UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
IXI QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
I I TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-9742
HARBOURTON FINANCIAL SERVICES L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1573349
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
2530 S. Parker Road, Suite 500, Aurora, CO
80014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 745-
3661
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Preferred Units New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At November 26, 1997, registrant had 41,169,558 Preferred Units
outstanding.
TABLE OF CONTENTS
PART I
Item 1. Financial Statements
Consolidated Balance Sheet as of December 31, 1996 3
Condensed Consolidated Statement of Net Assets in Liquidation as of
September 30, 1997 (unaudited) 4
Consolidated Statement of Operations for the Three Months and Nine
Months Ended September 30, 1996 (unaudited) 5
Condensed Consolidated Statement of Changes in Net Assets in Liquidation
For the Nine Months Ended September 30, 1997 (unaudited) 6
Consolidated Statement of Cash Flows for the Nine Months Ended September
30, 1996 (unaudited) 7
Notes to Consolidated Financial Statements as of September 30, 1997
(unaudited) 8
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
PART II
OTHER INFORMATION 24
SIGNATURES 25
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
Consolidated Balance Sheet
as of December 31, 1996
(After Corporate Reorganization -- Note 1)
(audited) (in thousands)
<TABLE>
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ASSETS
Cash and cash equivalents $ 1,951
Mortgage loans held for sale, net 214,609
Mortgage loans held for investment, net of 3,178
reserves of $307
CMO bonds, residual interests, investment
securities and SMATs, net of accumulated 3,583
amortization of $577
Notes receivable - affiliates 587
Investment in loans repurchased from GNMA 40,127
pools, net of reserves of $1,120
Advances receivable, net of reserves of $3,984 5,709
Mortgage servicing rights, net of accumulated 41,773
amortization of $9,268
Deferred acquisition, transaction and borrowing
costs, net of accumulated amortization of 2,825
$1,075
Property, equipment and leasehold improvements,
net of accumulated amortization of $4,567 5,773
Investment in affiliates 405
Due from affiliates --
Excess cost over identifiable tangible and
intangible assets acquired, net of accumulated 2,633
amortization of $577
Bulk and flow sales of servicing receivables 52,658
Other assets 8,309
Total Assets $384,120
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Installment purchase and sale obligations - $ 1,303
servicing
Foreclosure, repurchase and indemnification 6,403
reserves
Lines of credit & short-term borrowings 212,388
Servicing facility 54,400
Notes payable - affiliates 38,412
Due to affiliates 1,678
Accounts payable and other liabilities 10,604
Total Liabilities 325,188
Partners' Capital 58,932
Total Liabilities and Partners' Capital $384,120
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
(a partnership in liquidation)
Condensed Consolidated Statement of Net Assets in Liquidation
as of September 30, 1997
(unaudited) (in thousands)
<TABLE>
<S> <C>
Assets, at estimated realizable values:
Cash and cash equivalents $19,217
Mortgage loans held for investment 14,960
Investment in loans repurchased from GNMA pools 1,552
Advances receivable 5,285
Mortgage servicing rights 1,297
Mortgage servicing receivables 25,947
Other assets 5,866
Total Assets $74,124
Less - Liabilities, at estimated settlement amounts:
Installment purchase and sale obligations - 1,420
servicing
Foreclosure, repurchase and indemnification 12,494
reserves
Notes payable - affiliates 14,131
Due to affiliates 122
Accounts payable and other liabilities 3,591
Total Liabilities 31,758
Net Assets in Liquidation $42,366
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 1996
(unaudited) (in thousands)
<TABLE>
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Three Nine
Months Months
Ended Ended
September 30, 1996
REVENUES
Loan servicing fees $ 6,091 $ 18,752
Ancillary income 1,703 5,527
Gain on sale of defaulted loans to 167 678
affiliates
Investment income net of interest 3,663 8,129
expense on escrows
Total servicing revenue 11,624 33,086
Gain on sale of mortgage loans and
related mortgage servicing rights 5,617 15,280
Interest income, net of related 1,760 4,242
warehouse interest expense
Other production income 3,819 11,331
Total production income - gross 11,196 30,853
Other investment and interest income 430 4,083
Total Revenue 23,250 68,022
EXPENSES
Servicing costs 2,370 7,141
Prepayment costs and interest 610 1,783
curtailments
Provision for foreclosure losses 1,500 5,093
Amortization of mortgage servicing 3,311 8,812
rights
Total servicing expenses 7,791 22,829
Loan production and secondary marketing 10,312 28,540
costs
General and administrative costs, 1,633 4,845
including management fees
Interest expense - term loans 1,014 2,542
Other interest expense 276 1,073
Other interest expense-affiliates, net 694 1,778
of interest income-affiliates
Other amortization and depreciation 599 1,500
Total Expenses 22,319 63,107
Net Income Before Equity in Earnings of
Affiliates and Gain on Bulk Sale of 931 4,915
Servicing
Equity in earnings of affiliates (9) (4)
Gain on bulk sale of servicing 220 220
Net Income $ 1,142 $ 5,131
Net Income per Preferred Unit, based on
41,170 and 41,495 weighted average $ .03 $ .12
number of Preferred Units
outstanding, respectively
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For The Nine Months Ended September 30, 1996
(unaudited) (in thousands)
<TABLE>
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Nine Months
Ended
September
30, 1996
Cash Flows From Operating Activities:
Net Income $ 5,131
Adjustments to reconcile net income to net cash from
operating activities:
Gain on sale of defaulted loans (678)
Gain on sale of CMO bonds, residual interests (2,486)
and SMATs
Net unrealized gain on CMO bonds, residual (1,043)
interests and SMATs
Gain on bulk sale of originated servicing (220)
Mortgage servicing rights valuation recovery (1,042)
Amortization and depreciation 11,354
Equity in earnings of affiliates 4
Provision for foreclosure losses 5,093
Changes in operating assets and liabilities:
Mortgage loans held for sale and investment,net 63,163
Advances receivable (11,987)
Other assets (18,638)
Due to/from affiliates 31,228
Accounts payable and other liabilities (5,942)
Net Cash Flows From Operating Activities 73,937
Net Cash Flows From Investing Activities:
Proceeds from sale of CMO bonds, residual 5,550
interests and SMATs
Gain on sale associated with retained servicing (20,363)
Proceeds from bulk sale of originated servicing 3,546
Settlement of installment purchase obligation (8,017)
Funding of deferred acquisition and transaction (226)
costs
Amortization of CMO bonds, residual interests, and 1,222
investment securities
Investment in subsidiary (100)
Purchases of property and equipment (3,025)
Net Cash Flows From Investing Activities (21,413)
Cash Flows From Financing Activities:
Net payments on lines of credit and short-term (63,811)
borrowings
Principal payments on term loans (48,673)
Funding of deferred loan costs (387)
Term debt advances 71,658
Redemption of Preferred Units (1,100)
Net borrowings from notes payable - affiliates 25,668
Net Cash Flows From Financing Activities (16,645)
Increase in cash and cash equivalents 35,879
Cash and cash equivalents at beginning of period 2,273
Cash and cash equivalents at end of period $38,152
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
(a partnership in liquidation)
Condensed Consolidated Statement of Changes in Net Assets in
Liquidation
(unaudited) (in thousands)
<TABLE>
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Net partners' equity at December 31, 1996 $58,932
Net loss during the three months ended March 31,1997 (2,718)
Adjustment of carrying values of assets and
liabilities to estimated realizable values and
estimated settlement amounts, respectively, at
March 31, 1997, upon adoption of liquidation
basis of accounting:
Mortgage loans held for sale 1,393
Mortgage servicing rights 9,006
Property, equipment and leasehold improvements (779)
Foreclosure, repurchase and indemnification reserves (2,400)
Other liabilities related to liquidation (5,830)
Net assets in liquidation at March 31, 1997 $57,604
Changes from March 31, 1997 in estimated realizable
values and estimated settlement amounts:
Mortgage servicing rights (3,561)
Property, equipment and leasehold improvements (238)
Foreclosure, repurchase and indemnification reserves (8,509)
Other liabilities related to liquidation (2,930)
Net assets in liquidation at September 30, 1997 $42,366
Preferred Units outstanding at March 31 and 41,170
September 30, 1997
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
(a partnership in liquidation)
Notes to Consolidated Financial Statements
December 31, 1996 and September 30, 1997
Note 1. Description of Business and Organization
Harbourton Financial Services L.P. ("HBT") was created pursuant
to a Certificate of Limited Partnership filed with the Secretary
of the State of Delaware on August 12, 1987 and a limited
partnership agreement (the "HBT Agreement") (as amended and
restated) dated as of August 12, 1987. Harbourton Mortgage
Corporation (the "General Partner") was incorporated in the State
of Delaware on August 12, 1987. The General Partner manages the
business and affairs of HBT and has exclusive authority to act on
behalf of HBT. HBT's termination date is December 31, 2050
unless sooner dissolved or terminated pursuant to the HBT
Agreement. See Note 4, Liquidation of Partnership.
Harbourton Assignor Corporation ("Assignor Limited Partner") is
the sole limited partner of HBT. Pursuant to the HBT Agreement,
the Assignor Limited Partner holds for the benefit of the holders
of the Preferred Units all of the limited partnership interests
underlying such Preferred Units. Each Preferred Unit is
evidenced by a beneficial assignment certificate, which is issued
by the Assignor Limited Partner and HBT in fully registered form.
Each holder of a Preferred Unit is entitled to all of the
economic rights and interests in the underlying limited
partnership interest held by the Assignor Limited Partner, and
each holder of a Preferred Unit has the right to direct the
Assignor Limited Partner on voting and certain other matters with
respect to such underlying limited partnership interests.
HBT's primary business activity has been mortgage banking, which
has been conducted through its wholly-owned subsidiary Harbourton
Mortgage Co., L.P. ("HMCLP"). Mortgage banking consists of (i)
mortgage loan servicing activities, including the acquisition and
sale of mortgage servicing rights, (ii) the origination and
purchase of mortgage loans, including the securitization and sale
of mortgage loans with the related servicing rights retained or
released, and (iii) investments in other mortgage-related
securities. HMCLP is an approved Government National Mortgage
Association ("GNMA"), Federal National Mortgage Association
("FNMA"), and Federal Home Loan Mortgage Corporation ("Freddie
Mac") licensee. HBT, HMCLP and its general partners Harbourton
Funding Corporation ("HFC"), and HMCLP's 50% equity investment in
HTP Financial, L.P. ("HTP") are hereinafter collectively referred
to as the "Partnership" unless otherwise noted.
In general, each quarter the Partnership allocates 99% and 1% of
profits and losses to the Preferred Unitholders and General
Partner, respectively, up to a maximum amount as defined in the
HBT Agreement ("Participating Amount"). This Participating
Amount generally does not exceed the product of the cash or fair
value of property contributed to the Partnership in consideration
for the issuance of Preferred Units and the appropriate weighted
average Treasury Index. Profits that exceed this Participating
Amount, up to an additional amount as defined, are allocated 75%,
12.5% and 12.5% to the Preferred Unitholders ("Preferred
Amount"), General Partner and Subordinated Unitholder,
respectively. Preference amounts ("Second Preference") beyond
these levels, up to an additional amount as defined, are then
allocated 62.5%, 18.75% and 18.75% to the Preferred Unitholders,
General Partner and Subordinated Unitholder, respectively.
Preference amounts in excess of the Second Preference are then
allocated 55%, 22.5%, and 22.5% to the Preferred Unitholders,
General Partner, and Subordinated Unitholder, respectively. Cash
distributions are allocated approximately in the same manner as
allocated taxable profits. Losses are allocated up to the amount
of the sum of the undistributed Preferred Amount allocations,
Second Preference allocations and Participating Amount
allocations to the Preferred Unitholders, Subordinated
Unitholders, and General Partner in proportion to their
respective interest in the sum of such undistributed allocations.
After the allocation of profits or losses and the payment of or
provision for all debts, liabilities and obligations of the
Partnership, liquidating distributions are allocated to the
General Partner and Preferred and Subordinated Unitholders in
accordance with and in proportion to their respective capital
account balances as determined in accordance with the HBT
Agreement. At September 30, 1997, the Subordinated Unitholders
capital account balances totaled $0. Management believes that
there will be no liquidating distributions distributed to
Subordinated Unitholders.
Note 2. Summary of Significant Accounting Policies
(Consolidated Balance Sheet at December 31, 1996 and
Statement of Operations and Cash Flows for the Three
and Nine Months Ended September 30, 1996 - Going
Concern Basis of Accounting)
Basis of Presentation - The consolidated financial statements
primarily include the accounts of HBT, HMCLP, HFC, and a 50%
equity interest in HTP. All intercompany accounts and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents - Cash and cash equivalents consist of
cash on hand and in banks and short-term instruments with
original maturities of three months or less.
Mortgage Loans Held for Sale - Mortgage loans held for sale are
stated at the lower of aggregate cost, net of deferred loan
production fees and costs, or market value.
Mortgage Loans Held for Investment - Mortgage loans held for
investment are stated at the amount of unpaid principal, reduced
by an allowance for loan losses, based upon management's
evaluation of the economic conditions of borrowers, loan loss
experience, collateral value and other relevant factors, which
approximates the lower of cost or market.
Investment in Loans Repurchased from GNMA Pools - The Partnership
has repurchased loans from GNMA pools which it services.
Advances Receivable - Funds advanced for mortgagor escrow
deficits, foreclosures and other investor requirements are
recorded as advances receivable in the consolidated statements of
financial condition. Such receivables are generally recoverable
from the insurers or guarantors, which are generally government
agencies, or the mortgagors through increased monthly payments,
as applicable. A reserve for uncollectible items has been
established for those receivables which management estimates are
not recoverable.
Mortgage Servicing Rights - The Partnership capitalizes the cost
of mortgage servicing rights and amortizes such costs in
proportion to, and over the period of, estimated future
undiscounted net servicing income.
Collateralized Mortgage Obligation ("CMO") Bonds, Residual
Interests, Investment Securities, and Securitized Mortgage
Acceptance Trusts ("SMATs") - The Partnership classifies its CMO
bonds, residual interests, and SMATs portfolio as trading
securities since the securities are being held with the intent of
selling them in the near term. Accordingly, such assets are
stated at fair value and unrealized gains and losses are
recognized in earnings. The Partnership classifies its
investment securities as available for sale. Accordingly, such
assets are stated at fair value and unrealized gains and losses
are recognized as a component of partners' capital.
Deferred Acquisition, Transaction and Borrowing Costs - Deferred
borrowing costs are amortized over the life of the servicing
facility agreement using the straight-line method which
approximates the effective interest method. Deferred acquisition
and transaction costs are amortized over a period of five to
fifteen years using the straight-line method.
Property, Equipment and Leasehold Improvements - Property,
equipment and leasehold improvements are stated at cost less
accumulated depreciation. Depreciation is computed using the
straight-line method over the assets' useful lives, which are
estimated to be 30 years for depreciable real property and 2 to
15 years for furniture, fixtures and equipment. Leasehold
improvements are amortized using the straight-line method over
the lease life.
Investment in Affiliates - HMCLP recorded its 50% investment in
HTP based on the equity method of accounting for the year ended
December 31, 1996.
Excess Cost Over Identifiable Tangible and Intangible Assets
Acquired - Excess cost over identifiable tangible and intangible
assets acquired is amortized using the straight-line method over
15 years.
Loan Servicing Fees and Servicing Costs - Loan servicing fees are
based on a contractual percentage of the unpaid principal balance
of the related loans and are recognized in income as earned.
Servicing costs are charged to operations as incurred.
Investment Income Net of Interest Expense - Investment income net
of interest expense includes primarily the gain on sale of
reinstated loans, interest income on investment in loans
repurchased from GNMA pools, net of interest expense on related
borrowings to fund such investments and the earnings derived from
the servicing portfolio custodial balances.
Loan Production Fees and Costs - Certain direct loan production
fees and costs associated with mortgage loans held for sale are
deferred until the related loans are sold.
Foreclosure, Repurchase, and Indemnification Reserves -
Foreclosure reserves are maintained to provide for an estimate of
the losses associated with delinquent loans and loans in
foreclosure or bankruptcy ("Defaulted Loans") in which the
Partnership services and retains certain recourse obligations.
The reserves are established based on management's expectations
and historical loss experience and are adjusted periodically
through charges to current operations to reflect changes in the
Defaulted Loans, net of actual charge-offs.
As part of its production operations, the Partnership is subject
to certain repurchase and indemnification provisions through its
contractual agreements with the investors to which it sells
mortgage loans. These provisions generally provide that the
Partnership repurchase from the investor, i) loans in which the
borrower defaults on the first payment, ii) loans which have not
been insured by the government in a timely manner or are
uninsurable, and iii) mortgage loans in which an origination
(i.e., underwriting) defect is discovered. The investor,
however, may require the Partnership to indemnify them against
future losses that might result rather than repurchase the loan.
The reserve is based on management's expectations and historical
loss experience. The provisions for this reserve are charged
against loan production and secondary marketing costs.
Income Taxes - The Partnership is a limited partnership and is
not liable for federal income taxes, however, individual
unitholders have liability for income taxes. As a result of the
provisions currently in the tax law, the Partnership will be
assessed an excise tax equal to 3.5% of its gross profit from
operations for federal income tax purposes for its tax year
beginning on January 1, 1998.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
Note 3. Summary of Significant Accounting Policies
(Consolidated Statement of Net Assets in Liquidation as
of September 30, 1997 and Consolidated Statement of
Changes in Net Assets in Liquidation For the Three and
Nine Months Ended September 30, 1997 - Liquidation
Basis of Accounting)
All statements contained herein, as well as statements made in
press releases and oral statements that may be made by the
Partnership, the General Partner or by officers, directors or
employees of the General Partner acting on the Partnership's
behalf, that are not statements of historical fact, constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and
other factors that could cause the actual results of the
liquidation or operations of the Partnership to be materially
different from historical results or from any future results
expressed or implied by such forward-looking statements. Among
the factors that could materially affect such forward-looking
statements are the following: market conditions in the mortgage
banking industry, prevailing interest rates, the realization of
contingent payments owing to the Partnership, the Partnership's
ability to dispose of its remaining assets at expected prices,
the settlement of and provision for contingent liabilities and
claims, the length of time required to complete the disposition
of the Partnerships assets and the Partnership's liquidation, the
actual costs incurred in the liquidation, general business and
economic conditions and other risk factors described from time to
time in the Company's reports filed with the Securities and
Exchange Commission ("SEC"). All cautionary statements made
herein should be read as being applicable to all forward-looking
statements by or on behalf of the Partnership wherever they
appear, including, but not limited to, all subsequent written and
oral forward-looking statements.
Basis of Presentation - The condensed consolidated financial
statements primarily include the accounts of HBT, HMCLP, and HFC.
All intercompany accounts and transactions have been eliminated
in consolidation. As a result of the Partnership's determination
to liquidate during January 1997 (see Note 4), the Partnership
has changed its basis of accounting from a going concern basis to
a liquidation basis of accounting. Under the liquidation basis
of accounting, carrying values of assets are presented at
estimated net realizable values and liabilities are presented at
estimated settlement amounts. The basis for determining
estimated net realizable values and estimated settlement amounts
are described below. At March 31, 1997, certain secured
obligations were offset against the related assets. However, at
September 30, 1997, secured obligations were not offset against
the related assets.
Mortgage Loans Held for Investment - Mortgage loans held for
investment are stated at the amount of unpaid principal and
accrued interest, reduced by an allowance for loan losses, based
upon management's evaluation of the economic conditions of
borrowers, loan loss experience, collateral value and other
relevant factors, which approximates estimated net realizable
value.
Investment in Loans Repurchased from GNMA Pools - The investment
in loans repurchased from GNMA pools consists of the amount of
unpaid principal, interest, and funds advanced for mortgagor
escrow deficits, foreclosures and other investor requirements. A
reserve for uncollectible items (based on loan types and loan
loss experience) has been established for those receivables which
management estimates are not recoverable. The investment in loans
repurchased from GNMA pools approximates its estimated net
realizable value at September 30, 1997 except for certain loss
reserves which are included in foreclosure, repurchase and
indemnification reserves in the accompanying condensed
consolidated statement of net assets in liquidation.
Advances Receivable - Advances receivable, which approximates
estimated net realizable value, represents funds advanced for
mortgagor escrow deficits, foreclosures and other investor
requirements and are generally recoverable from the insurers or
guarantors, which are generally government agencies, or the
mortgagors through increased monthly payments, as applicable. A
reserve for uncollectible items (based on loan types and loan
loss experience) has been established for those receivables
which management estimates are not recoverable and is reflected
in foreclosure, repurchase and indemnification reserves in the
accompanying financial statements.
Mortgage Servicing Rights - Mortgage servicing rights are stated
at their net estimated realizable value which was determined
based on agreements in principle reached on September 30, 1997.
Foreclosure, Repurchase and Indemnification Reserves -
Foreclosure reserves are maintained to provide for an estimate of
the losses associated with delinquent loans and loans in
foreclosure or bankruptcy in which the Partnership services and
retains certain recourse obligations. The reserves are
established based on management's expectations and historical
loss experience.
As part of its production operations, the Partnership is subject
to certain repurchase and indemnification provisions through its
contractual agreements with the investors to which it sells
mortgage loans. These provisions generally provide that the
Partnership repurchase from the investor, i) loans in which the
borrower defaults on the first payment, ii) loans which have not
been insured by the government in a timely manner or are
uninsurable, and iii) mortgage loans in which an origination
(i.e., underwriting) defect is discovered. The investor,
however, may require the Partnership to indemnify them against
future losses that might result rather than repurchase the loan.
The reserve is based on management's expectations and historical
loss experience.
Other Assets and Liabilities - All other assets and liabilities
not described above are stated at book value which management
believes approximates estimated realizable values and estimated
settlement amounts. In addition, in accordance with liquidation
basis accounting, a liability has been established for
anticipated operating expenses in excess of operating revenues
during the anticipated liquidation period.
Note 4. Liquidation of Partnership
On January 31, 1997, pursuant to the HBT Agreement (as amended
and restated) the Board of Directors of the General Partner
determined that there was a substantial risk that an Adverse Tax
Consequence (as defined below) would occur within one year and
that it was in the best interests of the Partnership and the
holders of beneficial interests in the Partnership (collectively,
"Unitholders") to sell or otherwise dispose of all of the assets
of the Partnership and to liquidate the Partnership as soon as
reasonably practicable. Pursuant to Section 8.10 of the HBT
Agreement, in the event that the General Partner reasonably
believes that within one year there is a substantial risk of the
Partnership being treated for federal income tax purposes as a
corporation (an "Adverse Tax Consequence") as a result of, among
other things, a reclassification of the Partnership as a
corporation under the Revenue Act of 1987 (the " 1987 Act") for
its first taxable year beginning after December 31, 1997, the
General Partner may take certain actions (described further
below), including the liquidation of the Partnership, upon not
less than 30 days prior written notice to the Partners and the
Unitholders unless, prior to the taking of such action, the
Unitholders shall have voted against such action by a vote of at
least two-thirds of all Limited Partnership Interests in the
Partnership. Affiliates of HBT and the General Partner are the
owners of approximately 85% of the issued and outstanding
Preferred Units, and thus, no vote will be taken.
Under existing tax law, the Partnership is treated as a
partnership and is not separately taxed on its earnings. Rather,
income (or loss) of the Partnership is allocated to the
Unitholders pursuant to the terms of the HBT Agreement (see Note
1) and is included by them in determining their individual
taxable incomes, subject to certain special rules applicable to
publicly traded partnerships. By contrast, a corporation is
subject to tax on its net income and any dividends or liquidating
distributions paid to stockholders are then subject to a second
tax at the stockholder level. Accordingly, under current tax
law, the Partnership enjoys a tax advantage over a similarly
situated entity which is taxed as a corporation.
The 1987 Act generally requires publicly traded partnerships to
be taxed as corporations. However, under the 1987 Act existing
partnerships, such as the Partnership, were allowed to continue
to be treated as partnerships for federal income tax purposes for
all taxable years commencing on or prior to December 31, 1997.
From time to time, legislation has been introduced in Congress
that would have the effect of extending the December 31, 1997
grandfather date or eliminating altogether the relevant
provisions of the 1987 Act. Subsequent to the Partnership's
decision on January 31, 1997 to liquidate, legislation passed as
part of the Taxpayer Relief Bill of 1997, that was signed by the
President on August 5, 1997, that will tax publicly traded
partnerships 3.5% of its gross income from operations beginning
January 1, 1998. This provision was not beneficial to the
Partnership for two reasons. First, the legislation was passed
after the plan of liquidation was nearly complete and secondly,
the cost of the 3.5% tax on gross income is a greater tax burden
that the tax cost of operating as a corporation.
Pursuant to Section 8.10 of the HBT Agreement, the General
Partner had the right to take one of several actions when it
believed there was a substantial risk that an Adverse Tax
Consequence will occur within one year. For instance, the
General Partner had the power to (a) modify, restructure or
reorganize the Partnership as a corporation, a trust or other
type of legal entity, (b) liquidate the Partnership, (c) halt or
limit trading in the Units or cause the Units to be delisted from
the NYSE, or (d) impose restrictions on the transfer of Units.
The General Partner believed that the consolidation taking place
in the mortgage banking industry made it difficult for the
Partnership to compete effectively with market participants that
are larger and more readily able to recognize substantial
economies of scale in their operations than the Partnership. The
General Partner believed that its competitive tax structure
advantage of operating as a partnership would be eliminated
beginning January 1, 1998. This belief was confirmed by the
legislation that was passed on August 5, 1997 that assessed a
3.5% tax on gross income of publicly traded partnerships. These
factors weighed in favor of liquidating the Partnership rather
than attempting to continue the Partnership's business in its
present or some other form.
Although no assurances can be given, the General Partner believes
that substantially all of the Partnership's assets can be
disposed of and liabilities can be settled in an orderly fashion
and that the net proceeds thereof can be distributed to its
Preferred Unitholders by the end of 1997.
Disposition of Assets - See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidation of
Assets"
Wind Down of Operations - Upon completion of the disposition of
the Partnership's assets and settlement of liabilities, the
Partnership will be required to wind down the operations of the
disposed units including, without limitation, the production,
servicing and related general administration functions including
financial reporting and accounting. Upon completion of the wind
down functions, the Partnership will be required to terminate
employees not hired by the purchasers of the Partnership's
business units. Towards this end, the Partnership has announced
and provided notice of termination (in accordance with the
Worker's Adjustment and Retraining Notification Act, WARN) to all
employees located in its corporate headquarters located in
Aurora, Colorado. Accordingly, at September 30, 1997, the
Partnership has provided for anticipated severance costs which
include a component to induce certain notified employees to
remain until the liquidation is complete in order to ensure the
Partnership meets all obligations to its investors and creditors.
Liquidating Distribution - Once the assets of the Partnership
have been sold and the Partnership's creditors have been paid in
full, or adequate provision for such payment has been made, the
General Partner will cause the Partnership to pay liquidating
distributions to Unitholders upon the surrender of their Units.
While the exact timing and nature of any liquidating
distributions cannot be precisely determined at this time, the
Partnership expects to make such distributions during the month
of December 1997. However, because of the nature of the
Partnership's business, it is possible that Unitholders may
receive a portion of their distributions in the form of an
interest in another entity, such as a liquidating trust. Any
such interests would not, in all likelihood, be transferable by a
Unitholder.
During the fourth quarter of 1997, the Partnership may incur
additional expense and liabilities associated with its
liquidation, including, without limitation, expenses incurred in
connection with the disposition of its business operations and
its winding down. In order for distributions to be made to the
Unitholders at the end of 1997, the General Partner will have to
make provision for the post-1997 liabilities of the Partnership,
by means of a liquidating trust, an arrangement with another
entity (including an affiliate of its General Partner), or other
procedure. The post-1997 liabilities represent obligations of
the Partnership which will survive beyond December 31, 1997, such
as indemnification or repurchase obligations with respect to
mortgage loans and servicing rights sold or to be sold in prior
periods or in 1997 or indemnification obligations with respect to
business operations sold or to be sold in 1997. The actual
amount of such additional expenses to be incurred by the
Partnership in the fourth quarter of 1997 may be different from
those estimated and is dependent in part on factors beyond the
Partnership's control, such as the timing and difficulty of the
disposition of the Partnership's assets and the winding-down
process. In addition, the net amount ultimately available for
distribution from the liquidated Partnership depends on many
unpredictable factors, such as the amounts ultimately realized on
the sale of the remaining assets, carrying costs of the assets
prior to sale, collection of receivables, settlement of claims
and commitments, the amount of revenue and expenses of the
Partnership until completely liquidated and other uncertainties.
Federal Income Tax Consequences of Liquidation - Any taxable gain
or loss recognized by the Partnership on the sale of its assets
in connection with the liquidation will be allocated among the
Partners for income tax purposes in accordance with the HBT
Agreement. Assuming that a Partner's interest in the Partnership
is liquidated entirely for cash during 1997, then the Partner
will realize gain or loss to the extent that the cash received is
greater or less than the Partner's adjusted income tax basis in
his or her partnership interest, and the Partner will be
permitted to claim any losses from the Partnership which were
previously suspended under the rules regarding losses from
passive activities. Special rules would apply, however, if a
Partner did not receive a full distribution in cash of his or her
interest in the Partnership during the year. After the payment of
or provision for all debts, liabilities and obligations and the
allocation of income (loss), liquidating distributions are
allocated to the General Partner and Preferred and Subordinated
Unitholders in accordance with and in proportion to their
respective capital account balances as determined in accordance
with the HBT Agreement.
Note 5. Contingencies
During the third quarter of 1997, HMCLP was sued in the state of
Colorado by a mortgagor, in which HMCLP was servicing the
mortgage loan, alleging, on behalf of the mortgagor and on behalf
of an alleged class of similarly situated mortgagors that certain
escrow refunds were not made in a timely manner. Discussions to
dismiss this case have been made with the Plaintiff's attorneys.
If not dismissed, management intends to defend this case
vigorously.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
All statements contained herein, as well as statements made in
press releases and oral statements that may be made by the
Partnership, the General Partner or by officers, directors or
employees of the General Partner acting on the Partnership's
behalf, that are not statements of historical fact, constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and
other factors that could cause the actual results of the
liquidation or operations of the Partnership to be materially
different from historical results or from any future results
expressed or implied by such forward-looking statements. Among
the factors that could materially affect such forward-looking
statements are the following: market conditions in the mortgage
banking industry, prevailing interest rates, the realization of
contingent payments owing to the Partnership, the Partnership's
ability to dispose of its remaining assets at expected prices,
the settlement of and provision for contingent liabilities and
claims, the length of time required to complete the disposition
of the Partnerships assets and the Partnership's liquidation, the
actual costs incurred in the liquidation, general business and
economic conditions and other risk factors described from time to
time in the Company's reports filed with the Securities and
Exchange Commission ("SEC"). All cautionary statements made
herein should be read as being applicable to all forward-looking
statements by or on behalf of the Partnership wherever they
appear, including, but not limited to, all subsequent written and
oral forward-looking statements.
The following is management's discussion and analysis of the
financial condition and results of operations of the Partnership.
The discussion and analysis should be read in conjunction with
the financial statements included herein.
The decrease in the Partnership's net assets in liquidation from
approximately $57.6 million (or $1.40 per Unit) at March 31, 1997
to approximately $42.4 million (or $1.03 per Unit) at September
30, 1997 is attributable to the following: i) an increase in the
Partnership's foreclosure and repurchase and indemnification
reserves of approximately $8.5 million (representing a net
increase of approximately $3.8 million from June 30, 1997), ii) a
decrease in the estimated net realizable value of the
Partnership's mortgage servicing rights of approximately $3.6
million (based on actual realized sales that occurred during the
third and fourth quarters of 1997 and representing a net decrease
in estimated realizable value of approximately $.6 million from
June 30, 1997), iii) a decrease in the estimated net realizable
value of the Partnership's fixed assets of approximately $.3
million (based on actual realized sales that occurred during the
third quarter of 1997), and iv) an increase in the Partnership's
estimate of liquidation costs of approximately $2.9 million, of
which $5.7 million has already been incurred. This represents a
net increase of $.6 million from June 30, 1997, of which $3.5
million was incurred during the quarter ended September 30, 1997.
The higher foreclosure and repurchase and indemnification
reserves reflect i) the occurrence of foreclosure losses at a
higher rate than previously forecast and a corresponding increase
in the Partnership's estimate of future foreclosure losses and
ii) the assertion against the Partnership of a greater volume of
repurchase claims than previously forecast and a corresponding
increase in the Partnership's estimate of such claims in the
future. Additional facts that become known during the anticipated
liquidation period could increase or decrease the reserve
recorded at September 30, 1997.
The increase in the Partnership's estimate of liquidation costs
of approximately $2.9 million is due primarily to the occurrence
of and an increase in future accruals for i) legal costs and ii)
administrative services costs related to the wind-down of the
Partnership through the end of the fiscal year. These increases
are due in part to a lengthening of time required to liquidate
the Partnership.
The Partnership currently estimates that the amount to be
received in liquidation by its Preferred Unitholders will be
approximately $1.03 per unit. Such estimated value involves
known and unknown risks, uncertainties and other factors that
could cause the actual liquidation value of the Partnership to be
materially different from the estimated value. Among the factors
that could materially affect such estimated value are the
following: the realization of contingent payments owing to the
Partnership (affected by market conditions in the mortgage
banking industry and prevailing interest rates), the
Partnership's ability to dispose of its remaining assets at
expected prices, the settlement of and provision for contingent
liabilities and claims, including the Partnership's foreclosure
reserve and reserve for indemnification and repurchase
obligations with respect to mortgage loans and servicing rights
sold, the length of time required to complete the disposition of
the Partnership's remaining assets and the Partnership's
liquidation, the actual costs incurred in the liquidation,
general business and economic conditions and other risk factors
described from time to time in the Company's reports filed with
the Securities and Exchange Commission.
Recent Developments
Liquidation of Partnership and Subsequent Events
On January 31, 1997, pursuant to the HBT Agreement (as amended
and restated) the Board of Directors of the General Partner
determined that there was a substantial risk that an Adverse Tax
Consequence (as defined below) would occur within one year and
that it was in the best interests of the Partnership and the
holders of beneficial interests in the Partnership (collectively,
"Unitholders") to sell or otherwise dispose of all of the assets
of the Partnership and to liquidate the Partnership as soon as
reasonably practicable. Pursuant to Section 8.10 of the HBT
Agreement, in the event that the General Partner reasonably
believes that within one year there is a substantial risk of the
Partnership being treated for federal income tax purposes as a
corporation (an "Adverse Tax Consequence") as a result of, among
other things, a reclassification of the Partnership as a
corporation under the Revenue Act of 1987 (the " 1987 Act") for
its first taxable year beginning after December 31, 1997, the
General Partner may take certain actions (described further
below), including the liquidation of the Partnership, upon not
less than 30 days prior written notice to the Partners and the
Unitholders unless, prior to the taking of such action, the
Unitholders shall have voted against such action by a vote of at
least two-thirds of all Limited Partnership Interests in the
Partnership. Affiliates of HBT and the General Partner are the
owners of approximately 85% of the issued and outstanding
Preferred Units, and thus, no vote was taken.
Liquidation of Assets
During the first quarter of 1997, the Partnership began the
process of liquidating its assets. The disposition of the
Partnership's significant assets can be summarized into the
following categories: i) wholesale production operations, ii)
retail production operations, iii) remaining servicing assets,
iv) servicing operation, and v) other assets.
Wholesale Production Operations
On March 31, 1997, the Partnership's subsidiary, HMCLP, sold its
wholesale loan production branch operations to CrossLand Mortgage
Corp. ("CrossLand"), a subsidiary of First Security Corporation,
for approximately $4 million in cash. In addition, HMCLP will
receive an earnout payment based on the aggregate principal
amount of loans generated, between $1.5 billion and $4.0 billion,
from the transferred facilities during the thirteen months
following the closing date of March 31, 1997. If the aggregate
principal amount of loans generated is less than $1.5 billion,
the Partnership will not receive an earnout payment. If
CrossLand maintains the same volume of wholesale loan
originations as HMCLP experienced in 1996 (approximately $2.8
billion), this earnout payment would total approximately $3.3
million. For the seven months ended October 31, 1997,
CrossLand's wholesale loan origination volume exceeded HMCLP's
1996 wholesale loan origination volume for the same period.
Accordingly, management has established a receivable for this
actual and future estimated amount, totaling approximately $4.3
million, which is recorded as a component of other assets in the
accompanying September 30, 1997 consolidated financial
statements. The purchase did not include the wholesale mortgage
loan pipeline being processed by HMCLP at the time of the sale.
These excluded loans were processed and closed for HMCLP's
account by CrossLand pursuant to an administrative services
agreement between the parties.
Retail Production Operations
On March 19, 1997, HMCLP sold a majority of its retail loan
production branch operations to an unaffiliated third party for
an amount approximately equal to the net book value of the fixed
assets owned by the retail branches. The purchase did not include
the retail mortgage loan pipeline being processed by HMCLP at the
time of the sale. These excluded loans were processed and closed
for HMCLP's account by the unaffiliated third party pursuant to
an administrative services agreement between the parties. The
remaining retail branches were either closed or sold subsequent
to March 31, 1997.
Servicing Assets and Servicing Operations
Effective April 30, 1997, the Partnership executed a purchase and
sale agreement with an unrelated third party for the sale of the
Partnership's servicing rights related to non-recourse FNMA and
Freddie Mac loans and GNMA loans with unpaid principal balances
totaling approximately $1.5 billion. The transfer of the
servicing responsibilities occurred in July 1997. Net proceeds,
which were substantially collected in July and August 1997, from
the sale approximated $25.7 million and were used to reduce the
Partnership's servicing facility.
Effective July 31, 1997, the Partnership sold to an unrelated
third-party approximately $1.1 billion of its remaining servicing
portfolio and its National Servicing Center located in
Scottsbluff, Nebraska. The Partnership expects to receive net
proceeds, after transaction and transfer costs, of approximately
$18.4 million from this sale. Proceeds received to date were
used to reduce Harbourton's debt. The Partnership's Servicing
Center, including the operations, facilities, fixed assets and
employees, was sold along with the Partnership's GNMA pool buyout
and reinstatement unit, its streamline refinance capability and
certain fixed assets located in Aurora, Colorado for
approximately $1.85 million.
In connection with the sales of the National Servicing Center and
of the $1.1 billion servicing portfolio, Harbourton entered into
an Administrative Services Agreement with a subsidiary of the
unaffiliated third party pursuant to which the subsidiary will
perform, on a fee basis, certain services on Harbourton's behalf,
including various ongoing servicing and loan administration
functions.
The Partnership has negotiated with two unaffiliated third
parties to sell its remaining servicing portfolio available for
sale with unpaid principal balances totaling approximately $85
million. Agreements in principle were reached on September 30,
1997. The carrying value of the servicing is reflected at its net
realizable value, based upon these sales transactions, in the
accompanying September 30, 1997 consolidated financial
statements.
Mortgage Loans Held for Investment
During the first quarter of 1997, the Partnership sold a portion
of its mortgage loans held for investment portfolio totaling
approximately $3.0 million to an unrelated third party for
approximately $2.8 million. An unrealized loss of approximately
$0.2 million was provided for in the December 31, 1996
consolidated financial statements and realized during the first
quarter of 1997.
Subsequent to June 30, 1997, the Partnership sold a portion of
its mortgage loans held for investment portfolio totaling
approximately $3.3 million to an unrelated third party for
approximately $3.1 million. It is anticipated that any
additional mortgage loans repurchased during 1997 and the
remaining portfolio will be marketed and sold in a similar
fashion. A reserve for anticipated future repurchase losses has
been established at September 30, 1997.
CMO Bonds, Residual Interests, Investment Securities and SMATs
During the first quarter of 1997, the Partnership sold its CMO
bond and residual interest portfolio, except for certain non-
economic residual interests (with a book value of $0), totaling
approximately $1.2 million to unrelated third parties for
approximately $3.1 million. An unrealized gain of approximately
$1.9 million was provided for, in accordance with SFAS No. 115,
in the December 31, 1996 consolidated financial statements.
During the second quarter of 1997, the Partnership sold its
remaining portfolio for approximately $0.7 million which
approximated its net realizable value reflected in the March 31,
1997 consolidated financial statements.
Investment in Loans Repurchased from GNMA Pools
At April 30 and August 31, 1997, the Partnership sold
approximately $35 million and $10 million, respectively of its
investment in loans repurchased from GNMA pools to unrelated
third parties for an amount that approximated its net book value.
The Partnership is negotiating a sales transaction with an
unrelated third party with respect to its remaining investment in
loans repurchased from GNMA pools. The Partnership expects to
sell these assets for an amount that approximates their net book
value at September 30, 1997.
Other
During the third quarter of 1997, the Partnership sold its
remaining property, plant and equipment and mortgage loans held
for sale for an amount that approximated their net book value.
The Partnership will market and dispose of its remaining
operating receivables and operating payables which are reflected
at their current estimated liquidation amounts and settlement
amounts, respectively, in the accompanying consolidated statement
of net assets in liquidation as of September 30, 1997. Operating
receivables (reflected as other assets in the accompanying
consolidated financial statements) consists primarily of
production operation receivables, mortgage loan interest
receivables, trade receivables, and prepaid assets (e.g.,
insurance and maintenance contracts). Operating payables
(reflected as accounts payable and other liabilities in the
accompanying consolidated financial statements) consists
primarily of production operation payables, interest payables on
lines of credit and other debt, and trade payables and an
estimate of operating expenses in excess of operating revenues
expected to be incurred through liquidation. The actual amounts
realized from the sale of the Partnership's assets and the actual
settlement amounts of the Partnership's remaining liabilities
could differ materially from their current carrying values.
Reduction in Borrowing Facilities
On September 30, 1997, the Partnership terminated all of its bank
borrowing facilities. The Partnership's notes payable to
affiliates were paid off subsequent to September 30, 1997.
Resignation of Officers
Mr. Rick Skogg (President and Chief Operating Officer),
Mr. Paul Szymanski (Executive Vice President, Chief Financial
Officer and Secretary), and Mr. Lee Trautman (Executive Vice
President), have resigned and accepted positions with a
subsidiary of the unaffiliated third party that purchased the
servicing rights and the National Servicing Center located in
Scottsbluff, Nebraska subsequent to June 30, 1997. Mr. Skogg has
also resigned as a director of Harbourton.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
During the third quarter of 1997, HMCLP was sued in the state of
Colorado by a mortgagor, in which HMCLP was servicing the
mortgage loan, alleging, on behalf of the mortgagor and on behalf
of an alleged class of similarly situated mortgagors that certain
escrow refunds were not made in a timely manner. Discussions to
dismiss this case have been made with the Plaintiff's attorneys.
If not dismissed, management intends to defend this case
vigorously.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
1) The Asset Purchase Agreement between Harbourton Mortgage
Co., L.P. and Lehman Brothers Holdings Inc., dated July 31, 1997
2) The Mortgage Servicing Purchase and Sale Agreement between
Harbourton Mortgage Co., L.P. and Lehman Brothers Holdings Inc.,
dated July 31, 1997
b. Reports on Form 8-K:
Not Applicable
SIGNATURES
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.
HARBOURTON MORTGAGE CO., L.P.
By: Harbourton Mortgage Corporation, its
General Partner
Signatures Title Date
s/ Jack W. Schakett Chief Executive Officer and November 26,
Director of 1997
Jack W. Schakett the General Partner
(Principal Executive
Officer)
s/ Bill L. Reid III Chief Accounting Officer November 26,
1997
Bill L. Reid III
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement"), made this
31st day of July, 1997, by and between HARBOURTON FINANCIAL
SERVICES L.P., a Delaware limited partnership (the "Seller"), and
LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation
("Purchaser").
WHEREAS, Seller, through certain subsidiaries, owns and
operates a mortgage servicing business (including GNMA pool
buyout and reinstatement services and GNMA streamline refinance
services) through its National Servicing Center in Scottsbluff,
Nebraska and headquarters in Aurora, Colorado ("NSC"); and
WHEREAS, upon the terms and conditions set forth
herein, Seller desires to cause its subsidiaries, Harbourton
Mortgage Co., L.P. ("HMC") and Harbourton Funding Corporation
("HFC") (each a "Selling Affiliate" and collectively, the
"Selling Affiliates") to sell, and Purchaser desires to purchase
or cause a subsidiary (the "Designee") to purchase, certain of
the assets of, and assume certain related liabilities of Seller
relating to, NSC (in each case subject to certain exceptions)
(the "Purchased Assets").
NOW, THEREFORE, in consideration of the premises and
the respective representations, warranties and covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
l.1 Certain Definitions. As used in this Agreement,
the following terms shall have the respective meanings ascribed
to them in this Section:
"Affiliate" means, as to any party, any entity
which directly or indirectly, is in control of, is
controlled by, or is under common control with, such party;
and any officer or director of such party. For purposes of
this definition, an entity shall be deemed to be "controlled
by" a party if the party possesses, directly or indirectly,
power either to (i) vote 50% or more of the securities
(including convertible securities) having ordinary voting
power for the election of directors of such entity or (ii)
direct or cause the direction of the management or policies
of such entity whether by contract or otherwise; provided,
however, that for purposes of Section 3.18, the term
"Affiliate" shall be limited to any person who would be
treated as a member of a controlled group under Section 4001
of ERISA or Section 414 of the Code.
"Authority" means any federal, state, provincial
or local, or any foreign governmental or regulatory agency
or authority.
"Business Day" means any day other than a
Saturday, Sunday, or a day on which banking institutions in
New York, New York are authorized or obligated by law or
executive order to close.
"Code" means the US Internal Revenue Code of
1986, as amended.
"Colorado Location" means Suite 601, 2530 So.
Parker Road, Aurora, Colorado.
"Employee" means a salaried or hourly employee of
Seller whose services are rendered primarily for the benefit
of NSC.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"Interim Expenses" means the out-of-pocket
expenses incurred prior to the Closing Date by Seller and
the Selling Affiliates for the benefit of Purchaser which
are described on Schedule 2.1(l) hereto.
"Loss" or "Losses" means all claims, losses,
damages, liabilities, assessments, fines, judgments,
consultants' fees, administrative costs, actions, suits,
proceedings, interest, penalties and expenses (including
settlement costs and any reasonable legal or other expenses
for investigating or defending any actions or threatened
actions or for enforcing rights of indemnity and defense)
(individually a "Loss" and collectively "Losses").
"Liability" means any direct or indirect
liability, indebtedness, obligation, expense, claim, loss,
damage, deficiency, guaranty or endorsement of or by any
Person, absolute or contingent, primary or secondary,
accrued or unaccrued, due or to become due, liquidated or
unliquidated.
"Nebraska Location" means 601 Fifth Avenue and
615 S. Beltline East, Scottsbluff, Nebraska, and the
surrounding area of real estate owned by the Selling
Affiliates and utilized by Selling Affiliates to conduct the
NSC business.
"Person" means an individual, a corporation, a
limited liability company, a partnership, an association, an
Authority, a trust or other entity or organization.
"Section 4 Material Adverse Effect" means a
material adverse effect on, or material adverse change in,
the ability of Purchaser to perform its obligations under
this Agreement or any other agreement contemplated hereby.
"Section 3 Material Adverse Effect" means a
material adverse effect on, or material adverse change in,
(i) the Purchased Assets or (ii) the ability of Seller to
perform its obligations under this Agreement or any other
agreement contemplated hereby.
"Securities Act" means the Securities Act of
1933, as amended.
"Taxes" means all federal, state, local, foreign
and other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, property, license,
withholding, payroll, employment, excise, occupation,
premium or other tax, fee, or assessment imposed by any
governmental authority including interest penalties and
other additions imposed with respect thereto.
"Tax Return" means any return, declaration,
report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
"Transaction Documents" means this Agreement, the
Assumption Agreement, the Warranty Deed, the Bill of Sale,
the Guaranty and the Transition Services Agreement.
"Transactions" means the purchase and sale of the
Purchased Assets and the other transactions contemplated by
any Transaction Documents.
"Transition Services Agreement" means the
Administrative Services Agreement to be executed between
Purchaser and Seller on the Closing Date in substantially
the form attached as Exhibit C.
1.2 Other Defined Terms. The following terms are
defined elsewhere in this Agreement:
Term Section
Agreement Background
Assigned Contracts 2.1(m)
Assigned Subservicing Contracts 2.1(b)
Assumption Agreement 2.3
Assumed Liabilities 2.3
Bill of Sale 2.7(b)(i)
Closing 2.7(a)
Closing Date 2.7(a)
Colorado Personal Property 2.1(d)
Customer List 2.1(g)
Designated Employees 5.12(a)
DOJ 3.4
Environmental Laws 3.14(a)
Excluded Assets 2.2
FTC 3.4
Guaranty
2.7(b)(viii)
Inventory 2.1(e)
Liens 3.6(b)
Materials of Environmental Concern 3.14(a)
Multiemployer Plan 3.18(e)
Nebraska Real Property 2.1(a)
Necessary Permits 3.14(f)
Net Loss 7.4(c)
NSC Personal Property 2.1(c)
NSC Personal Property Depreciation Adjustment
2.6
Plans 3.18(a)
Prepaid Expenses 2.1(1)
Purchase Price 2.6
Purchased Assets Recitals
Purchaser Background
Purchaser's Health Plan 5.12(d)
Purchaser's Pension Plan 5.12(i)
Purchaser's Savings Plan 5.12(h)(i)
Representatives 5.4
Restricted Business 5.13
Restriction Period 5.13
Retained Liabilities 2.4
Seller Background
Seller's 401K Plan 5.12(h)(i)
Selling Affiliates Background
Systems 2.1(f)
Transferred Employees 5.12(a)
Transition Services Employees 5.12(a)
Vacation Pay Liabilities 2.3(b)
Vehicles 2.1(k)
Warranty Deed 2.7(b)(ii)
ARTICLE II
THE TRANSACTION
2.1 Sale and Purchase of Purchased Assets. Upon the
terms and subject to the satisfaction or waiver of the conditions
set forth in this Agreement, and on the basis of the
representations, warranties, covenants and agreements set forth
in this Agreement, at the Closing, Seller shall transfer, sell,
convey, assign and deliver, or cause to be transferred, sold,
conveyed, assigned and delivered by the Selling Affiliates, to
Purchaser or its Designee, and Purchaser shall purchase and
accept or cause its Designee to accept from Seller and the
Selling Affiliates, all of Seller's and the Selling Affiliates'
right, title and interest in and to the Purchased Assets.
Subject to Section 2.2, the Purchased Assets shall include,
without limitation, the following:
(a) all real property and leasehold interests and
estates in real property located at the Nebraska Location
and more particularly described on Schedule 2.1(a) hereto,
together with all easements, privileges, rights-of-way,
riparian and other water rights, lands underlying any
adjacent streets or roads, appurtenances, licenses, permits
and other rights pertaining to or accruing to the benefit of
such real property and leasehold interests and estates in
real property, and all buildings, structures, towers and
improvements situated, mounted and located thereon
(collectively, the "Nebraska Real Property");
(b) the mortgage subservicing contracts listed on
Schedule 2.1(b) hereto, together with such other mortgaging
subservicing contracts as the parties hereto shall mutually
agree on or prior to the Closing Date shall be transferred
to the Purchaser or its Designee pursuant to the terms of
the Mortgage Servicing Purchase and Sale Agreement executed
by the Purchaser and Seller simultaneously herewith (the
"Assigned Subservicing Contracts");
(c) all computer equipment, computer terminals,
furniture, furnishings and fixtures used or useful in the
conduct of the operations of NSC which are listed or
described on Schedule 2.1(c) hereto (plus or less any items
acquired or disposed of in the ordinary course of business
and in accordance with past practice), including, without
limitation, the desks, chairs and computer terminals located
at the Nebraska Location, and all warranties and guarantees,
if any, express or implied, existing for the benefit of the
Seller or any Selling Affiliate to the extent transferable (
the "NSC Personal Property");
(d) all computer equipment, computer terminals,
furniture, furnishings and fixtures listed or described on
Schedule 2.1(d) hereto (plus or less any items acquired or
disposed of in the ordinary course of business and in
accordance with past practice) located at the Colorado
Location, and all warranties and guarantees, if any, express
or implied, existing for the benefit of Seller or any
Selling Affiliate to the extent transferable (the "Colorado
Personal Property");
(e) all materials, supplies, stationery, tools,
employee manuals, training manuals, servicing manuals and
policies, books, inventory, spare parts and other tangible
personal property not otherwise set forth on another
Schedule referred to in this Section 2.1 used in the conduct
of the operations of NSC and maintained at the Nebraska
Location or with respect to the Colorado Location, referred
to on Schedule 2.1(e), and owned by the Seller or any
Selling Affiliate on the Closing Date, together with any
related intellectual property rights (except those expressly
retained by Seller or a Selling Affiliate in accordance
herewith) ("Inventory");
(f) all management and other systems (including
computers and peripheral equipment), data bases, computer
software, computer discs and similar assets relating to the
conduct of the operations of NSC which are listed or
described on Schedule 2.1(f) hereto, together with any
related intellectual property rights ("Systems");
(g) the current customer list and potential
customer lists associated with NSC (the "Customer List");
(h) all technical or marketing information
relating to NSC as well as such other information as is in
the possession of NSC employees or in the possession of
suppliers of information to NSC or customers of NSC,
including new developments, inventions or ideas, and trade
secrets and documentation thereof and all rights thereto
related to NSC;
(i) all business records, tangible data,
documents, contracts, files, logs, and all other books and
records, in each case relating to the Purchased Assets,
Assumed Liabilities and NSC business to the extent permitted
by law, provided that Seller and the Selling Affiliates may
keep copies thereof;
(j) copies of all business records, documents,
files, logs, tax returns and other books and records, in
each case relating to the Purchased Assets, Assumed
Liabilities, Transferred Employees and NSC business to the
extent the Seller or any Selling Affiliate is required to
keep the originals;
(k) all vehicles listed or described on Schedule
2.1(k) hereto (the "Vehicles");
(l) the prepaid expenses described on Schedule
2.1(1) hereto (the "Prepaid Expenses"), including the
Interim Expenses; and
(m) the contracts, agreements and subscriptions
listed on Schedule 2.1(m) hereto (the "Assigned Contracts").
2.2 Excluded Assets. Notwithstanding anything to the
contrary contained in this Agreement, the Purchased Assets shall
not include, and Seller is not selling to Purchaser or its
Designee, the following assets, properties and rights (the
"Excluded Assets"):
(a) any books and records that Seller or a
Selling Affiliate is required to retain pursuant to any
statute, rule, regulation or ordinance, or which do not
relate to any Purchased Assets, Assumed Liabilities,
Transferred Employees or the NSC business;
(b) any assets, property or rights not being
transferred pursuant to Section 2.1 or which by law cannot
be transferred; and
(c) any assets of any Plans.
2.3 Assumed Liabilities. On the Closing Date,
Purchaser shall deliver to Seller an undertaking (the "Assumption
Agreement") in the form attached as Exhibit A. Pursuant to the
Assumption Agreement, Purchaser or its Designee, on and as of the
Closing Date, shall assume and agree to perform, pay and
discharge when due:
(a) the liabilities and obligations of Seller
and the Selling Affiliates with respect to the Purchased
Assets, but in each case only insofar as each such
liability or obligation relates to the period from and
after the close of business on the Closing Date (other than
as a result of any breach by Seller or any Selling
Affiliate of any of its obligations to Purchaser or its
Designee); and
(b) all obligations of Seller and its Affiliates
to Transferred Employees for unused accrued vacation, sick
leave and holiday pay (the "Vacation Pay Liabilities"); and
(c) all liabilities and obligations of
Purchaser, its Designee and its Affiliates to Transferred
Employees arising after the Closing Date out of the
employment of the Transferred Employees by Purchaser or its
Designee after the Closing Date.
(all such assumed liabilities, collectively, the "Assumed
Liabilities"). Purchaser and its Designee are not assuming, and
shall not be deemed to have assumed, any liability or obligation
of Seller or any Affiliate of any kind or nature whatsoever,
except as expressly provided in the immediately preceding
sentence, in the Assumption Agreement or in any other agreement
to which the Purchaser or its Designee may be a party.
2.4 Retained Liabilities. Notwithstanding anything to
the contrary contained in this Agreement, and without limiting
the foregoing, the Assumed Liabilities shall not include, and the
Purchaser and its Designee are not assuming the following
Liabilities (the "Retained Liabilities"):
(a) any Taxes of Seller or its Affiliates,
whether or not accrued, assessed or currently due and
payable, relating to operations or events occurring prior to
the close of business on the Closing Date (other than as
expressly provided in this Agreement);
(b) any Liabilities relating to or arising out of
any Excluded Assets;
(c) all Liabilities of Seller or any Affiliate to
or with respect to any present or former Employee, applicant
for such employment, or a person claiming to be an Employee,
other than a Transferred Employee, however arising, and all
Liabilities of Seller or any Affiliate to or with respect to
any Transferred Employee, however arising, other than the
Vacation Pay Liabilities expressly assumed by Purchaser or
its Designee pursuant hereto;
(d) all liabilities and obligations for
interdivisional, intracompany or intercompany payables,
obligations or agreements;
(e) all indebtedness of Seller and its Affiliates
for borrowed money;
(f) all Materials of Environmental Concern;
(g) any Liabilities relating to or arising out of
any Purchased Assets with respect to any claim, cause of
action, proceeding or other litigation pending or threatened
as of the close of business on the Closing Date or which is
initiated at any time thereafter to the extent based on
acts, facts, circumstances, events or conditions occurring
or existing on or prior to the close of business on the
Closing Date;
(h) any other Liabilities relating to or arising
out of any Purchased Assets, whether arising before, on, or
after the Closing Date, other than the Assumed Liabilities;
and
(i) all Liabilities resulting from any breach or,
default under, or misrepresentation contained in this
Agreement or in any document delivered by or on behalf of
Seller or any Selling Affiliate pursuant hereto.
Pursuant to Section 7.2, Seller agrees to pay, perform
and discharge, and to indemnify Purchaser and its Affiliates
against and hold them harmless from, all obligations and
liabilities relating to the Purchased Assets and Transferred
Employees other than those which Purchaser or its Designee have
expressly agreed to assume pursuant to the second sentence of
Section 2.3.
2.5 Instruments of Conveyance and Transfer; Further
Assurances. (a) On the Closing Date, Seller shall (i) deliver
or cause to be delivered to Purchaser or its Designee such fully
executed deeds endorsements, consents, assignments and other
good and sufficient instruments of conveyance and assignment,
all in recordable form, where applicable, as shall be effective
to vest in Purchaser or its Designee all right, title and
interest of Seller and the Selling Affiliates in and to the
Purchased Assets and (ii) transfer to Purchaser or its Designee
possession and control of all Purchased Assets.
(b) From time to time after the Closing Date,
Seller will execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such other instruments of
conveyance, assignment, transfer and delivery and will take or
cause to be taken such other actions as Purchaser may reasonably
request in order to more effectively exchange, convey, assign,
transfer, deliver to, and vest in the Purchaser or its Designee
any of the Purchased Assets and as otherwise may be appropriate
to carry out the transactions contemplated by this Agreement.
2.6 Consideration for Transfer of the Purchased
Assets. In consideration for the conveyance, assignment,
transfer and delivery to Purchaser or its Designee of the
Purchased Assets on the Closing Date as provided in Section 2.1
hereof, subject to the terms and conditions of this Agreement,
Purchaser agrees to pay Seller on the Closing Date a purchase
price in cash equal to the sum of: (a) if the Closing Date is on
or before July 31, 1997, $1.9 million less the NSC Personal
Property Depreciation Adjustment plus the amount of the Prepaid
Expenses or (b) if the Closing Date is after July 31, 1997, $2
million less the NSC Personal Property Depreciation Adjustment
plus the amount of the Prepaid Expenses, plus the assumption of
the Assumed Liabilities (the "Purchase Price"). The cash portion
of the Purchase Price shall be paid in immediately available
funds by wire transfer to the account designated by Seller in
writing to Purchaser at the Closing. "NSC Personal Property
Depreciation Adjustment" is the amount by which the assumed book
value of the NSC Personal Property as at May 31, 1997 exceeds the
assumed book value of the NSC Personal Property as at the earlier
of July 31, 1997 or the Closing Date; for purposes of the
preceding computations assumed book value shall be the
depreciated book value of the NSC Personal Property as at the
relevant date as determined in accordance with generally accepted
accounting principles consistently applied by Seller and the
Selling Affiliates as if NSC were a going concern and in
accordance with the methodology used in creating Schedule 2.1(c).
Seller shall furnish to Purchaser or its Designee within 5
Business Days of the Closing a detailed schedule showing the
computation of the cash portion of the Purchase Price and based
on such schedule Seller shall pay to Purchaser or its Designee or
Purchaser or its Designee shall pay to Seller any required
adjustments to the Purchase Price payment made at the Closing.
Seller shall give Purchaser's Representatives reasonable access
to the books and records of the Seller and its Selling Affiliates
so that Purchaser or its Designee may verify such computation.
Purchaser or its Designee shall notify Seller within 30 Business
Days after receipt of such schedule of any objections. If no
objections are made within such period, the schedule shall be
deemed to be accepted by the Purchaser and its Designee.
2.7 Closing and Deliveries.
(a) Closing. Subject to the terms and conditions
of this Agreement, the closing of the sale and purchase of
the Purchased Assets (the "Closing") shall take place at the
offices of Lehman Brothers Holdings Inc., 3 World Financial
Center, New York, New York 10285 at 10:00 a.m. on the
second Business Day after the condition to Closing specified
in Section 6.1 shall have been satisfied, or such other time
as Seller and Purchaser together agree in writing. The
actual time and date on which the Closing shall occur are
herein referred to as the "Closing Date". All calculations
hereunder to be made as of the Closing Date shall be made as
of such time and date that is immediately prior to the close
of business on the Closing Date. The Closing shall be
effective as of 11:59 p.m. (EST) on the Closing Date.
(b) Seller's Deliveries. Subject to the terms
and conditions of this Agreement, at the Closing Seller
shall deliver or cause to be delivered to Purchaser or its
Designee:
(i) a general assignment and bill of sale
(the "Bill of Sale") in the form of Exhibit B conveying all
the Purchased Assets not specified by (ii) or (iii) below;
(ii) a warranty deed (or its local
equivalent) in form and substance acceptable to the
Purchaser to the Nebraska Real Property (the "Warranty
Deed");
(iii) the Assumption Agreement;
(iv) the certificates referred to in Sections
6.2(h) and (i);
(v) the Customer List (if any);
(vi) such other instruments as may be
necessary to convey the Purchased Assets to Purchaser;
(vii) originals or copies of all of the
contracts, files and other documents required to be
delivered to Purchaser or its Designee pursuant to Section
2.1 hereof, which may be delivered in the form and order in
which they are maintained by or on behalf of Seller or the
Selling Affiliates;
(viii) a guaranty agreement substantially
in the form of Exhibit F hereto (the "Guaranty") executed by
Harbourton Holdings, L.P.; and
(ix) the Transition Services Agreement.
(c) Purchaser's Deliveries. Subject to the terms
and conditions of this Agreement, at the Closing Purchaser
shall deliver or cause to be delivered to Seller
(i) immediately available funds equal to the
cash portion of the Purchase Price;
(ii) the Assumption Agreement;
(iii) the Bill of Sale;
(iv) the certificate referred to in Sections
6.3(d) and (e); and
(v) the Transition Services Agreement.
2.8 Allocation of Consideration.
(a) Allocation. The Purchase Price shall be
allocated among the Purchased Assets as set forth on
Schedule 2.8(a).
(b) Tax Consistency. Purchaser and Seller shall,
and shall cause their Affiliates to, report the transactions
contemplated by this Agreement in a manner consistent with
such allocation for the purposes of reporting Taxes,
including but not limited to the preparation and filing of
Form 8594 under Section 1060 of the Code (or any successor
form or successor provision of any future tax law) with
their respective federal income tax returns for the taxable
year that includes the Closing Date, and neither Purchaser
nor Seller will take, nor will they permit their Affiliates
to take, any position inconsistent with such allocation
unless otherwise required by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1 Organization and Good Standing. Each of Seller
and the Selling Affiliates is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction
of organization and has the requisite corporate power and
authority to own, lease and operate the Purchased Assets. Each
of Seller and the Selling Affiliates has all requisite
partnership or corporate power and authority to enter into this
Agreement and any other agreement contemplated hereby and to
perform its obligations hereunder and thereunder. Each of Seller
and the Selling Affiliates is duly authorized, qualified or
licensed to do business as a foreign entity, and is in good
standing, in each of the jurisdictions in which its right, title
or interest in or to any of the Purchased Assets requires such
authorization, qualification or licensing, except where the
failure to so qualify or to be in good standing is not
individually or in the aggregate reasonably expected to have a
Section 3 Material Adverse Effect.
3.2 Authority. The execution, delivery and
performance by Seller and each Selling Affiliate of this
Agreement and any other agreements or documents executed or to be
executed by it in connection herewith, and the consummation of
the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary partnership or corporate
action of Seller and the Selling Affiliates. This Agreement has
been, and any other agreements or documents to be executed by it
in connection herewith will be, duly executed and delivered by
Seller and each Selling Affiliate and constitutes, or will
constitute, a legal, valid and binding obligation of Seller and
each Selling Affiliate, enforceable against it in accordance with
its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
3.3 No Conflict or Breach. The execution, delivery
and performance of this Agreement and any other agreements
contemplated hereby by Seller and each Selling Affiliate and the
consummation by it of the transactions contemplated hereby and
thereby do not and will not:
(a) conflict with or constitute a violation of
organization documents of Seller or any Selling Affiliate;
(b) conflict with or constitute a violation of
(with or without the giving of notice or the lapse of time
or both) any provision of any law, judgment, order, decree,
rule or regulation of any legislative body, court,
governmental or regulatory authority or arbitrator which is
applicable to or relates to Seller or any Selling Affiliate
or any of the Purchased Assets, which individually or in the
aggregate could reasonably be expected to have a Section 3
Material Adverse Effect; or
(c) violate or conflict with, constitute a
default under, result in a breach, acceleration or
termination of any provision of, require notice to or the
consent of any third party which has not been obtained
under, or result in the creation of any Lien (as defined
below) upon all or any portion of the Purchased Assets
pursuant to, any contract, agreement, commitment, indenture,
mortgage, deed of trust, lease, licensing agreement, note or
other instrument or obligation to which Seller or any
Selling Affiliate is a party or by which Seller, any Selling
Affiliate or any of the Purchased Assets is bound.
3.4 Consents. Except as provided on Schedule 3.4, no
consent, approval or authorization of, or designation declaration
or filing with, or notice to, any legislative body court,
governmental or regulatory authority or arbitrator (other than
the Federal Trade Commission ("FTC") and the Department of
Justice ("DOJ")) under any provision of any law, judgment, order,
decree, rule or regulation is required on the part of Seller or
any Selling Affiliate in connection with the execution, delivery
and performance of this Agreement or any other agreement
contemplated hereby, the consummation of the transactions
contemplated hereby and thereby, or to ensure that the Purchased
Assets can be operated or used after the Closing as presently
operated or used.
3.5 Licenses, Permits and Approvals. Except as set
forth on Schedule 3.5 hereto, Seller and each Selling Affiliate
hold all material licenses, permits, franchises, releases,
certificates of compliance, consents, approvals and
authorizations of governmental authorities necessary for or used
in the ownership or operations of NSC and all such licenses,
permits, franchises, releases, certificates of compliance,
consents approvals and authorizations are, in full force and
effect. Schedule 3.5 hereto contains a true and complete list or
description of all such licenses, permits, franchises, releases
certificates of compliance, consents, approvals and
authorizations (showing in each case, the expiration date).
Except as set forth on Schedule 3.5 hereto, no application,
petition, objection, opposition, action or proceeding is pending
or, to the best of Seller's knowledge, threatened that may result
in the denial of an application for renewal, the revocation,
modification, nonrenewal or suspension of any of such licenses,
permits, franchises, releases, certificates of compliance,
consents, approvals or authorizations, the issuance of a cease-
and-desist order, or the imposition of any administrative or
judicial sanction with respect to Seller, any Selling Affiliate
or any of the Purchased Assets that is reasonably expected to
have a Section 3 Material Adverse Effect
3.6 Real Property.
(a) Compliance. Except as set forth on Schedule
3.6(a) hereto, the Nebraska Real Property is in compliance
in all material respects with applicable laws, including
zoning, land use and building code laws, ordinances and
regulations necessary to conduct the operations of Seller
and its Affiliates thereon as presently conducted, and the
transactions contemplated by this Agreement could not
reasonably be expected to result in the revocation of any
permit or variance, except to the extent that any such non-
compliance, violation or revocation, individually or in the
aggregate, could not reasonably be expected to have a
material adverse effect on such property. Except as set
forth on Schedule 3.6(a) hereto, all buildings, structures
and improvements on the Nebraska Real Property are in good
condition and repair, ordinary wear and tear excepted, and
are fit for the purpose for which they are presently
utilized and conform to generally accepted industry
practice.
(b) Title to Real Property. Except as
specifically set forth on Commonwealth Land Title Insurance
Company Commitment No. 4340A attached as Schedule 3.6(b)
hereto, Seller and the Selling Affiliates have, and
Purchaser or its Designee will receive on the Closing Date,
good and insurable fee simple title to the Nebraska Real
Property, free and clear of all claims, liens, mortgages,
pledges, imperfections of title, easements, covenants,
restrictions, options, rights of refusal, security
interests, charges, leases, encumbrances, licenses or
sublicenses and other restrictions of any kind and nature
(collectively, "Liens").
3.7 Tangible Personal Property. Schedules 2.1(c),
(d), (e), (f), and (k) hereto contain a true and complete list of
all NSC Personal Property, all Colorado Personal Property,
Vehicles and tangible assets which are included as part of
Systems and Inventory on the date hereof. Seller has, and
Purchaser will receive on the Closing Date, good and marketable
title to all such assets, free and clear of all Liens, except as
specifically set forth on Schedule 3.7(a) hereto. Except as set
forth on Schedule 3.7(b) hereto, all such tangible personal
property is in good operating condition and repair, ordinary wear
and tear excepted.
3.8 Contracts. Schedule 2.l(b) and (m) hereto contain
a true and complete list or description of all Assigned
Subservicing Contracts and Assigned Contracts. Except as set
forth on Schedule 3.8(a) hereto, all the Contracts are in full
force and effect and are valid and enforceable in all material
respects in accordance with their respective terms. Except as
specified in Schedule 3.8(a) hereto, none of Seller or its
Selling Affiliates is in breach or default in the performance of
any obligation thereunder and no event has occurred or has failed
to occur whereby, with or without the giving of notice or the
lapse of time or both, a default or breach will be deemed to have
occurred thereunder or any of the other parties thereto have been
or will be released therefrom or will be entitled to refuse to
perform thereunder. To the knowledge of the Seller and the
Selling Affiliates, no other party to an Assigned Subservicing
Contract or Assigned Contract is in default thereunder in any
material respect. The Seller and Selling Affiliates, as well as
each prior servicer of a mortgage loan subject to an Assigned
Subservicing Contract, has duly and faithfully complied with all
applicable laws and regulations with respect to subject to any
Assigned Subservicing Contract and with all of the terms of each
Assigned Subservicing Contract, including mortgage servicing
guidelines, applicable to such loans. No other party to any such
Contract has made or asserted, or, to the best of the knowledge
of Seller has, any defense, setoff or counterclaim under any such
Contract, no such other party has exercised any option granted to
it to cancel or terminate its agreement, to shorten the term of
its agreement, or to renew or extend the term of its agreement
and none of Seller or any of its respective Affiliates has
received any notice to that effect. True and complete copies of
all documents relating to the Contracts have been delivered or
made available to Purchaser or its representatives. Except for
the consents of the counterparties to the Assigned Subservicing
Agreements referred to in Schedule 3.8(a), no consent or approval
of any third party which will not have been obtained on or prior
to the Closing Date is required for the assignment of the
Assigned Subservicing Agreements and the Assigned Contracts to
the Purchaser or its Designee and, subject to receipt of such
counterparty consents, the assignment of such Contracts to the
Purchaser or its Designee will not result in a breach of or
default under any provision of such Contract.
3.9 Operation of NSC. NSC has been and is being
operated in all material respects in accordance with federal and
state mortgage servicing laws and regulations and all records,
documents and logs that are required to be maintained pursuant to
such rules, regulations and policies have been properly
maintained, except those the absence of which in the aggregate
would be immaterial to the conduct of the operations of NSC.
3.10 Sufficiency of Purchased Assets. Except as set
forth on Schedule 3.10 hereto and subject to the Purchaser's
obtaining all necessary licenses, permits, consents and approvals
of governmental authorities, and employing at least 85
Transferred Employees, to the knowledge of the Seller, the
Purchased Assets and all other rights to be conveyed to Purchaser
hereunder will provide Purchaser at the Closing with sufficient
systems, rights, know-how and other assets to enable Purchaser or
its Designee to have the capability to conduct a mortgage
servicing business in a manner substantially similar to that
presently conducted by NSC.
3.11Undisclosed Obligations. Except as disclosed on
Schedule 3.11 hereto or on any other Schedule to this Agreement,
Seller does not have any liability or obligation of any kind with
respect to the Purchased Assets or Transferred Employees, whether
accrued, absolute, fixed or contingent, known or unknown, other
than liabilities and obligations not being assumed by Purchaser
or its Designee under this Agreement or the Assumption Agreement.
3.12Absence of Certain Changes. Since the end of the
last fiscal quarter prior to the Closing, NSC has been operated
in the usual and ordinary course consistent with past practice
and, except as set forth on Schedule 3.12 hereto, there has been
no transaction, event or condition that individually or in the
aggregate has had or is reasonably expected to have a Section 3
Material Adverse Effect.
3.13Litigation; Compliance with Laws. (a) There is no
claim, litigation, proceeding or governmental investigation
pending or, to the best of the knowledge of Seller, threatened,
or any order, injunction or decree outstanding, against Seller or
any Selling Affiliate, which if adversely determined could
individually or in the aggregate reasonably be expected to have a
Section 3 Material Adverse Effect, (b) except with respect to the
Herbst case listed on Schedule 3.13 hereto, Seller and each
Selling Affiliate is in material compliance with all laws,
statutes, rules, regulations, orders and licensing requirements
of federal, state, local and foreign agencies and authorities
applicable to the conduct of the operations of NSC and the
Purchased Assets as a whole (including those relating to
antitrust and trade regulation and civil rights), and (c) no
written or oral notice has been received by Seller or any Selling
Affiliate from any such agency or authority alleging any such
material non-compliance. Clause (b) of this Section 3.13 does
not relate to compliance with environmental laws, as to which
Section 3.14 is applicable, or compliance with labor laws, as to
which Section 3.18 is applicable.
3.14Environmental Matters. (a) Except as set forth
on Schedule 3.14(a) hereto, with respect to the Nebraska
Location, Seller and its Affiliates are in material compliance
with all federal, state and local laws, regulations, rules,
orders, decrees, ordinances and common law relating to pollution,
the protection of human health or the environment, including laws
relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials
of Environmental Concern ("Environmental Laws"). "Materials of
Environmental Concern" means chemicals, pollutants, contaminants,
wastes, radiation (including radio-frequency radiation), toxic
substances, petroleum and petroleum products and any other
substance regulated by or that could result in liability under
any Environmental Laws, including those substances listed
pursuant to 42 U.S.C. 9601(14) and (33), PCBs (as defined below)
and asbestos.
(b) Except as set forth on Schedule 3.14(b)
hereto, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including the
release, emission, discharge or disposal of any Materials of
Environmental Concern, at any property or facility currently or
formerly owned, operated or leased by Seller that could form the
basis after the Closing of any claim against Purchaser or its
Designee arising out of actions, activities, circumstances,
conditions, events or incidents prior to the Closing.
(c) Except as set forth on Schedule 3.14(c)
hereto, (i) there are no underground storage tanks located at the
Nebraska Location, (ii) there is no asbestos contained in or
forming part of any building, building component, structure or
office space located at the Nebraska Location, (iii) no
polychlorinated biphenyls (PCBs) are used or stored at the
Nebraska Location, and (iv) none of the electrical equipment
located at the Nebraska Location contains any PCBs. Except as
set forth on Schedule 3.14(c) hereto, there are no on-site or off-
site locations where Seller or any Affiliate has stored, disposed
or arranged for the disposal of Materials of Environmental
Concern which relate in any way to the Nebraska Location.
(d) Except as set forth on Schedule 3.14(d)
hereto, none of Seller or any of its Affiliates has received any
notice of violation, alleged violation, noncompliance, liability
or potential liability regarding environmental matters or
compliance with Environmental Laws which relate in any way to the
Colorado Location or the Nebraska Location.
(e) Materials of Environmental Concern have not
been transported or disposed of by Seller or any Affiliate
thereof from the Colorado Location or the Nebraska Location or
the business of NSC in a manner or to a location which could
reasonably be expected to give rise to liability of Purchaser or
any of its Affiliate under Environmental Laws.
(f) Seller holds, and is in compliance with, all
permits, licenses, registrations or other authorizations required
under Environmental Laws ("Necessary Permits") which relate to
the Colorado Location and the Nebraska Location. Except as set
forth on Schedule 3.14(f) hereto, to Seller's knowledge no
modification, revocation, reissuance, alteration, transfer, or
amendment of the Necessary Permits, or any review by, or approval
of, any third party of the Necessary Permits is required in
connection with the execution or delivery by Seller of this
Agreement or the documents executed or to be executed in
connection herewith, or the consummation of the transactions
contemplated hereby or thereby, or the operation, use and
enjoyment of the Colorado Location and the Nebraska Location by
Purchaser or its Designee following such consummation.
3.15Reports; Books and Records. The books and records
of and relating to NSC that have been delivered by Seller or any
Selling Affiliate to Purchaser or its Designee in connection with
the transactions contemplated by this Agreement have been
maintained in accordance with good business practice and
accurately reflect and evidence the transactions of such business
in all material respects.
3.16Insurance. Schedule 3.16 sets forth the liability
and other insurance that has been maintained by the Seller and
its Affiliates with respect to the operations of NSC. Such
insurance coverage is commensurate with the levels of coverage
reasonable and customary in the mortgage servicing industry. In
order to protect Purchaser and its Designee against any loss or
liability for events or acts occurring on or prior to the Closing
Date, Seller will or will cause its Affiliates to maintain run-
off coverage on the errors and omissions policy through at least
December 31, 1998, on the blanket bond policy through at least
July 1, 1998 and on its directors and liability policy through at
least August 6, 1998 and to name Purchaser and its Designee as a
loss payee with a right to file claims endorsement on the errors
and omissions and blanket bond policies. If Seller or any of its
Affiliates in their discretion maintain such coverage beyond the
dates specified in the preceding sentence, Purchaser and Designee
shall continue to be named as a loss payee with a right to file
claims endorsement.
3.17Taxes. All Tax Returns required to be filed by
law where the failure to file such Tax Returns on a duly and
timely basis could result in a Lien on the Purchased Assets or
the imposition on Purchaser or its Designee of any liability for
Taxes have been duly and timely filed in the proper form with the
appropriate governmental authority. All Taxes of whatever nature
due or payable pursuant to said Tax Returns or otherwise have
been paid, except for such amounts as are being contested
diligently, in the appropriate forum and in good faith, where the
failure to pay or contest such amounts could result in a material
Lien on the Purchased Assets or the imposition on Purchaser or
its Designee of any liability for any Taxes. There are no Tax
audits pending and no outstanding agreements or waivers extending
the statutory period of limitations applicable to any federal,
state or local income Tax Return for any period, the result of
which could result in a Lien on the Purchased Assets or the
imposition on Purchaser or its Designee of any liability for any
Taxes. There are no governmental investigations or other legal,
administrative or Tax proceedings pursuant to which Seller or any
Affiliate is or could be made liable for any Taxes, penalties,
interest or other charges, the liability for which could extend
to Purchaser or its Designee as transferee of the Purchased
Assets, or which could result in a Lien on the Purchased Assets
and, to the best of Seller's knowledge, no event has occurred
that could impose on Purchaser or its Designee any liability for
any Taxes, penalties or interest due or to become due from Seller
or any Affiliate. Any open Tax Return year of Seller or any
Affiliate that relates to the period prior to the closing of
business on the Closing Date that may be audited after the
Closing Date, or any assessments related to any such period,
shall be the sole responsibility of the Seller or such Affiliate.
3.18Employee Benefits. (a) Schedule 3.18(a) hereto
lists each "employee benefit plan" (within the meaning of section
3(3) of ERISA) and any other employee plan, agreement or
arrangement maintained or otherwise contributed to by Seller or
any of its Affiliates for the benefit of any Employees (the
"Plans"). Copies or descriptions of the Plans have been or will
be furnished or made available to Purchaser or its
representatives.
(b) Each Plan has been administered and is in
material compliance with the terms of such plan and all
applicable laws, rules and regulations, except as disclosed in
the copy of the voluntary compliance resolution request attached
as Schedule 3.18(b). Additionally, except as so disclosed, none
of Seller, any Affiliate or any trustee, administrator or other
fiduciary of any Plan has engaged in any transaction or acted in
a manner that could, or has failed to act so as to, (i) result in
any material liability for breach of fiduciary duty under ERISA
or any other applicable law or (ii) result in fines, penalties,
taxes or related charges under (x) section 502(c), (i) or (1) of
ERISA, (y) section 4071 of ERISA or (z) Chapter 43 of the Code.
(c) No "reportable event" (as such term is used
in section 4043 of ERISA) with respect to which notice to the
Pension Benefit Guaranty Corporation has not been waived,
"prohibited transaction" (as such term is used in section 4975 of
the Code or section 406 of ERISA) or "accumulated funding
deficiency" (as such term is used in section 412 or 4971 of the
Code) has heretofore occurred with respect to any Plan and Seller
has not incurred any liability to the Pension Benefit Guaranty
Corporation with respect to any Plan subject to Title IV of ERISA
other than liability for premiums. Neither the execution of this
Agreement nor the transactions contemplated hereby will
constitute a "reportable event."
(d) There are no pending or, to the best of the
knowledge of Seller, threatened, actions, claims or lawsuits
which have been asserted or instituted involving or arising out
of any Plan, with respect to the operation or administration of
such plan (other than routine benefit claims).
(e) Neither Seller nor any member of a
"Controlled Group" (as defined in section 414 of the Code) in
which Seller is a member (a "Commonly Controlled Entity" as
defined in the Code) has any liability in respect of any
"multiemployer plan" (as such term is defined in section 3(37) of
ERISA, a "Multiemployer Plan") and neither Seller nor any
Commonly Controlled Entity of Seller has incurred any withdrawal
liability which remains unsatisfied. Additionally, Seller (i)
has not previously announced an intention to withdraw without
completing withdrawal, and (ii) has no present intention to
withdraw, in each case from a Multiemployer Plan with respect to
the Purchased Assets; and no action has been taken, and no
circumstances exist, that alone or with the passage of time could
result in either a partial or complete withdrawal from such
Multiemployer Plan by Seller or any Affiliate with respect to the
Purchased Assets.
(f) Except as set forth on Schedule 3.18(f)
hereto, no Plan exists which could result in the payment to any
Employee of any money or other property or rights or accelerate
or provide any other rights or benefits to any such employee as a
result of the transactions contemplated by this Agreement,
whether or not such payment would constitute a parachute payment
within the meaning of section 280G of the Code.
3.19Certain Fees. Except as disclosed on Schedule
3.19, neither Seller nor any of its Affiliates, nor any of its
officers, directors or employees, on behalf of Seller or such
Affiliates, has retained or dealt with any broker or finder or
incurred any other liability for any brokerage fees, commissions
or finders' fees in connection with the transactions
contemplated by this Agreement.
3.20Intellectual Property Rights. Seller and the
Selling Affiliates own or have valid licenses to all of the
Systems and the other intellectual property constituting part of
the Purchased Assets and at the Closing Purchaser or its
Designee will receive ownership or a valid license to all of
such Systems and intellectual property constituting part of the
Purchased Assets, free and clear of all Liens except as noted on
Schedule 3.20. All intellectual property licenses being
transferred to the Purchaser or its Designee as part of the
Purchased Assets are valid for the number of employees and
locations using such licenses.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
4.1 Organization and Good Standing. Purchaser and
each Designee is a corporation duly organized, validly existing
and in good standing under the laws of the state of its
jurisdiction of incorporation and has the requisite corporate
power and authority to enter into this Agreement and any other
agreement contemplated hereby, and to perform its obligations
hereunder and thereunder.
4.2 Authority. The execution, delivery and
performance by it of this Agreement and any other agreements or
documents executed or to be executed by it in connection
herewith, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all
necessary corporate and stockholder action of Purchaser and its
Designee. This Agreement has been, and any other agreements or
documents to be executed by it or any Designee in connection
herewith will be, duly executed and delivered by it and
constitutes, or will constitute, a legal, valid and binding
obligation of Purchaser, enforceable against it in accordance
with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
4.3 No Conflict or Breach. The execution, delivery
and performance of this Agreement and any other agreements
contemplated hereby by it and the consummation by it of the
transactions contemplated hereby and thereby do not and will not:
(a) conflict with or constitute a violation of
the certificate of incorporation or bylaws of Purchaser or
any Designee; or
(b) conflict with or constitute a violation of
(with or without the giving of notice or the lapse of time
or both) any provision of any law, judgment, order, decree,
rule or regulation of any legislative body, court,
governmental or regulatory authority or arbitrator which is
applicable to or relates to Purchaser or its Designee, which
individually or in the aggregate could reasonably be
expected to have a Section 4 Material Adverse Effect.
4.4 Consents. Except as set forth on Schedule 4.4
hereto, no consent, approval or authorization of, or designation,
declaration or filing with, or notice to, any legislative body,
court, governmental or regulatory authority or arbitrator (other
than the FTC and the DOJ) under any provision of any law,
judgment, order, decree, rule or regulation is required on the
part of Purchaser or its Designee in connection with the
execution, delivery and performance of this Agreement or any
other agreement contemplated hereby, the consummation of the
transactions contemplated hereby and thereby, or to ensure that
the Purchased Assets can be operated or used after the Closing as
presently operated or used.
4.5 Certain Fees. Neither Purchaser nor its
Affiliates, nor any of their respective officers, directors or
employees, on behalf of Purchaser or such Affiliates, has
retained or dealt with any broker or finder or incurred any other
liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
ARTICLE V
FURTHER AGREEMENTS OF THE PARTIES
5.1 Pre-Closing Covenants. From the date of this
Agreement through the Closing Date, the Seller shall directly or
indirectly through the Selling Affiliates:
(a) cause the business of NSC to be operated in
the usual and ordinary course consistent with past practices
and in material compliance with all applicable laws,
ordinances, regulations, rules or orders;
(b) use reasonable best efforts, consistent with
its past practices, (i) to preserve the business
organization of NSC and to preserve the goodwill and
business of NSC, (ii) to retain the services of the
employees of NSC, and (iii) to preserve all trademarks,
trade names, service marks, internet domain names and
copyrights and related registrations of NSC;
(c) not sell, transfer, lease or otherwise
dispose of any of the Purchased Assets, or agree to do any
of the foregoing, other than in the ordinary course of its
business consistent with past practice;
(d) not permit or allow any of the Purchased
Assets to become subject to any Liens, other than those
listed or described on Schedule 3.6(b) or 3.7(a) or those
which are released on or prior to the Closing Date;
(e) except with the Purchaser's prior written
approval, which approval with respect to clause (i) below
shall not be unreasonably withheld, not (i) enter into or
renew any lease, commitment or other agreement with respect
to any of the Purchased Assets providing for payments by the
Seller, any Selling Affiliate or the Purchaser or its
Designee, except in the ordinary course of business and
consistent with past practices, (ii) cause or take any
action to allow any material lease, commitment or other
agreement to lapse (other than in accordance with its
terms), to be modified in any adverse respect, or otherwise
to become impaired in any material manner, except in the
ordinary course of business where such actions, individually
or in the aggregate, are not reasonably expected to have a
Section 3 Material Adverse Effect, (iii) make material
changes in any method of marketing, management or operation,
accounting methods, practices or procedures, collection or
credit extension policies, or cash management methods,
practices or procedures, (iv) grant or agree to grant any
general increases in the rates of salaries or compensation
payable to the Employees, other than in the ordinary course
of business consistent with past practices, (v) grant or
agree to grant any specific bonus or increase to any
executive or Employee whose total annual compensation after
the increase would be at an annual rate in excess of $50,000
(including any such increase pursuant to any pension, profit
sharing or other plan or commitment), other than bonuses or
salary increases in the ordinary course of business
consistent with past practices, or (vi) provide for any new
profit sharing, pension, retirement or other employment
benefits for Employees or any increase in any existing
profit sharing or benefits, establish any new employee
benefit plan or amend or modify any existing employee
benefit plan, or otherwise incur any obligation or liability
under any employee benefit plan materially different in
nature or amount from obligations or liabilities incurred
during similar periods in prior years;
(f) maintain in full force and effect property
damage, liability and other insurance with respect to the
Purchased Assets at levels of coverage consistent with
Seller or the Sellings Affiliates' past practice with
respect to similar assets;
(g) refrain from taking any action (or failing to
take any action) if such action (or failure to take any
action) could reasonably be expected to result in the
expiration, revocation, suspension or adverse modification
of any governmental licenses, permits or certificates
material to the operation of NSC or the Purchased Assets as
a whole, and prosecute with due diligence any applications
to any governmental authority material to the operation of
NSC or the Purchased Assets as a whole; and
(h) refrain, and shall cause each of its
Affiliates to refrain, from agreeing, whether in writing or
otherwise, to take any action inconsistent with any of the
foregoing.
5.2 No Control. Between the date of this Agreement
and the Closing Date, the Purchaser shall not, directly or
indirectly control, supervise or direct, or attempt to control,
supervise or direct, the operations of NSC, but such operations
shall be solely the responsibility of the Seller and its Selling
Affiliates, and, subject to the provisions of Section 5.1, shall
be in its complete discretion.
5.3 Expenses. Each of the parties shall bear its own
expenses incurred in connection with the negotiation and
preparation of this Agreement and in connection with all
obligations required to be performed by it under this Agreement,
except where specific expenses have been otherwise allocated by
this Agreement.
5.4 Access to Information. Prior to the Closing, the
Purchaser and its directors, officers, employees, Affiliates, non-
employee representatives (including financial advisors, attorneys
and accountants) and agents (collectively, its "Representatives")
may make such investigation of NSC, the Purchased Assets and
Transferred Employees as it may reasonably desire, and the Seller
shall give to the Purchaser and to its Representatives, upon
reasonable notice, full access during normal business hours
throughout the period prior to the Closing to all of the
Purchased Assets, including all the assets, books, commitments,
agreements, records and files of NSC and the Transferred
Employees. The Seller shall furnish to the Purchaser during that
period all documents and copies of documents and information
concerning the businesses and affairs of NSC, the Transferred
Employees and the Purchased Assets as the Purchaser reasonably
may request. The Purchaser shall treat, and shall cause its
Representatives to treat, all such information and documents and
all other information and documents delivered pursuant to this
Agreement confidential and, if the purchase and sale contemplated
by this Agreement is not consummated for any reason, upon request
therefor, the Purchaser shall return to the Seller all such
documents and shall destroy any copies thereof as soon as
practicable. The Purchaser's obligations under this Section 5.4
shall survive the termination of this Agreement.
5.5 Consents; Assignment of Agreements. The Seller
shall use its best efforts to obtain at the earliest practicable
date all consents and approvals referred to in Sections 3.3(c)
and 3.4; provided, that no contract or other agreement shall be
modified to increase the amount payable thereunder or to
otherwise modify the terms thereof in a manner adverse to the
Purchaser, in order to obtain any such consent or approval
without first obtaining the written consent of the Purchaser and;
provided, further, if any such consent is not obtained (and
Purchaser has waived the condition precedent to Closing that such
consent or approval has been obtained), Seller and its Selling
Affiliates shall, to the extent reasonably possible, keep the
agreement in effect and shall give Purchaser or its Designee the
benefit of the agreement to the same extent as if it had not been
excluded, and Purchaser or its Designee shall perform the
obligations under the agreement relating to the benefit obtained
by Purchaser or such Designee. The Seller shall furnish the
Purchaser with a copy of all consents and approvals referred to
in Sections 3.3(c) and 3.4 obtained pursuant hereto. Nothing in
this Agreement shall be construed as an attempt to assign any
agreement or other instrument that is by its terms nonassignable
without the consent of the other party.
5.6 Transition Services Agreement. At Closing, Seller
and Purchaser shall enter into the Transition Services Agreement
substantially in the form of Exhibit C.
5.7 Further Assurances. Prior to the Closing Date,
Seller shall assist Purchaser in Purchaser's efforts to hire such
employees of NSC whom Purchaser determines to hire pursuant to
Section 5.12. At any time and from time to time after the
Closing, each of the parties shall, without further
consideration, execute and deliver to the other such additional
instruments and shall take such other action as the other may
request to carry out the transactions contemplated by this
Agreement. The Seller and the Purchaser will notify the other
parties hereto immediately of any litigation, arbitration or
administrative proceeding pending, or to their knowledge,
threatened, against any party hereto which challenges the
transactions contemplated by this Agreement. For a period of
three years after the Closing, Purchaser shall grant Seller, the
Selling Affiliates, and Harbourton Holdings, L.P. reasonable
access during normal business hours upon reasonable prior notice
to the books and records of Purchaser as they relate to the
Purchased Assets to the extent necessary to comply with any
applicable law or governmental rule or request relating to the
period during which Seller owned the Purchased Assets.
5.8 Compliance with Bulk Transfer Law. The Seller
expressly agrees to comply with the provisions of any bulk sales
act relating to bulk transfers in any jurisdiction wherein any of
the Purchased Assets are located, if applicable to this
transaction. Seller shall indemnify and hold the Purchaser and
its Designee harmless from any obligations, losses, liabilities
and expenses (including reasonable attorneys' fees) asserted by
third parties or incurred by Purchaser or its Designee as a
result of Seller's noncompliance with any such act.
5.9 Other Action. None of the parties to this
Agreement shall take any action that would result in the
condition set forth in Section 6.2(a) or 6.3(a), as the case may
be, not being satisfied at and as of the time of the Closing.
Subject to the terms and conditions hereof, each of the parties
shall use its best efforts to cause the fulfillment at the
earliest practicable date of all of the conditions to the
obligations of the parties to consummate the transactions
contemplated by this Agreement. Without limiting the generality
of the foregoing, the Seller shall execute and deliver to the
Purchaser (or the Purchaser's title insurer) such reasonable and
customary affidavits, certificates and documentation relating to
the Seller's ownership and title to the Nebraska Real Property,
as shall be reasonably required in connection with the
Purchaser's or its Designee's obtaining an owner's policy of
title insurance with respect to such property.
5.10 Updated Schedules. Prior to the Closing, Seller
shall update the Schedules hereto, in each case to reflect any
actions taken or omitted to be taken by the Seller in accordance
with the provisions of this Agreement during the period
commencing on the date of this Agreement and ending immediately
prior to the Closing.
5.11 Certain Taxes and Expenses. (a) Sales Taxes;
Transfer and Recording Fees. Purchaser shall pay (i) any state
or local sales and use Taxes payable in connection with the
transactions contemplated by this Agreement, (ii) any stamp or
transfer Taxes, real property Taxes or recording fees payable in
connection with the transactions contemplated by this Agreement
and (iii) any registration fees and expenses payable in
connection with the transactions contemplated by this Agreement;
provided such taxes, fees and expenses are customarily paid by a
purchaser. The Seller shall comply, and shall cause the
Purchased Assets to be transferred by it to comply, with any
reasonable requirements for obtaining any available exemption
from any such Taxes or other fees.
(b) Tax Apportionment. In the case of any taxable
period that includes (but does not begin on) the Closing Date
(the "Tax Period"): the parties shall prorate (i) real estate and
other property taxes, including special assessments, and (ii)
rents, utilities, deposits and other like items customarily
prorated in connection with the sale of assets on the basis of
the number of days of the tax year, calendar year or service
period (as the case may be) which has elapsed as of 1 1:59 P.M.
on the Closing Date. With respect to real estate taxes, Seller
shall pay such taxes and assessments for assessment period 1997
when they fall due (whether or not after the Closing) and
Purchaser shall pay to Seller Purchaser's pro rata share of such
amounts after Seller has paid such taxes and within thirty (30)
days of being presented with an invoice from Seller. Nothing in
this Section 5.11(b) is intended to affect the provisions of
Sections 2.3 and 2.4 with respect to the respective obligations
of the parties in connection with the liabilities of Seller and
Purchaser or any other item not customarily pro rated in
connection with the sale of assets.
(c) Except as described above, each of Seller and
Purchaser shall be responsible for the preparation and filing of
any Tax Returns which it is required by law to file and for the
payment of all Taxes due and payable with respect to such Tax
Returns or otherwise.
5.12Employees. (a) Transfer of Employees. Promptly
after the date hereof, Seller shall provide to Purchaser a list
of all current Employees identified (as applicable) by name,
social security number, most recent hire date, seniority date,
base salary and hourly wage. Effective as of the Closing,
Purchaser or its Designee shall offer employment to at least 85
Employees, of which at least 80 shall be Employees at the
Nebraska Location, designated by Purchaser on Schedule 5.12(a)
hereto (the "Designated Employees"), at a base salary or wage
level at least equal to that which they were receiving
immediately prior to Closing; notwithstanding the foregoing,
Purchaser or its Designee shall be required to offer employment
to the aforementioned minimum number of Employees only if the
Transition Services Agreement is entered into at the Closing.
Purchaser's offer of employment to the Designated Employees shall
be conditioned upon such employee's resignation from the Seller
and such employee's acceptance of the offer of employment no
later than five (5) Business Days after the Closing Date. All
Employees who are Designated Employees and who accept an offer of
employment from Purchaser are herein referred to as the
"Transferred Employees." Schedule 5.12(a) identifies
approximately 20 Transferred Employees as "Transition Services
Employees." Seller agrees that in the event that Purchaser or
its Designee terminates the employment of any Transition Services
Employee within 12 months after the Closing Date, it will
promptly after written demand therefor, reimburse Purchaser for
the full amount of the severance payment paid to such terminated
Employee, provided that such reimbursement shall not be in excess
of the amount payable under Seller's current severance practice.
(b) Severance Benefits. Seller shall be responsible
and liable for all severance benefits and termination pay that
become due and payable whether by operation of common law,
statute, or otherwise to any Employees or individuals claiming to
be Employees as a result of the Transactions.
(c) Purchaser's Benefit and Welfare Programs. All of
Purchaser's employee benefit and welfare plans, programs and
arrangements in which Transferred Employees become eligible to
participate (other than any pension plan) shall credit such
Transferred Employees with a period of service beginning on their
most recent hire date with Seller or its Affiliates for purposes
of eligibility, but not for purposes of benefit computation or
accrual.
(d) Health Insurance. Effective as of Closing,
Purchaser shall establish a new group health insurance plan or
designate a pre-existing group health plan ("Purchaser's Health
Plan") that will provide coverage to all Transferred Employees
(and their dependents) without any probationary or waiting
period. Purchaser's Health Plan shall not contain any exclusion
or limitation with respect to any preexisting condition of any
Transferred Employees or their dependents. In addition, with
respect to any Transferred Employee (or the dependent of any
Transferred Employee) with an ongoing medical condition first
arising prior to Closing for which treatment will continue after
the Closing, Purchaser's Health Plan shall bear the expense of
covered treatment to the extent that the services rendered by the
provider occurred after the Closing Date, subject to the terms of
the Purchaser's Health Plan provisions relating to the coverage,
if any, of such treatment (but without any probationary or
waiting period). Any amount paid by Transferred Employees or
their dependents for the current plan year for medical expenses
that are treated as a deductible or co-insurance payment under
the Seller's or its Affiliates' health insurance plan shall
reduce the amount of any deductible or co-insurance payment
required to be paid for a similar period under Purchaser's Health
Plan. Notwithstanding the foregoing, Seller and the Selling
Affiliates shall provide to Employees all COBRA notices to the
extent required by applicable law.
(e) Vacation, Holiday and Sick Pay. Effective as of
Closing, Purchaser expressly assumes all of the Seller's or any
Affiliate's then existing accrued obligations for Vacation Pay
Liabilities owed to Transferred Employees. Schedule 5.12(e)
hereto contains a list of the accrued Vacation Pay Liabilities
owed to each Employee as of June 30, 1997. Such Schedule 5.12(e)
shall be updated at Closing, or as soon thereafter as is
reasonably practicable with respect to all Transferred Employees,
provided that, notwithstanding anything to the contrary in this
Agreement, Seller or a Selling Affiliate shall pay to each
Transferred Employee his or her accrued Vacation Pay Liabilities
in excess of ten working days as of the Closing.
(f) Workers' Compensation. Seller expressly retains
all of Seller's or any Affiliate's obligations for workers
compensation benefits payable after Closing to any Transferred
Employee with respect of events occurring on or before the
Closing Date
(g) Disability. Seller expressly retains all of
Seller's then existing obligations for benefits payable after
Closing to any Transferred Employee due to leave of absence,
disability or layoff occurring prior to the Closing.
(h) 401 (k) Plan and Pension Plan.
(i) Plan Participation. Effective as of the
Closing Date, all Transferred Employees shall cease participation
in any 401(k) Plan of Seller or any Affiliate ("Seller's 401(k)
Plan"). As soon as practicable, following Closing, Purchaser
shall designate, or establish, a savings plan, qualified under
Code 401 (a) and 401 (k), and a trust thereunder that is
exempt from tax under Code 501(a) (collectively "Purchaser's
Savings Plan"), and shall allow all Transferred Employees to
participate in Purchaser's Savings Plan on the same terms and
conditions as apply to other similarly situated employees of
Purchaser, with service credit as described in paragraph 5.12(c)
above.
(ii)401(k) Plan Vesting. Seller shall take any
action that may be necessary or appropriate to insure that all
Transferred Employees are 100% vested in their account balances
under the Seller's 401(k) Plan and shall cause the trustee of
that Plan to pay those account balances to the Transferred
Employees or their beneficiaries in accordance with the terms of
the Seller's 401(k) Plan.
(iii) Pension Plan. None of the Employees
currently participate in any pension plan of Seller or any
Affiliate and none have any accrued but unpaid benefits under any
such plan.
(i) Tax Information for Employees. Purchaser and
Seller agree to follow the Standard Procedure specified in Rev.
Proc. 96-60 1996-53 I.R.B.1, whereby, among other things, each
will be responsible for the reporting duties with respect to its
own payment of wages and compensation to employees. The parties
will provide each other with reasonable access to any information
needed to comply with the foregoing and provide copies upon
request.
5.13Non-Compete. (a) In order that the Purchaser and
its Affiliates may have and enjoy the full benefit of the
business of the Purchased Assets, the Seller agrees that, for a
period commencing on the Closing Date and ending on the third
anniversary of the Closing Date (the "Restriction Period"),
neither Seller nor any of its Selling Affiliates will, without
the express written approval of the Purchaser, directly or
indirectly, engage in any Restricted Business in the United
States. "Restricted Business" means the servicing of mortgage
loans secured by first or second liens primarily on one- to four-
family residential properties. Because of the unique talents and
knowledge of the Seller and the Selling Affiliates, Seller agrees
that in the event it or any Selling Affiliate breach the
covenants contained in this Section, Purchaser and its Designee
shall suffer damages for which the remedy at law is inadequate
and the Purchaser or its Designee shall be entitled to specific
performance hereof and shall be entitled to an injunction to be
issued by any court of competent jurisdiction restraining Seller
or any Affiliate from committing or continuing any breach of this
Section. Resort to equitable relief by Purchaser or its Designee
shall not, however, be construed to be a waiver of any other
rights that it may have for damages under this Agreement or
otherwise.
(b) From the date hereof through the third anniversary
of the Closing Date, neither Seller nor any Affiliate shall
solicit or seek to hire any Designated Employee so long as any
such person is in the employ of Purchaser or any Affiliate
thereof.
ARTICLE VI
CONDITIONS PRECEDENT; TERMINATION
6.1 Conditions Precedent to Obligations of Purchaser
and Seller. The obligations of Purchaser, on the one hand, and
Seller, on the other hand, to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at
or prior to the Closing, of the following condition: there shall
not be in effect any preliminary or permanent injunction or other
order issued by any federal or state court of competent
jurisdiction in the United States or by any United States federal
or state governmental or regulatory body nor any statute, rule,
regulation or executive order promulgated or enacted by any
United States federal or state governmental authority which
restrains, enjoins or otherwise prohibits the consummation of the
transactions contemplated by this Agreement or any other
agreements contemplated hereby; and
6.2 Conditions Precedent to the Obligations of
Purchaser. The obligations of Purchaser to consummate the
transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Closing, of each of the following
conditions (any of which may be waived in writing by Purchaser)
(a) all representations and warranties of Seller under
this Agreement (including the Schedules hereto as updated
pursuant to Section 5.10) shall be true and correct in all
material respects (provided, however, that, notwithstanding
the foregoing, any such representation and warranty that is
qualified as to materiality shall be true and correct in all
respects) at and as of the time of the Closing with the same
effect as though those representations and warranties had
been made again at and as of that time (except as to any
representation or warranty at or as of a specific date in
which case such representation or warranty shall be deemed
to have been made again at the time of the Closing but only
with respect to such specific date);
(b) Seller shall have performed and complied in all
material respects with each obligation, covenant and
condition required by this Agreement to be performed or
complied with by it prior to or at the Closing;
(c) Purchaser shall have been furnished with the
instruments of conveyance and transfer referred to in
Section 2.5, in form and substance reasonably satisfactory
to Purchaser;
(d) Purchaser or its Designee shall have all mortgage
servicing and related licenses which are necessary to enable
it to acquire the Purchased Assets and operate a mortgage
servicing business in a manner substantially similar to that
of NSC (including with the benefit of the Transition
Services Agreement);
(e) Purchaser or its Designee shall have entered into
employment agreements with each of Messrs. Rick W. Skogg and
Leo C. Trautman, Jr. on terms and subject to conditions that
Purchaser, in its sole discretion shall deem reasonable;
(f) Purchaser or its Designee shall have received a
minimum number of acceptances of its offers of employment to
Designated Employees such that Purchaser would have a
minimal assembled workforce as of the Closing Date capable
of conducting a mortgage servicing business in a manner
consistent with the past practices of NSC;
(g) Purchaser shall have received from counsel to
Seller an opinion, dated the Closing Date, substantially in
the form attached as Exhibit D;
(h) Purchaser shall have been furnished with a
certificate of an officer of Seller, dated the Closing Date,
in form and substance reasonably satisfactory to Purchaser,
certifying to the fulfillment of the conditions set forth in
Sections 6.2(a) and (b);
(i) Purchaser shall have been furnished with a
certificate of a Secretary or Assistant Secretary of the
general partner of Seller dated the Closing Date in form and
substance reasonably satisfactory to Purchaser, certifying
as to the attached copy of the resolutions of the general
partner of Seller and each Selling Affiliate authorizing the
execution, delivery and performance of, and the transactions
contemplated by, this Agreement and any other agreements
contemplated hereby, and stating that the resolutions
thereby certified have not been amended, modified, revoked
or rescinded;
(j) Purchaser or its Designee shall have entered into
a modification to the contract with CPI/Alltel contract
reasonably satisfactory to Purchaser;
(k) Purchaser or its Designee shall have entered into
a lease for office space in Aurora, Colorado; and
(1) Harbourton Holdings L.P. shall have executed the
Guaranty.
6.3 Conditions Precedent to the Obligations of Seller.
The obligations of Seller to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at
or prior to the Closing, of each of the following conditions (any
of which may be waived in writing by Seller):
(a) all representations and warranties of Purchaser
under this Agreement shall be true and correct in all
material respects (provided, however, that, notwithstanding
the foregoing, any such representation and warranty that is
qualified as to materiality shall be true and correct in all
respects) at and as of the time of the Closing with the same
effect as though those representations and warranties had
been made again at and as of that time (except as to any
representation or warranty at or as of a specific date in
which case such representation or warranty shall be deemed
to have been made again at the time of the Closing but only
respect to such specific date);
(b) Purchaser shall have performed and complied, in
all material respects, with each obligation, covenant and
condition required by this Agreement to be performed or
complied with by it prior to or at the Closing;
(c) Seller shall have received from counsel to
Purchaser an opinion, dated the Closing Date, substantially
in the form attached as Exhibit E;
(d) Seller shall have been furnished with a
certificate of an officer of Purchaser, dated the Closing
Date, in form and substance reasonably satisfactory to
Seller, certifying to the fulfillment of the conditions set
forth in Sections 6.3(a) and (b);
(e) Seller shall have been furnished with a
certificate of a Secretary or Assistant Secretary (or other
appropriate officer) of Purchaser and its Designee (if any),
dated the Closing Date, in form and substance reasonably
satisfactory to Seller certifying as to the attached copy of
the resolutions of the Board of Directors (or a duly
authorized committee thereof) of Purchaser and its Designee,
respectively, authorizing the execution, delivery and
performance of, and the transactions contemplated by, this
Agreement and any other agreements contemplated hereby, and
stating that the resolutions thereby certified have not been
amended, modified, revoked or rescinded; and
(f) Purchaser or its Designee shall have entered into
an office lease for Suite 600, 2530 So. Parker Road, Aurora,
Colorado.
ARTICLE VII.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES: INDEMNIFICATION
7.1 Survival. All representatives, warranties,
covenants and agreements, certificates or other instruments
delivered pursuant to this Agreement, shall survive the Closing
and shall remain in full force and effect; provided, that the
Seller shall only be liable to the Purchaser and its Affiliates
pursuant to Section 7.2(ii) below to the extent that written
notice of the claim is delivered within the periods set forth in
Section 7.4(a)(1) below.
7.2 Indemnification by Seller The Seller agrees to
indemnify and hold the Purchaser and its Affiliates, and their
respective officers, directors, employees and representatives,
harmless against and in respect of all Losses incurred or
suffered by the Purchaser and its Affiliates, and their
respective officers, directors, employees and representatives, in
connection with, arising out of, or as a result of each and all
of the following: (i) all obligations and Liabilities of the
Seller or its Affiliates or related to the Purchased Assets,
whether accrued, absolute, fixed, contingent or otherwise, other
than the Assumed Liabilities, as described in Section 2.3; (ii)
subject to Section 7.4(a), any breach by any of the Seller or its
Affiliates of their respective representations and warranties
contained herein or in the certificate delivered by the Seller
pursuant to Section 6.2(i) (which, for this purpose, shall be
determined without giving effect to any "materiality" or
"material adverse effect" limitation set forth therein); (iii)
any nonperformance or breach by the Seller or its Affiliates of
any covenant or other obligation (other than a representation or
warranty made by the Seller in Article III) to be performed by
the Seller or its Affiliates under this Agreement, and (iv)
sales, use, income and other Taxes arising at any time out of the
operations of NSC or any of the Purchased Assets as a whole prior
to the Closing Date (excluding any Taxes allocated to the
Purchaser under Section 5.11). Notwithstanding anything to the
contrary contained herein or in the Assumption Agreement, the
indemnification obligations of the Seller in favor of the
Purchaser set forth in clauses (i), (iii) and (iv) above shall be
absolute and unconditional, and shall be enforceable without
regard to the existence or accuracy of any representations or
warranties given by the Seller or the Purchaser.
7.3 Indemnification by Purchaser. The Purchaser
agrees to indemnify and hold the Seller and its Affiliates
harmless against and in respect of all Losses incurred or
suffered by the Seller and its Affiliates in connection with,
arising out of, or as a result of each and all of the following:
(i) the Assumed Liabilities; (ii) subject to Section 7 4(a), any
breach by any of the Purchaser or its Affiliates of its
representations and warranties contained herein or in any
certificates delivered pursuant to Section 6.3(d) (which, for
this purpose, shall be determined without giving effect to any
"materiality" or "material adverse effect" limitation set forth
therein); and (iii) any nonperformance or breach by the Purchaser
or its Affiliates of any covenant or other obligation (other than
a representation or warranty made by the Purchaser in Article IV)
to be performed by the Purchaser or its Affiliates under this
Agreement. Notwithstanding anything to the contrary contained
herein or in the Assumption Agreement, the indemnification
obligation of the Purchaser in favor of the Seller set forth in
clauses (i) and (iii) above shall be absolute and unconditional,
and shall be enforceable without regard to the existence or
accuracy of any representations or warranties given by the Seller
or the Purchaser.
7.4 General Indemnification Provisions. (a)
Notwithstanding the provisions of Sections 7.2 and 7.3, the
indemnified party shall not be entitled to indemnification for
Losses solely with respect to claims pursuant to Section 7.2(ii)
or 7.3(ii), as the case may be:
(i) unless the indemnified party shall have given written
notice to the indemnifying party, setting forth its
claim for indemnification in reasonable detail: (x) on
or before the date which is two years after the
Closing Date for Losses arising out of the matters
referred to in Article III (other than Section 3.14 or
3.17); (y) on or before the date which is three years
after the Closing Date for Losses arising out of the
matters referred to in Section 3.14, or (z) with
respect to Losses arising out of the matters referred
to in Section 3.17, on or before the date which is 60
days following expiration of the applicable statute of
limitations with respect to the Taxes as to which any
such claim relates;
(ii) unless the aggregate Loss arising out of any single
breach or series of related breaches shall be at least
equal to $1,000, provided that if the aggregate sum of
each Loss which arises out of a single breach or
series of related breaches that individually is less
than $1,000 shall be at least equal to $5,000, then,
subject to satisfaction of the basket in clause (iii)
below, the indemnified party shall be entitled to
indemnification under such Section 7.2(ii) or 7.3(ii)
for all such Losses in excess of $5,000; and
(iii)unless and until the aggregate amount of all Losses
arising therefrom exceeds $25,000, whereupon the
indemnified party shall be entitled to indemnification
under such Section 7.2(ii) or 7.3(ii) only for the
aggregate amount of such Losses in excess of $25,000;
provided that for purposes of determining the
aggregate amount of all Losses for this clause (iii),
only such Losses referred to in the proviso to clause
(ii) above that are in excess of $5,000 shall count
toward the $25,000 minimum set forth in this clause
(iii).
(b) Promptly after (i) receipt by an indemnified party
under this Article VII of notice of any claim or the commencement
of any action or (ii) the intervention as of right by an
indemnified party under this Article VII into any action the
indemnified party shall if a claim in respect thereof is to be
made against the indemnifying party under this Article VII,
notify the indemnifying party in writing of the claim or the
commencement of or intervention as of right into that action,
provided that the failure to notify the indemnifying party shall
not relieve it from any liability which it may have to the
indemnified party under this Article VII, except if such
notification with respect to any claim to be made pursuant to
Section 7.2(ii) or 7.3(ii) is given after the applicable time
period specified in Section 7.4(a)(i) has lapsed. If any such
claim shall be brought against an indemnified party or if an
indemnified party shall intervene as of right in any such action,
and such indemnified party shall notify the indemnifying party
thereof, and if the indemnifying party shall agree in writing to
indemnify promptly the indemnified party for the full amount of
any Loss sustained, suffered or incurred by the indemnified party
by reason of such claim or action, then the indemnifying party
shall be entitled to participate therein, and to assume the
defense thereof with counsel satisfactory to the indemnified
party, and to settle and compromise any such claim or action,
provided, however, that if the indemnified party has elected to
be represented by separate counsel pursuant to the proviso to the
second following sentence, such settlement or compromise shall be
effected only with the consent of the indemnified party, which
consent shall not be unreasonably withheld. If the indemnifying
party does not agree to indemnify promptly the full amount of any
such Loss as provided in the immediately preceding sentence, then
the indemnifying party shall nevertheless have the right to
participate in the defense of any such claim or action, but such
defense and any settlement or compromise thereof shall at all
times be under the sole direction and control of the indemnified
party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such
claim or action, the indemnifying party shall not be liable to
the indemnified party under this Article VII for any legal or
other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs
of investigation; provided, however, that the indemnified party
shall have the right to employ counsel to represent it if, in the
indemnified party's reasonable judgment, it is advisable for the
indemnified party to be represented by separate counsel, and in
that event the fees and expenses of such separate counsel shall
be paid by the indemnified party. The Seller and the Purchaser
each agree to render to each other such assistance as may
reasonably be requested in order to ensure the proper and
adequate defense of any such claim or proceeding.
(c) The amount of any Loss for which indemnification
is provided under any of Sections 7.2 or 7.3 shall be net of any
amounts recovered or recoverable by the indemnified party under
insurance policies with respect to such Loss (collectively, a
"Net Loss") and shall be (i) increased to take account of any net
Tax cost incurred by the indemnified party arising from the
receipt of indemnity payments hereunder (grossed up for such
increase) and (ii) reduced to take account of any net Tax benefit
realized by the indemnified party arising from the incurrence or
payment of any such Net Loss. In computing the amount of any
such Tax cost or Tax benefit, the indemnified party shall be
deemed to recognize all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the
receipt of any indemnity payment hereunder or the incurrence or
payment of any indemnified Net Loss. Any indemnification payment
hereunder shall initially be made without regard to this Section
and shall be increased or reduced to reflect any such net Tax
cost (including gross-up) or net Tax benefit only after the
indemnified party has actually realized such cost or benefit.
For purposes of this Agreement, an indemnified party shall be
deemed to have "actually realized" a net Tax cost or a net Tax
benefit to the extent that, and at such time as, the amount of
Taxes payable by such indemnified party is increased above or
reduced below, as the case may be, the amount of Taxes that such
indemnified party would be required to pay but for the receipt of
the indemnity payment or the incurrence or payment of such Net
Loss, as the case may be. The amount of any increase or
reduction hereunder shall be adjusted to reflect any final
determination (which shall include the execution of Form 870-AD
or successor form) with respect to the indemnified party's
liability for Taxes and payments between the parties to this
Agreement to reflect such adjustment shall be made if necessary.
Any indemnity payment under this Agreement shall be treated as an
adjustment to the value of the asset upon which its underlying
claim was based, unless a final determination (which shall
include the execution of a Form 870-AD or successor form) with
respect to the indemnified party or any of its Affiliates causes
any such payment not to be treated as an adjustment to the value
or the asset for United States federal income tax purposes.
(d) Anything to the contrary contained herein
notwithstanding, in no event shall Seller or its Affiliates be
liable for any Loss (including without limitation any and all
liabilities of Seller and its Affiliates for costs, expenses and
attorneys' fees paid or incurred in connection therewith or in
connection with the curing of any and all misrepresentations or
breaches of warranties or covenants under this Agreement) to the
extent the aggregate of all indemnification payments by or on
behalf of Seller with respect to all Losses shall have exceeded
the Purchase Price.
(e) The provisions of this Article VII shall
constitute the sole and exclusive remedy of Purchaser and its
Affiliates against Seller and the Selling Affiliates for all
Losses subject to the provisions of Section 7.2 (ii) and any
other rights or remedies with respect to the same, whether now
existing or hereafter arising, which Purchaser and its Affiliates
have or may have, are hereby waived to the maximum extent
permitted by applicable law.
ARTICLE VIII.
TERMINATION
8.1 Termination. Except with respect to provisions
that expressly survive termination, this Agreement may be
terminated:
(a) by written agreement of all of the parties hereto;
(b) by Purchaser, by written notice to Seller,
delivered not less than 30 days after receipt by Seller of
an earlier written notice from Purchaser that there have
been breaches or defaults of Seller's covenants and
agreements hereunder which individually or in the aggregate
could reasonably be expected to result in a Section 3
Material Adverse Effect, provided such breaches and defaults
have not been cured to the reasonable satisfaction of
Purchaser since such earlier notice;
(c) by Seller by written notice to Purchaser,
delivered not less than 30 days after receipt by Purchaser
of an earlier written notice from Seller that there have
been breaches or defaults of Purchaser's covenants and
agreements hereunder which individually or in the aggregate
could reasonably be expected to result in a Section 4
Material Adverse Effect, provided such breaches and
defaults have not been cured to the reasonable satisfaction
of Seller since such earlier notice; or
(d) by Seller or Purchaser, if the Closing has not
taken place by August 31, 1997,
provided, however, that the party seeking termination pursuant
to clauses (b) through (d) above (A) is not in breach in any
material respect of any of its representations, warranties,
covenants or agreements contained in this Agreement and (B) has
not caused such condition to have become incapable of
fulfillment through its own actions (or failures to act) that
directly result in a breach of a representation, warranty or
covenant by the other party contained herein.
8.2 Liability. The termination of this Agreement
under Section 8.1 shall not relieve any party of any Liability
for breach of this Agreement prior to the date of termination.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. Any notice or other communication under
this Agreement shall be in writing (including by telecopy or
like transmission) and shall be considered given when delivered
personally, when delivered by a nationally recognized overnight
courier service, when mailed by registered mail (return receipt
requested) or when telecopied (with confirmation of transmission
having been received) to the parties at the addresses set forth
below (or at such other address as a party may specify by notice
to the other)
If to Seller, to it at:
Harbourton Financial Services L.P.
2530 South Parker Road
Aurora, Colorado 80014
Attention: Chief Executive Officer
Fax: (303) 338-2289
with copies to:
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.C.
65 Livingston Avenue
Roseland, New Jersey 07068
Attention: Allen B. Levithan, Esq.
Fax: (973) 992-5820
If to Purchaser, to it at:
Lehman Brothers Holdings Inc.
Three World Financial Center
New York, NY 10285
Attention: Karen C. Manson, Esq.
Secretary and Vice President
Fax: (212) 526-3774
9.2 Entire Agreement: No Third Party Beneficiaries.
This Agreement, including the Schedules hereto and the Exhibits
hereto, (a) constitutes the entire agreement between the parties
with respect to its subject matter and supersedes any previous
agreement among them relating to the subject matter hereof and
(b) is not intended to confer upon any person, including any
employee, other than the parties hereto and their respective
successors and assigns, any rights or remedies hereunder.
9.3 Headings; Interpretation. (a) The table of
contents and section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction
or interpretation of this Agreement.
(b) When a reference is made in this Agreement to an
Article, Section, Schedule or Exhibit, such reference shall be to
an Article, Section, Schedule or Exhibit of this Agreement unless
otherwise indicated. Whenever the words "included", "includes"
or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation". All accounting
terms not defined in this Agreement shall have the meanings
determined by generally accepted accounting principles as in
effect from time to time. The words "hereof', "herein" 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. The definitions
contained in this Agreement are applicable to the singular as
well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term, and
references to a person are also to its permitted successors and
assigns. Any agreement, instrument or statute defined or
referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as
from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent
and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and
instruments incorporated therein.
9.4 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the law of the
State of New York applicable to agreements made and to be
performed in New York regardless of the laws that might
otherwise govern under applicable principles of conflicts of
law.
9.5 Amendment; Waiver. This Agreement may be
amended, supplemented or otherwise modified only by a written
instrument executed by the parties hereto. No waiver by a of
any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so
waiving. Except as provided in the preceding sentence, no
action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be led to
constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or
agreements contained herein or in any documents delivered or
to be delivered pursuant to this Agreement or in connection
with the Closing hereunder. The waiver by any party hereto
of a breach of any provision of this Agreement shall operate
or be construed as a waiver of any subsequent breach.
9.6 Separability. If any provision of this
Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in full force and effect.
9.7 Assignment. Neither party to this Agreement
may assign any of its rights or delegate any of its duties
under this Agreement without the prior written consent of the
other party to this Agreement. Any purported assignment in
violation of this Section shall be void. Subject to the two
immediately preceding sentences of this Section 9.7, this
Agreement will be binding upon, inure to the benefit of and
be enforceable by the parties hereto and their respective
successors and assigns.
9.8 Publicity. So long as this Agreement is in
effect, neither party nor any of their affiliates shall issue
or cause the publication of any press release or other public
announcement with respect to the transactions contemplated by
this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld; provided,
however, that no such consent shall be required in connection
with any public disclosure which based on advice of counsel
is required by law, but the party required to make such
disclosure shall give the other party reasonable opportunity
to review and comment on any such disclosure prior to the
time such disclosure is made.
9.9 Jurisdiction. The courts of the State of New York
in New York County and the United States District Court for the
Southern District of New York shall have exclusive jurisdiction
over the parties with respect to any dispute or controversy
between them arising under or in connection with this Agreement
and, by execution and delivery of this Agreement, each of the
parties to this Agreement submits to the jurisdiction of those
courts, including the in personam and subject matter jurisdiction
of those courts, waives any objection to such jurisdiction on the
grounds of venue or forum non conveniens, the absence of in
personam or subject matter jurisdiction and any similar grounds,
consents to service of process by mail (in accordance with
Section 9.1) or any other manner permitted by law. These
consents to jurisdiction shall not be deemed to confer rights on
any person other than the parties to this Agreement.
9.10Specific Performance. Each of the parties to this
Agreement acknowledge that all the Purchased Assets are of a
special, unique and extraordinary character, and that any breach
of this Agreement by any party hereto could not be compensated
for by damages. Accordingly, if any of the parties breaches its
obligations under this Agreement, the other parties hereto shall
be entitled, in addition to any other remedies that they may
have, to enforcement of this Agreement by a decree of specific
performance requiring that the breaching party fulfill its
obligations under this Agreement.
9.11Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be
an original and all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be signed by its duly authorized
officer as of the date first above written.
HARBOURTON FINANCIAL SERVICES
L.P.
By Harbourton Mortgage
Corporation,
its general partner
By:_____________________________________
Name:
Title:
LEHMAN BROTHERS HOLDINGS INC.
By:_____________________________________
Name:
Title:
LIST OF SCHEDULES
2.1(a)Nebraska Real Property
2.1(b)Assigned Subservicing Contracts
2.1(c)NSC Personal Property
2.1(d)Colorado Personal Property
2.1(e)Inventory
2.1(f)Systems
2.1(k)Vehicles
2.1(l)Prepaid Expenses
2.1(m)Assigned Contracts
2.8(a)Purchase Price Allocation
3.4 Consents
3.5 Licenses, Permits and Approvals
3.6(a)Compliance
3.6(b)Title To Real Property
3.7(a)Tangible Personal Property-Liens
3.7(b)Tangible Personal Property - Not Good Working Condition
3.8(a)Subservicing Contracts
Valid and Enforceable Contracts
3.10 Sufficiency of Assets
3.11 Undisclosed Liabilities
3.12 Absence of Certain Changes
3.13 Litigation
3.14(a) Environmental/Compliance
3.14(b) Environmental/Materials of Concern
3.14(c) Environmental/Storage Tanks, Asbestos, PCB's
3.14(d) Environmental/Notice of Violation
3.14(f) Necessary Permits
3.16 Insurance
3.18(a) Employee Benefit Plan
3.18(b) Plan Compliance Exception
3.18(f) Payments
3.19 Certain Fees
3.20 Intellectual Property Rights
4.4 Licenses and Approvals
5.12(a) Designated Employees/Transition Services Employees
5.12(e) Accrued Vacation and Sick Pay/Holiday
LIST OF EXHIBITS
A Assumption Agreement
B Bill of Sale
C Transition Services Agreement
D Opinion of Seller's Counsel
E Opinion of Purchaser's Counsel
F Guaranty
THIS MORTGAGE SERVICING PURCHASE AND SALE AGREEMENT,
dated as of July 31, 1997 (this "Agreement"), is made by and
between HARBOURTON MORTGAGE CO., L.P., a Delaware limited
partnership ("Seller"), and LEHMAN CAPITAL, A DIVISION OF LEHMAN
BROTHERS HOLDINGS INC., a Delaware corporation ("Purchaser").
BACKGROUND:
Seller owns the Servicing Rights (as herein defined)
with respect to the Mortgage Loans listed on the Mortgage Loan
Schedule (as herein defined) and Seller desires to sell to
Purchaser, and Purchaser desires to purchase from Seller, all
right, title and interest in and to the Servicing Rights in
accordance with the terms and subject to the conditions of this
Agreement.
NOW THEREFORE, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Section 1.1 Definitions.
For the purpose of this Agreement, capitalized terms
have the meanings set out below or elsewhere in this Agreement.
"Advance" means, with respect to a Mortgage Loan, an
advance by the servicer of such Mortgage Loan of its own funds to
make payments of principal, interest, taxes, insurance premiums,
ground rents, assessments, foreclosure related costs, amounts
transferred for NSF checks, and similar charges advanced with
respect to a Mortgage Loan as required or permitted by the
Applicable Requirements or the Investor.
"Advance Settlement Date" has the meaning set forth in
Section 2.3.
"Affiliate" means, in respect of any Person, any other
Person directly or indirectly controlling, controlled by or under
direct or indirect common control with, such Person, whether
through the ownership of voting securities, by contract or
otherwise. "Control" as used herein means the power to direct
the management and policies of such Person.
"Agencies" or "Agency" means FNMA, FHLMC, FmHA, GNMA,
FHA, VA and/or a State Agency, as applicable.
"Agreement" means this Mortgage Servicing Purchase and
Sale Agreement, together with its Exhibits and Schedules.
"Ancillary Income" means all income from or relating to
the Mortgage Loans to which the servicer is entitled other than
servicing fees, including but not limited to late charges,
insufficient funds fees, assumption fees, optional insurance
amounts and all other incidental fees and charges.
"Applicable Requirements" with respect to any Mortgage
Loan, shall include: (i) all applicable contractual obligations
contained in the Mortgage and Mortgage Note, in the Servicing
Agreement and in policies of insurance pertaining to such
Mortgage Loans, (ii) all applicable Laws pertaining to the
processing, origination insuring, purchase, sale, servicing or
subservicing of the Mortgage Loans, (iii) all other applicable
requirements and guidelines of each Governmental Authority having
jurisdiction (including without limitation, FNMA, FHLMC, FmHA,
GNMA, FHA and VA, and their respective selling and/or servicing
guides), (iv) all applicable requirements and guidelines of PMI
companies and Investors, and (iv) to the extent not covered by
the foregoing, the reasonable and customary mortgage servicing
practices of prudent mortgage lending institutions which service
mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related secured properties are
located.
"Business Day" means a day other than Saturday, Sunday,
or any other day on which commercial banks in Denver, Colorado or
New York, New York are authorized or required, by law or
executive order, to close.
"Certified Pool" means, as of any date, a Pool that has
received (i) original final certification in compliance with the
GNMA Guide, and (ii) if issuer responsibility with respect to
such Pool has been transferred subsequent to issuance of such
Pool but prior to the transfer contemplated by this Agreement,
recertification in compliance with the GNMA Guide with respect to
each such transfer.
"Custodian File" means the documents required by the
applicable Agency or the Investor under the Servicing Agreements
to be retained by a document custodian acceptable to the Agency
or the Investor, or by the Agency or the Investor.
"Designee" means the Person designated by Purchaser to
perform the obligations of the Purchaser under this Agreement or
any of the Exhibits hereto, which Person shall reasonably
acceptable to Seller.
"Fed Funds Rate" means, as of any date, the rate of
interest published by The Wall Street Journal, Northeast Edition,
in the money rates column, as the "Federal Funds Rate" or if such
rate is no longer published, an alternate rate of interest that
is reasonably acceptable to the Parties.
"FHA" means the Federal Housing Administration, or any
successor thereof.
"FHLMC" means the Federal Home Loan Mortgage
Corporation, or any successor thereof.
"FmHA" means the Farmers Home Administration, the
United States of America acting through Rural Housing Services or
its successor, the US Department of Agriculture, or any successor
thereof.
"FNMA" means the Federal National Mortgage Corporation,
or any successor thereof.
"GNMA" means the Government National Mortgage
Corporation, or any successor thereof.
"GNMA Subserviced Loans" means those Mortgage Loans
included in GNMA Pools that, as of the Servicing Transfer Date
applicable to GNMA Mortgage Loans, are not Certified Pools.
"GNMA Subservicing Agreement" means the Subservicing
Agreement (GNMA) between the Parties substantially in the form of
Exhibit C.
"GNMA Subservicing Period" means, with respect to a
GNMA Subserviced Loan, the period commencing with the Servicing
Transfer Date applicable to GNMA Mortgage Loans and continuing
through and until the related GNMA Pool has become a Certified
Pool and the Investor Consent is received with respect to such
GNMA Subserviced Loan.
"GO Portfolio Mortgage Loans" means the Mortgage Loans
which are indicated to be included in "GO Portfolio" on Schedule
3.1(l)(1).
"GO Portfolio Pools" means all Pools consisting of GO
Portfolio Mortgage Loans.
"GO Portfolio Purchase Price Percentage" means 0.92%
(92 basis points), subject to adjustment in accordance with
Section 2.2(c).
"Governmental Authority" means any federal, state,
municipal, local, territorial, or other governmental department,
commission, board, bureau, agency, court, authority or
instrumentality, domestic or foreign.
"Guaranty" means the Unconditional Guaranty,
substantially in the form of Exhibit D, to be made by Harbourton
Holdings, L.P., a Delaware limited partnership, in favor of
Purchaser.
"Indemnified Events" has the meaning set forth in
Article VIII.
"Indemnified Party" means a Party that benefits from
indemnification or seeks indemnification from another Party
pursuant to Article VIII.
"Indemnifying Party" means a Party providing
indemnification to another Party pursuant to Article VIII.
"Insurer" means FHA or VA, any PMI insurer or any other
insurer that provides policies of life, hazard, disability, title
or other insurance with respect to any of the Mortgage Loans or
the collateral securing a Mortgage Loan.
"Interim Period" means, with respect to any Mortgage
Loan, the period commencing with the Sale Date and continuing
through and until the applicable Servicing Transfer Date.
"Interim Servicing Agreement" means the Interim
Servicing Agreement between the Parties substantially in the form
of Exhibit A.
"Investor Consent" means, with respect to any Pool or
Mortgage Loan, the written consent and approval of the applicable
Investor to the transfer from Seller to Purchaser of the
Servicing Rights and issuer responsibility with respect to such
Pool or Mortgage Loan in accordance with the provisions of the
related Servicing Agreement, without material adverse
modification to the rights of the servicer thereunder.
"Investor" means FNMA, FHLMC, GNMA or any Private
Investor party to a Servicing Agreement relating to the servicing
or subservicing of the Mortgage Loans, as the case may be.
"Law" means any applicable statute, law, ordinance,
regulation, order, writ, injunction, or decree of any
Governmental Authority.
"Lien" means any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise), or preference, priority, or other security agreement,
or preferential arrangement 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 in respect
of any of the foregoing).
"Losses" means any and all claims, damages,
liabilities, losses, deficiencies, or reasonable out of pocket
costs and expenses, (including, without limitation, counsel's
fees) of any kind or nature actually incurred associated with the
conveyance of the Servicing Rights from the Seller to the
Purchaser.
"Mortgage, Custodial and Escrow Accounts" means all
escrow, impound and custodial accounts relating to the Mortgage
Loans including, without limitation, all accounts established for
purposes of receiving funds for the payment of principal and
interest or real or personal property taxes, insurance premiums,
ground rents, assessments, funds due the Investor, unearned fees,
hazard insurance loss drafts, Advances, funds held in connection
with buy-down loans, and similar charges relating to the Mortgage
Loans and interest accrued on such funds for the benefit of the
Mortgagors under Applicable Requirements or otherwise.
"Mortgage Loan Schedule" means Schedule 3.1(l)(1)
hereto.
"Mortgage Loans" means the single-family mortgage
loans secured by the related Mortgages, the Servicing Rights to
which mortgage loans are to be sold to Purchaser pursuant to this
Agreement, which Mortgage Loans are listed on the Mortgage Loan
Schedule.
"Mortgage Note" means, with respect to a Mortgage Loan,
the promissory note or other evidence of indebtedness of the
related Mortgagor.
"Mortgage" means, with respect to a Mortgage Loan, the
instrument securing the related Mortgage Note which creates a
first lien on the related Mortgaged Property.
"Mortgaged Property" means, with respect to a Mortgage
Loan, a fee simple interest in residential real property,
together with improvements thereon, subject to the lien of the
related Mortgage.
"Mortgagor" means, with respect to a Mortgage Loan, the
obligor on the related Mortgage Note.
"NSF Check" means a check tendered by a Mortgagor as a
payment on a Mortgage Loan that is returned by the drawee bank
because of insufficient funds, including without limitation
insufficient funds due to funds being denominated as uncollected.
"Operative Documents" means this Agreement, the Interim
Servicing Agreement, the Private Investor Subservicing Agreement,
the GNMA Subservicing Agreement, each Investor assignment
agreement, each bill of sale and assignment and assumption
agreement, and all other documents or instruments executed and
delivered in connection with this Agreement or any of such other
agreements or any of the transactions contemplated hereby or
thereby.
"Parties" means Purchaser and Seller.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, incorporated
association, joint venture, Governmental Authority or other
entity of whatever nature, and in each case includes permitted
successors and assigns..
"PMI" means any private mortgage insurer.
"Pool Schedule" means Schedule 3.1(l)(2) hereto.
"Pool" means an aggregation of one (1) or more Mortgage
Loans identified on the Pool Schedule.
"Portfolio B Mortgage Loans" means the Mortgage Loans
which are indicated to be included in "Portfolio B" on Schedule
3.1(l)(2).
"Portfolio B Pools" means all Pools consisting of
Portfolio B Mortgage Loans.
"Portfolio B Purchase Price Percentage" means 1.49%
(149 basis points), subject to adjustment in accordance with
Section 2.2(c)..
"Portfolio" means either the Portfolio B Mortgage Loans
or the GO Portfolio Mortgage Loans, as the context may require.
"Prior Servicer" means any originator or servicer of a
Mortgage Loan, other than Seller.
"Private Investor" means any owner of the Mortgage
Loans other than an Agency party to a Servicing Agreement
relating to the servicing of the Mortgage Loans.
"Private Investor Subserviced Loans" means those
Private Investor Mortgage Loans as to which the applicable
Investor Consent has not been obtained on or prior to the related
Servicing Transfer Date.
"Private Investor Subservicing Agreement" means the
Subservicing Agreement (Private Investor) between the Parties
substantially in the form of Exhibit B.
"Private Investor Subservicing Period" means, with
respect to any Private Investor Subserviced Loan, the period
commencing with the applicable Servicing Transfer Date and
continuing through and until the applicable Investor Consent is
obtained or the related Servicing Agreement is terminated.
"Purchase Price Schedule" has the meaning set forth in
section 2.2.
"Purchase Price" means the amount payable by Purchaser
to Seller for the Servicing Rights as set forth in Section 2.2.
"Purchaser's Document Custodian" means one or more
document custodian(s) designated by Purchaser from time to time
that is acceptable to the applicable Investors to hold the
Custodian Files.
"Repurchase Balance" means the unpaid principal balance
as of the date of repurchase of a Mortgage Loan to be repurchased
in accordance with Section 8.5.
"Repurchase Price" means the sum of (a) the Repurchase
Balance, plus all interest accrued thereon through the end of the
month of repurchase (if repurchase is required by the applicable
Investor), (b) the product of the Repurchase Balance and the GO
Portfolio Purchase Price Percentage (if paid) in the case of a GO
Portfolio Loan or the Portfolio B Purchase Price Percentage (if
paid) in the case of a Portfolio B Mortgage Loan and (c) all
reasonable unreimbursed out-of-pocket costs and expenses incurred
by Purchaser relating to the subject Mortgage Loan, including but
not limited to reasonable unreimbursed Advances.
"Sale Date" means July 31, 1997.
"Servicing Agreement" means a pool purchase contract,
whole loan sale and servicing contract or other servicing or
subservicing contract pursuant to which the Seller is servicing
or subservicing a Mortgage Loan or a pool of Mortgage Loans on
behalf or for the benefit of an Investor, as indicated on the
Servicing Agreement Schedule.
"Servicing Agreement Schedule" means Schedule 3.1(l)(3)
hereto.
"Servicing File" means, with respect to a Mortgage
Loan, the file containing all documents in Seller's possession or
control, whether on hard copy, computer record, microfiche or any
other format, evidencing and pertaining to a particular Mortgage
Loan and relating to the processing, origination, servicing,
collection, payment and foreclosure of such Mortgage Loan,
including (i) copies of certain documents executed or delivered
in connection with the closing of such Mortgage Loan, including
without limitation copies of the Mortgage Note, Mortgage and any
assignments of such Mortgage, and (ii) any servicing
documentation which relates to such Mortgage Loan of the type
customarily included by mortgage loan servicers in their
servicing files. The Servicing File for each Mortgage Loan shall
include all documents required to be maintained under, or that
are necessary to comply with, Applicable Requirements.
"Servicing Rights" means the rights and
responsibilities of Seller with respect to the servicing or
subservicing of the Mortgage Loans under Applicable Requirements
and the right to receive servicing fees and ancillary income
thereunder, and the associated right, title and interest of
Seller in the related Mortgage Loans, Pools, Mortgage Note,
Mortgage Escrow Accounts, Custodian File, and Servicing File.
"Servicing Transfer Date" means, with respect to a
Mortgage Loan, the date on which physical servicing of such
Mortgage Loan transfers from Seller to Purchaser. Subject to
modification by written agreement of the Parties, the Servicing
Transfer Date will be the close of business on (i) August 31,
1997 for all FNMA Mortgage Loans, (ii) September 2, 1997 for all
GNMA Mortgage Loans, (iii) September 15, 1997 for all FHLMC
Mortgage Loans and (iv) the applicable Investor cutoff date
immediately following August 31, 1997 for all Private Investor
Mortgage Loans.
"State Agency" means any state agency with authority to
(i) regulate the businesses of Purchaser or Seller, including
without limitation any state agency with authority to determine
the investment or servicing requirements with regard to mortgage
loans originated, purchased or serviced by Purchaser or Seller or
(ii) originate, purchase, or service mortgage loans, or otherwise
promote mortgage lending, including without limitation state and
local housing finance authorities.
"Survival Period" has the meaning set forth in Section
8.1.
"Transfer Instructions" means the actions to be taken
and procedures to be followed in connection with the transfer of
the Servicing Rights to Purchaser as set forth on Exhibit E.
"VA Buy-down" means with respect to a Mortgage Loan
that is guaranteed by the VA, the waiver by Purchaser of a
portion of the indebtedness of the Mortgage Loan, which can take
the form of a reduction of the principal, a credit to escrow or
unapplied funds accounts, the forgiveness of accrued interest or
any combination of the foregoing, and which causes the VA to pay
off the remaining amount of the indebtedness owed and acquire the
collateral securing the Mortgage Loan.
"VA No-Bid-Mortgage Loan" means a Mortgage Loan
guaranteed by the VA and for which the VA provides written notice
that it will not accept conveyance of the property securing said
Mortgage Loan after such Mortgage Loan has been placed in
foreclosure.
"VA" means the United States Department of Veterans
Affairs, or any successor thereof.
Section 1.2 Interpretations. In this Agreement,
unless specified otherwise: (i) "Any" means "any one or more";
"including" means "including without limitation"; "day" means
"calendar day," unless "Business Day" is specified. (ii)
Singular words include plural, and vice versa. For example, the
words "Party" and "Parties" each means "Party or Parties as the
case may be." (iii) Headings are for convenience only, and do
not affect the meaning of any provision. (iv) Reference to an
agreement includes reference to its permitted supplements,
amendments and other modifications. (v) Reference to a law
includes reference to any amendment or modification of the law
and to any rules or regulations issued thereunder. (vi)
Reference to a Person includes reference to its permitted
successors and assigns in the applicable capacity. (vii)
Reference to a Section, Exhibit, or Schedule signifies reference
to a Section, Exhibit, or Schedule of this Agreement, unless the
context clearly indicates otherwise. (viii) "Hereunder,"
"hereto," "hereof," "herein," and like words, refer to the whole
of this Agreement rather than to a particular part hereof, unless
the context clearly indicates otherwise.
ARTICLE II
PURCHASE AND SALE OF SERVICING RIGHTS;
PURCHASE PRICE; ADDITIONAL COVENANTS
Section 2.1 Purchase and Sale of Servicing Rights.
(a) Sale Date Conveyance. Upon the terms and
subject to the conditions of this Agreement and on the basis of
the representations, warranties and agreements contained herein,
effective as of the close of business on the Sale Date
(regardless of the date of execution of this Agreement), Seller
hereby sells, assigns, transfers, conveys and delivers to
Purchaser all of Seller's beneficial right, title and interest in
and to the Servicing Rights related to the Mortgage Loans, and
Purchaser hereby purchases and assumes the beneficial interest in
the Servicing Rights related to the Mortgage Loans from Seller as
of such date.
(b) Servicing Transfer Date Conveyance. Upon the
terms and subject to the conditions of this Agreement and on the
basis of the representations, warranties and agreements contained
herein, effective as of the commencement of business on each
Servicing Transfer Date, Seller shall sell, assign, transfer,
convey and deliver to Purchaser, legal title, and all of Seller's
remaining right, title and interest in and to the Mortgage Loans
and the Servicing Rights related to the Mortgage Loans, including
the obligation to service the Mortgage Loans from and after such
date, and Purchaser hereby purchases and assumes such Servicing
Rights from Seller as of such Servicing Transfer Date; provided,
that, subject to Section 2.6 below, Seller shall not transfer or
convey to Purchaser legal or record title to the Servicing Rights
relating to any GNMA Subserviced Loans or to any Private Investor
Subserviced Loans until the applicable Investor Consents have
been obtained. The transfer of servicing responsibility will be
conducted in accordance with the Transfer Instructions. Except
as otherwise provided herein, as of each Transfer Date, the
Seller will cease all servicing activities and responsibilities
with respect to the Mortgage Loans and shall sever its
relationship with the Mortgagors.
Section 2.2 Purchase Price.
(a) Purchase Price. In full consideration for the
sale of the Servicing Rights, Purchaser shall pay to Seller a
purchase price (the "Purchase Price") equal to the sum of:
(i) the product of (x) the Portfolio B
Purchase Price Percentage and (y) the aggregate unpaid
principal balance, as of the Sale Date, of the
Portfolio B Mortgage Loans;
plus
(ii) the product of (x) the GO Portfolio
Purchase Price Percentage and (y) the aggregate unpaid
principal balance, as of the Sale Date, of the GO
Portfolio Mortgage Loans.
(b) Purchase Price Schedule. No fewer than two (2)
Business Days prior to the Sale Date, the Seller shall deliver to
the Purchaser a schedule containing the information required by
Schedule 2.2(b) (the "Purchase Price Schedule") setting forth the
Seller's calculation of the Purchase Price, the Portfolio B
Purchase Price and the GO Portfolio Purchase Price, in each case
estimated as of the last day of the calendar month preceding the
Sale Date. Seller shall deliver a revised Schedule 2.2(b),
incorporating any applicable adjustments to the Purchase Price
and including the amount of the related Advances on or before the
third (3rd) Business Day after each Servicing Transfer Date. The
Purchase Price Schedules shall also include all information
necessary to calculate the weighted average servicing fee for the
Mortgage Loans for purposes of Section 2.2(c).
(c) Adjustment to Purchase Price Percentages. The GO
Portfolio Purchase Price Percentage and the Portfolio B Purchase
Price Percentage may each be adjusted upward or downward on or
prior to the Sale Date in accordance with this Section 2.2(c).
If the weighted average servicing fee for the GO Portfolio
Mortgage Loans is different than 41 basis points (0.41%), the GO
Portfolio Purchase Price Percentage shall be adjusted by adding
thereto the product (whether positive or negative) of (x) 2.25
times (y) the difference between the actual weighted average
servicing fee for the GO Portfolio Mortgage Loans as of the Sale
Date and 41 basis points (0.41%). Similarly, if the weighted
average servicing fee for the Portfolio B Mortgage Loans is
different than 38.2 basis points (0.382%), the GO Portfolio
Purchase Price Percentage shall be adjusted by adding thereto the
product (whether positive or negative) of (x) 3.90 times (y) the
difference between the actual weighted average servicing fee for
the Portfolio B Mortgage Loans as of the Sale Date and 38.2 basis
points (0.382%). By way of example only, if the actual weighted
average servicing fee for the GO Portfolio Mortgage Loans as of
the Sale Date is 40 basis points, the GO Portfolio Purchase Price
Percentage would be adjusted downward by 2.25 basis points (-
0.0225%). All information necessary to calculate the weighted
average servicing fee for the Mortgage Loans shall be included on
the Purchase Price Schedules delivered in accordance with Section
2.2(b).
Section 2.3 Payment of Purchase Price.
On the Sale Date, Purchaser shall pay Seller thirty
percent (30%) of the estimated Purchase Price calculated based
upon the Purchase Price Schedule delivered prior to the Sale Date
in accordance with Section 2.2(b).
Within two (2) Business Days after Purchaser's receipt
of the Purchase Price Schedule to be delivered by Seller in
accordance with Section 2.2(b) after each Servicing Transfer
Date, Purchaser shall pay Seller the remaining balance of the
Purchase Price relating to the Mortgage Loans as to which
Servicing Rights are transferred on such Servicing Transfer Date
calculated based upon the Purchase Price Schedule delivered after
the applicable Servicing Transfer Date, together with interest on
such portion of the Purchase Price at the Fed Funds Rate from the
Sale Date to the date payment is made.
Unless otherwise agreed by the parties, all payments
required hereunder shall be made by bank wire transfer in
immediately available funds.
If any of the information used in calculating the
Purchase Price shall be found by a Party to have been incorrectly
computed or the Purchase Price shall be found by a Party to have
been otherwise calculated improperly, the Purchase Price shall be
promptly and appropriately adjusted on the basis of the correct
and proper information. Payment or reimbursement shall be
promptly made by the appropriate Party after notice from the
other Party setting forth in reasonable detail the amount of such
adjustment claimed and the basis for such adjustment. If any
adjustments are made to the Purchase Price after the applicable
Advance Settlement Date in accordance with the provisions of this
Section, any such adjustment shall include interest at the Fed
Funds Rate on the amount of the adjustment from the applicable
Advance Settlement Date to (but not including) the date that the
payment of such adjustment is made.
Section 2.4 Reimbursement of Advances.
On the second Business Days after Purchaser's receipt
of the Purchase Price Schedule to be delivered by Seller in
accordance with Section 2.2(b) after each Servicing Transfer Date
(each, an "Advance Settlement Date"), Seller shall provide
Purchaser with a schedule on a loan-by-loan basis that sets forth
all Advances with respect to the Mortgage Loans, the Servicing
Rights to which were transferred on such Servicing Transfer Date.
On each Advance Settlement Date, Purchaser shall reimburse
Seller, by wire transfer of immediately available funds, one
hundred percent (100%) of the Advances relating to the related
Mortgage Loans.
For any GO Portfolio Mortgage Loan as to which the
first claim payment relating to principal is received by
Purchaser from the FHA or VA within two (2) months following the
Sale Date, Seller shall reimburse Purchaser for any Advances and
accrued interest (calculated at the applicable pool pass-through
rate) that are not reimbursed by FHA or VA in the insurance or
guaranty payments received with respect to such Mortgage Loan.
Seller shall make such payment to Purchaser within 30 days of its
receipt of an invoice therefor from Purchaser, accompanied by a
detail of the claim payments received.
In addition, for any Mortgage Loan that, as of the Sale
Date, is either current or not more than thirty (30) days past
due, Seller shall upon Purchaser's written demand (which demand
shall be received by Seller not more than five (5) years after
the Sale Date), reimburse Purchaser for any Advance paid for by
Purchaser pursuant to the first paragraph of this Section 2.4 to
the extent that such Advance is not reimbursable to the Purchaser
by the applicable Mortgagor, Investor or Insurer pursuant to
Applicable Requirements. Seller shall make such payment to
Purchaser within 30 days of its receipt of an invoice therefor
from Purchaser, accompanied by a detail of the Advance and the
reason that such Advance is deemed to be not reimbursable from
the applicable Mortgagor, Investor or Insurer pursuant to
Applicable Requirements. Seller shall not be liable for any
Advances that become unreimbursable after the Sale Date as a
result of any delay or omission by the Purchaser or any
subsequent servicer of the applicable Mortgage Loans.
Section 2.5 Interim Servicing.
Seller shall continue to service the Mortgage Loans
during the Interim Period in accordance with Applicable
Requirements pursuant to the Interim Servicing Agreement.
Section 2.6 Subservicing.
(a) Purchaser or its Designee shall subservice the
Private Investor Subserviced Loans on behalf of Seller during the
Private Investor Subservicing Period in accordance with
Applicable Requirements and the Private Investor Subservicing
Agreement. During the Private Investor Subservicing Period,
Seller will cooperate reasonably with Purchaser or its Designee
to facilitate Purchaser's performance of its subservicing
obligations pursuant to the Private Investor Subservicing
Agreement. Such cooperation will include appointment of certain
employees of Purchaser or its Designee as officers of Seller for
the limited purpose of performing certain necessary and delegable
Private Investor reporting functions including without limitation
Investor remittance. Upon receipt of applicable Investor
Consents, all of Seller's right title and interest in and to the
Servicing Rights and Escrow Accounts related to the Private
Investor Subserviced Loans for which such Investor Consent has
been obtained, including without limitation record title and the
obligation to service the applicable Private Investor Subserviced
Loans, shall be transferred to Purchaser.
(b) Purchaser or its Designee shall subservice the
GNMA Subserviced Loans on behalf of Seller during the GNMA
Subservicing Period in accordance with Applicable Requirements
and the GNMA Subservicing Agreement. During the GNMA
Subservicing Period, Seller will perform its remaining
obligations as servicer of the GNMA Subserviced Loans pursuant to
Applicable Requirements and will cooperate reasonably with
Purchaser or its Designee to facilitate Purchaser's performance
of its subservicing obligations pursuant to the GNMA Subservicing
Agreement. Such cooperation will include appointment of certain
employees of Purchaser or its Designee as officers of Seller for
the limited purpose of performing certain necessary and delegable
GNMA reporting functions including without limitation Investor
remittance. Notwithstanding anything to the contrary contained
herein, until the applicable Investor Approval Date, Seller shall
retain record title in and to the Servicing Rights related to the
GNMA Subserviced Loans and shall remain as Servicer of record
with the GNMA, and fully subject to GNMA's rights and
requirements with respect to the Servicing. Purchaser and Seller
acknowledge that Purchaser or its designee will be identified to
GNMA as the subservicer of the Pools related to the GNMA
Subserviced Loans effective as of the Servicing Transfer Date
applicable to GNMA Mortgage Loans. Upon receipt of the
applicable Investor Consent, all of Seller's right title and
interest in and to the Servicing Rights and Escrow Accounts
related to the GNMA Subserviced Loans, including without
limitation record title and the obligation to service the GNMA
Subserviced Loans, shall be transferred to Purchaser.
Section 2.7 Mortgage Escrow Accounts: Optional
Insurance Payments.
On each Advance Settlement Date, Seller shall transfer,
by wire transfer of immediately available funds, to accounts in
Purchaser's name as custodian or trustee, in one (1) or more
depository institutions identified by Purchaser and acceptable to
each applicable Investor, the Mortgage Escrow Account balances
relating to the related Mortgage Loans. Such payment will be
accompanied by an itemized statement of the Mortgage Escrow
Account balances and the outstanding Advances, reflecting the
balances as of the applicable Advance Settlement Date, sufficient
to enable Purchaser to reconcile the amount of such payment with
the accounts of the related Mortgage Loans. Purchaser shall
review the accuracy of Seller's accounting statement of the
Mortgage Escrow Account balances and, in the event of an error,
the amount of the Mortgage Escrow Account balances transferred
shall be adjusted and Seller shall pay to Purchaser any
additional amounts of Mortgage Escrow Account balances or
Purchaser shall reimburse Seller for any overpayment of Mortgage
Escrow Account balances, as the case may be, by wire transfer of
immediately available funds. Seller shall be obligated to credit
to the Mortgage Escrow Accounts any interest accrued on Mortgage
Escrow Account balances in accordance with any Applicable
Requirements prior to or on the applicable Advance Settlement
Date. On or before each Advance Settlement Date, Seller shall
remit to all applicable optional insurance carrier(s) all
optional insurance premiums, if any, being held by Seller for, or
on behalf of, any Mortgagors that have not yet been remitted to
the optional insurance carriers.
If under Applicable Requirements, the Seller is
required to make the remittance to one or more Investors in the
month following or in which the Servicing Transfer Date occurs,
the Purchaser shall retransfer to the Seller the amount of the
required Investor remittance on or before the applicable
remittance date, upon written notification from the Seller to the
Purchaser of the amount of monies required in order to fulfill
these remittance obligations. Written notification should be
forwarded by Seller to Purchaser at least three (3) Business Days
in advance of the required remittance date.
Section 2.8 Closing.
The closing hereunder shall take place on the Sale
Date, and shall, at Purchaser's option, be either (a) by
telephone, confirmed by letter, facsimile transmission or wire as
the Parties shall agree, or (b) conducted in person, at such
place as the Parties shall agree.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1. Seller's Representations and Warranties.
Seller represents and warrants to Purchaser as follows
as of the Sale Date and the Servicing Transfer Date:
(a) Organization and Qualification. It is a
limited partnership duly organized, validly existing, and in good
standing, under the laws of the jurisdiction of its formation,
has the authority and power necessary to own its assets and to
transact the business in which it is engaged, and is duly
qualified and in good standing to do business in each
jurisdiction in which the conduct of its business or the
ownership of its assets (including the Servicing Rights or the
Mortgage Loans) so requires.
(b) Authorization; Enforceability; Execution. It
has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and each Operative
Document, and to perform its obligations hereunder and
thereunder. It has duly authorized, executed, and delivered this
Agreement and each Operative Document. This Agreement and each
Operative Document constitute the legal, valid, and binding
obligation of Seller, enforceable against it in accordance with
their respective terms, except to the extent bankruptcy,
insolvency, reorganization, fraudulent conveyance, or similar
laws affect the enforcement of creditors' rights generally. The
signatory executing this Agreement and each Operative Document is
duly authorized to execute and deliver each such document.
(c) Non-Contravention. Its execution and
delivery of this Agreement and each Operative Document, and the
consummation and performance of any of the transactions
contemplated hereby or thereby, do not and will not: (i)(A)
violate any applicable law or any judgment, award, order, writ,
or decree of any court or other Governmental Authority, (B)
violate any Mortgage Loan Requirement, or (C) violate any
provision of its partnership agreement; (ii) violate any
provision of, or cause a default under, any mortgage, indenture,
contract, agreement, or other undertaking to which it is a party
or that purports to be binding upon it or upon any of its assets;
or (iii) result in the creation or imposition of any lien on any
of its assets.
(d) Consents. Other than the Investor Consents,
no consent of any other Person (including such Person's
shareholders) and no consent, license, approval, or exemption by,
or authorization of, or registration, filing or declaration with,
any Governmental Authority or any other Person, is necessary to
(i) its execution, delivery or performance of this Agreement or
any Operative Document, or (ii) the validity or enforceability of
this Agreement or any Operative Document.
(e) No-Default. It is not in default, and no
event or condition exists that after the giving of notice or
lapse of time or both, would constitute an event of default under
any material mortgage, indenture, contract, agreement, judgment,
or other undertaking, to which it is a party or which purports to
be binding upon it or upon any of its assets.
(f) Approvals. It is an approved FNMA and FHLMC
Seller/Servicer, GNMA Issuer/Servicer, FmHA Servicer, and FHA and
VA mortgagee in good standing and has not been suspended as a
mortgagee or servicer by any of FNMA, FHLMC, GNMA, FmHA, FHA or
the VA. It has all federal, state and local licenses, permits,
and other authorizations of Governmental Authorities required for
the conduct of its business with respect to the Mortgage Loans
and the Servicing Rights, including but not limited to state
mortgage banking licenses in those jurisdictions where such
licenses are necessary for the conduct of Seller's business, and
Seller has not received any notice that revocation is being
considered with respect to any of such licenses, permits, or
authorizations. It knows of no reason why any Investor would not
consent to the transfer contemplated by this Agreement.
(g) Financial Statements; Solvency. It meets all
minimum net worth or similar requirements necessary in order to
conduct its business which are applicable to Seller under any law
or any requirement of any regulatory agency, Investor, or other
authority. Attached hereto as Schedule 3.1(g) is a copy of its
audited balance sheet as of December 31, 1996, and its unaudited
balance sheet as at March 31, 1997, and the related statements of
income, retained earnings and changes in financial position for
the periods then ended (collectively, the "Seller's Financial
Statements"). Seller's Financial Statements present fairly in
all material respects the financial condition of Seller as of the
dates, and for the periods, covered thereby, and were prepared in
accordance with GAAP through the periods involved. There has
been no change in the financial condition of Seller since the
date of Seller's Financial Statements which would have a material
adverse effect upon the ability of Seller to complete the
transactions contemplated herein and comply with its
responsibilities and obligations hereunder. Purchaser
acknowledges that Seller's parent has publicly announced its
intention to liquidate its assets and since the date of Seller's
Financial Statements Seller has entered into agreements to sell a
substantial part of its servicing and mortgage loan portfolio.
On the Sale Date and each Servicing Transfer Date,
and after giving effect to each of the transactions contemplated
to occur on such date, it will not be insolvent and has, or will
have as of such date, adequate net worth to meet all Investor
requirements.
(h) Insurance. It maintains insurance against
liability to third parties to the extent and in the manner
required by the Applicable Requirements, including without
limitation errors and omissions insurance and fidelity bond
coverage in accordance with the Applicable Requirements. All
such insurance policies maintained by Seller are in full force
and effect.
(i) Compliance with Law. It has complied in all
material respects with all applicable Laws, the violation of
which might materially and adversely effect its operations or
financial condition or delay the consummation of the transactions
contemplated hereby.
(j) Litigation. Except as set forth on Schedule
3.1(j), there are no lawsuits, actions, proceedings, claims,
orders or investigations by or before any Governmental Authority
pending or, to Seller's best knowledge, threatened against it or
its Affiliates relating to the Mortgage Loans, the Servicing
Rights, the Escrow Balances, the Servicing Agreements or seeking
to enjoin the transactions contemplated hereby and there are no
facts or circumstances known to Seller that could result in a
claim for damages or equitable relief which, if decided
adversely, could, individually or in the aggregate, have a
material adverse effect on the value of the Servicing Rights or
Seller's ability to consummate the transactions contemplated
hereby.
(k) Brokers. With the exception of BayView
Financial Trading Group, Inc. ("BayView"), it has not retained
any broker, finder, investment banker or financial advisor in
connection with this Agreement or any of the transactions
contemplated hereby that would be entitled to a broker's,
finder's, investment banker's, financial adviser's or similar fee
in connection therewith. The fees and expenses of BayView are
the sole responsibility of, and shall be paid by, Seller pursuant
to a separate agreement between Seller and BayView.
(l) Purchased Asset Schedules.
(1) Mortgage Loan Schedule. Schedule
3.1(l)(1) (the "Mortgage Loan Schedule") identifies for each
Portfolio, each Mortgage Loan (including a trial balance for each
such Mortgage Loan as of April 30, 1997, which balance shall be
updated as of the Sale Date) that is serviced by Seller under the
Servicing Agreement, the Servicing Rights to which are being sold
to Purchaser pursuant to this Agreement. The Mortgage Loan
Schedule shall also include a separate listing of all Mortgage
Loans that are subserviced by Seller under the Servicing
Agreements which constitute subservicing agreements, the
Servicing Rights to which are being transferred to Purchaser
pursuant to this Agreement. Such subserviced Mortgage Loans
shall not be deemed included in either the Portfolio B Mortgage
Loans or the GO Portfolio Mortgage Loans, unless otherwise
specified on the Mortgage Loan Schedule.
(2) Pool Schedule. Schedule 3.1(l)(2) (the
"Pool Schedule") identifies for each Portfolio, each Pool
included in such Portfolio as of April 30, 1997, which Schedule
shall be updated as of the Sale Date. When updated as of the
Sale Date, the Pool Schedule shall also include a separate
listing of all GNMA Pools that are to be subserviced by the
Purchaser pursuant to the GNMA Subservicing Agreement.
(3) Servicing Agreement Schedule. Schedule
3.1(l)(3) (the "Servicing Agreement Schedule") identifies and
lists each of the Servicing Agreements (including title and date
of the agreement, whether such agreement is a servicing or
subservicing agreement, identity of the Investor and number of
loans serviced thereunder) pursuant to which the Seller is
servicing or subservicing any Mortgage Loans or pools of Mortgage
Loans as of April 30, 1997, which Schedule shall be updated as of
the Sale Date.
All of the information set forth on each of the
Mortgage Loan Schedule, the Pool Schedule and the Servicing
Agreement Schedule is true, correct and complete as of the date
indicated thereon, and when updated as of the Sale Date, will be
true, correct and complete as of the Sale Date. The Seller has
previously provided the Purchaser with true, correct and complete
copies of each Servicing Agreement and all amendments thereto.
(m) Ownership of Servicing Rights. Subject to
the rights of the Investors in the Servicing Agreements and
Servicing Rights, Seller has good and merchantable title to the
Servicing Rights, free and clear of all Liens, other than the
lien of First Bank National Association, which lien shall be
released in accordance with a separate agreement between the
Purchaser, the Seller and First Bank National Association. There
are no contracts affecting the Mortgage Loans, Servicing Rights
or Advances to which Purchaser will be bound except for the
Servicing Agreements and the Applicable Requirements and no other
Person has any interest in the Mortgage Loans or the Servicing
Rights, except the Investors to the extent set forth in the
Servicing Agreements and Applicable Requirements.
Section 3.2 Mortgage Banking Representations and
Warranties.
Seller represents and warrants to Purchaser that each
of the representations and warranties set forth below is true,
complete and correct as of the Sale Date and the Servicing
Transfer Date with respect to each Mortgage Loan and the related
Servicing Rights transferred to Purchaser on such date.
(a) Information.
(i) All information contained in each
Servicing File, and in any electronic data file, with regard to
loan origination and servicing activity contains all information
necessary to properly service the Mortgage Loans in accordance
with Applicable Requirements, and is accurate in all material
respects, and all monies received with respect to each Mortgage
Loan have been properly accounted for and applied. All Servicing
Files are complete in all material respects with regard to
origination and servicing activity.
(ii) The amount of the unpaid balance for
each Mortgage Loan which is reflected on Schedule 3.1(l)(1) is
true and correct as of the date thereof.
(b) Origination and Sale of Mortgage Loans.
(i) Each Mortgage Loan has been originated
and/or sold in accordance, in all material respects, with
Applicable Requirements, including without limitation, applicable
state or federal laws, rules, or regulations pertaining to
consumer credit, truth-in-lending and usury.
(ii) The selling and origination
representations and warranties made by Seller to Investors under
the Servicing Agreements are true and correct in all material
respects as of the date made.
(c) Enforceability.
Each Mortgage Note and each Mortgage has been duly
executed by the appropriate obligor and each is a valid and
enforceable document, subject only to applicable antideficiency
and bankruptcy statutes and to application of the rules of
equity, and there are no defenses, setoffs or counterclaims
against any Mortgage Loan.
(d) General Servicing of Mortgage Loans.
(i) As of the Sale Date, each Mortgage Loan
has been serviced in accordance with Applicable Requirements in
all material respects.
(ii) Except as set forth on Schedule 3.2(l)
(which Schedule shall be updated as of the Sale Date), Seller has
not taken any action or failed to take any action which might
cause the cancellation of or otherwise affect any of the
insurance contracts pertaining to Servicing of a Mortgage Loan
(including without limitation PMI, FHA insurance or VA guaranty)
or which might otherwise materially and adversely affect the
Servicing.
(e) Mortgage Escrow Accounts.
(i) All Mortgage Escrow Accounts are
maintained in accordance with Applicable Requirements. Except as
to payments which are past due under the Mortgage Loans, all
Mortgage Escrow Account balances required by the Mortgage Loan
Documents and paid to Seller for the account of the Mortgagor and
Seller are on deposit in the appropriate Mortgage Escrow
Accounts.
(ii) All payments for taxes, assessments,
ground rents, mortgage insurance, hazard and flood insurance or
other payments made from the related Mortgage Escrow Account have
been made on a timely basis, and Seller has paid to the Mortgagor
interest on Mortgage Escrow Accounts to the extent such payment
is required by Applicable Requirements. Seller has properly
conducted an escrow analysis for each Mortgage Loan within the
twelve (12) month period immediately preceding the Servicing
Transfer Date. All books and records with respect to each
Mortgage Loan shall be in good condition and shall have been
adjusted to reflect properly the results of the escrow analysis.
(iii) Where applicable, Seller has
notified each Mortgagor, in accordance with Applicable
Requirements, as to any payment adjustments which resulted from
an escrow analysis. Seller shall provide Purchaser with copies
of any notices and analyses prepared in accordance with
subsection (ii) above.
(f) No Modifications.
Except with respect to partial releases, actions
required by a divorce decree, assumptions, or as otherwise
permitted under Applicable Requirements, (i) the terms of each
Mortgage Note and Mortgage have not been modified by Seller, (ii)
no party thereto has been released in whole or in part by Seller
and (iii) no part of the Mortgaged Property has been released by
Seller. The full original principal amount of each Mortgage Note
listed has been advanced to the Mortgagor.
(g) Mortgage Insurance.
Except as disclosed in Schedule 3.2(l), as
required by the applicable Investor, the Mortgage Loans are
validly insured by mortgage insurance, and all premiums or other
charges due in connection with such insurance have been paid.
(h) Hazard Insurance.
There is in force with respect to each Mortgaged
Property a hazard insurance policy that provides, at a minimum,
for fire and extended coverage in an amount which is the lesser
of (i) the outstanding principal balance of the Mortgage Loan or
(ii) the full insurable value of improvements, but in no event
less than the amount required under Applicable Requirements. If
required by the Flood Disaster Protection Act of 1973, as
amended, or by the Investor, each Mortgaged Property is and will
be covered by a flood insurance policy in an amount not less than
the lesser of (i) the outstanding principal balance of the
applicable Mortgage Loan, or (ii) the maximum amount of insurance
that is available under the Flood Disaster Protection Act of
1973, as amended.
(i) Condition of Mortgaged Property; Casualties.
(i) There exists no damage to any Mortgaged
Property from fire, windstorm, earthquake, other casualty,
environmental hazard, or any other circumstances or conditions
that would cause any Mortgage Loan to become delinquent or
otherwise materially and adversely affect the value or
marketability of such Mortgage Loan or related Mortgaged
Property. Notwithstanding anything to the contrary contained in
this Section, to the extent that timely repairs are presently
being undertaken utilizing casualty insurance proceeds pursuant
to an insurance claim which is being timely processed with the
insurance company, such repairs shall not constitute a breach of
this warranty provided, however, that upon completion of such
repairs, the collateral value of the repaired Mortgaged Property
shall not be diminished materially from its value prior to such
casualty loss.
(ii) There are (i) no uninsured casualty
losses and (ii) no insured casualty losses relating to any
Mortgaged Property where coinsurance has been, or Seller has
reason to believe it will be, claimed by the insurance company or
where the loss, exclusive of contents, is greater than the net
recovery from the fire insurance carrier. Casualty insurance
proceeds paid with respect to a Mortgage Loan have been used
either to reduce the Mortgage Loan balance or for the purpose of
making repairs to the Mortgaged Property. Unless such insurance
proceeds have been used to reduce the Mortgage Loan balance, all
damage with respect to which casualty insurance proceeds have
been received by or through Seller has been properly repaired or
is in the process of being repaired with such proceeds.
(j) Lien Priority; Title Insurance.
As required by Applicable Requirements, a title
policy, binding title commitment or attorney's opinion as to
title, as the case may be, has been issued and is currently in
effect for each Mortgage Loan insuring that the related Mortgage
is a valid first lien on the Mortgaged Property which has not
been modified, and that such Mortgaged Property is free and clear
of all encumbrances and liens having priority over the first lien
of the Mortgage, except for liens for real estate taxes and
special assessments not yet due and payable and except for
easements and restrictions of record identified in such title
policy and such other matters as are permissible under Applicable
Requirements.
(k) Condemnation; Forfeiture.
Except as disclosed in Schedule 3.2(k) hereto
(which Schedule shall be updated as of the Sale Date), to the
knowledge of Seller, no Mortgaged Property has been or will be
subject to an action seeking condemnation or forfeiture of such
Mortgaged Property.
(l) Custodian Files.
Except as disclosed in Schedule 3.2(l) hereto, the
Custodian File for each Mortgage Loan will contain, upon transfer
of the Servicing Rights to Purchaser, all items required by
applicable Investor regulations for the certification of each and
every Pool, and each and every Pool will be in compliance with
all applicable Investor requirements and guidelines. Except for
GNMA Subserviced Loans that are included in Pools that are not
Certified Pools and except as otherwise disclosed in Schedule
3.2(l) hereto, all Pools have been certified in accordance with,
and the securities backed by such Pools are issued on uniform
documents promulgated in, the applicable Investor guide without
any material deviation therefrom. All Pools shall be, on the
date of receipt of the applicable Investor Consent, finally
certified in accordance with applicable Investor requirements and
procedures and Purchaser shall be under no obligation to accept
Pools which have not been so certified. All Pools shall be, when
transferred to Purchaser on the date of receipt of the applicable
Investor Consent, eligible for recertification by the Purchaser's
custodian (except, in the case of GNMA Pools only, for the
preparation and recording, if necessary, of appropriate
assignments of Mortgages from Seller to Purchaser and from
Purchaser to GNMA), and Seller will be responsible for cure of
any deficiencies necessary for recertification. The principal
balances outstanding and owing on the Mortgage Loans in each Pool
equal or exceed the amounts owing to the security holders of each
Pool. It is understood that any deficiencies in the Pool
certifications will be cured at the sole cost and responsibility
of the Seller and in the time frame required under applicable
Investor guidelines for such cure.
(m) Exception Loans.
Except as disclosed in Schedule 3.2(m) hereto
(which Schedule shall be updated as of the Sale Date), no
Mortgage Loan is a VA vendee loan, an FHA Section 235 loan, an
FHA Section 203(k) loan, an FmHA loan or a GNMA "Targeted Lending
Initiative" (reduced guaranty fee) loan.
(n) Investor Repurchase and Indemnification.
Except as disclosed in Schedule 3.2(n) hereto
(which Schedule shall be updated as of the Sale Date), no
Mortgage Loan is subject to a pending request relating to either
repurchase or indemnification by an Investor or an Investor
indemnification.
(o) Fraud.
To the knowledge of Seller, no fraudulent action,
error, omission, misrepresentation, negligence, or similar
occurrence with respect to a Mortgage Loan has taken place on the
part of any person, including without limitation the Mortgagor,
any appraiser, any builder or developer or any other party
involved in (x) the origination of the Mortgage Loan or (y) the
application of any insurance proceeds with respect to a Mortgage
Loan, Mortgaged Property or REO Property.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1. Purchaser's Representations and
Warranties.
Purchaser represents and warrants to Seller as follows
as of the date hereof, the Sale Date and the Servicing Transfer
Date:
(a) Organization and Qualification. It is a
corporation duly organized, validly existing, and in good
standing, under the laws of the jurisdiction of its formation,
has the authority and power necessary to own its assets and to
transact the business in which it is engaged, and is duly
qualified and in good standing to do business in each
jurisdiction in which the conduct of its business or the
ownership of its assets so requires.
(b) Authorization; Enforceability; Execution. It
has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and each Operative
Document, and, subject to the receipt of all necessary licenses
and approvals in accordance with Section 5.1, to perform its
obligations hereunder and thereunder. It has duly authorized,
executed, and delivered this Agreement and each Operative
Document. This Agreement and each Operative Document constitute
the legal, valid, and binding obligation of Purchaser,
enforceable against it in accordance with their respective terms,
except to the extent bankruptcy, insolvency, reorganization,
fraudulent conveyance, or similar laws affect the enforcement of
creditors' rights generally. The signatory executing this
Agreement and each Operative Document is duly authorized to
execute and deliver each such document.
(c) Non-Contravention. Its execution and
delivery of this Agreement and each Operative Document, and the
consummation and performance of any of the transactions
contemplated hereby or thereby, do not and will not: (i)(A)
violate any applicable law or any judgment, award, order, writ,
or decree of any court or other Governmental Authority, (B)
violate any Mortgage Loan Requirement, or (C) violate any
provision of its certificate of incorporation or by-laws; (ii)
violate any provision of, or cause a default under, any mortgage,
indenture, contract, agreement, or other undertaking to which it
is a party or that purports to be binding upon it or upon any of
its assets; or (iii) result in the creation or imposition of any
lien on any of its assets.
(d) Consents. Other than the Investor Consents
and the licenses, consents and approvals contemplated by Section
5.1, no consent of any other Person (including such Person's
general partners or shareholders) and no consent, license,
approval, or exemption by, or authorization of, or registration,
filing or declaration with, any Governmental Authority or any
other Person, is necessary to (i) its execution, delivery or
performance of this Agreement or any Operative Document, or (ii)
the validity or enforceability of this Agreement or any Operative
Document.
(e) No-Default. It is not in default, and no
event or condition exists that after the giving of notice or
lapse of time or both, would constitute an event of default under
any material mortgage, indenture, contract, agreement, judgment,
or other undertaking, to which it is a party or which purports to
be binding upon it or upon any of its assets.
(f) Approvals. It is, or as of the Servicing
Transfer Date will be, an approved FNMA and FHLMC
Seller/Servicer, GNMA Issuer/Servicer, FmHA Servicer, and FHA and
VA mortgagee in good standing and has not been suspended as a
mortgagee or servicer by any of FNMA, FHLMC, GNMA, FmHA, FHA or
the VA. It has, or as of the Servicing Transfer Date will have,
all federal, state and local licenses, permits, and other
authorizations of Governmental Authorities required for the
conduct of its business with respect to the Mortgage Loans and
the Servicing Rights, including but not limited to state mortgage
banking licenses in those jurisdictions where such licenses are
necessary for the conduct of Purchaser's business after the
Servicing Transfer Date. It knows of no reason why any Investor
would not consent to the transfer contemplated by this Agreement.
(g) Compliance with Law. Purchaser has complied
in all material respects with all applicable Laws, the violation
of which might materially and adversely effect the operations or
financial condition of Purchaser or delay the consummation of the
transactions contemplated hereby.
(h) Brokers. Purchaser has not retained any
broker, finder, investment banker or financial advisor in
connection with this Agreement or any of the transactions
contemplated hereby that would be entitled to a broker's,
finder's, investment banker's, financial adviser's or similar fee
in connection therewith.
(i) Financial Statements; Solvency. It meets all
minimum net worth or similar requirements necessary in order to
conduct its business which are applicable to Purchaser under any
law or any requirement of any regulatory agency, Investor, or
other authority.
On the Sale Date and each Servicing Transfer Date,
and after giving effect to each of the transactions contemplated
to occur on such date, it will not be insolvent and has, or will
have as of such date, adequate net worth to meet all Investor
requirements.
ARTICLE V
COVENANTS AND AGREEMENTS
The Parties hereby covenant and agree with each other
as follows, each such covenant and agreement to survive the
applicable Servicing Transfer Date:
Section 5.1 Licenses and Approvals.
Purchaser shall use its best efforts from and after the
date of this Agreement to obtain all licenses, permits and
approvals from all Governmental Authorities, Investors and
Insurers as may be necessary or appropriate in order to enable
Purchaser or its designee to consummate the transactions
contemplated by this Agreement and service the Mortgage Loans in
accordance with all Applicable Requirements from and after each
Servicing Transfer Date.
Seller shall cooperate with Purchaser and provide
Purchaser with reasonable assistance, at Purchaser's expense, as
may be necessary in order to enable Purchaser to obtain all such
licenses and approvals from Persons specified by Purchaser.
Seller shall not be liable for Purchaser's failure to obtain any
necessary license or approval.
Section 5.2 Delivery of Custodian Files and
Servicing Files.
With respect to all Mortgage Loans other than the GNMA
Subserviced Loans, on or before each applicable Servicing
Transfer Date, Seller, at Seller's sole cost and expense, shall
deliver, or cause to be delivered, the applicable complete
Custodian Files to Purchaser's Document Custodian by insured
courier. Seller shall provide Purchaser with a detailed list of
all Custodian Files that have been released by Seller's document
custodian (other than Custodian Files shipped to Purchaser's
Document Custodian), indicating the Person to whom such file has
been released and the reason for such release. Any Custodian
Files in Seller's possession shall be delivered to Purchaser.
On or before each applicable Advance Settlement Date,
Seller, at Seller's sole cost and expense, shall deliver the
applicable Servicing Files and any other books, documents and
records relating to the Servicing Rights and the Advances to
Purchaser by insured courier in accordance with, and by the dates
required by, the Transfer Instructions.
If Seller has not delivered all complete Custodian
Files and Servicing Files to Purchaser's Document Custodian or to
Purchaser, as applicable, on or before each Servicing Transfer
Date, Seller shall use its best efforts to deliver all such files
and documents to Purchaser's Document Custodian or to Purchaser,
as applicable, as soon as practicable after each Servicing
Transfer Date.
Section 5.3 Pool Certification.
With respect to all Mortgage Loans other than the GNMA
Subserviced Loans, on or before each applicable Servicing
Transfer Date, the Custodian Files transferred to Purchaser's
Document Custodian in accordance with the provisions of this
Article V shall contain all of the documents (other than
assignments of Mortgage from Seller to Purchaser and from
Purchaser to the Investor) required by the Investor in order for
Seller's document custodian to have finally certified or
recertified, as the case may be, all of the transferred Pools and
for Purchaser's Document Custodian to recertify the Pools upon
their transfer to Purchaser after each applicable Servicing
Transfer Date. If Purchaser or Purchaser's Document Custodian
advises Seller that any of the documents received from Seller or
its custodian is either missing, incomplete or erroneous, Seller,
at its sole cost and expense, shall promptly clear any such
exceptions. Purchaser shall cause Purchaser's Document Custodian
to provide Seller with a list of all such exceptions within 75
days of receipt of each Custodian File; provided, that any delay
or failure to provide such notice within such time period shall
not affect any of Seller's obligations under this Agreement,
except to the extent, and only to the extent, (i) that any
obligation would not have arisen but for such delay or failure or
(ii) such delay or failure materially increases the expense of
Seller's compliance with any obligations under this Agreement (in
which case Purchaser shall pay the amount of the increased
expense solely attributable to such delay or failure). Seller,
at its sole expense, shall engage a reputable independent third-
party contractor acceptable to Purchaser to prepare all
endorsements to the applicable Mortgage Notes and assignments of
the applicable Mortgages from Seller to Purchaser and from
Purchaser to the Investor to the extent required by Applicable
Requirements in order to recertify the Pools after the transfer
contemplated by this Agreement. All such endorsements and
assignments shall be completed, and in the case of assignments of
mortgages from Seller to Purchaser, sent for recording in the
applicable jurisdiction in which the related Mortgaged Property
is located, within the time period required by the Applicable
Requirements. Seller shall cause such contractor to properly
record each assignment and provide Purchaser with a certified
true copy of each assignment sent for recording, which
certification shall be stamped on the face of each assignment and
be in form and substance satisfactory to Purchaser. Blanket
assignments may be used where permitted by applicable
jurisdictions and the Applicable Requirements. Seller shall
cause the contractor to forward to Purchaser (or Purchaser's
Document Custodian) each recorded assignment promptly upon
receipt of such recorded assignment. Seller shall track the
status of the recordation process and the clearance of
exceptions, shall diligently pursue such items and shall report
to Purchaser on its progress at least monthly until all
exceptions are cleared and all assignments recorded.
Section 5.4 Investor Consents.
Upon Purchaser's receipt of all applicable licenses,
permits and approvals contemplated by Section 5.1, Seller, at its
sole cost and expense, shall prepare and submit all documentation
necessary and shall use its best efforts to timely obtain the
Investor Consents for the transfer of the Servicing Rights on
each Servicing Transfer Date in accordance with this Agreement.
Seller shall provide Purchaser with a copy of each Investor
Consent promptly after it is received. Purchaser shall cooperate
with Seller in connection with obtaining each Investor Consent,
and shall execute and deliver to Seller all documentation
reasonably necessary to obtain each Investor Consent.
Section 5.5 Notice to Mortgagors.
In accordance with all Applicable Requirements, Seller
shall send to each Mortgagor a letter advising the Mortgagor of
the transfer of the applicable servicing rights to Purchaser not
later than fifteen (15) days prior to the applicable Servicing
Transfer Date, the form and content of which letters shall be
mutually acceptable to Seller and Purchaser in the exercise of
reasonable judgment; provided, that Seller shall not be required
to send any such notices prior to the date on which the
applicable Investor Consents shall have been received. Copies of
all such letters shall be provided to Purchaser.
Section 5.6 Sale And Transfer Documents.
Seller shall, prior to or on the Sale Date and each
Servicing Transfer Date, execute and deliver, or cause to be
executed and delivered to Purchaser, the documents or instruments
described in Article VI. Purchaser shall, prior to or on the Sale
Date and each Servicing Transfer Date, execute and deliver, or
cause to be executed and delivered, to Seller, the documents or
instruments described in Article VII.
Section 5.7 Costs and Expenses.
Seller shall bear all costs associated with
transferring to Purchaser the Servicing Rights, the Mortgage
Escrow Accounts, the Custodian Files and the Servicing Files,
including without limitation (i) all fees and charges due to
Investors with respect to the transfer, (ii) Seller's custodian
removal fees, including shipping the Custodian Files, (iii) costs
in connection with the transfer, preparation and recording of
assignments of the Mortgage Loans from Seller to Purchaser and
from Purchaser to Investors, and in providing Purchaser with
certified copies thereof, (iv) costs of insured shipping of the
Loans Files and all other loan documents and servicing records
related to the Mortgage Loans to Purchaser's home office or to
such other location as Purchaser may direct, (v) costs of
preparing Seller's computer tapes in a readable format with all
pertinent data necessary to service the Mortgage Loans and costs
of delivery of such tapes to Purchaser, (vi) costs of
notifications to and requests of hazard insurers to change
endorsements on all hazard insurance policies, notifications to
change the mortgagee of record, and Seller's notification to
Mortgagor of the change in servicers, and (vii) costs incurred in
obtaining or correcting documents that were erroneously certified
by Seller's or Prior Servicer's custodian. Purchaser shall bear
all of its document custodian's costs associated with
recertifying the Pools purchased hereunder.
Except as specifically provided above or elsewhere in
this Agreement, each Party shall bear the expenses and costs,
including attorney fees, it incurs in connection with the
preparation of this Agreement and consummation of the
transactions contemplated by this Agreement.
Section 5.8 Access to Mortgage Documents, Files,
Records, Etc.
From the Sale Date to the applicable Servicing Transfer
Date, Purchaser and its attorneys, accountants, consultants and
other representatives, shall have reasonable access, upon
reasonable notice and during regular business hours, to the
Servicing Files and to Seller's books, records and accounts with
respect to the Mortgage Loans, the Servicing Rights and the
Advances, including but not limited to the documents held by
Seller's document custodian. Seller shall provide Purchaser,
within three (3) Business Days after written request, with all
information reasonably requested by Purchaser with respect to the
Mortgage Loans, the Servicing Rights and the Advances, including
but not limited to copies of audits of Seller by any Agency or
any other federal or state regulatory body. The Parties agree
that Purchaser's examination and determination hereunder shall
not evidence that Seller has complied with any of its
representations, warranties or covenants contained in this
Agreement.
Section 5.9 Best Efforts; Further Assurances.
Subject to the terms and conditions herein provided,
each of the Parties shall use its best efforts to take, or cause
to be taken, all action, and to do, or cause to be done, all
things reasonably necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Each of Seller and
Purchaser will use their respective best efforts to obtain
consents of all Governmental Authorities, all Investor Consents
and third parties necessary to the consummation of the
transactions contemplated by this Agreement.
Each Party hereby covenants and agrees that it will,
whenever and as often as reasonably requested so to do by the
other Party, its successors and assigns, do, execute, acknowledge
and deliver any and all such other and further acts, assignments,
limited powers of attorney, acknowledgments, acceptances and any
instruments of further assurance, approvals and consents as such
other Party, its successors and assigns, may hereinafter
reasonably deem necessary or proper in order to complete and
perfect the conveyances to Purchaser contemplated hereby
Seller shall furnish to Purchaser such powers of
attorney and other documents as are reasonably necessary or
appropriate to enable Purchaser to prosecute any collection or
foreclosure proceedings with respect to the Mortgage Loans in
Seller's or any applicable Prior Servicer's name.
Section 5.10 Hart-Scott-Rodino Filings.
If required by applicable law, each of Seller and
Purchaser will use their respective best efforts to file with the
Antitrust Division of the Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") promptly
following the date hereof the notification and report form (the
"Report") required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), with
respect to the transactions contemplated hereby. Each of Seller
and Purchaser shall cooperate with the other party to the extent
necessary to assist the other party in the preparation of its
Report, shall request early termination of the waiting period
required by the HSR Act and, if requested, will promptly amend or
furnish additional information thereunder if requested by the
Antitrust Division and/or the FTC.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
Section 6.1 Conditions to the Sale Date.
The obligations of Purchaser to consummate the
transactions contemplated by this Agreement shall be subject to
the fulfillment prior to the Sale Date of each of the following
conditions:
(a) (i) No Governmental Authority of competent
jurisdiction shall have (x) enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order which is in effect; or (y)
commenced or threatened any action or proceeding, which in either
case would prohibit consummation of the transactions contemplated
by this Agreement, and (ii) if the filings contemplated by
Section 5.10 are made by the parties, the waiting period required
by the HSR Act, and any extensions thereof obtained by request or
other action of the FTC and/or the Antitrust Division, shall have
expired or been terminated by the FTC and the Antitrust Division.
(b) All representations and warranties made by
Seller in this Agreement and the Schedules delivered by Seller to
Purchaser pursuant hereto shall be true, correct and complete in
all material respects on the date hereof and as of the Sale Date
as though such representations and warranties were made as of the
Sale Date, and Seller shall have duly performed or complied with
all of the covenants, obligations and conditions to be performed
or complied with by it under the terms of this Agreement on or
prior to the Sale Date.
(c) All other authorizations, consents (other
than Investor Consents or the licenses, approvals and
authorizations contemplated by Section 5.1), waivers, approvals
or other actions legally required in connection with the
execution, delivery and performance of this Agreement and the
other Operative Documents by the Parties and the consummation by
the Parties of the transactions contemplated hereby and thereby
shall have been obtained and shall be in full force and effect;
Seller shall have obtained any authorizations, consents, waivers,
approvals or other actions required to prevent a material breach
or default by Seller under any contract to which Seller is party.
(d) Prior to or on the Sale Date, Seller shall
have duly executed and delivered to Purchaser this Agreement, the
other Operative Documents and such other documents as shall be
requested by Purchaser in form and substance reasonably
acceptable to Purchaser's counsel, including the following:
(i) a certificate of the President or a Vice
President of Seller, dated the Sale Date, to the effect that (1)
the person signing such certificate is familiar with this
Agreement and (2) the conditions specified in Section 6.1(a), (b)
and (c) as they relate to Seller have been satisfied;
(ii) a certificate of the Secretary or
Assistant Secretary of Seller, dated the Sale Date, as to the
incumbency of any officer of Seller executing this Agreement, any
other Operative Document or any document related thereto and
covering such other matters as Purchaser may reasonably request;
(iii) a certified copy of the resolutions of
the Board of Directors of Seller's general partner authorizing
the execution, delivery and consummation of this Agreement and
the other Operative Documents and the transactions contemplated
hereby and thereby;
(iv) an opinion of Lowenstein, Sandler,
Kohl, Fisher & Boylan, P.A., counsel to Seller, dated the Sale
Date, and substantially in the form attached as Exhibit F, and
(v) such other documents or instruments as
Purchaser reasonably requests to effect the transactions
contemplated hereby.
(e) Seller, Purchaser and First Bank National
Association shall have entered into an agreement in form and
substance acceptable to the parties providing for the release of
First Bank's Lien on the Servicing Rights.
(f) Seller shall have provided the Purchase Price
Schedule to Purchaser at least two Business Days prior to the
Sale Date.
(g) Purchaser shall have received the Guaranty,
duly executed and delivered by Harbourton Holdings, L.P.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Section 7.1 Conditions to the Sale Date.
The obligations of Seller to consummate the
transactions contemplated by this Agreement shall be subject to
the fulfillment prior to or on the Sale Date of each of the
following conditions:
(a) (i) No Governmental Authority of competent
jurisdiction shall have (x) enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order which is in effect; or (y)
commenced or threatened any action or proceeding, which in either
case would prohibit consummation of the transactions contemplated
by this Agreement[, and (ii) the waiting period required by the
HSR Act, and any extensions thereof obtained by request or other
action of the FTC and/or the Antitrust Division, shall have
expired or been terminated by the FTC and the Antitrust Division.
(b) All representations and warranties made by
Purchaser in this Agreement shall be true, correct and complete
in all material respects on the date hereof and as of the Sale
Date as though such representations and warranties were made as
of the Sale Date, and Purchaser shall have duly performed or
complied with all of the covenants, obligations and conditions to
be performed or complied with by it under the terms of this
Agreement on or prior to the Sale Date.
(c) All authorizations, consents, waivers,
approvals or other actions legally required in connection with
the execution, delivery and performance of this Agreement and the
other Operative Documents by the Parties and the consummation by
the Parties of the transactions contemplated hereby and thereby
shall have been obtained and shall be in full force and effect.
(d) Prior to or on the Sale Date, Purchaser shall
have duly executed and delivered to Seller this Agreement and
such other documents as shall be requested by Seller in form and
substance reasonably acceptable to Seller's counsel, including
the following:
(i) a certificate of an authorized officer
of the Purchaser, dated the Sale Date, to the effect that (1) the
person signing such certificate is familiar with this Agreement
and (2) the conditions specified in Section 7.1(a), (b) and (c)
as they relate to Purchaser have been satisfied;
(ii) a certificate of the Secretary or
Assistant Secretary of the Purchaser, dated the Sale Date, to the
effect that (a) the Purchaser is duly authorized to execute and
deliver this Agreement and each of the other Operative Documents
and to perform its obligation hereunder and thereunder and (b) as
to the incumbency of any officer of the Purchaser executing this
Agreement, any other Operative Document or any document related
thereto on behalf of Purchaser and covering such other matters as
Seller may reasonably request;
(iii) Omitted
(iv) an opinion of in-house counsel to
Purchaser, dated the Sale Date, and substantially in the form
attached as Exhibit G, and
(v) such other documents or instruments as
Seller reasonably requests to effect the transactions
contemplated hereby.
(e) Seller shall have received from Purchaser the
portion of the Purchase Price due on the Sale Date.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; REPURCHASE
Section 8.1 Survival of Representations and
Warranties.
The representations and warranties provided for in this
Agreement shall survive for five (5) years from the Sale Date for
the benefit of the Parties and their successors and assigns. The
survival period of each representation or warranty as provided in
this Section 8.1 is hereinafter referred to as the "Survival
Period." No investigation by Purchaser heretofore or hereafter
made shall modify or otherwise affect any representations and
warranties of Seller or any of its indemnification obligations
contained herein.
Section 8.2 Indemnification by Seller.
Seller shall indemnify and hold harmless Purchaser, its
Affiliates, officers, directors, employees, agents and
representatives, and any Person claiming by or through any of
them, against and in respect of any and all Losses, together with
interest thereon, calculated at the Fed Funds Rate from the date
such Loss is incurred to the date Seller pays its indemnity
obligation hereunder, arising out of, resulting from or incurred
in connection with any of the following events (collectively, the
"Indemnified Events"; individually, an "Indemnified Event"):
(a) the inaccuracy of any representation or the
breach of any warranty made by Seller in this Agreement or any
other Operative Document, in any agreement entered into by the
Parties in connection with this Agreement, or in any Schedule,
Exhibit, written statement or certificate furnished by Seller
pursuant to this Agreement for the Survival Period, in each case
determined without regard to any limitations contained therein as
to Seller's knowledge;
(b) the breach by Seller of any covenant or
agreement to be performed by Seller under this Agreement or any
other Operative Document;
(c) any litigation pending, threatened or arising
out of events occurring prior to the Sale Date in connection with
the Mortgage Loans, the Servicing Rights, the Mortgage Escrow
Accounts or the Advances, including any litigation, proceedings
or investigations disclosed on any Schedule to this Agreement;
(d) any VA No-Bid Mortgage Loan or VA Buydown, in
each case relating to a Mortgage Loan that is one or more payment
past due as of the Sale Date, for which the VA notifies the
Servicer of the related Mortgage Loan within two (2) years after
the Sale Date that a Buydown is required to avoid a "no-bid" by
the VA; provided that (x) in the case of a such a no-bid notice,
Purchaser and Seller agree to elect the Buydown option, (y) prior
to claiming indemnification under this paragraph Purchaser shall
use commercially reasonable efforts to submit to Seller for its
prompt review and approval a calculation of the debt reduction
required to avoid a no-bid, if the VA affords Purchaser
sufficient time thereafter and (z) the amount indemnified
hereunder shall only include the amount of the debt reduction
necessary to avoid a no-bid; and
(e) errors and omissions in the processing,
originating or servicing any of the Mortgage Loans, as
applicable, on the part of Seller or any Prior Servicer prior to
the applicable Servicing Transfer Date.
Section 8.3 Indemnification by Purchaser.
Purchaser shall indemnify and hold harmless Seller, its
Affiliates, officers, directors, employees, agents and
representatives, and any Person claiming by or through any of
them, against and in respect of any and all Losses, together with
interest thereon, calculated at the Fed Funds Rate from the date
such Loss is incurred to the date Purchaser pays its indemnity
obligation hereunder, arising out of, resulting from or incurred
in connection with any of the following events (collectively, the
"Indemnified Events"; individually, an "Indemnified Event"):
(a) the inaccuracy of any representation or the
breach of any warranty made by Purchaser in this Agreement or any
other Operative Document, in any agreement entered into by the
Parties in connection with this Agreement, or in any Schedule,
Exhibit, written statement or certificate furnished by Purchaser
pursuant to this Agreement for the Survival Period, in each case
determined without regard to any limitations contained therein as
to Purchaser's knowledge;
(b) the breach by Purchaser of any covenant or
agreement to be performed by Purchaser under this Agreement or
any other Operative Document; or
(c) any failure by Purchaser to service the
Mortgage Loans after the applicable Servicing Transfer Date in
accordance with Applicable Requirements, provided that whenever
such failure arises out of or relates to Seller's indemnification
obligations hereunder, no indemnification is required unless such
failure materially and adversely affects Seller's ability to cure
a breach, defend a claim or otherwise result in a material loss
to Seller.
Section 8.4 Indemnification Procedures.
In the case of any claim for indemnification arising
hereunder, an Indemnified Party shall give prompt written notice
to the Indemnifying Party as and when the same becomes known to
the Indemnified Party (provided, that the failure of the
Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations hereunder unless, and only
to the extent, such failure deprives the Indemnifying Party of
the right to contest any claim, increases the amount of such
claim, or decreases the amount of the claim that could have been
avoided had proper notice been given). The Indemnifying Party
shall have the right to defend and to direct the defense against
any such claim or demand, in its name or in the name of the
Indemnified Party, as the case may be, at the expense of the
Indemnifying Party, and with counsel selected by the Indemnifying
Party and acceptable to the Indemnified Party unless (i) such
claim or demand seeks an order, injunction or other equitable
relief against the Indemnified Party, or (ii) the Indemnified
Party shall have reasonably concluded that (x) there is a
conflict of interest between the Indemnified Party and the
Indemnifying Party in the conduct of the defense of such claim or
demand or (y) the Indemnified Party has one or more defenses not
available to the Indemnifying Party. If the Indemnified Party
concludes that (x) or (y) above apply, the Indemnified Party
shall provide prompt written notice to the Indemnifying Party
stating the reasons for such conclusions. Notwithstanding
anything in this Agreement to the contrary, the Indemnified Party
shall, at the expense of the Indemnifying Party, cooperate with
the Indemnifying Party, and keep the Indemnifying Party fully
informed, in the defense of such claim or demand. The
Indemnified Party shall have the right to participate in the
defense of any claim or demand with counsel employed at its own
expense; provided, however, that, in the case of any claim or
demand described in clause (i) or (ii) of the second preceding
sentence or as to which the Indemnifying Party shall not in fact
have employed counsel to assume the defense of such claim or
demand, the reasonable fees and disbursements of such counsel
shall be at the expense of the Indemnifying Party. The
Indemnifying Party shall have no indemnification obligations with
respect to any such claim or demand which shall be settled by the
Indemnified Party without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. Notwithstanding the preceding sentence,
Purchaser shall have the exclusive right, absent fraud or bad
faith, to settle any claim for less than $10,000 from Purchaser's
own funds without in any manner affecting its rights to
indemnification therefor under this Article VIII.
Notwithstanding anything to the contrary contained
herein, the Indemnified Party, without in any manner affecting
the indemnity to be provided under this Article VIII, shall have
the right to assume the defense of any claim and shall have the
right to settle any claim on a reasonable basis without the
consent or involvement of the Indemnifying Party, if the
Indemnified Party reasonably believes that such assumption or
settlement is necessary to discharge its responsibilities as
servicer of the Mortgage Loans or to preserve its authority and
approvals to service the Mortgage Loans or to maintain the manner
in which it conducts its business, if the failure to assume the
defense of or settle the claim could materially and adversely
impact upon its relationship with an Investor or Insurer, or if
the Indemnifying Party does not, in the Indemnified Party's
reasonable judgment, diligently defend and/or cure any
Indemnified Event.
Section 8.5 Repurchase.
If Seller is obligated to indemnify Purchaser with
respect to an Indemnified Event under Section 8.2 relating to a
Mortgage Loan, and as a result Purchaser is required by
Applicable Requirements to repurchase such Mortgage Loans out of
the related Pool (or Purchaser would be required or permitted to
repurchase such Mortgage Loan if it was still in a Pool), then in
addition to the obligations of Seller to indemnify Purchaser for
any Losses arising out of, resulting from or relating to the
Indemnified Event under Section 8.2, Purchaser may require Seller
to repurchase the Mortgage Loan and the related Servicing Rights
from the Investor and Purchaser, as the case may be. The
purchase price under this Section 8.5 for any Mortgage Loan and
the related Servicing Rights repurchased hereunder shall equal
the Repurchase Price, and shall be paid within fifteen (15) days
following receipt from Purchaser of written demand therefor. In
addition, Seller shall reimburse Purchaser for all Advances
related to the applicable Mortgage Loan repurchased hereunder
Immediately upon completion of the purchase or repurchase of a
Mortgage Loan or Servicing Rights by Seller, Purchaser shall
assign to Seller all of its rights, title and interest in and to
such Mortgage Loan and the related Servicing Rights and Advances,
and shall forward to Seller all Mortgage Escrow Accounts,
Custodian Files, Servicing Files, servicing records and other
documents relating to such repurchased Mortgage Loan or Servicing
Rights.
ARTICLE IX
TERMINATION
Section 9.1 Termination.
This Agreement may be terminated at any time prior to
the Sale Date as follows:
(a) by mutual consent of Seller and Purchaser;
(b) by either Seller or Purchaser, if the other
party hereto shall breach in any material respect any of its
representations, warranties or obligations contained in this
Agreement;
(c) by Purchaser, if the conditions to its
obligations set forth in Article VI have not been satisfied or
waived on or before the Sale Date; and
(d) by Seller, if the conditions to its
obligations set forth in Article VII have not been satisfied or
waived on or before the Sale Date.
9.2 Effect of Termination.
If this Agreement is terminated pursuant to Section
9.1, all rights and obligations of Seller and Purchaser hereunder
shall terminate and no Party shall have any liability to the
other Party, except as provided in the last sentence of this
paragraph, which shall survive the termination of this Agreement,
and except nothing herein will relieve any Party from liability
for any breach of any representation, warranty, agreement or
covenant contained herein prior to such termination. Upon
termination of this Agreement pursuant to Section 9.1, any
portion of the Purchase Price or other amounts delivered by
Purchaser to Seller shall be promptly returned to Purchaser
together with interest at the Fed Funds Rate.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Notices.
All notices, consents, requests, and other
communications under this Agreement shall be in writing and shall
be effective: (a) upon delivery by hand; (b) one day after being
deposited with a recognized overnight delivery service; (c) three
days after being deposited in the United States mail, first-
class, postage prepaid, registered or certified, return receipt
requested; or (d) if sent by facsimile, upon receipt of a clear
transmission report--in each case addressed to such party as
follows (or to such other address as hereafter may be designated
in writing by such Party to the other Party):
If to Purchaser, addressed to Purchaser at:
Lehman Capital, A Division of
Lehman Brothers Holdings Inc.
3 World Financial Center
12th Floor
New York, NY 10285-1200
Attn: Manager-Contract Finance
Telecopier No.: 212-528-6659
If to Seller, addressed to Seller at:
Harbourton Mortgage Co., L.P.
2530 South Parker Road
Suite 500
Denver, CO 80014
Attn: Mr. Jack W. Schakett, Chief Executive Officer
Telecopier No.: 303-745-3688
and
Harbourton Mortgage Co., L. P.
601 Fifth Avenue
Scottsbluff, NE 69361
Attention: Servicing Manager
Telecopier No.: 308-630-6700
Section 10.2 Assignment; Successors and Assigns; No
Third Party Rights.
This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and
assigns. This Agreement shall be for the sole benefit of the
Parties and their respective successors, assigns and legal
representatives and is not intended, nor shall be construed, to
give any Person, other than the Parties and their respective
successors, assigns and legal representatives, any legal or
equitable right, remedy or claim hereunder.
Section 10.3 Entire Agreement.
This Agreement and the other Operative Documents,
including the Schedules and Exhibits attached hereto and thereto,
constitutes the entire agreement among the Parties with respect
to the matters covered hereby and supersedes all previous
written, oral or implied understandings among them with respect
to such matters.
Section 10.4 Amendment, Modification and Waivers.
This Agreement may only be amended or modified in
writing signed by the party against whom enforcement of such
amendment or modification is sought. Any of the terms or
conditions of this Agreement may be waived at any time by the
party or parties entitled to the benefit thereof, but only by a
writing signed by the party or parties waiving such terms or
conditions.
Section 10.5 Severability.
The invalidity of any portion hereof shall not affect
the validity, force or effect of the remaining portions hereof.
If it is ever held that any restriction hereunder is too broad to
permit enforcement of such restriction to its fullest extent,
such restriction shall be enforced to the maximum extent
permitted by law.
Section 10.6 Omitted.
Section 10.7 Governing Law; Jurisdiction; Service of
Process.
THE PARTIES HEREBY IRREVOCABLY DECLARE AND AGREE AS
FOLLOWS: This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of
the conflict of laws principles thereof. Any legal action, suit,
or other proceeding arising out of or in any way connected with,
this Agreement may be brought in the courts of the State of New
York, or in the United States courts for the District of New
York. With respect to any such proceeding in any such court: (a)
Each Party generally and unconditionally submits itself and its
property to the nonexclusive jurisdiction of such court. (b)
Each Party waives, to the fullest extent permitted by law, any
objection it has or hereafter may have to the venue of such
proceeding, as well as any claim it has or may have that such
proceeding is in an inconvenient forum. (c) Process may be
served on a Party anywhere in the world, by the same methods as
are required for notice under this Agreement.
Section 10.8 No Waiver.
Unless expressly provided to the contrary, the failure
of any Party to insist upon strict performance of any covenant or
obligation in this Agreement shall not be a waiver of such
Party's right to demand strict compliance in the future or to
pursue or enforce whatever remedies may be available to such
Party for any breach or default of or in such covenant or
obligation (subject to applicable statutes of limitation). No
consent or waiver, express or implied, to or of any breach or
default in the performance of any covenant or obligation in this
Agreement shall constitute a consent or waiver to or of any other
breach or default in the performance of the same or any other
covenant or obligation hereunder.
Section 10.9 Payments by Wire Transfer.
All payments required to be made by wire transfer
hereunder shall be made to the Parties as follows, or to such
other location or account as may be designated in writing by the
Party entitled to payment:
If payment is to be made to Seller:
First Bank National Association
Minneapolis, MN
ABA Routing No. 0910-0002-2
For Credit to A/C: 1902-7206-3180
Harbourton Mortgage Co., L.P.
Collateral Account
If payment is to be made to Purchaser:
For Custodial Funds
[____________________]
[____________________]
[____________________]
[____________________]
For All Other Transactions
Citibank NYC
ABA # 021000089
Lehman Brothers Holdings Inc.
A/C # 40615501
REF: Harbourton Servicing Purchase
Section 10.10 Reproduction of Documents.
This Agreement, each of the other Operative Documents,
and each other document or instrument executed and delivered in
connection with the transactions contemplated hereby and thereby,
may be reproduced by any photographic, photostatic, facsimile,
electronic or other similar process. Any such reproduction shall
be admissible in evidence as the original itself in any judicial,
administrative or arbitral proceeding, whether or not the
original is in existence and whether or not such reproduction was
made by a Party in the regular course of business.
Section 10.11 No Strict Construction.
The Parties acknowledge that this Agreement and the
other Operative Documents have been prepared jointly, and shall
not be strictly construed against either Party.
Section 10.12 Counterparts.
This Agreement may be executed in counterparts, each of
which, when so executed and delivered, shall be deemed to be an
original and all of which, taken together, shall constitute one
and the same agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the Parties hereby duly execute and
deliver this Agreement:
HARBOURTON MORTGAGE CO., L.P.,
a Delaware limited partnership
By: Harbourton Funding
Corporation,
a Delaware corporation,
its general partner
By:_______________________
Name:
Title:
LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.,
a Delaware corporation,
By:_______________________
Name:
Title:
Schedule 3.1(l)(1)
MORTGAGE LOAN SCHEDULE
Schedule 3.1(l)(2)
POOL SCHEDULE
MORTGAGE SERVICING
PURCHASE AND SALE AGREEMENT
between
HARBOURTON MORTGAGE CO., L.P.,
Seller
and
LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.,
Purchaser
Dated as of July 31, 1997
$903 Million Agency Mortgage Servicing Rights
$240Million FNMA Government Obligation Servicing Rights
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Section 1.1 Definitions 1
Section 1.2 Interpretations 8
ARTICLE II
PURCHASE AND SALE OF SERVICING RIGHTS;
PURCHASE PRICE; ADDITIONAL COVENANTS
Section 2.1 Purchase and Sale of Servicing Rights 8
Section 2.2 Purchase Price 9
Section 2.3 Payment of Purchase Price 10
Section 2.4 Reimbursement of Advances 10
Section 2.5 Interim Servicing 11
Section 2.6 Subservicing 11
Section 2.7Mortgage Escrow Accounts; Optional Insurance Payments 12
Section 2.8 Closing 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Seller's Representations and Warranties 13
Section 3.2 Mortgage Banking Representations and Warranties 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1 Purchaser's Representations and Warranties 20
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Licenses and Approvals 21
Section 5.2 Delivery of Custodian Files and Servicing Files 22
Section 5.3 Pool Certification 22
Section 5.4 Investor Consents 23
Section 5.5 Notice to Mortgagors 23
Section 5.6 Sale and Transfer Documents 23
Section 5.7 Costs and Expenses 24
Section 5.8Access to Mortgage Documents, Files, Records, Etc. 24
Section 5.9 Best Efforts; Further Assurances 24
Section 5.10 Hart-Scott-Rodino Filings. 25
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
Section 6.1 Conditions to the Sale Date 25
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Section 7.1 Conditions to the Sale Date 27
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; REPURCHASE
Section 8.1 Survival of Representations and Warranties 28
Section 8.2 Indemnification by Seller 28
Section 8.3 Indemnification by Purchaser 29
Section 8.4 Indemnification Procedures 30
Section 8.5 Repurchase 31
ARTICLE IX
TERMINATION
Section 9.1 Termination 31
Section 9.2 Effect of Termination 31
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Notices 32
Section 10.2Assignment; Successors and Assigns; No Third Party Rights
33
Section 10.3 Entire Agreement 33
Section 10.4 Amendment, Modification and Waivers 33
Section 10.5 Severability 33
Section 10.6 Omitted 33
Section 10.7 Governing Law; Jurisdiction; Service of Process 33
Section 10.8 No Waiver 34
Section 10.9 Payments by Wire Transfer 34
Section 10.10 Reproduction of Documents 35
Section 10.11 No Strict Construction 35
Section 10.12 Counterparts 35
Exhibits
Exhibit A Interim Servicing Agreement
Exhibit B Private Investor Subservicing Agreement
Exhibit C GNMA Subservicing Agreement
Exhibit D Guaranty
Exhibit E Transfer Instructions
Exhibit F Opinion of Seller's Counsel
Exhibit G Opinion of Purchaser's Counsel
Schedules
Schedule 2.2(b) Purchase Price Schedule
Schedule 3.1(g) Seller's 1996 Audited Financial Statements
Schedule 3.1(j) Litigation
Schedule 3.1(l)(1) Mortgage Loan Schedule
GO Portfolio Mortgage Loans
B Portfolio Mortgage Loans
Schedule 3.1(l)(2) Pool Schedule
Subserviced GNMA Pool Schedule
Schedule 3.1(l)(3) Servicing Agreement Schedule
Schedule 3.2(k) Condemnation; Forfeiture
Schedule 3.2(l) Servicing/Insurance and Certification
Exceptions
Schedule 3.2(m) Exception Loans
Schedule 3.2(n) Investor Repurchase and Indemnification
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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