clause (a) above, each third party shall,
in the judgment of the applicable Purchaser, be an institutional
accredited investor or a qualified institutional buyer.
9D. Minimum Principal Amount. No sale of the Debentures to
any one purchaser will be for less than U.S. $100,000 principal
amount and no Security will be issued in a smaller principal
amount. If the purchaser is a non-bank fiduciary acting on
behalf of others, each person for whom it is acting must purchase
at least U.S. $100,000 principal amount of the Debentures.
9E. Restrictions on Transfer. The transfer restrictions
and the other provisions set forth in the Debentures shall apply
to the Debentures except as otherwise agreed by the Company and
the Purchasers. Following the sale of the Debentures by the
Purchasers to subsequent purchasers pursuant to the terms hereof,
no Purchaser shall be liable or responsible to the Company for
any losses, damages or liabilities suffered or incurred by the
11
<PAGE>
Company, including any losses, damages or liabilities under the
1933 Act, arising from or relating to any resale or transfer of
any Debenture.
9F. Company to Provide Certain Information. The Company
will make available, upon request, to any seller of the
Debentures the information specified in Rule 144A(d)(1) under the
Securities Act.
10. DEFINITIONS. For the purpose of this Agreement the
following terms shall have the meanings specified with respect
thereto below:
"Affiliate" means any Person (i) which directly or
indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii)
which beneficially owns or holds 5% or more of any class of the
voting stock of the Company or (iii) which beneficially owns or
holds 5% or more of the voting stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of
the Company or a Subsidiary thereof. The term "control" means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract
or otherwise.
"Capitalized Lease" shall mean any rental obligation
which, under generally accepted accounting principles, is or will
be required to be capitalized on the books of the Company or any
Subsidiary, taken at the amount thereof accounted for as
indebtedness (net of interest expense) in accordance with such
principles.
"Consolidated Net Worth", shall mean Stockholders'
Equity plus the unallocated Allowance for Loan Losses plus
Deferred Loan Fees.
"Consolidated Tangible Equity Capital", shall mean
Consolidated Net Worth minus Goodwill.
"Event of Default" shall mean any of the events
specified in paragraph 6A, provided that there has been satisfied
any requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further
condition, event or act, and "Default" shall mean any of such
events, whether or not any such requirement has been satisfied.
"Funded Indebtedness" shall mean all Indebtedness that
matures more than one year from the date of creation thereof, or
that is extendible or renewable at the option of any party
12
<PAGE>
thereto to a date more than one year from the date of creation
thereof (whether or not renewed or extended).
"Indebtedness" shall mean all indebtedness, liabilities
and other obligations, direct or contingent (other than deferred
income taxes and other credits, outside minority interests and
items of Stockholders' Equity) which would, in accordance with
generally accepted accounting principles, be classified upon the
consolidated balance sheet of the Company as liabilities, but in
any event including without limitation:
1) all guarantees, other than guarantees on secured
indebtedness;
2) all indebtedness, liabilities and other
obligations arising under any conditional sale or other
title retention agreement, whether or not the rights
and remedies of the seller or lender under such
agreement in the event of default are limited to
repossession or sale of such property; provided,
however, that the terms "Funded Indebtedness" and
"Indebtedness" shall not include any obligation of the
Company or of any Subsidiary incurred in the ordinary
course of its banking, mortgage banking or trust
business, with respect to:
a) any deposits with it or funds collected by it;
b) any banker's acceptance or letter of credit issued
by it;
c) any check, note, certificate of deposit, money
order, traveler's check, draft or bill of exchange
issued, accepted or endorsed by it;
d) any discount with, borrowing from, or other
obligation to any Federal Reserve Bank, the FDIC or any
Federal Home Loan Bank (or successor organization)
which discount or borrowing is in the ordinary course
of its banking business and not incurred in connection
with any unusual or extraordinary "rescue loan" or
substantially similar investment by such Federal
Reserve Bank, the FDIC or the Federal Home Loan Bank
(or successor organization);
e) any agreement, made by it in the ordinary course
of its banking business, to purchase or repurchase
securities, loans or federal funds, or to participate
in any such purchase or repurchase;
13
<PAGE>
f) any transaction made by it in the ordinary course
of its banking business in the nature of any extension
of credit, whether in the form of a commitment,
guarantee or otherwise, undertaken by it for the
account of a third party with the application by it of
the same banking considerations and legal lending
limits that would be applicable if the transaction were
a loan to such party;
g) any transaction in which it acts solely in a
fiduciary or agency capacity;
h) other obligations incurred by it in the ordinary
course of its banking, mortgage banking or trust
business to its customers solely in their capacities as
such;
i) any other liability or obligation of such
Subsidiary incurred in the ordinary course of its
banking business not involving any obligation for
borrowed money;
j) any borrowing under mortgage warehousing lines of
credit;
k) any borrowings under any revolving line of credit
with a maturity date of less than one year up to an
aggregate amount at any time outstanding equal to 30%
of Consolidated Net Worth; and
l) drafts outstanding or official bank checks
outstanding used to fund mortgage loan volume;
provided, however, that notwithstanding the foregoing,
Indebtedness shall not be deemed to include the
guaranty by the Company of any secured Indebtedness of
any Subsidiary which is permitted to be incurred
pursuant to subsection 2(d).
"Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or
agency thereof.
"Stockholders' Equity", "Allowance for Loan Losses",
"Deferred Loan Fees", "Consolidated Assets", "Net Income",
"Consolidated Net Loss", and "Goodwill" shall be defined
according to generally accepted accounting principles applicable
to the Company and in effect on the date the Debentures are
issued.
14
<PAGE>
"Subsidiary" shall mean: any entity (i) that is
organized under the laws of the United States of America or any
state hereof or the District of Columbia and (ii) of which at
least 50% (by number of votes) of the voting stock of such entity
and all outstanding shares of preferred stock, all outstanding
securities convertible into or exchangeable for shares of capital
stock and all outstanding warrants, rights or options to purchase
shares of capital stock of such entity are owned directly by the
Company or by another Subsidiary.
11. MISCELLANEOUS.
11A. Debenture Payments. The Company agrees that, so long
as you shall hold any Debenture, it will make payments of
principal thereof and premium, if any, and interest thereon,
which comply with the terms of this Agreement, by wire transfer
of immediately available funds for credit to your account or
accounts as specified in the Purchaser Schedule attached hereto,
or such other account or accounts in the United States as you may
designate in writing, notwithstanding any contrary provision
herein or in any Debenture with respect to the place of payment.
You agree that, before disposing of any Debenture, you will make
a notation thereon (or on a schedule attached thereto) of all
principal payments previously made thereon and of the date to
which interest thereon has been paid. The Company agrees to
afford the benefits of this paragraph 11A to any Transferee which
shall have made the same agreement as you have made in this
paragraph 11A.
11B. Indemnification. The Company agrees to pay and save
you and any Transferee harmless against liability for the payment
of the costs and expenses, including attorneys' fees, incurred by
you or any Transferee in enforcing any rights under this
Agreement or the Debentures or in responding to any subpoena or
other legal process issued in connection with this Agreement or
the transactions contemplated hereby or by reason of your or any
Transferee's having acquired any Debenture, including without
limitation costs and expenses incurred in any bankruptcy case.
The obligations of the Company under this paragraph 11B shall
survive the transfer of any Debenture or portion thereof or
interest therein by you or any Transferee and the payment of any
Debenture.
11C. Survival of Representations and Warranties; Entire
Agreement. All representations and warranties contained herein
or made in writing by or on behalf of the Company in connection
herewith shall survive the execution and delivery of this
Agreement and the Debentures, the transfer by you of any
Debenture or portion thereof or interest therein and the payment
of any Debenture, and may be relied upon by any subsequent
15
<PAGE>
purchaser, regardless of any investigation made at any time by or
on behalf of you or any subsequent purchaser. Subject to the
preceding sentence, this Agreement and the Debentures embody the
entire agreement and understanding between you and the Company
and supersede all prior agreements and understandings relating to
the subject matter hereof.
11D. Successors and Assigns. All covenants and other
agreements in this Agreement contained by or on behalf of either
of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto
(including, without limitation, any Transferee) whether so
expressed or not.
11E. Notices. All written communications provided for
hereunder shall be sent by first class mail or nationwide
overnight delivery service (with charges prepaid) and (i) if to
you, addressed to you at the address specified for such
communications in the Purchaser Schedule attached hereto, or at
such other address as you shall have specified to the Company in
writing, (ii) if to any other holder of any Debenture, addressed
to such other holder at such address as such other holder shall
have specified to the Company in writing or, if any such other
holder shall not have so specified an address to the Company,
then addressed to such other holder in care of the last holder of
such Debenture which shall have so specified an address to the
Company, and (iii) if to the Company, addressed to it at 1070
East Main Street, Owosso, Michigan 48867, Attention: Thomas F.
Menacher, or at such other address as the Company shall have
specified to the holder of each Debenture in writing; provided,
however, that any such communication to the Company may also, at
the option of the holder of any Debenture, be delivered by any
other means either to the Company at its address specified above
or to any officer of the Company.
11F. Descriptive Headings. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.
11G. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall
be governed by, the law of the State of New York.
11H. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one
such counterpart.
16
<PAGE>
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement between you and the Company.
Very truly yours,
REPUBLIC BANCORP INC.
By /s/ Thomas F. Menacher
-----------------------
Title: CHIEF FINANCIAL
OFFICER
The foregoing Agreement is
hereby accepted as of the
date first above written.
SCUDDER, STEVENS & CLARK, INC.
By:
--------------------------
Title:
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
By:
--------------------------
Title:
COLUMBUS LIFE INSURANCE COMPANY
By:
--------------------------
Title:
By:
--------------------------
Title:
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
By:
--------------------------
Title:
17
<PAGE>
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement between you and the Company.
Very truly yours,
REPUBLIC BANCORP INC.
By
-----------------------
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
SCUDDER, STEVENS & CLARK, INC.
By: /s/ John Schaefer
--------------------------
Title: Managing Director
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
By:
--------------------------
Title:
COLUMBUS LIFE INSURANCE COMPANY
By:
--------------------------
Title:
By:
--------------------------
Title:
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
By:
--------------------------
Title:
17
<PAGE>
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement between you and the Company.
Very truly yours,
REPUBLIC BANCORP INC.
By
-----------------------
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
SCUDDER, STEVENS & CLARK, INC.
By:
--------------------------
Title:
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
By: /s/ Conaught M. Troutman
--------------------------
Title: Vice President-Securities
COLUMBUS LIFE INSURANCE COMPANY
By:
--------------------------
Title:
By:
--------------------------
Title:
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
By:
--------------------------
Title:
17
<PAGE>
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement between you and the Company.
Very truly yours,
REPUBLIC BANCORP INC.
By
-----------------------
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
SCUDDER, STEVENS & CLARK, INC.
By:
--------------------------
Title:
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
By:
--------------------------
Title:
COLUMBUS LIFE INSURANCE COMPANY
By: /s/ W. F. Ledwin
--------------------------
Title: Vice President
By: /s/ D. J. Wuebbling
--------------------------
Title: Vice President
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
By:
--------------------------
Title:
17
<PAGE>
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement between you and the Company.
Very truly yours,
REPUBLIC BANCORP INC.
By
-----------------------
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
SCUDDER, STEVENS & CLARK, INC.
By:
--------------------------
Title:
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
By:
--------------------------
Title:
COLUMBUS LIFE INSURANCE COMPANY
By:
--------------------------
Title:
By:
--------------------------
Title:
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
By: /s/ Robert Stuart
--------------------------
Title: Senior Executive
Vice President
17
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of
Debentures
to be
Purchased
SCUDDER, STEVENS & CLARK, INC. $15,000,000
(1) Address for all notices relating to payments:
Scudder, Stevens & Clark, Inc.
600 Vine Street
Suite 2000
Cincinnati, OH 45202-2430
Attention: John Schaefer, Managing Director
(2) Address for all other communications and
notices:
Scudder, Stevens & Clark, Inc.
600 Vine Street
Suite 2000
Cincinnati, OH 45202-2430
Attention: John Schaefer, Managing Director
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of
Debentures
to be
Purchased
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA $5,000,000
(I) Address for all notices relating to payments:
Business Men's Assurance
P.O. Box 419458
Kansas City, MO 64141
Attention: Investment Accounting - 876
(2) Address for all other communications and
notices:
Business Men's Assurance
P.O. Box 419458
Kansas City, MO 64141
Attention: Investment Department - 1865
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of
Debentures
to be
Purchased
COLUMBUS LIFE INSURANCE COMPANY $2,500,000
(1) Address for all notices relating to payments:
Columbus Life Insurance Company
P. O. Box 1119
Cincinnati, OH 45201
Attention: Treasurer
(2) Address for all other communications and
notices:
Columbus Life Insurance Company
P. O. Box 1119
Cincinnati, OH 45201
Attention: Treasurer
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of
Debentures
to be
Purchased
MUTUAL OF AMERICA LIFE INSURANCE COMPANY $2,500,000
(1) Address for all notices relating to payments:
Mutual of America Capital Management
Corporation
666 Fifth Avenue, 19th Floor
New York, NY 10103
Attention: Investments - Private Placement
Group
(2) Address for all other communications and
notices:
Mutual of America Capital Management
Corporation
666 Fifth Avenue, 19th Floor
New York, NY 10103
Attention: Investments - Private Placement
Group
<PAGE>
EXHIBIT A
[FORM OF DEBENTURE]
THIS DEBENTURE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
DEBENTURE PURCHASE AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), OR A NOMINEE THEREOF. THIS GLOBAL SECURITY MAY NOT BE
EXCHANGED, IN WHOLE OR IN PART, FOR A SECURITY REGISTERED IN THE NAME
OF ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF, AND MAY NOT BE
TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE DEBENTURE PURCHASE AGREEMENT. UNLESS
THIS DEBENTURE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO
REPUBLIC BANCORP INC. (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE
FOR THIS DEBENTURE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY ITS ACCEPTANCE HEREOF, AGREES FOR THE BENEFIT OF
THE COMPANY THAT THIS DEBENTURE MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY, (2) SO LONG
AS THIS DEBENTURE IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A, THAT IS
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), (4) TO AN INSTITUTIONAL
INVESTOR THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT
("INSTITUTIONAL ACCREDITED INVESTOR") THAT IS ACQUIRING THIS
DEBENTURE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER
INSTITUTIONAL ACCREDITED INVESTOR FOR INVESTMENT PURPOSES
AND NOT FOR DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
AND A SIGNED CERTIFICATION LETTER (A FORM OF WHICH MAY BE
<PAGE>
OBTAINED FROM THE COMPANY) IS DELIVERED BY THE TRANSFEREE TO
THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES. BY PURCHASING THIS DEBENTURE, THE
HOLDER HEREOF AGREES AND REPRESENTS FOR THE BENEFIT OF THE
COMPANY THAT (A) IT IS (1) A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT
IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THIS
DEBENTURE FOR INVESTMENT PURPOSES FOR ITS OWN ACCOUNT OR THE
ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT AND (B) IT WILL NOTIFY ANY PURCHASER OF
THIS DEBENTURE FROM IT OF THE RESALE RESTRICTIONS REFERRED
TO ABOVE. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION
OF THREE YEARS FROM THE ORIGINAL ISSUANCE OF THE DEBENTURE
EVIDENCED HEREBY.
REPUBLIC BANCORP INC.
7.17% SENIOR DEBENTURE DUE APRIL 1, 2001
$25,000,000 March 31, 1994
FOR VALUE RECEIVED, the undersigned, REPUBLIC BANCORP INC.
(herein called the "Company"), a corporation organized and existing
under the laws of the State of Michigan, hereby promises to pay to
Cede & Co., as nominee for the Depository Trust Company, or registered
assigns the principal sum of $25,000,000 on April 1, 2001,
("Maturity") with interest (computed on the basis of a 360-day
year-30-day month) on the unpaid balance thereof at the rate of 7.17%
per annum from the date hereof, payable semiannually on the 1st day of
April and October in each year (each, an "Interest Payment Date"),
commencing with the October 1 next succeeding the date hereof, until
the principal hereof shall have become due and payable.
In the case where the applicable Interest Payment Date or
Maturity with respect hereto, as the case may be, does not fall on a
Business Day, payment of principal or interest otherwise payable on
such day need not be made on such day, but may be made on the next
succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or at Maturity and no interest shall accrue
with respect to such payment for the period from and after the
Interest Payment Date or such Maturity, as the case may be, to the
date of payment.
<PAGE>
The Debentures (including all of the obligations of the Company
hereunder) are direct, unconditional obligations of the Company and
rank without preference or priority among themselves and at least pari
passu with all other existing and future unsecured and unsubordinated
indebtedness of the Company.
The Debentures will not be subject to any sinking fund and,
except as described below, will not be redeemable or repayable prior
to their Stated Maturity.
Payments of principal, premium, if any, and interest are to be
made at such other place as the holder hereof shall designate to the
Company in writing, in lawful money of the United States of America.
This global Debenture is issued pursuant to a Debenture Purchase
Agreement, dated as of March 30, 1994 (the "Debenture Purchase
Agreement") between the Company and the respective original purchasers
of the Debentures named in the Purchaser Schedule attached thereto and
is entitled to the benefits thereof.
In case an Event of Default, as defined in the Debenture Purchase
Agreement, shall occur and be continuing, the principal of this
Debenture may be declared or otherwise become due and payable in the
manner and with the effect provided in the Debenture Purchase
Agreement.
The Debenture Purchase Agreement permits, with certain exceptions
as therein provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of Holders of the
Debentures to be affected thereby by the Company with the consent of
the Holders of 66 2/3% of the aggregate principal amount of Debentures
at the time outstanding. The Debenture Purchase Agreement also
contains provisions permitting the Holders of a majority in principal
amount of the outstanding Debentures to waive compliance by the
Company with certain provisions of the Debenture Purchase Agreement.
Any such consent or waiver by or behalf of the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the
registration or transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon
this Security.
No provision of this Security or of the Debenture Purchase
Agreement shall alter or impair the obligations of the Company, which
are absolute and unconditional, to pay the principal of and interest
on this Security at the time, place, and rate herein prescribed.
<PAGE>
This Debenture shall be construed and enforced in accordance with
the law of the State of New York.
REPUBLIC BANCORP INC.
By
-------------------------------------
Chief Financial Officer
By
-------------------------------------
President and Chief Executive Officer
<PAGE>
EXHIBIT B
[FORM OF OPINION OF COMPANY'S COUNSEL]
[Date of Closing]
[Names and addresses of
purchasers]
Dear Sirs:
We have acted as counsel for Republic Bancorp Inc. (the
"Company") in connection with the Agreement, dated as of March _,
1994, between the Company and each of you (the "Debenture Purchase
Agreement"), pursuant to which the Company has issued to you today
7.17% Senior Debentures of the Company due _________ __, 2001 in the
aggregate principal amount of $25,000,000. All terms used herein that
are defined in the Debenture Purchase Agreement have the respective
meanings specified in the Debenture Purchase Agreement.
In this connection, we have examined such certificates of public
officials, certificates of officers of the Company and copies
certified to our satisfaction of corporate documents and records of
the Company and of other papers, and have made such other
investigations, as we have deemed relevant and necessary as a basis
for our opinion hereinafter set forth. We have relied upon such
certificates of public officials and of officers of the Company with
respect to the accuracy of material factual matters contained therein
which were not independently established. With respect to the opinion
expressed in paragraph 3 below, we have also relied upon the
representation made by each of you in the first sentence of paragraph
9 of the Debenture Purchase Agreement.
Based on the foregoing it is our opinion that:
1. The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Michigan.
Each Subsidiary is a corporation duly organized and validly existing
in good standing under the laws of its jurisdiction of incorporation.
The Company and its Subsidiaries have the corporate power to carry on
their respective businesses as now being conducted.
<PAGE>
2. Assuming that the Debentures have been duly authorized
by the Company, when delivered and paid for by the Purchasers in
accordance with the terms of the Debenture Purchase Agreement, the
Debentures will constitute the legal, valid and binding obligations of
the Company.
3. The Debentures conform in all material respects to the
descriptions thereof in the Private Placement Memorandum.
4. There are no laws or regulations, or any pending or
threatened legal or governmental proceedings or any contracts or
documents to which the Company is a party, that are material to the
Company's operations which are not described in the Private Placement
Memorandum.
5. No consent, approval, authorization, order, decree,
registration or qualification of or filing with any court or
governmental authority or agency is necessary or required for the
performance by the Company of its obligations hereunder or in the
Private Placement Memorandum, except such as may be required by state
securities or Blue Sky law.
6. To the best of such counsel's knowledge, the execution,
delivery and performance by the Company of the Debenture Purchase
Agreement and the consummation of the transactions contemplated
therein will not conflict with or constitute a breach of, any
applicable law or any rule, administrative regulation, judgment or
order of any governmental agency or body or any administrative or
court decree thereof.
<PAGE>
EXHIBIT C
LIST OF AGREEMENTS RESTRICTING DEBT
NONE
Exhibit 4(q)
CREDIT AND SECURITY AGREEMENT
dated as of August 11, 1994
between
CUB FUNDING CORPORATION
as Borrower
and
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.,
as Lender
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . 1
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Accounting Terms . . . . . . . . . . . . . . . . . . . 20
Section 1.03. Computation of Time Periods. . . . . . . . . . . . . . 20
Section 1.04. Rules of Construction. . . . . . . . . . . . . . . . . 20
ARTICLE II. LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.01. The Loans. . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.02. Notice and Manner of Borrowing . . . . . . . . . . . . 21
Section 2.03. Reduction or Termination of Commitment . . . . . . . . 21
Section 2.04. [Intentionally Omitted.] . . . . . . . . . . . . . . . 21
Section 2.05. Interest . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.06. Note . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.07. [Intentionally Deleted]. . . . . . . . . . . . . . . . 23
Section 2.08. Mandatory Prepayment . . . . . . . . . . . . . . . . . 23
Section 2.09. Fees . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.10. Method of Payment. . . . . . . . . . . . . . . . . . . 23
Section 2.11. Use of Proceeds. . . . . . . . . . . . . . . . . . . . 24
Section 2.12. Reliance Upon Instructions . . . . . . . . . . . . . . 24
Section 2.13. Additional Costs . . . . . . . . . . . . . . . . . . . 25
ARTICLE III. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.01. Grant of Security Interest . . . . . . . . . . . . . . 25
Section 3.02. Wet Closing Provisions . . . . . . . . . . . . . . . . 26
Section 3.03. Responsibility for Collateral. . . . . . . . . . . . . 27
Section 3.04. Release of Security Interest . . . . . . . . . . . . . 28
Section 3.05. Creation of GNMA Securities and Other
Agency Securities . . . . . . . . . . . . . . . . . . 28
Section 3.06. Payment for Securities . . . . . . . . . . . . . . . . 28
Section 3.07. Representations Concerning Collateral. . . . . . . . . 28
Section 3.08. Covenants and Agreements Concerning
Collateral. . . . . . . . . . . . . . . . . . . . . . 32
Section 3.09. List of Qualified Investors. . . . . . . . . . . . . . 34
Section 3.10. Uniform Commercial Code Financing
Statements. . . . . . . . . . . . . . . . . . . . . . 35
Section 3.11. Collection Rights. . . . . . . . . . . . . . . . . . . 35
Section 3.12. Attorney-in-Fact . . . . . . . . . . . . . . . . . . . 35
Section 3.13. The Borrower Remains Liable. . . . . . . . . . . . . . 36
ARTICLE IV. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . 37
Section 4.01. Conditions Precedent to Initial Loan.. . . . . . . . . 37
Section 4.02. Conditions Precedent to All Loans. . . . . . . . . . . 39
Section 4.03. Deemed Representation. . . . . . . . . . . . . . . . . 40
ARTICLE V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 41
Section 5.01. Formation, Good Standing and Due
Qualification . . . . . . . . . . . . . . . . . . . . 41
Section 5.02. Power and Authority; No Conflicts. . . . . . . . . . . 41
Section 5.03. Legally Enforceable Agreements . . . . . . . . . . . . 41
Section 5.04. Litigation . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.05. Financial Statements . . . . . . . . . . . . . . . . . 42
Section 5.06. Ownership and Liens. . . . . . . . . . . . . . . . . . 42
Section 5.07. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.08. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.09. Subsidiaries . . . . . . . . . . . . . . . . . . . . . 43
Section 5.10. Operation of Business; Prior or Existing
Restrictions, Etc . . . . . . . . . . . . . . . . . . 43
Section 5.11. No Default on Outstanding Judgments or
Orders. . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.12. No Defaults on Other Agreements. . . . . . . . . . . . 44
Section 5.13. Labor Disputes and Acts of God . . . . . . . . . . . . 44
Section 5.14. Partnerships . . . . . . . . . . . . . . . . . . . . . 44
Section 5.15. Environmental Protection . . . . . . . . . . . . . . . 44
Section 5.16. Management of Borrower . . . . . . . . . . . . . . . . 45
ARTICLE VI. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 45
Section 6.01. Maintenance of Existence . . . . . . . . . . . . . . . 45
Section 6.02. Conduct of Business. . . . . . . . . . . . . . . . . . 45
Section 6.03. Maintenance of Properties. . . . . . . . . . . . . . . 45
Section 6.04. Maintenance of Records . . . . . . . . . . . . . . . . 45
Section 6.05. Maintenance of Insurance . . . . . . . . . . . . . . . 45
Section 6.06. Compliance with Laws . . . . . . . . . . . . . . . . . 45
Section 6.07. Right of Inspection. . . . . . . . . . . . . . . . . . 46
Section 6.08. Reporting Requirements . . . . . . . . . . . . . . . . 46
Section 6.09. Compliance With Environmental Laws . . . . . . . . . . 51
Section 6.10. Agency and Purchase Commitments. . . . . . . . . . . . 51
Section 6.11. Agency Approvals . . . . . . . . . . . . . . . . . . . 51
ARTICLE VII. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 52
Section 7.01. Debt . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.02. Guaranties . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.03. Liens. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.04. Investments. . . . . . . . . . . . . . . . . . . . . . 54
Section 7.05. Sale of Assets . . . . . . . . . . . . . . . . . . . . 55
Section 7.06. Transactions with Affiliates . . . . . . . . . . . . . 55
Section 7.07. Mergers, Etc.. . . . . . . . . . . . . . . . . . . . . 55
Section 7.08. Leases . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.09. Dividends. . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.10. Recourse Mortgage Loans. . . . . . . . . . . . . . . . 56
Section 7.11. Other Warehouse Facilities . . . . . . . . . . . . . . 56
ARTICLE VIII. FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . 56
Section 8.01. Adjusted Tangible Net Worth. . . . . . . . . . . . . . 56
Section 8.02. Current Ratio. . . . . . . . . . . . . . . . . . . . . 57
Section 8.03. Adjusted Leverage Ratio. . . . . . . . . . . . . . . . 57
Section 8.04. Minimum Unencumbered Servicing Rights. . . . . . . . . 57
ARTICLE IX. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . 57
Section 9.01. Events of Default. . . . . . . . . . . . . . . . . . . 57
Section 9.02. Remedies . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.03. Application of Proceeds. . . . . . . . . . . . . . . . 62
Section 9.04. Lender May Perform . . . . . . . . . . . . . . . . . . 62
Section 9.05. The Lender's Duties. . . . . . . . . . . . . . . . . . 62
Section 9.06. Continuing Security Interest; Transfer
of Note . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE X. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.01. Amendments and Waivers. . . . . . . . . . . . . . . . 63
Section 10.02. Usury . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.03. Expenses; Indemnification . . . . . . . . . . . . . . 64
Section 10.04. Assignment; Participation . . . . . . . . . . . . . . 64
Section 10.05. Notices . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.06. Setoff. . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.07. Table of Contents; Headings . . . . . . . . . . . . . 65
Section 10.08. Severability. . . . . . . . . . . . . . . . . . . . . 65
Section 10.09. Counterparts. . . . . . . . . . . . . . . . . . . . . 66
Section 10.10. Integration . . . . . . . . . . . . . . . . . . . . . 66
Section 10.11. Governing Law . . . . . . . . . . . . . . . . . . . . 66
Section 10.12. Jurisdiction; Immunities. . . . . . . . . . . . . . . 66
EXHIBITS
Exhibit A Form of Note
Exhibit B Loan Request Form
Exhibit C Borrowing Base Certificate
Exhibit D Opinion of Counsel to Borrower
Exhibit E Compliance Certificate
Exhibit F Collateral Agency Agreement
Exhibit G Assignment and Assumption Agreement
Exhibit H Schedule of Investments
Exhibit I Wet Closing Notice
Exhibit J Management of Borrower
Exhibit K Mandatory Purchase Commitment Report
Exhibit L List of Qualified Investors
Exhibit M Addendum to Closing Instructions
<PAGE>
CREDIT AND SECURITY AGREEMENT
CREDIT AND SECURITY AGREEMENT dated as of August
11, 1994, between CUB FUNDING CORPORATION a California
corporation (the "Borrower") and THE PRUDENTIAL HOME
MORTGAGE COMPANY, INC. (the "Lender").
The Borrower desires that the Lender extend credit
as provided herein, and the Lender is prepared to extend
such credit. Accordingly, the Borrower and the Lender agree
as follows:
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Definitions. As used in this
Agreement, the following terms have the following meanings
(terms defined in the singular are to have a correlative
meaning when used in the plural and vice versa):
"Adjusted Tangible Net Worth" means an amount
equal to (1) the sum of: (a) Total Assets plus (b) an
amount equal to one percent (1%) of Primary Non-Recourse
Servicing Rights, minus (2) the sum of (a) Total Liabilities
plus (b) Capitalized Excess Servicing Rights plus (c)
Purchased Servicing Rights plus (d) Total Intangible Assets.
"Affiliate" means, with respect to the Borrower,
any Person: (1) which directly or indirectly controls, or
is controlled by, or is under common control with the
Borrower; (2) which directly or indirectly beneficially owns
or holds five percent (5%) or more of any equity or
partnership interest of the Borrower; or (3) five percent
(5%) or more of the equity or partnership interest of which
is directly or indirectly beneficially owned or held by the
Borrower. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or
otherwise.
"Agency" means one or more of GNMA, FNMA, FHLMC,
HUD, VA or FHA.
"Agency Approvals" means the full approval and
good standing of the Borrower as a seller, servicer, issuer
and mortgagee by and with GNMA, FNMA, FHLMC, HUD, FHA and VA
under all applicable provisions of the Guides.
"Agency Commitments" means firm written
commitments issued by any of the Agencies to issue or
guaranty Securities issued or to be issued in respect of
Mortgage Loans.
"Agency Securities" means GNMA Securities and
Other Agency Securities.
"Agreement" means this Credit and Security
Agreement, as amended, supplemented or modified from time to
time.
"Assignee" has the meaning specified in Section
10.04.
"Assignment and Assumption Agreement" means an
Assignment and Assumption Agreement in the form of Exhibit
G.
"Borrowing Base" means, as of the date of
determination, with respect to all Collateral the sum of:
(1) the Collateral Value of Eligible Mortgages for all
Eligible Single Family Mortgage Loans; provided, however, in
no event will the Collateral Value of Eligible Mortgages
include Wet Mortgage Loans in excess of the Wet Mortgage
Loan Commitment; (2) the Collateral Value of Eligible
Securities for all Eligible Securities which are not Shared
Collateral; (3) the Collateral Value of Shared Collateral
for all Eligible Securities which are Shared Collateral; and
(4) the amount of cash held by or for the benefit of Lender
in the Cash Collateral Account.
"Borrowing Base Certificate" means a Certificate
in the form of Exhibit C hereto and to the Collateral Agency
Agreement, properly completed, executed and delivered by the
Collateral Custodian.
"Business Day" means any day (a) on which
commercial banks are not authorized or required to close in
New York or Maryland and (b) which is also a "Business Day"
under and as defined in the Collateral Agency Agreement.
"Capital Lease" means any lease which has been or
should be capitalized on the books of the lessee in
accordance with GAAP.
"Capitalized Excess Servicing Fees" means
capitalized excess servicing fees of the Borrower, all as
determined in accordance with GAAP.
"Cash Collateral Account" means the account or
accounts established by the Lender with the Collateral
Custodian for the benefit of Lender for purposes of
maintaining cash and investments of such cash where such
account is under the sole dominion and control of the Lender
or an agent, including the Collateral Custodian on behalf of
Lender, and all steps have been taken to perfect the
Lender's Lien in such account and all assets included in
such account.
"Certified Loans" means Loans made in respect to
Mortgage Loans for which the Collateral Custodian has
certified in the applicable Borrowing Base Certificate that
such Mortgage Loan meets the pool documentation requirements
of the applicable Qualified Investor.
"Closing Date" means August 11, 1994.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" has the meaning specified in Section
3.01.
"Collateral Agency Agreement" means the Collateral
Agency Agreement in the form of Exhibit F hereto, among the
Lender, the Borrower, the Collateral Custodian, or such
other custodial agreement approved by the Lender.
"Collateral Custodian" means Chemical Bank or such
other collateral agent selected by the Lender in accordance
with the Collateral Agency Agreement.
"Collateral Custodian Account" means any account
established by Collateral Custodian at Collateral
Custodian's offices for the benefit of Lender and other
Warehouse Lenders for purposes of receiving Collateral Sale
Proceeds from Securities which are Shared Collateral, if
applicable. The Collateral Custodian Account shall be under
the sole dominion and control of Collateral Custodian on
behalf of Lender and such other Warehouse Lenders having an
interest in Collateral Sale Proceeds from Pledged Securities
which are Shared Collateral and Borrower shall have no
interest of any kind in the Collateral Custodian Account or
any funds deposited therein.
"Collateral Documents" means documents,
instruments and agreements related to a Pledged Mortgage or
a Pledged Security which the Borrower is obligated to
deliver to Collateral Custodian in accordance with the
Collateral Agency Agreement.
"Collateral Market Value" means the then current
market price obtainable for any Pledged Mortgage or Pledged
Security, as reasonably determined by the Lender, in the
commercial markets regularly trading Mortgage Loans and
Securities of a similar nature.
"Collateral Sale Proceeds" means all proceeds of
the sale of Pledged Mortgages or Pledged Securities.
"Collateral Value of Eligible Mortgages" means, as
of any date of determination, in the case of each Eligible
Single Family Mortgage Loan, an amount equal to the lesser
of: (a) the outstanding principal amount of the Eligible
Single Family Mortgage Loan, and (b) ninety-eight percent
(98%) of an amount equal to the weighted average purchase
price for such Eligible Single Family Mortgage Loan under
all Purchase Commitments pursuant to which such Eligible
Single Family Mortgage Loan may be delivered.
"Collateral Value of Eligible Securities" means,
as of the date of determination, in the case of an Eligible
Security, an amount equal to ninety-eight percent (98%) of
the least of (1) the outstanding principal amount of such
Eligible Security, (2) the weighted average purchase price
of such Eligible Security under all Purchase Commitments
pursuant to which such Eligible Security may be delivered,
and (3) with respect to each Eligible Security that is not
covered by a firm priced Purchase Commitment, the Collateral
Market Value of such Eligible Security.
"Collateral Value of Shared Collateral" means, as
of any date of determination, in the case of each Eligible
Security which is Shared Collateral, an amount equal to the
Collateral Value of Eligible Securities for the Eligible
Security multiplied by the Lender's Shared Percentage.
"Commitment" has the meaning specified in Section
2.01.
"Compliance Certificate" means a compliance
certificate in form attached as Exhibit E and otherwise
acceptable to the Lender to be delivered to the Lender
quarterly by the Borrower in accordance with Section 6.08(4)
and certified by the chief financial or other authorized
officer of the Borrower.
"Conventional Conforming Mortgage Loan" means a
Mortgage Loan which satisfies all requirements for sale to
FNMA and FHLMC under FNMA and FHLMC standard purchase
programs.
"CP Rate" means the annual interest rate for
composite commercial paper for high-grade unsecured notes
having a maturity of 30 days as published in Federal Reserve
Statistical Release H.15 (519) under the heading "Commercial
Paper." In the event that such rate ceases to be regularly
published in Federal Reserve Statistical Release H.15 (519)
then the CP Rate shall, unless otherwise provided in this
Agreement, be such other commercial paper rate as is
published on a regular basis and is acceptable to Lender.
"Current Assets" means total current assets of the
Borrower minus all prepaid expenses, all as determined in
accordance with GAAP.
"Current Liabilities" means total current
liabilities of the Borrower, all as determined in accordance
with GAAP.
"Debt" means: (1) indebtedness or liability for
borrowed money, or for the deferred purchase price of
property or services (including trade obligations); (2)
obligations as lessee under Capital Leases; (3) current
liabilities in respect of unfunded vested benefits under any
Plan; (4) obligations under letters of credit issued for the
account of any Person; (5) all obligations arising under
bankers' or trade acceptance facilities; (6) all guarantees,
endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent
obligations to purchase any of the items included in this
definition, to provide funds for payment, to supply funds to
invest in any Person, or otherwise to assure a creditor
against loss (other than commitments to make Mortgage Loans
extended in the ordinary course of business of the
Borrower); (7) all obligations secured by any Lien on
property owned by such Person, whether or not the
obligations have been assumed; and (8) all obligations under
any agreement providing for a swap, ceiling rates, ceiling
and floor rates, contingent participation or other hedging
mechanisms with respect to interest payable on any of the
items described above in this definition.
"Default" means any event which with the giving of
notice or the lapse of time, or both, would become an Event
of Default.
"Default Rate" means, with respect to an amount of
any Loan not paid when due, a rate per annum equal to the
then applicable interest rate accruing on the respective
Loans plus one hundred (100) basis points.
"Disbursement Account" means account no.
530-042770 established by the Lender with the Collateral
Custodian at Collateral Custodian's offices for purposes of
receiving funds from Lender to fund Loans in the manner
provided in the Collateral Agency Agreement. The Borrower
shall have no interest of any kind in the Disbursement
Account or any funds deposited therein by the Lender.
"Documented Loans" means Loans made in respect of
Mortgage Loans for which a Borrowing Base Certificate has
been delivered to the Lender by the Collateral Custodian in
accordance with this Agreement and the Collateral Agency
Agreement in which the Collateral Custodian has certified to
the Lender that all of the required documents have been
received and accepted by the Collateral Custodian and, to
the extent such Mortgage Loan was previously classified as a
Wet Mortgage Loan, such Mortgage Loan is no longer
classified as a Wet Mortgage Loan.
"Dollars" and the sign "$" mean lawful money of
the United States of America.
"Earnings Before Interest and Taxes" means Net
Income plus Interest Expense (other than Interest Expense
incurred under this Agreement and under other Warehouse
Facilities) plus Taxes.
"Eligible Security" means a GNMA Security or Other
Agency Security which in each case:
(1) is, in the case of Securities which are not
Shared Collateral, backed solely by Eligible Single
Family Mortgage Loans which were Collateral or is, in
the case of Securities which are Shared Collateral,
backed in part by Eligible Single Family Mortgage Loans
which were Collateral;
(2) complies with all requirements (including all
covenants, representations and warranties) of this
Agreement and the Collateral Agency Agreement for the
inclusion of such Security in the Borrowing Base,
including the documentary and other requirements
specified in this Agreement and the Collateral Agency
Agreement;
(3) is subject to a Purchase Commitment;
(4) has been properly issued and validly
authorized by, and is enforceable against, all parties
thereto and constitutes the item of Collateral
purported to be represented by the documents,
instruments and agreements relating thereto delivered
to the Collateral Custodian;
(5) is effectively pledged to the Lender and in
respect of which the Lender has a first perfected Lien
subject to no other Liens, except with respect to
Shared Collateral Liens granted to Warehouse Lenders
providing Warehouse Facilities to the Borrower who have
entered into and are subject to an Intercreditor
Agreement;
(6) is not pledged as Collateral for a period
exceeding ninety (90) days calculated from the date
that any of the Mortgage Loans backing such Security
were originally pledged as Collateral or, with respect
to any Security backed by Mortgage Loans in an
aggregate principal balance of not more than Two
Million Five Hundred Thousand Dollars ($2,500,000), is
not pledged as Collateral for a period exceeding one
hundred twenty (120) days, calculated from the date
that any of the Mortgage Loans backing such Security
were originally pledged as Collateral;
(7) satisfies all requirements of and is being
held and maintained in the manner contemplated by the
term "Pledged Security"; or
(8) is not a Security which Lender notifies the
Borrower and the Collateral Custodian that, in Lender's
reasonable opinion, it is not satisfactory as
Collateral.
"Eligible Single Family Mortgage Loan" means a
Single Family Mortgage Loan which meets each of the
following criteria, as applicable:
(1) is a Mortgage Loan that is one of the
following: (a) a FHA Mortgage Loan or VA Mortgage
Loan; (b) a Conventional Conforming Mortgage Loan; or
(c) a Non-Conforming Mortgage Loan;
(2) complies with all requirements (including all
representations, covenants and warranties) of this
Agreement and the Collateral Agency Agreement for the
inclusion of such Mortgage Loan as Collateral eligible
to be included in the Borrowing Base, including all
documentary requirements specified in this Agreement
and the Collateral Agency Agreement;
(3) has been properly closed and funded, issued
and validly authorized by, and is enforceable against,
all parties thereto and constitutes the item of
Collateral purported to be represented by the
documents, instruments and agreements relating thereto
delivered to the Collateral Custodian and/or pledged to
the Lender;
(4) is effectively pledged to the Lender and in
respect of which the Lender has a first perfected Lien
not subject to any other Liens or claims of any kind;
(5) is a Mortgage Loan with a principal balance
equal to or less than One Million Dollars ($1,000,000);
(6) is subject to a fixed price Purchase
Commitment from a Qualified Investor, and, in the case
of a Mortgage Loan with a principal balance of $650,000
or more, has been preapproved for purchase by such
Qualified Investor;
(7) is either held by the Collateral Custodian on
behalf of Lender pursuant to this Agreement and the
Collateral Agency Agreement or is pledged as Collateral
in accordance with the Wet Closing provisions in the
Agreement and the Collateral Agency Agreement;
(8) was pledged to Lender as Collateral within
thirty (30) days after the date of its origination and
has not remained as Collateral for more than ninety
(90) days or, with respect to Single Family Mortgage
Loans pledged to Lender as Collateral in an aggregate
principal balance of not more than Two Million Five
Hundred Thousand Dollars ($2,500,000), has not remained
as Collateral for more than one hundred twenty (120)
days;
(9) is not in payment default for a period of
sixty (60) days or more under the terms of such Single
Family Mortgage Loan;
(10) is a Mortgage Loan that will fully amortize
within thirty (30) years after the date of origination
and is not subject to any negative amortization;
(11) is a first Lien on a Single Family Residence;
(12) is not a Mortgage Loan in respect of a
cooperative unit;
(13) is not a Mortgage Loan in respect of which
forty-five (45) days have elapsed from the date such
Mortgage Loan was delivered to a Qualified Investor for
examination and purchase;
(14) is not a Mortgage Loan in respect of which
ten (10) days have elapsed from the date a Collateral
Document with respect to such Mortgage Loan was
delivered to the Borrower for correction or completion
without the return thereof to the Collateral Custodian
of the corrected and completed Collateral Documents
complying with the terms of the Collateral Agency
Agreement;
(15) is not a Wet Mortgage Loan in respect of
which the Collateral Custodian has not received all
Collateral documents required to be delivered to the
Collateral Custodian within five (5) Business Days
after the funding of such Wet Mortgage Loan;
(16) is in respect of a Single Family Residence
which is and will continue to be occupied by the
mortgagor or grantor thereunder;
(17) is not a Mortgage Loan that is committed to
be sold to an investor subject to Recourse Obligations;
and
(18) is not a Mortgage Loan, which the Lender
notifies the Borrower and the Collateral Custodian
that, in the Lender's reasonable opinion, is not
satisfactory as Collateral.
"Environmental Discharge" means any discharge or
release of any Hazardous Materials in violation of any
applicable Environmental Law.
"Environmental Law" means any Law relating to
pollution or the environment, including, without limitation,
Laws relating to noise or to emissions, discharges, releases
or threatened releases of Hazardous Materials into the
workplace, the community or the environment, or otherwise
relating to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials.
"Environmental Notice" means any complaint, order,
citation, letter, inquiry, notice or other written
communication from any Person (1) affecting or relating to
the Borrower's compliance with any Environmental Law in
connection with any activity or operations at any time
conducted by the Borrower, (2) relating to the occurrence or
presence of or exposure to or possible or threatened or
alleged occurrence or presence of or exposure to Environ-
mental Discharges or Hazardous Materials at any of the
Borrower's locations or facilities, including, without
limitation (a) the existence of any contamination or
possible or threatened contamination at any such location or
facility and (b) remediation of any Environmental Discharge
or Hazardous Materials at any such location or facility or
any part thereof; and (3) any violation or alleged violation
of any relevant Environmental Law.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time,
including any rules and regulation promulgated thereunder.
"ERISA Affiliate" means any corporation or trade
or business which is a member of the same controlled group
of corporations (within the meaning of Section 414(b) of the
Code) as the Borrower or is under common control (within the
meaning of Section 414(c) of the Code) with the Borrower.
"Escrow Deposits" means all monies held by the
Borrower representing principal, interest, tax, insurance
and other deposits or payments made by mortgagors under
Mortgage Loans.
"Event of Default" has the meaning specified in
Section 9.01.
"Facility Fee" has the meaning specified in
Section 2.09.
"FHA" means the Federal Housing Administration and
its successors.
"FHA Mortgage Loan" means a Mortgage Loan which
satisfies all applicable rules and requirements to be
insured by the FHA and which is insured by the FHA.
"FHLMC" means the Federal Home Loan Mortgage
Corporation and its successors.
"Financial Intermediary" means any securities
clearing house, financial intermediary, clearing corporation
or depositary institution, including the PTC and Federal
Reserve Bank, which may receive, hold or transmit payments
to or on behalf of the Lender or Collateral Custodian
representing Collateral Sale Proceeds.
"Fiscal Year" means each period from January 1 to
December 31.
"FNMA" means the Federal National Mortgage
Association and its successors.
"GAAP" means generally accepted accounting
principles in the United States of America as in effect on
the date of the financial statements referred to in Section
5.05.
"GNMA" means the Government National Mortgage
Association and its successors.
"GNMA Security" means Mortgage-backed securities
issued by the Borrower and guaranteed by GNMA.
"Good Faith Contest" means the contest of an item
if, in the Lender's sole determination: (1) the item is
diligently contested in good faith by appropriate
proceedings timely instituted; (2) adequate reserves are
established with respect to the contested item; (3) during
the period of such contest, the enforcement of any contested
item is effectively stayed; and (4) the failure to pay or
comply with the contested item could not result in a
Material Adverse Change.
"Governmental Approvals" means any authorization,
consent, approval, license, permit, certification, or
exemption of, registration or filing with or report or
notice to, any Governmental Authority.
"Governmental Authority" means any nation or
government, any state or other political subdivision
thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to government.
"Guides" means the seller, servicer, issuer,
mortgagee or related guides, Laws, obligations, rules and
regulations applicable from time to time with respect to
GNMA, FNMA, FHLMC, HUD, FHA or VA and the creation,
origination, sale and servicing of Mortgage Loans and Agency
Securities subject to such guides, Laws, obligations, rules
and regulations.
"Hazardous Materials" means any pollutant,
effluents, emissions, contaminants, toxic or hazardous
wastes or substances, as any of those terms are defined from
time to time in or for the purposes of any relevant
Environmental Law, including, without limitation, asbestos
fibers and friable asbestos, polychlorinated biphenyls, and
any petroleum or hydrocarbon-based products or derivatives.
"HUD" means the Department of Housing and Urban
Development and its successors.
"Increased Wet Mortgage Loan Period" means the
period of time commencing on the fifth to last Business Day
of any month during the term hereof and ending on the fifth
Business Day of the immediately succeeding month.
"Interest Expense" means interest expense of the
Borrower, all as determined in accordance with GAAP.
"Intercreditor Agreement" means an intercreditor
agreement in form and substance acceptable to the Lender
between the Lender and a Warehouse Lender providing a
Warehouse Facility to the Borrower.
"Law" means any federal, state or local statute,
law, rule, regulation, ordinance, order, code, policy or
rule of common law, now or hereafter in effect, and in each
case as amended, and any judicial or administrative
interpretation thereof by a Governmental Authority or
otherwise, including any judicial or administrative order,
consent decree or judgment.
"Lender Express Program " means the Lender
Express wholesale mortgage loan purchase program of the
Lender in which the Borrower is a participant.
"Lien" means any mortgage, deed of trust, pledge,
security interest, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or
preference, priority, or other security agreement or
preferential arrangement, charge, or encumbrance of any kind
or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any
financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction to evidence any of the
foregoing).
"List of Qualified Investors" means the List of
Investors approved by the Lender from time to time in
accordance with Section 3.09; the initial List of Qualified
Investors is attached hereto as Exhibit L.
"Loan" has the meaning specified in Section 2.01.
"Loan Documents" means this Agreement, the Note,
the Collateral Agency Agreement, each Loan Request Form,
each Compliance Certificate, each Borrowing Base
Certificate, and the UCC-1 financing statements delivered in
connection with this Agreement, together with any and all
documents, instruments and materials issued, executed and/or
delivered by the Borrower in connection with any of the
foregoing.
"Loan Request Form" means a Loan Request Form in
the form attached hereto as Exhibit B.
"Material Adverse Change" means (1) a material
adverse change in the status of the business, results of
operations, condition (financial or otherwise), property or
prospects of the Borrower, (2) any event or occurrence of
whatever nature which could have a material adverse effect
on the Borrower's ability to perform its obligations under
the Loan Documents to which it is a party or (3) any
material adverse change in the Collateral or any event or
occurrence of whatsoever nature which could have a material
adverse effect or result in an adverse change in the value,
enforceability, collectability or the nature of the
Collateral.
"Maximum Credit Limit" means Thirty Million
Dollars ($30,000,000), as such amount may be reduced in
accordance with Section 2.03.
"Monthly Date" means the first (1st) day of each
month.
"Mortgage" means a mortgage, deed of trust,
security deed or similar lien encumbering residential real
property securing a Mortgage Loan more fully described
therein.
"Mortgage Loan" means a loan secured by a
Mortgage, the proceeds of which are used to purchase or
refinance the purchase of a Single Family Residence.
"Mortgage Pool" means all Mortgage Loans owned by
the Borrower and held by the Collateral Custodian pursuant
to the terms of the Collateral Agency Agreement.
"Multiemployer Plan" means a Plan defined as such
in Section 3(37) of ERISA to which contributions have been
made by the Borrower or any ERISA Affiliate and which is
covered by Title IV of ERISA.
"Net Income" means net income of the Borrower, all
as determined in accordance with GAAP.
"Non-Conforming Mortgage Loan" means an Eligible
Single Family Mortgage Loan that is not a VA Mortgage Loan,
an FHA Mortgage Loan or a Conventional Conforming Mortgage
Loan.
"Note" has the meaning specified in Section 2.06.
"Obligations" means (1) each and every obligation,
covenant and agreement of the Borrower now or hereafter
existing contained in this Agreement, and any of the other
Loan Documents to which the Borrower is a party, whether for
principal, interest, fees, expenses, indemnities or
otherwise, and any amendments or supplements thereto,
extensions or renewals thereof or replacements therefor,
including but not limited to all indebtedness, obligations
and liabilities of the Borrower to the Lender now existing
or hereafter incurred under or arising out of or in
connection with the Note, this Agreement, the other Loan
Documents, and any documents or instruments executed in
connection therewith, (2) all sums advanced in accordance
with this Agreement by or on behalf of the Lender to protect
any of the Collateral purported to be covered hereby, and
(3) any amounts paid by the Lender in preservation of any of
the Lender's rights or interest in the Collateral, together
with interest on such amounts from the date such amounts are
paid until reimbursement in full at a rate per annum equal
at all times to the Default Rate; in each case whether
direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, now or hereafter
existing, renewed or restructured, whether or not from time
to time decreased or extinguished and later increased,
created or incurred, and including all indebtedness of the
Borrower under any instrument now or hereafter evidencing or
securing any of the foregoing.
"Operating Account" means the Borrower's account
no. 530-042800 maintained with the Collateral Custodian at
Collateral Custodian's offices for purposes of (1)
depositing the Borrower's portion of any amount necessary
for the funding of a Wet Mortgage Loan closing, (2)
receiving the proceeds of any Loans other than Wet Loans,
and (3) receiving the Borrower's portion of the proceeds
from the sale of Collateral or Shared Collateral, which
proceeds are in excess of the amounts necessary to repay the
Obligations. Once amounts are deposited in the Operating
Account, such may be disbursed to or at the direction of the
Borrower.
"Other Agency Securities" means either a security,
pass through certificate or similar instrument issued or
guaranteed by FHLMC or FNMA and backed by a pool of Mortgage
Loans.
"Outstanding Credit" means, as of the date of
determination, the aggregate principal amount of all
outstanding Loans.
"Participant" has the meaning specified in Section
10.04.
"PBGC" means the Pension Benefit Guaranty
Corporation and any entity succeeding to any or all of its
functions under ERISA.
"Permitted Liens" has the meaning specified in
Section 7.03.
"Person" means an individual, partnership,
corporation, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan
established or maintained, or to which contributions have
been made, by the Borrower or any ERISA Affiliate and which
is covered by Title IV of ERISA or to which Section 412 of
the Code applies.
"Pledged Mortgages" means all Mortgage Loans (1)
covered by or referred to or included in a Loan Request
Form, or (2) relied on by the Lender in making a Loan, or
(3) for which any of the documentation related thereto is
received by the Lender or the Collateral Custodian under or
pursuant to any of the Loan Documents, or (4) which are the
subject of the Wet Closing provisions of this Agreement and
the Collateral Agency Agreement.
"Pledged Security" means all Securities issued in
respect of Mortgage Loans some or all of which were, until
the issuance of the Security, Pledged Mortgages, and (1) in
the case of a certificated Security not maintained or traded
in book entry form, delivered in accordance with the terms
of any of the Loan Documents to the Lender, the Collateral
Custodian or a Person acting on behalf of the Lender, (2) in
the case of an uncertificated Security or a certificated
Security maintained or traded in book-entry form, either (a)
posted in the name of the Lender or the Collateral Custodian
for the benefit of the Lender to the PTC Account, an account
maintained with the Federal Reserve Bank, or other
applicable account, or (b) registered in the name of the
Lender or the Collateral Custodian for the benefit of the
Lender with the Financial Intermediary at whose offices or
in whose name such account is held or maintained in
accordance with the procedures for the formation of pools
and Securities specified in Section 7 of the Collateral
Agency Agreement.
"Presence", when used in connection with any
Environmental Discharge or Hazardous Materials, means and
includes presence, generation, manufacture, installation,
treatment, use, storage, handling, repair, encapsulation,
disposal, transportation, spill, discharge and release.
"Primary Nonrecourse Servicing Rights" means the
Servicing Rights which are (1) secured by the Borrower on a
primary basis and not as the subservicing agent for a Person
that has the primary Servicing Rights, (2) not subject to
any recourse arrangement and (3) in full force and effect,
and in respect of which Borrower has satisfied all of its
servicing or other obligations in a timely manner in
accordance with its terms.
"Prohibited Transaction" means any transaction set
forth in Section 406 of ERISA or Section 4975 of the Code.
"PTC" means the Participants Trust Company or any
successor, in either case approved by GNMA for purposes of
holding certificated GNMA Securities so they can be traded
in book entry form.
"PTC Account" means any trading accounts not
subject to any Liens and any other accounts not subject to
any Lien maintained at the PTC into which GNMA Securities or
proceeds or interest on or other amounts payable in respect
of any GNMA Security are deposited.
"PTC Participant" means any Person eligible to
trade securities through the PTC who is in good standing in
accordance with the PTC rules as in effect from time to
time.
"Purchase Commitments" means valid and enforceable
written mandatory or standby commitments issued by Qualified
Investors to purchase Mortgage Loans or Securities.
"Purchased Servicing Rights" means purchased
servicing rights of the Borrower, all as determined in
accordance with GAAP.
"Qualified Investors" shall mean GNMA, FNMA,
FHLMC, and each investor approved by the Lender in
accordance with Section 3.10 and listed on the list of
Qualified Investors which may include banks, insurance
companies, mortgage bankers, pension funds, investment
bankers, securities dealers, state, county or municipal
housing agencies and other financially responsible private
investors.
"Repayment Account" means the account No.
530-042797 maintained by the Lender with the Collateral
Custodian for purposes of receiving repayments, including
Collateral Sale Proceeds, of all portions of the Obligations
and other amounts required to be paid by the Borrower under
this Agreement, the Note and the other Loan Documents. The
Repayment Account shall be a Lender access only account in
Lender's name and the Borrower shall have no interest
therein or access thereto.
"Recourse Obligation" shall mean the obligation
of the Borrower to repurchase Mortgage Loans from a
Qualified Investor or any other Person other than as a
result of (a) a breach of any representations or warranties
contained in any Guide, (b) a breach by Borrower of any
term, covenant or agreement of Borrower contained in any
Purchase Commitment with respect to the sale of such
Mortgage Loans or Securities except, in the case of clauses
(a) or (b), a breach resulting from a Mortgage Loan default.
"Security" means, as applicable, a GNMA Security
or Other Agency Security.
"Servicing Contracts" means all Mortgage Loan
servicing contracts and servicing rights of the Borrower,
including the right of the Borrower to act as servicing
agent for, and otherwise to service (whether on a primary or
subservicing basis), Mortgage Loans and any Securities
backed by Mortgage Loans owned or held by the Borrower or
any other Person (including the Agencies), including,
without limitation, all rights of the Borrower to receive,
hold, collect and distribute principal and interest payments
on, and to receive, hold, collect and distribute insurance,
tax or other escrow deposits made in respect of, Mortgage
Loans and Securities, to administer such Mortgage Loans and
Securities, including the right to send notices and other
communications with respect to such Mortgage Loans and to
pursue remedies under such Mortgage Loans, the right to
receive, hold and collect compensation, fees and other
income (whether payable directly or through the utilization
by the Borrower of escrow or related deposits or otherwise)
in respect of such servicing rights, all documents, files,
data, agreements and instruments creating, affecting,
defining or evidencing such servicing rights and all
accounts, receivables, files, data, computer tapes,
information and data and all records, contract rights and
general intangibles relating to any of the foregoing.
"Servicing Right" means the right of the Borrower
to service its own Mortgage Loans and Securities or Mortgage
Loans and Securities of other Persons pursuant to Servicing
Contracts.
"Shared Collateral" means any Pledged Securities
which are backed in part but not in full by Mortgage Loans
which were previously Collateral under this Agreement, any
Agency Commitments issued in respect of Mortgage Loans which
will back a Pledged Security which is Shared Collateral,
Purchase Commitments which have been pledged to both Lender
and a Warehouse Lender and all Collateral Sale Proceeds from
Pledged Securities which are Shared Collateral in the
Collateral Custodian Account.
"Shared Percentage" means the interest of Lender
and any other Warehouse Lender in any Pledged Security which
is Shared Collateral expressed as a percentage, the
numerator of which is in the case of the Lender, the
Collateral Value of Eligible Mortgages for all Mortgage
Loans backing such Pledged Security which were pledged to
Lender under this Agreement or in the case of any other
Warehouse Lenders, the collateral value attributed to all
Mortgage Loans under the applicable Warehouse Facility
backing such Pledged Security which were pledged to such
Warehouse Lender under such Warehouse Lender's Warehouse
Facility and the denominator of which is the sum of: (1) in
the case of the Lender, the Collateral Value of Eligible
Mortgages for all Mortgage Loans pledged to Lender and, (2)
in the case of all other Warehouse Lenders, the collateral
value of all Mortgage Loans pledged to such Warehouse
Lenders, in either case backing such Pledged Security,
determined in each case as of the date of the pledging of
such Mortgage Loans to Lender or such other Warehouse
Lenders.
"Single Family Mortgage Loan" means a Mortgage
Loan which is secured by a Mortgage which is a first Lien on
a Single Family Residence.
"Single Family Residences" means completed one (1)
to four (4) family residential dwellings and property
related thereto.
"Subsidiary" means, as to any Person, a
corporation of which shares of stock having ordinary voting
power (other than stock having such power only by reason of
the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are
at the time owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person.
"Tangible Net Worth" means Total Assets minus
Total Intangible Assets minus Total Liabilities.
"Taxes" means taxes of the Borrower, all as
determined in accordance with GAAP.
"Termination Date" means August 9, 1995; provided,
however, the Lender may in its sole discretion agree in
writing to extend such date for successive periods of three
hundred and sixty four (364) days.
"Total Assets" means total assets of the Borrower,
all as determined in accordance with GAAP.
"Total Intangible Assets" means the intangible
assets of the Borrower as reflected in the balance sheet of
the Borrower, prepared in accordance with GAAP, including
but not limited to non-compete contracts, employment
contracts, deferred or prepaid transaction costs,
capitalized research and development costs, capitalized
interest, debt discount and expenses, goodwill, patents,
trademarks, copyrights, franchises, licenses and other
intangible assets.
"Total Liabilities" means total liabilities of the
Borrower, all as determined in accordance with GAAP.
"Type of Loan" has the meaning specified in
Section 2.01.
"VA" shall mean the Veterans Administration and
its successors.
"VA Mortgage Loan" means a Mortgage Loan which
satisfies all applicable rules and regulations to be
guaranteed by the VA and is guaranteed by the VA.
"Warehouse Lender" means Lender and any other
lender which is (1) providing a Warehouse Facility to the
Borrower, (2) a party to an Intercreditor Agreement to the
extent that such Warehouse Lender has a Lien on Shared
Collateral and (3) is, in the case of a Warehouse Lender
other than Lender, a party to a collateral agency agreement
similar to the Collateral Agency Agreement with Collateral
Custodian.
"Warehouse Facility" means each credit facility to
which the Borrower is a party, the proceeds of which are
used to finance the origination or acquisition of Mortgage
Loans.
"Wet Closing" means a Wet Mortgage Loan closing
where the Lender is requested to make a Loan, on the date
of, or after, the closing and funding of the Wet Mortgage
Loan, but prior to the delivery of the Collateral Documents
related thereto required to be delivered to the Collateral
Custodian in accordance with the procedures outlined
therefor under this Agreement and the Collateral Agency
Agreement.
"Wet Closing Agent" means each authorized title
insurance representative or Mortgage Loan closing attorney
who (a) is designated by the Borrower as responsible for the
closing of a Wet Mortgage Loan, (b) is subject to approval
by the Lender in its sole discretion, and (c) has received
from the Borrower with the Mortgage Loan closing
instructions an Addendum to Closing Instructions in the form
of Exhibit M whereby it has been instructed to act as agent
for the Lender with regard to each Wet Closing, so that upon
satisfaction of all applicable closing conditions, it will
close each Wet Mortgage Loan, disburse the Wet Loan proceeds
and receive properly completed Collateral Documents on
behalf of the Lender, and deliver such documentation to the
Collateral Agent, all in accordance with the Addendum to
Closing Instructions.
"Wet Collateral" has the meaning specified in
Section 3.02(3).
"Wet Loans" means Loans made to originate Wet
Mortgage Loans.
"Wet Mortgage Loan" means any Eligible Single
Family Mortgage Loan that is pledged to the Lender pursuant
to the Wet Closing provisions contained in this Agreement
and the Collateral Agency Agreement.
"Wet Mortgage Loan Commitment" means the lesser of
(a) Six Million Dollars ($6,000,000.00), or (b)(1) with
respect to any time other than an Increased Wet Mortgage
Loan Period, twenty percent (20%) of the Maximum Credit
Limit, and (2) with respect to any time which is an
Increased Wet Mortgage Loan Period, thirty percent (30%) of
the Maximum Credit Limit.
Section 1.02. Accounting Terms. All accounting
terms not specifically defined herein shall be construed in
accordance with GAAP, and all financial data required to be
delivered hereunder shall be prepared in accordance with
GAAP, consistently applied.
Section 1.03. Computation of Time Periods.
Except as otherwise provided in this Agreement, in the
computation of periods of time from a specified date to a
later specified date, the word "from" means "from and
including" and words "to" and "until" each means "to but
excluding".
Section 1.04. Rules of Construction. When used
in this Agreement: (1) "or" is not exclusive; (2) a
reference to a Person includes its permitted successors and
permitted assigns; and (3) a reference to an agreement,
instrument or document shall include such agreement,
instrument or document as the same may be amended, modified
or supplemented from time to time in accordance with its
terms and as permitted by the Loan Documents.
ARTICLE II. LOANS
Section 2.01. The Loans. Subject to the terms
and conditions of this Agreement, the Lender agrees to make
loans (the "Loans") to the Borrower from time to time during
the period from the Closing Date up to but not including the
Termination Date, provided that after giving effect to such
Loan (1) the Outstanding Credit does not exceed the lesser
of (a) the Maximum Credit Limit, or (b) the Borrowing Base
(the "Commitment") and (2) the Wet Loans do not exceed the
Wet Loan Commitment. The Loans may be outstanding as Wet
Loans, Documented Loans and Certified Loans (each a "Type"
of Loan). Each Loan which shall not utilize the Commitment
in full shall be in the minimum amount set forth in Section
2.14. Within the limits of the Commitment, the Borrower may
borrow, make prepayments pursuant to Section 2.02 and
Mandatory Payments of Collateral Sale Proceeds pursuant to
Section 2.03, and reborrow under this Section 2.01.
The Loans may be: (1) Wet Loans; (2) Documented
Loans; (3) Certified Loans; or (4) any combination of the
foregoing, as determined by the Borrowing Base Certificate.
Section 2.02. Notice and Manner of Borrowing.
The Borrower may request a Loan hereunder by delivering to
the Lender, with a copy thereof to the Collateral Custodian,
a signed telefax of a Loan Request Form in the form of
Exhibit B not later than 7:30 a.m. (eastern time) on the
Business Day of the requested Loan. Such Loan Request Form
shall specify (1) the Business Day on which the Loan is to
be made, and (2) the total amount of the Loan requested.
The Borrower shall deliver written originals of each
telefaxed Loan Request Form to the Collateral Custodian on a
weekly basis, to be delivered to the Collateral Custodian
not later than the first Business Day of the week
immediately following the delivery of the telefaxed Loan
Request Form.
Upon satisfaction of the terms of this Agreement,
including satisfaction of all conditions precedent, the
Lender will make the requested Loan by wiring the proceeds
of the Loan to the Disbursement Account in accordance with
the terms of the Collateral Agency Agreement.
Section 2.03. Reduction or Termination of
Commitment. The Borrower shall have the right, upon not
less than thirty (30) days' written notice to the Lender and
the Collateral Custodian, to terminate the Commitment, in
whole or in part, provided, however, at the time of such
termination the Borrower makes a payment on the Loans to the
extent the principal amount of the Loans exceed the
Commitment as so terminated, together with all interest and
other amounts payable thereon to the date of payment. Any
partial termination shall be in the amount of One Million
Dollars ($1,000,000) or an integral multiple thereof. Upon
termination in whole or in part of the Commitment, the
Commitment to the extent so terminated may not be reinstated
without the written consent of the Lender.
Section 2.04. [Intentionally Omitted.]
Section 2.05. Interest. The Borrower shall pay
interest to the Lender on the Outstanding Credit, at a rate
per annum as follows: (1) for a Wet Loan at a rate equal to
the CP Rate plus two and three quarters percent (2.750%);
(2) for a Documented Loan at a rate equal to the CP Rate
plus one and three quarters percent (1.750%); and (3) for a
Certified Loan at a rate equal to the CP Rate plus one and
one quarter percent (1.250%). Any principal amount not paid
when due (at maturity, by acceleration or otherwise) shall
bear interest thereafter, payable on demand, at the Default
Rate.
The interest rate on each Loan shall change when
the CP Rate changes. Interest on each Loan shall not exceed
the maximum amount permitted under applicable law and shall
be calculated on the basis of a year of three hundred sixty
(360) days for the actual number of days elapsed.
Interest on that portion of the Outstanding Credit
which the Lender determines is attributable to all
Documented Loans shall bear interest at the CP Rate plus one
and three quarters percent (1.750%) and interest on that
portion of the Outstanding Credit which the Lender
determines is attributable to Wet Mortgage Loans shall bear
interest at the CP Rate plus two and three quarters percent
(2.750%). Loans that were initially made in respect of a
Wet Mortgage Loan will begin to accrue interest at the CP
Rate plus one and three quarters percent (1.750%) on the
Business Day that the Collateral Custodian certifies to the
Lender in a Borrowing Base Certificate received by Lender
not later than 2:00 p.m. (eastern time) on such Business Day
that all of the required documents have been received and
accepted by the Collateral Custodian and that such Mortgage
Loan is no longer classified in the Borrowing Base as a Wet
Mortgage Loan. Loans accruing interest at the rate of the
CP Rate plus one and three quarters percent (1.750%) will
begin to accrue interest at the CP Rate plus one and one
quarter percent (1.250%) on the Business Day that the
Collateral Custodian certifies in the applicable Borrowing
Base Certificate received by Lender not later than 2:00 p.m.
(eastern time) on such Business Day that the underlying
Mortgage Loan meets the pool documentation requirements of
the applicable Qualified Investor.
Section 2.06. Note. All Loans made by the Lender
under this Agreement shall be evidenced by, and repaid with
interest in accordance with, a single promissory note of the
Borrower in substantially the form of Exhibit A duly
completed, in the original principal amount equal to the
initial Maximum Credit Limit, dated the Closing Date,
payable to the Lender and maturing as to principal on the
Termination Date (the "Note"). The amount of each Loan, the
type of the Loan and each renewal, the accruing interest
rate and payment of principal amount received by the Lender
shall be recorded in the books and records of the Lender,
which books and records shall, in the absence of manifest
error, be conclusive as to the outstanding balance of and
other information related to the Loans made by the Lender.
Lender shall be entitled at any time to endorse on a
schedule attached to the Note the amount and type of each
Loan and information relating thereto.
Section 2.07. [Intentionally Deleted].
Section 2.08. Mandatory Prepayment. To the
extent that the Outstanding Credit exceeds the then
effective Borrowing Base, the Borrower shall immediately
either (1) make a prepayment on the Outstanding Credit in an
amount equal to the excess of such Outstanding Credit over
the then effective Borrowing Base or (2) provide additional
Collateral so that the Outstanding Credit does not exceed
the Borrowing Base.
All Collateral Sale Proceeds shall be paid
directly to the Repayment Account by the Qualified Investor
or Financial Intermediary making such payment to be applied
by the Lender to reduce the Outstanding Credit and interest
payable thereon. The application of Collateral Sale
Proceeds to the repayment of the Outstanding Credit and
interest thereon shall not be subject to the prior notice or
minimum amount requirements specified in Section 2.07.
If for any reason a Wet Loan shall be made in
respect of a Wet Mortgage Loan which is not closed and
funded on the scheduled funding date, then the Borrower will
prepay the Wet Loan made in respect of such Wet Mortgage
Loan on the following Business Day.
Section 2.09. Fees. The Borrower shall pay to
the Lender a non-refundable facility fee (the "Facility
Fee") equal to one fifth of one percent (0.20%) of the
Maximum Credit Limit as of the Closing Date which fee shall
be payable in advance in monthly installments on each
Monthly Date.
Section 2.10. Method of Payment. The Borrower
shall make each payment under this Agreement and under the
Note not later than 2:00 p.m. (eastern time) on the date
when due in Dollars by Federal Reserve wire transfer to the
Repayment Account in immediately available funds. If a
Federal Reserve wire reference number for the wire transfer
is not received by Lender by 2:00 p.m. (eastern time), the
payment will be credited to the Borrower's account on the
next Business Day. The Borrower hereby authorizes the
Lender, if and to the extent payment is not made when due
under this Agreement or under the Note, to charge from time
to time against any account it maintains with the Lender or
Collateral Custodian on behalf of Lender or any amount so
due to the Borrower by the Lender the amount so due.
Accrued interest shall be due and payable in
arrears as follows:
(1) The Lender will send by telefax or first
class U.S. mail to the Borrower monthly bills for interest
and other amounts payable under this Agreement and the Note
on or about the first day of each month covering the
immediately preceding month. Such amounts shall be due and
payable on each Monthly Date, commencing the first such date
after the commencement of the Loan, and such bills shall be
paid not later than five (5) days after the receipt of same
by Borrower;
(2) Accrued interest shall be due and payable
upon any payment or prepayment of principal; and
(3) Interest accruing at the Default Rate shall
be due and payable on demand.
The Borrower shall take all actions required so
that all Collateral Sale Proceeds will be (1) paid directly
to the Repayment Account or the Collateral Custodian Account
in the case of Collateral Sale Proceeds in respect of Shared
Collateral by a Qualified Investor or a Financial
Intermediary acting on behalf of such Qualified Investor,
and (2) applied to repay the Loans.
Except to the extent provided in this Agreement,
whenever any payment to be made under this Agreement or
under the Note shall be stated to be due on any day other
than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in
such case be included in the computation of the payment of
interest.
Section 2.11. Use of Proceeds. The proceeds of
the Loans hereunder shall be used by the Borrower solely for
the purpose of purchasing, acquiring and originating
Mortgage Loans which will be Eligible Single Family Mortgage
Loans. The Borrower will not, directly or indirectly, use
any part of such proceeds: (1) for the purpose of
purchasing or carrying any margin stock within the meaning
of Regulation U of the Board of Governors of the Federal
Reserve System, or (2) to extend credit to any Person for
the purpose of purchasing or carrying any such margin stock.
Section 2.12. Reliance Upon Instructions.
Without limiting the coverage of any other indemnities
provided in this Agreement, the Borrower hereby indemnifies
and agrees to hold harmless the Lender, the Collateral
Custodian and their respective officers, employees and
agents from and against any and all liabilities, damages,
losses, costs and expenses, including counsel fees,
howsoever arising out of any actions taken in reliance upon
telephonic, telecopier or other instructions believed in
good faith to have been given under this Agreement on the
Borrower's behalf by a Person designated by the Borrower.
Section 2.13. Additional Costs. The Borrower
shall pay directly to the Lender from time to time on demand
such amounts as the Lender may determine to be necessary to
compensate it for any increased costs which the Lender
determines are attributable to its making or maintaining any
Loan at a CP Rate, or any reduction in any amount receivable
by the Lender hereunder in respect of any of such Loans or
such obligation. Determinations by the Lender for purposes
of this Section 2.16 shall be conclusive absent manifest
error.
ARTICLE III. COLLATERAL.
Section 3.01. Grant of Security Interest. The
Borrower hereby assigns and pledges to the Lender and hereby
grants to the Lender a security interest in and to the
following, whether now owned or hereafter acquired by the
Borrower (the "Collateral"):
(1) All Pledged Mortgages and Pledged Securities;
(2) All commitments and other approvals, issued
by or on behalf of the FHA or VA to insure or guarantee
and any FHA or VA insurance or guarantees of any
Mortgage Loans included in the Pledged Mortgages;
(3) all Purchase Commitments and Agency
Commitments held by or issued to the Borrower (whether
or not the Pledged Mortgages or the Pledged Securities
are intended for delivery and sale pursuant to, or in
connection with, such Purchase Commitments or Agency
Commitments);
(4) All cash from time to time delivered to the
Lender or the Collateral Custodian, which cash is
deposited by the Lender or the Collateral Custodian in
the Cash Collateral Account, the Repayment Account, the
Operating Account, the PTC Account, the Collateral
Custodian Account, the Disbursement Account, any
accounts maintained by a Wet Closing Agent for purposes
of holding Loan proceeds and all cash and other
property from time to time delivered by the Borrower to
the Lender or the Collateral Custodian or received by
the Lender or the Collateral Custodian in respect of
the Collateral;
(5) All deposits, deposit accounts, accounts,
accounts receivable, contract rights, inventory,
equipment, personal property, chattel paper,
instruments, acceptances, drafts, and other obligations
of any kind, together with all ledger sheets, files,
records and documents relating to any of the foregoing,
including, without limitation, all computer records,
programs storage media and computer software useful or
required in connection therewith (including without
limitation the right to receive payments and deposits
of any kind under or in connection with, and all
Servicing Rights related to, the Pledged Mortgages and
Pledged Securities) of whatsoever kind relating to the
Pledged Mortgages, Pledged Securities, the PTC Account,
the Operating Account, the Repayment Account, the
Disbursement Account, the Collateral Custodian Account,
any accounts maintained by a Wet Closing Agent for
purposes of holding Loan proceeds, general intangibles,
documents, agreements, data, records, information
(including, without limitation, the right to receive
income, interest, payments and deposits of any kind
under or in connection with all Collateral) of
whatsoever kind relating to or in respect of the
foregoing items of Collateral (and without regard to
whether any of the foregoing may be in the possession
of the Lender or the Collateral Custodian), including,
without limitation, the right to receive all hazard,
private mortgage and title insurance proceeds and
condemnation awards which may be payable in respect of
the premises encumbered by any Pledged Mortgage; and
(6) All proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds
which constitute property of the types described in any
of the clauses of this Section 3.01 and, to the extent
not otherwise included, all payments under insurance
(whether or not the Lender or the Borrower is the loss
payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise
with respect to any of the foregoing Collateral.
The pledge, assignment and security interest
granted under this Section 3.01 secures the payment and
performance in full of the Obligations.
Section 3.02. Wet Closing Provisions. In the
event of a Wet Closing, the Borrower agrees that:
(1) The Borrower shall deliver to the Collateral
Custodian and the Lender, not later than 4:00 p.m. of
the Business Days immediately prior to the scheduled
date to close the Wet Mortgage Loan, (a) a Wet Closing
Notice in the form of Exhibit I specifying the amount
of the Wet Mortgage Loan, the date of the Wet Mortgage
Closing, the name and address of the Wet Closing Agent,
and such other information set forth in the Wet Closing
Notice; and Borrower shall comply with all provisions
of the Collateral Agency Agreement required to be
complied with in connection with the making of a Wet
Loan.
(2) The Borrower will cause the Wet Mortgage Loan
to properly close and fund on the date specified
therefor, and will cause all Mortgage Loan documents to
be properly completed, executed and, where applicable,
recorded and filed;
(3) The Lender shall have a Lien in each Wet
Mortgage Loan and all documents and agreements
delivered in connection therewith or relating thereto
including, without limitation, the Mortgage note,
Mortgage and all items of Collateral related thereto
(such Wet Mortgage Loan and all such documents,
instruments and agreements and other items of
collateral related thereto, being herein collectively
called, the "Wet Collateral") immediately upon the
funding of the Loan in respect thereof and the creation
of the Wet Mortgage Loan;
(4) the Borrower shall as soon as reasonably
possible, but in no event later than five (5) Business
Days after the date of the making of the Wet Loan,
deliver to the Collateral Custodian all documents and
instruments related to the Wet Collateral which are
required to be delivered to the Collateral Custodian
pursuant to this Agreement; and
(5) the Borrower shall execute any and all
additional documents, agreements, notices or
acknowledgments as the Collateral Custodian shall
reasonably request to maintain, preserve, perfect or
protect the Lender's Lien in such Wet Collateral.
While the Borrower is in possession of the Wet
Collateral, it will hold same exclusively for the
Lender, without authority to make any other disposition
thereof, or of the proceeds thereof.
Section 3.03. Responsibility for Collateral. To
the extent required by Section 9-207 of the applicable
Uniform Commercial Code or other applicable law, the Lender
shall use reasonable care in the care, transmittal, custody
and preservation of Collateral in its possession; reasonable
care shall be deemed to be such care that the Lender
exercises in the transmittal, care, preservation and custody
of its own property of a similar nature. Notwithstanding
the foregoing, the Lender shall have (1) no responsibility
with respect to the risk of accidental loss or damage to
Collateral either in its possession or in the possession of
the Collateral Custodian, (2) no obligation to provide
insurance for or in respect of the Collateral or the duties
performed by the Collateral Custodian and (3) no
responsibility for Collateral not in its possession. The
Lender shall have no fiduciary responsibility or duty to the
Borrower with respect to the care, preservation, holding,
maintenance or transmittal of the Collateral delivered to
the Collateral Custodian or any other Person.
Section 3.04. Release of Security Interest. The
Collateral Custodian is authorized under the Collateral
Agency Agreement, within a reasonable time of the receipt of
a request therefor from the Borrower, to release any
Collateral specified in such request from the Lien granted
hereby and thereupon deliver the same to the Borrower,
provided, however, that (a) no Default or Event of Default
shall have occurred and be continuing, and (b) after giving
effect to such release and delivery, the Borrowing Base of
the remaining Collateral shall be at least equal to the
Outstanding Credit.
Section 3.05. Creation of GNMA Securities and
Other Agency Securities. With respect to each Mortgage Loan
pledged under this Agreement, which Mortgage Loan is
intended for inclusion in a GNMA, FNMA or FHLMC Mortgage
Loan pool to back certificated or book-entry Securities, the
Borrower agrees that it will enter into and conform to such
agreements and procedures, including the timely delivery of
all Agency required delivery documents in accordance with
the Guides, as are established by the Collateral Agency
Agreement or otherwise with the approval of the Lender from
time to time for the delivery of Pledged Mortgages to the
GNMA, FHLMC or FNMA pool custodians and the issuance,
maintenance and transfer of Securities at the PTC or through
the Federal Reserve System and the maintenance and
preservation of the Lender's perfected Lien in Pledged
Mortgages intended to back such Securities (prior to the
issuance of Securities in respect thereof) and in such
Securities when issued.
All procedures relating to the creation of
Securities shall be subject to the approval of the Lender.
Section 3.06. Payment for Securities. All
Securities delivered to a Qualified Investor at the PTC or
through the Federal Reserve System shall be against same day
payment in good funds in accordance with applicable rules
and regulations of the PTC or the Federal Reserve System
relating to the delivery and transfer of such Securities.
Section 3.07. Representations Concerning
Collateral. The Borrower hereby represents and warrants to
the Lender and by submitting each Loan Request Form shall be
deemed to have represented and warranted to the Lender that
as of the date of such Loan Request Form.
(1) Ownership; No Liens; Pledge to the Lender.
The Borrower is the legal and equitable owner of the
Pledged Mortgages, the Pledged Securities and all other
items of Collateral, free and clear of all Liens,
except (a) for the Lien granted under this Agreement
and (b) Liens held by Warehouse Lenders in Shared
Collateral complying with the requirements of this
Agreement. All Pledged Mortgages, Pledged Securities
and other items of Collateral have been duly authorized
and validly issued or transferred to the Borrower and
all items of Collateral (a) comply, as applicable, with
all of the requirements of this Agreement and the
Collateral Agency Agreement, including those required
for inclusion in the Borrowing Base, and (b) have been
validly pledged or assigned to the Lender, subject to
no other Liens (other than Shared Collateral), and the
Lender has a first perfected Lien therein within the
meaning of the applicable Uniform Commercial Code if
and to the extent governed by the Uniform Commercial
Code. The Borrower has the full right and authority to
pledge the Collateral pledged by it hereunder and has
not pledged the Collateral, or any part thereof, to any
Person other than to Persons holding Shared Collateral.
(2) Compliance with Laws; Enforceability;
Modification; Required Documents, Etc. All Pledged
Mortgages and documents related thereto (a) have been
made in compliance, in all material respects, with all
requirements of the Real Estate Settlement Procedures
Act, the Equal Credit Opportunity Act, the Federal
Truth-In-Lending Act and all other applicable Laws
governing residential Mortgage lending, (b) are
genuine, valid, duly authorized, properly executed,
properly recorded or filed and enforceable in
accordance with their terms, without defense or offset,
(c) have not been modified or amended and have not had
any requirements thereof waived except (i) for minor
modifications in the ordinary course of the Borrower's
business which do not in any event materially adversely
affect the value or marketability of the relevant item
of Collateral or (ii) modifications or waivers which
are required by GNMA, FNMA, FHLMC, FHA, VA in
connection with changes to the Guides, (d) comply with
the terms of this Agreement, are subject to and comply
with a Purchase Commitment issued by a Qualified
Investor, (e) have been fully advanced in the
respective face amounts thereof and (f) are secured by
Mortgages which are first Liens on the respective
Single Family Residences described therein. With
respect to each Pledged Mortgage, the Borrower has in
its possession all documents and instruments required
to be possessed by the Borrower (a) under the
Collateral Agency Agreement, (b) under the Guides in
the case of all Mortgage Loans other than Non-
Conforming Mortgage Loans, and (c) under a Purchase
Commitment for all Mortgage Loans required to be
covered by a Purchase Commitment pursuant to this
Agreement, other than those documents and instruments
which are in the possession of the Collateral Custodian
or in the possession of a party to whom delivery was
made in accordance with the Collateral Agency
Agreement.
(3) Defaults. No default, nor any event which
would become a default with notice or lapse of time or
both, has occurred and is continuing under any Pledged
Mortgage for a period in excess of sixty (60) days, and
with respect to Pledged Mortgages, if any such default
or event has occurred and has continued for more than
sixty (60) days, the Borrower has notified the
Collateral Custodian and the Lender thereof in the
Borrower's most recent monthly Collateral report.
(4) Compliance with Agency Requirements; Status
with Agencies. The Borrower has complied in all
material respects with all Laws relating to obtaining
and maintaining FHA insurance or VA guarantees with
respect to each Mortgage Loan included in the Pledged
Mortgages which was designated by the Borrower as an
FHA Mortgage Loan or a VA Mortgage Loan, and such
insurance or guarantee is in full force and effect.
All Conventional Conforming Mortgage Loans included in
the Pledged Mortgages comply in all material respects
with all applicable requirements for purchase under the
FNMA or FHLMC standard form of selling contract for
similar Mortgage Loans and any supplement thereto then
in effect, including, but not limited to, the
representations and warranties made therein. All Non-
Conforming Mortgage Loans included in the Pledged
Mortgages comply in all material respects with all
applicable requirements for sale to a Qualified
Investor, including, but not limited to, the
representations and warranties required by such
Qualified Investor. If required by any Qualified
Investor, the Borrower shall become a qualified HUD/FHA
lender, mortgagee and servicer and in good standing,
and shall become eligible fully to participate as a
lender, mortgagee and servicer in good standing under
the VA guaranty program. To the extent Borrower
intends to pledge Mortgage Loans to back GNMA
Securities, the Borrower is fully approved by and in
good standing with GNMA as an issuer, servicer under
all provisions of the Guides. The Borrower is fully
approved by and in good standing with GNMA, FNMA and
FHLMC as a seller, servicer to sell and pledge Mortgage
Loans to back Other Agency Securities under all
provisions of the Guides. Each Pledged Mortgage which
is intended to back a GNMA Security or Other Agency
Security complies in all respects with the requirements
applicable thereto to such Mortgage Loans as required
from time to time by the applicable Agencies, and in
the creation of any such Security, the Borrower has
complied with and has satisfied all rules,
requirements, procedures, representations, warranties
and agreements promulgated or required by such
Agencies. All Pledged Securities comply with terms of
this Agreement and except as provided in Section 3.03
are subject to and comply with a Purchase Commitment
held by the Borrower or as provided in Section 3.03 are
completely covered by one or more.
(5) Insurance Relating to Pledged Mortgages. All
fire and casualty policies covering the premises
encumbered by each Mortgage included in the Pledged
Mortgages (a) name the Borrower as an additional
insured under a standard mortgagee clause not less
favorable to the Borrower than the applicable standard
mortgagee endorsement, (b) are in full force and
effect, and (c) afford insurance against fire and such
other hazards as are usually insured against in the
broad form of extended coverage insurance from time to
time available. All flood, title and other insurance
policies (including required private mortgage
insurance) (i) name the Borrower as an additional
insured under a standard mortgagee clause not less
favorable to the Borrower than the applicable standard
mortgagee endorsement, or in the case of title
insurance, the insured mortgagee, (ii) are in full
force and effect, and (iii) afford insurance against
the hazards and risks required to be insured against by
any Agency or prudent underwriting practices. The
Borrower has complied with all requirements of the
Agencies or any Qualified Investor for obtaining
insurance with respect to any Pledged Mortgage or
Mortgage Loan serviced under any Servicing Contract.
(6) Purchase Commitments; Agencies Commitments.
All Purchase Commitments and Agency Commitments
included in the Collateral constitute legally binding
and enforceable obligations of the Borrower and the
Qualified Investors or Agencies who are parties
thereto.
(7) Servicing Contracts. All Servicing Contracts
are valid and binding agreements between the Borrower
and/or the other Person thereto, are full and complete
statements of the terms and provisions of the
transactions contemplated thereby, are unmodified and
in full force and effect, and the Borrower's rights
thereunder are not subject to any offset, counterclaim
or defense.
(8) Escrow Deposits. All Escrow Deposits are
held by the Borrower in accordance with applicable Laws
and any agreements relating to same and have been and
will be applied to the obligations for which they were
deposited in accordance with any agreements relating to
same.
Section 3.08. Covenants and Agreements Concerning
Collateral. The Borrower covenants and agrees as follows:
(1) Defense of Interests. The Borrower covenants
and agrees that it will defend the right, title and
interest of the Lender in and to the Pledged Mortgages,
the Pledged Securities and all other items of
Collateral against the claims and demands of all
Persons.
(2) Modification; Etc. The Borrower shall not
amend, modify, or waive any of the terms and conditions
of, or settle or compromise any claim in respect of,
any Pledged Mortgages, Pledged Securities or other
Collateral, or any rights related to any of the
foregoing, except in the ordinary course of business
conducted in accordance with (a) standards of servicing
consistent with customary and usual practice in the
industry, and (b) standards and rules of the respective
Qualified Investors.
(3) Sale or Encumbrance. The Borrower shall not
sell, option, assign, transfer or otherwise alienate
any Collateral, other than in the ordinary course of
its business and in accordance with the terms and
provisions of this Agreement, or permit any Collateral
or any interest therein to be subject to a Lien, except
the Lien granted under this Agreement and Shared
Collateral.
(4) Performance under Servicing Contracts; Escrow
Deposits. The Borrower shall service or cause to be
serviced all Pledged Mortgages, Mortgage Loans backing
Pledged Securities, Pledged Securities and Mortgage
Loans serviced under Servicing Contracts in accordance
with the standard requirements of the issuers of
Purchase Commitments covering the same, all
requirements of applicable Servicing Contracts and all
applicable Agency requirements. The Borrower shall
hold all Escrow Deposits in accordance with all
applicable Laws and all agreements relating to such
Escrow Deposits, without commingling the same with
non-escrow funds, and shall hold and apply the same for
the purposes for which such Escrow Deposits were
collected in accordance with all applicable Laws and
agreements.
(5) Failure to Qualify for Inclusion in Borrowing
Base and Related Matters. The Borrower shall notify
the Collateral Custodian and the Lender of (a) any
default under any Pledged Mortgage which continues
beyond sixty (60) days in each monthly Collateral
report, (b) the failure of any item of Collateral which
is required by the terms hereof to be so covered by a
Purchase Commitment, (c) the failure of any item of
Collateral to satisfy any requirements of this
Agreement for inclusion in the Borrowing Base, and (d)
any other matter which in the reasonable determination
of the Borrower has a material adverse effect on the
Collateral.
(6) Further Assurances. The Borrower agrees that
from time to time, at the expense of the Borrower
(including the payment of all filing fees whether the
items are filed by the Borrower or by the Lender), the
Borrower will promptly execute and deliver all further
instruments and documents, and take all further
actions, that may be necessary or desirable, or that
the Lender may request, in order to preserve, perfect
and protect any security interest granted or purported
to be granted hereby or to enable the Lender to
exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the
generality of the foregoing, the Borrower will execute
and file such financing or continuation statements, or
amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the
Lender may request, in order to perfect and preserve
the security interest granted or purported to be
granted to the Lender hereby.
(7) Inspection. The Lender and the Collateral
Custodian, or any agent or representative thereof,
shall have the right at any reasonable time from time
to time, beginning during normal business hours, upon
prior notice to enter the Borrower's premises to
inspect the Collateral, documents and agreements
related thereto and the records relating to the
Collateral. The Lender and the Collateral Custodian
shall have the right to make abstracts or photocopies,
at the Borrower's sole cost and expense, from or of the
Borrower's books and records pertaining to the
Collateral.
(8) Servicing Rights Valuation. The Borrower
shall designate annually a recognized independent
appraiser acceptable to the Lender in the exercise of
its reasonable discretion to the Lender to review the
Servicing Contracts and determine the value thereof.
In the event the Borrower fails or refuses to designate
such an appraiser to value the Servicing Contracts or
such appraiser fails to timely deliver such appraisal,
the Lender shall have the right upon prior notice to
the Borrower to designate an appraiser to perform such
valuation. The Borrower shall pay the reasonable costs
incurred by the Lender and any independent appraiser
from time to time in determining the value of the
Servicing Contracts.
(9) Review of the Borrower with the Agencies.
The Lender shall have the right from time to time to
contact the Agencies to review and discuss the
Borrower's status and standing with the Agencies and to
otherwise review and discuss the Borrower's business
and other relationship and information with any Agency,
including, without limitation, the Borrower's Servicing
Contracts with such Agencies. The Borrower authorizes
the Agencies to review and discuss all such matters
with the Lender as permitted hereby and shall confirm
such authorization in writing to any one or more of the
Agencies at the request of the Lender.
Section 3.09. List of Qualified Investors.
Contemporaneously with the execution and delivery of this
Agreement, the Borrower shall submit to the Lender, and the
Collateral Custodian for the approval of the Lender, a List
of Qualified Investors to which the Borrower may direct the
delivery of Collateral in accordance with the terms of this
Agreement, from time to time. The Lender shall have the
right, in its sole discretion, to approve or disapprove of
any Qualified Investors so listed by the Borrower at any
time upon notice to the Borrower (which notice may be
telephonic) and the initial acceptance of a Qualified
Investor by the Lender shall not prevent the subsequent
rejection of any such Qualified Investor by the Lender. In
the event Lender disapproves or rejects a Qualified
Investor, Lender shall make a good faith effort to minimize
the affect of such disapproval or rejection on the business
of the Borrower, provided, however, Borrower acknowledges
and agrees that Lender shall have no obligation or liability
to Borrower or any other party as a result of such
disapproval or rejection. The Borrower may add or delete
Qualified Investors from the List of Qualified Investors by
submitting an updated List of Qualified Investors to the
Lender and the Collateral Custodian, which updated List of
Qualified Investors shall be subject to the approval in all
respects of the Lender.
Section 3.10. Uniform Commercial Code Financing
Statements. The Lender is hereby authorized to file in the
name of the Borrower, without the need for the Borrower's
signature thereto, such Uniform Commercial Code financing
statements, amendments thereto and continuations thereof
which the Lender at any time reasonably determines is
necessary to perfect or better assure the Lien and other
benefits intended to be afforded hereby. A carbon,
photographic or other reproduction of this Agreement or any
financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where
permitted by law.
Section 3.11. Collection Rights. Unless a
Default or Event of Default shall have occurred and be
continuing, and except with respect to Collateral Sale
Proceeds which shall be paid to the Repayment Account
directly by a Qualified Investor or through a Financial
Intermediary as provided in Section 2.10, the Borrower shall
be entitled to receive and collect directly all sums payable
to the Borrower in respect of the Collateral and to exercise
all voting or consensual powers in respect of the Collateral
in a manner not inconsistent with the terms of this
Agreement. Upon the occurrence and during the continuance
of a Default or an Event of Default, the Lender or at the
direction of the Lender, the Collateral Custodian shall be
entitled to receive and collect all sums payable to the
Borrower in respect of the Collateral subject to applicable
law and Qualified Investor and mortgage insurer
requirements, and in such case (a) the Lender or Collateral
Custodian at the direction of the Lender may, in the
Lender's or the Collateral Custodian's name or in the name
of the Borrower or otherwise, demand, sue for, collect or
receive any money or property at any time payable or
receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so, (b)
the Borrower shall, forthwith pay to the Lender or, if
required by the Lender, to the Collateral Custodian at their
respective principal offices all amounts thereafter received
by the Borrower upon or in respect of any of the Collateral,
advising the Lender and Collateral Custodian as to the
source of such funds, and (c) all amounts so received and
collected by the Lender and Collateral Custodian shall be
held by them as part of the Collateral.
Section 3.12. Attorney-in-Fact. The Lender and
the Collateral Custodian are each hereby appointed the agent
and attorney-in-fact of the Borrower for the purpose of
carrying out the provisions of this Agreement, taking any
action and executing any instruments which the Lender may
deem reasonably necessary or advisable to accomplish the
purposes hereof and to obtain for the Lender the benefits of
this Agreement, the other Loan Documents, the Collateral and
the security intended to be provided to the Lender hereby
and thereby subject to applicable law and Qualified Investor
and mortgage insurer requirements, which agency and
appointment as attorney-in-fact is irrevocable and coupled
with an interest. Without limiting the generality of the
foregoing, upon the occurrence of an Event of Default, the
Lender and the Collateral Custodian (at the direction of the
Lender) shall have the right and power in the place and
stead of the Borrower, and in the name of the Borrower or
otherwise (from time to time and without prior notice to or
consent from the Borrower, and without releasing or in any
manner affecting the Borrower's obligations to the Lender):
(a) to receive, endorse and collect all checks, drafts or
chattel paper made payable to the order of the Borrower
representing any payment on account of the principal,
interest or other amount on any of the Pledged Mortgages,
Pledged Securities or other items of Collateral, to give
full discharge for the same and to complete any endorsements
or assignments made in blank or which are updated or
otherwise incomplete or to execute new endorsements or
assignments to any persons, (b) to ask, demand, collect, sue
for, recover, compound, receive and give, acquittances and
receipts for moneys due and to become due under or in
respect of any of the Collateral, (c) to file any claims or
take any action or institute any proceedings which the
Lender may deem necessary or desirable for the collection or
completion of, or perfection of the Lender's interest in any
of the Collateral or otherwise to enforce the rights of the
Borrower or the Lender with respect to any of the
Collateral, this Agreement or the other Loan Documents,
including, without limitation, the endorsement of any
Mortgage note, and the creation, execution and recording of
any Assignment of Mortgage for any Pledged Mortgage and (d)
if the Borrower fails to perform any obligation under this
Agreement or the other Loan Documents, to perform to cause
performance of such obligation.
Section 3.13. The Borrower Remains Liable.
Anything herein to the contrary notwithstanding: (1) the
Borrower shall remain liable under the contracts and
agreements included in the Collateral to the extent set
forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not
been executed; (2) the exercise by the Lender of any of the
rights hereunder shall not release the Borrower from any of
its duties or obligations under the contracts and agreements
included in the Collateral; and (3) the Lender shall not
have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this
Agreement, nor shall the Lender be obligated to perform any
of the obligations or duties of the Borrower thereunder or
to take any action to collect or enforce any claim for
payment assigned hereunder.
ARTICLE IV. CONDITIONS PRECEDENT
Section 4.01. Conditions Precedent to Initial
Loan. The obligations of the Lender to make the initial
Loan is subject to the condition precedent that the Lender
shall have received on or before the Closing Date each of
the following documents, in form and substance satisfactory
to the Lender and its counsel, and each of the following
requirements shall have been fulfilled:
(1) Evidence of Due Incorporation and all
Corporate Action. A certificate of the Secretary or
Assistant Secretary of the Borrower, dated the Closing
Date, attesting to the certificate of incorporation and
by-laws of the Borrower and all amendments thereto, and
to all corporate actions taken by the Borrower,
including, without limitation, resolutions of its board
of directors, authorizing the execution, delivery and
performance of the Loan Documents, and each other
document to be delivered by the Borrower pursuant to
the Loan Documents;
(2) Incumbency and Signature Certificate of the
Borrower. A certificate of the Secretary or Assistant
Secretary of the Borrower, dated the Closing Date,
certifying the names and true signatures of the
officers of the Borrower authorized to sign the Loan
Documents, and the other documents to be delivered by
the Borrower under the Loan Documents including,
without limitation, each Loan Request Form;
(3) Good Standing Certificates for the Borrower.
A certificate, dated within forty-five (45) days of the
Closing Date, from the Secretary of State (or other
appropriate official) of the jurisdiction of
incorporation of the Borrower certifying as to the due
incorporation and good standing of the Borrower and
certificates, dated within one (1) month of the Closing
Date, from the Secretary of State (or other appropriate
official) of each other jurisdiction where the Borrower
is required to be qualified to conduct business or
where such qualification is necessary to enforce any
Mortgage Loan, certifying that the Borrower is duly
qualified to do such business and is in good standing
in such state;
(4) Note. The Note duly executed by the
Borrower;
(5) Financing Statement, Etc. (a) Duly executed
financing statements (UCC-1) to be filed under the
Uniform Commercial Code of all jurisdictions necessary
or, in the opinion of the Lender, desirable to perfect
the Lien created by the Agreement; (b) duly executed
copies of the financing statements (UCC-3) to be filed
under the Uniform Commercial Code of all jurisdictions
necessary, or in the opinion of the Lender, desirable
to terminate any Liens in favor of any party other than
the Lender; and (c) Uniform Commercial Code searches
identifying all of the financing statements on file
with respect to the Borrower in all jurisdictions
referred to under (a), including the financing
statements filed by the Lender against the Borrower,
indicating that no party other than the Lender claims
an interest in any of the Collateral;
(6) Collateral Agency Agreement. The Borrower
and the Collateral Custodian shall have duly executed
and delivered the Collateral Agency Agreement;
(7) Material Adverse Change. As of the Closing
Date no material adverse change shall have occurred in
the financial position, management, business or
operations of the Borrower since March 31, 1994.
(8) Fees. All fees, costs and expenses payable
to the Lender and its legal counsel and agents required
to be paid at or prior to the closing of the
transactions contemplated thereby, shall have been paid
in full including the Facility Fee and fees and
expenses of Lender's counsel due on the Closing Date.
(9) Agency Good Standing. The Lender shall have
received evidence that the Borrower has been approved
and is in good standing with each of the Agencies with
respect to all Agency Approvals.
(10) Licenses, Etc. Copies of all licenses,
qualifications (including licenses and qualifications
required in each state where each Single Family
Residence securing each Mortgage Loan acquired or
originated by the Borrower is located), Agency
Approvals, permits, franchises, patents, copyrights,
trademarks and trade names, or evidence of rights
thereto in form acceptable to Lender, required in order
for Borrower to conduct its business substantially as
now conducted and as presently proposed to be
conducted.
(11) Approval of Borrower in the Lender Express
Program. Borrower shall be an approved Seller (as
defined in the Lender Express Seller Guide) in good
standing under the Lender Express Program;
(12) Opinion of Counsel for the Borrower. A
favorable opinion of Soosman & Associates, external
counsel for the Borrower, dated the Closing Date, in
substantially the form of Exhibit D, together with all
opinions relied upon by Soosman & Associates, if any,
and as to such other matters as the Lender may
reasonably request;
(13) Certificate. The following statements shall
be true and the Lender shall have received a
certificate signed by the chief financial officer of
the Borrower dated the Closing Date stating that:
(a) The representations and warranties
contained in this Agreement and in each of the
other Loan Documents are correct on and as of the
Closing Date as though made on and as of such
date; and
(b) No Default or Event of Default has
occurred and is continuing, or could result from
the transactions contemplated by this Agreement
and the Loan Documents; and
(14) Certificate from Parent. Lender shall have
received a certificate signed by the chief financial
officer of Republic Bancorp, Inc., the parent entity of
Borrower, dated the Closing Date certifying that the
parent entity has made all necessary equity
contributions to Borrower to cause all financial
covenants contained herein to be satisfied.
(15) List of Investors. An initial List of
Qualified Investors;
(16) Additional Documentation. Such other
approvals, opinions or documents as the Lender may
reasonably request.
Section 4.02. Conditions Precedent to All Loans.
The obligations of the Lender to provide each Loan
(including the actual Loan), shall be subject to the further
conditions precedent that on the date of providing each such
Loan:
(1) The following statements shall be true:
(a) All the representations and warranties
contained in this Agreement and in each of the
other Loan Documents are correct on and as of the
date of providing such Loan as though made on and
as of such date; and
(b) No Default or Event of Default has
occurred and is continuing, or could result from
providing such Loan.
(2) Loan Request Form. The Lender and the
Collateral Custodian shall have received a Loan Request
Form for such requested Loan duly completed and
executed by the Borrower.
(3) Pledged Mortgages. Except for the Wet
Mortgage Loans covered by and included in a Loan
Request Form, all documentation required to be
delivered pursuant to the Loan Documents for such
Pledged Mortgages covered by and included in a Loan
Request Form must have been delivered to the Collateral
Custodian; such documentation shall include but not be
limited to: (a) original signed Mortgage Notes
endorsed in blank; (b) certified copy of the Mortgage;
(c) a recordable assignment; (d) all intervening
assignments, as appropriate, and all as more full
provided in the Collateral Agency Agreement.
(4) Borrowing Base Certificate. The Lender shall
have received a Borrowing Base Certificate duly
completed and executed by the Collateral Custodian
indicating that requested Loan is available to the
Borrower in accordance with the terms of the Loan
Documents.
(5) Qualified Investor Requirements. The
Borrower shall have possession of all other documents
required by the relevant Qualified Investor to be held
by Borrower.
(6) Other Approvals, Opinions and Documents. The
Lender shall have received such other approvals,
opinions and documents as the Lender may reasonably
request.
In the event of a Loan made based upon a Wet
Mortgage Loan, the provisions of Section 3.02 of this
Agreement shall govern instead of the above closing
provisions.
Section 4.03. Deemed Representation. Each
request for a Loan and acceptance by the Borrower of any
Loan shall constitute a representation and warranty that the
statements contained in Section 4.02 are true and correct
both on the date of such notice and, unless the Borrower
otherwise notifies the Lender in writing prior to the
receipt of such Loan, as of the date of the providing of
such Loan.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants that:
Section 5.01. Formation, Good Standing and Due
Qualification. The Borrower is duly formed, validly
existing and in good standing under the laws of the
jurisdiction of its formation, has the power and authority
to own its assets and to transact the business in which it
is now engaged or proposed to be engaged, and is duly
qualified and in good standing under the laws of each other
jurisdiction in which such qualification is required or
where such qualification is necessary to permit Borrower to
enforce any Mortgage Loan.
Section 5.02. Power and Authority; No Conflicts.
The execution, delivery and performance by the Borrower of
the Loan Documents to which it is a party have been duly
authorized and do not and will not: (1) contravene its
articles of incorporation or other formation documents; (2)
violate any provision of, or require any filing (other than
the filing of the financing statements contemplated by this
Agreement), registration, consent or approval under any Law
(including, without limitation, Regulation U), order, writ,
judgment, injunction, decree, determination or award
presently in effect having applicability to such
corporation; (3) result in a breach of or constitute a
default under or require any consent under any indenture or
loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it
or its properties may be bound or affected; (4) result in,
or require, the creation or imposition of any Lien (other
than as created under this Agreement) upon or with respect
to any of the properties now owned or hereafter acquired by
the Borrower; or (5) cause the Borrower to be in default
under any such Law, order, writ, judgment, injunction,
decree, determination or award or any such indenture,
agreement, lease or instrument.
Section 5.03. Legally Enforceable Agreements.
Each Loan Document to which the Borrower is a party is a
legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its
terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
Section 5.04. Litigation. There are no actions,
suits or proceedings pending or threatened, against or
affecting the Borrower before any court, governmental agency
or arbitrator, which could, in any one case or in the
aggregate, result in (1) a Material Adverse Change or (2)
liability to the Borrower in excess of One Hundred Thousand
Dollars ($100,000).
Section 5.05. Financial Statements.
(1) Financial statements as of March 31, 1994.
The interim balance sheet of the Borrower as of March 31,
1994, and the related statement of income and retained
earnings for the three (3) month period then ended, copies
of which have been furnished to the Lender, are complete and
correct and fairly present the financial condition of the
Borrower as of such dates all in accordance with GAAP
consistently applied (subject to year-end adjustments), and
since March 31, 1994 there has been no Material Adverse
Change. There are no liabilities of the Borrower, fixed or
contingent, which are material but are not reflected in the
financial statements or in the notes thereto, other than
liabilities arising in the ordinary course of business since
March 31, 1994. No information, exhibit, or report
furnished by the Borrower to the Lender in connection with
this Agreement contained any material misstatement of fact
or omitted to state a material fact or any fact necessary to
make the statements contained therein not materially
misleading.
Section 5.06. Ownership and Liens. The Borrower
has title to, or valid leasehold interests in, all of its
properties and assets, real and personal, including the
properties and assets, and leasehold interests reflected in
the financial statements referred to in Section 5.05 (other
than any properties or assets disposed of in the ordinary
course of business), and none of the properties and assets
owned by the Borrower and none of its leasehold interests is
subject to any Lien, except as may be permitted under this
Agreement.
Section 5.07. Taxes. The Borrower has filed all
tax returns (federal, state and local) required to be filed
and has paid all taxes, assessments and governmental charges
and levies thereon to be due, including interest and
penalties, except to the extent they are the subject of a
Good Faith Contest.
Section 5.08. ERISA. The Borrower is in
compliance in all material respects with all applicable
provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred with respect to any
Plan; no notice of intent to terminate a Plan has been filed
nor has any Plan been terminated; no circumstance exists
which constitutes grounds under Section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC
instituted any such proceedings; neither the Borrower nor
any ERISA Affiliate has completely or partially withdrawn
under Sections 4201 or 4204 of ERISA from a Multiemployer
Plan; the Borrower has met its minimum funding requirements
under ERISA with respect to all of its Plans and there are
no unfunded vested liabilities; and neither the Borrower nor
any of its ERISA Affiliates has incurred any liability to
the PBGC under ERISA.
Section 5.09. Subsidiaries. The Borrower has no
Subsidiaries.
Section 5.10. Operation of Business; Prior or
Existing Restrictions, Etc. The Borrower possesses all
licenses, qualifications (including licenses and
qualifications required in each state where each Single
Family Residence securing each Mortgage Loan acquired or
originated by the Borrower is located), Agency Approvals,
permits, franchises, patents, copyrights, trademarks and
trade names, or rights thereto, to conduct its business
substantially as now conducted and as presently proposed to
be conducted and the Borrower is not in violation of any
valid rights of others with respect to any of the foregoing.
The Borrower has disclosed all written reports, actions
and/or sanctions of any nature threatened, and all reviews,
investigations, examinations, audits, actions and/or
sanctions that have been undertaken and/or imposed within
two (2) years prior to the date of this Agreement by any
federal or state agency or instrumentality (including any
Agency) with respect to either the lending or related
financial operations of the Borrower or the ability of the
Borrower to perform in accordance with the terms of this
Agreement, including any of the events described in Section
9.01(11). Except as may have been disclosed to and approved
by the Lender in writing, the Borrower is not operating
under any type of agreement or order (including, without
limitation, a supervisory agreement, memorandum of
understanding, cease and desist order, capital directive,
supervisory directive, consent decree, and any actual or
threatened suspensions, revocations or other event described
in Section 9.01(11) with any state or federal banking
department or government banking or other agency or
instrumentality (including any Agency), and the Borrower is
in compliance with any and all capital, leverage or other
financial standards and requirements imposed by any
applicable regulatory authority, agency or instrumentality,
including any Agency.
Section 5.11. No Default on Outstanding Judgments
or Orders. The Borrower has satisfied all judgments and the
Borrower is not in default with respect to any judgment,
writ, injunction, decree, rule or regulation of any court,
arbitrator or federal, state, municipal or other
Governmental Authority, commission, board, bureau, agency or
instrumentality, domestic or foreign.
Section 5.12. No Defaults on Other Agreements.
The Borrower is not a party to any indenture, loan or credit
agreement or any lease or other agreement or instrument or
subject to any certificate of incorporation or corporate
restriction which could result in a Material Adverse Change.
The Borrower is not in default in any respect in the
performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any
agreement or instrument which could result in a Material
Adverse Change.
Section 5.13. Labor Disputes and Acts of God.
Neither the business nor the properties of the Borrower are
affected by any fire, explosion, accident, strike, lockout
or other labor dispute, drought, storm, hurricane, hail,
earthquake, embargo, act of God or of the public enemy or
other casualty (whether or not covered by insurance), which
could result in a Material Adverse Change.
Section 5.14. Partnerships. The Borrower is not
a partner in any partnership.
Section 5.15. Environmental Protection. The
Borrower has obtained all permits, licenses and other
authorizations which are required under all Environmental
Laws, except to the extent failure to have any such permit,
license or authorization could not result in a Material
Adverse Change. The Borrower is in compliance with all
Environmental Laws and the terms and conditions of the
required permits, licenses and authorizations, and is also
in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in those
Laws or contained in any plan, order, decree, judgment,
injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent
failure to comply could not result in a Material Adverse
Change.
To the best of Borrower's knowledge, the
Collateral contains no Hazardous Materials that, under any
Environmental Law currently in effect, (1) would impose
liability on the Borrower that could result in a Material
Adverse Change, or (2) could result in the imposition of a
Lien on the Collateral or any portion thereof or any other
assets of the Borrower, in each case if not properly handled
in accordance with applicable Law.
Section 5.16. Management of Borrower. As of the
Closing Date, Exhibit J sets forth the key persons providing
the management of the Borrower's business.
Section 5.17. No Other Warehouse Facility. As of
the Closing Date, Borrower (1) has no Warehouse Facility
other than the Loan contemplated by this Agreement, and (2)
has made no application for or otherwise arranged to obtain
any other Warehouse Facility.
ARTICLE VI. AFFIRMATIVE COVENANTS
So long as the Note shall remain unpaid or the
Commitment shall exist hereunder, or any other amount is
owing by the Borrower to any Lender hereunder or under any
other Loan Document, the Borrower shall:
Section 6.01. Maintenance of Existence. Preserve
and maintain its existence and good standing in the
jurisdiction of its formation, and qualify and remain
qualified in each jurisdiction in which such qualification
is required except to the extent that its failure to so
qualify could not result in a Material Adverse Change.
Section 6.02. Conduct of Business. Continue to
engage in a business of the same general type as conducted
by it on the Closing Date. Use its best efforts to adhere
to customary practices and standards in effect from time to
time in the mortgage banking industry.
Section 6.03. Maintenance of Properties.
Maintain, keep and preserve all of its properties (tangible
and intangible) necessary or useful in the proper conduct of
its business in good working order and condition, ordinary
wear and tear excepted.
Section 6.04. Maintenance of Records. Keep
adequate records and books of account, in which complete
entries will be made in accordance with GAAP, reflecting all
of its and their financial transactions.
Section 6.05. Maintenance of Insurance.
Maintain insurance with financially sound and reputable
insurance companies or associations in such amounts and
covering such risks as are usually carried by companies
engaged in the same or a similar business and similarly
situated or as is required by the Agencies or any agreement
to which the Borrower is a party.
Section 6.06. Compliance with Laws. Comply in
all respects with all applicable Laws and orders, such
compliance to include, without limitation, paying before the
same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its property,
except to the extent they are the subject of a Good Faith
Contest.
Section 6.07. Right of Inspection. At any
reasonable time and from time to time upon reasonable notice
to the Borrower, permit the Lender or any agent or
representative thereof, to examine and make copies and
abstracts from the records and books of account of, and
visit the properties of, the Borrower and to discuss the
affairs, finances and accounts of the Borrower with any of
its officers and directors and the Borrower's independent
accountants.
Section 6.08. Reporting Requirements. Furnish
directly to the Lender:
(1) Annual Financial Statements of Borrower. As
soon as available and in any event within one hundred twenty
(120) days after the end of each Fiscal Year of the Borrower
(a) the balance sheet of the Borrower as of the end of such
Fiscal Year, the statement of income and retained earnings,
the statement of accounts receivable and payable and the
statement of cash flows of the Borrower for such Fiscal
Year, and the accompanying footnotes, all in reasonable
detail and stating in comparative form the respective
figures for the corresponding date and period in the prior
Fiscal Year and all prepared in accordance with GAAP
consistently applied, accompanied by an opinion thereon
acceptable to the Lender by an independent accountant
selected by the Borrower and acceptable to the Lender in
exercise of its reasonable discretion and (b) a Compliance
Certificate.
(2) Quarterly Financial Statements. As soon as
available and in any event within forty-five (45) days after
the end of each calendar quarter, (a) the balance sheet of
the Borrower as of the end of such quarter and statements of
income and retained earnings and the statement of cash flows
of the Borrower for the period commencing at the end of the
previous Fiscal Year and ending with the end of such
quarter, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and
period in the previous Fiscal Year and all prepared in
accordance with GAAP consistently applied and (b) a
Compliance Certificate.
(3) Management Letters. As soon as available and
in any event within ninety (90) days after the end of each
Fiscal Year, copies of any reports submitted to the Borrower
by independent certified public accountants in connection
with the examination of the financial statements of the
Borrower made by such accountants.
(4) Compliance Certificate. Concurrently with
the delivery to the Lender of the financial statements in
Section 6.08 (1) and (2), the Borrower will provide the
Lender with a certificate of the chief financial officer in
the form of Exhibit E (a) certifying that to the best of his
or her knowledge no Default or Event of Default has occurred
and is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature
thereof and the action which is proposed to be taken with
respect thereto, and (b) with computations demonstrating
compliance with the covenants contained in Article VIII as
of the end of the prior quarter.
(5) Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits, and
proceedings before any court or Governmental Authority,
affecting the Borrower which, if determined adversely to the
Borrower, could result in (1) a Material Adverse Change, or
(2) liability to the Borrower in excess of One Hundred
Thousand Dollars ($100,000).
(6) Notices of Defaults and Events of Default.
As soon as possible and in any event within five (5) days
after the occurrence of each Default or Event of Default of
which Borrower has knowledge, a written notice setting forth
the details of such Default or Event of Default and the
action which is proposed to be taken by the Borrower with
respect thereto.
(7) ERISA Reports. As soon as possible and in
any event within twenty (20) days after the Borrower knows
or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan
or that the PBGC or the Borrower has instituted or will
institute proceedings under Title IV of ERISA to terminate
any Plan, the Borrower will deliver to the Lender a
certificate of the chief financial officer of the Borrower
setting forth details as to such Reportable Event or
Prohibited Transaction or Plan termination and the action
the Borrower proposes to take with respect thereto.
(8) Reports to Other Creditors. Promptly after
the furnishing thereof, copies of any statement or report
furnished to any other party pursuant to the terms of any
indenture, loan or credit or similar agreement and not
otherwise required to be furnished to the Lender pursuant to
any other clause of this Agreement.
(9) Audit Reports. Promptly after receipt
thereof by the Borrower, copies of each HUD Single Family
Audit Report and FNMA and FHLMC audit reports on the
Borrower and its operations.
(10) Securities Reports. Promptly after filing,
copies of all financial information, proxy materials and
other information and reports, if any, which the Borrower
shall file with the Securities and Exchange Commission or
any governmental agencies substituted therefor.
(11) Mortgage Banking Reports. Promptly after
filing with FNMA and FHLMC, a copy of the Borrower's
Mortgage Bankers Financial Reporting Form Statement of
Condition (designated as FHLMC Form 1055 and FNMA Form 1002,
respectively, and any successor thereto or replacement
thereof).
(12) Insurance. Upon the occurrence of any
casualty, damage or loss, whether or not giving rise to a
claim under any insurance policy, in an amount greater than
One Hundred Thousand Dollars ($100,000), notice thereof,
together with copies of any document relating thereto
(including copies of any such claim) in possession or
control of the Borrower or any agent of the Borrower.
(13) Material Adverse Change. As soon as
possible and in any event within five (5) Business Days
after Borrower has knowledge of the occurrence of any event
or circumstance which could result in or has resulted in a
Material Adverse Change, written notice thereof.
(14) Offices. Thirty (30) days prior written
notice of any change in the chief executive office or
principal place of business of the Borrower.
(15) Management. Thirty (30) days prior written
notice of any change in the management of the Borrower as
set forth in Exhibit J.
(16) Liens. As soon as possible and in any event
within five (5) days after Borrower has knowledge of the
assertion of any Lien (other than Permitted Liens) against
the Collateral or the occurrence of any event that could
have a material adverse effect on the value or marketability
of the Collateral or the validity, enforceability or
priority of the Liens created under this Agreement, written
notice thereof.
(17) Environmental Notices. As soon as possible
and in any event within five (5) days after receipt, copies
of all Environmental Notices received by the Borrower which
are not received in the ordinary course of the Borrower's
business.
(18) Reports Relating to Collateral.
(a) As soon as available and in any event within
ten (10) days after the end of each month:
(1) A schedule in form acceptable to the
Lender hereto of all commitments to make Mortgage
Loans, commitments to purchase Mortgage Loans and
other information related to all Mortgage Loans
pledged or intended to be pledged under this
Agreement.
(2) A schedule in form acceptable to the
Lender hereto of the outstanding principal amount
and the amount advanced by the Borrower with
respect to each Mortgage Loan included in the
Pledged Mortgages, the date of origination of each
such Mortgage Loan, the interest rate borne by
each such Mortgage Loan and the type of each such
Mortgage Loan listing the aggregate outstanding
principal amount, and the aggregate amount
advanced by the Borrower with respect to such
Mortgage Loans grouped first by type then by
interest rate, together with a schedule listing
all cash, Securities, and other items of
Collateral hereunder;
(3) A schedule in form acceptable to the
Lender hereto of all Purchase Commitments held by
the Borrower grouped by type of Mortgage Loan or
Security (whether or not delivered as Collateral
hereunder) which qualifies for delivery pursuant
to such Purchase Commitments, listing the name of
the investor, the commitment type (i.e.,
mandatory, optional, standby, etc.), the
commitment amount which remains available for
future deliveries, the yield requirement or the
price and interest rate for which said price is
quoted, and the expiration, delivery or settlement
date for each such Purchase Commitment, and the
weighted average yield requirement or the weighted
average price at each applicable interest rate for
each such group of Purchase Commitments and (b) a
schedule in the form of Exhibit K hereto listing
the mandatory Purchase Commitments held by the
Borrower which shall be satisfied by delivering
Mortgage Loans or Securities which the Borrower
has committed to purchase;
(4) A schedule in form acceptable to the
Lender hereto of all Mortgage Loans and Securities
held by the Borrower (whether or not delivered as
Collateral hereunder), listing the aggregate
principal amount of such Mortgage Loans and
Securities, the aggregate dollar amount of
discount points charged upon origination of such
Mortgage Loans and the aggregate amount which is
secured by the pledge of such Mortgage Loans and
Securities (whether or not a part or all of this
sum represents the Outstanding Credit) for each
group of Mortgage Loans and Securities arranged
first by type then by interest rate, together with
an additional schedule in the form of Exhibit J
hereto listing this information as it relates to
commitments issued by the Borrower to make
Mortgage Loans during the next three (3) calendar
months; and
(5) A schedule in form acceptable to the
Lender listing the principal amount of Servicing
Contracts and subservicing rights by the Borrower
as of the date of such schedule, identified where
applicable by pool numbers of Mortgage Loan pools
serviced thereunder, the delinquency rates (listed
by thirty (30), sixty (60) and ninety (90) day
defaults) of Mortgage Loans serviced thereunder
and the principal amount, weighted average
interest rates, term and type of guarantee and
insurance, the amount of escrow balances
maintained thereunder, the amount of unfunded
obligations which are due and remain unpaid under
the Servicing Contracts and subservicing rights,
the amount of all FHA and VA insurance and
guarantee payments that have been paid and which
remain to be paid thereunder, the principal amount
of Mortgage Loans prepaid, and such other
information concerning the Servicing Contracts and
subservicing rights as the Lender may require;
(6) From time to time, with reasonable
promptness, such further information regarding the
Collateral as the Lender may reasonably request,
including copies of any financial or other reports
required to be delivered to any other party,
including, without limitation, the Agencies.
(b) As soon as available, but in any event not
later than the date that such reports are delivered to
the Agencies, copies of all annual and regularly
delivered reports to the Agencies relating to the
Borrower's Servicing Contracts with such Agencies, the
Borrower's Mortgage Loan origination and acquisition
activities and other matters requested or required by
the Agencies.
(c) As soon as available, but in any event not
later than five (5) days after the receipt thereof by
the Borrower (1) any notice received by an Agency
relating to matters described in Section 9.01(11), and
(2) any notice from a Qualified Investor or a party to
a Servicing Contract relating to a material default or
other deficiency under a Servicing Contract which could
result in termination thereof.
(d) As soon as available, but in any event not
later than forty-five (45) days from the Closing Date,
a balance sheet of the Borrower and all related
financial statements requested by the Lender, together
with an opinion thereon of Deloitte & Touche,
independent certified public accountants that such
financial statements are complete and correct and
fairly present the financial condition of the Borrower
for the periods covered by such statements, all in
accordance with GAAP consistently applied.
(19) General Information. Such other information
respecting the condition or operations, financial or
otherwise, of the Borrower as the Lender may from time to
time reasonably request.
Section 6.09. Compliance With Environmental Laws.
Comply in all material respects with all applicable
Environmental Laws and immediately pay or cause to be paid
all costs and expenses incurred in connection with such
compliance.
Section 6.10. Agency and Purchase Commitments.
Maintain valid Agency Commitments sufficient at all times in
accordance with customary business practices to permit the
creation of Securities in respect of all Pledged Mortgages,
other than Pledged Mortgages otherwise subject to and
intended to be delivered in accordance with Purchase
Commitments for the direct purchase thereof. Maintain valid
and enforceable Purchase Commitments sufficient at all times
to (i) satisfy the requirements of this Agreement and (ii)
in accordance with prudent business practices to protect the
Borrower against interest rate risk with respect to Mortgage
Loans and Securities originated or acquired by it and to
permit the timely sale of Mortgage Loans and Securities and
in accordance with prudent mortgage banking industry
practices.
Section 6.11. Agency Approvals. Take all actions
required to maintain all Agency Approvals.
ARTICLE VII. NEGATIVE COVENANTS
So long as the Note shall remain unpaid or the
Lender shall have any Commitment hereunder or any other
amount is owing by the Borrower to the Lender hereunder or
under any other Loan Document, the Borrower shall not:
Section 7.01. Debt. Create, incur, assume or
suffer to exist any Debt, except:
(1) Debt of the Borrower under this Agreement or
the Note;
(2) accounts payable to trade creditors for goods
or services which are not aged more than thirty (30) days
from the due date (or if there is no specified due date or
if such account payable is due immediately, are not aged
more than ninety (90) days) and current operating
liabilities (other than for borrowed money) which are not
more than ninety (90) days past due, in each case incurred
in the ordinary course of business and paid within the
specified time, unless subject to a Good Faith Contest, and,
in any event, in an amount not greater than Five Hundred
Thousand Dollars ($500,000);
(3) Debt secured by purchase money Liens
permitted by Section 7.03;
(4) Guaranties permitted under Section 7.02;
(5) Debt owed to Warehouse Lenders (including
Lender) of up to a maximum aggregate amount outstanding at
any time of an amount equal to the sum of Thirty Million
Dollars ($30,000,000) provided all such Debt complies with
the conditions, covenants and agreements contained in this
Agreement; and
(6) Unsecured debt of Borrower to Republic
Bancorp, Inc., the parent entity of Borrower, having a
maximum principal amount of Two Million Dollars
($2,000,000), which debt is subordinate in all respects to
any financial accommodation of Lender to Borrower,
including, without limitation, the Loan.
Section 7.02. Guaranties. Assume, guarantee,
endorse or otherwise be or become directly or contingently
responsible or liable (including, but not limited to an
agreement to purchase any obligation, stock, assets, goods
or services or to supply or advance any funds, assets, goods
or services, or an agreement to maintain or cause such
Person to maintain a minimum working capital or net worth or
otherwise to assure the creditors of any Person against
loss) for the obligations of any Person, except: guaranties
by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business.
Section 7.03. Liens. Create, incur, assume or
suffer to exist any Lien, upon or with respect to any of its
real or personal properties (including, without limitation,
leasehold interests, leasehold improvements and any other
interest in real property or fixtures), now owned or
hereafter acquired, except the following ("Permitted
Liens"):
(1) Liens granted to the Lender under and
pursuant to the Loan Documents;
(2) Liens for taxes or assessments or other
government charges or levies if not yet due and payable or
if due and payable if they are the subject of a Good Faith
Contest;
(3) Liens imposed by law, such as mechanic's,
materialmen's, landlord's, warehousemen's and carrier's
Liens, and other similar Liens, securing obligations
incurred in the ordinary course of business which are not
past due for more than thirty (30) days, or which are the
subject of a Good Faith Contest;
(4) Liens under workmen's compensation,
unemployment insurance, social security or similar
legislation (other than ERISA);
(5) Liens, deposits or pledges to secure the
performance of bids, tenders, contracts (other than
contracts for the payment of money), leases (permitted under
the terms of this Agreement), public or statutory
obligations, surety, stay, appeal, indemnity, performance or
other similar bonds, or other similar obligations arising in
the ordinary course of business;
(6) judgment and other similar Liens arising in
connection with court proceedings, provided that the
execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are the subject of a
Good Faith Contest;
(7) easements, rights-of-way, restrictions and
other similar encumbrances which, in the aggregate, do not
materially interfere with the occupation, use and enjoyment
by the Borrower of the property or assets encumbered thereby
in the normal course of its business or materially impair
the value of the property subject thereto;
(8) purchase money Liens on any real property,
fixtures or equipment hereafter acquired or the assumption
of any Lien on real property, fixtures or equipment existing
at the time of such acquisition, or a Lien incurred in
connection with any conditional sale or other title
retention agreement or a Capital Lease; provided that:
(a) any property subject to any of the
foregoing is acquired by the Borrower in the
ordinary course of its business and the Lien on
any such property is created contemporaneously
with such acquisition;
(b) the Debt secured by any Lien so created,
assumed or existing shall not exceed one hundred
percent (100%) of the lesser of cost or fair
market value as of the time of acquisition of the
property covered thereby;
(c) each such Lien shall attach only to the
property so acquired and fixed improvements
thereon;
(d) the Debt secured by such Lien is
permitted by the provisions of Section 7.01; and
(e) all Debt secured by all such Liens shall not
exceed at any time in the aggregate One Million
($1,000,000);
(9) Liens on the Borrower's Servicing Rights
which (i) do not violate Section 8.04; and (ii) do not cover
the Borrower's Servicing Rights on any of the Collateral;
and
(10) Liens granted to secure Warehousing
Facilities provided that no such Lien extends to or covers
any of the Collateral, except Shared Collateral.
Section 7.04. Investments. Make any loan or
advance to any Person (including, without limitation, loans
made to shareholders of Borrower) or purchase or otherwise
acquire any capital stock, assets, obligations or other
securities of, make any capital contribution to, or
otherwise invest in, or acquire any interest in, any Person,
except: (1) direct obligations of the United States of
America or any agency thereof with maturities of one year or
less from the date of acquisition; (2) commercial paper with
maturities of two hundred seventy (270) days or less of a
domestic issuer rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investors Service, Inc.; (3)
certificates of deposit with maturities of one year or less
from the date of acquisition issued by any commercial bank
operating within the United States of America whose
outstanding short-term debt is rated in the highest rating
category available by either Standard & Poor's Corporation
or Moody's Investors Service, Inc.; (4) stock, obligations
or securities received in settlement of Debts (created in
the ordinary course of business) owing to the Borrower; (5)
Mortgage Loans or Securities; (6) investments existing on
the date hereof as set forth in Exhibit H hereto, but not
the increase in amount thereof; (7) investments required to
be made or purchased by any Agency or any applicable
provisions of Law; and (8) Purchase Commitments.
Section 7.05. Sale of Assets. Sell, lease,
assign, transfer or otherwise dispose of any of its now
owned or hereafter acquired assets; except: (1) for
inventory disposed of in the ordinary course of business;
(2) the sale or other disposition of assets no longer used
or useful in the conduct of its business; or (3) the sale of
Mortgage Loans, Securities and Servicing Contracts and
Servicing relating to Mortgage Loans and Securities which
are not Collateral, provided the such sale is made in the
ordinary conduct of its businesses upon fair and reasonable
terms and such sale otherwise complies with the other terms
and provisions of this Agreement and the other Loan
Documents.
Section 7.06. Transactions with Affiliates.
Enter into any transaction, including, without limitation,
the purchase, sale or exchange of property or the rendering
of any service or the payment of any management fees, with
any Affiliate or enter into any transaction, except in the
ordinary course of and pursuant to the reasonable
requirements of the Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than the
Borrower would obtain in a comparable arm's length
transaction with a Person not an Affiliate.
Section 7.07. Mergers, Etc. Merge or consolidate
with, or sell, assign, lease or otherwise dispose of
(whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person, or acquire all or
substantially all of the assets or the business of any
Person (or enter into any agreement to do any of the
foregoing).
Section 7.08. Leases. Create, incur, assume, or
suffer to exist any obligation as lessee for the rental or
hire of any real or personal property except (1) Capital
Leases, and (2) leases that do not in the aggregate require
the Borrower to make payments (including taxes, insurance,
maintenance, and similar expenses which the Borrower is
required to pay under the terms of the lease) in any Fiscal
Year in excess of Two Hundred Fifty Thousand Dollars
($250,000).
Section 7.09. Dividends. Declare or pay any
dividends, or return any capital, to its stockholders or
authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or
redeem, retire, purchase or otherwise acquire, directly or
indirectly, for consideration, any shares of any class of
its capital stock now or hereafter outstanding (or any
options or warrants issued by the Borrower with respect to
its capital stock), or set aside any funds for any of the
foregoing purposes in any such event in excess of fifty
percent (50%) of Net Income of the four quarters that ended
immediately prior to paying such dividend, less any dividend
previously made based on Net Income for such four quarters
reduced by all applicable taxes.
Section 7.10. Recourse Mortgage Loans. After the
date of this Agreement, Borrower shall not make or enter
into commitments to make, or sell or pledge or enter into
agreements to sell or pledge, Mortgage Loans either in
connection with the creation of Securities to be backed by
such Mortgage Loans or otherwise, in any such case with
Recourse Obligations to the Borrower.
Section 7.11. Other Warehouse Facilities. Apply
to or obtain from any Warehouse Lender any Warehouse
Facility without the prior written consent of Lender, which
consent shall not be unreasonably withheld so long as, in
connection with any such Warehouse Facility (1) Borrower
enters into an Intercreditor Agreement in form and substance
acceptable to Lender in all respects, and (2) the Collateral
Custodian is used for such Warehouse Facility pursuant to a
collateral agency agreement in form similar to the
Collateral Agency Agreement and acceptable to Lender in all
respects.
ARTICLE VIII. FINANCIAL COVENANTS
So long as the Note shall remain unpaid or the
Lender shall have any Commitment hereunder or any other
amount is owing by the Borrower to the Lender hereunder or
under any other Loan Document:
Section 8.01. Adjusted Tangible Net Worth. The
Borrower shall maintain at all times an Adjusted Tangible
Net Worth of not less than Three Million Dollars
($3,000,000).
Section 8.02. Current Ratio. The Borrower shall
maintain at all times a ratio of Current Assets to Current
Liabilities of not less than 1.05 to 1.
Section 8.03. Adjusted Leverage Ratio. The
Borrower shall maintain at all times a ratio of Total
Liabilities to Adjusted Tangible Net Worth of not greater
than 7.0 to 1.
Section 8.04. Minimum Unencumbered Servicing
Rights. The Borrower shall at all times maintain all of its
Servicing Rights without Liens or security interests.
In the event Borrower shall fail to satisfy any of
the financial covenants set forth in Sections 8.01, 8.02 and
8.03, Borrower shall have thirty (30) days after the first
date of any such failure within which to cure such failure,
provided, however, during the continuance of any such cure
period, all amounts payable under this Agreement shall
accrue interest at the Default Rate. Any cure period
provided under this Article VIII shall not serve to modify
or postpone the occurrence of any other Event of Default or
Lender's remedies enumerated in Article IX hereof.
ARTICLE IX. EVENTS OF DEFAULT
Section 9.01. Events of Default. Any of the
following events shall be an "Event of Default":
(1) the Borrower shall: (a) fail to pay the
principal of the Note, or (b) fail to make any of the
prepayments required by Section 2.08 as and when required,
or (c) fail to pay interest on the Loan or any fee or
interest or any other amount due under this Agreement or any
other Loan Document as and when due and payable and such
failure shall continue for five (5) days;
(2) any representation or warranty made or deemed
made by the Borrower in this Agreement or in any other Loan
Document to which it is a party or which is contained in any
certificate, document, opinion, financial or other statement
furnished at any time under or in connection with any Loan
Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made;
(3) the Borrower shall fail to perform or observe
any term, covenant or agreement contained in this Agreement
or any other Loan Document (to which it is a party) (other
than obligations specifically referred to elsewhere in this
Section 9.01);
(4) the Borrower shall: (a) fail to pay any
Debt, (other than the payment obligations described in (1)
above), of the Borrower when due (whether by scheduled
maturity, required prepayment, acceleration, demand or
otherwise), including but not limited to Debt owed in
connection with any Warehouse Facility; or (b) fail to
perform or observe any term, covenant or condition on its
part to be performed or observed under any agreement or
instrument relating to any such Debt, when required to be
performed or observed, if the effect of such failure to
perform or observe is to accelerate, or to permit the
acceleration of, after the giving of notice or the lapse of
time, or both, of the maturity of such Debt, whether or not
the failure to perform or observe shall be waived by the
holder of such Debt; or any such Debt 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;
(5) the Borrower: (a) shall generally not, or be
unable to, or shall admit in writing its inability to, pay
its debts as such debts become due; or (b) shall make an
assignment for the benefit of creditors, petition or apply
to any tribunal for the appointment of a custodian, receiver
or trustee for it or a substantial part of its assets; or
(c) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (d)
shall have had any such petition or application filed or any
such proceeding shall have been commenced, against it, in
which an adjudication or appointment is made or order for
relief is entered, or which petition, application or
proceeding remains undismissed or unstayed for a period of
thirty (30) days or more; or shall be the subject of any
proceeding under which its assets may be subject to seizure,
forfeiture or divestiture; or (e) by any act or omission
shall indicate its consent to, approval of or acquiescence
in any such petition, application or proceeding or order for
relief or the appointment of a custodian, receiver or
trustee for all or any substantial part of its property; or
(f) shall suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of thirty
(30) days or more;
(6) one or more judgments, decrees or orders for
the payment of money in excess of Fifty Thousand Dollars
($50,000) in the aggregate shall be rendered against the
Borrower, and such judgments, decrees or orders shall
continue unsatisfied and in effect for a period of thirty
(30) consecutive days without being vacated, discharged,
satisfied or stayed or bonded pending appeal;
(7) any of the following events shall occur or
exist with respect to the Borrower or any ERISA Affiliate:
(a) any Prohibited Transaction involving any Plan; (b) any
Reportable Event shall occur with respect to any Plan; (c)
the filing under Section 4041 of ERISA of a notice of intent
to terminate any Plan or the termination of any Plan; (d)
any event or circumstance exists which might constitute
grounds entitling the PBGC to institute proceedings under
Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the
institution by the PBGC of any such proceedings; (e)
complete or partial withdrawal under Section 4201 or 4204 of
ERISA from a Multiemployer Plan or the reorganization,
insolvency, or termination of any Multiemployer Plan; and in
each case above, such event or condition, together with all
other events or conditions, if any, could in the opinion of
any Lender subject the Borrower or any ERISA Affiliate to
any tax, penalty, or other liability to a Plan,
Multiemployer Plan, the PBGC, or otherwise (or any
combination thereof) which in the aggregate exceeds or may
exceed Fifty Thousand Dollars ($50,000);
(8) this Agreement shall at any time and for any
reason cease: (a) to create a valid and perfected first
priority Lien in the Collateral; or (b) to be in full force
and effect or shall be declared null and void, or the
validity or enforceability thereof shall be contested by the
Borrower, or the Borrower shall deny it has any further
liability or obligation under this Agreement;
(9) if there is a material adverse change in the
Collateral, or if there shall occur a Material Adverse
Change (as determined by the Lender in its reasonable
discretion), or if the Lender in good faith believes that
the prospects of payment, performance or realization upon
the Collateral is impaired, or if the Lender shall deem
itself insecure;
(10) if the Collateral Agency Agreement shall
cease at any time to be in full force or effect or shall be
declared null and void, or the validity or enforceability
thereof shall be contested by any party thereto, or any
party thereto shall deny it has any further liability or
obligation under such Agreement, or any party thereto shall
fail to perform any of its obligations under such Collateral
Agency Agreement;
(11) if there is a threatened revocation of, or
an investigation by an Agency which has a reasonable
likelihood of resulting in the revocation of, any Agency
Approvals, or if any Agency Approvals shall, in whole or in
part, be cancelled, terminated, suspended or withdrawn, or
if in the reasonable determination of the Lender, if any
operating restrictions or other limitations (including any
moratorium on commitment authority with any Agency resulting
from the failure of the Borrower to satisfy or comply with
any applicable Agency's standards, rules, regulations,
guidelines or directives) shall be imposed upon the Borrower
by any Agency, or if an Agency has given notice to the
Borrower of material servicing deficiencies requiring
correction within a time specified, which (a) if not
corrected, could result in the termination of the Borrower's
Servicing Contracts or commitment authority with such Agency
and (b) which are not corrected within the time period
specified by such Agency or if no such time period is
specified, within such reasonable time period established by
the Lender, or if an Agency shall impose supervisory
controls upon the Borrower or a moratorium on transfers of
additional Servicing Contracts to the Borrower;
(12) if any of the Persons listed in Exhibit J as
the key members of the management of the Borrower are no
longer actively engaged for any reason in the management of
the Borrower's business; unless within thirty (30) days
after any such key member terminates his active involvement
in the management of Borrower, Borrower submits a plan or
indicates the appointment of another Person acceptable to
the Lender in its reasonable judgment to ensure that
management of the Borrower continues at a level acceptable
to Lender in its reasonable judgment;
(13) if there shall occur a material default by
the Borrower under (a) the Lender Express Program (b) under
a Servicing Contract or (c) under a Purchase Commitment; or
(14) If an Intercreditor Agreement shall, at any
time after its execution and delivery and for any reason
cease to be in full force and effect or shall be declared
null and void, or the validity or enforceability thereof
shall be contested by any party thereto or any party thereto
shall deny it has any further liability or obligation under
the Intercreditor Agreement, or shall fail to perform its
obligations under such Intercreditor Agreement.
Section 9.02. Remedies. If any Event of Default
shall occur and be continuing, the Lender may, by notice to
the Borrower, (1) declare the Commitment to be terminated,
whereupon the same shall forthwith terminate; (2) declare
the Note, all interest thereon, and all other amounts
payable under this Agreement, and any other Loan Documents
to be forthwith due and payable, whereupon the Note, all
such interest, and all such amounts due under this
Agreement, and under any other Loan Document shall become
and be forthwith due and payable, without presentment,
demand, protest, or further notice of any kind, all of which
are hereby expressly waived by the Borrower; and/or (3)
exercise any remedies provided in any of the Loan Documents,
at Law or otherwise, with respect to the Collateral and the
Loans; provided, however, that upon the occurrence of an
Event of Default referred to in Section 9.01(5), the
Commitment shall automatically terminate and the Note and
any other amounts payable under this Agreement or any of the
other Loan Documents, and all interest on any of the
foregoing shall be forthwith due and payable without
presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower.
Upon the occurrence of an Event of Default, the
Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein,
at Law or otherwise available to it, all the rights and
remedies of a secured party on default under the applicable
Uniform Commercial Code (whether or not the applicable
Uniform Commercial Code applies to the affected Collateral)
and also may (i) require the Borrower to, and the Borrower
hereby agrees that it will at its expense and upon request
of the Lender forthwith, assemble all or part of the
Collateral as directed by the Lender and make it available
to the Lender at a place to be designated by the Lender
which is reasonably convenient to the parties, and (ii)
without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Lender's offices or
elsewhere, for cash, on credit or for future delivery, and
upon such other commercially reasonable terms. The Borrower
agrees that, to the extent notice of sale shall be required
by law, notice to the Borrower of the time and place of any
public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The
Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and
place to which it was so adjourned. All cash proceeds
received by the Lender in respect of any sale of, collection
from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by
the Lender as Collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to
the lender pursuant to Section 9.03) in whole or in part by
the Lender against, all or any part of the Obligations in
such order as the Lender shall elect. After the occurrence
of an Event of Default, the Lender shall have the right to
deliver any Pledged Mortgage or Pledged Security into any
Purchase Commitment and to obtain the benefits of any Agency
Commitment and of any commitments held by the Borrower to
issue or receive FHA insurance and VA guarantees, in any
such event either in the name of the Lender or the Borrower,
pursuant to the power of attorney granted under this
Agreement or otherwise.
Section 9.03. Application of Proceeds. The
proceeds of any sale or enforcement of all or any part of
the Collateral shall be applied by the Lender:
First, to the payment of the costs and expenses
incurred by the Lender in connection with such sale or
enforcement of any rights and benefits afforded hereby,
by any other Loan Documents or at Law, of the security
interest granted hereunder of all or any part of the
Collateral or of the security interest, collateral, any
guaranty or other assurances granted under the other
Loan Documents, all costs and expenses incurred in
collecting, maintaining and preserving the Collateral,
the enforcement of this Agreement, the Note and the
other Loan Documents, including payment to the Lender's
agents and counsel in accordance with Section 10.03,
and all expenses, liabilities and advances made or
incurred by such parties in connection therewith;
Second, to the payment of all accrued and unpaid
interest due and owing on the Outstanding Credit;
Third, to the payment of all accrued and unpaid
Outstanding Credit;
Fourth, to the payment of all other amounts owed
by the Borrower in respect of the Loan Documents; and
Finally, to the payment to the Borrower, or to its
successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining
from such proceeds.
If the proceeds of any such sale are insufficient to cover
the amounts described in clauses First through Fourth,
inclusive, above, the Borrower shall remain liable for any
deficiency.
Section 9.04. Lender May Perform. If the
Borrower fails to perform any agreement contained in this
Agreement, the Lender may itself perform, or cause
performance of, such agreement, and the expenses of the
Lender incurred in connection therewith shall be payable by
the Borrower under Section 10.03.
Section 9.05. The Lender's Duties. The powers
conferred on the Lender under this Agreement are solely to
protect its interest in the Collateral and shall not impose
any duty upon the Lender to exercise any such powers.
Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received
by it hereunder, the Lender shall not have any duty as to
any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights
pertaining to any Collateral.
Section 9.06. Continuing Security Interest;
Transfer of Note. This Agreement creates a continuing
security interest in the Collateral and shall (i) remain in
full force and effect until payment in full of all the
Obligations to the Lender after the Termination Date, (ii)
be binding upon the Borrower, its successors and assigns,
and (iii) inure to the benefit of the Lender and its
successors, transferees and assigns. Without limiting the
generality of the foregoing clause (iii), the Lender may
assign or otherwise transfer any document evidencing any
Obligation held by it to its successors or any Affiliate,
and such other person or entity shall thereupon become
vested with all the benefits in respect thereof granted to
the Lender herein or otherwise. Upon the payment in full of
the Obligations after the Termination Date and cancellation
of the Commitment, the Lien granted hereby shall terminate
and all rights to the Collateral shall revert to the
Borrower. Upon any such termination, the Lender will, at
the Borrower's expense, execute and deliver to the Lender
such documents as the Borrower shall reasonably request to
evidence such termination.
ARTICLE X. MISCELLANEOUS
Section 10.01. Amendments and Waivers. No
amendment or waiver of any provision of this Agreement or
any other Loan Document nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Lender and
then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which
given. No failure on the part of the Lender to exercise,
and no delay in exercising, any right hereunder shall
operate as a waiver thereof or 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 remedies provided by law.
Section 10.02. Usury. Anything herein to the
contrary notwithstanding, the obligations of the Borrower
under this Agreement and the Note shall be subject to the
limitation that payments of interest shall not be required
to the extent that receipt thereof would be contrary to
provisions of law applicable to a Lender limiting rates of
interest which may be charged or collected by the Lender.
Section 10.03. Expenses; Indemnification. The
Borrower agrees to reimburse the Lender on demand for all
costs, expenses, and charges (including, without limitation,
all reasonable fees and charges of external legal counsel
for the Lender) incurred by the Lender in connection with
the preparation, review, performance, or enforcement of this
Agreement, the Note, or any other Loan Documents. The
Borrower agrees to indemnify the Lender, and its directors,
officers, employees and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims,
damages or expenses incurred by any of them arising out of
or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or
litigation or other proceedings) relating to any actual or
proposed use by the Borrower of the proceeds of the Loans,
including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified).
The obligations of the Borrower under this Section
shall survive the repayment in full of the Loan and all
amounts due under or in connection with any of the Loan
Documents and the termination of the Commitment.
Section 10.04. Assignment; Participation. This
Agreement shall be binding upon, and shall inure to the
benefit of, the Borrower, the Lender and their respective
successors and permitted assigns. The Borrower may not
assign or transfer its rights or obligations hereunder. The
Lender may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests
in the Loans.
The Lender may at any time assign to one or more
banks or other institutions (each an "Assignee") a
proportionate part of all of its rights and obligations
under this Agreement and the Note, provided, that such
Assignee shall assume rights and obligations, pursuant to an
Assignment and Assumption Agreement executed by such
Assignee and the Lender. Upon execution and delivery of
such instruments and payment by such Assignee to the Lender
of an amount equal to the purchase price agreed between the
Lender and such Assignee, such Assignee shall be a secured
party under this Agreement and shall have all the rights and
obligations of the Lender with a Commitment as set forth in
such Assignment and Assumption Agreement, and the Lender
shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by
any party shall be required. Upon the consummation of any
assignment pursuant to this paragraph, a new Note or Notes
shall be issued by the Borrower.
The Borrower agrees to provide all assistance
reasonably requested by the Lender to enable the Lender
either to sell participations in or to make assignments of
its portion of the Loans as permitted by this Section 10.04.
Section 10.05. Notices. Unless the party to be
notified otherwise notifies the other party in writing as
provided in this Section, and except as otherwise provided
in this Agreement, notices shall be given to the Lender by
telephone, confirmed by telecopy or other writing, and to
the Borrower by ordinary mail or telecopy addressed to such
party at its address on the signature page of this
Agreement. Notices shall be effective: (1) if given by
mail, upon receipt; and (2) if given by telecopy, when the
telecopy is transmitted to the telecopy number as aforesaid;
provided that notices to the Lender shall be effective upon
receipt.
Section 10.06. Setoff. The Borrower agrees that,
in addition to (and without limitation of) any right of
setoff, bankers' lien or counterclaim the Lender may
otherwise have, the Lender shall be entitled, at its option,
to offset balances (general or special, time or demand,
provisional or final) which are not Escrow Deposits held by
it for the account of the Borrower at any of the Lender's
offices held for the Lender's benefit at any bank, in
Dollars or in any other currency, against any amount payable
by the Borrower to the Lender under this Agreement or the
Note, or any other Loan Document which is not paid when due
(regardless of whether such balances are then due to the
Borrower), in which case it shall promptly notify the
Borrower thereof; provided that the Lender's failure to give
such notice shall not affect the validity thereof.
Section 10.07. Table of Contents; Headings. Any
table of contents and the headings and captions hereunder
are for convenience only and shall not affect the
interpretation or construction of this Agreement.
Section 10.08. Severability. The provisions of
this Agreement are intended to be severable. If for any
reason any provision of this Agreement shall be held invalid
or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffec-
tive to the extent of such invalidity or unenforceability
without in any manner affecting the validity or enforce-
ability thereof in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
Section 10.09. Counterparts. This Agreement may
be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument,
and any party hereto may execute this Agreement by signing
any such counterpart.
Section 10.10. Integration. The Loan Documents
set forth the entire agreement among the parties hereto
relating to the transactions contemplated thereby and
supersede any prior oral or written statements or agreements
with respect to such transactions.
Section 10.11. Governing Law. This Agreement
shall be governed by, and interpreted and construed in
accordance with, the laws of the State of New York.
Section 10.12. Jurisdiction; Immunities. The
Borrower hereby irrevocably submits to the jurisdiction of
New York or United States Federal court sitting in New York
over any action or proceeding arising out of or relating to
this Agreement, the Note or any other Loan Document, and the
Borrower hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and
determined in such New York or Federal court. The Borrower
irrevocably consents to the service of any and all process
in any such action or proceeding by the mailing of copies of
such process to the Borrower at its address specified below.
The Borrower agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other
manner provided by law. The Borrower further waives any
objection to venue in such State and any objection to an
action or proceeding in such State on the basis of forum non
convenience. The Borrower further agrees that any action or
proceeding brought against the Lender or any Lender with
regard to this Credit Agreement shall be brought only in New
York or United States Federal court sitting in New York.
Nothing in this Section 10.12 shall affect the
right of the Lender to serve legal process in any other
manner permitted by law or affect the right of the Lender to
bring any action or proceeding against the Borrower or its
property in the courts of any other jurisdictions.
To the extent that the Borrower has or hereafter
may acquire any immunity from jurisdiction of any court or
from any legal process (whether from service or notice,
attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or
its property, the Borrower hereby irrevocably waives such
immunity in respect of its obligations under this Agreement,
the Note, and any other Loan Document.
THE BORROWER WAIVES ANY RIGHT IT MAY HAVE TO JURY
TRIAL.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
CUB FUNDING CORPORATION
By /s/ Douglas E. Jones
--------------------------------
Name: Douglas E. Jones
Title: Chief Executive Officer
Address for Notices:
26565 West Agoura Road
Suite 305
Calabasas, California 91302
Attn: Mr. Douglas E. Jones
Telecopy No.: (818) 880-9087
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
By /s/ Russell R. Anderson
--------------------------------
Name: Russell R. Anderson
Title: Vice President
Address for Notices:
7435 New Technology Way
Frederick, Maryland 21701
Attn: Mr. Russell R. Anderson
Vice President
Telecopy No.: (301) 815-6494
and
The Legal Department of
The Prudential Home Mortgage Company,Inc.
Address for Notices:
7485 New Horizon Way
Frederick, Maryland 21701
Telecopy No.: (301) 696-7555
Exhibit 4(r)
[ Letterhead of Prudential Home Mortgage ]
The Prudential Home Mortgage Company, Inc.
7485 New Horizon Way
Frederick, MD 21701
301 696-7900
November 1, 1994
Mr. Douglas E. Jones
Chief Executive Officer
CUB Funding Corporation
26565 West Agoura Road
Suite 305
Calabasas, California 91302
Re: Amendment No. 1 to Credit and Security Agreement
Dear Doug:
We refer you to the Credit and Security Agreement dated as
of August 11, 1994, (the "Agreement") between The Prudential Home
Mortgage Company, Inc. (the "Lender") and CUB Funding Corporation
(the "Borrower"). Unless otherwise defined in this letter
amendment (the "Amendment"), the terms defined in the Agreement
shall be used in this Amendment as defined in the Agreement.
The Lender and the Borrower desire to amend certain
provisions of the Agreement to reduce the amount of the
Commitment in accordance with Section 2.03 of the Agreement and
to change the interest rate and fees payable in connection with
the Loans, as more particularly described below. Accordingly, it
is hereby agreed by the Lender and the Borrower, effective as of
the Effective Date (as defined below), as follows:
A. REDUCTION OF COMMITMENT
1. Amendment of "Maximum Credit Limit." The definition of
"Maximum Credit Limits" contained in Section 1.01 of the Agreement
is deleted and the following substituted therefor:
"Maximum Credit Limit" means, Sixteen Million
Dollars ($16,000,000), as such amount may be reduced in
accordance with Section 2.03."
2. Note. The first sentence of Section 2.06 of the
Agreement is deleted and following sentence substituted therefor:
All Loans made by the Lender under this Agreement shall
be evidenced by, and repaid with interest in accordance
with, a single promissory note of the Borrower in
substantially the form of Exhibit A duly completed, in
the original principal amount equal to the Maximum
Credit Limit, payable to the Lender, and maturing as to
principal on the Termination Date (the "Note").
<PAGE>
Mr. Douglas E. Jones
November 1, 1994
Page 2 of 5
B. AMENDMENT OF INTEREST AND FEES:
1. Deletion of "Certified Loans." The definition of
"Certified Loans" contained in Section 1.01 of the Agreement is
deleted and the following substituted therefor in the proper
alphabetical order:
"Shipped Loans" means Loans made in respect of
Mortgage Loans for which the Collateral Custodian has
certified in the applicable Borrowing Base Certificate
that such Mortgage Loans have been shipped to a
Qualified Investor under a Purchase Commitment or
Agency Commitment.
2. Amendment of Available Loans. The references to
"Certified Loans" in Section 2.01 of the Agreement are deleted
and the defined term "Shipped Loans" is substituted therefor.
3. Amendment of Interest. Section 2.05 of the Agreement
is deleted in its entirety and the following substituted
therefor:
Section 2.05. Interest. The Borrower shall
pay interest to the Lender on the Outstanding Credit,
at a rate per annum as follows: (1) for a Wet Loan at
a rate equal to the CP Rate plus two and three quarters
percent (2.750%); (2) for a Documented Loan outstanding
for no more than three (3) days, at a rate equal to the
CP Rate plus one and three quarters percent (1.750%);
(3) for a Documented Loan outstanding for longer than
three (3) days, at a rate equal to the CP Rate plus one
and one quarter percent (1.250%); and (4) for a Shipped
Loan at a rate equal to the CP Rate plus one percent
(1.000%). Any principal amount not paid when due (at
maturity, by acceleration or otherwise) shall bear
interest thereafter, payable on demand, at the Default
Rate.
The interest rate on each Loan shall change
when the CP Rate changes. Interest on each Loan
shall not exceed the maximum amount permitted under
applicable law and shall be calculated on the basis of
a year of three hundred sixty (360) days for the actual
number of days elapsed.
Loans that were initially made in respect of
Wet Mortgage Loans, will begin to accrue interest at
the interest rate applicable to Documented Loans on the
Business Day that the Collateral Custodian certifies to
<PAGE>
Douglas E. Jones
November 1, 1994
Page 3 of 5
the Lender in a Borrowing Base Certificate received by the
Lender not later than 2:00 p.m. (eastern time) on such
Business Day what all of the required documents have been
received and accepted by the Collateral Custodian and that
such Mortgage Loans are no longer classified in the
Borrowing Base as Wet Mortgage Loans. Loans accruing
interest at the initial rate applicable to Documented Loans
will begin to accrue interest at the CP Rate plus one and
one quarter percent (1.250%) on the Business Day that the
Collateral Custodian certifies to the Lender in a Borrowing
Base certificate received by the Lender not later than 2:00
p.m. (eastern time) on such Business Day that such
Documented Loans have been outstanding for more than three
(3) days. Loans accruing interest at the rate applicable to
Documented Loans will begin to accrue interest at the rate
applicable to Shipped Loans on the Business Day that the
Collateral Custodian certifies to the Lender in a Borrowing
Base certificate received by the Lender not later than 2:00
p.m. (eastern time) on such Business Day that such
Documented Loans have been shipped to a Qualified Investor.
4. Amendment of Fees. Section 2.09 of the Agreement is
deleted in its entirety and the following substituted therefor:
Section 2.09. Fees. The Borrower shall pay
to the Lender a non-refundable facility fee (the
"Facility Fee") equal to one fifth of one percent
(0.20%) of the Maximum Credit Limit, which fee shall be
payable monthly in advance in monthly installments on
each Monthly Date.
C. MISCELLANEOUS
1. Reaffirmation of Loan Documents. Except as expressly
amended herein, the Loan Documents shall remain in full force and
effect as currently written. The Borrower hereby affirms and
agrees that: (a) the execution and delivery by the Borrower of
and the performance of its obligations under this Amendment shall
not in any way impair, invalidate, or otherwise affect any of the
obligations of the Borrower or the rights of the Lender under the
Agreement or any other Loan Documents; (b) the term "Obligations"
as used in the Agreement includes, without limitation, the
Obligations of the Borrower under the Loan Documents as amended
by this Amendment and (c) the pledge of a security interest in
the Collateral by the Borrower to the Lender in the Agreement
remains in full force and effect in that such pledge constitutes
a continuing first priority security interest in and lien upon
the Collateral securing all of the obligations.
<PAGE>
Douglas E. Jones
November 1, 1994
Page 4 of 5
2. Effective Date. This Amendment shall be effective as
of November 1, 1994, (the "Effective Date") provided that there
shall have been delivered to the Lender each of the following,
duly executed by all required hereunder:
(a) This Amendment;
(b) A $16,000,000 replacement Note dated as of
November 1, 1994;
(c) A Certificate of the Secretary of the Borrower (in
substantially the form attached hereto as Exhibit
A) certifying that the Borrower has the necessary
corporate authorizations to execute, deliver, and
perform this Amendment; and
(d) Such other additional documentation as the Lender
may reasonably request in connection herewith.
3. Counterparts. This Amendment may be executed in any
number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together
shall constitute one and the same agreement.
4. Representations and Warranties. The Borrower hereby
represents and warrants to the Lender as follows:
(a) The Borrower has the power and authority and the
legal right to execute, deliver, and perform this Amendment,
and has taken all necessary corporate action to authorize
the execution, delivery, and performance of this Amendment.
This Amendment has been duly executed and delivered on
behalf of the Borrower and constitutes the legal, valid, and
binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms. The execution,
delivery, and performance of this Amendment will not violate
any Law or require any consent, approval, authorization of,
or registration, declaration, or filing with, any
Governmental Authority.
(b) At and as of the date of execution of this
Amendment and at and as of the Effective Date, and both
prior to and after giving effect to this Amendment: (1) the
representations and warranties of the Borrower contained in
the Loan Documents are accurate and complete in all
respects, and (2) there has not occurred a Default or Event
of Default under the Agreement or any other Loan Document.
<PAGE>
Douglas E. Jones
November 1, 1994
Page 5 of 5
Very truly yours:
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
By /s/ Russell R. Anderson
--------------------------
Name: Russell R. Anderson
Title: Vice President
AGREED TO AND ACCEPTED AS OF NOVEMBER 1, 1994, BY:
CUB FUNDING CORPORATION
By /s/ Douglas E. Jones
--------------------------
Name: Douglas E. Jones
Title: Chief Executive Officer
<PAGE>
NOTE
$16,000,000 November 1, 1994
For value received, the undersigned CUB FUNDING CORPORATION,
a California corporation (the "Borrower"), promises to pay to the
order of The Prudential Home Mortgage Company, Inc. (the
"Lender"), at its office at 7485 New Horizon Way, Frederick,
Maryland 21701, in lawful money of the United States and in
immediately available funds, the principal amount of Sixteen
Million Dollars ($16,000,000) or the aggregate unpaid principal
amount of all Loans made to the Borrower by the Lender pursuant
to the Credit and Security Agreement (as defined below),
whichever is less, on the Termination Date, and to pay interest
from the date of this Note on the unpaid principal amount of this
Note, in like money, at said office, at the time and at the rate
per annum as provided in the Credit and Security Agreement. Any
amount of principal hereof that is not paid when due, whether at
stated maturity, by acceleration, or otherwise, shall bear
interest from the date when due until said principal amount is
paid in full, payable on demand, at the Default Rate.
The Borrower hereby authorizes the Lender to endorse in the
books and records of the Lender all Loans made to the Borrower by
the Lender, the amount of each Loan, the type of Loan and each
renewal and all payments of principal amounts in respect of such
Loans, which endorsements shall, in the absence of manifest
error, be conclusive as to the outstanding principal amount of
all Loans made to the Borrower by the Lender; provided, however,
that the failure to make such notation with respect to any Loan
or payment shall not limit or otherwise affect the obligations of
the Borrower to the Lender under the Credit and Security
Agreement or this Note.
This Note is a Note referred to in, and is entitled to the
benefits of, the Credit and Security Agreement dated as of August
11, 1994 (as amended from time to time, the "Credit and Security
Agreement") among the Borrower and the Lender. This Note
replaces the Note of the Borrower to the Lender dated August 11,
1994, in the amount of $30,000,000; and any outstanding
Obligations under such former Note are incorporated under this
replacement Note. All capitalized terms used herein and not
defined in this Note shall have the meanings given to them in the
Credit and Security Agreement.
The Credit and Security Agreement contains, among other
things, provisions for the prepayment of and acceleration of the
maturity of this Note upon the happening of certain stated events
as specified therein. This Note is secured as provided in the
Credit and Security Agreement and certain of the Loan Documents
referred to therein, reference to which is hereby made for a
description of the Collateral provided for under the above-
referenced documents and the rights of the Borrower and the
Lenders with respect to such Collateral.
<PAGE>
This Note shall be governed by the laws of the State of New
York, provided that, as to the maximum rate of interest that may
be charged or collected, if the laws applicable to the Lender
permit it to charge or collect a higher rate than the laws of the
State of New York, then such law applicable to the Lender shall
apply to the Lender under this Note.
CUB FUNDING CORPORATION
By /s/ Douglas E. Jones
----------------------------
Name: Douglas E Jones
Title: Chief Executive Officer
Exhibit 13
TABLE OF CONTENTS
Financial Highlights 3
Letter to Shareholders 4
Five Year Summary of Selected Financial Data 6
Management's Discussion and Analysis 7
Consolidated Financial Statements 21
Notes to Consolidated Financial Statements 26
Report of Management 44
Independent Auditors' Report 45
Summary of Common Share and Quarterly Data 46
Republic Affiliates 47
Republic Bancorp Inc. Board of Directors and Officers 56
Corporate Information 57
<PAGE>
COMPANY PROFILE
Republic Bancorp Inc. is a bank holding company established in 1986 which
currently operates 86 banking and mortgage banking offices in 19 states. The
Company owns Republic Bank based in Ann Arbor, Michigan, with 25 offices in
Michigan, and Republic Savings Bank with 11 offices primarily in the greater
Cleveland, Ohio area. The Company's two banking entities engage in the
business of commercial banking and exercise the powers of a full-service
commercial bank and savings bank, respectively, with the exception of trust
services.
To complement its retail banking activities, the Company maintains a
nationwide mortgage banking presence with Republic Bancorp Mortgage Inc.,
located in Farmington Hills, Michigan, which operates its retail and wholesale
mortgage operations in 19 offices located in 6 states; Market Street Mortgage
Corporation, a retail mortgage company based in Clearwater, Florida with 24
locations in 9 states; and CUB Funding Corporation, a retail and wholesale
mortgage company, headquartered in Calabasas, California with 7 offices in 3
states. During 1994 the Company originated or purchased $2.8 billion in
residential mortgage loans. The Company also performs servicing of mortgage
loans, which includes the processing and administration of mortgage loan
payments. At December 31, 1994, the mortgage loan servicing portfolio was
$4.7 billion.
<TABLE>
<CAPTION>
Financial Highlights
%
(Dollars in thousands, except per share data) 1994 1993 Change
<S> <C> <C> <C>
NET INCOME $15,719 $23,183 (32)%
PER COMMON SHARE DATA:
Income before cumulative effect of change
in accounting principle 1.00 1.45 (31)
Cumulative effect of change in accounting principle - .06 -
Net income - primary 1.00 1.51 (34)
Net income - fully diluted 1.00 1.50 (33)
Cash dividends declared .32 .23 39
Book value per common share outstanding 7.73 7.37 5
Average shares outstanding (000s) - fully diluted 15,751 15,437 2
OPERATING DATA (IN MILLIONS):
Residential mortgage loan closings $2,837 $4,911 (42)%
Mortgage loan servicing portfolio 4,669 3,023 54
YEAR-END BALANCES:
Total assets $1,363,614 $1,170,594 16%
Portfolio loans, net 599,545 399,903 50
Total deposits 818,742 833,734 (2)
Shareholders' equity 117,914 111,433 6
FINANCIAL RATIOS:
Return on average assets 1.23% 1.94% (37)%
Return on average equity 13.43 23.72 (43)
Total shareholders' equity to assets 8.65 9.52 (9)
Total risk-based capital 21.05 20.19 4
ASSET QUALITY RATIOS:
Non-performing assets to loans and other
real estate owned .54% .58% (7)%
Non-performing assets to total assets .30 .45 (33)
</TABLE>
3
<PAGE>
Letter to Shareholders
RESULTS
We are pleased to report your Company earned net income of $15.7 million in
1994. While 1994 earnings were below our banner year of 1993 in which the
Company earned $23.2 million, they are very respectable in relationship to
both our peer group and the volatile interest rate environment in 1994. Our
return on average assets was 1.23% for 1994, compared with national peer of
1.11%, and our return on average equity was 13.43%, compared with peer of
12.77%. Included in net income for 1993 was $950,000 in earnings for the
Company's change in accounting for income taxes, or $.06 per share. Fully
diluted earnings per share was $1.00 for the year ended December 31, 1994
compared to $1.45 in 1993, excluding the earnings for the Company's change in
accounting for income taxes. All earnings per share amounts presented are
restated to reflect the 10% stock dividend issued December 2, 1994.
Mortgage loan closings were $2.8 billion for the year ending December 31,
1994, a decrease of 42% from the $4.9 billion closed during 1993. While the
dramatic increase in interest rates throughout the year substantially reduced
the volume of refinance mortgages, the Company's origination of home purchase
mortgages actually increased by 28% during 1994 through our nationwide
mortgage network.
STRENGTH OF ASSET QUALITY AND CAPITAL
The Company's total assets increased to $1.36 billion at December 31, 1994,
compared to $1.17 billion reported at December 31, 1993. Republic's asset
quality ratios continue to be among the best in the country. Net charge-offs
in 1994 were only .20% of average total loans and non-performing assets were
only .30% of total assets at December 31, 1994. These ratios reflect the
Company's emphasis on conservative lending policies. At December 31, 1994,
approximately 90% of the Company's loan portfolio consisted of residential
mortgages and commercial loans secured by real estate.
The Company also continues to enjoy very strong capital levels with total
shareholders' equity increasing to $118 million at December 31, 1994 from $111
million at December 31, 1993. The Company's capital ratios are more than
double the regulatory requirements of a well-capitalized financial
institution, with a Total Risk-Based capital ratio of 21.05% at December 31,
1994.
1994 OVERVIEW
The year ending December 31, 1994 was a year of significant change in our
industry. The dramatic increase in both short-term and long-term interest
rates during the year caused a reduction in mortgage loan volume, a fall-off
of the refinance business, overcapacity in the mortgage market and very
competitive pricing. In this challenging environment, the Company still
closed $2.84 billion in mortgages during 1994. Other than for the refinance
boom of 1993, our mortgage loan closings in 1994 represent the highest volume
ever at the Company.
The Company also did very well in Small Business Administration (SBA)
lending in 1994. Based on number of loans closed, Republic Bank was the Number
One SBA originator in the state of Michigan. As a Company, we closed over $12
million in SBA loans during the year.
While 1994 also saw a reduction in the price of the Company's stock, the
Company's five year average return on stock of 31% continues to exceed that
of the NASDAQ Stock Market composite for all U.S. companies of 20% and the
NASDAQ bank stocks of 15%.
4
<PAGE>
During 1994, the Company also took the following steps to better position
itself for 1995 and beyond:
Republic acquired Home Funding with seven mortgage origination offices in
the states of New York, Connecticut, Massachusetts and Maryland.
Additionally, we expanded into the Southwest market in Phoenix, and into
the Northwest in Portland and Seattle. Also, in December, 1994 we sold
our bank branch offices in the Traverse City, Michigan region and
redeployed those assets through an acquisition of deposits in the Flint,
Owosso and Flushing, Michigan markets. This expansion has been coupled
with a review of the staffing levels and profitability of all of our
offices.
During the fourth quarter, the Company sold approximately $47 million of
lower yielding, adjustable rate securities. The proceeds from the
securities sale were redeployed into higher yielding adjustable rate
residential mortgage loans which will improve our future interest income.
The Company significantly increased its mortgage loan servicing portfolio
to $4.7 billion, an increase of more than 50% since 1993. This servicing
has value in that it may either be sold or retained and recognized as an
income stream over an extended period. Our mortgage loan servicing
portfolio also acts as a natural hedge against rising interest rates, in
that its value increases as mortgage loan interest rates increase. As of
December 31, 1994, we estimate the market value of this servicing
portfolio exceeds its book value by more than $10 million.
DIRECTORS
John F. Northway retired from the Board of Directors in January 1995 and
became a director-emeritus. We would like to acknowledge his many significant
contributions and counsel to the Company over the last nine years.
Additionally, Lyman H. (Tim) Treadway has chosen to retire from the Board
effective with the 1995 annual meeting. We would like to express our sincere
appreciation for his efforts and guidance.
OUTLOOK
In February 1995, your Board of Directors approved a 12.5% increase in the
quarterly dividend to $.09 per share, as a result of the Company's strong
capital position and positive outlook for 1995. This is the third increase
in Republic's regular quarterly dividend in the last three years and
represents a cumulative increase of 140% over this period. Additionally, the
Company has acquired approximately 250,000 shares under the previously
announced stock repurchase program.
We believe the actions we have taken and those we continue to implement
will create additional opportunities in our fundamental business. Republic is
a geographically diversified organization with 86 offices in 19 states, and
our emphasis remains on our strengths of mortgage banking, SBA lending and
personal banking. With the talent of Republic employees and a clear vision of
our goals and objectives, we will continue to create value for our
shareholders.
The directors, officers and staff look forward to 1995 and want to thank
you for your continued support.
Sincerely,
/s/ Jerry D. Campbell
-----------------------
Jerry D. Campbell
Chairman and President
5
<PAGE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
The selected consolidated financial information for the Company and its
subsidiaries presented below for each of the five years in the period ended
December 31, 1994 has been derived from the Consolidated Financial Statements
of the Company and the related notes to the Consolidated Financial Statements.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME INFORMATION (Dollars in thousands):
Total interest income $78,219 $78,831 $74,068 $70,886 $71,106
Total interest expense 44,999 42,268 40,339 43,990 48,015
Net interest income before provision for loan losses 33,220 36,563 33,729 26,896 23,091
Provision for loan losses 94 603 3,967 2,135 1,151
Mortgage banking income 69,899 85,128 30,697 8,985 5,652
Other non-interest income 5,762 6,992 6,113 4,482 1,578
Non-interest expense 85,021 93,539 47,811 29,325 25,246
Provision for income taxes 8,047 12,308 7,339 3,342 1,497
------ ------ ------ ----- -----
Net income before cumulative effect of
change in accounting principle 15,719 22,233 11,422 5,561 2,427
Cumulative effect of change in accounting principle - (950) - - -
------- ------- ------- ------- -------
Net income $15,719 $23,183 $11,422 $ 5,561 $ 2,427
======= ======= ======= ======= =======
PER COMMON SHARE DATA:
Net income (primary) (1) $1.00 $1.51 $.83 $.45 $.17
Net income (fully diluted) (1) 1.00 1.50 .80 .44 .17
Cash dividends declared .32 .23 .20 - -
Dividend payout ratio 32% 15% 25% - -
Book value per common share outstanding (1) $7.73 $7.37 $5.93 $5.30 $5.18
OPERATING DATA (Dollars in millions):
Residential mortgage loan closings $2,837 $ 4,911 $ 2,078 $ 528 $ 267
Mortgage loan servicing rights sold 4,508 2,301 1,213 201 103
Mortgage loan servicing portfolio 4,669 3,023 2,049 284 150
YEAR-END BALANCES (Dollars in millions):
Total assets $1,364 $1,171 $1,126 $838 $743
Total earning assets 1,224 1,078 1,041 801 703
Net loans 600 400 519 459 466
Total deposits 819 834 898 686 630
Long-term debt 56 20 5 7 9
Shareholders' equity 118 111 84 65 59
PERFORMANCE RATIOS:
Return on average assets 1.23% 1.94% 1.20% .71% .33%
Return on average common equity 13.43 23.72 15.05 8.91 3.60
Net interest margin 2.88 3.29 3.70 3.62 3.30
ASSET QUALITY RATIOS:
Non-performing assets to loans and other real estate owned (2) .54% .58% 1.01% 1.68% 1.78%
Non-performing assets to total assets .30 .45 .69 1.07 1.16
Allowance for estimated loan losses to non-performing loans 158.61 148.34 163.73 78.41 54.37
Allowance for estimated loan losses to loans .92 1.77 1.46 1.16 .94
Net charge-offs to average loans outstanding (2) .20 .06 .26 .23 .12
CAPITAL RATIOS:
Total shareholders' equity to assets 8.65% 9.52% 7.48% 7.74% 7.96%
Tier 1 risk-based capital 17.57 16.35 12.97 13.07 12.99
Total risk-based capital 21.05 20.19 14.23 14.54 14.37
Tier 1 leverage 8.43 8.43 7.51 8.02 7.83
<FN>
(1) All per common share amounts have been restated to reflect stock dividends
and stock splits.
(2) Includes mortgage loans held for sale.
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income in 1994 totaled $15.7 million, compared to $23.2 million earned in
1993. This decrease in earnings was due primarily to a significant decline in
single-family mortgage volume, which resulted in a reduction in mortgage
banking income. Net income per common share, fully diluted, was $1.00 for
1994, compared to $1.50 earned in 1993. Return on average assets in 1994 was
1.23%, while return on average equity was 13.43%.
Republic Bancorp Inc. has five subsidiaries engaged in two business
segments, mortgage banking and commercial banking. The subsidiaries in the
mortgage banking segment include: Republic Bancorp Mortgage Inc. ("Republic
Mortgage"), Market Street Mortgage Corporation ("Market Street") and CUB
Funding Corporation ("CUB Funding"), while the commercial banking segment
includes Republic Bank and Republic Savings Bank ("Republic Savings").
MORTGAGE BANKING
During 1994, the Company closed $2.8 billion in single-family, residential
mortgage loans, compared to $4.9 billion during 1993, a decrease of 42%. The
decline in the Company's residential loan closings for 1994 was due to the
significant increase in both short-term and long-term interest rates which
substantially reduced the volume of mortgage loan originations.
The decrease in mortgage loan volume resulted in a decrease of mortgage
banking income of $15.2 million, or 18% from $85.1 million in 1993 to $69.9
million in 1994. A breakdown of income from mortgage banking activities is
summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Net mortgage loan servicing fees $7,439 $4,558 $918
Origination fee income 25,054 34,044 9,550
Gain on sale of mortgages 4,968 33,190 17,760
Gain on sale of servicing 32,438 13,336 2,469
------- ------- -------
Total mortgage banking income $69,899 $85,128 $30,697
======= ======= =======
</TABLE>
The Company generates origination fee income primarily through its retail
mortgage loan operation. The Company's retail mortgage loan closings were
$1.77 billion in 1994 compared to $2.35 billion for 1993. This decrease in
retail mortgage closings resulted in a decrease in origination fee income of
$9.0 million from $34.0 million in 1993 to $25.0 million in 1994.
The Company typically sells all of its long-term fixed rate and a
significant portion of its variable rate mortgages to the secondary market.
During 1994, the Company's gain on sale of mortgages totaled $5.0 million
compared to $33.2 million for 1993. The decrease in the gain on sale of
mortgages was due to lower volume and the significant decline in margins. The
margin decline was caused by an overcapacity in the mortgage market,
resulting in very competitive pricing for a significant portion of 1994.
During 1994, the Company continued its emphasis on the purchase of and
retention of mortgage loan servicing rights. This emphasis contributed to the
increase in the mortgage servicing portfolio from $3.0 billion at December
31, 1993 to $4.7 billion at December 31, 1994. This increase in the servicing
portfolio resulted in net mortgage loan servicing fees of $7.4 million for
the year ended December 31, 1994, or a 63% increase over the $4.6 million in
fees in 1993. The servicing fees are net of the amortized cost of the
purchased mortgage servicing rights for the years ended December 31, 1994,
1993 and 1992 of $5.0 million, $4.6 million, and $1.4 million, respectively.
During 1994 and 1993, the Company sold both purchased and originated
mortgage servicing rights of $4.5 billion and $2.3 billion, respectively,
resulting in gains of $32.4 million and $13.3 million, respectively.
For a further discussion of the mortgage banking segment, please refer to
Notes 4 and 19 of the Notes to the Consolidated Financial Statements. The
remainder of the Management's Discussion and Analysis provides various
disclosures and analysis relating principally to the commercial banking
segment.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income totaled $33.2 million in 1994, a decrease of 9.1% from
the $36.6 million earned during 1993. The decrease in net interest income was
primarily due to the decline in the net interest margin from 3.29% in 1993 to
2.88% in 1994. The decrease in the net interest margin was a result of a
decrease in mortgage loans held for sale and a subsequent redeployment of
assets into lower yielding securities as well as a significant increase in
short-term borrowing costs.
While average earning asset balances grew 3.6% or $40.4 million, to $1.15
billion as of December 31, 1994, the yield on average earning assets decreased
from 7.08% to 6.78%, resulting in an overall decrease of $612,000 in interest
income. As a result of the rise in interest rates and the decline in mortgage
production, the average mortgage loans held for sale balance decreased from
$382 million in 1993 to $214 million in 1994. These assets were redeployed
primarily into investment securities, which earned 161 basis points less on
average than mortgage loans held for sale. An additional factor in the decline
in yield on interest earning assets was the 84 basis points decline in average
rates earned on portfolio real estate mortgages from 1993, a significant
portion of which reprice annually based on the one-year Constant Maturity
Treasury, plus an index.
Interest expense for 1994 increased $2.7 million compared with 1993. This
was a result of an increase in average interest bearing liabilities of $51.9
million, or 5.5%, over 1993 and an increase in the average rates paid on
liabilities from 4.47% to 4.51%. As a result of the decrease in mortgage loan
originations, the 1994 average borrowings of the Company's mortgage affiliates
under the higher cost warehousing facilities decreased $60.7 million while the
average borrowing rate increased from 5.77% to 6.19% in 1994. Offsetting the
reduction in these borrowings was an increase of $136.0 million in other
short-term borrowings of the bank affiliates, primarily reverse repurchase
agreements. Average balances and rates on these borrowings were $159.6 million
and 4.83% in 1994 and $23.6 million and 3.78% in 1993, respectively.
Net interest income totaled $36.6 million in 1993, an increase of 8.4%
from 1992. The increase in net interest income in 1993 compared with 1992,
resulted from an increase of $4.8 million in interest income offset by an
increase of $1.9 million in interest expense. The increase in both interest
income and interest expense was primarily due to an increase in interest
earning assets and interest bearing liabilities partially offset by general
declines in interest rates. The net interest margin decreased from 3.70% in
1992 to 3.29% in 1993.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
The following table presents an analysis of average balances and rates for
each of the three years ended December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
Average Avg. Average Avg. Average Avg.
Balance(1) Interest Rate Balance(1) Interest Rate Balance(1) Interest Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE ASSETS:
Money market investments $13,163 $474 3.60% $50,541 $1,473 2.91% $47,942 $1,572 3.28%
Mortgage loans held for sale 213,593 15,317 7.17 382,196 27,361 7.16 153,754 10,966 7.13
Securities 434,440 24,128 5.56 213,984 10,823 5.06 205,832 14,391 6.99
Commercial loans 114,954 10,599 9.22 148,707 13,213 8.89 193,595 18,493 9.55
Real estate mortgage loans 326,902 23,243 7.11 270,537 21,520 7.95 262,214 23,662 9.02
Installment loans 50,120 4,458 8.89 46,830 4,441 9.48 48,290 4,984 10.32
Total loans, net of ------- ------ ---- ------- ------ ---- ------- ------ -----
unearned income 491,976 38,300 7.78 466,074 39,174 8.41 504,099 47,139 9.35
--------- ------ ---- --------- ------ ---- ------- ------ ----
Total interest earning assets 1,153,172 78,219 6.78 1,112,795 78,831 7.08 911,627 74,068 8.12
--------- ------ ---- --------- ------ ---- ------- ------ ----
Allowance for loan losses (6,360) (7,594) (6,147)
Cash and due from banks 25,758 20,467 14,525
Other assets 108,549 71,892 35,435
---------- ---------- --------
Total assets $1,281,119 $1,197,560 $955,440
========== ========== ========
AVERAGE LIABILITIES AND
SHAREHOLDERS' EQUITY:
Deposits:
Interest bearing demand
deposits $86,965 2,295 2.64 $65,392 1,846 2.82 $57,552 1,907 3.31
Savings deposits 188,267 6,212 3.30 179,988 5,093 2.83 178,072 6,451 3.62
Time deposits 420,995 19,754 4.69 512,666 25,346 4.94 489,934 28,338 5.78
------- ------ ---- ------- ------ ---- ------- ------ ----
Total interest bearing deposits 696,227 28,261 4.06 758,046 32,285 4.26 725,558 36,696 5.06
Short-term borrowings 216,663 10,902 5.03 141,409 6,479 4.58 28,776 1,557 5.41
FHLB advances 42,796 2,237 5.23 28,008 1,781 6.36 23,546 1,666 7.05
Long-term debt 42,499 3,599 8.47 18,833 1,723 9.15 6,410 420 6.55
------- ------ ---- ------- ------ ---- ------- ------ ----
Total interest bearing liabilities 998,185 44,999 4.51 946,296 42,268 4.47 784,290 40,339 5.14
------- ------ ---- ------- ------ ---- ------ ------ ----
Non-interest bearing deposits 121,594 127,562 62,605
Other liabilities 44,273 25,951 30,708
--------- --------- -------
Total liabilities 1,164,052 1,099,809 877,603
--------- --------- -------
Shareholders' equity 117,067 97,751 77,837
Total liabilities and ---------- ---------- --------
shareholders' equity $1,281,119 $1,197,560 $955,440
========== ========== ========
Net interest income $33,220 $36,563 $33,729
======= ======= =======
Net interest spread 2.27% 2.61% 2.98%
==== ==== ====
Net interest margin 2.88% 3.29% 3.70%
==== ==== ====
<FN>
(1) Non-accrual loans and overdrafts are included in average balances. No
significant amounts of tax-exempt income were earned by the Company or
its subsidiaries during 1994, 1993 or 1992.
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Net interest income can be analyzed in terms of the impact of changing rates
and changing volumes of interest earning assets and interest bearing
liabilities. The following table sets forth certain information regarding
changes in net interest income due to changes in the average balance of
interest earning assets and interest bearing liabilities and due to changes
in average rates for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 versus 1993 1993 versus 1992
Increase/(Decrease) Increase/(Decrease)
Due to Change In: Due to Change In:
Average Average Net Average Average Net
Balance(1) Rate(1) Change Balance(1) Rate(1) Change
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Money market investments $(1,285) $286 $(999) $83 $(182) $(99)
Mortgage loans held for sale (12,082) 38 (12,044) 16,350 45 16,395
Securities 12,140 1,165 13,305 598 (4,166) (3,568)
Loans, net of unearned income(2) 2,129 (3,003) (874) (3,414) (4,551) (7,965)
----- ------ ---- ------ ------ -----
Total interest income 902 (1,514) (612) 13,617 (8,854) 4,763
----- ------ ---- ------ ------ -----
INTEREST EXPENSE:
Interest bearing demand deposits 573 (124) 449 241 (302) (61)
Savings deposits 243 876 1,119 68 (1,426) (1,358)
Time deposits (4,358) (1,234) (5,592) 1,268 (4,260) (2,992)
------ ------ ------ ----- ------ ------
Total interest bearing deposits (3,542) (482) (4,024) 1,577 (5,988) (4,411)
Short-term borrowings 3,734 689 4,423 5,196 (274) 4,922
FHLB advances 815 (359) 456 295 (180) 115
Long-term debt 2,007 (131) 1,876 986 317 1,303
----- ---- ----- ----- ------ -----
Total interest expense 3,014 (283) 2,731 8,054 (6,125) 1,929
------- ------- ------- ------ ------- ------
Net interest income $(2,112) $(1,231) $(3,343) $5,563 $(2,729) $2,834
======= ======= ======= ====== ======= ======
<FN>
(1) Any variance attributable jointly to volume and rate changes is allocated
to volume and rate in proportion to the relationship of the absolute dollar
amount of the change in each.
(2) Non-accrual loans are included in average balances.
</TABLE>
NON-INTEREST INCOME
Non-interest income decreased to $75.7 million in 1994 compared to $92.1
million in 1993. The largest component of non-interest income is mortgage
banking income which is discussed previously in the mortgage banking section
of Management's Discussion and Analysis. Certain non-recurring items had a
impact on non-interest income for the Company in 1994. In December 1994, the
Company completed the sale of its three northern Michigan branch offices with
total deposits of $43.7 million, resulting in a gain of $4.0 million. In
addition, during the fourth quarter of 1994 the Company sold approximately
$47.0 million of low yielding mortgage backed securities, resulting in a loss
of $2.0 million and an overall loss on sale of securities of $1.4 million for
the year. During 1993, the Company's gain on sale of securities was $2.0
million
NON-INTEREST EXPENSE
During 1994, non-interest expense decreased to $85.0 million, or 6.6% of
average assets, compared to $93.5 million, or 7.8% of average assets from 1993.
The decrease in non-interest expense was due primarily to the reduction in
salaries and employee benefits of $7.4 million, including commissions paid on
residential loan closings. Salaries and employee benefits are the largest
portion of non-interest expense, totalling $47.6 million, or 56.0% of total
non-interest expense in 1994. Furthermore, other non-interest expenses
decreased from $38.5 million in 1993 to $37.4 million in 1994, a decrease of
2.8%. This decrease is primarily attributable to a decrease in mortgage loan
closing costs.
Non-interest expense increased from $47.8 million in 1992, or 5.0% of average
assets, compared to $93.5 million, or 7.8% of average assets, in 1993. Salaries
and employee benefits were the largest portion of non-interest expense,
totalling $55.0, or 58.8% of total non-interest expense in 1993. The increase
in salaries and employee
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
benefits were primarily due to increased commissions on the significant
increase in residential loan closings and the expansion of the Company's
mortgage banking activities, including the Market Street acquisition.
INCOME TAXES
Federal income tax expense was $8.0 million in 1994, as compared to $12.3
million in 1993 and $7.3 million in 1992. The effective tax rate in 1994 was
33.9%, as compared to 35.6% in 1993 and 39.1% in 1992. The decrease from 1993
is due to a decreased percentage of non-tax deductible expenses to income
before income taxes.
The Company adopted Statement of Financial Accounting Standards No. 109
("SFAS 109"), "Accounting for Income Taxes," effective January 1, 1993.
Included in earnings for the year ended December 31, 1993 was a cumulative
adjustment of $950,000, or $.06 per share, relating to the adoption of SFAS
109.
FINANCIAL CONDITION
ASSETS
Total assets at December 31, 1994 were $1.36 billion, compared to $1.17
billion at December 31, 1993, an increase of 16%. The increase in assets
during 1994 was due primarily to an increase in securities, which increased by
$307.8 million, and an increase in portfolio loans of $198.0 million. These
increases have been funded by a decrease in mortgage loans held for sale of
$355.7 million and increased levels of federal funds purchased and reverse
repurchase agreements, as well as Federal Home Loan Bank advances totalling
$228.5 million. The decrease in mortgage loans held for sale resulted from the
decreased mortgage volume attributable to the significant increase in interest
rates during the year.
Average earning assets totalled $1.15 billion for 1994, compared with
$1.11 billion for 1993.
LOANS
Total loans, excluding loans held for sale, at December 31, 1994 were $605.1
million. This represents an increase of $198.0 million from the $407.1 million
reported at December 31, 1993. Residential real estate loans increased $228.6
million to $457.8 million, or 75.7% of total loans at December 31, 1994, from
$229.2 million, or 56.3% at December 31, 1993, due primarily to the Company
increasing it's portfolio of variable rate residential real estate loans. The
Company will continue its emphasis on originating fixed rate residential real
estate loans to be subsequently sold into the secondary market, and on
generating adjustable rate, real estate-secured portfolio loans. Commercial
loans, including commercial loans secured by real estate, decreased from
$126.5 million to $97.9 million or 16.1% of total loans at December 31, 1994.
The decrease of $28.6 million from 1993 was due to the sale of $12.8 million
of commercial loans by Republic Bank and Republic Savings Bank to other
financial institutions, SBA loan sales and loan payoffs.
Mortgage loans held for sale decreased from $507.8 million at December 31,
1993 to $152.1 million at December 31, 1994. During 1994, the Company closed
$2.8 billion in residential real estate mortgage loans, compared to $4.9
billion closed during 1993. The substantial majority of all mortgage loans
closed were sold or committed for sale into the secondary market.
The Company attempts to minimize credit risk in its loan portfolio by
focusing primarily on residential real estate mortgages and real estate-
secured commercial loans. As of December 31, 1994, these loans comprise 89.2%
of the total loan portfolio, excluding mortgage loans held for sale. The
Company's general policy is to originate conventional real estate mortgages
with loan to value ratios of 80% or less and SBA-secured loans or real estate-
secured commercial loans with loan to value ratios of 70% or less. The
substantial majority of the Company's loans are conventional mortgage loans
which are secured by residential properties and which comply with the
requirements for sale to or conversion to mortgage-backed securities issued
by the Federal Home Loan Mortgage Corporation ("FHLMC") or the Federal
National Mortgage Association ("FNMA"). The majority of the Company's
commercial loans are secured by real estate and are made to small and medium-
sized businesses. These loans are generally made at rates based on the
prevailing prime interest rates of Republic Bank and Republic Savings and are
adjusted periodically. The focus of the Company on real estate-secured lending
with lower loan to value ratios is generally reflected in the low net charge-
off ratio percentages.
The Company has not emphasized installment loans and, excluding home
equity loans, does not intend to emphasize these loans in the future. To the
extent made, these loans generally result from accommodations to customers
related to other banking activities. The Company has insignificant amounts of
agribusiness loans outstanding, and has no loans to foreign debtors. The table
on the following page summarizes the composition of the Company's loan
portfolio.
11<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
<TABLE>
<CAPTION>
December 31,
1994 1993 1992 1991 1990
Amount % Amount % Amount % Amount % Amount %
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans:
Secured by real
estate $81,922 13.5% $94,428 23.2% $147,790 28.1% $144,832 31.2% $128,069 27.2%
Other (generally
secured) 15,989 2.6 32,114 7.9 44,538 8.5 48,238 10.4 56,020 11.9
------ ---- ------- ---- ------- ---- ------- ---- ------- ----
Total commercial
loans 97,911 16.1 126,542 31.1 192,328 36.6 193,070 41.6 184,089 39.1
Residential loans:
Real estate
mortgages 457,755 75.7 229,203 56.3 286,502 54.4 224,478 48.3 242,416 51.6
Installment loans 49,423 8.2 51,372 12.6 47,563 9.0 46,955 10.1 43,536 9.3
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total loans $605,089 100.0% $407,117 100.0% $526,393 100.0% $464,503 100.0% $470,041 100.0%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
The following table sets forth information regarding the maturity and
sensitivity to interest rates of the Company's commercial loan portfolio.
<TABLE>
<CAPTION>
December 31, 1994
(Dollars in thousands)
<S> <C>
Commercial Loan Maturity:
Due within one year $25,121
One year through five years 52,074
After five years 20,716
-------
Total commercial loans $97,911
=======
Commercial Loans Maturing After One Year:
With predetermined rates $24,564
With floating rates 48,226
-------
Total commercial loans $72,790
=======
</TABLE>
The following table sets forth information regarding the geographic
distribution of the Company's loan portfolio as of December 31, 1994. As noted
below, the majority of loans have been originated in Michigan.
<TABLE>
<CAPTION>
December 31, Percent of Total
1994 Outstanding
(Dollars in thousands)
<S> <C> <C>
Michigan $404,966 66.9%
Ohio 114,359 18.9
Florida 12,986 2.2
Indiana 12,144 2.0
Other 60,634 10.0
-------- -----
Total $605,089 100.0%
======== =====
</TABLE>
There are no loans outstanding which would be considered a concentration of
lending in any particular industry or group of industries.
NON-PERFORMING ASSETS
Loans held in portfolio are reviewed on a regular basis and are placed on
non-accrual status when, in the opinion of management, reasonable doubt
exists as to the full, timely collection of interest or principal. Generally,
loans are placed in non-accrual status when either principal or interest is
90 days or more past due. Furthermore, at the time such loans are placed in
non-accrual status, uncollected accrued interest is charged against current
income. At December 31, 1994, approximately $1.6 million, or .3% of the loans
in the Company's portfolio were 30-89 days delinquent.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Real estate acquired by the Company as a result of foreclosure or by deed in
lieu of foreclosure is classified as other real estate owned ("ORE") until
such time as it is sold. When such property is acquired, it is recorded at the
lower of the unpaid principal balance of the related loan or its net
realizable value. Any further write-down of the property is charged to
expense. The following table provides information with respect to the
Company's past due loans and the components of non-performing assets at the
dates indicated.
<TABLE>
<CAPTION>
December 31,
1994 1993 1992 1991 1990
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans past due 90 days or more and still accruing interest:
Commercial $104 $217 - - $435
Residential real estate mortgages - - $90 - 176
Installment 35 93 31 $3 12
---- ---- ---- -- ----
Total $139 $310 $121 $3 $623
==== ==== ==== == ====
Non-accrual loans:
Commercial $982 $1,812 $1,386 $3,332 $6,285
Residential real estate mortgages 1,304 803 1,085 1,223 1,808
Installment 79 108 82 163 48
----- ----- ----- ----- -----
Total 2,365 2,723 2,553 4,718 8,141
Restructured loans 1,130 2,140 2,140 2,181 -
Other real estate owned 586 405 3,117 2,078 449
------ ------ ------ ------ ------
Total non-performing assets $4,081 $5,268 $7,810 $8,977 $8,590
====== ====== ====== ====== ======
Non-performing assets as a percentage of:
Total loans and OREO(1) .67% 1.29% 1.47% 1.92% 1.83%
Total loans and OREO(2) .54 .58 1.01 1.68 1.78
Total assets .30 .45 .69 1.07 1.16
<FN>
(1) Including other real estate owned, but excluding loans held for sale.
(2) Including other real estate owned and loans held for sale.
</TABLE>
Gross interest income that would have been recorded in 1994 for loans that
were classified as non-accrual on December 31, 1994, assuming they had been
accruing interest throughout the year in accordance with their original terms,
was approximately $214,000. The amount of interest collected on these loans
and included in income for 1994 was approximately $75,000. Therefore, on a net
basis, total income foregone in 1994 due to these loans was approximately
$139,000. Furthermore, gross interest income that would have been recorded on
restructured loans throughout the year in accordance with their original
terms, was approximately $114,000, versus $77,000, the amount actually
collected under the new loan terms, resulting in lost interest of
approximately $37,000.
The Company also maintains a watch list for loans identified as requiring
a higher level of monitoring by management. These are loans which, because of
one or more characteristics, such as economic conditions, industry trends,
nature of collateral, collateral margin or other factors, require more than
normal monitoring by the Company. As of December 31, 1994, total loans on the
watch list of the Company were $9.2 million, or 1.52% of total portfolio
loans, compared to $8.9 million, or 2.18% of the total loan portfolio at
December 31, 1993.
ALLOWANCE FOR ESTIMATED LOAN LOSSES
Management is responsible for maintaining an adequate allowance for estimated
loan losses. The appropriate level of the allowance for estimated loan losses
is determined by systematically reviewing the loan portfolio quality,
analyzing economic changes, consulting with regulatory agencies and reviewing
historical loan loss experience. Actual net loan losses are charged against
this allowance. If actual circumstances and losses differ substantially from
management's assumptions and estimates, such reserves for loan losses may not
be sufficient to absorb all future losses, and net earnings could be
significantly and adversely affected. Management is of the opinion that the
allowance for estimated loan losses is adequate to meet potential losses in
the portfolio. It must be understood, however, that there are inherent risks
and uncertainties related to the operation of a financial institution. By
necessity, Republic Bancorp's financial statements are dependent upon
estimates, appraisals and evaluations of loans. Therefore, the possibility
exists that abrupt changes in such estimates, appraisals and evaluations
might be required because of changing economic conditions and the economic
prospects of borrowers.
As of December 31, 1994, the allowance for estimated loan losses was $5.5
million, or .92% of total loans,
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
excluding mortgage loans held for sale, compared with $7.2 million, or 1.77%,
as of December 31, 1993, and $7.7 million, or 1.46% as of December 31, 1992.
Including mortgage loans held for sale such ratios would be .73%, .79% and
1.00% as of December 31, 1994, 1993 and 1992, respectively. The provision for
loan losses for the years ended December 31, 1994, 1993 and 1992 was $94,000,
$603,000 and $4.0 million, respectively.
An analysis of the allowance for estimated loan losses, the amount of
loans charged off, and the recoveries on loans previously charged off is
summarized in the following table:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for estimated loan losses:
Balance at beginning of period $7,214 $7,684 $5,410 $4,426 $3,862
Loans charged off (1,705) (762) (2,079) (1,350) (871)
Recoveries of loans previously charged off 291 279 386 199 284
------ ---- ------ ------ ----
Net charge-offs (1,414) (483) (1,693) (1,151) (587)
------ ---- ----- ----- -----
Provision charged to expense 94 603 3,967 2,135 1,151
Reduction due to sale of commercial loans (350) (590) - - -
------ ------ ------ ------ ------
Balance at end of period $5,544 $7,214 $7,684 $5,410 $4,426
====== ====== ====== ====== ======
Analysis of charge-offs and recoveries:
Charge-offs:
Commercial loans $1,521 $612 $1,778 $860 $346
Residential real estate mortgage loans 70 49 69 291 217
Installment loans 114 101 232 199 308
----- --- ----- ----- ---
Total charge-offs 1,705 762 2,079 1,350 871
----- --- ----- ----- ---
Recoveries:
Commercial loans 219 170 262 81 135
Residential real estate mortgage loans - 36 4 39 26
Installment loans 72 73 120 79 123
--- --- --- --- ---
Total recoveries 291 279 386 199 284
------ ---- ------ ------ ----
Net charge-offs $1,414 $483 $1,693 $1,151 $587
====== ==== ====== ====== ====
Net charge-offs as a percentage of average loans
outstanding .29% .10% .34% .25% .12%
Allowance for estimated loan losses at end of year
as a percentage of loans outstanding .92 1.77 1.46 1.16 .94
Allowance for estimated loan losses at end of year
as a percentage of non-performing loans 158.61 148.34 163.73 78.41 54.37
</TABLE>
The following table summarizes the allocation of the loan loss reserve by loan
type. The entire loan loss reserve is available for use against any loan
charge-offs:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
(Dollars in thousands) ---------------- ---------------- ---------------- ---------------- ----------------
% of % of % of % of % of
related related related related related
loans loans loans loans loans
Dollar to total Dollar to total Dollar to total Dollar to total Dollar to total
Amount loans Amount loans Amount loans Amount loans Amount loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans $2,221 16% $3,382 31% $4,738 37% $3,454 42% $2,783 39%
Residential real estate mortgage loans 598 76 1,298 56 906 54 508 48 449 52
Installment loans 501 8 559 13 481 9 513 10 449 9
Unallocated 2,224 - 1,975 - 1,559 - 935 - 745 -
------ --- ------ --- ------ --- ------ --- ------ ---
Total allowance for estimated loan losses $5,544 100% $7,214 100% $7,684 100% $5,410 100% $4,426 100%
====== === ====== ==== ====== === ====== === ====== ===
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
INVESTMENT SECURITIES
The securities portfolio serves as a source of earnings with relatively
minimal principal risk. As a result, the Company's portfolio includes a large
portion of U.S. Treasury and Government agency obligations and obligations
collateralized by U.S. Government agencies, primarily in the form of
collateralized mortgage obligations and mortgage-backed securities. The
maturity structure of the portfolio is generally short-term (with estimated
average maturities of 0.1 to 6.1 years) or at variable rates. The held-to-
maturity and available-for-sale investment securities portfolios constituted
19.8% and 14.4%, respectively, of the Company's assets at December 31, 1994.
The held-to-maturity investment securities portfolios at December 31, 1993 and
1992, constituted 9.2% and 16.8%, respectively, of the Company's assets, while
the held-for-sale investment securities portfolios constituted 4.4% and 1.6%,
respectively. The increase in investment securities during 1994 was primarily
a result of excess liquidity provided by a decrease in mortgage loans held for
sale. Securities identified that will be held for indefinite periods of time,
including securities that will be used as part of the Company's
asset/liability management strategy and may be sold in response to changes in
interest rates, prepayments and similar factors, are classified as available-
for-sale and accounted for at market value. The following schedule sets forth
the book value of the held-to-maturity, available-for-sale and held-for-sale
investment portfolios at December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
December 31,
1994 1993 1992
Held-To Available Held-To Held-For Held-To Held-For
Maturity For-Sale Maturity Sale Maturity Sale
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury $81,395 - $3,121 - $4,178 -
U.S. Government agency obligations 70,106 $3,708 9,637 - 12,736 -
Collateralized mortgage obligations 104,667 4,811 21,026 $9,002 56,899 $2,011
Mortgage-backed securities 12,436 176,798 68,145 42,042 110,307 16,167
Other securities 1,097 19,297 5,469 - 4,987 -
-------- -------- -------- ------- -------- -------
Total securities $269,701 $204,614 $107,398 $51,044 $189,107 $18,178
======== ======== ======== ======= ======== =======
</TABLE>
The maturity distribution and average yields, on a fully taxable equivalent
basis, of the major components of the investment securities portfolio at
December 31, 1994 are shown below:
<TABLE>
<CAPTION>
U.S. Govt. Collateralized Mortgage-
U.S. Treasury Agency Mortgage Backed Other
Obligations Obligations Obligations(2) Securities(2) Securities(1)
---------------- ---------------- ---------------------- --------------------- --------------------
Book Avg. Book Avg. Book Avg. Book Avg. Book Avg.
Held-To-Maturity Securities Value Yield Value Yield Value Yield Value Yield Value Yield
(Dollars in thousands) -------- ------ -------- ------ --------- ------ -------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maturities:
Due within one year $3,508 4.81% - - - - - - $236 8.01%
One to five years 77,887 5.84 $70,106 6.39% $1,934 5.67% $4,679 6.14% 327 9.16
Five to ten years - - - - 11,190 6.12 7,757 6.08 204 9.57
After ten years(3) - - - - 91,543 5.95 - - 330 9.92
------- ---- ------- ---- -------- ---- ------- ---- ------ ----
$81,395 5.80% $70,106 6.39% $104,667 5.96% $12,436 6.10% $1,097 9.22%
======= ==== ======= ==== ======== ==== ======= ==== ====== ====
<CAPTION>
U.S. Govt. Collateralized Mortgage-
Agency Mortgage Backed Equity
Obligations Obligations(2) Securities(2) Securities
--------------- ------------------ ------------------- ------------------
Book Avg. Book Avg. Book Avg. Book Avg.
Available-For-Sale Securities Value Yield Value Yield Value Yield Value Yield
(Dollars in thousands) -------- ------- ------- ------ ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maturities:
Due within one year - - - - - - $19,297 5.80%
One to five years $2,934 4.77% - - - - - -
Five to ten years 774 5.18 - - - - - -
After ten years(3) - - $4,811 5.24% $176,798 5.97% - -
------ ---- ------ ---- -------- ---- ------- ----
$3,708 4.85% $4,811 5.24% $176,798 5.97% $19,297 5.80%
====== ==== ====== ==== ======== ==== ======= ====
<FN>
(1) Average yields on tax-exempt obligations included in other securities have
been computed on a tax equivalent basis, based on a 35% federal tax rate.
(2) Collateral guaranteed by U.S. Government agencies.
(3) All maturities beyond ten years are at variable rates or have estimated
average lives of less than 6.2 years. The average yield presented is the
current yield on these securities.
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
LIABILITIES
DEPOSITS
The Company's primary funding sources are non-interest bearing and interest
bearing deposits. Interest bearing deposits increased 4.0% to $707.3 million
in 1994, from $680.3 million in 1993. Non-interest bearing deposits decreased
$42.0 million to $111.4 million at December 31, 1994 from $153.4 million at
December 31, 1993. The decrease in non-interest bearing deposits was primarily
due to a decrease in official checks outstanding of $26.0 million.
The following table sets forth the average deposits of the Company for the
years indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits:
Non-interest bearing $121,594 - $127,562 - $62,605 -
Interest bearing 86,965 2.64% 65,392 2.82% 57,552 3.31%
Savings deposits 188,267 3.30 179,988 2.83 178,072 3.62
Time deposits 420,995 4.69 512,666 4.94 489,934 5.78
-------- -------- --------
Total $817,821 $885,608 $788,163
======== ======== ========
<CAPTION>
The maturity distribution of time deposits of $100,000 or more is as follows:
December 31,
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Three months or less $111,707 $28,446 $28,256
Four through six months 24,133 21,257 30,006
Seven through twelve months 17,337 22,466 41,085
Over twelve months 16,773 19,825 26,076
-------- ------- --------
Total $169,950 $91,994 $125,423
======== ======= ========
</TABLE>
Approximately $86.4 million of time deposits of $100,000 or more at December
31, 1994, were from brokers with the remaining being originated primarily in
the Republic Bank and Republic Savings Bank local markets.
FEDERAL FUNDS BORROWED AND REVERSE REPURCHASE AGREEMENTS
As of December 31, 1994, the Company had federal fund borrowings of $21.0
million that had a weighted average interest rate of 6.13% and matured January
2, 1995. The Company also had $196.1 million of reverse repurchase agreements
at an average rate of 5.96%. Such agreements are secured by certain securities
with a carrying value of $235.3 million, with $120.7 million of the reverse
repurchase agreements maturing January 1995 and $75.4 million maturing in
February 1995. The proceeds from both the federal funds borrowed and the
reverse repurchase agreements were used to fund portfolio loans and investment
securities purchases.
SHORT-TERM BORROWINGS
Market Street Mortgage has a $75 million warehousing line of credit agreement
with G.E. Capital Mortgage Services, Inc. and Cooper River Funding Inc. used
for the purpose of funding the origination of mortgage loans by Market Street.
The line of credit, which is payable on demand, is secured by various real
estate mortgage loans and expires in July 1995. Interest, which is payable
monthly, is calculated at a rate equal to 2.00% above the lower of the
lender's one month commercial paper rate or the LIBOR rate. Due to the
decreased mortgage loan origination volume, borrowings under this warehousing
line of credit decreased to $22.8 million at December 31, 1994, from $85.5
million at December 31, 1993. During 1994, the average borrowings and interest
rate on this line were $35.4 million and 6.23%, respectively.
Republic Bancorp Mortgage has a $20 million warehousing line of credit
with NBD Bank, N.A. used to fund the acquisition or origination of mortgage
loans by Republic Mortgage. The line of credit, which is payable on demand,
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
is secured by various real estate mortgage loans and expires in April 1995.
Republic Mortgage is required to pay interest on the unpaid principal amount
on each borrowing at the adjusted LIBOR rate or federal funds sold plus 1.25%,
as applicable to such advance. No borrowings under this line were outstanding
at December 31, 1994. At December 31, 1993 borrowings under this line were
$14.9 million. During 1994, the average borrowings and interest rate on this
line were $4.5 million and 5.87%, respectively.
CUB Funding has a $16 million warehousing line of credit agreement with
Prudential Home Mortgage Company used for the purpose of funding the
origination of mortgage loans by CUB Funding. The line of credit, which is
payable on demand, is secured by various real estate mortgage loans and
expires in August 1995. Interest, which is payable monthly, is computed based
on the 30 day commercial paper index plus various spreads ranging from 1.00%
to 2.75% based on the document status of each loan. Borrowings under this
warehousing line of credit at December 31, 1994 totaled $12.0 million. During
1994, the average borrowings and interest rate on this line were $10.2
million and 6.0%.
CUB Funding entered into a $1.1 million repurchase agreement with Paine
Webber Inc. to fund a portion of its mortgage loan originations. Security for
this borrowing includes various real estate mortgage notes and expires
January 23, 1995. The interest rate on the borrowing was fixed at 6.98% at
December 31, 1994.
The Company has an $18 million Revolving Credit Agreement with Firstar
Bank Milwaukee, N.A. with loan proceeds being utilized for working capital
purposes. The credit facility is secured by the common and preferred stock of
Republic Bank and expires January 1996. The agreement provides for interest
at the prime rate less .25% or LIBOR rate plus 1.75%. At December 31, 1994 no
amounts were outstanding under this Credit Agreement.
FHLB ADVANCES
Republic Savings Bank has outstanding two advances from the Federal Home Loan
Bank ("FHLB"), one a $10 million advance with an interest rate of 7.15%,
maturing in February 1997, and a $5 million advance with an interest rate of
4.45%, maturing in December 1995. These advances are secured by first mortgage
loans equal to at least 150% of the advances under a blanket security
agreement, with interest payable monthly for both advances.
In order to provide liquidity needs for mortgage loan originations,
Republic Savings Bank entered into a $50 million line of credit with the FHLB
in September 1994. The line of credit, which is payable on demand, has
borrowing rates set daily by the FHLB, is secured by various real estate
mortgage loans, and expires in September 1995. As of December 31, 1994,
borrowing under this line totaled $35.0 million with an interest rate of
5.90%.
Republic Bank has outstanding one advance with the FHLB, a $20 million advance
with an interest rate of 6.25%, maturing in March 1995. This advance is
secured by investment securities equal to at least 110% of the advance under a
specific collateral agreement, with interest payable monthly.
LONG-TERM DEBT
During March 1994, the Company completed a private offering of $25.0 million
principal amount of 7.17% Senior Debentures which mature April 1, 2001.
Interest on the notes is payable semiannually at 7.17%. A portion of the net
proceeds were used to fund the purchase of mortgage servicing rights and
expand the Company's mortgage banking network. The remainder of the net
proceeds will be used to further expand the Company's mortgage banking
operations and activities and for general corporate purposes, including future
acquisitions.
During April 1994, Market Street entered into a Term Loan Agreement with
GE Capital Mortgage Services, Inc. to finance the acquisition of mortgage loan
servicing rights. At December 31, 1994, the Company had $16 million available
under this agreement, of which $15.3 million had been borrowed. Borrowings
under this agreement are collateralized by the mortgage loan servicing
portfolio in respect of when a borrowing advance has been made pursuant to the
Term Loan Agreement. Interest on borrowings under the Term Loan Agreement is
payable monthly at a rate of 3.75% above the lender's one month commercial
paper rate, or 9.73% at December 31, 1994. Principal payments began on January
1, 1995 and are due monthly based on a 60 month amortization period with a
balloon payment equal to the unpaid principal balance on December 1, 1998. As
of December 31, 1994, $3.1 million of the amount outstanding is classified as
short-term borrowings.
During January 1993, the Company completed a public offering of $17.25
million of 9% Subordinated Notes which mature in 2003. The majority of the net
proceeds from the sale of the notes were used to repay the $15 million of
borrowings incurred with Firstar Bank Milwaukee, N.A. in connection with the
Company's acquisition of the assets of Market Street Mortgage Corporation. The
Subordinated Notes qualify as Tier 2 capital for the calculation of Total
Risk-Based capital under Federal Reserve Board guidelines.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
During September 1993, Republic Bancorp Mortgage financed the acquisition
of its new corporate office with a mortgage loan in the amount of $2.1 million
with Firstar Bank Milwaukee, N.A. Principal and interest with a fixed rate of
6.99% is payable quarterly, with a final maturity date of October 1, 2000. As
of December 31, 1994, $91,000 of the total $2.0 million outstanding is
classified as short-term borrowings.
In connection with the purchase of Market Street Mortgage Corporation, a
subsidiary of Poughkeepsie Savings Bank F.S.B. ("Poughkeepsie"), Market Street
incurred a $2.2 million note payable to Poughkeepsie. This note is secured by
the servicing rights underlying the Poughkeepsie mortgages which are serviced
by Market Street. Interest is payable at the prime rate plus 2%, or 10.5% at
December 31, 1994, and is payable in twelve (12) equal quarterly installments
commencing February 1993 with final maturity due November 30, 1995. As of
December 31, 1994, the remaining $744,000 is classified as short-term
borrowings.
CAPITAL RESOURCES
Total shareholders' equity at December 31, 1994 was $117.9 million compared to
$111.4 million at December 31, 1993 and $84.2 million at December 31, 1992.
The increase of $6.5 million in 1994 was due primarily to earnings, net of
dividends and the market value adjustment for securities available-for-sale.
The increase of $27.2 million in 1993 was due to earnings, net of dividends
and the proceeds and tax benefits from the exercise of stock options.
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. At December 31, 1992 the minimum guidelines for the
ratio of Total capital to risk-weighted assets (including certain off-balance-
sheet activities, such as standby letters of credit) became 8%. The Federal
Reserve capital guidelines require at least 4% of the Total capital to be
composed of common shareholders' equity, minority interests in the equity
accounts of consolidated subsidiaries and a limited amount of perpetual
preferred stock, less goodwill and purchased mortgage servicing rights in
excess of 50% of Tier 1 capital less goodwill, or Tier 1 capital. The
remainder may consist of subordinated debt, other preferred stock and a
limited amount of loan loss reserves, or Tier 2 capital. At December 31, 1994,
Republic's Tier 1 capital and Total capital ratios were 17.57% and 21.05%,
respectively. These ratios exceed minimum guidelines prescribed by regulatory
agencies. As of December 31, 1994, Total risk-based capital was $137.8
million, an excess of $85.4 million over the minimum guidelines prescribed by
regulatory agencies.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum Tier 1 Capital Leverage ratio (Tier 1 capital to total average assets
for the most recent quarter, less goodwill, less purchased mortgage servicing
rights in excess of 50% of Tier 1 capital less goodwill) of 3% for bank
holding companies that meet certain specified criteria, including having the
highest regulatory rating. All other bank holding companies will generally be
required to maintain a minimum Tier 1 Capital Leverage ratio of 3% plus an
additional cushion of 100 to 200 basis points. The guidelines also provide
that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the guidelines indicated that the
Federal Reserve Board will continue to consider a "tangible Tier 1 Capital
leverage ratio" (deducting all intangibles) in evaluating proposals for
expansion or new activities. The Federal Reserve Board has not advised
Republic of any specific minimum Tier 1 Capital Leverage ratio applicable to
it. Republic's Tier 1 Capital Leverage ratio at December 31, 1994 was 8.43%.
The following table sets forth the Total capital to risk-weighted assets
ratio, the Tier 1 capital to risk-weighted assets ratio, and the Tier 1
Capital Leverage ratios for the Company.
<TABLE>
<CAPTION>
At December 31,
1994 1993 1992
<S> <C> <C> <C>
Total capital to risk-weighted assets ratio 21.05% 20.19% 14.23%
Tier 1 capital to risk-weighted assets ratio 17.57 16.35 12.97
Tier 1 capital leverage ratio 8.43 8.43 7.51
</TABLE>
The Company is committed to maintaining a strong capital position at
Republic Bank and Republic Savings Bank. As of December 31, 1994, Republic
Bank and Republic Savings Bank Total capital to risk-weighted assets ratio,
and Tier 1 Capital to risk-weighted assets ratio were in excess of
requirments. It is management's opinion that the Company and its subsidiaries'
capital structure is adequate and the Company does not anticipate any
difficulty in meeting these guidelines on an ongoing basis.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
INTEREST RATE SENSITIVITY AND LIQUIDITY
ASSET/LIABILITY MANAGEMENT. The primary objective of interest rate management
is to maintain an appropriate balance between the stability of net interest
income and the risks associated with significant changes in market interest
rates. Interest rate risk arises when assets and liabilities reprice, or
mature, at different times. If more assets than liabilities reprice in a given
period (an asset sensitive position or "positive gap"), market interest rate
changes will be reflected more quickly in asset rates and increases in
interest rates will generally benefit net interest income. Alternatively,
where liabilities reprice more quickly than assets in a given period
(a liability sensitive position or "negative gap"), an increase in market
rates will generally have an adverse impact on net interest income. The
Company's current policy is to maintain a mix of asset and liability
maturities that permits a moderate amount of short-term interest rate risk
based on current interest rate projections, customer credit demands and
deposit preferences. Management believes that this policy reduces the
vulnerability to large shifts in market interest rates while allowing the
Company to take advantage of fluctuations in current short-term rates. The
interest rate sensitivity table below presents the repricing structure of the
Company's balance sheet as of December 31, 1994.
<TABLE>
<CAPTION>
December 31, 1994
Within 4 Months Total Within 1 to 5 Years
3 Months to 1 Year One Year 5 Years or Over Total
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
RATE SENSITIVE ASSETS:
Other cash investments $779 - $779 - - $779
Mortgage loans held for sale 152,138 - 152,138 - - 152,138
Securities available for sale 132,218 $61,388 193,606 $2,896 - 196,502
Securities held to maturity 896 11,646 12,542 199,431 $57,728 269,701
Loans 136,040 124,546 260,586 262,368 82,135 605,089
------- ------- ------- ------- ------- ---------
Total rate sensitive assets 422,071 197,580 619,651 464,695 139,863 1,224,209
======= ======= ======= ======= ======= =========
RATE SENSITIVE LIABILITIES:
Interest bearing deposits:
Demand deposits - 25,758 25,758 20,999 - 46,757
Savings deposits - 16,500 16,500 193,274 - 209,774
Certificates of deposit:
Under $100,000 54,594 131,077 185,671 94,971 194 280,836
Over $100,000 111,707 41,470 153,177 16,773 - 169,950
------- ------- ------- ------- --- -------
Total interest bearing deposits 166,301 214,805 381,106 326,017 194 707,317
------- ------- ------- ------- ---- -------
Short-term borrowings(1) 256,134 812 256,946 - - 256,946
FHLB advances 54,950 5,000 59,950 10,000 - 69,950
Long-term debt 12,242 - 12,242 429 43,708 56,379
------- ------- ------- ------- ------ ---------
Total rate sensitive liabilities 489,627 220,617 710,244 336,446 43,902 1,090,592
-------- -------- -------- -------- ------- ---------
Interest rate sensitivity gap(2) $(67,556) $(23,037) $(90,593) $128,249 $95,961 $133,617
======== ======== ======== ======== ======= =========
Interest rate sensitivity gap as percentage of
total rate sensitive assets (5.52)% (1.88)% (7.40)% 10.48% 7.84% 10.91%
===== ===== ===== ===== ==== =====
<FN>
(1) Includes federal funds purchased and reverse repurchase agreements.
(2) Interest rate sensitivity gap is the difference between interest rate
sensitive assets and interest rate sensitive liabilities within the above
time frames.
</TABLE>
This table incorporates a number of estimation techniques and assumptions and
represents only a one day position at the date presented. It shows the
interval of time in which given volumes of interest earning assets and
interest bearing liabilities will be responsive to changes in market interest
rates. The Company adjusts its interest rate sensitivity throughout the year.
As a result, there may be considerable day-to-day variations in the interest
rate sensitivity gap. The table indicates that as of December 31, 1994, the
Company was in a position to benefit in the next year from decreasing short-
term interest rates. Interest margins would widen because liabilities would
reprice more quickly than assets. Of those assets identified as interest
sensitive within 3 months, the largest category is mortgage loans held for
sale, which are primarily fixed rate loans and generally held less than 60
days, as outstanding
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
commitments are generally obtained to sell the loans to investors prior to the
Company funding the loans. Therefore, the Company can earn long-term interest
rates on short-term assets while reducing interest rate risk. Additionally,
approximately $261 million of total portfolio loans reprice within one year,
of which approximately 65.7% are adjustable rate mortgages and have maximum
adjustments, or caps, of 2% in one year and 6% over their terms. These loans,
therefore, are not totally interest sensitive in that a significant change in
interest rates would only be reflected up to the maximum of the rate cap in
any one year. Consistent with a strategy of managing interest rate risk, the
Company typically securitizes and sells all long-term fixed rate mortgages and
retains a portion of variable rate and short-term fixed rate mortgages.
LIQUIDITY MANAGEMENT. The objectives of liquidity management are to provide
funds at an acceptable cost to meet mortgage and commercial loan demand,
deposit withdrawals and service other liabilities as they become due, as well
as to capitalize on opportunities for business expansion. Asset liquidity
sources consist of cash and due from banks, mortgage loans held for sale,
repayments and maturities of portfolio loans, money market investments, and
investment securities. Also, liquidity is generated from liabilities through
deposit growth, the maturity structure of time deposits and the accessibility
to market sources of funds through warehouse lines of credit, FHLB advances,
federal funds borrowings and reverse repurchase agreements.
At December 31, 1994, Republic Bank had available $24.9 million in unused
lines for federal funds borrowing. Additionally, Republic Savings Bank had
available $15.0 million in unused borrowings on its line of credit with the
FHLB. The mortgage companies had unused capacity of $76.2 million on warehouse
lines of credit to fund mortgage loan origination volume. The parent company
has available an $18 million revolving line of credit with Firstar Bank
Milwaukee, N.A. for borrowings to be used for general corporate purposes.
Republic is a legal entity separate and distinct from its subsidiaries. A
portion of Republic's revenues result from dividends paid to it by its
subsidiaries as well as earnings on investments. There are statutory and
regulatory requirements applicable to the payment of dividends by Republic
Bank and Republic Savings Bank as well as by Republic to its shareholders.
Such restrictions have not had, and are not expected to have, a material
effect on the Company's ability to meet its cash obligations.
IMPACT OF INTEREST RATE FLUCTUATIONS AND INFLATION
Unlike most industrial companies, substantially all the assets and liabilities
of a financial institution are monetary in nature. As a result, interest rate
fluctuations generally have a more significant and direct impact on a financial
institution's performance than do the effects of inflation. To the extent
inflation affects interest rates, real estate values and other costs, the
Company's lending activities are impacted. Significant increases in interest
rates make it more difficult for potential borrowers to purchase residential
property and to qualify for mortgage loans. As a result, the volume and related
income on loan originations may be reduced. Significant decreases in interest
rates result in higher loan prepayment activity although such conditions may
enable potential borrowers to qualify for a relatively higher mortgage loan
balance.
ACCOUNTING AND REPORTING DEVELOPMENTS
In May 1993, the FASB issued Statement of Financial Accounting Standards
("SFAS") 114, "Accounting by Creditors for Impairment of a Loan." In October
1994, the FASB issued SFAS 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures," that amended SFAS 114 and eliminated
its provisions regarding how a creditor should report income on an impaired
loan. SFAS 114 provides guidance in measuring and accounting for impaired
loans. The Statements are effective for fiscal years beginning after December
15, 1994. The impact of these Statements on the Company's financial statements
have not been estimated.
20
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
December 31,
1994 1993
CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
<S> <C> <C>
ASSETS:
Cash and due from banks (Note 3) $22,518 $23,508
Other cash investments 779 4,517
------ ------
Cash and cash equivalents 23,297 28,025
Mortgage loans held for sale 152,138 507,795
Securities (Note 5):
Held-to-Maturity (aggregate market value of approximately
$254,996, 1994 and $108,360, 1993) 269,701 107,398
Available-for-Sale (amortized cost of approximately $204,614, 1994) 196,502 -
Held-for-Sale (aggregate market value of approximately $51,776, 1993) - 51,044
Loans (Note 6) 605,089 407,117
Less allowance for estimated loan losses (Note 7) 5,544 7,214
------- -------
Net loans 599,545 399,903
Premises and equipment, net (Note 8) 15,484 16,295
Purchased mortgage servicing rights (Note 4) 57,183 18,428
Other assets 49,764 41,706
---------- ----------
Total assets $1,363,614 $1,170,594
========== ==========
LIABILITIES
Deposits:
Non-interest bearing $111,425 $153,474
Interest bearing 707,317 680,260
------- -------
Total deposits 818,742 833,734
Federal funds purchased and reverse repurchase agreements (Note 9) 217,124 35,572
Short-term borrowings (Note 9) 39,822 101,273
FHLB advances (Note 10) 69,950 23,000
Accrued and other liabilities 43,077 45,123
Long-term debt (Note 11) 56,379 19,970
--------- ---------
Total liabilities 1,245,094 1,058,672
Minority interest 606 489
--- ---
Commitments and contingencies (Notes 18 and 20)
SHAREHOLDERS' EQUITY (Notes 2, 13, 14 and 22):
Preferred stock, $25 stated value; $2.25 cumulative and convertible;
5,000,000 shares authorized, none issued and outstanding - -
Common stock, $5 par value; 20,000,000 shares authorized; 15,246,134 and
13,747,771 shares issued and outstanding in 1994 and 1993, respectively 76,231 68,739
Capital surplus 35,636 27,229
Market value adjustment for securities available-for-sale (5,273) -
Retained earnings 11,320 15,465
------- -------
Total shareholders' equity 117,914 111,433
---------- ----------
Total liabilities and shareholders' equity $1,363,614 $1,170,594
========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1994 1993 1992
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $53,617 $66,535 $58,105
Securities:
Held-to-Maturity 12,878 8,556 13,186
Available-for-Sale 11,250 - -
Held-for-Sale - 2,267 1,205
Money market investments:
Federal funds sold 277 1,282 1,091
Other 197 191 481
------ ------ ------
Total interest income 78,219 78,831 74,068
------ ------ ------
INTEREST EXPENSE:
Demand deposits 2,295 1,846 1,907
Savings and time deposits 25,966 30,439 34,789
Short-term borrowings 10,902 6,479 1,557
FHLB advances 2,237 1,781 1,666
Long-term debt 3,599 1,723 420
------ ------ ------
Total interest expense 44,999 42,268 40,339
------ ------ ------
Net interest income 33,220 36,563 33,729
Provision for loan losses (Note 7) 94 603 3,967
------ ------ ------
Net interest income after provision for loan losses 33,126 35,960 29,762
------ ------ ------
NON-INTEREST INCOME:
Service charges 1,337 1,431 1,424
Mortgage banking 69,899 85,128 30,697
Gain/(Loss) on sale of securities (1,392) 2,014 3,580
Gain on sale of commercial loans 1,135 2,224 -
Gain on sale of bank branches 4,034 - -
Other 648 1,323 1,109
------ ------ ------
Total non-interest income 75,661 92,120 36,810
------ ------ ------
NON-INTEREST EXPENSE:
Salaries and employee benefits 47,586 55,028 26,892
Occupancy expense of premises 5,807 4,540 2,805
Equipment expense 4,090 3,133 1,733
Other (Note 16) 27,538 30,453 16,303
Minority interest - 385 78
------ ------ ------
Total non-interest expense 85,021 93,539 47,811
------ ------ ------
Income before income taxes 23,766 34,541 18,761
Provision for income taxes (Note 12) 8,047 12,308 7,339
------ ------ ------
Net income before cumulative effect of change in accounting principle 15,719 22,233 11,422
Cumulative effect of change in accounting principle (Note 12) - (950) -
------ ------ ------
NET INCOME 15,719 23,183 11,422
Less dividends on preferred shares - - 275
------- ------- -------
Net income applicable to common shares $15,719 $23,183 $11,147
======= ======= =======
NET INCOME PER COMMON SHARE (Note 14):
Income before cumulative effect of change in accounting principle $1.00 $1.45 $.83
Cumulative effect of change in accounting principle - .06 -
----- ----- ----
Net income per common share, primary $1.00 $1.51 $.83
Net income per common share, fully diluted $1.00 $1.50 $.80
<FN>
See notes to consolidated financial statements.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Market
Valuation
Number Number Adjustment Total
of of for Securities Share-
Preferred Preferred Common Common Capital Available- Retained holders'
Shares Stock Shares Stock Surplus For-Sale Earnings Equity
(Dollars and numbers of shares in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1992 245 $6,125 8,635 $43,175 $5,286 $ - $10,344 $64,930
Net income 11,422 11,422
Preferred stock dividends (275) (275)
Cash dividends declared on common
shares ($.20 per share) (1,903) (1,903)
Amortization of restricted stock 15 15
Conversion of Series B and C preferred
shares to common shares (85) (2,125) 311 1,556 569 -
Conversion and redemption of Series A
preferred shares to common shares (160) (4,000) 437 2,187 1,120 (693)
Conversion of subordinated debentures
to common shares 151 752 376 1,128
10% common share dividend 760 3,800 3,230 (7,036) (6)
Issuance of common shares:
Through exercise of stock options 5 26 61 87
Through exercise of stock warrants 65 327 109 436
Through sale of common shares 1,374 6,869 2,196 9,065
----- ----- ------ ------ ------ --------- ------ ------
BALANCES AT DECEMBER 31, 1992 - - 11,738 58,692 12,962 - 12,552 84,206
Net income 23,183 23,183
Cash dividends declared on
common shares ($.23 per share) (2,746) (2,746)
Amortization of restricted stock 119 119
Awards of common shares under
Restricted Stock Plan (328) (328)
10% common share dividend 1,219 6,093 11,423 (17,524) (8)
Issuance of common shares:
Through exercise of stock options 752 3,757 757 4,514
Through exercise of stock warrants 39 197 38 235
Tax benefit relating to
exercise of stock options 2,258 2,258
----- ----- ------ ------ ------ ------ ------ -------
BALANCES AT DECEMBER 31, 1993 - - 13,748 68,739 27,229 - 15,465 111,433
Net income 15,719 15,719
Cash dividends declared on common
shares ($.32 per share) (4,542) (4,542)
Amortization of restricted stock 109 109
10% common share dividend 1,392 6,961 8,353 (15,322) (8)
Issuance of common shares:
Through exercise of stock options 104 522 130 652
Through exercise of stock warrants 82 409 10 419
Tax benefit relating to exercise of
stock options 243 243
Adjustment to beginning balance for
change in accounting method for
securities available-for-sale, net of
income taxes of $453 840 840
Change in market valuation for
securities available-for-sale, net of
income tax benefit of $3,292 (6,113) (6,113)
Repurchase of common shares (80) (400) (438) (838)
----- ---- ------ ------- ------- ------- ------- --------
BALANCES AT DECEMBER 31, 1994 - - 15,246 $76,231 $35,636 $(5,273) $11,320 $117,914
===== ==== ====== ======= ======= ======= ======= ========
<FN>
See notes to consolidated financial statements.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15,719 $23,183 $11,422
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities:
Depreciation and amortization 4,268 3,090 1,846
Amortization of purchased mortgage servicing rights 5,008 4,607 1,407
(Increase)/decrease in deferred income tax credit (1,801) 317 (1,429)
Provision for loan losses 94 603 3,967
Provision for loss on other real estate - 888 447
Gain on sale of purchased mortgage servicing rights (32,438) (13,336) (2,469)
Gain on sale of securities held-for-sale - (2,014) (3,580)
Loss on sale of securities available-for-sale 1,392 - -
Gain on sale of loans (2,793) (3,869) (342)
Gain on sale of other real estate - (170) (38)
Gain on sale of bank branches (4,034) - -
(Increase)/decrease in interest receivable (3,639) 1,001 (49)
Increase in interest payable 793 362 124
Increase/(decrease) in deferred loan fees (1,113) (1,830) 454
Net premium amortization on securities 839 1,146 853
Increase in other assets (8,782) (4,719) (5,372)
Increase/(decrease) in other liabilities (5,409) 654 18,345
Proceeds from sale of mortgage loans held for sale 3,002,993 4,578,910 1,649,042
Origination of mortgage loans held for sale (2,640,165) (4,841,731) (1,827,451)
Other, net 595 211 (213)
------- -------- --------
Total adjustments 315,808 (275,880) (164,458)
------- -------- --------
Net cash provided by/(used in) operating activities 331,527 (252,697) (153,036)
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of mortgage servicing rights (52,604) (19,454) (11,472)
Proceeds from sale of mortgage servicing rights 45,676 20,070 7,068
Proceeds from sale of securities held-for-sale - 84,150 132,484
Proceeds from sale of securities available-for-sale 106,470 - -
Proceeds from maturities/principal payments of securities held-to-maturity
and held-for-sale and interest earning deposits 16,728 82,119 54,465
Proceeds from maturities/principal payments of securities
available-for-sale 48,808 - -
Purchase of securities held-for-sale - (21,413) -
Purchase of securities available-for-sale (238,926) - -
Purchase of securities held-to-maturity (250,958) (53,061) (108,191)
Proceeds from sale of other real estate 1,770 1,605 246
Proceeds from sale of loans related to bank branch sale 28,933 - -
Proceeds from sale of loans 82,742 92,096 10,896
Net increase in loans made to customers (307,793) (10,937) (113,708)
Recoveries on loans previously charged off 291 279 386
Premises and equipment expenditures (2,849) (6,609) (2,844)
Payment for the purchase of Market Street Mortgage - - (17,456)
Payment for the purchase of CUB Funding - (3,390) -
Payment for the purchase of Home Funding. (2,450) - -
-------- ------- -------
Net cash provided by/(used in) investing activities (524,162) 165,455 (48,126)
-------- ------- -------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Year Ended December 31,
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase/(decrease) in demand deposits, NOW accounts
and savings accounts $(20,175) $75,474 $49,636
Net increase/(decrease) in certificates of deposit 52,966 (139,395) 61,688
Sale of bank branch deposits (43,749) - -
Net increase in short-term borrowings 120,094 69,238 28,611
Net increase/(decrease) in FHLB advances 46,950 (4,000) 12,000
Redemption of Series A Preferred Stock - - (619)
Redemption of Subordinated Debentures - - (471)
Increase in long-term debt 12,244 1,976 -
Net proceeds from issuance of common shares 1,072 4,741 9,595
Repurchase of common shares (838) - -
Dividends paid (4,542) (2,746) (2,183)
Payments on current portion of long-term debt (827) (4,368) (1,558)
Issuance of senior debt, net of issuance costs 24,712 - -
Issuance of subordinated debt, net of issuance costs - 16,492 -
------- ------ -------
Net cash provided by financing activities 187,907 17,412 256,699
------ ------- ------
Net increase/(decrease) in cash and cash equivalents (4,728) (69,830) 55,537
Cash and cash equivalents at beginning of year 28,025 97,855 42,318
------- ------- -------
Cash and cash equivalents at end of year(1) $23,297 $28,025 $97,855
======= ======= =======
Cash paid during the year for:
Interest $44,206 $41,906 $40,216
Income taxes $9,980 $9,873 $8,521
<FN>
Noncash investing activities:
* During the years ended December 31, 1993 and 1992, the Company securitized
residential real estate portfolio loans into investment securities held-for-
sale of $42.0 million and $38.0 million, respectively.
* During the years ended December 31, 1994, 1993 and 1992, the Company incurred
charge-offs on portfolio loans of $1.7 million, $762,000 and $2.1 million,
respectively.
Noncash financing activities:
* During the year ended December 31, 1992, the Company purchased certain
assets of Market Street Mortgage Corporation for $17.5 million in cash
(primarily purchased mortgage servicing rights) and notes payable to the
seller of $2.4 million and a purchase holdback of $300,000.
* During the year ended December 31, 1992, the Company converted $1.1 million
of subordinated debentures into 150,498 common shares.
* During the year ended December 31, 1992, the Company converted $5.5 million
of Series A, B and C preferred stock into 748,499 common shares.
(1) For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, federal funds sold and other short-term
money market investments with maturities less than 30 days. Generally, federal
funds are purchased and sold for one-day periods.
See notes to consolidated financial statements.
</TABLE>
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Republic Bancorp Inc. ("Republic" or the "Company") and the
accounts of three wholly owned subsidiaries: Republic Bank, Republic Bancorp
Mortgage Inc., and Republic Savings Bank (formerly Horizon Savings Bank); and
Market Street Mortgage Corporation and CUB Funding Corporation, of which the
Company owns an 80% majority interest in each subsidiary. Republic Bancorp
Mortgage Inc. operates Home Funding, Inc., which was acquired in October 1994,
as a division. The Company's financial statements have been restated for the
effect of the acquisition of Horizon Financial Services, Inc. in 1993, which
was accounted for under the "pooling of interests method" of accounting (See
Note 2). All significant intercompany transactions and balances have been
eliminated in consolidation.
SECURITIES: In May 1993, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") 115, "Accounting
for Certain Investments in Debt and Equity Securities," effective for fiscal
years beginning after December 15, 1993. Under SFAS 115, all affected debt and
equity securities must be classified as held-to-maturity, trading or available-
for-sale. Classification is critical because it affects the carrying amount of
the security, as well as the timing of gain or loss recognition in the income
statement. The Company does not currently maintain a trading account
classification. The Company adopted SFAS 115 for the financial period beginning
January 1, 1994.
Management determines the appropriate classification for debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when the Company has
the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities consist primarily of U.S. Treasuries, U.S.
Government Agency obligations, fixed rate mortgage-backed securities and fixed
rate collateralized mortgage obligations and are stated at amortized cost.
Debt securities not classified as held-to-maturity and marketable equity
securities are classified as available-for-sale. Available-for-sale securities
consist primarily of adjustable rate mortgage-backed securities. Such
securities are stated at fair value, with the market value adjustment, net of
tax, reported as a separate component of shareholders' equity.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premium and accretion of
discounts to maturity, or in the case of mortgage-backed securities and
collateralized mortgage obligations, over the estimated life of the security.
Interest and dividends are included in interest income from investments.
Realized gains and losses, and declines in value judged to be other-than-
temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method.
MORTGAGE BANKING ACTIVITIES: Mortgage loans held for sale are valued at the
lower of cost or market as determined by outstanding commitments to sell loans
to investors. All mortgage loans held for sale balances are committed for sale
to secondary market investors under firm agreements at or prior to closing date
on the individual loan. Since mortgage loans originated or acquired are
generally sold within 60 to 90 days, the related fees and costs are not
amortized during that period. For mortgage portfolio loans which later become
securitized and retained as investment securities, the net remaining deferred
fees or costs are treated as discount or premium, and recognized as an
adjustment to yield over the life of the security using the effective interest
method. If the security is sold, the net deferred balance is treated as part
of the cost basis in calculating the gain or loss on sale of security.
The cost of purchased mortgage servicing rights is capitalized and amortized
over the period of, and in proportion to, the related net servicing income to
be generated from the various servicing portfolios acquired.
The Company evaluates possible impairment using the undiscounted,
disaggregated method.
LOANS: Loans are stated at the principal amount outstanding and the related
interest on loans is generally accrued daily. Loans on which the accrual of
interest has been discontinued are designated as non-accrual loans. Accrual of
interest on loans is discontinued when, in the opinion of management,
reasonable doubt exists as to the full, timely collection of interest or
principal. Further, uncollected accrued interest is charged against current
income at the time such loans are placed in a non-accrual status. Loan
origination fees are deferred, along with incremental direct costs and are
amortized over the term of the loan as an adjustment to yield.
In May 1993, the FASB issued SFAS 114, "Accounting by Creditors for Impairment
of a Loan." In October 1994, the FASB issued SFAS 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures," that
amended SFAS 114 and eliminated its provisions regarding how a creditor should
report income on an impaired loan. SFAS 114 provides guidance in measuring and
accounting for impaired loans. The Statements are effective for fiscal years
beginning after December 15, 1994. The impact of these Statements on the
Company's financial statements have not been estimated.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
ALLOWANCE FOR ESTIMATED LOAN LOSSES: Management provides for and determines
the adequacy of the allowance for estimated loan losses based on actual loan
loss experience, reviews of individual loans, estimates of potential losses
in the loan portfolio in light of prevailing and anticipated economic
conditions and other factors which require recognition in estimating credit
losses. A charge is made to the allowance at the time management determines
that all or part of a loan is uncollectible.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets.
Amortization of leasehold improvements is computed using the straight-line
method over the shorter of the estimated useful lives of the related assets
or the remaining lease terms.
GOODWILL: The excess of cost over the fair value of net assets acquired is
amortized using the straight-line method over fifteen years.
INCOME TAXES: Deferred income taxes are accounted for under SFAS 109. Under
the asset and liability method of SFAS 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. To the extent that current
available evidence about the future raises doubt about the future realization
of a deferred tax asset, a valuation allowance must be established. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enacted date.
Effective January 1, 1993, the Company adopted SFAS 109 which resulted in a
cumulative adjustment of $950,000 or $.06 per share. Previously, the Company
accounted for deferred income taxes using APB No. 11 which provides for items
of income and expense in different periods or on different basis than those
used to determine income taxes currently payable.
PER COMMON SHARE AMOUNTS: All per common share amounts have been restated to
reflect stock dividends.
NOTE 2: ACQUISITIONS
On November 1, 1994, pursuant to an agreement with Home Funding, Inc. of
Hopewell Junction, New York, the Company's subsidiary, Republic Bancorp
Mortgage Inc., purchased the assets and mortgage origination network of Home
Funding, Inc. The purchase included the acquisition of Home Funding's $130
million mortgage servicing portfolio. The total purchase price was
approximately $2.5 million, of which $1.2 million was goodwill. The purchased
assets and results of operations of Home Funding, Inc. are included in the
consolidated financial statements from November 1, 1994, the effective date of
the acquisition.
On November 10, 1993, pursuant to an agreement with California United Bank,
N.A. ("C.U.B."), of Encino, California, the Company purchased C.U.B's mortgage
origination network, loan production offices and certain other assets. The
total purchase price was approximately $4 million, of which $2.25 million was
goodwill, with C.U.B. entitled to additional payments through 1995 based on
the profitability of the mortgage banking operation. This mortgage banking
acquisition operates under the name of CUB Funding Corporation. The purchased
assets and results of operations of CUB Funding are included in the
consolidated financial statements from November 10, 1993, the effective date
of the acquisition.
On December 29, 1992, pursuant to an agreement with Poughkeepsie Savings Bank,
FSB, ("Poughkeepsie"), a federal savings bank, and its subsidiary, Market
Street Mortgage Corporation, a Florida corporation, the Company purchased
Market Street's mortgage loan servicing and origination operations, a
servicing portfolio of approximately $1.4 billion and certain other assets
for a total purchase price of $20.2 million, of which $2.8 million was
goodwill. The purchased assets and results of operations of Market Street
are included in the consolidated financial statements from December 1, 1992,
the effective date of the acquisition.
The unaudited proforma consolidated results of operations if the acquistition
of the assets of Market Street had occurred on January 1, 1992 would have
resulted in interest income of $78.5 million, net interest income of $34.4
million, net income of $12.6 million and earnings per common share of $0.93.
This information is based upon numerous assumptions and estimates and may not
be indicative of actual consolidated results of operations if the acquisition
had been consummated on January 1, 1992. The acquisition of the assets of Home
Funding, Inc. and CUB Funding Corporation did not have a significant impact on
the results of operations of the Company.
27<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
On June 30, 1993, pursuant to an agreement entered into on September 30, 1992
with Horizon Financial Services, Inc. ("Horizon Financial"), a registered
unitary savings and loan holding company incorporated under the laws of the
state of Delaware and located in Cleveland, Ohio, Horizon Financial was merged
with and into the Company. Under the terms of the restated and amended
agreement, Horizon Financial shareholders received two shares of the Company's
common stock for each share of Horizon Financial stock tendered. As a result of
the exchange, approximately 4.1 million shares of Republic stock were issued.
The merger was accounted for under the "pooling of interests method" of
accounting and, accordingly, all amounts presented give retroactive effect to
reflect the acquisition of Horizon Financial.
The effect on the results of operations for the periods prior to the
combination is as follows:
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1993 1992
(Unaudited)
(in thousands, except per share amounts)
<S> <C> <C>
Total Revenue:
Republic Bancorp Inc. $61,619 $77,795
Horizon Financial Services, Inc. 16,292 33,083
------- --------
Total $77,911 $110,878
======= ========
Net Income:
Republic Bancorp Inc. $9,404 $11,353
Horizon Financial Services, Inc. 2,739 69
------- -------
Total $12,143 $11,422
======= =======
Earnings Per Share-Primary:(1)
Republic Bancorp Inc. $0.84 $1.22
Combined $0.80 $0.85
Earnings Per Share-Fully Diluted:(1)
Republic Bancorp Inc. $0.84 $1.11
Combined $0.80 $0.80
Average Shares-Primary:(1)
Republic Bancorp Inc. 11,131 9,297
Combined 15,205 13,373
Average Shares-Fully Diluted:(1)
Republic Bancorp Inc. 11,175 10,266
Combined 15,250 14,342
<FN>
(1) Restated for the 10% stock dividends distributed on October 29, 1993 and
December 2, 1994.
</TABLE>
In December 1992, Horizon Financial recorded $1.2 million ($772,000 after tax)
of merger-related expenses for investment banking services, legal and
accounting fees, and severance packages for senior management. In June 1993,
Horizon Financial recorded an additional $280,000 ($182,000 after tax) related
to the senior management severance packages.
Pursuant to a stock purchase agreement dated September 30, 1988 and the
amended stock purchase agreement approved by the Board of Directors on
November 14, 1991, Republic purchased common stock from the shareholders of
Premier Bancorporation, Inc. ("Premier") resulting in Republic owning 94.8%
of the issued and outstanding common stock of Premier as of December 31, 1991.
During 1992 and 1993, Republic acquired the remaining 32,131 shares of
Premier's common stock for total cash consideration aggregating $778,000. On
March 31, 1993, Premier Bancorporation, Inc. was merged into Republic Bancorp.
The excess of cost over the fair value of the increased ownership interest in
the net assets acquired totaled approximately $1.1 million for the
acquisitions during the years 1990 through 1993.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3: CASH RESERVE REQUIREMENTS
Republic Bank and Republic Savings Bank are required by the Federal Reserve
Bank to maintain an average reserve balance. Such reserve amounted to
approximately $9.6 million and $9.9 million at December 31, 1994 and 1993,
respectively.
NOTE 4: MORTGAGE BANKING
PURCHASED MORTGAGE SERVICING RIGHTS
The unamortized cost of purchased mortgage servicing rights are summarized as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Balance at January 1 $18,428 $16,126 $1,450
Purchases of mortgage loan servicing rights 52,604 19,454 11,472
Mortgage loan servicing rights acquired through the purchase of the assets
of mortgage companies 1,388 - 17,029
Sales of purchased and acquired mortgage loan servicing rights (10,229) (12,545) (12,418)
Amortization (5,008) (4,607) (1,407)
------- ------- -------
Balance at December 31 $57,183 $18,428 $16,126
======= ======= =======
</TABLE>
SERVICING OF MORTGAGE LOANS
The Company originates, purchases and sells to investors, without recourse,
loans secured by mortgages, principally on single-family residential properties.
The Company generally retains the servicing of certain loans sold to investors
and collects the monthly principal and interest payments and performs certain
escrow services. The aggregate mortgage servicing portfolio was approximately
$4.7 billion and $3.0 billion at December 31, 1994 and 1993, respectively,
representing approximately 59,000 and 37,000 mortgages, respectively.
The Company is accountable for related escrow funds aggregating $59.8 million
and $80.4 million at December 31, 1994 and 1993, respectively. At December 31,
1994 and 1993, $58.1 million and $67.5 million, respectively, of these funds
are included in the consolidated non-interest bearing deposit accounts of
Republic Bank and Republic Savings Bank. The remaining $1.7 million and $12.9
million of escrow balances at December 31, 1994 and 1993, respectively, are on
deposit at financial institutions not affiliated with the Company, and are not
included in the consolidated balance sheet totals.
NOTE 5: INVESTMENTS
The following is a summary of the Company's securities portfolio:
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
Available-for-Sale Securities (Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1994:
Obligations of U.S. government agencies $3,708 - $343 $3,365
Mortgage-backed securities 176,798 - 6,631 170,167
Collateralized mortgage obligations 4,811 - 316 4,495
------- ------- ----- -------
Total debt securities 185,317 - 7,290 178,027
Equity securities 19,297 - 822 18,475
-------- ------- ------ --------
Total available-for-sale securities $204,614 - $8,112 $196,502
======== ======= ====== ========
Held-to-Maturity Securities
December 31, 1994:
U.S. Treasury securities and obligations
of U.S. government agencies $151,501 - $6,023 $145,478
Mortgage-backed securities 12,436 $11 836 11,611
Collateralized mortgage obligations 104,667 - 7,832 96,835
Other debt securities 1,097 9 34 1,072
-------- --- ------- --------
Total held-to-maturity securities $269,701 $20 $14,725 $254,996
======== === ======= ========
</TABLE>
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
Held-for-Sale Securities (Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1993:
Mortgage-backed securities $42,042 $734 $18 $42,758
Collateralized mortgage obligations 9,002 16 - 9,018
------- ---- --- -------
Total held-for-sale securities $51,044 $750 $18 $51,776
======= ==== === =======
Held-to-Maturity Securities
December 31, 1993:
U.S. Treasury securities and obligations
of U.S. government agencies $12,758 $128 $8 $12,878
Mortgage-backed securities 68,145 662 35 68,772
Collateralized mortgage obligations 21,026 76 6 21,096
Other debt securities 5,469 145 - 5,614
-------- ------- --- --------
Total held-to-maturity securities $107,398 $1,011 $49 $108,360
======== ======= === ========
</TABLE>
The Company adopted SFAS 115 as of January 1, 1994. The market valuation
adjustment of $5.3 million on available-for-sale securities, net of tax, is
reported as a separate component in shareholders' equity at December 31, 1994.
The amortized cost and estimated market value of held-to-maturity and
available-for-sale investments at December 31, 1994, by contractual maturity,
are shown below. Expected maturities for mortgage-backed securities and
collateralized mortgage obligations will differ from contractual maturities
because borrowers may have the right to call or prepay obligations. Based upon
prepayment assumptions, estimated lives of the fixed rate mortgage-backed
securities range from 1.0 to 3.8 years. The variable rate mortgage-backed
securities are primarily indexed to the one-year Constant Maturity
Treasury and 11th District Cost of Funds. Estimated average remaining lives of
the Company's collateralized fixed rate mortgage obligations range from 0.1 to
6.1 years. Collateral for all mortgage-backed securities and collateralized
mortgage obligations is guaranteed by U.S. Government agencies.
<TABLE>
<CAPTION>
Available-for-Sale Securities
------------------------------------------------------------------
Obligations of Collateralized
U.S.Government Mortgage-Backed Mortgage
Agencies Securities Obligations
------------------------------------------------------------------
Estimated Estimated Estimated
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
Maturities:(Dollars in thousands) --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Due within one year - - - - - -
One to five years $2,934 $2,602 - - - -
Five to ten years 774 763 - - - -
After ten years - - $176,798 $170,167 $4,811 $4,495
------ ------ -------- -------- ------ ------
Total $3,708 $3,365 $176,798 $170,167 $4,811 $4,495
====== ====== ======== ======== ====== ======
<CAPTION>
Available-for-Sale Securities
-----------------------------------------------------------------
Total Total
Available-for-Sale Available-for-Sale
Debt Securities Equity Securities Securities
-------------------------------------------------------------------
Estimated Estimated Estimated
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
Maturities:(Dollars in thousands) --------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Due within one year - - $19,297 $18,475 $19,297 $18,475
One to five years $2,934 $2,602 - - 2,934 2,602
Five to ten years 774 763 - - 774 763
After ten years 181,609 174,662 - - 181,609 174,662
------ -------- ------- -------- -------- --------
Total 185,317 $178,027 $19,297 $18,475 $204,614 $196,502
====== ======== ======= ======== ====== ========
<CAPTION>
Held-to-Maturity Securities
------------------------------------------------------------------------------------------------------------
U.S. Treasury and Collateralized Total
Government Agency Mortgage-Backed Mortgage Other Debt Held-to-Maturity
Obligations Securities Obligations Securities Securities
-------------------- ---------------------- ---------------------- -------------------- --------------------
Estimated Estimated Estimated Estimated
Amortized Market Amortized Market Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value Cost Value Cost Value
(Dollars in thousands) --------- ------- --------- --------- --------- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maturities:
Due within one year $3,508 $3,438 - - - - $236 $238 $3,744 $3,675
One to five years 147,993 142,040 $4,679 $4,456 $1,934 $1,888 327 331 154,933 148,715
Five to ten years - - 7,757 7,155 11,190 10,304 204 207 19,151 17,667
After ten years - - - - 91,543 84,643 330 296 91,873 84,939
-------- -------- ------- ------- -------- ------- ------ ------ -------- --------
Total $151,501 $145,478 $12,436 $11,611 $104,667 $96,835 $1,097 $1,072 $269,701 $254,996
======== ======== ======= ======= ======== ======= ====== ====== ======== ========
</TABLE>
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Proceeds from the sale of securities available-for-sale during 1994 were
$106.5 million with gross realized gains and losses on those securities of
$587,000 and $2.0 million, respectively. Proceeds from sale of securities
held-for-sale during 1993 and 1992 were $84.2 million and $132.5 million,
respectively. The gross realized gains on such sales totaled $2.2 million
and $3.7 million, respectively, and the gross realized losses totaled $184,000
and $167,000, respectively.
Certain securities, with a carrying value of approximately $235.3 million and
$25.5 million at December 31, 1994 and 1993, respectively, were pledged to
secure certain short-term borrowings and public and other deposits as
required by law.
NOTE 6: LOANS
Loans consist of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Commercial loans: (Dollars in thousands)
Secured by real estate $81,922 $94,428
Other (generally secured) 15,989 32,114
------ -------
Total commercial loans 97,911 126,542
Residential real estate mortgages 457,755 229,203
Installment loans 49,423 51,372
-------- --------
Net loans $605,089 $407,117
======== ========
</TABLE>
The commercial loan portfolio is well diversified as to industry concentration
with no aggregate loans to any one specific industry exceeding 10% of total
commercial loans outstanding at December 31, 1994. Approximately 67% and 19% of
the Company's loan portfolio at December 31, 1994 has been originated in the
states of Michigan and Ohio, respectively.
NOTE 7: ALLOWANCE FOR ESTIMATED LOAN LOSSES
Changes in the allowance for estimated loan losses are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Balance at January 1 $7,214 $7,684 $5,410
Loans charged off (1,705) (762) (2,079)
Recoveries on loans previously charged off 291 279 386
Provision charged to expense 94 603 3,967
Reduction due to sale of commercial loans at Republic Savings Bank (350) (590) -
------ ------ ------
Balance at December 31 $5,544 $7,214 $7,684
====== ====== ======
</TABLE>
NOTE 8: PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
(Dollars in thousands)
<S> <C> <C>
Land $2,038 $2,066
Furniture and equipment 16,195 15,105
Buildings and improvements 9,664 10,109
------ ------
27,897 27,280
Less accumulated amortization and depreciation 12,413 10,985
------- -------
Net premises and equipment $15,484 $16,295
======= =======
</TABLE>
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 9: SHORT-TERM BORROWINGS
Short-term borrowings, including Federal funds purchased and reverse
repurchase agreements, consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1994 1993
--------------------- ---------------------
Interest Interest
Balance Rate Balance Rate
(Dollars in thousands) ------- -------- ------- ---------
<S> <C> <C> <C> <C>
Federal funds purchased and reverse repurchase agreements $217,124 5.97% $35,572 3.34%
======== =======
Short-term borrowings:
Mortgage banking warehousing line of credit for
Market Street, variable rate $22,806 7.98 $85,535 5.73
Mortgage banking warehousing line of credit for
Republic Mortgage, variable rate - - 14,911 6.13
Mortgage banking warehousing line of credit for
CUB Funding, variable rate 11,984 7.57 - -
Repurchase agreement for CUB Funding, fixed rate 1,136 6.98 - -
Short-term portion of long-term debt (See Note 11) 3,896 9.80 827 7.90
------- --------
Total short-term borrowings $39,822 $101,273
======= ========
</TABLE>
On July 30, 1994, Market Street entered into a $75 million warehousing line of
credit agreement with G.E. Capital Mortgage Services, Inc. (G.E. Capital) and
Cooper River Funding Inc. (Cooper River). Advances under such line are to be
used for funding the origination of mortgage loans by Market Street. Interest,
which is payable monthly, is computed at a rate equal to the lower of 2.00%
above the lower of the lender's one month commercial paper rate or the LIBOR
rate. The interest rate at December 31, 1994 was 7.98% and the balance
outstanding was $22.8 million. The line of credit, which is payable on demand,
is secured by various real estate mortgage loans and expires in July 1995. The
provisions of the warehousing line of credit include various financial
covenants for Market Street. Prior to this warehousing line of credit, Market
Street funded its mortgage originations and those of its division, CUB Funding,
through a $135 million mortgage warehousing line of credit with G.E. Capital.
Security for this warehousing line of credit, which was payable on demand,
included various real estate mortgage loans. Interest, which was payable
monthly, was computed at the lower of 2.25% plus the monthly commercial paper
rate, or 2.25% plus the LIBOR rate. The interest rate at December 31, 1993 was
5.73% and the balance outstanding was $85.5 million. The average aggregate
amounts outstanding under such agreements were $35.4 million and $76.8 million
in 1994 and 1993, respectively. As of April 1, 1994, CUB Funding ceased to
operate as a division of Market Street and began to operate as a separate
affiliate of Republic Bancorp Inc.
On December 18, 1992, Republic Mortgage entered into a $50 million warehousing
line of credit with NBD Bank, N.A. and Comerica, Inc. This agreement was amended
on September 1, 1994 to reduce the line of credit to $20 million, and to
discontinue the warehousing line of credit with Comerica, Inc. Advances under
such line are to be used to fund the acquisition or origination of mortgage
loans by Republic Mortgage. Security for this line of credit, which is payable
on demand, includes various real estate mortgage notes and expires in April
1995. Interest is computed on the unpaid principal amount of each advance at
the adjusted LIBOR rate or federal funds sold plus 1.25%, as applicable to
such advance. The provisions of the warehousing line of credit include various
financial covenants for Republic Mortgage. The interest rate at December 31,
1994 and 1993 was 7.375% and 6.13%, respectively, and the balance outstanding
at December 31, 1994 and 1993 was $-0- and $14.9 million, respectively. The
average aggregate amounts outstanding under such agreement were $4.5 million
and $21.8 million in 1994 and 1993, respectively.
On August 11, 1994, CUB Funding Corporation entered into a $30 million
warehousing line of credit agreement with Prudential Home Mortgage Company
(Prudential). On November 1, 1994, this agreement was amended to reduce the
line of credit to $16 million. Advances under such line are to be used for
funding the origination of mortgage loans by CUB Funding. Interest, which is
payable monthly, is computed based upon the 30 day commercial paper index plus
various spreads ranging from 1.00% to 2.75% based on the document status of
each loan. The average interest rate at December 31, 1994 was 7.57% and the
balance outstanding was $12.0 million. The line of credit, which is payable
on demand, is secured by various real estate mortgage loans and expires in
August 1995. The provisions of the warehousing line of credit include various
financial covenants for CUB Funding. During 1994, the average aggregate amount
outstanding under such agreement was $10.2 million.
32<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In December 1994, CUB Funding entered into a $1.1 million repurchase agreement
with Paine Webber Inc. to fund a portion of its mortgage loan originations.
Security for this borrowing includes various real estate mortgage notes and
expires January 23, 1995. The interest rate on this borrowing was fixed at
6.98% at December 31, 1994.
The Company has an $18 million Revolving Credit Agreement with Firstar Bank
Milwaukee, N.A. with loan proceeds available to be utilized for working capital
purposes. The credit facility is secured by the common and preferred stock of
Republic Bank and expires in January 1996. The agreement provides for borrowings
with interest at the prime rate, less .25%, or LIBOR plus 1.75% for borrowings
up to $18 million. No amounts were outstanding under this Credit Agreement at
December 31, 1994 or 1993.
Federal funds purchased mature the day following the date of purchase while
reverse repurchase agreements generally mature within 30 to 90 days from the
date of the transaction. Federal funds purchased and reverse repurchase
agreements are detailed as follows:
<TABLE>
<CAPTION>
1994 1993
Maximum Maximum
Balance Interest Average Average Amount Balance Interest Average Average Amount
at Rate at Balance Rate Outstanding at Rate at Balance Rate Outstanding
December December during during at any December December during during at any
31 31 the Year the Year Month End 31 31 the Year the Year Month End
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds purchased $21,000 6.13% $11,873 4.63% $37,900 $16,000 3.21% $4,547 3.39% $16,200
Reverse repurchase
agreements 196,124 5.96 146,206 4.85 251,601 19,572 3.44 17,518 3.37 65,746
</TABLE>
At December 31, 1992, the Company had reverse repurchase agreements of $2.5
million with an interest rate of 3.33%. The average amount outstanding during
the year ended December 31, 1992 was $13.2 million and the maximum amounts
outstanding at any month end was $29.2 million.
NOTE 10: FHLB ADVANCES
Republic Savings Bank has outstanding two advances from the Federal Home Loan
Bank ("FHLB"), a $10 million advance with an interest rate of 7.15%, maturing
in February 1997, and a $5 million advance, with an interest rate of 4.45%,
maturing in December 1995. These advances are secured by first mortgage loans
equal to at least 150% of the advances under a blanket security agreement with
interest payable monthly.
Republic Bank has outstanding one advance from the FHLB, a $20 million advance
with an interest rate of 6.25%, maturing in March 1995. This advance is secured
by investment securities equal to at least 110% of the advance under a specific
collateral agreement, with interest payable monthly.
In order to provide liquidity needs for mortgage loan originations, Republic
Savings entered into a $50 million line of credit with the FHLB in September
1994. The line of credit is payable on demand and is secured by various real
estate mortgage loans and expires in September 1995. As of December 31, 1994,
borrowings under this line totaled $34.95 million, with a variable interest
rate of 5.90%.
At December 31, 1993, Republic Savings Bank had outstanding the following three
advances from the FHLB; $8 million due on demand; $10 million due February 1997;
and $5 million due December 1995, with interest rates at 5.90%, 7.15% and 4.45%,
respectively.
<TABLE>
<CAPTION>
NOTE 11: LONG-TERM DEBT December 31,
Long-term debt consists of the following: 1994 1993
(Dollars in thousands)
<S> <C> <C>
Senior notes, interest at 7.17%, interest payable semi-annually, maturing 2001 $25,000 -
Subordinated notes, interest at 9%, interest payable monthly, maturing 2003 17,250 $17,250
Mortgage loan, interest at 6.99%, principal and interest
payable quarterly, maturing October 1, 2000 1,977 2,060
Note payable under term loan agreement, interest at one month commercial
paper rate plus 3.75%, principal and interest payable monthly, maturing
December 1, 1998 15,304 -
Note payable with bank, interest at prime plus 2%, principal
and interest payable quarterly, maturing November 30, 1995 744 1,487
------ ------
Total 60,275 20,797
Less maturities included as short-term borrowings (Note 9) (3,896) (827)
------- -------
Total $56,379 $19,970
======= =======
</TABLE>
33<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
During March 1994, the Company completed a private offering of $25.0 million
principal amount of 7.17% Senior Debentures which mature April 1, 2001 with
interest on the notes payable semiannually. A portion of the net proceeds from
the sale of the Debentures has been used to fund the purchase of mortgage
servicing rights and for acquisitions. The remainder of the net proceeds will
be used to further expand the Company's mortgage banking operations and
activities and for general corporate purposes, including possible future
acquisitions.
During January 1993, the Company completed a public offering of $17.25 million
principal amount of 9% Subordinated Notes which mature February 1, 2003.
Interest on the notes is payable monthly at 9%. The notes are redeemable in
whole or in part by the Company, subject to Federal Reserve Board approval at
par plus accrued interest at any time after February 1, 1996. The majority of
the net proceeds from the sale of the Notes were used to repay the amounts
outstanding under the Revolving Credit Agreement with Firstar Bank Milwaukee,
N.A. incurred in connection with the Company's acquisition of the assets of
Market Street Mortgage Corporation in December 1992. The Subordinated Notes
qualify as Tier 2 capital for the calculation of Total risk-based capital under
Federal Reserve guidelines.
On September 27, 1993, Republic Mortgage financed the acquisition of its new
corporate office with a mortgage loan in the amount of $2.1 million with
Firstar Bank Milwaukee, N.A. Principal and interest, with a fixed rate of
6.99%, is payable quarterly, with a final maturity date of October 1, 2000.
As of December 31, 1994, $91,000 of the amount outstanding is classified as
short-term borrowings.
On April 29, 1994, Market Street entered into a Term Loan Agreement with GE
Capital Mortgage Services, Inc. to finance the acquisition of mortgage loan
servicing rights. At December 31, 1994, the Company had $16 million available
under this agreement, of which $15.3 million had been borrowed. Borrowings
under this agreement are collateralized by Market Street's mortgage loan
servicing portfolio in respect of when a borrowing advance has been made
pursuant to the Term Loan Agreement. Interest on borrowings under the Term
Loan Agreement is payable monthly at a rate of 3.75% above the lender's one
month commercial paper rate (9.73% at December 31, 1994). Principal payments
begin on January 1, 1995 and are due monthly based on a 60-month amortization
period with a balloon payment equal to the unpaid principal balance required
in the 48th month (December 1, 1998). As of December 31, 1994, $3.1 million of
the amount outstanding is classified as short-term borrowings.
On December 29, 1992, to finance a portion of the purchase of the assets of
Market Street Mortgage Corporation, Market Street entered into a $2.2 million
note payable with Poughkeepsie. Interest is payable at the prime rate plus 2%
and the note is payable in twelve equal quarterly installments commencing
February 29, 1993 with the final payment due on November 30, 1995. At December
31, 1994 and 1993 the interest rate was 10.5% and 8%, respectively and the
loan is secured by the servicing rights underlying the Poughkeepsie mortgages
which are serviced by Market Street. As of December 31, 1994, the entire
amount outstanding of $744,000 is classified as short-term borrowings.
Premier incurred a term note due September 30, 1998 in the original principal
amount of $5.8 million to Merchants National Bank & Trust Company of
Indianapolis, Indiana pursuant to a Term Loan Agreement dated September 30,
1988. Loan proceeds were used to fund a portion of the purchase of two banks
from Michigan National Corporation. Simultaneous with the acquisition of the
remaining minority shares of Premier by the Company in March 1993, the
remaining $4.4 million balance due was paid in full.
The following table indicates the remaining principal maturities of long-term
debt at December 31, 1994 (excludes short-term portion detailed in Note 9):
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
1996 $3,156
1997 3,164
1998 3,172
1999 3,180
2000 1,457
2001 and thereafter 42,250
-------
Total $56,379
=======
</TABLE>
NOTE 12: INCOME TAXES
As discussed in Note 1, the Company adopted SFAS 109 as of January 1, 1993.
The cumulative effect of this change in accounting for income taxes of
$950,000 is reported separately in the consolidated statement of income for
the year ended December 31, 1993. Prior years' financial statements have not
been restated to apply the provisions of SFAS 109.
34<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following is a summary of the components of the provision for income tax
expense for the years ended December 31, 1994, 1993 and 1992. During the years
ended December 31, 1994, 1993 and 1992, the Company's state taxes on income
were insignificant.
<TABLE>
<CAPTION>
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Current expense $7,008 $11,991 $8,768
Deferred income tax (benefit) 1,039 317 (1,429)
------ ------- ------
Total income tax expense $8,047 $12,308 $7,339
====== ======= ======
</TABLE>
Deferred taxes reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant temporary differences which give rise to the deferred tax assets
and liabilities as of December 31, 1994 and December 31, 1993 are as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
Asset Liability Asset Liability
(Dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for estimated loan losses $1,020 - $1,392 -
Purchased mortgage servicing rights amortization 1,393 - 1,289 -
Deferred loan fees and costs, net - $162 499 -
Non-deductible accruals 195 - 296 -
Depreciation/amortization - 399 - $351
Stock dividends in FHLB stock - 431 - 352
Purchase accounting adjustment amortization 558 - - -
Market value adjustment for securities available-for-sale 2,839 - - -
Loan mark-to-market adjustment - 344 - -
Other 580 83 1,026 249
------ ------ ------ ----
Total deferred taxes $6,585 $1,419 $4,502 $952
====== ====== ====== ====
</TABLE>
The significant components of deferred taxes under APB No. 11 are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1992
(Dollars in thousands)
<S> <C>
Provision for loan losses $(275)
Non-deductible accruals (400)
Deferred loan fees (109)
Hedging transactions (448)
Severance benefits (170)
Other, net (27)
-------
Total deferred income tax benefit $(1,429)
=======
</TABLE>
Items causing differences between the statutory tax rate and the effective tax
rate are summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992
Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statutory tax rate $8,318 35.0% $12,089 35.0% $6,379 34.0%
Amortization of purchase adjustments and goodwill 88 .4 77 .2 136 .7
Bad debt deduction of Republic Savings Bank - - - - (359) (1.9)
Losses on loans and other real estate - - - - 929 5.0
Merger expense - - - - 221 1.2
Other, net (359) (1.5) 142 .4 33 .1
------ ---- ------- ---- ------ ----
Provision for income taxes $8,047 33.9% $12,308 35.6% $7,339 39.1%
====== ==== ======= ==== ====== ====
</TABLE>
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 13: COMMON STOCK
STOCK OPTIONS
The Company has an incentive stock option plan for key employees which
currently provides for granting options to purchase up to 1,815,000 common
shares during a ten-year period, at exercise prices equal to the fair market
value at date of grant.
Activity and price information for 1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
Number of Option Number of Option Number of Option
Options Price Options Price Options Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 863,020 $2.90-12.50 1,450,364 $2.90- 9.71 1,424,397 $2.90- 5.01
Granted 52,035 9.88-12.95 167,447 8.88-12.50 160,930 5.07- 9.71
Exercised (104,479) 4.19- 9.77 (751,464) 4.44- 9.77 (5,232) 6.07
Cancelled (7,814) 5.51-13.41 (3,327) 4.88 (25,597) 5.58- 6.67
Converted to stock warrants - - - - (104,134) 4.87- 6.06
------- ----------- ------- ----------- --------- -----------
Outstanding at end of year 802,762 $2.90-12.95 863,020 $2.90-12.50 1,450,364 $2.90- 9.71
======= =========== ======= =========== ========= ===========
Available for future grant 19,037 73,238 358,304
====== ====== =======
</TABLE>
STOCK WARRANTS
The Company has awarded warrants to purchase common shares during exercise
periods ranging from three to ten years to key executive officers and certain
directors of the Company and its affiliates. In addition, the Company has a
Director Compensation Plan that awards 1,000 warrants annually to each of the
Company's non-employee directors.
Activity and price information for 1994, 1993 and 1992 follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
Number of Warrant Number of Warrant Number of Warrant
Warrants Price Warrants Price Warrants Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 253,757 $4.03- 9.09 279,943 $4.03- 5.01 219,259 $4.19-5.01
Granted 15,400 11.93 13,200 9.09-10.00 - -
Exercised (81,797) 4.61- 5.13 (39,386) 4.82-11.00 (65,317) 5.82-6.67
Expired - - - - - -
Converted from stock options - - - - 126,001 4.03-5.01
------- ----------- ------- ----------- ------- ----------
Outstanding at end of year 187,360 $4.03-11.93 253,757 $4.03- 9.09 279,943 $4.03-5.01
======= =========== ======= =========== ======= ==========
</TABLE>
RESTRICTED STOCK PLAN
Under the Republic Restricted Stock Plan, 98,575 common shares are authorized
to be granted to certain key employees. Such shares must be forfeited if
employment terminates within three years of issuance. In 1994 and 1992 no
shares were issued under this plan and 39,567 shares were issued in 1993. At
December 31, 1994, 88,617 shares have been issued under this plan. The Company
amortizes the share issuance price over the restriction period of the
agreement.
STOCK DIVIDENDS
On September 22, 1994, Republic's Board of Directors declared a 10% stock
dividend distributed on December 2, 1994 to shareholders of record on November
4, 1994. Similar stock dividends were distributed on October 29, 1993 to
shareholders of record on October 1, 1993 and on October 30, 1992 to
shareholders of record September 30, 1992.
NOTE 14: PRIMARY EARNINGS PER COMMON SHARE
Primary earnings per common share are computed by dividing net income, after
deducting preferred stock dividends by the weighted average number of common
shares outstanding and common equivalent shares with a dilutive effect. Common
equivalent shares are shares which may be issuable upon exercise of outstanding
stock options and warrants.
Fully diluted earnings per common share are determined on the assumption that
the weighted average number of common shares and common equivalent shares
outstanding is further increased by conversion of convertible debentures and
convertible preferred stock. Convertible debentures and Series A, B and C
convertible preferred stock were included in earnings per fully diluted common
share computations for 1992. During 1992, all of the convertible debt and
Series A, B and C preferred stock was converted to common stock or redeemed
for cash value.
36<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table presents information necessary for the computation of
earnings per share, on both a primary and fully diluted basis, for the years
ended December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Average number of common shares outstanding 15,247,537 14,608,466 12,825,529
Common share equivalents on stock options and stock
warrants based on average market price 502,012 788,435 546,896
---------- ---------- ----------
Average number of common shares outstanding to
compute primary earnings per share 15,749,549 15,396,901 13,372,425
Incremental common share equivalents on stock options
and stock warrants based on end of period market price 1,150 39,953 112,515
Common shares outstanding based on conversion of:
Convertible debentures - - 165,689
Series A convertible preferred stock - - 414,841
Series B and C convertible preferred stock - - 275,854
---------- ---------- ----------
Average number of common shares outstanding to
compute fully diluted earnings per share 15,750,699 15,436,854 14,341,324
========== ========== ==========
</TABLE>
NOTE 15: TRANSACTIONS WITH RELATED PARTIES
Republic Bank and Republic Savings Bank have, in the normal course of business,
made loans to certain directors and officers and to organizations in which
certain directors and officers have an interest. Other transactions with
related parties include non-interest bearing and interest bearing deposits.
In the opinion of management, such loans and other transactions were made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unrelated
parties and did not involve more than normal risk of collectibility. A summary
of related party loan activity for the years ended December 31, 1994 and 1993
follows:
<TABLE>
<CAPTION>
1994 1993
(Dollars in thousands)
<S> <C> <C>
Balance at January 1 $4,508 $8,073
New loans and advances 557 1,106
New directors and officers - -
Repayments (1,087) (3,664)
Former directors and officers - (1,007)
------ ------
Balance at December 31 $3,978 $4,508
====== ======
</TABLE>
NOTE 16: OTHER NON-INTEREST EXPENSE
For 1994, 1993 and 1992, the other non-interest expense category contained
certain types of expenses which exceeded 1% of total interest income and other
non-interest income. Telephone expense, advertising, travel and auto and FDIC
insurance premiums of $2.7 million, $1.6 million, $1.7 million and $1.9
million, respectively, during 1994, exceeded this 1% threshold. Telephone
expense and FDIC insurance premiums of $2.2 million and $2.0 million,
respectively, during 1993, exceeded this 1% threshold. Legal fees, FDIC
insurance premiums and Michigan Single Business Tax of $1.9 million, $1.6
million and $1.6 million, respectively, during 1992, exceeded this 1%
threshold.
NOTE 17: EMPLOYEE BENEFIT PLANS
401(K) PLANS: The Company maintains 401(k) plans for Republic Bancorp Inc.
employees and Republic Savings Bank employees. The employer contributions to
the plans are determined annually by the respective Board of Directors.
Expenses under these plans for the years ended December 31, 1994, 1993 and
1992 aggregated $669,000, $353,000 and $196,000, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN: Horizon Financial Services, Inc. maintained an
Employee Stock Ownership Plan (ESOP) that was a qualified defined contribution
plan. Substantially all of the assets in this plan were invested in Horizon
Financial Services, Inc. common stock which was converted to Republic Bancorp
Inc. common stock effective June 30, 1993. This plan was terminated effective
November 30, 1994 and the assets of the plan were distributed to the
participants. ESOP expense for the years ending December 31, 1994, 1993 and
1992 amounted to $0, $0 and $220,000, respectively.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 18: COMMITMENTS AND CONTINGENCIES
The Company leases certain office facilities under lease agreements that
expire at various dates. In some cases, these leases offer renewal options and
provide that the Company pay for insurance, maintenance and taxes. Rental
expense under all operating leases charged to operations in 1994, 1993 and 1992
approximated $3.7 million, $2.5 million and $1.1 million, respectively. As of
December 31, 1994, the future aggregate minimum lease payments required under
noncancellable operating leases are as follows:
<TABLE>
<CAPTION>
Operating
Year Ending (Dollars in thousands) Leases
<S> <C>
1995 $2,673
1996 1,777
1997 1,357
1998 677
1999 153
2000 and thereafter 0
------
Total minimum payments required $6,637
======
</TABLE>
In the ordinary course of business, there are various legal proceedings
pending against Republic and its subsidiaries. Management considers that the
aggregate liabilities, if any, arising from such actions would not have a
material adverse effect on the consolidated financial position of the Company.
NOTE 19: SEGMENT INFORMATION
The Company operates in two industry segments (as defined by SFAS 14,
"Financial Reporting for Segments of a Business Enterprise"). The two industry
segments are mortgage banking and commercial banking. Following is a
presentation of the revenues, operating profits and identifiable assets for
the years ended December 31, 1994, 1993 and 1992. The intercompany income/
(expense) presented below consists of interest expense incurred by the
mortgage banking subsidiaries on their notes payable with the parent company,
less amounts paid to the mortgage banking subsidiaries by Republic Bank for
servicing their mortgage loans. Intercompany assets included in the commercial
banking total identifiable assets consist primarily of notes receivable of the
parent company from the mortgage banking subsidiaries.
<TABLE>
<CAPTION>
Commercial Banking Mortgage Banking Consolidated
YEAR ENDED DECEMBER 31, 1994 1993 1992 1994 1993 1992 1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income after provision
for loan losses $35,617 $34,949 $28,964 $(2,491) $1,011 $798 $33,126 $35,960 $29,762
Non-interest income 5,762 6,992 6,113 - - - 5,762 6,992 6,113
Mortgage banking income(1) - - - 69,899 85,128 30,697 69,899 85,128 30,697
Depreciation and amortization 2,051 1,771 1,566 2,217 1,319 280 4,268 3,090 1,846
Non-interest expense 23,582 28,682 27,177 57,171 61,767 18,788 80,753 90,449 45,965
------- ------- ------ ------ ------- ------- ------- ------- -------
Income before taxes $15,746 $11,488 $6,334 $8,020 $23,053 $12,427 $23,766 $34,541 $18,761
======= ======= ====== ====== ======= ======= ======= ======= =======
Intercompany income/(expense)
included in income before taxes $1,111 $1,015 $123 $(1,111) $(1,015) $(123) - - -
====== ====== ==== ======= ======= ===== ===== ===== ======
AT DECEMBER 31,
(Dollars in millions)
Total identifiable assets $1,241 $1,003 $1,031 $155 $181 $118 $1,396 $1,184 $1,149
Intercompany assets included in
total identifiable assets (26) (12) (22) - (1) (1) (26) (13) (23)
------ ---- ------ ---- ---- ---- ------ ------ ------
Assets after intercompany
eliminations $1,215 $991 $1,009 $155 $180 $117 $1,370 $1,171 $1,126
====== ==== ====== ==== ==== ==== ======= ====== ======
<FN>
(1) Included in mortgage banking income is amortization of purchased mortgage
servicing rights of $5.0 million, $4.6 million and $1.4 million in 1994, 1993
and 1992, respectively.
</TABLE>
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 20: OFF-BALANCE SHEET TRANSACTIONS
In the normal course of business, Republic is a party to financial instruments
with off-balance sheet risk to meet the financing needs of its customers and
to reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby letters of
credit. These instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the consolidated
balance sheet. The contract or notional amounts of those instruments reflect
the involvement Republic has in particular classes of fiancial instruments.
Commitments to extend credit are agreements to lend cash to a customer as long
as there is no breach of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require the payment of a fee. Certain of the commitments may expire
without being drawn upon, therefore the total commitment amounts do not
necessarily represent future cash requirements. The exposure to credit loss in
the event of nonperformance by the other party to the financial instrument for
these commitments is represented by the contractual notional amount. Loan
commitments are subject to market risk resulting from fluctuations in interest
rates. Republic applies the same credit policies in making commitments as it
does for on-balance sheet instruments, mainly by evaluating each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by Republic upon extension of credit, is based on
management's credit evaluation of the counterparty. Collateral held varies but
may include residential properties, accounts receivable, inventories,
investments, property, plant and equipment, and income-producing commercial
properties.
Standby letters of credit guarantee the performance of a customer to a third
party. These guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing, and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan commitments to
customers. Republic uses the same credit policies in making these conditional
obligations as it does for on-balance sheet instruments. Collateral held for
those commitments in which it is deemed necessary varies but may include
accounts receivable, inventories, investments and real estate.
The following table outlines Republic's off-balance sheet exposure to credit
and interest rate risk at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
Outstanding at December 31,
1994 1993
(Dollars in thousands)
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Unused commitments to extend credit $18,905 $22,478
Standby letters of credit 450 885
Commitments to fund residential real estate loans 195,472 313,798
Commitments to fund commercial real estate loans 43,391 16,531
Financial instruments whose contract amounts represent interest rate risk:
Residential real estate loan applications with agreed-upon rates 129,640 406,444
Commitments to sell residential real estate loans 213,569 667,373
</TABLE>
Offsetting the risk associated with the commitments to fund residential real
estate loan applications with agreed-upon rates, as well as mortgage loans
held for sale, Republic has entered into firm commitments to sell forward
$213.6 million of residential mortgage loans to various third parties of which
$152.1 million related to the balances of mortgage loans held for sale at
December 31, 1994 with the remaining $61.5 million relating to those
commitments for real estate loan applications with agreed-upon interest rates.
The commitments to sell forward, which are expected to settle in the first
quarter of 1995, is not expected to produce any material gains or losses. At
December 31, 1993, Republic had entered into firm commitments to sell forward
$667.4 million of residential mortgage loans of which $507.8 million related
to the balances of mortgage loans held for sale with the remaining $159.6
million relating to those commitments for residential real estate loan
applications with agreed-upon interest rates.
The Company has sold certain loans to the Federal Home Loan Mortgage
Corporation ("FHLMC") with recourse. Under the sales agreement, the Company
must repurchase FHLMC's share of principal and interest upon the completion of
a foreclosure sale or upon receipt of a deed in lieu of foreclosure. The
outstanding balance of loans sold with recourse was $2.7 million and $6.1
million at December 31, 1994 and 1993, respectively. Management has
established appropriate reserves for these estimated losses, if any.
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 21: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates of financial instruments are made at a specific point in
time, based on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that could
result from offering for sale at one time the Company's entire holdings of a
particular financial instrument. Because no ready market exists for a
significant portion of the Company's financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates.
Fair value estimates are based on existing on-and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and value of assets and liabilities that are not considered financial
instruments. Tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and
have not been considered in these estimates.
The estimated fair values of the Company's financial instruments as of
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------- -------------------
Carrying Fair Carrying Fair
Value Value Value Value
(Dollars in thousands) -------- ------- -------- -------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $23,297 $23,297 $28,025 $28,025
Mortgage loans held for sale 152,138 152,064 507,795 508,951
Held-for-sale securities - - 51,044 51,776
Held-to-maturity securities 269,701 254,996 107,398 108,360
Available-for-sale securities 204,614 196,502 - -
Loans, net of the allowance for estimated loan losses 599,545 580,911 399,903 403,974
LIABILITIES:
Deposits:
Non-interest bearing demand deposits 111,425 111,425 153,474 153,474
Interest bearing demand and savings deposits 256,528 256,528 254,448 254,448
Certificates of deposit:
Maturing in six months or less 218,475 218,348 173,080 173,330
Maturing between six months and one year 108,266 107,817 109,797 110,230
Maturing between one and three years 103,090 102,590 111,113 112,618
Maturing beyond three years 20,958 20,615 31,822 32,469
------- ------- ------- -------
Total deposits 818,742 817,323 833,734 836,569
Federal funds purchased and reverse repurchase agreements 217,124 217,124 35,572 35,572
Short-term borrowings 39,822 39,821 101,273 101,273
FHLB advances 69,950 69,605 23,000 23,565
Long-term debt 56,379 52,094 19,970 20,382
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS:
The carrying amount is a reasonable estimate of fair value for these
instruments.
MORTGAGE LOANS HELD FOR SALE:
The fair value of mortgage loans held for sale is estimated based on the
present value of estimated future cash flows using a discount rate
commensurate with the risks associated with the financial instrument. As
mortgage loans held for sale are originated or acquired at current market
interest rates and generally sold within 60 to 90 days, the difference between
carrying value and fair value is generally minimal.
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
INVESTMENTS:
The fair value of held-to-maturity securities, available-for-sale securities
and held-for-sale securities is estimated based on quoted market prices or
dealer quotes for those investments.
LOANS:
Fair values are estimated for portfolio loans based on the present value of
future expected cash flows using discount rates which incorporate a premium
commensurate with normal credit and interest rate risks involved. Loans are
segregated by type such as commercial, commercial real estate, residential
mortgage and installment.
Fair value for nonperforming loans is based on the premise that management has
allocated adequate reserves for loan losses. As a result, the fair value of
nonperforming loans are reported at carrying value.
DEPOSITS:
The fair value of deposits with no stated maturity, such as non-interest
bearing demand deposits, savings, money market, checking and NOW accounts,
is equal to the amount payable on demand. The estimated fair value of
certificates of deposit is based on the present value of future estimated
cash flows using the rates currently offered for deposits of similar remaining
maturities.
FEDERAL FUNDS PURCHASED AND REVERSE REPURCHASE AGREEMENTS:
The carrying amount is a reasonable estimate of fair value as the majority of
such borrowings were negotiated at or near December 31, 1994 and 1993.
SHORT-TERM BORROWINGS:
The fair value is estimated based on the present value of future estimated
cash flows using current rates offered to the Company for debt with similar
terms. As 99.8% of borrowings classified short-term float based on indexes
such as prime, LIBOR and commercial paper, the carrying amount will generally
approximate fair value as the rates on such notes reprice frequently.
FHLB ADVANCES AND LONG-TERM DEBT:
The fair value is estimated based on the present value of future estimated
cash flows using current rates offered to the Company for debt with similar
terms.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS:
The Company's off-balance sheet financial instruments are detailed in Note 20
in the Notes to Consolidated Financial Statements. The Company's residential
real estate loan applications with agreed-upon interest rates may result in a
gain or loss upon the sale of the funded residential real estate loans.
Additionally, the Company's forward commitment to sell residential real estate
loans may result in a gain or loss. The aggregated fair value of these
off-balance sheet financial instruments at December 31, 1994 and 1993 were not
material.
NOTE 22: DIVIDEND RESTRICTIONS
The Company's state chartered bank and state chartered savings bank regulatory
agencies limit the amount of dividends these financial institutions can
declare to the parent company in any calendar year without obtaining prior
approval. The limitations of the subsidiary bank and the state savings bank
for 1994 were approximately $18.4 million and $18.3 million, respectively.
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 23: PARENT COMPANY FINANCIAL INFORMATION
The condensed financial statements of Republic Bancorp Inc. (Parent Company
only) are as follows:
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31,
1994 1993
(Dollars in thousands)
<S> <C> <C>
Assets:
Cash and due from banks $199 $171
Interest earning deposits 5,744 1,674
----- -----
Cash and cash equivalents 5,943 1,845
Investment in subsidiaries 131,446 112,544
Notes and advances receivable from non-bank subsidiaries 21,811 11,472
Furniture and equipment 109 88
Other assets 5,312 4,575
-------- --------
Total assets $164,621 $130,524
======== ========
Liabilities and Shareholders' Equity:
Accrued and other liabilities $4,457 $1,841
Short-term borrowings - -
Long-term debt 42,250 17,250
------ ------
Total liabilities 46,707 19,091
------- -------
Total shareholders' equity 117,914 111,433
-------- --------
Total liabilities and shareholders' equity $164,621 $130,524
======== ========
<CAPTION>
STATEMENTS OF INCOME
Year Ended December 31,
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Interest income $1,653 $1,182 $414
Management fees from subsidiaries - - 180
Dividends from subsidiaries 7,242 5,392 439
Gain on sale of securities - - 3
Other income 19 108 -
----- ----- -----
Total income 8,914 6,682 1,036
----- ----- -----
Interest expense 3,107 1,705 106
Salaries and employee benefits and other expenses 2,713 3,884 4,359
----- ----- -----
Total expense 5,820 5,589 4,465
----- ----- -----
Income/(loss) before income taxes and equity in undistributed earnings
of subsidiaries 3,094 1,093 (3,429)
Income tax credits (1,615) (1,433) (1,056)
------ ------ ------
Income/(loss) before equity in undistributed earnings of subsidiaries and
cumulative effect of change in accounting principle 4,709 2,526 (2,373)
Cumulative effect of change in accounting principle - (50) -
Equity in undistributed earnings of subsidiaries 11,010 20,607 13,795
------- ------- -------
Net income $15,719 $23,183 $11,422
======= ======= =======
</TABLE>
42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
PARENT COMPANY FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15,719 $23,183 $11,422
Adjustments to reconcile net income to net cash (used in)/provided
by operating activities:
Depreciation and amortization 498 444 254
Equity in undistributed earnings of consolidated subsidiaries (11,010) (20,607) (13,795)
(Increase)/decrease in interest receivable (149) 277 (270)
Increase/(decrease) in interest payable 349 124 (15)
(Increase)/decrease in other assets (427) 1,110 (515)
Increase in other liabilities 2,267 630 2,697
Other, net - - 68
------ ------- -------
Total adjustments (8,472) (18,022) (11,576)
------ ------- -------
Net cash (used in)/provided by operating activities 7,247 5,161 (154)
------ ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of securities - - 250
Proceeds from maturities of mortgage-backed securities - 416 68
Premises and equipment expenditures (45) (54) (23)
Capital investments in subsidiaries (9,779) - (500)
Increase in notes and advances receivable from non-bank subsidiaries (13,729) (4,072) (20,375)
Acquisition of minority interest in bank subsidiary - (74) -
Acquisition of increased ownership interest under stock purchase agreement
with Premier Bancorporation, Inc. - (668) (81)
------- ------ -------
Net cash used in investing activities (23,553) (4,452) (20,661)
------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt - - (917)
Payment of long-term debt of Premier Bancorporation, Inc.
upon acquisition of remaining minority interest - (3,756) -
Net proceeds from issuance of common shares - - 9,106
Net proceeds from issuance of common shares through exercise of stock options
and stock warrants 1,072 4,749 489
Repurchase of common shares (838) - -
Dividends paid on preferred shares - - (276)
Dividends paid on common shares (4,542) (2,746) (1,907)
Redemption of subordinated debentures - - (471)
Redemption of Series A preferred stock - - (619)
Net increase/(decrease) in short-term borrowings - (15,000) 15,000
Issuance of subordinated debt, net of issuance costs - 16,492 -
Issuance of senior debt, net of issuance costs 24,712 - -
------ ------ ------
Net cash (used in)/provided by financing activities 20,404 (261) 20,405
------ ------ ------
Net increase/(decrease) in cash and cash equivalents 4,098 448 (410)
Cash and cash equivalents at beginning of year 1,845 1,397 1,807
------ ------ ------
Cash and cash equivalents at end of year $5,943 $1,845 $1,397
====== ====== ======
Cash paid during the year for:
Interest $2,758 $1,581 $121
Income taxes $9,980 $9,873 $8,521
<FN>
Noncash investing activities:
* During the year ended December 31, 1994, the holding company reclassified
$3.4 million of a borrowing to Market Street Mortgage for the purchase of CUB
Funding to capital investment in CUB Funding upon the spinoff of CUB Funding
into a separate subsidiary.
Noncash financing activities:
* During the year ended December 31, 1992, the Company converted $1.1 million
of subordinated debentures into 150,498 common shares.
* During the year ended December 31, 1992, the Company converted $5.5 million
of Series A, B and C preferred shares into 748,499 common shares.
</TABLE>
43
<PAGE>
REPORT OF MANAGEMENT
The management of Republic Bancorp Inc. is responsible for the preparation of
the financial statements and other related financial information included in
this annual report. The financial statements have been prepared in accordance
with generally accepted accounting principles and include the amounts based on
management's estimates and judgements where appropriate. Financial information
appearing throughout this annual report is consistent with the financial
statements.
Management is responsible for the integrity and objectivity of the consolidated
financial statements. Established accounting procedures are designed to provide
financial records and accounts which fairly reflect the transactions of the
Company. The training of qualified personnel and the assignment of duties are
intended to provide an internal control structure at a cost consistent with
management's evaluation of the risks involved. Such controls are monitored by
an internal audit staff to provide reasonable assurances that transactions are
executed in accordance with management's authorization and that adequate
accountability for the Company's assets is maintained.
The financial statements have been audited by Deloitte & Touche LLP,
independent auditors, and their report follows.
The Audit Committee of the Board of Directors is composed of outside directors
who meet with management, internal auditors, independent auditors and
regulatory examiners to review matters relating to financial reporting and
internal controls. The internal auditors, independent auditors and regulatory
examiners have direct access to the Audit Committee.
/s/ Jerry D. Campbell /s/ Thomas F. Menacher, C.P.A.
-------------------------------- --------------------------------------
Jerry D. Campbell Thomas F. Menacher, C.P.A.
Chairman of the Board, President Chief Financial Officer
and Chief Executive Officer
44
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
REPUBLIC BANCORP INC.
We have audited the accompanying consolidated balance sheet of Republic Bancorp
Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements give retroactive effect to
the merger of Republic Bancorp Inc. and Horizon Financial Services, Inc. which
has been accounted for as a pooling of interests as described in Note 2 to the
consolidated financial statements. We did not audit the statements of income,
shareholders' equity and cash flows of Horizon Financial Services, Inc. for
the year ended December 31, 1992, whose financial statements reflect total
revenues of $33 million for the year ended December 31, 1992. Those statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for Horizon Financial
Services, Inc. for 1992, is based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the reports
of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Republic Bancorp Inc. and its
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 12 to the consolidated financial statements,
Republic Bancorp Inc. adopted recently issued Statements of Financial
Accounting Standards and, accordingly changed its method of accounting for
investments in debt and equity securities effective January 1, 1994 and its
method of accounting for income taxes in 1993.
/s/ Deloitte & Touche LLP
-------------------------
January 18, 1995
Detroit, Michigan
45
<PAGE>
SUMMARY OF COMMON SHARE MARKET DATA
<TABLE>
<CAPTION>
Market Price on Common Shares
1994 1993
High Low High Low
<S> <C> <C> <C> <C>
First quarter 14 11 1/8 11 1/8 8
Second quarter 12 3/4 11 1/8 10 3/8 8 1/2
Third quarter 13 5/8 11 3/4 12 5/8 9 1/4
Fourth quarter 12 1/2 9 1/2 14 5/8 11 1/4
</TABLE>
The Company had 3,923 common shareholders of record and approximately 13,000
total common shareholders as of February 20, 1995. The Common Stock is traded
on the NASDAQ Stock Market under the symbol "RBNC." The prices shown above
are the high and low sales prices of the common stock reported during the
periods indicated and have been restated to reflect all stock dividends.
Payment of cash dividends by the Company on any of its common stock will
depend upon the receipt of dividends from its subsidiaries, on the
consolidated earnings and financial condition of the Company, on legal
restrictions and on such other factors as the Board of Directors may consider
relevant at the time. The Board of Directors of Republic Bancorp Inc., on
February 16, 1995, declared a quarterly cash dividend of $.09 per share
on Common Stock, payable on April 7, 1995 to shareholders of record on March
10, 1995. It is the current intent of the Company's Board of Directors to
continue to distribute quarterly cash dividends to common shareholders at the
rate of $.09 per share and to retain the balance of earnings and surplus to
provide operating capital and to finance the growth and development of the
Company.
The Company has historically declared stock dividends and stock splits
effected in the form of dividends on its Common Stock. Based on the Company's
intent to distribute quarterly cash dividends to common shareholders in the
future, it has not been determined whether the Company will continue stock
dividends in the future.
QUARTERLY DATA
Selected unaudited quarterly financial information for the latest eight
quarters is shown in the table below. All amounts are in thousands, except
per common share amounts.
<TABLE>
<CAPTION>
1994
1st 2nd 3rd 4th
Qtr Qtr Qtr Qtr
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Total income $45,296 $37,089 $36,036 $35,459
Total interest income 15,896 19,332 21,620 21,371
Total interest expense 8,363 10,663 12,530 13,443
Provision for loan losses 47 17 20 10
Net income before cumulative effect of
change in accounting principle 6,082 5,007 3,025 1,605
Cumulative effect of change in
accounting principle - - - -
Net income 6,082 5,007 3,025 1,605
Net income per common share:
Primary .39 .32 .19 .10
Fully diluted .39 .32 .19 .10
<CAPTION>
1993
1st 2nd 3rd 4th
Qtr Qtr Qtr Qtr
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Total income $34,674 $45,679 $44,321 $46,277
Total interest income 18,859 20,805 19,501 19,666
Total interest expense 10,830 11,097 10,465 9,876
Provision for loan losses 117 204 190 92
Net income before cumulative effect of
change in accounting principle 4,799 6,394 6,076 4,964
Cumulative effect of change in
accounting principle (950) - - -
Net income 5,749 6,394 6,076 4,964
Net income per common share:
Primary .38 .42 .39 .32
Fully diluted .37 .42 .39 .32
</TABLE>
46
<PAGE>
REPUBLIC AFFILIATES
REPUBLIC BANK
DIRECTORS
Lee E. Benz
President
Benz Insurance Agency
Barry J. Eckhold
Chairman of the Board
President, Chief
Executive Officer and
Chief Credit Officer
D. Wayne Fate
Pharmacist
Jack R. Lousma
Consultant
Milton F. Lutz, II
President
Midbrook Products, Inc.
Frederick H. Marx
President
Marx, Layne & Company
Alan R. Pfaff, Jr.
President
Atlantic Eagle Inc.
Grant C. Putman
Farmer
William C. Rands, III
Managing Partner
Rands Investment Company
David G. Stickel
Regional President and
Secretary to the Board
John E. VanderPoel
Chief Executive Officer
Jackson Iron & Metal, Inc.
Giorgio Vozza
President
Adventure Golf and Design
David W. Wright
Owner
Wright Ventures
Michael D. Young
President, Michael D. Young
Olds, Pontiac, GMC Trucks, Inc.
OFFICERS
Barry J. Eckhold
Chairman of the Board
President, Chief
Executive Officer and
Chief Credit Officer
David G. Stickel
Regional President and
Secretary to the Board
Constance A. Deneweth
Community Bank President-
Traverse City
C. Howard Haas
Community Bank President-
Lansing
Dennis A. Hill
Community Bank President-
Jackson
Craig L. Johnson
Community Bank President-
Flint
Peter W. Smith
Community Bank President-
Southeastern Michigan
Theodore J. Carlson
Executive Vice President
and Cashier
Patricia A. Brady
Senior Vice President-
Mortgage Lending
Lawrence D. Corbett
Senior Vice President and
Mortgage Loan Officer
Kenneth W. Faupel
Senior Vice President and
Senior Operations Officer
Richard P. Lupkes
Senior Vice President and
Commercial Loan Officer
David B. Randall
Senior Vice President and
Mortgage Loan Officer
Diana L. Wallace
Senior Vice President
Thomas G. Zernick
Senior Vice President and
Commercial Loan Officer
Vincent G. Cassisa
Vice President-
Commercial Lending
Ronald L. Clingerman
Vice President and
Commercial Loan Officer
Michael A. DeMeyere
Vice President-Retail Banking
John C. Deming
Vice President and
Commercial Loan Officer
Ian T. Glassford
Vice President-Retail Banking
Michael J. Gleason
Vice President-Mortgage Sales
Jack S. Harris
Vice President-Retail Banking
Suzanne A. Lieder
Vice President-
Mortgage Lending
Douglas A. Liverance
Vice President-
Consumer Lending
Daniel F. Mackenzie
Vice President-
Mortgage Lending
Cassandra Miller
Vice President-
Mortgage Lending
Jeffrey D. Saunders, C.P.A.
Controller
David J. Skaff
Vice President-
Commercial Lending
Gregory B. Smith
Vice President-
Mortgage Lending
James L. Stotz
Vice President-Loan Servicing
Joanne M. Wrozek
Vice President
47
<PAGE>
REPUBLIC AFFILIATES
REPUBLIC BANK (continued)
OFFICES
ANN ARBOR
122 South Main Street
Ann Arbor, Michigan 48104
(313) 665-4030
2100 South Main Street, Suite 2
Ann Arbor, Michigan 48103
(313) 665-4080
FLINT
3200 Beecher Road
Flint, Michigan 48532
(810) 732-3300
220 E. Main Street
Flushing, Michigan 48433
(810) 659-7712
G-8455 South Saginaw Road
Grand Blanc, Michigan 48439
(810) 694-8222
1070 East Main Street
Owosso, Michigan 48867
(517) 723-7800
1345 N. Shiawassee Street
Owosso, Michigan 48867
(517) 723-5101
JACKSON
306 West Michigan Avenue
Jackson, Michigan 49201
(517) 789-4300
125 West Main Street
Hanover, Michigan 49241
(517) 563-8332
2201 East Michigan Avenue
Jackson, Michigan 49202
(517) 789-4330
2030 Fourth Street
Jackson, Michigan 49203
(517) 789-4335
904 North Wisner Street
Jackson, Michigan 49202
(517) 789-4394
Loan Production Office
4205 South Westnedge Avenue
Kalamazoo, Michigan 49008
(616) 344-0011
112 Jonesville Street
Litchfield, Michigan 49252
(517) 542-2931
12811 East Chicago Road
P.O. Box 9
Somerset Center, Michigan 49282
(517) 688-4433
119 West Main Street
Spring Arbor, Michigan 49283
(517) 789-4340
LANSING
500 North Homer Street
Lansing, Michigan 48912
(517) 351-7300
601 West Grand River
Okemos, Michigan 48864
(517) 349-1930
127 East Grand River
Webberville, Michigan 48892
(517) 521-3122
105 West Middle Street
Williamston, Michigan 48895
(517) 655-4371
SOUTHEASTERN MICHIGAN
1700 North Woodward Avenue
Suite B
Bloomfield Hills, Michigan 48304
(810) 258-5300
31155 Northwestern Highway
Farmington Hills, Michigan 48334
(810) 737-0444
18720 Mack Avenue
Grosse Pointe Farms, Michigan 48236
(313) 882-6400
TRAVERSE CITY
534 E. Front Street
Traverse City, Michigan 49686
(616) 933-5626
Loan Production Office
616 Petoskey Street, Suite 306
Petoskey, Michigan 49770
(616) 347-0290
48
<PAGE>
REPUBLIC AFFILIATES
REPUBLIC BANK COMMUNITY BOARDS
DIRECTORS
ANN ARBOR
Lee E. Benz
Jack R. Lousma
Robert L. McNaughton
William G. Milliken, Jr.
David G. Stickel
James D. Short, Jr., Ph.D.
Jeoffrey K. Stross, M.D.
George D. Zuidema, M.D.
FLINT
Bruce L. Cook
Richard J. Cramer
Dr. George A. Eastman
Barry J. Eckhold
Howard J. Hulsman
Gary Hurand
Craig L. Johnson
Robert C. Manutes
Dr. Milton Rosenbaum
David G. Stickel
David W. Wright
Michael D. Young
JACKSON
G. Mark Alyea
Theodore J. Carlson
Frank A. Denbrock
Lloyd G. Ganton
Dennis A. Hill
Gary Hurand
William C. Koons
Milton F. Lutz, II
Phillip O. Richards, M.D.
Jo-Anne Rosenfeld
Lawrence Schultz
John E. VanderPoel
LANSING
George L. Burkitt
A. Gregory Eaton
Barry J. Eckhold
D. Wayne Fate
C. Howard Haas
Joe D. Pentecost
Grant C. Putman
SOUTHEASTERN MICHIGAN
Peter A. Dow
Robert C. Edgar
Harvey C. Fruehauf, Jr.
Frederick C. Gould
Frederick H. Marx
Sam H. McGoun
Lawrence E. Padlo
Alan R. Pfaff, Jr.
William C. Rands, III
Peter W. Smith
Richard H. Turner
Robert C. Valade
49
<PAGE>
REPUBLIC AFFILIATES
REPUBLIC SAVINGS BANK
DIRECTORS
Joseph D. Rusnak
President and
Chief Executive Officer
Albert P. Blank
Executive Vice President
Dana M. Cluckey
Executive Vice President and
Treasurer
Republic Bancorp Inc.
Paul C. Drueke
First Vice President
Stifel Nicolaus & Company, Inc.
Dennis J. Ibold
Chairman of the Board
Partner
Petersen, Ibold & Wantz
Attorneys at Law
John J. Lennon
Retired Chairman and
Chief Executive Officer
White Engines, Inc.
John L. Macklin
President
Investment Advisors
International, Inc.
Lyman H. Treadway
Consultant
Retired Chairman and
Chief Executive Officer
Bancapital Corporation
OFFICERS
Joseph D. Rusnak
President and
Chief Executive Officer
Albert P. Blank
Executive Vice President
David C. Williams
Senior Vice President and
Senior Credit Officer
Terry G. Robbins
First Vice President and Secretary
David W. Gifford, C.P.A.
Vice President and Treasurer
Ronald E. Decker
Vice President
Glenn B. Keeney
Vice President
Denise H. Long
Vice President
John L. Mlakar
Vice President
Karen H. Rhodes
Vice President
Leeanne M. Wright
Vice President
OFFICES
23175 Commerce Park Road
Beachwood, Ohio 44122
(216) 765-1100
17800 Chillicothe Road
Chagrin Falls, Ohio 44023
(216) 543-8237
8389 Mayfield Road
Chesterland, Ohio 44026
(216) 729-1636
80 Severance Circle Drive
Cleveland Heights, Ohio 44118
(216) 291-3171
5710 Mayfield Road
Greens of Lyndhurst
Lyndhurst, Ohio 44124
(216) 461-7300
26777 Lorain Road
North Olmsted, Ohio 44070
(216) 779-9922
2104 Warrensville Center Road
South Euclid, Ohio 44121
(216) 932-7774
Loan Production Office
7333 Paragon Road, Suite 160
Centerville, Ohio 45459
(513) 438-4663
Loan Production Office
209 West Portage Trail Extension
Suite 200
Cuyahoga Falls, Ohio 44223
(216) 922-5800
Loan Production Office
7784 Reynolds Road
Mentor, Ohio 44060
(216) 946-2690
Loan Production Office
500 W. Wilson Bridge Road
Suite 100
Worthington, Ohio 43085
(614) 888-9582
50
<PAGE>
REPUBLIC AFFILIATES
REPUBLIC BANCORP MORTGAGE INC.
DIRECTORS
George B. Smith
Chairman of the Board
Republic Bancorp Mortgage Inc.
Jerry D. Campbell
Chairman of the Board, President
and Chief Executive Officer
Republic Bancorp Inc.
Dana M. Cluckey
Executive Vice President
and Treasurer
Republic Bancorp Inc.
Richard H. Shaffner
President and
Chief Executive Officer
Republic Bancorp Mortgage Inc.
OFFICERS
George B. Smith
Chairman of the Board
Richard H. Shaffner
President and
Chief Executive Officer
Shirley M. Clark
Executive Vice President
Alice M. Alvey
Senior Vice President
Lawrence Rosenberg, C.P.A.
Chief Financial Officer
Gregory R. Bixby
Vice President
Robert L. Borkowski
Vice President
Charles W. Cracraft
Vice President
Robert V. Drury
Vice President
Thomas R. Henaughen
Vice President
Brian R. Ludtke, C.P.A.
Vice President
Marianne Opt-Thompson
Vice President
Gary L. Shafer
Vice President
Denise M. Sims
Vice President
Barbara Jo Smith
Vice President
Daniel B. Smith
Vice President
Thomas B. Smith
Vice President
Timothy B. Smith
Vice President
Michael G. Taormino
Vice President
Gayle S. Wickham
Vice President
Lisa A. Wickham
Vice President
William D. Wilhammer
Vice President
OFFICES
31155 Northwestern Highway
Farmington Hills, Michigan 48334
(810) 932-6500
1919 West Stadium, Suite 4
Ann Arbor, Michigan 48103
(313) 995-4499
1700 North Woodward Avenue
Bloomfield Hills, Michigan 48304
(810) 646-7050
322 West Grand River
Brighton, Michigan 48116
(810) 229-7440
186 South Main Street
Plymouth, Michigan 48170
(313) 459-7800
543 Main Street
Suite 213
Rochester, Michigan 48307
(810) 656-4200
19301 Northline Road
Southgate, Michigan 48195
(313) 287-0400
1200 Valley West Drive
Suite 206-14
West Des Moines, Iowa 50265
(800) 800-6492
17218 Preston Road
Suite 451
Dallas, Texas 75252
(214) 713-9564
51
<PAGE>
REPUBLIC AFFILIATES
HOME FUNDING, INC.
(a division of Republic Bancorp Mortgage Inc.)
OFFICERS
Joseph A. Cilento
President
Kathleen Quinn
Executive Vice President
OFFICES
1811 Route 52
Hopewell Junction, New York 12533
(914) 226-6000
1407 Route 9
Clifton Park, New York 12065
(518) 373-0814
6701 Manlius Center Road
East Syracuse, New York 13057
(315) 431-4100
457 Main Street
Danbury, Connecticut 06811
(203) 791-1736
195 Farmington Avenue
Suite 310
Farmington, Connecticut 06032
(203) 678-1778
1301 York Road, Suite 400
Lutherville, Maryland 21093
(410) 339-7794
Two Meeting House Road
Chelmsford, Massachusetts 01824
(508) 250-2700
AMERIFIRST HOME MORTGAGE
(a division of Republic Bancorp Mortgage Inc.)
OFFICERS
David N. Gahm
Senior Vice President
Mark A. Jones
Senior Vice President
Nancy F. Bastian
Vice President
David H. Jones
Vice President
Blake E. Bottomley
Vice President
OFFICES
7215 S. Westnedge
Portage, Michigan 49002
(616) 324-4120
138 N. Otsego
P.O. Box 840
Gaylord, Michigan 49735
(517) 732-3526
5763 28th Street, SE
Grand Rapids, Michigan 49546
(616) 285-3200
112 East Chart St.
Plainwell, Michigan 49080
(616) 685-1441
52
<PAGE>
REPUBLIC AFFILIATES
MARKET STREET MORTGAGE CORPORATION
DIRECTORS
Randall C. Johnson
Chairman of the Board,
President and
Chief Executive Officer
T. Donnell Smith
Executive Vice President
Michael H. Dillon
Executive Vice President
Jerry D. Campbell
Chairman of the Board,
President and
Chief Executive Officer
Republic Bancorp Inc.
Dana M. Cluckey
Executive Vice President
and Treasurer
Republic Bancorp Inc.
Richard H. Shaffner
President and
Chief Executive Officer
Republic Bancorp Mortgage Inc.
OFFICERS
Randall C. Johnson
Chairman of the Board,
President and
Chief Executive Officer
T. Donnell Smith
Executive Vice President
Michael H. Dillon
Executive Vice President
James B. Capps
Senior Vice President
Tracy S. Jackson
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
Barbara V. VanAntwerp
Senior Vice President
Vickey L. Adkins
Vice President
Anna Y. Agee
Vice President
Tony J. Agliardi, C.P.A.
Vice President
and Controller
Michael T. Alea
Vice President
W. Patrick Begg
Vice President
Ross G. Bennett
Vice President
Tambra L. Butler
Vice President
Barry W. Carroll
Vice President
Jerry F. Cobbe
Vice President
Elizabeth Jamison-Rouquie
Vice President
Barbara Jan Jenkins
Vice President
Nancy A. Jones
Vice President
Bruce W. Kates
Vice President
Thomas J. Ninness
Vice President
John C. Pacini
Vice President
Charles W. Richardson
Vice President
Timothy A. Slone
Vice President
Gene F. Swindle
Vice President
Nancy J. Weaver
Vice President
John M. Welsh
Vice President
53
<PAGE>
REPUBLIC AFFILIATES
MARKET STREET MORTGAGE CORPORATION (continued)
OFFICES
2650 McCormick Drive, Suite 200
Clearwater, Florida 34619
(800) 669-3210
(813) 724-7000
2410 West Brandon Boulevard
Brandon, Florida 33511
(813) 681-7700
2650 McCormick Drive, Suite 100
Clearwater, Florida 34619
(813) 539-8300
Cross Bayou Commerce Center
11701 Belcher Road South, Suite 110
Largo, Florida 34643
(813) 539-8300
2500 Maitland Center Parkway
Suite 402
Maitland, Florida 32751
(407) 875-6900
10700 North Kendall Drive, Suite 301
Miami, Florida 33176
(305) 596-1640
9000 W. Sheridan Street
Unit 147
Pembroke Pines, Florida 33024
(305) 438-6600
5700 North Davis Highway, Suite 4
Pensacola, Florida 32503
(904) 479-7991
1800 Second Street, Suite 808
Sarasota, Florida 34236
(813) 954-8880
3160 Fifth Avenue North, Suite 140
St. Petersburg, Florida 33713
(813) 539-8300
3550 Bushwood Park Drive, Suite 150
Tampa, Florida 33618
(813) 932-4578
1715 North Westshore Boulevard
Suite 552
Tampa, Florida 33607
(813) 286-8700
111 Hidden Glen Way
Dothan, Alabama 36303
(205) 794-7660
6719 Taylor Circle, Unit B
Montgomery, Alabama 36106
(334) 277-9011
4222 E. Camelback Road
Suite H100
Phoenix, Arizona 85018
(602) 840-4434
500 E. Fry Boulevard, Suite L9
Sierra Vista, Arizona 85635
(502) 458-8523
Plaza Quebec
6025 South Quebec, Suite 120
Englewood, Colorado 80111
(303) 721-1120
400 Interstate North Parkway
Suite 600
Atlanta, Georgia 30339
(404) 988-1800
5669 Whitesville Road, Suite E
Columbus, Georgia 31904
(706) 324-0074
1750 East Golf Road, Suite 210
Schaumburg, Illinois 60173
(708) 706-9411
3901 National Drive, Suite 210
Burtonsville, Maryland 20866
(301) 989-8500
2701 Coltsgate Road, Suite #101
Charlotte, North Carolina 28211
(704) 365-9044
7611 Little River Turnpike
Suite 502W
Annandale, Virginia 22003
(703) 941-6600
3998 Fair Ridge Drive, Suite 200
Fairfax, Virginia 22033
(703) 359-0100
54
<PAGE>
REPUBLIC AFFILIATES
CUB FUNDING CORPORATION
DIRECTORS
Douglas E. Jones
Chairman of the Board and
Chief Executive Officer
Daniel M. LuVisi
Vice Chairman and President
Jerry D. Campbell
Chairman of the Board,
President and
Chief Executive Officer
Republic Bancorp Inc.
Dana M. Cluckey
Executive Vice President
and Treasurer
Republic Bancorp Inc.
OFFICERS
Douglas E. Jones
Chairman of the Board and
Chief Executive Officer
Daniel M. LuVisi
Vice Chairman and President
Anne L. Elliott
Senior Vice President
Judy L. Smith
Vice President and Controller
Dennece Bickley
Vice President
Jackie M. Casillas
Vice President
John P. Dixon
Vice President
Scott K. Osder
Vice President
OFFICES
26565 West Agoura Road, Suite 305
Calabasas, California 91302-1958
(818) 880-4400
5345 Madison Avenue, Suite 301
Sacramento, California 95841
(916) 349-3211
100 Pacifica, Suite 340
Irvine, California 92718
(714) 753-7424
468 North Rosemead Boulevard,
No. 104
Pasadena, California 91107
(818) 351-4888
4320 Stevens Creek Blvd., Suite 165
San Jose, California 95129
(408) 261-1660
10655 NE Fourth, Suite 400
Bellevue, Washington 98004
(206) 455-3462
10260 SW Greenburg Road,
Suite 535
Portland, Oregon 97223
(503) 293-7390
55
<PAGE>
REPUBLIC BANCORP INC.
DIRECTORS
Jerry D. Campbell
Chairman of the Board,
President and
Chief Executive Officer
Dana M. Cluckey, C.P.A.
Executive Vice President,
Treasurer and
Assistant Secretary
Bruce L. Cook
President
Wolverine Sign Works
Richard J. Cramer
President
Dee Cramer, Inc.
Dr. George A. Eastman
Orthodontic Consultant
Howard J. Hulsman
Chairman
Ross Learning Inc.
Gary Hurand
President
Dawn Donut Systems, Inc.
Dennis J. Ibold
Partner
Petersen, Ibold & Wantz
Attorneys at Law
Stephen M. Klein
Chairman and
Chief Executive Officer
Omni Funding Corporation
John J. Lennon
Retired Chairman and
Chief Executive Officer
White Engines, Inc.
Sam H. McGoun
President and
Chief Executive Officer
Willis Corroon Corporation
of Michigan, Inc.
Kelly E. Miller
President
Miller Oil Corporation
Joe D. Pentecost
President
Better Properties, Inc.
George B. Smith
Chairman of the Board
Republic Bancorp Mortgage Inc.
Dr. Jeoffrey K. Stross
Professor, Internal Medicine
Associate Chief of Clinical Affairs
University Medical Center
Lyman H. Treadway
Consultant
Retired Chairman and
Chief Executive Officer
Bancapital Corporation
DIRECTOR-EMERITUS
John F. Northway
Chairman
The Owosso Company
OFFICERS
Jerry D. Campbell
Chairman of the Board,
President and
Chief Executive Officer
Dana M. Cluckey, C.P.A.
Executive Vice President,
Treasurer and
Assistant Secretary
Barry J. Eckhold
Vice President,
Chief Credit Officer and
Secretary
Richard H. Shaffner
Vice President
Thomas F. Menacher, C.P.A.
Chief Financial Officer
Timothy G. Blazejewski, C.P.A.
Controller and
Assistant Secretary
Travis D. Jones, C.P.A.
Risk Management Officer
Mary Lou Scriba
Investment Relations Manager
and Assistant Secretary
OFFICES
1070 East Main Street
P.O. Box 70
Owosso, Michigan 48867
(517) 725-7337
122 South Main Street
Ann Arbor, Michigan 48104
(313) 665-4030
56
<PAGE>
CORPORATE INFORMATION
ANNUAL MEETING
The Annual Meeting of Shareholders of Republic Bancorp Inc. will be held on
April 26, 1995 at 9:00 a.m. at the Novi Hilton, 21111 Haggerty Road, Novi,
Michigan.
ADDITIONAL SHAREHOLDER INFORMATION
Those seeking general information about the Company or a copy of the Form 10-K
filed with the Securities and Exchange Commission may contact:
Dana M. Cluckey, C.P.A.
Executive Vice President and Treasurer
P.O. Box 70
Owosso, Michigan 48867
(517) 725-7337
INDEPENDENT AUDITORS
Deloitte & Touche, LLP,
Detroit, Michigan
LEGAL COUNSEL
Dickinson, Wright, Moon, Van Dusen & Freeman
Detroit, Michigan
Miller, Canfield, Paddock and Stone
Detroit, Michigan
STOCK TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
c/o Boston Financial Data Services
P.O. Box 8204
Boston, Massachusetts 02266
(800) 257-1770
57
<PAGE>
CORPORATE INFORMATION (continued)
DIVIDEND REINVESTMENT PLAN
Republic Bancorp Inc. shareholders of record may elect to have dividends
automatically reinvested in additional shares of Republic stock through its
Dividend Reinvestment Plan (Plan). The Plan offers you the opportunity to
reinvest your quarterly cash dividends, as well as make supplemental cash
contributions toward the purchase of additional Republic Bancorp common stock.
The Plan is voluntary and there are no service charges or brokerage fees for
purchases under the Plan. We are pleased to make this Plan available to
Republic shareholders, and we invite you to participate.
Requests for additional information about this Plan, or any questions about
stock holdings should be directed to:
Mary Lou Scriba
Investor Relations Manager
P.O. Box 70
Owosso, Michigan 48867
(517) 725-7337
COMMON STOCK
The common stock of Republic Bancorp Inc. is traded on The NASDAQ Stock Market
under the symbol RBNC. The following 26 brokerage firms make a market in the
common stock of Republic Bancorp Inc.
A.G. Edwards & Sons, Inc.
St. Louis, Missouri 63103
Advest, Inc.
Hartford, Connecticut 06103
Allen & Company, Inc.
New York, New York 10022
Robert W. Baird & Co. Incorporated
Milwaukee, Wisconsin 53202
The Chicago Corporation
Chicago, Illinois 60604
Dean Witter Reynolds, Inc.
New York, New York 10048
First of Michigan Corporation
Detroit, Michigan 48226
Gerald Klauer Mattison & Co.
New York, New York 10016
Gruntal & Co. Incorporated
New York, New York 10005
Herzog, Heine, Geduld, Inc.
New York, New York 10004
Howe Barnes & Johnson, Inc.
Chicago, Illinois 60603
Keefe, Bruyette & Woods, Inc.
New York, New York 10048
Kemper Securities Group Inc.
Chicago, Illinois 60606
MacAllister Pitfield MacKay
New York, New York 10004
Mayer & Schweitzer Inc.
Jersey City, New Jersey 07302
McDonald & Company Securities, Inc.
Cleveland, Ohio 44114
Merrill Lynch, Pierce, Fenner & Smith
New York, New York 10281
Nash Weiss
Jersey City, New Jersey 07302
PaineWebber Inc.
New York, New York 10019
RFB Investments Inc.
New York, New York 10022
Roney & Co.
Detroit, Michigan 48226
Sherwood Securities Corp.
New York, New York 10285
Smith Barney Shearson, Inc.
New York, New York 10105
Stifel Nicolaus & Co., Inc.
St. Louis, Missouri 63102
Troster Singer Corp.
Jersey City, New Jersey 07302
Wertheim Schroder & Co., Inc.
New York, New York 10019
58
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
Republic Bancorp Inc.:
We consent to the incorporation by reference in Registration Statements
No. 33-55336, 33-55304, and 33-62508 on Form S-8 and 33-61842 on Form S-3,
of Republic Bancorp Inc. (Republic) of our report dated January 18, 1995
incorporated by reference in the Annual Report on Form 10-K of Republic
for the year ended December 31, 1994.
Deloitte & Touche LLP
Detroit, Michigan
March 29, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF
DECEMBER 31, 1994 AND CONSOLIDATED STATEMENT OF
INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 22,518
<INT-BEARING-DEPOSITS> 779
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 196,502
<INVESTMENTS-CARRYING> 269,701
<INVESTMENTS-MARKET> 254,996
<LOANS> 757,227
<ALLOWANCE> 5,544
<TOTAL-ASSETS> 1,363,614
<DEPOSITS> 818,742
<SHORT-TERM> 316,896
<LIABILITIES-OTHER> 43,077
<LONG-TERM> 66,379
0
0
<COMMON> 76,231
<OTHER-SE> 41,683
<TOTAL-LIABILITIES-AND-EQUITY> 1,363,614
<INTEREST-LOAN> 53,617
<INTEREST-INVEST> 24,602
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 78,219
<INTEREST-DEPOSIT> 28,261
<INTEREST-EXPENSE> 44,999
<INTEREST-INCOME-NET> 33,220
<LOAN-LOSSES> 94
<SECURITIES-GAINS> 1,392
<EXPENSE-OTHER> 85,021
<INCOME-PRETAX> 23,766
<INCOME-PRE-EXTRAORDINARY> 23,766
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,719
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
<YIELD-ACTUAL> 2.88
<LOANS-NON> 2,365
<LOANS-PAST> 139
<LOANS-TROUBLED> 1,130
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,214
<CHARGE-OFFS> 1,705
<RECOVERIES> 291
<ALLOWANCE-CLOSE> 5,544
<ALLOWANCE-DOMESTIC> 3,320
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,224
</TABLE>
Exhibit 28(f)
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") made as of September
2, 1994 by and between Mayflower Mortgage Corporation, a Michigan corporation
doing business as "REPUBLIC BANCORP MORTGAGE INC." ("Purchaser"), and HOME
FUNDING, INC., a New York corporation ("Seller").
ARTICLE 1.
DEFINITIONS AND REFERENCES
1.1. DEFINITIONS.
Certain terms are defined elsewhere in this Agreement. Unless the
context otherwise requires, for the purposes of this Agreement, the following
terms have the respective meanings ascribed in this Article. Undertakings
contained within definitions shall be regarded as covenants of the parties.
"AGENCIES" means FHLMC and FNMA.
"AGENCY APPROVALS" means the written approvals of FHLMC and FNMA to the
transfer of the servicing rights from Seller to Purchaser in connection with
Serviced Loans.
"AGREEMENT" means this Purchase and Sale Agreement by and between
Purchaser and Seller, including the Schedules and Exhibits hereto and all
amendments hereof and thereof.
"ARBITER" has the meaning set forth in Section 3.3(b) of this Agreement.
"ASSUMED AGREEMENTS" has the meaning set forth in the attached Exhibit
2.1.
"ASSUMED LEASES" has the meaning set forth in the attached Exhibit 2.1.
"ASSUMED OBLIGATIONS" has the meaning set forth in Section 2.3(a).
"BRIDGE NOTE" means that certain revolving promissory note dated July 22,
1994 and having a stated principal balance of $300,000 made by Seller and
payable to the order of Purchaser. Neither the Bridge Note nor any term or
provision of the Bridge Note shall obligate Purchaser to consummate the
transactions contemplated by this Agreement.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which banks in Detroit, Michigan are authorized or obligated by law to be
closed.
<PAGE>
"CLOSING" has the meaning set forth in Section 2.4(a) of this Agreement.
"CLOSING DATE" has the meaning set forth in Section 2.4(a) of this
Agreement.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CUSTODIAL ACCOUNT FUNDS" means the aggregate of all funds held by Seller
in the Custodial Accounts, including any Mortgage Escrow Funds.
"CUSTODIAL ACCOUNTS" means, with respect to any Serviced Loan, all P&I
accounts and T&I accounts maintained in connection with such Serviced Loan
(including any buy-down accounts, suspense accounts, lost drafts accounts and
unapplied funds accounts), together with such other trust or escrow accounts
as may be required by the applicable Servicing Agreement or Investor.
"DOLLAR" OR "$" means the coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public
and private debts.
"EMPLOYEE PLANS" has the meaning set forth in Section 4.12(a) of this
Agreement.
"EMPLOYMENT LOSS" has the meaning set forth in Section 4.12(f) of this
Agreement.
"ENVIRONMENTAL LAW" has the meaning set forth in Section 4.11 of this
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EMPLOYMENT AGREEMENTS" means employment agreements between Purchaser, on
the one hand, and each of Joseph A. Cilento and Kathleen Quinn, on the other
hand. Each of said employment agreements shall be in form and substance
acceptable to each of the parties thereto.
"EXCLUDED ASSETS" has the meaning set forth in Section 2.2 of this
Agreement.
"FHA" means the Federal Home Administration.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"FIXED ASSETS" has the meaning set forth in the attached Exhibit 2.1.
-2-
<PAGE>
"FNMA" means the Federal National Mortgage Association.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"INVESTMENT LOANS" means those Mortgage Loans owned and retained by
Seller which are not saleable in the usual and ordinary course of business of
Seller consistent with its past practices.
"INVESTOR" means a Private Investor or an Agency.
"LOAN FILES" means all loan documentation, loan applications, credit and
closing packages, custodial documents, escrow documents, and other documents
(including, without limitation, records on computer tape or disk, microfilm,
microfiche, or the equivalent) in the possession of Seller and relating to the
Serviced Loans or necessary for the prudent servicing of a Serviced Loan, in
each case as required by any Investor or PMI and their guidelines,
requirements, procedures, rules and regulations.
"MORTGAGE" means a mortgage, deed or trust, security deed, trust deed or
other real estate security instrument securing a promissory note and creating
a lien on the real estate securing the note, which instrument is customarily
used for such purpose in the jurisdiction where the real estate is located.
"MORTGAGE ESCROW FUNDS" means, with respect to any Serviced Loan, the
amounts constituting T&I.
"MORTGAGE LOANS" means mortgage loans evidenced by a Mortgage Note and
secured by a Mortgage on a one- to four-family residence.
"MORTGAGE NOTE" means the written promise to pay a sum of money to a
stated interest rate during a specified term.
"MORTGAGE ORIGINATION NETWORK" has the meaning set forth in
the attached Exhibit 2.1.
"NET WORTH" shall mean the net worth of the entity referred to in
accordance with generally accepted accounting principles consistently applied.
"P&I" means principal and interest paid in account of a Mortgage Loan.
"PIPELINE" means, with respect to any date of determination, all rights
and obligations with respect to the applications for Mortgage Loans that are
listed on the attached Exhibit 1.1 as then amended. Purchaser and Seller each
covenant and agree that at the close of business on each Monday following the
date of this Agreement, commencing with the first Monday following the date of
this Agreement, and at the close of business on the Closing Date,
-3-
<PAGE>
Purchaser and Seller shall amend Exhibit 1.1 so as to (i) add thereto all
applications for Mortgage Loans previously listed on Exhibit 1.1, and (ii)
remove therefrom all applications for Mortgage Loans listed thereon that have
been funded, terminated or abandoned prior to or on the date of such
amendment.
"PIPELINE ADJUSTMENT" has the meaning set forth in Section 3.3 of this
Agreement.
"PIPELINE COMMITMENTS" has the meaning set forth in Section 3.3 of this
Agreement.
"PIPELINE LOANS" means all Mortgage Loans originated pursuant to the
Pipeline from and after the Closing Date.
"PMI" means a primary private mortgage guaranty insurance policy or a
private mortgage guaranty insurer, as the context may require.
"PREPAID EXPENSES" has the meaning set forth in the attached Exhibit 2.1.
"PRIVATE INVESTOR" means an owner or holder of Mortgage Loans, other than
the Agencies, which is a party to a Servicing Agreement with Seller relating
to such Mortgage Loans.
"PRIVATE INVESTOR CONSENT" means the written consent of a Private
Investor to the transfer by Seller to Purchaser of the servicing rights to
Mortgage Loans owned or held by that Private Investor, which consent does not
reduce or limit the rights or compensation of the servicer under the
applicable Service Agreement.
"PURCHASE COMMITMENTS" means the commitment by Investors to acquire
Mortgage Loans.
"PURCHASE PRICE" has the meaning set forth in Section 3.1 of this
Agreement.
"PURCHASED ASSETS" has the meaning set forth in Section 2.1 of this
Agreement.
"PURCHASER FINANCIAL STATEMENTS" has the meaning set forth in Section 5.5
of this Agreement.
"REO PROPERTY" means real estate property obtained by Seller in its name
or on behalf of Investors in connection with foreclosure proceedings or deed
in lieu of foreclosure proceedings on certain Mortgage Loans.
"REPUBLIC MORTGAGE BANKING OPERATION" means the mortgage banking
activities and operations (which activities and operations are expected to
include originating, producing, selling, marketing and servicing residential
mortgage loans on one- to four-family
-4-
<PAGE>
residences) conducted by or on behalf of Purchaser in the States of New York,
Connecticut and Massachusetts (i) by Seller using the Purchased Assets up to
the Closing Date and (ii) by all or some of the Retained Employees using the
Purchased Assets as a division of Purchaser, following the Closing Date.
Seller (x) understands that Purchaser has other mortgage banking activities
and operations (which activities and operations include originating,
producing, selling, marketing and servicing residential mortgage loans on one-
to four-family residences) in addition to those to be conducted by all or some
of the Retained Employees using the Purchased Assets and (y) agrees that such
other mortgage banking activities and operations shall neither be a part of
nor be deemed a part of the Republic Mortgage Banking Operation for purposes
of this Agreement, notwithstanding the fact that such may be operated in the
States of New York, Connecticut and Massachusetts.
"RETAINED EMPLOYEES" has the meaning set forth in Section 6.4(a) of this
Agreement.
"RETAINED OBLIGATIONS" has the meaning set forth in Section 2.3(b) of
this Agreement.
"SELLER FINANCIAL STATEMENTS" means the financial statements of Seller
described in Section 4.4(a) of this Agreement.
"SERVICED LOANS" means the Mortgage Loans which are subject to a
Servicing Agreement and the Warehouse Loans.
"SERVICING AGREEMENT" means an (i) agreement between Seller and an
Investor under which Seller services Mortgage Loans, and (ii) any agreement
pursuant to which Seller subservices Mortgage Loans.
"T&I" means all (i) escrows, impounds and custodial payments deposited
pursuant to a Mortgage Loan for (A) payment of real estate or other taxes,
hazard, floor or other insurance premiums, ground rents and assessments, (B)
insured loss payments, and (C) monies held in connection with "buy-down" loans
and (ii) any other payments required to be escrowed by the related mortgagor
with the mortgagee pursuant to the related Mortgage or any other related
document.
"THRESHOLD AMOUNT" means $182,000 from and after June 1, 1994 to the
Closing Date.
1.2. REFERENCES.
(a) Words used herein denoting the singular include the plural and
vice versa, and pronouns of whatever gender will be deemed to include and
designate and masculine, feminine or neuter gender. When used herein, unless
the context otherwise clearly requires, the words "or" and "including" will
not be construed to be a limitation or exclusive but will be construed to be
inclusive.
-5-
<PAGE>
(b) Unless the context otherwise requires, references to Article,
Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and
Schedules of or to this Agreement. Article and Section headings are for ease
of reference only and will not affect the construction of this Agreement.
(c) All references herein to any agreement or other instrument will
be deemed to be references to such agreement or other instrument as amended
from time to time.
ARTICLE 2.
PURCHASE AND SALE OF PURCHASED ASSETS;
ASSUMPTION OF OBLIGATIONS; CLOSING
2.1. PURCHASE AND SALE OF PURCHASED ASSETS. Upon the terms and subject to
the conditions hereof and in reliance upon the agreements, representations and
warranties contained herein, at the Closing, Seller will sell, assign,
transfer, convey and deliver to Purchaser, and Purchaser will purchase,
acquire and accept from Seller, all right, title, interest and benefit in and
to each asset, and all of the assets of Seller (including, without limitation,
each asset, and all of the assets, of Seller described on the attached Exhibit
2.1) existing as of the Closing Date other than the Excluded Assets (the
"Purchased Assets").
Notwithstanding the foregoing, nothing contained in this Agreement will
be construed as an attempt to assign any Servicing Agreement, contract or
other instrument which is not assignable without the consent of the other
party or parties thereto until such consent is given; provided, however, that
in the event that the requisite Agency Approval or Private Investor Consent to
the transfer of any Servicing Agreement is not received as of the Closing
Date, Purchaser will subservice the Mortgage Loans subject to such Servicing
Agreement on behalf of Seller, at Purchaser's expense, and will be entitled to
all benefits and all servicing compensation payable thereunder to Seller, and
(ii) that if and when such requisite consent is obtained, all Seller's right,
title, interest and benefit in and to such Servicing Agreement, the related
Loan Files and all other related rights and benefits will be deemed to have
been automatically transferred and assigned to Purchaser in the same manner as
if sold and assigned on the Closing Date.
2.2. EXCLUDED ASSETS. The assets of Seller described on the attached
Exhibit 2.2 (the "Excluded Assets") are not included in the Purchased Assets,
are not being purchased by or sold to Purchaser, and will be retained by
Seller.
-6-
<PAGE>
2.3. ASSUMPTION OF OBLIGATIONS.
(A) ASSUMED OBLIGATIONS. In consideration of the sale, conveyance,
transfer and delivery of the Purchased Assets, and upon the terms and subject
to the conditions of this Agreement, Purchaser hereby agrees to pay, perform
and discharge when due, and fully assume, effective as of the Closing Date,
(i) the liabilities, responsibilities and obligations of Seller accruing and
relating to periods, events and circumstances after the Closing Date
pertaining to any Purchased Asset, including the Assumed Leases and the
Assumed Agreements, and (ii) the liabilities, responsibilities, obligations,
claims and debts described on the attached Exhibit 2.3 (collectively, the
"Assumed Obligations").
(B) RETAINED OBLIGATIONS. All obligations, responsi- bilities and
liabilities of Seller which are not specifically assumed by Purchaser pursuant
to Section 2.3(a) will not be included in the Assumed Obligations but will be
retained by Seller (the "Retained Obligations").
2.4. PROCEDURES FOR CLOSING.
(A) TIME OF CLOSING. The consummation of the purchase and sale
contemplated by this Agreement (the "Closing") will take place at the offices
of Golenbock, Eiseman, Assor & Bell located at 437 Madison Avenue, New York,
New York, at 10:00 a.m. New York time, on the first Business Day after the
conditions specified in Article 7 have been fulfilled, or at such other place,
time or date as Purchaser and Seller mutually agree (the "Closing Date").
(B) DELIVERIES.
(i) At the Closing, Seller will deliver to Purchaser:
(A) bills of sale, deeds, assignments and other documents, in
such form as Purchaser may reasonably request, necessary to convey to Purchaser
such title to the Purchased Assets as is warranted by Seller herein;
(B) a certificate in the form of the attached
Exhibit 2.4(b)(i)(B) dated the Closing Date and executed by the President and
Assistant Secretary of Seller;
(C) certified copies of resolutions of the Board of
Directors of Seller and, if necessary, shareholders authorizing Seller to
execute and perform this Agreement;
(D) the sum to be transferred and delivered to Purchaser as
provided in Section 2.4(c) of this Agreement;
(E) all books and records pertaining to the Purchased Assets;
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(F) estoppel letters in the form of Exhibit 2.4(b)(i)(F)
dated the Closing Date and executed by authorized agents of each of the persons
and entities identified as lessors or sublessors in the leases in the attached
Schedule 4.2;
(G) the amendments to the attached Exhibit 1.1 contemplated
by this Agreement executed by the President and Assistant Secretary of Seller;
and
(H) custody of the Loan Files, which will contain copies
(on paper, microfilm or microfiche) of all documents reasonably necessary to
service the Serviced Loans in accordance with the Servicing Agreements and
accepted mortgage banking industry standards;
(I) copies of the Agency Approvals and, to the extent
obtained by Seller, the Private Investor Consents relating to the Servicing
Agreements assigned hereunder;
(J) a consent, executed by two officers of Seller,
authorizing Purchaser to use Seller's name ("Home Funding, Inc."); and
(K) all such other documents, instruments and papers as are
appropriate for the consummation of the transactions contemplated by this
Agreement and as Purchaser may reasonably request.
(ii) At the Closing, Purchaser will deliver to Seller:
(A) instruments of assumption, in such form as Seller may
reasonably request, with respect to the Assumed Obligations;
(B) a certificate in the form of the attached
Exhibit 2.4(b)(ii)(B) dated the Closing Date and executed by the President and
an Assistant Secretary of Purchaser;
(C) the consideration payable at Closing by Purchaser in
the manner provided in Section 3.2;
(D) the amendments to the attached Exhibit 1.1 contemplated
by this Agreement executed by the President and an Assistant Secretary of
Seller; and
(E) all such other documents, instruments and papers as are
appropriate for the consummation of the transactions contemplated by this
Agreement and as Seller may reasonably request.
(C) CUSTODIAL ACCOUNTS. At the Closing, Purchaser shall be entitled
to, and Seller shall deliver to Purchaser by wire transfer of immediately
available funds, an amount equal to the
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Custodial Account Funds or otherwise transfer fully and completely custody of
the Custodial Account Funds. After the date the Custodial Account Funds are
delivered to Purchaser, Purchaser shall (i) be liable for any interest on the
Mortgage Escrow Funds included in such Custodial Account Funds that is payable
to the payors of such Mortgage Escrow Funds, and (ii) pay such interest, and
hold such Mortgage Escrow Funds, in accordance with applicable law and
agreements pertaining thereto.
ARTICLE 3.
CALCULATION AND PAYMENT OF PURCHASE PRICE
3.1. CALCULATION OF PURCHASE PRICE. Subject to the adjustments
contemplated by Section 3.4 of this Agreement, the purchase price for the
Purchased Assets will equal the sum of the amounts specified in subparagraphs
(a) and (b) of this Section 3.1 (the "Purchase Price").
(a) $2,500,000, (i) less an amount equal to the principal balance,
if any, on the Closing Date of Seller's deposit with NatWest Bank, provided
such deposit balance is retained by Seller as an Excluded Asset and appears on
the attached Exhibit 2.2 as such or as amended to so provide; (ii) less a sum
equal to the aggregate purchase price amount which Republic Bancorp Mortgage
Inc. has paid and is paying to Home Funding, Inc. under an agreement dated
July 22, 1994 relating to the purchase by Republic Bancorp Mortgage Inc. of
mortgage servicing rights from Home Funding, Inc. provided such purchase price
amount is retained by Seller as an Excluded Asset and appears on the attached
Exhibit 2.2 as such or as amended to so provide; (iii) plus an amount which is
the difference between $300,000 and the balance owing on the Bridge Note on
the Closing Date, provided such reduction on the balance owing on the Closing
Date results from, and solely from, Purchaser's set-off of monies which
Purchaser owes Seller under the Service Purchase Contract described in Section
7.1 of this Agreement; and (iv) plus or minus an amount equal to the Pipeline
Adjustment.
(b) The amount, if any, payable to Seller regarding earn-out
pursuant to the attached Exhibit 3.1(b).
3.2. PAYMENT OF PURCHASE PRICE. The Purchase Price will be payable as
follows:
(a) An amount in Dollars equal to the sum payable pursuant to
Section 3.1(a) of this Agreement shall be paid by Purchaser to Seller at the
Closing by wire transfer of immediately available funds.
(b) An amount in Dollars equal to the amount, if any, payable by
Purchaser to Seller pursuant to Section 3.1(b) of this Agreement shall be paid
to Seller by wire transfer of immediately
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available funds at the time provided in the attached
Exhibit 3.1(b).
3.3. PIPELINE ADJUSTMENT. (a) As soon as practicable but in any event
within five Business Days after the Closing Date, Purchaser and Seller will
use commercially reasonable efforts to determine and agree (i) which mortgage
loan purchase commitments existing as of the Closing Date, and providing for
the sale of mortgage loans by Seller to investors, relate to the Pipeline (the
"Pipeline Commitments"), and (ii) based upon the Pipeline, the Pipeline
Commitments, prevailing interest rates and the market for mortgage loans, all
as of the Closing Date (the "Pipeline Loans"), in the ordinary course of
business consistent with Seller's past practices and pursuant to the Pipeline
Commitments to the extent applicable, would be expected to result in an
aggregate sale price (net of any adjustment for accrued interest) greater or
less than the principal amount of the Pipeline Loans outstanding at the time
of sale and, if so, the amount of such excess or deficiency (the "Pipeline
Adjustment"). If the Pipeline Adjustment reflects an excess, the Pipeline
Adjustment will be a positive number. If the Pipeline Adjustment reflects a
deficiency, the Pipeline Adjustment will be a negative number.
(b) If Purchaser and Seller are unable to agree upon the Pipeline
Commitments and the amount of the Pipeline Adjustment within such five
Business Days, Purchaser will request Ernst & Young or, if Ernst & Young is
unable or declines such request, then such other independent accounting or
other firm as is determined by Seller with the consent of Purchaser, which
consent will not be unreasonably withheld (the firm so selected being
hereinafter referred to as the "Arbiter"), to determine all items in dispute
and to deliver to Purchaser and Seller as soon as practical a report setting
forth the resolution of such items in dispute and setting forth the Pipeline
Commitments and the amount of the Pipeline Adjustment. Purchaser and Seller
will each use commercially reasonable efforts to cause the Arbiter to so
deliver such report within 15 Business Days after employment of the Arbiter.
In resolving such disputes the Arbiter will employ such procedures as it, in
its sole discretion, deems necessary or appropriate in the circumstances. Upon
receipt by Purchaser and Seller of such report of the Arbiter the Pipeline
Commitments and the amount of the Pipeline Adjustment as set forth therein
will be deemed to be finally determined for purposes of this Agreement.
(c) Seller will pay such portion of the fees and expenses of the
Arbiter as is equal to the amount, in Dollars, derived from the formula that
follows:
A = (F) x (1 - (R/D))
where A = the portion of the fees and expenses of
the Arbiter to be paid by Seller;
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F = the aggregate amount, in Dollars, of the
fees and expenses of the Arbiter;
R = the aggregate amount, in Dollars, of all
disputed items resolved in favor of
Seller; and
D = the aggregate amount, in Dollars, of all disputed
items.
If R is equal to or less than zero, then the quotient of (R/D) shall be deemed
to be zero.
The balance of the fees and expenses of the Arbiter will be paid by Purchaser.
(d) Notwithstanding anything to the contrary in this Agreement,
Seller and Purchaser agree to the treatment of certain fees and expenses as
follows: (i) "application fees" paid or payable by a borrower in respect of a
Pipeline Loan prior to its funding (i.e., limited to those fees intended to
compensate a lender for expenses in reviewing and approving a Mortgage Loan
application) will be deemed earned at the time an application for such
Pipeline Loan is accepted; (ii) all other fees paid or payable by a borrower
in respect of a Pipeline Loan subject to this Agreement at anytime through the
initial funding of such Pipeline Loan, whether referred to as "origination
fees," "commitment fees" or otherwise, will be deemed earned at the time such
Pipeline Loan is funded; and (iii) servicing fees, late charges and all other
fees and expenses in respect of a Pipeline Loan paid or payable at any time
after the initial funding will be deemed earned only when and if collected,
except that Seller will be entitled to receive from Purchaser all advances
made by Seller prior to the Closing Date on Serviced Loans which advances are
collected by Purchaser to the extent not otherwise reimbursed to Seller.
Seller, on the one hand, and Purchaser, on the other hand, each agree that
should either of them receive or collect any fees, charges or expenses in
respect of a Pipeline Loan or Serviced Loan which, pursuant to the foregoing
provisions, are deemed earned at a time the other held title to such loan, or
the servicing rights thereto, it shall immediately remit the amount owing to
the other. Subject to the foregoing, (x) for any Serviced Loan subject to this
Agreement that is funded on or prior to the Closing Date, Seller will be
responsible for paying or causing to be paid all costs, expenses and fees
relating thereto, including all costs and expenses for recording the related
Mortgage or of appraisals, surveys, title and mortgage insurance premiums and
all salaries, bonuses and commissions to brokers and originators; and (y) for
any Pipeline Loan subject to this Agreement that is funded after the Closing
Date, Purchaser will be responsible for paying or causing to be paid all such
costs, expenses and fees relating thereto, except for credit report and
appraisal fees for which Seller has previously collected money (for which
exceptions Seller will be responsible).
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3.4. ALLOCATION OF PURCHASE PRICE. The Purchase Price will be allocated
among the Purchased Assets pursuant to Section 1060 of the Code in accordance
with Exhibit 3.4 hereto. Seller and Purchaser agree to report the sale of the
Purchased Assets to Purchaser for federal income tax purposes on Form 8594 in
substantially the manner reflected on said Exhibit 3.4, subject only to any
adjustments to the Purchase Price contemplated by this Article 3, and to file
all other applicable tax returns and forms to reflect such allocation of the
Purchase Price. At the time of execution of this Agreement said Exhibit 3.4
was not completed. Purchaser and Seller agree to complete said Exhibit 3.4 on
or before the Closing Date and to amend this Agreement so as to include said
Exhibit 3.4 as so completed.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows, as of the date of
this Agreement and as of the Cut-off Date:
4.1. ORGANIZATION AND QUALIFICATION OF SELLER. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York. Except as set forth in the attached Schedule 4.1, Seller is
duly qualified and authorized, and has obtained all necessary approvals or
exemptions, to do business in those states where the nature of the activities
conducted by Seller or the character of the properties owned, leased or
operated by Seller require such qualification and where failure so to qualify
would individually or in the aggregate have a material adverse effect on the
business, operations, assets or financial condition of Seller. The copies of
the articles of incorporation and by-laws of Seller which have been previously
delivered to Purchaser (designated for purposes of this Agreement as a part of
Schedule 4.1) are true and complete.
4.2. AUTHORITY RELATIVE TO AGREEMENT. Seller has all requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Except as set forth in the attached Schedule 4.2, the
execution and delivery of this Agreement by Seller and the consummation by it
of the transactions contemplated hereby (a) have been duly authorized by all
necessary corporate action, (b) do not otherwise require the consent, waiver,
approval, license or authorization of, or filing or registration with or
notification to, any person, entity or Governmental Authority (other than
those which have been made or obtained), (c) do not violate any provision of
law applicable to Seller, or the articles of association or by-laws of Seller,
and (d) do not, with or without the giving of notice or the passage of time,
conflict with or result in a breach or termination of any provision of, or
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any of the Purchased Assets of Seller pursuant to, any
mortgage, deed of
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trust, indenture or other material agreement or instrument, or any law or
other restriction of any kind or character, to which Seller is a party or by
which Seller or any of the Purchased Assets may be bound. This Agreement has
been duly executed and delivered by Seller and is a valid and binding
obligation of Seller.
4.3. PURCHASED ASSETS. Except for those Purchased Assets leased by Seller
and except as set forth in the attached Schedule 4.3, Seller has good and
marketable title to the Purchased Assets free of liens of any kind or
character, except as provided below (other than the Custodial Accounts and
Loan Files), is custodian of the Custodial Accounts and Loan Files, has the
sole right and authority to transfer the Purchased Assets as contemplated
hereby, and is not contractually obligated to sell the Purchased Assets to any
other party. Except as set forth in the attached Schedule 4.3, the transfer,
assignment and delivery of the Purchased Assets in accordance with the terms
and conditions of this Agreement will vest in Purchaser the right, title and
interest in and to the Purchased Assets, free and clear of any and all claims,
charges, defenses, offsets and encumbrances of any kind or nature excepting,
however, those Permitted Liens as set forth in the attached Schedule 4.3
entitled "Permitted Liens". With respect to all Assumed Leases and Assumed
Agreements, (a) Seller has complied in all material respects with and, to the
best knowledge of Seller after due inquiry, there is no material default under
any such lease or agreement, (b) such leases and agreements are in full force
and effect and are valid and binding obligations of the parties thereto, and
(c) upon the Closing Date, Seller shall have paid, performed and satisfied all
its material obligations under such leases and agreements to have been paid
performed or satisfied on or before such date. Each application for a Mortgage
Loan listed on the attached Exhibit 1.1 is for a Mortgage Loan which upon
origination would be saleable to an Investor in the usual and ordinary course
of business of Seller consistent with its past practices.
4.4. FINANCIAL STATEMENTS. The balance sheets of Seller as of December
31, 1993, 1992 and 1991 and the related statements of operations,
stockholder's equity and cash flows for the years then ended, including the
notes thereto, audited by independent certified public accountants as
reflected therein (collectively, the "Seller Financial Statements"), true and
complete copies of such financial statements having been previously delivered
to Purchaser (designated for purposes of this Agreement as Schedule
4.4(a)(i)), present fairly, in all material respects, the financial position
of Seller at December 31, 1993, 1992 and 1991 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles (except as otherwise reported in the
notes thereto). The unaudited balance sheets of Seller as of the end of each
calendar month beginning January, 1994 and ending on the Closing Date and the
related unaudited monthly operating statements of Seller for the calendar
months beginning January, 1994 and ending on the Closing Date, true and
complete copies of all such unaudited
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financial statements having been previously delivered to Purchaser or to be
delivered to Purchaser (designated for purposes of this Agreement as Schedule
4.4(a)(ii)), present fairly, in all material respects, the financial position
of Seller at the dates of such statements and the results of its operations
for such monthly periods.
4.5. ABSENCE OF CERTAIN CHANGES. Except as set forth in the attached
Schedule 4.5 or as otherwise contemplated by this Agreement, since December
31, 1993 (a) Seller has conducted its business only in the ordinary and usual
course consistent with past practices and (b) there has not been any material
adverse change in the condition (financial or otherwise), results of
operations, assets, properties, business or operations of Seller or the
Purchased Assets except those changes which relate to the mortgage banking
industry generally.
4.6. PERMITS, AUTHORIZATIONS, ETC. Seller possesses, and is current and
in good standing under, all approvals, authorizations, consents, licenses,
orders and other permits of FNMA, FHLMC, and all other Governmental
Authorities required to permit the operation of the business of Seller as
presently conducted, except approvals, authorizations, consents, licenses,
orders and other permits which are set forth in the attached Schedule 4.6 or
the failure of which to possess would not have a material adverse effect on
Seller or the Purchased Assets.
4.7. COMPLIANCE WITH APPLICABLE LAW. Seller is, in the conduct of its
business, in material compliance with all laws, statutes, ordinances and
regulations applicable to it, the enforcement of which, if the Seller were not
in material compliance, would have a material adverse effect on Seller or the
Purchased Assets.
4.8. LITIGATION. Except as set forth in the attached Schedule 4.8, there
is no action, suit, arbitration or other proceeding pending or, to the best
knowledge of Seller, threatened against Seller that would individually or in
the aggregate, if decided adversely to Seller, have a material adverse effect
on Seller or the Purchased Assets or that seeks to prevent or impair the
consummation of the transactions contemplated hereby.
4.9. BROKERS AND FINDERS. Seller has engaged Capital Research Partners in
connection with the transactions contemplated by this Agreement and has agreed
to pay that firm's fees for its services. Except for said engagement, Seller
has not employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted directly or indirectly for Seller, in connection
with this Agreement or the transactions contemplated hereby.
4.10. ENVIRONMENTAL MATTERS. Seller has not taken any action with respect
to the property subject to the Assumed Leases, the
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Pipeline, other real estate owned, or the Serviced Loans (the "subject
property") which would be a violation in any material respect of any
Environmental Law applicable to the subject property. Seller does not have any
knowledge (although no specific program of inquiry has been undertaken) of any
non-compliance with or violation of any Environmental Law affecting any of the
subject property. For purposes of this Agreement, the term "Environmental Law"
means and includes, without limitation, any and all laws, statutes,
ordinances, rules, regulations, orders or determinations of any governmental
authority now or hereafter existing pertaining to health or to the
environment, and relating to such properties, including the Clean Air Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), the Federal Water Pollution Control Act
Amendments, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Hazardous Materials Transportation Act of 1975, as amended, the Safe Drinking
Water Act, as amended, and the Toxic Substances Control Act, as amended.
4.11. EMPLOYEES. (a) Attached to this Agreement as Schedule 4.11 is a
true and complete list of (i) all effective written employment agreements with
current employees of Seller, (ii) all union or collective bargaining
agreements covering employees of Seller, (iii) each employee bonus,
retirement, pension, profit-sharing, stock option, stock appreciation, stock
purchase, incentive, deferred compensation, hospitalization, medical, dental,
vision, life and other health and disability (whether provided by insurance or
otherwise), severance, termination, vacation, sick leave and any other plan,
program, policy or payroll practice providing employee benefits, in each
instance maintained by Seller or to which Seller contributes and under which
any person presently employed by Seller participates ("Employee Plans"), and
(iv) all current employees of Seller, together with the title or job
classification of each such employee, the employee's date of hire and the
employee's current annual rate of base salary or wages.
(b) Except as set forth in the attached Schedule 4.11: (i) there is
no unfair labor practice complaint against Seller pending before the National
Labor Relations Board; (ii) there is no labor strike, slowdown or stoppage
actually pending or, to Seller's knowledge, threatened against Seller; (iii)
no representation petition respecting the employees of Seller has been filed
with the National Labor Relations Board to Seller's knowledge; (iv) Seller has
not experienced any primary work stoppage or any attempt to unionize involving
its employees; (v) no labor union represents or, to Seller's knowledge,
purports to represent the employees or any employee of Seller; (vi) Seller is
in substantial compliance with all laws and governmental regulations relating
to the employment of labor, including any provisions thereof relating to
wages, hours and the payment of employment taxes; and (vii) there are no
complaints by or on behalf of current or former employees of Seller or a class
of current or former employees of Seller pending before
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any federal, state, or local government agency, and there are no suits pending
or, to Seller's best knowledge, threatened, by current or former employees of
Seller, which complaints or suits allege nonpayment of wages or benefits or
discrimination or wrongful termination of employment on account of sex, race,
age, color, national origin, handicap, marital status, height or weight.
(c) Seller is not now, nor has it ever been, a party to, or
obligated to contribute to, (i) a multi-employer plan as defined in Section
3(37) or Section 4001(a)(3) of ERISA, or (ii) a multiple employer plan covered
under Section 413(C) of the Code. The sale contemplated by this Agreement
shall not cause Seller or any affiliate of Seller to have any withdrawal
liability (either as a contributory employer or as a member of a controlled
group which includes a contributing employer) to any multiemployer plan or to
any multiple employer plan.
(d) There has been no failure to comply with the health care
coverage continuation requirements of Section 4980B of the Code and Sections
601 through 608 of ERISA by Seller that has resulted in or could result in the
imposition on Seller of a material liability, penalties or sanctions.
(e) No retiree welfare benefits are currently payable, or will be
payable, to any employee under any employee welfare benefit plan, as defined
in Section 3(1) of ERISA, maintained by Seller.
(f) If any employee of Seller suffers or may be deemed to have
suffered an "employment loss," as defined in 29 U.S.C. Section 2101(a)(6)
("Employment Loss") as a result of the transactions contemplated by this
Agreement, or if Purchaser takes any action after the Closing Date which
independently or in conjunction with any Employment Loss occurring within the
90 day period prior to the Closing Date could be construed as a "plant
closing" or "mass layoff," as those terms are defined in the Worker Adjustment
and Retraining Notification Act, 29 U.S.C. Section 2101- 2109, Seller will be
solely responsible for providing any notices required by said Act and for
making payments, if any, and paying all penalties and costs which may result
from any failure to provide such notice.
4.12. SERVICED LOANS. Attached to this Agreement as Schedule 4.12 is a
true and complete list of each Investor with whom Seller has a Servicing
Agreement, listing, for each Investor, its name and the aggregate principal
amount and number of Serviced Loans subject to such Servicing Agreement.
4.13. ORIGINATION COMPLIANCE. Except as set forth in the attached
Schedule 4.13, each Serviced Loan has been properly originated and funded, and
each application included in the Pipeline was taken, in accordance with all
applicable laws, rules and regulations and applicable guidelines, procedures,
rules and regulations of PMI, FNMA, FHLMC, other Investors or state banking
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authorities, as applicable, except for any defects that are capable of being
corrected at a cost or expense not to exceed in the aggregate $10,000. Except
as set forth in the attached Schedule 4.13, each Serviced Loan (a) is
evidenced by an enforceable Mortgage Note and is subject to no defense, offset
or counterclaim, (b) complies with all applicable requirements and regulations
of any governmental or regulatory official, body or authority and the
procedures, guidelines, rules, regulations and requirements of FNMA, FHLMC and
any applicable PMI, and (c) is secured by a duly recorded and enforceable
first Mortgage duly recorded where recordation is necessary to establish the
priority thereof, except for any defects that are capable of being corrected
at a cost or expense not to exceed in the aggregate $10,000. The full original
principal amount of each Serviced Loan has been advanced to the mortgagor.
4.14. OWNERSHIP OF SERVICING RIGHTS. Except as set forth in the attached
Schedule 4.14, Seller owns the entire right, title and interest in and to the
servicing of each Serviced Loan and the sole right to service such Serviced
Loans, free and clear of all liens, security interests, pledges, adverse
claims or charges.
4.15. SERVICING. All information in each Loan File is complete and
accurate in all material respects, and all monies received with respect to
each Serviced Loan have been properly accounted for and applied. Except as set
forth in the attached Schedule 4.15, Seller has not received notice of
servicing improprieties with respect to Serviced Loans any of which
individually or in the aggregate are material and each Serviced Loan serviced
by Seller has been serviced and accounted for in accordance with standard
industry practices and in accordance with applicable Investor requirements. To
the extent that applicable law in any jurisdiction or FNMA, FHLMC or PMI
requires the payment of interest on Mortgage Escrow Funds by Seller with
respect to any particular Serviced Loan, all such interest has been properly
paid to the extent so required to have been paid. Prior to the Closing, Seller
will have conducted an escrow analysis (a) for each fixed rate Serviced Loan
within the twelve month period, and (b) for each adjustable rate Serviced Loan
within the eighteen month period, immediately preceding the Closing Date and
the Loan Files will have been adjusted to reflect the results of such escrow
analysis. Prior to the Closing, Seller will have timely delivered notification
to the mortgagor under each Serviced Loan of any payment adjustments resulting
from such escrow analysis. Prior to the Closing, Seller will have completed an
audit of all Serviced Loans with adjustable rates, and such Serviced Loans
will have been adjusted to reflect the results of such audit. All amounts
payable in respect of a Mortgage Note, Mortgage or the property covered by a
Serviced Loan which Seller is responsible for paying, directly or on behalf of
a mortgagor, have been paid when due and payable. The files delivered to the
document custodian with respect to each Serviced Loan will contain upon the
Closing Date all items required by applicable FNMA or FHLMC and other
Investors guidelines, procedures, requirements and regulations to be in
material
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compliance with same. All pools of Mortgage Loans formed by Seller are in
compliance with all applicable investor requirements, procedures, rules,
regulations and guidelines. The principal balances outstanding and owing on
the Serviced Loans in each such pool equal or exceed the amounts owing to the
security holders of each such pool. Except as set forth in the attached
Schedule 4.15, the servicing on all Serviced Loans are non-recourse to Seller.
4.16. VALIDITY OF SERVICING AGREEMENTS. Each of the Servicing Agreements
is valid, binding and enforceable. Seller has no knowledge or notice of any
material default by other parties under any Servicing Agreement. No material
default of Seller exists under any Servicing Agreement, including any default
arising with notice or lapse of time.
4.17. CASUALTY INSURANCE. With respect to Serviced Loans, there are no
material uninsured casualty losses to the mortgaged premises and no casualty
losses to the mortgaged premises where coinsurance has been, or Seller has
reason to believe will be, claimed by the insurance company or where the loss,
exclusive of contents, is greater than the net recovery from the insurance
carrier. No casualty insurance proceeds administered by Seller have been used
to reduce Serviced Loan balances or for any other purposes except to make
repairs to mortgaged premises. All damage with respect to which casualty
insurance proceeds have been received by or through Seller has been repaired
or is in the process of being repaired to the extent of such proceeds. With
respect to Serviced loans, Seller has no knowledge of material damage to the
mortgaged property from fire, windstorm, other casualty or any other
circumstances or conditions that would cause any Mortgage to become delinquent
or adversely affect the value or marketability of any Mortgage. Seller has not
received notice that any property subject to a Serviced Loan has been or will
be condemned.
4.18. COMPLIANCE WITH MORTGAGE LAWS. Except as set forth in the attached
Schedule 4.18, each Serviced Loan was made in compliance with all laws, rules
and regulations pertaining thereto, including all applicable federal or state
laws, rules or regulations governing consumer credit and truth-in-lending.
Deviations from the foregoing which are not material are excepted. Each
Serviced Loan meets or is exempt from applicable state or federal laws,
regulations and other requirements pertaining to usury and no Serviced Loan is
usurious.
4.19. HAZARD INSURANCE. There is in force with respect to each property
securing a Serviced Loan a hazard insurance policy that complies with
applicable Investor requirements. If required by the Flood Disaster Protection
Act of 1973, each such property is covered by a flood insurance policy in an
amount not less than the lesser of (a) the outstanding principal balance of
the applicable Serviced Loan and (b) the maximum amount of insurance that is
available under that act.
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4.20. TITLE AND MORTGAGE INSURANCE. Except as set forth in the attached
Schedule 4.20, there is currently in force with respect to each Serviced Loan
a valid title insurance policy (where such policies are customarily required)
evidencing that the Mortgage for each Serviced Loan is a valid first lien upon
the mortgaged property, subject only to the lien for taxes and assessments not
delinquent at the date of the recording of the Mortgage and other usual and
customary exceptions and insuring Seller or the Investor in the amount of the
original principal amount of the Serviced Loan. The renewal mortgage insurance
premium, if applicable, with respect to each Serviced Loan has been paid.
Nothing has been done or omitted by Seller, the effect of which act or
omission would be to invalidate any contract of insurance or guaranty with a
PMI insuring or guaranteeing a Serviced Loan. Seller has received no notice
from any PMI disclaiming liability on the insurance or guaranty of any
Serviced Loan.
4.21. REO PROPERTY. The attached Schedule 4.21 is a true and complete
list of all REO Property. All title, hazard and other insurance claims and
mortgage guaranty claims with respect to such REO Property have been timely
filed and Seller has received no notice of denial of any such claim. Except as
set forth in the attached Schedule 4.21, no legal proceeding is pending
concerning any such REO Property or any servicing activity or omission to
provide a servicing activity with respect to any such REO Property.
4.22. DISCLOSURE. None of the representations made to Purchaser pursuant
to this Agreement nor any of the information in the Schedules or Exhibits
delivered to Purchaser pursuant to this Agreement contains any untrue
statement of a material fact or omits to state any material fact requirement
to make the statements herein or therein not misleading in any material
respect.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
5.1. ORGANIZATION OF PURCHASER. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Michigan. The copies of the articles of incorporation and by-laws of
Purchaser which have been previously delivered to Seller (designated for
purposes of this Agreement as Schedule 5.1) are true and complete.
5.2. AUTHORITY RELATIVE TO AGREEMENT. Purchaser has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Except as set forth in the attached
Schedule 5.2, the execution and delivery of this Agreement by Purchaser and
the consummation by it of the transactions contemplated hereby (a) have been
duly authorized by
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all necessary corporate action, (b) do not otherwise require the consent,
waiver, approval, license or authorization of, or filing or registration with
or notification to, any person, entity or Governmental Authority (other than
those which have been made or obtained), (c) do not violate any provision of
law applicable to Purchaser, or the articles of incorporation or by-laws of
Purchaser, and (d) do not, with or without the giving of notice or the passage
of time, conflict with or result in a breach or termination of any provision
of, or constitute a default under, or result in the creation of any lien,
charge or encumbrance upon any of the property or assets of Purchaser pursuant
to, any mortgage, deed of trust, indenture or other material agreement or
instrument, or any law or other restriction of any kind or character, to which
Purchaser is a party or by which Purchaser or any of its assets may be bound.
This Agreement has been duly executed and delivered by Purchaser and is a
valid and binding obligation of Purchaser.
5.3. BROKERS AND FINDERS. Except for the engagement of Keefe, Bruette &
Woods, as to whose fees Purchaser exclusively will be responsible, Purchaser
has not employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted directly or indirectly for Purchaser, in connection
with this Agreement or the transactions contemplated hereby.
5.4. LITIGATION. Except as set forth in the attached Schedule 5.4, there
is no action, suit, arbitration or other proceeding pending or, to the
knowledge of Purchaser, threatened against Purchaser which seeks to prevent or
impair the consummation of the transactions contemplated hereby.
5.5. FINANCIAL STATEMENTS. The balance sheets of Purchaser as of December
31, 1993, 1992 and 1991 and the related statements of operations,
stockholder's equity and cash flows for the years then ended, including the
notes thereto, audited by independent certified public accountants as
reflected therein (collectively, the "Purchaser Financial Statements"), true
and complete copies of such financial statements having been previously
delivered to Seller (designated for purposes of this Agreement as Schedule
5.5(a)), present fairly, in all material respects, the financial position of
Purchaser at December 31, 1993, 1992 and 1991 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles (except as otherwise reported in the
notes thereto). The balance sheets of Purchaser as of June 30, 1994 and the
related statement of income for the six month period ended June 30, 1994, true
and complete copies of all such financial statements having been previously
delivered to Seller (designated for purposes of this Agreement as Schedule
5.5(b)), present fairly, in all material respects, the financial position of
Purchaser at June 30, 1994 and the results of its operations for the six month
period ended June 30, 1994.
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5.6. ABSENCE OF CERTAIN CHANGES. Except as set forth in the attached
Schedule 5.6 or as otherwise contemplated by this Agreement, since December
31, 1993 there has not been any material adverse change in the condition
(financial or otherwise), results of operations, assets, properties, business,
operations or prospects of Purchaser that would prevent the consummation of
the transactions contemplated by this Agreement.
5.7. COMPLIANCE WITH APPLICABLE LAW. Purchaser is, in the conduct of its
business, in material compliance with all laws, statutes, ordinances and
regulations applicable to it, the enforcement of which, if it were not in
material compliance, would prevent the consummation of the transactions
contemplated by this Agreement.
5.8. PUBLIC FILINGS. None of the disclosures relating to or regarding
Purchaser set forth in the Annual Report of Republic Bancorp Inc. ("Bancorp")
for the year ended December 31, 1993, the Annual Report on Form 10-K of
Bancorp for the year ended December 31, 1993, and the Quarterly Report on Form
10-Q of Bancorp for the quarterly period ended June 30, 1994 contain any
untrue statement of a material fact or omits to state any material fact
required to make the disclosures therein not misleading in any material
respect.
5.9. PERMITS, AUTHORIZATIONS, ETC. Purchaser possesses or will possess,
and is current and in good standing under, all approvals, authorizations,
consents, licenses, orders and other permits of FNMA, FHLMC, and all other
Governmental Authorities required to permit the operation of the business of
the Mortgage Banking Division as will be conducted except as set forth in the
attached Schedule 5.9.
ARTICLE 6.
COVENANTS OF SELLER AND PURCHASER
6.1. CONDUCT OF BUSINESS. Between the date of this Agreement and the
Closing Date, unless Purchaser otherwise agrees in writing or as otherwise
contemplated by this Agreement, Seller will:
(a) not enter into any transaction or make any agreement or
commitment that would result in any of the representations or warranties of
Seller contained in this Agreement not being true and correct in all material
respects at and as of the time immediately after the occurrence of the
transaction or event or the entering into of such agreement or commitment;
(b) not purchase or acquire any fixed asset with a purchase price or
value in excess of $5,000, except as described in the attached Exhibit 6.1(b);
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(c) not redeem or declare any dividends or make any distributions
with respect to its capital stock;
(d) use commercially reasonable efforts to (i) preserve its business
organization intact in all material respects, (ii) preserve generally the
goodwill of those persons and entities with whom Seller has business
relationships, and (iii) obtain all consents and approvals required to permit
it to complete the transactions contemplated herein;
(e) not enter into any transaction or make any agreement or
commitment that would require Seller to provide servicing that is materially
different from the servicing currently provided pursuant to the terms of the
Servicing Agreements;
(f) not originate or otherwise acquire any mortgage loan or loan
commitment except in the usual and ordinary course of business of Seller
consistent with its past practices;
(g) not sell, transfer, assign, encumber or otherwise dispose of any
servicing rights relating to Serviced Loans, or solicit, negotiate or
otherwise entertain any proposals related thereto, or amend or terminate any
Servicing Agreement, or sell, transfer, assign, encumber or otherwise dispose
of any other assets of Seller of the type contemplated by this Agreement to be
Purchased Assets, or solicit, negotiate or otherwise entertain any proposals
related thereto, except (i) sales in the usual and ordinary course of business
of Seller consistent with its past practices, and (ii) as described in Exhibit
6.1(g);
(h) not increase the compensation payable to any employee of Seller,
or make any material change in the compensation policies applicable to
employees of Seller, other than pursuant to a contractual obligation disclosed
in Exhibit 6.1(h);
(i) immediately inform Purchaser if, at any time prior to the
Closing, (i) any representation or warranty of Seller set forth in this
Agreement ceases to be true and correct in all material respects, or (ii)
Seller receives from any Agency or Governmental Authority any correspondence
or communication relating to an examination, report, inquiry or investigation
of Seller;
(j) promptly furnish to Purchaser copies of any and all consents,
communications, letters, reports, applications, notices or other documents
submitted to or received from any Agency or Private Investor in connection
with the transactions contemplated by this Agreement;
(k) use commercially reasonable efforts to maintain substantially
the same insurance coverage as that currently maintained by Seller with
respect to the assets and operations of Seller; and
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(l) pay, perform and satisfy all obligations of Seller under the
Assumed Leases, Assumed Agreements and the Servicing Agreements required to
have been paid, performed or satisfied prior to the Cut-off Date.
6.2. CONDUCT OF PURCHASER. Between the date of this Agreement and the
Closing Date, unless Seller otherwise agrees in writing or as otherwise
contemplated by this Agreement, Purchaser will:
(a) not enter into any transaction or make any agreement or
commitment, and use commercially reasonable efforts not to permit any event to
occur, that would result in any of the representations or warranties of
Purchaser contained in this Agreement not being true and correct in all
material respects at and as of the time immediately after the occurrence of
the transaction or event or the entering into of such agreement or commitment;
(b) use commercially reasonable efforts to obtain all consents and
approvals required to permit it to complete the transactions contemplated
herein;
(c) immediately inform Seller if, at any time prior to the Closing,
(i) any representation or warranty of Purchaser set forth in this Agreement
ceases to be true and correct in all material respects, or (ii) Purchaser
receives from any Agency or Governmental Authority any correspondence or
communication relating to an examination, report, inquiry or investigation of
Purchaser; and
(d) promptly furnish to Seller copies of any and all consents,
communications, letters, reports, applications, notices or other documents
submitted to or received from any Agency or Private Investor in connection
with the transactions contemplated by this Agreement.
6.3. ACCESS TO INFORMATION BEFORE CLOSING. Prior to the Closing Date,
Purchaser may cause its employees and representatives or other persons at
Purchaser's request to make such reasonable investigation with respect to
Seller and the Purchased Assets as Purchaser deems necessary or advisable.
Prior to the Closing Date, Seller will permit Purchaser's agents and
representatives or such other persons to have access to the premises and the
books and records of Seller upon reasonable notice and during normal business
hours, and Seller will furnish such data and other information with respect to
Seller and the Purchased Assets as Purchaser may from time to time reasonably
request, Seller will permit Purchaser's agents and representatives to consult
with Seller's employees regarding the operations of Seller, provided that such
access does not unreasonably interfere with the normal operations or customer
or employee relations of Seller and provided further that each such other
person executes a confidentiality agreement with Seller, in form and substance
reasonably satisfactory to Seller, prior to any
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such access. Seller will provide reasonable facilities for the use of such
agents and representatives of Purchaser at Seller's principal place of
business.
6.4. FURTHER ASSURANCES. Seller and Purchaser will each use commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, or appropriate under applicable laws
and regulations to consummate and make effective the transfer and sale of the
Purchased Assets and the assumption of the Assumed Obligations as contemplated
by this Agreement. From time to time after the Closing Date, Seller and
Purchaser will, at their own expense (except as otherwise provided by this
Agreement), execute and deliver to each other such documents as may reasonably
be required to consummate and perfect the transactions provided for in this
Agreement. In the event that Purchaser is obligated (i) to report the
consummation of the transactions under the Securities Exchange Act of 1934, as
amended, on a Current Report on Form 8-K (the "Report") and (ii) to include in
the Report financial statements with respect to the assets and businesses
acquired pursuant to this Agreement, then Seller shall (x) cause the financial
statements required to be included in the Report to be timely prepared, and,
if necessary, audited, and delivered to Purchaser for inclusion in the Report,
and (y) in the event such financial statements are audited, cause such
auditors to issue their consent to the inclusion of their audit report in the
Report. The cost and expense of any such audit in excess of amounts accrued as
expense by Seller for such purpose shall be paid by Seller if Seller is
obligated to procure such an audit for its own disclosure purposes, otherwise
the cost and expense of such audit shall be paid by Purchaser. Each of the
parties hereto will use commercially reasonable efforts to obtain the
authorizations, waivers and consents of all persons, entities and Governmental
Authorities necessary to consummate such transactions.
6.5. EMPLOYEE MATTERS. (a) The employment of all the employees of Seller
will terminate effective as of the close of business on the business day
immediately preceding the Closing Date. Effective as of the Closing Date,
Purchaser, in its discretion, will offer to employ, on an "at will" basis, in
such positions and at such rates of pay as Purchaser deems appropriate, such
employees of Seller as Purchaser deems appropriate. Such employees who accept
such offer and become employed by Purchaser are referred to herein as the
"Retained Employees." Nothing in this Agreement shall obligate Purchaser to
offer employment to any employee of Seller other than Joseph A. Cilento and
Kathleen Quinn, and nothing in this Agreement will prevent Purchaser from
modifying, altering or terminating any of the existing terms and conditions of
employment of the Retained Employees. Purchaser will treat the Retained
Employees as newly hired employees and, except as otherwise required by
applicable law, the Retained Employees will receive no credit under
Purchaser's employee benefit plans for their period of employment with Seller
or for any other employment prior to the Closing Date.
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(b) Effective as of the close of business on the business day
immediately preceding the Closing Date, the Retained Employees will cease
participation in the Employee Plans of Seller. Effective as of the Closing
Date, Purchaser will cause each Retained Employee who accepts employment with
Purchaser and who is a covered employee under a group health plan of Seller
(and their dependents, if any) to be covered under a group health plan (or
plans) maintained by Purchaser, subject to Purchaser's standard eligibility
requirements for new hires. Such plan or plans will not contain any exclusion
or limitation with respect to any preexisting conditions of such Retained
Employees (or their dependents). If any such Retained Employees elects COBRA
continuation coverage, but only during the time that such employee is
fulfilling the eligibility requirements to participate in Purchaser's group
health plan. Purchaser will assist Seller in the administration of COBRA and
similar administrative Post-Closing responsibilities.
(c) Purchaser will not assume and will have no obligation with
respect to any Employee Plan. Purchaser will not assume any other liability
relating to the employees of the Seller where the liability relates to events
occurring at any time prior to the Closing Date, whether or not a claim is
actually asserted prior to such date.
(d) The named parties to this Agreement will have the sole right to
enforce the performance of the provisions of this Section 6.5, and no person
or entity will have any claim, right, title or interest by virtue of this
Section 6.5.
6.6. INVESTOR APPROVALS. Seller will be responsible for obtaining all
necessary Agency Approvals as Purchaser may request. Seller will promptly
prepare and submit all documentation necessary to obtain the consents of the
Agencies to the transfer to Purchaser of the Servicing Agreements involving
the Agencies and will seek Agency Approvals diligently and in good faith.
Seller will diligently seek Private Investor Consents in connection with the
Servicing Agreements with Private Investors. Purchaser will cooperate with
Seller in connection with obtaining all Agency Approvals and Private Investor
Consents and will timely execute and deliver to Seller all documentation, on
standard forms to the extent possible, reasonably necessary to obtain the
Agency Approvals and Private Investor Consents. Seller will pay any required
transfer fees payable in connection with the transactions contemplated by this
Agreement.
6.7. ASSIGNMENTS. On or prior to the Closing Date, Seller will (a)
complete the preparation of assignments to Purchaser, by appropriate
endorsements and assignments of all Seller's right, title and interest in and
to the applicable pools, participation certificates, notes and Mortgages
related to the Serviced Loans as required by the appropriate Investors and (b)
complete the preparation of assignments of the Serviced loans from Purchaser
to the applicable Investors. Upon request by Seller, Purchaser will
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review the forms of assignment to be used by Seller; provided that Seller will
be solely responsible for preparing assignments that fulfill all applicable
investor requirements. Within five Business Days following the Closing Date,
Purchaser will at its expense, (i) cause the assignments of Seller's right,
title and interest to the pools, notes and Mortgages related to the Serviced
Loans to be recorded in the appropriate jurisdictions, (ii) deliver to Seller
copies of the assignments of the Serviced loans from Seller to Purchaser,
along with a certification from an officer of Purchaser that each assignment
has been submitted for recording, and (iii) deliver to Seller the assignments
of the Serviced Loans from Purchaser to the applicable Investors. In addition,
Seller will deliver to Purchaser such other appropriately executed and
authenticated instruments of sale, assignment, transfer and conveyance,
including limited powers of attorney, as Purchaser or its counsel shall
reasonably request to accomplish the transfer to Purchaser of all Seller's
right related to the Servicing Agreements (for example, Seller's rights with
respect to bankruptcies and insurance/guarantee claims) and to facilitate the
servicing of the Serviced Loans by Purchaser. Such instruments provided by
Seller will be satisfactory in form to Purchaser and its counsel.
6.8. CHANGE OF NAME. Seller will take all action necessary to amend its
articles of incorporation to change its name to one bearing no resemblance to
"Home Funding, Inc." and will execute and deliver to Purchaser at the Closing
executed articles of amendment and resolutions relating thereto.
6.9. NOTICE TO MORTGAGORS. If Purchaser advises Seller that servicing is
to be transferred, Seller will mail to the mortgagor of each Mortgage Loan no
later than 15 days prior to the Closing Date a letter (in form reasonably
acceptable to Purchaser) advising the mortgagor of the transfer of servicing
of the Mortgage loan to Purchaser.
6.10. NOTICE TO MORTGAGE INSURERS. If Purchaser advises Seller that
servicing is to be transferred, Seller will, prior to the Closing Date, obtain
the written consent of any private mortgage insurance companies which have the
contractual right to approve transfer of the Servicing Agreements. In
addition, Seller will notify all relevant private mortgage insurance companies
no later than five Business Days prior to the Closing Date (or such other date
as may be agreed to by the parties) by certified mail, return receipt
requested, that all insurance premium billings for the Serviced Loans must
thereafter be sent to Purchaser. Seller will provide Purchaser with copies of
the certified receipts.
6.11. NOTICE TO INSURANCE COMPANIES. If Purchaser advises Seller that
servicing is to be transferred, no later than five days before the Closing
Date (or such other date as may be agreed to by the parties), Seller will
transmit to the applicable insurance companies or agents notification of the
assignment of the Servicing Agreements to Purchaser and instructions to
deliver all notices and insurance statements to Purchaser from and after the
Closing Date.
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6.12. RELEASE OF LIENS. At or prior to the Closing, Seller will obtain
the release of any lien on Seller's rights relating to Servicing Agreements
excepting liens set forth in the attached Exhibit 6.12.
6.13. TAX SERVICE AND DOCUMENT CUSTODIAN. If Purchaser so elects it may,
on Seller's behalf, (a) cause the tax servicing for the Serviced Loans to be
transferred to the entity designated by Purchaser and (b) cause Seller's
document custodian to deliver to Purchaser's document custodian a complete
custodial file for each Serviced Loan. Each such custodial file will include
all documents required by the applicable investor. Purchaser will pay all
termination fees, transfer expenses and recertification costs relating to the
transfers and deliveries described in this Section 6.13.
6.14. INSURANCE PREMIUMS; PROPERTY TAXES. Prior to the Closing Date,
Seller will deliver to Purchaser a list of all insurance premiums and property
tax payments regarding the Purchased Assets due or proposed within 10 Business
Days after the Closing Date.
6.15. REMITTANCES TO INVESTORS. On or before the Closing Date, Seller
will pay to each Investor all collections theretofore received by Seller with
respect to Serviced Loans and other amounts required by the applicable
Servicing Agreement to be paid to such Investor. Purchaser will pay all
amounts due to Investors pursuant to the Servicing Agreements with respect to
collections received by Purchaser after the Closing Date.
6.16. ACCESS TO INFORMATION AFTER CLOSING. After the Closing Date,
Purchaser will permit Seller, Seller's major stockholders and agents and
representatives of each to have access to the premises and the books and
records of Purchaser pertaining to Seller, the Purchased Assets, the Assumed
Obligations, the Retained Obligations and the transactions contemplated by
this Agreement, and Seller will permit Purchaser's agents and representatives
to have access to the premises and the books and records of Seller pertaining
to Seller, the Purchased Assets, the Assumed Obligations, the Retained
Obligations and the transactions contemplated by this Agreement, upon
reasonable notice and during normal business hours, and Purchaser or Seller
will furnish such data and other information with respect thereto as Seller or
Purchaser, as the case may be, may from time to time reasonably request, for
general business purposes and for the purpose of reviewing the accuracy of
Seller's and Purchaser's preparation of tax returns, financial statements and
other required reports relating to the Purchased Assets and Seller's prior
ownership thereof; provided, however, that such access shall not unreasonably
interfere with Seller's or Purchaser's normal operations or its customer or
employee relations.
6.17. NON-SOLICITATION. Seller will not, and will not permit its
subsidiaries, affiliates or successors-in-interest (other than
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Purchaser) to, (i) during the one year period following the Closing Date,
solicit any employee of Seller who within 30 days after the Closing Date
becomes an employee of Purchaser or its affiliates or subsidiaries to accept
employment with Seller or its subsidiaries, affiliates, or
successors-in-interest (other than Purchaser), (ii) during the three year
period following the Closing Date, solicit directly and knowingly any borrower
to refinance any Mortgage Loan for which an application or pre-qualification
request was in the Pipeline on the Closing Date, except for general
advertisements or solicitations, and (iii) use any customer list or business
record of Seller to compete directly and knowingly with the Purchaser or its
subsidiaries in the origination in the States of New York, Connecticut and
Massachusetts of Mortgage Loans.
6.18. BOOKS AND RECORDS. (a) Until the Closing Date, Seller, on behalf of
Purchaser, shall keep books of account with respect to the Purchased Assets,
the Assumed Obligations and the business conducted by Seller using the
Purchased Assets and the Assumed Obligations. Such books of account shall be
kept in accordance with generally accepted accounting principles and shall be
transferred and delivered to Purchaser at the Closing.
(b) From the Closing Date, Purchaser shall cause separate books of
account to be kept with respect to the Purchased Assets, the Assumed
Obligations and the business conducted by the Republic Mortgage Banking
Operating in the States of New York, Connecticut and Massachusetts using the
Purchased Assets and the Assumed Obligations in accordance with Exhibit
3.1(b).
(c) During the period beginning on the Closing Date and ending on
December 31, 1995, the books and records described in this Section 6.18 shall
be kept in accordance with generally accepted accounting principles.
6.19. CONSENTS AND APPROVALS. Purchaser will be responsible for
obtaining, will promptly prepare and submit all documentation necessary to
obtain, and will diligently, employing its best efforts and good faith, obtain
(a) the approval of each Governmental Authority having jurisdiction over the
Purchaser or the Purchased Assets (including, without limitation, the approval
of the Board of Governors of the Federal Reserve System and such licenses for
the States of New York and Connecticut as are necessary) and (b) all consents
necessary or required to consummate the transactions contemplated by this
Agreement.
ARTICLE 7.
CONDITIONS PRECEDENT
7.1. PURCHASER'S CONDITIONS. The obligation of Purchaser to effect the
transactions contemplated hereby are subject to the fulfillment of the
conditions, which may be waived in writing by Purchaser, that (a) the
representations and warranties of Seller
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herein shall have been and shall be true and correct in all material respects
on the date of this Agreement and the Closing Date; (b) Seller shall have
performed in all material respects all its obligations under this Agreement
required to be performed at or prior to the Closing Date (including, without
limitation, the delivery of the estoppel letters contemplated by Section
2.4(b)(i)(F) of this Agreement); (c) the consents and approvals specified in
Schedules 4.2 and 5.2 to this Agreement (including, without limitation, the
consents of National Westminster Bank USA and The Fishkill National Bank &
Trust Company, the approval of the Board of Governors of the Federal Reserve
System, and such licenses from the States of New York and Connecticut as are
necessary to conduct the Republic Mortgage Banking Operation) shall have been
received; (d) since June 1, 1994 until the Closing Date, there shall not have
been any material adverse change in the condition (financial or otherwise),
results of operations, assets, properties, business or operations of Seller or
the Purchased Assets; (e) Purchaser shall have entered into employment
agreements with each of Joseph A. Cilento and Kathleen Quinn; (f) the Sellers
net worth on the Closing Date shall be equal to or greater than the Threshold
Amount and in calculating Seller's net worth for this purpose (i) Seller's
Mortgages held for sale shall be valued at cost or market, whichever is lower,
and (ii) the effect of the purchase of Serviced Loans by Republic Bancorp
Mortgage Inc. from Home Funding, Inc. under agreement dated July 22, 1994 (the
"Service Purchase Contract") shall be disregarded; (g) Seller's Pipeline on
the Closing Date shall be equal to or greater than $50,000,000; (h) Seller's
Serviced Loans on the Closing Date shall be equal to or greater than
$130,000,000 (less any Serviced Loans sold by Seller to Purchaser prior to the
Closing Date); and (i) all consents of Investors necessary or appropriate to
the transfer of all commitments to Purchaser shall have been received or such
commitments shall have been exchanged for like kind commitments acceptable to
Purchaser.
7.2. SELLER'S CONDITIONS. The obligation of Seller to effect the
transactions contemplated hereby are subject to the fulfillment of the
conditions, which may be waived in writing by Seller, that (a) the
representations and warranties of Purchaser herein shall have been true and
correct in all material respects on the date of this Agreement and the Closing
Date; (b) Purchaser shall have performed in all material respects all its
obligations under this Agreement required to be performed at or prior to the
Closing Date; (c) the Sellers net worth on the Closing Date shall be equal to
or greater than the Threshold Amount and in calculating Seller's net worth for
this purpose Seller's Mortgages held for sale shall be valued at cost or
market, whichever is lower; (d) Seller's Pipeline on the Closing Date shall be
equal to or greater than $50,000,000; (e) Seller's Serviced Loans on the
Closing Date shall be equal to or greater than $130,000,000 (less any Serviced
Loans sold by Seller to Purchaser prior to the Closing Date); (f) the consents
and approvals specified in Schedules 4.2 and 5.2 to this Agreement (including,
without limitation, the consents of National Westminster Bank USA and The
Fishkill National Bank & Trust
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Company, the approval of the Board of Governors of the Federal Reserve System
and such licenses from the States of New York and Connecticut as necessary to
conduct the Republic Mortgage Banking Operation) shall have been received; and
(g) all consents of Investors necessary to the transfer of all Purchase
Commitments to Purchaser shall have been received or all such Purchase
Commitments shall have been exchanged for like kind commitments acceptable to
Seller.
7.3. JOINT CONDITIONS. Neither Seller nor Purchaser will be obligated to
effect the transactions contemplated hereby if on the Closing Date (a) Seller
or Purchaser is subject to any order, decree, rule or regulation of any
Governmental Authority that prevents, or delays to any material extent, the
consummation of any of the transactions contemplated by this Agreement or that
would impose any material limitation on Seller's ability to sell, or
Purchaser's ability to acquire, all the Purchased Assets; and (b) Seller and
Purchaser have not agreed to an allocation of the Purchase Price and completed
Exhibit 3.4 hereto as provided in Section 3.4 of this Agreement.
ARTICLE 8.
ADDITIONAL UNDERTAKINGS AND AGREEMENTS
8.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties, and covenants made by the parties in this
Agreement will survive the Closing; provided that no claim may be made by any
party under this Agreement, and no party will have any liability with respect
to any such misrepresentation or breach of warranty or covenant under this
Agreement, unless written notification of claim therefor is given by the party
claiming misrepresentation or breach to the party alleged to have made such
misrepresentation or caused such breach within six months after the Closing
Date and suit thereon is commenced within three months after such written
notification. No investigation or any right to investigate in favor of any
party to this Agreement will in any manner limit, affect or impair the right
and ability of such party to rely upon the representations, warranties and
covenants of the parties set forth in this Agreement. No investigation or
knowledge of any Retained Employee (including, without limitation, Joseph A.
Cilento, Kathleen Quinn, and Theodore Tuttle) will in any manner limit, affect
or impair the right and ability of Purchaser to rely upon the representations,
warranties and covenants of the parties set forth in this Agreement.
8.2. INDEMNIFICATION.
(a) From and after the Closing, Seller will indemnify and hold
harmless Purchaser from and against any and all claims, demands, losses,
liabilities, damages and expenses (net of any tax benefit derived by Purchaser
or any of its affiliates from the accrual or payment of such claim, demand,
loss, liability, damage
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or expense), including amounts paid in settlement, reasonable costs of
investigation and reasonable fees and disbursements of counsel, asserted
against or suffered by Purchaser arising out of, or resulting from: (i) the
material inaccuracy of any representation or warranty, or the breach of any
covenant, by Seller contained herein; (ii) the termination of any employee of
Seller, including any reasonable termination agreement that Seller may enter
into with such employee where the termination occurs at or prior to the
Closing and the termination agreement has been previously consented to by
Purchaser; (iii) any liability arising out of or related in any manner to the
failure of Seller to pay benefits or satisfy liabilities and obligations of
any Employee Plan with respect to any employee of Seller; (iv) any liability
relating to workers compensation claims of any employee of Seller; (v) any
liability relating to severance, vacation and holiday pay claims of any
employee of Seller; (vi) any liability resulting from unlawful discrimination,
or wrongful termination of employment, on account of sex, race, age, color,
national origin, handicap, marital status, height or weight, and any liability
relating to payment of wages and benefits (or the failure to pay same); or
(vii) any liability, arising out of or related in any manner to the failure to
pay benefits or satisfy liabilities and obligations of any employee pension
plan maintained or contributed to by Seller. Purchaser will make no claim
against Seller for indemnification under this Section 8.2 for a breach of a
representation, warranty or covenant (other than a knowing and intentional
breach) contained herein unless and until the aggregate amount of such claims
exceeds $50,000 (the "Indemnification Threshold Amount"), in which event
Purchaser may claim indemnification for the full amount of such claims, or any
portion thereof, including the Indemnification Threshold Amount.
(b) From and after the Closing, Purchaser will indemnify and hold
harmless Seller from and against any and all claims, demands, losses,
liabilities, damages and expenses (net of any tax benefit derived by Seller or
any of its affiliates from the accrual or payment of such claim, demand, loss,
liability, damage or expense), including the Assumed Obligations, amounts paid
in settlement, reasonable costs of investigation and reasonable fees and
disbursements of counsel, asserted against or suffered by Seller arising out
of, or resulting from (i) the material inaccuracy of any representation or
warranty, or the breach of any covenant, by Purchaser contained herein; (ii)
any failure to discharge in accordance with the terms thereof related to facts
arising out of or in connection with the Purchased Assets or the Assumed
Liabilities after the Closing Date; (iii) the termination of any Retained
Employee, including any termination agreement that Purchaser may enter into
with such employee where the termination occurs after Closing; (iv) any
liability relating to workers compensation claims of Retained Employees
relating to employment with Purchaser after the Closing Date; (v) any
liability relating to severance, vacation and holiday pay claims of Retained
Employees relating to Purchaser after the Closing Date; (vi) any liability
resulting from unlawful discrimination, or wrongful termination of
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employment, on account of the sex, race, age, color, national origin,
handicap, marital status, height of weight of any Retained Employee, and any
liability relating to payment of wages and benefits (or the failure to pay
same) to any Retained Employee, in each instance where the act or omission
giving rise to the liability occurred after the Closing or was taken at the
behest of Purchaser after the Closing Date. Seller will make no claim against
Purchaser for indemnification under this Section 8.2 for a breach of a
representation, warranty or covenant (other than a knowing and intentional
breach) contained herein unless and until the aggregate amount of such claims
exceeds the Indemnification Threshold Amount, in which event Seller may claim
indemnification for the full amount of such claims, or any portion thereof,
including the Indemnification Threshold Amount.
(c) The indemnification provided for in this Section 8.2 will be
limited to claims asserted within the applicable time period set forth in
Section 8.1. Seller will have no liability or obligation in the aggregate
under this Section 8.2 and under the Service Purchase Contract in excess of
$2,500,000. Purchaser will have no liability or obligation in the aggregate
under this Section 8.2 and under the Purchase Service Contract in excess of
$2,500,000.
(d) A party seeking indemnification (an "Indemnified Party") will
promptly notify the party against whom indemnification is sought (an
"Indemnifying Party") in writing of any claim for indemnification under this
Agreement, specifying in reasonable detail the basis of such claim, the facts
pertaining thereto and, if know, the amount, or an estimate of the amount, of
the liability arising therefrom. The Indemnified Party will provide to the
Indemnifying Party as promptly as practicable thereafter information and
documentation reasonably requested by the Indemnifying Party to support and
verify the claims asserted.
(e) If the facts giving rise to a right to indemnification arise out
of the claim of any third party, or if there is any claim against a third
party, an Indemnifying Party may assume, and if it assumes it will control,
the defense or the prosecution thereof, including the employment of counsel,
at its cost and expense. An Indemnified Party will have the right to employ
counsel separate from counsel employed by an Indemnifying Party in any such
action and to participate therein, but the fees and expenses of such counsel
employed by an Indemnified Party will be at its expense. Following an
Indemnified Party's assumption of the defense or prosecution of any claim, the
Indemnifying Party will have no further liability to the Indemnified Party for
any legal or other expense in connection with such defense or prosecution as
long as the Indemnifying Party maintains such defense or prosecution. The
Indemnifying Party will be entitled to settle any claim for monetary damages
if the Indemnifying Party will be fully responsible to the Indemnified Party
for all amounts payable in settlement of the claims. An Indemnifying Party
will not be liable for any settlement of any such claim effected without
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its prior written consent. Whether or not an Indemnifying Party chooses to so
defend or prosecute such claim, the parties hereto will cooperate in the
defense of prosecution thereof and will furnish such records, information and
testimony, and attend at such conferences, discovery proceedings, hearings,
trials and appeals, as may be reasonably requested in connection therewith. An
Indemnifying Party will be subrogated to all rights and remedies of an
Indemnified Party.
(f) This Section 8.2 sets forth the only responsibility of the
parties hereto to indemnify one another against any claims or damages arising
out of, or related to, this Agreement and the transactions contemplated by
this Agreement.
(g) Notwithstanding anything herein to the contrary, (i) if Seller
notifies Purchaser in writing prior to the Closing Date of any inaccuracy in
any representation or warranty of, or any breach of any covenant by, Seller
and Purchaser nonetheless proceeds with the Closing, Seller will have no
liability to Purchaser for any such inaccuracy or breach, and (ii) if
Purchaser notifies Seller in writing prior to the Closing Date of any
inaccuracy in any representation or warranty of, or any breach of any covenant
by, Purchaser and Seller nonetheless proceeds with the Closing, Purchaser will
have no liability to Seller for any such inaccuracy or breach; provided,
however, that the provisions of this paragraph (g) will not apply with respect
to (x) any matter of which the party giving notice had knowledge prior to the
execution hereof and (y) any matter resulting from a knowing and intentional
breach of this Agreement.
(h) To the extent any party as an Indemnified Party receives any
insurance proceeds from its insurance carrier as indemnification for any
claim, loss, damage or liability, as between the parties hereto, the
obligation of the Indemnifying Party to the Indemnified Party will be reduced
by the amount of such insurance proceeds actually received by the Indemnified
Party.
(i) If any dispute with respect to this Agreement of whatever nature
arises between the parties to this Agreement, the prevailing party, if any, in
such dispute will be reimbursed for the reasonable fees and disbursements of
its counsel in such dispute by the losing party, if any.
ARTICLE 9.
MISCELLANEOUS PROVISIONS
9.1. TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by written notice by Purchaser to Seller if at any time any of
the conditions set forth in Section 7.1 (other than the condition set forth in
Section 7.1(c)) becomes impossible to
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fulfill and Purchaser has not waived in writing the fulfillment of
such condition;
(b) by written notice by Seller to Purchaser if at any time any of
the conditions set forth in Section 7.2 becomes impossible to fulfill and
Seller has not waived in writing the fulfillment of such condition;
(c) by mutual agreement of Seller and Purchaser; or
(d) by Seller or Purchaser giving notice to such effect to the other
if the Closing has not taken place by December 31, 1994 for any reason other
than the breach by the party giving such notice of its obligations,
representations or warranties under this Agreement; provided, however, that
failure of Purchaser to receive approval of each Governmental Authority having
jurisdiction over the Purchaser or the Purchased Assets or the transactions
contemplated by this Agreement shall not constitute such a breach so long as
Purchaser is making reasonable and diligent efforts to obtain such approval.
In the event of termination of this Agreement pursuant to this
Section 9.1, the Agreement shall immediately become void and of no force or
effect except (i) with respect to Section 9.7 and Section 9.8, and (ii) no
party shall be relieved or released from any liabilities or damages arising
out of the willful breach of this Agreement.
9.2. ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations of any party hereunder may be assigned without the prior written
consent of the parties hereto; provided, however, that Purchaser may assign
this Agreement to any affiliate or subsidiary of Purchaser, but any such
assignment will not relieve Purchaser of any of its obligations hereunder.
Subject to the foregoing, this Agreement will be binding upon and will inure
to the benefit of the parties hereto and their respective successors and
assigns, but no other person will have any right, benefit or obligation
hereunder.
9.3. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing (including by facsimile telecopy), and unless
otherwise expressly provided in this Agreement and shall be deemed to have
been duly given or made when delivered by hand, or three business days after
being deposited in the mail, postage prepaid, or, in the case of facsimile
telecopy notice, when received, in each case addressed or at the telephone
numbers or facsimile telecopy numbers set forth below or to such other address
or facsimile telecopy number as may be hereafter notified by the respective
parties to this Agreement:
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(a) If to Seller, to:
Home Funding Inc.
1811 Route 52
Hopewell Junction, New York 12533
Attention: Joseph A. Cilento
Telephone: (914) 226-6000
Telecopy: (914) 226-1887
and
Mr. John Montfort
c/o Montfort Bros. Inc.
P.O. Box 420, Elm Street
Fishkill, New York 12524
Telephone: (914) 896-6225
Telecopy: (914) 896-4456
with a copy to:
Golenbock, Eiseman, Assor & Bell
437 Madison Avenue
New York, New York 10022-7302
Attention: A.C. Peskoe
Telephone: (212) 907-7300
Telecopy: (212) 754-0330
and
Wichler & Gobetz
400 Reila Avenue
Suffern, New York 10901
Attention: R. Wichler
Telephone: (914) 368-1710
Telecopy: (914) 368-1470
(b) If to Purchaser, to:
Republic Bancorp Mortgage Inc.
1070 East Main Street
Owosso, Michigan 48867
Attention: Dana M. Cluckey
Telephone: (517) 725-7337
Telecopy: (517) 723-8762
with a copy to:
Miller, Canfield, Paddock and Stone, P.L.C.
150 West Jefferson, Suite 2500
Detroit, Michigan 48226
Attention: George E. Parker III, Esq.
Telephone: (313) 963-6420
Telecopy: (313) 496-8451
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9.4. CHOICE OF LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Michigan without giving effect to
the principles of conflict of laws thereof.
9.5. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, together
with the Schedules and Exhibits hereto, constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, between the parties. No supplement,
modification or waiver of this Agreement will be binding unless executed in
writing by the party to be bound thereby. No waiver of any provision of this
agreement will constitute a waiver of any other provision hereof (whether or
not similar), nor will such waiver constitute a continuing waiver unless
otherwise expressly provided.
9.6. SEVERABILITY. Any term or provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining terms and provisions hereof or affecting the
validity or enforceability of such provision in any other jurisdiction. If any
term or provision of this Agreement is held by any court of competent
jurisdiction to be void, voidable, invalid or unenforceable in any given
circumstance or situation (the "challenged provision"), then all other terms
and provisions, being severable, will remain in full force and effect in such
circumstance or situation, and such challenged provision will remain valid and
in effect in any other circumstances or situations.
9.7. EXPENSES. Except as otherwise specifically provided in this
Agreement, all costs and expenses incurred in connection with this Agreement
will be paid by the party incurring such expenses. Purchaser will pay all
expenses, filing fees and counsel fees in connection with the license
applications and similar qualification processes. Any expenses paid by a party
which are required to be borne by another party as provided in this Agreement
will be reimbursed by such party to the party so paying the expense promptly
after request by the paying party. This Section 9.7 will survive any
termination of this Agreement.
9.8. CONFIDENTIAL INFORMATION. Any and all non-public information
regarding any party hereto or its businesses, properties and personnel or
those of its subsidiaries (the "Confidential Information") which is derived or
results from another party's access to the properties, books and records of
such first party pursuant to the provisions of this Agreement or otherwise,
whether obtained before or after the execution of this Agreement, will be held
in strict confidence; and the parties hereto will exercise the same degree of
care with respect thereto that they use to preserve and safeguard their own
confidential proprietary information. Except as otherwise required by law, the
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Confidential Information will not directly or indirectly be divulged,
disclosed or communicated to any other person or entity or used for any
purposes other than those purposes expressly contemplated by this Agreement.
In the event the transactions contemplated by this Agreement are not
consummated for any reason, the confidentiality of the Confidential
Information will be maintained (except to the extent that the Confidential
Information is or becomes publicly available other than as a result of
disclosure which is not permitted hereunder or has been or is acquired without
obligation to maintain the confidentiality thereof), and all copies of all
documents, work papers and other recorded material comprising the Confidential
Information will immediately be returned to the party to which such
information relates and will not thereafter be used for any purpose by the
other party hereto or any subsidiary or affiliate thereof. Except as otherwise
required by law in the reasonable opinion of its counsel, neither Purchaser
nor Seller shall, or permit any of their respective affiliates to, issue or
cause the issuance of any press release or other public announcement with
respect to this Agreement or the transactions contemplated hereby, without the
prior written consent of the other party (which consent shall not be
unreasonably withheld). This Section 9.8 will survive any termination of this
Agreement.
9.9. COOPERATION. The parties hereto will cooperate with the other
parties in carrying out the provisions of this Agreement and will execute and
deliver, or cause to be executed and delivered, such governmental
notifications and additional reasonable documents and instruments and do, or
cause to be done, all reasonable things necessary, proper or advisable under
applicable law to consummate and make effective the transactions contemplated
hereby.
9.10. DELIVERY OF SCHEDULES. The schedules delivered to Purchaser as
described in Article 4 will be deemed delivered only upon written
acknowledgement by Purchaser of Purchaser's acceptance of each such schedule.
9.11. MISCELLANEOUS. Until this Agreement is terminated, neither Seller
nor any of its affiliates shall authorize or knowingly permit any agents or
representatives of any of them to entertain, solicit, encourage, or
participate in, directly or indirectly, negotiations with any person or
entity, other than Purchaser, to acquire, directly or indirectly.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers on the date first above
written.
MAYFLOWER MORTGAGE CORPORATION,
a Michigan corporation doing
business as "REPUBLIC BANCORP
MORTGAGE INC."
By: /s/ Richard H. Shaffner
----------------------------------
Name: Richard H. Shaffner
Title: President and CEO
HOME FUNDING INC., a New York
corporation
By: /s/ Joseph A. Cilento
----------------------------------
Name: Joseph A. Cilento
Title:
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Exhibit 28(g)
AGREEMENT
THIS AGREEMENT is made and entered into this 27th day of
September, 1994, by and between REPUBLIC BANK, a Michigan-chartered state bank
("Seller"), and CB NORTH, a Michigan-chartered state bank ("Purchaser").
Purchaser desires to acquire and assume from Seller, and Seller is willing to
sell and transfer to Purchaser, the following branch office buildings and
properties (hereinafter "Premises"), the deposit accounts, applicable loan
portfolio and branch banking business conducted therefrom (excluding for all
purposes from this Agreement, however, Seller's Traverse City and Petoskey
loan production offices and operations) and certain items of equipment and
furniture located therein. The branch offices which are the subject of this
Agreement (the "Branch Offices") are as follows:
1. 305 E. Cayuga, Bellaire, Michigan 49615
2. 2530 Main Street, Central Lake, Michigan 49622
3. 880 Munson, Traverse City, Michigan 49684
In consideration of the premises and the mutual covenants and undertakings set
forth hereinafter, the parties agree as follows:
I. PURCHASE AND SALE
1.1 Property to Be Transferred. Subject to the terms and
conditions of this Agreement, effective at the close of business on the
Closing Date (as defined hereinafter), Seller shall sell, transfer, convey and
assign to Purchaser the following properties:
(a) The Premises more particularly described in Exhibit A
hereto, together with all easements, improvements thereon
and all appurtenances thereto;
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(b) All of Seller's right, title and interest in and to that
certain lease dated March 21, 1988, by and between Seller,
as tenant, and Anthony Vozza d/b/a Scarpa, as landlord (the
"Traverse City Lease"), with respect to the Premises
located in Traverse City, Michigan;
(c) All of Seller's right, title and interest in and to the
applicable loan portfolio carried as assets on the regular
books and records of the Branch Offices as of the Closing
Date excluding only (i) the existing SBA loans for Account
Names Willow Creek, Drayton Plain Vet Clinic, Inc.,
Batter-Up, Inc. and William Rzadkowolski, Account Numbers
7036101, 7037302, 7043401 and 7042702, respectively, and
(ii) such loans as to which Purchaser notifies Seller in
writing not later than ten (10) business days prior to the
Closing Date that Purchaser has elected not to acquire
(such loans, other than those described in (i) and (ii)
above being referred to as the "Loan Portfolio"), including
all notes, mortgages (and any escrow accounts established
thereunder), security agreements, assignments, financing
statements, insurance policies and other instruments,
documents, contract rights, claim and books and records
pertaining to the Loan Portfolio;
(d) All of Seller's right, title and interest in and to the
office equipment, furniture, office records, maintenance
contracts, if any, relating to the Premises and the
personal property located on the Premises, and other items
of personal property relating to the Premises, including
all leased equipment, all of which is described in Exhibit
B attached hereto, all of which is and, subject to Section
3.6 and Section 5.7 hereof, will be at the Closing Date
located on Premises; excepting, however, all teller station
terminals and any other assets specifically described on
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Exhibit B-1 which are specifically excluded from the sale
and transfer contemplated by this Agreement ("Excluded
Equipment");
(e) All cash and currency issued by the United States of
America held in the vaults at the Premises as of the
Closing Date;
(f) All of Seller's right, title and interest in and to the
time deposits, savings accounts, certificates of deposit,
money market checking accounts ("MMCA's"), money market
deposit accounts ("MMDA's"), checking ("NOW") accounts, all
other forms of N0W or demand accounts, including economy
checking accounts ("ECA's"), regular business checking
accounts ("RBCA") and low volume business checking account
("LBCA"), all individual retirement accounts ("IRA's"),
Keogh plans and self employed Pension Plans ("SEPs"), if
any, as of the Closing Date and which are associated with
the Branch Offices (hereinafter "Core Deposits"), all loans
secured by any of such Core Deposits being transferred to
Purchaser in whole or in part, all overdraft loans or lines
of credit associated with any Core Deposit accounts being
transferred to Purchaser (collectively "Deposit Related
Loans"), if any, all land contract accounts being serviced
by Seller for which the land contract payments are
deposited into a deposit account being transferred to
Purchaser according to the books and records of Seller at
the Closing Date, and, subject to Section 3.6 and Section
5.7 hereof, all of Seller's rights and interests under: (i)
assignable service and maintenance contracts in effect with
respect to the Premises and with respect to the personal
property located on the Premises; (ii) all assignable
personal property leases pertaining to the Premises; and
(iii) all assignable leases and subleases pertaining to the
Premises;
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(g) A sum of money equal to: (i) the aggregate of the Core
Deposits assumed by Purchaser pursuant to Section 1.2,
reduced by the aggregate principal amount plus accrued but
unpaid interest, on all Deposit Related Loans, if any, plus
(ii) the amount of accrued but unpaid interest on such Core
Deposit liabilities as of the Closing Date, plus (iii) the
amount of prepaid land contract servicing fees, if
applicable, calculated on a pro rata basis to the Closing
Date, minus (iv) the amount of currency in the vault in the
Premises as of the Closing Date, and minus (v) the sum of
the aggregate book value principal amount of the Loan
Portfolio as of the Closing Date, plus accrued but unpaid
interest, late charges and other sums due and owing thereon
through the Closing Date.
All of the foregoing items described in paragraphs (a), (b), (c), (d), (e),
(f) and (g) of this Section 1.1 are sometimes hereafter referred to as the
"Branch Office Properties."
1.2 Purchase Price. In full consideration for the sale,
transfer and assignment of the Branch Office Properties, Purchaser agrees to
pay to Seller a sum of money (the "Purchase Price") equal to (i) $1,190,000
less the Seller's net book value determined in accordance with generally
accepted accounting principles consistently applied of the Excluded Equipment
as of the end of the month immediately preceding the Closing Date, such amount
representing the agreed upon value as of the Closing Date of the Premises and
furniture, fixtures and equipment located therein, plus (ii) a Deposit Premium
(as hereinafter defined). The "Deposit Premium" shall equal eight percent (8%)
of the total Core Deposits (excluding for this purpose only certificates of
deposit issued and outstanding as of the Closing Date in amounts of $100,000
or more) transferred to Purchaser at the time of Closing (as defined herein).
The Seller and the Purchaser agree that they will prepare and file their
federal and any state or
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local income tax returns, including any and all notices, and other filings
required pursuant to Section 1060 of the Internal Revenue Code of 1986, as
amended, including IRS Form 8594, based on the resulting Purchase Price of the
Branch Office Properties described in this Section 1.2.
Purchaser also agrees to assume the specified deposit
liabilities of Seller arising as of the Closing on account of savings, NOWS,
MMCAs, MMDAs, ECAs, RBCAs, LBCAs, certificates of deposit, IRA's and SEP's,
Seller's obligations to pay all accrued but unpaid interest thereon and
Seller's obligations under all other agreements relating to such deposit
accounts, the Deposit Related Loans, if any, the Loan Portfolio (subject,
however, to Purchaser's rights pursuant to Section 8.7 hereof) and maintenance
and service contracts and other leases and agreements assumed by Purchaser, in
each case as the same shall exist at the Closing.
1.3 Prorated Items Adjustment. All real and personal property
taxes and special assessments (other than any special assessments payable in
installments over time extending beyond the Closing Date) which have become a
lien on the Premises or on any personal property located on the Premises as of
the Closing shall be paid by Seller. Current real and personal property taxes
and any special assessments payable in installments for the year in which the
Closing occurs, if any, shall be prorated and adjusted at the Closing on a due
date basis as if paid in arrears. Water and other utility bills and safe
deposit box rental fees will be prorated and adjusted as of the Closing.
Seller shall be reimbursed by Purchaser for the portion, prorated as of the
Closing Date, of the deposit insurance premiums paid by Seller to the FDIC
with respect to the Core Deposits for the second semi-annual assessment period
in 1994 if the Closing occurs in calendar year 1994 or for the first
semi-annual assessment period in 1995 if the Closing occurs in calendar year
1995. For purposes of calculating this reimbursement, an assessment rate shall
be used which is the annual risk based assessment rate applicable to the
Purchaser under the Bank Insurance Fund ("BIF"). Seller shall also be
reimbursed for any unused portion of the security deposit under the Traverse
City Lease.
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II. CLOSING
2.1 Closing. The closing (herein "Closing") shall take place as
of the close of business on either the first, second or third Saturday
following approval of the Commissioner of the Financial Institutions Bureau of
the State of Michigan (the "FIB") or the expiration of thirty (30) days
following the date of approval of the Federal Deposit Insurance Corporation
("FDIC"), whichever occurs later. The selection of the precise date of Closing
and the location of Closing shall be a date and location mutually agreeable to
Purchaser and Seller (herein "Closing Date").
2.2 Deliveries by Seller. Seller shall deliver to Purchaser the
following:
(a) At the Closing, Seller shall deliver to Purchaser: (i) the
information described on Exhibit C hereto with respect to
the Core Deposit accounts and Loan Portfolio transferred to
Purchaser, which shall be prepared in a manner consistent
with Exhibit C hereto and shall be complete and accurate in
all material respects as of the close of business on the
day preceding the Closing Date, and shall be certified as
such by the Chief Financial or Accounting Officer of
Seller, as well as the computer files from which such
information was generated; (ii) corporate warranty deeds in
the form set forth in Exhibit D, conveying good and
marketable title to the Premises situated in Bellaire,
Michigan and Central Lake, Michigan, subject only to
existing building and use restrictions and easements of
record and other imperfections of title reasonably
acceptable to the Purchaser, real estate transfer valuation
affidavits with respect to such Premises executed by Seller
in the form prescribed by the Register of Deeds in the
county in which each such Premises is located for
determining the amount of the transfer tax payable with
respect to
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the conveyance of such Premises to Purchaser hereunder
(which transfer tax shall be payable by Seller), and the
affidavit referred to in Section 3.13 hereof; (iii) an
assignment of the Traverse City Lease, in form and
substance acceptable to Purchaser, along with the
landlord's consent and estoppel affidavit described in
Section 5.11 hereof; (iv) a bill of sale conveying
marketable title to the tangible personal property
described in Exhibit B, in the form as set forth in Exhibit
E; (v) a general assignment of contract rights transferring
to Purchaser all of Seller's rights and privileges under
the Core Deposit account contracts, safe deposit box rental
agreements and Deposit Related Loan agreements, if any, the
Loan Portfolio, all personal property leases, service
contracts and other agreements to be assumed by Purchaser,
in the form as set forth in Exhibit F, along with copies of
all such contracts, agreements and leases; (vi) original
promissory notes and other negotiable instruments endorsed
to Purchaser's order, assignments of mortgages, UCC
financing statements and other security instruments with
respect to the Loan Portfolio, and any escrow accounts
established thereunder; (vii) a certificate of Seller's
Secretary attesting to the approval of this Agreement by
its Board of Directors, with copies attached thereto of the
resolutions adopted by its Board of Directors; (viii) the
title insurance commitments required by Section 5.3, along
with irrevocable instructions to the title insurance
company to issue and deliver the title insurance policies
to Purchaser in accordance therewith; and (ix) such other
documents as Purchaser may reasonably request to more
effectively transfer the Branch Office Properties to
Purchaser. Seller shall deliver possession of the Branch
Office Properties to Purchaser at the close of business on
the Closing Date.
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(b) By ten o'clock in the morning, Detroit time, on the first
business day for both Seller and Purchaser following the
Closing Date, Seller shall deliver to Purchaser (i) a sum
of money, in immediately available funds, equal to the
aggregate balance of all Core Deposits liabilities
(including accrued but unpaid interest) transferred to
Purchaser, reduced by the aggregate principal and net
accrued but unpaid interest amounts on all Deposit Related
Loans, if any, computed as of the close of business on the
day preceding the Closing Date relating to the deposit
account liabilities transferred to Purchaser; and (ii) a
sum of money, in immediately available funds, which
represents interest on the sum described in Section
2.2(b)(i) at the Federal Funds Rate for "this week" as last
reported prior to the Closing Date by the Board of
Governors of the Federal Reserve System ("Federal Reserve
Board") in the Federal Reserve Statistical Release H-15,
Selected Interest Rates (the "Federal Funds Rate") for the
period beginning with, and including, the Closing Date to,
but not including, the date of payment hereunder, MINUS (A)
a sum of money equal to the currency in the vaults at
the Premises at the close of business on the Closing Date,
(B) a sum of money equal to the aggregate principal
balance, and accrued but unpaid interest, late charges and
other sums due and owing as of the Closing Date, in respect
of the Loan Portfolio, and (C) a sum of money equal to
interest on the sum described in Section 2.2(b)(ii)(B)
above at the Federal Funds Rate for the period beginning
with, and including, the Closing Date to, but not
including, the date of payment hereunder.
2.3 Deliveries by Purchaser. Purchaser shall deliver to Seller
the following:
(a) At the Closing, Purchaser shall deliver to Seller: (i) an
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instrument of assumption substantially in the form attached
hereto as Exhibit G, pursuant to which Purchaser assumes
and agrees to perform all of Seller's liabilities and
obligations relating to the Core Deposit and Deposit
Related Loans, if any, transferred to Purchaser by Seller,
the Loan Portfolio, subject to the rights of Purchaser
pursuant to Section 8.7 hereof, the servicing agreements
for land contracts being transferred to Purchaser, if any,
and the assignable contracts, leases and subleases to be
assumed by Purchaser in accordance with Section 5.7 hereof;
and (ii) a certificate of Purchaser's Cashier or Secretary
attesting to the approval of this Agreement by the
Purchaser's Board of Directors, with copies attached
thereto of the resolutions adopted by Purchaser's Board of
Directors.
(b) By ten o'clock in the morning, Detroit time, on the first
business day for both Seller and Purchaser following the
Closing Date, Purchaser shall deliver to Seller: (i) a sum
of money, in immediately available funds, equal to the
Purchase Price; and (ii) a sum of money, in immediately
available funds, which represents interest on the Purchase
Price at the Federal Funds Rate for the period beginning
with, and including, the Closing Date to, but not
including, the date of payment hereunder.
2.4 Net Payment. Notwithstanding any other provisions of this
Section 2 to the contrary, Purchaser and Seller agree that at the time of
Closing, they will calculate the net payment due pursuant to Section 2.2 and
Section 2.3 and the party owing funds to the other will remit said net payment
in the manner set forth in Section 2 of this Agreement.
2.5 Post Closing Settlement. On the first or second day
following the
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Closing Date, Seller shall deliver to Purchaser a complete and accurate list
of the information described on Exhibit C with respect to all deposit accounts
and loan balances included in the Branch Office Properties as of the close of
business on the Closing Date, certified by the Chief Financial or Accounting
Officer of Seller. Within ten (10) business days after the Closing, at a time
and place to be agreed upon, the parties shall make an appropriate transfer of
funds to reflect any change in total deposits and loan balances from the close
of business on the day preceding the Closing through the close of business on
the Closing Date, plus any amount required to reflect NOW, MMCA, MMDA, ECA,
RBCA, LBCA, certificate of deposit, IRA and SEP transactions, if any, that
settle after the Closing Date as required by Section 8.3. If Seller's
certified list of Core Deposit accounts and Loan Portfolio shall be
unacceptable to Purchaser, a mutually acceptable nationally recognized
certified public accounting firm shall conduct an audit of such accounts and
loans within 30 days after the Closing and shall certify the results thereof
to the Purchaser and Seller and such certified report shall be conclusive and
binding on both parties hereto, and the cost of such audit shall be borne
equally by both parties
III. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1 Organization, etc. Seller is a state bank duly organized,
validly existing and in good standing under the laws of the State of Michigan,
and has the full corporate power to enter into this Agreement and to carry out
its obligations hereunder. Seller further represents and warrants that
Seller's Board of Directors has approved this Agreement and that this
Agreement constitutes a legal, valid and binding obligation of Seller.
3.2 No Violation, etc. Neither the execution and delivery of
this Agreement nor the performance by Seller of its obligations hereunder
constitutes or will constitute a violation of or default under Seller's
charter or bylaws or any law,
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rule, ordinance, regulation, court order, agreement, indenture or
understanding to which Seller is a party or by which Seller or its properties
is bound or affected.
3.3 Taxes. Seller has duly and timely filed all returns and
reports with federal, state and local taxing authorities relating to the
payment of interest, earnings or dividends on the Core Deposits to be
transferred to Purchaser hereunder, and has duly and timely paid all taxes,
levies and assessments on such accounts and any other of the Branch Office
Properties, including but not limited to any applicable intangibles taxes,
personal property taxes, real property taxes, sales and use taxes and excise
taxes. To the best of its knowledge and to the best of its ability, Seller has
obtained, to the extent required by law, all federal tax identification
numbers related to the Core Deposits.
3.4 Environmental. Seller has no actual knowledge of any
hazardous substances, hazardous waste, pollutant or contaminant, including but
not limited to asbestos, PCB's or urea formaldehyde, having been generated,
released into, stored or deposited over, upon or below the Premises or into
any water systems on or below the surface of the Premises by Seller, or, to
its actual knowledge, from any source whatsoever. As used in this Agreement,
the terms "hazardous substances," "hazardous waste", "pollutant" and
"contaminant" mean any substance, waste, pollutant or contaminant included
within such terms under any applicable Federal, or state statute or
regulation. To best of Seller's knowledge, no demand, claim, notice, suit in
equity, administrative action, investigation or inquiry, whether brought on by
any governmental authority, private person or entity or otherwise, arising
under, relating to or in connection with any environmental laws is pending or
threatened against Seller in respect of the Premises or any past or present
operation of Seller therein.
3.5 Real Property. Except as disclosed on Exhibit I hereto, the
improvements and appurtenances to the Premises and their present use by Seller
do not, and the use of the same by Purchaser (including specifically all
drive-up teller windows), to the best of Seller's knowledge, will not violate
any provision of any
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presently applicable law, zoning ordinance, fire regulation, or restrictive
covenant; except that Seller makes no representations or warranties with
respect to compliance of the Premises with any state or federal law, rule or
regulation pertaining to accessibility of the Premises to individuals with
handicaps or disabilities, including, but not limited to, the Americans with
Disabilities Act and the regulations adopted in connection therewith. Seller
owns the Premises situated in Bellaire, Michigan and Central Lake, Michigan in
fee simple free and clear from all liens and encumbrances whatsoever, subject
only to current taxes which are a lien thereon but not yet due and payable and
other exceptions permitted under this Agreement or otherwise acceptable to
Purchaser. Upon delivery by Seller of the corporate warranty deeds to the
Premises located in Bellaire, Michigan and Central Lake, Michigan at the
Closing, Purchaser will acquire good, valid and marketable fee simple title to
such Premises. Seller is the tenant under the Traverse City Lease which is in
full force and effect in the form previously delivered to Purchaser, and there
are no defaults in any material respect currently existing thereunder. Except
as disclosed in Section 3.12 hereof, no party is in possession of all or any
portion of the Premises, whether as lessee or tenant at sufferance, other than
Seller.
3.6 Personal Property. All of the tangible personal property
described on Exhibit B under the category "Assets Owned" is validly and
indefeasibly owned by Seller free and clear of all liens and encumbrances. Any
personal property located on the Premises in which Seller has a leasehold
interest may be removed from the Premises by the Closing Date without breach
or violation of any applicable lease agreement or any material damage or
alterations to the Premises; provided, however, Seller shall not remove any
such personal property from the Premises unless Purchaser has given Seller
written notice pursuant to Section 5.7 hereof that Purchaser does not want to
assume the applicable lease agreement, in which case such personal property
shall be removed from the Premises, at Seller's expense, on or before the
Closing Date.
3.7 Litigation; Compliance with Law. There are no claims,
demands, actions, suits or proceedings pending or, to Seller's knowledge,
threatened against
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or affecting Seller by any customer, depositor, supplier or employee of Seller
or by any other person on account of any business or related activities
conducted by Seller or its employees or agents at the Premises, and Seller
does not know of any basis in fact for any such claim, demand, action, suit or
proceeding.
3.8 Outstanding Accounts and Contracts As of August 31, 1994,
the aggregate of all Core Deposit liabilities relating to accounts maintained
at the Branch Offices was approximately $49,029,000. Seller has previously
furnished to Purchaser: (a) a complete and accurate list of all types of
accounts offered at the Branch Offices and all outstanding loans secured by
any such accounts; (b) copies of all forms of deposit account contracts,
passbooks, certificates of deposit and other evidences of ownership relating
to such accounts; (c) copies of all powers of attorney, IRS W-9 forms, joint
control agreements and other agreements, orders or instructions relating to
the rights of existing depositors at the Branch Offices; and (d) copies of all
direct deposit agreements with the Social Security Administration or any other
person or party relating to the accounts at the Branch Offices. All such lists
and copies were true, accurate and complete in all material respects.
3.9 Loan Portfolio. All of the loans in the Loan Portfolio
will include all related servicing rights with respect to such loans.
3.10 No Adverse Change in Financial Condition. Since July 31,
1994, there has been no material adverse change in the financial condition,
assets, liabilities or business of Seller. Since such date no event has
occurred or, to Seller's knowledge, is likely to occur that would have a
material adverse effect on the financial condition, assets, liabilities or
business of Seller.
3.11 Disclosure. To the best of its knowledge, Seller has
disclosed to Purchaser all facts material to the Branch Office Properties. No
representation or warranty by Seller contained in this Agreement and no
statement contained in any certificate, schedule, list or other writing
furnished to Purchaser pursuant hereto
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contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading.
3.12 Bellaire Tenancy. Seller has leased a portion of the
Premises situated in Bellaire, Michigan (the "Tenant Premises") to Derman &
Turkelson, a Michigan co-partnership ("Tenant"), in accordance with the terms
of a certain lease dated April 6, 1987 (the "Tenant Lease"), which lease
expired on March 31, 1990. Notwithstanding the expiration of the Tenant Lease,
a true and complete copy of which has previously been provided to Purchaser,
Tenant continues to occupy the Tenant Premises on a month-to-month basis in
accordance with the terms of the Tenant Lease. Seller and Tenant have not
entered into any agreements or understandings, and Seller has not made any
representations to Tenant, regarding Tenant's continued occupancy of the
Tenant Premises on terms other than as set forth in the Tenant Lease. Tenant
is current in the payment of rent for its continued occupancy of the Tenant
Premises through the month of September, 1994.
3.13 Contracts. There are no service or maintenance contracts
with respect to the Premises or any personal property located thereon, any
personal property leases pertaining to the Premises, or any leases or
subleases relating to all or any portion of the Premises, other than the
Traverse City Lease and the Tenant Lease.
3.14 FIRPTA. Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Internal Revenue Code of 1986 and regulations
promulgated thereunder, and Seller will furnish to the Purchaser, at Closing,
an affidavit to this effect.
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
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4.1 Organization, etc. Purchaser is a state bank duly
organized, validly existing and in good standing under the laws of the State
of Michigan, and has the full corporate power to enter into this Agreement and
to carry out its obligations hereunder (subject to receipt of the approvals of
the FIB and the FDIC). Purchaser further represents and warrants that
Purchaser's Board of Directors has approved this Agreement and that upon
receipt of approvals from the FIB and the FDIC, this Agreement will constitute
a legal, valid and binding obligation of Purchaser.
4.2 No Violation, etc. Neither the execution and delivery of
this Agreement nor the performance by Purchaser of its obligations hereunder
constitutes or will constitute a violation of or default under Purchaser's
charter or bylaws or any law, rule, ordinance, regulation, court order,
agreement, indenture or understanding to which Purchaser is a party or by
which Purchaser or its properties is bound or affected.
V. CONDITIONS TO OBLIGATIONS OF PURCHASER
Each and every obligation of Purchaser hereunder is subject to
the satisfaction of the following conditions, or their waiver in writing by
Purchaser, at or prior to the Closing Date:
5.1 Truth and Accuracy. The representations and warranties of
Seller contained in this Agreement shall have been true and correct in all
material respects when made and shall continue to be true and correct in all
material respect through the Closing Date as though made on such date.
5.2 Approval by Regulators. The written approvals of the FIB
and the FDIC to the transactions contemplated hereby shall have been received
and all requisite waiting periods shall have expired.
5.3 Title Commitment. Seller shall have furnished to
Purchaser not
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later that twenty-five (25) days prior to the Closing Date, at Seller's
expense, one or more commitments for title insurance, issued by a title
insurance company reasonably acceptable to Purchaser and bearing a date
subsequent to the date of this Agreement, in which said title insurance
company agrees to issue and deliver, without cost to Purchaser, one or more
policies of title insurance with standard exceptions insuring Purchaser for
the amount of the Purchase Price of the Premises against any loss or damage
incurred by Purchaser's failure to acquire from Seller fee simple marketable
title to the Premises situated in Bellaire, Michigan and Central Lake,
Michigan, subject to building and use restrictions and easements of record and
other exceptions reasonably acceptable to Purchaser, and a leasehold interest
in the Premises located in Traverse City, Michigan pursuant to the Traverse
City Lease. Purchaser shall have a period of ten (10) days following delivery
to it of such commitment or commitments issued by the title insurance company
under this Section 5.3 within which to notify Seller of any exceptions in such
title insurance commitments which do not meet the provisions of this Section
5.3. Any portion of such title insurance commitments as to which notice is not
given shall be deemed to be satisfactory to Purchaser. In the event such
notification is given to Seller, Seller shall have sixty (60) days from the
date of Purchaser's notice of defects in which to cure such defects.
5.4 No Adverse Change. There shall not have been any material
disposition of any of the Premises or personal property set forth on Exhibit
B, or material damage or destruction to the Premises and personal property set
forth in Exhibit B from fire, lightning, smoke, storms, explosion, vandalism
or similar events, nor shall there have been any material adverse change in
the financial condition of Seller or the business of Seller as conducted at
the Branch Offices, including any material adverse change in the offered terms
governing any Core Deposit accounts that is not in the ordinary course of
business consistent with past practices, or any material change in the
aggregate amounts of and relative composition of the Core Deposit accounts or
the Loan Portfolio from that prevailing as of the most recent date that
information was provided by Seller to Purchaser immediately prior to execution
of
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this Agreement.
5.5 Environmental. Acceptance by Purchaser of an environmental
assessment performed by an environmental consultant selected by Purchaser and
approved by Seller, at Purchaser's expense, which states to Purchaser's sole
satisfaction that no present indication exists that hazardous or toxic
materials, wastes or substances have been used, generated, stored, released,
discharged, disposed of or are present on, under or about the Premises or on
any adjoining land to any material extent and that the Premises are free from
and contain no hazardous or toxic substances, asbestos, wastes, chemicals or
liquids to any material extent as such terms are described or defined in the
following statues and rules:
Federal Clean Air Act
Federal Clean Water Act
Federal Resource Conservation and Recovery Act
Comprehensive Environmental Response, Compensation
and Liability Act
Purchaser shall have until 11:59 p.m. on October 10, 1994 to satisfy, waive,
remove this condition or notify Seller in writing as to any objections it has
regarding the environmental condition of the Premises and that Purchaser is
terminating the Agreement. Failure of Purchaser to give Seller the notice
required herein shall be deemed a waiver of this condition by Purchaser.
5.6 Intentionally Omitted.
5.7 Intentionally Omitted.
5.8 Seller Performance. Seller shall have performed all of its
obligations hereunder, except those obligations which by their terms are to be
performed at or after the Closing, and as to such obligations Seller shall be
ready, willing and able to perform the same.
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5.9 No Litigation. No action, suit or proceeding against
Seller or Purchaser prevents, or is pending and seeks to prevent, the
consummation of the transactions contemplated hereby.
5.10 Other. Purchaser shall have received from Seller all
lists, schedules and copies referred to in Section 3.8 not previously
delivered by Seller prior to the execution of this Agreement, and such
certificates of Seller's officers as Purchaser reasonably deems necessary to
evidence the continued truth and accuracy in all material respects of Seller's
representations and warranties as of the Closing Date and Seller's compliance
in all material respects with all other agreements and covenants by Seller
contained herein.
5.11 Landlord Consent and Estoppel Affidavit. Seller shall have
obtained a written consent, in form and substance acceptable to Purchaser
(which form Purchaser shall cause to be prepared and circulated within seven
(7) days after the date of this Agreement), from the landlord under the
Traverse City Lease to the assignment of the Traverse City Lease from Seller
to Purchaser, and an estoppel affidavit from such landlord, in form and
substance acceptable to Purchaser, attesting to the continuing existence of
the Traverse City Lease and the non-existence of any defaults thereunder,
among other things.
5.12 Tenant Estoppel. Seller shall have obtained an estoppel
affidavit from the Tenant, in substantially the form of Exhibit H, pursuant to
which Tenant shall have agreed to attorn to Purchaser as landlord under the
terms of the Tenant Lease upon consummation of the transactions contemplated
hereby, and acknowledging the continued occupancy of the Tenant Premises by
Tenant on a month-to-month basis in accordance with the terms of the Tenant
Lease, that such continued occupancy may be terminated upon thirty (30) days
written notice to Tenant, and that there are no defaults under the terms of
the Tenant Lease, among other things.
VI. CONDITIONS TO OBLIGATIONS OF SELLER
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Each and every obligation of Seller hereunder is subject to the
satisfaction of the following conditions, or their waiver in writing by
Seller, at or prior to the Closing Date:
6.1 Approvals by Regulators. The written approvals of the FIB
and the FDIC to the applications submitted by Purchaser for the transactions
contemplated hereby shall have been received by the Purchaser and all
requisite waiting periods shall have expired.
6.2 Purchaser Performance. Purchaser shall have performed all
of its obligations hereunder, except those obligations which by their terms
are to be performed at or after the Closing, and as to such obligations
Purchaser shall be ready, willing and able to perform the same.
6.3 No Litigation. No action, suit or proceeding against
Seller or Purchaser prevents, or is pending and seeks to prevent, the
consummation of the transactions contemplated hereby.
6.4 Other. Seller shall have been provided with a written
statement from Purchaser indicating that each of the conditions set forth in
Section 5 hereof have been satisfied or waived and that, subject to
Purchaser's rights pursuant to Section 8.7 hereof, Purchaser accepts the
Premises and the Branch Office Properties "as is" in their present condition.
VI. CONDUCT PRIOR TO CLOSING
During the period of time from the date of execution of this
Agreement to the date of Closing the parties agree to take the following
action:
7.1 Applications to Regulators. Promptly after execution of
this Agreement, Purchaser shall prepare and submit applications to the FIB and
the FDIC and
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any other required regulatory agency for permission to establish branch
offices at the Premises. To the extent necessary, Seller shall join in such
applications and furnish to Purchaser all necessary financial information,
certificates and other documents as shall be necessary or desirable in
connection with the filing of such applications.
7.2 Intentionally Omitted.
7.3 No Material Change in 0perations. So long as this Agreement
shall remain in effect prior to the Closing Date, Seller shall carry on its
banking business at the Branch Offices in substantially the same manner as
conducted on the date of this Agreement and shall refrain from introducing any
new or unusual methods of operation or accounting. Seller shall not purchase
or commit to purchase any additional furnishings or equipment to be placed on
the Premises without first obtaining Purchaser's written approval for such
action. Additionally, Seller shall not sell any material Branch Office
Property, enter into any material contracts, including leases, concerning the
Premises or pledge or encumber the Premises or Branch Office Property without
first obtaining Purchaser's written approval. Seller shall pay or credit all
regular payments relating to deposit accounts maintained at the Branch Offices
in accordance with its customary practices. During the pendency of this
Agreement, Seller shall grant no pay raises to employees working at the
Premises if said raises would be outside the ordinary course of Seller's
business, unless and until said raises have been approved in writing by
Purchaser.
7.4 Maintenance of Properties. Seller shall maintain the
Premises and all tangible personal property located thereon in accordance with
its customary practices and shall keep the same fully insured under existing
policies of insurance.
7.5 No Breach. Seller shall refrain from doing any act or
omitting to do any act which will cause a material breach of any contract or
commitment relating to its business conducted at the Branch Offices or the
properties included in the Branch Office Properties.
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7.6 Access to Records and Premises. Within fifteen (15) days
after the date of this Agreement, Seller shall, to the extent it has such
information available, provide Purchaser with the information specified on
Exhibit C attached hereto, and Seller agrees to provide updates of such
information as required by Section 2.2. Following execution of this Agreement,
Seller agrees to provide Purchaser, or its representatives, with access during
normal business hours to the Premises to permit Purchaser to install telephone
data communication lines and to examine the Premises in order to facilitate
transference of the business conducted thereon, provided that Purchaser shall
not disrupt Seller's operations in carrying out such activities, Seller also
agrees to make available for inspection by Purchaser the books and records
pertaining to the business of Seller as conducted at the Branch Offices, and
Seller agrees not to destroy any such books and records without giving
Purchaser reasonable prior notice of its intent to do so and an opportunity to
review the same and make copies thereof. Seller further agrees that in the
event Purchaser finds any deficiencies in Seller's books and records
pertaining to the Premises or any of the other Branch Office Properties,
Seller shall, upon request by Purchaser, use its best efforts to cure such
deficiencies as soon as reasonably practicable after receipt of such request
from Purchaser. In the event the sale and transfer as contemplated by this
Agreement is not consummated for any reason within the time periods set forth
in this Agreement, then Purchaser shall, within five (5) business days of
receipt of demand from Seller, return to Seller all originals and copies of
account and customer information, books, records, computer tapes and data
provided to Purchaser pursuant to this Agreement and further agrees to
promptly remove all personal property and communications lines installed by
Purchaser upon receipt of Seller's request therefor.
7.7 No Announcements. Purchaser and Seller shall each refrain
from making any public announcement or any announcement to Seller's customers
(including depositors) of the transactions contemplated by this Agreement
without the prior written approval thereof of the other party unless such an
announcement is required by the Securities and Exchange Commission or some
other regulatory body governing the
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affairs of either the Purchaser or Seller. Additionally, the parties agree to
jointly prepare and issue a press release announcing this transaction on a
mutually agreeable date and Purchaser agrees not to commence the publication
of public notices required in connection with the regulatory approvals
anticipated by Sections 5.2 and 6.1 hereof until the satisfaction or waiver of
the contingency set forth in Section 5.5 hereof.
7.8 Notice to Depositors and Customers. Purchaser, at its sole
cost and expense, shall prepare and send a notice, promptly following the
Closing, to the depositors whose accounts it is acquiring and to the loan
customers, which notice shall comply with all requirements of regulatory
authorities.
7.9 No Other Agreements. Seller agrees that so long as this
Agreement is pending, it will not solicit any offers or enter into any
agreements or understandings with any other party relating to the disposition
of the Branch Office Properties or Premises without the prior written consent
of the Purchaser.
7.10 Surveys. Within ten (10) days after the date of this
Agreement, Seller shall deliver to Purchaser any existing surveys of the
Premises situated in Bellaire, Michigan and Central Lake, Michigan which
Seller has in its possession.
7.11 Best Efforts. Each party to this Agreement shall use its
best efforts to render its representations and warranties hereunder true and
correct, to perform its covenants and obligations hereunder, to obtain as soon
as possible all government and other third-party consents required to be
obtained by it, and to take such action as may be necessary to close the
transactions contemplated herein on or before December 31, 1994.
7.12 No-Shop Clause From the day hereof until the later of the
Closing or June 30, 1995, the Seller, its affiliates, and their respective
officers, directors, employees and other agents shall immediately cease any
existing discussions or negotiations with any person or entity conducted with
respect to any proposal for a
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merger or other business combination or sale of any assets inconsistent with
the transactions anticipated hereby (a"Sale Proposal") and will not directly
or indirectly take any action to facilitate, initiate, or encourage any offer
or indication of interest from any person or entity with respect to any Sale
Proposal, propose, authorize, recommend or enter into any agreement with
respect to any Sale Proposal, or disclose any non-public information relating
to the Branch Office Properties or afford access to any such properties or the
books and records relating thereto to any person or entity who might be
considering making, or who has made, an offer with respect to a Sale Proposal.
VIII. ACTION SUBSEQUENT TO CLOSING
8.1 Assistance After Closing. With respect to any alarm and
surveillance or other equipment not purchased by Purchaser hereunder, Seller
agrees to keep in service and make available to Purchaser any such equipment
at the Premises for a period of up to fifteen (15) business days after the
Closing, and Purchaser agrees to reimburse Seller for a pro rata portion of
the costs for such systems for the time of actual use thereof by Purchaser.
8.2 Removal of Property. If Purchaser shall request, Seller
agrees to remove from the Premises any tangible personal property located
thereon not sold to Purchaser as a part of the Branch Office Properties prior
to the Tuesday following the Closing.
8.3 Post-Closing Settlement. For a period of ninety (90) days
following Closing, Seller shall consult with Purchaser upon presentment of any
checks, drafts, incoming ACH debits and credits, credit card debits and
adjustments, ATM transactions on sold accounts (only for ten (10) days) and
other negotiable instruments drawn on any of the deposit accounts transferred
to Purchaser hereunder, and if assured by Purchaser that sufficient funds are
available to honor such
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instruments, Seller shall pay such instruments. Upon presentment of such
instruments following such consultation with and assurance by Purchaser and
payment by Seller, Purchaser agrees to purchase such checks and instruments
from Seller for the face amount thereof. If any customer of Seller whose
deposit account is transferred to Purchaser hereunder has, prior to the
Closing Date, presented or deposited a negotiable instrument drawn on another
financial institution for collection and payment, and such instrument
subsequently is dishonored by the drawee institution, Purchaser agrees to
purchase such negotiable instrument from Seller for the face amount thereof
provided that at the time of transfer of such deposit account to Purchaser
there existed a proper hold on sufficient credit in the account against which
to charge such dishonored instrument.
8.4 Indemnification.
(a) Seller shall indemnify, defend and hold Purchaser, its
directors, officers, employees and agents harmless from and
against all demands, damages, liabilities, costs and
expenses (including, without limitation, interest,
penalties and attorneys' fees) asserted against, imposed on
or incurred by such indemnified party by reason of or
resulting from (a) any material breach of the
representations, warranties or covenants of Seller herein;
and (b) any other material liability or obligation of or
claim against Seller or Purchaser arising out of any
occurrence, event or state of facts relating to any of the
properties transferred to Purchaser hereunder existing or
having taken place prior to the Closing, including, without
limitation, any material liability or obligation for any
tax, penalty or interest arising from or with respect to
any of the Branch Office Properties, or operations of the
business conducted therewith, which is incurred or is
attributable to any period on or prior to the Closing Date,
other than those liabilities, obligations and claims
specifically
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assumed by Purchaser hereunder. Purchaser will give Seller
notice of any such claims, and Seller will undertake the
defense thereof at its own cost by representatives of its
own choosing. Further, Purchaser shall have the option of
participating in said defense at its own expense.
(b) Purchaser shall indemnify, defend and hold Seller, its
directors, officers, employees and agents harmless from and
against all demands, damages, liabilities, costs and
expenses (including, without limitation, interest,
penalties and attorneys' fees) asserted against, imposed on
or incurred by such indemnified party by reason of or
resulting from any material breach of the representations,
warranties or covenants of Purchaser herein. Seller will
give Purchaser notice of any such claims, and Purchaser
will undertake the defense thereof at its own cost by
representatives of its own choosing reasonably acceptable
to Seller. Further, Seller shall have the option of
participating in said defense at its own expense.
8.5 Tax Reports. Seller agrees to file with appropriate
federal, state, and local taxing authorities and to send to all Core Deposit
account customers and loan customers, including but not limited to Deposit
Related Loan customers, if any, all required reports pertaining to the
interest paid to or by them with respect to their accounts from the beginning
of the calendar year in which the Closing occurs to (but not including) the
Closing Date. Purchaser agrees to file with appropriate federal, state, and
local taxing authorities and to send to all Core Deposit account customers and
loan customers, including but not limited to Deposited Related Loan customers,
if any, all required reports pertaining to the interest paid to or by them
with respect to their accounts from and including the Closing Date to the last
day of the calendar year in which the Closing occurs.
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8.6 Account Transfers. Following the Closing, Purchaser agrees,
for all Core Deposit accounts acquired hereunder, to honor all existing
arrangements with the Automated Clearing House Association ("ACHA") for
incoming transactions to and from accounts with other financial institutions
and third parties (including Seller) and to honor any arrangements for
transfers by Seller from one account of a depositor to another account at the
Branch Offices, but Purchaser shall not be required to honor any other type of
account transfer arrangement offered by Seller to the depositors whose
accounts are transferred hereunder.
8.7 Put Rights Regarding Loan Portfolio. Notwithstanding
anything in this Agreement to the contrary, for a period of ninety (90) days
following the Closing Date, Purchaser shall have an option, exercisable in its
sole discretion and upon written notice to Seller, to cause Seller to
repurchase any or all loans in the Loan Portfolio (the "Purchased Loans") from
Purchaser, at the price paid at Closing by Purchaser for such Purchased Loans,
adjusted for all payments, accruals and advances received, booked or made, as
the case may be, in accordance with the written agreements relating to such
Purchased Loans from the Closing Date to the date of such repurchase by
Seller. In the event that Purchaser exercises its rights under this Section
8.7, Seller shall repurchase such Purchased Loans described in such written
notice within fifteen (15) days following receipt of such written notice, and
Purchaser shall deliver to Seller such instruments of conveyance as may
reasonably be necessary to effectuate such repurchase, including but not
limited to a general assignment of rights with respect to such Purchased
Loans, original promissory notes and other negotiable instruments duly
endorsed to Seller's order and assignments in recordable form of mortgages,
UCC financing statements and other security instruments relating to such
Purchased Loans, and such other documents as Seller may reasonably request.
8.8 Further Assurances. Each party hereto agrees to execute and
deliver such other documents as the other party hereto may reasonably deem
necessary or desirable to effectuate the transactions contemplated by this
Agreement.
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8.9 Covenant Not To Compete. Seller hereby covenants and agrees
that for a period of two years commencing on the Closing Date none of Seller,
Seller's affiliates, and their respective officers, directors, employees and
other agents will establish a deposit gathering branch office or otherwise,
directly and knowingly, solicit deposits from any of the owners of any of the
Core Deposits or loans to the borrowers, guarantors or other obligors under
any loans included in the Loan Portfolio within a radius of five miles of any
of the Branch Offices (the "Territory"). Not withstanding anything to the
contrary express or implied herein, this Covenant Not to Compete shall neither
prohibit nor apply to (i) any automated teller machines owned or operated by
Seller now located in the Territory and any automated teller machines owned
and operated by third parties which participated in an ATM network in which
Seller also participates, (ii) any deposit gathering branch offices of third
parties now or hereafter established in the Territory that are subsequently
acquired by Seller or its affiliates as a result of a merger or acquisition
involving any such third party or Seller or its affiliates, (iii) general
advertisements or solicitations, or (iv) deposit accounts associated with any
extensions of credit to a depositor which were not solicited in contravention
of this Section 8.9.
IX. MISCELLANEOUS
9.1 Survival of Representations. The representations and
warranties of Seller and Purchaser herein shall survive the Closing for a
period of one (1) year. All statements contained herein or in any certificate,
schedule, list or other document delivered pursuant hereto shall be deemed
representations and warranties within the meaning of this Section.
9.2 No Commissions. Except for the fee to be paid by Purchaser
to W.Y. Campbell & Company, each of the parties hereto represents and warrants
to the other that there are no claims for brokerage commissions or finder's
fees in connection with the transactions contemplated by this Agreement. Each
party will indemnify the other and hold it harmless from and against any and
all claims or
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liabilities for brokerage commissions or finder's fees incurred by reason of
any action taken by it.
9.3 Termination of Agreement. Notwithstanding any other
provision contained herein, this Agreement may be terminated (i) by either
party upon written notice to the other and without liability for breach hereof
by the terminating party if the Closing has not occurred by March 31, 1995 for
any reason other than a breach of this Agreement by the terminating party,
(ii) by the non-breaching party in the case of a material breach of the
representations, warranties or agreements set forth herein (excluding Section
7.11, the violation of which will not constitute a material breach of this
Agreement) or in case any of the conditions precedent to the terminating
party's obligation to proceed has not been satisfied or waived by March 31,
1995, or (iii) if the Closing has not occurred by December 31, 1994 either
party may terminate this Agreement provided such party is not in material
breach of any representation warranty or covenant contained in this Agreement,
such party pays the other party $20,000.00 in full and complete satisfaction
of all obligations and liabilities whereunder, and such party provides the
other party written notice of its election to terminate this Agreement prior
to 5:00 p.m., Eastern Standard Time, on January 3, 1995.
9.4 Expenses. Seller agrees that all fees and expenses incurred
by it in connection with this Agreement shall be borne by it, and Purchaser
agrees that all fees and expenses incurred by it in connection with this
Agreement shall be borne by it.
9.5 Parties in Interest. This Agreement and the schedules and
other writings referred to herein or delivered pursuant hereto which form a
part hereof contain the entire understanding of the parties with respect to
its subject matter. There are no restrictions, promises, warranties, covenants
or undertakings other than expressly set forth herein or therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to its subject matter. This
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<PAGE>
Agreement may be amended only by a written instrument duly executed by the
parties and may not be assigned by Purchaser without the express written
consent of the Seller. Any condition to a party's obligations hereunder may be
waived in writing by such party.
9.6 Employees. Purchaser shall have no obligation to employ any
person now employed by Seller. Purchaser will review the qualifications and
may interview some or all of Seller's employees working at the Premises, and
may offer employment positions on an at will basis to all, some or none of the
employees now employed by Seller at salary and wage levels and benefits
determined solely by Purchaser. Each individual employee may accept or reject
Purchaser's employment offer. Purchaser assumes no liability for any accrued
or vested employee benefits of any of Seller's employees.
9.7 Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.8 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and will be
deemed to have been duly given if delivered or mailed (registered or certified
mail, postage prepaid, return receipt requested or Federal Express or other
overnight delivery service which guarantees next day delivery and requires
acknowledgement of receipt):
If to Purchaser: Brian D. Bell, Chairman, President
and Chief Executive Officer
CB Financial Corporation
One Jackson Square
Jackson, Michigan 49201
With a copy to: Richard M. Bolton, Esq.
Dickinson, Wright, Noon, Van Dusen
& Freeman
500 Woodward Avenue, Suite 4000
Detroit, Michigan 48226-3598
If to Seller: Dana M. Cluckey
Executive Vice President
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Republic Bancorp, Inc.
1070 East Main Street
Owosso, Michigan 48867
With a copy to: George E. Parker III, Esq.
Miller, Canfield, Paddock and
Stone, P.L.C.
150 W. Jefferson, Suite 250
Detroit, Michigan 48226-4415
9.9 Confidentiality. For purposes of this Agreement, any and
all financial information, schedules, agreements, books, records, accounts,
reports, customer lists, customer information, electronic data bases, loan
files, instruments, papers, documents, or other information relating to the
Branch Office Properties shall be deemed to be "Confidential Information".
(a) While this Agreement is in effect and at all times
thereafter unless and until this transaction is
consummated, Purchaser shall treat as strictly
confidential, and shall not divulge to any other person
(natural or corporate) the Confidential Information which
it may come to know as a direct result of a disclosure by
Seller or which may come into its possession directly as a
result of and during the course of investigation pursuant
to this Agreement. Purchaser shall be permitted to disclose
such Confidential Information to its directors, officers,
employees, attorneys, accountants, and financial advisers
who have a need for such information in connection with
this transaction.
(b) The provisions of this Section shall not preclude Purchaser
from using or disclosing at any time Confidential
Information which is (i) readily ascertainable from public
information or trade sources; (ii) reasonably required to
be included in a report filed with any governmental agency;
(iii) reasonably required to be included in any filing or
application required by any regulatory agency; (iv)
received from a third party not under any obligation to
keep such information confidential; (v) required by law or
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<PAGE>
regulation to be disclosed; (vi) known by it before the
commencement of discussions among the parties to this
Agreement; or (vii) subsequently developed by it
independent of its disclosure pursuant to or in connection
with this Agreement.
9.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same Agreement.
9.11 Governing Law. Except insofar as this Agreement is
subject to federal banking law, this Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF the parties have caused this Agreement to be
executed on their behalf by duly authorized officers as of the date first
above written.
REPUBLIC BANK
By: /s/ Barry J. Eckhold
------------------------------------
Barry J. Eckhold
President and Chief Executive
Officer
CB NORTH
By: /s/ Francis B. Flanders
------------------------------------
Its: Chairman, President and C.E.O.
-------------------------------
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Exhibit 28(h)
AGREEMENT
THIS AGREEMENT is made by and between REPUBLIC BANK, a
Michigan-chartered state bank, ("Purchaser"), and STANDARD FEDERAL BANK, a
federal savings bank ("Seller"). Purchaser desires to acquire from Seller, and
Seller is willing to sell to Purchaser, the following branch office buildings
(hereinafter "Premises") the deposit accounts and business conducted therefrom
and certain items of equipment and furniture located therein as well as the
deposit accounts located at the branch located at G-4442 Beecher Road, Flint
Township, Michigan.
The branch offices which are the subject of this Agreement
are as follows:
1. 220 E. Main Street, Flushing, Michigan
2. 1345 North Shiawassee Street, Owosso, Michigan
In consideration of the premises and the mutual covenants and undertakings set
forth hereinafter, the parties agree as follows:
I. PURCHASE AND SALE
1.1 Property to be Transferred. Subject to the terms and
conditions of this Agreement, effective at the close of business on the day of
closing ("Closing Date") (as defined hereafter), Seller shall sell, transfer,
convey, warrant and assign to
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Purchaser the following properties:
(a) The Premises more particularly described in Exhibit A
hereto together with all easements, improvements thereon and
all appurtenances thereto;
(b) All of Seller's right, title and interest in and to the
office equipment, furniture, office records, maintenance
contracts, if any, relating to the Premises and other items of
personal property , including all leased equipment, all of
which is described in Exhibit B attached hereto, all of which
is (and will be at the closing) located on the Premises.
Specifically excluded from the terms of this sale is the
property listed on Exhibit B-1.
(c) All cash and currency issued by the United States of
America held in the vaults at the Premises as of the Closing
Date.
(d) All of Seller's right, title and interest in and to all
deposits including but not limited to the savings accounts,
certificates of deposit, money market checking accounts
("MMCA's"), money market deposit accounts ("MMDA's"), checking
("NOW") accounts, all other forms of NOW or demand accounts,
including economy checking accounts ("ECA's"), regular business
checking accounts and low volume business checking accounts
("LBCA"), all individual retirement accounts ("IRA's") except
self-directed IRA's, Keogh plans, self
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employed Pension Plans ("SEPs"),and those IRA's which belong to
individuals aged 59 l/2 or greater as of the Closing Date and
which are associated with the Premises as well as the branch
office located at G-4442 Beecher Road, Flint Township,
Michigan, (hereinafter "Core Deposits"), all loans secured by
any of such Core Deposits being transferred to Purchaser in
whole or in part, all overdraft loans or lines of credit
associated with any Core Deposit accounts being transferred to
Purchaser, (collectively "Deposit-Related Loans) all land
contract accounts being serviced by Seller for which the Land
Contract payments are deposited into a deposit account being
transferred to Purchaser according to the books and records of
Seller at the effective date of transfer, all of Seller's
rights and interests under: (i) assignable service and
maintenance contracts in effect with respect to the Premises;
(ii) all assignable personal property leases; and, (iii) all
leases and subleases.
(e) A sum of money equal to: (i) the aggregate of the Core
Deposits assumed by Purchaser pursuant to Section 1.2, reduced
by the aggregate principal amount plus accrued but unpaid
interest, on all Deposit-Related Loans, (ii) the amount of
accrued but unpaid interest on such Core Deposits as of the
Closing Date; (iii) the amount of prepaid land contract
servicing fees, if
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applicable, calculated on a pro rata basis from the Closing
Date minus the amount of cash on hand and currency in the
vaults in the Premises.
All of the foregoing are sometimes hereafter referred to as the "Branch Office
Properties." Specifically excluded from the definition of Branch Office
Properties and from the terms of this sale are all individual retirement
accounts belonging to individuals aged 59 l/2 or greater as of the Closing
Date, all self-directed IRA's, all self employed pension plans ("SEPs), and
all Keogh accounts.
1.2 Purchase Price. In full consideration for the sale,
transfer and assignment of the Branch Office Properties, Purchaser agrees to
pay to Seller a sum of money (the "Purchase Price") equal to the Seller 's
book value as of the date of the Closing of the Premises and Furniture,
fixtures and equipment located therein plus a Deposit Premium as hereinafter
defined. The Deposit Premium shall equal 3.75 percent of the total Core
Deposits (excluding for this purpose only certificates of deposit issued and
outstanding as of the Closing Date in amounts of $100,000 or more) transferred
to Purchaser at the time of closing.
The Seller and the Purchaser agree that they will prepare and file their
federal and any state or local income tax returns based on the resulting
Purchase Price of the Branch Office Properties described in this Section 1.2.
The Seller and the Purchaser agree that they will prepare and file any and all
notices, and other filings required pursuant to Section 1060 of the Internal
Revenue Code of 1986, as amended, including IRS Form 8594, and that all
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such notices and filings will be prepared based on a mutually agreeable
allocation of the Purchase Price.
In addition, if applicable, Purchaser will pay any exit fees from the
Savings Association Insurance Fund ("SAIF") and any entrance fees to the Bank
Insurance Fund ("BIF") which are assessed or otherwise become payable as a
result of this Agreement.
Purchaser also agrees to assume the specified deposit liabilities of Seller
arising as of the Closing on account of savings, NOWs, MMCAs, MMDAs, ECAs,
RBCAs, LBCAs, certificate of deposits, and IRA's, Seller's obligations to pay
all accrued but unpaid interest thereon, and Seller's obligations under all
other agreements relating to such deposit accounts in each case as the same
shall exist at the Closing.
1.3 Prorated Items Price. All real and personal property taxes
and special assessments which have become a lien on the Premises or on any
personal property as of the Closing shall be paid by Seller. Current real and
personal property taxes, if any, shall be prorated and adjusted at the Closing
on a fiscal year basis. Water bills and other utility bills, if any, will be
prorated and adjusted as of the Closing. Seller shall be reimbursed by
Purchaser for the portion, prorated as of the Closing Date, of the deposit
insurance premiums paid by Seller to the FDIC with respect to the Core
Deposits for the second semi-annual assessment period in 1994 if the Closing
occurs in calendar year 1994 or for the first semi-annual (or first or second
quarterly
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assessment period, if applicable) assessment period if the Closing
occurs in calendar year 1995. For purposes of calculating this reimbursement,
an assessment rate shall be used which is the Seller's risk-based assessment
rate as established by the FDIC as applicable to the Savings Association
Insurance Fund ("SAIF").
II. CLOSING
2.1 Closing. The closing ("hereinafter Closing") shall take
place as of the close of business on either the first, second or third
Saturday following the expiration of thirty (30) days following receipt of the
last to be obtained of the regulatory approvals required under the terms of
this Agreement. The Closing shall take place at the offices of Seller at 2600
West Big Beaver Road, Troy, Michigan on the first, second or third Saturday
following receipt of all required regulatory approvals. The selection of the
precise Closing Date shall be a date mutually agreeable to Purchaser and
Seller (hereinafter "Closing Date").
2.2 Deliveries by Seller. Seller shall deliver to Purchaser the
following:
(a) At the Closing, Seller shall deliver to Purchaser:
(i) to the extent available to Seller, the information
described on Exhibit C hereto with respect to the Core Deposit
accounts transferred to Purchaser, which shall be complete and
accurate as of the close of business on
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the day preceding the Closing Date, and shall be certified as
such by the Chief Financial or Accounting Officer of Seller;
(ii) corporate warranty deeds in the form set forth in Exhibit
D, conveying marketable title to the Premises, subject only to
existing building and use restrictions and easements of record,
reasonably acceptable to the Purchaser and acceptable to the
title insurance company for purposes of securing title
insurance covering the Premises; "real estate transfer
valuation affidavits with respect to such Premises executed by
Seller in the form prescribed by the Register of Deeds in the
county in which each such Premises is located for determining
the amount of the transfer tax payable with respect to the
conveyance of such Premises to Purchaser hereunder (which
transfer tax shall be payable by Seller), and the affidavit
referred to in Section 3.12 hereof;" (iii) a bill of sale
conveying marketable title to the tangible personal property
described in Exhibit B, in the form as set forth in Exhibit E;
(iv) a general assignment of contract rights transferring to
Purchaser all of Seller's rights and privileges under the Core
Deposit account contracts, and Deposit-Related Loan agreements,
all leases, service contracts and other agreements to be
assumed by Purchaser, in the form as set forth in Exhibit F,
along with copies of all such contracts,
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agreements, and lists; (v) a certificate of Seller's Secretary
attesting to the approval of this Agreement by its Board of
Directors, with copies attached thereto of the resolutions
adopted by its Board of Directors; (vi) the title insurance
commitments required by Section 5.4, along with irrevocable
instructions to the title insurance company to issue and
deliver the title insurance policies to Purchaser in accordance
therewith; (vii) a list of all (A) assignable service and
maintenance contracts in effect with respect to the Premises
and all personal property located on the Premises, (B) all
assignable personal property leases pertaining to the Premises,
and (C) all assignable leases and subleases with respect to the
Premises, along with a copy of each such contract, lease and
sublease; and with a copy of each such contract, lease and
sublease; and (viii) such other documents as Purchaser may
reasonably request to more effectively transfer the Branch
Office Properties to Purchaser. Seller shall deliver possession
of the Branch Office Properties to Purchaser at the close of
business on the Closing Date. (vii) such other documents as
Purchaser may reasonably request to more effectively transfer
the Branch Office Properties to Purchaser. Seller shall deliver
possession of the Branch Office Properties to Purchaser at the
close of business on the Closing Date.
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(b) By ten o'clock in the morning, Detroit time, on the first
business day for both Seller and Purchaser following the
Closing Date, Seller shall deliver to Purchaser (i) a sum of
money, in immediately available funds, equal to the aggregate
balance of all Core Deposits liabilities (including accrued but
unpaid interest) transferred to Purchaser, reduced by the
aggregate principal and net accrued but unpaid interest amounts
on all specified Deposit-Related Loans, computed as of the
close of business on the day preceding the Closing Date
relating to the deposit account liabilities transferred to
Purchaser; (ii) a sum of money, in immediately available funds,
which represents interest on the sum described in Section
2.2(b)(i) at the Federal Funds Rate for "this week" as last
reported prior to the Closing Date by the Board of Governors of
the Federal Reserve System ("Federal Reserve Board") in the
Federal Reserve Statistical Release H-15, Selected Interest
Rates (the "Federal Funds Rate") for the period beginning with,
and including, the Closing Date to, but not including, the date
of payment hereunder; and (iii) a sum of money, in immediately
available funds, equal to the amount that Seller should have,
but did not, withhold during the year in which the Closing
occurs from interest paid or credited on the deposit account
liabilities to be
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assumed by Purchaser hereunder for remittance to the IRS
pursuant to any applicable laws or regulations relating to
backup withholding of interest, MINUS a sum of money equal to
the cash on hand and currency in the vault at the Premises.
2.3 Deliveries by Purchaser. Purchaser shall deliver to Seller
the following:
(a) At the Closing, Purchaser shall deliver to Seller:
(i) an instrument of assumption substantially in the form
attached hereto as Exhibit G, pursuant to which Purchaser
assumes and agrees to perform all of Seller's liabilities and
obligations relating to the Core Deposits and Deposit-Related
Loans transferred to Purchaser by Seller, and the servicing
agreements for land contracts being transferred to Purchaser;
and (ii) a certificate of Purchaser's Cashier or Secretary
attesting to the approval of this Agreement by the Purchaser's
Board of Directors, with copies attached thereto of the
resolutions adopted by Purchaser's Board of Directors.
(b) By ten o'clock in the morning, Detroit time, on the first
business day for both Seller and Purchaser following the
Closing Date, Purchaser shall deliver to Seller: (i) a sum of
money, in immediately available funds, equal to the total of
the consideration set
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forth in Section 1.2; and (ii) a sum of money, in immediately
available funds, which represents interest on the sum described
in Section 2.3(b)(i) at the Federal Funds Rate for the period
beginning with, and including, the Closing Date to, but not
including, the date of payment hereunder.
Seller shall deliver possession of the Branch Office Properties to Purchaser
at the close of business on the Closing Date.
2.4 Net Payment. Notwithstanding any other provisions of this
Section 2 to the contrary, Purchaser and Seller agree that at the time of
Closing, they will calculate the net payment due pursuant to Section 2.2 and
Section 2.3 and the party owing funds to the other will remit said net payment
in the manner set forth in Section 2 of this Agreement.
2.5 Post-Closing Settlement. On the first or second day
following the Closing Date, Seller shall deliver to Purchaser a complete and
accurate list of the information described on Exhibit C with respect to all
Core Deposits and Deposit-Related Loan balances included in the Branch Office
Properties as of the close of business on the Closing Date, certified by the
Chief Financial or Accounting Officer of Seller. Within 10 business days after
the Closing, at a time and place to be agreed upon, the parties shall make an
appropriate transfer of funds to reflect any change in total deposits and loan
balances from the close of
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business on the day preceding the Closing through the close of business on the
Closing Date, plus any amount required to reflect NOW, MMCA, MMDA, ECA,
certificate of deposit, and IRA transactions that settle after the Closing
Date as required by Section 8.3. If Seller's certified list of Core Deposit
Accounts shall be unacceptable to Purchaser, Deloitte & Touche shall conduct
an audit of such savings accounts within 30 days after the Closing and shall
certify the results thereof to the Purchaser and Seller and such certified
report shall be conclusive and binding on both parties hereto, and the cost of
such audit shall be borne equally by both parties.
III. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1 Organization, etc. Seller is a federal savings bank duly
organized, validly existing and in good standing under the federal Home
Owner's Loan Act of 1933, as amended, and has the full corporate power to
enter into this Agreement and to carry out its obligations hereunder (subject
to receipt of the approval of its Board of Directors and the Office of Thrift
Supervision, Department of Treasury (hereinafter "OTS") approval referred to
in Section 7.1). Seller further represents and warrants that upon approval by
its Board of Directors and the OTS, this Agreement will constitute Seller's
legal, valid and binding obligation.
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3.2 No Violation, etc. Neither the execution and delivery of
this Agreement nor the performance by Seller of its obligations hereunder
constitutes or will constitute a violation of or default under Seller's
charter or bylaws or any law, rule, ordinance, regulation, court order,
agreement, indenture or understanding to which Seller is subject or by which
Seller is bound.
3.3 Taxes. Seller has duly and timely filed all returns and
reports with federal, state and local taxing authorities relating to the
payment of interest, earnings or dividends on the Core Deposits to be
transferred to Purchaser hereunder, and has duly and timely paid all taxes,
levies and assessments on such accounts and any other of the Branch Office
Properties, including (but not limited to) any applicable intangibles taxes,
personal property taxes, real property taxes, sales and use taxes and excise
taxes. To the best of its knowledge and to the best of its ability, Seller has
obtained, to the extent required by law, all federal tax identification
numbers related to the Core Deposits.
3.4 Environmental. Seller has no actual knowledge of any
hazardous substances, hazardous waste, pollutant or contaminant, including,
but not limited to, asbestos, PCB's or urea formaldehyde, having been
generated, released into, stored or deposited over, upon or below the Premises
or into any water systems on or below the surface of the Premises by Seller,
or, to its actual knowledge, from any source whatsoever. As used in this
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Agreement, the terms "hazardous substances," "hazardous waste," "pollutant"
and "contaminant" mean any substance, waste, pollutant or contaminant included
within such terms under any applicable Federal, or state statute or
regulation. No demand, claim, notice, suit in equity, or administrative
action, by any governmental authority, arising under, relating to or in
connection with any environmental laws is pending or threatened against Seller
in respect of the Premises or any past or present operation of Seller therein.
3.5 Real Property. The improvements and appurte-nances to the
Premises and their present use by Seller do not, and the use of the same by
Purchaser (including specifically all drive-up teller windows), to the best of
Seller's knowledge, will not violate any provision of any presently applicable
zoning ordinance, fire regulation, or restrictive covenant; except that Seller
makes no representations or warranties with respect to compliance of the
Premises with any state or federal law, rule, or regulation pertaining to
accessibility of the Premises to individuals with handicaps or disabilities,
including, but not limited to, the Americans with Disabilities Act and the
regulations adopted in connection therewith. Seller owns the Premises in fee
simple free and clear from all liens and encumbrances whatsoever, subject only
to current taxes which are a lien thereon but not yet due and payable. Upon
delivery by Seller of the corporate warranty deeds at the Closing, Purchaser
will acquire good, valid and marketable
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fee simple title to the Premises. No party is in possession of all or any
portion of the Premises, whether as lessee or tenant at sufferance, other than
Seller.
3.6 Personal Property. All of the tangible personal property
described on Exhibit B under the category "Assets Owned" is validity and
indefeasibly owned by Seller free and clear of all liens and encumbrances. Any
personal property located on the Premises and listed on Exhibit B-1 in which
Seller has a leasehold interest may be removed from the Premises by the
Closing Date without breach or violation of any applicable lease agreement or
any material damage or alterations to the Premises.
3.7 Litigation; Compliance with Law. There are no claims,
demands or actions pending or, to Seller's knowledge, threatened against
Seller by any customer, depositor, supplier or employee of Seller on account
of any business or related activities conducted by Seller or its employees or
agents at the Premises, and Seller does not know of any basis in fact for any
such claim, demand or action.
3.8 Outstanding Accounts and Contracts. As of September 2,
1994, the aggregate of all Core Deposits maintained at the Branch Office
Properties and the branch located at G-4442 Beecher Road, Flint Township,
Michigan, was approximately $20.1 Million. As soon as reasonably feasible
after execution of this
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Agreement, Seller shall, to the extent it has such information available,
furnish to Purchaser: (a) a complete and accurate list of all types of
accounts offered at its office located on the Premises and all outstanding
loans secured by any such accounts; (b) copies of all forms of deposit account
contracts, passbooks, certificates of deposit and other evidences of ownership
relating to such accounts; (c) copies of all powers of attorney, IRS W-9
forms, joint control agreements and other agreements, orders or instructions
relating to the rights of existing depositors at such branch office; and (d)
copies of all direct deposit agreements with the Social Security
Administration or any other person or party relating to the accounts at such
branch offices. All such lists and copies shall be true, accurate and complete
in all material respects.
3.9 Disclosure. To the best of its knowledge, Seller has
disclosed to Purchaser all facts material to the Branch Office Properties. No
representation or warranty by Seller contained in this Agreement and no
statement contained in any certificate, schedule, list or other writing
furnished to Purchaser pursuant hereto, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
3.10 No Adverse Change in Financial Condition. Since October 1,
1994, there has been no material adverse change in the
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financial condition, assets, liabilities or business of Seller. Since such
date no event has occurred or, to Seller's knowledge, is likely to occur that
would have a material adverse effect on the financial condition, assets,
liabilities or business of Seller.
3.11 Contracts. There are no service or maintenance contracts
with respect to the Premises or any personal property located thereon, any
personal property leases pertaining to the Premises, or any leases or
subleases relating to all or any portion of the Premises, other than as
specifically listed on Exhibit I attached hereto.
3.12 FIRPTA. Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Internal Revenue Code of 1986 and regulations
promulgated thereunder, and Seller shall furnish to the Purchaser, at Closing,
an affidavit to this effect.
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
4.1 Organization, etc. Purchaser is a Michigan-chartered state
bank, duly organized, validly existing and in good standing under the laws of
the State of Michigan, and has the full corporate power to enter into this
Agreement and to carry out its obligations hereunder (subject to receipt of
the approval of its Board of Directors and the Financial Institutions Bureau -
State of
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Michigan ("FIB") the Federal Deposit Insurance Corporation ("FDIC"), and the
Federal Reserve Board ("FRB")). Purchaser further represents and warrants that
upon approval by its Board of Directors, the FIB, the FRB and the FDIC, this
Agreement will constitute Purchaser's legal, valid and binding obligation.
4.2 No Violation, etc. Neither the execution and delivery of
this Agreement nor the performance by Purchaser of its obligations hereunder
constitutes or will constitute a violation of or default under Purchaser's
charter or bylaws or any law, rule, ordinance, regulation, court order,
agreement, indenture or understanding to which Purchaser is subject or by
which Purchaser is bound.
V. CONDITIONS TO OBLIGATIONS OF PURCHASER
Each and every obligation of Purchaser hereunder is subject to
the satisfaction of the following conditions, or their waiver in writing by
Purchaser, at or prior to the Closing Date:
5.1 Truth and Accuracy. The representations and warranties of
Seller contained in this Agreement shall be true and correct as of the Closing
Date as though made on such date.
5.2 Director Approval. This Agreement shall have been approved
by the Boards of Directors of both Seller and
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Purchaser within 45 days after execution hereof, and such approvals shall not
have been rescinded or modified.
5.3 Approval by Regulators. The written approvals of the OTS,
the FIB, the FRB and FDIC to the transactions contemplated hereby shall have
been received and all requisite waiting periods shall have expired.
5.4 Title Commitment. Seller shall have furnished to Purchaser,
at Seller's expense, a commitment for title insurance, issued by a title
insurance company reasonably acceptable to Purchaser and bearing a date
subsequent to the date of this Agreement, in which said title insurance
company agrees to issue and deliver, without cost to Purchaser, a policy of
title insurance with standard exceptions insuring Purchaser for the amount of
the Purchase Price of the Premises against any loss or damage incurred by
Purchaser's failure to acquire fee simple marketable title to the Premises
from Seller, subject to building and use restrictions and easements of record
reasonably acceptable to Purchaser. Purchaser shall have a period of ten (10)
days following delivery to it of the commitment issued by the title insurance
company under this paragraph 5.5 within which to notify Seller of any
exceptions in the title insurance commitment which do not meet the provisions
of this paragraph 5.5. Any portion of the title insurance commitment as to
which notice is not given shall be deemed to be satisfactory to Purchaser. In
the event such notification is given
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to Seller, Seller shall have sixty (60) days from the date of Purchaser's
notice of defects in which to cure such defects.
5.5 No Adverse Change. There shall not have been any material
damage to the Premises and personal property set forth in Exhibit B from fire,
lightning, smoke, storms, explosion, vandalism or similar events nor shall
there have been any material adverse change in the business of Seller as
conducted at its branch office located on the Premises, including any material
adverse change in the offered terms governing any Core Deposit accounts or
Deposit Related Loans that is not in the ordinary course of business
consistent with past practices.
5.6 Environmental. Acceptance by Purchaser, in its reasonable
discretion, of an environmental assessment performed by an environmental
consultant selected by Purchaser, at Purchaser's expense, which states to
Purchaser's sole satisfaction that no present indication exists that hazardous
or toxic materials, wastes or substances have been used, generated, stored,
released, discharged, disposed of or are present on, under or about the
Premises or on any adjoining land and that the Premises are free from and
contain no hazardous or toxic substances, asbestos, wastes, chemicals or
liquids as such terms are described or defined in the following statues and
rules:
Federal Clean Air Act
Federal Clean Water Act
Federal Resource Conservation and Recovery Act
Comprehensive Environmental Response, Compensation
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and Liability Act
Copies of all reports received by Purchaser pertaining to the Premises shall
be provided to Seller upon receipt by Purchaser. Purchaser shall have a period
of thirty (30) days from the date that this Agreement is last signed by
Purchaser or Seller to satisfy, waive, remove this condition or notify Seller
in writing as to any objections it has regarding the environmental condition
of the Premises. Failure of Purchaser to give Seller the notice required
herein shall be deemed a waiver of this condition by Purchaser.
5.7 Other. Purchaser shall have received from Seller all lists,
schedules and copies referred to in Section 3.8 not previously delivered by
Seller prior to the execution of this Agreement, and such certificates of
Seller's officers as Purchaser reasonably deems necessary to evidence the
continued truth and accuracy of Seller's representations and warranties as of
the Closing Date and Seller's compliance with all other agreements and
covenants by Seller contained herein.
5.8 Seller Performance. Seller shall have performed all of its
obligations hereunder, except those obligations which by their terms are to be
performed at or after the Closing, and as to such obligations Seller shall be
ready, willing and able to perform the same.
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5.9 No Litigation. No action, suit or proceeding against Seller
or Purchaser prevents, or is pending and seeks to prevent, the consummation of
the transactions contemplated hereby.
VI. CONDITIONS TO OBLIGATIONS OF SELLER
Each and every obligation of Seller hereunder is subject to the
satisfaction of the following conditions, or their waiver in writing by
Seller, at or prior to the Closing Date:
6.1 Approvals by Directors. This Agreement shall have been duly
approved by the Boards of Directors of both Purchaser and Seller within 45
days after execution hereof and such approvals shall not have been rescinded
or modified.
6.2 Approval by OTS. The written approval of the OTS to the
transaction contemplated hereby shall have been received and no conditions or
requirements to such approval shall have been imposed by the OTS which are not
satisfactory to Seller and Purchaser.
6.3 Other. Seller shall have been provided with a written
statement from Purchaser indicating that each of the conditions set forth in
Section 5 hereof have been satisfied or waived and that Purchaser accepts the
Premises and the Branch
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Office Properties "as is" in their present condition. Seller in its sole
discretion may waive this condition in part or in total.
6.4 Purchaser Performance. Purchaser shall have performed all
of its obligations hereunder, except those obligations which by their terms
are to be performed at or after the Closing, and as to such obligations
Purchaser shall be ready, willing and able to perform the same.
6.5 No Litigation. No action, suit or proceeding against Seller
or Purchaser prevents, or is pending and seeks to prevent, the consummation of
the transactions contemplated hereby.
VII. CONDUCT PRIOR TO CLOSING
During the period of time from the date of execution of this
Agreement to the date of Closing the parties agree to take the following
action:
7.1 OTS Application. Promptly after approval of this Agreement
by the Boards of Directors of both Purchaser and Seller, Seller shall commence
preparation of an application to the OTS for permission to sell the branch
offices at the Premises, and Purchaser shall join in such application to
secure approval of the OTS for the sale of the Branch Office Properties to
Purchaser. Purchaser shall furnish to Seller all necessary financial
information, certificates and other documents as shall be necessary
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or desirable in connection with the filing of such application, including a
certified copy of the resolutions adopted by Purchaser's Board of Directors
approving this Agreement. In addition, Purchaser shall, within promptly after
approval of this Agreement by the Boards of Directors of both Purchaser and
Seller, submit an application to the FIB, the FRB, the FDIC and any other
required regulatory agency for permission to establish branch offices at the
Premises or any other Branch Office Properties and for permission to continue
coverage for the Core Deposit under the Savings Association Insurance Fund. To
the extent necessary, Seller shall join in such application and furnish to
Purchaser all necessary financial information, certificates and other
documents as shall be necessary or desirable in connection with the filing of
such application(s).
7.2 No Change in Operations. Seller shall carry on its savings
bank business at the Branch Office Properties in substantially the same manner
as conducted on the date of this Agreement and shall refrain from introducing
any new or unusual methods of operation or accounting. Seller shall not
purchase or commit to purchase any additional furnishings or equipment to be
placed on the Premises without first obtaining Purchaser's written approval
for such action. Additionally, Seller shall not sell any Branch Office
Property, enter into any material contracts concerning the Premises or pledge
or encumber the Premises or Branch Office Property without first obtaining
Purchaser's written
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approval. Seller shall pay or credit all regular payments relating to deposit
accounts maintained at such branch in accordance with its customary practices.
During the pendency of this Agreement, Seller shall grant no pay raises to
employees working at the Premises if said raises would be outside the ordinary
course of Seller's business, unless and until said raises have been approved
in writing by Purchaser.
7.3 Maintenance of Properties. Seller shall maintain the
Premises and all tangible personal property located thereon in good working
order and shall keep the same fully insured under existing policies of
insurance.
7.4 No Breach. Seller shall refrain from doing any act or
omitting to do any act which will cause a material breach of any contract or
commitment relating to its business conducted at such branch offices or the
properties included in the Branch Office Properties.
7.5 Access to Records and Premises. Within 15 days after the
date of this Agreement, Seller shall, to the extent it has such information
available, provide Purchaser with the information specified on Exhibit C
attached hereto, and Seller agrees to provide updates of such information as
required by Section 2.2. Following execution of this Agreement, Seller agrees
to provide Purchaser, or its representatives, with access during
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normal business hours to the Premises to permit Purchaser to install telephone
data communication lines and to examine the Premises in order to facilitate
transference of the business conducted thereon, provided that Purchaser shall
not disrupt Seller's operations in carrying out such activities. Seller also
agrees to make available for inspection by Purchaser the books and records
pertaining to the business of Seller as conducted at the branch offices
located on the Premises, and Seller agrees not to destroy any such books and
records without giving Purchaser reasonable prior notice of its intent to do
so and an opportunity to review the same and make copies thereof. Seller
further agrees that in the event Purchaser finds any deficiencies in Seller's
books and records pertaining to the Premises, Seller shall, upon request by
Purchaser, use its best efforts to cure such deficiencies as soon as
reasonably practicable after receipt of such request from Purchaser. In the
event the sale and transfer as contemplated by this Agreement is not
consummated for any reason within the time periods set forth in this
Agreement, then Purchaser shall, within three (3) days of receipt of demand
from Seller, return to Seller all originals and copies of account and customer
information, books, records, computer tapes and data provided to Purchaser
pursuant to this Agreement and further agrees to remove all personal property
and communications lines installed by Purchaser upon receipt of Seller's
demand.
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7.6 No Announcements. Purchaser and Seller shall each refrain
from making any public announcement or any announcement to Seller's customers
(including depositors) of the transactions contemplated by this Agreement
without the prior written approval thereof of the other party unless such an
announcement is required by the Securities and Exchange Commission or some
other regulatory body governing the affairs of either the Purchaser or Seller.
Additionally, the parties agree to jointly prepare and issue a press release
announcing the terms of this transaction on a mutually agreeable date.
7.7 Notice to Depositors. In the event Purchaser is required by
its regulators to prepare a notice to the depositors whose accounts it is
acquiring, either before or after Closing, Purchaser agrees that it will
prepare said notice, at its sole cost and expense, in accordance with the
instructions received from its regulators. Seller will prepare and file any
branch closing notices required by any rules and regulations applicable to
this transaction.
7.8 No Other Agreements. Seller agrees that so long as this
Agreement is pending, it will not solicit any offers or enter into any
agreements or understandings with any other party relating to the disposition
of the Branch Office Properties or Premises without the express written
consent of Purchaser.
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7.9 Best Efforts. Each party to this Agreement shall use its
best efforts to render its representations and warranties hereunder true and
correct, to perform its covenants and obligations hereunder, to obtain as soon
as possible all government and other third-party consents required to be
obtained by it, and to take such action as may be necessary to close the
transactions contemplated herein as soon as practicable, but in any event on
or before March 31, 1995.
7.10 No Shop. Seller agrees that so long as this Agreement is
pending, it will not solicit any offers or enter into any agreements or
understanding with any other party relating to the disposition of the premises
without the express written consent of Purchaser.
VIII. ACTION SUBSEQUENT TO CLOSING
8.1 Assistance After Closing. With respect to alarm &
surveillance equipment not purchased by Purchaser hereunder, Seller agrees to
keep in service and make available to Purchaser any such equipment at the
Premises for a period of up to 15 business days after the Closing, and
Purchaser agrees to reimburse Seller for a pro rata portion of the costs for
such systems for the time of actual use thereof by Purchaser.
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8.2 Removal of Property. If Purchaser shall request, Seller
agrees to remove from the Premises any tangible personal property located
thereon not sold to Purchaser as a part of the Branch Office Properties prior
to the Tuesday following Closing.
8.3 Post-Closing Settlement. For a period of ninety (90) days
following Closing, Seller shall consult with Purchaser upon presentment of any
checks, drafts, incoming ACH debits and credits, Visa debits and adjustments,
ATM transactions on sold accounts (only for ten (10) days) and other
negotiable instruments drawn on any of the deposit accounts transferred to
Purchaser hereunder, and if assured by Purchaser that sufficient funds are
available to honor such instruments, Seller shall pay such instruments. Upon
presentment of such instruments following such consultation with and assurance
by Purchaser and after their payment by Seller, Purchaser agrees to purchase
such checks and instruments from Seller for the face amount thereof. If any
customer of Seller whose deposit account is transferred to Purchaser hereunder
has, prior to the effective time of the Closing, presented or deposited a
negotiable instrument drawn on another financial institution for collection
and payment, and such instrument subsequently is dishonored by the drawee
institution, Purchaser agrees to purchase such negotiable instrument from
Seller for the face amount thereof provided that at the time of transfer of
such deposit account to Purchaser there existed a proper hold on
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sufficient credit in the account against which to charge such dishonored
instrument.
8.4 Indemnification.
(a) Seller shall indemnify, defend and hold Purchaser, its directors,
officers, employees and agents harmless from and against all demands, damages,
liabilities, costs and expenses (including, without limitation, interest,
penalties and attorney's fees) asserted against, imposed on or incurred by
such indemnified party by reason of or resulting from (a) any breach of the
representations, warranties or covenants of Seller herein; and (b) any other
liability or obligation of or claim against Seller or Purchaser arising out of
any occurrence, event or state of facts relating to any of the properties
transferred to Purchaser hereunder existing or having taken place prior to the
Closing, including, without limitation, any liability or obligation for any
tax, penalty or interest arising from or with respect to any of the Branch
Office Properties, or operations of the business conducted therewith, which is
incurred or is attributable to any period on or prior to the Closing Date,
other than those liabilities, obligations and claims specifically assumed by
Purchaser hereunder. Purchaser will give Seller notice of any such claims, and
Seller will undertake the defense thereof at its own cost by representatives
of its own choosing. Further, Purchaser shall have the option of participating
in said defense at its own expense.
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(b) Purchaser shall indemnify, defend and hold Seller, its directors,
officers, employees and agents harmless from and against all demands, damages,
liabilities, costs and expenses (including, without limitation, interest,
penalties and attorney's fees) asserted against, imposed on or incurred by
such indemnified party by reason of or resulting from any breach of the
representations, warranties or covenants of Purchaser herein. Seller will give
Purchaser notice of any such claims, and Purchaser will undertake the defense
thereof at its own cost by representatives of its own choosing reasonably
acceptable to Seller. Further, Seller shall have the option of participating
in said defense at its own expense.
8.5 Tax Reports. Purchaser agrees to file with appropriate
federal, state, and local taxing authorities and to send to all Core Deposit
account customers and Deposit Related Loan customers all required reports
pertaining to the interest paid to or by them with respect to their accounts
during the entire calendar year in which the Closing occurs. Seller agrees to
timely provide to Purchaser the necessary information for each such account
through the Closing Date to enable Purchaser to do this combined reporting for
the entire calendar year.
8.6 Account Transfers. Following the Closing, Purchaser agrees,
for all Core Deposit accounts acquired hereunder, to honor all existing
arrangements with the Automated Clearing House
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Association ("ACHA") for incoming transactions to and from accounts with other
financial institutions and third parties (including Seller) and to honor any
arrangements for transfers by Seller from one account of a depositor to
another account at the subject branch offices, but Purchaser shall not be
required to honor any other type of account transfer arrangement offered by
Seller to the depositors whose accounts are transferred hereunder.
8.7 Further Assurances. Each party hereto agrees to execute and
deliver such other documents as the other party hereto may reasonably deem
necessary or desirable to effectuate the transactions contemplated by this
Agreement.
IX. MISCELLANEOUS
9.1 Survival of Representations. The representations and
warranties of Seller and Purchaser herein shall survive the Closing without
limit for a period of six years. All statements contained herein or in any
certificate, schedule, list or other document delivered pursuant hereto shall
be deemed representations and warranties within the meaning of this Section.
9.2 No Commissions. Each of the parties hereto represents and
warrants to the other that there are no claims for brokerage commissions or
finder's fees in connection with the transactions contemplated by this
Agreement. Each party will
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indemnify the other and hold it harmless from and against any and all claims
or liabilities for brokerage commissions or finder's fees incurred by reason
of any action taken by it.
9.3 Termination of Agreement. Notwithstanding any other
provision contained herein, this Agreement may be terminated by either party
upon written notice to the other and without liability for breach hereof by
the terminating party if the approval of the OTS, the FRB, the FIB or the FDIC
required for the consummation of the transactions contemplated hereby shall
not have been received by March 31, 1995. Additionally, this Agreement may be
terminated by the non-breaching party in the case of a material breach of the
representations and warranties set forth herein or in case the conditions
precedent to terminating either party's obligation to proceed have not been
satisfied or waived.
9.4 Expenses. Seller agrees that all fees and expenses incurred
by it in connection with this Agreement shall be borne by it, and Purchaser
agrees that all fees and expenses incurred by it in connection with this
Agreement shall be borne by it.
9.5 Parties in Interest. This Agreement and the schedules and
other writings referred to herein or delivered pursuant hereto which form a
part hereof contain the entire understanding of the parties with respect to
its subject matter.
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There are no restrictions, promises, warranties, covenants or undertakings
other than expressly set forth herein or therein. This Agreement supersedes
all prior agreements and understandings between the parties with respect to
its subject matter. This Agreement may be amended only by a written instrument
duly executed by the parties and may not be assigned by Purchaser without the
express written consent of the Seller. Any condition to a party's obligations
hereunder may be waived in writing by such party.
9.6 Covenant Not to Compete. Seller hereby further covenants
and agrees that for a period of two years commencing on the Closing Date none
of Seller, Seller's affiliates, and their respective officers, directors,
employees and other agents will establish a deposit gathering branch within
two (2) miles of the Branch Offices or otherwise, directly and knowingly,
solicit deposits from any of the owners of any of the Core Deposits.
Notwithstanding anything to the contrary express or implied herein, this
Covenant Not to Compete shall neither prohibit nor apply to (i) any automated
teller machines owned or operated by Seller now located in the Territory and
any automated teller machines owned and operated by third parties which
participate in an ATM network in which Seller also participates, (ii) any
deposit gathering branch or loan solicitation offices of third parties now or
hereafter established in the Territory that are subsequently acquired by
Seller or its affiliates as a result of a merger or acquisition involving any
such third party or Seller or its
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affiliates, (iii) general advertisements or solicitations, (iv) deposit
accounts associated with any extensions of credit to a depositor which were
not solicited in contravention of this Section 9.6 or (v) branches in
existence at the date of closing and owned by a third party which acquires
Seller through a merger, acquisition or otherwise.
9.7 Employees. Purchaser shall have no obligation to employ any
person now employed by Seller. Purchaser will review the qualifications and
may interview some or all of Seller's employees working at the Premises, and
may offer employment positions on an at will basis to all, some or none of the
employees now employed by Seller at salary and wage levels and benefits
determined solely by Purchaser. Each individual employee may accept or reject
Purchaser's employment offer. Purchaser assumes no liability for any accrued
or vested employee or severance or termination benefits of any of Seller's
employees.
9.8 Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.9 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and will be
deemed to have been duly given if delivered or mailed (registered or certified
mail, postage prepaid, return receipt requested or Federal Express or other
overnight delivery
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service which guarantees next day delivery and requires acknowledgement of
receipt):
If to Seller: Jack D. Brown, Senior Vice President
Standard Federal Bank
2600 West Big Beaver Road
Troy, Michigan 48084
With a Copy to: David P. Trahan, Esq.
Standard Federal Bank
2600 West Big Beaver Road
Troy, Michigan 48084
If to Purchaser: Dana M. Cluckey
Executive Vice President
Republic Bancorp, Inc.
1070 East Main Street
Owosso, Michigan 48867
With a copy to: George E. Parker III
Miller, Canfield, Paddock & Stone
150 W. Jefferson, Suite 250
Detroit, Michigan 48226-4415
9.10 Confidentiality. For purposes of this Agreement any and
all financial information, schedules, agreements, books, records, accounts,
reports, customer lists, customer information, electronic data bases, loan
files, instruments, papers, documents, or other information relating to the
Branch Office Properties shall be deemed to be "Confidential Information."
(a) While this Agreement is in effect and at all times
thereafter unless and until this transaction is
consummated, Purchaser shall treat as strictly
confidential, and shall not divulge to any other person
(natural or corporate) the Confidential Information which
it may come to know as a direct result of a
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disclosure by Seller or which may come into its possession
directly as a result of and during the course of
investigation pursuant to Section 7.5. Purchaser shall be
permitted to disclose such Confidential Information to its
directors, officers, employees, attorneys, accountants,
and financial advisers who have a need for such
information in connection with this transaction. (b) The
provisions of this Section shall not preclude Purchaser
from using or disclosing at any time Confidential
Information which is (i) readily ascertainable from public
information or trade sources; (ii) reasonably required to
be included in a report filed with any governmental
agency; (iii) reasonably required to be included in any
filing or application required by any regulatory agency,
(iv) received from a third party not under any obligation
to keep such information confidential; (v) required by law
or regulation to be disclosed; (vi) known by it before the
commencement of discussions among the parties to this
Agreement; or (vii) subsequently developed by it
independent of its disclosure pursuant to or in connection
with this Agreement.
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9.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same Agreement.
9.12 Governing Law. Except insofar as this Agreement is sub
ject to the Federal Home Owners' Loan Act of 1933, as amended, and federal
banking law, this Agr eement shall be governed by and construed in accordance
with the laws of the State of Michigan.
IN WITNESS WHEREOF the parties have caused this Agreement
to be executed on their behalf by duly authorized officers on the dates
indicated below.
REPUBLIC BANK
By: /s/ Barry Eckhold
-----------------------------------
Barry Eckhold
Its: Chairman and President
----------------------------------
Date: 11/14/94
STANDARD FEDERAL BANK
By: /s/ Jack D. Brown
-----------------------------------
Jack D. Brown, Senior Vice President
Date: 11-30-94
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STATE OF MICHIGAN )
) SS
COUNTY OF SHIAWASSEE )
On this 14th day of November, 1994, before me, a Notary Public,
appeared Barry Eckhold, Chairman & President of Republic Bank, a
Michigan-chartered state bank, and who executed the foregoing Agreement on
behalf of said Bank.
/s/ Pamela May Beckman
-----------------------------
Notary Public
Pamela May Beckman
Notary Public, Shiawassee County
My Commission Expires May 1, 1995
STATE OF MICHIGAN )
) SS
COUNTY OF OAKLAND )
On this 30th day of November, 1994, before me, a Notary Public,
appeared Jack D. Brown, Sr. Vice President of Standard Federal Bank, a federal
savings bank, and who executed the foregoing Agreement on behalf of said Bank.
/s/ Paulette L. Langford
------------------------------
Notary Public
Paulette L. Langford
Macomb County (Acting in Oakland), MI
My Commission Expires: 3-4-95
39
