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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported) December 31, 1996
PACIFICAMERICA MONEY CENTER, INC.
(Exact name of registrant as specified in its charter)
California 0-20897 95-4465729
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(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
Ventura Boulevard, Suite 102
Woodland Hills, California 91364
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (818) 992-8999
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Item 2. Acquisition or Disposition of Assets
SALE OF ASSETS AND STOCK OF SUBSIDIARIES
Effective as of December 31, 1996, PacificAmerica Money Center, Inc.
(the "Company") completed the sale of substantially all of the assets and
liabilities of Consolidated Reconveyance Company, a California limited
partnership ("CRC") and Lenders Posting and Publishing Company, a California
limited partnership ("LPPC"), and all of the outstanding stock of Consolidated
Reconveyance Corporation, a Washington corporation ("CRCWA"). The sale was
completed pursuant to the terms of an Asset and Stock Purchase and Sale and
Assumption of Liabilities Agreement (the "Purchase Agreement"), dated as of
December 15, 1996, among the Company, CRC, LPPC, CRCWA and two new entities
established for the purpose of the transaction, Consolidated Reconveyance
Company, LLC ("New CRC"), Lenders Posting and Publishing Company, LLC ("New
LPPC"). New CRC and New LPPC were established and are managed by Kenneth
Carmona, who had acted as the Chief Executive Officer of each of CRC, LPPC and
CRCWA since their respective inceptions, and was also an Executive Vice
President of the Company since its inception. Effective as of the closing of
the transaction, Mr. Carmona resigned as an officer, director and employee of
the Company and each of its subsidiaries.
The total purchase price for the assets and stock and goodwill was
$1,822,000, subject to increase or decrease in an amount equal to the increase
or decrease in the total combined partners' and shareholders' equity of CRC,
LPPC and CRCWA, as shown on the audited consolidating balance sheets of PAMM at
December 31, 1996, from the total combined partners' and shareholders' equity
of CRC, LPPC and CRCWA at November 30, 1996. As a result of the transaction,
the Company is writing off approximately $880,000 of the approximately
$1,700,000 of goodwill on its books; no other gain or loss will be recognized
in connection with the sale.
The purchase price was paid $450,000 in cash and $1,372,000, subject
to adjustment as described above, under the terms of a secured promissory note
of New CRC, New LPPC and CRCWA. The note is payable in installments of
principal and interest equal to $25,000 per month for two years beginning April
1, 1997, and thereafter in installments of approximately $9,300 per month until
March 1, 2012. Mandatory prepayments are also due quarterly on the note equal
to specified percentages of the quarterly gross revenues in excess of minimum
quarterly amounts of each of New CRC, New LPPC and CRCWA. The note is secured
by all of the accounts receivable of New CRC, New LPPC and CRCWA. The purchase
price and terms of the sale were established by arms' length negotiation
between the Company and the purchasers.
The Company determined to sell the business of CRC, LPPC and CRCWA as
part of its strategy to exit all businesses other than residential mortgage
lending for securitization. For further information see the Purchase Agreement
filed herewith as Exhibit 10.1.
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COMPLETION OF SALE OF COMMERICAL LOANS
Also in the fourth quarter of 1996, the Company completed the sale of
approximately $18 million in commercial loans to Pacific Crest Investment and
Loan. The Company expects to book a net gain (including release of reserve for
loan losses) of approximately $1,000,000 in connection with the sale. As
announced in November 1996, the sale of these commercial loans was completed in
connection with the Company's decision to exit the commercial loan business and
devote all of its resources on residential mortgage lending for securitization.
For further information see the Mortgage Loan Purchase and Sale Agreement dated
as of December 27, 1996, filed herewith as Exhibit 10.2.
SALE OF RESIDENTIAL LOANS ORIGINATED BY PRESIDENTIAL
On January 16, 1997, the Company sold to California Thrift and Loan,
with recourse, approximately $2,440,000 of the loan portfolio originated by
Presidential Mortgage Company, the Company's predecessor-in-interest, at a
discount of approximately $44,000 from the net book value of the loans, less
reserves and participations previously sold to the purchaser. Substantially all
of the loans were originated prior to 1994, and were not compatible with the
Company's current lending business. The Company used a portion of the proceeds
of the sale to make the final $745,000 payment on the bank loan from Fleet Bank,
and intends to use the balance of the proceeds to provide additional funds for
its residential mortgage lending and securitization business. The Company will
continue to service the loans for the purchaser, and has guaranteed the
purchaser of the loans against any loss due to a deficiency in the value of the
secured property acquired in foreclosure, a loss caused by a senior lien holder
taking title to the secured property or a loss after the purchaser determines
that legal title to the secured property cannot be acquired, as well as for
losses due to environmental claims and litigation claims or a default by the
Company with respect to certain other customary representations and warranties.
For further information see the Guaranteed Loan Sale and Servicing Agreement
dated as of January 14, 1997, filed herewith as Exhibit 10.3.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
10.1 Asset and Stock Purchase and Sale and Assumption of Liabilities
Agreement, Secured Promissory Note and Security Agreement, all dated
as of December 15, 1996, among the Company, CRC, LPPC, CRCWA,
Consolidated Reconveyance Company, LLC ("New CRC") and Lenders Posting
and Publishing Company, LLC ("New LPPC").
10.2 Mortgage Loan Purchase and Sale Agreement dated as of December 27,
1996, by and between the Company and Pacific Crest Investment and
Loan.
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10.3 Guaranteed Loan Sale and Servicing Agreement dated as of January 14,
1997, by and among PacificAmerica Lending, Inc., the Company, Pacific
Thrift and Loan Company and California Thrift & Loan, Inc.
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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.
Dated: January 21, 1997 PACIFICAMERICA MONEY CENTER, INC.
By: /s/ Joel R. Schultz
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President and Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ----------
<S> <C> <C>
10.1 Asset and Stock Purchase and Sale and Assumption of Liabilities
Agreement (the "Purchase Agreement"), Secured Promissory Note and
Security Agreement, all dated as of December 15, 1996, among the
Company, CRC, LPPC, CRCWA, Consolidated Reconveyance Company, LLC
("New CRC") and Lenders Posting and Publishing Company, LLC ("New
LPPC") ...........................................................
10.2 Mortgage Loan Purchase and Sale Agreement dated as of December 27,
1996, between the Company and Pacific Crest Investment and Loan...
10.3 Guaranteed Loan Sale and Servicing Agreement dated as of January 14,
1997, by and among PacificAmerica Lending, Inc., the Company, Pacific
Thrift and Loan Company and California Thrift & Loan, Inc.........
</TABLE>
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EXHIBIT 10.1
CONSOLIDATED RECONVEYANCE COMPANY,
LENDERS POSTING AND PUBLISHING COMPANY
AND CONSOLIDATED RECONVEYANCE CORPORATION
ASSET AND STOCK PURCHASE AND SALE
AND ASSUMPTION OF LIABILITIES AGREEMENT
This Asset and Stock Purchase and Sale and Assumption of Liabilities
Agreement (the "Agreement"), dated as of December 15, 1996, is entered into by
and between Consolidated Reconveyance Company ("CRC"), a California limited
partnership, Lenders Posting and Publishing Company ("LPPC"), a California
limited partnership, and PacificAmerica Money Center, Inc. ("PAMM"), a Delaware
corporation (sometimes collectively referred to herein as "Sellers"), on the
one hand, and Consolidated Reconveyance Company, LLC ("New CRC"), a California
limited liability company, and Lenders Posting and Publishing Company, LLC
("New LPPC"), a California limited liability company, and Consolidated
Reconveyance Corporation ("CRCWA"), a Washington corporation (sometimes
collectively referred to herein with New CRC and New LPPC as "Purchasers"), on
the other hand, with reference to the following facts:
RECITALS
A. CRC is engaged in the business of providing trust deed foreclosure
and reconveyance services to mortgage lenders on loans secured by real property
located primarily in California (the "CRC Business"). LPPC is engaged in the
business of providing posting and publishing services to trust deed foreclosure
services companies and lenders (the "LPPC Business"). PAMM owns all of the
outstanding shares of common stock of CRCWA, which is engaged in the business
of providing trust deed foreclosure and reconveyance services to mortgage
lenders on loans secured by real property located primarily in Washington (the
"CRCWA Business").
B. CRC desires to sell, and New CRC desires to purchase the
assets of CRC, assume the liabilities of CRC (except the liabilities
specifically excluded herein) and continue the CRC Business. LPPC desires to
sell, and New LPPC desires to purchase the assets of LPPC, assume the
liabilities of LPPC and continue the LPPC Business. PAMM desires to sell, and
New CRC desires to purchase, all of the outstanding shares of stock of CRCWA
and continue the CRCWA Business. The assets of CRC and LPPC and the Common
Stock of CRCWA are sometimes collectively referred to herein as the
"Acquisition Assets."
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and
promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
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ARTICLE 1.
PURCHASE AND SALE OF CRC ASSETS
AND ASSUMPTION OF CRC LIABILITIES
BY NEW CRC
1.1. Transfer of Assets. Upon the terms and subject to the
conditions contained herein, on the Closing Date (as hereinafter defined), CRC
agrees to sell, convey, transfer, assign and deliver to New CRC, and New CRC
agrees to accept and purchase from CRC, the following assets, properties and
rights of CRC (collectively, the "CRC Assets"), subject to the exclusions set
forth in Section 1.2 hereof:
1.1.1. Balance Sheet Assets. All of the assets reflected on
the balance sheet of CRC at December 31, 1996, prepared in a manner consistent
with CRC's past financial statements. All of the tangible assets included in
the CRC Assets are being sold on an "as is" basis, with no warranties as to
condition from CRC to New CRC;
1.1.2. Business Names. All of CRC's rights to conduct
business under the name Consolidated Reconveyance Company and all trade names
and trademarks associated with such name, including logos and designs
pertaining thereto and derivatives thereof and all goodwill associated
therewith;
1.1.3. Customer Lists. All of CRC's right, title and
interest in and to that portion of CRC's customer list that is maintained and
used by CRC in the Business;
1.1.4. Contracts. All of CRC's right, title and interest in
and to each contract, agreement or commitment, written or oral, relating to
the Business to which CRC is a party as of the Closing Date, including all
rights of CRC as trustee under deeds of trust which name CRC as trustee
(collectively, the "Assigned Contracts"); and
1.1.5. Business and Records. The Business, together with
all books, records and accounts, correspondence, employment records, marketing
information and any confidential information which has been reduced to writing
relating to or arising out of the Business or customers or suppliers of CRC,
subject to CRC's reasonable rights of access as set forth in Section 11.1
hereof;
1.2. Excluded Assets. Notwithstanding anything contained in
Section 1.1 hereof to the contrary, CRC is not selling, and New CRC is not
purchasing, pursuant to this Agreement, any of the following, all of which
shall be retained by CRC (collectively, the "Excluded Assets"):
1.2.1. Real Property. Any real property, leaseholds or
leasehold improvements owned by CRC as of the Closing Date; and
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1.2.2. Partnership Documents. CRC's tax returns and other
partnership documents;
1.3. Assumption of Balance Sheet, Executory and Other Liabilities.
1.3.1. Balance Sheet Liabilities Except as provided in
Sections 1.3.3 and 1.3.4 hereof, as of the Closing Date, New CRC shall assume
and agree to thereafter pay when due and discharge and indemnify CRC and hold
CRC harmless with respect to all liabilities reflected on the balance sheet of
CRC as of December 31, 1996.
1.3.2. Executory Liabilities Assumed by New CRC. Except as
provided in Sections 1.3.3 and 1.3.4 hereof, as of the Closing Date, New CRC
shall assume and agree to thereafter pay when due and discharge and indemnify
CRC and hold CRC harmless with respect to the executory liabilities and
obligations of CRC under each Assigned Contract in effect on the Closing Date
and assigned to New CRC pursuant to Section 1.1.5 hereof.
1.3.3. Limited Liability in Connection with Consumer Action
and Smith Actions. New CRC has agreed that it shall have the following
obligations in connection with the pending legal actions entitled Consumer
Action et al. v. Agency Sales, et al. (Contra Costa Superior Court Case No.
C95-02299) (the "Consumer Action") and Smith v. TICOR Title Insurance Co. et
al. (Los Angeles Superior Court Case No. BC148433) ( the "Smith Action");
1.3.3.1. Liability in Connection with Consumer
Action. In the event that a judgment is rendered against CRC in the Consumer
Action or CRC agrees to a settlement of the Consumer Action involving the
payment of damages or penalties by CRC, New CRC will reimburse CRC for 25% of
the total damages and/or penalties paid by CRC (not including any attorneys'
fees paid by CRC) in excess of $400,000, provided that New CRC's total
liability will not exceed $50,000;
1.3.3.2. Liability in Connection with the Smith
Action. In the event that a judgment is rendered against CRC in the Smith
Action or CRC agrees to a settlement of the Smith Action involving the payment
of damages or penalties by CRC, New CRC will reimburse CRC for 25% of the total
damages and/or penalties paid by CRC (not including any attorneys' fees paid by
CRC) in excess of $25,000, provided that New CRC's total liability will not
exceed $25,000;
1.3.4. Liabilities Not Assumed by New CRC. New CRC shall
not be deemed by anything contained in this Agreement to have assumed and CRC
hereby agrees to indemnify New CRC and hold it harmless with respect to:
1.3.4.1. Agreement Breaches. Any liability of CRC to
any person or entity the existence of which constitutes a breach of any
covenant, agreement, representation, or warranty of Sellers contained in this
Agreement;
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1.3.4.2. Taxes. Any liability of CRC for any federal,
state, local or foreign income or franchise taxes, state or local property
taxes or other taxes of any kind or description except New CRC's pro rata
portion of any personal property taxes with respect to its ownership of any of
the CRC Assets after the Closing Date;
1.3.4.3. Employee Obligations. Any employment
contracts or obligations of CRC to its employees, including all expenses in
connection with the termination of any of such employees terminated prior to
the Closing Date;
1.3.4.4. Employee Benefit Plans. Any accrued or other
liability for contribution or payments to be made in respect of service during
periods through the Closing Date under any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ["ERISA"]) or other employee benefit plan maintained for the
employees of CRC who are participants therein up to the Closing Date;
1.3.4.5. Partnership and Securities Liabilities. Any
liabilities of CRC to the partners of CRC under the terms of its Agreement of
Limited Partnership, as amended and currently in effect, and any liabilities of
CRC for any federal or state securities law violations by either of them; and
1.3.4.6. Litigation Claims. Any liabilities of CRC
arising in the ordinary course of its business for actions taken by CRC prior
to the Closing Date, except for liabilities arising as a result of any
fraudulent action or wilful misconduct of CRC prior to the Closing Date and
except as provided in Section 1.3 hereof.
1.4. Closing Costs; Transfer Taxes. New CRC shall be responsible
for any sales, use, excise, property or other taxes imposed by reason of the
transfer of the CRC Assets provided hereunder and any deficiency, interest or
penalty asserted with respect thereto.
ARTICLE 2.
PURCHASE AND SALE OF LPPC ASSETS
AND ASSUMPTION OF LPPC LIABILITIES
BY NEW LPPC
2.1. Transfer of Assets. Upon the terms and subject to the
conditions contained herein, on the Closing Date (as hereinafter defined), LPPC
agrees to sell, convey, transfer, assign and deliver to New LPPC, and New LPPC
agrees to accept and purchase from LPPC, the following assets, properties and
rights of LPPC (collectively, the "LPPC Assets"), subject to the exclusions set
forth in Section 2.2 hereof:
2.1.1. Balance Sheet Assets. All of the assets reflected on
the balance sheet of LPPC at December 31, 1996, prepared in a manner consistent
with LPPC's past
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financial statements. All of the tangible assets included in the LPPC Assets
are being sold on an "as is" basis, with no warranties as to condition from
LPPC to New LPPC;
2.1.2. Business Names. All of LPPC's rights to conduct
business under the name Lenders Posting and Publishing Company and all trade
names and trademarks associated with such name, including logos and designs
pertaining thereto and derivatives thereof and all goodwill associated
therewith;
2.1.3. Customer Lists. All of LPPC's right, title and
interest in and to that portion of LPPC's customer list that is maintained and
used by LPPC in the Business;
2.1.4. Contracts. All of LPPC's right, title and interest
in and to each contract, agreement or commitment, written or oral, relating to
the Business to which LPPC is a party as of the Closing Date (collectively, the
"Assigned Contracts"); and
2.1.5. Business and Records. The LPPC Business, together
with all books, records and accounts, correspondence, employment records,
marketing information and any confidential information which has been reduced
to writing relating to or arising out of the Business or customers or suppliers
of LPPC, subject to LPPC's reasonable rights of access as set forth in Section
11.1 hereof;
2.2. Excluded Assets. Notwithstanding anything contained in
Section 2.1 hereof to the contrary, LPPC is not selling, and New LPPC is not
purchasing, pursuant to this Agreement, any of the following, all of which
shall be retained by LPPC (collectively, the "Excluded Assets"):
2.2.1. Real Property. Any real property, leaseholds or
leasehold improvements owned by LPPC as of the Closing Date; and
2.2.2. Partnership Documents. LPPC's tax returns and other
partnership documents;
2.3. Assumption of Balance Sheet, Executory and Other Liabilities.
2.3.1. Balance Sheet Liabilities. As of the Closing Date,
New LPPC shall assume and agree to thereafter pay when due and discharge and
indemnify LPPC and hold LPPC harmless with respect to all liabilities reflected
on the balance sheet of LPPC as of December 31, 1996.
2.3.2. Executory Liabilities Assumed by New LPPC. As of the
Closing Date, New LPPC shall assume and agree to thereafter pay when due and
discharge and indemnify LPPC and hold LPPC harmless with respect to the
executory liabilities and obligations of LPPC under each Assigned Contract in
effect on the Closing Date and assigned to New LPPC pursuant to Section 2.1.4
hereof.
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2.3.3. Liabilities Not Assumed by New LPPC. New LPPC shall
not be deemed by anything contained in this Agreement to have assumed and LPPC
hereby agrees to indemnify New LPPC and hold it harmless with respect to:
2.3.3.1. Agreement Breaches. Any liability
of LPPC to any person or entity the existence of which constitutes a breach of
any covenant, agreement, representation, or warranty of LPPC contained in this
Agreement;
2.3.3.2. Taxes. Any liability of LPPC for
any federal, state, local or foreign income or franchise taxes, state or local
property taxes or other taxes of any kind or description, except New LPPC's pro
rata portion of any personal property taxes with respect to its ownership of
any of the LPPC Assets after the Closing Date;
2.3.3.3. Employee Obligations. Any
employment contracts or obligations of LPPC to its employees, including all
expenses in connection with the termination of any of such employees terminated
prior to the Closing Date;
2.3.3.4. Employee Benefit Plans. Any accrued
or other liability for contribution or payments to be made in respect of
service during periods through the Closing Date under any employee pension
benefit plan (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ["ERISA"]) or other employee benefit plan
maintained for the employees of LPPC who are participants therein up to the
Closing Date;
2.3.3.5. Partnership and Securities
Liabilities. Any liabilities of LPPC to the partners of LPPC under the terms
of its Agreement of Limited Partnership, as amended and currently in effect and
any liabilities of LPPC for any federal or state securities law violations by
either of them; and
2.3.3.6. Litigation Claims. Any liabilities of LPPC
arising in the ordinary course of its business for actions taken by LPPC prior
to the Closing Date, except for liabilities arising as a result of any
fraudulent action or wilful misconduct of LPPC prior to the Closing Date.
2.4. Closing Costs; Transfer Taxes. New LPPC shall be responsible
for any sales, use, excise, property or other taxes imposed by reason of the
transfer of the LPPC Assets provided hereunder and any deficiency, interest or
penalty asserted with respect thereto.
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ARTICLE 3.
PURCHASE AND SALE OF COMMON STOCK
OF CRCWA BY NEW CRC
3.1. Purchase and Sale of Common Stock. Upon the terms and subject
to the conditions contained herein, on the Closing Date (as hereinafter
defined), PAMM hereby sells, conveys, transfers, assigns and delivers to New
CRC, and New CRC hereby accepts and purchases from PAMM, all of the issued and
outstanding Common Stock of CRCWA. PAMM hereby agrees to indemnify and hold
harmless New CRC and New LPPC to the extent of the following liabilities, which
the parties agree shall be the primary responsibility of PAMM:
3.1.1. Taxes. Any liability of CRCWA for any
federal, state, local or foreign income or franchise taxes, state or local
property taxes or other taxes of any kind or description accrued through
December 31, 1996 except the pro rata portion of any personal property taxes
accrued after the Closing Date;
3.1.2. Employee Obligations. Any employment
contracts or obligations of CRCWA to its employees, including all expenses in
connection with the termination of any of such employees terminated prior to
the Closing Date;
3.1.3. Employee Benefit Plans. Any accrued or other
liability for contribution or payments to be made in respect of service during
periods through the Closing Date under any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ["ERISA"]) or other employee benefit plan maintained for the
employees of CRCWA who are participants therein up to the Closing Date;
3.1.4. Shareholder and Securities Liabilities. Any
liabilities of CRCWA to the shareholders of CRCWA and any liabilities of CRCWA
for any federal or state securities law violations by it; and
3.1.4.1. Litigation Claims. Any liabilities
of CRCWA arising in the ordinary course of its business for actions taken by
CRCWA prior to the Closing Date, except for liabilities arising as a result of
any fraudulent action or wilful misconduct of CRCWA prior to the Closing Date.
3.2. Tax Election. PAMM and New CRC agree that each of them shall
take such actions as are necessary to elect the tax treatment applicable under
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended.
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ARTICLE 4.
PURCHASE PRICE
4.1. Purchase Price for Acquisition Assets. The aggregate purchase
price (the "Acquisition Price") for the Acquisition Assets shall be $1,822,000,
subject to increase or decrease in an amount equal to the increase or decrease
in the total combined partners' and shareholders' equity of CRC, LPPC and
CRCWA, as shown on the audited consolidating balance sheets of PAMM at December
31, 1996, from the total combined partners and shareholders' equity of CRC,
LPPC and CRCWA at November 30, 1996. The Acquisition Price shall be paid
$450,000 in cash on the Closing Date and $1,372,000, subject to adjustment as
described in the foregoing sentence, under the terms of a secured promissory
note of New CRC, New LPPC and CRCWA (the "Note") in the form attached hereto
as Exhibit A, secured by a Security Agreement (the "Security Agreement") in the
form attached hereto as Exhibit B.
4.2. Covenants of Purchasers Which Apply Until Note is
Paid in Full. Until the Note is paid in full, Purchasers hereby covenant that
neither they nor any of their affiliates (including any person or entity that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, any of the Purchasers) shall
engage in, or have any direct or indirect interest in, any business competitive
with the CRC Business, the LPPC Business or the CRCWA Business unless the
entity in which such business is conducted agrees to become jointly and
severally liable under the terms of the Note and Security Agreement, and the
gross revenues from any such business are included in the Gross Revenues (as
defined in the Note) for determining the amount owed by Purchasers to Sellers
under the terms of the Note.
4.3. Value of Assets. The parties agree that the fair
market value of the assets of each of CRC, LPPC and CRCWA is equal to the book
value of such assets as reflected in the balance sheets of those entities at
December 31, 1996, and that the value of the goodwill for the assets and stock
purchased hereby is $820,000.
ARTICLE 5.
CLOSING
5.1. Closing. The Closing of the transactions contemplated herein
(the "Closing") shall be held at the offices of Jeffer, Mangels, Butler &
Marmaro, 2121 Avenue of the Stars, 10th Floor, Los Angeles, California, at
10:00 a.m. local time on December 31, 1996 (the "Closing Date"). The Closing
Date may not be extended unless Sellers and Purchasers mutually consent to a
later date.
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5.2. Documents to Be Delivered.
5.2.1. Deliveries at the Closing. Sellers and Purchasers
shall, on the Closing Date, deliver all instruments and documents required to
be delivered pursuant to Articles 6 and 7 hereof;
5.2.2. Form of Instruments and Documents. All of the
foregoing instruments and documents shall be in form and substance, and shall
be executed and delivered in a manner, reasonably satisfactory to Purchasers
and Sellers, as the case may be.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES
OF SELLERS
6.1. Representations of CRC. CRC hereby represents and warrants to
Purchasers as follows:
6.1.1. Organization of CRC. CRC is duly organized, validly
existing and in good standing as a limited partnership under the laws of the
state of California, has full partnership power and authority to conduct its
business as it is presently being conducted and to own and lease its properties
and assets.
6.1.2. Authorization. CRC has all necessary partnership
power and authority and has taken all partnership action necessary to enter
into this Agreement, to consummate the transactions contemplated hereby, and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by CRC and is a legal, valid and binding obligation of it enforceable
against CRC in accordance with its terms.
6.2. Representations of LPPC. LPPC hereby represents and warrants
to Purchasers as follows:
6.2.1. Organization of LPPC. LPPC is duly organized,
validly existing and in good standing as a limited partnership under the laws
of the state of California, has full partnership power and authority to
conduct its business as it is presently being conducted and to own and lease
its properties and assets.
6.2.2. Authorization. LPPC has all necessary partnership
power and authority and has taken all partnership action necessary to enter
into this Agreement, to consummate the transactions contemplated hereby, and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by LPPC and is a legal, valid and binding obligation of it
enforceable against LPPC in accordance with its terms.
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6.3. Representations of CRCWA and PAMM. CRCWA and PAMM hereby
represent and warrant to Purchasers as follows:
6.3.1. Organization of CRCWA. CRCWA is duly organized,
validly existing and in good standing as a corporation under the laws of the
state of Washington, and has full corporate power and authority to conduct its
business as it is presently being conducted and to own and lease its properties
and assets.
6.3.2. Organization of PAMM. PAMM is duly organized,
validly existing and in good standing as a corporation under the laws of the
state of Delaware, and has full corporate power and authority to conduct its
business as it is presently being conducted and to own and lease its properties
and assets.
6.3.3. Authorization. PAMM has all necessary corporate
power and authority and has taken all corporate action necessary to enter into
this Agreement, to consummate the transactions contemplated hereby, and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by PAMM and is a legal, valid and binding obligation of it
enforceable against PAMM in accordance with its terms.
6.3.4. 6.4. No Conflict or Violation. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in (a) a violation of or a
conflict with any provision of the Certificate of Incorporation or Bylaws of
PAMM or CRCWA, or result in a breach of, or a default under, any term or
provision of any contract, agreement, indebtedness, lease, commitment, license,
franchise, permit, authorization or concession to which either of PAMM is a
party which breach or default would have a material adverse effect on the
ability of PAMM to consummate the transactions contemplated hereby or (c) a
violation by PAMM of any statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree or award, which violation would have a
material adverse effect on its ability to consummate the transactions
contemplated hereby.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
7.1. General Representations and Warranties. Purchasers hereby
represent and warrant to Sellers as follows:
7.1.1. Organization of New CRC and New LPPC. Each of New
CRC and New LPPC is duly organized, validly existing and in good standing as a
limited liability company under the laws of the State of California.
7.1.2. Authorization. Each of New CRC and New LPPC has all
necessary power and authority and has taken all action necessary to enter into
this Agreement,
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to consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
New CRC and New LPPC and is a legal, valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms.
7.2. No Conflict or Violation. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will result in (a) a violation of or a conflict with any provision of the
Operating Agreement of either New CRC or New LPPC, (b) a breach of, or a
default under, any term or provision of any contract, agreement, indebtedness,
lease, commitment, license, franchise, permit, authorization or concession to
which either of New CRC or New LPPC is a party which breach or default would
have a material adverse effect on its business or financial condition or Seller
or its ability to consummate the transactions contemplated hereby or (c) a
violation by New CRC or New LPPC of any statute, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree or award, which violation would
have a material adverse effect on its business or financial condition or its
ability to consummate the transactions contemplated hereby.
7.3. Additional Representations and Warranties. Purchasers
acknowledge that Kenneth Carmona, the managing member of each of New CRC and
New LPPC, has been the chief executive officer of CRC, LPPC and CRCWA since
their respective organizations, and that certain other employees of CRC, LPPC
and CRCWA who will continue as employees of New CRC, New LPPC and CRCWA also
have knowledge of certain of the matters described herein, and that therefore,
Purchasers have knowledge of the business affairs of CRC, LPPC and CRCWA,
including litigation, assets and liabilities and obligations of each of them
under contractual arrangements. Purchasers therefore hereby represents and
warrants to Sellers as follows:
7.3.1. Consents and Approvals. No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, or any other person or entity, is required to be made
or obtained by any of Purchasers or Sellers in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
7.3.2. Litigation. Except with respect to the actions
disclosed in Section 1.3.3 hereof, to the best of Purchasers' knowledge, there
is no order, writ, injunction, judgment or decree outstanding or any action,
claim, suit, litigation, proceeding, labor dispute, arbitral action or
investigation (collectively, "Actions") pending or, to the knowledge of
Purchasers, threatened or anticipated against CRC, LPPC or CRCWA or any of the
transactions contemplated by this Agreement, which, if adversely determined,
would have a material adverse effect on Seller, or on the consummation of the
transactions contemplated by this Agreement. None of CRC, LPPC or CRCWA is in
default with respect to any judgment, order, writ, injunction or decree of any
court or governmental agency, and there are no unsatisfied judgments against
it.
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7.4. Assets. CRC, LPPC and CRCWA have no material assets except as
disclosed or accounted for on the respective balance sheets of CRC, LPPC and
CRCWA.
7.5. Liabilities. To the best knowledge of Purchasers, based upon
the knowledge of Kenneth A. Carmona and certain other employees who will
continue as employees of New CRC, New LPPC and CRCWA regarding the business
affairs of CRC, LPPC and CRCWA, none of them has any material liabilities or
obligations (absolute, accrued, contingent or otherwise), including, without
limitation, any liability for taxes and interest, penalties, and other charges
with respect thereto, except (i) current liabilities and long-term debt as
reflected on the Balance Sheet, and (ii) liabilities arising under contracts,
leases, letters of credit, purchase orders, permits, purchase agreements and
other agreements entered into by CRC, LPPC and CRCWA in the ordinary course of
their respective businesses.
7.6. Material Misstatements or Omissions. No representations or
warranties by Purchasers in this Agreement, nor any document, exhibit,
statement, certificate or schedule furnished to Seller pursuant hereto,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements of facts
contained therein not misleading.
ARTICLE 8.
COVENANTS OF SELLERS AND PURCHASERS
Sellers and Purchasers covenant with each other as follows:
8.1. Maintenance of Business Prior to Closing. Sellers shall use
their best efforts to continue to carry on the CRC Business, the LPPC Business
and the CRCWA Business in the ordinary course and substantially in accordance
with past practice and will not take any action inconsistent therewith or with
the consummation of the closing of this Agreement.
8.2. Maintenance of Cash Account. Sellers will use their best
efforts, and will cause all of their officers to use their best efforts, to
maintain a minimum aggregate of $500,000 in the cash account(s) of CRC, LPPC
and CRCWA as of the Closing Date.
8.3. Certain Prohibited Transactions. Prior to the Closing Date,
CRC, CRCWA and LPPC shall not, without the prior written consent of Kenneth A.
Carmona on behalf of Purchasers and of Joel R. Schultz on behalf of Sellers:
8.3.1. enter any material transaction not in the ordinary
course of business and consistent with past practice;
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8.3.2. mortgage, pledge or otherwise encumber any of the
Acquisition Assets or sell, transfer or otherwise dispose of any of the
Acquisition Assets, except in the ordinary course of business and consistent
with past practice;
8.3.3. make any investment of a capital nature either by
purchase of stock or securities, contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other
individual, partnership, firm or corporation, except in the ordinary course of
business and consistent with past practice, or sell or otherwise dispose of, or
agree to sell or otherwise dispose of, any such investment;
8.3.4. enter into or terminate any material contract or
agreement, or make any material change in any of its contracts, other than in
the ordinary course of business and consistent with past practice, and other
than personnel changes as deemed appropriate by Kenneth A. Carmona;
8.3.5. make any increase in, or any commitment to increase
the compensation payable to any employee of CRC, LPPC or CRCWA other than
routine increases made in the ordinary course of business and consistent with
past practice;
8.3.6. materially alter the manner of keeping its books; or
8.3.7. do any other act which would cause any representation
or warranty of Sellers or Purchasers in this Agreement to be or become untrue
in any material respect.
8.4. Notification of Certain Matters. Sellers shall give prompt
notice to Purchasers, and Purchasers shall give prompt notice to Sellers of (i)
the occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect any time from the
date hereof to the Closing Date and (ii) any material failure of Sellers or
Purchasers, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by them hereunder.
Each party shall use all reasonable efforts to remedy any material failure on
its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
8.5. No Mergers, Consolidations, Sale of Stock, Etc. Sellers will
not, directly or indirectly, solicit any inquiries or proposals or enter into
or continue any discussions, negotiations or agreements relating to the sale or
exchange of capital stock or partnership interests or the merger of CRC, LPPC
or CRCWA with, or any direct or indirect disposition of a significant amount of
the assets or business of CRC, LPPC or CRCWA to, any person other than
Purchasers or provide any assistance or any information to or otherwise
cooperate with any person in connection with any such inquiry, proposal or
transaction.
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8.6. Continuation of Business Relationship. For a period of seven
years following the Closing Date, provided that Purchasers provide reasonably
acceptable services at competitive rates, PAMM and its subsidiaries shall
engage New CRC or CRCWA, as appropriate, to act as trustee and provide all
trust deed foreclosure services on substantially all trust deeds securing loans
made by PAMM or any of its affiliates; provided that this agreement to engage
New CRC or CRCWA shall not include loans originated for sale if the intended
purchaser of such loans requires PAMM or its subsidiaries to use a different
trustee specified by such purchaser. Except in the event of fraud of New CRC
or CRCWA or misconduct which results in a material loss on a loan held by PAMM
or one of its subsidiaries, PAMM shall be required to deliver written notice to
New CRC and/or CRCWA informing them of the reasons for dissatisfaction with
their services, and New CRC and/or CRCWA shall have a period of 15 days to
provide evidence to PAMM of a correction of the reasons for PAMM's
dissatisfaction. If such evidence is reasonably satisfactory to PAMM, it shall
not terminate the engagement of New CRC or CRCWA. If New CRC or CRCWA do not
provide evidence of correction or such evidence that is provided is not
reasonably satisfactory to PAMM, then PAMM and its subsidiaries may terminate
the engagement of New CRC or CRCWA as trustee of record on deeds of trust
originated by PAMM or its subsidiaries. New CRC and CRCWA agree that they will
give PAMM and its subsidiaries access to the borrower lists of New CRC and
CRCWA for the purpose of allowing PAMM and its subsidiaries to solicit such
borrowers to refinance their loans, except to the extent prohibited by law.
ARTICLE 9.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions provided for
hereby are subject, in the discretion of Seller, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions:
9.1. Representations, Warranties, and Covenants. All
representations and warranties of Purchasers contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date, and
Purchasers shall have performed all agreements and covenants required hereby to
be performed by it prior to or at the Closing Date.
9.2. Cash Deposit. Purchasers shall have delivered by December 31,
1996 to Sellers' legal counsel, to hold in trust for Purchasers until the
Closing Date, a cashier's or certified check in the amount of $450,000.
9.3. Security Agreement. Sellers and Purchasers shall execute and
deliver a Security Agreement in the form attached hereto as Exhibit B.
9.4. Certificates. Purchasers will furnish Sellers with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article 9 as may be reasonably requested by
Seller.
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9.5. Corporate Documents. Sellers shall have received from
Purchasers resolutions duly adopted by the members or board of directors, as
appropriate, of Purchasers approving this Agreement and the transactions
contemplated hereby, certified by Carmona as managing member of New CRC and New
LPPC.
9.6. Assumption of Liabilities. Purchasers shall have executed and
delivered to Sellers such instruments, in form and substance satisfactory to
Sellers, as Sellers shall deem necessary in order for Purchasers to assume the
executory obligations of Sellers under each Assigned Contract to be assumed by
Purchasers pursuant hereto.
ARTICLE 10.
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchasers to consummate the transactions provided
for hereby are subject, in the discretion of Purchasers, to the satisfaction,
on or prior to the Closing Date, of each of the following conditions:
10.1. Representations, Warranties, and Covenants. All
representations and warranties of Sellers contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date, and
Sellers shall have performed all agreements and covenants required hereby to be
performed by them prior to or at the Closing Date.
10.2. Certificates. Sellers will furnish Purchasers with such
certificates of Sellers to evidence compliance with the conditions set forth in
this Article 10 as may be reasonably requested by Purchasers.
10.3. Corporate Documents. Purchasers shall have received from
Sellers resolutions duly adopted by the board of directors PAMM and the board
of directors of Presidential Services Corporation, general partner of
Presidential Management Company, general partner of CRC and LPPC, approving
this Agreement and the transactions contemplated hereby, certified by the
corporate secretaries of each of PAMM and Presidential Services Corporation, as
appropriate.
10.4. Bills of Sale. Sellers shall have executed and delivered to
Purchasers deeds and bills of sale and other instruments of assignment in form
and substance satisfactory to Purchasers and its counsel, effectively
transferring title to the Acquisition Assets to Purchasers, as applicable.
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ARTICLE 11.
ACTIONS BY SELLER AND PURCHASERS
AFTER THE CLOSING
11.1. Books and Records. Each party agrees that he or it will
cooperate with and make available to the other parties, during normal business
hours, all books and records, information and employees (without substantial
disruption of employment) retained and remaining in existence after the Closing
Date which are necessary or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such books and records, information or employees for any
reasonable business purpose. The party requesting any such books and records,
information or employees shall bear all out-of-pocket costs and expenses paid
to third parties (including without limitation, attorneys' fees) reasonably
incurred in connection with providing such books and records, information or
employees. Sellers may require certain financial information relating to
Sellers for periods prior to the Closing Date for the purpose of filing
federal, state, local and foreign tax returns and other governmental reports,
and Purchasers agree to furnish such information to Sellers at their reasonable
request.
11.2. Indemnification.
11.2.1. By Sellers. Sellers shall indemnify, save and hold
harmless Purchasers and their officers, directors, employees and agents, from
and against any and all costs, losses (including, without limitation,
diminution in value), liabilities, damages, lawsuits, deficiencies, claims and
expenses (whether or not arising out of third-party claims), including, without
limitation, interest, penalties, reasonable attorneys' fees and all amounts
paid in investigation, defense or settlement of any of the foregoing (herein,
"Damages"), incurred in connection with or arising out of or resulting from (i)
any material breach of any covenant or warranty, or the material inaccuracy of
any representation, made by Sellers in or pursuant to this Agreement;(ii) any
and all liabilities and obligations of Sellers which arose prior to the Closing
Date which have not been assumed by Purchasers hereunder; and (iii) any and all
liabilities arising as a result of any federal or state securities law
violations due to the actions of CRC, LPPC, CRCWA or PAMM. The term "Damages"
as used in this Section 11.2 is not limited to matters asserted by third
parties against Purchasers, but includes Damages incurred or sustained by
Purchasers in the absence of third party claims.
11.2.2. By Purchasers. Purchasers shall indemnify and save
and hold harmless Sellers and their officers, directors, employees and agents,
from and against any and all Damages incurred in connection with or arising out
of or resulting from (i) any material breach of any covenant or warranty, or the
material inaccuracy of any representation, made by Purchasers in or pursuant to
this Agreement; (ii) any liability, obligation or commitment of Purchasers
relating to the Acquisition Assets or the operation of the Business after the
Closing Date; (iii) as of or after the Closing Date, any other claim, liability,
obligation or commitment
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of any nature which is expressly assumed by Purchasers pursuant to this
Agreement; and (iii) any and all liabilities arising as a result of any federal
or state securities law violations due to the actions of New CRC, New LPPC or
Carmona.
11.2.3. Defense of Claims. If a claim for Damages is to be
made by a party entitled to indemnification hereunder against the indemnifying
party, the party entitled to such indemnification shall give written notice to
the indemnifying party as soon as practicable after the party entitled to
indemnification becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought under this Section
11.2.3 Such notice shall set forth, with reasonable specificity, the facts,
conditions, or events which may give rise to Damages for which indemnification
may be sought under this Section 11.2.3 If any lawsuit or enforcement action
is filed against any party entitled to the benefit of indemnity hereunder,
written notice thereof shall be given to the indemnifying party as promptly as
practicable (and in any event within fifteen (15) days after the service of the
citation or summons); provided, that the failure of any indemnified party to
give timely notice shall not affect rights to indemnification hereunder except
to the extent that the indemnifying party demonstrates actual damage caused by
such failure. After such notice, if the indemnifying party shall acknowledge
in writing to the indemnified party that the indemnifying party shall be
obligated under the terms of its indemnity hereunder in connection with such
lawsuit or action, then the indemnifying party shall be entitled, if it so
elects, to take control of the defense and investigation of such lawsuit or
action and to employ and engage attorneys of its own choice to handle and
defend the same, at the indemnifying party's cost, risk and expense provided
that the indemnifying party and its counsel shall proceed with diligence and in
good faith with respect thereto. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its
own cost, participate in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom.
11.3. Further Assurances. After the Closing Date, each party will
cooperate in good faith with the other and will take all appropriate action and
execute any documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder. From time to time after the Closing Date, Sellers will
execute and deliver to Purchasers such instruments of sale, transfer,
conveyance, assignment and delivery, consents, assurances, powers of attorney
and other instruments as may be reasonably requested by counsel for Purchasers
in order to vest in Purchasers all right, title and interest of Sellers in and
to the Acquisition Assets and otherwise in order to carry out the purpose and
intent of this Agreement.
11.4. Personal Property Tax Adjustments After the Closing Date.
Personal property taxes with respect to the Acquisition Assets to be conveyed
to Purchasers pursuant hereto shall be prorated through the Closing Date and
shall be paid by Purchasers as and when due or reimbursed to Sellers to the
extent prepaid by them prior to the Closing Date.
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11.5. Right to Sublease of Premises by Purchasers. Purchasers shall
have the right to sublease from PAMM the premises currently occupied by
Sellers, on a month-to-month basis for up to 12 months, with the right to
terminate on 30 days' prior written notice to PAMM, at a monthly rental rate
equal to 85% of the monthly rental expense paid by Sellers on Suite 520 and
upon substantially the same additional terms as apply to Sellers under the
terms of the lease pursuant to which Sellers occupy the premises as of the
Closing Date.
ARTICLE 12.
MISCELLANEOUS
12.1. Notices. Any and all notices required or desired to be given
pursuant to this Agreement to any of the parties hereto shall be personally
delivered, or deposited in the United States mail, by registered or certified
mail, return receipt requested, postage fully prepaid, or transmitted by
facsimile transmission, addressed to each of the parties at the addresses set
forth below. Any and all notices given pursuant to this Section 12.1 shall be
deemed delivered to the other party when delivered by hand to the other party,
transmitted by facsimile transmission with confirmation of transmission, or on
the date mailed as set forth above. Any party may change its address for
notices by giving notice thereof in the same manner provided herein for
notices.
If to Sellers, addressed to:
Consolidated Reconveyance Company
Lenders Posting and Publishing Company
PacificAmerica Money Center, Inc.
21031 Ventura Boulevard, Suite 102
Woodland Hills, California 91364
Attention: Joel R. Schultz
If to Purchasers, addressed to:
Consolidated Reconveyance Company, LLC
Lenders Posting and Publishing Company, LLC
29646 Meadowmist Way, Agoura Hills, CA 91301
Attention: Kenneth A. Carmona
or to such other place and with such other copies as any party may designate as
to himself or itself by written notice to the others.
12.2. Choice of Law. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
State of California.
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12.3. Entire Agreement; Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No supplement, modification or
waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
12.4. Multiple Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.5. Expenses. Each party hereto shall pay its own legal,
accounting, out-of-pocket and other expenses incident to this Agreement and to
any action taken by such party in preparation for carrying this Agreement into
effect, and Purchasers shall not assume any liabilities of Sellers for such
expenses.
12.6. Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
12.7. Titles. The titles, captions or headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
12.8. Further Actions. Each of the parties hereto agrees that it
will sign such additional documents and take such additional actions as any
other party reasonably requests in order to carry out the purpose and of this
Agreement.
12.9. Attorneys' Fees. Should any party hereto institute any action
or proceeding at law or in equity, or in connection with an arbitration, to
enforce any provision of this Agreement, including an action for declaratory
relief, or for damages by reason of an alleged breach of any provision of this
Agreement, or otherwise in connection with this Agreement, or any provision
thereof, the prevailing party shall be entitled to recover from the losing
party or parties reasonable attorney's fees and costs for services rendered to
the prevailing party in such action or proceeding.
12.10. Arbitration. In the event of any dispute between one or more
parties arising under this Agreement, the parties agree that such dispute shall
be submitted to binding arbitration before a retired judge of the Superior
Court of the State of California under the auspices of Judicial Arbitration and
Mediation Services, Inc. ("JAMS"). The parties may
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agree on a retired judge from the JAMS panel. If they are unable promptly to
agree, JAMS will provide a list of three available judges and each party may
strike one. The remaining judge (of, if there are two, the one selected by
JAMS) will serve as the arbitrator. The arbitration shall be conducted in Los
Angeles, California. In rendering its decision, the arbitrator shall determine
the rights and obligations of the parties according to the substantive and
procedural laws of California. The decision must be based on, and accompanied
by, a written statement of decision explaining the factual and legal basis for
the decision as to each of the principal controverted issues. The decision
shall be conclusive and binding, and it may thereafter be confirmed as a
judgment by the Superior Court of the State of California, subject only to
challenge for errors of law or fact appearing on the face of the written
statement of decision.
12.11. Binding on Successors, Etc. This Agreement shall be binding
upon and be for the benefit of the parties and each of their successors and
assigns. In addition, all obligations of CRC and LPPC as provided for herein
shall be joint and several obligations of PAMM.
12.12. Disaster Plan. In the event of an earthquake or other natural
disaster, if as a result of such event New CRC, New LPPC or CRCWA are unable to
conduct business from their established business location, if any location of
PAMM has not been damaged as result of such event and to the extent that desk
space and computer needs of PAMM and its subsidiaries permit, then PAMM shall
allow New CRC, New LPPC and CRCWA to use the computer equipment and three desks
at any undamaged location PAMM for a period of up to 30 days from the date of
the event in order to continue their business.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
"Purchasers"
CONSOLIDATED RECONVEYANCE COMPANY, LLC
By: /s/ KENNETH A. CARMONA
-------------------------------------
Kenneth A. Carmona, Managing Member
LENDERS POSTING AND PUBLISHING COMPANY, LLC
By: /s/ KENNETH A. CARMONA
-------------------------------------
Kenneth A. Carmona, Managing Member
CONSOLIDATED RECONVEYANCE CORPORATION,
a Washington corporation
By: /s/ KENNETH A. CARMONA
------------------------------------
Kenneth A. Carmona, President
"Sellers"
CONSOLIDATED RECONVEYANCE COMPANY,
a California limited partnership
By: /s/ JOEL R. SCHULTZ
------------------------------------
Joel R. Schultz, President
Presidential Services Corporation,
general partner, Presidential Management
Company, general partner
LENDERS POSTING AND PUBLISHING COMPANY,
a California limited partnership
By: /s/ JOEL R. SCHULTZ
-----------------------------------
Joel R. Schultz, President
Presidential Services Corporation,
general partner, Presidential Management
Company, general partner
PACIFICAMERICA MONEY CENTER, INC.,
a Delaware corporation
By: /s/ JOEL R. SCHULTZ
-----------------------------------
Joel R. Schultz, President
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SECURED PROMISSORY NOTE
December 31, 1996 $1,372,000 Los Angeles, California
FOR VALUE RECEIVED, each of the undersigned (collectively, "Debtors"),
jointly and severally, promises to pay to the order of PACIFICAMERICA MONEY
CENTER, INC. ("PAMM"), as designee of Consolidated Reconveyance Company (CRC")
and Lenders Posting and Publishing Company ("LPPC") under that certain Asset and
Stock Purchase and Sale and Assumption of Liabilities Agreement dated as of
December 31, 1996, at 21031 Ventura Boulevard, Suite 102, Woodland Hills,
California 91364, or at such other address as the holders of this Note shall
from time to time designate in writing to Debtors, the principal sum of One
Million Three Hundred Seventy Two Thousand and no/100 Dollars ($1,372,000),
together with interest on the balance owed thereon from the date hereof until
paid in full at the rate of seven percent (7%) per annum.
The principal amount of this Note is subject to increase or decrease in
amount equal to the increase or decrease in the total combined partners' and
shareholders' equity of CRC, LPPC and Consolidated Reconveyance Corporation
("CRCWA"), as shown on the audited consolidating balance sheets of PAMM at
December 31, 1996, from the total combined partners and shareholders' equity of
CRC, LPPC and CRCWA at November 30, 1996.
Each of the Debtors, jointly and severally, further agrees to pay
interest on any amount of principal which is not paid when due (either as a
regular payment or as a mandatory prepayment, as described below), from the date
on which such amount is due until such amount of principal is paid in full, at a
rate per annum (in lieu of the seven percent interest rate) equal to 10% per
annum.
All unpaid principal and interest owed under this Note shall be due and
payable in full on March 1, 2012.
Payments of regular principal installments and accrued interest shall
be made on or before the 1st day of each calendar month commencing April 1, 1997
in an amount equal to $25,000 per month until March 1, 1999; from April 1, 1999
until March 1, 2012, payments of regular principal installments and accrued
interest shall equal $9,328.93 per month. In addition, Debtors shall make
mandatory prepayments on this Note on or before the 15th day of each April,
July, October and January, beginning on July 15, 1997, in an amount equal to the
following percentages of the combined gross revenues of Debtors for new orders
booked on an accrual basis ("Gross Revenues"), during the next to last quarter
preceding the date on which a prepayment is due:
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10% of Gross Revenues in excess of $660,000 and under $750,000; and
33% of Gross Revenues in excess of $750,000.
Until all amounts owed under this Note are repaid in full, Debtors
shall provide to PAMM quarterly statements of revenues. In addition, Debtors
shall provide to PAMM such other financial statements of Debtors as PAMM shall
reasonably request, provided that such information shall not be requested more
frequently than semi-annually unless an Event of Default has occurred under the
terms of this Note or the Security Agreement, Debtors request any consent or
waiver under the Security Agreement or Secured Party has a special need to
receive current information from Debtors.
It is the intent of Debtors and PAMM that the holders of this Note
shall never be entitled to receive, collect or apply, as interest of any kind
required hereunder, any amount in excess of the maximum rate of interest
permitted to be charged by applicable law; and in the event the holders of this
Note ever receive, collect or apply as interest of any kind any such excess,
such amount which would be excess interest shall be deemed a partial prepayment
of principal and treated hereunder as such; and if the principal is paid in
full, any remaining excess fund shall forthwith be paid to Debtors.
Each payment made by Debtors under this Note shall be credited first to
interest, if any, then due, and the remainder to principal. Principal and
interest shall be payable in lawful money of the United States of America.
Debtors shall have the right to prepay all or any portion of the
principal sum hereof at any time without penalty.
This Note is secured by a Security Agreement of even date herewith (the
"Security Agreement") between Debtors and PAMM. Upon the occurrence of an Event
of Default as defined in the Security Agreement, then, in addition to all of the
holders' other rights and remedies under the Security Agreement or otherwise
under applicable law, the entire principal sum, all principal and accrued
interest shall become immediately due and payable at the option of the holders
hereof, without demand or notice, and all future amounts of contingent interest
shall become due and payable, without demand or notice, immediately as such
amounts become determinable.
Each of the Debtors, jointly and severally, agrees to pay all costs and
expenses (including without limitation actual attorneys' fees) incurred by any
holder of this Note in connection with or related to this Note or the
enforcement thereof, whether or not suit be brought. In any litigation arising
out of or relating to this Note, in which any holder of this Note is an adverse
party, each of the Debtors hereby waives trial by jury. Each of the Debtors
hereby further waives presentment, demand for payment, notice of dishonor,
notice of nonpayment, protest, notice of protest, and any and all other notices
and demands in connection with the delivery, acceptance, performance, default,
or enforcement of this Note.
2
<PAGE> 24
To the fullest extent permitted by law, each of the Debtors waives the statute
of limitations in any action brought by the holders in connection with this
Note.
No failure to exercise, and no delay in exercising, any right, power or
remedy hereunder or under any document delivered to the holders hereof shall
impair any right, power or remedy which the holders may have. The rights and
remedies of the holders hereof are cumulative and not exclusive of any rights or
remedies which the holders would otherwise have.
No waiver or modification of any of the terms or provisions of this
Note shall be valid or binding unless set forth in a writing signed by the
holders of this Note and each of the Debtors, and then only to the extent
therein specifically set forth.
This Note and all transactions hereunder and/or evidenced hereby shall
be governed by, construed under and enforced in accordance with the laws of the
State of California. Each of the Debtors hereby agrees that all actions or
proceedings relating directly or indirectly hereto may, at the option of the
holders, be litigated in courts located within the State of California, and each
of the Debtors hereby expressly consents to the jurisdiction of any such court
and consents to the service of process in any such action or proceeding by
personal delivery or by certified or registered mail directed to each of the
Debtors at their respective addresses last known to holders.
This Note and the Security Agreement securing this Note may be pledged,
assigned or transferred at any time by the holder hereof.
"Debtors"
CONSOLIDATED RECONVEYANCE COMPANY, LLC
By: s/KENNETH A. CARMONA
------------------------------------
Kenneth A. Carmona, Managing Member
LENDERS POSTING AND PUBLISHING COMPANY, LLC
By: s/KENNETH A. CARMONA
------------------------------------
Kenneth A. Carmona, Managing Member
CONSOLIDATED RECONVEYANCE CORPORATION
By: s/KENNETH A. CARMONA
------------------------------------
Kenneth A. Carmona, Managing Member
<PAGE> 25
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated December 31, 1996,
is made by and between Consolidated Reconveyance Company, LLC ("New CRC"), a
California limited liability company, and Lenders Posting and Publishing
Company, LLC ("New LPPC"), a California limited liability company
(collectively, "Purchasers"), and Consolidated Reconveyance Corporation
("CRCWA"), a Washington corporation, on the one hand (sometimes collectively
referred to herein with Purchasers as "Debtors") and PacificAmerica Money
Center, Inc., on the other hand ("Secured Party"), with reference to the
following facts:
RECITALS:
A. Pursuant to the Consolidated Reconveyance Company, Lenders
Posting Agreement and Consolidated Reconveyance Corporation Asset and Stock
Purchase and Sale and Assumption of Liabilities Agreement (the "Purchase
Agreement") between Purchasers, Consolidated Reconveyance Company ("CRC"), a
California limited partnership, Lenders Posting and Publishing Company
("LPPC"), a California limited partnership, and PacificAmerica Money Center,
Inc. ("PAMM"), a Delaware corporation (sometimes collectively referred to
herein as "Sellers"), Purchasers have agreed to purchase and Sellers have
agreed to sell all of the assets and transfer all of the liabilities of CRC and
LPPC and PAMM has agreed to sell all of the stock of CRCWA in accordance with
the terms of the Purchase Agreement. A portion of the Acquisition Price (as
defined in the Purchase Agreement) is payable by Purchasers after the closing
date of the Purchase Agreement in accordance with the terms of a promissory
note of Debtors (the "Note") in the form attached as Exhibit A to the Purchase
Agreement.
B. In order to secure the balance of the Note, Debtors have
agreed to grant a security interest to Secured Party in all of the accounts
receivable of New CRC, CRCWA and New LPPC upon the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
1. Pledge and Security Interest. Debtors hereby pledge
to Secured Party, and grant to Secured Party a security interest in, the
following, whether now owned or hereafter acquired (the "Collateral"): all of
Debtors' rights, title and interest in and to all accounts receivable of any of
them, whether arising before, on or after the date of this Agreement, and all
proceeds thereof, including cash, securities, instruments, accounts and general
intangibles.
<PAGE> 26
2. Security for Obligations. This Agreement secures the payment
of all amounts owed by Debtors under the Note in accordance with its terms (all
such obligations being referred to herein as the "Obligations").
3. Representations and Warranties. Debtors represent and
warrant, now and until the indefeasible payment in full of all Obligations, as
follows:
a. Debtors are (or, with respect to after-acquired
property, will be when acquired) the legal and beneficial owners of the
Collateral free and clear of any lien, security interest, charge or encumbrance
except for the security interest created by this Agreement and a security
interest created by Debtors in favor of a third party lender (the "Third Party
Lender") concurrently with this Agreement not to exceed $400,000. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except such as may
have been filed in favor of Secured Party relating to this Agreement and in
favor of the Third Party Lender.
b. The pledge and grant of a security interest in the
Collateral pursuant to this Agreement, create or, with respect to
after-acquired property, will create when Debtors have rights in such property,
a valid and perfected first priority security interest in the Collateral,
securing the payment of the Obligations.
c. This Agreement has been duly and validly authorized,
executed and delivered and constitutes the binding obligation of Debtors,
enforceable against each of them in accordance with its terms.
4. Covenants of Debtors. Until the indefeasible payment of the
Obligations, each of Debtors agrees that:
a. It will not (i) transfer, sell, assign, convey,
pledge or encumber any of the Collateral or any interest therein, except that
it may use proceeds of accounts receivable to pay its obligations in the
ordinary course of its business; (ii) create any lien, security interest or
other charge or encumbrance upon or with respect to any of the Collateral,
except for the security interest created by this Agreement, a security interest
in favor of the Third Party Lender to secure a loan not to exceed $400,000, and
except as provided in Section 5 hereof; (iii) allow to exist any lien, security
interest or other charge or encumbrance on the Collateral imposed by a third
party without the consent of Debtors for a period of 60 days; (iv) change its
address without notice to Secured Party or the filing of amendments to each
financing statement required to be filed hereunder to reflect such change; or
(v) fail to comply with any of the covenants contained in the Purchase
Agreement.
b. At any time and from time to time, at the expense of
Debtors, each Debtor will promptly execute and deliver all further instruments
and documents, and take all further action that may be necessary or that
Secured Party may reasonably request, in order to perfect and protect any
security interest granted or to be granted hereby or to enable
-2-
<PAGE> 27
Secured Party to exercise and enforce their rights and remedies hereunder with
respect to the Collateral.
c. Secured Party is hereby authorized to file one or
more financing or continuation statements, or amendments thereto, relative to
all or any part of the Collateral, without the signature of Debtors when
permitted by law. A carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement when permitted by law.
d. Debtors will furnish to Secured Party from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral and information as
Secured Party may reasonably request, all in reasonable detail. Unless an
Event of Default has occurred under the terms of this Agreement, Debtors
request any consent or waiver under this Agreement or Secured Party has a
special need to receive current information from Debtors, Secured Party shall
not request information from Debtors more frequently than every six months.
Secured Party agrees to keep all such information confidential, except to the
extent necessary to make limited disclosure thereof to its accountants,
attorneys or regulators.
e. Debtors will not increase the principal amount owing
to the Third Party Lender to an amount in excess of $400,000 without the
written consent of Secured Party, which will not be unreasonably withheld, and
shall be granted if the conditions of Section 5 hereof are met.
f. Neither Debtors nor any of their affiliates
(including any person or entity that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, any of the Debtors) shall engage in, or have any direct or indirect
interest in, any business competitive with the business of any of Debtors
unless the entity under which such business is conducted agrees to become a
joint debtor with Debtors under the terms of the Note and this Security
Agreement and the gross revenues from any such business are included in the
Gross Revenues (as defined in the Note) for determining the amount owed by
Debtors to Secured Party under the terms of the Note.
5. Agreement to Subordinate. Notwithstanding anything to the
contrary contained in this Agreement, Secured Party agrees that it will, upon
the reasonable request of Debtors and the provision of such information by
Debtors to Secured Party as it shall reasonably request, agree to subordinate
its interest in the Collateral in favor of a security interest granted to the
provider of financing for any of Debtors, provided that the total combined
accounts receivable of New CRC, CRCWA and New LPPC is equal to at least 200% of
the aggregate of the remaining Obligations owed by Debtors to Secured Party and
any other debts or obligations owed by Debtors which are secured by the
Collateral or any part thereof.
6. Events of Default. An Event of Default, as used herein, shall
be deemed to occur in the event: (a) any material warranty, representation,
statement, report, or
-3-
<PAGE> 28
certificate made or delivered to Secured Party by any Debtor, or any of their
employees or agents, is incorrect, false, untrue, or misleading when given in
any material respect whatever; or (b) Debtors shall fail to pay or perform when
due all or any part of the Obligations or any material covenant or obligation
required of Debtors under the Purchase Agreement; or (c) there occurs in
Secured Party' judgment a material impairment of the prospect of payment or
performance of any or all of the Obligations; or (d) any event shall occur
which may or does result in the acceleration of the maturity of any
indebtedness of any Debtor to others (regardless of any requirement of notice,
opportunity to cure or other condition prior to the exercise of any right of
acceleration); or (e) there shall be made or exist any levy, assessment,
attachment, seizure, lien, or encumbrance for any cause or reason whatsoever
upon all or any material part of the assets of any Debtor (unless discharged by
payment, release or bond not more than sixty days after such event has
occurred); or (f) there shall occur the dissolution, termination of existence,
or business failure of New CRC, CRCWA or New LPPC; or (g) any of New CRC, CRCWA
or New LPPC file a petition for reorganization, arrangement, composition, or
similar relief under any federal or state insolvency law or seek, consent to or
acquiesce in the appointment of a receiver, trustee or custodian for any New
CRC, CRCWA or New LPPC or all or any part of its property; or (h) or any
involuntary petition under any federal or state insolvency law or involuntary
appointment of a receiver, trustee or custodian of New CRC, CRCWA or New LPPC
is not dismissed, vacated or stayed within sixty days after such petition or
appointment; or (i) the assignment for the benefit of creditors by New CRC,
CRCWA or New LPPC; or (j) any Debtor shall enter into any agreement (whether
written or oral), or offer to enter into any such agreement, with all or a
significant number of its creditors regarding any moratorium or other
indulgence with respect to its debts.
7. Secured Party Appointed Attorney-in-Fact. Upon the occurrence
of an Event of Default, each Debtor hereby irrevocably appoints Secured Party
as each Debtor's attorney-in-fact, with full authority in the place and stead
of such Debtor and in the name of Debtor, Secured Party or otherwise, from time
to time in Secured Party's discretion, without notice to any Debtor, to take
any commercially reasonably action and to execute any instrument which Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
a. To ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral; and
b. To file any claims or take any action or institute
any proceedings which Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral.
8. Remedies. If any Event of Default shall have occurred and be
continuing:
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<PAGE> 29
a. Secured Party may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to them, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in the State of
California (whether or not the Uniform Commercial Code applies to the affected
Collateral) and also may, without notice or demand except as specified below,
sell the Collateral or any part thereof in a commercially reasonably manner in
one or more parcels at public or private sale, at Secured Party's offices or
elsewhere, at such time or times, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms, in each case as may be
commercially reasonable. Debtors agree that, to the extent notice of a private
sale shall be required by law, at least ten (10) days' notice to Debtors of the
time after which any private sale is to be made shall constitute reasonable
notification. Notice of any public sale shall be sufficient if it describes
the Collateral to be sold in general terms and is published at least once in
"The Los Angeles Times" or "The Wall Street Journal" not less than ten (10)
days prior to the sale. All requirements of commercially reasonable notice
shall be met if such notice is mailed by certified mail, postage prepaid, to
Debtors, at the addresses set forth herein or at such other address or
addresses as Debtors may have in writing provided to Secured Party, at least
ten (10) days before the time of such sale or disposition. At any sale of the
Collateral, if permitted by law, Secured Party may bid (which bid may be, in
whole or in part, in the form of cancellation of indebtedness) for and purchase
the Collateral or any portion thereof for the account of Secured Party.
Secured Party shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice to Debtors, be made at the
time and place to which it was so adjourned.
b. In accordance with California Commercial Code Section
9502 or otherwise permitted by law, Secured Party shall have the right to
notify the account debtors of the Collateral to make all payments otherwise
payable to Debtors, or any of them, directly to Secured Party. Secured Party
shall keep records of all notices sent to account debtors and all payments
received by Secured Party from such account debtors.
c. Effective immediately upon notice of default by
Secured Party, all payments received by Debtors in respect of the Collateral
shall be received in trust for the benefit of Secured Party, shall be
segregated from other funds of Debtors and shall be forthwith paid over to
Secured Party in the same form as so received (with any necessary indorsement).
9. Application of Proceeds. Any cash held by Secured Party as
Collateral after and during the continuance of an Event of Default, and all
cash proceeds received by Secured Party (all such cash being "Proceeds") in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral, shall be applied promptly from time to time by Secured
Party:
-5-
<PAGE> 30
First, to the payment of the costs and expenses of such sale,
collection or other realization, including reimbursement to Secured Party and
its agents and counsel for expenses, liabilities and advances made or incurred
by Secured Party in connection therewith;
Second, to the payment of the Obligations; and
Third, after payment in full of all Obligations, to Debtors or their
successors or assigns, or to whomsoever may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct, of any surplus then
remaining from such Proceeds.
Each Debtor shall, jointly and severally, remain liable for any
deficiency due on the Obligations after application of the Proceeds.
10. Indemnity and Expenses.
a. Each of Debtors and Secured Party agree to indemnify
the other party from and against any and all claims, losses and liabilities of
the indemnified party as a result of any breach of this Agreement by the
indemnifying party.
b. Debtors will upon demand pay to Secured Party the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of counsel and of any experts and agents, which Secured Party may
incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale or substitution of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or
(iv) the failure by Debtors to perform or observe any of the provisions hereof.
11. Waivers; Remedies. No waiver of any provision of this
Agreement, nor consent to any departure by Debtors therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
Secured Party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No failure on
the part of Secured Party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
12. Notices. All notices and other communications provided for
hereunder shall be in writing (including telecopier) and mailed, telecopied or
delivered, if to Debtors, at their address at 29646 Meadowmist Way, Agoura
Hills, California 91301; Telecopier No. (818) 706-2961, Attention: Kenneth A.
Carmona; and if to Secured Party, 21031 Ventura Boulevard, Suite 102, Woodland
Hills, California 91364, Telecopier No. (818) 992-8889, Attention: Joel R.
Schultz; or, as to any Debtor or Secured Party, at such other address as shall
be designated by it in a written notice to the others. All such notices and
communications shall be effective when personally delivered upon receipt, when
mailed, three days following deposit in the mails, and when telecopied upon
electronic confirmation of
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<PAGE> 31
receipt, except that notices to Secured Party shall not be effective until
actually received by them.
13. Continuing Security Interest; Transfer of Obligations. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until indefeasible payment in full of
the Obligations, (b) be binding upon each Debtor, its representatives,
successors and assigns, and (c) inure, together with the rights and remedies of
Secured Party hereunder, to the benefit of Secured Party and each of its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Secured Party may assign or otherwise transfer the
Obligations to any other person or entity, and such other person or entity
shall thereupon become vested with all the benefits in respect thereof granted
to Secured Party herein or otherwise.
14. Termination. Upon the indefeasible payment to Secured Party
of all Obligations due, the security interest granted hereby shall terminate
and all rights to the Collateral shall revert to Debtors. Upon any such
termination, Secured Party will, at Debtors' expense, execute and deliver to
Debtors such documents as Debtors shall reasonably request to evidence such
termination and reversion.
15. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the laws of the State of California except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of the security interests hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of
a jurisdiction other than the State of California. Unless otherwise defined
herein, terms used in the Uniform Commercial Code in the State of California
are used herein as therein defined.
16. Counterparts. This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
17. Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and unenforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired hereby.
18. Captions. The captions of the various sections herein are for
convenience only, and none of them is intended to be any part of the body or
text of this Agreement or is intended to be referred to in construing any of
the provisions hereof.
19. Interpretation. This Agreement has been prepared and
negotiations in connection therewith have been carried on by the joint efforts
of the parties and their respective counsel. This Agreement is to be construed
simply and fairly and not strictly for or against any of the parties hereto.
Whenever in this Agreement the context may require, the
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<PAGE> 32
masculine gender shall be deemed to include the feminine and/or neuter, and the
singular to include the plural. The obligations hereunder of each person or
entity constituting a Debtor are joint and several.
20. Time is of the Essence. Time is of the essence in the
performance by Debtors of each and every obligation under this Agreement.
21. Entire Agreement. This Agreement and the Purchase Agreement
contain the entire agreement and understanding among the parties hereto and
supersede all prior oral and written agreements, promises, representations,
commitments or understandings relating to the subject matter hereof.
-8-
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
DEBTORS:
CONSOLIDATED RECONVEYANCE COMPANY,
a California limited liability company
By: /s/ KENNETH A. CARMONA
--------------------------------------
Kenneth A. Carmona, Managing Member
LENDERS POSTING AND PUBLISHING COMPANY,
a California limited liability company
By: /s/ KENNETH A. CARMONA
--------------------------------------
Kenneth A. Carmona, Managing Member
CONSOLIDATED RECONVEYANCE CORPORATION,
a Washington corporation
By: /s/ KENNETH A. CARMONA
--------------------------------------
Kenneth A. Carmona, President
SECURED PARTY:
PACIFICAMERICA MONEY
CENTER, INC.,
a Delaware corporation
By: /s/JOEL. R. SCHULTZ
--------------------------------
Joel R. Schultz, President
-9-
<PAGE> 1
EXHIBIT 10.2
MORTGAGE LOAN
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
PACIFIC CREST INVESTMENT AND LOAN
AS BUYER
AND
PACIFIC THRIFT AND LOAN
AS SELLER
DATED AS OF NOVEMBER 20, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions ................................... 1
Section 1.02. Forms ......................................... 4
Section 1.03. Recitals, Table of Contents, Titles and
Headings ...................................... 4
Section 1.04. Interpretation ................................ 4
ARTICLE II
PURCHASE AND SALE OF THE LOANS
Section 2.01. Agreement to Sell and Purchase Mortgage Loans . 5
Section 2.02. Release of Servicing........................... 5
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01. Representations, Warranties and Covenants of
the Buyer ..................................... 5
Section 3.02. Representations, Warranties and Covenants of
Seller ........................................ 6
Section 3.03. Representations, Warranties and Covenants
Relating to Mortgage Loans .................... 8
Section 3.04. Defects; Remedies for Breach of Representations
and Warranties ................................ 14
Section 3.05. Performance Holdback........................... 15
Section 3.06. Seller's and Buyer's Indemnification Covenants. 16
Section 3.07. Premium Protection............................. 17
ARTICLE IV
CLOSING OF PURCHASE OF MORTGAGE LOANS
Section 4.01. Payment ....................................... 17
Section 4.02. Assignment and Delivery of Loan Documents ..... 17
Section 4.03. Additional Conditions to Closing .............. 18
Section 4.04. Mortgage Loan Review Prior to Purchase ........ 20
Section 4.05. Casualty or Condemnation Prior to Closing...... 20
Section 4.06. Indemnification................................ 21
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE V
MISCELLANEOUS PROVISIONS
<S> <C> <C>
Section 5.01. Amendments, Changes and Modifications ....... 21
Section 5.02. Governing Law ............................... 21
Section 5.03. Notices ..................................... 21
Section 5.04. Assignment Of Rights To Third Parties ....... 22
Section 5.05. Transfer of Mortgage Loans .................. 22
Section 5.06. Subsequent Documentation .................... 22
Section 5.07. Severability ................................ 22
Section 5.08. Rights Cumulative; Waivers .................. 22
Section 5.09. Counterparts ................................ 22
Section 5.10. Remedies Not Exclusive . .................... 22
Section 5.11. Survival .................................... 23
Section 5.12. Term of Agreement ........................... 23
Section 5.13. Limitation on Liability of parties .......... 23
Section 5.14. Access to Seller's Records .................. 23
Section 5.15. Agreement to Pay Attorneys' Fees ............ 23
Section 5.16. Integrated Agreement ........................ 23
Section 5.17. Reports and Payments Due on Weekends and
Holidays .................................... 23
</TABLE>
EXHIBIT A-MORTGAGE LOAN SCHEDULE
EXHIBIT B-SELLER'S OPINION OF COUNSEL
-ii-
<PAGE> 4
MORTGAGE LOAN
PURCHASE AND SALE AGREEMENT
THIS MORTGAGE LOAN PURCHASE AND SALE AGREEMENT (the "Agreement"), is
made and entered into as of November 20, 1996 by and between PACIFIC CREST
INVESTMENT AND LOAN, a California corporation (the "Buyer") and PACIFIC THRIFT
AND LOAN, a California corporation (the "Seller") .
W I T N E S S E T H:
WHEREAS, Seller desires to sell and Buyer desires to purchase the
Mortgage Loans which were originated and funded by Seller and which are the
subject of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the Seller and Buyer each agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. All words and phrases defined in this
Article I (except as expressly provided otherwise herein or unless the context
otherwise requires) shall have the respective meanings specified in this
Article I for all purposes of this Agreement.
"ADA" means the Americans with Disabilities Act.
"Agreement" means this Mortgage Loan Purchase and Sale Agreement
entered into by and between the Buyer and the Seller, and all exhibits,
amendments and supplements hereto.
"Assignment of Mortgage" means an assignment of the Mortgage in
recordable form or equivalent instrument sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale and assignment of all of the Seller's right, title and interest
in and to the related Mortgage Loan to the Buyer, to be executed by the Seller
in connection with each Mortgage Loan purchased by the Buyer hereunder.
"Business Day" means any day of the week other than Saturday, Sunday,
or a day which shall be a legal holiday in California, or a day on which
industrial loan companies are authorized or obligated by law or executive order
to close.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Closing Date" means that date mutually agreed upon by Seller and
Buyer for the actual conveyance of all or a portion of the Mortgage Loans by
Seller to Buyer.
"Cut-Off Date" means November 21, 1996.
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"Debtor Relief Laws" means any applicable liquidation,
conservatorship, bankruptcy, insolvency, rearrangement, moratorium,
reorganization, or similar debtor relief laws affecting the enforcement of
creditors' rights generally and general equitable principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law)
from time to time in effect in the State or under the Laws of the United
States.
"Defect" has the meaning set forth in Section 3.04 hereof.
"Escrow Account" means an account maintained by the Seller into which
monies collected to obtain or maintain insurance or property taxes shall be
deposited, which account will be assigned by the Seller to the Buyer on the
Closing Date of the Mortgage Loan to which it relates.
"Hazardous Substances" means (i) those substances included within the
definitions of any one or more of the terms "hazardous substances", "hazardous
materials", and "toxic substances" in CERCLA, RCRA, and the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Subsection 1801 et.seq.) and with
respect to any Loan secured by Mortgaged Property located in any jurisdiction,
and in the regulations promulgated pursuant thereto; (ii) those substances
listed in the United States Department of Transportation Table (49 CFR
Subsection 172.101 and amendments thereto) or by the Environmental Protection
Agency (or any successor agency) (40 CFR 302 and amendments thereto) as
hazardous substances; (iii) such other substances, materials, and wastes that
are or become regulated under applicable local laws, state or federal laws, or
that are classified as hazardous or toxic under federal, state, or local laws
or regulations; and (iv) any materials, wastes, or substances that are (A)
petroleum; (B) polychlorinated biphenyl; (C) within the definition of
"hazardous substance" set forth in Section 311 of the Clean Water Act (33
U.S.C. Subsection 1321) or designated as "toxic pollutants" subject to Chapter
26 of the Clean Water Act pursuant to Section 307 of the Clean Water Act (33
U.S.C. Subsection 1317; (D) flammable explosives; (E) friable asbestos; or (F)
radioactive materials; provided, however, that Hazardous Substances shall not
include non-friable asbestos to the extent that the existence of same is not in
violation of any applicable law, regulation, or ruling.
"Laws" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions or decrees of the United States or any agency
thereof, or any state or political subdivision thereof, or any court of
competent jurisdiction thereof.
"Mortgage" means the instrument securing a Mortgage Loan that creates
a lien on a Mortgaged Property subject to Permitted Encumbrances, and that
shall be in form acceptable to the Buyer.
"Mortgage Documents" means the original or certified copies of all of
the agreements, certificates, legal opinions or other documents evidencing, or
related to the origination and servicing of, a Mortgage Loan, including, but
not limited to, the original Mortgage Note, the original Mortgage, original
Assignment of Mortgage, appraisals, guarantees, insurance certificates, credit
reports, lender's title insurance policy, and environmental assessment and
soils reports, as applicable to a Mortgage Loan.
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"Mortgage Interest Rate" means the annual rate of interest borne by a
Mortgage Note as shown on the Mortgage Loan Schedule.
"Mortgage Loan" means an individual mortgage loan which is transferred
to the Buyer pursuant to this Agreement, together with the rights and
obligations of a holder thereof and payments thereon and proceeds therefrom,
the Mortgage Loans originally subject to this Agreement being identified on the
Mortgage Loan Schedule. Any mortgage loan which, although intended by the
parties hereto to have been, and which purportedly was, transferred and
assigned to the Buyer by the Seller (as indicated by the Mortgage Loan
Schedule), in fact was not transferred and assigned to the Buyer for any reason
whatsoever shall nevertheless be considered a "Mortgage Loan" for all purposes
of this Agreement.
"Mortgage Loan Schedule" means the schedule attached hereto as Exhibit
A setting forth certain information regarding the Mortgage Loans as of the
Cut-Off Date and prepayments in full, if any, between the Cut-Off Date and the
Closing Date, in the form provided to the Seller by the Buyer or acceptable in
another form to the Buyer, to be submitted by the Seller with Mortgage Loans
delivered to the Buyer for purchase pursuant to this Agreement.
"Mortgage Note" means the promissory note evidencing the obligation to
repay a Mortgage Loan, that shall be in the form acceptable to the Buyer.
"Mortgaged Property" means the underlying real property securing a
Mortgage Loan, consisting of a fee simple estate in a single contiguous parcel
of land improved by a commercial structure.
"Mortgagor" means the obligor(s) on a Mortgage Note, or a subsequent
owner of a Mortgaged Property who has assumed the Mortgage in accordance with
this Agreement.
"Notice Address" means:
(a) Buyer: Pacific Crest Investment and Loan
30343 Canwood Street, Suite 100
Agoura Hills, CA 91301
Attn: Mr. Lyle Lodwick
(b) Seller: Pacific Thrift and Loan
21031 Ventura Boulevard
Woodland Hills, CA 91364
Attn: Mr. Richard Young
"Officer" means any duly authorized officer of the Seller involved in,
or responsible for, the sale of the Mortgage Loans whose name appears on a list
furnished by the Seller to the Buyer, as such list may be amended from time to
time.
"Origination" means the execution of a Mortgage Note and Mortgage by a
Mortgagor and the concurrent origination and funding of a Mortgage Loan by the
Seller.
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"Permitted Encumbrances" means with respect to a Mortgage those liens,
covenants, conditions, restrictions, rights-of-way, easements, and other
matters that are of public record as of the date of the recording of a
Mortgage, none of which matters materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment, value
or marketability of the Mortgaged Property.
"Prior Lien" means, with respect to any Mortgage Loan which is not a
first priority lien, each mortgage loan relating to the corresponding Mortgaged
Property having a prior priority lien and which has been disclosed by Seller on
the Mortgage Loan Schedule.
"Purchase Price" means the price to be paid by the Buyer to the Seller
for the Mortgage Loans, which shall consist of cash in the amount equal to
______ of the aggregate outstanding principal balance of the Mortgage Loans,
plus accrued and unpaid interest thereon based on the interest rates set forth
in the related Mortgage Notes, plus any accrued late charges or other expenses,
from the Cut-Off Date to but excluding the Closing Date.
"RCRA" means the Resource Conservation and Recovery Act, as amended.
"Responsible Officer" means the President or Chief Executive Officer
of the Seller.
"Structural Defects" means any physical defects in the foundation,
roof, load bearing walls and structural support elements except for ordinary
wear and tear.
Section 1.02. FORMS. All forms specified by the text hereof or by
reference to exhibits attached hereto shall be substantially as set forth
herein, subject to such changes agreed to between Buyer and Seller that do not
alter the substantive rights of the parties hereto, or as may be required by
applicable Laws hereafter enacted.
Section 1.03. RECITALS, TABLE OF CONTENTS, TITLES AND HEADINGS. The
terms and phrases used in the recitals of this Agreement have been included for
convenience of reference only and the meaning, construction and interpretation
of such words and phrases for purposes of this Agreement shall be determined
solely by reference to Section 1.01 hereof. The table of contents, titles and
headings of the articles and sections of this Agreement have been inserted for
convenience and reference only and are not to be considered a part hereof and
shall not in any way modify or restrict any of the terms or provisions hereof
and shall never be considered or given any effect in construing this Agreement
or any provision hereof or in ascertaining intent, if any question of intent
should arise.
Section 1.04. INTERPRETATION. Unless the context requires
otherwise, words of the masculine gender shall be construed to include
correlative words of the feminine and neuter genders and vice versa, and words
of the singular number shall be construed to include correlative words of the
plural number and vice versa. This Agreement, and all the terms and provisions
hereof, shall be liberally construed to effect the purposes set forth herein
and to sustain the validity of this Agreement. The provisions of this
Agreement were negotiated by all of the parties hereto, and this Agreement
shall be deemed to have been drafted by all of the
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parties hereto; accordingly, any rule of construction that a document is to be
construed against the drafting party shall not be applicable.
ARTICLE II
PURCHASE AND SALE OF THE LOANS
Section 2.01. AGREEMENT TO SELL AND PURCHASE MORTGAGE LOANS.
(a) On the Closing Date, the Seller agrees to sell,
transfer, assign, set over and convey to the Buyer, and the Buyer
agrees to purchase, at the Purchase Price, all rights, title and
interest of the Seller in and to the Mortgage Loans in an aggregate
principal amount equal to the amount set forth in the Mortgage Loan
Schedule, the servicing rights (as described below), and the Mortgage
Documents, all upon the terms and conditions set forth herein. Except
as provided below with respect to Mortgage Loans reacquired by the
Seller pursuant to Section 3.04 hereof, all other payments made on
each Mortgage Loan on and after the Cut-Off Date shall belong to the
Buyer.
(b) The Seller intends that the conveyance of the
Seller's right, title and interest in and to the Mortgage Loans
pursuant to this Agreement shall constitute a purchase and sale of the
Mortgage Loans and proceeds thereof and not a pledge of security for a
loan.
Section 2.02. RELEASE OF SERVICING. The Mortgage Loans shall be
sold and conveyed to the Buyer on a servicing-released basis. As of the Closing
Date, all rights, obligations, liabilities and responsibilities with respect to
the servicing of the Mortgage Loans shall be performed and undertaken by the
Buyer.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
BUYER. The Buyer represents and warrants to, and covenants with, the Seller
that:
(a) Buyer is an industrial loan company duly organized,
validly existing, and in good standing under the Laws of the State of
California, is duly qualified and in good standing to transact
business, and possesses all requisite authority, power, licenses,
permits and franchises to execute, deliver and comply with its
obligations under the terms of this Agreement, the execution, delivery
and performance of which have been duly authorized by all necessary
corporate action.
(b) The execution and delivery of this Agreement by the
Buyer in the manner contemplated herein and the performance and
compliance with the terms hereof by it shall not violate: (i) its
charter or bylaws, or (ii) any Laws that could have any material
adverse effect whatsoever upon the validity, performance or
enforceability of any of the
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terms of this Agreement applicable to the Buyer, and will not
constitute a material default (or an event that, with notice or lapse
of time or both, would constitute a material default) under, or result
in the breach of, any material contract, agreement or other instrument
to which the Buyer is a party or that may be applicable to it or any
of its assets.
(c) The execution and delivery of this Agreement by the
Buyer in the manner contemplated herein and the performance and
compliance with the terms hereof by it do not require the consent or
approval of any governmental authority, or if such consent or approval
is required, it has been obtained.
(d) Assuming due authorization, execution and delivery by
each other party hereto, this Agreement and all of the obligations of
the Buyer hereunder are the legal, valid and binding obligations of
the Buyer, enforceable in accordance with the terms of this Agreement,
except as such enforcement may be limited by applicable Debtor Relief
Laws.
Section 3.02. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SELLER. The Seller represents and warrants, and covenants with, the Buyer that:
(a) Seller is an industrial loan company duly organized,
validly existing, and in good standing under the Laws of the State of
California and has all licenses necessary to carry on its business as
now being conducted with full power and authority to own its
properties and conduct its business as such properties are presently
owned and such business is presently conducted; Seller is licensed,
qualified and in good standing in each jurisdiction where the
Mortgaged Property is located and in each jurisdiction in which it
owns or leases property if the laws of such state require licensing or
qualification in order to conduct business of the type conducted by
Seller and perform its obligations hereunder; Seller has the corporate
power and authority to execute and deliver this Agreement and to
perform in accordance herewith and therewith; the execution, delivery
and performance of this Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement) by Seller and the
consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action;
this Agreement evidences the valid, binding and enforceable obligation
of Seller; and all requisite corporate action has been taken by Seller
to make this Agreement valid, binding and enforceable upon Seller in
accordance with the respective terms of each, subject to the effect of
Debtor Relief Laws, none of which will affect the ownership of the
Mortgage Loans by the Buyer;
(b) All actions, approvals, consents, waivers,
exemptions, variances, franchises, orders, permits, authorizations,
rights and licenses required to be taken, given or obtained, as the
case may be, by or from any federal, state or other governmental
authority or agency that are necessary or advisable in connection with
the sale of the Mortgage Loans to the Buyer and the execution and
delivery by Seller of the Agreement and related documents, have been
duly taken, given or obtained, as the case may be, are in full force
and effect on the date hereof, are not subject to any pending
proceedings or
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appeals (administrative, judicial or otherwise) and either the time
within which any appeal therefrom may be taken or review thereof may
be obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other related
documents on the part of Seller and the performance by Seller of its
obligations under this Agreement and such of the other related
documents to which it is a party;
(c) The consummation of the transactions contemplated by
this Agreement will not result in the breach of any terms or
provisions of the certificate of incorporation or bylaws of Seller or
result in the breach of any term or provision of, or conflict with or
constitute a default under or result in the acceleration of any
obligation under, any material agreement, indenture or loan or credit
agreement or other material instrument to which Seller or its property
is subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which Seller or its property is subject;
(d) Neither this Agreement nor any statement, report or
other document furnished or to be furnished pursuant to this Agreement
or in connection with the transactions contemplated hereby and thereby
contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or
therein not misleading;
(e) 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;
(f) There is no action, suit, proceeding or investigation
pending or threatened against Seller which, either in any one instance
or in the aggregate, may (i) result in any material adverse change in
the business, operations, financial condition, properties or assets of
Seller or in any material impairment of the right or ability of Seller
to carry on its business substantially as now conducted, or in any
material liability on the part of Seller or of any action taken or to
be taken in connection with the obligations of Seller contemplated
herein, or which would be likely to impair the ability of Seller to
perform under the terms of this Agreement or (ii) which would draw
into question the validity of this Agreement or the Mortgage Loans;
(g) The Seller was, on the Origination of each Mortgage
Loan and during the entire period that it held each Mortgage Loan, and
is on the Closing Date, a lender authorized and approved by, and in
good standing with, the Department of Corporations of the State of
California.
(h) Seller is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of Seller or its properties or
might have consequences that would materially and adversely affect its
performance hereunder;
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(i) No information, certificate of an Officer, statement
furnished in writing, or report required hereunder, delivered to the
Buyer or its agents, to the knowledge of the Seller, contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the information, certificate, statement or report
not misleading, and there has been no material adverse change in the
financial condition of the Seller since the date of the Seller's most
recent financial statements delivered to the Buyer;
(j) The sale of each Mortgage Loan shall be reflected on
the Seller's balance sheet and other financial statements as a sale of
assets by the Seller. The Seller will not take any action or omit to
take any action which would cause the transfer of the Mortgage Loans
to the Buyer to be treated as anything other than a sale to the Buyer
of all of the Seller's right, title and interest in and to each
Mortgage Loan;
(k) The transfer, assignment and conveyance of the Loans
by the Seller pursuant to this Agreement is not subject to the bulk
transfer or any similar statutory provisions in effect in any
applicable jurisdiction. The Seller is not transferring the Mortgage
Loans with an actual intent to hinder, delay or defraud any of its
creditors. The Seller is solvent and will not be rendered insolvent by
the sale of the Mortgage Loans;
(l) In the opinion of the Seller, it has received fair
consideration and reasonably equivalent value in exchange for the sale
of the Mortgage Loans pursuant to this Agreement; and
(m) Seller will be in full compliance with all applicable
federal and state regulatory capital requirements upon completion of
the sale effected hereunder. Seller is not operating under any order
by any federal or state agency regulating its activities that would
restrict its ability to enter into or perform this Agreement.
Section 3.03. REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO
MORTGAGE LOANS. Seller represents and warrants to the Buyer, with respect to
each Mortgage Loan, as of the Closing Date (except when another date is
specifically included), as follows:
(a) The information with respect to each Mortgage Loan
set forth in the Mortgage Loan Schedule is true and correct;
(b) All of the original documentation set forth in
Section 4.02 hereof (including all material documents related thereto)
has been or will be delivered to the Buyer on or prior to the Closing
Date;
(c) Each Mortgaged Property pledged as primary collateral
contains a commercial building thereon, or as otherwise stated on the
Mortgage Loan Schedule, and all Mortgaged Property improvements that
were considered in determining the appraised value of the related
Mortgaged Property lay wholly within the legal boundaries and building
restrictions of the Mortgaged Property and such building does not
constitute other than real property under state law;
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(d) No Mortgage Loan is cross-collateralized with any
other loan not included in the Mortgage Loans or with any Mortgage
Loan that is not identified as being cross-collateralized with another
loan on the Mortgage Loan Schedule;
(e) No Mortgage Note provides for any extension of the
original term;
(f) Each Mortgage has been duly filed or recorded and is
a valid and subsisting first or junior lien of record on the Mortgaged
Property including the land and all buildings on the Mortgaged
Property subject only to any applicable Prior Liens on such Mortgaged
Property;
(g) Immediately prior to the sale and assignment of the
Mortgage Loans hereunder contemplated, the Seller held good and
indefeasible legal title to, and was the sole owner of, each Mortgage
Loan conveyed by the Seller subject to no liens, pledges, charges,
mortgages, encumbrances or rights of others except as set forth in
Section 3.03(f) hereof; and immediately upon the sale and assignment
herein contemplated, the Buyer will hold good and indefeasible legal
title to, and be the sole owner of, each Mortgage, Mortgage Note and
Mortgage Loan subject to no liens, pledges, charges, mortgages,
encumbrances or rights of others except as set forth in Section
3.03(f);
(h) As of the Cut-Off Date, (i) no Mortgage Loan is 15
or more days delinquent in payment, and (ii) none of the Mortgage
Loans has been 30 or more days delinquent in payment at any time
during the prior 12-month period.
(i) Upon origination of each Mortgage Loan there was no
delinquent tax or assessment lien on any Mortgaged Property and each
Mortgaged Property and all improvements thereon are free of Structural
Defects and are in good repair. The Mortgaged Property is assessed
separate and apart from any other property for local property tax
purposes and the Mortgagor receives a tax bill clearly identifying the
property tax paid on the Mortgaged Property;
(j) With respect to each Mortgaged Property and all
improvements thereon, there are no violations of any zoning, housing
or building law, ordinance, regulation, or any restrictive covenant as
a result of the maintenance, operation, occupancy or use of such
Mortgaged Property such that the violation would materially or
adversely affect the operation, occupancy or other use of such
Mortgaged Property in its present manner; and as of the Cut-Off Date,
all material licenses, permits, inspections, authorizations,
certifications and approvals required by all governmental authorities
having jurisdiction over the operation of each Mortgaged Property has
been performed or issued and paid for and are in full force and
effect.
(k) None of the Mortgages, Mortgage Notes or Mortgage
Loans are 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 any 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,
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counterclaim or defense, including the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(l) Neither the Mortgagor nor any previous owner, tenant,
occupant or user of any Mortgaged Property, or any property adjacent
thereto, used, generated, released, discharged, stored or disposed of
any Hazardous Substance on, under, in, or about any Mortgaged Property
in violation of any applicable law, or any property adjacent thereto,
or transported any Hazardous Substance to or from any Mortgaged
Property, or any property adjacent thereto in violation of any
applicable law;
(m) Each Mortgage Loan at the time it was made complied
in all material respects with applicable state and federal laws and
regulations, including, without limitation, usury, equal credit
opportunity, disclosure, consumer and recording laws;
(n) Each Mortgage Loan was originated and underwritten by
the Seller in accordance with underwriting criteria generally
acceptable to financial institutions in connection with their regular
mortgage lending activities and in accordance with the underwriting
criteria established by the Seller; and since origination, each
Mortgage Loan has been serviced exclusively by the Seller;
(o) With respect to each Mortgage Loan which provides for
an adjustable Mortgage Interest Rate, all of the terms of each such
Mortgage Loan pertaining to such adjustments are enforceable and will
not affect the priority of the lien of the related Mortgage;
(p) The improvements upon each Mortgaged Property are
covered by a valid and existing hazard insurance policy with a
generally acceptable carrier that provides for fire and extended
coverage representing coverage in an amount which is at least equal to
the (i) the full insurable value of such improvements and (ii) the
minimum amount required to compensate for damage or loss on a full
replacement cost basis; provided, however, that in no event shall the
amount of such insurance be less than the minimum amount necessary to
prevent the beneficiary thereof from becoming a co-insurer; and the
Seller, and its successors and assigns are named beneficiaries of each
such insurance policy;
(q) If the Mortgaged Property is in an area identified in
the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, a Flood Insurance Policy is in effect
with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage described in Section
3.03(p) hereof;
(r) All insurance policies referred to in Sections
3.03(p) and 3.03(q) are endorsed with standard mortgagee clauses with
losses payable to the Seller as holder of the Mortgage Loans;
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(s) The Seller has caused and will cause to be performed
any and all acts required to be performed to preserve the rights and
remedies of the Buyer in any insurance policies applicable to the
Mortgage Loans;
(t) Each Mortgage and Mortgage Note are genuine and each
is the legal, valid and binding obligation of the maker thereof and is
enforceable in accordance with its terms;
(u) Each original Mortgage was recorded, and all
subsequent assignments of the original Mortgage have been recorded in
the appropriate jurisdictions wherein such recordation is necessary to
perfect the lien thereof;
(v) Each Mortgage Loan is secured by a Mortgaged
Property; and the title of the Trustor to the Mortgaged Property is in
fee simple title and not subject to any ground lease estate or lesser
estate;
(w) The terms of each Mortgage Note and the Mortgage have
not been impaired, waived, altered or modified in any respect, except
by a written instrument reflected on the Mortgage Documents and no
provision of any Mortgage or Mortgage Note has been "whited out" or
erased unless such modification has been initialed by each of the
parties to the related Mortgage Loan;
(x) No instrument of release, modification, alteration or
waiver has been executed in connection with the Mortgage Loan, and no
Mortgagor has been released, in whole or in part, except in connection
with an assumption agreement which has been approved by and which has
been delivered to the Seller, which assumption agreement is part of
the Mortgage Documents and the terms of which are reflected in the
Mortgage Documents nor has any instrument been executed that would
effect any such release, cancellation, subordination or rescission;
(y) There are no defaults in complying with the terms of
the Mortgage and all property taxes, insurance premiums (other than
insurance premiums reflected on the Mortgage Loan Schedule),
municipal charges, and to the best of Seller's knowledge, all
governmental assessments which previously became due and owing have
been paid; and the Seller has not advanced funds, or induced,
solicited or knowingly received any advance of funds by a party other
than the Mortgagor, directly or indirectly, for the payment of any
amount required by the Mortgage;
(z) There is no proceeding pending or threatened for the
total or partial condemnation of the Mortgaged Property, nor is such a
proceeding currently occurring, and all such Mortgage Property is
undamaged by waste, fire, earthquake or earth movement, windstorm,
flood, tornado or other casualty, so as to affect adversely the value
of the Mortgaged Property as security for the Mortgage Loan or the use
for which the Mortgaged Property was intended;
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(aa) A lender's title insurance policy regarding each
Mortgage Loan became effective as of the origination of such loan
which policy is, and shall be, valid and is, and shall remain, in full
force and effect; such title insurance shows whether any prior lien
secures an open-end obligation requiring future advances; any such
insurance policy has been issued by a title insurer qualified to do
business in which the related mortgaged property is located, insuring
the priority of the lien of the mortgage in the original principal
amount of the related mortgage note, which policy is in the then
current American Land Title Association's form customarily used in the
state in which the mortgaged property is located. Upon the sale of
the Mortgage Loan to Buyer, Buyer shall be vested with all right,
title and interest to Seller and to the proceeds derived from such
policy.
(ab) The proceeds of the Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
disbursements of any escrow funds therefor and as otherwise set forth
in the Mortgage Loan documents have been complied with. All costs,
fees and expenses incurred in making or closing or recording the
Mortgage Loans were paid;
(ac) The related Mortgage Note is not and has not been
secured by any collateral, pledged account or other security except
the lien of the corresponding Mortgage;
(ad) The Mortgage Note and/or the Mortgage obligates the
Trustor to maintain the insurance policies referred to in section
3.03(p) and, where applicable, section 3.03(q), at such Trustor's
expense;
(ae) There is no obligation on the part of the Seller to
make payments in addition to those made by the Mortgagor;
(af) The origination and collection practices used by the
Seller with respect to the Mortgage Note and Mortgage have been in all
respects legal, proper, prudent and customary in the commercial
mortgage lending and servicing business and have complied in all
material respects with applicable state and federal laws and
regulations, including, without limitation, usury, equal credit
opportunity, disclosure, consumer and recording laws;
(ag) With respect to each Mortgage constituting 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 such Mortgage, or a valid substitution of trustee has been
recorded or may be recorded and no fees or expenses are or will become
payable by the Buyer to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor;
(ah) No Mortgage Loan has a shared appreciation feature,
or other contingent interest feature;
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(ai) To the best of Seller's knowledge, with respect to
each Mortgage Loan that is not a first mortgage loan, each related
Prior Lien was and is not 15 or more days delinquent;
(aj) With respect to each Mortgage Loan that is not a
first mortgage loan, either (i) no consent for the Mortgage Loan is or
was required by the holder of any related Prior Lien or (ii) such
consent has been obtained and is contained in the Mortgage Documents;
(ak) The related Mortgage Loan is evidenced by a Mortgage
Note and secured by a Mortgage creating a valid, enforceable lien on
such Mortgaged Property, subject only to Permitted Encumbrances;
(al) With respect to each Mortgage Loan that is not a
first mortgage loan, the maturity date of the Mortgage Loan is prior
to the maturity date of any related Prior Lien that provides for a
balloon payment, and the related Prior Lien that requires a balloon
payment also provides a refinancing option;
(am) The Mortgaged Property is located in the state
identified in the Mortgage Loan Schedule.
(an) All parties which have had any interest in the
Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise,
are (or, during the period in which they held and disposed of such
interest, were) (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) federal
savings and loan associations or national banks having principal
offices in such state, or (D) not doing business in such state;
(ao) The Mortgage contains an enforceable 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;
(ap) Any future advances made prior to the Cut-Off Date
have been consolidated with the outstanding principal amount secured
by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term reflected on
the Mortgage Loan Schedule. The consolidated principal amount does not
exceed the original principal amount of the Mortgage Loan, other than
as stated on the Mortgage Loan Schedule. The Mortgage Note does not
permit or obligate the Buyer to make future advances to the Mortgagor
at the option of the Mortgagor;
(aq) The related Mortgage contains 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
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foreclosure. There is no homestead or other exemption available to the
Mortgagor which would materially interfere with the right to sell the
Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage;
(ar) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the related Mortgage Note
and no event which, with the passage of time or with notice and the
expiration of any grace or cure period, or both, would constitute a
default, breach, violation or event of acceleration; and the Seller
has not waived any default, breach, violation or event of
acceleration;
(as) All parties to each Mortgage Note and each Mortgage
had legal capacity to enter into the related Mortgage Loan and to
execute and deliver the Mortgage Note and the Mortgage and each
Mortgage Note and Mortgage have been duly and properly executed by
such parties;
(at) The Mortgagor of a Mortgage Loan has not conveyed
such Mortgagor's right, title or interest to or in the Mortgaged
Property to any party. The related Mortgage Note is not, and has not
been, secured by any collateral except the lien of the related
Mortgage and the Mortgage was not given as collateral or security for
the performance of obligations of any person other than the Mortgagor;
(au) The Seller did not use any adverse selection
procedures in selecting the Mortgage Loans from among the outstanding
mortgage loans in the Seller's portfolio and Seller has no knowledge
of any circumstances or conditions with respect to the Mortgage Loan,
the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor's
credit standing that can be reasonably expected to cause prudent
private investors in the secondary market to regard the Mortgage Loan
as an unacceptable investment, cause the Mortgage Loan to become
delinquent, adversely affect the value or marketability of the
Mortgage Loan or which would not otherwise qualify such Mortgage Loan
for purchase hereunder; and
(av) The Seller has no knowledge of any circumstances or
conditions not reflected in the representations set forth herein, or
in the Mortgage Documents with respect to any Mortgage, the related
Mortgage Property or the related Mortgagor which in the Seller's
opinion could reasonably be expected to materially and adversely
affect the value of related Mortgage Property, or the marketability of
the related Mortgage Loan or cause the related Mortgage Loan to become
delinquent or otherwise in default.
Section 3.04. DEFECTS; REMEDIES FOR BREACH OF REPRESENTATIONS AND
WARRANTIES.
(a) Following the Purchase of any Mortgage Loan, and
notwithstanding any review of the Mortgage Documents pursuant to
Section 4.04 hereof, if: (i) any document constituting a part of the
Mortgage Documents, in the judgment of the Buyer, is materially
defective or inaccurate, except for inadvertent or unintended errors
made by a borrower on an application in connection with a Mortgage
Loan, (ii) the Seller or the Buyer discovers that any document
executed by one or more of the parties to the
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Mortgage Loan is not valid and binding, (iii) any representation or
warranty of the Seller contained in this Agreement, in the judgment of
the Buyer, is untrue or incorrect or (iv) notification to the Seller
from the Buyer that a Mortgage Loan does not conform to any one or
more of the characteristics for such Mortgage Loan set forth on the
Mortgage Loan Schedule provided to Buyer pursuant to Section 4.03(c)
hereof (any of the foregoing being referred to as a "Defect" with
respect to the related Mortgage Loan), the Seller shall (X) cure such
Defect (other than a Defect under clause (iv)) within a period of
sixty (60) days from the time it discovers or receives from Buyer
notice of the existence of such Defect or such shorter period as may
be required by Law or this Agreement, or (Y) in the case of a Defect
under clause (iv) repurchase such Mortgage Loan for the amounts
described in Section 3.04(b) below.
(b) The Seller hereby agrees that if any Defect cannot be
cured within such sixty (60) day period, or such shorter period as
applicable, it will: (A) not later than thirty (30) days after notice
to it respecting such Defect as to a Mortgage Loan with an outstanding
principal balance, repurchase the related Mortgage Loan from the Buyer
at a price equal to (1) 100% of the unpaid principal balance of such
Mortgage Loan plus (2) any accrued and unpaid late charges and any
accrued and unpaid interest at the annual rate borne by the Mortgage
Note to the date of the repurchase, plus (3) any fees and expenses
charged by third parties relating to the Mortgage Loan, plus (4) any
premium paid by the Buyer in connection with the purchase of that
Mortgage Loan, reduced by an amount on a prorated, declining basis
over a 60-month period (for example, if Seller is required to
repurchase that Mortgage Loan in the 13th month after the Closing
date, the amount to be deducted from the premium to be returned to
Buyer shall be calculated by multiplying the dollar amount of premium
paid by Buyer times a fraction the numerator of which shall be equal
to the number of full months elapsed after the Closing Date, and the
denominator of which shall be 60; therefore, in this example, the
fraction would equal 12/60, which fraction would be multiplied by the
amount of premium paid by Buyer to determine the amount to be deducted
from the premium to be returned to Buyer, plus (5) all expenses
incurred by the Buyer in connection with the purchase of that Mortgage
Loan, including expenses relating to the review of such Mortgage Loan,
and (B) in all cases, whether or not the Mortgage Loan has been repaid
or otherwise satisfied, indemnify and hold harmless the Buyer and its
respective successors and assigns for any loss, damage, forfeiture,
penalty or expenses (including reasonable attorneys' fees) incurred by
any of them in connection with the defective Mortgage Loan. The
repurchase proceeds for a Mortgage Loan repurchased pursuant to this
Section 3.04 to which a Defect relates shall be remitted by the Seller
as instructed by Buyer, with notice to the Buyer of the amount of such
remittance and the Mortgage Loan concerned and, upon compliance with
all of the terms of this Section by the Seller, the Buyer shall assign
and deliver (or cause to be assigned and delivered) the related
Mortgage Documents to the Seller, without recourse. The Seller hereby
waives any statute of limitations or other Law that might otherwise be
raised in defense to any repurchase hereunder. If the Seller fails to
repurchase a Mortgage Loan to which a Defect relates, at the time and
in the manner provided in this Section 3.04, the Buyer may pursue any
and all other remedies available under this Agreement or as otherwise
may be provided by law.
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Section 3.05. PERFORMANCE HOLDBACK. Buyer shall withhold from the
Purchase Price on the Closing Date an amount equal to 10% of the Purchase Price
(the "Performance Holdback") which amount shall be held by Buyer until no later
than 5:00 p.m. on ________________, for the purpose of allowing Buyer
sufficient time in order to confirm the transaction histories of each Mortgage
Loan set forth on the Mortgage Loan Schedule, attached hereto as Exhibit "A",
which transaction histories Seller has agreed to provide Buyer on the Closing
Date pursuant to Section 2.01 of this Agreement. Seller agrees that the
existence of this Performance Holdback shall not relieve Seller of any
responsibilities or obligations to Buyer under the terms and conditions of this
Agreement nor from any and all warranties and representations made by Seller to
Buyer under the terms of this Agreement. Buyer shall pay Seller simple
interest at the per annum rate of 5.25% on the Performance Holdback amount from
the Closing Date until the date Buyer remits the Performance Holdback amount to
Seller; provided, however, Buyer shall not be required to pay any such interest
on any portion of the Performance Holdback amount not ultimately remitted by
Buyer to Seller.
Section 3.06. SELLER'S AND BUYER'S INDEMNIFICATION COVENANTS.
(a) SELLER'S INDEMNIFICATION COVENANTS. The Seller shall
indemnify, save, and keep the Buyer and its successors and assigns
harmless against and from all liabilities, demands, claims, actions,
or causes of action, assessments, losses, fines, penalties, costs,
damages, and expenses, including reasonable attorneys' and expert
witness' fees, sustained or incurred by the Buyer or its successors or
assigns as a result of or arising out of or by virtue of:
(i) The material inaccuracy of any
representation or warranty made by the Seller to the Buyer in
Sections 3.02 and 3.03 of this Agreement;
(ii) The breach by the Seller of any of
the covenants set forth in this Agreement to be performed by
the Seller; or
(iii) Any and all liabilities of the Buyer
to third parties and reasonable out-of-pocket costs and
expenses, and losses incurred by the Buyer in connection
therewith arising out of acts or omissions (including, without
limitation, any lender or servicer liability claims of any
Mortgagor) of the Seller (and any predecessor to the Seller by
merger or otherwise) in regard to any Mortgage Loan.
(b) BUYER'S INDEMNIFICATION COVENANTS. The Buyer shall
indemnify, save, and keep the Seller and its successors and assigns
harmless against and from all liabilities, demands, claims, actions,
or causes of action, assessments, losses, fines, penalties, costs,
damages, and expenses, including reasonable attorneys' and expert
witness' fees, sustained or incurred by the Seller or its successors
or assigns as a result of or arising out of or by virtue of:
(i) The material inaccuracy of any
representation or warranty made by the Buyer to the Seller in
Section 3.01 of this Agreement; or
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<PAGE> 20
(ii) The breach by the Buyer of any of
the covenants set forth in this Agreement to be performed by
the Buyer.
(iii) Any and all liabilities of the
Seller to third parties and reasonable out-of-pocket costs and
expenses, and losses incurred by the Seller in connection
therewith arising out of acts or omissions (including, without
limitation, any lender or servicer liability claims of any
Mortgagor) of the Buyer (and any predecessor to the Buyer by
the merger or otherwise) in regard to any Mortgage Loan.
(c) SELLER'S RIGHTS TO DEFEND. In the event that a claim
is made against the Seller as to matters described in Subsection
3.06(a)(iii), the Buyer shall give the Seller written notice thereof.
The Seller shall have the right, but not the obligation, to assume the
defense of the claim with counsel of its own choosing reasonably
satisfactory to the Buyer and shall have the right to reasonably
approve any settlement with respect to which the Seller is obligated
to indemnify the Buyer. Regardless of which party is in control of
the defense, the Seller and the Buyer shall cooperate fully with each
other and shall make available to each other all relevant books and
records during normal business hours and shall furnish each other such
assistance as each may reasonably require in connection with such
defense.
Section 3.07. PREMIUM PROTECTION. Seller acknowledges that Buyer has
paid a premium to Seller in connection with Buyer's purchase of the Mortgage
Loans based on the remaining term of the Mortgage Loans. Therefore, it is
agreed by the parties that with respect to each Mortgage Loan that does not
contain a prepayment penalty in favor of the holder thereof, that it would be
fair and equitable that in the event a Mortgagor prepays such a Mortgage Loan
in its entirety within 60 months of the Closing Date, that Buyer shall be
entitled to a refund of the premium paid to Seller for such Mortgage Loan, on a
prorated, declining basis over said 60-month period. For example, if such a
Mortgage Loan prepays in the 5th month after the Closing Date (i.e. 4 full
months have elapsed), the amount of premium to be refunded to Buyer shall be
calculated by multiplying the dollar amount of premium paid by Buyer times a
fraction the numerator of which shall be equal to 60 minus the number of full
months after the Closing Date in which the prepayment occurs, and the
denominator of which shall be 60; therefore, in the above example, the fraction
would equal 56/60. As an additional example, if such a Mortgage Loan prepays
in the 13th month after the Closing Date (i.e. 12 full months have elapsed),
such fraction would equal 48/60, which fraction would be multiplied by the
amount of premium paid by Buyer to determine the amount of refund due to Buyer.
ARTICLE IV
CLOSING OF PURCHASE OF MORTGAGE LOANS
Section 4.01. PAYMENT. On the Closing Date, the Buyer shall pay to
the Seller the amount of the Purchase Price (net of any amount relating to the
purchase price of any Mortgage
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Loan the Buyer shall have elected not to purchase pursuant to this Agreement,
and net of the Performance Holdback set forth in Section 3.05 of this
Agreement). The closing shall, at the Buyer's option, be either by telephone,
confirmed by letter or wire or conducted in person at the place designated by
the Buyer.
Section 4.02. ASSIGNMENT AND DELIVERY OF LOAN DOCUMENTS.
(a) On or prior to the Closing Date, the Seller shall
deliver to the Buyer the following documents or instruments with
respect to each Mortgage Loan conveyed to the Buyer:
(i) The original Mortgage Note, endorsed "Pay to
the order of Pacific Crest Investment and Loan" and signed in
the name of the Seller by an Officer;
(ii) The original Mortgage, with evidence of
recording thereon;
(iii) The original Assignment of Mortgage from the
Seller to the Buyer that shall be in the form acceptable to
the Buyer, for recordation by the Buyer;
(iv) Mortgage Loan application, title report,
credit reconciliation worksheet, credit investigation receipts
and approval sheet;
(v) Originals of all assumption and modification
agreements, if any;
(vi) An original or certified copies of all
insurance policies relating to a Mortgage Loan naming the
Seller as an insured and all endorsements thereto or binders
therefor;
(vii) Originals or certified copies of all
assignment of rents or lessor's interest in leases;
(viii) Originals or certified copies of all rent
rolls, leases or rental agreements, estoppel certificates or
non-disturbance, attornment or subordination agreements;
(ix) UCC financing statements with evidence of
recording indicated thereon and the assignments thereof (that
shall be in the form acceptable to the Buyer) naming the Buyer
as the secured party; and
(x) All other documents and materials contained in
the Mortgage Documents.
The endorsements required pursuant to Subsection 4.02(a)(i) and the
assignments required pursuant to Subsection 4.02(a)(iii) shall be stated to be
"without recourse." It is understood, however, that notwithstanding that such
endorsements and assignments or any other Mortgage Documents are stated to be
without recourse, the Mortgage Loans are sold subject to the terms
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and provisions of this Agreement, including, without limitation, the
representations, warranties, covenants and undertakings of the Seller provided
for in this Agreement, and the obligations of the Seller to the Buyer with
respect to the Mortgage Loans shall be governed by this Agreement.
(b) The Seller shall, within five Business Days after the
receipt thereof, and in any event, within 30 days or immediately upon
receipt from the county recorder's office of the jurisdiction thereof
following the Closing Date, deliver or cause to be delivered to the
Buyer any additional original Mortgage Documents.
(c) All recording required pursuant to this Section 4.02
shall be accomplished at the expense of the Seller.
Section 4.03. ADDITIONAL CONDITIONS TO CLOSING. With respect to the
Closing Date, the Buyer's obligation to consummate the purchase of the Mortgage
Loans pursuant to this Agreement is subject to the satisfaction of the
following conditions:
(a) The Seller shall further perform any other action or
deed as the Buyer may reasonably request to cause the proper filing or
recording of each Mortgage and Assignment of Mortgage in such other
places and in such other manner, form or condition satisfactory to the
Buyer;
(b) All Mortgagor payments on account of taxes, site
inspection fees or insurance collected by the Seller with respect to a
Mortgage Loan prior to the submission of such Mortgage Loan to the
Buyer shall be held by the Seller in an Escrow Account. All such
Escrow Accounts shall be transferred to the Buyer on or before the
Closing Date;
(c) The Seller shall also provide to the Buyer the
Mortgage Loan Schedule and such other reports or information regarding
the Mortgage Loans as may be reasonably requested by Buyer;
(d) All representations and warranties of the Seller set
forth in Sections 3.02 and 3.03 of this Agreement shall be true and
shall take into account all of the Mortgage Loans in the aggregate;
provided, however, that the Buyer shall have no obligation to purchase
any individual Mortgage Loan as to which the representations and
warranties set forth in Sections 3.02 and 3.03 are not true and
correct with respect to such Mortgage Loan; provided further, however,
that in the event the Buyer elects not to purchase such Mortgage Loan,
the purchase price for the Mortgage Loans shall be recalculated in
order to reflect the deletion of such Loan as of the Cut-Off Date; and
no event shall have occurred which, with notice or the passage of
time, would constitute a default under this Agreement;
(e) The Buyer shall have received prior to the Closing
Date the expected final Mortgage Loan Schedule;
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(f) The Seller shall provide to the Buyer the opinion of
Seller's counsel in the form of Exhibit B attached hereto;
(g) The Seller shall provide to the Buyer a copy of the
Seller's letter to each Mortgagor and any guarantor(s) advising of the
sale and transfer of servicing of the related Mortgage Loan to Buyer,
in form and content acceptable to the Buyer and dated within 5 days of
the Closing Date; and
(h) The Seller shall provide to the Buyer a copy of a
resolution of the board of directors of Seller, certified by the
secretary of Seller, to the effect that the execution of this
Agreement by Seller, and the performance of the obligations of Seller
under this Agreement, have been duly authorized by the board of
directors of Seller, or are within the scope and coverage of a general
authorization adopted by the board of directors of Seller, and stating
that said resolution is in full force and effect and the application
of which includes the officers of Seller who are signatories hereto.
Section 4.04. MORTGAGE LOAN REVIEW PRIOR TO PURCHASE.
(a) Prior to the Cut-Off Date, the Buyer shall have the
right to inspect the Mortgage Documents. If the Buyer so elects, the
Seller shall deliver to the Buyer or its designated agent, with
respect to each Mortgage Loan to be purchased on the Closing Date, the
Mortgage Documents. The Seller shall pay all costs of preparing and
furnishing to the Buyer the Mortgage Loan file, including original and
certified copies of the respective Mortgage Documents and instruments
in the transaction.
(b) Prior to the Cut-Off Date, the Buyer shall have the
right to review such documents with respect to each Mortgage Loan and
shall approve or disapprove such Mortgage Loan for purchase hereunder.
Any Mortgage Loan with respect to which the Mortgage Loan file is
deemed to be defective, or any Mortgage Loan that is otherwise not
acceptable for purchase in the sole discretion of the Buyer, may be
returned by the Buyer, with all documents submitted in accordance with
this Section 4.04, to the Seller. At the Buyer's election, the Seller
may cure any disapproved Mortgage Loan, if possible, or the Buyer, in
its sole discretion, may hold such Mortgage Documents pending
correction of the defect as specified in a notice or other
communication to the Seller. The Seller must resubmit any such
Mortgage Loan for purchase hereunder in accordance with the procedures
of this Section 4.04. The examination of a Mortgage Loan file by the
Buyer hereunder shall not constitute a waiver of any warranty,
representation or covenant by the Seller, the Mortgagor or any other
party connected with the Mortgage Loan, with respect to such Mortgage
Loan.
(c) Notwithstanding the delivery procedures of this
Section 4.04, the Buyer may, in its sole discretion, accept Mortgage
Loan files that contain certified copies of the Mortgage and the
Assignment of Mortgage in lieu of the originals of same, and may
approve the pertinent Mortgage Loan for purchase hereunder without
such originals if
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<PAGE> 24
the Mortgage Loan file is otherwise complete, all other Mortgage
Documents are present, and the Mortgage Loan otherwise qualifies for
purchase hereunder. The purchase of such Mortgage Loan is subject in
all respects to Section 3.04 hereof, and the original Mortgage, and
the original Assignment of Mortgage, must be delivered to the Buyer
within two months from the Closing Date to prevent a Defect from
occurring.
Section 4.05. CASUALTY OR CONDEMNATION PRIOR TO CLOSING.
(a) In the event of damage to any Mortgaged Property by
fire or other casualty, act of God or any other event prior to the
Closing Date, Seller agrees to promptly give the Buyer written notice
of such casualty. The Seller shall bear the risk of loss until, and
the Buyer shall bear the risk of loss on and after, the Closing Date
of each Mortgaged Property (as mortgagee).
(b) The Seller agrees to give the Buyer written notice of
any action or proceeding instituted or pending prior to the Closing
Date, in eminent domain or for condemnation, affecting any part of any
Mortgaged Property promptly after the Seller's receipt of notice
thereof.
(c) In the event of damage to or eminent domain or
condemnation of a Mortgaged Property prior to the Closing Date as
described in Subsections 4.05(a) and (b) above, and whether or not the
Seller has given the required notice to the Buyer, the Seller agrees
that this Agreement shall be automatically terminated with respect to
any such Mortgage Loan and that such Mortgage Loan shall be
automatically deleted in accordance with the terms hereof and, in such
event, the purchase price payable by the Buyer on the Closing Date
shall be reduced by the purchase price of such Mortgage Loan as set
forth on the Mortgage Loan Schedule or the Seller shall immediately
repurchase each such Mortgage Loan from the Buyer pursuant to Section
3.04(b) if the Buyer has already paid the Seller for such Mortgage
Loan.
Section 4.06. INDEMNIFICATION PROCEDURES.
In the event an indemnification duty of either party arises under
Section 3.06, the following procedures shall apply: neither party (the
"Indemnifying Party") shall be obligated to indemnify the other party (the
"Indemnified Party") from any claims to the extent that such claims result from
the action or inaction of the Indemnified Party; the Indemnified Party shall
promptly notify the Indemnifying Party of any claim, and the Indemnifying Party
shall have the right to assume the defense with respect thereto and control the
defense thereof with counsel of the Indemnifying Party's choice, subject to the
Indemnified Party's reasonable right of approval/disapproval of such choice; if
the Indemnifying Party does not elect to assume such defense, the Indemnified
Party shall assume the defense of such claim, and the Indemnifying Party shall
reimburse the Indemnified Party for the Indemnified Party's legal fees and
expenses and costs of investigation with respect to such claim; provided,
however, that in no event shall the Indemnified Party consent to the settlement
of any claim with a third party where the Indemnifying Party would be liable
therefore hereunder without the prior written consent of the Indemnifying
Party. It is understood that the obligations of the Seller and the Buyer under
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Section 3.06 and this Section 4.06 shall survive the sale of the Mortgage Loans
to the Buyer and the transfer of servicing on the Closing Date.
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement
may be amended, changed, modified or altered only with the written consent of
the Buyer and the Seller by an instrument in writing that specifically refers
to this Agreement and that is executed by all parties adversely affected by
such amendment, change, modification or alteration.
Section 5.02. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of California, and the obligations,
rights and remedies of the parties hereunder shall be determined in accordance
with such laws.
Section 5.03. NOTICES. All notices, certificates or other
communications hereunder shall be deemed given when delivered or four (4)
Business Days after mailing by United States Postal Service, postage prepaid,
return receipt requested, addressed to the appropriate Notice Address. The
Buyer or the Seller may, by notice given hereunder, designate any further or
different address to which subsequent notices, certificates and other
communications shall be sent.
Section 5.04. ASSIGNMENT OF RIGHTS TO THIRD PARTIES. With respect
to any Mortgage Loan, the Buyer and any subsequent holder shall have the right,
at any time after the Closing Date, to assign its rights under this Agreement
to any subsequent transferee of such Mortgage Loan. The Seller may not assign
any of its rights or duties under this Agreement without the Buyer's prior
written consent. This Agreement shall inure to the benefit of the Seller, the
Buyer and their respective permitted successors and assigns.
Section 5.05. TRANSFER OF MORTGAGE LOANS. The Seller acknowledges
irrevocably that the Buyer may transfer the Mortgage Loans at any time and
consents to the assignment, in whole or in part, of this Agreement and all
rights hereunder and thereunder to the holders.
Section 5.06. SUBSEQUENT DOCUMENTATION. At any time, and from time
to time hereafter, upon the reasonable request of the Buyer, and without
payment of further consideration to the Seller, the Seller will do, execute,
acknowledge and deliver, and will cause to be done, executed, acknowledged and
delivered, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may be required in order to better assign,
transfer, grant, convey, assure and confirm to the Buyer, or to collect and
reduce to possession, any or all of the Loans as provided for herein.
Section 5.07. SEVERABILITY. Each part of this Agreement is intended
to be severable. If any term, covenant, condition or provision hereof is
unlawful, invalid, or unenforceable for any reason whatsoever, and such
illegality, invalidity, or unenforceability does not affect the remaining parts
of this Agreement, then all such remaining parts hereof shall be valid and
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enforceable and have full force and effect as if the invalid or unenforceable
part had not been included.
Section 5.08. RIGHTS CUMULATIVE; WAIVERS. The rights of each of the
parties under this Agreement are cumulative and may be exercised as often as
any party considers appropriate. 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.
Section 5.09. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall constitute one and the same
instrument, and either party hereto may execute this Agreement by signing any
such counterpart.
Section 5.10. REMEDIES NOT EXCLUSIVE. Except as provided otherwise
herein, the rights and remedies of the parties provided in the Agreement are
cumulative and not exclusive and are in addition to any other rights and
remedies now or hereafter provided by law.
Section 5.11. SURVIVAL. Notwithstanding anything to the contrary
herein, the expiration or the termination of this Agreement shall not affect
any obligations of the Seller or the Buyer under this Agreement. Each and every
representation, warranty and covenant herein shall survive the Closing Date and
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of the Seller or the Buyer or (ii) the
observance or performance of any covenant, agreement or obligation hereunder.
There shall be no merger of the representations and warranties of the Seller
into the closing documents or otherwise under any circumstances, but instead
shall be independently enforceable.
Section 5.12. TERM OF AGREEMENT. This Agreement shall continue in
full force and effect so long as the Buyer shall own any Mortgage Loans
purchased from the Seller and will be supplemented from time to time by the
parties, as and if necessary.
Section 5.13. LIMITATION ON LIABILITY OF PARTIES. Each party to
this Agreement shall be liable under this Agreement only to the extent that
obligations are imposed upon the party against whom enforcement is sought.
Section 5.14. ACCESS TO SELLER'S RECORDS. The Buyer may from time
to time request the Seller to allow the inspection of any of the Seller's
books and records pertaining to this Agreement and the Seller shall allow such
inspections and access to such books and records at reasonable times during the
Seller's normal business hours and upon reasonable terms.
Section 5.15. AGREEMENT TO PAY ATTORNEYS' FEES. If any action at
law or in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be
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entitled to reasonable attorney's fees, costs, and necessary disbursements in
addition to any other relief to which the prevailing party may be entitled.
Section 5.16. INTEGRATED AGREEMENT. This Agreement and the
documents, instruments and agreements executed and delivered pursuant to this
Agreement, constitute the entire agreement between the parties with respect to
the subject of the transactions contemplated hereby and supersedes all prior
letters or agreements with respect thereto.
Section 5.17. REPORTS AND PAYMENTS DUE ON WEEKENDS AND HOLIDAYS.
Any report, certificate, or payment required hereunder falling due on a
Saturday, Sunday or other day on which industrial loan companies in the State
of California are authorized or obligated by Law or executive order to close
shall be due on the next succeeding day which is not a Saturday, Sunday or a
day on which industrial loan company's are authorized or obligated by Law or
executive order to close.
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IN WITNESS WHEREOF, this Mortgage Loan Purchase and Sale Agreement has
been executed as of the date first above written.
PACIFIC CREST INVESTMENT AND LOAN,
as Buyer
By: /s/ L. D. LODWICK
---------------------------------------
Name: L. D. Lodwick
-------------------------------------
Title: Executive Vice President
------------------------------------
PACIFIC THRIFT AND LOAN,
as Seller
By: /s/ MARDY GROSSMAN
---------------------------------------
Name: Mardy Grossman
-------------------------------------
Title: Vice President
------------------------------------
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<PAGE> 1
EXHIBIT 10.3
GUARANTEED LOAN SALE AND SERVICING AGREEMENT
THIS GUARANTEED LOAN SALE AND SERVICING AGREEMENT ("Agreement") is entered into
by and among PACIFICAMERICA LENDING INC., A DELAWARE CORPORATION ("Seller"),
CALIFORNIA THRIFT & LOAN, INC., A CALIFORNIA CORPORATION ("Buyer"), PACIFIC
THRIFT AND LOAN COMPANY, A CALIFORNIA CORPORATION ("Servicer") and
PACIFICAMERICA MONEY CENTER, INC., A DELAWARE CORPORATION ("Guarantor") pursuant
to the following recitals, terms and conditions.
A. This Agreement governs the sale, assignment and transfer by Seller
to Buyer of the undivided ownership interests in the mortgage loans ("loan" or
"loans") identified in the Loan Certificate attached hereto as Exhibit "A" to
this Agreement, which by this reference is incorporated herein, together with
any future loan sales which will be governed by additional Loan Certificates.
This Agreement also governs Seller's responsibility for causing servicing to be
done by Servicer and other incidents, including those of trusteeship with
respect to the loans.
B. Seller's responsibilities, and the warranties and representations
made by Seller herein, are made for the benefit of Buyer and its successors and
assignees, and are intended to be binding upon Seller.
C. Guarantor is the parent company of Seller, and will unconditionally
guarantee that Buyer shall not suffer any financial loss as a result of the
transactions contemplated by this Agreement, whether as a result of non-payment
by a loan debtor, any environmental issue arising in connection with real
property which secures any loan, or otherwise, unless such loss is caused solely
as a result of Buyer's own misconduct or gross negligence. Such guarantee shall
include complete indemnification in the event Buyer (or any successor of Buyer),
shall be involved in any legal proceeding in connection with any loan, or the
real property securing such loan.
D. Seller and Buyer further agree and acknowledge that the loans are
serviced, and will continue to be serviced, by Servicer pursuant to that certain
Loan and REO Servicing Agreement between Seller and Servicer dated as of January
1, 1994 (the "Servicing Agreement"), which is attached hereto as Exhibit "B" and
is incorporated herein by this reference.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties agree to the following:
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ARTICLE I.
SALE AND TRANSFER OF UNDIVIDED OWNERSHIP INTEREST IN LOANS
SECTION 1.01.
(a) SALE AND IDENTIFICATION OF LOAN OWNERSHIP INTERESTS.
Seller hereby agrees to sell to Buyer and Buyer hereby agrees to buy from Seller
the undivided ownership interests in the loans and portions of loans identified
in Loan Certificate(s) issued pursuant to this Agreement. Each such Loan
Certificate, together with its attachment(s), shall specify, among other things,
the principal amount of each of the individual loans sold and accrued interest,
the name and account number of each of the loans sold, the loan-to-value ratio
of each loan, and the purchase price (as described in section 1.01 (b)), to be
paid to Seller.
(b) PURCHASE PRICE OF THE LOANS. Buyer shall pay to Seller the
principal amount outstanding, plus any accrued interest due and payable to
Seller, on each loan. Notwithstanding the foregoing, in the event the loan
amount is greater than the value of the property securing such loan, as set
forth in the Loan Certificate, the purchase price will be reduced to the gross
loan-to-value ratio equal to 100% of the value of the real property securing
such loan. Notwithstanding any other agreements between Buyer and Seller, in the
event Buyer under this Agreement is purchasing the remaining portion of any loan
in which it already owns an interest, Buyer is entitled to 100% of the yield due
on the underlying promissory note for such loan (less any applicable servicing
fee described in Section 3.08(a)).
(c) TIME AND NATURE OF THE SALE. Upon Buyer's payment of the
purchase price for any loan, Buyer shall immediately become vested in the
beneficial ownership of the interest in the loan. Seller will reflect the
transaction hereunder on its balance sheet and other financial statements as a
purchase of assets by Buyer and a sale of assets by Seller.
SECTION 1.02. WARRANTIES AND REPRESENTATIONS.
(a) SELLER'S OWNERSHIP OF LOANS AND COMPLIANCE WITH APPLICABLE
LAW. Seller hereby represents and warrants that as of the date Buyer buys an
ownership interest in any loan and is issued a Loan Certificate under this
Agreement in evidence thereof, all loan interests described in such Loan
Certificate are solely owned by Seller, such loans have been duly executed and
acknowledged by the loan debtor, and Seller's lien on the security property has
been recorded; such loans have been made or acquired by Seller pursuant to and
in compliance with all applicable federal and state laws, rules, and regulations
as from time to time amended; all conditions within the control of Seller and
Servicer including, without limitation, assurances that all applicable insurance
policies, as required under the loans, have been obtained, and such insurance is
valid and enforceable; and that all copies of any documents used in connection
with this transaction are accurate and complete.
(b) SELLER'S AUTHORITY; POSSESSION OF COPIES OF LOAN
DOCUMENTATION. Seller further represents and warrants that, without the need for
further approvals or authorizations,
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it is authorized to sell its entire loan interests described in the Loan
Certificate; that Seller will do all acts necessary to perfect ownership of the
loans sold under this Agreement in Buyer; and that Seller has in its possession
true copies of all documents representing each such loan and all records
required to be maintained for such loans, under applicable law and regulations,
including, but not limited to: (1) a loan application signed by loan debtor(s);
(2) a promissory note or other evidence of debt signed by loan debtor(s); (3) a
copy of the security instrument, including any modification agreement(s); (4) an
appraisal or signed report of certification of valuation of the real estate
collateral made in compliance with the requirements of all applicable laws and
regulations; (5) a copy of loan debtors financial statement(s) or written credit
report(s); (6) a title policy insuring the validity of Seller's lien position on
the real estate collateral; (7) copies of applicable tax, assessment and
insurance premium payment record(s); (8) a copy of the hazard insurance policy
in an amount representing coverage at least equal to the outstanding principal
balance or the full insurable value of the improvements, whichever is less,
which covers such perils as are commonly covered in policies described as
"Standard Fire and Extended Coverage," as well as other perils as to which
institutional lenders operating in the same area commonly require hazard
insurance, and which provides that Seller's hazard insurance is not invalidated
by acts of loan debtor(s); (9) documentation showing loan originator's and, if
applicable, Seller's, compliance with mortgage loan disclosure laws and
regulations; and (10) any flood insurance policy required under the Flood
Disaster Protection Act of 1973, as amended.
(c) DELIVERY OF COPIES OF LOAN DOCUMENTS. Seller promptly
shall deliver to Buyer copies of the following documents pertaining to each loan
or portion of loan sold under this Agreement: (1) loan application signed by
loan debtor(s); (2) an appraisal or signed report of certification of valuation
made in compliance with the requirements of the applicable laws and regulations;
(3) loan debtor's financial statement(s) or written credit report(s); (4) title
policy insuring the validity of Seller's lien; and (5) documentation showing
loan originator's and, if applicable, Seller's compliance with pertinent loan
disclosure laws and regulations.
(d) DELIVERY OF DOCUMENTS EVIDENCING THIS TRANSACTION TO
BUYER. In addition to the foregoing, Seller shall deliver to Buyer the original
of the following: (1) a properly signed duplicate original of this Agreement;
(2) a statement of each loan's current status as of the time of sale, including
a statement of the loan-to-value ratio of each loan; (3) the pertinent security
instrument, mortgage or deed of trust; (4) for each applicable deed of trust, an
original notarized assignment of deed of trust in recordable form, in form and
substance acceptable to Buyer, executed by Seller, assigning each loan to Buyer;
and (5) for each such note, an allonge in form and substance acceptable to
Buyer, which will endorse the loan interest to Buyer. Seller and Servicer shall
each retain a copy of each document described in this Section 1.02(d).
(e) RIGHTS OF INSPECTION. Buyer or its representative, or
Buyer's successors or assignees, including any examiners or supervisory agents
having jurisdiction, has the right at any reasonable time during normal business
hours to request, and have access to and examine any and all books, records and
documents relating to any loan in which Buyer has an ownership interest or
relating to any of the matters covered by this Agreement. In addition, Seller
shall fully cooperate and assist with any confidential quality control audit
that Buyer may wish to perform at Buyer's own expense.
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<PAGE> 4
(f) OTHER WARRANTIES AND REPRESENTATIONS. Seller further
represents and warrants that, as of the date of the Loan Certificate: (1) no
loan is in arrears more than one calendar month; (2) to the best of Seller's
knowledge, there are no mechanics' liens on the security properties; (3) to the
best of Seller's knowledge, the security properties are free of substantial
damage and are in good repair; (4) none of the loans are pledged as collateral
for any loan or for any other purpose; and (5) each representation as to each
such loan is true and correct.
ARTICLE II.
RELATIONSHIP OF PARTIES AND GUARANTEE PROVISIONS
SECTION 2.01. RELATIONSHIP OF THE PARTIES. It is agreed that none of
Seller, Buyer, Servicer nor Guarantor are partners or joint venturers.
SECTION 2.02. GUARANTEE PROVISIONS. These provisions shall be in
addition to the repurchase provisions described in Section 6.01 of this
Agreement. Guarantor covenants to protect Buyer against any loss actually
incurred, or where it is reasonably likely that a loss will occur in connection
with any loan purchased pursuant to this Agreement in accordance with the terms
set forth in this Section 2.02. However, Guarantor shall not be liable for any
loss resulting solely from the misconduct or gross negligence of Buyer.
(a) LOAN LOSSES - BUYER ACQUIRES TITLE TO REAL PROPERTY
SECURITY. For the purposes of this subsection (a), a loss will have deemed to
occur at such time as legal title to the real property securing the applicable
loan(s) has been acquired by or on behalf of Buyer, or any assignee or nominee
of Buyer. Buyer shall market the real property security for such loan(s) as
Buyer deems appropriate. Once Buyer has received a bona fide written offer for
such real property, it shall so notify Guarantor, and Guarantor may, within ten
(10) days elect to purchase such real property. In that event, Guarantor shall,
within five (5) business days of Guarantor's election to purchase such real
property, accept a quit-claim deed without warranty of any kind, to such real
property from Buyer and concurrently pay to Buyer the amount Buyer paid to
Seller pursuant to Section 1.01(b) hereof, less any reduction of principal
actually received by Buyer, plus all accrued but unpaid interest due to Buyer,
plus any and all expenses, fees and costs incurred by Buyer in connection with
such loan (except for earned servicing fees described in Section 3.08 (a)
hereof). If Guarantor either does not elect to purchase the real property, or
does not respond within the ten (10) day election period, Buyer may convey the
real property to a third party, and Guarantor shall, within five (5) business
days of being provided the closing statement of the escrow for such property,
reimburse Buyer for any net loss to Buyer resulting from such disposal
(including all fees and costs associated with such disposition). In addition,
Guarantor covenants to completely indemnify and hold Buyer harmless from any
expense, claim, cause of action or other proceeding in which Buyer may be named
as a party as a result of the transaction contemplated by this Agreement.
Guarantor shall not be liable for any loss resulting solely from the misconduct
or gross negligence of Buyer.
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<PAGE> 5
(b) LOAN LOSSES - BUYER DOES NOT ACQUIRE TITLE TO REAL
PROPERTY SECURITY. In the event of a loss where: (i) legal title to the real
property security for a loan(s) has been acquired by a holder of any senior
interest in the property; or (ii) Buyer, acting reasonably, determines that
legal title can not be acquired by Buyer, Servicer, Seller or Guarantor within
twelve (12) months of a default by the loan debtor(s) (as described in Section
3.10 hereof), within ten (10) days of such notice from Buyer, Guarantor shall
cause the loan(s) in question to be repurchased from Buyer for the amount Buyer
paid to Seller pursuant to Section 1.01(b) hereof, less any reduction of
principal actually received by Buyer, plus all accrued but unpaid interest due
to Buyer, plus any and all expenses, fees and costs incurred by Buyer in
connection with such loan (except for earned servicing fees described in Section
3.08 (a) hereof). Buyer shall reassign such loan(s) without warranty of any kind
to Guarantor (or assignee of Guarantor) concurrently with such payment. In
addition, Guarantor covenants to completely indemnify and hold Buyer harmless
from any expense, claim, cause of action or other proceeding in which Buyer may
be named as a party as a result of the transaction contemplated by this
Agreement. Guarantor shall not be liable for any loss resulting solely from the
misconduct or gross negligence of Buyer.
(c) ENVIRONMENTAL CLAIMS. In the event of any environmental
claim, or any claim arising from the environmental condition of real property
securing a loan, Servicer shall immediately notify Buyer, Seller and Guarantor
of such claim or other litigation. In the event Servicer either does not so
notify, or is not aware of any such claim, Buyer may give notice to Seller,
Servicer and Guarantor. Within ten (10) days of such notice, Guarantor shall
cause the loan(s) in question to be repurchased from Buyer for the amount Buyer
paid to Seller pursuant to Section 1.01(b) hereof, less any reduction of
principal actually received by Buyer, plus all accrued but unpaid interest due
to Buyer, plus any and all expenses, fees and costs incurred by Buyer in
connection with such loan (except for earned servicing fees described in Section
3.08 (a) hereof). In addition, Guarantor covenants to completely indemnify and
hold Buyer harmless from any expense, claim, cause of action or other proceeding
in which Buyer may be named as a party as a result of the transaction
contemplated by this Agreement. Guarantor shall not be liable for any loss
resulting solely from the misconduct or gross negligence of Buyer.
(d) OTHER LITIGATION CLAIMS. In the event of any claim, or
cause of action involving either any loan or real property securing any loan,
Guarantor covenants to completely indemnify and hold Buyer harmless from any
expense, claim, cause of action or other proceeding in which Buyer may be named
as a party as a result of the transaction contemplated by this Agreement.
Guarantor shall not be liable for any loss resulting solely from the misconduct
or gross negligence of Buyer.
(e) INACCURATE FINANCIAL INFORMATION. In the event Buyer
discovers it has been provided with materially incorrect financial information
whether consolidated, or for Seller, Servicer or Guarantor individually, which,
in Buyer's reasonable opinion, could impair any such entity or entities ability
to financially perform under this Agreement, (whether provided as a condition
precedent to this Agreement or pursuant to Section 3.01(c) hereof) Buyer shall
give notice to Guarantor. Within ten (10) days of such notice, Seller shall
repurchase all of the loans sold to Buyer hereunder at a purchase price equal to
the amount Buyer paid to Seller pursuant to Section 1.01(b) hereof, less any
reduction of principal actually
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received by Buyer, plus all accrued but unpaid interest due to Buyer, plus any
and all expenses, fees and costs incurred by Buyer in connection with such loan
(except for earned servicing fees described in Section 3.08 (a) hereof). In
addition, Guarantor hereby guarantees Seller's performance under this Section
2.02(c) and covenants to completely indemnify and hold Buyer harmless from any
expense, claim, cause of action or other proceeding in which Buyer may be named
as a party as a result of the transaction contemplated by this Agreement.
Guarantor shall not be liable for any loss resulting solely from the misconduct
or gross negligence of Buyer.
SECTION 2.03. GUARANTOR IS A PARTY TO THIS AGREEMENT. As a condition
precedent to this Agreement, Seller shall cause Guarantor to accept and agree to
the terms of this Agreement and to evidence same by causing Guarantor to execute
this Agreement in the space provided below for its signature.
ARTICLE III.
ADMINISTRATION AND SERVICING OF THE LOANS
SECTION 3.01. SERVICING RESPONSIBILITIES.
(a) Seller hereby assumes the responsibility for causing Servicer to
administer and service the loans specified in this Agreement and the Loan
Certificate, and shall retain such responsibility while this Agreement remains
in effect. A new Servicer may be designated only with the prior written consent
of Buyer and Seller or its respective designee, successor or assignee, or in
accordance with Section 5.01. Servicer shall not commingle with any of
Servicer's funds any part of Buyer's loan principal and interest collections and
other payments. Seller warrants that Servicer will administer and service the
loans sold hereunder consistent with prevailing good mortgage practice, and
applicable law and regulations.
(b) Seller has requested that Buyer look solely to Seller to ensure
Servicer complies with each and every requirement of this Agreement. Seller has
further requested that Buyer pay any sums due under this Agreement to Seller,
who shall have the sole responsibility to disburse, as appropriate and as agreed
upon between Seller and Servicer, any sums due to Servicer under this Agreement.
Seller shall be responsible for paying to Servicer all amounts due to Servicer
for all loans in accordance with the Servicing Agreement. Buyer shall not be
required to have any dealing with any party other than Seller, although Buyer
may, at its sole option, deal with Servicer, or make enquiries of Servicer
directly. Seller hereby indemnifies and holds Buyer, its directors, officers,
agents and employees free and harmless from any loss, fees, liability, expense
(including reasonable attorneys' fees and costs), claim or demand whatsoever
resulting from Seller's request that Buyer deal only with Seller in connection
with Servicer's rights and duties under this Agreement.
(c) Seller represents that it will provide Buyer or Buyer's successors
or assignees, as indicated on Seller/Servicer's books and records, with
Seller's, Servicer's, Guarantor's or their
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consolidated certified annual financial statements for that fiscal year within
fifteen (15) days of completion of such statement.
(d) Servicer shall be responsible for the execution of any and all
notices, and other acts necessary to transfer ownership of the loans sold under
this or any subsequent agreement to Buyer, Buyer's successors, or Buyer's
assignees, as the case may be, and for preserving all rights in said loans.
SECTION 3.02. REMITTANCE/APPLICATION OF PAYMENT.
(a) REMITTANCE OF PAYMENT. Servicer shall segregate, report
and remit to Buyer and its successors and assignees registered on Servicer's
books and records, on the fifteenth (15th) and last day of each month of the
year ("Remittance Date") Buyer's principal and interest collections (less any
money owed Servicer), as well as any prepayment in full of any loan received by
Servicer through the Cutoff Date for each loan subject to the Loan Certificate.
The Cutoff Date is the preceding Remittance Date through which all principal and
interest collections are accumulated and totaled for reporting and remittance
purposes under this Agreement. Should either the Cutoff Date or the Remittance
Date fall on a holiday, such date shall be deemed to be the business day
immediately preceding the actual Cutoff Date or Remittance Date. In the event
that such remittance is not received by Buyer, or its successors or assignees,
by the tenth (10th) day after the applicable Remittance Date, Seller shall be
subject to a late charge of 8% of the amount of such remittance not received;
and such charge shall be payable on demand by Buyer.
(b) APPLICATION OF PAYMENTS. For each loan, Servicer shall
apply each payment received by it as follows, and in the following order: (i) to
Seller, for the benefit of Servicer, the servicing fee more particularly
described in Section 3.08(a) (but not any other fees or charges); (ii) to Buyer
all sums owed to Buyer for any reason whatsoever; (iii) to Seller, any late
charge paid by a loan debtor; and (iv) to Seller or Servicer, as applicable, a
sum for all other fees or penalties payable to Servicer under the Servicing
Agreement for such loan. If a final payment is less than the total amount owed
to Buyer at the time of such pay-off, Servicer shall not accept payment without
the prior written consent of Buyer.
SECTION 3.03. REPORTING. Not less that once each month, pursuant to a
schedule to be determined between Buyer and Seller, Servicer shall provide a
monthly report to Buyer setting forth payments made, the outstanding principal
balance, accrued interest and the status of each loan subject to this Agreement,
segregated by the loans in each Loan Certificate issued hereunder. Such report
shall also indicate: (1) the number and aggregate principal amount of loans
delinquent one month and two or more months; (2) the value, as determined by an
appraisal made in compliance with applicable regulations, of any real estate
acquired through foreclosure, a deed in lieu of foreclosure or otherwise; (3)
the payment status of any senior lien; and (4) the aggregate principal amount of
loans in which Buyer or any successor or assignee is a participant, categorized
separately by the type of real estate security. In addition, not less than
quarterly, commencing three (3) months after the first purchase of loans under
this Agreement, Buyer and Servicer shall reconcile payments made to Buyer during
such
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quarter, as well as the principal balance, and accrued interest of the remainder
of each loan which is the subject of this Agreement.
SECTION 3.04. SERVICER'S AUTHORITY. It is agreed that the exclusive
rights to decide how the loans sold under this Agreement shall be serviced in
the ordinary course of business is hereby vested in Servicer, as trustee for
Buyer, subject to this Article III. Seller warrants that, except as authorized
by Section 3.11, Servicer will not waive or modify any right, term or provision
of any loan contract under this Agreement, including the release, exchange or
assumption of any loan or the real property securing any loan, without the prior
written consent of Buyer. Servicer shall not, without Buyer's consent, commingle
with any of Servicer's funds any part of Buyer's loan principal and interest
collections and other payments. Servicer shall deposit all such collections and
payments in a segregated trust or custodial demand deposit account in an
FDIC-insured institution.
SECTION 3.05. INDEXED LOAN ADJUSTMENTS. In the event the loans are
adjustable rate loans, Servicer is authorized and required to make loan
adjustments in compliance with the loan contract and any applicable regulatory
lending requirements which shall reflect the movement of the applicable loan
index, combination of indexes or a moving average of index values, or other
applicable formula or schedule. The pertinent loan adjustments shall be
implemented in accordance with the applicable lending regulations and the loan
contract. Servicer shall be responsible for the execution and timely delivery of
all appropriate notices required by the applicable lending and disclosure
regulations and loan contract regarding such adjustments. If the loan debtor on
any loan hereunder is in default at the time such notices are executed and
delivered to such loan debtor, Servicer also shall have the responsibility for
the timely execution and delivery to the loan debtor of notice that all
contractual rights under the applicable loan contract in regard to such default
are reserved even if the loan is adjusted. Even if Servicer has not made a loan
adjustment(s) as provided for by the loan contracts and as required above,
Servicer shall remit, in accordance with Section 3.02(a), an amount equal to
Buyer's principal and interest payments that would have been collected if
Servicer had made the loan adjustments in a timely fashion.
SECTION 3.06. RECORDS, MAINTENANCE AND REPORTING REQUIREMENTS. Servicer
shall be responsible for maintaining, or requiring the maintenance of, a
complete set of books and records, as to each of the loans subject to this
Agreement, including, but not limited to, a record of each receipt and each
disbursement. Such books and records shall be sufficient to enable Buyer to meet
all applicable regulatory requirements applicable to Buyer; and for making sure
that the required monthly and quarterly reports and remittances required
pursuant to Section 3.02(a) and Section 3.03 hereunder are furnished to Buyer.
SECTION 3.07. TAXES AND INSURANCE. It is agreed that Buyer shall make
additional advances on loans for taxes and insurance premiums to the extent
provided in the pertinent security instrument and to the extent necessary to
protect Buyer's interest in the real property collateral. Such advances and such
sums advanced (including any interest or penalty thereon), shall be deemed to be
part of the loan, and may be recovered from Guarantor pursuant to Section 2.02
hereof in the event of
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Buyer's loss under the applicable loan. Such amounts, where appropriate, shall
be added to the principal balance of the applicable loan.
SECTION 3.08. SERVICER'S FEES.
(a) SERVICING FEES PAYABLE. Buyer shall pay to Seller a
service fee of 75/100 OF ONE PERCENT (.75%) per annum of the then principal
balance of each loan for the servicing of the loans. On each Remittance Date,
Buyer shall pay to Seller such service fee, calculated and payable weekly in an
amount equal to ONE FIFTY SECOND (1/52) of the product of .75% times the
principal balance of each loan identified in a Loan Certificate as of the Cutoff
Date. In no event is Buyer to incur any further or additional cost for
Servicer's fees. Servicer shall also receive or retain any default penalties,
late charges, assumption fees and other penalties or fees paid by any loan
debtor, including prepayment penalties.
(b) "EXTRAORDINARY" FEES/EXPENSES. Although Seller is
responsible for causing Servicer to service the loans for such consideration as
is provided for in this Agreement, Buyer shall pay necessary extraordinary
services which may be proper under this Agreement, including, but not limited
to, the foreclosure of mortgages, property maintenance and improvement, property
management, attorneys' fees, trustee's fees and costs, the sale of any
foreclosed real estate and similar extraordinary expenses. These shall be
contracted for by Servicer for the customary and reasonable costs for such
services in the jurisdiction where the real estate is located. Servicer shall be
entitled to reimburse itself for such amounts as of the Remittance Date
following such expenditure. Such amounts, where appropriate, shall be added to
the principal balance of the applicable loan and may be recoverable from
Guarantor pursuant to Section 2.02 hereof.
SECTION 3.09. NOTIFICATION REQUIREMENTS. Seller shall have a duty to
use due diligence to ascertain, and forthwith to notify Buyer (or cause Buyer to
be notified), in any event within not more than thirty (30) days of discovery,
or, if prudent, such sooner date as a competent servicer would notify, either
directly or through Servicer, of any failure of any loan debtor to perform a
material obligation under the applicable loan, or of any of the following events
which might come to the attention of Seller or Servicer:
(a) The abandonment of the premises securing a loan subject to
this Agreement;
(b) The sale or transfer of premises securing a loan subject
to this Agreement;
(c) The death, bankruptcy, insolvency or other disability of
any loan debtor which might impair such loan debtor's ability
to repay the loan;
(d) Any loss or damage to the premises securing a loan subject
to this Agreement in excess of $10,000.00 in which event, in
addition to notifying Buyer, Seller shall cause the property
insurer concerned with the premises to be notified as required
under the applicable policy of insurance;
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(e) Any material lack of repair or any other material
deterioration or waste suffered or committed with respect to
the premises securing any loan;
(f) Any property tax with respect to any premises securing a
loan that is delinquent in excess of two (2) years; or
(g) Any event specified in Article V. hereof.
It is understood, however, that no notice need be given to Buyer of any facts
other than those of which Seller or Servicer shall have actual notice or, except
for its negligence, would or should have had notice.
SECTION 3.10. DEFAULT BY LOAN DEBTOR. For the purpose of this Section
3.10 a loan shall be in "default" or "defaulted" on the date which is the
earlier of the mailing or recording of a notice of default to a loan debtor, or
the date of filing (whether voluntarily or otherwise) of any petition under any
provision of bankruptcy law in connection with such loan debtor.
(a) SERVICER'S DUTIES. Servicer shall be responsible for
foreclosing upon the real property collateral securing any defaulted loan under
this Agreement by appropriate procedure to be determined by Servicer and Buyer.
If Servicer, Seller or Guarantor knows, or has reason to know, that there is an
environmental liability associated with real property securing a defaulted loan,
Servicer shall immediately so notify Buyer in writing. In no event shall
Servicer commence a foreclosure proceeding, foreclose, take a deed-in-lieu or
commence any other action intended to obtain title to real property underlying a
defaulted loan if Servicer, Seller or Guarantor knows, or has reason to know,
that there is an environmental liability associated with such real property
unless Buyer has agreed to such action in writing. Upon foreclosure (or other
taking of title) of the real property which had secured the loan, Guarantor
shall concurrently pay to Buyer the sums described in Section 2.02(a), together
with all fees and costs, including, without limitation, all necessary expenses
incurred in the payment of taxes, insurance premiums, waste and vandalism
prevention, repairs, maintenance, improvement, management, foreclosure,
attorneys' fees, and other similar expenses, including any interest or penalty
thereon, incurred by Buyer.
SECTION 3.11. OTHER AUTHORIZED ACTS. If, from time to time, any of the
loans covered under this Agreement are endorsed or insured, or the obligations
thereunder are further secured by other collateral, then it is agreed that
Seller shall (and that Seller is authorized to appoint Servicer as its agent),
act for Buyer. Upon Buyer's written consent, Seller is authorized to release
collateral security other than the real property described in the security
instrument, to waive or collect special fees or charges, and to agree to
substitution of personal liability, or to release persons secondarily liable.
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ARTICLE IV.
TRANSFERABILITY AND SALE TO THIRD PARTIES
SECTION 4.01. AUTHORITY TO TRANSFER LOANS. Buyer may sell or transfer
its ownership interests in loans subject to this Agreement to third parties.
SECTION 4.02. RIGHTS OF THIRD PARTIES ON RESALE. In the event Buyer or
any successor or assignee of Buyer resells to a third party or parties all or a
portion of its ownership interest in any loan(s), such resale may be evidenced
by a new Loan Certificate(s), which shall be issued by Buyer or its successor or
assignee in the same form as the Loan Certificate attached hereto and which
shall set forth the interest in the underlying loans being resold. All reselling
parties to such resale transactions may notify Seller, Servicer and Guarantor of
such resale by written instructions identifying the interest in the underlying
loan(s) being resold and the number of the Loan Certificates representing such
resold interests. Upon receipt of any such instructions, Seller will be
responsible for promptly causing Servicer to make notations in the books and
records to reflect the change ownership interests resulting from such resale and
segregate such third party's (or parties') portion of the amount of principal
and interest collected and causing monthly remittances and reports to be made to
the respective owners of such interests in a manner consistent with the
ownership interest then outstanding and the provisions of this Agreement,
subject to the provisions of Section 3.08; provided, however, that if Seller or
Servicer receives such a notification less than five (5) days before a
Remittance Date (as defined in Section 3.02(a)), Servicer's duties to remit and
report as required by this section shall begin with the next succeeding
Remittance Date.
Notwithstanding the foregoing, if such a third party is buying a whole loan(s),
it reserves the right to transfer servicing to any other person or entity. In
that event, Servicer shall, as soon as practicable, but in any event within
thirty (30) days, transfer the servicing of such loan, as directed by such third
party, together the copies of the note, deed of trust and title policy and a
statement of each such loan's current status as of the time of sale.
ARTICLE V.
INSOLVENCY (OF SELLER OR SERVICER)
AND BREACH OF CONTRACT
SECTION 5.01. TRANSFER OF SERVICING: TRIGGERING EVENTS. In the event of
any of the following (the occurrence of any of which Seller or Servicer
covenants to promptly notify Buyer of): (1) the insolvency of Servicer; (2) the
filing by or against Seller or Servicer of a petition under any provision of
bankruptcy law, or of an assignment for the benefit of creditors; (3) the
appointment by any public or supervisory authority of any person or firm in
charge of Seller or Servicer or the assets of either; (4) a material breach by
Seller or Servicer of any covenant or agreement herein or in any Loan
Certificate, except for the breach described in Section 5.02; (5) the
involuntary sale of any loans covered by this Agreement; or (6) the issuance by
an appropriate public monitoring or supervisory authority of a cease and desist
order or its equivalent against Seller or Servicer or any of their directors
and
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officers which, in Buyer's reasonable opinion, would materially affect the
ability of Seller or Servicer to service the loans as required by this
Agreement, it is agreed that Buyer, or its successor or assignee shall
automatically succeed to all rights, titles, status, and responsibilities which
Seller or Servicer may have regarding the holding and servicing of said loans
and advances. Buyer, or its successor or assignee, shall have the option to
designate itself or any person or firm in its discretion to exercise such powers
in a manner consistent with the respective interests of all owners hereunder as
such interests may appear. In such event, said loans and all records thereof
shall be delivered to Buyer, its successor, assignee or its designee or the
successor Servicer, as the case may be, together with necessary or proper
assignments, transfers, and documents of authority. In such event, Buyer or its
successor or assignee shall assume the duties of Servicer and Guarantor shall
have the same rights to notification under Section 3.09 hereof and to approval
under Section 3.11 hereof as are granted to Buyer pursuant to those sections.
SECTION 5.02. RIGHT TO CURE BREACH OF WARRANTY. In the event of a
breach of the warranty set forth in Section 1.02(f)(2), Seller shall have ten
(10) days to cure such breach after written notification is sent in accordance
with Section 6.05 to Seller by Buyer. In the event Seller has not cured such
breach to Buyer's satisfaction within such time frame, Seller shall repurchase
such loan(s) in accordance with Section 6.01(b).
SECTION 5.03 RIGHT OF BUYER TO CAUSE SERVICER TO BE REMOVED. If, in
Buyer's reasonable discretion, Buyer believes that Servicer has not performed
each of its obligations in accordance with the provisions of this Agreement, or
has charged excessive fees in connection with the servicing of the loans, Buyer
shall provide thirty (30) days written notice of such act, or failure to act, to
Seller. Seller and Servicer shall have a period of thirty (30) days to cure such
default(s) to the reasonable satisfaction of Buyer. If such default(s) have not
been so cured, Buyer shall have the immediate right to cause the servicing of
the loans to be transferred to another servicer of Buyer's selection. In that
event, Seller and Servicer shall fully cooperate with Buyer to cause the smooth
and timely transition of the servicing of the loans. In such event, Buyer or its
successor or assignee shall assume the duties of Servicer and Guarantor shall
have the same rights to notification under Section 3.09 hereof and to approval
under Section 3.11 hereof as are granted to Buyer pursuant to those sections.
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ARTICLE VI.
MISCELLANEOUS PROVISIONS
SECTION 6.01. REPURCHASE OF LOANS.
(a) MISSTATEMENT OF MATERIAL FACT. Seller agrees, upon Buyer's
written request, to repurchase Buyer's interest in any pertinent loan(s), if any
misstatement of material fact, intentional or otherwise which would materially
affect the value of the underlying collateral or the collectability of any loan,
by Seller or loan debtor(s), is disclosed by actual inspection by Buyer or its
representative, or otherwise. The repurchase price shall be for an amount equal
to the then unpaid balance of such loan(s), plus any accrued interest on such
unpaid balance, plus any costs or expenses incurred by Buyer in connection with
such loan(s). Seller shall repurchase such loan(s) within 15 days from the date
of Seller's receipt of Buyer's written repurchase request.
(b) BREACH OF REPRESENTATIONS, WARRANTIES OR COVENANT(S).
Subject to Section 5.02 of this Agreement, if Seller or Servicer breaches any
representation, warranty or covenant made in this Agreement regarding any loan
which Buyer has purchased, Seller shall repurchase such loan(s) within fifteen
(15) days from receipt of Buyer's written request for such repurchase. The
purchase price shall be for an amount equal to the then unpaid balance of such
loan(s), plus any accrued interest on such unpaid balance, plus any costs or
expenses incurred by Buyer in connection with such loan(s).
SECTION 6.02. EFFECT OF ARTICLE AND SECTION HEADINGS/ENTIRE AGREEMENT.
The Article and Section headings herein are for convenience only and shall not
affect the construction of this Agreement. This Agreement contains the entire
agreement between the parties hereto and cannot be modified in any respect
except by an agreement in writing.
SECTION 6.03 COUNTERPARTS. This Agreement may be executed
simultaneously or in counterparts, each of which shall be deemed an original,
but all of which taken together shall constitute one Agreement.
SECTION 6.04. SEVERABILITY. If any provision of this Agreement is held
to be invalid, the legality and enforceability of all remaining provisions shall
not in any way be affected or impaired, and this Agreement shall be interpreted
as if such invalid provision was not contained herein.
SECTION 6.05. NOTICE. Unless otherwise specified herein, any written
notice required to be given pursuant to this Agreement shall be sent by
first-class mail, personal delivery or facsimile transmission with confirmation
of receipt and shall be sent to the principal business office of Seller, Buyer
or Servicer at the following address:
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If to Buyer: California Thrift & Loan, Inc.
945 North Grand Avenue
Covina, CA 91724
Attention: Mr. Michael A. Iachelli
If to Seller: PacificAmerica Lending Inc.
21031 Ventura Blvd.
Woodland Hills, CA 91364-2203
Attention: Mr. Joel R. Schultz
If to Servicer: Pacific Thrift and Loan Company
21031 Ventura Blvd.
Woodland Hills, CA 91364-2203
Attention: Mr. Mardy Grossman
If to Guarantor: PacificAmerica Money Center, Inc.
21031 Ventura Blvd.
Woodland Hills, CA 91364-2203
Attention: Mr. Richard D. Young
Notice shall be deemed to have been given as of the date such notice was
deposited in the United States mail, postage prepaid.
SECTION 6.06. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 6.07. ATTORNEYS' FEES. In any dispute between the parties,
whether or not resulting in litigation, the prevailing party shall be entitled
to recover from the other party reasonable costs, including, without limitation,
reasonable attorneys' fees. "Prevailing party" shall include, without
limitation, a party who dismisses an action for recovery in exchange for sums
allegedly due, performance for covenants allegedly breached or considerations
substantially equal to the relief sought in the action or which receives, in
connection with any dispute, performance from the other party substantially
equivalent to any of these.
SECTION 6.08. SELLER'S, SERVICER'S AND GUARANTOR'S BOARD OF DIRECTORS
TO CONSENT TO AGREEMENT. As a condition precedent to this Agreement, the Board
of Directors of each of Seller, Servicer and Guarantor shall approve the terms
of this Agreement, and the transaction contemplated hereby. Such action shall be
reflected in the meeting minutes of each such Board of Directors. Such
resolutions shall be attached hereto as Exhibit "C," and will be incorporated
herein by this reference. Failure by any party to provide such a written board
resolution shall cause this Agreement to be null and void at inception.
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SECTION 6.09. SELLER, SERVICER AND GUARANTOR COVENANTS RE ABILITY TO
PERFORM. Seller, Servicer and Guarantor hereby represent and warrant that there
are no agreements which affect, or could potentially affect, Buyer in connection
with the transaction contemplated by this Agreement. Seller, Servicer and
Guarantor (as applicable), hereby covenant to notify Buyer immediately of any
proposed modification, revision, amendment, restatement or supplement to the
Servicing Agreement and to provide Buyer with a copy of any new agreement within
five (5) business days of Seller's, Servicer's or Guarantor's execution of same.
SECTION 6.10 AUTHORIZED SIGNATURES. Any individual signing this
Agreement on behalf of an entity represents and warrants that he has full
authority to do so and that no person or entity other than such individual is
required to execute this Agreement in order to give it legal effect.
IN WITNESS WHEREOF, each party has caused its corporate seal to be affixed
hereto and this instrument to be signed in its corporate name on its behalf by
its proper officials duly authorized.
SELLER: BUYER:
PACIFICAMERICA LENDING, INC. CALIFORNIA THRIFT & LOAN, INC.
by: /s/ JOEL R. SCHULTZ by: /s/ MICHAEL A. IACHELLI
--------------------------- ----------------------------
Joel R. Schultz Michael A. Iachelli
President and CEO President
Date: January 14, 1997 Date: January 14, 1997
------------------------ -------------------------
SERVICER: GUARANTOR:
PACIFIC THRIFT AND LOAN PACIFICAMERICA MONEY CENTER, INC.
by: /s/ RICHARD D. YOUNG by: /s/ JOEL R. SCHULTZ
--------------------------- ----------------------------
Richard D. Young Joel R. Schultz
President President and CEO
Date: January 14, 1997 Date: January 14, 1997
------------------------ -------------------------
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EXHIBIT "A"
LOAN CERTIFICATE
TO:______________________________________________________, Buyer
THIS CERTIFIES THAT THE UNDERSIGNED SELLER has received from the undersigned
Buyer the purchase price in the principal sum of $ ___________________. Seller
sells, conveys, assigns, transfers, and issues to Buyer under and subject to,
the Guaranteed Loan Sale and Servicing Agreement ("Agreement") dated__________,
19__, between Seller, Buyer, Servicer and Guarantor undivided ownership
interests in each of the loans or portions of loans described with
particularity, (including, without limitation, each such loan's remaining term,
interest rate, lien position and loan-to-value ratio) on the list attached
hereto and incorporated hereby into this Loan Certificate.
The total outstanding unpaid principal balance of said loans as of this date is
$______________.
It is agreed that Buyer shall receive a yield equal to the current interest rate
of each note, the unpaid principal balance from time to time as specified in
Sections 3.02 and 3.03 of the Agreement, plus the amount of any interest
collected pursuant to any increase in the interest rate on any of said loans.
Buyer's yield shall begin to accrue as of the date Buyer pays the purchase price
to Seller under the Agreement.
The rights and obligations of the parties to this Loan Certificate are governed
by the above-described Agreement, which is fully incorporated herein by
reference.
SELLER: BUYER:
PACIFICAMERICA LENDING, INC. CALIFORNIA THRIFT & LOAN, INC.
by: by:
--------------------------- ----------------------------
Joel R. Schultz Michael A. Iachelli
President and CEO President
Date: Date:
------------------------ -------------------------
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