UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to _______________________
Commission file number 0-18945
WESTMARK GROUP HOLDINGS, INC.
(name of small business issuer in its charter)
DELAWARE 84-1055077
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
8000 No. FEDERAL HIGHWAY
BOCA RATON, FLORIDA 33487
(Address of principal executive offices)(Zip Code)
(561) 526-3300
(Issuer's telephone number, including area code)
---------------------
Check whether the issuer (1) 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 [XX] No [ ]
The number of shares outstanding of each of the registrant's classes of common
stock, as of September 30, 1999: 3,447,426 (one class).
Transitional Small Business Disclosure Format: Yes [ ] No [XX]
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WESTMARK GROUP HOLDINGS, INC.
FORM 10-QSB REPORT INDEX
10-QSB Part and Item No.
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Part I-Financial Information
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Item 1. Financial Statements (Unaudited)
Consolidated balance sheets as of
September 30, 1999 and December 31, 1998...........................3
Consolidated statements of operations
for the three months and nine months ended September 30, 1999
and 1998...........................................................4
Consolidated statements of cash flows for the nine
months ended September 30, 1999 and 1998...........................5
Condensed notes to consolidated financial statements........................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................7
Part II-Other Information
Item 1. Legal Proceedings..........................................................11
Item 2. Changes in Securities......................................................12
Item 3. Defaults Upon Senior Securities............................................12
Item 4. Submission of Matters to a Vote of Security Holders........................12
Item 5. Other Information..........................................................12
Item 6. Exhibits and Reports on Form 8-K...........................................12
Signatures...................................................................................13
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ITEM 1. Financial Statements
--------------------
Westmark Group Holdings, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, 1999 with comparative figures for December 31, 1998
UNAUDITED
ASSETS 1999 1998
------
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Current assets:
Cash and cash equivalents $ 7,929,504 $7,111,373
Accounts receivable 5,265,835 1,259,252
Mortgage loans held for sale 44,779,906 21,741,557
Deferred tax asset 1,275,000 1,275,000
------------------- -----------------
Total current assets 59,250,245 31,387,182
Property and equipment, net 830,871 578,382
Investments in preferred stock 76,528 349,028
Property and Notes Held for Sale, net 820,801 211,500
Investments in real estate 150,000 300,000
Other assets 540,753 315,982
------------------- -----------------
Total assets $61,669,198 $33,142,074
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Warehouse lines of credit $57,177,904 $29,006,951
Notes payable and capital leases 366,890 304,525
Settlements payable 180,399 309,746
Accounts payable 409,880 723,765
Accrued liabilities 483,571 221,775
Income taxes payable - 32,000
Dividends payable 33,803 17,500
------------------- -----------------
Total current liabilities 58,652,447 30,616,262
------------------- -----------------
Long-term portion of debt and capital lease obligations - 39,749
------------------- -----------------
Stockholders' Equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 417,154
(150,005 at December 31, 1998) shares issued and outstanding;
stated at liquidation value 1,256,510 600,010
Common stock, $0.005 par value, 15,000,000 shares authorized,
3,447,426 (3,315,824 at December 31, 1998) shares issued and outstanding 17,236 16,579
Additional paid-in capital 29,622,370 29,293,091
Treasury Stock (58,173 shares at cost) (333,333) -
Deficit (27,296,032) (27,173,617)
Stock subscription receivable (250,000) (250,000)
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Total stockholders' equity 3,016,751 2,486,063
------------------- -----------------
Total liabilities and stockholders' equity $61,669,198 $33,142,074
=================== =================
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See accompanying condensed notes to consolidated financial statements.
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Westmark Group Holdings, Inc. and Subsidiary
Consolidated Statements of Operations
For the three months and nine months ended September 30, 1999 and 1998
UNAUDITED
Three Months Ended Nine Months Ended
------------------------------------- ----------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
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Revenues:
Gain on sale of loans $4,462,014 $4,209,187 $11,811,460 $9,803,193
Loan origination fees 649,942 294,103 1,686,862 1,173,728
Interest income 1,123,754 642,646 2,594,706 1,306,142
Other income 97,676 41,172 342,653 74,670
--------------- --------------- ---------------- ---------------
6,333,386 5,187,108 16,435,681 12,357,733
--------------- --------------- ---------------- ---------------
Costs and Expenses:
Direct loan fees 1,700,673 1,345,083 3,369,171 2,369,259
Interest expense 994,489 606,288 2,090,421 1,356,381
General and administrative 3,834,728 2,719,752 10,836,969 7,152,798
Depreciation and amortization 22,098 43,576 85,232 129,211
--------------- --------------- ---------------- ---------------
6,551,988 4,714,699 16,381,793 11,007,649
--------------- --------------- ---------------- ---------------
Income (loss) from operations (218,602) 472,409 53,888 1,350,084
--------------- --------------- ---------------- ---------------
Other Income (Expense):
Dividend income - 35,000 - 105,000
Provision for impairment in value of
investment in real estate (150,000) - (150,000) -
--------------- --------------- ---------------- ---------------
Income (loss) before taxes (368,602) 507,409 (96,112) 1,455,084
Income tax expense - 177,593 - 509,279
--------------- --------------- ---------------- ---------------
Tax benefit of net operating loss carryforward - (177,593) - (509,279)
--------------- --------------- ---------------- ---------------
Net income (loss) $(368,602) $ 507,409 $ (96,112) $1,455,084
=============== =============== ================ ===============
Earnings (Loss) Per Common Share:
Basic $ (0.12) $ 0.17 $ (0.04) $ 0.52
=============== =============== ================ ===============
Diluted $ (0.12) $ 0.10 $ (0.04) $ 0.30
=============== =============== ================ ===============
Weighted Average Shares Outstanding:
Basic 3,340,601 2,915,225 3,325,295 2,783,998
=============== =============== ================ ===============
Diluted 3,530,675 5,218,609 3,515,369 4,916,886
=============== =============== ================ ===============
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See accompanying condensed notes to consolidated financial statements.
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Westmark Group Holdings, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1999 and 1998
UNAUDITED
1999 1998
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Cash Flows from Operating Activites:
Net income (loss) $ (96,112) $1,455,084
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 85,232 49,960
Amortization - 74,187
Common stock issued for services 12,000 237,500
Changes in operating assets and liabilities:
Impairment in value of investment in real estate 150,000 -
(Increase) decrease in:
Accounts receivable (4,006,583) -
Mortgage loans held for sale (23,038,349) (11,061,093)
Other assets (224,771) (245,306)
Increase (decrease) in:
Accounts payable (329,582) 60,352
Accrued liabilities 261,796 (33,370)
Settlements payable (129,347) (452,177)
Warehouse lines of credit 28,170,953 10,732,642
---------------- ---------------
Net cash provided by operating activities 855,237 817,779
---------------- ---------------
Cash Flows from Investing Activities:
Purchases of property and equipment (337,721) (451,191)
Investment in property and notes held for sale (609,301) -
---------------- ---------------
Net cash used by investing activities (947,022) (451,191)
---------------- ---------------
Cash Flows from Financing Activities:
Proceeds from sale of preferred stock 974,436 306,144
Preferred dividends (26,303) -
Proceeds from sale of common stock - 600,000
Purchase of common stock for treasury (60,833) -
Proceeds from line of credit 100,000 -
Payments on notes payable and capital leases (77,384) (951,407)
---------------- ---------------
Net cash provided (used) by financing activities 909,916 (45,263)
---------------- ---------------
Net Increase in Cash and Cash Equivalents 818,131 321,325
Cash and Cash Equivalents, Beginning 7,111,373 100,010
---------------- ---------------
Cash and Cash Equivalents, Ending $7,929,504 $ 421,335
================ ===============
Supplemental Disclosures:
Cash paid for interest $1,896,391
================
Capital leases $ 39,749
================
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See accompanying condensed notes to consolidated financial statements.
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Westmark Group Holdings, Inc. and subsidiary
Condensed Consolidated Notes to Financial Statements
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310b of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine and three month periods ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999. For further information, refer to
the consolidated financial statements and footnotes related thereto included in
the Company's audited annual report on Form 10-KSB for the year ended December
31, 1998.
NOTE 2: FINANCING ACTIVITY
The Company has secured warehouse lines of credit on favorable terms
from the following institutions:
Household Financial Services, Inc. $40 million
Princap Mortgage Warehouse, Inc. $10 million
Great Eastern Funding $10 million
Provident Bank $10 million
National Mortgage Warehouse $10 million
All warehouse lines of credit are one year renewable contracts and
there can be no assurance that they will renew or renew on similar terms.
Warehouse lines totaling $31.5 million, which are not included in the above
table, did not renew in the first three quarters of 1999 due to lenders changing
their lending policies to exclude sub-prime business.
NOTE 3: EARNINGS PER SHARE
The Company provides for the calculation of basic and diluted earnings
per share. Basic earnings per share include only common stock outstanding during
the period. Diluted earnings per share assumes exercising warrants and options
granted that are "In the Money" and convertible preferred stock and convertible
debt. Earnings per share is computed by dividing income available to common
stockholders by the basic weighted average number of common shares and income
available to all stock holders by the diluted weighted average number of common
shares. For the nine months ended September 30, 1999, diluted loss per share has
not been adjusted for the anti dilutive effect of preferred stock dividends,
warrants, options, convertible debt and convertible preferred stock.
NOTE 4: RELATED PARTY
Effective September 30, 1999, Medical Industries of America, Inc., now
known as Cyber-Care, Inc., required the Company to repurchase $333,333 of the
Company's common stock at $5.73 per share because diluted earnings per share, as
defined in an exchange agreement dated September 30, 1998 between the Company
and Cyber-Care, did not equal or exceed $.45 per diluted share for the six
months ended June 30, 1999. The Company used $272,500 of Cyber-Care preferred
stock that it owned as partial consideration in the transaction. Additionally,
the Company has agreed to repurchase $333,333 of its common stock owned by
Cyber-Care at $5.73 per share if diluted earnings per share do not equal or
exceed $0.55 per share for the six months ending December 31, 1999.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
This Quarterly Report on Form 10-QSB contains forward-looking
statements. For this purpose, any statements contained in it that are not
statements of historical fact should be regarded as forward-looking statements.
For example, the words "believes," "anticipates," "plans," and "expects" are
intended to identify forward-looking statements. There are a number of important
factors that could cause the Company's actual results to differ materially from
those indicated by such forward-looking statements. These factors include those
shown in the company's 1998 Annual Report on Form 10-KSB under the caption
"Certain Factors That May Affect Future Results."
The following discussion of the Company's results of operations and
financial condition should be read together with the Company's condensed
consolidated unaudited Financial Statements contained in Part I, Item 1 and the
related Notes in this Form 10-QSB, and the company's audited Financial
Statements and the related Notes contained in the Company's audited Financial
Statements contained in the Company's 1998 Annual Report on Form 10-KSB.
General
- -------
Westmark Mortgage Corporation, the Company's wholly-owned subsidiary,
is a mortgage banking company engaged in the business of funding, purchasing and
selling mortgage loans secured primarily by one-to-four family residences. The
Company operates in 34 states and has operating offices in Boca Raton, Florida;
Santa Ana, California; Chicago, Illinois area; and, Atlanta, Georgia area. In
1999, the Company began a "Retail Operation" which has three South Florida
locations and deals directly with borrowers, to compliment its "Wholesale
Operation", which deals through mortgage brokers. The Company primarily
generates income from (i) gains recognized from premiums on loans sold to
institutional purchasers, (ii) investment income earned on loans held for sale,
and (iii) origination fees and related revenue received as part of loan
closings. Gain on sale of loans, which represents the sales price in excess of
loan acquisition costs from whole loan sales, constituted 72% and 79% of total
revenues for the nine months ended September 30, 1999 and 1998, respectively,
and 70% and 81% of total revenues for the three months ended September 30, 1999
and 1998, respectively. Investment income earned on loans held for sale
constituted 16% and 11% of total revenues for the nine months ended September
30, 1999 and 1998, respectively, and 18% and 12% of total revenues for the three
months ended September 30, 1999 and 1998, respectively. Loan origination fees
and related revenue represented 10% and 9% of total revenues for the nine months
ended September 30, 1999 and 1998, respectively, and 10% and 6% of total
revenues for the three months ended September 30, 1999 and 1998, respectively.
The Company sells most of the loans it funds, generally within 30 to 60
days of origination. The loans are sold through purchase agreements with
Household Financial Services, Conseco Finance Servicing Corporation, Bay
Financial, Associates Home Equity Services, Inc., BancOne Financial Services,
Inc., GMAC/Residential Funding Corporation, and various other non-conforming
mortgage conduits. These agreements are for specific terms or are open ended,
and require the loans to satisfy the underwriting criteria described therein.
The Company sold loans totaling $302.2 million and $190.5 million during the
nine months ended September 30, 1999 and 1998, respectively, and $115.6 million
and $80.8 million during the three months ended September 30, 1999 and 1998,
respectively. The Company does not retain the servicing rights for any of the
loans it sells, and sells all loans primarily in whole loan sales. The gain on
sale of loans was $11,811,460 and $9,803,193 for the nine months ended September
30, 1999 and 1998, respectively; and $4,462,014 and $4,209,187 for the three
months ended September 30, 1999 and 1998, respectively.
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Loans held for sale were comprised of all sub-prime loans at September
30, 1999 and 1998. At the time the Company commits to fund a loan, the interest
rate is locked for the individual loan transaction. Until the Company obtains a
commitment to sell the loan to an investor, the Company is subject to
interest-rate fluctuations.
Investment income earned on loans held for sale is derived primarily
from interest payments on loans in inventory. Loans generally carry a note rate
in excess of the Company's borrowing cost. This results in a positive revenue
differential between cost to borrow (at the time the loan funds) and the loan
sale. Management's strategy is to sell those loans in whole loan sales and in
bulk sales as quickly as practicable in order to optimize cash flow from the
sale of the loans. In addition, the Company realizes revenue from loan
origination fees and certain loan discount fees.
The Company assigns credit grades to its sub-prime loans during the underwriting
process. These grades range from "A+" to "D". At September 30, 1999, the credit
grades assigned to mortgage loans held for sale was approximately 75% "A+", "A"
and "A-", 16% "B", 8% "C", and 1% "D". About 55% of these loans were adjustable
rate mortgages and 45% were fixed rate. The weighted average interest rate of
these loans was approximately 10.7%.
Underwriting
- ------------
All home equity loans are underwritten to the Company's mortgage
underwriting guidelines. The underwriting process is intended to assess both the
prospective borrower's ability to repay the loan and the adequacy of the real
property security as collateral for the loan. In the origination process,
typically, the loan application is taken by the approved broker/correspondent
using the basic application (FNMA Form 1003) and the credit report ordered by
the originating office. The Form 1003 and credit report are forwarded via Toll
Free fax to the Boca Raton, Florida, Santa Ana, California, Schaumberg, Illinois
or Kennesaw, Georgia offices. Westmark underwriters grade the credit report and
determine acceptability within program guidelines and a preliminary
approval/pre-qualification is faxed back to the originator. Approvals are
usually generated within a 24-hour period and closing occurs within days.
Account executives rely on pagers, fax machines, cellular phones and overnight
delivery to be in contact with corporate headquarters at all times. The
underwriting standards involve the following:
o the borrower's ability to repay is analyzed by verifying income
via traditional methods, i.e., self-employed borrowers are asked
to supply copies of Federal Income Tax Returns and waged borrowers
supply copies of W-2 forms and paystubs. In instances where
"stated income" is used, lower loan to value ratios are offered,
and verification of the source of the income is obtained (copies
of business license, phone verification of employment, and/or bank
statements);
o loan to value ratios are adjusted to reflect the condition of the
borrower's recent credit history. The greater and more recent the
derogatory items are, the more equity the borrower is required to
maintain in the property;
o the property being offered as security for the loan is appraised
by a state licensed appraiser. The appraisal report is carefully
reviewed by Westmark's staff underwriter to ensure that the loan
is sufficiently secured. If there is a question about the quality
of the appraisal, a review from another appraiser is obtained.
Larger loan sizes require two full independent appraisal reports;
8
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o on purchase transactions, the borrower's cash down payment is
verified as to amount and source to ensure that they have
legitimate equity in the property and on refinances, the length of
time of ownership is verified, using FNMA guidelines in this area;
o and, on a case-by-case basis, after review and approval by the
Company's underwriters, home equity loans may be made which vary
from the underwriting guidelines if approved by a senior
underwriter or by an executive officer of the Company.
In summary, Westmark carefully analyzes each borrower's income, credit
and equity. The loan to value ratio reflects the risk associated with each
borrower's situation. These steps are taken to ensure each loan's quality and
performance.
See Condensed Notes to Consolidated Financial Statements of the Company
(included in Item 1) for further discussion of accounting policies and other
significant items.
Results of Operations
- ---------------------
Nine months and three months ended September 30, 1999 compared to nine
months and three months ended September 30, 1998:
Total revenues increased 33% and 22% to $16,435,681 and $6,333,386 in
the nine months and three months ended September 30, 1999 compared with
$12,357,733 and $5,187,108 in the nine months and three months ended September
30, 1998. This increase was primarily due to the Company's increased ability to
acquire and sell non-conforming mortgages, offset by a reduction in the premium
spread received as described below.
Gain on sale of loans, all of which was derived from premiums on whole
loan sales, increased 20% and 6% to $11,811,460 and $4,462,014 compared with
$9,803,193 and $4,209,187 for the nine months and three months ended September
30, 1999 and 1998, respectively. The volume of non-conforming loans sold was
approximately $302.2 and $190.5 million compared with $115.6 and $80.8 million
for the nine months and three months ended September 30, 1999 and 1998,
respectively. This is an increase of 58% and 43% for the nine and three months
ended September 30, 1999 as compared to the nine and three months ended
September 30, 1998, respectively. This increase was the result of increased
sales volume due to the implementation of management's strategy to increase the
volume of originating and selling loans, offset by a reduction in the premium
spread received, discussed below.
In October and November 1998 industry wide margins on the sale of loans
and the rate of growth in whole loan sales were both reduced. This resulted in
an industry wide reduction of premiums on whole loan sales of approximately 30%
due to many investors deciding to invest in more liquid securities with higher
yields. At the same time several investors who historically had acquired
mortgage loans for resale in credit enhanced and non-enhanced packages went out
of business or lost their funding sources. Since this October 1998 correction,
margins have begun to stabilize and the Company has been able to continue
growing. This is due primarily to certain investors the Company has developed
long-term relationships with, who purchase a significant majority of the
Company's mortgages, buying mortgages to hold for investment rather than resale.
As a result of this investment approach the investors are less concerned with
liquidity and are again purchasing the Company's loans in the same or greater
quantities as during 1998, although at premium reductions of 35% and 32% for the
nine months and three months ended September 30, 1999 compared to 1998.
Loan origination fees increased 44% and 121% to $1,686,862 and $649,942
compared to $1,173,728 and $294,103 for the nine months and three months ended
September 30, 1999 and 1998, respectively. This increase is primarily due to
increased loan volume, management adjusting the wholesale loan origination
pricing structure to provide for an increase in per loan origination fees, and a
higher fee structure on retail loans.
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Investment income, comprised primarily of interest earned on loans held
for sale, increased 99% and 75% to $2,594,706 and $1,123,754 compared to
$1,306,142 and $642,646 for the nine and three months ended September 30, 1999
and 1998, respectively. This increase is due primarily to more loan production
in 1999 as compared to 1998.
Total operating expenses increased 49% and 39% to $16,381,793 and
$6,551,988 compared to $11,007,649 and $4,714,699 for the nine months and three
months ended September 30, 1999 and 1998, respectively. This increase is
primarily due to (i) an increase in direct loan fees, (ii) an increase in
interest expense and, (iii) an increase in general and administrative expenses.
Direct loan fee expenses increased 42% and 26% to $3,369,171 and
$1,700,673 compared to $2,369,259 and $1,345,083 for the nine months and three
months ended September 30, 1999 and 1998, respectively, due primarily to the
increase in loan volume, higher fees paid on increased correspondent loan
purchases and increased loan processing fees charged by the Company's warehouse
lenders.
Interest expense increased 54% and 64% to $2,090,421 and $994,489
compared to $1,356,381 and $606,288 for the nine months and three months ended
September 30, 1999 and 1998, respectively, due primarily to the increased volume
of whole loan originations and correspondent loan purchases.
General and administrative expense increased 52% and 41% to $10,836,969
and $3,834,728 compared to $7,152,798 and $2,719,752 for the nine months and
three months ended September 30, 1999 and 1998, respectively, due primarily to
increased personnel costs necessary to implement management's strategy to
increase loan volumes and provide additional staff for future growth. Personnel
cost increased 42% to $7,037,540 for the nine months ended September 30, 1999
compared to $4,960,900 for the nine months ended September 30, 1998. The balance
of the increase in general and administrative expense was primarily attributable
to increases in rent, office supplies, telephones, and overnight deliveries.
Depreciation and amortization expenses decreased to $85,232 and $22,098
compared to $129,211 and $43,576 for the nine and three months ended September
30, 1999 and 1998, respectively, primarily due to reduced amortization expense
as a result of fully amortizing in 1998 assets acquired, offset by increased
depreciation on purchases of computer hardware and software, and leasehold
improvements.
The Company had a net loss of $96,112 and $368,602 compared to a net
income of $1,455,084 and $507,409 for the nine months and three months ended
September 30, 1999 and 1998, respectively. The decrease in net income in 1999
compared to 1998 was the result of the following:
o increased warehouse interest expense as a result of prime increasing
and the retirement of LIBOR based lines;
o staffing up for expected fourth quarter levels of production;
o reduced premium spread received; and
o the net realizable value writedown of "Investment in Real Estate" by
$150,000 to reflect the Company's current evaluation of facts and
circumstances.
Liquidity and Capital Resources
- -------------------------------
The Company uses its cash flow from whole loan sales, loan origination
fees, net interest income and borrowings under its warehouse lines of credit to
meet its working capital needs. The Company's cash requirements include the
funding of loan originations, purchases, payment of interest expenses,
operations expenses, taxes and capital expenditures.
10
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On September 30, 1999, total stockholders equity was $3,016,751,
working capital was $597,798 and the net loss was $96,112 for the nine months
ended September 30, 1999. Adequate credit facilities and other sources of
funding, including the ability of the Company to sell loans, are essential to
the continuation of the Company's ability to originate and purchase loans. The
Company borrows funds on a short- term basis to support the accumulation of
loans prior to sale. These short-term borrowings are made under warehouse lines
of credit with various lenders as described in note 2 to the condensed
consolidated financial statements. Pursuant to the warehouse lines of credit,
the Company has available total secured revolving credit lines of $80 million to
finance the Company's origination or purchase of loans, pending sale to
investors. The warehouse lines of credit are collateralized by the assignment
and pledge of eligible mortgage loans. The various warehouse lines of credit
bear interest at annual rates ranging from prime plus 1 to prime plus 2%,
payable at the time of purchase by the permanent investor. The warehouse lines
of credit provide for a transaction charge from $100 per loan to as low as $25
per loan and require the Company to possess a minimum net worth of $2.5 million,
a current ratio of 1.1 and a compensating cash balance on deposit in the amount
of $5,000 under the more restrictive covenants. On September 30, 1999, the
balance outstanding, pursuant to the warehouse lines of credit, totaled
$57,177,904. In April 1999, the Company obtained a working capital line of
credit for $150,000 with Northern Trust Bank, of which $100,000 has been used
and is outstanding as of September 30, 1999.
Pursuant to an exchange agreement dated September 30, 1998 between the
Company and Medical Industries of America, Inc., now known as Cyber-Care, Inc.,
the Company has agreed to repurchase $333,333 of its common stock owned by
Cyber-Care at $5.73 per share if diluted earnings per share do not equal or
exceed $0.55 per share for the six months ending December 31, 1999. The Company
anticipates that it will be required to make this repurchase based on its
earnings for the first nine months of 1999. The Company expects to have
sufficient funds available from operations to make the repurchase payment.
Year 2000 Compliance
- --------------------
Computer-based systems that utilize two digits rather than four digits
to define the applicable year may fail to properly recognize date sensitive
information when the year changes to 2000. The Company has completed a
comprehensive review of its computer-based systems to determine if they will be
affected by resulting Year 2000 related compliance issues, that is whether those
systems have Year 2000 related "computer bugs." This review has revealed no
material Year 2000 related compliance issues, primarily because the Company has
developed or purchased most of its computer hardware and software systems within
the last four years. Therefore, it does not expect to be affected by Year 2000
issues because very few of the Company's computer-based systems were installed
before the Y2K problem was recognized. We do not expect to incur Year 2000
compliance related costs that would be material to us. The Company is asking for
confirmation from outside vendors, financial institutions and others that they
are Year 2000 compliant or that they are developing and implementing plans to
become Year 2000 compliant. However, there is no assurance that these outside
vendors, financial institutions and others will timely resolve their own Year
2000 compliance issues or that any such failure would not have an adverse effect
on the Company. The Company has completed contingency plans to assure the
continuation of its operations if these outside vendors, financial institutions
or others fail to timely resolve their own Year 2000 compliance issues. The
Company believes it is devoting the necessary resources to timely address all
Year 2000 compliance issues over which we have control.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
The Company was named as a respondent in Ted BRISTOW and Gary PHILLIPPE
VS. GREEN WORLD TECHNOLOGIES, INC., MEDICAL INDUSTRIES OF AMERICA, INC., and
WESTMARK GROUP HOLDINGS, INC., Case #74-160-00629-99, filed with the American
Arbitration Association in California on May 10, 1999. The claimants were
employed by Green World Technologies, Inc., a former affiliate of the Company.
The claimants were terminated by Green World Technologies, Inc. in August of
1997. The claimants allege that they are entitled to severance compensation from
the Company as a result of their employment termination. The Company filed a
complaint in the Circuit Court of Palm Beach County, Florida on June 24, 1999,
Case #CL 99-6201 AO, seeking a judicial determination that the Company is not
bound to arbitrate this matter. The Circuit Court has denied BRISTOW's and
PHILLIPPE's motion to dismiss them from the Circuit Court action for lack of
jurisdiction. The parties have since stipulated to a permanent stay of the
arbitration proceedings against the Company. In a separate action, the United
States District Court for the Eastern District of California has denied
PHILLIPPE's and BRISTOW's motion to compel the Company to submit to arbitration
and granted the Company's motion to dismiss the Company for lack of personal
jurisdiction.
The Company does not believe that any of these pending legal
proceedings and those reported in its 1998 Annual Report on Form 10-KSB and in
its Quarterly Reports on Form 10-QSB for the periods ending March 31, 1999 and
June 30, 1999, individually or in the aggregate, will materially impact the
company's financial condition or results of operations. From time to time, the
company is a party to routine litigation incidental to its business. Management
does not believe that the resolution of any or all of such routine litigation is
likely to have a material adverse effect on the Company's financial condition or
results of operations.
11
<PAGE>
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-------------------------------------------------
In November 1999, the Company completed a private placement in which it
sold a total of 367,147 shares of Series H Preferred Stock and warrants to
purchase 367,147 shares of the Company's common stock. These figures include the
263,977 shares of preferred stock and warrants to purchase 263,977 shares of
common stock which were sold in the initial closing of the private placement in
June 1999, as previously reported in the Company's quarterly report for the
period ending June 30, 1999 on Form 10-QSB. Each share of preferred stock has a
liquidation preference of $3.15 per share, is convertible into one share of
common stock, and is entitled to a cumulative dividend of 10% per year. Each
warrant is exercisable at $3.75 per share into one share of common stock at the
election of the holder. The warrants expire on May 31, 2004. The securities were
sold to "accredited investors" as that term is defined in Regulation D of the
Securities Act of 1933. After payment of $115,650 in commissions, placement
agent expenses of $28,913 and legal fees of $37,502 the Company received net
proceeds of approximately $974,436 from the private placement. The net proceeds
will be used for working capital and general corporate purposes. The exemption
the Company relied upon for the above transactions is Section 4(2) of the
Securities Act of 1933.
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
Exhibit Description
- ------- -----------
4.1 Series H Preferred Stock Designation.
10.1 Warehouse Loan and Security Agreement between the Company's
wholly-owned subsidiary, Westmark Mortgage Corporation and The
Provident Bank dated July 7, 1999.
10.2 Broker Origination Agreement between the Company's
wholly-owned subsidiary, Westmark Mortgage Corporation and WMC
Mortgage Corp. dated April 27, 1999.
10.3 Master Agreement for Purchase and Sale of Mortgage Loans
between the Company's wholly-owned subsidiary, Westmark
Mortgage Corporation and EquiCredit Corporation of America
dated June 9, 1999.
10.4 Addendum to the Master Agreement for Purchase and Sale of
Mortgage Loans between the Company's wholly-owned subsidiary,
Westmark Mortgage Corporation and EquiCredit Corporation of
America dated June 25, 1999.
10.5 Broker Agreement between the Company's wholly-owned
subsidiary, Westmark Mortgage Corporation and Chase Manhattan
Mortgage Corporation dated July 21, 1999.
10.6 Master Commitment between the Company's wholly-owned
subsidiary, Westmark Mortgage Corporation and Merrill Lynch
Credit Corporation dated April 14, 1999.
12
<PAGE>
10.7 Master Loan Purchase and Sale Agreement between the Company's
wholly-owned subsidiary, Westmark Mortgage Corporation and
Merrill Lynch Credit Corporation dated April 14, 1999.
10.8 Master Agreement for Sale and Purchase of Mortgage Loans
between the Company's wholly-owned subsidiary, Westmark
Mortgage Corporation and BankBoston, N.A. dated August 31,
1999.
10.9 Mortgage Broker Agreement between the Company's wholly-owned
subsidiary, Westmark Mortgage Corporation and First Franklin
Financial Corporation dated March 23, 1999.
10.10 Master Agreement for Sale and Purchase of Mortgages between
the Company's wholly-owned subsidiary, Westmark Mortgage
Corporation and Bay Financial Savings Bank, F.S.B. dated
February 12, 1999.
10.11 Amendment to Master Agreement for Sale and Purchase of
Mortgages between the Company's wholly-owned subsidiary,
Westmark Mortgage Corporation and Bay Financial Savings Bank,
F.S.B dated February 12, 1999.
27.1 Financial Data Schedule (for SEC use only).
(b) REPORTS ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WESTMARK GROUP HOLDINGS, INC.
By: /c/ Irving H. Bowen
-----------------------
Irving H. Bowen, Executive Vice President, Treasurer
& Chief Financial Officer, Director (Principal Accounting
Officer & Duly Authorized Director & Officer of the Registrant)
By: /c/ Mark D. Schaftlein
--------------------------
Mark D. Schaftlein, President & Chief Executive
Officer, Director (Duly Authorized Director & Officer
of the Registrant)
Dated: November 12, 1999
13
Exhibit 4.1
CERTIFICATE OF THE DESIGNATION
OF THE SERIES H CONVERTIBLE PREFERRED STOCK
OF WESTMARK GROUP HOLDINGS, INC.
----------
Pursuant to Title 8, Section 151 of the Delaware Code
----------
The undersigned, being the Secretary of Westmark Group Holdings, Inc.,
a Delaware corporation (hereinafter called the "Corporation"), does hereby
certify that at a meeting of the Board of Directors of the Corporation duly
held, pursuant to Title 8, Section 141 of the Delaware Code and the bylaws of
the Corporation, the following resolution was duly adopted:
RESOLVED that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board') by the
provisions of the Certificate of Incorporation of the Corporation, as amended,
the Board hereby creates a series of the preferred stock of the Corporation to
consist of 759,000 shares. The Board hereby fixes the designations, preferences
and relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the shares of such
series (in addition to the designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, set forth in the certificate of
incorporation of the Corporation which are applicable to the preferred stock of
all series) as follows:
a series of preferred stock to be known as "Series H
Convertible Preferred Stock," the number of shares
constituting Series H Convertible Preferred Stock shall be
759,000, par value $.001 per share.
The designations, powers, preferences and relative participating, optional or
other special rights, and the qualifications, limitations and restrictions
thereof in respect of the Series H Convertible Preferred Stock are as follows:
1. Dividends.
(a) The holders of each share of Series H Convertible
Preferred Stock shall be entitled to receive, before any dividends shall be
declared and paid upon or set aside for the Junior Stock (as defined in Section
9 hereof) in any year, commencing with the calendar year ending December 31,
1999, out of funds legally available for that purpose, dividends in cash (the
"Annual Dividend") at the annual rate per share equal to ten percent (10%) of
the Preferred Distribution Preference Per Share (as defined in Section 9 hereof)
as of the date of such declaration, payable when and as declared by the Board of
Directors of the Corporation (any such dividend payment date being hereinafter
referred to as a "Dividend Payment Date"). Annual Dividends on shares of Series
H Convertible Preferred Stock shall be cumulative (whether or not there shall be
net profits or net assets of the Corporation legally available for the payment
of such dividends), so that if at any time accrued Annual Dividends on the
Series H
<PAGE>
Convertible Preferred Stock shall not have been paid or declared and a sum
sufficient for payment thereof set apart, (i) no dividend shall be declared or
paid or any other distribution ordered or made upon any Junior Stock or any sum
or sums set aside for or applied to the purchase or redemption of any shares of
any stock; and (ii) no dividends shall be declared or paid to holders of shares
of stock ranking on parity with the Series H Convertible Preferred Stock, unless
the holders of each share of Series H Convertible Preferred Stock share ratably
in any such dividend declaration or payment up to the aggregate amount of any
accrued Annual Dividends.
2. VOTING RIGHTS. Except as otherwise required by law, the
shares of Series H Convertible Preferred Stock shall not be entitled to vote on
any matters presented at any annual or special meeting of the stockholders of
the Corporation or to be taken by written consent of the stockholders of the
Corporation.
3. REACQUIRED SHARES. Any shares of Series H Convertible
Preferred Stock converted, purchased or otherwise acquired by the corporation in
any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. None of such shares of Series H Convertible Preferred Stock
shall be reissued by the Corporation.
4. LIQUIDATION, DISSOLUTION OR WINDING UP.
---------------------------------------
(a) Upon the voluntary or involuntary dissolution,
liquidation or winding up (each, a "Liquidation") of the Corporation, the
holders of the shares of the Series H Convertible Preferred Stock shall be
entitled to receive and to be paid out of the assets of the Corporation
available for distribution to its stockholders, before any payment or
distribution shall be made on any Junior Stock ( and ratably with holders of
shares of stock ranking on parity with the Series H Convertible Preferred
Stock), the Preferred Distribution Preference Per Share (as defined in Section 9
hereof) plus all accrued Annual Dividends with respect to each outstanding share
of Series H Convertible Preferred Stock.
(b) If upon any such Liquidation, whether voluntary or
involuntary, the assets to be distributed to the holders of the Series H
Convertible Preferred Stock shall be insufficient to permit payment of the full
amount of the Preferred Distribution Preference Per Share plus all accrued
Annual Dividends with respect to each share of Series H Convertible Preferred
Stock, then the entire assets of the Corporation to be distributed among the
holders of the Series H Convertible Preferred Stock shall be distributed ratably
among such holders.
(c) Neither the consolidation, merger or other business
combination of the Corporation with or into any other Person or Persons nor the
sale of all or substantially all the assets of the Corporation shall be deemed
to be a Liquidation for purposes of this Section 4.
2
<PAGE>
5. CONVERSION.
-----------
(a) Subject to the adjustments provided for in Subsection
(c) of this Section 5, each share of Series H Convertible Preferred Stock shall
be convertible at any time at the election of the holder into Common Stock on a
one-for-one basis (the "Conversion Ratio").
(b) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Series H Convertible Preferred
Stock, free from any preemptive rights, such number of its authorized but
unissued shares of Common Stock as will from time to time be necessary to permit
the conversion of all outstanding shares of Series H Convertible Preferred Stock
into shares of Common Stock, and shall take all action required to increase the
authorized number of shares of Common Stock if necessary to permit the
conversion of all outstanding shares of Series H Convertible Preferred Stock.
(c) The Conversion Ratio will be subject to adjustment from
time to time as follows:
(i) In case the Corporation shall at any time or from
time to time after the date hereof (A) pay any dividend, or make any
distribution, on the outstanding shares of Common Stock in shares of Common
Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the
outstanding shares of Common Stock into a smaller number of shares or (D) issue
by reclassification of the shares of Common Stock any shares of capital stock of
the Corporation, then, and in each such case, the Conversion Ratio in effect
immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the holder of any shares of Series H
Convertible Preferred Stock thereafter convertible into Common Stock pursuant to
this Section Five shall be entitled to receive the number and type of shares of
Common Stock or other securities of the Corporation which such holder would have
owned or have been entitled to receive after the happening of any of the events
described above, had such shares of Series H Convertible Preferred Stock been
converted into Common Stock immediately prior to the happening of such event of
the record date therefor, whichever is earlier. An adjustment made pursuant to
this clause (i) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of such subdivision,
reclassification or combination, at the close of business on the day upon which
such corporate action becomes effective.
(ii) For purposes of this paragraph (c) of this
Section Five, the number of shares of Common Stock at any time outstanding shall
mean the aggregate of all shares of Common Stock then outstanding (other than
any shares of Common Stock then owned or held by or for the account of the
Corporation) treating for purposes of this calculation all securities
convertible into, or exchangeable or exercisable for, any shares of Common Stock
(collectively, "Common Stock Equivalents") as having been converted, exchanged
or exercised.
3
<PAGE>
(iii) If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution and shall thereafter, and before such dividend or
distribution is paid or delivered to stockholders entitled thereto, legally
abandon its plan to pay or deliver such dividend or distribution, then no
adjustment in the Conversion Ratio then in effect shall be made by reason of the
taking of such record, and any such adjustment previously made as a result of
the taking of such record shall be reversed.
(d) The issuance of certificates for shares of Common Stock
upon conversion of the Series H Convertible Preferred Stock, shall be made
without charge to the holders thereof for any issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Series H Convertible
Preferred Stock which is being converted.
(e) The Corporation will at no time close its transfer
books against the transfer of the Series H Convertible Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
the Series H Convertible Preferred Stock, in any manner which interferes with
the timely conversion of the Series H Convertible Preferred Stock, except as may
otherwise be required to comply with applicable securities laws.
(f) As used in this Section 5, the term "Common Stock"
shall mean the Corporation's authorized Common Stock, par value $.005 per share,
as constituted on the Filing Date (as defined below), and shall also include any
capital stock of any class of the Corporation thereafter authorized which shall
neither be limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends nor be entitled to a preference in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up the Corporation; provided that the shares of Common
Stock receivable upon conversion of shares of the Series H Convertible Preferred
Stock shall include only shares designated as Common Stock of the Corporation on
the Filing Date, or in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets to be issued in
exchange for such Common Stock pursuant thereto.
(g) In the case of a Sale of Corporation (as defined in
Section 9 below) or a proposed reorganization of the Corporation or a proposed
reclassification or recapitalization of the capital stock of the Corporation,
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to the rights
and interest thereafter of the holders of the Series H Convertible Preferred
Stock, to the end that the provisions set forth herein (including provisions
with respect to changes in and other adjustments of the applicable conversion
price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the conversion of the Series H Convertible Preferred Stock. The Corporation
shall not effect any
4
<PAGE>
such Sale of the Corporation unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to the holders of
the Series H Convertible Preferred Stock such shares of stock, securities or
assets as, in accordance with the foregoing provisions, each such holder is
entitled to receive.
(h) The Corporation will not, by amendment of its Articles
of Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series H Convertible Preferred Stock against impairment.
(i) Notwithstanding the foregoing, the Corporation shall
not be required to make any adjustment of the Conversion Ratio unless such
adjustment would require an increase or decrease of at least 1% in such ratio.
Any lesser adjustment shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least 1% in such ratio.
6. CERTAIN COVENANTS. Any registered holder of Series H
Convertible Preferred Stock may proceed to protect and enforce its rights and
the rights of any other holders of Series H Convertible Preferred Stock with any
and all remedies available at law or in equity.
7. PROTECTIVE PROVISIONS. So long as shares of Series H
Convertible Preferred Stock (or securities convertible into, or exchangeable or
exercisable for, shares of Series H Convertible Preferred Stock ("Series H
Equivalents")) are outstanding, the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Series H
Convertible Preferred Stock:
(a) alter or change the rights, preference or privileges of
the shares of Series H Convertible Preferred Stock or otherwise amend the
Corporation's Articles of Incorporation so as to affect adversely the shares of
Series H Convertible Preferred Stock; or
(b) increase the authorized number of shares of Series H
Convertible Preferred Stock; or
(c) create or designate, or authorize the issuance of, any
new class or series of stock (i) ranking senior or having a preference over, the
Series H Convertible Preferred Stock with respect to dividends or upon
liquidation, or (ii) convertible into any such class or series of stock.
5
<PAGE>
8. REDEMPTION.
-----------
(a) Outstanding shares of Series H Preferred Convertible Stock
are redeemable by the Corporation at a redemption price of $.01 per share, plus
all dividends accrued and unpaid up to the date fixed for redemption, provided
the Market Price of the Corporation's Common Stock has been at least 200% of the
Preferred Distribution Preference Per Share for a period of at least 30
consecutive trading days immediately prior to the date on which the Corporation
sends notice of redemption.
(b) If less than all shares of Series H Preferred Convertible
Stock are redeemed at any time under this Section 8, shares of Series H
Convertible Preferred Stock held by each holder of record thereof shall be
called for redemption pro rata, according to the number of shares of Series H
Convertible Preferred Stock held by such holder, subject, however, to such
adjustment as may be equitably determined by the Corporation in order to avoid
the redemption of fractional shares.
(c) Any such redemption shall be effected by written notice
given by mail, postage prepaid, not less than fifteen (15) days nor more than
thirty (30) days prior to the date fixed for redemption to the holders of record
of Series A Preferred Stock whose shares are to be redeemed at their respective
addresses as the same shall appear on the books of the Corporation. Each such
notice of redemption shall specify the date fixed for redemption, the redemption
price and place of payment in trust thereof, and if less than all outstanding
shares of Series H Convertible Preferred Stock are to be redeemed, the number of
shares of Series H Convertible Preferred Stock held by each holder of record
thereof which are being called for redemption. Any such notice mailed in the
manner provided herein shall be conclusively presumed to have been duly given in
accordance with the terms of this Designation, whether or not the holder
receives such notice. No failure to mail such notice nor any defect therein or
in the mailing thereof shall affect the validity of the proceedings for such
redemption except as to a holder whose name appears on the books of the
Corporation (i) to whom notice was not mailed or (ii) whose notice was
defective. An affidavit of the Secretary or Assistant Secretary of the
Corporation that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein. A holder of Series H
Convertible Preferred Stock may, at its sole option, convert the Series H
Convertible Preferred Stock called for redemption at any time up to one business
day prior to the date fixed for redemption. Any such conversion shall be made in
accordance with Section 5hereof.
(i) Notice of redemption having been duly given, then
on the date for such redemption, the certificates for the Series H
Convertible Preferred Stock called for redemption (whether or not
surrendered) shall be deemed no longer outstanding for any purpose, and
all rights with respect to such shares shall thereupon cease and
terminate,
6
<PAGE>
except the right of the holders of such shares to receive, out of the
deposit in trust, on the redemption date, the redemption price to
which they are entitled, without interest.
(ii) In case any certificate for shares of Series H
Convertible Preferred Stock shall be surrendered by the holder thereof
for payment in connection with the redemption of only a portion of the
shares represented thereby, the Corporation shall deliver to or upon
the order of the holder thereof a certificate or certificates for the
number of shares of Series H Convertible Preferred Stock represented by
such surrendered certificate which are not being redeemed.
9. DEFINITIONS. In addition to any other terms defined herein,
for purposes of this Certificate of Designation, the following terms shall have
the meanings indicated:
"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the Florida are authorized or
obligated by law or executive order to close.
"Commission" shall mean the Securities and Exchange
Commission, and any successor agency.
"Conversion Ratio" determined as of any date, shall equal the
number of shares of Common Stock into which one share of Series H Convertible
Preferred Stock is convertible pursuant to Section 5 of this Certificate of
Designation.
"Distribution" shall mean the transfer of cash or property to
the holders of a class of capital stock of the Corporation, without
consideration, whether by way of dividend or otherwise (except a dividend in
shares of such class of stock), or the purchase or redemption of shares of the
Corporation, for cash or property, including such transfer, purchase or
redemption by a subsidiary of the Corporation. The time of any distribution by
way of dividends shall be the date of declaration thereof, and the time of any
distribution by purchase or redemption of shares shall be the date on which cash
or property is transferred by the Corporation, whether or not pursuant to a
contract of an earlier date; PROVIDED that, where a debt security is issued in
exchange for shares, the time of the distribution is the date when the
Corporation acquires the shares for such exchange.
"Junior Stock" shall mean any capital stock of the Corporation
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series H Convertible Preferred Stock, and shall include,
without limitation, the Corporation's Common Stock and Series G Convertible
Exchangeable Preferred Stock.
"Market Price" shall mean the closing bid price regular way
or, in case no such price is reported on such day, the average of the closing
bid and asked prices regular way, on the principal national securities exchange
in the United States on which the Corporation's common
7
<PAGE>
stock is listed or admitted to trading, including Nasdaq SmallCap, or if it is
not listed or admitted to trading on any such national securities exchange, the
average of the highest reported bid and lowest reported asked price as furnished
by the National Association of Securities Dealers, Inc. through its automated
quotation system ("Nasdaq") or a similar organization if Nasdaq is no longer
reporting such information.
"Preferred Distribution Preference Per Share" shall mean
$3.15.
"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Sale of the Corporation" shall mean consolidation or merger
of the Corporation with or into any other corporation or corporations (other
than a consolidation or merger in which the Corporation is the continuing
corporation), or a sale, conveyance or disposition of all or substantially all
of the assets of the Corporation or the effectuation by the Corporation of a
transaction or series of related transactions in which more than fifty (50%)
percent of the voting power of the Corporation is disposed of.
IN WITNESS WHEREOF, the undersigned, as Secretary of the Corporation,
certifies that the foregoing Amendment was duly adopted in accordance with
Section 242 of the Delaware General Corporation Law, and the Corporation has
caused its corporate seal to be affixed hereto, all as of the 24th day of May
1999.
Westmark Group Holdings, Inc.
By: /s/ Mark D. Schaftlein
----------------------------------
Name: MARK D. SCHAFTLEIN
Title: President and CEO
8
Exhibit 10.1
WAREHOUSE LOAN AND SECURITY AGREEMENT
-------------------------------------
This Warehouse Loan and Security Agreement ("Agreement") is made and
entered into on this 7th day of July between Westmark Mortgage Corporation, a
__________ corporation with its principal place of business located at 8000 N.
Federal Highway, Boca Raton, FL 33487 ("Borrower"), and The Provident Bank, an
Ohio banking corporation with its principal place of business located at One
East Fourth Street, Cincinnati, Ohio 45202 ("Provident").
WITNESSETH:
-----------
WHEREAS, Borrower is engaged in the business of underwriting,
processing, originating, closing, funding, purchasing, servicing and selling
mortgage loans secured by first or second liens evidenced by mortgages on real
property; and
WHEREAS, Borrower has requested and Provident has agreed to finance the
funding of mortgage loans by Borrower in connection with its origination thereof
subject to the terms, conditions and limitations set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the extension of
credit by Provident to Borrower, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Provident and Borrower
agree as follows:
1. DEFINITIONS. (a) When used in this Agreement, the following terms
shall have the following meanings and the terms defined elsewhere in this
Agreement shall have the meanings assigned to them (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ADVANCE" shall mean any mount loaned by Provident to
Borrower under this Agreement.
"AFFILIATE" shall mean, in relation to any Person (in this
definition called "Affiliated Person"), any Person (i) which (directly or
indirectly) controls or is controlled by or is under common control with such
Affiliated Person; or (ii) which (directly or indirectly) owns or holds five
percent (5%) or more of any equity interest in Borrower; or (iii) five percent
(5%) or more of whose voting stock or other equity interest is directly or
indirectly owned or held by Borrower. For the purposes of this definition, the
term "control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession (directly or indirectly) of the power to direct or to cause the
direction of the management or the policies of such Person, whether through the
ownership of shares of any class in the capital or any other voting securities
of such Person or by contract or otherwise.
"ASSIGNMENT OF MORTGAGE" shall mean, with respect to any
Mortgage, an assignment of the Mortgage, notice of transfer or equivalent
immanent, in recordable form, sufficient under the laws of the jurisdiction in
which the related Mortgaged Property is located to reflect the assignment of the
Mortgage.
"BUSINESS DAY" shall mean a day other than Saturdays, Sundays,
holidays or other days on which the main office of Provident is not open for
business.
<PAGE>
"CASH COLLATERAL ACCOUNT" shall mean the demand deposit
account comprising a portion of the Collateral and established and maintained by
Borrower with Provident pursuant to Section 5(d).
"CHANGE OF CONTROL" shall mean the time at which (i) any
Person (including a Person's Affiliates and associates) or group (as that term
is understood under Section 13(d) of the Securities Exchange Act of 1934 and the
rules and regulations thereunder), other than Management Shareholders and
Affiliates thereof (the "Control Group") or a group controlled by the Control
Group, has become the beneficial owner of a percentage (based on voting power,
in the event different classes of stock shall have different voting powers) of
the voting stock of Borrower equal to at least ten percent (10%), (ii) there
shall be consummated any consolidation or merger of Borrower pursuant to which
Borrower's common stock (or other capital stock) would be converted into cash,
securities or other property, other than a merger or consolidation of Borrower
in which the holders of such common stock (or such other capital stock)
immediately prior to the merger have the same proportionate ownership, directly
or indirectly, of common stock of the surviving corporation immediately after
the merger as they had of Borrowers common stock immediately prior to such
merger, or (iii) all or substantially all of Borrowers assets shall be sold,
leased, conveyed or otherwise disposed of as an entirety or substantially as an
entirety to any Person (including an Affiliate or associate of Borrower) in one
or a series of transactions.
"CLOSING DATE" shall mean the date on which Borrower sells,
transfers or otherwise disposes of a Mortgage Loan funded and originated by
Borrower with an Advance made by Provident to Borrower under this Agreement.
"COLLATERAL" shall have the meaning set forth in Section 5(a).
"COLLECTIONS" shall mean, collectively, all Sale Proceeds, all
Payment Collections and all other collections and Proceeds on or in respect of
the Mortgage Loans.
"COST AND FEE SCHEDULE" shall have the meaning set forth in
Section 2(f).
"CREDIT FILE" shall mean, as to each Mortgage Loan, a copy of
the Mortgage and copies of all intervening assignments of mortgage, if any, with
evidence of recording thereon, showing a complete chain of title from the
originator to Borrower; the original attorney's opinion of title or the original
policy of title insurance, if not previously delivered to Provident; the
originals of all assumption, modification and extension agreements, if any; and
all applications, credit reports, salary or employment verifications,
appraisals, surveys, other underwriting and work papers, closing statements,
HUD-1 settlement statements and any addendums thereto, math-in-lending
disclosures, right of rescission notices, payment histories, and all other
closing documents and all other agreements, reports, certificates, documents and
instruments related hereto or obtained or prepared in connection therewith and
included or includable in Borrower's mortgage file relating to such Mortgage
Loan.
"DEFAULT INTEREST RATE" shall mean an annual rate of interest
which shall (to the extent permitted by applicable law) at all times be equal to
four percent (4%) above the Interest Rate.
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"DEMAND FOR PAYMENT" shall have the meaning set forth in
Section 4(a).
"DOCUMENT CUSTODIAN" shall mean Borrower, as custodian and
bailee for Provident, or any successor appointed by Provident at any time.
"FEES" shall have the meaning set forth in Section 2(f).
"FUNDING DATE" shall mean the date on which an Advance is made
by Provident to Borrower under this Agreement.
"INITIAL COLLATERAL PACKAGE" shall mean, as to each Mortgage
Loan: (i) the original Mortgage Note and the originals of all intervening
endorsements, if any, showing a complete chain of title from the originator of
the Mortgage Loan to Borrower, endorsed in blank (either on the Mortgage Note or
a separate allonge attached thereto); (ii) a certified copy of the original
Mortgage and copies of all intervening assignments oft he Mortgage, if any;
(iii) the original Assignment of Mortgage in favor of Provident in recordable
form for the jurisdiction in which the Mortgaged Property is located; and (iv)
the original attorney's opinion of title or the original policy of title
insurance (or if such original policy of title insurance has not yet been
received by Borrower, a copy of such policy or a title insurance binder or
commitment for the issuance of such policy).
"INTEREST RATE" shall mean an annual ram of interest which
shall (to the extent permitted by applicable law) at all times be equal to the
Prime Rate plus the applicable margin determined by reference to the factors
applicable to such determination set forth in the Cost and Fee Schedule in
effect on an Interest Payment Date or Closing Date, as the case may be.
"LIEN" shall mean any lien, mortgage, pledge, security
interest, charge or other encumbrance of any kind including any conditional sale
or other title retention agreement, any lease in the nature thereof; and any
agreement to give any security interest.
"LOAN DOCUMENTS" shall mean this Agreement, the Security
Documents, the Policies and Procedures, the Cost and Fee Schedule and any other
instrument, certificate or document executed in connection with or pursuant to
this Agreement whether concurrently herewith or subsequent hereto.
"LOSSES" shall have the meaning set forth in Section 1 l(b).
"MANAGEMENT SHAREHOLDERS" shall mean those shareholders of
Borrower who are senior executive officers of Borrower on the date of this
Agreement.
"MATURITY DATE" shall have the meaning set forth in
Section 4(b).
"MORTGAGE" shall mean the mortgage, deed of trust or other
instrument creating a first or second Lien on an estate in fee simple interest
in the Mortgaged Property securing a Mortgage Loan.
"MORTGAGE LOAN" shall mean any mortgage loan funded and
originated by Borrower with any Advance made by Provident to Borrower under this
Agreement.
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"MORTGAGE LOAN DOCUMENTS" shall mean, with respect to a
Mortgage Loan, the documents comprising the Initial Collateral Package and the
Credit File for such Mortgage Loan.
"MORTGAGE NOTE" shall mean, with respect to a Mortgage Loan,
the original note or other evidence of indebtedness pursuant to which the
related Mortgagor agrees to pay the indebtedness evidenced thereby and which is
secured by the related Mortgage.
"MORTGAGED PROPERTY" shall mean the underlying real property,
including all improvements and additions thereon, securing a Mortgage Loan.
"MORTGAGOR" shall mean the obligor or obligors under a
Mortgage Note.
"OTHER OBLIGATIONS SECURED HEREBY" shall mean all of
Borrower's debts, obligations or liabilities of every kind, nature, class and
description to Provident (other than those under this Agreement and the other
Loan Documents), now due or to become due, direct or indirect, absolute or
contingent, presently existing or hereafter arising, joint or several, secured
or unsecured, purchase money or non-purchase money, related or unrelated,
similar or dissimilar, whether for payment or performance, regardless of how the
same arise or by what instrument, agreement or book account they may be
evidenced, or whether evidenced by any instrument, agreement or book account,
including, without limitation, all loans (including any loan by renewal or
extension), and all overdrafts, all guarantees, all bankers acceptances, all
agreements, all letters of credit issued by Provident for Borrower and the
applications relating thereto, all indebtedness of Borrower to Provident, all
undertakings to take or refrain from taking any action, and all indebtedness,
liabilities and obligations owing from Borrower to others which Provident may
obtain by purchase, negotiation, discount, assignment or otherwise.
"PAYMENT COLLECTIONS" shall mean, collectively, all
collections on the Mortgage Loans attributed to the payment of the principal
amount thereof; accrued interest thereon or any fees, charges or other amounts
payable thereunder or in respect thereof.
"PERSON" shall mean an individual, a company, a limited
liability company, a corporation, an association, a partnership, a joint
venture, an unincorporated trade or business enterprise, a trust, an estate, or
other legal entity or a government (national, regional or local), court,,
arbitrator or any agency, instrumentality or official of the foregoing.
"PRIME RATE" shall mean the rate of interest published from
time to time in the "Money Rates" column of THE WALL STREET JOURNAL (Central
Edition) as the "prime rate" or, if such rate ceases to be so published, then
such other rate as may be substituted by Provident as the prime rate, which may
be the rate of interest announced by Provident from time to time as its prime
rate. The Prime Rate shall change on each date the prime rate so published
changes.
"POLICIES AND PROCEDURES" shall mean Provident's Policies and
Procedures for its Warehouse Division as of the date of this Agreement, as
amended, modified, restated or supplemented by Provident from time to time.
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"SALE PROCEEDS" shall mean (i) any proceeds received or
receivable by Borrower with respect to or in respect of any sale, transfer or
other disposition of any Mortgage Loan and (ii) any proceeds received or
receivable by Borrower with respect to or in respect of any sale, transfer,
disposition, condemnation or casualty event and all other amounts from any
disposition, taking, damage or destruction of any Mortgaged Property acquired by
Borrower upon foreclosure (or deed in lieu of foreclosure) of any Mortgage Loan.
"SECURITY DOCUMENTS" shall have the meaning set forth in
Section 5(b).
"THIRD PARTY INVESTOR" shall mean any Person with whom
Borrower has contracted to sell any Mortgage Loan that has been funded and
originated by Borrower with any Advance made by Provident to Borrower under this
Agreement. Provident may itself be a Third Party Investor.
"UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of Ohio; PROVIDED, HOWEVER, that in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, or priority of Provident's security interest in any of
the Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Ohio, the term "UCC" shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such attachment, perfection, or priority and for
purposes of definitions related to such provisions.
(b) All terms defined in the UCC and used in Section 5 of this
Agreement shall have the meanings assigned to such terms in the UCC.
(c) Where appropriate, words importing the singular only shall
include the plural and vice versa.
2. ADVANCES.
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(a) Subject to the terms and conditions hereof and the
Policies and Procedures, which are hereby incorporated herein by this reference,
Provident may elect, in its sole discretion, to make Advances to Borrower from
time to time in such amounts as Borrower may request. Nothing herein shall be
deemed or construed as a commitment by Provident to make any Advance hereunder
and it is expressly acknowledged and agreed by Borrower that the decision to
make any Advance hereunder is, and shall at all times be, wholly discretionary
on the part of Provident.
(b) In order to obtain Advances, Borrower shall comply with
the requirements set forth in this Agreement and the Policies and Procedures and
shall furnish Provident with such requests and all other documents Provident may
request or require at any time in connection with any Advance. In addition, the
following conditions precedent, unless waived in whole or in part by Provident,
shall be satisfied before Provident makes any Advance hereunder. (i) Provident,
in its sole discretion, shall have approved the underwriting of the Mortgage
Loans to be funded with any Advance; (ii) Borrower shall have provided Provident
with an insured closing letter, evidence of a current errors and omissions
insurance policy with limits of at least $1,000,000, an executed closing agent
agreement and wiring instructions for each closing agent used by Borrower to
close the Mortgage Loans funded with any Advance, each of which shall be
acceptable to Provident in its sole discretion; (iii) Borrower shall have
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furnished Provident with an executed, recordable Power of Attorney covering the
items set forth in Section 5(e) hereof for each state in which Borrower does
business; and (iv) Provident, or its agent, bailee or designee, shall have
received the Initial Collateral Package for each of the Mortgage Loans funded
with any Advance. Each request for an Advance by Borrower shall constitute a
certification that each of the representations and warranties made by Borrower
to Provident in this Agreement or the other Loan Document shall be true and
correct in all material respects on and as of the date when made and shall, for
all purposes of this Agreement, be deemed to be repeated on and as of each date
an Advance is made by Provident to Borrower hereunder and shall be made and
correct in all material respects on and as of each of such date, except as
affected by the consummation of the transactions contemplated by this Agreement
and the other Loan Documents, and Borrower shall have performed, complied with
and observed all of its covenants and agreements contained in this Agreement and
the other Loan Documents on and as of each date an Advance is made by Provident
to Borrower hereunder.
(c) Advances hereunder will be made by Provident on behalf of
Borrower to third parties in connection with the funding of the Mortgage Loans
originated by Borrower. All matters relating to the funding of any Mortgage Loan
hereunder shall be acceptable to Provident in its sole discretion.
(d) Borrower represents, warrants and covenants to Provident
that all proceeds of all Advances shall be used by it solely to fund Mortgage
Loans originated by Borrower in the ordinary course of its business and for no
other use or purpose.
(e) Advances for the funding of any Mortgage Loan originated
by Borrower shall not exceed one hundred percent (100%) of the original
principal mount of such Mortgage Loan.
(f) In connection with each Advance, Borrower agrees to pay
Provident the transaction fees charged by Provident with respect to the Mortgage
Loans funded and originated with such Advance ("Fees"). The amounts of Fees
payable by Borrower in connection with any Advance shall be determined by
reference to the Cost and Fee Schedule in effect on the Funding Date of such
Advance (the "Cost and Fee Schedule"). The Cost and Fee Schedule in effect on
the date of this Agreement is attached hereto as Schedule A. Any Cost and Fee
Schedule shall remain in effect until a new Cost and Fee Schedule is delivered
to Borrower in accordance with the requirements of Section 11(f).
3. INTEREST PAYABLE ON ADVANCES. Borrower promises to pay to Provident
interest in arrears on the unpaid amount of each Advance made by Provident to
Borrower pursuant to this Agreement and on the unpaid amount of any interest not
paid when due at a variable rate of interest per annum equal at all times to the
Interest Rate. Interest shall be calculated on the daily unpaid amount of each
Advance from its Funding Date. Interest with respect to each Advance hereunder
shall be payable: (i) commencing on the date that is sixty-one (61) days after
the Funding Date of the Advance and continuing on the same day of each
consecutive month thereafter; and (ii) on its Maturity Date. Payments of
interest shall be due and payable as set forth above until payment in full of
all Advances. All interest under this Agreement shall be calculated on the basis
of a year consisting of 360 days (comprised of twelve 30 day months) and paid
for actual days elapsed.
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4. TERMINATION; MANDATORY REPAYMENTS OF ADVANCES PRIOR TO
------------------------------------------------------
TERMINATION
-----------
(a) Provident may, at any time, for any reason and without
prior notice, terminate this Agreement and demand that Borrower pay the
aggregate unpaid amount of all Advances made by Provident to Borrower pursuant
to this Agreement, all accrued and unpaid interest thereon as well as all Fees,
charges and other amounts payable hereunder and under the Loan Documents
("Demand For Payment").
Following a Demand for Payment, the aggregate unpaid
amount of all Advances made by Provident to Borrower pursuant to this Agreement,
together with all accrued and unpaid interest thereon as well as all Fees,
charges and other amounts payable hereunder and under the other Loan Documents
shall be immediately due and payable in full and no future or additional
Advances will be made by Provident to Borrower hereunder.
(b) Prior to termination of this Agreement as provided for
above, Borrower shall repay to Provident the unpaid amount of each Advance made
by Provident to Borrower hereunder, all accrued and unpaid interest thereon and
all Fees, charges and other amounts payable hereunder, on the earlier to occur
of: (i) the Closing Date on which Borrower sells or otherwise disposes of the
Mortgage Loan(s) funded and originated with the Advance whether by sale to a
Third Party Investor or otherwise; or (ii) on or before the applicable number of
days after its Funding Date set forth in the Cost and Fee Schedule under the
heading entitled "Days Allowed for Purchase by Third Party Investor" (the
earlier to occur of (i) or (ii) being referred to herein as the "Maturity
Date").
5. GRANT OF SECURITY INTEREST.
---------------------------
(a) To secure the prompt payment of the Advances, interest and
all other amounts payable hereunder and under the other Loan Documents and the
due and punctual performance and observance by Borrower of all of its other
covenants, obligations and liabilities under this Agreement and the other Loan
Documents and also to secure all of the other Obligations Secured Hereby,
Borrower hereby grants to Provident a security interest in and to, and hereby
pledges and collaterally assigns to Provident, all of its rights, title,
interest and claims in, to and under all of the following property, wherever
located, whether now or hereafter owned, held or acquired, or hereafter existing
or arising (collectively, the "Collateral"):
(i) all Mortgage Loans;
(ii) all Mortgage Loan Documents including, without
limitation, all Mortgage Notes, Mortgages and Assignments of Mortgages relating
to the Mortgage Loans;
(iii) all rights to service or subservice the
Mortgage Loans;
(iv) all certificates, notes and other securities of
any kind whatsoever, residual or otherwise, issued to Borrower or now or
hereafter owned, held or acquired by Borrower in connection with or related to
any mortgage loan securitization or any asset-back transaction involving the
Mortgage Loans;
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(v) all of Borrower's rights under contracts or
agreements to which Borrower is party (but none of its covenants, obligations or
liabilities thereunder) in connection with the Mortgage Loans, including all
contracts or agreements with all Third Party Investors and all attorney's
opinions of title and title insurance policies;
(vi) the Cash Collateral Account and all funds in the
Cash Collateral Account; and
(vii) all Proceeds of any and all of the foregoing
Collateral in whatever form, including but not limited to, all payments made by
Mortgagors to Borrower in connection with the Mortgage Loans and all premiums
paid to Borrower by Third Party Investors in connection with the sales of the
Mortgage Loans.
(b) Borrower shall take all actions necessary or appropriate
under all applicable laws, or as requested by Provident, to perfect, maintain
and preserve, and to continue as perfected, Provident's first lien and security
interest in the Collateral. Borrower shall pay all costs of preparing, recording
and filing UCC Financing Statements (and any continuation or termination
statements with respect thereto) and any other documents, titles, statements,
assignments or the like reasonably required to create, maintain, preserve or
perfect the. liens or security interests granted under the Loan Documents,
together with costs and expenses of any lien or UCC searches required by
Provident in connection with the making of any Advance. At Provident's request,
Borrower shall execute and deliver to Provident at any time and from time to
time hereafter, all supplemental documentation that Provident may reasonably
request to perfect, maintain, preserve or continue the security interest and
liens in the Collateral granted Provident hereby and under any of the other Loan
Documents (collectively, the "Security Documents"), in form and substance
acceptable to Lender, and pay the costs of preparing and recording or filing of
the same. Borrower agrees that a carbon, photographic, or other reproduction of
this Agreement or of a financing statement is sufficient as a financing
statement. Borrower shall promptly notify Provident concerning any changes in
its name, identity or structure, concerning any changes in the address(es) of
its chief executive office or other places of business or concerning any changes
in its trade name(s) or name(s) under which it does business.
(c) The Document Custodian shall maintain possession of each
Credit File and the Mortgage Loan Documents comprising each Credit File (other
than the Initial Collateral Package) for each Mortgage Loan. Promptly after
Provident's request therefor, Borrower, at its expense, shall cause the Credit
Files held by the Document Custodian to be delivered to Provident or its agent,
bailee or other designee.
(d) Borrower shall, at all times, maintain the Cash Collateral
Account with Provident. Borrower shall deposit or cause to be deposited all
Collections into the Cash Collateral Account when and as Collections are
received or receivable by Borrower. Withdrawals may be made from the Cash
Collateral Account by Borrower in accordance with the Policies and Procedures.
Provident is hereby authorized to withdraw funds from the Cash Collateral
Account from time to time, either before or after Provident's Demand for
Payment, and to apply such withdrawals to the payment of the Advances, accrued
and unpaid interest thereon and Fees, charges and other amounts payable
hereunder or under the other Loan Documents.
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(e) Borrower hereby makes, constitutes and appoints Provident
(by any of its officers, employees or agents), its true and lawful agent and
attorney-in-fact and hereby gives and grants to Provident full power and
authority to do and perform each and every act whatsoever requisite, necessary
and proper (i) to endorse the related Mortgage Note to the Third Party Investor
that purchases any Mortgage Loan; (ii) to endorse any original Mortgage Note to
Provident or the purchaser thereof should Borrower default in its obligations
hereunder; (iii) to prepare, execute and record on behalf of Borrower any
Assignment of Mortgage; (iv) at the sole option of Provident, to prosecute, in
Borrower's or Provident's name, any and all claims or causes of action
collaterally assigned to Provident hereunder; and (v) to do and perform every
act necessary to place Provident in position to enforce the payment of any
Mortgage Loan.
6. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Provident as follows as of the date hereof and as of each Funding
Date:
(a) Borrower is and shall at all times be, duly organized,
validly existing and in good standing under the laws of the State set forth in
the first paragraph of this Agreement and has, and shall at all times have, full
power and authority and legal right to engage in and carry on Borrower's
business as now being conducted, to undertake the borrowings contemplated hereby
and to execute and deliver each of the Loan Documents. Borrower is qualified and
licensed in each jurisdiction wherein the nature or conduct of its business make
such qualification necessary or advisable. Borrower is currently qualified and
licensed in good standing in each such jurisdiction. Borrower's name as set
forth in the caption of this Agreement and as set forth on the signature page of
this Agreement is Borrower's correct individual, partnership or corporate name,
as the case may be.
(b) Borrower has full power and authority and legal right to
enter into this Agreement and each of the other Loan Documents, and to perform,
observe and comply with all of its agreements and obligations under each of such
documents, including without limitation, the making by Borrower of the
borrowings contemplated hereby and the granting by Borrower of the security
interest in the Collateral pursuant to Section 5.
(c) The execution and delivery by Borrower of this Agreement
and the other Loan Documents, the performance by Borrower of all of its
agreements and obligations hereunder and thereunder and the making by Borrower
of the borrowings contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of Borrower and do not and will not
constitute a breach, violation or event of default (or an event which would
become an event of default with the lapse of time or notice or both) under any
judgment, decree, note, agreement, indenture or other instrument to which
Borrower is a party or otherwise subject.
(d) Borrower owns or possesses all rights, licenses, permits,
franchises and the like necessary for the conduct of its business as presently
conducted and proposed to be conducted. All of the foregoing rights, licenses,
permits and franchises are in full force and effect, and Borrower is in
compliance with all of the foregoing. No event has occurred which permits, or
after notice or lapse of time or both would permit, the revocation or
termination of any such right, license, permit or franchise, or affects the
rights of Borrower thereunder.
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(e) The balance sheets, statements of income and other
financial statements previously delivered to Provident present fairly the
financial condition and results of operations of Borrower as of the dates
thereof and for the fiscal periods then ended. There are no material liabilities
or obligations, secured and unsecured (whether accrued, absolute or actual,
contingent or otherwise), which were not reflected in the balance sheets of
Borrower as of the dates thereof.
(f) No changes have occurred in the assets, liabilities or
financial condition of Borrower from those reflected on the most recent balance
sheet delivered to Provident (the "Current Balance Sheet") which, individually
or in the aggregate, have been adverse. Since the date of the Current Balance
Sheet, there has been no adverse development in the business or in the
operations or prospects of Borrower.
(g) Borrower is the sole owner of and has good and marketable
title to the Collateral, free and clear of all Liens and encumbrances
whatsoever, except for the security interest granted by Borrower pursuant to
Section 5. All information furnished to Provident concerning the Collateral is
and will be complete, accurate and correct in all o respects when furnished.
7. COVENANTS REGARDING THE BORROWER. Borrower covenants and agrees with
Provident as follows:
(a) Borrower shall deliver to Provident as soon as available
and, in any event, within thirty (30) days after the end of each calendar
quarter, quarterly unaudited financial statements of Borrower and within
seventy-five (75) days after the end of each fiscal year of Borrower, annual
financial statements of Borrower which, in each case, shall include a balance
sheet, statement of income, statement of changes in financial position and notes
to financial statements. Provident reserves the right to require Borrower to
deliver audited annual financial statements.
Such financial statements shall be certified by the chief
executive officer of Borrower to the effect that such financial statements
reflect, in his opinion and in the opinion of senior management of Borrower, all
adjustments necessary to present fairly the financial position of Borrower as at
the end of such quarter or year, as the case may be, and the results of its
operations for the period then ended.
(b) Borrower shall deliver to Provident all information
Provident may reasonably request at any time and from time to time concerning
its business, financial condition, results of operations, the Mortgage Loans
financed hereunder or the other Collateral.
(c) Borrower covenants to keep the Credit File for each of the
Mortgage Loans financed hereunder at all times at Borrower's business premises
or at such other location or locations as Provident may approve in writing.
Borrower further covenants to deliver the Credit File(s) to Provident upon
demand by Provident, which demand may be made in Provident's sole and absolute
discretion.
(d) Borrower shall pay or cause to be paid all taxes,
assessments and other governmental charges imposed upon its properties or assets
or in respect of any of its franchises, business, income or profits before any
penalty or interest accrues thereon, and all
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claims (including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
might become due and payable and which by law have or might become a lien or
charge upon any of its properties or assets, provided that (unless any material
item of property would be lost, forfeited or materially damaged as a result
thereof) no such charge or claim need be paid if the amount, applicability or
validity thereof is currently being contested in good faith and if such reserve
or other appropriate provision, if any, as shall be required by generally
accepted accounting principles shall have been made therefor.
(e) At any time or times during Borrowers usual business
hours, Borrower shall permit Provident by any of its officers, employees or
agents) to enter upon Borrower's business premises for any of the following
reasons: (i) to inspect the Collateral and any books or records related thereto
(including making copies of and extracts therefrom), (ii) to verify the amount,
quality, quantity, value or condition of, or any other matter relating to, the
Collateral, (iii) to examine all of the other books and records of Borrower
(including making copies of and extracts therefrom), including those relating to
its tax records, payroll records and insurance records, and (iv) to discuss the
business, financial condition or results of operations with any of Borrower's
officers, employees, agents or accountants. Borrower covenants to pay Provident
a reasonable audit fee and reimburse Provident for its out-of-pocket expenses
for all inspections, audits and examinations conducted by Provident other than
regular monthly audits.
(f) Borrower covenants to comply with all federal, state and
local laws, rules, regulations and orders applicable to it and its business.
(g) Borrower agrees to notify Provident in writing within
fifteen (15) calendar days of any proposed Change of Control or any proposed, or
completed, change in the executive management of Borrower, including, but not
limited to, any management change in the office of president, or any change in
the management of Borrower's underwriting department. Borrower further agrees to
notify Provident in writing at least thirty (30) days in advance of any change
in the location of its principal place of business or of any proposed change in
the name of Borrower or the opening or closing of any office.
(h) Borrower shall not at any time create, assume, incur or
permit to exist, any Lien or other encumbrance in respect of any of the
Collateral.
(i) Borrower agrees to give Provident prompt notice of any
development, financial or otherwise, which would materially adversely affect its
business, properties or affairs or the ability of Borrower to perform its
obligations under this Agreement.
8. COVENANTS REGARDING THE MORTGAGE LOANS. Borrower further covenants
and agrees with Provident as follows with respect to each Mortgage Loan to be
financed by Provident hereunder.
(a) As of its Funding Date, the Initial Collateral Package and
Credit File relating to the Mortgage Loan shall contain each of the documents
and instruments specified herein to be included therein.
(b) The related Mortgage shall be a valid and enforceable
first or second Lien of record on the Mortgaged Property subject, in the case of
any second Mortgage Loan,
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only to a first Lien on such Mortgaged Property and subject in all cases to the
exceptions to title set forth in the title insurance policy or attorney's
opinion of title with respect to the related Mortgage Loan, which exceptions
shall be acceptable to Provident.
(c) Borrower shall hold good, marketable and indefeasible
title to, and be the sole owner and holder of, the Mortgage Loan subject to no
Liens or rights of others.
(d) The Mortgage Loan shall not be subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
nor shall the operation of any of the terms of the Mortgage Note or Mortgage, or
the exercise of any right thereunder, render either the Mortgage Note or the
Mortgage unenforceable in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense shall have
been asserted with respect thereto.
(e) The Mortgage Loan shall comply with, and shall at all
times be serviced in compliance with, in all material respects, applicable state
and federal laws and regulations, including, without limitation, usury, equal
credit opportunity, consumer credit, truth-in-lending and disclosure laws.
(f) With respect to the Mortgage Loan, either (i) a lender's
title insurance policy, issued in standard American Land Title Association or
California Land Title Association form, or other form acceptable in the
particular jurisdiction, by a title insurance company authorized to transact
business in the state in which the related Mortgaged Property is situated,
together with a condominium endorsement, if applicable, in an amount at least
equal to the original principal balance of such Mortgage Loan insuring the
mortgagee's interest under the related Mortgage Loan as the holder of a valid
first or second mortgage Lien of record on the Mortgaged Property described in
the Mortgage, subject only to the exceptions of the character referred to in
subsection (b) above, shall be valid and in full force and effect on the Funding
Date of the origination of such Mortgage Loan or (ii) an attorney's opinion of
title shall be prepared in connection with the origination of such Mortgage
Loan. Such mortgage title insurance policy or attorney's opinion of title shall
be issued in favor of Borrower and its successors and assigns. Borrower shall,
by act or omission, not have done anything that would impair the coverage of
such mortgage title insurance policy or attorney's opinion of title.
(g) The Mortgage Note and the related Mortgage shall have been
duly and properly executed, constitute the legal, valid and binding obligation
of the related Mortgagor and shall be enforceable in accordance with their
respective terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law), and all
parties to the Mortgage Loan shall have had full legal capacity to execute all
Mortgage Loan Documents and to convey thc, estate therein purported to be
conveyed.
(h) The terms of the Mortgage Note and thc Mortgage shall not
have been or be impaired, altered or modified in any material respect, except by
a written instrument which shall have been recorded or is in the process of
being recorded, if necessary, to protect the interests of Borrower therein. The
original Mortgage shall be recorded, and all subsequent assignments of the
original Mortgage shall be recorded in the appropriate jurisdictions wherein
such recordation is necessary to perfect the Lien thereof as against creditors
of Borrower.
12
<PAGE>
(i) No instrument of release or waiver shall have been
executed in connection with the Mortgage Loan, and no Mortgagor shall have been
released therefrom, in whole or in part.
(j) The proceeds of the Mortgage Loan shall have been fully
disbursed, and there shall be no obligation on the part of Borrower to make any
future advances thereunder. All costs, fees and expenses incurred in making or
closing or recording of the Mortgage Loan shall have been paid in full.
(k) The Mortgage Note shall not be secured by any collateral,
pledged account or other security except the lien of the corresponding Mortgage.
(l) There shall be no obligation on the part of Borrower or
any other Person to make payments in respect of the Mortgage Loan in addition to
those to be made by the Mortgagor.
(m) All parties which have had any interest in the Mortgage
Loan, whether as originator, mortgagee, assignee, pledgee, servicer or
otherwise, are (or, during the period in which they held and disposed of such
interest, were) (1) in compliance with any and all applicable licensing
requirements of the laws of the state wherein the Mortgaged Property is located,
and (2)(A) organized under the laws of such state, or (B) qualified to do
business in such state, or (C) federal savings and loan associations or national
banks having principal offices in such state, or (D) not doing business in such
state so as to require qualification or licensing.
(n) The Mortgage shall contain customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the Mortgaged Property of the benefits of the
security, including, (i) in the case of a Mortgage designated as a deed of
trust, by trustee's sale, and (ii) otherwise by judicial or non-judicial
foreclosure.
(o) To the best of Borrower's knowledge, there shall not exist
any circumstances or conditions with respect to the Mortgage Loan, the Mortgaged
Property, the Mortgagor or the Mortgagors credit standing that could be
reasonably expected to materially adversely affect the value or marketability of
the Mortgage Loan.
(p) Each of the documents and instruments included in the
Credit File shall have been duly executed and in due and proper form and each
such document or instrument shall be in a form generally acceptable to prudent
institutional mortgage lenders that regularly originate or purchase mortgage
loans.
(q) The Borrower shall be in possession of the complete Credit
File and there shall be no custodial agreements in effect adversely affecting
the right or ability of Borrower to make the document deliveries required
hereby.
(r) The Mortgage property shall not be damaged by fire, wind
or other cause or loss and there shall not be any condemnation proceedings
pending. To the best knowledge
13
<PAGE>
of Borrower, no improvement on any Mortgage property is in violation of any
applicable zoning law or regulation.
(s) All signatures, names and addresses, amounts and other
statements of fact, including descriptions of the property, appearing on the
credit application and other related documents relating to each Mortgage Loan
shall be true and correct and the Mortgagors named thereon will be, as of the
date of each such document upon which signatures appear, of majority age, and
will have the legal capacity to enter into the Mortgage.
(t) Borrower will have reviewed all of the Mortgage Loan
Documents, and all the related documents thereto, and will make such inquiries
as it deems necessary to make and confirm the accuracy of the representations
set forth herein and throughout this Agreement.
(u) Each Mortgage Loan which Borrower warrants is insured by a
private mortgage insurance company shall be so insured.
9. SALES OF MORTGAGE LOANS AND OTHER COLLATERAL. Until Provident shall
have made a Demand for Payment, Borrower shah be entitled to sell the Mortgage
Loans financed hereunder and the other Collateral in the ordinary course of
Borrower's business, but nothing herein shall be deemed to waive or release
Provident's security interest in any Proceeds of any Collateral. Upon the sale
of any Mortgage Loan financed hereunder, Borrower shall pay to Provident on its
Closing Date, the unpaid amount of the Advance with respect to such Mortgage
Loan, all accrued and unpaid interest thereon through and including such Closing
Date and all Fees, charges and other amounts payable hereunder. The sales of
Mortgage Loans to Third Party Investors shall be handled in accordance with the
requirements set forth in the Policies and Procedures. In addition, Borrower
agrees that Provident shall have the right, in its sole discretion, to (i)
impose additional requirements regarding the delivery of Mortgage Loan Documents
to any Third Party Investor; and (ii) return wire transfers received in
connection with the sale of any Mortgage Loan to the originating bank if such
wire transfer does not comply with the Policies and Procedures.
10. REMEDIES.
---------
(a) After a Demand for Payment shall have been made by
Provident, all amounts owed to Provident hereunder shall thereupon be
immediately due and payable and no additional or future Advances will be made by
Provident to Borrower hereunder.
(b) From and after any Demand For Payment, Provident shall, in
addition to its other rights and remedies under applicable law, have the rights
and remedies of a secured party under the Uniform Commercial Code with respect
to the Collateral and all other security pursuant to any other Security
Documents between Provident and Borrower. In addition, Provident or its agents
or representatives may take possession of the Collateral and sell the same. For
such purpose, Provident may enter upon the premises where the Collateral shall
be located and remove the same to such other place as Provident shall determine.
Borrower shall immediately, upon Provident's demand, make the Credit Files
available to Provident at Provident's place of business.
14
<PAGE>
(c) Any such taking of possession by Provident shall not
affect Provident's right, which hereby is confirmed, to retain all payments made
prior thereto by Borrower, and in the event of such taking of possession,
Provident may sell the Collateral at a public or private sale or any other
commercially reasonable manner permitted by law. The proceeds of any such sale
or other disposition shall be applied first to the actual and reasonable costs
of such sale, then to the actual and reasonable costs of retaking possession and
storage of such Collateral and then to the satisfaction of the unpaid balance of
the Advances. In the event the proceeds of any such sale are not sufficient to
pay such expenses and to satisfy all mounts due by acceleration or otherwise
with respect to all Advances made pursuant hereto, Borrower shall pay to
Provident any deficiency existing. Provident will give Borrower reasonable
notice of the time and place of any public sale of the Collateral or of the time
after which any private sales or other intended disposition thereof is to be
made. Borrower agrees that the requirement of reasonable notice shall be met if
such notice is mailed, postage prepaid, to the address of the Borrower listed in
Section 11(f) at least 10 days prior to the time of such sale or disposition.
Borrower further agrees and acknowledges that: (i) the Collateral is customarily
sold in a recognized market; (h) Borrower regularly sells and Provident
regularly purchases mortgage loans similar to the Collateral; and (iii)
Provident may be the purchaser of the Collateral either in a public or private
sale.
(d) From and after any Demand For Payment, Borrower shall pay,
in addition to interest on funds actually advanced, all costs incurred by
Provident in enforcing Provident's rights hereunder, including those incurred in
bankruptcy proceedings, expenses of locating the Collateral, all Costs and
expenses actually incurred by Provident in connection with examination,
preservation and protection of the Collateral, examination of the Borrower's
books and records otherwise in connection with the financing pursuant hereto and
reasonable attorney's fees and legal expenses.
(e) If any payment of interest under Section 3 or principal or
interest under Section 4 is not paid when due whether by demand or otherwise,
the unpaid amount of all Advances and all accrued and unpaid interest thereon as
well as any other charges and other amounts due Provident hereunder or under any
Loan Document shall bear interest, at Provident's option, at the Default
Interest Rate from the date on which such late payment shall have first become
due and payable to Provident. Interest will continue to accrue until the
obligations in respect of the payment are discharged (whether before or after
judgment).
(f) The rights and remedies of Provident hereunder shall be
cumulative and shall be in addition to every other right or remedy available to
Provident under applicable law.
11. GENERAL PROVISIONS.
-------------------
(a) Borrower absolutely and unconditionally agrees to pay to
Provident upon demand by Provident at any time and as often as the occasion
therefor may require, whether or not all or any of the transactions contemplated
by any of the Loan Documents are ultimately consummated (i) all reasonable
out-of-pocket costs and expenses which shall at any time be incurred or
sustained by Provident or any of its directors, officers, employees or agents as
a consequence of, on account of, in relation to or any way in connection with
the preparation, negotiation, execution and delivery of the Loan Documents and
the perfection and continuation of the rights of Provident in connection with
the Advances, as well as the preparation, negotiation, execution, or delivery or
in connection with the amendment or modification of any of the Loan Documents or
as a consequence of, on account of, in relation to or any way in connection with
the granting by Provident of any consents, approvals or waivers under any of
15
<PAGE>
the Loan Documents including, but not limited to, reasonable attorneys' fees and
disbursements; and (ii) all reasonable out-of-pocket costs and expenses which
shall be incurred or sustained by Provident or any of its directors, officers,
employees or agents as a consequence of; on account of, in relation to or any
way in connection with the exercise, protection or enforcement (whether or not
suit is instituted) of any of its rights, remedies, powers or privileges under
any of the Loan Documents or in connection with any litigation, proceeding or
dispute in any respect related to any of the Loan Documents (including, but not
limited to, all of the reasonable fees and disbursements of consultants, legal
advisers, accountants, experts and agents for Provident, the reasonable travel
and living expenses away from home of employees, consultants, experts or agents
of Provident, and the reasonable fees of agents, consultants and experts not in
the full-time employ of Provident for services rendered on behalf of Provident).
(b) Borrower shall absolutely and unconditionally indemnify
and hold harmless Provident against any and all claims, demands, suits, actions,
causes of action, damages, losses, settlement payments, obligations, costs,
expenses (including, but not limited to, attorney's fees and other legal costs
and expenses) and all other liabilities whatsoever ("Losses") which shall at any
time or times be incurred or sustained by Provident or by any of its
shareholders, directors, officers, employees, subsidiaries, Affiliates or agents
on account of, or in relation to, or in any way in connection with, any of the
arrangements or transactions contemplated by, associated with or ancillary to
this Agreement or any of the other Loan Documents, whether or not all or any of
the transactions contemplated by, associated with or ancillary to this Agreement
or any of such Loan Documents are ultimately consummated, including, but not
limited to, Losses arising from or in connection with, or related to, any of the
Mortgage Loans financed hereunder, whether arising from the underwriting,
processing, origination, closing, funding, purchase, servicing or sale of any
such Mortgage Loans.
(c) No amendment, supplement, modification, termination,
waiver, consent to departure or alteration of the terms hereof or any of the
other Loan Documents shall be binding or effective unless the same is in
writing, dated subsequent to the date hereof, and duly executed by Borrower and
Provident, and then such amendment, modification or waiver shall be effective
only in the specific instance and for the specific purpose for which given.
(d) All agreements, representations, obligations and
warranties made herein shall survive the execution and delivery of this
Agreement, the making of any Advance hereunder, the execution and delivery of
any of the other Loan Documents and payment in full of the Advances.
(e) This Agreement (including the Exhibits and Schedules
hereto) and the other Loan Documents (including the Security Documents) and any
documents, certificates and instruments referred to herein or delivered by the
parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and verbal, between the parties with
respect to the subject matter of this Agreement and are not intended to confer
upon any Person other than the parties any rights or remedies.
16
<PAGE>
(f) All notices and other communications pursuant to this
Agreement and under any of the other Loan Documents shall be in writing, either
delivered in hand or sent by first-class mail, registered or certified, return
receipt requested, or sent by telecopier or facsimile transmission, addressed as
follows:
If to Borrower, at:
-------------------------------
-------------------------------
-------------------------------
Fax No.
------------------------
If to Provident, at: The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Attn: Kenneth D. Logan,
Senior Vice President
Mail Stop: 265D
Fax Number: (513) 564-7943
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 11. Any notice or other communication pursuant to this Agreement
or any other Loan Document shall be deemed to have been duly given or made and
to have become effective when delivered in hand to the party to which it is
directed, or, if sent by first-class mail or by telecopier or facsimile
transmission, and properly addressed (i) when received by the addressee; or (ii)
if sent by first class mail, on the third (3rd) Business Day following the day
of the mailing thereof(unless actually received earlier).
(g) No delay or failure of Provident in exercising any right,
power, remedy or privilege hereunder or under any of the other Loan Documents on
any occasion shall affect such right, power, remedy or privilege or be construed
as a waiver or any requirement of this Agreement; nor shall any single or
partial exercise thereof or any abandonment or discontinuance of steps to
enforce such a right, power or privilege be prejudicial to any subsequent
exercise of such right, power or privilege. Provident's acceptance or approval
of any request, payment, document or instrument pertaining to any Advance made
pursuant hereto shall not constitute any representation or warranty, express or
implied, by Provident as to the validity or sufficiency of any such request,
payment, document or instrument. The rights and remedies of Provident hereunder
are cumulative and not exclusive. All remedies herein provided shall be in
addition to and not in substitution for any remedies otherwise available to
Provident. Any waiver, permit, consent or condition hereof, must be in writing
and shall be effective only to the extent set forth in such writing.
(h) This Agreement shall be binding upon and inure to the
benefit of Borrower and Provident and their respective successors and assigns,
except that Borrower may not assign or transfer any of its rights or obligations
hereunder to any Person or Persons without the express prior written consent of
Provident. If more than one Borrower shall sign this Agreement, the liability of
each hereunder shall be joint and several.
(i) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
17
<PAGE>
(j) It is hereby stipulated and agreed that TIME IS OF THE
ESSENCE hereon and shall be of the essence as to each of the other Loan
Documents.
(k) Any provision contained in any document which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of such document or affecting the validity
or enforceability of such provision in any other jurisdiction.
(l) This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed and deliver shall be deemed to be an original and all of which
taken together shall constitute but one and the same Agreement-
12. WAIVER OF JURY TRIAL: JURISDICTION AND VENUE.
---------------------------------------------
(a) AS A SPECIFICALLY BARGAINED INDUCEMENT FOR PROVIDENT TO
EXTEND CREDIT TO BORROWER, AND AFTER HAVING THE OPPORTUNITY TO CONSULT COUNSEL,
BORROWER AND, IF MORE THAN ONE, EACH OF THEM HEREBY EXPRESSLY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO THIS AGREEMENT OR
ARISING IN ANY WAY FROM ITS OBLIGATIONS HEREUNDER.
(b) BORROWER AND, IF MORE THAN ONE, EACH OF THEM HEREBY
DESIGNATES ALL COURTS OF RECORD SITTING IN HAMILTON COUNTY, OHIO AND HAVING
JURISDICTION OVER THE SUBJECT MATTER, STATE AND FEDERAL, AS FORUMS WHERE ANY
ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING FROM OR OUT OF THIS
AGREEMENT, ITS MAKING, VALIDITY, PERFORMANCE, INTERPRETATION OR ENFORCEMENT MAY
BE LITIGATED AS TO ALL PARTIES, THEIR SUCCESSORS AND ASSIGNS, AND BY THE
FOREGOING DESIGNATION BORROWER AND, IF MORE THAN ONE, EACH OF THEM HEREBY
CONSENTS TO THE JURISDICTION AND VENUE OF SUCH COURTS. BORROWER WAIVES ANY AND
ALL RIGHTS UNDER THE LAWS OF ANY OTHER STATE TO OBJECT TO JURISDICTION WITHIN
THE STATE OF OHIO FOR THE PURPOSES OF LITIGATION TO ENFORCE THE OBLIGATIONS
UNDER THIS AGREEMENT.
IN WITNESS WHEREOF, the undersigned have caused this Warehouse Loan and
Security Agreement to be signed by their duly authorized signatories on and as
of the date first above written.
-----------------------------------
BY: /s/ Payton Story, III
-------------------------------
NAME: PAYTON STORY, III
-----------------------------
TITLE: PRESIDENT
----------------------------
18
<PAGE>
THE PROVIDENT BANK
BY: /s/ Ken Logan
-------------------------------
NAME: KEN LOGAN
-----------------------------
TITLE: SENIOR VICE PRESIDENT
----------------------------
19
Exhibit 10.2
WMC
- ---
MORTGAGE CORP. BROKER ORIGINATION AGREEMENT
----------------------------
This Broker Origination Agreement ("Agreement") is made this 27th day of April,
1999, by and between WMC Mortgage Corp., a California corporation ("Lender") and
WESTMARK MORTGAGE CORPORATION, a California corporation ("Broker").
WHEREAS, Lender is in the business of originating, loans secured by residential
real property; and
WHEREAS, Broker is in the business of submitting to lenders loan application
packages on behalf of its clients who are seeking loans on their residential
real property;
NOW, THEREFORE, Lender end Broker enter into this Agreement for the purpose of
Broker submitting loan application packages to Lender on the following terms and
conditions, intending to be legally bound:
1. NATURE OF LENDER/BROKER RELATIONSHIP. Broker shall prepare and
submit to Lender loan applications and related information and documentation, as
required by Lender's program information and procedures as communicated to
Broker from time to time. Lender shall underwrite each application and, in its
sole discretion, approve or decline such applications. The relationship between
Lender and Broker shall be that of independent contractor; Broker is not the
Agent of Lender. Broker shall have no authority, and shall refrain from
representing that it has authority, to bind, or commit Lender with respect to
the terms or approval of any loan application. This relationship is
non-exclusive, Lender and Broker are free to do business with any other lenders
and brokers they so choose. This Agreement may be terminated by either party
upon written notice.
2. NATURE OF BROKER/APPLICANT RELATIONSHIP. Broker, in submitting loan
applications, is acting as agent for the applicant and is responsible for
keeping the applicant fully informed as to the status of the application. Lender
shall keep Broker informed of such status, and Broker agrees to accurately and
promptly pass all such information on to the applicant. Broker, as the agent for
the applicant, provides services directly to the applicant, which services will
vary from applicant to applicant depending upon the applicant's individual
credit and financial circumstances as well as the specific property for which
financing is sought. The Broker's services shall include those set forth on
Exhibit "A" attached hereto. Broker is responsible for arranging the amount of
its compensation and any fees directly with each applicant, and agrees to
provide this information to Lender at the earliest opportunity in the
application process. Broker shall be responsible for reviewing all loan product
pricing options with each applicant and shall inform the applicant of any
compensation to be paid by Lender to Broker as e result of the selection of a
particular product. Broker shall update the applicant in this regard if any
aspect of the applicant's loan transaction changes.
3. APPROVED BRANCHES. Lender will accept application packages only from
Broker's branch offices as listed on Exhibit "B" attached hereto. Broker agrees
that it is fully responsible for all applications submitted by such approved
branches. In the event that Broker wishes to authorize additional branches to
submit applications pursuant to this Agreement. Broker shall submit to Lender an
updated Exhibit "B". In the event that Broker wishes to terminate the
authorization for a branch to submit applications, Broker must notify Lender in
writing of such fact. Broker agrees that any application submitted by a branch
which has been authorized by Broker pursuant to these provisions shall be
subject to the terms of this Agreement and that Broker shall be fully liable for
such application, unless and until Broker notifies Lender in writing of the
revocation of such authorization.
4. CLOSING. Loans approved by Lender shall be closed in Lender's name
on forms and by settlement agents approved by Lender. Where applicable, Broker
shall ensure that an Insured closing protection letter is obtained in connection
with the closing of each loan. In some cases, Lender and Broker may agree that
loans will be closed in the Broker's name, using funds provided by Lender at
closing. Broker agrees to fully cooperate with Lender in the processing of any
application submitted and, upon the reasonable request of Lender prior or
subsequent to funding, perform all such further acts as may be required to
effect the transactions provided for in this Agreement.
5. BROKER REPRESENTATIONS AND WARRANTIES. Broker represents and
warrants as of the date of each agreement and with the submission of each
application and its related documentation: (i) that it has all requisite
authority to enter into this Agreement and to execute the transactions
contemplated hereunder; (ii) that it has all
<PAGE>
required legal or regulatory approvals, licenses, or authorizations to conduct
the business of brokering loans in all jurisdictions in which operates; (iii)
that the entering into and performance under this Agreement shall not cause
Broker to violate the terms of any governing organizational instrument of Broker
or any other instrument or agreement to which Broker is a party; and (iv) that
there is no action, suit, proceeding or investigation pending or threatened
against Broker which may result in a material adverse change in Broker's
business or financial condition or its ability to perform under this Agreement.
Broker further represents and warrants that all information regarding Broker
submitted to Lender is true, accurate and complete in all respects.
6. LOAN REPRESENTATIONS AND WARRANTIES. Broker represents and warrants
as to each loan application submitted to Lender, as of the date of submission
and the date of funding:
a. Broker has full right and authority to assign and transfer
each loan application to Lender, not subject to any other
person's interest or lien therein;
b. The application was taken and processed by Broker and such
application and all documentation and information provided to
Lender by Broker was produced in full compliance with all
applicable federal, state and local laws and regulations. Broker
specifically acknowledges its obligations to comply with laws and
regulations governing "Fair Lending."
c. All documentation and information submitted to Lender by
Broker in connection with a loan application is true and correct
in all material respects and does not fail to include any
information the exclusion of which would cause such documentation
to be misleading.
d. Broker and Broker's employees have not engaged in any
fraudulent activity and, to the best of Broker's knowledge, no
fraud has occurred by act or omission of any person in connection
with the application or the processing of the application or the
origination of the loan.
e. The appraisal obtained by Broker provides a bona fide market
value of the property to be mortgaged and was performed by an
appraiser who holds all required licenses or approvals and has no
interest in the real property to be appraised and who will
receive no compensation which is affected by the approval or
declination of the loan application. Lender shall not be
responsible for the cost of such appraisal.
7. REMEDIES FOR BREACH. In the event that Lender suffers any loss or
incurs any expense as the result of Broker's breach of its covenants,
representations or warranties obtained in this Agreement, upon written
notification from Lender. Broker shall have fifteen (15) days to cure such
default, and in the event that such default is not cured, or in a case of a
default which cannot be cured, Broker shall immediately pay to Ladder the full
amount of any costs, damages, losses, expense or liability which Lender has
incurred as a result of Broker's breach. Broker agrees that any such breach
which results in the impairment of a loan originated hereunder may result in
Lender being required to repurchase such loan from a subsequent investor, and
will cause Lender to exercise certain remedies including, but not limited to,
resale at a discount or foreclosure and sale of the collateral, which may result
in damages subject to reimbursement by Broker pursuant to this paragraph. Lender
shall have full discretion to deal with such impaired loans as it sees fit so
long as Lender exercises good faith in making such determinations, and shall not
be required to consult with or give notice of such actions to Broker. Broker
further agrees that in the event that a loan originated hereunder is rescinded
by the borrower, that Broker shall refund to Lender all broker compensation and
fees paid by borrower or Lender whether such compensation or fees were paid
through or outside of closing.
8. EARLY REFINANCE. Broker agrees that it will not solicit the
prepayment of any loan originated hereunder, and will not for compensation or
otherwise prepare or disseminate any list of borrowers arising from applications
submitted to Lender. In the event that Broker causes any loan originated
hereunder to be paid off within six (6) months of the funding date, due to a
refinance loan arranged by Broker, Broker shall reimburse Lender for the full
amount of any compensation paid by Lender to Broker for the origination of the
loan.
9. GENERAL PROVISIONS. This Agreement, along with Lender's product
guidelines, policies and procedures as provided to Broker from time to time as
well as the Zero Fraud Tolerance and Fair Lending Compliance Policies,
constitutes the entire agreement between the parties and supersedes any and all
prior written or oral agreements between the parties as to the subject matter
hereof and may not be modified or amended except in writing and signed by both
parties. Broker may not assign this Agreement. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and Lender's successors and
assigns In the event that any
2
<PAGE>
Exhibit 10.2
provision of this Agreement is held to be invalid, the same shall not affect the
validity of the remainder of this Agreement. The prevailing party in any
judicial proceeding regarding this Agreement shall be entitled to recover from
the losing party its reasonable attorneys' fees and out of pocket expenses
incurred in connection with such dispute. This Agreement shall be governed by
and construed in accordance with the laws of the State of California. This
Agreement may be executed in one or more counterparts. Notices or other
communication required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been given upon actual delivery or upon the
mailing by registered or certified mail, telecopy, courier or overnight express
delivery to the address for each party set forth below or to such other address
as either party shall designate in writing:
If to Lender: WMC MORTGAGE CORP.
6320 Canoga Avenue
Woodland Hills, California 91367
Attn.: Broker Approval Dept.
If to Broker: WESTMARK MORTGAGE CORP
8000 N. Federal Highway
Boca Raton, FL 33487
Attn.: Payton Story
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date set forth above.
WMC MORTGAGE CORP., a California corporation Broker: WESTMARK MORTGAGE CORP.,
a California corporation
By: By: PAYTON STORY, III
---------------------------- ----------------------------
Its: ASSISTANT SECRETARY Its: PRESIDENT
--------------------------- ----------------------
3
Exhibit 10.3
MASTER AGREEMENT FOR PURCHASE AND
SALE OF MORTGAGE LOANS
This Master Agreement for Purchase and Sale of Mortgage Loans dated
this 9th day of June, 1999 by and between Westmark Mortgage Corporation located
at 8000 N. Federal Hwy., Boca Raton, Florida, a corporation organized under the
laws of California ("Seller") and EquiCredit Corporation of America, a Delaware
corporation, and its subsidiaries ("EquiCredit") located at 10401 Deerwood Park
Boulevard, Jacksonville, Florida 32256.
RECITALS
WHEREAS, the Seller desires from time to time to offer for sale to
EquiCredit, and EquiCredit is willing to purchase from the Seller in accordance
with the terms and conditions of this Agreement certain Mortgage Loans.
WHEREAS, EquiCredit and Seller desire to enter into this agreement to
govern the purchase and sale of loans.
NOW THEREFORE, in consideration of the mutual agreement contained
herein, the parties agree as follows:
1. DEFINITIONS: As used in this agreement, the following terms shall
have the meanings assigned to them in this section:
ADJUSTABLE RATE MORTGAGE LOAN: A Mortgage Loan having provisions for
adjustment of interest rate or payment amount purchased pursuant to the terms of
this Agreement.
ASSIGNMENT OF MORTGAGE: An Assignment of Mortgage, notice of transfer
or equivalent instrument in recordable form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect the
sale of the Mortgage to EquiCredit.
BALLOON MORTGAGE LOAN: Any individual Mortgage Loan purchased pursuant
to this Agreement wherein the Mortgage Note matures after five years requiring a
final and accelerated payment of principal prior to full amortization.
BID LETTER: A letter Agreement executed on or after the date hereof
setting forth the general terms and conditions of each transaction contemplated
herein and identifying the loan characteristics of the Mortgage Loans to be
purchased from time to time in each case substantially in the form attached
hereto as Addendum 6.
BILL OF SALE: A document whereby Seller transfers all its right, title
and interest in the Mortgage Loans to EquiCredit. The form of the Bill of Sale
is attached as Addendum 4 to this Agreement.
BUSINESS DAY: Any day other than Saturday, Sunday, or a day which is a
legal holiday in either Florida or the state where Seller's corporate
headquarters is located.
CLOSING DATE: The date on which EquiCredit purchases and Seller sells
the Mortgage Loans listed on the related Mortgage Loan Schedule with respect to
the related Mortgage Loan Package. Such Closing Date shall be set forth in the
related Bill of Sale.
CONDITIONAL COMMITMENT: A commitment issued by EquiCredit to purchase
an individual Mortgage Loan prior to its closing which specifies conditions
which must be met before EquiCredit will be required to purchase the Mortgage
Loan. Each Conditional Commitment shall be in the form of Addendum 2.
CUT-OFF DATE: The first day of the month in which the related Closing
Date occurs.
DELETED MORTGAGE LOAN: A Mortgage Loan repurchased or replaced or to be
replaced with a Qualified Substitute Mortgage Loan.
DUE DATE: The day of the month on which the Monthly Payment is due on a
Mortgage Loan, exclusive of any days of grace.
<PAGE>
ESCROW FUNDS: Any and all monies held in escrow for the payment of
taxes, insurance, and any other purpose in connection with the Mortgage Loans.
FIXED RATE MORTGAGE LOAN: Any individual Mortgage Loan purchased
pursuant to this Agreement wherein the Mortgage Interest Rate set forth in the
Mortgage Note is fixed for the term of such Mortgage Loan.
FNMA: The Federal National Mortgage Association or any successor
organization.
FHMLC: The Federal Home Loan Mortgage Corporation.
LOAN-TO-VALUE RATIO OR LTV: With respect to any Mortgage Loan, the
ratio of the outstanding principal amount of the Mortgage Loan as of the date of
determination to the appraised value of the related Mortgaged Property.
MONTHLY PAYMENT: The scheduled monthly payment of principal and
interest on a Mortgage Loan.
MORTGAGE: The mortgage, deed of trust, or other instrument securing a
Mortgage Note. which creates a lien on an unsubordinated estate in fee simple in
real property securing the Mortgage Note or a lien upon a leasehold estate of
the Mortgagor, as the case may be.
MORTGAGE FILE: The items pertaining to a particular Mortgage Loan
referred to in Addendum 3 annexed hereto, and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
MORTGAGE LOAN: An individual Mortgage Loan which is sold and serviced
pursuant to this Agreement, each Mortgage Loan originally sold and subject to
this Agreement being identified on the related Mortgage Loan Schedule, which
Mortgage Loan includes without limitation the Mortgage File, the Monthly
Payments, and all other rights, benefits, proceeds and obligations arising from
or in connection with such Mortgage Loan.
MORTGAGE LOAN DOCUMENTS: The following documents pertaining to any
Mortgage Loan:
(a) The original Mortgage Note (or if provided in the related Purchase
and Terms Letter, a lost note affidavit bearing all intervening endorsements,
endorsed Pay to the order of WESTMARK MORTGAGE CORP., without recourse and
signed in the name of Seller by an authorized officer.
(b) The original Assignment of Mortgage for each Mortgage Loan in
blank.
(c) The original of any guarantee executed in connection with the
Mortgage.
(d) The original Mortgage with evidence of recording thereon. If in
connection with any Mortgage Loan, Seller has not delivered or caused to be
delivered the original Mortgage with evidence of recording thereon or prior to
the Closing Date because of a delay caused by the public recording office where
such Mortgage has been delivered for recordation or because such Mortgage has
been lost or because such public recording office retains the original recorded
Mortgage, Seller shall deliver or cause to be delivered to EquiCredit: (i) in
the case of a delay caused by the public recording office, a copy of such
Mortgage certified by Seller to be a true and complete copy of the original
recorded Mortgage and (ii) in the case where a public recording office retains
the original recorded Mortgage or in the case where a Mortgage is lost after
recordation in a public recording office, a copy of such Mortgage certified by
such public recording office to be a true and complete copy of the original
recorded Mortgage.
(e) The originals of all assumption, modification, consolidation or
extension agreements, with evidence of recording thereon, if any.
(f) The originals of all intervening assignments of mortgage with
evidence of recording thereon, or if any such intervening assignment has not
been returned from the applicable recording office or has been lost or if such
public recording office retains the original recorded assignments of mortgage,
Seller shall deliver or cause to be delivered to EquiCredit or EquiCredit's
designee (i) in the case of a delay caused by the public recording office, a
copy of such intervening assignment of mortgage certified by Seller to be a tree
and complete copy of the original recorded intervening assignment of mortgage
and (ii) in the case where a public recording office retains the original
recorded intervening assignment or in the case where an intervening assignment
is lost after recordation in a public recording office, a copy of such
intervening assignment certified by such public recording office to be a true
and complete copy of the original recorded intervening assignment.
<PAGE>
(g) The original mortgagee title insurance policy. If the policy has
not yet been issued. Such title insurance policy shall be delivered to
EquiCredit or its designee promptly upon receipt thereof by Seller but in no
event later than the time specified in Addendum 3.
MORTGAGE LOAN PACKAGE: A group of specified Mortgage Loans as
identified on a Mortgage Loan Schedule which will be the subject of a
transaction under the terms described in this Agreement.
MORTGAGE LOAN SCHEDULE: The Schedule of Mortgage Loans provided by
Seller to EquiCredit in respect of each Mortgage Loan Package, setting forth the
following information with respect to each Mortgage Loan: (1) Seller's Mortgage
Loan identifying number; (2) the Mortgagor's name; (3) the street address of the
Mortgaged Property including the city, state and zip code; (4) a code indicating
whether the Mortgaged Property is owner-occupied; (5) the type of residential
units constituting the Mortgaged Property (i.e., detached single family,
two-to-four-family, condominium units, etc.); (6) the date on which the current
monthly payment is now due and the original months to maturity or the remaining
months to maturity from the Cut-off Date, in any case based on the original
amortization schedule and, if different, the maturity expressed in the same
manner but based on the actual amortization schedule; (7) the appraised value of
the Mortgaged Property and the Loan-to-Value Ratio at origination; (8) the
Mortgage Interest Rate as of the Cut-off Date; (9) the date on which the initial
Monthly Payment was due on the Mortgage Loan; (10) the stated maturity date;
(11) the amount of the Monthly Payment as of the Cut-off Date; (12) the original
principal amount of the Mortgage Loan; (13) the principal balance of the
Mortgage Loan as of the close of business on the Cut-off Date, after deduction
of payments of principal due on or before the Cut-off Date whether or not
collected; (14) with respect to any Adjustable Rate Mortgage Loans, the interest
adjustment date; (15) with respect to any Adjustable Rate Mortgage Loans, the
gross margin; (16) a code indicating the purpose of the loan (i.e., purchase,
rate and term refinance, equity take-out refinance); (17) with respect to any
Adjustable Rate Mortgage Loans, the maximum mortgage interest rate under the
terms of the Mortgage Note; (18) with respect to any Adjustable Rate Mortgage
Loans, the periodic rate cap; (19) the name of any third party originator; (20)
a code indicating the documentation style (i.e., full, alternative, reduced or
streamlined); (21) a code indicating whether the Mortgage Loan is secured by the
Mortgagor's primary residence. With respect to the Mortgage Loans in the
aggregate. The Mortgage Loan Schedule shall set forth the following information,
as of the Cut-off Date: (1) the number of Mortgage Loans; (2) the current
principal balance of the Mortgage Loans; (3) the weighted average Mortgage
Interest Rate of the Mortgage Loans; and (4) the weighted average maturity of
the Mortgage Loans. Such schedule may be delivered in hard copy form or via any
electronic medium acceptable to EquiCredit or any combination thereof.
MORTGAGE NOTE: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
MORTGAGED PROPERTY: The real property (or leasehold estate, if
applicable) securing repayment of the debt evidenced by a Mortgage Note.
MORTGAGEE: The mortgagee or beneficiary named in the Mortgage and the
successors and assigns of such mortgagee or beneficiary.
MORTGAGOR: The obligor on a Mortgage Note.
PAYMENT ADJUSTMENT DATE: As to each Mortgage Loan, the date on which an
adjustment to the Monthly Payment on a Mortgage Note becomes effective.
POWER OF ATTORNEY: An authorization given by the Seller to EquiCredit
to perform certain acts with respect to the Mortgage Loan. A form of Power of
Attorney is attached as Addendum 5.
PURCHASE PRICE: The price paid on the related Closing Date by
EquiCredit to Seller in exchange for the Mortgage Loans purchased on such
Closing Date.
PURCHASE PREMIUM: The amount EquiCredit pays to the Seller, expressed
as percentage of the principal balance of Mortgage Loan as reflected in the Bid
Letter.
QUALIFIED SUBSTITUTE MORTGAGE LOAN: A Mortgage Loan eligible to be
substituted by Seller for a Deleted Mortgage Loan which must, on the date of
such substitution, (i) have an unpaid principal balance, after deduction of all
scheduled payments due in the month of substitution (or in the case of a
substitution of more than one (1) mortgage loan for a Deleted Mortgage Loan, an
aggregate principal balance), not in excess of the unpaid principal
<PAGE>
balance of the Deleted Mortgage Loan (the amount of any shortfall will be
deposited in the Custodial Account by Seller in the month of substitution); (ii)
have a Mortgage Interest Rate not less than, and not more than 1% greater than,
the Mortgage Interest Rate of the Deleted Mortgage Loan; (iii) have a remaining
term to maturity not greater than. and not more than one year less than, the
maturity date of the Deleted Mortgage Loan; (iv) comply with each representation
and warranty (respecting individual Mortgage Loans) set forth in Section 6
hereof; (v) shall be the same type of Mortgage Loan; (vi) have the same credit
classification as determined by EquiCredit as the Deleted Mortgage Loan.
REPURCHASE PRICE: With respect to any Mortgage Loan, a price equal to
(i) the stated principal balance of the Mortgage Loan plus (ii) interest on such
Stated Principal Balance from the last date through which interest has been paid
and distributed to EquiCredit to the date of repurchase, plus the Purchase
Premium.
2. AGREEMENT TO PURCHASE:
----------------------
2.1 Subject to the terms and conditions of this Agreement, Seller
may offer to sell Mortgage Loans and EquiCredit may purchase Mortgage Loans at
the Purchase Price set forth in the Bill of Sale.
2.2 Seller shall deliver the Mortgage Loan Schedule to EquiCredit
not less than five (5) business days prior to the anticipated Closing Date. The
Mortgage Loans shall comply with the representations and warranties set forth in
this Agreement, and shall have an aggregate outstanding principal balance as of
the close of business on the Cut-off Date after giving effect to any payments on
or before such date as shown in the Mortgage Loan Schedule. The sale of the
Mortgage Loans shall take place on the Closing Date as agreed to between the
parties at such place as specified by EquiCredit. EquiCredit shall upon
completion of its due diligence determine which Mortgage Loans on the Mortgage
Loan Schedule that it desires to purchase and shall forward to Seller a Bill of
Sale containing the relevant terms of purchase including without limitation
Purchase Price, Purchase Premium, if any, Closing Date and any other terms
applicable to such purchase. The Purchase Price for each Mortgage Loan shall be
determined in accordance with Bid Letter. The Purchase Price shall be set forth
m the proposed Bill of Sale to purchase Mortgage Loans.
2.3 If the Purchase Price contains a Premium and the Mortgage Loan
is paid off other than by EquiCredit within twelve months (one year) of the
related Closing Date, Seller shall rebate to EquiCredit a portion of the Premium
paid by EquiCredit to Seller, calculated by applying a percentage to such
Premium the numerator of which will be the number of months remaining in the one
year period following the Closing Date and the denominator of which is twelve.
If the Mortgage Loan that is prepaid contains a prepayment penalty clause or
addendum, the Premium rebate shall be reduced by the amount of the prepayment
penalty collected from the Mortgagor. EquiCredit shall provide Seller with a
monthly report showing payoff figures for the previous month including Premium
rebates, if any owing to EquiCredit.
2.4 If there are Escrow Funds held in connection with the Mortgage
Loans, Seller shall return such funds to the borrower and advise the borrower
that EquiCredit does not require the borrower to maintain an escrow account in
connection with the loan.
3. CLOSING:
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3.1 The Seller agrees to transfer, assign, set over and convey to
EquiCredit, without recourse but subject to the terms of this Agreement, on the
Closing Date and as of the Cut-off Date, all rights, title and interest of the
Seller in and to the Mortgage Loans including all of the following:
(i) All right, title and interest of Seller in and to
amounts collected on such Mortgage Loans after the Cut-off
Date;
(ii) All liens created by each Mortgage Loan
instrument;
(iii) All of Seller's rights to any insurance
proceeds;
(iv) All Mortgage Loan instruments and Mortgage Loan
Files pertaining to each Mortgage Loan;
(v) All proceeds derived from any of the foregoing;
<PAGE>
(vi) Ail rights of Seller to service the Mortgage
Loans and to enforce any of the foregoing;
(vii) If Seller did not originate any Mortgage Loan,
all of Seller's rights as purchaser under any documents
pursuant to which Seller acquired each Mortgage Loan, to the
extent such rights may be assigned.
3.2 Seller shall deliver at closing date the Mortgage Files
and the Mortgage Loan Documents.
3.3 The Seller shall, promptly upon receipt thereof, deliver
to EquiCredit or its designee the original Mortgage or assignment of Mortgage as
the case may be with evidence of recording indicated thereon. In the event the
Seller cannot deliver any original recorded Mortgage or assignment of Mortgage
to EquiCredit for any reason, the Seller shall deliver or cause to be delivered
to EquiCredit or it assignee a photocopy of such Mortgage or assignment as the
case may be certified by the appropriate county recorder's office to be a true
and correct copy of the original thereof recorded in such recorder's office.
3.4 In the event payment of any of the Mortgage Loans
purchased hereunder is made to Seller on or after the Closing Date, such payment
shall be deemed to have and shall have been received by Seller in trust for the
account of EquiCredit and shall be immediately paid over to EquiCredit.
3.5 Any sales, use, income, transfer, stamp or other taxes
applicable to the sale of Mortgage Loans shall be paid by the Seller.
3.6 Seller shall transfer all servicing rights and benefits
and accounts pertaining to or in any way connected with each such Mortgage Loan,
and documentation sufficient to enable EquiCredit or its designated
representative to service each such Mortgage Loan and evidencing compliance with
all rules, orders, and regulations of federal, state and municipal governments
and other duly appointed authorities affecting the Mortgage Loans. Seller shall
take all action necessary to transfer to EquiCredit all interest of Seller in
and to make EquiCredit the loss payee of, each title policy, mortgage guaranty
insurance policy, hazard insurance policy, and each other insurance policy
constituting a portion of any Mortgage File and with respect to each Mortgage
Loan Seller further agrees to resign forthwith any trusteeship under any deed of
trust or to procure for EquiCredit, if requested, the resignation of any
individual who may be named Trustee under such deed of trust.
4. RELATIONSHIP OF THE PARTIES: The execution of this Agreement and the
carrying out of its terms does not and will not make the Seller and EquiCredit
partners or joint ventures, nor is the Seller to act as an agent of the
EquiCredit in originating, administering or collecting any loan except as set
forth in the Agreement.
5. REPRESENTATIONS AND WARRANTIES: With respect to each loan which is
subject to this agreement, the Seller makes the following representations and
warranties:
5.1 REPRESENTATIONS AND WARRANTIES RESPECTING SELLER. Seller
represents, warrants and covenants to EquiCredit that, as of the Closing Dates:
(a) Seller is duly organized, validly existing and in
good standing under the laws of the United States or its state of incorporation
and is qualified to transact business in and is in good standing under the laws
of each state where a Mortgaged Property is located or is otherwise exempt under
applicable law from such qualification or is otherwise not required under
applicable law to effect such qualification and no demand for such qualification
has been made upon Seller by any state having jurisdiction and in any event
Seller is or will be in compliance with the laws of any such state to the extent
necessary to insure the enforceability of each Mortgage Loan and the servicing
of the Mortgage Loans in accordance with the terms of this Agreement;
(b) Seller has the full power and authority to perform,
and to enter into and consummate, all transactions contemplated by this
Agreement. As of the Closing Date, Seller has the full power and authority to
hold each Mortgage Loan and to sell each Mortgage Loan;
(c) Neither the acquisition or origination of the
Mortgage Loans by Seller, the sale of the Mortgage Loans to EquiCredit, the
consummation of the transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement, will conflict with
or result in a breach of any of the terms, conditions or provisions of Seller's
certificate of incorporation or by-laws or result in a material breach of any
legal restriction of any agreement or instrument to which Seller is now a party
or by which it is bound, or constitute a
<PAGE>
material default or result in an acceleration under any of the foregoing, or
result in the violation of any law, rule, regulation, order, judgment or decree
to which Seller or its property is subject;
(d) Seller does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant contained in
this Agreement;
(e) There is no action, suit, proceeding, investigation
or litigation pending or, to Seller's knowledge, threatened, which either in any
one instance or in the aggregate, if determined adversely to Seller would
adversely affect the sale of the Mortgage Loans to EquiCredit, the ability of
Seller to provide for the interim servicing for Mortgage Loans thereunder in
accordance with the terms hereof, or Seller's ability to perform its obligations
under this Agreement;
(f) No consent, approval, authorization or order of any
court or governmental agency or body is required for the execution, delivery and
performance by Seller of or compliance by Seller with this Agreement or the
terms of the Mortgage Loans, the sale of the Mortgage Loans to EquiCredit or the
consummation of the transactions contemplated by this Agreement, or if required,
such consent, approval, authorization or order has been obtained prior to the
related Closing Date; and
(g) The consummation of the transactions contemplated by
this Agreement are in the ordinary course of business of Seller, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
Seller pursuant to this Agreement are not subject to the bulk transfer or any
similar statutory provisions.
5.2 REPRESENTATIONS AND WARRANTIES REGARDING INDIVIDUAL
MORTGAGE LOANS. Seller represents and warrants to EquiCredit that, as to each
Mortgage Loan, as of the Closing Date for such Mortgage Loan:
(a) The information contained in the Mortgage Loan
Schedule and any other information furnished by the Seller is complete, true and
correct;
(b) All payments required to be made up to, and
including, the related Cutoff Date for such Mortgage Loan under the terms of the
Mortgage Note have been made; neither the originator nor Seller has advanced
funds, or induced, solicited or knowingly received any advance of funds from a
party other than the owner of the property subject to the Mortgage, directly or
indirectly, for the payment of any amount required by the Mortgage Loan.
(c) There are no delinquent taxes, ground rents, water
charges, sewer rents, assessments, insurance premiums, leasehold payments, or
other outstanding charges affecting the related Mortgaged Property;
(d) The Mortgage Note and the Mortgage are not subject to
any right of rescission, set-off, counterclaim or defense nor will the operation
of any of the terms of the Mortgage Note and the Mortgage, or the exercise of
any right thereunder, render the Mortgage unenforceable, in whole or in part, or
subject to any right of rescission, set-off counterclaim or defense;
(e) All buildings upon the Mortgaged Property are insured
by an insurer having an "A" rating in the AM Best Insurance Guide against loss
by fire, hazards of extended coverage and such other hazards as are customary in
the area where the Mortgaged Property is located. All insurance policies contain
a standard mortgagee clause naming Seller or the Originator, its successors and
assigns as mortgagee and all premiums thereon have been paid. If upon
origination of the Mortgage Loan, the Mortgaged Property was in an area
identified in the Federal Register by the Federal Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available),
a flood insurance policy meeting the requirements of the current Guidelines of
the Federal Insurance Administration (or any successor thereto) is in effect.
The Mortgage obligates the Mortgagor thereunder to maintain all such insurance
at Mortgagor's cost and expense, and on the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to maintain such insurance at Mortgagor's
cost and expense and to seek reimbursement therefore from the Mortgagor;
(f) Any and all requirements of any federal, state or
local law including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity or
disclosure laws applicable to the Mortgage Loan have been complied with in all
material respects;
<PAGE>
(g) The Mortgage has not been modified, satisfied,
canceled, subordinated, or rescinded, in whole or in part, and the Mortgaged
Property has not been released from the lien of the Mortgage, in whole or in
part, nor has any instrument been executed that would effect any such
modification, release, cancellation, subordination or rescission;
(h) The Mortgage is a valid, existing and enforceable
lien on the Mortgaged Property, including all improvements on the Mortgaged
Property, having the priority indicated in the Mortgage Loan Schedule subject
only to matters to which like properties are commonly subject. Any security
agreement, chattel mortgage or equivalent document related to and delivered in
connection with the Mortgage Loan establishes and creates a valid, existing and
enforceable lien and security interest on the property described therein and
Seller has full right to sell and assign the same to EquiCredit;
(i) The Mortgage Note is genuine and is the legal, valid
and binding obligation of the maker thereof, enforceable in accordance with its
terms;
(j) To the best of Seller's knowledge after reasonable
inquiry and investigation, all parties to the Mortgage Note and the Mortgage had
legal capacity to enter into the Mortgage Loan and to execute and deliver the
Mortgage Note and the Mortgage, and the Mortgage Note and the Mortgage have been
properly executed by such parties;
(k) The proceeds of the Mortgage Loan have been fully
disbursed and there is no requirement for future advances and any and all
requirements as to completion of any on-site or off-site improvement and as to
disbursements of any escrow funds therefore have been complied with;
(l) Seller is the sole owner and holder of the Mortgage
Loan. The Mortgage Loan is not assigned or pledged. Seller has full right to
transfer and sell the Mortgage Loan to EquiCredit free and clear of any
encumbrance, equity, lien, pledge, charge, claim or security interest;
(m) All parties which have had any interest in the
Mortgage, whether as mortgagee, assignee, pledges or otherwise, are (or, during
the period in which they held and disposed of such interest, were) (i) in
compliance with any and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located, and (ii) (a) organized under
the laws of such state, or (b) qualified to do business in such state, or (c) a
federal savings and loan association or national bank, or (d) not deemed to be
doing business in such state under applicable law;
(n) Unless another form of title evidence is described in
the Purchase and Terms Letter, each Mortgage Loan is covered by an ALTA lender's
title insurance policy issued by a title insurer meeting the standards for
acceptance by either FNMA or FHLMC and qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring Seller, its
successors and assigns as to the priority lien of the Mortgage designated on the
original principal mount of the Mortgage Loan;
(o) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any grace
or cure period, would constitute a default, breach, violation or event of
acceleration, and Seller has not waived any default, breach, violation or event
of acceleration;
(p) There are no mechanics or similar liens or claims
which have been filed for work, labor or material (and no rights are outstanding
that under law could give rise to such lien) affecting the related Mortgaged
Property which are or may be liens prior to, or equal or coordinate with, the
lien of the related Mortgage;
(q) All improvements which were considered in determining
the appraised value of the related Mortgaged Property lay wholly within the
boundaries and building restriction lines of the Mortgaged Property, and no
improvements on adjoining properties encroach upon the Mortgaged Property;
(r) The Mortgaged Property is free of material damage and
waste and there is no proceeding pending for the total or partial condemnation
thereof;
(s) The Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the benefits of
the security provided thereby, including, (i) in the case of a Mortgage
designated as a deed of trust, by
<PAGE>
trustee's sale, and (ii) otherwise by judicial foreclosure. There is no other
exemption available to the Mortgagor which would interfere with the right to
sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage. The Mortgagor has not notified Seller and Seller has no knowledge of
any relief requested or allowed to the Mortgagor under the Soldiers and Sailors
Civil Relief Act of 1940;
(t) The Mortgage File contains an appraisal of the
related Mortgaged Property signed prior to the approval of the Mortgage Loan
application by an appraiser who is duly certified or licensed in the state where
the property is located, duly appointed by the originator, who had no interest,
direct or indirect, in the Mortgaged Property or in any loan made on the
security thereof, and whose compensation is not affected by the approval or
disapproval of the Mortgage Loan;
(u) In the event the Mortgage constitutes a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the Mortgage, and no
fees or expenses are or will become payable by EquiCredit to the trustee under
the deed of trust, except m connection with a trustee's sale after default by
the Mortgagor;
(v) The Assignment of Mortgage is in recordable form and
is acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located;
(w) The Mortgage Note and Mortgage are on forms
acceptable to EquiCredit;
(x) All documents used to support the borrowers
application, including, but not limited to, verifications or other records
supporting the borrowers income, employment or credit are true and genuine; (y)
Any escrow account for payment of taxes and insurance has been terminated any
only funds held in such an account have been returned to the borrower.
5.3 REMEDIES FOR BREACH OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in Sections 5.1 and 5.2 shall survive
the sale of the Mortgage Loans to EquiCredit and shall inure to the benefit of
EquiCredit, notwithstanding any restrictive or qualified endorsement on any
Mortgage Note or Assignment of Mortgage or the examination or failure to examine
any Mortgage File. Upon discovery by either Seller or EquiCredit of a breach of
any of the foregoing representations and warranties which materially and
adversely affects the value of one or more of the Mortgage Loans, the party
discovering such breach shall give prompt written notice to the other.
Seller shall have a period of thirty (30) days from the
earlier of the discovery of a breach or the receipt by Seller of notice of a
breach within which to correct or cure such breach. If any such breach cannot be
corrected or cured within such thirty (30) day period, Seller shall, at
EquiCredit's option and not later than thirty (30) days after its discovery or
its receipt of notice of such breach, repurchase such Mortgage Loan at the
Repurchase Price. In the event that a breach shall involve any representation or
warranty set forth in Section 5.1 and such breach cannot be cured within thirty
(30) days of the earlier of either discovery by or notice to Seller of such
breach, all of the Mortgage Loans shall, at EquiCredit's option, be repurchased
by Seller at the Repurchase Price provided that Seller shall have no obligation
to repurchase or indemnify as a result of a breach of this warranty unless such
breach impairs the enforceability of the Mortgage Loan or the title or ownership
of EquiCredit thereto. However, if the breach shall involve a representation or
warranty set forth in Section 5.2 and Seller discovers or receives notice of any
such breach within one hundred and twenty (120) days of the Closing Date, Seller
may, with the consent of EquiCredit and provided that Seller has a Qualified
Substitute Mortgage Loan (or Loans), rather than repurchase the Mortgage Loan as
provided above, remove such Mortgage Loan and substitute in its place a
Qualified Substitute Mortgage Loan or Loans. If Seller has no Qualified
Substitute Mortgage Loan, it shall repurchase the deficient Mortgage Loan. Any
repurchase of a Mortgage Loan(s) pursuant to the foregoing provisions of this
Section 5.3 shall be accomplished by wire transfer of immediately available
funds on the repurchase date to an account designated by EquiCredit.
At the time of repurchase or substitution, EquiCredit and
Seller shall arrange for the reassignment of the Deleted Mortgage Loan to Seller
and the delivery to Seller of any documents held by EquiCredit relating to the
Deleted Mortgage Loan. In connection with any substitution, Seller shall be
deemed to have made as to such Qualified Substitution Mortgage Loan the
representations and warranties set forth in this Agreement except that all such
representations and warranties set forth in this Agreement shall be deemed made
as of the date of such substitution. Seller shall effect such substitution by
delivering to EquiCredit the Mortgage Loan Documents for such Qualified
Substitute Mortgage Loan.
<PAGE>
If Seller substitutes a Qualified Substitute Mortgage
Loan for a Deleted Mortgage Loan, Seller shall determine the amount (if any) by
which the aggregate principal balance of all Qualified Substitute Mortgage Loans
as of the date of substitution is less than the aggregate Stated Principal
Balance of all Deleted Mortgage Loans (after application of scheduled principal
payments due in the month of substitution). The amount of such shortfall shall
be remitted by wire transfer in immediately available funds.
In addition to such repurchase or substitution
obligation, Seller shall indemnify EquiCredit and hold it harmless against any
losses, damages, penalties, fines, forfeitures, reasonable and necessary legal
fees and related costs, judgments, and other costs and expenses resulting from
any claim, demand, defense or assertion based on or grounded upon, or resulting
from, a breach of Seller's representations and warranties contained in this
Section 5. Any cause of action against Seller relating to or arising out of the
breach of any representations and warranties made in Sections 5. I or 5.2 shall
accrue as to any Mortgage Loan upon (i) the discovery of such breach by
EquiCredit or notice thereof by Seller to EquiCredit, (ii) failure by Seller to
cure such breach or repurchase such Mortgage Loan as specified above, and (iii)
demand upon Seller by EquiCredit for compliance with the relevant provisions of
this Agreement.
5.4 REMEDY TO INSURE ACCURACY OF REAL ESTATE APPRAISALS.
EquiCredit may, at its own expense, in order to verify the accuracy of real
property appraisals prepared for Seller, order a re-appraisal of the property
secured by a Mortgage. If the reappraisal obtained by EquiCredit indicates a
fair market value which is more than ten (10) percent less than the original
appraisal value, then upon receipt by the Seller from EquiCredit of a signed
copy of the reappraisal, EquiCredit may, at its sole discretion, require Seller
to repurchase the loan at the Repurchase Price and reimburse EquiCredit for the
cost of the appraisal subject to the following: If Seller disputes the validity
of the reappraisal prepared by EquiCredit's appraiser, Seller may, at its own
expense, request EquiCredit to obtain a third appraisal, and only if such third
appraisal is also more than ten (10) percent less than the original appraisal
value shall the Seller be required to repurchase the Loan at the Repurchase
Price. EquiCredit shall choose the appraiser for the third appraisal with the
Seller's approval, which shall not be unreasonably withheld. The appraisal must
be performed in accordance with industry standards for the appraising industry
in the area in which the property is located, and the appraiser must be
independent with respect to both parties unless otherwise agreed on by the
parties. In determining the appropriate appraisal value, the review appraiser
must determine the fair market appraised value as of the original appraisal date
using comparable sales that were available as of the date of the original
appraisal. The original reappraisal must be ordered within one (1) year of
EquiCredit's purchase of the Loan from the Seller.
6. OPTIONAL CREDIT INSURANCE: Subject to EquiCredit's consent, Seller
may offer optional credit insurance to Borrowers in connection with the Mortgage
Loans. In the event Seller offers such insurance, Seller shall be solely
responsible for administration of any and all credit insurance coverage,
including, without limitation, the processing of claims and the rebate of
unearned premium. EquiCredit will use its best efforts to provide Seller with
information necessary to carry out its obligations.
7. ADDITIONAL COVENANTS:
---------------------
(a) Each party shall, from time to time, execute and deliver
or cause to be executed and delivered, such additional instruments, assignments,
and documents as the other party may at any time reasonably request for the
purpose of carrying out the terms of this Agreement and the transfers provided
for hereto.
(b) In order to enforce the EquiCredit's right under this
Agreement, Seller shall, upon the request of EquiCredit or its assigns, do and
perform or cause to be done and performed, every reasonable act and thing
necessary or advisable to put EquiCredit or its assigns in position to enforce
the payment of the Loans and to carry out the intent of this Agreement,
including the execution of and, if necessary, the recordation of additional
documents including separate endorsements and assignments upon request or
Purchase. In addition, Seller hereby irrevocably appoints any officer or
employee of EquiCredit or its assigns its true and lawful attorney to do and
perform every act necessary, requisite, proper, or advisable to be done to put
EquiCredit or its assigns in position to enforce the payment of the loans, its
rights under this Agreement, and to carry out the intent of this Agreement,
including, but not limited to the right to sign, execute, endorse and/or assign,
and deliver to EquiCredit or it's assigns on behalf of Seller and Mortgage Note,
Mortgage, or any other Loan documents and also any other writing of any kind or
nature whatsoever which may be used in connection therewith to evidence any
obligation of Seller or any Borrower to Purchase or its assigns, pursuant to
this Agreement and to endorse any check or other instruments for the payment
thereof. This Power of Attorney is conferred upon EquiCredit or its assigns
hereby together with the right to appoint any other person to execute the said
power.
<PAGE>
(c) Seller agrees that it will not solicit directly or
indirectly any borrower obligated on any Mortgage Loan sold under this Agreement
to refinance or otherwise pay the Mortgage Loan for a period of twenty-four
months from the Closing Date. This covenant shall not apply to mass mailing or
mass market efforts not specifically targeted to the borrowers on Mortgage
Loans.
(d) EquiCredit and Seller agree that, except as provided
herein and as may be required by applicable law or regulation, neither party
shall disclose in advertising, publicity, promotion, or otherwise the name of
the other party, the existence or contents of this Agreement or any terms or
conditions hereof without the prior written consent, unless such disclosure is
required pursuant to law or regulation.
8. SURVIVAL OF COVENANTS, AGREEMENT, REPRESENTATIONS AND WARRANTIES;
SUCCESSORS AND ASSIGNS: All warranties, representations and covenants made by
the parties in this Agreement or in any other instrument delivered by either
party under this Agreement, shall be considered to have been relied upon by the
other party hereto and shall survive the delivery to EquiCredit of any Mortgage
Loan after purchase of the Mortgage Loans (I) regardless of any investigation
made by either party or on its behalf and (ii) notwithstanding any restrictions
or qualified endorsements on any Note or other evidence indebtedness and (iii)
notwithstanding any subsequent transfer of a Mortgage Loan to any third party.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto, their respective successors and assigns, and shall supersede and cancel
any prior oral agreements between the parties. This Agreement may not be
assigned by Seller without EquiCredit's prior written consent.
9. SEVERABILITY: If any provision, or part thereof, of this Agreement
is invalid or unenforceable under any law, such provision or part thereof, is
and will be totally ineffective to that extent, but the remaining provisions, or
part thereof will be unaffected.
10. ATTORNEYS' FEES: Anything to contrary notwithstanding, in the event
of any action at law, m equity or otherwise between the parties in relation to
this Agreement or any Loan or other instrument or agreement required or
purchased or sold thereunder, the non-prevailing party, in addition to any other
sum which such party shall be required to pay pursuant to the terms and
condition of this Agreement, at law in equity, arbitration or otherwise shall
also be required to pay to the prevailing party all costs and expenses of such
litigation, including reasonable attorney fees.
11. WAIVERS: No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instance, shall
be deemed to be, or construed as a further or continuing waiver of any such
term, provision or condition, or of any other term, provision or condition of
this Agreement.
12. NOTICE: Any notice or other communication in this Agreement
provided or permitted to be given by one party to the other must be in writing
and given by personal delivery or by depositing the same in the United States
mail (certified mail, return receipt requested), addressed to the other party to
be notified, postage prepaid. A notice or other communication shall be effective
when delivered to the proper address. For purposes of notice, the addresses of
the parties shall be as follows:
Buyer: EquiCredit Corporation
10401 Deerwood Park Boulevard
Jacksonville, Florida 32256
Attention: Rodolfo F. Engmann, President
with a copy to the attention of: Legal Department
Seller: Westmark Mortgage Corporation
8000 North Federal Highway
Boca Raton, FL 33487
Attention: Payton Story III, President/COO
with a copy to the attention of:
Harry Coolidge
1260 41st Ave., Suite N
Capitola, CA
The above address may be changed from time to time by written notice
from one party to the other.
<PAGE>
13. ASSIGNMENT: The Seller shall not, without the prior written consent
of EquiCredit, assign any of its fights or obligations hereunder.
14. CAPTIONS: Paragraph or other headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. GOVERNING LAW: This Agreement shall be governed and construed in
accordance with the laws of the State of Florida. The provisions of this
paragraph shall not affect the provisions of any Note, Mortgage or Related
Assets which cause the laws of the United States or other state to be
applicable. Each party hereto is sophisticated and represented by legal counsel.
Accordingly, this Agreement shall be interpreted fairly in accordance with its
provisions and without regard to which party drafted it.
16. TERMINATION: Either party may terminate this Agreement on thirty
(30) days written notice to the other party. EquiCredit has the option of
terminating its obligations to purchase loans hereunder immediately upon notice
to the Seller upon the Seller's breach of any of the Representations and
Warranties contained in the Agreement, however, subject to the rights to cure as
outlined in the Agreement.
17. JURISDICTION AND VENUE: With respect to any controversy argument or
claim arising out of or relating to this Agreement, or any breach thereof
(including, but not limited to, a request for emergency relief), the parties
hereby consent to the exclusive jurisdiction of the state and federal courts
having jurisdiction over EquiCredit at the time any such controversy, argument
or claim arises, and waive personal service of any and all process upon them and
consent that all such service of process made by registered or certified mall
directed to them at the address stated herein and service so made shall be
deemed to be completed five (5) days after mailing. The parties waive trial by
jury and waive any objection to jurisdiction and venue of any action instituted
hereunder, agree not to assert any defense based on lack of jurisdiction or
venue and consent to the granting of such legal or equitable relief as is deemed
appropriate by the court, including, but not limited to, any emergency relief,
injunctive or otherwise.
18. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement
between the parties. No prior or contemporaneous representations, whether oral
or written not contained herein, shall be of any effect. This Agreement shall
not be modified, changed or altered in any respect, except in writing, executed
by both parties.
19. DUPLICATE ORIGINALS: This Agreement may be executed in one or more
counterparts, each of which shall be deemed a duplicate original, and all of
them shall constitute one and the same Agreement; provided that it shall only be
necessary to produce one duplicate of each Agreement for proof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
WESTMARK MORTGAGE CORPORATION EQUICREDIT CORPORATION OF AMERICA
By: /s/ Payton Story, III By:
------------------------------ ---------------------------------
Title: PRESIDENT Title:
-------------------------- -------------------------------
Exhibit 10.4
ADDENDUM TO THE MASTER AGREEMENT FOR
------------------------------------
PURCHASE AND SALE OF
--------------------
MORTGAGE LOANS
--------------
(THIRD PARTY ORIGINATORS)
-------------------------
This Addendum to the Master Agreement for Purchase and Sale of Mortgage
Loans dated June 9, 1999 ("The Agreement") by and between Westmark Mortgage
Corporation ("Seller") and EquiCredit Corporation of America ("Purchaser")
witnesseth:
WHEREAS, Seller desires to sell Accounts to Purchaser which have been
originated in the name of, and funded by, a third party; ("Third Party Accounts"
and "Third Party Originator(s)," respectively) and Purchaser is willing, subject
to the additional terms of this addendum to purchase such Accounts. The parties
therefore agree:
1. Seller will notify Purchaser of the name of any company which acted
as lender with respect to Third Party Accounts. The fact that an account is a
Third Party Account and the name of the lender shall be disclosed at the time
the loan is submitted for a price quotation. Purchaser may, but is not required
to, notify Seller of the names of Third Party Originators whose Accounts it will
refuse to purchase.
2. Seller shall remain fully responsible for all obligations contained
in the Agreement. Seller shall not be excused from any obligation under that
agreement pertaining to the origination of the Account by reason of the fact
that the loan was originated by a Third Party Originator. No qualification as to
knowledge contained in and representation or warranty shall be effective if the
Third Party Originator has such knowledge, or with the exercise of due diligence
would be presumed to have such knowledge.
IN WITNESS WHEREOF, the parties have executed this addendum this 25th
day of June 1999.
EQUICREDIT CORPORATION OF AMERICA WESTMARK MORTGAGE CORPORATION
By: By: /s/ Payton Story III
------------------------------ -----------------------------
Title: Title: PRESIDENT/COO
--------------------------- --------------------------
Witness: Witness:
------------------------------ ---------------------------------
Exhibit 10.5
BROKER AGREEMENT
HOME EQUITY LOAN AND LINE OF CREDIT PROGRAMS
THIS AGREEMENT is made this 21st day of July 1999 by and between
WESTMARK MORTGAGE CORPORATION (hereinafter referred to as "Broker"), and CHASE
MANHATTAN MORTGAGE CORPORATION, a New Jersey corporation, on behalf of itself
and on behalf of CHASE MANHATTAN BANK USA, N.A., the lender (individually and
jointly "Chase").
WHEREAS, from time to time, Broker agrees to submit to Chase, home
equity loan and line of credit application packages ("packages"); and
WHEREAS, Chase desires to accept packages from Broker for loans and
lines of credit;
NOW, THEREFORE, in mutual consideration of the promises herein
contained, the parties agree as follows:
A. LOAN AND LINE OF CREDIT PACKAGES
--------------------------------
1. Broker shall, in its sole discretion, decide which
packages are to be submitted to Chase.
2. Chase shall, in its sole discretion, decide which of the
packages will be either accepted or rejected. Chase shall
also, in its sole discretion, decide under what terms and in
what amount each such loan or line of credit will be made.
B. SUBMITTAL AND FREE PROCEDURES
-----------------------------
1. Broker will obtain from the customer all information and
signatures necessary to completely process each package
submitted to Chase, will obtain all verifications and
appraisals required by Chase, and will deliver all required
documentation to Chase in proper form to enable Chase to
approve or disapprove the loan or line of credit application
as submitted.
2. If Chase should close any additional loans or lines of credit
with any customers submitted to Chase by Broker, subsequent to
the initial submittal by Broker to Chase, Chase shall not be
required to pay any additional fee(s) to Broker.
C. WARRANTY
--------
1. Broker represents and warrants to Chase that it has all
necessary licenses, qualifications and registrations needed to
engage in the business conducted by Broker and the activities
contemplated by this Agreement.
2. Broker warrants that the information contained in all
documents submitted to Chase in connection with each package,
including, but not limited to, the loan or line of credit
application, estimate of settlement charges, schedule of real
estate owned, deposit verifications, employment verifications,
loan verifications, statement of loan or line of credit
purpose, and appraisal, is true, complete and accurate to the
best information and belief of Broker, its employees and
agents.
3. Broker warrants and agrees to deliver to each applicant any
disclosures and information mandated by State and Federal law.
<PAGE>
D. COMPENSATION
------------
1. Broker compensation from Chase regarding loans shall be based
on actual services performed according to the Federal Real
Estate Settlement Procedures Act of 1974, as amended, and
Regulation X thereunder.
2. Broker compensation from Chase for actual services performed
regarding lines of credit shall be solely in accordance with
the attached Schedule A.
3. Final settlement of all amounts due Broker shall be made alter
the rescission period has elapsed. No amounts will be payable
to Broker by Chase or applicant thereafter.
4. Broker represents that any compensation received by Broker
from applicant shall be permitted by applicable law and any
applicable professional responsibility standards and shall not
exceed the fair market value of its service. Broker will not
accept additional fees or other compensation of any type
except as permitted by applicable law and disclosed in writing
to applicant and Chase.
E. COMPLIANCE
----------
1. The validity, interpretation, enforcement and effect of this
Agreement shall be governed by the laws of the State of Ohio.
2. With regard to both Broker activity in general and each
package submitted, Broker shall comply with all applicable
State and Federal laws, rules and regulations, including, but
not limited to:
a) Federal Truth in Lending Act of 1969, as amended, and
the Federal Reserve Regulation Z thereunder;
b) Federal Equal Credit Opportunity Act (ECOA) and the
Federal Reserve Regulation B thereunder;
c) Federal Fair Credit Reporting Act;
d) Federal Real Estate Settlement Procedures Act of
1974, as amended, and Regulation X thereunder;
e) Flood Disaster Protection Act of 1973 and the
National Flood Insurance Reform Act of 1994;
f) Fair Housing Act;
g) Home Mortgage Disclosure Act;
h) Financial Institutions Reform Recovery and
Enforcement Act of 1989.
3. Upon request, Broker shall furnish to Chase evidence, in a
form satisfactory to Chase, of any action taken by Broker to
comply with such laws, including copies of any notice or
disclosure form furnished to an applicant.
4. This Agreement shall bind and inure to the benefit of any
successors, assignees, subsidiaries and/or affiliates of
Broker and Chase. Broker cannot transfer any rights therein or
assign this Agreement without the written consent of Chase.
Chase may assign this Agreement to any of its subsidiaries or
affiliates without the written consent of Broker.
<PAGE>
5. Should any provision of this Agreement for any reason be
declared invalid, such a decision shall not affect the
validity of the remaining provisions which shall remain in
full force and effect as if this Agreement had been executed
with the Invalid provision eliminated.
6. Chase will, at no time, represent themselves to be an agent
for Broker or in any way represent themselves as having any
affiliation with Broker.
7. At no time will Broker represent themselves to be an agent for
Chase or in any way represent themselves as having any
affiliation with Chase. Broker shall have no authority to bind
Chase in any respect. Broker shall not use or refer to Chase's
name in any form of advertising or written materials, except
as may be required by law or specifically licensed to do so by
Chase in writing.
F. INDEMNIFICATION
---------------
Broker shall indemnify and hold harmless Chase from any loss, damage,
cost or expense, including all attorney fees, resulting from the breach
by the Broker of any of its agreements or the inaccuracy of any
representation or warranty made by Broker. This indemnification shall
survive any termination or cancellation of this Agreement.
G. TERMINATION
-----------
1. Either Chase or Broker may terminate this Agreement, by giving
the other not less than thirty (30) days prior written notice
thereof by certified mail, return receipt requested.
2. A termination notice made by Chase shall be mailed to
the following address:
Westmark Mortgage Corporation
Attention: Payton Story III
8000 North Federal Highway
Boca Raton, FL 33487
3. A termination notice made by Broker shall be mailed
to the following address:
Jack Nunnery, Customer and Risk Management
Chase Manhattan Mortgage Corporation
10151 Deerwood Park Blvd., Bldg. #400
Jacksonville, Florida 32258
4. Any loans or lines of credit made by Chase to customers
referred by Broker during the thirty (30) day termination
period are subject to the terms of this Agreement.
H. AGREEMENT EXECUTION
-------------------
1. Broker represents that this Agreement does not conflict with
the provisions of any other agreement to which the Broker is a
party and that this Agreement is a legal, valid and binding
obligation of Broker. Broker will notify Chase immediately of
any material changes in its ownership, financial condition or
management.
<PAGE>
2. This Agreement constitutes the whole of the parties agreement
regarding the subject matter hereof, and all other agreements,
oral or written, are superseded. Any amendments or
modifications of this Agreement shall only be valid in
writing, signed and executed by each of the parties.
This Agreement is executed as of the date first above written.
BROKER CHASE MANHATTAN MORTGAGE CORPORATION
By: /S/ PAYTON STORY, III By:
---------------------------- -----------------------------
Title: PRESIDENT/COO Title:
------------------------- --------------------------
By: /S/ IRVING H. BOWEN
----------------------------
Title: CHIEF FINANCIAL OFFICER
------------------------
<PAGE>
BROKER AGREEMENT
HOME EQUITY LINE OF CREDIT PROGRAM
SCHEDULE A
LINE OF CREDIT PACKAGES
- -----------------------
All Line of Credit packages must be submitted according to the terms indicated
below.
|X| Provide prospective customers with information and applications for a Chase
Home Equity Line of Credit.
|X| Help applicant complete the application and provide continued liaison
relationship between applicant and Chase to work through details of the
transaction.
|X| Collect required income and wage verification documentation.
|X| Obtain credit report.
|X| Order, receive and review appraisal. If combined first and second mortgage
amount exceeds $500,000, the appraiser must be on Chase Approved Appraiser
Panel List. If combined first and second mortgage amount is less then
$500,000, appraisal* accepted from any appraiser meeting the following
criteria:
|X| Appraiser must be state licensed/certified
|X| Subject property must be physically inspected by state
licensed/certified appraiser
|X| Copy of appraiser's license must accompany each appraisal
submitted
|X| Order, receive and review title from approved title management coordinators.
|X| Forward file within 24 hours to the Chase Home Equity Regional Processing
Center.
|X| Coordinate the closing with Chase approved closing agent.
|X| Provide such other administrative services and tasks as detailed in Chase's
Operational Procedures.
Broker Compensation: $400 for each closed transaction that has not been
rescinded.
* CHASE WILL PROVIDE AN APPRAISER REVIEW LIST. THE REVIEW LIST CONTAINS
APPRAISERS WHO, IF USED, WILL REQUIRE A FIELD REVIEW BY G. F. HANSON LOAN
QUALITY SERVICES AT THE BROKER'S EXPENSE.
Exhibit 10.6
MASTER COMMITMENT
-----------------
Seller/Servicer No.:
This Master Commitment (the "Commitment") is entered into as of April 14, 1999,
by and between Merrill Lynch Credit Corporation ("MLCC") and Westmark Mortgage
Corporation ("Seller"), 8000 North Federal Highway, Boca Raton, FL 33487. This
Commitment sets out the terms and provisions governing the sale of mortgage
loans by Seller to MLCC. All capitalized terms not otherwise defined herein
shall bear the meaning ascribed to them in the MLCC Seller Guide (the "Guide").
INCORPORATION BY REFERENCE
The Guide as amended, supplemented or otherwise modified from time to time, and
the Master Loan Purchase Agreement, are hereby incorporated and made a part of
this Commitment. Seller is bound by all conditions of the Guide and Master Loan
Purchase Agreement unless expressly modified by this Commitment or separate
written agreement.
AMOUNT OF COMMITMENT
The amount of this Commitment is $25 million.
TERM OF COMMITMENT
This Forward Commitment shall expire upon the fulfillment of the amount of
Commitment through the takedown of best efforts or mandatory commitments or
through the pair off of any term ARMs or fixed rate loans, whichever occurs
first. All loans sold under this Commitment must be committed and delivered to
MLCC in purchasable form on or before April 30, 2000.
TYPE OF COMMITMENTS
MLCC shall purchase from the Seller, Super ARM mortgage loans under the best
efforts commitment and fixed-rate and term ARMs under the mandatory commitment
programs, as referenced in the Guide.
PRODUCTS COVERED BY THIS COMMITMENT
Seller may sell and MLCC will purchase, pursuant to terms of the Guide, the
following types of mortgage loans under the following programs up to the dollar
limits specified:
<PAGE>
o Super ARM, up to $5,000,000
o 30 year fully amortizing fixed rate, up to $5,000,000
o 15 year fully amortizing fixed rate, up to $5,000,000
o 5/1 Term and Interest Only ARM, up to $5,000,000
o 7/1 Term and Interest Only ARM, up to $5,000,000
o 10/1 Term and Interest Only ARM, up to $5,000,000
o Home Equity Lines of Credit, up to $500,000
o Loans secured by Mortgage 100SM guarantees for the following products:
(subject to availability; refer to state parameters for availability)
Super ARM, up to $5,000,000
30 year fully amortizing fixed rate, up to $5,000,000
15 year fully amortizing fixed rate, up to $5,000,000
o Loans secured by Parent Power(R) guarantees for the following products:
(subject to availability; refer to state parameters for available)
Super ARM, up to $5,000,000
30 year fully amortizing fixed rate, up to $5,000,000
15 year fully amortizing fixed rate, up to $5,000,000
Complete descriptions of these loan programs are included in the Guide.
PRIOR APPROVAL UNDERWRITING
Seller may request MLCC to approve loans intended for delivery to MLCC prior to
commitment in accordance with the Guide. All loans shall be underwritten and
delivered to MLCC or its designee in accordance with the terms and conditions of
this Commitment, the Master Loan Purchase and Sale Agreement and the Guide.
APPRAISALS
MLCC agrees to waive the related Representations and Warranties in Subchapter
2.2, Section 101 (xxi) of the Guide for Loans that are accompanied by appraisals
prepared by approved appraisers engaged by Lender's Service, Inc. ("LSI").
UNDERWRITING FEE
MLCC will charge the Seller $125 for all loans underwritten under the prior
approval program. The Underwriting Fee will accrue and be billed monthly by
MLCC.
<PAGE>
PRICING
Pricing for a particular loan or commitment is based on Standard Pricing.
Standard Pricing is defined as that pricing that is posted on the daily
Correspondent Lending Program Daily Pricing Matrix provided to the Seller on a
daily basis. Daily pricing will typically be available by 12:00 EST. Prior to
the updated pricing becoming available, MLCC will honor prices from the prior
day. Significant market fluctuations may cause MLCC to update its prices more
than one time during the day.
SERVICING RIGHTS
Seller agrees to sell MLCC the servicing rights related to this Commitment on a
loan-by-loan basis. MLCC will pay the prices indicated on the daily
Correspondent Lending Program Daily Pricing Matrix. Payment of the servicing
rights from MLCC to the Seller will be made at the time the purchase of the loan
is funded.
CREDIT FILE
The Credit File, if applicable, will be delivered to MLCC at 4802 Deer Lake
Drive East, Jacksonville, Florida 32246-6484, c/o Karen O. Haskin, and
underwriting approval will be required for each Mortgage Loan without a Pool
Certification. The Credit File will contain those documents required by the
Guide. The MLCC underwriter will review each Credit File and will notify the
Seller of its approval.
DELIVERY FILE
The Delivery File shall be delivered to MLCC at 4802 Deer Lake Drive East,
Jacksonville, Florida 32246-6484, c/o Karen O. Haskin, within 15 days of the
Closing Date but in no event later than the expiration date of the related
mandatory Commitment Confirmation. The Seller shall attach a copy of the
Delivery Schedule. The Seller shall identify each loan on the Delivery Schedule
by MLCC Loan Numbers. The Delivery File shall contain those documents required
by the Guide.
SERVICING FILE
The Servicing File shall be delivered to MLCC at 4802 Deer Lake Drive East,
Jacksonville, Florida 32246-6484, c/o Karen O. Haskin, within 15 days of the
closing date but in no event later than the expiration date of the related
Commitment Confirmation.
The Seller shall attach a copy of the Delivery Schedule. The Seller shall
identify each loan on the schedule by MLCC Loan Numbers. The Servicing File
shall contain those documents required by the Guide.
<PAGE>
AMENDMENTS
Except as otherwise provided herein, this Commitment may not be amended,
modified or supplemented except in writing signed by both parties.
SELLER COMPLIANCE
Each Mortgage must be executed by the Mortgagor, acknowledged and recorded. The
Seller shall endorse each Mortgage note to MLCC and shall prepare an Assignment
of Mortgage from Seller to MLCC, in accordance with the requirements of the
Guide.
TERMINATION OF CONTRACT
MLCC may at its option immediately terminate this Commitment and any related
takedown commitments, and all obligations thereunder, if any Event of
Seller/Servicer Default or Breach of Representations or Warranties occurs and is
not remedied by Seller/Servicer in accordance with the terms of the Guide.
Kindly acknowledge your consent to the terms of this letter by signing and
returning to us the enclosed duplicate copy.
MERRILL LYNCH CREDIT CORPORATION
By: /s/ Edward J. Mcdonald Date: 4/22/99
-------------------------- ------------
Name: Edward J. Mcdonald
-------------------------
Title: Senior Vice President
-------------------------
WESTMARK MORTGAGE CORPORATION
By: /s/ Payton Story, III Date: 4/19/99
--------------------------- -------------
Name: Payton Story, III
-------------------------
Title: President
-------------------------
Exhibit 10.7
MASTER LOAN PURCHASE AND SALE AGREEMENT
THIS MASTER LOAN PURCHASE AND SALE AGREEMENT ("Agreement") is made and
dated as of April 14, 1999 between MERRILL LYNCH CREDIT CORPORATION ("MLCC") and
WESTMARK MORTGAGE CORPORATION ("Seller"), 8000 North Federal Highway, Boca
Raton, FL 33487.
RECITALS
Seller is in the business inter alia of originating, making, and
selling one-to-four unit, first lien residential mortgage loans.
MLCC desires to purchase and Seller desires to sell to MLCC such
mortgage loans from time to time on the terms and conditions set forth herein
and in the Merrill Lynch Credit Corporation Seller Guide ("Guide"), a copy of
which Seller has received and reviewed and which is incorporated herein by
reference, including any subsequent amendments delivered by MLCC to Seller from
time to time.
NOW, THEREFORE, in consideration of the mutual covenants made herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF MORTGAGE LOANS. Following the date of this
Agreement, Seller agrees to deliver to MLCC Mortgage Loans having such
characteristics and in such aggregate principal amounts as are agreed between
MLCC and Seller in accordance with the eligibility guidelines in the Guide and
the Master Commitment. Transactions will be evidenced by Commitment
Confirmations issued by MLCC to Seller pursuant to the Guide. MLCC agrees to
purchase such Mortgage Loans from Seller on the terms and subject to the
conditions of the Commitment Confirmations, this Agreement and the Guide. Seller
hereby acknowledges and agrees to all terms and provisions of the Guide which
relate to the selling of Mortgage Loans, including without limitation, Chapter
2.2 thereof, which are hereby incorporated by reference as if such had been set
forth herein in their entirety and acknowledges that the Guide may be amended
from time to time.
2. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. As an
inducement to enter into this Agreement and to consummate each sale hereunder,
Seller and MLCC represent and warrant to each other (as applicable) as follows
(it being acknowledged that each such representation and warranty is made as of
both the date of execution hereof and the Sale Date for each Mortgage Loan):
2.1 DUE INCORPORATION AND GOOD STANDING. Seller and MLCC are
each duly organized, validly existing and in good standing under the laws of its
state of incorporation. Seller and MLCC have and shall continue to maintain in
full force and effect all licenses, registrations and certifications in all
appropriate jurisdictions to conduct all activities to be performed pursuant to
this Agreement. Seller represents that it meets any and all of the eligibility
criteria specified by MLCC.
2.2 AUTHORITY AND CAPACITY. Seller and MLCC have all requisite
corporate power, authority and capacity to enter into this Agreement and to
perform the obligations hereunder. The execution and delivery of this Agreement,
and any related agreements or instruments and the consummation of the
transactions contemplated hereby and thereby, each has been duly and validly
authorized by all necessary corporate action. This Agreement and any related
agreements or instruments each constitutes a valid and legally binding agreement
of Seller and MLCC enforceable in accordance with its terms subject to
bankruptcy law and other similar laws affecting the rights of creditors.
2.3 EFFECTIVE AGREEMENT. The execution, delivery and
performance of this Agreement, and any related agreements or instruments by
Seller or MLCC, its compliance with the terms
<PAGE>
hereof and thereof, and consummation of the transactions contemplated hereby and
thereby, will not violate, conflict with, result in a breach of, constitute a
default under, be prohibited by, or require any additional approval under its
articles of incorporation, bylaws, or any instrument or agreement to which
Seller or MLCC is a party or by which it is bound or which materially and
adversely affects the purchase or servicing of the Mortgage Loans, or any state
or federal law, rule, or regulation or any judicial or administrative decree,
order, ruling or regulation applicable to it or to the origination, pooling, or
servicing of the Mortgage Loans.
2.4 COMPLIANCE WITH CONTRACTS AND REGULATIONS. Seller and MLCC
have complied with all applicable (i) agreements and contracts and (ii) federal,
state and local laws and regulations, with respect to any of the Mortgage Loans.
2.5 TITLE TO THE ASSETS. Seller is the lawful owner of the
Mortgage Loans and has the sole right and authority to transfer the Mortgage
Loans as contemplated hereby. Upon payment of the purchase price by MLCC, the
transfer, assignment and delivery of the Mortgage Loans in accordance with the
terms and conditions of this Agreement shall vest in MLCC all rights as owner
free and clear of any and all claims, charges, defenses, offsets and
encumbrances of any kind or nature whatsoever, including but not limited to
those of Seller.
2.6 LITIGATION. There is no litigation, proceeding, claim,
demand or governmental investigation pending or, to the knowledge of Seller or
MLCC, threatened, and no order, injunction or decree outstanding against or
relating to Seller or MLCC, which could have a material adverse effect upon any
of the Mortgage Loans, result in liability to the other party or materially
impair the ability of either party to perform its obligations hereunder, nor
does Seller or MLCC know of any material basis for any such litigation,
proceeding, claim or demand or governmental investigation either against or
relating to Seller or MLCC. Neither Seller nor MLCC is in default with respect
to any order of any court, governmental authority or arbitration board or
tribunal to which Seller or MLCC is a party or is subject, and neither Seller
nor MLCC is in violation of any laws, ordinances, governmental rules or
regulations to which it is subject, the effect of which would have a material
and adverse effect on the ability of either party to perform its obligations
hereunder.
2.7 STATEMENT MADE. No representation, warranty or written
statement made by Seller in this Agreement, or in any schedule or exhibit to
this Agreement furnished to MLCC by Seller, contains, or will contain, any
untrue statement of a material fact or omits, or will omit, to state a material
fact necessary to make the statements contained herein or therein not
misleading.
3. NOTICES. All notices between the parties hereby shall be in writing
and shall be deemed received or given when mailed first-class mail, postage
prepaid, addressed to MLCC at:
4802 Deer Lake Drive East
Jacksonville, FL 32246-6484
Attention: Edward J. McDonald
Senior Vice President/Manager of Sales
Wholesale Lending
(with a copy to General Counsel
at same address)
and to Seller at its address set forth opposite its signature below. MLCC and
Seller may designate to the other party in writing, from time to time, other or
different addresses to which communications hereunder shall be sent.
4. THIRD-PARTY BENEFICIARIES. The assignees, transferees and designees
of MLCC are acknowledged by Seller to be the third-party beneficiaries of this
Agreement entitled to enforce the provisions hereof directly.
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5. DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meaning set forth in the Guide.
6. NON-SOLICITATION. Seller hereby agrees that it will not take any
action or cause any action to be taken by any of its agents, Affiliates, or
independent contractors working on its behalf, personally, by telephone or mail,
to solicit without the prior written consent of MLCC any MLCC Mortgagor for (a)
the prepayment of any Mortgage Loan, in whole or in part, (b) subordinate
mortgage financing, or (c) any financial services or products including, without
limitation, any type of insurance or brokerage account services. Seller agrees
that MLCC may solicit Mortgagors for financial services available from MLCC or
its Affiliates including, without limitation, insurance and brokerage account
services. Seller agrees that it will not prepare or disseminate, for
compensation or otherwise, any mailing list of the Mortgagors to parties other
than MLCC. With the exception of any direct mailings, nothing in this Section 6
shall be deemed to restrict Seller's ability to market any product or service
through solicitations to the general public or through the mass media.
7. POWER OF ATTORNEY. Seller agrees to cooperate with MLCC in order to
permit MLCC to effect transactions with any of its Affiliates, or other parties,
for further sale, assignment, transfer or delivery of any Mortgage Loan or
Mortgaged Property or any part thereof or any interest therein. If so requested
by MLCC, or any successor or assign of MLCC, Seller shall ratify and confirm any
such action, sale assignment, transfer or delivery by executing and delivering
all such instruments and other documents as may be designated in any such
request.
8. SUPPLEMENTARY INFORMATION. From time to time during the term of this
Agreement, Seller shall furnish to MLCC such information supplementary to the
information contained in the documents and schedules delivered pursuant to this
Agreement hereto as MLCC may reasonably request or which may be necessary to
enable MLCC to file any reports due in connection with the Mortgage Loans. If
such information is not readily available to Seller, MLCC agrees to pay Seller a
reasonable fee to compensate Seller for obtaining such information.
9. NO BROKER'S FEES. Each party hereto represents and warrants to the
other that it has made no agreement to pay any agent, finder, or broker or any
other representative, any fee or commission in the nature of a finder's or
broker's fee arising out of or in connection with the subject matter of this
Agreement. The parties hereto covenant with each other and agree to indemnify
and hold each other harmless from and against any such obligation or liability
and any expense incurred by the other in investigating or defending (including
reasonable attorney's fees) any claim based upon the other party's actions under
this paragraph.
10. FURTHER ASSURANCES. Seller shall, at any time and from time to
time, promptly, upon the reasonable request of MLCC or its representatives,
execute, acknowledge, deliver or perform all such further acts, deeds,
assignments, transfers, conveyances, and assurances as may be required for the
better vesting and confirming to MLCC, its successors and assigns of title to
the Mortgage Loans or as shall be necessary to effect the transactions provided
for in this Agreement.
11. TERMINATION. Unless terminated earlier as permitted hereunder, this
Agreement shall expire of its own term, and without the necessity of action by
either party, three (3) years following the date of execution of this Agreement,
unless earlier extended by both parties. This Agreement may be terminated at any
time (a) by mutual written consent of the parties; or (b) by either Party,
without cause, upon thirty (30) days written notice to the other party. MLCC
will honor all Mortgage Loans registered with MLCC by Seller as of the date
notice of termination is given.
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12. EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Paragraph 11 hereof, this Agreement shall forthwith
become void and MLCC shall not be required to purchase Mortgage Loans; provided,
however, that termination of this Agreement shall not release any party from
liability for its own misrepresentation or for any breach by it prior to such
termination of any covenant, agreement or warranty contained herein.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof. There are no written or
oral agreements, understandings, representations or warranties between the
parties other than those set forth herein and in that certain Master Commitment
by and between the parties dated as of April 14, 1999, as the same may be
modified, amended, or renewed from time to time, and/or commitment confirmations
between the parties hereto, and in the Guide. Seller acknowledges it is bound by
all conditions of the Guide unless expressly modified by this Agreement or in a
separate written agreement, including but not limited to any Master Commitment
and/or Commitment Confirmation. In the event of a conflict between the terms of
the Guide or any separate written agreement, the terms of the applicable
agreement shall control.
14. RIGHTS CUMULATIVE; WAIVERS. The rights of each of the parties under
this Agreement are cumulative, may be exercised as often as any party considers
appropriate and are in addition to each party's rights under any other documents
executed between the parties or, except as otherwise modified herein, under law.
The rights of each of the parties hereunder shall not be capable of being waived
or varied otherwise than by an express waiver or variation in writing. Any
failure to exercise or any delay in exercising any of such rights shall not
operate as a waiver or variation of that or any other such right. Any defective
or partial exercise of any of such rights shall not preclude any other or
further exercise of that or any other such right. No act or course of conduct or
negotiation on the part of any party shall in any way preclude such party from
exercising any such right or constitute a suspension or any variation of any
such right. At any time prior to any sale, Seller, on the one hand, and MLCC, on
the other, may (a) extend the time for the performance of any of the obligations
or other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto or (c) waive compliance with any of the
agreements of the other party contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party granting the extension waiver.
15. SURVIVAL. The representations, warranties, covenants and agreements
contained in this Agreement shall survive the closing of any mortgage loan and
sale to MLCC and shall not terminate, notwithstanding the termination of this
Agreement, any restrictive or qualified endorsement on any mortgage or
promissory note or MLCC's examination or failure to examine any mortgage file or
MLCC's approval of any mortgage loan for purchase.
16. GOVERNING LAW. This Agreement and all related agreements shall be
governed by, construed and enforced in accordance with the laws of the State of
Florida without reference to the choice of law principles thereof.
17. SEVERABILILTY. In the case any provision in this Agreement or any
related agreement shall be found by a court of competent jurisdiction to be
invalid, illegal or unenforceable, such provision shall be construed and
enforced as if it had been more narrowly drawn so as not to be invalid, illegal
or unenforceable, and the validity, legality and enforceability of the remaining
provisions of this Agreement or any related agreement shall not in any way be
affected or impaired thereby.
18. SUCCESSORS AND ASSIGNS. Seller may not assign, or delegate all or
any part of its rights, duties, and/or obligations hereunder without the written
permission of MLCC which may be withheld in its sole discretion. A change in
ownership, merger, or consolidation of Seller shall be considered an assignment
for purposes of this Agreement.
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19. RELATIONSHIP OF PARTIES. The relationship between the parties is an
independent contractor relationship, and Seller is not, and shall not represent
to third parties that it is acting as, an agent for and on behalf of MLCC.
IN WITNESS WHEREOF, Merrill Lynch Credit Corporation and Island
Mortgage Network have caused this Master Loan Purchase and Sale Agreement to be
duly executed in its corporate name by one of its duly authorized officers, all
as of the date first above written.
MERRILL LYNCH CREDIT CORPORATION
By: /s/ Edward J. Mcdonald
--------------------------
Name: Edward J. Mcdonald
-------------------------
Title: Senior Vice President
-------------------------
WESTMARK MORTGAGE CORPORATION
By: /s/ Payton Story, III
---------------------------
Name: Payton Story, III
-------------------------
Title: President
-------------------------
MASTER AGREEMENT FOR
SALE AND PURCHASE OF MORTGAGE LOANS
This Master Agreement for Sale and Purchase of Mortgage Loans is made
this 31st day of August, 1999, between BankBoston, N.A., having its principal
office and place of business at 100 Federal Street, Boston, MA 02110 ("Buyer"),
and Westmark Mortgage Corporation, a corporation with its principal office and
place of business at 8000 North Federal Highway, Boca Raton, FL 33487
("Seller").
PRELIMINARY STATEMENT
WHEREAS, Seller desires to sell, from time to time, to Buyer, and Buyer
desires to purchase, from time to time, from Seller, certain residential first
and second mortgage loans as described herein on a servicing-released basis, and
which shall be delivered in groups of whole loans on various dates as provided
herein (each a "Settlement Date"); and
WHEREAS, Buyer and Seller desire to prescribe the manner, terms and
conditions of the sale and conveyance of the Mortgage Loans.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:
ARTICLE 1. DEFINITIONS
1.1 Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings:
Agreement: This Agreement, including all Schedules and Exhibits hereto,
as the same may be amended and supplemented from time to time.
Appraisal: A written statement independently and impartially prepared
by a qualified appraiser setting forth an opinion as to the market value of the
Mortgaged Property in accordance with the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 and the regulations thereunder.
Approval Advice: See Section 2.3 of this Agreement.
Assignment of Mortgage: An individual assignment of a Mortgage, notice
of transfer or equivalent instrument in recordable form, sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
give record notice of and effect to the sale of the Mortgage to Buyer.
Bill of Sale and Assignment: A Bill of Sale and Assignment in the form
of Exhibit C hereto.
Business Day: Any day other than a Saturday or Sunday, or a day on
which banking institutions in the state in which Buyer maintains its principal
office are authorized or obligated by law or executive order to be closed.
Confirmatory Memorandum: See Section 2.2 of this Agreement.
FHLMC: Federal Home Loan Mortgage Corporation or any successor thereto.
FNMA: Federal National Mortgage Association or any successor thereto.
HELOC: A Mortgage Loan that is a home equity line of credit or any
other arrangement under which the Mortgagor has the right to demand further
advances from the mortgagee.
<PAGE>
Loan Documents: As to each Mortgage Loan, all agreements, records and
documents in Seller's files with respect to a Mortgage Loan, including at a
minimum but not limited to the documents specified in Exhibit A hereto.
Loan to Value Ratio or LTV: The sum of the original principal amount of
the Mortgage Loan (or, if the Mortgage Loan is a HELOC, the Maximum Loan Amount
of the Mortgage Loan) and the outstanding principal balance of the Permitted
Prior Encumbrance, if any, at the time of origination of the Mortgage Loan,
divided by the lesser of (i) the original purchase price of the Mortgaged
Property if Mortgagor purchased the Mortgaged Property within twelve months of
the Mortgage Loan origination date or (ii) the fair market value of the
Mortgaged Property as set forth in the Appraisal as of a date within 45 days
before the Mortgage Loan origination date.
Maximum Loan Amount: With respect to each Mortgage Loan that is a
HELOC, the maximum principal amount that may be outstanding at any time under
the terms of the related Loan Documents.
Mortgage: The mortgage, deed of trust, and any other document
constituting the basic instruments creating a first or second lien on the real
property owned by the Mortgagor and securing the Note.
Mortgage Loan: An individual residential mortgage loan offered or sold
by Seller to Buyer pursuant to this Agreement, including but not limited to, all
right, title and interest in, to and under all documents, agreements,
instruments and records in respect thereof and all rights, benefits, collateral,
payments, recoveries, proceeds and obligations arising therefrom or in
connection therewith. The Mortgage Loans sold, assigned and transferred to Buyer
under this Agreement shall be identified as provided in Section 3.1 hereof.
Mortgage Loan Schedule: The schedule of Mortgage Loans to be delivered
to Buyer on each Settlement Date as provided in Section 3.1 hereof, which shall
specify each Mortgage Loan purchased by Buyer on that Settlement Date and, as to
each such Mortgage Loan, shall contain the information specified in Exhibit B
hereto.
Mortgaged Property: The real property subject to the Mortgage which
secures a Mortgage Loan.
Mortgagor: The obligor or obligors under a Mortgage Loan.
Note: The original Note or other instrument or agreement evidencing the
indebtedness of the Mortgagor under a Mortgage Loan.
Permitted Prior Encumbrance: With respect to each Mortgage Loan, a
single recorded mortgage, deed of trust or similar lien instrument having lien
priority over the Mortgage and securing indebtedness not exceeding the amount
specified in the Mortgage Loan Schedule as to such Mortgage Loan.
Preliminary Mortgage Loan Schedule: The listing of loans, in the form
of a Mortgage Loan Schedule, which is to be provided to Buyer pursuant to
Section 2.1 hereof on which Seller identifies the Mortgage Loans offered for
sale to Buyer.
Premium: The premium, if any, included in the Purchase Price of a
Mortgage Loan, expressed as a percentage of the unpaid principal balance of the
Mortgage Loan on the Settlement Date, as specified in the Confirmatory
Memorandum as to that Mortgage Loan.
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Purchase Price: The purchase price for each Mortgage Loan shall be an
amount as of the Settlement Date equal to the sum of the: (1) unpaid principal
balances of the Note; (2) accrued interest which is due and not yet paid or
capitalized, calculated in accordance with the terms of the Note, up to but not
including the Settlement Date; and (3) any Premium in accordance with the
Confirmatory Memorandum; less (4) any discount due Buyer in accordance with the
Confirmatory Memorandum.
Repurchase Price: The sum total of: (1) the outstanding principal
balance of the Mortgage Loan, with accrued interest thereon which is due and not
yet paid, through the date the Mortgage Loan is repurchased by Seller; (2) all
advances made by Buyer and all charges due from the Mortgagor; (3) the total
amount, including accrued interest and other expenses paid by Buyer to any
senior lienholders to secure a priority lien position; (4) all reasonable and
necessary expenses, losses and damages paid or incurred by Buyer in connection
with the Mortgage Loan or an investigation of said Mortgage Loan and/or the
related collateral, including, but not limited to, property taxes, maintenance
costs, interest expense, insurance, appraisals, advertising, sales commissions,
reasonable attorney fees, expenses and costs, fines and penalties; and (5) if
the demand for repurchase was made within one year after the Settlement Date,
the Premium, if any, paid by Buyer in respect of the repurchased Mortgage Loan.
Settlement Date: Each date of the funding or payment of the Purchase
Price by Buyer for Mortgage Loans purchased pursuant to this Agreement.
Title Insurance Policy: A mortgagee's title insurance policy, in
standard ALTA loan policy form, which has been validly issued by a title insurer
duly qualified in the jurisdiction in which the Mortgaged Property is located,
which is in full force and effect, which is in an amount at least as great as
the outstanding principal balance of the Mortgage Loan, and which names Seller,
its successors and assigns as the insured party.
Underwriting Guidelines: The BankBoston Wholesale Seller's Manual
heretofore delivered to Seller as may from time to time be amended by Buyer.
ARTICLE 2. OFFER TO SELL AND ACCEPTANCE OF OFFER
2.1 Offer. Subject to the terms and conditions of this Agreement,
during the term of this Agreement, Seller shall offer to sell Mortgage Loans to
Buyer by submitting to Buyer from time to time, for Buyer's review, a
Preliminary Mortgage Loan Schedule together with originals or copies of the Loan
Documents for each of the Mortgage Loans so offered to Buyer. Each such
Preliminary Mortgage Loan Schedule shall include or be accompanied by Seller's
proposed rating of each of the Mortgage Loans therein, in accordance with the
pricing standards attached hereto as Exhibit D, sufficient to identify the
Purchase Price (including any Premium or discount to be used in computing the
Purchase Price) that Seller proposes for each of such Mortgage Loans.
2.2 Acceptance. (a) Buyer may accept Mortgage Loans offered by Seller
by delivering to Seller, within three Business Days after Buyer's receipt of the
Preliminary Mortgage Loan Schedule and Loan Documents, Buyer's confirmatory
memorandum (the "Confirmatory Memorandum") specifying the Mortgage Loans on the
Preliminary Mortgage Loan Schedule that Buyer will purchase and the Purchase
Price (specifying any Premium or discount to be used in computing the Purchase
Price) for each such Mortgage Loan.
(b) Buyer and Seller shall use reasonable efforts to resolve
any difference as to the rating or applicable Purchase Price in respect of any
Mortgage Loan before Buyer delivers its Confirmatory Memorandum. If the
Confirmatory Memorandum specifies a rating or applicable Purchase Price for any
Mortgage Loan that is different from that proposed or previously agreed by
Seller and to which Seller objects, Seller may by prompt notice to Buyer
withdraw the offer of that Mortgage Loan.
(c) If any submission to Buyer under Section 2.1 shall be
incomplete and Buyer shall require completion of the Preliminary Mortgage Loan
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Schedule or Loan Documents to complete Buyer's review, Buyer shall so notify
Seller within three Business Days after Buyer's receipt of such incomplete
information or documents. Buyer shall have an additional three Business Days
after receipt of the complete Preliminary Loan Schedule and Loan Documents in
which to accept such Mortgage Loans by delivery of a Confirmatory Memorandum.
Buyer shall promptly return to Seller the originals and copies of all Loan
Documents with respect to any Mortgage Loan that Buyer does not accept for
purchase.
2.3 Approval Advice. On occasion, Buyer may deliver to Seller a written
Approval Advice whereby Buyer shall agree, in advance of the origination of a
specific Mortgage Loan, to purchase that Mortgage Loan from Seller after
origination.
2.4 Buyer's Discretion. Except as to Mortgage Loans that Buyer shall
have committed to purchase by an Approval Advice, Buyer shall be under no
obligation to purchase any Mortgage Loan offered by Seller and shall have the
absolute and sole discretion and option to agree or decline to purchase any
Mortgage Loan submitted by Seller for Buyer's review.
ARTICLE 3. PURCHASE AND SALE OF MORTGAGE LOANS
3.1 Purchase and Sale. (a) The purchase and sale of all Mortgage Loans
accepted by Buyer shall be completed on the Settlement Date for those Mortgage
Loans, which shall be the third Business Day after Buyer's delivery of its
Confirmatory Memorandum or such other date as to which the parties shall
mutually agree.
(a) On each Settlement Date hereunder, Seller shall sell,
assign, transfer, convey and deliver to Buyer each of the Mortgage Loans that
Buyer has accepted pursuant to the related Confirmatory Memorandum, which sale
shall be confirmed by Seller's execution and delivery to Buyer of a Bill of Sale
and Assignment dated as of the Settlement Date, together with a Mortgage Loan
Schedule listing all of the Mortgage Loans purchased by Buyer on that Settlement
and including the information specified in Exhibit B hereto to be included in a
Mortgage Loan Schedule.
(b) On each Settlement Date, the Purchase Price for the
Mortgage Loans purchased on that Settlement shall be paid by Buyer by wire
transfer to an account designated by Seller.
3.2 Delivery of Loan Documents. (a) On or before the Business Day
immediately preceding each Settlement Date, Seller shall deliver to Buyer the
following for each Mortgage Loan to be purchased on that Settlement Date:
(1) The original Note bearing all intervening endorsements,
endorsed "Pay to the order of BankBoston, N.A., without
recourse" and signed in the name of Seller by an authorized
officer;
(2) The original Mortgage with evidence of recording thereon;
(3) The originals of all intervening assignments of the Mortgage
with evidence of recording thereon showing an unbroken chain
of title from the originator of the Mortgage Loan to Seller;
(4) The original Assignment of Mortgage for each Mortgage Loan, in
recordable form, in blank;
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(5) The Title Insurance Policy or, in lieu thereof, the title
insurer's binder or commitment to issue the Title Insurance
Policy with a statement by the title insurer or its authorized
agent on such commitment or binder that the priority of the
lien of the Mortgage as of the date of the origination of the
Mortgage Loan is insured; provided, however, that if a binder
or commitment shall be delivered in lieu of the Title
Insurance Policy, the Title Insurance Policy in conformity
with the binder or commitment shall be delivered to Buyer
within sixty (60) days after the Settlement Date;
(6) If the Mortgage Loan has at any time been subject to any
security interest, pledge or hypothecation for the benefit of
any person, Seller shall deliver to Buyer, inform satisfactory
to Buyer, a certification by the former secured party that
such security interest has been released.
(b) In the event that Seller cannot deliver to Buyer a duly
recorded Mortgage or assignment of Mortgage or any other document required to be
recorded under this Agreement when required above solely because of a delay
caused by the public recording office when such document(s) has been delivered
for recordation, Seller shall deliver to Buyer a certified copy of each such
document(s) with a statement thereon signed by an officer of the title insurer,
the closing agent or the closing attorney certifying each to be a true and
correct copy of document(s) delivered to the appropriate public recording
official for recordation. Seller shall deliver to Buyer such recorded
document(s) with evidence of recording indicated thereon no later than 15 days
after Seller receives such document, but in any event, no later that 120 days
from the Settlement Date. In the event that missing documents are not received
by Buyer within the above-stated time period strictly as a result of delay
caused by the public recording office(s), Buyer may by written consent extend
the time for delivery of the missing documents if in Buyer's sole discretion
Seller is using prudent and diligent follow-up efforts to obtain and deliver the
missing documents. In the event that missing documents are not received by Buyer
within the above-stated time period or any extension thereof to which Buyer
shall have agreed in Buyer's discretion, Buyer may, at any time thereafter
before Buyer's receipt of such missing original documents, exercise any of the
remedies provided in Article 5 hereof.
(c) Within three Business Days following the Settlement Date,
Seller shall deliver to Buyer all other Loan Documents not theretofore delivered
or required to have been delivered to Buyer.
3.3 Conditions of Settlement. Buyer's obligations to purchase Mortgage
Loans on each Settlement Date shall be subject to Seller's satisfaction or
Buyer's waiver of each of the following conditions:
(a) All of Seller's representations and warranties under this
Agreement shall be true and correct as of the related Settlement Date and no
event shall have occurred which, with notice or the passage of time, would
constitute a breach of Seller's representations, warranties or obligations under
this Agreement;
(b) Buyer shall have received all documents as specified
herein, in such forms as are agreed upon and acceptable to Buyer, duly executed
by all signatories;
(c) Seller shall have delivered to Buyer before the first
Settlement Date, in form and substance satisfactory to Buyer, an opinion of
Seller's counsel as to the matters in Sections 4.1(a) through (f), inclusive.
(d) Seller shall have delivered to Buyer a certificate of
Seller's Secretary or Clerk, including a true and correct copy of resolutions of
Seller's Board or Directors or other authorization for Seller's execution,
delivery and performance of this Agreement and designating the officers or other
representatives of Seller authorized to execute and deliver this Agreement, to
endorse and deliver Notes, to execute and deliver instruments of assignments and
to act for Seller in respect of transactions under this Agreement.
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(e) All other terms and conditions of this Agreement shall
have been complied with.
3.4 Title and Possession of Loan Files. Upon payment of the Purchase
Price on the Settlement Date, title to the Mortgage Loans, all Loan Documents
and all rights, benefits, collateral, payments, recoveries, proceeds and
obligations arising therefrom or in connection therewith, shall vest in Buyer.
All rights arising out of the Mortgage Loans, including but not limited to all
funds received on or in connection with the Mortgage Loans and all records or
documents with respect to the Mortgage Loans prepared by or which come into the
possession of Seller on or after the Settlement Date, shall be received and held
by Seller in trust for the benefit of Buyer as the owner of the Mortgage Loans
and shall promptly be paid and delivered to Buyer.
3.5 Additional Title Documents. Seller agrees at any time, and from
time to time, upon the request of Buyer on and after the applicable Settlement
Date hereof to use its best efforts to execute and deliver such further
instruments and documents of conveyance as are presented to Seller by or on
behalf of Buyer as shall be reasonably necessary to vest or confirm in Buyer
legal or equitable title in and to the Mortgage Loans and the Loan Documents.
3.6 Adjustments. In the event that within sixty days after any
Settlement Date either party discovers any error or omission with respect to any
payment made by a party pursuant to this Agreement, Seller and Buyer shall
consult with each other and use their best efforts to agree to the proper
calculation or amount and to pay any appropriate cash adjustments therefor.
Neither the correction of any error nor the payment of a cash adjustment in
connection therewith shall be deemed a waiver or cure of any breach of a
representation or warranty contained in Article 5 hereof unless Buyer waives
such breach in writing.
3.7 Advances. From and after the applicable Settlement Date, Buyer
shall make all advances required to be made under any Mortgage Loan that is a
HELOC.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 General Representations and Warranties of Seller. Seller hereby
represents and warrants to Buyer as of the date of this Agreement and as of each
Settlement Date as follows:
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and has all required
powers and all material governmental licenses, authorization, consents and
approvals required to carry on its business as now conducted. In particular,
Seller is licensed and qualified to transact a mortgage origination business in
and is in good standing under the laws of each state where a Mortgaged Property
is located or is otherwise not required under applicable law to effect such
licensing and qualification, and no demand for such licensing or qualification
has been made upon Seller by any state where a Mortgaged Property is located.
(b) Seller has the full power and authority to hold and sell
the Mortgage Loans, and to execute, deliver and perform, and to enter into and
consummate all transactions contemplated by, this Agreement.
(c) The execution, delivery and performance of this Agreement
has been duly authorized by all required action on the part of Seller, and this
Agreement constitutes the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other laws relating to or affecting the rights of
creditors generally, and by general equity principles.
(d) The execution and delivery of this Agreement by Seller and
the performance by Seller of the obligations to be performed by Seller hereunder
do not, and will not, violate any provision of law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently in effect
having applicability to Seller or to the corporate charter or by-laws of Seller
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and will not result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other agreement, lease or instrument to which
Seller is a party or by which Seller or any of Seller's properties may be bound
or affected.
(e) No litigation or administrative, investigative or
arbitration proceeding is pending or, to the best of Seller's knowledge,
threatened against Seller, which if determined adversely to Seller would
adversely affect the sale of the Mortgage Loans to Buyer, the execution,
delivery or enforceability of this Agreement or which would have a material
adverse effect on the financial condition of Seller.
(f) No consent, approval, authorization, exemption or order
of, or notice to or registration or filing with, any court or governmental
agency, authority or administrative or regulatory body is required for the
execution, delivery and performance by Seller of or compliance by Seller with
this Agreement, the delivery of the Loan Documents to Buyer the sale of the
Mortgage Loans to Buyer or the consummation of the transactions contemplated by
this Agreement.
(g) Seller has not incurred any obligation, made any
commitment or taken any action which might result in a claim against Buyer or an
obligation by Buyer to pay a sales brokerage commission, finder's fee or similar
fee in respect to the transactions between Buyer and Seller as described in this
Agreement.
4.2 Financial Statements. Seller represents and warrants to Buyer that
Seller's financial statements furnished by Seller to Buyer were prepared in
accordance with generally accepted accounting principles consistently applied,
and fully and fairly present the financial condition of Seller as of the
respective dates thereof and the results of operations for the respective
periods indicated therein, and there has been no material adverse change in the
financial condition or business of Seller since the date of the last of such
financial statements. During the term of this Agreement, Seller shall deliver to
Buyer:
(a) Within 90 days after the last day of each fiscal year of
Seller, a copy of Seller's annual financial statement with the report thereon of
independent certified public accountants in form generally regarded as
unqualified;
(b) Within 45 days after the end of each fiscal quarter,
Seller's internally prepared financial statements for the fiscal quarter and for
the fiscal year-to-date prepared by Seller in accordance with generally accepted
accounting principles consistently applied;
(c) A copy of any statement or report filed by Seller with any
regulatory authority having jurisdiction over Seller, as and when the same shall
be filed with the regulatory authority;
(d) A copy of any notice received by Seller from any Federal
regulatory authority, or any regulatory authority of any state in which Seller
conducts business, that asserts a claim or matter which if adversely determined
would have a material effect on Seller's business or any Mortgage Loans.
(e) Promptly, such other financial information with respect to
Seller and its affiliates as Buyer may reasonably request from time to time.
4.3 Representations and Warranties of Seller As to Each Mortgage Loan.
Seller hereby represents and warrants to Buyer that as of each Settlement Date
with respect to each Mortgage Loan purchased:
(a) All information set forth as to the Mortgage Loan in any
Mortgage Loan Schedule is complete, true and correct; all other information
furnished to Buyer in writing by Seller with respect to the Mortgage Loan is
true and correct; the Loan Documents delivered by Seller to Buyer include all of
Seller's records and documents with respect to the Mortgage Loan; and the
Mortgage Loan conforms to the Underwriting Guidelines and the conditions of any
applicable Approval Advice.
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(b) All payments required under the terms of the Note to have
been made up to 30 days prior to the Settlement Date have been made, and the
first scheduled payment following the Settlement Date shall be made to the
Buyer.
(c) The Note and the Mortgage have not been assigned or
pledged, and Seller has good and marketable title thereto and is the sole owner
thereof and has full right to transfer and sell the Mortgage Loan to Buyer free
and clear of any encumbrance, equity, lien, pledge, charge, claim or security
interest; and the Assignment of Mortgage has been duly executed by Seller and is
in form acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located.
(d) All parties to the Note and the Mortgage had legal
capacity to enter into the Mortgage Loan and to execute and deliver the Note and
the Mortgage; the Note and the Mortgage have been duly and properly executed and
delivered by such parties; the Note and Mortgage are in every respect genuine
and are the legal, valid, binding and enforceable obligations of the Mortgagor;
and the Note and Mortgage contain customary, valid, legal and enforceable
provisions such as to render the fights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the benefits of
the security created thereby.
(e) The proceeds of the Mortgage Loan, including any escrows
of such proceeds, have been fully disbursed; the Note and the Mortgage are not
subject to any right of rescission, set-off, counterclaim or defense, including
the defense of usury, nor will the operation of any of the terms of the Note or
the Mortgage, or the exercise of any right thereunder, render the Note or the
Mortgage unenforceable, or subject to any fight of rescission, set-off,
counterclaim or defense, including the defense of usury; and no such fight of
rescission, set-off, counterclaim or defense has been asserted with respect
thereto.
(f) There is no agreement with the Mortgagor regarding any
variation of the interest rate or schedules of payment (except as set forth in
the Note) or other terms and conditions of the Mortgage Loan; no Mortgagor has
been released from liability on the Note; and no property has been released from
the Mortgage.
(g) Any and all requirements of any federal, state or local
law including, without limitation, usury, truth in lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity or
disclosure laws applicable to the Mortgage Loan and the transfer thereof
hereunder (including notice of transfer of servicing to Buyer) have been
complied with in the origination, servicing and collection of the Mortgage Loan.
(h) The Mortgagor has executed a statement to the effect that
the Mortgagor has received all disclosure materials including the notice of the
right of cancellation or rescission required by applicable law with respect to
the making of the Mortgage Loan and any waiver of any right of cancellation or
rescission exercised by the Mortgagor was in accordance with applicable law and
is binding on the Mortgagor.
(i) The Mortgage was recorded in the appropriate public office
of land evidence records concurrently with the origination of the Mortgage Loan
so as to perfect the lien of the Mortgage under the law of the jurisdiction in
which the Mortgaged Property is located; and the Mortgage is a valid, subsisting
and enforceable lien on the Mortgaged Property, including all improvements on
the Mortgaged Property securing all advances made through the Settlement Date,
subject only to (a) the Permitted Prior Encumbrance, (b) the lien of current
real property taxes and assessments not yet due and payable, (c) covenants,
conditions and restrictions, rights of way, easements and other matters of the
public record as of the date of recording acceptable to mortgage lending
institutions generally and which do not adversely affect the use, value or
marketability of the Mortgaged Property, and (d) other matters to which like
properties are commonly subject which do not materially interfere with or
adversely affect the benefits of the security intended to be provided by the
Mortgage or the use, enjoyment, value or marketability of the related Mortgaged
Property.
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(j) Seller has not received notice of: (1) any proceeding for
the total or partial condemnation of the Mortgaged Property, (2) any subsequent,
intervening mortgage, lien, attachment, lis pendens or other encumbrance
affecting the Mortgaged Property or (3) or any default under any mortgage, lien
or other encumbrance senior to the Mortgage.
(k) No Mortgagor in respect of the Mortgage Loan is deceased;
there is no proceeding pending for relief by or against any such Mortgagor under
the Federal Bankruptcy Code or any state insolvency law; and there are no
circumstances or conditions with respect to the Mortgaged Property or any such
Mortgagor that can reasonably be expected to cause the Mortgage Loan to become
delinquent or to affect adversely the value or marketability of the Mortgaged
Property.
(l) Where required or customary in the jurisdiction in which
the Mortgaged Property is located, Seller has filed for record a request for
notice of any action by a senior lienholder under a senior lien, and Seller has
notified any senior lienholder in writing of the existence of the Mortgage Loan
and requested notification of any action to be taken against the Mortgagor by
the senior lienholder.
(m) All taxes, ground rents, water charges, sewer rents,
assessments, insurance premiums, leasehold payments, including assessments
payable in future installments or other outstanding charges affecting the
Mortgaged Property are current.
(n) The Appraisal made in connection with the Mortgage Loan
was performed by a qualified appraiser in accordance with the requirements of
the Financial Institutions Reform, Recovery and Enforcement Act of 1989
applicable to federally related mortgage loans.
(o) Seller has not been advised, has received no notice or
report and has no knowledge that any hazardous or toxic materials or wastes or
products regulated by any law or ordinance or asbestos or asbestos products or
materials or polychlorinated biphenyls or urea formaldehyde insulation have been
used or employed in the construction, use or maintenance of the Mortgaged
Property or have ever been stored, treated at or disposed of on the Mortgaged
Property, or that there has occurred or that any person or entity has alleged
that there has occurred, upon the Mortgaged Property any spillage, leakage,
discharge or release into the air, soil or groundwater of any hazardous material
or regulated wastes.
(p) All buildings upon the Mortgaged Property are insured by a
generally acceptable insurer against loss by fire, hazards of extended coverage
and such other hazards as are customary in the area where the Mortgaged Property
is located, pursuant to insurance policies conforming to the requirements of
FNMA and FHLMC. All such insurance policies contain a standard mortgagee clause
naming Seller, its successors and assigns as mortgagee and all premiums thereon
have been paid. If upon origination of the Mortgage Loan, the Mortgaged Property
was in an area identified on a Flood Hazard Map or Flood Insurance Rate Map
issued by the Federal Emergency management Agency as having special flood
hazards (and such flood insurance has been made available) a flood insurance
policy meeting the requirements of the current guidelines of the Federal
Insurance Administration is in effect which policy conforms to the requirements
of FNMA and FHLMC. The Mortgage obligates the Mortgagor thereunder to maintain
all such insurance at the Mortgagor's cost and expense, and on the Mortgagor's
failure to do so, authorizes the holder of the Mortgage to maintain such
insurance at Mortgagor's cost and expense and to seek reimbursement therefor
from the Mortgagor.
(q) All improvements which were considered in determining the
Appraised Value of the Mortgaged Property lay wholly within the boundaries and
building restriction lines of the Mortgaged Property, and no improvements on
adjoining properties encroach upon the Mortgaged Property.
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(r) If the Mortgage is a deed of trust, a trustee, duly
qualified under applicable law to serve as such, has been properly designated
and currently so serves and is named in the Mortgage, and no fees or expenses
are or will become payable by Buyer to the trustee under the deed of trust,
except in connection with a trustee's sale after default by the Mortgagor.
(s) Each Note and Mortgage contains a provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event the related Mortgaged Property is sold without the prior consent of
the mortgagee thereunder, unless prohibited by the law of the jurisdiction in
which the Mortgaged Property is located.
(t) The Mortgage Loan contains no provisions pursuant to which
monthly payments are paid or partially paid with funds deposited in any separate
account established by Seller, the Mortgagor, or anyone on behalf of the
Mortgagor, or are paid by any source other than the Mortgagor; the Mortgage Loan
contains no other similar provisions which may constitute a "buydown" provision;
the Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest feature; and
the Mortgage Loan was not made in connection with the construction or
rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange
of a Mortgaged Property.
(u) The Mortgaged Property consists of real property with a
single family residence erected thereon, or a two to four family dwelling, or an
individual condominium unit, or an individual unit in a planned unit development
none of which is a cooperative apartment, and is lawfully occupied under
applicable law; and all inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the Mortgaged Property
and, with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy, have been made or obtained from the
appropriate authorities.
(v) If the Mortgage Loan is a HELOC, the Mortgage is in form
and contains terms sufficient to be an "open-end" mortgage under the laws of the
jurisdiction in which the Mortgaged Property is located so as to secure advances
made after the initial recording of the Mortgage up to the Maximum Loan Amount
with the same priority as advances secured thereby that have been made at the
time of recording of the Mortgage.
4.4 Fair Lending Laws. Without limiting and in addition to the above,
Seller acknowledges and understands that Buyer is committed to full compliance
with any and all applicable laws, rules, regulations and orders relating to fair
lending (the "Fair Lending Laws"). In connection with such commitment, Seller
represents, warrants and covenants that it shall not engage in any practice or
transaction relating to a Mortgage Loan which would directly or indirectly have
the effect of discriminating against any Mortgage Loan applicant on the basis of
race, color, religion, national origin, sex, marital status or age (provided
that the applicant has the legal capacity to contract), the fact that all or
part of the applicant's income derives from any public assistance program, or
the fact that the applicant has in good faith exercised any rights under the
Consumer Credit Protection Act. Buyer and Seller shall cooperate to develop and
implement underwriting criteria and other Mortgage Loan practices which (a) are
consistent with safe and sound banking practices and Co) are consistent and
comply with the Fair Lending Laws.
ARTICLE 5. BREACH OF REPRESENTATION AND WARRANTIES
5.1 Survival of Representations and Warranties. It is understood and
agreed that the representations and warranties set forth in Article 4 shall
survive the sale of the Mortgage Loans and the delivery of the Loan Documents to
Buyer and shall inure to the benefit of Buyer, its successors and assigns,
notwithstanding any restrictive or qualified endorsement or statement on any
Note or Assignment of Mortgage or the examination of any documents by Buyer.
5.2 Repurchase. (a.) Upon discovery by either Seller or Buyer of a
breach of any of the representations and warranties set forth in Article 4 above
or if Seller fails to timely deliver a material Loan Document as required
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hereunder, the party discovering such breach shall give prompt written notice to
the other. If Seller shall not correct or cure any such breach within thirty
days of its discovery or its receipt of notice of such breach, Seller shall upon
demand of Buyer and at the sole option and absolute discretion of Buyer: (1)
repurchase the Mortgage Loan(s) affected for the Repurchase Price within thirty
days of receipt of written notification; or (2) if the Mortgage Loan(s) has been
sold by Buyer or the Mortgaged Property(ties) has been liquidated or sold by
Buyer, Seller shall, within thirty days of written notification, pay Buyer the
Repurchase Price (including the costs of the liquidation or sale), less the net
proceeds from the sale of the Mortgage Loan or the sale or liquidation of the
Mortgaged Property. (b.) If the first scheduled payment after the Settlement
Date for the Mortgage Loan shall not be made by the Mortgagor to the Buyer
within the grace period specified in the applicable Note, the seller shall
repurchase that Mortgage Loan for the Repurchase Price within thirty days after
written demand from Buyer.
5.3 Reassignment. Upon receipt of the Repurchase Price, in immediately
available funds, Buyer shall reassign the Mortgage Loan affected and any right
Buyer may have in the relevant Mortgaged Property to Seller free and clear of
all liens, encumbrances, claims, or interest of any person or entity claiming
by, through, or under Buyer without recourse and shall execute and deliver to
Seller in recordable from and assignment of Buyer's beneficial interest in the
affected Mortgage, as well as other documents necessary to reflect the
reassignment of any title protection and insurance policies.
5.4 Buyer's Right to Liquidate. In the event that Seller does not
repurchase a Mortgage Loan within thirty days of notification by Buyer as
required by Section 5.2 above, any action taken by Buyer to sell or liquidate a
Mortgage Loan or Mortgaged Property in good faith and in a commercially
reasonable manner shall be final and conclusively binding upon Seller in
determining the amount payable by Seller to Buyer under Section 5.2 above.
5.5 Indemnification by Seller. In addition to the foregoing obligations
under this Article, Seller shall indemnify Buyer and hold Buyer and its parent,
subsidiaries, affiliates, directors, officers and employees harmless against any
claim, action, demand, proceeding and suit, whether or not groundless, and
against every liability, cost or damage (including reasonable legal fees and
related costs), arising out of or directly or indirectly from: (i) any material
breach of Seller's representations and warranties contained in Article 4, (ii)
any other breach of this Agreement by Seller or its agents, officers or
employees, unless such breach arises out of an act or omission of Buyer, and
(iii) any other act or omission by Seller or its agents, officers or employees
with respect to any Mortgage Loan up to and including the Settlement Date as to
such Mortgage Loan.
5.6 Indemnification by Buyer. Buyer shall indemnify Seller and hold
Seller and its parent, subsidiaries, affiliates, directors, officers and
employees harmless against any claim, action, demand, proceeding and suit,
whether or not groundless, and against every liability, cost or damage
(including reasonable legal fees and related costs), arising out of or directly
or indirectly from any act or omission by Buyer or its agents, officers or
employees with respect to any Mortgage Loan after the Settlement Date unless
such act or omission arises from Seller's breach of its obligations.
5.7 Indemnification Generally. (a) A claim for indemnification pursuant
to this Article shall be made, if at all, within five (5) years after the
applicable Settlement Date notwithstanding any statute of limitations that may
specify a shorter period, the provisions of which are hereby waived.
(b) As a condition of any claim for indemnification under this
Article, the indemnifying party shall be given timely notice of any claim or
demand as to which indemnification may be claimed and shall have the right,
together with the indemnified party, to participate in the defense, compromise
or settlement thereof through the indemnifying party's own attorney and at the
indemnifying party's expense.
ARTICLE 6. REFINANCINGS AND PREPAYMENTS
6.1 Non-Solicitation of Mortgagors. For three (3) years from and after
the Settlement Date as to any Mortgage Loan, Seller nor any officer, employee,
agent or representative of Seller shall knowingly solicit any Mortgagor in
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respect of that Mortgage Loan, either singly or as part of a group, on behalf of
Seller or any other entity in any manner that would encourage prepayment of any
Mortgage Loan, except that Seller may continue to make general solicitations to
the public and may advertise, sell and provide all financial services offered by
Seller.
6.2 Refinancings by Seller sold to Buyer. In the event a Mortgagor
refinances a Mortgage Loan with Seller or any affiliate of Seller, and such
refinanced Mortgage Loan is then owned or serviced by Buyer or Buyer otherwise
retains a financial interest in the Mortgage Loan, Seller will offer Buyer the
right of first refusal to purchase the refinancing loan. If Buyer purchases the
refinancing loan, Buyer will pay to Seller the normal premium percentage on the
refinancing loan.
6.3 Prepayments. If any Mortgage Loan is prepaid by the Mortgagor,
other than by a refinancing by Buyer or any of its subsidiaries or affiliates,
Seller shall pay to Buyer, upon demand by Buyer, the appropriate percentage
specified below of the Premium, if any, initially paid by Buyer to Seller with
respect to the prepaid Mortgage Loan:
(a) If the Mortgage Loan is prepaid within twelve months after
the Settlement Date of such Mortgage Loan, the entire Premium less one twelfth
(1/12th) of the Premium for each month from the Settlement Date of such Mortgage
Loan to the date of prepayment; or
(b) If the Mortgage Loan is prepaid more than twelve months
after the Settlement Date of such Mortgage Loan, none of the Premium.
Any premium rebate by Seller hereunder shall be offset by any prepayment premium
specified in the Loan Documents to the extent such prepayment premium is
collected by Buyer, provided that Buyer shall use reasonable efforts to collect
the prepayment premium except where there is a substantial question as to the
enforceability of the prepayment premium.
6.4 Insurance Prepayment. Insurance refund or credits of any kind
whatsoever shall be the sole responsibility of Seller in the event of prepayment
of any Mortgage Loan, cancellation of insurance or any other event requiring
refunding or crediting of unearned insurance premiums. Upon Buyer's demand,
Seller shall pay to Buyer, from the Seller's own funds, any required insurance
premium rebate resulting from the prepayment, cancellation, refinancing or other
termination of any Mortgage Loan. Upon any such payment, Buyer shall assign
Seller any rights of Buyer against the insurer for any rebate made to Mortgagor.
ARTICLE 7. MISCELLANEOUS
7.1 Termination. This Agreement shall terminate upon the earliest to
occur of the following:
(a) The first anniversary of the date of this Agreement,
provided that the term of this Agreement shall thereafter be extended from
year-to-year unless terminated by either party by written notice to the other
not less than thirty days before the end of the then current term; or
(b) The termination date specified by either party by written
notice to the other, which shall not be less than thirty days after the date of
such notice.
The representations and warranties made by Seller as to any Mortgage Loan
purchased by Buyer during the term of this Agreement and the obligations of the
parties hereunder in respect of such Mortgage Loans shall survive the
termination of this Agreement.
7.2 Entire Agreement. This Agreement constitutes the entire agreement
and supersedes all other prior agreements and understanding, both written and
oral, between Buyer and Seller with respect to the subject matter hereof.
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7.3 Headings. The headings and subheadings of Articles and Sections
contained in this Agreement, except the terms identified for definition in
Article 1 and elsewhere in this Agreement are inserted for convenience only and
shall not affect the meaning or interpretation of this Agreement or any
provision thereof.
7.4 Governing Law. This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to principles of conflicts of law.
7.5 Public Announcements. Neither Buyer nor Seller shall make any
public announcement or disclosure concerning this Agreement without the consent
of the other party, except as may be required by law.
7.6 Successors and Assigns. All terms and conditions of this Agreement
shall be binding on the successors and assigns of Seller and Buyer. Seller shall
not, without the prior written consent of Buyer, assign any of its rights or
obligations hereunder.
7.7 Parties in Interest. Nothing in this Agreement, express or implied,
is intended to or shall confer upon any person other than Buyer and Seller any
legal or equitable rights, benefits, claims or remedies of any nature whatsoever
or by reason of this Agreement or any provisions contained herein, it being the
intention of the parties hereto that this Agreement, the obligations and
statements of responsibilities hereunder, and all other conditions and
provisions hereof are for the sole and exclusive benefit of Seller and Buyer,
and their successors and permitted assigns, and for the benefit of no other
person.
7.8 Modification. No amendment or other modification of this Agreement
shall be effective except pursuant to a written agreement executed by the duly
authorized representatives of Buyer and Seller.
7.9 No Agency or Partnership. This is an agreement of purchase and
sale; no partnership or joint venture is created by this Agreement. Neither
party is constituted or appointed as the agent or representative of the other
party, and neither party is authorized or empowered to enter into any agreement
or incur any obligation on the other party's behalf or commit the other party in
any manner or thing whatsoever.
7.10 Notices. Any notice, request, demand, consent, approval or other
communication to any party hereto shall be effective when received and shall be
given in writing, and delivered in person against receipt therefor, or sent by
certified mail, postage prepaid, or courier service or confirmed facsimile at
this address set forth below or at such other address as it shall hereafter
furnish in writing to the others. Where any provision of this Agreement directs
a method of communication or notification, such method must be used for such
communication or notification. All such notices and other communications shall
be deemed given on the date received by the addressee.
If to Seller, to:
Westmark Mortgage Corporation
8000 North Federal Highway
Boca Raton, FL 33487
Attention: Payton Story, III
Telephone No.: 561-526-3300
Facsimile No.: 561-526-3309
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If to Buyer, to:
BankBoston, N.A.
15 Westminster Street
Providence, RI 02903
Attention: Paul C. Mangelsdorf III, Director of Consumer Asset
Finance
Telephone No.: 401-278-8209
Facsimile No.: 401-278-7952
7.11 Waiver. Seller and Buyer may waive their respective fights, powers
or privileges under this Agreement; provided, that such waiver shall be in
writing; and further provided, that no failure or delay on the part of Seller or
Buyer to exercise any of its respective rights, powers or privileges under this
Agreement will operate as a waiver thereof, nor will any single or partial
exercise of any right, power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege by Seller or Buyer under the terms of this Agreement.
7.12 Costs, Fees and Expenses. (a) If any legal proceeding is
instituted by either party against the other under this Agreement or in respect
to any Mortgage Loan, the non-prevailing party shall also be required to pay the
prevailing party's costs and expenses of such litigation, including reasonable
attorney fees.
(b) Except as otherwise provided in this Agreement, each party
agrees to pay all costs, fees and expenses which it has incurred in connection
with or incidental to the matters contained in this Agreement, including without
limitation any fees and disbursements to its accountants and counsel.
7.13 Severability. If any provision of this Agreement is invalid or
unenforceable, then, to the extent such invalidity or unenforceability shall not
deprive either party of any material benefit intended to be provided by this
Agreement, all of the remaining provisions of this Agreement shall remain in
full force and effect and shall be binding upon the parties hereto.
7.14 Remedies. The parties agree that immediate and irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
7.15 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, Seller and Buyer each has caused this Agreement to
be executed on its behalf by its duly authorized representative, all as of the
date first above written,
Seller: Westmark Mortgage Corporation
By: /s/ Payton Story, III
-----------------------------
Name: Payton Story, III
-----------------------------
Title: President and Chief Operating
Officer
-----------------------------
Buyer: BankBoston, N.A.
By: /s/ Paul C. Mangelsdorf III
-----------------------------
Name: Paul C. Mangelsdorf III
-----------------------------
Title: Director, Consumer Asset Finance
-----------------------------
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EXHIBIT A
LOAN DOCUMENTS
(1) The Note;
(2) The Mortgage;
(3) All intervening assignments of the Mortgage with evidence of recording
thereon showing an unbroken chain of title from the originator of the
Mortgage Loan to Seller;
(4) The Assignment of Mortgage;
(5) The Title Insurance Policy;
(6) Federal and state Fair Lending and Equal Credit Notices including the
truth-in-lending statement and rescission notices;
(7) The Appraisal and, if the Mortgaged Property had been purchased by the
Mortgagor within 12 months prior to the origination of the Mortgage, a
copy of the settlement sheet or other evidence as to the purchase price
paid for the Mortgaged Property; and
(8) The Mortgagor's loan application;
(9) Credit reports with respect to the Mortgagor obtained in connection
with the Mortgagor's application;
(10) All written communications and memoranda of oral communications with
the Mortgagor in respect of the Mortgage Loan;
(11) All records of disbursements made and payments received in respect of
the Mortgage Loan;
(12) All insurance policies, binders, and certificates in respect of the
Mortgage Property.
15
<PAGE>
EXHIBIT B
MORTGAGE LOAN SCHEDULE
(1) Loan number
(2) Mortgagor's name
(3) Street Address of Mortgaged Property, including city, state and zip
code
(4) Principal Amount
(5) Interest Rate
(6) Maturity Date
(7) Next payment due date
(8) Appraised Value
(9) Prior Encumbrance Holder
(8) Prior Encumbrance Amount Secured
(9) LTV
(10) Prepayment Premium
(11) Maximum Loan Amount
<PAGE>
EXHIBIT C
BILL OF SALE AND ASSIGNMENT
BILL OF SALE AND ASSIGNMENT, dated ____________________________ from
_____________________________________________ ("Seller") to BankBoston
("Buyer").
FOR VALUE RECEIVED, pursuant to the Master Agreement for Sale and
Purchase of Mortgage Loans dated as of by and between the Seller and the Buyer
(the "Agreement"), the Seller does hereby sell, assign, transfer and convey unto
Buyer, its successors and assigns, all of the undersigned Seller's right, title
and interest in, to and under each and every Mortgage Loan (the "Mortgage
Loans") identified on the Mortgage Loan Schedule appended hereto, together with
all right, title and interest in, to and under all documents, agreements,
instruments and records in respect thereof and all rights, benefits, collateral,
payments, recoveries, proceeds and obligations arising therefrom or in
connection therewith.
And Seller hereby represents, warrants and confirms to Buyer that all
of Seller's representations and warranties made in or pursuant to the Agreement
are true and correct as of the date hereof and no event has occurred which, with
notice or the passage of time, would constitute a breach of Seller's
representations, warranties or obligations under the Agreement.
And Seller hereby grants to Buyer a power of attorney, with full power
of substitution, to execute in Seller's name and on Seller's behalf such
notices, endorsements (including, without limitation, endorsements of the
Notes), consents, Assignment of Mortgages, and other instruments and documents
which may be necessary in Buyer's judgment to evidence the assignment of the
Mortgage Loans or to record or otherwise perfect Buyer's interest therein, or
which may be otherwise consistent with the sale and assignment of the Mortgage
Loans effected under the Agreement. This power of attorney is coupled with an
interest and is irrevocable.
All terms used herein and not otherwise defined shall have the meeting
set forth in the Agreement.
This Bill of Sale and Assignment is made WITHOUT RECOURSE OR WARRANTY
to the Seller, except to the extent specifically provided for in the Agreement.
IN WITNESS WHEREOF, the undersigned Seller has caused this Bill of Sale
and Assignment to be executed on its behalf by its duly authorized officer, this
_______ day of ______________________.
Seller:
By:________________________
Print Name:________________
Title:_____________________
[NOTARIAL ACKNOWLEDGMENT]
<PAGE>
EXHIBIT D
MORTGAGE LOAN PRICING
A. The Premium for fixed rate Mortgage Loans shall be calculated as
follows:
The Premium (expressed in points) for each Mortgage Loan will be equal
to:
Loan Interest Rate - Buy Rate
-----------------------------
40 basis points
Where the Buy Rate and the Loan Interest Rate are expressed in basis
points, and the Buy Rate is as defined in the Wholesale Pricing Matrix
as periodically amended. Buyer will not purchase any loan where the
Loan Interest Rate exceeds the Buy Rate by more than 400 basis points.
B. The Premium for variable rate Mortgage Loans based on an index rate,
such as 6-month LIBOR, shall be calculated as follows:
The Premium (expressed in points) for each Mortgage Loan will be equal
to:
Loan Margin - Buy Rate Margin
-----------------------------
35 basis points
Where the Loan Margin is defined as the Loan Interest Rate less the
index rate applicable to the loan, all expressed in basis points. Buy
Rate Margin is as defined in the Wholesale Pricing Matrix as
periodically amended. Buyer will not pay a Premium that exceeds 5
points.
C. The Premium for HELOCs shall be calculated as follows:
The Premium (expressed in points) for each HELOC will be equal to:
Loan Margin - Buy Rate Margin
-----------------------------
25 basis points
Where the Loan Margin is defined as the Loan Interest Rate less the
index rate applicable to the loan, all expressed in basis points. Buy
Rate Margin is as defined in the Wholesale Pricing Matrix as
periodically amended. The Premium will be paid only on the Loan balance
outstanding at the time of purchase. Buyer will not pay a Premium that
exceeds 4 points.
D. The following terms apply to the Mortgage Loans:
1) Buy-downs will not be accepted.
2) The above terms may change at any time subject to the Buyer's
discretion.
Exhibit 10.9
MORTGAGE BROKER AGREEMENT
This agreement (the "Agreement") is effective as of the 23 day of March, 1999,
and is entered into in San Jose, California, by and between FIRST FRANKLIN
FINANCIAL CORPORATION, a Delaware corporation ("FFFC"), and WESTMARK MORTGAGE
CORP. ("BROKER").
RECITALS
- --------------------------------------------------------------------------------
A. BROKER is in the business of negotiating loans on behalf of others
("Borrower(s)") for a fee or other consideration.
B. FFFC is in the business of, among other things, making loans secured by
real property.
C. The parties wish to establish a relationship whereby BROKER. as an
independent contractor, will submit Borrower loan packages to FFFC for
possible funding ("Loan(s)"), all in accordance with the terms contained
herein.
AGREEMENT
- --------------------------------------------------------------------------------
NOW, THEREFORE, the parties agree as follows:
1. SUBMISSION OF LOAN Packages. BROKER will:
------------------
1.1 COMPLETED PACKAGES. Submit to FFFC completed Loan packages for
Borrowers under such programs, terms, and requirements as FFFC
may establish from time to time;
1.2 CREDIT INFORMATION. Furnish to FFFC at BROKER'S sole expense
such credit, financial, and other information concerning
Borrowers that FFFC may require in determining whether to
approve and fund the Loan(s); and
1.3 OTHER SERVICES. Perform at BROKER'S sole expense such other
services as FFFC shall require in closing the Loan(s). No
Appraisal or Title company controlling, controlled by or under
common control with Broker shall be used in connection with
the closing of any loan.
2. FFFC'S DISCRETION. Nothing in this Agreement shall require FFFC to
approve and/or fund any Loan presented by BROKER, which approval shall
be solely within FFFC's absolute discretion. BROKER shall not warrant
or represent to any Borrower that FFFC has approved or will approve and
fund any Loan until such time as BROKER is so informed by FFFC in
writing.
3. FEES. Any fee, commission, or other consideration to be received by
BROKER with respect to any Loan shall be paid by FFFC to BROKER only
after FFFC deducts from the Loan all its fees and charges in connection
therewith as specified in FFFC price schedules released from time to
time. No payment whatsoever shall be owed to BROKER by FFFC on account
of any proposed Loan which is not funded and closed.
<PAGE>
4. Warranties by BROKER. BROKER represents and warrants to FFFC that:
4.1 LOAN SUBMISSION. The contents of all Loan packages submitted
to FFFC immediately shall become the property of FFFC, and all
information therein may be subject to FFFC's independent
verification.
4.2 NO UNTRUE STATEMENTS. None of the statements or information
with respect to income documentation, cash or cash equivalent
asset documentation, or subject property occupancy
documentation contained in any Loan package submitted to FFFC
will contain any untrue statement or omit to state a fact
necessary in order to make such statements or information not
misleading. BROKER understands that by making the warranty
contained in this subparagraph it is warranting the accuracy
of all income documentation, cash or cash equivalent
documentation, or subject property occupancy documentation
contained in any Loan package submitted to FFFC, whether or
not BROKER has knowledge, or reason to suspect, any inaccuracy
contained therein.
4.3 DULY LICENSED. BROKER possesses all necessary licenses and
permits from all applicable local, state and federal
authorities to engage in the activities contemplated by this
Agreement.
4.4 COMPLIANCE WITH LAWS. In connection with BROKER's activities
in general and with the preparation of Loan packages for
Borrowers. BROKER wilt comply with all applicable laws. rules,
and regulations, and amendments thereto, including without
limitation the Truth-ln-Lending Act and Regulation Z issued
thereunder; the Fair Credit Reporting Act; the Equal Credit
Opportunity Act and Regulation B issued thereunder; the Real
Estate Settlement Procedures Act and Regulation X issued
thereunder; and all state and federal fair lending laws and
regulations.
4.5 VALID ORGANIZATION. BROKER is. and throughout the term of this
Agreement will be. a corporation duly organized, validly
existing, and in good standing under the laws of the state of
its organization and has all necessary power and authority to
execute this Agreement, which has been authorized by all
necessary corporate action. The execution, delivery, and
performance of this Agreement by BROKER will not violate any
agreement to which BROKER is a party.
5. REPRESENTATION; WARRANTIES TRUE AT FUNDING; CLOSING. The
representations and warranties made by BROKER to FFFC shall be true in
ail respects on the dates the Loan is funded by FFFC and the Loan
transaction closes. If at any time during the period between the
submission of any Loan package to FFFC and the funding and closing of
the Loan, BROKER learns, or has reason to believe, that any of its
representations and warranties may cease to be true, BROKER shall give
written notice thereof to FFFC immediately.
6. BROKER'S INDEMNIFICATION. BROKER shall indemnify and hold FFFC harmless
from and against, and shall reimburse FFFC with respect to forty
percent (40%) of any and all loss, damage, liability, costs, and
expenses, including, reasonable attorneys' fees and incurred by FFFC by
reason of or arising out of or in connection with (a) any breach of any
representation or warranty contained in paragraph 4, and (b) and the
2
<PAGE>
failure of BROKER to perform any obligation required by the Agreement
to be performed by it. Should any event requiring indemnification under
this paragraph occur, in its attempt to mitigate its losses FFFC shall
consult with the Broker with regard to (a) selecting a Realtor to
market the property securing the Loan, (b) selling the Loan to another
investor at a discount, or (c) refinancing the Loan through the BROKER.
Not withstanding the foregoing, all decisions respecting mitigation
shall be made by FFFC.
7. NO SOLICITATION. For one hundred-twenty (120) days after the funding of
any Loan by FFFC with above par pricing, BROKER shall not solicit, or
take any refinance loan application on the same property from, the
Borrower(s) to whom such Loan was made.
8. TERMINATION OF AGREEMENT. This Agreement may be terminated at any time
by written notice by either party, provided that the obligations
contained in paragraphs 3 through 12 shall survive termination.
9. FORUM; GOVERNING LAW. This Agreement shall be deemed to have been
entered in the County of Santa Clara, State of California, and all
questions regarding the validity, interpretation, or performance of any
of its terms or of any rights or obligations of the parties shall be
governed by California law. Any action arising out of this Agreement
shall be initiated only in a California court or in the Northern
District of the United States District Court.
10. MISCELLANEOUS.
--------------
10.1 ATTORNEYS' FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default, or misrepresentation in
connection with any of the provisions of this Agreement, the
successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to
which it or they might be entitled.
10.2 ENTIRE AGREEMENT AMENDMENT. This Agreement constitutes the
entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and
contemporaneous agreements, representations, and
understandings of the parties. No supplement, modification, or
amendment of this Agreement shall be binding unless executed
in writing by all parties.
10.3 WAIVERS; NON-CUMULATIVE REMEDIES. Failure or delay on the part
of either party to audit any Loan or to exercise any right
provided for herein shall not act as a waiver of any right
hereunder, nor shall any single or partial exercise of any
right by any party preclude any other or further exercise
thereof. No waiver of any, of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
Remedies herein are deemed as cumulative and nonexclusive on
each other.
11. DISCLOSURE OF INFORMATION. BROKER understands and agrees that FFFC may
report instances of BROKER's making any material misstatement in
3
<PAGE>
connection with a Loan, or BROKER's knowingly aiding a Borrower to do
the same, to the appropriate regulatory agency or any other interested
party, including other mortgage bankers. BROKER acknowledges the
importance to the mortgage industry of FFFC's right and necessity to
disclose such information and waives any and all claims for liability,
damages, or equitable or administrative relief in connection with
FFFC's disclosure of such information.
Wherefore, the parties have executed this agreement effective as of the date
first above written.
BROKER: FFFC:
Print Name: Westmark Mortgage Corporation First Franklin Financial Corporation
2150 N. First Street
Address: 8000 N. Federal Highway San Jose, California 95131
(408) 955-9600
City, State, Zip: Boca Raton, FL 33487
By: /s/
---------------------------------
Fax: 561-526-3696 Name Title
By: /s/ Payton Story, III President Date: 8/20/99
--------------------------------------- -------------------------------
Name Title
Date: 3/23/99
-------------------------------------
4
Exhibit 10.10
BAY FINANCIAL SAVINGS BANK, F.S.B.
WHOLESALE MORTGAGE PROGRAM
MASTER AGREEMENT FOR SALE AND PURCHASE OF
MORTGAGES
BY AND BETWEEN
BAY FINANCIAL SAVINGS BANK, F.S.B.
AND
WESTMARK MORTGAGE CORPORATION
SELLER
<PAGE>
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
I. RECITALS................................................................................1
II. DEFINITIONS.............................................................................1
(A) Agreement......................................................................1
(B) Loan to Value Ratio............................................................1
(C) Loan...........................................................................1
(D) "Marked-Up"Title Insurance Policy, Binder or Certificate.......................1
(E) Mortgage.......................................................................1
(F) Essential Mortgage File Documents..............................................1
(G) Mortgage Loans.................................................................1
(H) Mortgaged Property or Subject Property.........................................2
(I) Mortgagor or Borrower..........................................................2
(J) Note...........................................................................2
(K) Purchase Price.................................................................2
(L) Related Assets.................................................................2
(M) Settlement Date................................................................2
(N) Underwriting Guidelines/Purchasing Guidelines..................................2
III. OFFER TO SELL AND ACCEPTANCE OF OFFER...................................................2
(A) Offer..........................................................................2
(B) Acceptance.....................................................................2
IV. PURCHASE AND SALE OF LOANS..............................................................2
(A) Delivery of Loans..............................................................2
(B) Purchase and Sale..............................................................3
(C) Purchase Price.................................................................3
(D) Payment of Purchase Price......................................................3
(E) Premium Rebate.................................................................3
V. REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................4
(A) Representations and Warranties of the Seller - General.........................4
(B) Representations and Warranties of the Seller As to Each Loan...................5
VI. BREACH OF REPRESENTATION AND WARRANTIES.................................................7
(A) Remedy For Breach..............................................................7
(B) Reassignments..................................................................7
(C) "Buy-Back Price"...............................................................8
(D) Definition of "Loss"...........................................................8
(E) Remedy For Non-Delivery of Documents...........................................8
(F) Remedy For First Payment Default...............................................8
(G) Remedy to Insure Accuracy of Real Estate Appraisals............................8
i
<PAGE>
VII. REPRESENTATIONS AND WARRANTIES OF THE BUYER.............................................9
VIII. IDENTIFICATION..........................................................................9
IX. RELATIONSHIP OF THE PARTIES............................................................10
X. OPINION OF COUNSEL.....................................................................10
XI. CLOSING DOCUMENTS......................................................................10
XII. MISCELLANEOUS..........................................................................10
(A) Additional Covenants..........................................................10
(B) Survival of Covenants, Agreements, Representations
and Warranties-Successors and Assigns.........................................11
(C) Severability..................................................................11
(D) Attorneys'Fees................................................................11
(E) Waivers.......................................................................11
(F) Notice........................................................................11
(G) Insurance Prepayment..........................................................11
(H) Assignment....................................................................12
(I) Captions......................................................................12
(J) Entire Agreement..............................................................12
(K) Governing Law.................................................................12
(L) Termination...................................................................12
(M) Arbitration, Jurisdiction, and Venue..........................................12
(N) Endorsements..................................................................13
</TABLE>
ii
<PAGE>
MASTER AGREEMENT FOR SALE AND PURCHASE OF MORTGAGES
This Master Agreement for Sale and Purchase of Mortgages is made this
12th day of February, 1999 by and between Bay Financial Savings Bank, F.S.B.,
located at 5537 Sheldon Road, Tampa, FL 33615, a Corporation organized and
existing under the laws of the United States ("Buyer") and Westmark Mortgage
Corporation located at 8000 North Federal Highway, Boca Raton, Florida 33487, a
Corporation organized and existing under the laws of California ("Seller").
I. RECITALS
WHEREAS, the Seller desires from time to time to offer for
sale to the Buyer and the Buyer desires from time to time to purchase from the
Seller on the terms and subject to the conditions set forth herein certain Loans
owned by the Seller evidenced by notes and secured by mortgages of the
agreed-upon priority on real property owned by the borrowers ("Borrowers").
WHEREAS, the Buyer and the Seller desire to enter into this
agreement to govern the sale and purchase of said Loans.
NOW, THEREFORE, in consideration of the above recitals and the
mutual covenants contained herein, the parties hereto hereby agree as follows:
II. DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
(A) AGREEMENT: shall mean this Agreement as same may be
amended and supplemented from time to time. The parties agree that this
Agreement shall be used as the master sale and purchase agreement for those
loans purchased by Buyer from Seller in the future, unless otherwise agreed in
writing by the parties.
(B) LOAN TO VALUE RATIO: shall mean the sum of the original
principal amount of the Mortgage Loan and the outstanding principal balance of
the first Mortgage (the "first Mortgage"), if any, at the time of origination of
the Mortgage Loan divided by the lesser of the original purchase price of the
Mortgaged Property if Borrower purchased the Mortgaged Property within twelve
(12) months of the Mortgage Loan origination date or the appraised value of the
Mortgaged Property.
(C) LOAN: the Note, the related Mortgage and the Related
Assets are referred to as "Loan," and collectively as "Loans."
(D) "MARKED-UP" TITLE INSURANCE POLICY, BINDER OR CERTIFICATE:
a title insurance policy as further defined in Article V(B)9 of this Agreement
in which all liens, mortgages, claims, assessments, defects, encumbrances and
other exceptions affecting or against the Mortgaged Property have been removed
and are insured against in favor of Buyer by the title insurance company unless
otherwise agreed or approved by the Buyer in writing.
(E) MORTGAGE: the Note, bond, deed of trust, Mortgage,
mortgage warranty, extension agreement, assumption of indebtedness, assignment
and any other documents constituting the basic instruments for real estate
security on real property owned by the Borrower in the state in which the
Mortgaged Property is located.
<PAGE>
(F) ESSENTIAL MORTGAGE FILE DOCUMENTS: as to each Mortgage
Loan, the original of the Note, Mortgage, title insurance policy including
endorsements or "marked-up" title commitment, Related Assets and the additional
documents as described in EXHIBIT "A,' attached hereto and made a part hereof,
as applicable.
(G) MORTGAGE LOANS: the Loans identified in the Purchase
Schedule (EXHIBIT "B1") as from time to time are subject to this Agreement.
(H) MORTGAGED PROPERTY OR SUBJECT PROPERTY: the residential
real property subject to the Mortgage which secures the Mortgage Loan.
(I) MORTGAGOR OR BORROWER: the obligor under a Mortgage Loan.
(J) NOTE: the original Note or bond or other evidence of
indebtedness evidencing the indebtedness of the Borrower/Mortgagor under a
Mortgage Loan.
(K) PURCHASE PRICE: the purchase price for the Loan(s)
described on each Purchase Schedule shall be an amount as of the Settlement Date
equal to the sum of the: (1) unpaid principal balances of the Note(s); (2) all
interest accrued (up to but not including the Settlement Date) but unpaid on the
Note(s) (prorated on a 30-day month - 360-day year); and (3) any premiums due
Seller, if applicable, in accordance with the Approval Advice or Purchase
Schedule; (4) less any discount due Buyer, if applicable, in accordance with the
Approval Advice or Purchase Schedule; and (5) less the fee for recordation of
assignments, if applicable.
(L) RELATED ASSETS: the documents as further defined in
Article IV(A)(iv) of this Agreement.
(M) SETTLEMENT DATE: the date of the funding or payment of
Purchase Price by the Buyer for Loans purchased pursuant to this Agreement. Each
Settlement shall be held at the offices of Bay Financial Savings Bank, F.S.B.,
5537 Sheldon Road, Tampa, FL 33615.
(N) UNDERWRITING GUIDELINES/PURCHASING GUIDELINES: EXHIBIT "C"
attached hereto and made a part hereof as may from time to time be amended by
Buyer.
III. OFFER TO SELL AND ACCEPTANCE OF OFFER
(A) OFFER: The Seller may offer from time to time to submit to
the Buyer a list of the Loans, along with the Essential Mortgage File Documents,
as defined herein, for each of the Loans, for the Buyer's review. The Buyer
shall then deliver to the Seller a Purchase Schedule on which the Buyer has
indicated which Loans, if any, the Buyer is offering to purchase from the Seller
and the Purchase Price for the Loans Buyer is willing to purchase.
(B) ACCEPTANCE: The Seller shall endorse the Notes and
Mortgages evidencing the Loan on which the Seller agrees to accept the Buyer's
offer to purchase. Such endorsement shall constitute the Seller's acceptance of
the Buyer's offer to purchase the indicated Loans pursuant to the terms and
conditions of this Agreement.
On occasion, Bayer may issue to Seller a written Approval
Advice in the form attached hereto, made a part hereto and marked EXHIBIT "D,"
to cover a specific Loan purchase by Buyer hereunder which is approved by Buyer
in advance of said specific Loan being made by Seller. Any purchase made
hereunder that is subject to an Approval Advice shall be governed first by the
terms of such Approval Advice and then by the terms of this Agreement, and to
the extent of a conflict between the Approval Advice and this Agreement, the
Approval Advice shall govern for that purchase and only that purchase.
Buyer shall have the absolute and sole discretion and option
to agree or decline to purchase any Loans(s) submitted by Seller for review.
2
<PAGE>
IV. PURCHASE AND SALE OF LOANS
(A) DELIVERY OF LOANS. On or before the business day
immediately preceding each Settlement Date, the Seller shall deliver to the
Buyer the following for each Loan purchased:
(i) Those Loans described by the Buyer on each
Purchase Schedule which are purchased by Buyer. pursuant to this Agreement.
(ii) The agreed-upon priority liens and/or Mortgages
on Subject Property.
(iii) The Note(s) and the Mortgage(s) endorsed by an
authorized Officer of Seller to the Buyer pursuant to the language set forth on
EXHIBIT "E," attached hereto and made a part hereof together with an executed
individual assignment to the Buyer, in recordable form and originals of all
intervening assignments, if any, of the Seller's beneficial interest in the
Mortgage, showing a complete chain of title from origination to the Seller,
including warehousing assignment, with evidence of recording thereon.
(iv) Any and all documents, instruments, collateral
agreements, and assignments and endorsements for all documents, instruments and
collateral agreements, referred to in the Notes and/or Mortgages or related
thereto, including, without limitation, current insurance policies (private
mortgage insurance, if applicable; flood insurance, if applicable; hazard
insurance; title insurance; and other applicable insurance policies) covering
the Subject Property or relating to the Notes and all files, books, papers,
ledger cards, reports and records including, without limitation, loan
applications, Borrower financial statements, separate assignment of rents, if
any credit reports and appraisals, relating to the Loans (the "Related Assets").
In all cases, the Related Assets shall be the original documents.
(v) The Essential Mortgage File Document List,
including all writings evidencing the Loan(s) purchased by Buyer. In all cases,
these documents shall be the original documents.
(vi) In the event that Seller cannot deliver to Buyer
a duly recorded assignment of Mortgage or any other document required to be
recorded under this Agreement on the Settlement Date solely because or a delay
caused by the public recording office when such document(s) has been delivered
for recordation, Seller shall deliver to the Buyer a certified copy of each such
document(s) with a statement thereon signed by an Officer of the Seller
certifying each to be a true and correct copy of document(s) delivered to the
appropriate public recording official for recordation. Seller shall deliver to
Buyer such recorded document(s) with evidence of recording indicated thereon no
later than 15 days after Seller receives such document, but in any event, no
later than 120 days from the Settlement Date.
(B) PURCHASE AND SALE. On each Settlement Date hereunder,
Seller shall sell, assign, transfer, convey and deliver to Buyer all of its
right, title and interest in and to the Loans, assets and documents as more
fully enumerated and set forth in Article IV (A)(i) through (vi) inclusive,
which is incorporated herein by reference.
(C) PURCHASE PRICE: The Purchase Price for the Loan described
on each Purchase Schedule shall be an amount as defined in Article II(K) above.
The Purchase Price shall be payable as set forth in Article IV(D) below.
3
<PAGE>
(D) PAYMENT OF PURCHASE PRICE: On each Settlement Date, the
Purchase Price shall be paid as follows: The Buyer shall deposit funds by wire
to the Seller's bank as outlined on the Wire Transfer Authorization (Exhibit
"F").
(E) PREMIUM REBATE: In the event that a premium is paid by the
Buyer to the Seller on a Loan and such Loan is prepaid in full by the Borrower,
other than by a refinancing by the Buyer or any of its subsidiaries or
affiliates, within twelve (12) months of Settlement Date, the Seller shall, upon
demand by the Buyer, refund to the Buyer the premium paid by the Buyer to the
Seller as follows: if prepayment in full is within one (1) month of the
Settlement Date, 12/12ths of the premium shall be refunded; if prepayment in
full is within two (2) months of the Settlement Date, 11/12ths of the premium
shall be refunded; if prepayment in full is within three (3) months of the
Settlement Date, 10/12ths of the premium shall be refunded; if prepayment in
full is within four (4) months of the Settlement Date, 9/12ths of the premium
shall be refunded; if prepayment in full is within five (5) months of the
Settlement Date, 8/12ths of the premium shall be refunded; if prepayment in full
is within six (6) months of the Settlement Date, 7/12ths of the premium shall be
refunded; if prepayment in full is within seven (7) months of the Settlement
Date, 6/12ths of the premium shall be refunded; if prepayment in full is within
eight (8) months of the Settlement Date, 5/12ths of the premium shall be
refunded; if prepayment in full is within nine (9) months of the Settlement
Date, 4/12ths of the premium shall be refunded; if prepayment in full is within
ten (10) months of the Settlement Date, 3/12ths of the premium shall be
refunded; if prepayment in full is within eleven (11) months of the Settlement
Date, 2/12ths of the premium shall be refunded; if prepayment in full is within
twelve (12) months of the Settlement Date, 1/12ths of the premium shall be
refunded. In the event any Loan is prepaid in full later than twelve (12) months
from the Settlement Date of such Loan, no refund shall be due. In the event the
Note carrier a prepayment penalty, the Buyer agrees first to recapture the
premium rebate from the proceeds of the prepayment penalty and them from the
Seller, if there is any deficient balance according to the refund calculation
specified above.
V. REPRESENTATIONS AND WARRANTIES OF THE SELLER
(A) REPRESENTATIONS AND WARRANTIES OF THE SELLER - GENERAL: It
is understood and agreed by Seller and Buyer that as a material inducement to
Buyer to enter into this Agreement the Seller hereby represents and warrants to
the Buyer as follows:
1. The Seller is an organization as set forth in the
introductory paragraph of this Agreement and is duly organized, validly existing
and in good standing under the laws of the state of its incorporation, and is
duly qualified as a foreign corporation in all jurisdictions wherein the
character of the property owned or leased or the nature of the business
transacted by it makes qualification as a foreign corporation necessary.
2. The execution and delivery of the Agreement by the
Seller and the performance by the Seller of the obligations to be performed by
it hereunder have been duly authorized by all necessary corporate or other
similar action. Prior to the first Settlement Date, the Seller shall deliver to
the Buyer certified copies of relevant corporate or similar resolutions and a
good standing certificate for the state of its incorporation and, as requested
by Buyer, for each state in which Seller is registered to do business. It is
within Buyer's discretion to periodically request good standing certificates for
all states in which Seller is registered to do business.
3. The execution and delivery of this Agreement by
the Seller and the performance by the Seller of the obligations to be performed
by it hereunder do not, and will not, violate any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Seller or to the charter or
bylaws of the Seller. All parties which have had any interest in the Mortgages,
whether as a mortgagee, assignee (other than Buyer or assignee of Buyer) or
pledgee are (or during the period in which they held and disposed of such
interest, were) in compliance with all applicable licensing requirements of the
federal, state, and local government wherein the Subject Property is located.
4. The execution and delivery of this Agreement by
the Seller and the performance by the Seller of the obligations to be performed
by it hereunder do not and will not result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which the Seller is a party or by which it or its
properties may be bound or affected.
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5. This Agreement constitutes, when duly executed and
delivered by the Seller, a legal, valid and binding obligation of the Seller
enforceable against the Seller according to its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium, or similar laws affecting creditors' rights in
general, including equitable remedies.
6. There are no actions, suits or proceedings pending
or, to the knowledge of the Seller, threatened against or affecting the Seller
or the properties of the Seller before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Seller, would have a material adverse
effect on the financial condition, properties or operation of the Seller. Any
consent by the Buyer to purchase Loans pursuant to this Agreement shall
automatically terminate if: (a) a decree or order of a court or agency
supervisory authority having jurisdiction for the appointment of a conservator
or receiver or liquidator in any insolvency, adjustment of debt, marshaling of
assets and liabilities, bankruptcy proceeding or any similar proceedings, or for
the winding up or liquidation of its affairs, shall have been entered against
the Seller or a Borrower and such decree or order shall have remained in force
undischarged or unstated for a period of 60 days; or CO) the Seller or a
Borrower shall consent to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities, bankruptcy or similar proceedings relating to the Seller or
relating to all or substantially all of its property; or (c) the Seller or
Borrower shall admit in writing its inability to pay its debts as they become
due, file a petition to take advantage of any applicable insolvency,
reorganization or bankruptcy statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations.
(B) REPRESENTATIONS AND WARRANTIES OF THE SELLER AS TO EACH
LOAN: It is understood and agreed by Seller and Buyer that as a material
inducement to Buyer to enter into this Agreement the Seller hereby represents
and warrants to the Buyer as of each Settlement Date with respect to each Loan
purchased.
1. The Seller is a holder-in-due-course of each Note
within the meaning of the Uniform Commercial Code and is the sole owner of the
Loan and has the right to assign and transfer the Loan to the Buyer. The Seller
has not sold, assigned or otherwise transferred any right or interest in or to
the Loan and has not pledged the Loan as collateral for any loan or obligation
of Seller or other purpose. The assignment of the Loan by the Seller to Buyer
validly transfers such Loan to Buyer free and clear of any pledges, liens,
claims, encumbrances, Mortgages, charges, exceptions and/or security interests.
2. Except as expressly disclosed to and agreed to by
the Buyer in writing, each Loan conforms to: (a) Underwriting Guidelines of
Buyer, and (b) the conditions of the Approval Advice (if applicable).
3. All information set forth in any Purchase Schedule
is true and correct in all respects, and all other information furnished to
Buyer by Seller with respect to the Loan(s) purchased is true and correct as of
the Settlement Date.
4. Each Note and Mortgage and the Related Assets are
in every respect genuine,
are the valid instrument they purport on their face to be, are the legal, valid,
binding and enforceable obligation of the Borrower thereunder and not subject to
any discount, allowance, set off, counterclaim, presently pending bankruptcy or
other defenses; none of the Notes, Mortgages, or Related Assets are forged or
have affixed hereto any unauthorized signature or have been entered into by any
persons without the required legal capacity; and no foreclosure (including any
non-judicial foreclosure) or any other legal action has been brought by the
Seller or any senior lienholder in connection therewith.
5. No instruments other than those delivered herewith
are required under applicable law to evidence the indebtedness represented by
the Loan(s) or to perfect the lien of the Mortgage(s).
6. Except as has been disclosed to and agreed to by
the Buyer in writing, there is no agreement with the Borrower regarding any
variation of the interest rate and schedules of payment (except as described in
the Note and Mortgage) or other terms and conditions of the Loan, no Borrower
has been released from liability on the Note, and no property, has been released
from the Mortgage. If the Loan is a variable rate loan, the Seller represents
and warrants as of each Settlement Date that all applicable notices required by
law or regulation have been provided to the Borrower and that the right to
future changes in the interest rate and payment schedules has not been waived by
the Seller or any Previous holder of the Loan.
7. The Loan is secured by a valid Mortgage, of the
agreed-upon priority, on real property, and such Mortgage has been properly
received by the appropriate public recording official to be filed, recorded or
otherwise perfected in due course in accordance with applicable law in the
appropriate jurisdiction.
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8. There are no violations of any applicable federal
or state law or regulation, including, without limitation, Fair Credit Reporting
Act and Regulations, the Federal Truth-in-Lending Act and Regulation Z
(including but not limited to Section 32), the Federal Equal Credit Opportunity
Act and Regulation B, the Federal Real Estate Settlement Procedures Act and
Regulations, the Federal Debt Collection Practices Act, the Home Mortgage
Disclosure Act, and any federal or state usury laws and regulations. All
disclosures required by law, federal, state or local were properly made by the
Seller prior to the closing of the Loan.
9. The Seller holds a marked-up title policy or a
title insurance binder or title certificate which is in full force and effect;
which has an insurance limit at least as great as the outstanding principal
balance of the Loan; which names the Seller, its successors and assigns as the
insured party; and which is issued by a title insurer which has been approved by
the Buyer in writing and is qualified to do business in the jurisdiction where
the Subject Property is located. Said policy shall:
(i) Insure the absence of any lien of taxes and other
assessments;
(ii) Disclose whether all taxes and other assessments
due as of the date of the policy have been paid in full; and
(iii) Disclose all other matters to which like
properties are commonly subject.
If the Buyer purchases a Loan having relied on a
marked-up title insurance binder or title certificate rather than a title
insurance policy, the Seller shall have thirty (30) days to deliver to the Buyer
the title insurance policy.
10. As of the Settlement Date the Seller has
transferred to Buyer all of its right, title and interest in the Note(s),
Mortgage(s) and Related Assets for each Loan purchased free and clear of any
pledge, liens, claims, encumbrances, Mortgages, charges, exceptions or security
interests other than as is disclosed in the title insurance policy to each Loan,
together with an individual flood insurance policy (to the extent required by
the Flood Disaster Protection Act) and an individual current hazard insurance
policy (including fire and extended coverage and other matters as are customary
in the area of the Subject Property), or a blanket policy in lieu thereof, or a
certificate if the Buyer agrees in writing to accept a certificate, insuring the
Subject Property, with a loss payable clause in favor of the Seller, its
successors and assigns in an amount equal to the lower of: (a) the replacement
value of the Subject Property, or (b) the unpaid principal balance of the Loan
and the senior mortgage deed(s) of trust loan.
11. The Note and Mortgage contain customary, valid
legal and enforceable provisions such as to render the rights and remedies of
the holder thereof adequate for the realization against the Subject Property of
the benefits of the security created thereby.
12. The proceeds of the Loan have been fully
disbursed and any and all requirements as to completion of on-site and off-site
improvements and disbursement of any escrow funds therefore have been complied
with.
13. There are no mechanic's liens or similar liens or
claims which have been filed for work, labor or material affecting the Subject
Property which are or may be liens prior to or equal with the lien of the
Mortgage and senior Mortgage(s).
14. The Subject Property is free of material damage
and waste and is in good repair and there is no proceeding pending or threatened
for the total or partial condemnation of the Subject Property, and the Subject
Property is free and clear of all hazardous material.
15. All matured obligations pursuant to the Note and
Mortgage have been paid or performed and the Seller has not waived any defaults,
breach, violation or event of acceleration.
16. The Seller has no knowledge of any fact as to
such Loan which it has failed to disclose which would materially and adversely
affect the value or marketability of such Loans.
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17. The Seller has no knowledge of any impediments to
title that adversely affect the value, enjoyment or marketability of the Subject
Property.
18. Where required by state law, the Seller has filed
for record a request for notice of any action by a senior lienholder under a
senior lien, and the Seller has notified any superior lienholder in writing of
the existence of the Loan and requested notification of any action to be taken
against the Borrower by the superior lienholder. The Seller shall, upon request
of the Buyer, cooperate in recording a new request for action in favor of the
Buyer and in providing superior lienholders with written requests for
notification to the Buyer of action against the Borrower.
19. There is no default, breach, violation or event
of acceleration existing under any senior Mortgage which, with notice, and the
expiration of any grace or cure period, would constitute a default, breach,
violation or event of acceleration.
20. Each Note and Mortgage contains a provision for
the acceleration of the payment of the unpaid principal balance of the Mortgage
Loan in the event the related Mortgaged Property is sold without the prior
consent of the mortgagee thereunder.
21. All real estate appraisals made in connection
with each Loan shall have been performed in accordance with industry standards
in the appraising industry I n the area where the appraised property is located.
Any variances ascertained pursuant to Article VI(G) of this Agreement greater
than eight (8%) percent shall constitute conclusive evidence of a breach of this
warranty.
22. No hazardous or toxic materials or wastes or
products regulated by any law or ordinance or asbestos or asbestos products or
materials or polychlorinated biphenyls or urea formaldehyde insulation have been
used or employed in the construction, use or maintenance of the Subject Property
or have ever been stored, treated at or disposed of on the Subject Property.
23. There has not occurred nor has any person or
entity alleged that there has occurred, upon the Subject any spillage, leakage,
discharge or release into the air, soil or groundwater of any hazardous material
or regulated wastes.
24. The Seller has not, in connection with each Loan
purchased by Buyer, taken any action which might result in a claim against the
Buyer or an obligation by the Buyer to refund unearned finance charges, credit
life insurance premiums or any other fees in respect to the transactions between
Buyer and Seller as described in this Agreement. The Seller agrees to indemnify
and hold the Buyer harmless from and against any claims, liabilities, damages or
costs (including reasonable attorney fees) relating to any Borrower, insurer or
other party who claims to be due a refund of finance charges or insurance
premiums or any other fees in connection with transactions contemplated by this
Agreement.
25. The Seller has not, in connection with each Loan
purchased by Buyer, incurred any obligation, made any commitment or taken any
action which might result in a claim against the Buyer or an obligation by the
Buyer to pay a sales brokerage commission, finder's fee or similar fee in
respect to the transactions between Buyer and Seller as described in this
Agreement. The Seller agrees to indemnify and hold the Buyer harmless from and
against any claims, liabilities, damages or costs (including reasonable attorney
fees) relating to any broker, agent or finder or other person, who shall claim
to have dealt on behalf of the Seller in connection with the transactions
contemplated by this Agreement.
26. Seller agrees that for the time period of 36
months beginning from the applicable settlement date, not to take any action to
solicit Borrowers individually in order to effect the refinancing of any Loans
previously purchased by Buyer from Seller. In the event a Borrower elects to
refinance with Seller a Loan purchased by Buyer from Seller, and such Loan is
currently owned or serviced by Buyer or Buyer otherwise retains a financial
interest in the Loan, Buyer will have the right of first refusal on the purchase
of the refinancing.
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VI. BREACH OF REPRESENTATION AND WARRANTIES
(A) REMEDY FOR BREACH. In addition to any rights or remedies
the Buyer has at law or in equity, if at any time there is a breach of any
representation or warranty set forth herein by Seller, the Seller shall upon
demand of the Buyer and at the sole option and absolute discretion of Buyer: (1)
repurchase the Loan affected for the Buy-Back Price within ten (i0) days of
notification; or (2) if the Loan(s) has been sold by Buyer or the Subject
Property has been liquidated or sold by Buyer, the Seller shall, within ten (10)
days ¬ification, pay the Buyer the amount of loss, (as defined in Article
VI(D) below).
(B) REASSIGNMENTS. Upon receipt of the Buy-Back Price, in
full, in immediately available funds, the Buyer shall reassign the Loan affected
and any right it may have in the relevant Subject Property to the Seller free
and clear of all liens, encumbrances, claims, or interest of any person or
entity claiming by, through, or under the Buyer without recourse and shall
execute and deliver to the Seller in recordable form an assignment of the
Buyer's beneficial interest in the affected Mortgage, as well as other documents
necessary to reflect the reassignment of any title protection and insurance
policies.
(C) "BUY-BACK PRICE". The term "Buy-Back Price" shall mean the
sum total of: (1) the outstanding principal balance of the Loan, with accrued
interest thereon through the date the Loan is repurchased by Seller; (2) all
advances made by Buyer and all charges due from the Borrower; (3) the total
amount, including accrued interest and other expenses paid by the Buyer to any
senior lienholders, if any, to secure a priority lien position; (4) all
reasonable and necessary expenses, losses and damages paid or incurred by the
Buyer in connection with the Loan or an investigation of said Loan and/or the
related collateral, including but not limited to, property taxes, maintenance
costs, interest expense, insurance, appraisals, advertising, sales commissions,
reasonable attorney fees, expenses and costs, fines and penalties; and (5)
rebate of premium due Buyer, if applicable.
(D) DEFINITION OF "LOSS". The term "Loss" shall mean the
negative result, if any, of the following calculations: (a) the sum total of:
(i) the outstanding principal balance of the Loan, with accrued interest thereon
through the date the Loan is sold or date the collateral is liquidated; (ii) all
advances by Buyer and all charges due from the Borrower; (iii) the total amount
paid by the Buyer to any senior lienholders, if any, to secure a first lien
position; (iv) accrued interest on all Mortgage Loans purchased form senior
lienholders from the date such Mortgage Loans were purchased through the date
the Loan is sold or the date the collateral is liquidated; and (v) all other
reasonable and necessary expenses, losses and damages incurred by and/or paid by
the Buyer in connection with the Loan or an investigation of said Loan or the
sale or liquidation of the Loan and/or the related collateral, including, but
not limited to, reasonable attorney fees, expenses and costs, property taxes,
maintenance costs, insurance, appraisals, advertising, sales commissions, fines
and penalties; less the (b) net proceeds from the sale of the Loan or the sale
or liquidation of the Subject Property or the collateral.
(E) REMEDY FOR NON-DELIVERY OF DOCUMENTS. However, anything to
the contrary notwithstanding, in the event that the Seller is required to
deliver to the Buyer any documents related to a purchased Loan and the Seller
fails to deliver such document in the proper form on the date or within the time
period specified by the controlling section of this Agreement, Buyer shall
notify the Seller of the breach, and the Seller shall have thirty (30) days from
the date of notice to cure the breach. If the Seller has not cured the breach
within the thirty (30) day cure period, the Seller shall immediately repurchase
the Loan upon Buyer's demand. The Buy-Back Price shall be determined in
accordance with Article VI(C). Any Loan returned by the Buyer pursuant to this
paragraph shall be without recourse, representation or warranty.
(F) REMEDY FOR FIRST PAYMENT DEFAULT. However, anything to the
contrary notwithstanding, in the event the Borrower fails to make the first
payment due to the Buyer within thirty (30) days of the payment due date,
regardless of whether such payment is subsequently paid by the Borrower, the
Buyer, at its sole and absolute discretion, shall have the right to have Seller
repurchase said Loan(s) at the Buy-Back Price.
(G) REMEDY TO INSURE ACCURACY OF REAL ESTATE APPRAISALS. Buyer
may, at its own expense, in order to verify the accuracy of real property
appraisals prepared for Seller, order a reappraisal of the property secured by a
Mortgage. If the reappraisal obtained by Buyer indicates a fair market value
which is more than EIGHT (8%) less than the original appraisal value, then upon
receipt by Seller from Buyer of a signed copy of the reappraisal, Seller shall
repurchase the Loan at the Buy-Back Price (as defined in Article VI(C), above)
and reimburse Buyer for the cost of the appraisal subject to the following: If
Seller disputes the validity of the reappraisal prepared by Buyer's appraiser,
Seller may, at its own expense, request Buyer to obtain a third appraisal, and
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only if such third appraisal is also more than EIGHT (8%) percent less than the
original appraisal value shall the Seller be required to repurchase the Loan at
the Buy-Back Price. Buyer shall choose the appraiser for the third appraisal
with Seller's approval, which shall not be unreasonably withheld, but such
appraiser must possess the minimum qualifications specified in Buyer's
Underwriting Guidelines. The appraisal must be performed in accordance with
industry standards for the appraising industry in the area in which the property
is located, and the appraiser must be independent with respect to both parties
unless otherwise agreed to by the parties. In determining the appropriate
appraisal value, the review appraiser must determine the appraised value as of
the original appraisal date using comparable sales that were available as of the
date of the original appraisal.
However, anything to the contrary notwithstanding, the Buyer
reserves the sole right not to request the Seller to repurchase the Loan should
the reappraisal cause the combined loan-to-value not to exceed the maximum
allowable combined loan-to-value of the loan class under which the loan was
purchased.
VII. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as
follows:
(A) The Buyer is an organization as set forth in the
introductory paragraphs and is duly organized, validly existing and in good
standing under laws applicable to its organization's existence.
(B) The execution and delivery of this Agreement by the Buyer
and the performance by the Buyer of the obligations by it to be performed
hereunder have been duly authorized by all necessary corporate resolutions.
(C) The execution and delivery of this Agreement by the Buyer
and the performance by the Buyer of the obligations by it to be performed
hereunder do not, and will not, violate any provision of any law, rule,
regulations, order writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Buyer or to the charter or
bylaws of the Buyer.
(D) The execution and delivery of this Agreement by the Buyer
and the performance by the Buyer of the obligations by it to be performed
hereunder do not and will not result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Buyer is a party or by which it or its properties may be
bound or affected.
(E) This Agreement constitutes, when duly executed and
delivered by the Buyer, a legal, valid and binding obligation of the Buyer
enforceable against the Buyer according to its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or similar laws affecting creditor's rights in general, including
equitable remedies.
(F) There are no actions, suits or proceedings pending or, to
the knowledge of the Buyer, threatened against or affecting the Buyer or the
properties of the Buyer before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which if
determined adversely to the Buyer, would have a material adverse effect on the
financial condition, properties or operation of the Buyer.
(G) Buyer has the authority and legal right to make, deliver
and perform this Agreement and all transactions contemplated hereunder. No
consent of any other party and no consent, license, approval or authorization
of, or registration, or declaration with, any governmental authority, bureau or
agency is required in connection with the execution, delivery, validity or
enforceability of this Agreement or purchase of any Loan, which consent,
license, approval, authorization, registration or declaration has not been
obtained. Buyer shall make available to Seller copies of any required license
upon Seller's request.
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VIII. IDENTIFICATION
(A) Seller agrees to protect, indemnify, and hold Buyer and
its employees, officers, and directors, harmless against, and in respect of, any
and all losses, liabilities, costs and expenses (including reasonable attorney's
fee), judgments, damages, claims, counterclaims, demands, action or proceedings,
by whomsoever asserted, including but not limited to, the Borrowers, against any
person or persons who prosecute or defend any actions or proceedings as
representatives of or on behalf of a class or interested group, or any
governmental instrumentality, body, agency, department or commission, or any
administrative body or agency having jurisdiction pursuant to any applicable
statute, rule, regulation, order or decree, or the settlement or compromise of
any of the foregoing, providing, however, any of the foregoing arises out of, is
connected with or results from any breach of representations, covenants or
warranties made by Seller in relation to the Loans sold to Buyer hereunder.
(B) The waiver of any breach, term, provision or condition of
this Agreement shall not be construed to be a waiver of any other or subsequent
breach, term, provision or condition. All remedies afforded by this Agreement
for a breach hereof shall be cumulative; that is, in addition to all other
remedies provided for herein or at law or in equity.
(C) Provided further, in the event of any legal action,
including counterclaims, wherein the claim is based upon alleged facts that
would constitute a breach of any one or more of the warranties, covenants, and
representations made or assumed by Seller under the terms hereof, Seller shall
thereupon, at Buyer's option, repurchase without recourse such Loan at the
Buy-Back Price.
(D) The indemnification contained in (A) and (B) above is
applicable to any servicing of the Loans purchased hereunder which is performed
by the Seller.
IX. RELATIONSHIP OF THE PARTIES
It is agreed that the Seller and the Buyer are not partners or
joint venturers and that the Seller is not to act as an agent for the Buyer in
originating, administering or collecting any Loan, but shall have the status of
and shall act in all matters hereunder as an independent contractor.
X. OPINION OF COUNSEL
The Seller shall deliver to the Buyer in form and substance
satisfactory to the Buyer and its counsel on or before the first Settlement Date
hereunder, an opinion of the Seller's independent outside counsel pursuant to
"Exhibit "G", attached hereto and made a part hereof, opining on the provisions
of Articles V(A)I through V(A)6, inclusive and the Opinion of Counsel will cover
all Loans purchased by Buyer under this Agreement unless the opinion is
rescinded or revoked by the Law Firm rendering the Opinion.
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XI. CLOSING DOCUMENTS
The Seller shall have delivered to Buyer an officer's
certificate, attested to by the Secretary of the Seller, stating the names and
showing the facsimile signatures of the officers of Seller authorized to execute
and deliver this Agreement; endorse Note(s), Mortgage(s) and Assignment(s); and
authorize the bank accounts for Buyer to utilize for funding Loans (Exhibit
"H"). Seller shall deliver to Buyer a good standing certificate for its State of
Incorporation. It is within Buyer's discretion to periodically request good
standing certificates for all states in which Seller is registered to do
business. In addition, Seller shall provide Buyer copies of all applicable
lending licenses.
XII. MISCELLANEOUS
(A) ADDITIONAL COVENANTS.
1. Each party shall, from time to time, execute and
deliver or cause to be executed and delivered, such additional instruments,
assignments, endorsements, papers, and documents as the other party may at any
time reasonably request for the purpose of carrying out of this Agreement and
the transfers provided for herein.
2. The Seller shall, upon request of the Buyer, sign
a letter, in form to be approved by the Buyer .and in conformity with the terms
and conditions hereof, addressed to all the Borrowers on the loans, announcing
the sale evidenced hereby and instructing such Borrowers to recognize the Buyer
as the Seller's successor in interest to such Loans.
3. After any Settlement Date hereunder, the Seller
will hold in trust for the Buyer all sums received by the Seller from
Borrower(s) on any Loan purchased pursuant to this Agreement and pay them to the
Buyer within three (3) business days of the receipt of those sums.
4. Any and all decisions made by Buyer in good faith
to take action or to not take action relative to a Loan, including, but not
limited to, the sale or liquidation of a Loan, Subject Property or collateral
shall be final and conclusively binding upon Seller in the event Seller does not
repurchase a Loan within ten (10) days of notification by Buyer pursuant to
Section VI of this Agreement.
5. In order to enforce Buyer's rights under this
Agreement, Seller shall, upon the request of Buyer or its assigns, do and
perform or cause to be done and performed, every reasonable act and thing
necessary or advisable to put buyer or its assigns in position to enforce the
payment of the Loans and to carry out the intent of this Agreement, including
the execution of and, if necessary, the recordation of additional documents
including separate endorsements and assignments upon request of Buyer. In
addition, Seller hereby irrevocably appoints any officer or employee of Buyer
o/: its assigns its tree and lawful attorney to do and perform every act
necessary, requisite, proper, or advisable to be done to put Buyer or its
assigns in position to enforce the payment of the Loans. (Said Power of Attorney
is set forth as Exhibit "I").
(B) SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND
WARRANTIES-SUCCESSORS AND ASSIGNS. All warranties, representations and covenants
made by either party in this Agreement or in any other instrument delivered by
either party to the other, including those made by third parties for the benefit
of either party, shall be considered to have been relied upon by the other party
(unless otherwise agreed in writing by the parties) and shall survive the
termination of this Agreement. The Buyer reserves the right to proceed against
third parties to enforce any representations, warranties and covenants made by
them for the benefit of the Seller.
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(C) SEVERABILITY. If any provision, or part thereof, of this
Agreement is invalid or unenforceable under any law, such provision, or part
thereof, is and will be totally ineffective to that extent, but the remaining
provisions, or part thereof, will be unaffected.
(D) ATTORNEYS' FEES. However, anything to the contrary
notwithstanding, in the event of any action at law, in equity, arbitration or
otherwise between the parties in relation to this Agreement or any Loan or other
instrument or agreement required or purchased or sold hereunder, the
non-prevailing party, in addition to any other sums which such party shall be
required to pay pursuant to the terms and conditions of this Agreement, at law,
in equity, arbitration or otherwise shall also be required to pay to the
prevailing party all costs and expenses of such litigation, including reasonable
attorney fees.
(E) WAIVERS. No waiver of any term, provision or condition of
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, provision, or condition, or of any other term, provision, or
condition of this Agreement.
(F) NOTICE. Any notice or other communication in this
Agreement provided or permitted to be given by one party to the other must e in
writing and given by personal delivery or by depositing the same in the United
States mail (certified mail, return receipt requested), addressed to the other
party to be notified, postage prepaid. For purposes of notice, the addresses of
the parties shall be as follows:
BUYER:. BAY FINANCIAL SAVINGS BANK, F.S.B., 5537
Sheldon Road, Tampa, FL 33615
ATTENTION: John Liszka, Executive Vice President
SELLER: WESTMARK MORTGAGE CORPORATION, 8000 North
Federal Highway, Boca Raton, FL 33487
ATTENTION: Payton Story, III, President
The above address may be changed from time to time by written
notice from one party to the other.
(G) INSURANCE PREPAYMENT. Insurance refund or credits of any
kind whatsoever shall be the sole responsibility of the Seller in the event of
prepayment of any Loan, cancellation of insurance or any other event requiring
refunding or crediting of unearned insurance premiums. Upon the Buyer's demand,
Seller shall pay to the Buyer, from the Seller's own funds, any required
insurance premium rebate resulting from the prepayment, cancellation,
refinancing or other termination of any Mortgage Loan. Upon such payment, Buyer
shall assign in writing any rights it had to require that the insurer reimburse
Buyer for any rebate made to Borrower. No loan that is sold to Buyer shall be
the subject of the sale to Buyer of Life Insurance which premium has been
included in the Loan Amount, unless Buyer is made aware of same and approves
such Loan which shall then be governed by this paragraph.
(H) ASSIGNMENT. The Seller shall not, without the prior
written consent of the Buyer, assign any of its rights or obligations hereunder.
12
<PAGE>
(I) CAPTIONS. Paragraph or other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(J) ENTIRE AGREEMENT. This Agreement and the Exhibits attached
hereto, and the documents referred to herein or executed concurrently herewith
constitute the entire agreement between the parties hereto with regard to the
subject matter hereof, and there are no prior agreements, understandings,
restrictions, warranties, or representations between the parties with respect
thereto.
(K) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida. The provisions of
this paragraph shall not affect the provisions of any Note, Mortgage or Related
Assets which cause the laws of the United States or any other state to be
applicable. This Agreement shall be interpreted fairly in accordance with its
provisions and without regard to which party drafted it.
(L) TERMINATION. This Agreement is terminable by either the
Buyer or Seller upon ninety (90) days' written notice of termination to the
non-terminating party. Upon such termination, Buyer must honor any outstanding
commitments or Approval Advice's issues to Seller and purchase all Loans subject
to such commitment or Approval Advice in accordance with the terms of this
Agreement and the terms of the commitment or Approval Advice. Notwithstanding
the foregoing, Buyer has the option of terminating this Agreement immediately
upon notice of the Seller upon the Seller's breach of any of the Representations
and Warranties contained in Article V of this Agreement, and Buyer shall have no
obligation to honor any commitment or Approval Advice after such termination.
Seller may terminate this Agreement immediately upon written notice to the buyer
upon the breach of any of Buyer's representations and warranties contained in
Article VII of this Agreement.
(M) ARBITRATION, JURISDICTION, AND VENUE. With respect to any
controversy, argument or claim arising out of or relating to this Agreement, or
any breach thereof, (including, but not limited to, a request for emergency
relief, the parties hereby consent to the exclusive jurisdiction of the Court of
Common Pleas of Hillsboro County, Florida or the Federal District of Court for
the main Jurisdiction in Tampa Florida and waive personal service of any and all
process upon them and consent that all such service of process made by
registered or certified mail directed to them at the address stated herein and
service so made shall be deemed to be completed five (5) days after mailing. The
parties waive trial by jury and waive any objection to jurisdiction and venue of
any action instituted hereunder, agree not to assert any defense based on lack
or jurisdiction or venue and consent to the granting of such legal or equitable
relief as is deemed appropriate by the court, including, but not limited to, any
emergency relief, injunctive or otherwise.
However, anything to the contrary notwithstanding, except with
respect to emergency relief, Buyer shall have the sole and exclusive option and
discretion to have any controversy, argument or claim arising out of or relating
to this Agreement, or any breach thereof, settled in Tampa, Florida in
accordance with the Rules of the American Arbitration Association (as modified
below), and judgment upon the award may be entered in any Court having
jurisdiction thereof.
13
<PAGE>
The arbitration panel shall be made up of three members which
shall be appointed: one by Buyer, one by Seller, and the third by the first tow
arbitrators. Each arbitrator shall be a lawyer experienced in matters relating
to real estate and mortgage banking. Discovery shall be permitted in connection
with the arbitration proceeding within the reasonable discretion of the
arbitration panel. The decision (award) shall be taken to a three-member
arbitration panel, the members of which shall be selected in accordance with the
above-described procedures, and the panel's review shall be limited to the
application of the statutory and decisional law of the State of Florida to the
facts of the dispute as determined in writing by the original arbitration panel.
(N) ENDORSEMENTS. In the event that the remedies or other
terms outlined in this Agreement conflict with the terms of any endorsement by
the Seller or any Note evidencing a Loan purchased by the Buyer from the Seller,
including, but not limited to, an endorsement stating that the assignment of the
Note without recourse, the remedies and terms of this Agreement shall govern and
control.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written:
BUYER: BAY FINANCIAL SAVINGS BANK, F.S.B.
By: /s/ John Liska
--------------------------------
JOHN LISZKA
TITLE: Executive Vice President
SELLER: WESTMARK MORTGAGE CORPORATION
By: /s/ Payton Story, III
--------------------------------
PAYTON STORY III
TITLE: President
14
<PAGE>
EXHIBIT A
Essential Mortgage File Documents
The following documents must be included in the package when submitted
by the Seller to the Buyer for purchase:
1. Original Note.
2. Executed Endorsement or Assignment of the Note.
3. Disclosure Statement, Federal and State, i.e., Good Faith
Estimate, Servicing Transfer Letter, Information Booklet,
Preliminary Truth-in-Lending.
4. Note and Disclosure Riders, when applicable, i.e. Balloon
Rider.
5. Certified or True Copy of the Mortgage or Deed of Trust.
6. Original, Recordable Assignment of the Mortgage.
7. Truth-in-Lending, Itemization of Amount Financed, and HUD-1.
8. Recission Documents.
9. Loan Application (FNMA 1012 or 1003).
10. Fair Lending and Equal Credit Notices, Federal and State.
11. Verification of Employment and Income as expressed in the
"Product Descriptions."
12. Credit Reports as expressed in the "Product Descriptions."
13. Appraisal Report as expressed in Exhibit C and the "Product
Descriptions."
14. Preliminary Title Report and evidence that an ALTA policy has
been ordered.
15. Evidence of Hazard Insurance and documentation showing proper
coverage and loss payable endorsement has been ordered.
16. Evidence of Flood Insurance with loss payable endorsement in
effect or ordered. (Only if the Subject Property is in Flood
Zone "A.")
17. Authorization to Release Information.
18. If there is a prepayment penalty, Seller shall write "PPP" in
bold letters on outside front cover of the loan file.
1. Survey.
2. Termite Inspection.
3. Occupancy Permit.
<PAGE>
EXHIBIT B
Purchase Schedule
Sample unavailable at the present time.
<PAGE>
EXHIBIT E
Endorsement
Pay to the order of
Bay Financial Savings Bank, F.S.B.
without recourse.
----------------------------------
Officer Name and Title
Company Name
<PAGE>
EXHIBIT F
REPETITIVE WIRE #_____________
WIRE TRANSFER AUTHORIZATION
Payee Name:
-------------------------------------------
Account Title:
-------------------------------------------
Account Number:
-------------------------------------------
Bank Name:
-------------------------------------------
ABA Number:
-------------------------------------------
Bank Address:
-------------------------------------------
FOR FURTHER CREDIT TO:
Bank Name:
-------------------------------------------
Account Number:
-------------------------------------------
Bank Address:
-------------------------------------------
FOR FURTHER CREDIT TO:
Account Title:
-------------------------------------------
Account Number:
-------------------------------------------
Payee Verification
-------------------------
Signature, Title
(Must also appear on
Officer's Certificate)
Funding Authorization
-----------------------
Signature, Title
Date:
------------------
Verified By
---------------------------------
Exhibit 10.11
AMENDMENT
TO
MASTER AGREEMENT
FOR SALE AND PURCHASE OF MORTGAGES
This amendment is entered into by and between Bay Financial Savings
Bank, F.S.B. ("Buyer") and Westmark Mortgage Corporation ("Seller") on the 12th
day of February, 1999. The parties mutually agree to amend that certain Master
Agreement for Sale and Purchase of Mortgages entered into by and between the
parties hereto as follows:
1. V, (B), 1: The second sentence is hereby amended to read as follows:
"The Seller has not sold, assigned or otherwise transferred
any right or interest in or to the loan and has not pledged
the loan as collateral for any loan or obligation of Seller or
other purpose, save and except for any right, interest or
claim of Seller's warehouse lenders."
2. V, 03), 14, 22 and 23: Each are hereby amended and modified to limit
the representations and warranties contained in paragraphs 14, 2:2 and
:23 "to Seller's knowledge."
3. V, (B), 21 and VI (G): Each are hereby amended to increase the
appraisal discrepancy from 9%.
4. VI: "Breach of Representations and Warranties" is hereby amended and
modified to provide Seller with the right to cure the breach of any
representation or warranty contained in V, (B), 1, 5,6, 7, 9, 10, 11,
12, 13, 15, 18, 24, and 25, within thirty (30) days from the date
notice to cure is received by Seller.
5. VIII: "Identification" is hereby amended to read "Indemnification."
6. Except as hereinabove amended or modified, said Master Agreement for
Sale and Purchase of Mortgages shall continue in full force and effect.
BAY FINANCIAL SAVINGS BANK, F.S.B. WESTMARK MORTGAGE CORPORATION
By: By: /s/ Payton Story, III
------------------------------ ---------------------------------
Its: Its: President
----------------------------- --------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS AND
CONSOLIDATED STATEMENT OF CASH FLOWS INCLUDED IN THE COMPANY'S FORM 10-QSB FOR
THE NINE MONTHS ENDING SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 7929
<SECURITIES> 44780
<RECEIVABLES> 5266
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 59250
<PP&E> 1391
<DEPRECIATION> 560
<TOTAL-ASSETS> 831
<CURRENT-LIABILITIES> 58652
<BONDS> 0
<COMMON> 17
0
1257
<OTHER-SE> 1743
<TOTAL-LIABILITY-AND-EQUITY> 61669
<SALES> 0
<TOTAL-REVENUES> 16436
<CGS> 3369
<TOTAL-COSTS> 16382
<OTHER-EXPENSES> 150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2090
<INCOME-PRETAX> (96)
<INCOME-TAX> 0
<INCOME-CONTINUING> (96)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (96)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
