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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 18, 1997
PACIFICAMERICA MONEY CENTER, INC.
(Exact name of registrant as specified in its charter)
California 0-20897 95-4465729
- ---------------------------- ------------------------ --------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of 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 5. Other Events
On December 18, 1997, the PacificAmerica Home Equity Loan Trust
Series 1997-1 (the "Trust") issued $100 million in securities backed by home
equity loans ("Mortgage Loans") originated by Pacific Thrift and Loan Company
("Pacific Thrift"), a wholly-owned subsidiary of PacificAmerica Money Center,
Inc. (the "Company"). The Trust was formed pursuant to a Trust Agreement, dated
as of December 1, 1997, between Merrill Lynch Mortgage Investors, Inc. (the
"Depositor") and Wilmington Trust Company, the Owner Trustee. The securities
were issued by the Trust in form of notes (the "Notes"), pursuant to the terms
of an Indenture, dated as of December 1, 1997, between the Trust and Bankers
Trust Company of California, N.A., the Indenture Trustee. The Notes are insured
under a financial guaranty insurance policy issued by Financial Security
Assurance Inc., and are rated "AAA" by Standard & Poor's Ratings Services and
"Aaa" by Moody's Investors Service, Inc. The offering of Notes was underwritten
by Merrill Lynch, Pierce, Fenner & Smith ("Merrill Lynch"). The terms of the
Notes and a description of the Mortgage Loans sold by the Company to the Trust
are contained in a Prospectus Supplement dated December 11, 1997 to Prospectus
dated June 19, 1997, included as part of a registration statement filed by the
Depositor with the Securities and Exchange Commission.
The Company sold Mortgage Loans having an aggregate principal
balance of $75,767,802 to the Trust as of the closing date of the
securitization. On December 23, 1997, the Company sold to the Trust additional
Mortgage Loans having an aggregate principal balance of $24,240,248. The terms
of the sale of Mortgage Loans are contained in a Home Equity Loan Purchase
Agreement, dated as of December 11, 1997 (the "Loan Purchase Agreement"), by and
among PAMM, the Depositor, the Trust and the Indenture Trustee. The Loan
Purchase Agreement provides, among other terms, that the sale of the Mortgage
Loans is non-recourse except for the obligation to repurchase or replace
Mortgage Loans upon a breach of certain standard and customary representations
and warranties.
The Company is named as Master Servicer for the Mortgage Loans.
Advanta Mortgage Corp. USA ("Advanta"), as Sub-Servicer for the Mortgage Loans,
will provide substantially all servicing related to the Mortgage Loans.
The Company has also entered into a Master Assignment Agreement,
dated as of December 18, 1997 (the "Master Assignment Agreement"), with Merrill
Lynch Mortgage Capital, Inc.("MLMCI"), under which the Company expects to
obtain financing secured by interest-only strip receivables retained by the
Company insecuritization transactions underwritten by Merrill Lynch.
The Company has also entered into a Master Repurchase Agreement,
dated as of October 31, 1997 (the "Repurchase Agreement"), with MLMCI, under
which the Company obtains warehouse financing for mortgage loans pending
securitization. The terms of each advance are established on the date of each
transaction under the Repurchase Agreement, and Advances are repaid upon the
completion of each securitization transaction.
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The Company anticipates that future securitizations will be
completed on a quarterly basis. The Company has committed to deliver a total of
$750 million in home equity loans for securitization through Merrill Lynch,
Pierce, Fenner & Smith. The Company also intends to continue to sell loans under
an existing loan sale agreement with Advanta Mortgage Conduit Services Inc.
Except for historical information contained herein, statements in
this report are forward-looking statements that involve certain risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. Such risks include, among others, risk of
inability to meet loan production goals; risk of loss on the interest-only strip
receivables resulting from differences between actual and assumed prepayment or
loss experience; risk of loss of funding sources for loan originations; risk of
loss of credit enhancement; loan delinquencies and defaults; possible decline of
collateral values for loans; fluctuations in interest rates; competition in the
lending industry; and possible regulatory enforcement actions and legislative
action. For more complete information concerning factors which could affect the
Company's financial results, reference is made to the Company's registration
statements, reports and other documents filed with the Securities and Exchange
Commission.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
10.1 Home Equity Loan Purchase Agreement, dated as of December 11,
1997, by and among the Company, Merrill Lynch Mortgage Investors,
Inc., as depositor, PacificAmerica Home Equity Loan Trust Series
1997-1, as issuer, and Bankers Trust Company of California, N.A.,
as indenture trustee.
10.2 Master Assignment Agreement, dated as of December 18, 1997, by
and between the Company and Merrill Lynch Mortgage Capital, Inc.
10.3 Master Repurchase Agreement, dated as of October 31, 1997, by and
between the Company, on the one hand, and Merrill Lynch Mortgage
Capital, Inc. and Merrill Lynch Credit Corporation on the other,
which Agreement includes, without limitation, the Supplemental
Terms and Conditions attached to and incorporated into the Master
Repurchase Agreement.
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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: December 29, 1997 PACIFICAMERICA MONEY CENTER, INC.
By: /s/ JOEL R. SCHULTZ
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Joel R. Schultz
President and Chief Executive
Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
10.1 Home Equity Loan Purchase Agreement, dated as of December 11,
1997, by and among the Company, Merrill Lynch Mortgage Investors,
Inc., as depositor, PacificAmerica Home Equity Loan Trust Series
1997-1, as issuer, and Bankers Trust Company of California, N.A.,
as indenture trustee.
10.2 Master Assignment Agreement, dated as of December 18, 1997, by
and between the Company and Merrill Lynch Mortgage Capital, Inc.
10.3 Master Repurchase Agreement, dated as of October 31, 1997, by and
between the Company, on the one hand, and Merrill Lynch Mortgage
Capital, Inc. and Merrill Lynch Credit Corporation on the other,
which Agreement includes, without limitation, the Supplemental
Terms and Conditions attached to and incorporated into the Master
Repurchase Agreement.
</TABLE>
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EXHIBIT 10.1
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MERRILL LYNCH MORTGAGE INVESTORS, INC.
as Company,
PACIFICAMERICA MONEY CENTER, INC.
as Seller,
PACIFICAMERICA HOME EQUITY LOAN TRUST SERIES 1997-1
as Issuer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
as Indenture Trustee
-------------------------
HOME EQUITY LOAN PURCHASE AGREEMENT
Dated as of December 11, 1997
-------------------------
Fixed and Adjustable Rate Mortgage Loans
================================================================================
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.................................................2
ARTICLE II
SALE OF MORTGAGE LOANS AND RELATED PROVISIONS
Section 2.1. Sale of Initial Mortgage Loans.............................16
Section 2.2. Obligations Regarding the Mortgage Loans...................16
Section 2.3. Conveyance of the Subsequent Mortgage Loans................19
Section 2.4. Pre-Funding Account........................................22
Section 2.5. Interest Coverage Account..................................23
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.1. Seller Representations and Warranties......................24
Section 3.2 Company Representations and Warranties.....................38
ARTICLE IV
SELLER'S COVENANTS
Section 4.1. Covenants of the Seller....................................39
Section 4.2. Payment of Expenses........................................40
ARTICLE V
CONDITIONS TO INITIAL MORTGAGE LOAN PURCHASE
Section 5.1. Conditions of Company's Obligations........................41
ARTICLE VI
LIMITATION ON LIABILITY OF THE SELLER
WITH RESPECT TO THE MORTGAGE LOANS
Section 6.1. Limitation on Liability of the Seller......................41
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ARTICLE VII
TERMINATION
Section 7.1. Termination.................................................42
Section 7.2. Optional Redemption.........................................43
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. Amendment...................................................44
Section 8.2. Governing Law...............................................44
Section 8.3. Notices.....................................................44
Section 8.4. Severability of Provisions..................................45
Section 8.5. Relationship of Parties.....................................46
Section 8.6. Counterparts................................................46
Section 8.7. Further Agreements..........................................46
Section 8.8. Intention of the Parties....................................46
Section 8.9. Successors and Assigns; Assignment of Purchase Agreement....46
Section 8.10. Survival....................................................47
Section 8.11. Third Party Beneficiary.....................................47
Exhibits
Exhibit 1 Mortgage Loan Schedule for Initial Mortgage Loans
Exhibit 2 Subsequent Transfer Instrument
</TABLE>
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This HOME EQUITY LOAN PURCHASE AGREEMENT (this "Agreement"),
dated as of December 11, 1997, is made among PacificAmerica Money Center, Inc.
(the "Seller"), Merrill Lynch Mortgage Investors, Inc. (the "Company"),
PacificAmerica Home Equity Loan Trust Series 1997-1 (the "Issuer") and Bankers
Trust Company of California, N.A. (the "Indenture Trustee").
W I T N E S S E T H :
WHEREAS, the Seller owns certain Mortgage Loans indicated on the
Mortgage Loan Schedule attached as Exhibit 1 hereto (the "Initial Mortgage
Loans"), including rights to (a) any property acquired by foreclosure or deed in
lieu of foreclosure or otherwise, and (b) the proceeds of any insurance policies
covering the Initial Mortgage Loans;
WHEREAS, pursuant to the terms of this Home Equity Loan Purchase
Agreement the parties hereto desire that the Seller sell (i) the Initial
Mortgage Loans to the Company on the Closing Date and (ii) the Subsequent
Mortgage Loans to the Issuer on each Subsequent Transfer Date, and that the
Seller make certain representations and warranties on the Closing Date and on
each Subsequent Transfer Date;
WHEREAS, the Company will sell the Initial Mortgage Loans and
transfer all of its rights under this Home Equity Loan Purchase Agreement to the
Issuer on the Closing Date;
WHEREAS, pursuant to the terms of the Trust Agreement, the Issuer
will issue and transfer to or at the direction of the Company, the Certificates;
WHEREAS, pursuant to the terms of the Indenture, the Issuer will
issue and transfer to or at the direction of the Company, the Notes; and
WHEREAS, pursuant to the terms of the Servicing Agreement, the
Master Servicer will service the Mortgage Loans directly or through one or more
Subservicers;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1. Definitions. For all purposes of this Agreement, all
capitalized terms used herein shall have the meanings specified herein.
Addition Notice: With respect to the transfer of Subsequent
Mortgage Loans to the Trust pursuant to Section 2.3 herein, a notice given to
the Rating Agencies, the Indenture Trustee, the Note Insurer and the Owner
Trustee , which shall be given not later than seven Business Days prior to the
related Subsequent Transfer Date, of the Seller's designation of Subsequent
Mortgage Loans to be sold to the Issuer and the aggregate principal balance as
of the Subsequent Cut-off Date of such Subsequent Mortgage Loans.
Adjustable Rate Initial Mortgage Loan: Each of the Adjustable
Rate Mortgage Loans transferred to the Issuer on the Closing Date.
Adjustable Rate Mortgage Loan: Each of the Mortgage Loans
identified in the Mortgage Loan Schedule as having a Mortgage Rate that is
subject to adjustment.
Adjustment Date: As to each Adjustable Rate Mortgage Loan, each
date set forth in the related Mortgage Note on which an adjustment to the
interest rate on such Mortgage Loan becomes effective.
Appraised Value: The appraised value of a Mortgaged Property
based upon the lesser of (i) the appraisal made at the time of the origination
of the related Mortgage Loan, or (ii) the sales price of such Mortgaged Property
at such time of origination. With respect to a Mortgage Loan the proceeds of
which were used to refinance an existing mortgage loan, the appraised value of
the Mortgaged Property based upon the appraisal (as reviewed and approved by the
Seller) obtained at the time of refinancing.
Assignment of Mortgage: An assignment of Mortgage, notice of
transfer or equivalent instrument, in recordable form, which is sufficient under
the laws of the jurisdiction wherein the related Mortgaged Property is located
to reflect of record the sale of the Mortgage, which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering Mortgages secured by Mortgaged Properties located in the
same county, if permitted by law.
Bankruptcy Code: The Bankruptcy Code of 1978, as amended.
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Basic Documents: The Trust Agreement, the Certificate of Trust,
the Indenture, this Agreement, the Insurance Agreement, the Indemnification
Agreement, the Servicing Agreement, the Sub-Servicing Agreement and the other
documents and certificates delivered in connection with any of the above.
Business Day: Any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the City of New York, Delaware or
California or in the city in which the corporate trust offices of the Indenture
Trustee or the principal office of the Note Insurer are located, are required or
authorized by law to be closed.
Business Trust Statute: Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss.ss.3801 et seq., as the same may be amended from time to
time.
Carry-Forward Amount: With respect to the Notes and any Payment
Date, an amount equal to (a) the amount determined pursuant to clause (i) of the
definition of Interest Payment Amount minus (b) the Guaranteed Interest Payment
Amount.
Certificate of Trust: The Certificate of Trust filed for the
Trust pursuant to Section 3810(a) of the Business Trust Statute.
Certificates or Home Equity Loan Asset-Backed Certificates: The
PacificAmerica Home Equity Loan Asset-Backed Certificates, Series 1997-1,
evidencing the beneficial ownership interest in the Issuer and executed by the
Owner Trustee in substantially the form set forth in Exhibit A to the Trust
Agreement.
Certificateholder: The Person in whose name a Certificate is
registered in the Certificate Register. Pledgees of Certificates that have been
pledged in good faith may be regarded as Certificateholders if the pledgee
establishes to the satisfaction of the Indenture Trustee or the Owner Trustee,
as the case may be, the pledgee's right so to act with respect to such
Certificates and that the pledgee is not the Issuer, any other obligor upon the
Certificates or any Affiliate of any of the foregoing Persons.
Closing Date: December 18, 1997.
Collection Account: The account or accounts created and
maintained pursuant to the Servicing Agreement. The Collection Account shall be
an Eligible Account.
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan
which is secured by a second lien on the related Mortgaged Property and any
date, the ratio, expressed as a percentage, the numerator of which is the sum of
(i) the unpaid principal balance of the Mortgage Loan plus (ii) the original
principal balance of any second lien on the related Mortgaged
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Property as of such date, and the denominator of which is the lesser of (i) the
Appraised Value of the related Mortgaged Property as of the date of the
appraisal used by or on behalf of the Seller to underwrite such Mortgage Loan or
(ii) the sale price of the related Mortgaged Property if such a sale occurred at
origination of the Mortgage Loan.
Company: Merrill Lynch Mortgage Investors, Inc., a Delaware
corporation, and its successors and assigns.
Cut-off Date: December 1, 1997.
Deficient Valuation: With respect to any Mortgage Loan, a
valuation by a court of competent jurisdiction of the Mortgaged Property in an
amount less than the then outstanding indebtedness under the Mortgage Loan, or
any reduction in the amount of principal to be paid in connection with any
scheduled Monthly Payment that constitutes a permanent forgiveness of principal,
which valuation or reduction results from a proceeding under the Bankruptcy
Code.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced
with an Eligible Substitute Mortgage Loan.
Determination Date: With respect to any Payment Date, the 15th
day of the related month, or if the 15th day of such month is not a Business
Day, the immediately preceding Business Day.
Due Date: The first day of the month of the related Payment Date.
Due Period: With respect to any Mortgage Loan and Due Date, the
period commencing on the second day of the month preceding the month of such
Payment Date (or, with respect to the first Due Period, the day following the
Cut-off Date) and ending on the related Due Date.
Eligible Account: An account that is either: (A) (1) (i) a
segregated account or (ii) accounts maintained with an institution whose
deposits are insured by the FDIC, (2) the unsecured and uncollateralized long
term debt obligations of which institution shall be rated A+ or higher by
Standard & Poor's and A1 or higher by Moody's and the unsecured and
uncollateralized short term debt obligations of which institution shall be rated
A-1 or higher by Standard & Poor's and P-1 or higher by Moody's, and (3) which
is (i) a federal savings and loan association duly organized, validly existing
and in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state; (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company or (v) approved in writing by the Note
Insurer and each Rating Agency or (B) a
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segregated trust account or accounts maintained with the trust department of a
federal or state chartered depository institution acceptable to the Note Insurer
and each Rating Agency, having capital and surplus of not less than
$100,000,000, acting in its fiduciary capacity.
Eligible Investments: One or more of the following:
(i) direct obligations of, and obligations fully guaranteed
by, the United States of America, any of the Federal Home Mortgage
Corporation, the Federal National Mortgage Association, the Federal Home
Loan Banks or any agency or instrumentality of the United States of
America the obligations of which are backed by the full faith and credit
of the United States of America;
(ii) (A) demand and time deposits in, certificates of deposit
of, banker's acceptances issued by or federal funds sold by any
depository institution or trust company (including the Indenture Trustee
or its agent acting in their respective commercial capacities)
incorporated under the laws of the United States of America or any State
thereof and subject to supervision and examination by federal and/or
state authorities, so long as at the time of such investment or
contractual commitment providing for such investment, such depository
institution or trust company has a short term unsecured debt rating in
the highest available rating category of each of the Rating Agencies and
provided that each such investment has an original maturity of no more
than 365 days, and (B) any other demand or time deposit or deposit which
is fully insured by the Federal Deposit Insurance Corporation;
(iii) repurchase obligations with a term not to exceed 30 days
with respect to any security described in clause (i) above and entered
into with a depository institution or trust company (acting as a
principal) rated "A" or higher by Standard & Poor's and A2 or higher by
Moody's; provided, however, that collateral transferred pursuant to such
repurchase obligation must (A) be valued daily at current market price
plus accrued interest, (B) pursuant to such valuation, equal, at all
times, 105% of the cash transferred by the Indenture Trustee in exchange
for such collateral and (C) be delivered to the Indenture Trustee or, if
the Indenture Trustee is supplying the collateral, an agent for the
Indenture Trustee, in such a manner as to accomplish perfection of a
security interest in the collateral by possession of certificated
securities.
(iv) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States of
America or any State thereof which has a long term unsecured debt rating
in the highest available rating category of each of the Rating Agencies
at the time of such investment;
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(v) commercial paper having an original maturity of less
than 365 days and issued by an institution having a short term unsecured
debt rating in the highest available rating category of each of the
Rating Agencies at the time of such investment;
(vi) a guaranteed investment contract approved by each of the
Rating Agencies and the Note Insurer and issued by an insurance company
or other corporation having a long term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the
time of such investment;
(vii) money market funds having ratings in the highest
available long-term rating category of each of the Rating Agencies at
the time of such investment; any such money market funds which provide
for demand withdrawals being conclusively deemed to satisfy any maturity
requirement for Eligible Investments set forth in the Indenture; and
(viii) any investment approved in writing by each of the Rating
Agencies and the Note Insurer.
provided, however, that each such instrument shall be acquired in an arm's
length transaction and no such instrument shall be an Eligible Investment if it
represents, either (1) the right to receive only interest payments with respect
to the underlying debt instrument or (2) the right to receive both principal and
interest payments derived from obligations underlying such instrument and the
principal and interest payments with respect to such instrument provide a yield
to maturity greater than 120% of the yield to maturity at par of such underlying
obligations; provided further, however, that each such instrument acquired shall
not be acquired at a price in excess of par.
The Indenture Trustee may purchase from or sell to itself or an affiliate, as
principal or agent, the Eligible Investments listed above.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by
the Seller for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in an Officer's Certificate delivered to the
Indenture Trustee and the Note Insurer, (i) have an outstanding principal
balance, after deduction of the principal portion of the monthly payment due in
the month of substitution (or in the case of a substitution of more than one
Mortgage Loan for a Deleted Mortgage Loan, an aggregate outstanding principal
balance, after such deduction), not in excess of the outstanding principal
balance of the Deleted Mortgage Loan (the amount of any shortfall to be
deposited by the Seller in the Collection Account in the month of substitution);
(ii) comply in all material respects with each representation and warranty set
forth in clauses (i) through (lxvi) of Section 3.1(b) hereof other than clauses
(iii)-(xiv), (xli), (xliv), (lv) and (lix); (iii) have a Mortgage Rate (or in
the case of a substitution of more than one Mortgage Loan for a Deleted Mortgage
Loan, a weighted average Mortgage Rate) and, with respect to an Adjustable Rate
Mortgage Loan, a Gross Margin, no lower than and not more than 1% per annum
higher than the Mortgage Rate and Gross Margin, respectively, of the Deleted
Mortgage Loan as of the
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date of substitution; (iv) have a Loan-to-Value Ratio and Combined Loan-to-Value
Ratio, if applicable, at the time of substitution no higher than that of the
Deleted Mortgage Loan at the time of substitution; (v) have a remaining term to
stated maturity not greater than (and, unless consented to by the Note Insurer,
not more than one year less than) that of the Deleted Mortgage Loan; (vi) not be
30 days or more delinquent; (vii) have a property type, occupancy status, and
credit quality based on the applicable underwriting guidelines that are at least
as favorable as those of the Deleted Mortgage Loan and not provide for a balloon
payment; (viii) in the case of each Adjustable Rate Mortgage Loan, have a next
Adjustment Date not more than two months later than that of the Deleted Mortgage
Loan; (ix) in the case of a Mortgage Loan substituted for an Adjustable Rate
Mortgage Loan, be an Adjustable Rate Mortgage Loan; and (x) be acceptable to the
Note Insurer, in its sole discretion.
Fixed Rate Initial Mortgage Loan: Each of the Fixed Rate Mortgage
Loans transferred to the Issuer on the Closing Date.
Fixed Rate Mortgage Loan: Each of the Mortgage Loans identified
in the Mortgage Loan Schedule as having a Mortgage Rate that is fixed.
Funding Period: The period beginning on the Closing Date and
ending on the earlier of the date on which (a) the amount on deposit in the
related Pre-Funding Account (net of any investment earnings thereon) is less
than $10,000 or (b) the close of business on January 26, 1998.
Guaranteed Interest Payment Amount: As to any Payment Date, an
amount equal to interest accrued on the aggregate outstanding Principal Balance
of the Mortgage Loans payable on the related Due Date minus the aggregate amount
of the related Servicing Fee, the Indenture Trustee Fee, the Owner Trustee Fee,
the Note Insurance Premium and the Minimum Spread, each as determined pursuant
to the Basic Documents.
Gross Margin: With respect to any Mortgage Loan, the percentage
set forth as the "Gross Margin" for such Mortgage Loan on the Mortgage Loan
Schedule, as adjusted from time to time in accordance with the terms of the
Servicing Agreement.
Home Equity Loan Purchase Agreement: This Agreement, dated
December 11, 1997, among the Seller, the Company, the Indenture Trustee and the
Issuer.
Indenture: The indenture, to be dated as of December 1, 1997,
between the Issuer, as debtor, and the Indenture Trustee, as Indenture Trustee.
Indenture Trustee: Bankers Trust Company of California, N.A., a
national banking association, and its successors and assigns or any successor
indenture trustee appointed pursuant to the terms of the Indenture.
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Index: With respect to any Adjustable Rate Mortgage Loan, the
index for the adjustment of the Mortgage Rate set forth as such on the related
Mortgage Note.
Initial Mortgage Loan: A Mortgage Loan transferred and conveyed
by the Company to the Issuer on the Closing Date, as listed on the Mortgage Loan
Schedule.
Insurance Agreement: The Insurance Agreement, to be dated as of
December 1, 1997, among the Master Servicer, the Seller, the Company, the
Issuer, the Indenture Trustee and the Note Insurer, including any amendments and
supplements thereto.
Interest Coverage Account: The account established and maintained
pursuant to Section 2.5 of this Agreement.
Interest Coverage Addition: As to any Payment Date, an amount,
not less than $0.00, equal to the sum of (x) interest accrued for the related
Interest Period on an amount equal to (i) the Original Pre-Funded Amount minus
(ii) the aggregate Principal Balance of any related Subsequent Mortgage Loans
transferred prior to the related Interest Period, calculated at a rate equal to
the Note Interest Rate and (y) the Note Insurance Premium accrued on the excess,
if any, of the Original Pre-Funded Amount over the aggregate Principal Balance
of any related Subsequent Mortgage Loans transferred prior to the related
Interest Period.
Interest Coverage Amount: The amount to be paid from proceeds
received from the sale of the Notes for deposit into the related Interest
Coverage Account pursuant to Section 2.5 hereof on the Closing Date, which
amount shall be $110,219.87.
Interest Payment Amount: With respect to any Payment Date, an
amount equal to the lesser of (i) interest accrued during the related Interest
Period on the Note Principal Balances of the Notes at the then-applicable Note
Interest Rate and (ii) the Guaranteed Interest Payment Amount.
Issuer: PacificAmerica Home Equity Loan Trust Series 1997-1, a
Delaware business trust, or its successor in interest.
Lien: Any mortgage, deed of trust, pledge, conveyance,
hypothecation, assignment, participation, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority right or interest or other security
agreement or preferential arrangement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agree ment, any financing lease having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the UCC
(other than any such financing statement filed for informational purposes only)
or comparable law of any jurisdiction to evidence any of the foregoing.
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Loan-to-Value Ratio: With respect to any Mortgage Loan, as of any
date of determination, a fraction expressed as a percentage, the numerator of
which is the then current principal amount of the Mortgage Loan, and the
denominator of which is the lesser of the Purchase Price or the Appraised Value
of the related Mortgaged Property.
Master Servicer: PacificAmerica Money Center, Inc. a Delaware
corporation, and its successors and assigns.
Maximum Mortgage Rate: With respect to each Adjustable Rate
Mortgage Loan, the maximum Mortgage Rate as set forth in the related Mortgage
Note.
Minimum Mortgage Rate: With respect to each Adjustable Rate
Mortgage Loan, the minimum Mortgage Rate as set forth in the related Mortgage
Note.
Monthly Payment: With respect to any Mortgage Loan (including any
REO Property) and any Due Date, the payment of principal and interest due
thereon in accordance with the amortization schedule at the time applicable
thereto (after adjustment, if any, for partial Principal Prepayments and for
Deficient Valuations occurring prior to such Due Date but before any adjustment
to such amortization schedule by reason of any bankruptcy, other than a
Deficient Valuation, or similar proceeding or any moratorium or similar waiver
or grace period).
Mortgage: The mortgage, deed of trust or other instrument
creating a first lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The file containing the Related Documents
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to Section 2.2 hereof or the Servicing
Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of
Mortgage Loans pledged under the Indenture on such date, including, as
applicable, the schedule of Initial Mortgage Loans as of the Cut-off Date set
forth in Exhibit 1 of this Agreement and such schedule, as amended by the Seller
to reflect (i) Eligible Substitute Mortgage Loans and Deleted Mortgage Loans,
and (ii) as of each Subsequent Transfer Date, any Subsequent Mortgage Loans,
which schedules set forth as to each Mortgage Loan
(i) the loan number and name of the Mortgagor;
(ii) the street address, city, state and zip code of the
Mortgaged Property;
(iii) the Mortgage Rate at origination;
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(iv) with respect to an Adjustable Rate Mortgage Loan, the
Maximum Rate and the Minimum Rate;
(v) the maturity date;
(vi) the original principal balance;
(vii) the first payment date;
(viii) the type of Mortgaged Property;
(ix) the Monthly Payment in effect as of the Cut-off Date (with
respect to an Initial Mortgage Loan) or Subsequent Cut-off
Date (with respect to a Subsequent Mortgage Loan);
(x) the Principal Balance as of the Cut-off Date (with respect
to an Initial Mortgage Loan) or Subsequent Cut-off Date
(with respect to a Subsequent Mortgage Loan);
(xi) with respect to an Adjustable Rate Mortgage Loan, the
Index, the Gross Margin; the Lifetime Rate Cap and the
Periodic Rate Cap;
(xii) with respect to an Adjustable Rate Mortgage Loan, the
first Adjustment Date and next Adjustment Date, if any;
(xiii) with respect to an Adjustable Rate Mortgage Loan, the
Adjustment Date frequency and Payment Date frequency;
(xiv) the occupancy status;
(xv) the purpose of the Mortgage Loan;
(xvi) the Appraised Value of the Mortgaged Property;
(xvii) the original term to maturity;
(xviii) the paid-through date of the Mortgage Loan;
(xix) the Loan-to-Value Ratio;
(xx) whether the Mortgage Loan is an Adjustable Rate Mortgage
Loan or a Fixed Rate Mortgage Loan; and
<PAGE> 14
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(xxi) whether or not the Mortgage Loan was underwritten pursuant
to a limited documentation program.
The Mortgage Loan Schedule shall also set forth the total of the
amounts described under (ix) above for all of the Mortgage Loans.
Mortgage Loans: At any time, collectively, all Mortgage Loans
that have been sold or otherwise transferred and conveyed by the Seller to the
Company or to the Issuer, as applicable, under this Agreement, in each case
together with the Related Documents, and that remain subject to the terms
thereof. As applicable, Mortgage Loan shall be deemed to refer to the related
REO Property and to Initial Mortgage Loans, Eligible Substitute Mortgage Loans
and Subsequent Mortgage Loans.
Mortgage Note: The note or other evidence of the indebtedness of
a Mortgagor under a Mortgage Loan.
Mortgage Rate: With respect to any Mortgage Loan, the annual rate
at which interest accrues on such Mortgage Loan.
Mortgaged Property: The underlying property, including real
property and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Mortgage Note.
Note Insurer: Financial Security Assurance Inc., a New York stock
insurance corporation or any successor thereto.
Note Interest Rate: With respect to each Payment Date after the
first Payment Date, a per annum rate equal to the lesser of (i) (a) with respect
to each Payment Date up to and including the Payment Date on which the aggregate
Principal Balance of the Mortgage Loans is less than 10% of the aggregate
Cut-off Date Principal Balance of the Mortgage Loans and the Original Pre-Funded
Amount, One-Month LIBOR plus 0.26%, and (b) with respect to each Payment Date
thereafter, One-Month LIBOR plus 0.52% and (ii) 15.00% per annum.
Note Principal Balance: With respect to any Note, the initial
principal balance thereof as of the Closing Date and reduced by all amounts
distributed in respect of principal with respect to such Note.
Noteholder or Holder: The Person in whose name a Note is
registered in the Note Register, except that, any Note registered in the name of
the Company, the Issuer or the Indenture Trustee or any Affiliate of any of them
shall be deemed not to be a Noteholder or Holder, nor shall any Note so owned be
considered outstanding, for purposes of giving any request, demand,
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authorization, direction, notice, consent or waiver under the Indenture or the
Trust Agreement, provided that, in determining whether the Indenture Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes that the Indenture Trustee
knows to be so owned shall be so disregarded. Any Notes on which payments are
made under the Note Insurance Policy shall be deemed Outstanding until the Note
Insurer has been reimbursed with respect thereto and the Note Insurer shall be
deemed the Noteholder thereof to the extent of such unreimbursed payment.
Notes: PacificAmerica Home Equity Loan Asset-Backed Notes, Series
1997-1, designated as the "Notes" in the Indenture.
Officer's Certificate: With respect to the Master Servicer, a
certificate signed by the President, a Director, a Vice President or an
Assistant Vice President, of the Master Servicer and delivered to the Indenture
Trustee. With respect to the Seller, a certificate signed by the President, a
Director, a Vice President or an Assistant Vice President, of the Seller, under
the circumstances described in, and otherwise complying with, the applicable
requirements of Section 2.03(b)(vi) of this Agreement. With respect to the
Issuer, a certificate signed by any Authorized Officer of the Issuer, under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section 10.01 of the Indenture, and delivered to the Indenture
Trustee.
Opinion of Counsel: A written opinion of counsel acceptable to
the Note Insurer, who may be in-house counsel for the Master Servicer if
acceptable to the Indenture Trustee, the Note Insurer and the Rating Agencies or
counsel for the Company, as the case may be.
Original Pre-Funded Amount: The amount deposited (from proceeds)
in the Pre-Funding Account on the Closing Date, which amount is $23,831,323.
Owner Trustee: Wilmington Trust Company and its successors and
assigns or any successor owner trustee appointed pursuant to the terms of the
Trust Agreement.
Payment Account: The account established by the Indenture Trustee
pursuant to Section 3.01 of the Indenture. The Payment Account shall be an
Eligible Account.
Payment Date: The 25th day of each month, or if such day is not a
Business Day, then the next Business Day.
Periodic Rate Cap: With respect to any Adjustable Rate Mortgage
Loan, the maximum rate, if any, by which the Mortgage Rate on such Mortgage Loan
can adjust on any Adjustment Date, as stated in the related Mortgage Note or
Mortgage.
<PAGE> 16
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Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Pre-Funded Amount: With respect to any date of determination, the
amount on deposit in the Pre-Funding Account.
Pre-Funding Account: The account established and maintained
pursuant to Section 2.4 of this Agreement.
Principal Balance: With respect to any Mortgage Loan or related
REO Property, at any given time, (i) the Principal Balance of the Mortgage Loan
as of the Cut-off Date or Subsequent Cut-off Date, as applicable, minus (ii) the
sum of (a) the principal portion of the Monthly Payments which were received
with respect to such Mortgage Loan or REO Property during each Due Period ending
prior to the most recent Payment Date, and (b) all Principal Prepayments with
respect to such Mortgage Loan or REO Property, and all Insurance Proceeds,
Liquidation Proceeds and REO Proceeds, to the extent applied by the Master
Servicer as recoveries of principal in accordance with the Servicing Agreement
with respect to such Mortgage Loan or REO Property, and (c) the principal
portion of any Realized Loss with respect thereto for any previous Payment Date.
Prospectus: The Prospectus Supplement dated December 11, 1997,
together with the attached Prospectus dated June 19, 1997, with respect to the
Notes.
Prospectus Supplement: The Prospectus Supplement dated December
11, 1997, with respect to the Notes.
Purchase Price: The meaning specified in Sections 2.1 and 2.3(a)
of this Agreement.
Related Documents: With respect to each Mortgage Loan, the
documents specified in Section 2.2 of this Agreement and any documents required
to be added to such documents pursuant to this Agreement, the Trust Agreement,
the Indenture or the Servicing Agreement.
REO Property: A Mortgaged Property that is acquired by the Issuer
by foreclosure or by deed in lieu of foreclosure.
Repurchase Event: With respect to any Mortgage Loan, either (i) a
discovery that, as of the Closing Date the related Mortgage was not a valid
first lien on the related Mortgaged Property subject only to (A) the lien of
real property taxes and assessments not yet due and payable, (B) covenants,
conditions, and restrictions, rights of way, easements and other matters of
public record as of the date of recording of such Mortgage and such other
permissible title
<PAGE> 17
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exceptions as are permitted and (C) other matters to which like properties are
commonly subject which do not materially adversely affect the value, use,
enjoyment or marketability of the related Mortgaged Property or (ii) with
respect to any Mortgage Loan as to which the Seller delivers an affidavit
certifying that the original Mortgage Note has been lost or destroyed, a
subsequent default on such Mortgage Loan if the enforcement thereof or of the
related Mortgage is materially and adversely affected by the absence of such
original Mortgage Note.
Repurchase Price: With respect to any Mortgage Loan required to
be repurchased on any date pursuant to this Agreement or permitted to be
purchased by the Master Servicer pursuant to the Servicing Agreement, an amount
equal to the sum, without duplication, of (i) 100% of the Principal Balance
thereof (without reduction for any amounts charged off) and (ii) unpaid accrued
interest at the Mortgage Rate on the outstanding principal balance thereof from
the Due Date to which interest was last paid by the Mortgagor (or with respect
to which an Advance was last made by the Master Servicer) to the first day of
the month following the month of purchase plus (iii) the amount of any
unreimbursed Servicing Advances or unreimbursed Advances made with respect to
such Mortgage Loan plus (iv) any other amounts owed to the Master Servicer or
the Subservicer pursuant to Section 3.07 of the Servicing Agreement and not
included in clause (iii) of this definition.
Required Subordination Amount: The Required Subordination Amount
determined pursuant to the Indenture, which amount may be adjusted thereunder by
mutual agreement of the Note Insurer and the Seller, under the circumstances set
forth in Section 2.3(e) of this Agreement.
Security: Any of the Certificates or Notes.
Securityholder or Holder: Any Noteholder or a Certificateholder.
Seller: PacificAmerica Money Center, Inc. a Delaware corporation,
and its successors and assigns.
Servicing Advances: All customary, reasonable and necessary "out
of pocket" costs and expenses incurred in connection with a default, delinquency
or other unanticipated event in the performance by the Master Servicer of its
servicing obligations, including, without duplication, but not limited to, the
cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
(iii) the management and liquidation of any REO Property and (iv) compliance
with the obligations under Section 3.13 of the Servicing Agreement.
Servicing Agreement: The Servicing Agreement, to be dated as of
December 1, 1997, among the Master Servicer, the Indenture Trustee and the
Issuer.
<PAGE> 18
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Servicing Officer: Any officer of the Master Servicer involved
in, or responsible for, the administration and servicing of the Mortgage Loans
whose name and specimen signature appear on a list of servicing officers
furnished to the Indenture Trustee (with a copy to the Note Insurer) by the
Master Servicer or a Subservicer, as such list may be amended from time to time.
Subsequent Cut-off Date: With respect to those Subsequent
Mortgage Loans which are sold to the Trust pursuant to a Subsequent Transfer
Instrument the date specified in the related Subsequent Transfer Instrument.
Subsequent Mortgage Loan: A Mortgage Loan sold by the Seller to
the Issuer pursuant to Section 2.3 of this Agreement, such Mortgage Loan being
identified on the Mortgage Loan Schedule attached to a Subsequent Transfer
Instrument, as set forth in such Subsequent Transfer Instrument.
Subsequent Transfer Date: With respect to each Subsequent
Transfer Instrument, the date on which the related Subsequent Mortgage Loans are
sold to the Trust.
Subsequent Transfer Instrument: Each Subsequent Transfer
Instrument dated as of a Subsequent Transfer Date executed by the Seller and the
Issuer substantially in the form of Exhibit 2 to this Agreement, by which
Subsequent Mortgage Loans are sold to the Trust.
Sub-Servicer: Advantage Mortgage Corp. USA, and its successors
and assigns.
Sub-Servicing Agreement: The Sub-Servicing Agreement, to be dated
as of December 1, 1997, between the Master Servicer and the Sub-Servicer.
Trust: The PacificAmerica Home Equity Loan Trust Series 1997-1 to
be created pursuant to the Trust Agreement.
Trust Agreement: The Trust Agreement, to be dated as of December
1, 1997, as amended and restated by the Amended and Restated Trust Agreement, to
be dated as of December 1, 1997, between the Owner Trustee and the Company.
Trust Estate: The meaning specified in the Granting Clause of the
Indenture.
UCC: The Uniform Commercial Code, as amended from time to time,
as in effect in any specified jurisdiction.
Underwriter: Merrill Lynch, Pierce, Fenner & Smith Incorporated.
<PAGE> 19
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ARTICLE II
SALE OF MORTGAGE LOANS AND RELATED PROVISIONS
Section 2.1. Sale of Initial Mortgage Loans.
The Seller hereby sells, and the Company hereby purchases on the
Closing Date, the Initial Mortgage Loans identified on the Mortgage Loan
Schedule annexed hereto as Exhibit 1. In addition, the Seller shall deposit with
the Indenture Trustee from proceeds of the issuance of the Notes on the Closing
Date (i) the Original Pre-Funded Amount for deposit in the Pre- Funding Account
and (ii) the Interest Coverage Amount for deposit in the Interest Coverage
Account. The Initial Mortgage Loans will be fixed and adjustable rate,
residential first lien mortgage loans. The Initial Mortgage Loans will have a
Principal Balance as of the close of business on the Cut-off Date, after giving
effect to any payments due on or before such date whether or not received, of
approximately $76,168,676.59. The sale of the Initial Mortgage Loans will take
place on the Closing Date, subject to and simultaneously with the deposit of the
Initial Mortgage Loans and the amounts in the Pre-Funding Account and the
Interest Coverage Account into the Trust Estate, the issuance of the Securities
and the sale of the Notes by the Issuer pursuant to the Underwriting Agreement.
The purchase price (the "Purchase Price") for the Initial Mortgage Loans to be
paid by the Company to the Seller on the Closing Date shall consist of the
following:
(i) a payment in an amount equal to 99.396% of the aggregate
Principal Balance of the Initial Mortgage Loans as of the close of
business on the Cut-off Date, which payment shall be paid to the Seller
by wire transfer in immediately available funds on the Closing Date by
or on behalf of the Company, or as otherwise agreed by the Company; and
(ii) delivery to the Seller of the Certificates issued by the
Issuer pursuant to the Trust Agreement.
Section 2.2. Obligations Regarding the Mortgage Loans. (a) In
connection with the conveyances by the Seller of the Initial Mortgage Loans and
the Subsequent Mortgage Loans, the Seller shall on behalf of and at the
direction of the Company deliver to, and deposit with, the Indenture Trustee, on
or before the Closing Date in the case of an Initial Mortgage Loan, and one
Business Day prior to the related Subsequent Transfer Date in the case of a
Subsequent Mortgage Loan, the following documents or instruments with respect to
each Mortgage Loan (the "Mortgage File"):
(i) the original Mortgage Note endorsed to the order of "Bankers
Trust Company of California, N.A., as trustee pursuant to the Indenture
dated as of
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December 1, 1997, relating to the PacificAmerica Home Equity Loan
Asset-Backed Notes, 1997-1";
(ii) the original Mortgage with evidence of recording thereon,
or, if the original Mortgage has not yet been returned from the public
recording office, a copy of the original Mortgage certified by the
Seller, its designee or the public recording office in which such
original Mortgage has been recorded;
(iii) an original assignment (which may be included in one or
more blanket assignments if permitted by applicable law) of the Mortgage
endorsed to "Bankers Trust Company of California, N.A., as trustee
pursuant to the Indenture dated as of December 1, 1997, relating to the
PacificAmerica Home Equity Loan Asset-Backed Notes, Series 1997-1", and
otherwise in recordable form;
(iv) originals of any intervening assignments of the Mortgage,
with evidence of recording thereon, or, if the original of any such
intervening assignment has not yet been returned from the public
recording office, a copy of such original intervening assignment
certified by the Seller, its designee or the public recording office in
which such original intervening assignment has been recorded;
(v) the original policy of title insurance (or a commitment for
title insurance, if the policy is being held by the title insurance
company pending recordation of the Mortgage or a binder or preliminary
title policy if the final title insurance policy is not available);
(vi) a true and correct copy of each assumption, modification,
consolidation or substitution agreement, if any, relating to the
Mortgage Loan.
If a material defect in any Mortgage File is discovered which may
materially and adversely affect the value of the related Mortgage Loan, or the
interests of the Indenture Trustee (as pledgee of the Mortgage Loans), the
Noteholders, the Certificateholders or the Note Insurer in such Mortgage Loan,
including if any document required to be delivered to the Indenture Trustee has
not been delivered (provided that a Mortgage File will not be deemed to contain
a defect for an unrecorded assignment under clause (iii) above for 180 days
following submission of the assignment if the Seller has submitted such
assignment for recording pursuant to the terms of the following paragraph), the
Seller shall cure such defect, repurchase the related Mortgage Loan at the
Repurchase Price or substitute an Eligible Substitute Mortgage Loan for the
related Mortgage Loan upon the same terms and conditions set forth in Section
3.1 hereof as to the Initial Mortgage Loans and the Subsequent Mortgage Loans
and Section 2.3(c) hereof as to the Subsequent Mortgage Loans.
<PAGE> 21
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Within 30 days after the Closing Date in the case of an Initial
Mortgage Loan or, in the case of a Subsequent Mortgage Loan, promptly after the
Subsequent Transfer Date (or after the date of transfer of any Eligible
Substitute Mortgage Loan), the Seller at its own expense shall complete and
submit for recording in the appropriate public office for real property records
each of the assignments referred to in clause (iii) above, with such assignment
completed in favor of the Indenture Trustee. While such assignment to be
recorded is being recorded, the Indenture Trustee shall retain a photocopy of
such assignment. If any assignment is lost or returned unrecorded to the
Indenture Trustee because of any defect therein, the Seller is required to
prepare a substitute assignment or cure such defect, as the case may be, and the
Seller shall cause such substitute assignment to be recorded in accordance with
this paragraph.
In instances where an original Mortgage or any original
intervening assignment of Mortgage is not, in accordance with clause (ii) or
(iv) above, delivered by the Seller to the Indenture Trustee prior to or on the
Closing Date in the case of an Initial Mortgage Loan or, in the case of a
Subsequent Mortgage Loan, prior to or on the Subsequent Transfer Date, the
Seller will deliver or cause to be delivered the originals of such documents to
the Indenture Trustee promptly upon receipt thereof.
Effective on the Closing Date, the Company hereby acknowledges
its acceptance of all right, title and interest to the Initial Mortgage Loans
and other property, existing on the Closing Date and thereafter created,
conveyed to it pursuant to Section 2.1 and this Section 2.2.
The Indenture Trustee, as assignee or transferee of the Company,
shall be entitled to all scheduled principal payments due after the Cut-off
Date, all other payments of principal due and collected after the Cut-off Date,
and all payments of interest on the Initial Mortgage Loans, minus that portion
of any such payment which is allocable to the period prior to the Cut-off Date.
No scheduled payments of principal due on or before the Cut-off Date and
collected after the Cutoff Date shall belong to the Company pursuant to the
terms of this Agreement. The Servicing Agreement shall provide that any late
payment charges collected in connection with a Mortgage Loan shall be paid to
the Master Servicer as provided therein.
(b) The parties hereto intend that the transactions set forth
herein constitute a sale by the Seller to the Company on the Closing Date of all
the Seller's right, title and interest in and to the Initial Mortgage Loans and
other property as and to the extent described above. In the event the
transactions set forth herein shall be deemed not to be a sale, the Seller
hereby grants to the Company as of the Closing Date a security interest in all
of the Seller's right, title and interest in, to and under the Initial Mortgage
Loans and such other property, to secure all of the Seller's obligations
hereunder, and this Agreement shall constitute a security agreement under
applicable law. The Seller agrees to take or cause to be taken such actions and
to execute such documents, including without limitation the filing of all
necessary UCC-1 financing statements filed in the State of Delaware and the
State of California (which shall be submitted for filing within 10 days after
the Closing Date), any continuation statements with respect thereto and any
<PAGE> 22
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amendments thereto required to reflect a change in the name or corporate
structure of the Seller or the filing of any additional UCC-1 financing
statements due to the change in the principal office of the Seller, as are
necessary to perfect and protect the interests of the Company and its assignees
in each Initial Mortgage Loan and the proceeds thereof.
Section 2.3. Conveyance of the Subsequent Mortgage Loans.
(a) Subject to the conditions set forth in paragraphs (b) and (c)
below in consideration of the Issuer's delivery on the related Subsequent
Transfer Dates of all or a portion of the balance of funds in the Pre-Funding
Account, the Seller shall on any Subsequent Transfer Date sell, transfer,
assign, set over and convey without recourse to the Issuer but subject to the
other terms and provisions of this Agreement all of the right, title and
interest of the Seller in and to (i) the Subsequent Mortgage Loans identified on
the related Mortgage Loan Schedule attached to the related Subsequent Transfer
Instrument delivered by the Seller on such Subsequent Transfer Date, (ii)
principal due and interest accruing on the Subsequent Mortgage Loans after the
related Subsequent Cut-off Date and (iii) all items with respect to such
Subsequent Mortgage Loans to be delivered pursuant to Section 2.2 above and the
other items in the related Mortgage Files; provided, however, that the Seller
reserves and retains all right, title and interest in and to principal received
and interest accruing on the Subsequent Mortgage Loans prior to the related
Subsequent Cut-off Date. The transfer to the Issuer by the Seller of the
Subsequent Mortgage Loans identified on each Mortgage Loan Schedule attached to
the related Subsequent Transfer Instrument shall be absolute and is intended by
the Issuer and the Seller to constitute and to be treated as a sale of the
Subsequent Mortgage Loans by the Seller to the Issuer. In the event the
transactions set forth herein shall be deemed not to be a sale, the Seller
hereby grants to the Issuer as of each Subsequent Transfer Date a security
interest in all of the Seller's right, title and interest in, to and under the
related Subsequent Mortgage Loans and such other property, to secure all of the
Seller's obligations hereunder, and this Agreement shall constitute a security
agreement under applicable law. The Seller agrees to take or cause to be taken
such actions and to execute such documents, including without limitation the
filing of all necessary UCC-1 financing statements filed in the State of
Delaware and the State of California (which shall be submitted for filing as of
the related Subsequent Transfer Date), any continuation statements with respect
thereto and any amendments thereto required to reflect a change in the name or
corporate structure of the Seller or the filing of any additional UCC-1
financing statements due to the change in the principal office of the Seller, as
are necessary to perfect and protect the interests of the Issuer and its
assignees in each Subsequent Mortgage Loan and the proceeds thereof.
The Issuer on each Subsequent Transfer Date shall acknowledge its
acceptance of all right, title and interest to the related Subsequent Mortgage
Loans and other property, existing on the Subsequent Transfer Date and
thereafter created, conveyed to it pursuant to this Section 2.3.
<PAGE> 23
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The Indenture Trustee, as assignee of the Issuer, shall be
entitled to all scheduled principal payments due after each Subsequent Cut-off
Date, all other payments of principal due and collected after each Subsequent
Cut-off Date, and all payments of interest on the Subsequent Mortgage Loans,
minus that portion of any such payment which is allocable to the period prior to
the related Subsequent Cut-off Date. No scheduled payments of principal due on
or before the related Subsequent Cut-off Date and collected after the related
Subsequent Cut-off Date shall belong to the Issuer pursuant to the terms of this
Agreement.
The Purchase Price paid for any Subsequent Mortgage Loan by the
Indenture Trustee, at the direction of the Issuer, from amounts on deposit in
the Pre-Funding Account shall be one-hundred percent (100%) of the aggregate
Principal Balances of the Subsequent Mortgage Loans so transferred (as
identified on the Mortgage Loan Schedule attached to the related Subsequent
Transfer Instrument provided by the Seller).
(b) The Seller shall transfer to the Issuer the Subsequent
Mortgage Loans and the other property and rights related thereto described in
Section 3 (a) above, and the Issuer shall cause to be released funds from the
related Pre-Funding Account, only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Indenture Trustee and the
Note Insurer with a timely Addition Notice, which notice shall be given
no fewer than seven Business Days prior to the related Subsequent
Transfer Date and shall designate the Subsequent Mortgage Loans to be
sold to the Issuer and the aggregate Principal Balances of such
Subsequent Mortgage Loans as of the related Subsequent Cut-off Date and
any other information reasonably requested by the Indenture Trustee or
the Note Insurer with respect to the Subsequent Mortgage Loans, provided
that such notice shall be deemed to have been given to the Note Insurer
in a timely manner with respect to the pool of proposed Substitute
Mortgage Loans as to which information was provided to the Note Insurer
on or about December 10, 1997.
(ii) the Seller shall have delivered to the Indenture Trustee a
duly executed Subsequent Transfer Instrument substantially in the form
of Exhibit 2, (A) confirming the satisfaction of each condition
precedent and representations specified in this Section 2.3(b) and
Section 2.3(c) following and in the related Subsequent Transfer
Instrument and (B) including a Subsequent Mortgage Loan Schedule listing
the Subsequent Mortgage Loans;
(iii) as of each Subsequent Transfer Date, as evidenced by
delivery of the Subsequent Transfer Instrument in the form of Exhibit 2,
the Seller shall not be insolvent nor shall it have been made insolvent
by such transfer nor shall it be aware of any pending insolvency;
<PAGE> 24
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(iv) such sale and transfer shall not result in a material
adverse tax consequence to the Issuer or, due to any action or inaction
on the part of the Seller, to the Securityholders;
(v) the Funding Period shall not have terminated;
(vi) the Note Insurer shall have informed the Seller that the
Subsequent Mortgage Loans are acceptable to the Note Insurer in its sole
discretion, and the Seller shall have delivered to the Issuer and the
Indenture Trustee, with a copy to the Note Insurer, an Officer's
Certificate confirming such approval;
(vii) the Seller shall have delivered to the Indenture Trustee,
the Rating Agencies and the Note Insurer Opinions of Counsel addressed
to the Note Insurer, the Rating Agencies and the Indenture Trustee with
respect to the transfer of the Subsequent Mortgage Loans substantially
in the form of the Opinions of Counsel delivered to the Note Insurer and
the Indenture Trustee on the Closing Date regarding certain bankruptcy,
corporate and tax matters.
(c) The obligation of the Issuer to purchase a Subsequent
Mortgage Loan on any Subsequent Transfer Date is subject to the following
conditions: (1) each such Subsequent Mortgage Loan must satisfy the
representations and warranties specified in the related Subsequent Transfer
Instrument and this Agreement; (2) the Seller will select such Subsequent
Mortgage Loans only in a manner that it reasonably believes is not adverse to
the interests of the Noteholders or the Note Insurer; (3) the Seller will
deliver to the Note Insurer and the Indenture Trustee certain Opinions of
Counsel acceptable to the Note Insurer and the Indenture Trustee with respect to
the validity of the conveyance of such Subsequent Mortgage Loans; and (4) as of
each Subsequent Cut-off Date each Subsequent Mortgage Loan will satisfy the
following criteria: such Subsequent Mortgage Loan may not be 30 or more days
contractually delinquent as of the related Subsequent Cut-off Date; (ii) the
remaining stated term to maturity of such Subsequent Mortgage Loan will not
exceed 360 months; (iii) the lien securing any such Subsequent Mortgage Loan
must be a first lien priority; (iv) such Subsequent Mortgage Loan must have an
outstanding Principal Balance of at least $20,000 and no more than $350,000 as
of the Subsequent Cut-off Date; (v) such Subsequent Mortgage Loan will be
underwritten in accordance with the criteria set forth under "Description of the
Home Equity Pool--Underwriting" in the Prospectus Supplement; (vi) such
Subsequent Mortgage Loan must have a Loan-to-Value Ratio at origination of no
more than 90.00%; and, if applicable, a Combined Loan-to-Value Ratio at
origination of no more than 90.00%; (vii) the stated maturity of such Subsequent
Mortgage Loan will be no later than 360 months; (viii) such Subsequent Mortgage
Loan shall not provide for negative amortization; (ix) such Subsequent Mortgage
Loan must have a fixed Mortgage Rate of at least 9.00% or, if an adjustable rate
loan, a Gross Margin of at least 5.50%; (x) such Subsequent Mortgage Loan must
not have a fixed Mortgage Rate if the aggregate principal balance of Fixed Rate
Mortgage Loans included in the Trust Estate following the purchase of such
Subsequent Mortgage Loan would be
<PAGE> 25
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greater than 8.0% of the aggregate principal balance of all Mortgage Loans
included in the Trust Estate following the purchase of such Subsequent Mortgage
Loans and (xi) following the purchase of such Subsequent Mortgage Loan by the
Issuer, the Mortgage Loans included in the Trust Estate must have a weighted
average interest rate, a weighted average remaining term to maturity and a
weighted average Loan-to-Value Ratio at origination, as of each respective
Subsequent Cut-off Date, which would not vary materially from the Initial
Mortgage Loans included initially in the Trust Estate. In addition, the
Indenture Trustee shall not agree to any transfer of Subsequent Mortgage Loans
without a signed certification required pursuant to Section 2.3(b)(vi).
Subsequent Mortgage Loans with characteristics varying from those set forth
above may be purchased by the Issuer and included in the Trust Estate if they
are acceptable to the Note Insurer, in its sole discretion, as evidenced by the
certification required pursuant to Section 2.3(b)(vi); provided, however, that
the addition of such Mortgage Loans will not materially affect the aggregate
characteristics of the entire Mortgage Loans. Upon the end of the Funding
Period, the Note Insurer may adjust the Required Subordination Amount pursuant
to Section 2.3(e) hereof.
(d) Within five Business Days after each Subsequent Transfer
Date, the Seller shall deliver to the Rating Agencies, the Indenture Trustee and
the Note Insurer a copy of the updated Mortgage Loan Schedule including the
Subsequent Mortgage Loans in electronic format.
(e) In the event that a mortgage loan is not acceptable to the
Note Insurer as a Subsequent Mortgage Loan pursuant to Section 2.3(b)(vi)
hereof, the Note Insurer and the Seller may mutually agree to the transfer of
such mortgage loan to the Issuer as a Subsequent Mortgage Loan, subject to any
increase in the Required Subordination Amount that may be agreed to by the
Seller and the Note Insurer pursuant to the Indenture, in which event the Seller
shall deliver to the Issuer and the Indenture Trustee, with a copy to the Note
Insurer, an Officer's Certificate confirming the agreement to the transfer of
such Subsequent Mortgage Loan and specifying the amount of such increase in the
Required Subordination Amount.
Section 2.4. Pre-Funding Account.
(a) No later than the Closing Date, the Indenture Trustee shall
establish and maintain in the name of the Indenture Trustee one or more
segregated trust accounts that are Eligible Accounts, which shall be titled
"Pre-Funding Account, Bankers Trust Company of California, N.A., as indenture
trustee for the registered holders of PacificAmerica Home Equity Loan Asset
Trust Series 1997-1" (the "Pre-Funding Account"). The Indenture Trustee shall,
promptly upon receipt, deposit in the Pre-Funding Account and retain therein the
Original Pre- Funded Amount remitted on the Closing Date to the Indenture
Trustee by the Issuer from proceeds of the sale of the Notes. Funds deposited in
the Pre-Funding Account shall be held in trust by the Indenture Trustee for the
Holders of the Notes and the Note Insurer for the uses and purposes set forth
herein. If the Indenture Trustee shall not have received an investment direction
from the Issuer, the Indenture Trustee will invest funds deposited in the
Pre-Funding Account in Eligible Investments of the kind described in clause
(vii) of the definition of Eligible Investments with a
<PAGE> 26
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maturity date no later than the second Business Day preceding each Payment Date.
The Issuer shall be the owner of the Pre-Funding Account and shall report all
items of income, deduction, gain or loss arising therefrom. All income and gain
realized from investment of funds deposited in the Pre-Funding Account shall be
transferred to the Interest Coverage Account on the Business Day immediately
preceding each Payment Date. The Issuer shall deposit in the Pre-Funding Account
the amount of any net loss incurred in respect of any such Eligible Investment
immediately upon realization of such loss without any right of reimbursement
therefor.
(ii) Amounts on deposit in the Pre-Funding Account shall be
withdrawn by the Indenture Trustee as follows:
(A) On any Subsequent Transfer Date, upon the direction of
the Issuer, the Indenture Trustee shall withdraw from the Pre-Funding
Account an amount equal to 100% of the Principal Balances of the
Subsequent Mortgage Loans transferred and assigned to the Indenture
Trustee on such Subsequent Transfer Date and pay such amount to or upon
the order of the Seller upon satisfaction of the conditions set forth in
Section 2.3 hereof with respect to such transfer and assignment; and
(B) If the Pre-Funded Amount has not been reduced to zero
during the Funding Period, on the second Business Day immediately prior
to the first Payment Date following the end of the Funding Period, the
Indenture Trustee shall deposit into the Payment Account any amounts
remaining in the Pre-Funding Account.
Section 2.5. Interest Coverage Account.
(a) No later than the Closing Date, the Indenture Trustee shall
establish and maintain on behalf of itself one or more segregated trust
accounts, which shall be Eligible Accounts, titled "Interest Coverage Account,
Bankers Trust Company of California, N.A., as indenture trustee for the
registered holders of PacificAmerica Home Equity Loan Asset Trust Series 1997-1"
(the "Interest Coverage Account"). The Indenture Trustee shall, promptly upon
receipt, deposit in the Interest Coverage Account and retain therein the
Interest Coverage Amount remitted on the Closing Date to the Indenture Trustee
by the Issuer. In addition, the Indenture Trustee shall deposit into the
Interest Coverage Account all income and gain on investments in the Pre-Funding
Account pursuant to Section 2.4. Funds deposited in the Interest Coverage
Account shall be held in trust by the Indenture Trustee for the Holders of the
Notes and the Note Insurer for the uses and purposes set forth herein. If the
Indenture Trustee shall not have received an investment direction from the
Issuer, the Indenture Trustee will invest funds deposited in the Interest
Coverage Account in Eligible Investments of the kind described in clause (vii)
of the definition of Eligible Investments with a maturity date no later than the
second Business Day preceding each Payment Date. The Seller shall deposit in the
Interest Coverage Account the amount of any net loss incurred in respect of any
such Eligible Investment immediately upon realization of such loss without any
right of reimbursement therefor. The Seller shall be the
<PAGE> 27
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owner of the Interest Coverage Account and shall report all items of income,
deduction, gain or loss arising therefrom.
(b) On each Payment Date during the Funding Period and on the
Payment Date immediately after the Funding Period, the Indenture Trustee shall
withdraw from the Interest Coverage Account and deposit in the Payment Account
the Interest Coverage Addition.
(c) On each Payment Date following the conveyance of a Subsequent
Mortgage Loan to the Indenture Trustee, funds on deposit in the Interest
Coverage Account in an amount equal to (i) the product of (a) the Pre-Funding
Amount on the related Due Date (or in the case of the first Payment Date during
the Funding Period, on the Closing Date) and (b) one-twelfth and (c) the
weighted average of the applicable Note Interest Rates for the Notes minus (ii)
in the case of any Subsequent Mortgage Loan transferred to the Issuer during the
related Due Period, the amount of any interest collected after the related
Subsequent Cut-off Date and during such related Due Period shall be deposited
into the Payment Account.
(d) Upon the earlier of (i) termination of the Trust Estate in
accordance with Section 8.01 of the Trust Agreement and (ii) the Payment Date
following the end of the Funding Period, any amount remaining on deposit in the
Interest Coverage Account shall be withdrawn by the Indenture Trustee and paid
to the Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.1. Seller Representations and Warranties. The Seller
hereby represents and warrants to the Company, the Indenture Trustee and the
Note Insurer as of the date hereof and as of the Closing Date and as of each
Subsequent Transfer Date (or if otherwise specified below, as of the date so
specified):
(a) As to the Seller:
(i) The Seller (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and (ii) is qualified and in good standing as a foreign corporation to
do business in each jurisdiction where such qualification is necessary,
except where the failure so to qualify would not have a material adverse
effect on the Seller's ability to enter into this Agreement and each
Subsequent Transfer Instrument and to consummate the transactions
contemplated hereby and thereby;
(ii) The Seller has the power and authority to make, execute,
deliver and perform its obligations under this Agreement and each
Subsequent Transfer Instrument and
<PAGE> 28
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all of the transactions contemplated under this Agreement and each
Subsequent Transfer Instrument, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement and each Subsequent Transfer Instrument;
(iii) The Seller is not required to obtain the consent of any
other Person or any consent, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity
or enforceability of this Agreement or any Subsequent Transfer
Instrument, except for such consents, approvals or authorization, or
registration or declaration, as shall have been obtained or filed, as
the case may be;
(iv) The execution and delivery of this Agreement and each
Subsequent Transfer Instrument and the performance of the transactions
contemplated hereby by the Seller will not violate any provision of any
existing law or regulation or any order or decree of any court
applicable to the Seller or any provision of the certificate of
incorporation or bylaws of the Seller, or constitute a material breach
of any mortgage, indenture, contract or other agreement to which the
Seller is a party or by which the Seller may be bound;
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the
knowledge of the Seller threatened, against the Seller or any of its
properties or with respect to this Agreement or any Subsequent Transfer
Instrument, the Notes or the Certificates which in the opinion of the
Seller has a reasonable likelihood of resulting in a material adverse
effect on the transactions contemplated by this Agreement or any
Subsequent Transfer Instrument;
(vi) This Agreement and each Subsequent Transfer Instrument
constitute the legal, valid and binding obligations of the Seller,
enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by general principles of
equity (whether considered in a proceeding at law or in equity);
(vii) This Agreement constitutes a valid transfer and assignment
to the Company of all right, title and interest of the Seller in and to
the Cut-off Date Principal Balance of the Initial Mortgage Loans, all
monies due or to become due with respect thereto, and all proceeds of
such Cut-off Date Principal Balance of the Initial Mortgage Loans and
this Agreement and the related Subsequent Transfer Instrument constitute
a valid transfer and assignment to the Issuer of all right, title and
interest of the Seller in and to the Subsequent Cut-off Date Principal
Balance of the Subsequent Mortgage Loans, all
<PAGE> 29
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monies due or to become due with respect thereto, and all proceeds of
such Subsequent Cut-off Date Principal Balance of the Subsequent
Mortgage Loans; and
(viii) The Seller is not in default with respect to any order or
decree of any court or any order or regulation of any federal, state or
governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or other) or
operations of the Seller or its properties or might have consequences
that would materially adversely affect its performance hereunder; and
(b) As to each Initial Mortgage Loan as of the Closing Date, and with
respect to each Subsequent Mortgage Loan as of the related Subsequent Transfer
Date, except as otherwise expressly stated:
(i) The information set forth on the Mortgage Loan Schedule with
respect to each Mortgage Loan is true and correct in all material
respects as of the Closing Date, each Subsequent Transfer Date and each
date of substitution of an Eligible Substitute Mortgage Loan, as
applicable, and the information regarding the Mortgage Loans on the
computer diskette or tape delivered to the Note Insurer prior to the
Closing Date, each Subsequent Transfer Date and each date of
substitution of an Eligible Substitute Mortgage Loan, is true and
accurate in all material respects and describes the same Mortgage Loans
as the Mortgage Loans on the Mortgage Loan Schedule;
(ii) The Mortgage Loans are not being transferred with any intent
to hinder, delay or defraud any creditors;
(iii) No more than 1.80% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) were secured by condominium units; no
more than 3.00% of the Initial Mortgage Loans (by Cut-off Date Principal
Balance) were secured by attached housing; and no Initial Mortgage Loans
were secured by properties in planned unit developments;
(iv) As of the Cut-off Date, the remaining term of each Mortgage
Loan is not more than 360 months and not less than 177 months;
(v) No more than 22.68% of the Initial Mortgage Loans (by Cut-off
Date Principal Balance) have been the subject of cash-out refinances;
(vi) No more than 46.29% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) have been the subject of rate and term
(no cash-out) refinances;
(vii) No fewer than 31.03% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) are purchase money loans;
<PAGE> 30
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(viii) No more than 19.95% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) are secured by Mortgaged Properties
located in the State of California, and no more than 14.19% of the
Initial Mortgage Loans (by Cut-off Date Principal Balance) are located
in any other state;
(ix) The original Principal Balances of the Initial Mortgage
Loans ranged from $19,491.78 to $420,000.00. The average outstanding
Principal Balance of the Initial Mortgage Loans (by Cut-off Date
Principal Balance) is approximately $97,903.18;
(x) At least 92.40% of the Initial Mortgage Loans (by Cut-off
Date Principal Balance) were secured by a first lien on a parcel of real
property improved by a single family detached residence; no more than
2.07% of the Initial Mortgage Loans (by Cut-off Date Principal Balance)
were secured by a first lien on a parcel of real estate improved by a
two-to four-unit single family residence; no more than 0.49% of the
Initial Mortgage Loans (by Cut-off Date Principal Balance) were secured
by a first lien on a parcel of real estate improved by manufactured
housing; and no more than 0.24% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) were secured by a first lien on a parcel
of real estate improved by a townhouse;
(xi) The earliest year of origination of any Initial Mortgage
Loan is 1997 and the latest month and year of origination of any Initial
Mortgage Loan is November, 1997.
(xii) The Mortgage Rates borne by the Initial Mortgage Loans as
of the Cutoff Date range from 7.4% per annum to 16.09% per annum and the
weighted average Mortgage Rate (by Cut-off Date Principal Balance) of
the Initial Mortgage loans was 11.02% per annum;
(xiii) No Initial Mortgage Loan in the Mortgage Pool had a
Loan-to-Value Ratio at origination in excess of 90.00%, and the weighted
average Loan-to-Value Ratio (by Cut-off Date Principal Balance) was
equal to or less than 77.40%. Approximately 35.00% of the Initial
Mortgage Loans (by Cut-off Date Principal Balance) have a Loan-to- Value
Ratio in excess of 80% and none were covered by a Primary Insurance
Policy;
(xiv) All of the Mortgage Loans are secured by first liens on the
related Mortgaged Property; 18.91% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) have secondary financing on the related
Mortgaged Property, which second lien is not included in the Trust
Estate;
(xv) To the best of the Seller's knowledge, there is no valid
offset, right of rescission, defense, claim or counterclaim of any
obligor under any Mortgage Note or Mortgage, including the obligation of
the Mortgagor to pay the unpaid principal of or interest on such
Mortgage Note, and any applicable right of rescission has expired, nor
<PAGE> 31
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will the operation of any of the terms of such 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, recoupment, counterclaim or
defense, including, without limitation, the defense of usury, and no
such right of rescission, set-off, recoupment, counterclaim or defense
has been asserted with respect thereto, and, to the best of Seller's
knowledge, no Mortgagor as of the Cut-off Date or as of the Subsequent
Cut-off Date, as applicable, of the applicable Mortgage was a debtor in
any state or federal bankruptcy or insolvency proceeding;
(xvi) To the best of the Seller's knowledge, there are no
mechanics' liens or claims for work, labor or material affecting any
Mortgaged Property which are or may be a lien prior to, or equal with,
the lien of such Mortgage, except those which are insured against by the
title insurance policy referred to in clause (xix) below;
(xvii) To the best of the Seller's knowledge, as of the Cut-off
Date in the case of an Initial Mortgage Loan or as of the related
Subsequent Cut-off Date in the case of a Subsequent Mortgage Loan, each
Mortgaged Property is free of material damage and is in good repair and
there is no proceeding pending or threatened for the total or partial
condemnation of any Mortgage Property;
(xviii) Each Mortgage is a valid and enforceable first lien on
the Mortgaged Property securing the related Mortgage Note and each
Mortgaged Property is owned by the Mortgagor in fee simple (except with
respect to common areas in the case of condominiums, PUDs and de minimis
PUDs) subject only to (1) the lien of nondelinquent current real
property taxes and assessments, (2) covenants, conditions and
restrictions, rights of way, easements and other matters of public
record as of the date of recording of such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal made in connection
with the origination of the related Mortgage Loan or referred to in the
lender's title insurance policy delivered to the originator of the
related Mortgage Loan and (3) other matters to which like properties are
commonly subject that do not materially interfere with the benefits of
the security intended to be provided by such Mortgage. Immediately prior
to the sale of such Mortgage Loan to the Company in the case of an
Initial Mortgage Loan and to the Issuer in the case of a Subsequent
Mortgage Loan pursuant to this Agreement, the Seller had full right to
sell and assign the same to the Company or the Issuer, as the case may
be. Immediately following the sale of such Mortgage Loan to the Company
and the Company's assignment and sale thereof to the Issuer in the case
of an Initial Mortgage Loan and immediately following the sale of such
Mortgage Loan to the Issuer in the case of a Subsequent Mortgage Loan,
the Issuer will have good title thereto subject to no claims or liens
other than the lien of the Indenture;
<PAGE> 32
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(xix) To the best of the Seller's knowledge, each Mortgage Loan
at origination complied in all material respects with applicable state
and federal laws, including, without limitation, usury, equal credit
opportunity, real estate settlement procedures, the Federal
Truth-In-Lending Act and disclosure laws and consummation of the
transactions contemplated hereby, including without limitation, the
receipt of interest by the owner of such Mortgage Loan or the holders of
Notes secured thereby, will not violate any such laws. Each Mortgage
Loan is being serviced in all material respects in accordance with
applicable state and federal laws, including, without limitation, the
Federal Truth-In-Lending Act and other consumer protection laws, real
estate settlement procedures, usury, equal credit opportunity and
disclosure laws;
(xx) Neither the Seller nor any prior holder of any Mortgage has
impaired, waived, altered or modified the Mortgage or Mortgage Notes in
any material respect (except that a Mortgage Loan may have been modified
by a written instrument which has been recorded, if necessary to protect
the interests of the owner of such Mortgage Loan or the Notes, and which
has been delivered to the Indenture Trustee); satisfied, canceled or
subordinated such Mortgage in whole or in part; released the applicable
Mortgaged Property in whole or in part from the lien of such Mortgage;
or executed any instrument of release, cancellation or satisfaction with
respect thereto;
(xxi) A lender's policy of title insurance (on an ALTA or CLTA
form) or binder, or other assurance of title customary in the relevant
jurisdiction insuring the first lien priority of the Mortgage Loan in an
amount at least equal to the original Principal Balance of each such
Mortgage Loan or a commitment binder or commitment to issue the same was
effective on the date of the origination of each Mortgage Loan, each
such policy is valid and remains in full force and effect, and each such
policy was issued by a title insurer qualified to do business in the
jurisdiction where the Mortgaged Property is located, which policy
insures the Seller and successor owners of indebtedness secured by the
insured Mortgage as to the first priority lien of the Mortgage as
applicable. The Seller is, and such successor owners will be, the sole
insured under such lender's title insurance policy; no claims have been
made under such mortgage title insurance policy; no prior holder of the
applicable Mortgage, including the Seller, has done, by act or omission,
anything which would impair the coverage of such mortgage title
insurance policy; and each such policy, binder or assurance contains all
applicable endorsements;
(xxii) All of the improvements which were included for the
purpose of determining the Appraised Value of the Mortgaged Property lie
wholly within the boundaries and building restriction lines of such
property and no improvements on adjoining properties encroach upon the
Mortgaged Property;
(xxiii) No improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning law or regulation,
subdivision law or ordinance,
<PAGE> 33
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except where the failure to comply would not have a material adverse
effect on the market value of the Mortgaged Property. All inspections,
licenses and certificates required to be made or issued with respect to
all occupied portions of the Mortgaged Property and, with respect to the
use and occupancy and fire underwriting certificates, have been made or
obtained from the appropriate authorities and the Mortgaged Property is
lawfully occupied under applicable law except where the failure to
comply would not have a material adverse effect on the market value of
the Mortgaged Property;
(xxiv) Each Mortgage Note and the applicable Mortgage are
genuine, and each is the legal, valid and binding obligation of the
maker thereof, enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium,
receivership and other similar laws relating to creditors' rights
generally or by equitable principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law). All
parties to the Mortgage Note and the Mortgage had legal capacity to
execute the Mortgage Note and the Mortgage and each Mortgage Note and
Mortgage has been duly and properly executed by such parties;
(xxv) The proceeds of the Mortgage Loans have been fully
disbursed, there is no requirement for future advances thereunder and
any and all requirements as to completion of any on-site or off-site
improvements and as to disbursement of any escrow funds therefor have
been complied with. All costs, fees and expenses incurred in making,
closing or recording the Mortgage Loans were paid and the Mortgagor is
not entitled to any refund of amounts paid or due under the Mortgage
Note;
(xxvi) Each Mortgage contains customary and enforceable
provisions that 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 foreclosure or if applicable, non-judicial foreclosure. Upon
default by a Mortgagor on a Mortgage Loan and foreclosure on, or
trustee's sale of, the Mortgaged Property pursuant to the proper
procedures, the holder of the Mortgage Loan will be able to deliver good
and merchantable title to the property, subject to any applicable rights
of redemption;
(xxvii) With respect to each Mortgage constituting a deed of
trust, either 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 if no duly qualified trustee has been properly
designated and so serves, the Mortgage contains satisfactory provisions
for the appointment of such trustee by the holder of the Mortgage at no
cost or expense to such holder, and no fees or expenses are or will
become payable by the Noteholders or the Note Insurer to the trustee
under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor;
<PAGE> 34
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(xxviii) There exist no deficiencies with respect to escrow
deposits and payments, if such are required, for which customary
arrangements for repayment thereof cannot be made, and no escrow
deficits or payments of other charges or payments due the Seller have
been capitalized under the Mortgage or the applicable Mortgage Note;
(xxix) The Mortgage Note is not and has not been secured by any
collateral, pledged account or other security other than real estate
securing the Mortgagor's obligations and no Mortgage Loan is secured by
more than one Mortgaged Property;
(xxx) To the best of the Seller's knowledge, as of the Closing
Date in the case of an Initial Mortgage Loan, and as of the related
Subsequent Transfer Date in the case of a Subsequent Mortgage Loan, the
improvements upon each Mortgaged Property are covered by a valid and
existing hazard insurance policy substantially acceptable to the Seller
which policy provides for fire extended coverage and such other hazards
as are customary in the area where the Mortgaged Property is located
representing coverage in an amount not less than the lesser of (A) the
maximum insurable value of the improvements securing such Mortgage Loan
and (B) the outstanding Principal Balance of the related Mortgage Loan;
if the improvement on the Mortgaged Property is a condominium unit, it
is included under the coverage afforded by a blanket policy for the
condominium project. All individual insurance policies contain a
standard mortgagee clause naming the Seller or the original holder of
the Mortgage, and its successors in interest, as mortgagee, and the
Seller has received no notice that any premiums due and payable thereon
have not been paid; the Mortgage obligates the Mortgagor thereunder to
maintain all such insurance at the Mortgagor's cost and expense, and
upon the Mortgagor's failure to do so, authorizes the holder of the
Mortgage to obtain and maintain such insurance at the Mortgagor's cost
and expense and to seek reimbursement therefor from the Mortgagor. There
has been no act or omission which would impair the coverage of any such
policy, the benefits of the endorsement provided for herein, or the
validity and binding effect of either;
(xxxi) 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 in a form meeting the
requirements of the current guidelines of the Flood Insurance
Administration is in effect with respect to such Mortgaged Property with
a generally acceptable carrier in an amount representing coverage not
less than the least of (A) the outstanding Principal Balance of the
Mortgage Loan, (B) the minimum amount required to compensate for damage
or loss on a replacement cost basis and (C) the maximum amount of flood
coverage that is available under federal law;
(xxxii) Except for the Mortgage Loans referred to in clause (xli)
as being delinquent, there is no material monetary default, breach,
violation or event of acceleration existing under the Mortgage or the
applicable Mortgage Note; and no material event
<PAGE> 35
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which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a material default, breach,
violation or event of acceleration, and neither the Seller, any of its
affiliates nor any Master Servicer or subservicer of any related
Mortgage Loan has waived any default, breach, violation or event of
acceleration; no foreclosure action is threatened or has been commenced
with respect to the Mortgage Loan;
(xxxiii) Each Mortgage Loan is being serviced by Advanta
Mortgage Corp. USA;
(xxxiv) There is no obligation on the part of the Seller or any
other party to make any payments with respect to the related Mortgage
Loan in addition to the Monthly Payments required to be made by the
applicable Mortgagor;
(xxxv) Any future advances made prior to the Cut-off Date in the
case of an Initial Mortgage Loan and as of the related Subsequent
Cut-off Date in the case of a Subsequent Mortgage Loan, with respect to
any Mortgage Loan have been consolidated with the outstanding principal
amount secured by such 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. The Mortgage Note with respect to any Mortgage Loan does not
permit or obligate the Master Servicer to make future advances to the
Mortgagor at the option of the Mortgagor;
(xxxvi) The Seller has caused or will cause to be performed any
and all acts required to preserve the rights and remedies of the Company
and the Issuer evidencing an interest in the Mortgage Loans in any
insurance policies applicable to the Mortgage Loans including, without
limitation, any necessary notifications of insurers, assignments of
policies or interests therein, and establishments of coinsured, joint
loss payee and mortgagee rights in favor of the Company or the Issuer,
as applicable;
(xxxvii) To the best of the Seller's knowledge, except as set
forth in clause (xli), there are no defaults by the Mortgagor in
complying with the terms of any Mortgage, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges
which previously became due and owing have been paid, or, if required by
the terms of the Mortgage Loan, an escrow of funds has been established
in an amount sufficient to pay for every such item which remains unpaid
and which has been assessed, but is not yet due and payable. Except for
(A) payments in the nature of escrow payments and (B) interest accruing
from the date of the Mortgage Note or date of disbursement of the
Mortgage proceeds to the day which precedes by one month the Due Date of
the first installment of principal and interest, including, without
limitation, taxes and insurance payments, the Master Servicer has not
advanced funds, or induced, solicited or knowingly
<PAGE> 36
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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;
(xxxviii) At the time of origination, each Mortgaged Property was
the subject of an appraisal which conforms to the underwriting
requirements of the related originator; and the Mortgage File contains
an appraisal of the applicable Mortgaged Property;
(xxxix) None of the Mortgage Loans are graduated payment Mortgage
Loans or growth equity Mortgage Loans;
(xl) None of the Adjustable Rate Mortgage Loans permit or
require the conversion of the related Mortgage Rate to a fixed rate;
(xli) (a) Except with respect to no more than 0.37% of the
Initial Mortgage Loans (by Cut-off Date Principal Balance) and of the
Mortgage Loans (by Principal Balance) as of the end of the Funding
Period, none of the payments of principal of or interest on or in
respect of any Initial Mortgage Loans shall be 30 days or more but less
than 60 days past due as of December 1, 1997; none of the payments of
principal or interest on or in respect of any Initial Mortgage Loans or
Subsequent Mortgage Loans shall be 60 days or more past due as of the
Cut-off Date or Subsequent Cut-off Date, as applicable; (b) except as
set forth in clause (a) above, no Mortgage Loan has been contractually
delinquent for more than one monthly installment period during the
twelve months preceding the Cut-off Date or the Subsequent Cut-off Date,
as applicable; (c) except as set forth in clause (a) above, all payments
required to be made by the Mortgagor under the terms of the Mortgage
Note have been made and credited; and (d) to the Seller's knowledge,
there was no delinquent recording, tax or assessment lien against the
property subject to any Mortgage, except where such lien was being
contested in good faith and a stay had been granted against levying on
the property;
(xlii) Upon payment of the Purchase Price for the Mortgage Loans
by the Company or the Issuer, as applicable, pursuant to this Agreement,
the Seller has transferred to the Company in the case of an Initial
Mortgage Loan and to the Issuer in the case of a Subsequent Mortgage
Loan good and marketable title to each Mortgage Note and Mortgage free
and clear of any and all liens (except as set forth in clause (xviii)
above), claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature and has or had full
right and authority, subject to no participation of or agreement with
any other person, to sell and assign the same, and following the sale of
each Mortgage Loan, the Company, or the Issuer, as applicable, will own
such Mortgage Loan free and clear of any encumbrance, equity interest,
participation interest, lien, pledge, charge, claim or security
interest;
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(xliii) The Seller acquired any right, title and interest in and
to the Mortgage Loans in good faith and without notice of any adverse
claim;
(xliv) 89.19% of the Initial Mortgage Loans are Adjustable Rate
Mortgage Loans and 10.81% of the Initial Mortgage Loans are Fixed Rate
Mortgage Loans;
(xlv) The Mortgage Note, the Mortgage, the related Assignment of
Mortgage and any other documents required to be delivered by the Seller
have been or will be delivered to the Indenture Trustee. The Indenture
Trustee is in possession of a complete, true and accurate Mortgage File
in accordance with Section 2.2 hereof. Substantially all Mortgage Loans
have monthly payments due on the first day of each month and each
Mortgage Loan had an original term to maturity of no greater than 30
years;
(xlvi) All of the Mortgage Loans contain a due-on-sale provision
except that all of the Mortgage Loans located in Minnesota that are
purchase money loans are assumable;
(xlvii) Each of the Mortgage and the Assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located;
(xlviii) The Mortgagor has not notified the Seller, and the
Seller has no knowledge of any relief requested or allowed to the
Mortgagor under the Soldiers' and Sailors' Civil Relief Act of 1940;
(xlix) To the best of the Seller's knowledge, there exists no
violation of any local, state, or federal environmental law, rule or
regulation in respect of the Mortgaged Property which violation has or
could have a material adverse effect on the market value of such
Mortgaged Property. The Seller has no knowledge of any pending action or
proceeding directly involving the related Mortgaged Property in which
compliance with any environmental law, rule or regulation is in issue;
and, to the best of the Seller's knowledge, nothing further remains to
be done to satisfy in full all requirements of each such law, rule or
regulation constituting a prerequisite to the use and employment of such
Mortgaged Property;
(l) Each Mortgage Loan conforms, and all such Mortgage Loans in
the aggregate conform, to the description thereof set forth in the
Prospectus Supplement in all material respects;;
(li) Immediately prior to the transfer to the Company or the
Issuer, as applicable, the Seller had good and marketable title thereto,
and the Seller is the sole owner of beneficial title to and holder of
the Mortgage Loan. The Seller is conveying the
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same to the Company or the Issuer, as applicable, free and clear of any
and all liens claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature and has full right
and authority to sell and assign the same pursuant to this Agreement,
except for liens which will be released simultaneously with such
conveyance;
(lii) For each Mortgage Loan, the related Mortgage File contains
a true, accurate and correct copy of each of the documents and
instruments required to be included therein;
(liii) The Seller, in its capacity as Master Servicer, meets all
applicable requirements under the Servicing Agreement;
(liv) No instrument of release or waiver has been executed in
connection with the Mortgage Loans, and no Mortgagor has been released,
in whole or in part from its obligations in connection with a Mortgage
Loan except in connection with an assumption agreement which has been
delivered to the Indenture Trustee;
(lv) On the basis of a representation by the Mortgagor at the
time of origination of the Mortgage Loans, at least 97.10% of the
Initial Mortgage Loans (by Cutoff Date Principal Balance) will be
secured by Mortgages on owner-occupied primary residence properties;
(lvi) None of the Initial Mortgage Loans (by Cut-off Date
Principal Balance) provide for a balloon payment;
(lvii) No Mortgage Loan was originated based on an appraisal of
the related Mortgaged Property made prior to completion of construction
of the improvements thereon;
(lviii) None of the Mortgage Loans is a "buy down" mortgage loan;
(lix) As of the Cut-Off Date, the Mortgage Rate of each
Adjustable Rate Initial Mortgage Loan was not more than 16.09% per annum
and not less than 7.40% per annum, and the weighted average Mortgage
Rate of the Adjustable Rate Initial Mortgage Loans was approximately
11.00% per annum;
(lx) No selection procedure reasonably believed by the Seller to
be adverse to the interests of the Noteholders or the Note Insurer was
utilized in selecting the Mortgage Loans;
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(lxi) The terms of the Mortgage Note related to each Adjustable
Rate Mortgage Loan provide that, following an initial period of six
months, two years, three years or five years following the month in
which such Mortgage Loan was originated and semiannually or annually
thereafter (each such date, an "Adjustment Date"), the Mortgage Rate on
such Mortgage Loan will be adjusted to equal the sum of (a) the related
Index and (b) a fixed percentage amount specified in the related
Mortgage Note (each, a "Gross Margin"), provided, however, that the
Mortgage Rate generally will not increase or decrease by the related
Periodic Rate Cap, and will not increase above a specified maximum
Mortgage Rate over the life of the Adjustable Rate Mortgage Loan (the
"Maximum Mortgage Rate") or decrease below a specified minimum Mortgage
Rate over the life of the Adjustable Rate Mortgage Loan (the "Minimum
Mortgage Rate").
(lxii) No material misrepresentation, fraud or similar occurrence
with respect to a Mortgage Loan has taken place on the part of the
Seller, its affiliates or employees or to the best of the Seller's
knowledge, any other person involved in the origination of the Mortgage
Loan or in the application for any insurance in relation to such
Mortgage Loan.
(lxiii) Each Mortgage Loan was originated by a mortgagee approved
by the Secretary of Housing and Urban Development pursuant to Sections
203 and 211 of the Act, a savings and loan association, a savings bank,
a commercial bank, credit union, insurance company or similar
institution which is supervised and examined by a federal or state
authority.
(lxiv) With respect to each Mortgage Loan secured by manufactured
housing, such manufactured housing is permanently affixed to a
foundation and constitutes real estate under applicable state law.
(lxv) No Mortgage Loans are date of payment or simple interest
loans.
(lxvi) The sale, transfer, assignment and conveyance of Mortgage
Loans by the Seller pursuant to this Agreement is not subject to and
will not result in any tax, fee or governmental charge payable by the
Company, the Issuer or the Indenture Trustee to any federal, state or
local government ("Transfer Taxes") other than Transfer Taxes which have
or will be paid by the Seller as due.
Upon discovery by the Seller or upon notice from the Company, the
Note Insurer, the Issuer, the Owner Trustee or the Indenture Trustee, as
applicable, of a breach of any representation or warranty in subsection (a) of
this Section which materially and adversely affects the interests of the
Noteholders or the Certificateholders or the Note Insurer, as applicable, the
Seller shall, within 45 days of its discovery or its receipt of notice of such
breach, either (i) cure such breach in all material respects or (ii) to the
extent that such breach is with respect to a Mortgage Loan or a Related
Document, either (A) repurchase such Mortgage Loan from the Issuer
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at the Repurchase Price, or (B) substitute one or more Eligible Substitute
Mortgage Loans for such Mortgage Loan, in each case in the manner and subject to
the conditions and limitations set forth below.
Upon discovery by the Seller or upon notice from the Company, the
Note Insurer, the Issuer, the Owner Trustee or the Indenture Trustee, as
applicable, of a breach of any representation or warranty in this subsection (b)
with respect to any Mortgage Loan or upon the occurrence of a Repurchase Event,
which materially and adversely affects the value of the related Mortgage Loan or
the interests of any Noteholders, Certificateholders or the Note Insurer, as
applicable, or of the Company or the Issuer in such Mortgage Loan (notice of
which shall be given to the Company and the Issuer by the Seller, with a copy to
the Note Insurer, if it discovers the same) the Seller shall, within 90 days
after the earlier of its discovery or receipt of notice thereof, either cure
such breach or Repurchase Event in all material respects or either (i)
repurchase such Mortgage Loan from the Issuer at the Repurchase Price, or (ii)
substitute one or more Eligible Substitute Mortgage Loans for such Mortgage
Loan, in each case in the manner and subject to the conditions set forth below.
The Repurchase Price for any such Mortgage Loan repurchased by the Seller shall
be deposited or caused to be deposited by the Master Servicer in the Collection
Account maintained by it pursuant to Section 3.06 of the Servicing Agreement.
With respect to the representations and warranties contained herein that the
Seller has made to the best of its knowledge, if it is discovered that the
substance of any such representation and warranty was inaccurate as of the date
such representation and warranty was made or deemed to be made, and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan or the interest therein of the Company or the Note Insurer, then
notwithstanding the lack of knowledge by the Seller with respect to the
substance of such representation and warranty being inaccurate at the time the
representation and warranty was made, the Seller shall take such action
described in this paragraph in respect of such Mortgage Loan.
In the event that the Seller elects to substitute an Eligible
Substitute Mortgage Loan or Loans for a Deleted Mortgage Loan pursuant to this
Section 3.1, the Seller shall deliver to the Indenture Trustee on behalf of the
Issuer, with respect to such Eligible Substitute Mortgage Loan or Loans, the
original Mortgage Note and all other documents and agreements as are required by
Section 2.2 hereof, with the Mortgage Note endorsed as required by such Section
2.2 hereof. No substitution will be made in any calendar month after the
Determination Date for such month. Monthly Payments due with respect to Eligible
Substitute Mortgage Loans in the month of substitution shall not be part of the
Trust Estate and will be retained by the Master Servicer and remitted by the
Master Servicer to the Seller on the next succeeding Payment Date. For the month
of substitution, distributions to the Payment Account pursuant to the Servicing
Agreement will include the Monthly Payment due on a Deleted Mortgage Loan for
such month and thereafter the Seller shall be entitled to retain all amounts
received in respect of such Deleted Mortgage Loan. The Seller shall cause the
Master Servicer to amend the Mortgage Loan Schedule to reflect the removal of
such Deleted Mortgage Loan and the substitution of the Eligible Substitute
Mortgage Loan or Loans and to deliver the amended Mortgage Loan Schedule to the
Indenture Trustee.
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Upon such substitution, the Eligible Substitute Mortgage Loan or Loans shall be
subject to the terms of this Agreement and the Servicing Agreement in all
respects, the Seller shall be deemed to have made the representations and
warranties with respect to the Eligible Substitute Mortgage Loan contained
herein set forth in this Section 3.1(b), to the extent set forth in the
definition of "Eligible Substitute Mortgage Loan", as of the date of
substitution, and the Seller shall be obligated to repurchase or substitute for
any Eligible Substitute Mortgage Loan as to which a Repurchase Event has
occurred as provided herein. In connection with the substitution of one or more
Eligible Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Master Servicer will determine the amount (such amount, a "Substitution
Adjustment Amount"), if any, by which the aggregate principal balance of all
such Eligible Substitute Mortgage Loans as of the date of substitution is less
than the aggregate principal balance of all such Deleted Mortgage Loans (after
application of the principal portion of the Monthly Payments due in the month of
substitution that are to be distributed to the Payment Account in the month of
substitution). The Seller shall pay the amount of such shortfall to the Master
Servicer for deposit into the Collection Account on the day of substitution,
without any reimbursement therefor.
Upon receipt by the Issuer and the Indenture Trustee of written
notification, signed by a Servicing Officer, of the deposit of such Repurchase
Price or of such substitution of an Eligible Substitute Mortgage Loan and
deposit of any applicable Substitution Adjustment Amount as provided above, the
Indenture Trustee on behalf of the Issuer and the Note Insurer shall release to
the Seller the related Mortgage File for the Mortgage Loan being repurchased or
substituted for and the Issuer shall execute and deliver such instruments of
transfer or assignment prepared by the Master Servicer, in each case without
recourse, as shall be necessary to vest in the Seller or its designee such
Mortgage Loan released pursuant hereto and thereafter such Mortgage Loan shall
not be an asset of the Issuer.
It is understood and agreed that the obligation of the Seller to
cure any breach with respect to or to repurchase or substitute for, any Mortgage
Loan as to which such a breach has occurred and is continuing shall, except to
the extent provided in Section 5.1 of this Agreement, constitute the sole remedy
respecting such breach available to the Company, the Issuer, the
Certificateholders (or the Owner Trustee on behalf of the Certificateholders)
and the Noteholders (or the Indenture Trustee on behalf of the Noteholders)
against the Seller.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1 shall survive delivery of the
respective Mortgage Files to the Issuer.
Section 3.2 Company Representations and Warranties. The Company
hereby represents and warrants to the Seller, the Indenture Trustee and the Note
Insurer as of the date hereof and as of the Closing Date that:
(a) The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority to own its
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properties and to conduct its business as such properties are currently owned
and such business is presently conducted.
(b) The Company is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its property
or the conduct of its business shall require such qualifications and in which
the failure to so qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of the Company and the
ability of the Company to perform under this Agreement.
(c) The Company has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Company has full power
and authority to purchase the property to be purchased from the Seller and the
Company has duly authorized such purchase by all necessary corporate action; and
the execution, delivery and performance of this Agreement have been duly
authorized by the Company by all necessary corporate action.
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of incorporation
or bylaws of the Company, or any indenture, agreement or other instrument to
which the Company is a party or by which it is bound; nor result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement or other instrument (other than pursuant to the
Basic Documents); nor violate any law or, to the best of the Company's
knowledge, any order, rule or regulation applicable to the Company of any court
or of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Company or its
properties.
ARTICLE IV
SELLER'S COVENANTS
Section 4.1. Covenants of the Seller. The Seller hereby covenants
as of the date hereof and as of the Closing Date and as of each Subsequent
Transfer Date that, except for the transfer hereunder, on and after the Closing
Date, the Seller will not sell, pledge, assign or transfer to any other Person,
or grant, create, incur or assume any Lien on, any Initial Mortgage Loan or
Subsequent Mortgage Loan, whether now existing or hereafter created, or any
interest therein; the Seller will notify the Issuer, on its own behalf and as
assignee of the Company, the Indenture Trustee and the Note Insurer of the
existence of any such Lien on any Mortgage Loan immediately upon discovery
thereof; and the Seller will defend the right, title and interest of the Issuer,
on its own behalf and as assignee of the Company, the Indenture Trustee and the
Note
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Insurer in, to and under the Mortgage Loans, whether now existing or hereafter
created, against all claims of third parties claiming through or under the
Seller.
In the event that the Indenture Trustee receives actual notice of any
Transfer Taxes arising out of the transfer, assignment and conveyance of the
Mortgage Loans, on written demand by the Indenture Trustee, or upon the Seller's
otherwise being given notice thereof by the Indenture Trustee, the Seller shall
pay any and all such Transfer Taxes (it being understood that the Holders of the
Notes, the Indenture Trustee and the Note Insurer shall have no obligation to
pay such Transfer Taxes).
Section 4.2. Payment of Expenses.
(a) The Seller will pay on the Closing Date all expenses incident
to the performance of its obligations under this Agreement, including (i) the
preparation, printing and any filing of the preliminary prospectus, Prospectus
Supplement and Prospectus (including any schedules or exhibits and any document
incorporated therein by reference) originally filed and of each amendment or
supplement thereto, (ii) the preparation, printing and delivery to the
Underwriter of this Agreement, the Indenture and such other documents as may be
required in connection with the offering, purchase, sale and delivery of the
Notes, (iii) the preparation, issuance and delivery of the certificates for the
Notes to the Underwriter, including any charges of DTC in connection therewith;
(iv) the fees and disbursements of the Company's accountants and other advisors,
(v) the qualification of the Notes under securities laws in accordance with the
provisions of Section 3(f) of the Underwriting Agreement, including filing fees
and the reasonable fees and disbursements of counsel for the Underwriter in
connection therewith, (vi) the printing and delivery to the Underwriter of
copies of each preliminary prospectus and of the Prospectus and any amendments
or supplements thereto, (vi) the fees and expenses of the Indenture Trustee and
Owner Trustee, including the fees and disbursements of counsel for the Indenture
Trustee and Owner Trustee in connection with the Indenture, the Trust Agreement
and the Notes and (vii) any fees payable in connection with the rating of the
Notes.
(b) If the Underwriting Agreement is terminated by the
Underwriter in accordance with the provisions of Section 5 or Section 9(a)(i)
thereof, the Seller shall reimburse the Underwriter for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriter.
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ARTICLE V
CONDITIONS TO INITIAL MORTGAGE LOAN PURCHASE
Section 5.1. Conditions of Company's Obligations. The Company's
obligation to purchase the Initial Mortgage Loans which it accepts for purchase
hereunder shall be subject to each of the following conditions:
(i) the Mortgage File for each Initial Mortgage Loan
shall have been delivered in accordance with this
Agreement and the Trust Agreement;
(ii) the representations and warranties set forth in
Section 3.1(b) hereof with respect to each Initial
Mortgage Loan shall be true as of the Closing Date;
(iii) The Underwriter or its affiliates shall have had an
opportunity to perform a due diligence review of
each Mortgage Loan and shall have arranged for
reappraisals of value with respect to each Mortgage
Loan if desired by the Underwriter; and
(iv) The Seller shall have provided to the Underwriter
or its affiliates such other documents which are
then required to have been delivered under this
Agreement or which are reasonably requested by the
Underwriter or its affiliates, which other
documents may include UCC financing statements, a
favorable opinion or opinions of counsel with
respect to matters which are reasonably requested
by the Underwriter, and/or an Officers' Certificate
from the Underwriter.
ARTICLE VI
LIMITATION ON LIABILITY OF THE SELLER
WITH RESPECT TO THE MORTGAGE LOANS
Section 6.1. Limitation on Liability of the Seller. None of the
directors, officers, employees or agents of the Seller shall be under any
liability to the Company, it being expressly understood that all such liability
is expressly waived and released as a condition of, and as consideration for,
the execution of this Agreement. Except as and to the extent expressly provided
in the Basic Documents, the Seller shall not be under any liability to the
Issuer, the Owner Trust, the Owner Trustee, the Indenture Trustee, the
Noteholders or the Certificateholders.
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The Seller and any director, officer, employee or agent of the Seller may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder.
ARTICLE VII
TERMINATION
Section 7.1. Termination.
(a) Except as provided in Section 7.1(b) hereof, the respective
obligations and responsibilities of the Seller, the Company, the Issuer and the
Indenture Trustee created hereby shall terminate, except for the Seller's
indemnity obligations as provided herein, upon the earlier of (i) the
termination of the Issuer pursuant to the terms of the Trust Agreement and (ii)
the purchase by the Seller from the Issuer of all, but not part, of the Mortgage
Loans and all property acquired, in respect of any Mortgage Loan pursuant to
Section 7.2 hereof.
(b) The Company may terminate this Agreement, by notice to the
Seller, at any time at or prior to the Closing Date:
(i) if the Underwriting Agreement is terminated by the
Underwriter pursuant to the terms of the Underwriting Agreement or if
there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Prospectus,
any material adverse change in the financial condition, earnings,
business affairs or business prospects of the Seller, whether or not
arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the
financial markets in the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of
which is such as to make it, in the judgment of the Underwriter,
impracticable to market the Notes or to enforce contracts for the sale
of the Notes, or
(iii) if trading in any securities of the Seller has been
suspended or limited by the Commission or the New York Stock Exchange,
or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the NASDAQ National Market System has been
suspended or limited, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental
authority,
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(iv) if a banking moratorium has been declared by either Federal
or New York authorities,
(v) a change in control of the Seller shall have occurred other
than in connection with and as a result of the issuance and sale by the
Seller or registered, publicly offered common stock;
(vi) there is (A) a material breach by the Seller of any
representation and warranty contained in this Agreement or the
Underwriting Agreement other than a representation or warranty relating
to particular Mortgage Loans, and the Underwriter has reason to believe
in good faith either that such breach is not curable within 2 (two) days
or that such breach may not have been cured in all material respects at
the expiration of 2 (two) days following discovery thereof by the Seller
or (B) a failure by the Seller to make any payment payable by it under
this Agreement or (C) any other failure by the Seller to observe and
perform in any material respect its material covenants, agreements and
obligations with the Company, including without limitation those
contained in this Agreement, and the Company has reason to believe in
good faith that such failure may not have been cured in all material
respects at the expiration of 2 (two) days following discovery thereof
by the Seller, or
(vii) the Seller fails to provide written notification to the
Underwriter of any change in its loan origination, acquisition or
appraisal guidelines or practices, or the Seller, without the prior
consent of the Underwriter (which shall not be unreasonably withheld),
amends in any material respect its loan origination, acquisition or
appraisal guidelines or practices.
If this Agreement is terminated pursuant to this Section 7.1(b),
such termination shall be without liability of any party to any other party
except as provided in Section 4.2 hereof.
Section 7.2. Optional Redemption. (a) Subject to the provisions
of clause (b) below, the Seller has the right to purchase the Mortgage Loans in
whole, but not in part, on any Payment Date on or after the Payment Date on
which the aggregate Principal Balance of the Mortgage Loans as of any Payment
Date is less than or equal to 10% of the sum of the aggregate Principal Balance
of the Mortgage Loans as of the Cut-off Date and the Original Pre-Funded Amount.
The purchase price will be equal to 100% of the aggregate outstanding Note
Principal Balance and accrued and unpaid interest thereon (including any
Carry-Forward Amount) at the Note Interest Rate through the date on which the
Notes are redeemed in full together with all amounts due and owing, including
any such amounts due and owing in connection with such redemption, to the Note
Insurer, the Master Servicer and the Indenture Trustee. If such right is
exercised by the Seller, the Seller shall deposit the amount calculated above
with the Indenture Trustee pursuant to Section 5.02 of the Indenture and, upon
the receipt of such deposit, the
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Indenture Trustee shall release to the Seller pursuant to Section 8.07 of the
Indenture the Mortgage Files pertaining to the Mortgage Loans being purchased.
(b) The Seller, at its expense, shall prepare and deliver to the
Indenture Trustee for execution, at the time the Mortgage Loans are to be
released to the Seller, appropriate documents assigning each such Mortgage Loan
from the Indenture Trustee or the Trust to the Seller or the appropriate party.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. Amendment. This Agreement may be amended from time
to time by the Seller, the Indenture Trustee and the Company by written
agreement signed by the Seller, the Indenture Trustee and the Company, with the
prior written consent of the Note Insurer.
Section 8.2. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
Section 8.3. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail, postage prepaid, addressed
as follows:
(i) if to the Seller:
PacificAmerica Money Center, Inc.
21031 Ventura Boulevard
Woodland Hills, CA 91364-2210
Attention:
or, such other address as may hereafter be furnished to the Company in writing
by the Seller.
(ii) if to the Company:
Merrill Lynch Mortgage Investors, Inc.
North Tower
World Financial Center
New York, NY 10281-1201
Attention: Legal Department
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or such other address as may hereafter be furnished to the Seller in writing by
the Company.
(iii) if to the Issuer:
PacificAmerica Home Equity Loan Trust Series 1997-1
c/o PacificAmerica Money Center, Inc.
21031 Ventura Boulevard
Woodland Hills, CA 91364-2210
Attention:
or such other address as may hereafter be furnished to the Seller in writing by
the Issuer.
(iv) if to the Indenture Trustee:
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92614
Attention: PacificAmerica Series 1997-1
or such other address as may hereafter be furnished to the Seller in writing by
the Indenture Trustee.
(v) if to the Note Insurer:
Financial Security Assurance
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: PacificAmerica Home Equity Loan
Asset-Backed Notes Series 1997-1
Telecopy No.: (212) 339-3518, (212) 359-3529
Confirmation: (212) 826-0100
Section 8.4. Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
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Section 8.5. Relationship of Parties. Nothing herein contained
shall be deemed or construed to create a partnership or joint venture between
the parties hereto, and the services of the Seller shall be rendered as an
independent contractor and not as agent for the Company.
Section 8.6. Counterparts. This Agreement may be executed in two
or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an original
and such counterparts together shall constitute one and the same agreement.
Section 8.7. Further Agreements. The Company, the Indenture
Trustee and the Seller each agree to execute and deliver to the other such
additional documents, instruments or agreements as may be necessary or
appropriate to effectuate the purposes of this Agreement. Each of the Company
and the Seller agrees to use its best reasonable efforts to take all actions
necessary to be taken by it to cause the Notes to be issued and rated in the
highest rating category by each of the Rating Agencies, and each party will
cooperate with the other in connection therewith.
Section 8.8. Intention of the Parties. It is the intention of the
parties that (i) the Company will be purchasing on the Closing Date, and the
Seller will be selling on the Closing Date, the Initial Mortgage Loans, rather
than the Company providing a loan to the Seller secured by the Initial Mortgage
Loans on the Closing Date, and (ii) the Issuer will be purchasing on each
Subsequent Transfer Date, and the Seller will be selling on each Subsequent
Transfer Date, the related Subsequent Mortgage Loans, rather than the Issuer
providing a loan to the Seller secured by the related Subsequent Mortgage Loans
on each Subsequent Transfer Date. Accordingly, the parties hereto each intend to
treat this transaction with respect to the transaction for federal income tax
purposes as (i) a sale by the Seller, and a purchase by the Company, of the
Initial Mortgage Loans on the Closing Date and (ii) a sale by the Seller, and a
purchase by the Issuer, of the related Subsequent Mortgage Loans on each
Subsequent Transfer Date. The Company and the Issuer will have the right to
review the Mortgage Loans and the Related Documents to determine the
characteristics of the Mortgage Loans which will affect the federal income tax
consequences of owning the Mortgage Loans and the Seller will cooperate with all
reasonable requests made by the Company and/or the Issuer in the course of such
review.
Section 8.9. Successors and Assigns; Assignment of Purchase
Agreement. This Agreement shall bind and inure to the benefit of and be
enforceable by the Seller, the Company, the Issuer, the Indenture Trustee and
the Note Insurer and their respective successors and assigns. The obligations of
the Seller under this Agreement cannot be assigned or delegated to a third party
without the consent of the Company and the Note Insurer, which consent shall be
at the Company's and the Note Insurer's sole discretion. The parties hereto
acknowledge that (i) the Company is acquiring the Initial Mortgage Loans for the
purpose of selling them to the Issuer, who will in turn pledge the Initial
Mortgage Loans to the Indenture Trustee for the benefit of the Noteholders and
the Note Insurer and (ii) the Issuer is acquiring the Subsequent Mortgage Loans
for the purpose of pledging the Subsequent Mortgage Loans to the Indenture
Trustee for the
<PAGE> 50
-47-
benefit of the Noteholders and the Note Insurer. As an inducement to the Company
and the Issuer to purchase the Mortgage Loans, the Seller acknowledges and
consents to (i) the assignment by the Company to the Issuer of all of the
Company's rights against the Seller pursuant to this Agreement and to the
enforcement or exercise of any right or remedy against the Seller pursuant to
this Agreement and (ii) the assignment by the Issuer to the Indenture Trustee
and the Note Insurer of such rights and to the enforcement or exercise of any
right or remedy against the Seller pursuant to this Agreement. Such enforcement
of a right or remedy by the Issuer, the Owner Trustee, the Indenture Trustee or
the Note Insurer, as applicable, shall have the same force and effect as if the
right or remedy had been enforced or exercised by the Company or the Issuer
directly.
Section 8.10. Survival. The representations and warranties made
herein by the Seller and the provisions of Article V hereof shall survive the
purchase of the Mortgage Loans hereunder.
Section 8.11. Third Party Beneficiary. The Note Insurer shall be
a third party beneficiary hereof and shall be entitled to enforce the provisions
of this Agreement as if a party hereto.
<PAGE> 51
-48-
IN WITNESS WHEREOF, the Seller and the Company have caused their
names to be signed to this Home Equity Loan Purchase Agreement by their
respective officers thereunto duly authorized as of the day and year first above
written.
MERRILL LYNCH MORTGAGE INVESTORS, INC.
as Company
By:
---------------------------------
Name:
Title:
PACIFICAMERICA MONEY CENTER, INC.
as Seller
By:
---------------------------------
Name:
Title:
PACIFICAMERICA HOME EQUITY LOAN
TRUST SERIES 1997-1
as Issuer
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely in
its capacity as Owner Trustee
By:
---------------------------------
Authorized Signatory
BANKERS TRUST COMPANY OF CALIFORNIA,
N.A.
as Indenture Trustee
By:
---------------------------------
Name:
Title:
<PAGE> 52
EXHIBIT 1
MORTGAGE LOAN SCHEDULE
<PAGE> 53
EXHIBIT 2
SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Subsequent Transfer Instrument (the
"Instrument"), dated ___________, 199_, between PacificAmerica Money Center,
Inc. as seller (the "Seller"), and PacificAmerica Home Equity Loan Trust Series
1997-1 as issuer (the "Issuer"), and pursuant to the Home Equity Loan Purchase
Agreement, dated as of December 11, 1997, among the Seller, the Issuer, Merrill
Lynch Mortgage Investors, Inc. and Bankers Trust Company of California, N.A.
(the "Home Equity Loan Purchase Agreement"), the Seller and the Issuer agree to
the sale by the Seller and the purchase by the Issuer of the Mortgage Loans
listed on the attached Subsequent Mortgage Loan Schedule (the "Subsequent
Mortgage Loans").
Capitalized terms used and not defined herein have their
respective meanings as set forth in Section 1.1 of the Home Equity Loan Purchase
Agreement, which meanings are incorporated by reference herein. All other
capitalized terms used herein shall have the meanings specified herein.
Section 1. Conveyance of Subsequent Mortgage Loans.
(a) The Seller does hereby sell, transfer, assign, set over and
convey to the Issuer, without recourse, all of its right, title and interest in
and to the Subsequent Mortgage Loans, and including all principal received and
interest accruing on the Subsequent Mortgage Loans on and after the related
Subsequent Cut-off Date, and all items with respect to the Subsequent Mortgage
Loans to be delivered pursuant to Section 2.2 of the Home Equity Loan Purchase
Agreement; provided, however, that the Seller reserves and retains all right,
title and interest in and to principal received and interest accruing on the
Subsequent Mortgage Loans prior to the related Subsequent Cut-off Date. The
Seller, contemporaneously with the delivery of this Agreement, has delivered or
caused to be delivered to the Indenture Trustee each item set forth in Section
2.2 of the Home Equity Loan Purchase Agreement. The transfer to the Issuer by
the Seller of the Subsequent Mortgage Loans identified on the Subsequent
Mortgage Loan Schedule shall be absolute and is intended by the Seller, the
Issuer, the Indenture Trustee and the Noteholders to constitute and to be
treated as a sale by the Seller.
The parties hereto intend that the transactions set forth herein
constitute a sale by the Seller to the Issuer on the Subsequent Transfer Date of
all the Seller's right, title and interest in and to the Subsequent Mortgage
Loans, and other property as and to the extent described above. In the event the
transactions set forth herein shall be deemed not to be a sale, the Seller
hereby grants to the Issuer as of the Subsequent Transfer Date a security
interest in all of the Seller's right, title and interest in, to and under the
Subsequent Mortgage Loans, and such other property, to secure all of the
Issuer's obligations hereunder, and this Agreement shall constitute a security
agreement under applicable law. The Seller agrees to take or cause to be taken
such actions and to execute such documents, including without limitation the
filing of all necessary UCC-1
<PAGE> 54
financing statements filed in the State of Delaware and the State of California
(which shall be submitted for filing as of the Subsequent Transfer Date), any
continuation statements with respect thereto and any amendments thereto required
to reflect a change in the name or corporate structure of the Seller or the
filing of any additional UCC-1 financing statements due to the change in the
principal office of the Seller, as are necessary to perfect and protect the
Issuer's interests in each Subsequent Mortgage Loan and the proceeds thereof.
(b) The expenses and costs relating to the delivery of the
Subsequent Mortgage Loans, this Instrument and the Home Equity Loan Purchase
Agreement shall be borne by the Seller.
(c) Additional terms of the sale are set forth on Attachment A
hereto.
Section 2. Representations and Warranties; Conditions Precedent.
(a) The Seller hereby affirms the representations and warranties
set forth in Section 3.1 of the Home Equity Loan Purchase Agreement that relate
to the Seller or the Subsequent Mortgage Loans as of the date hereof. The Seller
hereby confirms that each of the conditions set forth in Section 2.3(b) of the
Home Equity Loan Purchase Agreement are satisfied as of the date hereof and
further represents and warrants that each Subsequent Mortgage Loan complies with
the requirements of this Instrument and Section 2.3(c) of the Home Equity Loan
Purchase Agreement.
(b) The Seller is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the execution and
delivery of this Instrument or by the performance of its obligations hereunder
nor is it aware of any pending insolvency; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Seller prior to the date
hereof;
(c) All terms and conditions of the Home Equity Loan Purchase
Agreement are hereby ratified and confirmed; provided, however, that in the
event of any conflict the provisions of this Instrument shall control over the
conflicting provisions of the Home Equity Loan Purchase Agreement.
Section 3. Recordation of Instrument.
To the extent permitted by applicable law, this Instrument, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the properties
subject to the Mortgages are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Master
Servicer at the Noteholders' expense on direction of the Majority Noteholders or
the Note Insurer, but only when accompanied by an Opinion of Counsel to the
effect that such recordation materially and
<PAGE> 55
beneficially affects the interests of the Noteholders or the Note Insurer or is
necessary for the administration or servicing of the Mortgage Loans.
Section 4. Governing Law.
This Instrument shall be construed in accordance with the laws of
the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws, without giving
effect to principles of conflicts of law.
Section 5. Counterparts.
This Instrument may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same instrument.
Section 6. Successors and Assigns.
This Instrument shall inure to the benefit of and be binding upon
the Seller and the Issuer and their respective successors and assigns.
PACIFICAMERICA MONEY CENTER, INC.
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
PACIFICAMERICA HOME EQUITY LOAN
TRUST SERIES 1997-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
By:
----------------------------------
Authorized Signatory
<PAGE> 56
Attachments
A. Additional terms of the sale.
B. Schedule of Subsequent Mortgage Loans.
C. Opinions of Seller's counsel (bankruptcy, corporate).
D. Seller's Officer's Certificate.
E. Seller's Officer's Certificate (confirmation of Note Insurer
approval).
<PAGE> 57
PACIFICAMERICA HOME EQUITY LOAN
ASSET-BACKED-
NOTES, SERIES 1997-1
ATTACHMENT A TO SUBSEQUENT TRANSFER INSTRUMENT
Series 1997-1
________, 199__
<TABLE>
<S> <C> <C> <C>
A.
1. Subsequent Cut-off Date:
2. Pricing Date:
3. Subsequent Transfer Date:
4. Aggregate Principal Balance of the Subsequent Mortgage Loans as
of the Subsequent Cut-off Date:
5. Purchase Price: 100.00%
B.
As to all the Subsequent Mortgage Loans the subject of this Instrument:
1. Longest stated term to maturity: _____ months
2. Minimum Mortgage Rate: _____ %
3. Maximum Mortgage Rate: _____ %
4. WAC of all Mortgage Loans: _____ %
5. WAM of all Mortgage Loans: _____ %
6. Largest Principal Balance: $________
7. Non-owner occupied Mortgaged Properties: _____ %
8. California zip code concentration: _____ %
9. Condominiums: _____ %
10. Single-family: _____ %
11. Weighted average term since origination:
12. [January/February/March 1998] first payment date: _____ %
</TABLE>
<PAGE> 1
EXHIBIT 10.2
[EXECUTION COPY]
================================================================================
MASTER ASSIGNMENT AGREEMENT
BETWEEN
PACIFICAMERICA MONEY CENTER, INC.
AND
MERRILL LYNCH MORTGAGE CAPITAL INC.
DATED AS OF DECEMBER 18, 1997
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
SECTION 1. DEFINITIONS; CONSTRUCTION................................................. 1
(a) Definitions........................................................ 1
(b) Accounting Terms and Determinations................................ 4
(c) Other Definitional Terms........................................... 4
SECTION 2. GRANT OF SECURITY INTEREST; DELIVERY OF
COLLATERAL; LOANS DISCRETIONARY.................................... 5
(a) Grant of Security Interest......................................... 5
(b) Delivery of Instruments of Transfer................................ 5
(c) Funding of Loans................................................... 5
(d) MLMCI's Duty of Care............................................... 6
SECTION 3. EARNINGS ON COLLATERAL.................................................... 6
SECTION 4. CONFIRMATION STATEMENT.................................................... 7
SECTION 5. MARGIN DETERMINATIONS..................................................... 7
(a) Margin Requirement................................................. 7
(b) Current Margin..................................................... 7
(c) Supplemental Collateral............................................ 7
(d) Release of Supplemental Collateral................................. 7
SECTION 6. RELEASE AND SUBSTITUTION OF COLLATERAL.................................... 8
SECTION 7. CONDITIONS TO THE LOANS................................................... 8
(a) Conditions to the Effective Date................................... 8
(b) Conditions Precedent to all Loans and Substitutions................ 9
(c) Assignment of Subordinated Interest................................ 11
SECTION 8. REPRESENTATIONS AND WARRANTIES............................................ 11
(a) Due Incorporation.................................................. 11
(b) Authorization...................................................... 11
(c) No Conflict........................................................ 12
(d) Approvals, etc..................................................... 12
(e) Good Title......................................................... 12
(f) Tax Liens.......................................................... 12
(g) Financial Statements............................................... 12
(h) No Litigation...................................................... 13
(i) Disclosure......................................................... 13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(j) Permits, Licenses, Approvals, Consents, etc........................ 13
(k) The Investment Company Act......................................... 13
SECTION 9. AFFIRMATIVE COVENANTS..................................................... 13
(a) Financial Statements and Other Information......................... 13
(b) Existence, Conduct of Business, etc................................ 14
(c) Taxes.............................................................. 15
(d) Laws............................................................... 15
(e) Name and Locations................................................. 15
(f) Records............................................................ 15
(g) Pay Obligations.................................................... 15
(h) Notices............................................................ 15
(i) Covenant Compliance Certificate.................................... 16
(j) Reports............................................................ 16
SECTION 10. NEGATIVE COVENANTS........................................................ 16
(a) Liens.............................................................. 16
(b) Mergers, Sales, Dissolution, etc................................... 16
(c) Corporate Changes.................................................. 16
(d) Credit Covenants................................................... 16
(e) Use of Proceeds.................................................... 17
(f) Further Covenants.................................................. 17
SECTION 11. EVENTS OF DEFAULT......................................................... 17
(a) Nonperformance..................................................... 17
(b) Termination of Interest............................................ 17
(c) Act of Insolvency.................................................. 17
(d) Material Adverse Change............................................ 18
(e) Default Under Other Contracts...................................... 18
(f) Merger or Consolidation............................................ 18
(g) Anticipated Insolvency............................................. 18
(h) Final Judgment..................................................... 18
(i) Breach of Representation........................................... 18
(j) Breach of Covenant................................................. 18
SECTION 12. REMEDIES.................................................................. 18
(a) Action Regarding Collateral........................................ 18
(b) Deficiency......................................................... 19
(c) Private Sale....................................................... 19
(d) Application of Proceeds............................................ 20
(e) Default Rate of Interest........................................... 20
(f) Attorney-in-Fact................................................... 20
(g) Payments on Collateral to Assignor................................. 20
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
(h) Cross-Collateralization; Right of Set-Off.......................... 21
SECTION 13. MATURITY DATE; INTEREST PAYMENT DATES;
REPAYMENT OF PRINCIPAL............................................. 21
(a) Payment on Maturity Date........................................... 21
(b) Extension of Maturity Date......................................... 21
(c) Interest Payment................................................... 21
(d) Payment of Principal............................................... 21
(e) Event of Default................................................... 22
SECTION 14. PAYMENT OF TAX LIABILITY.................................................. 22
SECTION 15. GENERAL PROVISIONS........................................................ 22
(a) No Waiver.......................................................... 22
(b) Governing Law; Severability........................................ 22
(c) Construction....................................................... 22
(d) Assignment......................................................... 22
(e) Notices, Payments, Deliveries...................................... 23
(f) Termination........................................................ 24
(g) Aggregate Amount of Loans; Disbursement of Funds................... 25
(h) Expenses........................................................... 25
(i) MLMCI's Right to Pledge............................................ 25
(j) Indemnification.................................................... 26
(k) Further Assurances................................................. 26
(l) Remedies Cumulative................................................ 26
(m) Litigation......................................................... 26
EXHIBIT A ................................................................................A-1
LOAN SCHEDULE..............................................................................A-4
EXHIBIT B ................................................................................B-1
EXHIBIT C ................................................................................C-1
EXHIBIT D ................................................................................D-1
EXHIBIT E ................................................................................E-1
</TABLE>
iii
<PAGE> 5
THIS AGREEMENT is made as of the 18th day of December, 1997 by and
between PACIFICAMERICA MONEY CENTER, INC. ("Assignor") and MERRILL LYNCH
MORTGAGE CAPITAL INC. ("MLMCI"). By executing this Agreement, Assignor and
MLMCI agree to be bound by the terms of this Agreement.
WITNESSETH
WHEREAS the parties elect to enter into this Agreement and, at the
request of Assignor, MLMCI may from time to time at its option agree to make one
or more loans (in each instance, a "Loan") to Assignor, which Loans shall be
limited in aggregate outstanding principal amount to the Maximum Loan Amount (as
hereinafter defined), said Loans to be evidenced by Assignor's Note (the "Note")
of even date herewith, maturing on December 18, 1998 (the "Maturity Date"), a
form of which is attached hereto as Exhibit A; and
WHEREAS, in order to induce MLMCI to make Loans from time to time to
it, Assignor has agreed to assign and pledge to MLMCI and grant to MLMCI a lien
upon and a security interest in the Collateral (as hereinafter defined) for the
purpose of securing its obligations under the Note;
NOW, THEREFORE, in consideration of the foregoing and of the
covenants and agreements hereinafter set forth, Assignor and MLMCI agree as
follows:
SECTION 1. DEFINITIONS; CONSTRUCTION
(a) Definitions. As used herein, the following terms shall have the
meaning herein specified (to be equally applicable to be the singular and plural
forms of the terms defined):
"Act of Insolvency" shall mean the occurrence of any action described in
Section 11(c) hereof.
"Agreement" shall mean this Master Assignment Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Approvals" shall have the meaning set forth in Section 8(d) hereof.
"Assignor" shall have the meaning set forth in the preamble hereof.
"Book Net Worth" shall refer to the equity of Assignor determined in
accordance with GAAP.
"Business Day" shall mean any day excluding Saturday, Sunday, or any
other day on which banks in the City of New York or the State of California are
authorized or required by law to close or a day on which trading by and between
banks in Dollars in the London interbank market is not conducted.
<PAGE> 6
"Closing Date" shall mean with respect to each Loan, the settlement date
set forth in the Confirmation Statement applicable to such Loan.
"Collateral" shall have the meaning ascribed thereto in Section 2 hereof
and shall include any Supplemental Collateral.
"Confirmation Statement" shall have the meaning set forth in Section 4
hereof.
"Covenant Compliance Certificate" shall refer to a certificate of
Assignor and Pacific Thrift to the effect that Assignor and Pacific Thrift are
in compliance, as of the date of such certificate, with the covenants set forth
in Section 10(d) of this Agreement.
"Current Margin" shall have the meaning ascribed to it in Section 5(b)
hereof.
"Default" shall mean any condition, act or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning specified in Section 12(e) hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States
of America.
"Effective Date" shall mean the date that all of the conditions set
forth in Section 7 hereof have been met.
"Event of Default" shall have the meaning set forth in Section 11
hereof.
"GAAP" shall have the meaning specified in Section 1(b) hereof.
"Governmental Authority" shall mean any nation, government, or State, or
any political subdivision of any of them, or any court, entity or agency
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Lien" shall mean any interest in property, or a claim by, a Person
other than the owner of such property, whether such interest is based on the
common law, statute or contract, and including, but not limited to, a security
interest, security title or lien arising from a security agreement, mortgage,
deed of trust, deed to secure debt, encumbrance, pledge, conditional sale,
financing statement or trust receipt or a lease, consignment or bailment for
security purposes.
"Loan" shall have the meaning set forth in the preamble hereof.
"Loan Documents" shall mean and include this Agreement, the Note, each
Confirmation Statement and all instruments and documents now or hereafter
executed and/or delivered pursuant hereto or thereto or in connection herewith
or therewith.
2
<PAGE> 7
"Margin Stock" shall have the meaning provided in Regulation G of the
Board of Governors of the Federal Reserve System.
"Market Value" shall mean the fair market value of any Pledged MBS to
the earliest permissible call date thereof as determined in accordance with
MLMCI's valuation model for such type of Pledged ABS, provided that such fair
market value or valuation model may be modified by MLMCI in its discretion using
reasonable business judgement and taking into consideration relevant market
conditions at the time of such determination. The pricing assumptions used by
MLMCI in determining the fair market value of any Pledged ABS will be set forth
in the related Confirmation Statement.
"Master Repurchase Agreement" shall mean the master repurchase agreement
for mortgage loans, dated October 31, 1997, between PacificAmerica Securities,
Inc. and MLMCI, as the same shall be amended from time to time.
"Material Adverse Change" shall mean a material adverse change in (a)
the business, operations, properties, prospects or condition (financial or
otherwise) of Assignor, as applicable, or (b) the ability of Assignor to perform
its obligations hereunder and under the other Loan Documents.
"Maturity Date" shall mean with respect to each Loan, the earlier of (a)
December 18, 1998, subject to extension under Section 13(b), and (b) the
Termination Date.
"Maximum Loan Amount" shall mean, as of any date of determination, the
lesser of (i) $20,000,000 and (ii) one-third of the average amount outstanding
under the Master Repurchase Agreement for the three-month period immediately
preceding such date of determination.
"MBS Issuance Agreements" shall mean the agreements pursuant to which
the related Pledged MBS has been issued, including any agreements relating to
the payment or distribution of amounts to the holder of such Pledged MBS, which
agreements have been previously approved by MLMCI or its affiliate.
"MLMCI" shall have the meaning set forth in the preamble hereof.
"Note" shall have the meaning set forth in the preamble hereof.
"Obligations" shall mean the principal of and all interest on the Loans,
all fees, expenses, reimbursements (including, without limitation the reasonable
fees and expenses of attorneys), taxes and indemnities and other amounts payable
by Assignor under the Loan Documents and under any other documents or
instruments executed and delivered by Assignor in connection therewith to MLMCI
pursuant to Section 2 hereof or any of their respective successors or assigns,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising and however arising.
3
<PAGE> 8
"Outstanding Loans" shall mean on the date of determination thereof the
aggregate unpaid principal amount of each Loan made hereunder.
"Pacific Thrift" shall mean Pacific Thrift and Loan Company.
"Person" shall mean any individual, partnership, firm, corporation,
association, joint venture, trust or other entity, or any government or
political subdivision or agency, department or instrumentality thereof.
"Pledged MBS" shall mean any residual interest mortgage pass through
security (i) issued in connection with a securitization involving Assignor and
in which MLMCI or an affiliate of MLMCI has acted as the lead or co-lead
underwriter or placement agent and (ii) pledged by Assignor and accepted by
MLMCI in connection with a Loan hereunder.
"Proceeds" shall have the meaning assigned to it under the UCC and, in
any event, shall include, but not be limited to, (i) any and all Proceeds of any
insurance, indemnity, warranty or guaranty payable to Assignor from time to time
with respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to Assignor from time to time in connection
with any reacquisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any Governmental Authority and any sale,
transfer or other disposition of all or any part of the Collateral, and (iv) any
and all other amounts from time to time paid or payable under or in connection
with any of the Collateral.
"Substitute Collateral" shall have the meaning set forth in Section 6
hereof.
"Supplemental Collateral" shall mean collateral acceptable to MLMCI in
accordance with the provisions of Section 5(c) hereof.
"Termination Date" shall have the meaning ascribed to it in Section
15(f) hereof.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of New York or in any other applicable jurisdiction.
(b) Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms shall be construed herein, all accounting
determinations hereunder shall be made, all financial statements required to be
delivered hereunder shall be prepared and all financial records shall be
maintained in accordance with generally accepted accounting principles ("GAAP")
applied on a basis consistent with the financial statements referred to in
Sections 9(a)(i) and 9(a)(ii) hereof.
(c) Other Definitional Terms. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, schedule, exhibit and like
4
<PAGE> 9
references are to this Agreement unless otherwise specified. Any defined term
which relates to a document shall include within its definition any amendments,
modifications, renewals, restatements, extensions, supplements or substitutions
which may have been heretofore or may be hereafter executed in accordance with
the terms hereof.
SECTION 2. GRANT OF SECURITY INTEREST; DELIVERY OF
COLLATERAL; LOANS DISCRETIONARY
(a) Grant of Security Interest. Assignor hereby grants, pledges,
assigns, transfers and delivers to MLMCI with respect to each Loan on the
Closing Date, and grants to MLMCI a lien upon and continuing security interest
in all of Assignor's right, title and interest in, to and under all of the
following whether now owned or existing, or at any time hereafter acquired or
arising, by Assignor or in which Assignor now has or at any time in the future
may acquire any right, title or interest (all of which being hereinafter
collectively called the "Collateral"): (i) the Pledged MBS described in the
Confirmation Statement delivered pursuant to Section 4 relating to a Loan, (ii)
any Supplemental Collateral that may be granted to MLMCI pursuant to Section
5(c) hereof (provided, however, that any representations, warranties or
covenants contained herein, and the grant of a lien and security interest with
respect to any Supplemental Collateral, shall be effective as to any
Supplemental Collateral (or any Proceeds, distributions or other amounts
realized in respect of such Supplemental Collateral) only upon the delivery of
such Supplemental Collateral to MLMCI pursuant to such Section 5(c) hereof),
(iii) all Proceeds, distributions and other amounts realized in respect of any
of the foregoing, as security for the due and punctual payment by Assignor of
the Note and any amounts that may become payable thereunder or hereunder and
(iv) with respect to any Loan, all books and records of Assignor pertaining to
any of the foregoing.
(b) Delivery of Instruments of Transfer. Assignor shall, with respect to
each Loan, deliver to MLMCI the Collateral endorsed in the name of MLMCI or its
nominee or with properly endorsed instruments of transfer (including, without
limitation, any necessary assignments, corporate resolutions and opinions of
legal counsel) that will enable MLMCI to cause such Collateral to be so
registered without further action on the part of Assignor and such instruments
of transfer to the appropriate transfer agent.
(c) Funding of Loans. (i) MLMCI Discretion. MLMCI shall not be required
to make any Loans hereunder and any Loan hereunder shall be made by MLMCI in its
sole discretion.
(ii) Loan Advances. If MLMCI determines to make any Loan hereunder,
then in accordance with the related Confirmation Statement, MLMCI shall advance
such Loan to Assignor in a principal amount of up to 75% (such percentage or
such lesser percentage as provided in Section 7(c)(iv) hereof, the "Advance
Percentage") of the sum of (i) the Market Value of the Collateral described in
such Confirmation Statement and (ii) accrued and unpaid interest on such amount.
Each Loan advance hereunder shall be recorded as such by MLMCI and be
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evidenced by the "Loan Schedule" attached to the Note, and any repayments
of each such Loan shall be recorded as such by MLMCI and be evidenced by such
"Loan Schedule"; provided, however, that the failure of such recordation by
MLMCI shall not affect the rights of the parties hereunder with respect to such
Loan.
(iii) Interest Rate. Each Loan shall bear interest, as calculated on
a monthly basis, on the unpaid principal amount thereof from and including the
related Closing Date to but excluding the related Maturity Date at a per annum
rate (based upon a 360-day year and the actual number of days elapsed) equal to
two hundred and fifty (250) basis points in excess of the prevailing London
Interbank Offered Rate for one-month United States Dollar deposits as set forth
on page 8695 of Knight-Ridder as of 8:00 a.m. New York City time on the last
Business Day of the month preceding the month in which such interest is
currently accruing ("LIBOR").
(d) MLMCI's Duty of Care. Except as herein provided in this Section
2(d), MLMCI's sole duty with respect to the Collateral shall be to use
reasonable care in the safekeeping, custody, use, operation and preservation of
the Collateral in its possession or control. MLMCI shall incur no liability to
Assignor for any act of government, act of God, or other destruction in whole or
in part or negligence or wrongful act of custodians or agents selected by and
supervised by MLMCI with reasonable care, or MLMCI's failure to provide adequate
protection or insurance for the Collateral. MLMCI shall have no obligation to
take any action to preserve any rights in any of the Collateral against prior
parties, and Assignor hereby agrees to take such action. Assignor shall defend
the Collateral against all such claims and demands of all persons, at all times,
as are adverse to MLMCI. MLMCI shall have no obligation to realize upon any
Collateral, except through proper application of any distributions with respect
to the Collateral made directly to MLMCI or its agent(s). So long as MLMCI shall
act in a commercially reasonable manner, Assignor hereby waives the defense of
impairment of the Collateral.
SECTION 3. EARNINGS ON COLLATERAL
All payments and distributions, whether in cash or in kind, made on or
with respect to the Collateral shall, so long as an Event of Default as defined
in Section 11 hereof shall not have occurred and be continuing, be paid to
Assignor directly by the applicable paying agent by wire transfer in immediately
available funds pursuant to wiring instructions delivered in writing by Assignor
to MLMCI, and upon receipt by Assignor such payments and distributions shall be
released from the lien and security interest granted to MLMCI hereunder. Subject
to compliance with the MBS Issuance Agreements, MLMCI may, in its sole
discretion after the occurrence and during the continuation of an Event of
Default, cause all such payments and distributions to be paid, delivered or
transferred directly to MLMCI.
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SECTION 4. CONFIRMATION STATEMENT
MLMCI shall, with respect to each Loan, deliver a confirmation statement
substantially in the form attached hereto as Exhibit B (in each case, the
"Confirmation Statement") to Assignor confirming the agreement between Assignor
and MLMCI as to the specific terms of the Loan. Each such Confirmation Statement
shall constitute a binding agreement between Assignor and MLMCI, and this
Agreement is hereby incorporated in each such Confirmation Statement and made a
part thereof as if it were set out in full in each such Confirmation Statement.
Each such Confirmation Statement will be binding upon the parties hereto unless
written notice of objection is given by the objecting party to the other party
within two (2) Business Days after the objecting party's receipt of such
Confirmation Statement.
SECTION 5. MARGIN DETERMINATIONS
(a) Margin Requirement. A margin requirement (the "Margin Requirement")
expressed as a percentage shall be established by MLMCI with respect to each
Loan on the related Closing Date and shall be set forth in the related
Confirmation Statement. The Margin Requirement for each Pledged MBS shall be
equal to 25% of the related Market Value.
(b) Current Margin. MLMCI may, in its reasonable discretion, from time
to time calculate the "Current Margin" with respect to any Loan, which shall
equal the amount by which (i) 100% exceeds (ii) a fraction (expressed as a
percentage) (A) the numerator of which is the then outstanding principal amount
of such Loan together with accrued and unpaid interest thereon to the date of
determination and (B) the denominator of which shall be the then current Market
Value of the related Collateral (including any Supplemental Collateral delivered
pursuant to this Agreement) then held by MLMCI.
(c) Supplemental Collateral. If MLMCI shall at any time determine with
respect to a Loan that the Current Margin is less than the related Margin
Requirement, MLMCI may in its discretion notify Assignor of such fact, and
Assignor shall, on the day of such notice, if such notice is received prior to
1:00 p.m. New York City time, and on the Business Day next succeeding the day of
such notice, if such notice is received after 1:00 p.m. New York City time,
deliver to MLMCI cash or Supplemental Collateral acceptable to MLMCI in its sole
reasonable judgment as Collateral hereunder, which cash shall be applied to
reduce the principal balance of the related Loan and which Supplemental
Collateral shall, in the aggregate, equal an amount such that, after giving
effect to the application of such cash and the delivery of such Supplemental
Collateral, the Current Margin for such Loan will be at least equal to the
related Margin Requirement. Delivery of Supplemental Collateral pursuant to this
Section 5(c) shall be in such manner as is acceptable to, and under such
additional conditions as may be required by, MLMCI in its sole reasonable
judgment.
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(d) Release of Supplemental Collateral. If at any time the Current
Margin for a Loan exceeds the Margin Requirement for such Loan and provided that
Assignor shall not have failed to satisfy the requirements of Section 5(c) with
respect to any notice thereunder given by MLMCI relating to any Loan, Assignor
may, upon notice to MLMCI, demand that MLMCI redeliver all or any portion of the
Supplemental Collateral, provided, however, that after giving effect to such
redelivery, the Current Margin would not be less than the Margin Requirement,
and MLMCI shall make good delivery of such Supplemental Collateral, in a manner
equivalent to the manner in which such Supplemental Collateral was delivered to
MLMCI, no later than the Business Day following receipt by MLMCI of such notice.
In such connection, MLMCI shall execute such other documents and take such other
actions as Assignor may reasonably request in order to evidence and give effect
to the release of such Supplemental Collateral from the security interest
granted by this Agreement, within three (3) Business Days following Assignor's
request.
SECTION 6. RELEASE AND SUBSTITUTION OF COLLATERAL
(a) Assignor may obtain the release from MLMCI of the security interest
in and lien on all or any part of the Collateral at any time, and from time to
time, by paying to MLMCI as a repayment the amount of the Loan outstanding with
respect to such Collateral to be so released; provided, however, that the date
of any such repayment must be acceptable to MLMCI. Any release of the security
interest in and lien on all or any part of the Collateral as a result of a
repayment or a substitution pursuant to this Section shall be evidenced by the
execution and delivery by MLMCI of appropriate documentation to evidence such
release.
(b) MLMCI shall allow Assignor, in Assignor's sole discretion, to
provide collateral acceptable to MLMCI, in MLMCI's sole reasonable discretion,
to be substituted for existing Collateral of equal market value ("Substitute
Collateral"). All certificates or instruments representing such Substitute
Collateral shall be accompanied by duly executed instruments of transfer or
assignments in blank, all in form and substance reasonably satisfactory to
MLMCI.
SECTION 7. CONDITIONS TO THE LOANS
(a) Conditions to the Effective Date. The obligation of MLMCI to enter
into this Agreement is subject to the satisfaction by Assignor of the following
conditions on the Effective Date:
(i) Loan Documents. MLMCI shall have received the following
documents each in form and substance satisfactory to MLMCI and its counsel:
a. this Agreement, executed and delivered on behalf of
Assignor by a duly authorized officer of Assignor,
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b. the Note, executed and delivered on behalf of Assignor
by a duly authorized officer of Assignor,
c. the related Collateral, if delivery of the Collateral is
required in order to perfect MLMCI's security interest
in such Collateral, and
d. the Master Repurchase Agreement, executed and delivered
on behalf of an affiliate of Assignor by a duly
authorized officer of such affiliate of Assignor.
(ii) Proceedings of Assignor. MLMCI shall have received a copy of
the resolutions in form and substance satisfactory to MLMCI and its counsel, of
Assignor authorizing (i) the execution, delivery and performance of the Loan
Documents and the other documents to be executed and/or delivered by it pursuant
hereto or thereto or in connection herewith or therewith, (ii) the borrowings
contemplated hereunder and (iii) the granting by it of the security interest
contemplated hereby, certified by a duly authorized officer of Assignor as of
the Effective Date, which certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate.
(iii) Corporate Documents. MLMCI shall have received true and
complete copies of the Certificate of Incorporation and By-Laws of Assignor
(including any and all amendments, supplements and modifications thereto)
certified to such effect by a duly authorized officer of Assignor as of the
Effective Date.
(iv) No Violation. The consummation of the transactions contemplated
hereby and by the other Loan Documents shall not contravene, violate or conflict
with, nor involve MLMCI in a violation of, any requirement of law.
(v) Permits, Licenses, Approvals, Consent, etc. MLMCI shall have
received a certificate of a duly authorized officer of Assignor certifying that
all material permits, licenses, approvals and consents required in connection
with the execution, delivery and performance by Assignor and the validity and
enforceability against Assignor of this Agreement and the other Loan Documents
have been obtained and such permits, licenses, approvals and consents are in
full force and effect and have not been amended, modified, revoked or rescinded.
(vi) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory in form and substance to MLMCI
and its counsel.
(b) Conditions Precedent to all Loans and Substitutions. The making of
any Loan or the permitting of any substitution of Substitute Collateral by MLMCI
hereunder is, except as otherwise provided in this Section 7, subject to
compliance by Assignor with the following conditions precedent and the other
terms and conditions hereof and, the giving of any notice by
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Assignor with respect to a Loan pursuant to Section 4 and the acceptance of the
Proceeds of any Loan by Assignor and the substitution of any Substitute
Collateral shall be deemed certification by Assignor that the following
conditions shall have been met:
(i) Representations and Warranties. Each of the representations and
warranties made by Assignor herein and in the other Loan Documents are true and
correct on and as of the Closing Date, before and after giving effect to the
Loan (and the application of the Proceeds therefrom) or the substitution, as
though made on and as of such date.
(ii) No Default. Before and after giving effect to such Loan (and
the application of Proceeds therefrom) or such substitution, no Default or Event
of Default shall have occurred and be continuing on and as of the Closing Date.
(iii) Financing Statements. The separate financing statement,
instrument or other document, if required by MLMCI to be recorded and/or filed
with respect to the subject Loan or substitution, shall have been so recorded
and/or filed.
(iv) Good Standing Certificates. On or prior to the initial
Closing Date hereunder and from time to time thereafter as MLMCI may reasonably
request (but not more frequently than quarterly), MLMCI shall have received
original certificates, in form and substance satisfactory to MLMCI and its
counsel, from the Secretary of State or other appropriate authority of such
jurisdiction, evidencing the good standing of Assignor in the state of its
incorporation and in each other jurisdiction where the ownership of its property
or the conduct of its business requires such qualification.
(v) Legal Opinion of Counsel to Assignor. On or prior to the
initial Closing Date hereunder and on each date after the initial Closing Date
that a security interest in Collateral is granted to MLMCI hereunder Assignor
shall cause to be delivered to MLMCI an opinion of counsel to Assignor (which
counsel may be internal counsel for Assignor and shall be satisfactory to
MLMCI), in substantially the form attached hereto as Exhibit C or such other
form as MLMCI and Assignor may mutually agree.
(vi) Recordings and Filings. All material instruments and documents
(including, without limitation, financing statements and continuation
statements) required to be filed hereunder in order to create in favor of MLMCI
a perfected security interest in the Collateral hereunder shall have been
properly filed in each office in each relevant jurisdiction and copies of such
instruments and documents, stamped to indicate such filing, shall have been
delivered to MLMCI.
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(c) Assignment of Subordinated Interest.
(i) If Assignor has previously assigned a portion of the cash flow
payable to Assignor under the Pledged MBS to Pacific Thrift, Pacific Thrift has
acknowledged to MLMCI in writing that (1) the interest acquired by Pacific
Thrift from Assignor is totally subordinated to the rights of MLMCI to such
Pledged MBS, (2) Pacific Thrift will not contest the timing, procedure or sales
price of any sale of such Pledged MBS by MLMCI and (3) MLMCI shall have no duty
to Pacific Thrift with respect to the Pledged MBS or any proceeds thereof except
for its obligations as a secured creditor to a debtor under the Uniform
Commercial Code.
(ii) Assignor shall not pledge or otherwise hypothecate its
remaining interest in any Pledged MBS to any Person other than Pacific Thrift
without the prior written consent of MLMCI.
(iii) In the case of any Pledged MBS with respect to which Assignor
has previously assigned a portion of the cash flow to Pacific Thrift as
permitted hereby, the Advance Percentage shall be 65% and the Margin Requirement
shall be 35%.
SECTION 8. REPRESENTATIONS AND WARRANTIES
In order to induce MLMCI to enter into this Agreement and to make the
Loans hereunder, Assignor hereby represents and warrants to MLMCI, and shall on
and as of the Closing Date of each Loan and each date on which Substitute
Collateral is substituted, be deemed to represent and warrant to MLMCI, that:
(a) Due Incorporation. Assignor has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation and is duly qualified and in good standing in each other
jurisdiction where the conduct of its business or the ownership, lease or
operation of its property requires such qualification.
(b) Authorization. Assignor has full power and authority to execute and
deliver the Loan Documents and to perform its obligations hereunder and
thereunder; the Loan Documents have each been duly authorized by all necessary
action and neither requires any additional approval of any directors or officers
other than that which has already been obtained, each has been duly executed and
delivered by Assignor and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization or similar laws of general
applicability relating to or affecting creditors' rights, to the assumption that
enforcement will be undertaken in a commercially reasonable manner and to
general principles of equity and equitable remedies, regardless of whether
enforcement is considered in a proceeding in equity or at law.
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(c) No Conflict. Neither the execution and delivery nor the performance
by Assignor of this Agreement or the Note will conflict with the governing
instruments of Assignor or conflict with, result in a breach of or constitute a
default or require any consent under any instrument or agreement to which
Assignor is a party or by which Assignor may be bound, or any law, order or
regulation applicable to Assignor of any court, governmental agency, authority
or body having jurisdiction over Assignor and do not and will not result in or
require the creation of any lien, security interest or other charge or
encumbrance (other than pursuant hereto) upon or with respect to any of
Assignor's properties.
(d) Approvals, etc. Neither the execution and delivery nor the
performance by Assignor of this Agreement requires any authorization, approval,
consent, license, exemption (other than any self-executing exemption), filing,
registration or the taking of any other action in respect of any federal or
state authority (collectively, the "Approvals") except where the failure to
comply with such requirement would not adversely affect the delivery, execution
or performance by Assignor of this Agreement or cause a Material Adverse Change
with respect to Assignor.
(e) Good Title. (i) Assignor is the owner of the Collateral and such
Collateral is free and clear of all security interests, liens, charges,
encumbrances and rights of others, except for the lien and security interest
created hereby, and on the related Closing Date, MLMCI has a first priority lien
on and security interest in the Collateral (including all Proceeds,
distributions and other amounts realized in respect thereof) in favor of MLMCI,
subject to no prior security interest, lien, charge, encumbrance or rights of
others, and, MLMCI having taken possession of the Collateral endorsed in the
name of MLMCI or its nominee or delivered with such instruments of transfer as
provided in Section 2(b) hereof, no further action, including any filing or
recordation of any document, is currently required in order to establish and
perfect the liens on and security interests in the Collateral in favor of MLMCI
against any third parties in any jurisdiction.
(ii) Assignor's chief executive office and the place where its books and
records concerning the Collateral are kept is set forth on Exhibit D hereto.
Each location of Assignor where any of the Collateral is located is set forth on
Exhibit D.
(f) Tax Liens. There are no delinquent federal, state, city, county or
other taxes relating to Assignor, the Collateral or any arrangement pursuant to
which the Collateral is issued that might, in the reasonable judgment of MLMCI,
materially adversely affect any of the Collateral or cause a Material Adverse
Change in Assignor, and all such delinquent tax liabilities have been satisfied
except those that are being contested by Assignor in good faith and with respect
to which payment has been stayed by a court of competent jurisdiction.
(g) Financial Statements. Since the date of the most recent financial
statement delivered by Assignor to MLMCI, there has been no Material Adverse
Change in Assignor. Assignor shall provide MLMCI with such financial statements
and other information as is contemplated in Section 9(a) hereof.
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(h) No Litigation. There are no actions, suits, investigations, or other
proceedings pending, or, to the best knowledge of Assignor, after due inquiry,
threatened, against or affecting Assignor by or before any court, arbitrator, or
Governmental Authority which challenge any of the transactions contemplated
under this Agreement or any other Loan Document or could result in a Material
Adverse Change in Assignor and there are no preliminary or permanent injunctions
or orders by any court or other Governmental Authority pending affecting this
Agreement or any other Loan Document or any of the transactions contemplated
hereby or thereby.
(i) Disclosure. No certificate, statement, report or other document
furnished and no representation or warranty made or to be furnished or made to
MLMCI by or on behalf of Assignor in or in connection with this Agreement or any
transaction contemplated hereby, or in connection with any other Loan Document
or any transaction contemplated thereby, or in connection with any Pledged MBS,
at the time furnished, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary in
order to make the statements contained therein not misleading.
(j) Permits, Licenses, Approvals, Consents, etc. Assignor has obtained
any and all material permits, licenses, approvals and consents of any
Governmental Authority or other Person as may be required in connection with the
execution, delivery and performance by and the validity and enforceability
against Assignor of this Agreement and the other Loan Documents and the
consummation of the transactions contemplated hereby or thereby (all such
permits, licenses, approvals and consents, if any, are in full force and effect
and have not been amended, modified, revoked or rescinded).
(k) The Investment Company Act. Assignor is not an "investment company",
or an entity "controlled by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 9. AFFIRMATIVE COVENANTS
Until the Obligations are paid and satisfied in full and this Agreement
has been terminated, Assignor covenants and agrees that it will:
(a) Financial Statements and Other Information. Furnish to MLMCI:
(i) as soon as available and in any event within sixty (60) days after
the close of each of the first three (3) quarters of each fiscal year of
Assignor, the applicable quarterly Form 10-Q as filed with the Securities and
Exchange Commission, including the consolidating statements for Assignor,
subject to normal recurring year-end audit adjustments, and as prepared in
accordance with GAAP;
(ii) as soon as available and in any event within ninety (90) days after
the close of each fiscal year of Assignor, a balance sheet of Assignor, a
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statement of income of Assignor and a statement of changes in financial position
of Assignor as at the end of and for the fiscal year just closed, setting forth
the corresponding figures of the previous fiscal year, if applicable, in
comparative form, all in reasonable detail and certified (without any
qualification or exception deemed material by MLMCI) by independent public
accountants selected by Assignor and reasonably satisfactory to MLMCI and
concurrently with such financial statements, a written statement signed by such
independent public accountants to the effect that, based solely on the
examination necessary for their certification of such financial statements,
Assignor is in compliance with the covenants in Section 10(d) hereof, or if such
independent public accountants shall have obtained from such examination any
knowledge to the contrary, they shall disclose in such written statement the
related Event of Default or Default and the nature thereof;
(iii) concurrently with the delivery of the financial statements
required to be furnished by Section 9(a)(ii) hereof, a certificate signed by the
chief executive or financial officer of Assignor, stating (1) that a review of
the activities of Assignor during such quarter or fiscal year, as the case may
be, has been made under his or her immediate supervision with a view to
determining whether Assignor has observed, performed and fulfilled all of its
obligations under this Agreement and whether Assignor is in compliance with the
representations and warranties in Section 8 hereof and the covenants in Sections
9 and 10 hereof, and (2) that there existed during such quarter or fiscal year,
as the case may be, no Event of Default and no Default or if any such Event of
Default or Default did exist, specifying the nature thereof, the period of
existence thereof and what action Assignor proposes to take, or has taken, with
respect thereto;
(iv) promptly, and in any event no later than five (5) Business Days,
after the commencement thereof, written notice of any material actions, suits or
proceedings (including arbitrations) against Assignor before any court or other
Governmental Authority;
(v) immediately upon becoming aware of any development or other
information which is reasonably likely to result in a Material Adverse Change in
Assignor, written notice specifying the nature of such development or
information, such anticipated effect and action, if any, Assignor proposes to
take or has taken with respect thereto;
(vi) with reasonable promptness, such other information respecting any
matter likely to result in a Material Adverse Change in Assignor as MLMCI may
reasonably request from time to time.
(b) Existence, Conduct of Business, etc. Continue to engage primarily in
the business of the same general type as now conducted by it and preserve, renew
and maintain in full force and effect its existence and all permits, licenses,
approvals, consents, rights, privileges and franchises necessary or desirable in
the conduct or transaction of its business or the ownership or operation of its
properties or the lease of its properties to which it is a lessee.
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(c) Taxes. Assignor will pay and discharge all taxes, levies, liens and
other charges on its assets and on the Collateral that, in each case, in any
manner would create any lien or charge upon the Collateral.
(d) Laws. Assignor will at all times comply in all material respects
with all laws, ordinances, rules and regulations of any federal, state,
municipal or other public authority having jurisdiction over Assignor or any of
its assets.
(e) Name and Locations. Assignor will immediately advise MLMCI in
writing of the opening of any new chief executive office or new principal
executive office or the closing of any such office and of any change in
Assignor's name or the places where the books and records pertaining to the
Collateral are kept.
(f) Records. Assignor will maintain records with respect to the
Collateral and the conduct and operation of its business in conformity with
general industry standards and with no less a degree of prudence than if the
Collateral were held by Assignor for its own account and will furnish MLMCI,
upon reasonable request by MLMCI or its designated representative, with
reasonable information with respect to the Collateral and the conduct and
operation of its business. Assignor will permit MLMCI or its designated
representative to inspect Assignor's records with respect to the Collateral and
the conduct and operation of its business upon reasonable notice from MLMCI or
its designated representative, at reasonable times during regular business hours
and with reasonable frequency, and to make copies or extracts of any and all
thereof. MLMCI shall act in a commercially reasonable manner in requesting and
conducting any inspection relating to the conduct and operation of Assignor's
business.
(g) Pay Obligations. Pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all its material
obligations of whatever nature, except when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and Assignor
has established adequate reserves with respect thereto and no Liens have
attached to the Collateral or any portion thereof.
(h) Notices. Promptly, and in any event within one (1) Business Day of
the occurrence thereof, notify MLMCI in writing of (i) the occurrence of any
Default or Event of Default hereunder or under any other Loan Document or (ii)
any event of default by any party thereto under any indenture, mortgage, deed of
trust, agreement or other instrument or contractual obligation to which Assignor
is a party or by which any of its properties may be bound or affected which
could result in a Material Adverse Change in Assignor, and specifying in each
case the action Assignor has taken or proposes to take with respect thereto.
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(i) Covenant Compliance Certificate. Deliver a Covenant Compliance
Certificate to MLMCI on the first Business Day of each calendar month.
(j) Reports. Cause to be furnished directly to MLMCI, promptly after the
production thereof, Assignor's Call Reports and each report from Assignor to any
applicable regulatory authority and any response thereto from such regulatory
authority.
(k) Monthly Collateral Report. Furnish or cause to be furnished to
MLMCI, on the last Business Day of each month, a report for each Pledged MBS
substantially in the form of, and containing the information set forth on,
Exhibit E hereto.
SECTION 10. NEGATIVE COVENANTS
Until the Obligations are paid and satisfied in full and this Agreement
has been terminated, Assignor covenants and agrees that it will not:
(a) Liens. Create, incur, assume or suffer to exist, any Lien on any of
the Collateral whether now owned or hereafter acquired, other than Liens in
favor of MLMCI hereunder.
(b) Mergers, Sales, Dissolution, etc. (i) Merge into or consolidate with
any other Person without the prior consent of MLMCI, which consent shall not be
unreasonably withheld or delayed, or (ii) assign, transfer, sell, lease, or
otherwise dispose of any of the Collateral, or all or substantially all of its
other property or assets to any other Person or (iii) wind up, liquidate or
dissolve, or agree to do any of the foregoing.
(c) Corporate Changes. Change its name, principal place of business, the
location where its books and records are kept with respect to the Collateral or
corporate structure on less than thirty (30) days prior written notice to MLMCI.
(d) Credit Covenants. Permit (i) the ratio of Assignor's assets to
equity to exceed 15 to 1;
(ii) the ratio of Pacific Thrift's assets to equity to exceed 15 to 1;
(iii) Assignor shall experience losses or changes in its financial
condition that cause its Book Net Worth for any two consecutive calendar
quarters to be less than or equal to 80% of its Book Net Worth as of the
commencement of such period;
(iv) Assignor's Book Net Worth shall at any time be less than
$25,000,000; and
(v) Assignor shall pay or declare any dividend or other distribution
except (a) dividends payable solely in the form of capital stock or (b)
dividends otherwise approved in writing by
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MLMCI; notwithstanding the above, Assignor may not pay or declare any dividends
at any time while an Event of Default exists and is continuing or would be
created by such dividends.
(e) Use of Proceeds. The Proceeds of the Loans made pursuant to this
Agreement will not be used by Assignor, directly or indirectly, for the purpose
of purchasing or carrying any Margin Stock or for the purpose of reducing or
retiring any debt which was originally incurred to purchase or carry Margin
Stock or for any other purpose which might constitute the Loans under this
Agreement as being "purpose credit" within the meaning of Regulation G or X of
the Board of Governors of the Federal Reserve System.
(f) Further Covenants. Without prior written consent of MLMCI, Assignor
will not: (i) assign, sell, transfer, pledge or grant any security interest in
or lien on any of the Collateral to anyone except MLMCI, permit any financing
statement (except any financing statements in favor of MLMCI) or assignment
(except for any assignments in favor of MLMCI) to be on file in any public
office with respect thereto, (ii) permit or suffer to exist any security
interest, lien, charge, encumbrance or right of others to attach to any of the
Collateral, except as contemplated by this Agreement, or (iii) consent to any
amendment or supplement to any MBS Issuance Agreement that is reasonably likely
to result in a material adverse affect on the Market Value of the Pledged MBS,
but excluding in any event any amendment or supplement that effectuates a
letter-of-credit and the limited quarterly substitution into a related reserve
fund for the release of cash as contemplated in such MBS Issuance Agreement.
SECTION 11. EVENTS OF DEFAULT
Each of the following, so long as it shall not have been remedied, shall
constitute an "Event of Default" hereunder:
(a) Nonperformance. Any failure to pay, whether on the acceleration
thereof or otherwise, any amounts due under the Note or any failure to pay any
amount due under this Agreement or to perform any provision of this Agreement in
accordance herewith, or any material breach of any representation, warranty or
covenant set forth herein or in the Note.
(b) Termination of Interest. The lapse or termination of Assignor's
interest in any of the Collateral.
(c) Act of Insolvency. The filing by Assignor or any affiliate, of a
petition in bankruptcy, the adjudication of Assignor or any affiliate as
insolvent or bankrupt, the petition or application by Assignor or any affiliate
for any receiver or trustee for itself or any substantial part of its property,
the commencement by Assignor or any affiliate of any proceeding relating to it
under any reorganization, arrangement, dissolution or liquidation law, or the
initiation of any such proceeding against Assignor or any affiliate, if Assignor
or such affiliate indicates by any act its consent thereto or if such proceeding
is not dismissed within thirty (30) days.
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<PAGE> 22
(d) Material Adverse Change. In the reasonable judgment of MLMCI, a
Material Adverse Change in Assignor shall have occurred.
(e) Default Under Other Contracts. Assignor shall be in default with
respect to any normal and customary covenants under any contract or agreement to
which it is a party (which covenants include, but are not limited to, an Act of
Insolvency of Assignor or the failure of Assignor to make required payments
under such contract or agreement as they become due) which default permits
acceleration of the obligations of Assignor under such contract or agreement by
any other party thereto and which default, in the reasonable judgment of MLMCI,
is likely to result in a Material Adverse Change in Assignor.
(f) Merger or Consolidation. Assignor shall merge or consolidate into
any entity unless MLMCI shall have expressly consented to such merger or
consolidation in writing, which consent shall not be unreasonably withheld.
(g) Anticipated Insolvency. MLMCI shall reasonably determine that
Assignor is or will be unable to meet its commitments hereunder, notifies
Assignor of such determination and Assignor shall not have responded with
appropriate information to the contrary to the satisfaction of MLMCI within
thirty-six (36) hours.
(h) Final Judgment. A final, non-appealable judgment by any competent
court in the United States for the payment of money in an amount of at least
$100,000 is rendered against Assignor, and the same remains undischarged and
unpaid for a period of sixty (60) days during which execution of such judgment
is not effectively stayed.
(i) Breach of Representation. Any representation or warranty made by
Assignor herein shall have been incorrect or untrue in any material respect when
made or repeated or when deemed to have been made or repeated and which breach,
in the reasonable judgment of MLMCI, is likely to result in a Material Adverse
Change in Assignor.
(j) Breach of Covenant. Assignor shall breach in any material respect
any covenant made by it herein and MLMCI's interests shall have been materially
adversely affected thereby.
SECTION 12. REMEDIES
(a) Action Regarding Collateral. If an Event of Default shall occur,
MLMCI, without demand of performance or other demand or notice of any kind to
Assignor or any other person, all of which are hereby expressly waived, may
forthwith apply the cash, if any, then held by it as part of the Collateral
relating to any Loan to the payment of any of the Obligations, and, if there
shall be no such cash or the cash so applied shall not be sufficient to pay in
full all such Obligations, may thereafter collect, receive, appropriate, retain
and realize upon the Collateral, or any part thereof, and may forthwith sell,
assign, give an option or options to purchase, contract to
18
<PAGE> 23
sell, or otherwise dispose of and deliver the Collateral, or any part thereof,
in one or more parcels at such public or private sale or sales, at such place or
places, at such price or prices and upon such other terms and conditions as
MLMCI may deem best (provided, however, that MLMCI shall act in all respects in
a commercially reasonable manner), for cash or on credit or for future delivery
without assumption of any credit risk, with the right of MLMCI upon any such
sale or sales to purchase all or any part of the Collateral so sold. Upon any
sale, transfer or other disposition of the Collateral pursuant hereto MLMCI
shall have the right to deliver, assign and transfer to the transferee thereof
the Collateral so sold. Each transferee upon any such transfer or other
disposition shall hold the property thereby acquired by it absolutely free from
any claim or right of any kind, including any equity or rights of redemption, of
Assignor, who hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any rule of law or statute whether now
existing or hereafter adopted (in the latter case, to the extent permitted
thereby). Assignor agrees that MLMCI need give only such notice of the time and
place of any public or private sale (including any adjourned private sale) or
other intended disposition as may be required by market conditions and standards
of commercial reasonableness and that MLMCI need not in any event give more than
five (5) Business Days' notice that such sale or disposition is to take place.
Assignor agrees that the notice provided for in the preceding sentence is
reasonable notification of such matters.
MLMCI shall not be obligated to make any sale pursuant to any such
notice. MLMCI may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any sale of all or any
part of the Collateral on credit or for future delivery, the Collateral so sold
may be retained by MLMCI until the selling price is paid by the purchaser
thereof, but MLMCI shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice. MLMCI, however,
instead of exercising the power of sale herein conferred upon it, may proceed by
a suit or suits at law or in equity to foreclose the lien and security interest
created hereby and sell the Collateral, or any portion thereof, under a judgment
or decree of a court or courts of competent jurisdiction.
(b) Deficiency. If the Proceeds of sale, collection, foreclosure or
other realization of or upon the Collateral are insufficient to cover the costs
and expenses of such realization and the payment in full of the Obligations,
Assignor shall remain liable for any deficiency.
(c) Private Sale. MLMCI shall incur no liability as a result of the sale
of the Collateral (provided, however, that MLMCI shall act in a commercially
reasonable manner) or any part thereof, at any private sale. Assignor hereby
waives any claims against MLMCI or any holder or holders of the Note arising by
reason of the fact that the price at which the Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale or was less than the aggregate amount of the Obligations, even if
MLMCI accepts the first
19
<PAGE> 24
offer received and does not offer the Collateral to more than one offeree
(provided, however, that MLMCI shall act in a commercially reasonable manner).
(d) Application of Proceeds. The Proceeds of any sale or other
realization of all or any part of the Collateral, and any other cash at the time
held by MLMCI under this Agreement, shall be applied by MLMCI in the following
order of priority:
First, to the payment of the costs and expenses of such sale and
all expenses (including the reasonable fees and expenses of counsel),
liabilities and advances made or incurred by MLMCI in connection
therewith.
Second, to the payment of all accrued interest under the Note
due or past due.
Third, to the payment of principal upon the Note due or past
due.
Fourth, to the payment of all other amounts owing under this
Agreement.
Fifth, to the payment to Assignor, or to such other person as a
court of competent jurisdiction may direct, of any surplus then
remaining from such Proceeds and other cash.
(e) Default Rate of Interest. After demand is made with respect to the
Note or upon acceleration thereof, until the balance thereof shall be paid, the
Loan amounts due thereunder, shall bear interest at a per annum rate (based on a
year of 360 days and actual days elapsed) equal to two hundred (200) basis
points in excess of the interest rate for such Loan, but in no event higher than
the maximum rate permitted by law (the "Default Rate").
(f) Attorney-in-Fact. Effective upon the occurrence of an Event of
Default hereunder, MLMCI is hereby appointed the attorney-in-fact of Assignor
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instruments which MLMCI may deem necessary or advisable
to accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, after an Event of Default has occurred, MLMCI shall have the right
and power to receive, endorse and collect all checks made payable to the order
of Assignor representing any distribution in respect of the Collateral or any
part thereof and to give full discharge for the same.
(g) Payments on Collateral to Assignor.
(i) All rights of Assignor to receive any payments from the related
Collateral which it would otherwise be authorized to receive shall cease, and
all such rights shall thereupon become vested in MLMCI, which shall thereupon
have the sole right to receive and hold as Collateral such payments.
20
<PAGE> 25
(ii) All payments which are received by Assignor contrary to the
provisions of the preceding subsection (i) shall be received in trust for the
benefit of MLMCI, shall be segregated from other funds of Assignor and shall be
promptly paid to MLMCI.
(h) Cross-Collateralization; Right of Set-Off. MLMCI may, in its sole
discretion upon the occurrence and during the continuation of an Event of
Default hereunder, proceed against any assets held by it under the Master
Repurchase Agreement and shall have a right of set-off against any amounts owed
by MLMCI under the Master Repurchase Agreement. In addition, the parties agree
that MLMCI may, in its sole discretion upon the occurrence and during the
continuation of an event of default under the Master Repurchase Agreement,
proceed against any assets held by it hereunder and shall have a right of
set-off against any amount owed by MLMCI to Assignor hereunder.
SECTION 13. MATURITY DATE; INTEREST PAYMENT DATES;
REPAYMENT OF PRINCIPAL
(a) Payment on Maturity Date. Assignor and MLMCI hereby agree that the
Obligations of Assignor hereunder and under the Note are payable on the Maturity
Date unless earlier payment thereof is required pursuant to the terms of this
Agreement.
(b) Extension of Maturity Date. Assignor may, not later than three (3)
months prior to the Maturity Date, request in writing that MLMCI extend such
Maturity Date for a period not exceeding one year. MLMCI will use its best
efforts to respond within two (2) weeks of receiving such written request. Such
response will include whether or not MLMCI would be willing to so extend the
Maturity Date and the terms of any such extension. Nothing contained herein
shall be deemed to limit the right of MLMCI, in its sole discretion, to decline
to enter into such extension or to agree to such extension on terms different
from those set forth herein. Any such extension shall be evidenced only by a
written agreement among the parties amending this Agreement and the Note.
(c) Interest Payment. Interest on each Loan shall be payable monthly on
the dates described in the related Confirmation Statement.
(d) Payment of Principal. The principal portion of each Loan may be
repaid in whole or in part at the discretion of Assignor on any date on which a
payment of interest is to be made thereon by Assignor pursuant to the terms of
this Agreement and the related Confirmation Statement provided that (i) Assignor
shall have provided MLMCI with not less than two (2) Business Days' written
notice of Assignor's intention to effect such repayment and the amount thereof,
(ii) all payments of interest then due and owing on the Loan are paid in full
and (iii) no Event of Default has occurred and is continuing with respect to any
of Assignor's Obligations hereunder or under the Note.
21
<PAGE> 26
(e) Event of Default. Nothing in this Section 13 shall be deemed to
limit the right of MLMCI to require, so long as an Event of Default shall have
occurred and is continuing, the payment by Assignor of all Obligations arising
hereunder and under the Note.
SECTION 14. PAYMENT OF TAX LIABILITY
Assignor and MLMCI agree that any tax or other liability (excluding any
tax liability arising from the receipt by MLMCI of interest income on any Loan
under this Agreement) incurred by the beneficial owner or the registered holder
of any Collateral pledged under the this Agreement shall be borne by Assignor.
So long as any Obligations are outstanding hereunder, Assignor agrees to
indemnify MLMCI for, and to hold MLMCI harmless against, any liability inuring
to MLMCI as a result of the endorsement of the Collateral in MLMCI's name, or
MLMCI's status as the lender hereunder or beneficial holder of such Collateral,
including, without limitation, any tax liability or liability for the payment of
expenses of the trust funds established under the applicable MBS Issuance
Agreements.
SECTION 15. GENERAL PROVISIONS
(a) No Waiver. No waiver or amendment of or forbearance in enforcing any
provision of this Agreement nor consent to any departure by either party
herefrom shall be effective unless expressly granted in writing and shall be
limited to the extent expressed therein.
(b) Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely performed therein. Unless otherwise defined herein,
terms defined in the UCC are used herein as defined therein. Each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or be invalid under such law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
(c) Construction. The captions in this Agreement are for convenience of
reference only and shall not affect the construction or interpretation of any of
the provisions hereof.
(d) Assignment. This Agreement shall be binding upon and shall inure to
the benefit of each of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any rights or other
obligations hereunder may be assigned by Assignor without prior written consent
of MLMCI and any attempted or purported assignment hereof or thereof shall be
void. MLMCI may assign any or all of its rights hereunder without consent.
22
<PAGE> 27
(e) Notices, Payments, Deliveries. Unless otherwise provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, facsimile or telex communication), and such notices and
other communications shall, when mailed, telegraphed, communicated by facsimile
transmission or telexed, be effective when received at the address for notices
for the party to whom such notice or communications is to be given as follows:
If to MLMCI:
Merrill Lynch Mortgage Capital Inc.
Merrill Lynch World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Attention: Timothy M. Loughlin
Telephone: (212) 449-5939
Telecopy: (212) 449-6673
With a copy to:
Attention: Michael A. Blum
Telephone: (212) 449-8486
Telecopy: (212) 449-6673
23
<PAGE> 28
If to Assignor:
PacificAmerica Money Center, Inc.
21031 Ventura Boulevard
Suite 102
Woodland Hills, California 91364
Attention: Joel R. Schultz
Telephone: (818) 992-8999 ext. 260
Telecopy: (818) 992-8889
with a copy to:
Attention: Charles J. Siegel
Telephone: (818) 992-8999 ext. 298
Telecopy: (818) 340-6303
and
Attention: Richard D. Young
Telephone: (818) 992-8999 ext. 222
Telecopy: (818) 703-1896
and
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars
Tenth Floor
Los Angeles, California 90067
Attention: Catherine DeBono Holmes
Telephone: (310) 203-8080
Telecopy: (310) 203-0567
provided, however, that a facsimile or other form of electronic transmission
shall be deemed to be received by the parties hereto when transmitted so long as
the transmitting machine has provided an electronic confirmation of such
transmission and such facsimile or other form of electronic transmission is
confirmed with a printed paper copy thereof by mail or overnight courier
service. All payments on and deliveries of Collateral hereunder shall be made to
the address or account for payments and deliveries of such Collateral for the
party to whom such payment or delivery is to be made as set forth above. Either
party may revise any information relating to it by notice in writing to the
other party, which notice shall be effective on the third Business Day following
receipt thereof.
(f) Termination. When all Obligations shall have been paid in full and
upon the written request of Assignor, this Agreement shall terminate (such date,
the "Termination Date") and
24
<PAGE> 29
MLMCI shall release its lien and security interest hereunder and assign,
transfer and deliver, against receipt, any remaining Collateral and money
received in respect thereof to or on the order of Assignor. Upon the request of
Assignor, MLMCI will then execute termination statements and such other
documents as Assignor may reasonably request as are necessary to make clear upon
the public record the termination of the lien and security interests created
hereby with respect to such assignment. The obligations of Assignor under
Section 15(h) below shall, with respect to each transaction entered into
hereunder, survive any termination hereof.
(g) Aggregate Amount of Loans; Disbursement of Funds.
(i) The aggregate outstanding principal amount of the Loans made by
MLMCI hereunder shall be limited to the Maximum Loan Amount.
(ii) Assignor may request disbursement of amounts borrowed hereunder
upon not less than two (2) Business Days' written notice to MLMCI.
(iii) MLMCI is not obligated to make any Loan or advance under this
Agreement or pursuant to the Note.
(h) Expenses.
(i) Assignor shall pay its own costs and expenses and all reasonable
costs and expenses of MLMCI (including, without limitation, reasonable
fees and expenses for legal services) incident to the preparation and
negotiation of this Agreement and any documents relating hereto.
(ii) Assignor agrees to pay to MLMCI on demand all reasonable costs
and expenses (including reasonable expenses for legal services) of any
subsequent enforcement of any of the provisions hereof, or of the
performance by MLMCI of any Obligations of Assignor in respect of the
Collateral which Assignor has failed or refused to perform, or any
actual or attempted sale, or any exchange, enforcement, collection,
compromise or settlement in respect of any of the Collateral and for the
custody, care or preservation of the Collateral (including insurance
costs) and defending or asserting rights and claims of MLMCI in respect
thereof, by litigation or otherwise, including expenses of insurance. In
addition, Assignor agrees to pay to MLMCI on demand all costs and
expenses (including reasonable expenses for legal services) of the
registration of the Collateral in the name of MLMCI or its nominee. All
such expenses shall be Obligations to MLMCI secured under this
Agreement.
(i) MLMCI's Right to Pledge. Nothing in this Agreement shall preclude
MLMCI from engaging in transactions with third parties involving the selling
pursuant to a repurchase arrangement, pledging or hypothecating of the
Collateral, but no such transaction shall relieve MLMCI of its obligations
hereunder. MLMCI hereby grants to Assignor the right to perform in
25
<PAGE> 30
MLMCI's stead under any repurchase, reverse repurchase, loan or similar
transaction in which MLMCI has sold, pledged or otherwise transferred any
Pledged MBS in the event that MLMCI has defaulted on its obligations to
repurchase or accept redelivery of such Pledged MBS in conformity with the terms
of any such transaction and so long as an Event of Default hereunder by Assignor
shall not have occurred and be continuing. MLMCI further acknowledges that each
Pledged MBS identified in a Confirmation Statement and included as Collateral
for a Loan hereunder is unique and identifiable on the date of such Loan and
that an award of money damages would be insufficient to compensate Assignor for
the losses and damages incurred by Assignor in the event of MLMCI's failure to
release and redeliver any Pledged MBS upon the repayment of the related Loan by
Assignor as provided hereunder.
(j) Indemnification. Assignor agrees to indemnify and hold harmless
MLMCI against all liabilities and expenses to which MLMCI may become subject
relating to any fees, taxes or liability to any third party resulting from any
action taken or omitted by or upon instructions of Assignor with respect to the
Collateral.
(k) Further Assurances. Assignor agrees that, from time to time upon the
prior written request of MLMCI, it will (i) execute and deliver such further
documents and do such other acts and things as MLMCI may reasonably request in
order to fully effectuate the purposes of this Agreement and (ii) provide such
opinions of counsel concerning matters relating to this Agreement as MLMCI may
reasonably request.
(l) Remedies Cumulative. All rights, remedies and powers of MLMCI
hereunder and in connection herewith are irrevocable and cumulative, and not
alternative or exclusive, and shall be in addition to all other rights, remedies
and powers of MLMCI whether under law, equity or agreement. In addition to the
rights and remedies granted to it in this Agreement or under the Note, MLMCI
shall have all the rights and remedies of a secured party under the UCC.
(m) Litigation. Notwithstanding any termination hereof, Assignor hereby
agrees that any legal action or proceeding against it in connection herewith may
be brought in the courts of the State of New York or of the United States of
America located in the City and State of New York, Borough of Manhattan, as
MLMCI may elect, and Assignor hereby irrevocably submits to the jurisdiction of
each of said courts, and waives any objection on the grounds of venue, forum non
conveniens or similar grounds.
26
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PACIFICAMERICA MONEY CENTER, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
MERRILL LYNCH MORTGAGE CAPITAL INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
27
<PAGE> 32
EXHIBIT A
THIS NOTE IS NOT A
NEGOTIABLE INSTRUMENT.
NO TRANSFER OR SALE OF THIS NOTE SHALL BE MADE UNLESS SUCH TRANSFER IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE SECURITIES LAWS OR IS MADE IN ACCORDANCE WITH SAID ACT
AND LAWS.
NOTE
$20,000,000
New York, New York December 18, 1997
FOR VALUE RECEIVED, PACIFICAMERICA MONEY CENTER, INC. (the "Assignor")
promises to pay to MERRILL LYNCH MORTGAGE CAPITAL INC. (the "Payee") the
principal sum of Twenty Million Dollars ($20,000,000) (or so much thereof as
shall have been advanced here against pursuant to the Master Assignment
Agreement and shall be outstanding, in lawful money of the United States of
America, in immediately available funds, with interest on each principal sum
advanced here against or the unpaid balance thereof with such frequency and to
such location as is specified in the related confirmation statement (in each
case, the "Confirmation Statement") for such advance (or on such other day and
with such other frequency and to such other location as may be mutually agreed
upon by Assignor and the Payee) at said office and in said money and funds from
the date of the related Loan advance until the related Maturity Date for such
Loan at the rate per annum (based on a year of 360 days and actual days elapsed)
indicated on the related Confirmation Statement attached hereto, but in no event
higher than the maximum rate permitted by law, and after such Maturity Date, or
upon acceleration as hereinafter provided, until said balances shall be paid, at
the rate per annum (based on a year of 360 days and actual days elapsed) equal
to two hundred (200) basis points in excess of the interest rate for such
advance, but in no event higher than the maximum rate permitted by law.
Loans here against shall be in minimum amounts of $1,000,000. Assignor
may request disbursement of amounts borrowed hereunder upon not less than two
(2) Business Days' written notice to the Payee. The Payee is not obligated to
make any advances hereunder. The Payee is
A-1
<PAGE> 33
hereby authorized by Assignor to endorse on the Loan Schedule amounts advanced
here against, the rate of interest relating thereto and any principal
prepayments hereunder (as permitted by the Assignment defined below), it being
understood, however, that failure to make any such endorsement shall not affect
the obligations of Assignor hereunder in respect of the amounts advanced here
against.
This Note is the Note referred to in the Master Assignment Agreement
(the "Master Assignment Agreement"), dated as of December 18, 1997, between
Assignor and the Payee, granting to the Payee a first priority perfected
security interest in the Collateral, as described therein. The holder is
entitled to the benefits of the Master Assignment Agreement and may enforce the
agreements of Assignor contained therein and exercise the remedies provided for
thereby or otherwise available in respect thereof. All capitalized terms used in
this Note and not otherwise defined shall have the respective meanings set forth
in the Master Assignment Agreement except where the context clearly indicates
otherwise.
This Note and all other present and future obligations of any and all
kinds of Assignor in favor of the holder hereof, whether created directly or
acquired by assignment, whether absolute or contingent, shall, unless the holder
shall otherwise elect, forthwith be due and payable without notice or demand of
any kind (except as expressly provided in the Master Assignment Agreement), all
of which are expressly waived upon the occurrence of an Event of Default.
Assignor hereby agrees that any legal action or proceeding against it
for enforcement of this Note or of any judgment with respect to this Note may be
brought in the courts of the State of New York or of the United States of
America located in the City and State of New York, Borough of Manhattan, as the
holder may elect, and Assignor hereby irrevocably submits to the jurisdiction of
each of said courts, and waives any objection on the grounds of venue, forum non
conveniens or similar ground. Assignor irrevocably consents that service of
process in any such action or proceeding may be made upon Assignor by the
mailing thereof by the holder by United States registered or certified mail,
postage prepaid, to Assignor at the address set forth herein below the signature
of Assignor, and Assignor hereby further agrees that service of process in such
manner shall be full and sufficient notice of any such action or proceeding.
A-2
<PAGE> 34
Assignor waives diligence, presentment of any instrument, protest and
notice of non-payment or protest and any and all other notices and demands
whatsoever in connection with the delivery, acceptance, performance, default or
enforcement of this Note. Assignor will pay on demand all costs of collection
(including reasonable attorneys' fees) paid or incurred by the holder in
enforcing this Note on default. As used herein, the world "holder" shall mean
the Payee or any endorsee of this Note who is in possession hereof, if this Note
is at the time payable to the bearer.
This Note shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and entirely performed
therein.
PACIFICAMERICA MONEY CENTER, INC.
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Address:
A-3
<PAGE> 35
LOAN SCHEDULE
This Note evidences Loans made by the Payee to Assignor and the repayment of
principal by Assignor to the Payee, in the principal amounts and on the dates
and with the related interest rates set forth below as well as the total amount
advanced here against as of each such date:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT INTEREST PRINCIPAL AMOUNT TOTAL
DATE LOANED RATE REPAID OUTSTANDING
<S> <C> <C> <C> <C>
- --------------- ---------------- ------------- ---------------- ------------
- --------------- ---------------- ------------- ---------------- ------------
- --------------- ---------------- ------------- ---------------- ------------
- --------------- ---------------- ------------- ---------------- ------------
- --------------- ---------------- ------------- ---------------- ------------
- --------------- ---------------- ------------- ---------------- ------------
- --------------- ---------------- ------------- ---------------- ------------
</TABLE>
A-4
<PAGE> 36
EXHIBIT B
CONFIRMATION STATEMENT
MERRILL LYNCH MORTGAGE CAPITAL INC.
Date: __________________________
Assignor:
Attention:
Telephone:
Fax Number:
Re: LOAN PURSUANT TO MASTER ASSIGNMENT AGREEMENT
Gentlemen:
Merrill Lynch Mortgage Capital Inc. ("MLMCI") is pleased to confirm our Loan to
you (the "Assignor") pursuant to the Master Assignment Agreement (the "Master
Assignment Agreement"), dated as of December 18, 1997, between you and MLMCI
under the following terms and conditions:
1. Collateral Description: ________________________
A. Security Issue Date: ______________________
B. Percentage Ownership: _____________________%
C. Face Amount: $_____________________
D. Current Market Value: $_____________________
E. Margin Requirement: _____________________%
2. Loan: _____ New Funds _____ Roll
A. Amount: $______________
B. Interest Rate: ______________%
C. Closing Date: ______________
D. Interest Payment Date: The last Business Day of each month.
B-1
<PAGE> 37
MLMCI's Wiring Instructions Assignor's Wiring Instructions
Bankers Trust New York
For the Account of Merrill Lynch
Mortgage Capital Inc.
Account Number: 00812914 Account Number:
ABA Number: 021-001-033 ABA Number:
The Note, dated December 18, 1997, which evidences advances under
the Master Assignment Agreement will be annotated on the schedule attached
thereto to reflect the date, amount and interest rate relating to this advance.
The Master Assignment Agreement is incorporated by reference into
this Confirmation Statement and made a part hereof as if it were fully set forth
herein. All capitalized terms used herein but not otherwise defined shall have
the meanings specified in the Master Assignment Agreement.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
AGREED AND ACKNOWLEDGED:
PACIFICAMERICA MONEY CENTER, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
B-2
<PAGE> 38
EXHIBIT C
[FORM OF OPINION OF COUNSEL TO ASSIGNOR]
Gentlemen:
We have acted as counsel to PacificAmerica Money Center, Inc., a
_______ corporation (the "Assignor"), in connection with (i) the execution and
delivery of the Master Assignment Agreement, dated as of December 18, 1997 (the
"Agreement"), between Assignor and Merrill Lynch Mortgage Capital Inc., a
Delaware corporation ("MLMCI") and (ii) the execution and delivery of the Note,
dated December 18, 1997 in the principal amount of $20,000,000 ("Note") made by
Assignor to the order of MLMCI. Unless otherwise defined herein, all defined
terms used herein shall have the meanings assigned thereto in the Agreement.
As counsel to Assignor, we have participated in the preparation and
negotiation of the Agreement, the Note and the other documents and instruments
executed and delivered pursuant thereto and in connection therewith by Assignor.
In this connection, we have examined, among other documents, the
Certificate of Incorporation and By-Laws of Assignor, the minutes of meetings of
Assignor, and such other documents and records of Assignor as we have deemed
relevant and necessary as a basis for the conclusions contained in the opinions
hereafter set forth. We have had various conferences with officers and directors
of Assignor with respect to the provisions of the Agreement and the Note as to
certain matters contemplated by the opinions expressed below, and we have relied
upon information as provided by said officers and directors. In our examination,
we have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us as originals and the conformity to originals of all
documents submitted to us photostatic copies.
Based upon the foregoing, we are of opinion that:
1. Assignor is duly organized and validly existing as a corporation
in good standing under the laws of the State of [ ] and has power and authority
to enter into and perform its obligations under this Agreement. Assignor is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the business transacted by it requires such qualification and
in which the failure so to qualify would have a material adverse effect on the
business, properties, assets or condition (financial or other) of Assignor and
its subsidiaries, considered as a whole.
C-1
<PAGE> 39
2. This Agreement and the Note have each been duly authorized,
executed and delivered by Assignor, and each constitutes a valid and legally
binding obligation of Assignor enforceable against Assignor in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights generally and to general equity principles.
3. No consent, approval, authorization or order of any state or
federal court or government agency or body is required to be obtained by
Assignor for the consummation of the transactions contemplated by this Agreement
or the Note.
4. The consummation of any of the transactions contemplated by this
Agreement and the Note will not conflict with, result in a breach of, or
constitute a default under the articles of incorporation or bylaws of Assignor
or the terms of any indenture or other agreement or instrument known to us to
which Assignor is party or bound, or any order known to such counsel to be
applicable to Assignor or any regulations applicable to Assignor, of any state
or federal court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over Assignor.
5. There is no pending or threatened action, suit or proceeding
before any court or governmental agency, authority or body or any arbitrator
involving Assignor or relating to the transaction contemplated by this Agreement
or the Note.
6. Each Pledged MBS will have been endorsed in a manner which
satisfies any requirement of endorsement in order to transfer all right, title
and interest in and to that Pledged MBS from Assignor to MLMCI. This Agreement
together with (a) the delivery of such related Pledged MBS to MLMCI and (b) the
endorsement of such Pledged MBS to MLMCI, creates a valid, perfected security
interest in such Pledged MBS in favor of MLMCI. Such security interest will have
the same priority and will be subject to the same security interests and liens
as apply to such Pledged MBS in the hands of Assignor.
Very truly yours,
C-2
<PAGE> 40
EXHIBIT D
LOCATION OF CHIEF EXECUTIVE OFFICES AND COLLATERAL
Chief Executive Office
PacificAmerica Money Center, Inc.
21031 Ventura Boulevard
Suite 102
Woodland Hills, California 91364
Collateral
With respect to any Loan, the Pledged MBS to be delivered to, and
held by, MLMCI or its bailee.
D-1
<PAGE> 41
EXHIBIT E
MONTHLY COLLATERAL REPORT
INDEX DELINQUENCY
Issuer STATUS
Account Number (Current/Delinq/Fcir/REO)
Last Pay Date
SECURITIZATION INFO Months Delinquent
Deal 24 Months Status History
(ie CCCCCCC369CC369999FFFRRR)
LOAN ATTRIBUTES
Loan Type DEFAULT
Original Balance Defaulted Amount
Origination Date Liquidation Loss Amount
Maturity Date Default Date
Zip Code
County PREPAYMENT
State Prepay Amount
WAC Prepay Penalty Paid
RTM Amort Prepay Date
RTM Std
P&I ARM SPECIFIC
Current Balance Next IA Date
CLTV Reset Frequency
Property Type Margin
Occupancy Status Index
Loan Purpose Caps/Floors
Documentation Periodic Cap
Balloon Life Cap
Lien Life Floor
2nd Lien Ratio
Prepay Penalty Schedule
(ie 3yr penalty - 6mo interest)
Servicer
Loan Source (Retail/Corresp/Wholesale)
BORROWER INFORMATION
FICO Score
Credit Grade
DTI
E-1
<PAGE> 1
EXHIBIT 10.3
MASTER REPURCHASE AGREEMENT
September 1996 Version
Dated as of October 31, 1997
Between:
MERRILL LYNCH MORTGAGE CAPITAL INC.
and
MERRILL LYNCH CREDIT CORPORATION
and
PACIFICAMERICA SECURITIES, INC.
1. APPLICABILITY
From time to time the parties hereto may enter into transactions in
which one party ("Seller") agrees to transfer to the other ("Buyer")
securities or other assets ("Securities") against the transfer of funds
by Buyer, with a simultaneous agreement by Buyer to transfer to Seller
such Securities at a date certain or on demand, against the transfer of
funds by Seller. Each such transaction shall be referred to herein as a
"Transaction" and, unless otherwise agreed in writing, shall be
governed by this Agreement, including any supplemental terms or
conditions contained in Annex I hereto and in any other annexes
identified herein or therein as applicable hereunder.
2. DEFINITIONS
(a) "Act of Insolvency", with respect to any party, (i) the
commencement by such party as debtor of any case or proceeding
under any bankruptcy, insolvency, reorganization, liquidation,
moratorium dissolution, delinquency or similar law, or such
party seeking the appointment or election of a receiver,
conservator, trustee, custodian or similar official for such
party or any substantial part of its property, or the
convening of any meeting of creditors for purposes of
commencing any such case or proceeding or seeking such an
appointment or election, (ii) the commencement of any such
case or proceeding against such party, or another seeking such
an appointment or election, or the filing against a party of
an application for a protective decree under the provisions of
the Securities Investor Protection Act of 1970, which (A) is
consented to or not timely contested by such party, (B)
results in the entry of an order for relief, such an
appointment or election, the issuance of such a protective
decree or the entry of an order having a similar effect, or
(C) is not dismissed within 15 days,
<PAGE> 2
(iii) the making by such party of a general assignment for the
benefit of creditors, or (iv) the admission in writing by such
party of such party's inability to pay such party's debts as
they become due;
(b) "Additional Purchased Securities", Securities provided by
Seller to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Buyer's Margin Amount", with respect to any Transaction as of
any date, the amount obtained by application of the Buyer's
Margin Percentage to the Repurchase Price for such Transaction
as of such date;
(d) "Buyer's Margin Percentage", with respect to any Transaction
as of any date, a percentage (which may be equal to the
Seller's Margin Percentage) agreed to by Buyer and Seller or,
in the absence of any such agreement, the percentage obtained
by dividing the Market Value of the Purchased Securities on
the Purchase Date by the Purchase Price on the Purchase Date
for such Transaction;
(e) "Confirmation", the meaning specified in Paragraph 3(b)
hereof,
(f) "Income", with respect to any Security at any time, any
principal thereof and all interest, dividends or other
distributions thereon,
(g) "Margin Deficit", the meaning specified in Paragraph 4(a)
hereof,
(h) "Margin Excess", the meaning specified in Paragraph 4(b)
hereof,
(i) "Margin Notice Deadline", the time agreed to by the parties in
the relevant Confirmation, Annex I hereto or otherwise as the
deadline for giving notice requiring same-day satisfaction of
margin maintenance obligations as provided in Paragraph 4
hereof (or, in the absence of any such agreement, the deadline
for such purposes established in accordance with market
practice);
(j) "Market Value", with respect to any Securities as of any date,
the price for such Securities on such date obtained from a
generally recognized source agreed to by the parties or the
most recent closing bid quotation from such a source, plus
accrued Income to the extent not included therein (other than
any Income credited or transferred to, or applied to the
obligations of, Seller pursuant to Paragraph 5 hereof) as of
such date (unless contrary to market practice for such
Securities);
(k) "Price Differential", with respect to any Transaction as of
any date, the aggregate amount obtained by daily application
of the Pricing Rate for such Transaction to the Purchase Price
for such Transaction on a 360-day-per-year basis for the
actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending
on (but excluding)
<PAGE> 3
the date of determination (reduced by any amount of such Price
Differential previously paid by Seller to Buyer with respect
to such Transaction);
(l) "Pricing Rate", the per annum percentage rate for
determination of the Price Differential;
(m) "Prime Rate", the prime rate of U.S. commercial banks as
published in The Wall Street journal (or, if more than one
such rate is published, the average of such rates);
(n) "Purchase Date", the date on which Purchased Securities are to
be transferred by Seller to Buyer;
(o) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Securities are transferred by Seller to Buyer, and
(ii) thereafter, except where Buyer and Seller agree
otherwise, such price increased by the amount of any cash
transferred by Buyer to Seller pursuant to Paragraph 4(b)
hereof and decreased by the amount of any cash transferred by
Seller to Buyer pursuant to Paragraph 4(a) hereof or applied
to reduce Seller's obligations under clause (ii) of Paragraph
5 hereof;
(p) "Purchased Securities", the Securities transferred by Seller
to Buyer in a Transaction hereunder, and any Securities
substituted therefor in accordance with Paragraph 9 hereof.
The term "Purchased Securities" with respect to any
Transaction at any time also shall include Additional
Purchased Securities delivered pursuant to Paragraph 4(a)
hereof and shall exclude Securities returned pursuant to
Paragraph 4(b) hereof,
(q) "Repurchase Date", the date on which Seller is to repurchase
the Purchased Securities from Buyer, including any date
determined by application of the provisions of Paragraph 3(c)
or 11 hereof;
(r) "Repurchase Price", the price at which Purchased Securities
are to be transferred from Buyer to Seller upon termination of
a Transaction which will be determined in each case (including
Transactions terminable upon demand) as the sum of the
Purchase Price and the Price Differential as of the date of
such determination;
(s) "Seller's Margin Amount", with respect to any Transaction as
of any date, the amount obtained by application of the
Seller's Margin Percentage to the Repurchase Price for such
Transaction as of such date;
(t) "Seller's Margin Percentage", with respect to any Transaction
as of any date, a percentage (which may be equal to the
Buyer's Margin Percentage) agreed to by Buyer and Seller or,
in the absence of any such agreement, the percentage
<PAGE> 4
obtained by dividing the Market Value of the Purchased
Securities on the Purchase Date by the Purchase Price on the
Purchase Date for such Transaction.
3. Initiation; Confirmation; Termination
(a) An agreement to enter into a Transaction may be made orally or
in writing at the initiation of either Buyer or Seller. On the
Purchase Date for the Transaction, the Purchased Securities
shall be transferred to Buyer or its agent against the
transfer of the Purchase Price to an account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or
Seller (or both), as shall be agreed, shall promptly deliver
to the other party a written confirmation of each Transaction
(a "Confirmation"). The Confirmation shall describe the
Purchased Securities (including CUSIP number, if any),
identify Buyer and Seller and set forth (i) the Purchase Date,
(ii) the Purchase Price, (iii) the Repurchase Date, unless the
Transaction is to be terminable on demand, (iv) the Pricing
Rate or Repurchase Price applicable to the Transaction, and
(v) any additional terms or conditions of the Transaction not
inconsistent with this Agreement. The Confirmation, together
with this Agreement, shall constitute conclusive evidence of
the terms agreed between Buyer and Seller with respect to the
Transaction to which the Confirmation relates, unless with
respect to the Confirmation specific objection is made
promptly after receipt thereof. In the event of any conflict
between the terms of such Confirmation and this Agreement,
this Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such
demand shall be made by Buyer or Seller, no later than such
time as is customary in accordance with market practice, by
telephone or otherwise on or prior to the business day on
which such termination will be effective. On the date
specified in such demand, or on the date fixed for termination
in the case of Transactions having a fixed term, termination
of the Transaction will be effected by transfer to Seller or
its agent of the Purchased Securities and any Income in
respect thereof received by Buyer (and not previously credited
or transferred to, or applied to the obligations of, Seller
pursuant to Paragraph 5 hereof) against the transfer of the
Repurchase Price to an account of Buyer.
4. MARGIN MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased
Securities subject to all Transactions in which a particular
party hereto is acting as Buyer is less than the aggregate
Buyer's Margin Amount for all such Transactions (a "Margin
Deficit"), then Buyer may by notice to Seller require Seller
in such Transactions, at Seller's option, to transfer to Buyer
cash or additional Securities reasonably acceptable to Buyer
("Additional Purchased Securities"), so that the cash and
aggregate Market Value of the Purchased Securities,
<PAGE> 5
including any such Additional Purchased Securities, will
thereupon equal or exceed such aggregate Buyer's Margin Amount
(decreased by the amount of any Margin Deficit as of such date
arising from any Transactions in which such Buyer is acting as
Seller).
(b) If at any time the aggregate Market Value of all Purchased
Securities subject to all Transactions in which a particular
party hereto is acting as Seller exceeds the aggregate
Seller's Margin Amount for all such Transactions at such time
(a "Margin Excess"), then Seller may by notice to Buyer
require Buyer in such Transactions, at Buyer's option, to
transfer cash or Purchased Securities to Seller, so that the
aggregate Market Value of the Purchased Securities, after
deduction of any such cash or any Purchased Securities so
transferred, will thereupon not exceed such aggregate Seller's
Margin Amount (increased by the amount of any Margin Excess as
of such date arising from any Transactions in which such
Seller is acting as Buyer).
(c) If any notice is given by Buyer or Seller under subparagraph
(a) or (b) of this Paragraph at or before the Margin Notice
Deadline on any business day, the party receiving such notice
shall transfer cash or Additional Purchased Securities as
provided in such subparagraph no later than the close of
business in the relevant market on such day. If any such
notice is given after the Margin Notice Deadline, the party
receiving such notice shall transfer such cash or Securities
no later than the close of business in the relevant market on
the next business day following such notice.
(d) Any cash transferred pursuant to this Paragraph shall be
attributed to such Transactions as shall be agreed upon by
Buyer and Seller.
(e) Seller and Buyer may agree, with respect to any or all
Transactions hereunder, that the respective rights of Buyer or
Seller (or both) under subparagraphs (a) and (b) of this
Paragraph may be exercised only where a Margin Deficit or a
Margin Excess, as the case may be, exceeds a specified dollar
amount or a specified percentage of the Repurchase Prices for
such Transactions (which amount or percentage shall be agreed
to by Buyer and Seller prior to entering into any such
Transactions).
(f) Seller and Buyer may agree, with respect to any or all
Transactions hereunder, that the respective rights of Buyer
and Seller under subparagraphs (a) and (b) of this Paragraph
to require the elimination of a Margin Deficit or a Margin
Excess, as the case may be, may be exercised whenever such a
Margin Deficit or a Margin Excess exists with respect to any
single Transaction hereunder (calculated without regard to
any other Transaction outstanding under this Agreement).
5. INCOME PAYMENTS
<PAGE> 6
Seller shall be entitled to receive an amount equal to all Income paid
or distributed on or in respect of the Securities that is not otherwise
received by Seller, to the full extent it would be so entitled if the
Securities had not been sold to Buyer. Buyer shall, as the parties may
agree with respect to any Transaction (or, in the absence of any such
agreement, as Buyer shall reasonably determine in its discretion), on
the date such Income is paid or distributed either (i) transfer to or
credit to the account of Seller such Income with respect to any
Purchased Securities subject to such Transaction or (ii) with respect
to Income paid in cash, apply the Income payment or payments to reduce
the amount, if any, to be transferred to Buyer by Seller upon
termination of such Transaction. Buyer shall not be obligated to take
any action pursuant to the preceding sentence (A) to the extent that
such action would result in the creation of a Margin Deficit, unless
prior thereto or simultaneously therewith Seller transfers to Buyer
cash or Additional Purchased Securities sufficient to eliminate such
Margin Deficit, or (B) if an Event of Default with respect to Seller
has occurred and is then continuing at the time such Income is paid or
distributed.
6. SECURITY INTEREST
Although the parties intend that all Transactions hereunder be sales
and purchases and not loans, in the event any such Transactions are
deemed to be loans, Seller shall be deemed to have pledged to Buyer as
security for the performance by Seller of its obligations under each
such Transaction, and shall be deemed to have granted to Buyer a
security interest in, all of the Purchased Securities with respect to
all Transactions hereunder and all Income thereon and other proceeds
thereof.
7. PAYMENT AND TRANSFER
Unless otherwise mutually agreed, all transfers of funds hereunder
shall be in immediately available funds. All Securities transferred by
one party hereto to the other Party (i) shall be in suitable form for
transfer or shall be accompanied by duly executed instruments of
transfer or assignment in blank and such other documentation as the
party receiving possession may reasonably request, (ii) shall be
transferred on the book-entry system of a Federal Reserve Bank, or
(iii) shall be transferred by any other method mutually acceptable to
Seller and Buyer.
8. SEGREGATION OF PURCHASED SECURITIES
To the extent required by applicable law, all Purchased Securities in
the possession of Seller shall be segregated from other securities in
its possession and shall be identified as subject to this Agreement.
Segregation may be accomplished by appropriate identification on the
books and records of the holder, including a financial or securities
intermediary or a clearing corporation. All of Seller's interest in the
Purchased Securities shall pass to Buyer on the Purchase Date and,
unless otherwise agreed by Buyer and Seller, nothing in this Agreement
shall preclude Buyer from engaging in repurchase transactions with the
Purchased Securities or otherwise selling, transferring,
<PAGE> 7
pledging or hypothecating the Purchased Securities, but no such
transaction shall relieve Buyer of its obligations to transfer
Purchased Securities to Seller pursuant to Paragraph 3, 4 or 11 hereof,
or of Buyer's obligation to credit or pay Income to, or apply Income to
the obligations of, Seller pursuant to Paragraph 5 hereof.
REQUIRED DISCLOSURE FOR TRANSACTIONS IN WHICH THE SELLER RETAINS
CUSTODY OF THE PURCHASED SECURITIES
Seller is not permitted to substitute other securities for
those subject to this Agreement and therefore must keep
Buyer's securities segregated at all times, unless in this
Agreement Buyer grants Seller the right to substitute other
securities. If Buyer grants the right to substitute, this
means that Buyer's securities will likely be commingled with
Seller's own securities during the trading day. Buyer is
advised that, during any trading day that Buyer's securities
are commingled with Seller's securities, they [will]* [may]**
be subject to liens granted by Seller to [its clearing bank]*
[third parties]** and may be used by Seller for deliveries on
other securities transactions. Whenever the securities are
commingled, Seller's ability to resegregate substitute
securities for Buyer will be subject to Seller's ability to
satisfy [the clearing]* [any]** lien or to obtain substitute
securities.
*Language to be used under 17 C.F.R. Section403.4(e) if Seller is a
government securities broker or dealer other than a financial
institution.
**Language to be used under 17 C.F.R. Section403.5(d) if Seller is a
financial institution.
9. SUBSTITUTION
(a) Seller may, subject to agreement with and acceptance by Buyer,
substitute other Securities for any Purchased Securities. Such
substitution shall be made by transfer to Buyer of such other
Securities and transfer to Seller of such Purchased
Securities. After substitution, the substituted Securities
shall be deemed to be Purchased Securities.
(b) In Transactions in which Seller retains custody of Purchased
Securities, the parties expressly agree that Buyer shall be
deemed, for purposes of subparagraph (a) of this Paragraph, to
have agreed to and accepted in this Agreement substitution by
Seller of other Securities for Purchased Securities; provided,
however, that such other Securities shall have a Market Value
at least equal to the Market Value of the Purchased securities
for which they are substituted.
<PAGE> 8
10. REPRESENTATIONS
Each of Buyer and Seller represents and warrants to the other flat (i)
it is duly authorized to execute and deliver this Agreement, to enter
into Transactions contemplated hereunder and to perform its obligations
hereunder and has taken all necessary action to authorize such
execution, delivery and performance, (ii) it will engage in such
Transactions as principal (or, if agreed in writing, in the form of an
annex hereto or otherwise, in advance of any Transaction by the other
party hereto, as agent for a disclosed principal), (iii) the person
signing this Agreement on its behalf is duly authorized to do so on its
behalf (or on behalf of any such disclosed principal), (iv) it has
obtained all authorizations of any governmental body required in
connection with this Agreement and the Transactions hereunder and such
authorizations are in full force and effect and (v) the execution,
delivery and performance of this Agreement and the Transactions
hereunder will not violate any law, ordinance, charter, by-law or rule
applicable to it or any agreement by which it is bound or by which any
of its assets are affected. On the Purchase Date for any Transaction
Buyer and Seller shall each be deemed to repeat all the foregoing
representations made by it.
11. EVENTS OF DEFAULT
In the event that (i) Seller fails to transfer or Buyer fails to
purchase Purchased Securities upon the applicable Purchase Date, (ii)
Seller fails to repurchase or Buyer fails to transfer Purchased
Securities upon the applicable Repurchase Date, (iii) Seller or Buyer
fails to comply with Paragraph 4 hereof, (iv) Buyer fails, after one
business day's notice, to comply with Paragraph 5 hereof, (v) an Act of
Insolvency occurs with respect to Seller or Buyer, (vi) any
representation made by Seller or Buyer shall have been incorrect or
untrue in any material respect when made or repeated or deemed to have
been made or repeated, or (vii) Seller or Buyer shall admit to the
other its inability to, or its intention not to, perform any of its
obligations hereunder (each an "Event of Default"):
(a) The nondefaulting party may, at its option (which option shall
be deemed to have been exercised immediately upon the
occurrence of an Act of Insolvency), declare an Event of
Default to have occurred hereunder and, upon the exercise or
deemed exercise of such option, the Repurchase Date for each
Transaction hereunder shall, if it has not already occurred,
be deemed immediately to occur (except that, in the event that
the Purchase Date for any Transaction has not yet occurred as
of the date of such exercise or deemed exercise, such
Transaction shall be deemed immediately canceled). The
nondefaulting party shall (except upon the occurrence of an
Act of Insolvency) give notice to the defaulting party of the
exercise of such option as promptly as practicable.
(b) In all Transactions in which the defaulting party is acting as
Seller, ff the nondefaulting party exercises or is deemed to
have exercised the option referred to in subparagraph (a) of
this Paragraph, (i) the defaulting party's obligations in
<PAGE> 9
such Transactions to repurchase all Purchased Securities, at
the Repurchase Price therefor on the Repurchase Date
determined in accordance with subpara graph (a) of this
Paragraph, shall thereupon become immediately due and payable,
(ii) all Income paid after such exercise or deemed exercise
shall be retained by the nondefaulting party and applied to
the aggregate unpaid Repurchase Prices and any other amounts
owing by the defaulting party hem- under, and (iii) the
defaulting party shall immediately deliver to the
nondefaulting party any Purchased Securities subject to such
Transactions then in the defaulting party's possession or
control
(c) In all Transactions in which the defaulting party is acting as
Buyer, upon tender by the nondefaulting party of payment of
the aggregate Repurchase Prices for all such Transactions, all
right, title and interest in and entitlement to all Purchased
Securities subject to such Transactions shall be deemed
transferred to the nondefaulting party, and the defaulting
party shall deliver all such Purchased Securities to the
nortdefaulting party.
(d) If the nondefaulting party exercises or is deemed to have
exercised the option referred to in subparagraph (a) of this
Paragraph, the nondefaulting party, without prior notice to
the defaulting party, may:
(i) as to Transactions in which the defaulting party is
acting as Seller, (A) immediately sell, in a
recognized market (or otherwise in a commercially
reasonable manner) at such price or prices as the
nondefaulting party may reasonably deem satisfactory,
any or all Purchased Securities subject to such
Transactions and apply the proceeds thereof to the
aggregate unpaid Repurchase Prices and any other
amounts owing by the defaulting party hereunder or
(B) in its sole discretion elect, in lieu of selling
all or a portion of such Purchased Securities, to
give the defaulting party credit for such Purchased
Securities in an amount equal to the price therefor
on such date, obtained from a generally recognized
source or the most recent closing bid quotation from
such a source, against the aggregate unpaid
Repurchase Prices and any other amounts owing by the
defaulting party hereunder, and
(ii) as to Transactions in which the defaulting party is
acting as Buyer, (A) immediately purchase, in a
recognized market (or otherwise in a commercially
reasonable manner) at such price or prices as the
nondefaulting party may reasonably deem satisfactory,
securities ("Replacement Securities") of the same
class and amount as any Purchased Securities that are
not delivered by the defaulting party to the
nondefaulting party as required hereunder or (B) in
its sole discretion elect, in lieu of purchasing
Replacement Securities, to be deemed to have
purchased Replacement Securities at the price
therefor on such date,
<PAGE> 10
obtained from a generally recognized source or the
most recent closing offer quotation from such a
source.
Unless otherwise provided in Annex 1, the parties acknowledge
and agree that (1) the Securities subject to any Transaction
hereunder are instruments traded in a recognized market, (2)
in the absence of a generally recognized source for prices or
bid or offer quotations for any Security, the nondefaulting
party may establish the source therefor in its sole discretion
and (3) all prices, bids and offers shall be determined
together with accrued Income (except to the extent contrary to
market practice with respect to the relevant Securities).
(e) As to Transactions in which the defaulting party is acting as
Buyer, the defaulting party shall be liable to the
nondefaulting party for any excess of -the price paid (or
deemed paid) by the nondefaulting party for Replacement
Securities over the Repurchase Price for the Purchased
Securities replaced thereby and for any amounts payable by the
defaulting party under Paragraph 5 hereof or otherwise
hereunder.
(f) For purposes of this Paragraph 11, the Repurchase Price for
each Transaction hereunder in respect of which the defaulting
party is acting as Buyer shall not increase above the amount
of such Repurchase Price for such Transaction determined as of
the date of the exercise or deemed exercise by the
nondefaulting party of the option referred to in subparagraph
(a) of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting
party for (i) the amount of all reasonable legal or other
expenses incurred by the nondefaulting party in connection
with or as a result of an Event of Default, (ii) damages in an
amount equal to the cost (including all fees, expenses and
commissions) of entering into replacement transactions and
entering into or tern-terminating hedge transactions in
connection with or as a result of an Event of Default and
(iii) any other loss, damage, cost or expense directly arising
or resulting from the occurrence of an Event of Default in
respect of a Transaction.
(h) To the extent permitted by applicable law, the defaulting
party shall be liable to the nondefaulting party for interest
on any amounts owing by the defaulting party hereunder, from
the date the defaulting party becomes liable for such amounts
hereunder until such amounts are (i) paid in full by the
defaulting party or (ii) satisfied in full by the exercise of
the nondefaulting party's rights hereunder. Interest on any
sum payable by the defaulting party to the nondefaulting party
under this Paragraph 11(h) shall be at a rate equal to the
greater of the Pricing Rate for the relevant Transaction or
the Prime Rate.
(i) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any
other agreement or applicable law.
<PAGE> 11
12. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will
enter into each Transaction hereunder in consideration of and in
reliance upon the fact that, all Transactions hereunder constitute a
single business and contractual relationship and have been made in
consideration of each other. Accordingly, each of Buyer and Seller
agrees (i) to perform all of its obligations in respect of each
Transaction hereunder, and that a default in the performance of any
such obligations shall constitute a default by it in respect of all
Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any
Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries and other
transfers made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries and
other transfers in respect of any other Transactions hereunder, and the
obligations to make any such payments, deliveries and other transfers
may be applied against each other and netted.
13. NOTICES AND OTHER COMMUNICATIONS
Any and all notices, statements, demands or other communications
hereunder may be given by a party to the other by mail, facsimile-dle,
telegraph, messenger or otherwise to the address specified in Annex H
hereto, or so sent to such party at any other place specified in a
notice of change of address hereafter received by the other. All
notices, demands and requests hereunder may be made crafty, to be
confirmed promptly in writing, or by other communication as specified
in the preceding sentence.
14. ENTIRE AGREEMENT; SEVERABILITY
This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for repurchase
transactions. Each provision and agreement herein shall be treated as
separate and independent from any other provision or agreement herein
and shall be enforceable notwithstanding the unenforceability of any
such other provision or agreement.
15. NON-ASSIGNABILITY; TERMINATION
(a) The rights and obligations of the parties under this Agreement
and under any Transaction shall not be assigned by either
party without the prior written consent of the other party,
and any such assignment without the prior written consent of
the other party shall be null and void. Subject to the
foregoing, this Agreement and any Transactions shall be
binding upon and shall inure to the benefit of the parties and
their respective successors and assigns. This Agreement may be
terminated by either party upon giving written notice to the
other, except that this Agreement shall, notwithstanding such
notice, remain applicable to any Transactions then
outstanding.
<PAGE> 12
(b) Subparagraph (a) of this Paragraph 15 shall not preclude a
party from assigning, charging or otherwise dealing with all
or any part of its interest in any sum payable to ft under
Paragraph 11 hereof.
16. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflict of law principles thereof
17. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise
of any remedy hereunder by any party shall constitute a waiver of its
right to exercise any other remedy hereunder. No modification or waiver
of any provision of this Agreement and no consent by any party to a
departure herefrom shall be effective unless and until such shall be in
writing and duly executed by both of the parties hereto. Without
limitation on any of the foregoing, the failure to give a notice
pursuant to Paragraph 4(a) or 4(b) hereof will not constitute a waiver
of any right to do so at a later date.
18. USE OF EMPLOYEE PLAN ASSETS
(a) If assets of an employee benefit plan subject to any provision
of the Employee Retirement Income Security Act of 1974
("ERISA") are intended to be used by either party hereto (the
"Plan Party") in a Transaction, the Plan Party shall so notify
the other party prior to the Transaction. The Plan Party shall
represent in writing to the other party that the Transaction
does not constitute a prohibited transaction under ERISA or is
otherwise exempt therefrom, and the other party may proceed in
reliance thereon but shall not be required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this
Paragraph, any such Transaction shall proceed only if Seller
furnishes or has furnished to Buyer its most recent available
audited statement of its financial condition and its most
recent subsequent unaudited statement of its financial
condition.
(c) By entering into a Transaction pursuant to this Paragraph,
Seller shall be deemed (i) to represent to Buyer that since
the date of Seller's latest such financial statements, there
has been no material adverse change in Seller's financial
condition which Seller has not disclosed to Buyer, and (ii) to
agree to provide Buyer with future audited and unaudited
statements of its financial condition as they are issued, so
long as it is a Seller in any outstanding Transaction
involving a Plan Party.
<PAGE> 13
19. INTENT
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11
of the United States Code, as amended (except insofar as the
type of Securities subject to such Transaction or the term of
such Transaction would render such definition inapplicable),
and a 'securities contract' as that term is defined in Section
741 of Title 11 of the United States Code, as amended (except
insofar as the type of assets subject to such Transaction
would render such definition inapplicable).
(b) It is understood that either party's right to liquidate
Securities delivered to it in connection with Transactions
hereunder or to exercise any other remedies pursuant to
Paragraph 11 hereof is a contractual right to liquidate such
Transaction as described in Sections 555 and 559 of Title 11
of the United States Code, as amended.
(c) The parties agree and acknowledge that if a party hereto is an
"insured depository institution," as such term is defined in
the Federal Deposit Insurance Act, as amended ("FDIA"), then
each Transaction hereunder is a "qualified financial
contract," as that term is defined in FDIA and any rules,
orders or policy statements thereunder (except insofar as the
type of assets subject to such Transaction would render such
definition inapplicable).
(d) It is understood that this Agreement constitutes a "netting
contract" as defined in and subject to Title IV of the Federal
Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") and each payment entitlement and payment obligation
under any Transaction hereunder shall constitute a "covered
contractual payment entitlement" or "covered contractual
payment obligation", respectively, as defined in and subject
to FDICIA (except insofar as one or both of the parties is not
a financial institution as that is defined in FDICIA).
20. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a
broker or dealer registered with the Securities and Exchange
Commission ("SEC") under Section 15 of the Securities Exchange
Act of 1934 ("1934 Act"), the Securities Investor Protection
Corporation has taken the position that the provisions of the
Securities Investor Protection Act of 1970 ("SIPA") do not
protect the other party with respect to any Transaction
hereunder;
(b) in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer
registered with the SEC under Section
<PAGE> 14
15C of the 1934 Act, SIPA will not provide protection to the
other party with respect to any Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a
financial institution funds held by the financial institution
pursuant to a Transaction hereunder are not a deposit and
therefore are not insured by the Federal Deposit Insurance
Corporation or the National Credit Union Share Insurance Fund,
as applicable.
MERRILL LYNCH MORTGAGE CAPITAL INC. MERRILL LYNCH CREDIT CORPORATION
By: By:
------------------------------- -------------------------------
Title: Title:
------------------------------- ----------------------------
Date: Date:
------------------------------- -----------------------------
PACIFICAMERICA SECURITIES, INC.
By:
-------------------------------
Title:
-------------------------------
Date:
-------------------------------
<PAGE> 15
ANNEX I
(continued)
SUPPLEMENTAL TERMS AND CONDITIONS TO
MASTER REPURCHASE AGREEMENT,
DATED AS OF OCTOBER 31, 1997, AMONG
MERRILL LYNCH MORTGAGE CAPITAL INC.,
MERRILL LYNCH CREDIT CORPORATION
AND PACIFICAMERICA SECURITIES, INC.
1. APPLICABILITY. These Supplemental Terms and Conditions (the
"Supplemental Terms") to Master Repurchase Agreement (the
"Master Repurchase Agreement", and collectively with these
Supplemental Terms, the "Agreement") modify the terms and
conditions under which the parties hereto, from time to
time, enter into Transactions. To the extent that these
Supplemental Terms conflict with the terms of the Master
Repurchase Agreement, these Supplemental Terms shall
control.
2. ADDITIONAL DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Master Repurchase
Agreement. Capitalized terms used in the Master Repurchase Agreement
whose definitions are modified in these Supplemental Terms shall, for
all purposes of the Agreement, be deemed to have such modified
definitions.
"A Quality Mortgage Loans" shall refer to Mortgage Loans
originated in the manner described for such category in the
Seller's Underwriting Guidelines.
"A- Quality Mortgage Loans" shall refer to Mortgage Loans
originated in the manner described for such category in the
Seller's Underwriting Guidelines.
"Affiliate" means any subsidiary of Seller.
"Assignment" shall have the meaning set forth in Paragraph 3(b)
of the Master Repurchase Agreement.
"B Quality Mortgage Loans" shall refer to Mortgage Loans
originated in the manner described for such category in the
Seller's Underwriting Guidelines.
"Book Net Worth" shall refer to the equity of PAMM determined in
accordance with GAAP less the sum of (i) intercompany
receivables, (ii) loans to officers or employees of Seller, (iii)
deferred charges and (iv)
<PAGE> 16
amounts to be withdrawn for payment of taxes due and payable by
the shareholders of PAMM.
"Business Day" shall mean any day excluding Saturday, Sunday and
any day on which banks located in the States of New York or
California are authorized or permitted to close for business. All
references to "business day" in the Master Repurchase Agreement
shall be deemed to be references to Business Day.
"Buyer" shall mean MLCC, in the case of Mortgage Loans secured by
second liens, and MLMCI in all other cases.
"Buyer's Margin Amount" shall have the meaning set forth in the
Master Repurchase Agreement except that the percentage referred
to therein for each Transaction shall be specified in the related
Confirmation/Funding Request.
"C Quality Mortgage Loans" shall refer to Mortgage Loans
originated in the manner described for such category in the
Seller's Underwriting Guidelines.
"C- Quality Mortgage Loans" shall refer to Mortgage Loans
originated in the manner described for such category in the
Seller's Underwriting Guidelines.
"CLTV" shall mean, with respect to each Mortgage Loan that is not
a first lien residential mortgage loan, the combined
loan-to-value ratio calculated as a fraction, expressed as a
percentage, the numerator of which is the original principal
balance of the related Mortgage Loan (together with the related
senior lien mortgage loans) and the denominator of which is
either (i) the lesser of the sales price or the appraised value
of the related mortgaged property if the sale occurred within six
(6) months of the determination date, or (ii) the appraised value
of the related mortgaged property.
"Confirmation/Funding Request" shall have the meaning of
"Confirmation" as set forth in the Master Repurchase Agreement
but shall be substantially in the form attached hereto as Exhibit
A.
"Covenant Compliance Certificate" shall refer to a certificate of
PAMM to the effect that PAMM and Pacific Thrift and Loan Company
are in compliance, as of the date of such certificate, with the
covenants set forth in Paragraphs 15(c)(xi) and (xii),
respectively, of this Annex I.
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<PAGE> 17
"Custodian" shall refer to Bankers Trust Company of California,
N.A., or any permitted successor thereto pursuant to the Custody
Agreement.
"Custody Agreement" shall refer to a custody agreement pursuant
to which the Custodian acts as bailee for Buyer.
"D Quality Mortgage Loans" shall refer to Mortgage Loans
originated in the manner described for such category in the
Seller's Underwriting Guidelines.
"FHA" shall mean the Federal Housing Administration of the
Department of Housing and Urban Development.
"FNMA" shall mean the Federal National Mortgage Association.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Market Value" shall mean, with respect to any Mortgage Loans as
of any date of determination, the value of such Mortgage Loans on
such date as determined in accordance with Paragraph 12 of these
Supplemental Terms.
"Master Assignment Agreement" means a loan agreement between
Buyer and Seller for the financing of residual interests
resulting from Seller's securitization of Mortgage Loans.
"MLCC" shall refer to Merrill Lynch Credit Corporation.
"MLMCI" shall refer to Merrill Lynch Mortgage Capital Inc.
"Mortgage" shall mean a duly recorded first or second mortgage or
first or second deed of trust on improved residential real
property.
"Mortgage Loan Schedule" shall have the meaning set forth in
Paragraph 3(b) of the Master Repurchase Agreement.
"Mortgage Loans" shall mean those first or second lien
residential mortgage loans secured by real property that Seller
has sold to Buyer hereunder and shall include A Quality Mortgage
Loans, A- Quality Mortgage Loans, B Quality Mortgage Loans, C
Quality Mortgage Loans, C- Quality Mortgage Loans and D Quality
Mortgage Loans.
I-3
<PAGE> 18
"Mortgage Loan Income" shall mean income payable with respect to
a Mortgage Loan including all amounts payable on account of such
Mortgage Loan whether principal, interest, partial prepayments,
prepayments in full, penalties, advance payments or expenses and
whether payable by or from the mortgagor or the servicer for such
Mortgage Loan.
"PAMM" shall refer to PacificAmerica Money Center, Inc.
"Person" means a corporation, association, partnership,
organization, business, trust, individual, a government or
political subdivision thereof, any governmental agency or any
other entity.
"Required Loan Documents" shall refer to the documents required
to be held by the Custodian as bailee under the Custody
Agreement.
"Securities" shall, in addition to the definition set forth in
the Master Repurchase Agreement, refer to Mortgage Loans;
provided, however, that such Mortgage Loans shall not be deemed
to be securities for the purposes of any securities or blue sky
laws; provided further, however, that "Securities" shall also
refer to additional assets as Buyer may determine at its option
and in its sole discretion as evidenced by an amendment to this
Agreement.
"Seller" shall refer to PacificAmerica Securities, INc., a
Delaware corporation.
"Seller's Margin Amount" shall have the meaning set forth in the
Master Repurchase Agreement except that the percentage referred
to therein for each Transaction shall be specified in the related
Confirmation/Funding Request.
"Seller's Underwriting Guidelines" shall refer to the
underwriting guidelines for various categories of Mortgage Loans
in the form most recently approved by Buyer in writing.
"Servicer" shall refer to Seller or such other servicer as Buyer
may approve in its sole discretion as the servicer of a Mortgage
Loan.
"Third Person" shall refer to any Person to whom Buyer transfers
any portion of its interest in the Mortgage Loans.
I-4
<PAGE> 19
"Transaction" shall, in addition to the definition set forth in
the Master Repurchase Agreement, refer to substitutions pursuant
to Paragraph 9 of the Master Repurchase Agreement.
"Trust Receipt" shall refer to the Trust Receipt substantially in
the form attached as an exhibit to the Custody Agreement.
3. MODIFICATION OF PARAGRAPH 3(b) OF THE MASTER REPURCHASE AGREEMENT.
Paragraph 3(b) of the Master Repurchase Agreement is amended by adding
the following after the first
sentence of Paragraph 3(b):
In the case of Transactions involving Securities that are
Mortgage Loans, (a) copies of the documents reasonably requested
by Buyer shall have been delivered to Buyer prior to the Purchase
Date for such Mortgage Loans, (b) the Purchased Securities shall
be identified on a detailed listing to be provided by Seller to
Buyer (a "Mortgage Loan Schedule") attached to an Assignment (as
defined below), which Mortgage Loan Schedule shall indicate the
category of Mortgage Loan and such other information as Buyer may
require and (c) the Required Loan Documents shall be delivered to
and/or held by the Custodian pursuant to the terms of the Custody
Agreement, pursuant to which Custody Agreement the Custodian
shall, among other things, issue Trust Receipts in a form
acceptable to Buyer, evidencing Custodian's retention of the
Required Loan Documents as custodian for Buyer.
4. MODIFICATION OF PARAGRAPH 4 OF THE MASTER REPURCHASE AGREEMENT.
(a) Paragraph 4 of the Master Repurchase Agreement is hereby amended
by adding the following sentence at the end of subparagraph (a):
In case of a Margin Deficit with respect to Mortgage
Loans, Seller shall transfer cash or Mortgage Loans to satisfy
its obligations hereunder; provided, however, Seller may transfer
Mortgage Loans only to the extent that they have been reviewed by
the Custodian pursuant to the Custody Agreement and the Custodian
has furnished its Trust Receipt with respect thereto.
(b) Paragraph 4(a) of the Master Repurchase Agreement is hereby
further amended to provide that Seller shall transfer the cash or
Mortgage Loans to Buyer (in the manner contemplated by the
Agreement and the Custody
I-5
<PAGE> 20
Agreement) in accordance with Paragraph 24 of these Supplemental
Terms.
5. MODIFICATION OF PARAGRAPH 5 OF THE MASTER REPURCHASE AGREEMENT.
Paragraph 5 of the Master Repurchase Agreement is hereby amended by
adding the following after the last
sentence of such Paragraph:
If an Event of Default shall have occurred and be
continuing, Seller shall collect, or cause to be collected, all
Mortgage Loan Income on behalf of Buyer and, upon request of
Buyer, shall forward such payments to Buyer immediately upon
receipt.
6. MODIFICATION OF PARAGRAPH 7 OF THE MASTER REPURCHASE AGREEMENT.
Paragraph 7 of the Master Repurchase Agreement is hereby amended by
adding the following after the last
sentence of such Paragraph:
Buyer shall disburse funds to an account specified in
writing by Seller. In the case of Mortgage Loans, transfer of
such Mortgage Loans to Buyer shall occur as of the date on which
Buyer receives (i) the Trust Receipt of the Custodian and (ii) a
list identifying the Servicer with respect to each such Mortgage
Loan, if not otherwise set forth in the Trust Receipt.
In the case of Mortgage Loans transferred by Buyer to a
Third Person, Buyer shall send a notice to the Custodian and
transfer of such Mortgage Loans to any Third Person shall occur
when such Third Person receives the acknowledgment of the
Custodian identifying such Mortgage Loans. Any Mortgage Loans
repurchased by Seller pursuant to Paragraph 3(c) or 11(c) of the
Master Repurchase Agreement shall be transferred to Seller or its
agent upon the receipt by the Custodian from Buyer of a notice of
transfer which confirms the release of Buyer's interest in any
such Mortgage Loans.
7. MODIFICATION OF PARAGRAPH 8 OF THE MASTER REPURCHASE AGREEMENT.
Paragraph 8 of the Master Repurchase Agreement is amended by adding the
following at the end of the last
sentence thereof:
In the case of Mortgage Loans, Buyer hereby grants to
Seller the right to perform in Buyer's stead under any
repurchase, reverse repurchase or similar transaction in which
Buyer has sold, loaned or otherwise transferred the Mortgage
Loans in the event that Buyer has defaulted on its obligation to
repurchase or accept redelivery of such Mortgage Loans
I-6
<PAGE> 21
in conformity with the terms of any such transaction and so long
as an Event of Default under the Agreement on the part of Seller
shall not have occurred and be continuing.
8. MODIFICATIONS OF PARAGRAPH 11 OF THE MASTER REPURCHASE AGREEMENT.
Paragraph 11 of the Master Repurchase Agreement is hereby further
amended by adding new subsections (i),
(j), (k) and (l) to such Paragraph:
(i) Any sales of Purchased Securities, pursuant to
Paragraph 11(d)(i) of the Agreement, which are Mortgage Loans may
be effected in public or private sales as Buyer may reasonably
deem appropriate and at such price or prices as Buyer may
reasonably deem satisfactory. In the event Buyer elects in lieu
of so selling such Purchased Securities to give Seller credit for
such Purchased Securities, such credit shall be in an amount
equal to the Market Value thereof as of the date of permitted
acceleration of the non-defaulting party hereunder pursuant to
Paragraph 11(a).
(j) If an Event of Default shall occur and be continuing,
Buyer shall exercise reasonable efforts (the reasonableness of
which shall be determined by Buyer in its discretion in light of
the circumstances) to provide notice to Seller prior to
exercising any remedy in respect of an Event of Default by
Seller, provided, however, that notwithstanding anything in the
Agreement to the contrary, Buyer shall not be required, prior to
exercising any remedy in respect of an Event of Default by
Seller, to give any notice otherwise required hereunder, if Buyer
reasonably believes that (i) the Mortgage Loans then held by
Buyer threaten to decline speedily in value or (ii) any delay
occasioned by the giving of such notice will jeopardize Buyer's
ability to recover, by sale of such Securities or otherwise, all
or part of the then-outstanding amount of the Repurchase Price or
of any other amounts owed to Buyer in connection therewith. If no
prior notice is given, Buyer shall give notice to Seller of the
remedies effected by Buyer promptly thereafter. Buyer may
forthwith apply the cash, if any, then held by it as part of the
Purchased Securities relating to any Transaction to the payment
of the Repurchase Price, and, if there shall be no such cash or
the cash so applied shall not be sufficient to pay in full the
Repurchase Price, may thereafter collect, receive, appropriate,
retain and realize upon the Purchased Securities, or any part
thereof, and may forthwith sell, assign, contract to sell, or
otherwise dispose of and deliver the Purchased Securities, or any
part
I-7
<PAGE> 22
thereof, in one or more parcels at such public or private sale or
sales, at such place or places, at such price or prices and upon
such other terms and conditions as Buyer may deem best (provided,
however, that Buyer shall act in a commercially reasonable
manner), for cash or on credit or for future delivery without
assumption of any credit risk, with the right of Buyer upon any
such sale or sales to purchase all or any part of the Purchased
Securities so sold. Upon any sale, transfer or other disposition
of the Purchased Securities pursuant hereto Buyer shall have the
right to deliver, assign and transfer to the transferee thereof
the Purchased Securities so sold. Each transferee upon any such
transfer or other disposition shall hold the property thereby
acquired by it absolutely free from any claim or right of any
kind, including any equity or rights of redemption, of Seller,
who hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any rule of law or
statute whether now existing or hereafter adopted (in the latter
case, to the extent permitted thereby). Seller agrees that Buyer
need give only such notice of the time and place of any public or
private sale (including any adjourned private sale) or other
intended disposition as may be required by market conditions and
standards of commercial reasonableness and that Buyer need not in
any event give more than five (5) days' notice that such sale or
disposition is to take place. Seller agrees that the notice
provided for in the preceding sentence is reasonable notification
of such matters.
Buyer shall not be obligated to make any sale pursuant to
any such notice. Buyer may, without notice or publication,
adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned, provided that Buyer
shall act in a commercially reasonable manner. In case of any
sale of all or any part of the Purchased Securities on credit or
for future delivery, the Purchased Securities so sold may be
retained by Buyer until the selling price is paid by the
purchaser thereof, but Buyer shall not incur any liability in
case of the failure of such purchaser to take up and pay for the
Purchased Securities so sold, and, in case of any such failure,
such Purchased Securities may again be sold upon like notice.
Buyer, however, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the lien and security interest created hereby
I-8
<PAGE> 23
and sell the Purchased Securities, or any portion thereof, under
a judgment or decree of a court or courts of competent
jurisdiction.
(k) Buyer shall have no obligation to realize upon any
Purchased Securities, except through proper application of any
distributions with respect to the Purchased Securities made
directly to Buyer or its agent(s). Seller hereby waives the
defense of impairment of the Purchased Securities; provided,
however, that Buyer shall act in a commercially reasonable
manner. Buyer may in its sole discretion elect to realize upon
all or a portion of the Purchased Securities by giving Seller
credit for such Purchased Securities, which credit shall be in an
amount equal to the Market Value thereof as of the date of
permitted acceleration by Buyer hereunder pursuant to Paragraph
11(a).
(l) Any purchases of Replacement Securities, pursuant to
Paragraph 11(d)(ii) of the Agreement, which are Mortgage Loans
shall be of the same or similar type, maturity and amount as the
Purchased Securities that are not delivered by Buyer and may be
effected in purchases in a commercially reasonable manner at such
price or prices as Seller may reasonably deem appropriate. In the
event Seller elects in lieu of so purchasing such Replacement
Securities to be deemed to have purchased Replacement Securities
in a commercially reasonable manner as provided in Paragraph
11(d)(ii), such Replacement Securities shall be deemed to have
been purchased at the Market Value thereof (determined as of the
date of permitted acceleration by Seller hereunder pursuant to
Paragraph 11(a).
9. DISBURSEMENT OF FUNDS. Seller may request that the parties enter into
a transaction hereunder by making a written request under the form of
Confirmation/Funding Request attached hereto as Exhibit A for the
purchase and sale of Mortgage Loans, either by mail or facsimile
transmission, to Buyer. Buyer shall pay the Purchase Price within one
(1) Business Day of receipt of such notice, so long as the terms and
conditions of the Agreement are fully satisfied and no Event of Default
hereunder shall have occurred and be continuing. The amount of any such
Purchase Price of Mortgage Loans shall be in a minimum amount of
$1,000,000.
10. CONFIRMATIONS.
(a) Each Confirmation shall be binding upon Seller and Buyer unless
written notice of objection is given by the objecting party to
the other party within one (1)
I-9
<PAGE> 24
business day after the objecting party's receipt of such
Confirmation.
(b) Notwithstanding Paragraph 3(b) of the Master Repurchase
Agreement, in the event of any conflict between the terms of a
Confirmation and this Agreement, such Confirmation shall prevail.
11. INCOME PAYMENTS. All payments and distributions, whether in cash or in
kind, made on or with respect to the Mortgage Loans shall, unless
otherwise mutually agreed by Buyer and Seller, be paid, delivered or
transferred in the case of Mortgage Loans, so long as an Event of
Default on the part of Seller shall not have occurred and be continuing,
directly to the Servicer from the related mortgagor.
12. MARKET VALUE DETERMINATION. Buyer shall determine the Market Value for
the Purchased Securities in the good faith exercise of its reasonable
business judgment from time to time and at such time as it may elect in
its sole discretion; provided, however, that Buyer shall assign a Market
Value of zero with respect to (i) any Mortgage Loan that is, as of the
valuation date, delinquent for (1) more than sixty (60) days in the case
of Mortgage Loans amounting in aggregate principal amount to 3% of the
aggregate principal amount of Mortgage Loans subject to this Agreement
on the date of determination and (2) more than thirty (30) days in the
case of all other Mortgage Loans, (ii) any Mort- gage Loan with respect
to which there is a breach of a rep- resentation, warranty or covenant
made by Seller in this Agreement or the Custody Agreement that
materially adversely affects Buyer's interest in such Mortgage Loan and
which breach has not been cured prior to the date on which Market Value
is being determined and (iii) any Mortgage Loan that was not originated
in conformity with Seller's Underwriting Guidelines. Buyer shall inform
Seller on each valuation date of any Mortgage Loan which has been
assigned a Market Value of zero, and Buyer shall, within one Business
Day of its receiving a written request for release of such Mortgage
Loan, notify the Custodian that Buyer has released its interest in such
Mortgage Loan. Buyer shall provide Seller with communications outlining
Buyer's periodic determination of the Market Value of the Purchased
Securities, which communications shall be provided bi-weekly or with
such lesser frequency as the Market Value is actually determined.
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<PAGE> 25
13. SECURITY INTEREST.
(a) In the event, for any reason, any Transaction is construed by any
court as a secured loan rather than a purchase and sale, the
parties intend that Buyer shall have a perfected first priority
security interest in all of the Purchased Securities.
(b) Seller shall pay all reasonable fees and expenses associated with
perfecting such security interest including, without limitation,
the cost of filing financing statements under the Uniform
Commercial Code, to the extent required by Buyer or its counsel,
and any fees charged by the Custodian.
14. DELIVERY OF ADDITIONAL DOCUMENTS. Seller shall, simultaneously with the
funding of each Transaction, deliver to Buyer through the Custodian a
fully executed Trust Receipt.
15. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Each party represents and warrants, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and
warrant, as follows:
(i) The execution, delivery and performance of the Agreement
and the performance of each Transaction do not and will
not result in or require the creation of any lien,
security interest or other charge or encumbrance (other
than pursuant hereto) upon or with respect to any of its
properties; and
(ii) The Agreement is, and each Transaction when entered into
under the Agreement will be, a legal, valid and binding
obligation of such party enforceable against it in
accordance with the terms of the Agreement, subject to
applicable bankruptcy, insolvency, and similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity
(regardless of whether enforcement is sought in a
proceeding in equity or at law).
(b) Seller represents and warrants as of the date of the Agreement
and as of the Purchase Date of each Transaction, as follows:
(i) All information provided by Seller to Buyer or the
Custodian concerning the Mortgage Loans is true and
correct in all material respects;
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(ii) No Mortgage Loan shall have any scheduled payments of
Mortgage Loan Income in default or delinquent by (1)
more than sixty (60) days in the case of Mortgage Loans
amounting in aggregate principal amount to 3% of the
aggregate principal amount of Mortgage Loans subject to
this Agreement on the date of determination and (2)
more than thirty (30) days in the case of all other
Mortgage Loans;
(iii) No Mortgage Loan shall be in foreclosure and no
mortgagor relating to a Mortgage Loan shall be
currently the subject of an Act of Insolvency;
(iv) Seller shall cause each Mortgage Loan to be serviced in
strict conformity with the servicing standards
described in Paragraph 26(b) of these Supplemental
Terms;
(v) Seller, immediately prior to the purchase by Buyer
under the Agreement, is the legal and beneficial owner
of the Mortgage Loans free and clear of any lien,
security interest, option or encumbrance;
(vi) Buyer has a perfected first-priority security interest
in each Mortgage Loan (including all proceeds,
distributions and other amounts realized in respect
thereof) subject to no prior lien, charge, encumbrance
or rights of others, and no further action, other than
the possession by the Custodian of certain documents
relating thereto pursuant to the Custody Agreement,
including any filing or recordation of any document, is
required in order to establish and perfect the liens on
and security interest in the Mortgage Loans in favor of
Buyer against any third party in any jurisdiction;
(vii) No Mortgage Loan was subject to any lien or encumbrance
at the time of the purchase thereof by Buyer under the
Agreement;
(viii) Notwithstanding any other provision of the Agreement,
the maximum number of days, in aggregate that a
Mortgage Loan subject to any Transaction hereunder
shall have been subject to the Agreement or to the
Custody Agreement (except with the consent of Buyer)
shall be (1) one hundred and fifty (150) days with
respect to Mortgage Loans constituting up to 20% (by
Market Value) of the Mortgage Loans subject to this
Agreement and (2) one hundred and twenty (120) days in
all other cases;
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(ix) The aggregate outstanding Repurchase Price for Mortgage
Loans that are not first lien residential mortgage
loans does not exceed an amount equal to 20% of the
aggregate outstanding Repurchase Price for all Mortgage
Loans subject to the Agreement;
(x) The CLTV for each Mortgage Loan is not in excess of (1)
125% with respect to Mortgage Loans constituting up to
10% (by Market Value) of the Mortgage Loans subject to
this Agreement and (2) 90% in all other cases;
(xi) Each Mortgage Loan has been originated in compliance
with the Seller's Underwriting Guidelines and all
applicable laws and no change to such guidelines has
occurred since the date of the last written revision to
such guidelines was furnished to and approved in
writing by Buyer;
(xii) Seller is a wholly-owned subsidiary of PAMM;
(xiii) No Mortgage Loan is secured by mixed-use mortgaged
property utilized for both commercial and residential
purposes;
(xiv) No Mortgage Loan is secured exclusively by mortgaged
property constituting outbuildings; and
(xv) No Mortgage Loan is secured by a mobile home, modular
home or manufactured house that was not originated in
accordance with the origination standards of FNMA or
the FHA.
(c) Seller covenants with Buyer as follows:
(i) Seller shall be at the time it delivers any Mortgage
Loans to the Custodian or Buyer for any Transaction,
and shall continue to be, through the Purchase Date
relating to each such Transaction, the legal and
beneficial owner of such Mortgage Loans free and clear
of any lien, security interest, option or encumbrance
except for the security interest created by the
Agreement;
(ii) All data and other information relating to the Mortgage
Loans provided at any time by or on behalf of Seller to
the Custodian, whether in writing, by electronic
transmission or on computer tape or diskette or
otherwise, will be true and correct;
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(iii) Seller will pay and discharge all taxes, levies, liens
and other charges on its assets and on the Purchased
Securities sold by it to Buyer under the Agreement
which, in each case, in any manner would create any
lien or charge upon such Purchased Securities and which
would materially adversely affect the interests of
Buyer except those that are being contested by Seller
in good faith and with respect to which payment has
been stayed by a court of competent jurisdiction;
(iv) Seller will perform all of its duties and obligations
under the Agreement and the Custody Agreement;
(v) Seller shall promptly notify Buyer of (i) the
acceleration of any debt obligation or the termination
of any credit facility of Seller or PAMM; (ii) the
amount and maturity of any such debt assumed after the
date hereof; (iii) any material adverse developments
with respect to pending or future litigation involving
Seller or PAMM; and (iv) any other developments which
might materially and adversely affect the financial
condition of Seller or PAMM;
(vi) Seller shall promptly notify Buyer if Seller intends to
amend or supplement Seller's Underwriting Guidelines in
any way;
(vii) There shall exist, with respect to each Mortgage Loan,
a policy of title insurance (or title commitment or
title binder to issue same) effective as of the date of
origination of such Mortgage Loan, the original of
which policy of title insurance (or title commitment or
title binder to issue same) shall be delivered to the
Custodian in accordance with the terms of the Agreement
and the Custody Agreement;
(viii) Seller shall remain a wholly-owned subsidiary of PAMM
unless Buyer shall otherwise agree in writing;
(ix) Seller shall cause PAMM to deliver a Covenant
Compliance Certificate to Buyer on the first business
day of each calendar month;
(x) The ratio of PAMM's assets to equity is not greater
than 15 to 1;
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(xi) The ratio of Pacific Thrift and Loan Company's assets
to equity is not greater than 15 to 1; and
(xii) Seller shall cause to be furnished directly to Buyer,
promptly after the production thereof, PAMM's Call
Reports and each report from PAMM to any applicable
regulatory authority and any response thereto from such
regulatory authority.
16. EVENTS OF DEFAULT.
(a) The term "Event of Default" shall, in addition to the definition
set forth in the Master Repurchase Agreement, include the
following events:
(i) Any governmental or self-regulatory authority shall
take possession of Seller, or any Affiliate thereof, or
all or substantially all its property or appoint any
such trustee, receiver, conservator or other official,
or such party shall take any action to authorize any of
the actions set forth in this clause (i).
(ii) Buyer or Seller shall have reasonably determined that
the other party is or will be unable to meet its
commitments under this Agreement, shall have notified
such other party of such determination (which notice
shall describe in a reasonable manner the reason for
such determination) and such other party shall not have
responded with appropriate information to the contrary
to the satisfaction of the notifying party within one
(1) Business Day.
(iii) In the judgment of Buyer a material adverse change
shall have occurred in the business, operations,
properties, prospects or financial condition of Seller;
(iv) The Agreement shall for any reason cease to create a
valid, perfected, first priority security interest in
any of the Purchased Securities; provided, however,
that such circumstance shall not constitute an Event of
Default if, after determining the Market Value of the
Mortgage Loans without taking into account the Mortgage
Loans with respect to which such circumstance has
occurred, no other Event of Default shall have occurred
and be continuing;
(v) Seller or PAMM shall be in material default with
respect to any normal and customary covenants
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under any material contract or agreement to which
it is a party (which covenants include, but are not
limited to, an Act of Insolvency of Seller or the
failure of Seller to make required payments under such
contract or agreement as they become due) which default
permits acceleration of the obligations of Seller under
such contract or agreement by any other party thereto;
(vi) Seller shall merge or consolidate into any entity
unless the surviving or resulting entity shall be
acceptable to Buyer, in its reasonable discretion, and
such entity expressly assumes by written agreement,
executed and delivered to Buyer in form and substance
satisfactory to Buyer, the performance of all Seller's
duties and obligations hereunder and under the Custody
Agreement;
(vii) Buyer shall request reasonable assurances as to the
financial well-being of Seller and such assurances
shall not have been provided in writing within
twenty-four (24) hours;
(viii) A final judgment by any competent court in the United
States of America for the payment of money in an amount
of at least $100,000 is rendered against the defaulting
party or PAMM (the latter case resulting in the
defaulting party being Seller), and the same remains
undischarged or unpaid for a period of thirty (30) days
during which execution of such judgment is not
effectively stayed;
(ix) Any representation or warranty made by Seller in the
Agreement or the Custody Agreement shall have been
incorrect or untrue when made or repeated or when
deemed to have been made or repeated and such breach is
continuing; provided, however, that with respect to any
representation or warranty made by Seller with respect
to a Mortgage Loan, such circumstance shall not
constitute an Event of Default if after determining the
Market Value of the Mortgage Loans without taking into
account the Mortgage Loan with respect to which such
circumstances have occurred, no other Event of Default
shall have occurred and be continuing;
(x) Seller shall breach any covenant in the Agreement and
such breach is continuing;
(xi) The filing by Seller or an Affiliate of a petition in
bankruptcy, the adjudication of Seller or an
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Affiliate as insolvent or bankrupt, the application by
Seller or an Affiliate for any receiver or trustee for
itself or any substantial part of its property, the
commencement of any proceeding relating to Seller or an
Affiliate under any reorganization, arrangement,
dissolution or liquidation law, or the initiation of
any such proceeding against Seller or an Affiliate if
such party indicates by any act its consent thereto or
if such proceeding is not dismissed or stayed within
fifteen (15) days;
(xii) A firm of independent accountants shall have failed to
issue an opinion or shall have issued an opinion
qualified adversely in any material respect in
connection with the most recent audited financial
statements of PAMM;
(xiii) Seller shall cease to conduct its business or shall
undertake a new line of businesses in substitution for,
or in addition to, its business as it is being
conducted on the date of the Agreement without Buyer's
review and consent, which consent shall not be
unreasonably withheld and which consent shall either be
given by Buyer within five (5) business days of Buyer
receiving a request from Seller or shall be deemed to
have been refused by Buyer;
(xiv) PAMM shall experience losses or changes in its
financial condition (exclusive of amounts withdrawn for
payment of taxes due and payable by the shareholders of
Seller) that cause its Book Net Worth for any two
consecutive calendar quarters to be less than or equal
to 80% of its Book Net Worth as of the commencement of
such period; and
(xv) Seller or any of Seller's Affiliates shall be in
default with respect to any contract or agreement with
Buyer or any of Buyer's Affiliates.
(b) In addition to the other remedies available to Buyer or Seller
upon the occurrence and during the continuance of an Event of
Default by a defaulting party, Buyer shall have the following
additional remedies upon the occurrence and during the
continuance of an Event of Default by Seller:
(i) All rights of Seller to receive payments on the
Mortgage Loans which it would otherwise be authorized
to receive pursuant to Paragraph 5 of
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the Master Repurchase Agreement as modified by
Paragraph 4 of these Supplemental Terms shall cease,
and all rights to such payments shall thereupon become
vested in Buyer, which shall thereupon have the sole
right to receive such payments and apply them to the
amounts owed by Seller pursuant to the Agreement.
(ii) All payments that are received by Seller contrary to
the provisions of the preceding clause (i) shall be
received in trust for the benefit of Buyer, shall be
segregated from other funds of Seller and shall be
promptly paid to Buyer.
(iii) Buyer may unilaterally instruct the Servicer to direct
all payments of Mortgage Loan Income directly to Buyer.
(iv) Buyer may exercise any self-help remedies permitted by
applicable law.
(v) Buyer shall be entitled to the right of set off with
respect to any amounts owed by Buyer or any Affiliate
of Buyer to Seller or any Affiliate of Seller under any
contract, margin account or other arrangement.
(c) Any sale of Purchased Securities under Paragraph 11 of the Master
Repurchase Agreement as modified by these Supplemental Terms
shall be conducted in a commercially reasonable manner.
(d) Expenses incurred in connection with an Event of Default shall
include without limitation those reasonable costs and expenses
incurred by the nondefaulting party as a result of the early
termination of any repurchase agreement or reverse repurchase
agreement entered into by the nondefaulting party in connection
with the Transaction then in default.
17. APPLICATION OF PROCEEDS. The proceeds of any sale or other realization
of all or any part of the Purchased Securities, and any other cash at
the time held by Buyer under the Agreement, shall be applied by Buyer in
the following order of priority:
First, to the payment of all reasonable costs and expenses
of such sale incurred by Buyer and its Affiliates and all
reasonable expenses (including the fees and expenses of counsel),
liabilities and advances
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reasonably made or incurred by Buyer and its affiliates
in connection therewith.
Second, to the payment of the outstanding Repurchase Price
owed by Seller under the Agreement.
Third, to the payment of all other amounts owed by Seller
under the Agreement.
Fourth, to the payment of any other amounts owed by Seller
to Buyer or any Affiliate thereof under any other instrument or
agreement.
Fifth, to the payment to Seller, or to such other person
as a court of competent jurisdiction may direct, of any surplus
then remaining from such proceeds and other cash.
As used in the Agreement, "proceeds" of the Purchased
Securities shall mean cash and other property received or
otherwise realized in respect of the Purchased Securities.
18. FINANCIAL STATEMENTS.
(a) As of the date hereof, Seller shall provide, or cause to be
provided, to Buyer the audited year-end financial statements and
most recent available interim financial statement of PAMM. Seller
shall periodically provide, or cause to be provided to, Buyer,
without any request or other action on the part of Buyer, PAMM's
year-end balance sheet, income statement and cash flow statement,
audited by BDO Seidman, LLP or another firm of independent
accountants acceptable to Buyer in its sole discretion, within
ninety (90) days after the end of PAMM's fiscal year, PAMM's
quarterly balance sheet income statement and cash flow statement,
within sixty (60) days after the end of the first three fiscal
Quarters in each of PAMM's fiscal years and PAMM's monthly
balance sheet and income statement within thirty (30) days after
the end of the first two months in each of PAMM's fiscal
quarters.
(b) Seller shall provide, or shall cause to be provided to, Buyer, at
the expense of Seller when requested by Buyer, with all periodic
unaudited balance sheets and income statements of PAMM and Seller
from time to time as soon after the preparation thereof as
practicable.
(c) Each delivery of Purchased Securities by Seller to Buyer
hereunder will constitute a representation by Seller that there
has been no material adverse change
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in Seller's or PAMM's financial condition not disclosed to Buyer
since the date of Seller's and PAMM's most recent unaudited
balance sheet or income statement delivered to Buyer. Seller
shall provide, or shall cause to be provided to, Buyer, from time
to time at Seller's expense, with such information concerning
Seller or PAMM of a financial or operational nature as Buyer may
reasonably request promptly upon receipt of such request.
19. PRICE DIFFERENTIAL; REPURCHASE PRICE.
(a) The Price Differential shall be payable in arrears with respect
to each Transaction, together with the Purchase Price therefor,
on the termination date for the related Transaction or as may be
otherwise mutually agreed upon by the parties and as specified in
the related Confirmation.
(b) All calculations of Price Differential shall be made on the basis
of a 360-day year and the actual number of days elapsed from, and
including, the related Purchase Date to, but excluding, the date
the related Repurchase Price is paid to Buyer.
(c) Payment of the Repurchase Price (including the Price
Differential) shall be made by wire transfer in immediately
available funds or in such other manner as may be mutually agreed
upon by Buyer and Seller in writing. Amounts received by Buyer
after 3:00 p.m., New York City time, on any Business Day shall be
deemed to have been paid by Seller and received by Buyer on the
next succeeding Business Day.
20. MAXIMUM TRANSACTION AMOUNT; TYPES OF MORTGAGE LOANS;
TRANSACTIONS PERMISSIVE.
(a) The aggregate outstanding Repurchase Price for the Purchased
Securities that are Mortgage Loans shall not at any time exceed
$120,000,000.
(b) The aggregate outstanding Repurchase Price for Purchased
Securities that are C Quality Mortgage Loans shall not at any
time exceed 30% of the aggregate outstanding Repurchase Price for
all Purchased Securities under the Agreement.
(c) The aggregate outstanding Repurchase Price for Purchased
Securities that are D Quality Mortgage Loans shall not at any
time exceed 15% of the aggregate outstanding Repurchase Price for
all Purchased Securities under the Agreement.
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(d) The aggregate outstanding Repurchase Price for Purchased
Securities that are C Quality Mortgage Loans and D Quality
Mortgage Loans shall not at any time exceed 45% of the aggregate
outstanding Repurchase Price for all Purchased Securities that
are A Quality Mortgage Loans and B Quality Mortgage Loans.
(e) The aggregate outstanding Repurchase Price for Mortgage Loans
that are not first lien residential mortgage loans shall not
exceed an amount equal to 20% of the aggregate outstanding
Repurchase Price for all Mortgage Loans subject to the Agreement.
(f) Any Mortgage Loan that is rejected for financing hereunder by
Buyer because such Mortgage Loan does not conform to the
requirements for financing set forth herein or any Mortgage Loan
assigned a Market Value of zero may be resubmitted for financing
hereunder but such financing shall be at Buyer's sole discretion,
whether or not any previous deficiency with respect to such
Mortgage Loan shall have been cured.
(g) Any provision hereof to the contrary notwithstanding, Buyer may
enter into Transactions hereunder in its sole individual
discretion but Buyer is not required to enter into any such
Transaction.
21. TERMINATION. Notwithstanding any provisions of Paragraph 15 of the
Master Repurchase Agreement to the contrary, the Agreement and all
Transactions outstanding hereunder shall terminate automatically without
any requirement for notice on the date occurring on the earlier of (i)
three hundred and sixty-four (364) days after the date of the Agreement
and (ii) the written agreement of Seller and Buyer; provided, however,
that notwithstanding the foregoing, the Agreement shall continue in full
force and effect until any outstanding Repurchase Price has been paid in
full. Upon termination of the Agreement and the payment of the
Repurchase Price with respect to all Transactions, Buyer shall release
its lien and security interest under the Agreement and assign, transfer
and deliver, against receipt, any remaining Purchased Securities and
money received in respect thereof to or on the order of Seller. Upon the
request of Seller, Buyer will then execute termination statements and
such other documents as Seller may reasonably request as are necessary
to make clear upon the public record the termination of the lien and
security interests created by the Agreement with respect to the
Purchased Securities.
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22. ADDITIONAL INFORMATION; CONFIDENTIALITY.
(a) At any reasonable time during business hours, Seller shall permit
Buyer, its agents or attorneys, to inspect and copy any and all
documents and data in their possession pertaining to each
Mortgage Loan that is the subject of such Transaction. Such
inspection shall occur upon the request of Buyer at a mutually
agreeable location during regular business hours and on a date
not more than two (2) Business Days after the date of such
request.
(b) Seller agrees to provide Buyer from time to time with such
information concerning Seller or PAMM of a financial or
operational nature as Buyer may reasonably request.
(c) Each of the parties acknowledges that the Agreement and the
Custody Agreement are confidential in nature and each such party
agrees that, unless otherwise directed by a court or regulatory
entity of competent jurisdiction or as may be required by federal
or state law (which determination as to federal or state law
shall be based upon written advice of counsel) or as may be
necessitated by any filing requirements of the Securities and
Exchange Commission, it shall limit the distribution of such
documents to its officers, employees, attorneys, accountants and
agents as required in order to conduct its business with the
other parties hereto. This subparagraph (c) shall not apply to
information which has entered the public domain through means
other than a breach of the foregoing covenant by the party
seeking to distribute such documents or which the other party has
given written permission to disclose.
23. MARGIN MAINTENANCE. Paragraph 4(a) of the Master Repurchase Agreement is
hereby modified to provide that if the notice to be given by Buyer to
Seller under such paragraph is given at or prior to 1:00 p.m. New York
City time on a Business Day, Seller transfer the cash or Additional
Purchased Securities to Buyer (in the manner contemplated by the
Agreement and the Custody Agreement) prior to 1:00 p.m. New York City
time on the following Business Day, and if such notice is given after
1:00 p.m. New York City time, Seller shall transfer the cash or
Additional Purchased Securities (in the manner as aforesaid) prior to
the close of business in New York City on the Business Day following the
date of such notice.
24. OPINIONS OF COUNSEL. Seller shall, on the date of the first Transaction
hereunder and, upon the request of Buyer, on the
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date of any subsequent Transaction, cause to be delivered to Buyer, with
reliance thereon permitted as to any person or entity that purchases the
Mortgage Loans from Buyer in a repurchase transaction, a favorable
opinion of Seller's counsel with respect to the matters set forth in
Exhibit D hereto, in form and substance reasonably acceptable to Buyer.
25. SERVICING ARRANGEMENTS.
(a) The parties hereto agree and acknowledge that, notwithstanding
the purchase and sale of the Mortgage Loans contemplated hereby,
Seller shall continue to service, or cause the Servicer to
service, the Mortgage Loans for the benefit of Buyer and, if
Buyer shall exercise its rights to sell the Mortgage Loans
pursuant to the Agreement, Buyer's assigns; provided, however,
that the obligation to service Mortgage Loans for the benefit of
Buyer as aforesaid shall cease upon the receipt by Buyer of the
related Repurchase Price and all other amounts due to Buyer
hereunder with respect thereto.
(b) Seller shall service and administer, or cause the Servicer to
service and administer, the Mortgage Loans in accordance with
prudent mortgage loan servicing standards and procedures
generally accepted in the mortgage banking industry. Seller shall
at all times maintain, or cause the Servicer to maintain,
accurate and complete records of its servicing of the Mortgage
Loans.
(c) Seller shall cause the Servicer to provide directly to Buyer and
its permitted assigns with monthly reports concerning the
Mortgage Loans with such frequency and containing such
information as is set forth in Exhibit E hereto. In addition,
Seller shall deliver to Buyer on each business day a schedule of
Mortgage Loans reflecting current balances and such other
information as Buyer may reasonably request.
(d) Buyer shall, in connection with the exercise of its rights to
sell the Mortgage Loans pursuant to Paragraph 11(d) of the Master
Repurchase Agreement, have the option to sell the Mortgage Loans
on a servicing released basis without the payment of any
termination fee to Seller or any Servicer.
26. FURTHER ASSURANCES. Seller shall promptly provide such further
assurances or agreements as Buyer may request in order to effect the
purposes of the Agreement.
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27. BUYER AS ATTORNEY-IN-FACT. Upon the occurrence and during the
continuation of an Event of Default, Buyer is hereby appointed the
attorney-in-fact of Seller for the purpose of carrying out the
provisions of the Agreement and taking any action and executing any
instruments that Buyer may deem necessary or advisable to accomplish the
purposes hereof, which appointment as attorney-in-fact is irrevocable
and coupled with an interest. Without limiting the generality of the
foregoing, after an Event of Default has occurred and is continuing,
Buyer shall have the right and power to (i) take any action Buyer deems
prudent to direct the receipt of payments on any Mortgage Loan from the
Servicer thereof to Buyer or its designee, including, without
limitation, the sending of any letter which irrevocably instructs such
Servicer to make all payments directly to Buyer or its designee, and
(ii) receive, endorse and collect all checks made payable to the order
of Seller representing any payment on account of the principal of or
interest on any of the Purchased Securities and to give full discharge
for the same.
28. PERMITTED ASSIGNMENT.
(a) Seller shall not assign to any Person its duties and obligations
under the Agreement or the Custody Agreement or its liabilities
with respect to the Agreement or the Custody Agreement without
the express written consent of Buyer.
(b) Notwithstanding any assignment of rights as contemplated by
Paragraph 29(a) of these Supplemental Terms, Seller shall remain
obligated to Buyer pursuant to the terms of the Agreement as
though no such assignment had occurred.
(c) Buyer's rights and remedies with respect to the Mortgage Loans
and otherwise under the Agreement shall not be affected by any
such assignment.
29. APPOINTMENT OF AGENT. MLCC hereby appoints MLMCI as its agent for
purposes of reviewing and executing Confirmation/Funding Requests,
determining Market Value, exercising any termination option provided for
in Paragraph 17 of these Supplemental Terms, exercising MLCC's rights
under any margin maintenance provision of the Agreement, exercising
MLCC's rights under the default provisions of the Agreement and such
other purposes as MLCC may direct. The appointment of such agent shall
not relieve MLCC of its obligations as Buyer hereunder.
30. CROSS-COLLATERALIZATION; RIGHT OF SET-OFF. MLMCI may, in its sole
discretion upon the occurrence and during the
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continuation of an Event of Default hereunder, proceed against any
assets held by it under the Master Assignment Agreement and shall have a
right of set-off against any amounts owed by MLMCI to Seller under the
Master Assignment Agreement. In addition, the parties agree that MLMCI
may, in its sole discretion upon the occurrence and during the
continuation of an event of default under the Master Assignment
Agreement, proceed against any assets held by it hereunder and shall
have a right of set-off against any amounts owed by MLMCI to Seller
hereunder.
31. EXPENSES. Seller shall pay its own expenses incurred in connection with
the transactions contemplated hereby. In addition, Seller shall pay the
fees and expenses incurred by Buyer in connection with the transactions
contemplated hereby (including without limitation the fees and expenses
of Buyer's counsel, which fees and expenses shall not exceed $50,000
without Seller's prior written consent).
32. COUNTERPARTS. The Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an
original, and such counterparts shall constitute but one and the same
instrument.
33. BINDING TERMS. All of the covenants, stipulations, promises and
agreements in the Agreement shall bind the successors and assigns of the
parties hereto, whether expressed or not.
34. NOTICES AND OTHER COMMUNICATIONS. Any provision of Paragraph 13 of the
Master Repurchase Agreement to the contrary notwithstanding, any notice
required or permitted by the Agreement shall be in writing (including
telegraphic, facsimile or telex communication) and shall be effective
and deemed delivered only when received by the party to which it is
sent; provided, however, that a facsimile transmission shall be deemed
to be received when transmitted so long as the transmitting machine has
provided an electronic confirmation of such transmission. Any such
notice shall be sent to a party at the address or facsimile transmission
number set forth in Annex II attached hereto.
35. INCORPORATION OF TERMS. The Master Repurchase Agreement as supplemented
hereby shall be read, taken and construed as one and the same
instrument.
36. CONTROLLING AGREEMENT. The Agreement shall supersede all other
agreements between the parties relating to the subject matter hereof.
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<PAGE> 40
EXHIBIT A
CONFIRMATION/FUNDING REQUEST
TO: PacificAmerica Securities, Inc. FROM: Merrill Lynch Mortgage Capital Inc.
______________________________ 101 Hudson Street, 12th Floor
______________________________ Jersey City, NJ 07302
Attention: ________________ Attention: Michael Jackson
Merrill Lynch Mortgage Capital Inc. ("Buyer") is pleased to confirm your sale
and our purchase of the Mortgage Loans listed on Attachment I hereto pursuant to
the Master Repurchase Agreement (including the supplemental terms set forth in
Annex I thereto), dated as of October 31, 1997 (the "Master Repurchase
Agreement") among Buyer and Pacific Thrift and Loan under the following terms
and conditions:
<TABLE>
<S> <C> <C> <C> <C> <C>
ORIG PRIN AMT OF MTG LOANS: _____ _____ _____ _____ _____
REM PRIN AMT OF MTG LOANS: _____ _____ _____ _____ _____
PURCHASE DATE: _____ _____ _____ _____ _____
REPURCHASE DATE: _____ _____ _____ _____ _____
PURCHASE PRICE: _____ _____ _____ _____ _____
PRICING RATE: _____ _____ _____ _____ _____
PRICE DIFFERENTIAL DUE: _____ _____ _____ _____ _____
BUYER'S MARGIN AMOUNT: _____ _____ _____ _____ _____
SELLER'S MARGIN AMOUNT: _____ _____ _____ _____ _____
</TABLE>
The Master Repurchase Agreement is incorporated by reference into this
Confirmation/Funding Request and made a part hereof as if it were fully set
forth herein. All capitalized terms used herein but not otherwise defined shall
have the meanings specified in the Master Repurchase Agreement.
PACIFICAMERICA SECURITIES, INC. MERRILL LYNCH MORTGAGE CAPITAL INC.
BY: ______________________________ BY: ______________________________
NAME: ____________________________ NAME: ____________________________
TITLE: ___________________________ TITLE: ___________________________
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<PAGE> 41
ATTACHMENT I
TO EXHIBIT A
CONFIRMATION/FUNDING REQUEST FOR MORTGAGE LOANS
Request No. ___
Date: _________
<TABLE>
<CAPTION>
Product Wire Loan Borrower Loan Purchase Market Takeout Note Commitment Takeout Maturity
Investor Type Date Number Last Amount Price Value Date Rate Number* Price Date
- -------- ------- ---- ------ -------- ------ -------- ------ ------- ---- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTALS:
</TABLE>
PACIFICAMERICA SECURITIES, INC.**
By: ______________________________
Title: ______________________________
Date: ______________________________
Amount to be
funded by Buyer: $____________
* To be provided within 2 Business Days of funding if not currently available.
** PacificAmerica Securities, INc. hereby represents that no warehouse lien or
other lien or encumbrance exists with respect to the above-referenced Mortgage
Loans.
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<PAGE> 42
EXHIBIT D
OPINION OF COUNSEL TO SELLER
1. Seller is a duly organized and validly existing corporation in good
standing under the laws of the State of ________ and has all power and
authority (corporate and other) to enter into and perform its obligations
under the Agreement and the Custody Agreement. Seller is duly qualified to
do business and is in good standing in each jurisdiction in which the
character of the business transacted by it requires such qualification and
in which the failure so to qualify would have a material adverse effect on
the business, properties, prospects, assets or condition (financial or
other) of Seller and its subsidiaries, considered as a whole.
2. The Agreement and the Custody Agreement have each been duly authorized,
executed and delivered by Seller.
3. The consummation of any of the transactions contemplated by the Agreement
and the Custody Agreement will not conflict with, result in a breach of, or
constitute a default under the charter or bylaws of Seller or the terms of
any indenture or other agreement or instrument known to us to which Seller
is party or bound, or any order known to such counsel to be applicable to
Seller or any regulations applicable to Seller, of any state or federal
court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over Seller.
4. Each note relating to a Mortgage Loan will have been endorsed in a manner
which satisfies any requirement of endorsement in order to transfer all
right, title and interest in and to that Mortgage Loan from Seller to
Buyer. Each assignment of Mortgage related to each Mortgage Loan is in
recordable form and is sufficient under applicable law to validly and
effectively transfer all right, title and interest of Seller to Buyer. The
Agreement together with (a) the delivery of such related notes to the
Custodian; (b) the endorsement of such Notes in blank; and (c) the delivery
of the assignments of Mortgages related to the Mortgage Loans to the
Custodian in recordable form assigning such Mortgages in blank, creates a
valid, perfected security interest in such Mortgage Loans in favor of
Custodian for the benefit of Buyer; such security interest will have the
same priority and will be subject to the same security interests and liens
as apply to such Mortgage Loans in the hands of Seller.
5. The Agreement and the Custody Agreement each constitute a valid and legally
binding obligation of Seller enforceable against Seller in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and
D-1
<PAGE> 43
other laws of general applicability relating to or affecting creditors'
rights generally and to general equity principles.
6. No consent, approval, authorization or order of any state or federal court
or government agency or body is required to be obtained by Seller for the
consummation of the transactions contemplated by the Agreement or the
Custody Agreement.
7. The consummation of any of the transactions contemplated by the Agreement
and the Custody Agreement will not conflict with, result in a breach of, or
constitute a default under any regulations applicable to Seller, of any
state or federal court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over Seller.
8. [Substantive Consolidation and True Sale]
D-2
<PAGE> 44
EXHIBIT E
MONTHLY MORTGAGE LOAN REPORT
[Date of Report]
<TABLE>
<CAPTION>
Mortgage No. of Days
Loan Subject to No. of Days
Number Agreement Delinquent
- -------- ------------ -----------
<S> <C> <C>
</TABLE>
E-1
<PAGE> 45
ANNEX II
Names and Addresses for Communications Between Parties
MERRILL LYNCH MORTGAGE CAPITAL INC.
Timothy M. Loughlin, Jr.
Vice President
Merrill Lynch World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Telephone: (212) 449-5939
Telecopy: (212) 449-6673
MERRILL LYNCH CREDIT CORPORATION c/o
Merrill Lynch Mortgage Capital Inc.
Timothy M. Loughlin, Jr.
Vice President
Merrill Lynch World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Telephone: (212) 449-5939
Telecopy: (212) 449-6673
in each case with a copy to
Michael A. Blum
Director
Merrill Lynch World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Telephone: (212) 449-8486
Telecopy: (212) 449-6673
and
Michael P. Peck, Esq.
Brown & Wood LLP
One World Trade Center
New York, New York 10048
Telephone: (212) 839-5576
Telecopy: (212) 839-5599
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<PAGE> 46
PACIFICAMERICA SECURITIES, INC.
21031 Ventura Boulevard
Suite 102
Woodland Hills, California 91364
Attention: Joel R. Schultz
Telephone: (818) 992-8999 ext. 260
Telecopy: (818) 992-8889
with a copy to:
Attention: Charles J. Siegel
Telephone: (818) 992-8999 ext. 298
Telecopy: (818) 340-6303
and
Attention: Richard D. Young
Telephone: (818) 992-8999 ext. 222
Telecopy: (818) 703-1896
and
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars
Tenth Floor
Los Angeles, California 90067
Attention: Catherine DeBono Holmes
Telephone: (310) 203-8080
Telecopy: (310) 203-0567
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